[Federal Register Volume 66, Number 17 (Thursday, January 25, 2001)]
[Proposed Rules]
[Pages 7725-7736]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-2126]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 66, No. 17 / Thursday, January 25, 2001 / 
Proposed Rules  

[[Page 7725]]



FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 36, 54, 61, 64, 65, and 69

[CC Docket Nos. 96-45, 98-77, 98-166, and 00-256; FCC 00-448]


Multi-Association Group (MAG) Plan for Regulation of Interstate 
Services of Non-Price Cap Incumbent Local Exchange Carriers and 
Interexchange Carriers

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rule.

-----------------------------------------------------------------------

SUMMARY: In this document, the Commission seeks comment on a petition 
for rulemaking submitted by the Multi-Association Group (MAG). The 
Petition sets forth an interstate access reform and universal service 
supported proposal for incumbent local exchange carriers subject to 
rate-of-return regulation. The MAG offers its plan as a comprehensive 
solution to regulatory issues facing non-price cap carriers.

DATES: Comments are due on or before February 26, 2001. Reply comments 
are due on or before March 12, 2001. Written comments by the public on 
the proposed and/or modified information collections discussed in this 
Further Notice of Proposed Rulemaking are due on or before February 26, 
2001. Written comments must be submitted by the Office of Management 
and Budget (OMB) on the proposed and/or modified information 
collections on or before March 26, 2001.

ADDRESSES: All filings must be sent to the Commission's Secretary, 
Magalie Roman Salas, Office of the Secretary, Federal Communications 
Commission, 445 12th Street, SW., Washington, DC 20554. In addition to 
filing comments with the Secretary, a copy of any comments on the 
information collection(s) contained herein should be submitted to Judy 
Boley, Federal Communications Commission, Room 1-C804, 445 12th Street, 
SW, Washington, DC 20554, or via the Internet to [email protected] and to 
Edward C. Springer, OMB Desk Officer, 10236 NEOB, 725 17th Street, NW., 
Washington, DC 20503, or via the Internet to [email protected]. Parties 
who choose to file by paper should also submit their comments on 
diskette. These diskettes should be submitted to Wanda Haris, 
Competitive Pricing Division, Common Carrier Bureau, Federal 
Communications Commission, 445 Twelfth Street, S.W., Room 5-A452, 
Washington, DC 20554. Parties who choose to file by paper and comment 
on the universal service aspect of the MAG plan should also submit one 
paper copy of the comments to Sheryl Todd, Accounting Policy Division, 
Common Carrier Bureau, Federal Communications Commission, 445 Twelfth 
Street, S.W., Room 5-B540, Washington, DC 20554. In addition, 
commenters must send diskette copies to the Commission's copy 
contractor, International Transcription Services, Inc., 1231 20th 
Street, N.W., Washington, D.C. 20037.

FOR FURTHER INFORMATION CONTACT: William Scher, Attorney, Common 
Carrier Bureau, Accounting Policy Division, (202) 418-7400.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM) in CC Docket Nos. 96-45, 98-77, 98-166, 
and 00-256 released on January 5, 2001. The full text of this document 
is available for public inspection during regular business hours in the 
FCC Reference Center, Room CY-A257, 445 Twelfth Street, S.W., 
Washington, DC, 20554.
    This NPRM contains proposed information collection(s) subject to 
the Paperwork Reduction Act of 1995 (PRA). It has been submitted to the 
Office of Management and Budget (OMB) for review under the PRA. OMB, 
the general public, and other Federal agencies are invited to comment 
on the proposed information collections contained in this proceeding.

Paperwork Reduction Act

    The NPRM contains a proposed information collection. The 
Commission, as part of its continuing effort to reduce paperwork 
burdens, invites the general public and OMB to comment on the 
information collection(s) contained in this NPRM, as required by the 
PRA, Public Law 104-13. Public and agency comments on the proposed and/
or modified information collections discussed in this Notice of 
Proposed Rulemaking are due on or before February 26, 2001. Written 
comments must be submitted by the Office of Management and Budget (OMB) 
on the proposed and/or modified information collections on or before 
March 26, 2001.
    Comments should address: (a) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information 
collected; and (d) ways to minimize the burden of the collection of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology.
    OMB Control Number: None.
    Title: Multi-Association Group (MAG) Plan for Regulation of 
Interstate Services of Non-Price Cap Incumbent Local Exchange Carriers 
and Interexchange Carriers.
    Form No.: N/A.
    Type of Review: Proposed New collections.
    Respondents: Business or other for-profit.

----------------------------------------------------------------------------------------------------------------
                                                                      No. of       Est. time per   Total annual
                              Title                                 respondents      response         burden
----------------------------------------------------------------------------------------------------------------
1. Tariff Filing................................................              65               2             130
2. Annual Data Filings:
    a. Special Access Rate Reporting............................              64               1              64
    b. Filing the Effective Per Line Support and a Geographic              1501*               2            2502
     Description And Map........................................
3. Periodic Data Filings:

[[Page 7726]]

 
    a. Reporting of Mergers & Acquisitions......................              20              80            1600
    b. Filing of Low-end Adjustments With NECA..................               4              20             80
----------------------------------------------------------------------------------------------------------------
*Based on the number of study areas.
Total Annual Burden: 4376.
Cost to Respondents: $0.

    Needs and Uses: The Commission is seeking comment on a proposal 
filed by a Multi-Association Group (MAG). The MAG plan proposes to 
reform the interstate access charge structure for non-price cap 
carriers, to establish explicit interstate access universal service 
support for non-price cap carriers that will be sustainable in an 
increasingly competitive marketplace, and to require interexchange 
carriers to offer their services that are available in other areas in 
the non-price cap carriers' service areas. Affected carriers may be 
required to file tariffs and to make periodic and annual data filings. 
The information will be used to determine compliance with Commission 
rules and eligibility for interstate access universal service support.

Synopsis of NPRM

I. Introduction

    1. In this NPRM, we seek comment on a Petition for Rulemaking 
submitted by the MAG. The Petition sets forth an interstate access 
reform and universal service support proposal for incumbent local 
exchange carriers (LECs) subject to rate-of-return regulation (rate-of-
return or non-price cap carriers). It is designed to be implemented 
over a five-year period beginning on July 1, 2001.
    2. The MAG offers its plan as a comprehensive solution to 
regulatory issues facing non-price cap carriers, and asks that the 
Commission adopt the plan without modification as an integrated 
package. The MAG plan is modeled in some respects on the CALLS plan 
adopted for price cap carriers. The MAG plan would increase the 
recovery of common line costs through flat, non-traffic sensitive 
charges. For carriers that elect a transition to a new form of 
incentive-based regulation, it provides for reduced per-minute access 
rates, and a new, explicit interstate access universal service subsidy 
to make up for any shortfall in carriers' revenues. The MAG plan also 
proposes to eliminate the current funding caps on high-cost loop 
support for rural carriers. The MAG believes its plan would have many 
benefits, including a more efficient access rate structure, more 
explicit universal service support, and new incentives for carriers to 
increase efficiency and invest in new technologies.
    3. The specifics of the MAG plan are set forth in the Petition, in 
particular Exhibits 1 (Detailed Description) and 3 (Proposed Rules).

II. Issues for Comment

    4. The MAG offers its plan as a comprehensive solution to 
regulatory issues facing non-price cap carriers, and asks that the 
Commission adopt the plan without modification as an integrated 
package. We seek comment on whether we should adopt the MAG plan in its 
entirety, as requested by the MAG members. We also seek comment on 
whether, in the event that we do not adopt the MAG plan in its 
entirety, there are specific aspects of the proposal that we should 
adopt or incorporate into any of our captioned proceedings. In 
addition, we seek comment on the impact, if any, of the MAG plan on 
other pending proceedings before the Commission. We also seek comment 
on the process through which the Commission should evaluate the MAG 
plan. In particular, we ask how we may best address the concerns that 
may be raised by parties who are not members of the MAG.
    5. We invite interested parties from all industry segments, 
including competitive LECs, IXCs, and wireless providers, as well as 
consumer groups and state commissions, to submit comments on the MAG 
plan. Parties should comment on the public policy implications of the 
MAG plan and/or particular aspects of the plan, including its potential 
effects on the competition and universal service goals of the 1996 Act, 
and whether and how it would promote consumer welfare. What would the 
net impact of the MAG proposal be on non-price cap carrier revenues? 
Parties also should address how small business entities, including 
small incumbent LECs and new entrants, will be affected by the MAG 
plan. We briefly discuss several of the major issues raised by the MAG 
plan that we encourage interested parties specifically to address in 
their comments.
    6. Access Rate Structure. We seek comment on the access rate 
structure aspects of the MAG plan. Are the proposed reforms, which in 
some respects are modeled on the CALLS plan adopted for price cap 
carriers, appropriate for non-price cap carriers? Are they likely to 
achieve the competitive and consumer benefits anticipated by the MAG 
members? Is continued maintenance of lower SLC caps for non-price cap 
carriers than for price cap carriers consistent with section 254 of the 
1996 Act? Is a two-path scheme necessary to accommodate diversity among 
non-price cap carriers? Would the potential regulatory complexity of 
this two-tiered approach have practical or administrative consequences? 
Would the MAG plan benefit all non-price cap carriers, regardless of 
size and/or operating conditions? Are larger carriers with relatively 
low costs more likely than small carriers to elect Path A? If so, would 
the result be inflation of Path B access rates? What are the 
characteristics of companies that are likely to elect Path B? Is it 
appropriate as a legal or policy matter to restrict RAS to Path A 
carriers? Would it be appropriate to close out our rate-of-return 
proceeding and keep the rate of return at its current level of 11.25 
percent for Path B carriers? We invite parties to comment on these and 
any other issues related to the MAG plan's proposed reform of the 
interstate access rate structure for non-price cap carriers.
    7. Universal Service Support. Unlike the CALLS plan, the MAG plan 
does not estimate the amount of implicit support in access rates, or 
place a ceiling on the proposed new access subsidy, RAS. Is it 
appropriate to cap interstate access support for price cap carriers but 
not for non-price cap carriers? To what extent is RAS likely to 
increase the size of the universal service fund, and how will RAS 
support levels change over time? What impact will such increases have 
on consumers? Is the increase likely to be offset by decreases in 
access rates and charges resulting from implementation of the MAG plan? 
Should RAS be available to support special access services, which have 
not been defined as supported services by the Commission? If the 
Commission creates RAS as a residual support mechanism, should LTS be 
retained as a separate interstate access subsidy? Should we adopt a 
provision similar to

[[Page 7727]]

that included in the CALLS Order for recovery of universal service 
contributions through a separate rate element or line item?
    8. Incentive-Based Regulation. Would the MAG incentive-based 
approach create appropriate economic incentives for operating 
efficiency and investment? Is it likely to encourage long term 
investment? Is it likely to encourage investment in high-speed 
infrastructure? Is the proposed ability of carriers to fix or adjust 
RPL at any time likely to reinforce ``lumpy'' investment patterns 
(significant investment in a single year, rather than a steady flow of 
investment), and/or encourage cost inflation? How would consumers 
benefit from any of the efficiency gains that incentive-based 
regulation is expected to produce?
    9. In addition, to what extent is the MAG incentive-based approach 
likely to increase non-price cap carrier revenues? Does an inflation 
factor equal to the GDP Price Index accurately reflect changes in costs 
per line experienced by the carriers that can be expected to select 
Path A? Should an X-factor or consumer productivity dividend be 
included in RPL? Is a low-end adjustment necessary where carriers 
retain the option to remain under rate-of-return regulation, and at 
what level should it be set? How would the Commission evaluate the 
validity of low-end adjustment showings if carriers are no longer 
required to report cost data annually? What are the costs and benefits 
of permitting carriers to elect on a study area basis when to convert 
to incentive-based regulation and whether to continue pooling? Is the 
five-year transition period proposed by the MAG an appropriate 
transition period to incentive-based regulation? We invite commenters 
to address these issues and any others when discussing the incentive-
based regulation proposals in the MAG plan.
    10. Advanced Services. One goal of the MAG plan is to promote the 
deployment of advanced services to rural areas, a goal shared by the 
Commission. We seek comment on the validity of the MAG's premise that 
universal service funding caps and regulatory uncertainty have 
diminished non-price cap carriers' incentives to invest in new 
technologies. Does the MAG plan represent the best means of promoting 
the deployment of advanced services in rural areas, or are there 
alternative means that would better accomplish this goal? Does the MAG 
plan require the use of universal service funding to support advanced 
services or infrastructure capable of providing advanced services?
    11. Mergers and Acquisitions. Is elimination of the all-or-nothing 
rule, as proposed in the MAG plan, warranted? Cost shifting concerns 
prompted the Commission to adopt the rule in 1993; do these concerns 
remain valid today? Likewise, is the proposed elimination of the freeze 
of study areas for non-price cap carriers warranted? Does the MAG plan 
adequately address gaming concerns that would arise if Sec. 54.305 of 
the Commission's rules were eliminated? Are there alternative ways to 
address the underlying concerns raised by the MAG that limits on 
universal service support discourage non-price cap carriers in rural 
areas from acquiring and upgrading telephone exchanges? We invite the 
Joint Board to comment on the universal service implications of these 
MAG proposals.
    12. Geographic Rate Averaging and Rate Integration. We seek comment 
on the proposed pricing rules in the MAG plan that would be applicable 
to IXCs. Among other things, we invite parties to address whether all 
IXC minimum monthly charges should be prohibited, or whether IXCs 
should only be required to offer at least one calling plan without such 
charges. In addition, how would the Commission ensure that IXCs comply 
with the MAG's proposed requirements, given the fact that the 
Commission does not regulate the rates of IXCs?

III. Procedural Issues

A. Ex Parte Presentations

    13. 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.

B. Initial Regulatory Flexibility Act

    14. As required by the Regulatory Flexibility Act (RFA), the 
Commission has prepared this Initial Regulatory Flexibility Analysis 
(IRFA) of the possible significant economic impact on small entities by 
the proposals in this NPRM. Written public comments are requested on 
the IRFA. These comments must be filed in accordance with the same 
filing deadlines as comments on the rest of this NPRM, and should have 
a separate and distinct heading designating them as responses to the 
IRFA. The Commission will send a copy of the NPRM, including this IRFA, 
to the Chief Counsel for Advocacy of the Small Business Administration 
(SBA) in accordance with the RFA. In addition, the NPRM and IRFA (or 
summaries thereof) will be published in the Federal Register.
1. Need for, and Objectives of, the Proposed Rules
    15. The Commission has initiated this proceeding to consider 
interstate access charge and universal service reforms for rate-of-
return carriers proposed by the MAG. The MAG plan would raise SLCs for 
all rate-of-return carriers to the price cap carriers' SLC caps and 
permit deaveraging of the SLCs. The plan would also extend the Lifeline 
program to cover the increased SLCs and eliminate the cap on high cost 
loop support and the corporate operations expense limitation. In other 
respects, the plan would permit rate-of-return carriers to continue 
under the current access charge and universal service regulatory 
regimes, or elect the alternatives available in the MAG plan. The MAG 
plan would also require IXCs to pass through to customers savings 
realized from reduced access rates and to offer the same optional 
calling plans to rural and urban customers alike.
    16. Rate-of-return carriers electing the alternative regulatory 
approach proposed by the MAG plan would commence a five-year transition 
plan for interstate access charges and universal service funding. The 
MAG plan would, for example: establish an ``incentive'' method for 
compensating NECA pool members electing the incentive approach based on 
inflation-adjusted, revenue per line amounts; reduce per minute access 
charges to $0.016; establish low-end earnings levels; consolidate the 
two NECA pools into one pool; provide for certain pricing flexibility 
if a non-price cap carrier elects to remove one or more study areas 
from the NECA pool; and make certain of the options, including 
participation in the NECA pool, available on a study-area basis. The 
plan also establishes procedures for introducing new services and for 
the treatment of mergers and acquisitions. The plan would also 
establish an additional, explicit universal service subsidy for non-
price cap carriers electing the incentive approach of the MAG plan 
(known as rate averaging support), make universal service support 
payments portable, and permit carriers to deaverage the universal 
service support into three zones per wire center. Settlements with non-
price cap carriers would be handled by NECA whether a carrier elected 
to convert to incentive-based regulation under Path A of the MAG plan 
or remain under rate-of-return regulation. A rate-of-return carrier 
could elect to tariff its offerings for one or more study areas itself, 
which would give it additional pricing flexibility, but would

[[Page 7728]]

require it to forgo any rate averaging support.
2. Legal Basis
    17. This rulemaking action is supported by sections 4(i), 4(j), 
201-205, 254, and 403 of the Communications Act of 1934, as amended.
3. Description and Estimate of the Number of Small Entities to Which 
the NPRM Will Apply
    18. 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 
``small entity'' as having the same meaning as the term ``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, unless the Commission has developed one or more definitions that 
are appropriate to its activities. Under the Small Business Act, a 
``small business concern'' is one that: (1) Is independently owned and 
operated; (2) is not dominant in its field of operation; and (3) meets 
any additional criteria established by the SBA.
    19. We have included small incumbent carriers in this RFA analysis. 
As noted, a ``small business'' under the 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 carriers are not 
dominant in their field of operation because any such dominance is not 
``national'' in scope. We have therefore included small incumbent 
carriers in this RFA analysis, although we emphasize that this RFA 
action has no effect on the Commission's analyses and determinations in 
other, non-RFA contexts.
    20. Local Exchange Carriers. Neither the Commission nor the SBA has 
developed a definition for small providers of local exchange services. 
The closest applicable definition under the SBA rules is for telephone 
communications companies other than radiotelephone (wireless) 
companies. According to the most recent Telecommunications Industry 
Revenue data, 1,348 incumbent carriers reported that they were engaged 
in the provision of local exchange services. We do 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 are unable at this time to 
estimate with greater precision the number of local exchange carriers 
that would qualify as small business concerns under the SBA's 
definition. Of this number, 13 entities are price cap carriers that 
would not be subject to the rules, if adopted. Consequently, we 
estimate that fewer than 1,335 providers of local exchange service are 
small entities or small incumbent local exchange carriers that may be 
affected by the proposed rules.
    21. Competitive Local Exchange Carriers. Neither the Commission nor 
the SBA has developed a definition of small providers of local exchange 
service. The closest applicable definition under SBA rules is for 
telephone communications companies other than radiotelephone (wireless) 
companies. The most reliable source of information regarding the number 
of competitive LECs nationwide of which the Commission is aware appears 
to be the data that the Commission collects annually in connection with 
the Telecommunications Relay Service (TRS). According to the 
Commission's most recent data, 129 companies reported that they were 
engaged in the provision of either competitive access provider services 
or competitive LEC services. 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 competitive LECs that 
would qualify as small business concerns under the SBA's definition. 
Consequently, the Commission estimates that fewer than 129 providers of 
local exchange service are small entities or small competitive LECs 
that may be affected by these proposals.
    22. Interexchange Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
providers of interexchange services. The closest applicable definition 
under the SBA rules is for telephone communications companies other 
than radiotelephone (wireless) companies. According to the most recent 
Carrier Locator data, 738 carriers reported that their primary 
telecommunications service activity was the provision of interexchange 
services. We do not have data specifying the number of these carriers 
that are not independently owned and operated or have more than 1,500 
employees, and thus are unable at this time to estimate with greater 
precision the number of IXCs that would qualify as small business 
concerns under the SBA's definition. Consequently, we estimate that 
there are less than 738 small entity IXCs that may be affected by the 
proposed rules.
4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    23. The MAG plan is a proposal submitted by four associations 
representing rate-of-return carriers. Under the MAG proposal, all rate-
of-return LECs would be required to modify their access tariffs to 
comply with the new SLC caps, which may be deaveraged. Rate-of-return 
LECs selecting Path A must adjust their traffic sensitive rates 
(carrier common line, local switching, transport, and transport 
interconnection charge) to comply with the composite access rate or CAR 
target. Rate-of-return carriers electing incentive-based regulation for 
one or more study areas must establish revenue per line or RPL 
compensation amounts that will be inflation-adjusted annually, after 
which they will not be required to file cost data with NECA. The MAG 
proposes that Path A carriers with study areas participating in the 
pool's switched traffic sensitive tariff, but not in the special access 
tariff, must provide the special access rates of those study areas to 
NECA by March 1 prior to the annual filing to support NECA's 
calculation of pool transport rates. The MAG plan also proposes that 
rate-of-return carriers choosing to deaverage their universal service 
support file the effective per-line support amount for each universal 
service zone and a geographic description and map of each such zone 
with the Commission, the relevant state regulatory agency, and USAC. 
Rate-of-return carriers would be required to notify the Commission and 
the affected state regulatory commission before incorporating acquired 
telephone exchanges or lines into existing study areas, rather than 
having to file a waiver to do so, as is currently required. The MAG 
plan proposes that Path A carriers under incentive-based regulation and 
participating in the NECA pool be required to perform a twelve-month 
cost study of the acquired lines within eighteen months of the 
acquisition. Finally, the plan would permit a Path A carrier subject to 
incentive-based regulation (whether in or out of the NECA pool) to file 
a cost study with NECA seeking a low-end adjustment if its earnings 
fall below 10.75 percent (if five or fewer study areas are served) or 
10.25 percent (if more than five study

[[Page 7729]]

areas are served). It is not clear whether, on balance, the proposals 
will increase or decrease rate-of-return carriers' administrative 
burdens.
5. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    24. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.
    25. The proposals in the MAG plan could have varying positive or 
negative impacts on rate-of-return carriers, including any such small 
carriers. Because most of the changes are actually elective options, a 
small entity should be able to assess the impacts as part of its 
decision-making process. The alternative to consideration of adopting 
the MAG proposal at this time would be to continue in effect the 
existing access charge and universal service fund rules applicable to 
these small carriers, or adopting a portion, or a modified version, of 
the MAG plan. Public comments are welcomed on modifications of the MAG 
proposal that would reduce any potential impacts on small entities. 
Specifically, suggestions are sought on different compliance or 
reporting requirements that take into account the resources of small 
entities; clarification, consolidation, or simplification of compliance 
and reporting requirements for small entities that would be subject to 
the rules; and whether waiver or forbearance from the rules for small 
entities is feasible or appropriate. Comments should be supported by 
specific economic analysis.
6. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules
    26. None.

IV. Comment Filing Procedures

    27. Pursuant to Secs. 1.415 and 1.419 of the Commission's rules, 
interested parties may file comments on or before February 26, 2001 and 
reply comments on or before March 12, 2001. Comments may be filed using 
the Commission's Electronic Comment Filing System (ECFS) or by filing 
paper copies.
    28. 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 your e-mail address>.'' A sample form and directions will be sent 
in reply.
    29. 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, SW., Washington, DC 20554.
    30. Parties who choose to file by paper should also submit their 
comments on diskette. These diskettes should be submitted to: Wanda 
Harris, Competitive Pricing Division, 445 12th Street, SW., Washington, 
DC 20554. Such a submission should be on a 3.5-inch diskette formatted 
in an IBM compatible format using Word 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 labeled 
with the commenter's name, proceeding (including the docket number, in 
this case CC Docket No. 00-256, 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, NW., Washington, DC 20037.
    31. Parties who choose to file by paper and comment on universal 
service aspects of the MAG plan also should submit one paper copy of 
the comments to Sheryl Todd, Accounting Policy Division, 445 12th 
Street, SW., Room 5-B540, Washington, DC 20554.
    32. Written comments by the public on the proposed and/or modified 
information collections are due on or before February 26, 2001. Written 
comments must be submitted by the Office of Management and Budget (OMB) 
on the proposed and/or modified information collections on or before 
March 26, 2001. 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, SW., Washington, DC 20554, or via the 
Internet to [email protected] and to Edward Springer, OMB Desk Officer, 
10236 NEOB, 725--17th Street, NW., Washington, DC 20503.

V. Ordering Clauses

    33. Pursuant to the authority contained in sections 4(i), 4(j), 
201-205, 254, and 403 of the Communications Act of 1934, as amended, 
this Notice of Proposed Rulemaking is adopted.
    34. It is further ordered that the Commission's Consumer 
Information Bureau, Reference Information Center, shall send a copy of 
this Notice of Proposed Rulemaking, including the Initial Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

List of Subjects

47 CFR Part 36

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone.

47 CFR Part 54

    Reporting and recordkeeping requirements, Telecommunications, 
Telephone.

47 CFR Part 61

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone.

47 CFR Part 64

    Communications common carriers, Reporting and recordkeeping 
requirements, Telecommunications, Telephone.

47 CFR Part 65

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone.

[[Page 7730]]

47 CFR Part 69

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Proposed Rules

    For the reasons set forth in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR Parts 36, 54, 61, 
64, 65, and 69 as follows:

PART 36--JURISDICTIONAL SEPARATIONS PROCEDURES; STANDARD PROCEDURES 
FOR SEPARATING TELECOMMUNICATIONS PROPERTY COSTS, REVENUES, 
EXPENSES, TAXES AND RESERVES FOR TELECOMMUNICATIONS COMPANIES

Subpart F--Universal Service Fund

    1. The authority citation for part 36 continues to read as follows:

    Authority: 47 U.S.C. Secs. 151, 154(i) and (j), 205, 221(c), 
254, 403 and 410.

    2. In Sec. 36.601, add the following sentence to the end of 
paragraph (c) to read as follows:


Sec. 36.601  General.

* * * * *
    (c) The indexed cap on the Universal Service Fund as described in 
this subsection shall no longer apply as of July 1, 2001. The 
Administrator shall recalculate the Universal Service Fund without such 
cap as of July 1, 2001.
    3. In Sec. 36.621, revise paragraph (a)(4) introductory text to 
read as follows:


Sec. 36.621  Study area total unseparated loop cost.

    (a) * * *
    (4) Corporate Operations Expenses, Operating Taxes and the benefits 
and rent portions of operating expenses, as reported in Sec. 36.611(e) 
attributable to investment in C&WF Category 1.3 and COE Category 4.13. 
This amount is calculated by multiplying the total amount of these 
expenses and taxes by the ratio of the unseparated gross exchange plant 
investment in C&WF Category 1.3 and COE Category 4.13, as reported in 
36.611(a), to the unseparated gross telecommunications plant 
investment, as reported in Sec. 36.611(f). Total Corporate Operations 
Expense, for purposes of calculating universal service support 
payments, beginning July 1, 2001 shall be the actual average monthly 
per-line Corporate Operations Expense.
* * * * *
    4. In Sec. 36.622, add paragraphs (d) and (e) to read as follows:


Sec. 36.622  National and study area average unseparated loop costs.

* * * * *
    (d) Beginning July 1, 2001, the National Average Unseparated Loop 
Cost per Working Loop shall be calculated pursuant to Sec. 36.621 and 
Sec. 36.622(a), without any of the caps formerly required in this part.
    (e) The National Exchange Carrier Association shall calculate 
support for loop-related costs on a per-loop basis for study areas of 
Path A LECs, as defined in Sec. 61.3 of this chapter, that elect Path A 
incentive regulation for such study areas initially by adjusting such 
support as calculated for each such study area for the year prior to 
such election to reflect the annual percentage change in the GDP Price 
Index (GDP-PI), the estimate of the Chain-Type Price Index for Gross 
Domestic Product published by the United States Department of Commerce, 
and dividing such adjusted support by the study area's number of loops 
for the prior year reported pursuant to Sec. 36.611. After election of 
incentive regulation for a study area, a Path A LEC may provide the 
Administrator with data updated to the date of such election, and the 
Administrator will adjust support for loop-related costs based on such 
data coincident with its time schedule. For each year subsequent to the 
year of election, the Administrator shall calculate per-line support 
for loop-related costs annually by adjusting the previous year's level 
of support to reflect the annual percentage change in the GDP-PI. The 
Administrator shall calculate the total annual support for loop-related 
costs for each such study area under incentive regulation by 
multiplying the adjusted per-loop support by the number of loops in 
that study area reported pursuant to Sec. 36.611.
    5. The definition of ``Study area'' in Part 36, Appendix-Glossary, 
is revised to read as follows:
* * * * *
    Study area. Study area boundaries shall be frozen as they are on 
November 15, 1984, except that Path A LECs and Path B LECs, as defined 
in Sec. 61.3, may alter study area boundaries when they acquire 
exchanges or lines from another telephone company, including a company 
subject to price cap regulation, so long as they notify the Common 
Carrier Bureau and the affected state regulatory commission or 
commissions of their intent to do so 30 days before the completion of 
such transaction. In such transaction with a Path A LEC or Path B LEC, 
the study area boundaries of a company subject to price cap regulation 
shall be adjusted accordingly.
* * * * *

PART 54--UNIVERSAL SERVICE

Subpart A--General Information

    6. In Sec. 54.5, add the following definitions in alphabetical 
order to read as follows:


Sec. 54.5  Terms and definitions.

* * * * *
    Path A incentive regulation. ``Path A incentive regulation'' is the 
form of regulation established in Sec. 61.62 of this chapter.
    Path A LEC. A ``Path A LEC'' is an ILEC as defined in Sec. 61.3 of 
this chapter.

Subpart D--Universal Service Support for High Cost Areas

    7. Add a new paragraph (g) to Sec. 54.301 to read as follows:


Sec. 54.301  Local switching support.

* * * * *
    (g) The Administrator shall calculate local switching support on a 
per-line basis for study areas of Path A LECs that elect Path A 
incentive regulation for such study areas initially by adjusting the 
local switching support for each such study area for the year prior to 
such election to reflect the annual percentage change in the Department 
of Commerce's Gross Domestic Product--Chained Price Index (GDP-PI) and 
by dividing such adjusted support by its number of working loops for 
the prior year. After election of incentive regulation for a study 
area, a Path A LEC may provide the Administrator with data updated to 
the date of such election, and the Administrator will adjust local 
switching support based on such data coincident with its time schedule. 
For each year subsequent to the year of election, the Administrator 
shall calculate per-line local switching support annually by adjusting 
the previous year's level of support to reflect the annual percentage 
change in the GDP-PI. The Administrator shall calculate the total 
annual local switching support for each such study area under incentive 
regulation by multiplying the adjusted per-line local switching support 
by the number of working loops in that study area reported pursuant to 
Sec. 36.611.
    8. In Sec. 54.303, paragraph (a) is revised and paragraph (b)(5) is 
added to read as follows:


Sec. 54.303  Long term support.

    (a) Beginning July 1, 2001, an eligible telecommunications carrier 
that

[[Page 7731]]

participates in the association pool shall receive Long Term Support.
* * * * *
    (b) * * *
    (5) The Administrator shall calculate Long Term Support on a per-
line basis for study areas of Path A LECs that elect incentive 
regulation for such study areas initially by adjusting the Long Term 
Support for each such study area for the year prior to such election to 
reflect the annual percentage change in the GDP-PI and dividing such 
adjusted amount by its number of working loops for the prior year. For 
each year subsequent to the year of election, the Administrator shall 
calculate per-line Long Term Support annually by adjusting the previous 
year's level of support to reflect the annual percentage change in the 
GDP-PI. The Administrator shall calculate the total annual Long Term 
Support for each such study area under incentive regulation by 
multiplying the adjusted per-line Long Term Support by the number of 
working loops in that study area reported pursuant to Sec. 36.611 of 
this chapter.
    9. In Sec. 54.305, add a sentence at the end of the section to read 
as follows:


Sec. 54.305  Sale or transfer of exchanges.

    * * * This section shall not apply to non-price cap LECs as defined 
in Sec. 61.3 of this chapter.
    10. In Sec. 54.307, paragraph (a)(1) is revised to read as follows:


Sec. 54.307  Support to a competitive eligible telecommunications 
carrier.

    (a) * * *
    (1) A competitive eligible telecommunications carrier shall receive 
support for each line it serves based on the support the ILEC receives 
for each line. A Path A LEC's per-line support for purposes of this 
section shall be the effective per-line support per zone calculated in 
Sec. 54.321(b).
* * * * *
    11. Add Secs. 54.319 and 54.321 to subpart F to read as follows:


Sec. 54.319  Rate averaging support.

    (a) Beginning July 1, 2001, Path A LECs with study areas that 
participate in the pool administered by the association as of July 1, 
2001 shall receive Rate Averaging Support (RAS).
    (b) The Association shall calculate RAS as described in this 
paragraph.
    (1) The common line component of RAS will be calculated as the 
difference between the pool's projected common line revenue requirement 
for Path A LECs and the sum of revenues of Path A LECs from end user 
common line charges and carrier common line (CCL) charges described in 
part 69 of this chapter of these rules and Long Term Support (LTS) of 
Path A LECs. The common line component of RAS will be distributed among 
study areas of Path A LECs subject to incentive regulation based on the 
difference between their individual common line revenue requirements 
and the sum of their individual revenues from end user common line 
charges and CCL charges that are consistent with the targeted CAR and 
their individual LTS.
    (2) The traffic sensitive switched component of RAS will be 
calculated as the difference between the pool's projected traffic 
sensitive switched revenue requirement for Path A LECs and the sum of 
Path A LECs' projected revenues from the traffic sensitive elements 
that constitute the CAR as defined in Sec. 69.130 and local switching 
support (LSS) of Path A LECs. The traffic sensitive component of the 
RAS will be distributed among Path A study areas based on the 
difference between their individual traffic sensitive switched revenue 
requirements and the sum of their individual revenues from the traffic 
sensitive elements that constitute the CAR as defined in Sec. 69.130 
and their individual LSS.
    (3) The special access component of RAS will be calculated based on 
identifying the difference between projected special access revenue 
requirements and special access billed revenues for all those study 
areas of Path A LECs participating in the pool and subject to incentive 
regulation with revenue retention ratios greater than one. This 
component of the RAS would be distributed only to Path A study areas 
with revenue retention ratios greater than one based on their base year 
individual revenue retention ratios.
    (c) The Association will calculate RAS annually, but the 
Association may adjust RAS on a monthly basis to reflect any delay in 
reporting of actual lines and billed revenues to bring Path A incentive 
settlements and revenues into balance beginning with periods after June 
30, 2006.
    (d) Path B LECs and non-pooling Path A LECs as defined in Sec. 61.3 
of this chapter are not eligible to receive RAS.


Sec. 54.321  Adjustments to per-line universal service support; 
disaggregation.

    (a) The Administrator shall increase per-line universal service 
support as calculated in this part and in part 36 to reflect any 
expansion in the supported services listed in Sec. 54.101 or if the 
Commission or Congress acts to stimulate the deployment of new 
services, adjust such support to reflect costs that Path A LECs and 
Path B LECs incur in complying with new state or federal regulations as 
the Commission shall permit by rule or order, which, subject to further 
order of the Commission, include but are not limited to regulations 
concerning number portability, the Communications Assistance in Law 
Enforcement Act, the completion of the amortization of depreciation 
reserve deficiencies, changes in the Uniform System of Accounts 
requirements made pursuant to Sec. 32.16 of this chapter, changes in 
the Separations Manual, state and federal tax law changes, and changes 
in rules governing affiliate transactions and cost allocation; and 
adjust such support to reflect changes in Lifeline support per 
Sec. 54.403.
    (b) Within each study area, a Path A LEC or Path B LEC may define 
up to three zones per wire center and allocate to each a different 
percentage of the total universal service support per line provided to 
that study area under this part and part 36 of this chapter. Universal 
service support for purposes of this calculation section shall include 
Rate Averaging Support, if any, as calculated in Sec. 54.319. Such 
allocation must be reasonably related to such LEC's costs of providing 
service in the various zones, and must remain in effect for at least 
four years. For each such zone, such LEC will calculate the effective 
per-line support amount within each zone by dividing the percentage of 
the study area's total universal service support allocated to that zone 
by the total number of lines within that zone. Such LEC must file the 
effective per-line support amount for each zone, together with a 
geographic description and map of each such zone, with the Commission, 
the Administrator, and the public utility commission of the state in 
which the study area is located.
    (c) If a Path A LEC that participates in the pool administered by 
the Association and is under incentive regulation acquires or merges 
with an exchange or study area, for the first eighteen months after the 
date of the transaction, the universal service support for the acquired 
lines will be set at the average support of all Path A study areas in 
the pool under incentive regulation. The acquiring LEC must perform a 
cost study of the acquired lines for a consecutive twelve-month period 
within the first eighteen months after acquisition, and the support for 
the acquired lines will be calculated according to the cost study. If 
the acquired lines are included in an existing study area of the 
acquiring LEC, the LECs would receive an automatic waiver from the 
price cap rules of parts 61 and 69 of this chapter so that

[[Page 7732]]

individual exchanges from price cap companies may convert to incentive 
regulation.

PART 61--TARIFFS

Subpart A--General

    12. In Sec. 61.3, add the following definitions in alphabetical 
order to read as follows:


Sec. 61.3  Definitions.

* * * * *
    (aaa) Non-price cap LEC. An incumbent Local Exchange Carrier for 
which price cap regulation is not mandatory and does not apply.
* * * * *
    (bbb) Path A. A method of regulation provided in Secs. 61.60 
through 61.62.
    (ccc) Path A incentive regulation. A method of regulation of Path A 
LECs provided in Sec. 61.62.
    (ddd) Path A incentive study area. A study area for which a Path A 
LEC has elected Path A incentive regulation.
    (eee) Path A LEC. A non-price cap LEC that chooses Path A pursuant 
to Sec. 61.60.
    (fff) Path A transition period. The period from July 1, 2001, 
through June 30, 2006.
    (ggg) Path B. A method of regulation provided in Sec. 61.60(d).
    (hhh) Path B LEC. A non-price cap LEC that chooses Path B pursuant 
to Sec. 61.60.
* * * * *
    (iii) Revenue per line (RPL). A settlement method used in Path A 
incentive regulation calculated pursuant to Sec. 61.62(a)(1)(B).
* * * * *

Subpart E--General Rules for Dominant Carriers


Sec. 61.39  [Amended]

    13. Amend Sec. 61.39(b)(4)(ii) by removing the phrase ``carrier 
common line pool'' and adding in its place ``pool administered by the 
National Exchange Carrier Association.''
    14. In Sec. 61.41(c), add paragraph (c)(4) to read as follows:


Sec. 61.41  Price cap requirements generally.

* * * * *
    (c) * * *
    (4) Notwithstanding the provisions of Sec. 61.42(c)(1) and (c)(2), 
when a Path A LEC or Path B LEC, as defined in Sec. 61.3, acquires 
lines, exchanges or study areas from a telephone company subject to 
price cap regulation, or acquires, is acquired by, merges with, or 
otherwise becomes affiliated with a telephone company subject to price 
cap regulation, the Path A LEC or Path B LEC may retain its status as a 
Path A LEC or Path B LEC or become subject to price cap regulation in 
accordance with Sec. 69.3(i) and the requirements referenced in that 
section.
    15. Add Secs. 61.60 and 61.62 to subpart E to read as follows:
* * * * *


Sec. 61.60  Regulation of non-price cap LECs.

    (a) As of July 1, 2001, non-price cap LECs will be subject to 
either Path A or Path B as described in this section and Sec. 61.62.
    (b) Non-price cap LECs must notify the Commission no later than 
March 1, 2001, whether they elect to be Path A LECs or Path B LECs as 
of July 1, 2001. Such LECs must make this election on a per-operating 
company basis.
    (c) Path A.--(1) During the Path A transition period.
    (i) Except as otherwise expressly provided in the Commission's 
rules, during the Path A transition period, Path A LECs will continue 
under the regulations in place for them prior to July 1, 2001. During 
the Path A transition period, a Path A LEC that is a non-price cap LEC 
may choose for any of its study areas to recover revenues within the 
Association's single pool described in Sec. 69.603 of this chapter on 
the same basis that the study area did prior to July 1, 2001. However, 
at any time during the Path A transition period, a Path A LEC may 
choose to move one or more of its study areas to Path A incentive 
regulation as defined in Sec. 61.62.
    (ii) If a Path A LEC's study area is settling with the pool at the 
start of the plan on a cost basis, it may continue during the Path A 
transition period to settle with the pool based on its reported costs.
    (iii) A Path A LEC currently operating on an average schedule basis 
may choose for one or more of its study areas to remain regulated on 
that basis during the transition period. That study area will continue 
to settle with the pool based on average schedule settlement formulas. 
Path A LECs under average schedule rules may elect Path A incentive 
regulation within the pool on a per-study-area basis at any time during 
the Path A transition period. Path A LECs with average schedule study 
areas could also elect to convert to cost at any time during the 
transition period on a per-study area basis, consistent with current 
rules, as long as they have not moved to incentive regulation.
    (iv) For all Path A LECs within the pool, there will be per-study 
area tariff election options during the Path A transition period. For 
switched access services, a Path A LEC may elect by study area to 
participate in the common line tariff only or the common line and 
traffic sensitive tariffs. Special access tariff participation is 
optional.
    (2) Post-transition period. At the conclusion of the Path A 
transition period, all study areas of all Path A LECs not already 
subject to Path A incentive regulation will become Path A incentive 
study areas.
    (d) Path B. (1) Except as otherwise expressly provided in the 
Commission's rules, Path B LECs will continue under the regulations in 
place for them prior to July 1, 2001. The authorized rate of return as 
of July 1, 2000 remains in effect for Path B LECs that continue under 
rate-of-return regulation.
    (2) During the Path A transition period, a Path B LEC may elect to 
become a Path A LEC. After such election and until the end of the Path 
A transition period, such LEC, like other Path A LECs, may choose on a 
per-study-area basis to be subject to Path A incentive regulation 
pursuant to Secs. 61.60 through 61.62. After expiration of the Path A 
transition period, all of the study areas of such Path A LEC will 
become subject to incentive regulation pursuant to such subsections.
    (3) After expiration of the Path A transition period, Path B LECs 
that have not become Path A LECs may only be subject to Path A 
incentive regulation upon application for and grant of a waiver of this 
subsection by the Common Carrier Bureau of the Commission.
    (4) Path B LECs may elect to file interstate access rates on a per-
study area basis outside the Association tariffing and pooling process 
consistent with the tariff election options in effect prior to July 1, 
2001.


Sec. 61.62  Path A Incentive Regulation.

    (a) During the Path A transition period.--(1) Study areas 
participating in the Association pool.
    (i) A study area of a Path A LEC participating in the Association 
pool and electing Path A incentive regulation during the Path A 
transition period will receive monthly settlement payments, including 
explicit universal service support, from the pool that equal the 
product of its revenue per line (RPL) for that year and its actual 
average monthly access line count. Pool settlements will be based on 
the pool's realized rate of return.
    (ii) The Association shall calculate the RPL as the revenue 
requirement or settlement amount received per average monthly line 
count in the base year prior to the study area's conversion to 
incentive regulation, adjusted initially for inflation to reflect the 
annual

[[Page 7733]]

percentage change in the GDP Price Index (GDP-PI). During the 
transition period, the pool settlements for study areas under incentive 
regulation will be based on the study area's RPL requirement, but 
adjusted for the pool's realized rate of return. The RPL will be 
adjusted annually for inflation to reflect the annual percentage change 
in the GDP-PI. A Path A LEC may also provide information to the 
Association to permit it to update the RPL on a prospective basis to 
reflect updated cost study or revenue requirement data up to the point 
when the study area converted to Path A incentive regulation. Example: 
A study area in the Association pool elects Path A incentive regulation 
as of July 1, 2001, the start of the path A transition period. The 
revenue figures that the Association will use for calculating the RPL 
for that study area will be based on a 1999 cost study or average 
schedule revenue requirement data, adjusted for inflation to reflect 
the GDP Price Index (GDP-PI). On July 1, 2002, the RPL may be adjusted 
for inflation and to include updated 2000 cost study or settlement 
data. On July 1, 2003, the RPL will be adjusted for inflation, and it 
may be updated to include a half-year of updated 2001 cost study or 
settlement data. In all subsequent years, the RPL will be adjusted 
annually to include inflation only. Alternatively, a Path A LEC may 
notify the Association to set an RPL for a study area based on the 
latest data available at the time that the study area converts to Path 
A incentive regulation, with no further cost study or settlement 
updates. The Association then would adjust the RPL only for inflation.
    (iii) Special access settlements for study areas subject to Path A 
incentive regulation that participate in the pool will be the product 
of a retention ratio, i.e., a factor by which a pool participant keeps 
a percentage of the revenue that it bills, and billed revenues. A 
retention ratio equal to the base year's retention ratio (adjusted for 
rate changes) will apply.
    (iv) Exchanges acquired by pool participants may enter the pool. If 
a Path A LEC in the pool and under incentive regulation acquires or 
merges with an exchange or study area, for the first eighteen months 
after the date of the transaction, the RPL for the acquired lines will 
be set at the average RPL of all Path A study areas in the pool under 
incentive regulation. The acquiring LEC must perform a cost study of 
the acquired lines for a consecutive twelve-month period within the 
first eighteen months after acquisition, and the RPL for the acquired 
lines will be calculated according to the cost study. If the acquired 
lines are included in an existing study area of the acquiring LEC, the 
RPL for that study area will be the weighted average of the RPLs of the 
acquiring study area and the acquired lines. If the acquired lines will 
be in a separate study area, the RPL for that study area is calculated 
separately from the RPLs of the acquiring LEC's existing study areas.
    (2) Study areas not participating in the Association pool.
    (i) Path A LECs may elect to file interstate access rates on a per-
study area basis outside the Association tariffing and pooling process. 
Once a study area exits the Association pool, it cannot return, absent 
a waiver of this and other applicable rules, except that if pool 
participants acquire lines or study areas outside the pool, the 
acquired lines may reenter the pool.
    (ii) Path A LECs that elect the non-pooling option for one or more 
of their tariff options will file and administer their own interstate 
access tariffs for those tariff options. Interstate access charge rate 
elements will be those in the applicable sections of part 69 of this 
chapter. End User Common Line Charges must be set, and apply, pursuant 
to Sec. 69.104 of this chapter. Non-pooling Path A LECs on Path A 
incentive regulation will establish all other switched access rate 
elements based on the applicable RPL consistent with paragraph 
(a)(1)(ii) of this section. Such rates may initially include universal 
service revenues including rate averaging support (RAS) as defined in 
Sec. 54.319 of this chapter lost by exiting the pool, but RAS will not 
apply in subsequent years for study areas outside the pool. Once the 
initial rates are established, they can be de-averaged so long as such 
de-averaging does not increase the RPL. Path A LECs will establish 
special access rates for study areas outside the pool on a market 
basis. Deaveraging, term and volume discounts and contract pricing are 
permitted for such special access services. Such LECs may introduce new 
interstate access services subject to the tariff filing requirements of 
subpart F of part 61. A low end adjustment is available to non-pooling 
study areas subject to Path A incentive regulation per 
Sec. 61.62(c)(3).
    (b) After the Path A transition period.--(1) Study areas 
participating in the Association pool. After the Path A transition 
period ends, all study areas of Path A LECs that participate in the 
pool will receive settlements calculated by the Association as the 
product of the study area's RPL and actual line counts. For special 
access, settlements will be based on the applicable retention ratio, 
multiplied by billed revenues. The Association will make any 
adjustments needed to bring the available pool revenues and settlement 
claims into balance for Path A LECs once actual data is available. This 
adjustment amount will be included in the RAS of Sec. 54.319 of this 
chapter on a monthly basis, to reflect any lag in the reporting of 
access lines and revenues. The low-end adjustment of Sec. 61.60(c) will 
continue to be available.
    (2) Study areas not participating in the Association pool. Path A 
LECs that elect the non-pooling option for one or more of their study 
areas will file and administer their own interstate access tariffs 
consistent with paragraph (a)(2) of this chapter. The low end 
adjustment of Sec. 61.62(c) will continue to be available.
    (c) Path A low end adjustment.--(1) Five or fewer study areas 
subject to incentive regulation in the pool. A Path A LEC with five or 
fewer study areas that are subject to Path A incentive regulation and 
are within the pool may apply for a low end adjustment at the end of a 
tariff period for any of its study areas in the pool if the interstate 
access rate of return for the prior year for a study area or study 
areas is below the authorized level of 11.25% by more than 50 basis 
points (i.e., the return is less than 10.75%). Such LEC must apply to 
the Association for the adjustment. Such application must include a 
cost study demonstrating that the study area or areas earned less than 
10.75% for a given year. Upon such a showing, the LEC will receive 
payments in twelve equal installments over the following year to bring 
the prior year's earnings for the study area or areas up to 10.75%. The 
Association will adjust the RAS, as defined in Sec. 54.319 of this 
chapter, accordingly. Except in special circumstances, these payments 
will terminate at the end of the twelve-month period following the year 
in which the study area underearned. Any claim for an adjustment in a 
subsequent year would have to be supported by a new cost study. The 
accounting for these payments will provide that such payments will not 
increase the LEC's earnings for the period in which they are received. 
Any claim for a low end adjustment for a year subsequent to that for 
which an adjustment already has been made will exclude currently paid 
low end adjustment revenues.
    (2) More than five study areas subject to incentive regulation in 
the pool. A Path A LEC with more than five study areas that are in the 
pool and subject to incentive regulation may apply for a low end 
adjustment for any of its study areas in the pool at the end of a 
tariff period

[[Page 7734]]

if the interstate access rate of return for the prior year for the 
study area or areas is below the authorized level of 11.25% by more 
than 100 basis points (i.e., the return is less than 10.25%). Such LEC 
must apply to the Association for the adjustment. Such application must 
include a cost study demonstrating that the study area or areas earned 
less than 10.25% for a given year. Upon such a showing, the LEC will 
receive payments in twelve equal installments over the following year 
to bring the prior year's earnings of the study area or areas up to 
10.25%. The Association will adjust the RAS, as defined in Sec. 54.319 
of this chapter, accordingly. Except in special circumstances, these 
payments would terminate at the end of the twelve-month period 
following the year in which the study area underearned. Any claim for 
an adjustment in a subsequent year would have to be supported by a new 
cost study. The accounting for these payments will provide that such 
payments will not increase the LEC's earnings for the period in which 
they are received. Any claim for a low end adjustment for a year 
subsequent to that for which an adjustment already has been made will 
exclude currently paid low end adjustment revenues.
    (3) Path A LECs with five or fewer study areas subject to incentive 
regulation outside the pool. A Path A LEC with five or fewer study 
areas that do not participate in the pool and are subject to incentive 
regulation may apply at the end of a tariff period to the Commission 
for a low end adjustment to its rates if the interstate access rate of 
return for the prior year for its interstate tariff filing entity is 
below the authorized level of 11.25% by more than 50 basis points 
(i.e., the return is less than 10.75%). Such application must include a 
cost study demonstrating that the study areas collectively earned less 
than 10.25% for a given year. Upon approval of such adjustment, the 
tariff filing entity will adjust its rates prospectively for twelve 
months to permit its interstate tariff filing entity to realize an 
interstate return of 10.25%. Except in special circumstances, this 
adjustment would terminate at the end of the twelve-month period 
following the year in which the tariff filing entity underearned. Any 
claim for an adjustment in a subsequent year would have to be supported 
by a new cost study. The accounting for this adjustment must provide 
that such adjustment will not increase the LEC's earnings for the 
period in which it is made. Any claim for a low end adjustment for a 
year subsequent to that for which an adjustment already has been made 
will exclude current low end adjustment revenues.
    (4) More than five study areas subject to incentive regulation 
outside the pool. A Path A LEC with more than five study areas that are 
outside the pool and subject to incentive regulation may apply to the 
Commission for a low end adjustment to its rates at the end of a tariff 
period if the interstate rate of return for the prior year for its 
interstate tariff filing entity is below the authorized level of 11.25% 
by more than 100 basis points (i.e., the return is less than 10.25%). 
Such application must include a cost study demonstrating that the study 
areas collectively earned less than 10.25% for a given year. Upon such 
a showing, the tariff filing entity will adjust its rates prospectively 
for twelve months to bring its prior year's earnings up to 10.25%. 
Except in special circumstances, this adjustment would terminate at the 
end of the twelve-month period following the year in which the tariff 
filing entity underearned. Any claim for an adjustment in a subsequent 
year would have to be supported by a new cost study. The accounting for 
this adjustment will provide that such adjustment will not increase the 
LEC's earnings for the period in which it is made. Any claim for a low 
end adjustment for a year subsequent to that for which an adjustment 
already has been made will exclude current low end adjustment revenues.
    (d) Adjustments for new regulatory requirements. When new state or 
federal requirements as in Sec. 54.321(a)(2) of this chapter apply to 
Path A LECs with study areas subject to Path A incentive regulation in 
the pool, the Association is authorized to prospectively adjust the RPL 
for these study areas within 90 days of the effective dates of such 
requirements in order to permit recovery of the costs of complying with 
them.

PART 64--[AMENDED]

Subpart R--Geographic Rate Averaging and Rate Integration

    16. In Sec. 64.1801, paragraph (c) is added to read as follows:


Sec. 64.1801  Geographic rate averaging and rate integration.

* * * * *
    (c) Providers of interstate interexchange telecommunications 
services must offer customers in rural and high-cost areas of the 
United States the same optional calling plans, including discount or 
volume-based plans, that are available to their customers in urban 
areas. Providers of interstate interexchange telecommunications 
services in rural and high-cost areas of the United States are 
prohibited from imposing minimum monthly charges on their residential 
customers. Providers of interstate interexchange telecommunications 
services in rural and high-cost areas of the United States must pass 
through to long distance customers the savings that IXCs realize from 
lower access rates charged by Path A LECs and Path B LECs.

PART 65--[AMENDED]

Subpart F--Maximum Allowable Rates of Return


Sec. 65.702  [Amended]

    17. In Sec. 65.702, revise paragraph (b) by removing the phrase 
``pool or pools'' and add in its place where ever it exists the word 
``pools.''

PART 69--[AMENDED]

Subpart A--General

    18. In Sec. 69.2, add the following definitions in alphabetical 
order to read as follows:


Sec. 69.2  Definitions.

* * * * *
    (WW) Non-price cap LEC. This term means the same as in Sec. 61.3 of 
this chapter.
* * * * *
    (XX) Path A incentive study area. This term means the same as in 
Sec. 61.3 of this chapter.
    (YY) Path A LEC. This term means the same as in Sec. 61.3 of this 
chapter.
    (ZZ) Path A transition period. This term means the same as in 
Sec. 61.3 of this chapter.
* * * * *
    19. In Sec. 69.3, paragraph (e)(9) is revised and paragraph (g) is 
amended by removing the phrase ``Association pool'' and by adding the 
phrase ``Association common line pool.''


Sec. 69.3  Filing of access service tariffs.

* * * * *
    (e) * * *
* * * * *
    (9) At the start of the Path A transition period defined in 
Sec. 61.3 of this chapter, non-price cap LECs that elect to file their 
own tariffs outside the Association pool for one or more of their study 
areas effective July 1, 2001, shall notify the Association no later 
than March 1, 2001 that such study areas will no longer participate in 
Association tariffs. After the start of the Path A transition period, 
non-price cap LECs that elect to file their own tariffs outside the 
Association

[[Page 7735]]

pool for one or more of their study areas effective July 1, 2002 or 
thereafter, shall notify the Association no later than March 1 prior to 
the annual tariff filing that such study areas will no longer 
participate in Association tariffs. During the Path A transition 
period, a non-price cap LEC within the Association pool may elect to 
participate in the pool's common line tariff only or the common line 
and traffic sensitive tariffs. After the Path A transition period ends, 
non-price cap LECs may elect for their study areas to participate in 
the Association pool's common line and traffic sensitive tariffs. The 
exercise of such options shall be effective July 1 of each year 
beginning in 2001, and such LECs must notify the Association of their 
decision regarding such options according to the schedule established 
earlier in this paragraph (e)(9). Path A LECs have the option to file 
special access tariffs outside the pool.
* * * * *

Subpart B--Computation of Charges

    20. In Sec. 69.101, revise the paragraph to read as follows:


Sec. 69.101  General.

    Except as provided in Sec. 69.1 and subpart C of this part, charges 
for each access element shall be computed and assessed as provided in 
this subpart. For general rules governing the calculation of charges 
for Path A LECs and Path B LECs, see Secs. 69.130 through 69.136.
    21. Section 69.104 is revised to read as follows:


Sec. 69.104  End user common line charge for non-price cap LECs and 
Path A incentive study areas.

    (a) This section is applicable only to non-price cap LECs. A charge 
that is expressed in dollars and cents per line per month shall be 
assessed upon end users that subscribe to local exchange telephone 
service or Centrex service to the extent they do not pay carrier common 
line charges. A charge that is expressed in dollars and cents per line 
per month shall be assessed upon providers of public telephones. Such 
charge shall be assessed for each line between the premises of an end 
user, or public telephone location, and a Class 5 office that is or may 
be used for local exchange service transmissions.
    (b) Beginning July 1, 2001, the maximum end user common line 
charges for all residential and single-line business lines shall be no 
higher than the maximum amounts for end user common line charges of 
price cap carriers stated in Sec. 69.152 (d)(1)(ii)(A) through 
(d)(1)(ii)(D) (the ``stated amounts''), so long as those amounts are 
reasonably comparable to the end user common line charges that price 
cap LECs actually charge pursuant to Sec. 69.152. Assuming such 
comparability, the end user common line charge for residential and 
single business lines will change to $5.00 per month on July 1, 2001, 
and annually change consistent with the stated amounts thereafter. 
There is no separate end user carrier common line charge for non-
primary residence lines. End user common line charges for multi-line 
business lines and for each subscriber line associated with a public 
telephone will change from $6.00 per line to $9.20 per line in equal 
increments over the period from July 1, 2001 to July 1, 2003. End user 
common line charges for Centrex lines may be assessed based on a per-
line charge that is 1/9 of the multi-line business end user common line 
charge. However, if a Centrex customer has fewer than nine lines, the 
monthly end user charge for those lines shall be the end user common 
line charge for one multi-line business.
    (c) The End User Common Line charge for each residential local 
exchange service subscriber line shall be the same as such charge for 
each single-line business local exchange service subscriber line.
    (d) A line shall be deemed to be a residential subscriber line if 
the subscriber pays a rate for such line that is described as a 
residential rate in the local exchange service tariff. Effective July 
1, 2001, for purposes of this section, ``residential subscriber line'' 
includes residential lines that a non-price cap LEC provides to a 
competitive LEC that resells the line and on which access charges may 
be assessed.
    (e) A line shall be deemed to be a single-line business subscriber 
line if the subscriber pays a rate that is not described as a 
residential rate in the local exchange service tariff and does not 
obtain more than one such line from a particular telephone company.
    (f) No charge shall be assessed for any WATS access line.
    (g) A non-price cap LEC shall assess no more than one End User 
Common Line charge as calculated under the applicable method under this 
section for Basic Rate Interface integrated services digital network 
(ISDN) service. No more than five End User Common Line charges shall be 
assessed as calculated under this section for Primary Rate Interface 
ISDN service.
    (h) In the event that a non-price cap LEC charges less than the 
maximum End User Common Line charge for any subscriber lines, it may 
not recover the difference between the amount collected and the maximum 
from carrier common line charges or RAS as defined in Sec. 54.319 of 
this chapter.
    (i) End User Common Line Charge De-Averaging. Beginning on July 1, 
2001, non-price cap LECs may geographically de-average End User Common 
Line charges into up to three geographic zones per wire center, so long 
as no multi-line business End User Common Line charge is set lower than 
the lowest residential End User Common Line charge. Such LECs must file 
their End User Common Line Charges for each zone, together with a 
geographic description and map of each such zone, with the Commission. 
If such LECs participate in the pool, the Association will impute 
revenues from End User Common Line Charges as if they had been set at 
the maximum amount.
    22. In Sec. 69.114 paragraphs (a) through (d) are redesignated as 
paragraphs (b) through (e) and a new paragraph (a) is added to read as 
follows:


Sec. 69.114  Special access services.

    (a) The Association will tariff special access services for Path A 
and Path B study areas participating in the pool. Path A LECs may also 
elect to tariff their special access services outside the Association 
pool. Pricing flexibility for individual rates, such as term and volume 
discounts, will be available. The Association will have the flexibility 
to develop other price structures that would align study area prices 
and costs more closely.
* * * * *
    23. Add Secs. 69.130, 69.132, 69.134 and 69.136 to subpart B to 
read as follows:


Sec. 69.130  Composite access rate.

    (a) Association access tariffs for non-price cap LECs or access 
tariffs filed directly with the Commission by such entities shall 
include all applicable per-minute switched access rate elements in this 
subpart B.
    (b) The Association shall calculate a Composite Access Rate 
(``CAR'') for the Association pool that is the weighted aggregate of 
the per-minute switched access rates of the Path A LECs' study areas 
that participate in the pool at any time. During the Path A transition 
period, as defined in Sec. 61.3 of this chapter, NECA will adjust the 
CAR annually according to the following schedule: As of July 1, 2001, 
the CAR will equal 2.2 cents per minute. As of July 1, 2002, the CAR 
will equal 1.8 cents per minute. As of July 1, 2003, and thereafter, 
the CAR will equal 1.6 cents per minute.

[[Page 7736]]

Sec. 69.132  New access services for non-price cap LECs and Path A 
incentive study areas.

    New access services of non-price cap LECs shall be introduced at 
prevailing market rates. Such services either shall be administered by 
the Association on behalf of LECs that are pool participants or 
introduced outside the pool by non-price cap LECs that do not 
participate in the pool.


Sec. 69.134  Rates for certain access elements of Path A LECs.

    Notwithstanding other sections of this subpart B:
    (a) For Path A LECs that participate in the Association pool, the 
Association may set charges for the access rate elements included in 
the CAR to recover the revenue requirement that remains after revenues 
are received from the end user common line charges, carrier common line 
charges, long term support (LTS), local switching support (LSS), and 
rate averaging support (RAS) of such LECs. The Association shall set 
charges for such rate elements in a flexible manner to develop price 
structures that would align such charges and costs more closely.
    (b) Path A LECs with study areas participating in the pool's 
switched traffic sensitive tariff but not in the special access tariff 
must provide the special access rates of those study areas to the 
Association by March 1 prior to the annual filing to support 
Association calculation of pool transport rates.


Sec. 69.136  Rates for certain access elements of Path B LECs.

    For Path B LECs, the Association will calculate a total revenue 
requirement for average schedule and cost companies. The end user 
common line charges of Path B LECs will be the same as those for Path A 
LECs. Association calculations of rates for the access elements of Path 
B LECs will follow Secs. 69.104 through 69.129 in effect as of July 1, 
2000, recognizing the explicit support flows from Long Term Support and 
local switching support.

Subpart G--Exchange Carrier Association

    24. Add a new paragraph (c) to Sec. 69.603 to read as follows:


Sec. 69.603  Association functions.

* * * * *
    (c) As of July 1, 2001, the Association shall convert its pooling 
system to a single pool for Path A LECs and Path B LECs, as defined in 
Sec. 61.3 of this chapter. The authorized rate of return for the pool 
shall be that in effect as of July 1, 2000. The Association is 
authorized to evaluate the operation of the pool during the Path A 
transition period, as defined in Sec. 61.3 of this chapter, and, as of 
the end of that period, is authorized to replace the single pool with 
two or more pools, including but not limited to separate pools for Path 
A LECs and Path B LECs, upon 60 days prior notice to the Commission.
* * * * *
    25. In Sec. 69.605, paragraphs (a) and (e) are revised to read as 
follows:


Sec. 69.605  Reporting and distribution of pool access revenues.

    (a) Access revenues and cost data shall be reported by participants 
in association tariffs to the association for computation of monthly 
pool revenues distributions in accordance with this subpart. 
Notwithstanding the foregoing, Path A LECs with Path A incentive study 
areas as defined in Sec. 61.3 are not required to report cost data to 
the Association for those study areas.
* * * * *
    (e) The Association may update average schedule formulas for 
changes in costs or demands over the five-year period using changes in 
relative cost data of similarly-sized study areas that settle on a cost 
basis. The Association also may make structural modifications to the 
design of the average schedule formulas, to reflect changes in the mix 
of service offerings, changes in network design, or changes in 
operating practices.

[FR Doc. 01-2126 Filed 1-24-01; 8:45 am]
BILLING CODE 6712-01-U