Federal Communications Commission DA 15-766
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
Connect America Fund
Allband Communications Cooperative
Petition for Waiver of Certain High-Cost
Universal Service Rules
)
)
)
)
)
)
)
WC Docket No. 10-90
ORDER
Adopted:  June 29, 2015 Released:  June 29, 2015
By the Chief, Wireline Competition Bureau:  
I. INTRODUCTION 
1. In this Order, the Wireline Competition Bureau (Bureau) directs the Universal Service 
Administrative Company (USAC) to undertake certain factual inquiries and on an interim basis extends a 
waiver previously granted to Allband Communications Cooperative (Allband or company or ACC) until 
the earlier of either December 31, 2015 or the date on which further action is taken on the pending waiver 
request, without prejudice to the ultimate determination as to whether relief is warranted.  
II. BACKGROUND
2. In the USF/ICC Transformation Order,
1
the Commission comprehensively reformed 
federal universal service funding for high-cost, rural areas, adopting fiscally responsible, accountable, 
incentive-based policies to preserve and advance voice and broadband-capable networks while ensuring 
fairness for consumers and businesses that ultimately pay into the universal service fund.
2
  The 
Commission adopted new section 54.302, establishing a presumptive per line cap of $250 per month on 
total high-cost universal service support for all ETCs, including incumbent local exchange carriers
(LECs), to be phased in over three years.
3
  The Commission concluded that support in excess of that 
amount should not be provided without further justification.
4
3. The USF/ICC Transformation Order noted that “any carrier negatively affected by the 
universal service reforms . . . [may] file a petition for waiver that clearly demonstrates that good cause 
exists for exempting the carrier from some or all of those reforms, and that waiver is necessary and in the 
public interest to ensure that consumers in the area continue to receive voice service.”
5
  The Commission 
                                                          
1
Connect America Fund et al., WC Docket No. 10-90 et al., Report and Order and Further Notice of Proposed 
Rulemaking, 26 FCC 17663 (2011) (USF/ICC Transformation Order), aff’d sub nom In re: FCC 11-161, 753 F.3d 
1015 (10th Cir. 2014).
2
See id. at 17670, para. 11.
3
47 C.F.R. § 54.302. 
4
USF/ICC Transformation Order, 26 FCC Rcd at 17765, para. 274.
5
Id. at 17839-40, paras. 539-40.  The Commission’s intent in discussing waivers relating to reductions in federal 
universal service fund (USF) support was not to replace the ordinary standard for granting waivers under section 1.3 
of the Commission’s rules, but rather to provide guidance in advance to potential applicants of the circumstances 
that would be persuasive and compelling grounds for grant of a waiver under that waiver standard to assist potential 
(continued…)
Federal Communications Commission DA 15-766
2
stated that “[w]e envision granting relief only in those circumstances in which the petitioner can 
demonstrate that the reduction in existing high-cost support would put consumers at risk of losing voice 
services, with no alternative terrestrial providers available to provide voice telephony service.”
6
  In 
delegating to the Wireline Competition Bureau the authority to approve or deny requests for waiver,
7
the 
Commission indicated that it did not anticipate granting waiver requests routinely or for “undefined 
duration[s]”
8
and provided guidance on the types of information that would be relevant for such requests.
9
  
In the Fifth Order on Reconsideration, the Commission further clarified that “we envision granting relief 
to incumbent telephone companies only in those circumstances in which the petitioner can demonstrate 
that consumers served by such carriers face a significant risk of losing access to a broadband-capable 
network that provides both voice as well as broadband today, at reasonably comparable rates, in areas 
where there are no alternative providers of voice or broadband.”
10
  
4. On July 25, 2012, the Bureau granted Allband a three-year waiver of section 54.302 of 
the Commission’s rules so that Allband could receive the lesser of high-cost universal service support 
based on its actual costs or the annualized total high-cost support that it received for the period January 1, 
2012 through June 30, 2012.
11
  In that order, the Bureau stated that if Allband determined that additional 
support above the $250 cap was necessary after June 30, 2015, “Allband should file with the Bureau the 
financial and operational information necessary for the Bureau to determine what further relief is 
appropriate based on the specific circumstances present at that time.”
12
5. On December 31, 2014, Allband filed a petition for further waiver of section 54.302 and 
included its 2012 and 2013 audited financial statements.
13
  In this Further Waiver Petition, Allband 
requests that the Commission extend Allband’s current waiver for an additional 12 years.
14
  Allband states 
that a waiver is necessary to allow Allband to continue to provide voice services, repay its Rural Utilities 
(Continued from previous page)                                                      
applicants in effectively formulating their waiver petitions.  See Connect America Fund et al., WC Docket No 10-90 
et al., Fifth Order on Reconsideration, 27 FCC Rcd 14549, 14556-57, para. 19 (2012) (Fifth Order on 
Reconsideration).  Generally, the Commission’s rules may be waived if good cause is shown.  47 C.F.R. § 1.3. The 
Commission may exercise its discretion to waive a rule where the particular facts make strict compliance 
inconsistent with the public interest.  Northeast Cellular Telephone Co. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 
1990) (Northeast Cellular).  In addition, the Commission may take into account considerations of hardship, equity, 
or more effective implementation of overall policy on an individual basis.  WAIT Radio v. FCC, 418 F.2d 1153, 
1159 (D.C. Cir. 1969); Northeast Cellular, 897 F.2d at 1166.  Waiver of the Commission’s rules is appropriate only 
if both (i) special circumstances warrant a deviation from the general rule and (ii) such deviation will serve the 
public interest. Northeast Cellular, 897 F.2d at 1166.
6
USF/ICC Transformation Order, 26 FCC Rcd at 17840, para. 540.
7
Id. at 17840, 17842, paras. 540, 544.
8
Id. at 17766, para. 278.
9
Id. at 17840-42, paras. 542, 544.
10
Fifth Order on Reconsideration, 27 FCC Rcd at 14557, para. 21.
11
See Allband Communications Cooperative Petition for Waiver of Certain High-Cost Universal Service Rules, WC 
Docket No. 10-90, Order, 27 FCC Rcd 8310 (Wireline Comp. Bur. 2012).
12
Id. at 8315, para. 16.
13
Petition of Allband Communications Cooperative (Allband) for Further Waiver of Part 54.302, WC Docket No. 
10-90, et al. (filed Dec. 31, 2014) (Further Waiver Petition).
14
Id. at 1.
Federal Communications Commission DA 15-766
3
Service loan, and continue operations.
15
  Subsequently, on May 18, 2015, Allband filed its 2014 audited 
financial statements.
16
III. DISCUSSION
6. The Bureau has reviewed the materials submitted and identified certain accounting issues 
that require further review.
17
The Bureau is unable to determine based on the information submitted the 
extent to which relief may be appropriate.  The Bureau directs USAC to undertake the necessary inquiry 
and report its findings to the Bureau as outlined below.
7. First, the Bureau directs USAC to review Allband’s cost allocations between regulated 
and non-regulated activities, with a particular focus on the allocation of general and administrative 
expenses recorded in Account 6720 between regulated and non-regulated services pursuant to sections
64.901 - 64.903 of the Commission’s rules per Allband’s financial records for the period from January 1, 
2012 through December 31, 2014, the years included within the term of the existing waiver. The Bureau
notes certain incongruities between the financial results reported by the incumbent telephone company, 
ACC, compared with those reported by ACC’s wholly-owned, unregulated subsidiary Allband 
Multimedia (AMM).  As shown in the table below, while AMM earned 77 percent of the cooperative’s 
customer revenues in 2014 and has between 500-600 customers (in contrast to ACC’s 170 access lines),
18
it was allocated only 32 percent of the cooperative’s operating expense, even when depreciation expense, 
which is incurred entirely by ACC, is excluded.  
Year Ending December 31, 2014
19
$ % $ % 
OPERATING REVENUES
Total operating revenues 1,598,112 509,387 
USF revenues 1,448,594 0 
Total operating revenues
(excluding USF) 149,518 23% 509,387 77%
OPERATING EXPENSES
Plant specific operations 187,016 56% 149,103 44%
Plant nonspecific operations 105,520 56% 82,376 44%
Customer operations 72,877 49% 77,085 51%
Total operating expenses
(excluding depreciation & 
amortization) 675,837 68% 316,697 32%
Depreciation and amortization 374,439 100% 0 0%
                                                          
15
Id.
16
See Letter from Don L. Keskey, Counsel for Allband Communications Cooperative, to Marlene H. Dortch, 
Federal Communications Commission Secretary, Attach. B (filed May 18, 2015) (May 18, 2015 Ex Parte).  
17
In 2011, the Commission concluded that “any company that seeks additional funding will be subject to a thorough 
total earnings review.”  USF/ICC Transformation Order, 26 FCC Rcd at 17739, para. 202.
18
ASR Analytics Broadband Technology Opportunities Program Evaluation Study, Case Study Report Merit 
Network, Inc., National Telecommunications and Information Administration, Order No. D10PD18645 (submitted 
Mar. 4, 1014), http://www2.ntia.doc.gov/files/merit_case_study_report_order_number_d10pd18645.pdf (stating 
AMM has between 500 and 600 subscribers); Further Waiver Petition at 14 (stating that ACC has a total of 170 
access lines).
19
May 18, 2015 Ex Parte, Attach. B.
Federal Communications Commission DA 15-766
4
Total operating expenses
(including depreciation & 
amortization) 1,050,276 77% 316,697 23%
8. USAC should examine the company’s cost allocation procedures and report any instances 
in which the allocation procedures were not consistent with the carrier’s allocation methodology or 
Commission rules and the resulting effect on support calculations. For the years 2012-2014, for 
allocations made on the basis of direct factors, such as labor hours spent on an activity, Allband must
provide USAC with those factors and provide supporting documentation for them such as quarterly time 
sheet summaries in electronic spreadsheet format.  For allocations made on the basis of indirect factors, 
such as those developed in Allband’s annual jurisdictional cost process or from vendor invoices, Allband
must provide USAC with those factors and provide appropriate summary documentation for them, in 
electronic spreadsheet format when possible.
20
  USAC shall provide a report with both direct and indirect 
factors to the Commission, as well as a summary of USAC’s conclusions regarding the appropriateness of 
those factors.
9. Second, as the table above shows, ACC incurs 77 percent of total operating expenses yet
receives only 23 percent of non-USF revenue.  Further, ACC provides and maintains the loops, transport 
network, and Internet Service Provider (ISP) interconnections that AMM uses to service its customers.
21
  
We direct USAC to conduct an inquiry and obtain supporting documentation from Allband to determine 
why ACC’s share of the non-USF revenues is not greater than 23 percent when ACC provides and 
maintains the underlying facilities and services used by AMM.  In particular, what were the specific 
monthly rates ACC charged for provisioning and maintaining the lines it provides to AMM?  On average 
during 2014, what was the number of lines per month for which ACC invoiced AMM, and what was the 
average rate per line charged by ACC to AMM during 2014?  When services are provided from a carrier 
to an affiliate pursuant to a tariff, under the Commission’s rules those services are recorded in the 
appropriate revenue account at the tariffed rate.  The Commission’s rules further establish a floor, the 
higher of fair market value or fully distributed cost, below which a transaction may not be recorded.
22
  
Was the floor determined consistent with the section 32.27?  Besides provisioning and maintenance 
services that ACC provided for AMM’s end-user customer lines, what other facilities and services did 
ACC provide to AMM during 2014?  What were the rates ACC charged for those services, and was the 
floor determined consistent with section 32.27?  Allband must provide USAC with the documentation 
necessary to make these determinations. 
10. Third, we note that the amount of money owed by AMM, the unregulated subsidiary, to 
ACC, the regulated telephone company, has varied significantly between 2010 and 2013.
23
                                                          
20
Allband describes its cost allocation processes in its recent ex parte.  SeeMay 18, 2015 Ex Parte, Attach. C.  See 
also Allband Communications Cooperative Petition for Waiver of Part 54.302 and the Framework to Limit 
Reimbursable Capital and Operating Costs, WC Docket No. 10-90, WT Docket No. 10-208, Appx. 2, Attach. 1 
(filed Feb. 3, 2012) (Allband 2012 Waiver Petition).
21
Allband 2012 Waiver Petition at Appx. 2, Attach. 1, Exh. 1.
22
See 47 C.F.R. § 32.27(c)(1).
23
The Commission recently stated that unpaid balances among regulated and unregulated affiliates are inconsistent 
with section 32.27 of the Commission’s rules.  See Adak Eagle Enterprises, LLC and Windy City Cellular, LLC 
Petitions for Waiver of Certain High-Cost Universal Service Rules, WC Docket No. 10-90, WT Docket No. 10-208, 
FCC 15-51, para. 9 (rel. May 7, 2015).
Federal Communications Commission DA 15-766
5
2014
24
2013
25
2012
26
2011
27
2010
28
Net Accounts Receivable
(Amounts owed to ACC by 
AMM)
$19,670 $146,449 $132,800 $67,402 $19,815
In 2010, AMM owed ACC just under $20,000, whereas by 2013 that amount had grown to over 
$145,000.  The amount AMM owed to ACC decreased again to just under $20,000 in 2014.   USAC 
should conduct an inquiry and obtain Allband’s supporting documentation to determine why the amount 
owed to the regulated affiliate increased from 2010 to 2013, and the age of those accounts payable owed 
by AMM to ACC.  USAC also should examine the amounts owed from December 31, 2010 through 
December 31, 2014, and report the extent to which amounts were more than 30 days past due.  Allband 
must provide USAC with the documentation necessary to make these determinations.
11. Fourth, Allband’s 2014 financials show that ACC borrowed $300,000 from the 
company’s founder and President, John Reigle, at an annual interest rate of 12 percent.
29
  We direct 
USAC to conduct an inquiry and obtain Allband’s supporting documentation to determine how the ceiling 
for the interest rate for this loan, as defined in 47 C.F.R. § 32.27(c)(2), was calculated.  Further, USAC 
shall report on the specific uses the $300,000 in loan funds were put by ACC. Allband must provide 
USAC with the documentation necessary to make these determinations.    
12. Fifth, USAC should conduct an inquiry and obtain Allband’s supporting documentation 
to to determine if Allband currently or in the past owned a residential rental property, and if so, how 
Allband has accounted for the costs and rental revenues for the property.  On line 19(h) of its 2010 IRS 
Form 990 (the latest year this form is publically available for Allband), the cooperative listed a 
depreciation recovery period of 27.5 years for a “Residential Rental Property.”  However, there has been 
no mention of a “residential rental property” in the other materials Allband has submitted with its waiver 
petitions. Allband must provide USAC with the documentation necessary to make these determinations.    
13. We direct USAC to submit the results of its inquiry in a memorandum to the Bureau by 
September 30, 2015.
30
  However, if USAC anticipates that it needs additional time to complete its work, it 
should inform the Bureau of how much longer it requires no later than September 1, 2015.  
14. As the Bureau is unable to make a determination as to the necessity of the waiver filed by 
Allband, we extend Allband’s current waiver until the earlier of either December 31, 2015 or the date on 
which further action is taken on the pending waiver request.  As such, USAC can continue to provide to 
Allband of the lesser of high-cost universal service support based on Allband’s actual costs or the 
annualized total high-cost support that it received for the period January 1, 2012 through June 30, 2012.     
This will maintain the status quo while USAC conducts its review and reports back to the Bureau, without 
prejudging whether Allband is in compliance with the Commission’s rules.
31
   
                                                          
24
Id.  
25
Allband Petition for Further Waiver, Appx. 2, Schedule 3 – 2013 Audited Financial Statements.
26
Id. at Appx. 2, Schedule 2.
27
Id.
28
Allband 2012 Waiver Petition, Appx. 2, Attach. 2C – 2010 Audited Financial Statements.
29
May 18, 2015 Ex Parte, Attach. B.
30
We note that such results will likely contain confidential information and will need to be filed in accordance with 
the Commission’s procedures to protect such information.
31
We note that universal service support amounts may be adjusted retroactively, if it is determined that Allband has 
received support amounts in the past to which it was not entitled.  Universal service support may be used “only for 
(continued…)
Federal Communications Commission DA 15-766
6
IV. ORDERING CLAUSES
15. IT IS ORDERED, pursuant to the authority contained in sections 4(i), 4(j) and 254 of the 
Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i), 154(j), and 254, sections 0.91, 0.131, 
0.291, 0.331, and 1.3 of the Commission’s rules, 47 C.F.R. §§ 0.91, 0.131, 0.291, 0.331, and 1.3, and 
paragraph 544 of the USF/ICC Transformation Order,
32
FCC 11-161, that the Universal Service 
Administrative Company SHALL MAKE payment to Allband Communications Cooperative in 
accordance with the amount, terms, and conditions described herein and CONDUCT the inquiries 
outlined herein.
16. IT IS FURTHER ORDERED that, pursuant to section 1.102(b)(1) of the Commission’s 
rules, 47 C.F.R. § 1.102(b)(1), this Order SHALL BE EFFECTIVE upon release.
FEDERAL COMMUNICATIONS COMMISSION
Matthew DelNero
Chief
Wireline Competition Bureau
(Continued from previous page)                                                      
the provision, maintenance and upgrading of facilities and services for which the support is intended.”  47 C.F.R. 
§ 54.7.
32
USF/ICC Transformation Order, 26 FCC Rcd at 17842, para. 544.