Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Rules and Regulations 56121

Synopsis of Memorandum Opinion and

Order

1. The National Exchange Carrier

Association, Inc. (NECA) asserts in its

reconsideration petition that the

Commission should revise on

reconsideration the rule provisions

governing calculation of NECA carrier

common line (CCL) rates, without

waiting for the conclusion of a separate

proceeding on access charge reform for

rate-of-return LECs. In the alternative,

NECA requests that the Commission

issue an order waiving § 69.105(b)(2)–(3)

for NECA’s pool, so as to allow NECA

to reflect revised long term support

(LTS) formula amounts in its CCL tariff

rates effective January 1, 1998. No party

opposed or supported NECA’s petition

for reconsideration or waiver of the rule.

We have decided to waive the specified

rule provisions at this time, and make

appropriate rule revisions in the

separate proceeding.

2. Section 69.105(b) currently sets the

NECA CCL tariff at the average of pricecap LECs’ CCL charges. Prior to January

1, 1998, LTS is a variable amount, based

on the difference between the revenues

earned from charging a nationwide

average CCL rate and the NECA pool

CCL revenue requirement. In the

Universal Service Order, we substituted

federal universal service support

payments for previously-received

recovery from the interstate access

charge system through LTS. FederalState Joint Board on Universal Service,

Report and Order, CC Docket No. 96–45,

62 FR 32862 (June 17, 1997) (Universal

Service Order). The rule revisions in the

First Report and Order removed LTS

amounts from price cap LEC CCL

calculations, but postponed making

conforming revisions in § 69.105(b) to

the CCL rate calculation for NECA tariff

participants. Access Charge Reform, CC

Docket No. 96–262, First Report and

Order, 62 FR 31040 (June 6, 1997).

3. Section 1.3 of our rules empowers

the Commission to grant waivers of its

rules if good cause is shown. In this

situation, NECA must demonstrate that

special circumstances justify a

departure from the general rule and that

such a deviation will serve the public

interest. Northeast Cellular Telephone

Co. v. FCC, 897 F.2d 1164 (D.C. Cir.

1990); WAIT Radio v. FCC, 418 F.2d

1153 (D.C. Cir. 1969). We conclude that

NECA has demonstrated that continued

application of § 69.105(b)(2)–(3) would

be contrary to the public interest in

these circumstances. As we stated in the

Universal Service Order, the

‘‘elimination of price-cap (incumbent

LECs’) LTS obligations will allow their

CCL charges to fall, but there is no

corresponding reason for a reduction in

the NECA CCL tariff. Yet under our

current rules, the NECA CCL charge

would fall simply because of our

regulatory changes to price-cap

(incumbent LECs’) LTS payment

obligations. We must therefore establish

a new method to set the NECA CCL

tariff.’’

4. Because changes in the recovery of

LTS amounts and price-cap carrier CCL

rate computations as adopted in the

First Report and Order and Universal

Service Order are scheduled to become

effective on January 1, 1998, grant of the

waiver will allow NECA to conform its

rates to decisions reached in the

Universal Service Order by reflecting

revised LTS formula amounts in its CCL

tariff rates effective January 1, 1998. We

therefore waive § 69.105(b)(2)–(3) for the

calculation of NECA’s CCL pool rate

that will become effective January 1,

1998, on the condition that NECA must

compute the Carrier Common Line

charge as follows:

(a) From the NECA pool aggregate

Carrier Common Line revenue

requirement amount, subtract: (1)

Aggregate End User Common Line

charges; (2) aggregate Special Access

Surcharges; and (3) the portion of perline support that NECA CCL pool

participants receive, in the aggregate,

pursuant to 47 CFR 54.303.

(b) The premium originating Carrier

Common Line charge must be one cent

per minute, except as described herein

at paragraph (d), and

(c) The premium terminating Carrier

Common Line charge must be computed

by subtracting the projected revenues

generated by the originating Carrier

Common Line charges (both premium

and non-premium) from the number

calculated in paragraph (a), and

dividing the remainder by the sum of

the projected premium terminating

minutes and a number equal to 0.45

multiplied by the projected nonpremium terminating minutes, except as

described herein at paragraph (d).

(d) If the calculations described in

paragraph (c) result in a per minute

charge on premium terminating minutes

that is less than one cent, both the

originating and terminating premium

charges for the NECA CCL pool

participants must be computed by

dividing the number calculated

pursuant to paragraph (a) by the sum of

the premium minutes and a number

equal to 0.45 multiplied by the nonpremium minutes for the NECA CCL

pool participants.

This NECA CCL charge calculation

will reflect that now the CCL charge,

rather than LTS, is a residual amount.

Accordingly, it is ordered, pursuant to

47 U.S.C. 154(i) and 47 CFR 1.3, that

NECA’s request for waiver of

§ 69.105(b)(2)–(3) of the Commissions

rules, 47 CFR part 69.105(b)(2)–(3) is

granted subject to the limitations and

conditions described in this document.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 97–28544 Filed 10–28–97; 8:45 am]

BILLING CODE 6712–01–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 69

[CC Docket Nos. 96–262, 94–1, 91–213; FCC

97–368]

Access Charge Reform; Price Cap

Performance Review for Local

Exchange Carriers; Transport Rate

Structure

AGENCY: Federal Communications

Commission.

ACTION: Final rule; petition for

reconsideration.

SUMMARY: On December 23, 1996, the

Commission adopted a Notice of

Proposed Rulemaking in this docket, 62

FR 4670 (Jan. 31, 1997), seeking

comment on how the interstate access

charge regime should be revised in light

of the local competition and Bell

Operating Company entry provisions of

the Telecommunications Act of 1996

and state actions to open local markets

to competition, the effects of potential

and actual competition on incumbent

LEC pricing for interstate access, and

the impact of the Act’s mandate to

preserve and enhance universal service.

On May 7, 1997, the Commission

adopted a First Report and Order, 62 FR

31040 (June 6, 1997), in which it

adopted many of the rules it proposed.

In this Second Order on

Reconsideration, the Commission

modifies some of the rules adopted in

the First Report and Order. These rule

revisions are intended to foster

competition, move access charges over

time to more economically efficient

levels and rate structures, preserve

universal service, and lower rates.

EFFECTIVE DATES: The following rules or

amendments thereto, shall become

effective January 1, 1998: 47 CFR

69.153(g), 69.4, 69.111(c)(1),

69.153(c)(1), 69.153(d)(1)(i),

69.153(d)(2)(i), and 69.155(c). The

Commission has requested emergency

approval of the information collection

requirements to ensure that it may be
56122 Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Rules and Regulations

effective on January 1, 1998. Written

comments by the public on the new

and/or modified information collections

are due November 13, 1997. Written

comments must be submitted to the

Office of Management and Budget

(OMB) on the new and/or modified

information collections on or before

October xx, 1997.

FOR FURTHER INFORMATION CONTACT:

Richard Lerner, Attorney, Common

Carrier Bureau, Competitive Pricing

Division, (202) 418–1530. For additional

information concerning the information

collections contained in this Report and

Order contact Judy Boley at 202–418–

0214, or via the Internet at

jboley@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a

summary of the Commission’s Report

and Order adopted October 8, 1997, and

released October 9, 1997. The full text

of this Report and Order is available for

inspection and copying during normal

business hours in the FCC Reference

Center (Room 239), 1919 M St., N.W.,

Washington, DC. The complete text also

may be obtained through the World

Wide Web, at http://www.fcc.gov/

Bureaus/CommonlCarrier/Orders/

1997/fcc97368.wp, or may be purchased

from the Commission’s copy contractor,

International Transcription Service,

Inc., (202) 857–3800, 1231 20th Street,

NW, Washington, DC 20036. The rules

adopted in this Second Order on

Reconsideration are made in response to

petitions for reconsideration to Access

Charge Reform, CC Docket No. 96–262,

Report and Order, 62 FR 31040 (June 6,

1997) (First Report and Order), and to

correct clerical errors of the First Report

and Order. This Second Order on

Reconsideration contains new and/or

modified information collections subject

to the Paperwork Reduction Act of 1995

(PRA). It has been submitted to the

Office of Management and Budget

(OMB) for review under the PRA. OMB,

the general public, and other Federal

agencies are invited to comment on the

new and/or modified information

collections contained in this

proceeding. Please note that the

Commission has requested emergency

review and approval of this collection

by November 13, 1997 under the

provisions of 5 CFR 1320.13.

Final Regulatory Flexibility Analysis

In the First Report and 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, Pub. L. No.

104–121, 110 Stat. 847 (1996). The

changes we adopt in this Order do not

affect that analysis.

Paperwork Reduction Act

This Order contains either a proposed

or modified information collection. As

part of its continuing effort to reduce

paperwork burdens, we invite the

general public and the Office of

Management and Budget (OMB) to take

this opportunity to comment on the

information collections contained in

this Order, as required by the Paperwork

Reduction Act of 1995, Public Law 104–

13. Please note that the Commission has

requested emergency review and

approval of this collection by November

13, 1997 under the provisions of 5 CFR

1320.13. OMB notification of action is

due November 13, 1997. Comments

should address: (a) Whether the

proposed collection of information is

necessary for the proper performance of

the functions of the Commission,

including whether the information shall

have practical utility; (b) the accuracy of

the Commission’s burden estimates; (c)

ways to enhance the quality, utility, and

clarity of the information collected; and

(d) ways to minimize the burden of the

collection of information on the

respondents, including the use of

automated collection techniques or

other forms of information technology.

OMB Approval Number: 3060–0760.

Title: Access Charge Reform Second

Order on Reconsideration

Type of Review: Revised Collection

Respondents: Business and other for

profit.

Number of Respondents: 14.

Estimated Time Per Response:

128,907 hours.

Total Annual Burden: 1,804,690

hours.

Estimated Costs Per Respondent:

$4,504,388.

Total Annual Estimated Costs:

$63,061,430.

Needs and Uses: 1. In the First Report

and Order (Order), CC Docket No. 96–

262, Access Charge Reform and the

Second Order on Reconsideration, the

FCC adopts, that, consistent with

principles of cost-causation and

economic efficiency, non-traffic

sensitive (NTS) costs associated with

local switching should be recovered on

an NTS basis, through flat-rated, per

month charges. The information

collections are as follows:

a. Showings Under the Market-Based

Approach: As competition develops in

the market, the FCC will gradually relax

and ultimately remove existing Part 69

federal access rate structure

requirements and Part 61 price caps

restrictions on rate level changes.

Regulatory reform will take place in two

phases. The first phase of regulatory

reform will take place when an

incumbent Local Exchange Carrier’s

(LEC) network has been opened to

competition for interstate access

services. The second phase of rate

structure reforms will take place when

an actual competitive presence has

developed in the marketplace.

Detariffing will take place when

substantial competition has developed

for the access charge elements. In our

initial statement, we proposed that in

order for LECs to meet this standard,

they have to demonstrate that: (1)

Unbundled network element prices are

based on geographically deaveraged,

forward-looking economic costs in a

manner that reflects the way costs are

incurred; (2) transport and termination

charges are based on the additional cost

of transporting and terminating another

carrier’s traffic; (3) wholesale prices for

retail services are based on reasonably

avoidable costs; (4) network elements

and services are capable of being

provisioned rapidly and consistent with

a significant level of demand; (5) dialing

parity is provided by the incumbent

LEC to competitors; (6) number

portability is provided by the incumbent

LEC to competitors; (7) access to

incumbent LEC rights-of-way is

provided to competitors; and (8) open

and non-discriminatory network

standards and protocols are put into

effect. We propose that the second

phase of rate structure reforms would

take place when an actual competitive

presence has developed in the

marketplace. LECs would have to show

the following to indicate that actual

competition has developed in the

marketplace by: (1) Demonstrated

presence of competition; (2) full

implementation of competitively neutral

universal service support mechanisms;

and (3) credible and timely enforcement

of pro-competitive rules. In the NPRM,

we sought comment on four options for

a prescriptive approach: reinitializing

price cap indices (PCIs) to economic

cost-based levels; reinitializing PCIs to

levels targeted to yield no more than an

11.25 percent rate of return, or some

other rate of return; adding a policybased mechanism similar to the CPD to

the X-Factor; or prescribing economic

cost-based rates. We have decided above

to rely primarily on a market-based

approach, and impose prescriptive

requirements only when market forces

are inadequate to ensure just and

reasonable rates for particular services

or areas. We will determine the details

of our market-based approach in a

future Order. In that Order, we will also

discuss in more detail what prescriptive
Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Rules and Regulations 56123

requirements we will use as a backstop

to our market-based access charge

reform. Because we are not adopting the

prescriptive approach at this time, we

are removing the collections associated

with the prescriptive approach from our

statement. If the collections are adopted

at a later date, we will request that OMB

reinstates them at that time. No change.

b. Cost Study of Local Switching

Costs: The FCC does not establish a

fixed percentage of local switching costs

that incumbent LECs must reassign to

the Common Line basket or newly

created Trunk Cards and Ports service

category as NTS costs. In light of the

widely varying estimates in the record,

we conclude that the portion of costs

that is NTS costs likely varies among

LEC switches. Accordingly, we require

each price cap LEC to conduct a cost

study to determine the geographicallyaveraged portion of local switching

costs that is attributable to the line-side

ports, as defined above, and to

dedicated trunk side cards and ports.

These amounts, including cost support,

should be reflected in the access charge

elements filed in the LEC’s access tariff

effective January 1, 1998. No Change.

c. Cost Study of Interstate Access

Service That Remain Subject to Price

Cap Regulation: The 1996 Act has

created an unprecedented opportunity

for competition to develop in local

telephone markets. We recognize,

however, that competition is unlikely to

develop at the same rate in different

locations, and that some services will be

subject to increasing competition more

rapidly than others. We also recognize,

however, that there will be areas and

services for which competition may not

develop. We will adopt a prescriptive

‘‘backstop’’ to our market-based

approach that will serve to ensure that

all interstate access customers receive

the benefits of more efficient prices,

even in those places and for those

services where competition does not

develop quickly. To implement our

backstop to market-based access charge

reform, we require each incumbent

price cap LEC to file a cost study no

later than February 8, 2001,

demonstrating the cost of providing

those interstate access services that

remain subject to price cap regulation

because they do not face substantial

competition. No Change.

The Order also adopts the following

collection of information:

d. Tariff Filings: In the First Report

and Order, the Commission requires the

filing of various tariffs, with

modifications. For example, the FCC

directs incumbent LECs to establish

separate rate elements for the

multiplexing equipment on each side of

the tandem switch. LECs must establish

a flat-rated charge for the multiplexers

on the SWC side of the tandem,

imposed pro-rata on the purchasers of

the dedicated trunks on the SWC side of

the tandem. Multiplexing equipment on

the EO side of the tandem shall be

charged to users of common EO-totandem transport on a per-minute of use

basis. These multiplexer rate elements

must be included in the LEC access

tariff filings to be effective January 1,

1998. In the Second Order on

Reconsideration, the FCC clarifies that

the TIC exemption for access customers

using competitive transport providers

only applies to that portion of the

residual per-minute TIC that is related

to transport facilities, and directs

incumbent local exchange carriers to

include, in their access tariff filing, the

amount of per-minute transport

interconnection charge (TIC) they

anticipate will be allocated to facilitiesbased rate elements in the future.

e. Third-Party Disclosure: In the

Second Order on Reconsideration, the

Commission requires LECs to provide

IXCs with customer-specific information

about how many and what type of

presubscribed interexchange carrier

charges (PICCs) they are assessing for

each of the IXC’s presubscribed

customers. One of the primary goals of

our First Report and Order was to

develop a cost-recovery mechanism that

permits carriers to recover their costs in

a manner that reflects the way in which

those costs are incurred. Without access

to information that indicates whether

the LEC is assessing a primary or nonprimary residential PICC, or about how

many local business lines are

presubscribed to a particular IXC, the

IXC will be unable to develop rates that

accurately reflect the underlying costs.

SYNOPSIS OF REPORT AND ORDER

I. Presubscribed Interexchange Carrier

Charge

A. Implementation Issues

1. Background

1. In the First Report and Order, we

adopted common line rate structure

modifications that will permit price cap

LECs to shift gradually from a costrecovery mechanism that recovers a

significant portion of non-traffic

sensitive common line costs through

per-minute CCL charges to one that

recovers these costs through flat-rated

charges. The cost-recovery mechanism

we adopted retains the current $3.50

ceiling on the SLC for primary

residential and single-line business

lines and increases the SLC ceilings on

other lines to permit LECs to recover a

greater amount of the common line costs

through flat-rated charges assessed on

the end user. To the extent that SLC

ceilings prevent price cap LECs from

recovering their allowed common line

revenues from end users, LECs will

recover the shortfall, subject to a

maximum charge, through a

presubscribed interexchange carrier

charge (PICC), a flat, per-line charge

assessed on the end-user’s

presubscribed interexchange carrier.

2. The PICC, which over time will

shift revenue recovery from the perminute CCL charges to a flat-rated

charge assessed on IXCs, was designed

to allow price cap LECs to recover the

difference between revenues collected

through the SLCs and the total revenue

permitted for the common line basket.

In order to provide price cap LECs and

IXCs with adequate time to adjust to the

new rate structure, we adopted an

approach that will gradually phase in

the PICC over time. Specifically,

effective January 1, 1998, we capped

PICCs for primary residential and

single-line business lines at $0.53 per

month for the first year. Beginning

January 1, 1999, the ceiling on the

monthly PICC on primary residential

and single-line business lines will be

adjusted for inflation and will increase

by $0.50 per year until it equals the

monthly per-line common line revenues

and residual interconnection charge

revenues permitted under our price cap

rules, less the maximum SLC charge

allowed under our rules.

3. In addition, to the extent that the

SLC ceilings on all lines and the PICC

ceilings on primary residential and

single-line business lines prevent

recovery of the full common line

revenues permitted by our price cap

rules, the new rate structure we adopted

for price cap LECs permits these carriers

to recover the shortfall through PICCs

assessed on non-primary residential and

multi-line business lines. For the first

year, the ceiling on the PICC will be

$1.50 per month for non-primary

residential lines and $2.75 per month

for multi-line business lines.

4. Beginning January 1, 1999, the

PICC ceilings for price cap non-primary

residential and multi-line business lines

will be adjusted for inflation and will

increase by a maximum of $1.00 and

$1.50 per year, respectively, until

incumbent LECs can recover all of their

permitted common line revenues

through a combination of flat-rated SLCs

and PICCs. As the PICC ceilings on

primary residential and single-line

business lines increase, the residual perminute CCL charge will decrease until

it is eliminated. After the residual perminute CCL charge is eliminated and
56124 Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Rules and Regulations

the PICC ceilings for primary residential

and single-line business lines increase,

price cap LECs will reduce their PICCs

on non-primary residential and multiline business lines by a corresponding

amount. Reductions will be targeted

first to the PICCs on multi-line business

lines until the PICCs for those lines are

equal to the PICCs for non-primary

residential lines. Thereafter, price cap

LECs will apply the annual reductions

to both classes of customers equally

until the combined SLCs and PICCs for

primary residential and single-line

business lines recover the full average

per-line common line revenues

permitted under our price cap rules, and

the additional PICCs on non-primary

residential and multi-line business lines

no longer recover common line

revenues.

2. Sprint’s Petition for Reconsideration

5. On July 11, 1997 Sprint filed a

Petition for Expedited Reconsideration

and Clarification in which it requests

that the Commission reconsider certain

implementation issues related to the

PICCs adopted in the First Report and

Order. Sprint argues that these issues

need to be resolved prior to January 1,

1998, the effective date of the PICCs.

Specifically, Sprint requests that the

Commission require LECs to provide

IXCs with customer-specific billing

information that specifies the number

and type(s) of PICCs LECs will be

assessing for each of the IXCs’

presubscribed customers. Sprint asserts

that because LECs will be assessing IXCs

different PICCs for primary and nonprimary residential lines, IXCs may

choose to develop different residential

rates for these lines. Sprint argues that

IXCs will therefore need the customerspecific PICC information in order to

develop separate toll rates for calls

originated on these lines.

6. In addition, Sprint contends that in

a typical multi-line business

configuration IXCs are unable to

determine how many multi-line

business lines are presubscribed to

them. According to Sprint, unless the

LECs provide customer-specific PICC

information, IXCs are unable to know

how many of these local lines exist or

how many PICCs are being assessed for

these lines. Sprint argues that IXCs need

access to customer-by-customer PICC

data so that they have the ability to pass

through the PICCs directly to their

customers if they so choose.

7. In its petition, Sprint seeks

guidance from the Commission on how

LECs should assess PICCs where a

LATA encompasses territory in more

than one state, and a customer has one

IXC handling intraLATA interstate calls

and another IXC handling interLATA

interstate calls. Sprint suggests that the

PICC should be assessed on the

interLATA interstate carrier.

3. Discussion

8. We grant Sprint’s request that LECs

be required to provide IXCs with

customer-specific information about the

number and type(s) of PICCs they are

assessing for each of the IXC’s

presubscribed customers. We agree with

Sprint that this measure is necessary to

provide IXCs the opportunity to develop

a rate structure that recovers these costs

in a cost-causative manner. One of the

primary goals of our First Report and

Order was to develop a cost-recovery

mechanism that permits carriers to

recover their costs in a manner that

reflects the way in which those costs are

incurred. If an IXC were to receive a bill

for the aggregate amount of the PICCs

assessed on its presubscribed lines and

did not have access to information that

indicates for which lines the LEC is

assessing a primary or non-primary

residential PICC, the IXC would be

unable to develop residential rates that

accurately reflect the underlying costs of

providing service over those lines.

Similarly, in a multi-line business

configuration, without information

about the number of local business lines

that are presubscribed to a particular

IXC and the amount of PICCs being

charged for which lines, the IXC will

not be able to recover the costs of

serving its customers in an efficient

manner. We therefore conclude that

LECs must provide IXCs with

information about how many and what

type of PICCs they are charging IXCs for

each customer.

9. We conclude that there is

insufficient evidence in the record to

support arguments that providing

customer-specific PICC data to IXCs will

be overly burdensome and that

discrepancies can be resolved through

normal billing reconciliation processes.

In order to bill IXCs the proper amount,

LECs will presumably have to create a

database for purposes of determining

how many lines are presubscribed to

each IXC and what type of PICC is being

assessed for each of those lines. We

conclude that LECs must provide this

information to the IXCs to enable them

to develop rate structures that will

recover these costs efficiently.

10. We also grant Sprint’s request to

clarify how LECs assess PICCs in

situations where a customer for a

particular line has one presubscribed

carrier for interstate intraLATA calls

and another for interstate interLATA

calls. Dividing the PICC between two

IXCs based on actual calling patterns

would create an unnecessary

administrative burden that would

outweigh any minimal benefit.

Moreover, LATA boundaries that cross

state lines are the exception rather than

the rule, and interstate calls within a

LATA thus represent only a small

portion of interstate traffic. We therefore

conclude that in such cases, the PICC

shall be assessed on the interstate

interLATA carrier.

B. PICC Calculation

1. Background

11. In its petition for reconsideration,

Sprint argues that the Commission’s

formula for calculating PICCs will not

allow sufficient recovery of loop costs,

because the formula relies on base

period revenues divided by the

projected number of loops in use for

such annual period. Sprint contends

that such a formula would force PICCs

downward because revenues

determined on a base period would not

adequately reflect revenue growth

commensurate with projected growth in

loops. In turn, Sprint argues, underrecovery of loop costs through flat-rated

PICCs will necessitate greater reliance

on usage charges to recover non-trafficsensitive costs, undermining the

Commission’s efforts to align access

charges with the manner in which costs

are incurred.

2. Discussion

12. We clarify in this Order that the

rule describing the formula for

calculating PICCs relies on projected

revenues and projected loop counts. The

use of projected revenues and projected

loop counts is applicable to PICC

calculations conducted under sections

69.153(c) and 69.153(d) of our rules. We

note that the rule setting forth the

method of calculating SLCs expressly

incorporates projected revenues and

projected loop numbers. Although the

PICC rule does not expressly state that

projected revenues are to be used in the

formula, the rule has been designed to

use projected revenues rather than

revenues derived from a base period.

Accordingly, there is no ‘‘mismatch’’

caused by dividing projected loops by

base period revenues. We will, however,

amend our rules to state explicitly that

the projected revenues must be used to

conduct the PICC calculation.

13. In our First Report and Order, we

adopted section 69.153(c)(1) in which

we directed incumbent LECs to

calculate the maximum monthly PICC

for primary residential subscriber lines

and single-line business lines by using

‘‘one twelfth of the sum of annual

common line revenues and residual
Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Rules and Regulations 56125

interconnection charge revenues

permitted under our price cap rules

divided by the projected average

number of local exchange service

subscriber lines in use during such

annual period, minus $3.50.’’ On further

consideration of section 69.153(c)(1), we

recognize that, as written, this rule may

not permit an incumbent LEC to recover

its residual interconnection charge

revenues from primary residential and

single-line business lines when its

maximum primary residential and

single-line business SLC is less than

$3.50. On our own motion, therefore, we

take this opportunity to reconsider this

issue and revise section 69.153(c)(1). We

replace the phrase ‘‘minus $3.50’’ with

the phrase ‘‘minus the maximum

subscriber line charge computed

pursuant to section 69.152(d)(2).’’

In the First Report and Order, we also

adopted section 69.153(d)(2)(i), which

instructs incumbent LECs how to

calculate the maximum monthly PICC

for multi-line business lines when the

maximum charge for the non-primary

residential PICC is at its cap. The rule

was intended to provide that the

calculation be performed by taking

‘‘[o]ne twelfth of the annual common

line, residual interconnection charge,

and § 69.156(a) marketing expense

revenues permitted,’’ less the maximum

amounts permitted to be recovered

through the SLC, the other PICCs, and

other marketing expense recovery

mechanisms. In crafting the language of

the rule, however, we identified the

maximum amount permitted to be

recovered from the non-primary

residential PICC as section

69.153(d)(1)(i) instead of section

69.153(d)(1). We correct this error to

take into account the fact that the cap

on the non-primary residential PICC

limits the amount that charge can

recover.

C. Application of PICCs to Centrex Lines

1. Background

15. The First Report and Order

requires that the PICC recover common

line revenues not recovered from the

SLC and other common line charges,

and that the PICC be applied on the

same basis as the SLC. Centrex

arrangements are charged more SLCs

than are similarly-sized PBX

arrangements. Consequently, the First

Report and Order requires that Centrex

arrangements be assessed a greater

number of PICCs than are similarlysized PBX arrangements.

22. Petitions

16. USTA, ICA, and the County of Los

Angeles (Los Angeles) assert that the

number of PICCs that are assessed on

Centrex arrangements should equal the

number of PICCs assessed on similarlysized PBX arrangements. They contend

that the revenues recovered from

Centrex arrangements by the PICC are

unrelated to the costs of providing

Centrex service. They argue that Centrex

customers currently pay one SLC per

line, which recovers the full interstate

portion of common line costs used to

provide Centrex service. They further

contend that the disproportionate level

of PICC Centrex charges unfairly

subjects Centrex systems to

anticompetitive and arbitrary charges,

which is contrary to the clear intent of

Congress that subsidies be explicit and

cost-based.

17. ICA observes that the

Commission’s rules appear to apply to

lines that are toll restricted, thereby

penalizing customers that attempt to

control costs and reduce the possibility

of toll fraud. According to ICA, many

Centrex customers require that a portion

of their Centrex lines be toll restricted.

ICA argues that toll-restricted Centrex

lines should not be subject to any PICCs.

18. Petitioners propose that LECs be

permitted to reflect trunk equivalency.

They propose that the PICC on Centrex

lines be assessed using a line-to-trunk

equivalency ratio. Such ratios are

already set forth in intrastate tariffs. In

the absence of an intrastate tariff, the

LECs could develop such a ratio, or

there could be agreed upon industry

relationships between the Centrex lines

and trunks. USTA also suggests that

LECs should be permitted to count

Network Access Registers (NARs) for

purposes of assessing the PICC on

Centrex customers. USTA contends that

NARs are equivalent to PBX trunks

since one NAR provides one link to the

switch. In an ex parte filing, USTA has

indicated that in order to address the

complexity and verification problems of

using individual state tariffs or

individual company ratios, the

Commission should adopt a uniform

line-to-trunk equivalency ratio of 9 to 1.

3. Discussion

19. We grant the petitions of USTA,

ICA, and Los Angeles that the PICC be

assessed on Centrex lines using a lineto-trunk equivalency ratio. For the

reasons discussed below, we adopt

USTA’s proposal to use a uniform 9:1

ratio. In large part, the multi-line

business PICC is not a cost-based

charge, but a contribution, ‘‘for a limited

period, to the recovery of common line

costs that incumbent LECs incur to

serve single-line customers.’’ It is

therefore reasonable to consider noncost factors in determining how to

assess the PICC. We conclude that with

respect to the PICC, Centrex customers

should be treated similarly to PBX

customers, because the two

arrangements are functionally

equivalent.

20. Petitioners state that Centrex and

PBX arrangements are functionally

equivalent, and opposing parties do not

dispute this assertion. We do not wish

to encourage a large customer to choose

one of these arrangements, PBX, over

another, Centrex, simply because, as a

result of its IXC being charged

substantially more PICCs, i.e., non-costrelated charges, for Centrex service, the

PBX service becomes cheaper.

21. In addition, many Centrex users

are government, education, and health

care facilities. We note that more than

25 percent (18,640) of Los Angeles’s

67,000 Centrex lines, which do not

include Los Angeles County public

schools are used by health care

facilities. Without using a line-to-trunk

equivalency ratio, Los Angeles could be

required to pay an additional $2.8

million annually in PICCs, if its

presubscribed IXC passes these charges

through. New York could see the

implementation of the PICC increase its

rates by over $2.4 million annually, if

these charges are passed through by its

IXC. Boston University, with its 10,000

Centrex lines, faces a potential increase

of $330,000 per year in PICCs. By

granting the petitions for relief, we

ensure that all multi-line business

customers shoulder a similar portion of

the PICC contribution, irrespective of

whether they use Centrex or PBX

arrangements.

22. Centrex arrangements are charged

SLCs on a per-line basis, even though

this difference results in a higher rate

than equivalent PBX arrangements have

to pay. That differential is due to the

additional common line costs that

Centrex lines incur. Historically, the

Commission has declined to apply a

trunk equivalency ratio for Centrex

services, under the rationale that ‘‘[i]f

Centrex uses more lines, then Centrex

necessarily creates more line costs.’’

Unlike the SLC, in most instances, the

multi-line business PICC will not

recover loop costs of multi-line

businesses. Instead, it will contribute to

the recovery of the cost of single-line

business and residential loops, which

have lower SLC and PICC caps. Centrex

and PBX are functionally equivalent in

most respects. Taking these factors into

consideration, it would be inequitable to

require Centrex users to cause its

presubscribed IXC to bear a significantly

larger PICC contribution than do

similarly-sized PBX users.
56126 Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Rules and Regulations

23. Therefore, we will limit the PICC

charges that may be assessed on IXCs

serving Centrex customers on a line-totrunk equivalency basis, except where

the multi-line business SLC ceiling does

not permit the recovery of all interstateallocated loop costs from the end user.

In those instances, a somewhat greater

PICC—one that includes the difference

between the per-line loop cost and the

multi-line business SLC cap—will be

assessed on Centrex lines. Thus, for

example, if on January 1, 1998, in a

particular region the loop cost is $9.40,

and the maximum permitted multi-line

business PICC is being assessed, i.e.,

$2.75, each Centrex line would be

assessed a $0.71 PICC, which is equal to

one-ninth of $2.75 plus the difference

between the $9.40 loop cost and the

$9.00 SLC.

24. In determining the appropriate

line-to-trunk equivalency ratio, we

consider several factors. First, we

observe that many states, but not all,

already have trunk equivalency tables

for their intrastate tariffs. USTA has

indicated that although these tables are

similar, they are not identical. For

example, USTA states that a Centrex

customer with 70 lines is equivalent to

a PBX customer with 13 trunks, while

Ameritech states that in Illinois, the

equivalency tariff for 70 Centrex lines is

8 PBX trunks. Adopting the trunk

equivalency ratios set out in intrastate

tariffs would result in different

equivalency ratios being used in

different states and would not provide

a trunk equivalency ratio for many

states. Because the trunk equivalency

ratio we adopt today is for an interstate

charge, a national standard for trunk

equivalency ratio is appropriate.

25. We also desire administrative ease

in calculating trunk equivalency.

Adoption of a single ratio would

simplify the assessment of PICCs on

Centrex lines by eliminating the use of

multiple ratios from multiple tables or

state tariffs. IXCs would have the benefit

of knowing that they will be assessed a

set fraction of the PICC for each Centrex

line that is presubscribed to their

service, even when Centrex customers

have lines presubscribed to different

IXCs. Therefore, we have elected to

adopt a single trunk equivalency ratio

for establishing PICC charges for all

Centrex lines. USTA suggested a ratio of

nine (9) Centrex lines to one (1) PBX

trunk. It bases its recommendation on

the average of the weighted average

trunk equivalency ratios or relationship

between NARs and Centrex lines that

are employed in several jurisdictions.

Applying a 9:1 ratio would result in a

maximum PICC on Centrex lines of

approximately $0.30 per line in 1998 for

the overwhelming majority of Centrex

lines. We note that the ratio under some

state tariffs can approach 18 to 1 for

certain Centrex customers. Reducing the

PICC from up to $2.75 to less than $0.31

achieves the goal of spreading the PICC

contribution more equitably among

multi-line business customers. Using a

more complicated approach to establish

equivalency may only add a marginal

benefit, increasing or reducing PICCs by

less than $0.16, and does not outweigh

the additional administrative costs. We

adopt the 9:1 ratio proposed by USTA,

finding it to be reasonable and

administratively simple.

26. Time Warner is correct in

observing that our treatment of Centrex

arrangements differs from how we

addressed ISDN service in the First

Report and Order. There, we set the SLC

for PRI ISDN to be up to five times the

amount assessed multi-line business

subscribers, because that figure reflects

the ratio of non-traffic sensitive loop

costs associated with PRI ISDN service

to non-traffic sensitive costs associated

with other multi-line business loops.

We also elected to permit incumbent

LECs to assess up to five PICCs on PRI

ISDN service because ‘‘prohibiting

incumbent LECs from charging as many

as five PICCs for PRI ISDN service could

prevent them from recovering the

common line costs associated with

providing PRI ISDN service in cases

where the common line costs exceed the

SLC ceiling.’’

27. In both our treatment of ISDN

lines and Centrex lines, our goal is to

establish an equitable sharing of the

multi-line business PICC. Prior to the

adoption of the First Report and Order,

we had no rules relating to the PICC. We

had no evidence to the contrary that the

assessment of five PICCs for PRI ISDN

was inappropriate, so we elected to be

consistent as between SLC and PICC

assessment. Previously, however, ISDN

lines could be charged up to 24 SLCs.

The adjustment from 24 SLCs to five

SLCs and five PICCs does not create

undue hardship on ISDN subscribers,

and the First Report and Order should

reduce their overall rates.

28. Time Warner also argues that

imposing the PICC on Centrex on a perline basis is part of the Commission’s

access charge transition to a more costcausative rate structure. Although the

multi-line PICC is part of our transition,

this alone does not justify requiring

Centrex customers to make a greater

contribution toward recovery of the loop

cost of residential customers than do

PBX customers. Teleport’s assertion that

petitioners are exaggerating the impact

of the PICC on Centrex users, because

the amount of the charge is substantially

less than the SLC, ignores the fact that

the SLC recovers the additional costs

imposed by Centrex customers, while

the PICC does not.

29. We deny ICA’s petition that we

not assess PICCs on toll-restricted

Centrex lines. Although the PICC is

assessed upon IXCs for all lines that are

presubscribed to an IXC, the PICC is not

a charge based on toll usage or on the

ability to place toll calls. The

Commission anticipated that some lines

might not be used for long distance

when it adopted a rule allowing PICCs

to be assessed directly upon end users

for any line not presubscribed to an IXC.

The fact that toll-restricted Centrex lines

incur no long-distance charges is,

therefore, irrelevant. Also, costs for

these lines are assigned to the interstate

jurisdiction by separations, regardless of

whether the lines are toll-restricted.

II. Transport

A. TIC Exemption

1. Background

30. The Commission created the TIC

originally as a residual charge to ensure

that its adoption of the 1992 interim

transport rate structure was revenueneutral for the incumbent LECs. As

such, the Commission required that the

TIC be assessed on a per-minute basis

on all interstate access customers that

interconnect with the LEC switched

access network. A portion of the TIC

represented the 80 percent of the costs

of the tandem switch remaining after the

Commission set the tandem-switching

rate to recover only 20 percent of the

tandem-switching revenue requirement.

The rest of the revenues collected from

the TIC represented costs previously

recovered through transport charges that

could not, at that time, be associated

definitively with specific facilities or

services related to transport. The

Commission stated in the First

Transport Order that, in addition to

tandem-switching costs, the TIC likely

recovered: (a) Costs more appropriately

recovered through other rate elements;

(b) costs that more properly belong in

the intrastate jurisdiction, but that the

Part 36 jurisdictional separations rules

allocate to the interstate jurisdiction; (c)

costs of facilities that were then in

place, but not needed for transport

under the more efficient transport rate

structure being adopted; and (d) costs of

not-fully-depreciated copper plant that

was nevertheless being replaced by less

expensive fiber optic facilities.

Transport Rate Structure and Pricing,

Report and Order and Further Notice of

Proposed Rulemaking, 57 FR 54717

(November 20, 1992) (First Transport

Order). The Commission also cited
Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Rules and Regulations 56127

assertions by parties to that proceeding

that the TIC also recovered (e) general

support facilities (GSF) and central

office equipment (COE) maintenance

expenses and GSF investment that were

overallocated to the transport category;

and (f) additional costs that the

Commission had not then identified.

31. In reviewing the Commission’s

interim transport rate structure, the

United States Court of Appeals for the

District of Columbia Circuit (D.C.

Circuit) found that the just and

reasonable rates required by Sections

201 and 202 of the Communications

Act, 47 U.S.C. §§ 201–202, must

ordinarily be cost-based, absent a clear

explanation of the Commission’s

reasons for a departure from cost-based

ratemaking. Competitive

Telecommunications Ass’n v. FCC, 87

F.3d 522, 529 (D.C. Cir. 1996)

(‘‘CompTel’’). The D.C. Circuit,

therefore, directed the Commission to

develop a cost-based alternative to the

TIC, or to provide a reasoned

explanation for its departure from the

principles of cost-based ratemaking.

32. In the First Report and Order, we

reformed the TIC and set forth a plan

that will eliminate per-minute TIC

charges over the next few years. We

initially identified TIC amounts that

could be associated with particular

network facilities and directed

incumbent LECs to reallocate these TIC

amounts to access rate elements more

closely corresponding to those network

facilities. These LECs will perform the

required reallocations in access tariffs

filed to become effective January 1,

1998, with some exceptions. For

example, the portion of tandemswitching costs that the Commission

initially allocated to the TIC will be

reallocated to the tandem-switching rate

element in three approximately equal

steps concluding January 1, 2000. In

addition, the costs of the incumbent

LECs’ tandem-switched transport

transmission facilities that are not

recovered from tandem-switched

transport users under the unitary rate

structure will be recovered through the

TIC until July 1, 1998.

33. For price cap LECs, the ‘‘residual

TIC,’’ consisting of amounts that the

LEC has not reallocated as described

above, will be recovered through perline PICCs, to the extent possible while

remaining within the PICC caps.

Residual TIC amounts that the price cap

LEC cannot recover through PICCs will

be recovered through a per-minute TIC

on originating access, up to a cap, with

any remainder recovered from perminute charges assessed on terminating

access.

In the First Report and Order, we

recognized that the per-minute TIC,

because it is assessed on all transport

minutes carried on facilities that

interconnect with the incumbent LEC’s

local switch, may give the incumbent

LEC a competitive advantage in the

transport market. We therefore provided

a TIC exemption for switched minutes

carried by competitive access providers

(CAPs) that interconnect with the

incumbent LEC switched access

network at the end office, stating that,

‘‘if the incumbent LEC’s transport rates

are kept artificially low and the

difference is recovered through the TIC,

competitors of the incumbent LEC pay

some of the incumbent LEC’s transport

costs.’’ This TIC exemption is scheduled

to take effect on January 1, 1998.

2. Petitions for Reconsideration and

Petitions for Stay

a. AT&T and Teleport. 35. On

reconsideration, AT&T and Teleport

request that we permit the per-minute

residual TIC exemption for switched

minutes carried by CAPs that

interconnect with the incumbent LEC

switched access network at the end

office to take effect immediately, rather

than on January 1, 1998. According to

Teleport, the Commission, having

recognized that the imposition of TIC

charges on CAP-transported minutes is

‘‘inconsistent with the pro-competitive

goals of the 1996 Act,’’ should not

permit the practice to continue

throughout the balance of calendar

1997.

b. RCN. 36. RCN argues that the TIC

exemption contained in the First Report

and Order preserves the incumbent

LECs’ competitive advantage because it

exempts CAP-transported minutes only

from the ‘‘residual’’ TIC. In making this

argument, RCN interprets the term

‘‘residual TIC’’ to include only nonfacilities-related TIC amounts. Under

RCN’s interpretation, the ‘‘residual TIC’’

would not include facilities-related TIC

amounts that will remain in the TIC

until they are reallocated as late as

January, 2000.

c. U S West and NYNEX Petitions for

Stay. 37. NYNEX and U S West

separately have filed petitions

requesting that the Commission stay the

effectiveness, pending appeal, of 47 CFR

69.155(c), the rule we adopted in the

First Report and Order prohibiting local

exchange carriers from assessing the

per-minute residual TIC on traffic that

uses the LEC’s local switching services,

but that does not use the LEC’s local

transport services. NYNEX and U S West

argue that such a stay is warranted

because they are likely to prevail on the

merits of their respective appeals and

that the balance of equities favors a stay.

NYNEX and U S West further argue that

the rule should be stayed in its entirety,

to allow them to recover the entire perminute TIC, without regard for the

transport provider. In the alternative,

however, NYNEX requests a partial stay

to allow it to so recover the nonfacilities-related portion of the TIC.

38. Procedurally, NYNEX maintains

that the Commission failed to offer an

adequate opportunity for public

comment on the residual TIC

exemption, in that the Commission’s

Notice, Access Charge Reform, CC

Docket No. 96–262, Notice of Proposed

Rulemaking, 62 FR 6270 (January 31,

1997) (Notice), failed to provide

adequate notice of the TIC exemption

and that the Commission improperly

relied on a CompTel/Teleport ex parte

presentation made three weeks before

the Order was adopted.

39. Substantively, NYNEX argues that

the Commission’s decision to prohibit

assessment of the residual TIC on

minutes that use CAP transport

networks is inconsistent with the

Commission’s findings that a large

portion of the TIC is not related to any

specific transport or other facilities.

40. NYNEX also argues that the

Commission has failed to explain why

it is reasonable for the LEC to recover

both service-related and non-servicerelated TIC amounts from PICCs, but

neither component from the per-minute

residual TIC.

41. NYNEX also argues that the use of

price cap X-factor reductions to

decrease the per-minute TIC will

effectively reallocate the per-minute

residual TIC to other rate elements as

the per-minute TIC is reduced to the

exclusion of all other rate elements.

According to NYNEX, the residual TIC

is completely excluded only to the

extent that the X-factor targeting has not

reallocated it to a permitted rate

element. NYNEX argues that the

Commission has not offered a

justification for disallowing TIC

recovery only during this transition

period.

42. NYNEX argues that the CAP TIC

exemption is arbitrary in that it will

have a disproportionately harsh effect

on NYNEX, and that this non-uniform

impact will hinder the development of

‘‘full and fair’’ competition. Similarly,

U S West argues that, by making it

difficult or impossible for it to collect

the per-minute TIC, the TIC exemption

is contrary to the Commission’s decision

not to disallow any portion of the

current TIC.

43. NYNEX also argues that the TIC

exemption contradicts the

Commission’s conclusion that access
56128 Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Rules and Regulations

reform, in itself, should not produce

overall rate reductions because the price

cap LECs’ per-minute TIC revenues are

likely to be less than those calculated in

the restructure. As a result, the price cap

LECs will be unable to collect the full

amount of revenues from per-minute

residual TIC rates or PICCs that will be

included in their January 1, 1998, tariff

revisions.

44. NYNEX and U S West argue that

an exemption for the service-related

portion of the TIC is inconsistent with

the Commission’s continued reliance on

subsidization of tandem-switching rates

by direct-trunked transport customers

until December 31, 1999.

45. U S West argues that, after January

1, 1998, the TIC will consist of implicit

tandem switching and universal service

support subsidies (including the higher

costs of providing rural transport) and

that the TIC exemption results in a

collection system for this subsidy that is

non-sustainable, discriminatory, and

inequitable.

3. Discussion

46. We decline to modify the effective

date of 47 CFR 69.155(c) as AT&T and

Teleport request. Although some of the

Commission’s actions to reform the

interstate access charge system took

effect in access tariffs filed to become

effective July 1, 1997, the majority of the

Commission’s rate structure changes

take effect on January 1, 1998, or later.

Because the TIC exemption at issue here

is one part of our larger effort to reform

the system of interstate access charges to

preserve and promote competition, we

believe that the rule should take effect

on January 1, 1998, at the same time as

many of our other rules relating to the

transport rate structure. Incumbent LEC

access tariffs filed to become effective

on that date will reallocate many of the

currently-identified facilities-related

TIC amounts to other rate elements. In

addition, on January 1, 1998, for the first

time, the incumbent LECs will begin

collecting remaining TIC amounts from

PICCs assessed to IXCs on a flat-rate,

per-line basis. Because a portion of the

TIC, including some facilities-related

TIC amounts, will be allocated to PICCs

on January 1, 1998, we conclude that

the extent of the exemption we adopt

here will not be evident until these tariff

revisions take effect. Thus, we conclude

that the exemption should take effect

only in concurrence with the

implementation of the PICC.

47. We agree with RCN and MCI that

we should clarify the extent of the TIC

exemption described in the First Report

and Order. In addition, in response to

concerns raised in NYNEX’s and U S

West’s petitions for stay, we reconsider

on our own motion our adoption of the

TIC exemption provided in the First

Report and Order. 47 CFR 1.108. Under

long-established Commission practice,

the filing of a petition for

reconsideration tolls the thirty day

period our rules provide for sua sponte

reconsideration. E.g., Central Fla.

Enters., Inc. v. FCC, 598 F.2d 37, 48 n.51

(D.C. Cir. 1978), cert. dismissed, 441

U.S. 957 (1979), and cert. denied 460

U.S. 1084 (1983); Radio Americana, Inc.

44 F.C.C. 2506, 2510 (1961). Upon

further consideration, we conclude that

the TIC exemption provided in the First

Report and Order could provide an

unjustified windfall to competitive

providers of local transport. Because the

non-facilities-related portion of the

residual TIC does not relate to the use

of the incumbent LEC’s interstate

transport facilities, we need not exempt

competitors from paying this portion of

the TIC in order to prevent them from

paying for the incumbent LEC’s

transport when that transport is not

used. Therefore, incumbent LECs may

continue, after January 1, 1998, to assess

upon all local switching traffic that

portion of their per-minute TIC charges

that they do not anticipate will be

reallocated in the future to facilitiesbased rate elements. This is the only

portion of the per-minute TIC, however,

that may be assessed upon traffic that

uses the incumbent LEC’s local

switching services, but that does not use

the incumbent LEC’s local transport

services. Under this rule, interexchange

traffic that is switched at the incumbent

LEC’s local switch, but that is not

transported on the incumbent LEC’s

local transport network, will be subject

to the per-minute TIC, less the portion

of the per-minute TIC attributable to

incumbent LEC tandem-switching and

tandem-switched transport transmission

costs that have not yet been reallocated

to facilities-based rate elements. In

access tariff revisions filed to become

effective January 1, 1998, incumbent

LECs must show all such facilitiesrelated amounts that they anticipate will

be reallocated in the future, including

appropriate documentation, and

calculate separate per-minute TIC

charges for those minutes that use the

incumbent LEC’s local transport

facilities and those that do not.

48. In remanding the interim rate

structure, the D.C. Circuit instructed the

Commission to ‘‘move expeditiously

* * * to a cost-based alternative to the

[TIC], or to provide a reasoned

explanation of why a departure from

cost-based ratemaking is necessary and

desirable in this context.’’ For our rate

structure to be ‘‘cost-based,’’ costs must

be recovered (1) only from the party that

causes the costs to be incurred; and (2)

in the manner in which the costs are

incurred (e.g., non-traffic-sensitive costs

should be recovered on a non-traffic

sensitive basis).

49. Our First Report and Order

identified certain costs within the TIC

that more properly should be recovered

through other access rate elements.

These costs include additional trunking

costs left unrecovered by rates set

assuming a uniform loading of 9000

minutes of use per month on shared

trunks, rather than rates set using actual

traffic levels, as well as misallocated

costs of central office equipment

maintenance. In addition, we identified

costs related to multiplexing, SS7

signalling, and host/remote trunking

that are currently recovered through the

TIC. LECs must reallocate all of these

costs to facilities-based rate elements in

access tariffs filed to become effective

January 1, 1998. In addition, one third

of the 80 percent of the costs of the

tandem switch currently assigned to the

TIC will be reallocated to the tandem

switching rate element on that date.

50. After January 1, 1998, the costs

contained in the TIC that the

Commission has identified as facilitiesrelated will have two primary sources.

The majority of the facilities-related TIC

will consist of the portion of the

incumbent LEC’s tandem-switching

costs not yet reallocated to the tandemswitching rate element. These costs will

be reallocated to the tandem-switching

rate element in two additional

installments in tariffs filed to become

effective on January 1, 1999, and

January 1, 2000. In addition, from

January 1, 1998, until July 1, 1998, the

TIC will also recover the costs of

tandem-switched transport transmission

facilities that are not recovered by the

incumbent LEC from tandem-switched

transport customers electing the unitary

rate structure. These TIC amounts are

also facilities-related. In the First Report

and Order, we directed incumbent LECs

to remove costs from the TIC ‘‘equal to

the additional revenues realized from

the new tandem-switched transport

rates * * * implemented in accordance

with the [final transport] rate structure.’’

Because the three-part rate structure

will not take effect until July 1, 1998, we

require incumbent LECs to estimate in

their tariffs filed to become effective

January 1, 1998, the amount by which

their tandem-switched transport

transmission revenues will increase

under the three-part rate structure. This

amount, currently contained in the TIC,

is facilities-related and therefore subject

to the exemption described in this

order.
Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Rules and Regulations 56129

51. Neither the tandem-switching

costs nor the tandem-switched transport

transmission costs contained in the TIC

relate to facilities used by purchasers of

competitive alternatives to the

incumbent LEC’s transport facilities.

The D.C. Circuit remanded the interim

transport rate structure to the

Commission in part because that rate

structure did not recover the costs of the

tandem switch in a cost-causative

manner. Our First Report and Order, in

reallocating these costs, remedies this

situation as expeditiously as possible

while minimizing the potential for rate

shock that otherwise might accompany

such a shift. Because these costs are

incurred on behalf of the incumbent

LEC’s own transport operation,

however, it would be inconsistent with

the principles of cost-causation to

prolong the recovery of these costs from

users of competing transport facilities.

52. Our approach to access reform

relies first on increasing market-based

pressures as competition develops to

place downward pressure on access

charge levels. We conclude that, for this

approach to succeed, we should develop

a rate structure that permits maximum

competitive pressure on each incumbent

LEC revenue stream, absent compelling

public policy reasons to the contrary. It

would impair the effectiveness of our

market-based approach for us to insulate

a significant portion of the costs of the

incumbent LEC’s transport facilities

from competition by mandating

recovery of these costs from incumbent

LEC competitors.

53. We recognize that, during the twoyear transition period, our rules will

continue to prohibit the incumbent LEC

from allocating the full, embedded cost

of the tandem switch to the tandemswitching rate element. The effect of our

three-step reallocation process will be to

permit a continued subsidy of the

incumbent LEC’s tandem switch by

users of the incumbent LEC’s directtrunked transport facilities and

minimize any rate shock for tandemswitched transport customers. Because

the incumbent LEC’s competitors

offering transport services will not be

subject to this subsidy, they may enjoy

a slight competitive advantage over the

incumbent LEC.

54. We find, however, that the

competitive benefits to be gained from

recovering these costs only from the

incumbent’s customers and not from

customers using competitive transport

providers outweigh any potential

dangers resulting from the small,

temporary asymmetry caused by the TIC

exemption we provide here. Even

though the full costs of the incumbent

LEC’s tandem switch will not be borne

by the users of the tandem switch until

January, 2000, the effects of the TIC

exemption will be reduced substantially

before that time as the incumbent LEC

collects an increasing proportion of the

tandem-switching costs remaining in

the TIC through PICCs. As discussed

below, we continue to permit the

incumbent LEC to assess the full PICC

on each of its loops, without regard for

the type or provider of the transport the

IXC uses to transport the minutes

generated by that loop from the end

office to the IXC’s facilities. As the

portion of the incumbent LEC’s tandemswitching costs that is recovered

through the per-minute TIC decreases,

any potential adverse effects of this

small asymmetry will rapidly decrease.

In contrast, if we were to mandate

recovery of this portion of the

incumbent LEC’s tandem-switching

costs from all customers using the

incumbent LEC’s local switching

facilities, without regard for whether

they make use of the incumbent LEC’s

transport facilities, we would insulate

this revenue from much of the pressure

we anticipate will develop as

competitors enter the local service and

access markets. The resulting delay in

competitive entry would be harmful to

consumers, who will benefit most from

increased competition.

55. We revise the TIC exemption

contained in our First Report and Order,

however, to permit the incumbent LEC

to impose the remaining non-transport

costs assigned to the TIC on all minutes

switched by the incumbent LEC at its

end office, without regard for whether

those minutes are carried on incumbent

LEC or competitive transport facilities.

In contrast to the portion of the

incumbent LEC’s tandem-switched

transport costs that will remain in the

TIC after January 1, 1998, we did not

find in the First Report and Order that

the remainder of the TIC could be

associated definitively with particular

interstate facilities on the record before

us. Instead, we stated that a portion of

these TIC amounts may result from the

operation of the jurisdictional

separations process, which allocates the

costs of private line and switched

services differently between the state

and interstate jurisdictions, despite the

fact that these two types of services use

comparable facilities. As a result, we

recognized in the First Report and Order

the possibility that rates for directtrunked transport and tandem-switched

transport transmission facilities may not

recover the full amount of the costs of

switched facilities the separations

process allocates to the interstate

jurisdiction.

56. We have recently begun a broad

re-examination of the jurisdictional

separations process that may eventually

correct this problem. In the meantime,

however, we are unable to associate

these TIC amounts with any particular

interstate facilities. Instead, to the extent

that this portion of the TIC may result

in part from overallocation of costs to

the interstate jurisdiction, thereby

lowering intrastate rates, this portion of

the TIC may be a form of implicit

universal service support. As such, it

would be inequitable to mandate

recovery of this portion of the perminute TIC only from the incumbent

LEC’s transport customers. Because

these amounts do not appear to be any

more closely related to the incumbent

LEC’s interstate transport facilities than

they are to any other interstate facilities

of the incumbent, it is appropriate for

all of the incumbent LEC’s access

customers, and not just its transport

customers, to pay a share of this portion

of the per-minute TIC. In the First

Report and Order, we stated our

commitment to minimize the potential

of the per-minute TIC artificially to

suppress demand for interstate toll

services. Because the non-facilitiesrelated TIC is composed of amounts that

have not been demonstrated to reflect

usage-sensitive costs, it does have this

undesirable effect. We have therefore

required that it be eliminated

expeditiously through targeting of the Xfactor reductions to the interconnection

charge service category and through

conversion of the residual TIC to a flatrated charge.

57. In addition, we stated in the First

Report and Order that a portion of the

costs remaining in the TIC may result

from our use of special access rates to

develop initial geographically-averaged

direct-trunked transport and tandemswitched transport transmission rates.

We agreed in the First Report and Order

that, while the use of such rates appears

to have been appropriate in urban areas,

these rates may not fully recover the

higher costs of transport in less densely

populated rural areas. Because we are

unable to quantify these cost

differences, and because it is likely that

the cost differential varies greatly across

LECs and across study areas served by

the same LEC, we did not mandate any

immediate reallocation of costs from the

TIC to rural transport rates. Instead, we

expect that, as competition develops,

the incumbent LECs will come under

increasing pressure to deaverage

transport rates under our existing

deaveraging rules. We observe that, as

with the costs discussed in the previous

paragraph, recovery of rural transport
56130 Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Rules and Regulations

costs through the TIC supports a

conclusion that at least a portion of the

non-facilities-related TIC may be related

to the provision of universal service.

58. We also here clarify that the

‘‘residual TIC’’ that the incumbent LEC

should recover from PICCs includes all

TIC amounts that have not been

reassigned to other facilities-based rate

elements, including the portion of the

incumbent LEC’s tandem switching

costs that have not been reassigned to

the tandem-switching rate element in

tariffs filed to become effective on

January 1, 1998, and January 1, 1999.

We direct price cap LECs that will

recover only a portion of their residual

TIC from PICCs to allocate nonfacilities-related TIC amounts and

facilities-related TIC amounts between

PICCs and per-minute charges on a pro

rata basis. The incumbent LECs must

reallocate the full amount of the costs of

their tandem switch to the tandem

switching rate element in installments

on January 1, 1998, 1999, and 2000,

whether they are then contained in perminute charges or in PICCs.

59. Accordingly, we revise the TIC

exemption contained in our First Report

and Order to permit the incumbent LEC,

in tariffs filed to become effective

January 1, 1998, to impose that portion

of the per-minute TIC that is not

expected to be reassigned to particular

facilities on a cost-causative basis on all

transport minutes switched at its end

office, without regard for whether those

minutes are carried on incumbent LEC

or competitive transport facilities. Perminute TIC amounts that the LEC

expects to reallocate to facilities-based

rate elements, in contrast, may be

assessed only on minutes transported on

the incumbent LEC’s own transport

facilities.

60. TIC amounts that a price cap LEC

will recover through PICC charges may

be assessed to an IXC for a particular

loop without regard for the type or

provider of the transport the IXC uses to

transport the minutes generated by that

loop from the end office to the IXC’s

facilities. Although certain price cap

LECs will recover a portion of the costs

of their tandem-switching facilities

during the transition through PICCs

from IXCs that do not use the price cap

LEC’s transport facilities to transport all

of the minutes generated on a particular

loop, the administrative difficulties

associated with calculating partial

PICCs in this context outweigh the

benefits to be gained from doing so. If

an IXC were to use a combination of

competitive- and incumbent LECprovided transport facilities between an

end office and its serving wire center, it

would be needlessly complicated to

determine the portion of the minutes

generated on each loop that were carried

on competitive transport links.

Furthermore, unlike the per-minute TIC,

the flat-rated PICC will not substantially

alter the incremental cost of additional

transport minutes transported over

competitive transport facilities. Thus,

even if an IXC pays a full PICC, this

payment will not affect the IXC’s

decision whether to purchase additional

transport minutes from the incumbent

LEC or a competitive transport provider.

As a flat-rated charge, the PICC will not

artificially suppress demand for

interstate toll telecommunications

services.

61. In addition, the PICC is subject to

competitive pressures, whether or not it

recovers TIC amounts for traffic

transported by the incumbent LEC’s

competitors. If the end user chooses an

alternate provider of local service, the

incumbent LEC will no longer recover

any portion of the PICC for that loop.

Thus, we conclude that the dangers

associated with the recovery of the full

PICC without regard for the transport

provider are far more attenuated than

the dangers that would be associated

with recovery of facilities-related costs

from per-minute TIC charges levied on

competitive transport minutes.

62. We deny the petitions filed by U

S West and NYNEX requesting a stay of

the per-minute TIC exemption rule. In

determining whether to stay the

effectiveness of one of its rules or

orders, the Commission uses the fourfactor test established in Virginia

Petroleum Jobbers Ass’n v. FPC, 259

F.2d 921, 925 (D.C. Cir. 1958), as

modified in Washington Metropolitan

Area Transit Comm’n v. Holiday Tours,

Inc., 559 F.2d 841, 843 (D.C. Cir. 1977).

Under that test, petitioners must

demonstrate that: (1) They are likely to

succeed on the merits on review; (2)

they would suffer irreparable injury

absent a stay; (3) a stay would not

substantially harm other interested

parties; and (4) a stay would serve the

public interest. We find that neither

NYNEX nor U S West has satisfied any

of the four factors for granting a stay. In

light of the substantial relief we have

granted above, however, we provide

only a brief analysis here of the

petitioners’ arguments. The practical

effect of our revisions to the TIC

exemption, however, will be to provide

a substantial portion of the relief sought

in the stay petitions. In light of these

revisions, we believe that the petitioners

are unlikely to succeed on the merits on

review, that they will not suffer

irreparable injury absent a stay, that a

stay would cause substantial harm to

the incumbent LECs’ competitors, and

that the public interest is best served by

the TIC exemption described here. With

respect to the portion of the TIC related

to the costs of the incumbent LEC’s

interstate transport facilities, we

conclude that there are sound policy

reasons underlying our decision to

maintain this exemption and,

consequently, we find against the

petitioners here.

63. We conclude that NYNEX’s

objections to the sufficiency of our

notice are without merit. The Notice in

this proceeding provided adequate

notice of the TIC exemption we

ultimately adopted. Our Notice in this

proceeding stated that ‘‘to the extent

that any portion of the TIC should

properly be included in LEC transport

rates, other than the TIC, the TIC

provides the LECs with a competitive

advantage for their interstate transport

services because incumbent LEC

transport rates are priced below cost

while the LECs’ competitors using

expanded interconnection must pay a

share of incumbent LEC transport costs

through the TIC * * *. Our goal in this

proceeding is to establish a mechanism

to phase out the TIC in a manner that

fosters competition and responds to the

[CompTel] court’s remand.’’ We went on

to state, in the section of the Notice

entitled ‘‘Possible Revisions to the TIC,’’

that ‘‘our goals are to move towards

significantly more cost-based access

rates and competition in the access and

interexchange markets. The

development of a competitive access

market will be distorted by the

assessment of the TIC as a surcharge on

local switching. The TIC therefore will

be unsustainable.’’ We sought comment

on the extent to which various

approaches to reducing the TIC would

‘‘achieve the goals of this proceeding’’

and asked parties to ‘‘address the

relative merits of each [approach], or of

other approaches that they may

suggest.’’ We conclude therefore that,

beyond reasonable question, our Notice

provided adequate notice of ‘‘the terms

or substance of the proposed rule or a

description of the subjects and issues

involved.’’

64. In any event, courts require only

that the rule, as adopted, constitute a

‘‘logical outgrowth’’ of the proposed

rule. E.g., National Mining Ass’n v. Mine

Safety and Health Admin., 116 F.3d

520, 531 (D.C. Cir. 1997). To satisfy this

standard, courts ask ‘‘whether ‘the

purposes of notice and comment have

been adequately served.’ ’’ Factors to be

considered include ‘‘whether a new

round of notice and comment would

provide the first opportunity for

interested parties to offer comments that

could persuade the agency to modify its
Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Rules and Regulations 56131

rule;’’ American Water Works Ass’n v.

EPA, 40 F.3d 1266, 1274 (D.C. Cir.

1994), and whether ‘‘the notice given

affords ‘exposure to diverse public

comment,’ ‘fairness to affected parties,’

and ‘an opportunity to develop evidence

in the record.’ ’’ We conclude that the

Notice language quoted above more than

adequately meets this standard. The

Notice in this proceeding discussed

possible revisions to the TIC rate

element for nine full pages, sought

comment on four specific TIC-reduction

options, and invited commenters to

suggest alternate approaches. The

Notice in this proceeding discussed

expressly the anti-competitive problems

associated with the payment of TIC

charges by competitive providers of

transport services, stated that the TIC

would be ‘‘unsustainable’’ in that form,

and sought comment on approaches to

reform that would ‘‘achieve the goals of

this proceeding,’’ among which was the

adoption of a transport rate structure

that would foster competition. In such

circumstances, we conclude that

commenters should have anticipated

that the Commission might eventually

adopt a TIC exemption for competitive

transport providers, that our Notice

afforded adequate notice of the

Commission’s eventual adoption of such

an exemption, and that we provided an

adequate opportunity for diverse public

comment.

65. In response to the Notice, several

commenters, in their initial comments,

proposed TIC exemptions for

competitive transport. WorldCom, for

example, argued that, ‘‘the Commission

should restructure the TIC rate element

* * * in a manner that maximizes

competitive pressure on the charge. As

local and full-service competition

begin[s] to emerge, competitive carriers

should be able to avoid the TIC to the

extent that they win customers away

from incumbent LECs. This will create

competitive pressure for the LECs to

reduce their TIC rate levels, without

necessitating any prescriptive action by

the Commission.’’ The fact that several

commenters raised this solution in their

comments, and in subsequent ex parte

filings, supports our conclusion that the

Notice adequately raised this issue.

66. We also conclude that NYNEX’s

claims of irreparable harm are without

merit. Although the TIC exemption may

impact some incumbent LECs

differently from others, the same can be

said for virtually all of the rules we

adopt, simply because of differences in

the circumstances and business climate

facing each LEC. Our focus in the

context of a stay petition must be on

individualized allegations of irreparable

harm. We find that neither petitioner

has met that standard with respect to

the TIC exemption we provide in this

Order. Mere financial or economic

losses do not, in and of themselves,

constitute irreparable harm. In addition,

because this portion of the per-minute

TIC is likely to be relatively small, in

relation to the remainder of the TIC and

other transport charges, the incumbent

LECs are unlikely to suffer large-scale

competitive losses as a result of the

exemption, as modified here. In any

event, we have long held that ‘‘revenues

and customers lost to competition

which can be regained through

competition are not irreparable.’’

67. In contrast, continued subsidy of

the incumbent LECs’ tandem switching

facilities by competitors is incompatible

with the development of competition in

the local market. Without an exemption

permitting new entrants to cease

subsidizing incumbent LEC transport

facilities, the incumbent LEC’s revenue

stream from facilities-related, perminute TIC charges would be insulated

from competition. These new entrants,

having already shouldered financial

burdens in seeking to compete with the

established monopoly incumbent LEC,

should not be required in addition to

subsidize the facilities of the incumbent

LEC against whom they compete. Such

a result would cause continued harm to

these new entrants, and would further

delay the public interest benefits of

competition. Thus, we conclude that the

petitioners have failed to satisfy either

of the last two factors we must consider

in evaluating their stay petitions.

Accordingly, we deny the stay petitions.

B. Deaveraged Tandem-Switched

Transport Transmission Rates

68. We also take this opportunity to

amend the language of section

69.111(c)(1) to specify the manner in

which minutes are to be determined

through June 30, 1998, in calculating

tandem-switched transport transmission

rates when an incumbent LEC has

deaveraged rates by density zone.

Section 69.111(c)(2), which applies after

July 1, 1998, includes such language.

The First Report and Order did not

intend to take away the ability of

incumbent LECs to deaverage transport

transmission rates if they have met the

requisite qualifications. Finally, we

amend the references to section 69.124

in section 69.111 to refer to section

69.123.

III. Rate-of-Return LECs

69. In the First Report and Order, we

took steps to adopt, inter alia, a costbased transport rate structure and to

comply with the D.C. Circuit’s CompTel

remand. As acknowledged in the First

Report and Order, the CompTel remand

applied to rate-of-return LECs as well as

price cap LECs.

70. Upon further consideration, we

recognize that, absent clarification,

some language in the First Report and

Order may be ambiguous in delineating

which of our decisions applied to all

incumbent LECs, including rate-ofreturn LECs. For example, in Section

III.C. of the First Report and Order, we

directed ‘‘all incumbent LECs to

discontinue the unitary rate structure

option for the transmission component

of tandem-switched transport, effective

July 1, 1998.’’ In contrast to this

language, we stated at paragraph 335 in

the First Report and Order that we had

restricted ‘‘application of the rules we

adopt in this proceeding to the

incumbent price cap LECs, with [three]

limited exceptions,’’ for: (1) ‘‘Universal

service support to the interstate revenue

requirement for all incumbent LECs in

Section VI.D;’’ (2) ‘‘the changes to the

TIC that we adopt[ed] in Section III.D

* * * will also apply to rate-of-return

incumbent LECs;’’ and (3) ‘‘in Section

VI.A * * * our exclusion of unbundled

network elements from Part 69 access

charges applies to all incumbent LECs.’’

71. We take this opportunity to clarify

that, with two limited exceptions, the

decisions made in Section III.C of the

First Report and Order relating to the

rate structure and rate levels for

entrance facilities, direct-trunked

transport, and tandem-switched

transport apply to all incumbent LECs,

including rate-of-return LECs. The two

exceptions are that we did not create for

rate-of-return LECs separate rate

elements for dedicated ports at the

tandem switch and for multiplexers at

the tandem switch. Thus, for example,

rate-of-return LECs must discontinue

the unitary rate structure option for

tandem-switched transport no later than

July 1, 1998, when all incumbent LECs

must use only the three-part rate

structure for cost recovery. These

transport modifications that are

applicable to rate-of-return LECs are in

addition to those decisions made in

Sections III.D, VI.A, and VI.D that also

apply to rate-of-return LECs.

IV. Ordering Clauses

72. 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 1.108 that

this Order on Reconsideration is

adopted.
56132 Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Rules and Regulations

73. It is further ordered That section

69.153(g) of the Commission’s rules, 47

CFR 69.153(g) is amended as set forth in

the rule changes.

74. It is further ordered that sections

69.4, 69.111(c)(1), 69.153(c)(1),

69.153(d)(1)(i), 69.153(d)(2)(i), and

69.155(c) of the Commission’s rules, 47

CFR 69.4, 69.111(c)(1), 69.153(c)(1),

69.153(d)(1)(i), 69.153(d)(2)(i), and

69.155(c) are amended as set forth in the

rule changes.

75. It is further ordered That the

information collections contained in

these rules become effective January 1,

1998, following OMB approval, unless a

notice is published in the Federal

Register stating otherwise.

76. It is further ordered That, except

as otherwise specified herein, the

policies and rules adopted here shall be

effective January 1, 1998.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

PART 69—ACCESS CHARGES

77. The authority citation for Part 69

continues to read as follows:

Authority: Secs. 4, 201, 202, 203, 205, 218,

403, 48 Stat. 1066, 1070, 1072, 1077, 1094,

as amended, 47 U.S.C. 154, 201, 202, 203,

205, 218, 403.

78. Section 69.4 is amended by

removing paragraph (h)(6), and revising

paragraph (a) to read as follows:

§ 69.4 Charges to be filed.

(a) The end user charges for access

service filed with this Commission shall

include charges for the End User

Common Line element, and for line port

costs in excess of basic, analog service.

* * * * *

79. Section 69.111 is amended by

revising paragraph (c) to read as follows:

§ 69.111 Tandem-Switched Transport and

Tandem Charge.

* * * * *

(c)(1) Until June 30, 1998:

(i) Except in study areas where the

incumbent local exchange carrier has

implemented density pricing zones as

described in section 69.123, per-minute

common transport charges described in

paragraph (a)(1) of this section shall be

presumed reasonable if the incumbent

local exchange carrier bases the charges

on a weighted per-minute equivalent of

direct-trunked transport DS1 and DS3

rates that reflects the relative number of

DS1 and DS3 circuits used in the

tandem to end office links (or a

surrogate based on the proportion of

copper and fiber facilities in the

interoffice network), calculated using

the total actual voice-grade minutes of

use, geographically averaged on a studyarea-wide basis, that the incumbent

local exchange carrier experiences based

on the prior year’s annual use. Tandemswitched transport transmission charges

that are not presumed reasonable shall

be suspended and investigated absent a

substantial cause showing by the

incumbent local exchange carrier.

(ii) In study areas where the

incumbent local exchange carrier has

implemented density pricing zones as

described in section 69.123, per-minute

common transport charges described in

paragraph (a)(1) of this section shall be

presumed reasonable if the incumbent

local exchange carrier bases the charges

on a weighted per-minute equivalent of

direct-trunked transport DS1 and DS3

rates that reflects the relative number of

DS1 and DS3 circuits used in the

tandem to end office links (or a

surrogate based on the proportion of

copper and fiber facilities in the

interoffice network), calculated using

the total actual voice-grade minutes of

use, averaged on a zone-wide basis, that

the incumbent local exchange carrier

experiences based on the prior year’s

annual use. Tandem-switched transport

transmission charges that are not

presumed reasonable shall be

suspended and investigated absent a

substantial cause showing by the

incumbent local exchange carrier.

(2) Beginning July 1, 1998:

(i) Except in study areas where the

incumbent local exchange carrier has

implemented density pricing zones as

described in section 69.123, per-minute

common transport charges described in

paragraph (a)(2)(i) of this section shall

be presumed reasonable if the

incumbent local exchange carrier bases

the charges on a weighted per-minute

equivalent of direct-trunked transport

DS1 and DS3 rates that reflects the

relative number of DS1 and DS3 circuits

used in the tandem to end office links

(or a surrogate based on the proportion

of copper and fiber facilities in the

interoffice network), calculated using

the total actual voice-grade minutes of

use, geographically averaged on a studyarea-wide basis, that the incumbent

local exchange carrier experiences based

on the prior year’s annual use. Tandemswitched transport transmission charges

that are not presumed reasonable shall

be suspended and investigated absent a

substantial cause showing by the

incumbent local exchange carrier.

(ii) In study areas where the

incumbent local exchange carrier has

implemented density pricing zones as

described in section 69.123, per-minute

common transport charges described in

paragraph (a)(2)(i) of this section shall

be presumed reasonable if the

incumbent local exchange carrier bases

the charges on a weighted per-minute

equivalent of direct-trunked transport

DS1 and DS3 rates that reflects the

relative number of DS1 and DS3 circuits

used in the tandem to end office links

(or a surrogate based on the proportion

of copper and fiber facilities in the

interoffice network), calculated using

the total actual voice-grade minutes of

use, averaged on a zone-wide basis, that

the incumbent local exchange carrier

experiences based on the prior year’s

annual use. Tandem-switched transport

transmission charges that are not

presumed reasonable shall be

suspended and investigated absent a

substantial cause showing by the

incumbent local exchange carrier.

* * * * *

80. Section 69.153 is amended by

revising paragraphs (c)(1) and (d), and

adding paragraph (g) to read as follows:

§ 69.153 Presubscribed interexchange

carrier charge (PICC).

* * * * *

(c) The maximum monthly PICC for

primary residential subscriber lines and

single-line business subscriber lines

shall be the lower of:

(1) One twelfth of the sum of

projected annual common line revenues

and residual interconnection charge

revenues permitted under our price cap

rules divided by the projected average

number of local exchange service

subscriber lines in use during such

annual period, minus the maximum

subscriber line charge calculated

pursuant to § 69.152(d)(2); or

(2) * * *

(d) To the extent that a local exchange

carrier cannot recover its full common

line revenues, residual interconnection

charge revenues, and those marketing

expense revenues described in

§ 69.156(a) permitted under price cap

regulation through the recovery

mechanisms established in §§ 69.152,

69.153(c), and 69.156 (b) and (c), the

local exchange carrier may assess a PICC

on multi-line business subscriber lines

and non-primary residential subscriber

lines.

(1) The maximum monthly PICC for

non-primary residential subscriber lines

shall be the lower of:

(i) One twelfth of the projected annual

common line, residual interconnection

charge, and § 69.156(a) marketing

expense revenues permitted under our

price cap rules, less the maximum

amounts permitted to be recovered

through the recovery mechanisms under

§§ 69.152, 69.153(c), and 69.156 (b) and

(c), divided by the total number of
Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Rules and Regulations 56133

projected non-primary residential and

multi-line business subscriber lines in

use during such annual period; or

(ii) * * *

(2) If the maximum monthly PICC for

non-primary residential subscriber lines

is determined using paragraph (d)(1)(i)

of this section, the maximum monthly

PICC for multi-line business subscriber

lines shall equal the maximum monthly

PICC of non-primary residential

subscriber lines. Otherwise, the

maximum monthly PICC for multi-line

business lines shall be the lower of:

(i) One twelfth of the projected annual

common line, residual interconnection

charge, and § 69.156(a) marketing

expense revenues permitted under parts

61 and 69 of our rules, less the

maximum amounts permitted to be

recovered through the recovery

mechanisms under §§ 69.152, 69.153(c)

and (d)(1), and 69.156 (b) and (c),

divided by the total number of projected

multi-line business subscriber lines in

use during such annual period; or

(ii) * * *

* * * * *

(g)(1) The maximum monthly PICC for

Centrex lines shall be one-ninth of the

maximum charge determined under

paragraph (d)(2) 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 (d)(2) of this section divided

by the customer’s number of Centrex

lines.

(2) In the event the monthly loop

costs for a multi-line business line, as

defined in § 69.152(b)(1), exceed the

maximum permitted End User Common

Line charge, as set in § 69.152(b)(3), the

maximum monthly PICC for a Centrex

line determined under paragraph (g)(1)

of this section shall be increased by the

difference between the monthly loop

costs defined in § 69.152(b)(1) and the

maximum permitted End User Common

Line charge set in § 69.152(b)(3). In no

event, however, shall the PICC for a

Centrex line exceed the maximum

established under paragraph (d)(2) of

this section.

81. Section 69.155 is amended by

revising paragraph (c) to read as follows:

§ 69.155 Per-minute residual

interconnection charge.

* * * * *

(c)(1) No portion of the charge

assessed pursuant to paragraphs (a) or

(b) of this section that recovers revenues

that the local exchange carrier

anticipates will be reassigned to other,

facilities-based rate elements, including

the tandem-switching rate element

described in § 69.111(g), the three-part

tandem switched transport rate

structure described in § 69.111(a)(2),

and port and multiplexer charges

described in § 69.111(l), shall be

assessed upon minutes utilizing the

local exchange carrier’s local switching

facilities, but not the local exchange

carrier’s transport service.

(2) If a local exchange carrier cannot

recover its full residual interconnection

charge revenues through the PICC

mechanism established in § 69.153, and

will consequently recover a portion of

its residual interconnection charge

revenues through per-minute charges

assessed pursuant to paragraphs (a) and

(b) of this section, then the local

exchange carrier must allocate its

residual interconnection charge

revenues subject to the exemption

established in paragraph (c)(1) of this

section between the PICC and the perminute residual interconnection charge

in the same proportion as other residual

interconnection charge revenues are

allocated between these two recovery

mechanisms.

[FR Doc. 97–28548 Filed 10–28–97; 8:45 am]

BILLING CODE 6712–01–P