06-4768. Jurisdictional Separations and Referral to the Federal-State Joint Board

AGENCY:

Federal Communications Commission.

ACTION:

Interim rule.

SUMMARY:

Jurisdictional separations is the process by which incumbent local exchange carriers (incumbent LECs) apportion regulated costs between the intrastate and interstate jurisdictions. In this document, the Commission extends, on an interim basis, the current freeze of part 36 category relationships and jurisdictional cost allocation factors, which would otherwise expire on June 30, 2006. Extending the freeze will allow the Commission to provide stability for carriers that must comply with the Commission's separations rules while the Commission considers issues relating to comprehensive reform of the jurisdictional separations process.

DATES:

Effective June 23, 2006.

FOR FURTHER INFORMATION CONTACT:

Ted Burmeister, Attorney Advisor, at [phone] or Michael Jacobs, at [phone], Telecommunications Access Policy Division, Wireline Competition Bureau, TTY [phone].

SUPPLEMENTARY INFORMATION:

This is a summary of the Commission's Order in CC Docket No. 80-286, FCC 06-70, released on May 16, 2006. 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.

1. Jurisdictional separations is the process by which incumbent LECs apportion regulated costs between the intrastate and interstate jurisdictions. The Order extends, on an interim basis, the current freeze of part 36 category relationships and jurisdictional cost allocation factors, which would otherwise expire on June 30, 2006. Specifically, the duration of such extension shall be no longer than three years from the initial date of this extension or until comprehensive reform of the jurisdictional separations process can be completed by the Commission and Federal-State Joint Board on Jurisdictional Separations (Joint Board), whichever is sooner. Extending the freeze will allow the Commission to provide stability for carriers that must comply with the Commission's separations rules while the Commission considers issues relating to comprehensive separations reform.

2. In the 2001 Separations Freeze Order, 66 FR 33202, June 21, 2001, that established the current freeze, the Commission concluded that it had the authority to adopt an interim separations freeze to preserve the status quo pending reform and provide for a reasonable allocation of costs. The analysis performed there remains applicable here.

3. In addition, under the Administrative Procedure Act, 5 U.S.C. 553(b)(3)(B), an administrative agency may implement a rule without public notice and comment “when the agency for good cause finds * * * that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.” The Commission finds that good cause exists in this instance. Extending the freeze will prevent the wasteful expenditure of significant resources by carriers to develop the ability to perform separations in a manner that likely would only be relevant for a relatively short time while the Commission considers comprehensive separations reform. The Commission finds, as it did in the 2001 Separations Freeze Order, that avoiding a sudden cost shift will provide regulatory certainty that offsets the concern that there may be a temporary misallocation of costs between the jurisdictions.

4. The Commission also finds that an interim extension of the separations freeze without public notice and comment is consistent with Mid-Tex Electric Cooperative, Inc. v. FERC, 822 F.2d 1123 (DC Cir. 1987). Here, too, the interim extension of the separations freeze is limited, and the concurrent adoption of the companion Further Notice of Proposed Rulemaking should allow for a timely resolution of the underlying issues. In addition, the Commission finds that the interim extension of the separations freeze does not require a referral to the Joint Board, because it is temporary in scope and because the issue of extension was within the scope of the Joint Board's earlier recommended decision. The Commission has continued to receive valuable comments, analysis, and expertise from the Joint Board on this matter during the current separations freeze.

5. The extended freeze will be implemented as described in the 2001 Separations Freeze Order. Specifically, price-cap carriers will use the same relationships between categories of investment and expenses within Part 32 accounts and the same jurisdictional allocation factors that have been in place since the inception of the current freeze on July 1, 2001. Rate-of-return carriers will use the same frozen jurisdictional allocation factors, and will use the same frozen category relationships if they had opted previously to freeze those as well.

I. Procedural Matters

A. Final Regulatory Flexibility Certification

6. The Regulatory Flexibility Act of 1980, as amended (RFA), requires that a regulatory flexibility analysis be prepared for rulemaking proceedings, unless the agency certifies that “the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.” 5 U.S.C. 605(b). The RFA generally defines “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” 5 U.S.C. 601(6). In addition, the term “small business” has the same meaning as the term “small business concern” under section 3 of the Small Business Act. 5 U.S.C. 601(3). Under the Small Business Act, a small business concern is one that: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA). 15 U.S.C. 632.

7. In the instant Order, we extend the current freeze of the part 36 category relationships and jurisdictional cost allocation factors for price cap carriers, and of the allocation factors only for rate-of-return carriers. Among the underlying objectives of the freeze are to ease the administrative burden of regulatory compliance and to provide greater regulatory certainty for all local exchange carriers subject to the Commission's part 36 rules, including some entities employing 1500 or fewer employees. The extension of the freeze will continue the status quo that has existed since July 1, 2001, when the freeze originally became effective. Moreover, the freeze has eliminated the need for all incumbent LECs, including incumbent LECs with 1500 employees or fewer (small incumbent LECs), to complete certain annual studies formerly required by the Commission's rules.

8. The Order poses no additional regulatory burden on incumbent LECs, including small incumbent LECs. If this extended action can be said to have any effect under the RFA, it is to reduce a regulatory compliance burden for small incumbent LECs, by eliminating the aforementioned separations studies and providing these carriers with greater regulatory certainty. Furthermore, we note that the Commission specifically considered the impact of the freeze on small incumbent LECs (in general, rate-of-return carriers) in the 2001 Separations Freeze Order, and provided them with the option to freeze their category relationships at the onset of the freeze. Our action, therefore, does nothing more than temporarily extend the status quo, which itself was certified in the 2001 Separations Freeze Order not to have a significant economic impact on a substantial number of small entities.

9. Therefore, we certify that the requirements of the Order will not have a significant economic impact on a substantial number of entities. The Commission will send a copy of the Order, including a copy of this final certification, in a report to Congress and the Government Accountability Office pursuant to the Congressional Review Act. In addition, the Order and this certification will be sent to the Chief Counsel for Advocacy of the Small Business Administration, and will be published in the Federal Register.

B. Paperwork Reduction Act Analysis

10. The Order does not contain any new, modified, or proposed information collections subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. In addition, therefore, it does not contain any new, modified, or proposed “information collection burden for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

C. Congressional Review Act

11. The Commission will send a copy of the Order in a report to be sent to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

II. Ordering Clauses

12. Pursuant to the authority contained in sections 1, 2, 4, 201-205, 215, 218, 220, 229, 254, and 410 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154, 201-205, 215, 218, 220, 229, 254 and 410, this Order is adopted.

13. The Order shall be effective June 23, 2006.

14. The Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of the Order, including the Final Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the Small Business Administration.

List of Subjects in 47 CFR Part 36

• Communications common carriers

Federal Communications Commission.

Marlene H. Dortch,

Secretary.