**Before the**

Federal Communications Commission

Washington, D.C. 20554

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| In the Matter of                 | * | WC Docket No. 07-21          |
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| Petition of AT&T Inc. For        | ) | WC Docket No. 05-342         |
| Forbearance                      | * |                              |
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| Under 47 U.S.C. § 160 From       |   |                              |
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| of Certain of the Commission's   | ) |                              |
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| Cost Assignment Rules            | * |                              |
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| Petition of BellSouth            | * |                              |
| Telecommunications,              | * |                              |
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| Inc. For Forbearance Under 47    | * |                              |
| U.S.C. § 160                     | * |                              |
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| From Enforcement of Certain of   | * |                              |
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| Commission's Cost Assignment     | * |                              |
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**MEMORANDUM OPINION AND ORDER**

**Adopted: April 24, 2008 Released: April 24, 2008**

By the Commission: Commissioners Tate and McDowell issuing separate
statements; Commissioners Copps and Adelstein dissenting and issuing a
joint statement.

Table of Contents

Para.

I. Introduction 1

II\. Background 2

III\. DISCUSSION 10

A. Charges, Practices, Classifications and Regulations 15

B. Protection of Consumers 36

C. Public Interest 39

IV\. Conclusion 46

V. EFFECTIVE DATE 47

VI\. ORDERING CLAUSES 48

APPENDIX

# Introduction

1.  In this Order, we address the petitions filed by AT&T Inc. on behalf
    of certain of its legacy SBC affiliates (Legacy AT&T) and BellSouth
    Telecommunications, Inc. (Legacy BellSouth) (jointly, "AT&T")[^1]
    requesting that the Commission forbear, pursuant to section 10 of
    the Communications Act of 1934, as amended (Act), from applying its
    "cost assignment" rules to AT&T.[^2] For the reasons set forth
    below, we grant both petitions, subject to conditions.[^3] We find
    that AT&T has demonstrated that the forbearance petitions meet the
    statutory criteria for forbearance.

# Background

2.  Initially, incumbent local telephone companies were monopolies
    subject to rate-of-return rate regulation at both the federal and
    state levels. Under rate-of-return regulation, rates were targeted
    to levels that allowed carriers to recover their costs and earn a
    specific return on their regulated investment.[^4] Because the same
    local network facilities were used to provide both interstate and
    intrastate services, as well as both regulated and nonregulated
    services, however, the Commission developed the rules described
    below, to standardize rate-of-return rate regulation. Specifically,
    the Commission created rules to assign or allocate the common costs
    to build and maintain the network, and the revenues derived from the
    array of services offered over the network, by type of cost, type of
    service (regulated or nonregulated), jurisdiction (intrastate or
    interstate), and service categories.[^5]

3.  To record company investment, expense, cost, and revenue for
    rate-of-return rate regulation, the Commission adopted a Uniform
    System of Accounts (USOA).[^6] Currently embodied in Part 32 of the
    Commission's rules, the USOA is a financial accounting system that
    discloses the results of operational and financial events in a
    manner that enables both the companies' management and regulatory
    agencies to assess these results.[^7] First, the USOA sets forth a
    standardized chart of accounts and thereby directs companies how to
    record certain transactions in their books of account. Second, the
    USOA establishes rules for carriers' affiliate transactions. Third,
    the USOA specifies accounting treatment for depreciation expenses.
    Finally, the USOA requires carriers to maintain property records of
    all telecommunications plant in service.

4.  Additionally, for companies to determine how to jurisdictionally
    separate their investment, expense, taxes, resources, operating
    revenues, and other income for accounting purposes, the Commission
    adopted jurisdictional separations rules. Separations procedures
    were performed by incumbent local exchange carriers (LECs) since the
    Supreme Court's 1930 holding that the "separation of intrastate and
    interstate property, revenues and expenses" is "essential to the
    appropriate recognition of the competent governmental authority in
    each field of regulation."[^8] In 1947, the Commission created what
    is now known as the "NARUC-FCC Separations Manual," which was a
    result of cooperative efforts and studies undertaken by the
    industry, state regulatory agencies through the National Association
    of Regulatory Utility Commissioners (NARUC), and the Commission
    beginning in 1941.[^9] After working with the states on separations
    guidelines for a number of years, the Commission ultimately adopted
    a set of legally binding separations procedures in 1969 that are now
    set forth in Part 36 of the Commission's rules.[^10]

5.  Further, in 1983, shortly before the AT&T divestiture, the
    Commission adopted Part 69 to govern how incumbent LECs calculate
    their access charge rates.[^11] These rules help to ensure that
    incumbent LECs' access charges are just and reasonable, consistent
    with section 201 of the Act, and not unjustly or unreasonably
    discriminatory, consistent with section 202 of the Act.[^12] For
    example, the Part 69 rules establish the rate structure for access
    charges to be paid by interexchange carriers to LECs for the
    origination and termination of long distance calls, as well as the
    access charges to be paid directly by end users. These rate
    structure rules establish the access charge rate elements as well as
    the nature of the charges, such as whether they are assessed on a
    per-minute or a flat-rate basis.

6.  As a result of the Commission subsequently permitting
    post-divestiture AT&T and the regional Bell operating companies
    (BOCs) to offer "enhanced" or "information" services, which were
    treated as "nonregulated," the Commission addressed concerns of cost
    shifting. As telecommunications technology advanced, and as new
    technology was ubiquitously deployed, the Commission became
    concerned with the opportunities for carriers with market power to
    subsidize the development of new technologies with increased rates
    for noncompetitive services.[^13] To address these concerns, the
    Commission adopted Part 64 to help ensure, among other things, that
    carriers could not impermissibly "impos\[e\] on ratepayers for
    regulated interstate services the costs and risks of nonregulated
    ventures."[^14]

7.  Together, these Commission rules establish a rational four-step
    process for recording and allocating incumbent LECs' costs and
    revenues associated with their regulated and nonregulated
    activities.[^15] First, carriers record their costs, including
    investments and expenses, into various accounts in accordance with
    the USOA prescribed by Part 32 of the Commission's rules.[^16]
    Second, carriers directly assign, or allocate if direct assignment
    is not possible, the costs and revenues associated with their
    regulated and nonregulated activities using the rules established by
    the Commission in Part 64 of its rules.[^17] Third, interstate and
    intrastate costs and revenues are separated as provided in Part 36
    of the Commission's rules.[^18] Finally, the access charge rules in
    Part 69 require carriers to separate regulated interstate costs into
    interexchange costs and access costs, and then apportion the latter
    among the enumerated access elements.[^19]

8.  In 1991, in response to the concern that rate-of-return regulation
    had eliminated carriers' incentives to reduce costs and improve
    efficiency, the Commission implemented price cap regulation.[^20]
    Price cap regulation is incentive-based regulation that focuses on
    the prices that a carrier may charge and the revenues it may
    generate from interstate access services.[^21] Price cap regulation
    was a means for the Commission to encourage regulated markets to
    produce results similar to highly competitive unregulated markets
    and as such ensure that consumers benefit from carriers' cost
    efficiencies.[^22] As the Commission has explained, "price cap
    regulation severs the direct link between regulated costs and
    prices."[^23] Price cap regulation was designed to encourage
    carriers "to improve their efficiency by harnessing profit-making
    incentives to reduce costs, invest efficiently in new plant and
    facilities, and develop and deploy innovative service offerings,
    while setting price ceilings at reasonable levels."[^24] Pursuant to
    Part 61 of the Commission's rules, price cap indices, or ceilings,
    are designed to provide price cap carriers some pricing flexibility
    while ensuring that interstate rates remain just and
    reasonable.[^25]

9.  Since the adoption of price cap regulation, many carriers, including
    AT&T, have moved from rate-of-return rate regulation to price cap
    regulation, and the Commission has modified its regulation of price
    cap carriers over time to reflect changing circumstances. According
    to AT&T, both its interstate and intrastate rates are now regulated
    under price cap regulation, if at all.[^26] However, price cap
    regulation always was intended to act "as a transitional regulatory
    scheme until the advent of actual competition makes price cap
    regulation unnecessary."[^27]

# DISCUSSION

10. In this Order, we grant AT&T's petitions for forbearance, subject to
    conditions, because we find that AT&T, as a price cap carrier
    generally not subject to rate-of-return regulation, has demonstrated
    that forbearance from enforcing the Cost Assignment Rules satisfies
    the standard for forbearance under section 10 of the Act. AT&T is a
    price cap carrier seeking forbearance from the Cost Assignment
    Rules, which were developed at a time when the LECs' interstate
    rates and many of their intrastate rates were set under rate-based,
    cost-of-service regulation. An integral part of the
    "pro-competitive, de-regulatory national policy framework"[^28]
    established in the Act is the requirement, set forth in section 10,
    that the Commission forbear from applying any provision of the Act,
    or any of the Commission's regulations, if the Commission makes
    certain findings with respect to such provisions or
    regulations.[^29] Specifically, the Commission is required to
    forbear from any statutory provision or regulation if it determines
    that (1) enforcement of the regulation is not necessary to ensure
    that charges and practices are just, reasonable, and not unjustly or
    unreasonably discriminatory; (2) enforcement of the regulation is
    not necessary to protect consumers; and (3) forbearance is
    consistent with the public interest.[^30] In making such
    determinations, the Commission also must consider pursuant to
    section 10(b) "whether forbearance from enforcing the provision or
    regulation will promote competitive market conditions."[^31]

11. For the reasons explained below, we find that AT&T's request
    satisfies the three forbearance criteria with regard to the Cost
    Assignment Rules to the extent that AT&T complies with the
    conditions we set forth. Specifically, we conclude that there is no
    current, federal need for the Cost Assignment Rules, as they apply
    to AT&T, to ensure that charges and practices are just, reasonable,
    and not unjustly or unreasonably discriminatory; to protect
    consumers; and to ensure the public interest. Although we find in
    this Order that AT&T has demonstrated that forbearance from the Cost
    Assignment Rules satisfies the three-prong test under section 10, we
    conclude that this test is only satisfied to the extent that AT&T
    complies with conditions we impose here. Because we cannot conclude
    here that the Commission will never have any need for accounting
    data from AT&T in the future, we condition this forbearance on,
    among other things, the provision by AT&T of accounting data on
    request by the Commission for regulatory purposes, consistent with
    the Commission's statutory authority and AT&T's commitment in this
    proceeding. These conditions mitigate factors that would otherwise
    lead us to conclude that these rules remain necessary to ensure that
    charges and practices are just, reasonable, and not unjustly or
    unreasonably discriminatory; to protect consumers; and to ensure the
    public interest. LECs similarly situated to AT&T are free to seek
    comparable forbearance relief.

12. ***Scope.*** In this Order, we grant forbearance, subject to
    conditions, from the statutory provision and Commission rules as
    requested in the Legacy AT&T and Legacy BellSouth petitions
    (collectively, "Cost Assignment Rules").[^32] Specifically, AT&T
    seeks limited forbearance from section 220(a)(2) of the Act to the
    extent that this provision contemplates separate accounting of
    nonregulated costs.[^33] AT&T also seeks forbearance from various
    Commission rules including the following: section 32.23
    (nonregulated activities); section 32.27 (transactions with
    affiliates); Part 64 Subpart I, including the requirement to file
    Cost Allocation Manuals (CAMs)[^34] (allocation of costs); Part 36
    (jurisdictional separations procedures); Part 69, Subparts D and E
    (cost apportionment); and other related rules that are derivative of
    or dependent on the foregoing rules.[^35] Finally, AT&T seeks
    forbearance from four of the Commission's reporting requirements --
    the Access Report (ARMIS 43-04), the Rate of Return Monitoring
    Report (FCC Form 492), the Reg/Non-Reg Forecast Report (FCC Form
    495A) and the Reg/Non-Reg Actual Usage Report (FCC Form 495B) --
    because forbearance from the Cost Assignment Rules renders these
    reports meaningless.[^36] To be clear, AT&T generally does not seek,
    and we do not grant, forbearance from the Part 32 USOA.[^37]
    Although AT&T seeks relief from section 220(a)(2) and a significant
    number of rules, we consider the Cost Assignment Rules together as a
    group under the statutory forbearance criteria because, as the
    Commission has concluded, the various accounting rules were intended
    to work together to help ensure the primary statutory goal of just
    and reasonable rates.[^38] In addition, AT&T has represented that
    both petitions seek substantively identical relief for the Legacy
    AT&T and Legacy BellSouth affiliates.[^39] To the extent that there
    could be any inconsistency between the petitions, it is our
    intention to grant the same relief for both petitions, and we expect
    uniform implementation across all of the AT&T affiliates subject to
    this relief, whether Legacy AT&T or Legacy BellSouth affiliates.

13. ***Rulemaking.*** The State Members of the Federal-State Joint Board
    on Separations (State Members) oppose the AT&T Petitions and urge us
    to allow the Federal-State Joint Board on Separations (Joint Board)
    "to continue its current efforts and not be effectively preempted by
    piecemeal forbearance decisions that would overthrow existing
    separations procedures . . . ."[^40] The State Members argue that
    "even if the current petition is denied, AT&T would not be without
    relief for long" because reform will be necessary before the
    separations freeze ends in 2009.[^41] Although we recognize the
    value that the Joint Board adds to our deliberation of these issues,
    section 10 does not allow us the leeway to choose our procedural
    vehicle and the timing of resolution outside the limitations of
    section 10.[^42] Section 10 provides that the Commission shall
    forbear from applying any regulation or provision of the Act if it
    finds that the three-prong forbearance test is satisfied.[^43]
    Notably, section 10(c) provides that "\[a\]ny \[forbearance\]
    petition shall be deemed granted" if the Commission does not "deny"
    it "for failure to meet the requirements for forbearance" within one
    year of receiving it (plus 90 days if the Commission extends the
    statutory period).[^44] As the United States Court of Appeals for
    the District of Columbia Circuit (D.C. Circuit) has concluded, "an
    alternative route for seeking \[relief\] does not diminish the
    Commission's responsibility to fully consider petitions under
    \[section\] 10."[^45] "The Commission has no authority to sweep
    \[section 10\] away by mere reference to another, very different,
    regulatory mechanism."[^46] Thus, by the terms of the statute, we
    may not adopt the approach advocated by the State Members to deny
    these petitions in favor of referral to the Joint Board with
    presumably a rulemaking to follow, concluded well beyond the
    statutory deadline imposed by section 10. We are obligated to
    proceed with these petitions under the legal standard and the
    timeline established by Congress in section 10 of the Act.

14. ***Statutory backdrop.*** Following forbearance, AT&T will remain
    subject to a number of statutory safeguards that are important
    components of the regulatory framework that ensure that AT&T's rates
    and practices are just, reasonable and not unjustly or unreasonably
    discriminatory, as required by section 10. In particular, AT&T will
    remain subject to section 251 obligations;[^47] section 271
    obligations, including the obligation to continue to comply with the
    market-opening requirements that AT&T had to meet in order to
    receive authority to provide in-region, interLATA services;[^48] and
    the continuing general obligation to provide service on just,
    reasonable, and not unjustly or unreasonably discriminatory rates,
    terms, and conditions pursuant to sections 201 and 202 of the
    Act.[^49] Most significantly, AT&T will remain subject to dominant
    carrier regulation of its interstate exchange access services,
    including price cap regulation of most exchange access
    services.[^50]

## Charges, Practices, Classifications and Regulations

15. Section 10(a)(1) requires us to determine whether application of the
    Cost Assignment Rules is "necessary to ensure that the charges,
    practices, classifications or regulations by, for, or in connection
    with that telecommunications carrier or telecommunications service
    are just and reasonable and are not unjustly or unreasonably
    discriminatory."[^51] We find that AT&T demonstrates that
    forbearance from the Cost Assignment Rules, subject to conditions,
    satisfies this criterion.

16. ***Interstate rates.*** Because its interstate rates are now
    generally regulated under price caps, we agree with AT&T that the
    Cost Assignment Rules are unnecessary in determining whether its
    rates are just, reasonable, and not unjustly or unreasonably
    discriminatory.[^52] AT&T argues in its petitions that technological
    advances have made the Cost Assignment Rules antiquated and
    unnecessary. Legacy BellSouth asserts that, as consumers demand new
    and innovative products, their competitors are able to quickly bring
    to market new product offerings because they are not subject to Cost
    Assignment Rules, while AT&T must "try to shoehorn compliance with
    cost assignment rules designed for an analog, single purpose,
    circuit switched network."[^53] As such, AT&T contends that "the
    Commission's cost assignment rules no longer serve any useful
    purpose."[^54] Specifically, AT&T argues that because its rates are
    not based on costs under price cap regulation, the Commission has no
    use for the information provided by the Cost Assignment Rules and,
    thus, the continued burden of providing this information is not
    justified.[^55]

17. The Commission has articulated the goals of its accounting rules as
    "protecting ratepayers from unjust and unreasonable interstate
    rates," and "ensur\[ing\] that ratepayers share in any savings
    achieved through the integrated provision of regulated and
    nonregulated activities."[^56] The Cost Assignment Rules were
    developed in a time when the incumbent LECs' interstate rates and
    many of their intrastate rates were set under rate-based,
    cost-of-service regulation. The rules therefore are quite detailed,
    designed to parallel the level of detail in the cost-of-service
    calculations that LECs performed to develop their rates for
    interstate access services.[^57] Although not required to do so,
    many state commissions followed these rules for intrastate
    ratemaking purposes.[^58] Since that time, however, our ratemaking
    methods and those of our state counterparts have evolved
    considerably.[^59] As the Commission has recognized, this evolution
    has greatly reduced incumbent LECs' incentives to overstate the
    costs of their tariffed telecommunications services.[^60] As the
    Commission has explained, "\[B\]ecause price cap regulation severs
    the direct link between regulated costs and prices, a carrier is not
    able automatically to recoup misallocated non-regulated costs by
    raising basic service rates, thus reducing the incentive for the
    BOCs to shift non-regulated costs to regulated services."[^61]

18. To the extent incentives remain, following forbearance, price cap
    regulation of AT&T's rates will remain in place to continue to
    protect consumers from unjust, unreasonable, and unjustly or
    unreasonably discriminatory charges, practices, classification and
    regulations.[^62] We agree with AT&T and commenters that flourishing
    competition increasingly constrains prices.[^63] We do not agree
    that current market conditions eliminate all need for rate
    regulation and possible future need for cost data.[^64] Price cap
    regulation of AT&T's rates will continue. Therefore, we reject the
    notion of opposing commenters that by granting forbearance on the
    petitions before us, we are effectively deregulating interstate
    access service rates.[^65]

19. Certain commenters contend that we must maintain the Cost Assignment
    Rules because accounting data derived from the Cost Assignment Rules
    would be needed for various functions even under price cap
    regulation, such as reinitializing price caps, reviewing exogenous
    adjustments, and setting the X-factor.[^66] We agree with AT&T that
    the Commission's need for cost data for the purposes of price caps
    has been significantly decreased with the adoption of various
    reforms that eliminated features of the original price cap regime
    that required rate-of-return regulation accounting inputs. For
    example, in 1997, the Commission eliminated the requirement that
    price cap LECs "share," or return to ratepayers, earnings above
    specified levels.[^67] Similarly, the low-end adjustment mechanism
    is no longer generally applicable to AT&T as a result of its
    obtaining pricing flexibility relief.[^68] Indeed, in the *Pricing
    Flexibility Order*, the Commission anticipated that its reforms
    "might enable the Commission to relax, for that LEC, any accounting
    rules necessitated only by the rate-of-return-based low-end
    adjustment mechanism."[^69] Moreover, the Commission's price caps do
    not currently include a productivity factor, since the *CALLS Order*
    set the X-factor at the rate of inflation rather than at a rate to
    approximate productivity gains in LEC operations.[^70] Because these
    changes have eliminated ongoing tinkering with price caps, we no
    longer routinely need the accounting data derived from the Cost
    Assignment Rules for rate regulation functions.[^71] On the other
    hand, we do not concede, as AT&T urges, that there will never be any
    federal need for accounting information in the future to adjust our
    existing price cap regime or in our consideration of reforms moving
    forward.[^72]

20. We do, however, conclude that section 10 does not allow us to find a
    regulatory requirement "necessary to ensure that the charges,
    practices, classifications or regulations by, for, or in connection
    with that telecommunications carrier or telecommunications service
    are just and reasonable and are not unjustly or unreasonably
    discriminatory" if it is not a current need.[^73] As the D.C.
    Circuit concluded, "In the forbearance context, . . . it is
    reasonable to construe 'necessary' as referring to the existence of
    a strong connection between what the agency has done by way of
    regulation and what the agency permissibly sought to achieve with
    the disputed regulation."[^74] Here, we cannot conclude that there
    is a "strong connection" between maintaining the Cost Assignment
    Rules in anticipation of a possible need for the information to
    modify rate regulation at some point in the future.

21. The Commission, however, will have continuing responsibilities under
    the Act to ensure that rates are just and reasonable, and not
    unjustly or unreasonably discriminatory, and we need the tools,
    possibly including accounting data, to accomplish our statutory
    responsibilities.[^75] We can only reach our conclusion that the
    three-prong forbearance test is satisfied because we impose
    conditions that mitigate factors that would otherwise lead us to
    conclude that the Cost Assignment Rules remain necessary under
    section 10. We find a "strong connection" between the conditions we
    impose and our continuing responsibilities under the Act. Even
    without the Cost Assignment Rules, the Act provides the Commission
    with ample authority -- including section 220 -- to require AT&T to
    produce any accounting data that the Commission needs for regulatory
    purposes, including rulemakings or adjudications, in the
    future.[^76] We also expressly condition the forbearance granted in
    this Order on the provision by AT&T of accounting data on request by
    the Commission for its use in rulemakings, adjudications or for
    other regulatory purposes.[^77] To the extent that the Commission
    requests such data, we require AT&T to provide useable information
    on a timely basis. As noted above, AT&T generally has not sought
    relief from the Part 32 USOA requirements. AT&T states, for example,
    that its petitions will not affect its accounting for revenues but
    only deals with the assignment of costs (expense and investment),
    and its revenue can be identified by jurisdiction through the Part
    32 accounts.[^78] Thus, this USOA account data will continue to be
    maintained and available to the Commission on request. Further, we
    require AT&T to implement a method of preserving the integrity --
    for both costs and revenues -- of its accounting system in the
    absence of the Cost Assignment Rules to ensure that accounting data
    requested by the Commission in the future will be available and
    reliable. As discussed below, we require AT&T to file a compliance
    plan that will, among other things, explain how it will satisfy this
    condition. We conclude that this approach maintains the Commission's
    ability to obtain accounting information that may be necessary in
    the future, while providing a less costly and administratively
    burdensome alternative to AT&T.

22. ***Enforcement.*** As discussed above, we agree with commenters that
    accounting information could be critical to our efforts to enforce
    provisions of the Act, including sections 201 and 202.[^79] Thus, we
    emphasize that our condition that AT&T provide accounting data on
    request by the Commission for use in its proceedings includes
    requests for accounting data to be used for the purposes of an
    enforcement action against AT&T, either a Commission investigation
    or a complaint proceeding under section 208.[^80] Ad Hoc notes that,
    before the D.C. Circuit, the Commission opposed a petition for writ
    of mandamus related to the special access rules based, in part, on
    the grounds that complaints under section 208 of the Act would be an
    adequate remedy.[^81] Ad Hoc asserts that forbearance from the Cost
    Assignment Rules "would put the Commission in an indefensible
    position" before the court because "\[s\]uch complaints would be
    impossible if \[the\] AT&T petition is granted . . . ."[^82] We
    disagree. In this Order, we do not grant forbearance from
    section 208. Complaints under section 208 will remain an important
    mechanism for enforcing the provisions of the Act, including the
    justness and reasonableness of special access rates. Moreover,
    because we condition forbearance from the Cost Assignment Rules on
    AT&T's provision of accounting data on request by the Commission,
    including for the purposes of an enforcement proceeding, section 208
    complaints will continue to be a viable option for enforcing the
    provisions of the Act and the Commission's rules.[^83]

23. ***Different accounting regimes.*** We realize that our decision
    here will result in a different accounting regime for AT&T than for
    the other BOCs.[^84] Although uniform regulatory treatment for
    similarly situated carriers is sometimes preferable, we do not think
    that is the case here with regard to the Cost Assignment Rules.
    First, we note that AT&T generally will continue to maintain its
    USOA accounts according to our rules. Second, uniform cost
    accounting rules are slow to change and may not adapt to the quickly
    evolving characteristics of competitive markets, particularly where
    those markets may vary from carrier to carrier. This uniform
    treatment could impose unnecessary regulatory burdens on carriers,
    which could in turn negatively affect the provision of new services
    to consumers. The forbearance we grant here, together with the
    conditions we impose, will provide AT&T flexibility to adapt its
    accounting procedures to changing market conditions in its region,
    while still ensuring that consumers are protected from unjust,
    unreasonable, and unjustly or unreasonably discriminatory rates.
    Further, we note that financial accounting generally does not
    require absolute uniformity. Specifically, AT&T is subject to
    Generally Accepted Accounting Principles (GAAP) for its financial
    accounting. GAAP is "\[a\] common set of accounting concepts,
    standards, and procedures by which financial statements are
    prepared."[^85] It does not, however, require uniform accounts among
    companies so long as the implementation is consistent with the
    principles.

24. ***Smith v. Illinois Bell.*** We agree with Time Warner Telecom[^86]
    that *Smith v. Illinois Bell*, as well as the provisions of the
    Act,[^87] required jurisdictional separations to allow states and
    the Commission to share their regulatory responsibilities under the
    dual federal-state regulatory framework established in the
    Act*.*[^88] *Smith v. Illinois Bell*, a pre-1934 case, held that a
    telephone company must deduct the value of property attributable to
    interstate services before a court can consider a confiscation case
    claiming unconstitutional takings based on low intrastate
    rates.[^89] The Court concluded that "separation of intrastate and
    interstate property, revenues and expenses" is "essential to the
    appropriate recognition of the competent governmental authority in
    each field of regulation."[^90] The Court also explained that while
    the carrier and state could not "ignore altogether the actual use to
    which the property is put," "the difficulty in making an exact
    apportionment of the property is apparent and extreme nicety is not
    required, only reasonable measures being essential . . . ."[^91] In
    the wake of *Smith v. Illinois Bell*, Congress passed the
    Communications Act of 1934, reserving state authority over
    intrastate communications and expressly authorizing -- but not
    mandating -- the Commission to promulgate separations rules.[^92] In
    fact, the Commission first adopted a set of legally binding
    separations procedures in 1969, nearly 40 years after *Smith v.
    Illinois Bell*.[^93]

25. As discussed above, jurisdictional separations, like other Cost
    Assignment Rules, have reduced significance under price caps because
    "price cap regulation reduces a BOC's incentives to allocate costs
    improperly."[^94] Indeed, the Commission has acknowledged that
    statutory, regulatory, and market changes since *Smith v. Illinois
    Bell* may have eliminated the need for federal separations rules
    generally.[^95] We need not resolve that issue here. But for the
    narrow issue before us, we conclude that *Smith v. Illinois Bell*
    does not preclude us from finding that forbearance from these rules
    satisfies the three-prong statutory test with regard to AT&T. We
    believe that AT&T, working cooperatively with the state commissions
    in its region, can develop methods of separating costs, satisfying
    any remaining need states have for jurisdictional separations
    information.

26. ***Section 272 Sunset Order.*** We are not persuaded by commenters'
    arguments that forbearance from the Cost Assignment Rules is in
    conflict with the Commission's recent decision in the *Section 272
    Sunset Order*.[^96] In the *Section 272 Sunset Order*, the
    Commission modified its regulatory framework to provide nondominant
    treatment for interexchange services provided by BOCs on an
    integrated basis with dominant exchange access services, but
    continued to treat the costs and revenues of such interexchange
    services as nonregulated for accounting purposes, recognizing that
    the Commission's cost allocation rules protect against improper cost
    shifting.[^97] In that order, the Commission specifically recognized
    that the BOCs and their independent incumbent LEC affiliates remain
    subject to the "Commission's accounting and cost allocation rules
    and related reporting requirements."[^98]

27. We acknowledge that in that order, we concluded that each BOC,
    including AT&T, continues to have "\[e\]xclusionary market power
    within its respective regions by reason of its control over these
    bottleneck access facilities,"[^99] and we made strong statements
    about the utility of existing nonstructural safeguards for
    protecting against anticompetitive discrimination and improper cost
    shifting.[^100] We do not abandon those conclusions here. We do not,
    however, believe that the *Section 272 Sunset Order* precludes us
    from our actions in this Order.[^101] The *Section 272 Sunset Order*
    was a rulemaking of general applicability in which we discussed
    existing nonstructural safeguards, including the Cost Assignment
    Rules, as part of the regulatory framework that supported our
    decision to modify rules related to the provision of in-region,
    interexchange services by the BOCs. That rulemaking does not
    preclude us from granting forbearance to AT&T, and indeed, we
    conclude that section 10 compels us to modify the framework where,
    as here, the three-prong statutory standard for forbearance is
    satisfied for AT&T. With the conditions attached to the forbearance
    granted here, the forbearance standard is satisfied for AT&T and the
    modified regulatory framework will include sufficient nonstructural
    safeguards to continue to protect against anticompetitive
    discrimination and improper cost shifting by AT&T.

28. ***Section 272(e)(3).*** Although we forbear from the Cost
    Assignment Rules in this Order, AT&T must continue to comply with
    section 272(e)(3) of the Act. Section 272(e)(3) requires that each
    BOC charge its section 272 separate affiliate, or "impute to itself
    (if using the access for its provision of its own services), an
    amount for access to its telephone exchange service and exchange
    access that is no less than the amount charged to any unaffiliated
    interexchange carriers for such service."[^102] In the *Section 272
    Sunset Order*, we concluded that the imputation requirement in
    section 272(e)(3) of the Act would continue to apply and we provided
    guidance to AT&T, Qwest and Verizon regarding the treatment of
    charges for any access services that their incumbent LEC affiliates
    provide their in-region, long distance operations.[^103] In that
    order, we, among other things, directed each BOC to continue to
    impute to itself its highest tariffed rate for access, including
    access provided over joint-use facilities, in order to ensure the
    BOCs' continued compliance with their imputation obligations under
    section 272(e)(3).[^104] We do not forbear from that requirement.
    We, however, agree with AT&T that "\[t\]he maintenance of the
    elaborate and pervasive blanket of regulations at issue in the
    instant AT&T petitions would constitute a substantially overbroad
    method of ensuring section 272(e) compliance."[^105] We cannot
    justify maintaining overbroad Cost Assignment Rules when a more
    focused approach will ensure that AT&T satisfies the regulatory
    goals of section 272(e)(3).

29. As discussed below, we require, as a condition of this forbearance,
    that AT&T file a compliance plan, which must include, among other
    things, a description of its imputation methodology. AT&T must
    demonstrate that its access charge imputation methodologies remain
    consistent with section 272(e)(3). In the *Section 272 Sunset
    Order*, to facilitate transparency of each carrier's imputation of
    in-region, long distance costs, we required AT&T, Qwest, and
    Verizon, as a condition of that order, to include the imputation
    charges in their ARMIS filings, accompanied by an explanatory
    footnote for each line item identifying the amount imputed.[^106]
    AT&T "will continue to journalize revenue to Account 5280" as
    required by section 32.5280(a) of the Commission's rules.[^107] AT&T
    has not, however, sought forbearance from the relevant ARMIS reports
    in the petition before us, and therefore it will continue to report
    its imputation data as required by the *Section 272 Sunset Order*
    based on the imputation methodology approved in its compliance
    plan.[^108] In particular, AT&T's compliance plan must describe how
    it will account for imputed tariff rates given the grant of the
    requested forbearance from section 32.5280(b) and (c) of the
    Commission's rules.[^109]

30. ***Section 254(k).*** We also reject commenters' contentions that
    without the affiliate transaction rules, the Commission will be
    unable to prevent cross-subsidies between competitive and
    noncompetitive services.[^110] Section 254(k) prohibits a
    telecommunications carrier from "us\[ing\] services that are not
    competitive to subsidize services that are subject to
    competition."[^111] Although we forbear from our Cost Assignment
    Rules, including the affiliate transaction rules, we do not forbear
    from section 254(k) of the Act. We merely find that AT&T has
    demonstrated that it satisfies the three-prong test for forbearance
    with regard to these particular rules. AT&T remains subject to
    section 254(k) itself. We, therefore, condition the forbearance
    granted here on annual certification by AT&T that it will comply
    with its obligations under section 254(k) in the absence of the Cost
    Assignment Rules, and will maintain and provide any requested cost
    accounting information necessary to prove such compliance.[^112]
    With the continuing statutory obligation and this condition in
    place, we are persuaded that the affiliate transaction rules are not
    needed to help prevent cross-subsidies between competitive and
    noncompetitive services.

31. ***Compliance plan.*** As discussed above, we condition the relief
    granted in this Order on approval of a compliance plan by AT&T
    describing in detail how it will continue to fulfill its statutory
    and regulatory obligations, including sections 272(e)(3) and 254(k),
    and the conditions of this Order. The relief granted in this Order
    will not become effective unless and until AT&T's plan is approved.
    As mentioned above, the plan must include proposed procedures to
    ensure continued compliance with sections 272(e)(3) and 254(k) of
    the Act. The plan must include a description of AT&T's imputation
    methodology that demonstrates that its access charge imputation
    methodologies remain consistent with section 272(e)(3) and the
    *Section 272 Sunset Order*. The compliance plan must also include
    AT&T's first annual certification that it will comply with its
    obligations under section 254(k) in the absence of the Cost
    Assignment Rules and will provide any requested cost accounting
    information necessary to prove such compliance. Pursuant to section
    220 of the Act and as a condition of this Order, we require AT&T to
    include a proposal for how it will maintain its accounting
    procedures and data in a manner that will allow it to provide
    useable information on a timely basis if requested by the Commission
    to comply with any of the conditions of this relief and its
    commitment to the Commission.[^113] Finally, the plan must include
    an explanation of the transition process that AT&T will undertake,
    including an expected schedule, to discontinue compliance with the
    Cost Assignment Rules and replace them with the procedures outlined
    in its compliance plan upon approval of the plan. We delegate
    authority to the Chief of the Wireline Competition Bureau (Bureau)
    to prescribe the administrative requirements of the filing and to
    approve the plan when the Bureau is satisfied that AT&T will
    implement a method of preserving the integrity of its accounting
    system in the absence of the Cost Assignment Rules.[^114] This
    delegation of authority to the Bureau is consistent with existing
    procedures for CAM modifications that allow the Chief of the Bureau
    to suspend any changes for a period not to exceed 180 days and to
    allow the change to become effective or prescribe a different
    procedure.[^115]

32. ***State rates.*** Commenters disagree on the extent to which states
    rely on the data produced by our Cost Assignment Rules for
    intrastate rate regulation and other state regulatory
    purposes.[^116] For example, AT&T asserts that all states in its
    region regulate AT&T's rates "under incentive regulation (including
    price cap) plans without regard to the information generated by the
    Commission's cost assignment rules."[^117] In contrast, Sprint
    Nextel asserts that states rely on this data for ratemaking
    (including under state price cap regulation), determining intrastate
    universal service support, and setting rates for unbundled network
    elements (UNEs) under the Commission's TELRIC methodology.[^118] We
    need not resolve this factual dispute. We conclude that we do not
    have authority under sections 2(a) and 10 of the Act to maintain
    federal regulatory requirements that meet the three-prong
    forbearance test with regard to interstate services in order to
    maintain regulatory burdens that may produce information helpful to
    state commissions for intrastate regulatory purposes solely.[^119]
    In the case of the Commission's Cost Assignment Rules, we conclude
    that these rules as applied to AT&T, a price cap carrier generally
    not subject to rate-of-return regulation, are not routinely needed
    to ensure that interstate charges and practices are just,
    reasonable, and not unjustly or unreasonably discriminatory. Thus,
    because there is no current, federal need for the Cost Assignment
    Rules in these circumstances, and the section 10 criteria otherwise
    are met, we find that it would be beyond our authority to maintain
    these onerous regulatory requirements for AT&T.[^120]

33. We recognize that state commissions may exercise their own state
    authority to conduct their rate and other regulation as permitted
    under state law.[^121] We emphasize that we do not in this Order
    preempt any state accounting requirements adopted under state
    authority.[^122] We recognize, as the State Members point out, that
    section 10(e) states that "\[a\] State commission may not continue
    to apply or enforce any provision of this Act that the Commission
    has determined to forbear from applying" under section 10.[^123]
    Although states will not have authority to enforce the federal Cost
    Assignment Rules as they apply to AT&T once this relief is
    effective, we do not read section 10(e) to prevent states from
    adopting similar provisions to the extent that they have authority
    under state law.[^124] In the wake of this decision, we would expect
    that any states that may rely on the Cost Assignment Rules and
    resulting data for state regulatory purposes would assert their
    jurisdiction to obtain the needed information from AT&T.

34. Moreover, in addition to states' authority to obtain this
    information, AT&T has committed to work with the state commissions
    in its in-region territory to address state needs. As AT&T
    explained, "When a need exists for jurisdictional information for
    monitoring or other purposes, AT&T can develop such information to
    meet those state-specific requirements without continued compliance
    with the Commission's cost assignment rules."[^125] In addition,
    AT&T states that total company cost information will remain readily
    available if needed for valid regulatory purposes.[^126] Further,
    AT&T explained that, because its petitions affect cost accounting
    data only, AT&T will continue to provide intrastate revenue data to
    any state commission in its territory as needed.[^127] Thus, we
    expect that states will be able to obtain from AT&T all cost
    accounting information needed for state regulatory purposes
    following our forbearance from the Cost Assignment Rules.

35. Finally, we recognize that there is undoubtedly a federal role in
    intrastate ratemaking for UNEs, reciprocal compensation, and resale
    under section 251.[^128] Under the framework established by section
    251, the Commission establishes pricing methodology principles,
    which are then applied by the state commissions.[^129] Ratemaking
    for these elements and services remains a state responsibility. We,
    however, have an interest in ensuring that states can implement the
    Commission's methodology to satisfy federal responsibilities under
    section 251. Thus, we conclude that section 251 requires AT&T to
    continue to provide state commissions, on request, any accounting
    data that states need to implement our pricing methodologies under
    section 251.

## Protection of Consumers

36. Section 10(a)(2) of the Act requires the Commission to determine
    whether continued enforcement of the Cost Assignment Rules is
    necessary to protect consumers.[^130] For the reasons discussed
    above, consumers are protected from unjust, unreasonable, unjustly
    or unreasonably discriminatory interstate rates charged by AT&T
    through continued rate regulation in the form of price caps. Because
    we find that there is no current, federal need for the Cost
    Assignment Rules under the conditions set forth in this Order, we
    conclude, as discussed in more detail below, that the Cost
    Assignment Rules, in this case, impose costs that outweigh their
    benefits.[^131] We believe that these costs likely distort the
    market for telecommunications services by diverting AT&T resources
    that would otherwise be directed to "positive activities that
    generate consumer benefit."[^132] We agree with Legacy BellSouth
    that the Cost Assignment Rules could negatively affect "innovation,
    efficiency and competitiveness" of services provided to
    consumers.[^133] Thus, rather than being necessary for the
    protection of consumers, we conclude that the Cost Assignment Rules
    could hinder consumer welfare, and we find that the second prong of
    the section 10 forbearance test is satisfied.

37. ***Universal service impact.*** We also conclude that consumers will
    not be harmed by any negative impact on the Universal Service Fund
    resulting from the forbearance we grant in this Order. We do not
    agree with commenters that contend that we must retain the Cost
    Assignment Rules for AT&T because embedded cost inputs are needed
    for the non-rural high-cost support model.[^134] Although the
    high-cost model initially required some historical cost data, those
    data are not needed on an ongoing basis.[^135] Moreover, AT&T's
    Class A account data used for universal service purposes will remain
    available.[^136] As discussed above, we expressly condition the
    forbearance granted in this Order on the provision by AT&T of
    accounting data on request, and therefore, the Commission will
    continue to have access to any accounting data it may need for
    developing non-rural universal service policy going forward.[^137]
    As commenters note,[^138] section 254(k) provides that:

> \[t\]he Commission, with respect to interstate services, and the
> States, with respect to intrastate services, shall establish any
> necessary cost allocation rules, accounting safeguards, and guidelines
> to ensure that services included in the definition of universal
> service bear no more than a reasonable share of the joint and common
> costs of facilities used to provide those services.[^139]

As mentioned above, AT&T will remain subject to section 254(k) following
forbearance from the Cost Assignment Rules, and its compliance plan,
filed as a condition of this relief, will include a certification that
it will comply with its obligations under section 254(k) and will
provide any requested cost accounting information necessary to prove
such compliance. We also reject Sprint Nextel's argument that AT&T's
cost data are needed to set high-cost loop support levels for rural
carriers.[^140] Because AT&T does not receive high-cost loop support and
the National Exchange Carrier Association (NECA) is not using AT&T's
cost data to calculate the national average unseparated loop cost for
purposes of calculating rural high-cost loop support,[^141] AT&T's cost
data are not currently needed for the purposes of the rural support
mechanism.[^142]

38. ***Financial accounting requirements.*** We agree with AT&T that the
    Cost Assignment Rules are not necessary to protect consumers by
    ensuring the integrity of AT&T's financial records through financial
    transparency or accountability.[^143] GAAP, Securities and Exchange
    Commission, the Sarbanes-Oxley Act, and other financial accounting
    and reporting requirements will be unaffected by our forbearance
    here. These financial safeguards are critical to protect investors,
    particularly in the wake of a number of high-profile financial
    accounting scandals, including some in the telecommunications
    industry.[^144] At the same time, price cap regulation of rates and
    the conditions we adopt here will continue to protect consumers, in
    their role as ratepayers, as required by section 10.[^145]

## Public Interest

39. Section 10(a)(3) of the Act requires us to determine whether
    forbearance from the Commission's Cost Assignment Rules is
    consistent with the public interest.[^146] In making this
    determination, section 10(b) of the Act directs us to consider
    whether forbearance from enforcing the provisions at issue will
    promote competitive market conditions, including the extent to which
    forbearance will enhance competition among providers of
    telecommunications services.[^147] If we determine that forbearance
    will in fact promote competition among providers of
    telecommunications services, that determination may be the basis for
    finding that forbearance is in the public interest.[^148] We
    conclude that granting AT&T relief here will promote competitive
    market conditions and enhance competition as contemplated by section
    10(b) and that forbearance is in the public interest.

40. ***Costs.*** We find that there is sufficient evidence in the record
    to show that the Cost Assignment Rules significantly increase AT&T's
    operating costs, and that the elimination of the Cost Assignment
    Rules will likely result in substantial cost savings and enable AT&T
    to compete more effectively.[^149] The Cost Assignment Rules impose
    a variety of significant costs, including administrative costs on
    both AT&T and the Commission.[^150] Despite the costs, the
    Commission adopted the Cost Assignment Rules because it believed at
    the time that the rules, among other things, were needed to help
    protect consumers from improper cross-subsidization of competitive
    services when those services are provided on an integrated basis
    with noncompetitive services by dominant providers with individual
    market power.[^151]

41. We now find, however, that when we consider the continuing costs of
    the Cost Assignment Rules for AT&T against protections afforded by
    price caps, the continuing applicability of USOA, and the conditions
    we impose here, the costs of these rules exceed the likely benefits
    of maintaining the rules for AT&T. We agree with AT&T that
    forbearance should allow it to compete more effectively with its
    rivals both by freeing it from unnecessary regulations to which its
    nondominant competitors are not subject and freeing capital for
    investments.[^152]

42. First, AT&T asserts that the Cost Assignment Rules negatively affect
    consumers because, as consumers demand new and innovative products,
    its competitors are able to quickly bring to market new product
    offerings because they are not subject to the Cost Assignment Rules,
    while AT&T must "try to shoehorn compliance with cost assignment
    rules designed for an analog, single purpose, circuit switched
    network."[^153] As Legacy BellSouth explains:

    For every new broadband service that it seeks to offer,
    \[BellSouth\] must conduct an exhaustive analysis of every part of
    the network and the other resources used to provide the service to
    ensure compliance with the Commission's cost allocation and
    affiliate transaction requirements. The more technologically
    involved the product or service offering, the more allocation
    decisions are involved: some complex services, in fact, can require
    up to 100 separate allocation decisions.[^154]

    For example, according to Legacy BellSouth, new services can be
    delayed to market by as much as six months due to compliance with
    the Cost Assignment Rules; some never get to market at all.[^155]
    Based on the record before us, we conclude that these rules hinder
    AT&T's ability to expeditiously introduce new services, making it a
    less effective competitor. Thus, the forbearance we grant here will
    allow AT&T to compete more effectively with its rivals by operating
    more efficiently -- without regulatory obligations that no longer
    produce benefits warranting their costs in terms of competitive
    advantage in the marketplace.

43. Second, we are persuaded that the Cost Assignment Rules require AT&T
    to direct considerable financial and personnel resources "to utilize
    a complex hierarchy to track, value and record affiliate
    transactions, to allocate costs of regulated and non-regulated
    services, to maintain, update and audit its Cost Allocation Manual,
    to jurisdictionalize intra and interstate costs and to apportion
    interstate costs to interstate service baskets . . . ."[^156] For
    example, Legacy AT&T states that it spends \$1.7 million per year on
    an outside auditor just to audit its CAM as required by our
    rules.[^157] Overall, Legacy AT&T estimates that it spends
    approximately \$7 million annually in employee-related systems and
    audit costs associated with these activities to ensure compliance
    with these requirements.[^158]

44. For these reasons, we are convinced that forbearance from the Cost
    Assignment Rules "will enhance competition among providers of
    telecommunications services."[^159] At the same time, as discussed
    above, the modification of our regulatory framework applicable to
    AT&T does not remove all protections for consumers or competition.
    We find that the Cost Assignment Rules are an overbroad means of
    eliminating the risk of cost misallocation and price discrimination
    in today's market. On the basis of these findings, we conclude that
    the Cost Assignment Rules pose significant adverse consequences --
    in terms of competition and financial costs -- that outweigh any
    potential benefits of enforcing the Cost Assignment Rules against
    AT&T, given the protections afforded to consumers and competition by
    remaining safeguards and conditions. Thus, we find that the likely
    savings to AT&T by elimination of the rules, in conjunction with
    AT&T's compliance with our remaining rules and conditions, including
    the price cap rules, supports a finding that forbearance from the
    Cost Assignment Rules at this time is in the public interest.

45. ***Open proceedings.*** We are not persuaded by commenters'
    arguments that it is consistent with the public interest to maintain
    these burdensome Cost Assignment Rules because the resulting data
    could be useful in pending rulemaking proceedings that broadly
    consider, among others, universal service, intercarrier
    compensation, special access, or other reform.[^160] We do not deny
    that cost accounting data could be useful when the Commission moves
    forward with these and other comprehensive reform proposals.
    Significant records have already been compiled in these proceedings
    while this data has been readily available. We also recognize that
    depending on the approach adopted by the Commission, these data may
    not be relevant to adopted reforms at all. We believe that the
    Commission's possible need for this information in a proceeding at
    some future point is speculative.[^161] At the same time, we
    recognize that as the Commission moves forward with various policy
    initiatives, it could have a need for this information. As discussed
    above, we condition the forbearance granted here on AT&T providing
    accounting data as requested by the Commission for future regulatory
    purposes, including rulemakings or adjudications, as AT&T has
    committed to do in this proceeding.[^162] Given this condition, we
    view it as inconsistent with the public interest, under section 10,
    to maintain costly requirements in exchange for benefits that are
    speculative in nature and for uses that do not currently exist,
    particularly when the conditions we adopt ensure that the Commission
    will have access to the data it needs for policymaking purposes
    going forward.

# Conclusion

46. For the reasons discussed above, we grant the AT&T Petitions,
    subject to the conditions described herein.

# EFFECTIVE DATE

47. Consistent with section 10 of the Act and our rules, this Order
    shall be effective on Thursday, April 24, 2008.[^163] The time for
    appeal shall run from the release date of this Order.

# ORDERING CLAUSES

48. Accordingly, IT IS ORDERED that, pursuant to sections 10(c) and 220
    of the Communications Act of 1934, as amended, 47 U.S.C. §§ 160(c),
    220, AT&T Inc.'s petition requesting the Commission to forbear from
    applying or enforcing its Cost Assignment Rules IS GRANTED, subject
    to conditions, to the extent described herein, and otherwise IS
    DENIED.

49. Accordingly, IT IS ORDERED that, pursuant to sections 10(c) and 220
    of the Communications Act of 1934, as amended, 47 U.S.C. §§ 160(c),
    220, BellSouth Telecommunications, Inc.'s petition requesting the
    Commission to forbear from applying or enforcing its Cost Assignment
    Rules IS GRANTED, subject to conditions, to the extent described
    herein, and otherwise IS DENIED.

50. IT IS FURTHER ORDERED that, pursuant to section 10 of the
    Communications Act of 1934, as amended, 47 U.S.C. § 160, and section
    1.103(a) of the Commission's rules, 47 C.F.R. § 1.103(a), that the
    Commission's forbearance decision SHALL BE EFFECTIVE on April
    24, 2008. Pursuant to sections 1.4 and 1.13 of the Commission's
    rules, 47 C.F.R. §§ 1.4, 1.13, the time for appeal SHALL RUN from
    the release date of this Order.

    FEDERAL COMMUNICATIONS COMMISSION

    Marlene H. Dortch

    Secretary

    **APPENDIX**

    [Comments to AT&T Petition & BellSouth Petition (WC Docket No.
    07-21)]{.underline}

    Ad Hoc Telecommunications Users Committee (Ad Hoc)

    National Association of State Utility Consumer Advocates (NASUCA)

    Nebraska Rural Independent Companies (Nebraska Companies)

    New Jersey Public Advocate, Division of Rate Counsel (New Jersey
    Rate Counsel)

    Public Service Commission of Wisconsin (Wisconsin Commission)

    Sprint Nextel Corporation (Sprint Nextel)

    State Members of the Federal-State Joint Board on Separations (State
    Members)

    Texas Office of Public Utility Counsel (TOPC)

    Time Warner Telecom Inc. (TWTC)

    United States Telecom Association (US Telecom)

    [Reply Comments to AT&T Petition & BellSouth Petition (WC Docket No.
    07-21)]{.underline}

    Ad Hoc Telecommunications Users Committee (Ad Hoc)

    AT&T Inc. (AT&T)

    California Public Utilities Commission and the People of the State
    of California (California Commission)

    National Association of State Utility Consumer Advocates (NASUCA)

    NuVox Communications, Covad Communications Group, Inc., and XO
    Communications, LLC (NuVox *et al.*)

    Public Utilities Commission of Ohio (Ohio Commission)

    Sprint Nextel Corporation (Sprint Nextel)

    Verizon

    [Comments to original BellSouth petition (WC Docket No.
    05-342)]{.underline}

    Ad Hoc Telecommunications Users Committee (Ad Hoc)

    AT&T Inc. (AT&T)

    New Jersey Division of the Ratepayer Advocate (New Jersey Rate
    Counsel)[^164]

    Time Warner Telecom (TWTC)

    Verizon

    [Reply Comments to original BellSouth petition (WC Docket No.
    05-342)]{.underline}

    Ad Hoc Telecommunications Users Committee (Ad Hoc)

    BellSouth Telecommunications, Inc. (BellSouth)

    National Association of State Utility Consumer Advocates (NASUCA)

    New Jersey Division of the Ratepayer Advocate (New Jersey Rate
    Counsel)^1^

    Qwest Communications International Inc. (Qwest)

    Verizon

**JOINT STATEMENT OF**

**COMMISSIONER MICHAEL J. COPPS AND COMMISSIONER JONATHAN S. ADELSTEIN**

**DISSENTING**

Re: *Petition of AT&T Inc. For Forbearance Under 47 U.S.C. §160 From
Enforcement of Certain of the Commission's Cost Assignment Rules,* WC
Docket No. 07-21; *Petition of BellSouth Telecommunications, Inc. For
Forbearance Under 47 U.S.C. §160 From Enforcement of Certain of the
Commission's Cost Assignment Rules,* WC Docket No. 05-342.

The Enron and WorldCom-type accounting scandals earlier this decade are
not so far behind us that we cannot remember the distress they wrought
on the telecommunications industry and on the economy as a whole. But if
those scandals seem too distant to recall, just open the morning
newspaper to find lax financial standards and oversight implicated in
the housing crisis and economic upheaval that too many hard-working
Americans face today. It is in this context that we face the
above-referenced Petitioners' requests for forbearance from the
Commission's application of its cost assignment and allocation rules. At
this moment, more information---not less---is what is needed to promote
competition, consumer confidence, investor security and the public
interest. Indeed, the Commission has a duty to ensure that the required
system of accounts provides both state and federal regulators with the
information they need to discharge their oversight responsibilities.
Given the necessity of the rules at issue, now and in the future, we
dissent from today's Order based on the Petitioners' failure to meet the
statutory requirements set forth in section 10 of the Communications
Act.

We disagree for a number of reasons with Petitioners' contention that
the cost assignment rules are no longer necessary. First, the Commission
remains under ongoing statutory obligation to ensure that
telecommunications services are offered on rates, terms and conditions
that are just, reasonable and not unjustly or unreasonably
discriminatory. The Commission and market participants have repeatedly
relied on the very cost assignment and allocation data at issue in these
petitions to set rules to carry out that statutory duty and to monitor
the Petitioners' compliance. For example, in the 2000 *CALLS Order*, the
Commission used this data to set the current price cap rules that are
designed to ensure that Petitioners provide rates that are just,
reasonable and nondiscriminatory.[^165] More recently, the Commission
sought comment on a plan to succeed the *CALLS Order* and specifically
asked parties to address how the Petitioner's cost accounting data
should guide the Commission's analysis.[^166]

Second, a unanimous Commission just last year established "a new
regulatory framework for the BOCs' in-region, long distance service" and
expressly concluded that "an important component of the regulatory
framework . . . \[is\] the Commission's accounting and cost allocation
rules and related reporting requirements."[^167] The Commission in fact
relied on the cost assignment and allocation rules to prevent
anticompetitive discrimination and improper cost-shifting. Despite
Petitioners' promises to continue to comply with the statutory
obligations of sections 272(e)(3) and 254(k), we fear that today's Order
will render largely meaningless the important safeguards adopted less
than a year ago. Such a conclusion is particularly surprising when we
consider the fact that section 11 of the Act requires the Commission
every two years (most recently in 2006) to review all of the cost
assignment and allocation rules to "determine whether any such
regulation is no longer necessary in the public interest as the result
of meaningful economic competition."[^168] While the Commission makes
adjustments to these rules where appropriate, it has not, before today,
found a reason for their elimination.

Third, the Commission must still tackle the widely-recognized need for
comprehensive inter-carrier compensation and Universal Service Fund
reform. The elimination of the cost assignment and allocation rules is
likely to hinder the Commission's ability to effectively implement such
reform no matter what policies are adopted, and such a hindrance is
likely to result in harm to consumers and the public interest.

Fourth, it is clear from the record that there are many states that rely
on this data in the performance of their duties. The Commission's
ambivalence (or worse) towards the critical role of state commissions
and the Federal-State Joint Board on Separations ignores the statutory
responsibility to establish a uniform system of accounts and promote a
viable federal-state partnership.

A decision to grant forbearance relief is not one to be taken lightly.
Yet, the record is replete with comments from consumer advocates, state
regulators and Commissions, Members of Congress, rural wireline
companies, wireless companies, CLECs and telecom end-users all opposed
to the elimination of the cost assignment rules. These comments should
not have been ignored. While we recognize the need to continually
examine and improve the Commission's cost assignment and allocation
rules, Petitioners have not offered any alternative---other than a
"trust us" approach---for ensuring that the public interest is
protected. In this instance, we prefer to "trust but verify" and we are
unable to conclude that Petitioners have met the burden for doing
otherwise.

Finally, while not the basis for our dissent, we again believe it
important to note that such sweeping revisions to the Commission's rules
are best accomplished through industry-wide rulemakings, conducted under
the balanced governance of the Administrative Procedures Act, rather
than via the improvised and piecemeal route of forbearance petitions,
unguided by meaningful procedural rules to ensure fairness and
transparency. There are currently five related forbearance petitions
statutorily due for determination by the Commission this year. While the
particular circumstances faced by the industry as a whole when it comes
to our cost assignment and accounting rules are not before us, today's
decision will no doubt impact future decisions. For a Commission with
limited resources and urgent demands, this is no way to set sound
policy.

The telecommunications industry has not been immune from accounting
malfeasance in the past and in fact the Petitioners' in certain
instances suffered greatly from it. So we end where we began---more
transparency and increased accountability to facilitate more effective
federal and state oversight must be critical parts of any plan to put
the country's economy on a sounder footing. Now is not the time to
permit the Petitioners and those that follow them---who all play an
enormous role in our economy---to shut their books and assume that's all
they need to do.

**STATEMENT OF**

**COMMISSIONER DEBORAH TAYLOR TATE**

*Re: Petition of AT&T Inc. For Forbearance Under 47 U.S.C. § 160 From
Enforcement of Certain of the Commission's Cost Assignment Rules*, WC
Docket No. 07-21; *Petition of BellSouth Telecommunications, Inc. For
Forbearance Under 47 U.S.C. § 160 From Enforcement of Certain of the
Commission's Cost Assignment Rules*, WC Docket No. 05-342, Memorandum
Opinion and Order.

An integral part of the pro-competitive, de-regulatory national policy
framework established by Congress in the 1996 Act is the section 10
forbearance provision. The deregulation of record-keeping seems an
inevitable consequence of today's increasingly competitive
telecommunications marketplace. Since the adoption of price cap
regulation in 1991, many carriers, including AT&T, have moved from
rate-of-return rate regulation to price cap regulation, and the
Commission has modified its regulation of price cap carriers over time
to reflect changing circumstances. Because AT&T's rates are now
regulated under price caps, there is no current federal need for the
specific cost assignment rules as they apply to AT&T. Even without these
outdated rules, the Commission has clear statutory authority to require
AT&T to produce any accounting data that the Commission needs for
regulatory purposes. Indeed, we expressly condition the forbearance
granted in this Order on the provision by AT&T of accounting data on
request by the Commission for use in rulemakings or adjudications, or
for other regulatory purposes, such as reform of universal service,
intercarrier compensation, or special access. Significantly, AT&T
remains subject to a number of statutory safeguards - section 251
obligations, section 271 obligations, and section 201 and 202
obligations - and the other conditions adopted in this Order, subject to
the compliance plan. I appreciate the broad participation of States in
this proceeding and have carefully considered their concerns.
Significantly, we do not in this order preempt any State's authority to
obtain any information from AT&T for their own regulatory purposes, and
AT&T has committed to provide such information.

**STATEMENT OF**

**COMMISSIONER ROBERT M. McDOWELL**

*Re: Petition of AT&T Inc. For Forbearance Under 47 U.S.C. § 160 From
Enforcement of Certain of the Commission's Cost Assignment Rule,* WC
Docket No. 07-21, *Petition of BellSouth Telecommunications, Inc. For
Forbearance Under 47 U.S.C. § 160 From Enforcement of Certain of the
Commission's Cost Assignment Rules,* WC Docket No. 05-342, Memorandum
Opinion and Order

I am supporting AT&T's request for relief in this forbearance petition.
This request by a price cap local exchange carrier to eliminate cost
allocation data collection and reporting requirements that were adopted
in the all-analog, voice-only, rate-of-return regulatory environment of
yesteryear appears to be just the type of relief Congress designed the
forbearance process to address. Relief is especially appropriate as
telecommunications traffic migrates toward an all-I.P. world. As we
witness this rapid technological evolution, cost models are also
changing. Yesterday's regulations are quickly outliving their
usefulness. Given these developments, I look forward to granting
comparable relief to similarly-situated carriers as soon as possible.

Opponents to this petition have argued passionately for preservation of
the existing regime primarily out of fear that the Commission, and the
public at-large, will not have at their disposal the proper information
necessary to help make sound policy decisions regarding Universal
Service reform, Intercarrier Compensation reform, Special Access reform,
and the Separations Freeze, among others. However, no part of today's
Order precludes the Commission - at any time - from compelling AT&T, or
any other incumbent local exchange carrier, to provide promptly any and
all information necessary to build a sufficient record for any
regulatory purpose. In the meantime, most of this data has not been used
by the Commission for several years. Additionally, for many years
neither competitors nor end-users have filed complaints that call for
the use of such data. Should they file complaints in the future, the
Commission can compel production of all relevant data necessary for
proper adjudication. Section 10 does not allow us to maintain a
requirement merely "just in case" it is needed in the future, especially
when we have at our disposal other means of gathering any data for a
specific purpose.

In short, even without these rules, we continue to have sufficiently
potent tools to protect consumers' interests. AT&T has also assured us
that it will supply relevant state public utility commissions with any
information they may request in pursuit of their policy objectives.
Should AT&T not live up to this assurance, the Commission has the
ability to compel the production of such data at any time and for any
regulatory purpose.

Accordingly, I find that today's order granting relief meets the
statutory obligations of Section 10 and, therefore, is in the public
interest.

[^1]: Petition of AT&T Inc. For Forbearance Under 47 U.S.C. § 160(c)
    From Enforcement of Certain of the Commission's Cost Assignment
    Rules, WC Docket No. 07-21 (filed Jan. 25, 2007) (AT&T Petition);
    Petition of BellSouth Telecommunications, Inc. For Forbearance Under
    47 U.S.C. § 160(c) From Enforcement of Certain of the Commission's
    Cost Assignment Rules, WC Docket Nos. 07-21, 05-342 (filed Feb. 9,
    2007) (BellSouth Petition) (collectively, AT&T Petitions). AT&T
    filed an erratum to correct the captions of the AT&T Petition and
    the BellSouth Petition. *See* AT&T Erratum, WC Docket No. 07-21, at
    2 (filed Feb. 16, 2007). On December 6, 2005, Legacy BellSouth filed
    a petition seeking forbearance from the Commission's cost assignment
    rules. *See* Petition of BellSouth Telecommunications, Inc. For
    Forbearance Under 47 U.S.C. § 160 From Enforcement of Certain of the
    Commission's Cost Assignment Rules, WC Docket No. 05-342 (filed Dec.
    6, 2005). While Legacy BellSouth's petition was pending, Legacy AT&T
    acquired Legacy BellSouth. *See AT&T Inc. and BellSouth Corporation
    Application for Transfer of Control*, WC Docket No. 06-74,
    Memorandum Opinion and Order, 22 FCC Rcd 5662 (2007)
    (*AT&T/BellSouth Order*); Order on Recon., 22 FCC Rcd 6285 (2007).
    On February 9, 2007, AT&T Inc., on behalf of Legacy BellSouth,
    withdrew the original Legacy BellSouth petition and simultaneously
    resubmitted it with a request to synchronize the pleading cycle with
    the AT&T Petition. *See* Letter from Theodore Marcus, Senior
    Attorney, AT&T Services, Inc., to Marlene H. Dortch, Secretary, FCC,
    WC Docket No. 05-342, at 2 (filed Feb. 9, 2007). The Commission
    granted that request and incorporated the record from WC Docket No.
    05-342 into WC Docket No. 07-21. *See Pleading Cycle Established for
    AT&T Inc. Petition for Forbearance from the Commission's Cost
    Assignment Rules*, WC Docket No. 07-21, Public Notice, 22 FCC
    Rcd 3332* *(2007) (*Public Notice*); Appendix (appending a list of
    commenters). All pleadings cited are filed in WC Docket No. 07-21
    unless otherwise noted.

[^2]: AT&T requests that the Commission forbear from section 220(a)(2)
    of the Act (to a limited extent) and various rules, including the
    following: section 32.23 (nonregulated activities); section 32.27
    (transactions with affiliates); Part 64, Subpart I (allocation of
    costs); Part 36 (jurisdictional separations procedures); Part 69,
    Subparts D and E (cost apportionment); and other related rules that
    are derivatives of, or dependent on, the foregoing rules. *See,
    e.g.*, 47 C.F.R. §§ 32.23, 32.27, Part 64 Subpart I, Part 36, Part
    69 Subparts D and E. Attachment 1 of the AT&T Petition lists each
    rule from which Legacy AT&T seeks forbearance. *See* AT&T Petition,
    Attach. 1. The affiliates for which Legacy AT&T seeks forbearance
    relief are listed in the AT&T Petition. *See* AT&T Petition at 1
    n.1. Legacy BellSouth seeks forbearance from the same rules. *See*
    BellSouth Petition, App. 1 (listing each rule from which Legacy
    BellSouth seeks forbearance). We refer to the statutory provision
    and Commission rules from which AT&T seeks forbearance collectively
    as the "Cost Assignment Rules."

[^3]: On January 7, 2008, the Wireline Competition Bureau (Bureau)
    extended by 90 days, to April 24, 2008, the date by which the AT&T
    Petition shall be deemed granted in the absence of a Commission
    decision. The Bureau extended by 90 days, to May 9, 2008, the date
    by which the BellSouth Petition shall be deemed granted in the
    absence of a Commission decision. *See Petition of AT&T Inc. For
    Forbearance Under 47 U.S.C. § 160 From Enforcement of Certain of the
    Commission's Cost Assignment Rules; Petition of BellSouth
    Telecommunications, Inc. For Forbearance Under 47 U.S.C. § 160 From
    Enforcement of Certain of the Commission's Cost Assignment Rules*,
    WC Docket Nos. 07-21, 05-342, Order, 23 FCC Rcd 102 (WCB 2008).

[^4]: *See* *Separation of Costs of Regulated Telephone Service from
    Costs of Nonregulated Activities; Amendment of Part 31, the Uniform
    System of Accounts for Class A and Class B Telephone Companies to
    Provide for Nonregulated Activities and to Provide for Transactions
    Between Telephone Companies and their Affiliates*, CC Docket No.
    86-111, Report and Order, 2 FCC Rcd 1298, 1300, para. 10 (1987)
    (*Joint Cost Order*), *petition for review denied*, *Southwestern
    Bell Corp. v. FCC*, 896 F.2d 1378 (D.C. Cir. 1990).

[^5]: Thus, the various Commission accounting rules are intended to work
    together to help ensure the primary statutory goal of just and
    reasonable rates. *See Joint Cost Order*, 2 FCC Rcd at 1299, para.
    1.

[^6]: 47 U.S.C. § 220.

[^7]: *See generally* 47 C.F.R. Part 32. *See also, e.g.*, *Revision of
    the Uniform System of Accounts and Financial Reporting Requirements
    for Class A and Class B Telephone Companies (Parts 31, 33, 42, and
    43 of the FCC's Rules*)*,* CC Docket 78-196, Report and Order, FCC
    86-221 (rel. May 15, 1986) (replacing the USOA in Parts 31 and 33 of
    the Commission's rules, originally adopted in 1935, with a new Part
    32 USOA).

[^8]: *Smith v. Illinois Bell Tel. Co*., 282 U.S. 133, 148 (1930)
    (*Smith v. Illinois Bell*).

[^9]: *See Jurisdictional Separations Reform and Referral to the
    Federal-State Joint Board*, CC Docket No. 80-286, Notice of Proposed
    Rulemaking, 12 FCC Rcd 22120, 22125, para. 7 (1997) (*Separations
    Notice*) (citing *American Tel. & Tel. Co*., 3 FCC 2d 307, 309-11
    (1966)).

[^10]: 47 C.F.R. Part 36; *Prescription of Procedures for Separating and
    Allocating Plant Investment, Operating Expenses, Taxes, and Reserves
    Between the Intrastate and Interstate Operations of Telephone
    Companies*, Docket No. 17975, Report and Order, 16 FCC 2d 317
    (1969).

[^11]: *See generally* *MTS and WATS Market Structure*, CC Docket No.
    78-72, Phase I, 93 FCC 2d 241 (1983) (subsequent history omitted).

[^12]: 47 U.S.C. §§ 201, 202.

[^13]: *See Joint Cost Order*, 2 FCC Rcd at 1300, para. 10.

[^14]: *Id.* at 1298, para. 1; *see* *id*. at 1303, para. 37
    (articulating the goals of the Commission's accounting rules as
    "protecting ratepayers from unjust and unreasonable interstate
    rates" and "ensur\[ing\] that ratepayers share in any savings
    achieved through the integrated provision of regulated and
    nonregulated activities").

[^15]: *See id*. at 1301, para. 15; *see also id*. at 1303, para. 37
    ("We reaffirm that protecting ratepayers from unjust and
    unreasonable interstate rates is the primary purpose behind the
    accounting separation of regulated from nonregulated activities,
    just as it is the purpose behind all of our accounting and cost
    allocation rules.").

[^16]: *See* 47 C.F.R. Part 32.

[^17]: *See* 47 C.F.R. §§ 64.901-905.

[^18]: *See* 47 C.F.R. Part 36.

[^19]: *See* 47 C.F.R. § 69.4(b) (including the following elements:
    common line, local switching, information, tandem-switched
    transport, direct-trunked transport, special access, line
    information database, entrance facilities and recovery of
    contributions to the universal service support mechanisms by
    incumbent LECs).

[^20]: *See Policy and Rules Concerning Rates for Dominant Carriers*, CC
    Docket No. 87-313, Second Report and Order, 5 FCC Rcd 6786, 6818-20,
    paras. 257-59 (1990) (*LEC Price Cap Order*), *aff'd*, *Nat'l Rural
    Telecom Ass'n v. FCC*, 988 F.2d 174 (D.C. Cir. 1993).

[^21]: *See Access Charge Reform*, CC Docket Nos. 96-262, 94-1, 99-249,
    96-45, Sixth Report and Order in CC Docket Nos. 96‑262 and 94-1,
    Report and Order in CC Docket No. 99-249, Eleventh Report and Order
    in CC Docket No. 96-45, 15 FCC Rcd 12962, 12968, para. 15 (2000)
    (*CALLS Order*), *aff'd in part, rev'd in part, and remanded*,
    *Texas Office of Pub. Util. Counsel v. FCC*, 265 F.2d 313 (5th Cir.
    2001), *cert. denied*, 525 U.S. 986 (2002), *on remand*, *Access
    Charge Reform*, CC Docket Nos. 96-262, 94-1, 99-249, 96-45, Order on
    Remand, 18 FCC Rcd 14976 (2003); *see also CALLS Order*, 15 FCC Rcd
    at 12968-69, para. 16 n.15 (finding that price cap regulation was
    designed to encourage carriers "to improve their efficiency by
    harnessing profit-making incentives to reduce costs, invest
    efficiently in new plant and facilities, and develop and deploy
    innovative service offerings, while setting price ceilings at
    reasonable levels").

[^22]: *See Joint Cost Order*, 2 FCC Rcd at 1312, para. 111.

[^23]: *Computer III Remand Proceedings: Bell Operating Company
    Safeguards and Tier I Local Exchange Company Safeguards*, CC Docket
    No. 90-623, Report and Order, 6 FCC Rcd 7571, 7596, para. 55 (1991)
    (*Computer III Remand Order*), *vacated in part and remanded,
    California v. FCC*, 39 F.3d 919 (9th Cir. 1994), *cert denied*, 514
    U.S. 1050 (1995).

[^24]: *See CALLS Order*, 15 FCC Rcd at 12968-69, para. 16 n.15.

[^25]: *See* 47 C.F.R. §§ 61.41-49.

[^26]: *See* AT&T Petition at 2; BellSouth Petition at 18, 22.

[^27]: *Price Cap Performance Review for Local Exchange Carriers*, CC
    Docket No. 94-1, First Report and Order, 10 FCC Rcd 8961, 8965,
    para. 1 (1995), *petition for review denied*, *Bell Atlantic Tel.
    Co. v. FCC*, 79 F.3d 1195 (D.C. Cir. 1996).

[^28]: Joint Explanatory Statement of the Committee of Conference, S.
    Conf. Rep. No. 230, 104th Cong., 2d Sess. 113 (1996).

[^29]: 47 U.S.C. § 160(a).

[^30]: *Id*.

[^31]: 47 U.S.C. § 160(b).

[^32]: The State Members ask us to clarify the scope of relief granted
    here with regard to the covered affiliates. *See* State Members
    Comments at 13. Specifically, the State Members note that, in the
    AT&T Petition, AT&T Inc. requested relief "on behalf of certain of
    its legacy SBC affiliates," which are listed by name in the
    petition. *Id.* (citing AT&T Petition at 1 & n.1). The Bureau
    released a public notice seeking comment on the AT&T Petitions. The
    *Public Notice* characterized the request as filed by AT&T Inc. "on
    behalf of itself and its affiliates." *Public Notice* at 1. It was
    not our intention to expand the scope of this proceeding beyond that
    requested by AT&T. Thus, we clarify that the scope of relief granted
    here is limited to the affiliates described by AT&T in the AT&T
    Petitions.

[^33]: *See* AT&T Petition at 1-2 n.2 (citing 47 U.S.C. § 220(a)(2));
    BellSouth Petition at 1 n.1.

[^34]: 47 C.F.R. § 64.903.

[^35]: *See, e.g.*, 47 C.F.R. §§ 32.23, 32.27, Part 64 Subpart I, Part
    36, Part 69 Subparts D and E. Attachment 1 of the AT&T Petition
    lists each rule from which Legacy AT&T seeks forbearance. *See* AT&T
    Petition, Attach. 1. Legacy BellSouth seeks forbearance from the
    same rules. *See* BellSouth Petition, App. 1 (listing each rule from
    which Legacy BellSouth seeks forbearance).

[^36]: *See* AT&T Petition at 38 n.83. We note that AT&T requests
    forbearance from section 43.21(f) of the Commission's rules. *See*
    AT&T Petition at 1-2 n.2, Attach. 1 at 86. Rule 43.21(f) is
    implemented by requiring the filing of ARMIS Report 43-01. In the
    text of its petition, however, Legacy AT&T neither mentioned its
    obligation to file this report in its request for relief, nor
    expressly analyzed why such relief might be warranted. *See* AT&T
    Petition at 38 n.83, Attach. 6 at 1. We also note that in a separate
    petition seeking forbearance from certain ARMIS filing requirements,
    AT&T characterized the relief it requests through its cost
    assignment forbearance petition at issue here as including the ARMIS
    Report 43-03 reporting requirements. *See* Petition of AT&T Inc. for
    Forbearance Under 47 U.S.C. § 160(c) from Enforcement of Certain of
    the Commission's ARMIS Reporting Requirements, WC Docket No. 07-139,
    at 1 n.2 (filed June 8, 2007). In fact, the obligation to file ARMIS
    Report 43-03 is not included in the relief AT&T requests in this
    proceeding. *See* AT&T Petition at 38 n.83, Attach. 6 at 1. To be
    clear, we do not grant forbearance from these reporting requirements
    -- ARMIS Reports 43-01 and 43-03 -- in this Order, except to the
    extent that AT&T will no longer generate certain underlying data by
    virtue of the forbearance from the Cost Assignment Rules granted in
    this Order.  We note that AT&T otherwise still will have the data
    and information necessary for those ARMIS reports.

[^37]: *See* AT&T Petition at 1-2 n.2 (citing 47 C.F.R. Part 32);
    BellSouth Petition at 4, 60-61, 71; AT&T Reply at 13; BellSouth
    Reply, WC Docket No. 05-342, at 3-4; Letter from Gary L. Phillips,
    General Attorney & Associate General Counsel, AT&T Services Inc., to
    Marlene Dortch, Secretary, FCC, WC Docket No. 07-21, at 2 (filed
    Apr. 18, 2008) (AT&T Apr. 18 *Ex Parte* Letter); Letter from Robert
    W. Quinn, Senior Vice President -- Federal Regulatory, AT&T Services
    Inc., to Marlene Dortch, Secretary, FCC, WC Docket No. 07-21, at 4
    (filed Apr. 22, 2008) (AT&T Apr. 22 *Ex Parte* Letter).

[^38]: *See Joint Cost Order*, 2 FCC Rcd at 1298, para. 1.

[^39]: *See* AT&T Reply at 1 n.1; Letter from Linda Vandeloop,
    Director-Federal Regulatory, AT&T Services Inc., to Marlene H.
    Dortch, Secretary, FCC, WC Docket No. 07-21, at 1 (filed Feb. 22,
    2007) (AT&T Feb. 22 *Ex Parte* Letter).

[^40]: State Members Comments at 6; *see* NASUCA Comments at 3; Sprint
    Nextel Comments at 3-4; TOPC Comments at 2; TWTC Comments at 20-22;
    Wisconsin Commission Comments at 1-2; California Commission Reply at
    1-4; NuVox *et al.* Reply at 7; Sprint Nextel Reply at 4; New Jersey
    Rate Counsel Comments, WC Docket No. 05-342, at 18-19; NASUCA Reply,
    WC Docket No. 05-342, at 2-4; New Jersey Rate Counsel Reply, WC
    Docket No. 05-342, at 2; *see also* Sprint Nextel Comments at 3
    (advocating a proceeding of general applicability); TWTC Comments at
    3, 19, 21 n.52 (advocating a proceeding of general applicability or
    reauthorization of and referral to the Federal-State Joint Board on
    Accounting); NuVox *et al.* Reply at 7; Letter from Gregory M.
    Kennan, Federal Counsel, One Communications Corp., to Marlene H.
    Dortch, Secretary, FCC, WC Docket No. 07-21, at 1 (filed Feb. 7,
    2008); Letter from Jonathan Lechter, Counsel for TWTC, Cbeyond Inc.
    & One Communications Corp., to Marlene H. Dortch, Secretary, FCC, WC
    Docket Nos. 07-21, 05-342, Attach. 1 at 2 (filed Feb. 21, 2008)
    (TWTC *et al.* Feb. 21 *Ex Parte* Letter); Letter from Daniel
    Mitchell, Vice President, Legal & Industry, National
    Telecommunications Cooperative Association, to Marlene H. Dortch,
    Secretary, FCC, WC Docket No. 07-21, at 2 (filed Apr. 14, 2008)
    (NTCA Apr. 14 *Ex Parte* Letter); Letter from Christopher J. White,
    Deputy Ratepayer Advocate, New Jersey Division of the Ratepayer
    Advocate, to Marlene H. Dortch, Secretary, FCC, WC Docket No.
    05-342, Attach. (filed June 20, 2006) (New Jersey Rate Counsel June
    20 *Ex Parte* Letter). On April 15, 2008, the current state members
    of the Joint Board filed a letter indicating that during the
    pendency of this proceeding, the state membership of the Joint Board
    has changed but that the current state members and those that await
    confirmation continue to support the view of the State Members'
    comments. *See* Letter from Mark K. Johnson, State Chairman, Federal
    State Joint Board on Separations, *et al.*, to Deborah Taylor Tate,
    Commissioner, FCC, *et al.*, WC Docket No. 07-21, CC Docket No.
    80-286, at 2 (filed Apr. 15, 2008) (State Members Apr. 15 *Ex Parte*
    Letter); Letter from Mike Gleason, Chairman, Arizona Corporation
    Commission, *et al.*, to Kevin J. Martin, Chairman, FCC, *et al.*,
    WC Docket Nos. 07-21, 05-342, 07-273, 07-204, at 2 (filed Apr. 22,
    2008) (Arizona Commission Apr. 22 *Ex Parte* Letter); Tennessee
    Regulatory Authority *Ex Parte* Comments, WC Docket Nos. 07-21,
    05-342, 80-286, at 2 (filed Apr. 22, 2008) (Tennessee Commission
    Apr. 22 *Ex Parte* Comments).

[^41]: State Members Comments at 6.

[^42]: We also appreciate the broad participation of states in this
    proceeding and have carefully considered their concerns. *See
    generally, e.g.*, Wisconsin Commission Comments; California
    Commission Reply; Letter from Cindy B. Miller, Senior Attorney,
    Florida Public Service Commission, to Marlene H. Dortch, Secretary,
    FCC, WC Docket No. 05-342 (filed Feb. 9, 2007) (Florida Commission
    Feb. 9 *Ex Parte* Letter).

[^43]: 47 U.S.C. § 160(a).

[^44]: 47 U.S.C. § 160(c).

[^45]: *AT&T Corp. v. FCC*, 236 F.3d 729, 738 (D.C. Cir. 2001); *see
    Sprint Nextel Corp. v. FCC*, 508 F.3d 1129, 1132 (D.C. Cir. 2007);
    *see also* AT&T Reply at 19-20; Ad Hoc Reply at 5; BellSouth Reply,
    WC Docket No. 05-342, at 11; AT&T Apr. 18 *Ex Parte* Letter at 7;
    AT&T Apr. 22 *Ex Parte* Letter at 3.

[^46]: *AT&T Corp. v. FCC*, 236 F.3d at 738.

[^47]: 47 U.S.C. § 251. AT&T will remain subject to unbundling
    obligations pursuant to section 251(c)(3), which, as the Commission
    has found previously, provides "a check on special access pricing."
    *Unbundled Access to Network Elements; Review of the Section 251
    Unbundling Obligations of Incumbent Local Exchange Carriers*, WC
    Docket No. 04-313, CC Docket No. 01-338, Order on Remand, 20 FCC Rcd
    2533, 2574-75, para. 65 (2004), *petition for review denied*, *Covad
    Communications Co. v. FCC*, 450 F.3d 528 (D.C. Cir. 2006).

[^48]: 47 U.S.C. § 271(d)(6).

[^49]: 47 U.S.C. §§ 201, 202. Under section 202(a) of the Act, AT&T will
    remain obligated to provide any of its special access services that
    its competitors rely on as inputs for the competitors' own interLATA
    telecommunications service offerings on rates, terms, and conditions
    that are not unreasonably discriminatory. 47 U.S.C. § 202(a). Ad Hoc
    appears to argue that the three-prong test cannot be satisfied for
    forbearance from section 201(b) of the Act. *See* Ad Hoc Comments at
    9-11. AT&T does not seek, nor do we grant, forbearance from section
    201(b).

[^50]: BOCs are not subject to price cap regulation for (1) the exchange
    access services for which they have been granted phase II pricing
    flexibility; and (2) certain of their services that are provided
    pursuant to rate-of-return regulation. *See Access Charge Reform;
    Price Cap Performance Review for Local Exchange Carriers;
    Interexchange Carrier Purchases of Switched Access Services Offered
    by Competitive Local Exchange Carriers; Petition of U S West
    Communications, Inc. for Forbearance from Regulation as a Dominant
    Carrier in the Phoenix, Arizona MSA*, CC Docket Nos. 96-262, 94-1,
    98-157, CCB/CPD File No. 98- 63, Fifth Report and Order and Notice
    of Proposed Rulemaking, 14 FCC Rcd 14221, 14225, paras. 4-5, 14301,
    para. 153, 14307, para. 166 (1999) (*Pricing Flexibility Order*),
    *petition for review denied*, *WorldCom, Inc. v. FCC*, 238 F.3d 449
    (D.C. Cir. 2001); 47 C.F.R. § 65.1(b)(3). For example, as part of
    its annual access-tariff filing waiver petitions for its TIPToP
    service, AT&T has acknowledged that it is subject to cost-based
    regulation and commented that "\[a\]ny rate increases or change in
    terms or conditions for TIPToP must be filed on 15-days notice *with
    cost support*.  Thus, the Bureau would continue to maintain
    significant regulatory oversight over TIPToP, and importantly, more
    regulatory oversight than over most services subject to price cap
    regulation."  AT&T Reply Comments, WCB Pricing File No. 07-08, at
    2-3 (filed April 16, 2007) (emphasis in original).  The Bureau has
    agreed that "these rules require AT&T to justify any rate increases
    it seeks for its TIPToP service by providing cost and other
    supporting data in the tariff review process."  *AT&T Inc. Petition
    for Waiver of Section 61.42(g) of the Commission's Rules*,
    WCB/Pricing File No. 06-18, Order, 21 FCC Rcd 5968, 5970, para. 6
    (WCB 2006); *see also* *AT&T Inc. Petition for Waiver of Section
    61.42(g) of the Commission's Rules*, WCB/Pricing File No. 07-08,
    Order, 22 FCC Rcd 8666 (WCB 2007); *Comments Sought on AT&T Petition
    for Waiver of Section 61.42(g) of the Commission's Rules*,
    WCB/Pricing File No. 08-11, Public Notice, DA 08-781 (rel. Apr. 1,
    2008) (seeking comment on AT&T's petition for waiver from the
    Commission's price cap rules for its TIPToP service for the upcoming
    2008 annual access tariff filing).

[^51]: 47 U.S.C. § 160(a)(1).

[^52]: *See* AT&T Petition at 21; BellSouth Petition at 46; *see also*
    US Telecom Comments at 5-7; Verizon Reply at 5; Qwest Reply, WC
    Docket No. 05-342, at 2.

[^53]: BellSouth Petition at 25.

[^54]: AT&T Petition at 3; *see* BellSouth Petition at 23; AT&T Apr. 22
    *Ex Parte* Letter at 1.

[^55]: *See, e.g.*, AT&T Petition at 3; BellSouth Petition at 3, 18, 21,
    23, 54; *see also* US Telecom Comments at 5-6; AT&T Comments, WC
    Docket No. 05-342, at 3-4; Qwest Reply, WC Docket No. 05-342, at 3.

[^56]: *Joint Cost Order*, 2 FCC Rcd at 1303, para. 37; *see also
    Appropriate Framework for Broadband Access to the Internet over
    Wireline Facilities*, CC Docket No. 02-33, Report and Order and
    Notice of Proposed Rulemaking, 20 FCC Rcd 14853, 14925, para. 131
    (2005) (*Wireline Broadband Order*), *aff'd*, *Time Warner Telecom
    v. FCC*, 507 F.3d 205 (3rd Cir. 2007).

[^57]: *See* *Wireline Broadband Order*, 20 FCC Rcd at 14925, para. 132.

[^58]: *See id.*

[^59]: *See, e.g.*, *Multi-Association Group (MAG) Plan for Regulation
    of Interstate Services of Non-Price Cap Incumbent Local Exchange
    Carriers and Interexchange Carriers; Federal-State Joint Board on
    Universal Service*, CC Docket Nos. 00-256, 96-45, Report and Order
    and Second Further Notice of Proposed Rulemaking, 19 FCC Rcd 4122,
    4153-55, paras. 70-72 (2004); *Wireline Broadband Order*, 20 FCC Rcd
    at 14925-26, para. 133; *see also* AT&T Petition at 27-29; BellSouth
    Petition at 3.

[^60]: *See* *Wireline Broadband Order*, 20 FCC Rcd at 14925-26, para.
    133.

[^61]: *Computer III Remand Order*, 6 FCC Rcd at 7596, para. 55; *see
    California v. FCC*, 39 F.3d at 926-27; *United States v. Western
    Elec. Co*., 993 F.2d 1572, 1580 (D.C. Cir. 1993) ("\[Price cap
    regulation\] reduces any BOC's ability to shift costs from
    unregulated to regulated activities, because the increase in costs
    for the regulated activity does not automatically cause an increase
    in the legal rate ceiling."); *Implementation of the Non-Accounting
    Safeguards of Sections 271 and 272 of the Communications Act of
    1934, as Amended*, CC Docket No. 96-149, First Report and Order and
    Further Notice of Proposed Rulemaking, 11 FCC Rcd 21905, 21992,
    para. 181 (1996) (*Non-Accounting Safeguards Order*) (subsequent
    history omitted) ("\[F\]ederal price cap regulation reduces a BOC's
    incentives to allocate costs improperly."); *Wireline Broadband
    Order*, 20 FCC Rcd at 14925-26, para. 133.

[^62]: *See* AT&T Petition at 3 ("Under price cap regulation, consumers
    are protected by price cap ceilings and rate bands that prevent
    carriers with market power in a particular service from raising
    rates to unjust and unreasonable levels."). We also note that, under
    the conditions of the *AT&T/BellSouth Order*, no Legacy AT&T/Legacy
    BellSouth incumbent LEC may increase the rates for its interstate
    tariff special access services within the Legacy AT&T/Legacy
    BellSouth in-region territory for 48 months following the Legacy
    AT&T/Legacy BellSouth merger. *See* *AT&T/BellSouth Order*, 22 FCC
    Rcd at 5811; *see also* TWTC *et al.* Feb. 21 *Ex Parte* Letter,
    Attach. 1 at 1.

[^63]: *See* AT&T Petition at 29-32; BellSouth Petition at 72-75; US
    Telecom Comments at 9; AT&T Reply at 4, 5 n.13; Verizon Reply at
    1-4; AT&T Comments, WC Docket No. 05-342, at 4-5; Verizon Comments,
    WC Docket No. 05‑342, at 9-10; Qwest Reply, WC Docket No. 05-342, at
    3; AT&T Apr. 18 *Ex Parte* Letter at 1, 6 n.12.

[^64]: *See* Ad Hoc Comments at 16; Ad Hoc Reply at 3-4; NuVox *et al.*
    Reply at 6; Sprint Nextel Reply at 8; Ad Hoc Reply, WC Docket No.
    05-342, at 4-6; NASUCA Reply, WC Docket No. 05-342, at 7-8; New
    Jersey Rate Counsel Reply, WC Docket No. 05-342, at 10-11; *see
    also, e.g.*, TWTC *et al.* Feb. 21 *Ex Parte* Letter, Attach. 1 at
    1; New Jersey Rate Counsel June 20 *Ex Parte* Letter, Attach.

[^65]: *See* Ad Hoc Comments at 17-18; NuVox *et al.* Reply at 6.

[^66]: *See* Ad Hoc Comments at 13-16; Sprint Nextel Comments at 9-11;
    TWTC Comments at 2-3, 5-6; Ad Hoc Reply at 2-3; NASUCA Reply at 3;
    NuVox *et al.* Reply at 3; Sprint Nextel Reply at 3-4; Ad Hoc
    Comments, WC Docket No. 05-342, at 14-17; New Jersey Rate Counsel
    Comments, WC Docket No. 05-342, at 10-11; TWTC Comments, WC Docket
    No. 05-342, at 7-9; Ad Hoc Reply, WC Docket No. 05-342, at 2-4;
    NASUCA Reply, WC Docket No. 05-342, at 5-6; *see also,* *e.g.*,
    Letter from Aryeh Friedman, Counsel for BT Americas Inc., to Marlene
    H. Dortch, Secretary, FCC, WC Docket No. 07-21, Attach. at 5-6
    (filed Dec. 21, 2007) (BT Dec. 21 *Ex Parte* Letter); TWTC *et al.*
    Feb. 21 *Ex Parte* Letter, Attach. 1 at 2; Letter from David C.
    Bergmann, Chair, NASUCA Telecommunications Committee, National
    Association of State Utility Consumer Advocates, to Kevin Martin,
    Chairman, *et al.*, FCC, WC Docket No. 07-21 (filed Apr. 9, 2008)
    (NASUCA Apr. 9 *Ex Parte* Letter); Letter from Karen Reidy, COMPTEL,
    to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 07-21, 07-273,
    Attach. at 6 (filed Apr. 11, 2008) (COMPTEL Apr. 11 *Ex Parte*
    Letter); New Jersey Rate Counsel June 20 *Ex Parte* Letter, Attach.;
    Letter from James S. Blaszak, Counsel for Ad Hoc Telecommunications
    Users Committee, to Robert McDowell, Commissioner, FCC, WC Docket
    No. 07-21, at 1-2 (filed Apr. 22, 2008) (Ad Hoc Apr. 22 *Ex Parte*
    Letter); Letter from Karen Reidy, COMPTEL, to Marlene H. Dortch,
    Secretary, FCC, WC Docket No. 07-21, at 1-2 (filed Apr. 23, 2008)
    (COMPTEL Apr. 23 *Ex Parte* Letter).

[^67]: *Price Cap Performance Review for Local Exchange Carriers*, CC
    Docket Nos. 94-1, 96-262, Fourth Report and Order in CC Docket No.
    94-1 and Second Report and Order in CC Docket No. 96-262, 12 FCC Rcd
    16642, 16700, para. 149 (1997), *aff'd in part, rev'd in part*,
    *USTA v. FCC*, 188 F.3d 521 (D.C. Cir. 1999); *see also* AT&T
    Petition at 22-23; BellSouth Petition at 48. *But see, e.g.*, TWTC
    *et al.* Feb. 21 *Ex Parte* Letter, Attach. 1 at 2.

[^68]: *See, e.g.*, *Pricing Flexibility Order*, 14 FCC Rcd at 14304,
    para. 162 ("We eliminate the low-end adjustment mechanism for price
    cap LECs that qualify for and elect to exercise either the Phase I
    or Phase II pricing flexibility we grant in this Order.");
    *Ameritech Operating Companies Petition for Pricing Flexibility for
    Special Access and Dedicated Transport Services; Southwestern Bell
    Telephone Company Petition for Pricing Flexibility for Special
    Access and Dedicated Transport Services*, WCB/Pricing File Nos.
    06-8, 06-9, Order, 21 FCC Rcd 5172 (WCB 2006); *BellSouth Petition
    for Pricing Flexibility for Special Access and Dedicated Transport
    Services*, WCB/Pricing File No. 02-24, Memorandum Opinion and Order,
    17 FCC Rcd 23725 (WCB 2002); *see also* AT&T Petition at 23;
    BellSouth Petition at 49; AT&T Reply at 18.

[^69]: *Pricing Flexibility Order*, 14 FCC Rcd at 14306-07, para. 166.

[^70]: *See CALLS Order*, 15 FCC Rcd at 12978, para. 40, 13016, para.
    132; *see also* BellSouth Petition at 50; AT&T Reply at 6, 11;
    Letter from Mary L. Henze, Assistant Vice President -- Federal
    Regulatory, BellSouth Corporation, to Marlene Dortch, Secretary,
    FCC, WC Docket No. 05-342, Attach. at 11-12 (filed Sept. 27, 2006)
    (BellSouth Sept. 27 *Ex Parte* Letter). The Commission adopted the
    price cap formula's productivity factor (or X-factor) in the *LEC
    Price Cap Order*.  *See LEC Price Cap Order*, 5 FCC Rcd at 6818-20,
    paras. 257-59.  This factor represented "the extent to which the
    overall LEC productivity growth rate could be expected to exceed the
    productivity growth rate of the economy as a whole."  *Special
    Access Rates for Price Cap Local Exchange Carriers; AT&T Corp.
    Petition for Rulemaking to Reform Regulation of Incumbent Local
    Exchange Carrier Rates for Interstate Special Access Services*, WC
    Docket No. 05-25, RM-10593, Order and Notice of Proposed Rulemaking,
    20 FCC Rcd 1994, 1998, para. 11 (2005).  For a history of the
    X-factor, see *id.* at 2007-09, paras. 31-37.

[^71]: *See, e.g.*, AT&T Apr. 18 *Ex Parte* Letter at 5-6; AT&T Apr. 22
    *Ex Parte* Letter at 1. We note that AT&T concedes that "should
    AT&T's forbearance petitions be granted, it will no longer have any
    basis for seeking exogenous relief for investment reallocation . . .
    ." AT&T Reply at 11; *see* BellSouth Petition at 50-51; AT&T Apr. 18
    *Ex Parte* Letter at 6; *see also* AT&T Reply at 17 ("a price cap
    ILEC raising a confiscation claim may find it more difficult to
    prove such a claim without separated cost data").

[^72]: *See* AT&T Petition at 2-3, 17, 19, 21 ("It is equally beyond
    dispute that the complicated tracking and allocation of investments
    and costs between regulated and non-regulated activities and the
    apportionment between interstate and intrastate jurisdictions play
    no role under price cap regulation in determining whether AT&T's
    rates are just, reasonable, and nondiscriminatory at either the
    federal or state level."), 22; AT&T Reply at 1, 4-5, 10, 12.

[^73]: 47 U.S.C. § 160(a)(1).

[^74]: *Cellular Telecommunications & Internet Ass'n v. FCC*, 330 F.3d
    502, 512 (2003).

[^75]: *See* 47 U.S.C. §§ 160(a)(1), 201, 202.

[^76]: *See, e.g.*, 47 U.S.C. §§ 154(i), 208, 213, 218, 219, 220,
    254(k), 403, 409; *2000 Biennial Regulatory Review -- Comprehensive
    Review of the Accounting Requirements and ARMIS Reporting
    Requirements for Incumbent Local Exchange Carriers: Phase 2;
    Amendments to the Uniform System of Accounts for Interconnection;
    Jurisdictional Separations Reform and Referral to the Federal-State
    Joint Board; Local Competition and Broadband Reporting*, CC Docket
    Nos. 00-199, 97-212, 80-286, 99-301, Report and Order in CC Docket
    Nos. 00-199, 97-212, and 80-286; Further Notice of Proposed
    Rulemaking in CC Docket Nos. 00-199, 99‑301, and 80-286, 16 FCC Rcd
    19911, 19980-81, para. 192 (2001) (*Phase 2 Order*) ("We note,
    however, that pursuant to section 220(c), the Commission has the
    authority to request further information or order an audit of any
    carrier's books to ensure compliance with our cost allocation
    requirements."). As discussed above, we forbear from applying
    section 220(a)(2) of the Act to AT&T but only to the extent that
    this provision contemplates separate accounting of nonregulated
    costs.

[^77]: *Cf. Phase 2 Order*, 16 FCC Rcd at 19980, para. 190 (eliminating
    annual CAM filing and biennial attestation audits for mid-sized
    carriers but stating that those carriers "like all other carriers,
    must be prepared to produce documentation of how they separate
    regulated from nonregulated costs to the Bureau, upon request").

[^78]: *See* AT&T Petition at 26; BellSouth Petition at 51. We also note
    that AT&T's Class A accounts will not be eliminated by the
    forbearance we grant here, and therefore, data needed for pole
    attachment rate formulas will remain available. *See* BellSouth
    Reply, WC Docket No. 05-342, at 4 n.8. *But see* TWTC Comments, WC
    Docket No. 05-342, at 12-13.

[^79]: *See* Ad Hoc Comments at 5, 10; Sprint Nextel Comments at 11-12;
    Ad Hoc Comments, WC Docket No. 05-342, at 10-13.

[^80]: 47 U.S.C. § 208.

[^81]: *See* Ad Hoc Comments at 12 (citing Opposition of the Federal
    Communications Commission to Petition for Writ of Mandamus, No.
    03-1397, at 26-27 (D.C. Cir. filed Jan. 9, 2004)); Ad Hoc Comments,
    WC Docket No. 05-342, at 13-14.

[^82]: Ad Hoc Comments at 12; *see* NASUCA Apr. 9 *Ex Parte* Letter, at
    3 n.15.

[^83]: Section 208 will remain as a mechanism to enforce the Act with
    regard to allegations of price squeezes. *See* BellSouth Petition at
    57-58. *But see* New Jersey Rate Counsel Comments, WC Docket No.
    05-342, at 23.

[^84]: *See, e.g.*, TWTC *et al.* Feb. 21 *Ex Parte* Letter, Attach. 1
    at 1.

[^85]: Stephen A. Ross, Randolph W. Westerfield & Jeffrey Jaffe,
    *Corporate Finance* 898 (7th ed. 2005).

[^86]: *See* TWTC Comments at 9 (citing *Smith v. Illinois Bell*, 282
    U.S. at 148-51); *see also* Ad Hoc Comments, WC Docket No. 05-342,
    at 17; TWTC Comments, WC Docket No. 05-342, at 10; TWTC *et al.*
    Feb. 21 *Ex Parte* Letter, Attach. 1 at 2. As TWTC explains, the
    2006 Biennial Regulatory Review staff report states that "WCB staff
    concludes that Part 36 remains necessary in the public interest, in
    some form . . . ." *FCC 2006 Biennial Regulatory Review*, WC Docket
    No. 06-157, Wireline Competition Bureau Staff Report, 22 FCC Rcd
    2803, 2820 (WCB 2007) (*WCB Staff Report*) (*cited in* TWTC Comments
    at 9). We note that the staff also concluded that Part 36 "merits
    further consideration for possible amendment" and recommended that
    the Commission "consider . . . whether the Part 36 rules are
    necessary in the public interest." *WCB Staff Report*, 22 FCC Rcd at
    2820. The staff also stated that "\[n\]othing in this staff
    recommendation should be interpreted as prejudging in any way the
    Commission's consideration of \[these\] issues . . . ." *Id.* We
    also note that the section 11 legal standard differs from the legal
    standard we apply here under section 10. *Compare* 47 U.S.C. § 161,
    *with* 47 U.S.C. § 160. *See generally* BellSouth Reply, WC Docket
    No. 05-342, at 5-7.

[^87]: 47 U.S.C. §§ 152(b) (preserving state authority over intrastate
    communications), 221(c) (granting the Commission authority to
    classify property of carriers as interstate).

[^88]: 47 U.S.C. § 152; *see* Verizon Comments, WC Docket No. 05-342, at
    6.

[^89]: *See Smith v. Illinois Bell*, 282 U.S. at 150-51.

[^90]: *Id.* at 148.

[^91]: *Id.* at 150-51 (citations omitted).

[^92]: *See* 47 U.S.C. §§ 152, 221(c) ("\[T\]he Commission *may*
    classify the property . . . used for wire telephone communication,
    and determine what property of said carrier shall be considered as
    used in interstate . . . service.") (emphasis added).

[^93]: 47 C.F.R. Part 36; *Prescription of Procedures for Separating and
    Allocating Plant Investment, Operating Expenses, Taxes, and Reserves
    Between the Intrastate and Interstate Operations of Telephone
    Companies*, Docket No. 17975, Report and Order, 16 FCC 2d 317
    (1969).

[^94]: *Non-Accounting Safeguards Order*, 11 FCC Rcd at 21992, para.
    181.

[^95]: *See Separations Notice*, 12 FCC at 22123, para. 3; *see also
    id.* at 22126, para. 9 ("Due to statutory, technological and market
    changes in the telecommunications industry, today's network
    architecture and service offerings differ in many important ways
    from the network and services used to define the cost categories
    appearing in our current Part 36 separations rules.").

[^96]: *See, e.g.*, Letter from James S. Blaszak, Counsel for Ad Hoc
    Telecommunications Users Committee, to Marlene H. Dortch, Secretary,
    FCC, WC Docket No. 07-21, at 2-3 (filed Nov. 27, 2007) (Ad Hoc Nov.
    27 *Ex Parte* Letter); BT Dec. 21 *Ex Parte* Letter, Attach. at 5-6;
    TWTC *et al.* Feb. 21 *Ex Parte* Letter, Attach. 1 at 1; COMPTEL
    Apr. 11 *Ex Parte* Letter, Attach. at 2-4; Letter from Anne L.
    Hammerstein, Attorney for the Public Utilities Commission of Ohio,
    to Magalie Roman Salas, Secretary, FCC, WC Docket Nos. 07-21,
    05-342, CC Docket No. 80-286, Attach. at 2 (filed Apr. 16, 2008)
    (Ohio Commission Apr. 16 *Ex Parte* Letter); *see also* TWTC
    Comments at 3, 17-18; Ad Hoc Reply at 4; TWTC Comments, WC Docket
    No. 05-342, at 13-14; New Jersey Rate Counsel Reply, WC Docket No.
    05-342, at 5; New Jersey Rate Counsel June 20 *Ex Parte* Letter,
    Attach.

[^97]: *See* *Section 272(f)(1) Sunset of the BOC Separate Affiliate and
    Related Requirements; 2000 Biennial Regulatory Review Separate
    Affiliate Requirements of Section 64.1903 of the Commission's Rules;
    Petition of AT&T Inc. for Forbearance Under 47 U.S.C. § 160(c) with
    Regard to Certain Dominant Carrier Regulations for In-Region,
    Interexchange Services*, WC Docket Nos. 02-112, 06-120, CC Docket
    No. 00-175, Report and Order and Memorandum Opinion and Order, 22
    FCC Rcd 16440, 16486-87, paras. 93-94 (2007) (*Section 272 Sunset
    Order*); *see also* Letter from Theodore C. Marcus, Senior Attorney,
    AT&T Services Inc., to Marlene Dortch, Secretary, FCC, WC Docket No.
    07-21, at 2 (filed Dec. 14, 2007) (AT&T Dec. 14 *Ex Parte* Letter).

[^98]: *Section 272 Sunset Order*, 22 FCC Rcd at 16484-85, para. 90 &
    n.260; *see also* AT&T Dec. 14 *Ex Parte* Letter at 2.

[^99]: *Section 272 Sunset Order*, 22 FCC Rcd at 16472-73, para. 64;
    *see, e.g.*, Ad Hoc Nov. 27 *Ex Parte* Letter at 2; TWTC *et al.*
    Feb. 21 *Ex Parte* Letter, Attach. 1 at 1.

[^100]: *See, e.g.*, *Section 272 Sunset Order*, 22 FCC Rcd at 16481-82,
    paras. 84-85; *see, e.g.*, Ad Hoc Nov. 27 *Ex Parte* Letter at 2;
    TWTC *et al.* Feb. 21 *Ex Parte* Letter, Attach. 1 at 1. *But see*
    AT&T Dec. 14 *Ex Parte* Letter at 2; AT&T Apr. 18 *Ex Parte* Letter
    at 7.

[^101]: *See* AT&T Dec. 14 *Ex Parte* Letter at 2; AT&T Apr. 18 *Ex
    Parte* Letter at 7; AT&T Apr. 22 *Ex Parte* Letter at 3; *see also*
    AT&T Reply at 9-10 n.28.

[^102]: 47 U.S.C. § 272(e)(3). Imputation is an accounting and
    regulatory device that is used in recognizing intra-company
    transactions. In the context of access services, this Commission and
    state commissions have long recognized the potential for LECs to use
    their control over their local networks to impede competition in
    services for which local network access is a needed input.
    Imputation requirements address this concern by requiring the BOC to
    recognize for accounting and other regulatory purposes charges for
    local network access equal to the amounts that an unaffiliated third
    party would pay for comparable access. *See, e.g.*, *Section 272
    Sunset Order*, 22 FCC Rcd at 16489-90, para. 99 n.287 (citing
    *Application of Access Charges to the Origination and Termination of
    Interstate, IntraLATA Services and Corridor Services*, Memorandum
    Opinion and Order, FCC 85-172, 1985 FCC Lexis 3510, para. 9 & n.22
    (Apr. 12, 1985) (requiring that LECs impute access charges to
    themselves in calculating their interstate, intraLATA toll rates);
    *1998 Biennial Regulatory Review -- Part 61 of the Commission's
    Rules and Related Tariffing Requirements*, CC Docket No. 98-131,
    Report and Order and First Order on Reconsideration, 14 FCC Rcd
    12293, 12312, para. 53 (1999) (requiring that price cap LECs
    offering interexchange services impute to themselves the same access
    charges that they impose on interexchange carriers)).

[^103]: *See* *Section 272 Sunset Order*, 22 FCC Rcd at 16484-85, para.
    90, 16489-92, paras. 99-105.

[^104]: *See* *id.* at 16490, para. 100.

[^105]: AT&T Reply at 9-10 n.28; *see* AT&T Apr. 18 *Ex Parte* Letter at
    7.

[^106]: *See* *Section 272 Sunset Order*, 22 FCC Rcd at 16491-92, para.
    104.

[^107]: *See* AT&T Petition, Attach. 1 at 11; 47 C.F.R. § 32.5280(a).

[^108]: *See supra* para. 12 (describing the scope of the instant
    petition). These data values with explanatory footnotes are to be
    provided in FCC Report 43-01, ARMIS Annual Summary Report, table I,
    row 1045, columns (b) and (c); FCC Report 43-02, ARMIS USOA Report,
    table I-1, row 5280, column (b); and in FCC Report 43-03, ARMIS
    Joint Cost Report, table I, row 5280, columns (b), (d), and (j).
    *See* *Section 272 Sunset Order*, 22 FCC Rcd at 16492 n.300.

[^109]: *See* AT&T Petition, Attach. 1 at 11; 47 C.F.R. § 32.5280(b),
    (c); *see also* AT&T Apr. 22 *Ex Parte* Letter at 4 n.4.

[^110]: *See* Nebraska Companies Comments at 5; Sprint Nextel Comments
    at 7, 19-20; TWTC Comments at 3, 13, 18; NuVox *et al.* Reply at 5;
    TWTC *et al.* Feb. 21 *Ex Parte* Letter, Attach. 1 at 2; COMPTEL
    Apr. 11 *Ex Parte* Letter, Attach. at 7; COMPTEL Apr. 23 *Ex Parte*
    Letter at 1.

[^111]: 47 U.S.C. § 254(k).

[^112]: *See* AT&T Apr. 18 *Ex Parte* Letter at 2, 6-7 ("AT&T is willing
    to commit voluntarily to provide an annual certification -- similar
    to what midsized carriers (some of which are still subject to
    rate-of-return regulation) are required to provide under 47 C.F.R. §
    64.905(c) -- that it has not engaged in improper
    cross-subsidization."); AT&T Apr. 22 *Ex Parte* Letter at 3; AT&T
    Apr. 22 *Ex Parte* Letter at 4 n.4.

[^113]: 47 U.S.C. § 220; *see* AT&T Apr. 18 *Ex Parte* Letter at 2; AT&T
    Apr. 22 *Ex Parte* Letter at 4. *But see* Ad Hoc Apr. 22 *Ex Parte*
    Letter at 2.

[^114]: Upon approval, the Bureau will release a public notice notifying
    the public of approval of the plan.

[^115]: *See* 47 C.F.R. § 64.903(b). More generally, the Chief of the
    Bureau has delegated authority to "\[d\]evelop and administer rules
    and policies relating to incumbent local exchange carrier
    accounting." 47 C.F.R. § 0.91(e); *see also* 47 C.F.R. § 0.291.

[^116]: *Compare* AT&T Petition at 25; BellSouth Petition at 22-23, 51,
    60, App. 2; US Telecom Comments at 5-7; AT&T Reply at 13, 16-17;
    AT&T Apr. 18 *Ex Parte* Letter at 8-9, *with* Nebraska Companies
    Comments at 1-4; Sprint Nextel Comments at 12-14; State Members
    Comments at 6-7; TOPC Comments at 3-4; TWTC Comments at 3, 9-12;
    NASUCA Reply at 2; NuVox *et al.* Reply at 3-4, 5-6; Ohio Commission
    Reply at 3; New Jersey Rate Counsel Comments, WC Docket No. 05-342,
    at 5,7-8, 10, 23; TWTC Comments, WC Docket No. 05-342, at 11-12; New
    Jersey Rate Counsel Reply, WC Docket No. 05-342, at 4; TWTC *et al.*
    Feb. 21 *Ex Parte* Letter, Attach. 1 at 2, Attach. 2 at 1-3; Florida
    Commission Feb. 9 *Ex Parte* Letter, Attach. at 3-4; COMPTEL Apr. 11
    *Ex Parte* Letter, Attach. at 8; Ohio Commission Apr. 16 *Ex Parte*
    Letter, Attach. at 2-3; State Members Apr. 15 *Ex Parte* Letter at
    2; Arizona Commission Apr. 22 *Ex Parte* Letter at 2-3; Tennessee
    Commission Apr. 22 *Ex Parte* Comments at 1-2.

[^117]: AT&T Petition at 25; *see* BellSouth Petition at 22-23.

[^118]: *See* Sprint Nextel Comments at 12-14; Sprint Nextel Reply at
    4-5; *see also* Nebraska Companies Comments at 1-4; State Members
    Comments at 6-7; TOPC Comments at 3-4; TWTC Comments at 3, 9-12;
    NASUCA Reply at 2; NuVox *et al.* Reply at 3-6; Ohio Commission
    Reply at 3; New Jersey Rate Counsel Comments, WC Docket No. 05-342,
    at 5,7-8, 10, 23; TWTC Comments, WC Docket No. 05-342, at 11-12; New
    Jersey Rate Counsel Reply, WC Docket No. 05-342, at 4; TWTC *et al.*
    Feb. 21 *Ex Parte* Letter, Attach. 1 at 2, Attach. 2 at 1-3; NASUCA
    Apr. 9 *Ex Parte* Letter at 3; Florida Commission Feb. 9 *Ex Parte*
    Letter, Attach. at 3-4; COMPTEL Apr. 11 *Ex Parte* Letter, Attach.
    at 8; Ohio Commission Apr. 16 *Ex Parte* Letter, Attach. at 2-3;
    State Members Apr. 15 *Ex Parte* Letter at 2. "TELRIC" is an acronym
    for Total Element Long Run Incremental Cost. *See* *AT&T Corp. v.
    Iowa Utils. Bd.*, 525 U.S. 366, 374 (1999).

[^119]: 47 U.S.C. §§ 152(a), 160; *see* AT&T Petition at 25 n.44;
    BellSouth Petition at 51 n.77; Ad Hoc Reply at 5 ("Federal
    interests, however, exist independent of the States' interests.");
    AT&T Apr. 18 *Ex Parte* Letter at 8-9; *cf. Phase 2 Order*, 16 FCC
    Rcd at 19985, para. 207 ("We believe that, if we cannot identify a
    federal need for a regulation, we are not justified in maintaining
    such a requirement at the federal level.").

[^120]: As discussed above, we do not conclude here that there will
    never be any federal need for accounting data from AT&T in the
    future, and thus, we condition this forbearance on, among other
    things, the provision by AT&T of accounting data on request by the
    Commission for regulatory purposes, consistent with the Commission's
    statutory authority and AT&T's commitment in this proceeding.

[^121]: *See* AT&T Petition at 27.

[^122]: *See, e.g.*, NASUCA Reply, WC Docket No. 05-342, at 9. *But see*
    Verizon Reply at 6-7; Verizon Comments, WC Docket No. 05-342, at 7;
    Qwest Reply, WC Docket No. 05-342, at 5-6; Verizon Reply, WC Docket
    No. 05-342, at 1-3.

[^123]: 47 U.S.C. § 160(e); *see* State Members Comments at 7; Verizon
    Comments, WC Docket No. 05-342, at 7.

[^124]: *Cf. Policy and Rules Concerning the Interstate, Interexchange
    Marketplace; Implementation of Section 254(g) of the Communications
    Act of 1934, as amended*, CC Docket No. 96-61, Second Report and
    Order, 11 FCC Rcd 20730, 20751-52, para. 40 (1996) (subsequent
    history omitted) (finding that Commission forbearance to detariff
    interstate, domestic, interexchange services of nondominant
    interexchange carriers does not affect, under section 10(e), state
    tariff filing requirements for intrastate services); *Federal-State
    Joint Board on Universal Service*, CC Docket No. 96-45, Report to
    Congress, 13 FCC Rcd 11501, 11525-26, para. 48 (1998) (finding that
    although section 10(e) precludes a state from applying or enforcing
    provisions of federal law when the Commission has forborne, it does
    not preclude a state from imposing requirements derived from state
    law).

[^125]: AT&T Reply at 14 n.38; *see* AT&T Petition at 26; BellSouth
    Petition at 51.

[^126]: *See* AT&T Petition at 25 n.43.

[^127]: *See* *id.* at 26; BellSouth Petition at 51.

[^128]: 47 U.S.C. § 251; *see* TWTC Comments at 9-10; Ohio Commission
    Reply at 4; TWTC Comments, WC Docket No. 05-342, at 11-12; NASUCA
    Reply, WC Docket No. 05-342, at 7; New Jersey Rate Counsel Reply, WC
    Docket No. 05-342, at 4; New Jersey Rate Counsel June 20 *Ex Parte*
    Letter, Attach.; TWTC *et al.* Feb. 21 *Ex Parte* Letter, Attach. 2.
    *But see* BellSouth Petition at 59-60; BellSouth Reply, WC Docket
    No. 05-342, at 4 n.8.

[^129]: *See* *AT&T Corp. v. Iowa Utils. Bd.*, 525 U.S. at 384.

[^130]: 47 U.S.C. § 160(a)(2).

[^131]: *See infra* para. 44.

[^132]: AT&T Petition at 39; *see* AT&T Comments, WC Docket No. 05-342,
    at 4, 6-7.

[^133]: BellSouth Petition at 2; *see id.* at 4.

[^134]: *See* TWTC Comments, WC Docket No. 05-342, at 10-11.

[^135]: *See* BellSouth Reply, WC Docket No. 05-342, at 13.

[^136]: *See id.* at 12.

[^137]: *See* AT&T Apr. 18 *Ex Parte* Letter at 8.

[^138]: *See, e.g.*, Nebraska Companies Comments at 4-5; NTCA Apr. 14
    *Ex Parte* Letter at 3.

[^139]: 47 U.S.C. § 254(k).

[^140]: *See* Sprint Nextel Comments at 20.

[^141]: *See* 47 C.F.R. § 36.622(a), (c).

[^142]: *See* AT&T Reply at 18.

[^143]: *See* AT&T Petition at 4, 32-38; BellSouth Petition at 4, 61,
    65-70; *see also* Sprint Nextel Comments at 19; TWTC Comments at 8-9
    n.19; TWTC Comments, WC Docket No. 05-342, at 12; New Jersey Rate
    Counsel Reply, WC Docket No. 05-342, at 5.

[^144]: *See, e.g.,* Allison Fass, *Reforming The Boardroom: One Year
    Later, The Impact Of Sarbanes-Oxley* (July 22, 2003), *available at*
    http://www.forbes.com/2003/07/22/cz_af_0722sarbanes.html.

[^145]: *See* AT&T Petition at 4; BellSouth Petition at 4.

[^146]: 47 U.S.C. § 160(a)(3).

[^147]: 47 U.S.C. § 160(b).

[^148]: *Id*.

[^149]: *See* AT&T Petition at 4; BellSouth Petition at 7, 54 n.83;
    Qwest Reply, WC Docket No. 05-342, at 4-5; Letter from Mary L.
    Henze, Assistant Vice President -- Federal Regulatory, BellSouth
    Corporation, to Marlene Dortch, Secretary, FCC, WC Docket No.
    05-342, at 1 (filed Sept. 8, 2006); AT&T Feb. 22 *Ex Parte* Letter
    at 1; AT&T Dec. 14 *Ex Parte* Letter at 2; *see also* State Members
    Comments at 3 ("\[AT&T\] plausibly asserts that cost allocation
    rules, including Part 36, continue to impose very significant costs
    upon its operations."). *But see* Sprint Nextel Comments at 21-22;
    New Jersey Rate Counsel Comments, WC Docket No. 05-342, at 12-13,
    19-20; New Jersey Rate Counsel Reply, WC Docket No. 05-342, at 12;
    NASUCA Apr. 9 *Ex Parte* Letter at 3; NTCA Apr. 14 *Ex Parte* Letter
    at 3; Ad Hoc Apr. 22 *Ex Parte* Letter at 2.

[^150]: *Cf.* *Section 272 Sunset Order*, 22 FCC Rcd at 16479-80, para.
    82. *See* AT&T Petition at 10-16; AT&T Apr. 18 *Ex Parte* Letter at
    1-2.

[^151]: *See, e.g.*, *Wireline Broadband Order*, 20 FCC Rcd at 14925,
    para. 131 (explaining that the purpose of the cost allocation rules
    "was to ensure that telephone ratepayers would continue to receive
    reasonable protections against improper cross-subsidization in the
    event the BOCs provided enhanced service on an integrated basis,
    rather than through separate subsidiaries"); *Joint Cost Order*, 2
    FCC Rcd at 1304, para. 47; *Phase 2 Order*, 16 FCC Rcd at 19980-81,
    paras. 189, 191-92.

[^152]: *See* AT&T Petition at 4, 39; BellSouth Petition at 7, 76; *see
    also* US Telecom Comments at 8-9; Verizon Reply at 5-6; AT&T
    Comments, WC Docket No. 05-342, at 6-7. *But see* Sprint Nextel
    Reply at 7.

[^153]: BellSouth Petition at 25; *see id.* at 2 ("\[T\]he cost
    assignment rules at issue in this Petition stand in the way of
    technological innovation, efficiency and competitiveness . . . .");
    *see also id.* at 4, 32-34, 63-65; AT&T Comments, WC Docket No.
    05-342, at 6-7; Verizon Comments, WC Docket No. 05-342, at 3.

[^154]: BellSouth Petition at 4 (footnote omitted); *see id.* at 5
    ("There is no good reason that \[BellSouth's\] customers should have
    to wait while \[BellSouth's\] products and services stand in a long,
    value-depleting line of regulatory cost assignment exercises.");
    Verizon Comments, WC Docket No. 05-342, at 9.

[^155]: *See* BellSouth Petition at 25.

[^156]: AT&T Petition at 39.

[^157]: *See* AT&T Petition at 15, 38-39; *see also* AT&T Comments, WC
    Docket No. 05-342, at 5. As AT&T points out, the Commission has
    exempted mid-size carriers from performing these independent audits
    to "significantly lighten regulatory burdens." AT&T Petition at
    15-16 n.21 (citing *Phase 2 Order*, 16 FCC Rcd at 19980, para. 189).

[^158]: *See* AT&T Petition at 39.

[^159]: 47 U.S.C. § 160(b); *see id.* ("If the Commission determines
    that such forbearance will promote competition among providers of
    telecommunications services, that determination may be the basis for
    a Commission finding that forbearance is in the public interest.").

[^160]: *See* Ad Hoc Comments at 3-4, 12, 19; Sprint Nextel Comments at
    5; TWTC Comments at 3, 7-8; NASUCA Reply at 3; NuVox *et al.* Reply
    at 5; Ohio Commission Reply at 2; Sprint Nextel Reply at 5-6; Ad Hoc
    Comments, WC Docket No. 05-342, at 4-10; TWTC Comments, WC Docket
    No. 05-342, at 9-10; Ad Hoc Reply, WC Docket No. 05-342, at 4-7; New
    Jersey Rate Counsel Reply, WC Docket No. 05-342, at 4; NASUCA Apr. 9
    *Ex Parte* Letter at 3; COMPTEL Apr. 11 *Ex Parte* Letter, Attach.
    at 5; Ohio Commission Apr. 16 *Ex Parte* Letter, Attach. at 3; Ad
    Hoc Apr. 22 *Ex Parte* Letter at 1-2. *But see* AT&T Reply at 6-7,
    10; BellSouth Reply, WC Docket No. 05-342, at 8; Verizon Reply, WC
    Docket No. 05-342, at 5-6; AT&T Apr. 18 *Ex Parte* Letter at 2.
    Certain commenters allege that AT&T has earned supra-competitive
    profits on special access services and contend that the Cost
    Assignment Rules are particularly needed for monitoring rates of
    return of AT&T's special access services. *See* Ad Hoc Comments at
    4-9; Sprint Nextel Comments at 14-17; NuVox *et al.* Reply at 6;
    Sprint Nextel Reply at 2-3, 5; Ad Hoc Comments, WC Docket No.
    05-342, at 4-10; New Jersey Rate Counsel Comments, WC Docket No.
    05-342, at 8-9, 16; Ad Hoc Reply, WC Docket No. 05-342, at 4; BT
    Dec. 21 *Ex Parte* Letter, Attach. at 2-5; COMPTEL Apr. 11 *Ex
    Parte* Letter, Attach. at 4. We note that in the *Special Access*
    proceeding, AT&T and other BOCs dispute the validity of using this
    data to calculate special access rates of return. *See, e.g.*, SBC
    Comments, RM-10593, at 19-22 (filed Dec. 2, 2002); BellSouth
    Comments, RM-10593, at 4-6 (filed Dec. 2, 2002); Qwest Comments,
    RM-10593, at 8-13 (filed Dec. 2, 2002); Verizon Comments, RM-10593,
    at 21-23 (filed Dec. 2, 2002); *see also* AT&T Reply at 7-9;
    BellSouth Reply, WC Docket No. 05-342, at 8-10; Verizon Reply, WC
    Docket No. 05-342, at 5-6; AT&T Apr. 18 *Ex Parte* Letter at 3-4;
    AT&T Apr. 22 *Ex Parte* Letter at 1-2. We do not resolve that issue
    here.

[^161]: *See* AT&T Petition at 21, 24 ("Thus, any claim that cost
    assignment rules are necessary 'just in case' the Commission decides
    to resurrect a productivity factor would rest entirely on
    speculation, which as noted does not demonstrate the necessity for a
    rule under the forbearance test."); AT&T Reply at 2.

[^162]: *See* AT&T Apr. 18 *Ex Parte* Letter at 2; AT&T Apr. 22 *Ex
    Parte* Letter at 4. *But see* Ad Hoc Apr. 22 *Ex Parte* Letter at 2.

[^163]: *See* 47 U.S.C. § 160(c) (deeming the petition granted as of the
    forbearance deadline if the Commission does not deny the petition
    within the time period specified in the statute); 47 C.F.R. §
    1.03(a) ("\[T\]he Commission may, on its own motion or on motion by
    any party, designate an effective date that is either earlier or
    later in time than the date of public notice of such action.").

[^164]: Effective July 1, 2006, the New Jersey Division of the Ratepayer
    Advocate is now Rate Counsel. *See* New Jersey Rate Counsel Comments
    at 1 n.1.

[^165]: *See generally Access Charge Reform*, CC Docket Nos. 96-262,
    94-1, 99-249, 96-45, Sixth Report and Order in CC Docket Nos. 96-262
    and 94-1, Report and Order in CC Docket No. 99-249, Eleventh Report
    and Order in CC Docket No. 96-45, 15 FCC Rcd 12962 at ¶ 171 (2000)
    ("*CALLS Order*").

[^166]: *Special Access Rates for Price Cap Local Exchange Carriers*;
    *AT&T Corp. Petition for Rulemaking to Reform Regulation of
    Incumbent Local Exchange Carrier Rates for Interstate Special Access
    Services*; WC Docket No. 05-25, RM-10593, Order and Notice of
    Proposed Rulemaking at ¶ 35 (2005).

[^167]: *Section 272(f)(1) Sunset of the BOC Separate Affiliate and
    Related Requirements; 2000 Biennial Regulatory Review Separate
    Affiliate Requirements of Section 64.1903 of the Commission's Rules;
    Petition of AT&T Inc. for Forbearance Under 47 U.S.C. § 160(c) with
    Regard to Certain Dominant Carrier Regulations for In-Region,
    Interexchange Services*, WC Docket No. 02-112, CC Docket No. 00-175,
    WC Docket No. 06-120, FCC 07-159; Report and Order and Memorandum
    Opinion and Order at ¶¶ 89-90 (Aug. 31, 2007).

[^168]: 47 U.S.C. § 161(a)(2).