Before the Federal Communications Commission Washington, D.C. 20554 In the matter of Oklahoma Telephone & Telegraph, Inc. Petition for Waiver of Section 36.621(a)(4) of the Commission's Rules (Corporate Operations Expense Cap) ) ) ) ) ) ) ) CC Docket No. 96-45 ORDER Adopted: September 17, 2001 Released: September 18, 2001 By the Common Carrier Bureau: I. introduction 1. In this Order, we deny a request filed by Oklahoma Telephone & Telegraph, Inc. (OT&T) for a waiver of section 36.621(a)(4) of the Commission's rules, which limits the amount of corporate operations expenses that a carrier may include in the high-cost loop support mechanism. We find that OT&T has not demonstrated that its high corporate operations expenses are due to exceptional circumstances that would justify a grant of a waiver. II. BACKGROUND 2. In the First Report and Order, the Commission adopted the corporate operations expense limitation formula to "ensure that carriers use universal service support only to offer better service to their customers through prudent facility investment and maintenance consistent with their obligations under section 254(k)." Corporate operations expenses include, for example, travel, lodging, and other expenses associated with attending industry conventions and corporate meetings. In the First Reconsideration Order and the Fourth Reconsideration Order, the Commission made further refinements to the formula specifically to recognize problems of smaller carriers. The Commission explained that carrier expenditures for corporate operations expenses may be discretionary in many instances, in contrast to expenditures for maintaining plant and equipment. The Commission determined that "imposing a cap that is relatively generous to small carriers, but still imposes a limitation, is a reasonable method of encouraging carriers to assign corporate operations expenses to the proper accounts and discouraging carriers from incurring excessive expenditures." The Commission recently further modified the corporate operations expense limitation formula to reflect changes in costs since the limitation was first imposed. 3. OT&T seeks a waiver of section 36.621(a)(4) of the Commission's rules and asks that it be permitted to include its actual corporate operations expenses in the calculation of its high-cost loop support. OT&T states that it "submits this request for waiver of the Commission's rules at the direction of the Oklahoma Corporation Commission." On June 7, 2000, the Oklahoma Commission granted OT&T's request for additional funding from the Oklahoma Universal Service Fund as reimbursement for the loss of revenue associated with the federal limitation on corporate operations expenses in the high- cost loop support mechanism. Specifically, the Oklahoma Commission ordered that OT&T be reimbursed from the Oklahoma Universal Service Fund a lump sum of $78,516 for the year 1999 and a monthly recurring amount of $6,543 beginning January 2000. The Oklahoma Commission further ordered that the payment of such reimbursement would begin upon demonstration by OT&T that it had filed with this Commission a request to waive the corporate operations expense limitation. On May 8, 2001, we sought comment on OT&T's request. No parties filed comments or reply comments. III. DISCUSSION 4. Generally, Commission rules may be waived for good cause shown. As noted by the Court of Appeals for the D.C. Circuit, however, agency rules are presumed valid. The Commission may exercise its discretion to waive a rule where the particular facts make strict compliance inconsistent with the public interest. In addition, the Commission may take into account considerations of hardship, equity, or more effective implementation of overall policy on an individual basis. Waiver of the Commission's rules therefore is appropriate only if special circumstances warrant a deviation from the general rule, and such a deviation will serve the public interest. 5. We conclude that OT&T has failed to demonstrate that special circumstances exist to justify a waiver of our rules. We are not persuaded by OT&T's mere assertions that its "provision of service is characterized by significant distances between exchanges and sparsely populated rural areas of Oklahoma that, collectively, lead to high operational costs." OT&T provides no further explanation of how its corporate operations expenses differ from those of other affected small rural carriers subject to these requirements. Similarly, OT&T fails to provide any support as to how a waiver would be necessary to maintain affordable rates consistent with the public interest. Although we recognize that significant distances and sparse populations may have implications for costs associated with customer operations and plant specific operations, OT&T provides no explanation as to how and to what degree these circumstances affected its corporate operations. Based on the record before us, we find that OT&T has not demonstrated that its high corporate operations expenses are due to exceptional circumstances that would justify a grant of a waiver. 6. Moreover, OT&T has not demonstrated that deviation from our current rules, which limit universal service support for corporate operations expenses to a reasonable per-line or minimum amount, is warranted. Because the amount of corporate operations expenses may result from managerial priorities and discretionary spending, the limitation helps to ensure that carriers use universal service support for the provision, maintenance, and upgrading of the facilities and services for which support is intended, consistent with section 254 of the Communications Act of 1934, as amended. We note, however, that due to a recently adopted change in the Commission's rules, effective July 1, 2001, OT&T will be permitted to include an increased amount of corporate operations expenses in the high-cost loop support mechanism. IV. ORDERING CLAUSE 7. Accordingly, IT IS ORDERED, pursuant to sections 1, 4(i), 5(c), 201-205, and 254 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154(i), 155(c), 201-205, and 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 request of Oklahoma Telephone & Telegraph, Inc. for waiver of section 36.621(a)(4) of the Commission's rules IS DENIED. FEDERAL COMMUNICATIONS COMMISSION Carol E. Mattey Deputy Chief, Common Carrier Bureau