40742 Federal Register / Vol. 62, No. 146 / Wednesday, July 30, 1997 / Rules and Regulations

Commodity Parts per million Expiration/Revocation Date

Cattle, fat ............................................................................................. 0.02 July 31, 1998

Cattle, MBYP ....................................................................................... 0.5 July 31, 1998

Cattle, meat ......................................................................................... 0.02 July 31, 1998

Citrus fruit ............................................................................................ 2.0 July 31, 1998

Citrus, pulp, dried ................................................................................ 10 July 31, 1998

Cotton seed ......................................................................................... 1.0 July 31, 1998

Cotton, gin byproducts ........................................................................ 20 July 31, 1998

Goats, fat ............................................................................................. 0.02 July 31, 1998

Goats, MBYP ....................................................................................... 0.5 July 31, 1998

Goats, meat ......................................................................................... 0.02 July 31, 1998

Hogs, fat .............................................................................................. 0.02 July 31, 1998

Hogs, MBYP ........................................................................................ 0.5 July 31, 1998

Hogs, meat .......................................................................................... 0.02 July 31, 1998

Horses, fat ........................................................................................... 0.02 July 31, 1998

Horses, MBYP ..................................................................................... 0.5 July 31, 1998

Horses, meat ....................................................................................... 0.02 July 31, 1998

Milk ...................................................................................................... 0.03 July 31, 1998

Sheep, fat ............................................................................................ 0.02 July 31, 1998

Sheep, MBYP ...................................................................................... 0.5 July 31, 1998

Sheep, meat ........................................................................................ 0.02 July 31, 1998

(c) Tolerances with regional

registrations. [Reserved]

(d) Indirect or inadvertent residues.

[Reserved]

[FR Doc. 97–20061 Filed 7-29-97; 8:45 am]

BILLING CODE 6560–50–F

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 721

[OPPTS–50581E; FRL–5733–5]

Revocation of Significant New Use

Rule for Certain Chemical Substances;

Correction

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Final rule; technical correction.

SUMMARY: EPA issued a document (FR

Doc. 97–17178) in the Federal Register

of July 2, 1997 (62 FR 35690) revoking

two significant new use rules (SNUR).

That document inadvertently contained

an incorrect CFR section number. EPA

intended to revoke the SNURs as stated

in the preamble of the proposed

revocation for these two substances (62

FR 6160, February 11, 1997) (FRL–

5580–8). This action is necessary so that

the correct SNURs are removed from

part 721. Because this is a

nonsubstantive change, notice and

public comment are not required.

DATES: This document is effective on

August 1, 1997.

FOR FURTHER INFORMATION CONTACT:

Susan Hazen, Director, Environmental

Assistance Division (TS–799), Office of

Pollution Prevention and Toxics,

Environmental Protection Agency,

Room E–543A, 401 M St., SW.,

Washington, DC 20460; telephone: (202)

554–1404; TDD: (202) 554–0551; e-mail:

TSCA-Hotline@epamail.epa.gov.

SUPPLEMENTARY INFORMATION: EPA

issued a document (FR Doc. 97–17178)

in the Federal Register of July 2, 1997

(62 FR 35690) (FRL–5715–3)

inadvertently removing § 721.3020. This

document correctly removes § 721.3060.

On page 35691, in the first column,

amendatory item 2 should read: ‘‘2. By

removing § 721.3060.’’

Dated: July 22, 1997.

Charles M. Auer,

Director, Chemical Control Division, Office

of Pollution Prevention and Toxics.

[FR Doc. 97–20062 Filed 7–29–97; 8:45 am]

BILLING CODE 6560–50–F

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Parts 36 and 54

[CC Docket No. 96–45; FCC 97–246]

Universal Service

AGENCY: Federal Communications

Commission.

ACTION: Final rule; order on

reconsideration; errata.

SUMMARY: On May 8, 1997, we adopted

the Universal Service Report and Order

(Order) implementing section 254 of the

Communications Act of 1934, as

amended (the Act). We reconsider on

our own motion several issues with

respect to school and library contracts,

the school and library discount matrix,

the method used to calculate the limit

placed on the amount of corporate

operations expense, the source of

support and administration of support

for high loop costs, and the new

monitoring program and Monitoring

Report. In addition, we reiterate our

holdings in the Order with respect to

the Commission’s authority to assess

universal service contributions from

intrastate and interstate revenues, the

Commission’s authority to require any

carrier to seek state authority to recover

a share of its contribution through

intrastate rates, section 254(k), and the

Commission’s review of decisions by

state commissions not to waive the ‘‘nodisconnect’’ requirement for the Lifeline

program. The intended effect of these

rules is to implement fully the universal

service provisions of the Act.

DATES: All policies and rules adopted

herein shall be effective August 29,

1997, except for the amendments to

§ 54.500, which will take effect July 30,

1997.

FOR FURTHER INFORMATION CONTACT:

Valerie Yates, Legal Counsel, Common

Carrier Bureau, (202) 418–1500, or

Sheryl Todd, Common Carrier Bureau,

(202) 418–7400.

SUPPLEMENTARY INFORMATION: This is a

summary of the Commission’s Order on

Reconsideration adopted and released

on July 10, 1997 and reflecting the

changes included in errata released on

July 14, 1997 and on July 24, 1997. The

full text of the Order on Reconsideration

and the errata is available for inspection

and copying during normal business

hours in the FCC Reference Center

(Room 239), 1919 M St., NW.,

Washington, DC.

Pursuant to the Telecommunications

Act of 1996, the Commission released a

Notice of Proposed Rulemaking and
Federal Register / Vol. 62, No. 146 / Wednesday, July 30, 1997 / Rules and Regulations 40743

Order Establishing Joint Board, FederalState Joint Board on Universal Service,

CC Docket No. 96–45 on March 8, 1996

(61 FR 10499 (March 14, 1996)), a

Recommended Decision on November 8,

1996 (61 FR 63778 (December 2, 1996)),

a Public Notice on November 18, 1996

(61 FR 63778 (December 2, 1996)), and

a Report and Order that was adopted on

May 7, 1997 and released on May 8,

1997 (62 FR 32862 (June 17, 1997))

implementing rules for §§ 254 and

214(e) of the Act relating to universal

service.

As required by the Regulatory

Flexibility Act, (RFA), this Order on

Reconsideration contains a Final

Regulatory Flexibility Analysis.

Pursuant to § 604 of the RFA, the

Commission performed a

comprehensive analysis of the Report

and Order with regard to small entities

and small incumbent LECs which has

remained unchanged in this Order on

Reconsideration. This Order on

Reconsideration does not contain any

information collection requirements

subject to the Paperwork Reduction Act

(PRA).

Summary of the Order on

Reconsideration

School and Library Contracts

1. Existing Contracts. We now

conclude that we will make a limited

extension of the competitive bidding

exemption in order to accommodate

schools and libraries that negotiate and

sign contracts prior to the date that the

competitive bidding system becomes

fully operational. We conclude that any

contract signed after November 8, 1996

and before the first date that the

competitive bidding system is

operational will be considered an

‘‘existing contract’’ under § 54.511 of

our rules, but only if the contract

terminates no later than December 31,

1998. We adopt a definition of ‘‘existing

contract’’ that includes this additional

exemption.

2. We extend the competitive bidding

exemption because services obtained

pursuant to a contract signed after

November 8, 1996 and prior to the date

that the competitive bidding system

becomes operational would otherwise

not be eligible for federal universal

service discounts. We extend this

exemption for the same reasons we

adopted the existing competitive

bidding exemption. Specifically, we do

not wish to penalize schools or libraries

that seek to or must negotiate contracts

prior to the date that the universal

service competitive bidding system

becomes fully operational. The

competitive bidding requirement,

however, is important because it

implements the principle of competitive

neutrality by allowing all providers

access to information about particular

schools’ and libraries’ needs and

because it helps to ensure that schools

and libraries will receive the lowest

possible pre-discount price. To ensure

that schools, libraries, and service

providers that qualify for this additional

competitive bidding exemption do not

negotiate long-term contracts during this

interim period, and thus avoid the

competitive bidding requirement

altogether, we conclude that, in order to

receive universal service discounts,

contracts signed between November 8,

1996 and the date the competitive

bidding system becomes operational

must cover only services provided

before December 31, 1998. We conclude

that allowing the contract to govern

service provided until December 1998

should give schools enough flexibility to

procure service for the 1997–1998

school year and will allow schools and

libraries to submit a single request for

services for the entire 1998 funding

year, but will also limit the set of

contracts that are exempt from the

competitive bidding requirement.

3. We conclude, as we did in the

Order, that schools and libraries that

invoke this exemption have sufficient

incentive to negotiate low rates.

Although we acknowledge that, unlike

schools and libraries that signed

contracts prior to November 8, 1996,

schools and libraries that sign contracts

after that date were on notice that

discounts might be available for the

contracts they were negotiating. We

find, however, that these entities

continue to have an incentive to

minimize their costs in obtaining

service even if they receive section

254(h) discounts. Most important, they

will pay a portion of the costs—between

ten percent and eighty percent—of any

contact price that they negotiate. In

addition, we note that many schools and

libraries must comply with state or local

government competitive procurement

requirements. Finally, our decision that

contracts that benefit from this

additional exemption may not cover

services provided after December 31,

1998 will prevent schools, libraries, and

providers from avoiding the competitive

bidding requirement by signing

contracts for extended periods of time.

We find that this solution will assist

schools and libraries signing contracts

prior to the date the competitive bidding

mechanism becomes available to obtain

service for 1997–1998 school year

without unduly diminishing the

benefits of our competitive bidding

requirement.

4. We will consider the competitive

bidding system to be fully operational

when both: (1) The Universal Service

Administrator is ready to accept and

post requests for service from schools

and libraries on a website and (2) that

website may be used by potential

service providers. We will issue a public

notice, which we will publish in the

Federal Register, identifying the exact

date that the competitive bidding

system will be fully operational. Finally,

we note that this limitation on the

duration of a contract applies only to

contracts signed after November 8, 1996

and before the date on which the

competitive bidding system becomes

fully operational. As we held in the

Order, schools and libraries may sign

multi-year contracts after the

competitive bidding mechanisms is in

place. We do not impose here, nor did

we impose in the Order, any durational

limitations or competitive bidding

requirements on contracts signed prior

to November 8, 1996.

5. Date Services Must Be Supplied.

We now find it necessary to adopt a rule

to clarify that only services provided to

schools and libraries after January 1,

1998 will be eligible for universal

service discounts. This rule applies

regardless of the date when the contract

for these services was signed. The Order

stated that the funding year would be

the calendar year, we adopted a funding

cap based on the calendar year, we

stated the support would begin to flow

on January 1, 1998, and we required the

universal service administrator to

approve funding on an annual basis.

Nevertheless, we incorrectly stated in

paragraph 545 that services supplied

after the effective date of our rules

would be supported. The amount of

funding reflected in the funding cap

anticipates only the expected demand

by schools and libraries for the sixmonth period between January 1, 1998

and June 30, 1998. If all services

supplied after the date our rules become

effective were eligible for support, we

would be attempting to support services

supplied during the eleven and a half

month period between July 17, 1997 and

June 30, 1998 using funds that were

estimated to be sufficient to support

services supplied during the six month

period between January 1, 1998 and

June 30, 1998.

6. We conclude that this change will

not impose a significant hardship on

schools and libraries, particularly in

light of our other holdings in the Order.

As indicated above, other decisions in

the Order are consistent with our intent

and decision to provide funding to
40744 Federal Register / Vol. 62, No. 146 / Wednesday, July 30, 1997 / Rules and Regulations

schools after January 1, 1998. In

addition, we determined that all schools

and libraries must comply with the

application process, which will likely

be completed by the first schools or

libraries during mid-fall 1997, before

being assured of receiving funding. In

this context, we find it highly unlikely

that any school or library relying upon

our decisions in the Order would have

made irrevocable decisions based on

their anticipation that they would

receive funding for services provided

prior to January 1, 1998.

7. Modifications to the Discount

Matrix. We now clarify that the

Commission shall consult the members

of the 96–45 Federal-State Joint Board

before adopting any changes to the

discount matrix, including those

changes that might occur prior to the

date we reconvene the 96–45 Joint

Board. (We concluded that we would

reconvene the 96–45 Federal-State Joint

Board no later than January 1, 2001.) We

find that this approach will promote the

joint federal-state cooperation we

envisioned in the Order and will

provide us with the benefits of states’

experience and knowledge.

Corporate Operations Expense

8. We now reconsider on our own

motion the formula we established to

cap the amount of corporate operations

expense that carriers can recover from

high loop cost support mechanisms.

There are two features of the formula

that we believe warrant modification.

First, under the existing formula,

carriers with very small numbers of

working loops might be unable to

recover portions of corporate operations

expense that are fixed or do not vary

with the number of loops. This attribute

occurs because, under the current

formula, allowable corporate operations

expense is determined by a factor that

is multiplied by the number of loops.

The second problem pertains to the

relationship between the recoverable

amount of support for corporate

operation expenses produced by the

formula and the number of working

loops. Although, based on our analysis

of data submitted by NECA, we

expected that applying the formula

would provide carriers with a total

recoverable amount of support for

corporate operating expenses that

increases with the number of access

lines or working loops, Pursuant to 47

CFR 36.611(a)(8), ‘‘working loops’’ are

defined as ‘‘the number of working

Exchange Line C&WF loops used jointly

for exchange and message

telecommunications service, including

C&WF subscriber lines associated with

pay telephones in C&WF Category 1, but

excluding WATS closed end access and

TWX access,’’ we have determined that,

within the range of 6,780 to 12,913

working loops, support for corporate

operations expense does not increase

with the number of working loops. For

example, applying the formula to a

carrier with 5,000 working loops would

result in a cap of $98,440.00 of support

for corporate operations expense

[($27.12¥.002×5,000)

×1.15×5,000=98,440]. Under our

provision for carriers with more than

10,000 working loops, however, a

carrier with 11,000 working loops

would receive no more than $90,060.00

[$7.12×1.15×11,000=90,060].

Accordingly, we make modifications to

the formula set forth in § 36.621 of the

Commission’s rules for calculating the

amount of support recoverable for

carriers’ corporate operating expenses.

We set forth the methodology on which

we base these modification below.

9. Based on the conclusions set forth

below, we modify the existing formula

as follows:

For study areas with 6,000 or fewer

working loops the amount per working

loop shall be $27.12¥(0.002×the

number of working loops)×1.15 or

1.15×$8,266/the number of working

loops, whichever is greater;

For study areas with more than 6,000

but fewer than 17,988 working loops,

the amount per working loop shall be

$72,024/the number of working

loops+$3.12;

For study areas with 17,988 or more

working loops, the amount per working

loop shall be $7.12.

The range from 6,000 to 17,988 is

wider than the range identified as

problematic in paragraph 14 (6,780 to

12,913). This extended range allows the

formula to fit the available data more

closely. We conclude that these

modifications will result in total

recoverable support amounts that

increase proportionally with the number

of working loops. By way of example,

under these formulae, a carrier with

5,000 working loops could recover a

total of $98,440.00 for corporate

operations expenses

[($27.12¥(0.002×5,000))×1.15×5,000 =

98,440] and a carrier with 11,000

working loops could recover

$122,295.60 [($72,024/

11,000+3.12)×1.15×11,000 =

$122,295.60].

10. The original formula also

determined allowable corporate

operating expense by multiplying the

number of loops by a factor. This may

have caused small firms to have

difficulty recovering portions of

corporate operations expense that are

fixed or do not vary with the number of

loops. It is necessary to modify the

formula in order to allow carriers with

small numbers of working loops to

receive sufficient support to recover

these initial or fixed corporate

operations expenses. According to our

analysis of data submitted by NECA, we

estimate the minimum corporate

operations expense per month to be

$8,266. Using a sample of stand-alone

companies with fewer than 2,000

working loops, total operating expense

was regressed on working loops. The

minimum total operating expense was

estimated as the y intercept from the

linear regression. Therefore, we are

revising the formula appearing in the

Order to ensure that no carrier recovers

less than 1.15×$8,266 ($9,505.90). The

revised formula for maximum allowable

support for monthly corporate

operations expense per loop will be

1.15×$8,266 divided by the number of

working loops or the result of the

formula for study areas with 6,000 or

fewer working loops set forth in

§ 36.621, whichever is greater.

11. We find that these adjustments

lead to results that are consistent with

both the policies and intended

outcomes enunciated in the Order.

These modifications do not reduce the

amount of corporate operations

expenses carriers can recover through

the support mechanisms for high loop

costs. The new formulae continue to

reflect our recognition that small study

areas may experience greater amounts of

corporate operations expense per

working loop than large study areas. As

stated above, we seek by this Order

merely to eliminate outcomes that

would result in carriers with fewer

working loops receiving a total support

amount that is greater than that of

carriers with more working loops.

Funding for the High Cost Loop Support

Mechanism

12. We clarify that, although the rules

that describe the high loop cost support

mechanisms and govern separations

between the interstate and intrastate

jurisdictions remain in part 36, the

expense adjustment for high cost loops,

like the support for DEM weighting,

LTS, Lifeline, Linkup, and Internet

access for schools and libraries, will be

administered and funded through part

54 of our rules. We make this

clarification because we find that the

Order did not articulate that the expense

adjustment calculated pursuant to part

36 would be administered and funded

through the new universal service

mechanism set forth in part 54.
Federal Register / Vol. 62, No. 146 / Wednesday, July 30, 1997 / Rules and Regulations 40745

Universal Service Support Mechanisms

13. Commission Jurisdiction Over

Universal Service Support Mechanisms.

We take this opportunity to reiterate

that, although the Order concluded that

the Commission has authority to assess

universal service contributions from

intrastate and interstate revenues and to

require carriers to recover some share of

the contribution from intrastate

revenues, the Commission has not

exercised this authority. Recently, the

Commission’s Office of General Counsel

(OGC) responded to an inquiry by

clarifying that the Commission has not

yet ‘‘crystallized its position regarding

the proper treatment of the recovery of

intrastate revenues and in any event has

not required carriers to seek a portion of

the contribution in intrastate rates.’’ See

Letter from William E. Kennard, General

Counsel, FCC, to Lawrence G. Malone,

General Counsel, New York State Dep’t

of Public Service, dated June 13, 1997.

Accordingly, the OGC concluded that

any judicial challenge to paragraphs 813

through 823 of the Order would not be

‘‘ripe’’ at this time. Because of the

importance of this issue and the

possibility that other interested parties

have similar concerns, we take this

opportunity to reiterate that, although

the Act empowers it to do so, the

Commission has neither assessed

universal service contributions from

intrastate and interstate revenues nor

required carriers to recover some share

of the contribution from intrastate

revenues. For these reasons, any

challenges to the Commission’s

authority are not currently ripe. The

Order anticipated that the Joint Board

would continue to consult with the

Commission regarding the sufficiency of

universal service support mechanisms

and we recognize that this issue is of

primary concern to the Joint Board.

14. Assessment of the Revenue Base

for the High Cost and Low-Income

Support Mechanisms. The Order

anticipated that states would take steps

similar to those taken by the

Commission in the Order to convert

implicit intrastate support mechanisms

into explicit support mechanisms. As

discussed in the Order, the 25 percent

allocation factor for loop costs is

historically applied to the interstate

jurisdiction. By funding 25 percent of

the cost of universal service through

federal support mechanisms beginning

January 1, 1999, we sought to coordinate

this approach with the shift of universal

service support for rural, insular, and

high cost areas served by non-rural LECs

from the access charge regime to the

new section 254 universal service

support mechanisms. We recognize that

prior to that date, the costs of universal

service will be carefully considered by

the Commission, which will establish a

forward-looking economic cost

mechanism, and by the states, which

may conduct their own forward-looking

economic cost studies. States should

elect by August 15, 1997 whether they

will conduct their own forward-looking

economic cost studies and those that

elect to do so must file the cost studies

with the Commission on or before

February 6, 1998. Accordingly, it is

premature for us to reexamine our

decision to fund 25 percent of universal

service at this time. Our action today,

does not, however, foreclose the

possibility that, as states replace their

programs with explicit support

mechanisms, the Commission will

reassess whether there is a need for

additional federal support. Instead, we

stress the need for federal-state

partnership in order to allay any

concerns that support amounts will be

insufficient. Because it is critical to the

preservation and advancement of

universal service, we anticipate that this

issue will be an important subject in

future consultations between the

Commission and the Joint Board.

15. Preventing Subsidization of

Competitive Services. We clarify that,

because section 254(k) assigns the duty

of preventing the subsidization of

competitive services to the Commission,

with respect to interstate services, and

to the states, with respect to intrastate

services, the Commission did not

discuss section 254(k) in the Order.

Instead, in a separate order, the

Commission adopted the statutory

language, which will serve as the basis

for Commission action with respect to

the establishment of ‘‘cost allocation

rules, accounting safeguards, and

guidelines to ensure that services

included in the definition of universal

service bear no more than a reasonable

share of the joint and common cost of

facilities used to provide those services’’

for interstate services. Implementation

of 254(k) of the Communications Act of

1934, as amended, FCC 97–163

(released May 8, 1997). We expect that

each state will also take action to

implement safeguards for intrastate

services.

Review Process for Carrier Petitions for

Waivers

16. We reiterate that carriers

disagreeing with state commission

decisions regarding a request to waive

the no-disconnect rule may pursue their

concerns with the Commission. This

approach will offer such carriers an

additional forum for resolving their

concerns. Nevertheless, in considering a

carrier’s arguments on the merits, the

Commission will give great weight to a

state commission’s articulated rationales

for denying a waiver request.

Monitoring Reports

17. We now reconsider on our own

motion a limited aspect of that decision

and clarify that the Bureau shall consult

with the state staff of the 96–45 Joint

Board to implement the new monitoring

program. Because the Monitoring Report

will be based on information regarding

the universal service support

mechanisms, we find that participation

by the 96–45 Joint Board will ensure

that the Bureau will have full access to

the expertise of state staff. Because of its

experience in implementing section

254, we find that the 96–45 Joint Board

is fully able to help implement a

monitoring program for the new

universal service support mechanisms

without drawing on the resources of the

80–286 Joint Board. We also clarify that,

until the permanent administrator is

chosen by a Federal Advisory

Committee, the temporary administrator

of the support mechanisms shall

maintain and report to the Commission

detailed records relating to the

determination and amount of payments

made and monies received through the

support mechanisms which shall be

used in the preparation of the

Monitoring Report.

Explanation of Methodology for

Modifications to Corporate Operations

Expense Formulae Included in

Appendix B of Order

18. This analysis, included in

Appendix B of the Order, describes the

procedure used to derive the formulae,

set forth in § 36.621, for determining the

allowable amount of corporate

operations expenditures recoverable

through universal service support

mechanisms.

19. Selecting the Basic Model. In order

to determine the best formula, we

applied a statistical analysis to a

number of different models that

compared the relationship between

corporate operations expense per loop

and the number of loops using data

supplied by NECA. Outliers were

removed from the sample before

estimation. These outliers were those

companies whose corporate operations

expense exceeded the mean of the

sample by 3 times the sample standard

deviation. The companies excluded

from the sample had corporate

operations expense exceeding $74.00

per loop. Also, two companies which

reported negative corporate operations

expense were removed from the sample.

We used statistical regression
40746 Federal Register / Vol. 62, No. 146 / Wednesday, July 30, 1997 / Rules and Regulations

techniques that focused on the

relationship between expenses per loop,

rather than total expense, in order to

find a model under which the cap on

corporate operations expense per line

declines as the number of loops

increases for a range of smaller

companies so that economies of scale,

which are evident in the data, can be

reflected in the model. Of the models

studied, the linear spline was found to

have the highest R2, a measure

indicating that this model provides the

best fit with the data. The linear spline

model in this case is two line segments

joined together at a single point or knot.

In general, the linear spline model

allows the cap on corporate operations

expense to decline as the number of

loops increases for the smaller

companies having fewer loops than the

knot point. Estimates of the linear spline

model suggest that the cap on corporate

operations expense per loop for

companies with a number of loops

higher than the spline knot is constant.

20. Choosing the spline model also

required selecting a knot, the point at

which the two line segments of differing

slopes meet. We had two primary

objectives in selecting the knot point.

First, the model had to characterize

accurately the relationship between

corporate operations expense per loop

and the number of working loops.

Second, the model had to characterize

accurately the relationship between

total corporate operations expense and

the number of working loops. To

achieve these objectives, we examined

the R2s for both total corporate

operations expense and corporate

operations expense per loop over a wide

range of knot points. The highest R2 for

per loop corporate operations expense

was obtained for a knot point at 3800.

We found, however, that the highest R2

that reflects goodness of fit for the total

corporate operations expense using the

estimated model was obtained at 13,408

working loops. Visual inspection of the

data representing corporate operations

cost per loop indicates that cost per loop

appears to flatten close to 10,000 loops.

See Figure 1. At 10,000 loops, both R2s

remain near the maximum R2s obtained

for both per loop and total corporate

operations expense. Accordingly, we

selected 10,000 loops as the knot point

that best meets both objectives.

21. The regression results, which

incorporate a spline model that uses

data provided by NECA, are as follows:

• For companies having fewer than

10,000 working loops, maximum

allowable corporate operations expense

per loop for each month equals

$27.12—0.002 × (number of working

loops);

• For companies with working loops

greater than or equal to 10,000 loops,

maximum allowable corporate

operations expense per loop for each

month equals $7.12. The R2 associated

with this regression is 0.396.

22. Correcting for Nonmonotonic

Behavior in Model’s Total Corporate

Operations Expenses. The spline model

has one undesirable feature. For a

certain range, it yields a total allowable

corporate operations cost that declines

as the number of working loops

increases. This occurs because

multiplying the linear function that

defines the first line segment of the

estimated spline model (27.12—0.002 ×

the number of loops) by the number of

loops defines a quadratic function that

determines total allowable corporate

operations expense. This quadratic

function assumes its maximum value at

6,780 loops, well below the selected

knot point of 10,000. (The feature exists

with all knot points considered. The

practical effect of the function peaking

at 6,780 loops is that a carrier with more

than 6,780 loops, but less than 10,000

loops, will receive less corporate

operations expense support than one

with just 6,780 loops.) To correct this

problem, we refined the formula

defining allowable per loop expense to

ensure that the total allowable corporate

operations expense always increases as

the number of loops increases. We chose

a point to the left of the point at which

the total corporate operations expense

estimate peaks. At that selected point,

the slope of the function defining total

corporate operations expense is

positive. We then calculated the slope at

that point and extended a line with the

same slope upward to the right of that

point until the line intersected the

original estimated total operations

expense, which is represented by 7.12 ×

the number of loops. See Figure 2. Thus,

we created a line segment with constant

slope covering the region over which

the original model of corporate

operations expenses declines so that

total corporate operations expense

continues to increase with the number

of loops. We chose the point that leads

to a line segment that yields the highest

R2.

23. Using this procedure, we selected

6000 as the point. The slope of total

operations expense at this point is 3.12

and the line extended intersects the

original total operations expense model

at 17,988. Accordingly, the line segment

formed for total corporate operations

expenses, to be applied from 6000 loops

to 17,988 loops, is $72,024 + $3.12 × the

number of working loops. Dividing this

number by the number of working loops

defines the maximum allowable

corporate operations expense per loop

for the range from 6000 to 17,988

working loops, i.e., ($72,024 • (number

of working loops)) + $3.12. See Figures

1, 2.

BILLING CODE 6712–01–P
Federal Register / Vol. 62, No. 146 / Wednesday, July 30, 1997 / Rules and Regulations 40747

BILLING CODE 6712–01–C
40748 Federal Register / Vol. 62, No. 146 / Wednesday, July 30, 1997 / Rules and Regulations

Final Regulatory Flexibility Analysis

24. In the Order, we conducted a

Final Regulatory Flexibility Analysis, as

required by section 603 of the

Regulatory Flexibility Act, as amended

by the Contract With America

Advancement Act of 1996, Public Law

104–121, 110 Stat. 847 (1996). The

changes we adopt in this Order do not

affect that analysis.

List of Subjects

47 CFR Part 36

Communications common carriers,

Reporting and recordkeeping

requirements, Telephone.

47 CFR Part 54

Libraries, Schools,

Telecommunications, Telephone.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

Parts 36 and 54 of title 47 of the Code

of Federal Regulations are amended as

follows:

PART 36—JURISDICTIONAL

SEPARATIONS PROCEDURES:

STANDARD PROCEDURES FOR

SEPARATING

TELECOMMUNICATIONS PROPERTY

COSTS, REVENUES, EXPENSES,

TAXES AND RESERVES FOR

TELECOMMUNICATIONS COMPANIES

1. The authority citation for part 36

continues to read as follows:

Authority: 47 USC Secs. 151, 154 (i) and

(j), and 205, 221(c), 254, 403, and 410.

2. Section 36.601 is amended by

adding a last sentence to paragraph (a)

to read as follows:

§ 36.601 General.

(a) * * * Beginning January 1, 1998,

the expense adjustment calculated

pursuant to this subpart will be

administered and funded through the

new universal service system discussed

in part 54 of this chapter.

* * * * *

3. Section 36.621 is amended by

revising paragraph (a)(4) introductory

text, the first sentence of paragraph

(a)(4)(ii), paragraph (a)(4)(ii)(A) and

(a)(4)(ii)(B) and adding new paragraph

(a)(4)(ii)(C) to read as follows:

§ 36.621 Study area total unseparated loop

cost.

(a) * * *

(4) Corporate Operations Expenses,

Operating Taxes and the benefits and

rent portions of operating expenses, as

reported in § 36.611(a)(5) attributable to

investment in C&WF Category 1.3 and

COE Category 4.13. This amount is

calculated by multiplying the total

amount of these expenses and taxes by

the ratio of the unseparated gross

exchange plant investment in C&WF

Category 1.3 and COE Category 4.13, as

reported in § 36.611(a)(1), to the

unseparated gross telecommunications

plant investment, as reported in

§ 36.611(a)(6). Total Corporate

Operations Expense, for purposes of

calculating universal service support

payments beginning January 1, 1998,

shall be limited to the lesser of:

(i) * * *

(ii) A per-line amount computed

according to paragraphs (a)(4)(ii)(A),

(a)(4)(ii)(B), and (a)(4)(ii)(C) of this

section. * * *

(A) For study areas with 6,000 or

fewer working loops; [($27.12 minus

(0.002 times the number of working

loops)) times 1.15] or [1.15 × $8,266

divided by the number of working

loops], whichever is greater.

(B) For study areas with more than

6,000 but fewer than 17,988 working

loops; [($72,024 divided by the number

of working loops) + $3.12)] times 1.15.

(C) For study areas with 17,988 or

more working loops; $7.12 times 1.15,

which equals $8.19.

* * * * *

PART 54—UNIVERSAL SERVICE

4. The authority citation for part 54

continues to read as follows:

Authority: 47 U.S.C. Secs. 1, 4(i), 201, 205,

214, and 254 unless otherwise noted.

5. Section 54.500 is amended by

redesignating paragraphs (b) through (h)

as paragraphs (c) through (i) and adding

new paragraph (b) to read as follows:

§ 54.500 Terms and definitions.

* * * * *

(b) Existing contract. For the purpose

of § 54.511(c), an ‘‘existing contract’’ is

any signed contract for services eligible

for discounts pursuant to this subpart

between an eligible school or library as

defined under § 54.501 and a service

provider that either:

(1) Was signed prior to November 8,

1996; or

(2) Is limited to services provided

before December 31, 1998 and was

signed on or after November 8, 1996 but

before the first date that the universal

service competitive bidding system

described in § 54.504 is operational. The

competitive bidding system will be

deemed to be operational when both the

universal service administrator is ready

to accept and post requests for service

from schools and libraries on a website

and that website may be used by

potential service providers.

* * * * *

6. Section 54.507 is amended by

redesignating paragraph (f) as paragraph

(g), and adding new paragraph (f) to

read as follows:

§ 54.507 Cap.

* * * * *

(f) Date services must be supplied.

The administrator shall not approve

funding for service received by a school

or library before January 1, 1998.

* * * * *

[FR Doc. 97–20031 Filed 7–29–97; 8:45 am]

BILLING CODE 6712–01–P

DEPARTMENT OF ENERGY

48 CFR Parts 909, 952, and 970

RIN 1991–AB26

Acquisition Regulation; Revisions to

Organizational Conflicts of Interest

AGENCY: Office of Procurement and

Assistance Management, Department of

Energy.

ACTION: Final rule.

SUMMARY: The Department of Energy

(DOE) publishes today amendments to

its Acquisition Regulation that effect

changes to its Organizational Conflicts

of Interest policies as a result of the

repeal of the two statutory provisions

upon which DOE’s system for treating

organizational conflicts of interest was

based.

DATES: These regulations will be

effective on August 29, 1997.

FOR FURTHER INFORMATION CONTACT:

Robert M. Webb, U.S. Department of

Energy, Office of Procurement and

Assistance Management, 1000

Independence Avenue, SW.,

Washington, D.C. 20585, (202) 586–

8264

Edward Lovett, U.S. Department of

Energy, Office of Procurement and

Assistance Management, 1000

Independence Avenue, SW.,

Washington, D.C. 20585, (202) 586–

8614

SUPPLEMENTARY INFORMATION:

I. Background

II. Discussion of Public Comments

III. Procedural Requirements

A. Review Under Executive Order 12866

B. Review Under Executive Order 12988

C. Review Under the Regulatory Flexibility

Act

D. Review Under the Paperwork Reduction

Act