******************************************************** 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 In the Matter of) ) National Exchange Carrier ) Association, Inc. (NECA) ) AAD 97-2 Proposed Modifications to the 1997 ) Interstate Average Schedule Formulas ) and ) Proposed Further Modifications to the 1997-98 ) AAD 97-109 Interstate Average Schedule Formulas ) ORDER ON RECONSIDERATION AND ORDER Adopted: December 24, 1997 Released: December 24, 1997 By the Chief, Common Carrier Bureau: I. INTRODUCTION 1. On December 31, 1996, the National Exchange Carrier Association, Inc. ("NECA") submitted its annual proposed revisions to its average schedule formulas in accordance with the Commission's rules. On May 28, 1997, the Common Carrier Bureau ("Bureau") issued an Order modifying the Common Line average schedule formula (Common Line formula) and approving the other average schedule formulas submitted by NECA. On June 20, 1997, the National Exchange Carrier Association, Inc. ("NECA") filed a Petition for Reconsideration ("Petition") regarding the Bureau's decision to modify the Common Line formula. Six parties filed comments. On August 15, 1997, NECA filed reply comments. In this Order, we affirm our decision directing NECA to modify the Common Line formula, as specified in our May Order. Our decision helps to ensure that carriers serving the smallest exchanges receive adequate settlements to cover the higher projected costs of serving those exchanges, and that as exchanges become bigger, settlements per line are reduced to reflect scale economies. 2. On November 3, 1997, NECA filed proposed further modifications to the average schedule formulas. On November 5, 1997, the Division issued a public notice soliciting comments on NECA's filing. Three parties filed comments. On December 10, 1997, NECA filed sixteen pages of errata to their November 3 filing. For the reasons discussed below we approve in part and deny in part NECA's proposed further modifications to the average schedule formulas. II. BACKGROUND 3. Incumbent local exchange carriers ("incumbent LECs") that participate in the tariff and pooling arrangements administered by NECA recover costs from the pools calculated either on the basis of cost studies reflecting the carrier's own booked costs of service or on the basis of average schedule formulas that estimate the cost of service. Prior to the adoption of the Commission's access charge rules in 1984, incumbent LEC compensation arrangements were handled through private contractual agreements within the telephone industry. The industry's settlement mechanism based the amount of incumbent LEC compensation either on cost studies or average schedule formulas that were used to estimate an incumbent LEC's cost of service. To facilitate implementation of its access charge rules, the Commission incorporated a modified version of the industry's existing average schedule arrangement. Average schedule companies are defined in the Commission's rules as telephone companies that participated in average schedule settlements on December 1, 1982. 4. An incumbent LEC participating in the NECA Common Line pool charges interstate access rates according to a NECA tariff. The settlement process determines whether the company has collected from its customers an amount greater than or less than its interstate costs. If a company's interstate access charge revenues exceed its costs, including a reasonable rate of return on its interstate investment, that company pays the difference to the NECA pools in the settlement process. Conversely, if the company receives less in interstate access revenues than its actual or estimated costs of service, the NECA pool pays the difference to the company. "Cost companies" settle with NECA on the basis of their actual interstate costs of service. "Average schedule companies" use formulas to estimate the average costs of service and settle with NECA on the basis of those estimated costs. The average schedule formulas are designed to simulate the disbursements that would be received by cost companies that are representative of average schedule companies. 5. In developing interstate settlement formulas, NECA uses data from a sample of both average schedule companies and cost companies. From average schedule companies, NECA collects data that represents total investments and expenses. From cost companies, NECA collects data concerning investment and expenses that are allocated to the interstate jurisdiction and to access charge categories pursuant to the Commission's jurisdictional separations and access charge rules. Average schedule companies do not have this type of data because they are presumed to lack the resources to justify a requirement that they perform separations and access charge cost studies to determine their compensation from interstate services. Because data filed by average schedule companies are insufficient to calculate their interstate revenue requirements, NECA develops simulated revenue requirements for the sample average schedule companies based on analysis of the jurisdictional separations and access element factors of a sample of cost companies. NECA then uses the simulated revenue requirements of the sample average schedule companies to develop formulas that determine settlements for all average schedule companies. 6. Section 69.606(b) of the Commission's rules requires NECA either to file revised average schedule formulas on or before December 31 of each annual period, or to certify that no such revisions are necessary. If the proposed settlement formulas are approved or modified by the Commission, they take effect on July 1. On December 31, 1996, NECA filed proposed revisions to the following average schedule formulas: Traffic Sensitive Central Office; Line Haul Non-Distance Sensitive; Line Haul Distance Sensitive; Intertoll Dial Switching; Signal System 7; Special Access; Equal Access; Database Query and Interim Translation; Universal Service; and Common Line. In its May Order, the Bureau approved all of the proposed formula changes with the exception of the Common Line formula, which it modified. 7. NECA's proposed Common Line formula calculated an average schedule company's Common Line settlement on the basis of its average number of access lines per exchange. NECA used a linear spline model to determine the settlement per access line. A linear spline is graphically represented by two straight lines joined at an inflection point. A comparison of the NECA linear spline model with the actual cost data NECA obtained from the sample, raised several concerns. For example, we questioned the appropriateness of the location of the inflection point, which was based on 1985 data. We were also concerned that, using the linear spline model, the settlement amounts for a large number of companies did not provide an accurate simulation of the settlements that comparable cost companies would receive. We determined that a reciprocal model would best fit the sample data, and, accordingly, we modified NECA's proposed Common Line formula to incorporate a reciprocal model. 8. In deciding to modify the Common Line formula, we relied on two primary methods of evaluation. First, we compared NECA's proposed formula with alternative models using the R2 statistic as a measure of goodness of fit. Second, we compared the sum of estimated settlements using NECA's model with the sum of the sample revenue requirements. The modified formula was superior to NECA's formula under both criteria. Overall, the Bureau's modified formula resulted in higher settlements to the smallest average schedule companies and decreased total settlements by $2 million, compared with last year's settlements. These results are discussed in greater detail below. 9. On June 16, 1997 NECA filed its annual tariffs and average schedule formulas that reflected the Bureau's modification to the Common Line formula. On June 20, 1997 NECA filed a petition seeking reconsideration of the Bureau's decision directing NECA to use the Bureau's modified Common Line formula instead of NECA's proposed formula. On July 1, 1997 NECA's June 16 tariffs took effect. III. POSITIONS OF PARTIES A. NECA's Petition for Reconsideration 10. In its Petition for Reconsideration, NECA states that the Bureau's modification to the Common Line formula contains significant statistical flaws. Specifically, NECA maintains that the Bureau's modified formula produces substantial, unpredictable settlement changes for average schedule companies, is overly sensitive to data from companies with small numbers of lines per exchange, and understates the aggregate Common Line revenue requirement for average schedule companies. In addition, NECA argues that the Bureau used two erroneous data points in its calculations that should have been excluded. 11. NECA maintains that these flaws cause the modified formula to produce settlements which fail to simulate cost company disbursements, as required by Section 69.606(a) of the Commission's rules. In addition, NECA states that the modified formula would cause serious fluctuations in settlements for average schedule companies. NECA also claims that the Bureau failed to give notice of its proposed modified formula in violation of section 205 of the Communication's Act and section 553 of the Administrative Procedure Act. 12. NECA requests that the Commission permit NECA to use its proposed linear spline model to calculate the Common Line formula for 1997. NECA maintains that its linear spline model more accurately targets population revenue requirements and will produce less volatile, more predictable changes in settlements. B. Comments and Reply Comments 13. Alliance supports NECA's petition, observing that the reciprocal model does not posit a plausible relationship between costs and model variables. For instance, Alliance states that when calculating the reciprocal model at low access lines per exchange levels, small decreases in average lines per exchange produce large increases in the estimates of the cost per line. Park Region, supporting NECA's petition, states that the Bureau did not consider the effects that changes in the Common Line formula can have on individual average schedule companies and the average schedule process in general. NTCA also supports NECA's petition, stating that the Bureau's modification in the Common Line formula would result in unpredictable fluctuations in year-to-year settlement rates. USTA, OPASTCO, NTCA, Park Region, and Alliance emphasize that the Bureau should have sought comment on its proposed modification. 14. MCI opposes NECA's petition. MCI states that, under NECA's formula, only companies with higher cost structures than those subject to cost-based regulation will migrate to cost company status. In addition, MCI states that: 1) removal of the two data points, which NECA claims to be erroneous, has only a marginal effect on the intercepts, slopes, and the coefficients of determination, or R2 values, of the models; 2) use of the Bureau's modified formula does not necessarily increase rate instability because future formulas should better address the Bureau's concerns; 3) NECA fails to justify the use of an inflection point derived from 1985 data; and 4) NECA fails to show that its model minimizes the difference between simulated revenue requirements for sample firms and estimated settlements for these firms. 15. In its reply comments, NECA included reports of two consultants, each of whom conducted an analysis comparing a number of attributes of NECA's proposed linear spline model with the reciprocal model. NECA's consultants claim that the reciprocal model is excessively sensitive to companies with low numbers of lines per exchange. This sensitivity, they argue, could lead to large year-to-year fluctuations in settlements. C. NECA's Petition for Further Modifications 16. On November 3, 1997, NECA proposed interim modifications to several of the average schedule formulas, that are scheduled to take effect on January 1, 1998 and remain in effect through June 30, 1998. NECA asserts that these modifications comply with the rule changes implemented in the Commission's universal service and access reform proceedings. In addition to changes necessary to implement recent Commission orders, NECA proposes substantial changes to the Common Line and its USF Loop Cost formulas. NECA also included revisions to its sample data in its filing. 17. OPASTCO, NTCA and the USTA filed comments. These associations generally support NECA's proposed revisions to the average schedule formulas. IV. DISCUSSION A. Petition for Reconsideration 18. The average schedule process is a method of modeling or projecting the costs of providing interstate service for carriers that are so small that they are presumed to lack sufficient financial resources or expertise to justify a requirement that they perform jurisdictionally separated cost studies for determining their compensation in originating and terminating interstate telecommunications services. For these companies, the costs of performing a cost study would likely outweigh the potential benefit of a more precise cost estimate. To estimate the costs of service, the average schedule companies use formulas that are designed to produce disbursements that would be received by companies whose cost characteristics are representative of average schedule companies. Both NECA and the Bureau have derived average schedule formulas by applying regression analysis to simulated cost and other operational data for a sample of average schedule companies. Our prior analysis of NECA's linear spline model for the Common Line formula showed that it consistently and significantly overstated the average schedule revenue requirement. We also found that several statistical models, including the Bureau's model, not only reduce that tendency, but also more closely fit the data used to develop the formula. In comparing various models, econometric regression is used to assess the relationship between cost and other variables such as the number of access lines and the number of exchanges. We refer to this measure of accuracy as "goodness of fit." In general, a model is considered more accurate if it more closely tracks or follows these relationships. After careful evaluation of alternative formulas, we required NECA to modify the model to match more closely the average schedule revenue requirement based on the data in NECA's sample. 19. NECA's Model. We affirm our decision to reject NECA's model for the 1997 Common Line formula. NECA's regression analyses result in biased formulas that yield higher settlements than are justified by the data. Table 1 lists in one column the simulated aggregate Common Line revenue requirements that NECA computed for the average schedule companies included in its sample for the past five years. The adjacent column in Table 1 then lists the Common Line revenue requirements for those companies for each of those years that the use of NECA's 1997 Common Line formula produces. As Table 1 shows, use of the NECA formulas consistently results in settlements to the sample average schedule companies that exceed the simulated revenue requirements computed by NECA. The overstatements range from a low of 4.9 percent to a high of 8.7 percent. Table 1 Comparison of NECA's Estimated Total Costs with Total Costs of Sample Year Number of Average Schedule Companies in the Sample NECA's Simulated Revenue Requirements for Sample Companies (Millions) Sample Company Settlements using NECA's Proposed Formula (Millions) Overstatement of Costs Amount (Millions) Percent 1992 165 $ 113.7 $ 120.9 $ 7.2 6.3 1993 167 $ 133.8 $ 140.4 $ 6.6 4.9 1994 190 $ 122.7 $ 129.1 $ 6.4 5.2 1995 222 $ 138.8 $ 150.9 $ 12.1 8.7 1996 180 $ 103.0 $ 108.6 $ 5.6 5.4 20. In addition to the bias inherent in the results of NECA's average schedule formulas during the past five years, we have determined that NECA's linear spline model does not accurately reflect the sample data. First, these data do not demonstrate a sharp shift in slope that would support the selection of an abrupt inflection point characteristic of NECA's linear spline model. Second, even if NECA's use of a linear spline model were reasonable, NECA's choice of an inflection point is not adequately supported by current data. NECA's failure to recalculate the inflection point based on more current data is likely to be a primary reason why NECA's linear spline model fails to accurately represent 1996 data. 21. Impact on Small Companies. We also affirm our decision to use a reciprocal model to compute the Common Line formula. Upon examination of the data, we found several different models, including the reciprocal model, that fit the data more closely than NECA's proposal. At the outset, we observe that any modification of the Common Line formula will change the amount of revenue received by individual companies. Such modifications are warranted, however, to ensure that the formulas used by NECA appropriately compensate average schedule companies. Park Region argues that the Bureau did not adequately consider the effect that the use of the reciprocal model would have on the settlements of individual average schedule companies. The Bureau staff did, in fact, analyze the effect that the modified formula would have on every average schedule company. We found that approximately half the 600 average schedule companies would have a higher settlement under the modification than they would using NECA's proposal. In fact, 85 percent of the average schedule companies with fewer than 1,000 lines per exchange (291 of 344 companies) would receive a higher settlement using the modified formula than they would receive if NECA's proposed formula were used. Of the companies receiving higher settlements using the modified formula, a high proportion were the smaller average schedule companies. The modified formula, therefore, has a positive impact on these smaller incumbent LECs. 22. Validity of the R2 statistic. Table 2 shows a comparison of the R2 statistics, which measure goodness of fit, for various models. NECA's linear spline model had the lowest R2 value and therefore was the poorest fit among these alternative models. The reciprocal model, which is the model selected by the Bureau, had the highest Rư value and therefore was the best fit. NECA argues in its petition that the Rư statistic used by the Bureau as a measure of goodness of fit is not valid when the residuals do not conform to a normal distribution. We reject that argument. The passage from the Kmenta text cited by NECA to support its challenge regarding R2 statistics does not discuss R2 analysis. In fact, the Kmenta text supports the Bureau's use of linear regression analysis with least squares criterion, stating that such analyses produce the most reliable unbiased estimators in the presence of non-normal residuals. NECA also argues that, according to the Scheffe text, mathematically correct statistical inferences rely on the condition that residuals are distributed normally around zero. We reject that argument as irrelevant because no statistical inferences were involved in our choice of the Rư statistic as a measure of goodness of fit. Table 2 Comparison of Common Line Settlement Models ModelsFor a complete description of these models see For a description of the models see National Exchange Carrier Association, Inc., Memorandum Opinion and Order, AAD 97-2, DA 97-1114, released May 28, 1997, at Attachment 2. R2 NECA's Linear Spline 0.16 Bureau's Estimated Spline 0.19 Reciprocal 0.20 Log Reciprocal 0.17 23. Variance in Settlements over Time. NECA argues that, over time, use of the Bureau's modification will result in excessive variation or volatility in the interstate average schedule settlements for small average schedule companies. The basis for this volatility, according to NECA, is that the reciprocal model is more sensitive to the variation for small companies than the linear spline model. We find no basis for this argument. After careful analysis of the changes in estimated settlements over the last five years using the reciprocal model, we found no excessive variation for small average schedule companies. Changes in technology and cost structure for average schedule companies, however, may require that we consider other models over time. Our task is to ensure that, each year, the model used best simulates cost companies based upon analysis of the cost company data. We do not believe that selecting the optimal model for a given year will inevitably lead to excessive variation or volatility. For the current year, we found that a reciprocal model fits the sample data supplied by NECA better than the linear spline model filed by NECA. We do not expect significant volatility in the cost data that form the basis for the Common Line average schedule model, because these data are largely a function of embedded loop costs that do not typically increase or decrease significantly from year to year. 24. Inclusion of Erroneous Data Points. In addition to challenging which model more closely represents the data, NECA also argues that, in determining that the average schedule model should be modified, the Bureau used two data points that resulted from significant reporting errors. NECA argues that for one of the reported outliers it was unable to allocate costs correctly to Common Line because the company had incorrectly included costs from other operations. This reporting error should result in artificially inflated costs, implying that inclusion of this data point would result in an average schedule that is too high. Exclusion of this data point, however, results in an increased average schedule. For the other data point, NECA claims that this point is not usable because the company operates in two states, but reported data for only one state. Elsewhere, however, NECA reveals that it has complete company information for that carrier, thus establishing that it could have determined the costs of the company's operations in the second state. Furthermore, we agree with MCI's conclusion that the faulty data points had only a marginal effect on the intercept slope and R2 values of the Commission reciprocal model. Therefore, we conclude that both of these data points should be included in the sample set used to derive the formula. 25. Settlements and Cost Trends. NECA argues that its formula would produce a 2.4 percent increase in per-unit Common Line settlements, while the Bureau's modification would cause per-unit Common Line settlements to decline by 1.0 percent. According to NECA, this one percent decline is inconsistent with universal service fund data, which show that Common Line unit costs have increased each year from 1993 to 1996. 26. NECA's argument is misleading because it implies that the per-unit common line settlements received by average schedule companies have accurately tracked the estimated per- unit common line unit costs computed using simulated cost data. That has not, however, been the case. As Table 1 shows, over the past several years the average schedule formulas have produced results much higher than those derived using simulated cost data. This overstatement was particularly pronounced for last year's Common Line formula settlements, which exceeded the results from the sample by nearly nine percent. NECA, in citing a one percent decline using the Bureau's modification, compared last year's Common Line formula settlements and the level of settlements using the Bureau's modification. Given the significant overstatement of last year's Common Line formula settlements, the alleged "one percent decline" does not demonstrate that the Bureau's modification is unwarranted. 27. Sensitivity of the Model. NECA argues that our statistical analysis is unduly sensitive to a few data points of the smallest companies. We disagree. In fact, as shown by the Rư statistic, our analysis accurately reflects the sample data provided to the Commission by NECA. Nonetheless, we believe that NECA has identified a potential area of concern regarding the validity of the sample data upon which NECA bases its average schedule models. Specifically, the sample data may not contain information for a sufficient number of very small companies, and therefore the sample may not be an accurate representation of the entire group of such companies. Accordingly, we hereby direct NECA to work with the Bureau staff to develop a means of assuring that the sample data produced for design of future average schedule models will accurately reflect all sizes of average schedule companies, including those with very few lines. Should we determine that the use of sample data continues to be problematic, however, the Bureau will consider requiring the use of expense and investment data from all average schedule companies. 28. Notice. NECA and many commenters argue that the Bureau violated section 205 of the Communication's Act and section 553 of the Administrative Procedures Act by failing to provide notice of the required modifications to NECA's proposed Common Line formula. These assertions are without merit. 29. Section 553 of the Administrative Procedures Act is inapplicable because this proceeding to consider NECA's average schedule formulas is not a rulemaking. Consideration of the average schedule formulas is, instead, an intermediate step in the development of NECA's interstate access tariff process. Under Section 69.606(a) of the Commission's rules, the computation of average schedule payments is made in accordance with formulas approved or modified by the Commission. Once the average schedule formulas are approved or modified, they serve as a basis for NECA's computation of interstate access rates and subsequent filing of interstate tariffs with the Commission, in accordance with sections 201 through 203 of the Communications Act. 30. The tariffs are filed with the Commission prior to the date upon which they become effective and, as required by section 61.38 of the Commission's rules, they must be accompanied by all required cost support information, including the average schedule formulas. Section 61.58 of the Commission's rules prescribes a notice period before the tariffs become effective. During this notice period, all interested parties have an opportunity to review the tariffs and the supporting documentation, including the average schedule formulas. Such parties have an opportunity to petition the Commission to reject or to suspend and investigate any tariff provision they believe to be unjustly discriminatory or otherwise unlawful. Once the tariff becomes effective, parties may challenge the lawfulness of any tariff provision pursuant to Section 208 of the Act by filing a complaint with the Commission. 31. In requiring modification of NECA's Common Line formula, we acted consistently with section 69.606 of the Commission's rules governing average schedule formulas. Subsequently, on June 16, 1997, NECA filed the interstate tariffs and the requisite cost support information, including the modified average schedule formulas. We find that the notice period following NECA's tariff filing provided full notice of the modifications to the average schedule Common Line formula. Furthermore, we find that the tariff review process and the protection of Section 208 of the Act afforded interested parties full opportunity to challenge the modifications to that formula. We therefore reject as unfounded the assertion that no notice of such modification was given. B. Petition for Further Modification 32. NECA proposes minor modifications to the Traffic Sensitive Central Office, Special Access, Signalling System 7, Intertoll Dial Switching, Line Haul-Distance Sensitive, and Line-Haul Non-Distance Sensitive formulas. The effect of these changes on the revenue requirement for averages schedule companies is minimal. We have reviewed NECA's proposed changes to these formulas and find them consistent with the sample data and the Commission's recent universal service and access reform orders. We therefore approve them. For the following reasons, we do not approve NECA's proposed modifications to the Common Line or USF loop cost formulas. NECA's proposed modifications of these formulas would increase the average schedule companies' 1998 settlements by approximately $21 million. 33. Common Line Formula. We deny NECA's request to implement its proposed Common Line formula. In our May Order, we demonstrated that the Bureau's reciprocal model presented a better fit for the data than the linear spline model NECA developed for its Common Line formula. In its interim proposal, NECA again proposes a linear spline model. In this Order, we affirm that decision. We have analyzed NECA's proposed formula based on the new sample data submitted by NECA. Our analysis shows that the Rư, or goodness of fit index, obtained using NECA's proposed Common Line formula is less than the Rư obtained using the reciprocal model. Because this higher Rư indicates a better goodness of fit, the Bureau's reciprocal model more accurately represents carriers' costs. We therefore direct NECA to use the following reciprocal model: Settlement = $7.152430 x (Common Line access lines) + $725.252636 x (No. of exchanges) 34. High cost support. NECA seeks an increase of 173 percent in the USF support for average schedule companies in 1998, as compared to 1997, from $9.369 million to $25.607 million. NECA calculates this increase in the USF expense adjustment by changing the manner in which the sample average schedule company data is expanded to the total average schedule company population. However, in reviewing NECA's calculations, we find that NECA's actual costs per loop for its sample companies are generally less than the costs per loop derived from its proposed formula. According to individual company estimated costs per loop calculated by NECA, we find that 128 of the 195 sampled companies, or about two-thirds, have estimated costs per loop that are less than those derived from NECA's proposed formula. We expect any calculation of costs per loop from NECA's average schedule formula to reasonably approximate the actual costs per loop for the sampled companies. Furthermore, we find no justification for a substantial increase in high cost support payments to average schedule companies that NECA's proposed USF formula would produce. The Commission's policy of controlling growth in high cost support have been clearly established. The Joint Board recommended, and the Commission adopted, interim rules that limit the rate of growth of the USF to the rate of growth in the total number of working loops nationwide. Nationwide annual growth in loops over the past several years has been approximately 4 percent. As noted above, NECA seeks an increase in support of approximately 173 percent. NECA has offered no persuasive justification for treating growth in the support for average schedule companies differently than the Commission's rules that limit growth in the total high cost fund. We therefore find the $16 million dollar increase in high cost support payments to average schedule companies excessive and unsubstantiated. For these reasons, we direct NECA to continue using the USF average schedule formula that became effective July 1, 1997. V. CONCLUSION 35. We find, based on the record developed in response to NECA's Petition for Reconsideration, that NECA's linear spline model does not provide a more reliable basis for establishing the average schedule Common Line formula than the reciprocal model reflecting the modifications specified in the May Order. Specifically, we found fundamental flaws in NECA's method of evaluating sample cost data, which resulted in overstatement of NECA's simulated revenue requirements. The Bureau's reciprocal model, on the other hand, more accurately reflects the sample data provided to the Commission by NECA. As a result, carriers serving the smallest exchanges will receive adequate settlements to cover the higher projected costs of serving those exchanges. Finally, we find that NECA's assertions that the Bureau violated section 205 of the Communication's Act and section 553 of the Administrative Procedures Act by failing to provide notice of the required modifications to NECA's proposed Common Line formula are without merit. We conclude that the greater accuracy of the Bureau's model reinforces our decision directing NECA to modify its proposed Common Line formula calculations. We therefore affirm our prior Order. 36. In addition, we approve all of the average schedule formula adjustments proposed by NECA in its November 3 filing except those for Common Line formula and the USF Loop Cost formula. The formulas we herein approve shall become effective on January 1, 1998. We do not approve NECA's proposed formula changes for the Common Line and USF Loop Cost formulas. The USF Loop Cost formula that became effective on July 1, 1997 shall remain in effect. NECA shall use the Common Line formula specified in paragraph 34 above to become effective on January 1, 1998. VI. ORDERING CLAUSES 37. Accordingly, IT IS ORDERED, pursuant to Sections 0.91, 0.291 and 69.606 of the Commission's rules, 47 C.F.R 0.91, 0.291 and 69.606, 47 U.S.C.  154(i) and (j), 201, 202, 203, 205, 218 and 403, that NECA's Petition for Reconsideration IS DENIED. 38. IT IS FURTHER ORDERED, pursuant to Sections 0.91 and 0.291 of the Commission rules, 47 C.F.R.  0.91, 9.291, that the average schedule formulas proposed by the National Exchange Carriers Association, Inc. on November 3, 1997, for: Traffic Sensitive - Central Office; Special Access; Signalling System 7; Intertoll Dial Switching; Line Haul - Distance Sensitive; and Line-Haul Non-Distance Sensitive, SHALL BECOME EFFECTIVE January 1, 1998. 39. IT IS FURTHER ORDERED, pursuant to Sections 0.91 and 0.291 of the Commission rules, 47 C.F.R.  0.91, 9.291, that the average schedule formulas proposed by the National Exchange Carrier Association, Inc. for Common Line and, USF Loop Costs, ARE NOT APPROVED. 40. IT IS FURTHER ORDERED, pursuant to Sections 0.91 and 0.291 of the Commission rules, 47 C.F.R.  0.91, 9.291, that the average schedule formula that became effective on July 1, 1997 for USF Loop Costs, SHALL REMAIN IN EFFECT and that the Common Line formula specified in this Order SHALL BECOME EFFECTIVE on January 1, 1998. 41. IT IS FURTHER ORDERED, pursuant to Section 4(i) of the Communications Act of 1934, as Amended, 47 U.S.C.  154(i), and Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.  0.91, 0.291, that THIS ORDER IS EFFECTIVE UPON ITS RELEASE. 42. IT IS FURTHER ORDERED, that the National Exchange Carrier Association, Inc., SHALL FILE revised tariffed rates in accordance with this Order. For these purposes we will waiver Sections 61.58 and 61.59 of our rules, 47 C.F.R.  61.58, 61.59, to allow NECA to file its revised rates on 2-days notice, on a non-streamlined basis, on December 30, 1997, to become effective January 1, 1998, if it chooses to do so. NECA shall cite the DA number of this Order for its permission. FEDERAL COMMUNICATIONS COMMISSION A. Richard Metzger, Jr. Chief, Common Carrier Bureau APPENDIX