15412 Federal Register / Vol. 62, No. 62 / Tuesday, April 1, 1997 / Rules and Regulations

The NPL is Appendix B of 40 CFR Part

300 which is the National Oil and

Hazardous Substances Contingency Plan

(NCP), which EPA promulgated

pursuant to section 105 of the

Comprehensive Environmental

Response, Compensation, and Liability

Act of 1980 (CERCLA), as amended.

EPA and the State of North Dakota have

determined that the Site, as remediated,

poses no significant threat to public

health or the environment and,

therefore, no further remedial measures

pursuant to CERCLA are appropriate.

EFFECTIVE DATE: April 1, 1997.

FOR FURTHER INFORMATION CONTACT: Erna

Acheson Waterman, Site Manager, U.S.

Environmental Protection Agency,

Region 8, 999 18th Street, Suite 500,

Mail Stop 8EPR–SR, Denver, Colorado

80202–2466, (303) 312–6762.

SUPPLEMENTARY INFORMATION: The Site

to be deleted from the NPL is: Minot

Landfill Superfund Site, Ward County,

North Dakota.

A Notice of Intent to Delete for this

Site was published December 26, 1996

(61 FR 67975). The closing date for

comments on the Notice of Intent to

Delete was January 27, 1997. No

comments have been received.

EPA identifies sites that appear to

present a significant risk to public

health, welfare, or the environment and

it maintains the NPL as a list of those

sites. Any site deleted from the NPL

remains eligible for Fund-financed

remedial actions in the unlikely event

that conditions at the site warrant such

action in the future. Section 300.425

(e)(3) of the NCP. Deletion of a site from

the NPL does not affect responsible

party liability or impede agency efforts

to recover costs associated with

response efforts.

List of Subjects in 40 CFR Part 300

Environmental Protection, Superfund,

Hazardous waste.

Dated: March 5, 1997.

Jack W. McGraw,

Acting Regional Administrator, U.S.

Environmental Protection Agency, Region

VIII.

For the reasons set out in the

preamble, 40 CFR part 300 is amended

as follows:

PART 300—[AMENDED]

1. The authority citation for part 300

continues to read as follows:

Authority: 33 U.S.C. 1321(c)(2); 42 U.S.C.

9601–9657; E.O. 12777, 56 FR 54757, 3 CFR,

1991 Comp., p. 351; E.O. 12580, 52 FR 2923,

3 CFR, 1987 Comp., p. 193.

Appendix B—[Amended]

2. Table 1 of Appendix B to Part 300

is amended by removing the Site,

‘‘Minot Landfill’’, Minot County, North

Dakota.

[FR Doc. 97–8086 Filed 3–31–97; 8:45 am]

BILLING CODE 6560–50–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 36

[CC Docket No. 80–286; FCC 97–30]

Establishment of a Joint Board

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: On February 3, 1997, the

Commission adopted a Report and

Order (‘‘Order’’) adopting a

recommended decision by the FederalState Joint Board regarding permanent

rules to govern the procedures that

incumbent local exchange carriers

(ILECs) use for allocating Other Billing

and Collecting (OB&C) expenses

between the intrastate and interstate

jurisdictions. Specifically, the Joint

Board recommended that OB&C

expenses be divided equally among

three services: Interstate toll; intrastate

toll; and local exchange, with two thirds

of the OB&C expenses thus allocated to

the state jurisdiction, and one third

allocated to the interstate jurisdiction.

In cases in which an ILEC provides no

interstate billing and collecting for an

interexchange carrier (IXC), the Joint

Board recommended an automatic

reduction of the interstate assignment to

five percent to cover the cost of billing

the federal Subscriber Line Charge

(SLC). The intended effect is to adopt

the Joint Board’s recommendations and

implement new rules regarding the

separations procedures applicable to

OB&C expenses.

DATES: May 1, 1997.

FOR FURTHER INFORMATION CONTACT:

Lynn Vermillera, Attorney/Advisor,

Accounting and Audits Division,

Common Carrier Bureau, (202) 418–

0852.

SUPPLEMENTARY INFORMATION: In this

proceeding, we establish permanent

rules that satisfy our stated goals that

the permanent rules (1) reflect

principles of cost causation, (2) not be

unnecessarily burdensome to

implement and administer, (3) be

simple to audit, and (4) be certain and

predictable in their effect.

Regulatory Flexibility Analysis

In the NPRM (60 FR 30059, June 7,

1995) Amendment of Part 36 of the

Commission’s Rules and Establishment

of a Joint Board, Notice of Proposed

Rulemaking, 10 FCC Rcd 7013 (1995)),

the Commission certified that the

Regulatory Flexibility Act (RFA) of 1980

did not apply to this rulemaking

because the rules it proposed to adopt

in this proceeding would not have a

significant impact on a substantial

number of small businesses. The

Commission’s RFA in this Report and

Order (Amendment of Part 36 of the

Commission’s Rules and Establishment

of a Joint Board, Report and Order, CC

Docket No. 80–286, FCC 97–30 (1997))

conforms to the RFA, as amended by the

Contract With America Advancement

Act of 1996 (CWAAA), Public Law 104–

121, 110 Stat. 847 (1996).

Need for and Objectives of the Proposed

Rules

To reflect the fact that their facilities

are used for both intrastate and

interstate communication, ILECs must

allocate their costs and expenses

between the state and interstate

jurisdictions. Prior to 1987, the rules for

jurisdictional separation of OB&C

expenses required ILECs to determine

the amount of time spent billing for

interstate services and for intrastate

services. In 1987, the Commission

adopted, at the recommendation of the

Federal-State Joint Board, a new

apportionment formula based on the

number of users billed by each ILEC for

specific interstate and intrastate

services. Because the new system led to

unpredictable results, and because

carriers had difficulty administering the

new formula (as evidenced by waiver

requests), in 1988 the Commission

reinstated, on an interim basis, a portion

of the allocation rules that were in effect

prior to 1987. In this proceeding, we are

establishing permanent rules that satisfy

our stated goals that the permanent

rules (1) reflect principles of cost

causation, (2) not be unnecessarily

burdensome to implement and

administer, (3) be simple to audit, and

(4) be certain and predictable in their

effect.

Summary of Significant Issues Raised by

the Public Regarding Regulatory

Flexibility

There is some concern over what

might be perceived by some as a likely

shift of OB&C expenses to the interstate

jurisdiction, with the possible result

that ILECs could either lose money on

billing and collection, or lose their IXC

billing and collecting contracts
Federal Register / Vol. 62, No. 62 / Tuesday, April 1, 1997 / Rules and Regulations 15413

altogether. The argument suggested that

a shift of OB&C expenses to the

interstate jurisdiction might keep small

ILECs from providing billing and

collection services to IXCs, and

convenient single-source billing to end

users. In particular the Commission was

urged to consider how this might affect

small ILECs, and was suggested further

that non-price cap companies should

have the option of either using whatever

fixed allocator is adopted, or user

counts, or relative use among service

categories. The Joint Board, however,

thought and we concur, the likelihood

of ILECs being unable to recover a large

amount of their billing and collection

expenses, or of their losing the IXCs’

billing and collection business

altogether, had been greatly exaggerated.

The Joint Board therefore recommended

that we not adopt the suggestion that

non-price cap companies be allowed to

choose among several methodologies in

allocating their OB&C expenses. The

Joint Board also stated that, under its

recommended procedures, ILECs that

lose their IXC OB&C customers (or that

never handled billing and collecting for

IXCs) need only allocate five percent of

OB&C expenses to the interstate

jurisdiction to cover the cost of billing

the federal SLC.

The Joint Board’s recommendation

included the preference for waivers of

the fixed allocation for OB&C expenses

over an automatic adjustment

mechanism expressed by some of the

state Commissioners. It was argued that

waivers were preferable to a specific

alternative procedure, because the

waiver process would be flexible and

sensitive to individual circumstances. If,

contrary to the Joint Board’s

expectation, a pattern of waiver requests

developed indicating that non-price cap

ILECs might need other separations

rules for allocation of OB&C expenses,

the Joint Board suggested the

Commission refer that issue, and the

record accumulated through the waiver

process, to it for consideration.

We concur with the Joint Board’s

reasoning. As we have said, if IXCs

discontinue employing ILECs as their

billing agents, other developments, such

as the IXCs competing with ILECs in

local service markets, will probably

influence their decision much more

than this change to our allocation rules.

If market forces or these rules do in fact

cause an ILEC to lose all IXC billing and

collecting business, that carrier will

allocate only five percent of its OB&C

expenses to the interstate jurisdiction to

cover the cost of billing the SLC.

PaPUC’s suggestion that small ILECs

choose among three different

procedures could be burdensome to

administer, difficult to audit, and have

uncertain and unpredictable effects, and

would therefore be a disproportionate

response to a speculative concern. If a

pattern of waiver requests indicates that

non-price cap ILECs need other rules for

the allocation of OB&C expenses, the

record accumulated through the waiver

process could form a record for the Joint

Board’s consideration. We believe,

however, that the new rules will not

cause significant IXC abandonment of

their billing relationship with ILECs, but

rather will simplify the needlessly

complex procedures currently in use,

and thus reduce the burden on carriers.

Description and Estimates of the

Number of Small Entities to Which

Rules Will Apply

For the purposes of this Order, the

RFA defines a ‘‘small business’’ to be

the same as a ‘‘small business concern’’

under the Small Business Act, 15 U.S.C.

§ 632, unless the Commission has

developed one or more definitions that

are appropriate to its activities. Under

the Small Business Act, a ‘‘small

business concern’’ is one that: (1) is

independently owned and operated; (2)

is not dominant in its field of operation;

and (3) meets any additional criteria

established by the Small Business

Administration (SBA). SBA has defined

a small business for Standard Industrial

Classification (SIC) categories 4812

(Radiotelephone Communications) and

4813 (Telephone Communications,

Except Radiotelephone) to be small

entities when they have fewer than

1,500 employees. We first discuss

generally the total number of small

telephone companies falling within both

of those SIC categories. Then, we

discuss the number of small businesses

within the two subcategories, and

attempt to refine further those estimates

to correspond with the categories of

telephone companies that are commonly

used under our rules.

We have found incumbent LECs to be

‘‘dominant in their field of operation’’

since the early 1980’s, and we

consistently have certified under the

RFA that incumbent LECs are not

subject to regulatory flexibility analyses

because they are not small businesses.

We have made similar determinations in

other areas. We recognize SBA’s special

role and expertise with regard to the

RFA, and intend to continue to consult

with SBA outside the context of this

proceeding to ensure that the

Commission is fully implementing the

RFA. Although we are not persuaded on

the basis of this record that our prior

practice has been incorrect, we will,

nevertheless, include small incumbent

LECs in this FRFA to remove any

possible issue of RFA compliance.

Total Number of Telephone Companies

Affected

Many of the decisions and rules

adopted herein may have a significant

effect on a substantial number of the

small telephone companies identified

by SBA. The United States Bureau of the

Census (‘‘the Census Bureau’’) reports

that, at the end of 1992, there were

3,497 firms engaged in providing

telephone services, as defined therein,

for at least one year. This number

contains a variety of different categories

of carriers, including local exchange

carriers, interexchange carriers,

competitive access providers, cellular

carriers, mobile service carriers,

operator service providers, pay

telephone operators, PCS providers,

covered SMR providers, and resellers. It

seems certain that some of those 3,497

telephone service firms may not qualify

as small entities or small incumbent

LECs because they are not

‘‘independently owned and operated.’’

For example, a PCS provider that is

affiliated with an interexchange carrier

having more than 1,500 employees

would not meet the definition of a small

business. It seems reasonable to

conclude, therefore, that fewer than

3,497 telephone service firms are small

entity telephone service firms or small

incumbent LECs that may be affected by

this Order.

Local Exchange Carriers

Neither the Commission nor SBA has

developed a definition of small

providers of local exchange services

(LECs). The closest applicable definition

under SBA rules is for telephone

communications companies other than

radiotelephone (wireless) companies

(SIC 4813). The most reliable source of

information regarding the number of

LECs nationwide of which we are aware

appears to be the data that we collect

annually in connection with the

Telecommunications Relay Service

(TRS). According to our most recent

data, 1,347 companies reported that

they were engaged in the provision of

local exchange services. Although it

seems certain that some of these carriers

are not independently owned and

operated, or have more than 1,500

employees, we are unable at this time to

estimate with greater precision the

number of LECs that would qualify as

small business concerns under SBA’s

definition. Consequently, we estimate

that there are fewer than 1,347 small

incumbent LECs that may be affected by

the decisions and rules adopted in this

Order.
15414 Federal Register / Vol. 62, No. 62 / Tuesday, April 1, 1997 / Rules and Regulations

Interexchange Carriers

Neither the Commission nor SBA has

developed a definition of small entities

specifically applicable to IXCs (SIC

4813). The closest applicable definition

is for telephone carriers other than

radiotelephone (wireless) companies.

The most reliable source of information

regarding the number of IXCs

nationwide of which we are aware

appears to be the data that we collect

annually in connection with TRS.

According to our most recent data, 97

companies reported that they were

engaged in the provision of

interexchange service. Although it

seems certain that some of these carriers

are not independently owned and

operated, or have fewer than 1500

employees, we are unable at this time to

estimate with greater precision the

number of IXCs that would qualify as

small business concerns under SBA’s

definition. Tentatively, we conclude

that there are fewer than 97 small IXCs

that may be affected by the permanent

OB&C separations rules.

Description of Projected Reporting,

Record Keeping and Other Compliance

Requirements of the Rules

The Commission’s Part 36 rules apply

to all incumbent local exchange carriers.

This order reduces current reporting,

record keeping or other compliance

requirements, because carriers,

including small ILECs, will no longer be

required to segregate expenses assigned

to the OB&C classification on the basis

of the number of users of various

services. We anticipate that carriers,

including small ILECs, will need to

devote less staff time to comply with

these permanent rules than was needed

to comply with the interim rules. No

new skills are required to comply with

these rules.

Steps Taken to Minimize Impact on

Small Entities Consistent With Stated

Objectives

The Joint Board recommended a

fixed-factor plan that was consistent

with our stated objectives that the

permanent rules be easy to implement

and administer, simple to audit, and

certain and predictable in their effect.

As we explain in paragraph 22 above,

the Joint Board recommended that we

not adopt the PaPUC’s suggestion that

non-price cap companies be allowed to

choose among several methodologies for

allocating their OB&C expenses, because

the Joint Board thought the likelihood of

ILECs being unable to recover a large

amount of their OB&C expenses, or of

their losing their IXC OB&C customers,

had been greatly exaggerated. We agree

that having small ILECs choose among

three different procedures would be

needlessly complex to administer,

difficult to audit, and unpredictable in

result, and we consider such a

complicated approach to be an

excessive precaution against a

speculative concern. We do, however,

entertain waiver petitions for good

cause shown,and if a pattern of waiver

petitions develops that indicates,

contrary to our expectation, that these

rules are not satisfactory in regard to

small ILECs, the waiver requests could

form a basis for the Joint Board to

recommend a solution tailored to any

problem that is revealed. We also note

that the Joint Board found greater

support among commenters for waivers

than for the alternative procedures we

suggested in the NPRM.

Significant Alternatives Considered and

Rejected

The Joint Board considered and

rejected an allocation procedure based

on relative-use measurements. The Joint

Board reasoned that measuring use

produced results no more indicative of

cost causation than applying a fixed

factor, and that our other goals—ease of

administration, auditability, and

predictable results—were best met by

adopting a fixed allocation factor. The

Joint Board considered the contention of

some parties that a measured-use

method would be more convenient

because it was self-adjusting, and that

changing separations procedures was

itself burdensome, but was persuaded

by other commenters, including all the

participating state public utility

commissions, that the convenience of

allocating OB&C expenses by a fixed

factor outweighed these considerations

and best met our goals.

After determining to recommend

allocation by fixed factor, the Joint

Board considered all the possible factors

set forth for its consideration by this

Commission and by parties. The Joint

Board took the approach that any plan

that called for it to revise its 1987 view

that there are three essential services

(local exchange service, intrastate toll

service, and interstate toll service) bore

the burden of convincing the Joint

Board of its superiority, and no plan

overcame that challenge. We consider

the Joint Board’s approach reasonable.

The Joint Board considered the

argument that it should choose a factor

that would result in an allocation to the

interstate jurisdiction similar to that

arrived at by using the interim rules, but

rejected that approach because the

results produced by the interim rules

bear no special relation to cost causation

that would justify their use as a

benchmark.

Report to Congress

The Secretary shall send a copy of

this Final Regulatory Flexibility

Analysis, along with this Report and

Order, in a report to Congress pursuant

to the Small Business Regulatory

Enforcement Fairness Act of 1996, 5

U.S.C. 801(a)(1)(A). A copy of this Final

Regulatory Flexibility Analysis shall

also be published in the Federal

Register.

Summary of Report and Order

The expenses ILECs incur in

preparing and rendering end user

customer bills, and in accounting for

revenues generated by those bills, are

categorized as OB&C expenses. Most of

the OB&C expenses are allocated to

nonregulated activities, and, except for

the cost of billing and collecting the

SLC, ILECs recover them through

untariffed charges.

Prior to 1987, the rules for

jurisdictional separation of OB&C

expenses required ILECs to measure the

amount of time they spent billing for

interstate services and for intrastate

services. In 1987, the Federal-State Joint

Board in CC Docket No. 80–286

recommended, and we adopted, an

interstate apportionment formula that

replaced this method with one based on

counting the number of users billed by

each ILEC for specific interstate and

intrastate services. This formula

established an upper bound of thirtythree percent and a lower bound of five

percent for the interstate assessment of

OB&C expenses.

Although we had expected that the

new procedures would result in reduced

interstate assignments, it became

apparent that the new procedures would

have the opposite effect, at least in some

cases. In 1988, this unanticipated result,

combined with the difficulty carriers

had administering the new formula (as

evidenced by waiver requests), led us,

on reconsideration, to reinstate on an

interim basis a portion of the allocation

rules that were in effect prior to 1987.

On May 4, 1995 we adopted a Notice of

Proposed Rulemaking (NPRM) (60 FR

30059, June 7, 1995) in which we

proposed replacing those interim rules

with permanent rules for allocating

OB&C expenses between the

jurisdictions.

The Order adopts the Joint Board’s

finding that nearly all OB&C expenses

are joint or common with respect to the

individual services appearing on

customer bills, and that there is no

method of allocating these joint and

common expenses that reflects cost
Federal Register / Vol. 62, No. 62 / Tuesday, April 1, 1997 / Rules and Regulations 15415

causation better than a fixed allocator

does. The Joint Board explained that a

carrier’s ability to attribute costs to

individual services largely depends on

the nature of the costs, i.e., on whether

the costs are incremental, joint, or

common. If a cost is incurred solely for

a particular service, that cost is

‘‘incremental’’ with respect to the

service. The Joint Board observed,

however, that the costs of some shared

facilities and operations are not

incremental with respect to the

individual services they support, and

referred to such non-incremental costs

as joint or common.

Moreover, the Order adopts the Joint

Board’s determination that most OB&C

expenses are not incremental but rather

are joint and common expenses, and as

such are ill-suited to a measured-use

method of allocation, because such

measurements are not based on cost

causation. As the Joint Board

recommended, the Order adopts of a

fixed allocation factor for OB&C

expenses, because a fixed allocator

would be easier to administer, easier to

audit, and more certain and predictable

in its effect than allocators based on

usage measurements. Furthermore, as

the Joint Board reasoned, a simple fixed

allocator should be less expensive for

ILECs to implement than procedures

requiring time-consuming separations

studies.

The Joint Board recommended that

‘‘assignment of these [OB&C] costs

should reflect the three basic services

for which the ILECs render bills: local,

state toll and interstate toll.’’ The Joint

Board also stated that it saw no

justification for departing from the

established industry benchmark of

allocating five percent of OB&C

expenses to cover the cost of billing the

SLC, and explained that allocating the

larger share called for in some of the

plans would consume an unreasonably

high percentage of the total SLC

revenue. The Joint Board anticipated,

however, that the five percent

assignment will be used only by those

ILECs that do not perform billing

functions for one or more IXC.

The Joint Board acknowledged that

dividing the allocation of OB&C

expenses equally among interstate toll,

intrastate toll, and local service may in

at least some cases increase the

allocation to the interstate jurisdiction,

and that some commenters from the

ILEC industry viewed this increased

allocation to interstate as a drawback.

The Joint Board did not, however, view

this possible increase in the allocation

to the interstate jurisdiction as a defect

in its recommendation. In response to

comments that the advent of

competition may disrupt the traditional

billing relationship between ILECs and

IXCs, the Joint Board noted that the

circumstances of individual ILECs are

likely to vary significantly, and declined

to speculate on the effect of local

competition on the billing activities of

ILECs. The Joint Board stated that,

under its recommended procedures,

ILECs that lose their IXC OB&C

customers (or that never handled billing

and collecting for IXCs) should allocate

five percent of OB&C expenses to the

interstate jurisdiction to cover the cost

of billing the federal SLC.

The Joint Board expressed skepticism

in regard to the concern of some ILECs

that, rather than pay ILECs for any

increased interstate allocation, the IXCs

would stop using the ILECs as billing

agents altogether. The Joint Board noted

that the IXCs must bill their customers

in some manner, and asserted that

sharing the OB&C expense with the

ILECs, rather than bearing the entire

billing expense themselves, would

continue to be an attractive option for

cost-conscious and highly competitive

IXCs. The Joint Board also discounted

the concern of some ILECs that, because

ILECs provide billing and collecting

services to IXCs under fixed contractual

arrangements, they would not be able to

recover the increased allocation of

OB&C expenses to interstate unless they

could successfully renegotiate contracts

with their IXC customers. The Joint

Board observed that the ILECs are free

to renegotiate their contracts with IXCs,

and foresaw a one-third allocation to the

interstate jurisdiction causing, at worst,

a temporary decline in the profitability

of some ILECs’ billing operations. The

Joint Board found that the likelihood of

ILECs being unable to recover a large

amount of their billing and collection

expenses, or of their losing the IXCs’

billing and collection business

altogether, had been greatly exaggerated.

Therefore the Joint Board recommended

that we not adopt the suggestion of the

Pennsylvania Public Utility Commission

(PaPUC) that non-price cap companies

be allowed to choose among a fixedfactor, a user-count, or a relative-use

methodology in allocating their OB&C

expenses. The Joint Board noted,

however, that if cases occur where the

effect of the allocation rules on an ILEC

would be unduly harsh, the ILEC could

file a petition for waiver.

In the NPRM, we suggested that the

proposed fixed allocation methods

might require an adjustment mechanism

that would be triggered if IXCs

substantially reduced their use of ILEC

billing and collecting services. The

NPRM suggested two possible

adjustment triggers. The first would

permit an adjustment, or recourse to an

alternative procedure, if an ILEC lost 50

percent of its existing interstate toll

billing and collecting operations. The

second would use the ILEC’s loss of its

largest IXC customer for billing services

to activate the alternative allocation

procedure. Under either procedure, the

Commission could adjust the fixed

allocator to take into account the

decrease in the ILEC’s interstate toll

billing and collecting operations. The

Joint Board, however, found little

support from commenters for the

proposed automatic adjustment

mechanism to a fixed-factor allocation

system, and therefore recommended

that we not adopt a specific automatic

adjustment mechanism at this time. The

Joint Board explained that if, contrary to

its expectation, a pattern of waiver

requests developed indicating that nonprice cap ILECs appear to need other

separations rules for allocation of OB&C

expenses, we could refer that issue, and

the record accumulated through the

waiver process, to the Joint Board for

consideration.

We believe that adoption of these

rules will further our goal of simplifying

the separations process. In its

Recommended Decision, the Joint Board

carefully considered the nature of OB&C

expenses, explained why a fixed factor

is the most sensible approach to

allocating these expenses among

services and between the jurisdictions,

and explained its recommendation that

OB&C expenses be allocated equally

among local exchange service, intrastate

toll service, and interstate toll service.

We also adopt as our own the Joint

Board’s reasoning in support of its

recommendations.

We agree with the Joint Board’s

characterization of OB&C expenses as

joint and common expenses. In the

NPRM, we suggested that postage costs

constitute a substantial portion of OB&C

costs, and that such costs are not

directly attributable to any individual

service, because several pages

containing many itemized charges can

be included in a customer’s bill without

increasing the postage charge. In

addition, because the same group of

employees perform the billing and

collecting function for various services,

segregation of their work by services is

difficult and of doubtful usefulness. We

agree, therefore, with the Joint Board

that there is no method of allocating

these joint and common expenses that

reflects cost causation better than a

fixed allocator does, and other

considerations such as predictability

and ease of administration strongly

militate in favor of using a fixed factor.

The Joint Board’s recommended
15416 Federal Register / Vol. 62, No. 62 / Tuesday, April 1, 1997 / Rules and Regulations

methodology is clear and

straightforward, and will be predictable

in its effect, and will also be easier to

administer and to audit than the current

rules. Thus the Joint Board’s

recommendations fully satisfy the

criteria for permanent rules for

allocating OB&C expenses that we set

forth in the NPRM.

In the 1988 Reconsideration Order (53

FR 33010) (August 29, 1988), we said

that ‘‘[a]lthough these [OB&C] costs are

fixed, only a specific and decreasing

portion of the expenses in this category

are related to interstate services [and]

the reduction in the amount of billing

and collecting the LECs perform on

behalf of the [IXCs] should be reflected

in reduced interstate assignments.’’ We

now believe that statement rested on

faulty analysis. The Joint Board has

correctly stated that nearly all the costs

associated with OB&C are joint and

common with respect to the services

billed. In contrast to incrementally

incurred costs, which are by nature

specific, the interstate portion of these

joint and common costs cannot

meaningfully be described as ‘‘specific

and decreasing.’’ Because the causation

of joint and common costs is not

attributable to individual services, no

economic reason exists for concluding

that a ‘‘reduction in the amount of

billing and collecting the LECs perform

on behalf of IXCs should be reflected in

reduced interstate assignments’’ unless,

of course, the service is no longer billed

at all. We are further persuaded that

noneconomic considerations of fairness

and convenience do not, in the case of

allocating OB&C expenses, call for

adoption of a usage-based surrogate for

measurable cost causation. The nature

of OB&C expenses, which are unrelated

to such possible surrogates for

measurable cost causation as facilities

investment or subscriber use, makes the

option of allocating the costs equally

among the billed services particularly

attractive in this case.

Thus we also find the factor chosen

by the Joint Board—one third each to

local exchange service, intrastate toll

service, and interstate toll service—to be

reasonable. The Joint Board saw no

reason to depart from the tripartite

division of services into local exchange,

intrastate toll, and interstate toll that it

recommended in 1987, stating that,

‘‘Neither the three alternatives proposed

in the Notice nor the fixed-factor

proposals made by * * * [various

commenters], surpass the simplicity or

clarity of the three-way division we

recommended in 1987 or otherwise offer

benefits that induce us to depart from

that position.’’ We agree that the other

possible factors that we and the

commenters suggested do not improve

on the three-way division recommended

by the Joint Board. We also agree with

the Joint Board that, for ILECs that do

no billing or collecting for IXCs, there is

no justification for departing at this time

from the established industry

benchmark of five percent as an

appropriate allocation to cover the costs

of billing the federal SLC.

We do not find troubling the

possibility that the new rules for

allocating OB&C expenses may increase

some ILECs’ allocation to the interstate

jurisdiction. We recognize that ILECs

may wish to renegotiate IXC contracts

that were based on the interim rules.

Like the Joint Board, however, we find

exaggerated the concern of some ILECs

that, rather than pay a minor increase in

OB&C expenses, IXCs will prefer to take

on the entire cost of running a billing

operation themselves. If IXCs

discontinue employing ILECs as their

billing agents, we think that other

developments, such as the IXCs

competing with ILECs in local service

markets, will influence the IXCs’

decisions in this regard much more than

will this change to our OB&C expense

allocation rules. If market forces or these

rules do in fact cause an ILEC to lose all

IXC billing and collecting business, that

ILEC will no longer be required to

allocate a third of its OB&C expenses to

the interstate jurisdiction, but instead

will allocate only five percent of its

OB&C expenses to the interstate

jurisdiction to cover the cost of billing

the SLC.

We also agree with the Joint Board’s

rejection of PaPUC’s suggestion that

small ILECs choose among three

different allocation procedures. We

conclude that PaPUC’s proposal would

be burdensome to administer, difficult

to audit, and could have uncertain and

unpredictable effects, and would

therefore be a disproportionate response

to a speculative concern.

If unforeseen circumstances cause

these or any of our rules to place an

undue burden on specific carriers, those

carriers may seek a waiver. We believe,

however, for the reasons state above,

that the new rules will not cause

significant IXC abandonment of their

billing relationship with ILECs, but

rather will simplify the needlessly

complex separations procedures

currently in use, and will therefore

reduce the administrative burden on

carriers.

Ordering Clauses

Accordingly, pursuant to Sections 1,

4(i), 220, 221(c) and 410(c) of the

Communications Act of 1934, as

amended, 47 U.S.C. 151, 154(i), 220,

221(c), and 410(c).

It is ordered That the

recommendations of the Federal-State

Joint Board in CC Docket No. 80–286

ARE ADOPTED.

It is further ordered That, pursuant to

Sections 1, 4(i), 220, and 221(c) and

410(c) of the Communications Act of

1934, as amended, 47 U.S.C. 151, 154(i),

220, and 221(c), Part 36 of the

Commission’s Rules and Regulations, is

amended as shown below.

List of Subjects in 47 CFR Part 36

Communications common carriers,

Reporting and recordkeeping

requirements, Telephone, Uniform

System of Accounts.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

Part 36 of Title 47 of the Code of

Federal Regulations is amended as

follows:

PART 36—JURISDICTIONAL

SEPARATIONS PROCEDURES;

STANDARD PROCEDURES FOR

SEPARATING

TELECOMMUNICATIONS PROPERTY

COSTS, REVENUES, EXPENSES,

TAXES AND RESERVES FOR

TELECOMMUNICATIONS COMPANIES

1. The authority citation for part 36

continues to read as follows:

Authority: 47 U.S.C. Secs. 151, 154 (i) and

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

2. Section 36.380 is amended by

revising paragraphs (b) and (c) to read

as follows:

§ 36.380 Other billing and collecting

expense.

* * * * *

(b) Local exchange carriers that bill or

collect from end users on behalf of

interexchange carriers shall allocate one

third of the expenses assigned this

classification to the interstate

jurisdiction, and two thirds of the

expenses assigned this classification to

the state jurisdiction.

(c) Local exchange carriers that do not

bill or collect from end users on behalf

of interexchange carriers shall allocate

five percent of the expenses assigned

this classification to the interstate

jurisdiction, and ninety-five percent of

the expenses assigned this classification

to the state jurisdiction.

[FR Doc. 97–8113 Filed 3–31–97; 8:45 am]

BILLING CODE 6712–01–P