[Federal Register Volume 82, Number 85 (Thursday, May 4, 2017)]
[Rules and Regulations]
[Pages 20833-20843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07175]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1, 32, and 65

[WC Docket No. 14-130, CC Docket No. 80-286; FCC 17-15]


Comprehensive Review of the Uniform System of Accounts, 
Jurisdictional Separations and Referral to the Federal-State Joint 
Board

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) completes its proceeding to review the Uniform System of 
Accounts (USOA) to minimize the compliance burdens on carriers while 
ensuring that the agency retains access to the information it needs to 
fulfill its regulatory duties.

DATES: The rules adopted in this document shall become effective on 
January 1, 2018, with the exception of amendments to Sec. Sec.  1.1409 
and 32.1, which shall become effective following publication in the 
Federal Register of a document announcing approval by OMB of these 
amendments.

FOR FURTHER INFORMATION CONTACT: Robin Cohn, Wireline Competition 
Bureau, Pricing Policy Division at (202) 418-2747 or at 
[email protected], or Nicole Ongele, Office of Managing Director at 
(202) 418-2991 or at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order, WC Docket No. 14-130, CC Docket 80-286; FCC 17-15, adopted 
February 23, 2017 and released February 24, 2017. The full text of this 
document may be downloaded at https://transition.fcc.gov/Daily_Releases/Daily_Business/2017/db0228/FCC-17-15A1.pdf. In this 
present document, we have assessed the effects of our streamlining the 
part 32 Uniform System of Accounts (part 32 USOA) accounting rules and 
find that the Commission's actions will result in overall reduced 
regulatory burdens for both price cap and rate-of-return carriers, 
including small businesses with fewer than 25 employees. In addition, 
the Report and Order allows price cap carriers to elect to use GAAP for 
all regulatory accounting purposes so long as they comply with targeted 
accounting rules. Because incumbent LECs subject to price cap 
regulation are among the largest of telecommunications companies, we do 
not anticipate any impact from this action on small businesses with 
fewer than 25 employees.

[[Page 20834]]

Synopsis

I. Introduction

    1. In this Report and Order (Order), we complete our proceeding to 
review our part 32 Uniform System of Accounts (USOA) to consider ways 
to minimize the compliance burdens on carriers while ensuring that the 
agency retains access to the information it needs to fulfill its 
regulatory duties. Section 220 of the Communications Act of 1934, as 
amended (the Act), authorizes the Commission to prescribe the system of 
accounts to be used by carriers subject to the Act, and the USOA and 
its predecessors have historically performed this function for 
regulated telephone companies. But the USOA comes with a cost: Many 
regulated companies must maintain two sets of books--one for financial 
reporting and another for regulatory purposes--with the attendant costs 
of additional training for accountants, creating a second set of 
customized accounting software, and auditing two sets of processes for 
compliance.
    2. We now conclude that, in light of the Commission's actions in 
areas of price cap regulation, universal service reform, and 
intercarrier compensation reform, as well as the advancement of robust 
intermodal competition in the market for telephone services, the duty 
to maintain two sets of accounts is generally not necessary for price 
cap carriers. Moreover, with respect to all carriers, we streamline and 
eliminate outdated accounting rules no longer needed to fulfill our 
statutory or regulatory duties. By reducing the costly burden of 
outdated regulatory requirements placed upon carriers, today's reforms 
give carriers the ability to better allocate scarce resources toward 
expanding modern networks which are critical to bringing economic 
opportunity, job creation, and civic engagement to all Americans.

II. Background

    3. Section 220 of the Act requires the Commission to ``prescribe a 
uniform system of accounts for use by telephone companies.'' The 
Commission adopted its first accounting system in 1935 as parts 31 and 
33 of the Commission's rules ``when a rigid institutionalized 
regulatory environment was expected to continue forever.'' In 1986, the 
Commission adopted the USOA contained in part 32 to respond to the 
``introduction of competition and an explosion of new products and 
services to which the existing systems could not respond without 
massive modification.''
    4. The Commission intended the USOA to ``accommodate generally 
accepted accounting principles (GAAP) to the extent regulatory 
considerations permit.'' As the Commission explained: GAAP is that 
common set of accounting concepts, standards, procedures and 
conventions which are recognized by the accounting profession as a 
whole and upon which most nonregulated enterprises base their external 
financial statements and reports. It directs the recording of financial 
events and transactions and relates to how assets, liabilities, 
revenues and expenses are to be identified, measured, and reported. 
While part 32 specifies a chart of accounts and the types of 
transactions to be maintained in each account, GAAP allows companies to 
determine their own system of accounts subject to certain principles.
    5. The Commission adopted the USOA ``at a time when regulators were 
required or inclined to organize telecommunications costs in a manner 
that allowed a logical mapping of these costs to telecommunications 
rate structures.'' Accordingly, the USOA was designed to complement 
rate-of-return regulation and the system of tariffed interstate access 
charges that incumbent LECs were required to follow at that time. Part 
32 required carriers to record their assets, expenses, and revenues in 
prescribed accounts. Part 64's cost assignment rules apportioned the 
investment, expenses, and revenues between regulated and nonregulated 
activities. Part 36 prescribed rules for separating regulated 
investment, expenses, and revenues between the interstate and 
intrastate jurisdictions. Part 69 then specified how carriers were to 
apportion costs assigned to the interstate jurisdiction among the 
interexchange service category and the access categories and rate 
elements. In other words, the access rates carriers charged were 
directly tied to the costs of the carriers, and thus the accurate 
recording of such costs in the USOA.
    6. From 1984 until 1991, virtually all interstate access services 
were subject to rate-of-return regulation, under which carriers' 
charges are set to cover an entity's regulated operating expenses and 
to provide the opportunity to earn a prescribed return on the capital 
the company uses to provide regulated services. Earnings were monitored 
through part 32 data that incumbent LECs filed annually through the 
Commission's Automated Reporting Management Information System (ARMIS). 
Future carriers' charges were adjusted if profit margins were above or 
below the prescribed rate of return.
    7. In 1991, the Commission adopted price cap regulation for the 
largest incumbent local exchange carriers (LECs) while making it 
optional for other incumbents. Price cap regulation is a form of 
incentive regulation that relies on a series of Price Cap Indexes 
(PCIs) to limit the prices that these carriers charge for services to 
levels that are presumed to be just and reasonable. Today, more than 95 
percent of access lines are served by price cap carriers.
    8. Price cap regulation eliminated the direct link between changes 
in allocated accounting costs and changes in price, but as originally 
implemented, it did not sever the connection between accounting costs 
and prices entirely. The 1991 LEC price cap plan required earnings 
above prescribed levels to be shared with ratepayers and provided for 
upward adjustment of PCIs if earnings fell below a prescribed level. 
LECs were also permitted to file above-cap rates if cost-based showings 
demonstrated that a rate within the cap would be confiscatory. In 1997, 
the Commission eliminated the sharing mechanism, and in 1999, the 
Commission eliminated the low-end adjustment for incumbent LECs that 
received and exercised pricing flexibility. This had the practical 
effect of severing the connection between prices and the need to 
account for costs from a regulatory point of view.
    9. In the years following passage of the Telecommunications Act of 
1996, the Commission reviewed and streamlined its accounting rules on 
several occasions. In 1997, the Commission clarified that ``only 
incumbent local exchange carriers'' are subject to specific USOA 
requirements and other accounting rules. In 1999, the Commission 
``greatly streamline[d]'' its depreciation requirements for price cap 
carriers, and established a waiver process whereby these carriers could 
obtain the ability to set their own depreciation rates in accordance 
with GAAP. In 2000, the Commission streamlined part 32 obligations by 
eliminating the expense matrix filing requirement, reducing the cost 
allocation manual audit requirement, relaxing certain affiliate 
transaction requirements for services, and eliminating the 
reclassification requirement for certain plant under construction. In 
2001, it consolidated and streamlined Class A accounting requirements, 
relaxed additional aspects of the affiliate transaction rules, reduced 
the cost of regulatory compliance with cost allocation rules for mid-
sized incumbent LECs, and reduced financial reporting requirements. And 
in 2008, the Commission forbore from applying its cost assignment rules 
and financial reporting rules to AT&T, Verizon, and Qwest, finding that 
its need for cost data had significantly diminished with

[[Page 20835]]

continuing refinement of price cap ratemaking and universal service 
reforms.
    10. In 2012, USTelecom filed a petition pursuant to section 10 of 
the Act requesting that the Commission forbear from enforcing certain 
``legacy telecommunications regulations.'' In the USTelecom Forbearance 
Order, the Commission extended the forbearance it had granted to AT&T, 
Verizon, and Qwest to other price cap carriers, but declined to forbear 
from applying the USOA to these carriers. Nevertheless, the Commission 
``acknowledge[d] that further streamlining of our rules is likely 
appropriate,'' and promised to ``conduct a comprehensive review of the 
Part 32 Uniform System of Accounts'' with the aim of ``minimiz[ing] the 
compliance burdens of our regulations while ensuring our continued 
access to the relevant financial information necessary to fulfill our 
duties.''
    11. On September 15, 2014, the Commission published the 
Comprehensive Review of Uniform System of Accounts, Notice of Proposed 
Rulemaking, 79 FR 54942 (2014 NPRM), initiating the instant proceeding 
to reform its rules to ease the accounting burdens on carriers. First, 
the 2104 NPRM proposed to streamline the Commission's USOA accounting 
rules while preserving their existing structure. In this regard, the 
2014 NPRM proposed to consolidate Class A and Class B accounts, to 
revise our rules regarding continuing property records for price cap 
carriers, and to better align with GAAP the USOA's asset accounting 
rules, its Allowance-for-Funds-Used-During-Construction (AFUDC) rules, 
its materiality rules, and its rules requiring that carriers submit all 
prior period adjustments (PPAs) and unusual or extraordinary items to 
the Commission for review and approval. It sought comment on whether to 
better align the USOA's depreciation and cost of removal-and-salvage 
accounting rules with GAAP. Second, the 2014 NPRM also sought focused 
comment on additional specific requirements that should be applied to 
price cap carriers. These included ``eliminating the requirement that 
price cap carriers comply with the USOA and imposing targeted 
accounting requirements that fit our specific statutory needs.'' Third, 
it sought comment on several related issues, including state 
requirements, rate effects, implementation, and legal authority. The 
Commission received ten comments and seven reply comments in response 
to the 2014 NPRM.

II. Discussion

    12. In this Order, we make significant revisions to our part 32 
USOA accounting rules and take a number of steps to substantially 
reduce the accounting burdens on incumbent LECs. First, we streamline 
the USOA for all carriers, amending 39 rules effective January 1, 2018. 
Second, we allow price cap carriers to elect to use GAAP for all 
regulatory accounting purposes so long as they comply with targeted 
accounting rules. These additional reforms will eliminate burdensome 
accounting requirements that serve no federal purpose for electing 
price cap carriers.
    13. The reforms we adopt herein will significantly reduce the 
regulatory burdens associated with maintaining separate sets of 
financial accounts. As previously noted, while part 32 specifies a 
chart of accounts and the types of transactions to be maintained in 
each account, GAAP allows companies to determine their own system of 
accounts subject to certain principles in the form of an overarching 
system of broad accounting guidelines that address the recording of 
assets, liabilities, and stockholders' equity. Further, GAAP allows 
carriers to record financial transactions in a manner that reflects the 
broader nature of the enterprise, while part 32 compliance requires 
carriers to maintain two separate sets of financial and accounting 
books for federal regulatory purposes. Commenters emphasized the 
burdensome nature of this requirement, which we acknowledge here.

A. Streamlining the USOA

    14. In this section, we adopt revisions to part 32 that 
significantly streamline the accounting requirements applicable to 
incumbent LECs. Specifically, we adopt our proposals to consolidate 
Class A and Class B accounts and to revise our rules regarding 
continuing property records for price cap carriers. We better align 
with GAAP the USOA's asset accounting rules, its AFUDC rules, and its 
materiality rules. And we decline to amend the USOA's depreciation and 
cost of removal-and-salvage rules. These revisions, with the exception 
of the continuing property records rules, will apply to all carriers 
subject to part 32's USOA, but not to any price cap carriers that elect 
to use GAAP accounting.
1. Consolidating the Class A and Class B Accounts
    15. Part 32, as authorized by section 220(h) of the Act, divides 
incumbent LECs into two classes for accounting purposes based on annual 
revenues: Class A (carriers with annual revenues equal to or above 
$152.5 million) and Class B (smaller carriers). These rules require 
Class A carriers to generally maintain 138 accounts, which provide more 
detailed records of investment, expense, and revenue than the 80 
accounts that smaller Class B carriers are required to maintain. When 
the Commission adopted this regime, it drew this line to ``adopt a far 
less burdensome system'' for smaller carriers--but one that was 
nevertheless sufficient to meet its statutory obligations. The 
Commission has gradually altered these requirements as regulatory needs 
and market conditions have changed.
    16. We now eliminate the classification of carriers, so that all 
carriers subject to part 32's USOA will be required to keep only the 
streamlined Class B accounts and will otherwise be treated as Class B 
carriers for purposes of part 32. Collapsing the distinction between 
Class A and Class B carriers will simplify our rules and reduce the 
number of accounts that Class A carriers must keep by one-third. Doing 
so will ensure a more uniform treatment of accounts for carriers 
subject to the USOA, simplifying both compliance for carriers and 
oversight by the Commission. Furthermore, we find that eliminating 
Class A treatment is sufficient to meet our regulatory needs, since no 
rate-of-return carrier (i.e., those where cost accounting is most 
important) is required by the Commission's rules today to keep Class A 
accounts.
    17. Ad Hoc disagrees, arguing that eliminating the distinction 
would prevent the Commission from carrying out its statutory duties. Ad 
Hoc argues that we should retain the Class A accounts for cable and 
wire facilities, depreciation, amortization, amortizable assets, and 
revenue reporting for the basic local exchange category that includes 
private line revenue because doing so has ``obvious import, both for 
the setting of pole and conduit rates and for the ongoing special 
access proceeding.''
    18. Contrary to Ad Hoc's contentions, maintenance of accounts at 
the Class B level, coupled with the Commission's ability to require 
carriers to produce additional accounting data when there is an express 
federal need, will enable us to ensure that Class A carriers' rates are 
just and reasonable and not unreasonably discriminatory. Indeed, no 
rate-of-return carrier currently qualifies as a Class A carrier, 
although the Commission's need for part 32 accounting data are 
unquestionably greater for carriers subject to rate-of-return 
regulation and legacy universal

[[Page 20836]]

service mechanisms that tie federal support to a carrier's reported 
costs. And Ad Hoc offers nothing beyond mere assertions that the rates 
would differ in any material way with Class B treatment, and ignores 
the fact that the Commission neither relied on part 32 accounts when 
formulating its special access data collection nor relied on any 
existing part 32 Class A account in the 2014 NPRM. We accordingly find 
Ad Hoc's assertions speculative and baseless.
    19. Furthermore, we conclude that section 402(c) of the 
Telecommunications Act of 1996 does not prohibit us from eliminating 
the distinction between Class A and Class B carriers. That section 
states that ``[i]n classifying carriers according to section 32.11 of 
[the FCC's] regulations . . . the Commission shall adjust the revenue 
requirements to account for inflation . . . annually.'' In the 2014 
NPRM, the Commission did ``not read this provision to require the 
Commission to classify carriers for purposes of Part 32 accounting 
rules, but instead to require annual adjustments so long as the 
Commission continues to classify carriers for these purposes.'' The 
only party to address this issue agreed with this interpretation. We 
adopt it now.
2. Continuing Property Records for Price Cap Carriers
    20. In the USTelecom Forbearance Order, the Commission concluded 
that forbearance from the continuing property records requirements in 
Sec.  32.2000(e) and (f) was warranted for price cap carriers, as long 
as they could demonstrate in compliance plans how they would ``maintain 
the records necessary to track substantial assets and investment in an 
accurate, auditable manner that enables them to verify account balances 
in their Part 32 Uniform System of Accounts, make such property 
information available to the Commission upon request, and ensure 
maintenance of such data.'' In the 2014 NPRM, the Commission sought 
comment on memorializing these requirements in a rule. USTelecom 
supports requiring price cap carriers to maintain property records 
necessary to track substantial investments in an auditable fashion that 
enables verification and the ability to make such information available 
to the Commission upon request. These data can be maintained by 
utilizing GAAP, according to USTelecom. No party opposed the property 
records proposal advanced in the 2014 NPRM.
    21. As proposed in the 2014 NPRM, we revise part 32 to require 
price cap carriers with a continuing part 32 accounting obligation to 
maintain continuing property records necessary to track substantial 
assets and investments in an accurate, auditable manner that enables 
them to verify their accounting books, make such property information 
available to the Commission upon request, and ensure the maintenance of 
such data. This rule change reflects the expectations and commitments 
connected with the forbearance relief we granted in the USTelecom 
Forbearance Order.
    22. We decline at this time to require price cap carriers to file 
compliance plans, as proposed by the 2014 NPRM, to the extent they have 
not done so. No commenter addressed this issue. In the absence of 
record support for the proposal, we decline to adopt any compliance 
plan filing requirement.
3. Aligning the USOA More Closely With GAAP
    23. In the 2014 NPRM, the Commission proffered several different 
proposals for aligning the USOA more closely with GAAP. We adopt the 
proposals to align with GAAP the USOA's asset accounting rules, its 
AFUDC rules, and its materiality rules. First, we align our definition 
of original cost to align with GAAP so that carriers carry an asset at 
its purchase price when it was acquired, even if its value has 
increased or has declined when it goes into regulated service. Second, 
we allow carriers to reprice an asset at market value after a merger or 
acquisition. The record is barren of evidence that these requirements 
for carriers to price assets differently than they would in the 
ordinary course of business retain any value.
    24. Third, we find that using GAAP principles to determine AFUDC 
should be the applicable standard. We revise the rules accordingly. As 
the Commission noted at the time, the resulting difference in 
accounting is immaterial from a regulatory perspective but may increase 
the administrative burdens of compliance for carriers otherwise 
required to meet GAAP standards.
    25. Fourth, we revise our rules to incorporate the concept of 
materiality. As USTelecom explains, ``USOA has no materiality standard 
and requires all transactions be booked regardless of any materiality 
consideration. This forces carriers to justify every accounting 
discrepancy, no matter how trivial and immaterial, thereby adding 
unnecessary costs to the preparation and audit of a carrier's 
accounting records.'' We agree and incorporate the GAAP standard of 
materiality for price cap carriers. We believe the flexible GAAP 
standard offers the ``case-by-case'' standard proposed by the Nevada 
Public Utilities Commission--and we agree with the state commission 
that the Commission will ``ultimately be[] the arbiter'' of whether a 
carrier has complied with GAAP's materiality standard.
    26. We also agree with Alexicon that ``it would be beneficial to 
NECA and its pool members if the Commission adopted a definition of 
materiality that provided guidance related to NECA's review 
procedures.'' Indeed, more particular guidance may be especially 
important for carriers receiving legacy universal service support 
because federal support is tied to the reported costs of such carriers. 
We adopt the general materiality guidelines promulgated by the Auditing 
Standards Board. Materiality levels are in large part a matter of 
professional judgment, and according to generally accepted auditing 
standards, may consider such factors as:
    (1) The elements of the financial statements (for example, assets, 
liabilities, equity, income, and expenses) and the financial statement 
measures defined in generally accepted accounting principles (for 
example, financial position, financial performance, and cash flows), or 
other specific requirements;
    (2) Where there are financial statement items on which, for the 
particular entity, users' attention tends to be focused (for example, 
for the purpose of evaluating financial performance);
    (3) The nature of the entity and the industry in which it operates; 
and
    (4) The size of the entity, nature of its ownership, and the way it 
is financed.
    Because independent auditors are required to undertake assessments 
of materiality and risk in all audit engagements, their judgment can 
and should be relied upon when determining materiality levels for 
purposes of regulatory reporting and review.
    27. In contrast, we decline at this time to revise the USOA's 
depreciation procedures or its rules for cost of removal-and-salvage 
accounting. As the Rural Associations argue, and we agree, revising 
USOA's depreciation rules might result in unpredictable changes in 
rates and universal service funding mechanisms--potentially rendering 
universal service support unpredictable absent further study. And we 
find the record too spare to quell the concern we recognized in the 
2014 NPRM that changing the USOA's rules for cost of removal-and-
salvage accounting could have a significant impact on pole attachment 
rates.

[[Page 20837]]

    28. We are unconvinced that the generic opposition in the record to 
the wholesale adoption of GAAP for rate-of-return carriers warrants 
rejecting the targeted reforms we adopt in this Section. Nor are we 
convinced by the Rural Associations' argument that no changes should be 
made to the USOA for rate-of-return carriers. The association does not 
identify any of the reforms we are adopting as significant, nor do we 
find based on the record any reason to think that these paperwork-
reducing reforms will not be beneficial to rural carriers. Further, we 
do not anticipate any significant rate effects resulting from these 
efforts to further align the USOA with GAAP principles.

B. Elective Use of Targeted Accounting Rules for Price Cap Carriers

    29. In the 2014 NPRM, the Commission sought comment on either 
maintaining the USOA for price cap carriers or replacing it with a more 
limited set of accounting rules targeted to our particular statutory 
needs. Based on developments in the market and the nature of telephone 
rate regulation, and in light of the record before us, we conclude that 
we should let price cap carriers elect to use targeted accounting rules 
in lieu of the strictures and the second set of books required by the 
USOA.
    30. Indeed, all evidence in the record demonstrates that continued 
application of the USOA to price cap carriers is a substantial and 
unjustifiable burden. ACS, for example, ``incurs substantial and 
ongoing costs maintaining an entire second set of account books that 
meet the requirements of the USOA. The information they contain has no 
bearing on ACS's corporate planning, financial results, or service 
rates.'' CenturyLink appends to its comments an appendix of the 
separate accounting entries it must maintain to comply with USOA and 
notes the ``over 400 GAAP specific account codes'' it must document so 
that its accountants can translate entries from one set of books to the 
other. And AT&T explains how it must pay software engineers up to $24 
million a year to ``bolt on'' changes to vendor general ledger packages 
and to maintain the USOA on top of its existing GAAP-compliant 
accounts.
    31. We conclude that none of the three particular statutory 
obligations nor the regulatory requirement identified in the 2014 NPRM 
justify the requirement that price cap carriers comply with the USOA. 
Instead, we conclude that price cap carriers may elect to comply with 
GAAP accounting, subject to a commitment to mitigate any impact 
election would have on pole attachment rates. We address these four 
issues in turn.
    32. Pole Attachment Rates. Section 224 of the Act allows state 
commissions to regulate pole attachment rates so long as they certify 
to the Commission that they will do so; elsewhere, the Commission's 
rules apply. Under the Commission's rules, pole attachment rates are 
set in the first instance through private negotiation using cost data 
reported by carriers. Because many poles and conduits are owned by 
electric or other utilities not regulated by the Commission, our rules 
do not require all pole attachments to be based on USOA data, but 
instead require that the ``data and information should be based upon 
historical or original methodology'' and ``should be derived from 
ARMIS, FERC 1, or other reports filed with state or federal regulatory 
agencies.'' For incumbent LECs, however, the Commission has relied on 
data from ``various Part 32 accounts (e.g., gross pole investment, 
gross plant investment, accumulated depreciation--poles, maintenance 
expense--poles etc.).'' And the Commission has used the USOA data to 
modify the formula by which pole attachment rates are calculated.
    33. USTelecom and AT&T contend that for price cap carriers, the use 
of a rate-of-return-based formula for pole attachments does not 
preclude the use of GAAP. Verizon agrees with USTelecom, contending 
that the formulae used to derive pole attachment rates could be 
populated with GAAP-based data. USTelecom also argues that there is no 
evidence that relying upon GAAP would alter rates price cap carriers 
charge for pole attachments, while AT&T contends that there is no basis 
to believe that pole attachment rates calculated based on GAAP 
accounting would not be just and reasonable. ACS also supports allowing 
price cap carriers to use GAAP. CenturyLink proposes to address 
concerns about possible harms to pole attachment users during a 
transition to the use of GAAP by capping pole attachment rates at their 
current levels plus an annual inflation adjustment in states subject to 
federal regulation, except to the extent that rate increases are 
justified. On the other hand, NCTA urges the Commission to continue 
compliance with part 32 accounting in connection with pole attachment 
data, while NASUCA argues that targeted accounting requirements would 
be more complicated and costly than maintaining the current mechanisms.
    34. We find that USOA accounting data are not necessary for the 
continued development of pole attachment rates in accordance with the 
statute. Nothing in section 224 directs or requires us to rely on the 
USOA, and we see no reason to subject one set of pole and conduit 
owners to onerous accounting obligations just because they happen to 
operate in a federal-default state or happened to have provided 
telephone service 21 years ago. Nor is there any reason to think the 
continued maintenance of USOA data for pole attachments is necessary 
for any future reforms. The Commission successfully collected data from 
hundreds of carriers on demand in the special access proceeding, and it 
could require similar disclosure of pole attachment costs if the need 
should arise.
    35. Nonetheless, we share the concern of some commenters that a 
change in accounting rules could lead to rate shock--a large swing in 
rates as price cap carriers transition from one accounting system to 
another. This possible rate differential is due to a number of factors, 
such as depreciation rates, cost of removal, and return on investment. 
Pole attachment rates play a significant role in the deployment and 
availability of voice, video, and data networks, and sharp changes in 
pole attachment rates may distort infrastructure investment decisions 
and in turn could negatively affect the availability of advanced 
services and broadband, contrary to the policy goals of the Act.
    36. As such, we condition any price cap carrier's election of GAAP 
accounting on compliance with one of two framework options to mitigate 
any disruption in pole attachment rates from the election. The first 
option is for electing carriers to calculate an Implementation Rate 
Difference between the attachment rates calculated by the price cap 
carrier under the USOA and under GAAP as of the last full year 
preceding the carrier's initial opting-out of part 32 USOA accounting 
requirements. We further require electing carriers to adjust their 
annually computed GAAP-based rates by the Implementation Rate 
Difference for a period of 12 years after the election. This framework 
largely parallels the plan offered by industry representatives to 
mitigate any pole attachment rate increases due to fluctuations and 
timing differences associated with the treatment of depreciation rates, 
the cost of removal, and salvage when GAAP is utilized instead of part 
32. It relies on the half-life of a typical pole to establish the 12-
year term (as a means of ensuring against double recovery). We find 
this option is an appropriate means of mitigating rate shock to 
attaching ISPs

[[Page 20838]]

while still allowing the price cap carrier to shed its USOA 
obligations.
    37. As a second option, price cap carriers may comply with GAAP 
accounting for all purposes other than those associated with setting 
pole attachment rates while continuing to use the part 32 accounts and 
procedures necessary to establish and evaluate pole attachment rates. 
Carriers have a period of 12 years in which they can opt into GAAP 
accounting for pole attachment rates and would be required to utilize 
the Implementation Rate Difference for the remaining portion of the 12 
years after they have chosen to move to GAAP accounting. We find that 
this approach offers flexibility for price cap carriers who do not wish 
to immediately transition to GAAP for purposes of setting pole 
attachment rates.
    38. We emphasize that a shift in accounting methodology (here, from 
USOA to GAAP) does not change what costs may be included in pole 
attachment rates--instead, it changes only how and when those costs are 
recognized. We thus expect that shifting the accounting method is 
unlikely to result in abrupt changes in pole attachment rates in the 
near term, and that rates will remain steady over the long-run. Price 
cap carriers have explained that shifting accounting methods is ``not 
an effort to increase pole attachment rates'' and ``not an attempt to 
do some other rate- or cost-shifting,'' and we intend to monitor pole 
attachment rates and hold them to that promise.
    39. Finally, to facilitate transparency of pole attachment rates 
during the transition from USOA to GAAP, a pole attacher may request 
that a price cap carrier submit its pole attachment accounting data for 
a particular state to this Commission for three years following the 
effective date of the rule permitting a price cap carrier to elect GAAP 
accounting. Thus, if a pole attacher informs the Commission of a 
suspected problem with pole attachment rates, the Commission will 
require the price cap carrier to file its pole attachment data for the 
state in question. This requirement will assist the parties and the 
Commission in monitoring and evaluating any abrupt rate changes that 
may occur. If it proves necessary, the Commission may extend this 
obligation for an additional three years.
    40. Other Issues. We conclude that USOA accounting data is 
unnecessary to ensure compliance with section 254(k) of the Act, which 
prohibits a telecommunications carrier from ``us[ing] services that are 
not competitive to subsidize services that are subject to 
competition.'' As the 2014 NPRM explained, the Commission has never 
found it necessary to seek accounting data to address allegations of 
violations of section 254(k). In other words, USOA data have not been 
needed to ensure compliance with section 254(k), even right after the 
end of legal telephone service monopolies in the late 1990s. Given the 
advent of even more intermodal competition, we do not foresee a need 
for USOA data to resolve any section 254(k) violations going forward.
    41. The Commission also sought comment on whether the harm intended 
to be addressed by section 272(e)(3) continues to be a concern, or 
whether the Commission should consider forbearing from this 
requirement. In the record, the BOCs primarily focused on alternatives 
to antiquated part 32 accounting, rather than addressing forbearance 
from section 272(e)(3). In evaluating the lack of utility of part 32 
accounting rules, our attention is also focused on regulatory 
requirements such as section 272(e)(3) that, similar to the USOA, have 
outgrown their usefulness.
    42. Before 1996, the BOCs were prohibited from entering the long-
distance market (i.e., from offering interexchange service) out of 
concern that they could use their local monopoly to subsidize 
competitive operations in the long-distance market. The 
Telecommunications Act created a path for the BOCs to enter that 
market, requiring, among other things, that a BOC that offers its long-
distance service to ``impute to itself . . . an amount for access to 
its telephone exchange service and exchange access that is no less than 
the amount charged to any unaffiliated interexchange carriers for such 
service.''
    43. We conclude that we should forbear from the continued 
application of section 272(e)(3)'s imputation requirements. No party 
commented on whether the Commission should forbear. The rationales for 
removing the accounting requirements associated with section 272(e)(3) 
are equally applicable to considerations of forbearing from the 
requirements of the subsection completely. In the USF/ICC 
Transformation Order, the Commission placed terminating intercarrier 
compensation charges on a path toward bill-and-keep, which greatly 
diminishes the need for imputation charges. Furthermore, many other 
entities provide integrated long-distance service, such as non-BOC 
LECs, cable operators, over-the-top voice over Internet Protocol 
companies, and commercial mobile radio service providers; these 
entities are not required to impute charges between their local and 
long-distance affiliates (to the extent they even offer those services 
through separate affiliates). In the last 20 years, increased 
competition in access markets as a result of legislative, regulatory, 
and technological changes has reduced the need for section 272 
imputation requirements to prevent cross-subsidization between 
incumbent LECs' local and long distance services. Thus, continued 
enforcement of the section 272(e)(3) imputation requirements is not 
necessary to ensure that the charges, practices, classifications, or 
regulations by, for, or in connection with that telecommunications 
carrier or telecommunications service are just and reasonable and are 
not unjustly or unreasonably discriminatory. Given these changes in the 
regulatory landscape and the diminished importance of imputation 
requirements to prevent marketplace harms, section 272(e)(3) is not 
necessary for the protection of consumers, and forbearance will be in 
the public interest. Accordingly, we determine that forbearing from the 
continued application of these requirements is appropriate.
    44. Finally, we terminate the conditions that the Commission placed 
on a variety of carriers granted forbearance from our cost allocation 
rules. Forbearance was expressly premised on the continued availability 
of part 32 accounting data and the filing of compliance plans 
consistent with that condition. AT&T, Qwest and Verizon filed 
compliance plans that detailed their commitment to continue to maintain 
part 32 accounting data. In the 2014 NPRM, the Commission invited 
parties to comment on how changes to the part 32 requirements would 
affect the commitments made in compliance plans filed in connection 
with forbearance proceedings. Commenters directly addressing this issue 
support the action taken herein. Although we speculated in 2013 that 
``there may be a `federal need for this accounting information in the 
future to adjust our existing price cap regime or in our consideration 
of reforms moving forward,''' time has proven that prediction untrue. 
And continuing to maintain these costly requirements on the speculation 
that at some point, some day, the Commission might do something with 
them fails any cost-benefit analysis.

C. Other Considerations

    45. We decline requests to reconsider other deregulatory actions by 
the Commission in this proceeding. NASUCA broadly argues that it 
opposes

[[Page 20839]]

the rationale behind the 2014 NPRM because the Commission has already 
minimized the compliance burden below the level needed for its 
regulatory duties, and urges the Commission to reverse course on other 
information requirements, pointing to ARMIS forbearance and other 
recent forbearance decisions. The issues NASUCA raises are rejected as 
being overly vague and beyond the scope of the 2014 NPRM. In any event, 
NASUCA has not presented sufficient support for its arguments to allow 
the Commission to act on these requests, instead merely stating its 
objections to the proposed reforms in a conclusory manner and failing 
to suggest concrete alternative solutions.

IV. Referral to the Joint Board

    46. We recognize that eliminating the distinctions between Class A 
and Class B accounts and allowing all carriers to utilize the more 
streamlined requirements of Class B accounts has implications for the 
Commission's jurisdictional separations rules pursuant to part 36. For 
instance, many of the separations rules also designate accounts by 
Class A and Class B categories, and those rules likely would need to be 
modified to be consistent with the revised part 32 regulations. 
Accordingly, pursuant to section 410(c) of the Act, we refer to the 
Joint Board the issue of examining jurisdictional separations rules in 
light of the reforms adopted to the part 32 regulations in this Report 
and Order. We ask the Joint Board to consider the reforms adopted in 
this Report and Order and to consider how such reforms impact part 36 
and consequently the rule changes necessary to ensure the 
jurisdictional separations rules are consistent. We request that the 
Joint Board prepare a recommended decision within nine months of 
publication in the Federal Register regarding how and when the 
Commission's jurisdictional separations rules should be modified to 
reflect the issues in the referral.

V. Procedural Matters

A. Final Regulatory Flexibility Analysis

    47. As required by the Regulatory Flexibility Act of 1980 (RFA), an 
Initial Regulatory Flexibility Analysis (IRFA) was incorporated into 
the 2014 NPRM. The Commission sought written public comment on the 
possible significant economic impact on small entities regarding the 
proposals in the 2014 NPRM, including comments on the IRFA. Pursuant to 
the RFA, a Final Regulatory Flexibility Analysis (FRFA) is set forth in 
Appendix C of the Commission's Report and Order, WC Docket No. 14-130, 
CC Docket No. 80-286; FCC 17-15, adopted February 23, 2017 and released 
February 24, 2017.

B. Final Paperwork Reduction Act Analysis

    48. This document contains modified information collection 
requirements subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. The requirements will be submitted to the Office of 
Management and Budget (OMB) for review under Section 3507(d) of the 
PRA. OMB, the general public, and other Federal agencies are invited to 
comment on the modified information collection requirements contained 
in this proceeding. In addition, we note that pursuant to the Small 
Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 
U.S.C. 3506(c)(4), we previously sought specific comment on how the 
Commission might further reduce the information collection burden for 
small business concerns with fewer than 25 employees.
    49. In this present document, we have assessed the effects of our 
streamlining the part 32 USOA accounting rules and find that the 
Commission's actions will result in overall reduced regulatory burdens 
for both price cap and rate-of-return carriers, including small 
businesses with fewer than 25 employees. In addition, the Report and 
Order allows price cap carriers to elect to use GAAP for all regulatory 
accounting purposes so long as they comply with targeted accounting 
rules. Because incumbent LECs subject to price cap regulation are among 
the largest of telecommunications companies, we do not anticipate any 
impact from this action on small businesses with fewer than 25 
employees.

C. Congressional Review Act

    50. The Commission will send a copy of this Report and Order in a 
report to be sent to Congress and the Government Accountability Office 
pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

VI. Ordering Clauses

    51. Accordingly, it is ordered that, pursuant to the authority 
contained in sections 10, 201, 219-220, 224, 254(k), 272(e)(3), and 403 
of the Communications Act of 1934, as amended, 47 U.S.C. 160, 201, 219-
220, 224, 254(k), 272(e)(3), 403, this Report and Order is adopted.
    52. It is further ordered that, pursuant to the authority contained 
in sections 10, 201, 219-220, 224, 254(k), 272(e)(3), and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 160, 201, 219-220, 
224, 254(k), 272(e)(3), 403, 47 CFR parts 1, 32, and 65, are amended, 
effective on a date (``Effective Date'') following publication in the 
Federal Register of a document announcing approval by the Office of 
Management and Budget (OMB) of these rules, which contain requirements 
involving Paperwork Reduction Act burdens, or on January 1, 2018, 
whichever is later, with the exception of amendments to Sec. Sec.  
1.1409 and 32.1, which the Effective Date shall be following 
publication in the Federal Register of a document announcing approval 
by OMB of these amendments.
    53. It is further ordered that the Commission shall send a copy of 
this Report and Order to Congress and the Government Accountability 
Office pursuant to the Congressional Review Act, see 5 U.S.C. 
801(a)(1)(A).
    54. 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 Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.
    55. It is further ordered that, pursuant to section 410(c) of the 
Communications Act of 1934 as amended, 47 U.S.C. 410(c), the issues 
specified in Section IV of this Report and Order are hereby referred to 
the Federal-State Joint Board on Separations for preparation of a 
recommended decision to be produced within nine months of publication 
in the Federal Register.
    56. It is further ordered that, should no petitions for 
reconsideration, applications for review, or petitions for judicial 
review be timely filed, this proceeding shall be terminated and its 
docket closed.

List of Subjects in 47 CFR Parts 1, 32, and 65

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone, Uniform system of accounts.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR parts 1, 32, and 65 as follows:

PART 1--PRACTICE AND PROCEDURE

0
1. The authority citation for part 1 is revised to read as follows:


[[Page 20840]]


    Authority:  15 U.S.C. 79 et seq.; 47 U.S.C. 151, 154(j), 160, 
201, 225, 303, and 309.

0
2. Section 1.791 is revised to read as follows:


Sec.  1.791   Reports and requests to be filed under part 32 of this 
chapter.

    Reports and requests shall be filed either periodically, upon the 
happening of specified events, or for specific approval by telephone 
companies in accordance with and subject to the provisions of part 32 
of this chapter.

0
3. Section 1.1409 is amended by adding paragraph (g) to read as 
follows:


Sec.  1.1409   Commission consideration of the complaint.

* * * * *
    (g) A price cap company opting-out of part 32 of this chapter may 
calculate attachment rates for its poles, conduits, and rights of way 
using either part 32 accounting data or GAAP accounting data. A price 
cap company using GAAP accounting data to compute rates to attach to 
its poles, conduits, and rights of way in any of the first twelve years 
after opting-out must adjust (increase or decrease) its annually 
computed GAAP-based rates by an Implementation Rate Difference for each 
of the remaining years in the period. The Implementation Rate 
Difference means the difference between attachment rates calculated by 
the price cap carrier under part 32 and under GAAP as of the last full 
year preceding the carrier's initial opting-out of part 32 USOA 
accounting requirements.

PART 32--UNIFORM SYSTEM OF ACCOUNTS FOR TELECOMMUNICATIONS 
COMPANIES

0
4. The authority citation for part 32 is revised to read as follows:

    Authority:  47 U.S.C. 219, 220 as amended, unless otherwise 
noted.

0
5. Section 32.1 is revised to read as follow:


Sec.  32.1   Background.

    The revised Uniform System of Accounts (USOA) is a historical 
financial accounting system which reports the results of operational 
and financial events in a manner which enables both management and 
regulators to assess these results within a specified accounting 
period. The USOA also provides the financial community and others with 
financial performance results. In order for an accounting system to 
fulfill these purposes, it must exhibit consistency and stability in 
financial reporting (including the results published for regulatory 
purposes). Accordingly, the USOA has been designed to reflect stable, 
recurring financial data based to the extent regulatory considerations 
permit upon the consistency of the well established body of accounting 
theories and principles commonly referred to as generally accepted 
accounting principles (GAAP). Price cap companies that have opted-out 
of USOA requirements pursuant to the conditions specified by the 
Commission in Sec.  32.11(g) are relieved of the rules of this part in 
their entirety, including any other rules or orders that are derivative 
of or dependent on the rules in this part.


Sec.  32.3   [Removed and Reserved]

0
6. Section 32.3 is removed and reserved.

0
7. Section 32.11 is amended by revising the section heading and 
paragraph (a), removing and reserving paragraphs (b) though (f), and 
adding paragraph (g) to read as follows:


Sec.  32.11   Companies subject to this part.

    (a) This part applies to every incumbent local exchange carrier, as 
defined in section 251(h) of the Communications Act, and any other 
carrier that the Commission designates by order. This part refers to 
such carriers as ``companies'' or ``Class B companies.'' 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.
* * * * *
    (g) Notwithstanding paragraph (a) of this section, a price cap 
company that elects to calculate its pole attachment rates pursuant to 
Sec.  1.1409(g) of this chapter will not be subject to this Uniform 
System of Accounts.

0
8. Section 32.26 is revised to read as follows:


Sec.  32.26   Materiality.

    (a) Except as provided in paragraph (b) of this section, companies 
may abide by the materiality standards of GAAP when implementing this 
system of accounts.
    (b) For companies that receive High-Cost Loop Support, or Connect 
America Fund Broadband Loop Support, materiality shall be determined 
consistent with the general materiality guidelines promulgated by the 
Auditing Standards Board.

0
9. Section 32.101 is amended by revising paragraph (c) to read as 
follows:


Sec.  32.101   Structure of the balance sheet accounts.

* * * * *
    (c) Account 3100, Accumulated depreciation through Account 3400, 
Accumulated amortization--tangible, shall include the asset reserves 
except that reserves related to certain asset accounts will be included 
in the asset account. (See Sec. Sec.  32.2005, 32.2682 and 32.2690.)
* * * * *

0
10. Section 32.103 is revised to read as follows:


Sec.  32.103   Balance sheet accounts for other than regulated-fixed 
assets to be maintained.

    Balance sheet accounts to be maintained by companies for other than 
regulated-fixed assets are indicated as follows:

                         Balance Sheet Accounts
------------------------------------------------------------------------
                Account title
------------------------------------------------------------------------
               Current assets
 
Cash and equivalents........................  1120
Receivables.................................  1170
Allowance for doubtful accounts.............  1171
Supplies:
  Material and supplies.....................  1220
Prepayments.................................  1280
Other current assets........................  1350
              Noncurrent assets
Investments:
  Nonregulated investments..................  1406
  Other noncurrent assets...................  1410
Deferred charges:
  Deferred maintenance, retirements and       1438
   other deferred charges.
Other:
  Other jurisdictional assets-net...........  1500
------------------------------------------------------------------------


0
11. Section 32.2000 is amended by:
0
a. Removing and reserving paragraph (a)(4);
0
b. Revising paragraphs (b)(1), (b)(2)(iii), and (c)(2)(x);
0
c. Adding paragraph (e)(8); and
0
d. Revising paragraphs (f)(2)(iii) and (j).
    The revisions and addition read as follows:


Sec.  32.2000   Instructions for telecommunications plant accounts.

    (a) * * *
    (4) [Reserved]
    (b) * * *
    (1) Property, plant and equipment acquired from an entity, whether 
or not affiliated with the accounting company, shall be accounted for 
at original cost, except that property, plant and equipment acquired 
from a nonaffiliated entity through an acquisition or merger may be 
accounted for at market value at the time of the acquisition or merger.
    (2) * * *
    (iii) Accumulated Depreciation and amortization balances related to 
plant

[[Page 20841]]

acquired shall be credited to Account 3100, Accumulated depreciation, 
or Account 3200, Accumulated depreciation--held for future 
telecommunications use, or Account 3400, Accumulated amortization--
tangible and debited to Account 1438. Accumulated amortization balances 
related to plant acquired which ultimately is recorded in Accounts 
2005, Telecommunications plant adjustment, Account 2682, Leasehold 
improvements, or Account 2690, Intangibles shall be credited to these 
asset accounts, and debited to Account 1438.
* * * * *
    (c) * * *
    (2) * * *
    (x) Allowance for funds used during construction (``AFUDC'') 
provides for the cost of financing the construction of 
telecommunications plant. AFUDC shall be charged to Account 2003, 
Telecommunications plant under construction, and credited to Account 
7300, Nonoperating income and expense. The rate for calculating AFUDC 
shall be determined in accordance with GAAP when implementing this 
system of accounts. The amount of interest cost capitalized in an 
accounting period shall not exceed the total amount of interest cost 
incurred by the company in that period.
* * * * *
    (e) * * *
    (8) Notwithstanding any other provision of this part concerning 
continuing property records, carriers subject to price cap regulations 
set forth in part 61 of this chapter shall maintain property records 
necessary to track substantial assets and investments in an accurate, 
auditable manner that enables them to verify their accounting books, 
make such property information available to the Commission upon 
request, and ensure the maintenance of such data.
    (f) * * *
    (2) * * *
    (iii) The continuing property record shall reveal the description, 
location, date of placement, the essential details of construction, and 
the original cost (note also paragraph (f)(3) of this section) of the 
property record units. The continuing property records shall be 
compiled on the basis of original cost (or other book cost consistent 
with this system of accounts) and maintained in such manner as will 
provide for the verification of property record units by physical 
examination. The continuing property record and other underlying 
records of construction costs shall be so maintained that, upon 
retirement of one or more retirement units or of minor items without 
replacement when not included in the costs of retirement units, the 
actual cost or a reasonably accurate estimate of the cost of the plant 
retired can be determined.
* * * * *
    (j) Plant accounts to be maintained by telephone companies as 
indicated:

------------------------------------------------------------------------
                Account title
------------------------------------------------------------------------
               Regulated plant
 
Property, plant and equipment:
  Telecommunications plant in service.......  \1\ 2001
  Property held for future                    2002
   telecommunications use.
  Telecommunications plant under              2003
   construction-short term.
  Telecommunications plant adjustment.......  2005
  Nonoperating plant........................  2006
  Goodwill..................................  2007
 Telecommunications plant in service (TPIS)
TPIS--General support assets:
  Land and support assets...................  2110
TPIS--Central Office assets:
  Central Office--switching.................  2210
  Operator systems..........................  2220
  Central Office--transmission..............  2230
TPIS--Information origination/termination
 assets:
  Information origination termination.......  2310
TPIS--Cable and wire facilities assets:
  Cable and wire facilities.................  2410
TPIS--Amortizable assets:
  Amortizable tangible assets...............  2680
  Intangibles...............................  2690
------------------------------------------------------------------------
\1\ Balance sheet summary account only.


0
12. Section 32.2110 is revised to read as follows:


Sec.  32.2110  Land and support assets.

    This account shall be used by companies to record the original cost 
of land and support assets of the type and character detailed in 
Accounts 2111 through 2124.

0
13. Section 32.2210 is revised to read as follows:


Sec.  32.2210   Central office--switching.

    This account shall be used by companies to record the original cost 
of switching assets of the type and character detailed in Accounts 2211 
through 2212.

0
14. Section 32.2230 is revised to read as follows:


Sec.  32.2230   Central office--transmission.

    This account shall be used by companies to record the original cost 
of radio systems and circuit equipment of the type and character 
detailed in Accounts 2231 and 2232.

0
15. Section 32.2310 is revised to read as follows:


Sec.  32.2310   Information origination/termination.

    This account shall be used by companies to record the original cost 
of information origination/termination equipment of the type and 
character detailed in Accounts 2311 through 2362.

0
16. Section 32.2410 is revised to read as follows:


Sec.  32.2410   Cable and wire facilities.

    This account shall be used by companies to record the original cost 
of cable and wire facilities of the type and character detailed in 
Accounts 2411 through 2441.

0
17. Section 32.2680 is revised to read as follows:


Sec.  32.2680   Amortizable tangible assets.

    This account shall be used by companies to record amounts for 
property acquired under capital leases and the original cost of 
leasehold improvements of the type of character detailed in Accounts 
2681 and 2682.


Sec.  32.2682   [Amended]

0
18. Section 32.2682 is amended by removing the last sentence in 
paragraph (c).


Sec.  32.2690   [Amended]

0
19. Section 32.2690 is amended by removing and reserving paragraph (b).

0
20. Section 32.3000 is revised to read as follows:


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

    (a) Depreciation and amortization subsidiary records. (1) 
Subsidiary record categories shall be maintained for each class of 
depreciable telecommunications plant in Account 3100 for which there is 
a prescribed depreciation rate. (See also Sec.  32.2000(g)(1)(iii).)
    (2) Subsidiary records shall be maintained for Accounts 2005, 2682, 
2690, 3400 in accordance with Sec.  32.2000(h)(4).
    (b) Depreciation and amortization accounts to be maintained by 
telephone companies, as indicated.

------------------------------------------------------------------------
                Account title
------------------------------------------------------------------------
Depreciation and amortization:
  Accumulated depreciation..................  3100
  Accumulated depreciation--Held for future   3200
   telecommunications use.
  Accumulated depreciation--Nonoperating....  3300
  Accumulated depreciation--Tangible........  3400
------------------------------------------------------------------------


[[Page 20842]]


0
21. Section 32.3400 is amended by revising paragraph (a) introductory 
text to read as follows:


Sec.  32.3400   Accumulated amortization--tangible.

    (a) This account shall include:
* * * * *

0
22. Section 32.3999 is revised to read as follows:


Sec.  32.3999   Instructions for balance sheet accounts--liabilities 
and stockholders' equity.

    Liabilities and Stockholders' Equity Accounts To Be Maintained by
                                Companies
------------------------------------------------------------------------
                Account title
------------------------------------------------------------------------
Current liabilities:
  Current accounts and notes payable........  4000
  Customer's Deposits.......................  4040
  Income taxes--accrued.....................  4070
  Other taxes--accrued......................  4080
  Net Current Deferred Nonoperating Income    4100
   Taxes.
  Net Current Deferred Nonoperating Income    4110
   Taxes.
  Other current liabilities.................  4130
Long-term debt:
  Long Term debt and Funded debt............  4200
Other liabilities and deferred credits:
  Other liabilities and deferred credits....  4300
  Unamortized operating investment tax        4320
   credits--net.
  Unamortized nonoperating investment tax     4330
   credits--net.
  Net noncurrent deferred operating income    4340
   taxes.
  Net deferred tax liability adjustments....  4341
  Net noncurrent deferred nonoperating        4350
   income taxes.
  Deferred tax regulatory adjustments--net..  4361
  Other jurisdictional liabilities and        4370
   deferred credits--net.
Stockholder's equity:
  Capital stock.............................  4510
  Additional paid-in capital................  4520
  Treasury stock............................  4530
  Other capital.............................  4540
  Retained earnings.........................  4550
------------------------------------------------------------------------


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


Sec.  32.4999   General.

* * * * *
    (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. Such subsidiary record categories shall be reported as 
required by part 43 of this chapter.
* * * * *
    (n) Revenue accounts to be maintained.

------------------------------------------------------------------------
                Account title
------------------------------------------------------------------------
Local network services revenues:
  Basic local service revenue...............
Network access service revenues:
  End user revenue..........................  5081
  Switched access revenue...................  5082
  Special access revenue....................  5083
Long distance network services revenues:
  Long distance message revenue.............  5100
Miscellaneous revenues:
  Miscellaneous revenue.....................  5200
Nonregulated revenues:
  Nonregulated operating revenue............  5280
Uncollectible revenues:
  Uncollectible revenue.....................  5300
------------------------------------------------------------------------


0
24. Section 32.5000 is revised to read as follows:


Sec.  32.5000   Basic local service revenue.

    Companies shall use this account for revenues of the type and 
character detailed in Accounts 5001 through 5060.

0
25. Section 32.5200 is amended by revising the introductory text to 
read as follows:


Sec.  32.5200   Miscellaneous revenue.

    This account shall include revenue derived from the following 
sources, as well as revenue of the type and character detailed in 
Account 5230, Directory revenue.
* * * * *

0
26. Section 32.5999 is amended by revising paragraph (g) to read as 
follows:


Sec.  32.5999   General.

* * * * *
    (g) Expense accounts to be maintained.

------------------------------------------------------------------------
                Account title
------------------------------------------------------------------------
          Income Statement Accounts
Plant specific operations expense:
  Network support expense...................  6110
  General support expenses..................  6120
  Central office switching expense..........  6210
  Operators system expense..................  6220
  Central office transmission expenses......  6230
  Information origination/termination         6310
   expense.
  Cable and wire facilities expenses........  6410
Plant nonspecific operations expense:
  Other property plant and equipment          6510
   expenses.
  Network operations expenses...............  6530
  Access expense............................  6540
  Depreciation and amortization expenses....  6560
Customer operations expense:
  Marketing.................................  6610
  Services..................................  6620
Corporate operations expense:
  General and administrative................  6720
  Provision for uncollectible notes           6790
   receivable.
------------------------------------------------------------------------


0
27. Section 32.6110 is revised to read as follows:


Sec.  32.6110   Network support expenses.

    (a) Companies shall use this account for expenses of the type and 
character detailed in Accounts 6112 through 6114.
    (b) Credits shall be made to this account by companies for amounts 
transferred to Construction and/or other Plant Specific Operations 
Expense accounts. These amounts shall be computed on the basis of 
direct labor hours.

0
28. Section 32.6120 is revised to read as follows:


Sec.  32.6120   General support expenses.

    Companies shall use this account for expenses of the type and 
character detailed in Accounts 6121 through 6124.

0
29. Section 32.6230 is amended to read:


Sec.  32.6230   Central office transmission expense.

    Companies shall use this account for expenses of the type and 
character detailed in Accounts 6231 and 6232.

0
30. Section 32.6310 is revised to read as follows:


Sec.  32.6310   Information origination/termination expenses.

    Companies shall use this account for expenses of the type and 
character detailed in Accounts 6311 through 6362.

0
31. Section 32.6410 is revised to read as follows:


Sec.  32.6410   Cable and wire facilities expenses.

    Companies shall use this account for expenses of the type and 
character detailed in Accounts 6411 through 6441.

0
32. Section 32.6510 is revised to read as follows:


Sec.  32.6510   Other property, plant and equipment expenses.

    Companies shall use this account for expenses of the type and 
character detailed in Accounts 6511 and 6512.

[[Page 20843]]


0
33. Section 32.6530 is revised to read as follows:


Sec.  32.6530   Network operations expense.

    Companies shall use this account for expenses of the type and 
character detailed in Accounts 6531 through 6535.

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


Sec.  32.6560   Depreciation and amortization expenses.

    Companies shall use this account for expenses of the type and 
character detailed in Accounts 6561 through 6565.

0
35. Section 32.6610 is revised to read as follows:


Sec.  32.6610   Marketing.

    Companies shall use this account for expenses of the type and 
character detailed in Accounts 6611 through 6613.

0
36. Section 32.6620 is revised to read as follows:


Sec.  32.6620   Services.

    Companies shall use this account for expenses of the type and 
character detailed in Accounts 6621 through 6623.

0
37. Section 32.6999 is revised to read as follows:


Sec.  32.6999   General.

    (a) Structure of the other income accounts. The other income 
accounts are designed to reflect both operating and nonoperating income 
items including taxes, extraordinary items and other income and expense 
items not properly included elsewhere.
    (b) Other income accounts listing.

------------------------------------------------------------------------
                Account title
------------------------------------------------------------------------
Other operating income and expense:
  Other operating income and expense........  7100
Operating taxes:
  Operating taxes...........................  7200
Nonoperating income and expense:
  Nonoperating income and expense...........  7300
Nonoperating taxes:
  Nonoperating taxes........................  7400
Interest and related items:
  Interest and related items................  7500
  Extraordinary items.......................  7600
Jurisdictional differences and non-regulated
 income items:
  Income effect of jurisdictional ratemaking  7910
   difference--net.
  Nonregulated net income...................  7990
------------------------------------------------------------------------


0
38. Section 32.7200 is revised to read as follows:


Sec.  32.7200   Operating taxes.

    Companies shall use this account for operating taxes of the type 
and character detailed in Accounts 7210 through 7250.

0
39. Section 32.9000 is amended by revising the definition of ``Original 
cost'' to read as follows:


Sec.  32.9000   Glossary of terms.

* * * * *
    Original cost or cost, as applied to telecommunications plant, 
rights of way and other intangible property, means the actual money 
cost of (or the current money value of any consideration other than 
money exchanged for) property at the time when it was purchased.
* * * * *

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

0
40. The authority citation for part 65 continues to read as follows:

    Authority:  47 U.S.C. 151, 154(i), 155, 201, 205, 214, 219, 220, 
254, 303(r), 403, and 1302 unless otherwise noted.

0
41. The heading for part 65 is revised to read as set forth above.

0
42. Section 65.810 is revised to read as follows:


Sec.  65.810   Definitions.

    As used in this subpart ``account xxxx'' means the account of that 
number kept in accordance with the Uniform System of Accounts for 
Telecommunications Companies in 47 CFR part 32.

0
43. Section 65.820 is amended by revising paragraph (d) to read as 
follows:


Sec.  65.820   Included items.

* * * * *
    (d) Cash working capital. The average amount of investor-supplied 
capital needed to provide funds for a carrier's day-to-day interstate 
operations. Carriers may calculate a cash working capital allowance 
either by performing a lead-lag study of interstate revenue and expense 
items or by using the formula set forth in paragraph (e) of this 
section. Carriers, in lieu of performing a lead-lag study or using the 
formula in paragraph (e) of this section, may calculate the cash 
working capital allowance using a standard allowance which will be 
established annually by the Chief, Wireline Competition Bureau. When 
either the lead-lag study or formula method is used to calculate cash 
working capital, the amount calculated under the study or formula may 
be increased by minimum bank balances and working cash advances to 
determine the cash working capital allowance. Once a carrier has 
selected a method of determining its cash working capital allowance, it 
shall not change to an optional method from one year to the next 
without Commission approval.
* * * * *
[FR Doc. 2017-07175 Filed 5-3-17; 8:45 am]
 BILLING CODE 6712-01-P