[Federal Register Volume 69, Number 170 (Thursday, September 2, 2004)]
[Rules and Regulations]
[Pages 53645-53652]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18934]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 32, 51 and 65

[WC Docket No. 02-269; CC Docket No. 00-199; CC Docket No. 80-286; CC 
Docket No. 99-301; FCC 04-149]


Federal-State Joint Conference on Accounting Issues

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission addresses recommendations 
made by the Federal-State Joint Conference on Accounting Issues (Joint 
Conference) in a report filed with the Commission on October 9, 2003. 
It also makes recommendations on

[[Page 53646]]

other accounting related matters as well as resolves outstanding 
petitions for reconsideration of the Commission's Phase II Report and 
Order. Finally, this document further delays the effective date and 
implementation of four previously adopted accounting and reporting rule 
changes.

DATES: The effective date for amendments to 47 CFR 32.5200, 32.6560, 
and 32.6620 published at 67 FR 5670 (February 6, 2002) is further 
suspended from July 1, 2004, through December 31, 2004. The rules 
contained in this document are effective March 2, 2005.

FOR FURTHER INFORMATION CONTACT: Jane E. Jackson, Associate Chief, 
Wireline Competition Bureau, (202) 418-1500.

SUPPLEMENTARY INFORMATION: The full text of this document is available 
for public inspection and copying during regular business hours at the 
FCC Reference Information Center, Portals II, 445 12th Street, SW., 
Room CY-A257, Washington, DC 20554. This document may also be purchased 
from the Commission's duplicating contractor, Best Copy and Printing, 
Inc., Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 
20554, telephone (202) 488-5300, facsimile (202) 488-5563, e-mail 
[email protected].

Background

    1. On September 5, 2002, the Commission issued an order which was 
published at 67 FR 66069 (October 30, 2002), convening the Joint 
Conference ``to provide a forum for an ongoing dialogue between the 
Commission and the states in order to ensure that regulatory accounting 
data and related information filed by carriers are adequate, truthful, 
and thorough.'' The Commission found that the ``Joint Conference would 
provide a focused means by which it and interested state commissions 
may conduct an open dialogue, collect and exchange information, and 
consider initiatives that would improve the collection of adequate, 
truthful, and thorough accounting data for regulatory purposes.'' In 
charging the Joint Conference with the task of reexamining federal and 
state accounting and reporting requirements, the Commission noted that 
the Joint Conference has a broad mandate to perform its work, including 
the ability to recommend additions to, or eliminations of, accounting 
requirements.
    2. On November 12, 2002, the Commission released an order which was 
published at 67 FR 77432 (December 18, 2002), suspending the 
implementation of the following four accounting and reporting 
requirement rule changes until July 1, 2003: (1) The consolidation of 
Accounts 6621 through 6623 into Account 6620, with subaccounts for 
wholesale and retail; (2) the consolidation of Account 5230, Directory 
revenue, into Account 5200 Miscellaneous revenue; (3) the consolidation 
of the depreciation and amortization expense accounts (Accounts 6561 
through 6565) into Account 6560, Depreciation and amortization 
expenses; (4) the revised ``Loop Sheath Kilometers'' data collection in 
Table II of ARMIS Report 43-07. The Commission adopted these accounting 
rules and reporting requirements as part of the Commission's biennial 
review of accounting requirements and Automated Reporting Management 
Information System (ARMIS) reporting. The Commission suspended 
implementation of these four accounting and reporting requirement rule 
changes in order to allow the recently-established Joint Conference to 
review these rules and requirements before carriers were required to 
implement them. These rules had been adopted in 2001 in the Phase II 
Report and Order which was published at 67 FR 5670 (February 6, 2002), 
in which the Commission had eliminated many part 32 accounts, defined 
ILECs subject to its accounting rules, streamlined its affiliate 
transaction rules and revised some of its ARMIS reporting requirements. 
(The Commission subsequently issued two additional orders further 
suspending implementation of the four previously-adopted rules which 
were published at 68 FR 38641 and 68 FR 75455 on June 30, 2003 and 
December 31, 2003, respectively).
    3. On December 12, 2002, as part of its comprehensive review of the 
Commission's accounting and reporting requirements, the Joint 
Conference issued a public notice requesting comment on a broad range 
of regulatory accounting issues. The Joint Conference also sought 
comment on four groups of specific issues related to the Phase II 
Report and Order: (1) Certain accounts that had been requested by 
states but not adopted by the Commission; (2) changes to the affiliate 
transaction rules; (3) the accounting and recordkeeping rules that were 
suspended by the Commission in its November 12, 2002 Order; and (4) the 
issues raised by the outstanding petitions for reconsideration of the 
Phase II Report and Order.
    4. In a Notice of Proposed Rulemaking (NPRM) released on December 
23, 2003, which was published at 68 FR 75478 (December 31, 2003), the 
Commission sought comment on the recommendations of the Joint 
Conference related to the issues it raised in its December 12, 2002 
public notice and on other accounting-related matters.

Paperwork Reduction Act

    5. This Order 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.

Synopsis of Report and Order

I. Accounting Rules

    6. The Commission adopts the following Joint Conference 
recommendations: (1) Reinstates Account 5230, Directory revenue; (2) 
Reinstates Accounts 6621, Call completion services; 6622, Number 
services; and 6623, Customer services and requires wholesale/retail 
information only for Account 6623. The wholesale/retail information for 
Account 6623 will be reported in ARMIS Report 43-03 rather than a part 
32 subaccount; (3) Reinstates Accounts 6561, Depreciation expense--
telecommunications plant in service; 6562, Depreciation expense--
property held for future telecommunications use; 6563, Amortization 
expense--tangible; 6564, Amortization expense--intangible; and Account 
6565, Amortization expense--other. The Commission rejects the Joint 
Conference recommendation to add new part 32 accounts for: (1) Optical 
switching; (2) switching software; (3) loop and inter-office transport; 
(4) interconnection revenue; and (5) universal service revenue and 
expense. While the Commission rejects the recommendation to add new 
part 32 accounts, it does, however, require Class A companies to 
maintain subsidiary record categories to identify interconnection 
revenues. Finally, the part 32 definition of incumbent local exchange 
carrier is modified to clarify that a successor/assign company that is 
found to be nondominant will not be subject to the Commission's 
accounting requirements.

II. Affiliate Transactions Rules

    7. The Commission rejects the Joint Conference recommendations to 
modify

[[Page 53647]]

its affiliate transactions rules pertaining to: (1) Fair market value 
comparisons for assets totaling less than $500,000; (2) Establishment 
of floor and ceiling threshold; (3) Prevailing price treatment 
threshold; (4) Centralized services exception to the estimated fair 
market value rule; (5) Nonregulated to nonregulated transactions; and 
(6) Intra-holding company ILEC-to-ILEC transfers of assets or services.

III. Reporting Requirements

    8. The Commission adopts the Joint Conference recommendation to 
reinstate the title of the first section of Table II of the ARMIS 
Report 43-07 from ``loop sheath kilometers'' back to ``sheath 
kilometers''. The Joint Conference also recommended that the Commission 
deny the petition for reconsideration regarding the reporting of 
broadband infrastructure data in ARMIS Report 43-07. The Commission 
adopts the recommendation and denies the petition for reconsideration.

IV. Suspension of Implementation of Four Accounting and Reporting 
Requirement Rule Changes

    9. As noted above, the Commission has suspended the implementation 
of four previously-adopted accounting and recordkeeping rules to allow 
the Joint Conference time to review them, and for the Commission to act 
upon the Joint Conference's recommendation. The suspension currently is 
effective through June 30, 2004. The Commission further suspends the 
rule changes through December 31, 2004, which is the next date to 
coincide with the start of a fiscal year after six months' notice 
required by the Act for the rules to take effect.

V. Other Issues

    10. Additional proposals and specific areas for investigation 
submitted by commenters in response to the NPRM will continue to be 
examined by the Joint Conference and the Commission.

Final Regulatory Flexibility Certification

    11. The Regulatory Flexibility Act of 1980, as amended (RFA), 
requires that a regulatory flexibility analysis be prepared for notice-
and-comment rule making proceedings, unless the agency certifies that 
``the rule will not, if promulgated, have a significant economic impact 
on a substantial number of small entities.'' The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A ``small business concern'' is one which: (1) Is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria established by the Small Business 
Administration (SBA).
    12. The SBA has developed a small business size standard for Wired 
Telecommunications Carriers, which consists of all such firms having 
1,500 or fewer employees. Under the Commission's rules, there are two 
classes of ILECs for accounting purposes: Class A and Class B. Carriers 
with annual revenues from regulated telecommunications operations that 
are equal to or above the indexed revenue threshold, currently $123 
million, are classified as Class A; those falling below that threshold 
are considered Class B. Class A carriers are required to maintain a 
more detailed level of accounts than Class B carriers. In addition, 
Class A carriers are required to file ARMIS Reports annually while 
Class B carriers are not subject to the ARMIS Reporting requirement. 
Class A carriers with annual revenues in excess of $123 million but 
less than $7.240 billion are classified as mid-sized carriers and are 
permitted to maintain accounts at the less detailed Class B level. The 
less detailed level of accounting required under Class B was 
established to accommodate smaller carriers and relieve them of the 
burdens associated with maintaining the more detailed level of 
accounts. The accounting and reporting requirements adopted by the 
Commission in this Report and Order are mandatory only for Class A non-
mid sized carriers. These carriers have annual revenues in excess of 
$7.240 billion, therefore it is likely that these companies employ more 
than 1,500 employees and are not small businesses under the SBA's 
definition for Wired Telecommunications Carriers.
    13. In this Report and Order the Commission adopts the Joint 
Conference's recommendations to reinstate the following Part 32 Class A 
accounts: Account 5230, Directory revenue, Account 6621, Call 
completion services, Account 6622, Number services, Account 6623, 
Customer services, Account 6561, Depreciation expense--
telecommunications plant in service; Account 6562, Depreciation 
expense--property held for future telecommunications use; Account 6563, 
Amortization expense--tangible; Account 6564 Amortization expense--
intangible; Account 6565, Amortization expense--other. These accounting 
changes are mandatory only for non-mid-sized Class A ILECs. The 
reinstatement of these accounts, however, will not impose any 
additional burden on non-mid-sized Class A ILECs because the 
Commission's prior action to aggregate the accounts has been suspended. 
Similarly, the Commission's reinstatement of the sheath kilometer 
reporting requirement in the ARMIS 43-07 will not impose any additional 
burden on non-mid-sized Class A ILECs. Non-mid-sized Class A ILECs are 
meeting these requirements at the current time, therefore the rule 
changes in this Report and Order will impose no economic burden.
    14. Although the Commission declines to adopt any new accounts, it 
will require that non-mid-sized Class A ILECs maintain subsidiary 
record categories for unbundled network element revenues, resale 
revenues, reciprocal compensation revenues, and other interconnection 
revenues in the accounts in which these revenues are currently 
recorded. The use of subsidiary record categories allows carriers to 
use whatever mechanisms they choose, including those currently in 
place, to identify the relevant amounts as long as the information can 
be made available to state and federal regulators upon request. Also, 
the Commission is requiring the ARMIS reporting of the wholesale and 
retail percentages applicable to Account 6623, Customer services. The 
use of subsidiary record categories for interconnection revenue and the 
ARMIS reporting of wholesale retail percentages do not require massive 
changes to the ILECs' accounting systems and are far less burdensome 
alternatives than the creation of new accounts and/or subaccounts.
    15. Even if there are mid-sized Class A carriers or Class B 
carriers that are small businesses within the SBA's definition (i.e., 
with fewer than 1,500 employees) that may elect to comply with the 
rules, the impact of the rules is economically de minimis and 
negligible. As discussed above, compliance with the rules adopted 
herein imposes no new burdens. Accordingly, even if there is economic 
impact on any such small carrier, it is not significant. Therefore, we 
certify that the requirements of the Report and Order will not have a 
significant economic impact on a substantial number of small entities.
    16. The Commission will send a copy of the Report and Order, 
including a copy of this Final Regulatory Flexibility Certification, in 
a report to Congress pursuant to the Congressional Review Act. In 
addition, the Report and Order and this final certification will be 
sent to the Chief Counsel for Advocacy of the

[[Page 53648]]

SBA, and will be published in the Federal Register. Ordering Clauses
    17. Accordingly, it is ordered that pursuant to sections 1, 4, 201-
205, 215 and 218-220 of the Communications Act of 1934, as amended, 47 
U.S.C. 151, 154, 201-205, 215, and 218-220, Part 32 of the Commission's 
rules, 47 CFR part 32, is amended as described above.
    18. It is further ordered that pursuant to section 220(g) of the 
Communications Act of 1934, as amended, 47 U.S.C. 220(g), changes to 
our part 32, System of Accounts, adopted in this Report and Order shall 
take effect six months after publication in the Federal Register 
following OMB approval, unless a notice is published in the Federal 
Register stating otherwise. We will, however, permit carriers to 
implement Part 32 accounting changes as of January 1, 2005.
    19. It is further ordered that pursuant to sections 1, 4, and 220 
of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154, and 
220, and section 1.401 of the Commission's rules, 47 CFR 1.401, the 
Petition of BellSouth, SBC and Verizon for Reconsideration and the SBC 
Communications, Inc. Petition for Reconsideration are granted in part, 
to the extent indicated herein, and denied in part.
    20. It is further ordered that pursuant to the authority contained 
in sections 1, 4(i), 4(j), 201-205, 215, and 218-220 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), 
201-205, 215 and 218-220, FCC Report 43-07, the Infrastructure Report, 
is revised as set forth above.
    21. It is further ordered that pursuant to sections 1, 4(i), 4(j), 
5(c), 201, 202, 219 and 220 of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 154(i), 154(j), 155(c), 201, 202, 219 and 220, 
section 1.3 of the Commission's rules, 47 CFR 1.3, and sections 553(b) 
and 553(d)(3) of the Administrative Procedure Act, 5 U.S.C. 553(b), 
553(d)(3), implementation of certain rule modifications described in 
paragraph 3, above, is suspended from July 1, 2004, through December 
31, 2004.
    22. It is further ordered that pursuant to the authority contained 
in section 0.291 of the Commission's rules, 47 CFR 0.291, the Wireline 
Competition Bureau is delegated authority to implement all changes to 
ARMIS reporting as set forth above.
    23. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Report and Order, including the Final Regulatory 
Flexibility Certification, to the Chief Counsel for Advocacy of the 
Small Business Administration.

List of Subjects

47 CFR Part 32

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

47 CFR Part 51

    Communications common carriers, Telecommunications.

47 CFR Part 65

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone.

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

Rule Changes

0
For the reasons set forth in the preamble, amend parts 32, 51, and 65 
of title 47 of the Code of Federal Regulations as follows:

PART 32--UNIFORM SYSTEM OF ACCOUNTS FOR TELECOMMUNICATIONS 
COMPANIES

0
1. The authority citation for part 32 continues to read as follows:

    Authority: 47 U.S.C. 154(i), 154(j) and 220 as amended, unless 
otherwise noted.

0
2. Section 32.11 is amended by revising paragraph (a) to read as 
follows:


Sec.  32.11  Classification of companies.

    (a) For purposes of this section, the term ``company'' or 
``companies'' means incumbent local exchange carrier(s) as defined in 
section 251(h) of the Communications Act, and any other carriers that 
the Commission designates by Order. Incumbent local exchange carriers' 
successor or assign companies, as defined in section 251(h)(1)(B)(ii) 
of the Communications Act, that are found to be non-dominant by the 
Commission, will not be subject to this Uniform System of Accounts.
* * * * *

0
3. Section 32.27 is amended by revising paragraph (a) to read as 
follows:


Sec.  32.27  Transactions with affiliates.

    (a) Unless otherwise approved by the Chief, Wireline Competition 
Bureau, transactions with affiliates involving asset transfers into or 
out of the regulated accounts shall be recorded by the carrier in its 
regulated accounts as provided in paragraphs (b) through (f) of this 
section.
* * * * *

0
4. Section 32.1280 is amended by revising paragraph (d) to read as 
follows:


Sec.  32.1280  Prepayments.

* * * * *
    (d) The cost of preparing, printing, binding, and delivering 
directories and the cost of soliciting advertisements for directories, 
except minor amounts which may be charged directly to Account 6622, 
Number services. These prepaid directory expenses shall be cleared to 
Account 6622 by monthly charges representing that portion of the 
expenses applicable to each month.
* * * * *

0
5. Section 32.2000 is amended by revising paragraph (g)(5) to read as 
follows:


Sec.  32.2000  Instructions for telecommunications plant accounts.

* * * * *
    (g) * * *
    (5) Upon direction or approval from this Commission, the company 
shall credit Account 3100, Accumulated Depreciation, and charge Account 
1438, Deferred Maintenance, retirements and other deferred charges, 
with the unprovided-for loss in service value. Such amounts shall be 
distributed from Account 1438 to Account 6561, Depreciation expense--
Telecommunications plant in service, or Account 6562, Depreciation 
expense--property held for future telecommunications use, over such 
period as this Commission may direct or approve.
* * * * *

0
6. Section 32.2005 is amended by revising paragraphs (b)(1) and (b)(4) 
to read as follows:


Sec.  32.2005  Telecommunications Plant Adjustment.

* * * * *
    (b) * * *
    (1) Debit amounts may be charged in whole or in part, or amortized 
over a reasonable period through charges to Account 7300, Nonoperating 
income and expense, without further direction or approval by this 
Commission. When specifically approved by this Commission, or when the 
provisions of paragraph (b)(3) of this section apply, debit amounts 
shall be amortized to Account 6565, Amortization expense--other.
* * * * *
    (4) Within one year from the date of inclusion in this account of a 
debit or credit amount with respect to a current acquisition, the 
company may dispose of the total amount from an acquisition of 
telephone plant by a lump-sum

[[Page 53649]]

charge or credit, as appropriate, to Account 6565 without further 
approval of this Commission, provided that such amount does not exceed 
$100,000 and that the plant was not acquired from an affiliated 
company.

0
7. Section 32.2682 is amended by revising paragraph (c) to read as 
follows:


Sec.  32.2682  Leasehold improvements.

* * * * *
    (c) Amounts contained in this account shall be amortized over the 
term of the related lease. For Class A companies, except mid-sized 
incumbent local exchange carriers, the amortization associated with the 
costs recorded in the Leasehold improvement account will be credited 
directly to this asset account, leaving a balance representing the 
unamortized cost.

0
8. Section 32.2690 is amended by revising paragraph (c) to read as 
follows:


Sec.  32.2690  Intangibles.

* * * * *
    (c) The cost of other intangible assets, not including software, 
having a life of one year or less shall be charged directly to Account 
6564, Amortization expense--intangible. Such intangibles acquired at 
small cost may also be charged to Account 6564, irrespective of their 
term of life. The cost of software having a life of one year or less 
shall be charged directly to the applicable expense account with which 
the software is associated.
* * * * *

0
9. Section 32.3000 is amended by revising paragraph (b) to read as 
follows:


Sec.  32.3000  Instructions for balance sheet accounts--Depreciation 
and amortization.

* * * * *
    (b) Depreciation and Amortization Accounts to be Maintained by 
Class A and Class B telephone companies, as indicated.

------------------------------------------------------------------------
                                              Class A         Class B
              Account title                   account         account
------------------------------------------------------------------------
Depreciation and amortization:
    Accumulated depreciation............            3100            3100
    Accumulated depreciation--Held for              3200            3200
     future telecommunications use......
    Accumulated depreciation--                      3300            3300
     Nonoperating.......................
    Accumulated depreciation--Tangible..  ..............            3400
    Accumulated depreciation--                      3410  ..............
     Capitalized leases.................
------------------------------------------------------------------------

0
10. Section 32.3100 is amended by revising paragraphs (b) and (d) to 
read as follows:


Sec.  32.3100  Accumulated depreciation.

* * * * *
    (b) This account shall be credited with depreciation amounts 
concurrently charged to Account 6561, Depreciation expense--
telecommunications plant in service. (Note also Account 3300, 
Accumulated depreciation--nonoperating.)
* * * * *
    (d) This account shall be credited with amounts charged to Account 
1438, Deferred maintenance, retirements, and other deferred charges, as 
provided in Sec.  32.2000(g)(4) of this subpart. This account shall be 
credited with amounts charged to Account 6561 with respect to other 
than relatively minor losses in service values suffered through 
terminations of service when charges for such terminations are made to 
recover the losses.

0
11. Section 32.3200 is amended by revising paragraph (b) to read as 
follows:


Sec.  32.3200  Accumulated depreciation--held for future 
telecommunications use.

* * * * *
    (b) This account shall be credited with amounts concurrently 
charged to Account 6562, Depreciation expense--property held for future 
telecommunications use.

0
12. Section 32.3400 is revised to read as follows:


Sec.  32.3400  Accumulated amortization--tangible.

    (a) This account shall be used by Class B companies and shall 
include:
    (1) the accumulated amortization associated with the investment 
contained in Account 2681, Capital leases.
    (2) the accumulated amortization associated with the investment 
contained in Account 2682, Leasehold improvements.
    (b) This account shall be credited with amounts for the 
amortization of capital leases and leasehold improvements concurrently 
charged to Account 6563, Amortization expense--tangible. (Note also 
Account 3300, Accumulated depreciation--nonoperating.)
    (c) When any item carried in Account 2681 or Account 2682 is sold, 
is relinquished, or is otherwise retired from service, this account 
shall be charged with the cost of the retired item. Remaining amounts 
associated with the item shall be debited to Account 7100, Other 
operating income and expenses, or Account 7300, Nonoperating income and 
expense, as appropriate.

0
13. Section 32.3410 is amended by revising paragraph (b) to read as 
follows:


Sec.  32.3410  Accumulated amortization--capitalized leases.

* * * * *
    (b) This account shall be credited with amounts for the 
amortization of capital leases concurrently charged to Account 6563, 
Amortization expense--tangible. (Note also Account 3300, Accumulated 
depreciation--nonoperating.)
* * * * *

0
14. Section 32.4999 is amended by revising paragraphs (c), (f) and (n) 
to read as follows:


Sec.  32.4999  General.

* * * * *
    (c) Commissions. Commissions paid to others or employees in place 
of compensation or salaries for services rendered, such as public 
telephone commissions, shall be charged to Account 6623, Customer 
services, and not to the revenue accounts. Other commissions shall be 
charged to the appropriate expense accounts.
* * * * *
    (f) Subsidiary records--jurisdictional subdivisions and 
interconnection. Subsidiary record categories shall be maintained in 
order that the company may separately report revenues derived from 
charges imposed under intrastate, interstate and international tariff 
filings. Class A carriers shall also maintain subsidiary record 
categories in order that the companies may separately report 
interconnection revenues derived from the following categories: 
Unbundled network element revenues, Resale revenues, Reciprocal 
compensation revenues, and Other interconnection revenues. Such 
subsidiary record categories shall be reported as required by part 43 
of this Commission's Rules and Regulations.
* * * * *

[[Page 53650]]

    (n) Revenue accounts to be maintained.

------------------------------------------------------------------------
                                              Class A         Class B
              Account title                   account         account
------------------------------------------------------------------------
Local network services revenues:
    Basic local service revenue.........  ..............            5000
    Basic area revenue..................            5001  ..............
    Private line revenue................            5040  ..............
    Other basic area revenue............            5060  ..............
Network access service revenues:
    End user revenue....................            5081            5081
    Switched access revenue.............            5082            5082
    Special access revenue..............            5083            5083
Long distance network services revenues:
    Long distance message revenue.......            5100            5100
Miscellaneous revenues:
    Miscellaneous revenue...............            5200            5200
    Directory revenue...................            5230  ..............
Nonregulated revenues:
    Nonregulated operating revenue......            5280            5280
Uncollectible revenues:
    Uncollectible revenue...............            5300            5300
------------------------------------------------------------------------


0
15. Section 32.5001 is amended to revise paragraph (b) to read as 
follows:


Sec.  32.5001  Basic area revenue.

* * * * *
    (b) Revenue derived from charges for nonpublished number or 
additional and boldfaced listings in the alphabetical section of the 
company's telephone directories shall be included in account 5230, 
Directory revenue.
* * * * *

0
16. Section 32.5200 is revised to read as follows:


Sec.  32.5200  Miscellaneous revenue.

    This account shall include revenue derived from the following 
sources. For Class B companies, this account shall also include revenue 
of the type and character required of Class A companies in Account 
5230, Directory revenue.
    (a) Rental or subrental to others of telecommunications plant 
furnished apart from telecommunications services rendered by the 
company (this revenue includes taxes when borne by the lessee). It 
includes revenue from the rent of such items as space in conduit, pole 
line space for attachments, and any allowance for return on property 
used in joint operations and shared facilities agreements. The expense 
of maintaining and operating the rented property, including 
depreciation and insurance, shall be included in the appropriate 
operating expense accounts. Taxes applicable to the rented property 
shall be included by the owner of the rented property in appropriate 
tax accounts. When land or buildings are rented on an incidental basis 
for non-telecommunications use, the rental and expenses are included in 
Account 7300, Nonoperating income and expense.
    (b) Services rendered to other companies under a license agreement, 
general services contract, or other arrangement providing for the 
furnishing of general accounting, financial, legal, patent, and other 
general services associated with the provision of regulated 
telecommunications services. (See also Account 5230.)
    (c) The provision, either under tariff or through contractual 
arrangements, of special billing information to customers in the form 
of magnetic tapes, cards or statements. Special billing information 
provides detail in a format and/or at a level of detail not normally 
provided in the standard billing rendered for the regulated telephone 
services utilized by the customer.
    (d) The performance of customer operations services for others 
incident to the company's regulated telecommunications operations which 
are not provided for elsewhere. (See also Sec. Sec.  32.14(e) and 
32.4999(e)).
    (e) Contract services (plant maintenance) performed for others 
incident to the company's regulated telecommunications operations. This 
includes revenue from the incidental performance of nontariffed 
operating and maintenance activities for others which are similar in 
nature to those activities which are performed by the company in 
operating and maintaining its own telecommunications plant facilities. 
The records supporting the entries in this account shall be maintained 
with sufficient particularity to identify the revenue and associated 
Plant Specific Operations Expenses related to each undertaking. This 
account does not include revenue related to the performance of 
operation or maintenance activities under a joint operating agreement.
    (f) The provision of billing and collection services to other 
telecommunications companies. This includes amounts charged for 
services such as message recording, billing, collection, billing 
analysis, and billing information services, whether rendered under 
tariff or contractual arrangements.
    (g) Charges and credits resulting from contractual revenue pooling 
and/or sharing agreements for activities included in the miscellaneous 
revenue accounts only when they are not identifiable by miscellaneous 
revenue account in the settlement process. (See also Sec.  32.4999(e)). 
The extent that the charges and credits resulting from a settlement 
process can be identified by miscellaneous revenue accounts they shall 
be recorded in the applicable account.
    (h) The provision of transport and termination of local 
telecommunications traffic pursuant to section 251(c) of the 
Communications Act and part 51 of this chapter.
    (i) The provision of unbundled network elements pursuant to section 
251(c) of the Communications Act and part 51 of this chapter.
    (j) This account shall also include other incidental regulated 
revenue such as:
    (1) Collection overages (collection shortages shall be charged to 
Account 6623, Customer services);
    (2) Unclaimed refunds for telecommunications services when not 
subject to escheats;

[[Page 53651]]

    (3) Charges (penalties) imposed by the company for customer checks 
returned for non-payment;
    (4) Discounts allowed customers for prompt payment;
    (5) Late-payment charges;
    (6) Revenue from private mobile telephone services which do not 
have access to the public switched network; and
    (7) Other incidental revenue not provided for elsewhere in other 
Revenue accounts.
    (k) Any definitely known amounts of losses of revenue collections 
due to fire or theft, at customers' coin-box stations, at public or 
semipublic telephone stations, in the possession of collectors en route 
to collection offices, on hand at collection offices, and between 
collection offices and banks shall be charged to Account 6720, General 
and Administrative.

0
17. Section 32.5999 is amended by revising paragraphs (b)(4), (c) and 
(g) as follows:


Sec.  32.5999  General.

* * * * *
    (b) * * *
    (4) In addition to the activities specified in paragraph (b)(3) of 
this section, the appropriate Plant Specific Operations Expense 
accounts shall include the cost of personnel whose principal job is the 
operation of plant equipment, such as general purpose computer 
operators, aircraft pilots, chauffeurs and shuttle bus drivers. 
However, when the operation of equipment is performed as part of other 
identifiable functions (such as the use of office equipment, capital 
tools or motor vehicles), the operators' cost shall be charged to 
accounts appropriate for those functions. (For costs of operator 
services personnel, see Accounts 6621, Call completion services, and 
6622, Number services, and for costs of test board personnel see 
Account 6533.)
    (c) Plant nonspecific operations expense. The Plant Nonspecific 
Operations Expense accounts shall include expenses related to property 
held for future telecommunications use, provisioning expenses, network 
operations expenses, and depreciation and amortization expenses. 
Accounts in this group (except for Account 6540, Access expense, and 
Accounts 6560 through 6565) shall include the costs of performing 
activities described in narratives for individual accounts. These costs 
shall also include the costs of supervision and office support of these 
activities.
* * * * *
    (g) Expense accounts to be maintained.

------------------------------------------------------------------------
                                              Class A         Class B
              Account title                   account         account
------------------------------------------------------------------------
                        Income Statement Accounts
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½
Plant specific operations expense:
    Network support expense.............  ..............            6110
    Motor vehicle expense...............            6112  ..............
    Aircraft expense....................            6113  ..............
    Tools and other work equipment                  6114  ..............
     expense............................
    General support expenses............  ..............            6120
    Land and building expenses..........            6121  ..............
    Furniture and artworks expense......            6122  ..............
    Office equipment expense............            6123  ..............
    General purpose computers expense...            6124  ..............
    Central office switching expense....  ..............            6210
    Non-digital switching expense.......            6211  ..............
    Digital electronic switching expense            6212  ..............
    Operators system expense............            6220            6220
    Central office transmission expenses  ..............            6230
    Radio systems expense...............            6231  ..............
    Circuit equipment expense...........            6232  ..............
    Information origination/termination   ..............            6310
     expense............................
    Station apparatus expense...........            6311  ..............
    Large private branch exchange                   6341  ..............
     expense............................
    Public telephone terminal equipment             6351  ..............
     expense............................
    Other terminal equipment expense....            6362  ..............
    Cable and wire facilities expenses..  ..............            6410
    Poles expense.......................            6411  ..............
    Aerial cable expense................            6421  ..............
    Underground cable expense...........            6422  ..............
    Buried cable expense................            6423  ..............
    Submarine and deep sea cable expense            6424  ..............
    Intrabuilding network cable expense.            6426  ..............
    Aerial wire expense.................            6431  ..............
    Conduit systems expense.............            6441  ..............
Plant nonspecific operations expense:
    Other property plant and equipment    ..............            6510
     expenses...........................
    Property held for future                        6511  ..............
     telecommunications use expense.....
    Provisioning expense................            6512  ..............
    Network operations expenses.........  ..............            6530
    Power expense.......................            6531  ..............
    Network administration expense......            6532  ..............
    Testing expense.....................            6533  ..............
    Plant operations administration                 6534  ..............
     expense............................
    Engineering expense.................            6535  ..............
    Access expense......................            6540            6540
    Depreciation and amortization         ..............            6560
     expenses...........................
    Depreciation expense--                          6561  ..............
     telecommunications plant in service
    Depreciation expense--property held             6562  ..............
     for future telecommunications use..

[[Page 53652]]

 
    Amortization expense--tangible......            6563  ..............
    Amortization expense--intangible....            6564  ..............
    Amortization expense--other.........            6565  ..............
Customer operations expense:
    Marketing...........................  ..............            6610
    Product management and sales........            6611  ..............
    Product advertising.................            6613  ..............
    Services............................  ..............            6620
    Call completion services............            6621  ..............
    Number services.....................            6622  ..............
    Customer services...................            6623  ..............
Corporate operations expense:
    General and administrative..........            6720            6720
    Provision for uncollectible notes               6790            6790
     receivable.........................
------------------------------------------------------------------------


0
18. Section 32.6560 is revised to read as follows:


Sec.  32.6560  Depreciation and amortization expenses.

    Class B telephone companies shall use this account for expenses of 
the type and character required of Class A companies in Accounts 6561 
through 6565.
0
19. Add Sec.  32.6562 to read as follows:


Sec.  32.6562  Depreciation expense--property held for future 
telecommunications use.

    This account shall include the depreciation expense of capitalized 
costs included in Account 2002, Property held for future 
telecommunications use.
0
20. Section 32.6620 is revised as follows:


Sec.  32.6620  Services.

    Class B telephone companies shall use this account for expenses of 
the type and character required of Class A companies in Accounts 6621 
through 6623.

PART 51--INTERCONNECTION

0
21. The authority citation for part 51 continues to read:

    Authority: Sections 1-5, 7, 201-05, 207-09, 218, 225-27, 251-54, 
256, 271, 303(r), 332, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 
151-55, 157, 201-05, 207-09, 218, 225-27, 251-54, 256, 271, 303(r), 
332, 47 U.S.C. 157 note, unless otherwise noted.

0
22. Section 51.609 is amended by revising paragraphs (c)(1), (c)(3), 
and (d) to read as follows:


Sec.  51.609  Determination of avoided retail costs.

* * * * *
    (c) * * *
    (1) Include as direct costs, the costs recorded in USOA accounts 
6611 (product management and sales), 6613 (product advertising), 6621 
(call completion services), 6622, (number services), and 6623 (customer 
services) (Sec. Sec.  32.6611, 32.6613, 32.6621, 32.6622, and 32.6623 
of this chapter);
* * * * *
    (3) Not include plant-specific expenses and plant non-specific 
expenses, other than general support expenses (Sec. Sec.  32.6112-6114, 
32.6211-6565 of this chapter).
    (d) Costs included in accounts 6611, 6613 and 6621-6623 described 
in paragraph (c) of this section (Sec. Sec.  32.6611, 32.6613, and 
32.6621-6623 of this chapter) may be included in wholesale rates only 
to the extent that the incumbent LEC proves to a state commission that 
specific costs in these accounts will be incurred and are not avoidable 
with respect to services sold at wholesale, or that specific costs in 
these accounts are not included in the retail prices of resold 
services. Costs included in accounts 6112-6114 and 6211-6565 described 
in paragraph (c) of this section (Sec. Sec.  32.6112-32.6114, 32.6211-
32.6565 of this chapter) may be treated as avoided retail costs, and 
excluded from wholesale rates, only to the extent that a party proves 
to a state commission that specific costs in these accounts can 
reasonably be avoided when an incumbent LEC provides a 
telecommunications service for resale to a requesting carrier.
* * * * *

PART 65--INTERSTATE RATE OF RETURN PRESCRIPTION PROCEDURES AND 
METHODOLOGIES

0
23. The authority citation for part 65 continues to read:

    Authority: Secs. 4, 201, 202, 203, 205, 218, 403, 48 Stat., 
1066, 1072, 1077, 1094, as amended, 47 U.S.C. 151, 154, 201, 202, 
203, 204, 205, 218, 219, 220, 403.

0
24. Section 65.450 is amended by revising paragraphs (a) and (b)(1) to 
read as follows:


Sec.  65.450  Net income.

    (a) Net income shall consist of all revenues derived from the 
provision of interstate telecommunications services regulated by this 
Commission less expenses recognized by the Commission as necessary to 
the provision of these services. The calculation of expenses entering 
into the determination of net income shall include the interstate 
portion of plant specific operations (Accounts 6110-6441), plant 
nonspecific operations (Accounts 6510-6565), customer operations 
(Accounts 6610-6623), corporate operations (Accounts 6720-6790), other 
operating income and expense (Account 7100), and operating taxes 
(Accounts 7200-7250), except to the extent this Commission specifically 
provides to the contrary.
    (b) * * *
    (1) Gains related to property sold to others and leased back under 
capital leases for use in telecommunications services shall be recorded 
in Account 4300, Other long-term liabilities and deferred credits, and 
credited to Account 6563, Amortization expense--tangible, over the 
amortization period established for the capital lease;
* * * * *
[FR Doc. 04-18934 Filed 9-1-04; 8:45 am]
BILLING CODE 6712-01-P