NOTICE ************************************************************************* NOTICE ************************************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file pnmc5021. File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ************************************************************************* Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) The Ameritech Telephone ) AAD No. 93-146 Operating Companies ) ) CONSENT DECREE ORDER Adopted: October 15, 1996 Released: November 1, 1996 By the Commission: 1. At the direction of the Commission, the National Exchange Carrier Association, Inc. ("NECA") hired Ernst and Young to conduct an independent audit of carrier- reported adjustments to the common line revenue pool for 1988 and the first quarter of 1989. On December 9, 1991, NECA submitted to the Commission Ernst and Young's report ("Adjustments Report"). 2. The independent auditor reported numerous apparent violations of the Commission's rules committed by the Bell Operating Companies, including the Ameritech Telephone Operating Companies ("Ameritech"). These apparent violations generally involve failures to keep accounts, memoranda and records in the manner prescribed by the Commission. 3. On March 3, 1995, the Commission released an Order to Show Cause directing Ameritech to show cause why the Commission should not: (1) issue a Notice of Apparent Liability for Forfeiture for apparent violation of Section 220(d) of the Communications Act of 1934, as amended; (2) require Ameritech to adjust its price cap indexes; and (3) require Ameritech to improve its internal processes to bring them into compliance with Commission rules and orders. 4. On May 2, 1995, Ameritech responded to the Commission's Order to Show Cause and contested and denied each of the NECA audit report findings listed in the Commission's Order. By public notice dated June 20, 1995, the Common Carrier Bureau invited public comment on Ameritech's response. Only MCI Telecommunications Corporation filed comments, and Ameritech replied on September 11, 1995. 5. This Commission and Ameritech have reached an agreement with respect to these audit findings. The terms and conditions of this agreement are contained in the attached Consent Decree. 6. We have reviewed the terms of the Consent Decree and evaluated the circumstances of the case. We believe the public interest would be served by approving the Consent Decree, the terms of which are incorporated herein by reference. Among other things, the Consent Decree requires Ameritech to make on a prospective basis an exogenous cost reduction of $1.2 million in its price cap indexes. Under Section 61.45(d) of our price cap rules, local exchange carriers may make exogenous cost changes only if permitted or required by Commission rule, waiver or declaratory ruling. On our own motion, we find it in the public interest to issue a waiver of Section 61.45(d) of our rules to permit Ameritech to adjust its price cap indexes to make the exogenous cost reduction specified in the Consent Decree. A waiver of Section 61.45(d) is appropriate because strict compliance with the rule would prevent or delay the adjustment required by the Consent Decree and, thus, would be inconsistent with the public interest. 7. We delegate authority to the Common Carrier Bureau to: (1) review the price cap recalculations of Ameritech; (2) review the annual examination by the independent auditors that verifies that Ameritech's internal controls are working properly; and (3) take such other appropriate action as is needed. 8. Accordingly, IT IS ORDERED, pursuant to Sections 4(i) and 4(j) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i) and (j), that the Consent Decree and its Attachments, incorporated by reference herein and attached to this Order, IS HEREBY ADOPTED, and the Secretary shall sign such Consent Decree on behalf of the Commission. 9. IT IS FURTHER ORDERED that Ameritech is permitted to adjust its price cap indexes to make the exogenous cost reduction as required by and specified in the Consent Decree. 10. IT IS FURTHER ORDERED that this Order is effective upon execution of the Consent Decree by all parties to the Agreement. 11. IT IS FURTHER ORDERED that proceedings under the March 3, 1995 Order to Show Cause, 10 FCC Rcd 5606, ARE HEREBY TERMINATED. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary Before the Federal Communications Commission Washington, D.C. 20554 ) In the Matter of ) ) The Ameritech Telephone )AAD 93-146 Operating Companies) ) ) CONSENT DECREE 12. This is a Consent Decree entered into by the Federal Communications Commission ("Commission") and the Ameritech Telephone Operating Companies ("Ameritech") (collectively referred to sometimes as the "Parties"). 13. The common line revenue pool is administered by the National Exchange Carrier Association, Inc. ("NECA") and allows incumbent local exchange carriers ("LECs") to participate in a tariff filed by NECA that establishes uniform access rates on a nation-wide basis for all participants. Monthly distributions from the pool are computed using monthly revenue, expense and investment figures reported by the participating LECs. Initially the figures are only estimates, but in later months the incumbent LECs adjust them to actual monthly figures. At the direction of the Commission, NECA hired Ernst and Young to conduct an independent audit of carrier-reported adjustments to the common line revenue pool for 1988 and the first quarter of 1989. The Ernst and Young audit report ("Adjustments Report") included numerous audit findings against the Bell Operating Companies, including Ameritech, concerning apparent rule violations and misconduct. These findings generally involve failures to keep accounts, memoranda and records in the manner prescribed by the Commission. 14. On March 3, 1995, the Commission released an Order to Show Cause directing Ameritech to respond to certain of the findings in the Adjustments Report. On May 2, 1995, Ameritech responded to the Commission's Order to Show Cause and contested and denied each of the Adjustments Report findings listed in the Commission's Order. By public notice dated June 20, 1995, the Common Carrier Bureau invited public comment on Ameritech's response. Only MCI Telecommunications Corporation filed comments, and Ameritech replied on September 11, 1995. 15. The Commission's Order to Show Cause and the Ameritech Response to the Order to Show Cause are incorporated into this Agreement by reference. The positions of the parties are reflected in those pleadings. 16. The Commission and Ameritech agree that the expeditious resolution of issues raised by the Adjustments Report and the Commission's Order to Show Cause in accordance with the terms of this Consent Decree is in the public interest. 17. Accordingly, and in consideration of the agreement of the Commission and Ameritech to conclude action on the Order to Show Cause on the terms set forth in this Consent Decree, Ameritech agrees to act as specified in this paragraph: (a) Ameritech agrees to the extent necessary to maintain practices and supporting documentation that will avoid in the future issues raised by the apparent violations set forth in the Order to Show Cause. (b) Ameritech agrees to make a permanent exogenous adjustment to its price cap indexes to reflect the removal of $ 1.2 million dollars in costs. Ameritech shall make this prospective adjustment within 60 days after the effective date of this Consent Decree. (c) Ameritech agrees to an independent review of its internal Separations Information System for Personal Computer (SIS-PC) as specified in Attachment A of this Consent Decree. 18. In the event Ameritech fails to comply with the requirements set forth in paragraph 6 and Attachment A of this Consent Decree, the Commission reserves the right to pursue legal action against Ameritech. If Ameritech complies with the terms set forth in paragraph 6 and Attachment A of this Consent Decree, then the accounting treatments, procedures and documentation adopted in compliance with the requirements of paragraph 6 and Attachment A shall be regarded by the Commission as presumptively reasonable and lawful. The Commission, however, reserves its right under law to change accounting requirements, prospectively and retroactively as long as no penalty attaches to such retroactive application. Likewise, Ameritech shall be authorized to make changes to its accounting treatments, procedures and documentation to implement or reflect changes in the law or rules or waivers of the Commission's rules, and shall not thereby be in violation of any part of this Consent Decree. 19. In light of Ameritech's covenants and representations contained in paragraph 6 and Attachment A of this Consent Decree, and in express reliance thereon, the Commission has issued a final order formally authorizing the Secretary to execute this Consent Decree ("Consent Decree Order") without change, addition or modification and without a finding of wrongdoing, violations or liability by Ameritech and further agrees not to begin, on the motion of the Commission or its staff, any proceeding, formal or informal, concerning matters that were the subject of the Adjustments Report. Nothing herein, however, shall preclude the Commission from using the information underlying the findings and observations in the Adjustments Report for other lawful regulatory purposes provided that Ameritech shall have all opportunities afforded by law to contest that use and that information. 20. Ameritech admits the jurisdiction of the Commission to adopt this Consent Decree. 21. Ameritech waives any rights it may have to judicial review, appeal or rights otherwise to challenge or contest the validity of the Consent Decree Order, provided the Commission adopts this Consent Decree without change, addition or modification. 22. The Parties agree not to engage in conduct inconsistent with the terms of this Consent Decree. The Parties may comment publicly, however, on the nature of the Consent Decree, and the merits of their respective positions, after it has been adopted by the Commission. 23. It is understood that Ameritech's agreement to this Consent Decree does not constitute an adjudication of any factual or legal issues or an admission by Ameritech of wrongdoing, violations or of any inconsistency between its position, on the one hand, and, on the other hand, (i) the Communications Act of 1934, as amended, and (ii) the rules and policies of the Commission. As a result, Ameritech shall not be precluded or estopped from litigating de novo any and all of the issues subject to this Consent Decree in any forum, except as provided herein. 24. The Parties agree that this Consent Decree and the Consent Decree Order may not be used in any fashion by either of the Parties to this Consent Decree in any legal proceeding except as set forth in this Consent Decree. 25. Adoption by the Commission of this Consent Decree shall conclude action in the proceeding commenced by the Order to Show Cause, 10 FCC Rcd 5606, and the Adjustments Report without a finding of wrongdoing, violations or liability on the part of Ameritech. The Parties agree that the effectiveness of this Consent Decree is expressly contingent upon issuance of the Consent Decree Order described herein, and compliance by Ameritech with the terms of this Consent Decree. If this Consent Decree is not signed by Ameritech and the Commission, or is otherwise rendered invalid by any court of competent jurisdiction, it shall become null and void and may not become part of the record in this proceeding. 26. If the Commission brings an action in any court of competent jurisdiction to enforce the terms of the Consent Decree Order or the Consent Decree, Ameritech agrees that it will not contest the validity of either the Consent Decree Order or the Consent Decree, will waive any statutory right to contest the validity of the Consent Decree Order or this Consent Decree through a trial de novo, and will consent to a judgment incorporating the terms of this Consent Decree without change, addition or modification provided, however, that the Commission has complied with all of its obligations under the Consent Decree. 27. This agreement may be signed in counterparts. FEDERAL COMMUNICATIONS COMMISSION By:_____________________________________ Acting Secretary Signed this ______ day of October, 1996 AMERITECH OPERATING COMPANIES By:_____________________________________ Its_____________________________________(Title) Signed this ______ day of October, 1996 Attachment A Ameritech maintains a personal computer-based mechanized system to perform the calculations necessary to produce jurisdictionally separated investments, revenues, and expenses. This mechanized system, known as the Separations Information System for Personal Computer (SIS- PC), is reviewed annually by an external accounting firm to ensure that any changes made to the system during the previous year comply with any separations rulings issued by the Commission during that period of time. Ameritech agrees to maintain SIS-PC or a successor system as long as jurisdictional separations are required by the Commission. Ameritech agrees to continue to arrange for an annual review by an external accounting firm of any modifications made to the SIS-PC system during the previous year, and to submit the results of that annual review to the Commission. Ameritech further agrees to submit to the Commission an implementation plan for each recommendation that the independent accounting firm determines has the potential for material impact on the results of the company's jurisdictional allocations.