**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the matter of                 | *  | WC Docket No. 02-304         |
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| BellSouth Telecommunications,    | ** |                              |
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| Tariff FCC No. 1, Transmittal    | *) |                              |
| No. 657                          | ** |                              |
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**ORDER**

**Adopted: September 18, 2002 Released: September 18, 2002**

**Direct Case Due by:** October 10, 2002

**Oppositions to Direct Case Due by:** October 24, 2002

**Rebuttal Due by:** October 31, 2002

By the Chief, Pricing Policy Division:

# Introduction

1.  In this order, we designate for investigation, pursuant to sections
    204 and 205 of the Communications Act of 1934, as amended (the
    Act),[^1] certain issues regarding the rates, terms, and conditions
    in tariff Transmittal No. 657 that BellSouth Telecommunications,
    Inc., (BellSouth) filed to become effective August 3, 2002.[^2] We
    suspended Transmittal 657 for five months on August 2, 2002, and
    initiated this investigation.[^3] As discussed below, we designate
    issues relating to BellSouth's provisions for security deposits
    contained in tariff Transmittal No. 657 for investigation to ensure
    that the proposed tariff provisions are not unjust, unreasonable, or
    unreasonably discriminatory in violation of sections 201 and 202 of
    the Act.[^4]

# Background 

2.  A brief overview of the Commission's policies concerning security
    deposits and treatment of uncollectibles would be useful to the
    discussion of the issues presented by the present tariff revisions.
    Existing incumbent local exchange carrier (LEC) interstate access
    tariffs contain protections for uncollectibles. In 1984, the
    Commission rejected incumbent LECs' proposed security deposit tariff
    language and instead permitted dominant LECs to require security
    deposits from: (1) those carriers that have a proven history of late
    payments to the LEC; and (2) those carriers that have no established
    credit.[^5] These provisions since have become a standard term in
    interstate access tariffs.[^6] In 1987, the Commission addressed a
    BellSouth proposal to reduce the notice it must give to terminate
    service for nonpayment to 15 days from 30 days. The Commission
    allowed a 15-day notice period only if the customer received its
    bill within three days after the billing date.[^7]

3.  The Commission's ratemaking policies for incumbent LECs also account
    for interstate uncollectibles and provide for their recovery through
    interstate access charges. As a price cap carrier, BellSouth's rates
    at the time it entered price caps included a factor reflecting
    wholesale uncollectibles.[^8] Under price caps, the permitted price
    indexes are annually adjusted for changes in general economic
    conditions as reflected in the GDP-PI inflation index.[^9] Price cap
    carriers experiencing a rise in uncollectibles resulting in
    interstate rates of return below 10.25% may, if eligible, seek a
    low-end adjustment, permitting the carrier to target a 10.25% rate
    of return.[^10] Price cap carriers that are not eligible for a
    low-end adjustment because they have exercised pricing flexibility
    retain the right to demonstrate that earnings are low enough to
    warrant an above cap filing, or to seek an exogenous cost change,
    either of which would allow them to charge rates that exceed the
    current price caps.[^11]

4.  BellSouth's existing interstate access tariff requires only "a
    customer which has a proven history of late payments to the
    Telephone Company or does not have established credit to make a
    deposit prior to or at any time after the provision of a service to
    the customer."[^12] The existing tariff further provides that a
    deposit "will be refunded or credited to the customer's account when
    the customer has established credit or, in any event, after the
    customer has established a one-year prompt payment record at any
    time prior to the termination of the provision of the service to the
    customer."[^13]

5.  The tariff revisions proposed in Transmittal No. 657 would allow
    BellSouth to require security deposits not only from an existing
    customer that has a proven history of late payments, but from an
    existing customer "if that existing Customer's credit worthiness
    decreases to a commercially significant extent as compared to the
    level of credit worthiness determined by BellSouth when that
    Customer's service was established."[^14] Further, the revision
    would allow BellSouth to require a security deposit from an existing
    customer if the customer's gross monthly billing has increased as
    compared to the billing level used to determine the initial security
    deposit.[^15] The revision would also allow BellSouth to require a
    security deposit from a new customer not only if the new customer
    lacks established credit, but also based on BellSouth's review of
    the new customer's credit worthiness.[^16] The revision states that
    BellSouth will use a "commercially acceptable credit scoring tool
    applied in a commercially reasonable manner to determine a
    Customer's credit worthiness."[^17] Finally, the revision outlines a
    procedure to resolve disputes regarding deposits, and provides that
    deposits will be refunded only on written request and if the
    customer is credit worthy.[^18]

6.  As justification for this revision, BellSouth states that its
    uncollectible bills due to bad debt increased by more than 200
    percent during the year 2001, as compared to the year 2000, and that
    the potential for bad debts continues to rise in 2002. Thus,
    according to BellSouth, the revision is necessary to safeguard its
    interests.[^19] On July 26, 2002, AT&T Corp. (AT&T); Sprint
    Communications Company, L.P. (Sprint); WorldCom, Inc. (WorldCom); US
    LEC Corp. (US LEC); and ITC\^DeltaCom Communications, Inc., KMC
    Telecom Holdings, Inc., NewSouth Communications Corp., NuVox
    Communications, Inc., and XO Communications, Inc. filed petitions to
    reject, or, in the alternative, to suspend and investigate
    BellSouth's tariff.[^20] BellSouth filed its reply on August 1,
    2002.[^21]

# issues designated for investigation 

## Basis for Requiring a Deposit from a Customer 

### Background

7.  Under its proposed revisions, BellSouth could require a security
    deposit from a new customer: (1) based on its review of the
    customer's credit worthiness; (2) if the customer has a proven
    history of late payments on undisputed charges to BellSouth; or (3)
    if the customer does not have established credit.[^22] BellSouth
    states that it will "use a commercially acceptable credit scoring
    tool applied in a commercially reasonable manner to determine a
    Customer's credit worthiness."[^23]

8.  The revisions in Transmittal No. 657 would also permit BellSouth to
    require a security deposit from an existing customer "if that
    existing Customer's credit worthiness decreases to a commercially
    significant extent as compared to the level of credit worthiness
    determined by BellSouth when that Customer's service was
    established. In addition, if that Customer's credit worthiness is
    still determined by BellSouth to be at a level that requires a
    security deposit, BellSouth reserves the right to require an
    additional deposit from an existing Customer whose gross monthly
    billing has increased as compared to the billing level used to
    determine the initial security deposit. In any case, such deposits
    collected will not exceed in total the rates and charges for two
    months of the Customer's estimated billing for service(s),
    calculated by using an average of the most recent three (3) months
    of undisputed charges."[^24]

9.  Several carriers petitioned against the BellSouth Transmittal No.
    657.[^25] These parties allege that the tariff revisions: (1) are
    unjust and unreasonable in violation of section 201(b) of the
    Act;[^26] (2) are vague and ambiguous in violation of sections 61.2
    and 61.54 of the Commission's rules;[^27] (3) permit BellSouth too
    much discretion in determining whether a customer is credit
    worthy;[^28] and (4) have the potential to be anticompetitive
    because BellSouth could impose unnecessary and burdensome credit
    requirements on its carrier customers that are also its
    competitors.[^29] US LEC states that a requirement for two months'
    cash deposit by all network providers could trigger bank covenants
    jeopardizing a competitive LEC's financial stability.[^30] Some
    parties suggest that alternatives exist, such as improved billing
    practices by BellSouth and advanced payment plans that would cover
    the allegedly at risk period.[^31]

### Discussion

10. The initial issue designated for investigation is whether the
    revised security deposit provisions applicable to interstate access
    customers, both new and existing, are reasonable and not so vague as
    to permit BellSouth to discriminate unreasonably among its
    interstate access customers, whether they be interexchange carriers,
    competitive LECs, or business end-user subscribers. The interstate
    access market has two distinct characteristics \-- BellSouth must
    provide access services to IXCs and competitive LECs requesting such
    service, and those carriers must use BellSouth's access services to
    originate or terminate many of their interstate calls. The proposed
    revisions to the security deposit terms significantly alter the
    balance between BellSouth and its interstate access customers with
    respect to the risks of nonpayment of interstate access bills that
    was struck in the early 1980s when access charges were instituted.
    The revisions raise the question whether circumstances have changed
    so as to warrant the imposition of additional security deposits. The
    tariff also raises concerns about whether the tariff language
    clearly and unambiguously sets forth a standard that can be
    objectively administered in a nondiscriminatory manner. We therefore
    direct BellSouth to respond to the matters discussed below and
    provide the requested information in its direct case. Nonetheless,
    BellSouth may, as part of its direct case, seek to justify its
    expansion of the instances in which security deposits may be
    required of interstate access customers.

11. As part of its direct case, BellSouth shall explain why it believes
    its rates under price caps do not adequately compensate it for the
    risk of uncollectibles. BellSouth's rates include a revenue
    requirement component for uncollectible debts that is based on the
    amount of uncollectibles permitted as an interstate revenue
    requirement at the time BellSouth became subject to price cap
    regulation. BellSouth is directed to submit the level of
    uncollectible debts from interstate access services for the years
    1990 to the present and indicate the level of uncollectibles that
    was included in its initial price cap rates. It shall then address
    whether the variation in uncollectible levels for 2000 and 2001 is
    merely a normal fluctuation in uncollectibles, which would be
    covered by the business risks anticipated to be endogenous to price
    caps, or whether it reflects some long term trend that warrants
    expanded security deposits from customers meeting BellSouth's
    proposed standards. BellSouth shall provide the Commission with the
    total amount uncollected by year from January 2000 to July 31, 2002.
    BellSouth shall also provide the totals of each of the individual
    defaults grouped into the following ranges: less than \$250,000;
    \$250,001-\$500,000; \$500,001-\$1,000,000; \$1,000,000-\$5,000,000;
    and more than \$5,000,000. For each range, BellSouth shall indicate
    the number of defaulting entities. BellSouth shall also indicate the
    total dollar amount of security deposits it holds that are
    attributable to interstate access services and the percentage
    relationship of that amount to average monthly interstate access
    billings. The changes in the security deposit provisions of
    BellSouth's interstate access tariff would increase
    customer-supplied funding as well as reduce BellSouth's exposure to
    defaults. BellSouth should accordingly address what modifications
    should be made to its price cap indexes and service band indexes to
    account for these changes to the capital and risk parameters of
    price caps.

12. To assist the Commission in understanding the increase in the level
    of uncollectibles, BellSouth should describe its billing and
    collection procedures and explain any changes in its billing and
    collection procedures or the accounting treatment of disputed
    amounts on bills within the past two years that could have affected
    the levels of uncollectibles. BellSouth shall indicate the average
    length of time from the bill date until the bill is sent to the
    carrier customer and what percentage of those bills, by number of
    entities and by billed amount, is sent electronically. In addition,
    BellSouth shall provide the Commission with the number of customers
    that have been sent non-payment, discontinuance of service, or
    refusal of new orders letters in the past year and the average
    length of time from a bill's being delinquent until the letter was
    sent. To provide information on possible changes in customer
    behavior, BellSouth shall provide the Commission with the percent of
    carrier bills disputed, the percent of carrier-billed revenues
    disputed, and the percentage of the disputed amounts that were
    successfully disputed by the carrier for billing periods beginning
    with January 2000 to the present. BellSouth should also indicate if
    it deducts disputed amounts from amounts billed for purposes of
    determining whether a carrier has complied with a deadline.

13. BellSouth shall indicate which services in its interstate access
    tariff, including the subscriber line charge and other common line
    services, are billed in advance and those that are billed in
    arrears. It shall indicate the percentage of interstate billings
    that are billed in advance, how this level has changed over the past
    five years, and how this change has affected the risk BellSouth
    faces. In this connection, BellSouth should discuss whether
    different security deposit provisions should apply depending upon
    whether the service is billed in advance or billed in arrears.
    BellSouth shall also discuss the extent to which it has a debtor
    relationship with its customers and how that may affect BellSouth's
    credit risk. BellSouth should indicate the amount of unpaid bills of
    defaulting customers that have gone into bankruptcy since January
    2000 and the percentage of that amount that it has recovered through
    bankruptcy proceedings.

14. If BellSouth believes that the risk of uncollectible debts has
    increased permanently, it should explain what accounts for this
    change, *e.g.*, the general economic climate or some structural
    change in the market. If the change is a structural one, are there
    methods other than the BellSouth proposal that would adequately
    address this additional risk, *e.g.*, is there a subset of carriers
    that can be identified that are the major cause of the increased
    risk? Alternatively, is there some means of accelerated billing that
    could, if there were a nonpayment, trigger the existing security
    deposit provisions and thus offer some additional protection to
    BellSouth? BellSouth should also discuss any other steps, other than
    requiring additional security deposits, it might take to mitigate
    the risk. For example, could it adopt some form of advance payment
    for services currently billed in arrears and, if so, what
    modifications to its tariff and billing programs would be necessary?
    How difficult would such changes be to implement? BellSouth's tariff
    revisions increasing the security deposits would impose additional
    costs on carriers that are also BellSouth's competitors at a time
    when access to capital markets is extremely limited. This could
    adversely affect the competitiveness of telecommunications markets.
    Thus, if some measures are necessary, an approach that has the
    fewest adverse effects on the competitive market while protecting
    BellSouth's interests would be preferred.

15. BellSouth's proposed security deposit revisions also raise questions
    about whether they are sufficiently clear and unambiguous to
    preclude discriminatory or anticompetitive application. Section
    61.54(j) of the Commission's rules provides that "\[t\]he general
    rules (including definitions), regulations, exceptions, and
    conditions which govern the tariff must be stated clearly and
    definitely."[^32] BellSouth's proposed tariff revisions provide that
    it shall judge credit based on a "commercially acceptable scoring
    tool applied in a commercially reasonable manner." The tariff
    indicates that the credit scoring tool may consider "number of years
    in business; management history; liens, suits and judgments; payment
    history with third parties; payment history with BellSouth (on
    undisputed amounts); publicly available information."[^33] The
    tariff also provides that BellSouth "will use a commercially
    acceptable financial scoring tool applied in a commercially
    reasonable manner to consider financial data evidencing the degree
    of financial stability including, but not limited to, debt ratings,
    debt performance, net worth, cash flow, debt/net worth,
    profitability and financial statements, if available."[^34]
    BellSouth has not shown that these factors are valid predictors of
    the likelihood of a customer paying its access bill, or that they
    are better predictors of whether a customer will pay its bills in
    the future than the customer's past payment history. As part of its
    direct case, BellSouth shall explain how each of these factors is a
    valid predictor of whether the carrier will pay its interstate
    access bill. BellSouth shall also explain how such varied data can
    be applied in a manner that will not produce arbitrary and/or
    discriminatory results. This is especially important because in most
    cases the entity upon which BellSouth would impose the security
    deposit would also be a competitor of BellSouth itself, or of its
    long-distance affiliate. In this connection, BellSouth shall provide
    the Commission with information concerning the security deposits
    that it has required of any of its long-distance affiliates.
    BellSouth shall also indicate how those affiliates would score under
    its proposed credit-rating procedures and what actions BellSouth
    would take in response to that rating. BellSouth shall also indicate
    how it would score under its credit-rating methodology. We note that
    most of these criteria relate to ratings for carriers and large
    businesses. BellSouth should discuss its intentions, if any, with
    respect to residential end users.

16. BellSouth shall provide the Commission with data on the payment
    characteristics of defaulting interstate access customers during the
    year prior to the time the account was 90 days overdue. BellSouth
    shall present the data in terms that will enable the Commission to
    identify patterns that may exist in a customer's payment practices
    prior to default that may permit alternatives to security deposits
    to be identified and evaluated. BellSouth shall also explain why the
    factors it intends to examine are better indicators of the
    probability of timely payment by an existing customer than is a
    customer's previous payment record with BellSouth. In addition,
    BellSouth shall explain the differences between the evaluative
    criteria it intends to apply to existing customers and those applied
    to new customers for judging credit worthiness and the rationale for
    those differences.

17. Finally, we ask BellSouth to provide data, to the extent available,
    on the level of uncollectibles of other regulated utilities, or in
    the broader marketplace. It should also discuss the means those
    businesses use to address the risks of default, especially how they
    manage bad credit risks while continuing to provide goods or
    services to the customer.

## Refund of Deposits 

### Background

18. The proposed tariff revision provides that, "at the Customer's
    written request, BellSouth shall refund Customer's security
    deposit(s) if BellSouth's review determines the Customer is now
    credit worthy. When conducting it's \[*sic*\] review to consider
    refund of security deposit(s), BellSouth will apply the same
    methodology it used to determine that a security deposit was
    required."[^35]

19. The Joint Petitioners assert that the refund language is vague and
    ambiguous, and they argue that BellSouth should be required to
    refund a security deposit to any customer with a good payment record
    after twelve months.[^36]

### Discussion

20. The second issue designated for investigation is the reasonableness
    of the deposit refund provision. The refund provision requires a
    written request for a refund and ties the refund obligation to the
    initial analysis conducted to determine if a security deposit is
    required. We direct BellSouth to explain why it should not include
    provisions that provide it will periodically review the need for a
    security deposit and why it should not make refunds after timely
    payments had been received for twelve months. Furthermore, because
    somewhat less stringent standards appear to apply to new customers
    than apply to existing customers, BellSouth should explain why, at
    some predefined point, a new customer's credit worthiness
    determination should not be the same as that for an existing
    customer. Finally, we direct BellSouth to explain why the proposed
    refund provision is not vague and ambiguous for the same reasons
    identified for issue A, above. Nonetheless, BellSouth may, as part
    of its direct case, seek to justify the security deposit refund
    provisions in its proposed tariff revision.

## Dispute Resolution 

### Background

21. BellSouth's proposed tariff revisions provide for arbitration of any
    disputes concerning the reasonableness of BellSouth's credit
    worthiness determinations. The proposed revisions state that the
    arbitration shall be on an expedited basis, with the losing party
    paying all the costs of arbitration.[^37]

22. Several parties oppose the use of expedited arbitration procedures,
    claiming that the American Arbitration Association (AAA) rules
    generally disfavor such steps except in cases involving relatively
    small sums.[^38] Parties also oppose the imposition of all the costs
    of the arbitration on the losing party, referring to AAA rules
    providing that costs should be split between the parties.[^39]

### Discussion

23. The third issue designated for investigation is whether the
    requirement that arbitrations be conducted on an expedited basis and
    the requirement that the losing party pay all the costs of
    arbitration are just and reasonable. These provisions are alleged to
    be inconsistent with the AAA rules and may have disproportionate
    effects on smaller customers. We direct BellSouth to respond to the
    matters discussed below and provide the requested information in its
    direct case. Nonetheless, BellSouth may, as part of its direct case,
    seek to justify the arbitration provisions in its proposed tariff
    revision.

24. With respect to the expedited arbitration procedures, BellSouth is
    clearly interested in receiving a security deposit promptly once it
    determines that a deposit is warranted under the proposed credit
    worthiness standards and precluding a customer from delaying
    providing a deposit through an extended arbitration proceeding. As
    part of its direct case, BellSouth shall provide an explanation of
    the timing of and any procedural differences between expedited and
    regular arbitration proceedings. BellSouth shall also address the
    additional costs, if any, an expedited arbitration would impose and
    whether the expedited procedures will in any way adversely affect a
    customer's ability to present its case before an arbitrator.

25. The requirement that the losing party pay all the arbitration costs
    could significantly alter the balance between BellSouth and the
    customer. The potential high costs of paying all the costs of the
    arbitration could cause a small customer to forego arbitration.
    BellSouth shall explain why it believes that the losing party should
    pay the costs of arbitration despite the rules of the AAA, paying
    special attention to the chilling effects of such a requirement on
    smaller customers. BellSouth is directed to submit as part of its
    direct case an estimate of the costs it would incur and what the
    shared costs would be in an arbitration proceeding to resolve a
    credit worthiness determination. BellSouth should also discuss
    whether the possible costs of the arbitration might be excessive in
    relation to the size of the potential deposit. BellSouth should
    address in its direct case how its tariff language provides an
    unambiguous standard by which the arbitrator could render a decision
    and how the losing party would be determined if the arbitrator did
    not rule entirely in favor of one party.

## Application of Revised Deposit Requirements to Term Plan Customers

### Background

26. Several petitioners assert that BellSouth has not demonstrated
    substantial cause for a material change in a provision of a term
    plan, citing *RCA Communications, Inc.*[^40] For example, US LEC
    states that the revisions fail the substantial cause test, under
    which the Commission measures the reasonableness of a tariff
    modification during a term plan by weighing two principal
    considerations: the carrier's explanation of the factors
    necessitating the desired changes at that particular time; and the
    position of the relying customer.[^41] WorldCom asserts that
    BellSouth has not shown that it has experienced any material change
    in its business circumstances, much less a change that would
    constitute an injury to BellSouth that would outweigh the existing
    customers' legitimate expectations of stability.[^42] Moreover,
    WorldCom states that the increase in uncollectibles is merely the
    normal effect of the business cycle, constituting only 1.4 percent
    of BellSouth's access revenues, and with only a negligible effect on
    BellSouth's financial performance, which produced an interstate
    return of 21.22 percent in 2001.[^43]

### Discussion

27. The fourth issue designated for investigation is whether the
    imposition of revised security deposit provisions constitutes a
    material change to BellSouth's term contracts, and, if so, whether
    it is reasonable for BellSouth to apply the revised deposit
    provisions to term plans. If a carrier would have to provide a new
    or increased security deposit to BellSouth, its operating capital
    would be significantly reduced. This could affect other capital or
    loan commitments it had, potentially causing the carrier to need to
    restructure or terminate some services that would then trigger a
    termination penalty. This would be a serious destabilizing event in
    the competitive marketplace. We direct BellSouth to respond to the
    matters discussed below and provide the requested information in its
    direct case. Nonetheless, BellSouth may, as part of its direct case,
    seek to justify applying the revised security deposit provisions to
    term plans.

28. BellSouth shall explain in its direct case the reasons increased
    security deposits should be required of customers with existing term
    plans and how that is consistent with the Commission's decision in
    *RCA Communications, Inc.* This could have significant financial and
    competitive consequences for existing term plan customers that, in
    most cases, would also be competitors of BellSouth. BellSouth shall
    provide the Commission with data on the share of interstate access
    revenues that are received from services subject to term plans and,
    of that amount, what portion is attributable to services that are
    paid in advance. If the majority of term plans require prepayment,
    the risk to BellSouth would appear to be much less than if they were
    all paid in arrears. Moreover, we recognize that when customers'
    existing term plans expire BellSouth will be able to apply
    prevailing security deposit provisions to new plans taken by such
    carriers.

## Requirement for Service Application for New Customers

### Background

29. In Transmittal No. 657, BellSouth proposes that it "may . . .
    require a new customer to complete an application for service
    provided by the Company."[^44]

### Discussion

30. The fifth issue designated for investigation is whether it is
    reasonable for BellSouth to establish a new application for
    customers seeking new service. We direct BellSouth to respond to the
    matters discussed below and provide the requested information in its
    direct case. Nonetheless, BellSouth may, as part of its direct case,
    seek to justify establishing a new service application.

31. BellSouth should specify in its direct case the additional
    information it seeks and why the additional information is
    necessary. BellSouth should also indicate how the new information
    differs from the information it currently obtains from a new
    customer subscribing to one of BellSouth's interstate access
    services. BellSouth should explain what information on the service
    application would result in denial of service to, or trigger a
    deposit requirement from, a new customer.

# PROCEDURAL MATTERS

## Filing Schedules

32. This investigation is designated WC Docket No. 02-304. BellSouth
    Telecommunications, Inc., is designated a party to this
    investigation. BellSouth shall file its direct case no later than
    October 10, 2002. The direct case must present BellSouth's position
    with respect to the issues described in this Order. Pleadings
    responding to the direct cases may be filed no later than October
    24, 2002, and must be captioned "Oppositions to Direct Case" or
    "Comments on Direct Case." BellSouth may file a "Rebuttal" to
    oppositions or comments no later than October 31, 2002.

33. An original and four copies of all pleadings shall be filed with the
    Secretary of the Commission. In addition, parties shall serve with
    three copies: Pricing Policy Division, Wireline Competition Bureau,
    445 12th Street, S.W., Room 6-C222, Washington, D.C. 20554, Attn:
    Julie Saulnier. Parties shall also serve with one copy: Qualex
    International, Portals II, 445 12th Street, S.W., Room CY-B402,
    Washington, D.C. 20554, (202) 863-2893. Members of the general
    public who wish to express their views in an informal manner
    regarding the issues in this investigation may do so by submitting
    one copy of their comments to the Office of the Secretary, Federal
    Communications Commission, 445 12th Street, S.W., Room TW-A325,
    Washington, D.C. 20554. Such comments should specify the docket
    number of this investigation, WC Docket No. 02‑304. Parties are also
    strongly encouraged to submit their pleadings via the Internet
    through the Electronic Comment Filing System at
    \<http://www.fcc.gov/e-file/ecfs.html\>. Generally, only one copy of
    an electronic submission must be filed. In completing the
    transmittal screen, commenters should include their full name,
    Postal Service mailing address, and the applicable docket number,
    which in this instance is WC Docket No. 02‑304. Parties may also
    submit an electronic comment via Internet e-mail. To get filing
    instructions for e-mail comments, commenters should send an e-mail
    to \<ecfs@fcc.gov\>, and should include the following words in the
    body of the message: "get form \<your e-mail address\>." A sample
    form and directions will be sent in reply.

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

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

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

## *Ex Parte* Requirements {#ex-parte-requirements .unnumbered}

36. This investigation is a permit-but-disclose proceeding and is
    subject to the requirements of section 1.1206(b) of the Commission's
    rules, 47 C.F.R. § 1.1206(b), as revised. Persons making oral *ex
    parte* presentations are reminded that memoranda summarizing the
    presentations must contain a summary of the substance of the
    presentation and not merely a listing of the subjects discussed.
    More than a one- or two-sentence description of the views and
    arguments presented is generally required.[^45] Other rules
    pertaining to oral and written presentations are also set forth in
    section 1.1206(b).

37. Interested parties are to file any written *ex parte* presentations
    in this proceeding with the Commission's Secretary, Marlene Dortch,
    445 12th Street, S.W., TW-B204, Washington, D.C. 20554, and serve
    with three copies: Pricing Policy Division, Wireline Competition
    Bureau, 445 12th Street, S.W., Room 6-C222, Washington, D.C. 20554,
    Attn: Julie Saulnier. Parties shall also serve with one copy: Qualex
    International, Portals II, 445 12th Street, S.W., Room CY-B402,
    Washington, D.C. 20554, (202) 863-2893.

## Paperwork Reduction Act {#paperwork-reduction-act .unnumbered}

38. This order designating issues for investigation contains no new or
    modified information collections subject to the Paperwork Reduction
    Act of 1995, Pub. Law 104-13.

# ORDERING CLAUSES {#ordering-clauses .unnumbered}

39. ACCORDINGLY, IT IS ORDERED that, pursuant to sections 4(i), 4(j),
    201-205, and 403 of the Communications Act, 47 U.S.C. §§ 154(i),
    154(j), 201-205, and 403, and pursuant to the authority delegated by
    sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R. §§
    0.91, 0.291, the issues set forth in this Order ARE DESIGNATED FOR
    INVESTIGATION.

40. IT IS FURTHER ORDERED that BellSouth Telecommunications, Inc. SHALL
    BE a party to this proceeding.

41. IT IS FURTHER ORDERED that BellSouth Telecommunications, Inc., SHALL
    INCLUDE, in its direct case, a response to each request for
    information that it is required to answer by this Order.

    FEDERAL COMMUNICATIONS COMMISSION

    Tamara L. Preiss

    Chief, Pricing Policy Division

    Wireline Competition Bureau

[^1]: 47 U.S.C. §§ 204 and 205.

[^2]: BellSouth Telecommunications, Inc., Tariff FCC No. 1, Transmittal
    No. 657 (July 19, 2002).

[^3]: *BellSouth Telecommunications, Inc.*, Tariff FCC No. 1,
    Transmittal No. 657, Order, DA 02-1886 (released Aug. 2, 2002).

[^4]: 47 U.S.C. §§ 201 and 202.

[^5]: *Investigation of Access and Divestiture Related Tariffs*, Phase I
    Order, CC Docket No. 83-1145, 97 FCC 2d 1082, 1169 (1984).

[^6]: In general, existing tariffs also provide that deposits may not
    exceed the actual or estimated rates and charges for service for a
    two-month period.

[^7]: *Annual 1987 Access Tariff Filings,* Memorandum Opinion and Order,
    2 FCC Rcd 280, 304-05. BellSouth apparently never implemented this
    provision.

[^8]: For rate-of-return carriers, uncollectibles are reflected in the
    rate base that they use to calculate the 11.25% allowed rate of
    return. An increase in uncollectibles will result in higher rates
    the following year. Upon a proper showing of an extraordinary rise
    in uncollectibles, rate-of-return carriers may file mid-term
    corrections to raise their rates to target an 11.25% rate of return.
    *See* 47 C.F.R. § 69.3(b).

[^9]: 47.C.F.R. § 61.45(b).

[^10]: 47 C.F.R. § 61.45(d)(1)(vii).

[^11]: 47 C.F.R. § 61.45(d).

[^12]: BellSouth Telecommunications, Inc., Tariff FCC No. 1, section
    2.4.1(A).

[^13]: BellSouth Telecommunications, Inc., Tariff FCC No. 1, section
    2.4.1(A).

[^14]: Tariff FCC No. 1, Second Revised Page 2-21.1, section 2.4.1(A).

[^15]: *Id*.

[^16]: *Id*. at Sixth Revised Page 2-21, section 2.4.1(A).

[^17]: *Id.*

[^18]: *Id.* at Original Page 2-21.2, section 2.4.1(A).

[^19]: BellSouth Telecommunications, Inc., Tariff FCC No. 1, Transmittal
    No. 657, Description and Justification at 2.

[^20]: BellSouth Telecommunications, Inc., Tariff FCC No. 1, Transmittal
    No. 657, Petition of AT&T Corp. (July 26, 2002) (*AT&T Petition*);
    Petition of Sprint to Reject or Alternatively Suspend and
    Investigate (July 26, 2002) (*Sprint Petition*); WorldCom Petition
    to Reject or, in the Alternative, Suspend and Investigate (July 26,
    2002) (*WorldCom Petition*); Petition to Reject or Suspend and
    Investigate Proposed Tariff Revisions (July 26, 2002) (*US LEC
    Petition*); and Petition to Reject or, Alternatively, to Suspend and
    Investigate of ITC\^DeltaCom Communications, Inc., KMC Telecom
    Holdings, Inc., NewSouth Communications Corp., NuVox Communications,
    Inc., and XO Communications, Inc. (July 26, 2002) (*Joint
    Petition*).

[^21]: BellSouth Telecommunications, Inc., Tariff FCC No. 1, Transmittal
    No. 657, Reply (Aug. 1, 2002).

[^22]: Tariff FCC No. 1, Second Revised Page 2-21.1, section 2.4.1(A).

[^23]: *Id*.

[^24]: Tariff FCC No. 1, Second Revised Page 2-21.1, section 2.4.1(A).

[^25]: AT&T and WorldCom allege that BellSouth's tariff filing violates
    a Commission prescription from 1984. *See* *supra*, note 5; AT&T
    Petition at 2-4; WorldCom Petition at 2-4. Even if these parties are
    correct, a tariff investigation is a valid means of reviewing a
    Commission prescription. *Pacific Northwest Bell Telephone Company*,
    Revisions to Tariff FCC No. 9, Transmittal No. 159, Memorandum
    Opinion and Order, (released Oct. 11, 1985).

[^26]: 47 U.S.C. § 201(b).

[^27]: 47 C.F.R. §§ 61.2, 61.54. *See, e.g*., WorldCom Petition at 2-3,
    8-13, 4-8; AT&T Petition at 2-3, 6-9; Joint Petition at 9-12.

[^28]: *See, e.g.*, US LEC Petition at 2-3.

[^29]: *See, e.g.*, Sprint Petition at 4-5; WorldCom Petition at 10.

[^30]: US LEC Petition at 6.

[^31]: US LEC Petition at 6-7.

[^32]: 47 C.F.R. § 61.54(j).

[^33]: Tariff FCC No. 1, Sixth Revised Page 2-21, section 2.4.1(A).

[^34]: *Id*.

[^35]: Tariff FCC No. 1, Second Revised Page 2-21.2, section 2.4.1(A).

[^36]: Joint Petition at 10.

[^37]: Tariff FCC No. 1, Second Revised Page 2-21.2, section 2.4.1(A).

[^38]: *See, e.g.*, WorldCom Petition at 12.

[^39]: Joint Petition at 11-12 (citing AAA rule 52); WorldCom Petition
    at 12.

[^40]: *RCA Communications, Inc., Revisions to FCC Tariff Nos. 1 and 2,*
    CC Docket No. 80-766, Transmittal Nos. 191 and 273, Memorandum
    Opinion and Order, 94 FCC 2d 1338 (1983); *see, e.g*., Joint
    Petition at 8-9; US LEC Petition at 5-6; WorldCom Petition at 13-17.

[^41]: US LEC Petition at 5-6.

[^42]: WorldCom Petition at 16-17.

[^43]: *Id*.

[^44]: Tariff FCC No. 1, Second Revised Page 2-21, section 2.4.1(A).

[^45]: *See* 47 C.F.R. §1.1206(b)(2), as revised.