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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 97-2724 In the Matter of ) ) Tariffs Implementing ) CC Docket No. 97-250 Access Charge Reform ) ) Beehive Telephone Company ) CC Docket No. 97-249 Beehive Telephone, Inc. Nevada) Tariff F.C.C. No. 1 ) Transmittal No. 8 MEMORANDUM OPINION AND ORDER Adopted: December 30, 1997 Released: December 30, 1997 By the Chief, Common Carrier Bureau: I. INTRODUCTION 1. On May 16, 1997, the Commission released its Access Charge Reform Order, amending the Commission's access charge rules so that access charges better reflect the manner in which the costs underlying those charges are incurred. The reforms and rate restructurings mandated by that Order involve the most comprehensive changes to the Commission's system of interstate switched access charges since these tariffed charges first were introduced more than 10 years ago. Because many of the amended rules take effect January 1, 1998, the Commission directed incumbent local exchange carriers (LECs) to file implementing tariffs that would be effective on that date. As part of the tariff filings, LECs subject to price cap regulation were required to file summary material, known as tariff review plans (TRPs), to support the revisions to rates in their tariff filings. The TRPs partially fulfill the requirements of sections 61.41 through 61.49 of the Commission's rules. LECs were also required to file tariff revisions, effective January 1, 1998, to comply with: (a) the Commission's order concluding the 1997 Access Tariff Investigation; and (b) the Access Charge Reform Third Report and Order. In addition, revisions to the LECs' access charge tariffs were required to account for the implementation of the new universal service support mechanisms. 2. Price cap LECs filed TRPs on November 26, 1997, MCI and Sprint filed comments on the TRPs on December 10, 1997, AT&T filed comments on December 11, 1997, and LEC replies were filed December 17, 1997. LECs filed their tariff transmittals on December 17, 1997, with AT&T, MCI, Sprint, and TCG filing petitions to suspend and investigate on December 23, 1997, and LECs filing replies on December 29, 1997. We refer hereafter to all of the tariff transmittals filed by price cap LECs that are identified in Appendix A collectively as the Price Cap Access Charge Reform Tariffs. In this Memorandum Opinion and Order, we suspend for one day and set for investigation all of the rate changes contained in the Price Cap Access Charge Reform Tariffs. As discussed below, because of the close interrelationship between the many changes that LECs were required to implement in these tariff transmittals, it is not possible at this time to exclude from our investigation particular rate changes proposed by the LECs. In addition, we also suspend for one day and set for investigation the tariffs of Beehive Telephone Company and Puerto Rico Telephone Company, as discussed below. The Bureau will separately issue an order designating specific issues for investigation. II. DISCUSSION 3. We find that various issues raised by AT&T, MCI, Sprint, and TCG in support of their petitions to suspend and investigate the Price Cap Access Charge Reform Tariffs raise substantial questions of lawfulness that warrant investigation of these tariffs. These issues include, but are not limited to, the following: whether price cap LECs have provided adequate cost information to support their determinations of the amount of switching costs that is associated with line ports and trunk ports and that, consequently, should be reassigned from the Local Switching to the Common Line rate element; whether price cap LECs were correct in applying the percentage of switching costs associated with line ports to revenue requirement for purposes of calculating the exogenous adjustments to their price cap indices; whether certain price cap LECs have improperly failed to establish a flat-rated charge for multiplexers used between the tandem switch and the serving wire center; whether price cap LECs have properly removed SS7 and tandem trunk port costs from the transport interconnection charge (TIC); whether price cap LECs have correctly replaced 9,000 minutes of use with actual minutes of use for purposes of calculating the tandem switched transport rate and the TIC; whether price cap LECs have properly calculated the residual and facilities-based portions of the TIC; whether price cap LECs have correctly calculated trunking basket end-user revenues in determining exogenous adjustments to reflect contributions to the new Universal Service Fund; and whether price cap LECs correctly defined and calculated the number of non-primary residential lines. 4. In addition to the issues raised by petitioners, we have identified other issues that raise substantial questions of lawfulness that warrant investigation of price cap LECs' tariffs. These include, but are not limited to, the following: whether price cap LECs used an incorrect value for "g" in the common line formula; and whether price cap LECs are incorrectly assessing certain multiplexer charges on tandem-switching customers that take service pursuant to the unitary rate structure option. 5. The rate structure changes and exogenous adjustments required for price cap LECs by the Access Charge Reform Proceeding are extensive, complex, and interdependent. We are therefore unable at this time to limit our investigation to discrete rates or provisions of the price cap LECs' tariff filings. We will, accordingly, suspend all tariff revisions contained in the Price Cap Access Charge Reform Tariffs for one day and set these provisions for investigation. The specific issues that will be the subject of the investigation will be identified in an upcoming designation order and may include, but are not limited to, the issues identified in this Order. The designation order may also identify discrete issues that do not warrant further investigation. 6. Ameritech, BellSouth, GTOC and GSTC voluntarily filed their tariff revisions several weeks before the deadline for this tariff filing. These early filings permitted the resolution of certain issues affecting particular proposed rate changes so that an investigation of those issues is not necessary. Because, however, resolution of the remaining issues may require further revisions to those proposed rate changes, it is necessary to suspend their entire filings. 7. Due to the unusual nature and scope of these tariff filings, the rates that are the subject of this suspension order may be subject to a special, two-way adjustment at the conclusion of the investigation. In the Access Charge Reform Proceeding the Commission ordered a fundamental restructuring of incumbent LEC interstate switched access service offerings. As noted above, the tariff revisions required to implement this restructuring are far more extensive than any that the Commission has ordered since it first instituted its system of tariffed access charges. In addition, most of the changes affect multiple rate elements, price cap baskets and service categories. For example, the reassignment of non-traffic-sensitive costs associated with line ports from the local switching to the common line rate element has the effect of reducing charges for local switching while increasing common line charges. Thus, in many cases, if our investigation shows that a particular rate has been set too high, it may also show that another rate has been set lower than would have been permitted. The Commission's usual practice in proceedings under section 204(a) is to investigate rates subject to an accounting order, and to order refunds of overcharges where refunds are justified. Carriers are not ordinarily compensated if, at the conclusion of an investigation, they are allowed higher rates than were in effect during the investigation. Under these unusual circumstances, however, in which the Commission has ordered a massive restructuring of many interrelated rates, it may not be possible to achieve a fair balance of ratepayer and shareholder interests without also allowing LECs some measure of recoupment, where appropriate. The Commission has the authority under section 4(i) of the Communications Act of 1934, as amended, to allow such recoupment. 8. For these reasons, we hereby put customers on notice that the rates provided in the Price Cap Access Charge Reform Tariffs that are suspended for one day in this order are provisional rates. If these provisional rates are found at the conclusion of the investigation initiated by this Order to be below a just and reasonable level, we may allow carriers prospectively to charge higher rates for some elements to reflect the fact that they were charging less than would have been permitted for those elements during the pendency of the investigation. If these provisional rates are found at the conclusion of the investigation initiated by this Order to be above those permitted by our rules, and thus unreasonably high, we may require the LECs to make refunds to their customers. It is also possible that, in cases in which the same customer has paid charges that were found to be too high and charges that were found to be too low, refunds could be offset by amounts allowed for recoupment. 9. We find that Beehive Telephone Company's tariff filing provides insufficient documentation in support of its proposed rate changes, thereby raising substantial questions of lawfulness. We will therefore suspend Beehive Telephone Company's December 17, 1997 tariffs for one day and initiate an investigation into the lawfulness of the proposed tariff. 10. AT&T asserts that Puerto Rico Telephone Company's proposed revenue requirement for its host/remote central office equipment (COE) Category 4.3 investment and carrier cable and wire facilities (C&WF) Category 4 investment that is to be redistributed to the tandem switched termination and tandem switched facility rates is overstated. We find AT&T's petition raises substantial questions of lawfulness concerning Puerto Rico Telephone Company's host/remote revenue requirement. Because the rates in question are interrelated with other rate changes proposed by Puerto Rico Telephone Company, however, it is necessary to suspend the entirety of its tariff filing. We will therefore suspend Puerto Rico Telephone Company's tariff filings, Transmittal Numbers 24 and 25, for one day and initiate an investigation into the lawfulness of the proposed tariffs. III. EX PARTE REQUIREMENTS 11. This investigation will be conducted as a permit-but-disclose proceeding. Ex parte presentations are permitted, except during the Sunshine Agenda period, provided that they are disclosed as provided in the Commission's rules. IV. ORDERING CLAUSES 12. ACCORDINGLY, IT IS ORDERED that, pursuant to Section 204(a) of the Communications Act of 1934, as amended, 47 U.S.C.  204(a) and through the authority delegated pursuant to Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.  0.91 and 0.291, the tariff revisions filed by Aliant Communications Company, Ameritech Operating Companies, Bell Atlantic Operating Companies, BellSouth Telecommunications, Inc., Cincinnati Bell Telephone Company, Citizens Telecommunications Companies, Frontier Communications of Minnesota and Iowa, Frontier Telephone of Rochester, GTE Systems Telephone Companies, GTE Telephone Operating Companies, Nevada Bell, NYNEX Telephone Companies, Pacific Bell, Southern New England Telephone Company, Southwestern Bell Telephone Company, Sprint Local Telephone Companies, and U S West Communications, Inc., as detailed in Appendix A for price cap local exchange carriers, ARE SUSPENDED for one day and an investigation IS INSTITUTED. 13. IT IS FURTHER ORDERED that, pursuant to Sections 204(a) and 4(i) of the Communications Act of 1934, as amended, 47 U.S.C.  204(a), 154(i) and through the authority delegated pursuant to Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.  0.91 and 0.291, Aliant Communications Company, Ameritech Operating Companies, Bell Atlantic Operating Companies, BellSouth Telecommunications, Inc., Cincinnati Bell Telephone Company, Citizens Telecommunications Companies, Frontier Communications of Minnesota and Iowa, Frontier Telephone of Rochester, GTE Systems Telephone Companies, GTE Telephone Operating Companies, Nevada Bell, NYNEX Telephone Companies, Pacific Bell, Southern New England Telephone Company, Southwestern Bell Telephone Company, Sprint Local Telephone Companies, and U S West Communications, Inc. SHALL KEEP ACCURATE ACCOUNT of all amounts received that are associated with the rates that are subject to this investigation. 14. IT IS FURTHER ORDERED that, pursuant to Section 204(a) of the Communications Act of 1934, as amended, 47 U.S.C.  204(a) and through the authority delegated pursuant to Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.  0.91 and 0.291, the tariff revisions filed by Beehive Telephone Company ARE SUSPENDED for one day and an investigation IS INSTITUTED. 15. IT IS FURTHER ORDERED that, pursuant to Sections 204(a) and 4(i) of the Communications Act of 1934, as amended, 47 U.S.C.  204(a), 154(i) and through the authority delegated pursuant to Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.  0.91 and 0.291, Beehive Telephone Company SHALL KEEP ACCURATE ACCOUNT of all amounts received that are associated with the rates that are subject to this investigation. 16. IT IS FURTHER ORDERED that, pursuant to Section 204(a) of the Communications Act of 1934, as amended, 47 U.S.C.  204(a) and through the authority delegated pursuant to Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.  0.91 and 0.291, the tariff revisions filed by Puerto Rico Telephone Company, Transmittal Numbers 24 and 25, ARE SUSPENDED for one day and an investigation IS INSTITUTED. 17. IT IS FURTHER ORDERED that, pursuant to Sections 204(a) and 4(i) of the Communications Act of 1934, as amended, 47 U.S.C.  204(a), 154(i) and through the authority delegated pursuant to Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.  0.91 and 0.291, Puerto Rico Telephone Company SHALL KEEP ACCURATE ACCOUNT of all amounts received that are associated with the rates that are subject to this investigation. 18. IT IS FURTHER ORDERED that each local exchange carrier required to suspend its tariff revisions for one day pursuant to this Order, SHALL FILE a supplement advancing the currently scheduled effective date to December 31, 1997, and at the same time file a supplement reflecting the one day suspension to January 1, 1998. 19. IT IS FURTHER ORDERED that all local exchange carriers SHALL FILE these supplements no later than five business days from the release date of this Order. 20. IT IS FURTHER ORDERED that for this purpose, we waive Sections 61.58 and 61.59 of the Commission's rules, 47 C.F.R.  61.58, 61.59. Carriers should cite the "DA" number of the instant Order as the authority for this filing. 21. IT IS FURTHER ORDERED that the petitions to suspend and investigate or to reject the Access Charge Reform Tariffs identified in Appendix A of this Order ARE GRANTED to the extent indicated herein and otherwise ARE DENIED. FEDERAL COMMUNICATIONS COMMISSION A. Richard Metzger, Jr. Chief, Common Carrier Bureau APPENDIX A Filings made by Price Cap Carriers November 26, 1997 Ameritech Operating Companies Transmittal No. 1135 BellSouth Telecommunications, Inc. Transmittal No. 434 GTE System Telephone Companies Transmittal No. 226 GTE Telephone Operating Companies Transmittal No. 1123 Aliant Communications Company Tariff Review Plan Ameritech Operating Companies Tariff Review Plan Bell Atlantic Operating Companies Tariff Review Plan BellSouth Telecommunications, Inc. Tariff Review Plan Cincinnati Bell Telephone Company Tariff Review Plan Citizens Telecommunications Companies Tariff Review Plan Frontier Communications of Minnesota and Iowa Tariff Review Plan Frontier Telephone of Rochester Tariff Review Plan GTE System Telephone Companies Tariff Review Plan GTE Telephone Operating Companies Tariff Review Plan NYNEX Telephone Companies Tariff Review Plan Southern New England Telephone Company Tariff Review Plan Southwestern Bell Telephone Company Tariff Review Plan Sprint Local Telephone Companies Tariff Review Plan U S West Communications, Inc. Tariff Review Plan December 8, 1997 Nevada Bell Tariff Review Plan Pacific Bell Tariff Review Plan December 17, 1997 Aliant Communications Company Transmittal No. 10 Ameritech Operating Companies Transmittal No. 1136 Bell Atlantic Operating Companies Transmittal No. 1016 BellSouth Telecommunications, Inc. Transmittal No. 435 Cincinnati Bell Telephone Company Transmittal No. 712 Citizens Telecommunications Companies Transmittal No. 42 Frontier Communications of Minnesota and Iowa Transmittal No. 10 Frontier Telephone of Rochester Transmittal No. 2 GTE System Telephone Companies Transmittal No. 228 GTE Telephone Operating Companies Transmittal No. 1127 Nevada Bell Transmittal No. 232 NYNEX Telephone Companies Transmittal No. 477 Pacific Bell Transmittal No. 1959 Southern New England Telephone Company Transmittal No. 704 Southwestern Bell Telephone Company Transmittal No. 2678 Sprint Local Telephone Companies Transmittal No. 44 U S West Communications, Inc. Transmittal No. 884 December 19, 1997 Bell Atlantic Telephone Companies Transmittal No. 1017 Citizens Telecommunications Companies Transmittal No. 43 GTE System Telephone Companies Transmittal No. 230 GTE Telephone Operating Companies Transmittal No. 1128 Nevada Bell Transmittal No. 233 Southern New England Telephone Company Transmittal No. 705 Southwestern Bell Telephone Company Transmittal No. 2679 December 23, 1997 NYNEX Telephone Companies Amended Transmittal No. 477 U S West Communications, Inc. Transmittal No. 885 December 29, 1997 Bell Atlantic Telephone Companies Amended Transmittal No. 1016 December 30, 1997 Sprint Local Telephone Companies Transmittal No. 46 U S West Communications, Inc. Transmittal No. 886 Filings made by Rate of Return Carriers November 17, 1997 National Exchange Carrier Association Transmittal No. 776 December 17, 1997 ALLTEL Telephone Services Corporation Transmittal No. 58 All West - Utah Telephone Company Transmittal No. 4 Anchorage Telephone Utility Transmittal No. 96 Arkansas Telephone Company Transmittal No. 2 Bay Springs Telephone Company Transmittal No. 74 Beehive Telephone Company Transmittal No. 8 Bixby Telephone Company Transmittal No. 3 Century Telephone of Ohio, Inc. Transmittal No. 31 Century Telephone of Wisconsin, Inc. Transmittal No. 9 CFW Telephone Inc. Transmittal No. 5 Chariton Valley Telephone Corporation Transmittal No. 2 Chickamauga Telephone Corporation Transmittal No. 9 Chillcothe Telephone Company Transmittal No. 60 Contoocook Valley Telephone Company Transmittal No. 3 DeKalb Telephone Cooperative, Inc. Transmittal No. 2 Dunkirk and Fredonia Telephone Company Transmittal No. 24 Elkhart Telephone Company Transmittal No. 52 Etex Telephone Cooperative Transmittal No. 2 Fidelity/Bourbeuse Telephone Company Transmittal No. 42 Great Plains Communications, Inc. Transmittal No.70 GTC Telephone Company Transmittal No. 1 GVNW Inc/Management Transmittal No. 147 Harrisonville Telephone Company Transmittal No. 16 ICORE Transmittal No. 10 Illinois Consolidated Telephone Company Transmittal No. 96 John Staurulakis, Inc. (JSI) Transmittal No. 28 Lafourche Telephone Company Transmittal No. 23 Lexington Telephone Company Transmittal No. 4 Lufkin-Conroe Telephone Exchange, Inc. Transmittal No. 37 Merrimack County Telephone Company Transmittal No. 16 National Exchange Carrier Association Transmittal No. 779 National Exchange Carrier Association Transmittal No. 780 Ogden Telephone Company Transmittal No. 14 Puerto Rico Telephone Company Transmittal No. 24 Puerto Rico Telephone Company Transmittal No. 25 Roseville Telephone Company Transmittal No. 54 South Central Telephone Association Transmittal No. 2 Southern Kansas Telephone Company Transmittal No. 5 Telephone Utilities Exchange Carrier Association Transmittal No. 150 Townes Telecommunications Inc. Transmittal No. 6 Tri-County Telephone Association Transmittal No. 2 Union Telephone Company Transmittal No. 65 Virgin Islands Telephone Corporation Transmittal No. 36 Vista-United Telecommunications Transmittal No. 28 Winterhaven Telephone Company Transmittal No. 4 Wood County Telephone Company Transmittal No. 27 (Note: Rhinelander Telephone Company filed a letter stating that it had made all calculations and no rate changes were necessary). December 19, 1997 Century Telephone of Ohio, Inc. Transmittal No. 32 Roseville Telephone Company Transmittal No. 55 (Note: UTELCO, Inc. filed a letter stating that it had made all calculations and no rate changes were necessary). December 24, 1997 Alltel Communications Transmittal No. 59 City of Brookings Municipal Telephone Department Transmittal No. 10 December 29, 1997 Great Plains Communications filed a letter stating that its current Long Term Support will cease as of January 1, 1998 and it will begin to pay into the high-cost and low-income service universal funds. Its payments to the funds will be based on FCC-prescribed contribution factors. Therefore, no change in rates is required. December 30, 1997 National Exchange Carrier Association Transmittal No. 781 Taconic Telephone Company Transmittal No. 28 The following Equal Access Carriers did not file: Iowa Network Services; Kansas Network Access Division; Minnesota Independent Equal Access Corporation; and South Dakota Network, Inc. The following carriers were listed by AT&T in its Petition on Rate-of-Return LEC Tariff Filings as carriers that did not file. This chart explains where to find the filings of these carriers. Carrier Where to Find Carrier Filing South Canaan Telephone Company Files under ICORE Searsboro Telephone Company Files under ICORE Ronan Telephone Company Files under ICORE Rochester Telephone Company (IN) Files under ICORE Northwest Iowa Telephone Company Files under ICORE Fairbanks Municipal Utilities System Files under TUECA Cleveland County Telephone Company Files under NECA Prairie Grove Telephone Company Files under ICORE Vista-United Telecommunications Systems Filed Transmittal No. 28 on 12/17/97 MCTA, Inc. Files under Contoocook Telephone City of Brookings Municipal Telephone Department Filed Transmittal No. 10 on 12/24/97 Roanoke & Botetourt Telephone Company Files under NECA Price County Telephone Company Files under GVNW Inc. APPENDIX B Petitions The following parties filed petitions against the January 1, 1998 Tariff Filings. The names in parentheses are used for these parties throughout the Order. AT&T Corp. (AT&T) December 11, 1997 Petition and Comments December 23, 1997 Petition on Rate-of-Return LECs December 23, 1997 Petition MCI Telecommunications Corporation (MCI) December 10, 1997 Petition December 23, 1997 Petition Sprint Communications Company, L.P. (Sprint) December 23, 1997 Petition Teleport Communications Group Inc. (TCG) December 23, 1997 Petition Replies The following parties filed replies to the petitions. The date of the reply is December 29, 1997 unless otherwise stated. Aliant Communications Company (Aliant) ALLTEL Telephone Services Corporation All West Communications, Inc. -- Utah, Bay Springs Telephone Company, Inc., Bixby Telephone Company, Elkhart Telephone Company, and Lexington Telephone Company Ameritech Operating Companies (Ameritech) December 17, 1997 Reply December 29, 1997 Reply Arkansas Telephone Company, Inc. Beehive Telephone Company, Inc. Bell Atlantic Operating Companies (Bell Atlantic) BellSouth Telecommunications, Inc. (BellSouth) December 17, 1997 Reply December 29, 1997 Reply Century Telephone of Ohio, Inc. Century Telephone of Wisconsin, Inc. Cincinnati Bell Telephone Company (CBT) Citizens Telecommunications Companies (Citizens) City of Brookings Municipal Telephone Department Frontier Telephone Companies [Frontier Communications of Minnesota and Iowa, and Frontier Telephone of Rochester] (Frontier) GTE Telephone Operating Companies (GTOC) and GTE Systems Telephone Companies (GSTC) (collectively GTE) December 17, 1997 Reply December 29, 1997 Reply GVNW, Inc. ICORE, Inc. ITCs, Inc. Lafourche Telephone Company Merrimack County Telephone and Contoocook Valley Telephone Company, Inc. Puerto Rico Telephone Company Roseville Telephone Company Southern New England Telephone Company (SNET) Southwestern Bell Telephone Company (SWBT), Pacific Bell and Nevada Bell (the SBC Companies) Sprint Local Telephone Companies (Sprint LECs) U S West Communications, Inc. (U S West) Virgin Islands Telephone Corp.