[Federal Register Volume 64, Number 159 (Wednesday, August 18, 1999)]
[Proposed Rules]
[Pages 44877-44883]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-21402]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 32, 43, and 64

[CC Docket No. 99-253; FCC 99-174]


Comprehensive Review of the Accounting Requirements and ARMIS 
Reporting Requirement for Incumbent Local Exchange Carriers: Phase 1

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In this document, the Commission is initiating a comprehensive 
review of its accounting and reporting requirements. In this 
comprehensive review, we plan to reevaluate our existing accounting and 
reporting requirements to determine whether they should be modified or 
eliminated as changes occur in the industry. We also consider the 
appropriate timing of accounting and reporting changes to assure that 
we will continue to have the information we need to make informed 
decisions.

DATES: Interested parties may file written comments on the proposed 
information collections by August 23, 1999 and reply comment on or 
before September 9, 1999. Written comments must be submitted by the 
Office of Management and Budget (OMB) on the proposed information 
collections on or before October 18, 1999.

ADDRESSES: Office of the Secretary, Room TW-B204, Federal 
Communications Commission, 445 12th Street, NW., Washington, DC 20554. 
In addition to filing comments with the Secretary, a copy of any 
comments on the information collections contained herein should be 
submitted to Judy Boley, Federal Communications Commission, Room 1-
C804, 445 12th Street, NW., Washington, DC 20054, or via the Internet 
to [email protected], and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 
725-17th Street, NW., Washington, DC 20503 or via the Internet to 
[email protected].

FOR FURTHER INFORMATION CONTACT: Mika Savir, Accounting Safeguards 
Division, Common Carrier Bureau, (202) 418-0384 or Andy Mulitz, 
Accounting Safeguards Division, Common Carrier Bureau, (202) 418-0850. 
For additional information concerning the information collections 
contained in this NPRM contact Judy Boley at 202-418-0214, or via the 
Internet at [email protected].

SUPPLEMENTARY INFORMATION:
    This is a summary of the Commission's Notice of Proposed Rulemaking 
(NPRM), CC Docket 99-253, adopted on July 13, 1999, and released on 
July 14, 1999. 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 proposed 
information collections contained in this proceeding. The full text of 
the NPRM is available for inspection and copying during normal business 
hours in the FCC Reference Center (Room CY-A257), 445 12th Street NW., 
Washington, DC 20554. The complete text may also be purchased from the 
Commission's copy contractor, International Transcription Service, 
Inc., 1231 20th Street, Washington, DC 20036, telephone (202) 857-3800.
    OMB Approval No.: None.
    Title: Comprehensive Review of the Accounting Requirements and 
ARMIS Reporting Requirements for Incumbent Local Exchange Carriers: 
Phase 1, CC Docket No. 99-253 (NPRM).
    Form No.: FCC Report 43-02.
    Type of Review: New Collections.
    Respondents: Business or other for profit.

----------------------------------------------------------------------------------------------------------------
                                                                                     Estimated
                              Title                                   No. of         hours per     Total annual
                                                                    respondents      response         burden
----------------------------------------------------------------------------------------------------------------
Uniform Systems of Accounts.....................................             239            9540       2,280,080
Annual Auditors Attestations....................................              19             268           5,100
ARMIS USOA Report...............................................              52             284          14,770
Allocation of Cost, Cost Allocation Manual......................              18             300          10,800
Implementation of the Telecommunications Act of 1996: Accounting              20              24             480
 Safeguards Under the Telecommunications Act of 1996 (Affiliate
 Transaction Only)..............................................
----------------------------------------------------------------------------------------------------------------

    Total Annual Burden: 2,311,230.
    Estimated Costs Per Respondent: $1,200,000.
    Needs and Uses: In CC Docket No. 99-253, the Commission is 
initiating a comprehensive review of its accounting and reporting 
requirements. The Commission seeks comment on its proposals to reduce 
or further streamline its recordkeeping requirements for common 
carriers, audit requirements for the large incumbent LECs and reduce 
filing requirements of accounting record changes on the part of 
affected common carriers. The information is needed so that the 
Commission can fulfill its statutory responsibilities and obligations.

Summary of Notice of Proposed Rulemaking

    We are performing this comprehensive review in two phases. Phase 1, 
which commences with this Notice of Proposed Rulemaking (NPRM) and will 
conclude by the end of the year, will address accounting and reporting 
reform measures that can be implemented without delay and still retain 
sufficient information for the Commission and state commissions to meet 
their responsibilities. Phase 2, which will begin in the last quarter 
of 1999, will examine the current accounting and reporting structure 
and address long-term changes needed as local exchange markets become 
competitive. During this process, the Common Carrier Bureau will 
continue to work closely with the National Association of Regulatory 
Utility Commissioners (NARUC) and state commissioners so that, in 
addition to eliminating unnecessary reporting requirements, the 
Commission and states will focus on further steps necessary to 
eliminate unnecessary

[[Page 44878]]

overlap of Federal and state reporting requirements.
    In this first phase of the comprehensive review, we seek comment on 
the following accounting issues: eliminating or revising the matrix 
used to classify expenses in the Uniform System of Accounts (USOA); 
reducing the audit burdens on incumbent local exchange carriers 
(ILECs); adopting a de minimis exception to our affiliate transactions 
rules; eliminating the 15-day prefiling for cost pool changes; 
eliminating the notifications and approvals required in 
Secs. 32.13(a)(3) and 32.25; and revising the accounting requirements 
for Secs. 32.2002 and 32.2003. In addition, we seek comment on 
streamlining the reporting requirements in the ARMIS 43-02 USOA Report. 
Specifically, we seek comment on eliminating certain corporate 
information collected in the ``C'' series tables and on consolidating 
certain information into one table. We also seek comment on eliminating 
certain information concerning balance sheet accounts reported in the 
``B'' series tables and income statement accounts reported in the ``I'' 
series tables.

A. Accounting Rules

1. Expense Matrix
    Section 32.5999(f) of the Commission's rules requires carriers to 
maintain disaggregated financial data in subsidiary record categories 
to be reported in an expense matrix. The Commission uses the detailed 
data contained in the carriers' expense subsidiary record categories in 
performing studies and trend analyses, and in its overall monitoring 
efforts. The additional information provided by the expense matrix 
helps the Commission analyze a carrier's expenses. In particular, the 
Commission has relied heavily upon the salaries and wages and rent data 
detailed in the expense matrix. For example, when the Financial 
Accounting Standards Board (FASB) promulgated new accounting standards 
for post-employment benefits and post-retirement benefits other than 
pensions, the Commission used the salaries and wages data in its 
analysis of the reasonableness of carrier projections related to 
implementation of the new accounting standards. The Commission also 
uses the salaries and wages data in calculating productivity factors 
used to adjust price cap indices. This expense data would be needed for 
future productivity studies if the price cap formula is revised. 
Expense matrix data is also used in tracking the salaries and wages and 
rents portion of maintenance expense in the analysis of service 
quality. Furthermore, carriers, competitors, and the Commission use the 
pole rents information detailed in the expense matrix in the formula to 
calculate carriers' pole attachment rates.
    We tentatively conclude that we can eliminate the expense matrix or 
reduce it to the minimum amount necessary to meet other regulatory 
purposes. We believe that this information could be provided by the 
carriers on an as-needed basis even if the Commission did not prescribe 
it to be maintained. We seek comment on this tentative conclusion. 
Commenters should discuss whether it would be more burdensome to 
maintain and file the expense matrix or to keep such data, at the same 
level of disaggregation, for several years, to provide to the 
Commission if requested. We seek comment on whether, as an alternative, 
the reporting burden would be alleviated by reducing the expense matrix 
to two classifications: (1) salary and wages and (2) other. Commenters 
should specifically address whether this would affect the analysis of 
the price cap performance/productivity factor calculations. In 
addition, we seek comment on whether, and how, elimination of the 
expense matrix would affect the jurisdictional separations process, 
universal service support calculations, or service quality studies.
    In the Accounting Reductions Report and Order, FCC No. 99-106, 
released June 30, 1999, we required mid-sized ILECs to maintain 
subsidiary record categories to capture the pole attachment data 
currently provided in the Class A accounts. We believe it is necessary 
to require subsidiary records for data needed in pole attachment 
formulas to assure that the data is publicly available, uniformly 
maintained among the carriers, and maintained in a manner that can be 
audited. We propose that, if the expense matrix is eliminated, carriers 
maintain subsidiary records to provide the data used in the pole 
attachment formulas and report in their ARMIS reports the information 
necessary for the Commission, carriers, and competitors to calculate 
pole attachment rates. We seek comment on this proposal.
2. Audits
    The Commission has established accounting safeguards governing the 
allocation of costs between the carriers' regulated and nonregulated 
activities. These safeguards are designed to promote fair cost 
allocations and to protect regulated ratepayers from absorbing the 
costs of nonregulated activities. One of the accounting safeguards, 
prescribed in Sec. 64.904 of the Commission's rules, is that carriers 
obtain an independent audit of reported cost allocation data. Before 
adoption of the Accounting Reductions Report and Order, our rules 
required that the audit be performed annually for ILECs required to 
file cost allocation manuals, that it provide a positive opinion, that 
the reported data is presented fairly in all material respects, and 
that it be conducted in accordance with generally accepted auditing 
standards.
    In the Accounting Reductions Report and Order, we revised the audit 
requirement for mid-sized ILECs. Under rules adopted in that Order, 
mid-sized ILECs are required to obtain a less stringent attestation 
every two years (covering the prior two year period) instead of an 
annual financial audit requiring a positive opinion. The financial 
audit requires that an ILEC's independent auditor provide assurance 
that the reported data are fairly reported. An attestation requires 
that the auditor provide assurance that specific management assertions 
are fairly stated. An attestation generally provides less assurance and 
is governed by less stringent standards of testing, reporting, and 
expression of opinion than the financial audits required by Sec. 64.904 
for large ILECs.
    We tentatively conclude that, if properly implemented, a less 
stringent audit requirement for the large ILECs will provide the 
necessary assurance that the carriers' cost allocations are consistent 
with our rules and at the same time result in significant savings in 
both time and money for the carriers. We note that in other instances 
the Commission requires something less than a positive opinion audit. 
For example, we have new audit requirements specifically for Sec. 272 
affiliates. Section 272 of the Act permits a BOC to manufacture 
equipment, originate in-region, interLATA telecommunications services, 
and provide interLATA information services only if it does so through 
one or more separate affiliates. The BOC and its affiliate(s) must, 
among other things, obtain a joint Federal/State audit every two years 
conducted by an independent auditor. Our rules require that the 
independent auditor perform an agreed-upon procedures engagement as 
specified by the regional Federal/State biennial oversight team.
    We tentatively conclude that we can reduce our audit requirements 
for the large ILECs--the BOCs and GTE--by extending the same audit 
requirements to the large ILECs that we adopted for mid-sized ILECs in 
the Accounting Reductions Report and Order, i.e.,

[[Page 44879]]

allowing carriers to obtain an attestation, instead of an annual 
financial audit requiring a positive opinion. We seek comment on this 
tentative conclusion. Furthermore, we seek comment on whether we should 
adopt an audit requirement similar to the Sec. 272 biennial audit, an 
agreed-upon procedures engagement, for the large ILECs. Commenters 
should discuss whether these alternatives would provide the necessary 
assurance that the reported cost allocation data is an accurate 
reflection of the carrier's CAM and the Commission's rules. Commenters 
should also discuss any other alternatives to an annual financial audit 
requiring a positive opinion. In addition, commenters should address 
whether the new audit procedure should be an annual requirement.
3. Affiliate Transactions Rules
    In the Accounting Safeguards Order, 62 FR 02918 (January 21, 1997) 
the Commission amended the affiliate transactions rules for services 
provided by a carrier to its affiliate and services received by a 
carrier from its affiliate that are not subject to: (1) an existing 
tariff rate, (2) a publicly-filed agreement or statement, or (3) a 
qualified prevailing price valuation. Services provided by a carrier to 
its affiliate must be recorded at the higher of fair market value or 
fully distributed cost. Services received by a carrier from its 
affiliate must be recorded at the lower of fair market value or fully 
distributed cost. The Commission further required carriers to make a 
good faith determination of fair market value in those instances when a 
fair market value was not readily available so that the carrier could 
assign the appropriate value to the service when recording its value 
under the affiliate transactions rules.
    Based on our experience enforcing these requirements over the past 
two years, we tentatively conclude that when the total annual value of 
transactions for that service is de minimis, the regulatory benefits of 
requiring carriers to make a good faith determination of the fair 
market value of a service are outweighed by the administrative cost and 
effort of making such a determination. We tentatively conclude that 
such a de minimis exception will not lessen the effectiveness of the 
Commission's affiliate transactions rules, and at the same time, will 
reduce the burden associated with the requirement that carriers make a 
good faith determination of fair market value. We, therefore, propose 
to eliminate the requirement that carriers make a good faith 
determination of fair market value for each service in which the total 
annual value of transactions for that service is less than $250,000. We 
propose that in such cases the service should be recorded at fully 
distributed cost, and carriers should continue to report such 
transactions in their cost allocation manuals and ARMIS reports.
    We seek comment on our proposals and tentative conclusions. We also 
seek comment on whether a different threshold should serve to delineate 
the de minimis treatment. Commenters proposing a different threshold 
should explain why their proposed threshold should be higher or lower 
than $250,000. In addition, commenters should address whether affiliate 
transaction services conducted pursuant to Secs. 260, and 271-276 of 
the Act should be included in the services eligible for the de minimis 
exception.
4. Elimination of 15-Day Prefiling for Cost Pool Changes
    Section 64.903 of the Commission's rules requires that carriers 
update their CAMs at least annually except that changes to the cost 
apportionment table and time-reporting procedures must be filed at 
least 15 days before the carrier plans to implement changes. Once a CAM 
change has been filed, the Chief, Common Carrier Bureau may suspend any 
such changes for a period not to exceed 180 days, and may thereafter 
allow the change to become effective. BellSouth claims that the 15-day 
special filing requirement for changes in cost pools discloses 
sensitive competitive service information. We tentatively conclude that 
we should eliminate the 15-day pre-filing requirement in order to 
eliminate any disclosure of sensitive data in advance of implementation 
of a service. If we adopt this proposal, carriers would file the 
necessary CAM changes contemporaneous with the implementation of the 
change. We seek comment on this tentative conclusion.
5. Revision to Section 32.13, Accounts--General
    Section 32.13(a)(3) of the Commission's rules permits carriers to 
establish temporary or experimental accounts provided they notify the 
Commission of the nature and purpose of the accounts within 30 days of 
establishing them. This requirement was adopted to allow the Commission 
to review the nature of the proposed temporary or experimental accounts 
prior to the effective date. Carriers use these temporary accounts as 
clearing accounts, which are closed each financial period and do not 
alter the Part 32 accounting structure. We tentatively conclude that 
this 30-day notification is not necessary because other accounting 
safeguards, such as ARMIS reporting and our audit program, together 
with our ability to obtain additional information as necessary, are 
sufficient for our regulatory oversight. Accordingly, we propose to 
modify Sec. 32.13(a)(3) by eliminating the notification requirement. We 
seek comment on our tentative conclusion and proposal.
6. Revision to Section 32.25, Unusual Items and Contingent Liabilities
    Section 32.25 of the Commission's rules requires carriers to submit 
journal entries detailing extraordinary items, contingent liabilities, 
and material prior period adjustments for Commission approval before 
recording them in their books of account. This requirement was 
established as a safeguard to prevent carriers from inflating their 
rate base through the use of accounting adjustments. We tentatively 
conclude that prior Commission review of journal entries is not 
necessary for the Commission's regulatory oversight, and that other 
accounting safeguards, such as the ARMIS reporting and our audit 
program, together with our ability to obtain additional information as 
necessary, are sufficient to assure that carriers will comply with our 
accounting requirements. We tentatively conclude, therefore, that it is 
no longer necessary to require the routine filing of these journal 
entries. Accordingly, we propose to eliminate the Sec. 32.25 filing 
requirement. We seek comment on our tentative conclusion and proposal.
7. Revision to Section 32.2002, Property Held for Future 
Telecommunications Use
    Section 32.2002 of the Commission's rules requires that carriers 
record to Account 2002 the costs of property held for no longer than 
two years under a definite plan for use in telecommunications service. 
After two years, Sec. 32.2002 requires that the carrier reclassify the 
cost of the property to Account 2006, Nonoperating plant. BellSouth 
states that this reclassification is burdensome and that the property 
could remain recorded in Account 2002, but be removed from the ratebase 
in a less burdensome manner. We tentatively conclude that we should 
allow carriers to maintain the costs in Account 2002 but we should 
require carriers to exclude the cost of such property, and the 
associated depreciation reserve, from the ratebase. The depreciation 
expense associated with such property should also be excluded from 
ratemaking considerations. These

[[Page 44880]]

amounts would be reported in the ARMIS 43-01, column (e) All Other 
Adjustments and ARMIS 43-03, column (l) Other Adjustments. We believe 
that adoption of this tentative conclusion will provide the same 
protection for ratepayers while alleviating the burden on carriers to 
reclassify these costs to Account 2006. We seek comment on this 
tentative conclusion.
8. Revisions to Section 32.2003, Telecommunications Plant Under 
Construction
    Section 32.2003 of the Commission's rules requires that carriers 
record to Account 2003 the original cost of construction projects 
including all related direct and indirect costs as provided under 
Sec. 32.2000(c). If the construction project has been suspended for six 
months or more, the cost of the project must be reclassified to Account 
2006, Nonoperating plant. If the project is eventually abandoned, these 
costs must be charged to Account 7370, Special charges. BellSouth 
states that this reclassification is burdensome and that the property 
could remain recorded in Account 2003 but be excluded from the ratebase 
in a less burdensome manner. We tentatively conclude that carriers be 
permitted to maintain the costs in Account 2003 and that carriers be 
required to remove the cost of suspended projects after six months from 
the ratebase. Additionally, carriers would be required to discontinue 
capitalization of allowance for funds used during construction under 
Sec. 32.2000(c)(2)(x) until construction is resumed. These amounts 
would be reported in the ARMIS 43-01, column (e) All Other Adjustments 
and ARMIS 43-03, column (l) Other Adjustments. Carriers would still 
charge Account 7370 if the project were abandoned. We believe that 
adoption of this tentative conclusion will provide the same protection 
for ratepayers while alleviating the burden on carriers to 
reclassifying these costs to Account 2006. We seek comment on this 
tentative conclusion.

B. ARMIS Reporting Requirements

1. Reductions to ARMIS 43-02 USOA Report
    In the ARMIS 43-02 USOA Report, carriers report their annual 
operating results for every account in the USOA. The USOA contains both 
balance sheet and income statement accounts which report the results of 
operational and financial events. Information provided by these 
accounts is used to review the overall investment and expense levels, 
affiliate transactions, property valuation, and depreciation rates of 
regulated carriers. The ARMIS 43-02 USOA Report contains a total of 27 
tables, and is one of the most voluminous reporting requirements in 
ARMIS. The tables are set out in three series: (1) the ``C'' series, 
which includes 5 tables that provide corporate information; (2) the 
``B'' series, which includes 15 tables that provide information about 
the balance sheet accounts of the carrier; and (3) the ``I'' series, 
which includes 7 tables that provide information about the carriers' 
income and expenses.
    In light of the objectives we seek to achieve in Phase 1 of our 
comprehensive review, we are proposing significant reductions in 
reporting requirements in the ARMIS 43-02 USOA Report for the largest 
ILECs. For the reasons discussed below, we tentatively conclude that 
the filing burden imposed on the largest ILECs by ARMIS 43-02 USOA 
Report should be reduced by eliminating the requirement to file 14 of 
27 tables, adding one short-form table, and changing the threshold 
level of reporting required in 3 of the remaining 13 tables. We propose 
eliminating or modifying the reporting requirements for the following 
tables: C-1 (Identity of Respondent); C-2 (Control Over Respondent); C-
3 (Board of Directors and General Officers); C-4 (Stockholders); C-5 
(Important Changes During the Year); B-8 (Capital Leases); B-9 
(Deferred Charges); B-11 (Long-Term Debt); B-12 (Net Deferred Income 
Taxes); B-13 (Other Deferred Credits); B-14 (Capital Stock); and B-15 
(Capital Stock and Funded Debt Reacquired or Retired During the Year); 
I-3 (Pension Costs); I-4 (Operating Other Taxes); I-5 (Prepaid Taxes 
and Accruals); I-6 (Special Charges); and I-7 (Donations or Payments 
for Services Rendered by Persons Other Than Employees).
    We seek comment generally on our tentative proposal to streamline 
the ARMIS 43-02 USOA Report for the largest ILECs. Specifically, we 
seek comment on whether alternative sources of information would 
provide sufficient protection against the potentially anti-competitive 
practices we identified in the ARMIS Reductions Report and Order, FCC 
No. 99-107, released June 30, 1999. For instance, we believe that much 
of the information contained in the series ``C'' tables can be obtained 
from the carrier's Form 10-K Annual Report filed with the Securities 
and Exchange Commission (SEC), as well as in other publicly available 
reports. We also believe that, to a large extent, balance sheet and 
income statement information reported in the series ``B'' and ``I'' 
tables may be obtained from underlying source data and can be readily 
provided by the carrier upon request. Although we continue to believe 
that access to information is crucial for our processes as well as for 
the state commissions, we believe access to this information may be 
more efficiently obtained through other sources. We also believe that 
the need for obtaining certain data on a regular basis may not be so 
vital to regulatory mandates as to outweigh the burden imposed on the 
ILECs in reporting this information. We seek comment on these overall 
tentative conclusions.
2. ARMIS 43-02 USOA Report: Table C Reductions
    The ``C'' series tables of the ARMIS 43-02 USOA Report include five 
tables containing carrier and stockholder information. We believe we 
could reduce the burdens imposed on the carriers by modifying these 
tables. We believe that most of the data contained in C-1 (Identity of 
Respondent), C-2 (Control Over Respondent), and C-4 (Stockholders), are 
available in public filings. Our experience suggests that routine 
filing of information contained in C-3 (Board of Directors and General 
Officers) may not be needed if the information is made available upon 
request. We tentatively conclude that because carriers must publicly 
file most of the information in these tables with the SEC in their Form 
10-K Annual Reports, which are available on the Internet, and because 
we may request and obtain this information as necessary, streamlining 
these reporting requirements will not impair our ability to perform 
necessary oversight functions but will reduce the filing burden on 
large ILECs. Certain basic information contained in these reports, 
however, may be needed for purposes of efficiency in administering and 
managing the database. Thus, we tentatively propose to consolidate all 
basic information into one table, which would generally provide 
information on the carrier's name, carrier's address, operating states, 
and executive officers. We seek comment on these proposals and 
tentative conclusions.
    Table C-5 (Important Changes During the Year) provides information 
on significant events, such as extensions of systems, substantial 
portions of property sold, changes in direct and indirect control of 
the carrier, important contracts or agreements entered into, and 
important changes in service and rate schedules. We believe the 
reporting requirements for table C-5 could be streamlined by 
eliminating the requirement to report certain information. For 
instance, we believe

[[Page 44881]]

that the data reported on changes in direct and indirect control may no 
longer be needed on a recurring basis. We believe this information may 
be available in the carrier's Form 10-K Annual Reports or in the 
carrier's cost allocation manuals, and where necessary, could be 
obtained from the carrier upon request. Thus, we tentatively conclude 
that the reporting requirements concerning changes in direct and 
indirect control of the carrier be eliminated. We seek comment on this 
tentative conclusion and proposal to modify table C-5 in this manner. 
We also believe that the information collected in table C-5 could be 
reduced further by collecting information only where the change 
involves a significant or material change. Thus, we seek comment on 
whether we should adopt a threshold amount for items reported in table 
C-5 (such as important contracts or agreements entered into, or 
important changes in service and rate schedules), and if so, what an 
appropriate threshold level would be. We seek comment on the above 
proposals for streamlining table C-5 reporting requirements.
3. ARMIS 43-02 USOA Report: Table B Reductions
    The ``B'' series tables contain data about the balance sheet 
accounts. Table B-1 (Balance Sheet) and Table B-2 (Statement of Cash 
Flows) are basic financial statements that are essential to our 
analysis of a carrier's financial condition. Several other supporting 
tables are important in our analysis of investment in and transactions 
with affiliates and in evaluating carrier depreciation reserves. We are 
not proposing changes in these tables. We believe, however, that 
several other tables in the ``B'' series need not be routinely reported 
as long as we have continued access to the underlying data and source 
documents supporting these tables. Further, we believe that the 
carrier's own accounting practices, which are governed by standard 
accounting practices and procedures and subject to internal and 
external audits, should assure that these accounts are properly 
maintained. Thus, we propose to eliminate the following ``B'' tables: 
B-8: (Capital Leases); B-9 (Deferred Charges); B-11 (Long-Term Debt); 
B-12 (Net Deferred Income Taxes); B-13 (Other Deferred Credits); B-14 
(Capital Stock); and B-15 (Capital Stock and Funded Debt Reacquired or 
Retired During the Year). We seek comment on these tentative 
conclusions and proposals. We are concerned that we not eliminate 
information that may be needed to carry out our responsibilities. We 
ask parties to address this concern and whether information concerning 
these accounts are readily available from other sources, such as in the 
carrier's Annual 10-K Report or through other internal records. We also 
ask parties to identify specific needs for this information and whether 
alternative sources of information provide sufficient level of detail 
to meet these needs.
4. ARMIS 43-02 USOA Report: Table I Reductions
    We have also examined the continuing need for routine reporting of 
information contained in the ``I'' series tables, specifically I-3 
(Pension Costs); I-4 (Operating Other Taxes); and I-5 (Prepaid Taxes 
and Accruals). For the reasons stated above with respect to the 
accounts reported in the ``B'' series, we tentatively conclude that 
carriers should no longer be required to report the information 
required in tables I-3, I-4, and I-5 annually to the Commission. We 
believe that as long as we have continued access to underlying data and 
source documents supporting these tables, this information can be 
obtained from the ILECs on an as-needed basis. We seek comment on these 
tentative conclusions and proposals.
    Our review of table I-6 (Special Charges) finds that the 
information reported in this table continues to be essential. Data 
reported in this table are below-the-line amounts, i.e., are not an 
allowable expense to be charged against regulated revenues. Special 
Charges reported on this table include lobbying expenses, membership 
fees and dues, abandoned construction projects amounting to $100,000 or 
more, penalties and fines amounting to $100,000 or more, and 
charitable, social, or other community welfare expenses. We find it 
necessary to maintain routine reporting of these items to ensure that 
these expenses, especially if material, are properly recorded on the 
ILECs' books. The $100,000 reporting threshold, however, for reporting 
abandoned construction projects, penalties and fines may be relatively 
immaterial in light of the strong revenue growth since the outset of 
ARMIS in 1989. We seek comment, therefore, on whether the reporting 
threshold should be raised to a higher amount and, if so, what amount 
to establish as the reporting threshold.
    Similarly, our review finds that information reported in table I-7 
(Donations or Payments for Services by Persons Other than Employees) 
continues to be essential for regulatory monitoring purposes to ensure 
that material costs claimed against regulated revenues are appropriate. 
The information reported in table I-7 requires that carriers report all 
amounts paid to academia; amounts exceeding $250,000 paid for 
advertising and information services, clerical and office services, 
computer and data processing services, personnel services, printing and 
design services, and security services; amounts exceeding $25,000 paid 
for audit and accounting services, consulting and research services, 
financial services, and legal services; and amounts exceeding $10,000 
for membership fees and dues. Again, in light of the tremendous growth 
in ILEC revenues, the reporting thresholds may now be too low. We seek 
comment, therefore, on whether the reporting thresholds for each of the 
above mentioned payments to outside vendors should be raised to a 
higher amount and, if so, what amounts to establish as the reporting 
thresholds.

IV. Procedural Issues

A. Ex Parte Presentations

    This is a permit but disclose rulemaking proceeding. Ex parte 
presentations are permitted, except during the Sunshine Agenda period, 
provided that they are disclosed as provided in the Commission's rules. 
See generally 47 CFR 1.1202, 1.1203, and 1.1206.

B. Final Regulatory Flexibility Certification

    The Regulatory Flexibility Act (RFA) requires that an initial 
regulatory flexibility analysis be prepared for notice-and-comment 
rulemaking proceedings, unless the agency certifies that ``the rule 
will not, if promulgated, have a significant economic impact on a 
substantial number of small entities.'' The RFA generally defines 
``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A small business concern is one which: (1) is independently owned 
and operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (SBA).
    This Notice of Proposed Rulemaking proposes to eliminate or revise 
the matrix used to classify expenses in the Uniform System of Accounts 
(USOA); reduce the audit burdens on incumbent local exchange carriers 
(ILECs); adopt a de minimis exception to the Commission's affiliate 
transactions rules; eliminate the 15-day prefiling for

[[Page 44882]]

cost pool changes; eliminate the notifications and approvals required 
in Secs. 32.13(a)(3) and 32.25; and revise the accounting requirements 
for Secs. 32.2002 and 32.2003. In addition, with respect to ARMIS 
reporting requirements, the Notice of Proposed Rulemaking seeks comment 
on eliminating certain corporate information collected in the ``C'' 
series tables and on consolidating certain information into one table. 
The Notice of Proposed Rulemaking also seeks comment on eliminating 
certain information concerning balance sheet accounts reported in the 
``B'' series tables and income statement accounts reported in the ``I'' 
series tables.
    Neither the Commission nor SBA has developed a definition of 
``small entity'' specifically applicable to LECs. The closest 
definition under SBA rules is that for establishments providing 
``Telephone Communications, Except Radiotelephone,'' which is Standard 
Industrial Classification (SIC) code 4813. Under this definition, a 
small entity is one that, including affiliates of the entity, employs 
no more than 1,500 persons. For the purpose of this present 
certification we would assume that an ILEC can be characterized as non 
dominant for the purpose of analysis under the Regulatory Flexibility 
Act.
    We certify that the proposals in this Notice of Proposed 
Rulemaking, if adopted, will not have a significant economic impact on 
a substantial number of small entities. Pursuant to long-standing 
rules, ILECs with annual operating revenues equal to or exceeding the 
indexed revenue threshold must comply with the Commission's record 
keeping rules and CAM audit requirements. The Commission proposes to 
reduce certain of these CAM and record retention requirements. These 
changes should be easy and inexpensive for ILECs to implement and will 
not require costly or burdensome procedures. We therefore expect that 
the potential impact of the proposal rules, if such are adopted, is 
beneficial and does not amount to a possible significant economic 
impact on affected entities. If commenters believe that the proposals 
discussed in the Notice require additional RFA analysis, they should 
include a discussion of these issues in their comments.
    The Commission's Office of Public Affairs, Reference Operations 
Division, will send a copy of this Notice of Proposed Rulemaking, 
including this initial certification, to the Chief Counsel for Advocacy 
of the Small Business Administration. A copy will also be published in 
the Federal Register.

C. Paperwork Reduction Act

    This NPRM contains either a proposed or modified information 
collection. As part of our continuing effort to reduce paperwork 
burdens, we invite the general public to take this opportunity to 
comment on information collections contained in this Notice of Proposed 
Rulemaking, as required by the Paperwork Reduction Act of 1995, Public 
Law 104-13. Public and agency comments are due at the same time as 
other comments on this Notice of Proposed Rulemaking. 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.

D. Comment Filing Procedures

    Pursuant to Secs. 1.415 and 1.419 of the Commission's rules, 47 CFR 
1.415, 1.419, interested parties may file comments on or before August 
23, 1999, and reply on or before September 9, 1999. Comments may be 
filed using the Commission's Electronic Comment Filing System (ECFS) or 
by filing paper copies.
    Comments filed through the ECFS can be sent as an electronic file 
via the Internet to <http://www.fcc.gov/e-file/ecfs.html>. Generally, 
only one copy of an electronic submission must be filed. If multiple 
docket or rulemaking numbers appear in the caption of this proceeding, 
however, commenters must transmit one electronic copy of the comments 
to each docket or rulemaking number referenced in the caption. In 
completing the transmittal screen, commenters should include their full 
name, Postal Service mailing address, and the applicable docket or 
rulemaking number. Parties may also submit an electronic comment by 
Internet e-mail. To get filing instructions for e-mail comments, 
commenters should send an e-mail to [email protected], and should include 
the following words in the body of the message, ``get form '' A sample form and directions will be sent in reply.
    Parties who choose to file by paper must file an original and four 
copies of each filing. If more than one docket or rulemaking number 
appear in the caption of this proceeding, commenters must submit two 
additional copies for each additional docket or rulemaking number. All 
filings must be sent to the Commission's Secretary, Magalie Roman 
Salas, Office of the Secretary, Federal Communications Commission, 445 
12th Street, S.W., Washington, D.C. 20554.
    Parties who choose to file by paper should also submit their 
comments on diskette. These diskettes should be submitted to: Ernestine 
Creech, Accounting Safeguards Division, 445 12th Street, S.W., 
Washington, D.C. 20554. Such a submission should be on a 3.5 inch 
diskette formatted in an IBM compatible format using WordPerfect 5.1 
for Windows or compatible software. The diskette should be accompanied 
by a cover letter and should be submitted in ``read only'' mode. The 
diskette should be clearly labelled with the commenter's name, 
proceeding (including the docket number, in this case CC Docket No. 99-
253, type of pleading (comment or reply comment), date of submission, 
and the name of the electronic file on the diskette. The label should 
also include the following phrase ``Disk Copy--Not an Original.'' Each 
diskette should contain only one party's pleadings, preferably in a 
single electronic file. In addition, commenters must send diskette 
copies to the Commission's copy contractor, International Transcription 
Service, Inc., 1231 20th Street, N.W., Washington, D.C. 20037.
    Written comments by the public on the proposed information 
collections are due on or before August 23, 1999. Written comments must 
be submitted by the Office of Management and Budget (OMB) on the 
proposed and/or modified information collections on or before October 
18, 1999. In addition to filing comments with the Secretary, a copy of 
any comments on the information collections contained herein should be 
submitted to Judy Boley, Federal Communications Commission, Room 1-
C804, 445 12th Street, S.W., Washington, DC 20554, or via the Internet 
to [email protected] and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 
725-17th Street, N.W., Washington, DC 20503 or via the Internet to 
[email protected].

V. Ordering Clauses

    Accordingly, it is ordered that, pursuant to the authority 
contained in sections 4(i), 4(j), 11, 201(b), 303(r), and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), 161, 
201(b), 303(r), and 403, this Notice of Proposed Rulemaking is adopted.
    It is further ordered that the Commission's Office of Public 
Affairs, Reference Operations Division, shall

[[Page 44883]]

send a copy of this Notice of Proposed Rulemaking, including the 
Initial Regulatory Flexibility Certification, to the Chief Counsel for 
Advocacy of the Small Business Administration, 5 U.S.C. 605(b).

List of Subjects

47 CFR Part 32

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone, Uniform System of Accounts

47 CFR Part 43

    Communications common carriers, Radio, Reporting and recordkeeping 
requirements, Telegraph, Telephone

47 CFR Part 64

    Communications common carriers, Federal Communications Commission, 
Radio, Reporting and recordkeeping requirements, Telegraph, Telephone

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 99-21402 Filed 8-17-99; 8:45 am]
BILLING CODE 6701-12-P