[Federal Register Volume 59, Number 206 (Wednesday, October 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26489]
[[Page Unknown]]
[Federal Register: October 26, 1994]
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FEDERAL COMMUNICATIONS COMMISSION
[CC Docket No. 92-296; FCC 94-256]
Simplification of the Depreciation Prescription Process
AGENCY: Federal Communications Commission.
ACTION: Notice; further order inviting comments.
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SUMMARY: The Federal Communications Commission has adopted a Further
Order Inviting Comments on selected accounts and proposed projection
life and future net salvage ranges for use by local exchange carriers
(LECs) regulated under its price cap regulatory scheme. The Further
Order Inviting Comments identifies eight accounts for which the
Commission proposes to establish ranges for use beginning in 1995. The
Commission has also proposed different simplification methods for four
other accounts. The rule change is intended to lessen the depreciation
prescription burden on price cap LECs in light of regulatory and market
changes without sacrificing protection for consumers.
DATES: Comments are due on November 14, 1994. Reply comments are due on
December 14, 1994.
ADDRESSES: All comments should be filed with the Office of the
Secretary, Federal Communications Commission, Washington, DC 20554. A
copy should be sent to Fatina K. Franklin, Accounting and Audits
Division, 2000 L Street NW., Washington, DC 20036.
FOR FURTHER INFORMATION CONTACT:
Fatina K. Franklin, Common Carrier Bureau, Accounting and Audits
Division, (202) 418-0840.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's
Further Order Inviting Comments on Simplification of the Depreciation
Prescription Process, CC Docket No. 92-296, FCC 94-256, adopted October
7, 1994 and released October 11, 1994. The full text of this Commission
decision is available for inspection and copying during normal business
hours in the FCC Dockets Branch (Room 230), 1919 M Street NW.,
Washington, DC. The full text will be published in the FCC Record and
may also be purchased from the Commission's copy contractor,
International Transcription Services, Room 246, 1919 M Street NW.,
Washington, DC 20554.
Summary
1. On September 23, 1993, we adopted streamlined depreciation
prescription procedures for the local exchange carriers (``LECs'')
regulated under our price cap incentive regulatory plan.\1\ These
procedures require us to establish ranges for the future net salvage
and projection life estimates that are used to compute depreciation
rates for plant categories. The new procedures generally permit price
cap LECs to make streamlined filings for changes in depreciation rates
for these categories, as long as these estimates fall within the
prescribed ranges. In our Second Report and Order, 59 FR 35632 (July
13, 1994), we adopted underlying factor ranges for 22 depreciation rate
categories. By this Further Order Inviting Comments, we invite comments
on our proposals for setting ranges for the remaining 12 plant
categories.
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\1\Simplification of the Depreciation Prescription Process,
Report and Order, 8 FCC Rcd 8025 (1993) (Depreciation Simplification
Order), 58 FR 58788 (November 4, 1993).
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2. Prior to adoption of the Depreciation Simplification Order, the
depreciation prescription process required carriers to submit extensive
data to support the underlying depreciation basic factors that are the
future net salvage, projection life, and survivor curve estimates used
to compute proposed depreciation rates. These data requirements often
resulted in voluminous submissions, consisting of up to 25 pages of
analysis for each of 34 plant categories. In recognition of the
regulatory, technological, and market changes that price cap LECs face,
we decided to simplify the process by establishing ranges that specify
maximum and minimum amounts for two of the basic depreciation factors,
the future net salvage and projection life estimates. Under our new
process, if a price cap LEC meeting the requisite criteria selects
future net salvage and projection life estimates that are within the
established ranges, it need not submit the detailed supporting data
otherwise required. In addition, under the new procedures, price cap
LECs can change these basic factors annually, as opposed to the current
triennial represcription cycle. These streamlined procedures are
intended to simplify the depreciation process, achieve administrative
savings, and allow the price cap LECs greater flexibility in the
depreciation process, while continuing an appropriate oversight of
their depreciation rates.
3. We determined that the new, streamlined procedures should be
implemented in two phases, beginning with the accounts most readily
adaptable to the range approach. We have completed phase one of the
streamlining process and adopted ranges for 22 plant categories. We now
begin phase two by proposing ranges for eight of the remaining
categories. If we implement these proposals, we will have established
ranges of projection life and future net salvage factors for 30 of the
34 plant categories. These plant categories represent 85% of the total
plant investment. In addition, we propose in this notice alternate
simplified procedures for the other four accounts. We solicit public
comment on the following proposals for phase two.
4. We propose to establish ranges for eight of the remaining twelve
plant categories. (See Appendix). In the Depreciation Simplification
Order, we set forth a number of specific data that should be considered
in establishing the projection life and future net salvage ranges, and
we used these data to formulate the ranges listed in the attached
Appendix. For each plant category, we first developed a range of one
standard deviation from the mean of each of the projection life and the
future net salvage basic factors underlying the currently prescribed
LEC depreciation rates. We then determined whether there are
technological trends or recent changes in carrier investment plans that
might not be fully reflected in the LECs' prescribed factors. Finally,
we considered the number of LECs with basic factors that fall within
the initial ranges and altered the ranges where appropriate. We
recognized, however, that these specifically enumerated data must be
considered in light of our obligation to prescribe reasonable
depreciation rates:
We wish to make the ranges wide enough to accommodate a
significant number, if not all, of the LECs. On the other hand, we
must not make the ranges so wide that they would no longer enable us
to exercise effective oversight of depreciation rates.
Thus, in developing the proposed ranges, we considered both the
specific data enumerated in the Depreciation Simplification Order and
our overriding responsibility to prescribe reasonable depreciation
rates. We set forth in the Appendix our proposed projection life and
future net salvage ranges for these light plant categories.
5. We do not propose to establish ranges for Account 2211, Analog
Electronic Switching; Account 2215, Electro-mechanical Switching; and
Account 2431, Aerial Wire. These are ``dying accounts'' as LECs are
replacing the plant in these accounts with newer technologies. The LECs
are rapidly phasing out this obsolete equipment in accordance with
specific retirement schedules that are based on company plans to
modernize their networks. Depreciation rates for this equipment can be
readily calculated from these retirement schedules. We believe that
depreciation rates for such equipment that are based upon a LEC's
specific retirement plans are more accurate than rates based upon
national averages. Moreover, the calculations are less complicated than
those for other plant accounts, since detailed statistical analyses are
not required to forecast lives.
6. In addition, we do not propose to set ranges for Account 2121,
Buildings. For depreciation study purposes, we have permitted the LECs
to subdivide this account and estimate lives for each subcategory.
Moreover, we allowed the LECs flexibility to develop individual methods
of categorization. As a result, some LECs subdivided this account based
on the size of the buildings, some by location, and others based on
use. Because of the significant differences among the categorization
methods, the LECs' current basic factors for the subaccounts cannot be
used to establish nationwide ranges. If ranges are to be developed for
the buildings account, the LECs' data must be recast into new, uniform
subcategories.
7. We believe that the cost of establishing such subcategories
would outweigh the benefits. The LECs have indicated that the cost of
compiling the information necessary to develop new subcategories would
be substantial. Moreover, the LECs do not have plans to add or retire a
significant number of buildings in the next few years. As a result, the
underlying depreciation factors applicable to Account 2121 likely will
not change, and an extensive analysis of the building account probably
will not be necessary within the next few years. Accordingly, we
propose to maintain the basic factors underlying the current prescribed
depreciation rates for the buildings account, until our three-year
range review when we will reconsider whether ranges would be
appropriate for this account. In the interim, we believe that the data
required under the streamlined procedures will be adequate, and we
propose to require that the price cap LECs provide only these data for
the buildings account.
8. This is a non-restricted notice and comment rulemaking
proceeding. Ex Parte presentations are permitted, except during the
Sunshine Agenda period, provided they are disclosed as provided in the
Commission's rules.
9. We certify that the Regulatory Flexibility Act of 1980 does not
apply to this proceeding because if the proposals in this Order
Inviting Comments are adopted, there will not be a significant economic
impact on a substantial number of small business entities, as defined
by Section 601(3) of the Regulatory Flexibility Act. Because of the
nature of local exchange and exchange access service, the Commission
has concluded that small telephone companies are dominant in their
fields of operation and therefore are not ``small entities'' as defined
by that Act. The Secretary shall send a copy of this Order Inviting
Comments, including this certification, to the Chief Counsel for
Advocacy of the Small Business Administration in accordance with
Section 603(a) of that Act.
10. We invite comment on the proposals set forth above. Pursuant to
applicable procedures set forth in Sections 1.415 and 1.419 of the
Commission's Rules, interested parties may file comments on or before
November 14, 1994, and reply comments on or before December 14, 1994.
To file formally in this proceeding, interested parties must file an
original and four copies of all comments and reply comments. If
commenters want each Commissioner to receive a personal copy of their
comments, they must file an original plus nine copies. Interested
parties should send comments and reply comments to Office of the
Secretary, Federal Communications Commission, Washington, D.C. 20554.
Parties should also file one copy of any documents filed in this docket
with the Commission's copy contractor, International Transcription
Services, Room 246, 1919 M Street, N.W., Washington, D.C. 20554. We
also ask that parties send a courtesy copy of their comments to the
Accounting and Audits Division, 2000 L Street, N.W., Washington, D.C.
20036. Comments and reply comments will be available for public
inspection during regular business hours in the FCC Reference Center
(Room 239) of the Federal Communications Commission, 1919 M Street,
N.W., Washington, D.C. 20554.
11. Accordingly, It is Ordered, pursuant to Sections 1, 4(i), 4(j),
and 220(b) of the Communications Act of 1934, as amended, 47 U.S.C.
Secs. 151, 154(i), 154(j), and 220(b), that Notice is Hereby Given of
proposed plant accounts for which basic factor ranges should be
established and the ranges proposed for those accounts to be used in
the depreciation prescription process as described in the Depreciation
Simplification Order.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Proposed Accounts and Ranges
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Projection life range Future net salvage range
Depreciation (years) (percent)
Account No. Account name rate ---------------------------------------------------
category Low High Low High
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2220.................. Digital switching..... Digital 16 18 0 5
Switching
2220.................. Operator systems...... Combined 8 12 0 5
2232.................. Circuit equipment..... Digital 11 13 0 5
2411.................. Poles................. Poles 25 35 -75 -50
2421.................. Aerial Cable.......... Metallic 20 26 -35 -10
2423.................. Buried Cable.......... Metallic 20 26 -10 0
2426.................. Intrabuilding network Metallic 20 25 -30 -5
cable.
2426.................. Intrabuilding network Non-metallic 25 30 -15 0
cable.
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[FR Doc. 94-26489 Filed 10-25-94; 8:45 am]
BILLING CODE 6712-01-M
