WPC5 2B;T 3|P) X-#Xj\  P6G;XP#Times New Roman (TT)HPLA5SMX.WRSx  @,,,"5X@2>@3P ZR3|jTimes New Roman (TT)Times New Roman (Bold) (TT)n ItalicTimes New Roman Bold ItalicHP LaserJet 5Si/5Si MXHPLA5SMX.WRSX\  P6G;,,,"5P|ppL8LTdDddXdX8dd88X8ddddLL8dXXXLP8PlD4lTDDD4DDDDDDdDd8|d|d|d|d|dX|X|X|X|XD8D8D8D8dddddddddpX|ddddpXd|d|d|d|dXXlXx|X|X|X|XdddldldD8DdDDDddllXp8pHpDp@p8dtdddd|L|L|LdLdLdLllpHp8pTddddddplpLpLpLdpDddLpDpdx4ddC,CWddddddddddddddddddddddddddddddddddddddddNHxxHhdLdddddd8@d<@d<DDppdDDxddxHxxHkddDpd<"dxtldxxdTimes New Roman (TT)Times New Roman (Bold) (TT)Times New Roman (Italic) (TT)p7PC2XXP\  P6QXP.q7UC2XXU4  pQX.y.G8*X<G4  pQ2>"H28&>"H2?22!!WFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN$<<$.2",2222`2 LL2 LL2L"",,2d""/>/>/>/x]SSSSx]x]x]x]xSxSx]SSxSxSf]xSxSxSxIxIxWxIx{nInInInISSSWS]a?/?]?9?]]WW]n/nKn9nCn/x]xx]x]SSxxIxIxI]?]?]?]WnUn9nax]x]x]x]x]x]xxWnInInIx]n9x]]?n9xSz+SS8-8WuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNd<d<BBYYdBBddBYBdYzzzzBBBBqodYYYYYYYYYYY8888dddddddnddddddd2P)&!$Z&"5^2BoddȦ8BBdr2B28ddddddddddBBrrrdzNdzoȐB8BtdBdoYoYBdo8Bo8odooYNBodddYO,Oh2BBBBPBdodddddȐYYYYYN8N8N8N8oddddooooddoddddzodddYYYYYdddooPoNoNBNoddȐoNNF2ldBddddddd<d<BBoodBBddBoBddzzzzzzzzzzBBBBozdddddddYYYYY8888dddddddndddddYd"5^*7FSS$77Sp*7*.SSSSSSSSSS77pppSffoxffxx7Jo]oxfxfS]xff]]A.AFS7SSJSJ.SS..J.xSSSSAA.SJoJJAC.CZ*7777C7SSfSfSfSfSfSooJfJfJfJfJ7.7.7.7.oSxSxSxSxSxSxSxSxS]JfSxSxSxS]JxSfSfSfSfSoJoJfJfJfJxSxSxSxSxSCS7S777SJxSoSAN:*WSASSSSSS.4}}S2~~S}277]]S77SS7]72N7[[pC`pSS`*7FSS$77Sp*7*.SSSSSSSSSS77pppSffoxffxx7Jo]oxfxfS]xff]]A.AFS7SSJSJ.SS..J.xSSSSAA.SJoJJAC.CZv7S]SS7S777]]:S7A7o]*ASSSS.S7~.Sp7~SC[227`W*724S}}}Sffffffoffff7777xoxxxxxpxxxxx]fSSSSSSSoJJJJJ....SSSSSSS[SSSSSJS2\2R5oy.C8*X/C\  P6QPp7PC2XXP\  P6QXP.q7UC2XXU4  pQX.ry.G8*X<G4  pQsW!0(Xh0\  P6QhPtI(!X,(\  P6Q,Pu5PC2X3f_XP*f9 xQXX{,C8*X3VC*f9 xQXnapps\wpc\mcwin.exe;00000000;WordPerfect Macro Compiler [WPWP-3rd] WPWEST=m:\wps\wpwin\wpwest5.dll MacroCmd=m:\winapps\wpc\wpwcmd.dll  yO X-{  Federal Communications Commission  xxDA 98yxdddxy1431    #X\  P6G;/P# Z1Before the FEDERAL COMMUNICATIONS COMMISSION  Washington, D.C. 20554  X -#Xj\  P6G;XP#  X - In the Matter of XXhhX@Xh)(# XxX` ` X XXhhX@Xh)(#  X-Beaver Creek Cooperative Telephone Company,hh)(#  X-Farmers Telephone Company, Inc., TCT @Xh)(#  X-West, Inc., Tri County Telephone hhX@Xh)(#  X-Association, Inc., Summit Telephone @Xh)XppXAAD 9577(#  X -Company, and Wilton Telephone Companyhh)(# XxX` ` X XXhhX@Xh)(#  XQ -Petition for Declaratory Ruling hhX@Xh)(#  X: -on the Retroactive Application of hhX@Xh)(#  X# -Section 36.154(f) of the Commission's Ruleshh)(# XxX` ` X XXhhX@Xh(#  X-~  MEMORANDUM OPINION AND ORDER ă  E Adopted: July 17, 1998 Released: July 17, 1998TP x I. A. 1. a.(1)(a) i) a) I. 1. 1. a.(1)(a) i) a) By the Chief, Common Carrier Bureau  X=-K I. INTRODUCTION ă  X-x1.` ` This Order responds to a Petition for Declaratory Ruling filed by six telephone  X-companies (Petitioners).+X yOq-  ԍxThe petition was jointly filed by Beaver Creek Cooperative Telephone Company, Farmers Telephone  xKCompany, Inc., TCT West, Inc., Tri County Telephone Association, Summit Telephone Company, and Wilton Telephone Company. + The Petitioners request that the Commission clarify that its  X-interpretation of Section 36.154(f) of the Commission's rulesK yOz-ԍx36 C.F.R.  36.154(f). K in the Order on Review was  X-"not to apply... retroactively."d\x yO!-  ԍxFlorida Public Service Commission, Request for Interpretation of the Applicability of the Limit on Change  {O"- xin Interstate Allocation, Section 36.154(f) of the Commission's Rules, Order, 12 FCC Rcd 3406, 3415 (1997) (Order  {O#-on Review).d These carriers have sought review of the Order on Review in  X-the U.S. Court of Appeals for the Tenth Circuit.r {O&-ԍxTCT West v. FCC, No. 979522 (10th Cir. filed May 5, 1997).r Petitioners state that, if the Commission  X-confirms that the Order on Review "was not meant to ... retroactively" apply Section 36.154(f)". 0*((aa "  X-of the Commission's Rules, then the issue will not need to be briefed in the pending appeal.HI yOy-ԍXxPetition at 1. (#H  X-In this Order, we clarify that neither the Division Orderz\XI yO-  ԍxFlorida Public Service Commission Request for Interpretation of the Applicability of the Limit on Change  {O- xin Interstate Allocation, Section 36.154(f) of the Commission's Rules, Report and Order, 11 FCC Rcd 10835 (Acct.  {O-Aud. Div. 1996) (Division Order).z nor the Order on Review required NECA to make intrapool adjustments that would redistribute funds that had been allocated to  X-carriers prior to the release of the Division Order on March 22, 1996.  X-xg II. BACKGROUND ă x  Xc-x2.` ` Sections 36.154(a) through (f) of the Commission's rules set forth procedures for allocating loop costs between the state and interstate jurisdictions. Prior to 1982, loop costs were allocated using a traffic sensitive interstate allocation factor known as the  X -subscriber plant factor." |I {OK-  MԍxSee 47 C.F.R. Part 67 (1980). The subscriber plant factors were determined by weighting toll minutes of  xuse by factors greater than 1.0, weighting local minutes of use by 1.0, and determining the relative state and interstate  xwproportions. Regardless of the relative proportions determined in this way, the rules limited the interstate subscriber plant factors to a maximum of 85 percent. By the early 1980's, increases in relative interstate usage caused carriers' interstate subscriber plant factors to escalate rapidly, reaching the maximum interstate cost allocation of 85 percent for some carriers. x  X -x3.` ` As a result, the Commission, in consultation with the FederalState Joint  X -Board, f I {O-  zԍx47 U.S.C.  410; Amendment of Part 67, Notice of Proposed Rulemaking and Order Establishing a Joint  {O-Board, CC Docket No. 80286, 78 FCC 2d 837 (1980). instituted a flatrate 25 percent interstate allocation factor that would be phased in  X-during an eightyear transition period, 1986 to 1993. & I {O-  >ԍxSee Amendment of Part 67 of the Commission's Rules and Establishment of a Joint Board, Decision and  {O- xOrder, 89 FCC 2d 1 (1982) (adopting Joint Board's recommendation to freeze the subscriber plant factor at 1981  {O- xxlevels);  Decision and Order, 96 FCC 2d 781 (1984) (adopting Joint Board's recommendation to establish a fixed 25 percent interstate allocation factor). Concurrent with the institution of the new subscriber plant factor transition period, the Commission established the universal service fund allowing incumbent local exchange carriers (LECs) with high local loop costs to allocate  XO-an additional portion of those costs to the interstate jurisdiction. OI {O"-  MԍxSee 47 C.F.R. Part 36, Subpart F. The universal service fund enabled state jurisdictions to establish lower local exchange rates in study areas receiving such assistance. The universal service fund"O  0*&&aaI" was phased in during the same eightyear transition period as the new subscriber plant factor. I yOb-  ԍxAlthough a variety of circumstances extended the duration of the subscriber plant factor transition period, the universal service fund transition was a fixed duration and was complete for all carriers in 1993. In order to ensure that a carrier's interstate cost allocation would not drop precipitously during the transition, the rules specified that the combined interstate factor, determined by considering the interstate subscriber plant factor and the universal service  X-amount, would decrease by no more than five percent in any one year.z \ I yOu-  \ԍxMTS and WATS Market Structure, Amendment of Part 67 (New Part 36) of the Commission's Rules and  {O= - xEstablishment of a Joint Board, CC Docket 7872, 80286 and 86297, Order on Reconsideration and Supplemental  {O -Notice of Proposed Rulemaking, 3 FCC Rcd 5518 (1988).z Carriers with a very high subscriber plant factor were directed to extend their transition periods, subject to the  Xv-fivepercent limitation, until the 25 percent interstate allocation was reached. vDI {Ok -  zԍxAmendment of Section 36.154 of the Commission's Rules, Memorandum Opinion and Order, 6 FCC Rcd 1873 (1991). x  XH-x4.` ` In 1991, NECA interpreted Section 36.154(f) to provide that the five percent peryear limit applied even after a carrier's subscriber plant factor reached the 25 percent  X -allocation requirement I {Oi-  /ԍx See Order on Review, 12 FCC Rcd at 3409; NECA Cost Issues Manual , Issue No. 5.3, The Five Percent Limitation Rule, page 3. established under our rules.J I yO-ԍx47 C.F.R.  36.154(c).J According to Petitioners, incumbent LECs that were members of the NECA common line pool were contractually bound to follow NECA's interpretation of the rules and continue to limit changes in their interstate allocations to no more than five percent even after they had reached the interstate subscriber plant factor  X -of 25 percent. I {O-  ԍxPetition at 2; Order on Review, 12 FCC Rcd at 3417. After universal service support was fully  x;implemented in 1993, changes in some carriers' operations significantly decreased their universal service funds. For  xexample, some carriers sold high cost exchanges, thereby reducing their average loop costs and their universal service  xsupport receipts. Under NECA's interpretation, such carriers that had already completed the transition to a 25  x-percent allocation were allowed to increase their interstate allocations to offset the reductions in their universal service fund receipts.  X-x5.` ` In response to a Request for Interpretation filed by the Florida Public Service Commission in 1996 and contrary to the interpretation that NECA provided to its members, the Accounting and Audits Division interpreted Section 36.154(f) as requiring that a carrier's  XK-interstate allocation for the subscriber plant factor remain fixed after it reached 25 percent.aKI {O$-ԍxDivision Order, 11 FCC Rcd 10835, 10839. a  X4-The Division Order was silent, however, about whether carriers that had previously adjusted"40*&&aaH" their interstate allocations in a manner inconsistent with the Division's interpretation would  X-have to redistribute funds that were allocated prior to the release of the Division Order on March 22, 1996. Because NECA distributes funds based on each carrier's interstate allocation, such a restatement could result in a finding that some carriers had received excessive support from NECA.  Xx-x6.` ` In response to the Division Order, NECA issued two letters, dated March 27  Xc-and April 23, 1996, to its members stating that, to comply with the Division Order, some carriers would have to submit revised settlement data from April 1994 to May 1996, for the  X7-purpose of determining revised settlement amounts from its common line pool.[7I {O -ԍxOrder on Review, 12 FCC Rcd at 3407.[  X -x7.` ` GVNW Inc./Management (GVNW) subsequently filed both a Motion for Partial Stay of the (Division) Order and an Application for Review. GVNW and other commentors contended that the Commission should adopt NECA's interpretation of the rule and argued  X -that the Division Order contradicted the plain language of the rule as well as previous NECA  X -interpretations of the rule.I ZI {O-ԍxId. at 3410.I GVNW also argued that "retroactive application" of the rule  X-would cause many incumbent LECs severe financial hardships.MI {O5-ԍxId. at 341516; M The Division granted  X-GVNW's petition to stay its Division Order partially and further stated that NECA and the  Xl-carriers need not, at that time, apply it to determine pool settlements for any month prior to  XU-the Division Order's release.\U~I yO-  ԍxFlorida Public Service Commission, Request for Interpretation of the Applicability of the Limit on Change  {OL- xin Interstate Allocation, Section 36.154(f) of the Commission's Rules, Order Granting Motion for Partial Stay, 11  {O-FCC Rcd 14324, 14327 (Acct. Aud. Div. 1996) (Stay Order). ę x  X)-x8.` ` In its Order on Review, the Commission held that declaratory rulings that interpret, but do not change, obligations under existing Commission rules have the effective  X-date of the rule. The Commission stated that the Division Order corrected a misinterpretation  X-put forth by NECA but did not change the purpose or operation of the underlying rules.[I {O; -ԍxOrder on Review, 12 FCC Rcd at 3416.[  X-The Commission found that NECA had misinterpreted Section 36.154(f) of the rules,J4 I yO"-ԍx47 C.F.R.  36.154(f).J and  X-that NECA must file corrected rateofreturn data (i.e., Form 492) for each of the years in which it required pooling companies to be in conformance with its misinterpretation of" 0*&&aao"  X-Section 36.154(f).^I {Oy-ԍxOrder on Review, 12 FCC Rcd at 341617.^ Because the Commission did not order the carriers to reallocate funds  X-within the pool based on the corrected interpretation of the rules,IZI {O-ԍxId. at 3418.I any reallocation would likely be based on contracts between NECA and the members of the carrier common line pool. The Commission further noted that the overassignment of costs to the interstate jurisdiction that resulted from NECA's erroneous interpretation of the Commission's rules might have given rise to violations of the Commission's rateofreturn prescription and that the overassignment may have meant that some members of the NECA pool received greater interstate returns than the rules would allow at the expense of many members that suffered somewhat lower interstate rates of return. The Commission declined to address whether intrapool adjustments should be required because no NECA pool members had sought redress for the damage. The Commission stated that it was taking no action that would result in significant adverse economic consequences for small carriers and that its actions were  X -consistent with Section 257 of the Communications Act of 1934, as amended. " I {O-  /ԍx47 U.S.C.  257.  See also Order on Review, 12 FCC Rcd at 3418. Section 257 required the Commission  xto identify and adopt rules eliminating market entry barriers for entrepreneurs and other small businesses in the  xprovision and ownership of telecommunications services and information services, or in the provision of parts or services to providers of telecommunications services and information services.   X -x9.` ` The Petitioners now contend that the Division Order and the Order on Review  X -reflect an "ambivalent approach to the retroactivity issue."@ I yO0-ԍxPetition at 3. @ The Petitioners argue that, while  X-paragraph 25 of the Order on Review states that rule interpretation orders have the effective date of the rule, paragraph 28 "defers or avoids retroactive effects" and states that the Commission is taking no action that will result in significant adverse economic consequences  XO-for small carriers.?Of I yOf-ԍxPetition at 3.? Petitioners contend because NECA required them to follow its interpretation and now is requiring them to adjust their costs retroactively to implement the  X!-Division Order, that the Commission's rule has an adverse economic affect on them. Petitioners seek clarification of whether the Commission meant to require carriers to apply  X-retroactively the interpretation of Section 36.154(f) stated in both the Division Order and the  X-Order on Review.  X- III. DISCUSSION ĐTP  X-x 10.` ` NECA misinterpreted Section 36.154(f). This rule has remained unchanged since it first became effective in 1990. Subsequently, NECA's interpretation of the rule was"o 0*&&aa"  X-rejected by both the Division and the Commission. Neither the Division Order nor the Order  X-on Review retroactively applied the rule; both orders merely clarified the rule that had been in effect since 1990. The Commission required NECA's rateofreturn reports to be corrected, thereby ensuring that the carrier common line pool did not exceed its maximum allowable rate of return. The Commission, however, did not require NECA or its pool members to make retroactive adjustments to the pool. By declining to require carriers to make intrapool adjustments, the Commission in effect held that the issue of whether some carriers had to make intrapool adjustments was a matter that NECA and the carriers should resolve in accordance with the terms of their contracts; it was not a matter that required a Commission  X5-edict.5I {O -  =ԍxOrder on Review, 12 FCC Rcd at 3418. The Commission explicitly stated that it was not ruling on whether "intrapool adjustments should be required because no NECA pool members have sought redress for the damage."  X -x 11.` ` In their petition, Petitioners contend in effect that the Commission should declare that the rule should not be interpreted in a way that is inconsistent with NECA's interpretation of Section 36.154(f) because NECA had made the Commission aware of its  X -interpretation of the rule by presenting it to members of the Commission staff in 1990._Z "I {O-  ԍxSee Attachment B to Petition. This "declaration" is a signed statement that purports to recount the substance  xZof a meeting that various industry members had with Commission staff members "in 1990." It was signed by the declarants in October and November of 1997._ Petitioners support their argument by presenting "evidence" of a 1990 presentation in a declaration attached to its petition. We reject Petitioners' contention on both procedural and  X}-substantive grounds.  XO-x 12.` ` We find Petitioners' suggestion that the agency review its decision in light of  X8-new "evidence" to be in effect a petition for reconsideration of the Order on Review, which is procedurally defective for two reasons. First, Section 1.106(b)(2) of the Commission's rules allows Petitions for Reconsideration of an order denying an Application for Review only when the petition "relies on facts which relate to events which have occurred or circumstances which have changed since the last opportunity to present such matters" or "the petition relies on facts unknown to petitioner until after his last opportunity to present such matters which could not, through the exercise of due diligence, have been learned prior to such  X-opportunity."MDI yO -ԍx47 C.F.R.  1.106(b)(2). M In the present case, the Petitioners meet neither of these tests. No new  X-developments have occurred and no new facts have been discovered since the Order on  Xm-Review was released in 1997. Indeed, the Petitioners do not explain why they had not presented the "evidence" set forth in the petition for declaratory ruling in an application for  XA-review of the Division Order. Second, the Petition for Declaratory Ruling cannot serve as a Petition for Reconsideration because it was not filed within 30 days of public notice of the",0*&&aaz"  X-order being appealed as required by Section 405(a) of the Communications ActG I yOy-ԍx47 U.S.C.  405(a).G and 1.106(f)  X-of the Commission's Rules.T!XI {O-ԍxSee 47 C.F.R.  1.106(f). T  X-x 13.` ` In any event, we have considered the Petitioners' arguments in light of the new "evidence" and find them unpersuasive. Although Petitioners' declaration states that the primary purpose of the meeting with Commission staff was to obtain staff reaction to that rule, "if possible," they do not contend that Commission staff issued such an interpretation and acknowledge in their declaration that the Commission staff members did not express  XH-approval or disapproval of the interpretation conveyed in the meetings.Q"HI yO -ԍxPetition at 5; Declaration at 1.Q "It is wellestablished that the positions of an agency's staff do not preclude the agency from reaching its  X -own conclusion." # zI {OE-  zԍxMacLeod v. ICC, 54 F. 3d 888, 891 (D.C.Cir. 1995), quoting San Luis Obispo Mothers for Peace v. NRC,  {O-789 F. 2d 26, 34 (D.C. Cir. 1986) (en banc), cert den. 479 U.S. 923 (1986).  Thus, even assuming that the staff's silence could be construed as a tacit acquiescence of NECA's construction of Section 36.154(f), it would not preclude the Commission from construing its own rule in a manner different from NECA's interpretation. In the present case, the staff's silence shows only that the staff at that meeting did not address the merits of NECA's construction of the rule. The staff's silence was neither a repudiation nor an endorsement of NECA's interpretation of Section 36.154(f) of the Commission's rules. x  Xb-H IV. ORDERING CLAUSE ĐTP  X4-x 14.` ` Accordingly, IT IS ORDERED that, pursuant to Sections 4(i), 201205 and 405(a) of the Communications Act of 1934, as amended, 47 U.S.C.  154(j), 201205 405(a) and Sections 0.91, 0.291, 1.2 and 1.106 of the Commission's rules, 47 C.F.R.  0.91, 0.291, 1.2, and 1.106, that it IS HEREBY CLARIFIED that the Commission has not required NECA  X-to require intrapool adjustments for periods prior to March 22, 1996. x` `  hhFEDERAL COMMUNICATIONS COMMISSION x x` `  hhJames D. Schlichting x` `  hhDeputy Chief, x` `  hhCommon Carrier Bureau