[Federal Register Volume 62, Number 145 (Tuesday, July 29, 1997)]
[Rules and Regulations]
[Pages 40460-40464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-19912]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 69

[CC Docket Nos. 96-262, 94-1, 91-213, 96-263; FCC 97-247]


Access Charge Reform; Price Cap Performance Review for Local 
Exchange Carriers; Transport Rate Structure and Pricing; Usage of the 
Public Switched Network by Information Service and Internet Access 
Providers

AGENCY: Federal Communications Commission.

ACTION: Final rule; sua sponte reconsideration.

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SUMMARY: The Federal Communications Commission here reconsiders on its 
own

[[Page 40461]]

motion five specific issues addressed in its First Report and Order in 
this proceeding. First, the Commission corrects errors in the rules 
adopted in the First Report and Order in this proceeding that could 
permit rural incumbent local exchange carriers (rural incumbent LECs) 
to recover twice a portion of their local switching costs, that could 
be interpreted to require carriers to deduct a potentially improper 
long term support amount from the base factor portion of their common-
line revenue requirement, and that could result in improper calculation 
of annual access minutes-of-use calculated by LECs for use in setting 
per-minute charges for shared multiplexers on the end office side of 
the tandem switch.
    Second, the Commission clarified the steps non-price cap LECs 
should take to reassign the costs of trunk ports and multiplexers used 
at the tandem switch, and the costs of DS1/voice grade multiplexers 
used at the local switch, from the transport interconnection charge 
(TIC) rate element to the tandem switching rate element and the local 
switching rate element, respectively.
    Third, the Commission clarified that price cap carriers may vary 
their tandem-switching charge in accordance with the part 61 price cap 
rules, even after reassigning to the tandem-switching rate element the 
portion of tandem switching costs now recovered through the TIC.
    Fourth, the Commission revised its rules to revise the triggering 
point at which a price cap carrier should begin calculating its SLC 
based on average per-line common line revenues permitted under the 
price cap rules.
    Fifth, the Commission reinstated a portion of its rules relating to 
general support facilities that we erroneously deleted in the First 
Report and Order.

EFFECTIVE DATE: The amendments to Sec. 69.307(c) shall become effective 
August 28, 1997. The amendments to Secs. 69.1(c), 69.106(b), 
69.111(g)(4), 69.111(l)(1), 69.152(b), and 69.502(c) shall become 
effective January 1, 1998.

FOR FURTHER INFORMATION CONTACT: Rich Lerner or Richard Cameron, 202-
418-1530.

SUPPLEMENTARY INFORMATION: Adopted: July 10, 1997; Released: July 10, 
1997.
    1. On May 7, 1997, we adopted the First Report and Order in this 
proceeding <SUP>1</SUP> and the Report and Order in our related 
Universal Service proceeding.<SUP>2</SUP> On our own motion, and upon 
further consideration of some of the issues addressed in our Access 
Reform Order, we take this opportunity to revise or clarify certain of 
our actions.<SUP>3</SUP>
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    \1\ Access Charge Reform, First Report and Order, 62 FR 31838 
(June 11, 1997) (Access Reform Order).
    \2\ Federal-State Joint Board on Universal Service, Report and 
Order, 62 FR 32862 (June 17, 1997) (Universal Service Order).
    \3\ See 47 CFR 1.108.
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I. DEM Weighting, Long Term Support, and Local Switching

    2. DEM Weighting. In our Universal Service Order, among other 
actions, we provided that, on January 1, 1998, eligible rural telephone 
company study areas with fewer than 50,000 lines would begin receiving 
local switching support from the new universal service support 
mechanisms in an amount equal to the implicit support they formerly 
received from dial equipment minute-of-use (DEM) weighting.<SUP>4</SUP> 
We did not make clear in the Access Reform Order, however, how the 
switching rates for both incumbent LECs subject to price cap regulation 
and those that are not subject to price cap regulation would be 
affected by the new universal service mechanisms. The obvious solution 
is to permit rural incumbent LECs to recover these switching costs 
either from universal service support mechanisms or from interstate 
access charges, but not to permit recovery of these costs from both 
sources duplicatively.
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    \4\ 47 CFR 54.301. The jurisdictional separations process 
currently allocates local switching costs between the state and 
interstate jurisdictions on the basis of relative DEM. Carrier study 
areas with fewer than 50,000 lines receive support, until December 
31, 1997, from DEM weighting, which shifts additional local 
switching costs to the interstate jurisdiction by multiplying the 
carrier's interstate DEM by a factor of up to 3.0. Until December 
31, 1997, these weighted local switching costs will continue to be 
recovered from interexchange carriers through per-minute access 
charges for use of the local switch. Beginning in January 1998, 
rural incumbent LECs will receive explicit support from the new 
universal service support mechanisms equal to the amount previously 
collected as a result of DEM weighting. Universal Service Order at 
Paras. 303-04.
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    3. The rules adopted to implement our Access Reform Order provide 
that the per-minute local switching charge to be imposed by incumbent 
LECs not subject to price cap regulation ``shall be computed by 
dividing the projected annual revenue requirement for the Local 
Switching element by the projected annual access minutes of use for all 
interstate or foreign services that use local exchange switching 
facilities.'' <SUP>5</SUP>
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    \5\ 47 CFR 69.106(b).
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    4. On further consideration of our revisions to Sec. 69.106, we 
recognize that, absent further clarification, rural incumbent LECs not 
subject to price cap regulation may have the opportunity to recover 
twice a portion of their local switching costs. DEM weighting increases 
the interstate local switching revenue requirement when costs are 
separated in part 36 between the intrastate and interstate 
jurisdictions.<SUP>6</SUP> Although the Universal Service Order 
established a new mechanism for providing to carriers the amount of 
support that was formerly received from DEM weighting, it preserved the 
use of DEM weighting in assigning local switching revenue requirement 
to the interstate jurisdiction. Thus, if a rural incumbent LEC were to 
use the entire DEM-weighted interstate component of the part 36 local 
switching revenue requirement in setting access charges for local 
switching under Sec. 69.106, it would have the opportunity to recover 
twice that portion of the interstate revenue requirement attributable 
to DEM-weighting. Specifically, the rural incumbent LEC would receive 
compensation for the DEM-weighted component of local switching from 
universal service support mechanisms, and also would be able to 
continue to set the local switching element of its access charges to 
recover the portion of its interstate revenue requirement attributable 
to DEM-weighting. Clearly, we did not intend our rules to permit such a 
result.
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    \6\ 47 CFR 36.125.
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    5. On our own motion, therefore, we take this opportunity to 
reconsider this issue and revise Sec. 69.106.<SUP>7</SUP> We clarify 
that, in setting its per-minute access charge for local switching under 
Sec. 69.106, each rural incumbent LEC not subject to price cap 
regulation must exclude from its local switching interstate revenue 
requirement any high-cost support attributable to DEM weighting.
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    \7\ See 47 CFR 1.108.
    \8\ Access Reform Order at Paras. 125-135.
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    6. Similarly, to the extent that any price cap LEC receives high-
cost support attributable to DEM-weighting under Sec. 54.301, we 
require such price cap LEC, in its access tariff filed re-
flecting its receipt of support under Sec. 54.301, to make a downward 
exoge-
nous adjustment to its traffic sensitive basket price cap index (PCI) 
and to its common line basket PCI to reflect the recovery of this 
amount from the new high-cost support mechanism. These exogenous 
adjustments must be made after the exogenous adjustments required when 
the price cap LEC reallocates the costs of line ports to the common 
line basket in accordance with the Access Reform Order.<SUP>8</SUP> The 
exoge-
nous downward adjustment to each basket must be in proportion to the 
local switching costs contained
within that basket. For

[[Page 40462]]

example, if a price cap LEC makes exogenous adjustments to reallocate 
30 percent of its local switching costs contained within the traffic 
sensitive basket to the common line basket, reflecting the costs of its 
line ports, it must then make a downward exogenous adjustment to the 
common line basket in an amount equal to 30 percent of the support it 
receives under Sec. 54.301 and a downward exogenous adjustment to the 
traffic sensitive basket in an amount equal to the remaining 70 
percent.
    7. Long Term Support. We also modify the language of Sec. 69.502(c) 
to clarify the per-line support amount that carriers should use in 
making deductions from the base factor portion of the common line 
element. In the Universal Service Order, we did not adopt the Joint 
Board's recommendation that, for the three years beginning January 1, 
1998, high-cost support be calculated for rural incumbent LECs based on 
historic high-cost loop support, DEM weighting, and long term support 
(LTS) amounts.<SUP>9</SUP> Instead, consistent with the recommendation 
of the State High Cost Report <SUP>10</SUP> and of many commenters, 
high-cost support attributable to the former LTS mechanism may increase 
based on changes in the nationwide average loop cost.<SUP>11</SUP> We 
therefore replace the phrase ``frozen per-line support'' in Sec. 69.502 
with the phrase ``per-line support.''
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    \9\ Universal Service Order at Paras. 297-99, 305-306.
    \10\ State Members' Report on the Use of Cost Proxy Models, 
dated March 26, 1997 (contained in the record of Federal-State Joint 
Board on Universal Service, CC Docket No. 96-45).
    \11\ Universal Service Order at Paras. 305-306. See 47 CFR 
54.303.
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    8. Other Local Switching Issues. In the Access Reform Order, we 
directed incumbent LECs to set per-minute rates for the transmission 
component of tandem-switched transport using ``the total actual voice-
grade minutes of use, geographically averaged on a study-area-wide 
basis, that the incumbent [LEC] experiences based on the prior year's 
annual use,'' <SUP>12</SUP> or averaged on a zone-wide basis where the 
incumbent LEC has implemented density pricing zones.<SUP>13</SUP> In 
new Sec. 69.111(l), however, we directed incumbent LECs to develop per-
minute charges for the shared multiplexers used on the end office side 
of the tandem switch, using as a denominator ``the projected annual 
access minutes of use calculated for purposes of recovery of common 
transport costs in paragraph (c) of this section.''<SUP>14</SUP> We 
will delete the word ``projected'' from this sentence of our rules. 
Paragraph (c) does not require a projection, but instead calls for the 
use of the prior year's historical data. For clarity, we also delete 
the extraneous phrase ``by the serving wire center side of the tandem 
switch'' from this section.
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    \12\ 47 CFR 69.111(c).
    \13\ 47 CFR 69.111(c)(2)(ii).
    \14\ 47 CFR 69.111(l)(1).
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II. TIC Reduction for Non-Price Cap Incumbent LECs

    9. In our Access Reform Order, we took steps to adopt a cost-based 
transport rate structure and to comply with the remand order issued by 
the United States Court of Appeals for the District of Columbia Circuit 
in Competitive Telecommunications Ass'n v. FCC (CompTel).<SUP>15</SUP> 
In complying with the CompTel remand, we took steps to eliminate or 
substantially reduce the transport interconnection charge (TIC), which 
we originally created as part of our interim transport rate 
structure.<SUP>16</SUP>
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    \15\ 87 F.3d 522 (D.C. Cir. 1996).
    \16\ Access Reform Order at Paras. 210-243. The TIC was created 
as part of the interim transport rate structure adopted in Transport 
Rate Structure and Pricing, Report and Order and Further Notice of 
Proposed Rulemaking, 57 FR 54717 (November 20, 1992).
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    10. We reassigned portions of the TIC to other rate elements, some 
of which were created in the Access Reform Order only for price cap 
carriers. In creating the new rate elements established for 
multiplexers used at the tandem switch, we ``direct[ed] incumbent LECs 
to establish separate rate elements for the multiplexing equipment on 
each side of the tandem switch.'' <SUP>17</SUP> This language 
potentially may be unclear, especially in light of subsequent language 
directing only ``price cap LECs [to] reallocate revenues'' to these 
rate elements.<SUP>18</SUP> As an initial matter, therefore, we here 
clarify that these rate elements apply only to price cap incumbent 
LECs.
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    \17\ Access Reform Order at para.170.
    \18\ Id. at <greek-a> 173.
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    11. We specifically directed carriers to reassign certain TIC 
amounts to newly created rate elements for trunk ports and multiplexers 
used at the tandem switch <SUP>19</SUP> and for DS1/voice grade 
multiplexers used at the local switch.<SUP>20</SUP> Because these rate 
elements were created only for price cap carriers, however, we take 
this opportunity to clarify the application of this section of our 
Access Reform Order with respect to incumbent LECs not subject to price 
cap regulation.
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    \19\ Access Reform Order at Paras. 171-173.
    \20\ Access Reform Order at Paras. 218-219.
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    12. In access tariffs filed to become effective January 1, 1998, 
incumbent LECs not subject to price cap regulation should assign TIC 
amounts attributable to trunk ports and multiplexers used at the tandem 
switch to the tandem switching rate element. Even though the specific 
rate elements created for these amounts do not yet exist for non-price 
cap carriers, the amounts involved relate broadly to the use of the 
tandem switch. Similarly, in access tariffs filed to become effective 
January 1, 1998, incumbent LECs not subject to price cap regulation 
should assign TIC amounts attributable to DS1/voice grade multiplexers 
used at analog local switches to the local switching rate element for 
recovery. Even though the specific rate elements created for these 
amounts do not yet exist for non-price cap carriers, the amounts 
involved relate broadly to the use of analog local switches. We will 
consider whether these amounts should be further reallocated to 
individual rate elements in our upcoming rulemaking proceeding 
addressing access charge reform for rate-of-return carriers.

III. Reallocation of Tandem Switching Costs

    13. Section 69.1(c) of our rules <SUP>21</SUP> limits the extent to 
which certain part 69 pricing rules apply to incumbent LECs subject to 
price cap regulation. Under the terms of Sec. 69.1(c), while a price 
cap LEC uses these part 69 rules, inter alia, to set initial charges 
for new rate elements, the price cap LEC thereafter has discretion to 
vary these charges, subject to the limitations of the relevant price 
cap index and any applicable service category banding constraints.
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    \21\ 47 CFR 69.1(c).
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    14. Section 69.111(g) governs the reallocation by all carriers of 
tandem switching amounts currently being recovered through the TIC to 
the tandem switching rate element. As our rules are currently 
constructed, Sec. 69.1(c) limits the extent to which Sec. 69.111(g)(1) 
applies to price cap carriers, as described above, but 
Secs. 69.111(g)(2) and 69.111(g)(3) are not so limited. We therefore 
revise Sec. 69.1(c) to clarify that Secs. 69.111(g)(2) and 69.111(g)(3) 
apply to price cap carriers only to the same extent as 
Sec. 69.111(g)(1). To reallocate tandem switching amounts as described 
in Sec. 69.111(g), price cap LECs must make downward exogenous 
adjustments to the interconnection charge service band index (SBI) and 
corresponding upward exogenous adjustments to the tandem-switched 
transport SBI at the times and in the amounts prescribed in 
Sec. 69.111(g)(1-3).<SUP>22</SUP> Thereafter, they may vary the tandem-
switching charge in

[[Page 40463]]

accordance with the part 61 price cap rules.
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    \22\ See Access Reform Order at para. 228.
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IV. Common Line Issues

    15. In the Access Reform Order, we directed each price cap carrier 
to calculate its subscriber line charge (SLC) based on the full average 
per-line interstate allocation of the common line revenue requirement, 
until its primary interexchange carrier charge (PICC) assessed on 
multi-line business (MLB) lines no longer recovers any common line 
revenues. At that time, we directed the price cap carrier to begin 
calculating the SLC based on average per-line common line revenues 
permitted under our price cap rules. <SUP>23</SUP> In certain 
situations, when the MLB PICC no longer recovers common line revenues, 
recalculation of the SLC may in turn create a common line residual to 
be recovered by the MLB PICC, making it impossible for the price cap 
LEC to develop a proper rate. Accordingly, we reconsider this aspect of 
our PICC rules, and take this opportunity to revise the triggering 
point at which a price cap carrier should begin calculating its SLC 
based on average per-line common line revenues permitted under the 
price cap rules. A price cap carrier should make this change in its SLC 
calculation when the maximum PICC assessed on primary residential 
lines, plus the maximum SLC on those lines, recovers the full amount of 
its per-line common line price cap revenues.
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    \23\ E.g., Access Reform Order at para. 102.
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V. General Support Facilities

    16. We also here reinstate portions of Sec. 69.307(c), relating to 
general support facilities (GSF), that were erroneously deleted in the 
Access Reform Order. We will address GSF cost allocation issues in a 
future order in this proceeding.

VI. Final Regulatory Flexibility Analysis

    17. In the Access Reform 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).<SUP>24</SUP> The 
changes we adopt in this Order do not affect that analysis.
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    \24\ Access Reform Order at Paras. 419-440.
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VII. Ordering Clauses

    18. Accordingly, it is ordered, pursuant to sections 1-4, 201-205, 
251, 254, 303, and 405 of the Communications Act of 1934, as amended, 
47 U.S.C. 151-154, 201-205, 251, 254, 303 and 405, and pursuant to 
section 1.108 of the Commission's rules, 47 CFR Sec. 1.108, that this 
Order on Reconsideration is adopted.
    19. It is further ordered that Sec. 69.307(c) of the Commission's 
rules, 47 CFR Sec. 69.307(c) is amended as set forth below, effective 
August 28, 1997.
    20. It is further ordered that Secs. 69.1(c), 69.106(b), 
69.111(g)(4), 69.111(l)(1), 69.152(b), and 69.502(c) of the 
Commission's rules, 47 CFR 69.1(c), 69.106(b), 69.111(g)(4), 
69.111(l)(1), 69.152(b), and 69.502(c), are amended as set forth below, 
effective January 1, 1998.

List of Subjects in 47 CFR Part 69

    Communications common carriers, Telephone.

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

    47 CFR, Part 69, is amended as follows:

PART 69--ACCESS CHARGES

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

    Authority: 47 U.S.C. 154(i) and (j), 201, 202, 203, 205, 218, 
254, and 403.

    2. Section 69.1(c) is revised to read as follows:


Sec. 69.1  Application of access charges.

* * * * *
    (c) The following provisions of this part shall apply to telephone 
companies subject to price cap regulation only to the extent that 
application of such provisions is necessary to develop the nationwide 
average carrier common line charge, for purposes of reporting pursuant 
to Secs. 43.21 and 43.22 of this chapter, and for computing initial 
charges for new rate elements: Secs. 69.3(f), 69.106(b), 69.106(f), 
69.106(g), 69.109(b), 69.110(d), 69.111(c), 69.111(g)(1), 69.111(g)(2), 
69.111(g)(3), 69.111(l), 69.112(d), 69.114(b), 69.114(d), 69.125(b)(2), 
69.301 through 69.310, and 69.401 through 69.412. The computation of 
rates pursuant to these provisions by telephone companies subject to 
price cap regulation shall be governed by the price cap rules set forth 
in part 61 of this chapter and other applicable Commission rules and 
orders.
    3. Section 69.106(b) is revised to read as follows:


Sec. 69.106  Local switching.

* * * * *
    (b) The per minute charge described in paragraph (a) of this 
section shall be computed by dividing the projected annual revenue 
requirement for the Local Switching element, excluding any local 
switching support received by the carrier pursuant to Sec. 54.301 of 
this chapter, by the projected annual access minutes of use for all 
interstate or foreign services that use local exchange switching 
facilities.
* * * * *
    4. Sections 69.111 (g)(4) and (l)(1) are revised to read as 
follows:


Sec. 69.111  Tandem Switched Transport and Tandem Charge.

* * * * *
    (g) * * *
    (4) A local exchange carrier that is subject to price cap 
regulation as that term is defined in Sec. 61.3(x) of this chapter 
shall calculate its tandem switching revenue requirement as used in 
this paragraph by dividing the tandem switching revenue requirement 
that was included in the original interconnection charge by the 
original interconnection charge, and then multiplying this result by 
the annual revenues recovered through the interconnection charge, 
described in Sec. 69.124, as of June 30, 1997. A local exchange carrier 
that is subject to price cap regulation as that term is defined in 
Sec. 61.3(x) of this chapter shall then make downward exogenous 
adjustments to the service band index for the interconnection charge 
service category (defined in Sec. 61.43(e)(2)(vi) of this chapter) and 
corresponding upward adjustments to the service band index for the 
tandem-switched transport service category (defined in 
Sec. 61.43(e)(2)(v) of this chapter) at the times and in the amounts 
prescribed in paragraphs (g)(1) through (g)(3) of this section.
* * * * *
    (l) * * *
    (1) Local exchange carriers must establish a traffic-sensitive 
charge for DS3/DS1 multiplexers used on the end office side of the 
tandem switch, assessed on purchasers of common transport to the tandem 
switch. This charge must be expressed in dollars and cents per access 
minute of use. The maximum charge shall be calculated by dividing the 
total costs of the multiplexers on the end office-side of the tandem 
switch by the annual access minutes of use calculated for purposes of 
recovery of common transport costs in paragraph (c) of this section. A 
similar charge shall be assessed for DS1/voice-grade multiplexing 
provided on the end-office side of analog tandem switches.
* * * * *
    5. Section 69.152(b) is revised to read as follows:

[[Page 40464]]

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

* * * * *
    (b) Except as provided in paragraphs (d) through (i) of this 
section, the maximum single line rate or charge shall be computed:
    (1) By dividing one-twelfth of the projected annual revenue 
requirement for the End User Common Line element by the projected 
average number of local exchange service subscriber lines in use during 
such annual period, only so long as a per-minute carrier common line 
charge is assessed or the maximum PICC assessed on primary residential 
lines, plus the maximum end user common line charge for primary 
residential lines, does not recover the full amount of its per-line 
common line price cap revenues; (and/or)
    (2) by dividing one-twelfth of the projected annual revenues 
permitted for the common line basket under the Commission's price cap 
rules, as set forth in Part 61 of this chapter, by the projected 
average number of local exchange service subscriber lines in use during 
such annual period, if no per-minute carrier common line charge is 
assessed and the maximum PICC assessed on primary residential lines, 
plus the maximum end user common line charge for primary residential 
lines, recovers the full amount of its per-line common line price cap 
revenues.
* * * * *
    6. Section 69.307(c) is added to read as follows:


Sec. 69.307  General support facilities.

* * * * *
    (c) All other General Support Facilities investments shall be 
apportioned among the interexchange category, the billing and 
collection category, and Common Line, Local Switching, Information, 
Transport, and Special Access elements on the basis of Central Office 
Equipment, Information Origination/Termination Equipment, and Cable and 
Wire Facilities, combined.
    7. Section 69.502(c) is revised to read as follows:


Sec. 69.502  Base factor allocation.

* * * * *
    (c) The portion of per-line support that carriers receive pursuant 
to Sec. 54.303.

[FR Doc. 97-19912 Filed 7-28-97; 8:45 am]
BILLING CODE 6712-01-P