[Federal Register Volume 62, Number 209 (Wednesday, October 29, 1997)]
[Rules and Regulations]
[Pages 56121-56133]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-28548]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 69

[CC Docket Nos. 96-262, 94-1, 91-213; FCC 97-368]


Access Charge Reform; Price Cap Performance Review for Local 
Exchange Carriers; Transport Rate Structure

AGENCY: Federal Communications Commission.

ACTION: Final rule; petition for reconsideration.

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SUMMARY: On December 23, 1996, the Commission adopted a Notice of 
Proposed Rulemaking in this docket, 62 FR 4670 (Jan. 31, 1997), seeking 
comment on how the interstate access charge regime should be revised in 
light of the local competition and Bell Operating Company entry 
provisions of the Telecommunications Act of 1996 and state actions to 
open local markets to competition, the effects of potential and actual 
competition on incumbent LEC pricing for interstate access, and the 
impact of the Act's mandate to preserve and enhance universal service. 
On May 7, 1997, the Commission adopted a First Report and Order, 62 FR 
31040 (June 6, 1997), in which it adopted many of the rules it 
proposed. In this Second Order on Reconsideration, the Commission 
modifies some of the rules adopted in the First Report and Order. These 
rule revisions are intended to foster competition, move access charges 
over time to more economically efficient levels and rate structures, 
preserve universal service, and lower rates.

EFFECTIVE DATES: The following rules or amendments thereto, shall 
become effective January 1, 1998: 47 CFR 69.153(g), 69.4, 69.111(c)(1), 
69.153(c)(1), 69.153(d)(1)(i), 69.153(d)(2)(i), and 69.155(c). The 
Commission has requested emergency approval of the information 
collection requirements to ensure that it may be

[[Page 56122]]

effective on January 1, 1998. Written comments by the public on the new 
and/or modified information collections are due November 13, 1997. 
Written comments must be submitted to the Office of Management and 
Budget (OMB) on the new and/or modified information collections on or 
before October xx, 1997.

FOR FURTHER INFORMATION CONTACT: Richard Lerner, Attorney, Common 
Carrier Bureau, Competitive Pricing Division, (202) 418-1530. For 
additional information concerning the information collections contained 
in this Report and Order contact Judy Boley at 202-418-0214, or via the 
Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order adopted October 8, 1997, and released October 9, 1997. The 
full text of this Report and Order is available for inspection and 
copying during normal business hours in the FCC Reference Center (Room 
239), 1919 M St., N.W., Washington, DC. The complete text also may be 
obtained through the World Wide Web, at http://www.fcc.gov/Bureaus/
Common__Carrier/Orders/1997/fcc97368.wp, or may be purchased from the 
Commission's copy contractor, International Transcription Service, 
Inc., (202) 857-3800, 1231 20th Street, NW, Washington, DC 20036. The 
rules adopted in this Second Order on Reconsideration are made in 
response to petitions for reconsideration to Access Charge Reform, CC 
Docket No. 96-262, Report and Order, 62 FR 31040 (June 6, 1997) (First 
Report and Order), and to correct clerical errors of the First Report 
and Order. This Second Order on Reconsideration contains new and/or 
modified information collections subject to the Paperwork Reduction Act 
of 1995 (PRA). It has been submitted to the Office of Management and 
Budget (OMB) for review under the PRA. OMB, the general public, and 
other Federal agencies are invited to comment on the new and/or 
modified information collections contained in this proceeding. Please 
note that the Commission has requested emergency review and approval of 
this collection by November 13, 1997 under the provisions of 5 CFR 
1320.13.

Final Regulatory Flexibility Analysis

    In the First Report and Order, we conducted a Final Regulatory 
Flexibility Analysis as required by Section 603 of the Regulatory 
Flexibility Act, as amended by the Contract with America Advancement 
Act of 1996, Pub. L. No. 104-121, 110 Stat. 847 (1996). The changes we 
adopt in this Order do not affect that analysis.

Paperwork Reduction Act

    This Order contains either a proposed or modified information 
collection. As part of its continuing effort to reduce paperwork 
burdens, we invite the general public and the Office of Management and 
Budget (OMB) to take this opportunity to comment on the information 
collections contained in this Order, as required by the Paperwork 
Reduction Act of 1995, Public Law 104-13. Please note that the 
Commission has requested emergency review and approval of this 
collection by November 13, 1997 under the provisions of 5 CFR 1320.13. 
OMB notification of action is due November 13, 1997. Comments should 
address: (a) Whether the proposed collection of information is 
necessary for the proper performance of the functions of the 
Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information 
collected; and (d) ways to minimize the burden of the collection of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology.
    OMB Approval Number: 3060-0760.
    Title: Access Charge Reform Second Order on Reconsideration
    Type of Review: Revised Collection
    Respondents: Business and other for profit.
    Number of Respondents: 14.
    Estimated Time Per Response: 128,907 hours.
    Total Annual Burden: 1,804,690 hours.
    Estimated Costs Per Respondent: $4,504,388.
    Total Annual Estimated Costs: $63,061,430.
    Needs and Uses: 1. In the First Report and Order (Order), CC Docket 
No. 96-262, Access Charge Reform and the Second Order on 
Reconsideration, the FCC adopts, that, consistent with principles of 
cost-causation and economic efficiency, non-traffic sensitive (NTS) 
costs associated with local switching should be recovered on an NTS 
basis, through flat-rated, per month charges. The information 
collections are as follows:
    a. Showings Under the Market-Based Approach: As competition 
develops in the market, the FCC will gradually relax and ultimately 
remove existing Part 69 federal access rate structure requirements and 
Part 61 price caps restrictions on rate level changes. Regulatory 
reform will take place in two phases. The first phase of regulatory 
reform will take place when an incumbent Local Exchange Carrier's (LEC) 
network has been opened to competition for interstate access services. 
The second phase of rate structure reforms will take place when an 
actual competitive presence has developed in the marketplace. 
Detariffing will take place when substantial competition has developed 
for the access charge elements. In our initial statement, we proposed 
that in order for LECs to meet this standard, they have to demonstrate 
that: (1) Unbundled network element prices are based on geographically 
deaveraged, forward-looking economic costs in a manner that reflects 
the way costs are incurred; (2) transport and termination charges are 
based on the additional cost of transporting and terminating another 
carrier's traffic; (3) wholesale prices for retail services are based 
on reasonably avoidable costs; (4) network elements and services are 
capable of being provisioned rapidly and consistent with a significant 
level of demand; (5) dialing parity is provided by the incumbent LEC to 
competitors; (6) number portability is provided by the incumbent LEC to 
competitors; (7) access to incumbent LEC rights-of-way is provided to 
competitors; and (8) open and non-discriminatory network standards and 
protocols are put into effect. We propose that the second phase of rate 
structure reforms would take place when an actual competitive presence 
has developed in the marketplace. LECs would have to show the following 
to indicate that actual competition has developed in the marketplace 
by: (1) Demonstrated presence of competition; (2) full implementation 
of competitively neutral universal service support mechanisms; and (3) 
credible and timely enforcement of pro-competitive rules. In the NPRM, 
we sought comment on four options for a prescriptive approach: 
reinitializing price cap indices (PCIs) to economic cost-based levels; 
reinitializing PCIs to levels targeted to yield no more than an 11.25 
percent rate of return, or some other rate of return; adding a policy-
based mechanism similar to the CPD to the X-Factor; or prescribing 
economic cost-based rates. We have decided above to rely primarily on a 
market-based approach, and impose prescriptive requirements only when 
market forces are inadequate to ensure just and reasonable rates for 
particular services or areas. We will determine the details of our 
market-based approach in a future Order. In that Order, we will also 
discuss in more detail what prescriptive

[[Page 56123]]

requirements we will use as a backstop to our market-based access 
charge reform. Because we are not adopting the prescriptive approach at 
this time, we are removing the collections associated with the 
prescriptive approach from our statement. If the collections are 
adopted at a later date, we will request that OMB reinstates them at 
that time. No change.
    b. Cost Study of Local Switching Costs: The FCC does not establish 
a fixed percentage of local switching costs that incumbent LECs must 
reassign to the Common Line basket or newly created Trunk Cards and 
Ports service category as NTS costs. In light of the widely varying 
estimates in the record, we conclude that the portion of costs that is 
NTS costs likely varies among LEC switches. Accordingly, we require 
each price cap LEC to conduct a cost study to determine the 
geographically-averaged portion of local switching costs that is 
attributable to the line-side ports, as defined above, and to dedicated 
trunk side cards and ports. These amounts, including cost support, 
should be reflected in the access charge elements filed in the LEC's 
access tariff effective January 1, 1998. No Change.
    c. Cost Study of Interstate Access Service That Remain Subject to 
Price Cap Regulation: The 1996 Act has created an unprecedented 
opportunity for competition to develop in local telephone markets. We 
recognize, however, that competition is unlikely to develop at the same 
rate in different locations, and that some services will be subject to 
increasing competition more rapidly than others. We also recognize, 
however, that there will be areas and services for which competition 
may not develop. We will adopt a prescriptive ``backstop'' to our 
market-based approach that will serve to ensure that all interstate 
access customers receive the benefits of more efficient prices, even in 
those places and for those services where competition does not develop 
quickly. To implement our backstop to market-based access charge 
reform, we require each incumbent price cap LEC to file a cost study no 
later than February 8, 2001, demonstrating the cost of providing those 
interstate access services that remain subject to price cap regulation 
because they do not face substantial competition. No Change.
    The Order also adopts the following collection of information:
    d. Tariff Filings: In the First Report and Order, the Commission 
requires the filing of various tariffs, with modifications. For 
example, the FCC directs incumbent LECs to establish separate rate 
elements for the multiplexing equipment on each side of the tandem 
switch. LECs must establish a flat-rated charge for the multiplexers on 
the SWC side of the tandem, imposed pro-rata on the purchasers of the 
dedicated trunks on the SWC side of the tandem. Multiplexing equipment 
on the EO side of the tandem shall be charged to users of common EO-to-
tandem transport on a per-minute of use basis. These multiplexer rate 
elements must be included in the LEC access tariff filings to be 
effective January 1, 1998. In the Second Order on Reconsideration, the 
FCC clarifies that the TIC exemption for access customers using 
competitive transport providers only applies to that portion of the 
residual per-minute TIC that is related to transport facilities, and 
directs incumbent local exchange carriers to include, in their access 
tariff filing, the amount of per-minute transport interconnection 
charge (TIC) they anticipate will be allocated to facilities-based rate 
elements in the future.
    e. Third-Party Disclosure: In the Second Order on Reconsideration, 
the Commission requires LECs to provide IXCs with customer-specific 
information about how many and what type of presubscribed interexchange 
carrier charges (PICCs) they are assessing for each of the IXC's 
presubscribed customers. One of the primary goals of our First Report 
and Order was to develop a cost-recovery mechanism that permits 
carriers to recover their costs in a manner that reflects the way in 
which those costs are incurred. Without access to information that 
indicates whether the LEC is assessing a primary or non-primary 
residential PICC, or about how many local business lines are 
presubscribed to a particular IXC, the IXC will be unable to develop 
rates that accurately reflect the underlying costs.

SYNOPSIS OF REPORT AND ORDER

I. Presubscribed Interexchange Carrier Charge

A. Implementation Issues

1. Background
    1. In the First Report and Order, we adopted common line rate 
structure modifications that will permit price cap LECs to shift 
gradually from a cost-recovery mechanism that recovers a significant 
portion of non-traffic sensitive common line costs through per-minute 
CCL charges to one that recovers these costs through flat-rated 
charges. The cost-recovery mechanism we adopted retains the current 
$3.50 ceiling on the SLC for primary residential and single-line 
business lines and increases the SLC ceilings on other lines to permit 
LECs to recover a greater amount of the common line costs through flat-
rated charges assessed on the end user. To the extent that SLC ceilings 
prevent price cap LECs from recovering their allowed common line 
revenues from end users, LECs will recover the shortfall, subject to a 
maximum charge, through a presubscribed interexchange carrier charge 
(PICC), a flat, per-line charge assessed on the end-user's 
presubscribed interexchange carrier.
    2. The PICC, which over time will shift revenue recovery from the 
per-minute CCL charges to a flat-rated charge assessed on IXCs, was 
designed to allow price cap LECs to recover the difference between 
revenues collected through the SLCs and the total revenue permitted for 
the common line basket. In order to provide price cap LECs and IXCs 
with adequate time to adjust to the new rate structure, we adopted an 
approach that will gradually phase in the PICC over time. Specifically, 
effective January 1, 1998, we capped PICCs for primary residential and 
single-line business lines at $0.53 per month for the first year. 
Beginning January 1, 1999, the ceiling on the monthly PICC on primary 
residential and single-line business lines will be adjusted for 
inflation and will increase by $0.50 per year until it equals the 
monthly per-line common line revenues and residual interconnection 
charge revenues permitted under our price cap rules, less the maximum 
SLC charge allowed under our rules.
    3. In addition, to the extent that the SLC ceilings on all lines 
and the PICC ceilings on primary residential and single-line business 
lines prevent recovery of the full common line revenues permitted by 
our price cap rules, the new rate structure we adopted for price cap 
LECs permits these carriers to recover the shortfall through PICCs 
assessed on non-primary residential and multi-line business lines. For 
the first year, the ceiling on the PICC will be $1.50 per month for 
non-primary residential lines and $2.75 per month for multi-line 
business lines.
    4. Beginning January 1, 1999, the PICC ceilings for price cap non-
primary residential and multi-line business lines will be adjusted for 
inflation and will increase by a maximum of $1.00 and $1.50 per year, 
respectively, until incumbent LECs can recover all of their permitted 
common line revenues through a combination of flat-rated SLCs and 
PICCs. As the PICC ceilings on primary residential and single-line 
business lines increase, the residual per-minute CCL charge will 
decrease until it is eliminated. After the residual per-minute CCL 
charge is eliminated and

[[Page 56124]]

the PICC ceilings for primary residential and single-line business 
lines increase, price cap LECs will reduce their PICCs on non-primary 
residential and multi-line business lines by a corresponding amount. 
Reductions will be targeted first to the PICCs on multi-line business 
lines until the PICCs for those lines are equal to the PICCs for non-
primary residential lines. Thereafter, price cap LECs will apply the 
annual reductions to both classes of customers equally until the 
combined SLCs and PICCs for primary residential and single-line 
business lines recover the full average per-line common line revenues 
permitted under our price cap rules, and the additional PICCs on non-
primary residential and multi-line business lines no longer recover 
common line revenues.
2. Sprint's Petition for Reconsideration
    5. On July 11, 1997 Sprint filed a Petition for Expedited 
Reconsideration and Clarification in which it requests that the 
Commission reconsider certain implementation issues related to the 
PICCs adopted in the First Report and Order. Sprint argues that these 
issues need to be resolved prior to January 1, 1998, the effective date 
of the PICCs. Specifically, Sprint requests that the Commission require 
LECs to provide IXCs with customer-specific billing information that 
specifies the number and type(s) of PICCs LECs will be assessing for 
each of the IXCs' presubscribed customers. Sprint asserts that because 
LECs will be assessing IXCs different PICCs for primary and non-primary 
residential lines, IXCs may choose to develop different residential 
rates for these lines. Sprint argues that IXCs will therefore need the 
customer-specific PICC information in order to develop separate toll 
rates for calls originated on these lines.
    6. In addition, Sprint contends that in a typical multi-line 
business configuration IXCs are unable to determine how many multi-line 
business lines are presubscribed to them. According to Sprint, unless 
the LECs provide customer-specific PICC information, IXCs are unable to 
know how many of these local lines exist or how many PICCs are being 
assessed for these lines. Sprint argues that IXCs need access to 
customer-by-customer PICC data so that they have the ability to pass 
through the PICCs directly to their customers if they so choose.
    7. In its petition, Sprint seeks guidance from the Commission on 
how LECs should assess PICCs where a LATA encompasses territory in more 
than one state, and a customer has one IXC handling intraLATA 
interstate calls and another IXC handling interLATA interstate calls. 
Sprint suggests that the PICC should be assessed on the interLATA 
interstate carrier.
3. Discussion
    8. We grant Sprint's request that LECs be required to provide IXCs 
with customer-specific information about the number and type(s) of 
PICCs they are assessing for each of the IXC's presubscribed customers. 
We agree with Sprint that this measure is necessary to provide IXCs the 
opportunity to develop a rate structure that recovers these costs in a 
cost-causative manner. One of the primary goals of our First Report and 
Order was to develop a cost-recovery mechanism that permits carriers to 
recover their costs in a manner that reflects the way in which those 
costs are incurred. If an IXC were to receive a bill for the aggregate 
amount of the PICCs assessed on its presubscribed lines and did not 
have access to information that indicates for which lines the LEC is 
assessing a primary or non-primary residential PICC, the IXC would be 
unable to develop residential rates that accurately reflect the 
underlying costs of providing service over those lines. Similarly, in a 
multi-line business configuration, without information about the number 
of local business lines that are presubscribed to a particular IXC and 
the amount of PICCs being charged for which lines, the IXC will not be 
able to recover the costs of serving its customers in an efficient 
manner. We therefore conclude that LECs must provide IXCs with 
information about how many and what type of PICCs they are charging 
IXCs for each customer.
    9. We conclude that there is insufficient evidence in the record to 
support arguments that providing customer-specific PICC data to IXCs 
will be overly burdensome and that discrepancies can be resolved 
through normal billing reconciliation processes. In order to bill IXCs 
the proper amount, LECs will presumably have to create a database for 
purposes of determining how many lines are presubscribed to each IXC 
and what type of PICC is being assessed for each of those lines. We 
conclude that LECs must provide this information to the IXCs to enable 
them to develop rate structures that will recover these costs 
efficiently.
    10. We also grant Sprint's request to clarify how LECs assess PICCs 
in situations where a customer for a particular line has one 
presubscribed carrier for interstate intraLATA calls and another for 
interstate interLATA calls. Dividing the PICC between two IXCs based on 
actual calling patterns would create an unnecessary administrative 
burden that would outweigh any minimal benefit. Moreover, LATA 
boundaries that cross state lines are the exception rather than the 
rule, and interstate calls within a LATA thus represent only a small 
portion of interstate traffic. We therefore conclude that in such 
cases, the PICC shall be assessed on the interstate interLATA carrier.

B. PICC Calculation

1. Background
    11. In its petition for reconsideration, Sprint argues that the 
Commission's formula for calculating PICCs will not allow sufficient 
recovery of loop costs, because the formula relies on base period 
revenues divided by the projected number of loops in use for such 
annual period. Sprint contends that such a formula would force PICCs 
downward because revenues determined on a base period would not 
adequately reflect revenue growth commensurate with projected growth in 
loops. In turn, Sprint argues, under-recovery of loop costs through 
flat-rated PICCs will necessitate greater reliance on usage charges to 
recover non-traffic-sensitive costs, undermining the Commission's 
efforts to align access charges with the manner in which costs are 
incurred.
2. Discussion
    12. We clarify in this Order that the rule describing the formula 
for calculating PICCs relies on projected revenues and projected loop 
counts. The use of projected revenues and projected loop counts is 
applicable to PICC calculations conducted under sections 69.153(c) and 
69.153(d) of our rules. We note that the rule setting forth the method 
of calculating SLCs expressly incorporates projected revenues and 
projected loop numbers. Although the PICC rule does not expressly state 
that projected revenues are to be used in the formula, the rule has 
been designed to use projected revenues rather than revenues derived 
from a base period. Accordingly, there is no ``mismatch'' caused by 
dividing projected loops by base period revenues. We will, however, 
amend our rules to state explicitly that the projected revenues must be 
used to conduct the PICC calculation.
    13. In our First Report and Order, we adopted section 69.153(c)(1) 
in which we directed incumbent LECs to calculate the maximum monthly 
PICC for primary residential subscriber lines and single-line business 
lines by using ``one twelfth of the sum of annual common line revenues 
and residual

[[Page 56125]]

interconnection charge revenues permitted under our price cap rules 
divided by the projected average number of local exchange service 
subscriber lines in use during such annual period, minus $3.50.'' On 
further consideration of section 69.153(c)(1), we recognize that, as 
written, this rule may not permit an incumbent LEC to recover its 
residual interconnection charge revenues from primary residential and 
single-line business lines when its maximum primary residential and 
single-line business SLC is less than $3.50. On our own motion, 
therefore, we take this opportunity to reconsider this issue and revise 
section 69.153(c)(1). We replace the phrase ``minus $3.50'' with the 
phrase ``minus the maximum subscriber line charge computed pursuant to 
section 69.152(d)(2).''
    In the First Report and Order, we also adopted section 
69.153(d)(2)(i), which instructs incumbent LECs how to calculate the 
maximum monthly PICC for multi-line business lines when the maximum 
charge for the non-primary residential PICC is at its cap. The rule was 
intended to provide that the calculation be performed by taking ``[o]ne 
twelfth of the annual common line, residual interconnection charge, and 
Sec. 69.156(a) marketing expense revenues permitted,'' less the maximum 
amounts permitted to be recovered through the SLC, the other PICCs, and 
other marketing expense recovery mechanisms. In crafting the language 
of the rule, however, we identified the maximum amount permitted to be 
recovered from the non-primary residential PICC as section 
69.153(d)(1)(i) instead of section 69.153(d)(1). We correct this error 
to take into account the fact that the cap on the non-primary 
residential PICC limits the amount that charge can recover.

C. Application of PICCs to Centrex Lines

1. Background
    15. The First Report and Order requires that the PICC recover 
common line revenues not recovered from the SLC and other common line 
charges, and that the PICC be applied on the same basis as the SLC. 
Centrex arrangements are charged more SLCs than are similarly-sized PBX 
arrangements. Consequently, the First Report and Order requires that 
Centrex arrangements be assessed a greater number of PICCs than are 
similarly-sized PBX arrangements.
22. Petitions
    16. USTA, ICA, and the County of Los Angeles (Los Angeles) assert 
that the number of PICCs that are assessed on Centrex arrangements 
should equal the number of PICCs assessed on similarly-sized PBX 
arrangements. They contend that the revenues recovered from Centrex 
arrangements by the PICC are unrelated to the costs of providing 
Centrex service. They argue that Centrex customers currently pay one 
SLC per line, which recovers the full interstate portion of common line 
costs used to provide Centrex service. They further contend that the 
disproportionate level of PICC Centrex charges unfairly subjects 
Centrex systems to anticompetitive and arbitrary charges, which is 
contrary to the clear intent of Congress that subsidies be explicit and 
cost-based.
    17. ICA observes that the Commission's rules appear to apply to 
lines that are toll restricted, thereby penalizing customers that 
attempt to control costs and reduce the possibility of toll fraud. 
According to ICA, many Centrex customers require that a portion of 
their Centrex lines be toll restricted. ICA argues that toll-restricted 
Centrex lines should not be subject to any PICCs.
    18. Petitioners propose that LECs be permitted to reflect trunk 
equivalency. They propose that the PICC on Centrex lines be assessed 
using a line-to-trunk equivalency ratio. Such ratios are already set 
forth in intrastate tariffs. In the absence of an intrastate tariff, 
the LECs could develop such a ratio, or there could be agreed upon 
industry relationships between the Centrex lines and trunks. USTA also 
suggests that LECs should be permitted to count Network Access 
Registers (NARs) for purposes of assessing the PICC on Centrex 
customers. USTA contends that NARs are equivalent to PBX trunks since 
one NAR provides one link to the switch. In an ex parte filing, USTA 
has indicated that in order to address the complexity and verification 
problems of using individual state tariffs or individual company 
ratios, the Commission should adopt a uniform line-to-trunk equivalency 
ratio of 9 to 1.
3. Discussion
    19. We grant the petitions of USTA, ICA, and Los Angeles that the 
PICC be assessed on Centrex lines using a line-to-trunk equivalency 
ratio. For the reasons discussed below, we adopt USTA's proposal to use 
a uniform 9:1 ratio. In large part, the multi-line business PICC is not 
a cost-based charge, but a contribution, ``for a limited period, to the 
recovery of common line costs that incumbent LECs incur to serve 
single-line customers.'' It is therefore reasonable to consider non-
cost factors in determining how to assess the PICC. We conclude that 
with respect to the PICC, Centrex customers should be treated similarly 
to PBX customers, because the two arrangements are functionally 
equivalent.
    20. Petitioners state that Centrex and PBX arrangements are 
functionally equivalent, and opposing parties do not dispute this 
assertion. We do not wish to encourage a large customer to choose one 
of these arrangements, PBX, over another, Centrex, simply because, as a 
result of its IXC being charged substantially more PICCs, i.e., non-
cost-related charges, for Centrex service, the PBX service becomes 
cheaper.
    21. In addition, many Centrex users are government, education, and 
health care facilities. We note that more than 25 percent (18,640) of 
Los Angeles's 67,000 Centrex lines, which do not include Los Angeles 
County public schools are used by health care facilities. Without using 
a line-to-trunk equivalency ratio, Los Angeles could be required to pay 
an additional $2.8 million annually in PICCs, if its presubscribed IXC 
passes these charges through. New York could see the implementation of 
the PICC increase its rates by over $2.4 million annually, if these 
charges are passed through by its IXC. Boston University, with its 
10,000 Centrex lines, faces a potential increase of $330,000 per year 
in PICCs. By granting the petitions for relief, we ensure that all 
multi-line business customers shoulder a similar portion of the PICC 
contribution, irrespective of whether they use Centrex or PBX 
arrangements.
    22. Centrex arrangements are charged SLCs on a per-line basis, even 
though this difference results in a higher rate than equivalent PBX 
arrangements have to pay. That differential is due to the additional 
common line costs that Centrex lines incur. Historically, the 
Commission has declined to apply a trunk equivalency ratio for Centrex 
services, under the rationale that ``[i]f Centrex uses more lines, then 
Centrex necessarily creates more line costs.'' Unlike the SLC, in most 
instances, the multi-line business PICC will not recover loop costs of 
multi-line businesses. Instead, it will contribute to the recovery of 
the cost of single-line business and residential loops, which have 
lower SLC and PICC caps. Centrex and PBX are functionally equivalent in 
most respects. Taking these factors into consideration, it would be 
inequitable to require Centrex users to cause its presubscribed IXC to 
bear a significantly larger PICC contribution than do similarly-sized 
PBX users.

[[Page 56126]]

    23. Therefore, we will limit the PICC charges that may be assessed 
on IXCs serving Centrex customers on a line-to-trunk equivalency basis, 
except where the multi-line business SLC ceiling does not permit the 
recovery of all interstate-allocated loop costs from the end user. In 
those instances, a somewhat greater PICC--one that includes the 
difference between the per-line loop cost and the multi-line business 
SLC cap--will be assessed on Centrex lines. Thus, for example, if on 
January 1, 1998, in a particular region the loop cost is $9.40, and the 
maximum permitted multi-line business PICC is being assessed, i.e., 
$2.75, each Centrex line would be assessed a $0.71 PICC, which is equal 
to one-ninth of $2.75 plus the difference between the $9.40 loop cost 
and the $9.00 SLC.
    24. In determining the appropriate line-to-trunk equivalency ratio, 
we consider several factors. First, we observe that many states, but 
not all, already have trunk equivalency tables for their intrastate 
tariffs. USTA has indicated that although these tables are similar, 
they are not identical. For example, USTA states that a Centrex 
customer with 70 lines is equivalent to a PBX customer with 13 trunks, 
while Ameritech states that in Illinois, the equivalency tariff for 70 
Centrex lines is 8 PBX trunks. Adopting the trunk equivalency ratios 
set out in intrastate tariffs would result in different equivalency 
ratios being used in different states and would not provide a trunk 
equivalency ratio for many states. Because the trunk equivalency ratio 
we adopt today is for an interstate charge, a national standard for 
trunk equivalency ratio is appropriate.
    25. We also desire administrative ease in calculating trunk 
equivalency. Adoption of a single ratio would simplify the assessment 
of PICCs on Centrex lines by eliminating the use of multiple ratios 
from multiple tables or state tariffs. IXCs would have the benefit of 
knowing that they will be assessed a set fraction of the PICC for each 
Centrex line that is presubscribed to their service, even when Centrex 
customers have lines presubscribed to different IXCs. Therefore, we 
have elected to adopt a single trunk equivalency ratio for establishing 
PICC charges for all Centrex lines. USTA suggested a ratio of nine (9) 
Centrex lines to one (1) PBX trunk. It bases its recommendation on the 
average of the weighted average trunk equivalency ratios or 
relationship between NARs and Centrex lines that are employed in 
several jurisdictions. Applying a 9:1 ratio would result in a maximum 
PICC on Centrex lines of approximately $0.30 per line in 1998 for the 
overwhelming majority of Centrex lines. We note that the ratio under 
some state tariffs can approach 18 to 1 for certain Centrex customers. 
Reducing the PICC from up to $2.75 to less than $0.31 achieves the goal 
of spreading the PICC contribution more equitably among multi-line 
business customers. Using a more complicated approach to establish 
equivalency may only add a marginal benefit, increasing or reducing 
PICCs by less than $0.16, and does not outweigh the additional 
administrative costs. We adopt the 9:1 ratio proposed by USTA, finding 
it to be reasonable and administratively simple.
    26. Time Warner is correct in observing that our treatment of 
Centrex arrangements differs from how we addressed ISDN service in the 
First Report and Order. There, we set the SLC for PRI ISDN to be up to 
five times the amount assessed multi-line business subscribers, because 
that figure reflects the ratio of non-traffic sensitive loop costs 
associated with PRI ISDN service to non-traffic sensitive costs 
associated with other multi-line business loops. We also elected to 
permit incumbent LECs to assess up to five PICCs on PRI ISDN service 
because ``prohibiting incumbent LECs from charging as many as five 
PICCs for PRI ISDN service could prevent them from recovering the 
common line costs associated with providing PRI ISDN service in cases 
where the common line costs exceed the SLC ceiling.''
    27. In both our treatment of ISDN lines and Centrex lines, our goal 
is to establish an equitable sharing of the multi-line business PICC. 
Prior to the adoption of the First Report and Order, we had no rules 
relating to the PICC. We had no evidence to the contrary that the 
assessment of five PICCs for PRI ISDN was inappropriate, so we elected 
to be consistent as between SLC and PICC assessment. Previously, 
however, ISDN lines could be charged up to 24 SLCs. The adjustment from 
24 SLCs to five SLCs and five PICCs does not create undue hardship on 
ISDN subscribers, and the First Report and Order should reduce their 
overall rates.
    28. Time Warner also argues that imposing the PICC on Centrex on a 
per-line basis is part of the Commission's access charge transition to 
a more cost-causative rate structure. Although the multi-line PICC is 
part of our transition, this alone does not justify requiring Centrex 
customers to make a greater contribution toward recovery of the loop 
cost of residential customers than do PBX customers. Teleport's 
assertion that petitioners are exaggerating the impact of the PICC on 
Centrex users, because the amount of the charge is substantially less 
than the SLC, ignores the fact that the SLC recovers the additional 
costs imposed by Centrex customers, while the PICC does not.
    29. We deny ICA's petition that we not assess PICCs on toll-
restricted Centrex lines. Although the PICC is assessed upon IXCs for 
all lines that are presubscribed to an IXC, the PICC is not a charge 
based on toll usage or on the ability to place toll calls. The 
Commission anticipated that some lines might not be used for long 
distance when it adopted a rule allowing PICCs to be assessed directly 
upon end users for any line not presubscribed to an IXC. The fact that 
toll-restricted Centrex lines incur no long-distance charges is, 
therefore, irrelevant. Also, costs for these lines are assigned to the 
interstate jurisdiction by separations, regardless of whether the lines 
are toll-restricted.

II. Transport

A. TIC Exemption

1. Background
    30. The Commission created the TIC originally as a residual charge 
to ensure that its adoption of the 1992 interim transport rate 
structure was revenue-neutral for the incumbent LECs. As such, the 
Commission required that the TIC be assessed on a per-minute basis on 
all interstate access customers that interconnect with the LEC switched 
access network. A portion of the TIC represented the 80 percent of the 
costs of the tandem switch remaining after the Commission set the 
tandem-switching rate to recover only 20 percent of the tandem-
switching revenue requirement. The rest of the revenues collected from 
the TIC represented costs previously recovered through transport 
charges that could not, at that time, be associated definitively with 
specific facilities or services related to transport. The Commission 
stated in the First Transport Order that, in addition to tandem-
switching costs, the TIC likely recovered: (a) Costs more appropriately 
recovered through other rate elements; (b) costs that more properly 
belong in the intrastate jurisdiction, but that the Part 36 
jurisdictional separations rules allocate to the interstate 
jurisdiction; (c) costs of facilities that were then in place, but not 
needed for transport under the more efficient transport rate structure 
being adopted; and (d) costs of not-fully-depreciated copper plant that 
was nevertheless being replaced by less expensive fiber optic 
facilities. Transport Rate Structure and Pricing, Report and Order and 
Further Notice of Proposed Rulemaking, 57 FR 54717 (November 20, 1992) 
(First Transport Order). The Commission also cited

[[Page 56127]]

assertions by parties to that proceeding that the TIC also recovered 
(e) general support facilities (GSF) and central office equipment (COE) 
maintenance expenses and GSF investment that were overallocated to the 
transport category; and (f) additional costs that the Commission had 
not then identified.
    31. In reviewing the Commission's interim transport rate structure, 
the United States Court of Appeals for the District of Columbia Circuit 
(D.C. Circuit) found that the just and reasonable rates required by 
Sections 201 and 202 of the Communications Act, 47 U.S.C. Secs. 201-
202, must ordinarily be cost-based, absent a clear explanation of the 
Commission's reasons for a departure from cost-based ratemaking. 
Competitive Telecommunications Ass'n v. FCC, 87 F.3d 522, 529 (D.C. 
Cir. 1996) (``CompTel''). The D.C. Circuit, therefore, directed the 
Commission to develop a cost-based alternative to the TIC, or to 
provide a reasoned explanation for its departure from the principles of 
cost-based ratemaking.
    32. In the First Report and Order, we reformed the TIC and set 
forth a plan that will eliminate per-minute TIC charges over the next 
few years. We initially identified TIC amounts that could be associated 
with particular network facilities and directed incumbent LECs to 
reallocate these TIC amounts to access rate elements more closely 
corresponding to those network facilities. These LECs will perform the 
required reallocations in access tariffs filed to become effective 
January 1, 1998, with some exceptions. For example, the portion of 
tandem-switching costs that the Commission initially allocated to the 
TIC will be reallocated to the tandem-switching rate element in three 
approximately equal steps concluding January 1, 2000. In addition, the 
costs of the incumbent LECs' tandem-switched transport transmission 
facilities that are not recovered from tandem-switched transport users 
under the unitary rate structure will be recovered through the TIC 
until July 1, 1998.
    33. For price cap LECs, the ``residual TIC,'' consisting of amounts 
that the LEC has not reallocated as described above, will be recovered 
through per-line PICCs, to the extent possible while remaining within 
the PICC caps. Residual TIC amounts that the price cap LEC cannot 
recover through PICCs will be recovered through a per-minute TIC on 
originating access, up to a cap, with any remainder recovered from per-
minute charges assessed on terminating access.
    In the First Report and Order, we recognized that the per-minute 
TIC, because it is assessed on all transport minutes carried on 
facilities that interconnect with the incumbent LEC's local switch, may 
give the incumbent LEC a competitive advantage in the transport market. 
We therefore provided a TIC exemption for switched minutes carried by 
competitive access providers (CAPs) that interconnect with the 
incumbent LEC switched access network at the end office, stating that, 
``if the incumbent LEC's transport rates are kept artificially low and 
the difference is recovered through the TIC, competitors of the 
incumbent LEC pay some of the incumbent LEC's transport costs.'' This 
TIC exemption is scheduled to take effect on January 1, 1998.
2. Petitions for Reconsideration and Petitions for Stay
    a. AT&T and Teleport. 35. On reconsideration, AT&T and Teleport 
request that we permit the per-minute residual TIC exemption for 
switched minutes carried by CAPs that interconnect with the incumbent 
LEC switched access network at the end office to take effect 
immediately, rather than on January 1, 1998. According to Teleport, the 
Commission, having recognized that the imposition of TIC charges on 
CAP-transported minutes is ``inconsistent with the pro-competitive 
goals of the 1996 Act,'' should not permit the practice to continue 
throughout the balance of calendar 1997.
    b. RCN. 36. RCN argues that the TIC exemption contained in the 
First Report and Order preserves the incumbent LECs' competitive 
advantage because it exempts CAP-transported minutes only from the 
``residual'' TIC. In making this argument, RCN interprets the term 
``residual TIC'' to include only non-facilities-related TIC amounts. 
Under RCN's interpretation, the ``residual TIC'' would not include 
facilities-related TIC amounts that will remain in the TIC until they 
are reallocated as late as January, 2000.
    c. U S West and NYNEX Petitions for Stay. 37. NYNEX and U S West 
separately have filed petitions requesting that the Commission stay the 
effectiveness, pending appeal, of 47 CFR 69.155(c), the rule we adopted 
in the First Report and Order prohibiting local exchange carriers from 
assessing the per-minute residual TIC on traffic that uses the LEC's 
local switching services, but that does not use the LEC's local 
transport services. NYNEX and U S West argue that such a stay is 
warranted because they are likely to prevail on the merits of their 
respective appeals and that the balance of equities favors a stay. 
NYNEX and U S West further argue that the rule should be stayed in its 
entirety, to allow them to recover the entire per-minute TIC, without 
regard for the transport provider. In the alternative, however, NYNEX 
requests a partial stay to allow it to so recover the non-facilities-
related portion of the TIC.
    38. Procedurally, NYNEX maintains that the Commission failed to 
offer an adequate opportunity for public comment on the residual TIC 
exemption, in that the Commission's Notice, Access Charge Reform, CC 
Docket No. 96-262, Notice of Proposed Rulemaking, 62 FR 6270 (January 
31, 1997) (Notice), failed to provide adequate notice of the TIC 
exemption and that the Commission improperly relied on a CompTel/
Teleport ex parte presentation made three weeks before the Order was 
adopted.
    39. Substantively, NYNEX argues that the Commission's decision to 
prohibit assessment of the residual TIC on minutes that use CAP 
transport networks is inconsistent with the Commission's findings that 
a large portion of the TIC is not related to any specific transport or 
other facilities.
    40. NYNEX also argues that the Commission has failed to explain why 
it is reasonable for the LEC to recover both service-related and non-
service-related TIC amounts from PICCs, but neither component from the 
per-minute residual TIC.
    41. NYNEX also argues that the use of price cap X-factor reductions 
to decrease the per-minute TIC will effectively reallocate the per-
minute residual TIC to other rate elements as the per-minute TIC is 
reduced to the exclusion of all other rate elements. According to 
NYNEX, the residual TIC is completely excluded only to the extent that 
the X-factor targeting has not reallocated it to a permitted rate 
element. NYNEX argues that the Commission has not offered a 
justification for disallowing TIC recovery only during this transition 
period.
    42. NYNEX argues that the CAP TIC exemption is arbitrary in that it 
will have a disproportionately harsh effect on NYNEX, and that this 
non-uniform impact will hinder the development of ``full and fair'' 
competition. Similarly, U S West argues that, by making it difficult or 
impossible for it to collect the per-minute TIC, the TIC exemption is 
contrary to the Commission's decision not to disallow any portion of 
the current TIC.
    43. NYNEX also argues that the TIC exemption contradicts the 
Commission's conclusion that access

[[Page 56128]]

reform, in itself, should not produce overall rate reductions because 
the price cap LECs' per-minute TIC revenues are likely to be less than 
those calculated in the restructure. As a result, the price cap LECs 
will be unable to collect the full amount of revenues from per-minute 
residual TIC rates or PICCs that will be included in their January 1, 
1998, tariff revisions.
    44. NYNEX and U S West argue that an exemption for the service-
related portion of the TIC is inconsistent with the Commission's 
continued reliance on subsidization of tandem-switching rates by 
direct-trunked transport customers until December 31, 1999.
    45. U S West argues that, after January 1, 1998, the TIC will 
consist of implicit tandem switching and universal service support 
subsidies (including the higher costs of providing rural transport) and 
that the TIC exemption results in a collection system for this subsidy 
that is non-sustainable, discriminatory, and inequitable.
3. Discussion
    46. We decline to modify the effective date of 47 CFR 69.155(c) as 
AT&T and Teleport request. Although some of the Commission's actions to 
reform the interstate access charge system took effect in access 
tariffs filed to become effective July 1, 1997, the majority of the 
Commission's rate structure changes take effect on January 1, 1998, or 
later. Because the TIC exemption at issue here is one part of our 
larger effort to reform the system of interstate access charges to 
preserve and promote competition, we believe that the rule should take 
effect on January 1, 1998, at the same time as many of our other rules 
relating to the transport rate structure. Incumbent LEC access tariffs 
filed to become effective on that date will reallocate many of the 
currently-identified facilities-related TIC amounts to other rate 
elements. In addition, on January 1, 1998, for the first time, the 
incumbent LECs will begin collecting remaining TIC amounts from PICCs 
assessed to IXCs on a flat-rate, per-line basis. Because a portion of 
the TIC, including some facilities-related TIC amounts, will be 
allocated to PICCs on January 1, 1998, we conclude that the extent of 
the exemption we adopt here will not be evident until these tariff 
revisions take effect. Thus, we conclude that the exemption should take 
effect only in concurrence with the implementation of the PICC.
    47. We agree with RCN and MCI that we should clarify the extent of 
the TIC exemption described in the First Report and Order. In addition, 
in response to concerns raised in NYNEX's and U S West's petitions for 
stay, we reconsider on our own motion our adoption of the TIC exemption 
provided in the First Report and Order. 47 CFR 1.108. Under long-
established Commission practice, the filing of a petition for 
reconsideration tolls the thirty day period our rules provide for sua 
sponte reconsideration. E.g., Central Fla. Enters., Inc. v. FCC, 598 
F.2d 37, 48 n.51 (D.C. Cir. 1978), cert. dismissed, 441 U.S. 957 
(1979), and cert. denied 460 U.S. 1084 (1983); Radio Americana, Inc. 44 
F.C.C. 2506, 2510 (1961). Upon further consideration, we conclude that 
the TIC exemption provided in the First Report and Order could provide 
an unjustified windfall to competitive providers of local transport. 
Because the non-facilities-related portion of the residual TIC does not 
relate to the use of the incumbent LEC's interstate transport 
facilities, we need not exempt competitors from paying this portion of 
the TIC in order to prevent them from paying for the incumbent LEC's 
transport when that transport is not used. Therefore, incumbent LECs 
may continue, after January 1, 1998, to assess upon all local switching 
traffic that portion of their per-minute TIC charges that they do not 
anticipate will be reallocated in the future to facilities-based rate 
elements. This is the only portion of the per-minute TIC, however, that 
may be assessed upon traffic that uses the incumbent LEC's local 
switching services, but that does not use the incumbent LEC's local 
transport services. Under this rule, interexchange traffic that is 
switched at the incumbent LEC's local switch, but that is not 
transported on the incumbent LEC's local transport network, will be 
subject to the per-minute TIC, less the portion of the per-minute TIC 
attributable to incumbent LEC tandem-switching and tandem-switched 
transport transmission costs that have not yet been reallocated to 
facilities-based rate elements. In access tariff revisions filed to 
become effective January 1, 1998, incumbent LECs must show all such 
facilities-related amounts that they anticipate will be reallocated in 
the future, including appropriate documentation, and calculate separate 
per-minute TIC charges for those minutes that use the incumbent LEC's 
local transport facilities and those that do not.
    48. In remanding the interim rate structure, the D.C. Circuit 
instructed the Commission to ``move expeditiously * * * to a cost-based 
alternative to the [TIC], or to provide a reasoned explanation of why a 
departure from cost-based ratemaking is necessary and desirable in this 
context.'' For our rate structure to be ``cost-based,'' costs must be 
recovered (1) only from the party that causes the costs to be incurred; 
and (2) in the manner in which the costs are incurred (e.g., non-
traffic-sensitive costs should be recovered on a non-traffic sensitive 
basis).
    49. Our First Report and Order identified certain costs within the 
TIC that more properly should be recovered through other access rate 
elements. These costs include additional trunking costs left 
unrecovered by rates set assuming a uniform loading of 9000 minutes of 
use per month on shared trunks, rather than rates set using actual 
traffic levels, as well as misallocated costs of central office 
equipment maintenance. In addition, we identified costs related to 
multiplexing, SS7 signalling, and host/remote trunking that are 
currently recovered through the TIC. LECs must reallocate all of these 
costs to facilities-based rate elements in access tariffs filed to 
become effective January 1, 1998. In addition, one third of the 80 
percent of the costs of the tandem switch currently assigned to the TIC 
will be reallocated to the tandem switching rate element on that date.
    50. After January 1, 1998, the costs contained in the TIC that the 
Commission has identified as facilities-related will have two primary 
sources. The majority of the facilities-related TIC will consist of the 
portion of the incumbent LEC's tandem-switching costs not yet 
reallocated to the tandem-switching rate element. These costs will be 
reallocated to the tandem-switching rate element in two additional 
installments in tariffs filed to become effective on January 1, 1999, 
and January 1, 2000. In addition, from January 1, 1998, until July 1, 
1998, the TIC will also recover the costs of tandem-switched transport 
transmission facilities that are not recovered by the incumbent LEC 
from tandem-switched transport customers electing the unitary rate 
structure. These TIC amounts are also facilities-related. In the First 
Report and Order, we directed incumbent LECs to remove costs from the 
TIC ``equal to the additional revenues realized from the new tandem-
switched transport rates * * * implemented in accordance with the 
[final transport] rate structure.'' Because the three-part rate 
structure will not take effect until July 1, 1998, we require incumbent 
LECs to estimate in their tariffs filed to become effective January 1, 
1998, the amount by which their tandem-switched transport transmission 
revenues will increase under the three-part rate structure. This 
amount, currently contained in the TIC, is facilities-related and 
therefore subject to the exemption described in this order.

[[Page 56129]]

    51. Neither the tandem-switching costs nor the tandem-switched 
transport transmission costs contained in the TIC relate to facilities 
used by purchasers of competitive alternatives to the incumbent LEC's 
transport facilities. The D.C. Circuit remanded the interim transport 
rate structure to the Commission in part because that rate structure 
did not recover the costs of the tandem switch in a cost-causative 
manner. Our First Report and Order, in reallocating these costs, 
remedies this situation as expeditiously as possible while minimizing 
the potential for rate shock that otherwise might accompany such a 
shift. Because these costs are incurred on behalf of the incumbent 
LEC's own transport operation, however, it would be inconsistent with 
the principles of cost-causation to prolong the recovery of these costs 
from users of competing transport facilities.
    52. Our approach to access reform relies first on increasing 
market-based pressures as competition develops to place downward 
pressure on access charge levels. We conclude that, for this approach 
to succeed, we should develop a rate structure that permits maximum 
competitive pressure on each incumbent LEC revenue stream, absent 
compelling public policy reasons to the contrary. It would impair the 
effectiveness of our market-based approach for us to insulate a 
significant portion of the costs of the incumbent LEC's transport 
facilities from competition by mandating recovery of these costs from 
incumbent LEC competitors.
    53. We recognize that, during the two-year transition period, our 
rules will continue to prohibit the incumbent LEC from allocating the 
full, embedded cost of the tandem switch to the tandem-switching rate 
element. The effect of our three-step reallocation process will be to 
permit a continued subsidy of the incumbent LEC's tandem switch by 
users of the incumbent LEC's direct-trunked transport facilities and 
minimize any rate shock for tandem-switched transport customers. 
Because the incumbent LEC's competitors offering transport services 
will not be subject to this subsidy, they may enjoy a slight 
competitive advantage over the incumbent LEC.
    54. We find, however, that the competitive benefits to be gained 
from recovering these costs only from the incumbent's customers and not 
from customers using competitive transport providers outweigh any 
potential dangers resulting from the small, temporary asymmetry caused 
by the TIC exemption we provide here. Even though the full costs of the 
incumbent LEC's tandem switch will not be borne by the users of the 
tandem switch until January, 2000, the effects of the TIC exemption 
will be reduced substantially before that time as the incumbent LEC 
collects an increasing proportion of the tandem-switching costs 
remaining in the TIC through PICCs. As discussed below, we continue to 
permit the incumbent LEC to assess the full PICC on each of its loops, 
without regard for the type or provider of the transport the IXC uses 
to transport the minutes generated by that loop from the end office to 
the IXC's facilities. As the portion of the incumbent LEC's tandem-
switching costs that is recovered through the per-minute TIC decreases, 
any potential adverse effects of this small asymmetry will rapidly 
decrease. In contrast, if we were to mandate recovery of this portion 
of the incumbent LEC's tandem-switching costs from all customers using 
the incumbent LEC's local switching facilities, without regard for 
whether they make use of the incumbent LEC's transport facilities, we 
would insulate this revenue from much of the pressure we anticipate 
will develop as competitors enter the local service and access markets. 
The resulting delay in competitive entry would be harmful to consumers, 
who will benefit most from increased competition.
    55. We revise the TIC exemption contained in our First Report and 
Order, however, to permit the incumbent LEC to impose the remaining 
non-transport costs assigned to the TIC on all minutes switched by the 
incumbent LEC at its end office, without regard for whether those 
minutes are carried on incumbent LEC or competitive transport 
facilities. In contrast to the portion of the incumbent LEC's tandem-
switched transport costs that will remain in the TIC after January 1, 
1998, we did not find in the First Report and Order that the remainder 
of the TIC could be associated definitively with particular interstate 
facilities on the record before us. Instead, we stated that a portion 
of these TIC amounts may result from the operation of the 
jurisdictional separations process, which allocates the costs of 
private line and switched services differently between the state and 
interstate jurisdictions, despite the fact that these two types of 
services use comparable facilities. As a result, we recognized in the 
First Report and Order the possibility that rates for direct-trunked 
transport and tandem-switched transport transmission facilities may not 
recover the full amount of the costs of switched facilities the 
separations process allocates to the interstate jurisdiction.
    56. We have recently begun a broad re-examination of the 
jurisdictional separations process that may eventually correct this 
problem. In the meantime, however, we are unable to associate these TIC 
amounts with any particular interstate facilities. Instead, to the 
extent that this portion of the TIC may result in part from 
overallocation of costs to the interstate jurisdiction, thereby 
lowering intrastate rates, this portion of the TIC may be a form of 
implicit universal service support. As such, it would be inequitable to 
mandate recovery of this portion of the per-minute TIC only from the 
incumbent LEC's transport customers. Because these amounts do not 
appear to be any more closely related to the incumbent LEC's interstate 
transport facilities than they are to any other interstate facilities 
of the incumbent, it is appropriate for all of the incumbent LEC's 
access customers, and not just its transport customers, to pay a share 
of this portion of the per-minute TIC. In the First Report and Order, 
we stated our commitment to minimize the potential of the per-minute 
TIC artificially to suppress demand for interstate toll services. 
Because the non-facilities-related TIC is composed of amounts that have 
not been demonstrated to reflect usage-sensitive costs, it does have 
this undesirable effect. We have therefore required that it be 
eliminated expeditiously through targeting of the X-factor reductions 
to the interconnection charge service category and through conversion 
of the residual TIC to a flat-rated charge.
    57. In addition, we stated in the First Report and Order that a 
portion of the costs remaining in the TIC may result from our use of 
special access rates to develop initial geographically-averaged direct-
trunked transport and tandem-switched transport transmission rates. We 
agreed in the First Report and Order that, while the use of such rates 
appears to have been appropriate in urban areas, these rates may not 
fully recover the higher costs of transport in less densely populated 
rural areas. Because we are unable to quantify these cost differences, 
and because it is likely that the cost differential varies greatly 
across LECs and across study areas served by the same LEC, we did not 
mandate any immediate reallocation of costs from the TIC to rural 
transport rates. Instead, we expect that, as competition develops, the 
incumbent LECs will come under increasing pressure to deaverage 
transport rates under our existing deaveraging rules. We observe that, 
as with the costs discussed in the previous paragraph, recovery of 
rural transport

[[Page 56130]]

costs through the TIC supports a conclusion that at least a portion of 
the non-facilities-related TIC may be related to the provision of 
universal service.
    58. We also here clarify that the ``residual TIC'' that the 
incumbent LEC should recover from PICCs includes all TIC amounts that 
have not been reassigned to other facilities-based rate elements, 
including the portion of the incumbent LEC's tandem switching costs 
that have not been reassigned to the tandem-switching rate element in 
tariffs filed to become effective on January 1, 1998, and January 1, 
1999. We direct price cap LECs that will recover only a portion of 
their residual TIC from PICCs to allocate non-facilities-related TIC 
amounts and facilities-related TIC amounts between PICCs and per-minute 
charges on a pro rata basis. The incumbent LECs must reallocate the 
full amount of the costs of their tandem switch to the tandem switching 
rate element in installments on January 1, 1998, 1999, and 2000, 
whether they are then contained in per-minute charges or in PICCs.
    59. Accordingly, we revise the TIC exemption contained in our First 
Report and Order to permit the incumbent LEC, in tariffs filed to 
become effective January 1, 1998, to impose that portion of the per-
minute TIC that is not expected to be reassigned to particular 
facilities on a cost-causative basis on all transport minutes switched 
at its end office, without regard for whether those minutes are carried 
on incumbent LEC or competitive transport facilities. Per-minute TIC 
amounts that the LEC expects to reallocate to facilities-based rate 
elements, in contrast, may be assessed only on minutes transported on 
the incumbent LEC's own transport facilities.
    60. TIC amounts that a price cap LEC will recover through PICC 
charges may be assessed to an IXC for a particular loop without regard 
for the type or provider of the transport the IXC uses to transport the 
minutes generated by that loop from the end office to the IXC's 
facilities. Although certain price cap LECs will recover a portion of 
the costs of their tandem-switching facilities during the transition 
through PICCs from IXCs that do not use the price cap LEC's transport 
facilities to transport all of the minutes generated on a particular 
loop, the administrative difficulties associated with calculating 
partial PICCs in this context outweigh the benefits to be gained from 
doing so. If an IXC were to use a combination of competitive- and 
incumbent LEC-provided transport facilities between an end office and 
its serving wire center, it would be needlessly complicated to 
determine the portion of the minutes generated on each loop that were 
carried on competitive transport links. Furthermore, unlike the per-
minute TIC, the flat-rated PICC will not substantially alter the 
incremental cost of additional transport minutes transported over 
competitive transport facilities. Thus, even if an IXC pays a full 
PICC, this payment will not affect the IXC's decision whether to 
purchase additional transport minutes from the incumbent LEC or a 
competitive transport provider. As a flat-rated charge, the PICC will 
not artificially suppress demand for interstate toll telecommunications 
services.
    61. In addition, the PICC is subject to competitive pressures, 
whether or not it recovers TIC amounts for traffic transported by the 
incumbent LEC's competitors. If the end user chooses an alternate 
provider of local service, the incumbent LEC will no longer recover any 
portion of the PICC for that loop. Thus, we conclude that the dangers 
associated with the recovery of the full PICC without regard for the 
transport provider are far more attenuated than the dangers that would 
be associated with recovery of facilities-related costs from per-minute 
TIC charges levied on competitive transport minutes.
    62. We deny the petitions filed by U S West and NYNEX requesting a 
stay of the per-minute TIC exemption rule. In determining whether to 
stay the effectiveness of one of its rules or orders, the Commission 
uses the four-factor test established in Virginia Petroleum Jobbers 
Ass'n v. FPC, 259 F.2d 921, 925 (D.C. Cir. 1958), as modified in 
Washington Metropolitan Area Transit Comm'n v. Holiday Tours, Inc., 559 
F.2d 841, 843 (D.C. Cir. 1977). Under that test, petitioners must 
demonstrate that: (1) They are likely to succeed on the merits on 
review; (2) they would suffer irreparable injury absent a stay; (3) a 
stay would not substantially harm other interested parties; and (4) a 
stay would serve the public interest. We find that neither NYNEX nor U 
S West has satisfied any of the four factors for granting a stay. In 
light of the substantial relief we have granted above, however, we 
provide only a brief analysis here of the petitioners' arguments. The 
practical effect of our revisions to the TIC exemption, however, will 
be to provide a substantial portion of the relief sought in the stay 
petitions. In light of these revisions, we believe that the petitioners 
are unlikely to succeed on the merits on review, that they will not 
suffer irreparable injury absent a stay, that a stay would cause 
substantial harm to the incumbent LECs' competitors, and that the 
public interest is best served by the TIC exemption described here. 
With respect to the portion of the TIC related to the costs of the 
incumbent LEC's interstate transport facilities, we conclude that there 
are sound policy reasons underlying our decision to maintain this 
exemption and, consequently, we find against the petitioners here.
    63. We conclude that NYNEX's objections to the sufficiency of our 
notice are without merit. The Notice in this proceeding provided 
adequate notice of the TIC exemption we ultimately adopted. Our Notice 
in this proceeding stated that ``to the extent that any portion of the 
TIC should properly be included in LEC transport rates, other than the 
TIC, the TIC provides the LECs with a competitive advantage for their 
interstate transport services because incumbent LEC transport rates are 
priced below cost while the LECs' competitors using expanded 
interconnection must pay a share of incumbent LEC transport costs 
through the TIC * * *. Our goal in this proceeding is to establish a 
mechanism to phase out the TIC in a manner that fosters competition and 
responds to the [CompTel] court's remand.'' We went on to state, in the 
section of the Notice entitled ``Possible Revisions to the TIC,'' that 
``our goals are to move towards significantly more cost-based access 
rates and competition in the access and interexchange markets. The 
development of a competitive access market will be distorted by the 
assessment of the TIC as a surcharge on local switching. The TIC 
therefore will be unsustainable.'' We sought comment on the extent to 
which various approaches to reducing the TIC would ``achieve the goals 
of this proceeding'' and asked parties to ``address the relative merits 
of each [approach], or of other approaches that they may suggest.'' We 
conclude therefore that, beyond reasonable question, our Notice 
provided adequate notice of ``the terms or substance of the proposed 
rule or a description of the subjects and issues involved.''
    64. In any event, courts require only that the rule, as adopted, 
constitute a ``logical outgrowth'' of the proposed rule. E.g., National 
Mining Ass'n v. Mine Safety and Health Admin., 116 F.3d 520, 531 (D.C. 
Cir. 1997). To satisfy this standard, courts ask ``whether `the 
purposes of notice and comment have been adequately served.' '' Factors 
to be considered include ``whether a new round of notice and comment 
would provide the first opportunity for interested parties to offer 
comments that could persuade the agency to modify its

[[Page 56131]]

rule;'' American Water Works Ass'n v. EPA, 40 F.3d 1266, 1274 (D.C. 
Cir. 1994), and whether ``the notice given affords `exposure to diverse 
public comment,' `fairness to affected parties,' and `an opportunity to 
develop evidence in the record.' '' We conclude that the Notice 
language quoted above more than adequately meets this standard. The 
Notice in this proceeding discussed possible revisions to the TIC rate 
element for nine full pages, sought comment on four specific TIC-
reduction options, and invited commenters to suggest alternate 
approaches. The Notice in this proceeding discussed expressly the anti-
competitive problems associated with the payment of TIC charges by 
competitive providers of transport services, stated that the TIC would 
be ``unsustainable'' in that form, and sought comment on approaches to 
reform that would ``achieve the goals of this proceeding,'' among which 
was the adoption of a transport rate structure that would foster 
competition. In such circumstances, we conclude that commenters should 
have anticipated that the Commission might eventually adopt a TIC 
exemption for competitive transport providers, that our Notice afforded 
adequate notice of the Commission's eventual adoption of such an 
exemption, and that we provided an adequate opportunity for diverse 
public comment.
    65. In response to the Notice, several commenters, in their initial 
comments, proposed TIC exemptions for competitive transport. WorldCom, 
for example, argued that, ``the Commission should restructure the TIC 
rate element * * * in a manner that maximizes competitive pressure on 
the charge. As local and full-service competition begin[s] to emerge, 
competitive carriers should be able to avoid the TIC to the extent that 
they win customers away from incumbent LECs. This will create 
competitive pressure for the LECs to reduce their TIC rate levels, 
without necessitating any prescriptive action by the Commission.'' The 
fact that several commenters raised this solution in their comments, 
and in subsequent ex parte filings, supports our conclusion that the 
Notice adequately raised this issue.
    66. We also conclude that NYNEX's claims of irreparable harm are 
without merit. Although the TIC exemption may impact some incumbent 
LECs differently from others, the same can be said for virtually all of 
the rules we adopt, simply because of differences in the circumstances 
and business climate facing each LEC. Our focus in the context of a 
stay petition must be on individualized allegations of irreparable 
harm. We find that neither petitioner has met that standard with 
respect to the TIC exemption we provide in this Order. Mere financial 
or economic losses do not, in and of themselves, constitute irreparable 
harm. In addition, because this portion of the per-minute TIC is likely 
to be relatively small, in relation to the remainder of the TIC and 
other transport charges, the incumbent LECs are unlikely to suffer 
large-scale competitive losses as a result of the exemption, as 
modified here. In any event, we have long held that ``revenues and 
customers lost to competition which can be regained through competition 
are not irreparable.''
    67. In contrast, continued subsidy of the incumbent LECs' tandem 
switching facilities by competitors is incompatible with the 
development of competition in the local market. Without an exemption 
permitting new entrants to cease subsidizing incumbent LEC transport 
facilities, the incumbent LEC's revenue stream from facilities-related, 
per-minute TIC charges would be insulated from competition. These new 
entrants, having already shouldered financial burdens in seeking to 
compete with the established monopoly incumbent LEC, should not be 
required in addition to subsidize the facilities of the incumbent LEC 
against whom they compete. Such a result would cause continued harm to 
these new entrants, and would further delay the public interest 
benefits of competition. Thus, we conclude that the petitioners have 
failed to satisfy either of the last two factors we must consider in 
evaluating their stay petitions. Accordingly, we deny the stay 
petitions.

B. Deaveraged Tandem-Switched Transport Transmission Rates

    68. We also take this opportunity to amend the language of section 
69.111(c)(1) to specify the manner in which minutes are to be 
determined through June 30, 1998, in calculating tandem-switched 
transport transmission rates when an incumbent LEC has deaveraged rates 
by density zone. Section 69.111(c)(2), which applies after July 1, 
1998, includes such language. The First Report and Order did not intend 
to take away the ability of incumbent LECs to deaverage transport 
transmission rates if they have met the requisite qualifications. 
Finally, we amend the references to section 69.124 in section 69.111 to 
refer to section 69.123.

III. Rate-of-Return LECs

    69. In the First Report and Order, we took steps to adopt, inter 
alia, a cost-based transport rate structure and to comply with the D.C. 
Circuit's CompTel remand. As acknowledged in the First Report and 
Order, the CompTel remand applied to rate-of-return LECs as well as 
price cap LECs.
    70. Upon further consideration, we recognize that, absent 
clarification, some language in the First Report and Order may be 
ambiguous in delineating which of our decisions applied to all 
incumbent LECs, including rate-of-return LECs. For example, in Section 
III.C. of the First Report and Order, we directed ``all incumbent LECs 
to discontinue the unitary rate structure option for the transmission 
component of tandem-switched transport, effective July 1, 1998.'' In 
contrast to this language, we stated at paragraph 335 in the First 
Report and Order that we had restricted ``application of the rules we 
adopt in this proceeding to the incumbent price cap LECs, with [three] 
limited exceptions,'' for: (1) ``Universal service support to the 
interstate revenue requirement for all incumbent LECs in Section 
VI.D;'' (2) ``the changes to the TIC that we adopt[ed] in Section III.D 
* * * will also apply to rate-of-return incumbent LECs;'' and (3) ``in 
Section VI.A * * * our exclusion of unbundled network elements from 
Part 69 access charges applies to all incumbent LECs.''
    71. We take this opportunity to clarify that, with two limited 
exceptions, the decisions made in Section III.C of the First Report and 
Order relating to the rate structure and rate levels for entrance 
facilities, direct-trunked transport, and tandem-switched transport 
apply to all incumbent LECs, including rate-of-return LECs. The two 
exceptions are that we did not create for rate-of-return LECs separate 
rate elements for dedicated ports at the tandem switch and for 
multiplexers at the tandem switch. Thus, for example, rate-of-return 
LECs must discontinue the unitary rate structure option for tandem-
switched transport no later than July 1, 1998, when all incumbent LECs 
must use only the three-part rate structure for cost recovery. These 
transport modifications that are applicable to rate-of-return LECs are 
in addition to those decisions made in Sections III.D, VI.A, and VI.D 
that also apply to rate-of-return LECs.

IV. Ordering Clauses

    72. Accordingly, it is ordered, pursuant to Sections 1-4, 201-205, 
251, 254, 303, and 405 of the Communications Act of 1934, as amended, 
47 U.S.C. Secs. 151-154, 201-205, 251, 254, 303, and 405, and pursuant 
to section 1.108 of the Commission's rules, 47 CFR 1.108 that this 
Order on Reconsideration is adopted.

[[Page 56132]]

    73. It is further ordered That section 69.153(g) of the 
Commission's rules, 47 CFR 69.153(g) is amended as set forth in the 
rule changes.
    74. It is further ordered that sections 69.4, 69.111(c)(1), 
69.153(c)(1), 69.153(d)(1)(i), 69.153(d)(2)(i), and 69.155(c) of the 
Commission's rules, 47 CFR 69.4, 69.111(c)(1), 69.153(c)(1), 
69.153(d)(1)(i), 69.153(d)(2)(i), and 69.155(c) are amended as set 
forth in the rule changes.
    75. It is further ordered That the information collections 
contained in these rules become effective January 1, 1998, following 
OMB approval, unless a notice is published in the Federal Register 
stating otherwise.
    76. It is further ordered That, except as otherwise specified 
herein, the policies and rules adopted here shall be effective January 
1, 1998.

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

Rule Changes

PART 69--ACCESS CHARGES

    77. The authority citation for Part 69 continues to read as 
follows:

    Authority: Secs. 4, 201, 202, 203, 205, 218, 403, 48 Stat. 1066, 
1070, 1072, 1077, 1094, as amended, 47 U.S.C. 154, 201, 202, 203, 
205, 218, 403.

    78. Section 69.4 is amended by removing paragraph (h)(6), and 
revising paragraph (a) to read as follows:


Sec. 69.4  Charges to be filed.

    (a) The end user charges for access service filed with this 
Commission shall include charges for the End User Common Line element, 
and for line port costs in excess of basic, analog service.
* * * * *
    79. Section 69.111 is amended by revising paragraph (c) to read as 
follows:


Sec. 69.111  Tandem-Switched Transport and Tandem Charge.

* * * * *
    (c)(1) Until June 30, 1998:
    (i) Except in study areas where the incumbent local exchange 
carrier has implemented density pricing zones as described in section 
69.123, per-minute common transport charges described in paragraph 
(a)(1) of this section shall be presumed reasonable if the incumbent 
local exchange carrier bases the charges on a weighted per-minute 
equivalent of direct-trunked transport DS1 and DS3 rates that reflects 
the relative number of DS1 and DS3 circuits used in the tandem to end 
office links (or a surrogate based on the proportion of copper and 
fiber facilities in the interoffice network), calculated using the 
total actual voice-grade minutes of use, geographically averaged on a 
study-area-wide basis, that the incumbent local exchange carrier 
experiences based on the prior year's annual use. Tandem-switched 
transport transmission charges that are not presumed reasonable shall 
be suspended and investigated absent a substantial cause showing by the 
incumbent local exchange carrier.
    (ii) In study areas where the incumbent local exchange carrier has 
implemented density pricing zones as described in section 69.123, per-
minute common transport charges described in paragraph (a)(1) of this 
section shall be presumed reasonable if the incumbent local exchange 
carrier bases the charges on a weighted per-minute equivalent of 
direct-trunked transport DS1 and DS3 rates that reflects the relative 
number of DS1 and DS3 circuits used in the tandem to end office links 
(or a surrogate based on the proportion of copper and fiber facilities 
in the interoffice network), calculated using the total actual voice-
grade minutes of use, averaged on a zone-wide basis, that the incumbent 
local exchange carrier experiences based on the prior year's annual 
use. Tandem-switched transport transmission charges that are not 
presumed reasonable shall be suspended and investigated absent a 
substantial cause showing by the incumbent local exchange carrier.
    (2) Beginning July 1, 1998:
    (i) Except in study areas where the incumbent local exchange 
carrier has implemented density pricing zones as described in section 
69.123, per-minute common transport charges described in paragraph 
(a)(2)(i) of this section shall be presumed reasonable if the incumbent 
local exchange carrier bases the charges on a weighted per-minute 
equivalent of direct-trunked transport DS1 and DS3 rates that reflects 
the relative number of DS1 and DS3 circuits used in the tandem to end 
office links (or a surrogate based on the proportion of copper and 
fiber facilities in the interoffice network), calculated using the 
total actual voice-grade minutes of use, geographically averaged on a 
study-area-wide basis, that the incumbent local exchange carrier 
experiences based on the prior year's annual use. Tandem-switched 
transport transmission charges that are not presumed reasonable shall 
be suspended and investigated absent a substantial cause showing by the 
incumbent local exchange carrier.
    (ii) In study areas where the incumbent local exchange carrier has 
implemented density pricing zones as described in section 69.123, per-
minute common transport charges described in paragraph (a)(2)(i) of 
this section shall be presumed reasonable if the incumbent local 
exchange carrier bases the charges on a weighted per-minute equivalent 
of direct-trunked transport DS1 and DS3 rates that reflects the 
relative number of DS1 and DS3 circuits used in the tandem to end 
office links (or a surrogate based on the proportion of copper and 
fiber facilities in the interoffice network), calculated using the 
total actual voice-grade minutes of use, averaged on a zone-wide basis, 
that the incumbent local exchange carrier experiences based on the 
prior year's annual use. Tandem-switched transport transmission charges 
that are not presumed reasonable shall be suspended and investigated 
absent a substantial cause showing by the incumbent local exchange 
carrier.
* * * * *
    80. Section 69.153 is amended by revising paragraphs (c)(1) and 
(d), and adding paragraph (g) to read as follows:


Sec. 69.153  Presubscribed interexchange carrier charge (PICC).

* * * * *
    (c) The maximum monthly PICC for primary residential subscriber 
lines and single-line business subscriber lines shall be the lower of:
    (1) One twelfth of the sum of projected annual common line revenues 
and residual interconnection charge revenues permitted under our price 
cap rules divided by the projected average number of local exchange 
service subscriber lines in use during such annual period, minus the 
maximum subscriber line charge calculated pursuant to 
Sec. 69.152(d)(2); or
    (2) * * *
    (d) To the extent that a local exchange carrier cannot recover its 
full common line revenues, residual interconnection charge revenues, 
and those marketing expense revenues described in Sec. 69.156(a) 
permitted under price cap regulation through the recovery mechanisms 
established in Secs. 69.152, 69.153(c), and 69.156 (b) and (c), the 
local exchange carrier may assess a PICC on multi-line business 
subscriber lines and non-primary residential subscriber lines.
    (1) The maximum monthly PICC for non-primary residential subscriber 
lines shall be the lower of:
    (i) One twelfth of the projected annual common line, residual 
interconnection charge, and Sec. 69.156(a) marketing expense revenues 
permitted under our price cap rules, less the maximum amounts permitted 
to be recovered through the recovery mechanisms under Secs. 69.152, 
69.153(c), and 69.156 (b) and (c), divided by the total number of

[[Page 56133]]

projected non-primary residential and multi-line business subscriber 
lines in use during such annual period; or
    (ii) * * *
    (2) If the maximum monthly PICC for non-primary residential 
subscriber lines is determined using paragraph (d)(1)(i) of this 
section, the maximum monthly PICC for multi-line business subscriber 
lines shall equal the maximum monthly PICC of non-primary residential 
subscriber lines. Otherwise, the maximum monthly PICC for multi-line 
business lines shall be the lower of:
    (i) One twelfth of the projected annual common line, residual 
interconnection charge, and Sec. 69.156(a) marketing expense revenues 
permitted under parts 61 and 69 of our rules, less the maximum amounts 
permitted to be recovered through the recovery mechanisms under 
Secs. 69.152, 69.153(c) and (d)(1), and 69.156 (b) and (c), divided by 
the total number of projected multi-line business subscriber lines in 
use during such annual period; or
    (ii) * * *
* * * * *
    (g)(1) The maximum monthly PICC for Centrex lines shall be one-
ninth of the maximum charge determined under paragraph (d)(2) of this 
section, except that if a Centrex customer has fewer than nine lines, 
the maximum monthly PICC for those lines shall be the maximum charge 
determined under paragraph (d)(2) of this section divided by the 
customer's number of Centrex lines.
    (2) In the event the monthly loop costs for a multi-line business 
line, as defined in Sec. 69.152(b)(1), exceed the maximum permitted End 
User Common Line charge, as set in Sec. 69.152(b)(3), the maximum 
monthly PICC for a Centrex line determined under paragraph (g)(1) of 
this section shall be increased by the difference between the monthly 
loop costs defined in Sec. 69.152(b)(1) and the maximum permitted End 
User Common Line charge set in Sec. 69.152(b)(3). In no event, however, 
shall the PICC for a Centrex line exceed the maximum established under 
paragraph (d)(2) of this section.
    81. Section 69.155 is amended by revising paragraph (c) to read as 
follows:


Sec. 69.155  Per-minute residual interconnection charge.

* * * * *
    (c)(1) No portion of the charge assessed pursuant to paragraphs (a) 
or (b) of this section that recovers revenues that the local exchange 
carrier anticipates will be reassigned to other, facilities-based rate 
elements, including the tandem-switching rate element described in 
Sec. 69.111(g), the three-part tandem switched transport rate structure 
described in Sec. 69.111(a)(2), and port and multiplexer charges 
described in Sec. 69.111(l), shall be assessed upon minutes utilizing 
the local exchange carrier's local switching facilities, but not the 
local exchange carrier's transport service.
    (2) If a local exchange carrier cannot recover its full residual 
interconnection charge revenues through the PICC mechanism established 
in Sec. 69.153, and will consequently recover a portion of its residual 
interconnection charge revenues through per-minute charges assessed 
pursuant to paragraphs (a) and (b) of this section, then the local 
exchange carrier must allocate its residual interconnection charge 
revenues subject to the exemption established in paragraph (c)(1) of 
this section between the PICC and the per-minute residual 
interconnection charge in the same proportion as other residual 
interconnection charge revenues are allocated between these two 
recovery mechanisms.

[FR Doc. 97-28548 Filed 10-28-97; 8:45 am]
BILLING CODE 6712-01-P