Jurisdictional Separations and Referral to the Federal-State Joint Board, 4351-4360 [2019-01721]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 84, Number 32 (Friday, February 15, 2019)]
[Rules and Regulations]
[Pages 4351-4360]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01721]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 36

[CC Docket No. 80-286, FCC No. 18-182]


Jurisdictional Separations and Referral to the Federal-State 
Joint Board

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission amends its part 36 
jurisdictional separations rules by extending for up to six years the 
freeze of separations category relationships and allocation factors 
that it originally adopted in 2001. As a result, the freeze will remain 
in effect until the earlier of December 31, 2024, or the completion of 
comprehensive reform of the part 36 jurisdictional separations rules. 
The Commission also amends its part 36 jurisdictional separations rules 
by providing rate-of-return carriers that elected to freeze their 
separations category relationships in 2001 a one-time opportunity to 
unfreeze and update those relationships so that they can categorize 
their costs based on current circumstances.

DATES: These rules are effective February 15, 2019, except for the 
amendment to 47 CFR 36.3(b) which is delayed. The Commission will 
publish a document in the Federal Register announcing the effective 
date.

ADDRESSES: Federal Communications Commission, 445 12th Street SW, 
Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Marvin Sacks, Pricing Policy Division 
of the Wireline Competition Bureau, at (202)-418-2017 or via email at 
Marvin.Sacks@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a final rule summary of the 
Commission's Report and Order, released December 17, 2018. A full-text 
version of this document can be obtained from the following internet 
address: https://www.fcc.gov/document/fcc-extends-jurisdictional-separations-freeze-six-years.

Synopsis

I. Introduction

    1. In 1970, when monopoly rate-of-return local exchange carriers 
(LECs) provided telephone services primarily over circuit-switched, 
voice networks, the Commission codified its jurisdictional separations 
rules. Those rules required each LEC to divide its cost of providing 
service between the interstate and intrastate jurisdictions in a manner 
reflecting each jurisdiction's relative use of the LEC's network. In an 
era when the Commission and its State counterparts set virtually all 
telephone rates based on actual costs, the separations rules helped 
ensure that each LEC had the opportunity to recover its expenses and 
earn a reasonable return on its investments.
    2. Today, phone companies deliver voice, data, and video services 
that are increasingly being provided over internet Protocol-based 
networks. New digital technologies blur the lines between interstate 
and intrastate communications, making last century's jurisdictional 
separations rules inadequate and outmoded vis-[agrave]-vis their

[[Page 4352]]

intended purpose. Moreover, the relevance of the cost-separation rules 
has diminished, as the Commission has incrementally replaced burdensome 
rate-of-return regulation with the efficiencies of incentive 
regulation. Currently, only a small percentage of Americans receive 
their telecommunications services from providers subject to rate-of-
return regulation and the cost separation rules. Nevertheless, the 
Commission's separations rules continue to play an important role in 
determining how rate-of-return carriers recover some of their costs.
    3. In 1997, the Commission recognized the need to comprehensively 
reform the separations rules and referred separations reform to the 
Federal-State Joint Board on Jurisdictional Separations (Joint Board) 
for a recommended decision. More than twenty years later, the Joint 
Board has not reached agreement on comprehensive separations reform. 
And so, starting in 2001, originally at the behest of the Joint Board, 
the Commission has completed several rulemaking proceedings to freeze 
the separations rules to stabilize and simplify the separations process 
pending reform. Most recently, the Commission extended the freeze until 
December 31, 2018.
    4. Today, the Commission breaks this cycle. Because so little 
progress has been made on comprehensive separations reform over the 
past 20 years, the Commission extends the separations freeze for up to 
six years so that it and the Joint Board can devote their resources to 
substantive reform, rather than to extending artificial deadlines. And 
because previous attempts at comprehensive reform have failed, the 
Commission requests that the Joint Board approach the challenge 
incrementally. The Commission asks that, in the short term, the Joint 
Board focus on how best to amend the separations rules to recognize 
that they impact only rate-of-return carriers and on whether any other 
separations rules or recordkeeping requirements can be modified or 
eliminated in light of that limited application. Coming to a decision 
on these issues will reduce the Joint Board's work over the longer term 
as it seeks to replace the existing jurisdictional separations process 
with a simplified system for reasonably allocating costs between the 
interstate and intrastate jurisdictions. The Commission begins this 
incremental reform by allowing rate-of-return carriers that elected to 
freeze their separations category relationships in 2001 to opt out of 
that freeze.

II. Background

A. The Jurisdictional Separations Process

    5. Jurisdictional separations is the third step in a four-step 
regulatory process. First, a rate-of-return carrier records its costs 
and revenues in various accounts using the Uniform System of Accounts 
prescribed by the Commission's part 32 rules. Second, the carrier 
divides the costs and revenues in these accounts between regulated and 
nonregulated activities in accordance with the Commission's part 64 
rules, a step that helps ensure that the costs of nonregulated 
activities will not be recovered through regulated interstate rates. 
Third, the carrier separates the regulated costs and revenues between 
the interstate and intrastate jurisdictions using the Commission's part 
36 jurisdictional separations rules. Finally, the carrier apportions 
the interstate regulated costs among the interexchange services and the 
rate elements that form the cost basis for its exchange access tariffs. 
Carriers subject to rate-of-return regulation perform this 
apportionment in accordance with the Commission's part 69 rules.
    6. To comply with these rules, rate-of-return incumbent LECs 
perform annual cost studies that include jurisdictional separations. 
The jurisdictional separations analysis begins with the categorization 
of the incumbent LEC's regulated costs and revenues, requiring the 
incumbent LEC to assign the regulated costs and revenues recorded in 
its part 32 accounts to various investment, expense, and revenue 
categories. Part 36 (or separations) category relationships are 
percentages of costs recorded in a part 32 account that are assigned to 
separations categories corresponding to that account. The incumbent LEC 
then allocates the costs or revenues in each category between the 
interstate and intrastate jurisdictions. Amounts in categories that are 
used exclusively for interstate or intrastate communications are 
directly assigned to the appropriate jurisdiction. Amounts in 
categories that support both interstate and intrastate services are 
divided between the jurisdictions using allocation factors that reflect 
relative use or a fixed percentage.

B. Attempts at Jurisdictional Separations Reform and the Separations 
Freeze

    7. In 1997, recognizing that ``changes in the law, technology, and 
market structure of the telecommunications industry'' necessitated a 
thorough reevaluation of the jurisdictional separations process, the 
Commission initiated a proceeding to comprehensively reform the 
separations rules. At the same time, pursuant to section 410(c) of the 
Communications Act of 1934, as amended (the Communications Act), the 
Commission referred the matter of jurisdictional separations reform to 
the Joint Board for a recommended decision. Section 410(c) requires the 
Commission to ``refer any proceeding regarding the jurisdictional 
separation of common carrier property and expenses between interstate 
and intrastate operations, which it initiates pursuant to a notice of 
proposed rulemaking'' to a Joint Board. Section 410(c) further 
specifies that after such a referral the Joint Board ``shall prepare a 
recommended decision for prompt review and action by the Commission.''
    8. Since the Commission initiated this proceeding in 1997, the 
Joint Board--comprised of both State and federal members--has been 
attempting to develop recommendations for comprehensive reform. In 
response to the Commission's initial referral, the State members of the 
Joint Board filed a report identifying issues they believed should be 
addressed. Over the years, the State members filed policy papers 
setting out options for reform, the Commission or the Joint Board 
sought comment, and the Joint Board held hearings and meetings to 
consider the various proposals. In 2009, the Commission made a second 
referral of comprehensive jurisdictional separations reform to the 
Joint Board and asked that ``the Joint Board prepare a recommended 
decision regarding whether, how, and when the Commission's 
jurisdictional separations rules should be modified.'' In 2010, the 
State members of the Joint Board submitted a limited interim proposal, 
and the Joint Board sought comment on their behalf. Despite two 
Commission referrals seeking a recommended decision on comprehensive 
separations reform, the Joint Board has not advanced a recommended 
decision on comprehensive reform to the Commission.
    9. In the course of considering comprehensive reform, the Joint 
Board did issue a recommendation, in 2000, that the Commission freeze 
the part 36 category relationships and jurisdictional allocation 
factors pending resolution of comprehensive reform. The Commission 
sought comment on that Recommended Decision; and based on the record 
before it, the Commission adopted the 2001 Separations Freeze Order. 
The Commission concluded that a freeze would stabilize the separations 
process pending reform by minimizing any impact of cost shifts on 
separations

[[Page 4353]]

results due to circumstances--such as the growth of internet usage, new 
technologies, and local competition--not contemplated by the rules. The 
Commission also concluded that a freeze would simplify the separations 
process by eliminating the need for many separations studies until 
separations reform was implemented.
    10. The Commission agreed with the Joint Board's Recommended 
Decision to freeze all part 36 category relationships and allocation 
factors for price cap carriers and to freeze all allocation factors for 
rate-of-return carriers. The Commission also agreed with the Joint 
Board that requiring rate-of-return carriers to freeze their category 
relationships could potentially harm these carriers. The Commission 
therefore provided rate-of-return carriers a one-time option to freeze 
their category relationships, enabling each of these carriers to 
determine whether such a freeze would be beneficial ``based on its own 
circumstances and investment plans.'' Presently, rate-of-return 
carriers in about 45 study areas operate under the category 
relationships freeze.
    11. In the 2001 Separations Freeze Order, the Commission specified 
that the freeze would last for five years or until the Commission 
completed comprehensive separations reform, whichever came first. The 
Commission also concluded that, prior to the expiration of the five-
year period, the Commission would, in consultation with the Joint 
Board, determine whether the freeze period should be extended. The 
Commission specified that ``the determination of whether the freeze 
should be extended at the end of the five-year period shall be based 
upon whether, and to what extent, comprehensive reform of separations 
has been undertaken by that time.''
    12. Since then, the Commission has extended the separations freeze 
seven times, for periods ranging from one year to three years, with the 
most recent extension expiring on December 31, 2018. In advance of all 
but one of the freeze extensions, the Commission sought comment on 
extending the freeze, but it has not referred the specific issue of 
freeze extensions to the Joint Board. In the 2009 Separations Freeze 
Extension Order and Second Referral, the Commission asked the Joint 
Board to consider whether the Commission should allow carriers to 
unfreeze their separations category relationships and requested that 
the Joint Board prepare a recommended decision on that matter. The 
Joint Board has not made a recommendation on that request.
    13. In repeatedly extending the freeze, the Commission has 
explained that the freeze would stabilize and simplify the separations 
process while the Joint Board and the Commission continued to work on 
separations reform. In its most recent freeze extension order, the 
Commission also explained that an extension until December 31, 2018, 
would provide the Joint Board with sufficient time to consider what 
effects the Commission's reforms to the high-cost universal service 
program and intercarrier compensation should have on the separations 
rules.
    14. Earlier this year, the Commission issued a Further Notice of 
Proposed Rulemaking (Further Notice), 83 FR 35582, July 27, 2018, 
proposing to extend the jurisdictional separations freeze for 15 years 
and inviting comment on that proposal. The Commission also sought 
comment on whether a shorter freeze extension would be preferable and 
on whether it should alter the scope of the referral to the Joint Board 
regarding comprehensive separations reform. In so doing, the Commission 
recognized that the issues before the Joint Board are extremely complex 
and stated the Commission's preference not to move forward on 
separations reform without a Joint Board recommendation on an approach 
to such reform. The Commission also recognized that as a practical 
matter it would have to choose between extending the separations freeze 
and requiring changes to long-unchanged allocation factors and, for 
some carriers, category relationships to take effect on January 1, 
2019.
    15. The Commission also proposed and sought comment on allowing 
rate-of-return carriers that had elected to freeze their category 
relationships in 2001 to opt out of that freeze. The Commission 
explained that the category relationships freeze has lasted 17 years 
instead of no more than five years as the Commission and the Joint 
Board originally had contemplated. The Commission also explained that 
since opting into the category relationships freeze many rate-of-return 
carriers had invested in network upgrades or were considering doing so, 
and that, as a result of the category relationships freeze, these 
carriers may be unable to recover the costs of those investments from 
ratepayers that benefit from the upgrades or from the Universal Service 
Fund. Consequently, the Commission pointed out, these carriers may lack 
incentives to improve service and deploy advanced technologies like 
broadband for their customers.

C. Declining Applicability of Jurisdictional Separations Results

    16. Over the course of the last decade, the jurisdictional 
separations rules have become irrelevant to the carriers that provide 
most Americans with telecommunications services. The separations rules 
were never applicable to wireless carriers. In 2008, the Commission 
granted price cap carriers forbearance from the separations rules; and 
recently the Commission extended this forbearance to rate-of-return 
carriers that receive fixed or model-based high-cost universal service 
support (fixed support carriers) and that elect incentive regulation 
for their business data services. As a result, by the middle of next 
year, the separations rules will apply only to rate-of-return carriers 
serving about 800 study areas.
    17. Even for the carriers that remain subject to the separations 
rules, separations results have only limited applicability because of 
recent reforms by the Commission. As part of comprehensive reform and 
modernization of the universal service and intercarrier compensation 
systems, the Commission adopted rate caps (including a transition to 
bill-and-keep for certain rate elements) for switched access services 
for rate-of-return carriers, thereby severing the relationship between 
costs and switched access rates. In addition, in 2016, the Commission 
gave rate-of-return carriers the option of receiving high-cost 
universal service support based on the Alternative Connect America Cost 
Model (A-CAM). More than 200 carriers opted to receive A-CAM support, 
which eliminated the need for those carriers to perform cost studies 
that required jurisdictional separations to quantify the amount of 
high-cost support for their common line offerings. Also as part of 
universal service reform, the Commission established rules to provide 
support for loop costs associated with broadband-only services offered 
by rate-of-return carriers.
    18. As a result of these reforms, the Commission currently uses 
separations results only for carriers subject to rate-of-return 
regulation and only for the following limited purposes of calculating: 
(a) Business data services rates; (b) the charge assessed on 
residential and business lines, known as a subscriber line charge, 
allowing carriers to recover part of the costs of providing access to 
the telecommunications network; (c) the rate for Consumer Broadband-
Only Loop service; and (d) the interstate common line and Consumer 
Broadband-Only Loop support for non-fixed

[[Page 4354]]

support carriers. The administrator of the universal service support 
program, the Universal Service Administrative Company also uses 
separations categorization results for calculating high-cost loop 
support for certain non-fixed support carriers, but without applying 
jurisdictional allocations. States also use separations results to 
determine the amount of intrastate universal service support and to 
calculate regulatory fees, and some states perform rate-of-return 
ratemaking using intrastate costs.

III. Discussion

    19. Based on the record in this proceeding, and cognizant of the 
impacts, both on rate-of-return carriers subject to the separations 
freeze and on the Commission, of the seven separations freeze 
extensions over the last 17 years, the Commission now extends for up to 
six years the freeze on part 36 category relationships and 
jurisdictional cost allocation factors that the Commission adopted in 
the 2001 Separations Freeze Order. This extension will begin on January 
1, 2019, and will continue until the earlier of December 31, 2024, or 
the completion of comprehensive reform of the part 36 jurisdictional 
separations rules. The Commission also provides carriers that opted to 
freeze their separations category relationships in 2001 a one-time 
opportunity to unfreeze and update those relationships so that they can 
categorize their costs based on current circumstances.

A. Further Extending the Separations Freeze

    20. The Commission finds, consistent with the recommendation of the 
State members of the Joint Board and the overwhelming consensus among 
the commenters, that an extension of the separations freeze beyond its 
December 31, 2018, expiration date will serve the public interest. As 
the Commission recognized in the Further Notice, this impending 
deadline compels the Commission to make a choice between extending the 
freeze further or allowing long-unused separations rules to take effect 
on January 1, 2019. The Commission finds that not extending the freeze 
would impose significant burdens on rate-of-return carriers that would 
far exceed the benefits, if any, of requiring those carriers to comply 
with rules that they have not implemented since 2001.
    21. In particular, the Commission agrees with those commenters that 
argue that rate-of-return carriers, particularly smaller rural 
carriers, would find it extremely difficult, if not impossible, to 
perform all of the studies needed for full compliance. The Commission 
has previously found that allowing the existing freeze to lapse and 
frozen separations rules to be reinstated would impose undue 
instability and administrative burdens on affected carriers. The record 
in this proceeding confirms that is still the case.
    22. First, the Commission agrees with commenters that developing 
``traffic factors'' to jurisdictionally separate costs assigned to 
voice-related services is ``an arcane science'' and that, after 17 
years of not performing traffic factor studies, carriers would be 
required to incur substantial training and other costs to reestablish 
the expertise necessary to perform them. This expense would hit 
smaller, rural carriers with limited resources the hardest. The 
Commission cannot justify imposing such a burden on small carriers 
particularly given that the impact of such traffic factors is 
continuing to diminish as investment in voice services decreases due to 
growing deployment of broadband services.
    23. Moreover, as NTCA explains, even if full compliance were 
possible, ``these smaller providers would be forced to return to a 
regulatory environment that last operated in full nearly two decades 
ago.'' The Commission cannot justify the costs of such compliance, 
given the outdated nature of the rules with which these small providers 
would have to comply. Furthermore, as the Commission previously 
explained, reinstating these largely outmoded rules in full measure 
could produce negative consequences by causing significant disruptions 
in carriers' regulated rates, cost recovery, and other operating 
conditions.
    24. The Commission therefore rejects the Irregulators' argument 
that it should not extend the freeze. The Irregulators express concern 
that the freeze has led ``to improper decision-making at various 
levels,'' with, for example, State governments basing policy on 
obsolete numbers that over-allocate costs to the intrastate 
jurisdiction. Yet, they fail to explain how ending the freeze would 
alleviate any such misallocation. Instead, the Irregulators propose two 
options for completely revamping the jurisdictional separations 
process. While those proposals may be useful to the Joint Board's 
consideration of comprehensive separations reform, they are beyond the 
scope of the question before the Commission today of whether to extend 
the separations freeze beyond December 31, 2018.
    25. The Commission also finds that another short-term freeze 
extension will not provide the Joint Board, the Commission, and 
interested stakeholders sufficient time to complete comprehensive 
separations reform. Indeed, several commenters support a fifteen-year 
freeze. By contrast, NARUC and the Colorado PUC both advocate for a 
freeze of no more than two years. In considering how long to extend the 
freeze, the Commission agrees with the State members of the Joint Board 
that an extension of up to six years is appropriate. A freeze of up to 
six years balances the competing considerations--the difficulty of 
comprehensive separations reform and the need to focus on that reform 
rather than on repeated freeze extensions--better than a longer or 
shorter extension period.
    26. The difficulty of comprehensively reforming the separations 
rules cannot be overstated. The current rules focus on allocating 
between the interstate and intrastate jurisdictions the costs of 
circuit-switched voice services provided over primarily copper 
networks. Those rules have largely been in place since 1969, with some 
revisions in 1987, and minor revisions earlier this year to harmonize 
the part 36 rules with changes the Commission made to the part 32 
rules. Since the freeze was first put in place, many rate-of-return 
carriers have converted much of their networks to packet-based 
technologies that provide telecommunications, information, and video 
services over fiber facilities. Comprehensive reform, as previously 
envisioned by the Commission, would entail rewriting the separations 
rules in a manner that recognizes these technological changes and is 
consistent with changes to the high-cost universal service program and 
intercarrier compensation systems. As the Commission's track record of 
repeated extensions demonstrates, such reform is not a short-term 
project.
    27. Accordingly, the Commission rejects NARUC's argument that it 
should extend the freeze ``on an interim basis for no more than two 
years to engage timely and substantively [with the Joint Board] on 
separations issues.'' Given the Commission's past experience with 
short-term separations freezes and stalled attempts at separations 
reform, the Commission finds that a two-year extension would almost 
certainly do nothing more than continue the cycle of repeated short-
term freeze extensions that has diverted industry, State, and 
Commission resources away from substantive reform, forcing a break in 
whatever momentum toward meaningful separations reform the Commission 
and the Joint Board achieve, long before that reform is complete. The 
Commission believes

[[Page 4355]]

instead that an extension of up to six years makes separations reform 
more likely because it will halt that cycle and provide sufficient time 
for the Joint Board to focus on short-term and long-term steps toward 
comprehensive reform.
    28. The Commission also declines to extend the freeze indefinitely, 
as USTelecom urges. USTelecom argues that the separations rules ``have 
become increasing[ly] irrelevant and unnecessary'' and that the 
Commission should therefore focus on substantive intercarrier 
compensation and universal service reforms, rather than on separations 
reform. Although the Commission agrees that the separations rules are 
irrelevant to price cap carriers, they remain applicable to, and impose 
substantial obligations on, rate-of-return carriers serving about 800 
study areas. The Commission therefore believes that there is value to 
continuing to work towards reform of those rules.

B. Allowing a One-Time Category Relationships Unfreeze

    29. In the Rate-of-Return Business Data Services Order, the 
Commission allowed carriers subject to the category relationships 
freeze that receive model-based and other forms of fixed high-cost 
support and elect incentive regulation for business data services to 
opt out of that freeze and update their category relationships. In this 
proceeding, the Commission grants all other rate-of-return carriers 
operating under the category-relationships freeze the opportunity to 
opt out of it and update their category relationships--enabling those 
carriers to better recover network upgrade costs from ratepayers that 
benefit from those upgrades and to take greater advantage of universal 
service programs that incent broadband deployment.
    30. Category Relationships Unfreeze. The rate-of-return carriers 
that elected to freeze their category relationships in 2001 did so 
based, in part, on the Commission's representation that the freeze 
would last no more than five years. Those carriers did not and could 
not have anticipated that the category relationships freeze would be in 
place for more than 17 years. Yet, the Commission's current rules 
prohibit carriers that elected the freeze from withdrawing from it. The 
result is that some, if not all, carriers with frozen category 
relationships are unable to recover their business data services costs 
from business data services customers or from NECA traffic sensitive 
pool settlements.
    31. Rate-of-return carriers that chose to freeze their category 
relationships in 2001 assign costs within part 32 accounts to 
categories using their separations category relationships from 2000. 
Consequently, these companies are still categorizing their costs based 
on the technologies and services that were in place in 2000, instead of 
being able to adjust the amounts assigned to separations categories to 
reflect current network costs and services. This circumstance, in turn, 
distorts revenue requirements and resulting rates. Allowing carriers to 
unfreeze and update their category relationships will enable them to 
more closely align their business data services and Consumer Broadband-
Only Loop service rates with the underlying costs of these services. It 
also will encourage those carriers to expand and upgrade their 
networks, thus enhancing their capability to provide these services.
    32. The Commission also agrees with commenters that allowing 
affected carriers to opt out of the freeze will enable these carriers 
to take better advantage of universal service programs that promote 
broadband growth. As commenters point out, the category relationships 
freeze undermines incentives for certain carriers to move toward 
broadband-only services. Endeavor, for example, explains that, without 
an opportunity to unfreeze and re-categorize investment levels, the 
ability of carriers to qualify for support of broadband-capable network 
loops through the Connect America Fund--Broadband Loop Service (CAF-
BLS) program is significantly reduced. Unfreezing category 
relationships will allow a carrier to assign broadband-only loop costs 
to the consumer broadband-only revenue requirement and also receive 
CAF-BLS support based on these costs, as carriers seek to meet consumer 
demand for broadband-only lines.
    33. In addition, consistent with the Commission's finding in the 
Rate-of-Return Business Data Services Order and the consensus of 
commenters in this proceeding including the State Members of the 
Federal-State Joint Board, the Commission concludes that affected 
carriers should be given the flexibility to choose whether to unfreeze 
their category relationships. Were the Commission instead to require 
all affected carriers to unfreeze and update their category 
relationships, the burden on some affected carriers could outweigh any 
potential benefits. As the Commission has recognized, the size, cost 
structures, and investment patterns of rate-of-return carriers vary 
widely. Certain rate-of-return carriers' cost structures may not have 
changed significantly enough since the freeze began to warrant the 
administrative costs that these carriers would incur in updating their 
category relationships, costs that would be borne by their customers 
and the high-cost universal service support program. Other carriers may 
find that updating their category relationships would disrupt business 
plans made based on a continuation of the category relationships freeze 
since it has been in effect for such a long period. Allowing affected 
carriers the flexibility to choose whether to unfreeze their category 
relationships properly recognizes that some carriers will embrace the 
opportunity to more accurately categorize their investments, while 
others would find updating their category relationships to be unduly 
costly or disruptive.
    34. Consistent with Commission precedent, the Commission adopts 
July 1, 2019, as the effective date for opting out of the freeze. The 
Commission finds it important to implement the unfreeze option 
``efficiently and swiftly'' while at the same time giving carriers 
enough time to prepare. Commenters generally agree that July 1, 2019, 
is a reasonable effective date. The Commission requires that carriers 
currently in the NECA traffic-sensitive pool notify NECA by March 1, 
2019, of their decision to opt out of the category relationships 
freeze. This deadline provides the same advance notice that carriers 
exiting the NECA pool must give NECA under Sec.  69.3 of the 
Commission's rules. The Commission also requires carriers that file 
their own tariffs to provide the Wireline Competition Bureau with 
notice of their intent to opt out of the category relationships freeze 
by May 1, 2019.
    35. The Commission finds there is insufficient basis in the record 
to modify any other aspects of the separations freeze. The Commission 
sought detailed input on several other possible modifications to the 
freeze, including whether carriers that unfreeze their category 
relationships should be permitted to refreeze them and whether carriers 
that did not freeze their category relationships in 2001 should be 
permitted to freeze them. In addition, carriers now apportion their 
categorized costs using jurisdictional allocation factors for the year 
2000, and the Commission sought input on whether it should allow or 
require carriers to reset these factors using current data. The record 
provides insufficient information, however, about the impact of 
allowing such a reset of jurisdictional allocation factors or about how 
best to implement such a reset. Moreover, requiring all rate-of-return 
carriers to reset their jurisdictional allocation

[[Page 4356]]

factors would impose substantial burdens on small rural carriers. And 
requiring or allowing all rate-of-return carriers to reset their 
jurisdictional allocation factors would impose a substantial burden on 
NECA and the Commission in reviewing such changes. Some commenters 
support other modifications to the separations freeze, such as giving 
carriers the opportunity to unfreeze and then refreeze their category 
relationships. The Commission agrees with NECA, however, that allowing 
companies to unfreeze and then refreeze their category relationships 
would risk gamesmanship, a risk that the Commission cannot adequately 
address on the current record. Indeed, the record lacks sufficient 
information to accurately assess the benefits and drawbacks of making 
changes to the separations freeze, other than to the category 
relationships freeze.
    36. Implementation of the Unfreeze. The Commission adopts the 
suggestion that carriers that file their own tariffs and unfreeze their 
category relationships be required to update their part 36 category 
relationships in new cost studies on which their interstate tariffed 
rates, other than switched access rates, will be based going forward, 
beginning with the 2019 annual filing. Rate-of-return carriers subject 
to Sec. Sec.  61.38 and 61.39 of the Commission's rules shall explain 
the impact of the unfreeze and describe these studies in the 
``Description & Justification'' sections of their filings. Carriers 
subject to Sec.  61.38 shall include the results of these studies in 
their tariff review plans. Carriers subject to Sec.  61.39 are not 
required to submit the supporting data at the time of filing, but the 
Commission and interested parties may request the data. NECA carriers 
that elect to unfreeze their category relationships must reflect these 
unfrozen relationships in the cost studies on which their pool 
settlements are based beginning with the last six months of studies for 
calendar year 2019.
    37. The Commission concludes, consistent with the view of nearly 
all commenters addressing the issue, that it should take steps to 
prevent double-recovery of costs. Unfreezing separations category 
relationships could result in a carrier's recovery of the same costs 
through higher business data services rates and unchanged switched 
access recovery. Updated category relationships will change the costs 
assigned to common line, to interstate switched access, and to business 
data services. The USF/ICC Transformation Order capped all interstate 
switched access rates at 2011 levels, subject to specified reductions 
over time. The Commission does not with this action make changes to the 
carefully-balanced transition to bill-and-keep set forth in that Order. 
Unless cost reductions to interstate switched access are reflected in a 
carrier's revised base period revenue, however, a carrier will over-
recover costs through its capped interstate switched access rates.
    38. To prevent this over-recovery, the Commission follows the 
approach it took in the Rate-of-Return Business Data Services Order. 
There, the Commission adopted a method similar to the approach the 
Bureau followed in waiving the category relationships freeze in the 
Eastex Waiver Order, which commenters generally agree is a reasonable 
approach to prevent double-recovery. Thus, a carrier subject to Sec.  
61.38 or Sec.  61.39 of the Commission's rules must calculate the 
difference between the interstate switched access costs in two cost 
studies--one based on unfrozen category relationships that is the basis 
for its tariff-year 2019-2020 rates and a second study that is the same 
except that it is based on frozen category relationships. Each carrier 
must then adjust its base period revenue by an amount equal to the 
interstate switched access cost difference between the two cost studies 
before applying the annual 5% reduction to the base period revenue, as 
required by the USF/ICC Transformation Order.
    39. A carrier that participates in the NECA interstate switched 
access tariff must report to NECA the interstate switched access cost 
difference between the two calendar year 2018 studies and its base 
period revenue as revised to reflect the cost difference. These 
procedures protect both carriers and customers from any unintended 
consequences of unfreezing category relationships. Finally, the 
Commission requires NECA to reflect these base period revenue changes 
in its settlement procedures.
    40. The Commission finds that these measures provide a reasonable 
and not unduly burdensome method for preventing double-recovery of 
costs when a carrier chooses to unfreeze its category relationships. 
Each carrier will need to perform detailed calculations to implement 
its choice to update category relationships. Because the Commission has 
an obligation to protect ratepayers against the harms of double-
recovery, the Commission rejects ITTA's assertion that the procedure 
carriers are required to follow to prevent double-recovery is too 
burdensome, particularly since ITTA poses no alternative.

C. Declining To Alter the Scope of the Referral

    41. The Commission declines to alter the scope of the referral to 
the Joint Board, and instead asks the Joint Board to adopt an 
incremental approach to separations reform by focusing first on 
cleaning up the existing separations rules and then on long-term steps 
toward comprehensive reform of the remaining rules. As previously 
articulated by the Commission, those issues include whether the 
separations rules are still needed, whether specific separations 
categories should be consolidated or disaggregated, and how certain 
types of costs should be allocated between the jurisdictions. Although 
the Commission has never retreated from its goal of comprehensive 
separations reform, over the years it has asked the Joint Board to 
focus on certain specific issues within that broad area. Most recently, 
the Commission referred to the Joint Board the harmonization of the 
Commission's part 32 jurisdictional separations rules with previous 
amendments to its part 32 accounting rules and asked the Joint Board to 
issue a recommended decision on that matter. The Joint Board issued its 
Recommended Decision eight months after receiving that referral; and, 
after seeking public comment on the Joint Board's recommendations, the 
Commission amended its separations rules consistent with those 
recommendations.
    42. Therefore, rather than narrowing the scope of the separations 
reform referral, the Commission believes that the best course is to ask 
the Joint Board to focus on certain discrete issues in the short term. 
First, should the Commission amend the separations rules to recognize 
that price cap carriers and rate-of-return carriers that have adopted 
the new incentive regulation framework for their business data services 
offerings are not subject to them--an action that would recognize the 
Commission's forbearance from application of the separations rules to 
these carriers? Second, given that the separations rules apply only to 
certain rate-of-return carriers and only for certain purposes, are 
there rules or recordkeeping requirements that the Commission should 
modify or eliminate in light of the freeze extension of up to six 
years? In highlighting these issues, the Commission hopes to draw on 
the Commission's recent experience with the Joint Board in amending the 
part 36 separations rules to harmonize them with changes in the part 32 
accounting rules.

[[Page 4357]]

    43. Longer term, the Commission continues to seek the Joint Board's 
recommendations on how the Commission might replace the existing 
jurisdictional separations process with a simplified system for 
reasonably allocating costs between the interstate and intrastate 
jurisdictions. The Commission agrees with NARUC that the existing 
separations rules, which presume circuit-switched, primarily voice 
networks, require updating to reflect today's network configurations 
and mix of broadband, video, and voice services. The Commission also 
shares NARUC's and the Irregulators' concern that those rules 
necessarily misallocate network costs. The Commission knows that any 
changes to the separations rules will need to be harmonized with the 
Commission's reforms to the universal service, intercarrier 
compensation, and business data services rules. Indeed, the Commission 
extends the separations freeze for up to six years to free resources to 
address these and other long-term separations problems. The Commission 
looks forward to working with the Joint Board in a more directed 
manner, addressing these important issues step-by-step. By addressing 
the separations procedures in a concerted fashion--through substantive 
reforms of the universal service, intercarrier compensation, and 
business data services rules on one hand, and focused revisions of 
specific areas in the separations rules on the other--the Commission 
hopes to resolve the complex separations issues that have proven so 
challenging well before the end of the maximum six-year extension 
period.

D. Consistency With the Communications Act

    44. The Commission rejects NARUC's assertion that because it did 
not refer or receive a recommended decision from the Joint Board on the 
specific proposal to extend the freeze for 15 years, and because it did 
not receive a recommended decision from the Joint Board on allowing 
carriers subject to the category relationships freeze the opportunity 
to update their category relationships, the Commission is violating 
section 410(c) of the Communications Act. In so arguing, NARUC ignores 
the fact that the Commission has twice referred comprehensive 
separations reform to the Joint Board. The Joint Board clearly 
understood that these referrals encompassed a separations freeze; 
otherwise it would have sought an additional referral before 
recommending the initial freeze. Moreover in 2009, the Commission 
referred the specific question of whether to allow carriers subject to 
the category relationships freeze the opportunity to unfreeze those 
relationships. The Joint Board has never come to a recommended decision 
on the latter referral, and the only Recommended Decision the Joint 
Board has issued addressing any part of either comprehensive reform 
referral was the decision the Joint Board issued in 2000 recommending a 
separations freeze. Following the Joint Board recommendation, the 
Commission adopted the separations freeze and recognized that it might 
need to extend the freeze if comprehensive reform were not completed 
before the freeze expired.
    45. Because the Commission has not completed comprehensive reform, 
consistent with the Commission's 2001 Separations Freeze Order, the 
Commission has extended the separations freeze seven times without an 
additional referral to, or receiving an additional recommended decision 
from, the Joint Board. The first time the Commission extended the 
freeze it explicitly found that the extension was within the scope of 
the Joint Board's previous recommendation. NARUC's assertion that the 
Commission found in 2001 that it would be required to receive a 
specific recommendation from the Joint Board on each extension of the 
separations freeze is plainly wrong. The Commission committed to 
consulting with the Joint Board on extensions of the initial five-year 
freeze; it did not commit to referring freeze extensions to the Joint 
Board. For their part, State members of the Joint Board have repeatedly 
submitted letters supporting the freeze extensions; and, as part of 
this proceeding, the current State members recommend that the 
Commission extend the separations freeze for up to six years and allow 
carriers a one-time opportunity to unfreeze their category 
relationships.
    46. In its comments, NARUC attempts to distinguish the proposed 15-
year freeze from earlier, shorter freeze extensions by arguing that a 
freeze of up to 15 years is the ``policy equivalent'' of a permanent 
freeze. The Commission's decision to extend the freeze for only six 
years should alleviate NARUC's concern. Moreover, the Commission's 
decision to extend the freeze for up to six years is consistent with 
the recommendation of the State members of the Joint Board and informed 
by the record of this proceeding and by the Joint Board's failure to 
reach a recommendation on comprehensive reform for the last 21 years. 
Furthermore, the freeze the Commission adopts today is not permanent; 
it will expire on a date certain absent further action by the 
Commission.
    47. Regarding the Commission's 2001 pledge to ``consult[] with the 
Joint Board'' to ``determine whether the freeze period shall be 
extended,'' the notice and comment and ex parte periods for the Further 
Notice provided ample opportunity for the Joint Board, including its 
State members, to voice their opinions on the extension. The State 
members of the Joint Board have taken the opportunity to engage in 
extensive discussions with all the other Joint Board members. These 
discussions meet any obligation the Commission may have under section 
410(c) to afford the State members of the Joint Board an opportunity to 
participate in the Commission's deliberations on this Report and Order.
    48. Moreover, given the lack of action by the Joint Board on the 
Commission's two referrals of comprehensive reform and separate 
referral of an unfreeze of the category relationships and the 
recommendations of the State Joint Board members, the Commission's 
actions today are necessary and appropriate. Section 410(c) directs 
that, after a referral, the Joint Board ``shall prepare a recommended 
decision for prompt review and action by the Commission.'' Nothing in 
section 410(c) obligates the Commission to wait indefinitely for a 
recommended decision before acting. The Commission concludes that the 
only reasonable interpretation of the statutory language allows the 
Commission to act unilaterally where, as here, issues have been pending 
before the Joint Board for many years without a recommended decision. 
Any contrary interpretation would allow the Joint Board to indefinitely 
delay Commission action. Congress could not have intended that result 
while requiring that the Commission act promptly once the Joint Board 
issues a recommended decision.
    49. Reducing the length of the freeze extension should also 
alleviate NARUC's concern that extending the freeze for up to 15 years 
would result in unjust and unreasonable rates because of the frozen 
allocation of the underlying costs to the interstate and intrastate 
jurisdictions. A freeze extension of up to six years will free up 
resources to address whether the separations rules produce reasonable 
results within the meaning of section 201(b) of the Communications Act 
and determine the proper methodology if the rules need to be revised. 
This is no easy undertaking, given the need to ensure that any changes 
to the separations rules are consistent with the Commission's high-cost 
universal service and

[[Page 4358]]

intercarrier compensation rules. Although the Commission agrees with 
NARUC on the need for separations reform, it finds that extending the 
freeze for up to six years will accelerate that reform. Accordingly, 
the Commission finds that a freeze extension of up to six years, in 
combination with a one-time option to unfreeze category relationships, 
will increase the Commission's and the Joint Board's ability to ensure 
just and reasonable rates.

IV. Procedural Matters

    50. Paperwork Reduction Act Analysis. This document contains new or 
modified information collection requirements subject to the Paperwork 
Reduction Act of 1995 (PRA), Public Law 104-13. It 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 
will be invited to comment on the new or modified information 
collection requirements contained in this proceeding. In addition, the 
Commission notes that pursuant to the Small Business Paperwork Relief 
Act of 2002, the Commission sought specific comment on how it might 
further reduce the information collection burden for small business 
concerns with fewer than 25 employees. The Commission describes impacts 
that might affect small businesses, which includes most businesses with 
fewer than 25 employees, in the Final Regulatory Flexibility Analysis 
below.
    51. Congressional Review Act. The Commission will 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).
    52. Final Regulatory Flexibility Act Analysis. The Regulatory 
Flexibility Act of 1980 requires that an agency prepare a regulatory 
flexibility analysis for notice and comment rulemakings, unless the 
agency certifies that ``the rule will not, if promulgated, have a 
significant economic impact on a substantial number of small 
entities.'' Accordingly, the Commission has prepared a Final Regulatory 
Flexibility Analysis (FRFA) concerning the possible impact of the rule 
changes contained in the Report and Order on small entities. The FRFA 
is set forth in part V, below.
    53. Effective Date. The Commission finds good cause to make the 
extension of the separations freeze effective immediately upon 
publication of a summary of the Report and Order in the Federal 
Register. The current freeze expired on December 31, 2018. To avoid 
unnecessary disruption to carriers subject to the separations rules, 
the Commission preserves the status quo by making the extension of the 
freeze effective upon publication.

V. Final Regulatory Flexibility Analysis

    54. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared this Final Regulatory 
Flexibility Analysis (FRFA) on the possible significant economic impact 
on small entities by the Report and Order. An Initial Regulatory 
Flexibility Analysis (IRFA) was incorporated into the Further Notice of 
Proposed Rulemaking. The Commission sought written public comment on 
the proposals in this rulemaking proceeding, including comment on the 
IRFA. The Commission did not receive comments on the IRFA.

A. Need for, and Objectives of, the Order

    55. The Commission's part 36 jurisdictional separations rules 
originated more than 30 years ago when the Commission and its State 
counterparts used costs to set rates, and the rules were designed to 
help prevent local exchange carriers (LECs) from recovering the same 
costs from both the interstate and intrastate jurisdictions. In 1997, 
the Commission initiated a proceeding to comprehensively reform those 
rules in light of the statutory, technological, and marketplace changes 
that had affected the telecommunications industry. In 2001, the 
Commission, pursuant to a recommendation by the Federal-State Joint 
Board on Jurisdictional Separations (Joint Board), froze the part 36 
separations rules for a five-year period beginning July 1, 2001, or 
until the Commission completed comprehensive separations reform, 
whichever came first. The Commission has extended the freeze seven 
times, with the most recent extension expiring on December 31, 2018. 
The deadline compelled the Commission to make a choice between 
extending the freeze further or allowing long-unused separations rules 
to take effect on January 1, 2019.
    56. The Commission finds that not extending the freeze would impose 
significant burdens on rate-of-return carriers that would far exceed 
the benefits, if any, of requiring those carriers to comply with rules 
that they have not implemented since 2001. Accordingly, the Report and 
Order extends for up to six years the freeze of part 36 category 
relationships and jurisdictional cost allocation factors that the 
Commission adopted in the 2001 Separations Freeze Order and 
subsequently extended until December 31, 2018. This additional 
extension will begin upon publication of the Order in the Federal 
Register, and will continue until the earlier of December 31, 2024, or 
the completion of comprehensive reform of the part 36 jurisdictional 
separations rules.
    57. Also, in the 2001 Separations Freeze Order, the Commission 
granted rate-of-return carriers a one-time option to freeze their 
category relationships. Carriers that chose to freeze their category 
relationships in 2001 assign costs within part 32 accounts to 
categories using their separations category relationships from 2000. 
Consequently, these companies are still separating their costs based on 
the technologies and services that were in place in 2000, instead of 
being able to adjust the amounts assigned to separations categories to 
reflect the current network costs and services.
    58. In the Rate-of-Return Business Data Services Order, the 
Commission allowed carriers subject to the category relationships 
freeze that receive model-based and other forms of fixed high-cost 
support and elect incentive regulation for business data services to 
opt out of that freeze and update their category relationships. In this 
Report and Order, the Commission grants all other rate-of-return 
carriers operating under that freeze the opportunity to opt out of it--
enabling carriers to better recover network upgrade costs from 
ratepayers that benefit from those upgrades and to take greater 
advantage of universal service programs that incent broadband 
deployment.

B. Summary of Significant Issues Raised by Comments in Response to the 
IRFA

    59. There were no comments that specifically addressed the proposed 
rules and policies presented in the IRFA that was part of the Further 
Notice.

C. Response to Comments by the Chief Counsel for Advocacy of the Small 
Business Administration

    60. Pursuant to the Small Business Jobs Act of 2010, which amended 
the RFA, the Commission is required to respond to any comments filed by 
the Chief Counsel of the Small Business Administration (SBA), and to 
provide a detailed statement of any change made to the proposed rules 
as a result of those comments. The Chief Counsel did not file any 
comments in response to the proposed rules in this proceeding.

[[Page 4359]]

D. Description and Estimate of the Number of Small Entities to Which 
Rules May Apply

    61. The RFA directs agencies to provide a description of, and, 
where feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A ``small business concern'' is one which: (1) Is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria established by the SBA. 
Nationwide, there are a total of approximately 27.9 million small 
businesses, according to the SBA.
    62. Incumbent Local Exchange Carriers. The rules adopted in this 
Report and Order affect the tariffed rates for interstate regulated 
services for incumbent LECs. Neither the Commission nor the SBA has 
developed a small business size standard specifically for providers of 
incumbent local exchange services. The closest applicable size standard 
under the SBA rules is for Wired Telecommunications Carriers. Under the 
SBA definition, a carrier is small if it has 1,500 or fewer employees. 
According to the FCC's Telephone Trends Report data, 1,307 incumbent 
LECs reported that they were engaged in the provision of local exchange 
services. Of these 1,307 carriers, an estimated 1,006 have 1,500 or 
fewer employees and 301 have more than 1,500 employees. Consequently, 
the Commission estimates that most incumbent LECs are small entities 
that may be affected by the rules and policies adopted in this 
proceeding.
    63. The Commission has included small incumbent LECs in this RFA 
analysis. As noted above, a ``small business'' under the RFA is one 
that, inter alia, meets the pertinent small business size standard 
(e.g., a telephone communications business having 1,500 or fewer 
employees), and ``is not dominant in its field of operation.'' The 
SBA's Office of Advocacy contends that, for RFA purposes, small 
incumbent LECs are not dominant in their field of operation because any 
such dominance is not ``national'' in scope. Because the Commission's 
proposals concerning the part 36 rules will affect all incumbent LECs, 
some entities employing 1,500 or fewer employees may be affected by the 
rule changes adopted in the Report and Order. The Commission has 
therefore included small incumbent LECs in this RFA analysis, although 
the Commission emphasizes that this RFA action has no effect on the 
Commission's analyses and determinations in other, non-RFA contexts.

E. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    64. None. Carriers are not required to unfreeze their category 
relationships. Even if they choose to do so, affected carriers may 
adjust their category relationships in cost studies that generally are 
conducted prior to filing tariffed rates.

F. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    65. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include (among others) the following four alternatives: (1) 
The establishment of differing compliance and reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or part thereof, for small 
entities.
    66. The jurisdictional freeze has eliminated the need for all 
incumbent LECs, including incumbent LECs with 1,500 employees or fewer, 
to complete certain annual separations studies that otherwise would be 
required by the Commission's rules. Thus, an extension of this freeze 
avoids increasing the administrative burden of regulatory compliance 
for rate-of-return incumbent LECs, including small incumbent LECs.
    67. Presently, rate-of-return carriers in a limited number of study 
areas operate under the category relationships freeze. When the 
Commission granted rate-of-return carriers the opportunity to elect the 
category relationships freeze, it specified the freeze would be an 
interim, ``transitional measure'' lasting no more than five years. But, 
the freeze has now lasted 17 years, and carriers that elected it are 
prohibited from withdrawing from that election. In the Report and 
Order, the Commission grants affected carriers the opportunity to 
voluntarily opt out of this freeze, rather than requiring carriers to 
do so. The Commission recognizes that the size, cost structures, and 
investment patterns of these carriers vary widely, and therefore 
enables an individual carrier to decide for itself whether the economic 
benefits of unfreezing its category relationships outweigh any costs. 
The Commission therefore certifies that this Report and Order will not 
have a significant economic impact on a substantial number of small 
entities.

G. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Final Rules

    68. None.

H. Report to Congress

    69. The Commission will send a copy of the Report and Order, 
including the FRFA, to Congress and the Government Accountability 
Office pursuant to the Small Business Regulatory Enforcement Fairness 
Act of 1996. In addition, the Commission will send a copy of the Report 
and Order, including the FRFA, to the Chief Counsel for Advocacy of the 
Small Business Administration.

VI. Ordering Clauses

    70. Accordingly, it is ordered that, pursuant to the authority 
contained in sections 1, 4(i) and (j), 201, 205, 220, 221(c), 254, 
303(r), 403, and 410 of the Communications Act of 1934, as amended, 47 
U.S.C. 151, 154(i) and (j), 201, 205, 220, 221(c), 254, 303(r), 403, 
410, this Report and Order is adopted.
    71. It is further ordered that, pursuant to the authority contained 
in sections 1, 4(i) and (j), 201, 205, 220, 221(c), 254, 303(r), 403, 
and 410 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 
154(i) and (j), 201, 205, 220, 221(c), 254, 303(r), 403, 410, and part 
36 of the Commission's rules, 47 CFR part 36, is amended as set forth 
in the Final Rules below.
    72. It is further ordered that, pursuant to the authority contained 
in sections 1, 4(i) and (j), 201, 205, 220, 221(c), 254, 303(r), 403, 
and 410 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 
154(i) and (j), 201, 205, 220, 221(c), 254, 303(r), 403, 410, except as 
otherwise provided in this Report and Order, the amendments to 47 CFR 
part 36 set forth in the Final Rules below shall be effective on the 
date of publication of a summary of the Report and Order in the Federal 
Register.
    73. It is further ordered that the amendments to 47 CFR 36.3(b) 
specified below in the Final Rules, which may contain new or modified 
information collection requirements that require approval by the OMB 
under the Paperwork Reduction Act, will become effective after OMB 
review, on the effective date specified in a document

[[Page 4360]]

that the Commission will publish in the Federal Register announcing 
such effective date.
    74. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of the Report and Order, including the Final Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.
    75. It is further ordered that the Commission shall send a copy of 
the Report and Order to Congress and the Government Accountability 
Office pursuant to the Congressional Review Act.

List of Subjects in 47 CFR Part 36

    Communications common carriers, Jurisdictional separations 
procedures, Reporting and recordkeeping requirements, Standard 
procedures for separating telecommunications property costs, revenues, 
expenses, taxes and reserves for telecommunications companies, 
Telephone.

Federal Communications Commission.
Katura Jackson,
Federal Register Liaison, Office of the Secretary.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR part 36 as follows:

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

0
1. The authority citation for part 36 continues to read as follows:

    Authority: 47 U.S.C. 151, 152, 154(i) and (j), 201, 205, 220, 
221(c), 254, 303(r), 403, 410, and 1302 unless otherwise noted.


0
2. Revise Sec.  36.3(b) to read as follows:


Sec.  36.3  Freezing of jurisdictional separations category 
relationships and/or allocation factors.

* * * * *
    (b) Effective July 1, 2001, through December 31, 2024, local 
exchange carriers subject to price cap regulation, pursuant to Sec.  
61.41 of this chapter, shall assign costs from the accounts under part 
32 of this chapter (part 32 account(s)) to the separations categories/
sub-categories, as specified herein, based on the percentage 
relationships of the categorized/sub-categorized costs to their 
associated part 32 accounts for the twelve-month period ending December 
31, 2000. If a part 32 account for separations purposes is categorized 
into more than one category, the percentage relationship among the 
categories shall be utilized as well. Local exchange carriers that 
invest in types of telecommunications plant during the period July 1, 
2001, through December 31, 2024, for which it had no separations 
category investment for the twelve-month period ending December 31, 
2000, shall assign such investment to separations categories in 
accordance with the separations procedures in effect as of December 31, 
2000. Local exchange carriers not subject to price cap regulation, 
pursuant to Sec.  61.41 of this chapter, may elect to be subject to the 
provisions of this paragraph (b). Such election must be made prior to 
July 1, 2001. Any local exchange carrier that is subject to Sec.  
69.3(e) of this chapter and that elected to be subject to this 
paragraph (b) may withdraw from that election by notifying the 
Commission by May 1, 2019, of its intent to withdraw from that 
election, and that withdrawal will be effective as of July 1, 2019. Any 
local exchange carrier that participates in an Association tariff, 
pursuant to Sec. Sec.  69.601 through 69.610 of this chapter, and that 
elected to be subject to this paragraph (b) may withdraw from that 
election by notifying the Association by March 1, 2019, of such intent. 
Subject to these two exceptions, local exchange carriers that 
previously elected to become subject to this paragraph (b) shall not be 
eligible to withdraw from such regulation for the duration of the 
freeze.
* * * * *


Sec.  36.126  [Amended]

0
3. Amend Sec.  36.126(b)(5) by removing the date ``June 30, 2014'' and 
adding in its place ``December 31, 2024.''


Sec.  Sec.  36.3, 36.123, 36.124, 36.125, 36.126, 36.141, 36.142, 
36.152, 36.154, 36.155, 36.156, 36.157, 36.191, 36.212, 36.214, 36.372, 
36.374, 36.375, 36.377, 36.378, 36.379, 36.380, 36.381, 
36.382  [Amended]

0
4. In addition to the amendments set forth above, in 47 CFR part 36, 
remove the date ``December 31, 2018'' and add in its place everywhere 
it appears the date ``December 31, 2024'' in the following places:
0
 a. Section 36.3(a), (c), (d) introductory text, and (e);
0
 b. Section 36.123(a)(5) and (6);
0
 c. Section 36.124(c) and (d);
0
 d. Section 36.125(h) and (i);
0
 e. Section 36.126(b)(6), (c)(4), (e)(4), and (f)(2);
0
 f. Section 36.141(c);
0
 g. Section 36.142(c);
0
 h. Section 36.152(d);
0
 i. Section 36.154(g);
0
j. Section 36.155(b);
0
 k. Section 36.156(c);
0
 l. Section 36.157(b);
0
 m. Section 36.191(d);
0
 n. Section 36.212(c);
0
 o. Section 36.214(a);
0
 p. Section 36.372;
0
 q. Section 36.374(b) and (d);
0
 r. Section 36.375(b)(4) and (5);
0
 s. Section 36.377(a) introductory text, (a)(1)(ix), (a)(2)(vii), 
(a)(3)(vii), (a)(4)(vii), (a)(5)(vii), and (a)(6)(vii);
0
 t. Section 36.378(b)(1);
0
 u. Section 36.379(b)(1) and (2);
0
v. Section 36.380(d) and (e);
0
 w. Section 36.381(c) and (d); and
0
 x. Section 36.382(a).

[FR Doc. 2019-01721 Filed 2-14-19; 8:45 am]
BILLING CODE 6712-01-P