[Federal Register Volume 60, Number 194 (Friday, October 6, 1995)]
[Rules and Regulations]
[Pages 52345-52346]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24884]



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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 61

[CC Docket No. 94-1; FCC 95-394]


Price Cap Performance Review for Local Exchange Carriers; 
Treatment of Video Dialtone Services Under Price Cap Regulation

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: On October 20, 1994, the Commission adopted a Memorandum 
Opinion and Order concluding that the basic video dialtone offerings of 
local exchange carriers (LECs) would be subject to the existing price 
cap rules. In that the order, the Commission stated it would initiate a 
rulemaking proceeding on whether to create a separate price cap basket 
for LEC video dialtone service. On February 7, 1995 the Commission 
issued a notice of proposed rulemaking in this docket seeking comment 
on whether to establish a separate price cap basket for LEC video 
dialtone service. The Report and Order adopted today establishes a 
separate price cap basket for video dialtone.

EFFECTIVE DATE: February 5, 1996.

FOR FURTHER INFORMATION CONTACT: Claudia Pabo, Policy and Program 
Planning Division, Common Carrier Bureau, (202) 418-1595 or Cheryl Lynn 
Schneider, Tariff Division, Common Carrier Bureau, (202) 418-1530.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second 
Report and Order adopted September 14, 1995 and released September 21, 
1995. The full text of the Commission's decision is available for 
public inspection and copying during normal business hours in the FCC 
Public Reference Room (Room 230), 1919 M St., NW., Washington, DC. The 
complete text of this decision may also be purchased from the 
Commission's copy contractor, International Transcription Service, 
Suite 140, 2100 M Street, NW., Washington, DC 20037.

Regulatory Flexibility Analysis

    We determined that section 605(b) of the Regulatory Flexibility Act 
of 1980, 5 U.S.C. 605(b), does not apply to the rule amendments adopted 
in this Order because they do not have a significant economic impact on 
a substantial number of small entities, as defined by section 301(3) of 
the Regulatory Flexibility Act. Carriers subject to price cap 
regulation for local exchange access services affected by the rule 
amendments adopted in this Order generally are large corporations or 
affiliates of such corporations.

Paperwork Reduction Analysis

    Public burden for the collection of information is estimated to 
average 203 hours per response, including the time for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed, and competing and reviewing the collection 
of information. Send comments regarding this burden estimate or any 
other aspect of the collection of information, including suggestions 
for reducing the burden, to the Federal Communications Commission, 
Records Management Branch, Paperwork Reduction Project (3060-0298), 
Washington, DC 20554 and to the Office of Management and Budget, 
Paperwork Reduction Project (3060-0298), Washington, DC 20503.

Summary of Report and Order

    In this Order, the Commission adopts new rules regarding the price 
cap treatment of video dialtone common carrier service provided by 
local exchange carriers (LECs). The Order amends the Commission's rules 
to require that basic video dialtone offerings of price cap LECs must 
be included in a new, separate price cap basket. The video dialtone 
basket may not include any other ``broadband'' services. The Order also 
establishes an initial productivity or ``X-Factor'' for the video 
dialtone basket of zero.
    The initial rates to be included in the video dialtone basket will 
be based upon the price cap new services test, as applied to video 
dialtone services. Consistent with this approach, the Commission will 
incorporate video dialtone rates into the new price cap basket in the 
first annual price cap tariff filing following the calendar year in 
which the new service is first offered, which may occur anywhere from 
six to eighteen months from the introduction of service. Moreover, as 
it has done with other price cap baskets, the Commission will assign an 
initial value of 100 to the PCI and the actual price index (API) for 
video dialtone service prior to adjustment for inflation and 
productivity, corresponding to the rates in effect just prior to the 
effective date of the annual filing in which rates for video dialtone 
service are included in the new basket.
    The Commission decided not to divide the video dialtone basket into 
separate subcategories at this time. Video dialtone is a nascent 
service for which LECs have just begun to file tariffs, and the 
Commission expects that the LECs will employ a variety of architectures 
to deliver their offerings which could lead to varying rate structures 
for video dialtone services. Thus, it would be difficult to create a 
stable set of service categories within the new video dialtone basket 
at this time.
    The Order imposes a lower banding limit on the video dialtone 
basket in addition to the protection provided by the new services test. 
Accordingly, LEC tariff filings reducing prices in excess of 15 percent 
per year relative to the PCI will not carry a presumption of 
lawfulness. Consistent with existing procedures, filings to implement 
rates below this level must be made on 45 days' notice, and be 
accompanied by a showing that the rates exceed average variable costs 
consistent with the cost 

[[Page 52346]]
support requirements specified in Sec. 61.49(d) of the Commission's 
rules.
    The Commission also decided to exclude video dialtone costs and 
revenues from the calculation of a LEC's earnings from other regulated 
interstate services for purposes of sharing and the low-end adjustment 
once video dialtone costs are no longer de minimis. Under this plan, 
price cap LECs will be allowed to include video dialtone costs and 
revenues with those from other baskets for purposes of sharing and low-
end adjustment calculations so long as their video dialtone costs are 
below a specified threshold. Once a LEC's costs rise above a de minimis 
level, however, the Commission will require the LEC to exclude video 
dialtone costs and revenues from its interstate rate of return 
calculations for sharing and the low-end adjustment.

Ordering Clause

    Accordingly, it is ordered that, pursuant to authority contained in 
sections 4(i), 4(j), 201-205, 215, 218, 303(r), and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), 201-
205, 215, 218, 303(r), 403, and section 553 of Title 5, United States 
Code, part 61 of the Commission's rules, 47 CFR part 61, is amended as 
set forth below effective February 5, 1996.

List of Subjects in 47 CFR Part 61

    Communications common carriers, Reporting and recordkeeping 
requirements.

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

Rule changes

    Part 61 of Title 47 of the CFR is amended as follows:

PART 61--TARIFFS

    1. The authority citation for Part 61 continues to read as follows:

    Authority: Secs. 4(i), 4(j), 201-205, 303(r), and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), 
201-205, 303(r), 403, unless otherwise noted.

    2. Section 61.42 is amended by adding a new paragraph (d)(5) to 
read as follows:


Sec. 61.42  Price cap baskets and service categories.

* * * * *
    (d) * * *
    (5) To the extent that a local exchange carrier specified in 
Secs. 61.41(a) (2) or (3) offers interstate video dialtone services, a 
basket for basic video dialtone services as described in Sec. 63.54 of 
this chapter.
* * * * *
    3. Section 61.45 is amended by revising paragraphs (b) introductory 
text and (h) and adding new paragraph (b)(3) to read follows:


Sec. 61.45  Adjustments to the PCI for Local Exchange Carriers.

* * * * *
    (b) Adjustments to local exchange carrier PCIs for the baskets 
designated in Secs. 61.42(d) (2), (3), (4), and (5), shall be made 
pursuant to the formula set forth in Secs. 61.44 (b), and as further 
explained in Secs. 61.44 (e), (f), (g), and (h).
* * * *
    (3) Notwithstanding the value of X defined in Sec. 61.44(b), the 
value of X applicable to the basket specified in Sec. 61.42(d)(5) shall 
be 0%.
* * * * *
    (h) To the extent a local exchange carrier elects the higher 
productivity factor, the election must be made in all baskets, except 
the video dialtone services basket, as designated in Sec. 61.42(d)(5).
    4. Section 61.47 is amended by adding a new paragraph (g)(6) to 
read as follows:


Sec. 61.47  Adjustments to the SBI; pricing bands.

* * * * *
    (g) * * *
    (6) Local exchange carriers subject to price cap regulation as that 
term is defined in Sec. 61.3 shall use the methodology set forth in 
paragraphs (a) through (d) of this section to calculate a lower pricing 
band for the basket described in Sec. 61.42(d)(5). The annual pricing 
flexibility for this basket, as reflected in the API, shall be limited 
to an annual decrease of fifteen percent, relative to the percentage 
change in the PCI for that basket, measured from the last day of the 
preceding tariff year.
* * * * *
    6. Section 61.48 is amended by adding paragraph (j) to read as 
follows:


Sec. 61.48  Transition rules for price cap formula calculations.

* * * * *
    (j) Video Dialtone Services. For local exchange carriers subject to 
price cap regulation, the video dialtone services basket, as designated 
in Sec. 61.42(d)(5), shall be established with an initial PCI and API 
level of 100 in the first annual price cap tariff filing following 
competition of the base period in which the initial video dialtone 
service was introduced. The initial value of 100 for the PCI and API 
for video dialtone service prior to adjustment of inflation and 
productivity shall correspond to the rates in effect just prior to the 
effective date of the annual filing in which rates for video dialtone 
service are initially included in the video dialtone basket.

[FR Doc. 95-24884 Filed 10-5-95; 8:45 am]
BILLING CODE 6712-01-M