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Before the
Federa                 l Communications Commission
Wash                       ington, D.C. 20554


In the Matter of)
     )     
Accipiter Communications, Inc.   )     AAD 96-96
     )          
Petition For Waiver of Sections 36.611 and   )
36.612 of the Commission's Rules )


ORDER
             
Adopted:  February 19, 1998                                       Released:  February 23, 1998

By the Chief, Accounting and Audits Division:

I.   INTRODUCTION
           
     1.    On September 12, 1996, Accipiter Communications, Inc ("Accipiter") filed a
petition ("Petition") requesting a waiver of Sections 36.611 and 36.612 of the Commission's
rules to enable it to receive high cost loop support immediately.  On September 30, 1996, the
Accounting and Audits Division ("Division") released a public notice soliciting comment on the
petition for waiver.  No comments were filed.  In this Order, we deny Accipiter's Petition.

           II.   BACKGROUND
                  
     2.    In 1984, the Commission established high cost support mechanisms to promote
the nationwide availability of telephone service at reasonable rates.  Specifically, high cost loop
support allows incumbent local exchange carriers with high local loop costs to allocate an
additional portion of those costs to the interstate jurisdiction, enabling the state jurisdictions to
establish lower local exchange rates in study areas receiving such assistance.  Under these rules,
a company's high cost loop support is based on the relationship of its historical loop cost to the
national average historical loop cost.

     3.    In the Universal Service Order released on May 8, 1997, the Commission
established new federal universal service support mechanisms consistent with the
Communications Act of 1934, as amended (the "Act").  Under the new federal universal
support mechanisms, support for high cost areas will be based upon forward-looking economic
cost mechanisms.  Thus, a carrier's support will be based on the forward-looking economic cost
of providing the supported services to a service area.  Non-rural incumbent local exchange
carriers ("incumbent LECs") will receive support based on forward-looking economic costs
beginning January 1, 1999; rural incumbent LECs will begin to receive support based on
forward-looking economic costs no earlier than January 1, 2001.   Until an incumbent LEC's
high cost loop support is based on forward-looking economic cost, its support will continue to
be based on historical cost data.  
     
     4.    In accordance with Sections 36.611 and 36.612 of the Commission's rules, on
July 31 of each year, incumbent LECs submit to the National Exchange Carrier Association
("NECA") loop cost data for the prior year.  NECA compiles and analyzes these data to
determine the average cost per loop for each incumbent LEC as well as the nationwide average
cost per loop.  Each incumbent LEC's high cost loop support amount for the following year is
based upon the relationship between the incumbent LEC's average cost per loop and the
nationwide average cost per loop.  Because the cost data is not submitted by carriers until seven
months after the end of a calendar year and because NECA requires time to compile and analyze
data, support is not provided generally to carriers until two years after costs are incurred.  This
period can be less than two years if quarterly updates are filed.

III.   PETITION 
                            
     5.    On October 11, 1995, the Arizona Public Utility Commission ("Arizona PUC")
granted Accipiter, a newly-formed company, a Certificate of Convenience and Necessity to
provide local exchange service to portions of Maricopa and Yavapai Counties.  US West
Communications, Inc. ("US West") had provided telephone service to portions of Accipiter's
proposed service area.  On November 14, 1996, the Division granted Accipiter a study area
waiver associated with Accipiter's purchase of the two exchanges previously operated by US
West.  The study area waiver was granted based on Accipiter's assertion that its planned
upgrades would improve customer service and that the estimated increase in high cost loop
support draw would not have a substantial adverse impact on the high cost loop support
mechanism.  Accipiter commenced service to the two exchanges on December 7, 1996.  

     6.    In its Petition, Accipiter states that, as a new incumbent LEC, it lacks the
historical cost data upon which to base high cost loop support distributions and, therefore,
requests a waiver of Sections 36.611 and 36.612 to permit it to receive immediate high cost loop
support.  In the absence of the requested relief, Accipiter will not receive any high cost loop
support revenues for up to two years as a result of the application of the high cost loop support
distribution rules.  As actual costs become known, Accipiter proposes to provide documentation
to NECA and to true up the payments it receives on a quarterly basis.

     7.    Accipiter argues that application of the Commission's rules in this instance would
be contrary to the public interest because without an opportunity for immediate high cost loop
support, it would be compelled to elevate local rates, thereby discouraging subscriptions to
service and jeopardizing the future availability of service.  
                              IV.  DISCUSSION

     8.     Under Section 1.3 of the Commission's rules, we are required to grant waivers
"if good cause therefor is shown."  As interpreted by the courts, this requires that a petitioner
demonstrate that "special circumstances warrant a deviation from the general rule and such a
deviation will serve the public interest."  
     
     9.     It has been long-standing policy not to waive Sections 36.611 and 36.612 of the
Commission's rules.  In fact, we have granted waivers of these sections only when a requesting
carrier proposes to serve or is serving previously unserved areas.  Although Accipiter asserts
that a portion of its service area was previously unserved, US West had provided service in the
area.  In addition, allowing Accipiter to receive immediate high cost loop support would result
in support for US West and for Accipiter for the same loops.  Accipiter does not assert any
special circumstances affecting it that were not faced by any of the numerous rural telephone
companies that have received study area waiver requests to obtain exchanges.  As a result,
Accipiter fails to demonstrate the special circumstances that would support the grant of a waiver
of Sections 36.611 and 36.612.   
     
     10.   We note that the Commission's high cost loop support distribution rules related
to the sale and acquisition of exchanges have been in place for many years.  In negotiating the
purchase price of an exchange, therefore, it is incumbent upon the purchaser and the seller to
take into consideration the necessary investments and future cash flows related to the sale.  In
fact, in its initial study area waiver petition, Accipiter provided a description of its upgrades and
extensions of service, but made no claim that its planned upgrades would be burdened by the
application of Sections 36.611 and 36.612.  Thus, Accipiter could have, but failed, to request
a waiver for immediate high cost loop support at its first opportunity to do so.  Because high
cost loop support receipts represent an important source of funds for the operation of an
exchange with high loop costs, the acquiring company would undoubtedly negotiate a lower price
for the exchange if the high cost loop support payments were delayed than it would be willing
to pay if there were no delay.  Because the selling company and the acquiring company negotiate
the transfer of an exchange with full knowledge of the Commission's rules that apply to the
transaction, we see no reason to waive the rules to compensate the acquiring company further. 
Consequently, we conclude that Accipiter's request for immediate high cost loop support must
be denied.  
 
                      V.   ORDERING CLAUSE
     
     11.     Accordingly, IT IS ORDERED, pursuant to Sections 1, 4(i), 5(c), 201, 202,
205, 218-220, and 254 of the Communications Act of 1934, as amended, 47 U.S.C.  151,
154(i), 155(c), 201, 202, 205, 218-220, 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 Petition of Accipiter
Communications, Inc. for Waiver of Sections 36.611 and 36.612 of the Commission's rules,
47 C.F.R.  36.611 and 36.612 IS DENIED.

     
     FEDERAL COMMUNICATIONS
COMMISSION



     Kenneth P. Moran
     Chief, Accounting and Audits Division