[Federal Register Volume 69, Number 91 (Tuesday, May 11, 2004)]
[Notices]
[Pages 26097-26103]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-10675]


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FEDERAL COMMUNICATIONS COMMISSION

[CC Docket Number 96-45; FCC 04-37]


Highland Cellular, Inc. Petition for Designation as an Eligible 
Telecommunications Carrier in the Commonwealth of Virginia

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: In this document, the Commission grants in part and denies in 
part the petition of Highland Cellular, Inc. (Highland Cellular) to be 
designated as an eligible telecommunications carrier (ETC) in portions 
of its licensed service area in the Commonwealth of Virginia pursuant 
to section 214(e)(6) of the Communications Act of 1934, as amended (the 
Act).

FOR FURTHER INFORMATION CONTACT: Thomas Buckley, Attorney, Wireline 
Competition Bureau, Telecommunications Access Policy Division, (202) 
418-7400, TTY (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Memorandum Opinion and Order in CC Docket 96-45 released on April 12, 
2004. The full text of this document is available for public inspection 
during regular business hours in the FCC Reference Center, Room CY-
A257, 445 12th Street, SW., Washington, DC 20554.

I. Introduction

    1. In this Order, we grant in part and deny in part the petition of 
Highland Cellular, Inc. (Highland Cellular) to be designated as an 
eligible telecommunications carrier (ETC) in portions of its licensed 
service area in the Commonwealth of Virginia pursuant to section 
214(e)(6) of the Communications Act of 1934, as amended (the Act). In 
so doing, we conclude that Highland Cellular, a commercial mobile radio 
service (CMRS) carrier, has satisfied the statutory eligibility 
requirements of section 214(e)(1) of the Act. Specifically, we conclude 
that Highland Cellular has demonstrated that it will offer and 
advertise the services supported by the federal universal service 
support mechanisms throughout the designated service area. Highland 
Cellular requests ETC designation for a service area that overlaps, 
among other areas, the study areas of three rural telephone companies. 
We find that the designation of Highland Cellular as an ETC in a wire 
center served by Verizon Virginia, Inc. (Verizon Virginia), a non-rural 
carrier, and certain areas served by two of the three rural companies 
serves the public interest and furthers the goals of universal service. 
With regard to the study area of Verizon South, Inc. (Verizon South) 
and the Saltville wire center of United Telephone Company--Southeast 
Virginia (United Telephone) we do not find that ETC designation would 
be in the public interest.
    2. Highland Cellular is licensed to serve the entire study area of 
only one of the three rural companies for which it seeks ETC 
designation--Burkes Garden Telephone Company, Inc. (Burkes Garden). 
Because Highland Cellular is licensed to serve only part of the study 
areas of the other two incumbent rural telephone companies, Highland 
Cellular has requested that we redefine the service areas of these 
rural telephone companies for ETC designation purposes, in accordance 
with section 214(e)(5) of the Act. We agree to the service area 
redefinition proposed by Highland Cellular for the service area of 
United Telephone, subject to agreement by the Virginia State 
Corporation Commission (Virginia Commission) in accordance with 
applicable Virginia Commission requirements. We find that the Virginia 
Commission's first-hand knowledge of the rural areas in question 
uniquely qualifies it to examine the redefinition proposal and 
determine whether it should be approved. Because we do not designate 
Highland Cellular as an ETC in Verizon South's study area, we do not 
redefine this service area.
    3. In response to a request from the Commission, the Federal-State 
Joint Board on Universal Service (Joint Board) is currently reviewing: 
(1) The Commission's rules relating to the calculation of high-cost 
universal service support in areas where a competitive ETC is providing 
service; (2) the Commission's rules regarding support for non-primary 
lines; and (3) the process for designating ETCs. Some commenters in 
that proceeding have raised concerns about the rapid growth of high-
cost universal service support and the impact of such growth on 
consumers in rural areas. The outcome of that proceeding could 
potentially impact, among other things, the support that Highland 
Cellular and other competitive ETCs may receive in the future and the 
criteria used for continued eligibility to receive support.
    4. While we await a recommended decision from the Joint Board, we 
acknowledge the need for a more stringent public interest analysis for 
ETC designations in rural telephone company service areas. As we 
concluded in a recent order granting ETC designation to Virginia 
Cellular in the Commonwealth of Virginia, this framework shall apply to 
all ETC designations for rural areas pending further action by the 
Commission. We conclude that the value of increased competition, by 
itself, is not sufficient to satisfy the public interest test in rural 
areas. Instead, in determining whether designation of a competitive ETC 
in a rural telephone company's service area is in the public interest, 
we weigh numerous factors, including the benefits of increased 
competitive choice, the

[[Page 26098]]

impact of multiple designations on the universal service fund, the 
unique advantages and disadvantages of the competitor's service 
offering, any commitments made regarding quality of telephone service 
provided by competing providers, and the competitive ETC's ability to 
provide the supported services throughout the designated service area 
within a reasonable time frame. Further, in this Order, we impose as 
ongoing conditions the commitments Highland Cellular has made on the 
record in this proceeding. These conditions will ensure that Highland 
Cellular satisfies its obligations under section 214 of the Act. We 
conclude that these steps are appropriate in light of the increased 
frequency of petitions for competitive ETC designations and the 
potential impact of such designations on consumers in rural areas.

II. Discussion

    5. After careful review of the record before us, we find that 
Highland Cellular has met all the requirements set forth in sections 
214(e)(1) and (e)(6) of the Act, to be designated as an ETC by this 
Commission for the portions of its licensed service area described 
herein. First, we find that Highland Cellular has demonstrated that the 
Virginia Commission lacks the jurisdiction to perform the designation 
and that the Commission therefore may consider Highland Cellular's 
petition under section 214(e)(6) of the Act. Second, we conclude that 
Highland Cellular has demonstrated that it will offer and advertise the 
services supported by the federal universal service support mechanisms 
throughout the designated service area upon designation as an ETC in 
accordance with section 214(e)(1) of the Act. In addition, we find that 
designation of Highland Cellular as an ETC in certain areas served by 
rural telephone companies serves the public interest and furthers the 
goals of universal service by better ensuring that consumers in high-
cost and rural areas of Virginia have access to the services supported 
by universal service at affordable rates. Pursuant to our authority 
under section 214(e)(6) of the Act, we therefore designate Highland 
Cellular as an ETC for parts of its licensed service area in the 
Commonwealth of Virginia as set forth below. As explained below, 
however, we do not designate Highland Cellular as an ETC in the study 
area of the rural telephone company, Verizon South, and the Saltville 
wire center of the rural telephone company, United Telephone. In areas 
where Highland Cellular's proposed service areas do not cover the 
entire study area of a rural telephone company, Highland Cellular's ETC 
designation shall be subject to the Virginia Commission's agreement 
with our new definition for the rural telephone company service areas. 
In all other areas, as described herein, Highland Cellular's ETC 
designation is effective immediately. Finally, we note that the outcome 
of the Commission's pending proceeding, now before the Joint Board, 
examining the rules relating to high-cost universal service support in 
competitive areas could potentially impact the support that Highland 
Cellular and other ETCs may receive in the future. This Order is not 
intended to prejudge the outcome of that proceeding. We also note that 
Highland Cellular always has the option of relinquishing its ETC 
designation and its corresponding benefits and obligations to the 
extent that it is concerned about its long-term ability to provide 
supported services in the affected rural study areas.

A. Commission Authority To Perform the ETC Designation

    6. We find that Highland Cellular has demonstrated that the 
Virginia Commission lacks the jurisdiction to perform the requested ETC 
designation and the Commission has authority to consider Highland 
Cellular's petition under section 214(e)(6) of the Act. Highland 
Cellular submitted as an ``affirmative statement'' an order issued by 
the Virginia Commission addressing an application filed by Virginia 
Cellular, LLC (Virginia Cellular) seeking ETC designation. In the 
Virginia Commission Order, the Virginia Commission concluded that it 
``has not asserted jurisdiction over CMRS carriers and that the 
Applicant should apply to the FCC for ETC designation.''
    7. We find that, as required by the Twelfth Report and Order, 65 FR 
47941, August 4, 2000, the Virginia Commission was given the specific 
opportunity to address and resolve the issue of whether it has 
authority to regulate CMRS providers as a class of carriers when it 
rendered its decision in the Virginia Commission Order. We find it 
sufficient that the Virginia Commission indicated that it does not have 
jurisdiction over CMRS carriers and that the Federal Communications 
Commission is the proper venue for CMRS carriers seeking ETC 
designation in the Commonwealth of Virginia. Therefore, based on this 
statement by the Virginia Commission, we find the Virginia Commission 
lacks jurisdiction to designate Highland Cellular as an ETC and this 
Commission has authority to perform the requested ETC designation in 
the Commonwealth of Virginia pursuant to section 214(e)(6) of the Act.

B. Offering and Advertising the Supported Services

    8. Offering the Services Designated for Support. We find that 
Highland Cellular has demonstrated through the required certifications 
and related filings that it now offers, or will offer upon designation 
as an ETC, the services supported by the federal universal service 
support mechanism. As noted in its petition, Highland Cellular is an 
``A2-Band'' cellular carrier for the Virginia 2 Rural Service Area, 
serving the counties of Bland and Tazewell. Highland Cellular states 
that it currently provides all of the services and functionalities 
enumerated in Sec.  54.101(a) of the Commission's rules throughout its 
cellular service area in Virginia. Highland Cellular certifies that it 
has the capability to offer voice-grade access to the public switched 
network, and the functional equivalents to DTMF signaling, single-party 
service, access to operator services, access to interexchange services, 
access to directory assistance, and toll limitation for qualifying low-
income consumers. Highland Cellular also complies with applicable law 
and Commission directives on providing access to emergency services. In 
addition, although the Commission has not set a minimum local usage 
requirement, Highland Cellular certifies it will comply with ``any and 
all minimum local usage requirements adopted by the FCC'' and it 
intends to offer a number of local calling plans as part of its 
universal service offering. As discussed below, Highland Cellular has 
committed to report annually its progress in achieving its build-out 
plans at the same time it submits its annual certification required 
under Sec. Sec.  54.313 and 54.314 of the Commission's rules.
    9. Highland Cellular has also made specific commitments to provide 
service to requesting customers in the service areas in which it is 
designated as an ETC. Highland Cellular states that if a request is 
made by a potential customer within its existing network, Highland 
Cellular will provide service immediately using its standard customer 
equipment. In instances where a request comes from a potential customer 
within Highland Cellular's licensed service area but outside its 
existing network coverage, it will take a number of steps to provide 
service that include determining whether: (1) The requesting customer's 
equipment can be modified or replaced to provide service; (2) a roof-
mounted antenna or other

[[Page 26099]]

equipment can be deployed to provide service; (3) adjustments can be 
made to the nearest cell tower to provide service; (4) there are any 
other adjustments that can be made to network or customer facilities to 
provide service; (5) it can offer resold services from another 
carrier's facilities to provide service; and (6) an additional cell 
site, cell extender, or repeater can be employed or can be constructed 
to provide service. In addition, if after following these steps, 
Highland Cellular still cannot provide service, it will notify the 
requesting party and include that information in an annual report filed 
with the Commission detailing how many requests for service were 
unfulfilled for the past year.
    10. Highland Cellular has further committed to use universal 
service support to further improve its universal service offering by 
constructing new cellular sites in sparsely populated areas within its 
licensed service area but outside its existing network coverage. 
Highland Cellular states that it will modify its construction plans 
based on the areas where ETC designation is granted. Highland Cellular 
notes that the parameters of its build-out plans may evolve over time 
as it responds to consumer demand. In connection with its annual 
reporting obligations, Highland Cellular will submit detailed 
information on its progress toward meeting build-out plans.
    11. Offering the Supported Services Using a Carriers's Own 
Facilities. Highland Cellular has demonstrated that it satisfies the 
requirement of section 214(e)(1)(A) of the Act, that it offer the 
supported services using either its own facilities or a combination of 
its own facilities and resale of another carrier's services. Highland 
Cellular states that it intends to provide the supported services using 
its cellular network infrastructure, which includes ``the same antenna, 
cell-site, tower, trunking, mobile switching, and interconnection 
facilities used by the company to serve its existing conventional 
mobile cellular service customers.'' We find that this certification is 
sufficient to satisfy the facilities requirement of section 
214(e)(1)(A) of the Act.
    12. Advertising the Supported Services. We conclude that Highland 
Cellular has demonstrated that it satisfies the requirement of section 
214(e)(1)(B) of the Act, to advertise the availability of the supported 
services and the charges therefor using media of general distribution. 
Highland Cellular certifies that it will ``use media of general 
distribution that it currently employs to advertise its universal 
service offerings throughout the service areas designated by the 
Commission.'' In addition, Highland Cellular details alternative 
methods that it will employ to advertise the availability of its 
services. For example, Highland Cellular will provide notices at local 
unemployment, social security, and welfare offices so that unserved 
consumers can learn about Highland Cellular's service offerings and 
learn about Lifeline and Linkup discounts. Highland Cellular also 
commits to publicize locally the construction of all new facilities in 
unserved or underserved areas so customers are made aware of improved 
service. We find that Highland Cellular's certification and its 
additional commitments to advertise its service offerings satisfy 
section 214(e)(1)(B) of the Act. In addition, as the Commission has 
stated in prior decisions, because an ETC receives universal service 
support only to the extent that it serves customers, we believe that 
strong economic incentives exist, in addition to the statutory 
obligation, for an ETC to advertise its universal service offering in 
its designated service area.

C. Public Interest Analysis

    13. We conclude that it is ``consistent with the public interest, 
convenience, and necessity'' to designate Highland Cellular as an ETC 
for the portion of its requested service area that is served by the 
non-rural telephone company, Verizon Virginia. We also conclude that it 
is in the public interest to designate Highland Cellular as an ETC in 
Virginia in the study area served by the rural telephone company, 
Burkes Garden and the Bland and Ceres wire centers served by the rural 
telephone company, United Telephone. In determining whether the public 
interest is served, the Commission places the burden of proof upon the 
ETC applicant. We conclude that Highland Cellular has satisfied the 
burden of proof in establishing that its universal service offering in 
these areas will provide benefits to rural consumers. We do not 
designate Highland Cellular as an ETC, however, for the study area of 
Verizon South and the Saltville wire center of United Telephone because 
we find that Highland Cellular has not satisfied its burden of proof in 
this instance.
    14. Non-Rural Study Areas. We conclude that it is ``consistent with 
the public interest, convenience, and necessity'' to designate Highland 
Cellular as an ETC for the portion of its requested service area that 
is served by the non-rural telephone company, Verizon Virginia. We note 
that the Common Carrier Bureau previously found designation of 
additional ETCs in areas served by non-rural telephone companies to be 
per se in the public interest based upon a demonstration that the 
requesting carrier complies with the statutory eligibility obligations 
of section 214(e)(1) of the Act. We do not believe that designation of 
an additional ETC in a non-rural telephone company's study area based 
merely upon a showing that the requesting carrier complies with section 
214(e)(1) of the Act will necessarily be consistent with the public 
interest in every instance. We nevertheless conclude that Highland 
Cellular's public interest showing here is sufficient based on the 
detailed commitments Highland Cellular made to ensure that it provides 
high quality service throughout the proposed rural and non-rural 
service areas; indeed, given our finding that Highland Cellular has 
satisfied the more rigorous public interest analysis for certain rural 
study areas, it follows that its commitments satisfy the public 
interest requirements for non-rural areas. We also note that no parties 
oppose Highland Cellular's request for ETC designation in the study 
area of this non-rural telephone company. We therefore conclude that 
Highland Cellular has demonstrated that its designation as an ETC in 
the study area of this non-rural telephone company, is consistent with 
the public interest, as required by section 214(e)(6) of the Act. We 
further note that the Joint Board is reviewing whether to modify the 
public interest analysis used to designate both non-rural and rural 
ETCs under section 214(e) of the Act. The outcome of that proceeding 
could impact the Commission's public interest analysis for future ETC 
designations in non-rural telephone company service areas.
    15. Rural Study Areas. Based on the record before us, we conclude 
that grant of this ETC designation for the requested rural study areas, 
in part, is consistent with the public interest. In considering whether 
designation of Highland Cellular as an ETC will serve the public 
interest, we have considered whether the benefits of an additional ETC 
in the wire centers for which Highland Cellular seeks designation 
outweigh any potential harms. We note that this balancing of benefits 
and costs is a fact-specific exercise. In determining whether 
designation of a competitive ETC in a rural telephone company's service 
area is in the public interest, we weigh the benefits of increased 
competitive choice, the impact of the designation on the universal 
service fund, the unique advantages and disadvantages of the 
competitor's service offering, any

[[Page 26100]]

commitments made regarding quality of telephone service, and the 
competitive ETC's ability to satisfy its obligation to serve the 
designated service areas within a reasonable time frame. We recognize 
that as part of its review of the ETC designation process in the 
pending proceeding examining the rules relating to high-cost support in 
competitive areas, the Commission may adopt a different framework for 
the public interest analysis of ETC applications. This Order does not 
prejudge the Joint Board's deliberations in that proceeding and any 
other public interest framework that the Commission might ultimately 
adopt.
    16. Highland Cellular's universal service offering will provide 
benefits to customers in situations where they do not have access to a 
wireline telephone. For instance, Highland Cellular has committed to 
serve residences that do not have access to the public switched network 
through the incumbent telephone company. Also, the mobility of Highland 
Cellular's wireless service will provide other benefits to consumers. 
For example, the mobility of telecommunications assists consumers in 
rural areas who often must drive significant distances to places of 
employment, stores, schools, and other critical community locations. In 
addition, the availability of a wireless universal service offering 
provides access to emergency services that can mitigate the unique 
risks of geographic isolation associated with living in rural 
communities. Highland Cellular also submits that, because its local 
calling area is larger than those of the incumbent local exchange 
carriers it competes against, Highland Cellular's customers will be 
subject to fewer toll charges.
    17. We acknowledge arguments made in the record that wireless 
telecommunication offerings may be subject to dropped calls and poor 
coverage. In addition, wireless carriers often are not subject to 
mandatory service quality standards. Highland Cellular has committed to 
mitigate these concerns. Highland Cellular assures the Commission that 
it will alleviate dropped calls by using universal service support to 
build new towers and facilities to offer better coverage. As evidence 
of its commitment to high service quality, Highland Cellular has also 
committed to comply with the Cellular Telecommunications Industry 
Association Consumer Code for Wireless Service, which sets out certain 
principles, disclosures, and practices for the provision of wireless 
service. In addition, Highland Cellular has committed to provide the 
Commission with the number of consumer complaints per 1,000 handsets on 
an annual basis. Therefore, we find that Highland Cellular's commitment 
to provide better coverage to unserved areas and its other commitments 
discussed herein adequately address any concerns about the quality of 
its wireless service.
    18. Although we find that grant of this ETC designation will not 
dramatically burden the universal service fund, we are increasingly 
concerned about the impact on the universal service fund due to the 
rapid growth in the number of competitive ETCs. Specifically, although 
competitive ETCs only receive a small percentage of all high-cost 
universal service support, the amount of high-cost support distributed 
to competitive ETCs is growing at a dramatic pace. For example, in the 
first quarter of 2001, three competitive ETCs received approximately $2 
million or 0.4 percent of high-cost support. In the fourth quarter of 
2003, 112 competitive ETCs received approximately $32 million or 3.7 
percent of high-cost support. This concern has been raised by parties 
in this proceeding, especially as it relates to the long-term 
sustainability of universal service high-cost support. Specifically, 
Verizon Telephone Companies (Verizon) argues that the Commission should 
not rule on the Highland Cellular ETC petition until after it has had 
an opportunity to initiate a broader rulemaking on high-cost fund 
issues. In particular, Verizon contends that the Commission should 
reexamine the rules concerning portability of support for ETCs and the 
designation of ETCs for areas different from those served by the 
incumbent LEC. We recognize that Verizon raises important issues 
regarding universal service high-cost support. As discussed above, the 
Commission has asked the Joint Board to examine, among other things, 
the Commission's rules relating to high-cost universal service support 
in service areas in which a competitive ETC is providing service, as 
well as the Commission's rules regarding support for second lines. We 
note that the outcome of the Commission's pending proceeding examining 
the rules relating to high-cost support in competitive areas could 
potentially impact, among other things, the support that Highland 
Cellular and other competitive ETCs may receive in the future. It is 
our hope that the Commission's pending rulemaking proceeding also will 
provide a framework for assessing the overall impact of competitive ETC 
designations on the universal service mechanisms.
    19. We further conclude that designation of Highland Cellular as an 
ETC in the Burkes Garden study area and the Bland and Ceres wire 
centers served by United Telephone does not create rural creamskimming 
concerns. As discussed below, however, we conclude that designation of 
Highland Cellular as an ETC in the study area of Verizon South and the 
Saltville wire center does raise creamskimming and other concerns, and 
therefore would be inconsistent with the public interest. Rural 
creamskimming occurs when competitors serve only the low-cost, high 
revenue customers in a rural telephone company's study area. Because 
Highland Cellular requests ETC designation in the entire study area of 
Burkes Garden, designation of Highland Cellular as an ETC in this 
portion of its licensed service area does not create creamskimming 
concerns. We note, however, that because the contours of Highland 
Cellular's CMRS licensed area differ from United Telephone's and 
Verizon South's service areas, Highland Cellular will be unable to 
provide facilities-based service to the entire study areas of these two 
companies. In this case, however, Highland Cellular commits to provide 
universal service throughout its licensed service area. It therefore 
does not appear that Highland Cellular is deliberately seeking to enter 
only certain portions of these companies' study areas in order to 
creamskim.
    20. At the same time, we recognize that, for reasons beyond a 
competitive carrier's control, the lowest cost portion of a rural study 
area may be the only portion of the study area that a wireless carrier 
is licensed to serve. Under these circumstances, granting a carrier ETC 
designation for only its licensed portion of the rural study may have 
the same effect on the ILEC as rural creamskimming.
    21. We have analyzed the record before us in this matter and find 
that, for the study area of United Telephone, Highland Cellular's 
designation as an ETC is unlikely to undercut the incumbent's ability 
to serve the entire study area. Our analysis of the population density 
of each of the affected wire centers for United Telephone reveals that 
Highland Cellular will not be serving only low-cost areas to the 
exclusion of high-cost areas. Although there are other factors that 
define high-cost areas, a lower population density indicates a higher 
cost area. The average population density for the United Telephone wire 
centers for which we grant Highland Cellular ETC designation is 19.5 
persons per square mile and the average population density for United

[[Page 26101]]

Telephone's remaining wire centers is 73.21 persons per square mile.
    22. We conclude, however, that it would not be in the public 
interest to designate Highland Cellular as an ETC in the study area of 
Verizon South. Highland Cellular's licensed CMRS service area covers 
only certain wire centers in the study area of Verizon South. Based on 
our examination of the population densities of the wire centers in 
Verizon South's study area, and using the same analysis used by the 
Commission in the Virginia Cellular Order, we find that designating 
Highland Cellular as an ETC in Verizon South's study area would not be 
in the public interest.
    23. In the Virginia Cellular Order, the Commission granted in part 
and denied in part the petition of Virginia Cellular LLC (Virginia 
Cellular) to be designated as an ETC throughout parts of its licensed 
service area in the Commonwealth of Virginia. In that proceeding, 
Virginia Cellular requested ETC designation for the study areas of six 
rural telephone companies. The Commission found that the designation of 
Virginia Cellular as an ETC in certain areas served by five of the six 
rural telephone companies served the public interest by promoting the 
provision of new technologies to consumers in high-cost and rural areas 
of Virginia. However, the Commission denied designation of Virginia 
Cellular as an ETC in one rural incumbent LEC's study area because 
Virginia Cellular would only have served the lowest-cost, highest-
density wire center within the incumbent LEC's study area.
    24. In this case, we find that the ETC designation of Highland 
Cellular in the portion of its licensed service area that covers only 
certain wire centers of Verizon South raises creamskimming concerns 
similar to those identified by the Commission in the Virginia Cellular 
Order. We agree with the arguments of Verizon that Highland Cellular 
should not be allowed to serve only the low-cost customers in a rural 
telephone company's study area. Our analysis of the population data for 
each of the affected rural wire centers, including the wire centers in 
Verizon South's study area that are not covered by Highland Cellular's 
licensed service area, reveals that Highland Cellular would be 
primarily serving customers in the low-cost and high-density portion of 
Verizon South's study area. Specifically, although the wire centers in 
Verizon South's study area that Highland Cellular would be able to 
serve includes two low density wire centers, approximately 94 percent 
of Highland Cellular's potential customers in Verizon South's study 
area would be located in the four highest-density, and thus presumably 
lowest-cost, wire centers in Verizon South's study area. The population 
in these four wire centers represents approximately 42,128 customers. 
In contrast, the remaining approximately six percent of Highland 
Cellular's potential customers in Verizon South's study area, which are 
located in the two lowest-density, highest-cost wire centers, represent 
only approximately 2,800 customers.
    25. As we discussed in the Virginia Cellular Order, when a 
competitor serves only the lowest-cost, highest-density wire centers in 
a study area with widely disparate population densities, the incumbent 
may be placed at a sizeable unfair disadvantage. Universal service 
support is calculated on a study-area-wide basis. Although Verizon 
South did not take advantage of the Commission's disaggregation options 
to protect against possible uneconomic entry in its lower cost area, we 
find on the facts here that designating Highland Cellular as an ETC in 
these requested wire centers potentially could undermine Verizon 
South's ability to serve its entire study area. Specifically, because 
Verizon South's study area includes wire centers with highly variable 
population densities, and therefore highly variable cost 
characteristics, disaggregation may be a less viable alternative for 
reducing creamskimming opportunities. This problem may be compounded 
where the cost characteristics of the incumbent and competitor differ 
substantially. We therefore reject arguments that incumbents can, in 
every instance, protect against creamskimming by disaggregating high-
cost support to the higher-cost portions of the incumbent's study area.
    26. Finally, we conclude that designating Highland Cellular as an 
ETC in a portion of United Telephone's Saltville wire center would not 
serve the public interest. Although the Wireline Competition Bureau 
previously designated an ETC for portions of a rural telephone 
company's wire center, we conclude that making designations for a 
portion of a rural telephone company's wire center would be 
inconsistent with the public interest. In particular, we conclude, that 
prior to designating an additional ETC in a rural telephone company's 
service area, the competitor must commit to provide the supported 
services to customers throughout a minimum geographic area. A rural 
telephone company's wire center is an appropriate minimum geographic 
area for ETC designation because rural carrier wire centers typically 
correspond with county and/or town lines. We believe that requiring a 
competitive ETC to serve entire communities will make it less likely 
that the competitor will relinquish its ETC designation at a later 
date. Because consumers in rural areas tend to have fewer competitive 
alternatives than consumers in urban areas, such consumers are more 
vulnerable to carriers relinquishing ETC designation. Highland Cellular 
has stated that, should the Commission impose a requirement that 
competitive ETCs serve complete rural telephone company wire centers, 
it would not seek designation in the Saltville wire center. We, 
therefore, do not designate Highland Cellular as an ETC in the 
Saltville wire center.

D. Designated Service Area

    27. Highland Cellular is designated an ETC in the requested areas 
served by the non-rural telephone company, Verizon Virginia, as listed 
in Appendix A. We designate Highland Cellular as an ETC throughout most 
of its CMRS licensed service area in the Virginia 2 Rural Service Area. 
Highland Cellular is designated as an ETC in the area served by the 
rural telephone company, Burkes Garden, whose study area Highland 
Cellular is able to serve completely, as listed in Appendix B. Subject 
to the Virginia Commission's agreement on redefining the service area 
of United Telephone, we also designate Highland Cellular as an ETC for 
the entire Bland and Ceres wire centers as listed in Appendix C. 
Finally, we do not designate Highland Cellular as an ETC in the study 
area served by Verizon South or the Saltville wire center served by 
United Telephone.
    28. We designate Highland Cellular as an ETC in the Bland and Ceres 
wire centers in the study area of United Telephone. We find that 
because the Bland and Ceres wire centers are low-density, high-cost 
wire centers, concerns about undermining United Telephone's ability to 
serve the entire study area are minimized. Accordingly, we find that 
denying Highland Cellular ETC status for United Telephone's Bland and 
Ceres wire centers simply because Highland Cellular is not licensed to 
serve the twenty-five remaining wire centers would be inappropriate. 
Consequently, we conclude that it is in the public interest to 
designate Highland Cellular as an ETC in United Telephone's Bland and 
Ceres wire centers and include those wire centers in Highland 
Cellular's service area, as redefined below.
    29. Finally, for the reasons described above, the service area we 
designate for Highland Cellular does not contain any

[[Page 26102]]

portion of Verizon South's study area or United Telephone's Saltville 
wire center.

E. Redefining Rural Company Service Areas

    30. We redefine the service area of United Telephone pursuant to 
section 214(e)(5) of the Act. Consistent with prior rural service area 
redefinitions, we redefine each wire center in the United Telephone 
study area as a separate service area. Our decision to redefine the 
service area of United Telephone is subject to the review and final 
agreement of the Virginia Commission in accordance with applicable 
Virginia Commission requirements. Accordingly, we submit our 
redefinition proposal to the Virginia Commission and request that it 
examine such proposal based on its unique familiarity with the rural 
areas in question.
    31. In order to designate Highland Cellular as an ETC in a service 
area that is different from the affected rural telephone company study 
area, we must redefine the service areas of the rural telephone company 
in accordance with section 214(e)(5) of the Act. We redefine the 
affected service area only to determine the portions of the rural 
service area in which to designate Highland Cellular and future 
competitive carriers seeking ETC designation in the same rural service 
area. In defining United Telephone's service area to be different than 
its study area, we are required to act in concert with the relevant 
state commission, ``taking into account the recommendations'' of the 
Joint Board. The Joint Board's concerns regarding rural telephone 
company service areas as discussed in the 1996 Recommended Decision, 
FCC 96J-1, June 19, 1996, are as follows: (1) Minimizing creamskimming; 
(2) recognizing that the Act places rural telephone companies on a 
different competitive footing from other LECs; and (3) recognizing the 
administrative burden of requiring rural telephone companies to 
calculate costs at something other than a study area level. We find 
that the proposed redefinition properly addresses these concerns.
    32. First, we conclude that redefining United Telephone's service 
area at the wire center level should not result in opportunities for 
creamskimming. We have analyzed the population densities of the wire 
centers in United Telephone's study area where Highland Cellular will 
and will not receive support and conclude that this redefinition does 
not raise creamskimming concerns. We note that we do not propose 
redefinition in areas where ETC designation would potentially undermine 
the incumbent's ability to serve its entire study area. Therefore, we 
conclude, based on the particular facts of this case, that there is 
little likelihood of rural creamskimming effects in redefining the 
service area of United Telephone.
    33. Second, our decision to redefine the service area includes 
special consideration for the affected rural carrier. We find no 
evidence that the proposed redefinition will harm United Telephone. 
Although no parties have opposed the specific redefinition of United 
Telephone's service area, Verizon has raised general concerns that the 
designation of Highland Cellular as a competitive ETC will result in 
inefficient investment or will strain the universal service fund. We 
find no evidence that the proposed redefinition will harm United 
Telephone. We note that redefining the service area of the affected 
rural telephone company will not change the amount of universal service 
support that is available to the incumbents.
    34. Third, we find that redefining United Telephone's service area 
as proposed will not require United Telephone to determine its costs on 
any basis other than the study area level. Rather, the redefinition 
merely enables competitive ETCs to serve areas that are smaller than 
the entire ILEC study area. Our decision to redefine the service area 
does not modify the existing rules applicable to rural telephone 
companies for calculating costs on a study area basis, nor, as a 
practical matter, the manner in which United Telephone will comply with 
these rules. Therefore, we find that the concern of the Joint Board 
that redefining rural service areas might impose additional 
administrative burdens on affected rural telephone companies is not at 
issue here.
    35. In accordance with Sec.  54.207(d) of the Commission's rules, 
we submit this Order to the Virginia Commission, and request that the 
Virginia Commission treat this Order as a petition to redefine a 
service area under Sec.  54.207(d)(1) of the Commission's rules. 
Highland Cellular's ETC designation in the service area of United 
Telephone is subject to the Virginia Commission's review and agreement 
with the redefinition proposal herein. We find that the Virginia 
Commission is uniquely qualified to examine the proposed redefinition 
because of its familiarity with the rural service area in question. 
Upon the effective date of the agreement of the Virginia Commission 
with our redefinition of the service area of United Telephone, our 
designation of Highland Cellular as an ETC in the area served by United 
Telephone as set forth herein, shall also take effect. In all other 
areas for which this Order grants ETC status to Highland Cellular, as 
described herein, such designation is effective immediately. If, after 
its review, the Virginia Commission determines that it does not agree 
with the redefinition proposal herein, we will reexamine Highland 
Cellular's petition with regard to redefining United Telephone's 
service area.

F. Regulatory Oversight

    36. We note that Highland Cellular is obligated under section 
254(e) of the Act to use high-cost support ``only for the provision, 
maintenance, and upgrading of facilities and services for which support 
is intended'' and is required under Sec. Sec.  54.313 and 54.314 of the 
Commission's rules to certify annually that it is in compliance with 
this requirement. Separate and in addition to its annual certification 
filing under Sec. Sec.  54.313 and 54.314 of our rules, Highland 
Cellular has committed to submit records and documentation on an annual 
basis detailing its progress towards meeting its build-out plans. 
Highland Cellular also has committed to become a signatory to the 
Cellular Telecommunications Industry Association's Consumer Code for 
Wireless Service and provide the number of consumer complaints per 
1,000 mobile handsets on an annual basis. In addition, Highland 
Cellular will annually submit information detailing how many requests 
for service from potential customers were unfulfilled for the past 
year. We require Highland Cellular to submit these additional data to 
the Commission and USAC on October 1 of each year beginning October 1, 
2004. We find that reliance on Highland Cellular's commitments is 
reasonable and consistent with the public interest and the Act and the 
Fifth Circuit decision in Texas Office of Public Utility Counsel v. 
FCC. We conclude that fulfillment of these additional reporting 
requirements will further the Commission's goal of ensuring Highland 
Cellular satisfies its obligation under section 214(e) of the Act to 
provide supported services throughout its designated service area. We 
note that the Commission may institute an inquiry on its own motion to 
examine any ETC's records and documentation to ensure that the high-
cost support it receives is being used ``only for the provision, 
maintenance, and upgrading of facilities and services'' in the areas 
where it is designated as an ETC. Highland Cellular will be required to 
provide such records and documentation to the Commission and

[[Page 26103]]

USAC upon request. We further emphasize that if Highland Cellular fails 
to fulfill the requirements of the statute, our rules and the terms of 
this Order after it begins receiving universal service support, the 
Commission has authority to revoke its ETC designation. The Commission 
also may assess forfeitures for violations of Commission rules and 
orders.

III. Anti-Drug Abuse Act Certification

    37. Pursuant to section 5301 of the Anti-Drug Abuse Act of 1988, no 
applicant is eligible for any new, modified, or renewed instrument of 
authorization from the Commission, including authorizations issued 
pursuant to section 214 of the Act, unless the applicant certifies that 
neither it, nor any party to its application, is subject to a denial of 
federal benefits, including Commission benefits. Highland Cellular has 
provided a certification consistent with the requirements of the Anti-
Drug Abuse Act of 1988. We find that Highland Cellular has satisfied 
the requirements of the Anti-Drug Abuse Act of 1988, as codified in 
Sec. Sec.  1.2001-1.2003 of the Commission's rules.

IV. Ordering Clauses

    38. Pursuant to the authority contained in section 214(e)(6) of the 
Communications Act, 47 U.S.C. 214(e)(6), Highland Cellular, Inc. is 
designated an eligible telecommunications carrier for portions of its 
licensed service area in the Commonwealth of Virginia to the extent 
described herein.
    39. Pursuant to the authority contained in section 214(e)(5) of the 
Communications Act, 47 U.S.C. 214(e)(5), and Sec.  54.207(d) and (e) of 
the Commission's rules, 47 CFR 54.207(d) and (e), the request of 
Highland Cellular, Inc. to redefine the service area of United 
Telephone Company--Southeast Virginia in Virginia is granted to the 
extent described herein and subject to the agreement of the Virginia 
State Corporation Commission with the Commission's redefinition of the 
service area. For United Telephone Company--Southeast Virginia, upon 
the effective date of the agreement of the Virginia State Corporation 
Commission with the Commission's redefinition of such service area, 
this designation of Highland Cellular, Inc. as an ETC for such area as 
set forth herein shall also take effect.
    40. Pursuant to the authority contained in section 214(e)(5) of the 
Communications Act, 47 U.S.C. 214(e)(5), and Sec.  54.207(d) and (e) of 
the Commission's rules, 47 CFR 54.207(d) and (e), the request of 
Highland Cellular, Inc. to redefine the service area of Verizon South, 
Inc.--Virginia in Virginia is denied.
    41. It is further ordered that a copy of this Memorandum Opinion 
and Order shall be transmitted by the Office of the Secretary to the 
Virginia State Corporation Commission and the Universal Service 
Administrative Company.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Appendix A--Virginia Non-Rural Telephone Company Wire Centers for 
Inclusion in Highland Cellular's ETC Service Area

Verizon Virginia Inc.

Honaker (wire center code HNKRVAHK)

Appendix B--Virginia Rural Telephone Company Study Areas for Inclusion 
in Highland Cellular's ETC Service Area

Burkes Garden Telephone Company, Inc. (Study Area Code 190220)

Appendix C--Virginia Rural Telephone Company Wire Centers for Inclusion 
in Highland Cellular's ETC Service Area

United Telephone Company--Southeast Virginia

Bland (wire center code BLNDVAXA)
Ceres (wire center code CERSVAX)

[FR Doc. 04-10675 Filed 5-10-04; 8:45 am]
BILLING CODE 6712-01-P