[Federal Register Volume 66, Number 231 (Friday, November 30, 2001)]
[Rules and Regulations]
[Pages 59719-59733]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-29739]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 54 and 69

[CC Docket Nos. 96-45, 98-77, 98-166 and 00-256; FCC 01-304]


Multi-Association Group (MAG) Plan for Regulation of Interstate 
Services of Non-Price Cap Incumbent Local Exchange Carriers and 
Interexchange Carriers; Federal-State Joint Board on Universal Service.

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission modifies its rules to reform 
the interstate access charge and universal service support system for 
incumbent local exchange carriers

[[Page 59720]]

subject to rate-of-return regulation (non-price cap or rate-of-return 
carriers). The Commission's actions are based on pending Commission 
proposals that build on interstate access charge reforms previously 
implemented for price cap carriers, the record developed in the above-
stated proceedings, and consideration of the Multi-Association Group 
(MAG) plan.

DATES: Effective December 31, 2001, except for the amendments to 
Secs. 54.307(b) and (c), and Secs. 54.315(a) and (f)(1) through (f)(4), 
54.902(a) through (c), 54.903(a)(1) through (a)(4), 54.904(a), (b), and 
(d) which contain information collection requirements that have not 
been approved by the Office of Management and Budget (OMB). The 
Commission will publish a document in the Federal Register announcing 
the effective date of those sections.

FOR FURTHER INFORMATION CONTACT: William Scher, Attorney, Common 
Carrier Bureau, Accounting Policy Division, (202) 418-7400; Douglas 
Slotten, Attorney, Common Carrier Bureau, Competitive Pricing Division, 
(202) 418-1520.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second 
Report and Order and Further Notice of Proposed Rulemaking in CC Docket 
Nos. 00-256, Fifteenth Report and Order in CC Docket No. 96-45, and 
Report and Order in CC Docket No. 98-77 and 98-166 released on November 
8, 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, SW., Washington, DC, 20554 or at: 
http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-01-304A1.doc.

I. Summary

    1. In the Order, we take the following actions to reform the 
interstate access charge and universal service support system for rate-
of-return carriers:
     We increase Subscriber Line Charge (SLC) caps for rate-of-
return carriers to the levels established for price cap carriers. The 
residential and single-line business SLC cap will increase to $5.00 on 
January 1, 2002, and may increase up to $6.00 on July 1, 2002, and 
$6.50 on July 1, 2003, subject to a cost review study for the SLC caps 
of price cap carriers. The multi-line business SLC cap will increase to 
$9.20 on January 1, 2002. The revised SLC caps, which conform to those 
already implemented for most subscribers nationwide, will foster 
efficient competition and greater choice for consumers, while ensuring 
that SLC rates in rural areas remain affordable and reasonably 
comparable to those in urban areas. Lifeline support will be increased 
in an amount equal to any SLC rate increases for low-income 
subscribers.
     We modify our rules to allow limited SLC deaveraging, 
which will enhance the competitiveness of rate-of-return carriers by 
giving them important pricing flexibility. The SLC deaveraging method 
we adopt combines the safeguards adopted for price cap carriers with 
the flexibility of the Rural Task Force universal service support 
disaggregation scheme, in order to address the significant diversity 
among rate-of-return carriers.
     We find that the Carrier Common Line (CCL) charge, an 
inefficient cost recovery mechanism and implicit subsidy, should be 
removed from the common line rate structure. This measure will 
rationalize the access rate structure and move per-minute switched 
access rates towards lower, cost-based levels. To replace the CCL 
charge, a new universal service support mechanism will be implemented 
beginning on July 1, 2002. The CCL charge will be eliminated as of July 
1, 2003, when SLC caps are scheduled to reach their maximum levels.
     We adopt measures to reform the local switching and 
transport rate structure. In particular, we shift the non-traffic 
sensitive costs of local switch line ports to the common line category, 
and reallocate the remaining costs contained in the Transport 
Interconnection Charge (TIC) to other access rate elements. These 
measures align the rate structure more closely with the manner in which 
costs are incurred and reduce per-minute switched access charges.
     We do not adopt proposals to prescribe a single, target 
rate for per-minute charges, either on an optional or a mandatory 
basis. The reforms that we adopt in this Order will reduce per-minute 
charges for all rate-of-return carriers, while giving them the 
flexibility to establish rates based on their own costs in the areas 
they serve.
     We address proposals to modify the rate structure for 
general support facilities (GSF) costs, marketing expenses, and special 
access services. We generally conclude that a different approach is 
warranted from that adopted for price cap carriers to avoid imposing 
undue administrative burdens on small local telephone companies serving 
rural and high-cost areas.
     We create a new universal service support mechanism, 
Interstate Common Line Support, to convert implicit support in the 
access rate structure to explicit support that is available to all 
eligible telecommunications carriers. Interstate Common Line Support 
will recover any shortfall between the allowed common line revenues of 
rate-of-return carriers and their SLC revenues, thereby replacing the 
CCL charge. The new support mechanism will ensure that changes in the 
rate structure do not affect the overall recovery of interstate access 
costs by rate-of-return carriers serving high-cost areas.
     We do not adopt MAG proposals to impose new requirements 
on interexchange carriers regarding optional calling plans, minimum 
monthly fees, and pass-through of savings from lower access rates. 
Among other things, we conclude that these requirements are 
unnecessary, inconsistent with our deregulatory approach to the 
interexchange services market, and would entail undue administrative 
costs and burdens.
     We streamline the rules for the introduction of new 
switched access services by extending to rate-of-return carriers the 
same flexibility that price cap carriers now have, with the exception 
of certain cost support and notice requirements.
     We terminate the proceeding in CC Docket No. 98-166 for 
prescription of the authorized rate of return, which was set at 11.25 
percent in 1990.

II. Procedural Issues

A. Ex Parte Presentations

    2. 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. Final Regulatory Flexibility Act

    3. As required by the Regulatory Flexibility Act (RFA), an Initial 
Regulatory Flexibility Analysis (IRFA) was incorporated into the MAG 
NPRM (66 FR 7725, January 25, 2001). An IRFA also was incorporated into 
the 1998 NPRM (63 FR 38774, July 20, 1998), in CC Docket No. 98-77. The 
Commission sought written public comment on the proposals in the 1998 
NPRM and on the MAG plan, including comment on the IRFAs. This present 
Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA, as 
amended. To the extent that any statement in this FRFA is perceived as 
creating ambiguity with respect to our rules or statements made in the 
Order, the rules and statements set forth in the Order shall be 
controlling.
1. Need for, and Objectives of, the Rules
    4. In the Order, the Commission modifies its interstate access 
charge and

[[Page 59721]]

universal service support system for incumbent local exchange carriers 
(LECs) subject to rate-of-return regulation. Consistent with the 
mandate of the 1996 Act, this Order is designed to foster competition 
and efficient pricing in the market for interstate access services, and 
to create universal service mechanisms that will be secure in an 
increasingly competitive environment. By simultaneously removing 
implicit support from the rate structure and replacing it with 
explicit, portable support, this Order will provide a more equal 
footing for competitors in local and long distance markets, while 
ensuring that consumers in all areas of the country, especially those 
living in high-cost, rural areas, have access to telecommunications 
services at affordable and reasonably comparable rates. This Order also 
is tailored to the needs of small and mid-sized local telephone 
companies serving rural and high-cost areas, and will help provide 
certainty and stability for such carriers, encourage investment in 
rural America, and provide important consumer benefits.
    5. Examination of the record in this proceeding demonstrates the 
need for interstate access charge and universal service reform for 
rate-of-return carriers. Rate-of-return carriers receive implicit 
support for universal service from various sources, including the 
interstate access rate structure. For example, recovery of non-traffic 
sensitive costs through per-minute rates creates an implicit support 
flow from high-to low-volume users of interstate long distance service. 
Implicit support is incompatible with a competitive market for local 
exchange and exchange access services. As the Commission noted in 1997, 
``where rates are significantly above cost, consumers may choose to 
bypass the incumbent LEC's switched access network, even if the LEC is 
the most efficient provider. Conversely, where rates are subsidized (as 
in the case of consumers in high-cost areas), rates will be set below 
cost and an otherwise efficient provider would have no incentive to 
enter the market.'' Rate-of-return carriers have expressed particular 
concern that high per-minute charges may place them at a disadvantage 
in competing for high-volume customers, jeopardizing an important 
source of revenue. In addition, higher rates and implicit subsidies may 
discourage efficient local and long distance competition in rural areas 
and limit consumer choice. Although there may not be significant 
competition in many high-cost, rural areas, rate-of-return carriers are 
not insulated from competitive pressures.
    6. By rationalizing the rate structure for recovery of interstate 
loop costs, this Order will foster competition for residential 
subscribers in rural areas by facilities-based carriers. By reducing 
per-minute switched access rates towards cost-based levels, it will 
enhance incentives for interexchange carriers to originate service in 
rural areas and facilitate long distance toll rate averaging. To a 
large extent, these modifications already have been implemented for the 
vast majority of subscribers nationwide.
    7. At the same time, this Order is tailored to the specific 
challenges faced by small carriers serving rural and high-cost areas. 
Although per-minute switched access charges will be reduced for all 
rate-of-return carriers, they will retain the flexibility to establish 
rates based on their own costs in the areas they serve, rather than 
being forced to conform to a prescribed target rate. Rate-of-return 
carriers will continue to be permitted to set rates based on the 
authorized rate of return of 11.25 percent. And a new, uncapped 
universal service support mechanism will provide certainty and 
stability by ensuring that the rate structure modifications adopted do 
not affect overall recovery of interstate access costs by rate-of-
return carriers. The Order adopts a cautious approach which 
rationalizes the access rate structure and converts identifiable 
implicit subsidies to explicit support, without endangering this 
important revenue stream for rate-of-return carriers.
2. Summary of Significant Issues Raised by the Public Comments in 
Response to the IRFA
    8. The Multi-Association Group (MAG), which is comprised of the 
National Rural Telecom Association, National Telephone Cooperative 
Association, Organization for the Promotion and Advancement of Small 
Telecommunications Companies, and the United States Telecom 
Association, argued that adoption of its comprehensive proposal for 
regulatory reform for rate-of-return carriers would benefit small 
business entities, including small incumbent LECs, interexchange 
carriers, and new entrants. According to the MAG, its plan would permit 
small rate-of-return carriers to control their administrative and 
regulatory burdens by permitting them to analyze and select the type of 
regulation that best suits their situation. The MAG also asserted that 
of a modified version of its plan would introduce more uncertainty for 
small carriers, but it did not provide support for this assertion. 
However, commenters have raised significant concerns about certain 
features of the MAG plan, and the Commission was persuaded that some of 
these concerns have merit, as discussed below.
    9. The Commission received a Congressional inquiry from Congressman 
John D. Dingell, asking that the Commission devote significant staff 
resources to the MAG proceeding, in particular, and to understanding 
the unique challenges of service in high-cost areas, in general. The 
Chairman responded to Congressman Dingell by letter, noting that the 
Commission has taken numerous measures to lessen the regulatory burdens 
of small local telephone companies, and is committed to continuing the 
examination of our rules and processes to ensure that small local 
telephone companies are provided with appropriate regulatory 
flexibility. The response also stated that the Commission has attempted 
to scrutinize carefully the potential impact of proposed regulations on 
small incumbent telephone companies.
    10. The Commission received a Congressional inquiry from Senators 
Thomas A. Daschle, Craig Thomas, Blanche Lambert Lincoln, Tim Johnson, 
Tom Harkin, Charles E. Grassley, Byron L. Dorgan, Kent Conrad, and Max 
S. Baucus, noting that significant legal and market changes had 
occurred since the MAG plan was developed, including two court 
decisions regarding universal service. The letter requested that the 
Commission delay its final decision in the MAG proceeding until all 
interested parties, including members of Congress, have had an 
opportunity to comment on any new proposal that the Commission might 
consider. The Chairman responded to this inquiry by letter, stating 
that it is the Commission's duty, pursuant to the Administrative 
Procedures Act, to consider the extensive input received from all 
interested parties regarding the MAG proposal. The Chairman's response 
noted that all interested parties have had a substantial opportunity to 
comment on the MAG plan and on other, related Commission proposals that 
build on prior reforms for large carriers. The response stated that it 
was important to proceed expeditiously with access charge and universal 
service reform for rate-of-return carriers, while continuing to explore 
other issues raised by the MAG proposal. The Chairman's response noted 
that a substantial number of interested parties had raised concerns 
about the wholesale adoption of the MAG proposal and had suggested 
possible modifications to it. The

[[Page 59722]]

response also agreed that it is important that the Commission take into 
account recent court decisions relevant to interpretation of the 
universal service provisions of the Act.
    11. The Commission also received Congressional inquiries from 
Senator Conrad Burns and Congressman Dennis Rehberg, Congressman 
Douglas K. Bereuter, Congressman John E. Sununu, and Congressman Lee 
Terry regarding the Commission's consideration of interstate access 
charge and universal service reform for rate-of-return carriers. They 
generally expressed concerns about the potential impact of reform on 
rural telecommunications customers and the companies that serve them, 
and urged the Commission to seek additional comment before adopting 
measures other than those proposed in the MAG plan.
    12. The Commission believes that it is important to proceed 
expeditiously with access charge and universal service reform for rate-
of-return carriers, while continuing to explore other issues raised by 
the MAG proposal. The Commission has adopted a cautious approach to 
reform. The new, uncapped support mechanism it creates will ensure that 
rate structure changes do not affect small carriers' overall recovery 
of the costs of interstate access service. In addition, the Order 
permits carriers to continue to set rates based on the authorized rate 
of return of 11.25 percent. These measures will promote regulatory 
stability and encourage investment in rural America. The Commission 
also is seeking additional comment on a number of issues, including the 
potential impact of modifications to Long Term Support on membership in 
the pools, the MAG's incentive regulation proposal for small carriers, 
and on other means of providing opportunities for rural telephone 
companies to increase their cost efficiency in ways that will benefit 
carriers and the communities they serve.
    13. The Commission also received general comments related to the 
needs of small local telephone companies. Examination of the record 
indicates that rate-of-return carriers are typically small, rural 
telephone companies concentrated in one area. They generally have 
higher operating and equipment costs than large, price cap carriers due 
to lower subscriber density, smaller exchanges, and limited economies 
of scale. They also rely more heavily on revenues from interstate 
access charges and universal service support. Numerous commenters 
argued that, although such carriers may incur costs in the same manner 
as large carriers, their size, diversity, and regulatory history 
warrant special consideration in adopting interstate access charge and 
universal service reforms. The Commission's actions in response to such 
concerns are discussed in detail below. As an example, the Commission 
does not require small carriers to conduct cost studies to determine 
the portion of local switching costs attributable to line ports. 
Rather, we adopt a proxy of 30 percent.
3.Description and Estimate of the Number of Small Entities to Which 
Rules Will Apply
    14. 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 rules adopted herein. 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.
    15. We have included small incumbent carriers in this RFA analysis. 
As noted above, 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.
    16. Local Exchange Carriers. Neither the Commission nor the SBA has 
developed a specific 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 Trends in Telephone Service 
data, 1,335 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 not subject to rules adopted 
herein. Consequently, we estimate that 1,335 or fewer providers of 
local exchange service are small entities that may be affected by the 
rules.
    17. Competitive Local Exchange Carriers. Neither the Commission nor 
the SBA has developed a specific 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. According to the Commission's Trends in Telephone 
Service data, 349 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 349 providers of local exchange 
service are small entities that may be affected by the rules.
    18. 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 
Trends in Telephone Service data, 204 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

[[Page 59723]]

204 or fewer small entity IXCs that may be affected by the rules.
    19. Competitive Access Providers. Neither the Commission nor the 
SBA has developed a definition of small entities specifically 
applicable to competitive access services providers (CAPs). The closest 
applicable definition under the SBA rules is for telephone 
communications companies other than radiotelephone (wireless) 
companies. According to the most recent Trends in Telephone Service 
data, 349 CAPs/competitive local exchange carriers and 60 other local 
exchange carriers reported that they were engaged in the provision of 
competitive local exchange 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 CAPs that would qualify 
as small business concerns under the SBA's definition. Consequently, we 
estimate that there are 349 or fewer small entity CAPs and 60 or fewer 
other local exchange carriers that may be affected.
    20. Wireless Telephony. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
wireless telephony including cellular, personal communications service 
(PCS) and Specialized Mobile Radio (SMR) telephony carriers. Therefore, 
the applicable definition of small entity is the definition under the 
SBA rules applicable to radiotelephone (wireless) companies. This 
provides that a small entity is a radiotelephone company employing no 
more than 1,500 persons. According to the most recent Trends in 
Telephone Report data, 806 carriers reported that they were engaged in 
the provision of either cellular service, PCS services, or SMR 
services, which are placed together in the data. Of these 806 carriers, 
323 reported that they have 1,500 or fewer employees. 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 
wireless telephone carriers that would qualify as small business 
concerns under the SBA's definition. Consequently, we estimate that 
there are 806 or fewer small wireless telephony service carriers that 
may be affected.
    21. The broadband PCS spectrum is divided into six frequency blocks 
designated A through F, and the Commission has held auctions for each 
block. The Commission defined ``small entity'' for Blocks C and F as an 
entity that has average gross revenues of less than $40 million in the 
three previous calendar years. For Block F, an additional 
classification for ``very small business'' was added and is defined as 
an entity that, together with their affiliates, has average gross 
revenues of not more than $15 million for the preceding three calendar 
years. These regulations defining ``small entity'' in the context of 
broadband PCS auctions have been approved by the SBA. No small 
businesses within the SBA-approved definition bid successfully for 
licenses in Blocks A and B. There were 90 winning bidders that 
qualified as small entities in the Block C auctions. A total of 93 
small and very small business bidders won approximately 40 percent of 
the 1,479 licenses for Blocks D, E, and F. Based on this information, 
we conclude that the number of small broadband PCS licensees will 
include the 90 winning C Block bidders and the 93 qualifying bidders in 
the D, E, and F blocks, for a total of 183 small entity PCS providers 
as defined by the SBA and the Commission's auction rules.
    22. The Commission awards bidding credits in auctions for 
geographic area 800 MHz and 900 MHz SMR licenses to firms that had 
revenues of no more than $15 million in each of the three previous 
calendar years. In the context of both the 800 MHz and 900 MHz SMR, a 
definition of ``small entity'' has been approved by the SBA. These fees 
apply to SMR providers in the 800 MHz and 900 MHz bands that either 
hold geographic area licenses or have obtained extended implementation 
authorizations. We do not know how many firms provide 800 MHz or 900 
MHz geographic area SMR service pursuant to extended implementation 
authorizations, nor how many of these providers have annual revenues of 
no more than $15 million.
    23. Rural Radiotelephone Service. The Commission has not adopted a 
definition of small entity specific to the Rural Radiotelephone 
Service. A significant subset of the Rural Radiotelephone Service is 
the Basic Exchange Telephone Radio Systems (BETRS). We will use the 
SBA's definition applicable to radiotelephone companies, i.e., an 
entity employing no more than 1,500 persons. There are approximately 
1,000 licensees in the Rural Radiotelephone Service, and we estimate 
that almost all of them qualify as small entities under the SBA's 
definition.
    24. Fixed Microwave Services. Microwave services include common 
carrier, private-operational fixed, and broadcast auxiliary radio 
services. At present, there are approximately 22,015 common carrier 
fixed licensees and 61,670 private operational-fixed licensees and 
broadcast auxiliary radio licensees in the microwave services. The 
Commission has not defined a small business specifically with respect 
to microwave services. For purposes of this FRFA, we utilize the SBA's 
definition applicable to radiotelephone companies--i.e., an entity with 
no more than 1,500 persons. We estimate, for this purpose, that all of 
the Fixed Microwave licensees (excluding broadcast auxiliary licensees) 
would qualify as small entities under the SBA definition for 
radiotelephone companies.
    25. 39 GHz Licensees. The Commission defined ``small entity'' for 
39 GHz licenses as an entity that has average gross revenues of less 
than $40 million in the three previous calendar years. An additional 
classification for ``very small business'' was added and is defined as 
an entity that, together with their affiliates, has average gross 
revenues of not more than $15 million for the preceding three calendar 
years. These regulations defining ``small entity'' in the context of 39 
GHz auctions have been approved by the SBA. The auction of the 2,173 39 
GHz licenses began on April 12, 2000 and closed on May 8, 2000. The 18 
bidders who claimed small business status won 849 licenses.
4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    26. Pursuant to the Order, all rate-of-return carriers will be 
required to modify their access tariffs to comply with the new SLC 
caps, to become effective on January 1, 2002, and on July 1, 2002, and 
July 1, 2003, subject to a cost review proceeding for the SLC caps of 
price cap carriers. This function would be performed by the National 
Exchange Carrier Association (NECA) for those carriers that participate 
in the NECA common line pool, as most small carriers do. Those rate-of-
return carriers filing their own tariffs also would have to make a 
tariff filing to reflect the access charge modifications.
    27. The CCL charge will be removed from the common line rate 
structure of rate-of-return carriers as of July 1, 2003. From July 1, 
2002 to June 30, 2003, rate-of-return carriers may impose a 
transitional CCL charge on all switched access minutes to recover, for 
each residential and single-line business line in their study area, the 
difference between the residential SLC and the lesser of $6.50 or their 
average cost per line.

[[Page 59724]]

    28. All rate-of-return carriers will be required to modify their 
access tariffs by reallocating line port costs from local switching to 
the common line category. To ease the burden of implementing this rate 
structure modification on small rate-of-return carriers, we will permit 
them to shift 30 percent of their local switching costs to the common 
line category in lieu of conducting a cost study. Carriers electing 
this cost study approach must base their costs studies on 
geographically-averaged costs, and submit the cost study in support of 
the tariff filing relying on the cost study. Once a rate-of-return 
carrier has performed a cost study to support its tariff, it may rely 
on that cost study for subsequent tariff filings.
    29. We require rate-of-return carriers to recover through a 
separate end-user charge the costs of ISDN line ports and line ports 
associated with other services that exceed the costs of a line port 
used for basic analog service.
    30. We require rate-of-return carriers to reallocate the costs 
recovered from the transport interconnection charge (TIC) to all other 
access categories. NECA will be required to establish for carriers that 
participated in the NECA pool during the tariff year ending June 30, 
2001, an individual carrier dollar limit based on its traffic volumes 
and the TIC rate for the twelve-month period ending June 30, 2001. Each 
carrier that was not in the pool during the tariff year ending on June 
30, 2001, must determine its TIC limit and report it to NECA for 
purposes of administering future pool membership changes.
    31. We permit, but do not require, rate-of-return carriers to 
establish the following local switching and transport rate elements: A 
flat charge for dedicated trunk port costs; a flat charge for the costs 
of DS1/voice grade multiplexers associated with terminating dedicated 
trunks at analog switches; a per-minute charge for shared trunk ports 
and any associated DS1/voice grade multiplexer costs; a flat charge for 
the costs of trunk ports used to terminate dedicated trunks on the 
serving wire center side of the tandem switch; individual charges for 
multiplexer costs associated with tandem switches; and a separate per-
message call setup charge.
    32. We require rate-of-return carriers that use general purpose 
computers to provide non-regulated billing and collection services to 
allocate a portion of their GSF costs to the billing and collection 
category. To accommodate the fact that rate-of-return carriers are not 
required to maintain separate land, buildings, office furniture, and 
general purpose computer investment accounts, we only require these 
carriers to apply the modified Big Three Expense Factor used by price 
cap carriers to the general purpose computer investment detail to 
determine the amount to be allocated to billing and collection. 
Carriers also may use the general purpose computer investment amount 
they develop for a period of three years. Carriers whose billing and 
collection activities are performed exclusively by service bureaus will 
not be subject to these requirements. Many small carriers use service 
bureaus exclusively to perform billing and collection services and, 
therefore, will not be affected by these requirements.
    33. Rate-of-return carriers electing to disaggregate their 
Interstate Common Line Support must submit a detailed description of 
their disaggregation plan, including information that will enable 
competitors to verify and reproduce the algorithm used to determine 
zone support levels, and a geographic description and map of each such 
zone with the Commission, the relevant state regulatory agency, and 
USAC. This is not a new compliance requirement because carriers would 
have to file the above-stated materials in order to disaggregate other 
forms of high-cost support pursuant to the Rural Task Force Order (66 
FR 30080, June 5, 2001).
    34. Rate-of-return carriers seeking Interstate Common Line Support 
will be required to file on an annual basis their projected common line 
revenue requirement for each study area in which they operate. Average 
schedule companies will not be required to submit common line revenue 
requirements, but instead will be required to submit information that 
USAC determines is necessary in order for it to calculate common line 
revenue requirements for average schedule companies. To enable USAC to 
begin distributing Interstate Common Line Support to carriers on July 
1, 2002, carriers will be required to submit projected common line 
revenue requirements for July 1, 2002, to June 30, 2003, by March 31, 
2002. Carriers will be permitted to submit corrections to their 
projected common line revenue requirements until April 10, 2002. After 
April 10, 2002, any corrections to projected common line revenue 
requirements shall be made in the form of true-ups using actual cost 
data. Rate-of-return carriers will be required to submit projected 
common line revenue requirements for subsequent years on the same 
schedule.
    35. To ensure that Interstate Common Line Support amounts reflect a 
carrier's actual common line costs, rate-of-return carriers will be 
required to update projected common line cost data with actual costs on 
an annual basis. Average schedule companies will not be required to 
calculate or submit their actual costs. Rate-of-return carriers also 
will be permitted to update their actual cost data on a quarterly 
basis.
    36. Consistent with rules adopted in the Rural Task Force Order, 
rate-of-return carriers will file their line counts with USAC, by 
disaggregation zone and customer class, in accordance with the schedule 
in Secs. 36.611 and 36.612 of our rules. Line count data for rural 
rate-of-return carrier study areas in which a competitive eligible 
telecommunications carrier has not begun providing service will be 
filed on an annual basis. Line count data will be filed on a regular 
quarterly basis upon competitive entry in rural rate-of-return carrier 
study areas. Non-rural rate-of-return carriers currently are required 
to file line count data on a quarterly basis regardless of whether a 
competitor is present and that requirement will not change. Competitive 
eligible telecommunications carriers will file their line counts with 
USAC, by disaggregation zone and customer class on a quarterly basis, 
in accordance with the schedule in Sec. 54.307 of our rules.
    37. Carriers seeking Interstate Common Line Support must file a 
certification with the Commission and USAC. These requirements will 
create additional reporting requirements, but such reporting is 
necessary to ensure compliance with section 254(e) of the Act.
    38. We require all incumbent LECs, including rate-of-return 
carriers, to recover universal service contributions only through end 
user charges. Rate-of-return carriers that choose to impose end-user 
charges for the recovery of universal service contributions must make 
corresponding reductions in their access charges to avoid double 
recovery.
5. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    39. The Commission has taken numerous steps to minimize significant 
economic impact on small entities of the interstate access charge and 
universal service reforms adopted in this Order. Overall, the 
Commission's approach is tailored to the specific challenges faced by 
small local telephone companies serving rural and high-cost areas. 
Although per-minute switched access charges will be reduced for all 
rate-of-return carriers, these carriers will retain the flexibility to 
establish rates based on their own costs in the areas they serve, 
rather than being forced to conform to a prescribed target rate. Rate-
of-return

[[Page 59725]]

carriers will continue to be permitted to set rates based on the 
authorized rate of return of 11.25 percent. And the new, uncapped 
support mechanism created by this Order will provide certainty and 
stability by ensuring that the rate structure modifications we adopt do 
not affect overall recovery of interstate access costs. The Order 
adopts a cautious approach which rationalizes the access rate structure 
and converts identifiable implicit subsidies to explicit support, 
without endangering this important revenue stream for rate-of-return 
carriers.
    40. The Commission also has taken steps to minimize the 
administrative burdens imposed on small carriers as a result of access 
charge and universal service reform. The Order does not create a 
separate non-primary residential line SLC cap. Instead, it applies the 
same SLC cap to primary and non-primary residential lines, concluding 
that this approach will simplify the common line rate structure and 
avoid the administrative costs associated with administering the 
distinction. The Order also provides that a separate cost showing to 
justify residential and single-line business SLC cap increases above 
$5.00 will not be required for rate-of-return carriers, concluding that 
such a requirement is unnecessary and would create undue administrative 
burdens. The Order provides that rate-of-return carriers may deaverage 
SLC rates in accordance with universal service support disaggregation 
plans established pursuant to the Rural Task Force Order, a measure 
which will minimize administrative burdens on small carriers, as well 
as confusion among competitive carriers, by ensuring that carriers do 
not have multiple overlapping zones within their services for universal 
service support and SLC rates, as well as providing the flexibility 
necessary to accommodate the diversity among small local telephone 
companies.
    41. To ease the burden on small local telephone companies of 
reallocating line port costs from local switching to the common line 
category, carriers will be permitted to shift 30 percent of their local 
switching costs to the common line category in lieu of conducting a 
cost study. A carrier conducting a cost study may use the results in 
future tariff filings.
    42. The Order permits, but does not require, rate-of-return 
carriers to establish a number of local switching and transport rate 
elements, concluding that these rate structure modifications should be 
optional to avoid undue administrative burdens on small rate-of-return 
carriers, and to allow carriers to make individual determinations as to 
whether the costs of establishing new rate elements are warranted by 
the potential efficiency gains.
    43. To accommodate the fact that rate-of-return carriers are not 
required to maintain the account detail that provides separate land, 
buildings, office furniture, and general-purpose computer investment 
detail in order to implement the allocator adopted for price cap 
carriers for GSF costs, we only require them to apply the modified Big 
Three Expense Factor used by price cap carriers to general purpose 
computer investment to determine the amount to be allocated to the 
billing and collection category, thereby removing costs of non-
regulated activities from the regulated rate base. We also permit rate-
of-return carriers to use the general purpose computer investment 
amount they develop for a period of three years. This procedure 
recognizes the limitations of the accounting system and the 
administrative burdens of developing further disaggregated investment 
detail. Rate-of-return carriers whose billing and collection activities 
are performed exclusively by service bureaus will continue to allocate 
GSF pursuant to Sec. 69.307(c) of our rules, which specifically 
addresses the situation in which rate-of-return carriers obtain all 
billing and collection services they provide to interexchange carriers 
from unregulated affiliates or from unaffiliated third parties.
    44. The Order does not require rate-of-return carriers to recover 
marketing expenses through the common line recovery mechanisms, 
reasoning that determination of the costs to be reallocated would be 
more difficult for small carriers than for large, price cap carriers 
because small carriers are not required to keep more detailed Class A 
accounts, and that the costs in question represent only a small portion 
of rate-of-return carriers' interstate access revenues.
    45. The Order generally adopts the same plan for disaggregation and 
targeting of Interstate Common Line Support as recently adopted for 
intrastate high-cost support for rural carriers, which will result in 
minimal additional administrative burdens for carriers that elect to 
disaggregate their support. Rate-of-return carriers choosing to 
disaggregate their Interstate Common Line Support must submit a 
detailed description of the disaggregation plan, including information 
that will enable competitors to verify and reproduce the algorithm used 
to determine zone support levels, and a geographic description and map 
of each such zone with the Commission, the relevant state regulatory 
agency, and USAC, as discussed further below. These geographic 
descriptions and zone maps are identical to the ones that carriers must 
submit pursuant to the requirements of the Rural Task Force Order, and 
thus create no additional reporting requirements.
    46. The Order limits as much as possible the filing requirements 
associated with the new Interstate Common Line Support mechanism, 
generally requiring carriers to file the minimum amount of information 
necessary for the proper functioning of the mechanism. Consistent with 
their average schedule status, average schedule companies will not be 
required to submit common line revenues requirements, but instead will 
be required to submit information that USAC determines is necessary in 
order for it to calculate common line revenue requirements for average 
schedule companies. Additionally, rural rate-of-return carriers and 
their competitors are required to file line count data on a quarterly 
basis only upon competitive entry by an eligible telecommunications 
carrier. The data that will be filed is similar to data that small 
carriers already prepare and submit to NECA to enable them to develop 
rates and operate the common line pool, but differs in important 
respects. The Order permits small carriers to file quarterly ``true 
ups'' to enable carriers that experience unforeseen costs to file 
actual cost data and receive increased per-line amounts of Interstate 
Common Line Support. The true-up option allows carriers to avoid over-
or under-payment and to obtain the correct level of support for their 
particular revenue requirements.
    47. The Order streamlines the part 69 waiver requirement for 
introduction of new services by rate-of-return carriers, concluding 
that streamlined filing requirements will eliminate unnecessary 
administrative burdens on small carriers.
    48. The Commission considered a number of significant alternatives 
in this proceeding. The Commission sought comment on the MAG plan, a 
comprehensive proposal addressing numerous issues facing rate-of-return 
carriers, including access charge reform and universal service support, 
on January 5, 2001, stating its intention to fully and expeditiously 
consider the MAG plan. Based on the significant concerns about features 
of the MAG plan raised by commenters, the Commission has determined 
that adoption of the plan in its entirety would not benefit consumers 
or service the public interest. For example, the Commission determined 
that the MAG's

[[Page 59726]]

proposals that certain access charge reforms be optional, and that only 
those carriers electing the MAG incentive regulation proposal be 
eligible for new, explicit universal service support to replace 
implicit support in access charges, are inconsistent with the mandate 
of the 1996 Act and could preclude many small carriers from fully 
participating in interstate access charge reform, leading to increased 
access rate disparities among local telephone companies that is not in 
the public interest.
    49. The Commission also has considered proposals for adoption of a 
target rate for the per-minute access charges of rate-of-return 
carriers, either on an optional or a mandatory basis. The Commission 
rejects these proposals and concludes that none of these proposals is 
supported by cost data and that the non-prescriptive, market-based 
approach to access charge reform adopted in the Order is more 
consistent with the competitive and universal service goals of the 1996 
Act. The comments filed in this proceeding indicate a wide variation in 
cost patterns, density, and other operational characteristics among 
rate-of-return carriers. The access charge reform approach adopted in 
this Order accommodates this diversity by reallocating costs and 
removing implicit support to create more efficient rate structures, 
while allowing carriers to establish rates based on their own costs.
    50. The Commission also considered and rejected proposals by some 
commenters for the establishment of a presubscribed interexchange 
carrier charge, or PICC, a flat, monthly charge assessed on the 
interexchange carrier with which an end user is presubscribed, for 
rate-of-return carriers in lieu of raising SLCs for rate-of-return 
carriers and/or removing the CCL charge from the common line rate 
structure. The Commission concludes that a PICC should not be 
introduced into the common line rate structure of rate-of-return 
carriers. Establishment of a PICC would force interexchange carriers to 
recover the cost of the PICC from all of their customers, and 
contribute to rate disparities between the two groups of carriers, 
thereby increasing the burden on interexchange carriers of compliance 
with the geographic rate averaging and rate integration requirements of 
section 254(g).
    51. The Commission also considered and rejected the imposition of a 
cap on the explicit interstate support mechanism established in this 
Order, concluding that a cap is not appropriate under the 
circumstances. Many rate-of-return carriers are small, rural carriers 
that serve high-cost regions. Small carriers generally are more 
dependent on their interstate access charge revenue streams and 
universal service support than large carriers and, therefore, more 
sensitive to disruption of those streams. The absence of a cap will 
ensure that the rate structure modifications adopted in this Order do 
not affect the overall recovery of interstate loop costs by small 
carriers.
6. Report to Congress
    52. The Commission will send a copy of this Order, including this 
FRFA, in a report to be sent to Congress pursuant to the Congressional 
Review Act. In addition, the Commission will send a copy of this Order, 
including this FRFA, to the Chief Counsel for Advocacy of the Small 
Business Administration. A copy of this Order and FRFA (or summaries 
thereof) will also be published in the Federal Register.

C. Paperwork Reduction Act Analysis

    53. The action contained herein has been analyzed with respect to 
the Paperwork Reduction Act of 1995 and found to impose new or modified 
reporting and recordkeeping requirements or burdens on the public. 
Implementation of these new or modified reporting and recordkeeping 
requirements will be subject to approval by the Office of Management 
and Budget (OMB) as prescribed by the Act, and will go into effect upon 
announcement in the Federal Register of OMB approval.

III. Ordering Clauses

    54. Accordingly, it is ordered that, pursuant to the authority 
contained in sections 1-4, 201-205, 214, 218-220, 254, 303(r), 403, 
405, and 410 of the Communications Act of 1934, as amended, this Second 
Report and Order in CC Docket No. 00-256, Fifteenth Report and Order in 
CC Docket No. 96-45, and Report and Order in CC Docket Nos. 98-77 and 
98-166 is adopted.
    55. Part 54 and 69 of the Commission's rules, are amended as set 
forth, effective December 31, 2001, except for Secs. 54.307(b), 
54.307(c), 54.315(a), 54.315(f)(1) through 54.315(f)(4), 54.902(a), 
54.902(b), 54.902(c), 54.903(a)(1) through 54.903(a)(4), 54.904(a), 
54.904(b), and 54.904(d), which contain information collection 
requirements that have not been approved by the Office of Management 
Budget (OMB). The Commission will publish a document in the Federal 
Register announcing the effective date of those sections.
    56. It is further ordered that Sec. 65.101 of the Commission's 
rules is stayed.
    57. It is further ordered that the Commission's Consumer 
Information Bureau, Reference Information Center, shall send a copy of 
this Order, including the Final Regulatory Flexibility Analysis, to the 
Chief Counsel for Advocacy of the Small Business Administration.

List of Subjects

47 CFR Part 54

    Reporting and recordkeeping requirements, Telecommunications, 
Telephone.

47 CFR Part 69

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone.

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

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR parts 54 and 69 as follows:

PART 54--UNIVERSAL SERVICE

    1. The authority citation continues to read as follows:

    Authority: 47 U.S.C. 1, 4(i), 201, 205, 214, and 254 unless 
otherwise noted.


    2. Amend Sec. 54.5 by adding the following definition in 
alphabetical order:


Sec. 54.5  Terms and definitions.

* * * * *
    Rate-of-Return Carrier. ``Rate-of-return carrier'' shall refer to 
any incumbent local exchange carrier not subject to price cap 
regulation as that term is defined in Sec. 61.3(x) of this chapter.
* * * * *

    3. Amend Sec. 54.307 by adding a third sentence to paragraph 
(a)(1), by revising the second and third sentences of paragraph (b), 
and by revising paragraph (c) to read as follows:


Sec. 54.307  Support to a competitive eligible telecommunications 
carrier.

    (a) * * *
    (1) * * * A competitive eligible telecommunications carrier serving 
loops in the service area of a rate-of-return carrier shall be eligible 
to receive Interstate Common Line Support for each line it serves in 
the service area in accordance with the formula in Sec. 54.901.
* * * * *
    (b) * * * For a competitive eligible telecommunications carrier 
serving

[[Page 59727]]

loops in the service area of a rural incumbent local exchange carrier, 
as that term is defined in Sec. 54.5, the carrier must report, by 
customer class, the number of working loops it serves in the service 
area, disaggregated by cost zone if disaggregation zones have been 
established within the service area pursuant to Sec. 54.315. For a 
competitive eligible telecommunications carrier serving loops in the 
service area of a non-rural telephone company, the carrier must report 
the number of working loops it serves in the service area, by customer 
class if the non-rural telephone company receives Interstate Common 
Line Support pursuant to Sec. 54.901 and by disaggregation zone if 
disaggregation zones have been established within the service area 
pursuant to Sec. 54.315 of this subpart, and the number of working 
loops it serves in each wire center in the service area. * * *
    (c) A competitive eligible telecommunications carrier must submit 
the data required pursuant to paragraph (b) of this section according 
to the schedule.
    (1) No later than July 31st of each year, submit data as of 
December 31st of the previous calendar year;
    (2) No later than September 30th of each year, submit data as of 
March 31st of the existing calendar year;
    (3) No later than December 30th of each year, submit data as of 
June 30th of the existing calendar year;
    (4) No later than March 30th of each year, submit data as of 
September 30th of the previous calendar year.

    4. Amend Sec. 54.315 by revising the section heading, paragraphs 
(a), (b)(4), (c)(5), (e)(1), (e)(4) through (e)(7), and (f)(1) through 
(f)(4) to read as follows:


Sec. 54.315  Disaggregation and targeting of high-cost support.

    (a) On or before May 15, 2002, all rural incumbent local exchange 
carriers and rate-of-return carriers for which high-cost universal 
service support pursuant to Secs. 54.301, 54.303, and/or 54.305 of this 
subpart, subpart K of this part, and/or part 36 subpart F is available 
must select a disaggregation path as described in paragraphs (b), (c), 
or (d) of this section. In study areas in which a competitive carrier 
was designated as a competitive eligible telecommunications carrier 
prior to June 19, 2001, the rural incumbent local exchange carrier or 
rate-of-return carrier may only disaggregate support pursuant to 
paragraphs (b), (c), or (d)(1)(iii) of this section. A rural incumbent 
local exchange carrier or rate-of-return carrier failing to select a 
disaggregation path as described in paragraphs (b), (c), or (d) of this 
section by May 15, 2002, will not be permitted to disaggregate and 
target federal high-cost support unless ordered to do so by a state 
commission as that term is defined in Sec. 54.5.
    (b) * * *
    (4) A state commission may require, on its own motion, upon 
petition by an interested party, or upon petition by the rural 
incumbent local exchange carrier or rate-of-return carrier, the 
disaggregation and targeting of support under paragraphs (c) or (d) of 
this section.
* * * * *
    (c) * * *
    (5) A state commission may require, on its own motion, upon 
petition by an interested party, or upon petition by the rural 
incumbent local exchange carrier or rate-of-return carrier, the 
disaggregation and targeting of support in a different manner.
* * * * *
    (e) * * *
    (1) Support available to the carrier's study area under its 
disaggregation plan shall equal the total support available to the 
study area without disaggregation.
* * * * *
    (4) Per-line support amounts for each disaggregation zone shall be 
recalculated whenever the carrier's total annual support amount changes 
using the changed support amount and lines at that point in time.
    (5) Per-line support for each category of support in each 
disaggregation zone shall be determined such that the ratio of support 
between disaggregation zones is maintained and that the product of all 
of the carrier's lines for each disaggregation zone multiplied by the 
per-line support for those zones when added together equals the sum of 
the carrier's total support.
    (6) Until a competitive eligible telecommunications carrier is 
certified in a study area, monthly payments to the incumbent carrier 
will be made based on total annual amounts for its study area divided 
by 12.
    (7) When a competitive eligible telecommunications carrier is 
certified in a study area, per-line amounts used to determine the 
competitive eligible telecommunications carrier's disaggregated support 
shall be based on the incumbent carrier's then-current total support 
levels, lines, disaggregated support relationships, and, in the case of 
support calculated under subpart K of this part, customer classes.
    (f) * * *
    (1) A carrier certifying under paragraph (b) of this section that 
it will not disaggregate and target high-cost universal service support 
shall submit to the Administrator a copy of the certification submitted 
to the state commission, or the Federal Communications Commission, when 
not subject to state jurisdiction.
    (2) A carrier electing to disaggregate and target support under 
paragraph (c) of this section shall submit to the Administrator a copy 
of the order approving the disaggregation and targeting plan submitted 
by the carrier to the state commission, or the Federal Communications 
Commission, when not subject to state jurisdiction, and a copy of the 
disaggregation and targeting plan approved by the state commission or 
the Federal Communications Commission.
    (3) A carrier electing to disaggregate and target support under 
paragraph (d) of this section shall submit to the Administrator a copy 
of the self-certification plan including the information submitted to 
the state commission pursuant to paragraphs (d)(2)(i) and (d)(2)(iv) of 
this section or the Federal Communications Commission.
    (4) A carrier electing to disaggregate and target support under 
paragraph (c) or (d) of this section must submit to the Administrator 
maps which precisely identify the boundaries of the designated 
disaggregation zones of support within the carrier's study area.

    5. Amend Sec. 54.701 by revising paragraph (g)(1)(iii) to read as 
follows:


Sec. 54.701  Administrator of universal service support mechanisms.

* * * * *
    (g)(1) * * *
    (iii) The High Cost and Low Income Division, which shall perform 
duties and functions in connection with the high cost and low income 
support mechanism, the interstate access universal service support 
mechanism for price cap carriers described in subpart J of this part, 
and the interstate common line support mechanism for rate-of-return 
carriers described in subpart K of this part, under the direction of 
the High Cost and Low Income Committee of the Board, as set forth in 
Sec. 54.705(c).

    6. Amend Sec. 54.702 by revising paragraph (a) and the second 
sentence of paragraph (i) to read as follows:


Sec. 54.702  Administrator's functions and responsibilities.

    (a) The Administrator, and the divisions therein, shall be 
responsible for administering the schools and libraries support 
mechanism, the rural health care support mechanism, the high cost 
support mechanism, the low income support mechanism, the

[[Page 59728]]

interstate access universal service support mechanism described in 
subpart J of this part, and the interstate common line support 
mechanism described in subpart K of this part.
* * * * *
    (i) * * * The Administrator shall keep separate accounts for the 
amounts of money collected and disbursed for eligible schools and 
libraries, rural health care providers, low-income consumers, 
interstate access universal service support, interstate common line 
support, and high-cost and insular areas.
* * * * *

    7. Amend Sec. 54.705 by revising paragraphs (c)(1) introductory 
text, (c)(1)(i), (c)(1)(ii), (c)(1)(iv), and (c)(1)(v) to read as 
follows:


Sec. 54.705  Committees of the Administrator's Board of Directors.

* * * * *
    (c) High Cost and Low Income Committee--(1) Committee functions. 
The High Cost and Low Income Committee shall oversee the administration 
of the high cost and low income support mechanisms, the interstate 
access universal service support mechanism for price cap carriers 
described in subpart J of this part, and the interstate common line 
support mechanism for rate-of-return carriers described in subpart K of 
this part by the High Cost and Low Income Division. The High Cost and 
Low Income Committee shall have the authority to make decisions 
concerning:
    (i) How the Administrator projects demand for the high cost, low 
income, interstate access universal service, and interstate common line 
support mechanisms;
    (ii) Development of applications and associated instructions as 
needed for the high cost, low income, interstate access universal 
service, and interstate common line support mechanisms;
* * * * *
    (iv) Performance of audits of beneficiaries under the high cost, 
low income, interstate access universal service and interstate common 
line support mechanisms; and
    (v) Development and implementation of other functions unique to the 
high cost, low income, interstate access universal service and 
interstate common line support mechanisms.
* * * * *
    8. Amend Sec. 54.715 by revising the third sentence of paragraph 
(c) to read as follows:


Sec. 54.715  Administrative expenses of the Administrator.

* * * * *
    (c) * * * The administrative expenses incurred by the Administrator 
in connection with the schools and libraries support mechanism, the 
rural health care support mechanism, the high cost support mechanism, 
the low income support mechanism, the interstate access universal 
service support mechanism, and the interstate common line support 
mechanism shall be deducted from the annual funding of each respective 
support mechanism. * * *

    9. Add subpart K to part 54 to read as follows:
Subpart K--Interstate Common Line Support Mechanism for Rate-of-Return 
Carriers
Sec.
54.901   Calculation of Interstate Common Line Support.
54.902   Calculation of Interstate Common Line Support for 
transferred exchanges.
54.903   Obligations of rate-of-return carriers and the 
Administrator.
54.904   Carrier certification.


Sec. 54.901  Calculation of Interstate Common Line Support.

    (a) Interstate Common Line Support available to a rate-of-return 
carrier shall equal the Common Line Revenue Requirement per Study Area 
as calculated in accordance with part 69 of this chapter minus:
    (1) The study area revenues obtained from end user common line 
charges at their allowable maximum as determined by Secs. 69.104(n) and 
69.104(o) of this chapter;
    (2) The carrier common line charge revenues to be phased out 
pursuant to Sec. 69.105 of this chapter;
    (3) The special access surcharge pursuant to Sec. 69.114 of this 
chapter;
    (4) The line port costs in excess of basic analog service pursuant 
to Sec. 69.130 of this chapter; and
    (5) Any Long Term Support for which the carrier is eligible or, if 
the carrier ceased participation in the NECA common line pool after 
October 11, 2001, any Long Term Support for which the carrier would 
have been eligible if it had not ceased its participation in the pool.
    (b) The per-line Interstate Common Line Support available to a 
competitive eligible telecommunications carrier serving lines in a 
study area served by a rate-of-return carrier shall be calculated by 
the Administrator as follows:
    (1) If the rate-of-return carrier has disaggregated the support it 
receives in the study area pursuant to Sec. 54.315, the Administrator 
shall calculate the amount of Interstate Common Line Support targeted 
to each disaggregation zone by the rate-of-return carrier (targeted 
Interstate Common Line Support). If the rate-of-return carrier has 
chosen not to disaggregate its support for a study area pursuant to 
Sec. 54.315, then the entirety of its Interstate Common Line Support 
for the study area shall be considered targeted Interstate Common Line 
Support for purposes of performing the calculations in this section.
    (2) In each disaggregation zone or undisaggregated study area, the 
Administrator shall calculate the Average Interstate Common Line 
Support by dividing the rate-of-return carrier's targeted Interstate 
Common Line Support by its total lines served.
    (3) The Administrator shall then calculate the Interstate Common 
Line Support available to the competitive eligible telecommunications 
carrier for each line it serves for each customer class in a 
disaggregation zone or undisaggregated study area by the following 
formula:
    (i) If the Average Interstate Common Line Support is greater than 
$2.70 multiplied by the number of residential and single-line business 
lines served by the rate-of-return carrier in the disaggregation zone 
or undisaggregated study area, then:
    (A) Interstate Common Line Support per Multi-Line Business Line = 
(Average Interstate Common Line Support - $2.70  x  residential and 
single-line business lines served by the rate-of-return carrier) 
 (total lines served by the rate-of-return carrier); and
    (B) Interstate Common Line Support per Residential and Single-Line 
Business Line = Interstate Common Line Support per Multi-Line Business 
Line + $2.70.
    (ii) If the Average Interstate Common Line Support is less than or 
equal to $2.70 multiplied by residential and single-line business lines 
served by the rate-of-return carrier in the disaggregation zone or 
undisaggregated study area, but greater than $0, then:
    (A) Interstate Common Line Support per Multi-Line Business Line = 
$0; and
    (B) Interstate Common Line Support per Residential and Single-Line 
Business Line = Average Interstate Common Line Support  
residential and single line business lines served by the rate-of-return 
carrier.
    (iii) If the Average Interstate Common Line Support is equal to $0, 
then the competitive eligible telecommunications carrier shall receive 
no Interstate Common Line Support for lines served in that 
disaggregation zone or undisaggregated study area.

[[Page 59729]]

Sec. 54.902  Calculation of Interstate Common Line Support for 
transferred exchanges.

    (a) In the event that a rate-of-return carrier acquires exchanges 
from an entity that is also a rate-of-return carrier, Interstate Common 
Line Support for the transferred exchanges shall be distributed as 
follows.
    (1) Each carrier may report its updated line counts to reflect the 
transfer in the next quarterly line count filing pursuant to 
Sec. 54.903(a) that applies to the period in which the transfer 
occurred. During a transition period from the filing of the updated 
line counts until the end of the funding year, the Administrator shall 
adjust the Interstate Common Line Support received by each carrier 
based on the updated line counts and the per-line Interstate Common 
Line Support, categorized by customer class and, if applicable, 
disaggregation zone, of the selling carrier. If the acquiring carrier 
does not file a quarterly update of its line counts, it will not 
receive Interstate Common Line Support for those lines during the 
transition period.
    (2) Each carriers' projected data for the following funding year 
filed pursuant to Sec. 54.903(c) shall reflect the transfer of 
exchanges.
    (3) Each carriers' actual data filed pursuant to Sec. 54.903(d) 
shall reflect the transfer of exchanges. All post-transaction 
Interstate Common Line Support shall be subject to true up by the 
Administrator pursuant to Sec. 54.903(e).
    (b) In the event that a rate-of-return carrier acquires exchanges 
from a price cap carrier that are incorporated into one of the rate-of-
return carrier's existing study areas, Interstate Common Line Support 
for the transferred exchanges shall be distributed as follows.
    (1) The acquiring carrier may report its updated line counts for 
the study area into which the acquired lines are incorporated in the 
next quarterly line count filing pursuant to Sec. 54.903(a) that 
applies to the period in which the transfer occurred. During a 
transition period from the filing of the updated line counts until the 
end of the funding year, the Administrator shall adjust the Interstate 
Common Line Support received by the acquiring carrier based on the 
updated line counts and the per-line amounts Interstate Common Line 
Support for the study area served by the acquiring carrier. If 
necessary, the Administrator shall develop an average per-line support 
amount to reflect various per-line amounts in multiple disaggregation 
zones served by the acquiring carrier. If the acquiring carrier does 
not file a quarterly update of its line counts, it will not receive 
Interstate Common Line Support for those lines during the transition 
period.
    (2) The acquiring carrier's projected data for the following 
funding year filed pursuant to Sec. 54.903(c) shall reflect the 
transfer of exchanges.
    (3) The acquiring carrier's actual data filed pursuant to 
Sec. 54.903(d) shall reflect the transfer of exchanges. All post-
transaction Interstate Common Line Support shall be subject to true up 
by the Administrator pursuant to Sec. 54.903(e).
    (c) In the event that a rate-of-return carrier acquires exchanges 
from a price cap carrier that are not incorporated into one of the 
rate-of-return carrier's existing study areas, Interstate Common Line 
Support for the transferred exchanges shall be distributed as follows.
    (1) The acquiring rate-of-return may submit to the Administrator a 
projected Interstate Common Line Revenue Requirement for the acquired 
exchanges for the remainder of the funding year in the next quarterly 
report to the Administrator. The Administrator shall distribute 
Interstate Common Line Support pursuant to the partial year projected 
Interstate Common Line Revenue Requirement for the remainder of the 
funding year. If the acquiring carrier does not file a projected 
Interstate Common Line Revenue Requirement, it will not receive 
Interstate Common Line Support for those exchanges during the 
transition period.
    (2) The acquiring carrier's projected data for the following 
funding year filed pursuant to Sec. 54.903(c) shall reflect the 
transfer of exchanges.
    (3) The acquiring carrier's actual data filed pursuant to 
Sec. 54.903(d) shall reflect the transfer of exchanges. All post-
transaction Interstate Common Line Support shall be subject to true up 
by the Administrator pursuant to Sec. 54.903(e).
    (d) In the event that an entity other than a rate-of-return carrier 
acquires exchanges from a rate-of-return carrier, per-line Interstate 
Common Line Support will not transfer.
    (e) This section does not alter any Commission rule governing the 
sale or transfer of exchanges, including the definition of ``study 
area'' in part 36.


Sec. 54.903  Obligations of rate-of-return carriers and the 
Administrator.

    (a) To be eligible for Interstate Common Line Support, each rate-
of-return carrier shall make the following filings with the 
Administrator.
    (1) On March 31, 2002, each rate-of-return carrier shall submit to 
the Administrator the number of lines it serves as of September 30, 
2001, within each rate-of-return carrier study area, by disaggregation 
zone if disaggregation zones have been established within that study 
area pursuant to Sec. 54.315, showing residential and single-line 
business line counts and multi-line business line counts separately. 
For purposes of this report, and for purposes of computing support 
under this subpart, the residential and single-line business class 
lines reported include lines assessed the residential and single-line 
business End User Common Line charge pursuant to Sec. 69.104 of this 
chapter, and the multi-line business class lines reported include lines 
assessed the multi-line business End User Common Line charge pursuant 
to Sec. 69.104 of this chapter. For purposes of this report, and for 
purposes of computing support under this subpart, lines served using 
resale of the rate-of-return local exchange carrier's service pursuant 
to section 251(c)(4) of the Communications Act of 1934, as amended, 
shall be considered lines served by the rate-of-return carrier only and 
must be reported accordingly. Beginning July 31, 2002, each rate-of-
return carrier shall submit the information described in this paragraph 
in accordance with the schedule in Sec. 36.611 of this chapter.
    (2) Each rate-of-return carrier in service areas where a 
competitive eligible telecommunications carrier has initiated service 
and reported line count data pursuant to Sec. 54.307(c) shall submit 
the information in paragraph (a) of this section in accordance with the 
schedule in Sec. 36.612 of this chapter. A rate-of-return carrier may 
submit the information in paragraph (a) of this section in accordance 
with the schedule in Sec. 36.612 of this chapter, even if it is not 
required to do so. If a rate-of-return carrier makes a filing under 
this paragraph, it shall separately indicate any lines that it has 
acquired from another carrier that it has not previously reported 
pursuant to paragraph (a) of this section, identified by customer class 
and the carrier from which the lines were acquired.
    (3) Each rate-of-return carrier shall submit to the Administrator, 
on March 31, 2002, and annually thereafter on March 31st information 
needed to calculate the Projected Annual Common Line Revenue 
Requirement for each of its study areas in the upcoming funding year. A 
rate-of-return carrier's Projected Annual Common Line Revenue 
Requirement shall be calculated in accordance with part 69 of this 
chapter. The funding year shall be July 1st of the current year through 
June 30th of the

[[Page 59730]]

next year. Rate-of-return carriers will be permitted to submit 
corrections to their projected Annual Common Line Revenue Requirement 
until April 10, 2002, and annually thereafter until April 10th.
    (4) Each rate-of-return carrier shall submit to the Administrator, 
on July 31, 2003, and annually thereafter on July 31st, the carrier's 
common line costs as defined in part 69 of this chapter for each study 
area in which it operates for the previous calendar year. Such data 
shall be used by the Administrator to make adjustments to monthly per-
line Interstate Common Line Support amounts in the following calendar 
year to the extent of any difference between the carrier's Projected 
Annual Common Line Revenue Requirement and the carrier's actual costs 
during the relevant period. A rate-of-return carrier may update the 
information submitted on July 31st one or more times quarterly on a 
rolling year basis according to the schedule in Sec. 36.612 of this 
chapter.
    (b) Upon receiving the information required to be filed in 
paragraph (a) of this section, the Administrator shall:
    (1) Perform the calculations described in Sec. 54.901;
    (2) Publish the results of these calculations showing Interstate 
Common Line Support Per Line available in each rate-of-return carrier 
study area, by Disaggregation Zone and customer class;
    (3) Perform periodic reconciliation of projected common line 
revenue requirements based on data provided by carriers pursuant to 
paragraph (a)(3) of this section and actual common line revenue 
requirements based on data provided by carriers pursuant to paragraph 
(a)(4) of this section;
    (4) Collect the funds necessary to provide support pursuant to this 
subpart in accordance with subpart H of this part;
    (5) Distribute support calculated pursuant to the rules contained 
in this subpart; and
    (6) Report quarterly to the Commission on the collection and 
distribution of funds under this subpart as described in 
Sec. 54.702(i). Fund distribution reporting will be by state and by 
eligible telecommunications carrier within the state.


Sec. 54.904  Carrier certification.

    (a) Certification. Carriers that desire to receive support pursuant 
to this subpart shall file a certification with the Administrator and 
the Federal Communications Commission stating that all Interstate 
Common Line Support provided to such carrier will be used only for the 
provision, maintenance, and upgrading of facilities and services for 
which the support is intended. Support provided pursuant to this 
subpart shall only be provided to the extent that the carrier has filed 
the requisite certification pursuant to this section.
    (b) Certification format. A certification pursuant to this section 
may be filed in the form of a letter from an authorized representative 
for the carrier, and must be filed with both the Administrator and the 
Office of the Secretary of the Federal Communication Commission clearly 
referencing CC Docket No. 96-45, on or before the filing deadlines set 
forth in paragraph (d) of this section.
    (c) All of the certifications filed by carriers pursuant to this 
section shall become part of the public record maintained by the 
Commission.
    (d) Filing deadlines. In order for a rate-of-return carrier, and/or 
an eligible telecommunications carrier serving lines in the service 
area of a rate-of-return carrier, to receive Interstate Common Line 
Support, such carrier must file an annual certification, as described 
in paragraph (b) of this section, on the date that it first files its 
line count information pursuant to Sec. 54.903, and thereafter on June 
30th of each year.

PART 69--ACCESS CHARGES

    10. The authority citation continues to read as follows:

    Authority: 47 U.S.C. 154, 201, 202, 203, 205, 218, 220, 254, 
403.


    11. Amend Sec. 69.2 by adding a new paragraph (ww) to read as 
follows:


Sec. 69.2  Definitions.

* * * * *
    (ww) Interstate Common Line Support (ICLS) means funds that are 
provided pursuant to Sec. 54.901 of this chapter.
    12. Amend Sec. 69.4 by revising paragraph (b)(2), by removing and 
reserving paragraph (c), by revising paragraphs (d) and (g), and by 
adding a new paragraph (j) to read as follows:


Sec. 69.4  Charges to be filed.

* * * * *
    (b) * * *
    (2) Carrier common line, provided that after June 30, 2003, non-
price cap local exchange carriers may not assess a carrier common line 
charge;
* * * * *
    (c) [Reserved.]
    (d) Recovery of Contributions to the Universal Service Support 
Mechanisms by Incumbent Local Exchange Carriers.
    (1) [Reserved.]
    (2)(i) Local exchange carriers may recover their contributions to 
the universal service support mechanisms only through explicit, 
interstate, end-user charges assessed pursuant to either Sec. 69.131 or 
Sec. 69.158 that are equitable and nondiscriminatory.
    (ii) Local exchange carriers may not recover any of their 
contributions to the universal service support mechanisms through 
access charges imposed on interexchange carriers.
* * * * *
    (g) Local exchange carriers may establish appropriate rate elements 
for a new service, within the meaning of Sec. 61.3(x) of this chapter, 
in any tariff filing.
* * * * *
    (j) In addition to the charges specified in paragraph (b) of this 
section, the carrier's carrier charges for access service filed with 
this Commission by non-price cap local exchange carriers may include 
charges for each of the following elements:
    (1) Dedicated local switching trunk port;
    (2) Shared local switching trunk port;
    (3) Dedicated tandem switching trunk port;
    (4) Multiplexers associated with tandem switching;
    (5) DS1/voice grade multiplexers associated with analog switches; 
and
    (6) Per-message call setup.
    13. Amend Sec. 69.104 by revising the first sentence of paragraph 
(a), by revising paragraphs (c) through (f), by removing and reserving 
paragraphs (j) through (l), and by adding new paragraphs (n) through 
(r) to read as follows:


Sec. 69.104  End user common line for non-price cap incumbent local 
exchange carriers.

    (a) This section is applicable only to incumbent local exchange 
carriers that are not subject to price cap regulation as that term is 
defined in Sec. 61.3(ee) of this chapter. * * *
* * * * *
    (c) Until December 31, 2001, except as provided in paragraphs (d) 
through (h) of this section, the single-line rate or charge shall be 
computed by dividing one-twelfth of the projected annual revenue 
requirement for the End User Common Line element by the projected 
average number of local exchange service subscriber lines in use during 
such annual period.
    (d)(1) Until December 31, 2001, if the monthly charge computed in 
accordance with paragraph (c) of this section exceeds $6, the charge 
for each local exchange service subscriber line,

[[Page 59731]]

except a residential line, a single-line business line, or a line used 
for Centrex-CO service that was in place or on order as of July 27, 
1983, shall be $6.
    (2) Until December 31, 2001, the charge for each subscriber line 
associated with a public telephone shall be equal to the monthly charge 
computed in accordance with paragraph (d)(1) of this section.
    (e) Until December 31, 2001, the monthly charge for each 
residential and single-line business local exchange service subscriber 
shall be the charge computed in accordance with paragraph (c) of this 
section, or $3.50, whichever is lower.
    (f) Except as provided in Sec. 54.403 of this chapter, the charge 
for each residential local exchange service subscriber line shall be 
the same as the charge for each single-line business local exchange 
service subscriber line.
* * * * *
    (j) [Reserved.]
    (k) [Reserved.]
    (l) [Reserved.]
* * * * *
    (n)(1) Beginning January 1, 2002, except as provided in paragraph 
(r) of this section, the maximum monthly charge for each residential or 
single-line business local exchange service subscriber line shall be 
the lesser of:
    (i) One-twelfth of the projected annual revenue requirement for the 
End User Common Line element divided by the projected average number of 
local exchange service subscriber lines in use during such annual 
period; or
    (ii) The following:
    (A) Beginning January 1, 2002, $5.00.
    (B) Beginning July 1, 2002, $6.00.
    (C) Beginning July 1, 2003, $6.50.
    (2) In the event that GDP-PI exceeds 6.5% or is less than 0%, the 
maximum monthly charge in paragraph (n)(1)(ii) of this section will be 
adjusted in the same manner as the adjustment in Sec. 69.152(d)(2).
    (o)(1) Beginning on January 1, 2002, except as provided in 
paragraph (r) of this section, the maximum monthly End User Common Line 
Charge for multi-line business lines will be the lesser of:
    (i) $9.20; or
    (ii) One-twelfth of the projected annual revenue requirement for 
the End User Common Line element divided by the projected average 
number of local exchange service subscriber lines in use during such 
annual period;
    (2) In the event that GDP-PI is greater than 6.5% or is less than 
0%, the maximum monthly charge in paragraph (o)(1)(i) of this section 
will be adjusted in the same manner as the adjustment in 
Sec. 69.152(k)(2).
    (p) Beginning January 1, 2002, non-price cap local exchange 
carriers shall assess:
    (1) No more than one End User Common Line charge as calculated 
under the applicable method under paragraph (n) of this section for 
Basic Rate Interface integrated services digital network (ISDN) 
service.
    (2) No more than five End User Common Line charges as calculated 
under paragraph (o) of this section for Primary Rate Interface ISDN 
service.
    (q) In the event a non-price cap local exchange carrier charges 
less than the maximum End User Common Line charge for any subscriber 
lines, the carrier may not recover the difference between the amount 
collected and the maximum from carrier common line charges, Interstate 
Common Line Support, or Long Term Support.
    (r) End User Common Line Charge Deaveraging. Beginning on January 
1, 2002, non-price cap local exchange carriers may geographically 
deaverage End User Common Line charges subject to the following 
conditions.
    (1) In order for a non-price cap local exchange carrier to be 
allowed to deaverage End User Common Line charges within a study area, 
the non-price cap local exchange carrier must have:
    (i) State commission-approved geographically deaveraged rates for 
UNE loops within that study area; or
    (ii) A universal service support disaggregation plan established 
pursuant to Sec. 54.315 of this chapter.
    (2) All geographic deaveraging of End User Common Line charges by 
customer class within a study area must be according to the state 
commission-approved UNE loop zone, or the universal service support 
disaggregation plan established pursuant to Sec. 54.315 of this 
chapter.
    (3) Within a given zone, Multi-line Business End User Common Line 
rates cannot fall below Residential and Single-Line Business rates.
    (4) For any given class of customer in any given zone, the End User 
Common Line Charge in that zone must be greater than or equal to the 
End User Common Line charge in the zone with the next lower cost per 
line.
    (5) A non-price cap local exchange carrier shall not receive more 
through deaveraged End User Common Line charges than it would have 
received if it had not deaveraged its End User Common Line charges.
    (6) Maximum charge. The maximum zone deaveraged End User Common 
Line Charge that may be charged in any zone is the applicable cap 
specified in paragraphs (n) or (o) of this section.
    (7) Voluntary Reductions. A ``Voluntary Reduction'' is one in which 
the non-price cap local exchange carrier charges End User Common Line 
rates below the maximum charges specified in paragraphs (n)(1) or 
(o)(1) of this section other than through offset of net increases in 
End User Common Line charge revenues or through increases in other zone 
deaveraged End User Common Line charges.
    14. Amend Sec. 69.105 by revising paragraph (a) and by adding a new 
paragraph (d) to read as follows:


Sec. 69.105   Carrier common line for non-price cap local exchange 
carriers.

    (a) This section is applicable only to local exchange carriers that 
are not subject to price cap regulation as that term is defined in 
Sec. 61.3(ee) of this chapter. Until June 30, 2003, a charge that is 
expressed in dollars and cents per line per access minute of use shall 
be assessed upon all interexchange carriers that use local exchange 
common line facilities for the provision of interstate or foreign 
telecommunications services, except that the charge shall not be 
assessed upon interexchange carriers to the extent they resell MTS or 
MTS-type services of other common carriers (OCCs).
* * * * *
    (d) From July 1, 2002, to June 30, 2003, the carrier common line 
charge calculations pursuant to this section shall be limited to an 
amount equal to the number of projected residential and single-line 
business lines multiplied by the difference between the residential and 
single-line business End User Common Line rate cap and the lesser of 
$6.50 or the non-price cap local exchange carrier's average cost per 
line.

    15. Amend Sec. 69.106 by revising paragraph (g) and by adding a new 
paragraph (h) to read as follows:


Sec. 69.106  Local switching.

* * * * *
    (g) A local exchange carrier may recover signaling costs associated 
with call setup through a call setup charge imposed upon all interstate 
interexchange carriers that use that local exchange carrier's 
facilities to originate or terminate interstate interexchange or 
foreign services. This charge must be expressed as dollars and cents 
per call attempt and may be assessed on originating calls handed off to 
the interexchange carrier's point of presence and on terminating calls 
received from an interexchange carrier's point of presence, whether or 
not that call is completed at the called location. Local exchange 
carriers may not recover

[[Page 59732]]

through this charge any costs recovered through other rate elements.
    (h) Except as provided in Sec. 69.118, non-price cap local exchange 
carriers may establish rate elements for local switching as follows:
    (1) Non-price cap local exchange carriers may separate from the 
projected annual revenue requirement for the Local Switching element 
those costs projected to be incurred for ports (including cards and 
DS1/voice-grade multiplexers required to access end offices equipped 
with analog switches) on the trunk side of the local switch. Non-price 
cap local exchange carriers electing to assess these charges shall 
further identify costs incurred for dedicated trunk ports separately 
from costs incurred for shared trunk ports.
    (i) Non-price cap local exchange carriers electing to assess trunk 
port charges shall recover dedicated trunk port costs identified 
pursuant to paragraph (h)(1) of this section through flat-rated charges 
expressed in dollars and cents per trunk port and assessed upon the 
purchaser of the dedicated trunk terminating at the port.
    (ii) Non-price cap local exchange carriers electing to assess trunk 
port charges shall recover shared trunk port costs identified pursuant 
to paragraph (h)(1) of this section through charges assessed upon 
purchasers of shared transport. This charge shall be expressed in 
dollars and cents per access minute of use. The charge shall be 
computed by dividing the projected costs of the shared ports by the 
historical annual access minutes of use calculated for purposes of 
recovery of common transport costs in Sec. 69.111(c).
    (2) Non-price cap local exchange carriers shall recover the 
projected annual revenue requirement for the Local Switching element 
that are not recovered in paragraph (h)(1) of this section through 
charges that are expressed in dollars and cents per access minute of 
use and assessed upon all interexchange carriers that use local 
exchange switching facilities for the provision of interstate or 
foreign services. The maximum charge shall be computed by dividing the 
projected remainder of the annual revenue requirement for the Local 
Switching element by the historical annual access minutes of use for 
all interstate or foreign services that use local exchange switching 
facilities.

    16. Amend Sec. 69.111 by adding a new paragraph (m) to read as 
follows:


Sec. 69.111  Tandem-switched transport and tandem charge.

* * * * *
    (m) In addition to the charges described in this section, non-price 
cap local exchange carriers may establish separate charges for 
multiplexers and dedicated trunk ports used in conjunction with the 
tandem switch as follows:
    (1)(i) Non-price cap local exchange carriers may establish a flat-
rated charge for dedicated DS3/DS1 multiplexing on the serving wire 
center side of the tandem switch provided in conjunction with dedicated 
DS3 transport service from the serving wire center to the tandem 
switch. This charge shall be assessed on interexchange carriers 
purchasing tandem-switched transport in proportion to the number of DS3 
trunks provisioned for that interexchange carrier between the serving 
wire center and the tandem switch.
    (ii) Non-price cap local exchange carriers may establish a flat-
rated charge for dedicated DS1/voice-grade multiplexing provided on the 
serving wire center side of analog tandem switches. This charge may be 
assessed on interexchange carriers purchasing tandem-switched transport 
in proportion to the interexchange carrier's transport capacity on the 
serving wire center side of the tandem.
    (2) Non-price cap local exchange carriers may recover the costs of 
dedicated trunk ports on the serving wire center side of the tandem 
switch through flat-rated charges expressed in dollars and cents per 
trunk port and assessed upon the purchaser of the dedicated trunk 
terminating at the port.

    17. Amend Sec. 69.124 by revising paragraph (a) to read as follows:


Sec. 69.124  Interconnection charge.

    (a) Until December 31, 2001, local exchange carriers not subject to 
price cap regulation shall assess an interconnection charge expressed 
in dollars and cents per access minute upon all interexchange carriers 
and upon all other persons using the telephone company switched access 
network.
* * * * *

    18. Add Sec. 69.130 to subpart B to read as follows:


Sec. 69.130  Line port costs in excess of basic analog service.

    To the extent that the costs of ISDN line ports, and line ports 
associated with other services, exceed the costs of a line port used 
for basic, analog service, non-price cap local exchange carriers may 
recover the difference through a separate monthly end-user charge, 
provided that no portion of such excess cost may be recovered through 
other common line access charges, or through Interstate Common Line 
Support.

    19. Add Sec. 69.131 to subpart B to read as follows:


Sec. 69.131  Universal service end user charges.

    To the extent the company makes contributions to the Universal 
Service Support Mechanisms pursuant to Secs. 54.706 and 54.709 of this 
chapter and the non-price cap local exchange carrier seeks to recover 
some or all of the amount of such contribution, the non-price cap local 
exchange carrier shall recover those contributions through a charge to 
end users other than Lifeline users. The charge to recover these 
contributions is not part of any other element established pursuant to 
part 69. Such a charge may be assessed on a per-line basis or as a 
percentage of interstate retail revenues, and at the option of the 
local exchange carrier it may be combined for billing purposes with 
other end user retail rate elements. A non-price cap local exchange 
carrier opting to assess the Universal Service end-user rate element on 
a per-line basis may apply that charge using the ``equivalency'' 
relationships established for the multi-line business PICC for Primary 
Rate ISDN service, as per Sec. 69.153(d), and for Centrex lines, as per 
Sec. 69.153(e).

    20. Amend Sec. 69.306 by revising paragraph (d) to read as follows:


Sec. 69.306  Central office equipment (COE).

* * * * *
    (d) COE Category 3 (Local Switching Equipment) shall be assigned to 
the Local Switching element except as provided in paragraph (a) of this 
section; and that,
    (1) For telephone companies subject to price cap regulation set 
forth in part 61 of this chapter, line-side port costs shall be 
assigned to the Common Line rate element; and
    (2) Beginning January 1, 2002, for non-price cap local exchange 
carriers, line-side port costs shall be assigned to the Common Line 
rate element. Such amount shall be determined after any local switching 
support has been removed from the interstate Local Switching revenue 
requirement. Non-price cap local exchange carriers may use thirty 
percent of the interstate Local Switching revenue requirement, minus 
any local switching support, as a proxy for allocating line port costs 
to the Common Line category.
* * * * *

    21. Amend Sec. 69.307 by revising paragraph (c) and by adding a new 
paragraph (e) to read as follows:

[[Page 59733]]

Sec. 69.307  General support facilities.

* * * * *
    (c)(1) Until June 30, 2002, for all local exchange carriers not 
subject to price cap regulation and for other carriers that acquire all 
of the billing and collection services that they provide to 
interexchange carriers from unregulated affiliates through affiliate 
transactions, from unaffiliated third parties, or from both of these 
sources, all other General Support Facilities investments shall be 
apportioned among the interexchange category, the billing and 
collection category, and Common Line, Local Switching, Information, 
Transport, and Special Access elements on the basis of Central Office 
Equipment, Information Origination/Termination Equipment, and Cable and 
Wire Facilities, combined.
    (2) Beginning July 1, 2002, for all local exchange carriers that 
acquire all of the billing and collection services that they provide to 
interexchange carriers from unregulated affiliates through affiliate 
transactions, from unaffiliated third parties, or from both of these 
sources, all other General Support Facilities investments shall be 
apportioned among the interexchange category, the billing and 
collection category, and Common Line, Local Switching, Information, 
Transport, and Special Access elements on the basis of Central Office 
Equipment, Information Origination/Termination Equipment, and Cable and 
Wire Facilities, combined.
* * * * *
    (e) Beginning July 1, 2002, for non-price cap local exchange 
carriers not covered by Sec. 69.307(c)(2), a portion of General purpose 
computer investment shall be apportioned to the billing and collection 
category on the basis of the Big Three Expense Factors allocator, 
defined in Sec. 69.2, modified to exclude expenses that are apportioned 
on the basis of allocators that include General Support Facilities 
investment. The remaining General Support Facilities investments shall 
be apportioned among the interexchange category, the billing and 
collection category, and Common Line, Local Switching, Information, 
Transport, and Special Access Elements on the basis of Central Office 
Equipment, Information Origination/Termination Equipment, and Cable and 
Wire Facilities, combined.

    22. Add Sec. 69.415 to subpart E to read as follows:


Sec. 69.415  Reallocation of certain transport expenses.

    (a) Beginning January 1, 2002, non-price cap local exchange 
carriers shall reallocate a portion of the costs otherwise assigned to 
the transport category to the common line, local switching, 
information, and special access elements.
    (b) The amount to be reallocated is limited to the total revenues 
recovered through the interconnection charge assessed pursuant to 
Sec. 69.124 for the 12-month period ending June 30, 2001.
    (c) The reallocation of the amount in paragraph (b) of this section 
shall be based on each access element's projected revenue requirement 
divided by the total revenue requirement of all the access elements, 
provided that:
    (1) Local switching support shall not be included in the local 
switching category's projected revenue requirement, or in the total 
projected revenue requirement;
    (2) A non-price cap local exchange carrier's universal service 
contribution shall not be included in the numerator or the denominator 
of the allocation formula;
    (3) The amount determined in paragraph (b) of this section shall be 
excluded from the transport revenue requirement and from the total 
projected revenue requirement for purposes of the allocation 
calculations; and
    (4) The common line revenue requirement shall include long term 
support as provided in Sec. 54.303 of this chapter and, beginning July 
1, 2002, shall include Interstate Common Line Support as provided in 
Sec. 54.901 of this chapter.

    23. Amend Sec. 69.501 by revising paragraphs (b), (c), and (e) and 
by adding a new paragraph (f) to read as follows:


Sec. 69.501  General.

* * * * *
    (b) Until December 31, 2001, any portion of the Common Line element 
annual revenue requirement that is attributable to CPE investment or 
expense or surrogate CPE investment or expense shall be assigned to the 
Carrier Common Line element or elements.
    (c) Until December 31, 2001, any portion of the Common Line element 
annual revenue requirement that is attributable to customer premises 
wiring included in IOT investment or expense shall be assigned to the 
Carrier Common Line element or elements.
* * * * *
    (e) Until December 31, 2001, any portion of the Common Line element 
revenue requirement that is not assigned to Carrier Common Line 
elements pursuant to paragraphs (b) and (c) of this section shall be 
apportioned between End User Common Line and Carrier Common Line 
pursuant to Sec. 69.502. Such portion of the Common Line element annual 
revenue requirement shall be described as the base factor portion for 
purposes of this subpart.
    (f) Beginning January 1, 2002, the Common Line element revenue 
requirement shall be apportioned between End User Common Line and 
Carrier Common Line pursuant to Sec. 69.502. The Common Line element 
annual revenue requirement shall be described as the base factor 
portion for purposes of this subpart.

    24. Amend Sec. 69.502 by adding new paragraphs (d) and (e) to read 
as follows:


Sec. 69.502  Base factor allocation.

* * * * *
    (d) Beginning July 1, 2002, the portion of per-line support that 
carriers receive pursuant to Sec. 54.901 of this chapter; and
    (e) Line port costs in excess of basic analog service pursuant to 
Sec. 69.130.

    25. Amend Sec. 69.603 by adding a new sentence immediately before 
the last sentence of paragraph (g) and a new sentence at the end of 
paragraph (h)(5) to read as follows:


Sec. 69.603  Association functions.

* * * * *
    (g) * * * Beginning July 1, 2002, Interstate Common Line Support 
revenues shall be included in the allocation base for Category I.B 
expenses. * * *
    (h) * * *
    (5) * * * Beginning July 1, 2002, Interstate Common Line Support 
shall be subject to this provision.
* * * * *

    26. Amend Sec. 69.609 by adding a second sentence to paragraph (b) 
to read as follows:


Sec. 69.609  End User Common Line hypothetical net balances.

* * * * *
    (b) * * * For purposes of this calculation, access revenues 
collected shall include any revenues foregone because of a voluntary 
reduction made pursuant to Sec. 69.104(r)(7).

[FR Doc. 01-29739 Filed 11-29-01; 8:45 am]
BILLING CODE 6712-01-P