Interstate Rate of Return Represcription and Enforcement Processes

[[Page 28542]]

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 65

[CC Docket No. 92-133; FCC 95-134]

Interstate Rate of Return Represcription and Enforcement

Processes

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Federal Communications Commission (``Commission'') has

adopted a Report and Order (``Order'') that reforms its rules that

govern the procedures and methodologies for prescribing and enforcing

the rate of return certain Local Exchange Carriers (``LECs'') may earn

on interstate access services. First, the Order replaces the existing

rule, which calls for the initiation of rate of return represcription

proceedings biennially, with a semiautomatic trigger activated by

changes in capital costs. Second, the Order modifies the paper hearing

rules set out in part 65 to streamline represcription proceedings.

Third, the Order simplifies and streamlines the methodologies used to

estimate the cost of capital for those LECs still subject to rate of

return regulation. Finally, the Order removes the Commission's rule

authorizing an automatic refund, with interest, of earnings in excess

of ``the maximum allowable rate of return.'' The Commission adopted

this Order to streamline the procedures and methodologies of the rate

of return represcription and enforcement processes and reduce the

burdens these regulations impose on the remaining rate of return LECs,

while allowing each the opportunity to maintain its credit and to

attract capital. These reforms reflect the Commission's experience in

the 1990 Represcription Proceeding,\1\ with incentive (``price cap'')

regulation for the largest LECs, and with incentive regulation

proposals for those LECs not subject to price cap regulation.

\1\ 5 FCC Rcd 7507 (1990), 55 FR 51423, December 14, 1990.

EFFECTIVE DATE: July 3, 1995, except that Secs. 65.100, 65.101, 65.102,

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65.103, 65.104, and 65.105 shall be effective August 30, 1995.

FOR FURTHER INFORMATION CONTACT:

Thomas J. Beers, telephone number 202-418-0872, John C.K. Hays,

telephone number 202-418-0875, or John V. Giusti, telephone number 202-

418-0878.

SUPPLEMENTARY INFORMATION: This is a summary of the FCC's Report and

Order in Amendment of parts 65 and 69 of the Commission's rules to

Reform the Interstate Rate of Return Represcription and Enforcement

Processes, FCC 95-134, CC Docket No. 92-133, adopted March 30, 1995 and

released April 6, 1995. The Commission has made the full text of the

Order available for inspection and copying during normal business hours

in the Commission's Reference Center, room 239, 1919 M Street, NW,

Washington, DC 20554, and will publish it in the FCC Record. The full

text of the Order may also be purchased from the Commission's

duplicating contractor, International Transcription Service, 2100 M

Street, NW, suite 140, Washington, DC 20037, telephone number 202-857-

3800.

Regulatory Flexibility Analysis

In the Notice of Proposed Rulemaking in this proceeding,\2\ the

Commission certified that the Regulatory Flexibility Act of 1980

exempts the rules proposed in this proceeding because they will not

have a significant economic impact on a substantial number of small

entities, as defined by section 601(3) of that act.\3\ LECs do not fall

within the Regulatory Flexibility Act's definition of a ``small

entity,'' which excludes any business that is dominant in its field of

operation. In the Competitive Carrier Rulemaking, the Commission found

that LECs, even small ones, enjoy a dominant monopoly position in their

local service area.\4\ In accordance with section 603(a) of the

Regulatory Flexibility Act, the Secretary sent a copy of the Notice,

including the certification, to the Chief Counsel for Advocacy of the

Small Business Administration.

\2\ Amendment of parts 65 and 69 of the Commission's rules to

Reform the Interstate Rate of Return Represcription and Enforcement

Processes, Notice of Proposed Rulemaking and Order, 7 FCC Rcd 4688

(1992) (Notice), 57 FR 31944, July 20, 1992.

\3\ 5 U.S.C. 601(3).

\4\ 85 FCC 2d 1, 23-24 (1980), 45 FR 76148, November 18, 1980.

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Paperwork Reduction

The Commission estimates the public reporting burden for the

collections of information to average 100,000 hours per represcription,

including the time for reviewing instructions, searching existing data

sources, gathering and maintaining the data needed, and completing and

reviewing the collections of information. Send comments regarding these

burden estimates or any other aspects of the collections of

information, including suggestions for reducing the burden, to the

Federal Communications Commission, Records Management Branch, Room 234,

Washington, DC 20554, and to the Office of Management and Budget,

Paperwork Reduction Project, Washington, DC 20503.

Synopsis of the Report and Order

Part 65 of the Commission's rules sets forth procedures and

methodologies for prescribing and enforcing the rate of return certain

local exchange carriers (``LECs'') may earn on interstate access

service.\5\ The Commission adopted those rules in 1985. In the Notice

in this proceeding,\6\ the Commission proposed a fundamental reform of

those rules in order to reflect the dramatic changes in the

telecommunications industry and the regulation of it that had occurred

since that time. This Order accomplishes that reform by streamlining

the rate of return represcription and enforcement processes in ways

that, the Commission believes, will substantially reduce the burden of

its regulations on the public and on those LECs still subject to rate

of return regulation. The changes achieve a proper balance of

regulatory goals by allowing a carrier the opportunity to ``maintain

its credit and to attract capital'' \7\ and by ensuring that ratepayers

are charged reasonable rates for interstate services.

\5\ 47 CFR part 65.

\6\ Notice, 7 FCC Rcd 4688 (1992), 57 FR 31994, July 20, 1992.

\7\ FPC v. Hope Natural Gas, 320 U.S. 591, 603 (1944).

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When part 65 was adopted, the Commission used rate of return

principles to regulate the rates for the interstate communications

services of the American Telephone and Telegraph Company (``AT&T'') and

all LECs. Since that time, price cap initiatives have removed all

interexchange and most interstate access revenues from such regulation.

The Commission has also created optional programs that allow the

remaining rate of return LECs to increase their opportunities for

increased profit and risks of loss above the levels they would face

under traditional, rate of return regulation.

To reflect the altered environment as well as the Commission's

experiences in implementing the part 65 rules, the Order changes

virtually every aspect of our rate of return represcription and

enforcement processes for telephone companies. First, the Order amends

the current rule that contemplates a new represcription proceeding

every two years regardless of conditions in the capital markets. The

Order replaces that rule with one that relies on the yields

[[Page 28543]] on ten-year United States Treasury securities to

determine when represcription might be warranted. Under this system,

the Commission's Common Carrier Bureau will issue a notice asking

whether the Commission should institute a represcription proceeding

only if, for six consecutive months, the six-month average of those

yields deviates by 150 basis points (1.5 percent) or more from the

yield on these securities measured as of our most recent

represcription. After evaluating the responses to such a notice, the

Commission will decide whether a represcription proceeding is necessary

and will then issue an order that either sets forth a procedural

schedule for the proceeding or announces that a represcription

proceeding is not necessary. Thus, the Order adopts a semi-automatic

trigger that initiates an inquiry into whether a represcription is

needed, rather than a trigger that automatically initiates a costly

represcription.

The current rules also establish a ``paper hearing'' process for

represcription proceedings that is modelled after the system used in

evidentiary hearings. Because this process contains procedural steps

beyond those necessary for a full and complete record, the Order adopts

streamlined procedures that will reduce the inordinate delays and costs

experienced in previous represcription proceedings, yet provide parties

full opportunity to present and evaluate relevant evidence. The Order,

therefore, streamlines the paper hearing system by removing unnecessary

provisions such as those relating to cross-examination and oral

argument options, notices of appearance, proposed findings of fact and

conclusions, and use of a separated trail staff. Elimination of these

provisions will significantly reduce procedural burden and delays. The

Order also adopts the automatic discovery requirement proposed in the

Notice in order to achieve further procedural efficiencies by

eliminating the need for routine additional discovery.

Part 65 now uses a weighted average cost of capital to calculate a

unitary, overall rate of return for rate of return LECs. This

calculation requires the Commission to determine a cost of equity, cost

of debt, and capital structure for LEC interstate access service. To

help the Commission determine these components, part 65 requires the

Regional Bell Holding Companies (``RHCs'') to undertake complex studies

and submit the resulting data for inclusion in the record in

represcription proceedings. Because the Commission has found in past

proceedings the cost of equity studies unnecessary and the cost of debt

and capital structure studies unduly complex the Order eliminates the

rules that require them. To facilitate the represcription process,

however, the Order specifies methods to calculate cost of debt and

capital structure that rely on readily available data regarding the

largest LECs for presumptive use in future represcription proceedings.

Under this approach, the Commission will use the specified

methodologies in future represcription proceedings unless the record in

those proceedings shows that the methodologies would produce

unreasonable results.

Part 65 had authorized an automatic refund, with interest, of

earnings exceeding what the rules refer to as ``the maximum allowable

rate of return.'' \8\ In the Automatic Refund Decision,\9\ the United

States Court of Appeals for the District of Columbia Circuit (``D.C.

Circuit'') remanded this rule to the Commission. Because we find that

our tariff review and complaint processes are sufficient to enforce the

prescribed interstate rate of return, we eliminate that rule.

\8\ 47 CFR 65.700

\9\ AT&T v. FCC, 836 F.2d 1386 (D.C. Cir. 1988) (per curiam)

(Automatic Refund Decision).

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Part 65 also provides that ``the maximum allowable rate of return''

equals the prescribed rate of return plus a buffer zone. The buffer

zones are defined by adding 25 basis points to overall interstate

earnings and 40 basis points each to earnings within the common line,

traffic sensitive, and special access categories. The Order retains

these buffer zones at their present levels. The zones serve an

important role in our complaint process by recognizing the effects

fluctuations in demand and operating costs may have on rate of return

LECs' earnings, while protecting customers from unreasonably high

rates. In monitoring compliance, the Order retains a two-year

enforcement period in order to provide sufficient time to reduce the

risk of targeting error and the risk that carriers will need to make

frequent rate changes to remain within the authorized rate of return.

Accordingly, it is ordered, pursuant to sections 1, 4(i), 4(j),

201-205, 218-220, and 403 of the Communications Act of 1934, as

amended, 47 U.S.C. 151, 154(i), 154(j), 201-205, 218-220, 403, that

part 65 of the Commission's rules, 47 CFR part 65, is amended, as

specified below.

List of Subjects in 47 CFR Part 65

Telephone.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Amendments

Part 65 of title 47 of the CFR is amended as follows:

Parts 65 of the Commission's rules and regulations, 47 CFR part 65,

is amended as follows:

PART 65--INTERSTATE RATE OF RETURN PRESCRIPTION PROCEDURES AND

METHODOLOGIES

1. The authority citation for part 65 is revised to read as

follows:

Authority: Secs. 4, 201, 202, 203, 205, 218, 403, 48 Stat.,

1066, 1072, 1077, 1094, as amended, 47 U.S.C. 151, 154, 201, 202,

203, 204, 205, 218, 219, 220, 403.

2. Section 65.1 is revised to read as follows:

Sec. 65.1 Application of part 65.

(a) This part establishes procedures and methodologies for

Commission prescription of an authorized unitary interstate exchange

access rate of return and individual rates of return for the interstate

exchange access rates of certain carriers pursuant to Sec. 65.102. This

part shall apply to those interstate services of local exchange

carriers as the Commission shall designate by rule or order, except

that all local exchange carriers shall provide to the Commission that

information which the Commission requests for purposes of conducting

prescription proceedings pursuant to this part.

(b) Local exchange carriers subject to Secs. 61.41 through 61.49 of

this chapter are exempt from the requirements of this part with the

following exceptions:

(1) Except as otherwise required by Commission order, carriers

subject to Secs. 61.41 through 61.49 of this chapter shall employ the

rate of return value calculated for interstate access services in

complying with any applicable rules under parts 36 and 69 that require

a return component;

(2) Carriers subject to Sec. Sec. 61.41 through 61.49 of this

chapter shall be subject to Sec. 65.600(d);

(3) Carriers subject to Secs. 61.41 through 61.49 of this chapter

shall continue to comply with the prescribed rate of return when

offering any services specified in Sec. 61.42(f) of this chapter unless

the Commission otherwise directs; and

(4) Carriers subject to Sec. Sec. 61.41 through 61.49 of this

chapter shall comply with Commission information requests made pursuant

to Sec. 65.1(a).

3. Sections 65.100 is revised to read as follows: [[Page 28544]]

Sec. 65.100 Participation and acceptance of service designation.

(a) All interstate exchange access carriers, their customers, and

any member of the public may participate in rate of return proceedings

to determine the authorized unitary interstate exchange access or

individual interstate exchange access rates of return authorized

pursuant to Sec. 65.102.

(b) Participants shall state in their initial pleading in a

prescription proceeding whether they wish to receive service of

documents and other material filed in the proceeding. Participants that

wish to receive service by hand on the filing dates when so required by

this Part 65 shall specify in their initial pleading in a prescription

proceeding, as specified in Secs. 65.103 (b) and (c), an agent for

acceptance of service by hand in the District of Columbia. The

participant may elect in its pleading to receive service by mail or

upon an agent at another location. When such an election is made, other

participants need not complete service on the filing date, and requests

for extension of time due to delays in completion of service will not

be entertained.

4. Section 65.101 is revised to read as follows:

Sec. 65.101 Initiation of unitary rate of return prescription

proceedings.

(a) Whenever the Commission determines that the monthly average

yields on ten (10) year United States Treasury securities remain, for a

consecutive six (6) month period, at least 150 basis points above or

below the average of the monthly average yields in effect for the

consecutive six (6) month period immediately prior to the effective

date of the current prescription, the Commission shall issue a notice

inquiring whether a rate of return prescription according to this part

should commence. This notice shall state:

(1) The deadlines for filing initial and reply comments regarding

the notice;

(2) The cost of debt, cost of preferred stock, and capital

structure computed in accordance with Secs. 65.302, 65.303, and 65.304;

and

(3) such other information as the Commission may deem proper.

(b) Based on the information submitted in response to the notice

described in Sec. 65.101(a), and on any other information specifically

identified, the Commission may issue a notice initiating a prescription

proceeding pursuant to this part.

(c) The Chief, Common Carrier Bureau, may issue the notice

described in Sec. 65.101(a).

5. Section 65.102 is revised to read as follows:

Sec. 65.102 Petitions for exclusion from unitary treatment and for

individual treatment in determining authorized return for interstate

exchange access service.

(a) Exclusion from unitary treatment will be granted for a period

of two years if the cost of capital for interstate exchange service is

so low as to be confiscatory because it is outside the zone of

reasonableness for the individual carrier's required rate of return for

interstate exchange access services.

(b) A petition for exclusion from unitary treatment and for

individual treatment must plead with particularity the exceptional

facts and circumstances that justify individual treatment. The showing

shall include a demonstration that the exceptional facts and

circumstances are not of transitory effect, such that exclusion for a

period of a least two years is justified.

(c) A petition for exclusion from unitary treatment and for

individual treatment may be filed at any time. When a petition is filed

at a time other than that specified in Sec. 65.103(b)(2), the

petitioner must provide compelling evidence that its need for

individual treatment is not simply the result of short-term

fluctuations in the cost of capital or similar events.

6. Section 65.103 is revised to read as follows:

Sec. 65.103 Procedures for filing rate of return submissions.

(a) Rate of return submissions listed in Sec. 65.103(b)(1) and (c)

may include any relevant information, subject to the page limitations

of Sec. 65.104. The Chief, Common Carrier Bureau, may require from

carriers providing interstate services, and from other participants

submitting rate of return submissions, data, studies or other

information that are reasonably calculated to lead to a full and fair

record.

(b) In proceedings to prescribe an authorized unitary rate of

return on interstate access services, interested parties may file

direct case submissions, responses, and rebuttals. Direct case

submissions shall be filed within sixty (60) calendar days following

the effective date of a Commission notice initiating a rate of return

proceeding pursuant to Sec. 65.101b). Rate of return submissions

responsive to the direct case submissions shall be filed within sixty

(60) calendar days after the deadline for filing direct case

submissions. Rebuttal submissions shall be field within twenty-one (21)

calendar days after the deadline for filing responsive submissions.

(c) Petitions for exclusion from unitary treatment and for

individual treatment may be filed on the same date as the deadline for

filing responsive rate of return submissions. Oppositions shall be

filed within 35 calendar days thereafter. Rebuttal submissions shall be

filed within 21 calendar days after the deadline for filing responsive

submissions.

(d) An original and 4 copies of all rate of return submissions

shall be filed with the Secretary.

(e) The filing party shall serve a copy of each rate of return

submission, other than an initial submission, on all participants who

have filed a designation of service notice pursuant to Sec. 65.100(b).

7. Section 65.104 is revised to read as follows:

Sec. 65.104 Page limitations for rate of return submissions.

Rate of return submissions, including all argument, attachments,

appendices, supplements, and supporting materials, such as testimony,

data and documents, but excluding tables of contents and summaries of

argument, shall be subject to the following double spaced typewritten

page limits:

(a) The direct case submission of any participant shall not exceed

70 pages in length.

(b) The responsive submission of any participant shall not exceed

70 pages in length.

(c) The rebuttal submission of any participant shall not exceed 50

pages in length.

(d) Petitions for exclusion from unitary treatment shall not exceed

70 pages in length. Oppositions to petitions for exclusion shall not

exceed 50 pages in length. Rebuttals shall not exceed 35 pages in

length.

8. Section 65.105 is revised to read as follows:

Sec. 65.105 Discovery.

(a) Participants shall file with each rate of return submission

copies of all information, including studies, financial analysts'

reports, and any other documents relied upon by participants or their

experts in the preparation of their submission. Information filed

pursuant to this paragraph for which protection from disclosure is

sought shall be filed subject to protective orders which shall be duly

granted by the Chief, Common Carrier Bureau, for good cause shown.

(b) Participants may file written interrogatories and requests for

documents directed to any rate of return submission and not otherwise

filed pursuant to Sec. 65.105(a). The permissible [[Page 28545]] scope

of examination is that participants may be examined upon any matter,

not privileged, that will demonstrably lead to the production of

material, relevant, decisionally significant evidence.

(c) Discovery requests pursuant to Sec. 65.105(b), including

written interrogatories, shall be filed within 14 calendar days after

the filing of the rate of return submission to which the request is

directed. Discovery requests that are not opposed shall be complied

with within 14 calendar days of the request date.

(d) Oppositions to discovery requests made pursuant to

Sec. 65.105(b), including written interrogatories, shall be filed

within 7 calendar days after requests are filed. The Chief, Common

Carrier Bureau, shall rule upon any such opposition. Except as stayed

by the Commission or a Court, any required response to a discovery

request that is opposed shall be provided within 14 calendar days after

release of the ruling of the Chief, Common Carrier Bureau.

(e) An original and 4 copies of all information described in

Sec. 65.105(a) and all requests, oppositions, and responses made

pursuant to Secs. 65.105 (a), (b) and (d) shall be filed with the

Secretary.

(f) Service of requests, oppositions, and responses made pursuant

to Secs. 65.105 (b), and (d) shall be made upon all participants who

have filed a designation of service notice pursuant to Sec. 65.100(b).

Service of requests upon participants who have filed designation of

service notices pursuant to Sec. 65.100(b) shall be made by hand on the

filing dates thereof.

Sec. 65.106 [Removed]

9. Section 65.106 is removed.

Secs. 65.200, 65.201, 65.400 and 65.510 [Removed]

10. Sections 65.200, 65.201, 65.400 and 65.510 are removed.

11. Section 65.300 is revised to read as follows:

Sec. 65.300 Calculations of the components and weights of the cost of

capital.

(a) Sections 65.301 through 65.303 specify the calculations that

are to be performed in computing cost of debt, cost of preferred stock,

and financial structure weights for prescription proceedings. The

calculations shall determine, where applicable, a composite cost of

debt, a composite cost of preferred stock, and a composite financial

structure for all local exchange carriers with annual revenues in

excess of $100 million. The calculations shall be based on data

reported to the Commission in FCC Report 43-02. (See 47 CFR 43.21). The

results of the calculations shall be used in the represcription

proceeding to which they relate unless the record in that proceeding

shows that their use would be unreasonable.

(b) Excluded from cost of capital calculations made pursuant to

Sec. 65.300 shall be those sources of financing that are not investor

supplied, or that are otherwise subtracted from a carrier's rate base

pursuant to Commission orders governing the calculation of net rate

base amounts in tariff filings that are made pursuant to section 203 of

the Communications Act of 1934, 47 U.S.C. 203, or that were treated as

``zero cost'' sources of financing in section 450 and subpart G of this

Part 65. Specifically excluded are: accounts payable, accrued taxes,

accrued interest, dividends payable, deferred credits and operating

reserves, deferred taxes and deferred tax credits.

12. Section 65.301 is revised to read as follows:

Sec. 65.301 Cost of equity.

The cost of equity shall be determined in represcription

proceedings after giving full consideration to the evidence in the

record, including such evidence as the Commission may officially

notice.

13. Section 65.302 is revised to read as follows:

Sec. 65.302 Cost of debt.

The formula for determining the cost of debt is equal to:

[GRAPHIC][TIFF OMITTED]TR01JN95.000

Where:

``Total Annual Interest Expense'' is the total interest expense for

the most recent two years for all local exchange carriers with annual

revenues of $100 million or more.

``Average Outstanding Debt'' is the average of the total debt for

the most recent two years for all local exchange carriers with annual

revenues of $100 million or more.

14. Section 65.303 is revised to read as follows:

Sec. 65.303 Cost of preferred stock.

The formula for determining the cost of preferred stock is:

[GRAPHIC][TIFF OMITTED]TR01JN95.001

Where:

``Total Annual Preferred Dividends'' is the total dividends on

preferred stock for the most recent two years for all local exchange

carriers with annual revenues of $100 million or more. ``Proceeds from

the Issuance of Preferred Stock'' is the average of the total net

proceeds from the issuance of preferred stock for the most recent two

years for all local exchange carriers with annual revenues of $100

million or more.

15. Section 65.304 is revised to read as follows:

Sec. 65.304 Capital structure.

The proportion of each cost of capital component in the capital

structure is equal to:

Proportion in the capital structure =

[GRAPHIC][TIFF OMITTED]TR01JN95.002

[[Page 28546]]

Where:

``Book Value of particular component'' is the total of the book

values of that component for all local exchange carriers with annual

revenues of $100 million or more.

``Book Value of Debt+Book Value of Preferred Stock+Book Value of

Equity'' is the total of the book values of all the components for all

local exchange carriers with annual revenues of $100 million or more.

The total of all proportions shall equal 1.00.

15. A new Sec. 65.305 is added to read as follows:

Sec. 65.305 Calculation of the weighted average cost of capital.

(a) The composite weighted average cost of capital is the sum of

the cost of debt, the cost of preferred stock, and the cost of equity,

each weighted by its proportion in the capital structure of the

telephone companies.

(b) Unless the Commission determines to the contrary in a

prescription proceeding, the composite weighted average cost of debt

and cost of preferred stock is the composite weight computed in

accordance with Sec. 65.304 multiplied by the composite cost of the

component computed in accordance with Sec. 65.301 or Sec. 65.302, as

applicable. The composite weighted average cost of equity will be

determined in each prescription proceeding.

16. A new Sec. 65.306 is added to read as follows:

Sec. 65.306 Calculation accuracy.

In a prescription proceeding, the final determinations of the cost

of equity, cost of debt, cost of preferred stock and their capital

structure weights shall be accurate to two decimal places.

17. Section 65.500 is revised to read as follows:

Sec. 65.500 Net income.

The net income methodology specified in Sec. 65.450 shall be

utilized by all interexchange carriers that are so designated by

Commission order.

18. Section 65.600(b) is revised to read as follows:

Sec. 65.600 Rate of return reports.

* * * * *

(b) Each local exchange carrier or group of affiliated carriers

which is not subject to Secs. 61.41 through 61.49 of this chapter and

which has filed individual access tariffs during the preceding

enforcement period shall file with the Commission, within three (3)

months after the end of each calendar quarter, a quarterly rate of

return monitoring report. Each report shall contain two parts. The

first part shall contain rate of return information on a cumulative

basis from the start of the enforcement period through the end of the

quarter being reported. The second part shall contain similar

information for the most recent quarter. The final quarterly monitoring

report for the entire enforcement period shall be considered the

enforcement period report. Reports shall be filed on the appropriate

report form prescribed by the Commission (see Sec. 1.795 of this

chapter) and shall provide full and specific answers to all questions

propounded and information requested in the currently effective report

form. The number of copies to be filed shall be specified in the

applicable report form. At least one copy of the report shall be signed

on the signature page by the responsible officer. A copy of each report

shall be retained in the principal office of the respondent and shall

be filed in such manner as to be readily available for reference and

inspection. Final adjustments to the enforcement period shall be made

by September 30 of the year following the enforcement period to ensure

that any refunds can be properly reflected in an annual access filing.

* * * * *

Sec. 65.700 [Amended]

19. In Sec. 65.700, paragraph (c) is removed and paragraph (d) is

redesignated as paragraph (c).

20. Section 65.701 is revised to read as follows:

Sec. 65.701 Period of review.

For both exchange and interexchange carriers subject to this part,

interstate earnings shall be measured over a two year period to

determine compliance with the maximum allowable rate of return. The

review periods shall commence on January 1 in odd-numbered years and

shall end on December 31 in even-numbered years.

Sec. 65.702 [Amended]

21. In Sec. 65.702, paragraph (a) is removed and paragraphs (b) and

(c) are redesignated as (a) and (b) respectively.

Sec. 65.703 [Removed]

Section 65.703 is removed.

[FR Doc. 95-13380 Filed 5-31-95; 8:45 am]

BILLING CODE 6712-01-M