[Federal Register Volume 62, Number 24 (Wednesday, February 5, 1997)]
[Proposed Rules]
[Pages 5373-5375]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2502]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 36, 51, 61 and 69
[CC Docket Nos. 96-45, 96-262, and 96-98; DA 97-56]
Implementation of the Telecommunications Act of 1996
AGENCY: Federal Communications Commission.
ACTION: Request for comment on staff analysis of economic cost proxy
models.
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SUMMARY: The Common Carrier Bureau of the Federal Communications
Commission here seeks comment on
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issues raised by its January 9, 1997 Staff Analysis of economic cost
computer models submitted in connection with several pending
proceedings implementing the Telecommunications Act of 1996.
DATES: Comments in response to the Public Notice are due February 3,
1997,1 and replies are due February 14, 1997.
\1\ Note: This document was received at the Office of the
Federal Register on January 28, 1997.
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ADDRESSES: Commenters must file an original and four copies of their
comments with the Office of the Secretary, Federal Communications
Commission, Room 222, 1919 M Street, N.W., Washington, D.C. 20554.
FOR FURTHER INFORMATION CONTACT: David A. Konuch, 202-418-0199 or Brad
Wimmer, 202-418-1847.
SUPPLEMENTARY INFORMATION: Released: January 9, 1997.
Commission Staff Releases Analysis of Forward-Looking Economic Cost
Proxy Models
Comment Date: February 3, 1997.
Reply Comment Date: February 14, 1997
1. This past year, the Commission has undertaken proceedings on
universal service, interstate access charge reform, and local exchange
competition to overhaul our current regulations in light of the
Telecommunications Act of 1996. In each proceeding the Commission has
examined the use of cost proxy models as a regulatory tool to estimate
forward-looking economic costs of providing telephone service. Today
the Commission Staff released a staff analysis intended to stimulate
discussion of criteria for the evaluation, and use, of forward-looking
cost proxy models in determining universal service support payments,
cost-based access charges, and interconnection and unbundled network
element pricing. The Common Carrier Bureau (``Bureau'') here is seeking
comment on the issues raised in the paper. The record gathered in
response to this paper may at a future date be associated with the
official record of certain pending rulemakings to which it may be
relevant and may be used to support Commission determinations in those
rulemakings. These rulemakings are Federal-State Joint Board on
Universal Service, CC Docket No. 96-45, Access Charge Reform, CC Docket
No. 96-262, and Implementation of the Local Competition Provisions of
the Telecommunications Act of 1996, CC Docket No. 96-98.
2. The staff's analysis begins with a methodological discussion of
the criteria for evaluating an economic cost model. These criteria
include: (1) Adherence to a forward-looking costing methodology; (2)
the ability to measure the cost of a narrowband network; (3)
consistency with independent cost evidence; (4) potential for
independent evaluation of model algorithms and input assumptions; and
(5) flexibility to vary user input choices. The Bureau seeks comment on
these design criteria, and other issues, including whether a proxy
model should estimate the cost of a network capable of delivering
broadband services as well as traditional narrowband services. In
commenting on the above issues and any others that commenters regard as
useful in evaluating the models, commenters should identify the
criteria they believe are the most important and the basis for their
position. Further, commenters should discuss whether and to what extent
the models in the record, or any models submitted subsequently, satisfy
these criteria.
3. The paper also contains a detailed analysis of the structure and
input requirements of existing proxy models. With regard to model
structure, the paper examines various issues including: (1) The use of
existing local exchange carrier wire centers; (2) the geographic unit
of analysis used by model proponents in designing their networks; (3)
the specification of demand for business and special access lines; and
(4) the specification of network elements included in a model and the
services those elements are capable of providing. The paper also
analyzes the engineering assumptions made by existing models submitted
in one or more of the rulemakings listed above in determining levels of
forward-looking investment, with particular attention directed to
feeder and distribution routes, fill factors, investment in structures,
and switching investment. Finally, the paper considers those models'
treatment of capital expenses, operating expenses, and joint and common
costs. Commenters should use this analysis as a basis for their
comments on existing proxy models. For instance, do the models include
loop plant investment sufficient to meet demand? In addition, based on
its analysis thus far, the Commission staff believes that varying any
one of a number of input factors of the models, such as the cost of
capital or the depreciation rate, may greatly affect the resulting
prices or support payment amounts. The Bureau seeks comment on this
view, and on which inputs are most critical to the soundness of the
prices generated by the models. Should the Commission take steps to set
specific inputs such as depreciation rates, capital costs, treatment of
taxes, joint and common costs, and expenses, and, if so, how?
4. The staff's analysis attempts to identify the modeling
assumptions and inputs that are most likely to have a significant
impact on estimated costs. Where appropriate, commenters should
indicate whether they agree or disagree with this analysis. In the case
of model input choices, commenters can, if desired, recommend either
specific input values or specific methodologies that could be used to
select an appropriate input. In some cases, the staff analysis
indicates areas in which alternative modeling approaches would be
desirable, and commenters are asked to describe in detail such
alternatives whenever possible. While commenters are invited to address
any aspect of existing or future proxy models, particular attention
should be paid to the following areas identified in the staff analysis:
(1) The appropriate choice of fill factors and the treatment of
structure costs; (2) methodologies for determining the appropriate
forward-looking cost of capital and rate of depreciation; (3)
alternative methodologies that models could use to estimate forward-
looking operating expenses; and (4) sources of independent evidence
that could be used to choose model inputs and verify model outputs.
5. The staff's analysis also considers several questions about the
potential uses of models in pending proceedings on universal service,
access reform and element pricing. For instance, could a single model,
or combination of models, be used for multiple regulatory objectives,
i.e., in determining cost-based access charges as part of a
prescriptive approach to access reform and in setting both
interconnection and unbundled element prices and universal service
support levels? The Federal-State Universal Service Joint Board has
already recommended that the models before it undergo refinement before
they may be used to set universal service support levels. Similarly,
the staff's analysis suggests that each of the models would need to be
modified before it alone could be used to set cost-based access charges
or to estimate network facilities' costs, and the Bureau seeks comment
on this view. As an alternative to choosing a single model or set of
models, could a hybrid model be developed that would employ the most
successful features and assumptions contained in individual models? The
Bureau also seeks comment on the different design assumptions that
commenters believe can or should be
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used in models used for different purposes. For instance, commenters
that believe the modeling of the economic cost of providing network
facilities or access costs can or should differ from the modeling of
the economic costs of providing the services receiving universal
service support should describe their reasons, including in part the
differences in network investments required. Specifically, they should
identify any costs included in unbundled elements that are directly
attributable to unsupported services. More broadly, the Bureau seeks
comment on whether the various inputs to the models, such as rate of
return and depreciation, can or should differ for these different
purposes.
6. The Bureau looks forward to receiving comments and working with
all interested parties in developing reasonable approaches to using
economic cost models as tools in resolving the various critical
telecommunications policy issues described above. The comments should
be filed on or before February 3, 1997, with reply comments due
February 14, 1997. Commenters must file an original and four copies of
their comments with the Office of the Secretary, Federal Communications
Commission, Room 222, 1919 M Street, N.W., Washington, D.C. 20554.
Comments should reference CPD Docket No. 97-2. Commenters should send
one copy of their comments to the Commission's copy contractor,
International Transcription Service, Room 140, 2100 M Street, N.W.,
Washington, D.C. 20037. Comments will be available for public
inspection during regular business hours in the FCC Reference Center,
Room 239, 1919 M Street, N.W., Washington, D.C. 20554.
7. Parties are also asked to submit comments on diskette. Such
diskette submissions would be in addition to and not a substitute for
the formal filing requirements addressed above. Parties submitting
diskettes should submit them to Wanda M. Harris, Competitive Pricing
Division, Common Carrier Bureau, 1919 M Street, N.W., Room 518,
Washington, D.C. 20554. Such a submission should be on a 3.5 inch
diskette in an IBM compatible format using WordPerfect 5.1 for Windows
software in a ``read only'' mode. The diskette should be clearly
labelled with the party's name, proceeding, and date of submission. The
diskette should be accompanied by a cover letter.
List of Subjects
47 CFR Part 36
Communications common carriers, Telephone, Uniform System of
Accounts.
47 CFR Part 51
Communications common carriers, Telephone.
47 CFR Part 61
Communications common carriers, Tariffs, Telephone.
47 CFR Part 69
Access charges, Communications common carriers, Telephone.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 97-2502 Filed 2-4-97; 8:45 am]
BILLING CODE 6712-01-P