Price Cap Performance Review for Local Exchange Carriers; Treatment of Video Dialtone Services Under Price Cap Regulation

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 61

[CC Docket No. 94-1; FCC 95-394]

Price Cap Performance Review for Local Exchange Carriers;

Treatment of Video Dialtone Services Under Price Cap Regulation

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: On October 20, 1994, the Commission adopted a Memorandum

Opinion and Order concluding that the basic video dialtone offerings of

local exchange carriers (LECs) would be subject to the existing price

cap rules. In that the order, the Commission stated it would initiate a

rulemaking proceeding on whether to create a separate price cap basket

for LEC video dialtone service. On February 7, 1995 the Commission

issued a notice of proposed rulemaking in this docket seeking comment

on whether to establish a separate price cap basket for LEC video

dialtone service. The Report and Order adopted today establishes a

separate price cap basket for video dialtone.

EFFECTIVE DATE: February 5, 1996.

FOR FURTHER INFORMATION CONTACT: Claudia Pabo, Policy and Program

Planning Division, Common Carrier Bureau, (202) 418-1595 or Cheryl Lynn

Schneider, Tariff Division, Common Carrier Bureau, (202) 418-1530.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second

Report and Order adopted September 14, 1995 and released September 21,

1995. The full text of the Commission's decision is available for

public inspection and copying during normal business hours in the FCC

Public Reference Room (Room 230), 1919 M St., NW., Washington, DC. The

complete text of this decision may also be purchased from the

Commission's copy contractor, International Transcription Service,

Suite 140, 2100 M Street, NW., Washington, DC 20037.

Regulatory Flexibility Analysis

We determined that section 605(b) of the Regulatory Flexibility Act

of 1980, 5 U.S.C. 605(b), does not apply to the rule amendments adopted

in this Order because they do not have a significant economic impact on

a substantial number of small entities, as defined by section 301(3) of

the Regulatory Flexibility Act. Carriers subject to price cap

regulation for local exchange access services affected by the rule

amendments adopted in this Order generally are large corporations or

affiliates of such corporations.

Paperwork Reduction Analysis

Public burden for the collection of information is estimated to

average 203 hours per response, including the time for reviewing

instructions, searching existing data sources, gathering and

maintaining the data needed, and competing and reviewing the collection

of information. Send comments regarding this burden estimate or any

other aspect of the collection of information, including suggestions

for reducing the burden, to the Federal Communications Commission,

Records Management Branch, Paperwork Reduction Project (3060-0298),

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

Paperwork Reduction Project (3060-0298), Washington, DC 20503.

Summary of Report and Order

In this Order, the Commission adopts new rules regarding the price

cap treatment of video dialtone common carrier service provided by

local exchange carriers (LECs). The Order amends the Commission's rules

to require that basic video dialtone offerings of price cap LECs must

be included in a new, separate price cap basket. The video dialtone

basket may not include any other ``broadband'' services. The Order also

establishes an initial productivity or ``X-Factor'' for the video

dialtone basket of zero.

The initial rates to be included in the video dialtone basket will

be based upon the price cap new services test, as applied to video

dialtone services. Consistent with this approach, the Commission will

incorporate video dialtone rates into the new price cap basket in the

first annual price cap tariff filing following the calendar year in

which the new service is first offered, which may occur anywhere from

six to eighteen months from the introduction of service. Moreover, as

it has done with other price cap baskets, the Commission will assign an

initial value of 100 to the PCI and the actual price index (API) for

video dialtone service prior to adjustment for inflation and

productivity, corresponding to the rates in effect just prior to the

effective date of the annual filing in which rates for video dialtone

service are included in the new basket.

The Commission decided not to divide the video dialtone basket into

separate subcategories at this time. Video dialtone is a nascent

service for which LECs have just begun to file tariffs, and the

Commission expects that the LECs will employ a variety of architectures

to deliver their offerings which could lead to varying rate structures

for video dialtone services. Thus, it would be difficult to create a

stable set of service categories within the new video dialtone basket

at this time.

The Order imposes a lower banding limit on the video dialtone

basket in addition to the protection provided by the new services test.

Accordingly, LEC tariff filings reducing prices in excess of 15 percent

per year relative to the PCI will not carry a presumption of

lawfulness. Consistent with existing procedures, filings to implement

rates below this level must be made on 45 days' notice, and be

accompanied by a showing that the rates exceed average variable costs

consistent with the cost

[[Page 52346]]

support requirements specified in Sec. 61.49(d) of the Commission's

rules.

The Commission also decided to exclude video dialtone costs and

revenues from the calculation of a LEC's earnings from other regulated

interstate services for purposes of sharing and the low-end adjustment

once video dialtone costs are no longer de minimis. Under this plan,

price cap LECs will be allowed to include video dialtone costs and

revenues with those from other baskets for purposes of sharing and low-

end adjustment calculations so long as their video dialtone costs are

below a specified threshold. Once a LEC's costs rise above a de minimis

level, however, the Commission will require the LEC to exclude video

dialtone costs and revenues from its interstate rate of return

calculations for sharing and the low-end adjustment.

Ordering Clause

Accordingly, it is ordered that, pursuant to authority contained in

sections 4(i), 4(j), 201-205, 215, 218, 303(r), and 403 of the

Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), 201-

205, 215, 218, 303(r), 403, and section 553 of Title 5, United States

Code, part 61 of the Commission's rules, 47 CFR part 61, is amended as

set forth below effective February 5, 1996.

List of Subjects in 47 CFR Part 61

Communications common carriers, Reporting and recordkeeping

requirements.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule changes

Part 61 of Title 47 of the CFR is amended as follows:

PART 61--TARIFFS

1. The authority citation for Part 61 continues to read as follows:

Authority: Secs. 4(i), 4(j), 201-205, 303(r), and 403 of the

Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j),

201-205, 303(r), 403, unless otherwise noted.

2. Section 61.42 is amended by adding a new paragraph (d)(5) to

read as follows:

Sec. 61.42 Price cap baskets and service categories.

* * * * *

(d) * * *

(5) To the extent that a local exchange carrier specified in

Secs. 61.41(a) (2) or (3) offers interstate video dialtone services, a

basket for basic video dialtone services as described in Sec. 63.54 of

this chapter.

* * * * *

3. Section 61.45 is amended by revising paragraphs (b) introductory

text and (h) and adding new paragraph (b)(3) to read follows:

Sec. 61.45 Adjustments to the PCI for Local Exchange Carriers.

* * * * *

(b) Adjustments to local exchange carrier PCIs for the baskets

designated in Secs. 61.42(d) (2), (3), (4), and (5), shall be made

pursuant to the formula set forth in Secs. 61.44 (b), and as further

explained in Secs. 61.44 (e), (f), (g), and (h).

* * * *

(3) Notwithstanding the value of X defined in Sec. 61.44(b), the

value of X applicable to the basket specified in Sec. 61.42(d)(5) shall

be 0%.

* * * * *

(h) To the extent a local exchange carrier elects the higher

productivity factor, the election must be made in all baskets, except

the video dialtone services basket, as designated in Sec. 61.42(d)(5).

4. Section 61.47 is amended by adding a new paragraph (g)(6) to

read as follows:

Sec. 61.47 Adjustments to the SBI; pricing bands.

* * * * *

(g) * * *

(6) Local exchange carriers subject to price cap regulation as that

term is defined in Sec. 61.3 shall use the methodology set forth in

paragraphs (a) through (d) of this section to calculate a lower pricing

band for the basket described in Sec. 61.42(d)(5). The annual pricing

flexibility for this basket, as reflected in the API, shall be limited

to an annual decrease of fifteen percent, relative to the percentage

change in the PCI for that basket, measured from the last day of the

preceding tariff year.

* * * * *

6. Section 61.48 is amended by adding paragraph (j) to read as

follows:

Sec. 61.48 Transition rules for price cap formula calculations.

* * * * *

(j) Video Dialtone Services. For local exchange carriers subject to

price cap regulation, the video dialtone services basket, as designated

in Sec. 61.42(d)(5), shall be established with an initial PCI and API

level of 100 in the first annual price cap tariff filing following

competition of the base period in which the initial video dialtone

service was introduced. The initial value of 100 for the PCI and API

for video dialtone service prior to adjustment of inflation and

productivity shall correspond to the rates in effect just prior to the

effective date of the annual filing in which rates for video dialtone

service are initially included in the video dialtone basket.

[FR Doc. 95-24884 Filed 10-5-95; 8:45 am]

BILLING CODE 6712-01-M