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INTRODUCTION p>"(# 1 XcII. BACKGROUND p>"(# 4 XcIII. ANALYSIS p>"(# 6  X4XX` ` A.` ` Automated Reporting Management Information System Reports ` p>"(# 6 XX` ` X ` ` 1. Retaining ARMIS Reports 4301, 4305 and 4306 p>"(# 6  Xa 4XX` ` X ` ` 2. The Revised ARMIS Filing Dates p!(# 10  XJ!4XX` ` X ` ` 3. Revisions to the Part 43 ARMIS Reporting Requirements p"(# 14  X3"4XX` ` B.` ` Cost Allocation Manual Filings ` p"(# 21  X#4XX` ` C.` ` Inflation Adjustments ` p"(# 36  X$4XX` ` D.` ` Other Filings ` p"(# 45  X$4XX` ` X ` ` 1. Section 43.22 Quarterly Filings p"(# 45  X%4XX` ` X ` ` 2. Section 43.21 Annual Filings p"(# 48  X&4XX` ` E.` ` Carriers Subject to These Filing Requirements ` p"(# 52  X'4XX` ` F.` ` Other Matters ` p"(# 55 "(0*0*0*&"ԌXcIV. ATU'S PETITION AND PROPOSALS TO  INCREASE THE REPORT FILING THRESHOLDp"(# 56  X4XcV. FINAL REGULATORY FLEXIBILITY ANALYSIS p"(# 75  X4XcVI. PAPERWORK REDUCTION ACT p"(# 79 XcVII. ORDERING CLAUSES p"(# 80 XcAPPENDIX A p!(# A1 XX` ` List of Commenters in CC Docket No. 96193 ` p!(# A1 XX` ` List of Reply Commenters in CC Docket No. 96193 ` p!(# A1 XX` ` Petitions for Reconsideration in CC Docket No. 96193 ` p!(# A1 XcAPPENDIX B p!(# B1 XX` ` Final Rules ` p!(# B1 XX` ` X ` ` PART 32 -- UNIFORM SYSTEM OF ACCOUNTS ` `  FOR TELECOMMUNICATIONS COMPANIESp!(# B1  Xb4XX` ` X ` ` PART 43-- REPORTS OF COMMUNICATION COMMON CARRIERS ` `  AND CERTAIN AFFILIATESp!(# B2 XX` ` X ` ` PART 64--MISCELLANEOUS RULES RELATING ` `  TO COMMON CARRIERSp!(# B5  X'U  ŲI. INTRODUCTION   I. A. 1. a.(1)(a) i) a) 1. 1. 1. 1.(a)(i) 1) a)c  X41.` ` In the Telecommunications Act of 1996,(X yO:'ԍ Telecommunications Act of 1996, Pub. L. No. 104104, 110 Stat. 56 (1996) (1996 Act). The 1996 Act amended the Communications Act of 1934. Hereinafter, the Communications Act of 1934, as amended by the 1996 Act, will be referred to as "the Act."( Congress sought "to provide for a procompetitive, deregulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and  X|4services to all Americans by opening all telecommunications markets to competition."u| yO'ԍSee S. Conf. Rep. No. 104230, 104th Cong., 2d Sess. 1 (1996).u To further its goal of deregulation, Congress required the Commission to permit any incumbent local exchange carriersto file cost allocation manuals (CAMs) and Automated Reporting Management Information System (ARMIS) reports annually, to the extent such carrier is required to file such manuals or reports. Congress also directed the Commission to revise its" x0*%%JJ"  X4carrier classification and reporting requirement rules by adjusting references to carrier  X4revenues for inflation.V yOb'ԍ1996 Act,  402(b)(2)(B), (c).V  X4 2.` ` In this Report and Order (Order), we revise the rules governing carriers filing  X4CAMs and ARMIS reports so that these rules are in accord with the 1996 Act.X yO'ԍAdditionally, several parties used this opportunity to argue that the Commission should either eliminate the requirement for price cap local exchange carriers, particularly those carriers that have elected the nosharing option, to file CAMs or that the Commission should forbear from requiring CAM filings and ARMIS reports.  yO 'See BellSouth Comments at 24; Cincinnati Bell Comments at 7; Pacific Comments at 2; Bell Atlantic Reply at 1; BellSouth Reply at 12. We note, however, that these issues are beyond the scope of this proceeding and accordingly, will not be addressed here. Specifically, these rules (1) provide for a uniform filing date of April 1 for all ARMIS reports; (2) reduce the 60day notice period for a carrier to make changes to its CAM to 15 days; (3) make permanent our interim rules for measuring inflation, used to adjust the threshold revenue values in Part 43 and sections 32.11 and 64.903 of our rules; (4) permit carriers to file the section 43.22 interstate carrier quarterly report on an annual basis; and (5) eliminate the section 43.21(b) supplemental reporting requirement.  X 43.` ` This Order also addresses a Motion for Reconsideration filed by Anchorage Telephone Utility (ATU). On June 22, 1995, ATU filed a petition seeking a declaratory ruling that it is not required to file ARMIS reports or, in the alternative, a waiver of these filing requirements or rulemaking to amend our filing requirements. As discussed below, this  X4petition was denied to the extent that it made requests for declaratory ruling or waiver.d yO'ԍSee infra. paras. 5, 5661.d In its Petition for Reconsideration, ATU argues that we should require only incumbent local exchange carriers with more than 2% of the nation's access lines to comply with the CAM and ARMIS filing requirements. For the reasons expressed below, we retain the $107 million annual revenue threshold (adjusted annually for inflation) defining those incumbent local exchange carriers that must comply with CAM and ARMIS reporting and filing requirements. Nevertheless, because it has shown a substantial likelihood of individualized harm, we grant ATU a limited twoyear waiver of the ARMIS reporting requirements.  X' "` 0*%%JJ"Ԍ X'ZFII. BACKGROUND אc  X44.` ` On September 12, 1996, the Commission released an Order and Notice of  X4Proposed Rulemaking~X yO4'ԍImplementation of the Telecommunications Act of 1996: Reform of Filing Requirements and Carrier  yO'Classifications, Anchorage Telephone Utility, Petition for Withdrawal of Cost Allocation Manual, Order and  yO'Notice of Proposed Rulemaking, CC Docket No. 96193, 11 FCC Rcd 11716 (1996).~ (the Order and Notice) modifying our rules as directed by the 1996 Act to require only annual ARMIS reports and annual cost allocation manual revisions. Furthermore, because the 1996 Act did not specify how we should measure inflation in adjusting annual revenue thresholds used to define (or identify) those incumbent local exchange carriers that must file these annual reports, we adopted interim rules that adjust  XJ4those thresholds for inflation using a generallyavailable inflation index.fJ yO 'ԍOrder and Notice, 11 FCC Rcd at 11722 para. 10.f The Order and  X54Notice sought comment on additional modifications to our rules, such as whether we should modify or eliminate the 60day advance notice requirement for cost allocation manual revisions as well as which permanent inflation measure we should incorporate into our rules  X 4pertaining to carrier classification and reporting requirements.] x yO'ԍId. at 11727 para. 21, 11729 para. 24.]  X 45.` ` In addition, the Order and Notice addressed a motion filed by ATU for  X 4permission to withdraw its CAM.T  yOh'ԍId. at 1172426 paras. 1619.T In its petition, ATU contended that because its operating revenues for 1995 were $107,823,490, it was not required to file a CAM with the  X4Commission for 1995.M  yO'ԍId. at 11724 para. 16.M ATU based this conclusion on the provision of the 1996 Act directing that we adjust the filing threshold for inflation, which ATU estimated would increase  XS4the threshold to "slightly more than $109 million." S(  yO,'ԍId., citing Letter from Paul J. Berman, Covington and Burling, to William F. Caton, Acting Secretary, FCC (Mar. 29, 1996). We denied ATU's motion primarily because ATU overestimated the new filing threshold after adjusting for inflation; the interim  X%4rules adopted in the Order and Notice increased the $100 million annual operating revenue  X4threshold for 1994 to $104 million and for 1995 to $107 million.f   yOA"'ԍOrder and Notice, 11 FCC Rcd at 11725 para. 18.f Because ATU's 1995" 0*%%JJ" operating revenue remained above the inflationadjusted threshold, we required ATU to file a  X4CAM with the Commission for 1995.P  yOb'ԍId. at 1172526 para. 19.P  X'l% 1III. ANALYSIS אcc  X' A.  Automated Reporting Management Information System Reports   X_' 1. Retaining ARMIS Reports 4301, 4305 and 4306  X14Background  X 46.` ` ARMIS is an automated system developed in 1987 for collecting financial and1  X 4operating information from certain carriers.X X yO'ԍ See ARMIS ORDERAutomated Reporting Requirements for Certain Class A and Tier 1 Telephone Companies (Parts 31,  yO'43, 67 and 69 of the FCC's Rules), CC Docket No. 86182, Report and Order, 2 FCC Rcd 5770 (1987) (ARMIS  yO'Order), modified on recon., Order on Reconsideration, 3 FCC Rcd 6375 (1988). Additional ARMIS reports were added in 1991 for the collection of service quality and network infrastructure information from local exchange carriers subject to our price cap regulations, in 1992 for the collection of statistical  X 4data formerly included in Form M, x yO'ԍThe Form M for local exchange companies, now discontinued, required the reporting of data now incorporated in the ARMIS 4302 and 4308 reports. and in 1995 for monitoring video dialtone investment,  X4expense and revenue data. yO'ԍ BUREAU ORDERPolicy and Rules Concerning Rates for Dominant Carriers, CC Docket No. 87313, Memorandum  yO'Opinion and Order, 6 FCC Rcd 2974 (Com. Car. Bur. 1991); BUREAU REVISIONRevision of ARMIS USOA Report (FCC Report  yO'4302) for Tier 1 Telephone Companies, AAD 9146, Memorandum Opinion and Order, 7 FCC Rcd 1083 (Com.  yOi'Car. Bur. 1992); Reporting Requirements on Video Dialtone Costs and Jurisdictional Separations for Local  yO1'Exchange Carriers Offering Video Dialtone Services, Memorandum Opinion and Order, 10 FCC Rcd 11292 (Com. Car. Bur. 1995). The video dialtone reporting requirement was effectively  Xy4eliminated by the 1996 Act.7yH  yOr'ԍ 1996 Act,  302(b)(3). See also Implementation of Section 302 of the Telecommunications Act of  yO:'1996, Open Video Systems, Report and Order and Notice of Proposed Rulemaking, CS Docket No. 9646, 61 FR  yO '10475, 10496, FCC 9699 (rel. Mar. 11, 1996); Second Report and Order, 61 FR 28698, FCC 96249 (rel. June  yO '3, 1996); Third Report and Order and Second Order on Reconsideration, 61 FR 43160, FCC 96334 (rel. August 8, 1996).7 Today, ARMIS consists of ten reports.rXXy yO"#'ԍ The ten ARMIS reports are: the Annual Summary Report (formerly referred to as the Quarterly Report) (4301); the USOA Report (4302); the Joint Cost Report (4303); the Access Report (4304); the Forecast Report (495A); the Actual Usage Report (495B); the Service Quality Report (formerly referred to as the"$0*%%$" Quarterly Service Quality Report) (4305); the Customer Satisfaction Report (formerly referred to as the SemiAnnual Service Quality Report) (4306); the Infrastructure Report (4307); and the Operating Data Report (4308).r"y0*%%JJ"Ԍ X4ԙ7.` ` Prior to the passage of the 1996 Act, seven of the ten ARMIS reports were filed on an annual basis. The exceptions were the ARMIS 4301 report, containing aggregate cost and revenue data for the previous calendar quarter, which was filed quarterly, the ARMIS 4305 report, containing service quality data for the previous calendar quarter, which was filed quarterly, and the ARMIS 4306 report, containing service quality data for the previous two calendar quarters, which was filed semiannually. As a result of the 1996 Act's mandate that "[t]he Commission shall permit any common carrier . . . to file . . . ARMIS reports  X_4annually,"O_ yO 'ԍ 1996 Act,  402(b)(2)(B).O we amended our rules to require carriers to file the quarterly and the semiannual  XH4reports only once each year.&Hx yOq'ԍOrder and Notice, 11 FCC at 11718 para. 4. In a separate proceeding, the Bureau authorized subject carriers to file the ARMIS Service Quality Report (4305) on an annual basis pursuant to section 402(b)(2)(B) of  yO'the 1996 Act. See Revision of Filing Requirements and Implementation of Section 402(b)(2)(B) of the  yO'Telecommunications Act of 1996: Annual ARMIS Reports, Order, CC Docket No. 9623, DA 96381 (Com. Car. Bur. rel. Mar. 20, 1996).& Noting that all but one of the annual ARMIS reports must be  X14filed on or before April 1,1(  yO 'ԍThe exception is ARMIS Report 4307 (the Infrastructure Report), which must be filed by June 30. we amended our rules to specify that carriers must now file the Annual Summary Report (4301) and the Customer Satisfaction Report (4306) on or before  X 4April 1.  yOl'ԍOrder and Notice, 11 FCC Rcd at 11718 para. 4. Although not specifically mentioned in the Notice, the  yO4'ARMIS 4305 report must also be filed by this date. See note 20, supra. Furthermore, t he Order and Notice directed the Common Carrier Bureau (Bureau)  X 4to make any changes to the form and content of these reports necessary to accommodate the  X 4change from quarterly and semiannual filings to annual filings.x  yO'ԍIn light of this directive, a number of parties suggest that we now modify several of our reporting requirements. Specifically, Ameritech and USTA states that several of the schedules contained in the ARMIS 4302 report should be eliminated. Ameritech Comments at 34; USTA Comments at 9. Moreover, Cincinnati Bell and USTA recommend that we allow Rate of Return and Optional Incentive Regulation carriers to file Form 492 [the rateofreturn monitoring report] on an annual basis. Cincinnati Bell Comments at 5; USTA Comments  yO'at 10. See also BellSouth Reply at 5. These issues are beyond the scope of this proceeding and accordingly will not be addressed here.  In this part of this Order," P0*%%JJ " we briefly address whether the 4301 and 4306 reports are now repetitive with other existing  X4ARMIS reports and no longer necessary under our modified rules.8(  yOb'ԍAlthough the Order and Notice did not, and was not required to, request comment on this issue, a number of parties expressed their relative positions. For the sake of completeness of the record, we briefly summarize these comments here. AT&T and MCI requested that the Commission clarify whether carriers will be required to report the same information in the new annual 4301 report as they had in the quarterly reports. MCI Comments at 2; AT&T Reply at 7. Specifically, AT&T and MCI argue that because the 1996 Act does not require the new annual ARMIS reports to contain only aggregate data for an entire year, carriers must continue to report cost and revenue data by quarter in order to provide the Commission with a consistent data series, thereby allowing  yO 'comparison of carrier operations with prior years. Id. Other parties, however, argue that the ARMIS 4301 report, when submitted annually, should contain only annual revenue data. Southwestern Bell Comments at 8; USTA Comments at 9. Accordingly, if this causes the 4301 report to become redundant with the 4303 and 43 yO '04 reports, it should be eliminated. Bell Atlantic Comments at 5; USTA Comments at 9. See also BellSouth Reply at 5.8  X4Discussion  X48.` ` Pursuant to the 1996 Act, subject carriers must be permitted to file the ARMIS 4301 and 4306 reports annually. Although nothing in the 1996 Act explicitly limits our  X_4ability to require the reporting of quarterly and semiannual data on an annual basis,M_  yO'ԍSee MCI Comments at 3.M we conclude that such a requirement is contrary to the intent of the Act. Compelling carriers to continue to report quarterly and semiannual data, albeit on an annual basis, would not decrease the regulatory burden on subject carriers and, therefore, would frustrate Congress's  X 4goal of "provid[ing] for a procompetitive, deregulatory national policy framework."O H  yO'ԍSee note 2, supra.O Therefore, we will now require that the ARMIS 4301 and 4306 reports contain only annual data.  X 49.` ` The ARMIS 4301 report, which will now be filed annually, contains highly aggregated cost and revenue data. The data presented in the ARMIS 4301 report is also presented in various levels of categorization and disaggregation among the ARMIS 4302, 4303 and 4304 reports. We conclude, however, that other interested parties and we will continue to find the ARMIS 4301 report a useful analysis tool because it is the only ARMIS report that provides a complete representation of reporting carriers' financial operating data beginning with the Part 32 Uniform System of Accounts and continuing through the Part 64 cost allocation, Part 36 jurisdictional separations, and the Part 69 access elements processes. We conclude that our interests are best served by continuing to require subject carriers to file the separate 4301 report. Likewise, the ARMIS 4306 report does not have an analogous"0*%%JJ" annual report. Prior to this proceeding, we did not require carriers to file any service quality data on an annual basis. Furthermore, the 4306 report is sufficiently different from the 4305 report so as to not be repetitive even when filed annually. For these reasons, we will continue to require subject carriers to file the Customer Satisfaction ARMIS report.  X' 2.` ` The Revised ARMIS Filing Dates   X_4Background  X14 10.` ` Pursuant to our rules, carriers must file the annual 4307 report by June 30 and  X 4the remainder of the ARMIS reports by April 1.~  yO 'ԍSee Order and Notice, 11 FCC Rcd 1171718 paras. 34.~ In the Order and Notice, we stated that we saw no reason for continuing our practice of having two different filing dates. Consequently, at paragraph 27, we proposed amending our rules to provide for a uniform filing deadline of  X 4April 1 for all ARMIS reports.M X yO'ԍId. at 11730 para. 27.M We invited comment on this proposal.  X 4Comments  X{4 11.` ` Most commenters oppose our suggestion to prescribe a uniform filing date for all ARMIS reports. Ameritech contends that nothing in the 1996 Act requires that all ARMIS  XM4reports be due on the same date.IM yO'ԍAmeritech Comments at 3.I USTA and US West argue that the filing date for all ARMIS reports should not be consolidated because of the impact on the carriers' work  X4forces.]x yOH'ԍUSTA Comments at 8; US West Comments at 45.] USTA states that for many incumbent local exchange carriers, the same personnel and resources are devoted to the preparation of the ARMIS reports. Therefore, retaining different filing dates for various ARMIS reports allows for more efficient use of resources in  X4the planning, preparation, and filing of the reports. yO'ԍUSTA Comments at 9. See also Ameritech Comments at 3; Bell Atlantic Comments at 23; Pacific Comments at 4.  X4 12.` ` In response to our proposal to establish a uniform filing deadline, several  X4parties have suggested that we stagger the due dates of the ARMIS reports. `  yO#'ԍAmeritech Comments at 3; Bell Atlantic Comments at 3; Cincinnati Bell Comments at 45; USTA  yOn$'Comments at 89. See also BellSouth Reply at 5. According to" 0*%%JJ" Cincinnati Bell, this would: (1) increase planning and preparation time, allowing for greater efficiency and accuracy; (2) spread out the burden placed on small and midsize incumbent local exchange carriers that have limited resources; and (3) place less burden on the  X4Commission staff.Q! yO4'ԍCincinnati Bell Comments at 45.Q USTA proposes that the due date of ARMIS reports 4301, 4302, 4303, 4304, 495A and 495B remain April 1 but that the operational and infrastructure reports, i.e.,  X44305, 4306, 4307 and 4308, be due on July 1 of each year."X yO'ԍUSTA Comments at 89. See also Ameritech Comments at 3; BellSouth Reply at 5. Bell Atlantic suggests that we require the filing of all statistical ARMIS reports on June 30, while retaining the April 1  X_4date for the remainder of the reports.M#_ yO 'ԍBell Atlantic Comments at 3.M Southwestern Bell agrees with the proposal to change to a uniform April 1 filing date for the annual reports required by sections 43.21(a) and  X1443.21(d).Q$1x yOZ'ԍSouthwestern Bell Comments at 9.Q  X 4Discussion  X 4 13.` ` We find that, contrary to the assertions of some commenters, requiring a uniform filing date for all ARMIS reports would not place an unnecessary, heavy burden on  X 4subject carriers because the same personnel often prepare every ARMIS report.%  yO`'ԍSee Bell Atlantic Comments at 3, USTA Comments at 8, US West Comments at 4. Currently, nine of our ten ARMIS reports are due April 1 of each year. Requiring one more ARMIS report to be filed by that same date should not impose an onerous burden on  Xb4telecommunications carriers subject to the reporting requirements.& b yO'ԍWe note that the carriers' filing burden was not increased when the Order and Notice established April 1 as the filing date of the ARMIS 4301, 4305 and 4306 reports. Although these ARMIS reports were previously required to be filed more frequent than annually, one filing due date was April 1 in addition to other dates throughout the year. Moreover, there is a close relationship between the data reported in the ARMIS 4307 report with that contained in the 4308 report. For example, the 4308 report indicates the quantity of sheath and conductor  X4kilometers of a carrier's cable.'  yON!'ԍSheath kilometers refer to the actual length of the pipe that surrounds the cable. Conversely, conductor kilometers refer to the total length of all individual wires or cables inside the sheath. The 4307 report supplements this information by indicating the amount of this cable in use. Accordingly, these reports must be reviewed together in order to fully comprehend the volume of cable use. We have been presented with no tangible evidence to support the contention that it will be difficult or impossible for carriers to comply" '0*%%JJn"  X4with this filing requirement or that the requirement will be unreasonably burdensome.( yOy'ԍFor example, we have been presented with no cost study showing that a common filing date would significantly increase the costs of subject carriers. For these reasons, we adopt our tentative conclusion and establish a common due date of April 1 for all ARMIS reports.  X4   X' x3.` ` Revisions to the Part 43 ARMIS Reporting Requirements   Xv4Background  XH4 14.` ` In order to assist carriers with compliance, we proposed in the Order and  X34Notice to add to sectionx 43.21 of our rules a brief description of four annual ARMIS reports, which are not described in Part 43: the Service Quality Report (43-05); the Customer Satisfaction Report (43-06); the Infrastructure Report (43-07); and the Operating Data Report  X 4(43-08).f)  yO'ԍOrder and Notice, 11 FCC Rcd at 11731 para. 27.f At paragraph 28 of the Order and Notice, we invited commenters to file specific alternate rule proposals.  X 4Comments  X415.` ` Bell Atlantic argues that by specifying the detailed contents of the service quality reports in the proposed rules, we would unnecessarily limit the Bureau's future ability  XQ4to alter the information required by the report.O*Q yO'ԍBell Atlantic Comments at 45.O Instead, Bell Atlantic asserts, the rules should employ general language to facilitate the Bureau's ability to change the annual reports  X#4without initiating a new proceeding to modify the rules.:+#@ yO'ԍId.:  X416.` ` USTA proposes that we implement certain word changes for our proposed rules in sections 43.21(g) and (h). Specifically, USTA suggests that we modify 43.21(g) to specify that carriers must file the Service Quality Report by July 1 instead of our proposed date of  X4April 1.,  yO1!'ԍUSTA Comments at 10. See also BellSouth Reply at 5. Our proposed language read: "The report shall contain data from the previous calendar year on a study area basis including information on installation and  yO"'repair intervals, trunk blockage, switch downtime, and service quality complaints." See Order and Notice, Appendix C.  In addition, USTA suggests that we modify the second sentence in 43.21(g) to read: "[t]he report shall contain data relative to network measures of service quality, as" ,0*%%JJ" defined by the Common Carrier Bureau, from the previous calendar year on a study area  X4basis."Q- yOb'ԍUSTA Comments at 10.Q USTA also would have us delete our proposed reference to specific data that the report shall contain, i.e., installation and repair intervals, trunk blockage, switch downtime and service quality complaints.  X417.` ` Similarly, USTA suggests that we modify 43.21(h) to specify that carriers must  Xv4file the Customer Satisfaction Report by July 1 instead of our proposed date of April 1.F.vX yO 'ԍId.F Furthermore, USTA suggests that we modify the second sentence in 43.21(h) to read: "[t]he report shall contain data relative to customer measures of service quality, as defined by the  X14Common Carrier Bureau, from the previous calendar year on a study area basis."F/1 yO 'ԍId.F USTA would delete our proposed reference to specific data that the report shall contain, i.e., a summary customer satisfaction survey and information on transmission quality and dial tone response.  X 418.` ` Sprint maintains that the new proposed rules should be modified to cite the specific ARMIS report number that the carrier is to use and that adding clarity by indicating the specific form to be used would enable carriers to comply with the filing requirement in a  Xy4more efficient manner.H0yx yO'ԍSprint Comments at 34.H Bell Atlantic argues that Sprint's proposal should be denied because codifying the report numbers would make it more difficult to streamline the reporting  XK4requirements as competition evolves.J1K yO'ԍBell Atlantic Reply at 3.J USTA argues that there is no reason to add specific  X44report numbers to the Commission rules as suggested by Sprint.A24 yO}'ԍUSTA Reply at 5.A According to USTA, this would only eliminate the ability of the Commission to consolidate the reports except by  X4specific rulemaking.:3(  yO'ԍId.: " 30*%%JJ"Ԍ X4Discussion  X419.` ` As determined above, we now require a common filing date of April 1 for all  X4ARMIS reports.X4 yO4'ԍSee section III.A.2, supra.X Accordingly, we decline to adopt USTA's proposal to modify our proposed rules for 43.21(g) & (h) to reflect a report filing date of July 1. We do, however, adopt the suggestion of USTA to amend the last sentence in these rules to be less specific about the data to be filed. This will facilitate our ability to assure that the reporting requirements of these ARMIS reports continue to provide the information most helpful to our analysis of network and service quality. These rules, as adopted here, are found in Appendix B of this  X14Order.  X 420.` ` We adopt our proposal to add to our Part 43 rules a brief description of the four annual ARMIS reports not currently described in Part 43, namely, the Service Quality Reports (43-05 and 43-06), the Infrastructure Report (43-07) and the Operating Data Report (43-08). We conclude that such descriptions in our rules would facilitate the reporting by carriers, particularly those that may first pass the filing threshold in the future. We disagree with Sprint that this proceeding should add to each new rule a citation to the number of the corresponding ARMIS report that a carrier must file to comply with that rule. The Sprint proposal should be considered in a more comprehensive rulemaking at a later date in which we examine consolidation or even elimination of some of the ARMIS reports. The rules  X64changes adopted in this Order are found in Appendix B.  X ' B.Cost Allocation Manual Filings   X4Background  X421.` ` Prior to the passage of the 1996 Act, our rules required carriers to file quarterly  X4updates to their cost allocation manuals.5 X yO'ԍ Pursuant to section 64.903(a) and (b) of our rules, local exchange carriers with "annual operating revenues of $100 million or more" had to file cost allocation manuals with the Commission and "update [them] . . . at least quarterly," but changes to the cost apportionment table and to the description of time reporting procedures had to be filed at least 60 days before the carrier planned to implement the changes. Section 402(b)(2)(B) of the 1996 Act provides that "[t]he Commission shall permit any common carrier . . . to file cost allocation manuals . . .  Xi4annually, to the extent such carrier is required to file such manuals."N6i@ yOZ"'ԍ 1996 Act,  402(b)(2)(B).N Section 402(b)(2)(B) supersedes our requirement that cost allocation manuals be filed more frequently than  X;4annually. As a result, in the Order and Notice we amended Section 64.903(b) of our rules to"; 60*%%JJ"  X4permit carriers to update their cost allocation manuals annually, rather than quarterly.e7 yOy'ԍOrder and Notice, 11 FCC Rcd at 11719 para. 6.e  X4Carriers are now required to file their annual updates on the last working day of each year.@8X yO'ԍId.@  X422.` ` Section 64.903(b) of our rules requires subject carriers to file certain changes to their cost allocation manuals "at least 60 days before the carrier plans to implement the  X4changes."L9 yO& 'ԍ 47 C.F.R. 64.903(b).L This requirement applies to "changes to the cost apportionment table and to the  Xv4description of time reporting procedures."::vx yO 'ԍId.: At paragraph 21 of the Order and Notice, we proposed retaining the existing requirement for carriers to file proposed changes to their cost apportionment tables or proposed changes to their descriptions of time reporting procedures at least 60 days before such changes are implemented. Alternatively, we proposed eliminating opportunities for carriers to modify their cost allocation manuals between annual filings. This latter approach would require carriers to seek a waiver of our rules before implementing changes to their cost allocation manuals as filed. At paragraph 21, we invited comment on these proposed alternatives. In particular, we asked interested parties to discuss whether the proposed alternatives are consistent with section 402(b)(2)(B)'s mandate that we permit carriers to file CAMs on an annual basis.  X{4Comments  XM423.` ` AT&T, Cox and Sprint agree that the 60day notice provision should be  X64retained.m;6 yO'ԍSprint Comments at 2; AT&T Reply at 2; Cox Reply at 45. m AT&T states that the Commission specified this advance notice requirement precisely because of the need for review of changes to cost categories and allocation  X4mechanisms and employee time reporting prior to those changes becoming effective.A< yOQ'ԍAT&T Reply at 2.A According to AT&T, given the express prohibitions in the 1996 Act, it remains essential for  X4the Commission to review and approve cost allocation procedures before they take effect.@=(  yO!'ԍId. at 3.@ Cox and Sprint contend that the 60day notice provision enables the Commission to ensure that each carrier's CAM reflects the carrier's new ventures and changes in the carrier's" =0*%%JJ("  X4accounting for existing ventures.V> yOy'ԍSprint Comments at 2; Cox Reply at 5.V Sprint argues that the 60day notice requirement promotes the 1996 Act's deregulatory national policy framework, which is designed to accelerate  X4rapidly private sector deployment of advanced telecommunicationsF?X yO'ԍSprint Comments at 2.F and that section  X4402(b)(2)(B) does not explicitly require that the 60day notice period be eliminated.m@ yOT'ԍId. But see Southwestern Bell Reply at 2.m  X424.` ` Bell Atlantic, BellSouth and Southwestern Bell argue that the 60day notice requirement is contrary to the intent of the 1996 Act and should be eliminated because otherwise, incumbent local exchange carriers will be required to file revisions to their CAMs  XH4more frequently than on an annual basis. AHx yOq'ԍBell Atlantic Comments at 2; BellSouth Comments at 4; GTE Comments at 2; US West Comments at 3;  yO9'Southwestern Bell Comments at 2. See also USTA Comments at 6; Bell Atlantic Reply at 2.  Southwestern Bell contends that if the Commission continues requiring CAM changes on dates other than the date of the annual CAM filing, the burden of frequent CAM filings will be further increased, instead of being  X 4reduced as intended by the 1996 Act.|B  yO'ԍSouthwestern Bell Comments at 3. See also NYNEX Comments at 2.| US West argues that there is no evidence that the 60day waiting period for these types of amendments serves any useful purpose, and it should  X 4therefore be eliminated.GC `  yO'ԍUS West Comments at 4.G  X 425.` ` BellSouth, Cincinnati Bell, Puerto Rico Telephone and USTA contend that retaining the 60day notice period is contrary to the demands of a competitive market and  Xy4would place incumbent local exchange carriers at a competitive disadvantage.Dy  yO'ԍBellSouth Comments at 45; Cincinnati Bell Comments at 3; Puerto Rico Telephone Comments at 5; USTA Comments at 7. Puerto Rico Telephone states that during that twomonth period, major changes could easily occur that would make the proposed CAM changes, and more importantly, the underlying operating  X44changes, meaningless.UE4H  yO-!'ԍPuerto Rico Telephone Comments at 5.U Cincinnati Bell contends that the 60day notice requirement severely limits the speed at which a carrier may react to customer needs and places the carrier at a  X4competitive disadvantage when compared to a new competitor.OF yO$'ԍCincinnati Bell Comments at 3.O"hF0*%%JJ"Ԍ X4ԙ26.` ` BellSouth and Puerto Rico Telephone state that allowing carriers to update their CAMs and report all changes once a year, with no requirement to provide interim updates  X4when implementing changes, is most consistent with section 402(b)(2)(B).G yOK'ԍPuerto Rico Telephone Comments at 3; BellSouth Reply at 3. See also Southwestern Bell Comments at 45. Alternatively, Puerto Rico Telephone suggests that carriers be allowed to file and implement changes to  X4their CAMs simultaneously.WH  yOu'ԍPuerto Rico Telephone Comments at 34.W This alternative would strike a compromise between the deregulatory demands of section 402(b)(2)(B) and the Commission's need to track changes in the allocation of carriers' costs. Similarly, Bell Atlantic argues that the Commission should permit carriers to implement changes that require CAM amendments at any time between  XH4annual filings without obtaining waivers or filing formal CAM amendments in advance.MIH yO 'ԍBell Atlantic Comments at 2.M USTA states that the Commission should require that the CAM be updated on or before the last working day of the calendar year for all changes that were effective in that calendar  X 4year.kJ @ yO'ԍUSTA Comments at 7. See also USTA Reply at 5.k Under USTA's proposal, incumbent local exchange carriers could provide preliminary  X 4notification to the Commission staff of significant changes.:K  yOm'ԍId.:  X 427.` ` Several parties suggest that the Commission retain a CAM change notice filing  X 4requirement, but that it be reduced from 60 days.L `  yO'ԍAmeritech Comments at 2; Cincinnati Bell Comments at 4; NYNEX Comments at 23; Pacific Comments at 34. Pacific suggests that the notice period be  X4shortened to 15 days.M  yO'ԍPacific Comments at 34. Under Pacific's proposal, the Commission would list CAM filings in a proposed "CAM Revisions Public Reference Log," similar to the Tariff Transmittal Public Reference Log for tariffs. Parties would then report opposition to CAM changes within 10 calendar days of the publication of the CAM Revisions Public Reference Log; replies to oppositions would be due within 5 calendar days of the filing of oppositions. NYNEX recommends that streamlined CAM filings could be provided on 15 days notice prior to implementation, but with a 60day FCC Staff review period to  Xb4reject the CAM changes if warranted.GNbh yO{"'ԍNYNEX Comments at 23.G Cincinnati Bell proposes that the Commission reduce"bN0*%%JJ@" the notice period to no longer than seven days, which is consistent with the new standard  X4established in the Act for certain tariff changes to become effective.OO yOb'ԍCincinnati Bell Comments at 4.O  X428.` ` Bell Atlantic, BellSouth and Southwestern Bell suggest that the Commission replace the 60day procedure with an informal cooperative process, whereby an incumbent local exchange carrier, at the time it implements such changes, would informally notify the Commission of any cost apportionment and time reporting changes via a letter to the  X_4Accounting & Audits Division of the Bureau.P_X yOh 'ԍSouthwestern Bell Comments at 56; Bell Atlantic Reply at 3; BellSouth Reply at 34. See also Southwestern Bell Reply at 3. GTE proposes a similar informal process whereby the carriers keep the staff informed, the staff offers its advice, and these activities  X14lead to annual CAM submissions in a form that will satisfy the Commission's needs.CQ1 yO'ԍGTE Comments at 1.C  X 429.` ` All responding parties oppose our proposal to prohibit CAM changes except on an annual basis and to require incumbent local exchange carriers to seek a waiver of the rules  X 4before implementing any changes.vRX @ yO'ԍAmeritech Comments at 2; BellSouth Comments at 5; Cincinnati Bell Comments at 4; GTE Comments at 2; NYNEX Comments at 2; Pacific Comments at 2; Puerto Rico Telephone Comments at 4; Southwestern Bell  yOV'Comments at 67; Sprint Comments at 23; USTA Comments at 7. See also BellSouth Reply at 45.v NYNEX contends that prohibiting CAM changes except on an annual basis would appear to prevent carriers from introducing new nonregulated products or services except on an annual basis, thereby frustrating "rapid[ ] private sector deployment of advanced telecommunications and information technologies and services to all  Xy4Americans..."XSy`  yO'ԍNYNEX Comments at 2 (citation omitted).X Southwestern Bell opposes the Commission's alternative to allow incumbent local exchange carriers to seek a waiver of the rules before implementing CAM changes  XK4because waivers are rarely considered in a timely fashion.TK  yO'ԍSouthwestern Bell Comments at 67. See also Pacific Comments at 3. BellSouth contends that such a procedure is a waste of resources for both the carrier and the Commission and is inconsistent with section 402(b)(2)(B)'s requirement that carriers update their CAMs no more frequently  X4than annually.U  yO7"'ԍBellSouth Comments at 5. See also Ameritech Comments at 23; BellSouth Reply at 5. Ameritech argues that such a procedure would be more burdensome and costly than the existing rules, which would be inconsistent with the overall deregulatory thrust"U0*%%JJ"  X4of the 1996 Act.yV yOy'ԍAmeritech Comments at 23. See also Sprint Comments at 23.y Cincinnati Bell argues that the waiver process provided for under this  X4proposal is unduly burdensome, and unnecessarily restricts the introduction of new services.WX yO'ԍCincinnati Comments at 4. See also Puerto Rico Telephone Comments at 4.  X4USTA opposes the waiver process because it is time consuming.DX yOk'ԍUSTA Comments at 7.D  X4  Discussion  Xv430.` ` We find that a notice requirement is consistent with the 1996 Act. The formal  X_4amendment filings do not constitute CAMs; they are merely notice of CAM changes. We are unpersuaded by the argument of Bell Atlantic, BellSouth and Southwestern Bell that the 60day notice requirement is contrary to the intent of the 1996 Act because it requires incumbent local exchange carriers to file revisions to their CAMs more than once a year. Carriers must submit notice only if they choose to amend or modify an existing CAM. If a carrier decides neither to offer a new product or service nor to change its existing accounting or time reporting systems, it has no duty to provide notice. For this reason, we conclude that the advance notice requirement is consistent with the intent of the 1996 Act.  X431.` ` We decline to adopt our alternate proposal to prohibit CAM changes unless waiver is first obtained. We agree with the commenting parties that such a proposal would be unduly burdensome to incumbent local exchange carriers. The commenters have persuaded us that this alternate proposal would create unnecessary regulation and potentially slow the process by which incumbent local exchange carriers can offer new products and services.  X432.` ` The purpose of the Commission's 60day notice requirement is to ensure that each carrier's cost allocation and time reporting procedures reflect the carrier's current accounting practices and to give the Bureau and third parties an adequate period to review CAM changes and offer comments. Despite recent and expected changes in the industry due  X4to increased competition, this purpose remains valid.Yx yO'ԍ TSAFE NOTICEhe 1996 Act prohibits the Bell operating companies, or, in some cases, all incumbent local exchange carriers, from using their telephone exchange service and exchange access operations to subsidize their  yOc 'competitive ventures. See, e.g., 47 U.S.C. 254(k), 260(a)(1), 272(b)(5), 272(c)(2), 274(b)(4), 275(b)(2), and  yO+!'276(a)(1). As we explained in the Accounting Safeguards Order, we believe that Congress's primary intent in  yO!'prohibiting this subsidization was to protect subscribers to regulated services from increased rates. Accounting  yO"'Safeguards Under the Telecommunications Act of 1996, Report and Order, CC Docket No. 96150, FCC 96490,  yO#'paras. 2425 (rel. Dec. 24, 1996). We developed our cost allocation rules to help ensure that interstate ratepayers  yOK$'do not bear the costs and risks of nonregulated activities. See, e.g. Separation of Costs of Regulated Telephone  yO%'Service from Costs of Nonregulated Activities, Report and Order, CC Docket No. 86111, 2 FCC Rcd 1298 para."%X0*%%%"  yO'1, modified on recon., 2 FCC Rcd 6283 (1987), modified on further recon., 3 FCC Rcd 6701 (1988), aff'd sub  yOX'nom. Southwestern Bell Corp. v. FCC, 896 F.2d 1378 (D.C. Cir. 1990). Because a carrier's cost allocation manual describes how it separates the costs of regulated from those of nonregulated activities, it must be updated to reflect modifications to its nonregulated service offerings. Moreover, pursuant to Sections 201205 of the Act, the Commission has a continuing obligation to ensure just, reasonable and nondiscriminatory rates. The reporting requirements at issue here facilitate compliance with these sections.  Accordingly, we adopt our proposal to"@Y0*%%JJ" retain a notice period for a carrier to make changes to its CAM. We conclude, however, that we should shorten the notice period.  X4 33.` ` As several parties have commented, retaining the 60day period would place incumbent local exchange carriers at a competitive disadvantage. A lengthy notice period such as 60 days provides nonincumbent local exchange carriers with the knowledge of when incumbent local exchange carriers intend to introduce a new product or service, and with the time to respond accordingly. Therefore, after carefully considering the arguments of the parties, we have decided to shorten the notice period to 15 days. We believe that a 15day period balances the interest of incumbent local exchange carriers in maintaining the ability to make rapid changes to their CAMs with the public interest in reviewing proposed changes prior to implementation. A 15day notice period will provide the Bureau with sufficient time to determine whether further information is required to facilitate its review process and, if necessary, to issue a temporary stay until the carrier submits additional information concerning the proposed changes.  X4 !34.` ` We also reject the proposal of Bell Atlantic, BellSouth and Southwestern Bell to replace the 60day procedure with an informal cooperative process. As noted above, there remains a valid purpose in requiring incumbent local exchange carriers to report changes to their cost allocation and time reporting procedures prior to implementation. Giving carriers the option of providing this information would undermine our ability to review such changes.  X4"35.` ` We therefore retain the notice period requirement for CAM changes, but shorten it to 15 days. The 15day period will begin to run upon receipt of the proposed CAM change filing by both the Office of the Secretary and the Common Carrier Bureau. Accordingly, carriers with annual revenues exceeding the threshold are required to serve proposed CAM changes on both the Office of the Secretary and the Bureau. Proposed CAM changes will be available for public comment immediately upon receipt by the Commission. Moreover, we retain the right to direct carriers to reverse CAM changes at any time, even after the 15day notice period has concluded. "N@Y0*%%JJ"Ԍ X' C.Inflation Adjustments   X4Background  X4#36.` ` Section 402(c) of the 1996 Act mandates that we "adjust the revenue requirements" of sections 32.11, 64.903, and Part 43 of our rules "to account for inflation as of the release date of the Commission's Report and Order in CC Docket No. 91141, and  X_4annually thereafter."HZ_ yO'ԍ 1996 Act,  402(c).H Prior to the passage of the 1996 Act, our rules established a $100 million threshold in "annual revenues from regulated telecommunications operations" for the  X14purpose of classifying carriers for accounting purposes.F[1X yO: 'ԍ47 C.F.R. 32.11.F In addition, section 64.903(a) of our rules required incumbent local exchange carriers with "annual operating revenues of $100 million or more" to file cost allocation manuals describing how they allocate costs between  X 4regulated and nonregulated activities]\  yO'ԍ GTE ORDERId. 64.903(a).] and imposing annual audit obligations on those  X 4incumbent local exchange carriers that must file a cost allocation manual.\] x yO'ԍCAM AUDITId. 64.904(a).\ Similarly, Part 43 of our rules required that "carriers having annual operating revenues in excess of $100  X 4million" shall file certain reports with the Commission.I^  yO`'ԍId.  43.21(a).I  Xy4$37.` ` The 1996 Act is silent with respect to the method we should use to adjust the  Xb4thresholds for inflation. In the Order and Notice, we adopted interim rules to adjust those thresholds for inflation using a generally available inflation index, the Gross Domestic Product  X64Chaintype Price Index (GDPCPI).e_6 yO'ԍOrder and Notice 11 FCC Rcd at 11722 para. 10.e We chose to rely on GDPCPI rather than the Gross Domestic Product Price Index (GDPPI) because the Bureau of Economic Analysis of the Department of Commerce, which produces both indices, considers the GDPCPI to be a more  X4accurate measure of price changes.`(  yO 'ԍId., citing Improved Estimates of the National Income and Product Accounts for 195995: Results of  yO!'the Comprehensive Revision, Survey of Current Business, Jan/Feb. 1996, at 12, 1920. The GDPCPI utilizes  yOZ"'chaintype annualweighted indices to measure real output and prices. Id. As discussed in the Order and Notice, chaintype weighted indices represent an improvement over fixedweighted indices, such as the GDPPI, because they "eliminate distortions in the measurement of prices for periods beyond the base year that are found in fixed yO$'weighted indices." Order and Notice, 11 FCC Rcd at 11729 para. 24.  At paragraph 24 of the Order and Notice, we proposed"`0*%%JJw" making permanent these interim rules for measuring inflation. We also requested that commenters discuss alternative methods to measure inflation, such as an inflation index that is derived from a broad sample of economic sectors or designed to track relevant industry sectors.  X4%38.` ` We invited comment on how we should calculate the GDPCPI value for the specific date, October 19, 1992, and in particular, on the method we adopted for doing this in our interim rules. We proposed that we adjust our fixed, $100 million and $75 million  XH4thresholdsa H yO 'ԍPursuant to section 43.22(d), "[e]ach record carrier with operating revenues over $75 million for a calendar year shall file a letter showing selected income statement and balance sheet items for that year with the Common Carrier Bureau Chief." All other reporting and filing requirements are subject to the $100 million annual revenue threshold (adjusted annually for inflation). for inflation by multiplying the fixed threshold by the ratio of the value of the annual GDPCPI for the revenue year to the value of the GDPCPI on October 19, 1992. We  X 4invited comment on these proposals.fb  yO{'ԍOrder and Notice, 11 FCC Rcd at 11730 para. 25.f  X 4&39.` ` In the Order and Notice, we noted that revenue thresholds that are adjusted based on fourth quarter GDPCPI values for the revenue year could not be determined until the Department of Commerce releases those GDPCPI values in April of the following year. Consequently, we proposed amending our cost allocation manual filing requirements so that a carrier with operating revenues that equal or exceed the inflation adjusted threshold for the first time in that revenue year would file its initial cost allocation manual 90 days after our publication of the adjusted threshold for that year in the Federal Register. We proposed requiring such carriers to implement their initial annual cost allocation manual audit requirement in the calendar year following publication and to file the audit report on or before April 1 of the subsequent calendar year. We proposed amending our rules to require any carrier for which operating revenues first exceeded an adjusted threshold for a given year to begin filing reports required pursuant to Part 43 of our rules in the calendar year following  X4our publication of that adjusted threshold in the Federal Register.bcX@ yO'ԍFor example, a carrier that first exceeds the annual revenue threshold for the 1998 calendar year must first implement its CAM procedures and begin data collection in 2000 and file ARMIS reports by April 1, 2001, assuming that the adjusted threshold had been published in the Federal Register during 1999.b We invited comment on these proposals.  X4 Comments  Xg4'40.` ` We received limited comment on our proposed rules to account for inflation. Pacific supports the adoption of GDPCPI for both the interim and final rules to adjust the"P` c0*%%JJ4"  X4revenue thresholds pursuant to section 402(c) of the 1996 Act.pd yOy'ԍPacific Comments at 5. See also AT&T Reply at 89.p No party objected to the  X4proposals for adjusting for inflation presented in the Order and Notice.  X4Discussion  X4(41.` ` We adopt our proposed rules to account for inflation as presented in the Order  Xz4and Notice. First, we make permanent our interim rule calling for use of the GDPCPI to  Xe4adjust the filing reporting threshold. As explained in the Order and Notice, the GDPCPI  XP4reflects price changes in all sectors of the economy.fePX yOY 'ԍOrder and Notice, 11 FCC Rcd at 11721 para. 10.f We choose to rely on the GDPCPI rather than the GDPPI, because the Bureau of Economic Analysis of the Department of Commerce, which produces both indices, considers the GDPCPI a more accurate measure of  X 4price changes.Vf  yO'ԍSee note 96, supra.V  X 4)42.` ` Second, we make permanent our interim rules to adjust the revenue thresholds in our rules for inflation for the calendar year in which the revenues were recorded. We will adjust the revenue thresholds for inflation based on the annual average value of the Department of Commerce GDPCPI for the revenue year relative to the value of the GDPCPI on October 19, 1992. Thus, the inflation adjusted revenue thresholds for 1995, for example,  Xj4apply to revenues recorded during the year ending December 31, 1995.)gXjx yO'ԍBased upon our experience with the rules being adopted in this Report and Order, the Commission may revisit the determination of the indexed revenue threshold or perhaps the commencement date for adjusting the revenue threshold for inflation.)  X<4*43.` ` Third, we make permanent our interim rules to adjust the revenue thresholds for inflation by multiplying the fixed revenue thresholds in our rules by the ratio of the annual value of the GDPCPI in the revenue year to the October 19, 1992 GDPCPI value, and rounding the result to the nearest $1 million. For the purposes discussed here, we calculated  X4the value of the GDPCPI index on October 19, 1992 to be 100.69.oh yO) 'ԍSee Order and Notice, 11 FCC Rcd 11747 Appendix B.o In Appendix B of the  X4Order and Notice, we calculated the GDPCPI for 1993 as 102.6; for 1994 as 105.0; and for 1995 as 107.6 by using 1992 as our base year. We then created ratios between the annual GDPCPI figures and the GDPCPI as of October 19, 1992 as indicated above. These ratios were multiplied by the original $100 million revenue threshold to adjust for inflation. Accordingly, we calculated the inflationadjusted revenue threshold as $102 million for 1993;"o( h0*%%JJ" $104 million for 1994; and $107 million for 1995. We adopt these findings on a permanent basis and therefore raise the $100 million inflationadjusted revenue threshold to $102 million for 1993; to $104 million for 1994; and to $107 million for 1995.  X'  X4 +44.` ` Fourth, we adopt our proposal to amend our cost allocation manual filing requirements so that a carrier with operating revenues that equal or exceed the inflation adjusted threshold for the first time would file its initial cost allocation manual 90 days after our publication of the adjusted threshold for that year in the Federal Register. Such carriers will implement their initial annual cost allocation manual audit requirement in the next calendar year, and the audit report must be filed on or before April 1 of the following calendar year. Similarly, we adopt our proposal to amend our rules to require any incumbent local exchange carrier, for which operating revenues first exceeded an adjusted threshold for a given year, to begin data collection for ARMIS reports pursuant to Part 43 of our rules in the  X 4calendar year following our publication of that adjusted threshold in the Federal Register.  X '_D.Other Filings  Xy'1.` ` Section 43.22 Quarterly Filings   XK4Background  X4,45.` ` Section 402(b)(2)(B) of the 1996 Act provides that "[t]he Commission shall_ permit any common carrier . . . to file . . . ARMIS reports annually, to the extent such carrier  X4is required to file such . . . reports."Mi yOh'ԍ1996 Act,  402(b)(2)(B).M Section 43.22 of our rules, "Quarterly reports of  X4communication common carriers," requires filing of two reports.HjX yO'ԍ 47 C.F.R. 43.22.H One of these is an  X4ARMIS report for which we now require annual, rather than quarterly, filing.nk yOZ'ԍ See Order and Notice, 11 FCC Rcd 11718 para. 4.n Section 43.22 also requires a second quarterly report to be filed by "designated interstate carrier[s]" with annual operating revenues above a defined threshold (the Interstate Carrier Quarterly  X|4Report).Ql|x yO 'ԍ 47 C.F.R. 43.22(b).Q  XN4-46.` ` Although section 402(b)(2)(B) of the 1996 Act does not direct us to change the  X74filing requirements for the Interstate Carrier Quarterly Report, at paragraph 36 of the Order  X"4and Notice we proposed amending our rules to require that this report be filed annually, on or""l0*%%JJ" before April 1. Consequently, we directed the Common Carrier Bureau to make any changes to the form and content of this report necessary to accommodate the change from quarterly to  X4annual filing. We received no comment on this proposal.  X4Discussion  Xv4.47.` ` We adopt our proposal to permit carriers to file the Interstate Carrier Quarterly  X_4Report on an annual basis. This report must now be filed on or before each April 1. The annual filing of this report now corresponds with the annual filing requirement for all ARMIS  X14reports. The modified rule appears in Appendix B of this Order.  X ' 2.` ` Section 43.21 Annual Filings   X 4Background  X 4/48.` ` Section 43.21 of our rules requires communications common carriers that maintain separate "departments or divisions" for carrier operations and noncarrier activities to file separate annual supplemental reports that show how the consolidated report required  Xd4pursuant to subsection 43.21(a) has been developed.Kmd yO'ԍ Id. 43.21(b).K Previously, only AT&T, on behalf of its General and Long Lines divisions, submitted such supplemental reports. Neither AT&T nor the Bell Operating Companies currently operate pursuant to the "departments or divisions"  X4model contemplated in Section 43.21(b). At paragraph 38 of the Order and Notice, we tentatively concluded that section 43.21(b) should be deleted from our rules. We sought  X4comment on this tentative conclusion.  X4049.` ` The remaining annual reporting requirements of section 43.21 of our rules  X4require some reports to be filed by April 1 and others by March 31.nX yO'ԍ See id. 43.21(a), (d) (establishing filing dates of March 31); 43.21(e), (f) (establishing filing dates of April 1). At paragraph 39, we proposed changing the current March 31 filing date to April 1 for annual reports filed  X4pursuant to sections 43.21(a) and 43.21(d) of our rules.,oX yO'ԍThis proposal would not affect the filing date for annual report Forms 10K (or any superseding form) pursuant to Section 43.21(c), which will continue to be filed annually, not later than the date prescribed by the Securities and Exchange Commission., We invited comment on this proposal. "Ro0*%%JJ4"Ԍ X4Comments  X4150.` ` All responding parties support our proposal to eliminate the reporting requirement contained in section 43.21(b) that provides that supplemental information be submitted by carriers that maintained separate departments or divisions for carrier and  X4noncarrier operations.~p yO'ԍAmeritech Comments at 3; Southwestern Bell Comments at 9; USTA Comments at 9.~ Southwestern Bell concurs with our proposal to change the filing  Xv4date for the remaining section 43.21 annual reports to April 1.QqvX yO 'ԍSouthwestern Bell Comments at 9.Q  XH4Discussion  X 4251.` ` We adopt our proposals in the Order and Notice regarding section 43.21. First, we eliminate the section 43.21(b) supplemental report. As stated above, because no carrier currently files this report and we do not anticipate requiring a carrier to file this supplemental  X 4report in the foreseeable future, we believe this requirement is unnecessary. Second, we change the filing date for the remaining section 43.21 reports to April 1. In this way, we will coordinate the filing dates of the remaining section 43.21(b) reports with the Part 43 ARMIS reports.  X{' v  Xd'E.Carriers Subject to These Filing Requirements   X64Background  X4352.` ` In this section, we clarify which local exchange carriers will be subject to thev  X4modified filing requirements adopted in this Order. Under our current rules, local exchange  X4carriers with annual operating revenues of $107 million or more must file cost allocation  X4manuals[r yO^'ԍSee 47 C.F.R.  64.903(a), (b). [ and ARMIS reports[sx yO'ԍSee 47 C.F.R.  43.21, 43.22.[ with the Commission. Our rules do not differentiate between incumbent and nonincumbent local exchange carriers with regard to these filing  X4requirements because this distinction did not exist prior to the passage of the 1996 Act.t yOP!'ԍSee 47 U.S.C.  251(h) for a definition of "incumbent local exchange carrier." We now must address whether both incumbent and nonincumbent local exchange carriers are  Xi4subject to the CAM and ARMIS filing requirements. A number of parties, including AT&T and Teleport, request that we confirm that these new CAM and ARMIS filing requirements"Rt0*%%JJN"  X4will only apply to incumbent local exchange carriers.]u yOy'ԍTeleport Comments at 24; AT&T Reply at 8. ] AT&T and Teleport believe that the reporting requirements should not be imposed upon nonincumbent local exchange carriers  X4because they do not possess bottleneck facilities and thus have no ability to engage in unlawful crosssubsidization regardless of whether their annual company operating revenues  X4exceed the prescribed threshold.vX yO'ԍTeleport Comments at 4; AT&T Reply at 8. See also Teleport Reply at 2. Cox and Teleport state that if the Commission does contemplate imposing certain reporting requirements on competitive local exchange carriers, then it must initiate and complete a separate rulemaking to investigate such a course of  X_4action.w_ yO 'ԍTeleport Comments at 45. See also Cox Reply at 7; Teleport Reply at 3. Bell Atlantic, Southwestern Bell and USTA argue that our CAM and ARMIS filing requirements should apply to all local exchange carriers, including nonincumbent local  X14exchange carriers, once their revenues surpass the necessary threshold.x@1x yOZ'ԍBell Atlantic Reply at 4; Southwestern Bell Reply at 45; USTA Reply at 34. See also ATU Comments at 36. Specifically, Bell Atlantic argues that the Commission should apply the CAM and ARMIS reporting rules to all carriersnot just incumbent local exchange carriersso long as their revenues exceed the reporting threshold. Bell Atlantic Reply at 4. Southwestern Bell contends that the rules do not distinguish between incumbent local exchange carriers and nonincumbent local exchange carriers, and that nonincumbent local exchange carriers should therefore be subject to the same requirements as incumbent local exchange carriers. Southwestern Bell Reply at 45. USTA states that requiring only incumbent local exchange carriers to file CAMs and ARMIS reports is contrary to the development of fair competition. USTA Reply at 34.  X 4Discussion  X 4453.` ` We clarify that only incumbent local exchange carriers are subject to our CAM  X 4and ARMIS filing requirements once their revenues surpass the necessary threshold.y  yO'ԍSimilarly, nonincumbent local exchange carriers are not subject to the filing requirements established in  yO'section III.D. of this Order. The CAM and ARMIS reports enable us to monitor whether all costs have been properly allocated to regulated and nonregulated products and services. Our interest in verifying that costs have not been improperly allocated is not germane for any carrier that does not provide a  Xb4telecommunications service for which either the retail rates or the rate of return is regulated. azb yO 'ԍWe note that our decision not to require new, small local exchange carriers to comply with these filing and reporting requirements is consistent with Section 257 of the 1996 Telecommunications Act, 47 U.S.C.  257. That section requires, among other things, that the Commission eliminate market entry barriers for small  yOC#'businesses in the ownership and operation of telecommunications services and information services. Id. at   yO $'257(a). The Commission issued a Notice of Inquiry in May 1996 to begin implementing Section 257. See  yO$'Section 257 Proceeding to Identify and Eliminate Market Entry Barriers for Small Businesses, Notice of Inquiry,"$y0*%%$" GN Docket No. 96113, 11 FCC Rcd 6280 (1996). a"bXz0*%%JJ "Ԍ X4ԙ554.` ` We note that our decision here not to impose our filing requirements on nonincumbent local exchange carriers does not require a separate rulemaking proceeding. Generally, before promulgating a rule, an agency is required to publish general notice of its proposal in the Federal Register unless those subject to the rule are actually named and either  X4personally served or have actual notice.F{X yO'ԍ5 U.S.C.  553(b).F Section 553(b)(A) of the Administrative Procedures Act (APA), however, makes an exception to the general notice requirement for  Xv4"interpretative rules."J|v yO 'ԍId.  553(b)(A).J We find that our determination here that nonincumbent local exchange carriers are not subject to our CAM and ARMIS filing requirements is merely  XH4interpretative in nature.}Hx yOq'ԍAdmittedly, there is "no bright line that separates" interpretive and substantive rules. Friedrich v.  yO9'Secretary of Health, 894 F.2d 829, 834 (6th Cir.), cert. denied, 498 U.S. 817 (1990). The courts have ruled that "an interpretative rule simply states what the administrative agency thinks the statute means, and only reminds  yO'affected parties of existing duties." First National Bank of Lexington v. Sanders, 946 F.2d 1185, 1188 (6th Cir.  yO'1991), citing Friedrich v. Secretary of Health, 894 F.2d at 834. Our clarification that our filing requirements do not apply to nonincumbent local exchange carriers does not represent a change in an existing rule nor the adoption of a new rule, but merely explains our position on a subject about which our rules  X 4were previously silent.~  yOG'ԍ See Metropolitan School Dist. of Wayne Township v. Davila, 969 F.2d 485, 48992 (7th Cir. 1992) (holding that an expression of agency opinion on a subject never before considered may be interpretive when the  yO'agency's ruling does not constitute a change in policy); Southern California Edison Co. v. Federal Energy  yO'Regulatory Comm'n, 770 F.2d 779, 783 (9th Cir. 1985) (holding that "[i]nterpretative rules merely clarify or explain existing law or regulations" and go "to what the administrative officer thinks the statute or regulation means") (citations omitted).  As such, a separate rulemaking proceeding is not necessary.  X ' " P~0*%%JJu "Ԍ X'F.Other Matters   X4655.` ` In the Order and Notice, we stayed our Part 43 reporting requirements to the extent that they are currently imposed upon carriers that first crossed the revenue threshold in  X41996.  yO'ԍOrder and Notice, 11 FCC Rcd para. 15. Furthermore, in an earlier Memorandum Opinion and Order, the Bureau temporarily stayed the dates for filing of future ARMIS reports for those companies that had not  yO'begun to file ARMIS reports by June 30, 1995. Because this Order clarifies the criteria for filing ARMIS  yOw'reports, this stay is lifted. Memorandum and Order, 10 FCC Rcd 13470 (Com. Car. Bur. 1995). In addition, we stayed our rule requiring each carrier to file a CAM within 90 days of first reaching the operating revenue threshold to the extent that the rule would first apply to  X4a carrier because of its 1996 operating revenues.: yO3'ԍId.: Because this Order establishes permanent rules for adjusting the revenue thresholds for inflation, these stays are lifted. In accordance  X4with the rules established in this Order, once the revenue threshold for 1996 is published in  X4the Federal Register,@ yO 'ԍWe expect that the revenue threshold for 1996 will be published in or about April 1997. carriers with operating revenues exceeding the threshold for the first  Xz4time must begin compliance with our filing and reporting requirements as indicated herein."z yO'ԍIn another proceeding, the Bureau stayed the filing of ARMIS reports for those companies that have not yet begun filing such reports, "pending issuance of an order clarifying the criteria for filing ARMIS reports."  yO'Memorandum Opinion and Order, 10 FCC Rcd 13470 (Com. Car. Bur. 1995). Because these criteria have been  {OS'clarified in this Order, this stay is lifted as well.  Xc4  XL'  IV. ATU'S PETITION AND PROPOSALS TO  X5' INCREASE THE REPORT FILING THRESHOLD אc  X 4Background  X 4756.` ` On June 22, 1995, ATU filed a "Petition for a Declaratory Ruling, or in the Alternative, for Waiver or Rule Making," requesting a determination that incumbent local exchange carriers with more than $100 million in annual operating revenues, but less than $100 million in annual revenues from regulated telecommunications operations, were not  X}4subject to our ARMIS filing requirements.}  yO'ԍ JUNE LETTERLetter from Paul J. Berman and Alane C. Weixel, Covington & Burling, to William F. Caton, Acting Secretary, FCC, at 45 (June 22, 1995). In support of its petition, ATU cited discrepancies between statements in previous Commission orders to the effect that only Tier 1 local exchange carriers were required to file such reports and Sections 43.22 and 43.21(f) of our rules requiring filing by local exchange carriers with annual operating revenues of $100  X!4million or more.[X@! yO"'ԍ See, e.g., id. at 58 (discussing Policy and Rules Concerning Rates for Dominant Carriers, CC Docket  yO#'No. 87313, Second Report and Order, 5 FCC Rcd 6786, 683334 paras. 381383 (1990), modified on recon.,  yOt$'Order on Reconsideration, 6 FCC Rcd 2637 (1991), aff'd sub nom. National Rural Telecom Ass'n v. FCC, 988"t$0*%%$" F.2d 174 (D.C. Cir. 1993); Elimination of FCC Form 901, Monthly Form Required from Telephone Companies,  yOX'CC Docket No. 87503, Report and Order, 3 FCC Rcd 6261 para. 1 & n.2 (1988); ARMIS Order, supra note 13  yO 'paras. 2425; Waiver of FCC Form 901, Monthly Form Required from Telephone Companies, Memorandum  yO'Opinion and Order, 3 FCC Rcd 567 (Com. Car. Bur. 1988)). For tariff review purposes, the term "Tier 1 local exchange carrier" has traditionally referred to a company having annual revenues from regulated operations of $100 million or more. For accounting purposes, the Commission uses the terms "Class A" and "Class B" companies as defined in section 32.11(a)(1) and (2) of the Commission's rules to differentiate between large and small carriers. 47 C.F.R.  32.11(a)(1), (2).["!0*%%JJ"Ԍ X4ԙ857.` ` At the same time, ATU also filed a "Petition for an Extension of Time" requesting an extension for the filing of its initial ARMIS 4301 report "until at least 90 days after the Commission resolves [its] Petition for Declaratory Ruling, or in the [A]lternative for  X4Waiver or Rule Making, filed [June 22, 1995]." yO< 'ԍ Letter from Paul J. Berman and Alane C. Weixel, Covington & Burling, to William F. Caton, Acting Secretary, FCC, at 45 (June 22, 1995) (regarding Extension of Time for FCC ARMIS Form 4301). On June 30, 1995, in response to ATU's filings and to requests from other incumbent local exchange carriers for clarification concerning the timing or applicability of our ARMIS report filing rules, the Bureau stayed the dates for the filing of future ARMIS reports for those carriers that had not yet begun filing  X_4such reports._(  yO8'ԍ DA 951488, Memorandum Opinion and Order, 10 FCC Rcd 13470 (Com. Car. Bur. 1995).  X14958.` ` In the Order and Notice, we explained that continuing to require ARMIS reports from those incumbent local exchange carriers for which annual operating revenues, both regulated and nonregulated, exceed a defined, inflationadjusted threshold is necessary to provide us with the financial and operating data we need to administer our accounting, cost allocation, jurisdictional separations, and access charge rules, and to preserve our ability to  X 4monitor industry developments and quantify the effects of alternative regulatory proposals.   yO)'ԍ ARMIS reports have been a valuable source of cost information to the Commission in its evaluation of tariffs filed under rateofreturn regulation. Cost information from these reports has also played an important role in tariff investigations, certain rulemakings concerning cost issues, and in the evaluation of exogenous cost adjustments under the price cap rules (for example, in determining the cost effects of property transfers). Otherwise, detection of improper subsidization of nonregulated services in violation of our cost allocation rules, a Commission responsibility explicitly imposed by the 1996 Act, would  X{4be impaired by a reporting requirement threshold based solely on regulated revenues.{ yO 'ԍFor a discussion of the accounting safeguards required by the 1996 Act, see Accounting Safeguards  yO!'Notice, supra note 87.  XM4:59.` ` Although we believed that our rules in this area were clearly stated, we decided "to reevaluate whether these reporting requirements should apply only to those incumbent"60*%%JJ" local exchange carriers for which annual revenues from regulated telecommunications  X4operations exceed a defined, inflationadjusted threshold."G yOb'ԍNotice para. 31.G We tentatively concluded that we should continue to require only those companies with annual operating revenues equal to or exceeding a defined, inflationadjusted threshold to file ARMIS reports. Accordingly, we granted ATU's petition for rulemaking to consider these issues, and dismissed ATU's petition to the extent that it makes alternative requests for declaratory ruling or waiver.  X_4;60.` ` On October 15, 1996, ATU filed a Petition for Reconsideration of the Commission's decision denying ATU's petition for declaratory ruling or waiver. Specifically, ATU argues that a "rational connection" between the Commission's analysis and the rules  X 4adopted is lacking.W X yO# 'ԍATU Petition for Reconsideration at 2.W ATU claims that the Commission's rules state that local exchange carriers with annual operating revenues of $100 million must file certain ARMIS reports, but the order adopting these rules does not provide any explanation for the $100 million  X 4threshold.B  yOn'ԍId. at 23.B Accordingly, it asserts, applying ARMIS reporting requirements to ATUa nonTier 1, nonClass A local exchange carrieris "arbitrary and capricious and contrary to the  X 4public interest."i x yO'ԍId. at 3. See also ALLTEL Reply at 2.i  Xy4<61.` ` Tier 1 local exchange carriers have been defined as "those companies having more than $100 million in total company regulated revenues, as determined by the 1984 Annual Statistical Volume II of the USTA Statistical Reports of Class A and B telephone  X44companies for the year 1983." 4 yO'ԍ Commission Requirements for Cost Support Material to Be Filed with 1990 Annual Access Tariffs,  yO'Order, 5 FCC Rcd 1364 para. 3 (Com. Car. Bur. 1990). See also Commission Requirements for Cost Support  yO}'Material to Be Filed with 1989 Annual Access Tariffs, Order, 4 FCC Rcd 1662, 1663 para. 10 (Com. Car. Bur.  yOE'1988); ARMIS Order, supra note ARMIS ORDER13, at 5844 n.4. The classification of carriers into "Tier 1" and "Tier 2" began in 1985 for the tariff review process. In the 1990 Tariff Review Plan, however, the definition of "Tier 1" was modified to equate "Tier 1" companies with "Class A" companies and "Tier 2" companies with "Class B" companies, as defined by section 32.11(a) and  X432.11(e) of our rules.  yOy"'ԍCommission Requirements for Cost Support Material to Be Filed with 1990 Annual Access Tariffs,  yOA#'Order, 5 FCC Rcd 1364 para. 4 (Com. Car. Bur. 1990). In the Order and Notice, we concluded that, by limiting ARMIS reporting requirements to Tier 1 local exchange carriers, we would impair our ability to collect financial and operating data reflecting the present structure of the telecommunications"H 0*%%JJ"  X4industry, including the widespread growth of nonregulated activities since 1983.Q yOy'ԍOrder and Notice para. 33.Q At paragraph 33, we tentatively concluded that we should continue to require ARMIS report filings by those carriers with annual operating revenues equal to or above a defined, inflationadjusted threshold. We invited comment on these tentative conclusions and, specifically, requested comment on alternative rule proposals.  Xv4Comments  XH4=62.` ` ATU argues that it should not be required to comply with our CAM and ARMIS reporting requirements because it "stands on the cusp" of the filing revenue threshold, as its operating revenues were $107,309,169 for 1994 and approximately $107,900,000 for  X 41995. X yO 'ԍATU Comments at 11. In section III.C., supra, we determine that the inflationadjusted revenue threshold was $104 million for 1994 and $107 million for 1995. Moreover, due to "impending competition in local exchange services and continued competition in deregulated services," ATU predicts that there is a reasonable likelihood that its revenues for 1996 or 1997 may fall below the required reporting, filing, and auditing  X 4threshold.D  yO'ԍATU Comments at 13.D For this reason, ATU fears that it will be required to incur the expense of learning how to prepare ARMIS reports and support a CAM audit for 1994 and 1995, only to find that any experience and expertise with these matters will not be necessary or useful in the  Xy4future.y@ yOj'ԍId. at 13. ATU estimates that these requirements would add approximately $500,000 annually in new  yO2'expenses starting as early as next year. See id. at 11. ATU contends that, because it accounts for only one tenth of 1% of access lines nationwide, there is little if any benefit from forcing ATU to comply with the ARMIS and  XK4CAM filing and auditing requirements.AK yO'ԍId. at 13.A  X4>63.` ` Because of these concerns, ATU proposes that the ARMIS reports and CAM filings and audits only be required for local exchange carriers with more than 2% of access  X4lines nationwide. (  yO 'ԍId. at 14. ATU bases its proposed 2% figure on the language of section 251(f) of the Act, which requires that incumbent local exchange carriers with less than two percent of access lines may petition for suspension or modification of the expanded interconnection, unbundling and other statutory requirements on  yO #'incumbents. Id. See also Cincinnati Bell Comments at 6; ALLTEL Reply at 34; Citizens Reply at 2. ATU argues that if the Commission adopts a reporting threshold based on access lines, all smaller local exchange carriers will be exempt from regulatory burdens that"0*%%JJT"  X4will inhibit their ability to compete.w yOy'ԍATU Reply at 1. See also Cincinnati Bell Comments at 67.w The premise of ATU's argument is that there cannot be a critical need for ARMIS and CAM information from carriers on the cusp of the Commission's reporting threshold. It adds that as competition increases, total operating revenues of incumbent local exchange carriers will likely decline. Thus, ATU argues, those carriers "on the cusp" of the reporting threshold may be required to prepare ARMIS and CAM filings some years and not others. ATU asserts that such fluctuating reporting requirements  Xv4will undermine the Commission's claim that information from these carriers is necessary.@vX yO 'ԍId. at 4.@  XH4?64.` ` Similarly, USTA argues that the Commission should "forbear from applying its CAM rules and ARMIS reporting requirements for those companies with less than [2%] of the  X 4[n]ation's subscriber lines installed in the aggregate nationwide."D  yO'ԍUSTA Comments at 4.D According to USTA, such an increased threshold would recognize that the nine largest local exchange carriers together provide approximately 90% of the access lines provided by local exchange carriers  X 4throughout the United States.: x yO'ԍId.: Moreover, "[g]iven the increase in competition, there is even  X 4less reason to require the CAM today for any [local exchange carrier]."@  yOw'ԍId. at 5.@ According to USTA, modifying the threshold to 2% of the access lines will promote competition by reducing any disparity in regulatory treatment among local exchange carriers and their  Xy4competitors.@y yO'ԍId. at 5.@  XK4@65.` ` GCI maintains that our CAM and ARMIS filing requirements must apply to  X44ATU and other similarlysituated carriers.@4(  yO 'ԍGCI Reply at 4.@ GCI asserts that these CAM and ARMIS requirements are imposed on carriers such as ATU to ensure that they do not use their monopoly local exchange business to crosssubsidize and support their competitive businesses. GCI adds that because "local exchange carriers such as ATU can enter the long distance business at any time, it is important that they meet the filing requirements for CAM and  X4ARMIS" outlined in the Order and Notice.:  yO*$'ԍId.: GCI further states that ATU's proposal for the Commission to impose its reporting requirements only on carriers with more than 2% of the"H 0*%%JJB" access lines is inconsistent with the intent of the 1996 Act because it specifically states that  X4the requirement for filing should be based on an inflation factor over the $100 million  X4threshold.H yOK'ԍId. at 45.H  X4A66.` ` Several commenters argue that the reporting threshold should remain based on  X4revenue, but be raised.X yO'ԍUSTA Comments at 5 n. 6; Southwestern Bell Reply at 7. But see ALLTEL Reply at 13 for a discussion of perceived fundamental defects in the revenue standard. USTA contends that the Commission could raise the threshold to  Xv4$250 million as an alternative to 2% of the access lines.Iv yO 'ԍUSTA Comments at 5 n. 6.I Southwestern Bell agrees, adding that the revenue threshold should be based only on the carrier's regulated revenues, which would minimize the burden of the Commission's filing requirements on those entities that  X14have made only relatively small entries into the local exchange market.N1@ yO"'ԍSouthwestern Bell Reply at 7.N  X 4B67.` ` AT&T argues that the Commission should not adopt USTA's proposals for  X 4revising the filing thresholds for CAM and ARMIS reports.E  yOm'ԍAT&T Reply at 56. E  X 4Discussion  X4C68.` ` In the Order and Notice, we tentatively concluded that our reporting requirements should continue to be based on total, and not solely regulated, operating  Xd4revenues.Qd`  yOu'ԍOrder and Notice para. 32.Q The purpose of our cost allocation rules is to ensure that costs associated with nonregulated operations are not shifted to ratepayers purchasing regulated services. Our cost allocation rules apply to carriers' total costs; therefore, it is appropriate that total costs be used to calculate the reporting requirement threshold. Accordingly, we will continue to require carriers to comply with our filing requirements once their total operating revenues surpass the applicable threshold level.  X4D69.` ` We do not agree that we should look to the language of section 251(f) of the Act when establishing a CAM and ARMIS filing threshold. Section 251(f) concerns the  X4process for local exchange carriers to petition for suspension or modification of certain obligations, including restrictions on resale of its telecommunications services, the duty to"~ 0*%%JJ" provide dialing parity to competitors, and the duty to provide interconnection at just, reasonable and nondiscriminatory rates. This section has no application to the CAM and  X4ARMIS filing threshold and therefore does not affect our decisions on this matter.J yOK'ԍSee GCI Reply at 5.J Moreover, we are unpersuaded that we should modify our threshold level by adopting a standard that reflects a percentage of the nation's access lines. Under such an approach, it would be necessary to determine the total number of access lines in use on an annual and expedited basis. Otherwise, carriers "on the cusp" of the access line filing threshold could not determine whether they are subject to our reporting requirements for a particular year.  XH4Moreover, in the past we have discovered discrepancies among carriers in interpreting the definition of "access line." Clearly, the simpler approach is to retain a standard based on  X 4operating revenue. X yO# 'ԍIn addition, there is insufficient notice in this proceeding to adopt a threshold based on access line use.  X 4E70.` ` We require some carriers to file CAMs and ARMIS reports to satisfy our interests in protecting ratepayers from improper cost allocations, and to ensure a base level of service quality. We established a filing threshold of $100 million because we found that for carriers with annual revenues at this level, the benefits of requiring compliance outweighed the burdens that compliance imposed upon them. We find again that, for carriers with annual revenues in excess of this threshold (adjusted for inflation), the benefits to ratepayers outweigh the costs to those carriers of requiring compliance with these reporting rules. Therefore, we retain our filing threshold of $100 million, as adjusted annually for inflation.  X4F71.` ` Given the conclusions we reach in this rulemaking proceeding, we find it appropriate to reexamine ATU's petition for waiver of its obligation to comply with ARMIS reporting requirements and to file with the Commission a CAM for the separation of costs of  X4its regulated and nonregulated activities. A petition for waiver of the Commission's rules  X4may be granted for good cause shown.u yOZ'ԍSee section 1.3 of the Commission's rules, 47 C.F.R.  1.3.u The Commission may exercise its discretion to waive a rule where particular facts would make strict compliance inconsistent with the public  X4interest.x yO'ԍNortheast Cellular Tel. Co. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990). The U.S. Court of Appeals for the D.C. Circuit has stated that waivers permit a more rigorous adherence to an effective regulation by allowing the agency to take into  Xe4account considerations of hardship, equity, or more effective implementation of overall policy on an individualized basis, while also emphasizing that "[a]n applicant for waiver faces a high  X74hurdle even at the starting gate."7 yO$'ԍWAIT Radio v. FCC, 418 F.2d 1153, 1157 (D.C. Cir. 1969), cert. denied, 409 U.S. 1027 (1972). In WAIT Radio, the court explained that "[t]he very"7!0*%%JJ+"  X4essence of a waiver is the assumed validity of the general rule . . . ."[ yOy'ԍWAIT Radio v. FCC, 418 F.2d at 1158.[ Given the validity of  X4the rule, the test identified in WAIT Radio requires the party seeking the waiver to demonstrate that the rule is unjust as applied to the party given the unique circumstances of  X4the situation.X yO'ԍSee Northeast Cellular Tel. Co. v. FCC, 897 F.2d at 1166, citing WAIT Radio v. FCC, 418 F.2d 1153.  yO'See also Industrial Broadcasting Co. v. FCC, 437 F.2d 680 (D.C. Cir. 1970). A waiver is thus appropriate only if special circumstances warrant a deviation from the general rule and such deviation will better serve the public interest than strict  X4adherence to the general rule.v yO 'ԍSee Northeast Cellular Tel. Co. v. FCC, 897 F.2d at 1166.v Therefore, the relevant test is whether petitioner has shown such special circumstances as individualized hardship or inequity that warrant deviation from our rule that incumbent local exchange carriers must comply with our reporting and filing requirements once their annual revenues surpass the adjusted threshold.  X 4G72.` ` We find that ATU's concern that it may be subject to our CAM and ARMIS reporting and filing requirements for only one year has some merit. The threshold was initially established at a level intended to determine clearly which carriers are subject to our reporting requirements. Currently, however, ATU's annual revenues barely exceed our filing and reporting threshold. Moreover, ATU has shown that there is a likelihood that its revenues will soon decrease once again to a level below the reporting and filing threshold. Under these unique circumstances, we find that there is good cause shown to waive ATU's compliance with our reporting requirements. The public interest will not be served by requiring ATU to incur substantial initial costs associated with training personnel and developing procedures designed to comply with our rules, when there is a likelihood that ATU will fall back below the reporting threshold within one or two years. We find that ATU has met its burden of showing special circumstances that warrant an exemption from our reporting and filing threshold by demonstrating that it would suffer individualized hardship should it be required to comply fully with our reporting and filing requirements for calendar years 1996 and 1997.  X4H73.` ` Neither the public interest generally nor the Commission's ARMIS reporting requirements will be undermined by a limited waiver granted to this one entity. This is especially true where that one entity, ATU, is the only one of which we are presently aware that is so close to the filing threshold, and the only one that has made a showing that it is likely to fall below the reporting requirement threshold in the coming year or two. We will limit the waiver grant to two years and will reevaluate whether the waiver should continue based upon review of ATU's 1997 annual revenues. "yL   "yL  If, however, ATU's 1997 revenues exceed the revenue threshold, as adjusted for inflation, then it must comply with the reporting requirements beginning in 1998. Finally, we believe the waiver demonstrates flexibility in" "@0*%%JJ" our regulatory approaches that advances the general deregulatory and procompetitive goals of the 1996 Act. Consequently, we grant ATU a limited twoyear waiver of our ARMIS reporting and filing requirements.  X4   X4I74.` ` We note, however, that the initial CAM filed by ATU has revealed that the  X4methodology it uses to allocate costs and record affiliate transactions is flawed.  yO'ԍSpecifically, ATU's treatment of certain nonregulated activities is not clearly stated. From the CAM, we are unable to determine whether certain nonregulated services are provided through ATU itself or through a separate affiliate. Moreover, several Part 32 accounts were inexplicably omitted from the CAM's cost apportionment tables. Although  Xv4only those carriers with annual revenues exceeding the threshold must file a CAM, the Joint  Xa4Cost Order requires that all incumbent local exchange carriers, regardless of annual revenue,  XL4must comply with our cost allocation and affiliate transaction rules.% L yO 'ԍSeparation of Costs of Regulated Telephone Service from Costs of Nonregulated Activities, Report and  yOu'Order, CC Docket No. 86111, 2 FCC Rcd 1298, 1304 para. 47 (1987) (Joint Cost Order), recon., 2 FCC Rcd  yO='6283 (1987) (Reconsideration Order), further recon., 3 FCC Rcd 6701 (1988) (Further Reconsideration Order),  yO'aff'd sub nom. Southwestern Bell Corp. v. FCC, 896 F. 2d 1378 (D.C. Cir. 1990).% We require incumbent local exchange carriers to file a CAM to verify that they are in compliance with these rules. We cannot ignore ATU's failure to observe our rules and therefore decline to waive our CAM filing requirement. Accordingly, we will require that ATU file a CAM reflecting accounting procedures that are in compliance with our cost allocation and affiliate transaction rules. We find that the CAM filing process is much less burdensome than the ARMIS reporting requirements. Moreover, we believe that ATU can correct the flaws in its initial CAM without great expense or difficulty. Therefore, ATU must file a revised CAM incorporating  X4the adjustments as discussed with Commission staff by April 30, 1997. yO'ԍOver the past several weeks, ATU has worked closely with Common Carrier Bureau staff towards correcting these problems. Six months after receiving final approval of its CAM, ATU must submit a report by an independent auditor attesting that ATU's cost system in place in the company reflects the company's CAM requirements.  X!' V. FINAL REGULATORY FLEXIBILITY CERTIFICATION    c  X4J75.` ` In the Order and Notice, the Commission certified that the proposed rules would  X4not have a significant economic impact on a substantial number of small entities.W r! yO"'ԍOrder and Notice para. 47.W No comments were received concerning the proposed certification. For the reasons stated below, we certify that the rules adopted herein will not have a significant economic impact on a substantial"# 0*%%JJ"  X4number of small entities.Fr! yOy'ԍ5 U.S.C.  605(b).F This certification conforms to the Regulatory Flexibility Act (RFA),  X4as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA).Xr! yO'ԍId.  601611. SBREFA was enacted as Subtitle II of the Contract With America Advancement Act of 1996 (CWAAA), Pub.L. No. 104121, 110 Stat. 847 (1996).  X4K76.` ` The Order and Notice certified that no regulatory flexibility analysis was required because the entities affected by the proposed rules were either large corporations, affiliates of  X4such corporations, or were dominant in their field of operations and therefore not small entities.Yr! yO 'ԍOrder and Notice para. 424.Y Section 32.2000(a)(4) "yL , however, "yL  applies to all carriers providing interstate services, some of  Xa4which may be small entities.a@r! yOR'ԍThe SBA defines small telecommunications entities as those having fewer than 1,500 employees. 15 C.F.R.  121.201 SIC Code 4813 (Telephone Communications, Except Radiotelephone). Although we consider small incumbent local exchange carriers to be dominant in their field of operations, we will include such companies in our regulatory  X34flexibility analysis. 3r! yO|'ԍSee Implementation of the Local Competition Provisions in the Telecommunications Act of 1996,  yOD'Report and Order, paras. 132830, CC Docket No. 9698, FCC 96325 (rel. Aug. 8, 1996).  Consequently, we cannot certify that no regulatory flexibility analysis is  X 4required for the reasons offered in the Order and Notice.  X 4L77. ` ` Nonetheless, we believe that we may still certify that no regulatory flexibility  X 4analysis is necessary here because we do not believe the rules adopted in this Order will have a significant economic impact on the carriers that must comply with our filing and reporting  X 4requirements. This Order adjusts our filing and reporting threshold for inflation and allows carriers to file ARMIS reports on an annual basis. As such, it prevents additional carriers from becoming subject to these filing and reporting requirements solely due to the cumulative effect of inflationary pressure. It also reduces the regulatory burden on those carriers that must comply with our ARMIS filing requirements by allowing these reports to be filed only once per year. Accordingly, we do not believe the rules adopted or modified herein will have a significant economic impact on a significant number of small entities. ` `  X4XX1cM78.` ` We therefore certify, pursuant to section 605(b) of the RFA, that the rules adopted in this Order do not have a significant economic impact on a substantial number of small entities.  X4The Commission will publish this certification in the Federal Register, and shall provide a copy"$ 0*%%JJ" of this certification to the Chief Counsel for Advocacy of the SBA. The Commission will also  X4include the certification in the report to Congress pursuant to the SBREFA.Mr! yOb'ԍId.  801(a)(1)(A).M  X4` `  X'"  VI. PAPERWORK REDUCTION ACT אc  X4N79.` ` The decision herein has been analyzed with respect to the Paperwork Reduction Act of 1995, Pub. L. 10413, and has been approved in accordance with the provisions of that Act. We have amended the existing rules only where we are certain that the existing rules will not fulfill the overall goals of the Communications Act of 1934, as amended by the Telecommunications Act of 1996. Second, in accordance with the overall policy underlying the 1996 Act, we will revisit these issues in the future to determine if our regulations are still  X 4necessary once competition increases.q  X '* VII. ORDERING CLAUSESא\  X 4 O80.` ` Accordingly, IT IS ORDERED that, pursuant to Sections 402(b)(2)(B) and 402(c) of the Telecommunications Act of 1996, Pub. L. No. 104104, and Sections 1, 4, 201205, 215, 218, 220 of the Communications Act of 1934, as amended, 47 U.S.C. 151(a), 154, 201205, 215, 218 and 220, and Section 553(b)(B) of the Administrative Procedure Act, 5 U.S.C. 553(b)(B), Parts 32, 43, and 64 of the Commission's rules, 47 C.F.R. Parts 32, 43, and 64 ARE AMENDED, as described in Part III, above.  X4P81.` ` IT IS FURTHER ORDERED that, pursuant to Sections 402(b)(2)(B) of the Telecommunications Act of 1996, Pub. L. No. 104104, and Sections 1, 4, 201205, 215, 218, 220 of the Communications Act of 1934, as amended, 47 U.S.C. 151(a), 154, 201205, 215, 218 and 220, the Petition for Reconsideration by Anchorage Telephone Utility IS DENIED.  v` `  FEDERAL COMMUNICATIONS COMMISSION  X 4` `  William F. Catonpp ` `  Acting Secretary  vŐ X' "%X0*%%JJt" aAPPENDIX A   X' List of Commenters in CC Docket No. 96193 א\ Ameritech Operating Companies (Ameritech) Anchorage Telephone Utility (ATU) Bell Atlantic Telephone Companies (Bell Atlantic) BellSouth Corporation and BellSouth Telecommunications, Inc. (BellSouth) Cincinnati Bell Telephone Company (Cincinnati Bell)  X14GTE Service Corporation and its affiliated domestic telephone operating, long distance and (#(#(#(#(#(#Xwireless companies (GTE)T$ MCI Telecommunications Corporation (MCI) NYNEX Telephone Companies (NYNEX) Pacific Bell and Nevada Bell (Pacific) Puerto Rico Telephone Company (Puerto Rico Telephone) Southwestern Bell Telephone Company (Southwestern Bell) Sprint Corporation (Sprint) Teleport Communications Group Inc. (Teleport) U S West, Inc. (US West) United States Telephone Association (USTA)  X'  List of Reply Commenters in CC Docket No. 96193 א\ ALLTEL Telephone Services Corporation (ALLTEL) ATU AT&T Corp. (AT&T) Bell Atlantic BellSouth Citizens Utilities Companies (Citizens) Cox Communications, Inc. (Cox) General Communication, Inc. (GCI) Southwestern Bell Teleport USTA  X',  Petitions for Reconsideration in CC Docket No. 96193 א\ ATU"!&0*''JJ"  X'a APPENDIX B   X'iFinal Rules  \ Parts 32, 43 and 64 of Title 47 of the Code of Federal Regulations (C.F.R.) are amended to read as follows:  X_'  PART 32 -- UNIFORM SYSTEM OF ACCOUNTS  XH'3 FOR TELECOMMUNICATIONS COMPANIES א\  X 41. The authority citation for Part 32 is revised to read as follows: AUTHORITY: Secs. 4(i), 4(j), and 220, as amended; 47 U.S.C. 154(i), 154(j) and 220; Telecommunications Act of 1996, Pub. L. No. 104104, sec. 402(c), 110 Stat. 56 (1996) unless otherwise noted.  Xy42. Section 32.11 is amended by revising paragraphs (a) (1) and (2) to read as follows :  XK'  32.11. Classification of companies.  X4(a) ` ` * * *  X4   X4` ` (1) Class A. Companies having annual revenues from regulated telecommunications operations that are equal to or above the indexed revenue threshold.  X4` ` (2) Class B. Companies having annual revenues from regulated telecommunications operations that are less than the indexed revenue threshold.  Xe4(b) ` ` * * *  X74(c) ` ` * * *  X 4(d) ` ` * * *  X4(e) ` ` * * *   X"43.Section 32.9000 is amended by adding the definition of "indexed revenue threshold for a given year" in alphabetical order to read as follows:  XQ%'  32.9000. Glossary of terms. ":&'0*''JJB$"Ԍ X4Indexed revenue threshold for a given year means $100 million, adjusted for inflation, as measured by the Department of Commerce Gross Domestic Product Chaintype Price Index ("GDPCPI"), for the period from October 19, 1992 to the given year. The indexed revenue threshold for a given year shall be determined by multiplying $100 million by the ratio of the annual value of the GDPCPI for the given year to the estimated seasonally adjusted GDPCPI on October 19, 1992. The indexed revenue threshold shall be rounded to the nearest $1 million. The seasonally adjusted GDPCPI on October 19, 1992 is determined to be 100.69.  XJ' PART 43-- REPORTS OF COMMUNICATION COMMON CARRIERS  X '$GAND CERTAIN AFFILIATES א\  X 41. The authority citation for Part 43 is revised to read as follows: AUTHORITY: Sec. 4, 48 Stat. 1066, as amended; 47 U.S.C. 154; Telecommunications Act of 1996, Pub. L. No. 104104, secs. 402(b)(2)(B), (c), 110 Stat. 56 (1996) unless otherwise noted. Interpret or apply secs. 211, 219, 220, 48 Stat. 1073, 1077, as amended; 47 U.S.C. 211, 219, 220.  XM42. Section 43.01 is amended by revising paragraph (b) and adding new paragraph (c) to read  X64as follows :  X'  43.01. Applicability.  X4(a) ` ` * * * (b) Except as provided in paragraph (c) of this section, carriers becoming subject to the provisions of the several sections of this part for the first time, shall, within thirty (30) days of becoming subject, file the required data as set forth in the various sections of the part. (c) Carriers becoming subject to the provisions of  43.21 and 43.43 for the first time, because their annual operating revenues equal or exceed the indexed revenue threshold for a given year, shall begin collecting data pursuant to such provisions in the calendar year following the publication of that indexed revenue threshold in the Federal Register. With respect to such initial filing of reports by any carrier, pursuant to the provisions of  43.21(d), (e), (f), (g), (h), (i), (j), and (k), the carrier is to begin filing data for the calendar year following the publication of that indexed revenue threshold in the Federal Register by April 1 of the second calendar year following publication of that indexed revenue threshold in the Federal Register.  Xj$43. Section 43.21 is amended by revising the first two sentences of paragraph (a), removing paragraph (b), revising paragraph (c), revising paragraph (d), revising the introductory text of"S%(0*''JJe#" paragraph (f), revising paragraph (g), redesignating paragraphs (c) through (g) as paragraphs (b)  X4through (f), and adding new paragraphs (g), (h), (i), (j), and (k) to read as follows :  X'  43.21. Annual reports of carriers and certain affiliates. (a) Communication common carriers having annual operating revenues in excess of the indexed revenue threshold, as defined in 32.9000, and certain companies (as indicated in paragraph (b) of this section) directly or indirectly controlling such carriers shall file with the Commission annual reports or an annual letter as provided in this section. Except as provided in paragraph (b) of this section, each annual report required by this section shall be filed no later than April 1 of each year, covering the preceding calendar year. *** (b) Each company, not itself a communication common carrier, that directly or indirectly controls any communication common carrier that has annual operating revenues equal to or above the indexed revenue threshold, as defined in 32.9000, shall file annually with the Commission, not later than the date prescribed by the Securities and Exchange Commission for its purposes, two complete copies of any annual report Forms 10K (or any superseding form) filed with that Commission. (c) Each miscellaneous common carrier (as defined by 21.2 of this chapter) with operating revenues for a calendar year in excess of the indexed revenue threshold, as defined in 32.9000, shall file with the Common Carrier Bureau Chief a letter showing its operating revenues for that year and the value of its total communications plant at the end of that year. This letter must be filed no later than April 1 of the following year. Those miscellaneous common carriers with annual operating revenues that equal or surpass the indexed revenue threshold for the first time may file the letter up to one month after publication of the adjusted revenue threshold in the Federal Register, but in no event shall such carriers be required to file the letter prior to April 1.  Xe4(d) ` ` * * * [Formerly 43.21(e)] (e) Each local exchange carrier with annual operating revenues equal to or above the indexed revenue threshold shall file, no later than April 1 of each year, reports showing:  X4` ` (1)  * * *  X 4` ` (2)  * * *  X"4` ` (3)  * * * (f) Each local exchange carrier with operating revenues for the preceding year that equal or exceed the indexed revenue threshold shall file, no later than April 1 of each year, a report showing for the previous calendar year its revenues, expenses, taxes, plant in service, other":&)0*''JJB$" investment and depreciation reserves, and such other data as are required by the Commission, on computer media prescribed by the Commission. The total operating results shall be allocated between regulated and nonregulated operations, and the regulated data shall be further divided into the following categories: State and interstate, and the interstate will be further divided into common line, traffic sensitive access, special access and nonaccess.  \(g) Each local exchange carrier for whom price cap regulation is mandatory and every local exchange carrier that elects to be covered by the price cap rules shall file, by April 1 of each year, a report designed to capture trends in service quality under price cap regulation. The report shall contain data relative to network measures of service quality, as defined by the Common Carrier Bureau, from the previous calendar year on a study area basis. (h) Each local exchange carrier for whom price cap regulation is mandatory shall file, by April 1 of each year, a report designed to capture trends in service quality under price cap regulation. The report shall contain data relative to customer measures of service quality, as defined by the Common Carrier Bureau, from the previous calendar year on a study area basis. (i) Each local exchange carrier for whom price cap regulation is mandatory shall file, by April 1 of each year, a report containing data from the previous calendar year on a study area basis that are designed to capture trends in telephone industry infrastructure development under price cap regulation. (j) Each local exchange carrier with annual operating revenues that equal or exceed the indexed revenue threshold shall file, no later than April 1 of each year, a report containing data from the previous calendar year on an operating company basis. Such report shall contain statistical data designed to monitor network growth, usage, and reliability. (k) Each designated interstate carrier with operating revenues for the preceding year that equal or exceed the indexed revenue threshold shall file, no later than April 1 of each year, a report showing for the previous calendar year its revenues, expenses, taxes, plant in service, other investment and depreciation reserves, and such other data as are required by the Commission, on computer media prescribed by the Commission. The total operating results shall be allocated between regulated and nonregulated operations, and the regulated data shall be further divided into the following categories: State and interstate, and the interstate will be further divided into common line, traffic sensitive access, special access, and nonaccess.  X!44. Section 43.22 is removed.   Xh$45. Paragraph (a) of section 43.43 is revised to read as follows:  X:&'  43.43 Reports of proposed changes in depreciation rates. ":&*0*''JJB$"Ԍ(a) Each communication common carrier with annual operating revenues that equal or exceed the indexed revenue threshold, as defined in 32.9000, and that has been found by this Commission to be a dominant carrier with respect to any communications service shall, before making any change in the depreciation rates applicable to its operated plant, file with the Commission a report furnishing the data described in the subsequent paragraphs of this section, and also comply with the other requirements thereof. Xv4  X_4(b) ` ` * * *  X14(c) ` ` * * *  X 4(d) ` ` * * *  X 4(e) ` ` * * *  X '  X 4 (f) ` ` * * * 9 PART 64--MISCELLANEOUS RULES RELATING  XK'.TO COMMON CARRIERS א\  X41. The authority citation for Part 64 is revised to read as follows: AUTHORITY: Sec. 4, 48 Stat. 1066, as amended; 47 U.S.C. 154; Telecommunications Act of 1996, Pub. L. No. 104104, secs. 402(b)(2)(B), (c), 110 Stat. 56 (1996) unless otherwise noted. Interpret or apply secs. 201, 218, 226, 228, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 201, 218, 226, 228 unless otherwise noted.   XN42. Section 64.903 is amended by revising the introductory text of paragraph (a) and  X74paragraph (b) to read as follows :  X '  64.903. Cost allocation manuals. (a) Each local exchange carrier with annual operating revenues that equal or exceed the indexed revenue threshold, as defined in 32.9000 of this chapter, shall file with the Commission within 90 days after the publication of that threshold in the Federal Register, a manual containing the following information regarding its allocation of costs between regulated and nonregulated activities: * * * \ (b) Each carrier shall ensure that the information contained in its cost allocation manual is accurate. Carriers must update their cost allocation manuals at least annually, except that changes":&+0*''JJB$" to the cost apportionment table and to the description of time reporting procedures must be filed at least 15 days before the carrier plans to implement the changes. Annual cost allocation manual updates shall be filed on or before the last working day of each calendar year. Proposed changes in the description of time reporting procedures, the statement concerning affiliate transactions, and the cost apportionment table must be accompanied by a statement quantifying the impact of each change on regulated operations. Changes in the description of time reporting procedures and the statement concerning affiliate transactions must be quantified in $100,000 increments at the account level. Changes in cost apportionment tables must be quantified in $100,000 increments at the cost pool level. 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 or prescribe a different procedure.  X 4(c)` ` * * *  X 43. Paragraph (a) of section 64.904 is revised to read as follows :  Xy'  64.904. Independent audits. (a) Each local exchange carrier required to file a cost allocation manual, by virtue of having annual operating revenues that equal or exceed the indexed revenue threshold for a given year or by order by the Commission, shall have an audit performed by an independent auditor on an annual basis, with the initial audit performed in the calendar year after the carrier is first required to file a cost allocation manual. The audit shall provide a positive opinion on whether the applicable data shown in the carrier's annual report required by 43.21(e)(2) of this chapter present fairly, in all material respects, the information of the carrier required to be set forth therein in accordance with the carrier's cost allocation manual, the Commission's Joint Cost Orders issued in conjunction with CC Docket No. 86111 and the Commission's rules and regulations including 32.23 and 32.27 of this chapter, 64.901, and 64.903 in force as of the date of the auditor's report. The audit shall be conducted in accordance with generally accepted auditing standards, except as otherwise directed by the Chief, Common Carrier Bureau.  X 4(b) ` ` * * *