**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

+----------------------------------+----+------------------------------+
| In the Matter of                 | *  | CC Docket No. 93-193         |
|                                  | *) |                              |
| Stale or Moot Docketed           | ** | CC Docket No. 94-65          |
| Proceedings                      |    |                              |
|                                  | *  | CC Docket No. 93-193         |
| 1993 Annual Access Tariff        | *) |                              |
| Filings                          | ** | CC Docket No. 94-157         |
|                                  |    |                              |
| Phase I                          | *  |                              |
|                                  | *) |                              |
| 1994 Annual Access Tariff        | ** |                              |
| Filings                          |    |                              |
|                                  | *  |                              |
| AT&T Communications Tariff       | *) |                              |
| F.C.C. Nos. 1 and 2, Transmittal | ** |                              |
| Nos. 5460, 5461, 5462, and 5464  |    |                              |
|                                  | *  |                              |
| Phase II                         | *) |                              |
|                                  | ** |                              |
| Bell Atlantic Telephone          |    |                              |
| Companies Tariff F.C.C. No. 1,   | *  |                              |
| Transmittal No. 690              | *) |                              |
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| NYNEX Telephone Companies Tariff |    |                              |
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| F.C.C No. 1, Transmittal No. 328 | *) |                              |
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+----------------------------------+----+------------------------------+

**ORDER, NOTICE, AND ERRATUM**

**Adopted: February 25, 2003 Released: February 25, 2003**

**Direct Case Due by: April 11, 2003**

**Oppositions to Direct Case Due by: May 12, 2003**

**Rebuttal Due by: May 27, 2003**

**Comments Due:** **No later than 28 days after the publication of this
Notice in the Federal Register**

**Reply Comments Due: No later than 14 days after the comments are due**

By the Chief, Wireline Competition Bureau:

# Introduction

1.  On June 30, 1995, the Common Carrier Bureau (Bureau) designated for
    investigation issues in three related tariff proceedings involving
    claims for exogenous treatment under price cap regulation of amounts
    associated with implementation of Statement of Financial Accounting
    Standards 106 (SFAS-106).[^1] SFAS-106 addressed, *inter alia*, the
    accounting treatment of "other postretirement employee benefits" or
    "OPEBs." In its *Combined OPEB Investigations Order*, the Bureau
    designated CC Docket No. 94-157 as the docket number for the
    combined investigation of these issues.[^2]

2.  After a period of inactivity in CC Docket No. 94-157, on December
    21, 2001, the Commission adopted an order that terminated stale or
    moot docketed proceedings. The Commission stated, with respect to a
    list of proceedings included in an appendix, that "\[t\]he matters
    at issue in these proceedings were resolved by the issuance of final
    orders that were not subject to judicial review, or if subject to
    judicial review, were affirmed and the court's mandate was
    issued."[^3] CC Docket No. 94-157 was among the 119 proceedings
    listed. Neither AT&T nor any other carrier sought review of the
    *Termination Order* as it related to CC Docket No. 94-157.

3.  The present Order, Notice, and Erratum reinstates CC Docket No.
    94-157, which was terminated in error, in order to address
    outstanding issues that are still in dispute, including an issue
    that AT&T recently brought to our attention. We direct Verizon
    Communications to submit its direct case and studies upon which it
    relies to demonstrate that OPEB-related costs incurred prior to
    January 1, 1993 are eligible for exogenous treatment. We also seek
    to refresh the record pertaining to OPEB issues discussed in the
    *1996 Tariff Order*.[^4]

4.  With respect to other OPEB issues under investigation in CC Docket
    No. 94-157, CC Docket No. 94-65, and CC Docket No. 93-193, we
    request that parties with interest in other OPEB issues under
    investigation in these dockets (whether or not described below)
    inform the Bureau of any issue that remains open. If we receive no
    timely comments in response to this notice, we will terminate our
    OPEB investigation in CC Docket No. 94-65 and CC Docket No. 93-193
    without further action. We note that, absent timely comments in
    response to this notice, we will also limit our further action in
    Docket No. 94-157 to two specific issues: (1) the issue B in the
    *Combined OPEB Investigations Order* (whether LECs may treat as
    exogenous the SFAS-106 costs they incurred prior to January 1,
    1993); (2) the issues regarding rate base treatment of OPEBs
    discussed in the *1996 Tariff Order*.

# BackGround

5.  In December 1990, the Financial Accounting Standards Board (FASB)
    adopted SFAS-106. For companies that follow generally accepted
    accounting principles (GAAP), SFAS-106 established new financial
    accounting and reporting requirements for accounting periods
    beginning after December 15, 1992, for any employer offering
    postretirement benefits other than pensions to its employees. This
    category of benefits, OPEBs, typically consists of health and dental
    care benefits and life insurance.

6.  Before the adoption of SFAS-106, regulated local exchange carriers
    (LECs) and AT&T accounted for OPEBs on a "pay-as-you-go" or cash
    basis, recognizing as expenses the amounts actually paid on behalf
    of retired employees in the current accounting period. SFAS-106
    requires companies to account for OPEBs on an accrual basis,
    treating these benefits as a form of deferred compensation earned by
    employees during their working years. Thus, SFAS-106 requires
    recognition of the costs of OPEBs during the years the employees
    earn the benefits before they retire, rather than during the years
    when the company actually pays benefits.

7.  The new accounting standard in SFAS-106 created two categories of
    OPEB expenses, "ongoing amounts" and the "transitional benefit
    obligation" (TBO). The "ongoing amount" represents the yearly
    expense that a firm recognizes as its current employees earn
    benefits that will be paid after they retire. SFAS-106 also requires
    companies to "book" (*i.e.,* to recognize on their financial
    records) the amount of their unfunded obligation for OPEBs to
    retirees and to active employees existing as of the date of their
    implementation of SFAS-106. This unfunded obligation, referred to as
    the TBO, reflects the amount that a company would have accrued on
    its books as of the effective date of the accounting change if it
    had been operating under the accrual method.[^5] SFAS-106 permits
    companies whose benefits plans have active participants either to
    recognize the TBO as an immediate expense or to amortize it over the
    average remaining service years of plan participants. If the average
    remaining service period is less than 20 years, SFAS-106 permits the
    employer to use a 20-year period rather than an average period.

8.  In December 1991, the Bureau, under delegated authority, issued an
    order approving the requests of two LECs to adopt SFAS-106-type
    accounting for OPEBs, on or before January 1, 1993.[^6] The Bureau
    declined, however, to allow LECs and AT&T to adopt the SFAS-106
    option of immediately recognizing the full TBO, because the amounts
    involved were so large that accounting for them as one-time expenses
    would have distorted the LECs\' earnings during the affected period.
    Instead, the Bureau required the carriers to use the other SFAS-106
    option of amortizing the TBO expense over either a 20-year period or
    the average remaining service period of active plan
    participants.[^7]

9.  On May 4, 1992, the Bureau released Responsible Accounting Officer
    Letter No. 20 (RAO 20) to provide carriers with accounting and
    ratemaking instructions for OPEBs in a manner consistent with
    SFAS-106.[^8] RAO 20 identified the Part 32 accounts that carriers
    must use to record OPEB costs under SFAS-106.[^9] It directed the
    LECs to exclude accrued OPEB liabilities recorded in USOA Account
    4310 from their interstate rate base and to include prepaid OPEB
    benefits recorded in USOA Account 1410 in their interstate rate
    base.[^10]

10. After the Bureau required AT&T and the LECs to conform their
    regulatory accounting practices to SFAS-106, several LECs subject to
    price cap regulation filed tariff transmittals in 1992 that sought
    exogenous treatment for the change in OPEB costs.[^11] The Bureau
    suspended the 1992 transmittals for five months and set them for
    investigation.[^12] The Bureau made all price cap regulated LECs
    subject to this investigation. On January 22, 1993, in its *OPEB
    Order,* the Commission terminated the investigation and denied the
    LECs\' requests for exogenous treatment of OPEBs.[^13]

11. In the *OPEB Order*, the Commission addressed the two types of OPEBs
    separately. With respect to the OPEB amounts accruing after the
    SFAS-106 change \-- the ongoing amounts \-- the Commission found
    that LECs have substantial control over the level of OPEB expenses.
    Accordingly, the Commission found that, with regard to the ongoing
    amounts, the LECs failed the first prong of the test for exogenous
    cost treatment which required that a cost to be outside of a
    carrier's control.[^14] With regard to the TBO amounts, the
    Commission stated that it did not have to resolve the control issue
    because the LECs had failed to establish that the TBO had not
    affected the economy generally (and was therefore not already
    accounted for the GNP-PI portion of the price cap formula) \-- the
    second prong of the test.[^15] Finally, the Commission indicated
    that it might further consider exogenous treatment of the TBO
    amounts based on a better and more complete record and suggested the
    annual 1993 access tariff filings as a possible forum for such
    consideration.[^16] Accordingly, in the 1993 annual access tariff
    filings, several LECs included adjustments to their price cap
    indices and rates based on exogenous treatment of certain TBO
    amounts. Effective July 1, 1993, AT&T also revised its price cap
    indices to reflect the LECs' proposed changes in access prices and
    to include adjustments for exogenous treatment of its own TBO
    amounts.[^17] The Commission suspended both the LECs' and AT&T's
    transmittals for one day and imposed an accounting order.[^18] The
    Commission designated the LEC portion of the investigation as "Phase
    I" and the AT&T portion of the investigation as "Phase II."[^19]

12. On July 12, 1994, the U.S. Court of Appeals for District of Columbia
    Circuit reversed and remanded the *OPEB Order*, concluding that
    changes in LEC OPEB costs caused by the implementation of SFAS-106
    were eligible for exogenous treatment under the Commission's then
    existing rules.[^20] Accordingly, the Court directed the Commission
    to grant exogenous treatment for OPEB-related costs. Because the
    carriers had withdrawn the tariffs that were the subject of the
    *OPEB Order*, and no tariffs remained pending in the remanded CC
    Docket No. 92-101, the Commission vacated the *OPEB Order* and
    terminated the CC Docket No. 92-101 proceeding.[^21] In response to
    the Court's reversal of the *OPEB Order,* however, the Bell Atlantic
    Telephone Companies (Bell Atlantic) and NYNEX Telephone Companies
    (NYNEX) filed tariff revisions that sought exogenous treatment of
    SFAS-106 amounts that they had not previously claimed.[^22] The
    Bureau suspended these tariffs for one day, imposed an accounting
    order, and initiated an investigation.[^23]

13. In April 1995, in its *Performance Review Order,* the Commission
    adopted new economic cost standards for exogenous treatment of
    accounting changes.[^24] In applying the new standards to SFAS-106,
    the Commission again rejected exogenous treatment of OPEB related
    costs.[^25] The Commission noted, however, that the new standards
    would operate on a prospective basis only and would not affect the
    pending investigations of exogenous claims associated with
    implementation of SFAS-106 in CC Docket No. 93-193 and CC Docket No.
    94-157.[^26]

14. On June 30, 1995, the Bureau consolidated the above-mentioned three
    separate pending investigations of exogenous claims (in CC Docket
    No. 93-193 and CC Docket No. 94-157) into a single proceeding,
    designating CC Docket No. 94-157 as the docket number for this
    investigation.[^27] As discussed above, the first investigation
    examines several issues relating to the 1993 annual access
    tariffs,[^28] including the LECs\' claims for exogenous treatment of
    the TBO portion of SFAS-106.[^29] The second investigation involves
    certain AT&T transmittals that proposed rates designed to recover
    LEC access charges that included the LECs' SFAS-106 costs, as well
    as AT&T\'s own SFAS-106 amounts.[^30] The third investigation in the
    *Combined OPEB Investigations Order* involves proposed tariff
    revisions filed by Bell Atlantic and NYNEX, which sought exogenous
    treatment of SFAS-106 amounts not previously claimed.[^31] In
    addition, the Bureau included four additional proposed tariff
    revisions in CC Docket No. 94-157.[^32] In each of the orders
    initiating these OPEB tariff investigations, the Bureau suspended
    the tariffs for one day and imposed accounting orders in the event
    the carriers\' proposed rates were later found to be
    unreasonable.[^33]

15. On March 7, 1996, the Commission rescinded the portion of RAO 20
    that addressed the rate base treatment of OPEB related costs.[^34]
    The Commission found that RAO 20 exceeded the Bureau's delegated
    authority under 47 C.F.R. § 32.17 to the extent that it directed
    exclusions from, and additions to, a LEC's interstate rate base that
    are not specifically authorized by Part 65 of the Commission's
    rules.[^35] The Commission specifically emphasized that its decision
    to order such rescission was based on procedural grounds and not on
    the substantive merits of the ratemaking practices at issue.[^36]

16. In response to the *RAO Rescission Order*, the LECs proposed to
    increase their PCIs for the 1996-1997 tariff period by adjusting
    their rate base treatment of OPEBs for certain prior years,
    resulting in reduced sharing obligations for those periods.[^37]
    Thus, in filing their 1996 annual access tariffs, Ameritech, Bell
    Atlantic, BellSouth, Nevada Bell, Pacific Bell, Southwestern Bell, U
    S West, Lincoln Telephone, GTE, and Sprint LTCs amended their Price
    Cap Regulation Rate of Return Monitoring Report (FCC Form 492A) to
    include accrued OPEB costs in their interstate rate bases.[^38] The
    inclusion of accrued OPEB costs increased the LECs' interstate rate
    bases, thereby lowering the reported rates of return and decreasing
    their calculated price cap sharing obligations.[^39] Reduced sharing
    obligations resulted in higher PCIs.[^40] Ameritech amended its FCC
    Form 492A to reflect OPEB liability costs accrued in the interstate
    rate base in 1992-1994; Bell Atlantic, Pacific Bell, Southwestern
    Bell, and Lincoln Telephone amended their earnings reports to
    reflect OPEB costs in 1993, 1994, and 1995.[^41] U S West amended
    its FCC Form 492A to include OPEB costs accrued in 1993, 1994, and
    1995.[^42]

17. In a June 24, 1996 order, the Bureau found that "the LECs' rate base
    treatment of OPEBs raises a substantial question of lawfulness under
    existing rules that warrants investigation."[^43] The Bureau also
    agreed with AT&T that "the LECs . . . failed to document and explain
    the derivation of the rate base adjustments underlying the
    \[proposed tariff\] revisions."[^44] The Bureau determined that it
    would investigate the extent to which the LECs were seeking to
    include OPEB costs in their rate bases while simultaneously seeking
    exogenous treatment for the same costs. [^45] The Bureau suspended
    the LEC tariffs, imposed an accounting order, and initiated an
    investigation.[^46]

18. After a period of inactivity, in December 2001, the Commission
    adopted an order that terminated stale or moot docketed proceedings.
    The Commission stated, with respect to a list of proceedings
    included in an appendix, that "\[t\]he matters at issue in these
    proceedings were resolved by the issuance of final orders that were
    not subject to judicial review, or if subject to judicial review,
    were affirmed and the court's mandate was issued."[^47] CC Docket
    No. 94-157 was among the 119 proceedings listed.[^48] Neither AT&T
    nor any other carrier sought review of the *Termination Order* as it
    related to CC Docket No. 94-157.[^49] Almost a year later, in an
    October 2002 meeting, AT&T urged the Bureau's Pricing Policy
    Division to take actions on specific issues involving OPEB cost
    claims.[^50] One issue, also known as "issue B" in the *Combined
    OPEB Investigation Order*, involves whether LECs may treat as
    exogenous the SFAS-106 costs they incurred prior to January 1, 1993,
    the date on which the Commission's rules required implementation of
    SFAS-106.[^51] AT&T believes that Bell Atlantic was the only LEC
    that requested exogenous treatment of OPEB costs for periods prior
    to January 1, 1993, and AT&T objects to Bell Atlantic's exogenous
    claims for calendar years 1991 and 1992.[^52] Another issue involves
    the proper rate base treatment of OPEBs discussed in the *1996
    Tariff Order*.[^53]

# Discussion

19. In the *Combined OPEB Investigations Order*, the Bureau designated
    certain issues for investigation, including issues relating to
    calculation of the specific amount of OPEB-related costs that are
    eligible for exogenous treatment and issues involving eligibility
    for exogenous treatment of certain OPEB-related costs (such as
    Voluntary Employee Benefit Association trusts and costs incurred
    prior to January 1, 1993).[^54] As stated above, the *Combined OPEB
    Investigations Order* designates CC Docket No. 94-157 as the docket
    number for all the OPEB-related issues.[^55] We note that the
    Commission also intended to resolve all other subsequent OPEB
    issues, including the proper rate base treatment of OPEBs discussed
    in the *1996 Tariff Order,* in the same combined OPEB
    proceeding.[^56]

20. Issue B, in the *Combined OPEB Investigations Order,* (*i.e*.,
    whether LECs may treat as exogenous the SFAS-106 costs they incurred
    prior to January 1, 1993, the Commission\'s date for mandatory
    compliance) remains in dispute.[^57] The issues regarding rate base
    treatment of OPEBs discussed in the *1996 Tariff Order* also remain
    unresolved.[^58]

21. The text of the *Termination Order* states that "none of the
    \[terminated\] dockets have any outstanding issues."[^59] Further,
    the *Termination Order* states that "the matters at issue in these
    \[terminated\] proceedings were resolved by the issuance of final
    orders that were not subject to judicial review."[^60] The appendix
    of the *Termination Order* explicitly lists CC Docket 94-157 as one
    of the dockets terminated by that order. Because certain issues in
    CC Docket 94-157 remain unresolved, we conclude that the inclusion
    of CC Docket 94-157 in the appendix of the *Termination Order* was
    an inadvertent technical error, and the Commission never intended to
    terminate the OPEB tariff investigation in this docket.[^61]

22. By this Order, Notice, and Erratum, we reinstate the investigation
    in CC Docket No. 94-157 to address AT&T's objections concerning
    treatment of OPEB related costs for calendar years 1991 and 1992, as
    well as OPEB-related issues discussed in the *1996 Tariff Order*.
    Because the record may be stale, we seek to refresh the record.
    Considering that some of the parties subject to this investigation
    have merged,[^62] we note that the old record may not accurately
    reflect the successor parties' current positions. In addition, we
    want to give interested parties the opportunity to provide new
    evidence, as appropriate, in light of the time that has passed.
    Accordingly, parties should state in full their arguments on these
    issues, rather than merely incorporating by reference arguments
    stated in their earlier filings in this once terminated docket.
    Parties should also identify clearly the portions of their previous
    filings that are no longer relevant, as well as those that remain
    relevant, and why.

23. With respect to issue B, in the *Combined OPEB Investigations
    Order*, we direct Verizon Communications[^63] to submit its direct
    case and studies upon which it relies to demonstrate that
    OPEB-related costs incurred prior to January 1, 1993 are eligible
    for exogenous treatment. As discussed above, Verizon should state in
    full its arguments, rather than merely incorporating by reference
    arguments stated in Bell Atlantic's earlier filings. Parties should
    also identify clearly the portions of their previous filings that
    are no longer relevant, as well as those that remain relevant, and
    why.

24. With respect to issues regarding rate base treatment of OPEBs
    discussed in the *1996 Tariff Order*, interested parties may file
    comments in response to this Order, Notice, and Erratum to refresh
    the record. Parties should also identify clearly the portions of
    their previous filings that are no longer relevant, as well as those
    that remain relevant, and why. We note that the specific issues that
    will be the subject of the investigation will be identified in a
    future designation order. We may also identify issues in that order
    that do not warrant further investigation.

25. Finally, with respect to other OPEB issues under investigation in CC
    Docket No. 94-157, CC Docket No. 94-65, and CC Docket No. 93-193, we
    request that parties with interest in such issues (whether or not
    described above) inform the Bureau of any issue that remains open.
    If we receive no timely comments in response to this order, we will
    terminate our OPEB investigation in CC Docket No. 94-65 and CC
    Docket No. 93-193 without further action. Additionally, absent
    timely comments in response to this order, we will limit our further
    action in Docket No. 94-157 to the two specific issues described in
    paragraph 18 above, and we will similarly terminate that docket once
    we have resolved those issues. Termination of issues no longer in
    dispute serves the public interest because it reduces the
    uncertainty to which carriers are subject in their normal
    operations, and it permits both carriers and the Commission to
    devote their resources more efficiently to other matters of
    significance.

# PROCEDURAL MATTERS

## Filing Schedules

26. This Order, Notice, and Erratum combines all OPEB investigations
    into one investigation, and this investigation is designated CC
    Docket No. 94-157.

27. Verizon shall file its direct case on issue B, designated in the
    *Combined OPEB Investigations Order*, no later than 45 days after
    release of this Order, Notice, and Erratum. Pleadings responding to
    the direct case must be captioned "Opposition to Direct Case" or
    "Comments on Direct Case" and may be filed no later than 30 days
    after the direct case is filed. Verizon may file a "rebuttal" to
    oppositions no later than 15 days after the oppositions are filed.

28. Interested parties may file comments on other OPEB issues, as
    discussed in paragraphs 24 and 25 above, no later than 28 days after
    the publication of this Order, Notice, and Erratum in the Federal
    Register. Reply comments are due no later than 14 days after the
    comments are filed.

29. An original and four copies of all pleadings shall be filed with the
    Secretary of the Commission. In addition, parties shall serve with
    three copies: Pricing Policy Division, Wireline Competition Bureau,
    445 12th Street, S.W., Room 5A-333, Washington, D.C. 20554, Attn:
    Nese Guendelsberger. Parties shall also serve with one copy: Qualex
    International, Portals II, 445 12th Street, S.W., Room CY-B402,
    Washington, D.C. 20554, (202) 863-2893. Members of the general
    public who wish to express their views in an informal manner
    regarding the issues in this Order, Notice, and Erratum may do so by
    submitting one copy of their comments to the Office of the
    Secretary, Federal Communications Commission, 445 12th Street, S.W.,
    Room TW-A325, Washington, D.C. 20554. Such comments should specify
    the docket number of this proceeding, CC Docket No. 94-157. Parties
    are also strongly encouraged to submit their pleadings via the
    Internet through the Electronic Comment Filing System at
    \<http://www.fcc.gov/e-file/ecfs.html\>. Generally, only one copy of
    an electronic submission must be filed. In completing the
    transmittal screen, commenters should include their full name,
    Postal Service mailing address, and the applicable docket number,
    which in this instance is CC Docket No. 94-157. Parties may also
    submit an electronic comment via Internet e-mail. To get filing
    instructions for e-mail comments, commenters should send an e-mail
    to \<ecfs@fcc.gov\>, and should include the following words in the
    body of the message: "get form \<your e-mail address\>." A sample
    form and directions will be sent in reply.

30. Interested parties who wish to file comments via hand-delivery are
    also notified that effective December 18, 2001, the Commission will
    only receive such deliveries weekdays from 8:00 a.m. to 7:00 p.m.,
    via its contractor, Vistronix, Inc., located at 236 Massachusetts
    Avenue, NE, Suite 110, Washington, DC 20002. **The Commission no
    longer accepts these filings at 9300 East Hampton Drive, Capitol
    Heights, MD 20743.** Please note that all hand deliveries must be
    held together with rubber bands or fasteners, and envelopes must be
    disposed of before entering the building. In addition, this is a
    reminder that as of October 18, 2001, the Commission no longer
    accepts hand-delivered or messenger-delivered filings at its
    headquarters at 445 12th Street, SW, Washington, DC 20554.
    Messenger-delivered documents (*e.g.*, FedEx), including documents
    sent by overnight mail (other than United States Postal Service
    (USPS) Express and Priority Mail), must be addressed to 9300 East
    Hampton Drive, Capitol Heights, MD 20743. This location is open
    weekdays from 8:00 a.m. to 5:30 p.m. USPS First-Class, Express, and
    Priority Mail should be addressed to the Commission's headquarters
    at 445 12th Street, SW, Washington, DC 20554. The following chart
    summarizes this information:

+-----------------------------------+----------------------------------+
| **TYPE OF DELIVERY**              | > **PROPER DELIVERY ADDRESS**    |
+-----------------------------------+----------------------------------+
| Hand-delivered paper filings      | > 236 Massachusetts Avenue, NE,  |
|                                   | >                                |
|                                   | > Suite 110, Washington, DC      |
|                                   | > 20002 (Weekdays - 8:00 a.m. to |
|                                   | > 7:00 p.m.)                     |
+-----------------------------------+----------------------------------+
| Messenger-delivered documents     | > 9300 East Hampton Drive,       |
| (e.g., Federal Express) including | >                                |
| documents sent by overnight mail  | > Capitol Heights, MD 20743      |
| (this type excludes USPS Express  | >                                |
| and Priority Mail)                | > (Weekdays - 8:00 a.m. to 5:30  |
|                                   | > p.m.)                          |
+-----------------------------------+----------------------------------+
| USPS First-Class, Express, and    | > 445 12^th^ Street, SW          |
| Priority Mail                     | >                                |
|                                   | > Washington, DC 20554           |
+-----------------------------------+----------------------------------+

31. All relevant and timely pleadings will be considered by the
    Commission. In reaching a decision, the Commission may take into
    account information and ideas not contained in pleadings, provided
    that such information, or a writing containing the nature and source
    of such information, is placed in the public file, and provided that
    the fact of reliance on such information is noted in the order.

## *Ex Parte* Requirements

32. This proceeding is a permit-but-disclose proceeding and is subject
    to the requirements of section 1.1206(b) of the Commission's rules,
    47 C.F.R. § 1.1206(b), as revised. Persons making oral *ex parte*
    presentations are reminded that memoranda summarizing the
    presentations must contain a summary of the substance of the
    presentation and not merely a listing of the subjects discussed.
    More than a one- or two-sentence description of the views and
    arguments presented is generally required.[^64] Other rules
    pertaining to oral and written presentations are also set forth in
    section 1.1206(b).

33. Interested parties are to file any written *ex parte* presentations
    in this proceeding with the Commission's Secretary, Marlene Dortch,
    445 12th Street, S.W., TW-B204, Washington, D.C. 20554, and serve
    with three copies: Pricing Policy Division, Wireline Competition
    Bureau, 445 12th Street, S.W., Room 5 A-333, Washington, D.C. 20554,
    Attn: Nese Guendelsberger. Parties shall also serve with one copy:
    Qualex International, Portals II, 445 12th Street, S.W., Room
    CY-B402, Washington, D.C. 20554, (202) 863-2893.

## Paperwork Reduction Act

34. This Order, Notice, and Erratum contains no new or modified
    information collections subject to the Paperwork Reduction Act of
    1995, Pub. Law 104-13.

# ORDERING CLAUSES

35. Pursuant to section 4(i) of the Communications Act of 1934, 47
    U.S.C. § 154(i), by this Order, Notice, and Erratum, the
    *Termination Order* is corrected to reinstate as a pending
    proceeding CC Docket No. 94-157. All references to CC Docket No.
    94-157 in the Appendix to the *Termination Order* are hereby
    DELETED.

36. IT IS also ORDERED that, pursuant to sections 4(i), 4(j), and 204(a)
    of the Communications Act of 1934, 47 U.S.C. §§ 154(i), 154(j),
    204(a), Verizon Communications SHALL RESPOND to the issue B,
    designated in the *Combined OPEB Investigations Order*, no later
    than 45 days after release of this Order, Notice, and Erratum.

37. The Bureau WILL SEND a copy of this Order, Notice, and Erratum to
    the entities listed in the Appendix A.

> FEDERAL COMMUNICATIONS COMMISSION
>
> William F. Maher, Jr.
>
> Chief
>
> Wireline Competition Bureau

**APPENDIX A.**

Verizon Communications, Inc., (including Bell Atlantic Telephone
Companies, GTE Telephone Operating Companies, GTE System Telephone
Companies, NYNEX Telephone Companies)

ALLTEL Communications (including Lincoln Telephone Companies)

Frontier Telephone of Rochester, Inc., (including Rochester Telephone
Corporation)

SBC Communications, Inc., (including Ameritech Operating Companies,
Nevada Bell Telephone Company, Pacific Bell Telephone Company, Southern
New England Telephone Company, Southwestern Bell Telephone Company)

Bell South Telecommunications, Inc.

Qwest Communications, Inc., (including U S West Communications, Inc.)

AT&T Communications

WorldCom Communications (including MCI Telecommunications Corporation,

Sprint Communications (including United and Central Telephone Companies,
Centel Telephone Companies)

Ad Hoc Telecommunications Users Committee

Williams Communications, LLC., (including Williams Telecommunications
Group, Inc.)

International Communications Association

United States Telecom Association

[^1]: *1993 Annual Access Tariff Filings,* CC Docket No. 93-193, *1994
    Annual Access Tariff Filings*, CC Docket No. 94-65, *AT&T
    Communications Tariff F.C.C. Nos. 1 and 2, Transmittal Nos. 5460,
    5461, 5462, and 5464*, CC Docket No. 93-193, *Bell Atlantic
    Telephone Companies Tariff F.C.C. No. 1, Transmittal No. 690*, CC
    Docket No. 94-157, Order Designating Issues for Investigation, 10
    FCC Rcd 11804 (Com. Car. Bur. 1995) (*Combined OPEB Investigations
    Order*). The present Wireline Competition Bureau was known as the
    Common Carrier Bureau until 2002.

[^2]: *See id.* at 11817, para. 32.

[^3]: *Termination of Stale or Moot Docketed Proceedings*, Order, 17 FCC
    Rcd 1199 (2002) (*Termination Order*); 67 Fed. Reg. 3617 (Jan. 25,
    2002).

[^4]: *See 1996 Annual Access Tariff Filings; National Exchange Carrier
    Association Universal Service Fund and Lifeline Assistance Rates;
    NYNEX Telephone Company Petition to Advance the Effective Date of
    the 5.3 X-Factor to January 1, 1995*, Transmittal No. 710,
    Memorandum Opinion and Order, 11 FCC Rcd 7564 (Com. Car. Bur. 1996)
    (*1996 Tariff Order*). *See also* paras*.* 13-15, *infra*, for
    detailed discussion of OPEB issues in the *1996 Tariff Order*.

[^5]: SFAS-106 defines the TBO as "the unrecognized amount, as of the
    date this Statement is initially applied, of (a) the accumulated
    postretirement benefit obligation in excess of (b) the fair value of
    plan assets plus any recognized accrued postretirement benefit cost
    or less any recognized prepaid postretirement benefit cost."

[^6]: *See* *Southwestern Bell Corporations, GTE Service Corporation,
    Notification of Intent to Adopt Statement of Financial Accounting
    Standards No. 106, Employers' Accounting for Postretirement Benefits
    Other Than Pensions*, 6 FCC Rcd 7560 (Com. Car. Bur. 1991).

[^7]: *Id. See also* *Uniform Accounting for Postretirement Benefits
    Other* *Than Pensions in Part 32*, 7 FCC Rcd 2872 (Accounting and
    Audits Division, Com. Car. Bur. 1992) (*RAO Letter 20*).

[^8]: *See RAO Letter 20*, 7 FCC Rcd at 2872. *See also 1996 Tariff
    Order*, 11 FCC Rcd at 7567, para. 5.

[^9]: *See RAO Letter 20*, 7 FCC Rcd at 2872.

[^10]: *Id*.

[^11]: *See* *Bell Atlantic Telephone Companies Tariff F.C.C. No. 1,
    Transmittal No. 497* (filed Feb. 28, 1992); *U S West
    Communications, Inc. Tariff F.C.C. Nos 1 and 4, Transmittal No. 246*
    (filed Apr. 3, 1992); and *Pacific Bell Tariff F.C.C. No. 128,
    Transmittal No. 1579* (filed Apr. 16, 1992). The \"Price Cap Index\"
    or \"PCI\" serves as an upper limit on rates. This index is adjusted
    annually for productivity, inflation (GNP-PI) and other factors,
    including exogenous adjustments.

[^12]: *Treatment of Local Exchange Carrier Tariffs Implementing
    Statement of Financial Accounting Standards,* "*Employers Accounting
    for Postretirement Benefits Other Than Pensions*," CC Docket No.
    92-101, Order of Investigation and Suspension, 7 FCC Rcd 2724 (Com.
    Car. Bur. 1992). The Bureau designated the following issues for
    investigation:

    > \(1\) whether the LECs had demonstrated that implementing SFAS-106
    > results in an exogenous cost change under the Commission\'s price
    > cap rules; and
    >
    > \(2\) if these cost changes were treated as exogenous, whether:
    >
    > \(a\) costs associated with implementation of SFAS-106 prior
    > January 1, 1993 (when the accounting change becomes mandatory)
    > should be treated as exogenous;
    >
    > \(b\) the assumptions made by the individual LECs in calculating
    > these costs were reasonable;
    >
    > \(c\) given these assumptions, the individual LECs had correctly
    > computed the exogenous cost changes; and
    >
    > \(d\) the individual LEC allocations of these costs among the
    > price cap baskets complied with Commission rules.
    >
    > *Id* at 2725-26, para. 10.

[^13]: *Treatment of Local Exchange Carrier Tariffs Implementing
    Statement of Financial Accounting Standards,* "*Employers Accounting
    for Postretirement Benefits Other Than Pensions*," CC Docket No.
    92-101, Memorandum Opinion and Order, 8 FCC Rcd 1024 (1993) (*OPEB
    Order*). This order directed Bell Atlantic, US West and Pacific Bell
    to file tariff revisions removing the OPEB costs from the
    calculation of their PCI*. Id.* at 1037, para. 75.

[^14]: *See OPEB Order*, 8 FCC Rcd at 1033, paras. 53-56. *See also* 47
    C.F.R. § 61.45(d) (1993).

[^15]: *See OPEB Order*, 8 FCC Rcd at 1033-34, paras. 57-59. *See also*
    47 C.F.R. § 61.45(d) (1993).

[^16]: *See OPEB Order*, 8 FCC Rcd at 1037, para. 75.

[^17]: *AT&T Communications Tariff F.C.C. Nos. 1 and 2, Transmittal Nos.
    5460, 5461, 5462, and 5464*, Memorandum Opinion and Order Suspending
    Rates and Designating Issues for Investigation, 8 FCC Rcd 6227 (Com.
    Car. Bur. 1993) (*AT&T OPEB Investigation Order*).

[^18]: *See 1993 Annual Access Tariff Filings*, CC Docket No. 93-193*,
    National Exchange Carrier Association, Transmittal No. 556,
    Universal Service Fund and Lifeline Assistance Rates*, CC Docket No.
    93-123*, GSF Order Compliance Filings, Bell Operating Companies
    Tariffs for the 800 Service Management System and 800 Data Base
    Access Tariffs*, CC Docket No. 93-129, Memorandum Opinion and Order
    Suspending Rates and Designating Issues for Investigation, 8 FCC Rcd
    4960 (Com. Car. Bur. 1993) (*1993 Annual Access Investigation
    Order*); *AT&T OPEB Investigation Order,* 8 FCC Rcd at 6227.

[^19]: *AT&T OPEB Investigation Order,* 8 FCC Rcd at 6227.

[^20]: *Southwestern Bell Telephone Company v. FCC*, 28 F.3d 165 (D.C.
    Cir. 1994).

[^21]: *Treatment of Local Exchange Carrier Tariffs Implementing
    Statement of Financial Accounting Standards,* "*Employers Accounting
    for Postretirement Benefits Other Than Pensions*," CC Docket No.
    92-101, Memorandum Opinion and Order, 10 FCC Rcd 11821 (1995).

[^22]: *See Bell Atlantic Telephone Companies Tariff F.C.C. No. 1,
    Transmittal No. 690, NYNEX Telephone Companies Tariff F.C.C. No. 1,
    Transmittal No. 328, Pacific Bell Tariff F.C.C. No. 128, Transmittal
    No. 1738 and US West Communications, Transmittal No. 550*, CC Docket
    No. 94-157, Memorandum Opinion and Order, 10 FCC Rcd 1594 (Com. Car.
    Bur. 1994) (*Bell Atlantic/NYNEX Investigation Order*).

[^23]: *Id.*

[^24]: *Price Cap Performance Review for Local Exchange Carriers*, CC
    Docket No. 94-1, First Report and Order, 10 FCC Rcd 8961, 9090-97,
    paras. 293-309 (1995) (*Performance Review Order*). The *Performance
    Review Order* amended the Commission's rules to preclude price cap
    index adjustments for accounting changes that involve no changes in
    economic cost "expected to affect prices." *See id*. at 9090, para.
    293. Applying the new rule in the *Performance Review Order,* the
    Commission ordered the price cap indices reduced prospectively, in
    order to preclude recovery of future, amortized installments of OPEB
    costs. *See id.* at 9095-97, paras. 306-309.

[^25]: *Performance Review Order,* 10 FCC Rcd at 9096-97, paras.
    306-309.

[^26]: *Performance Review Order,* 10 FCC Rcd at 9096-97, paras.
    306-309. *See also Bell Atlantic Telephone Cos. v. FCC*, 79 F.3d
    1195 (D.C. Cir. 1996).

[^27]: *See Combined OPEB Investigations Order*, 10 FCC Rcd at 11817,
    para. 32.

[^28]: *See 1993 Annual Access Investigation Order,* 8 FCC Rcd 4960.

[^29]: The *1993 Annual Access Investigation Order* also includes an
    investigation of Rochester Telephone Corporation, Tariff F.C.C. No.
    1, Transmittal No. 222, for SFAS-106 TBO amounts that were suspended
    by the Bureau for one day in the 1994 annual access tariff order.
    *See 1994 Annual Access Tariff Filings*, CC Docket No. 94-65,
    Memorandum Opinion Order Suspending Rates, 9 FCC Rcd 3519 (Com. Car.
    Bur. 1994) (*1994 Annual Access Investigation Order I*); *1994
    Annual Access Tariff Filings*, CC Docket No. 94-65, Memorandum
    Opinion and Order Suspending Rates, 9 FCC Rcd 3705 (Com. Car. Bur.
    1994) (*1994 Annual Access Investigation Order II*).

[^30]: *See AT&T OPEB Investigation Order*, 8 FCC Rcd 6227.

[^31]: *See Bell Atlantic/NYNEX Investigation Order*, 10 FCC Rcd 1594.

[^32]: The Bureau included the following four tariff filings in the
    investigation: *Bell Atlantic Telephone Companies, Tariff F.C.C. No.
    1, Transmittal No. 747*, CC Docket Nos. 94-139 and 94-157,
    Memorandum Opinion and Order Suspending Rates, 10 FCC Rcd 5027 (Tar.
    Div., Com. Car. Bur. 1995); *Pacific Bell, Tariff F.C.C. No. 128,
    Transmittal No. 1773 and US West, Tariff F.C.C. No. 5, Transmittal
    No. 584*, CC Docket No. 94-157, Memorandum Opinion and Order
    Suspending Rates, 10 FCC Rcd 6038 (Tar. Div., Com. Car. Bur., 1995);
    *The NYNEX Telephone Companies, Tariff F.C.C. No. 1, Transmittal No.
    374*, CC Docket No. 94-157, Memorandum Opinion and Order Suspending
    Rates, DA 95-966 (Tar. Div., Com. Car. Bur., rel. Apr. 27, 1995).

[^33]: In the *Combined OPEB Investigations Order*, the Bureau
    designated the following issues for investigation:

    > \(A\) whether AT&T and the individual LECs correctly, reasonably
    > and justifiably calculated the gross amount of SFAS-106 costs that
    > may be subject to exogenous treatment under price cap regulation;
    >
    > \(B\) whether exogenous claims should be permitted for SFAS-106
    > costs incurred prior to January 1, 1993, the Commission's date for
    > mandatory compliance;
    >
    > \(C\) whether AT&T and the individual LECs have correctly and
    > reasonably allocated and separated amounts associated with
    > implementation of SFAS-106 in accordance with the Commission's
    > rules and Responsible Accounting Officer (RAO) letters;
    >
    > \(D\) how Voluntary Employee Benefit Association (VEBA) trusts or
    > other funding mechanisms should be treated:
    >
    > \(1\) if implemented before price caps;
    >
    > \(2\) if implemented after price caps, but before the change
    > required by SFAS-106; and
    >
    > \(3\) if implemented after the change in accounting required by
    > SFAS-106;
    >
    > \(E\) whether exogenous cost treatment for SFAS-106 amounts should
    > be limited to costs that are funded;
    >
    > \(F\) whether exogenous treatment should be given only for amounts
    > associated with employee interests that have vested; and
    >
    > \(G\) how the deferred tax benefit applicable to OPEBs should be
    > treated for purposes of exogenous adjustments.
    >
    > *See Combined OPEB Investigations Order*, 10 FCC Rcd at 11812-15,
    > paras. 16-23.

[^34]: *Responsible Accounting Officer Letter 20, Uniform Accounting for
    Postretirement Benefits Other than Pensions in Part 32*, CC Docket
    No. 96-22, Memorandum Opinion Order and Notice of Proposed Rule
    Making, 11 FCC Rcd 2957 (1996) (*RAO Rescission Order*).

[^35]: *Id*. at 2961, para. 25.

[^36]: *Id*. at 2961, para. 27.

[^37]: *See 1996 Tariff Order*, 11 FCC Rcd at 7568, para. 7.

[^38]: *Id*.

[^39]: *Id*.

[^40]: *Id*.

[^41]: *Id*.

[^42]: *Id*.

[^43]: *Id*. at 7573, para. 19.

[^44]: *Id*., para. 20.

[^45]: *Id*. at 7574, para. 21. The Bureau stated that, "\[s\]ince the
    issue of rate base treatment of OPEB costs claimed for the 1992-1993
    period is similar to the issue before us in our investigation of CC
    Docket 93-193, we add the tariff revisions filed by Ameritech, Bell
    Atlantic, U S West, Pacific Bell, Southwestern Bell, and Lincoln to
    that investigation." *Id.*

[^46]: *Id*. at 7566-67, para. 4, 7573-74, paras. 20-21.

[^47]: *Termination Order,* 17 FCC Rcd 1199 (2002); 67 Fed. Reg. 3617
    (Jan. 25, 2002).

[^48]: *Termination Order*, 17 FCC Rcd 1199 (2002).

[^49]: We note that at least two other dockets with pending issues were
    terminated in the same *Termination Order*. *See* Termination of
    Stale or Moot Docketed Proceedings*, Erratum*, 17 FCC Rcd 4543 (Com.
    Car. Bur. 2002) (*Termination Order Erratum*). One of those dockets,
    CC Docket No. 96-198, was a rulemaking in which the Commission had
    not ruled on reconsideration petitions of AT&T and other parties.
    AT&T filed a timely petition for judicial review of the *Termination
    Order* on the grounds that the Commission could not lawfully
    terminate the rulemaking proceeding without disposing of the merits
    of its reconsideration petition. *See* *AT&T Corp. v. FCC*, D.C.
    Cir. No 02-1084 (2002). In the *Termination Order Erratum*, the
    Bureau concluded that the termination of that rulemaking was an
    inadvertent, technical error and reinstated CC Docket No. 96-198.
    *See Termination Order Erratum,* 17 FCC Rcd 4543, para. 2.

[^50]: *See* Letter from Patrick H. Merrick, Director, AT&T Federal
    Government Affairs, to Marlene H. Dortch, Secretary, FCC, filed
    October 23, 2002 (*AT&T Oct. 23, 2002 Ex-Parte Letter*).

[^51]: *Combined OPEB Investigations Order*, 10 FCC Rcd at 11813, para.
    19. *See also id*. at 11812-15, paras. 16-23 (other issues
    designated for investigation).

[^52]: *See AT&T Oct. 23, 2002 Ex-Parte Letter.*

[^53]: *Id. See also 1996 Tariff Order*, 11 FCC Rcd 7567.

[^54]: *See* footnote 31, *supra,* for more detail*. See also Combined
    OPEB Investigations Order*, 10 FCC Rcd at 11812-15, paras. 16-23.

[^55]: *See Combined OPEB Investigations Order*, 10 FCC Rcd at 11817,
    para. 32.

[^56]: The Commission has consistently treated the OPEB issues raised in
    CC Docket 93-193 as part of a group of issues that should be
    addressed together. For example, by order dated April 17, 1997, the
    Commission expressly declined "to address issues related to claims
    for exogenous treatment under price cap regulation of amounts
    associated with the implementation of \[SFAS-106\] relating to
    \[OPEBs\]." *In the Matter of 1993 Annual Access Tariff Filings, GSF
    Order Compliance Filings, In the Matter of 1994 Annual Access Tariff
    Filings, In the Matter of 1995 Annual Access Tariff Filings, In the
    Matter of 1996 Annual Access Tariff Filings*, CC Docket 93-193,
    Phase I, Part 2, CC Docket 94-65, Memorandum Opinion and Order, 12
    FCC Rcd 6277, 6280, para. 2 n.6 (1997). The Commission noted that
    "the OPEB issues" would be addressed in a separate proceeding and
    cited to, among other things, a clause in the *Combined OPEB
    Investigations Order* that "designated the SFAS-106 portion of the
    1993 Annual Access Order as Phase I, Part I" of the investigation.
    *Id*.

[^57]: *See AT&T Oct. 23, 2002 Ex-Parte Letter.*

[^58]: *See id.; 1996 Tariff Order*, 11 FCC Rcd at 7573-74, paras.
    19-21.

[^59]: *See Termination Order,* 17 FCC Rcd at 1199, para. 1.

[^60]: *Id.*

[^61]: *See Termination Order* *Erratum*, 17 FCC Rcd at 4543-44
    (reinstating two other proceedings with pending issues).

[^62]: *See*, *e.g.,* *Applications of NYNEX Corporation Transferor, and
    Bell Atlantic Corporation Transferee, for Consent to Transfer
    Control of NYNEX Corporation and its subsidiaries*, File No.
    NSD-L-96-10, Memorandum Opinion and Order, 12 FCC Rcd 19985 (1997);
    *Application of GTE Corporation, Transferor, and Bell Atlantic
    Corporation, Transferee, for* *Consent to Transfer Control of
    Domestic and International Sections 214 and 310 Authorizations and
    Application to Transfer Control of a Submarine Cable Landing
    License*, CC Docket No. 98-184, Memorandum Opinion and Order, 15 FCC
    Rcd 14032 (2000).

[^63]: When Bell Atlantic Corporation and GTE Corporation merged into
    one company, they named it Verizon Communications (Verizon). *See*
    <http://www.fcc.gov/wcb/armis/COSA_History/vctr.htm>;
    <http://investor.verizon.com/profile/history_001.html>.

[^64]: *See* 47 C.F.R. §1.1206(b)(2), as revised.