Jurisdictional Separations Reform and Referral to the Federal- State Joint Board

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 36

[CC Docket No. 80-286; FCC 97-354]

Jurisdictional Separations Reform and Referral to the Federal-

State Joint Board

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: On October 2, 1997, the Commission adopted a Notice of

Proposed Rulemaking (NPRM), that initiates a proceeding with the goal

of reviewing comprehensively the Part 36 jurisdictional separations

procedures to ensure that they meet the objectives of the

Telecommunication Act of 1996 (1996 Act), and to consider changes that

may need to be made to the jurisdictional separations process in light

of changes in the law, technology, and market structure of the

telecommunications industry. Pursuant to section 410(c) of the

Communications Act, the Commission refers the issues raised in the NPRM

to the Federal-State Joint Board established in CC Docket No. 80-286

(Separations Joint Board) for preparation of a recommended decision.

This NPRM contains proposed or modified information collections

subject to the Paperwork Reduction Act of 1995 (PRA). It has been

submitted to the Office of Management and Budget (OMB) for review under

the PRA. OMB, the general public, and other Federal agencies are

invited to comment on the proposed or modified information collections

contained in this proceeding.

DATES: Pursuant to applicable procedures set forth in Secs. 1.415 and

1.419 of the Commission's rules, 47 CFR 1.415 and 1.419, interested

parties may file comments on or before December 10, 1997, and reply

comments on or before January 26, 1998. Written comments by the public

on the proposed and/or modified information collections are due

December 10, 1997. Written comments must be submitted by the Office of

Management and Budget (OMB) on the proposed and/or modified information

collections on or before January 5, 1998.

ADDRESSES: Parties should send their comments or reply comments to

Office of the Secretary, Federal Communications Commission, 1919 M

Street, N.W., Room 222, Washington, D.C. 20554. Parties should also

send a paper copy, and a copy on 3.5 inch diskette formatted in an IBM

compatible form using, if possible, WordPerfect 5.1 for Windows

software, to Connie Chapman of the Common Carrier Bureau's Accounting

and Audits Division, 2000 L Street, N.W., room 258H, Washington, D.C.

20554. Parties also must serve comments on the Federal-State Joint

Board in accordance with the service list (See Attachment). Commenters

should also provide one copy of any documents filed in this proceeding

to the Commission's copy contractor, International Transcription

Service, 1231 20th Street, N.W., Washington, D.C. 20036.

In addition to filing comments with the Secretary, a copy of any

comments on the information collections contained herein should be

submitted to Judy Boley, Federal Communications Commission, Room 234,

1919 M Street, N.W., Washington, DC 20554, or via the Internet to

[email protected], and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 725-

17th Street, N.W., Washington, DC 20503 or via the Internet to

[email protected].

FOR FURTHER INFORMATION CONTACT: Lynn Vermillera, Accounting and Audits

Division, Common Carrier Bureau, (202) 418-7120. Alternate contact,

Connie Chapman (202) 418-0885. For additional information concerning

the information collections contained in this Notice contact Judy Boley

at 202-418-0214, or via the Internet at [email protected].

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

of Proposed Rulemaking adopted October 2, 1997, and released October 7,

1997 The full text of this Commission NPRM is available for inspection

and copying during normal business hours in the FCC Public Reference

Room (Room 239), 1919 M St., N.W., Washington, D.C. The complete text

of this NPRM may also be purchased from the Commission's copy

contractor, International Transcription Service, 1231 20th Street,

N.W., Washington, D.C. 20036.

Summary of Notice of Proposed Rulemaking

1. The NPRM seeks comment on the changes in law, technology, and

market structure of the telecommunications industry that affect the

separations process. It then seeks comment on the criteria that should

be used to evaluate the existing separations process and proposals to

reform the process in light of the goals of our comprehensive review.

2. In addition, the NPRM seeks comment on whether separations rules

are still needed during the transition period from a regulated to a

competitive marketplace. In this section, the Commission seeks comment

on whether some form of separations must exist under the 1930 Smith v.

Illinois decision, or whether statutory, regulatory and market changes

since that decision have been so pronounced and persuasive as to make

its holding inapplicable in the new deregulatory environment.

3. The NPRM then seeks comment on industry proposals to replace the

existing Part 36 separations rules. In particular, the NPRM seeks

comment on three industry proposals. The NPRM first seeks comment on

NYNEX's proposal to separate costs for individual incumbent local

exchange carriers (ILECs) in a given study area based on a single,

frozen, interstate allocation factor. It then seeks comment on Bell

South's proposal to separate costs in each study area based on two

factors, one for investment and one for expenses. It then seeks comment

on Southwestern Bell's proposal to consolidate the several dozen plant

and service categories in the existing separations rules into four cost

categories.

4. The NPRM then evaluates the existing separations rules and seeks

comment on how various separations reform options would affect prices

and revenue requirements. In this section, the NPRM seeks comment on

revisions to the definition of ``study area.'' It also seeks comment on

whether the existing set of plant, expense, and service categories

should be revised. The NPRM also seeks comment on whether there is a

need to revise the way in which costs are apportioned to each category

and the way in which those costs are then apportioned to the interstate

and intrastate jurisdiction.

5. The NPRM also seeks comment on whether and how to separate the

costs associated with interconnection. In this section, the Commission

proposes two alternatives for allocating the costs of providing

interconnection between the state and federal jurisdiction. The first

alternative is for the costs, once identified in part 32 as proposed in

the companion NPRM on accounting for interconnection, to be removed

entirely from the separations process and allocated through a process

designed to apply exclusively to these costs. The second alternative is

that the costs, once identified in part 32, be separated

[[Page 59843]]

through the current separations process and allocated directly to the

state jurisdiction. In this section, the NPRM also seeks comment on

whether the 8th Circuit holding in Iowa Utilities Board v. FCC requires

the assignment of all costs associated with the provision of local

exchange service to the intrastate jurisdiction.

6. Finally, the NPRM requests comment regarding changes to the

separations rules that may be necessary as a result of the Universal

Service Order and the Communications Assistance for Law Enforcement Act

(CALEA).

Paperwork Reduction Act

7. This NPRM contains either a proposed or modified information

collection. The Commission, as part of its continuing effort to reduce

paperwork burdens, invites the general public and the Office of

Management and Budget (OMB) to comment on the information collections

contained in this NPRM, as required by the Paperwork Reduction Act of

1995, Public Law 104-13. Public and agency comments are due at the same

time as other comments on this Notice; OMB notification of action is

due January 5, 1998. Comments should address: (a) Whether the proposed

collection of information is necessary for the proper performance of

the functions of the Commission, including whether the information

shall have practical utility; (b) the accuracy of the Commission's

burden estimates; (c) ways to enhance the quality, utility, and clarity

of the information collected; and (d) ways to minimize the burden of

the collection of information on the respondents, including the use of

automated collection techniques or other forms of information

technology.

OMB Approval Number: 3060-0233.

Title: Part 36--Separations.

Form No.: N/A.

Type of Review: Revision.

Respondents: Businesses or other for profit.

Number of Respondents: 100.

Estimated Time Per Response: 20 hours.

Total Annual Burden: 2000 hours for proposal only. 63,800 burden

hours for all Part 36 requirements.

Estimated costs per respondent: $0.

Needs and Uses: In the Notice of Proposed Rulemaking issued in CC

Docket No. 80-286, the Commission initiates a proceeding with the goal

of reviewing comprehensively our Part 36 jurisdictional separations

procedures to ensure that they meet the objectives of the 1996 Act and

to consider changes that may need to be made to the jurisdictional

separations process in light of changes in the law, technology, and

market structure of the telecommunications industry. The Commission

seeks comment on a proposal allowing incumbent LECs to separate joint

and common costs on an individual basis. The Commission also seeks

comment on whether this proposal should be contingent on an ILEC's

showing that competition exists in the local markets for which they

seek relaxed separations rules. If such a showing is required, the

Commission also seeks comment on what level of competition would be

required and what indicators should be used to measure the levels of

competition in local markets to ensure that joint and common costs are

allocated in a manner that produces just and reasonable rates. The

proposed requirement will be used to determine whether competition

exists in local markets.

Regulatory Flexibility Analysis

8. This NPRM seeks comment on the extent to which separations rules

are required, what standards should be used to evaluate separations

proposals, and what changes should be made to our existing separations

rules. The NPRM states that we want to adopt rules that are easily

interpreted and that will minimize any regulatory burdens on affected

parties. Section 603 of the Regulatory Flexibility Act (RFA), as

amended,1 requires an initial Regulatory Flexibility Act

Analysis in notice-and-comment rulemaking proceedings unless we certify

that ``the rule will not, if promulgated, have a significant economic

impact on a significant number of small entities.'' 2

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\1\ 5 U.S.C. Sec. 603.

\2\ Id. at Sec. 605(b).

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9. Section 603 of the Regulatory Flexibility Act (``RFA'')

3 requires an initial regulatory flexibility analysis that

describes the impact of the proposed rule on small entities for

rulemakings that are required to have public notice and comment. We

have determined that the RFA is inapplicable to this proceeding insofar

as it pertains to the Bell Operating Companies and other incumbent

local exchange carriers. The RFA defines a ``small business'' to be the

same as a ``small business concern'' under the Small Business

Act.4 Under the Small Business Act, a ``small business

concern'' is one that: (1) is independently owned and operated; (2) is

not dominant in its field of operation; and (3) meets any additional

criteria established by the Small Business Administration

(``SBA'').5 Section 121.201 of the Small Business

Administration regulations defines a small telecommunications entity in

SIC code 4813 (Telephone Companies Except Radio Telephone) as any

entity with 1,500 or fewer employees at the holding company

level.6 Because our proposals concerning the Part 36

separations process will affect all incumbent local exchange carriers

providing interstate services, some entities employing fewer than 1500

employees at the holding company level may be affected by the proposals

made in this NPRM. However, we do not consider such entities to be

``small entities'' under the RFA because they are either affiliates of

large corporations or dominant in their field of operations. Therefore,

we do not believe that the proposed rules will affect a substantial

number of small entities. Even if small ILECs were ``small entities''

under the SBA, however, we would still certify that no regulatory

flexibility analysis is necessary here because none of the proposals in

this NPRM, if adopted, would have a significant economic impact (as

such term is used in the RFA) on the carriers which must comply with

our accounting rules. One of the primary objectives of this proceeding

is to seek comment on proposals to simplify the current separations

process in an effort to lessen the regulatory burden on carriers in

furtherance of a deregulatory national policy framework.

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\3\ See id. Sec. 603.

\4\ Id. Sec. 601(6) (adopting 15 U.S.C. Sec. 632(a)(1)).

\5\ Id. Sec. 632. See, e.g., Brown Transport Truckload, Inc. v.

Southern Wipers, Inc., 176 B.R. 82 (N.D. Ga. 1994).

\6\ 13 CFR 121.201.

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10. We therefore certify, pursuant to section 605(b) of the RFA,

that the rules proposed in this NPRM will not have a significant

economic impact on a substantial number of small entities. The

Commission will publish this certification in the Federal Register and

will provide a copy of the certification to the Chief Counsel for

Advocacy of the SBA. The Commission will also include this

certification in the report to Congress pursuant to the Small Business

Regulatory Enforcement Fairness Act.7

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\7\ 5 U.S.C. Sec. 801(a)(1)(A).

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Ordering Clause

11. Accordingly, It Is Ordered that, pursuant to sections 1, 2, 4,

201-205, 215, 218, 220, 229, 254, and 410 of the Communications Act of

1934, as amended, 47 U.S.C. 151, 152, 154, 201-205, 215, 218, 220, 229,

254 and 410 that Notice Is Hereby Given of proposed amendments to Part

36 of the Commission's rules, 47 CFR Part 36, as

[[Page 59844]]

described in this Notice of Proposed Rulemaking.

12. It Is Further Ordered that, pursuant to section 410(c) of the

Communications Act of 1934, 47 U.S.C. 410(c), the proposals set forth

in the Notice of Proposed Rulemaking are hereby referred to the

Federal-State Joint Board established in CC Docket No. 80-286 for

preparation of a recommended decision.

13. It Is Further Ordered, that a copy of all filings in this

proceeding shall be served on each of the appointees and staff

personnel on the attached service list.

List of Subjects in 47 CFR Part 36

Jurisdictional Separations Procedures; Standard Procedures for

Separating Telecommunications Property, Costs, Revenues, Expenses,

Taxes and Reserves for Telecommunications Companies.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Attachment--Service List: 80-286 Separations Federal-State Joint

Board

The Honorable Reed E. Hundt, Chairman, Federal Communications

Commission, 1919 M Street N.W.--Room 814, Washington, D.C. 20554, 202-

418-1000

The Honorable Rachelle B. Chong, Commissioner, Federal Communications

Commission, 1919 M Street N.W.--Room 844, Washington, D.C. 20554, 202-

418-2200

The Honorable Susan Ness, Commissioner, Federal Communications

Commission, 1919 M Street N.W.--Room 832, Washington, D.C. 20554, 202-

418-2100

The Honorable Cheryl L. Parrino, Chair, Wisconsin Public Service

Commission, Post Office Box 7854, Madison, WI 53707-7854

The Honorable David W. Rolka, Commissioner, Pennsylvania Public Utility

Commission, North Office Building--Room 110, Commonwealth Avenue and

North Street, Harrisburg, PA 17105

The Honorable Joan H. Smith, Commissioner, Oregon Public Utility

Commission, 550 Capitol Street, N.E., Salem, OR 97310

The Honorable Thomas L. Welch, Chairman, Maine Public Utilities

Commission, 242 State Street, State House Station 18, Augusta, ME 04333

Joint Board Staff

Debra M. Kriete, Pennsylvania Public Utility Commission, North Office

Building--Room 110, Commonwealth Avenue and North Street, Harrisburg,

PA 17105-3265

Steve Burnett, Federal Communications Commission, Common Carrier

Bureau--Accounting & Audits Div., 2000 L Street, N.W.--Room 257,

Washington, D.C. 20036

Connie Chapman, Federal Communications Commission, Common Carrier

Bureau--Accounting & Audits Div., 2000 L Street, N.W.--Room 258H,

Washington, D.C. 20036

Sandy Ibaugh, Indiana Utility Regulatory Commission, 302 W. Washington,

Suite E-306, Indianapolis, IN 46204

Jonathon Lakritz, California Public Utilities Commission, California

State Building 505 Van Ness Avenue, San Francisco, California 94102

Samuel Loudenslager, Arkansas Public Service Commission, 1000 Center

Street, Little Rock, AR 72203

Chuck Needy, Federal Communications Commission, Common Carrier Bureau--

Accounting & Audits Div., 2000 L Street, N.W.--Room 812, Washington,

D.C. 20036

Paul Pederson, Missouri Public Service Commission, Post Office Box 360,

Jefferson City, MO 65102

Scott Potter, Public Utilities Commission of Ohio, 180 E. Broad St.,

3rd Fl., Columbus, OH 43215

James Bradford Ramsay, Assistant General Counsel, National Association

of Regulatory Utility Commissioners, 1102 ICC Building, Constitution

Avenue & 12th Street, N.W., Post Office Box 684, Washington, D.C.

20044-0684

Jeffrey J. Richter, Public Service Commission of Wisconsin, P.O. Box

7854, Madison, WI 53707-7854

Mike Sheard, Montana Public Utilities Commission, 1701 Prospect Ave.,

P.O. Box 202601, Helena, MT 59620

Kaylene Shannon, Federal Communications Commission, Common Carrier

Bureau--Accounting & Audits Div., 2000 L Street, N.W.--Room 200H,

Washington, D.C. 20036

Joel B. Shifman, Maine Public Utilities Commission, State House Station

#18, Augusta, ME 04333

Fred Sistarenik, State Joint Board Staff Chair, New York State

Department of Public Service, Communications Division, Three Empire

State Plaza, Albany, New York 12223-1350

Cynthia Van Landuyt, Oregon Public Utility Commission, 550 Capitol St.

NE, Salem, OR 97310

Lynn Vermillera, Federal Communications Commission, Common Carrier

Bureau--Accounting & Audits Div., 2000 L Street, N.W.--Room 200E,

Washington, D.C. 20036

John Wobbleton, Federal Communications Commission, Common Carrier

Bureau--Accounting & Audits Div., 2000 L Street, N.W.--Room 257,

Washington, D.C. 20036

[FR Doc. 97-29246 Filed 11-4-97; 8:45 am]

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