******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 97-2345 In the Matter of ) Support Material For Carriers to File ) to Implement Access Charge Reform ) Effective January 1, 1998 ) TARIFF REVIEW PLANS Adopted: November 6, 1997; Released: November 6, 1997 By the Chief, Competitive Pricing Division: I. INTRODUCTION 1. We set forth herein material that incumbent local exchange carriers (ILECs) should file to support certain changes in interstate cost classifications, price cap indices, and access charges in their interstate access service tariffs that are scheduled to become effective January 1, 1998 pursuant to the Access Charge Reform Proceeding. This material includes a revised 1997 TRP for price cap ILECs to file that incorporates changes to the price cap rules. In addition, we discuss workpapers with respect to price cap and rate of return ILECs. The material herein was developed through public comment and through discussions with telecommunications industry representatives. Its completion will partially fulfill the requirements in Sections 61.38, 61.39, 61.41 through 61.49 of the Commission's Rules. II. PRICE CAP TARIFF REVIEW PLAN 2. Price cap ILECs should file the tariff review plan (TRP) contained in Appendix A of this document. This TRP revises the 1997 TRP to incorporate changes to the price cap rules as a result of access charge reform. It displays supporting information in a consistent manner, and will thereby assist ILECs in implementing access charge reforms and facilitate review by the Commission and interested parties. In Section II.A, we discuss the changes we are making to the 1997 TRP charts. A. TRP Charts 1. Chart IND-1 3. IND-1 displays the price cap indices (PCIs), actual price indices (APIs), service band indices (SBIs), and SBI pricing limits. We are adding a column to display existing SBI pricing limits, because the existing limits are necessary to derive proposed limits pursuant to the USTA Waiver Petition Order. 2. Chart CAP-1 4. Chart CAP-1 is a 5-page chart which replaces Chart CCL-1. It shows in sequence for the common line basket: (1) base-year access lines, minutes of use, existing common line rates, and maximum revenue at existing rates; (2) the PCI update to maximum revenue and the proposed maximum revenue at existing rates; (3) the development of end-user common line charges (EUCLs), primary interexchange carrier charges (PICCs), and the calculation of per minute charges; and (4) the flow through at each stage of rate development (from EUCL to PICC to per minute charges) of the residual common line maximum revenue not recovered through EUCLs, transport interconnection charge (TIC) costs and marketing costs. 5. AT&T and MCI suggest a modification to CAP-1 which would require recovery of universal service fund (USF) obligations through end user charges rather than through a price cap adjustment to the common line basket PCI. We are not adopting this suggestion at this time. AT&T has petitioned for reconsideration or clarification on this issue, and that petition is pending before the Commission. MCI also suggests that CAP-1 should show the PICCs on the basis of projected demand rather than historical demand. We are not adopting this suggestion, because the price cap ILECS may use historical demand as a result of a rule waiver in the USTA Waiver Petition Order. We have made changes as suggested by AT&T and MCI to include lines on CAP-1 which take into account the rulings in the Second Reconsideration Order pertaining to centrex lines and facility and non-facility based transport interconnection charges, as well as several minor modifications to presentation. 3. Chart PCI-1 6. PCI-1 displays the calculation of the PCIs for the price cap baskets, and includes the following data: (1) the Gross Domestic Product Price Index (GDP-PI) measuring inflation; (2) the productivity offset (X-Factor); (3) the change in access charge expense (Y) imputed for ILEC toll services, which affects the Interexchange Basket PCI; (4) the exogenous cost change (Z); (5) the base year revenue (R) for each basket; (6) the weighting factor (w) used in computing the PCIs; (7) the growth in minutes per line (g); and (8) available and actual transport interconnection charge (TIC) revenue being directly designated to the common line PCI. 4. Chart SUM-1 7. This is a summary chart displaying the revenue (R) in each basket and service category. It displays the results of multiplying the base-year demand by (1) current rates and (2) proposed rates. We are adding lines to report revenues from: (a) the primary interexchange carrier charge (PICC) in the common line basket; (b) local switching trunk port and signalling transfer point (STP) port termination categories in the traffic sensitive basket; and (3) marketing basket revenue. 5. Chart EXG-1 8. Chart EXG-1 displays the exogenous cost changes to and from each basket, attributable to any changes in (1) Universal Service Fund payments; (2) FCC regulatory fees; (3) excess deferred taxes; (4) amortization of investment tax credits; (5) Telecommunications Relay Service fees; (6) transport interconnection charge (TIC) revenue true-up; (7) marketing revenue; (8) line port cost; (9) trunk port and multiplixer costs; (10) SS7 revenue; (11) central office maintenance (COE) cost; (12) the sale and transfers of local telephone exchanges and other exogenous cost changes the ILECs may file. 6. Chart EXG-2 9. Chart EXG-2 builds on Chart EXG-1 by summarizing the direct designation of exogenous cost changes to specific categories within each basket. 7. Chart RTE-1 10. This chart displays information used to compute the APIs, SBIs, and upper SBI limits. It displays calendar year 1996 demand, current rates, proposed rates, and revenues computed by multiplying the 1996 demand by current and proposed rates. Chart RTE-1 enables us to verify the accuracy of "R," the revenue variable in the PCI formula that equals base period (1996) demand multiplied by rates. Demand and price data are reported in the aggregate under the primary rate elements of each category. 11. We are not adopting MCI's suggestion to add rows in Chart RTE-1 to report new primary rate elements for: (a) line ports other than basic rates; (b) separate dedicated and shared port revenues in the traffic sensitive basket; and (c) dedicated and shared multiplexing, and dedicated and shared trunk ports in the tandem switching category. Nor are we adopting AT&T's recommendation to report a new element under the interconnection charge service category for directory assistance. We believe that at least in this initial filing the workpapers the ILECs must file will provide sufficient information to support revenue calculations, and that these new elements can be incorporated into existing primary rate elements on Chart RTE-1. B. Miscellaneous 12. If filing to revise the initial TRP filing, the TRP should be refiled in its entirety, rather than just the parts of the TRP that are changed. This is because the latest TRP filed becomes the TRP of record. Other parts of the original filing, e.g., portions of the explanations, description and justification, and workpapers, may be omitted if unchanged by the revision. III. WORKPAPERS 13. As usual, price cap and rate-of-return carriers must include workpapers that summarize the key methods and findings of cost studies. These workpapers should show the development of cost shifts and methods of reallocation, removal of subsidies, and exogenous cost changes to implement on January 1, 1998. The rules require sufficient information to support results, including (a) a detailed description of study methods; (b) the sources of data; (c) detailed investment, capital and operating expense, overhead loadings and other costs used in the cost studies. A. Price Cap ILECs 14. AT&T specifically requests that the price cap ILECs provide information on (a) the number and types of ports; (b) the method of determining network operations and maintenance expense; (c) how that expense was divided between port and usage sensitive elements; (d) the amount of nonrecurring charges included in accounts that make up switching related maintenance and network operations expense; (e) the per line cost of switches by manufacturer and by switch size; and (f) the switch prices used for cost studies. MCI requests similar detail and for all information to be filed on the public record. Further, AT&T proposes two additional TRP charts (TIC-1 and TIC-2) which would establish a uniform process through which ILECs would identify and reallocate transport interconnection charge (TIC) revenue, in order to prevent double recovery of cost that may result due to the complexity of required cost shifts. In addition, AT&T suggests a new chart (TST-1) which sets forth a method to remove the subsidy in the tandem switched transport elements related to the use of the 9,000 minutes of use factor. AT&T also suggests a new TRP chart to show the transfer of cost related to central office equipment (COE) maintenance, and a workpaper showing the calculation of TIC minutes of use rates, tandem routed directory assistance termination and facility rates, and tandem switching directory assistance rates. B. Rate of Return ILECs 15. With respect to rate-of-return ILECs, AT&T suggests the following charts: (a) RORMDEM-1 which would display dial equipment minutes (DEMs) to allow parties to verify the removal of DEM subsidies; (b) RORTPIS-1 which would show the trend in total company plant in service and other local switching investment to determine whether the proper amount of investment has been assigned to the universal service fund as a result of DEM weighting changes; (c) ROROPEXP-1 which would show the trend in employees and other corporate information for parties to evaluate the reasonableness of the ILECs prospective corporate operating expense; (d) RORLTS-1 which would show the trend and reasonableness of long term support subsidies that are being transferred to the universal service fund; (e) RORHCFLL-1 which would assist in evaluating the reasonableness of high cost funds and lifeline assistance received; and (f) RORTAND-1 which would assist in evaluating the reasonableness of transport cost reassignment. C. Discussion 16. We do not necessarily agree with the data, chart, and workpaper proposals made by AT&T and MCI, because the ILECs may be able to provide other data, charts, and workpapers that can demonstrate in a more efficient and complete manner the reasonableness of the methods and results of costs studies. Many of the proposals made by AT&T and MCI can provide useful guidelines for ILECs and entail information that must be provided in any event under Part 61 Rules. Nevertheless, we decline to require specific data, charts, and formats at this time other than those in the price cap TRP described in Section II. First, due to the complexity of the cost studies and restructures that must be developed, it is unlikely that the charts will be applicable to all the ILECs. Second, completion of these proposed charts may in fact hinder review if an ILEC uses the proposed information in lieu of data, charts and presentations that would have otherwise presented that ILEC's information in a more efficient, accurate, and complete manner. IV. GENERAL INSTRUCTIONS 17. The following general instructions apply to both price cap and rate-of-return ILECs. A. Geographic Aggregation 18. Study results should be consistent with the current level of geographic rate aggregation. In addition, if the rates are based on data from a number of study areas or operating companies, levels of aggregation associated with each study area (state) and operating company should be provided by carriers, except in those specific instances where geographically averaged costs or rates are required. B. Assistance from United States Telephone Association (USTA) 19. As in past filings, to assist the Commission and interested parties in evaluating the national impact of revised rates, we request that USTA provide us with aggregated TRP data for all price cap ILECs, except for those charts or portions of charts for which aggregation is inappropriate. C. Waivers 20. If carriers find that they are unable to provide data in the TRP or complete cost studies, they may file applications for waiver. These waiver applications should demonstrate good cause for reporting a different or lower level of detail than specified and should indicate how the carrier intends to report complete TRP data in the future. Each carrier requesting any waiver of the Commission's Rules should include all such requests in a single application. Carriers should not delay undertaking development of data in anticipation that waiver requests will be granted. D. Technical Instructions 21. Consistent with previous TRP filings, all price cap ILECs should file the TRP in 3 copies on computer disk. One of those disks along with a paper copy of the complete filing should be filed with International Transcription Services (ITS), the Commission's contractor for public records duplication. E. Compliance with the Paperwork Reduction Act 22. The TRP in Appendix A is subject to approval by the Office of Management and Budget (OMB) in accordance with the provisions of the Paperwork Reduction Act, 44 U.S.C.,  3506 et seq. Accordingly, we are requesting OMB approval for the collection. When the Commission receives such approval, we will issue a public notice to that effect, after which the information collection will become effective. F. Procedural Matters 23. This document will be sent directly to all carriers that must file a TRP. A copy of the document and all attachments will be available for inspection at the Public Reference Room, Common Carrier Bureau, Room 574, 2000 M St., NW, Washington, DC, 20037. The Commission will publish the text of this document in the FCC Record. Copies of Appendices can be obtained through International Transcription Service, Inc. (ITS), the Commission's contractor for public records duplication. 24. Specific TRP filing instructions and distribution lists will be detailed in a separate order. FEDERAL COMMUNICATIONS COMMISSION James D. Schlichting Chief, Competitive Pricing Division Common Carrier Bureau