**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

+----------------------------------+---+-------------------------------+
| In the Matter of                 | ) | WC Docket No. 06-183          |
|                                  |   |                               |
| Request Of Duo County Telephone  | ) |                               |
| Cooperative, Inc., For Authority |   |                               |
| To Include In Its Rate Base The  | ) |                               |
| Interstate Portion Of The        |   |                               |
| Prepaid Post-Employment Health   | ) |                               |
| Benefits Recorded In Account     |   |                               |
| 1410, Other Noncurrent Assets    | ) |                               |
|                                  |   |                               |
|                                  | ) |                               |
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|                                  | ) |                               |
|                                  |   |                               |
|                                  | ) |                               |
+----------------------------------+---+-------------------------------+
|                                  | ) |                               |
+----------------------------------+---+-------------------------------+
| Request Of Riviera Telephone     | ) | WC Docket No. 07-19           |
| Company, Inc., For Authority To  |   |                               |
| Include In Its Rate Base The     | ) |                               |
| Interstate Portion Of The        |   |                               |
| Prepaid Post-Employment Health   | ) |                               |
| Benefits Recorded In Account     |   |                               |
| 1410, Other Noncurrent Assets    | ) |                               |
|                                  |   |                               |
|                                  | ) |                               |
|                                  |   |                               |
|                                  | ) |                               |
+----------------------------------+---+-------------------------------+
|                                  | ) |                               |
+----------------------------------+---+-------------------------------+
| Request Of Central Texas         | ) | WC Docket No. 07-20           |
| Telephone Cooperative, Inc., For |   |                               |
| Authority To Include In Its Rate | ) |                               |
| Base The Interstate Portion Of   |   |                               |
| The Prepaid Post-Employment      | ) |                               |
| Health Benefits Recorded In      |   |                               |
| Account 1410, Other Noncurrent   | ) |                               |
| Assets                           |   |                               |
|                                  | ) |                               |
|                                  |   |                               |
|                                  | ) |                               |
|                                  |   |                               |
|                                  | ) |                               |
+----------------------------------+---+-------------------------------+
|                                  | ) |                               |
+----------------------------------+---+-------------------------------+
| Request Of Big Bend Telephone    | ) | WC Docket No. 07-33           |
| Cooperative, Inc., For Authority |   |                               |
| To Include In Its Rate Base The  | ) |                               |
| Interstate Portion Of The        |   |                               |
| Prepaid Post-Employment Health   | ) |                               |
| Benefits Recorded In Account     |   |                               |
| 1410, Other Noncurrent Assets    | ) |                               |
|                                  |   |                               |
|                                  | ) |                               |
|                                  |   |                               |
|                                  | ) |                               |
+----------------------------------+---+-------------------------------+

+----------------------------------+---+-------------------------------+
| Request by Brazos Telephone      | ) | WC Docket No. 07-150          |
| Cooperative, Inc.; Cap Rock      |   |                               |
| Telephone Cooperative, Inc.;     | ) |                               |
| Cumby Telephone Cooperative,     |   |                               |
| Inc.; Five Area Telephone        | ) |                               |
| Cooperative, Inc.; North Central |   |                               |
| Telephone Cooperative, Inc,.;    | ) |                               |
| and Wes-Tex Telephone            |   |                               |
| Cooperative, Inc. for Authority  | ) |                               |
| to Include in Their Rate Bases   |   |                               |
| the Interstate Portion of        | ) |                               |
| Prepaid Post-Retirement Health   |   |                               |
| Benefits                         | ) |                               |
|                                  |   |                               |
|                                  | ) |                               |
|                                  |   |                               |
|                                  | ) |                               |
+----------------------------------+---+-------------------------------+
|                                  |   |                               |
+----------------------------------+---+-------------------------------+

**MEMORANDUM OPINION AND ORDER**

**Adopted: February 1, 2008 Released: February 1, 2008**

By the Chief, Wireline Competition Bureau:

# INTRODUCTION

1.  In this Order, we consider separate letter requests submitted by Duo
    County Telephone Cooperative, Inc. (Duo County), [^1] Riviera
    Telephone Company, Inc. (Riviera), [^2] Central Texas Telephone
    Cooperative, Inc. (Central Texas),[^3] Big Bend Telephone
    Cooperative, Inc. (Big Bend),[^4] Brazos Telephone Cooperative, Inc.
    (Brazos), [^5] Wes-Tex Telephone Cooperative, Inc. (Wes-Tex), [^6]
    Five Area Telephone Cooperative, Inc. (Five Area), [^7] North
    Central Telephone Cooperative, (North Central), [^8] Cap Rock
    Telephone Cooperative (Cap Rock), [^9] and Cumby Telephone
    Cooperative, Inc. (Cumby) [^10] seeking authority to include in
    their respective rate bases the interstate portion of the prepaid
    post-employment health benefits recorded in Account 1410, Other
    noncurrent assets. As discussed below, we grant the ten requests.

# BaCKGROUND

2.  On December 26, 1991, the Common Carrier Bureau (Bureau) released an
    order that required carriers to adopt a new accounting standard
    issued by the Financial Accounting Standards Board \-- *Statement of
    Financial Accounting Standards No. 106, Employers' Accounting for
    Postretirement Benefits Other Than Pensions* (SFAS-106).[^11] On May
    4, 1992, the Bureau released Responsible Accounting Officer Letter
    No. 20, which provided guidance on the accounting and rate base
    treatment of certain postretirement benefits (OPEBs) recorded
    pursuant to SFAS-106.[^12] RAO Letter 20 instructed carriers to
    record unfunded OPEB liabilities in Account 4310, Other long-term
    liabilities, and to record prepaid OPEBs in Account 1410, Other
    noncurrent assets.[^13] RAO Letter 20 also instructed carriers to
    deduct OPEB liabilities recorded in Account 4310 from the rate base
    and to add prepaid OPEB assets recorded in account 1410 to the rate
    base.[^14]

3.  In June 1992, several carriers filed applications for review of RAO
    Letter 20. In an order and notice of proposed rulemaking released
    March 7, 1996, the Commission affirmed RAO Letter 20's accounting
    instructions, vacated the ratemaking instructions, and adopted an
    NPRM proposing amendments to Part 65, Subpart G of the Commission's
    rules, to address the ratemaking treatment of OPEBs.[^15] The
    Commission found that RAO Letter 20 exceeded the Bureau's delegated
    authority to the extent that it directed exclusions from and
    additions to the rate base for which the Part 65 rules do not
    specifically provide.[^16] In the NPRM it proposed, however, to
    adopt the same ratemaking treatment that had been set forth in RAO
    Letter 20.[^17]

4.  On February 20, 1997, the Commission released an order amending Part
    65 with regard to the ratemaking treatment of OPEBs.[^18] With
    regard to OPEB liabilities recorded in Account 4310, the Commission
    adopted the RAO Letter 20 position, i.e., carriers were required to
    deduct such liabilities from the rate base.[^19] With regard to
    amounts recorded in Account 1410, however, the Commission found that
    its current rules were adequate to determine what, if any, of the
    assets recorded in Account 1410 should be included in the rate base.
    The Commission held that, if a carrier could show that any of its
    assets recorded in Account 1410 (including prepaid OPEB amounts)
    meet the used-and-useful standard, those assets would be allowable
    in the rate base.[^20] Nevertheless, section 65.820(c) of the rules
    provides that Account 1410 amounts can be included in the rate base
    "only to the extent that they have been specifically approved by
    this Commission for inclusion."[^21]

5.  On March 14, 2006, the Commission approved a request by Roosevelt
    County Rural Telephone Cooperative Inc. (Roosevelt), to include in
    its rate base the interstate portion of prepaid post-retirement
    health benefits recorded in Account 1410, Other noncurrent
    assets.[^22] The Commission concluded that Roosevelt had
    demonstrated that the prepaid OPEBs costs recorded in Account 1410
    met the used-and-useful standard.[^23]

# DISCUSSION

6.  As was the case in the Commission's consideration of Roosevelt's
    requested accounting treatment, each carrier whose petition is
    addressed in this order offers post-retirement benefits to its
    employees.[^24] Each carrier's health and/or life insurance
    benefit(s) are funded through a pre-funding trust sponsored by the
    National Telephone Cooperative Association (NTCA).[^25] The table
    below shows the prepaid post-retirement benefits for each carrier
    and the interstate portion of that amount as of the stated
    dates.[^26] In accordance with section 65.820(c) of the Commission's
    rules, these carriers seek approval to include the interstate
    portion of these prepaid OPEBs in their respective rate bases,
    beginning with the date the prepayments were made. [^27] Each
    carrier states that the prepayments associated with the OPEB costs
    will reduce future expenses, and includes a memorandum from an NTCA
    Benefits employee confirming the reduction in expenses.[^28]

  ----------------------- ----------------------- -----------------------
  Carrier                 OPEB Balance            Interstate Portion

  Duo County              \$ 780,187              \$ 228,800

  Riviera                 \$ 144,733              \$ 53,000

  Central Texas           \$ 163,173              \$ 54,000

  Big Bend                \$ 476,429              \$ 188,000

  Brazos                  \$ 1,560,000            \$ 431,430

  Wes-Tex                 \$ 340,916              \$ 77,883

  Five Area               \$ 709,234              \$ 229,481

  North Central           \$ 5,720,823            \$ 1,223,355

  Cap Rock                \$ 1,654,824            \$ 523,653

  Cumby                   \$ 593,898              \$ 192,458
  ----------------------- ----------------------- -----------------------

7.  Under the Commission's rules, noncurrent assets recorded in Account
    1410 may be included in the rate base when a carrier makes a showing
    that these assets are used and useful in the provision of
    telecommunications services.[^29] As the Commission explained in the
    *Roosevelt Order*, the treatment sought for prepaid OPEBs is similar
    to the Commission's treatment of prepaid pension costs. A certain
    amount of prepaid pension costs are allowed in the rate base because
    pension fund prepayments included in the rate base in excess of the
    cost calculation earn a return that benefits the ratepayer by
    reducing later expenses. Consistent with the evidence before the
    Commission in the *Roosevelt Order,* the NTCA memoranda here explain
    that these prepaid health and life insurance costs will reduce
    future expenses, thus benefiting ratepayers. [^30] In this regard,
    there is no distinction in the ratemaking considerations between the
    prepaid life insurance and the prepaid health insurance that was
    presented in Roosevelt. We conclude that Duo County, Riviera,
    Central Texas, Big Bend, Brazos, Wes-Tex, Five Area, North Central,
    Cap Rock, and Cumby have demonstrated that the prepaid OPEBs costs
    recorded in Account 1410 meet the used-and-useful standard.
    Accordingly, we grant the unopposed requests of Duo County, Riviera,
    Central Texas, Big Bend, Brazos, Wes-Tex, Five Area, North Central,
    Cap Rock, and Cumby to include the interstate portion of the
    specified health and life insurance OPEBs costs recorded in Account
    1410 in their respective rate bases beginning with the date the
    prepayments were made.

    **IV. ORDERING CLAUSES**

8.  ACCORDINGLY, IT IS ORDERED, pursuant to sections 1, 4(i), 4(j),
    201-205, 218, 220, and 403 of the Communications Act of 1934, as
    amended, 47 U.S.C. §§ 151, 154(i)-(j), 201-205, 218, 220, and 403,
    Part 65 of the Commission\'s rules, 47 C.F.R. Part 65, and sections
    0.91 and 0.291 of the Commission's rules, 47 C.F.R. §§ 0.92 and
    0.291, that the requests by Duo County Telephone Cooperative, Inc.,
    Riviera Telephone Company, Inc., Central Texas Telephone
    Cooperative, Inc., Big Bend Telephone Cooperative, Inc., Brazos
    Telephone Cooperative, Inc., Wes-Tex Telephone Cooperative, Inc.,
    Five Area Telephone Cooperative, Inc., North Central Telephone
    Cooperative, Cap Rock Telephone Cooperative, and Cumby Telephone
    Cooperative, Inc., to include the interstate portion of their
    prepaid postretirement benefits other than pensions recorded in
    Account 1410 in their rate bases ARE GRANTED as set forth herein.

9.  IT IS FURTHER ORDERED, pursuant to section 1.103(a) of the
    Commission's rules, 47 C.F.R. § 1.103(a), that this order SHALL BE
    EFFECTIVE upon release.

    FEDERAL COMMUNICATIONS COMMISSION

    Marcus Maher

    Associate Chief, Wireline Competition Bureau

[^1]: Letter from Daryl L. Hammond, Vice-President/Chief Financial
    Officer, Duo County Telephone Cooperative, Inc., to Albert Lewis,
    Acting Chief, Pricing Policy Division, FCC (filed September 21,
    2006).

[^2]: Letter from Bill C. Colston, Jr., President/General Manager,
    Riviera Telephone Company, Inc., to Albert Lewis, Acting Chief,
    Pricing Policy Division, FCC (filed January 17, 2007).

[^3]: Letter from Jamey Wigley, General Manager, Central Texas Telephone
    Cooperative, Inc., to Albert Lewis, Acting Chief, Pricing Policy
    Division, FCC (filed January 17, 2007).

[^4]: Letter from Joan Johnson, Chief Financial Officer, Big Bend
    Telephone Cooperative, Inc., to Albert Lewis, Acting Chief, Pricing
    Policy Division, FCC (filed Jan. 26, 2007).

[^5]: Letter from Richard D. Adams, Executive Vice President/General
    Manager, Brazos Telephone Cooperative, Inc., to Albert Lewis, Acting
    Chief, Pricing Policy Division, FCC (filed July 18, 2007).

[^6]: Letter from Bob Wilson, Manager, Wes-Tex Telephone Cooperative,
    Inc., to Albert Lewis, Acting Chief, Pricing Policy Division, FCC
    (filed June 15, 2007).

[^7]: Letter from Candy Vandevender, Executive Vice President/General
    Manager, Five Area Telephone Cooperative, Inc., to Albert Lewis,
    Acting Chief, Pricing Policy Division, FCC (filed June 15, 2007).

[^8]: Letter from F. Thomas Rowland, President/CEO, North Central
    Telephone Cooperative, to Albert Lewis, Acting Chief, Pricing Policy
    Division, FCC (filed Jun 15, 2007).

[^9]: Letter from Jim Whitefield, Executive Vice President/General
    Manager, Cap Rock Telephone Cooperative, to Albert Lewis, Acting
    Chief, Pricing Policy Division, FCC (filed June. 15, 2007).

[^10]: Letter from Karen Zimmerman, General Manager, Cumby Telephone
    Cooperative, Inc., to Albert Lewis, Acting Chief, Pricing Policy
    Division, FCC (filed June 15, 2007).

[^11]: *Notification of Intent to Adopt Statement of Financial
    Accounting Standards No. 106,* *Employers' Accounting for
    Postretirement Benefits Other Than Pensions,* AAD 91-80, Order, 6
    FCC Rcd 7560 (CCB 1991). The Common Carrier Bureau is now the
    Wireline Competition Bureau.

[^12]: *Uniform Accounting for Postretirement Benefits Other Than
    Pensions in Part 32*, 7 FCC Rcd 2872 (CCB 1992) (RAO Letter 20).

[^13]: *Id*. OPEBs are postretirement benefits other than pensions. *See
    1993 Annual Access Tariff Filings Phase 1, 1994 Annual Access Tariff
    Filings*, CC Docket Nos. 93-193, *et al*., Order Terminating
    Investigation, 20 FCC Rcd 7672, 7673, para. 1 (2005)(*2005 OPEBs
    Tariff Order*). The *2005 OPEBs Tariff Order* contains a
    comprehensive discussion of the regulatory treatment of OPEBs by the
    Commission, 1991 to present.

[^14]: RAO Letter 20.

[^15]: *Responsible Accounting Officer Letter 20, Uniform Accounting for
    Postretirement Benefits Other Than Pensions in Part 32, Amendments
    to Part 65, Interstate Rate of Return Prescription Procedures and
    Methodologies, Subpart G, Rate Base*, CC Docket No. 96-22, AAD
    92-65, Memorandum Opinion and Order and Notice of Proposed
    Rulemaking, 11 FCC Rcd 2957 (1996).

[^16]: *Id*. at 2961, para. 25.

[^17]: *Id*. at 2962-63, paras. 30-34.

[^18]: *Responsible Accounting Officer Letter 20, Uniform Accounting for
    Postretirement Benefits Other Than Pensions in Part 32, Amendments
    to Part 65, Interstate Rate of Return Prescription Procedures and
    Methodologies, Subpart G, Rate Base*, CC Docket No. 96-22, AAD
    92-65, Report and Order, 12 FCC Rcd 2321 (1997).

[^19]: *Id*. at 2327, para. 18.

[^20]: *Id*. at 2325, para. 12.

[^21]: 47 C.F.R. § 65.820(c).

[^22]: *Roosevelt County Rural Telephone Cooperative, Inc., Petition to
    Include the Interstate Portion of a Prepaid Accumulated
    Post-Retirement Benefit Obligation, Recorded in Account 1410, in the
    Rate Base*, WCB/Pricing 05-31, Order, 21 FCC Rcd 2880 (2006)
    (*Roosevelt Order*).

[^23]: *Id*. at 2882, para. 7.

[^24]: Duo County, Riviera, Central Texas, Big Bend, Cap Rock, Cumby,
    and Wes-Tex offer only health benefits. Brazos, North Central, and
    Five Area offer health and life insurance benefits.

[^25]: Duo County Letter at 2; Riviera Letter at 2; Central Texas Letter
    at 2; Big Bend Letter at 2; Cap Rock Letter at 2; Cumby Letter at 2;
    Brazos Letter at 2; North Central, Letter at 1-2; Five Area Letter
    at 1; Wes-Tex Letter at 1.

[^26]: The financial data for Duo County, Riviera, Central Texas, and
    Big Bend are as of December 31, 2005, the Wes-Tex data are as of
    June 30, 2006, and the remainder are as of December 31, 2006.

[^27]: Duo County Letter at 2; Riviera Letter at 2; Central Texas Letter
    at 2; Big Bend Letter at 2; Cap Rock Letter at 2-3; Cumby Letter at
    3; Brazos Letter at 2; North Central, Letter at 3; Five Area Letter
    at 2; Wes-Tex Letter at 2-3.

[^28]: Duo County Letter at 3 and Attachment; Riviera Letter at 3 and
    Attachment; Central Texas Letter at 3 and Attachment; Big Bend
    Letter at 3 and Attachment; Cap Rock Letter at 2 and Attachment;
    Cumby Letter at 2 and Attachment; Brazos Letter at 2 and Attachment;
    North Central Letter at 2 and Attachment; Five Area Letter at 2 and
    Attachment; Wes-Tex Letter at 2. and Attachment.

[^29]: 47 C.F.R. § 65.820(c).

[^30]: *See supra* note 28.