[Federal Register Volume 64, Number 191 (Monday, October 4, 1999)]
[Proposed Rules]
[Pages 53648-53655]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-25703]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54, 61, and 69

[CC Docket Nos. 96-262; 94-1; 99-249; 96-45; FCC 99-235]


Access Charge Reform, Price Cap Performance Review for Local 
Exchange Carriers, Low-Volume Long Distance Users, and Federal-State 
Joint Board on Universal Service

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document seeks comment on whether the Commission should 
adopt, in its entirety, a proposal submitted by the Coalition for 
Affordable Local and Long Distance Services (CALLS), as requested by 
the CALLS members. The CALLS proposal is an integrated interstate 
universal service and interstate access reform plan covering price cap 
incumbent local exchange carriers. The document also solicits comment 
on whether there are any aspects of the proposal that the Commission 
should incorporate into any of the Commission's concurrent proceedings, 
in the event we do not adopt the CALLS proposal in its entirety. In 
addition, the document invites commenting parties to propose 
alternative plans to that submitted by CALLS.

DATES: Comments are due on or before October 29, 1999. Reply comments 
are due on or before November 19, 1999.

ADDRESSES: Federal Communications Commission, Secretary, Room TW-A325, 
445 12th Street SW, Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Richard Lerner, Deputy Division Chief, 
Common Carrier Bureau, Competitive Pricing Division, (202) 418-1520.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's NPRM 
adopted September 14, 1999, and released September 15, 1999. The plan 
as submitted by CALLS is attached as Appendix A. The full text of this 
NPRM, as well as the complete files for the relevant dockets, is 
available for inspection and copying during the weekday hours of 9:00 
a.m. to 4:30 p.m. in the Commission's Reference Center, Room CY-A257, 
445 12th St., SW, Washington, DC, (202) 418-0270, or copies may be 
purchased from the Commission's duplicating contractor, ITS, Inc., 1231 
20th St., NW, Washington, DC 20036, (202) 857-3800. The complete text 
of the NPRM also may be obtained through the Internet, at http://
www.fcc.gov/Bureaus/Common__Carrier/Notices/1999/fcc99235.doc.

Synopsis of Notice of Proposed Rulemaking

    1. This NPRM seeks comment on an integrated proposal submitted by 
CALLS. The CALLS proposal is an interstate universal service and 
interstate access reform plan covering incumbent price cap local 
exchange carriers (LECs). The proposal was developed through 
negotiations among those local exchange carriers and interexchange 
carriers who are coalition members. It is designed to be implemented 
over a five-year period beginning in January of 2000 and would apply to 
those carriers who voluntarily elect to participate. CALLS requests 
that the Commission adopt the plan without modification as an 
integrated package. CALLS believes this plan will promote comparable 
and affordable universal service, reduce long distance bills, and 
promote competition in rural and residential markets.
    2. The NPRM seeks comment on the CALLS proposal to revise the 
current system of common line charges by combining existing carrier and 
subscriber line charges into one flat-rated subscriber line charge, and 
permitting deaveraging of those charges subject to specific conditions. 
In addition, the NPRM invites parties to comment on the proposal by the 
CALLS members to establish a portable universal service fund that 
provides explicit support to replace support currently implicit in 
interstate access charges. The NPRM solicits further comment on the 
CALLS proposal to establish a ``social contract'' under which traffic-
sensitive switched access rates are reduced annually until they reach 
an agreed level; once that level is reached, rates for all access 
elements are frozen until July 1, 2004. Finally, as part of the 
Commission's continuing efforts to reform regulation of universal 
service and interstate access charges to accelerate the development of 
competition in all telecommunications markets, commenting parties are 
invited to submit alternative plans to that proposed by CALLS.
    3. Because some of the issues addressed by the CALLS Proposal 
involve matters that are already the subject of pending Commission and 
court proceedings (62 FR 31868, June 11, 1997), the Commission 
initiates this rulemaking to determine whether it should adopt the 
CALLS proposal in its entirety, as requested by the CALLS members, or 
whether certain elements of the proposal should be incorporated into 
any of the Commission's concurrent efforts to reform interstate access 
charges and universal service.

A. Ex Parte Presentations

    4. This NPRM is a permit-but-disclose proceeding and is subject to 
the permit-but-disclose requirements under 47 CFR 1206(b), as revised. 
Persons making oral ex parte presentations are reminded that memoranda 
summarizing the presentation must contain a summary of the substance of 
the presentation and not merely a listing of the subjects discussed. 
More than a one or two sentence description of the views and arguments 
presented is generally required. Other rules pertaining to oral and 
written presentations are set forth in section 1.1206(b), as well.

B. Initial Regulatory Flexibility Act Analysis

    5. As required by the Regulatory Flexibility Act (RFA), the 
Commission has prepared this Initial Regulatory Flexibility Analysis 
(IFRA) of the possible significant economic impact on small entities by 
the proposals in this NPRM. See 5 U.S.C. 603. The RFA, see 5 U.S.C. 601 
et seq., has been amended by the Contract with America Advancement Act 
of 1996, Public Law No. 104-121, 110 Stat. 847 (1996) (CWAA). Title II 
of the CWAA is the Small Business Regulatory Enforcement Fairness Act 
of 1996 (SBREFA). Written public comments are requested on the IFRA. 
Comments must be identified as responses to the IFRA and must be filed 
in accordance with the same filing deadlines as comments on the rest of 
this NPRM. Parties should address the extent to which the CALLS 
proposal would affect large and small price cap incumbent local 
exchange carriers differently, and how small business entities, 
including small price cap incumbent local exchange carriers, would be 
affected. The Office of Public Affairs, Reference Operations Division, 
will send a copy of the NPRM, including this IFRA, to the Chief Counsel 
for Advocacy of the Small Business Administration. See 5 U.S.C. 603(a). 
In addition, the NPRM and IFRA (or summaries thereof) will be published 
in the Federal Register.

[[Page 53649]]

    6. Need for, and Objectives of, the Proposed Rules. The CALLS 
members offer the proposal as a comprehensive solution to the members' 
access charge, universal service, and price cap concerns. The CALLS 
plan would revise the current system of common line charges by 
combining existing carrier and subscriber charges into one flat-rated 
subscriber line charge (SLC), and would provide for limited deaveraging 
of those charges under specific conditions. The CALLS plan also would 
establish a portable universal service fund that provides explicit 
support to replace support currently implicit in interstate access 
charges. In addition, the CALLS plan would establish a ``social 
compact'' under which traffic-sensitive switches access rates are 
reduced annually until they reach an agreed level. CALLS believes this 
plan will promote comparable and affordable universal service, reduce 
long distance bills, and promote competition in rural and residential 
telecommunications markets.
    7. Legal Basis. This rulemaking action is supported by 47 U.S.C. 
154(i), 154(j), 201-205, 254, and 403.
    8. Description and Estimate of the Number of Small Entities to 
Which the NPRM Will Apply. The RFA directs agencies to provide a 
description of and, where feasible, an estimate of the number of small 
entities that may be affected by the proposed rules, if adopted. The 
RFA generally defines the term ``small entity'' as having the same 
meaning as the term ``small business''. See 5 U.S.C. 601(3) 
(incorporating by reference the definition of ``small business 
concern'' in 15 U.S.C. 632). 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) meets any additional criteria established by the 
Small Business Administration. The Small Business Administration has 
defined a small business for Standard Industrial Classification (SIC) 
category 4813 (Telephone Communications, Except Radiotelephone) to be a 
small entity that has no more than 1,500 employees. See 13 CFR 121.201.
    9. Total Number of Telephone Companies Affected. The Commission has 
included small incumbent LECs in this present RFA analysis. As noted 
above, a ``small business'' under RFA is one that, inter alia, meets 
the pertinent small business size standard (e.g., a telephone 
communications business having 1,500 or fewer employees), and ``is not 
dominant in its field of operation.'' The SBA's Office of Advocacy 
contends that, for RFA purposes, small incumbent LECs are not dominant 
in their field of operation because any such dominance is not 
``national'' in scope. The Commission has therefore included small 
incumbent LECs in this RFA analysis, although it emphasizes that this 
RFA action has no effect on FCC analyses and determinations in other, 
non-RFA contexts.
    10. Price Cap Local Exchange Carriers. This rulemaking applies only 
to price cap LECs. The Commission does not have data specifying the 
number of these carriers that are either dominant in their field of 
operations, are not independently owned and operated, or have more than 
1,500 employees, and thus is unable at this time to estimate with 
greater precision the number of price cap LECs that would qualify as 
small business concerns under the SBA's definition. However, there are 
only 13 price cap LECs, and we know that these are mostly non-small 
entities. Consequently, we estimate that significantly fewer than 13 
providers of local exchange service are small entities or small price 
cap LECs that may be affected by these proposals.
    11. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements. It is not clear whether, on balance, the 
proposals made by CALLS would increase or decrease price cap incumbent 
local exchange carriers' administrative burdens. Some of the rate 
structure reforms proposed by CALLS may require additional filings, and 
some of the CALLS proposals may reduce some administrative burdens. For 
example, if the CALLS proposal to eliminate the presubscribed 
interexchange carrier charge is adopted, the Commission expects that 
this would decrease some administrative burdens for price cap incumbent 
local exchange carriers. Some of the rate structure reforms proposed by 
CALLS may have a neutral affect in terms of administrative burdens. For 
example, CALLS proposes that implicit subsidies now collected by price 
cap incumbent local exchange carriers from interexchange carriers 
through access charges would be collected as explicit subsidies from 
the Universal Service Fund Administrator. If this proposal is adopted, 
the administrative burden for the price cap incumbent local exchange 
carrier is expected to remain the same.
    12. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered. The proposals made 
by CALLS could have varying positive or negative impacts on price cap 
incumbent local exchange carriers, including any such small carriers. 
The alternative to consideration of adopting the CALLS proposal at this 
time would be to continue in effect the existing access charge and 
universal service fund rules. We seek comment on the economic impact on 
small entities of the CALLS proposal and urge that the parties support 
their comments with specific evidence and analysis.
    13. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules. None.

C. Deadlines and Instructions for Filing Comments

    14. Pursuant to 47 CFR 1.415 and 1.419, interested parties may file 
comments on or before October 29, 1999 and reply comments on or before 
November 19, 1999. Comments may be filed using the Commission's 
Electronic Comment Filing System (ECFS) or by filing paper copies. See 
Electronic Filing Documents in Rulemaking Proceedings, 63 FR 24,121 
(1998).
    15. 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. 
Because four docket or rulemaking numbers appear in the caption of this 
proceeding, however, commenters must transmit one electronic copy of 
the comments to each of the four docket or rulemaking numbers 
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 StudyArea =
PriceCapCMTRevenue FilingEntity  x 
    (BFPStudyArea  BFPFilingEntity) 
 LinesStudyArea

    Nothing in this definition precludes a price cap LEC from 
continuing to average rates across filing entities containing 
multiple study areas, where permitted under existing rules.
    2.1.1.3. Zone Average Revenue Per Line. Zone Average CMT Revenue 
Per Line is the Price Cap CMT Revenue Per Line calculated for a 
particular state-defined zone used for deaveraging of UNE loop 
prices. The Zone Average Revenue Per Line is computed according to 
the following formula:

ZoneAverageRevenuePerLine = 25%
    (LoopZonePrice + PortPrice) + U

    Where:

U (Uniform Revenue Per Line Adjustment) = 
((PriceCapCMTRevenuePerLineStudyArea(s)  x  Base Period 
LinesStudyArea(s) - (25% Sum of (LinesUNEZone 
x  Loop&Port PriceUNEZone  x  12) for each zone))) 
 Base Period LinesStudy Area(s)  12

Loop&Port PriceUNE Zone = the UNE rates for unbundled 
loop and switch ports in that UNE zone.(As stated in paragraph 5, 
nothing in this proposal supercedes, prejudices or otherwise implies 
a result of the UNE Remand proceeding.)
    2.1.2. Primary Residential and Single Line Business Charges.
    2.1.2.1. Presubscribed Interexchange Carrier Charge. Beginning 
on January 1, 2000, eliminate the primary residential line and 
single line business Presubscribed Interexchange Carrier Charge.
    2.1.2.2. Subscriber Line Charge.
    2.1.2.2.1. Averaged Subscriber Line Charge. Beginning on January 
1, 2000, the maximum averaged Subscriber Line Charge for primary 
residential and single line business lines in a given entity will be 
Average Price Cap CMT Revenue per Line up to a nominal cap of $5.50. 
($5.50 is equivalent to the current primary residential SLC, PICC-
related account fees charged to the vast majority of presubscribed 
residential long distance subscribers, and the 50 cent increase in 
the PICC cap for primary residential and single line business 
subscribers scheduled to go into effect on July 1, 2000.) Beginning 
on January 1, 2001, in lieu of what would have been scheduled annual 
increases in the cap on the primary residential line and single line 
business Presubscribed Interexchange Carrier Charge of $0.50, plus 
inflation, increase the nominal cap on primary residential and 
single line business Subscriber Line Charges according to the 
following schedule:

On January 1, 2001, to $6.25;
On July 1, 2002, to $6.75;
On July 1, 2003, to $7.00 per line.

    2.1.2.2.2. Zone Deaveraged Subscriber Line Charge.
    2.1.2.2.2.1. Maximum Charge. The maximum zone deaveraged SLC 
that may be charged in any zone is the lesser of the highest Zone 
Average Revenue Per Line within the study area, or a nominal cap, 
which as of January 1, 2000 is $5.50 per line per month. Beginning 
on January 1, 2001, increase the nominal cap on primary residential 
and single line business Subscriber Line Charges according to the 
following schedule:

On January 1, 2001, to $6.25;
On July 1, 2002, to $6.75;
On July 1, 2003, to $7.00 per line.

    2.1.2.2.2.2. Minimum Charge. See paragraph 2.1.5.6.2.
    2.1.2.3. Lifeline. Increase minimum federal Lifeline support 
effective January 1, 2000, and coincident with changes in nominal 
SLC caps thereafter, so that all of the Subscriber Line Charge 
continues to be waived for Lifeline customers, with carriers 
reimbursed from the Universal Service Fund. In subsequent years, 
increase minimum federal Lifeline support in the same amount as 
increases in the primary residential Subscriber Line Charge.
    2.1.3. Non-Primary Residential Lines.
    2.1.3.1. Presubscribed Interexchange Carrier Charges. Beginning 
on January 1, 2000, eliminate the PICC for Non-Primary Residential 
lines.
    2.1.3.2. Subscriber Line Charges.
    2.1.3.2.1. Averaged Subscriber Line Charges. Beginning on 
January 1, 2000, the maximum averaged Subscriber Line Charge for 
non-primary residential lines in a given entity will be the lesser 
of:
    (a) $7.00 or
    (b) The greater of:
    (1) The rate as of December 31, 1999 less amounts of SLC 
reduction pursuant to paragraph 2.1.6, or
    (2) Average Price Cap CMT Revenue Per Line.
    2.1.3.2.2. Zone Deaveraged Subscriber Line Charge.
    2.1.3.2.2.1. Maximum Charge. The maximum Zone Deaveraged Non-
Primary Residential Subscriber Line Charge will be the lesser of 
$7.00 per line per month or the highest Zone Average Revenue Per 
Line for any zone in the study area.
    2.1.3.2.2.2. Minimum Charge. See paragraph 2.1.5.6.2.
    2.1.3.2.3. Elimination of Distinction between Primary and Non-
Primary Residential Lines. Once the charges for primary and non-
primary residential lines are equal within a zone or study area, the 
ILEC may eliminate the distinction between primary and non-primary 
lines within that zone or study area.
    2.1.4. Multiline Business Lines.
    2.1.4.1. Presubscribed Interexchange Carrier Charges.
    Beginning on January 1, 2000, the cap on the Multiline Business 
PICC is reduced to $4.00 per line. Multiline Business PICCs remain 
assessed to the interexchange carrier. This charge will be 
eliminated over time in most areas pursuant to paragraph 2.1.6.
    2.1.4.2. Subscriber Line Charges.
    2.1.4.2.1. Averaged Subscriber Line Charges. Beginning on 
January 1, 2000, and in the absence of voluntary reductions, the 
averaged Subscriber Line Charge for multiline business lines in a 
given entity that has not deaveraged SLCs will be the lesser of:
    (a) $9.20 or
    (b) The greater of:
    (1) The rate as of December 31, 1999, less amounts of SLC 
reductions pursuant to paragraph 2.1.6 or
    (2) Average Price Cap CMT Per Line.
    Except when the incumbent LEC reduces the rate through voluntary 
reductions, the averaged multiline business SLC initially will be 
frozen until the entity's multiline business PICC and CCL are 
eliminated.
    2.1.4.2.2. Zone Deaveraged Subscriber Line Charge.
    2.1.4.2.2.1. Maximum Charge. The maximum Zone Deaveraged 
Multiline Business Subscriber Line Charge will be the lesser of 
$9.20 per line per month or the highest Zone Average Revenue Per 
Line for any zone in the study area.
    2.1.4.2.2.2. Minimum Charge. See paragraph 2.1.5.6.2.
    2.1.5. Limitations on Deaveraging of Subscriber Line Charges. 
Except as otherwise noted, these limitations apply both to 
deaveraging pursuant to 2.1.6(4) and to deaveraging through 
voluntary reductions.
    2.1.5.1. All Geographic Deaveraging According to UNE zones. All 
geographic deaveraging of SLCs by customer class must be done 
according to UNE zones. If a state has not created geographically 
deaveraged UNE rates for loops, the incumbent LEC may not deaverage 
its SLCs in that state. (As stated in paragraph 5, nothing in this 
proposal supercedes, prejudices or otherwise implies a result of the 
UNE Remand proceeding.) (footnote omitted.)
    2.1.5.2. No More Than 4 Zones for Interstate Pricing and 
Interstate Universal

[[Page 53652]]

Service Purposes Without FCC Approval. Solely for the purposes of 
determining interstate subscriber line charges and the interstate 
universal service funding described in Section 2.2, an ILEC may not 
have more than four geographic SLC/USF zones absent a review by the 
FCC. Where an ILEC has more than four state-created UNE zones and 
the FCC has not approved use of additional zones, the ILEC will 
determine, at its discretion, which state-created UNE zones to 
consolidate so that it has no more than four zones for the purpose 
of determining interstate subscriber line charges and interstate 
universal service funding.
    2.1.5.3. Relationship Between Multiline Business, Non-Primary 
Residential And Primary Residential And Single Line Business SLCs 
Within A UNE Zone. Within a given UNE zone, the multiline business 
SLC may not be lower than the SLC for non-primary residential lines, 
and the non-primary residential line SLC may not be lower than the 
primary residential and single line business SLC.
    2.1.5.4. Relationship Between SLCs for the Same Customer Class 
in Different UNE Zones in a Study Area. For any given customer class 
(i.e. Primary Residential and Single Line Business, Non-Primary 
Residential, or Multiline Business) and any given zone, the Zone 
Deaveraged SLC in that zone must be greater than or equal to the 
Zone Deaveraged SLC in the zone with the next lower Zone Average 
Revenue Per Line. (That is, Zone 4 SLCs must be greater than or 
equal to Zone 3 SLCs, which must be greater than or equal to Zone 2 
SLCs, which must be greater than or equal to Zone 1 SLCs, where Zone 
1 is the zone with the lowest Zone Average Revenue Per Line, and 
Zone 4 (if there is one) is the zone with the highest Zone Average 
Revenue Per Line).
    2.1.5.5. Revenues From all Zones Cannot Exceed Revenues from 
Averaged SLCs.
    The parties have discussed two alternate ways of implementing a 
restriction that precludes incumbent LEC from increasing permitted 
Price Cap CMT revenues through deaveraging. The parties will present 
their respective views to the FCC as to the appropriateness of each 
alternative.

Alternative 1--Filing Entity

    The sum of revenues per month that would be generated from all 
deaveraged SLCs in all SLC deaveraging zones within a filing entity 
plus revenues per month from all SLC, multiline business PICC and 
CCL charges from study areas within that filing entity that have not 
geographically deaveraged SLCs plus the sum of all Study Area Access 
Universal Service Support in all study areas within the filing 
entity, divided by the number of lines cannot exceed Average Price 
Cap CMT Revenue Per Line for the filing entity.

Alternative 2--Study Area and Filing Entity

    The sum of all revenues per month that would be generated from 
all deaveraged SLCs in all zones within a study area plus Study Area 
Access Universal Service Support for that study area divided by the 
number of lines in that study area cannot exceed Average Price Cap 
CMT Revenue Per Line for that study area. In addition, the sum of 
revenues per month that would be generated from all deaveraged SLCs 
in all SLC deaveraging zones within a filing entity plus revenues 
per month from all SLC, multiline business PICC and CCL charges from 
study areas within that filing entity that have not geographically 
deaveraged SLCs plus the sum of all Study Area Access Universal 
Service Support in all study areas within the filing entity, divided 
by the number of lines cannot exceed Average Price Cap CMT Revenue 
Per Line for the filing entity.
    2.1.5.6. Limitations Applicable Only To Zone SLC Deaveraging 
Pursuant To Paragraph 2.1.6, or Through Increases in Other Zone 
Deaveraged SLCs.
    2.1.5.6.1. Elimination of PICC and CCL Prior to SLC Deaveraging. 
Except where an incumbent LEC deaverages through voluntary 
reductions, before an incumbent LEC may begin geographically 
deaveraging its SLC rates, its Originating and Terminating CCL and 
Multiline Business PICC rates must equal $0.00. Deaveraging through 
voluntary reductions may be undertaken without regard to the levels 
of the CCL or Multiline Business PICCs.
    2.1.5.6.2. Minimum Charge. Except where the incumbent LEC 
chooses to lower the deaveraged SLC through voluntary reductions, 
the minimum Zone Deaveraged Subscriber Line Charge in any zone in a 
study area is at least the lowest Zone Average Revenue Per Line for 
any zone in that study area. The parties do not agree as to whether 
the Minimum Charge should also be adjusted to reflect a portion of 
those Study Area Above Cap Revenues not offset by Study Area 
Universal Service Support, and the parties will advocate their 
respective positions to the Commission. The parties do not agree as 
to whether limits on deaveraging through voluntary reductions are 
necessary, and will advocate their respective positions to the 
Commission.
    2.1.5.6.3. Voluntary Reduction. A ``Voluntary Reduction'' is one 
in which the incumbent LEC reduces prices other than through offset 
of net increase in subscriber line charge revenues or universal 
service revenues pursuant to paragraph 2.1.6, or through increases 
in other zone deaveraged Subscriber Line Charges.
    2.1.6. Phased Elimination of Carrier Common Line and Multiline 
Business Presubscribed Interexchange Carrier Charges, and SLC 
Deaveraging. Each year, the net increase in maximum permitted 
Subscriber Line Charge revenues (calculated by summing across all 
line classes in a study area the products of the maximum permitted 
Averaged Subscriber Line Charge for each class times the number of 
lines in each class times 12, and subtracting the sum across all 
line classes in a study area the products of the maximum permitted 
Averaged Subscriber Line Charge during the base period for each 
class times the number of lines in each class times 12) from changes 
specified in paragraph 2, and any universal service revenues 
received pursuant to paragraph 2.2, will be offset by reducing 
charges as follows, in order of priority:
    (1) Terminating CCL Charges until the Terminating CCL rate is 
$0.00; then
    (2) Originating CCL Charges until the Originating CCL rate is 
$0.00; then
    (3) Multiline Business PICC until the Multiline Business PICC 
rate is $0.00; then
    (4) Subscriber Line Charges, which may be deaveraged pursuant to 
paragraph 2.1.5, above.

(Note: This is the existing order of offsets, once the residential 
(primary and non-primary) and single line business PICCs are 
stricken.)

    2.2. New Universal Service for Areas Served by Price Cap 
Incumbent LECs.
    2.2.1 Implicit Support in Interstate Access Charges by Price Cap 
LECs. The total amount of universal service funding that is targeted 
to offset implicit support in interstate access charge rates 
(``Access USF'') for areas served by price cap incumbent LECs is 
$650 million per year. (New federal universal service support to 
replace implicit support in interstate access charges by price cap 
LECs does not include support calculated under FCC Rules 54.301 (DEM 
Weighting), 54.303 (Long Term Support), or 36.601 et seq. (Part 36 
Universal Service Fund), or support expressly designated by the FCC 
to offset costs allocated to the intrastate jurisdiction.) This size 
for Access USF assumes a final nominal residential and single line 
business SLC cap of $7.00, and a final nominal multiline business 
SLC cap of $9.20 for multiline businesses. Changes in the level of 
these caps would change the appropriate level of universal service 
funding. It also assumes that all price cap LECs are included. It 
also assumes that the new program will cover the areas currently 
served by all price cap LECs, except those offered for sale before 
January 1, 2000, and sold to a non-price cap company. If any such 
area does not participate in the program, either because the price 
cap LEC does not participate, or because the area is offered for 
sale after January 1, 2000, and sold to a non-price cap company, 
then the funding estimated for that area pursuant to paragraph 
2.2.3.1.1 will not be collected or distributed as part of this plan 
for price cap LECs.
    2.2.2. Minimum Access USF StudyArea. For each study area, the 
minimum amount of Access USF support that study area would receive 
is calculated as follows:

MinimumAccessUSFStudyArea = 
PriceCapCMTRevenuesStudyArea - (($7.00  x  Residential & 
SingleLineBusinessLinesStudyArea  x  12) + ($9.20  x  
MultilineBusinessLinesStudyArea  x  12), )

Where:

PriceCapCMTRevenueStudyArea= 
PriceCapCMTRevenueFilingEntity  x  
(BFPStudyArea  BFPFilingEntity)

    2.2.3. Calculation of Access USF Per Line.
    2.2.3.1. Terms.
    2.2.3.1.1. Zone Above SLC Cap Revenues. For each zone, the above 
cap revenues for that zone are calculated according to the following 
formula:


[[Page 53653]]


ZoneAboveSLCCapRevenues =
((ZoneAverageRevenuePerLine- $7.00)  x  Residential& 
SingleLineBusinessLinesStudyArea  x  12) + 
((ZoneAverageRevenuePerLine - $9.20)  x  
MultilineBusinessLinesStudyArea  x  12)

The zones used for determining universal service will be the same 
zones that would be used for any SLC deaveraging, as described in 
paragraph 2.1.5.2. Where an ILEC has consolidated zones pursuant to 
paragraph 2.1.5.2, the consolidated zone is used for determining 
universal service.
    (a) For the purposes of distributing Access USF, Zone Average 
Revenue Per Line should be calculated pursuant to paragraph 2.1.1.3, 
except that Loop&Port PriceUNE Zone could either be (1) 
the cost projected by an FCC-approved cost model, or (2) the rates 
for unbundled UNE loops and switch ports in that UNE zone. Parties 
differ as to the relative merits of using proxy cost model outputs 
or state-established UNE rates for this calculation, and will 
present their respective views.
    (b) In states that have not established UNE zones, support will 
be determined on a study area basis, as described in paragraph 
2.2.3.3. For purposes of calculating Access USF support for study 
areas in states that have not established UNE zones, an interim 
estimate of Zone Above SLC Cap Revenues will be calculated by using 
the FCC Proxy Cost Model or other substitute method if no model is 
available. In order to develop this estimate, zones will be 
established by assigning the lowest cost one third of lines to Zone 
1, the highest cost one third of lines to Zone 3 and the remaining 
lines to Zone 2.
    2.2.3.1.2. Study Area Above Cap Revenues. For each study area, 
Study Area Above Cap Revenues is calculated by summing the Zone 
Above SLC Cap Revenues for all zones in the study area.
    2.2.3.1.3. Nationwide Total Above Cap Revenues. Nationwide Total 
Above Cap Revenues is the sum of all Study Area Above Cap Revenues 
nationwide for all price cap incumbent LEC study areas.
    2.2.3.2. Study Area Access USF Support. Each study area's Access 
USF support is calculated according to the following steps:

Step 1: Calculate Preliminary Access USF Support

    Preliminary Access USF Support is calculated according to the 
following formula:

UniversalServiceSupport = Sum of Above Cap Revenues  x  ($650 
million  Total Nationwide Above Cap Revenues)

Step 2: Calculate the Minimum Support Requirement

    If the Minimum Access USFStudy Area (See paragraph 
2.2.2.) exceeds the Preliminary Study Area Universal Service Support 
(``PSAUSS'') then the Minimum Support Requirement for that study 
area is calculated using the following process:
    A. For each study area, calculate the Study Area Minimum Delta. 
Study Area Minimum Delta = Minimum Access USFStudy Area--
Preliminary Study Area Universal Service Support.
    B. Nationwide, calculate the Total National Minimum Delta, which 
equals the sum of all Study Area Minimum Deltas.
    C. (1) If the Total National Minimum Delta is less than or equal 
to $75 million then the Minimum Adjustment Amount is:

Minimum Adjustment Amount = Phase In Percentage  x  Minimum Delta.

    (2) If the Total National Minimum Delta is greater than $75 
million, then the Minimum Adjustment Amount is:

Minimum Adjustment Amount = (Phase In Percentage)  x  (Minimum 
Delta)  x  ($75 million  Total National Minimum Delta)

    The Phase In Percentage is:

50% on January 1, 2000
5% on January 1, 2001
100% on July 1, 2002

    For those study areas with a Minimum Adjustment Amount, the 
Minimum Support Requirement is:

Minimum Support Requirement = Preliminary Study Area Universal 
Service Support + Minimum Adjustment Amount.

Step 3: Determine the Study Area Universal Service Support

    For study areas with a Minimum Support Requirement, Study Area 
Universal Service Support equals Minimum Support Requirement.
    For study areas with no Minimum Support Requirements:
    (1) Determine the Total National Minimum Support Requirement 
(TNMSR), which equals the sum of all Minimum Support Requirements.
    (2) Study Area Universal Service Support is determined as 
follows:

Study Area Universal Service Support = PSAUSS  x  ($650 
million-TNMSR 
    Nationwide Sum of PSAUSS for Study Areas where MSR is $0)

    The above calculations ensure that the Total Interstate Implicit 
Support Fund does not exceed $650 million while the Study Area 
Minimum Support Requirements are phased in as the Primary 
Residential and Single Line Business Subscriber Line Charge 
increases to $7.00.
    2.2.3.3. No Access USF Above The Minimum Support Requirement For 
A Study Area That Has No Zone Deaveraged Prices For UNE Loops. 
Notwithstanding the calculations in paragraph 2.2.3.2, in any study 
area for which the incumbent LEC has not established zone deaveraged 
UNE loop prices approved by the state, the incumbent LEC will 
receive no Access USF Support unless the study area has a Minimum 
Support Requirement, in which case the Study Area Universal Service 
Support shall equal the Minimum Support Requirement. If an incumbent 
LEC establishes deaveraged UNE loop prices after January 1, 2000, 
then beginning with the subsequent quarter after it implements 
deaveraged UNE loop rates, that entity will receive the amount of 
Access USF support previously calculated pursuant to paragraph 
2.2.3.2 using the methodology described in paragraph 2.2.3.1.1(b). 
When Access USF support is subsequently recalculated to redistribute 
Access USF among Price Cap ILEC service territories, support for 
that entity will be calculated pursuant to paragraph 2.2.3.1.1.(a). 
(As stated in paragraph 5, nothing in this proposal supercedes, 
prejudices or otherwise implies a result of the UNE Remand 
proceeding.)
    2.2.4. Determination of Portable Access USF Support Per Line. 
Portable Access USF Support Per Line is the amount of new interstate 
universal service funding to replace implicit support in interstate 
access that an eligible telecommunications carrier receives for 
serving a customer. This support is portable between eligible 
telecommunications carriers as customers change service providers.
    2.2.4.1. Portable Access USF Support Per Line When Deaveraged 
UNE Loop Rates Have Not Been Established. When Deaveraged UNE Loop 
Rates have not been established in a study area, the Portable Access 
USF Support Per Line for that study area is Study Area Universal 
Service Support divided by total lines in the study area.
    2.2.4.2. Portable Access USF Support Per Line When Deaveraged 
UNE Loop Rates Have Been Established.
    The parties have discussed two alternate ways to allocate 
universal service support to zones and line-types within those 
zones. The parties will present their respective views to the FCC as 
to the appropriateness of each alternative means of allocating 
universal service support to lines within a study area.

Alternative 1

    Proportionate Allocation. Within each study area, determine the 
percentage proportion of Study Area Universal Service Support to 
Study Area Above Cap Revenues. Within each zone and customer class 
(i.e. residential/single line business and multiline business for 
each zone), total universal service support for that zone and 
customer class is that same proportion of the Above Cap Revenues for 
that zone and customer class. That is:

Universal ServiceCustomerClassByZone = 
AboveCapRevenuesCustomerClassbyZone  x  
(StudyAreaUniversalServiceSupport  
StudyAreaAboveCapRevenues)

    Portable Universal Service Support Per Line in any given zone 
and customer class is Universal Service 
CustomerClassByZone divided by the total number of lines 
of the customer class within that zone.

Alternative 2

    Highest Cost Zone First. The funding in each study area will be 
made portable for lines in the highest cost zone first, and will 
``cascade'' to lines in lower cost zones to the extent that 
sufficient funding is available. Beginning with the zone with the 
highest Zone Average Revenue Per Line, funding will be applied in 
the following order of priority:
    (1) To all lines in the highest zone, to eliminate the amount 
per line by which Zone Average Revenue Per Line exceeds the higher 
of $9.20 or the Average Revenue Per Line in the next highest zone;
    (2) If the Zone Average Revenue Per Line in the next highest 
zone is greater than $9.20, then to all lines in both zones to 
eliminate the amount per line by which Zone Average Revenue per Line 
exceeds $9.20;

[[Page 53654]]

    (3) To all residential and single line business lines in the 
highest zone, to eliminate the amount per line that Zone Average 
Revenue Per Line for these lines exceeds the higher of $7.00 or 
Average Revenue Per Line in the next highest zone;
    (4) If the Zone Average Revenue per Line in the next highest 
zone is greater than $7.00, then to all residential and single line 
business lines in both zones to eliminate the amount per line by 
which Zone Average Revenue Per Line exceeds $7.00.
    This ``cascade'' process will continue until all of the 
available funding has been assigned to lines by zone and by customer 
class; it may extend in similar fashion to additional zones, to the 
extent that their Zone Average Revenue per Line exceeds the $9.20 
and $7.00 caps, and available funding permits. The per-line amount 
assigned to each multiline business line in a given zone would then 
be portable among eligible telecommunications carriers, as would the 
per-line amount assigned to each residence line and each single line 
business line in that zone.
    2.2.5. Commencement of New Access USF Support. Universal service 
distributed pursuant to this section will begin once administrative 
mechanisms have been established to transfer support among eligible 
telecommunications carriers in the shortest interval possible given 
reasonable operational considerations. The parties agree that a 
three-month lag may be reasonable, provided that an ILEC's 
entitlement to receive Access USF for service to that customer stops 
when service stops, and that there are true-ups.
    2.2.6. Recalculation of Access USF Amounts. Access USF support 
for each ILEC service territory will be recalculated on July 1, 
2000, and January 1, 2001, and thereafter as determined by the USF 
Administrator.
    3. Reducing Traffic Sensitive Interstate Access Rates.
    3.1. Target Traffic Sensitive Interstate Access Charge Rate.
    3.1.1. Bell Companies and GTE. For Bell Companies and GTE, the 
Target Rate for traffic sensitive interstate access charges (defined 
as the average revenue per switched access minute for the sum of 
Local Switching (less amounts transferred to CMT), Local Switching 
Trunk Ports, Signaling Transfer Point Port Termination, switched 
Direct Trunk Transport, signaling for switched Direct Trunk 
Transport, entrance facilities for switched access traffic, Tandem 
Switched Transport, the residual and service-related Transport 
Interconnection Charges, Information Surcharge, and Signaling for 
Tandem Switching) is calculated by tariff filing entity and is 
$0.0055 per minute for each tariff filing entity. For Bell Atlantic, 
the former NYNEX telephone companies may be treated as a separate 
tariff filing entity.
    3.1.2. All Other Price Cap ILECs. For all other price cap ILECs, 
the Target Rate for traffic sensitive interstate access charges 
(defined as the average revenue per switched access minute for the 
sum of Local Switching, Local Switching Trunk Ports, Signaling 
Transfer Point Port Termination, switched Direct Trunk Transport, 
signaling for switched Direct Trunk Transport, entrance facilities 
for switched access traffic, Tandem Switched Transport, the residual 
and service-related Transport Interconnection Charges, Information 
Surcharge, and Signaling for Tandem Switching) is calculated by 
tariff filing entity and is $0.0065 per minute.
    3.2. Local Switching Restructuring. In any study area in which, 
on December 31, 1999, the average traffic sensitive access charge is 
greater than the Target Rate, 25% of Local Switching revenues 
(calculated using base period demand) will be moved to the CMT 
Basket, except that less than 25% of Local Switching revenues will 
be moved to the CMT Basket if moving 25% would reduce the average 
traffic sensitive access charge below the Target Rate. If moving 25% 
of Local Switching would reduce average traffic sensitive access 
charges below the Target rate, then the amount of Local Switching 
moved to the CMT Basket is the amount necessary to reach the Target 
Rate.
    3.3. Interstate X-Factor Levels and Targeting of X-Factor 
Reductions Effective January 1, 2000. The basic regime set up under 
this section is that all the price cap reductions flowing from an X-
factor of 6.5% are initially targeted to reduce traffic sensitive 
charges until those charges reach the Target Rate ($0.0055 per 
minute by tariff filing entity for Bell Companies and GTE, and 
$0.0065 per minute by tariff filing entity for other price cap 
ILECs). When the filing entity's average traffic sensitive switched 
interstate access charge reaches the Target Rate, then the X-factor 
becomes equal to GDP-PI. All X-factor targeting is done at the 
tariff filing entity level, not at a holding company level. 
Beginning July 1, 2001 (i.e. after one full year's X-factor 
reduction), an ILEC may choose not to target X-factor reductions 
from special access to reduce switched access rates.
    3.3.1 The interstate X-factor will be 6.5% until a Tariff 
Entity's average traffic sensitive access charge equals the Tariff 
Entity's Target Rate. The average traffic sensitive charge will be 
calculated by taking the sum of revenues for Local Switching, Local 
Switching Trunk Ports, Signaling Transfer Point Port Termination, 
switched Direct Trunk Transport, signaling for switched Direct Trunk 
Transport, entrance facilities for switched access traffic, Tandem 
Switched Transport, the residual and service-related Transport 
Interconnection Charges, Information Surcharge, and Signaling for 
Tandem Switching, and dividing that sum of revenues by total 
switched access minutes of use. If a new element is created from an 
existing switched access rate element (such as creating a call set-
up charge out of the existing local switching rate) the revenues 
anticipated from that element will be included in the calculation of 
the average traffic sensitive access charge. The X-factor of 6.5% 
will be applied only to the extent necessary to reduce the Tariff 
Entity's average traffic sensitive access charges to the Target 
Rate. Once the Tariff Entity's average traffic sensitive access 
charges reach the Target Rate, the X-factor will be GDP-PI.
    3.3.2 Until a Tariff Entity's average traffic sensitive 
interstate access charge equals the Target Rate, the aggregate 
reductions within a given tariff filing entity from application of 
the X-factor adjustment in the price cap formula across all of that 
entity's interstate price cap baskets (less special access 
reductions, if any, the ILEC chooses to apply beginning July 1, 2001 
to reduce special access rates, up to the amount of reductions 
special access would get through an untargeted application of the X-
factor adjustment) will be targeted to reduce the following rates 
for that tariff filing entity, in order of priority:
    (1) To the residual per minute Transport Interconnection Charge, 
until that rate is $0.00; then
    (2) To the Information Surcharge, until that rate is $0.00; then
    (3) To the Local Switching charge and Switched Transport charges 
until the Tariff Entity's average traffic sensitive interstate 
access charge equals the Target Rate. In making these reductions to 
Local Switching rates, the percentage of total X-factor reductions 
directed to Local Switching rates must be greater than or equal to 
the percentage that local switching revenues represent of the sum of 
revenues for Local Switching, Local Switching Trunk Ports, Signaling 
Transfer Point Port Termination, switched Direct Trunk Transport, 
signaling for switched Direct Trunk Transport, entrance facilities 
for switched access traffic, Tandem Switched Transport, and 
Signaling for Tandem Switching (i.e., Local Switching gets at least 
its proportionate share of reductions).
    Once the Tariff Entity's average traffic sensitive interstate 
access charge equals the Target Rate, no further reductions will be 
mandated (i.e. if applying the full X-factor reduction for a given 
year would reduce average traffic sensitive interstate access 
charges below the Target Rate, the amount of X-factor reduction 
applied that year will be the amount necessary to reach the Target 
Rate).
    In calculating aggregate X-factor reductions, the Price Cap 
formula should be applied against the entire common line basket, 
without removing amounts received through the new interstate 
universal service support pursuant to paragraph 2.2.
    3.3.3. CMT Adjustments After Reaching Target Rate. Once the CCL 
and PICC are eliminated and the primary residential and single line 
business SLC reaches the Average Price Cap CMT Revenues Per Line, 
the X-factor for the CMT Basket will equal GDP-PI as long as GDP-PI 
is less than or equal to 6.5 percent and greater than 0 percent. If 
GDP-PI is greater than 6.5% and an entity has eliminated its CCL and 
multiline business PICC charges, the X-factor for common line will 
equal 6.5%, and all SLC rates and nominal caps on SLC rates will be 
increased by the difference between GDP-PI and the X-factor. If GDP-
PI is less than 0, the X-factor for common line will be 0.
    3.3.4. Exogenous Adjustments. After January 1, 2000, exogenous 
adjustments will be applied only to services other than those 
constituting traffic sensitive interstate access charges.
    3.3.5. Annual Filings After Reaching Target Rate. With each 
annual filing, the Average Traffic Sensitive Rate will be 
recalculated

[[Page 53655]]

and set at the new base period level. Due to changes in base period 
demand and inclusion of new services for that Annual Tariff filing, 
the absolute level of a Tariff Entity's Average Traffic Sensitive 
Charge may change. The resulting new Average Traffic Sensitive 
Charge level will be what that Tariff Entity will measured against 
during that base period.
    4. Other Changes to Interstate Access Charge Rate Levels.
    4.1. Changes to the Interstate X-factor. No company will 
advocate changes to the interstate X-factor other than as outlined 
in paragraph 3.
    4.2. Prospective Interstate Adjustments. The companies agree 
that Paragraphs 2-3 are a just, reasonable and fair means of moving 
usage sensitive interstate access rates to a point achieved by the 
above mechanisms. Therefore, other adjustments, such as changes in 
the interstate X-factor, changes in interstate access rates for 
price cap ILECs based on results of present or future Continuing 
Property Records audits, changes in interstate access rates for 
price cap ILECs based on changes in the Prescribed Rate of Return, 
and changes in the rate structure for Common Line, Traffic Sensitive 
(Local Switching, Local Switching Trunk Ports, Signaling Transfer 
Point Port Termination, switched Direct Trunk Transport, signaling 
for switched Direct Trunk Transport, entrance facilities for 
switched access traffic, Tandem Switched Transport, the residual and 
service-related Transport Interconnection Charges, Information 
Surcharge, and Signaling for Tandem Switching) and Other (all other 
interstate access charges not included in Common Line or Traffic 
Sensitive, as defined here) charges by price cap ILECs, are 
unnecessary.
    4.3. Retrospective Interstate Adjustments. The companies also 
agree not to initiate legal or regulatory action to adjust price cap 
determined rates for interstate access charges billed for access 
minutes prior to January 1, 2000, although a payee would not be 
precluded from accepting any refund the FCC ordered to be made and a 
payor will not object to or resist such a refund on the basis of 
this paragraph.
    4.4. Lower Formula Adjustments. The Lower Formula Adjustment to 
interstate access rates is eliminated until January 1, 2005.
    4.5. Term of Agreements. These agreements in paragraph 4 will 
run until January 1, 2005.
    5. Pricing Flexibility/Non-Dominant Classification/Price Cap 
Forbearance With Respect To Specific Services/UNE Remand. Except as 
specifically addressed, the companies are not agreeing as to current 
or future proposals for pricing flexibility, non-dominant 
classification of specific services, or price cap forbearance with 
respect to specific services. The companies agree that the 
Commission should establish guidelines no later than October 1, 
1999, for granting appropriate incumbent LEC pricing flexibility for 
interstate access services. Nothing in this proposal supercedes, 
prejudices or otherwise implies a result of the UNE Remand 
proceeding. Parties will continue to argue for their respective 
positions in these other proceedings.
    6. Long Distance Rates and SLC Changes. This interstate access 
and universal service plan is in the public interest because the 
interstate access reductions the plan produces will result in lower 
long distance bills while the SLC and universal service revenues the 
plan produces will help to protect and enhance universal service and 
the local exchange infrastructure. The IXC signatories commit to 
meet with the FCC to review the effects of the interstate access 
reductions under the plan on long distance customers, and the 
incumbent LEC signatories commit to meet with the FCC to review 
effects of the SLC increases and SLC deaveraging under the plan on 
local customers.
    7. Non-Signatory Price Cap LECs. The signatories agree that this 
proposal, without modification, is a fair and reasonable compromise 
plan to resolve issues relating to access and universal service for 
price cap LECs. Accordingly, signatories agree on behalf of 
themselves and their current affiliates as of August 1, 1999 to 
participate in the proposal if it is approved by the FCC.
    The signatories agree that non-signatory price cap LECs are not 
bound by the terms of this plan and that the access rules that will 
apply solely to non-signatory price cap LECs will be determined by 
the FCC. All companies, whether signatories or not, would remain 
free to advocate for whatever changes, if any, are appropriate to 
the current price cap rules that would apply only to non-signatory 
price cap LECs.
    At their option, price cap LECs that are non-signatories to the 
proposal at the time of its submission may chose to become 
signatories to the proposal prior to its implementation following an 
FCC Order. Additionally, if a non-signatory price cap LEC 
experiences a change of control during the first six months of the 
year 2000, that LEC may become a signatory to the proposal before 
the July 1, 2000 annual filing becomes effective, provided that such 
a LEC incorporates all provisions of the proposal scheduled to be 
implemented during the first six months of 2000 no later than the 
July 1, 2000 annual filing effective date.

[FR Doc. 99-25703 Filed 10-1-99; 8:45 am]
BILLING CODE 6712-01-P