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(1) (a) (i) 1) a)E:*#8_>/ENEq 2KXK=K}"i~'^09]SS999S]+9+/SSSSSSSSSS99]]]Sxnxxng?Snxgx]nxxxxn9/9aS9S]I]I9S]/9]/]S]]I?9]SxSSIC%CW9+Wa999+999999S9]/xSxSxSxSxSxxInInInInI>/>/>/>/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+SS8-8WuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdYzzzzCCCCqodYYYYYYYYYYY8888dddddddnddddddd"i~'^:DPddDDDdp4D48dddddddddd88pppX|pDL|pp||D8D\dDXdXdXDdd88d8ddddDL8ddddX`(`lD4l\DDD4DDDDDDdDd8XXXXXX|X|X|X|XD8D8D8D8ddddddddddXdbdddpdXXXXXlX~|X|X|X|XdddldldD8DdDDDdplld|8|P|D|D|8dvddddDDDpLpLpLpl|T|8|\ddddddl|X|X|Xd|DdpL|Dd~4ddC$CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxH\dDXddddd8@d<@d<DDXXdDDxddxHxxHvppDXd<"dxtldpxxd2Coddȧ8CCdr2C28ddddddddddCCrrrdzNdzoȐC8CtdCdoYoYCdo8Co8odooYNCodddYO,OhdCddddCoCȜCCddFdCNC2Cdddd,dCddzzzzzzzzzzCCCCozdddddddYYYYY8888dddddddndddddYd2 KK/KoK"i~'^:DTddDDDd4D48ddddddddddDDd||||DXp||dp||ppL8LTdDddXdX8dd88X8ddddLL8dXXXLP8PlD4lTDDD4DDDDDDdDd8|d|d|d|d|dX|X|X|X|XD8D8D8D8dddddddddpX|ddddpXd|d|d|d|dXXlXx|X|X|X|XdddldldD8DdDDDddllXp8pHpDp@p8dtdddd|L|L|LdLdLdLllpHp8pTddddddplpLpLpLdpDddLpDpdx4ddC,CWddddddddddddddddddddddddddddddddddddddddNHxxHhdLdddddd8@d<@d<DDppdDDxddxHxxHkddDpd<"dxtldxxd]]]]]]]]]]]]]]]]]]]]]](1<8HH"&H>XHH8HB8>HH^HH>"".2",2,2,"222N2222"&22H22,006"6."""""""""2"2H,H,H,H,H,XAB,>,>,>,>,""""H2H2H2H2H2H2H2H2H2H2H,H2H1H2H2H282H,H,H,B,B,B6B,H?>,>,>,>,H2H2H2H6H2H6H2""2"""2F866H2>>(>">">H2;H2H2H2H2XHB"B"B"8&8&8&86>*>>.H2H2H2H2H2H2^HH6>,>,>,H2>"H28&>"H2?22!!WFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN$<<$.2",2222`2 LL2 LL2L"",,2d"" yO| 'ԍ Copper Valley Telephone, Inc., Midvale Telephone Exchange, Table Top Telephone Company, and US West Communications, Inc., Petition for Reconsideration, AAD 9393 (March 23, 1995) and Copper Valley Telephone, Inc., Amended Petition for Clarification and/or Reconsideration, AAD 9393 (May 21, 1999)  {O'("Copper Valley"); BEK Communications I, Inc., CTC Communications, Inc., Dakota Central Telecom I, Inc.,  {O'and West River Communications, Inc., Petition for Reconsideration, AAD 9572 (May 19, 1995) ("BEK"); Champlain Valley Telecom, Inc., and Northland Telephone Company of Vermont, Petitions for Reconsideration,  {O0'AAD 9530 (July 15, 1996) ("Champlain," and "Northland); Table Top Telephone Company, Petition for  {O'Waiver, AAD 9721 (December 23, 1996) ("Table Top"); and Midvale Telephone Exchange, Petition for Waiver,  {O'AAD 9723 (January 16, 1997) ("Midvale"); BEK Communications I, Inc.; CTC Communications, Inc.; Dakota Central Telecom I, Inc.; Dickey Rural Communications, Inc.; Dickey Rural Telephone Cooperative; Gilby Telephone Company; Griggs County Telephone Company; InterCommunity Telephone Company II, Inc.; Moore & Liberty Telephone Company; Northwest Communications Cooperative; Red River Telecom, Inc.; RTC II. Inc.; Turtle Mountain communications, Inc.; US West Communications, Inc.; United Telephone Mutual Aid Cooperative; West River Communications, Inc.; and York Telephone Company, Expedited Request for  {Ov'Elimination or Modification of Waiver Conditions, AAD 97117 (December 22, 1997) ("CTC"); Tularosa Basin  {O@'Telephone Company, Expedited, AAD 9844 (February 27, 1998) ("Tularosa"); Sanborn Telephone Cooperative; Sancom, Inc.; StockholmStrandburg Telephone Company; Sully Buttes Telephone Cooperative, Inc.; Valley Cable & Satellite Communications, Inc.; Valley Telecommunications Cooperative Association, Inc.; and Venture Communications, Inc., Conditional Request to Raise Universal Service Caps, AAD 9848 (March 27, 1998)  {Ob'("Sanborn"); Albion Telephone Company; BPS Telephone Company, Inc.; Cambridge Telephone Co., Inc.; Fremont Telecom; Leaco Rural Telephone Cooperative, Inc.; Midvale Telephone Exchange, Inc.; Rockland Telephone Company, Inc.; South Central Communications, Inc.; Table Top Telephone Co., Inc.; Tularosa Basin Telephone Company, Inc.; United Utilities, Inc.; and West River Telephone Cooperative, Inc., Petition for  {O'Expected Elimination or Modification of Waiver Conditions, AAD 9853 (April 3, 1998) ("Albion"). (#(# Petitioners raise two common issues: (a) whether the Commission should remove the individual caps that were placed on petitioners' high cost loop  X 4support; and (b) whether petitioners should be allowed to create study areas separate from  X 4their affiliates' existing study areas for newly acquired exchanges. Champlain and Northland  X 4also request that the effective date of their study area waiver requests be made retroactive. In this Order, we grant in part petitioners' requests to lift the individual caps placed on their high cost loop support and deny petitioners' requests to establish study areas separate from their affiliates' existing study area. In addition, we grant the requests of Champlain and"b*0*&&PP"  X4Northland to change the effective date of their study area waivers.    X4  II. NEED FOR CAPS ON HIGH COST LOOP SUPPORT ă  X4  IN INDIVIDUAL STUDY AREA WAIVER ORDERS ă  X'  X' A. Introduction  X_4 2.` ` In these petitions, several carriers have asked the Common Carrier Bureau (Bureau) to remove the individual caps placed on their high cost loop support. As discussed  X14below, we grant in part petitioners' requests.  X '  X 'B. Background   X 43.` ` All of petitioners' requests involve issues related to study area waiver requests. A study area is a geographic segment of an incumbent local exchange carrier's (LEC's) telephone operations. Generally, a study area corresponds to an incumbent LEC's entire service territory within a state. Thus, incumbent LECs operating in more than one state typically have one study area for each state, and incumbent LECs operating in a single state typically have a single study area. Study area boundaries are important because incumbent LECs perform jurisdictional separations, determine high cost loop support amounts, and  X44generally tariff their rates at the study area level. Effective November 15, 1984,4> {O'ԍ 47 C.F.R. Part 36 app. (defining "study area"). See MTS and WATS Market Structure, Amendment of  {Ow'Part 67 of the Commission's Rules and Establishment of a Joint Board, Recommended Decision and Order, 49  {OA'Fed. Reg. 48325 (1984) ("1984 Joint Board Recommended Decision"); Decision and Order, 50 Fed. Reg. 939  {O '(1985) ("1985 Order Adopting Recommendation"); see also Amendment of Part 36 of the Commission's Rules  {O'and Establishment of a Joint Board, Notice of Proposed Rulemaking, 5 FCC Rcd 5974 (1990) ("Study Area  {O'Notice"). the Commission froze all study area boundaries. The purpose of the freeze was to enable the Commission to ensure that policy decisions made in significant reliance on the number and size of existing study areas were not significantly undercut by study area boundary changes. For instance, existing federal high cost support mechanisms are based on the level of studyareawide averaged cost, in effect requiring low cost regions within a study area to support high cost regions within that study area. The study area freeze was to help ensure that incumbent LECs did not undermine this decision by setting up highcost exchanges within their existing service territories as separate study areas in order to increase interstate cost  Xe4allocations, and therefore their high cost support.KeL> {Ob"'ԍ Id.K An incumbent LEC must apply to the Commission for a waiver of the frozen study area rule if it wishes to sell or purchase an exchange and if that transaction would change the study area boundaries of either the seller or"70*&&PP+"  X4the buyer.J> yOy'ԍ 47 C.F.R.  1.3, Part 36 app.J   X44.` ` Consistent with the reasons for the 1984 study area freeze, the Commission has been concerned from the beginning about the potential adverse impact of waivers on the high cost loop support mechanism. This was an important concern in acquisitions because, when a lowcost carrier sold a highcost exchange, the acquiring carrier could substantially increase its high cost loop support by including the new exchange in its study area, without a  X_4corresponding reduction in the lowcost carrier's support. _X> yOh 'ԍ The selling carrier's support might not be reduced, for instance, because it may not have been receiving highcost support before the sale. Because highcost support was based on costs averaged throughout a study area, a carrier easily could be lowcost for a particular study area where it was operating several lowcost exchanges and a few highcost exchanges. This concern was heightened in the early 1990's when large, lowcost, incumbent LECs began to sell substantial numbers of  X14highcost exchanges to smaller incumbent LECs.1@> yO"'ԍ Since 1992, GTE has sold 95 exchanges serving 75,895 access lines and US West has sold 462 exchanges serving 346,130 access lines. The Bureau subsequently began to condition individual grants of study area waiver requests with caps on the high cost loop  X 4support drawn by those requesting incumbent LECs.U\ > {OL'ԍ See In the Matter of Nevada Bell and OregonIdaho Utilities, Inc., Joint Petition for Waiver of the Definition of "Study Area" Contained in the Part 36 AppendixGlossary of the Commission's Rules,  {O'Memorandum Opinion and Order, 9 FCC Rcd 5236 (1994).U Specifically, study area waivers were granted subject to the condition that, absent explicit approval from the Bureau, the annual high cost loop support provided to the acquiring carrier's study area could not exceed the amounts specified in their waiver petitions. This practice was established to prevent carriers from: (1) underestimating the effects the waiver may have on the high cost loop support mechanism in order to increase the chances that the waiver would be granted; and (2) then revising the cost figures upward, once the waiver was granted, thereby increasing the high cost loop support substantially.  X4' C. Petitions   X45.` `     Petitions for Reconsideration.  Copper Valley seeks reconsideration of the Accounting and Audits Division's (Division's) decision to deny its request to remove a cap on  X4its high cost loop support.I > {OF#'ԍ Copper Valley at 5.I Champlain and Northland (filing separately) also urge reconsideration of the Division's decision to place a cap on the amount of high cost loop"N 0*&&PPe"  X4support that may be received.[ > {Oy'ԍ Champlain at 6; Northland at 5.[  X4 6.` ` Petitions for Waiver. CTC, Z> yO'ԍ The carriers requesting modification of the waiver conditions in the CTC petition are BEK Communications Cooperative and BEK Communications I, Inc.; Consolidated Telephone Cooperative and CTC Communications, Inc.; Dakota Central Telecommunications Cooperative and Dakota Central Telecom I, Inc.; InterCommunity Telephone Company and InterCommunity Telephone Company II, Inc.; and Reservation Telephone Cooperative. Sanborn,  > yO 'ԍ The carriers requesting modification of the waiver conditions in the Sanborn petition are Sanborn  yOU 'Telephone Cooperative; Sancom, Inc.; StockholmStrandburg Telephone Company; Sully Buttes Telephone Cooperative, Inc.; Valley Cable & Satellite Communications, Inc.; Valley Telecommunications  yO 'Cooperative Association, Inc.; and Venture Communications, Inc.pp and Albion,8  > yOu'ԍ The carriers requesting modification of waiver conditions in the Albion petition are Albion Telephone Company; BPS Telephone Company, Inc.; Cambridge Telephone Co., Inc.; Fremont Telecom; Leaco Rural Telephone Cooperative, Inc.; Midvale Telephone Exchange, Inc.; Rockland Telephone Company, Inc.; South Central Communications, Inc.; Table Top Telephone Co., Inc.; Tularosa Basin Telephone Company, Inc.; United  yO'Utilities, Inc.; and West River Telephone Cooperative, Inc.pp  *8 Midvale, Table Top, and  X4Tularosa > yO'ԍ Midvale, Table Top, and Tularosa filed separate petitions in conjunction with their inclusion in the Albion petition. filed petitions for waiver requesting removal of the cap placed on their high cost  X4loop support.> {OP'ԍ Table Top at 2; Midvale at 2; CTC at 2; Tularosa at 5; Sanborn at 1; Albion at 1.  X4  Xw47.` ` CTC, Albion, and Tularosa argue that the caps on their high cost loop support  X`4were superseded by the rules announced in the Commission's Universal Service Order.i`> {O'ԍ CTC at 34; Tularosa at 5; Albion at 6.i In the alternative, should the Commission elect to keep the caps in place, petitioners contend that the individual caps should be modified to reflect the submission of more accurate and relevant  X 4data regarding their costs of providing service. > {O'ԍ CTC at 5; Tularosa at 1112; Albion at 45; Sanborn at 5.  X 48.` ` Midvale and Table Top claim that the caps placed on their high cost support are particularly unreasonable because their caps were based on the "initial post transfer amount" rather than following the completion of upgrades. Copper Valley requests that the Commission clarify that the cap placed on their high cost support applies only to increases in support directly associated with the acquisition of exchanges and not to the overall support for"0*&&PP"  X4the study area.D> {Oy'ԍ Copper Valley at 12.D Champlain, Northland, CTC, and Sanborn argue that the limits on high cost  X4loop support are arbitrary or unfairly discriminatory.Z> {O'ԍ Champlain at 1516; Northland at 45; CTC at 11; Sanborn at 10.   X' D. Discussion  X49.` ` As stated above, the Commission has long been concerned about the potential adverse impact study area waivers could have on the high cost loop support mechanism. To monitor this impact, carriers that received study area waivers to account for the acquisition of new exchanges were required to submit an estimation of the amount of money they would be eligible to receive from the high cost loop support mechanism following the completion of necessary and planned upgrades in the new study area. Those estimates were then used to establish a cap, limiting the carrier's draw from the high cost loop support mechanism. Absent such caps, we found that, even in a period of a few years, payments from the high  X 4cost loop support mechanism for some incumbent LECs rose by unexpected amounts.~ > {Or'ԍ See Delta Telephone Co., Inc., Petition for Waiver of the Definition of "Study Area" in Part 36  {O<'AppendixGlossary of the Commission Rules, Memorandum Opinion and Order, 5 FCC Rcd 7100 (1990) (high cost loop support payments grew from $82,500 in 1991 to $445,700 in 1993); US West and Gila River Telecomm., Inc., Petition for Waiver of the Definition of "Study Area" in Part 36 AppendixGlossary of the  {O'Commission's Rules, Memorandum Opinion and Order, 7 FCC Rcd 2161 (1992) (Gila River estimated 1992 high cost support would be $169,155, yet actual 1992 payment was $390,993, and the 1995 payment was  yO('approximately $750,000). The Commission's concern about adverse impacts on the high cost loop support mechanism has been of particular importance since it adopted the Joint Board's recommendation for an  X4overall indexed cap on the high cost loop support mechanism.l2 > yOs'ԍ The Joint Board recommended, and the Commission adopted, interim rules that limit the rate of growth of  yO;'the high cost loop support mechanism to the rate of growth in the total number of working loops nationwide.   {O'See generally Amendment of Part 36 of the Commission's Rules and Establishment of a Joint Board,  {O'Recommended Decision, 9 FCC Rcd 334 (Joint Bd. 1993) ("1993 Joint Board Recommended Decision") id.,  {O'Report and Order, 9 FCC Rcd 303 (1993) ("Interim Cap Order"). The Commission extended these interim rules through July 1, 1996. Amendment of Part 36 of the Commission's Rules and Establishment of a Joint Board,  {O)'Report and Order, 11 FCC Rcd 1077 (1995), summarized in 60 Fed. Reg. 65011 (1995). Recently, the Joint Board recommended, and the Commission adopted, an extension of the interim cap rules on the USF until the  {O 'final universal service rules become effective. FederalState Joint Board on Universal Service, Recommended  {O!'Decision, CC Docket No. 9645, released June 19, 1996 ("1996 Joint Board Recommended Decision"); id.,  {OO"'Report and Order, FCC 96281, released June 26, 1996 ("Extension of Interim Cap Rules").l Because of the operation of the indexed cap, any study area reconfiguration that increases the high cost loop support of"y0*&&PPI"  X4one recipient often reduces that of other recipients. > yOy'ԍ In evaluating whether a study area change would have an adverse impact on the distribution or level of the universal service fund ("USF"), the Commission has applied a "onepercent" guideline to study area waivers filed after January 5, 1995. Under this guideline, no study area waiver is granted if it would result in an annual aggregate shift in USF assistance in an amount equal to or greater than one percent of the total USF, unless the parties can demonstrate extraordinary public interest benefit. To prevent carriers from evading this limitation by disaggregating a single large scale of exchanges into a series of smaller transactions that in the aggregate have the same effect on the USF, the Commission has further required that the "onepercent" guideline be applied to all exchange transfers where either carrier has been a party as a purchaser or seller and where a study area  {O'waiver request was submitted and granted within the previous twelve months. See US West Communications, Inc., and Eagle Telecommunications, Inc., Joint Petition for Waiver of the definition of "Study Area" Contained  {OK 'in Part 36, AppendixGlossary of the Commission's Rules, Memorandum Opinion and Order, 10 FCC Rcd 1771  {O '(1995) ("US WestEagle Order"); US West Communications, Inc., and Eagle Telecommunications, Inc., Joint Petition for Waiver of "Study Area" Contained in Part 36, AppendixGlossary of the Commission's Rules and  {O 'Petition for Waiver of Section 61.41(c) of the Commission's Rules, Memorandum Opinion and Order on  {Oq 'Reconsideration, 12 FCC Rcd 4645 (1997). Although the concerns that prompted the Commission to impose these caps persist, we conclude that limiting the duration of these caps is appropriate. We therefore remove the caps on petitioners' high cost support on a goingforward basis.  X410.` ` We conclude that limiting the petitioners to the high cost loop support estimated in their original petitions, in perpetuity, is not necessary to accomplish the policies outlined above. We also believe that caps of unlimited duration may hinder petitioners' incentive and ability to extend service to previously unserved areas, as well as to upgrade service to their existing customers. We therefore find that the annual caps placed on petitioners' high cost loop support should be removed. Thus, as of January 1, 2000, petitioners' high cost loop support will be based upon the average cost of all their lines. We note that the caps imposed on petitioners' high cost loop support have been in effect in excess  X 4of three years.4 R > {O'ԍ See Copper Valley Telephone, Inc., et al, Petition for Waiver of the Definition of "Study Area" in Part 36  {O'AppendixGlossary of the Commission's Rules, Memorandum Opinion and Order, 10 FCC Rcd 3373 (1996); Champlain Valley Telecom, Inc., et al, Petition for Waiver of the Definition of "Study Area" in Part 36  {O4'AppendixGlossary of the Commission's Rules, Memorandum Opinion and Order, 11 FCC Rcd 7111 (1996); BEK Communications I, Inc., Albion Telephone Company, et al, Petition for Waiver of the Definition of "Study  {O'Area" in Part 36 AppendixGlossary of the Commission's Rules, Memorandum Opinion and Order, 11 FCC Rcd 10855 (1996); and Sanborn Telephone Cooperative, et al, Petition for Waiver of the Definition of "Study Area"  {OX 'in Part 36 AppendixGlossary of the Commission's Rules, Memorandum Opinion and Order, 11 FCC Rcd 11513  {O"!'(1996) (orders implementing caps on petitioners' high cost loop support). In JBN Telephone, the Accounting and Audits Division imposed a cap on JBN's high cost support but only for a three year period following the transfer. J.B.N. Telephone Company, Inc. and United Telephone Company of Eastern Kansas; Concerning Section 61.41(c)(2) and the Definition of "Study Area" Contained in the Part 36 AppendixGlossary of the Commission's Rules, Memorandum Opinion and Order, AAD 95174, 11 FCC Rcd 8619, at para. 12 (1996). We have concluded that, in that time, the individual caps placed on the carriers' high cost loop support have served their purpose by preventing the carriers from underestimating the effect the transfer of exchanges would have on the high cost loop support" N0*&&PPA " mechanism immediately following the transfer. In addition, we believe that lifting the caps on petitioners' high cost support may increase their incentive and ability to extend service to  X4previously unserved areas> yOK'ԍ The Commission's commitment to ensuring service in unserved areas is reflected in the recent release of a Notice Of Proposed Rulemaking which seeks comment on ways to promote the deployment of facilities to unserved and underserved areas and to provide the support necessary to increase subscribership in these areas.  {O'See generally,  FederalState Joint Board on Universal Service: Promoting Development and Subscribership in  {Om'Unserved Areas, Including Tribal and Insular Areas, Further Notice of Proposed Rulemaking, CC Docket No. 9645, FCC 99204 (rel. Sept. 3, 1999).  and upgrade their networks.D> {O 'ԍ See Letter from Kenneth C. Johnson, on behalf of Tularosa Basin Telephone Company, to Magalie  {O 'Roman Salas, FCC, dated Apr. 7, 1999 (Tularosa Apr. 7 ex parte) at 12.  X411.` ` Although we have concluded that we should eliminate the caps placed on the petitioners' high cost loop support, we conclude we should not do so retroactively. We disagree with CTC, Tularosa, Sanborn, and Albion's contention that the new universal service  X_4rules effectively eliminate the caps placed on their high cost loop support. In the Universal  XJ4Service Order, which was adopted on May 8, 1997, the Commission determined that a carrier that had entered into a binding commitment to buy exchanges prior to May 7, 1997 would receive support for the newly acquired lines based upon an analysis of the average cost of all  X 4its lines, both those acquired and those served prior to the acquisition. > {OX'ԍ FederalState Joint Board on Universal Service, First Report and Order, CC Docket No. 9645, 12 FCC  {O"'Rcd 8776, 8943, para. 308 (1997), affirmed in part, remanded in part and reversed in part, Texas Office of Util.  {O'Counsel, No. 9760421 (5th Cir. Jul. 30, 1999) (Universal Service Order); 47 C.F.R.  54.305 Where a carrier enters into a binding commitment to buy exchanges after May 7, 1997, the carrier will receive universal service support for the acquired exchanges at the same perline support for which those exchanges were eligible prior to the transfer of the exchanges. 47 C.F.R.  305. It is important to  X 4note that this rule merely codified the general rule that carriers receive support based on the average cost of all their lines. Moreover, by its terms, this rule applies only to transactions  X 4that were pending when the Universal Service Order was adopted. It does not apply to  X 4transactions that were completed prior to May 7, 1997. > yO|'ԍ Even for a transaction covered by the rule, the Commission is not precluded from imposing a cap as a condition on the approval of a study area waiver. In particular, it did not eliminate the caps that were conditions on the approval of petitioners' study area waivers.   Xh412.` ` We also disagree with Copper Valley's contention that the Bureau intended only to limit the high cost support that is directly associated with the acquired exchanges and not to the entire study area. Copper Valley cites two Bureau orders to support its": v0*&&PP"  X4contention.T^> {Oy'ԍ See GTE Midwest, Inc. and Winnebago Cooperative Telephone Association, Memorandum Opinion and  {OC'Order, 9 FCC Rcd 7789 (1994) and GTE Southwest, Inc. and Pioneer Telephone Cooperative, Inc.,  {O 'Memorandum Opinion and Order, 9 FCC Rcd 7785 (1994).T In both decisions, the Bureau granted study area waivers "subject to the  X4condition that any high cost support increase associated with the sale  "3> {O'ԍ Id.3 not exceed the amounts estimated by the respective petitioners. In those cases, the Bureau's use of the phrase "associated with the sale" is alternative language used to describe the condition limiting high cost support increases to "posttransfer" or "postupgrade" amounts estimated by petitioners for study area waivers. Copper Valley, therefore, misinterprets the Bureau's use of the phrase as applying only to its acquired exchanges. In support of this interpretation, Copper Valley notes that since it has demonstrated that it would not qualify for high cost support if its acquired exchanges were established as a separate study area, its consolidation need not limit overall high cost support for the new study area. We disagree. Because Copper Valley must consolidate the acquired exchanges with its affiliate's study area, it is reasonable that the imposed limits be based on the high cost support estimates for operations within that study area. This condition, that high cost support shall not exceed the initial post X 4transfer amounts specified in their petition,E > {O'ԍ Copper Valley at 78.E therefore, is consistent with the conditions the  X 4Bureau has placed on other grants of study area waivers.$ > {O'ԍ See Farmers Mutual Telephone Company; Project Mutual Telephone Cooperative Association Inc. and US West Communications, Inc., Petition for Waiver of Section 61.41(c) and the Definition of "Study Area"  {O'Contained in the Part 36 AppendixGlossary of the Commission's Rules, Memorandum Opinion and Order, 11 FCC Rcd 9380, 9385, para. 15 (1996)  X413.` ` Similarly, we reject Champlain, Northland, CTC, and Sanborn's further claim that the caps on their high cost loop support are unfair and discriminatory because telephone companies that do not participate in acquisitions are able to upgrade their networks and  XK4outside plant, receiving increased high cost loop support, if necessary.K > {O'ԍ Champlain at 1516; Northland a 45; CTC at 11; Sanborn at 10. We are not persuaded by that argument. The caps on petitioners' high cost support were based on petitioners' own estimates of their need for high cost support. Moreover, we believe that Champlain, Northland, CTC, and Sanborn are distinguishable from other carriers that have not participated in acquisitions of exchanges. Because high cost loop support depends on study area average loop cost, upgrading the exchanges after they have been transferred will result in a higher level of high cost support than would occur if the upgrading had been performed instead by the sellers. As a result, those transactions tend to have a negative effect on the support available to other recipients pursuant to the overall indexed cap on the high cost mechanism. " 0*&&PP"Ԍ X4ԙ14.` ` Although petitioners were invited to request an increase in their caps, we conclude that petitioners have not demonstrated that complete retroactive removal of their caps is warranted. At the time the caps were imposed, it was contemplated that petitioners would be upgrading their exchanges. Petitioners' assertions that these upgrades have been more costly than they anticipated emphasize the need for the caps imposed on their support. We conclude that the "unforeseen conditions" alleged by petitioners could have been discovered through due diligence and investigation before the exchanges were acquired.  XH415.` ` Similarly, we reject Midvale and Table Top's contention that their caps warrant modification because the caps were based on the "initial post transfer amount" rather than following the completion of upgrades. In its original study area waiver petition, Table Top estimated that its high cost support for its study area would be $219,300 as a result of its  X 4acquisition and upgrade of five new exchanges.d \ > {Oe 'ԍ See Copper Valley Telephone, Inc., Midvale Telephone Exchange, and Table Top Telephone Company, Joint Petition for Waiver of the Definition of "Study Area" contained in Part 36, AppendixGlossary of the  {O'Commission's Rules, Memorandum opinion and Order, 10 FCC Rcd 3373, 3374 (1995).d Similarly, Midvale estimated in its original petition that its annual high cost support would decrease as a result of its acquisition and  X 4upgrade of a singular exchange.3! > {O]'ԍ Id.3 The limits on high cost support imposed by the caps, therefore, are consistent with Midvale and Table Top's representations in their original petitions that their projections of high cost support included the completion of upgrades. We conclude, therefore, that the decision to limit Midvale and Table Top's high cost support based on posttransfer amounts is equivalent to similar limitations in other orders based on postupgrade amounts.  X!416.` ` For the reasons stated above, we grant petitioners' requests to remove the  X 4individual caps imposed on their high cost loop support. As of January 1, 2000, petitioners' high cost loop support will be based upon the average cost of all their lines.  X'   X'" III. SEPARATE STUDY AREAS Ã A. Introduction  Xi4 17.` ` In this proceeding, petitioners have asked the Bureau to allow them to create new study areas for newly acquired exchanges separate from their existing study areas in a state. As previously explained, a study area is a geographical segment of a carrier's telephone operations. Generally, a study area corresponds to a carrier's entire service area within a state. Study area boundaries are important because incumbent LECs perform jurisdictional separations, determine high cost loop support amounts, and generally tariff their rates at the study area level. In addition, as stated earlier, the Commission adopted the rule freezing" ~!0*&&PP"  X4study area boundaries, effective November 15, 1984.I"> {Oy'ԍ See para. 3, supra.I   X'  B. Petitions   X4  18.` `    Petitions for Reconsideration. #Z> yO'ԍ On January 14, 1999, WaitsfieldFayston Telephone Company, Inc. (Waitsfield) filed a petition requesting to withdraw a portion of the Petition for Reconsideration of Champlain Valley Telecom, Inc. (Champlain) filed on July 15, 1996. Because Champlain has since merged into Waitsfield, Waitsfield seeks a withdrawal of Champlain's request for separate study areas for the two carriers. Because this issue is rendered moot by the merger, we grant Waitsfield's request for withdrawal.   Copper Valley seeks reconsideration of the Division's decision to deny its request to establish separate study areas for Arizona exchanges acquired from US West. Similarly, BEK, CTC, Dakota, and West River seek reconsideration of the Division's decision to deny their request to establish separate study areas for North Dakota exchanges acquired from US West. Instead, the Division required the companies to consolidate the exchanges with their respective parents' existing North Dakota  X 4study areas.  Petitioners claim that the decisions to deny requests for separate study areas for  X 4newly acquired exchanges were founded on criteria that have no basis in fact or law,T$ > {O'ԍ Copper Valley at 17; BEK at 4.T and  X 4contradict Commission precedent and established study area waiver standards.i% > {O:'ԍ Copper Valley at 1213, 1819 and BEK at 23.i  X '   C. Discussion  X419.` ` Both the study area definition and the high cost loop support rules were  Xz4initiated by the 1984 Joint Board Recommended Decision, and their creation and the concerns  Xe4they reflect are intertwined.y&\e. > yOD'ԍ The rule section regarding the DEM (dial equipment minutes) allocator that allows very small companies  {O 'to triple their assignment to the interstate jurisdiction is also an intrinsic part of this program. See generally  {O'1984 Joint Recommended Decision; see also 47 C.F.R.  36.125.y Because it is administratively infeasible to calculate the precise cost of providing service to each customer in a service area, and because rate averaging and the absence of competition generally have allowed it, the cost of providing service is calculated by study area, and the total cost of providing service in that area is averaged over  X 4the number of customers in that area.'' R > yO #'ԍ These calculations are performed by carriers that submit this data to NECA, which, in turn, submits it to  {O#'the Commission as part of its duties pursuant to part 36 of our rules. See generally 47 C.F.R.  36.601 et seq.' This average cost provides the basis for calculating high cost loop support in that area. Because high cost loop support is calculated based on study area data, freezing study area boundaries was implemented as a means of controlling" '0*&&PP" unreasonable growth of the high cost loop support mechanism.  X420.` ` Specifically, the rule freezing study area boundaries was adopted to prevent carriers from inflating interstate cost allocations by establishing separate high cost exchange  X4study areas in states within their service territories.(> {O'ԍ See 1984 Joint Board Recommended Decision, 49 Fed. Reg. at 48325; 1985 Order Adopting  {O'Recommendation, 50 Fed. Reg. at 939. Allowing new, separate study areas, therefore, is counter to the reasons for freezing study area boundaries. For Copper Valley and BEK, the creation of new study areas would enable them to avoid reductions in their annual high cost loop support draws that would occur if the lowcost exchanges were consolidated with their high cost study areas, thereby frustrating the intent of the study area freeze rule and undermining the Commission's determination that high cost loop support should be based on carrier's entire service territory or study area within a state. Such a course could encourage disaggregation of study areas, thereby shifting high cost loop support among carriers and adding unnecessary complexity to the regulatory process.  X 421.` ` Because the Commission decided to set high cost support levels at the study area level, and thereby require the averaging of costs within the service territory/study area in a state, we find that the consolidation of study areas located within the same state, not the disaggregation of such areas, is the type of study area reconfiguration consistent with the  Xb4public interest.U)b$> {O7'ԍ See US West Communications, Inc., and Range Telephone Cooperative, Inc., Joint Petition for Waiver of  {O'the Definition of "Study Area" Contained in the Part 36 AppendixGlossary of the Commission's Rules, Order  {O'on Reconsideration, 10 FCC Rcd at 13270 (1995) ("US WestRange Recon Order"); ALLTEL Service Corporation, Petition for Waiver of the Definition of "Study Area" Contained in the Part 36 AppendixGlossary  {O]'of the Commission's Rules, Memorandum Opinion and Order, 9 FCC Rcd 4450, 4451 (1994); ALLTEL Service Corporation, Petition for Waiver of the Definition of "Study Area" Contained in the Part 36 AppendixGlossary  {O'of the Commission's Rules, Memorandum Opinion and Order, 8 FCC Rcd 6411 at para. 6 (1993); Study Area  {O'Notice, 5 FCC Rcd at 59755976; 1984 Joint Board Recommendation, 49 Fed. Reg. at 48340; 1985 Order  {O'Adopting Recommendation, 50 Fed. Reg. at 939.U  X4422.` ` In addition, as stated above, the Commission's concern about adverse impacts on the high cost loop support mechanism has been of particular importance since it adopted the Joint Board's recommendation for an indexed cap on the high cost loop support mechanism. Because of the operation of the indexed cap, any study area reconfiguration that increases the high cost loop support of one recipient often reduces that of other recipients. This benefit to one carrier at the disadvantage of another may also seriously impact the  X4integrity of the network. Finally, the Commission recognized that, even in the short term, the granting of a study area waiver may adversely affect the distribution of high cost loop support, if not its size. "e  )0*&&PPW"Ԍ X423.` ` We disagree with the petitioners' claims that Commission precedent requires us  X4to permit the creation of separate study areas.i* > {Ob'ԍ See Copper Valley at 1419 (citing Division decisions allowing incumbent LECs to establish a second  {O,'study area as support for allowing separate study areas in the current proceeding). See US West Communications, Inc., Central Utah Telephone, Bear Lake Communications, Joint Petition for Waiver of Sections 61.41(c) and 69.3(e)(11) and the Definition of "Study Area" Contained in the Part 36 of Appendix {O'Glossary of the Commission's Rules, Memorandum Opinion and Order, 9 FCC Rcd 194 (1993); US West Communications Inc., Blackfoot Telephone Cooperative, Clark Fork Telecommunications, Inc., Triangle Telephone Cooperative Association, Inc., and Central Montana Communications, Inc., Joint Petition for Waiver of Sections 61.41(c) and 69.3(e)(11) and the Definition of "Study Area" Contained in the Part 36 Appendix {O 'Glossary of the Commission's Rules, Memorandum Opinion and Order, 9 FCC Rcd 202 (1993); and Nevada Bell and OregonIdaho Utilities, Inc., Joint Petition for Waiver of the Definition of "Study Area" Contained in  {O: 'the Part 36 of AppendixGlossary of the Commission's Rules, Memorandum Opinion and Order, 9 FCC Rcd  {O '5236 (1994). See also BEK at 24 (contending that it should be permitted to establish separate study area because disaggregation would not have an adverse effect on the high cost loop support program, particularly in light of the considerations emphasized by the Bureau in previous study area waiver decisions).i The cases cited by petitioners do not persuade us under these circumstances because of what has happened since those waivers were granted. Specifically, the decisions cited occurred before the Bureau became aware of the magnitude of the potential cumulative effect of other similar waiver grants affecting hundreds of exchanges. The increased number of sales of exchanges that occurred at that time increased our concern that such transactions, in the aggregate, would have a substantial impact on the high cost loop support mechanism. Thus, we must carefully consider how a grant of a separate study area is consistent with the intent and purposes that underlie Commission rules and whether a grant would be in the public interest. We therefore reject Copper Valley's assertion that we are obligated to permit the creation of separate study areas because of the decisions they cited.  X 4  24.` ` For the reasons stated above, we affirm the Division's denials of petitioners' requests to establish study areas separate from their affiliates' existing study areas.   X4 ׃  Xy'@:IV. OTHER ISSUES ׃   XK425.` ` Study Area Effective Date.  Champlain and Northland request that the carriers' study area changes be made effective on January 1, 1996, instead of June 14, 1996, the  X4release date of the Memorandum Opinion and Order granting the study area waivers.U+ > {O[!'ԍ Champlain at 2; Northland at 6.U In support of their requests, Champlain and Northland state that without retroactive approval, they will be forced to conduct additional burdensome cost studies and would suffer a drastic  X4reduction in interstate revenue requirements.3,> {O%'ԍ Id.3 We find that these two carriers have",0*&&PP" sufficiently supported their claim that an earlier effective date would be in the public interest  X4and we therefore grant their requests. We note, however, that Champlain and Northland's  X4 requests for a change in the effective date of their study area waivers is granted only for the purposes contained in their petitions, that is to avoid a loss of interstate revenues associated  X4with DEM weighting.-> yO'ԍ Grant of this request shall not, for example, affect Champlain and Northland's high cost loop support payments for 1996. ׃  Xv'6%V . ORDERING CLAUSES ׃  XH426.` ` Accordingly, IT IS ORDERED, pursuant to Sections 4(i), 5(c), 201, 202, 219220, and 254 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 155(c), 201, 202, 218220, 254 and Sections 1.3, 0.91, and 0.291 of the Commission's Rules, 47 C.F.R.  1.3, 0.91, and 0.291, that the Petitions of Champlain Valley Telecom, Inc.; Copper Valley Telephone Inc.; Table Top Telephone Company, Midvale Telephone Exchange, Northland Telephone Company of Vermont, BEK Communications I, Inc.; et al, Tularosa Basin Telephone Company, Sanborn Telephone Cooperative, et al, and Albion Telephone Company requesting modifications to their existing cap on high cost loop support ARE  X4GRANTED IN PART. As of January 1, 2000 , these caps shall be removed and petitioners'  Xy4high cost loop support shall be based on the average cost of all of their lines.xxX  XK427.` ` IT IS FURTHER ORDERED, pursuant to Sections 4(i), 5(c), 201, 202, 218220. and 254 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 155(c), 201, 202, 218220, 254, and Sections 1.3, 0.91, and 0.201 of the Commission's rules, 47 C.F.R.  1.3, 0.91, and 0.291, that the Petitions for Reconsideration requesting separate study areas filed by Copper Valley Telephone Inc.; BEK Communications I Inc.; CTC Communications, Inc.; Dakota Telecom I Inc.; and West River Communications, Inc., ARE DENIED.  X428.` ` IT IS FURTHER ORDERED, pursuant to Sections 4(i), 5(c), 201, 202, 219220, and 254 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 155(c), 201, 202, 218220, 254 and Sections 1.3, 0.91, and 0.291 of the Commission's rules, 47 C.F.R.  1.3, 0.91, and 0.291, that the Petitions of Champlain Valley Telecom, Inc. and Northland Telephone Company of Vermont requesting a change in the effective date of the grant of their study area waivers ARE GRANTED subject to the condition contained in paragraph 25.   X429.` ` IT IS FURTHER ORDERED, pursuant to Sections 4(i), 5(c), 201, 202, 219220, and 254 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 155(c), 201, 202, 218220, 254 and Sections 1.3, 0.91, and 0.291 of the Commission's rules, 47 C.F.R.  1.3, 0.91, and 0.291, that the Petition of WaitsfieldFayston Telephone Company,"" -0*&&PP " Inc. requesting a partial withdrawal of a portion of the Petition for Reconsideration of  X4Champlain Valley Telecom, Inc. is GRANTED.pp ` `  hhCqFEDERAL COMMUNICATIONS COMMISSION ` `  hhCq ` `  hhCqLisa M. Zaina ` `  hhCqActing Deputy Chief ` `  hhCqCommon Carrier Bureau