Comprehensive Review of the Uniform System of Accounts, Jurisdictional Separations and Referral to the Federal-State Joint Board, 20833-20843 [2017-07175]
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shown in the last column. The
Administrator finds that notice and
public comment procedures under 5
U.S.C. 553(b), are impracticable and
unnecessary because communities listed
in this final rule have been adequately
notified.
Each community receives 6-month,
90-day, and 30-day notification letters
addressed to the Chief Executive Officer
stating that the community will be
suspended unless the required
floodplain management measures are
met prior to the effective suspension
date. Since these notifications were
made, this final rule may take effect
within less than 30 days.
National Environmental Policy Act.
FEMA has determined that the
community suspension(s) included in
this rule is a non-discretionary action
and therefore the National
Environmental Policy Act of 1969 (42
U.S.C. 4321 et seq.) does not apply.
Regulatory Flexibility Act. The
Administrator has determined that this
rule is exempt from the requirements of
the Regulatory Flexibility Act because
the National Flood Insurance Act of
1968, as amended, Section 1315, 42
U.S.C. 4022, prohibits flood insurance
coverage unless an appropriate public
body adopts adequate floodplain
management measures with effective
enforcement measures. The
communities listed no longer comply
with the statutory requirements, and
after the effective date, flood insurance
will no longer be available in the
communities unless remedial action
takes place.
Regulatory Classification. This final
rule is not a significant regulatory action
under the criteria of section 3(f) of
Executive Order 12866 of September 30,
1993, Regulatory Planning and Review,
58 FR 51735.
Executive Order 13132, Federalism.
This rule involves no policies that have
federalism implications under Executive
Order 13132.
Executive Order 12988, Civil Justice
Reform. This rule meets the applicable
standards of Executive Order 12988.
Community
No.
State and location
Region IV
Mississippi: North Carrollton, Town of, Carroll County.
280028
Paperwork Reduction Act. This rule
does not involve any collection of
information for purposes of the
Paperwork Reduction Act, 44 U.S.C.
3501 et seq.
List of Subjects in 44 CFR Part 64
Flood insurance, Floodplains.
Accordingly, 44 CFR part 64 is
amended as follows:
PART 64—[AMENDED]
1. The authority citation for Part 64
continues to read as follows:
■
Authority: 42 U.S.C. 4001 et seq.;
Reorganization Plan No. 3 of 1978, 3 CFR,
1978 Comp.; p. 329; E.O. 12127, 44 FR 19367,
3 CFR, 1979 Comp.; p. 376.
§ 64.6
[Amended]
2. The tables published under the
authority of § 64.6 are amended as
follows:
■
Effective date authorization/cancellation of
sale of flood insurance in community
Current effective
map date
June 16, 1975, Emerg; April 3, 1978, Reg;
May 2, 2017, Susp.
May 2, 2017 .....
Date certain
Federal assistance no longer
available in
SFHAs
May 2, 2017.
-do- =Ditto.
Code for reading third column: Emerg.—Emergency; Reg.—Regular; Susp.—Suspension.
Dated: April 24, 2017.
Michael M. Grimm,
Assistant Administrator for Mitigation,
Federal Insurance and Mitigation
Administration, Department of Homeland
Security, Federal Emergency Management
Agency.
[FR Doc. 2017–08951 Filed 5–3–17; 8:45 am]
BILLING CODE 9110–12–P
FEDERAL COMMUNICATIONS
COMMISSION
47 CFR Parts 1, 32, and 65
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[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
Federal Communications
Commission.
ACTION: Final rule.
AGENCY:
In this document, the Federal
Communications Commission
SUMMARY:
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(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 §§ 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 Robin.Cohn@fcc.gov, or
Nicole Ongele, Office of Managing
Director at (202) 418–2991 or at
Nicole.Ongele@fcc.gov.
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
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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.
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Synopsis
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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
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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
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(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
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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-forFunds-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.
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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
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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-ofreturn regulation and legacy universal
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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
§ 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
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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
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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.
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28. We are unconvinced that the
generic opposition in the record to the
wholesale adoption of GAAP for rate-ofreturn 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 paperworkreducing 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 GAAPcompliant 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
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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 GAAPbased 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
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20837
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
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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 costshifting,’’ 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
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13:02 May 03, 2017
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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 longdistance 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
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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 crosssubsidization 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 costbenefit 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
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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.
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-ofreturn 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.
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V. Procedural Matters
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).
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
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
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13:02 May 03, 2017
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20839
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
§§ 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
1. The authority citation for part 1 is
revised to read as follows:
■
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Federal Register / Vol. 82, No. 85 / Thursday, May 4, 2017 / Rules and Regulations
Authority: 15 U.S.C. 79 et seq.; 47 U.S.C.
151, 154(j), 160, 201, 225, 303, and 309.
2. Section 1.791 is revised to read as
follows:
■
§ 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.
■ 3. Section 1.1409 is amended by
adding paragraph (g) to read as follows:
§ 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 GAAPbased 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
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.
5. Section 32.1 is revised to read as
follow:
■
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§ 32.1
Background.
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§ 32.3
[Removed and Reserved]
6. Section 32.3 is removed and
reserved.
■ 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:
■
§ 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 § 1.1409(g) of this
chapter will not be subject to this
Uniform System of Accounts.
■ 8. Section 32.26 is revised to read as
follows:
§ 32.26
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
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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
§ 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.
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 HighCost 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.
■ 9. Section 32.101 is amended by
revising paragraph (c) to read as follows:
§ 32.101 Structure of the balance sheet
accounts.
*
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*
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*
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*
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(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 §§ 32.2005, 32.2682 and
32.2690.)
*
*
*
*
*
■ 10. Section 32.103 is revised to read
as follows:
§ 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 .....................
Receivables .....................................
Allowance for doubtful accounts .....
Supplies:
Material and supplies ..................
Prepayments ...................................
Other current assets .......................
Noncurrent assets
Investments:
Nonregulated investments ...........
Other noncurrent assets ..............
Deferred charges:
Deferred maintenance, retirements and other deferred
charges.
Other:
Other jurisdictional assets-net .....
1120
1170
1171
1220
1280
1350
1406
1410
1438
1500
11. Section 32.2000 is amended by:
a. Removing and reserving paragraph
(a)(4);
■ b. Revising paragraphs (b)(1),
(b)(2)(iii), and (c)(2)(x);
■ c. Adding paragraph (e)(8); and
■ d. Revising paragraphs (f)(2)(iii) and
(j).
The revisions and addition read as
follows:
■
■
§ 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
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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
VerDate Sep<11>2014
13:02 May 03, 2017
Jkt 241001
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.
Property held for future telecommunications use.
Telecommunications plant under
construction-short term.
Telecommunications plant adjustment.
Nonoperating plant ......................
Goodwill .......................................
Telecommunications plant in
service (TPIS)
TPIS—General support assets:
Land and support assets .............
TPIS—Central Office assets:
Central Office—switching ............
Operator systems ........................
Central Office—transmission .......
TPIS—Information origination/termination assets:
Information origination termination.
TPIS—Cable and wire facilities assets:
Cable and wire facilities ..............
TPIS—Amortizable assets:
Amortizable tangible assets ........
Intangibles ...................................
1 Balance
1 2001
2002
2003
2005
2006
2007
2110
2210
2220
2230
2310
2410
2680
2690
sheet summary account only.
12. Section 32.2110 is revised to read
as follows:
■
§ 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.
■ 13. Section 32.2210 is revised to read
as follows:
§ 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.
■ 14. Section 32.2230 is revised to read
as follows:
§ 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.
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Fmt 4700
Sfmt 4700
20841
15. Section 32.2310 is revised to read
as follows:
■
§ 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.
■ 16. Section 32.2410 is revised to read
as follows:
§ 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.
■ 17. Section 32.2680 is revised to read
as follows:
§ 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.
§ 32.2682
[Amended]
18. Section 32.2682 is amended by
removing the last sentence in paragraph
(c).
■
§ 32.2690
[Amended]
19. Section 32.2690 is amended by
removing and reserving paragraph (b).
■ 20. Section 32.3000 is revised to read
as follows:
■
§ 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 § 32.2000(g)(1)(iii).)
(2) Subsidiary records shall be
maintained for Accounts 2005, 2682,
2690, 3400 in accordance with
§ 32.2000(h)(4).
(b) Depreciation and amortization
accounts to be maintained by telephone
companies, as indicated.
Account title
Depreciation and amortization:
Accumulated depreciation ...........
Accumulated depreciation—Held
for future telecommunications
use.
Accumulated depreciation—Nonoperating.
Accumulated depreciation—Tangible.
E:\FR\FM\04MYR1.SGM
04MYR1
3100
3200
3300
3400
20842
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21. Section 32.3400 is amended by
revising paragraph (a) introductory text
to read as follows:
■
§ 32.3400
tangible.
Accumulated amortization—
(a) This account shall include:
*
*
*
*
*
■ 22. Section 32.3999 is revised to read
as follows:
§ 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.
Customer’s Deposits ...................
Income taxes—accrued ...............
Other taxes—accrued .................
Net Current Deferred Nonoperating Income Taxes.
Net Current Deferred Nonoperating Income Taxes.
Other current liabilities ................
Long-term debt:
Long Term debt and Funded
debt.
Other liabilities and deferred credits:
Other liabilities and deferred
credits.
Unamortized operating investment tax credits—net.
Unamortized nonoperating investment tax credits—net.
Net noncurrent deferred operating income taxes.
Net deferred tax liability adjustments.
Net noncurrent deferred nonoperating income taxes.
Deferred tax regulatory adjustments—net.
Other jurisdictional liabilities and
deferred credits—net.
Stockholder’s equity:
Capital stock ................................
Additional paid-in capital .............
Treasury stock .............................
Other capital ................................
Retained earnings .......................
4000
4040
4070
4080
4100
§ 32.5000
pmangrum on DSK3GDR082PROD with RULES
5081
5082
5083
5100
5200
5280
5300
Basic local service revenue.
Companies shall use this account for
revenues of the type and character
detailed in Accounts 5001 through
5060.
■ 25. Section 32.5200 is amended by
revising the introductory text to read as
follows:
4110
4130
4200
4300
§ 32.5200
Miscellaneous revenue.
4350
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.
*
*
*
*
*
■ 26. Section 32.5999 is amended by
revising paragraph (g) to read as follows:
4361
§ 32.5999
4320
4330
4340
4341
General.
*
*
*
*
(g) Expense accounts to be
maintained.
4370
4510
4520
4530
4540
4550
General.
Jkt 241001
Income Statement Accounts
Plant specific operations expense:
Network support expense ...........
General support expenses ..........
Central office switching expense
Operators system expense .........
Central office transmission expenses.
Information
origination/termination expense.
Cable and wire facilities expenses.
Plant nonspecific operations expense:
Other property plant and equipment expenses.
Network operations expenses .....
Access expense ..........................
PO 00000
Frm 00020
Fmt 4700
Sfmt 4700
Depreciation and amortization expenses.
Customer operations expense:
Marketing .....................................
Services .......................................
Corporate operations expense:
General and administrative .........
Provision for uncollectible notes
receivable.
6560
6610
6620
6720
6790
27. Section 32.6110 is revised to read
as follows:
■
§ 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.
■ 28. Section 32.6120 is revised to read
as follows:
§ 32.6120
General support expenses.
Companies shall use this account for
expenses of the type and character
detailed in Accounts 6121 through
6124.
■ 29. Section 32.6230 is amended to
read:
§ 32.6230
expense.
Central office transmission
Companies shall use this account for
expenses of the type and character
detailed in Accounts 6231 and 6232.
■ 30. Section 32.6310 is revised to read
as follows:
Companies shall use this account for
expenses of the type and character
detailed in Accounts 6311 through
6362.
■ 31. Section 32.6410 is revised to read
as follows:
Account title
*
*
*
*
(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.
Account title
§ 32.6310 Information origination/
termination expenses.
*
*
17:00 May 03, 2017
Local network services revenues:
Basic local service revenue.
Network access service revenues:
End user revenue ........................
Switched access revenue ...........
Special access revenue ..............
Long distance network services
revenues:
Long distance message revenue
Miscellaneous revenues:
Miscellaneous revenue ................
Nonregulated revenues:
Nonregulated operating revenue
Uncollectible revenues:
Uncollectible revenue ..................
24. Section 32.5000 is revised to read
as follows:
23. Section 32.4999 is amended by
revising paragraphs (f) and (n) to read as
follows:
VerDate Sep<11>2014
Account title
■
■
§ 32.4999
Such subsidiary record categories shall
be reported as required by part 43 of this
chapter.
*
*
*
*
*
(n) Revenue accounts to be
maintained.
6110
6120
6210
6220
6230
6310
6410
6510
6530
6540
§ 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.
■ 32. Section 32.6510 is revised to read
as follows:
§ 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.
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33. Section 32.6530 is revised to read
as follows:
■
§ 32.6530
Network operations expense.
Companies shall use this account for
expenses of the type and character
detailed in Accounts 6531 through
6535.
■ 34. Section 32.6560 is revised to read
as follows:
§ 32.6560 Depreciation and amortization
expenses.
Companies shall use this account for
expenses of the type and character
detailed in Accounts 6561 through
6565.
■ 35. Section 32.6610 is revised to read
as follows:
§ 32.6610
Marketing.
Companies shall use this account for
expenses of the type and character
detailed in Accounts 6611 through
6613.
■ 36. Section 32.6620 is revised to read
as follows:
§ 32.6620
Services.
Companies shall use this account for
expenses of the type and character
detailed in Accounts 6621 through
6623.
■ 37. Section 32.6999 is revised to read
as follows:
§ 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
pmangrum on DSK3GDR082PROD with RULES
13:02 May 03, 2017
Operating taxes:
Operating taxes ...........................
Nonoperating income and expense:
Nonoperating income and expense.
Nonoperating taxes:
Nonoperating taxes .....................
Interest and related items:
Interest and related items ...........
Extraordinary items .....................
Jurisdictional differences and nonregulated income items:
Income effect of jurisdictional
ratemaking difference—net.
Nonregulated net income ............
7200
7300
7400
7500
7600
7910
7990
38. Section 32.7200 is revised to read
as follows:
■
Operating taxes.
Companies shall use this account for
operating taxes of the type and character
detailed in Accounts 7210 through
7250.
■ 39. Section 32.9000 is amended by
revising the definition of ‘‘Original cost’’
to read as follows:
§ 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
40. The authority citation for part 65
continues to read as follows:
■
Other operating income and expense:
Other operating income and expense.
VerDate Sep<11>2014
41. The heading for part 65 is revised
to read as set forth above.
■
Account title
§ 32.7200
7100
Jkt 241001
Authority: 47 U.S.C. 151, 154(i), 155, 201,
205, 214, 219, 220, 254, 303(r), 403, and 1302
unless otherwise noted.
PO 00000
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Fmt 4700
20843
Sfmt 9990
42. Section 65.810 is revised to read
as follows:
■
§ 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.
43. Section 65.820 is amended by
revising paragraph (d) to read as
follows:
■
§ 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
E:\FR\FM\04MYR1.SGM
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Agencies
[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]
=======================================================================
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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
Robin.Cohn@fcc.gov, or Nicole Ongele, Office of Managing Director at
(202) 418-2991 or at Nicole.Ongele@fcc.gov.
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.)
* * * * *
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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.
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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.
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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.
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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.
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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.
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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.
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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]]
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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:
* * * * *
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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
------------------------------------------------------------------------
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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]]
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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