[Federal Register Volume 60, Number 198 (Friday, October 13, 1995)]
[Notices]
[Pages 53373-53374]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25318]



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FEDERAL COMMUNICATIONS COMMISSION

[DA 95-2083]


Approval of Cost Accounting Plan

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: This Order approves Southern New England Telephone Company's 
(SNET) cost accounting plan for its market trial of video dialtone 
service. Specifically, we approve the accounting plan filed by SNET in 
its Description and Justification filed in Transmittal No. 641, on 
March 9, 1995, as modified by a supplement filed on June 19, 1995. This 
approval is subject to the following three conditions that must be met 
within 30 days of publication in the Federal Register. SNET is required 
to: revise its accounting plan to include subsidiary records that 
reflect replacement of retired transmission plant with fiber optic and 
coaxial cable facilities within the VDT trial's geographic areas; 
provide a detailed explanation, including appropriate documentation, 
regarding the sufficiency of its internal controls and include an 
evaluation of internal controls for video dialtone service in its 1995 
annual audit of its Cost Allocation Manual. The Commission, granted 
permission for SNET to perform a market trial of video dialtone service 
for video only, but stipulated that in the event SNET decided to offer 
exchange access telephone service over video dialtone facilities, it 
must first submit and obtain approval of an accounting and cost 
allocation plan. This action is taken because SNET, in Transmittal 641 
proposed to perform its market test of video dialtone service to 
include both video and exchange access telephone service.

FOR FURTHER INFORMATION CONTACT: Tom Quaile, Common Carrier Bureau, 
Accounting and Audits Division, (202) 418-0838.

SUPPLEMENTARY INFORMATION: This is a Synopsis of the Commission's Order 
adopted September 29, 1995 and released September 29, 1995 The complete 
text of this Order is available for inspection and copying during 
normal business hours in the FCC Dockets Branch (Room 230), 1919 M 
Street, N.W., Washington, D.C. 20554 and also may be purchased from the 
Commission's copy contractor, ITS, at (202) 857-3822, Room 246, 1919 M 
Street, N.W., Washington, D.C. 20554.

Synopsis of Order

    1. This Order conditionally approves an accounting plan filed by 
SNET. The Commission granted SNET authority under Section 214 to 
construct a hybrid fiber optic/coaxial cable network for a one year 
market and technical trial. VDT is normally a combination of video and 
telephony service however, in its application to provide service, SNET 
stated that it would initially offer only video in its market trial. 
The Commission requires LECs that offer VDT and telephony, to establish 
two sets of subsidiary accounting records: one set to capture the 
investment, expense and revenue wholly dedicated to VDT; the other set 
to capture the investment, expense and revenue shared between VDT and 
other telephone services. Because SNET only proposed video service, the 
Commission did not impose this accounting requirement but stated that 
if SNET decided to offer telephone service over the upgraded network 
during the trial, it must submit and obtain approval of an accounting 
and cost allocation plan to implement the Commission's accounting 
requirements. SNET subsequently decided to offer telephony services 
over its upgraded network during the trial. It therefore filed 
accounting and cost allocation plans as required under the Commission's 
VDT specific accounting requirements contained in Responsible 
Accounting Officer Letter Number 25.
    2. RAO 25 requires that LEC's maintain subsidiary records to 
identify the cost of plant that is replaced or retired due to either 
the deployment of video dialtone plant or the deployment of fiber optic 
upgrades as mandated under state authority in study areas where VDT 
deployment occurs. SNET claims that its decision to upgrade its network 
facilities with fiber optic coaxial-cable facilities was not influenced 
by its decision to offer VDT service and thus it is not required under 
RAO 25 to maintain subsidiary records for the costs of retired plant. 
We believe that SNET's accounting plan should contain provisions for 
recording retired plant irrespective of the underlying reasons that 
support SNET's decision to construct its I-SNET network. The data and 
information reported during the course of the trial will allow the 
Commission to make informed decisions regarding appropriate costing 
methodologies for VDT services. To ensure that the Commission has 
sufficient data to make such decisions, we require that SNET's 
accounting plan include subsidiary records that contain the costs for 
retirements of transmission facilities within the geographic area in 
which the trial is conducted.
    3. RAO 25 requires that LECs have internal accounting controls and 
a complete audit trail for each subsidiary account record. SNET's 
accounting plan proposes to meet this requirement by establishing 
accounting codes and methods to ensure that employees apply the proper 
codes. Based on our review of SNET's accounting plan, it appears that 
SNET has developed adequate internal controls. Nevertheless, because we 
consider the development and maintenance of internal controls to be 
crucial to the accuracy of reported VDT costs, we require SNET to 
provide a more detailed explanation, including documentation, of how 
its controls provide sufficient safeguards to ensure accurate 
information. In addition, we require SNET to include an evaluation of 
its internal controls for VDT allocations and assignments as part of 
its annual independent CAM audits.
    4. This Order addresses only SNET's accounting plan. We believe 
that, if VDT costs are properly recorded in the accounts, adjustments 
can be made at a later date if changes in allocation methodologies 
warrant changes to subsidiary records. Cost allocation issues 
pertaining to VDT will be addressed in the tariff review process.
    5. Accordingly, it is ordered, pursuant to authority contained in 
Sections 1, 4(i), 218-220 and 403 of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 154(i), 218-220 and 403 and Sections 0.91 and 
0.291 of the Commission's rules, 47 CFR 0.91 and 0.291, that Southern 
New England Telephone Company's video dialtone marketing trial 
accounting plan, is approved subject to the following conditions:
    (a) That within 30 days of publication of this Order in the Federal 
Register, SNET shall revise its accounting plan to include subsidiary 
records that reflect 

[[Page 53374]]
replacement of retired transmission plant with fiber optic and coaxial 
cable facilities within the VDT trial's geographic areas.
    (b) That within 30 days of the release of this Order, SNET shall 
provide a detailed explanation, including appropriate documentation, 
regarding the sufficiency of its internal controls.
    (c) That SNET's annual CAM audit for 1995 shall include an 
evaluation of VDT internal controls.
    6. It is further ordered pursuant to authority contained in 
Sections 1, 4(i), 218-220 and 403 of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 154(i), 218-220 and 403 and Sections 0.91 and 
0.291 of the Commission's rule, 47 CFR 0.91 and 0.291, that the 
Cablevision Systems Corporation's and The New England Cable Television 
Association's Petition to Reject or, in the Alternative, to Suspend and 
Investigate SNET's Accounting and Cost Allocation plan is DENIED to the 
extent that petitioners seek rejection of the accounting plan.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 95-25318 Filed 10-12-95; 8:45 am]
BILLING CODE 6712-01-M