[Federal Register Volume 62, Number 145 (Tuesday, July 29, 1997)]
[Rules and Regulations]
[Pages 40460-40464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-19912]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 69
[CC Docket Nos. 96-262, 94-1, 91-213, 96-263; FCC 97-247]
Access Charge Reform; Price Cap Performance Review for Local
Exchange Carriers; Transport Rate Structure and Pricing; Usage of the
Public Switched Network by Information Service and Internet Access
Providers
AGENCY: Federal Communications Commission.
ACTION: Final rule; sua sponte reconsideration.
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SUMMARY: The Federal Communications Commission here reconsiders on its
own
[[Page 40461]]
motion five specific issues addressed in its First Report and Order in
this proceeding. First, the Commission corrects errors in the rules
adopted in the First Report and Order in this proceeding that could
permit rural incumbent local exchange carriers (rural incumbent LECs)
to recover twice a portion of their local switching costs, that could
be interpreted to require carriers to deduct a potentially improper
long term support amount from the base factor portion of their common-
line revenue requirement, and that could result in improper calculation
of annual access minutes-of-use calculated by LECs for use in setting
per-minute charges for shared multiplexers on the end office side of
the tandem switch.
Second, the Commission clarified the steps non-price cap LECs
should take to reassign the costs of trunk ports and multiplexers used
at the tandem switch, and the costs of DS1/voice grade multiplexers
used at the local switch, from the transport interconnection charge
(TIC) rate element to the tandem switching rate element and the local
switching rate element, respectively.
Third, the Commission clarified that price cap carriers may vary
their tandem-switching charge in accordance with the part 61 price cap
rules, even after reassigning to the tandem-switching rate element the
portion of tandem switching costs now recovered through the TIC.
Fourth, the Commission revised its rules to revise the triggering
point at which a price cap carrier should begin calculating its SLC
based on average per-line common line revenues permitted under the
price cap rules.
Fifth, the Commission reinstated a portion of its rules relating to
general support facilities that we erroneously deleted in the First
Report and Order.
EFFECTIVE DATE: The amendments to Sec. 69.307(c) shall become effective
August 28, 1997. The amendments to Secs. 69.1(c), 69.106(b),
69.111(g)(4), 69.111(l)(1), 69.152(b), and 69.502(c) shall become
effective January 1, 1998.
FOR FURTHER INFORMATION CONTACT: Rich Lerner or Richard Cameron, 202-
418-1530.
SUPPLEMENTARY INFORMATION: Adopted: July 10, 1997; Released: July 10,
1997.
1. On May 7, 1997, we adopted the First Report and Order in this
proceeding 1 and the Report and Order in our related
Universal Service proceeding.2 On our own motion, and upon
further consideration of some of the issues addressed in our Access
Reform Order, we take this opportunity to revise or clarify certain of
our actions.3
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\1\ Access Charge Reform, First Report and Order, 62 FR 31838
(June 11, 1997) (Access Reform Order).
\2\ Federal-State Joint Board on Universal Service, Report and
Order, 62 FR 32862 (June 17, 1997) (Universal Service Order).
\3\ See 47 CFR 1.108.
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I. DEM Weighting, Long Term Support, and Local Switching
2. DEM Weighting. In our Universal Service Order, among other
actions, we provided that, on January 1, 1998, eligible rural telephone
company study areas with fewer than 50,000 lines would begin receiving
local switching support from the new universal service support
mechanisms in an amount equal to the implicit support they formerly
received from dial equipment minute-of-use (DEM) weighting.4
We did not make clear in the Access Reform Order, however, how the
switching rates for both incumbent LECs subject to price cap regulation
and those that are not subject to price cap regulation would be
affected by the new universal service mechanisms. The obvious solution
is to permit rural incumbent LECs to recover these switching costs
either from universal service support mechanisms or from interstate
access charges, but not to permit recovery of these costs from both
sources duplicatively.
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\4\ 47 CFR 54.301. The jurisdictional separations process
currently allocates local switching costs between the state and
interstate jurisdictions on the basis of relative DEM. Carrier study
areas with fewer than 50,000 lines receive support, until December
31, 1997, from DEM weighting, which shifts additional local
switching costs to the interstate jurisdiction by multiplying the
carrier's interstate DEM by a factor of up to 3.0. Until December
31, 1997, these weighted local switching costs will continue to be
recovered from interexchange carriers through per-minute access
charges for use of the local switch. Beginning in January 1998,
rural incumbent LECs will receive explicit support from the new
universal service support mechanisms equal to the amount previously
collected as a result of DEM weighting. Universal Service Order at
Paras. 303-04.
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3. The rules adopted to implement our Access Reform Order provide
that the per-minute local switching charge to be imposed by incumbent
LECs not subject to price cap regulation ``shall be computed by
dividing the projected annual revenue requirement for the Local
Switching element by the projected annual access minutes of use for all
interstate or foreign services that use local exchange switching
facilities.'' 5
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\5\ 47 CFR 69.106(b).
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4. On further consideration of our revisions to Sec. 69.106, we
recognize that, absent further clarification, rural incumbent LECs not
subject to price cap regulation may have the opportunity to recover
twice a portion of their local switching costs. DEM weighting increases
the interstate local switching revenue requirement when costs are
separated in part 36 between the intrastate and interstate
jurisdictions.6 Although the Universal Service Order
established a new mechanism for providing to carriers the amount of
support that was formerly received from DEM weighting, it preserved the
use of DEM weighting in assigning local switching revenue requirement
to the interstate jurisdiction. Thus, if a rural incumbent LEC were to
use the entire DEM-weighted interstate component of the part 36 local
switching revenue requirement in setting access charges for local
switching under Sec. 69.106, it would have the opportunity to recover
twice that portion of the interstate revenue requirement attributable
to DEM-weighting. Specifically, the rural incumbent LEC would receive
compensation for the DEM-weighted component of local switching from
universal service support mechanisms, and also would be able to
continue to set the local switching element of its access charges to
recover the portion of its interstate revenue requirement attributable
to DEM-weighting. Clearly, we did not intend our rules to permit such a
result.
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\6\ 47 CFR 36.125.
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5. On our own motion, therefore, we take this opportunity to
reconsider this issue and revise Sec. 69.106.7 We clarify
that, in setting its per-minute access charge for local switching under
Sec. 69.106, each rural incumbent LEC not subject to price cap
regulation must exclude from its local switching interstate revenue
requirement any high-cost support attributable to DEM weighting.
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\7\ See 47 CFR 1.108.
\8\ Access Reform Order at Paras. 125-135.
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6. Similarly, to the extent that any price cap LEC receives high-
cost support attributable to DEM-weighting under Sec. 54.301, we
require such price cap LEC, in its access tariff filed re-
flecting its receipt of support under Sec. 54.301, to make a downward
exoge-
nous adjustment to its traffic sensitive basket price cap index (PCI)
and to its common line basket PCI to reflect the recovery of this
amount from the new high-cost support mechanism. These exogenous
adjustments must be made after the exogenous adjustments required when
the price cap LEC reallocates the costs of line ports to the common
line basket in accordance with the Access Reform Order.8 The
exoge-
nous downward adjustment to each basket must be in proportion to the
local switching costs contained
within that basket. For
[[Page 40462]]
example, if a price cap LEC makes exogenous adjustments to reallocate
30 percent of its local switching costs contained within the traffic
sensitive basket to the common line basket, reflecting the costs of its
line ports, it must then make a downward exogenous adjustment to the
common line basket in an amount equal to 30 percent of the support it
receives under Sec. 54.301 and a downward exogenous adjustment to the
traffic sensitive basket in an amount equal to the remaining 70
percent.
7. Long Term Support. We also modify the language of Sec. 69.502(c)
to clarify the per-line support amount that carriers should use in
making deductions from the base factor portion of the common line
element. In the Universal Service Order, we did not adopt the Joint
Board's recommendation that, for the three years beginning January 1,
1998, high-cost support be calculated for rural incumbent LECs based on
historic high-cost loop support, DEM weighting, and long term support
(LTS) amounts.9 Instead, consistent with the recommendation
of the State High Cost Report 10 and of many commenters,
high-cost support attributable to the former LTS mechanism may increase
based on changes in the nationwide average loop cost.11 We
therefore replace the phrase ``frozen per-line support'' in Sec. 69.502
with the phrase ``per-line support.''
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\9\ Universal Service Order at Paras. 297-99, 305-306.
\10\ State Members' Report on the Use of Cost Proxy Models,
dated March 26, 1997 (contained in the record of Federal-State Joint
Board on Universal Service, CC Docket No. 96-45).
\11\ Universal Service Order at Paras. 305-306. See 47 CFR
54.303.
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8. Other Local Switching Issues. In the Access Reform Order, we
directed incumbent LECs to set per-minute rates for the transmission
component of tandem-switched transport using ``the total actual voice-
grade minutes of use, geographically averaged on a study-area-wide
basis, that the incumbent [LEC] experiences based on the prior year's
annual use,'' 12 or averaged on a zone-wide basis where the
incumbent LEC has implemented density pricing zones.13 In
new Sec. 69.111(l), however, we directed incumbent LECs to develop per-
minute charges for the shared multiplexers used on the end office side
of the tandem switch, using as a denominator ``the projected annual
access minutes of use calculated for purposes of recovery of common
transport costs in paragraph (c) of this section.''14 We
will delete the word ``projected'' from this sentence of our rules.
Paragraph (c) does not require a projection, but instead calls for the
use of the prior year's historical data. For clarity, we also delete
the extraneous phrase ``by the serving wire center side of the tandem
switch'' from this section.
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\12\ 47 CFR 69.111(c).
\13\ 47 CFR 69.111(c)(2)(ii).
\14\ 47 CFR 69.111(l)(1).
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II. TIC Reduction for Non-Price Cap Incumbent LECs
9. In our Access Reform Order, we took steps to adopt a cost-based
transport rate structure and to comply with the remand order issued by
the United States Court of Appeals for the District of Columbia Circuit
in Competitive Telecommunications Ass'n v. FCC (CompTel).15
In complying with the CompTel remand, we took steps to eliminate or
substantially reduce the transport interconnection charge (TIC), which
we originally created as part of our interim transport rate
structure.16
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\15\ 87 F.3d 522 (D.C. Cir. 1996).
\16\ Access Reform Order at Paras. 210-243. The TIC was created
as part of the interim transport rate structure adopted in Transport
Rate Structure and Pricing, Report and Order and Further Notice of
Proposed Rulemaking, 57 FR 54717 (November 20, 1992).
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10. We reassigned portions of the TIC to other rate elements, some
of which were created in the Access Reform Order only for price cap
carriers. In creating the new rate elements established for
multiplexers used at the tandem switch, we ``direct[ed] incumbent LECs
to establish separate rate elements for the multiplexing equipment on
each side of the tandem switch.'' 17 This language
potentially may be unclear, especially in light of subsequent language
directing only ``price cap LECs [to] reallocate revenues'' to these
rate elements.18 As an initial matter, therefore, we here
clarify that these rate elements apply only to price cap incumbent
LECs.
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\17\ Access Reform Order at para.170.
\18\ Id. at 173.
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11. We specifically directed carriers to reassign certain TIC
amounts to newly created rate elements for trunk ports and multiplexers
used at the tandem switch 19 and for DS1/voice grade
multiplexers used at the local switch.20 Because these rate
elements were created only for price cap carriers, however, we take
this opportunity to clarify the application of this section of our
Access Reform Order with respect to incumbent LECs not subject to price
cap regulation.
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\19\ Access Reform Order at Paras. 171-173.
\20\ Access Reform Order at Paras. 218-219.
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12. In access tariffs filed to become effective January 1, 1998,
incumbent LECs not subject to price cap regulation should assign TIC
amounts attributable to trunk ports and multiplexers used at the tandem
switch to the tandem switching rate element. Even though the specific
rate elements created for these amounts do not yet exist for non-price
cap carriers, the amounts involved relate broadly to the use of the
tandem switch. Similarly, in access tariffs filed to become effective
January 1, 1998, incumbent LECs not subject to price cap regulation
should assign TIC amounts attributable to DS1/voice grade multiplexers
used at analog local switches to the local switching rate element for
recovery. Even though the specific rate elements created for these
amounts do not yet exist for non-price cap carriers, the amounts
involved relate broadly to the use of analog local switches. We will
consider whether these amounts should be further reallocated to
individual rate elements in our upcoming rulemaking proceeding
addressing access charge reform for rate-of-return carriers.
III. Reallocation of Tandem Switching Costs
13. Section 69.1(c) of our rules 21 limits the extent to
which certain part 69 pricing rules apply to incumbent LECs subject to
price cap regulation. Under the terms of Sec. 69.1(c), while a price
cap LEC uses these part 69 rules, inter alia, to set initial charges
for new rate elements, the price cap LEC thereafter has discretion to
vary these charges, subject to the limitations of the relevant price
cap index and any applicable service category banding constraints.
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\21\ 47 CFR 69.1(c).
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14. Section 69.111(g) governs the reallocation by all carriers of
tandem switching amounts currently being recovered through the TIC to
the tandem switching rate element. As our rules are currently
constructed, Sec. 69.1(c) limits the extent to which Sec. 69.111(g)(1)
applies to price cap carriers, as described above, but
Secs. 69.111(g)(2) and 69.111(g)(3) are not so limited. We therefore
revise Sec. 69.1(c) to clarify that Secs. 69.111(g)(2) and 69.111(g)(3)
apply to price cap carriers only to the same extent as
Sec. 69.111(g)(1). To reallocate tandem switching amounts as described
in Sec. 69.111(g), price cap LECs must make downward exogenous
adjustments to the interconnection charge service band index (SBI) and
corresponding upward exogenous adjustments to the tandem-switched
transport SBI at the times and in the amounts prescribed in
Sec. 69.111(g)(1-3).22 Thereafter, they may vary the tandem-
switching charge in
[[Page 40463]]
accordance with the part 61 price cap rules.
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\22\ See Access Reform Order at para. 228.
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IV. Common Line Issues
15. In the Access Reform Order, we directed each price cap carrier
to calculate its subscriber line charge (SLC) based on the full average
per-line interstate allocation of the common line revenue requirement,
until its primary interexchange carrier charge (PICC) assessed on
multi-line business (MLB) lines no longer recovers any common line
revenues. At that time, we directed the price cap carrier to begin
calculating the SLC based on average per-line common line revenues
permitted under our price cap rules. 23 In certain
situations, when the MLB PICC no longer recovers common line revenues,
recalculation of the SLC may in turn create a common line residual to
be recovered by the MLB PICC, making it impossible for the price cap
LEC to develop a proper rate. Accordingly, we reconsider this aspect of
our PICC rules, and take this opportunity to revise the triggering
point at which a price cap carrier should begin calculating its SLC
based on average per-line common line revenues permitted under the
price cap rules. A price cap carrier should make this change in its SLC
calculation when the maximum PICC assessed on primary residential
lines, plus the maximum SLC on those lines, recovers the full amount of
its per-line common line price cap revenues.
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\23\ E.g., Access Reform Order at para. 102.
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V. General Support Facilities
16. We also here reinstate portions of Sec. 69.307(c), relating to
general support facilities (GSF), that were erroneously deleted in the
Access Reform Order. We will address GSF cost allocation issues in a
future order in this proceeding.
VI. Final Regulatory Flexibility Analysis
17. In the Access Reform Order, we conducted a Final Regulatory
Flexibility Analysis, as required by section 603 of the Regulatory
Flexibility Act, as amended by the Contract With America Advancement
Act of 1996, Public Law 104-121, 110 Stat. 847 (1996).24 The
changes we adopt in this Order do not affect that analysis.
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\24\ Access Reform Order at Paras. 419-440.
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VII. Ordering Clauses
18. Accordingly, it is ordered, pursuant to sections 1-4, 201-205,
251, 254, 303, and 405 of the Communications Act of 1934, as amended,
47 U.S.C. 151-154, 201-205, 251, 254, 303 and 405, and pursuant to
section 1.108 of the Commission's rules, 47 CFR Sec. 1.108, that this
Order on Reconsideration is adopted.
19. It is further ordered that Sec. 69.307(c) of the Commission's
rules, 47 CFR Sec. 69.307(c) is amended as set forth below, effective
August 28, 1997.
20. It is further ordered that Secs. 69.1(c), 69.106(b),
69.111(g)(4), 69.111(l)(1), 69.152(b), and 69.502(c) of the
Commission's rules, 47 CFR 69.1(c), 69.106(b), 69.111(g)(4),
69.111(l)(1), 69.152(b), and 69.502(c), are amended as set forth below,
effective January 1, 1998.
List of Subjects in 47 CFR Part 69
Communications common carriers, Telephone.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
47 CFR, Part 69, is amended as follows:
PART 69--ACCESS CHARGES
1. The authority citation for part 69 continues to read as follows:
Authority: 47 U.S.C. 154(i) and (j), 201, 202, 203, 205, 218,
254, and 403.
2. Section 69.1(c) is revised to read as follows:
Sec. 69.1 Application of access charges.
* * * * *
(c) The following provisions of this part shall apply to telephone
companies subject to price cap regulation only to the extent that
application of such provisions is necessary to develop the nationwide
average carrier common line charge, for purposes of reporting pursuant
to Secs. 43.21 and 43.22 of this chapter, and for computing initial
charges for new rate elements: Secs. 69.3(f), 69.106(b), 69.106(f),
69.106(g), 69.109(b), 69.110(d), 69.111(c), 69.111(g)(1), 69.111(g)(2),
69.111(g)(3), 69.111(l), 69.112(d), 69.114(b), 69.114(d), 69.125(b)(2),
69.301 through 69.310, and 69.401 through 69.412. The computation of
rates pursuant to these provisions by telephone companies subject to
price cap regulation shall be governed by the price cap rules set forth
in part 61 of this chapter and other applicable Commission rules and
orders.
3. Section 69.106(b) is revised to read as follows:
Sec. 69.106 Local switching.
* * * * *
(b) The per minute charge described in paragraph (a) of this
section shall be computed by dividing the projected annual revenue
requirement for the Local Switching element, excluding any local
switching support received by the carrier pursuant to Sec. 54.301 of
this chapter, by the projected annual access minutes of use for all
interstate or foreign services that use local exchange switching
facilities.
* * * * *
4. Sections 69.111 (g)(4) and (l)(1) are revised to read as
follows:
Sec. 69.111 Tandem Switched Transport and Tandem Charge.
* * * * *
(g) * * *
(4) A local exchange carrier that is subject to price cap
regulation as that term is defined in Sec. 61.3(x) of this chapter
shall calculate its tandem switching revenue requirement as used in
this paragraph by dividing the tandem switching revenue requirement
that was included in the original interconnection charge by the
original interconnection charge, and then multiplying this result by
the annual revenues recovered through the interconnection charge,
described in Sec. 69.124, as of June 30, 1997. A local exchange carrier
that is subject to price cap regulation as that term is defined in
Sec. 61.3(x) of this chapter shall then make downward exogenous
adjustments to the service band index for the interconnection charge
service category (defined in Sec. 61.43(e)(2)(vi) of this chapter) and
corresponding upward adjustments to the service band index for the
tandem-switched transport service category (defined in
Sec. 61.43(e)(2)(v) of this chapter) at the times and in the amounts
prescribed in paragraphs (g)(1) through (g)(3) of this section.
* * * * *
(l) * * *
(1) Local exchange carriers must establish a traffic-sensitive
charge for DS3/DS1 multiplexers used on the end office side of the
tandem switch, assessed on purchasers of common transport to the tandem
switch. This charge must be expressed in dollars and cents per access
minute of use. The maximum charge shall be calculated by dividing the
total costs of the multiplexers on the end office-side of the tandem
switch by the annual access minutes of use calculated for purposes of
recovery of common transport costs in paragraph (c) of this section. A
similar charge shall be assessed for DS1/voice-grade multiplexing
provided on the end-office side of analog tandem switches.
* * * * *
5. Section 69.152(b) is revised to read as follows:
[[Page 40464]]
Sec. 69.152 End user common line for price cap local exchange
carriers.
* * * * *
(b) Except as provided in paragraphs (d) through (i) of this
section, the maximum single line rate or charge shall be computed:
(1) By dividing one-twelfth of the projected annual revenue
requirement for the End User Common Line element by the projected
average number of local exchange service subscriber lines in use during
such annual period, only so long as a per-minute carrier common line
charge is assessed or the maximum PICC assessed on primary residential
lines, plus the maximum end user common line charge for primary
residential lines, does not recover the full amount of its per-line
common line price cap revenues; (and/or)
(2) by dividing one-twelfth of the projected annual revenues
permitted for the common line basket under the Commission's price cap
rules, as set forth in Part 61 of this chapter, by the projected
average number of local exchange service subscriber lines in use during
such annual period, if no per-minute carrier common line charge is
assessed and the maximum PICC assessed on primary residential lines,
plus the maximum end user common line charge for primary residential
lines, recovers the full amount of its per-line common line price cap
revenues.
* * * * *
6. Section 69.307(c) is added to read as follows:
Sec. 69.307 General support facilities.
* * * * *
(c) All other General Support Facilities investments shall be
apportioned among the interexchange category, the billing and
collection category, and Common Line, Local Switching, Information,
Transport, and Special Access elements on the basis of Central Office
Equipment, Information Origination/Termination Equipment, and Cable and
Wire Facilities, combined.
7. Section 69.502(c) is revised to read as follows:
Sec. 69.502 Base factor allocation.
* * * * *
(c) The portion of per-line support that carriers receive pursuant
to Sec. 54.303.
[FR Doc. 97-19912 Filed 7-28-97; 8:45 am]
BILLING CODE 6712-01-P
