# Comprehensive Review of the Accounting Requirements and ARMIS Reporting Requirement for Incumbent Local Exchange Carriers: Phase 1

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URL: https://www.frixlaw.com/law-library/documents/fr%3A99-21402

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** August 18, 1999
- **Citation:** 64 FR 44877

## Text

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 32, 43, and 64

[CC Docket No. 99-253; FCC 99-174]

Comprehensive Review of the Accounting Requirements and ARMIS
Reporting Requirement for Incumbent Local Exchange Carriers: Phase 1

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In this document, the Commission is initiating a comprehensive
review of its accounting and reporting requirements. In this
comprehensive review, we plan to reevaluate our existing accounting and
reporting requirements to determine whether they should be modified or
eliminated as changes occur in the industry. We also consider the
appropriate timing of accounting and reporting changes to assure that
we will continue to have the information we need to make informed
decisions.

DATES: Interested parties may file written comments on the proposed
information collections by August 23, 1999 and reply comment on or
before September 9, 1999. Written comments must be submitted by the
Office of Management and Budget (OMB) on the proposed information
collections on or before October 18, 1999.

ADDRESSES: Office of the Secretary, Room TW-B204, Federal
Communications Commission, 445 12th Street, NW., Washington, DC 20554.
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 1-
C804, 445 12th Street, NW., Washington, DC 20054, or via the Internet
to [email protected], and to Timothy Fain, OMB Desk Officer, 10236 NEOB,
725-17th Street, NW., Washington, DC 20503 or via the Internet to
[email protected].

FOR FURTHER INFORMATION CONTACT: Mika Savir, Accounting Safeguards
Division, Common Carrier Bureau, (202) 418-0384 or Andy Mulitz,
Accounting Safeguards Division, Common Carrier Bureau, (202) 418-0850.
For additional information concerning the information collections
contained in this NPRM 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
(NPRM), CC Docket 99-253, adopted on July 13, 1999, and released on
July 14, 1999. 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
information collections contained in this proceeding. The full text of
the NPRM is available for inspection and copying during normal business
hours in the FCC Reference Center (Room CY-A257), 445 12th Street NW.,
Washington, DC 20554. The complete text may also be purchased from the
Commission's copy contractor, International Transcription Service,
Inc., 1231 20th Street, Washington, DC 20036, telephone (202) 857-3800.
OMB Approval No.: None.
Title: Comprehensive Review of the Accounting Requirements and
ARMIS Reporting Requirements for Incumbent Local Exchange Carriers:
Phase 1, CC Docket No. 99-253 (NPRM).
Form No.: FCC Report 43-02.
Type of Review: New Collections.
Respondents: Business or other for profit.

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Estimated
Title No. of hours per Total annual
respondents response burden
----------------------------------------------------------------------------------------------------------------
Uniform Systems of Accounts..................................... 239 9540 2,280,080
Annual Auditors Attestations.................................... 19 268 5,100
ARMIS USOA Report............................................... 52 284 14,770
Allocation of Cost, Cost Allocation Manual...................... 18 300 10,800
Implementation of the Telecommunications Act of 1996: Accounting 20 24 480
Safeguards Under the Telecommunications Act of 1996 (Affiliate
Transaction Only)..............................................
----------------------------------------------------------------------------------------------------------------

Total Annual Burden: 2,311,230.
Estimated Costs Per Respondent: $1,200,000.
Needs and Uses: In CC Docket No. 99-253, the Commission is
initiating a comprehensive review of its accounting and reporting
requirements. The Commission seeks comment on its proposals to reduce
or further streamline its recordkeeping requirements for common
carriers, audit requirements for the large incumbent LECs and reduce
filing requirements of accounting record changes on the part of
affected common carriers. The information is needed so that the
Commission can fulfill its statutory responsibilities and obligations.

Summary of Notice of Proposed Rulemaking

We are performing this comprehensive review in two phases. Phase 1,
which commences with this Notice of Proposed Rulemaking (NPRM) and will
conclude by the end of the year, will address accounting and reporting
reform measures that can be implemented without delay and still retain
sufficient information for the Commission and state commissions to meet
their responsibilities. Phase 2, which will begin in the last quarter
of 1999, will examine the current accounting and reporting structure
and address long-term changes needed as local exchange markets become
competitive. During this process, the Common Carrier Bureau will
continue to work closely with the National Association of Regulatory
Utility Commissioners (NARUC) and state commissioners so that, in
addition to eliminating unnecessary reporting requirements, the
Commission and states will focus on further steps necessary to
eliminate unnecessary

[[Page 44878]]

overlap of Federal and state reporting requirements.
In this first phase of the comprehensive review, we seek comment on
the following accounting issues: eliminating or revising the matrix
used to classify expenses in the Uniform System of Accounts (USOA);
reducing the audit burdens on incumbent local exchange carriers
(ILECs); adopting a de minimis exception to our affiliate transactions
rules; eliminating the 15-day prefiling for cost pool changes;
eliminating the notifications and approvals required in
Secs. 32.13(a)(3) and 32.25; and revising the accounting requirements
for Secs. 32.2002 and 32.2003. In addition, we seek comment on
streamlining the reporting requirements in the ARMIS 43-02 USOA Report.
Specifically, we seek comment on eliminating certain corporate
information collected in the ``C'' series tables and on consolidating
certain information into one table. We also seek comment on eliminating
certain information concerning balance sheet accounts reported in the
``B'' series tables and income statement accounts reported in the ``I''
series tables.

A. Accounting Rules

1. Expense Matrix
Section 32.5999(f) of the Commission's rules requires carriers to
maintain disaggregated financial data in subsidiary record categories
to be reported in an expense matrix. The Commission uses the detailed
data contained in the carriers' expense subsidiary record categories in
performing studies and trend analyses, and in its overall monitoring
efforts. The additional information provided by the expense matrix
helps the Commission analyze a carrier's expenses. In particular, the
Commission has relied heavily upon the salaries and wages and rent data
detailed in the expense matrix. For example, when the Financial
Accounting Standards Board (FASB) promulgated new accounting standards
for post-employment benefits and post-retirement benefits other than
pensions, the Commission used the salaries and wages data in its
analysis of the reasonableness of carrier projections related to
implementation of the new accounting standards. The Commission also
uses the salaries and wages data in calculating productivity factors
used to adjust price cap indices. This expense data would be needed for
future productivity studies if the price cap formula is revised.
Expense matrix data is also used in tracking the salaries and wages and
rents portion of maintenance expense in the analysis of service
quality. Furthermore, carriers, competitors, and the Commission use the
pole rents information detailed in the expense matrix in the formula to
calculate carriers' pole attachment rates.
We tentatively conclude that we can eliminate the expense matrix or
reduce it to the minimum amount necessary to meet other regulatory
purposes. We believe that this information could be provided by the
carriers on an as-needed basis even if the Commission did not prescribe
it to be maintained. We seek comment on this tentative conclusion.
Commenters should discuss whether it would be more burdensome to
maintain and file the expense matrix or to keep such data, at the same
level of disaggregation, for several years, to provide to the
Commission if requested. We seek comment on whether, as an alternative,
the reporting burden would be alleviated by reducing the expense matrix
to two classifications: (1) salary and wages and (2) other. Commenters
should specifically address whether this would affect the analysis of
the price cap performance/productivity factor calculations. In
addition, we seek comment on whether, and how, elimination of the
expense matrix would affect the jurisdictional separations process,
universal service support calculations, or service quality studies.
In the Accounting Reductions Report and Order, FCC No. 99-106,
released June 30, 1999, we required mid-sized ILECs to maintain
subsidiary record categories to capture the pole attachment data
currently provided in the Class A accounts. We believe it is necessary
to require subsidiary records for data needed in pole attachment
formulas to assure that the data is publicly available, uniformly
maintained among the carriers, and maintained in a manner that can be
audited. We propose that, if the expense matrix is eliminated, carriers
maintain subsidiary records to provide the data used in the pole
attachment formulas and report in their ARMIS reports the information
necessary for the Commission, carriers, and competitors to calculate
pole attachment rates. We seek comment on this proposal.
2. Audits
The Commission has established accounting safeguards governing the
allocation of costs between the carriers' regulated and nonregulated
activities. These safeguards are designed to promote fair cost
allocations and to protect regulated ratepayers from absorbing the
costs of nonregulated activities. One of the accounting safeguards,
prescribed in Sec. 64.904 of the Commission's rules, is that carriers
obtain an independent audit of reported cost allocation data. Before
adoption of the Accounting Reductions Report and Order, our rules
required that the audit be performed annually for ILECs required to
file cost allocation manuals, that it provide a positive opinion, that
the reported data is presented fairly in all material respects, and
that it be conducted in accordance with generally accepted auditing
standards.
In the Accounting Reductions Report and Order, we revised the audit
requirement for mid-sized ILECs. Under rules adopted in that Order,
mid-sized ILECs are required to obtain a less stringent attestation
every two years (covering the prior two year period) instead of an
annual financial audit requiring a positive opinion. The financial
audit requires that an ILEC's independent auditor provide assurance
that the reported data are fairly reported. An attestation requires
that the auditor provide assurance that specific management assertions
are fairly stated. An attestation generally provides less assurance and
is governed by less stringent standards of testing, reporting, and
expression of opinion than the financial audits required by Sec. 64.904
for large ILECs.
We tentatively conclude that, if properly implemented, a less
stringent audit requirement for the large ILECs will provide the
necessary assurance that the carriers' cost allocations are consistent
with our rules and at the same time result in significant savings in
both time and money for the carriers. We note that in other instances
the Commission requires something less than a positive opinion audit.
For example, we have new audit requirements specifically for Sec. 272
affiliates. Section 272 of the Act permits a BOC to manufacture
equipment, originate in-region, interLATA telecommunications services,
and provide interLATA information services only if it does so through
one or more separate affiliates. The BOC and its affiliate(s) must,
among other things, obtain a joint Federal/State audit every two years
conducted by an independent auditor. Our rules require that the
independent auditor perform an agreed-upon procedures engagement as
specified by the regional Federal/State biennial oversight team.
We tentatively conclude that we can reduce our audit requirements
for the large ILECs--the BOCs and GTE--by extending the same audit
requirements to the large ILECs that we adopted for mid-sized ILECs in
the Accounting Reductions Report and Order, i.e.,

[[Page 44879]]

allowing carriers to obtain an attestation, instead of an annual
financial audit requiring a positive opinion. We seek comment on this
tentative conclusion. Furthermore, we seek comment on whether we should
adopt an audit requirement similar to the Sec. 272 biennial audit, an
agreed-upon procedures engagement, for the large ILECs. Commenters
should discuss whether these alternatives would provide the necessary
assurance that the reported cost allocation data is an accurate
reflection of the carrier's CAM and the Commission's rules. Commenters
should also discuss any other alternatives to an annual financial audit
requiring a positive opinion. In addition, commenters should address
whether the new audit procedure should be an annual requirement.
3. Affiliate Transactions Rules
In the Accounting Safeguards Order, 62 FR 02918 (January 21, 1997)
the Commission amended the affiliate transactions rules for services
provided by a carrier to its affiliate and services received by a
carrier from its affiliate that are not subject to: (1) an existing
tariff rate, (2) a publicly-filed agreement or statement, or (3) a
qualified prevailing price valuation. Services provided by a carrier to
its affiliate must be recorded at the higher of fair market value or
fully distributed cost. Services received by a carrier from its
affiliate must be recorded at the lower of fair market value or fully
distributed cost. The Commission further required carriers to make a
good faith determination of fair market value in those instances when a
fair market value was not readily available so that the carrier could
assign the appropriate value to the service when recording its value
under the affiliate transactions rules.
Based on our experience enforcing these requirements over the past
two years, we tentatively conclude that when the total annual value of
transactions for that service is de minimis, the regulatory benefits of
requiring carriers to make a good faith determination of the fair
market value of a service are outweighed by the administrative cost and
effort of making such a determination. We tentatively conclude that
such a de minimis exception will not lessen the effectiveness of the
Commission's affiliate transactions rules, and at the same time, will
reduce the burden associated with the requirement that carriers make a
good faith determination of fair market value. We, therefore, propose
to eliminate the requirement that carriers make a good faith
determination of fair market value for each service in which the total
annual value of transactions for that service is less than $250,000. We
propose that in such cases the service should be recorded at fully
distributed cost, and carriers should continue to report such
transactions in their cost allocation manuals and ARMIS reports.
We seek comment on our proposals and tentative conclusions. We also
seek comment on whether a different threshold should serve to delineate
the de minimis treatment. Commenters proposing a different threshold
should explain why their proposed threshold should be higher or lower
than $250,000. In addition, commenters should address whether affiliate
transaction services conducted pursuant to Secs. 260, and 271-276 of
the Act should be included in the services eligible for the de minimis
exception.
4. Elimination of 15-Day Prefiling for Cost Pool Changes
Section 64.903 of the Commission's rules requires that carriers
update their CAMs at least annually except that changes to the cost
apportionment table and time-reporting procedures must be filed at
least 15 days before the carrier plans to implement changes. Once a CAM
change has been filed, the Chief, Common Carrier Bureau may suspend any
such changes for a period not to exceed 180 days, and may thereafter
allow the change to become effective. BellSouth claims that the 15-day
special filing requirement for changes in cost pools discloses
sensitive competitive service information. We tentatively conclude that
we should eliminate the 15-day pre-filing requirement in order to
eliminate any disclosure of sensitive data in advance of implementation
of a service. If we adopt this proposal, carriers would file the
necessary CAM changes contemporaneous with the implementation of the
change. We seek comment on this tentative conclusion.
5. Revision to Section 32.13, Accounts--General
Section 32.13(a)(3) of the Commission's rules permits carriers to
establish temporary or experimental accounts provided they notify the
Commission of the nature and purpose of the accounts within 30 days of
establishing them. This requirement was adopted to allow the Commission
to review the nature of the proposed temporary or experimental accounts
prior to the effective date. Carriers use these temporary accounts as
clearing accounts, which are closed each financial period and do not
alter the Part 32 accounting structure. We tentatively conclude that
this 30-day notification is not necessary because other accounting
safeguards, such as ARMIS reporting and our audit program, together
with our ability to obtain additional information as necessary, are
sufficient for our regulatory oversight. Accordingly, we propose to
modify Sec. 32.13(a)(3) by eliminating the notification requirement. We
seek comment on our tentative conclusion and proposal.
6. Revision to Section 32.25, Unusual Items and Contingent Liabilities
Section 32.25 of the Commission's rules requires carriers to submit
journal entries detailing extraordinary items, contingent liabilities,
and material prior period adjustments for Commission approval before
recording them in their books of account. This requirement was
established as a safeguard to prevent carriers from inflating their
rate base through the use of accounting adjustments. We tentatively
conclude that prior Commission review of journal entries is not
necessary for the Commission's regulatory oversight, and that other
accounting safeguards, such as the ARMIS reporting and our audit
program, together with our ability to obtain additional information as
necessary, are sufficient to assure that carriers will comply with our
accounting requirements. We tentatively conclude, therefore, that it is
no longer necessary to require the routine filing of these journal
entries. Accordingly, we propose to eliminate the Sec. 32.25 filing
requirement. We seek comment on our tentative conclusion and proposal.
7. Revision to Section 32.2002, Property Held for Future
Telecommunications Use
Section 32.2002 of the Commission's rules requires that carriers
record to Account 2002 the costs of property held for no longer than
two years under a definite plan for use in telecommunications service.
After two years, Sec. 32.2002 requires that the carrier reclassify the
cost of the property to Account 2006, Nonoperating plant. BellSouth
states that this reclassification is burdensome and that the property
could remain recorded in Account 2002, but be removed from the ratebase
in a less burdensome manner. We tentatively conclude that we should
allow carriers to maintain the costs in Account 2002 but we should
require carriers to exclude the cost of such property, and the
associated depreciation reserve, from the ratebase. The depreciation
expense associated with such property should also be excluded from
ratemaking considerations. These

[[Page 44880]]

amounts would be reported in the ARMIS 43-01, column (e) All Other
Adjustments and ARMIS 43-03, column (l) Other Adjustments. We believe
that adoption of this tentative conclusion will provide the same
protection for ratepayers while alleviating the burden on carriers to
reclassify these costs to Account 2006. We seek comment on this
tentative conclusion.
8. Revisions to Section 32.2003, Telecommunications Plant Under
Construction
Section 32.2003 of the Commission's rules requires that carriers
record to Account 2003 the original cost of construction projects
including all related direct and indirect costs as provided under
Sec. 32.2000(c). If the construction project has been suspended for six
months or more, the cost of the project must be reclassified to Account
2006, Nonoperating plant. If the project is eventually abandoned, these
costs must be charged to Account 7370, Special charges. BellSouth
states that this reclassification is burdensome and that the property
could remain recorded in Account 2003 but be excluded from the ratebase
in a less burdensome manner. We tentatively conclude that carriers be
permitted to maintain the costs in Account 2003 and that carriers be
required to remove the cost of suspended projects after six months from
the ratebase. Additionally, carriers would be required to discontinue
capitalization of allowance for funds used during construction under
Sec. 32.2000(c)(2)(x) until construction is resumed. These amounts
would be reported in the ARMIS 43-01, column (e) All Other Adjustments
and ARMIS 43-03, column (l) Other Adjustments. Carriers would still
charge Account 7370 if the project were abandoned. We believe that
adoption of this tentative conclusion will provide the same protection
for ratepayers while alleviating the burden on carriers to
reclassifying these costs to Account 2006. We seek comment on this
tentative conclusion.

B. ARMIS Reporting Requirements

1. Reductions to ARMIS 43-02 USOA Report
In the ARMIS 43-02 USOA Report, carriers report their annual
operating results for every account in the USOA. The USOA contains both
balance sheet and income statement accounts which report the results of
operational and financial events. Information provided by these
accounts is used to review the overall investment and expense levels,
affiliate transactions, property valuation, and depreciation rates of
regulated carriers. The ARMIS 43-02 USOA Report contains a total of 27
tables, and is one of the most voluminous reporting requirements in
ARMIS. The tables are set out in three series: (1) the ``C'' series,
which includes 5 tables that provide corporate information; (2) the
``B'' series, which includes 15 tables that provide information about
the balance sheet accounts of the carrier; and (3) the ``I'' series,
which includes 7 tables that provide information about the carriers'
income and expenses.
In light of the objectives we seek to achieve in Phase 1 of our
comprehensive review, we are proposing significant reductions in
reporting requirements in the ARMIS 43-02 USOA Report for the largest
ILECs. For the reasons discussed below, we tentatively conclude that
the filing burden imposed on the largest ILECs by ARMIS 43-02 USOA
Report should be reduced by eliminating the requirement to file 14 of
27 tables, adding one short-form table, and changing the threshold
level of reporting required in 3 of the remaining 13 tables. We propose
eliminating or modifying the reporting requirements for the following
tables: C-1 (Identity of Respondent); C-2 (Control Over Respondent); C-
3 (Board of Directors and General Officers); C-4 (Stockholders); C-5
(Important Changes During the Year); B-8 (Capital Leases); B-9
(Deferred Charges); B-11 (Long-Term Debt); B-12 (Net Deferred Income
Taxes); B-13 (Other Deferred Credits); B-14 (Capital Stock); and B-15
(Capital Stock and Funded Debt Reacquired or Retired During the Year);
I-3 (Pension Costs); I-4 (Operating Other Taxes); I-5 (Prepaid Taxes
and Accruals); I-6 (Special Charges); and I-7 (Donations or Payments
for Services Rendered by Persons Other Than Employees).
We seek comment generally on our tentative proposal to streamline
the ARMIS 43-02 USOA Report for the largest ILECs. Specifically, we
seek comment on whether alternative sources of information would
provide sufficient protection against the potentially anti-competitive
practices we identified in the ARMIS Reductions Report and Order, FCC
No. 99-107, released June 30, 1999. For instance, we believe that much
of the information contained in the series ``C'' tables can be obtained
from the carrier's Form 10-K Annual Report filed with the Securities
and Exchange Commission (SEC), as well as in other publicly available
reports. We also believe that, to a large extent, balance sheet and
income statement information reported in the series ``B'' and ``I''
tables may be obtained from underlying source data and can be readily
provided by the carrier upon request. Although we continue to believe
that access to information is crucial for our processes as well as for
the state commissions, we believe access to this information may be
more efficiently obtained through other sources. We also believe that
the need for obtaining certain data on a regular basis may not be so
vital to regulatory mandates as to outweigh the burden imposed on the
ILECs in reporting this information. We seek comment on these overall
tentative conclusions.
2. ARMIS 43-02 USOA Report: Table C Reductions
The ``C'' series tables of the ARMIS 43-02 USOA Report include five
tables containing carrier and stockholder information. We believe we
could reduce the burdens imposed on the carriers by modifying these
tables. We believe that most of the data contained in C-1 (Identity of
Respondent), C-2 (Control Over Respondent), and C-4 (Stockholders), are
available in public filings. Our experience suggests that routine
filing of information contained in C-3 (Board of Directors and General
Officers) may not be needed if the information is made available upon
request. We tentatively conclude that because carriers must publicly
file most of the information in these tables with the SEC in their Form
10-K Annual Reports, which are available on the Internet, and because
we may request and obtain this information as necessary, streamlining
these reporting requirements will not impair our ability to perform
necessary oversight functions but will reduce the filing burden on
large ILECs. Certain basic information contained in these reports,
however, may be needed for purposes of efficiency in administering and
managing the database. Thus, we tentatively propose to consolidate all
basic information into one table, which would generally provide
information on the carrier's name, carrier's address, operating states,
and executive officers. We seek comment on these proposals and
tentative conclusions.
Table C-5 (Important Changes During the Year) provides information
on significant events, such as extensions of systems, substantial
portions of property sold, changes in direct and indirect control of
the carrier, important contracts or agreements entered into, and
important changes in service and rate schedules. We believe the
reporting requirements for table C-5 could be streamlined by
eliminating the requirement to report certain information. For
instance, we believe

[[Page 44881]]

that the data reported on changes in direct and indirect control may no
longer be needed on a recurring basis. We believe this information may
be available in the carrier's Form 10-K Annual Reports or in the
carrier's cost allocation manuals, and where necessary, could be
obtained from the carrier upon request. Thus, we tentatively conclude
that the reporting requirements concerning changes in direct and
indirect control of the carrier be eliminated. We seek comment on this
tentative conclusion and proposal to modify table C-5 in this manner.
We also believe that the information collected in table C-5 could be
reduced further by collecting information only where the change
involves a significant or material change. Thus, we seek comment on
whether we should adopt a threshold amount for items reported in table
C-5 (such as important contracts or agreements entered into, or
important changes in service and rate schedules), and if so, what an
appropriate threshold level would be. We seek comment on the above
proposals for streamlining table C-5 reporting requirements.
3. ARMIS 43-02 USOA Report: Table B Reductions
The ``B'' series tables contain data about the balance sheet
accounts. Table B-1 (Balance Sheet) and Table B-2 (Statement of Cash
Flows) are basic financial statements that are essential to our
analysis of a carrier's financial condition. Several other supporting
tables are important in our analysis of investment in and transactions
with affiliates and in evaluating carrier depreciation reserves. We are
not proposing changes in these tables. We believe, however, that
several other tables in the ``B'' series need not be routinely reported
as long as we have continued access to the underlying data and source
documents supporting these tables. Further, we believe that the
carrier's own accounting practices, which are governed by standard
accounting practices and procedures and subject to internal and
external audits, should assure that these accounts are properly
maintained. Thus, we propose to eliminate the following ``B'' tables:
B-8: (Capital Leases); B-9 (Deferred Charges); B-11 (Long-Term Debt);
B-12 (Net Deferred Income Taxes); B-13 (Other Deferred Credits); B-14
(Capital Stock); and B-15 (Capital Stock and Funded Debt Reacquired or
Retired During the Year). We seek comment on these tentative
conclusions and proposals. We are concerned that we not eliminate
information that may be needed to carry out our responsibilities. We
ask parties to address this concern and whether information concerning
these accounts are readily available from other sources, such as in the
carrier's Annual 10-K Report or through other internal records. We also
ask parties to identify specific needs for this information and whether
alternative sources of information provide sufficient level of detail
to meet these needs.
4. ARMIS 43-02 USOA Report: Table I Reductions
We have also examined the continuing need for routine reporting of
information contained in the ``I'' series tables, specifically I-3
(Pension Costs); I-4 (Operating Other Taxes); and I-5 (Prepaid Taxes
and Accruals). For the reasons stated above with respect to the
accounts reported in the ``B'' series, we tentatively conclude that
carriers should no longer be required to report the information
required in tables I-3, I-4, and I-5 annually to the Commission. We
believe that as long as we have continued access to underlying data and
source documents supporting these tables, this information can be
obtained from the ILECs on an as-needed basis. We seek comment on these
tentative conclusions and proposals.
Our review of table I-6 (Special Charges) finds that the
information reported in this table continues to be essential. Data
reported in this table are below-the-line amounts, i.e., are not an
allowable expense to be charged against regulated revenues. Special
Charges reported on this table include lobbying expenses, membership
fees and dues, abandoned construction projects amounting to $100,000 or
more, penalties and fines amounting to $100,000 or more, and
charitable, social, or other community welfare expenses. We find it
necessary to maintain routine reporting of these items to ensure that
these expenses, especially if material, are properly recorded on the
ILECs' books. The $100,000 reporting threshold, however, for reporting
abandoned construction projects, penalties and fines may be relatively
immaterial in light of the strong revenue growth since the outset of
ARMIS in 1989. We seek comment, therefore, on whether the reporting
threshold should be raised to a higher amount and, if so, what amount
to establish as the reporting threshold.
Similarly, our review finds that information reported in table I-7
(Donations or Payments for Services by Persons Other than Employees)
continues to be essential for regulatory monitoring purposes to ensure
that material costs claimed against regulated revenues are appropriate.
The information reported in table I-7 requires that carriers report all
amounts paid to academia; amounts exceeding $250,000 paid for
advertising and information services, clerical and office services,
computer and data processing services, personnel services, printing and
design services, and security services; amounts exceeding $25,000 paid
for audit and accounting services, consulting and research services,
financial services, and legal services; and amounts exceeding $10,000
for membership fees and dues. Again, in light of the tremendous growth
in ILEC revenues, the reporting thresholds may now be too low. We seek
comment, therefore, on whether the reporting thresholds for each of the
above mentioned payments to outside vendors should be raised to a
higher amount and, if so, what amounts to establish as the reporting
thresholds.

IV. Procedural Issues

A. Ex Parte Presentations

This is a permit but disclose rulemaking proceeding. Ex parte
presentations are permitted, except during the Sunshine Agenda period,
provided that they are disclosed as provided in the Commission's rules.
See generally 47 CFR 1.1202, 1.1203, and 1.1206.

B. Final Regulatory Flexibility Certification

The Regulatory Flexibility Act (RFA) requires that an initial
regulatory flexibility analysis be prepared for notice-and-comment
rulemaking proceedings, unless the agency certifies that ``the rule
will not, if promulgated, have a significant economic impact on a
substantial number of small entities.'' The RFA generally defines
``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 Small Business
Administration (SBA).
This Notice of Proposed Rulemaking proposes to eliminate or revise
the matrix used to classify expenses in the Uniform System of Accounts
(USOA); reduce the audit burdens on incumbent local exchange carriers
(ILECs); adopt a de minimis exception to the Commission's affiliate
transactions rules; eliminate the 15-day prefiling for

[[Page 44882]]

cost pool changes; eliminate the notifications and approvals required
in Secs. 32.13(a)(3) and 32.25; and revise the accounting requirements
for Secs. 32.2002 and 32.2003. In addition, with respect to ARMIS
reporting requirements, the Notice of Proposed Rulemaking seeks comment
on eliminating certain corporate information collected in the ``C''
series tables and on consolidating certain information into one table.
The Notice of Proposed Rulemaking also seeks comment on eliminating
certain information concerning balance sheet accounts reported in the
``B'' series tables and income statement accounts reported in the ``I''
series tables.
Neither the Commission nor SBA has developed a definition of
``small entity'' specifically applicable to LECs. The closest
definition under SBA rules is that for establishments providing
``Telephone Communications, Except Radiotelephone,'' which is Standard
Industrial Classification (SIC) code 4813. Under this definition, a
small entity is one that, including affiliates of the entity, employs
no more than 1,500 persons. For the purpose of this present
certification we would assume that an ILEC can be characterized as non
dominant for the purpose of analysis under the Regulatory Flexibility
Act.
We certify that the proposals in this Notice of Proposed
Rulemaking, if adopted, will not have a significant economic impact on
a substantial number of small entities. Pursuant to long-standing
rules, ILECs with annual operating revenues equal to or exceeding the
indexed revenue threshold must comply with the Commission's record
keeping rules and CAM audit requirements. The Commission proposes to
reduce certain of these CAM and record retention requirements. These
changes should be easy and inexpensive for ILECs to implement and will
not require costly or burdensome procedures. We therefore expect that
the potential impact of the proposal rules, if such are adopted, is
beneficial and does not amount to a possible significant economic
impact on affected entities. If commenters believe that the proposals
discussed in the Notice require additional RFA analysis, they should
include a discussion of these issues in their comments.
The Commission's Office of Public Affairs, Reference Operations
Division, will send a copy of this Notice of Proposed Rulemaking,
including this initial certification, to the Chief Counsel for Advocacy
of the Small Business Administration. A copy will also be published in
the Federal Register.

C. Paperwork Reduction Act

This NPRM contains either a proposed or modified information
collection. As part of our continuing effort to reduce paperwork
burdens, we invite the general public to take this opportunity to
comment on information collections contained in this Notice of Proposed
Rulemaking, 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 of Proposed Rulemaking. 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.

D. Comment Filing Procedures

Pursuant to Secs. 1.415 and 1.419 of the Commission's rules, 47 CFR
1.415, 1.419, interested parties may file comments on or before August
23, 1999, and reply on or before September 9, 1999. Comments may be
filed using the Commission's Electronic Comment Filing System (ECFS) or
by filing paper copies.
Comments filed through the ECFS can be sent as an electronic file
via the Internet to http://www.fcc.gov/e-file/ecfs.html>. Generally,
only one copy of an electronic submission must be filed. If multiple
docket or rulemaking numbers appear in the caption of this proceeding,
however, commenters must transmit one electronic copy of the comments
to each docket or rulemaking number referenced in the caption. In
completing the transmittal screen, commenters should include their full
name, Postal Service mailing address, and the applicable docket or
rulemaking number. Parties may also submit an electronic comment by
Internet e-mail. To get filing instructions for e-mail comments,
commenters should send an e-mail to [email protected], and should include
the following words in the body of the message, ``get form '' A sample form and directions will be sent in reply.
Parties who choose to file by paper must file an original and four
copies of each filing. If more than one docket or rulemaking number
appear in the caption of this proceeding, commenters must submit two
additional copies for each additional docket or rulemaking number. All
filings must be sent to the Commission's Secretary, Magalie Roman
Salas, Office of the Secretary, Federal Communications Commission, 445
12th Street, S.W., Washington, D.C. 20554.
Parties who choose to file by paper should also submit their
comments on diskette. These diskettes should be submitted to: Ernestine
Creech, Accounting Safeguards Division, 445 12th Street, S.W.,
Washington, D.C. 20554. Such a submission should be on a 3.5 inch
diskette formatted in an IBM compatible format using WordPerfect 5.1
for Windows or compatible software. The diskette should be accompanied
by a cover letter and should be submitted in ``read only'' mode. The
diskette should be clearly labelled with the commenter's name,
proceeding (including the docket number, in this case CC Docket No. 99-
253, type of pleading (comment or reply comment), date of submission,
and the name of the electronic file on the diskette. The label should
also include the following phrase ``Disk Copy--Not an Original.'' Each
diskette should contain only one party's pleadings, preferably in a
single electronic file. In addition, commenters must send diskette
copies to the Commission's copy contractor, International Transcription
Service, Inc., 1231 20th Street, N.W., Washington, D.C. 20037.
Written comments by the public on the proposed information
collections are due on or before August 23, 1999. Written comments must
be submitted by the Office of Management and Budget (OMB) on the
proposed and/or modified information collections on or before October
18, 1999. 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 1-
C804, 445 12th Street, S.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].

V. Ordering Clauses

Accordingly, it is ordered that, pursuant to the authority
contained in sections 4(i), 4(j), 11, 201(b), 303(r), and 403 of the
Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), 161,
201(b), 303(r), and 403, this Notice of Proposed Rulemaking is adopted.
It is further ordered that the Commission's Office of Public
Affairs, Reference Operations Division, shall

[[Page 44883]]

send a copy of this Notice of Proposed Rulemaking, including the
Initial Regulatory Flexibility Certification, to the Chief Counsel for
Advocacy of the Small Business Administration, 5 U.S.C. 605(b).

List of Subjects

47 CFR Part 32

Communications common carriers, Reporting and recordkeeping
requirements, Telephone, Uniform System of Accounts

47 CFR Part 43

Communications common carriers, Radio, Reporting and recordkeeping
requirements, Telegraph, Telephone

47 CFR Part 64

Communications common carriers, Federal Communications Commission,
Radio, Reporting and recordkeeping requirements, Telegraph, Telephone

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 99-21402 Filed 8-17-99; 8:45 am]
BILLING CODE 6701-12-P

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A99-21402. Public record. Not legal advice.