[Federal Register Volume 61, Number 35 (Wednesday, February 21, 1996)]
[Notices]
[Pages 6641-6642]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3665]



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FEDERAL COMMUNICATIONS COMMISSION

[CC Docket No. 92-133; DA 96-139]


Common Carrier Bureau Sets Pleading Schedule in Preliminary Rate 
of Return Inquiry.

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: The Federal Communications Commission (``FCC'' or 
``Commission'') is issuing a public notice (``Notice'') asking for 
comments on whether a rate of return represcription proceeding should 
be initiated for those local exchange carriers (``LECs'') who are 
subject to rate of return regulation for their earnings on interstate 
access services. The commenters may submit any evidence and opinion 
they deem relevant to the cost of debt, cost of equity and the capital 
structure for LEC interstate access services. The Notice contains a 
revised cost of debt formula not presently included in the Commission's 
rules. The information contained in the comments and reply comments 
will be used to help the Commission decide whether to initiate a 
represcription proceeding.

DATES: All comments shall be filed no later than March 11, 1996. Reply 
comments shall be filed no later than April 15, 1996.

FOR FURTHER INFORMATION CONTACT: Thomas J. Beers, telephone number 
(202) 418-0872, or John Hays, telephone number 202-418-0875.

SUPPLEMENTARY INFORMATION: 1. This is a summary of the Commission's 
public notice, released February 6, 1996, asking for comments on 
whether a rate of return represcription proceeding should be initiated 
for those local exchange carriers (``LECs'') who are subject to rate of 
return regulation for their earnings on interstate access services. See 
47 CFR Sec. 65.101. In a Report and Order in CC Docket No. 92-133, 60 
FR 28542, June 1, 1995 (``Order''), the Commission adopted new 
represcription procedures under which the Commission monitors the 
monthly average yields on ten-year United States Treasury securities. 
Whenever such monthly average yields remain, for a consecutive six-
month period, at least 150 basis points (i.e., 1.5 percent) above or 
below a certain reference point, the Commission must issue a Notice 
inquiring whether to commence a rate of return represcription 
proceeding. The reference point is the average of the average monthly 
yields in effect for the consecutive six-month period immediately prior 
to the effective date of the current rate of return prescription. The 
Notice must: (1) set filing deadlines for comments and replies; (2) set 
forth the cost of debt, cost of preferred stock, and capital structure 
computed in accordance with Part 65 of the Commission's rules; and (3) 
solicit ``such further information as the Commission might deem 
proper.'' 47 CFR Secs. 65.302, 65.303, and 65.304. The Commission 
delegated authority to issue the Notice to the Chief, Common Carrier 
Bureau (``Bureau''). As stated in the Report and Order, the reference 
point currently is set at 8.64 percent.
    2. For the consecutive six-month period May through October 1995, 
the yields on ten-year United States Treasury securities were more than 
150 basis points below the 8.64 percent reference point. This downward 
trend in rates continued for the month of November 1995 when the yield 
on the ten-year Treasury securities was 5.93 percent, i.e., 2.71 
percent below the reference point. The Commission, therefore, is 
issuing this Notice to ask interested parities to file comments and 
replies in order to help the Commission decide whether to initiate a 
represcription proceeding.
    3. The Commission invites commenters to submit any evidence and 
opinion they deem relevant, including evidence regarding the cost of 
equity for LEC interstate access services. The Commission may decide to 
initiate a represcription proceeding based on information submitted in 
this proceeding and ``on any other information specifically 
identified'' by the Commission. See 47 CFR Sec. 65.101(b). In an 
appendix (``Appendix'') attached to the Notice, 

[[Page 6642]]
the Commission has set out calculations of the cost of debt and capital 
structure. For purposes of this Notice, the Commission requests comment 
on cost of debt determined by the formula set out in Section 65.302, 
but it notes that this formula would appear to yield an excessively 
high cost of carrier debt (i.e., 14.96%). This cost of debt results 
from an apparent error in the numerator in the cost of debt formula. 
That numerator, Total Annual Interest Expense, is defined as for ``the 
most recent two years'' for all LECs with annual revenues of $100 
million, rather than ``the most recent year'' which would appear to be 
consistent with the intent of the Commission's Order. The Bureau 
intends to propose to the Commission that it change the rule to reflect 
this modification. In the meantime, and pursuant to Section 65.101(b), 
commenters are invited to address revised cost of debt calculations 
based on a modified formula as set out in the Appendix attached to the 
Notice.
    4. For LECs with annual revenues of $100 million or more, the 
Commission computes a composite cost of debt of 7.21 percent and a 
capital structure composed of 42.48 percent debt and 57.52 percent 
equity. Based on information currently available to the Commission, no 
LEC subject to rate of return regulation for interstate access services 
has issued preferred stock as of the date of this Notice. The 
Commission invites comment on whether this is in fact the case and, if 
it is not, commenters may submit their analyses and cost calculations 
for preferred stock in their replies. All data submitted shall be filed 
in paper format and electronically on 3.5 inch high-density diskettes 
in either Lotus 123 (version 4.x or below) or Microsoft Excel (version 
4.x or below).
    5. For purposes of this proceeding, our non-restricted ``permit but 
disclose'' ex parte rules will apply. 47 CFR Secs. 1.1200(a) and 
1.1006. These rules generally allow ex parte presentations in non-
restricted proceedings subject to a public disclosure requirement. 
Responses to Commission and staff inquiries that are designed to 
clarify or adduce evidence, or to resolve issues, are considered exempt 
ex parte presentations pursuant to 47 CFR Sec. 1.1204(b)(7), provided 
that any new information is disclosed pursuant to the Note to that 
section and 47 CFR Sec. 1.1206(a).
    6. All comments shall be filed no later than March 11, 1996. Reply 
comments shall be filed no later than April 15, 1996. Comments should 
reference file number AAD 95-172. Four copies of each pleading should 
be sent to Ernestine Creech, FCC, Common Carrier Bureau, 2000 L Street 
NW., Suite 257, Washington, D.C. 20554, and one copy of each pleading 
to the International Transcription Service (ITS), 2100 M Street NW., 
Suite 140, Washington, D.C. 20037. Copies are available for public 
inspection in the Accounting and Audits Division public reference room 
2000 L Street NW., Room 812, Washington, D.C. Copies of comments and 
notice are available from ITS.

Federal Communications Commission.
Regina M. Keeney,
Chief, Common Carrier Bureau.
[FR Doc. 96-3665 Filed 2-20-96; 8:45 am]
BILLING CODE 6712-01-P