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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20054 In the Matter of ) ) National Exchange Carrier Association, Inc. ) ASD 98-96 Proposed Modifications to the 1998-99 ) Interstate Average Schedule Formulas ) ORDER Adopted: December 22, 1998 Released: December 22, 1998 By the Chief, Accounting Safeguards Division, Common Carrier Bureau: I. Introduction 1. On October 1, 1998 the National Exchange Carrier Association, Inc. ("NECA") filed proposed modifications to the current universal service formulas for average schedule companies. These formulas include a local switching support formula and a Universal Service Fund ("USF") expense adjustment formula. On October 23, 1998, the Accounting Safeguards Division ("Division") of the Common Carrier Bureau ("Bureau") issued a public notice soliciting comments on NECA's Filing. Two parties filed comments. For reasons discussed below, we approve NECA's modified local switching support formula. At this time, however, due to the submission of new and additional information, further review of NECA's proposed revisions to the USF expense adjustment formula is necessary. Until this review is complete, we direct NECA to retain the current USF expense adjustment formula that was approved June 29, 1998. 2. The current average schedule universal service formulas used to calculate the interstate local switching support and USF expense adjustment were approved by the Commission in orders dated December 24, 1997 and June 29, 1998, respectively. NECA proposes modifications to the two average schedule universal service formulas to take effect on January 1, 1999 and remain in effect through December 31, 1999. II. Discussion 3. Local Switching Support Formula. The local switching support formula is used to determine the amount of support for switching cost that will be recovered from universal service support mechanisms. This support, which is now explicit, was formerly provided implicitly in switched access rates under the Commission's Dial Equipment Minutes (DEM) weighting rules in Part 36. NECA proposes minor modifications to the current local switching support formula which, if approved, would decrease the local switching support for average schedule companies by approximately $1 million per month. We have reviewed NECA's proposed changes to this formula and find it consistent with our requirements. We therefore approve it. 4. USF Expense Adjustment Formula: NECA proposes revisions to the current USF expense adjustment formula. Under the proposed formula, USF expense adjustment payments would increase approximately 33 percent, from $13.8 million received in 1998 to $18.4 million. 5. Based on data contained in NECA's filing, our review found apparent inconsistencies between amounts derived under NECA's proposed USF expense adjustment formula for average schedule companies and amounts received by cost companies. We expressed our concern to NECA that its proposed average schedule formula may not simulate the disbursement process for comparable cost companies as required by our rules. NECA submitted further information and data for our review on December 16 and 17, 1998. 6. Further review and examination of the recent data submitted by NECA is necessary before we can determine whether revisions to the current USF expense adjustment formula are warranted. To maintain stability in USF expense adjustment payments to average schedule companies while we complete our review, we direct NECA to retain the current USF expense adjustment formula that we approved on June 29, 1998. Our review will proceed expeditiously so that any revised formula, if appropriate, will be implemented promptly. III. Ordering Clauses 7. Accordingly, IT IS ORDERED, pursuant to Sections 0.91 and 0.291 of the Commission rules, 47 C.F.R.  0.91, 9.291, that the average schedule formula proposed by the National Exchange Carriers Association, Inc. on October 1, 1998, for local switching support is adopted and SHALL BECOME EFFECTIVE January 1, 1998. 8. IT IS FURTHER ORDERED, pursuant to Sections 0.91 and 0.291 of the Commission rules, 47 C.F.R.  0.91, 9.291, that the current Universal Service Fund expense adjustment formula approved by the Commission on June 29, 1998, SHALL REMAIN IN EFFECT after December 31, 1998. 9. IT IS FURTHER ORDERED, pursuant to Section 4(i) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), and Sections 0.91, 0.291, 1.103 and 1.4(b)(2) of the Commission's rules, 47 C.F.R.  0.91, 0.291, 1.103 and 1.4(b)(2) that THIS ORDER IS EFFECTIVE UPON ITS RELEASE. FEDERAL COMMUNICATIONS COMMISSION Kenneth P. Moran Chief, Accounting Safeguards Division