Source: http://www.fcc.gov/document/fcc-seeks-comment-streamlining-telephone-co-accounting-rules
Timestamp: 2014-09-20 08:07:35
Document Index: 547750114

Matched Legal Cases: ['art 32', 'art 32', '§ 220', '§ 220', 'art 32', 'arts 31', 'art 32', '§ 160', '§ 220', 'arts 31', 'art 32', 'arts 31', 'art 32', 'art 32', 'art 64', 'art 36', 'art 69', '§ 64', 'art 36']

FCC Seeks Comment on Streamlining Telephone Co. Accounting Rules | FCC.gov
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By the Commission: Commissioners Pai and O’Rielly issuing separate statements
III. DISCUSSION ........................................................................................................................................ 9
A. Streamlining the USOA ................................................................................................................. 10
1. Consolidating the Class A and Class B Accounts................................................................... 11
2. Aligning the USOA with GAAP ............................................................................................. 14
B. Accounting Requirements for Price Cap Carriers.......................................................................... 31
1. Requiring Price Cap Carriers to Comply with the USOA....................................................... 34
2. Requiring Price Cap Carriers to Comply with Targeted Accounting Requirements............... 36
C. Other Issues.................................................................................................................................... 50
IV. PROCEDURAL MATTERS................................................................................................................ 56
V. ORDERING CLAUSES....................................................................................................................... 60
APPENDIX – Initial Regulatory Flexibility Analysis
In this Notice of Proposed Rulemaking (Notice), we initiate a proceeding to review our Part 32 Uniform System of Accounts (USOA) to consider ways to minimize the compliance burdens on carriers while ensuring that the agency retains access to the information it needs to fulfill its regulatory duties.1 Section 220 of the Communications Act of 1934, as amended (the Act), authorizes the Commission to prescribe the system of accounts to be used by carriers subject to the Act,2 and the USOA
1 See 47 C.F.R. Part 32. 2 See 47 U.S.C. § 220(a)(2) (“The Commission shall, by rule, prescribe a uniform system of accounts for use by telephone companies. Such uniform system shall require that each common carrier shall maintain a system of accounting methods, procedures, and techniques (including accounts and supporting records and memoranda) which shall ensure a proper allocation of all costs to and among telecommunications services, facilities, and products (and to and among classes of such services, facilities, and products) which are developed, manufactured, or offered by such common carrier”); see also 47 U.S.C. § 220(a)(1) (“The Commission may, in its discretion, prescribe the forms of any and all accounts, records, and memoranda to be kept by carriers subject to this chapter, including the (continued . . .)
and its predecessors have historically performed this function for regulated telephone companies. In the USTelecom Forbearance Order, the Commission denied the request that the Commission forbear completely from applying the requirement that price cap carriers maintain the USOA.3 At the same time, the Commission recognized that, in light of the Commission’s actions in areas of price cap regulation, universal service reform, and intercarrier compensation reform, it is likely appropriate to streamline the existing rules even though those reforms may not have eliminated the need for accounting data for some purposes.
Accordingly, we seek comment now on streamlining Part 32 to reduce regulatory burdens
while maintaining access to the data the Commission needs to fulfill its statutory and regulatory obligations.4 We will complete this proceeding no later than the end of 2015.
Section 220 of the Act requires the Commission to “prescribe a uniform system of accounts for use by telephone companies.”5 The Commission adopted its first accounting system in 1935 as parts 31 and 33 of the Commission’s rules “when a rigid institutionalized regulatory environment was expected to continue forever.”6 In 1986, the Commission adopted the USOA contained in Part 32 to respond to the “introduction of competition and an explosion of new products and services to which the existing systems could not respond without massive modification.”7
The Commission intended the USOA to “accommodate generally accepted accounting principles (GAAP) to the extent regulatory considerations permit.”8 As the Commission explained:
GAAP is that common set of accounting concepts, standards, procedures and conventions which are recognized by the accounting profession as a whole and upon which most nonregulated enterprises base their external financial statements and reports. It directs the recording of financial events and transactions and relates to how assets, liabilities, revenues and expenses are to be identified, measured, and reported.9
(Continued from previous page) accounts, records, and memoranda of the movement of traffic, as well as of the receipts and expenditures of moneys”).
3 See Petition of USTelecom for Forbearance Under 47 U.S.C. § 160(c) from Enforcement of Certain Legacy Telecommunications Regulations et al., WC Docket No. 12-61 et al., Memorandum Opinion and Order and Report and Order in WC Docket No. 10-132 and Further Notice of Proposed Rulemaking and Second Further Notice of Proposed Rulemaking, WC Docket No. 12-61 et al., 28 FCC Rcd 7627, 7665, para. 77 (2013) (USTelecom Forbearance Order), pets. for review pending, Verizon and AT&T, Inc., v. FCC & USA, No. 13-1220 (D.C. Cir. filed July 15, 2013).
4 This Notice is consistent with the Commission’s Data Innovation Initiative -- a whole-agency effort to modernize and streamline how we collect, use, and disseminate data. See FCC, Data Innovation Initiative, http://www.fcc.gov/data/data-innovation-initiative.shtml (last visited Aug. 15, 2014).
5 47 U.S.C. § 220(a)(2).
6 See Revision of the Uniform System of Accounts and Financial Reporting Requirements for Class A and Class B Telephone Companies (Parts 31, 33, 42, and 43 of the FCC’s Rules), CC Docket No. 78-196, Report and Order, 60 Rad. Reg. 2d (P&F) 1111, para. 2 (1986) (Part 32 USOA Order).
8 See id. at 1111, para. 3; see also infra Section III.A.2.
9 Revision of the Uniform System of Accounts for Telephone Companies to Accommodate Generally Accepted Accounting Principles (Parts 31, 33, 42, and 43 of the FCC’s Rules), CC Docket No. 84-469, Report and Order, 102 FCC 2d 964, 964, para. 1 n.1 (1985) (GAAP Accounting Order). The Commission stated at the time, “In very broad terms, these principles can be summarized as requiring that assets and liabilities be recorded at historical cost; that revenue be realized when the earning process is complete and an exchange transaction has occurred; that costs be matched with the revenues they helped to generate; that disclosure be full and adequate; that accounting principles (continued . . .)
The Commission adopted the USOA “at a time when regulators were required or inclined to organize telecommunications costs in a manner that allowed a logical mapping of these costs to telecommunications rate structures.”10 At that time, virtually all interstate access rates were subject to rate-of-return regulation, under which rates are set to cover an entity’s regulated operating expenses and provide a pre-specified return on the capital the company uses to provide regulated services.
Accordingly, Part 32 deviated from GAAP to the extent needed to support cost-based regulatory activities such as jurisdictional separations, cost assignment, and rate-of-return ratemaking. Part 32 specifies the revenue and expense accounts that must be maintained to record amounts for preparation of a carrier’s income statement for its regulated activities, as well as accounts that must be used for recording nonregulated activities. Carriers then directly assign, or allocate if direct assignment is not possible, the investment, expenses, and revenues between regulated and nonregulated activities using the cost assignment rules in Part 64.11 The regulated investment, expenses and revenues are then separated between the interstate and intrastate jurisdictions as specified in Part 36.12 The Commission and each state regulatory jurisdiction applies its own ratemaking processes to the amounts assigned to its jurisdiction.13 In the interstate jurisdiction, the access charge rules in Part 69 specify how carriers assign or allocate regulated costs among the interexchange service category and access categories.14 These rules, taken together, were designed to permit incumbent LECs to comply with rate-of-return regulation.
In 1991, the Commission adopted price cap regulation for the largest incumbent LECs while making it optional for other incumbents.15 Price cap regulation is a form of incentive regulation that relies on a series of Price Cap Indexes (PCIs) to limit the prices carriers charge for services to levels that are presumed to be just and reasonable.16 Unlike rate-of-return regulation, “price cap regulation eliminates the direct link between changes in allocated accounting costs and change in price [but] it does not sever the connection between accounting costs and prices entirely.”17 Today, fewer than five percent (Continued from previous page) be applied consistently between accounting periods; and that accounting data be objectively determined and verifiable.” Id.
10 2000 Biennial Regulatory Review -- Comprehensive Review of the Accounting Requirements and ARMIS Reporting Requirements for Incumbent Local Exchange Carriers: Phase 2 et al., CC Docket Nos. 00-199, 97-212, 80-286, 99-301, Report and Order and Further Notice of Proposed Rulemaking, 16 FCC Rcd 19911, 19916, para. 8 (2001) (2000 Biennial Regulatory Review: Phase 2 Order).
11 47 C.F.R. §§ 64.901-.905.
12 See 47 C.F.R. Part 36.
13 See, e.g., Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, WC Docket No. 05-271, 04-242, CC Docket Nos. 02-33, 01-337, 95-20, 98-10, Report and Order and Notice of Proposed Rulemaking, 20 FCC Rcd 14853,