[Federal Register Volume 65, Number 120 (Wednesday, June 21, 2000)]
[Rules and Regulations]
[Pages 38684-38704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-15170]



[[Page 38683]]

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Part III





Federal Communications Commission





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47 CFR Parts 54, 61, and 69



Access Charge Reform, Price Cap Performance Review for Local Exchange 
Carriers, Low-Volume Long Distance Users and Federal-State Joint Board 
on Universal Service; Final Rule

Federal Register / Vol. 65, No. 120 / Wednesday, June 21, 2000 / 
Rules and Regulations

[[Page 38684]]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 54, 61, and 69

[CC Docket Nos. 96-262; 94-1; 99-249; 96-45; FCC 00-193]


Access Charge Reform, Price Cap Performance Review for Local 
Exchange Carriers, Low-Volume Long-Distance Users, and Federal-State 
Joint Board on Universal Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document adopts an integrated interstate access reform 
and universal service proposal put forth by the members of the 
Coalition for Affordable Local and Long-distance Service (CALLS). By 
adopting this document, the Commission takes action to further 
accelerate the development of competition in the local and long-
distance telecommunications markets, and to further establish explicit 
universal service support that will be sustainable in an increasingly 
competitive marketplace, pursuant to the mandate of the 1996 Act.

DATES: Effective June 21, 2000.

FOR FURTHER INFORMATION CONTACT: Joi Roberson Nolen, Common Carrier 
Bureau, Competitive Pricing Division, (202) 418-1520.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Sixth 
Report and Order in CC Docket Nos. 96-262 and 94-1, Report and Order in 
CC Docket No. 99-249, Seventh Report and Order in CC Docket No. 96-45 
(``CALLS Report and Order'') adopted on May 31, 2000 and released on 
May 31, 2000. The full text of this Report and Order, as well as the 
complete files for the relevant dockets, is available for inspection 
and copying during the weekday hours of 9 a.m. to 4:30 p.m. in the 
Commission's Reference Center, 445 12th Street, SW, Room CY-A257, 
Washington, DC or copies may be purchased from the Commission's 
duplicating contractor, ITS Inc., 1231 20th Street., NW, Washington, DC 
20036; (202) 857-3088. The complete text of the Order also may be 
obtained through the World Wide Web at 
http://www.fcc.gov.
    The Federal Communications Commission (FCC) has received Office of 
Management and Budget (OMB) approval for the following public 
information collections pursuant to the Paperwork Reduction Act of 
1995, Public Law 104-13. An agency may not conduct or sponsor and a 
person is not required to respond to a collection of information unless 
it displays a currently valid control number.
    OMB Approval Number: 3060-0942.
    Expiration Date: 12/31/2000.
    Title: Access Charge Reform--CC Docket No. 96-262 (Sixth Report and 
Order) Price
    Cap Performance Review for Local Exchange Carriers--CC Docket No. 
94-1 (Sixth Report and Order), Low-Volume Long-Distance Users--CC 
Docket No. 99-249 (Report and Order), Federal-State Joint Board on 
Universal Service--CC Docket No. 96-45 (Eleventh Report and Order).
    Form No.: N/A.
    Respondents: Business or other for profit.
    (1) Estimates of hour burden of the collection of information.
    (a) Modified tariff filings with the Commission:
    Number of Respondents: 18.
    Frequency of Response: On occasion. 1 per year.
    Annual Hour Burden: 2.
    Total Annual Hour Burden for All Respondents: 36.
    (b) USAC filings. Price Cap LECs--line counts:
    Number of Respondents: 18.
    Frequency of Response: Quarterly. 4 per year.
    Annual Hour Burden: 20.
    Total Annual Hour Burden for All Respondents: 20 hours per 
respondent  x  18 respondents = 360.
    (c) Price Cap LECs-price and revenue data:
    Number of Respondents: 18.
    Frequency of Response: Annual. 1 per year (2 in the year 2000 
only).
    Total Annual Hour Burden for All Respondents: 6081 (12,162 in the 
year 2000).
    (d) Competitive LECs:
    Number of Respondents: 9
    Frequency of Response: Quarterly. 4 per year.
    Annual Hour Burden: 20 hours.
    Total Annual Hour Burden for All Respondents: 20 hours per 
respondent  x  9 respondents = 180 hours.
    (e) Total Annual Hour Burden for price cap LECs and CLECs: 6621.
    (f) Cost support filings with the Commission:
    Number of Respondents: 2
    Frequency of Response: 1 per year.
    Total Annual Hour Burden for all Respondents: 20
    (g) Total Annual Burden for All Collections: 36 + 360 + 12,162 + 
180 + 20 = 12,758 hours.
    (h) Estimated Annual Reporting and Recordkeeping Cost Burden: $0.

Needs and Uses

    The Commission will use the modified tariff information filed by 
the price cap local exchange carriers (LECs) to ensure compliance with 
the various interstate access reforms of the CALLS proposal. USAC will 
use the line count and other information filed by price cap and 
competitive LECs to determine, on a per-line basis, the amount that the 
carrier will receive from the interstate access universal service 
support mechanism. The Commission will use the cost support information 
filed by the price cap LECs to ensure that their interstate access 
rates are just and reasonable, as required by section 201(b) of the 
Communications Act.
    Obligation to respond: Required to obtain or retain benefits.
    Public reporting burden for the collections of information are as 
noted above. Send comments regarding the burden estimate or any other 
aspect of the collections of information, including suggestions for 
reducing the burden to Performance Evaluation and Records Management, 
Washington, DC 20554.

Regulatory Flexibility Certification

    As required by the Regulatory Flexibility Act, this Report and 
Order contains a Final Regulatory Flexibility Analysis regarding the 
Order. A brief description of the analysis follows. Pursuant to section 
604 of the Regulatory Flexibility Act, the Commission performed a 
comprehensive analysis of the Order with regard to small entities. This 
analysis includes: (1) A succinct statement of the need for, and 
objectives of, the Commission's decisions in the Order; (2) a summary 
of the significant issues raised by the public comments in response to 
the initial regulatory flexibility analysis, a summary of the 
Commission's assessment of these issues, and a statement of any changes 
made in the Order as a result of the comments; (3) a description of and 
an estimate of the number of small entities to which the Order will 
apply; (4) a description of the projected reporting, recordkeeping and 
other compliance requirements of the Order, including an estimate of 
the classes of small entities which will be subject to the requirement 
and the type of professional skills necessary for compliance with the 
requirement; and (5) a description of the steps the Commission has 
taken to minimize the significant economic impact on small entities 
consistent with the stated objectives of applicable statutes, including 
a statement of the factual, policy, and legal reasons for selecting the 
alternative adopted in the Order and why each one of the other 
significant alternatives to each of the Commission's decisions which 
affect small entities was rejected.

[[Page 38685]]

Synopsis of Order

    We note that CALLS submitted both an original and modified 
proposal. Unless otherwise noted, any reference to the CALLS proposal 
refers to the modified proposal. CALLS has presented us with an 
integrated and cohesive proposal that aims to resolve major outstanding 
issues concerning access charges. In addressing these issues, the CALLS 
proposal reduces, and in most instances eliminates, implicit subsidies 
among end-user classes; makes implicit universal service funding in 
access charges explicit and portable; provides significant benefits to 
consumers who make few or no long-distance calls; and sets carrier 
charges at reasonable levels. Because we find that the CALLS proposal 
resolves these issues in a way that benefits consumers and is pro-
competitive and economically efficient, we adopt certain parts of the 
plan, largely rate structure components, as mandatory for all price cap 
LECs for the full five years of the plan. As discussed in more detail 
below, for certain rate-level components of the plan, we adopt it as 
mandatory on an interim basis. Price cap LECs will be able to choose 
between having these interim rate-level components apply for the full 
five years or having their rates reinitialized based on forward-looking 
economic cost.
    The proposal that we adopt provides for the following:
    (1) Elimination of the residential presubscribed interexchange 
carrier charge (PICC);
    (2) Increases to the primary residential and single-line business 
subscriber line charge (SLC) caps, beginning at $4.35 on July 1, 2000, 
and gradually increasing to $6.50 on July 1, 2003, provided that LECs 
can justify any increase beyond $5.00;
    (3) A review of the SLC rates prior to the increase scheduled for 
July 1, 2002, including evaluation of forward looking cost information;
    (4) Targeting of an X-factor for switched access to switching and 
switched transport elements;
    (5) Creation of a separate X-factor for special access services;
    (6) $2.1 billion in reductions to switched access usage rates 
effective July 1, 2000;
    (7) Reduction of the switched access X-factor to the Gross Domestic 
Product--Price Index (GDP-PI) once specific target rate levels are 
achieved;
    (8) Removal of $650 million in implicit universal service support 
from access charges, and the creation of an explicit, portable 
interstate access universal service support mechanism at the same 
level;
    (9) Recovery of LEC universal service contributions directly from 
end users;
    (10) Elimination of minimum usage charges (MUCs) by participating 
long-distance carriers;
    (11) A commitment by participating long-distance carriers to flow 
through reductions in access rates to residential and business 
customers over the life of the plan; and
    (12) Adjustment of the Lifeline Assistance universal service 
support mechanism to shield low-income customers from increases in the 
residential SLC.
    As an initial point, the CALLS proposal reduces, and in many cases 
eliminates, implicit subsidies among customer classes through two 
means. First, by permitting a greater proportion of the local loop 
costs of primary residential and single-line business customers to be 
recovered through the SLC, rather than through the CCL charge and the 
multi-line business PICC, the CALLS proposal reduces, and in most 
instances removes, the subsidies associated with both of the latter 
charges. Second, by permitting participating LECs to deaverage their 
SLCs once the CCL charge and multi-line business PICCs are eliminated, 
the CALLS proposal reduces the subsidy that subscribers in low-cost 
areas provide those in higher cost areas.
    The CALLS proposal reduces these subsidies, and keeps rates 
affordable in high-cost areas, by replacing the subsidies with explicit 
interstate access universal service support. In section 254(e), 
Congress stated that federal universal service support should be made 
explicit. The CALLS proposal identifies and removes $650 million of 
implicit universal service support in interstate access charges, 
creates an explicit interstate access universal service support 
mechanism in this amount to replace the implicit support, and makes 
interstate access universal service support fully portable among 
eligible telecommunications carriers. The CALLS proposal conforms with 
our tentative conclusion in the Universal Service Seventh Report and 
Order, 64 FR 30440, that price cap LECs should reduce their interstate 
access rates to reflect any increase in explicit high-cost support. In 
addition, we conclude that this interstate access universal service 
support mechanism is specific, predictable and sufficient. Moreover, by 
making universal service support explicit and portable, the interstate 
access universal service support mechanism should also encourage 
competitive entry into high-cost areas.
    We note that even as the CALLS proposal phases out these subsidies, 
it maintains several safeguards that ensure that the rates consumers 
pay for the SLC remain well within a zone of reasonableness. The CALLS 
proposal maintains an overall cap on the SLC assessed on primary 
residential and single-line business lines at $6.50, and could set the 
cap even lower if price cap LECs cannot justify higher increases. Thus, 
as explained below, CALLS ensures that basic telephone service does not 
become too expensive. The CALLS proposal also asks the Commission to 
examine the appropriateness of setting the SLC caps for primary 
residential and single-line business lines above $5.00 before doing so. 
In addition, the CALLS proposal provides for additional Lifeline 
support so that low-income subscribers will not be hurt by increases to 
the primary residential SLC cap. The CALLS proposal also provides that 
Lifeline customers will not be assessed universal service charges by 
price cap LECs.
    Low-volume long-distance users also benefit from the CALLS 
proposal. First, AT&T and Sprint both commit to having no monthly 
minimum charge on their Basic Schedule for at least three years. 
Second, both carriers agree to eliminate their PICC pass-through 
charges for residential and single-line business subscribers in light 
of the elimination of the PICCs for those customers. Third, in a move 
that benefits all subscribers, both carriers have agreed to flow 
through to residential and business customers the savings they realize 
from the CALLS-related reductions in access charges. We find that these 
commitments are in the public interest and adopt them as requirements 
of this Order.
    We adopt the CALLS proposal because it accomplishes many objectives 
that the Commission to date has been unable to achieve in the absence 
of an industry consensus plan, while providing significant consumer 
benefits that we would not otherwise be able to ensure on such a wide-
scale basis and in such a timely manner. We therefore find the CALLS 
proposal to be in the public interest. Certainly there is no guarantee 
that, at the end of the CALLS proposal's five-year term, competition 
will exist to such a degree that deregulation of access charges for 
price cap LECs is the next logical step. Nevertheless, the CALLS 
proposal provides stability during its term and addresses several 
issues that have served as major obstacles to access charge reform and 
universal service. We also find the CALLS proposal to be consistent 
with our market-based approach to regulation.

[[Page 38686]]

    We approve and adopt the CALLS proposal because it resolves in a 
manner consistent with the public interest a number of complex, 
contentious and interrelated issues that stand as a roadblock to a 
competitive marketplace. The CALLS proposal is a reasonable approach 
for moving toward the Commission's goals of using competition to bring 
about cost-based rates, and removing implicit subsidies without 
jeopardizing universal service. The CALLS proposal is not designed as a 
permanent solution to all of the issues it addresses; instead, it is a 
transitional plan that moves the marketplace closer to economically 
rational competition, and it will enable us, once such competition 
develops, to adjust our rules in light of relevant market developments. 
Consequently, as the term of the CALLS proposal nears its end, we 
envision that the Commission will conduct a proceeding to determine 
whether and to what degree it can deregulate price cap LECs to reflect 
the existence of competition. At that time, the Commission can also 
examine whether the interstate access universal service support 
mechanism remains sufficient.
    The level of access rates, the amount of universal service support 
in access rates, and the appropriate X-factor have all been subject to 
contentious proceedings that heretofore have not been resolved despite 
years devoted to their resolution. For many years, IXCs and consumer 
groups have argued that access rates are significantly above cost and 
contain monopoly profits, the amount of which was itself subject to 
serious debate. Incumbent LECs, on the other hand, have contended that 
reducing access charges threatened universal service support. This 
dispute cannot be resolved with exactitude, as setting access charges 
is at best an imprecise process whose success can be measured only by 
using a zone of reasonableness. With adoption of the CALLS proposal, we 
believe that we have achieved a reasonable and appropriate up-front 
reduction to access rates that addresses the positions of both sides.
    The 1996 Act stated that the Commission should create explicit 
universal service mechanisms that would be secure in a competitive 
environment. The interstate access universal service support mechanism 
we create today to replace the implicit universal service support 
removed from access charges has been subject to heated debate as to the 
appropriateness of its size and distribution methodology. During the 
course of the proceeding, some parties have argued that the amount of 
implicit universal service support in access charges is as high as $3.9 
billion, while others have argued that the figure is only $250 million. 
Determining the amount of implicit universal service support is an 
imprecise exercise at best. Consequently, it is only today, more than 
four years after the passage of the 1996 Act, that we issue a decision 
on this matter.
    Similarly, the size of the X-factor has been subject to debate ever 
since the first time it was set with the creation of price caps. More 
recently, the current X-factor of 6.5 percent, which was set in 1997, 
is currently on remand with the Commission. By adopting the reasonable 
approach set forth in the CALLS proposal, which treats the X-factor not 
as a productivity estimate but as a method to reduce rates to certain 
levels, we expect to end the debate over the appropriate size of the X-
factor now and for the next five years for participating price cap 
LECs.
    The rates proposed by CALLS are reasonable. We have compared LEC 
revenues over the five-year period under the modified CALLS proposal 
with what their revenues would be under the status quo, and conclude 
that they are roughly the same. Overall LEC revenues are roughly $700 
million lower than they would have been for the first year of the plan, 
but gradually increase in the later years so that projected revenue is 
higher than the status quo at the end of the plan. We note, however, 
that these estimates make no adjustment to account for voluntary 
reductions participating LECs might make in response to the development 
of competition in the marketplace, something that is much more likely 
to occur in the later years of the plan, in part due to the reduction 
of implicit subsidies by the CALLS proposal.
    We find that the CALLS proposal provides a number of consumer 
benefits that are in the public interest. By eliminating the 
residential PICC, the CALLS proposal provides immediate reductions to 
consumers' overall rates, even after taking the increase to the primary 
residential SLC into account. By having IXCs provide calling plans with 
no monthly minimum charges, CALLS also provides additional benefits to 
low-volume long-distance customers. In addition, by recovering a 
greater proportion of loop costs directly from the end user and by 
creating an explicit and portable interstate access universal service 
mechanism, the CALLS proposal also promotes the development of greater 
facilities-based residential competition.
    By adopting the CALLS proposal, we require price cap LECs to make a 
larger rate reduction than they otherwise would have on July 1, 2000. 
For carriers that elect CALLS, however, we defer the rate prescription 
scheduled to take place next year that the Commission established as a 
``backstop'' to the market-based approach in the event competition was 
slow to develop. We thereby allow four additional years for competition 
to develop sufficiently to begin to control access rates.
    With one exception that we discuss below, we decline to make any 
significant modifications to the CALLS proposal as some parties 
advocate, and instead agree with the CALLS signatories that we should 
assess the proposal as a whole. In so doing, we note that the original 
proposal, made by a group of price cap LECs and IXCs but without 
comment from consumer groups, did not address the interests of 
consumers as adequately as the modified proposal. In response to the 
various critiques of the original proposal, CALLS made several pro-
consumer changes that resulted in a substantially more equitable 
proposal. These changes include lowering the primary residential and 
single-line business SLC caps from the original proposal, both at the 
start of the plan and throughout its term; proposing a cost review to 
examine the appropriateness of raising the SLC caps above $5.00; 
eliminating minimum usage charges for basic long-distance service by 
CALLS long-distance signatories; and removing a significant amount of 
revenues from access charges altogether, rather than shifting those 
permitted revenues to the common line basket.
    Although we find the CALLS proposal is reasonable for CALLS 
signatories and is likely to be reasonable for non-signatory price cap 
LECs, we recognize that it was developed with the idea that it would be 
voluntary for price cap LECs. At the same time, however, the benefits 
of the CALLS proposal could not be fully realized if all price cap LECs 
did not participate. Because the CALLS proposal is a cohesive proposal, 
failure to implement it fully would frustrate the consumer benefits we 
find appropriate for its adoption. Moreover, failure to implement CALLS 
completely will impede advancement toward the 1996 Act's competition 
and universal service goals.
    We recognize that not all price cap LECs could agree on all aspects 
of the CALLS proposal. CALLS members worked among themselves to develop 
the mechanisms under which price cap LECs contribute toward reducing

[[Page 38687]]

switched access usage charges by $2.1 billion, as well as the rules 
that determine the size and distribution of the $650 million interstate 
access universal service support mechanism. These decisions necessarily 
pit each price cap LEC's interest against the interests of all other 
price cap LECs. Consequently, price cap LECs that did not agree to the 
CALLS proposal might not receive the same benefits or carry the same 
burdens as the CALLS LEC signatories.
    Accordingly, out of an abundance of caution, we provide an 
opportunity for price cap LECs to choose between two options for 
certain rate-level, as opposed to rate structure, components of the 
CALLS proposal. Specifically, price cap LECs may elect CALLS for the 
full five-year period. Alternatively, price cap LECs may elect to 
submit a cost study based on forward-looking economic cost that will be 
the basis for reinitializing rates to the appropriate level. Because a 
cost study proceeding necessarily requires data specific to the price 
cap LEC to be submitted and analyzed, we find it necessary to mandate 
the CALLS rate-level components on an interim basis, subject to true-
up, in order to provide sufficient time to complete a cost study. A 
price cap LEC that elects the second option will be subject to the 
following rate-level components of the CALLS proposal until we have 
completed the forward-looking economic cost review: the size of the up-
front reduction; the size of the carrier's interstate access universal 
service support; the X-factor; and the switching target levels. 
Adopting these components on an interim basis will permit realization 
of the full consumer benefits of the CALLS proposal and preserve the 
$2.1 billion reduction in switched access usage charges for the first 
year.
    At the same time, we adopt the rate structure components of the 
CALLS proposal as mandatory for all price cap LECs, for the five-year 
period envisioned by the CALLS proposal. The rate structure components 
are the new SLC caps, elimination of the residential PICC, the multi-
line business PICC caps, the creation of a separate basket for special 
access, elimination of the marketing basket and the recovery of the 
revenues it recovered as part of CMT revenues, recovery of universal 
service contributions directly from end users, SLC deaveraging, 
portability of the interstate access universal service mechanism, and 
increased Lifeline support to cover the new SLC caps. For the reasons 
discussed elsewhere in this Order, the changes made in these components 
are reasonable and in the public interest and consistent with our 
policy of requiring, to the extent possible, that non-traffic sensitive 
costs be recovered through fixed rates or flat charges. In addition, 
these changes do not affect carriers' overall recovery of their costs 
and thus do not raise the same issues as the rate-level components.
    For the rate-level components, each price cap LEC will, at the 
holding-company level, choose between two options. The first 
alternative is to subscribe to the CALLS proposal for its full five-
year term. The second alternative is to submit a cost study based on 
forward-looking economic costs, resulting in the LEC's rates being 
reinitialized to the appropriate level indicated by the study and then 
made subject to a price cap plan and X-factor that we would determine.
    This cost study proceeding is consistent with what we outlined in 
the Access Charge Reform Order. See 62 FR 31868. In the Access Charge 
Reform Order, the Commission stated that its goal was for interstate 
access charges to reflect the forward-looking economic costs of 
providing interstate access services. The Commission adopted a two-
phased approach to reach that goal. It adopted a market-based approach 
that relied on competitive pressures to bring prices toward forward-
looking economic cost, with incumbent LECs receiving additional pricing 
flexibility where competition has developed. The second phase provided, 
however, that the Commission would require forward-looking cost studies 
by no later than February 8, 2001 for access services that were not 
subject to competition and ``eventually prescribe rates for those 
services at forward-looking economic cost levels.'' For those carriers 
that accept the CALLS proposal, we are extending for five years the 
period during which we will allow the market-based approach to bring 
interstate access prices toward forward-looking economic cost. Those 
carriers that reject the CALLS proposal will operate under the 
framework the Commission set forth in the Access Charge Reform Order to 
address services that are not subject to substantial competition.
    Each price cap LEC will have 60 days from the release of this Order 
to make its election between the two options. This election will be 
binding for the five-year term of CALLS. Price cap LECs that elect to 
proceed with a cost study will be subject to the rules we adopt today 
until the completion of our cost study proceeding. We make this 
election binding because we believe the CALLS proposal, coupled with a 
true-up mechanism discussed below, will ensure reasonable rate levels 
for all price cap LECs, while ensuring that the Commission does not 
waste its limited resources in cost proceedings performed solely for 
the purpose of having LECs determine under which approach they would be 
better off.
    For a price cap LEC electing the cost study option, we also adopt a 
true-up mechanism to be applied to such price cap LEC's rates. This 
will enable the LEC and its customers to be treated as it would have 
been, had we completed the cost study in time to avoid the need for 
imposing the CALLS proposal for an interim period. Should any price cap 
LEC elect to participate in the cost study proceeding, the Commission 
will consider the sufficiency of the interstate access universal 
service support mechanism, including both the size and distribution of 
support, concurrently with the industry-wide review of the increase to 
the primary residential SLC cap after July 2001, to avoid duplication 
of effort.

Final Regulatory Flexibility Analysis

    As required by the Regulatory Flexibility Act (RFA), an Initial 
Regulatory Flexibility Analysis (IRFA) was incorporated in the CALLS 
NPRM, and revised in the Public Notice requesting comment on the 
modified CALLS proposal. The Commission sought written public comment 
on the proposals in the CALLS NPRM and the CALLS proposal, including 
comments on the IRFAs. This present Final Regulatory Flexibility 
Analysis (FRFA) conforms to the RFA, as amended. To the extent that any 
statement in this FRFA is perceived as creating ambiguity with respect 
to our rules or statements made in preceding sections of this Order, 
the rules and statements set forth in those preceding sections shall be 
controlling.

Need for and Objectives of This Order

    The CALLS members offer the proposal as a comprehensive solution to 
the members' access charge, universal service, and price cap concerns. 
The CALLS plan would revise the current system of common line charges 
by combining existing carrier and subscriber charges into one flat-
rated subscriber line charge (SLC), and would provide for limited 
deaveraging of those charges under specific conditions. The CALLS plan 
also would establish an interstate access universal service support 
mechanism that provides explicit support to replace support currently 
implicit in interstate access charges. In addition, the CALLS plan 
calls for annual reductions in traffic

[[Page 38688]]

sensitive switching access rates until they reach a specified level.
    We believe that the CALLS proposal is in the public interest, and 
so adopt it to the extent discussed in this Order. This Order agrees 
with the CALLS members that the CALLS proposal is the result of certain 
segments of the telecommunications industry developing a comprehensive 
approach to resolve outstanding issues concerning access charges and 
universal service. By adopting the CALLS proposal, this Order will 
result in lower rates for both low-volume and high-volume long-distance 
consumers, more competition, greater flexibility for price cap LECs to 
meet competition, and an explicit, portable interstate access universal 
service support mechanism. It is the CALLS proposal's comprehensive 
solution of historically contentious issues that allows the Commission 
to take these actions while ensuring that consumers in high-cost areas 
will continue to have affordable service.

Summary of Significant Issues Raised by the Public Comments in Response 
to the IRFA

    The Commission received no comments addressing the IRFA. We did, 
however, receive some general small-business-related comments. Some 
commenters request that the CALLS proposal require a proportionate 
share of the agreed upon local switching rate reductions to come from 
tandem-switched rates. Other commenters argue that the CALLS proposal 
should have a separate X-factor for mid-size price cap LECs. These 
comments are addressed in detail in this Order.

Description and Estimate of the Number of Small Entities to Which the 
Rules Will Apply

    The RFA directs agencies to provide a description of, and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The Regulatory Flexibility 
Act defines the term ``small entity'' as having the same meaning as the 
terms ``small business,'' ``small organization,'' and ``small business 
concern'' under section 3 of the Small Business Act. A small business 
concern is one which: (1) Is independently owned and operated; (2) is 
not dominant in its field of operation; and (3) satisfies any 
additional criteria established by the SBA.
    The SBA has defined a small business for Standard Industrial 
Classification (SIC) category 4813 (Telephone Communications, Except 
Radiotelephone) to be a small entity that has no more than 1500 
employees.

Total Number of Telephone Companies Affected

    Price Cap Local Exchange Carriers. The Commission does not have 
data specifying the number of these carriers that are either dominant 
in their field of operations, are not independently owned and operated, 
or have more than 1,500 employees, and thus is unable at this time to 
estimate with greater precision the number of price cap LECs that would 
qualify as small business concerns under the SBA's definition. However, 
there are currently only 13 price cap LECs, four of which share common 
ownership. Consequently, significantly fewer than 13 providers of local 
exchange service are estimated to be small entities or small price cap 
LECs that may be affected by these proposals. We have included small 
price cap LECs in this present RFA analysis. As noted above, a ``small 
business'' under the RFA is one that, inter alia, meets the pertinent 
small business size standard (e.g., a telephone communications business 
having 1,500 or fewer employees), and ``is not dominant in its field of 
operation.'' The SBA's Office of Advocacy contends that, for RFA 
purposes, small price cap LECs are not dominant in their field of 
operation because any such dominance is not ``national'' in scope. We 
have therefore included small price cap LECs in this RFA analysis, 
although we emphasize that this RFA action has no effect on FCC 
analyses and determinations in other, non-RFA contexts.
    Competitive Local Exchange Carriers. Neither the Commission nor the 
SBA has developed a definition of small providers of local exchange 
service. The closest applicable definition under SBA rules is for 
telephone telecommunications companies other than radiotelephone 
(wireless) companies. The most reliable source of information regarding 
the number of competitive LECs nationwide of which the Commission is 
aware appears to be the data that the Commission collects annually in 
connection with the Telecommunications Relay Service (TRS). According 
to the Commission's most recent data, 129 companies reported that they 
were engaged in the provision of either competitive access provider 
services or competitive local exchange carrier services. The Commission 
does not have data specifying the number of these carriers that are 
either dominant in their field of operations, are not independently 
owned and operated, or have more than 1,500 employees, and thus is 
unable at this time to estimate with greater precision the number of 
competitive LECs that would qualify as small business concerns under 
the SBA's definition. Consequently, the Commission estimates that fewer 
than 129 providers of local exchange service are small entities or 
small competitive LECs that may be affected by these proposals.

Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    It is not clear whether, on balance, the CALLS proposal will 
increase or decrease price cap incumbent local exchange carriers' 
administrative burdens. Some of the rate structure reforms in the CALLS 
proposal will require additional filings. In particular, the CALLS 
proposal requires price cap LECs to file with USAC additional 
information pertaining to line counts by zone and customer class, 
revenue data, and information regarding zone boundaries. Competitive 
LECs would also have to file with USAC line counts by zone and customer 
class. The filings are on a quarterly basis. On the other hand, other 
reforms in the CALLS proposal, such as the elimination of the PICC, 
should reduce administrative burdens for price cap LECs. Finally, some 
of the reforms in the CALLS proposal may have a neutral affect on 
administrative burdens. For example, under the CALLS proposal, implicit 
subsidies now collected by price cap LECs from IXCs through access 
charges will be collected as explicit subsidies from USAC. This reform 
should neither increase nor decrease the administrative burden for 
price cap LECs.

Steps Taken To Minimize Significant Economic Impact on Small Entities, 
and Significant Alternatives Considered

    The proposals made by CALLS could have varying positive or negative 
impacts on price cap LECs, including any such small carriers. The 
alternative to consideration of adopting the CALLS proposal at this 
time would be to continue in effect the existing access charge and 
universal service fund rules. Neither this alternative, nor any other 
identified by the Commission, would lessen the significant economic 
impact on small entities while remaining consistent with this Order's 
objectives.
    Several commenters, while not directly responding to our IRFA, did 
raise general small-business-related concerns. Commenters concerned 
about protecting smaller IXCs in competition with large IXCs request 
that the CALLS proposal require a proportionate share of the agreed 
upon local switching rate reductions to come from tandem-switched 
rates. This Order explains,

[[Page 38689]]

however, that (1) competition in the long-distance market eliminates 
the need for rules protecting smaller IXCs, and (2) even if price cap 
LECs target their access rate reductions only to direct-trunked 
transport, these reductions should make direct-trunked transport an 
affordable alternative for smaller IXCs. Other commenters argue that 
the CALLS proposal should have a separate X-factor for mid-size price 
cap incumbent LECs because these carriers are not able to achieve the 
same levels of productivity growth as larger LECs. As this Order 
explains, however, the X-factor adopted under the CALLS proposal is not 
a productivity offset, but is merely a method to reduce traffic 
sensitive charges to the Proposal's target level.
    This Order makes two allowances for smaller price cap LECs. First, 
the Order allows a higher target access rate for smaller and very low-
density price cap LECs. Whereas the target for the BOCs and GTE is set 
at 0.55 cents, the target is 0.95 cents for small very-low density 
price cap LECs and 0.65 cents for the other smaller price cap LECs. 
Second, the Order allows mid-size price cap carriers with at least 20 
percent of total holding company lines serving statutorily rural areas 
to pool their access charge reductions and to temporarily recover them 
from sources other than residential end users and per-minute charges.

Report to Congress

    The Commission will send a copy of this Order, including this FRFA, 
in a report to be sent to Congress pursuant to the Small Business 
Regulatory Enforcement Fairness Act of 1996. In addition, the 
Commission will send a copy of this Order, including this FRFA, to the 
Chief Counsel for Advocacy of the Small Business Administration. A copy 
of this Order and FRFA (or summaries thereof) will also be published in 
the Federal Register.

Paperwork Reduction Act

    The action contained herein has been analyzed with respect to the 
Paperwork Reduction Act of 1995 and found to impose new or modified 
reporting and recordkeeping requirements or burdens on the public. 
Implementation of these new or modified reporting and recordkeeping 
requirements have been approval by OMB as prescribed by the Act, and 
will go into effect upon publication in the Federal Register.
    Pursuant to sections 1, 4(i) and (j), 201-209, 218-222, 254, and 
403 of the Communications Act, as amended, 47 U.S.C. 151, 154 (i), 
154(j), 201-209, 218-222, 254, and 403 that this Order Is Hereby 
Adopted.
    We, therefore, Order that the Inquiry initiated in CC Docket 99-249 
is hereby Terminated. This action is taken pursuant to authority 
contained in sections 4(i) and 303 of the Communications Act of 1934, 
as amended, 47 U.S.C. 4(i), 303.
    The Commission's Consumer Information Bureau, Reference Information 
Center, Shall Send a copy of this Order, including the Final Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.
    Pursuant to 5 U.S.C. 553(d)(3), we find good cause exists to have 
the rules take effect immediately upon publication in the Federal 
Register. Local exchange carriers subject to price cap regulation must 
file access reform tariffs no later than June 16, 2000 in order for 
them to be effective by July 1, 2000, as required by 47 CFR 69.3. In 
addition, to ensure that the local exchange carriers subject to price 
cap regulation have actual notice of these rules immediately following 
their release, we are serving those entities by overnight mail.

List of Subjects

47 CFR Part 54

    Reporting and recordkeeping requirements, Telecommunications, 
Telephone.

47 CFR Part 61

    Access charges, Communications common carriers, Telephone.

47 CFR Part 69

    Communications common carriers, Telephone.

Federal Communications Commission.
William F. Caton,
Deputy Secretary.

Regulatory Text

    For the reasons set forth in the preamble, the Federal 
Communications Commission amends 47 CFR parts 54, 61, and 69 as 
follows:

PART 54--UNIVERSAL SERVICE

    1. The authority citation for part 54 continues to read as follows:

    Authority: Secs. 1, 4(i), 201, 205, 214, and 254 unless 
otherwise noted.

    2. Amend Sec. 54.403 by removing paragraph (d) and revising 
paragraphs (a) and (b) to read as follows:


Sec. 54.403  Lifeline support amount.

    (a) The federal Lifeline support amount for all eligible 
telecommunications carriers shall equal:
    (1) Tier One. The tariffed rate in effect for the primary 
residential End User Common Line charge of the incumbent local exchange 
carrier serving the area in which the qualifying low-income consumer 
receives service, as determined in accordance with Sec. 69.104 or 
Secs. 69.152(d)(1) and 69.152(q) of this chapter, whichever is 
applicable;
    (2) Tier Two. If the state commission approves an additional 
reduction of $1.75 in the amount paid by consumers, additional federal 
Lifeline support in the amount of $1.75 will be made available to the 
carrier providing Lifeline service to that consumer; and
    (3) Tier Three. Additional federal Lifeline support in an amount 
equal to one-half the amount of any state Lifeline support will be made 
available to the carrier providing Lifeline service to a qualifying 
low-income consumer if the state commission approves an additional 
reduction in the amount paid by that consumer equal to the state 
support multiplied by 1.5.
    (b) For the qualifying low-income consumer, the federal Lifeline 
support amount shall not exceed $3.50 plus the tariffed rate in effect 
for the primary residential End User Common Line charge of the 
incumbent local exchange carrier serving the area in which the 
qualifying low-income consumer receives service, as determined in 
accordance with Sec. 69.104 or Secs. 69.152(d)(1) and 69.152(q) of this 
chapter, whichever is applicable. Eligible telecommunications carriers 
that charge federal End User Common Line charges or equivalent federal 
charges shall apply Tier One federal Lifeline support to waive Lifeline 
consumers' federal End User Common Line charges. Such carriers shall 
apply any additional federal support amount to a qualifying low-income 
consumer's intrastate rate, if the state has approved of such 
additional support. Other eligible telecommunications carriers shall 
apply Tier One federal Lifeline support amount, plus any additional 
federal support amount, to reduce their lowest tariffed (or otherwise 
generally available) residential rate for the services enumerated in 
Sec. 54.101(a)(1) through (a)(9), and charge Lifeline consumers the 
resulting amount.
* * * * *

    3. Amend Sec. 54.701 by revising paragraph (g) to read as follows:


Sec. 54.701  Administrator of universal service support mechanism.

* * * * *
    (g)(1) The Administrator shall establish three divisions:
    (i) the Schools and Libraries Division, which shall perform duties 
and

[[Page 38690]]

functions in connection with the schools and libraries support 
mechanism under the direction of the Schools and Libraries Committee of 
the Board, as set forth in Sec. 54.705(a);
    (ii) The Rural Health Care Division, which shall perform duties and 
functions in connection with the rural health care support mechanism 
under the direction of the Rural Health Care Committee of the Board, as 
set forth in Sec. 54.705(b); and
    (iii) The High Cost and Low Income Division, which shall perform 
duties and functions in connection with the high cost and low income 
support mechanism, and the interstate access universal service support 
mechanism described in subpart J of this part, under the direction of 
the High Cost and Low Income Committee of the Board, as set forth in 
Sec. 54.705(c).
    (2) As directed by the Committees of the Board set forth in 
Sec. 54.705, these divisions shall perform the duties and functions 
unique to their respective support mechanisms.
* * * * *

    4. Amend Sec. 54.702 by revising paragraphs (a) and (i) to read as 
follows:


Sec. 54.702  Administrator's functions and responsibilities.

    (a) The Administrator, and the divisions therein, shall be 
responsible for administering the schools and libraries support 
mechanism, the rural health care support mechanism, the high cost 
support mechanism, the low income support mechanism, and the interstate 
access universal service support mechanism described in subpart J of 
this part.
* * * * *
    (i) The Administrator shall report quarterly to the Commission on 
the disbursement of universal service support program funds. The 
Administrator shall keep separate accounts for the amounts of money 
collected and disbursed for eligible schools and libraries, rural 
health care providers, low-income consumers, interstate access 
universal service support, and high cost and insular areas.
* * * * *

    5. Amend Sec. 54.705 by revising paragraph (c)(1) to read as 
follows:


Sec. 54.705  Committees of the Administrator's Board of Directors.

* * * * *
    (c) * * *
    (1) Committee functions. The High Cost and Low Income Committee 
shall oversee the administration of the high-cost and low-income 
support mechanisms and the interstate access universal service support 
mechanism described in subpart J of this Part, by the High Cost and Low 
Income Division. The High Cost and Low Income Committee shall have the 
authority to make decisions concerning:
    (i) How the Administrator projects demand for the high-cost, low-
income, and interstate access universal service support mechanisms;
    (ii) Development of applications and associated instructions as 
needed for the high-cost, low-income, and interstate access universal 
service support mechanisms;
    (iii) Administration of the application process, including 
activities to ensure compliance with Federal Communications Commission 
rules and regulations;
    (iv) Performance of audits of beneficiaries under the high-cost, 
low-income, and interstate access universal service support mechanisms 
and;
    (v) Development and implementation of other functions unique to the 
high-cost, low-income, and interstate access universal service support 
mechanisms.
* * * * *

    6. Amend Sec. 54.715 by revising paragraph (c) to read as follows:


Sec. 54.715  Administrative expenses of the Administrator.

* * * * *
    (c) The Administrator shall submit to the Commission projected 
quarterly budgets at least sixty (60) days prior to the start of every 
quarter. The Commission must approve the projected quarterly budgets 
before the Administrator disburses funds under the federal universal 
service support mechanisms. The administrative expenses incurred by the 
Administrator in connection with the schools and libraries support 
mechanism, the rural health care support mechanism, the high-cost 
support mechanism, the low-income support mechanism, and the interstate 
access universal service support mechanism shall be deducted from the 
annual funding of each respective support mechanism. The expenses 
deducted from the annual funding for each support mechanism also shall 
include the Administrator's joint and common costs allocated to each 
support mechanism pursuant to the cost allocation manual filed by the 
Administrator under Sec. 64.903 of this chapter.

    7. Add subpart J to part 54 to read as follows:

Subpart J--Interstate Access Universal Service Support Mechanism

Sec.
54.800   Terms and definitions.
54.801   General.
54.802   Obligations of LECs and the Administrator.
54.803   Universal service zones.
54.804   Preliminary study area minimum access universal service 
support calculated by the Administrator.
54.805   Zone and study area above benchmark revenues calculated by 
the Administrator.
54.806   Calculation by the Administrator of interstate access 
universal service support for areas served by price cap LECs.
54.807   Interstate access universal service support.
54.808   Transition provisions and periodic calculation.
54.809   Carrier certification.

Subpart J--Interstate Access Universal Service Support Mechanism


Sec. 54.800  Terms and definitions.

    (a) Average Price Cap CMT Revenue Per Line Month in a Study Area 
has the same meaning as that term is defined in Sec. 61.3(d) of this 
chapter, except that it includes exogenous changes in effect prior to 
the effective date of a calculation made pursuant to Sec. 54.808 and 
exogenous changes not yet effective related to the sale or acquisition 
of exchanges, but excludes any other exogenous changes or other changes 
made pursuant to Sec. 61.45(i)(4) of this chapter that are not yet 
effective.
    (b) Base Period Lines. For purposes of calculations pursuant to 
this subpart, Base Period Lines are the number of lines for a given 
study area or zone as of the end of the quarter ending 6 months prior 
to the effective date of a calculation pursuant to Sec. 54.808.
    (c) Interstate Access Universal Service Support Benchmark shall 
mean, for residential and single-line business lines, $7.00, and for 
multi-line business lines, $9.20.
    (d) Minimum Adjustment Amount (MAA) is defined in Sec. 54.806(f).
    (e) MAA Phase In Percentage is:
    50% as of July 1, 2000,
    75% as of July 1, 2001,
    100% as of July 1, 2002.
    (f) Minimum Delta (MD) is defined in Sec. 54.806(d).
    (g) Minimum Support Requirement (MSR) is defined in Sec. 54.806(g).
    (h) Nationwide Total Above Benchmark Revenues is defined in 
Sec. 54.806(b).
    (i) Price Cap LEC is defined in Sec. 54.802(c).
    (j) Preliminary Study Area Minimum Access Universal Service Support 
is the amount calculated pursuant to Sec. 54.804.
    (k) Preliminary Study Area Universal Service Support (PSAUSS) is 
defined in Sec. 54.806(c).

[[Page 38691]]

    (l) Study Area Above Benchmark Revenues is the sum of all Zone 
Above Benchmark Revenues for all zones in the study area.
    (m) Study Area Access Universal Service Support (SAAUS) is defined 
in Sec. 54.806 (i) and (j).
    (n) Total National Minimum Delta (TNMD) is the nationwide sum of 
all study area Minimum Deltas.
    (o) Total National Minimum Support Requirement (TNMSR) is the sum 
of the MSR for all price cap LEC study areas.
    (p) Zone Above Benchmark Revenues is defined in Sec. 54.805(a)(2).
    (q) Zone Average Revenue per Line. The amount calculated as 
follows:
    Zone Average Revenue Per Line = (25% * (Loop + Port)) + U (Uniform 
revenue per line adjustment)
Loop = Price for the loop in a particular zone.
Port = Price for the port in a particular zone.
U = [(Average Price Cap CMT Revenue Per Line Month in a study area * 
LEC Base Period Lines) - (25% * <greek-S> (LEC Base Period Lines in a 
UNE Zone  x  ((Loop + Port ) for all zones)))] <divide> LEC Base Period 
Lines in a study area.


Sec. 54.801  General.

    (a) The total amount of universal service support under this 
subpart, excluding administrative expenses, for areas served by price 
cap LECs as of June 30, 2000, is targeted to be $650 million per year, 
if no exchanges, other than those offered for sale prior to January 1, 
2000, are sold to non-price-cap LECs or purchased from non-price cap 
LECs by price cap LECs.
    (b) In the event that all or a portion of a study area served by a 
price cap LEC is sold to an entity other than a price cap LEC, and the 
study area or portion thereof was not offered for sale prior to January 
1, 2000, then the support that would otherwise be provided under this 
subpart, had such study area or portion thereof not been sold, will not 
be distributed or collected. Subsequent calculations will use the last 
reported data for the study area or portion thereof that was sold to 
determine the amount that will not be distributed or collected.
    (c) In the event that a price cap LEC acquires additional 
exchanges, from an entity other than a price cap LEC, that acquisition 
should be reported to the Administrator pursuant to Sec. 54.802 and 
included in the determination of study area support pursuant to 
Sec. 54.806 for the areas served by the acquiring price cap LEC, 
beginning with the next support recalculation pursuant to Sec. 54.808.
    (d) In the event that a price cap LEC acquires additional exchanges 
from an entity that is also a price cap LEC, the acquiring price cap 
LEC will receive support under this subpart at the same level as the 
selling price cap LEC formerly received, and both carriers will adjust 
their line counts accordingly beginning with the next quarterly report 
to the Administrator. At the subsequent report to the Administrator for 
purposes of recalculating support as required by Sec. 54.808, the 
acquiring and selling price cap LECs will reflect the acquired and sold 
lines, and will adjust the average CMT Revenue per Line per Month for 
the affected study areas accordingly.
    (e) The Administrator for the fund created by this subpart shall be 
the Universal Service Administrative Company.


Sec. 54.802  Obligations of LECs and the Administrator.

    (a) Each Eligible Telecommunications Carrier that is providing 
service within an area served by a price cap LEC shall submit to the 
Administrator, on a quarterly basis on the last business day of March, 
June, September, and December of each year line count data showing the 
number of lines it serves for the period ending three months prior to 
the reporting date, within each price cap LEC study area disaggregated 
by UNE Zone if UNE Zones have been established within that study area, 
showing residential/single-line business and multi-line business line 
counts separately. For purposes of this report, and for purposes of 
computing support under this subpart, the aggregated residential/
single-line business class lines reported include single and non-
primary residence lines, single-line business lines, ISDN BRI and other 
related residence class lines. Similarly, the multi-line business class 
lines reported include multi-line business, centrex, ISDN PRI and other 
related business class lines assessed the End User Common Line charge 
pursuant to Sec. 69.152 of this chapter. For purposes of this report 
and for purposes of computing support under this subpart, lines served 
using resale of the price cap LEC's service pursuant to section 
251(c)(4) of the Communications Act of 1934, as amended, shall be 
considered lines served by the price cap LEC only and must be reported 
accordingly.
    (b) In addition to the information submitted pursuant to paragraph 
(a) of this section, each price cap LEC must submit to the 
Administrator, on June 30, 2000, October 15, 2000, and April 16, 2001 
and annually thereafter or as determined by the Administrator according 
to Sec. 54.808:
    (1)(i) Average Price Cap CMT Revenue Per Line Month in a study area 
for each of its study areas;
    (ii) The rates established for UNE Loops and UNE Line Ports, by 
zone in those study areas where UNE Zones have been established as of 
the date of filing; and
    (iii) Make available information sufficient to determine the 
boundaries of each UNE Zone within each of its study areas where such 
zones have been established;
    (2) Provided, however, that after the June 30, 2000 filing, if 
there have been no changes since its previous filing a company may 
submit a statement that there have been no changes in lieu of such 
information, and further provided that, for study areas in which UNE 
Zones have been newly established since the last filing pursuant to 
this paragraph, the price cap LEC shall also report the information 
required by paragraphs (b)(1)(ii) and (b)(1)(iii) of this section to 
the Administrator on July 15, 2000, or January 15, 2001, as required.
    (c) An eligible telecommunications carrier shall be eligible for 
support pursuant to this subpart only after it has filed all of the 
information required by paragraphs (a) through (c) of this section, 
where applicable. An eligible telecommunications carrier shall receive 
payment of support pursuant to this subpart only for such months the 
carrier is actually providing service to the end user. The 
Administrator shall ensure that there is periodic reconciliation of 
support payments.
    (d) Upon receiving the information required to be filed in 
paragraphs (a) and (b) of this section, the Administrator shall:
    (1) Perform the calculations described in Secs. 54.804 through 
54.807 of this subpart;
    (2) Publish the results of these calculations showing Interstate 
Access Universal Service Support Per Line available in each price cap 
LEC study area, by UNE Zone and customer class;
    (3) Collect the funds necessary to provide support pursuant to this 
subpart in accordance with subpart H; and
    (4) Distribute support calculated pursuant to the rules contained 
in this subpart; and;
    (5) Report quarterly to the Commission on the collection and 
distribution of funds under this subpart as described in 
Sec. 54.701(g). Fund distribution reporting will be by state and by 
eligible telecommunications carrier within the state.


Sec. 54.803  Universal service zones.

    (a) The zones used for determining interstate access universal 
service

[[Page 38692]]

support shall be the same zones that would be used for End User Common 
Line (EUCL) charge deaveraging as described in Sec. 69.152(q)(2) of 
this chapter.
    (b) In a price cap study area where the price cap LEC has not 
established state-approved prices for UNE loops by zone, the 
Administrator shall develop an estimate of the LEC's Zone Above 
Benchmark Revenues for transitional purposes, in order to reserve a 
portion of the fund for that study area. This estimate will be included 
by the Administrator in the Nationwide Study Area Above Benchmark 
Revenues calculated pursuant to Sec. 54.806.
    (1) For the purpose of developing this transitional estimate, the 
loop and port costs estimated by the FCC cost model, or other 
substitute method if no model is available, shall be used.
    (2) For the purpose of developing this transitional estimate, the 
administrator shall construct three zones. Wire centers within the 
study area will be grouped into these zones in such a way that each 
zone is assigned approximately one third of LEC base period lines in 
the study area, with the lowest cost wire centers assigned to Zone 1, 
the highest cost wire centers assigned to Zone 3, and the remainder to 
Zone 2.


Sec. 54.804  Preliminary study area minimum access universal service 
support calculated by the Administrator.

    (a) If Average Price Cap CMT Revenue Per Line Month is greater than 
$9.20 then: Preliminary Minimum Access Universal Service Support (for a 
study area) = Price Cap CMT Revenue Per Line Month in a study area  x  
LEC Base Period Lines  x  12)-(($7.00  x  LEC Base Period Residential 
and Single-Line Business Lines  x  12) + ($9.20  x  LEC Base Period 
Multi-line Business Lines  x  12)).
    (b) If Price Cap CMT Revenue Per Line Month in a study area is 
greater than $7.00 but less than $9.20 then: Preliminary Minimum Access 
Universal Service Support (for a study area) = (Price Cap CMT Revenue 
Per Line Month in a study area-$7.00)  x  (LEC Base Period Residential 
and Single-Line Business Lines  x  12).
    (c) If Price Cap CMT Revenue Per Line Month in a study area is less 
than $7.00 then the Preliminary Minimum Access Universal Service 
Support (for a study area) is zero.


Sec. 54.805  Zone and study area above benchmark revenues calculated by 
the Administrator.

    (a) The following steps shall be performed by the Administrator to 
determine Zone Above Benchmark Revenues for each price cap LEC.
    (1) Calculate Zone Average Revenue Per Line.
    (2) Calculate Zone Above Benchmark Revenues. Zone Above Benchmark 
Revenues is the sum of Zone Above Benchmark Revenues for Residential 
and Single-Line Business Lines and Zone Above Benchmark Revenues for 
Multi-line Business Lines Zone Above Benchmark Revenues for Residential 
and Single-Line Business Lines is, within each zone, (Zone Average 
Revenue Per Line minus $7.00) multiplied by all eligible 
telecommunications carrier Base Period Residential and Single-Line 
Business Lines times 12. If negative, the Zone Above Benchmark Revenues 
for Residential and Single-Line Business Lines for the zone is zero. 
Zone Above Benchmark Revenues for Multi-line Business Lines is, within 
each zone, (Zone Average Revenue Per Line minus $9.20) multiplied by 
all eligible telecommunications carrier zone Base Period Multi-line 
Business Lines times 12. If negative, the Zone Above Benchmark Revenues 
for Multi-line Business Lines for the zone is zero.
    (b) Study Area Above Benchmark Revenues is the sum of Zone Above 
Benchmark Revenues for all zones in the study area.


Sec. 54.806  Calculation by the Administrator of interstate access 
universal service support for areas served by price cap LECs.

    (a) The Administrator, based on the calculations performed in 
Secs. 54.804 and 54.805, shall calculate the Interstate Access 
Universal Service Support for areas served by price cap LECs according 
to the following methodology:
    (b) Calculate Nationwide Total Above Benchmark Revenues. Nationwide 
Total Above Benchmark Revenues is the sum of all Study Area Above 
Benchmark Revenues for all study areas served by LECs,
    (c) Calculate Preliminary Study Area Universal Service Support 
(PSAUSS).
    (1) If the Nationwide Total Above Benchmark Revenues is greater 
than $650 million, then the Preliminary Study Area Universal Service 
Support (PSAUSS) equals the Study Area Above Benchmark Revenues 
multiplied by the ratio of $650 million to Nationwide Total Above 
Benchmark Revenues (i.e., Preliminary Study Area Universal Service 
Support = Study Area Above Benchmark Revenues  x  ($650 Million/
Nationwide Total Above Benchmark Revenues).
    (2) If the Nationwide Total Above Benchmark Revenues is not greater 
than $650 million, PSAUSS equals the Study Area Above Benchmark 
Revenues.
    (d) Calculate the Minimum Delta (MD) by study area. Within each 
study area the Minimum Delta will be equal to the Preliminary Minimum 
Access Universal Service Support less the PSAUSS, if the difference is 
greater than zero. If the difference is less than or equal to zero, the 
MD is equal to zero.
    (e) Calculate the Total National Minimum Delta (TNMD) by summing 
all study are Minimum Deltas nationwide.
    (f) Calculate the Minimum Adjustment Amount. (1) If the TNMD is 
greater than $75 million, then the Minimum Adjustment Amount product of 
the (MAA) equals the MAA Phase In Percentage times the MD by study area 
times the ratio of $75 million to TNMD Or:
     Minimum Adjustment Amount = (MAA Phase in Percentage)  x  (Minimum 
Delta)  x  ($75 million / Total National Minimum Delta).
    (2) If the TNMD is less than $75 million, then the MAA equals the 
product of the MAA Phase In Percentage and the MD by study area.
    (g) Calculate the Minimum Support Requirement (MSR). The Minimum 
Support Requirement for a study area equals the PSAUSS plus the MAA.
    (h) Calculate the Total National Minimum Support Requirement 
(TNMSR), which equals the sum of the MSR for all study areas in which 
the Preliminary Minimum Access Universal Service Support is greater 
than or equal to the PSAUSS.
    (i) Calculate Study Area Access Universal Service Support (SAAUS) 
for a study area in which the price cap LEC has geographically 
deaveraged state-approved rates for UNE loops:
    (1) For study areas in which the Preliminary Minimum Access 
Universal Service Support is greater than PSAUSS, and within which the 
price cap LEC has established geographically deaveraged state-approved 
rates for UNE loops, the SAAUS for that study area is the MSR.
    (2) For study areas in which the Preliminary Minimum Access 
Universal Service Support is less than PSAUSS, and within which the 
price cap LEC has established geographically deaveraged state-approved 
rates for UNE loops, the SAAUS for that study area is equal to:
    Preliminary Study Area Universal Service Support  x  ($650 million 
- TNMSR) <divide> (the sum of PSAUSS of study areas where the 
Preliminary Minimum Access Universal Service Support is less than 
PSAUSS).
    (j) Calculate Study Area Access Universal Service Support (SAAUS) 
for a price cap LEC that has not established geographically deaveraged 
state-

[[Page 38693]]

approved rates for UNE loops. In such study areas, the SAAUS shall be 
the lesser of the Preliminary Minimum Access Universal Service Support 
or:
    (1) For study areas in which the Preliminary Minimum Access 
Universal Service Support is greater than PSAUSS, and for which an 
estimate has been made for deaveraged UNE loop costs, the SAAUS for 
that study area is the MSR.
    (2) For study areas in which the Preliminary Minimum Access 
Universal Service Support is less than PSAUSS, and for which an 
estimate has been made for deaveraged UNE loop costs, the SAAUS for 
that study area is equal to:
    Preliminary Study Area Universal Service Support  x  ($650 million 
- TNMSR) <divide> (the sum of PSAUSS of study areas where the 
Preliminary Minimum Access Universal Service Support is less than 
PSAUSS).


Sec. 54.807  Interstate access universal service support.

    (a) Each Eligible Telecommunication Carrier (ETC) that provides 
supported service within the study area of a price cap LEC shall 
receive Interstate Access Universal Service Support for each line that 
it serves within that study area.
    (b) In any study area within which the LEC has not established 
state approved geographically deaveraged rates for UNE loops, the 
Administrator shall calculate the Interstate Access Universal Service 
Support Per Line by dividing Study Area Access Universal Service 
Support by twelve times all eligible telecommunications carriers' base 
period lines in that study area adjusted for growth during the relevant 
support period based on the average nationwide annual growth in 
eligible lines during the three previous years. For the purpose of 
calculating growth, the Administrator shall use a simple average of 
annual growth rates for total switched access lines for the three most 
recent years as reported in the Common Carrier Bureau Report, 
Statistics of Communications Common Carriers, Table 6.10--Selected 
Operating Statistics. Interested parties may obtain this report from 
the U.S. Government Printing Office or by downloading it from the 
Federal Communication Commission's website http://www.fcc.gov.
    (c) In any study area within which the LEC has established state 
approved geographically deaveraged rates for UNE loops, the 
Administrator shall calculate the Interstate Access Universal Service 
Support Per Line for each customer class and zone using all eligible 
telecommunications carriers' base period lines by customer class and 
zone adjusted for growth during the relevant support period based on 
the average nationwide annual growth in eligible lines during the three 
previous years. For the purpose of calculating growth, the 
Administrator shall use a simple average of annual growth rates for 
total switched access lines for the three most recent years as reported 
in the Common Carrier Bureau Report, Statistics of Communications 
Common Carriers, Table 6.10--Selected Operating Statistics. Support 
shall be allocated to lines in the highest cost UNE zone first, and 
will ``cascade'' to lines in lower cost UNE zones to the extent that 
sufficient funding is available. Beginning with the zone with the 
highest Zone Average Revenue Per Line, support will be applied in the 
following order of priority:
    (1) To all lines in the highest zone, to eliminate the amount per 
line by which Zone Average Revenue Per Line exceeds the higher of $9.20 
or the Average Revenue Per Line in the next highest zone;
    (2) If the Zone Average Revenue Per Line in the next highest zone 
is greater than $9.20, then to all lines in both zones to eliminate the 
amount per line by which Zone Average Revenue per Line exceeds $9.20 or 
the Zone Average Revenue Per Line in the third highest zone. This 
application of support will continue to additional zones in the same 
fashion until the amount per line by which Zone Average Revenue Per 
Line exceeds $9.20 has been eliminated in all zones, or until the 
available support has been exhausted;
    (3) To all residential and single-line business lines in the 
highest zone, to eliminate the remaining amount per line that Zone 
Average Revenue Per Line for these lines exceeds the higher of $7.00 or 
Zone Average Revenue Per Line in the next highest zone;
    (4) If the Zone Average Revenue per Line in the next highest zone 
is greater than $7.00, then to all residential and single-line business 
lines in both zones to eliminate the remaining amount per line by which 
Zone Average Revenue Per Line exceeds $7.00. This application of 
support will continue to additional zones in the same fashion until the 
difference between Zone Average Revenue Per Line and $7.00 has been 
eliminated in all zones, or until the available support has been 
exhausted.
    (d) Notwithstanding the provisions of Sec. 54.307(a)(2), the per-
line support amount determined within each zone by applicable customer 
class under paragraph (b) or (c) of this section is portable among all 
eligible telecommunications carriers providing service within that 
zone.


Sec. 54.808   Transition provisions and periodic calculation.

    Study Area Access Universal Service Support amounts for the area 
served by each price cap LEC will be calculated as of July 1, 2000, 
January 1, 2001, July 1, 2001 and thereafter as determined by the 
Administrator, but at least annually.


Sec. 54.809  Carrier certification.

    (a) Certification. Carriers that desire to receive support pursuant 
to Sec. 54.807 must file a certification with the Administrator and the 
Commission stating that all interstate access universal service support 
provided to such carrier will be used only for the provision, 
maintenance, and upgrading of facilities and services for which the 
support is intended. Support provided pursuant to Sec. 54.807 shall 
only be provided to the extent that the carrier has filed the requisite 
certification pursuant to this section.
    (b) Certification format. A certification pursuant to this section 
may be filed in the form of a letter from an authorized representative 
for the carrier, and must be filed with both the Office of the 
Secretary of the Commission clearly referencing CC Docket No. 96-45, 
and with the Administrator of the interstate access universal service 
support mechanism, on or before the filing deadlines set forth in 
paragraph (c) of this section. All of the certifications filed by 
carriers pursuant to this section shall become part of the public 
record maintained by the Commission.
    (c) Filing deadlines. In order for a price cap local exchange 
carrier, and/or an eligible telecommunications carriers serving lines 
in the service area of a price cap local exchange carrier, to receive 
interstate access universal service support, such carrier must file an 
annual certification, as described in paragraph (b) of this section, on 
the date that it first files its line count information pursuant to 
Sec. 54.802, and thereafter on June 30th of each year.

PART 61--TARIFFS

    8. The authority citation for part 61 continues to read as follows:

    Authority: Secs.1, 4(i), 4(j), 201-205 and 403 of the 
Communications Act of 1934, as amended; 47 U.S.C. 151, 151(i), 
154(j), 201-205 and 403, unless otherwise noted.

    9. Amend Sec. 61.3 by revising paragraphs (d) through (pp) and 
adding paragraphs (qq) through (zz) to read as follows:

[[Page 38694]]

Sec. 61.3  Definitions.

* * * * *
    (d) Average Price Cap CMT Revenue per Line month. (1) Price Cap CMT 
Revenue (as defined in Sec. 61.3(cc)) per month as of July 1, 2000 
(adjusted to remove Universal Service Contributions assessed to LECs 
pursuant to Sec. 54.702 of this chapter) using 2000 annual filing base 
period demand, divided by the 2000 annual filing base period demand. In 
filing entities with multiple study areas, if it becomes necessary to 
calculate the Average Price Cap CMT Revenue Per Line month for a 
specific study area, then the Average Price Cap CMT Revenue Per Line 
month for that study area is determined as follows, using base period 
demand revenues (adjusted to remove Universal Service Contributions 
assessed to Local Exchange Carriers pursuant to Sec. 54.702 of this 
chapter), Base Factor Portion (BFP) and 2000 annual filing base period 
lines:

    Average Price Cap CMT Revenue Per Line Month in a study area = 
Price Cap CMT Revenue  x  (BFP in the study area <divide> (BFP in the 
Filing Entity) <divide>(Lines in the study area.

    (2) Nothing in this definition precludes a price cap local exchange 
carrier from continuing to average rates across filing entities 
containing multiple study areas, where permitted under existing rules.
    (3) Average Price Cap CMT Revenues Per Line month may be adjusted 
after July 1, 2000 to reflect exogenous costs pursuant to 
Sec. 61.45(d).
    (4) Average Price Cap CMT Revenues Per Line month may also be 
adjusted pursuant to Sec. 61.45 (b)(1)(iii).
    (e) Average traffic sensitive charge. (1) The Average Traffic 
Sensitive Charge (``ATS charge'') is the sum of the following two 
components:
    (i) The Local Switching (LS) component. The Local Switching 
component will be calculated by dividing the proposed Local Switching 
revenues (End Office Switch, LS trunk ports, Information Surcharge, and 
signalling transfer point (STP) port) by the base period LS minutes of 
use (MOUs); and
    (ii) The Transport component. The Transport component will be 
calculated by dividing the proposed Transport revenues (Switched Direct 
Trunk Transport, Signalling for Switched Direct Trunk Transport, 
Entrance Facilities for Switched Access traffic, Tandem Switched 
Transport, Signalling for Tandem Switching and residual per minute 
Transport Interconnection Charge (TIC) pursuant to Sec. 69.155 of this 
chapter by LEC only base period MOUs (including meet-point billing 
arrangements for jointly-provided interstate access by a LEC and any 
other LEC).
    (2) For the purposes of determining whether the ATS charge has 
reached the Target Rate as set forth in Sec. 61.3(qq), the calculations 
should include all the relevant revenues and minutes for services 
provided under generally available price cap tariffs.
    (f) Band. A zone of pricing flexibility for a service category, 
which zone is calculated pursuant to Sec. 61.47.
    (g) Base period. For carriers subject to Secs. 61.41 through 61.49, 
the 12-month period ending six months prior to the effective date of 
annual price cap tariffs. Base year or base period earnings shall 
exclude amounts associated with exogenous adjustments to the PCI for 
the lower formula adjustment mechanism permitted by 
Sec. 61.45(d)(1)(vii).
    (h) Basket. Any class or category of tariffed service or charge:
    (1) Which is established by the Commission pursuant to price cap 
regulation;
    (2) The rates of which are reflected in an Actual Price Index; and
    (3) The related revenues of which are reflected in a Price Cap 
Index.
    (i) Change in rate structure. A restructuring or other alteration 
of the rate components for an existing service.
    (j) Charges. The price for service based on tariffed rates.
    (k) Commercial contractor. The commercial firm to whom the 
Commission annually awards a contract to make copies of Commission 
records for sale to the public.
    (l) Commission. The Federal Communications Commission.
    (m) Concurring carrier. A carrier (other than a connecting carrier) 
subject to the Act which concurs in and assents to schedules of rates 
and regulations filed on its behalf an issuing carrier or carriers.
    (n) Connecting carrier. A carrier engaged in interstate or foreign 
communication solely through physical connection with the facilities of 
another carrier not directly or indirectly controlling or controlled 
by, or under direct or indirect common control with, such carrier.
    (o) Contract-based tariff. A tariff based on a service contract 
entered into between a non-dominant carrier and a customer, or between 
a customer and a price cap local exchange carrier which has obtained 
permission to offer contract-based tariff services pursuant to part 69, 
subpart H, of this chapter.
    (p) Corrections. The remedy of errors in typing, spelling, or 
punctuation.
    (q) Dominant carrier. A carrier found by the Commission to have 
market power (i.e., power to control prices).
    (r) GDP Price Index (GDP-PI). The estimate of the Chain-Type Price 
Index for Gross Domestic Product published by the United States 
Department of Commerce, which the Commission designates by Order.
    (s) GNP Price Index (GNP-PI). The estimate of the ``Fixed-Weighted 
Price Index for Gross National Product, 1982 Weights'' published by the 
United States Department of Commerce, which the Commission designates 
by Order.
    (t) Issuing carrier. A carrier subject to the Act that publishes 
and files a tariff or tariffs with the Commission.
    (u) Line month. Line demand per month multiplied by twelve.
    (v) Local exchange carrier. Any person that is engaged in the 
provision of telephone exchange service or exchange access as defined 
in section 3(26) of the Act.
    (w) Mid-size company. All price cap LECs other than the Regional 
Bell Operating Companies and GTE.
    (x) New service offering. A tariff filing that provides for a class 
or sub-class of service not previously offered by the carrier involved 
and that enlarges the range of service options available to ratepayers.
    (y) Non-dominant carrier. A carrier not found to be dominant.
    (z) Other participating carrier. A carrier subject to the Act that 
publishes a tariff containing rates and regulations applicable to the 
portion or through service it furnishes in conjunction with another 
subject carrier.
    (aa) Price cap LEC. See Sec. 61.41(a) of this section.
    (bb) Local switching pooled Revenue. For certain qualified 
companies as set forth in Sec. 61.48 (m), is the amount of additional 
local switching reductions in the July 2000 Annual filing allowed to be 
moved and recovered in the common line basket.
    (cc) Price Cap CMT Revenue. The maximum total revenue a filing 
entity would be permitted to receive from End User Common Line charges 
under Sec. 69.152 of this chapter, Presubscribed Interexchange Carrier 
charges (PICCs) under Sec. 69.153 of this chapter, Carrier Common Line 
charges under Sec. 69.154 of this chapter, and Marketing under 
Sec. 69.156 of this chapter, using Base Period lines. Price Cap CMT 
Revenue does not include the price cap LEC universal service 
contributions as of July 1, 2000. The Price Cap CMT revenue does not 
include the pooled local switching revenue outlined in paragraph (bb) 
of this section.

[[Page 38695]]

    (dd) Price Cap Index (PCI). An index of prices applying to each 
basket of services of each carrier subject to price cap regulation, and 
calculated pursuant to Sec. 61.45.
    (ee) Price cap regulation. A method of regulation of dominant 
carriers provided in Secs. 61.41 through 61.49.
    (ff) Price cap tariff filing. Any tariff filing involving a service 
subject to price cap regulation, or that requires calculations pursuant 
to Secs. 61.45, 61.46, or 61.47.
    (gg) [Reserved]
    (hh) Rate. The tariffed price per unit of service.
    (ii) Rate increase. Any change in a tariff which results in an 
increased rate or charge to any of the filing carrier's customers.
    (jj) Rate level change. A tariff change that only affects the 
actual rate associated with a rate element, and does not affect any 
tariff regulations or any other wording of tariff language.
    (kk) Regulations. The body of carrier prescribed rules in a tariff 
governing the offering of service in that tariff, including rules, 
practices, classifications, and definitions.
    (ll) Restructured service. An offering which represents the 
modification of a method of charging or provisioning a service; or the 
introduction of a new method of charging or provisioning that does not 
result in a net increase in options available to customers.
    (mm) Rural Company. A company that, as of December 31, 1999, was 
certified to the Commission as a rural telephone company.
    (nn) Service Band Index (SBI). An index of the level of aggregate 
rate element rates in a service category, which index is calculated 
pursuant to Sec. 61.47.
    (oo) Service category. Any group of rate elements subject to price 
cap regulation, which group is subject to a band.
    (pp) Supplement. A publication filed as part of a tariff for the 
purpose of suspending or canceling that tariff, or tariff publication 
and numbered independently from the tariff page series.
    (qq) Target Rate. The applicable Target Rate shall be defined as 
follows:
    (1) For regional Bell Operating Companies and GTE, $0.0055 per ATS 
minute of use;
    (2) For a holding company with a holding company average of less 
than 19 Switched Access End User Common Line charge lines per square 
mile served such company may elect to use a Target Rate of $0.0095 with 
respect to all exchanges owned by that holding company on July 1, 2000, 
or which that holding company is, as of April 1, 2000, under a binding 
and executed contract to purchase;
    (3) For other price cap local exchange carriers, $0.0065 per ATS 
minute of use.
    (rr) Tariff. Schedules of rates and regulations filed by common 
carriers.
    (ss) Tariff publication, or publication. A tariff, supplement, 
revised page, additional page, concurrence, notice of revocation, 
adoption notice, or any other schedule of rates or regulations filed by 
common carriers.
    (tt) Tariff year. The period from the day in a calendar year on 
which a carrier's annual access tariff filing is scheduled to become 
effective through the preceding day of the subsequent calendar year.
    (uu) Text change. A change in the text of a tariff which does not 
result in a change in any rate or regulation.
    (vv) United States. The several States and Territories, the 
District of Columbia, and the possessions of the United States.
    (ww) Corridor service. ``Corridor service'' refers to interLATA 
services offered in the ``limited corridors'' established by the 
District Court in United States v. Western Electric Co., Inc., 569 F. 
Supp. 1057, 1107 (D.D.C. 1983).
    (xx) Toll dialing parity. ``Toll dialing parity'' exists when there 
is dialing parity, as defined in Sec. 51.5 of this chapter, for toll 
services.
    (yy) Loop-based services. Loop-based services are services that 
employ Subcategory 1.3 facilities, as defined in Sec. 36.154 of this 
chapter.
    (zz) Zone Average Revenue per Line. The Price Cap CMT Revenue per 
Line allocated to a particular state-defined zone used for deaveraging 
of UNE loop prices. The Zone Average Revenue per Line is computed 
according to the following formula:

Zone Average Revenue Per Line = (25% * (Loop + Port)) + U

Where:

Loop = the price for unbundled loops in a UNE zone.
Port = price for switch ports in that UNE zone.
U(Uniform revenue per line adjustment) =
U = [(Price Cap CMT Revenue Per Line Month in a study area * LEC Base 
Period Lines)-(25% * <greek-S> (LEC Base Period Lines in a UNE Zone  x  
((Loop + Port ) for all zones)))] <divide> LEC Base Period Lines in a 
study area.


    10. Amend Sec. 61.41 by revising paragraphs (c) and (d) to read as 
follows:


Sec. 61.41  Price cap requirements generally.

* * * * *
    (c) The following rules in this paragraph (c) apply to telephone 
companies subject to price cap regulation, as that term is defined in 
Sec. 61.3(ee), which are involved in mergers, acquisitions, or similar 
transactions.
    (1) Any telephone company subject to price cap regulation that is a 
party to a merger, acquisition, or similar transaction shall continue 
to be subject to price cap regulation notwithstanding such transaction.
    (2) Where a telephone company subject to price cap regulation 
acquires, is acquired by, merges with, or otherwise becomes affiliated 
with a telephone company that is not subject to price cap regulation, 
the latter telephone company shall become subject to price cap 
regulation no later than one year following the effective date of such 
merger, acquisition, or similar transaction and shall accordingly file 
price cap tariffs to be effective no later than that date in accordance 
with the applicable provisions of this part 61.
    (3) Notwithstanding the provisions of Sec. 61.41(c)(2), when a 
telephone company subject to price cap regulation acquires, is acquired 
by, merges with, or otherwise becomes affiliated with a telephone 
company that qualifies as an `average schedule' company, the latter 
company may retain its `average schedule' status or become subject to 
price cap regulation in accordance with Sec. 69.3(i)(3) of this chapter 
and the requirements referenced in that section.
    (d) Local exchange carriers that become subject to price cap 
regulation as that term is defined in Sec. 61.3(ee) shall not be 
eligible to withdraw from such regulation.

    11. Amend Sec. 61.42 by removing paragraphs (d)(6) and (e)(2)(v) 
through (e)(2)(vii) and revising paragraphs (d)(1), (d)(3), (d)(5), 
(e)(2)(i) through (e)(2)(iv), and adding paragraph (e)(3), to read as 
follows:


Sec. 61.42  Price cap baskets and service categories.

* * * * *
    (d) * * *
    (1) A basket for the common line, marketing, and certain residual 
interconnection charge interstate access elements as described in 
Secs. 69.115, 69.152, 69.153, 69.154, 69.155, 69.156, and 69.157 of 
this chapter. For purposes of Secs. 61.41 through 61.49, this basket 
shall be referred to as the ``CMT basket.''
* * * * *
    (3) A basket for trunking services as described in Secs. 69.110, 
69.111, 69.112, 69.125(b), 69.129, and 69.155 of this chapter. For 
purposes of Secs. 61.41

[[Page 38696]]

through 61.49, this basket shall be referred to as the ``trunking 
basket.''
* * * * *
    (5) A basket for special access services as described in 
Sec. 69.114 of this chapter.
* * * * *
    (e) * * *
    (2) The trunking basket shall contain such switched transport as 
the Commission shall permit or require, including the following service 
categories and subcategories:
    (i) Voice grade entrance facilities, voice grade direct-trunked 
transport, voice grade dedicated signalling transport,
    (ii) High capacity flat-rated transport, including the following 
service subcategories:
    (A) DS1 entrance facilities, DS1 direct-trunked transport, DS1 
dedicated signalling transport, and
    (B) DS3 entrance facilities, DS3 direct-trunked transport, DS3 
dedicated signalling transport.
    (iii) Tandem-switched transport, as described in Sec. 69.111 of 
this chapter; and
    (iv) Signalling for tandem switching, as described in Sec. 69.129 
of this chapter.
* * * * *
    (3) The special access basket shall contain special access services 
as the Commission shall permit or require, including the following 
service categories and subcategories:
    (i) Voice grade special access, WATS special access, metallic 
special access, and telegraph special access services;
    (ii) Audio and video services;
    (iii) High capacity special access, and DDS services, including the 
following service subcategories:
    (A) DS1 special access services; and
    (B) DS3 special access services;
    (iv) Wideband data and wideband analog services.

    12. Revise Sec. 61.45 to read as follows:


Sec. 61.45  Adjustments to the PCI for Local Exchange Carriers.

    (a) Local exchange carriers subject to price cap regulation shall 
file adjustments to the PCI for each basket as part of the annual price 
cap tariff filing, and shall maintain updated PCIs to reflect the 
effect of mid-year exogenous cost changes.
    (b)(1)(i) Adjustments to local exchange carrier PCIs, in those 
carriers' annual access tariff filings, the traffic sensitive basket 
described in Sec. 61.42(d)(2), the trunking basket described in 
Sec. 61.42(d)(3), the special access basket described in 
Sec. 61.42(d)(5) and the Interexchange Basket described in 
Sec. 61.42(d)(4)(i), shall be made pursuant to the following formula:

PCI<INF>t-1</INF> = PCI<INF>t-1</INF>[1+w[GDP-PI-X] + Z/R]

    Where the terms in the equation are described:

GDP-PI = For annual filings only, the percentage change in the GDP-PI 
between the quarter ending six months prior to the effective date of 
the new annual tariff and the corresponding quarter of the previous 
year. For all other filings, the value is zero.
X = For the CMT, traffic sensitive, and trunking baskets, for annual 
filings only, the factor is set at the level prescribed in paragraphs 
(b)(1)(ii) and (iii) of this section. For the interexchange basket, for 
annual filings only, the factor is set at the level prescribed in 
paragraph (b)(1)(v) of this section. For the special access basket, for 
annual filings only, the factor is set at the level prescribed in 
paragraph (b)(1)(iv) of this section. For all other filings, the value 
is zero.
g = For annual filings for the CMT basket only, the ratio of minutes of 
use per access line during the base period, to minutes of use per 
access line during the previous base period, all minus 1.
Z = The dollar effect of current regulatory changes when compared to 
the regulations in effect at the time the PCI was updated to 
PCI<INF>t-1</INF>, measured at base period level of operations.
Targeted Reduction = the actual possible dollar value of the (GDP-PI-X) 
reductions that will be targeted to the ATS Charge pursuant to 
Sec. 61.45(i)(3). The reductions calculated by applying the (GDP-PI-X) 
portion of the formula to the CCL element within the CMT basket will 
contain the ``g'' component, as defined above.
R = Base period quantities for each rate element ``I'', multiplied by 
the price for each rate element ``I'' at the time the PCI was updated 
to PCI<INF>t-1.</INF>
w = R + Z, all divided by R (used for the traffic sensitive, trunking, 
and special access baskets).
w<INF>ix</INF> = R--(access rate in effect at the time the PCI was 
updated to PCI<INF>t-1</INF> x base period demand) + Z, all divided by 
R.
PCI<INF>t</INF> = The new PCI value.
PCI<INF>t-1</INF> = the immediately preceding PCI value.

    (b)(1)(ii) The X value applicable to the baskets specified in 
Secs. 61.42(d)(1), (d)(2), and (d)(3), shall be 6.5%, to the extent 
necessary to reduce a tariff entity's ATS charge to its Target Rate as 
set forth in Sec. 61.3(qq). Once an LEC tariff entity's ATS Charge is 
equal to the Target Rate as set forth in Sec. 61.3(qq) for the first 
time (the former NYNEX telephone companies may be treated as a separate 
tariff entity), then, except as provided in paragraph (b)(1)(iii) of 
this section, X is equal to GDP-PI and no further reductions will be 
mandated (i.e., if applying the full X-factor reduction for a given 
year would reduce the ATS charge below the Target Rate as set forth in 
Sec. 61.3 (qq), the amount of X-factor reduction applied that year will 
be the amount necessary to reach the Target Rate as set forth in 
Sec. 61.3 (qq)). A filing entity does not reach the Target Rate as set 
forth in Sec. 61.3(qq) in any year in which it exercises an exogenous 
adjustment pursuant to Sec. 61.45(d)(vii). For companies with separate 
tariff entities under a single price cap, the following rules shall 
apply:
    (A) Targeting amounts as defined in Sec. 61.45(i)(1)(i) shall be 
identified separately, using the revenue for each of the tariff 
entities under the cap.
    (B) Each tariff entity shall only be required to use the amount of 
targeting necessary to get to the Target Rate as set forth in Sec. 61.3 
(qq).
    (b)(1)(iii)(A) Except as provided in paragraph (b)(1)(iii)(B) of 
this section, once the Tariff Entity's Target Rate as set forth in 
Sec. 61.3 (qq) is achieved, the X-factor for the CMT basket will equal 
GDP-PI as long as GDP-PI is less than or equal to 6.5% and greater than 
0%. If GDP-PI is greater than 6.5%, and an entity has eliminated its 
CCL and multi-line business PICs charges, the X-factor for the CMT 
basket will equal 6.5%, and all End User Common Line charges, rates and 
nominal caps, will be increased by the difference between GDP-PI and 
the 6.5% X-factor. If GDP-PI is less than 0, the X-factor for the CMT 
basket will be 0.
    (B) For tariff filing entities with a Target Rate of $0.0095, or 
for the portion of a filing entity consolidated pursuant to 
Sec. 61.48(o) that, prior to such consolidation, had a Target Rate of 
$0.0095, in which the ATS charge has achieved the Target Rate but in 
which the carrier common line (CCL) charge has not been eliminated, the 
X-factor for the CMT basket will be 6.5% until the earlier of June 30, 
2004, or until CCL charges are eliminated pursuant to paragraph (i)(4) 
of this section. Thereafter, in any filing entity in which a CCL charge 
remains after July 1, 2004, the X-factor for the CMT basket will be 
determined pursuant to paragraph (b)(1)(iii)(A) of this section as if 
CCL charges were eliminated.
    (b)(1)(iv) For the special access basket specified in 
Sec. 61.42(d)(5), the value of X shall be 3.0% for the 2000 annual 
filing.

[[Page 38697]]

The value of X shall be 6.5% for the 2001, 2002 and 2003 annual 
filings. Starting in the 2004 annual filing, X shall be equal to GDP-PI 
for the special access basket.
    (b)(1)(v) For the interexchange basket specified in 
Sec. 61.42(d)(4), the value of X shall be 3.0% for all annual filings.
    (b)(2) Adjustments to local exchange carrier PCIs and average price 
cap CMT revenue per line, in tariff filings other than the annual 
access tariff filing, for the CMT basket described in Sec. 61.42(d)(1), 
the traffic sensitive basket described in Sec. 61.42(d)(2), the 
trunking basket described in Sec. 61.42(d)(3), the interexchange basket 
described in Sec. 61.42(d)(4), and the special access basket described 
in Sec. 61.42(d)(5), shall be made pursuant to the formulas set forth 
in paragraph (b)(1)(i) of this section, except that the ``w(GDP-PI-X)'' 
component of those PCI formulas shall not be employed.
    (c) Effective July 1, 2000, the prices of the CMT basket rate 
elements, excluding special access surcharges under Sec. 69.115 of this 
chapter and line ports in excess of basic under Sec. 69.157 of this 
chapter, shall be set based upon Average Price Cap CMT Revenue Per Line 
month.
    (d) The exogenous cost changes represented by the term ``Z'' in the 
formula detailed in paragraphs (b)(1)(i) of this section shall be 
limited to those cost changes that the Commission shall permit or 
require by rule, rule waiver, or declaratory ruling.
    (1) Subject to further order of the Commission, those exogenous 
changes shall include cost changes caused by:
    (i) The completion of the amortization of depreciation reserve 
deficiencies;
    (ii) Such changes in the Uniform System of Accounts, including 
changes in the Uniform System of Accounts requirements made pursuant to 
Sec. 32.16 of this chapter, as the Commission shall permit or require 
be treated as exogenous by rule, rule waiver, or declaratory ruling;
    (iii) Changes in the Separations Manual;
    (iv) [Reserved]
    (v) The reallocation of investment from regulated to nonregulated 
activities pursuant to Sec. 64.901 of this chapter;
    (vi) Such tax law changes and other extraordinary cost changes as 
the Commission shall permit or require be treated as exogenous by rule, 
rule waiver, or declaratory ruling;
    (vii) Retargeting the PCI to the level specified by the Commission 
for carriers whose base year earnings are below the level of the lower 
adjustment mark, subject to the limitation in Sec. 69.731 of this 
chapter. The allocation of LFAM amounts will be allocated pursuant to 
Sec. 61.45(d)(3). This section shall not be applicable to tariff 
filings during the tariff year beginning July 1, 2000, but is 
applicable in subsequent years;
    (viii) Inside wire amortizations;
    (ix) The completion of amortization of equal access expenses.
    (2) Local exchange carrier specified in Secs. 61.41(a)(2) or (a)(3) 
shall, in their annual access tariff filing, recognize all exogenous 
cost changes attributable to modifications during the coming tariff 
year in their Subscriber Plant Factor and the Dial Equipment Minutes 
factor, and completions of inside wire amortizations and reserve 
deficiency amortizations.
    (3) Exogenous cost changes shall be apportioned on a cost-causative 
basis between price cap services as a group, and excluded services as a 
group. Total exogenous cost changes thus attributed to price cap 
services shall be recovered from services other than those used to 
calculate the ATS charge.
    (e) [Reserved]
    (f) The exogenous costs caused by new services subject to price cap 
regulation must be included in the appropriate PCI calculations under 
paragraphs (b) and (c) of this section beginning at the first annual 
price cap tariff filing following completion of the base period in 
which such services are introduced.
    (g) In the event that a price cap tariff becomes effective, which 
tariff results in an API value (calculated pursuant to Sec. 61.46) that 
exceeds the currently applicable PCI value, the PCI value shall be 
adjusted upward to equal the API value.
    (h) [Reserved]
    (i)(1)(i) Price cap local exchange carriers that are recovering 
revenues through rates pursuant to Secs. 69.106, 69.108, 69.109, 
69.110, 69.111, 69.112, 69.113, 69.118, 69.123, 69.124, 69.125, 69.129, 
or Sec. 69.155 of this chapter shall target, to the extent necessary to 
reduce the ATS Charge to the Target Rate as set forth in Sec. 61.3 (qq) 
for the first time, any PCI reductions associated with the dollar 
impact of application of the (GDPPI-X) portion of the formula in 
Sec. 61.45(b)(1)(i) to the traffic sensitive and trunking baskets. In 
order to calculate the actual dollars to transfer to the trunking and 
traffic sensitive baskets, carriers will first determine the ``Targeted 
Revenue Differential'' that will be transferred to the trunking and 
traffic sensitive baskets to reduce the ATS Charge to the Target Rate 
as set forth in Sec. 61.3(qq). The Targeted Revenue Differential shall 
be applied only to the trunking and traffic sensitive baskets to the 
extent necessary to reduce the ATS charge to the Target Rate as set 
forth in Sec. 61.3 (qq), and shall not be applied to reduce the PCIs in 
any other basket or to reduced average price cap CMT Revenue per line, 
except as provided in Sec. 61.45(i)(4).
    (ii) For the purposes of Sec. 61.45(i)(1)(i), Targeted Revenue 
Differential will be determined by adding together the following 
amounts:
    (A) R * (GDP-PI-X) for the traffic sensitive basket, trunking 
basket, and the CMT basket excluding CCL revenues; and
    (B) CCL Revenues * [(GDP-PI-X-(g/2)]/[1 + (g/2)]
    Where ``g'' is defined in Sec. 61.45(b)(1)(i).
    (2) Until a tariff entity's ATS Charge equals the Target Rate as 
set forth in Sec. 61.3 (qq) for the first time, the Targeted Revenue 
Differential will be targeted to reduce the following rates for that 
tariff filing entity, in order of priority:
    (i) To the residual per minute Transport Interconnection Charge, 
until that rate is $0.00; then
    (ii) To the Information Surcharge, until that rate is $0.00; then
    (iii) To the other Local Switching charges and Switched Transport 
charges until the tariff entity's ATS Rate equals the Target Rate as 
set forth in Sec. 61.3(qq) for the first time. In making these 
reductions, the reductions to Local Switching rates as a percentage of 
total X-factor reductions must be greater than or equal to the 
percentage proportion of Local Switching revenues to the total sum of 
revenues for Local Switching, Local Switching Trunk Ports, Signalling 
Transfer Point Port Termination, Switched Direct Trunked Transport, 
Signalling for Switched Direct Trunked Transport, Entrance Facilities 
for switched access traffic, Tandem Switched Transport, and Signalling 
for Tandem Switching (i.e., Local Switching gets at least its 
proportionate share of reductions).
    (3) After a price cap LEC reaches the Target Rate as set forth in 
Sec. 61.3(qq) level, the ATS Rate will be recalculated each subsequent 
Annual Filing. This process will identify the new ATS Charge for the 
new base period level. Due to change in base period demand and 
inclusion of new services for that annual filing, the absolute level of 
a tariff entity's ATS Charge may change. The resulting new ATS Charge 
level will be what that tariff entity will be measured against during 
that base period. For example, if a company whose target is $0.0055 
reached the Target Rate during the 2000 annual filing, that level may 
change to $0.0058 in the 2001 annual filing due to change in demand and 
inclusion of new

[[Page 38698]]

services. Therefore, it will be the $0.0058 average rate that the 
tariff entity will be measured against for all non-annual filings. 
Likewise, if that same company was at the Target Rate during the 2000 
filing, that level may change to $0.0053 average rate in the 2001 
annual filing due to change in demand and inclusion of new services. In 
that case, it will be at the $0.0053 average rate that the tariff 
entity will be measured.
    (4) A company electing a $0.0095 Target Rate will, in the tariff 
year it reaches the Target Rate, apply any Targeted Revenue 
Differential remaining after reaching the Target Rate to reduce Average 
Price Cap CMT Revenue per Line month until the CCL charge is 
eliminated. In subsequent years, until the earlier of June 30, 2004 or 
when the CCL charge is eliminated, tariff filing entities with a Target 
Rate of $0.0095, or the portion of a filing entity consolidated 
pursuant to Sec. 61.48(o) that, prior to such consolidation, had a 
Target Rate of $0.0095, will reduce Average Price Cap CMT Revenue per 
Line month according to the following method:
    (i) Filing entity calculates the maximum allowable carrier common 
line revenue, as defined in Sec. 61.46(d)(1), that would be permitted 
in the absence of further adjustment pursuant to this paragraph;
    (ii) Filing entity identifies maximum amount of dollars available 
to reduce Average Price Cap CMT Revenue per Line month by the 
following:
    (CMT revenue in a $0.0095 Area less CCL revenue in a $0.0095 Area) 
* (GDPPI-X) + (CCL Revenue in a $0.0095 Area) * [GDPPI-X-(g/2)]/[1+(g/
2)]
    (iii) The Average Price Cap CMT Revenue per Line month shall then 
be reduced by the lesser of the amount described in paragraph (i)(4)(i) 
of this section and the amount described in paragraph (i)(4)(ii) of 
this section, divided by base period Switched Access End User Common 
Line Charge lines.
* * * * *

    13. Revise Sec. 61.46 to read as follows:


Sec. 61.46  Adjustments to the API.

    (a) Except as provided in paragraphs (d) and (e) of this section, 
in connection with any price cap tariff filing proposing rate changes, 
the carrier must calculate an API for each affected basket pursuant to 
the following methodology:

API<INF>t</INF> = 
API<INF>t-1</INF>[S<INF>1</INF>v<INF>i</INF>,(p<INF>t</INF>/
p<INF>t-1</INF>)i]

Where:

API[t] = the proposed API value, API[t-1] = the existing API value,
P[t] = the proposed price for rate element ``i,''
P[t-1] = the existing price for rate element ``i,'' and
v[i] = the current estimated revenue weight for rate element ``i,'' 
calculated as the ratio of the base period demand for the rate element 
``i'' priced at the existing rate, to the base period demand for the 
entire basket of services priced at existing rates.

    (b) New services subject to price cap regulation must be included 
in the appropriate API calculations under paragraph (a) of this section 
beginning at the first annual price cap tariff filing following 
completion of the base period in which they are introduced. This index 
adjustment requires that the demand for the new service during the base 
period must be included in determining the weights used in calculating 
the API.
    (c) Any price cap tariff filing proposing rate restructuring shall 
require an adjustment to the API pursuant to the general methodology 
described in paragraph (a) of this section. This adjustment requires 
the conversion of existing rates into rates of equivalent value under 
the proposed structure, and then the comparison of the existing rates 
that have been converted to reflect restructuring to the proposed 
restructured rates. This calculation may require use of carrier data 
and estimation techniques to assign customers of the preexisting 
service to those services (including the new restructured service) that 
will remain or become available after restructuring.
    (d) The maximum allowable carrier common line (CCL) revenue shall 
be computed pursuant to the following methodology:

CCL = CMT-EUCL-Interstate Access Universal Service Support Mechanism 
Per Line-PICC

Where:

CMT = Price Cap CMT Revenue as defined in Sec. 61.3(cc).
EUCL = Maximum allowable EUCL rates established pursuant to Sec. 69.152 
of this chapter multiplied by base period lines.
Interstate Access Universal Service Support Per Line = the amount as 
determined by the Administrator pursuant to Sec. 54.807 of this chapter 
times the number of base period lines for each customer class and zone 
receiving Interstate Access USF support pursuant to part 54, subpart J.
PICC = Maximum allowable PICC rates established pursuant to Sec. 69.153 
of this chapter multiplied by base period lines.

    (e) In no case shall a price cap local exchange carrier include 
data associated with services offered pursuant to contract tariff in 
the calculations required by this section.

    14. Amend Sec. 61.47 by revising paragraphs (e) through (k) to read 
as follows:


Sec. 61.47  Adjustments to the SBI; pricing bands.

* * * * *
    (e) Pricing bands shall be established each tariff year for each 
service category and subcategory within a basket. Each band shall limit 
the pricing flexibility of the service category, subcategory, as 
reflected in the SBI, to an annual increase of a specified percent 
listed in this paragraph, relative to the percentage change in the PCI 
for that basket, measured from the levels in effect on the last day of 
the preceding tariff year. For local exchanage carriers subject to 
price cap regulation as that term is defined in Sec. 61.3(ee), there 
shall be no lower pricing band for any service category or subcategory.
    (1) Five percent:
    (i) Local Switching (traffic sensitive basket)
    (ii) Information (traffic sensitive basket)
    (iii) Database Access Services (traffic sensitive basket)
    (iv) 800 Database Vertical Services subservice (traffic sensitive 
basket)
    (v) Billing Name and Address (traffic sensitive basket)
    (vi) Local Switching Trunk Ports (traffic sensitive basket)
    (vii) Signalling Transfer Point Port Termination (traffic sensitive 
basket) (viii) Voice Grade (trunking and special access baskets)
    (ix) Audio/Video (special access basket)
    (x) Total High Capacity (trunking and special access baskets)
    (xi) DS1 Subservice (trunking and special access baskets)
    (xii) DS3 Subservice (trunking and special access baskets)
    (xiii) Wideband (special access basket)
    (2) Two percent:
    (i) Tandem-Switched Transport (trunking basket)
    (ii) Signalling for Tandem Switching (trunking basket)
    (f) A local exchange carrier subject to price cap regulation may 
establish density zones pursuant to the requirements set forth in 
Sec. 69.123 of this chapter, for any service in the trunking and 
special access baskets, other than the interconnection charge set forth 
in Sec. 69.124 of this chapter. The pricing flexibility of each zone 
shall be limited to an annual increase of 15 percent, relative to the 
percentage change in the PCI for that basket, measured from the

[[Page 38699]]

levels in effect on the last day of the preceding tariff year. There 
shall be no lower pricing band for any density zone.
    (g) [Reserved]
    (h) [Reserved]
    (i)(l) [Reserved]
    (2) Effective January 1, 1998, notwithstanding the requirements of 
paragraph (a) of this section, if a local exchange carrier is 
recovering interconnection charge revenues through per-minute rates 
pursuant to Sec. 69.155 of this chapter, any reductions to the PCI for 
the basket designated in Sec. 61.42(d)(3) resulting from the 
application of the provisions of Sec. 61.45(b)(1)(i) and from the 
application of the provisions of Secs. 61.45(i)(1) and 61.45(i)(2) 
shall be directed to the SBI of the service category designated in 
Sec. 61.42(d)(i).
    (3) [Reserved]
    (4) Effective January 1, 1998, the SBI reduction required by 
paragraph (i)(2) of this section shall be determined by dividing the 
sum of the dollar amount of any PCI reduction required by 
Secs. 61.45(i)(1) and 61.45(i)(2), by the dollar amount associated with 
the SBI for the service category designated in Sec. 61.42(e)(2)(vi), 
and multiplying the SBI for the service category designated in 
Sec. 61.42(e)(2)(vi) by one minus the resulting ratio.
    (5) Effective July 1, 2000, notwithstanding the requirements of 
paragraph (a) of this section and subject to the limitations of 
Sec. 61.45(i), if a local exchange carrier is recovering an ATS charge 
greater than its Target Rate as set forth in 61.3(qq), any reductions 
to the PCI for the Traffic Sensitive or Trunking baskets designated in 
Secs. 61.42(d)(2) and 61.42(d)(3) resulting from the application of the 
provisions of Sec. 61.45(b), and the formula in Sec. 61.45(b) and from 
the application of the provisions of Secs. 61.45(i)(1), and 61.45(i)(2) 
shall be directed to the SBIs of the service categories designated in 
Secs. 61.42(e)(1) and 61.42(e)(2).
    (j) [Reserved]
    (k) In no case shall a price cap local exchange carrier include 
data associated with services offered pursuant to contract tariff in 
the calculations required by this section.

    15. Amend Sec. 61.48 by removing and reserving paragraphs (j) and 
(k), revising paragraphs (i)(2), (i)(3), (i)(4) introductory text and 
(i)(4)(iii), and by adding paragraphs (l) through (o), to read as 
follows:


Sec. 61.48  Transition rules for price cap formula calculations.

* * * * *
    (i)* * *
    (2) Simultaneous Introduction of Special Access and Transport 
Zones. local exchange carrier subject to price cap regulation that have 
established density pricing zones pursuant to Sec. 69.123 of this 
chapter, and whose special access zone date and transport zone date 
occur on the same date, shall initially establish density pricing zone 
SBIs and bands pursuant to the methodology in Secs. 61.47(e) through 
(f).
    (3) Sequential Introduction of Zones in the Same Tariff Year. 
Notwithstanding Secs. 61.47(e) through (f), local exchange carriers 
subject to price cap regulation that have established density pricing 
zones pursuant to Sec. 69.123 of this chapter, and whose special access 
zone date and transport zone date occur on different dates during the 
same tariff year, shall, on the earlier date, establish density pricing 
zone SBIs and pricing bands using the methodology described in 
Secs. 61.47(e) through (f), but applicable to the earlier service only. 
On the later date, such carriers shall recalculate the SBIs and pricing 
bands to limit the pricing flexibility of the services included in each 
density pricing zone category, as reflected in its SBI, as follows:
* * * * *
    (4) Introduction of Zones in Different Tariff Years. 
Notwithstanding Secs. 61.47(e) through (f), those local exchange 
carriers subject to price cap regulation that have established density 
pricing zones pursuant to Sec. 69.123 of this chapter, and whose 
special access zone date and transport zone date do not occur within 
the same tariff year, shall, on the earlier date, establish density 
pricing zone SBIs and pricing bands using the methodology described in 
Secs. 61.47(e) through (f), but applicable to the earlier service only.
* * * * *
    (iii) On the first day of the second tariff year following the 
tariff year during which the later date occurs, the local exchange 
carriers to which this paragraph applies shall establish the separate 
subindexes provided in Sec. 61.47(e), and shall set the initial SBIs 
for those density pricing zone categories that are combined (specified 
in paragraphs (i)(4)(i)(A), (i)(4)(i)(B), (i)(4)(i)(C), (i)(4)(i)(D), 
(i)(4)(i)(E), and (i)(4)(i)(G) of this section) by computing the 
weighted averages of the SBIs that applied to the formerly separate 
zone categories, weighted by the revenue weights of the respective 
services included in the zone categories.
* * * * *
    (l) Average Traffic Sensitive Revenues. (1) In the July 1, 2000 
annual filing, price cap LECs will make an additional reduction to 
rates comprising ATS charge, and to associated SBI upper limits and 
PCIs. This reduction will be calculated to be the amount that would be 
necessary, when calculated as if all price cap LECs elect to be price 
cap LECs, to achieve a total $2.1 billion reduction in carrier common 
line and ATS rates by all price cap LECs, compared with those rates as 
they existed on June 30, 2000 using 2000 annual filing base period 
demand.
    (i) The net change in revenue associated with Carrier Common Line 
Rate elements resulting from:
    (A) The removal from access of LEC contributions to the Federal 
universal service mechanisms;
    (B) LEC receipts of Interstate Access USF pursuant to subpart J of 
part 54;
    (C) Changes in End User Common Line Charges and PICC rates;
    (D) Changes in Carrier Common Line charges due to GDP-PI-X 
targeting for $0.0095 filing entities.
    (ii) Reductions in Average Traffic Sensitive charges resulting 
from:
    (A) Targeting of the application of the (GDPPI-X) portion of the 
formula in Sec. 61.45(b), and any applicable ``g'' adjustments;
    (B) The removal from access of LEC contributions to the Federal 
universal service mechanisms;
    (C) Additional ATS charge reductions defined in paragraph (2) of 
this section.
    (2) Once the reductions in paragraph (l)(1)(i) and paragraphs 
(l)(1)(ii)(A) and (l)(1)(ii)(B) of this section are identified, the 
difference between those reductions and $2.1 billion is the total 
amount of additional reductions that would be made to ATS rates of 
price cap LECs. This amount will then be restated as the percentage of 
total price cap LEC Local Switching revenues as of June 30, 2000 using 
2000 annual filing base period demand (``June 30 Local Switching 
revenues'') necessary to yield the total amount of additional 
reductions and taking into account the fact that, if participating, a 
price cap LEC would not reduce ATS rates below its Target Rate as set 
forth in Sec. 61.3(qq). Each price cap LEC then reduces ATS rate 
elements, and associated SBI upper limits and PCIs, by a dollar amount 
equivalent to the percentage times the June 30 Local Switching revenues 
for that filing entity, provided that no price cap LEC shall be 
required to reduce its ATS rates below its Target Rate as set forth in 
Sec. 61.3(qq). Each carrier can take its additional reductions against 
any of the ATS rate elements, provided that at least a proportional 
share must be taken against Local Switching rates.
    (m) Local Switching Revenues. (1) Price cap local exchange carriers 
are

[[Page 38700]]

permitted to pool local switching revenues in their common line basket 
under one of the following conditions.
    (i) Any price cap local exchange carriers that would otherwise have 
July 1, 2000 price cap reductions as a percentage of Base Period Price 
Cap Revenues at the holding company level greater than the industry 
wide total July 1, 2000 price cap revenue reduction as a percentage of 
Base Period Price Cap Revenues may elect temporarily to pool the amount 
of the additional reductions above 25% of the Local Switching element 
revenues necessary to yield that carrier's proportionate share of a 
total $2.1 billion reduction in switched access usage rates on July 1, 
2000. The basis of the reduction calculation will be R at PCI 
<INF>(t-1)</INF> for the upcoming tariff year. The percentage 
reductions per line amounts will be calculated as follows:
    (Total Price Cap Revenue Reduction/Base Period Price Cap Revenues) 
Pooled local switching revenue for each filing entity within a holding 
company that qualifies under this paragraph (i) will continue until 
such pooled revenues are eliminated under this paragraph. 
Notwithstanding the provisions of Sec. 61.45(b)(1), once the Average 
Traffic Sensitive (ATS) rate reaches the applicable Target Rate as set 
forth in Sec. 61.3(qq), the Targeted Revenue Differential as defined in 
Sec. 61.45(i) shall be targeted to reducing pooled local switching 
revenue until the pooled local switching revenue is eliminated. 
Thereafter, the X-factor for these baskets will be determined in 
accordance with Sec. 61.45(b)(1).
    (ii) Price cap local exchange carriers other than the Bell 
companies and GTE with at least 20% of total holding company lines 
operated by companies that as of December 31, 1999 were certified to 
the Commission as rural carriers, may elect to pool up to the following 
amounts:
    (A) For a price cap holding company's predominantly non-rural 
filing entities (i.e., filing entities within which more than 50% of 
all lines are operated by telephone companies other than those that as 
of December 31, 1999 were certified to the Commission as rural 
telephone companies), the amount of the additional reductions to 
Average Traffic Sensitive Charge rates as defined in paragraph (l)(2) 
of this section, to the extent such reductions exceed 25% of the Local 
Switching element revenues (measured in terms of June 30, 2000 rates 
times 1999 base period demand);
    (B) For a price cap holding company's predominantly rural filing 
entities (i.e., filing entities with greater than 50% of lines operated 
by telephone companies that as of December 31, 1999 were certified to 
the Commission as rural telephone companies), the amount of the 
additional reductions to Average Traffic Sensitive Charge rates as 
defined in paragraph (l)(2) of this section.
    (2) Allocation of Pooled Local Switching Revenue to Certain Common 
Line Elements.
    (i) The pooled local switching revenue for each filing entity is 
shifted to the common line basket within price caps. Pooled local 
switching revenue will not be included in calculations to determine the 
eligibility for interstate access universal service funding.
    (ii) Pooled local switching revenue will be capped on a revenue per 
line basis.
    (iii) Pooled local switching revenue is included in the total 
revenue for the common line basket in calculating the X-factor 
reduction targeted to the traffic sensitive rate elements, and for 
companies qualified under paragraph (m)(1)(i) of this section, to 
pooled elements after the Average Traffic Sensitive Charge reaches the 
target level. For the purpose of targeting X-factor reductions, 
companies that allocate pooled local switching revenue to other filing 
entities pursuant to paragraph (m)(2)(vii) of this section shall 
include pooled local switching revenue in the total revenue of the 
common line basket of the filing entity from which the pooled local 
switching revenue originated.
    (iv) Pooled local switching revenue shall be kept separate from CMT 
revenue in the CMT basket. CMT rate elements for each filing entity 
shall first be set based on CMT revenue per line without regard to the 
presence of pooled local switching revenue for each filing entity.
    (v) If the rates generated without regard to the presence of pooled 
local switching revenue for multi-line business (MLB) PICC and/or MLB 
SLC are below the nominal caps of $4.31 and $9.20, respectively, pooled 
amounts can be added to these rate elements to the extent permitted by 
the nominal caps.
    (vi) Notwithstanding the provisions of Sec. 69.152(k) of this 
chapter, pooled local switching revenue is first added to the MLB SLC 
until the rate equals the nominal cap ($9.20) or the pooled local 
switching revenue is fully allocated. If pooled local switching revenue 
remains after applying amounts to the MLB SLC, notwithstanding the 
provisions of Sec. 69.153 of this chapter, the remaining pooled local 
switching revenue may be added to the MLB PICC until the rate equals 
the nominal cap ($4.31) or the pooled local switching revenue is fully 
allocated. Unallocated pooled local switching revenue may still remain. 
For companies pooling pursuant to paragraph (m)(1)(i) of this section, 
these unallocated amounts may not be recovered from the CCL charge, the 
primary residential and single-line business SLC, a non-primary 
residential SLC, or from CMT elements in any other filing entity.
    (vii) For companies pooling pursuant to paragraph (m)(1)(ii) of 
this section, pooled local switching revenue that can not be allocated 
to the MLB PICC and MLB SLC rates within an individual filing entity 
may not be recovered from the CCL charge, primary residential and 
single-line business SLC or residential/single-line business SLC 
charges, but may be allocated to other filing entities within the 
holding company, and collected by adding these amounts to the MLB PICC 
and MLB SLC rates. The allocation of pooled local switching revenue 
among filing entities will be re-calculated at each annual filing. In 
subsequent annual filings, pooled local switching revenue that was 
allocated to another filing entity will be reallocated to the filing 
entity from where it originated, to the full extent permitted by the 
nominal caps of $9.20 and $4.31.
    (viii) Notwithstanding the provisions of Sec. 69.152(k) of this 
chapter, these unallocated local switching revenues that cannot be 
recovered fully pursuant to paragraph (m)(2)(vii) of this section are 
first added to the MLB SLC of other filing entities until the resulting 
rate equals the nominal cap ($9.20) or the pooled local switching 
revenue for the holding company is fully allocated. If the pooled local 
switching revenue can be fully allocated to the MLB SLC, the amount is 
distributed to each filing entity with a rate below the nominal cap 
($9.20) based on its below-cap MLB SLC revenue as a percentage of the 
total holding company's below-cap MLB SLC revenue.
    (ix) If pooled local switching revenue remains after applying 
amounts to the MLB SLC of all filing entities in the holding company, 
pooled local switching revenue may be added to the MLB PICC of other 
filing entities. Notwithstanding the provisions of Sec. 69.153 of this 
chapter, the remaining pooled local switching revenue is distributed to 
each filing entity with a rate below the nominal cap ($4.31) based on 
its below-cap MLB PICC revenue as a percentage of the total holding 
company's below-cap MLB PICC revenue.
    (x) If pooled local switching revenue is added to the MLB SLC but 
not to the MLB PICC for a filing entity that qualified to de-average 
SLCs without regard to pooled local switching, the resulting SLC rates 
can still be de-

[[Page 38701]]

averaged. Total pooled local switching is added to the de-averaged zone 
1 MLB SLC rate until the per line rate in zone 1 equals the rate in 
zone 2 or until the pooled local switching is fully allocated to the 
de-averaged MLB SLC rate for zone 1. If pooled local switching revenue 
remains after the rate in zone 1 equals zone 2, the de-averaged rates 
of zone 1 and zone 2 are increased until the pooled local switching is 
fully allocated to the de-averaged MLB SLC rates of zone 1 and 2 or 
until those rates reaches zone 3 MLB SLC rate level. This process 
continues until pooled local switching revenue is fully allocated to 
the zone de-averaged rates.
    (n) Establishment of the special access basket, effective July 1, 
2000.
    (1) On the effective date, the PCI value for the special access 
basket, as defined in Sec. 61.42(d)(5) shall be equal to the PCI for 
the trunking basket on the day preceding the establishment of the 
special access basket.
    (2) On the effective date, the API value for the special access 
basket, as defined in Sec. 61.42(d)(5) shall be equal to the API for 
the trunking basket on the day preceding the establishment of the 
special access basket.
    (3) Service Category, Subcategory, and Density Zone SBIs and Upper 
Limits.
    (i) Interconnection, Tandem Switched Transport, and Signalling 
Interconnec- tion will retain the SBIs and upper limits and remain in 
the trunking basket.
    (ii) Audio/Video and Wideband will retain the SBIs and upper limits 
and be moved into the special access basket.
    (iii) For Voice Grade, the SBIs and upper limits in both baskets 
will be equal to the SBIs and upper limits in the existing trunking 
basket on the day preceding the establishment of the special access 
basket. Voice Grade density zones in the trunking basket will retain 
their indices and upper limits. Voice Grade density zones will be 
initialized in the special access basket when services are first 
offered in them.
    (iv) For High Cap/DDS, DS1, and DS3 category and subcategories, the 
SBIs and upper limits in both baskets will be equal to the SBIs and 
upper limits in the existing trunking basket on the day preceding the 
establishment of the special access basket. SBIs and upper limits for 
services that are in both combined density zones and either DTT/EF or 
special access density zones will be calculated by using weighted 
averages of the indices in the affected zones.
    (v) For each DTT/EF-related zone remaining in the trunking basket, 
the values will be calculated by taking the sum of the products of the 
DTT/EF revenues times the DTT/EF index (or upper limit) and the DTT/EF-
related revenues in the combined zone times the combined index (or 
upper limit), and dividing by the total DTT/EF-related revenues for 
that zone.
    (vi) For each special access-related zone in the special access 
basket, the values will be calculated by taking the sum of the products 
of the special access revenues times the special access index (or upper 
limit) and the special access-related revenues in the combined zone 
times the combined index (or upper limit), and dividing by the total 
special access-related revenues for that zone.
    (o) Treatment of acquisitions of exchanges with different ATS 
Target Rates as set forth in Sec. 61.3(qq):
    (1) In the event of that a price cap LEC acquires a filing entity 
or portion thereof from a price cap LEC after July 1, 2000, and the 
price cap LEC did not have a binding and executed contract to purchase 
that filing entity or portion thereof as of April 1, 2000, those 
properties retain their pre-existing Target Rates as set forth in 
Sec. 61.3(qq). If those properties are merged into a filing entity with 
a different Target Rate as set forth in Sec. 61.3(qq), the Target Rate 
as set forth in Sec. 61.3(qq) for the merged filing entity will be the 
weighted average of the Target Rates as set forth in Sec. 61.3(qq) for 
the properties being combined into a single filing entity, with the 
average weighted by local switching minutes. When a property acquired 
as a result of a contract for purchase executed after April 1, 2000 is 
merged with $0.0095 Target Rate properties, the obligation to apply 
price-cap reductions to reduce CCL, pursuant to Sec. 61.45(b)(iii) does 
not apply to the properties purchased under contracts executed after 
April 1, 2000, but continues to apply to the other properties.
    (2) For sale of properties for which a holding company was, as of 
April 1, 2000, under a binding and executed contract to purchase but 
which close after June 30, 2000, but during tariff year 2000, and that 
are subject to the $0.0095 Target Rate as set forth in Sec. 61.3(qq), 
the Average Traffic Sensitive Rate charged by the purchaser for that 
property will be the greater of $0.0095 or the Average Traffic 
Sensitive Rate for that property.

PART 69--ACCESS CHARGES

    17. The authority citation for part 69 continues to read as 
follows:

    Authority: 47 U.S.C. 154, 201, 202, 203, 205, 218, 220, 254, 
403.

    18. Revise Sec. 69.4(d) to read as follows:


Sec. 69.4  Charges to be filed.

* * * * *
    (d) Recovery of Contributions to the Universal Service Support 
Mechanisms by Incumbent Local Exchange Carriers.
    (1) Incumbent local exchange carriers other than price cap LECs may 
recover their contributions to the universal service support mechanisms 
through carriers' carrier charges.
    (i) [Reserved]
    (ii) Non-price cap local exchange carriers may recover their 
contributions to the universal service mechanism by applying a factor 
to their carrier common line charge revenue requirements.
    (2)(i) In lieu of the carriers' carrier charges described in 
paragraph (d)(1) of this section, price cap local exchange carriers may 
recover their contributions to the universal service support mechanisms 
through explicit, interstate, end-user charges that are equitable and 
nondiscriminatory.
    (ii) To the extent that price cap local exchange carriers implement 
explicit, interstate, end-user charges to recover their contributions 
to the universal service support mechanisms, they must make 
corresponding reductions in their access charges to avoid any double 
recovery.
* * * * *

    19. Amend Sec. 69.115 by revising paragraph (c) to read as follows:


Sec. 69.115  Special access surcharges.

* * * * *
    (c) If the association, carrier or carriers that file the tariff 
are unable to estimate such average usage for a period ending May 31, 
1985, the surcharge for such period shall be twenty-five dollars ($25) 
per line termination per month. As of June 30, 2000, these rates will 
remain and be capped at the current levels until June 30, 2005.
* * * * *

    20. Revise Sec. 69.152 to read as follows:


Sec. 69.152  End user common line for price cap local exchange 
carriers.

    (a) A charge that is expressed in dollars and cents per line per 
month shall be assessed upon end users that subscribe to local exchange 
telephone service or Centrex service to the extent they do not pay 
carrier common line charges. A charge that is expressed in dollars and 
cents per line per month shall be assessed upon providers of public 
telephones. Such charge shall be assessed for each line between the 
premises of an end user, or public telephone location, and a Class 5 
office that is or may be used for local exchange service transmissions.

[[Page 38702]]

    (b) [Reserved]
    (c) The charge for each subscriber line associated with a public 
telephone shall be equal to the monthly charge computed in accordance 
with paragraph (k) of this section.
    (d)(1) Beginning July 1, 2000, in a study area that does not have 
deaveraged End User Common Line Charges, the maximum monthly charge for 
each primary residential or single-line business local exchange service 
subscriber line shall be the lesser of:
    (i) The Average Price Cap CMT Revenue Per Line as defined in 
Secs. 61.3(d) of this chapter or
    (ii) The following:
    (A) On July 1, 2000, $4.35.
    (B) On July 1, 2001, $5.00.
    (C) On July 1, 2002, $6.00.
    (D) On July 1, 2003, $6.50.
    (2) In the event that GDP-PI exceeds 6.5% or is less than 0%, the 
maximum monthly charge in paragraph (d)(1)(ii) of this section and the 
cap will be adjusted pursuant to Sec. 61.45(b)(1)(iii) of this chapter.
    (e)(1) Beginning July 1, 2000, in a study area that does not have 
deaveraged End User Common Line Charges, the monthly charge for each 
non-primary residential local exchange service subscriber line shall be 
the lesser of:
    (i) $7.00; or
    (ii) The greater of:
    (A) The rate as of June 30, 2000 less reductions needed to ensure 
over recovery of CMT Revenues does not occur; or
    (B) Average Price Cap CMT Revenue Per Line.
    (2) In the event that GDP-PI is greater than 6.5% or is less than 
0%, the maximum monthly charge in paragraph (e)(1)(i) of this section 
and the cap will be adjusted pursuant to Sec. 61.45(b)(1)(iii) of this 
chapter.
    (3) Where the local exchange carrier provides a residential line to 
another carrier so that the other carrier may resell that residential 
line to a residence that already receives a primary residential line, 
the local exchange carrier may collect the non-primary residential 
charge described in paragraph (e) of this section from the other 
carrier.
    (f) The charge for each primary residential local exchange service 
subscriber line shall be the same as the charge for each single-line 
business local exchange service subscriber line.
    (g) A line shall be deemed to be a residential subscriber line if 
the subscriber pays a rate for such line that is described as a 
residential rate in the local exchange service tariff.
    (h) Effective July 1, 1999, only one of the residential subscriber 
lines a price cap LEC provides to a location shall be deemed to be a 
primary residential line.
    (1) Effective July 1, 1999, for purposes of Sec. 69.152(h) of this 
chapter, ``residential subscriber line'' includes residential lines 
that a price cap LEC provides to a competitive LEC that resells the 
line and on which the price cap LEC may assess access charges.
    (2) Effective July 1, 1999, if a customer subscribes to residential 
lines from a price cap LEC and at least one reseller of the price cap 
LEC's lines, the line sold by the price cap LEC shall be the primary 
line, except that if a resold price cap LEC line is already the primary 
line, the resold line will remain the primary line should a price cap 
LEC subsequently sell an additional line to that residence.
    (i) A line shall be deemed to be a single-line business subscriber 
line if the subscriber pays a rate that is not described as a 
residential rate in the local exchange service tariff and does not 
obtain more than one such line from a particular telephone company.
    (j) No charge shall be assessed for any WATS access line.
    (k)(1) Beginning on July 1, 2000, for any study area that does not 
have deaveraged End User Common Line charges and in the absence of 
voluntary reductions, the maximum monthly End User Common Line Charge 
for multi-line business lines will be the lesser of:
    (i) $9.20, or
    (ii) The greater of:
    (A) The rate as of June 30, 2000, less reductions needed to ensure 
over recovery of CMT Revenues does not occur, or
    (B) Average Price Cap CMT Per Line as defined in Sec. 61.3(d) of 
this chapter.

    Note to paragraph (k)(1): Except when the LEC reduces the rate 
through voluntary reductions, the multi-line business End User 
Common Line charge will be frozen until the study area's multi-line 
business PICC and CCL charge are eliminated.

    (2) In the event that GDP-PI is greater than 6.5% or is less than 
0%, the maximum monthly charge in paragraph (k)(1)(i) of this section 
and the cap will be adjusted pursuant to Sec. 61.45(b)(1)(iii) of this 
chapter.
    (l)(1) Beginning January 1, 1998, LEC shall assess no more than one 
End User Common Line charge as calculated under the applicable method 
under paragraph (e) of this section for Basic Rate Interface integrated 
services digital network (ISDN) service.
    (2) Local exchange carriers shall assess no more than five End User 
Common Line charges as calculated under paragraph (k) of this section 
for Primary Rate Interface ISDN service.
    (m) In the event the local exchange carrier charges less than the 
maximum End User Common Line charge for any subscriber lines, the local 
exchange carrier may not recover the difference between the amount 
collected and the maximum from carrier common line charges or PICCs.
    (n) [Reserved]
    (o) [Reserved]
    (p) [Reserved]
    (q) End User Common Line Charge De-Averaging. Beginning on July 1, 
2000, LEC's may geographically deaverage End User Common Line charges 
subject to the following conditions:
    (1) In order for price cap LEC to be allowed to de-average End User 
Common Line charges within a study area, the price cap LEC must have 
state Commission approved geographically deaveraged rates for UNE loops 
within that study area. Except where a LEC geographically deaverages 
through voluntary reductions, before a price cap LEC may geographically 
deaverage its End User Common Line rates, its Originating and 
Terminating CCL and Multi-line Business PICC rates in that study area 
must equal $0.00.
    (2) All geographic deaveraging of End User Common Line charges by 
customer class within a study area must be according to the state 
commission-approved UNE loop zone. Solely for the purposes of 
determining interstate subscriber line charges and the interstate 
access universal service support described in Secs. 54.806 and 54.807 
of this chapter, a price cap LEC may not have more than four geographic 
End User Common Line Charge/USF zones absent a review by the 
Commission. Where a price cap LEC has more than four state-created UNE 
zones and the Commission has not approved use of additional zones, the 
price cap LEC will determine, at its discretion, which state-created 
UNE zones to consolidate so that it has no more than four zones for the 
purpose of determining interstate subscriber line charges and 
interstate access universal service support.
    (3) Within a given zone, Multi-line Business End User Common Line 
rates cannot fall below Primary Residential and Single-Line Business or 
Non-Primary Residential End User Common Line charges. Non-Primary End 
User Common Line charges cannot fall below Primary Residential and 
Single-Line Business charges.
    (4) For any given class of customer in any given zone, the Zone 
deaveraged End User Common Line Charge in that zone must be greater 
than or equal to the Zone deaveraged End User Common

[[Page 38703]]

Line charge in the zone with the next lower Zone Average Revenue Per 
Line.
    (5) The sum of all revenues per month that would be generated from 
all deaveraged End User Common Line charges in all zones within a study 
area plus Interstate Access USF Support Per Line (as defined in 
Sec. 54.807 of this chapter) for the applicable customer classes and 
zones receiving such support multiplied by corresponding base period 
lines, divided by the number of base period lines in that study area 
cannot exceed Average Price Cap CMT Revenue Per Line as defined in 
Sec. 61.3(d) of this chapter for that study area. In addition, the sum 
of revenues per month that would be generated from all deaveraged End 
User Common Line charges in all End User Common Line charge deaveraging 
zones within a study area plus revenues per month from all End User 
Common Line charge, multi-line business PICC and CCL charges from study 
areas within that study area that have not geographically deaveraged 
End User Common Line charges plus the sum of all Interstate Access USF 
Support Per Line (as defined in Sec. 54.807 of this chapter) for the 
applicable customer classes and zones receiving such support, 
multiplied by the corresponding base period lines for the applicable 
customer classes and zones within the study area, divided by the number 
of total base period lines in the study area cannot exceed Average 
Price Cap CMT Revenue Per Line as defined in Sec. 61.3(d) of this 
chapter for the study area.
    (6) Maximum charge. The maximum zone deaveraged End User Common 
Line Charge that may be charged in any zone is the applicable cap 
specified in Sec. 69.152(d)(1), Sec. 69.152(e)(1)(i) or Sec. 69.152 
(k)(1)(i) Zone Average Revenue Per Line is the Price Cap CMT Revenue 
Per Line allocated to a particular state-defined zone used for 
deaveraging of UNE loop prices. The zone average revenue per line is 
computed pursuant to Sec. 61.3 (zz) of this chapter.
    (7) Minimum charge. Except where a LEC chooses to lower the 
deaveraged End User Common Line Charge through voluntary reductions, 
the minimum zone deaveraged End User Common Line Charge in any zone in 
a study area is at least the Minimum EUCL. Minimum EUCL is Zone Average 
Revenue Per Line for the zone with the lowest Zone Average Revenue Per 
Line in that study area plus an amount per line calculated to recover 
the difference between Interstate Access USF Support Per Line (as 
defined in Sec. 54.807 of this chapter) multiplied by base period lines 
for the applicable customer class and zones receiving such support and 
Study Area Above Benchmark Revenues, first from Zone 1 until the End 
User Common Line Charges in Zone 1 equal the End User Common Line 
Charges in Zone 2, and then from lines in Zones 1 and 2 equally until 
the End User Common Line Charges in those Zones reach Zone 3 (with all 
End User Common Line Charges subject to the applicable residential and 
multi-line business lines nominal caps).
    (i) For the purposes of this part, ``Study Area Above Benchmark 
Revenues'' is the sum of all Zone Above Benchmark Revenues.
    (ii) For the purposes of this part, ``Zone Above Benchmark 
Revenues'' is calculated as follows:
    Zone Above Benchmark Revenues is the sum of Zone Above Benchmark 
Revenues for Residential and Single-line Business lines and Zone Above 
Benchmark Revenues for Multi-line Business lines. Zone Above Benchmark 
Revenues for Residential and Single-line Business lines is, within each 
zone, (Zone Average Revenue Per Line minus $7.00) multiplied by all 
eligible telecommunications carrier Base Period Residential and Single-
line Business lines times 12. If negative, the Zone Above Benchmark 
Revenues for Residential and Single-line Business lines for the zone is 
zero. Zone Above Benchmark Revenues for Multi-line Business lines is, 
within each zone,
    (Zone Average Revenue Per Line minus $9.20) multiplied by all 
eligible telecommunications carrier zone Base Period Multi-line 
Business lines times 12. If negative, the Zone Above Benchmark Revenues 
for Multi-line Business lines for the zone is zero.
    (8) Voluntary Reductions. A ``Voluntary Reduction'' is one in which 
the LEC reduces prices other than through offset of net increases in 
End User Common Line charge revenues or Interstate Access USF support 
received pursuant to Sec. 54.807 of this chapter, or through increases 
in other zone deaveraged End User Common Line charges.

    21. Amend Sec. 69.153 to read as follows:


Sec. 69.153  Presubscribed interexchange carrier charge (PICC).

    (a) A charge expressed in dollars and cents per line may be 
assessed upon the Multi-line business subscriber's presubscribed 
interexchange carrier to recover revenues totaling Average Price Cap 
CMT Revenues Per Line times the number of base period lines less 
revenues recovered through the End User Common Line charge established 
under Sec. 69.152 and Interstate Access USF Support Per Line (as 
defined in Sec. 54.807 of this chapter) multiplied by base period lines 
for the applicable customer class and zones receiving such support, up 
to a maximum of $4.31 per line per month. In the event the ceilings on 
the PICC prevent the PICC from recovering all the residual common line/
marketing and residual interconnection charge revenues, the PICC shall 
recover all residual common line/marketing revenues before it recovers 
residual interconnection charge revenues.
    (b) If an end-user customer does not have a presubscribed 
interexchange carrier, the local exchange carrier may collect the PICC 
directly from the end user.
    (c) [Reserved]
    (d) Local exchange carriers shall assess no more than five PICCs as 
calculated under paragraph (a) of this section for Primary Rate 
Interface ISDN service.
    (e) The maximum monthly PICC for Centrex lines shall be one-ninth 
of the maximum charge determined under paragraph (a) of this section, 
except that if a Centrex customer has fewer than nine lines, the 
maximum monthly PICC for those lines shall be the maximum charge 
determined under paragraph (a) of this section divided by the 
customer's number of Centrex lines.
    (f) [Reserved]
    (g) [Reserved]
    (h) [Reserved]

    22. Amend Sec. 69.154 by revising paragraph (a)(1) to read as 
follows:


Sec. 69.154  Per-minute carrier common line charge.

    (a)* * *
    (1) The per-minute rate using base period demand that would recover 
the maximum allowable carrier common line revenue as defined in 
Sec. 61.46(d) of this chapter; or
* * * * *

    23. Revise Sec. 69.156 to read as follows:


Sec. 69.156  Marketing expenses.

    Effective July 1, 2000, the marketing expenses formerly allocated 
to the common line and traffic sensitive baskets, and the switched 
services within the trunking basket pursuant to Sec. 32.6610 of this 
chapter and Sec. 69.403 will now be recovered in the CMT basket created 
pursuant to Sec. 61.42(d)(1) of this chapter. These marketing expenses 
will be recovered through the elements outlined in Secs. 69.152, 69.153 
and 69.154.

    24. Revise Sec. 69.157 to read as follows:

[[Page 38704]]

Sec. 69.157  Line port costs in excess of basic, analog service.

    To the extent that the costs of ISDN line ports, and line ports 
associated with other services, exceed the costs of a line port used 
for basic, analog service, local exchange carrier may recover the 
difference through a separate monthly end-user charge. As of June 30, 
2000, these rates will be capped until June 30, 2005.

    25. Add Sec. 69.158 to read as follows:


Sec. 69.158  Universal service end user charges.

    To the extent the company makes contributions to the Universal 
Service Support Mechanisms pursuant to Secs. 54.706 and 54.709 of this 
chapter and the LEC seeks to recover some or all of the amount of such 
contribution, the LEC shall recover those contributions through a 
charge to end users other than Lifeline users. These contributions are 
not a part of any price cap baskets, and the charge to recover these 
contributions is not part of any other element established pursuant to 
part 69. Such a charge may be assessed on a per-line basis or as a 
percentage of interstate retail revenues, and at the option of the LEC 
it may be combined for billing purposes with other end user retail rate 
elements. A LEC opting to assess the USF end-user rate element on a 
per-line basis may apply that charge using the ``equivalency'' 
relationships established for the multi-line business PICC for Primary 
Rate ISDN service, as per Sec. 69.153(d), and for Centrex lines, as per 
Sec. 69.153(e).

[FR Doc. 00-15170 Filed 6-16-00; 12:38 pm]
BILLING CODE 6712-01-U