[Code of Federal Regulations] [Title 47, Volume 3] [Revised as of October 1, 2003] From the U.S. Government Printing Office via GPO Access [CITE: 47CFR54.305] [Page 121-122] TITLE 47--TELECOMMUNICATION CHAPTER I--FEDERAL COMMUNICATIONS COMMISSION (CONTINUED) PART 54_UNIVERSAL SERVICE--Table of Contents Subpart D_Universal Service Support for High Cost Areas Sec. 54.305 Sale or transfer of exchanges. (a) A carrier that acquires telephone exchanges from an unaffiliated carrier shall receive universal service support for the acquired exchanges at the same per-line support levels for which those exchanges were eligible prior to the transfer of the exchanges. A carrier that has entered into a binding commitment to buy exchanges prior to May 7, 1997 will receive support for the newly acquired lines based upon the average cost of all of its lines, both those newly acquired and those it had prior to execution of the sales agreement. (b) Transferred exchanges in study areas operated by rural telephone companies that are subject to the limitations on the transfer of high- cost universal service support in paragraph (a) of this section may be eligible for a safety valve loop cost expense adjustment based on the difference between a rural incumbent local exchange carrier's index year expense adjustment and subsequent year expense adjustments for the acquired exchanges. Safety valve loop cost expense adjustments shall only be available to rural incumbent local exchange carriers that, in the absence of restrictions on the transfer of high-cost support in Sec. 54.305(a), would qualify for high-cost loop support for acquired exchanges under Sec. 36.631 of this chapter. (c) The index year expense adjustment for acquired exchange(s) shall be equal to the rural incumbent local exchange carrier's high-cost loop cost expense adjustment for acquired exchanges calculated at the end of the company's first year operating the acquired exchange(s). The index year expense adjustment for the acquired exchange(s) shall be established through cost data submitted in accordance with Sec. Sec. 36.611 and 36.612 of this chapter and shall be calculated in accordance with Sec. 36.631 of this chapter. For carriers establishing an index year for acquired exchanges pursuant to Sec. 36.611 of this chapter, the index year for the acquired exchange(s) shall commence at [[Page 122]] the beginning of the next calendar year after the transfer of said exchanges. For carriers establishing an index year for acquired exchanges pursuant to Sec. 36.612 of this chapter, the index year for the acquired exchange(s) shall commence at the beginning of the next calendar quarter after the transfer of said exchanges. The index year expense adjustment for rural telephone companies that have operated exchanges subject to this section for more than a full year on the effective date of this paragraph shall be based on loop cost data submitted in accordance with Sec. 36.612 of this chapter for the year ending on the nearest calendar quarter following the effective date of this paragraph. At the end of each subsequent year, a loop cost expense adjustment for the acquired exchanges will be calculated pursuant to Sec. 36.631 of this chapter and will be compared to the index year expense adjustment. A rural incumbent local exchange carrier's subsequent year expense adjustments shall end on the same calendar quarter as its index year expense adjustment. If acquired exchanges are incorporated into an existing rural incumbent local exchange carrier study area, the rural incumbent local exchange carrier shall exclude costs associated with the acquired exchanges from the costs associated with its pre-acquisition study area in its universal service data submissions filed in accordance with Sec. Sec. 36.611 and 36.612 of this chapter. Such excluded costs shall be used to calculate the rural incumbent local exchange carrier's safety valve loop cost expense adjustment. (d) Up to fifty (50) percent of any positive difference between the subsequent year loop cost expense adjustment and the index year expense adjustment will be designated as the study area's safety valve loop cost expense adjustment and will be available in addition to the amounts available to the study area under Sec. 54.305. In no event shall a study area's safety valve loop cost expense adjustment exceed the difference between the carrier's uncapped study area loop cost expense adjustment calculated pursuant to Sec. 36.631 of this chapter and transferred support amounts available to the acquired exchange(s) under paragraph (a) of this section. Safety valve support shall not transfer with acquired exchanges. (e) The sum of the safety valve loop cost expense adjustment for all eligible study areas operated by rural telephone companies shall not exceed five (5) percent of the total rural incumbent local exchange carrier portion of the annual nationwide loop cost expense adjustment calculated pursuant to Sec. 36.603 of this chapter. The five (5) percent cap on the safety valve mechanism shall be based on the lesser of the rural incumbent local exchange carrier portion of the annual nationwide loop cost expense adjustment calculated pursuant to Sec. 36.603 of this chapter or the sum of rural incumbent local exchange carrier expense adjustments calculated pursuant to Sec. 36.631 of this chapter. The percentage multiplier used to derive study area safety valve loop cost expense adjustments for rural telephone companies shall be the lesser of fifty (50) percent or a percentage calculated to produce the maximum total safety valve loop cost expense adjustment for all eligible study areas pursuant to this paragraph. The safety valve loop cost expense adjustment of an individual rural incumbent local exchange carrier also may be further reduced as described is paragraph (d) of this section. (f) Once an acquisition is complete, the acquiring rural incumbent local exchange carrier shall provide written notice to the Administrator that it has acquired access lines that may be eligible for safety valve support. Rural telephone companies also shall provide written notice to the Administrator of when their index year has been established for purposes of calculating the safety valve loop cost expense adjustment. [62 FR 32948, June 17, 1997, as amended at 66 FR 30087, June 5, 2001]