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Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú2Ú  Úóó€€òò1997€Annual€Access€Tariff€Filingsóó,€Memorandum€Opinion€and€Order,€13€FCC€Rcd€3815€(1997)€(òò1997Ð ° ÐAnnual€Access€Tariff€Investigation€Orderóó). .Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú3Ú  Úóó€€òòóóòòSeeóó€òòóóòòAccess€Charge€Reform€and€Transport€Rate€Structure€and€Pricingóó,€CC€Docket€Nos.€96„262€and€91„213,Ð ° ÐThird€Report€and€Order,€12€FCC€Rcd€22430€(1997)€(òòGSF€Orderóó).€ Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú4Ú  Úóó€€òòóóòòSeeóó€òòFederal„State€Joint€Board€on€Universal€Serviceóó,€CC€Docket€No.€96„45,€Report€and€Order,€12€FCC€RcdÐ ° Ð8776€(1997);€First€Quarter€1998€Universal€Service€Contribution€Factors€Revised€and€Approved,€CC€Docket€No.Ï96„45,€Public€Notice,€DA€97„2623€(rel.€Dec.€16,€1997).ò òó ó Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú5Ú  Úóó€€òòTariffs€Implementing€Access€Charge€Reformóó,€Memorandum€Opinion€and€Order,€13€FCC€Rcd€163€(1997)Ð ° Ð(òòAccess€Reform€Tariffs€Suspension€Orderóó). ^Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú6Ú  Úóó€€In€its€direct€case,€Bell€Atlantic€distinguishes€between€the€access€reform€tariffs€for€Bell€Atlantic„North€andÐ ° ÐBell€Atlantic„South.€€In€certain€sections€of€this€Order,€we€also€distinguish€between€Bell€Atlantic„North€and€BellÏAtlantic„South.€ sÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú7Ú  Úóó€€òòTariffs€Implementing€Access€Charge€Reformóó,€CC€Docket€No.€97„250,€Order€Designating€Issues€forÐ ° ÐInvestigation€and€Order€on€Reconsideration,€DA€98„151€(Com€Car.€Bur.,€rel.€January€28,€1998)€(òòAccess€ReformÐ xÈ ÐTariffs€Designation€Orderóó). œÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú8Ú  Úóó€€Comments€on€the€direct€cases€were€filed€by€AT&T,€MCI€and€DeltaCom. 8Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú9Ú  Úóó€€On€March€23,€1998,€the€General€Services€Administration€(GSA)€filed€"Rebuttal€Comments."€€RebuttalÐ ° ÐComments€of€the€General€Services€Administration,€filed€March€23,€1998.€€On€March€27,€1998,€BellSouth€filed€aÐ xÈ  Ðmotion€to€strike€GSA's€pleading€because€it€responds€to€the€price€cap€LECs'€direct€cases,€and€it€was,€therefore,€filedÏout„of„time.€€BellSouth's€Motion€to€Strike,€filed€March€27,€1998.€€We€grant€BellSouth's€motion€to€strike€GSA'sÏpleading,€but€it€will€remain€a€part€of€the€record€in€this€proceedingòò,€óó47€C.F.R.€ðð€1.8,€and€be€treated€as€an€ex€parteÐ Ï Ðcommunication.€€We€grant€BellSouth's€motion€because,€although€the€deadline€for€filing€an€opposition€or€commentÏon€the€direct€cases€was€March€16,€1998,€GSA€filed€its€pleading€on€March€23,€1998.€€GSA€did€not€file€a€motion€forÏan€extension€of€time,€provide€any€explanation€for€why€it€filed€its€pleading€late,€and€failed€to€respond€to€BellSouth'sÏmotion€to€strike.€€Moreover,€GSA's€pleading€cannot€reasonably€be€characterized€as€a€rebuttal€because€it€does€notÏrespond€to€the€comments€and€oppositions€that€were€filed€on€March€16,€1998;€GSA€limits€its€comments€to€the€directÏcases€filed€by€price€cap€LECs€in€this€proceeding.€€ ¶Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú10Ú  Úóó€€See€Appendix€A€for€a€complete€list€of€the€tariffs€and€pleading€filed€in€this€investigation. ‘Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú11Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16005. tÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú12Ú  Úóó€€47€C.F.R.€ðð€69.152(e). tÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú13Ú  Úóó€€47€C.F.R.€ðð€69.153(d). tÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú14Ú  Úóó€€47€C.F.R.€ðð€69.153(c). „Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú15Ú  Úóó€€òòSeeóó€47€C.F.R.€69.155,€69.156(d)(e). žÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú16Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2255.€ [Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú17Ú  Úóó€€Number€of€lines€are€reported€in€price€cap€LECs'€tariffs€as€demand€figures€over€a€twelve€month€period.€€InÐ ° Ðtheir€Tariff€Review€Plans€(TRPs)€price€cap€LECs€report€the€number€of€lines€as€the€actual€number€of€residentialÏloops€times€twelve. £Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú18Ú  Úóó€€òòAccess€Reform€Tariffs€óóòòDesignation€Orderóó,€13€FCC€Rcd€at€2257. 7Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú19Ú  Úóó€€The€two€Commission€Staff€studies,€the€Additional€Line€Study€and€Excess€Residential€Loop€Study,€are€basedÐ ° Ðon€data€filed€on€the€record€in€this€proceeding€by€the€Commission€Staff.€€òòSee€óóLetter€from€David€L.€Hunt,€StaffÐ xÈ ÐAttorney,€FCC€to€Magalie€Roman€Salas,€Commission€Secretary€(dated€May€27,€1998).€€The€independent€studiesÏand€public€statements€made€by€price€cap€LECs€were€also€made€part€of€the€record€in€this€proceeding.€€òòIdóó. íÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú20Ú  Úóó€€Single„line€business€line€counts€reported€by€the€price€cap€LECs€in€their€direct€cases€are€identified€inÐ ° ÐAppendix€B,€Table€B„1. ,Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8ôÑõX8XàYÔ€€€€€òòÚ  Ú21Ú  Úóó€€The€total€number€of€residential€lines€is€defined€as€the€sum€of€primary€residential€lines,€lifeline€lines,€non„Ð ° Ðprimary€residential€lines,€and€BRI„ISDN€lines.€Ô€8XàYXõ8ôÑÔÔ€6X™ãXX8XàYÔ GÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú22Ú  Úóó€€The€majority€of€price€cap€LECs€stated€in€their€direct€cases€that€to€determine€the€numbers€of€primary€andÐ ° Ðnon„primary€residential€lines,€individual€lines€per€month€(usually€at€the€end€of€the€month€or€some€other€specificÏdate)€were€counted€from€a€consistent€data€base€(billing€records€or€through€field€indicator€designations)€andÏsummed€for€1996.€€Appendix€B,€Table€B„2€explains€the€search€criteria,€time€frame€and€data€sources€used€by€eachÏprice€cap€LEC€to€determine€line€counts€for€primary€and€non„primary€residential,€single€line€business€and€BRI„¼ISDN€lines,€and€the€answers€to€the€hypothetical€line€count€classification€exercise€we€required€carriers€to€submitÏwith€their€direct€case,€except€for€U€S€West€which€did€not€comply.Table_A ­Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú23Ú  Úóó€€Although€BRI„ISDN€lines€can€also€be€used€by€single„line€business€customers,€we€do€not€distinguishÐ ° Ðresidential€users€of€BRI„ISDN€lines€from€business€users€of€these€lines.€€Including€BRI„ISDN€lines,€however,€forÏcomparison€purposes€will€raise€non„primary€line€penetration€levels€for€price€cap€LECs€with€BRI„ISDN€lines.€€ ñÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú24Ú  Úóó€€The€number€of€lifeline€lines€were€reported€in€the€price€cap€LECs€access€reform€tariff€filings€and€taken€fromÐ ° Ðtheir€TRPs.€€òòSee,€e.g.óó,€€TRP€CAP„1€Form€of€Pacific€Bell,€Attachment€("Calculation€of€Rate€Caps:€Demand€andÐ xÈ ÐRates,€Inputs€and€Initial€Revenue€Calculations"),€Line€140,€filed€December€17,€1997.€€Lifeline€lines€are€notÏincluded€as€a€component€of€primary€residential€lines.€€For€example,€Pacific€Bell's€TRP€and€SBC's€Direct€Case€bothÏshow€identical€primary€residential€and€single€line€business€(SLB)€line€counts.€€See€TRP€CAP„1€Form€of€PacificÏBell,€Line€100,€filed€December€17,€1997;€€SBC€Direct€Case,€Attachment€("Pacific€Line€Counts"),€filed€February€27,Ï1998.€€òòSee€alsoóó,€TRP€CAP„1€Form€of€Pacific€Bell,€Attachment€("Calculation€of€Rate€Caps:€Demand€and€Rates,Ð ` ° ÐInputs€and€Initial€Revenue€Calculations"),€Line€150,€filed€December€17,€1997.Table_BTable_C ¸Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú25Ú  Úóó€€PNR€and€Associates€is€an€economic€research€and€consulting€firm€located€at€101€Greenwood€Avenue,€SuiteÐ ° Ð502,€Jenkinstown,€PA€19046,€(215)€886„9200.€PNR€has€donated€a€number€of€research€databases€and€surveyÏinformation€to€the€Commission,€granting€permission€for€their€use€and€the€publication€of€any€results€on€which€theyÏare€based.€ £Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú26Ú  Úóó€€PNR€first€conducted€a€Bill€Harvesting€Study€in€1994.€The€format€was€changed€for€surveys€completed€in€1995Ð ° Ðand€1996€known€as€"Bill€Harvesting€II"€and€"Bill€Harvesting€III,"€respectively.€€Information€from€these€databasesÏhave€been€used€by€the€FCC€in€numerous€publicly€available€studies.€€For€example,€the€results€from€both€of€theseÏsurveys€were€relied€on€for€the€recently€issued€staff€report€on€market€shares€for€long€distance€service.€€òòSeeóó€CommonÐ X ÐCarrier€Bureau,€Industry€Analysis€Division,òò€Long€Distance€Market€Sharesóó€(March€1998). êÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú27Ú  Úóó€€òòSeeóó€Letter€from€David€L.€Hunt,€Staff€Attorney,€FCC€to€Magalie€Roman€Salas,€Commission€Secretary€(datedÐ ° ÐMay€27,€1998). ¤Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú28Ú  Úóó€€The€data€set€specifically€coded€or€identified€the€following€LECs€by€name:€Ameritech,€Bell€Atlantic,Ð ° ÐBellSouth,€Cincinnati€Bell,€GTE,€NYNEX,€Pacific€Telesis,€SNET,€Southwestern€Bell,€Sprint,€and€US€West.€€AllÏother€carriers€were€placed€in€a€data€category€called€Independents€and€were€classified€as€such€unless€they€wereÏspecifically€identifiable€due€to€state€identification.€€The€figures€for€price€cap€LECs€such€as€Aliant,€Citizens,€andÏFrontier€were,€therefore,€not€fully€distinguishable€from€rate„of„return€companies€or€other€carriers€in€the€AdditionalÏLine€study. ÕÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú29Ú  Úóó€€The€survey€question€asked€was€the€following:€"Does€your€household€have€more€than€one€telephone€line€(i.e.Ð ° Ðmore€than€one€telephone€number)?€1€Yes€and€2€No".€€Those€who€responded€"yes"€were€counted€as€a€householdÏhaving€òòoneóó€additional€line.€Those€responding€"no"€were€counted€as€a€household€that€had€no€additional€residentialÐ @ Ðservice. 3Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú30Ú  Úóó€€U.S.€Department€of€Commerce,€Economics€and€Statistics€Administration,€Bureau€of€the€Census,€òò1990Ð ° ÐCensus€of€Population€and€Housing;€Summary€Population€and€Housing€Characteristicsóó€(July€1991). {Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú31Ú  Úóó€€The€definition€of€a€household€as€used€by€the€U.S.€Department€of€Commerce,€Bureau€of€the€Census€in€theirÐ ° Ð1990€population€survey€is€as€follows:€ÌÌà8  àA€household€consists€of€all€the€persons€who€occupy€a€housing€unit.€€A€housing€unit€is€a€house€anÏapartment,€a€mobile€home,€a€group€of€rooms,€or€a€single€room€that€is€occupied€(or€if€vacant,€isÏintended€for€occupancy)€as€separate€living€quarters.€€Separate€living€quarters€are€those€in€whichÏthe€occupants€live€and€eat€separately€from€any€other€persons€in€the€building€and€which€haveÏdirect€access€from€the€outside€or€through€a€common€hall.€€The€occupants€may€be€a€single€family,Ïone€person€living€alone,€two€or€more€families€living€together,€or€any€other€group€of€related€orÏunrelated€persons€who€share€living€arrangements.Ð Ð Ð  ÐÌòòSee,€e.g.óó,€U.€S.€Department€of€Commerce,€Economics€and€Statistics€Administration,€òò1990€Census€of€PopulationÐ H ˜  Ðand€Housing;Summary€Population€and€Housing€Characteristics;€District€of€Columbiaóó€(July€1991). êÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú32Ú  Úóó€€òòSee€alsoóó,€Letter€from€David€L.€Hunt,€Staff€Attorney,€FCC€to€Magalie€Roman€Salas,€Commission€SecretaryÐ ° Ð(May€27,€1998). ëÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú33Ú  Úóó€€In€some€cases,€penetration€figures,€referenced€in€these€external€reports€as€"additional"€or€"second"€lines€mayÐ ° Ðrepresent€a€percentage€of€households€or€customers€that€have€at€least€one€additional€line.€€We€did€not€rely€on€theseÏdata,€however,€to€prescribe€non„primary€residential€line€counts€in€cases€where€we€found€that€LECs€had€reported€anÏunreasonable€percentage€of€these€lines. âÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú34Ú  Úóó€€Merrill€Lynch,€òòTelecom€Services,€RBOCs€&€GTEóó,€Table€3b€at€6€(òòóóNovember€13,€1996)€(Merrill€LynchÐ ° ÐReport). Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú35Ú  Úóó€€Salomon€Brothers,€òòCincinnati€Bell,€Inc.€„€More€than€A€Phone€Company:€Billing€and€Teleservices€DriveÐ ° ÐGrowthóó,€Figure€7€at€11€(November€28,€1997)€(Salomon€Brothers€Report). NÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú36Ú  Úóó€€These€companies€are€Bell€Atlantic,€BellSouth,€Pacific€Bell,€and€U€S€West.€€òòSeeóó€Figure€2,€òòsupraóó.€€FiguresÐ ° Ðreported€by€these€companies€on€additional€residential€line€penetration€were€taken€from€the€following€sources:ÏRaymond€W.€Smith,€Chairman,€Bell€Atlantic,€"Creating€Shareowner€Value€in€a€converged,€Post„LegislationÏEnvironment,"€(March€19,€1996);€BellSouth,€Corporate€Information€Center€News€Release,"BellSouth€Reports€FifthÐ X  ÐConsecutive€Year€of€Earnings€Growth:€Increase€in€access€lines€sets€fourth€annual€record€in€row;€WirelessÏcustomers€worldwide€surpass€6€million,"€(January€22,€1998);€Pacific€Telesis€òòInside€Lineóó€"Strong€Growth€ahead€forÐ È ÐPacific€Bell,"€Issue€No.€90,€(July€15,€1996);€U€S€West,€News€Center€Press€Release,€"U€S€West€CommunicationsÏReports€Continued€Solid€Earnings€as€it€Rolls€Out€New€Products€Including€First„In„the„Nation€PCSÏService:Improving€Revenues€Lead€to€Double„Digit€EPS€Growth"€(October€27,€1997). vÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú37Ú  Úóó€€We€tested€the€representative€sampling€of€the€data€used€in€the€Additional€Line€Study€by€comparing€it€to€1995Ð ° ÐARMIS€data.€€We€computed€relative€percentages€of€(1)€the€actual€number€of€1995€residential€lines€reported€forÏeach€price€cap€LEC€within€each€state€from€ARMIS,€and€(2)€the€10,457€sample€observations€taken€from€BillÏHarvesting€II.€€This€computation€produced€concentration€levels€of€residential€lines€in€each€state€by€the€price€capÏLECs€and€the€proportion€of€lines€each€state€contributes€to€the€price€cap€LECs'€total€residential€line€counts.€€UsingÏstandard€correlation€statistics€both€the€percentage€values€and€cardinal€rankings€were€highly€correlated.€€WeÏtherefore€concluded€that€the€Additional€Line€Study€line€count€information€reasonably€represents€the€state€or€serviceÏarea€proportions€within€each€price€cap€LEC€as€to€where€residential€lines€are€actually€located.€€Accordingly,€theÏfigures€on€additional€lines€per€household€would€not€be€proportionally€misrepresented€in€any€one€state€or€serviceÏarea€for€a€price€cap€LEC. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú38Ú  Úóó€€òòSee,€e.g.óó,€òòóóMerrill€Lynch€Report,€òòsupraóó,€at€6;€òòóóSalomon€Brothers€Report,€òòsupraóó,€at€10„11;€Pacific€Telesis,Ð ° ÐòòInside€Lineóó,€òòsupraóó. 'Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú39Ú  Úóó€€When€we€directly€compared€the€two€staff€study€results€for€each€state€and€each€price€cap€LEC€using€both€aÐ ° Ðcorrelation€and€rank€correlation€statistic,€they€were€correlated€at€60€percent. PÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú40Ú  Úóó€€Regression€statistics€for€these€staff€studies€were€made€part€of€the€record€in€this€proceeding.€€òòSeeóó€Letter€fromÐ ° ÐDavid€L.€Hunt,€Staff€Attorney,€FCC€to€Magalie€Roman€Salas,€Commission€Secretary€(dated€May€27,€1998)òòóó. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú41Ú  Úóó€€Aliant,€Nevada€Bell,€and€Cincinnati€Bell€have€relatively€small€sample€sizes€when€compared€to€the€otherÐ ° Ðprice€cap€LECs€and,€as€explained€below,€we€therefore€do€not€find€their€non„primary€residential€line€counts€to€beÏunreasonable.€€We€also€find€that€the€non„primary€residential€line€counts€reported€by€Citizens€and€Frontier€are€notÏunreasonable€because€the€Additional€Line€Study€contains€no€sample€data€for€these€companies. àÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú42Ú  Úóó€€SNET€reports€a€higher€additional€line€penetration€level€than€was€calculated€in€the€Excess€Residential€LoopÐ ° ÐStudy. ‹Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú43Ú  Úóó€€òòóóMerrill€Lynch€Report,€òòóóTable€3b€at€6. ‡Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú44Ú  Úóó€€Salomon€Brothers€Report,€òòsupraóó,€at€10. WÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú45Ú  Úóó€The€Merrill€Lynch€Report€states:€"We€believe€this€strong€growth€in€vertical€services€has€not€only€been€drivenÐ ° Ðby€solid€growth€in€primary€residential€lines,€but€also€by€the€growing€number€of€second€and€third€lines€being€addedÏby€US€households€(i.e.€customers€continue€to€augment€their€home€office€lines€(or€additional€lines)€with€callÏmanagement€features€and€voice€mail€boxes),€which€continue€to€grow€the€potential€vertical€service€subscriber€base."€ÏMerrill€Lynch€Report,€òòsupraóó,€at€6Table_D&ÿÿ0 d d ‹Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú46Ú  Úóó€€Pacific€Telesis,€òòInside€Lineóó,€òòsupraóó. ÃÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú47Ú  Úóó€€We€recognize€that€GTE€is€located€in€numerous€service€areas€throughout€the€country.€€The€Additional€LineÐ ° ÐStudy,€however,€included€999€sample€observations€for€GTE€in€26€of€the€states€for€which€GTE€offers€residentialÏservice.€€The€correlation€coefficient€between€the€ARMIS€1995€actual€residential€line€percentage€for€GTE€withinÏeach€state,€and€the€number€of€sample€observations€taken€in€each€state€from€the€Bill€Harvesting€II€data€for€GTE€isÏ97.05%.€€This€indicates€that€the€Additional€Line€Study's€estimate€is€a€reliable€one€in€terms€of€distribution€of€GTEÏresidential€lines€across€service€areas.€€ Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú48Ú  Úóó€€As€stated€earlier,€line€count€numbers€are€reported€in€price€cap€LEC€tariffs€and€herein€as€yearly€demandÐ ° Ðfigures€calculated€as€actual€number€of€lines€times€twelve.€€ ‘Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú49Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16016. —Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú50Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó€at€ò òó ó2257. ±Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú51Ú  Úóó€€òòSeeóó€SNET€Direct€Case€at€1„2;€BellSouth€Direct€Case€at€5„6;€SBC€Direct€Case€at€2. —Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú52Ú  Úóó€€BellSouth€Direct€Case€at€6„7;€SNET€Direct€Case€at€Exhibit€1. —Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú53Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó€at€2255ò òó ó. úÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú54Ú  Úóó€See€Appendix€B€for€a€description€of€price€cap€LEC€line€count€data€sources€and€sorting€criteria€that€carriersÐ ° Ðprovided€in€their€Direct€Cases. ŽÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú55Ú  Úóó€€òòSeeóó,òò€e.g.óó,€U€S€West€Direct€Case€at€1„2. ‘Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú56Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16000. ŒÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú57Ú  Úóó€€Using€customer€billing€records€for€New€Jersey,€Bell€Atlantic€ran€a€report€which€matched€and€then€providedÐ ° Ðthe€number€of€residential€additional€lines€billed€to€the€same€billing€name€customer,€at€a€single€service€address,€onÏthe€same€account€as€the€primary€residential€line€in€order€to€identify€non„primary€residential€line€penetration€whenÏusing€the€"account"€criterion.€€This€study€was€used€as€a€surrogate€for€the€proportion€of€non„primary€residentialÏlines€in€the€Bell€Atlantic€regions.€€Bell€Atlantic€Direct€Case€at€Attachment€A€pages€4„5. rÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú58Ú  Úóó€€SBC€Direct€Case€at€2„2. àÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú59Ú  Úóó€€òòIn€re€Defining€Primary€Linesóó,€CC€Docket€No.€97„181,€Notice€of€Proposed€Rulemaking,€12€FCC€Rcd€13647Ð ° Ð(1997). ÂÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú60Ú  Úóó€€"Pacific€does€not€actively€pursue€consolidate€residential€billing.€€In€other€words,€Pacific€does€not€encourageÐ ° Ðcustomers€to€'bill€on'€additional€residential€lines€to€existing€residential€accounts.€€This€could€lead€to€a€smallerÏnumber€of€non„primary€lines€when€compared€to€total€residential€lines."€(sic)€€Errata€to€Direct€Case€of€SBC€at€2. «Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú61Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16016;€47€C.F.R.€ðð69.152(a). tÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú62Ú  Úóó€€47€C.F.R.€ðð69.153(a). qÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú63Ú  Úóó€€47€C.F.R.€ðð69.153. qÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú64Ú  Úóó€€47€C.F.R.€ðð69.154. —Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú65Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó€at€ò òó ó2261. pÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú66Ú  Úóó€€CBT€Direct€Case€at€4. uÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú67Ú  Úóó€€U€S€West€Direct€Case€at€4. —Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú68Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó€at€ò òó ó2260. ¨Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú69Ú  Úóó€€Ameritech€Transmittal€No.€1146,€Access€Reform€Revision,€filed€March€17,€1998. ÞÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú70Ú  Úóó€€Ameritech€Transmittal€No.€1146,€Access€Reform€Revision,€Description€and€Justification,€page€1€(March€17,Ð ° Ð1998). Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú71Ú  Úóó€€We€note€that€these€lines€are€assessed€a€SLC,€pursuant€to€section€69.152(a),€which€states€that€a€SLC€isÐ ° Ðassessed€upon€end€users€that€subscribe€to€local€exchange€service. tÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú72Ú  Úóó€€47€C.F.R.€ðð69.153(b). rÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú73Ú  Úóó€€DeltaCom€Comments€at€2. ÞÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú74Ú  Úóó€€Ameritech€Transmittal€No.€1146,€Access€Reform€Revision,€Description€and€Justification,€page€1€(March€17,Ð ° Ð1998). vÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú75Ú  Úóó€€Ameritech€Direct€Case€at€6. }Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú76Ú  Úóó€€47€C.F.R.€ðððð69.501,€69.502. ÅÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8ôÑõX8XàYÔ€€€€€òòÚ  Ú77Ú  Úóó€€For€price€cap€LECs,€residential€and€single„line€business€SLCs€are€capped€at€$3.50€per€month,€while€non„Ð ° Ðprimary€residential€line€SLCs€are€currently€capped€at€$5.00€per€month.€€The€MLB€SLC€assessed€by€price€cap€LECsÏcurrently€may€not€exceed€$9.00€per€month.€€47€C.F.R.€ðð69.152.€€A€price€cap€LEC's€MLB€SLC€may€exceed€itsÏmonthly€per„line€BFP€revenue€requirement€forecast€only€to€the€extent€necessary€to€recover€certain€marketingÏexpenses.€€47€C.F.R.€ðð69.156€(permitting€price€cap€LECs€to€increase€the€MLB€SLC€and€non„primary€residentialÏSLC€above€the€monthly€per„line€BFP€revenue€requirement€to€recover€marketing€expenses). Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú78Ú  Úóó€€47€C.F.R.€ðððð61.46(d„e);€69.153. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú79Ú  Úóó€€47€C.F.R.€ðððð61.45(c),€61.46(d). œÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú80Ú  Úóó€€òò1997€Annual€Tariff€Investigation€Orderóó,€13€FCC€Rcd€at€3856. eÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú81Ú  Úóó€€òòIdóó.€ mÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú82Ú  Úóó€€òòIdóó.€at€3857. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú83Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2264. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú84Ú  Úóóòò€€Access€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2264. uÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú85Ú  Úóó€€U€S€West€Direct€Case€at€6. wÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú86Ú  Úóó€€U€S€West€Direct€Case€at€6„7. uÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú87Ú  Úóó€€U€S€West€Direct€Case€at€6. rÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú88Ú  Úóó€€47€U.S.€C.€ðð€201(b). qÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú89Ú  Úóó€€47€U.S.C.€ðð205(a). wÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú90Ú  Úóó€€U€S€West€Direct€Case€at€7„8. ÐÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú91Ú  Úóó€€òòPapago€Tribal€Util.€Auth.€v.€FERCóó,€628€F.2d€235,€240€(D.C.€Cir.€1980),€òòcert€deniedóó,€449€U.S.€1061€(1980).  Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú92Ú  Úóó€€òò1997€Annual€Tariff€Investigation€Orderóó,€13€FCC€Rcd€at€3838„47.€ eÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú93Ú  Úóó€€òòIdóó.€ pÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú94Ú  Úóó€€òòIdóó.€at€3856„57. ìÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú95Ú  Úóó€€The€CAP„1€chart€replaced€the€CCL„1€chart€beginning€with€the€access€reform€tariff€filings€that€took€effect€onÐ ° ÐJanuary€1,€1998. *Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú96Ú  Úóó€€AT&T€Petition,€Exhibit€CCL€Refund€at€1,€5€(dated€December€23,€1997).€€The€AT&T€methodology€uses€theÐ ° Ðadjusted€proposed€SLCs€in€the€calculation€of€the€maximum€CCL€rate€and€common€line€revenues€on€the€CCL„1Ïcharts€for€a€given€annual€tariff€filing.€€It€carries€these€adjusted€proposed€SLCs€forward€and€uses€these€as€the€SLCsÏat€the€last€PCI€update€on€the€CCL„1€chart€for€each€subsequent€annual€tariff€filing.€€òòIdóó.€at€1,€3,€3a„3g,€and€5.€€€€€ NÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú97Ú  Úóó€€The€AT&T€methodology€accounts€for€rate€changes€that€take€effect€between€annual€tariff€filings€by€firstÐ ° Ðdetermining€the€percentage€difference€between€the€maximum€CCL€rate€proposed€in€a€given€annual€tariff€filing€andÏthe€maximum€CCL€rate€at€the€last€PCI€update€in€the€subsequent€annual€filing.€€It€then€applies€this€percentageÏdifference€to€the€"AT&T€calculated€CCL€rate€cap"€for€the€earlier€of€the€two€annual€filings.€€AT&T€refers€to€theÏresult€obtained€by€applying€the€percentage€change€in€the€maximum€CCL€rate€between€annual€filings€to€the€"AT&TÏcalculated€CCL€rate€cap"€for€the€earlier€of€the€two€annual€filings€as€the€"AT&T€Calculated€CCL€Rate€Cap€withÏTrue„Up."€€AT&T€Petition,€Exhibit€CCL€Refund€at€1,€4€(dated€December€23,€1997). Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú98Ú  Úóó€€Bell€Atlantic€Direct€Case,€Exhibit€B2. ýÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú99Ú  Úóó€€For€example,€Bell€Atlantic€calculates€the€AT&T€adjusted€proposed€SLC€for€multi„line€businesses€by:€€(1)Ð ° Ðcalculating€the€percentage€difference€between€the€actual€BFP€and€the€forecasted€BFP€in€each€annual€filing;€and€(2)Ïapplying€this€percentage€to€the€€multi-line€business€SLCs€proposed€in€each€annual€filing€for€each€state€in€itsÏterritory€to€obtain€the€AT&T€adjusted€proposed€SLC€for€multi-line€businesses€in€each€state;€(3)€multiplying€theÏAT&T€adjusted€proposed€SLC€for€multi-line€businesses€in€each€state€by€the€multi-line€business€demand€for€eachÏstate€to€obtain€the€adjusted€proposed€SLC€revenues€for€multi-line€businesses€in€each€state;€(4)€summing€theÏadjusted€proposed€SLC€revenues€for€multi-line€businesses€in€each€state;€and€(5)€dividing€the€sum€of€the€adjustedÏproposed€SLC€revenues€for€multi-line€businesses€by€the€multi-line€business€demand€for€all€states.€€Bell€AtlanticÏDirect€Case,€Exhibit€B1. ÌÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú100Ú  Úóó€€Bell€Atlantic„South€files€separate€SLCs€for€each€state€in€its€territory.€€It€developed€the€maximum€CCL€rateÐ ° Ðand€common€line€revenues€by€using€a€weighted€average€of€the€SLCs€for€each€state€in€the€formula€for€calculatingÏthe€maximum€CCL€rate€on€the€CCL„1€charts.€€It€used€demand€for€SLC€elements€for€each€state€to€calculate€theÏweighted€average€SLCs. wÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú101Ú  Úóó€€47€C.F.R.€ðð€61.46(d)(1). çÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú102Ú  Úóó€€For€a€description€of€this€methodology,òò€seeóó€òòAccess€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2265„Ð ° Ð66. žÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú103Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2269. žÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú104Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2270. žÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú105Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2270. ÁÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú106Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2270.€€As€discussed€in€Section€II.D€òòsupraóó,€theÐ ° ÐBFP€is€the€portion€of€the€common€line€revenue€requirement€that€is€used€to€determine€the€maximum€end„user€per„¼line€charge.€€òòSeeóó€Section€II.D€òòsupraóó.€€òòSee€alsoóó€47€C.F.R.€ðððð69.152,€69.501(e),69.502.€€ ÔÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú107Ú  Úóó€€The€exception€is€the€exogenous€adjustment€to€reallocate€one€third€of€the€portion€of€the€tandem€switchingÐ ° Ðrevenue€requirement€that€is€recovered€form€the€TIC,€excluding€SS7€signalling€and€dedicated€tandem€trunk€portÏcosts€reallocated€elsewhere,€to€the€tandem€switching€rate€element.€€In€that€case,€the€Commission€required€price€capÏLECs€to€account€for€the€effects€of€"GDP„PI€minus€X„factor"€reductions€to€the€original€portion€of€the€tandemÏswitching€revenue€requirement€allocated€to€the€TIC.€€òòSeeóó€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16066„67.€Ð Ð  ÐAs€discussed€below,€this€methodology€prescribed€by€the€Commission€accomplishes€the€same€goal€as€the€permittedÏrevenue€methodology€that€we€adopt€in€this€Order.€€The€PCIs€for€price€cap€baskets€are€adjusted€annually€pursuant€toÏformulae€set€forth€in€our€rules.€€The€PCI€formula€consists€of€an€inflation€measure,€the€Gross€Domestic€ProductÏPrice€Index€(the€GDP„PI),€minus€a€productivity€measure€(the€X„factor),€plus€or€minus€any€permitted€exogenousÏcost€adjustments.€€òòSeeóó€Section€61.45(b)€of€the€Commission's€Rules,€47€C.F.R.€€ðð€61.45(b).€ wÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú108Ú  Úóó€€47€U.S.C.€ðððð€201„205. ŒÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú109Ú  Úóó€€òòSee€Policy€and€Rules€Concerning€Rates€for€Dominant€Carriersóó,€CC€Docket€No.€87„313,€Second€Report€andÐ ° ÐOrder,€5€FCC€Rcd€6786,€6789€(1990)€(òòLEC€Price€Cap€Orderóó).€€The€first€tariffs€filed€by€LECs€under€price€capÐ xÈ Ðregulation€took€effect€on€January€1,€1991.€€ ÚÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú110Ú  Úóó€€òòSee€óóòòLEC€Price€Cap€Orderóó,€5€FCC€Rcd€at€6814.€€The€Commission€adopted€an€11.25€percent€authorized€rateÐ ° Ðof€return€in€a€companion€order€to€the€òòLECóó€òòPrice€Cap€Orderóó.€€òòSee€Represcribing€the€Authorized€Rate€of€Return€forÐ xÈ ÐInterstate€Services€of€Local€Exchange€Carriersóó,€CC€Docket€No.€89„624,€Order,€5€FCC€Rcd€7507€(1990). ›Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú111Ú  Úóó€€For€example,€assume€that,€prior€to€the€òòAccess€Charge€Reformóó€proceeding,€the€local€switching€rate€elementÐ ° Ðconsisted€of€three€functions:€€line€ports,€end€office€trunk€ports,€and€other€local€switching€costs.€€Also€assume€thatÏthe€permitted€local€switching€revenues€under€price€caps€is€$100,€that€each€function€has€a€hypothetical€revenueÏrequirement€of€$30,€and€that€the€revenue€effect€of€each€function€is€$33.33.€€Under€the€price€cap€LECs'€revenueÏrequirement€methodology,€the€removal€of€the€line€port€and€end€office€trunk€port€functions€would€leave€$40€ofÏpermitted€revenues€in€the€local€switching€element€to€be€recovered€by€other€local€switching€costs.€€Thus,€other€localÏswitching€costs,€which€have€a€hypothetical€revenue€requirement€of€$30,€would€now€recover€$40€in€permittedÏrevenues€instead€of€$33.33.€ Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú112Ú  Úóó€€We€give€additional€specific€instructions€in€Section€IV.A€on€how€the€permitted€revenue€methodology€shouldÐ ° Ðbe€applied€to€the€exogenous€cost€change€for€SS7„STP.€ ­Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú113Ú  Úóó€òò€See,€e.g.óó,€BellSouth€Direct€Case€at€19„20;€Sprint€LTCs€Direct€Case€at€5„7.€ YÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú114Ú  Úóó€€Bell€Atlantic€Direct€Case,€Attachment€C€at€6„7;€BellSouth€Direct€Case€at€19„20;€SBC€Direct€Case€at€8„9;Ð ° ÐSNET€Direct€Case€at€3;€U€S€West€Rebuttal€at€4.€òò€See€alsoóó€GTE€Direct€Case€at€7.€€We€note€that€on€March€3,€1998,Ð xÈ ÐBell€Atlantic€filed€tariff€revisions€to€reflect€the€use€of€revenues€as€the€basis€for€determining€exogenous€costÏadjustments€for€line€ports€and€end€office€trunk€ports.€€Bell€Atlantic€Tariff€F.C.C.€No.€1,€Transmittal€No.€1033;ÏNYNEX€Tariff€F.C.C.€No.€1,€Transmittal€No.€488.€€Bell€Atlantic€states€that€it€filed€these€tariff€revisions€toÏminimize€potential€refund€liability€for€local€switching€rates€if€the€Commission€decided€to€apply€the€revenueÏmethodology€retroactively€without€allowing€offsetting€common€line€rate€increases.€€Bell€Atlantic€asserts,€however,Ïthat€the€filing€of€these€tariff€revisions€does€not€represent€a€concession€that€the€revenue€methodology€proposed€byÏthe€Bureau€in€the€òòAccess€Reform€Tariff€Designation€Orderóó€is€the€only€reasonable€approach€for€making€exogenousÐ ð @ Ðcost€changes€for€ports.€€Bell€Atlantic€Tariff€F.C.C.€No.€1,€Transmittal€No.€1033,€Description€and€Justification€at€1„¼2;€NYNEX€Tariff€F.C.C.€No.€1,€Transmittal€No.€488,€Description€and€Justification€at€1„2. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú115Ú  Úóó€€Bell€Atlantic€Direct€Case,€Attachment€C€at€6;€BellSouth€Direct€Case€at€19„20;€SNET€Direct€Case€at€3.€€òòSeeÐ ° Ðalsoóó€GTE€Rebuttal€at€6€n.8;€U€S€West€Rebuttal€at€4. }Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú116Ú  Úóó€€Sprint€LTCs€Direct€Case€at€6„7.€€ yÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú117Ú  Úóó€€Sprint€LTCs€Direct€Case€at€6. yÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú118Ú  Úóó€€Sprint€LTCs€Direct€Case€at€7. yÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú119Ú  Úóó€€Sprint€LTCs€Direct€Case€at€7. |Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú120Ú  Úóó€€òòSeeóó€SNET€Direct€Case€at€4. 6Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú121Ú  Úóó€€Ameritech€Direct€Case€at€9;€Bell€Atlantic€Direct€Case€at€8,€Attachment€C€at€1;€BellSouth€Direct€Case€at€18;Ð ° ÐSNET€Direct€Case€at€4;€U€S€West€Direct€Case€at€9„11;€Frontier€Direct€Case€at€10„11,€13„15. 8Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú122Ú  Úóó€€Ameritech€Direct€Case€at€9;€Bell€Atlantic€Direct€Case€at€8,€Attachment€C€at€1„3;€BellSouth€Direct€Case€atÐ ° Ð18;€SNET€Direct€Case€at€4;€U€S€West€Direct€Case€at€9„11;€Frontier€Direct€Case€at€10„11,€13„15. ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú123Ú  Úóó€€òòSeeóó€AT&T€Comments€at€16„19;€MCI€Comments€at€7„9. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú124Ú  Úóó€€CBT€and€Citizens€entered€price€cap€regulation€on€July€1,€1997€and€July€1,€1996,€respectively.€€òòSeeóó€CBTÐ ° ÐDirect€Case€at€5;€Citizens€Direct€Case€at€3. yÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú125Ú  Úóó€€Bell€Atlantic€Direct€Case€at€8,€Attachment€C€at€2;€BellSouth€Direct€Case€at€17„18;€BellSouth€Rebuttal€at€6;Ð ° ÐSNET€Direct€Case€at€4,€5.€òò€See€alsoóó€CBT€Direct€Case€at€5;€Frontier€Direct€Case€at€7„10;€Ameritech€Rebuttal€at€3;Ð xÈ ÐSBC€Rebuttal€at€7. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú126Ú  Úóó€€òòSeeóó€Bell€Atlantic€Direct€Case,€Attachment€C€at€2,òò€citing€Implementation€of€the€Pay€TelephoneÐ ° ÐReclassification€and€Compensation€Provisions€of€the€Telecommunications€Act€of€1996óó,€Report€and€Order,€11€FCCÐ xÈ ÐRcd€20541,€20633€(1996);€BellSouth€Direct€Case€at€17„18;€BellSouth€Rebuttal€at€6;€SNET€Direct€Case€at€4,€5;Ð @  ÐFrontier€Direct€Case€at€7„10;€Ameritech€Rebuttal€at€3.€€ ´Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú127Ú  Úóó€€In€fact,€as€BellSouth€points€out,€in€the€òòAccess€Charge€Reform€Orderóó€we€specified€a€methodology€for€theÐ ° Ðexogenous€adjustment€to€reallocate€one€third€of€the€portion€of€the€tandem€switching€revenue€requirement€that€isÏrecovered€form€the€TIC€to€the€tandem€switching€rate€element.€€òòSeeóó€BellSouth€Direct€Case€at€16.€€€ {Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú128Ú  Úóó€€òòSeeóó€5€U.S.C.€ðð€551(4). ´Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú129Ú  Úóó€€òòImplementation€of€Special€Access€Tariffs€of€Local€Exchange€Carriersóó,€Memorandum€Opinion€and€Order,€5Ð ° ÐFCC€Rcd€4861€(1990),€òòcitingóó€5€U.S.C.€ðð€551(4);€òòCincinnati€Bell€Telephone€Company€Tariff€FCC€No.€35óó,Ð xÈ ÐMemorandum€Opinion€and€Order€on€Reconsideration,€8€FCC€Rcd€4409,€4413€n.54€(1993). ¦Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú130Ú  Úóó€€òòSee€Access€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2264„70.€ ¡Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú131Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2269„70. ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú132Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16118. “Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú133Ú  Úóó€€òòSee€1997€Annual€Access€Tariff€Filingsóó,€CC€Docket€No.€97„149,€Memorandum€Opinion€and€Order,€13€FCCÐ ° ÐRcd€3815,€3860„66€(1997)€(òò1997€Annual€Access€Investigation€Orderóó);€òòrecon.óó€FCC€98„52€(rel.€March€31,€1998)Ð xÈ Ð(òò1997€Annual€Access€Reconsideration€Orderóó). •Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú134Ú  Úóó€€Bell€Atlantic€Direct€Case€at€9,€GTE€Direct€Case€at€6€n.5.  Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú135Ú  Úóó€€Bell€Atlantic€Direct€Case,€Attachment€C€at€5;€SNET€Direct€Case€at€5. •Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú136Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16004„06. ‚Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú137Ú  Úóó€€òòSeeóó€47€C.F.R.€ðð€69.152(b)(2). œÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú138Ú  Úóó€€GTE€Direct€Case€at€9„10.€€òòSeeóó€47€C.F.R.€ðð€61.46(d)(1).€ tÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú139Ú  Úóó€€GTE€Direct€Case€at€9„10. 1Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú140Ú  Úóó€€Policy€and€Rules€Concerning€Rates€for€Dominant€Carriers,€Second€Report€and€Order,€5€FCC€Rcd€6786,Ð ° Ð6793„95€(1990)€(òòLEC€Price€Caps€Orderóó);€òòseeóó€òòalsoóó,€47€C.F.R.€ðð€61.46(d)(1).€ ŠÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú141Ú  Úóó€€òòLEC€Price€Caps€Orderóó,€5€FCC€Rcd€at€6795. •Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú142Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16004„06. ½Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú143Ú  Úóó€€òòSeeóó€Section€II.D€òòsupraóó;€òòsee€alsoóó,€47€C.F.R.€ðððð69.152,€69.501(e),69.502. ‰Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú144Ú  Úóó€€47€C.F.R.€ðððð€69.152,€69.501(e),€69.502. |Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú145Ú  Úóó€€òòSeeóó€47€C.F.R.€ðð69.152. ªÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú146Ú  Úóó€€òòSee,€e.g.óó,€BellSouth€Direct€Case€at€20„21;€Sprint€LTCs€Direct€Case€at€9. žÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú147Ú  Úóó€€òòSeeóó€Ameritech€Rebuttal€at€2;€MCI€Supplemental€Comments€at€2. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú148Ú  Úóó€€AT&T€Comments€at€19;€MCI€Comments€on€Bell€Atlantic€Transmittal€No.€1033€and€NYNEX€TransmittalÐ ° ÐNo.€488€at€2€(filed€April€2,€1998)€(MCI€Supplemental€Comments). 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Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú153Ú  Úóó€€AT&T€Comments€at€20;€MCI€Comments€at€10.€€AT&T€suggests€that€the€Commission€require€price€capÐ ° ÐLECs€to€recalculate€the€BFP€in€the€following€manner:€€develop€the€exogenous€cost€change€for€line€ports€using€theÏrevenue€methodology;€calculate€a€per„line,€line€port€rate€by€dividing€the€exogenous€cost€change€by€the€total€numberÏof€loops;€add€the€per„line,€line€port€rate€to€the€per„line€BFP;€and€adjust€this€initial€per„line,€line€port€rate€in€futureÏfilings€to€the€same€degree€that€adjustments€are€made€to€the€Common€Line€PCI.€€AT&T€Comments€at€20„21.€€MCIÏsuggests€that€the€initial€line€port€investment€reallocated€from€the€local€switching€category€to€the€Common€LineÏbasket€should€be€large€enough€that,€when€a€"line€port€revenue€requirement"€is€computed€with€an€11.25€percent€rateÏof€return,€this€revenue€requirement€is€equal€to€the€exogenous€cost€change€computed€on€the€basis€of€revenues.€òò€óóMCIÐ ( x ÐComments€at€10„11ò òó ó. •Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú154Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16004„06. ‚Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú155Ú  Úóó€€òòSeeóó€47€C.F.R.€ðð€69.152(b)(2). ÂÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú156Ú  Úóó€€òòAccess€Charge€Reform€óóòòOrderóó,€12€FCC€Rcd€at€16035;€òòsee€alsoóó,€47€C.F.R.€ðð€69.306(d). ÅÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú157Ú  Úóó€€òòAccess€Charge€Reform€óóòòOrderóó,€12€FCC€Rcd€at€16036;€òòsee€alsoóó,€47€C.F.R.€ðð€69.106(f)(1). ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú158Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16078. ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú159Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16122. ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú160Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16076. ŸÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú161Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16055„57,€16076„77. •Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú162Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16070„72. ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú163Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16077. ¹Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú164Ú  Úóó€€òòSee€óóSection€IV.A€òòinfraóó;òò€Access€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16066„70.  Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú165Ú  Úóó€€òòSeeóó€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16066„67.€ –Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú166Ú  Úóó€€òòSee€Access€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16091. ŽÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú167Ú  Úóó€òò€See,€e.g.óó,€BellSouth€Direct€Case€at€16€n.30. bÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú168Ú  Úóó€€In€the€òòAccess€Charge€Reform€Orderóó,€the€Commission€proposed€changes€in€the€allocation€of€General€SupportÐ ° ÐFacilities€(GSF)€costs€between€regulated€interstate€services€and€non„regulated€billing€and€collection€activities,Ïwhich€the€Commission€adopted€in€a€subsequent€order€requiring€price€cap€LECs€to€make€exogenous€costÏadjustments€to€reflect€the€reallocations.€€òòSee€Access€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16155„60;€òòóóòòGSF€Orderóó,Ð X Ð12€FCC€Rcd€at€22446òòóó.€ †Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú169Ú  Úóó€€òòGSF€Orderóó,€12€FCC€Rcd€at€22447„48.€€ †Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú170Ú  Úóó€€òòGSF€Orderóó,€12€FCC€Rcd€at€22447„48.€€ ,Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú171Ú  Úóó€€òòSeeóó€Petition€for€Reconsideration€by€SBC€Companies€of€òòGSF€Orderóó€(filed€Jan.€14,€1998);€Petition€forÐ ° ÐReconsideration€by€U€S€West,€Inc.€of€òòGSF€Orderóó€(filed€Jan.€14,€1998).€€ Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú172Ú  Úóó€€òòTransport€Rate€Structure€and€Pricingóó,€Third€Memorandum€Opinion€and€Order€on€Reconsideration€andÐ ° ÐSupplemental€Notice€of€Proposed€Rulemaking,€10€FCC€Rcd€3030,€3033€(1994). Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú173Ú  Úóó€€òòTransport€Rate€Structure€and€Pricing,óó€Report€and€Order€and€Further€Notice€of€Proposed€Rulemaking,€7Ð ° ÐFCC€Rcd,€7006,€7038€(òòLocal€Transport€Orderóó). ™Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú174Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16072„16086.€ 4Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú175Ú  Úóó€€The€portion€of€tandem„switching€costs€that€the€Commission€initially€allocated€to€the€TIC€will€be€reallocatedÐ ° Ðto€the€tandem€switching€rate€element€in€three€approximately€equal€steps€concluding€January€1,€2000.€€In€addition,Ïthe€costs€of€the€incumbent€LECs'€tandem„switched€transport€transmission€facilities€that€are€not€recovered€fromÏtandem„switched€transport€users€under€the€unitary€rate€structure€will€be€recovered€through€the€TIC€until€July€1,Ï1998. #Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú176Ú  Úóó€€òòLocal€Transport€Order,€óó7€FCC€Rcd€atòò€óó7052.€€The€port€termination€rate€subelement€was€placed€in€theÐ ° Ðtrunking€basket.€€In€theòò€Access€Charge€Reform€Orderóó,€the€Commission€placed€the€port€termination€rate€subelementÐ xÈ Ðin€the€Traffic€Sensitive€basket€by€establishing€a€separate€STP€port€termination€service€rate€element€in€the€TrafficÏSensitive€basket.€€òòAccess€Charge€Reform€Order,€óó12€FCC€Rcd€at€16089,€16091.€€The€rate€for€the€second€of€the€twoÐ X Ðdedicated€signaling€transport€subelements,€the€signaling€link,€recovers€the€costs€for€dedicated€network€access€linesÏthat€transmit€queries€between€a€LEC's€signaling€network€and€the€signaling€networks€of€other€carriers,€such€asÏIXCs.€€òòLocal€Transport€Order,€óó7€FCC€Rcd€atòò€óó7052.€€The€rate€for€the€signaling€link€rate€subelement€is€in€theÐ ` ° Ðtrunking€basket.òò€€Access€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16089,€16091. ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú177Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16076. •Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú178Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16066„67. ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú179Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16067. ¡Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú180Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2273„74. ™Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú181Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó,€13€at€2273„74. ™Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú182Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó,€13€at€2273„74. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú183Ú  Úóó€€Permitted€revenue€is€the€maximum€amount€of€revenue€that€the€Commission's€price€cap€rules€allow€a€priceÐ ° Ðcap€LEC€to€recover€through€interstate€access€charges. ‹Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú184Ú  Úóó€€òòLocal€Transport€Order,€óó7€FCC€Rcd€at€7052. ÝÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú185Ú  Úóó€€US€West€has€recovered€revenues€from€SS7„STP€tariffed€rates€since€first€establishing€such€rates€in€itsÐ ° Ðinterstate€common€channel€signaling€access€capability€tariff€on€January€1,€1992,€pursuant€to€Transmittal€Nos.€203,Ï216,€and€219.€€Letter€from€BB€Nugent,€Executive€Director€„€Federal€Regulatory,€US€West,€Inc.,€to€Richard€J.ÏKwiatkowski,€FCC€(dated€April€21,€1998). éÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú186Ú  Úóó€€US€West€leases€STP€and€STP€port€capacity€to€other€LECs€pursuant€to€contracts.€€US€West€has€recoveredÐ ° ÐSS7„STP€revenues€from€contract€rates€since€December€7,€1994,€the€date€it€established€the€earliest€contract€reflectedÏin€its€existing€records.€€Letter€from€BB€Nugent,€Executive€Director€„€Federal€Regulatory,€US€West,€Inc.,€to€RichardÏJ.€Kwiatkowski,€FCC€(dated€April€21,€1998). SÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú187Ú  Úóó€€Marketing€expenses€are€recovered€through€MLB€and€non„primary€residential€SLCs.€€To€the€extent€thatÐ ° Ðceilings€on€the€SLC€prevent€full€recovery€of€these€amounts,€price€cap€LECs€may€recover€these€amounts€through€theÏnon„primary€residential€line€PICC€and€the€MLB€PICC.€€In€the€event€that€the€PICC€ceilings€prevent€full€recovery€ofÏthese€amounts€any€residual€may€be€recovered€through€per„minute€charges.€€òòóóòòAccess€Charge€Reform€Order,€óó12€FCCÐ X ÐRcd€at€16122„23.€ pÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú188Ú  Úóó€€òòIdóó.€at€16078.€ rÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú189Ú  Úóó€€47€C.F.R.€61.42(d)(6). žÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú190Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2275. eÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú191Ú  Úóó€€òòId.óó eÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú192Ú  Úóó€€òòId.óó eÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú193Ú  Úóó€€òòId.óó eÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú194Ú  Úóó€€òòId.óó eÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú195Ú  Úóó€€òòId.óó ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú196Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16078. rÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú197Ú  Úóó€€47€C.F.R.€ðð€69.401. ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú198Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16078. ËÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú199Ú  Úóó€€òòSee,€e.g.óó,€Frontier€Direct€Case€at€14„19,€Ameritech€Direct€Case€at€10„12;€BellSouth€Direct€Case€at€22„23. ÝÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú200Ú  Úóó€€Aliant€calculated€this€upward€exogenous€cost€adjustment€by€first€calculating€dollar€amounts€equal€to€80Ð ° Ðpercent€of€a€tandem€switching€revenue€requirement€reflecting€COE€maintenance€expenses€allocated€on€the€basis€ofÏcombined€investment€for€central€office€switching,€operator€systems,€and€central€office€transmission€and€the€sameÏrevenue€requirement€reflecting€COE€maintenance€expenses€allocated€on€the€basis€of€individual€investment€forÏthese€categories€of€investment.€€It€then€determined€the€exogenous€cost€adjustment€to€the€TIC€for€COE€maintenanceÏby€calculating€the€difference€between€these€two€revenue€requirements.€€ éÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú201Ú  Úóó€€Aliant€calculated€this€downward€exogenous€cost€adjustment€by€first€calculating€dollar€amounts€equal€to€aÐ ° ÐTrunking€basket€revenue€requirement,€excluding€80€percent€of€the€revenue€requirement€for€tandem€switching,Ïreflecting€COE€maintenance€expenses€allocated€on€the€basis€of€combined€investment€for€central€office€switching,Ïoperator€systems,€and€central€office€transmission€and€the€same€revenue€requirement€reflecting€COE€maintenanceÏexpenses€allocated€on€the€basis€of€individual€investment€for€these€categories€of€investment.€€It€then€determined€theÏexogenous€cost€adjustment€to€undesignated€categories€in€the€Trunking€basket€for€COE€maintenance€by€calculatingÏthe€difference€between€these€two€revenue€requirements.€€Aliant€allowed€the€price€cap€formula€to€distribute€amongÏthe€Trunking€basket€categories,€including€the€TIC,€the€exogenous€cost€adjustment€to€the€undesignated€categories.€€ Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú202Ú  Úóó€€òòSeeóó€AT&T€Comments€at€23€n.40. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú203Ú  Úóó€€òòSeeóó€Aliant€Direct€Case,€Exhibits€5€and€6;€Letter€from€Robert€A.€Mazer,€Counsel€for€Aliant,€to€Magalie€R.Ð ° ÐSalas,€Secretary,€FCC€(dated€April€29,€1998). —Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú204Ú  Úóó€€òòLocal€Transport€Orderóó,€7€FCC€Rcd€at€7017„19,€7037„38. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú205Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16067.€€The€Commission€required€price€cap€LECs€to€allocateÐ ° Ðfrom€the€TIC€to€tandem€switching€a€portion€of€the€tandem€switching€costs€in€the€current€TIC.€€The€CommissionÏrequired€price€cap€LECs€to€determine€this€portion€by€subtracting€from€the€tandem€switching€revenue€requirementÏin€the€current€TIC€those€tandem€switching€costs€that€they€were€required€to€allocate€from€the€TIC€to€serviceÏcategories€other€than€tandem€switching.€€In€the€access€reform€tariff€filings€that€took€effect€on€January€1,€1998,€theÏCommission€required€price€cap€LECs€to€allocate€from€the€TIC€to€tandem€switching€one€third€of€the€tandemÏswitching€costs€that€remained€in€the€current€TIC€after€allocating€those€tandem€switching€costs€that€they€wereÏrequired€to€allocate€from€the€TIC€to€service€categories€other€than€tandem€switching.€€Effective€January€1,€1999,Ïprice€cap€LECs€must€allocate€approximately€one€half€of€the€remaining€amount€of€the€tandem€switching€costs€in€theÐ ð @  ÐTIC€to€tandem€switching.€€Effective€January€1,€2000,€price€cap€LECs€must€allocate€any€portion€of€the€tandemÏswitching€costs€remaining€in€the€TIC€to€tandem€switching.€€òòIdóó. ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú206Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16122. eÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú207Ú  Úóó€€òòId.óó ËÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú208Ú  Úóó€€òòSee,€e.g.,óó€Frontier€Direct€Case€at€14„19,€Ameritech€Direct€Case€at€10„12;€BellSouth€Direct€Case€at€22„23. ,Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú209Ú  Úóó€€Under€price€cap€regulation,€the€weighted€average€of€the€prices€for€the€services€in€a€given€service€category€orÐ ° Ðsubcategory€within€the€Trunking€and€Traffic€sensitive€baskets,€or€the€service€band€index€(SBI),€must€be€less€than€orÏequal€to€the€SBI€upper€limit€for€the€category€or€subcategory.€€Price€cap€LECs€establish€SBI€upper€limits€each€tariffÏyear€for€each€service€category€or€subcategory€that€are€set€at€specified€percentages€above€the€SBI.€ ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú210Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16122. ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú211Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16084. oÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú212Ú  Úóó€€òòId.€óóat€16083. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú213Ú  Úóó€€GTE€Direct€Case€10;€BellSouth€Direct€Case€at€24„25. |Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú214Ú  Úóó€€47€C.F.R.€ðððð€61.45,€61.47. {Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú215Ú  Úóó€€Ameritech€Direct€Case€at€12„13. •Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú216Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16071„72. ÂÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú217Ú  Úóó€€òòSee€Competitive€Telecommunications€Ass's€v.€FCCóó,€87€F.3d€522€(D.C.€Cir.€1996)€("òòCompTelóó"). •Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú218Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16070„71. fÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú219Ú  Úóó€€òòId.óó€ eÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú220Ú  Úóó€€òòId.óó †Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú221Ú  Úóó€€47€C.F.R.€ðð€69.111(c)€(emphasis€added). ‰Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú222Ú  Úóó€€47€C.F.R.€ðð€69.111(c)(1)€(emphasis€added). ¨Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú223Ú  Úóó€€òòSee€e.g.,€Access€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2276. nÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú224Ú  Úóó€€òòId.óó€at€2278. nÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú225Ú  Úóó€€òòId.óó€at€2279. uÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú226Ú  Úóó€€47€C.F.R.€ðð€69.111(c). sÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú227Ú  Úóó€€47€C.F.R.€ðð€69.1(c). žÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú228Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2279. qÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú229Ú  Úóó€€òòId.€óóat€2279„80. eÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú230Ú  Úóó€€òòId.óó eÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú231Ú  Úóó€€òòId.óó nÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú232Ú  Úóó€€òòId.óó€at€2280. •Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú233Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16070„72. {Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú234Ú  Úóó€€òòSee€óó47€C.F.R.€ðð€61.49. 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ÅÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú238Ú  Úóó€€òòSee,€e.g.óó,€Bell€Atlantic€Direct€Case,€Attachment€F€at€3;€U€S€West€Rebuttal€at€7;€GTE€Rebuttal€at€8. šÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú239Ú  Úóó€€òòSee,€e.g.óó,€Bell€Atlantic€Direct€Case,€Attachment€F€at€3. ³Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú240Ú  Úóó€€òòInvestigation€of€Special€Access€Tariffs€of€Local€Exchange€Carriers,€óóMemorandum€Opinion€and€Order,€5Ð ° ÐFCC€Rcd€4861€(1990),€òòcitingóó€5€U.S.C.€ðð€551(4);€òòCincinnati€Bell€Telephone€Company€Tariff€FCC€No.€35,óóÐ xÈ ÐMemorandum€Opinion€and€Order€on€Reconsideration,€8€FCC€Rcd€4409,€4413€n.54€(1993). ¡Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú241Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2279„80. qÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú242Ú  Úóó€€5€U.S.C.€ðð€553(b). 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Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú248Ú  Úóó€€See€òòCompTelóó,€87€F.3d€522.ò òó ó •Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú249Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16070„71. ¢Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú250Ú  Úóó€€òòSee€Access€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2279. ¨Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú251Ú  Úóó€€òòSee,€e.g.óó,€Ameritech€Direct€Case€at€15„16€and€Aliant€Direct€Case€at€6. ™Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú252Ú  Úóó€€òòSee€Access€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16073„74. ŽÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú253Ú  Úóó€€Bell€Atlantic€Direct€Case€at€p.€4€of€Attachment€F. wÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú254Ú  Úóó€€Frontier€Direct€Case€at€22. •Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú255Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16081„86. ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú256Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16081. ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú257Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16081. ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú258Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16083. ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú259Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16083. žÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú260Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó,€13€FCC€Rcd€at€2283. µÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú261Ú  Úóó€€SBC€Direct€Case€at€19„20.€€òòSee,€alsoóó,€Pacific€Bell€Transmittal€No.€1959,€tariff€review€plan€CAP„1€form,Ð ° Ð(dated€December€17,€1997).€€SBC€explains€that€Pacific€Bell's€total€remaining€TIC€on€line€670€is€$33,732,293€andÏthe€facilities„based€TIC€on€line€690€is€$21,258,398,€leaving€a€non„facilities„based€TIC€of€$12,473,895. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú262Ú  Úóó€€Based€on€the€AT&T€worksheet,€LECs€did€not€overtarget€the€residual€TIC€if€the€dollar€amount€of€the€"GDP„Ð ° ÐPI€minus€X„factor"€targeting€is€less€than€the€new€residual€TIC. ëÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú263Ú  Úóó€€Furthermore,€the€calculations€on€the€worksheet€require€only€basic€mathematical€operations€such€as€additionÐ ° Ðand€subtraction. ŽÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú264Ú  Úóó€€òòUniversal€Service€Orderóó,€12€FCC€Rcd€at€9171. ’Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú265Ú  Úóó€€òòAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16147. 'Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú266Ú  Úóó€€The€end„user€charges€assessed€on€services€in€the€Common€Line€basket€were€recovered€through€the€SLCÐ ° Ð(starting€on€January€1,€1998,€some€end„user€revenues€are€also€recovered€through€PICCs€on€lines€that€are€notÏpresubscribed€to€an€IXC);€in€the€Interexchange€basket,€end„user€charges€are€recovered€through€per„minute€tollÏcharges;€and€in€the€Trunking€basket,€end„user€charges€are€recovered€through€special€access€service€providedÏdirectly€to€end„users.€€We€note€that€starting€January€1,€1998,€the€Marketing€basket€also€recovers€end„user€revenuesÏin€the€SLC,€and€that€price€cap€LECs€will€apportion€exogenous€adjustments€for€USF€contributions€assessed€in€thoseÏrevenues€to€the€Marketing€basket€as€well. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú267Ú  Úóó€€Rates€for€tandem„switched€transport,€interconnection,€and€tandem€switch€signalling€do€not€recover€end„userÐ ° Ðrevenues.€€47€C.F.R.€ðððð€61.42(e)(2)(v),€(vi),€and€(vii). ‡Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú268Ú  Úóó€€€The€four€remaining€service€categories€in€the€Trunking€basket€are:€€(1)€€voice€grade€entrance€facilities,€voiceÐ ° Ðgrade€direct„trunked€transport,€voice€grade€dedicated€signalling€transport,€voice€grade€special€access,€WATSÏspecial€access,€metallic€special€access,€and€telegraph€special€access€services;€(2)€audio€and€video€service;€(3)€highÏcapacity€flat„rated€transport,€high€capacity€special€access,€and€DDS€services;€and€(4)€wideband€data€and€widebandÏanalog€services.€€òòSeeóó€47€C.F.R.€ðððð€61.42(e)(2)(i),€(ii),€(iii),€(iv).€ ˜Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú269Ú  Úóó€€òòAccess€Reform€Tariffs€Designation€Orderóó€at€ò òó ó2265. žÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú270Ú  Úóó€€òòAccess€Reform€Tariffs€óóòòDesignation€Orderóó€at€ò òó ó2286. žÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú271Ú  Úóó€€òòAccess€Reform€Tariffs€óóòòDesignation€Orderóó€at€ò òó ó2285. >Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú272Ú  Úóó€€Special€access€interstate€end„user€revenues€are€recovered€in€the€following€three€Trunking€basket€serviceÐ ° Ðcategories:€(1)€Voice€Grade,€WATS,€Metallic€&€Telegraph;€(2)€Audio€&€Video;€and,€(3)€High€Caps€&€DDS. žÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú273Ú  Úóó€€òòòòóóò òó óAccess€Charge€Reform€Orderóó,€12€FCC€Rcd€at€16147. ŸÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú274Ú  Úóó€€òòAccess€Reform€Tariffs€Suspension€Orderóó,€13€FCC€Rcd€at€166„67. ŸÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú275Ú  Úóó€€òòAccess€Reform€Tariffs€Suspension€Orderóó,€13€FCC€Rcd€at€166„67. rÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú276Ú  Úóó€€47€U.S.C.€ðð€204(a). 3Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú277Ú  Úóó€€òò1997€Annual€Access€Reconsideration€Orderóó€at€ðð8,€ò òó ódiscussing€òòFPC€v.€Tennessee€Gas€Trans.€Co.óó,€371€U.S.Ð ° Ð145,€152„53€(1962).€€òòSee€alsoóó€òòLocal€Exchange€Carriers'€Individual€Case€Basis€DS3€Service€Offeringsóó,€CC€DocketÐ xÈ ÐNo.€88„166,€Memorandum€Opinion€and€Order,€6€FCC€Rcd€4776,€4778€(1991)€(affirming€Bureau€denial,€inÏsuspension€order,€of€request€for€retroactive€adjustments€to€rates€under€investigation). ™Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú278Ú  Úóó€€47€U.S.C.€ðð€154(i).€€òòSee€óóòòLincoln€Telephone€and€Telegraph's€Duty€to€Furnish€Interconnection€Facilities€toÐ ° ÐMCI€Telecommunications€Corporation,€Declaratory€Orderóó,€72€F.C.C.€2d€724,€728„29€(1979),€òòaff'd€óó659€F.2d€1092Ð xÈ Ð(D.C.€Cir.€1981)€(òòLincoln€Telephoneóó). œÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú279Ú  Úóó€€òòAccess€Reform€Tariffs€Suspension€Orderóó,€13€FCC€Rcd€at€166. œÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú280Ú  Úóó€€òòAccess€Reform€Tariffs€Suspension€Orderóó,€13€FCC€Rcd€at€166. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú281Ú  Úóó€€òòSeeóó€U€S€West€Direct€Case€at€12. …Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú282Ú  Úóó€€òòSeeóó€Bell€Atlantic€Direct€Case€at€9. Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú283Ú  Úóó€€For€example,€the€price€cap€LECs'€methodology€for€calculating€the€exogenous€cost€change€for€line€portsÐ ° Ðresulted€in€local€switching€rates€that€were€higher€than€justified€and€CCL€rates€or€PICCs€(for€carriers€with€MLBÐ xÈ  ÐPICC€below€the€$2.75€cap)€that€were€lower€than€the€price€cap€LECs€otherwise€would€have€been€permitted€toÏcharge.€€In€addition,€the€price€cap€LECs'€methodology€for€calculating€the€exogenous€cost€change€for€end€officeÏtrunk€ports€resulted€in€local€switching€rates€that€were€higher€than€justified€and€rates€for€dedicated€and€shared€endÏoffice€trunk€ports€that€were€lower€than€the€price€cap€LECs€otherwise€would€have€been€permitted€to€charge. ÃÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú284Ú  Úóó€€For€example,€in€the€case€of€line€ports,€the€additional€payment€caused€by€unreasonably€high€local€switchingÐ ° Ðrates€did€not€exactly€equal€the€savings€from€correspondingly€lower€CCL€rates€because€each€IXC€has€a€different€mixÏof€originating€and€terminating€minutes€subject€to€the€CCL€rates.€€In€the€case€of€end€office€trunk€ports,€theÏadditional€payment€caused€by€unreasonably€high€local€switching€rates€did€not€exactly€equal€the€savings€fromÏcorrespondingly€lower€end€office€trunk€port€rates€because€dedicated€end€office€trunk€port€costs€now€are€recoveredÏthrough€a€flat€rate,€rather€than€the€per„minute€local€switching€rate.€€Those€IXCs€with€a€high€number€of€minutes€perÏdedicated€trunk€may€have€paid€more€in€switching€than€they€saved€in€end€office€trunk€ports,€while€those€IXCs€withÏfewer€minutes€per€dedicated€trunk€may€have€paid€less€than€they€saved.€ žÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú285Ú  Úóó€€òòSeeóó€47€C.F.R.€ðððð€69.153,€69.154,€69.155,€69.156(d)(e). •Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú286Ú  Úóó€€òò1997€Annual€Access€Reconsideration€Orderóó€at€ðð€8. –Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú287Ú  Úóó€€òòSeeóó€47€C.F.R.€ðððð€69.154,€69.155,€69.156(d)(e). œÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú288Ú  Úóó€€In€Illinois,€Ameritech€did€not€exceed€the€MLB€PICC€cap€of€$2.75. †Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú289Ú  Úóó€€òòSeeóó€Section€II.C,€òòsupraóó.ò òó ó =Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú290Ú  Úóó€€We€note€that€these€lines€are€assessed€a€SLC,€pursuant€to€section€69.152(a),€which€states€that€a€SLC€isÐ ° Ðassessed€upon€end€users€that€subscribe€to€local€exchange€service.€€òòSeeóó€47€U.S.C.€ðð€69.152(a). Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú291Ú  Úóó€€òòSeeóó€47€C.F.R.€ðð€69.153(b). ßÝ ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú292Ú  Úóó€€Ameritech€Transmittal€No.€1146,€Access€Reform€Revision,€Description€and€Justification,€page€1€(March€17,Ð ° Ð1998). ¢Ý ƒÂøó!ÝÑ8À6™ã6XXdÈdÈ8ÑÑ @ ÑÓ  ÓÑ @ ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$$‰CÓÝ  ÝÔ€8&\L%X8XàYÔÔ€8ôÑõ%8&\LÔ€€€€€òòÚ  Ú293Ú  Úóó€€òòSeeóó€Bell€Atlantic€Direct€Case€at€3;€U€S€West€Direct€Case€at€5„6. ù(*!2ñv$¤¤Ý ƒÂøó!ÝÑ8€6™ã6XXdÈdÈ8ÑÑ  ÑÓ  ÓÑ  ÑÔ€6X™ãXX6XÔÔ€8XàYXX6X™ãÔÓC€ ‰ ÿÿ$#ÅCÓÝ  ÝÓÓÔ€8&\L%X8XàYÔ€€€€€òòÚ  Ú0Ú  Úóó1234 ÿÿ;=CIOU]ekOrderI.A.1.a.(1)(a)i)a))*+,-./0 ÿÿCy…‹‘™¡§Paragraph1. a. i. 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Ðà@>>$ìàFederal€Communications€CommissionˆÌà@<<)ìàWashington,€D.C.€20554ó óˆÐ ÷¸ ÐÌIn€the€Matter€ofà@ÎÎ4ìà)ˆÐ ¯ p Ðà@ÎÎ4ìà)ˆÌTariffs€Implementingà@ÎÎ4ìà)ˆà  àà p àCC€Docket€No.€97„250Ð g ( ÐAccess€Charge€Reformà@ÎÎ4ìà)ˆÐ C  ÐÌÌÓ  Óò òMEMORANDUM€OPINION€AND€ORDERó óРט  ÐÓ  ÓÌÌÓ °p°œXÓ€€€ò òAdopted:€€June€1,€1998ó óà p àò òReleased:€€June€1,€1998ó óÐ k,  ÐÌÓo[°X°` ¸ hÀpÈ xÐ (#€%Ø'0*ˆ,à.813è5@8˜:ð<H? A°hoÓÌBy€the€Commission:ÌÌI.€€à  àIntroduction€à ¸ àà  àà h àà À àà  àà p àà È àà  àà x àà Ð à€€1Ð »| ÐÌII.€€à  àCommon€Line€Issues€€à  à€Ð s4 Ðà  àA.à ` àNon„Primary€Residential€Linesà À àà  àà p àà È àà  àà x à€€€à Ð à€€8Ð O Ðà  àB.à ` àDefinitions€of€Primary€and€Non„Primary€Residential€Linesòòóóà  àà x à€à Ð à32Ð +ì Ðà  àC.à ` àPICC€and€SLC€Demand€Amountsà  àà p àà È àà  àà x àà Ð à40Ð È Ðà  àD.à ` àHistorical€Understatement€of€the€BFPà  àà p àà È àà  àà x à€à Ð à47Р㤠ÐÓ  ÓÌIII.à  àMethodology€for€Calculating€Exogenous€Adjustments€Ð ›\ Ðà  àthat€Reflect€Cost€ReallocationsÌà  àA.à ` àBackgroundà  àà h àà À àà  àà p àà È àà  àà x àà Ð à€69Ð S Ðà  àB.à ` àDiscussionà  àà h àà À àà  àà p àà È àà  àà x àà Ð à€71Ð / ð ÐÌIV.à  àTransport€Adjustment€IssuesÐ ç!¨ Ðà  àA.à ` àSS7€Costsà  àà h àà À àà  àà p àà È àà  àà x àà Ð à€€96Ð Ã"„  Ðà  àB.à ` àCOE€Maintenance€and€Marketing€Cost€Adjustments€to€the€TICà  àà x à104Ð Ÿ#`! Ðà  àC.à ` àImpact€on€the€TIC€Arising€from€the€Use€of€Actual€Minutes€à  àà x àà Ð à127Ð {$<" Ðà  àà ` àof€Use€Rather€than€an€Assumed€9,000€Minutes€of€UseÌà  àD.à ` àResidual€and€Facilities„Based€TICà  àà p àà È àà  àà x àà Ð à149Ð 3&ô$ ÐÌV.à  àRecovery€of€Universal€Service€Support€ObligationsÐ ë'¬ & Ðà  àA.à ` àBackgroundà  àà h àà À àà  àà p àà È àà  àà x àà Ð à160Ð Ç(ˆ!' Ðà  àB.à ` àDiscussionà  àà h àà À àà  àà p àà È àà  àà x àà Ð à165Ð £)d"( ÐÌÐ  [+$*£ ÐVI.à  àRefund€LiabilityÐ ? Ðà  àA.à ` àBackgroundà  àà h àà À àà  àà p àà È àà  àà x àà Ð à173Ð Ü Ðà  àB.à ` àDiscussionà  àà h àà À àà  àà p àà È àà  àà x àà Ð à174Ð ÷¸ ÐÌò òó óVII.à  àCompliance€Filingsà  àà h àà À àà  àà p àà È àà  àà x àà Ð à184Ð ¯ p ÐÌVIII.€€à  àOrdering€Clausesà  àà h àà À àà  àà p àà È àà  àà x àà Ð à185Ð g ( ÐÌà  àAppendix€A€„€List€of€Tariffs€and€Pleadings€Filed€by€PartiesÌà  àAppendix€B€„€Price€Cap€LEC€Line€Count€InformationÌÌò òI.à  àIntroductionó óÐ ³t  ÐÌà  àÔ2ÿÿÔÚ  Ú1Ú  Ú.Ô3  Ô€€Interexchange€carriers€(IXCs)€must€purchase€interstate€access€services€from€local€exchangeÏcarriers€(LECs)€in€order€to€provide€long-distance€telephone€service€to€business€and€residential€telephoneÏcustomers.€€Under€the€Commission's€rules,€incumbent€LECs€are€regulated€as€dominant€carriers€becauseÏthey€have€market€power€in€the€provision€of€access€services.€€This€Commission€regulates€the€manner€inÏwhich€incumbent€LECs€provide€access€in€order€to€prevent€that€market€power€from€being€exercised€to€theÏdetriment€of€consumers.€ÌÌÔ  ÔÝ‚MÿÿÿÝÔ  ÔÔ  ÔòòÝ  Ýóóà  àÔ2ÿÿÔÚ  Ú2Ú  Ú.Ô3  Ô€€On€May€16,€1997,€the€Commission€released€the€òòAccess€Charge€Reform€Orderóó,׃‹×Ý ƒŠÿÿÝòòÚ  Ú1Ú  ÚóóÝ  Ý×  ×€amending€theÐ o0 ÐCommission's€access€charge€rules€so€that€access€charges€better€reflect€the€manner€in€which€the€underlyingÏcosts€are€incurred.€€The€reforms€and€the€rate€restructuring€mandated€by€that€Order€involve€the€mostÏcomprehensive€changes€to€the€Commission's€system€of€interstate€switched€access€charges€since€theseÏtariffed€charges€first€were€introduced€more€than€ten€years€ago.€€Because€many€of€the€amended€rules€tookÏeffect€on€January€1,€1998,€the€Commission€directed€incumbent€LECs€to€file€implementing€tariffs€that€wouldÏbe€effective€on€that€date.€€LECs€also€were€required€to€file€tariff€revisions,€effective€January€1,€1998,€toÏcomply€with€(1)€the€òò1997€Annual€Access€Tariff€Investigation€Order,óó׃Œè×Ý ƒŠÿÿÝòòÚ  Ú2Ú  ÚóóÝ  Ý×  ×€(2)€the€òòAccess€Charge€Reform€ThirdÐ s4 ÐReport€and€Orderóó,׃@×Ý ƒŠÿÿÝòòÚ  Ú3Ú  ÚóóÝ  Ý×  ×€and€(3)€revisions€necessary€to€implement€the€new€universal€service€supportÐ O Ðmechanisms.×ƒŽ˜×Ý ƒŠÿÿÝòòÚ  Ú4Ú  ÚóóÝ  Ý×  ×€€Ð + ì Ðâ âÐ !È Ðà  àÔ2ÿÿÔÚ  Ú3Ú  Ú.Ô3  Ô€€On€December€30,€1997,€the€Common€Carrier€Bureau€(Bureau)€released€the€òòAccess€ChargeÐ ? ÐReform€Tariffs€Suspension€Orderóó,׃×Ý ƒŠÿÿÝòòÚ  Ú5Ú  ÚóóÝ  Ý×  ×€which,€òòinter€aliaóó,€suspended€for€one€day€the€access€tariffsÐ Ü Ðâ âimplementing€the€access€charge€reform€requirements€filed€by€the€LECs,€imposed€an€accounting€order,€andÏinitiated€an€investigation€into€the€lawfulness€of€a€number€of€issues€raised€by€these€tariff€filings.€€TheÏBureau€concluded€that€the€access€tariffs€filed€by€all€the€price€cap€LECs€raised€significant€questions€ofÏlawfulness€that€warranted€investigation.€€Those€carriers€are:€€Aliant€Communications€Company€(Aliant);ÏAmeritech€Operating€Companies€(Ameritech);€Bell€Atlantic€Operating€Companies€(Bell€Atlantic);׃ ×Ý ƒŠÿÿÝòòÚ  Ú6Ú  ÚóóÝ  Ý×  ×Ð g ( ÐBellSouth€Telecommunications,€Inc.€(BellSouth);€Cincinnati€Bell€Telephone€Company€(Cincinnati€Bell);ÏCitizens€Telecommunications€Companies€(Citizens);€Frontier€Communications€of€Minnesota€and€Iowa€andÏFrontier€Telephone€of€Rochester€(€collectively,€Frontier);€GTE€Telephone€Operating€Companies€(GTOC)Ïand€GTE€Systems€Telephone€Companies€(GSTC)€(collectively€GTE);€Southern€New€England€TelephoneÏCompany€(SNET);€Southwestern€Bell€Telephone€Company€(SWBT),€Pacific€Bell€and€Nevada€BellÏ(collectively,€SBC);€Sprint€Local€Telephone€Companies€(Sprint€LTCs);€and€US€West€Communications,ÏInc.€(US€West).€€ÌÌà  àÔ2ÿÿÔÚ  Ú4Ú  Ú.Ô3  Ô€€On€January€28,€1998,€the€Bureau€released€the€òòAccess€Charge€Reform€Tariffs€DesignationÐ #ä  ÐOrderóó,׃‘@×Ý ƒŠÿÿÝòòÚ  Ú7Ú  ÚóóÝ  Ý×  ×€which€designated€for€investigation€issues€regarding:€€(1)€non„primary€residential€line€counts;€(2)€theÐ ÿÀ  Ðdemand€for€lines€that€are€assessed€presubscribed€interexchange€carrier€charges€(PICCs)€and€subscriber€lineÏcharges€(SLCs);€(3)€the€adjustment€of€common€line€revenues€due€to€the€historic€understatement€of€LECs'Ïrevenue€requirements€for€the€base€factor€portion€of€the€Common€Line€basket;€(4)€the€methodology€forÏcalculating€exogenous€cost€changes€that€reflect€reallocations€of€rate€elements€or€partial€rate€elements;€(5)Ïcentral€office€equipment€(COE)€maintenance€and€marketing€exogenous€cost€adjustments€to€the€transportÏinterconnection€charge€(TIC);€(6)€Signalling€System€7€(SS7)€costs€in€the€tandem„switched€transportÏrevenue€requirement;€(7)€the€impact€on€the€TIC€arising€from€the€use€of€actual€minutes€of€use€(MOU)€ratherÏthan€an€assumed€9,000€MOU€for€circuit€loadings€after€computing€tandem„switched€transport€rates;€(8)Ïrecalculations€of€the€residual€and€facilities„based€TIC€amounts;€and€(9)€recovery€of€universal€serviceÏsupport€obligations.ÌÌà  àÔ2ÿÿÔÚ  Ú5Ú  Ú.Ô3  Ô€€Price€Cap€LECs€filed€their€direct€cases€on€February€27,€1998.€€Oppositions€and€comments€onÏthese€direct€cases€were€filed€on€March€16,€1998.׃’` ×Ý ƒŠÿÿÝòòÚ  Ú8Ú  ÚóóÝ  Ý×  ×€€All€of€the€price€cap€LECs€except€for€Citizens€and€SNETÐ + ì Ðfiled€rebuttal€cases€on€March€23,€1998.׃“ð ×Ý ƒŠÿÿÝòòÚ  Ú9Ú  ÚóóÝ  Ý×  ×€€On€March€25,€1998,€the€Bureau€released€a€public€noticeÐ !È Ðestablishing€a€pleading€cycle€for€comments€and€reply€comments€based€upon€revisions€to€the€access€chargeÏreform€tariffs€filed€by€several€price€cap€LECs€after€January€1,€1998.€€AT&T€and€MCI€filed€commentsÏpursuant€to€this€public€notice€on€April€2,€1998.€€On€April€8,€1998€Bell€Atlantic€and€Frontier€filed€replies€inÏresponse€to€those€comments.׃”˜×Ý ƒŠÿÿÝòòÚ  Ú10Ú  ÚóóÝ  Ý×  ×Ð Ó ” ÐÌòòóóà  àÔ2ÿÿÔÚ  Ú6Ú  Ú.Ô3  Ô€€We€have€reviewed€the€direct€cases,€comments,€and€replies€filed€in€response€to€the€òòAccessÐ ‹ L ÐReform€Tariffs€Designation€Orderóó.€€Based€on€our€examination€of€the€LECs'€tariffs,€and€the€direct€cases,Ð g ( Ðcomments,€and€replies,€we€find€that€certain€of€the€price€cap€LECs'€access€reform€tariffs€are€unreasonable.€ÏSpecifically,€we€determine€that€for€Bell€Atlantic„South,€the€Sprint€LTCs,€and€U€S€West,€the€currentÏmaximum€per„minute€carrier€common€line€(CCL)€charge€is€unreasonably€high€due€to€past€understatementÏof€the€per„line€revenue€requirement€for€that€basket.€€In€addition,€we€find€that€Pacific€Bell€and€GTEÏunderestimated€their€non„primary€residential€line€counts,€which€resulted€in€unreasonably€high€per„minuteÏresidual€charges€assessed€on€IXCs.€€We€also€conclude€that€Ameritech's€failure€to€count€inward„only€lines€asÏlines€that€are€subject€to€the€flat„rated€PICC€for€purposes€of€calculating€the€CCL€charge€resulted€inÏunreasonably€high€per„minute€residual€charges€assessed€on€IXCs.€€Further,€we€require€that€price€cap€LECsÏuse€permitted€revenues€to€calculate€the€exogenous€adjustments€required€by€the€òòAccess€Charge€ReformÐ #ä  ÐOrderóó€because€using€their€Part€69€revenue€requirement€and€an€11.25%€rate€of€return€does€not€remove€fullyÐ ÿÀ  Ðfrom€a€price€cap€basket€the€permitted€revenues€associated€with€each€exogenous€adjustment.€€We€alsoÏdetermine€that€some€of€the€price€cap€LECs€did€not€calculate€properly€certain€exogenous€adjustments€to€theÏTrunking€basket,€including€the€removal€of€signalling€network€costs€from€the€transport€interconnectionÏcharge€(TIC),€the€allocation€of€marketing€and€COE€maintenance€costs€among€service€categories€in€theÏTrunking€basket,€the€targeting€of€productivity€factor€reductions€to€the€residual€TIC,€and€the€use€of€actualÏminutes€as€an€allocator€for€a€tandem€switching€rate€element.€€We€further€find€that€some€price€cap€LECs€didÏnot€justify€certain€calculations€made€to€implement€the€new€factors€for€the€recovery€of€universal€service€fundÏ(USF)€obligations.€€ÌÌà  àÔ2ÿÿÔÚ  Ú7Ú  Ú.Ô3  Ô€€We€direct€price€cap€LECs€to€recalculate€their€rates€in€accordance€with€these€findings€and€to€fileÏtariff€revisions€to€reflect€the€new€rates.€€In€addition,€we€require€price€cap€LECs€to€make€refunds€to€theirÏcustomers€for€overcharges€resulting€from€the€lingering€effect€of€past€understatement€of€the€per„line€revenueÏrequirement€for€the€Common€Line€basket,€the€underestimation€of€non„primary€residential€line€counts,€andÏthe€exemption€of€inward„only€lines€from€the€assessment€of€the€flat„rated€presubscribed€IXC€charge.€€We€doÏnot,€however,€require€price€cap€LECs€to€make€refunds€for€overcharges€resulting€from€the€use€of€a€revenueÏrequirement€methodology€for€exogenous€cost€changes,€improper€calculations€of€adjustments€to€theÏTrunking€basket,€and€unjustified€calculations€for€allocating€USF€obligations.€ÌÝ‚Mÿÿÿ2BC);ÝòòÔ  ÔÔ  ÔÝ  ÝÝ‚MÿÿÿÝÔ  ÔÔ  Ôò…òÝ  Ýó…óòòò òóóó óÐ w$8" ÐÝ‚MÿÿÿÊ5BC);Ýò…òÔ  ÔÔ  ÔÝ  ÝÝ‚MÿÿÿÝÔ  ÔÔ  Ôò…òÝ  Ýó…óò òÔ& ( ÔII.à  àCommon€Line€Issuesó óÐ ? ÐÌà  àò òA.à ` àNon„Primary€Residential€Line€Issuesó óÐ K  ÐÌà  àà ` à1.à ¸ àBackgroundÐ W  ÐÔ'(?ž6ÔÌà  àÔ2ÿÿÔÚ  Ú8Ú  Ú.Ô3  Ô€€òòóóThe€Commission's€rules€permit€price€cap€LECs€to€recover€their€permitted€common€line€revenues€through:€(1)€a€monthly€per€„line€SLC€billed€to€end€users;€(2)€aÐ g ( Ðmonthly€per„line€PICC€billed€to€the€IXCs€to€whom€the€end€user€has€presubscribed;€and€(3)€a€per„minute€CCL€charge€billed€to€IXCs.׃•×Ý ƒŠÿÿÝò…òÚ  Ú11Ú  Úó…óÝ  Ý×  ×€€Effective€January€1,€1998,€the€SLC€capÐ ï ° Ðfor€non„primary€residential€lines€was€increased€from€$3.50€to€$5.00.׃–X×Ý ƒŠÿÿÝò…òÚ  Ú12Ú  Úó…óÝ  Ý×  ×€€Permitted€interstate€common€line€revenues€not€recoverable€from€SLCs€because€of€the€caps,€may€beÐ w 8 Ðrecovered€through€PICCs.€€PICCs€are€capped€at€$1.50€for€non„primary€residential€lines€and€$2.75€for€multi„line€business€(MLB)€lines€in€1998.׃—è×Ý ƒŠÿÿÝò…òÚ  Ú13Ú  Úó…óÝ  Ý×  ×€€For€primary€residential€linesÐ ÿ À  Ðand€single„line€business€lines,€the€PICC€is€currently€capped€at€$0.53€per€month.׃˜x×Ý ƒŠÿÿÝò…òÚ  Ú14Ú  Úó…óÝ  Ý×  ×€€The€remainder€of€permitted€common€line€revenues€is€recoverable€through€the€CCL€charge.Ð ‡ H  ÐÌà  àÔ2ÿÿÔÚ  Ú9Ú  Ú.Ô3  Ô€€òòóóThe€Commission's€purpose€in€the€òòAccess€Charge€Reform€Orderóó€was€to€recover€non„traffic€sensitive€costs€through€flat€fees,€such€as€SLCs€and€PICCs,€and€toÐ — X  Ðeliminate€implicit€cross„subsidies€between€classes€of€end€users.€€If€price€cap€LECs'€non„primary€residential€line€counts€are€too€low,€revenues€recoverable€through€SLCs€andÏPICCs€are€understated,€and€the€maximum€CCL€charges€is€too€high.€€For€price€cap€LECs€that€no€longer€have€a€CCL€charge€or€other€per„minute€residual€charges,׃™×Ý ƒŠÿÿÝò…òÚ  Ú15Ú  Úó…óÝ  Ý×  ×€the€maximumÐ §h Ðmulti„line€business€PICC€is€too€high€and€the€non„primary€residential€lines€not€identified€as€non„primary€make€too€small€a€contribution€to€permitted€common€line€revenues.ÌÌà  àÔ2ÿÿ ÔÚ  Ú10Ú  Ú.Ô3  Ô€€òòóóThe€Bureau€designated€for€investigation€the€line€counts€for€primary€and€non„primary€residential€lines€for€all€price€cap€LECs.׃š˜×Ý ƒŠÿÿÝò…òÚ  Ú16Ú  Úó…óÝ  Ý×  ×€€The€Bureau€observed€thatÐ ?  Ðnon„primary€residential€line€counts€were€lower€than€various€published€estimates€and€price€cap€LEC€public€statements.€€The€Bureau€required€the€price€cap€LECs€to€identify€theÏnumber€of€lines׃›( ×Ý ƒŠÿÿÝò…òÚ  Ú17Ú  Úó…óÝ  Ý×  ×€in€each€of€the€following€categories:€(1)€primary€residential€lines;€(2)€single„line€business€lines;€(3)€non„primary€residential€lines;€and€(4)€Basic€Rate€InterfaceÐ O  Є€Integrated€Services€Digital€Network€(BRI„ISDN)€lines.׃œH ×Ý ƒŠÿÿÝò…òÚ  Ú18Ú  Úó…óÝ  Ý×  ×òòóóРט  ÐÌà  à2.à ` àDiscussionÐ ç¨  ÐÌà  àÔ2ÿÿ ÔÚ  Ú11Ú  Ú.Ô3  Ô€€òòóóIn€this€section,€we€calculate€the€percentage€of€non„primary€residential€lines€to€total€residential€lines€reported€by€the€price€cap€LECs€and€compare€theseÐ ÷¸  Ðpercentages€with€data€collected€by€the€Commission€Staff,€independent€studies€of€additional€residential€line€penetration€levels€and€price€cap€LEC€public€statements.׃Ø×Ý ƒŠÿÿÝò…òÚ  Ú19Ú  Úó…óÝ  Ý×  ×€€WhereÐ @  Ðwe€find€the€percentage€reported€by€a€price€cap€LEC€to€be€unreasonable,€we€use€these€data€to€prescribe€a€corrected€count.€€Based€on€the€analysis€described€below,€we€prescribeÏcorrected€counts€for€Pacific€Bell€and€GTE.ÌÌà  àÔ2ÿÿ ÔÚ  Ú12Ú  Ú.Ô3  Ô€€òòPercentage€of€Non„Primary€Residential€Lines€to€Total€Residential€Linesóó.€€òòòòóóÔ€8XàYXJ8&\LÔóóFigure€1€below€presents€the€residential€line€count€information€reported€by€theÐ Ÿ` Ðprice€cap€LECs€in€their€direct€cases€separated€by:€(1)€primary€residential€lines;€(2)€lifeline€lines;€(3)€non„primary€residential€lines;€and€(4)€BRI„ISDN€lines.׃žÀ×Ý ƒŠÿÿÝò…òÚ  Ú20Ú  Úó…óÝ  Ý×  ×€€TheÐ +ì Ðâ âpercentage€of€non„primary€residential€lines€to€total€residential€lines€shown€in€the€last€column€in€Figure€1,€is€calculated€as€the€ratio€of€the€sum€of€non„primaryÐ ·x Ðresidential€and€BRI„ISDN€lines€over€the€total€residential€lines.׃Ÿ×Ý ƒŠÿÿÝò…òÚ  Ú21Ú  Úó…óÝ  Ý×  ×€€€€We€use€the€percentage€figures€set€forth€in€the€last€column€of€Figure€1€in€our€analysis€to€determineÐ ? Ðâ âthe€efficacy€of€the€price€cap€LECs'€non„primary€residential€line€identification.׃  ×Ý ƒŠÿÿÝò…òÚ  Ú22Ú  Úó…óÝ  Ý×  ×€€Ô€86>h8XàYÔà  àà p àà È àà  àà x àÐ ËŒ ÐÔ& ¾ ÔÌÌà@DD0ìàFIGURE€1Ô€8XàYXð86>ԈР Ð Ðà@ìì4ìàÔ€86>h8XàYÔˆÌà@\\ìàPrice€Cap€LEC€Direct€Case€and€Tariff€Filing€Submission€ˆÌà@üüìàof€Residential€Access€Lines€and€Percentage€of€Additional€LinesˆÌà@tt"ìà(Actual€Number€of€Lines€times€Twelve)ˆÌà0  àà0` (#(#àÐ ` (#` (# Ðà  àà ` àà ¸ àà  àà h àà À àà  àà p àà È àà  àà x àà Ð à€€€€€€€€€€(6)¼à  àÌÔ*qƒ¡¢ ddd Xdd Xdd X°(#°(#qÔÔ,rÔÔ,’ÔÔ,ãÔÔ,°ÔÔ,¶ÔÔ,ƒÔÔ,jÔÔ+  ÔÐ ," ï °  €¾€‚(‚ƒƒ„„,ÐÐ ' Ø " „„'ÐÐ ' Ø" „„'ÐÐ ' Ø" „„'ÐÐ ' Ø" „„'ÐÐ ' Ø" „„'Ѐ€€€€€€(5)€€€€€Ð ' Ø" „„'ÐADDITIONALÐ ?5 Ø" ( ¾ €¾€‚(‚ƒƒ„„?Ѐ€€€€€€€€€€€€Ð 'Õ –3 „„'Ð(1)€€€€€€€€€€Ð 'Õ –3 „„'Ð(2)€€€€€€€€Ð 'Õ –3 „„'Ð(3)€€€€€€€€€€Ð 'Õ –3 „„'Ð(4)€€€€€€€€Ð 'Õ –3 „„'ÐTOTAL€€€€€€€Ð 'Õ –3 „„'ÐLINES€as€a€%€of€Ð ?5Õ –3 ( ¾ €¾€‚(‚ƒƒ„„?ÐÐ '“ T3 „„'ÐÐ '“ T3 „„'ÐÐ '“ T3 „„'ÐÐ '“ T3 „„'ÐÐ '“ T3 „„'ÐRESIDENTIAL€Ð '“ T 3 „„'Ѐ€€TOTAL€€€€€€€€€Ð ?5“ T!3 ( ¾ €¾€‚(‚ƒƒ„„?ÐÐ 'Q"3 „„'ÐPRIMARY€€€Ð 'Q#3 „„'ÐÐ 'Q$3 „„'ÐNON„PRIMARYÐ 'Q%3 „„'ÐÐ 'Q&3 „„'ÐLINES€€€€€€€Ð 'Q'3 „„'Ѐ€€RESIDENTIAL€€€€€Ô ÿÿ ÔÏRESIDENTIA€€€€€€AL€€ŽÔ  ÔÐ @6Q(3 ( ¾  €¾€‚(‚ƒƒ„„@ÐÐ 'Ð)3 „„'ÐRESIDENTIALÐ 'Ð*3 „„'Ѐ€€€€€€€LIFELINEÐ 'Ð+3 „„'ÐRESIDENTIAL€Ð 'Ð,3 „„'ÐBRI„ISDNÐ 'Ð-3 „„'Ð(5)€=€(1)€+€(2)€+Ð 'Ð.3 „„'ÐLINES€€€€€€€Ð ?5Ð/3 ( ¾ €¾€‚(‚ƒƒ„„?ÐPRICE€CAP€LECÐ 'ÍŽ03 „„'ÐLINES€€€€€€Ð 'ÍŽ13 „„'ЀLINES€€€€€Ð 'ÍŽ23 „„'ÐLINES€€€€€€€€Ð 'ÍŽ33 „„'ÐLINES€€€€Ð 'ÍŽ43 „„'Ð(3)€+€(4)€€€€€€Ð 'ÍŽ53 „„'Ð(6)€=€[(3)+(4)]/(5)Ð ?5ÍŽ63 ( ¾ €¾€‚(‚ƒƒ„„?ÐÔ ÿÿ ÔÌÌÌÌŽÔ  ÔÐ (‹L 7" „„(Ѐ€€€€Ð '‹L 8" „„'ÐÐ '‹L 9" „„'ÐÐ '‹L :" „„'ÐÐ '‹L ;" „„'ÐÐ '‹L <" „„'ÐÐ ?5‹L =" ( ¾ €¾€‚(‚ƒƒ„„?ÐBell€Atlantic€„€SouthÐ 'I >3 „„'Ð140,050,374€Ð 'I ?3 „„'Ð515,982€Ð 'I @3 „„'Ð14,127,780€Ð 'I A3 „„'Ð2,189,736€Ð 'I B3 „„'Ð156,883,872€Ð 'I C3 „„'Ð10.40%Ð ?5I D3 ( ¾ €¾€‚(‚ƒƒ„„?ÐBell€Atlantic€„€NorthÐ 'È E3 „„'Ð114,665,434€Ð 'È F3 „„'Ð11,982,847€Ð 'È G3 „„'Ð8,891,924€Ð 'È H3 „„'Ð1,229,234€Ð 'È I3 „„'Ð136,769,439€Ð 'È J3 „„'Ð7.40%Ð ?5È K3 ( ¾ €¾€‚(‚ƒƒ„„?ÐBell€SouthÐ 'ņ L3 „„'Ð161,022,932€Ð 'ņ M3 „„'Ð2,965,743€Ð 'ņ N3 „„'Ð15,514,466€Ð 'ņ O3 „„'Ð426,424€Ð 'ņ P3 „„'Ð179,929,565€Ð 'ņ Q3 „„'Ð8.86%Ð ?5ņ R3 ( ¾ €¾€‚(‚ƒƒ„„?ÐGTEÐ 'ƒD S3 „„'Ð135,203,568€Ð 'ƒD T3 „„'Ð7,114,360€Ð 'ƒD U3 „„'Ð6,851,592€Ð 'ƒD V3 „„'Ð314,184€Ð 'ƒD W3 „„'Ð149,483,704€Ð 'ƒD X3 „„'Ð4.79%Ð ?5ƒD Y3 ( ¾ €¾€‚(‚ƒƒ„„?ÐAmeritechÐ 'A Z3 „„'Ð115,893,383€Ð 'A [3 „„'Ð1,911,549€Ð 'A \3 „„'Ð15,859,845€Ð 'A ]3 „„'Ð711,668€Ð 'A ^3 „„'Ð148,324,741€Ð 'A _3 „„'Ð11.17%Ð ?5A `3 ( ¾ €¾€‚(‚ƒƒ„„?ÐPacific€BellÐ 'ÿÀ a3 „„'Ð87,323,331€Ð 'ÿÀ b3 „„'Ð28,977,232€Ð 'ÿÀ c3 „„'Ð2,373,481€Ð 'ÿÀ d3 „„'Ð813,015€Ð 'ÿÀ e3 „„'Ð119,487,059€Ð 'ÿÀ f3 „„'Ð2.67%Ð ?5ÿÀ g3 ( ¾ €¾€‚(‚ƒƒ„„?ÐUS€WESTÐ '½~h3 „„'Ð110,665,848€Ð '½~i3 „„'Ð2,734,332€Ð '½~j3 „„'Ð12,523,500€Ð '½~k3 „„'Ð520,812€Ð '½~l3 „„'Ð126,444,492€Ð '½~m3 „„'Ð10.32%Ð ?5½~n3 ( ¾ €¾€‚(‚ƒƒ„„?ÐSouthwestern€BellÐ '{<o3 „„'Ð103,661,796€Ð '{<p3 „„'Ð2,265,840€Ð '{<q3 „„'Ð9,656,712€Ð '{<r3 „„'Ð835,572€Ð '{<s3 „„'Ð116,419,920€Ð '{<t3 „„'Ð9.01%Ð ?5{<u3 ( ¾ €¾€‚(‚ƒƒ„„?ÐSPRINT€LTC*Ð '9úv3 „„'Ð59,856,072€Ð '9úw3 „„'Ð577,320€Ð '9úx3 „„'Ð6,031,368€Ð '9úy3 „„'Ð73,908€Ð '9úz3 „„'Ð66,538,668€Ð '9ú{3 „„'Ð9.18%Ð ?59ú|3 ( ¾ €¾€‚(‚ƒƒ„„?ÐSNETÐ '÷¸}3 „„'Ð15,381,848€Ð '÷¸~3 „„'Ð757,400€Ð '÷¸3 „„'Ð1,037,964€Ð '÷¸€3 „„'Ð34,891€Ð '÷¸3 „„'Ð17,212,103€Ð '÷¸‚3 „„'Ð6.23%Ð ?5÷¸ƒ3 ( ¾ €¾€‚(‚ƒƒ„„?ÐCitizensÐ 'µv„3 „„'Ð7,246,531€Ð 'µv…3 „„'Ð29,527€Ð 'µv†3 „„'Ð234,151€Ð 'µv‡3 „„'Ð528€Ð 'µvˆ3 „„'Ð7,715,361€Ð 'µv‰3 „„'Ð3.04%Ð ?5µvŠ3 ( ¾ €¾€‚(‚ƒƒ„„?ÐFrontierÐ 's4‹3 „„'Ð7,169,279€Ð 's4Œ3 „„'Ð309,427€Ð 's43 „„'Ð335,566€Ð 's4Ž3 „„'Ð76,598€Ð 's43 „„'Ð7,890,870€Ð 's43 „„'Ð5.22%Ð ?5s4‘3 ( ¾ €¾€‚(‚ƒƒ„„?ÐCBTÐ '1ò’3 „„'Ð7,418,161€Ð '1ò“3 „„'Ð0€Ð '1ò”3 „„'Ð477,199€Ð '1ò•3 „„'Ð28,536€Ð '1ò–3 „„'Ð7,923,896€Ð '1ò—3 „„'Ð6.38%Ð ?51ò˜3 ( ¾ €¾€‚(‚ƒƒ„„?ÐNevada€BellÐ 'ï°™3 „„'Ð2,066,181€Ð 'ï°š3 „„'Ð61,184€Ð 'ï°›3 „„'Ð161,748€Ð 'ï°œ3 „„'Ð11,715€Ð 'ï°3 „„'Ð2,300,828€Ð 'ï°ž3 „„'Ð7.54%Ð ?5ï°Ÿ3 ( ¾ €¾€‚(‚ƒƒ„„?ÐAliantÐ '­n 3 „„'Ð2,075,620€Ð '­n¡3 „„'Ð0€Ð '­n¢3 „„'Ð99,713€Ð '­n£3 „„'Ð0€Ð '­n¤3 „„'Ð2,175,333€Ð '­n¥3 „„'Ð4.58%Ð ?5­n¦3 ( ¾ €¾€‚(‚ƒƒ„„?ÐTOTAL€or€€AVERAGEÐ 'k,§3 „„'Ð1,069,700,358€Ð 'k,¨3 „„'Ð60,202,743€Ð 'k,©3 „„'Ð94,177,009€Ð 'k,ª3 „„'Ð7,266,821€Ð 'k,«3 „„'Ð1,245,499,851€Ð 'k,¬3 „„'Ð8.14%Ð-#!k,­3 ( ¾  -Ðà  àà ` àÌà  àà ` à*€€Sprint€LTCs'€numbers€represent€a€correction€made€in€their€Direct€Case€from€their€tariff€filing€of€December€17,€1997.ÌÔ'¾·`LÔÌÌà  àÔ€8&\L%ð86>ÔÔ2ÿÿ ÔÚ  Ú13Ú  Ú.Ô3  Ô€€òòóóWe€used€the€above€formulation€to€quantify€non„primary€line€penetration€reported€by€price€cap€LECs€for€two€reasons.€€ò òó óFirst,€both€non„primary€residential€linesÐ q2± Ðand€BRI„ISDN€lines€are€subject€to€higher€maximum€SLCs€and€PICCs€than€primary€residential€lines.€€Any€additional€revenues€that€could€be€generated€from€the€collection€ofÏâ âthese€flat€fees€would€lead€to€lower€per„minute€CCL€charges.€€Second,€including€BRI„ISDN€lines€specifically€recognizes€a€major€contributor€to€the€growth€in€additional€linesÐ B³ Ðdue€to€increased€Internet€and€data€transmission€usage€by€residential€customers.׃£×Ý ƒŠÿÿÝò…òÚ  Ú23Ú  Úó…óÝ  Ý×  ×€€Lifeline€lines€were€included€in€the€count€of€total€residential€lines€because€they€are€residentialÐ ? Ðlines€that€require€interstate€access,€are€used€in€the€formulation€of€access€charges,€and€were€not€included€in€the€direct€case€residential€line€counts.׃¤è×Ý ƒŠÿÿÝò…òÚ  Ú24Ú  Úó…óÝ  Ý×  ×РLj Ðâ âÌà  àÔ2ÿÿ ÔÚ  Ú14Ú  Ú.Ô3  Ô€€òòóóFigure€2€compares€the€reported€percentage€of€non„primary€residential€lines€to€total€residential€lines,€pursuant€to€the€index€outlined€òòsupraóó,€to€several€sources.€Ð ט ÐThese€sources€are:€(1)€analyses€conducted€by€the€Commission€staff€based€on€available€data;€(2)€estimates€published€by€financial€institutions€of€the€penetration€levels€of€non„¼primary€residential€lines;€and€(3)€price€cap€LEC€public€statements.€€Figure€2€summarizes€these€data.Ô€86>J8&\LÔÐ ç ¨ Ðâ âÐ o 0 ÐÔ& ' Ôâ âÌà  àà ` àà ¸ àà  àà h àà À àFIGURE€2ÌÔ*µƒ¥¦ ddr’ã°¶ƒj¡¢°(#°(#µÔÔ, ÔÔ,FÔÔ,MÔÔ, ÔÔ,¿ÔÔ,ÔÔ,MÔÔ,äÔÔ+  ÔÐ ," ÷¸ €×€‚(‚ƒƒ„„,ÐÔ ÿÿ ÔÌÌÌÌÌŽÔ  ÔÐ (à3 „„(ÐÐ 'à" „„'ÐÐ 'à" „„'ÐÐ 'à" „„'ÐÐ 'à" „„'ÐÐ 'à3 „„'ÐÐ 'à " „„'ÐÐ ?5à " ( × €×€‚(‚ƒƒ„„?ÐÐ 'ö· 3 „„'ÐDirect€CaseÐ 'ö· " „„'ÐFCCÐ 'ö· " „„'ÐFCCÐ 'ö·" „„'ÐÐ 'ö·3 „„'ÐÐ 'ö·3 „„'ÐÐ 'ö·" „„'ÐÐ ?5ö·" ( × €×€‚(‚ƒƒ„„?ÐÐ 'Í Ž3 „„'ÐLEC€ReportedÐ 'Í Ž" „„'ÐAdditionalÐ 'Í Ž" „„'ÐExcessÐ 'Í Ž" „„'ÐÐ 'Í Ž3 „„'ÐÐ 'Í Ž3 „„'ÐÐ 'Í Ž" „„'ÐÐ ?5Í Ž" ( × €×€‚(‚ƒƒ„„?ÐÐ '¤ e3 „„'ÐPercentageÐ '¤ e" „„'ÐLineÐ '¤ e" „„'ÐResidentialÐ '¤ e" „„'ÐÐ '¤ e3 „„'ÐÐ '¤ e 3 „„'ÐÐ '¤ e!" „„'ÐÐ ?5¤ e"" ( × €×€‚(‚ƒƒ„„?ÐÐ '{ <#" „„'ÐNon„Primary€&Ð '{ <$" „„'ЀStudyÐ '{ <%" „„'ÐLoop€Study€Loop€LoopÔ ÿÿ ÔÏLoop€€Loop€ŽÔ  ÔÐ ({ <&" „„(ÐÐ '{ <'" „„'ÐMerrill€Lynch€LynchÔ ÿÿ ÔÏLynch€ŽÔ  ÔÐ ({ <(" „„(ÐÐ '{ <)" „„'ÐSalomonÐ ?5{ <*" ( × €×€‚(‚ƒƒ„„?ÐÐ 'R +" „„'ÐBRI„ISDN€LinesÐ 'R ," „„'ÐSurvey€w/Ð 'R -" „„'ÐStudy€%Ð 'R ." „„'ÐTelecom€ServicesÐ 'R /" „„'ÐBrothersÐ 'R 0" „„'ÐPrice€cap€Ð 'R 1" „„'ÐÐ ?5R 2" ( × €×€‚(‚ƒƒ„„?ÐÐ ') ê3" „„'Ðas€Percentage€ofÐ ') ê4" „„'Ð1995€BillÐ ') ê5" „„'ÐExcess€Res.Ð ') ê6" „„'Ð11/13/96Ð ') ê7" „„'Ð11/28/97Ð ') ê8" „„'ÐLECÐ ') ê9" „„'ÐPublicÐ ?5) ê:" ( × €×€‚(‚ƒƒ„„?ÐÐ 'Á;" „„'ÐTotal€ResidentialÐ 'Á<" „„'ÐHarvestingÐ 'Á=" „„'ЀLoops€perÐ 'Á>" „„'ÐÐ 'Á?" „„'ÐÐ 'Á@" „„'ÐPublicÐ 'ÁA" „„'ÐStatementÐ ?5ÁB" ( × €×€‚(‚ƒƒ„„?ÐPRICE€CAP€LECÐ 'טC" „„'ÐLinesÐ 'טD" „„'ÐDataÐ 'טE" „„'ÐHouseholdÐ 'טF" „„'Ð3Q95€„€3Q96Ð 'טG" „„'Ð3Q€97Ð 'טH" „„'ÐStatementsÐ 'טI" „„'ÐDateÐ ?5טJ" ( × €×€‚(‚ƒƒ„„?ÐÐ '®oK3 „„'ÐÐ '®oL" „„'ÐÐ '®oM" „„'ÐÐ '®oN" „„'ÐÐ '®oO3 „„'ÐÐ '®oP3 „„'ÐÐ '®oQ" „„'ÐÐ ?5®oR" ( × €×€‚(‚ƒƒ„„?ÐAmeritechÐ '…F S" „„'Ð11.17%Ð '…F T" „„'Ð11.55%Ð '…F U" „„'Ð12.19%Ð '…F V" „„'Ð11.00%€„€14.00%Ð '…F W" „„'Ð26.00%Ð '…F X" „„'ÐÐ '…F Y" „„'ÐÐ ?5…F Z" ( × €×€‚(‚ƒƒ„„?ÐUS€WestÐ '\ [" „„'Ð10.32%Ð '\ \" „„'Ð11.00%Ð '\ ]" „„'Ð10.29%Ð '\ ^" „„'Ð8.00%€„€10.00%Ð '\ _" „„'Ð13.00%Ð '\ `" „„'Ð12.90%Ð '\ a" „„'Ð10/27/97Ð ?5\ b" ( × €×€‚(‚ƒƒ„„?ÐÐ '3ô c" „„'ÐÐ '3ô d" „„'ÐÐ '3ô e" „„'ÐÐ '3ô f" „„'ÐÐ '3ô g3 „„'ÐÐ '3ô h3 „„'ÐÐ '3ô i" „„'ÐÐ ?53ô j" ( × €×€‚(‚ƒƒ„„?ÐSprint€LTCÐ ' Ë k" „„'Ð9.18%Ð ' Ë l" „„'Ð8.60%Ð ' Ë m" „„'Ð17.00%Ð ' Ë n" „„'ÐÐ ' Ë o3 „„'ÐÐ ' Ë p3 „„'ÐÐ ' Ë q" „„'ÐÐ ?5 Ë r" ( × €×€‚(‚ƒƒ„„?ÐBell€Atlantic€„€SouthÐ 'ᢠs" „„'Ð10.40%Ð 'ᢠt" „„'Ð13.45%Ð 'ᢠu" „„'Ð19.12%Ð 'ᢠv" „„'Ð15.00%€„€19.00%Ð 'ᢠw" „„'Ð19.00%Ð 'ᢠx" „„'Ð13.00%Ð 'ᢠy" „„'Ð3/1/96Ð ?5ᢠz" ( × €×€‚(‚ƒƒ„„?ÐBellSouthÐ '¸y {" „„'Ð8.86%Ð '¸y |" „„'Ð11.47%Ð '¸y }" „„'Ð16.86%Ð '¸y ~" „„'Ð9.00%€„€11.00%Ð '¸y " „„'Ð14.00%Ð '¸y €" „„'Ð12.03%Ð '¸y " „„'Ð1/22/98Ð ?5¸y ‚" ( × €×€‚(‚ƒƒ„„?ÐSouthwestern€BellÐ 'Pƒ" „„'Ð9.01%Ð 'P„" „„'Ð12.13%Ð 'P…" „„'Ð13.55%Ð 'P†" „„'Ð11.00%€„€12.00%Ð 'P‡" „„'Ð16.00%Ð 'Pˆ" „„'ÐÐ 'P‰" „„'ÐÐ ?5PŠ" ( × €×€‚(‚ƒƒ„„?ÐBell€Atlantic€„€North€(NYN€(NYN€(NYN€Ô ÿÿ ÔÏ(NYN€ŽÔ  ÔÐ (f'‹" „„(ÐÐ 'f'Œ" „„'Ð7.40%Ð 'f'" „„'Ð10.21%Ð 'f'Ž" „„'Ð18.85%Ð 'f'" „„'Ð11.00%€„€13.00%Ô ÿÿ ÔÏ13.00%€13.00%€ŽÔ  ÔÐ (f'" „„(ÐÐ 'f'‘3 „„'ÐÐ ?5f'’3 ( × €×€‚(‚ƒƒ„„?ÐÐ '=þ“" „„'ÐÐ '=þ”" „„'ÐÐ '=þ•" „„'ÐÐ '=þ–" „„'ÐÐ '=þ—" „„'ÐÐ '=þ˜3 „„'ÐÐ '=þ™" „„'ÐÐ ?5=þš" ( × €×€‚(‚ƒƒ„„?ÐGTEÐ 'Õ›" „„'Ð4.79%Ð 'Õœ" „„'Ð8.94%Ð 'Õ" „„'Ð14.77%Ð 'Õž" „„'Ð11.00%€„€14.00%Ð 'ÕŸ" „„'ÐÐ 'Õ 3 „„'ÐÐ 'Õ¡" „„'ÐÐ ?5Õ¢" ( × €×€‚(‚ƒƒ„„?ÐSNETÐ '묣" „„'Ð6.23%Ð '묤" „„'Ð11.88%Ð '묥" „„'Ð5.90%Ð '묦" „„'ÐÐ '묧3 „„'ÐÐ '묨3 „„'ÐÐ '묩" „„'ÐÐ ?5묪" ( × €×€‚(‚ƒƒ„„?ÐIndependents€*Ð 'ƒ«" „„'Ð5.09%Ð 'ƒ¬" „„'Ð10.46%Ð 'ƒ­" „„'ÐÐ 'ƒ®" „„'ÐÐ 'ƒ¯3 „„'ÐÐ 'ƒ°3 „„'ÐÐ 'ƒ±" „„'ÐÐ ?5ƒ²" ( × €×€‚(‚ƒƒ„„?Ð(Citizens)Ð '™Z³" „„'Ð3.04%Ð '™Z´" „„'ÐÐ '™Zµ" „„'ÐÐ '™Z¶" „„'ÐÐ '™Z·3 „„'ÐÐ '™Z¸3 „„'ÐÐ '™Z¹" „„'ÐÐ ?5™Zº" ( × €×€‚(‚ƒƒ„„?Ð(Frontier)Ð 'p1»" „„'Ð5.22%Ð 'p1¼" „„'ÐÐ 'p1½" „„'ÐÐ 'p1¾" „„'ÐÐ 'p1¿3 „„'ÐÐ 'p1À" „„'ÐÐ 'p1Á" „„'ÐÐ ?5p1Â" ( × €×€‚(‚ƒƒ„„?Ð(Aliant€)Ð 'GÃ" „„'Ð4.58%Ð 'GÄ" „„'ÐÐ 'GÅ" „„'Ð5.20%Ð 'GÆ" „„'ÐÐ 'GÇ3 „„'ÐÐ 'GÈ3 „„'ÐÐ 'GÉ" „„'ÐÐ ?5GÊ" ( × €×€‚(‚ƒƒ„„?Ð(CBT)Ð 'ßË" „„'Ð6.38%Ð 'ßÌ" „„'ÐÐ 'ßÍ" „„'Ð7.33%Ð 'ßÎ" „„'ÐÐ 'ßÏ3 „„'Ð10.00%Ð 'ßÐ" „„'ÐÐ 'ßÑ" „„'ÐÐ ?5ßÒ" ( × €×€‚(‚ƒƒ„„?Ð(Nevada€Bell)Ð 'õ¶Ó" „„'Ð7.54%Ð 'õ¶Ô" „„'ÐÐ 'õ¶Õ" „„'Ð17.10%Ð 'õ¶Ö" „„'ÐÐ 'õ¶×" „„'ÐÐ 'õ¶Ø" „„'ÐÐ 'õ¶Ù" „„'ÐÐ ?5õ¶Ú" ( × €×€‚(‚ƒƒ„„?ÐÐ 'ÌÛ" „„'ÐÐ 'ÌÜ" „„'ÐÐ 'ÌÝ" „„'ÐÐ 'ÌÞ" „„'ÐÐ 'Ìß3 „„'ÐÐ 'Ìà3 „„'ÐÐ 'Ìá" „„'ÐÐ ?5Ìâ" ( × €×€‚(‚ƒƒ„„?ÐPacific€BellÐ '£dã" „„'Ð2.67%Ð '£dä" „„'Ð17.61%Ð '£då" „„'Ð19.00%Ð '£dæ" „„'Ð22.00%€„€24.00%Ð '£dç" „„'Ð28.00%Ð '£dè" „„'Ð20.00%Ð '£dé" „„'Ð7/15/96Ð ?5£dê" ( × €×€‚(‚ƒƒ„„?ÐÐ 'z ;ë3 „„'ÐÐ 'z ;ì3 „„'ÐÐ 'z ;í" „„'ÐÐ 'z ;î" „„'ÐÐ 'z ;ï3 „„'ÐÐ 'z ;ð3 „„'ÐÐ 'z ;ñ" „„'ÐÐ ?5z ;ò" ( × €×€‚(‚ƒƒ„„?Ðâ âTOTAL€or€AVGÐ 'Q!ó" „„'Ð8.14%Ð 'Q!ô" „„'Ð11.40%Ð 'Q!õ" „„'Ð14.70%Ð 'Q!ö" „„'Ð12.25%€„€14.63%Ð 'Q!÷" „„'Ð18.00%Ð 'Q!ø" „„'ÐÐ 'Q!ù" „„'ÐÐ ?5Q!ú" ( × €×€‚(‚ƒƒ„„?ÐÐ '("éû3 „„'ÐÐ '("éü3 „„'ÐÐ '("éý3 „„'ÐÐ '("éþ3 „„'ÐÐ '("éÿ3 „„'ÐÐ '("é3 „„'ÐÐ '("é" „„'ÐÐ ?5("é" ( × €×€‚(‚ƒƒ„„?ÐÐ 'ÿ"À „„'ÐÐ 'ÿ"À3 „„'ÐÐ 'ÿ"À3 „„'ÐÐ 'ÿ"À3 „„'ÐÐ 'ÿ"À3 „„'ÐÐ 'ÿ"À3 „„'ÐÐ 'ÿ"À " „„'ÐÐ-#!ÿ"À " ( × -Ð*€Includes€Aliant,€Frontier,€Citizens,€and€CBT.€€Nevada€Bell€is€included€with€the€independent€LECs€due€to€small€sample€in€the€Additional€Line€Study.€€Independent€LECs€in€the€Additional€Line€Study's€sample€also€includes€rate„of„return€LECs.€ÌÔ''?UxÔÌà  àÔ€8&\L%ð86>ÔÔ2ÿÿÔÚ  Ú15Ú  Ú.Ô3  Ô€€òòStaff€Studies€of€Primary€and€Non„Primary€Residential€Linesóó.€€Common€Carrier€Bureau€staff€conducted€two€studies€estimating€additional€residential€lineÐ f$'  Ðpenetration.€€The€first€study€estimated€additional€line€penetration€by€using€extensive€survey€data€on€secondary€lines€(the€Additional€Line€Study).€€The€second€Commission€staffÏstudy€estimated€additional€line€penetration€levels€by€quantifying€excess€residential€loops€(the€Excess€Residential€Loop€Study).€€The€detailed€results€of€these€studies€areÏpresented€in€Figure€3.Ô€86>J8&\LÔÐ þ%¿ ÐÌÌâ âÐ >'ÿ Ðà@DD0ìàÔ& u Ôâ âFIGURE€3ˆÌÌà@ðð.ìàFCC€STUDIES€ˆÌÌà  àà ` àEXCESS€RESIDENTIAL€LOOP€STUDYà h àà À àADDITIONAL€LINE€STUDY€Ð ¯p Ðà  àà ` à1995€NECA€&€Census€Dataà  àà h àà À àPNR€and€AssociatesÐ  Ì Ðà  àà ` à1995€ARMIS€Residential€Linesà  àà h àà À à1995€Bill€Harvesting€IIÐ g ( ÐÔ*ƃ§¨ d!d FM ¿M䥦°(#°(#ÆÔÔ,ûÔÔ,˜ÔÔ,ÔÔ,¶ÔÔ,tÔÔ,ÔÔ,ÕÔÔ+  ÔÐ ," à „ €×€‚(‚ƒƒ„„,ÐÐ 'ë ¬" „„'Ð%€ExcessÐ 'ë ¬ " „„'ÐÐ 'ë ¬ " „„'ÐÐ 'ë ¬ 3 „„'ÐÐ 'ë ¬ " „„'ÐÐ 'ë ¬ 3 „„'Ѐ€€€€SurveyÐ ?5ë ¬" ( × €¾€‚(‚ƒƒ„„?ÐÐ ' ƒ" „„'ÐResidentialÐ ' ƒ" „„'ÐStandardÐ ' ƒ" „„'ÐÐ ' ƒ3 „„'Ð%€HouseholdsÐ ' ƒ" „„'ÐStandardÐ ' ƒ" „„'Ѐ€€€€€SampleÐ ?5 ƒ" ( ¾ €¾€‚(‚ƒƒ„„?ÐPRICE€CAP€LECÐ '€ A" „„'ÐLoopsÐ '€ A" „„'ÐErrorÐ '€ A" „„'ÐÐ '€ A3 „„'ÐAdditional€LinesÐ '€ A" „„'ÐErrorÐ '€ A" „„'Ѐ€€€€SizeÐ ?5€ A" ( ¾ €d€‚(‚ƒƒ„„?ÐÐ '> ÿ" „„'ÐÐ '> ÿ" „„'ÐÐ '> ÿ" „„'ÐÐ '> ÿ 3 „„'ÐÐ '> ÿ!" „„'ÐÐ '> ÿ"" „„'ÐÐ ?5> ÿ#" ( d €¾€‚(‚ƒƒ„„?ÐAmeritechÐ '¢ c$" „„'Ð12.19%Ð '¢ c%" „„'Ð0.01%Ð '¢ c&" „„'ÐÐ '¢ c'3 „„'Ð11.55%Ð '¢ c(" „„'Ð0.89%Ð '¢ c)" „„'Ð1,299€Ð ?5¢ c*3 ( ¾ €¾€‚(‚ƒƒ„„?ÐBell€Atlantic€„€SouthÐ '` !+" „„'Ð19.12%Ð '` !," „„'Ð0.01%Ð '` !-" „„'ÐÐ '` !.3 „„'Ð13.45%Ð '` !/" „„'Ð0.98%Ð '` !0" „„'Ð1,219€Ð ?5` !13 ( ¾ €¾€‚(‚ƒƒ„„?ÐBell€Atlantic€„€NorthÐ 'ß2" „„'Ð18.85%Ð 'ß3" „„'Ð0.01%Ð 'ß4" „„'ÐÐ 'ß53 „„'Ð10.21%Ð 'ß6" „„'Ð0.88%Ð 'ß7" „„'Ð1,316€Ð ?5ß83 ( ¾ €¾€‚(‚ƒƒ„„?ÐBell€SouthÐ 'Ü9" „„'Ðâ â16.86%Ð 'Ü:" „„'Ð0.01%Ð 'Ü;" „„'ÐÐ 'Ü<3 „„'Ð11.47%Ð 'Ü=" „„'Ð0.79%Ð 'Ü>" „„'Ð1,298€Ð ?5Ü?3 ( ¾ €¾€‚(‚ƒƒ„„?ÐGTEÐ 'š[@" „„'Ð14.77%Ð 'š[A" „„'Ð0.01%Ð 'š[B" „„'ÐÐ 'š[C3 „„'Ð8.94%Ð 'š[D" „„'Ð0.96%Ð 'š[E" „„'Ð999€Ð ?5š[F3 ( ¾ €¾€‚(‚ƒƒ„„?ÐNevada€Bell*Ð 'X G" „„'Ð17.10%Ð 'X H" „„'Ð0.09%Ð 'X I" „„'ÐÐ 'X J3 „„'Ð6.67%Ð 'X K" „„'Ð6.44%Ð 'X L" „„'Ð15€Ð ?5X M3 ( ¾ €¾€‚(‚ƒƒ„„?ÐPacific€BellÐ '× N" „„'Ð19.00%Ð '× O" „„'Ð0.01%Ð '× P" „„'ÐÐ '× Q3 „„'Ð17.61%Ð '× R" „„'Ð1.50%Ð '× S" „„'Ð619€Ð ?5× T3 ( ¾ €¾€‚(‚ƒƒ„„?ÐSNETÐ 'Ô• U" „„'Ð5.90%Ð 'Ô• V" „„'Ð0.02%Ð 'Ô• W" „„'ÐÐ 'Ô• X3 „„'Ð11.88%Ð 'Ô• Y" „„'Ð3.22%Ð 'Ô• Z" „„'Ð101€Ð ?5Ô• [3 ( ¾ €¾€‚(‚ƒƒ„„?ÐSouthwestern€BellÐ '’S \" „„'Ð13.55%Ð '’S ]" „„'Ð0.01%Ð '’S ^" „„'ÐÐ '’S _3 „„'Ð12.13%Ð '’S `" „„'Ð1.17%Ð '’S a" „„'Ð775€Ð ?5’S b3 ( ¾ €¾€‚(‚ƒƒ„„?ÐSPRINTÐ 'P c" „„'Ð17.00%Ð 'P d" „„'Ð0.02%Ð 'P e" „„'ÐÐ 'P f3 „„'Ð8.60%Ð 'P g" „„'Ð1.25%Ð 'P h" „„'Ð500€Ð ?5P i3 ( ¾ €¾€‚(‚ƒƒ„„?ÐUS€WESTÐ 'Ï j" „„'Ð10.29%Ð 'Ï k" „„'Ð0.01%Ð 'Ï l" „„'ÐÐ 'Ï m3 „„'Ð11.00%Ð 'Ï n" „„'Ð0.86%Ð 'Ï o" „„'Ð1,318€Ð ?5Ï p3 ( ¾ €¾€‚(‚ƒƒ„„?ÐIndependents**Ð 'Ì q" „„'ÐÐ 'Ì r" „„'ÐÐ 'Ì s" „„'ÐÐ 'Ì t3 „„'Ð11.22%Ð 'Ì u" „„'Ð1.04%Ð 'Ì v" „„'Ð927€Ð ?5Ì w3 ( ¾ €¾€‚(‚ƒƒ„„?Ð(Citizens)Ð 'ŠKx" „„'ÐÐ 'ŠKy" „„'ÐÐ 'ŠKz" „„'ÐÐ 'ŠK{3 „„'ÐÐ 'ŠK|" „„'ÐÐ 'ŠK}" „„'ÐÐ ?5ŠK~" ( ¾ €¾€‚(‚ƒƒ„„?Ð(Frontier)Ð 'H " „„'ÐÐ 'H €" „„'ÐÐ 'H " „„'ÐÐ 'H ‚3 „„'ÐÐ 'H ƒ" „„'ÐÐ 'H „" „„'ÐÐ ?5H …" ( ¾ €¾€‚(‚ƒƒ„„?Ð(CBT)Ð 'dž" „„'Ð7.33%Ð 'LJ" „„'Ð0.03%Ð 'Lj" „„'ÐÐ 'lj3 „„'Ð1.41%Ð 'ÇŠ" „„'Ð1.40%Ð 'Ç‹" „„'Ð71€Ð ?5ÇŒ3 ( ¾ €¾€‚(‚ƒƒ„„?Ð(Aliant€)Ð 'Ä…" „„'Ð5.20%Ð 'Ä…Ž" „„'Ð0.05%Ð 'Ä…" „„'ÐÐ 'Ä…3 „„'ÐÐ 'Ä…‘" „„'ÐÐ 'Ä…’" „„'ÐÐ ?5Ä…“3 ( ¾ €¾€‚(‚ƒƒ„„?ÐTotal€or€AvgÐ '‚C”" „„'Ð14.70%Ð '‚C•" „„'Ð0.00%Ð '‚C–" „„'ÐÐ '‚C—3 „„'Ð11.40%Ð '‚C˜" „„'Ð0.31%Ð '‚C™" „„'Ð10,457€Ð-#!‚Cš3 ( ¾  -ÐÌ*€€€Nevada€Bell€separated€from€Pacific€Bell.Ì**€€Independents€include€Aliant,€Frontier,€Citizens€and€CBT.Ô€8&\L%ð86>ÔРБœ ÐÔ'u?ƒ®ÔÌà  àÔ2ÿÿÔÚ  Ú16Ú  Ú.Ô3  Ô€€The€Additional€Line€Study€is€based€on€nationwide€survey€information€conducted€on€residential€telephone€usage,€second€lines,€household€demographics,Ïexpenditures€on€telephone€service€and€other€telecommunications€information.€€The€primary€data€source€for€this€research€is€PNR€and€Associates€(PNR)׃©×Ý ƒŠÿÿÝò…òÚ  Ú25Ú  Úó…óÝ  Ý×  ×€Bill€HarvestingÐ <ýŸ Ðstudies.׃ª°×Ý ƒŠÿÿÝò…òÚ  Ú26Ú  Úó…óÝ  Ý×  ×€€The€sample€relied€upon€in€this€study€was€"Bill€Harvesting€II,"€a€1995€survey€collected€from€10,457€households€with€telephone€service.׃«` ×Ý ƒŠÿÿÝò…òÚ  Ú27Ú  Úó…óÝ  Ý×  ×€€In€addition€to€answering€aÐ Ä…  Ðseries€of€questions,€participants€also€sent€copies€of€their€telephone€bills€for€one€month€in€1995€to€PNR.€€The€Additional€Line€Study€tabulated€and€analyzed€these€data€by€bothÏlocal€exchange€carrier׃¬¸ ×Ý ƒŠÿÿÝò…òÚ  Ú28Ú  Úó…óÝ  Ý×  ×€and€by€state,€detailing€the€percentage€of€households€who€identified€themselves€as€having€at€least€one€additional€line.€€The€national€average€forÐ Ô•¢ Ðâ âadditional€line€penetration€was€11.40€percent.€€Because€the€survey€question€did€distinguish€between€households€with€multiple€residential€lines€had€only€two€lines€or€more€thanÐ \£ Ðtwo€lines,€the€Additional€Line€Study€does€not€capture€any€additional€lines€after€the€second€line€in€a€household.׃­×Ý ƒŠÿÿÝò…òÚ  Ú29Ú  Úó…óÝ  Ý×  ×€€The€survey€question€also€did€not€distinguish€residential€linesÐ ? Ðâ âbetween€non„primary€or€BRI„ISDN.€€Thus,€there€is€a€downward€bias€in€the€Additional€Line€Study€estimates€to€the€extent€multiple€non„primary€residential€lines€exist€in€aÏhousehold.ÌÌà  àÔ2ÿÿÔÚ  Ú17Ú  Ú.Ô3  Ô€€òòóóThe€Excess€Residential€Loop€Study€calculated€total€residential€loops€by€taking€end„of„year€1995€USF€subscriber€line€counts€provided€by€the€NationalÐ _  ÐExchange€Carrier€Association€(NECA)€and€applying€a€ratio€of€residential€to€non„residential€access€lines€per€state€based€on€the€Commission's€òòStatistics€of€CommunicationsÐ ç ¨ ÐCommon€Carriers€óóand€1995€ARMIS€reports.€€This€estimate€of€108.1€million€residential€loops,€was€then€compared€with€the€1990€Census€Bureau׃®°×Ý ƒŠÿÿÝò…òÚ  Ú30Ú  Úó…óÝ  Ý×  ×€estimate€of€94.2€millionÐ o 0 Ðhouseholds׃¯×Ý ƒŠÿÿÝò…òÚ  Ú31Ú  Úó…óÝ  Ý×  ×€with€residential€telephone€service.€€The€13.9€million€line€difference€was€classified€as€excess€residential€loops.€€Using€the€1995€ARMIS€data€to€allocate€excessÐ ÷ ¸ Ðresidential€lines€by€state€to€each€carrier,€the€Excess€Residential€Loop€Study€estimated€excess€residential€loops€for€each€price€cap€LEC.€€Its€national€average€was€14.70€percent.€ÏThese€results€for€price€cap€LECs€are€also€shown€in€Figure€3.׃°ø×Ý ƒŠÿÿÝò…òÚ  Ú32Ú  Úó…óÝ  Ý×  ×Ð  È  ÐÌà  àÔ2ÿÿÔÚ  Ú18Ú  Ú.Ô3  Ô€€òòóóWe€also€compared€the€price€cap€LECs'€reported€non„primary€residential€line€counts€with€reports€made€by€financial€institutions€and€public€statements€made€byÐ  Ø  Ðprice€cap€LECs.׃±P×Ý ƒŠÿÿÝò…òÚ  Ú33Ú  Úó…óÝ  Ý×  ×€€Merrill€Lynch׃²8×Ý ƒŠÿÿÝò…òÚ  Ú34Ú  Úó…óÝ  Ý×  ×€and€Salomon€Brothers׃³×Ý ƒŠÿÿÝò…òÚ  Ú35Ú  Úó…óÝ  Ý×  ×€prepared€analyses€of€additional€line€penetration€by€price€cap€LECs€and€their€estimates€are€included€in€Figure€2.€Ð Ÿ `  ÐòòóóPublic€statements€made€by€price€cap€LECs€regarding€their€additional€residential€line€penetration€levels€are€reported€in€Figure€2.׃´è×Ý ƒŠÿÿÝò…òÚ  Ú36Ú  Úó…óÝ  Ý×  ×Ð 'è  Їà  àÔ2ÿÿÔÚ  Ú19Ú  Ú.Ô3  Ô€€òòóóòòAnalysis€of€Surrogate€Dataóó.€€We€rely€primarily€upon€the€Additional€Line€Study€to€evaluate€price€cap€LECs'€reporting€of€non„primary€residential€lines.€€WeÐ ? Ðfind€that€the€Additional€Line€Study€provides€a€reliable€data€source€for€the€purpose€of€determining€the€reasonableness€of€price€cap€LECs'€reporting€of€non„primary€lines€becauseÏit€uses€a€large€representative€sample׃µx×Ý ƒŠÿÿÝò…òÚ  Ú37Ú  Úó…óÝ  Ý×  ×€of€residential€phone€service€households.€€Moreover,€by€using€a€binary€method€to€measure€second€lines,€the€study€offers€a€reasonable€andÐ O Ðconsistent€counting€procedure€that€will€not€over€represent€the€number€of€additional€lines€for€any€carrier.€€In€fact,€the€Additional€Line€Study€conservatively€estimates€the€numberÏof€non„primary€residential€lines€for€each€price€cap€LEC€for€three€reasons.€€First,€it€counts€only€one€additional€line€even€if€a€particular€household€has€three€or€more€residentialÏlines.€€Second,€the€Additional€Line€Study€relies€on€1995€data€and€the€record€demonstrates€that€the€number€of€non„primary€residential€lines€has€grown€considerably€more€thanÏprimary€residential€lines€since€1995.׃¶×Ý ƒŠÿÿÝò…òÚ  Ú38Ú  Úó…óÝ  Ý×  ×€€Finally,€the€Commission€has€full€knowledge€of€the€data€sources,€control€over€study€methodology,€and€has€been€able€to€verify€theÐ o 0 Ðstatistical€analyses€for€estimated€additional€line€penetration€levels,€and€will,€therefore,€rely€on€its€internal€research,€as€compared€to€outside€sources,€to€evaluate€baseline€numbersÏfor€non„primary€residential€lines.€ÌÌà  àÔ2ÿÿÔÚ  Ú20Ú  Ú.Ô3  Ô€€òòóóAdditional€support€for€using€the€Additional€Line€Study€is€provided€by€the€Excess€Residential€Loop€Study.׃·h×Ý ƒŠÿÿÝò…òÚ  Ú39Ú  Úó…óÝ  Ý×  ×€€The€initial€purpose€of€gathering€of€these€data€inÐ  P  ÐJanuary€1997,€for€both€the€Additional€Line€and€Excess€Residential€Loop€studies,€was€to€determine€if€there€was€a€relationship€between€the€number€of€additional€residential€linesÏand€the€level€of€population€concentration.€€Each€study€compared€their€1995€second€line€penetration€estimates€to€Census€Bureau€1990€percent€urban€population€statistics€forÏeach€state.€€Individual€regression€analyses€showed€a€modest€but€statistically€significant€correlation€between€additional€residential€lines€and€percent€urban€for€each€data€set.׃¸À×Ý ƒŠÿÿÝò…òÚ  Ú40Ú  Úó…óÝ  Ý×  ×Ð 'è  ÐÌà  àÔ2ÿÿÔÚ  Ú21Ú  Ú.Ô3  Ô€€Except€for€a€few€instances,€where€insufficient€data€exist€to€make€a€comparison,׃¹×Ý ƒŠÿÿÝò…òÚ  Ú41Ú  Úó…óÝ  Ý×  ×€or,€as€in€SNET's€case,€only€one€Commission€study€shows€a€lower€non„Ð 7ø Ðprimary€residential€line€penetration€level€than€those€reported€in€the€direct€cases,׃º×Ý ƒŠÿÿÝò…òÚ  Ú42Ú  Úó…óÝ  Ý×  ×€most€price€cap€LECs€reported€percentages€in€their€direct€cases€that€are€lower€than€òòóóbothòòóó€theÐ ¿€ ÐAdditional€Residential€Line€and€the€Excess€Residential€Loop€study€results.€€Given€that€additional€residential€phone€lines€grow€at€a€faster€rate€than€primary€residential€phoneÏlines,€and€both€FCC€studies€use€1995€data€to€make€their€estimates,€the€FCC€percentages€should€be€lower€than€the€1996€figures€reported€by€the€price€cap€LECs.€€We€did€notÏexpect€the€results€we€found.€€This€is€particularly€significant€when€comparing€the€number€of€non„primary€residential€lines€reported€in€price€cap€LECs'€direct€cases€to€theÏAdditional€Line€Study€results€because€of€the€binary€method€of€classifying€the€number€of€additional€lines€in€the€Additional€Line€Study,€which€tends€to€undercount€non„primaryÏresidential€lines.Ìâ âÐ ï°  Ðà  àÔ2ÿÿÔÚ  Ú22Ú  Ú.Ô3  Ô€€The€Merrill€Lynch€and€Salomon€Brothers€percentages€support€the€finding€that€certain€price€cap€LECs€have€significantly€under„reported€their€percentage€ofÏâ ânon„primary€residential€lines€and€that€the€Additional€Line€Study€is€reasonable€and€conservative.€€The€Merrill€Lynch€Report€estimates€additional€line€penetration€as€a€percentageÏof€total€residential€lines€in€service.׃»×Ý ƒŠÿÿÝò…òÚ  Ú43Ú  Úó…óÝ  Ý×  ×€€The€Salomon€Brothers€Report€measures€additional€lines€as€the€percentage€of€"penetration€of€second€or€additional€lines€to€a€customer'sÐ O Ðhome€for€such€uses€as€access€to€the€Internet."׃¼X×Ý ƒŠÿÿÝò…òÚ  Ú44Ú  Úó…óÝ  Ý×  ×€€Merrill€Lynch€reports€second€residential€line€penetration€by€LEC€over€five€quarters€from€1995€and€1996.€€The€Merrill€LynchРט ÐReport€also€estimates€second€line€penetration€higher€than€the€Additional€Line€Study,€and€shows€growth€in€second€line€penetration€by€the€price€cap€LECs€identified€in€theirÏTelecom€Services€analysis.׃½è×Ý ƒŠÿÿÝò…òÚ  Ú45Ú  Úó…óÝ  Ý×  ×€€The€Salomon€Brothers'€estimates,€included€in€Figure€2,€also€show€the€significant€growth€levels€in€additional€residential€lines€beyond€those€of€theÐ ç ¨ Ðprevious€year€as€estimated€by€Merrill€Lynch.ÌÌà  àÔ2ÿÿÔÚ  Ú23Ú  Ú.Ô3  Ô€€For€the€reasons€stated€above,€òòóówe€rely€primarily€on€the€Additional€Line€Study€to€determine€the€reasonableness€of€the€percentage€of€non„primary€residentialÐ  @ Ðlines€to€total€residential€lines€reported€by€the€price€cap€LECs.ÌÔ& ¿ ÔÌÌà@DD0ìàÔ€86>J8&\LÔFIGURE€4Ô€8XàYXð86>ԈРŸ `  ÐÔ€86>h8XàYÔÌà@ŒŒìàAdditional€Line€Percentage€Comparisons€„€Direct€Case€and€Staff€StudyˆÌÔ*µƒ¾¿ ddû˜¶tÕ§¨°(#°(#µÔÔ,]ÔÔ,ÔÔ,§ÔÔ,zÔÔ+  ÔÐ ," ³t €×€‚(‚ƒƒ„„,ÐÐ 'Ûœ3 „„'ÐÐ 'Ûœ" „„'ÐÐ 'Ûœ" „„'ÐÐ ?5Ûœ" ( × €×€‚(‚ƒƒ„„?ÐÐ '²s3 „„'ÐÐ '²s" „„'ÐÐ '²s" „„'ÐÐ ?5²s" ( × €×€‚(‚ƒƒ„„?ÐColÐ '‰J 3 „„'Ð1Ð '‰J " „„'Ð2Ð '‰J " „„'Ð3Ð ?5‰J " ( × €×€‚(‚ƒƒ„„?ÐÐ '`! " „„'ÐLECÐ '`! " „„'ÐFCCÐ '`! " „„'ÐPercentageÐ ?5`! " ( × €×€‚(‚ƒƒ„„?ÐÐ '7ø " „„'ÐReportedÐ '7ø !" „„'ÐAdditionalÐ '7ø "" „„'Ðof€€FCCÐ ?57ø #" ( × €×€‚(‚ƒƒ„„?ÐÐ 'Ï $" „„'ÐAdditionalÐ 'Ï %" „„'ÐLine€StudyÐ 'Ï &" „„'ÐEstimateÐ ?5Ï '" ( × €×€‚(‚ƒƒ„„?ÐÐ 'å¦ (" „„'ÐLine€Ð 'å¦ )" „„'ÐSurveyÐ 'å¦ *" „„'ÐIdentifiedÐ ?5å¦ +" ( × €×€‚(‚ƒƒ„„?ÐPRICE€CAP€LECÐ '¼} ," „„'ÐPercentages€RESID.€LINESÔ ÿÿ ÔÏRESID.€€RESID.€€RESID.€ŽÔ  ÔÐ (¼} -" „„(ÐPercentagesÐ '¼} ." „„'Ð(Col€1€/€Col€2)Ð ?5¼} /" ( × €×€‚(‚ƒƒ„„?ÐÐ '“T03 „„'ÐÐ '“T1" „„'ÐÐ '“T2" „„'ÐÐ ?5“T3" ( × €×€‚(‚ƒƒ„„?ÐSPRINT€LTC'SÐ 'j+4" „„'Ð9.18%Ð 'j+5" „„'Ð8.60%Ð 'j+6" „„'Ð106.69%Ð ?5j+7" ( × €×€‚(‚ƒƒ„„?ÐAMERITECHÐ 'A8" „„'Ð11.17%Ð 'A9" „„'Ð11.55%Ð 'A:" „„'Ð96.75%Ð ?5A;" ( × €×€‚(‚ƒƒ„„?ÐU€S€WESTÐ 'Ù<" „„'Ð10.32%Ð 'Ù=" „„'Ð11.00%Ð 'Ù>" „„'Ð93.77%Ð ?5Ù?" ( × €×€‚(‚ƒƒ„„?ÐÐ 'ï°@" „„'ÐÐ 'ï°A" „„'ÐÐ 'ï°B" „„'ÐÐ ?5ï°C" ( × €×€‚(‚ƒƒ„„?ÐBELL€ATLANTIC„SOUTHÐ 'ƇD" „„'Ð10.40%Ð 'ƇE" „„'Ð13.45%Ð 'ƇF" „„'Ð77.31%Ð ?5ƇG" ( × €×€‚(‚ƒƒ„„?ÐBELL€SOUTHÐ '^H" „„'Ð8.86%Ð '^I" „„'Ð11.47%Ð '^J" „„'Ð77.21%Ð ?5^K" ( × €×€‚(‚ƒƒ„„?ÐSWBTÐ 't5L" „„'Ð9.01%Ð 't5M" „„'Ð12.13%Ð 't5N" „„'Ð74.30%Ð ?5t5O" ( × €×€‚(‚ƒƒ„„?ÐBELL€ATLANTIC„NORTHÐ 'K P" „„'Ð7.40%Ð 'K Q" „„'Ð10.21%Ð 'K R" „„'Ð72.48%Ð ?5K S" ( × €×€‚(‚ƒƒ„„?ÐÐ '"ãT" „„'ÐÐ '"ãU" „„'ÐÐ '"ãV" „„'ÐÐ ?5"ãW" ( × €×€‚(‚ƒƒ„„?ÐGTEÐ 'ùºX" „„'Ð4.79%Ð 'ùºY" „„'Ð8.94%Ð 'ùºZ" „„'Ð53.64%Ð ?5ùº[" ( × €×€‚(‚ƒƒ„„?ÐSNETÐ 'Б\" „„'Ð6.23%Ð 'Б]" „„'Ð11.88%Ð 'Б^" „„'Ð52.46%Ô ÿÿ ÔÌÌÌÌÌŽÔ  ÔÐ @6Б_" ( ×  €×€‚(‚ƒƒ„„@ÐIndependents*Ð '§h`" „„'Ð5.09%Ð '§ha" „„'Ð10.46%Ð '§hb" „„'Ð48.65%Ð ?5§hc" ( × €×€‚(‚ƒƒ„„?ÐÐ '~ ?d" „„'ÐÐ '~ ?e" „„'ÐÐ '~ ?f" „„'ÐÐ ?5~ ?g" ( × €×€‚(‚ƒƒ„„?ÐPACIFIC€BELLÐ 'U!h" „„'Ð2.67%Ð 'U!i" „„'Ð17.61%Ð 'U!j" „„'Ð15.14%Ð ?5U!k" ( × €×€‚(‚ƒƒ„„?ÐTOTAL€or€AVERAGEÐ ',"íl" „„'Ð8.14%Ð ',"ím" „„'Ð11.40%Ð ',"ín" „„'Ð71.45%Ô ÿÿ ÔÌÌÌÌŽÔ  ÔÐ C€À2,"ío" ( ×  €×€‚(‚„„CÐÔ ÿÿ ÔÌÌTTTTPTODKTOTOTOTTOtotialdkÌÌÌŽÔ  ÔÐ >€À-"#Äp"À „„>ÐÐ =€À,!#Äq"À „„=ÐÐ =€À,!#Är"À „„=ÐÐ<20#Äs" (0 ×  À <ÐÌÔ€8XàYXð86>Ôà  àÔ€86>h8XàYÔ*€Independents€are€Aliant,€Frontier,€Citizens,€CBT,€and€Nevada€Bell.€€This€Figure€does€not€include€these€companies€individually€because€we€do€not€have€sufficient€data€to€estimate€their€percentage€of€non„primary€residential€linesÐ $Ït Ðto€total€residential€lines.Ô€8&\L%ð86>ÔÐ j$+u ÐÔ'¿'õÔÌà  àÔ2ÿÿÔÚ  Ú24Ú  Ú.Ô3  Ô€€òòReasonableness€of€LEC€Reported€Percentages€of€Non„Primary€Residential€Line€Percentagesóó.€€Figure€4€groups€price€cap€LECs€based€on€the€differenceÐ N%w Ðbetween€the€percentage€they€reported€and€the€percentage€estimated€by€the€Additional€Line€Study.€€The€first€group€reported€between€94€and€106€percent€of€the€percentagesÏidentified€in€the€Additional€Line€Study;€the€second€group€reported€between€72€and€77€percent;€the€third€group€reported€between€49€and€54€percent;€and€the€fourth,€Pacific€BellÐ ^&y Ðreported€15€percent.€€As€explained€below,€we€find€that€the€price€cap€LECs€in€the€third€and€fourth€groups€for€which€we€have€sufficient€data,€(Pacific€Bell,€GTE,€and€SNET)Ïreported€unreasonably€low€percentages€of€non„primary€residential€lines.ÌÌà  àÔ2ÿÿÔÚ  Ú25Ú  Ú.Ô3  Ô€€òòóóWe€find€Pacific€Bell's€line€counts€to€be€unreasonable.€€Pacific€Bell€reported€non„primary€residential€line€counts€of€only€2.67€percent,€the€lowest€penetrationРט Ðlevel€reported€by€any€price€cap€LEC.€€This€estimate€is€approximately€fifteen€percentage€points€lower€than€the€17.61€percent€non„primary€residential€line€count€reported€by€theÏAdditional€Line€Study€for€Pacific€Bell.€€Thus,€Pacific€Bell€reported€only€15€percent€of€the€non„primary€residential€lines€identified€in€the€Additional€Line€Study.€€FurtherÏevidence€that€Pacific€Bell's€non„primary€residential€line€count€of€2.67€percent€is€unreasonably€low€can€be€found€in€the€second€line€penetration€levels€for€Pacific€Bell€identifiedÏby€Merrill€Lynch,€22€percent€to€24€percent€for€1995„1996,€and€Salomon€Brother's€second€line€estimate€of€28€percent€for€the€third€quarter€of€1997.€€Additionally,€the€ExcessÏResidential€Loop€Study's€estimate€of€excess€residential€loops€per€household€for€Pacific€Bell€is€19€percent.€€Furthermore,€in€a€public€statement€issued€by€the€company€on€JulyÏ15,€1996,€Pacific€Bell€states:€ÌÌà0  àThrough€targeted€promotions€in€the€consumer€market,€Pacific€Bell€has€maintained€its€lead€among€regional€Bell€operating€companies€(RBOCs)€in€customers€withÏtwo€or€more€lines.€€Today,€nearly€20€percent€of€Pacific€Bell's€residential€customers€have€òòmore€than€one€access€lineó󀄀compared€to€14€percent€for€the€next€closestÐ Ÿ `  ÐRBOC.€€During€the€first€five€months€of€1996,€the€number€of€new€additional€lines€increased€152€percent€compared€with€new€growth€during€the€same€period€lastÏyear.׃Á×Ý ƒŠÿÿÝò…òÚ  Ú46Ú  Úó…óÝ  Ý×  ×€€(Emphasis€in€original.)Яp(#(# ÐÌFurther,€as€explained€in€Section€II.B,€infra,€Pacific€Bell€failed€to€apply€its€definition€in€a€way€that€identified€as€non„primary€the€additional€residential€lines€that€are€billed€underÏthe€same€name€and€at€the€same€location.€€ÌÌà  àÔ2ÿÿÔÚ  Ú26Ú  Ú.Ô3  Ô€€òòóóWe€also€find€that€GTE's€reported€non„primary€residential€line€count€of€4.79€percent€is€unreasonable.€€This€estimate€is€more€than€four€percentage€points€lowerÐ W  Ðthan€the€Additional€Line€Study's€estimate€of€8.94€percent€for€GTE.€€GTE€therefore€only€reported€54€percent€of€the€non„primary€residential€lines€that€the€Additional€Line€StudyÏidentified€for€GTE.׃ÂX×Ý ƒŠÿÿÝò…òÚ  Ú47Ú  Úó…óÝ  Ý×  ×€€Further,€the€Merrill€Lynch€Report€estimates€that€GTE's€second€line€penetration€rose€from€11€percent€to€14€percent€between€1995€and€1996.€€Finally,€theÐ g(  ÐExcess€Residential€Loop€Study€indicates€excess€residential€loops€per€household€for€GTE€of€approximately€15€percent.ÌÌà  àÔ2ÿÿÔÚ  Ú27Ú  Ú.Ô3  Ô€€òòóóAlthough€SNET€is€in€the€third€group€identified€above,€we€do€not€have€sufficient€data€to€corroborate€a€finding€that€SNET€reported€an€unreasonably€lowÐ ÿÀ  Ðpercentage€of€non„primary€residential€lines€when€compared€to€the€percentage€of€lines€identified€for€SNET€in€the€Additional€Line€Study.€€This€is€because€SNET€reports€a€higherÏpercentage€of€additional€line€penetration€than€was€identified€for€SNET€in€the€Excess€Residential€Loop€Study€and€SNET€was€not€included€in€either€the€Merrill€Lynch€orÏSalomon€Brothers€studies.€€ÌÌà  àÔ2ÿÿÔÚ  Ú28Ú  Ú.Ô3  Ô€€òòóóFinally,€we€do€not€find€unreasonable€the€non„primary€residential€line€counts€of€Aliant,€Frontier,€Citizens,€CBT,€and€Nevada€Bell€because€we€lack€sufficientÐ §h Ðsurrogate€data€with€which€to€compare€the€non„primary€residential€line€counts€reported€by€these€price€cap€LECs.€€Specifically,€the€Additional€Line€Study€and€the€ExcessÏResidential€Loop€Study€contain€either€a€small€sample€size€or€no€data€for€these€price€cap€LECs.€€òòóóMoreover,€the€Merrill€Lynch€Report€does€not€provide€estimates€for€any€of€theseÐ ·x Ðprice€cap€LECs,€and€the€Salomon€Brothers€Report€only€has€relevant€data€for€one€of€these€five€companies,€CBT.ÌÌà  àÔ2ÿÿÔÚ  Ú29Ú  Ú.Ô3  Ô€€òòóóòòPrescriptionóó.€€We€order€Pacific€Bell€and€GTE€to€recalculate€their€PICC€and€CCL€rates€to€reflect€a€non„primary€residential€line€count€no€lower€than€70€percentÐ O" Ðof€the€lines€identified€by€the€Additional€Line€Study€for€these€companies.€€We€believe€that€it€is€reasonable€to€prescribe€a€non„primary€residential€line€count€of€no€lower€than€70Ïpercent€of€the€lines€identified€by€the€Additional€Line€Study€because,€on€average,€price€cap€LECs€in€this€investigation€reported€71.45€percent€of€the€non„primary€lines€identifiedÏby€the€Additional€Line€Study.€€Further,€all€other€price€cap€LECs€for€which€we€have€sufficient€data€report€at€least€70€percent€of€the€non„primary€lines€identified€by€theÏAdditional€Line€Study€for€their€company.€€Accordingly,€70€percent€closely€approximates€both€the€average€among€the€price€cap€LECs€in€this€investigation€(71.45€percent)€andÏthe€next€lowest€reporting€of€non„primary€lines€among€other€price€cap€LECs€(72€percent),€nearly€all€of€whom€are€grouped€between€77€percent€and€72€percent.€€ÌÌà  àÔ2ÿÿÔÚ  Ú30Ú  Ú.Ô3  Ô€€We€believe€that€this€prescription€strikes€an€appropriate€balance€among€the€relevant€public€interest€factors,€for€several€reasons.€€First,€we€believe€it€wasÏreasonable€to€choose€the€Additional€Line€Study€as€the€basis€for€the€non„primary€residential€line€prescriptions€in€this€investigation€because€this€study€reflects€the€results€of€aÏlarge€representative€sample€of€residential€households.€€It€further€provides€a€conservative€estimate€of€the€number€of€non„primary€residential€lines,€which€is€corroborated€by€otherÏdata€in€the€record.€€Second,€we€balanced€relevant€public€interest€factors€in€prescribing€a€threshold€of€70€percent€of€the€number€of€lines€identified€by€the€Additional€Line€Study,Ïrather€than€taking€unmodified€penetration€figures€from€the€study.€€We€chose€not€to€prescribe€100€percent€of€the€non„primary€residential€lines€identified€by€the€Additional€LineÏStudy€because€we€recognize€that€by€not€adopting€definitions€for€primary€and€non„primary€residential€lines€there€would€be€variations€among€price€cap€LECs€in€the€level€of€non„¼primary€residential€line€penetration€levels€when€compared€to€the€definition€used€in€the€Additional€Line€Study.€€ÌÌà  àÔ2ÿÿÔÚ  Ú31Ú  Ú.Ô3  Ô€€òòóóWe€therefore€order€Pacific€Bell€and€GTE€to€increase€their€non„primary€residential€line€counts€so€that€their€counts€falls€within€70€percent€of€the€number€ofÐ G!1 Ðnon„primary€lines€identified€by€Additional€Line€Study.€€Pacific€Bell€must,€therefore,€identify€a€total€of€14,728,373€non„primary€residential€and€BRI„ISDN€lines.׃ÃÐ×Ý ƒŠÿÿÝò…òÚ  Ú48Ú  Úó…óÝ  Ý×  ×€€As€a€result,Ð Ï!2 ÐPacific€Bell€must€reclassify€at€least€11,541,877€of€its€primary€residential€lines€as€non„primary€residential€lines.€€GTE€must€identify€a€total€of€9,351,369€non„primary€residentialÏand€BRI„ISDN€lines€by€reclassifying€at€least€2,185,593€primary€residential€as€non„primary€residential€lines.€€We€require€Pacific€Bell€and€GTE€to€recalculate€their€CCL€rates€andÏfile€tariff€revisions€that€reflect€these€adjustments.€€These€price€cap€LECs€also€must€issue€refunds€to€their€customers€as€required€by€Section€VI€of€this€Order.Ìò òó óÌò òà  àB.à ` àDefinitions€of€Primary€and€Non„Primary€Residential€Linesó óÐ w$87 Їà  àà ` à1.à ¸ àBackgroundÐ ? ÐÌà  àÔ2ÿÿÔÚ  Ú32Ú  Ú.Ô3  Ô€€òòóóThe€òòAccess€Charge€Reform€Orderóó€did€not€provide€a€definition€of€primary€and€non„primary€residential€lines.€€Instead,€the€Commission€initiated€a€rulemakingÐ O Ðproceeding€which€sought€comment€on€how€to€define€primary€and€non„primary€residential€lines.׃Ä×Ý ƒŠÿÿÝò…òÚ  Ú49Ú  Úó…óÝ  Ý×  ×€€Incumbent€LECs,€therefore,€developed€their€own€definitions€of€primary€andРט Ðnon„primary€residential€lines€for€purposes€of€the€access€reform€tariff€filings,€effective€January€1,€1998.€€In€the€òòAccess€Reform€Tariffs€Designation€Orderóó,€the€Bureau€designatedÐ _  Ðfor€investigation€for€all€price€cap€LECs,€the€issue€of€whether€their€definitions€of€primary€and€non„primary€lines€were€reasonable.׃ÅX×Ý ƒŠÿÿÝò…òÚ  Ú50Ú  Úó…óÝ  Ý×  ×€€ò òó óThe€Bureau€also€tentatively€concluded€thatÐ ç ¨ Ðthe€definitions€used€by€BellSouth,€SNET,€and€SWBT€were€unclear€and€required€further€elaboration.€€All€three€of€these€price€cap€LECs€filed€additional€language€attempting€toÏclarify€their€definitions.׃Æè×Ý ƒŠÿÿÝò…òÚ  Ú51Ú  Úó…óÝ  Ý×  ×€€BellSouth€and€SNET€also€filed€proposed€tariff€revisions€that€include€their€revised€definitions€of€primary€and€non„primary€residential€lines.׃Çx×Ý ƒŠÿÿÝò…òÚ  Ú52Ú  Úó…óÝ  Ý×  ×Ð ÷ ¸ ÐÌà  àà ` à2.à ¸ àDiscussionÐ  È  ÐÌà  àÔ2ÿÿ ÔÚ  Ú33Ú  Ú.Ô3  Ô€€We€find,€for€purposes€of€this€investigation,€all€but€one€of€the€definitions€of€primary€and€non„primary€residential€lines€used€by€the€price€cap€LECs€are€notÏunreasonable.€€As€explained€below,€we€find€unreasonable€the€definition€used€by€the€SBC€Companies€in€cases€where€it€does€not€identify€as€non„primary€the€additionalÏresidential€lines€billed€under€the€same€name€at€the€same€location.€€We€further€find€that€proposed€revised€definitions€of€primary€and€non„primary€residential€lines€filed€byÏBellSouth€and€SNET€clarify€the€way€they€identify€primary€and€non„primary€residential€lines.€€We€therefore€order€these€companies€to€revise€their€tariffs€to€include€these€revisedÏdefinitions.ÌÌ€à  àÔ2ÿÿ!ÔÚ  Ú34Ú  Ú.Ô3  Ô€€òòóóòòóóBecause€we€have€not€òòóódefined€primary€and€non„primary€residential€lines,€the€price€cap€LECs€were€required€to€select€a€reasonable€definition€of€primary€andÐ G  Ðnon„primary€residential€lines,€and€to€implement€their€chosen€definitions€in€a€reasonable€manner.׃È×Ý ƒŠÿÿÝò…òÚ  Ú53Ú  Úó…óÝ  Ý×  ×€€The€residential€line€definitions€adopted€by€the€price€cap€LECs€can€beÐ Ï  Ðcharacterized€into€two€broad€categories;€those€that€identified€and€counted€primary€and€non„primary€residential€lines€by€location€and€those€who€classified€residential€lines€byÏaccount.׃ɘ×Ý ƒŠÿÿÝò…òÚ  Ú54Ú  Úó…óÝ  Ý×  ×Ð ß   ÐÌà  àÔ2ÿÿ"ÔÚ  Ú35Ú  Ú.Ô3  Ô€€Ameritech€and€U€S€West€used€definitions€that€identified€non„primary€residential€lines€by€location.€€Under€this€definition,€at€a€given€location€one€line€isÏclassified€as€a€primary€residential€line,€and€the€remaining€residential€lines€are€classified€as€non„primary€residential€lines,€regardless€of€the€number€of€accounts€or€telephone€billsÏsent€to€that€location.׃Êð ×Ý ƒŠÿÿÝò…òÚ  Ú55Ú  Úó…óÝ  Ý×  ×€€We€find€that€the€"location"€definition€is€not€unreasonable€because,€if€applied€correctly,€it€identifies€one€line€at€a€particular€residence€as€primary,€and€theÐ ÿÀ  Ðremainder€non„primary.€€This€definition€is,€therefore,€in€keeping€with€both€the€universal€service€concerns€for€telephone€access€as€well€as€the€cost„causation€principles€set€forthÏin€the€òòAccess€Charge€Reform€Orderóó.׃ˀ ×Ý ƒŠÿÿÝò…òÚ  Ú56Ú  Úó…óÝ  Ý×  ×Ð Ð  ÐÌà  àÔ2ÿÿ#ÔÚ  Ú36Ú  Ú.Ô3  Ô€€The€remainder€of€the€price€cap€LECs€identified€primary€and€non„primary€residential€lines€by€"account."€€Within€the€group€that€used€the€"account"€definition,Ïthere€were€two€general€methods€of€identifying€non„primary€residential€lines.€€Bell€Atlantic€counted€lines€at€a€particular€location€as€primary€if€they€were€billed€to€separateÏaccounts.€€If€one€account€was€associated€with€more€than€one€line,€the€additional€lines€were€classified€as€non„primary.€€Bell€Atlantic€went€further,€however,€and€examined€theÏsubscriber€name€and€address€for€each€account.€€If€it€found€multiple€accounts€with€the€same€subscriber€name€and€address,€it€treated€one€line€in€those€accounts€as€primary€and€theÏrest€as€non„primary.׃Ì×Ý ƒŠÿÿÝò…òÚ  Ú57Ú  Úó…óÝ  Ý×  ×€€We€find€that€application€and€use€of€the€"account"€definition€in€this€manner€is€not€unreasonable€for€purposes€of€this€investigation,€because€it€shouldÐ ?  Ðidentify,€at€a€minimum,€multiple€lines€billed€to€the€same€subscriber€at€the€same€location.€€We€find€that,€at€a€minimum,€definitions€of€primary€and€non„primary€residential€linesÏshould€categorize€a€second€residential€line€as€non„primary€if€the€line€is€billed€to€the€same€name€at€the€same€location.ÌÌà  àÔ2ÿÿ$ÔÚ  Ú37Ú  Ú.Ô3  Ô€€Another€method€of€identifying€non„primary€residential€lines€is€the€"pure€account"€methodology€used,€for€example,€by€SBC€Companies.€€The€definition€setÏforth€by€the€SBC€Companies€is€as€follows:€Ìâ â€Ð o0& Ðà0  àà0` (#(#à"SWBT€considers€a€line€a€primary€residential€line€if€it€is€a€line€with€a€residence€class€of€service,€billed€on€a€single€line€account.€€In€addition,€a€line€isÏâ âconsidered€to€be€a€primary€residential€line€if€it€is€a€line€with€a€residence€class€of€service€that€is€single€account€billed€as€part€of€a€multi„line€or€multi„¼party€service.€€A€line€is€considered€to€be€a€non„primary€residential€line€if€it€has€a€residence€class€of€service,€is€billed€as€part€of€a€multi„line€or€multi„¼party€service€and€is€not€the€first€line€on€the€account€as€is€classified€as€an€additional€line€is€classified€as€an€additional€line€any€time€there€is€at€leastÏone€working€line€present€at€the€time€it€is€installed€in€a€single€family€living€unit.€€For€example,€if€two€lines€in€the€same€living€unit€appear€on€the€sameÏbill,€the€account€would€be€considered€multi„line€or€multi„party€service.€€The€first€line€would€be€considered€primary€and€the€second€line€would€beÏclassified€as€non„primary.€€Another€example€involves€two€lines€in€a€single„family€living€unit,€but€the€lines€are€billed€on€separate€bills.€€Because€bothÏlines€would€be€considered€single€line€service,€both€would€be€considered€primary."׃Í×Ý ƒŠÿÿÝò…òÚ  Ú58Ú  Úó…óÝ  Ý×  ×€Ð÷ ¸` (#` (# ÐÌà  àÔ2ÿÿ%ÔÚ  Ú38Ú  Ú.Ô3  Ô€€We€find€that€this€definition€is€unreasonable€if€applied€in€a€way€that€it€does€not€identify€as€non„primary€the€additional€residential€lines€that€are€billed€under€theÏsame€name€and€at€the€same€location.€€If€subscribers€in€a€study€area€with€multiple€lines€consolidate€those€lines€on€one€bill€or€to€a€single€account,€this€method,€like€Bell€Atlantic'sÏmethod,€will€identify€most€of€a€subscriber's€additional€lines€at€a€single€location€as€non„primary€and,€therefore,€can€be€considered€reasonable€at€least€until€our€rulemakingÏproceeding€is€complete.׃ÎX×Ý ƒŠÿÿÝò…òÚ  Ú59Ú  Úó…óÝ  Ý×  ×€If,€however,€as€with€Pacific€Bell€in€California,€subscribers€with€multiple€lines€at€the€same€location€are€not€encouraged€to€consolidate€those€lines€on€toÐ Ÿ `  Ða€single€account,׃ϰ×Ý ƒŠÿÿÝò…òÚ  Ú60Ú  Úó…óÝ  Ý×  ×€the€"pure€account"€definition€and€methodology€is€patently€unreasonable€because€it€fails€to€identify€additional€residential€lines€even€when€the€lines€are€billedÐ 'è  Ðto€the€same€name€and€location.€€ÌÌà  àÔ2ÿÿ&ÔÚ  Ú39Ú  Ú.Ô3  Ô€€However,€for€purposes€of€determining€the€reasonableness€of€the€rates€in€the€January€1,€1998€tariffs,€we€concluded€in€Section€II.A,€that€the€rates€are€reasonableÏif€a€price€cap€LEC€reported€percentages€of€non„primary€residential€lines€that€were€70€percent€of€those€found€in€our€Additional€Line€Study.€€Some€price€cap€LECs€that€used€theÏ"pure€account"€definition€met€this€benchmark,€possibly€because€customers€with€multiple€lines€at€the€same€location€have€them€consolidated€into€one€account.€€These€companiesÏdo€not€need€to€adjust€their€January€1,€1998€rates.ÌÌà  àò òC.à ` àPICC€and€SLC€Demand€Amountsó óÐ g(  ÐÌà  àà ` à1.à ¸ àBackgroundÐ s4  ÐÌà  àÔ2ÿÿ'ÔÚ  Ú40Ú  Ú.Ô3  Ô€€òòóóSubscriber€line€charges€(SLCs)€are€assessed€on€a€per„line€basis€upon€subscribers€to€local€exchange€telephone€service€or€Centrex€service.׃ÐÐ×Ý ƒŠÿÿÝò…òÚ  Ú61Ú  Úó…óÝ  Ý×  ×€€PresubscribedÐ ƒD  Ðinterexchange€carrier€charges€(PICCs)€are€assessed€per„line€upon€the€subscriber's€presubscribed€interexchange€carrier€(PIC),€in€part€to€recover€common€line€revenues€notÏrecovered€from€the€SLC.׃Ñ` ×Ý ƒŠÿÿÝò…òÚ  Ú62Ú  Úó…óÝ  Ý×  ×€€The€maximum€PICC€that€can€be€assessed,€subject€to€the€PICC€ceiling,€is€determined€by€dividing€residual€common€line€and€other€revenues€permittedÐ “T Ðunder€our€price€cap€rules€by€access€lines.׃Òð ×Ý ƒŠÿÿÝò…òÚ  Ú63Ú  Úó…óÝ  Ý×  ×€€Ð Ü ÐÌà  àÔ2ÿÿ(ÔÚ  Ú41Ú  Ú.Ô3  Ô€€CCL€charges€are€per„minute€charges€on€originating€and€terminating€minutes.€€The€CCL€recovers€common€line€revenues€not€recovered€through€SLCs€andÏPICCs.€€The€maximum€per„minute€CCL€charge€that€the€price€cap€LECs€can€recover€ò òó óis€the€lower€of:€(1)€the€per„minute€rate€that€would€recover€annual€common€line€permittedÐ ³t Ðrevenues€less€the€maximum€amounts€allowed€to€be€recovered€through€SLCs€and€PICCs;€or€(2)€for€originating€CCL€charges,€a€cap€based€on€charges€assessed€on€originatingÏminutes€on€December€31,€1997.׃Ӏ ×Ý ƒŠÿÿÝò…òÚ  Ú64Ú  Úó…óÝ  Ý×  ×€€This€determination€requires€the€price€cap€LECs€to€include€the€maximum€SLC€and€PICC€revenues€they€could€recover€in€their€calculations,РÄ! Ðregardless€of€whether€they€actually€assess€those€charges.€€If€a€price€cap€LEC€does€not€include€all€of€the€lines€for€which€it€is€permitted€to€charge€a€PICC€when€it€makes€itsÏcalculations,€the€PICC€determined€using€the€formula€in€section€69.153€will€be€too€high,€because€residual€revenues€will€be€divided€by€too€few€lines.€€If€the€PICCs€are€above€theÏPICC€caps,€the€residual€used€to€determine€the€per„minute€CCL€charge€pursuant€to€the€formula€in€section€69.154(a)€will€also€be€too€high.€€Thus,€if€the€price€cap€LECs€do€notÏinclude€in€their€maximum€PICC€and€CCL€calculations€all€the€lines€subject€to€these€charges,€the€IXCs€will€be€overcharged.ÌÌà  àÔ2ÿÿ)ÔÚ  Ú42Ú  Ú.Ô3  Ô€€òòóóThe€òòAccess€Reform€Tariffs€Designation€Orderóó€tentatively€concluded€that€Ameritech,€CBT,€and€US€West€should€be€required€to€include€in€their€line€countsÐ ó´' Ðinward„only€lines€for€their€SLC€and€PICC€counts.׃Ô×Ý ƒŠÿÿÝò…òÚ  Ú65Ú  Úó…óÝ  Ý×  ×€€The€Bureau€also€tentatively€concluded€that€Ameritech€failed€to€include€all€the€Primary€Rate€Interface€„€Integrated€ServicesÐ {<( ÐDigital€Network€(PRI„ISDN)€lines€in€its€line€count€because€it€assessed€five€SLCs€but€only€one€PICC€for€PRI„ISDN€service.ÌÌà  àà ` à2.à ¸ àDiscussionÐ Ô+ Ðâ âÐ ›\, Ðà  àÔ2ÿÿ*ÔÚ  Ú43Ú  Ú.Ô3  Ô€€In€its€direct€case,€CBT€states€that€it€inadvertently€filed€tariff€language€stating€that€it€does€not€include€inward„only€lines€in€its€SLC€and€PICC€counts.€€CBTÏâ âstates€that€it€did,€in€fact,€include€inward„only€lines€in€these€counts.׃Õ×Ý ƒŠÿÿÝò…òÚ  Ú66Ú  Úó…óÝ  Ý×  ×€€Upon€examination€of€the€data,€we€find€that€CBT's€explanation€is€adequate.€€We€require,€however,€thatРLj ÐCBT€revise€the€language€in€its€tariff€to€eliminate€the€provision€that€states€it€does€not€include€inward„only€lines€in€its€SLC€and€PICC€counts.ÌÌà  àÔ2ÿÿ+ÔÚ  Ú44Ú  Ú.Ô3  Ô€€U€S€West€states€that€it€included€inward„only€lines€in€its€SLC€and€PICC€line€counts.€€US€West€states€that,€although€it€had€not€yet€billed€PICCs€to€inward„onlyÏlines€due€to€an€"internal€misunderstanding"€at€the€time€US€West€filed€its€access€reform€implementation€tariff,€this€mistake€is€not€reflected€in€its€reported€line€counts.׃ÖX×Ý ƒŠÿÿÝò…òÚ  Ú67Ú  Úó…óÝ  Ý×  ×€€In€fact,Ð ç ¨ Ðbecause€U€S€West's€tariff€provides€for€a€PICC€on€all€inward„only€lines€ordered€out€of€its€general€exchange€tariffs,€U€S€West's€SLC€and€PICC€line€counts€included€all€such€lines.€ÏWe€therefore€find€US€West€did€not€base€its€maximum€PICC€and€CCL€charge€calculation€on€an€undercount€of€the€number€of€lines.ÌÌà  àÔ2ÿÿ,ÔÚ  Ú45Ú  Ú.Ô3  Ô€€Ameritech€argued€in€its€direct€case€that€it€does€not€have€to€assess€a€PICC€on€inward„only€lines€or€include€them€in€its€PICC€line€count€because€these€linesÏcannot€originate€calls.€€The€òòAccess€Reform€Tariffs€Designation€Orderóó€tentatively€rejected€Ameritech's€argument.׃×è×Ý ƒŠÿÿÝò…òÚ  Ú68Ú  Úó…óÝ  Ý×  ×€€òòóóAmeritech€has€since€revised€its€tariff€to€include€inward„onlyÐ  P  Ðlines€in€its€PICC€count.׃Øx×Ý ƒŠÿÿÝò…òÚ  Ú69Ú  Úó…óÝ  Ý×  ×€€This€tariff€became€effective€on€April€1,€1998.€€Ameritech,€however,€maintains€that€its€earlier€approach€was€reasonable.׃Ù×Ý ƒŠÿÿÝò…òÚ  Ú70Ú  Úó…óÝ  Ý×  ×€€We€reject€Ameritech'sÐ  Ø  Ðargument.€€There€is€no€provision€in€the€òòAccess€Charge€Reform€Orderóó€that€exempts€inward„only€lines€from€being€included€in€either€the€SLC€or€PICC€count.׃Ú` ×Ý ƒŠÿÿÝò…òÚ  Ú71Ú  Úó…óÝ  Ý×  ×€€Although€theÐ Ÿ `  Ðend€user€does€not€originate€traffic€on€inward„only€lines,€these€lines€carry€interstate€traffic,€and€part€of€the€cost€of€each€of€these€lines€is€assigned€to€the€interstate€jurisdiction.€ÏThese€lines€should,€therefore,€be€included€in€a€price€cap€LEC's€SLC€and€PICC€counts.€€Ameritech€assesses€a€SLC€on€inward„only€lines,€and€we€find€no€basis€for€including€theseÏlines€in€the€SLC€count€but€excluding€them€from€the€PICC€count.€€Furthermore,€our€rules€provide€Ameritech€an€opportunity€to€recover€PICCs€on€inward„only€lines.€€For€inward„¼only€lines€that€do€not€have€a€PIC,€price€cap€LECs€may€assess€the€PICC€upon€the€end„user.׃۸ ×Ý ƒŠÿÿÝò…òÚ  Ú72Ú  Úó…óÝ  Ý×  ×€€DeltaCom€argues€that€assessing€a€PICC€on€inward„only€lines€further€complicatesÐ ¿€ Ðthe€auditing€and€tracking€of€this€charge.׃ÜH ×Ý ƒŠÿÿÝò…òÚ  Ú73Ú  Úó…óÝ  Ý×  ×€€Even€if€this€is€true,€it€does€not€provide€sufficient€cause€to€exclude€these€lines€when€calculating€the€maximum€PICC€and€CCLÐ G  Ðcharges.€€We€therefore€order€Ameritech€to€revise€its€line€counts€to€include€inward„only€lines€in€its€PICC€count.€€We€note€that€Ameritech,€in€its€March€17€tariff€filing,€alreadyÏrecalculated€its€CCL€rates€for€the€period€starting€April€1,€1998.×ƒÝØ×Ý ƒŠÿÿÝò…òÚ  Ú74Ú  Úó…óÝ  Ý×  ×€€Accordingly,€Ameritech€must€recalculate€its€CCL€rates€for€the€first€three€months€of€1998€to€reflect€its€revisedÐ W  Ðline€counts€òòóófor€the€purpose€of€making€refunds€to€its€customers€in€accordance€with€the€requirements€of€Section€VI€of€this€Order.Ð ß   ÐÌà  àÔ2ÿÿ-ÔÚ  Ú46Ú  Ú.Ô3  Ô€€Ameritech,€in€its€December€17,€1998€reply,€stated€that€each€PRI„ISDN€service€offering€was€assessed€five€SLCs,€but€only€one€PICC€for€purposes€of€calculatingÏits€maximum€CCL€charge.׃Þ0×Ý ƒŠÿÿÝò…òÚ  Ú75Ú  Úó…óÝ  Ý×  ×€€Ameritech€acknowledges€that€this€representation€is€incorrect,€and€that€it€has€always€counted€an€equal€number€of€SLCs€and€PICCs€for€each€PRI„Ð w8  ÐISDN€offering.€€We€have€verified€Ameritech's€claims€by€examining€its€tariff€filing,€and€find€therefore€that€Ameritech€reasonably€counted€SLCs€and€PICCs€for€each€PRI„ISDNÏoffering.ÌÌò òà  àD.à ` àHistorical€Understatement€of€the€BFPó óà À àò òÐ —X ÐÌà  àà ` àó ó1.€BackgroundÐ Ÿ` ÐÌò òà  àó óÔ2ÿÿ.ÔÚ  Ú47Ú  Ú.Ô3  Ô€€In€preparing€its€annual€access€tariff€filing,€each€incumbent€LEC€must€forecast€its€common€line€costs€and€end€user€demand€levels€for€the€upcoming€tariff€year.€Ð ¯p Ðâ âThese€forecasts,€in€turn,€are€used€to€determine€the€LEC's€monthly€per„line€BFP€revenue€requirement.׃ßÀ×Ý ƒŠÿÿÝò…òÚ  Ú76Ú  Úó…óÝ  Ý×  ×€€The€LEC€then€uses€this€monthly€per„line€BFP€revenue€requirement€toÐ 7ø  Ðset€its€SLC,€subject€to€certain€SLC€caps€provided€in€the€Commission's€rules.׃à×Ý ƒŠÿÿÝò…òÚ  Ú77Ú  Úó…óÝ  Ý×  ×€€A€price€cap€LEC€then€sets€its€PICCs€and€its€per„minute€CCL€charges€to€recover€the€differenceÐ ? Ðâ âbetween€its€anticipated€SLC€revenues€and€the€total€common€line€revenues€permitted€by€its€price€cap.׃á@×Ý ƒŠÿÿÝò…òÚ  Ú78Ú  Úó…óÝ  Ý×  ×РLj ÐÌà  àÔ2ÿÿ/ÔÚ  Ú48Ú  Ú.Ô3  Ô€€A€price€cap€LEC€may€be€able€to€improperly€increase€its€overall€common€line€revenues€by€understating€its€per„line€BFP€revenue€requirement€and€calculatingÏcorrespondingly€higher€CCL€rates.€€A€price€cap€LEC€that€has€a€SLC€below€the€multi„line€business€(MLB)€SLC€cap,€and€that€expects€growth€in€minutes„of„use€per„line€(òògóó)€inÐ _  Ðthe€upcoming€tariff€year€to€exceed€òògóó/2€from€the€previous€year,€can€increase€its€overall€common€line€revenues€by€understating€its€per„line€BFP€revenue€requirement€because€theÐ ç ¨ Ðrevenue€from€higher€CCL€charges€more€than€offsets€the€revenue€foregone€from€lower€SLCs.€€In€the€òò1997€Annual€Access€Tariff€Investigation€Orderóó,€we€concluded€that€BellÐ o 0 ÐAtlantic„South,€Bell„Atlantic„North,€GTE,€SWBT,€the€Sprint€LTCs,€and€U€S€West€had€unjustly€and€unreasonably€understated€their€per„line€BFP€revenue€requirement€forecastsÏfor€tariff€year€1997„98,€and€had€tariffed€CCL€rates€that€were€correspondingly€unjustly€and€unreasonably€high.€€We€therefore€prescribed€per„line€BFP€revenue€requirementÏforecasts€for€these€LECs.€ÌÌà  àÔ2ÿÿ0ÔÚ  Ú49Ú  Ú.Ô3  Ô€€A€price€cap€LEC's€maximum€CCL€charge€is€determined,€in€part,€by€the€last€calendar€year's€(base„period's)€aggregate€common€line€basket€revenues.׃âÐ×Ý ƒŠÿÿÝò…òÚ  Ú79Ú  Úó…óÝ  Ý×  ×€€AnÐ  Ø  Ðimproper€increase€in€aggregate€common€line€revenues€is€carried€forward€into€the€following€year,€increasing€future€aggregate€common€line€revenues€and€CCL€charges.€€In€theÏòò1997€Annual€Tariff€Investigation€Orderóó,€the€Commission€stated€that€for€a€price€cap€LEC€that€routinely€develops€unbiased€per„line€BFP€revenue€requirement€forecasts,€the€priceÐ 'è  Ðcap€formula€adjusts€the€CCL€rate€in€a€manner€intended€to€generate€the€remainder€of€the€common€line€revenues€permitted€under€price€caps€not€recovered€from€SLCs.׃ã` ×Ý ƒŠÿÿÝò…òÚ  Ú80Ú  Úó…óÝ  Ý×  ×€€TheÐ ¯p ÐCommission€also€stated,€however,€that€an€incumbent€LEC€that€has€consistently€understated€its€per„line€BFP€revenue€requirement€has€consistently€and€correspondingly€inflatedÏits€maximum€CCL€rate.€€A€price€cap€LEC€uses€its€prior€year's€total€common€line€revenues€as€the€starting€point€in€computing€its€CCL€rate.€€If€the€price€cap€LEC€understates€itsÏper„line€BFP€revenue€requirement,€thereby€inflating€its€aggregate€common€line€revenues€in€a€given€year,€the€price€cap€formula€automatically€builds€this€inflation€into€its€CCLÏrate€for€the€upcoming€year.€€The€increase€to€a€price€cap€LEC's€aggregate€common€line€revenues€is€compounded€each€year€a€price€cap€LEC€understates€its€per„line€BFP€revenueÏrequirement.€€As€the€effects€of€this€overstatement€compound€each€year,€the€maximum€CCL€charge€becomes€increasingly€inflated,€generating€revenues€that€exceed€the€commonÏline€revenues€intended€to€be€permitted€under€price€caps.׃äð ×Ý ƒŠÿÿÝò…òÚ  Ú81Ú  Úó…óÝ  Ý×  ×€€Although€we€acknowledged€this€effect€in€the€òò1997€Annual€Tariff€Investigation€Orderóó,€we€did€not€order€reductionsÐ ß   Ðto€PCIs€to€remove€the€lingering€effect€of€historically€inflated€maximum€CCL€rates,€because€the€record€did€not€provide€sufficient€information€to€allow€calculation€of€suchÏreductions.×ƒå€ ×Ý ƒŠÿÿÝò…òÚ  Ú82Ú  Úó…óÝ  Ý×  ×€€Ð ï°  ÐÌà  àÔ2ÿÿ1ÔÚ  Ú50Ú  Ú.Ô3  Ô€€In€the€òòAccess€Reform€Tariffs€Designation€Orderóó,€we€tentatively€concluded€that€the€current€maximum€CCL€rates€of€Bell€Atlantic„South,€Bell€Atlantic„North,Ð ÿÀ  ÐGTE,€SWBT,€the€Sprint€LTCs,€and€US€West€were€unreasonably€high€due€to€past€understatement€of€per„line€BFP€revenue€requirement.׃æ×Ý ƒŠÿÿÝò…òÚ  Ú83Ú  Úó…óÝ  Ý×  ×€€We€directed€each€of€these€carriers€toÐ ‡H  Ðprovide,€as€part€of€its€direct€case,€a€recalculation€of€its€maximum€common€line€revenues,€using€the€CCL€Recalculation€Methodology€employed€by€AT&T€in€its€December€23ÏPetition.€€We€sought€comment€on€this€proposed€methodology.€€We€also€sought€comment€on€whether€this€proposed€methodology€should€be€adjusted€to€account€for€specificÏinstances€in€which€price€cap€LECs€have€priced€their€CCL€charges€below€the€permitted€cap€or€have€reduced€their€PCIs€for€a€tariff€year€because€of€sharing.€€Additionally,€weÏinvited€price€cap€LECs€to€submit€alternative€methodologies€that€in€their€view€may€present€a€more€accurate€calculation€of€their€maximum€common€line€revenues.׃ç ×Ý ƒŠÿÿÝò…òÚ  Ú84Ú  Úó…óÝ  Ý×  ×Ð §h ÐÌà  àà ` à2.à ¸ àDiscussionÐ ·x ÐÌà  àÔ2ÿÿ2ÔÚ  Ú51Ú  Ú.Ô3  Ô€€In€this€Order,€we€require€Bell€Atlantic„South,€Bell€Atlantic„North,€the€Sprint€LTCs,€GTE,€SWBT,€and€U€S€West€to€make€adjustments€to€their€maximumÏpermitted€CCL€rates€to€remove€the€effect€that€the€consistent€understatement€of€BFP€revenue€requirements€has€on€their€CCL€rates.€€These€price€cap€LECs€must€make€theseÏrecalculations€using€the€AT&T€CCL€rate€recalculation€methodology,€as€modified€by€this€Order.€€€ÌÌà  àÔ2ÿÿ3ÔÚ  Ú52Ú  Ú.Ô3  Ô€€U€S€West,€in€its€direct€case,€contends€that€the€adjustment€of€CCL€charges,€as€contemplated€by€the€òòAccess€Reform€Tariffs€Designation€Orderóó,€would€conflictÐ ç¨% Ðwith€the€Commission's€rules.׃è0×Ý ƒŠÿÿÝò…òÚ  Ú85Ú  Úó…óÝ  Ý×  ×€€U€S€West€argues€that€the€Commission's€rules€do€not€contemplate€a€true„up€process€of€this€kind.€€Even€if€the€Commission€could€require€a€true„Ð o0& Ðup,€U€S€West€argues,€it€must€first€find€the€price€cap€LECs'€CCL€rates€unreasonable€and€then€determine€that€a€reasonable€rate€requires€this€adjustment.€€U€S€West€argues,Ð ÷¸' Ðhowever,€that€the€Commission€has€effectively€prescribed€U€S€West's€CCL€rates€and€it€may€not€now€find€those€rates€unreasonable.€€Further€U€S€West€argues€that€in€order€for€theÏCommission€to€find€the€price€cap€LECs'€CCL€rates€unreasonable,€the€Commission€must€find€that€only€perfect€BFP€forecasts€can€produce€reasonable€rates.׃é×Ý ƒŠÿÿÝò…òÚ  Ú86Ú  Úó…óÝ  Ý×  ×€€In€addition,€U€SРLj ÐWest€argues€that€if€the€Commission€institutes€the€adjustment€contemplated€in€the€òòAccess€Reform€Tariffs€Designation€Orderóó,€"it€must€either€determine€the€allowable€margin€forÐ O Ðerror€in€the€LECs'€BFP€forecasts,€or€it€must€require€a€true„up€to€actual€BFPs€for€all€LECs,€regardless€of€the€accuracy€of€their€forecasts."׃êX×Ý ƒŠÿÿÝò…òÚ  Ú87Ú  Úó…óÝ  Ý×  ×Рט ÐÌà  àÔ2ÿÿ4ÔÚ  Ú53Ú  Ú.Ô3  Ô€€We€reject€U€S€West's€assertion€that€we€lack€the€authority€to€require€price€cap€LECs€to€adjust€their€CCL€rates€to€eliminate€any€lingering€effect€of€previousÏunderstatements€of€their€BFP€revenue€requirements.€€Under€Section€201(b),€we€are€charged€with€ensuring€the€price€cap€LEC€rates€are€just€and€reasonable,€and€in€exercising€thatÏauthority,€we€have€the€ability€to€set€just€and€reasonable€rates€when€we€find€rates€to€be€unreasonable.׃ëè×Ý ƒŠÿÿÝò…òÚ  Ú88Ú  Úó…óÝ  Ý×  ×€€The€Communications€Act€empowers€us€"to€determine€and€prescribe€whatÐ ÷ ¸ Ðwill€be€the€just€and€reasonable€charge,€or€the€maximum€or€minimum,€or€maximum€and€minimum,€charge€or€charges"€these€LECs€are€permitted€to€impose.׃ìx×Ý ƒŠÿÿÝò…òÚ  Ú89Ú  Úó…óÝ  Ý×  ×€€We€conclude€thatÐ  @ Ðthe€current€maximum€CCL€rates€of€Bell€Atlantic„South,€Bell€Atlantic„North,€the€Sprint€LTCs,€GTE,€SWBT,€and€U€S€West€are€unreasonably€high€due€to€past€understatement€ofÏper„line€BFP€revenue€requirement,€and€that€they€must€recalculate€their€maximum€CCL€rates€and€common€line€revenues€using€the€CCL€rate€recalculation€methodology,€asÏmodified€by€this€Order.€€We€are€not,€in€this€Order,€requiring€these€companies€to€refund€or€adjust€their€rates€to€account€for€the€fact€that€their€historic€overstatement€of€BFPÏresulted€in€higher€CCL€rates€in€any€period€before€January€1,€1998.€€These€price€cap€LECs€have€been€on€notice€that€this€issue€is€under€investigation€and€that€their€1998€rates€mayÏneed€to€be€adjusted€accordingly.ÌÌà  àÔ2ÿÿ5ÔÚ  Ú54Ú  Ú.Ô3  Ô€€U€S€West€asserts€that€the€Commission€has€"effectively€prescribed€U€S€West's€CCL€rates,"€and€the€Commission€may€not€now€"find€those€rates€not€justifiedÏunder€Section€204(a)."׃í×Ý ƒŠÿÿÝò…òÚ  Ú90Ú  Úó…óÝ  Ý×  ×€€The€Commission€has€not€"effectively,"€or€otherwise,€prescribed€the€maximum€CCL€rates€for€U€S€West.€€In€the€òò1997€Annual€Access€TariffÐ ¿€ ÐInvestigation€Orderóó,€we€found€that€the€CCL€rates€charged€by€U€S€West€and€several€other€price€cap€LECs€were€unreasonably€high€due€to€the€understatement€of€the€BFP€revenueÐ G  Ðrequirement€forecast€for€the€1997„98€tariff€year.€€We€therefore€required€U€S€West€and€other€price€cap€LECs€to€use€the€forecasts€we€prescribed€to€recalculate€their€common€lineÏrates€for€the€January€1,€1998€through€June€30,€1998€period.€€We€further€found€that€U€S€West€and€several€other€price€cap€LECs€had€consistently€overstated€their€BFP€revenueÏrequirement€over€the€course€of€several€years€and€had€correspondingly€inflated€their€maximum€CCL€rates.€€Although€prior€to€the€1997€annual€access€tariff€investigation€weÏallowed€tariffs€to€go€into€effect€that€reflected€understated€BFP€revenue€requirements€and€inflated€CCL€rates,€these€rates€went€into€effect€without€an€investigation€of€BFPÏrevenue€requirement€forecasts.€€The€fact€that€tariffs€were€allowed€to€go€into€effect€with€CCL€rates€that€reflected€understated€BFP€revenue€requirement€forecasts,€did€notÏconstitute€a€finding€that€these€forecasts€were€just€and€reasonable.€€It€is€well€established€that€a€Commission€decision€allowing€a€tariff€to€go€into€effect€without€an€investigationÏ"decides€nothing€concerning€the€merits€of€the€case;€it€merely€reserves€the€issues€pending€a€hearing."׃î˜×Ý ƒŠÿÿÝò…òÚ  Ú91Ú  Úó…óÝ  Ý×  ×€€Ð ÿÀ  ÐÌà  àÔ2ÿÿ6ÔÚ  Ú55Ú  Ú.Ô3  Ô€€Further,€Section€61.46(d)(1)€of€the€Commission's€rules€sets€forth€the€methodology€by€which€the€maximum€carrier€common€line€charge€shall€be€computed.€€TheÏCommission€has€the€authority€and€the€obligation€under€section€201(b)€of€the€Commission's€rules€to€determine€whether€price€cap€LECs€have€established€reasonable€rates€byÏusing€this€methodology€correctly.€€In€the€òò1997€Annual€Tariff€Investigation€Orderóó,€we€specifically€noted€that€although€a€price€cap€LEC€that€consistently€understated€its€per„lineÐ à ÐBFP€revenue€requirement€inflated€its€maximum€CCL€rate,€the€record€did€not€provide€sufficient€information€to€allow€calculation€of€such€reductions.€€This€proceeding,€however,Ïdesignated€this€issue€for€investigation€and€has€developed€a€sufficient€record.€ÌÌà  àÔ2ÿÿ7ÔÚ  Ú56Ú  Ú.Ô3  Ô€€We€also€find€without€merit€U€S€West's€claim€that€we€cannot€require€the€proposed€CCL€rate€adjustments€because€we€need€either€to€provide€acceptable€marginsÏof€error€for€BFP€forecasts€or€to€require€all€LECs€to€true„up€their€BFP.€€In€the€òò1997€Annual€Tariff€Investigation€Orderóó,€we€stated€which€price€caps€LECs€have€reasonableРLj! Ðmaximum€CCL€rates€and€which€ones€did€not.׃ï( ×Ý ƒŠÿÿÝò…òÚ  Ú92Ú  Úó…óÝ  Ý×  ×€€Price€cap€LECs€can€use€our€findings€in€that€investigation€as€a€guide€for€which€kind€of€BFP€forecasts€produce€reasonable€rates.€Ð O" ÐContrary€to€U€S€West's€claim,€we€do€not€need€to€find€that€only€perfect€BFP€forecasts€can€produce€reasonable€rates.€€In€fact,€in€the€òò1997€Annual€Tariff€Investigation€Orderóó,€weРט# Ðfound€that€most€of€the€price€cap€LECs€were€able€to€produce€reasonably€unbiased€and€accurate€forecasts€without€making€perfect€predictions.׃ð¸ ×Ý ƒŠÿÿÝò…òÚ  Ú93Ú  Úó…óÝ  Ý×  ×€€U€S€West€would€have€us€requireÐ _ $ Ða€true„up€to€actual€BFPs€for€all€price€cap€LECs,€even€ones€whose€rates€we€determined€were€reasonable.€€In€the€òò1997€Annual€Tariff€Investigation€Orderóó,€we€stated€that€"a€LECÐ ç¨% Ðthat€has€consistently€understated€its€per„line€BFP€revenue€requirement€over€the€course€of€several€years€has€also€consistently€and€correspondingly€inflated€its€maximum€CCLÏrate."׃ñH ×Ý ƒŠÿÿÝò…òÚ  Ú94Ú  Úó…óÝ  Ý×  ×€€In€this€order,€we€require€those€price€cap€LECs€which€have€"consistently€understated"€their€per„line€BFP€revenue€requirements€to€recalculate€their€maximum€CCL€rates.€Ð ÷¸' ÐThere€is€no€need€to€require€price€cap€LECs€that€have€produced€reasonably€unbiased€and€accurate€forecasts€to€recalculate€their€maximum€CCL€rates.€€That€would€unduly€punishÏprice€cap€LECs€that€have€consistently€and€reasonably€forecast€their€monthly€per„line€BFP€revenue€requirements.ÌÌò òó óà  àÔ2ÿÿ8ÔÚ  Ú57Ú  Ú.Ô3  Ô€€We€adopt,€with€some€modifications,€AT&T's€proposed€methodology€for€calculating€the€impact€of€the€historic€understatement€of€the€BFP€estimates€in€currentÐ Ø+ Ðâ âCCL€rates.€€The€AT&T€methodology€uses€adjusted€SLCs€and€the€formulas€on€the€CCL„1€charts€to€recalculate€the€maximum€permitted€CCL€rates€and€common€line€revenues€forÐ Ÿ`, Ð1991„1997.׃ò×Ý ƒŠÿÿÝò…òÚ  Ú95Ú  Úó…óÝ  Ý×  ×€€The€AT&T€methodology€for€recalculating€the€maximum€CCL€rate€adjusts€the€SLCs€proposed€in€the€annual€filings€by:€(1)€calculating€the€percentage€differenceÐ ? Ðâ âbetween€the€actual€BFP€and€the€forecasted€BFP€in€each€annual€filing;€and€(2)€applying€this€percentage€to€the€SLCs€proposed€in€each€annual€filing.€€For€each€SLC,€the€AT&TÏadjusted€proposed€SLC€is€the€lesser€of€this€calculation€and€the€SLC€cap.׃ó ×Ý ƒŠÿÿÝò…òÚ  Ú96Ú  Úó…óÝ  Ý×  ×€€The€AT&T€methodology€uses€a€"true„up"€mechanism€to€account€for€rate€changes€that€took€effectÐ O Ðbetween€annual€tariff€filings.׃ô×Ý ƒŠÿÿÝò…òÚ  Ú97Ú  Úó…óÝ  Ý×  ×Рט ÐÌà  àÔ2ÿÿ9ÔÚ  Ú58Ú  Ú.Ô3  Ô€€We€find€that€the€AT&T€methodology€is€generally€correct€for€two€reasons.€€First,€it€uses€CCL„1€charts€to€recalculate€the€maximum€CCL€rate€and€common€lineÏrevenues€and€the€formula€set€forth€on€these€charts€is€equivalent€to€the€formula€set€forth€in€our€rules€for€calculating€the€maximum€CCL€rate€and€common€line€revenues.€€Second,ÏAT&T's€methodology€removes€the€historic€understatement€of€BFP€forecasts€from€the€SLCs€proposed€in€the€annual€filings€because€it€applies€the€percentage€difference€betweenÏthe€actual€BFP€and€the€forecasted€BFP€to€the€proposed€SLCs.ÌÌà  àÔ2ÿÿ:ÔÚ  Ú59Ú  Ú.Ô3  Ô€€We€agree€with€Bell€Atlantic,€however,€that€the€true„up€mechanism€in€AT&T's€methodology€does€not€precisely€reflect€the€impact€that€rate€changes€betweenÏannual€tariff€filings€have€on€the€maximum€CCL€rate.€€The€AT&T€methodology€only€uses€a€"true„up"€mechanism€because€it€does€not€account€separately€for€interim€rate€changes.€ÏBell€Atlantic€recalculated€the€amount€of€the€maximum€CCL€and€common€line€revenue€overstatement€for€Bell€Atlantic„South€by€measuring€the€impact€on€the€CCL€rate€of€interimÏfilings€between€the€1996€and€1997€annual€filings.€€This€calculation€reveals€that€Bell€Atlantic„South's€maximum€common€line€revenue€overstatement€is€approximately€twoÏmillion€dollars€lower€than€the€overstatement€calculated€by€using€the€"true„up"€reflected€in€AT&T's€methodology.׃õH ×Ý ƒŠÿÿÝò…òÚ  Ú98Ú  Úó…óÝ  Ý×  ×€€We€find€that€accounting€separately€for€each€tariff€filing€thatÐ ¯p Ðhas€affected€maximum€common€line€revenues€since€1991€may€substantially€increase€the€precision€of€the€maximum€CCL€rate€recalculations.€€We€therefore€modify€AT&T'sÏmethodology€to€account€for€the€impact€of€interim€rate€changes.€€We€require€Bell€Atlantic„South,€Bell€Atlantic„North,€US€West,€GTE,€SWBT,€and€Sprint€to€recalculate€theirÏmaximum€CCL€rates€by€accounting€separately€for€each€tariff€filing€that€has€affected€maximum€common€line€revenues€since€1991.€€We€require€that€they€revise€each€CCL„1€chartÏthat€they€submitted€with€their€previous€filings€by€performing€the€calculations€on€these€charts€using€AT&T€adjusted€proposed€SLCs€in€place€of€the€proposed€SLCs€in€each€tariffÏfiling.€€These€LECs€should€not€"true„up"€the€calculation€of€the€maximum€CCL€rate€and€common€line€revenues€because€each€rate€change€that€has€affected€maximum€common€lineÏrevenues€since€1991€is€accounted€for€separately€under€this€revised€methodology.€ÌÌà  àÔ2ÿÿ;ÔÚ  Ú60Ú  Ú.Ô3  Ô€€For€price€cap€LECs€such€as€Bell€Atlantic„South€that€file€separate€SLCs€for€each€state€in€their€territories,€the€AT&T€adjusted€proposed€SLCs€are€weightedÏaverage€rates€based€on€SLC€demand€for€each€state€in€a€LEC's€territory.׃öØ×Ý ƒŠÿÿÝò…òÚ  Ú99Ú  Úó…óÝ  Ý×  ×€€ò òó óIn€implementing€AT&T's€methodology,€as€revised€by€this€Order,€Bell€Atlantic„South€must€use€theÐ w8  Ðsame€demand€for€calculating€the€adjusted€proposed€SLCs€reflected€in€the€calculations€on€the€revised€CCL„1€charts€as€was€used€originally€to€calculate€the€proposed€weightedÏaverage€rates€reflected€in€the€calculations€on€the€previously€submitted€CCL„1€charts.׃÷¨×Ý ƒŠÿÿÝò…òÚ  Ú100Ú  Úó…óÝ  Ý×  ×€€We€also€find€that€Bell€Atlantic„South€must€carry€forward€these€same€adjustedÐ ‡H  Ðproposed€SLCs€and€use€these€as€the€SLCs€at€the€last€PCI€update€on€the€CCL„1€chart€for€each€subsequent€recalculated€tariff€filing.€€By€carrying€forward€the€same€weightedÏaverage€rates€without€modifying€the€demand€reflected€in€the€calculation€of€these€rates,€the€rates€properly€reflect€the€demand€that€provided€the€basis€for€recovery€of€common€lineÏrevenues€between€tariff€filings.Ìà  àÌà  àÔ2ÿÿ<ÔÚ  Ú61Ú  Ú.Ô3  Ô€€We€disagree€with€Bell€Atlantic's€argument€that€section€61.46(d)(1)€of€our€rules׃ø×Ý ƒŠÿÿÝò…òÚ  Ú101Ú  Úó…óÝ  Ý×  ×€requires€that€the€weighted€average€SLCs€at€the€last€PCI€update€reflect€baseÐ _  Ðperiod€demand€for€the€current€tariff€filing.€€These€rules€require€that€the€SLCs€at€the€last€PCI€update€reflect€existing€rates.€€Existing€SLCs€are€those€in€effect€immediately€prior€toÏthe€effective€date€of€the€current€tariff€filing.€€For€a€price€cap€LEC€such€as€Bell€Atlantic„South€that€calculated€weighted€average€SLCs€and€used€these€weighted€averages€on€theÏCCL„1€chart€for€the€prior€tariff€filing,€existing€SLCs€reflect€the€demand€for€whatever€period€that€it€used€to€calculate€these€weighted€averages€and€the€SLCs€proposed€for€eachÏstate€in€its€territory€in€the€prior€tariff€filing.€€ÌÌà  àÔ2ÿÿ=ÔÚ  Ú62Ú  Ú.Ô3  Ô€€We€agree€with€Sprint€that€the€AT&T€methodology,€as€revised€by€this€Order,€must€be€extended€through€December€31,€1997€so€that€it€captures€any€rate€changesÏthat€may€have€affected€maximum€common€line€revenues€between€the€July€1,€1997€annual€filing€and€the€access€reform€tariff€filing.€€The€adjusted€proposed€SLCs€used€in€theÏrecalculation€of€the€maximum€CCL€rate€and€common€line€revenues€on€the€CCL„1€charts€for€these€tariff€filings€should€reflect€the€Commission's€prescribed€BFP€forecast.€€BellÏAtlantic„South,€Bell€Atlantic„North,€US€West,€GTE,€SWBT,€and€Sprint€LECs€must,€therefore,€apply€the€modified€AT&T€methodology€so€that€it€also€captures€interim€rateÏchanges€filed€between€July€1,€1997€and€December€31,€1997.€€They€also€must€reflect€the€Commission's€prescribed€BFP€forecast€in€the€recalculation€of€the€maximum€CCL€rateÏand€common€line€revenues€for€these€tariff€filings.ÌÌà  àÔ2ÿÿ>ÔÚ  Ú63Ú  Ú.Ô3  Ô€€We€find€that€SWBT€did€not€account€properly€for€rate€changes€reflected€in€its€1997€annual€tariff€filing.€€SWBT€recalculated€the€maximum€CCL€rate€andÏcommon€line€revenues€by€revising€its€CCL„1€charts€for€annual€and€interim€tariff€filings€between€1991€and€1998€using€adjusted€proposed€SLCs€in€place€of€the€originallyÏproposed€SLCs.€€It€did€not,€however,€revise€the€CCL„1€chart€it€submitted€for€the€1997€annual€tariff€filing.€€It€has€not,€therefore,€accounted€separately€for€rate€changes€reflectedÏin€its€1997€annual€tariff€filing.€€Accordingly,€SWBT€must€revise€the€CCL„1€chart€it€submitted€for€the€1997€annual€tariff€filing.€€SWBT€must€use€adjusted€proposed€SLCs€in€theÏrecalculation€of€the€maximum€CCL€rate€and€common€line€revenues€on€this€CCL„1€chart€that€reflect€the€Commission's€prescribed€BFP€forecast.€€It€also€must€reflect€theÏrecalculation€of€the€maximum€CCL€rate€and€common€line€revenues€for€the€1997€annual€tariff€filing€in€the€recalculation€of€the€maximum€CCL€rate€and€common€line€revenues€forÏsubsequent€tariff€filings.€€ÌÌà  àÔ2ÿÿ?ÔÚ  Ú64Ú  Ú.Ô3  Ô€€We€disagree€with€Bell€Atlantic's€argument€that€AT&T's€methodology€is€unreliable€because€it€does€not€include€the€impact€of€changes€in€sharing€amounts.€ÏWhile€the€AT&T€methodology€makes€no€adjustment€to€the€common€line€basket€PCIs€to€reflect€changes€in€sharing€amounts€for€1991„1997,€there€is€no€need€to€make€such€anÏadjustment.€€The€effect€of€sharing€is€reflected€in€the€PCIs€for€price€cap€baskets€by€making€downward€exogenous€adjustments€to€these€baskets€in€one€tariff€year.€€This€effect€isÏthen€reversed€by€making€upward€exogenous€adjustments€to€the€price€cap€baskets€in€the€following€tariff€year.€€Accordingly,€we€do€not€modify€the€AT&T€methodology€to€includeÏthe€impact€of€changes€in€sharing€amounts.ÌÌà  àÔ2ÿÿ@ÔÚ  Ú65Ú  Ú.Ô3  Ô€€We€find€that€the€methodology€we€adopt€in€this€order€for€recalculating€the€maximum€CCL€rate€and€maximum€common€line€revenues€does€not€require€anÏadjustment€to€account€for€instances€in€which€price€cap€LECs€have€priced€their€CCL€rates€below€the€permitted€cap€because€the€purpose€of€the€recalculation€is€to€establish€on€aÏgoing€forward€basis€the€proper€levels€for€the€maximum€allowable€CCL€rate€and€maximum€common€line€revenues.€€Price€cap€LECs€may€choose€to€price€their€CCL€rate€below€theÏpermitted€cap.€€The€tariffed€CCL€rate€does€not,€however,€affect€the€calculation€of€the€maximum€allowable€CCL€rate€and€maximum€allowable€common€line€revenues.€ÏAccordingly,€it€should€not€affect€the€recalculation€of€the€maximum€allowable€CCL€rate€and€maximum€common€line€revenues€for€price€cap€LECs€going€forward.ÌÌà  àÔ2ÿÿAÔÚ  Ú66Ú  Ú.Ô3  Ô€€SWBT€suggests€that€the€AT&T€methodology€be€refined€by€revising€the€PCIs€for€the€common€line€basket€to€reflect€base€period€revenues€that€are€based€on€theÏamount€of€the€recalculated€maximum€common€line€revenues.€€We€do€not€require€the€price€cap€LECs€to€modify€their€PCIs€to€reflect€the€recalculated€maximum€common€lineÏrevenues€because€this€refinement€would€introduce€additional€complexity€into€the€recalculation€of€the€maximum€CCL€rate€and€common€line€revenues.€€At€the€same€time,€there€isÏno€evidence€in€the€record€that€this€refinement€would€significantly€increase€the€precision€of€these€recalculations.€€While€SWBT€suggests€making€this€refinement,€it€concedes€thatÏthe€effect€of€such€a€refinement€for€SWBT€would€be€minor.ÌÌà  àÔ2ÿÿBÔÚ  Ú67Ú  Ú.Ô3  Ô€€We€also€find€that€GTE€incorrectly€recalculated€the€maximum€CCL€rate€and€common€line€revenues€on€a€total€company€basis.€€GTE's€recalculation€of€theÏmaximum€CCL€rate€and€common€line€revenues€on€a€total€company€basis€is€inconsistent€with€how€it€actually€calculates€its€maximum€CCL€rates€because€it€calculates€differentÏmaximum€CCL€rates€for€each€of€its€study€areas.€€Accordingly,€we€require€GTE€to€recalculate€separately€the€maximum€CCL€rate€and€common€line€revenues€for€each€of€its€studyÏareas€using€the€AT&T€methodology,€as€modified€by€this€Order.€€€€€€€€€ÌÌà  àÔ2ÿÿCÔÚ  Ú68Ú  Ú.Ô3  Ô€€Accordingly,€we€require€Bell€Atlantic,€the€Sprint€LTCs,€GTE,€SWBT,€and€U€S€West€to€file€tariff€revisions€with€new€maximum€permitted€CCL€rates€thatÏremove€past€effects€of€€understating€their€BFP€revenue€requirements€as€required€by€this€section.€€We€also€require€these€price€cap€LECs€to€issue€refunds€to€their€customers€inÏaccordance€with€the€requirements€of€Section€VI€of€this€Order.€€We€note€that€by€applying€the€AT&T€methodology,€as€revised€by€this€Order,€Bell€Atlantic„South,€Bell€Atlantic„¼North,€US€West,€GTE,€SWBT,€and€the€Sprint€LECs€may€demonstrate€that€their€maximum€permitted€CCL€rates€and€common€line€revenues€are€no€longer€inflated€due€to€historicÏunderstatement€of€BFP.€€€€ÌÌò òIII.à0  àMethodology€for€Calculating€Exogenous€Adjustments€that€Reflect€Cost€ReallocationsÐï#°6(#(# ÐÌà  àA.à ` àBackgroundó óÐ ÷$¸8 ÐÌà  àÔ2ÿÿDÔÚ  Ú69Ú  Ú.Ô3  Ô€€In€the€òòAccess€Charge€Reform€Orderóó,€the€Commission€required€price€cap€LECs€to€make€exogenous€cost€adjustments€in€their€January€1,€1998€tariff€filings€toÐ &Ä: Ðreflect€certain€amendments€to€the€Commission's€rules€on€access€charges.€€In€general,€the€price€cap€LECs€calculated€these€exogenous€cost€adjustments€by€computing€aÏhypothetical€revenue€requirement€based€on€their€reported€Part€69€costs€and€a€target€cost€of€capital€of€11.25€percent€for€each€exogenous€cost€item.׃ùX×Ý ƒŠÿÿÝò…òÚ  Ú102Ú  Úó…óÝ  Ý×  ×€€In€the€òòAccess€ReformÐ 'Ô< ÐTariffs€Designation€Orderóó,€the€Bureau€tentatively€concluded€that€the€price€cap€LECs'€hypothetical€revenue€requirement€methodology€does€not€accurately€identify€the€amount€ofÐ ›'\ = Ðexogenous€cost€adjustments€for€line€ports€and€end€office€trunk€ports.׃ú°×Ý ƒŠÿÿÝò…òÚ  Ú103Ú  Úó…óÝ  Ý×  ×€€Instead,€the€Bureau€tentatively€concluded€that€price€cap€LECs€should€calculate€the€exogenousÐ #(ä > Ðadjustments€using€a€two„step€methodology:€(1)€divide€the€hypothetical€revenue€requirement€for€each€exogenous€cost€item€by€the€hypothetical€revenue€requirement€for€the€totalÐ «(l!? Ðbasket;€and€(2)€multiply€this€ratio€by€the€maximum€permitted€basket€revenues.€€In€addition,€the€Bureau€suggested€that,€logically,€any€method€for€moving€rate€elements€or€servicesÏout€of€baskets€or€service€categories€should,€if€applied€òòseriatimóó€to€each€element€or€service,€remove€all€permitted€revenues€in€the€basket€or€service€category€when€the€last€service€orРLj Ðrate€element€was€removed.׃û×Ý ƒŠÿÿÝò…òÚ  Ú104Ú  Úó…óÝ  Ý×  ×Ð O ÐÌà  àÔ2ÿÿEÔÚ  Ú70Ú  Ú.Ô3  Ô€€The€òòAccess€Reform€Tariff€Designation€Orderóó€also€sought€comment€on€whether€the€methodology€proposed€for€ports€should€be€applied€to€the€other€exogenousÐ _  Ðcost€adjustments€required€by€the€òòAccess€Charge€Reform€Orderóó.€€The€Bureau€directed€parties€to€quantify€the€results€of€using€this€method€consistently€for€all€such€reallocations,Ð ç ¨ Ðand€required€each€price€cap€LEC€to€include€in€its€direct€case€a€comprehensive€list€of€all€the€exogenous€adjustments€it€has€made€since€it€entered€price€cap€regulation€for€theÏpurpose€of€reallocating€costs€among€baskets,€categories,€rate€elements,€or€between€price€cap€and€non„price€cap€services.׃üX×Ý ƒŠÿÿÝò…òÚ  Ú105Ú  Úó…óÝ  Ý×  ×€€In€addition,€the€Bureau€tentatively€concluded€that€ifÐ ÷ ¸ Ðpermitted€revenues€are€used€as€the€basis€of€the€exogenous€adjustment,€the€common€line€rate€adjustment€should€be€calculated€as€follows:€price€cap€LECs€should€use€localÏswitching€revenues€for€the€purpose€of€determining€the€amount€of€exogenous€cost€adjustments€to€the€Traffic„Sensitive€and€Common€Line€baskets,€but€price€cap€LECs€should€useÏtheir€Part€69€revenue€requirements€to€recalculate€the€BFP,€because€the€BFP€is€still€calculated€pursuant€to€fully„distributed€embedded€costs€and€revenue€requirements.׃ýè×Ý ƒŠÿÿÝò…òÚ  Ú106Ú  Úó…óÝ  Ý×  ×€€Ð  P  ÐÌò òà  àB.à ` àDiscussionó óÐ Ÿ `  ÐÌà  àò òó óÔ2ÿÿFÔÚ  Ú71Ú  Ú.Ô3  Ô€€In€the€òòAccess€Charge€Reform€Orderóó,€the€Commission€required€price€cap€LECs€to€make€exogenous€cost€changes€to€reflect€reallocations€of€cost€recoveryÐ «l Ðamong€price€cap€baskets,€service€categories,€and€rate€elements.€€Price€cap€LECs€were€required€to€make€many€of€these€adjustments€in€tariffs€that€became€effective€on€January€1,Ï1998.€€In€all€but€one€case,€the€Commission€did€not€adopt€a€specific€methodology€òòóófor€calculating€the€January€1,€1998€exogenous€cost€changes€required€by€the€òòAccess€ChargeÐ »| ÐReform€Orderóó.׃þ×Ý ƒŠÿÿÝò…òÚ  Ú107Ú  Úó…óÝ  Ý×  ×€€It€is€therefore€appropriate€and,€indeed,€necessary€for€us€to€determine€in€this€tariff€investigation€the€proper€methodology€for€the€January€1,€1998€exogenousÐ C  Ðadjustmentsòòóó€required€by€the€òòAccess€Charge€Reform€Orderóó,€pursuant€to€Sections€201„205€of€the€Communications€Act.׃ÿ ×Ý ƒŠÿÿÝò…òÚ  Ú108Ú  Úó…óÝ  Ý×  ×€€As€explained€below,€we€conclude€that€price€capÐ ËŒ  ÐLECs€must€calculate€these€exogenous€cost€adjustmentsòòóó€to€reflect€reallocations€on€the€basis€of€permitted€revenues,€rather€than€on€the€basis€of€revenue€requirements.€€Ð S  Ðà  àò òó óÌà  àò òó óÔ2ÿÿGÔÚ  Ú72Ú  Ú.Ô3  Ô€€Price€cap€regulation,€unlike€rate€of€return€regulation,€is€designed€to€focus€on€the€prices€that€carriers€can€charge€for€their€services,€as€opposed€to€the€carriers'Ð c$  Ðcosts€and€authorized€rate€of€return.׃0×Ý ƒŠÿÿÝò…òÚ  Ú109Ú  Úó…óÝ  Ý×  ×€€Although€the€initial€rate€elements€under€price€cap€regulation€were€based€on€Part€69€revenue€requirements€and€were€targeted€to€earn€anÐ ë¬  Ð11.25€percent€rate€of€return,׃P×Ý ƒŠÿÿÝò…òÚ  Ú110Ú  Úó…óÝ  Ý×  ×€rates€have€diverged€from€those€original€allocated€costs€over€time€through€operation€of€the€price€cap€formulas.€€Price€cap€regulation€has€allowedÐ s4  Ðcarriers€that€reduced€their€costs€to€keep€all€or€some€of€the€earnings€they€gained€by€being€more€efficient.€€Moreover,€price€cap€regulation€allowed€carriers€a€measure€of€pricingÏflexibility€within€baskets€to€raise€and€lower€rates€on€particular€rate€elements€without€reference€to€the€revenue€requirements€originally€recovered€through€those€rate€elements,€orÏto€the€revenue€requirement€that€would€result€today€from€application€of€the€Part€69€cost€allocation€rules.€€We€therefore€conclude€that€the€price€cap€LECs'€revenue€requirementÏmethodology,€which€uses€hypothetical€revenue€requirements€based€on€these€LECs'€reported€Part€69€costs€and€allowed€return€on€investment€of€11.25€percent,€is€not€a€reasonableÏmethodology€for€reallocating€cost€recovery€among€price€cap€baskets€and€service€categories.€Ìâ âÐ £d Ðò òó ó€à  àÔ2ÿÿHÔÚ  Ú73Ú  Ú.Ô3  Ô€€Instead,€we€require€price€cap€LECs€to€implement€the€exogenous€adjustments€due€to€reallocations€among€price€cap€baskets€and€service€categories€byÐ ? Ðâ âtransferring€permitted€revenues€proportional€to€relative€revenue€requirements.€€We€adopt€this€method€because€it€recognizes€the€revenue€effect€of€the€reallocation.€€TheÏmethodology€reflects€fully€the€effect€that€demand€growth€and€"GDP„PI€minus€X„factor"€adjustments€have€over€time€on€the€allowance€for€recovery€of€the€amounts€that€are€beingÏreallocated,€as€explained€below.€€If€the€revenue€effect€is€not€factored€into€the€exogenous€adjustment€when€a€rate€element€is€reallocated€to€another€basket€or€service€category,€theÏexogenous€adjustment€either€creates€headroom€for€rate€increases€or€forces€rate€reductions€for€the€remaining€rate€elements€in€the€basket.€€Moreover,€as€explained€below,€aÏmethod€that€did€not€remove€the€revenue€effect,€if€applied€òòseriatimóó€to€each€element€or€service,€would€fail€to€exhaust€permitted€revenues€in€the€basket€or€service€category€when€theÐ ç ¨ Ðlast€service€or€rate€element€is€removed.€ÌÌ€à  àÔ2ÿÿIÔÚ  Ú74Ú  Ú.Ô3  Ô€€The€following€scenario€illustrates€the€problematic€effects€of€the€price€cap€LECs'€revenue€requirement€methodology.€€If€the€price€cap€LECs'€revenueÐ  @ Ðrequirement€methodology€were€used€to€remove€a€rate€element€from€a€service€category€or€basket,€and€the€service€category€or€basket€had€been€earning€returns€in€excess€of€11.25Ïpercent,€the€price€for€the€remaining€elements€could€be€raised,€increasing€the€earned€return€on€the€basket€even€further.׃×Ý ƒŠÿÿÝò…òÚ  Ú111Ú  Úó…óÝ  Ý×  ×€€Following€this€scenario€to€its€logical€end,€when€theÐ  P  Ðlast€rate€element€in€the€basket€is€removed,€there€would€be€residual€permitted€revenues€in€the€basket€and€no€rate€elements€to€recover€those€revenues.€€We€also€note€that€if€theÏprice€cap€LECs'€revenue€requirement€methodology€were€used€to€remove€a€rate€element€from€a€service€category€or€basket€that€had€been€earning€òòbelowóó€11.25€percent,€and€theÐ Ÿ `  Ðbasket€or€service€category€had€no€headroom,€the€price€cap€LECs€would€need€to€decrease€prices€for€the€remaining€rate€elements.€€We€therefore€find€that€the€price€cap€LECs'Ïrevenue€requirement€methodology€would€produce€unreasonable€reallocations€of€rate€elements€or€partial€rate€elements€among€price€cap€baskets€and€service€categories.€ÏAccordingly,€we€require€price€cap€LECs€to€remove€the€revenue€effect€of€each€January€1,€1998€exogenous€adjustment€required€by€the€òòAccess€Charge€Reform€Orderóó.׃Ð×Ý ƒŠÿÿÝò…òÚ  Ú112Ú  Úó…óÝ  Ý×  ×Ð 7ø ÐÌ€à  àÔ2ÿÿJÔÚ  Ú75Ú  Ú.Ô3  Ô€€While€most€price€cap€LECs€acknowledge€that€a€permitted€revenue€methodology€may€be€appropriate€for€certain€exogenous€adjustments,€they€contend€that€it€isÐ G  Ðnot€a€reasonable€methodology€for€the€January€1,€1998€exogenous€adjustments€required€by€the€òòAccess€Charge€Reform€Orderóó.׃( ×Ý ƒŠÿÿÝò…òÚ  Ú113Ú  Úó…óÝ  Ý×  ×€€Some€price€cap€LECs€assert€that€because€theÐ Ï  Ðexogenous€cost€changes€implemented€in€the€January€1,€1998€tariff€filings€involve€the€removal€of€partial€rate€elements,€rather€than€entire€rate€elements,€the€permitted€revenuesÏmethodology€we€adopt€in€this€Order€should€not€be€used.׃¸ ×Ý ƒŠÿÿÝò…òÚ  Ú114Ú  Úó…óÝ  Ý×  ×€€In€particular,€these€price€cap€LECs€state€that€while€the€removal€of€entire€rate€elements€can€be€determined€on€theÐ ß   Ðbasis€of€revenues€because€the€rate€elements€can€be€multiplied€by€demand€to€calculate€the€associated€revenues,€in€the€case€of€partial€rate€elements,€no€rate€exists€and€thus€thisÏrevenue€calculation€cannot€be€made.׃×Ý ƒŠÿÿÝò…òÚ  Ú115Ú  Úó…óÝ  Ý×  ×€€We€conclude,€however,€that€the€methodology€applies€equally€well€even€where€there€were€no€separate€rate€elements€for€these€functionsÐ ï°  Ðprior€to€the€òòAccess€Charge€Reformóó€proceeding.€€The€absence€of€a€separate€rate€element€merely€affects€the€specifics€of€the€calculation€required.€€Ð w8  ÐÌà  àÔ2ÿÿKÔÚ  Ú76Ú  Ú.Ô3  Ô€€The€Sprint€LTCs€argue€that€if€a€price€cap€LEC€uses€a€permitted€revenue€methodology€to€separate€a€new€rate€element€from€an€existing€service€category€which€isÏearning€above€11.25€percent,€òòóóthe€LEC€must€either€price€the€new€rate€element€above€cost€or€shift€additional€cost€recovery€to€other€services€in€the€basket.׃p×Ý ƒŠÿÿÝò…òÚ  Ú116Ú  Úó…óÝ  Ý×  ×€€The€Sprint€LTCsÐ Ð  Ðâ âargue€that€this€result€would€distort€the€rates€of€the€new€rate€element,€which€should€be€priced€at€cost€in€order€to€provide€the€market€with€the€proper€economic€signals,€or€distortÐ —X Ðthe€rates€of€the€other€services€in€the€basket.׃×Ý ƒŠÿÿÝò…òÚ  Ú117Ú  Úó…óÝ  Ý×  ×€€We€disagree€with€the€Sprint€LTCs'€assertion€that€the€use€of€a€permitted€revenue€methodology€to€separate€a€new€rate€elementÐ ? Ðâ âfrom€an€existing€service€category€would€"distort"€rates.€€On€the€contrary,€the€use€of€a€permitted€revenue€methodology€would€evenly€apportion€permitted€revenues€between€theÏnew€rate€element€and€the€existing€service€category.€€If€the€price€cap€LECs'€hypothetical€revenue€requirement€methodology€were€used€to€separate€a€new€rate€element€from€anÏexisting€service€category€which€is€earning€returns€in€excess€of€11.25€percent,€all€earnings€in€excess€of€11.25€percent€would€remain€in€the€existing€service€category.€ÌÌà  àÔ2ÿÿLÔÚ  Ú77Ú  Ú.Ô3  Ô€€The€Sprint€LTCs€also€argue€that€the€use€of€a€permitted€revenue€methodology€to€calculate€the€January€1,€1998€exogenous€adjustments€would€result€inÏunreasonable€discrimination€among€customers€of€different€price€cap€LECs.׃ X×Ý ƒŠÿÿÝò…òÚ  Ú118Ú  Úó…óÝ  Ý×  ×€€The€Sprint€LTCs€state€that€customers€served€by€price€cap€LECs€that€have€achieved€significantÐ o 0 Ðefficiency€gains,€and€thus€earn€above€11.25€percent€in€baskets€from€which€costs€are€reallocated,€would€be€affected€differently€than€customers€served€by€price€cap€LECs€that€earnÏbelow€11.25€percent€in€baskets€from€which€costs€are€reallocated.׃ è×Ý ƒŠÿÿÝò…òÚ  Ú119Ú  Úó…óÝ  Ý×  ×€€While€we€agree€that€customers€served€by€price€cap€LECs€with€different€levels€of€efficiency€gains€may€beÐ  @ Ðaffected€in€different€ways€by€exogenous€adjustments€calculated€on€the€basis€of€a€permitted€revenue€methodology,€such€differences€do€not€constitute€unreasonableÏdiscrimination.€€Price€cap€regulation€gives€carriers€an€incentive€to€reduce€costs,€while€still€ensuring€that€customers€do€not€pay€rates€above€a€just€and€reasonable€level.€€Price€capÏregulation€does€not,€however,€ensure€that€customers€of€different€price€cap€LECs€are€affected€by€exogenous€adjustments€in€the€same€manner.€ÌÌà  àÔ2ÿÿMÔÚ  Ú78Ú  Ú.Ô3  Ô€€SNET€argues€that€a€permitted€revenue€methodology€cannot€be€used€to€calculate€the€exogenous€adjustments€for€ports€because€there€is€a€mismatch€between€theÏARMIS€Traffic„Sensitive€Switching€category,€which€includes€tandem€switching€costs,€and€the€price€caps€Local€Switching€category,€which€does€not.׃ x×Ý ƒŠÿÿÝò…òÚ  Ú120Ú  Úó…óÝ  Ý×  ×€€We€disagree.€€Price€capÐ ¯p ÐLECs€can€use€the€permitted€revenue€methodology€to€determine€the€exogenous€adjustment€for€ports€by€calculating€a€percentage€of€ports€to€Local€Switching€revenue€requirementÏand€by€directly€applying€that€percentage€to€the€price€caps€Local€Switching€category.€€ÌÌà  àÔ2ÿÿNÔÚ  Ú79Ú  Ú.Ô3  Ô€€Some€price€cap€LECs€contend€that€their€use€of€the€revenue€requirement€methodology€is€consistent€with€the€òòAccess€Charge€Reform€Orderóó€because€the€OrderÐ Ï  Ðdirects€the€carriers€to€reassign€costs€among€baskets€and€service€categories׃ ×Ý ƒŠÿÿÝò…òÚ  Ú121Ú  Úó…óÝ  Ý×  ×€and€a€revenue€requirement€plus€an€11.25€percent€rate€of€return€represents€the€carriers'€costs.׃ ` ×Ý ƒŠÿÿÝò…òÚ  Ú122Ú  Úó…óÝ  Ý×  ׀РW  ÐWe€recognize€that€the€òòAccess€Charge€Reform€Orderóó€states€that€price€cap€LECs€should€make€exogenous€adjustments€to€reflect€the€reallocation€of€certain€"costs."€€The€termÐ ß   Ð"costs,"€however,€must€be€considered€in€the€context€of€price€cap€regulation.€€As€discussed€above,€the€prices€charged€and€revenues€recovered€for€each€element€are€no€longerÏdirectly€linked€to€allocated€accounting€costs.€€To€capture€all€the€costs€that€are€represented€by€a€rate€element€or€partial€rate€element€under€price€caps,€we€must€take€into€accountÏall€the€revenues€associated€with€the€rate€element€or€partial€rate€element€that€are€permitted€by€the€price€cap€formula.׃¸ ×Ý ƒŠÿÿÝò…òÚ  Ú123Ú  Úó…óÝ  Ý×  ×€€We€recognize€that€CBT€and€Citizens€entered€price€capÐ w8  Ðregulation€more€recently€than€the€other€price€cap€LECs.׃H ×Ý ƒŠÿÿÝò…òÚ  Ú124Ú  Úó…óÝ  Ý×  ×€€We€conclude,€however,€that€the€permitted€revenue€methodology€is€equally€appropriate€for€the€exogenousÐ ÿÀ  Ðadjustments€made€by€CBT€and€Citizens€because€the€length€of€time€that€CBT€and€Citizens€have€been€under€price€cap€regulation€merely€affects€the€òòdegreeóó€of€attenuation€betweenÐ ‡H  Ðthe€revenues€recovered€by€these€LECs€for€each€element€and€the€LECs'€allocated€accounting€costs€for€those€elements.€€It€does€not,€therefore,€alter€our€conclusion€that€all€theÏpermitted€revenues€associated€with€the€rate€elements€must€be€taken€into€account€in€order€to€capture€all€the€costs€that€are€represented€by€the€rate€elements.€ÌÌà  àÔ2ÿÿOÔÚ  Ú80Ú  Ú.Ô3  Ô€€Some€price€cap€LECs€argue€that€Commission€precedent€on€exogenous€cost€changes€requires€us€to€allow€them€to€use€a€hypothetical€revenue€requirementÏmethodology€to€make€the€exogenous€cost€changes€required€by€the€òòAccess€Charge€Reform€Orderóó.׃ ×Ý ƒŠÿÿÝò…òÚ  Ú125Ú  Úó…óÝ  Ý×  ×€€Specifically,€these€LECs€contend€that€when€the€Commission€has€notÐ /ð Ðspecified€a€methodology€for€exogenous€cost€changes€in€a€rulemaking,€the€Commission€has€previously€not€challenged€the€use€of€a€Part€69€revenue€requirement€calculated€usingÏan€11.25€percent€rate€of€return.€€Conversely,€these€LECs€assert€that€when€the€Commission€has€intended€for€LECs€to€use€an€exogenous€cost€change€methodology€other€than€aÏPart€69€revenue€requirement€at€an€11.25€percent€rate€of€return,€the€Commission€has€specified€that€methodology€in€a€rulemaking.׃À×Ý ƒŠÿÿÝò…òÚ  Ú126Ú  Úó…óÝ  Ý×  ×€€We€have€in€certain€past€cases€specified€in€aРLj! Ðrulemaking€order€a€particular€methodology€that€price€cap€LECs€are€required€to€follow€for€the€purpose€of€implementing€certain€exogenous€cost€adjustments.׃X×Ý ƒŠÿÿÝò…òÚ  Ú127Ú  Úó…óÝ  Ý×  ×€€This€does€notÐ ? Ðmean,€however,€that€the€only€way€we€may€require€the€price€cap€LECs€to€use€a€particular€methodology€for€making€exogenous€cost€adjustments€is€by€rulemaking€order€prior€to€theÏfiling€of€a€tariff€implementing€those€adjustments.€€The€Commission€routinely€makes€significant€policy€and€methodological€decisions€based€on€the€records€developed€in€tariffÏinvestigations€and€such€decisions€do€not€violate€the€notice€and€comment€requirements€of€the€Administrative€Procedure€Act€(APA).׃x×Ý ƒŠÿÿÝò…òÚ  Ú128Ú  Úó…óÝ  Ý×  ×€€Ð ט ÐÌà  àÔ2ÿÿPÔÚ  Ú81Ú  Ú.Ô3  Ô€€As€the€Commission€has€previously€determined,€a€tariff€investigation€"is€a€rulemaking€of€particular€applicability"€under€the€APA.׃×Ý ƒŠÿÿÝò…òÚ  Ú129Ú  Úó…óÝ  Ý×  ×€€In€accordance€with€theÐ ç ¨ Ðnotice€and€comment€requirements€of€the€APA,€we€have€provided€carriers€with€full€notice€and€opportunity€to€comment€on€the€methodology€that€we€now€direct€the€price€capÏLECs€to€use€to€calculate€the€exogenous€cost€changes€required€by€the€òòAccess€Charge€Reform€Orderóó.׃( ×Ý ƒŠÿÿÝò…òÚ  Ú130Ú  Úó…óÝ  Ý×  ×€€Thus,€in€the€òòAccess€Reform€Tariffs€Designation€Orderóó,€the€BureauÐ ÷ ¸ Ðtentatively€concluded€that€price€cap€LECs€should€make€the€exogenous€cost€changes€for€line€ports€and€end€office€trunk€ports€on€the€basis€of€permitted€revenues€and€soughtÏcomment€on€whether€the€methodology€proposed€for€ports€should€be€applied€to€the€other€January€1,€1998€exogenous€cost€adjustments.׃¸ ×Ý ƒŠÿÿÝò…òÚ  Ú131Ú  Úó…óÝ  Ý×  ×€€In€response€to€the€òòAccess€ReformÐ  È  ÐTariffs€Designation€Orderóó,€price€cap€LECs€presented€their€arguments€on€the€proper€methodology€for€these€exogenous€cost€changes€in€their€direct€cases,€other€parties€addressedÐ  P  Ðthis€issue€in€their€comments€on€the€direct€cases,€and€price€cap€LECs€provided€further€comments€on€the€issue€in€their€rebuttals.€€Accordingly,€our€decision€to€require€price€capÏLECs€to€make€the€January€1,€1998€exogenous€cost€adjustments€required€in€the€òòAccess€Charge€Reform€Orderóó€on€the€basis€of€permitted€revenues€is€fully€consistent€with€theÐ Ÿ `  Ðnotice€and€comment€requirements€of€the€APA.€€€ÌÌà  àÔ2ÿÿQÔÚ  Ú82Ú  Ú.Ô3  Ô€€Furthermore,€there€have€been€instances€in€the€past€where€the€Commission€has€ordered€LECs€to€make€certain€exogenous€cost€changes€in€a€rulemakingÏproceeding€and€specified€the€methodology€for€making€those€changes€in€a€subsequent€tariff€investigation.€€For€example,€in€the€òòAccess€Charge€Reform€Orderóó€the€CommissionÐ ¿€ Ðrequired€price€cap€LECs€to€make€a€downward€exogenous€adjustment€to€the€Traffic„Sensitive€basket€in€their€1997€annual€access€tariff€filings€to€account€for€the€completedÏamortization€of€equal€access€expenses.׃H ×Ý ƒŠÿÿÝò…òÚ  Ú132Ú  Úó…óÝ  Ý×  ×€€In€the€òò1997€Annual€Access€Tariff€Investigation€Orderóó,€the€Commission€concluded€that€the€price€cap€LECs'€methodologies€forÐ Ï  Ðremoving€these€expenses€were€unreasonable€because€their€methodologies€did€not€remove€fully€the€revenue€effect€associated€with€that€rate€element.׃Ø×Ý ƒŠÿÿÝò…òÚ  Ú133Ú  Úó…óÝ  Ý×  ×€€Accordingly,€theÐ W  ÐCommission€prescribed€an€"R"€adjustment€factor€that€would€remove€the€revenue€effect€of€the€equal€access€rate€element€by€adjusting€for€the€growth€in€revenue€in€the€yearsÏbetween€the€initiation€of€price€caps€and€1997.Ì€€€Ìò òó óà  àÔ2ÿÿRÔÚ  Ú83Ú  Ú.Ô3  Ô€€Some€price€cap€LECs€argue€that€the€effect€on€IXCs€of€using€a€revenue€methodology€to€make€exogenous€cost€changes€for€ports€would€be€òòde€minimisóó€becauseÐ w8  Ðthose€costs€previously€recovered€from€the€per„minute€local€switching€rate€would€be€recovered€under€the€per„minute€CCL€charge.׃ø×Ý ƒŠÿÿÝò…òÚ  Ú134Ú  Úó…óÝ  Ý×  ×€€Some€price€cap€LECs€also€argue€thatÐ ÿÀ  Ðrecovering€additional€line€port€costs€from€the€CCL€charge€would€delay€the€Commission's€goal€of€phasing€out€the€CCL€charge.׃ˆ×Ý ƒŠÿÿÝò…òÚ  Ú135Ú  Úó…óÝ  Ý×  ×€€We€find,€however,€that€the€use€of€a€permittedÐ ‡H  Ðrevenue€methodology€for€making€exogenous€cost€changes€for€line€ports€and€end€office€trunk€ports€is€fully€consistent€with€the€goals€of€the€òòAccess€Charge€Reform€Orderóó€toÐ Ð  Ðrecover€non„traffic„sensitive€costs€through€flat„rated€charges.€€Although€the€immediate€effect€of€moving€additional€line€port€costs€to€the€Common€Line€basket€may€be€an€increaseÏâ âin€the€per„minute€CCL€charges,€over€the€long€run€these€costs€will€be€recovered€from€the€flat„rated€PICC€and€flat„rated€end€user€charges€as€PICC€ceilings€increase׃×Ý ƒŠÿÿÝò…òÚ  Ú136Ú  Úó…óÝ  Ý×  ×€and€theÐ à Ðformula€for€calculating€the€SLC€is€modified.׃×Ý ƒŠÿÿÝò…òÚ  Ú137Ú  Úó…óÝ  Ý×  ×€ò òó ó€Moreover,€any€immediate€increase€in€the€per„minute€CCL€charge€will€be€offset€by€a€concomitant€decrease€in€the€traffic„Ð ? Ðsensitive€local€switching€rate.Ìâ â€Ìà  àÔ2ÿÿSÔÚ  Ú84Ú  Ú.Ô3  Ô€€GTE€argues€that€if€the€Commission€adopts€the€permitted€revenue€methodology€for€the€exogenous€cost€changes€for€ports,€the€Commission€should€exempt€allÏline€port€costs€shifted€to€the€Common€Line€basket€from€the€Part€61€factor€used€to€reduce€next€year's€per„minute€CCL€charges€("the€g/2€factor").׃X×Ý ƒŠÿÿÝò…òÚ  Ú138Ú  Úó…óÝ  Ý×  ×€€GTE€contends€that€IXCsÐ _  Ðwould€otherwise€receive€"windfalls"€caused€by€the€further€reduction€in€local€switching€rates€without€the€full€corresponding€increase€in€the€CCL€rate.׃è×Ý ƒŠÿÿÝò…òÚ  Ú139Ú  Úó…óÝ  Ý×  ×€€We€decline€to€exemptÐ ç ¨ Ðthe€line€port€costs€shifted€to€the€Common€Line€basket€from€the€g/2€factor.€€The€g/2€factor€was€adopted€by€the€Commission€when€it€initiated€price€cap€regulation€as€part€of€theÏCommission's€"balanced€50„50"€formula€for€common€line€revenue€recovery.׃x×Ý ƒŠÿÿÝò…òÚ  Ú140Ú  Úó…óÝ  Ý×  ×€€This€formula€allows€price€cap€LECs€and€IXCs€both€to€benefit€from€one„half€of€the€increase€inÐ ÷ ¸ Ðrevenues€resulting€from€growth€in€minutes€of€use€per€line.€€In€adopting€this€formula,€the€Commission€concluded€that€future€growth€in€usage€per€common€line€can€be€maximizedÏonly€if€both€LECs€and€IXCs€are€encouraged€to€become€more€productive€and€rewarded€for€their€success.׃ Ð×Ý ƒŠÿÿÝò…òÚ  Ú141Ú  Úó…óÝ  Ý×  ×€€We€find€that€GTE€has€not€explained€why€the€application€of€the€g/2Ð  È  Ðfactor€to€any€additional€line€port€costs€shifted€to€the€Common€Line€basket€would€be€inconsistent€with€the€Commission's€intent€when€it€adopted€the€g/2€factor€and€its€intentÏwhen€it€adopted€the€exogenous€cost€changes€for€ports.€€We€note€that€the€g/2€factor€will€be€removed€from€common€line€rate€development€when€all€common€line€costs€areÏrecovered€through€flat„rated€charges.׃!` ×Ý ƒŠÿÿÝò…òÚ  Ú142Ú  Úó…óÝ  Ý×  ׀РŸ `  Ðò òó óà  àÔ2ÿÿTÔÚ  Ú85Ú  Ú.Ô3  Ô€€Although€we€are€requiring€price€cap€LECs€to€use€local€switching€revenues€for€the€purpose€of€making€the€January€1,€1998€exogenous€cost€adjustmentsòòóó,€weÐ 'è  Ðconclude€that€price€cap€LECs€should€use€their€Part€69€revenue€requirements€to€recalculate€the€BFP€to€reflect€reallocations€to€and€from€the€Common€Line€basket.€€The€price€capÏLECs€should€then€use€the€revised€BFP€to€compute€the€SLC.€€As€discussed€in€Section€II.D€òòsupraóó,€the€BFP€is€the€portion€of€the€common€line€revenue€requirement€that€is€used€toÐ 7ø Ðdetermine€the€maximum€end„user€per„line€charge.׃"ð ×Ý ƒŠÿÿÝò…òÚ  Ú143Ú  Úó…óÝ  Ý×  ×€€Our€rules€require€price€cap€LECs€to€continue€to€calculate€their€BFP€pursuant€to€fully„distributed€embedded€costs€andÐ ¿€ Ðrevenue€requirements.׃#€ ×Ý ƒŠÿÿÝò…òÚ  Ú144Ú  Úó…óÝ  Ý×  ×€€Under€our€Part€69€rules,€the€maximum€per-line€end„user€charge€is€the€lesser€of:€(1)€forecast€per-line€BFP€revenue€requirement€based€on€an€11.25Ð G  Ðpercent€rate€of€return,€or€(2)the€applicable€cap€on€per-line€end„user€charges.׃$×Ý ƒŠÿÿÝò…òÚ  Ú145Ú  Úó…óÝ  Ý×  ×€€Any€costs€added€to€the€BFP,€such€as€the€costs€of€line€ports,€would€need€to€be€calculated€basedÐ Ï  Ðon€a€Part€69€revenue€requirement€using€an€11.25€percent€rate€of€return€in€order€to€be€consistent€with€our€common€line€rate€development€rules.׃% ×Ý ƒŠÿÿÝò…òÚ  Ú146Ú  Úó…óÝ  Ý×  ×€€Several€parties€argue€that€itÐ W  Ðwould€be€inconsistent€with€the€Bureau's€revised€1997€Tariff€Review€Plan€(TRP)€if€we€require€price€cap€LECs€to€use€local€switching€revenues€for€the€purpose€of€making€theÏJanuary€1,€1998€exogenous€cost€adjustmentsòòóó€but€use€Part€69€revenue€requirements€to€recalculate€the€BFP.׃&0×Ý ƒŠÿÿÝò…òÚ  Ú147Ú  Úó…óÝ  Ý×  ×€€As€explained€in€Section€IV.B.2.c€òòinfraóó,€however,€the€TRP€doesÐ g(  Ðnot€set€forth,€independently€of€this€Commission's€rules€and€orders,€additional€substantive€standards€that€the€Commission€must€follow€in€resolving€the€issues€in€a€tariffÏinvestigation.òò€ó󀀀Рw8  ÐÌà  àÔ2ÿÿUÔÚ  Ú86Ú  Ú.Ô3  Ô€€AT&T€and€MCI€argue€that€the€use€of€revenue€requirement€rather€than€revenues€to€recalculate€the€BFP€would€cause€more€line€port€costs€to€be€recoveredÏthrough€the€CCL€charge.׃'À×Ý ƒŠÿÿÝò…òÚ  Ú148Ú  Úó…óÝ  Ý×  ×€€AT&T€and€MCI€argue€that€this€result€would€violate€the€requirement€in€the€òòAccess€Charge€Reform€Orderóó€that€line€port€costs€be€recovered€throughÐ Ð  Ðper„line€rates,€rather€than€usage€rates.׃(×Ý ƒŠÿÿÝò…òÚ  Ú149Ú  Úó…óÝ  Ý×  ×€€We€disagree.€€Although€we€concluded€in€the€òòAccess€Charge€Reform€Orderóó€that€line€port€costs€should€be€recovered€through€the€flat„Ð —X Ðrated€SLC€and€PICC,€we€did€not€envision€that€the€first€tariff€filing€implementing€the€Order€would€provide€for€recovery€of€òòallóó€line€port€costs€from€these€flat„rated€charges.€Ð à Ðâ âInstead,€we€anticipated€that€price€cap€LECs€could€impose€a€per„minute€CCL€charge€to€the€extent€that€the€ceilings€on€SLCs€and€PICCs€do€not€allow€recovery€of€all€permittedÐ §h Ðcommon€line€revenues.׃)×Ý ƒŠÿÿÝò…òÚ  Ú150Ú  Úó…óÝ  Ý×  ×€€We€noted€that,€as€the€PICC€caps€increase€over€time,€all€common€line€costs€would€eventually€be€recovered€through€flat„rated€charges.׃*X×Ý ƒŠÿÿÝò…òÚ  Ú151Ú  Úó…óÝ  Ý×  ×€€WeÐ ? Ðâ âtherefore€find€that€the€use€of€Part€69€revenue€requirements€to€recalculate€the€BFP€is€consistent€with€the€òòAccess€Charge€Reform€Orderóó.€€€€ò òó óРLj ÐÌà  àÔ2ÿÿVÔÚ  Ú87Ú  Ú.Ô3  Ô€€Although€we€conclude€that€price€cap€LECs€properly€used€Part€69€revenue€requirements€to€recalculate€the€BFP€in€their€initial€access€reform€tariff€filings,€weÏdo€not€determine€in€this€investigation€how€line€port€costs€should€be€included€in€BFP€development€in€future€annual€access€filings.€€AT&T€and€MCI€raise€concerns€about€theÏgoing„forward€treatment€of€line€port€costs€in€BFP€development€because€the€BFP€revenue€requirement€is€based€on€a€12„month€projection.׃+è×Ý ƒŠÿÿÝò…òÚ  Ú152Ú  Úó…óÝ  Ý×  ×€€These€parties€argue€that€if€theÐ ç ¨ ÐCommission€requires€price€cap€LECs€to€include€a€line€port€revenue€requirement€in€the€development€of€the€BFP€revenue€requirement,€price€cap€LECs€would€have€to€develop€aÏforecast€of€that€line€port€revenue€requirement.€€These€parties€claim€that€such€forecasts€will€be€unreliable€and€probably€will€be€based€on€proprietary€cost€models.׃,x×Ý ƒŠÿÿÝò…òÚ  Ú153Ú  Úó…óÝ  Ý×  ×€€On€April€2,Ð ÷ ¸ Ð1998,€price€cap€LECs€filed€their€TRPs€in€support€of€their€1998€annual€access€filings.€€These€TRPs€include,€among€other€things,€the€methodologies€that€the€price€cap€LECsÏpropose€to€use€to€integrate€line€port€costs€into€the€BFP€revenue€requirement€for€the€1998€tariff€year.€€If€it€becomes€necessary,€we€will€have€an€opportunity€to€evaluate€theseÏmethodologies€as€part€of€any€investigation€of€the€1998€annual€access€tariffs€that€we€may€initiate.€€We€note€that€the€forecasting€of€common€line€costs€will€become€unnecessaryÏwhen€all€common€line€costs€are€recovered€through€flat„rated€charges׃-H ×Ý ƒŠÿÿÝò…òÚ  Ú154Ú  Úó…óÝ  Ý×  ×€because€the€SLC€will€no€longer€be€calculated€on€the€basis€of€the€BFP.׃.Ø×Ý ƒŠÿÿÝò…òÚ  Ú155Ú  Úó…óÝ  Ý×  ×€€Ð  Ø  ÐÌà  àÔ2ÿÿWÔÚ  Ú88Ú  Ú.Ô3  Ô€€Accordingly,€we€require€price€cap€LECs€to€recalculate€the€following€January€1,€1998€exogenous€cost€changes€required€by€the€òòAccess€Charge€Reform€OrderóóÐ 'è  Ðòòóóusing€the€permitted€revenue€methodology:€(1)€the€reassignment€of€all€line€port€costs€from€the€Local€Switching€category€of€the€Traffic„Sensitive€basket€to€the€Common€LineÐ ¯p Ðbasket€rate€elements;׃/h×Ý ƒŠÿÿÝò…òÚ  Ú156Ú  Úó…óÝ  Ý×  ×€(2)€the€reassignment€of€all€end€office€trunk€port€costs€from€the€Local€Switching€category€to€a€new€trunk€ports€category€within€the€Traffic„SensitiveÐ 7ø Ðbasket;׃0ø×Ý ƒŠÿÿÝò…òÚ  Ú157Ú  Úó…óÝ  Ý×  ×€(3)€the€identification€of€the€amount€of€COE€maintenance€that€had€been€misallocated€to€the€Trunking€and€Common€Line€baskets;׃1ˆ×Ý ƒŠÿÿÝò…òÚ  Ú158Ú  Úó…óÝ  Ý×  ×€(4)€the€removal€of€marketingÐ ¿€ Ðexpenses€from€all€access€rate€elements€that€are€not€purchased€by€and€marketed€to€retail€customers;׃2×Ý ƒŠÿÿÝò…òÚ  Ú159Ú  Úó…óÝ  Ý×  ×€(5)€the€reassignment€of€SS7€costs€that€are€recovered€from€the€TIC€to€theÐ G  ÐTraffic„Sensitive€basket;€×ƒ3¨×Ý ƒŠÿÿÝò…òÚ  Ú160Ú  Úó…óÝ  Ý×  ×€(6)€the€reassignment€of€the€costs€of€multiplexers€and€dedicated€tandem€trunk€ports€from€the€TIC€to€new€rate€elements;׃48×Ý ƒŠÿÿÝò…òÚ  Ú161Ú  Úó…óÝ  Ý×  ×€(7)€the€substitution€ofÐ Ï  Ðactual€minute€of€use€for€the€assumption€of€9000€minutes€of€use€in€the€calculation€of€the€rates€for€the€common€transport€portion€of€tandem„switched€transport;׃5È×Ý ƒŠÿÿÝò…òÚ  Ú162Ú  Úó…óÝ  Ý×  ×€and€(8)€theÐ W  Ðinclusion€in€the€tandem„switched€transport€category€of€Host/remote€trunking€costs€not€recovered€by€the€current€tandem„switched€transport€rates.׃6X×Ý ƒŠÿÿÝò…òÚ  Ú163Ú  Úó…óÝ  Ý×  ×€€Ð ß   Їà  àÔ2ÿÿXÔÚ  Ú89Ú  Ú.Ô3  Ô€€Price€cap€LECs€must€file€tariff€revisions€to€reflect€new€rates€resulting€from€the€use€of€the€permitted€revenue€methodology€adopted€in€this€section.€€ò òó óAsÐ ? Ðexplained€in€Section€VI€of€this€Order,€however,€price€cap€LECs€are€not€required€to€issue€refunds€to€their€customers€for€the€difference€between€the€new€rates€resulting€from€theÏuse€of€the€permitted€revenue€methodology€and€existing€rates€resulting€from€the€use€of€the€hypothetical€revenue€requirement€methodology.€€Although€we€do€not€specify€theÏprecise€steps€that€price€cap€LECs€must€take€to€implement€the€permitted€revenue€methodology€for€each€exogenous€adjustment,€we€emphasize€that€price€cap€LECs€mustÏimplement€this€methodology€in€a€manner€consistent€with€their€obligation€under€Section€201(b)€of€the€Communications€Act,€47€U.S.C.€ðð€201(b),€to€tariff€just€and€reasonableÏrates.€€We€will€carefully€review€the€price€cap€LECs'€implementation€of€the€permitted€revenue€methodology€when€they€file€the€tariff€revisions€required€by€this€Order.€€ÌÌà  àÔ2ÿÿYÔÚ  Ú90Ú  Ú.Ô3  Ô€€We€do€not€require€the€price€cap€LECs€to€recalculate€the€exogenous€adjustment€for€the€reallocation€of€one€third€of€the€portion€of€the€tandem€switching€revenueÏrequirement€that€is€recovered€form€the€TIC€to€the€tandem€switching€rate€element,€except€to€the€extent€it€is€affected€by€the€recalculation€of€the€SS7„STP€exogenousÏadjustment.׃7×Ý ƒŠÿÿÝò…òÚ  Ú164Ú  Úó…óÝ  Ý×  ×€€In€the€òòAccess€Charge€Reform€Orderóó,€the€Commission€required€price€cap€LECs€to€account€for€the€effects€of€"GDP„PI€minus€X„factor"€reductions€to€the€originalÐ  È  Ðportion€of€the€tandem€switching€revenue€requirement€allocated€to€the€TIC.׃8X×Ý ƒŠÿÿÝò…òÚ  Ú165Ú  Úó…óÝ  Ý×  ×€€Therefore,€the€exogenous€adjustments€made€by€price€cap€LECs€for€the€tandem€switching€revenueÐ  P  Ðrequirement€recognizes€the€revenue€effect€of€that€reallocation,€and€accomplishes€the€same€goal€as€the€permitted€revenue€methodology€that€we€adopt€in€this€Order.€€We€also€doÏnot€require€the€price€cap€LECs€to€recalculate€the€exogenous€adjustment€for€the€reallocation€of€the€STP€port€termination€rate€element€to€the€Traffic„Sensitive€basket.׃9è×Ý ƒŠÿÿÝò…òÚ  Ú166Ú  Úó…óÝ  Ý×  ×€€PriceÐ Ÿ `  Ðcap€LECs€implemented€this€adjustment€by€multiplying€the€rate€for€the€STP€port€termination€element€times€demand.׃:x×Ý ƒŠÿÿÝò…òÚ  Ú167Ú  Úó…óÝ  Ý×  ×€€Thus,€the€exogenous€cost€adjustment€for€the€STP€portÐ 'è  Ðtermination€element€also€recognizes€the€revenue€effect€of€that€reallocation€and€accomplishes€the€same€goal€as€the€permitted€revenue€methodology€that€we€adopt€in€this€Order.ÌÌà  àÔ2ÿÿZÔÚ  Ú91Ú  Ú.Ô3  Ô€€We€note€that€the€price€cap€LECs'€January€1,€1998€filings€reflected€exogenous€cost€changes€required€by€the€òòGSF€Orderóó,€as€well€as€those€changes€required€byÐ ¿€ Ðthe€òòAccess€Charge€Reform€Orderóó.׃;×Ý ƒŠÿÿÝò…òÚ  Ú168Ú  Úó…óÝ  Ý×  ×€€We€recognize€that€the€òòGSF€Orderóó€specifically€directed€price€cap€LECs€to€base€their€exogenous€adjustments€for€GSF€costs€on€an€11.25Ð G  Ðpercent€rate€of€return,€which€is€inconsistent€with€the€methodology€we€adopt€in€this€section.׃<¸ ×Ý ƒŠÿÿÝò…òÚ  Ú169Ú  Úó…óÝ  Ý×  ×€€We€note€that€the€parties€to€the€GSF€proceeding€did€not€address€thisÐ Ï  Ðmethodology€issue€in€their€comments.€€We€also€note€that€the€òòGSF€Orderóó,€unlike€the€instant€one,€involved€reallocation€of€costs€from€regulated€categories€to€non-regulatedÐ W  Ðcategories,€as€opposed€to€reallocations€among€price€cap€baskets€and€service€categories.€€Because€we€specifically€ordered€price€cap€LECs€to€use€a€revenue€requirement€approachÏin€the€òòGSF€Orderóó,׃=H ×Ý ƒŠÿÿÝò…òÚ  Ú170Ú  Úó…óÝ  Ý×  ×€we€do€not€at€this€time€require€the€price€cap€LECs€to€calculate€the€exogenous€adjustment€due€to€the€GSF€reallocation€on€the€basis€of€permitted€revenues.€Ð g(  ÐWe€will€consider€the€continued€appropriateness€of€the€methodology€used€to€reallocate€GSF€costs,€in€light€of€our€determination€in€this€tariff€investigation,€when€we€address€theÏpending€petitions€for€reconsideration€of€the€òòGSF€Orderóó.׃>Ø×Ý ƒŠÿÿÝò…òÚ  Ú171Ú  Úó…óÝ  Ý×  ×Ð w8  ÐÌò òIV.à  àTransport€Adjustment€Issuesó óÐ ‡H  ÐÌà  àÔ2ÿÿ[ÔÚ  Ú92Ú  Ú.Ô3  Ô€€Transport€service€is€the€component€of€interstate€switched€access€consisting€of€transmission€between€the€IXC's€point€of€presence€(POP)€and€LEC€endÏoffices.׃?0×Ý ƒŠÿÿÝò…òÚ  Ú172Ú  Úó…óÝ  Ý×  ×€€Currently,€incumbent€LECs€offer€two€basic€types€of€interoffice€transport€services.€€The€first,€direct„trunked€transport,€uses€dedicated€circuits€for€transport€betweenÐ Ü Ða€LEC€end€office€and€the€LEC€serving€wire€center,€or€between€any€two€points€the€direct„trunked€transport€customer€requests.€€The€second,€tandem„switched€transport,€usesÏcommon€transport€facilities€to€connect€the€end€office€to€a€tandem€switch.€€Common€transport€circuits€may€be€used€to€transmit€the€individual€calls€of€many€IXCs.€€TransportÏcircuits€dedicated€to€a€particular€access€customer€connect€the€tandem€switch€to€the€serving€wire€center.€€Dedicated€entrance€circuits€carry€traffic€between€the€IXC€POP€and€theÏserving€wire€center,€whether€the€IXC€uses€direct„trunked€transport€or€tandem„switched€transport.ÌÌà  àÔ2ÿÿ\ÔÚ  Ú93Ú  Ú.Ô3  Ô€€The€Commission€created€the€transport€interconnection€charge€(TIC)€as€a€residual€charge€to€ensure€that€the€1992€interim€transport€rate€structure€was€revenueÏâ âneutral€for€incumbent€LECs.€€As€such,€the€Commission€required€that€the€TIC€be€assessed€on€a€per€minute€basis€on€all€interstate€access€customers€that€interconnect€with€the€LECÐ Ó”# Ðswitched€access€network.׃@×Ý ƒŠÿÿÝò…òÚ  Ú173Ú  Úó…óÝ  Ý×  ×€€A€portion€of€the€TIC€represented€80€percent€of€the€costs€of€the€tandem€switch.€€These€were€the€tandem€switch€costs€that€remained€after€theÐ ? Ðâ âCommission€set€the€tandem€switching€rate€to€recover€20€percent€of€the€tandem„switching€revenue€requirement.€€The€rest€of€the€revenues€collected€from€the€TIC€represented€costsÏpreviously€recovered€through€transport€charges€that€could€not,€at€that€time,€be€associated€definitely€with€specific€facilities€or€services€related€to€transport.ÌÌà  àÔ2ÿÿ]ÔÚ  Ú94Ú  Ú.Ô3  Ô€€In€the€òòAccess€Charge€Reform€Orderóó,€the€Commission€reformed€the€TIC€and€set€forth€a€plan€that€will€eliminate€the€per„minute€TIC€charges€over€the€next€fewÐ _  Ðyears.׃A ×Ý ƒŠÿÿÝò…òÚ  Ú174Ú  Úó…óÝ  Ý×  ×€€The€Commission€initially€identified€amounts€that€could€be€associated€with€particular€network€facilities€and€directed€incumbent€LECs€to€reallocate€these€TIC€amountsÐ ç ¨ Ðto€access€rate€elements€more€closely€corresponding€to€these€network€facilities.€€Price€cap€LECs€were€required€to€perform€the€required€reallocations€in€access€tariffs€that€tookÏeffect€on€January€1,€1998,€with€some€exceptions.׃B°×Ý ƒŠÿÿÝò…òÚ  Ú175Ú  Úó…óÝ  Ý×  ×Ð ÷ ¸ ÐÌà  àÔ2ÿÿ^ÔÚ  Ú95Ú  Ú.Ô3  Ôà ` àFor€price€cap€LECs,€the€"residual€TIC,"€consisting€of€amounts€that€the€LEC€has€not€reallocated,€will€be€recovered€through€per„line€PICCs,€to€theÐ  È  Ðextent€possible,€while€remaining€within€the€PICC€caps.€€Residual€TIC€amounts€that€the€price€cap€LEC€cannot€recover€through€PICCs€will€be€recovered€through€a€per„minuteÏTIC€on€originating€access,€up€to€the€cap,€with€any€remainder€recovered€from€per„minute€charges€assessed€on€terminating€access.€ÌÌò òà  àA.à ` àSS7€Costsó óÐ 'è  ÐÌà  àà ` à1.à ¸ àBackgroundÐ 3ô ÐÌà  àÔ2ÿÿ_ÔÚ  Ú96Ú  Ú.Ô3  Ô€€SS7€is€the€internationally€standardized€protocol,€or€language,€currently€used€to€transmit€signalling€information€over€the€common€channel€signaling€network.€ÏPrior€to€access€reform,€SS7€costs€were€recovered€in€a€number€of€places.€€The€costs€of€SS7€signal€transfer€points€(STPs)€were€recovered€in€three€charges.€€The€port€terminationÏcosts€of€SS7„STPs€were€recovered€in€a€subelement€of€the€dedicated€signaling€transport€rate€element€established€in€the€òòLocal€Transport€Orderóó.׃C` ×Ý ƒŠÿÿÝò…òÚ  Ú176Ú  Úó…óÝ  Ý×  ×€€Other€SS7„STP€costs€wereÐ S  Ðassigned€to€the€tandem€switching€category.€€Twenty€percent€of€tandem€switching€costs€were€recovered€in€tandem„switching€rates€and€the€remaining€80€percent€were€recovered€inÏthe€TIC.€€Accordingly,€certain€SS7„STP€costs€were€recovered€in€both€tandem€switching€rates€and€the€TIC.ÌÌà  àÔ2ÿÿ`ÔÚ  Ú97Ú  Ú.Ô3  Ô€€òòóóIn€the€òòAccess€Charge€Reform€Orderóó,€the€Commission€concluded€that€incumbent€LECs€must€reallocate€SS7€costs€recovered€in€the€TIC,€including€SS7„STPÐ s4  Ðcosts,€to€the€Traffic€Sensitive€basket.׃Dh×Ý ƒŠÿÿÝò…òÚ  Ú177Ú  Úó…óÝ  Ý×  ×€€It€also€ordered€the€price€cap€LECs€to€reallocate€to€tandem€switching€the€tandem€switching€costs€recovered€through€the€TIC.€€ThisÐ û¼  Ðsecond€allocation€required€each€price€cap€LEC€to:€(1)€calculate€the€percentage€of€its€total€original€TIC€that€represented€tandem€switching€costs;€and€(2)€apply€this€percentage€toÏits€June€30,€1997,€TICòò.óó׃Eø×Ý ƒŠÿÿÝò…òÚ  Ú178Ú  Úó…óÝ  Ý×  ×€€The€tandem€switching€revenue€costs€are€net€of€any€costs€being€reallocated€to€other€facilities„based€charges,€such€as€SS7„STP€costs€being€reallocatedÐ  Ì  Ðto€the€Traffic€Sensitive€basket.׃Fˆ×Ý ƒŠÿÿÝò…òÚ  Ú179Ú  Úó…óÝ  Ý×  ×€€Ð “T ÐÌà  àÔ2ÿÿaÔÚ  Ú98Ú  Ú.Ô3  Ô€€In€the€òòAccess€Reform€Tariffs€Designation€Orderóó,€the€Bureau€expressed€concern€that€while€most€price€cap€LECs€attributed€less€than€10€percent€of€theirÐ £d Ðtandem€switching€revenue€requirement€to€SS7€costs,€Bell€Atlantic„South€attributed€28€percent€of€its€tandem€switching€revenue€requirement€to€SS7.€€In€addition,€the€Bureau€wasÏunable€to€determine€whether€U€S€West€used€the€correct€SS7€cost€figure€in€adjusting€its€tandem€switching€revenue€requirement.€€Bell€Atlantic„South€and€U€S€West€were€requiredÏto€provide€justify€the€SS7€costs€removed€from€their€TIC.׃G×Ý ƒŠÿÿÝò…òÚ  Ú180Ú  Úó…óÝ  Ý×  ×€€SWBT,€Pacific€Bell,€and€Nevada€Bell€were€found€to€have€included€STP€port€termination€costs€in€calculating€theÐ ;ü  ÐSS7€costs€that€they€were€reallocating€from€the€TIC€to€the€Traffic€Sensitive€basket.׃H×Ý ƒŠÿÿÝò…òÚ  Ú181Ú  Úó…óÝ  Ý×  ×€€The€Bureau€found€that,€under€the€òòLocal€Transport€Orderóó,€these€port€termination€costsÐ ? Ðare€already€being€recovered€in€the€dedicated€signaling€transport€rate€element,€and€tentatively€concluded€that€these€costs€should€not€be€included€in€SS7€costs€reallocated€from€theÏTIC€to€the€Traffic€Sensitive€basket.׃IX×Ý ƒŠÿÿÝò…òÚ  Ú182Ú  Úó…óÝ  Ý×  ×€€Ð O ÐÌà  àà ` à2.€€à ¸ àDiscussionÐ _  ÐÌà  àÔ2ÿÿbÔÚ  Ú99Ú  Ú.Ô3  Ô€€As€we€explain€in€Section€III€of€this€Order,€we€require€all€price€cap€LECs€to€make€the€reallocations€required€by€the€òòAccess€Charge€Reform€Orderóó€byÐ o 0 Ðtransferring€permitted€revenues€proportional€to€relative€revenue€requirements.€€Price€cap€LECs€are,€therefore,€required€to€allocate€SS7„STP€costs€from€the€TIC€to€the€TrafficÏSensitive€basket€by€using€a€"permitted€revenue"€methodology.׃Jè×Ý ƒŠÿÿÝò…òÚ  Ú183Ú  Úó…óÝ  Ý×  ×€€Ð  @ Ðà  àÔ2ÿÿcÔÚ  Ú100Ú  Ú.Ô3  Ô€€For€the€reasons€stated€below,€in€applying€the€"permitted€revenue"€methodology€to€the€exogenous€adjustment€for€SS7„STP,€the€price€cap€LECs€should€use€theÏsame€method€to€determine€permitted€revenues€as€they€did€for€determining€the€reallocated€80€percent€of€the€tandem€switching€revenue€requirement.€€The€exogenous€costÏadjustment€reallocating€to€tandem€switching€the€tandem€switching€costs€allocated€to€the€TIC€should€be€the€same€percentage€of€the€June€30,€1997€TIC€as€tandem€switching€costsÏrepresented€in€the€original€TIC.€€The€reallocation€of€SS7„STP€revenues€from€the€TIC€to€the€Traffic€Sensitive€basket€should€be€the€same€proportion€of€the€original€TIC€thatÏrepresented€SS7„STP€costs.€€Accordingly,€the€SS7„STP€exogenous€adjustment€should€be€calculated€by€determining€the€percentage€of€the€original€TIC€that€represented€SS7„STPÏcosts€and€applying€that€percentage€to€the€TIC€revenues€on€June€30,€1997.ÌÌà  àÔ2ÿÿdÔÚ  Ú101Ú  Ú.Ô3  Ô€€We€conclude€that€SWBT,€Pacific€Bell,€and€Nevada€Bell€must€exclude€STP€port€revenues€from€the€calculation€of€their€SS7€exogenous€adjustments€to€the€TICÏand€the€Traffic€Sensitive€basket.€€The€òòAccess€Charge€Reform€Orderóó€required€price€cap€LECs€to€reallocate€SS7„STP€costs€recovered€in€the€TIC€to€the€Traffic€Sensitive€basket.€Ð G  ÐSTP€port€termination€costs,€however,€should€not€have€been€recovered€in€the€TIC€but€in€the€SS7„STP€port€termination€rate.׃K@×Ý ƒŠÿÿÝò…òÚ  Ú184Ú  Úó…óÝ  Ý×  ×€€SWBT,€Pacific€Bell,€and€Nevada€Bell€have€notÐ Ï  Ðargued,€nor€have€they€presented€any€evidence,€that€STP€port€revenues€were€ever€recovered€from€the€TIC.€€We€therefore€require€SWBT,€Pacific€Bell,€and€Nevada€Bell€to€excludeÏpermitted€SS7„STP€port€revenues€in€making€the€exogenous€adjustment€between€the€TIC€and€the€Traffic€Sensitive€basket.€€ÌÌà  àÔ2ÿÿeÔÚ  Ú102Ú  Ú.Ô3  Ô€€We€find€that€US€West€reasonably€excluded€SS7„STP€costs€associated€with€contracted€and€separately€tariffed€SS7„STP€services€from€its€SS7„STP€exogenousÏadjustments€because€it€recovers€these€amounts€in€SS7„STP€tariffed׃LÐ×Ý ƒŠÿÿÝò…òÚ  Ú185Ú  Úó…óÝ  Ý×  ×€and€contracted€SS7„STP€rates.׃M¸ ×Ý ƒŠÿÿÝò…òÚ  Ú186Ú  Úó…óÝ  Ý×  ×€€When€calculating€the€reallocation€of€the€tandem€switching€revenueÐ w8  Ðrequirement€from€the€TIC€to€tandem€switching,€however,€US€West€unreasonably€included€SS7„STP€costs€associated€with€contracted€and€separately€tariffed€STP€services€in€theÏSS7„STP€costs€it€subtracted€from€its€tandem€switching€revenue€requirement.€€US€West€must€exclude€these€costs€when€adjusting€its€reallocation€of€the€tandem€switching€revenueÏrequirement€to€reflect€the€reallocation€of€SS7„STP€costs.ÌÌà  àÔ2ÿÿfÔÚ  Ú103Ú  Ú.Ô3  Ô€€Bell€Atlantic„South€asserts€that€its€SS7„STP€costs€are€a€greater€percentage€of€its€tandem€switching€revenue€requirement€compared€to€this€percentage€for€otherÏprice€cap€LECs€because€it€has€more€local€access€and€transport€areas€and€more€STPs.€€Upon€examination€of€the€record,€we€find€that€this€is€a€reasonable€explanation€of€why€BellÏAtlantic„South's€SS7„STP€costs€are€greater€than€those€for€the€other€BOCs.€€We€note,€however,€that€application€of€the€"permitted€revenue"€methodology€for€this€exogenous€costÏadjustment€set€forth€above€could€reduce€the€amount€of€Bell€Atlantic„South's€SS7„STP€exogenous€cost€adjustment.ÌÌò òà  àB.à0 ` àCOE€Maintenance€and€Marketing€Cost€Adjustments€to€the€TICÐLj!` (#` (# ÐÌà  àà ` àó ó1.à ¸ àBackgroundÐ Ï# Ðâ âÐ W$ Ðà  àÔ2ÿÿgÔÚ  Ú104Ú  Ú.Ô3  Ô€€In€the€òòAccess€Charge€Reform€Orderóó,€the€Commission€required€the€LECs€to€move€Central€Office€Equipment€(COE)€maintenance׃N×Ý ƒŠÿÿÝò…òÚ  Ú187Ú  Úó…óÝ  Ý×  ×€misallocated€to€theÐ ? Ðâ âTrunking€and€Common€line€baskets€to€the€local€switching€service€category€in€the€Traffic€Sensitive€basket.׃Ox×Ý ƒŠÿÿÝò…òÚ  Ú188Ú  Úó…óÝ  Ý×  ×€€The€price€cap€LECs€were€also€required€to€remove€Account€6610РLj Ðmarketing€expenses€from€all€access€rate€elements€not€purchased€by€and€marketed€to€retail€customers€and€create€a€new€marketing€expense€basket.׃P×Ý ƒŠÿÿÝò…òÚ  Ú189Ú  Úó…óÝ  Ý×  ×Ð O ÐÌà  àÔ2ÿÿhÔÚ  Ú105Ú  Ú.Ô3  Ô€€In€the€òòAccess€Reform€Tariffs€Designation€Order,óó€the€Bureau€was€unable€to€determine€whether€the€price€cap€LECs€properly€removed€from€the€TIC€their€COEÐ _  Ðmaintenance€expenses€and€marketing€expenses.׃Q˜×Ý ƒŠÿÿÝò…òÚ  Ú190Ú  Úó…óÝ  Ý×  ×€€The€Bureau€therefore€required€the€price€cap€LECs€to€justify€the€amount€that€they€removed€from€the€TIC€as€COEÐ ç ¨ Ðmaintenance€and€marketing€expenses.׃R( ×Ý ƒŠÿÿÝò…òÚ  Ú191Ú  Úó…óÝ  Ý×  ×€€The€price€cap€LECs€were€also€required€to€explain€their€theory€for€determining€the€portion€of€those€costs€removed€from€the€TIC.׃S¸ ×Ý ƒŠÿÿÝò…òÚ  Ú192Ú  Úó…óÝ  Ý×  ׀Рo 0 ÐThe€Bureau€sought€comment€on€whether€the€portion€removed€from€the€TIC€should€be€based€on€the€relative€total€or€switched€revenues€in€each€category,€or€on€a€more€detailedÏanalysis€of€the€source€of€the€costs.׃TH ×Ý ƒŠÿÿÝò…òÚ  Ú193Ú  Úó…óÝ  Ý×  ×Ð  @ ÐÌà  àÔ2ÿÿiÔÚ  Ú106Ú  Ú.Ô3  Ô€€Finally,€the€Bureau€tentatively€concluded€that€the€price€cap€LECs€must€base€reallocations€of€TIC€revenues€on€the€TIC€as€it€existed€prior€to€July€1,€1997.׃UØ×Ý ƒŠÿÿÝò…òÚ  Ú194Ú  Úó…óÝ  Ý×  ׀Р P  ÐThe€Bureau€explained€that€if€the€price€cap€LECs€do€not€compute€these€reallocations€using€the€TIC€as€the€TIC€existed€prior€to€July€1,€1997,€the€targeted€TIC€reductions€thatÏoccurred€in€the€July€1,€1997€tariffs€could€skew€the€amount€of€reallocation€costs€credited€to€the€facilities„based€TIC.€€The€Bureau€sought€comment€on€this€tentativeÏconclusion.׃Vh×Ý ƒŠÿÿÝò…òÚ  Ú195Ú  Úó…óÝ  Ý×  ×Ð 'è  ÐÌà  àà ` à2.à ¸ àDiscussionÐ 7ø ÐÌà  àà ` àà ¸ àa.€€COE€Maintenance€ExpensesÌÌà  àÔ2ÿÿjÔÚ  Ú107Ú  Ú.Ô3  Ô€€In€the€òòAccess€Charge€Reform€Orderóó,€the€Commission€found€that€allocating€COE€maintenance€expenses€on€the€basis€of€combined€COE€investment€producedÐ W  Ðmisallocations€of€these€expenses€among€access€services.׃Wø×Ý ƒŠÿÿÝò…òÚ  Ú196Ú  Úó…óÝ  Ý×  ×€€The€Commission,€therefore,€modified€section€69.401€of€the€rules׃Xˆ×Ý ƒŠÿÿÝò…òÚ  Ú197Ú  Úó…óÝ  Ý×  ×€to€provide€that€the€COE€maintenanceÐ ß   Ðexpenses€assigned€to€the€interstate€jurisdiction€be€allocated€on€the€basis€of€the€allocation€of€the€specific€type€of€COE€investment€being€maintained.׃Y×Ý ƒŠÿÿÝò…òÚ  Ú198Ú  Úó…óÝ  Ý×  ×Ð g(  ÐÌà  àÔ2ÿÿkÔÚ  Ú108Ú  Ú.Ô3  Ô€€All€the€price€cap€LECs€have€submitted€detailed€information€showing€the€amount€of€COE€maintenance€expenses€removed€from€the€Trunking€basket€and€theÏportion€removed€from€the€TIC.€€The€price€cap€LECs,€except€for€Aliant,€calculated€these€Trunking€basket€adjustments€as€the€difference€between€the€revenue€requirement€for€theÏTrunking€basket€reflecting€the€old€Part€69.40€rule€for€allocating€COE€maintenance€expenses€and€the€revenue€requirement€reflecting€the€new€Part€69.401€rule€for€allocating€COEÏmaintenance€expenses.€€They€based€the€portion€allocated€to€the€TIC€on€the€ratio€of€TIC€revenues€to€total€Trunking€basket€revenues.׃Z¨×Ý ƒŠÿÿÝò…òÚ  Ú199Ú  Úó…óÝ  Ý×  ×€€Ð Ð  Ðâ âÐ —X Ðà  àÔ2ÿÿlÔÚ  Ú109Ú  Ú.Ô3  Ô€€Aliant€first€calculated€a€COE€maintenance€exogenous€cost€adjustment€solely€for€the€TIC€and€then€an€adjustment€for€undesignated€categories€of€the€TrunkingÏbasket,€including€the€TIC.€€Aliant's€first€adjustment€increased€the€TIC€by€$184,290.׃[×Ý ƒŠÿÿÝò…òÚ  Ú200Ú  Úó…óÝ  Ý×  ×€€Aliant's€second€adjustment€reduced€the€trunking€basket€by€$557,843.׃\@×Ý ƒŠÿÿÝò…òÚ  Ú201Ú  Úó…óÝ  Ý×  ×€€AliantРLj Ðâ âallocated€to€the€TIC€a€portion€of€the€second€adjustment€based€on€the€TIC's€portion€of€total€Trunking€basket€revenues.ÌÌà  àÔ2ÿÿmÔÚ  Ú110Ú  Ú.Ô3  Ô€€We€conclude€that€it€is€reasonable€for€price€cap€LECs€to€allocate€a€portion€of€the€Trunking€basket€COE€maintenance€exogenous€adjustment€from€the€TICÏbased€on€the€ratio€of€TIC€revenues€to€total€Trunking€basket€revenues.€€Using€relative€revenues€to€make€this€allocation€equitably€distributes€a€share€of€the€exogenous€costÏadjustment€to€each€Trunking€basket€service.€€This€methodology€also€is€consistent€with€our€price€cap€methodology€for€making€an€exogenous€cost€adjustment€to€a€specific€basketÏwhen€that€adjustment€is€not€associated€with€any€particular€service€within€that€basket.€€Under€the€price€cap€methodology,€an€exogenous€cost€change€to€a€price€cap€basket€indexÏautomatically€changes€service€level€band€indices€within€that€basket€based€on€the€proportion€of€revenues€in€each€service€band€to€total€basket€revenues.€€An€additional€reason€forÏallowing€price€cap€LECs€to€make€this€allocation€on€the€basis€of€relative€revenues€is€that€no€party€has€identified€a€cost„based€methodology€for€allocating€the€COE€maintenanceÏexogenous€cost€adjustment€to€each€particular€Trunking€basket€service.€€Nor€will€we€require€price€cap€LECs€to€study€or€account€for€their€costs€at€the€level€of€detail€needed€toÏmake€such€allocations€because€any€benefit€from€making€such€allocations€is€unlikely€to€outweigh€the€burden€from€performing€such€a€study€or€detailed€accounting€of€costs.€€WeÏnote€that€no€party€opposes€the€use€of€this€methodology.׃]H ×Ý ƒŠÿÿÝò…òÚ  Ú202Ú  Úó…óÝ  Ý×  ×Ð Ÿ `  ÐÌà  àÔ2ÿÿnÔÚ  Ú111Ú  Ú.Ô3  Ô€€We€also€find€that€it€is€reasonable€for€Aliant€to€compute€the€change€in€the€allowance€for€recovery€of€the€tandem€switching€revenue€requirement€arising€fromÏthe€revised€Part€69€rules€for€allocating€COE€maintenance€expense€and€to€make€an€exogenous€cost€adjustment€to€the€TIC€that€is€equal€to€80€percent€of€this€change.€€AliantÏsubmitted€workpapers€demonstrating€that€allocating€COE€maintenance€expenses€based€on€separate€investments€for€central€office€switching,€operator€systems,€and€central€officeÏtransmission€increases€the€allocation€of€these€expenses€in€the€tandem€switching€revenue€requirement€compared€to€an€allocation€based€on€the€combined€investments.׃^Ø×Ý ƒŠÿÿÝò…òÚ  Ú203Ú  Úó…óÝ  Ý×  ×€€InÐ G  Ðaddition,€as€Aliant€argues,€the€Commission€allocated€80€percent€of€the€tandem€switching€revenue€requirement€to€the€TIC€when€the€TIC€was€established.€€More€specifically,€theÏCommission€prescribed€an€initial€rate€for€tandem€switching€that€recovered€20€percent€of€the€then„current€Part€69€tandem€revenue€requirement,€with€the€remaining€80€percent€ofÏthis€requirement€recovered€through€the€TIC.׃_0×Ý ƒŠÿÿÝò…òÚ  Ú204Ú  Úó…óÝ  Ý×  ×€€Because€the€TIC€recovered€80€percent€of€the€tandem€switching€revenue€requirement,€Aliant€reasonably€makes€an€exogenousÐ ß   Ðadjustment€to€the€TIC€that€is€equal€to€80€percent€of€the€change€in€the€allowance€for€recovery€of€the€tandem€switching€revenue€requirement€arising€from€the€revised€Part€69€rulesÏfor€allocating€COE€maintenance€expense.€ÌÌà  àÔ2ÿÿoÔÚ  Ú112Ú  Ú.Ô3  Ô€€In€addition,€Aliant's€exogenous€costs€adjustment€to€the€TIC€due€to€COE€maintenance€is€reasonable€because€Aliant€adds€the€reallocated€COE€maintenanceÏexpense€to€the€portion€of€the€tandem€switching€revenue€requirement€in€the€current€TIC€that€price€cap€LECs€are€required€to€allocate€from€the€TIC€to€tandem€switching.׃`À×Ý ƒŠÿÿÝò…òÚ  Ú205Ú  Úó…óÝ  Ý×  ×€€AfterÐ ‡H  ÐAliant€allocates€this€portion€of€the€tandem€switching€revenue€requirement€from€the€TIC€to€tandem€switching,€it€will€recover€properly€from€customers€that€purchase€tandemÏswitched€transport€the€COE€maintenance€expenses€associated€with€tandem€switching€that€had€been€recovered€through€the€TIC€.Ì€€Ìà  àÔ2ÿÿpÔÚ  Ú113Ú  Ú.Ô3  Ô€€We€find,€however,€that€Aliant€must€make€an€exogenous€adjustment€to€tandem€switching€that€is€equal€to€20€percent€of€the€change€in€the€allowance€forÏrecovery€of€the€tandem€switching€revenue€requirement€arising€from€the€revised€Part€69€rules€for€allocating€COE€maintenance€expense.€€Because€the€tandem€switching€rateÏrecovered€20€percent€of€the€tandem€switching€revenue€requirement,€Aliant€must€make€an€exogenous€adjustment€to€tandem€switching€that€is€equal€to€20€percent€of€the€change€inÏthe€allowance€for€recovery€of€the€tandem€switching€revenue€requirement.€€After€Aliant€makes€this€allocation,€it€will€recover€from€customers€that€purchase€tandem€switchedÏtransport€all€of€the€COE€maintenance€expenses€associated€with€tandem€switching€.Ìà  àÌà  àÔ2ÿÿqÔÚ  Ú114Ú  Ú.Ô3  Ô€€We€find€that€it€is€reasonable€for€Aliant€to€compute€the€change€in€the€allowance€for€recovery€of€the€Trunking€basket€revenue€requirement,€excluding€theÏtandem€switching€revenue€requirement,€arising€from€the€revised€Part€69€rules€for€allocating€COE€maintenance€expense€and€to€allocate€this€change€among€Trunking€basketÏservice€categories€on€the€basis€of€relative€revenues.€€Using€relative€revenues€to€allocate€this€exogenous€cost€adjustment€equitably€distributes€a€share€of€the€adjustment€to€eachÏtrunking€basket€service.€€This€is€consistent€with€our€decision€above€to€allow€price€cap€LECs€to€use€relative€revenues€to€distribute€their€exogenous€COE€maintenance€costÏadjustments€among€service€categories€in€the€Trunking€basket.€€€€€€€€Ìà  àÌà  àÔ2ÿÿrÔÚ  Ú115Ú  Ú.Ô3  Ô€€As€we€explained€in€Section€III€of€this€Order,€we€are€requiring€all€price€cap€LECs€to€make€the€reallocations€required€by€the€òòAccess€Charge€Reform€Orderóó€byÐ 7ø Ðtransferring€permitted€revenues€proportional€to€relative€revenue€requirements.€€Price€cap€LECs€are,€therefore,€required€to€make€a€downward€COE€maintenance€exogenousÏadjustment€to€the€Trunking€basket€by€using€permitted€revenues.€€Accordingly,€we€require€all€price€cap€LECs€to€revise€their€tariffs€to€reflect€COE€maintenance€exogenousÏadjustments€calculated€in€accordance€with€the€requirements€of€Section€III€of€this€Order.€€As€explained€in€Section€VI€of€this€Order,€price€cap€LECs€that€made€reallocationsÏrequired€by€the€òòAccess€Charge€Reform€Orderóó€by€using€a€revenue€requirement€methodology€are€not€required€to€issue€refunds€to€their€customers.Ð W  ÐÌà  àà ` àà ¸ àb.€€Marketing€ExpensesÌò òó óÌà  àÔ2ÿÿsÔÚ  Ú116Ú  Ú.Ô3  Ô€€In€the€òòAccess€Charge€Reform€Orderóó,€we€concluded€that€it€was€appropriate€for€LECs€to€recover€marketing€expenses€for€special€access€and€interexchangeÐ w8  Ðservices€that€are€purchased€by,€and€marketed€to,€retail€customers€in€rates€for€those€services.׃a ×Ý ƒŠÿÿÝò…òÚ  Ú206Ú  Úó…óÝ  Ý×  ×€€We€required,€however,€that€marketing€expenses€be€removed€from€all€other€rateÐ ÿÀ  Ðelements€by€means€of€a€"downward€exogenous€adjustment€to€the€PCIs€for€the€common€line,€traffic€sensitive,€and€trunking€baskets€.€.€.€(and€that)€the€service€band€indices€withinÏthe€trunking€basket€shall€be€decreased€based€on€the€amount€of€Account€6610€marketing€expenses€allocated€to€switched€services€included€in€each€service€category€.€.€.€."׃b°×Ý ƒŠÿÿÝò…òÚ  Ú207Ú  Úó…óÝ  Ý×  ×Ð Ð  ÐÌà  àÔ2ÿÿtÔÚ  Ú117Ú  Ú.Ô3  Ô€€All€the€price€cap€LECs€have€submitted€detailed€information€showing€the€amount€of€marketing€expenses€removed€from€the€Trunking€basket€and€the€portionÏremoved€from€the€TIC.€€The€price€cap€LECs€calculated€the€Trunking€basket€adjustment€as€the€difference€between€a€revenue€requirement€for€the€Trunking€basket€reflecting€theÏrules€for€allocating€marketing€expenses€in€effect€prior€to€January€1,€1998€and€the€same€revenue€requirement€reflecting€the€rules€for€allocating€marketing€expenses€in€effect€onÏJanuary€1,€1998.׃c@×Ý ƒŠÿÿÝò…òÚ  Ú208Ú  Úó…óÝ  Ý×  ×€€They€based€the€portion€allocated€to€the€TIC€on€the€ratio€of€TIC€revenues€to€total€switched€revenues€in€the€Trunking€basket.Ð ·x ÐÌà  àÔ2ÿÿuÔÚ  Ú118Ú  Ú.Ô3  Ô€€We€conclude€that€it€is€reasonable€for€price€cap€LECs€to€remove€marketing€expenses€from€the€TIC€based€on€the€ratio€of€TIC€revenues€to€total€Trunking€basketÏswitched€access€revenues.€€We€find€it€reasonable€for€the€price€cap€LECs€to€have€used€switched€access€revenues€in€particular€to€make€this€allocation€because€the€òòAccess€ChargeÐ O" ÐReform€Orderóó€allowed€rates€for€special€access€services€to€continue€to€include€recovery€of€marketing€expenses.€€Using€relative€switched€access€revenues€to€make€this€allocationРט# Ðequitably€distributes€a€share€of€the€exogenous€marketing€cost€adjustment€to€each€switched€access€service€category€in€the€Trunking€basket.€€In€addition,€we€find€that€it€isÏreasonable€for€price€cap€LECs€to€make€this€allocation€on€the€basis€of€relative€revenues€because€no€party€has€identified€a€cost„based€methodology€for€allocating€the€marketingÏexogenous€cost€adjustment€to€each€particular€Trunking€basket€service.€€We€also€note€that€no€party€opposes€the€use€of€this€methodology.Ìà  àÌà  àÔ2ÿÿvÔÚ  Ú119Ú  Ú.Ô3  Ô€€We€find€that€it€is€unreasonable€for€CBT€to€allocate€from€the€TIC€the€entire€exogenous€marketing€cost€adjustment€for€the€Trunking€basket.€€CBT€argues€thatÏremoving€from€the€TIC€the€entire€amount€of€this€exogenous€cost€adjustment€allows€it€to€avoid€distorting€the€pricing€between€its€dedicated€switched€and€dedicated€special€accessÏrates.€€We€reject€this€argument.€€Under€price€cap€rules,€CBT€has€the€flexibility€to€increase€or€decrease€its€rates€for€dedicated€switched€and€dedicated€special€access€services,Ïprovided€that€the€SBIs€for€the€service€categories€in€which€these€services€are€placed€are€below€the€SBI€upper€limits€for€these€categories.׃dÐ×Ý ƒŠÿÿÝò…òÚ  Ú209Ú  Úó…óÝ  Ý×  ×€€Such€pricing€flexibility€under€priceÐ Ø+ Ðcaps€should€enable€CBT€to€avoid€pricing€distortions€between€its€dedicated€switched€and€dedicated€special€access€rates.€Moreover,€CBT€did€not€explain€how€removing€the€entireÏexogenous€marketing€cost€adjustment€from€the€TIC€without€removing€any€portion€of€this€exogenous€adjustment€from€the€other€Trunking€basket€service€categories€results€in€anÏequitable€allocation.€€Nor€did€CBT€demonstrate€any€cost€basis,€for€example,€by€comparing€the€actual€amount€of€marketing€costs€the€TIC€recovers€relative€to€the€actual€amount€ofÏthese€costs€recovered€in€Trunking€basket€rate€elements€other€than€the€TIC.€€Accordingly,€we€order€CBT€to€remove€marketing€expenses€from€the€TIC€based€on€the€ratio€of€TICÏrevenues€to€total€Trunking€basket€switched€access€revenues€as€did€the€other€price€cap€LECs.Ì€Ìà  àÔ2ÿÿwÔÚ  Ú120Ú  Ú.Ô3  Ô€€In€Section€III€of€this€Order,€we€stated€that€we€are€requiring€all€price€cap€LECs€to€make€the€reallocations€required€by€the€òòAccess€Charge€Reform€Orderóó€byÐ Ï!2 Ðtransferring€permitted€revenues€proportional€to€relative€revenue€requirements.€€Price€cap€LECs€are,€therefore,€required€to€make€a€downward€marketing€exogenous€adjustment€toÏâ âthe€Trunking€basket€by€using€a€proportional€allocation€of€Trunking€basket€permitted€revenues.€€Accordingly,€we€require€all€price€cap€LECs€to€revise€their€tariffs€to€reflectÐ ß" 4 Ðmarketing€exogenous€adjustments€calculated€in€accordance€with€the€requirements€of€Section€III€of€this€Order.€€As€explained€in€Section€VI€of€this€Order,€price€cap€LECs€thatÏmade€reallocations€required€by€the€òòAccess€Charge€Reform€Orderóó€by€using€a€revenue€requirement€methodology€are€not€required€to€issue€refunds€to€their€customers.€€Ð Lj Ðâ âÌà  àà ` àà ¸ àc.€€Calculation€of€Exogenous€Adjustments€Applied€to€the€TICÌà  àÌà  àÔ2ÿÿxÔÚ  Ú121Ú  Ú.Ô3  Ô€€We€find€that€the€price€cap€LECs€must€compute€their€exogenous€cost€adjustments€attributable€to€the€removal€of€COE€maintenance€and€marketing€costs€fromÏthe€TIC€as€the€TIC€existed€on€June€30,€1997.€€In€the€òòAccess€Charge€Reform€Orderóó,€we€modified€the€TIC€and€set€forth€a€transitional€plan€to€eliminate€per„minute€TIC€chargesÐ o 0 Ðover€the€next€few€years.€€As€part€of€that€plan,€we€first€ordered€the€price€cap€LECs€to€compute€the€amount€of€their€anticipated€"residual"€TIC€by€excluding€TIC€revenues€that€theyÏwould€reassign€on€a€cost„causative€basis€to€facilities„based€charges€in€the€future.׃e×Ý ƒŠÿÿÝò…òÚ  Ú210Ú  Úó…óÝ  Ý×  ×€€Moreover,€we€ordered€these€LECs€to€target€solely€to€this€residual€TIC€the€"GDP„PI€minusÐ  @ ÐX"€adjustments€they€ordinarily€would€apply€to€each€of€their€price€cap€indices€for€the€July€1,€1997€annual€filing.׃fX×Ý ƒŠÿÿÝò…òÚ  Ú211Ú  Úó…óÝ  Ý×  ×€€By€targeting€the€GDP„PI€minus€X€adjustments€to€theÐ  È  Ðresidual€portion€of€the€TIC€that€existed€on€June€30,€1997,€these€LECs€reduced€the€amount€of€their€total€July€1,€1997€TIC€revenues€as€compared€with€their€total€June€30,€1997ÏTIC€revenues.€€These€adjustments€reduced€the€July€1,€1997€ratios€of€total€TIC€revenues€to€total€Trunking€basket€revenues€and€total€TIC€revenues€to€total€Trunking€basketÏswitched€access€revenues€from€their€June€30,€1997€levels€for€the€price€cap€LECs.€€Because€the€price€cap€LECs€have€used€these€ratios€to€allocate€their€COE€maintenance€andÏmarketing€exogenous€cost€adjustments€from€the€TIC,€price€cap€LECs€that€allocated€these€exogenous€cost€adjustments€from€the€TIC€as€it€existed€on€July€1,€1997€have€allocatedÏless€of€these€adjustments€from€the€TIC€than€they€would€have€if€they€had€used€the€ratios€that€existed€on€June€30,€1997.€€ÌÌà  àÔ2ÿÿyÔÚ  Ú122Ú  Ú.Ô3  Ô€€We€find€that€the€calculations€made€by€the€price€cap€LECs€based€on€the€July€1,€1997€TIC€amounts€unreasonably€underallocated€COE€maintenance€andÏmarketing€exogenous€costs€from€the€TIC€to€other€facilities„based€rate€elements.€€As€noted€above,€our€residual€TIC€reduction€plan€required€price€cap€LECs€to€target€the€GDP„PIÏminus€X€adjustment€solely€to€the€non„facilities„based€residual€TIC.€€That€residual€TIC€is€developed€by€excluding€from€the€TIC€those€revenues€that€were€expected€to€beÏreassigned€to€facilities„based€charges€in€the€future.׃gè×Ý ƒŠÿÿÝò…òÚ  Ú212Ú  Úó…óÝ  Ý×  ×€€Thus,€COE€maintenance€and€marketing€expenses,€like€all€other€TIC€revenues€that€were€expected€to€be€reassigned€toÐ W  Ðfacilities„based€charges,€were€not€intended€to€be€subject€to€the€targeting.€€Determining€the€amount€of€the€exogenous€adjustments€to€the€TIC€due€to€COE€maintenance€andÏmarketing€expenses€based€on€post„June€30,€1997€trunking€basket€revenues€has€the€practical€effect€of€applying€some€of€the€targeting€to€revenues€that€were€reassigned€toÏfacilities„based€charges€on€January€1,€1998€and€that€were€intended€to€be€exempt€from€targeting.€€By€contrast,€use€of€June€30,€1997€relative€revenues€equitably€distributes€a€shareÏof€the€exogenous€COE€maintenance€and€marketing€costs€adjustments€to€service€categories€in€the€Trunking€basket.€Ìà  àÌà  àÔ2ÿÿzÔÚ  Ú123Ú  Ú.Ô3  Ô€€Several€of€the€price€cap€LECs€disagree€with€the€Bureau's€tentative€conclusion€that€the€price€cap€LECs€must€allocate€the€exogenous€COE€maintenance€andÏmarketing€cost€adjustments€from€the€TIC€as€it€existed€prior€to€July€1,€1997.€€GTE€and€BellSouth€contend€that€the€Bureau's€tentative€conclusion€is€inconsistent€with€theÏmethodology€for€allocating€"undesignated"€exogenous€costs€contained€in€the€Bureau's€revised€1997€Tariff€Review€Plan€(TRP)€.׃hx×Ý ƒŠÿÿÝò…òÚ  Ú213Ú  Úó…óÝ  Ý×  ×€€This€argument€is€based€on€a€fundamentalÐ —X Ðmisconception€of€the€legal€status€of€a€TRP€and€the€role€of€the€TRP€in€our€tariff€review€process.€€The€TRP€is€a€reporting€requirement€released€by€the€Bureau€that€sets€forthÏsummary€material€that€LECs€should€file€to€support€the€revisions€to€the€rates€in€their€interstate€access€service€tariff€filings.€€The€TRP€contains€only€reporting€requirements.€ÏCarriers€must€file€the€TRP€in€the€specified€format,€but€the€TRP€does€not€set€forth,€independently€of€this€Commission's€rules€and€orders,€additional€substantive€standards€that€theÏCommission€must€follow€in€resolving€the€issues€in€a€tariff€investigation.òò€óó€Ð ·x ÐÌà  àÔ2ÿÿ{ÔÚ  Ú124Ú  Ú.Ô3  Ô€€Ameritech€argues€that€the€use€of€the€pre„July€1€date€for€purposes€of€allocating€exogenous€costs€to€the€TIC€is€inconsistent€with€sections€61.45€and€61.47€ofÏthe€Commission's€rules,׃i×Ý ƒŠÿÿÝò…òÚ  Ú214Ú  Úó…óÝ  Ý×  ×€which€provide€that€exogenous€changes€that€are€applied€to€the€price€cap€LECs'€basket€PCIs€and€sub„band€SBIs€are€to€be€based€on€the€current€(t„1)Ð O" Ðindex€values.׃j˜×Ý ƒŠÿÿÝò…òÚ  Ú215Ú  Úó…óÝ  Ý×  ×€We€disagree€with€Ameritech€that€allocating€these€exogenous€cost€adjustments€from€the€TIC€as€it€existed€prior€to€July€1,€1997€is€inconsistent€with€our€price€capРט# Ðrules.€€We€require€the€price€cap€LECs€to€use€June€30,€1997€TIC€and€trunking€basket€revenues€only€to€identify€the€ratio€of€TIC€revenues€to€total€trunking€basket€revenues.€€ThatÏratio€is€still€applied€to€the€current€(t„1)€index€value€pursuant€to€section€61.45€and€61.47€of€our€rules.ÌÌà  àÔ2ÿÿ|ÔÚ  Ú125Ú  Ú.Ô3  Ô€€All€the€price€cap€LECs€except€for€CBT,€Citizens,€and€U€S€West€allocated€their€exogenous€cost€adjustments€for€COE€maintenance€and€marketing€from€theÏTIC€as€it€existed€on€or€after€July€1,€1997.€€We€order€these€LECs€to€allocate€the€COE€maintenance€exogenous€cost€adjustments€they€make€to€their€Trunking€baskets€amongÏTrunking€basket€services€on€the€basis€of€ratios€of€the€June€30,€1997€revenues€in€each€service€category€in€the€Trunking€basket€to€June€30,€1997€total€Trunking€basket€revenues.€ÏWe€order€these€LECs€to€allocate€the€marketing€exogenous€cost€adjustments€they€make€to€their€Trunking€baskets€among€Trunking€basket€services€on€the€basis€of€ratios€of€theÏJune€30,€1997€switched€access€revenues€in€each€service€category€in€the€Trunking€basket€to€June€30,€1997€total€Trunking€basket€switched€access€revenues.€€€€ÌÌà  àÔ2ÿÿ}ÔÚ  Ú126Ú  Ú.Ô3  Ô€€All€price€cap€LECs€must€recalculate€the€Trunking€basket€PCI€and€SBI€upper€limit€for€each€service€category€in€the€Trunking€basket€to€reflect€the€requirementsÏset€forth€in€this€section€for€calculating€exogenous€COE€maintenance€and€marketing€cost€adjustments.€€The€revised€PCIs€and€SBIs€must€reflect€use€of€permitted€revenues€toÏcalculate€exogenous€cost€adjustments€to€the€Trunking€basket€due€to€COE€maintenance€and€marketing€expenses.€€The€revised€SBIs€also€must€reflect€allocations€of€the€COEÏmaintenance€exogenous€cost€adjustment€among€Trunking€basket€services€that€are€based€on€ratios€of€the€June€30,€1997€revenues€in€each€service€category€in€the€Trunking€basketÏto€June€30,€1997€total€Trunking€basket€revenues.€€In€addition,€the€revised€SBIs€must€reflect€allocations€of€the€marketing€exogenous€cost€adjustment€among€Trunking€basketÏservices€that€are€based€on€ratios€of€the€June€30,€1997€switched€access€revenues€in€each€service€category€in€the€Trunking€basket€to€June€30,€1997€total€Trunking€basket€switchedÏaccess€revenues.€€After€recalculating€the€trunking€basket€PCI€and€the€SBI€upper€limit€for€each€Trunking€basket€service€category,€they€must€revise€their€tariffs€to€establish€ratesÏfor€each€service€in€each€such€category€such€that€the€SBI€for€each€category€does€not€exceed€the€SBI€upper€limit.€€ÌÌò òà  àC.à0 ` àImpact€on€the€TIC€Arising€from€the€Use€of€Actual€Minutes€of€Use€Rather€than€Assumed€9,000€Minutes€of€Useó óÐï#°6` (#` (# ÐÐ s$47 Ðà  àà ` à1.à ¸ àBackgroundÐ ? ÐÌà  àÔ2ÿÿ~ÔÚ  Ú127Ú  Ú.Ô3  Ô€€The€òòAccess€Charge€Reform€Orderóó€directed€all€incumbent€LECs,€both€price€cap€carriers€and€rate„of„return€carriers,€to€use€actual€MOU€per€circuit€rather€thanÐ O Ðan€assumed€9,000€MOU€to€develop€their€tandem„switched€transport€rates.׃k×Ý ƒŠÿÿÝò…òÚ  Ú216Ú  Úó…óÝ  Ý×  ×€€In€reviewing€the€interim€rate€structure€for€tandem„switched€transport€rates€in€accordance€with€theРט ÐòòCompTelóó€remand,׃lX×Ý ƒŠÿÿÝò…òÚ  Ú217Ú  Úó…óÝ  Ý×  ×€the€Commission€found€that€its€assumption€that€voice„grade€common€transport€circuits€experience€uniform€loadings€of€9,000€MOU€was€no€longerÐ _  Ðreasonable€based€on€evidence€in€the€record€presented€by€the€LECs€showing€that€for€many€LECs€the€actual€traffic€levels€were€substantially€lower€than€9,000€MOU€perÏmonth.׃mè×Ý ƒŠÿÿÝò…òÚ  Ú218Ú  Úó…óÝ  Ý×  ×€€The€Commission€found€that,€as€a€result,€in€those€cases,€use€of€the€9,000„minute€assumption€had€caused€revenues€to€be€assigned€to€the€TIC€that€would€have€beenÐ o 0 Ðassigned€to€switched€transport€rates€if€actual€MOU€had€been€used€to€develop€those€rates€in€1993.€€The€incumbent€LECs€were€therefore€directed€"to€develop€common€transportÏrates€based€on€the€relative€number€of€DS1€and€DS3€circuits€in€use€in€the€tandem„to„end€office€link,€and€using€actual€voice„grade€circuit€loadings,€geographically€averaged€on€aÏstudy„area„wide€basis,€that€the€incumbent€LEC€experienced€based€on€the€prior€year's€annual€use."׃nx×Ý ƒŠÿÿÝò…òÚ  Ú219Ú  Úó…óÝ  Ý×  ×€€As€the€incumbent€LECs€developed€transport€rates€based€on€actual€MOU,Ð  È  Ðthey€were€directed€to€use€any€increase€in€tandem„switched€transport€revenues€to€decrease€the€TIC.׃o×Ý ƒŠÿÿÝò…òÚ  Ú220Ú  Úó…óÝ  Ý×  ׀Р P  ÐÌà  àÔ2ÿÿÔÚ  Ú128Ú  Ú.Ô3  Ô€€Before€the€òòAccess€Charge€Reform€Order,€óósection€69.111(c)€stated€that:Ð Ÿ `  ÐÌà8  àà8` Ð Ð à"tandem„switched€transport€rates€generally€shall€be€presumed€reasonable€if€the€telephone€company€bases€the€charges€on€aÏweighted€per„minute€equivalent€of€direct„trunked€transport€DS1€and€DS3€rates€that€reflect€the€relative€number€of€DS1€andÏDS3€circuits€used€in€the€tandem„to„end€office€links€.€.€.€,€calculated€using€a€òòloading€factor€of€9000€minutes€of€useóó€perÐ ¿€ Ðmonth€per€voice„grade€circuit."׃p˜×Ý ƒŠÿÿÝò…òÚ  Ú221Ú  Úó…óÝ  Ý×  ×€€ÐG ` x` x ÐÌSection€69.111(c)(1)€now€states€that:€€ÌÌà8  àà8` Ð Ð à"[t]hrough€June€30,€1998,€tandem„switched€transport€transmission€charges€generally€shall€be€presumed€reasonable€if€theÏtelephone€company€bases€the€charges€on€a€weighted€per„minute€equivalent€of€direct„trunked€transport€DS1€and€DS3Ïcircuits€used€in€the€tandem„to„end€office€links€.€.€.€,€calculated€using€the€òòtotal€actual€voice„grade€minutes€of€useóó,Ð w8  Ðgeographically€averaged€on€a€study„area„wide€basis,€that€the€incumbent€local€exchange€carrier€experiences€based€on€theÏprior€year's€annual€use."׃q( ×Ý ƒŠÿÿÝò…òÚ  Ú222Ú  Úó…óÝ  Ý×  ×€€Ð‡H ` x` x ÐÌà  àÔ2ÿÿ€ÔÚ  Ú129Ú  Ú.Ô3  Ô€€The€majority€of€the€price€cap€LECs'€tariff€filings€revealed€that€tandem€usage€in€their€study€areas€exceeded€9,000€minutes€per€trunk€for€1996.׃r¸ ×Ý ƒŠÿÿÝò…òÚ  Ú223Ú  Úó…óÝ  Ý×  ×€€TheÐ —X Ðrecalculated€transport€rates€for€the€price€cap€LECs€were€lower€than€their€previously„existing€rates.€€The€price€cap€LECs€attributed€the€lower€rates€to€the€use€of€circuit€loadingsÏgreater€than€9,000€minutes;€to€their€use€of€current€DS1€and€DS3€rates,€which€are€generally€lower€than€they€were€in€1993€when€the€initial€common€transport€rates€wereÏdeveloped;€and€to€lower€transport€costs€resulting€from€new€technology.€€Consequently,€the€price€cap€LECs€made€exogenous€adjustments€that€removed€revenue€from€the€tandem„¼switched€transport€category€and€added€that€revenue€to€the€TIC€in€the€amount€of€$57.3€million.€The€tariff€filings€for€most€small€rate„of„return€carriers€showed€that€use€of€actualÏMOU€resulted€in€increased€transport€rates€and€a€decreased€TIC.€ÌÌà  àÔ2ÿÿÔÚ  Ú130Ú  Ú.Ô3  Ô€€€In€the€òòAccess€Reform€Tariffs€Designation€Orderóó,€the€Bureau€observed€that€in€the€òòAccess€Charge€Reform€Orderóó,€the€Commission€expected€that€the€price€capÐ O" ÐLECs'€use€of€actual€MOU€would€cause€an€increase€in€tandem„switched€transport€rates.€€The€Commission€therefore€directed€the€price€cap€LECs€to€use€any€increase€in€commonÏtransport€revenues€to€decrease€the€TIC.׃sH ×Ý ƒŠÿÿÝò…òÚ  Ú224Ú  Úó…óÝ  Ý×  ×€€The€Bureau€emphasized€that€the€òòAccess€Charge€Reform€Order€óódid€not€contemplate€that€price€cap€LECs€would€adjust€any€otherÐ _ $ Ðinputs€into€the€calculation€to€reflect€current€data,€and€that€it€was€not€the€Commission's€intention€to€generate€additional€TIC.׃tØ×Ý ƒŠÿÿÝò…òÚ  Ú225Ú  Úó…óÝ  Ý×  ׀Рç¨% Ðâ âÐ o0& Ðà  àÔ2ÿÿ‚ÔÚ  Ú131Ú  Ú.Ô3  Ô€€The€Bureau€tentatively€concluded€that€price€cap€carriers€should€not€recalculate€their€tandem„switched€transport€rates€pursuant€to€section€69.111(c).€€TheÏBureau€noted€that€Section€69.111(c)€of€the€Commission's€rules׃u×Ý ƒŠÿÿÝò…òÚ  Ú226Ú  Úó…óÝ  Ý×  ×€must€be€read€in€context€with€section€69.1(c)׃vX×Ý ƒŠÿÿÝò…òÚ  Ú227Ú  Úó…óÝ  Ý×  ×€of€the€Commission's€rules,€which€states€that€sectionРLj Ðâ â69.111(c)€applies€to€price€cap€LECs€only€for€purposes€of€computing€initial€charges€for€new€rate€elements.€€The€Bureau€concluded€that€the€amendment€to€section€69.111(c)Ïapplies€only€to€rate„of„return€carriers,€which€recalculate€their€tandem„switched€transport€rates€each€year€with€updated€data.€€The€Bureau€sought€comment€on€this€conclusion.׃wè×Ý ƒŠÿÿÝò…òÚ  Ú228Ú  Úó…óÝ  Ý×  ×Рט ÐÌà  àÔ2ÿÿƒÔÚ  Ú132Ú  Ú.Ô3  Ô€€The€Bureau€tentatively€concluded€that€to€satisfy€the€òòAccess€Charge€Reform€Orderóó,€the€price€cap€LECs€should€recalculate€tandem„switched€transport€ratesÐ ç ¨ Ðusing€the€same€data€that€was€used€when€those€rates€were€first€established€in€1993,€except€using€actual€minutes€of€use€for€circuit€loading,€rather€than€assuming€9,000€minutes€ofÏuse€per€month.׃xx×Ý ƒŠÿÿÝò…òÚ  Ú229Ú  Úó…óÝ  Ý×  ×€€The€Bureau€stated€that,€based€on€its€tentative€conclusion,€the€price€cap€LECs€should€compare€those€rates€to€the€1993€rates€to€determine€the€amount€of€theÐ ÷ ¸ ÐTIC€that€was€attributable€to€using€the€9,000€MOU€assumption.€€The€Bureau€tentatively€concluded€that€the€price€cap€LECs€should€determine€what€percentage€of€the€original€TICÏwas€therefore€attributable€to€the€9,000€MOU€assumption€and€make€an€exogenous€adjustment€to€their€June€30,€1997€TIC€SBI€by€that€percentage.€€The€price€cap€LECs€shouldÏthen€make€a€corresponding€exogenous€adjustment€to€their€tandem„switched€transport€SBIs,€based€on€the€percentage€of€tandem„switched€transport€revenue€attributable€to€theÏ9,000€minutes€of€use€assumption.€€The€Bureau€sought€comment€on€this€approach,€or€on€any€other€alternative€approach€a€company€requested€the€Commission€consider.׃y×Ý ƒŠÿÿÝò…òÚ  Ú230Ú  Úó…óÝ  Ý×  ×€€TheÐ  Ø  ÐBureau€also€sought€comment€on€whether€price€cap€LECs€should€be€permitted€to€increase€their€TIC,€or€whether€they€should€only€be€permitted€to€reduce€their€TIC.׃z˜×Ý ƒŠÿÿÝò…òÚ  Ú231Ú  Úó…óÝ  Ý×  ×Ð Ÿ `  ÐÌà  àÔ2ÿÿ„ÔÚ  Ú133Ú  Ú.Ô3  Ô€€In€addition,€the€Bureau€sought€comment€on€whether€multiplexer€costs€are€relevant€in€the€computation€of€the€tandem„switch€transport€rate€and€required€thatÏprice€cap€LECs€demonstrate€that€the€weighted€(by€total€DS1€and€DS3€lines)€average€of€DS1€and€DS3€rates€divided€by€actual€minutes€of€use€per€voice„grade€circuit€is€affected€byÏthe€multiplexers€at€the€tandem€switch.׃{( ×Ý ƒŠÿÿÝò…òÚ  Ú232Ú  Úó…óÝ  Ý×  ×€€Ð ¿€ ÐÌà  àà ` à2.à ¸ àDiscussionÐ Ï  ÐÌ€à  àÔ2ÿÿ…ÔÚ  Ú134Ú  Ú.Ô3  Ô€€We€adopt€the€Bureau's€tentative€conclusion€that,€with€the€exception€of€the€MOU€variable,€price€cap€LECs€must€use€1993€data€for€the€purpose€of€makingÐ ß   Ðexogenous€cost€adjustments€to€the€TIC€and€the€tandem€switched€transport€category.€€With€regard€to€MOU,€price€cap€LECs€must€use€actual€MOU€in€lieu€of€9,000€MOU€asÏrequired€by€the€òòAccess€Charge€Reform€Orderóó.€€We€also€adopt€the€Bureau's€tentative€conclusion€that€price€cap€LECs€must€compare€the€rates€that€result€from€this€methodology€toÐ ï°  Ðthe€1993€rates€in€order€to€determine€the€amount€of€the€TIC€that€was€attributable€to€the€assumption€of€9,000€MOU.€€After€determining€the€percentage€of€the€original€TIC€that€wasÏattributable€to€the€assumption€of€9,000€MOU,€price€cap€LECs€must€make€an€exogenous€adjustment€to€their€June€30,€1997€TIC€SBI€by€that€percentage.€€Further,€price€cap€LECsÏmust€make€a€corresponding€exogenous€adjustment€to€their€tandem€switched€transport€SBIs€based€on€the€percentage€of€tandem€switched€transport€revenues€attributable€to€theÏassumption€of€9,000€MOU.€€Price€cap€LECs€may€not,€however,€make€any€adjustment€to€the€TIC€if€their€actual€MOU€exceed€9,000.€€In€other€words,€in€situations€where€theÏ9,000€MOU€assumption€did€not€cause€revenues€to€be€collected€as€part€of€the€TIC,€no€adjustment€to€a€price€cap€LEC's€rates€is€necessary€or€reasonable.€Ìà  àÌò òó óà  àÔ2ÿÿ†ÔÚ  Ú135Ú  Ú.Ô3  Ô€€When€we€ordered€price€cap€LECs€to€make€exogenous€adjustments€to€the€TIC€and€the€tandem„switched€transport€category€using€actual€MOU€to€determine€theÐ §h Ðamount€of€revenues€that€should€have€been€assigned€to€tandem„switched€transport€rates,€it€was€for€the€express€purpose€of€removing€from€the€TIC€any€revenues€attributable€solelyÏto€the€use€of€the€9,000€MOU€assumption€when€the€TIC€was€first€established.׃|¸ ×Ý ƒŠÿÿÝò…òÚ  Ú233Ú  Úó…óÝ  Ý×  ×€€While€the€òòAccess€Charge€Reform€Order€óódiscussed€in€detail€the€rationale€for€modifying€theÐ ·x Ðassumption€of€9,000€MOU,€it€made€no€findings€concerning€the€other€inputs€that€were€used€in€the€calculation€of€initial€TST€rates€pursuant€to€Section€69.111(c).€€The€OrderÏcannot€therefore€be€reasonably€interpreted€as€authorizing€price€cap€LECs€to€reinitialize€tandem„switched€transport€rates€using€current€inputs€in€the€section€69.111(c)€rateÏformula.€€€ÌÌà  àÔ2ÿÿ‡ÔÚ  Ú136Ú  Ú.Ô3  Ô€€The€òòAccess€Charge€Reform€Orderóó€amended€section€69.111(c)€because€rate€of€return€carriers€adjust€their€tandem„switched€transport€rates€annually€pursuantÐ _ $ Ðto€that€rule.€€The€rule€amendment€was€necessary€to€ensure€that€rate„of„return€carriers€would€implement€our€findings€with€respect€to€the€9,000€MOU€assumption.€€Price€capÏLECs,€however,€do€not€set€new€rates€each€year€pursuant€to€section€69.111(c).€€Instead,€once€an€initial€rate€is€established,€price€cap€LECs€rates€are€governed€by€the€price€capÏformula.€€Price€cap€LECs€are€permitted€to€use€all€new€current€data€to€calculate€rates€under€two€circumstances€only:€to€set€the€price€of€a€new€service€and€to€support€a€rate€thatÏcauses€the€API€to€exceed€the€PCI.׃}H ×Ý ƒŠÿÿÝò…òÚ  Ú234Ú  Úó…óÝ  Ý×  ×€€The€òòAccess€Charge€Reform€Orderóó€did€not€change€this€pricing€methodology.€€SNET,€Ameritech,€and€the€other€price€cap€LECs€who€relyÐ @( Ðon€section€69.111(c)€to€support€their€use€of€current€data€for€the€purpose€of€recalculating€tandem„switched€transport€rates€are€in€error.€Section€69.111(c)€of€the€Commission'sÏrules€must€be€read€in€context€with€section€69.1(c),€which€states€that€69.111(c)€applies€to€price€cap€carriers€only€for€the€limited€purpose€of€computing€initial€charges€for€new€rateÏâ âelements.׃~Ø×Ý ƒŠÿÿÝò…òÚ  Ú235Ú  Úó…óÝ  Ý×  ×€€Because€section€69.111(c)€applies€to€price€cap€carriers€only€for€the€purpose€of€computing€initial€tandem„switched€transport€rates,€it€is€inappropriate€for€the€priceÐ Ø+ Ðcap€LECs€to€follow€section€69.111(c)€in€the€recalculation€of€the€tandem„switched€transport€rates.׃×Ý ƒŠÿÿÝò…òÚ  Ú236Ú  Úó…óÝ  Ý×  ×€€We€also€reject€BellSouth's€attempt€to€characterize€tandem„switchedÐ ? Ðâ âtransport€as€a€new€rate€element€and€the€recalculation€of€these€rates€as€the€establishment€of€initial€rates.׃€X×Ý ƒŠÿÿÝò…òÚ  Ú237Ú  Úó…óÝ  Ý×  ×€€If€the€recalculated€tandem„switched€transport€rates€were€indeed€newРLj Ðrate€elements,€then€the€earlier€tandem„switched€transport€rates€that€are€based€on€the€9,000€MOU€assumption€would€continue€to€be€valid,€which€we€have€already€decided€is€notÏthe€case.€€ÌÌà  àÔ2ÿÿˆÔÚ  Ú137Ú  Ú.Ô3  Ô€€The€formula€for€computing€the€initial€common€transport€TST€revenues€depends€on€the€following€variables:€the€rates€for€DS1€and€DS3€direct„trunkedÏtransport,€the€proportion€of€DS1€to€DS3€circuits€used€to€provide€the€common€transport€portion€of€TST,€the€rate€for€the€one€DS3€to€DS1€mutiplexer€needed€to€interconnect€DS3Ïtransmission€facilities€with€the€end„office€switch,€the€MOU€used€as€a€loading€factor;€and€the€demand€for€common€transport.€€The€methodology€outlined€above€isolates€theÏdifference€in€TIC€revenues€arising€solely€from€using€9,000€MOU€rather€than€the€actual€MOU€when€the€TIC€was€first€established€by€changing€only€the€value€of€one€variable,òò€i.eóó,Ð  @ Ðchanging€the€value€of€MOU€from€9,000€MOU€to€actual€MOU.€€When€the€MOU€are€changed€from€9,000€to€actual€MOU€while€holding€constant€variables€other€than€MOU€thatÏdetermine€the€level€of€the€common€transport€portion€of€TST€revenues€at€the€levels€they€were€at€when€the€TIC€was€first€established,€the€resulting€change€in€the€TST€revenues€isÏdue€solely€to€the€MOU€change.€€Conversely,€if€some€or€all€of€the€variables€that€determine€the€level€of€the€common€transport€portion€of€TST€revenues€are€changed€simultaneouslyÏfrom€the€levels€they€were€at€the€time€the€TIC€was€created,€then€the€effect€of€the€change€of€any€of€one€these€variables€on€the€common€transport€portion€of€TST€revenue€cannot€beÏascertained.€ÌÌà  àÔ2ÿÿ‰ÔÚ  Ú138Ú  Ú.Ô3  Ô€€While€we€adopt€the€Bureau's€tentative€conclusion€regarding€the€methodology€price€cap€LECs€must€use€to€compute€the€exogenous€cost€adjustments€to€theÏTIC€and€the€TST€service€categories€to€correct€for€use€of€the€9,000€MOU€assumption€when€the€TIC€was€established,€we€clarify€the€final€step€of€the€methodology€outlined€in€theÏòòAccess€Reform€Tariffs€Designation€Orderóó.€€The€final€step€of€the€methodology€proposed€in€the€òòAccess€Reform€Tariffs€Designation€Orderóó€accounts€for€the€effects€of€past€GDP„Ð G  ÐPI€minus€X„factor€reductions€to€TIC€revenues€attributable€solely€to€the€use€of€the€9,000€MOU€assumption€when€the€TIC€was€first€established.€€We€agree€with€the€Bureau'sÏtentative€conclusion€that€this€step€is€necessary€because€TST€customers€would€otherwise€be€denied€the€continuing€benefits€of€past€GDP„PI€minus€X„factor€reductions€under€priceÏcaps.€€This€methodology€determines€the€percentage€of€the€original€TIC€that€was€attributable€to€the€assumption€of€9,000€MOU€and€adjusts€the€June€30,€1997€TIC€SBI€by€thatÏpercentage.€€We€now€clarify€that€the€dollar€amount€associated€with€the€percentage€change€to€the€June€30,€1997€SBI€is€the€dollar€amount€of€the€exogenous€adjustments€to€theÏTIC€and€the€TST€service€category.€Price€cap€LECs€must€calculate€this€dollar€amount€by:€(1)€dividing€the€original€TIC€revenues€into€TIC€revenues€attributable€solely€to€the€use€ofÏthe€9,000€MOU€assumption€when€the€TIC€was€first€established;€and€(2)€multiplying€the€result€of€the€division€in€the€first€calculation€by€the€June€30,€1997€TIC€revenues.€€ThisÏdollar€amount€accounts€accurately€for€past€GDP„PI€minus€X„factor€reductions€to€TIC€revenues,€as€well€as€demand€changes,€after€the€TIC€was€established.€Ìà  àÌà  àÔ2ÿÿŠÔÚ  Ú139Ú  Ú.Ô3  Ô€€The€Bureau's€proposed€methodology€calculates€the€difference€between€original€common€transport€TST€revenues€and€common€transport€TST€revenuesÏcalculating€those€revenues€using€actual€MOU.€€Use€of€1992€actual€MOU,€òòi.eóó.,€MOU€for€the€year€prior€to€the€year€in€which€TST€rates€were€established,€would€provide€for€theÐ —X Ðmost€accurate€measurement€of€TIC€revenues€attributable€solely€to€the€use€of€the€9,000€MOU€assumption€when€the€TIC€was€first€established.€€For€two€reasons,€however,€we€willÏnot€require€the€price€cap€LECs€to€use€1992€MOU€when€they€calculate€TIC€revenues€attributable€solely€to€the€use€of€the€assumption€of€9,000€MOU€when€the€TIC€was€firstÏestablished.€€First,€some€price€cap€LECs€contend€that€they€do€not€have€data€on€1992€actual€MOU.׃è×Ý ƒŠÿÿÝò…òÚ  Ú238Ú  Úó…óÝ  Ý×  ×€€Second,€1996€actual€MOU€is€a€reasonable€proxy€for€1992€actual€MOU.€Ð /ð ÐActual€MOU€is€a€loading€factor€that€reflects€the€average€traffic€utilization€of€the€trunks€that€a€LEC€uses€to€provide€common€transport€throughout€its€network.€LECs€typicallyÏaim€to€utilize€their€network€at€a€certain€percentage€of€its€capacity.€€Operating€the€network€below€its€capacity€provides€an€allowance€for€growth€and€for€breakage.€€No€party€hasÏprovided€any€evidence€in€the€record€of€this€proceeding€indicating€that€any€LEC€utilizes€a€different€percentage€of€the€capacity€of€the€trunks€it€uses€to€provide€common€transportÏnow€than€it€did€when€the€TIC€was€established.€€While€the€absolute€amount€of€TST€traffic€a€LEC€carries€on€its€network€may€have€increased€over€time,€we€would€expect€that€theÏabsolute€number€of€trunks€carrying€that€traffic€also€would€have€increased.€€Accordingly,€we€will€allow€price€cap€LECs€to€calculate€their€exogenous€changes€to€the€TIC€and€theÏTST€service€category€using€1996€MOU,€unless€the€1996€MOU€exceed€9,000€MOU.€€For€the€reasons€we€set€forth€below,€if€any€price€cap€LEC's€actual€MOU€exceed€9,000€MOU,Ïthe€LEC€may€not€make€any€exogenous€cost€adjustments€to€the€TIC€or€TST€service€band.ÌÌà  àÔ2ÿÿ‹ÔÚ  Ú140Ú  Ú.Ô3  Ô€€We€reject€the€claim€by€Bell€Atlantic€and€other€price€cap€LECs€that€they€should€not€be€required€to€make€this€adjustment€using€the€Bureau's€proposedÏmethodology€because€the€òòAccess€Charge€Reform€Order€óódoes€not€specify€this€methodology€and€the€Commission€may€not€require€such€adjustments€absent€a€rulemaking.׃‚x×Ý ƒŠÿÿÝò…òÚ  Ú239Ú  Úó…óÝ  Ý×  ׀Р@( ÐFirst,€the€action€we€take€here€does€not€change€any€of€the€decisions€we€made€in€the€òòAccess€Charge€Reform€Orderóó€regarding€the€impact€of€the€9,000€MOU€assumption€on€theÐ È) ÐTIC.€€We€decided€in€that€rulemaking€proceeding€that€any€amounts€in€the€TIC€that€were€attributable€to€the€9,000€MOU€assumption€should€be€removed€from€the€TIC.€€In€thisÏtariff€investigation€order€we€are€merely€interpreting€and€implementing€that€decision.€€Further,€the€Commission€has€previously€determined€that€a€tariff€investigation€"is€aÏrulemaking€of€particular€applicability"€under€the€Administrative€Procedure€Act€(APA).׃ƒ×Ý ƒŠÿÿÝò…òÚ  Ú240Ú  Úó…óÝ  Ý×  ×€€In€the€òòAccess€Reform€Tariffs€Designation€Order,óó€the€Bureau€specified€the€carriersÐ Ÿ`, Ðwhose€tariffs€were€subject€to€investigation€with€respect€to€these€TIC€adjustments€and€sought€comment€on€its€proposed€and€tentative€conclusions.׃„( ×Ý ƒŠÿÿÝò…òÚ  Ú241Ú  Úó…óÝ  Ý×  ×€€In€response€to€the€òòAccessÐ 'è- ÐReform€Tariffs€Designation€Order,óó€Bell€Atlantic€and€other€price€cap€LECs€submitted€direct€cases€presenting€their€arguments€on€the€proposed€approach,€other€parties€addressedÐ ¯p. Ðthese€issues€in€their€comments€on€the€direct€cases,€and€price€cap€LECs€provided€further€comment€in€their€rebuttals.€€Accordingly,€our€decision€to€require€the€price€cap€LECs€toÏfollow€the€methodology€adopted€in€this€Order€is€fully€consistent€with€the€notice€and€comment€requirements€of€the€APA.׃…¸ ×Ý ƒŠÿÿÝò…òÚ  Ú242Ú  Úó…óÝ  Ý×  ×Ð ¿ €0 Ðâ âÐ G!1 Ðà  àÔ2ÿÿŒÔÚ  Ú141Ú  Ú.Ô3  Ô€€We€agree€with€the€price€cap€LECs€that€the€initial€calculation€of€TST€rates€included€the€cost€of€one€DS3€to€DS1€multiplexer.׃†×Ý ƒŠÿÿÝò…òÚ  Ú243Ú  Úó…óÝ  Ý×  ×€€This€finding€is€consistentÐ ? Ðâ âwith€the€statement€in€the€òòLocal€Transport€Orderóó€that€common€transport€TST€rates€would€recover€the€mutiplexing€equipment€needed€to€interconnect€DS3€transmission€facilitiesРLj Ðwith€the€end€office€switch.׃‡ ×Ý ƒŠÿÿÝò…òÚ  Ú244Ú  Úó…óÝ  Ý×  ×€€It€is€also€consistent€with€the€Bureau's€òòLocal€Transport€Restructure€Tariffs€Orderóó,€which€concluded€that€LECs€should€include€the€cost€of€oneÐ O Ðmultiplexer€in€developing€their€common€transport€TST€rates.׃ˆ°×Ý ƒŠÿÿÝò…òÚ  Ú245Ú  Úó…óÝ  Ý×  ×€€Accordingly,€we€find€that€when€the€price€cap€LECs€compute€the€impact€on€the€TIC€of€the€9,000€MOUРט Ðassumption€by€comparing€original€TST€revenues€with€TST€revenues€calculated€using€the€data€they€used€when€the€TIC€was€established,€except€using€actual€MOU,€both€of€theseÏTST€revenue€amounts€must€include€revenues€from€one€DS3€to€DS1€multiplexer.€€When€price€cap€LECs€determine€the€difference€between€original€TST€revenues€and€commonÏtransport€TST€revenues€calculated€using€the€data€they€used€when€the€TIC€was€established,€except€using€actual€MOU,€the€impact€of€the€9,000€MOU€will€be€isolated€becauseÏidentical€revenues€reflecting€the€same€demand€and€the€same€rate€for€one€DS3€to€DS1€mutiplexer€will€be€reflected€in€both€TST€revenues.ÌÌà  àÔ2ÿÿÔÚ  Ú142Ú  Ú.Ô3  Ô€€As€we€indicated€earlier,€if€a€price€cap€LEC's€actual€MOU€exceed€9,000,€we€prohibit€the€LEC€from€increasing€the€TIC.€€In€the€òòAccess€Charge€Reform€Orderóó,Ð  È  Ðthe€Commission€stated€that€one€of€the€goals€of€the€Access€Charge€Reform€proceeding€was€to€reduce,€and€ultimately€eliminate,€the€TIC€in€a€manner€that€fosters€competitionÏwhile,€at€the€same€time€implementing€a€cost„based€rate€structure.׃‰×Ý ƒŠÿÿÝò…òÚ  Ú246Ú  Úó…óÝ  Ý×  ×€€Consistent€with€those€objectives,€the€Commission€determined€in€the€òòAccess€Charge€Reform€Orderóó€thatÐ  Ø  Ðsome€costs€in€the€TIC€should€be€reallocated€to€other€access€elements.×ƒŠ˜×Ý ƒŠÿÿÝò…òÚ  Ú247Ú  Úó…óÝ  Ý×  ×€€As€an€example,€in€reviewing€the€interim€rate€structure€for€tandem„switched€transport€rates€inÐ Ÿ `  Ðaccordance€with€the€òòCompTelóó€remand,׃‹( ×Ý ƒŠÿÿÝò…òÚ  Ú248Ú  Úó…óÝ  Ý×  ×€the€Commission€found€that€its€assumption€that€voice„grade€common€transport€circuits€experience€uniform€loadings€of€9,000€minutesÐ 'è  Ðof€use€was€no€longer€reasonable€based€on€evidence€in€the€record€presented€by€the€LECs€showing€that€for€many€LECs€the€actual€traffic€levels€was€substantially€lower€than€9,000Ïminutes€of€use€per€month.׃Œ¸ ×Ý ƒŠÿÿÝò…òÚ  Ú249Ú  Úó…óÝ  Ý×  ×€€The€Commission€found€that,€as€a€result,€in€those€cases,€use€of€the€9,000„minute€assumption€had€caused€revenues€to€be€assigned€to€the€TIC€thatÐ 7ø Ðwould€have€been€assigned€to€switched€transport€rates€if€actual€MOU€had€been€used€to€develop€those€rates€in€1993.€€Thus,€when€theòò€Access€Charge€Reform€Orderóó€ordered€priceÐ ¿€ Ðcap€LECs€to€recalculate€rates€for€the€common€transport€portion€of€tandem„switched€transport€using€actual€minutes€of€use€for€circuit€loading€rather€than€assuming€9,000€minutesÏof€use€per€month,€it€was€for€the€purpose€of€removing€from€the€TIC€any€revenues€attributable€to€the€use€of€that€particular€assumption€when€the€TIC€was€first€established.׃H ×Ý ƒŠÿÿÝò…òÚ  Ú250Ú  Úó…óÝ  Ý×  ×€€WeÐ Ï  Ðfind€it€unjust€and€unreasonable€for€a€price€cap€LEC€to€make€those€recalculations€in€situations€where€it€is€demonstrated€that€the€9,000€MOU€assumption€did€no€lead€toÏadditional€revenues€being€collected€through€the€TIC.€Ì€Ìà  àÔ2ÿÿŽÔÚ  Ú143Ú  Ú.Ô3  Ô€€We€disagree€with€Ameritech€and€the€other€LECs€who€claim€that€the€price€cap€LECs€should€be€permitted€to€increase€the€TIC€because€there€is€nothing€in€theÏòòAccess€Charge€Reform€Orderóó€that€prohibits€such€an€increase.×ƒŽØ×Ý ƒŠÿÿÝò…òÚ  Ú251Ú  Úó…óÝ  Ý×  ×€€While€the€òòAccess€Charge€Reform€Orderóó€did€not€specifically€state€that€the€price€cap€LECs€were€prohibitedÐ w8  Ðfrom€increasing€the€TIC,€neither€did€the€òòOrderóó€state€that€they€could€increase€the€TIC.€€Indeed,€allowing€such€an€increase€would€be€contrary€to€the€Commission's€goals€ofÐ ÿÀ  Ðeliminating€the€TIC€in€a€manner€that€fosters€competition.׃h×Ý ƒŠÿÿÝò…òÚ  Ú252Ú  Úó…óÝ  Ý×  ×€€€€Ð ‡H  ÐÌà  àÔ2ÿÿÔÚ  Ú144Ú  Ú.Ô3  Ô€€We€reject€the€alternative€methodologies€proposed€by€the€price€cap€LECs€to€recalculate€tandem„switched€transport€rates€using€actual€minutes€of€use€forÏcircuit€loading€rather€than€assuming€9,000€MOU€per€month.€€Bell€Atlantic's€proposed€methodology€uses€actual€base€year€minutes€of€use€circuit€loadings,€an€updated€mix€ofÏfiber€and€copper€transport€facilities,€and€the€most€current€rates€for€DS3€and€DS1€transport,€òòi.e.,€óóJuly€1,€1997€rates€for€termination,€facility€and€DS3/DS1€muxes,€in€order€toÐ §h Ðmatch€the€usage€data€with€the€facilities€and€rates€for€the€same€time€period.׃ø×Ý ƒŠÿÿÝò…òÚ  Ú253Ú  Úó…óÝ  Ý×  ×€€We€reject€this€methodology€because€it€does€not€isolate€the€impact€on€the€TIC€of€using€9,000Ð /ð ÐMOU€to€calculate€TST€rates€when€the€TIC€was€established.€€ÌÌà  àÔ2ÿÿÔÚ  Ú145Ú  Ú.Ô3  Ô€€Frontier€proposes€that€the€Bureau's€proposed€methodology€be€modified€to€identify€the€exogenous€change€to€the€TIC€as€a€dollar€amount€and€create€anÏoffsetting€exogenous€change€of€the€same€dollar€amount€to€the€tandem€transport€band.׃‘ˆ×Ý ƒŠÿÿÝò…òÚ  Ú254Ú  Úó…óÝ  Ý×  ×€€As€we€clarify€above,€the€methodology€we€adopt€by€this€Order€does€compute€theÐ O" Ðexogenous€cost€change€to€the€TIC€as€a€dollar€amount.€€Moreover,€if€actual€MOU€are€less€than€9,000€MOU,€we€agree€with€Frontier€that€price€cap€LECs€should€make€anРט# Ðoffsetting€exogenous€cost€change€to€the€tandem€transport€band€that€is€equal€to€the€dollar€amount€of€the€exogenous€change€to€the€TIC€that€they€calculate€using€our€methodology.€ÏIn€this€case,€the€TIC€would€decrease,€a€result€consistent€with€the€goals€of€the€òòAccess€Reform€Orderóó.€€As€discussed€above,€we€disagree€with€Frontier,€however,€that€price€capРLj ÐLECs€should€compute€an€offsetting€exogenous€cost€change€to€the€tandem€transport€band€that€is€equal€to€the€dollar€amount€of€the€exogenous€change€to€the€TIC€if€actual€MOUÏare€greater€than€9,000€MOU.€€In€those€circumstances,€the€9,000€MOU€assumption€did€not€contribute€to€TIC€revenues.ÌÌà  àÔ2ÿÿ‘ÔÚ  Ú146Ú  Ú.Ô3  Ô€€We€have€reviewed€the€calculations€the€price€cap€LECs€made€using€the€methodology€proposed€by€the€Bureau€and€we€find€that€Bell€Atlantic,€BellSouth,€andÏGTE€have€made€these€calculations€correctly.€€GTE,€however,€has€made€these€calculations€for€some€of€its€companies€using€actual€MOU€that€exceed€9,000€MOU.€€For€theÏcompanies€for€which€GTE€made€these€calculations€using€actual€1996€MOU€that€exceed€9,000€MOU,€GTE€shall€not€make€any€exogenous€cost€adjustments€to€the€TIC€or€the€TSTÏservice€categories€on€account€of€the€circuit€loading€factor.€€Ì€Ìà  àÔ2ÿÿ’ÔÚ  Ú147Ú  Ú.Ô3  Ô€€The€other€price€cap€LECs€either€did€not€use€the€correct€methodology€or€did€not€submit€calculations€based€on€this€methodology.€€We€order€these€price€capÏLECs€to€submit€calculations€of€the€TIC€and€TST€exogenous€cost€adjustments€in€accordance€with€the€methodology€we€adopt€in€this€Order.€€We€order€these€price€cap€LECs€toÏsubmit€these€calculations€on€a€worksheet€with€a€format€identical€to€the€worksheet€BellSouth€used€to€make€these€calculations.€€ÌÌà  àÔ2ÿÿ“ÔÚ  Ú148Ú  Ú.Ô3  Ô€€All€price€cap€LECs€also€must€revise€their€tariffs€to€reflect€these€adjustments.€Specifically,€they€must€recalculate€the€SBI€upper€limit€for€the€TIC€and€the€TSTÏservice€category€in€the€trunking€basket€to€reflect€exogenous€cost€adjustments€for€the€impact€of€the€9,000€MOU€based€on€the€methodology€we€adopt€in€this€Order.€€AfterÏrecalculating€the€SBI€upper€limit€for€the€TIC€and€the€TST€service€category,€they€must€revise€their€tariffs€to€establish€rates€for€the€rate€elements€corresponding€to€the€TIC€and€theÏTST€service€categories€such€that€the€SBI€for€each€category€does€not€exceed€the€SBI€upper€limit.€€ÌÌò òà  àD.à ` àResidual€and€Facilities„Based€TICó óÐ W  ÐÌà  àà ` à1.à ¸ àBackgroundÐ c$  ÐÌà  àÔ2ÿÿ”ÔÚ  Ú149Ú  Ú.Ô3  Ô€€As€part€of€the€TIC€reduction€plan€outlined€in€the€òòAccess€Charge€Reform€Orderóó,€price€cap€LECs€were€required€to€separate€their€TIC€revenues€between€theÐ s4  Ðportion€of€the€TIC€that€is€facilities„related,€and€that€portion€of€the€TIC€that€cannot€be€associated€with€any€identifiable€cost€element€„„€the€residual€TIC.׃’×Ý ƒŠÿÿÝò…òÚ  Ú255Ú  Úó…óÝ  Ý×  ×€€Reassignment€of€theÐ û¼  Ðfacilities„related€TIC€revenue€to€facilities„based€charges€will€occur€in€three€stages,€beginning€with€the€incumbent€LEC€tariffs€that€became€effective€on€January€1,€1998.€€PriceÏcap€LECs€were€required€to€target€to€the€residual€TIC€the€price€cap€reductions€arising€in€any€price€cap€basket€as€a€result€of€the€application€of€the€"GDP„PI€minus€X„factor"Ïformula€until€the€per„minute€TIC€is€eliminated.׃“X×Ý ƒŠÿÿÝò…òÚ  Ú256Ú  Úó…óÝ  Ý×  ×€€This€targeting€approach€was€adopted€to€eliminate€the€anti„competitive€aspects€of€the€TIC.Ð “T ÐÌà  àÔ2ÿÿ•ÔÚ  Ú150Ú  Ú.Ô3  Ô€€The€Commission€requires€the€price€cap€LECs€to€compute€their€anticipated€residual€TIC€by€excluding€revenues€that€were€expected€to€be€reassigned€toÏfacilities„based€charges€in€the€future.׃”è×Ý ƒŠÿÿÝò…òÚ  Ú257Ú  Úó…óÝ  Ý×  ×€€In€the€July€1,€1997€tariff€filings,€price€cap€LECs€applied€"GDP„PI€minus€X„factor"€adjustments€to€their€anticipated€residual€TIC.€Ð +ì ÐPrice€cap€LECs€that€did€not€submit€actual€percentage€estimates€for€their€residual€TIC€amounts€on€the€record€in€the€òòAccess€Reform€Proceedingóó€were€required€to€use€an€amountÐ ³t Ðequal€to€55€percent€of€their€current€TIC.׃•x×Ý ƒŠÿÿÝò…òÚ  Ú258Ú  Úó…óÝ  Ý×  ×€€This€percentage€was€based€upon€the€lowest€residual€TIC€percentage€identified€in€the€rulemaking€record.׃–×Ý ƒŠÿÿÝò…òÚ  Ú259Ú  Úó…óÝ  Ý×  ×€€For€tariffs€that€becameÐ ;ü  Ðeffective€on€January€1,€1998,€the€price€cap€LECs€were€required€to:€(1)€recalculate€the€residual€TIC€targeted€in€their€July€1,€1997€tariffs;€(2)€eliminate€any€excess€targeting€thatÏresulted€in€a€larger€PCI€reduction€to€the€TIC€SBI€than€was€required€to€eliminate€the€per„minute€non„facilities„based€residual€TIC;€and€(3)€direct€all€necessary€exogenousÏadjustments€to€their€PCIs€and€SBIs€to€reverse€the€effects€of€any€excess€targeting.ÌÌà  àÔ2ÿÿ–ÔÚ  Ú151Ú  Ú.Ô3  Ô€€In€the€òòAccess€Reform€Tariffs€Designation€Orderóó,€the€Bureau€tentatively€concluded€that€a€worksheet€created€by€AT&T€for€the€TIC€recalculation€wouldÐ ã¤% Ðproperly€determine€the€allowance€for€recovery€of€transport€costs€that€price€cap€LECs€are€required€to€remove€from€the€TIC€and€from€the€facilities„based€portion€of€the€TIC.€€TheÏBureau€identified€Pacific€Bell,€and€certain€of€the€Sprint€LTCs,€Frontier,€and€GTE€operating€companies€as€companies€that€no€longer€have€a€non„facilities„based€residual€TIC,Ïand€thus€could€have€overtargeted€their€July€1,€1997€X„factor€reduction€to€the€TIC.€€The€Bureau€ordered€these€companies€to€recalculate€the€removal€of€allowances€for€theÏrecovery€of€costs€from€the€TIC€using€the€AT&T€worksheet.׃—˜×Ý ƒŠÿÿÝò…òÚ  Ú260Ú  Úó…óÝ  Ý×  ×Ð Ä) ÐÌà  àà ` àÔ& ˜ Ô2.à ¸ àDiscussionÐ Ô+ ÐÌà  àÔ2ÿÿ—ÔÚ  Ú152Ú  Ú.Ô3  Ô€€Although€the€Bureau€tentatively€concluded€that€Pacific€Bell€no€longer€has€a€non„facilities„Ô'˜;(ˆ‘Ô€based€residual€TIC,€on€further€investigation€we€find€that,Ïalthough€Pacific€Bell€no€longer€has€a€per„minute€TIC,€it€still€has€a€non„facilities„based€residual€TIC€that€is€being€recovered€in€its€PICC.€€Therefore,€it€could€not€haveÏovertargeted€its€X„factor€reduction€to€the€TIC.׃˜( ×Ý ƒŠÿÿÝò…òÚ  Ú261Ú  Úó…óÝ  Ý×  ×€€Ð 3 ô/ ЀÌà  àÔ2ÿÿ˜ÔÚ  Ú153Ú  Ú.Ô3  Ô€€In€this€Order,€we€adopt€AT&T's€worksheet€with€certain€modifications€to€account€for€changes€to€TIC€revenues€that€resulted€from€exogenous€cost€adjustmentsÏreflected€in€the€price€cap€LECs'€1997€annual€access€filings.€€AT&T's€worksheet€calculates€the€amount€by€which€a€price€cap€LEC€overtargeted€its€July€1,€1997€"GDP„PI€minus€X„Ð Ë!Œ2 Ðfactor"€to€the€non„facilities„based€residual€TIC€by:€(1)€calculating€the€"recalculated€TIC"€by€subtracting€from€the€June€30,€1997€TIC€revenues€allowances€for€the€recovery€ofÏactual€facilities„based€costs€that€the€price€cap€LECs€reallocated€to€facilities„based€rates€on€January€1,€1998;€(2)€calculating€the€"new€residual€TIC"€by€subtracting€from€theÏrecalculated€TIC€the€portion€of€the€TIC€that€represents€the€allowance€for€facilities„based€costs€that€the€price€cap€LEC€is€required€to€reallocate€to€facilities„based€rates€in€theÏfuture;€and€(3)€subtracting€the€dollar€amount€of€the€"GDP„PI€minus€X„factor"€targeting€from€the€new€residual€TIC€if€the€"GDP„PI€minus€X„factor"€targeting€exceeds€the€newÏresidual€TIC.׃™×Ý ƒŠÿÿÝò…òÚ  Ú262Ú  Úó…óÝ  Ý×  ׀Р_  ÐÓ  ÓÌÓ  Óà  àÔ2ÿÿ™ÔÚ  Ú154Ú  Ú.Ô3  Ô€€We€agree€with€AT&T€that€the€amount€by€which€price€cap€LECs€overtargeted€their€July€1,€1997€"GDP„PI€minus€X„factor"€to€the€residual€TIC€must€beÏdetermined€by€first€computing€the€recalculated€TIC€by€subtracting€from€the€June€30,€1997€TIC€revenues€the€allowances€for€the€recovery€of€actual€facilities„based€costs€that€theÏprice€cap€LECs€reallocated€to€facilities„based€rates€on€January€1,€1998.€€In€particular,€price€cap€LECs€must€use€June€30,€1997€revenues€in€this€calculation€because€theyÏcomputed€the€residual€TIC€that€they€targeted€in€their€July€1,€1997€annual€access€tariff€filings€based€on€June€30,€1997€TIC€revenues.€€More€specifically,€they€developed€the€non„¼facilities„based€residual€TIC€estimates€they€targeted€in€their€July€1,€1997€annual€access€tariff€filings€by€multiplying€June€30,€1997€TIC€revenues€by€percentages€prescribed€in€òòóótheòòÐ  P  ÐAccess€Charge€Reform€Orderóó.€€Computing€the€recalculated€TIC€by€subtracting€from€June€30,€1997€TIC€revenues€allowances€for€actual€facilities„based€costs€is€logically€the€firstÐ  Ø  Ðstep€in€determining€whether€the€price€cap€LECs€actually€overtargeted€June€30,€1997€TIC€revenues€when€they€subtracted€from€these€same€revenues€their€estimates€of€theÏallowances€for€these€costs€in€their€July€1,€1997€annual€access€tariff€filings.ÌÌà  àÔ2ÿÿšÔÚ  Ú155Ú  Ú.Ô3  Ô€€We€find,€however,€that€the€worksheet€should€also€subtract€from€June€30,€1997€TIC€revenues€any€changes€to€TIC€revenues€reflected€in€the€price€cap€LECs'ÏJuly€1,€1997€annual€access€filings€that€were€in€addition€to€the€change€due€to€the€"GDP„PI€minus€X„factor"€targeting.€€Actual€TIC€revenues€may€have€changed€as€a€result€of€theseÏother€changes€in€the€July€1,€1997€annual€access€tariff€filing.€€The€AT&T€worksheet€underestimates€or€overestimates€the€recalculated€TIC€depending€on€whether€these€otherÏchanges€increased€or€decreased€the€TIC.€€This,€in€turn,€results€in€an€underestimate€or€an€overestimate€of€the€new€residual€TIC€on€the€AT&T€worksheet.€€By€comparing€anÏoverestimate€or€an€underestimate€of€the€new€residual€TIC€to€the€dollar€amount€of€the€"GDP„PI€minus€X„factor"€targeting,€the€AT&T€worksheet€correspondingly€overestimates€orÏunderestimates€the€amount€by€which€price€cap€LECs€overtargeted€their€July€1,€1997€"GDP„PI€minus€X„factor"€to€the€non„facilities„based€residual€TIC.ÌÌà  àÔ2ÿÿ›ÔÚ  Ú156Ú  Ú.Ô3  Ô€€Accordingly,€we€modify€the€AT&T€worksheet€to€correctly€compute€the€recalculated€TIC.€€We€modify€the€calculation€of€the€recalculated€TIC€on€the€AT&TÏworksheet€as€follows:€(1)€subtract€from€June€30,€1997€TIC€revenues€the€absolute€value€of€the€sum€of€the€allowances€for€recovery€of€actual€facilities„based€costs€price€cap€LECsÏwere€required€to€reallocate€to€facilities„based€rates€on€January€1,€1998;€(2)€sum€the€actual€targeted€revenue€differential€for€the€common€line,€traffic€sensitive,€and€trunkingÏbaskets€on€PCI„1€line€237c,€columns€(A),€(B),€and€(C)€in€the€TRP€supporting€the€July€1,€1997€annual€access€tariff€filing;€(3)€subtract€from€the€absolute€value€of€the€result€in€(2)Ïabove€the€absolute€value€of€the€entire€TIC€revenue€change€on€SUM„1,€line€171,€column€E€in€the€TRP€supporting€the€July€1,€1997€annual€access€tariff€filing;€(4)€add€to€the€resultÏin€(1)€above€the€result€from€(3)€above.€Ìà  àÔ2ÿÿœÔÚ  Ú157Ú  Ú.Ô3  Ô€€We€note€that€both€SBC€and€Frontier€suggested€using€as€the€dollar€amount€of€the€"GDP„PI€minus€X„factor"€targeting,€the€entire€TIC€revenue€change€on€SUM„¼1,€line€171,€column€E€in€the€TRP€supporting€the€July€1,€1997€annual€access€tariff€filing.€€The€revision€we€make€here€to€the€AT&T€worksheet€is€mathematically€equivalent€toÏSBC's€proposal.ÌÌà  àÔ2ÿÿÔÚ  Ú158Ú  Ú.Ô3  Ô€€We€disagree€with€Frontier€that€use€of€data€from€the€July€1,€1997€annual€access€tariff€filing€imposes€an€undue€burden€on€the€price€cap€LECs.€€We€find€thatÏthese€data€should€be€readily€available€because€price€cap€LECs€used€these€data€to€compute€their€price€cap€indices€less€than€one€year€ago.€€Nor€do€we€agree€with€Frontier€that€theÏAT&T€worksheet€is€overly€complex.€€It€contains€no€more€calculations€than€are€needed€to€clearly€identify€all€of€the€exogenous€costs€adjustments€to€the€TIC€that€the€òòAccessÐ O" ÐCharge€Reform€Orderóó€required€the€price€cap€LECs€to€make€to€the€TIC€on€January€1,€1998,€and€those€that€it€requires€the€price€cap€LECs€to€make€in€the€future.׃š ×Ý ƒŠÿÿÝò…òÚ  Ú263Ú  Úó…óÝ  Ý×  ×Рט# ÐÌà  àÔ2ÿÿžÔÚ  Ú159Ú  Ú.Ô3  Ô€€Accordingly,€we€order€GTE,€the€Sprint€LTCs,€Frontier€and€Nevada€Bell€to€recalculate€the€amount€by€which€they€overtargeted€their€July€1,€1997€"GDP„PIÏminus€X„factor"€to€the€non„facilities„based€residual€TIC€using€the€AT&T€worksheet€as€modified€by€this€Order.€€We€have€attached€to€this€order€the€AT&T€worksheet€modifiedÏpursuant€to€the€requirements€in€this€section.€€These€LECs€also€must€recalculate€the€PCIs€for€each€price€cap€basket€other€than€the€interexchange€basket€and€the€SBI€upper€limitÏfor€each€service€category€in€these€price€cap€baskets€to€reflect€the€calculations€they€make€on€the€modified€AT&T€worksheet.€€After€recalculating€the€SBI€upper€limit€for€eachÏservice€category€in€these€price€cap€baskets,€they€must€revise€their€tariffs€to€establish€rates€for€each€service€in€each€such€category€such€that€the€SBI€for€each€category€does€notÏexceed€the€SBI€upper€limit.€€We€do€not€require€these€LECs€to€pay€refunds€to€customers€to€which€they€would€have€charged€a€lower€rate€had€they€not€overtargeted€the€non„¼facilities„based€residual€TIC€because€we€prescribed€the€ratios€the€LEC€used€to€estimate€the€amount€of€the€non„facilities„based€residual€TIC,€and€any€overtargeting€resulted€fromÏoverestimating€that€amount€using€those€prescribed€ratios.€ÌÌò òV.€€Recovery€of€New€Universal€Support€Obligationsó óÐ ¯p. ÐÌò òà  àA.à ` àBackgroundó óÐ » |0 ÐÌà  àÔ2ÿÿŸÔÚ  Ú160Ú  Ú.Ô3  Ô€€The€òòóóòòUniversal€Service€Order€óóestablished€a€new€funding€mechanism€for€universal€service.€€Contributions€to€the€universal€service€fund€are€made€by€allÐ Ç!ˆ2 Ðtelecommunications€carriers,€and€the€amount€of€the€contribution€is€a€percentage€of€end„user€revenues.€€ò òó óIncumbent€LECs€may€recover€universal€service€contributions€viaÐ O"3 Ðinterstate€mechanisms.׃›x×Ý ƒŠÿÿÝò…òÚ  Ú264Ú  Úó…óÝ  Ý×  ×€€In€the€òòAccess€Charge€Reform€Orderóó,€the€Commission€stated€that€price€cap€LECs€may€treat€their€contributions€to€the€new€universal€serviceÐ ×"˜4 Ðmechanisms€as€exogenous€changes€to€their€price€cap€indices€(PCIs).׃œ×Ý ƒŠÿÿÝò…òÚ  Ú265Ú  Úó…óÝ  Ý×  ×€€Price€cap€LECs€electing€to€recover€their€universal€service€obligation€through€interstate€access€chargesÐ _# 5 Ðâ âmust€apportion€the€amount€of€the€exogenous€adjustment€among€the€baskets€that€contain€end„user€interstate€revenues.€€These€baskets€are€the€Common€Line,€Interexchange,€andÐ ç#¨6 ÐTrunking€baskets.׃×Ý ƒŠÿÿÝò…òÚ  Ú266Ú  Úó…óÝ  Ý×  ×€€In€the€òòAccess€Charge€Reform€Orderóó,€the€Commission€concluded€that€in€the€Trunking€basket,€the€service€band€indices€for€services€that€do€not€recoverÐ ? Ðâ âend„user€revenues€should€not€be€increased€to€reflect€the€exogenous€adjustment€to€the€PCI€for€the€Trunking€basket.׃ž×Ý ƒŠÿÿÝò…òÚ  Ú267Ú  Úó…óÝ  Ý×  ×€€To€reflect€the€exogenous€adjustment€to€the€TrunkingРLj Ðbasket€PCI,€price€cap€LECs€were€ordered€to€increase€the€service€band€indices€for€the€remaining€service€categories€in€the€Trunking€basket€based€on€the€relative€end„userÏinterstate€revenues€generated€in€each€service€category.׃Ÿ` ×Ý ƒŠÿÿÝò…òÚ  Ú268Ú  Úó…óÝ  Ý×  ×€€Ð ט ÐÌà  àÔ2ÿÿ ÔÚ  Ú161Ú  Ú.Ô3  Ô€€The€tariffs€filed€by€price€cap€LECs€effective€on€January€1,€1998,€contained€universal€service€contributions€based€on€actual€end„user€revenue€received€by€priceÏcap€LECs€in€the€first€six€months€of€calendar€year€1997.€€In€the€òòAccess€Reform€Tariffs€Designation€Orderóó,€the€Bureau€concluded€that€the€price€cap€LECs'€allocations€ofÐ o 0 Ðuniversal€service€fund€(USF)€contributions€among€the€Common€Line,€Interexchange,€and€Trunking€baskets€warranted€further€review.׃ ×Ý ƒŠÿÿÝò…òÚ  Ú269Ú  Úó…óÝ  Ý×  ×€€For€each€price€cap€LEC,€the€BureauÐ ÷ ¸ Ðcalculated€ratios€of€the€USF€contribution€allocated€to€the€Common€Line,€Interexchange,€and€Trunking€baskets€to€its€total€USF€contribution.€€ò òó óThe€Bureau's€calculationsÐ  @ Ðdemonstrated€a€large€variance€in€the€ratios€among€the€price€cap€LECs.€€The€Bureau€also€noted€that€the€price€cap€LECs€used€three€different€methodologies€to€allocate€theirÏuniversal€service€obligations€across€price€cap€baskets.€€Under€the€first€method,€price€cap€LECs€relied€solely€on€the€interstate€end-user€revenues€reported€in€column€C€of€linesÏ34-47€of€FCC€Form€457,€the€Universal€Fund€Worksheet,€to€determine€price€cap€basket€allocation€factors.€€Price€cap€LECs€that€use€the€second€method€derived€price€cap€basketÏallocation€factors€by€using€the€interstate€end-user€service€category€revenue€figures€summarized€on€Chart€SUM-1€of€the€Tariff€Review€Plan€and€internal€company€billing€records.€ÏThe€internal€company€billing€records€were€used€to€determine€the€amount€of€interstate€end-user€revenues€generated€by€service€categories€within€the€Trunking€basket,€while€ChartÏSUM„1€was€the€bases€for€all€other€interstate€end„user€revenues.€€Under€the€third€method,€price€cap€LECs€used€internal€company€billing€records€to€determine€the€allocation€ofÏthe€universal€service€obligation€for€all€three€affected€price€cap€baskets.Ìò òÌà  àó óÔ2ÿÿ¡ÔÚ  Ú162Ú  Ú.Ô3  Ôò ò€€ó óGTE,€Bell€Atlantic,€SBC,€U€S€West,€Citizens,€Aliant,€and€SNET€used€Chart€SUM„1€and€internal€billing€records€to€allocate€USF€exogenous€costs;Ð C  ÐAmeritech,€CBT,€Frontier,€and€Sprint€used€FCC€Form€457€to€allocate€USF€exogenous€costs;€and€BellSouth€used€internal€billing€records€to€report€the€amount€of€interstateÏend-user€revenues€generated€within€the€three€affected€price€cap€baskets.€€€ÌÌà  àÔ2ÿÿ¢ÔÚ  Ú163Ú  Ú.Ô3  Ô€€The€Bureau€designated€for€investigation€the€methodology€employed€by€price€cap€LECs€to€calculate€and€allocate€their€universal€service€contributions€acrossÏeligible€price€cap€baskets€for€recovery€purposes.€€The€Bureau€required€all€price€cap€LECs€to€submit€explanations€detailing€why€the€methodologies€they€used€reasonably€reflectÏthe€distribution€of€interstate€end„user€revenues€across€baskets.ÌÌà  àÔ2ÿÿ£ÔÚ  Ú164Ú  Ú.Ô3  Ô€€In€addition,€the€Bureau€required€Citizens€to€explain€why€it€allocated€a€portion€of€its€USF€contribution€to€the€traffic€sensitive€basket,€given€the€Commission'sÏfinding€in€the€òòAccess€Charge€Reform€Orderóó€that€none€of€the€service€categories€in€this€basket€generates€interstate€end„user€revenues.׃¡ ×Ý ƒŠÿÿÝò…òÚ  Ú270Ú  Úó…óÝ  Ý×  ×€€The€Bureau€also€required€Ameritech€toÐ  Ì  Ðexplain€the€discrepancy€between€the€interstate€end„user€revenue€figures€Ameritech€reports€for€Trunking€basket€interstate€end„user€revenues€in€two€places.€€On€FCC€Form€457,ÏAmeritech€reports€Trunking€basket€interstate€end„user€revenues€of€$1.2€million,€whereas,€Ameritech's€company€records€show€interstate€end„user€revenues€generated€within€theÏTrunking€basket€of€$67.7€million.׃¢0×Ý ƒŠÿÿÝò…òÚ  Ú271Ú  Úó…óÝ  Ý×  ×Ð £d ÐÌò òà  àB.à ` àDiscussionó óÐ ³t ÐÌà  àÔ2ÿÿ¤ÔÚ  Ú165Ú  Ú.Ô3  Ô€€We€find€generally€that€each€of€the€three€methods€utilized€by€the€price€cap€LECs€reasonably€allocates€their€USF€exogenous€adjustment€among€the€baskets.€ÏWe€do€require,€however,€those€price€cap€LECs€that€calculate€USF€allocation€factors€across€price€cap€baskets€by€using€revenue€figures€reported€in€Chart€SUM„1€for€the€CommonÏâ âLine€and€Interexchange€baskets€and€internal€company€billing€records€for€the€Trunking€basket€to€use€the€internal€billing€record€method€to€calculate€the€percentage€of€TrunkingÐ Ï# Ðbasket€revenues€that€are€attributable€to€end„user€services€and€apply€this€percentage€to€the€Trunking€basket€revenues€reported€on€Chart€SUM„1€of€the€TRP.€€Price€cap€LECs€mustÏalso€use€this€methodology€to€allocate€the€exogenous€adjustment€to€the€Trunking€basket€among€the€service€categories€that€generate€end„user€revenues.׃£×Ý ƒŠÿÿÝò…òÚ  Ú272Ú  Úó…óÝ  Ý×  ×РLj Ðâ âÌà  àÔ2ÿÿ¥ÔÚ  Ú166Ú  Ú.Ô3  Ô€€Price€cap€LECs€using€FCC€Form€457€for€the€Common€Line€and€Interexchange€baskets€and€internal€billing€records€for€the€Trunking€basket€must€each€useÏbilling€records€for€the€Trunking€basket€from€the€same€time€period€for€which€the€Form€457€reports€revenues.€€For€price€cap€LECs€utilizing€internal€billing€records€to€report€theÏamount€of€interstate€end-user€revenues€generated€within€all€three€of€the€price€cap€baskets,€the€billing€records€must€correspond€to€the€same€period€of€time€for€which€revenueÏfigures€are€reported€on€FCC€Form€457.€€ÌÌà  àÔ2ÿÿ¦ÔÚ  Ú167Ú  Ú.Ô3  Ô€€We€are€unable€to€verify€the€source€of€interstate€Trunking€basket€end„user€revenues€reported€by€Aliant,€Citizens,€GTE,€SBC,€and€U€S€Westòòóó€for€purposes€ofÐ  @ Ðallocating€the€universal€service€obligation€to€and€within€that€basket,€because€these€companies€have€failed€to€provide€or€identify€adequately€the€time€period€covered€by€theirÏTrunking€basket€internal€billing€records.€€We,€therefore,€require€these€price€cap€LECs€to€submit€a€summary€of€company€billing€records€from€January€1,€1997€„€June€30,€1997,Ïand€calculate€allocation€factors€in€accordance€with€the€requirements€outlined€aboveòòóó.Ð  Ø  ÐÌà  àÔ2ÿÿ§ÔÚ  Ú168Ú  Ú.Ô3  Ô€€òòóóAs€we€stated€above,€price€cap€LECs€that€use€Form€457€method€to€allocate€the€costs€associated€with€their€USF€obligations€must€calculate€allocations€withinÐ 'è  Ðthe€trunking€basket€by€filing€billing€records€from€the€same€period€of€time€reported€on€the€most€recently€filed€USF€Worksheet€used€to€calculate€the€universal€service€obligation.€ÏAlthough€Ameritech's€Form€457€reports€1997€revenues,€it€uses€trunking€billing€records€from€1996.€€We,€therefore,€require€Ameritech€to€reallocate€its€universal€serviceÏobligation€within€the€Trunking€basket€on€the€basis€of€January€1,€1997€„€June€30,€1997,€billing€records.€€Moreover,€Frontier€and€Sprint€fail€to€provide€1997€billing€records€toÏjustify€the€intra„Trunking€basket€allocation€of€their€universal€service€obligation.€€We,€therefore,€require€Frontier€and€Sprint€to€submit€a€summary€of€January€1,€1997,€„€June€30,Ï1997,€company€billing€records€to€justify€their€intra„Trunking€basket€allocations.ÌÌà  àÔ2ÿÿ¨ÔÚ  Ú169Ú  Ú.Ô3  Ô€€òòóóBellSouth€used€billing€records€to€allocate€its€universal€service€obligation.€€Although€BellSouth€calculated€its€universal€service€obligation€using€actual€billedÐ ß   Ðrevenues€for€the€first€six€month€of€1997€summarized€on€Form€457,€it€used€1996€billing€records€to€construct€interbasket€allocation€factors.€€We,€therefore,€require€BellSouth€toÏsubmit€a€summary€of€the€relevant€January€1,€1997€„€June€30,€1997,€billing€records€and€to€recalculate€its€interbasket€allocation€factors€using€these€revenue€figures.ÌÌà  àÔ2ÿÿ©ÔÚ  Ú170Ú  Ú.Ô3  Ô€€òòóóAliant's€allocation€of€its€USF€contribution€to€the€Trunking€basket€based€on€total€interstate€special€access€revenues€is€unjust€and€unreasonable€because€theòòÐ ÿÀ  ÐAccess€Charge€Reform€Orderóó€explicitly€requires€carriers€to€use€only€interstate€end-user€revenues€to€construct€price€cap€basket€recovery€allocation€factors.׃¤ ×Ý ƒŠÿÿÝò…òÚ  Ú273Ú  Úó…óÝ  Ý×  ×€€Special€accessÐ ‡H  Ðrevenues€collected€from€sources€other€than€end-users€may€not€be€included€in€the€development€of€the€allocation€factors€that€distribute€the€USF€obligation€among€price€capÏbaskets.€€Aliant's€inclusion€of€total€special€access€revenues€to€allocate€the€USF€contribution€to€the€Trunking€basket,€therefore,€results€in€an€overallocation€to€the€TrunkingÏbasket€and€underallocations€to€the€Common€Line€and€Interexchange€baskets.€Accordingly,€we€order€Aliant€to€recalculate€its€first€quarter€1998€USF€contribution€price€capÏbasket€allocation€by€reallocating€its€USF€obligation€among€the€price€cap€baskets€based€strictly€on€the€ratio€of€interstate€end„user€revenues€within€each€basket€to€the€total€amountÏof€interstate€end„user€revenues€generated€by€all€three€price€cap€baskets€and€revise€its€tariffed€rates€to€reflect€this€adjustment.€€ÌÌà  àÔ2ÿÿªÔÚ  Ú171Ú  Ú.Ô3  Ô€€òòóóIn€the€òòAccess€Reform€Tariffs€Designation€Orderóó,€the€Bureau€required€Citizens€to€justify€allocating€a€portion€of€its€USF€contribution€to€the€Traffic€SensitiveÐ ?  Ðbasket.€€On€March€16,€1998,€Citizens€revised€its€tariff€by€limiting€the€allocation€of€its€USF€contribution€to€interstate€end-user€revenues€reported€in€Chart€SUM-1€to€calculate€itsÏUSF€obligation€allocation€factors.€€We€find€that€this€revision€reasonably€reflects€the€requirements€of€the€òòAccess€Charge€Reform€Orderóó.€€€Ð O" Ðò òó óÌà  àÔ2ÿÿ«ÔÚ  Ú172Ú  Ú.Ô3  Ô€€òòóóThe€Bureau€also€required€Ameritech€to€justify€the€discrepancy€between€the€interstate€end„user€revenue€figures€Ameritech€reported€for€Trunking€basketÐ _ $ Ðinterstate€end„user€revenues€in€two€places.€€On€FCC€From€457,€Ameritech€reported€Trunking€basket€interstate€end„user€revenues€of€$1.2€million,€while€Ameritech's€companyÏrecords€show€interstate€end„user€revenues€generated€within€the€Trunking€basket€of€$67.7€million.€€Ameritech€explained€that€it€did€not€include€all€of€the€Trunking€basket€end„¼user€revenues€identified€in€its€billing€records€as€end„user€revenues€on€Form€457€because€the€end„user€had€an€option€of€whether€it€or€its€long€distance€carrier€should€receiveÏthose€bills.€€This€may€indicate€that€Ameritech€underreported€its€end„user€revenues€in€Form€457,€and€therefore,€paid€a€smaller€USF€contribution€than€it€should€have.€€ThisÏproceeding,€however,€is€limited€to€determining€whether€the€amount€it€did€contribute€was€allocated€correctly€among€its€price€cap€baskets.€€Accordingly,€we€may€initiate€a€separateÏproceeding€to€determine€whether€Ameritech€underreported€its€USF€revenue€amount.€€We€find,€however,€that€Ameritech's€use€of€the€billing€records€to€allocate€the€USFÏcontribution€among€the€Trunking€basket€service€categories€is€reasonable€because€it€is€the€best€available€data€for€making€the€allocation.ÌÌò òVI.à  àRefund€Liabilityó óÐ 'è- Ðà  àò òA.à ` àBackgroundó óÐ «l. ÐÌà  àÔ2ÿÿ¬ÔÚ  Ú173Ú  Ú.Ô3  Ô€€òòóóIn€the€òòAccess€Reform€Tariffs€Suspension€Orderóó,€the€Bureau€put€customers€on€notice€that,€due€to€the€unusual€nature€and€scope€of€the€òòAccess€Charge€ReformóóÐ · x0 Ðtariff€filings,€the€rates€òòóóat€issue€in€this€investigation€were€provisional€and€might€be€subject€to€a€special,€two„way€adjustment.׃¥°×Ý ƒŠÿÿÝò…òÚ  Ú274Ú  Úó…óÝ  Ý×  ×€€The€Bureau€stated€that€if€these€provisional€ratesÐ ?!1 Ðare€found€at€the€conclusion€of€this€investigation€to€be€above€those€permitted€by€our€rules,€and€thus€unreasonably€high,€we€may€require€the€LECs€to€make€refunds€to€theirÏcustomers.€€The€Bureau€also€stated€that€at€the€conclusion€of€this€investigation€we€may€in€some€instances€allow€carriers€prospectively€to€charge€higher€rates€for€some€elements€toÏreflect€the€fact€that€they€were€charging€less€than€would€have€been€permitted€for€those€elements€during€the€pendency€of€the€investigation.€€In€addition,€the€Bureau€noted€that€inÏcases€in€which€the€same€customer€has€paid€charges€that€were€found€to€be€too€high€and€charges€that€could€have€been€higher,€refunds€could€be€offset€by€amounts€allowed€forÏrecoupment.׃¦@×Ý ƒŠÿÿÝò…òÚ  Ú275Ú  Úó…óÝ  Ý×  ×Ð ç#¨6 ÐÌò òà  àB.à ` àDiscussionó ó€€Ð ÷$¸8 ÐÌà  àà ` à1.à ¸ àGenerallyÐ &È: Ðâ âÐ &P; Ðà  àÔ2ÿÿ­ÔÚ  Ú174Ú  Ú.Ô3  Ô€€òòòòóóóóIn€Sections€II€„€V€above,€we€find€that€certain€of€the€price€cap€LECs'€methods€of€implementing€requirements€of€the€òòAccess€Charge€Reform€Orderóó€areÐ ? Ðâ âunreasonable,€and€resulted€in€rates€that€are€higher€than€justified.€€We€also€find€that,€in€some€of€these€cases,€these€same€methods€produced€other€rates€that€are€lower€thanÏotherwise€would€have€been€permitted.€€Under€Section€204(a)€of€the€Communications€Act,€as€amended,€we€have€authority€to€impose€refund€liability€on€the€price€cap€LECs€forÏovercharges.׃§×Ý ƒŠÿÿÝò…òÚ  Ú276Ú  Úó…óÝ  Ý×  ×€€The€Commission€does€not€allow€carriers,€at€the€end€of€a€Section€204€investigation,€to€recoup€past€undercharges€or€to€offset€revenues€foregone€from€one€rateРט Ðelement€against€refunds€owed€for€overcharges,€absent€unusual€circumstances€and€prior€notice€to€customers.׃¨X×Ý ƒŠÿÿÝò…òÚ  Ú277Ú  Úó…óÝ  Ý×  ×€€We€find€that€due€to€the€unusual€nature€and€scope€of€the€òòAccessÐ _  ÐCharge€Reformóó€tariff€filings,€however,€we€must€consider€permitting€such€recoupment,€pursuant€to€our€authority€under€Section€4(i).׃©@×Ý ƒŠÿÿÝò…òÚ  Ú278Ú  Úó…óÝ  Ý×  ×€€As€the€Bureau€noted€in€the€òòAccessÐ ç ¨ ÐReform€Tariffs€Suspension€Orderóó,€the€òòAccess€Charge€Reform€Orderóó€involved€a€fundamental€restructuring€of€incumbent€LEC€interstate€switched€access€service€offerings.׃ª` ×Ý ƒŠÿÿÝò…òÚ  Ú279Ú  Úó…óÝ  Ý×  ׀Рo 0 ÐThe€tariff€revisions€required€to€implement€this€restructuring€are€far€more€extensive€than€any€that€the€Commission€has€ordered€since€it€first€instituted€its€system€of€tariffed€accessÏcharges.€€In€addition,€most€of€the€changes€affect€multiple€rate€elements,€price€cap€baskets,€and€service€categories.€€We€note€that€in€the€òòAccess€Reform€Tariffs€Suspension€Orderóó,Ð  @ Ðthe€Bureau€put€customers€on€notice€that€under€these€unusual€circumstances,€in€which€the€Commission€has€ordered€a€massive€restructuring€of€many€interrelated€rates,€it€may€notÏbe€possible€to€achieve€a€fair€balance€of€ratepayer€and€shareholder€interests€without€also€allowing€LECs€some€measure€of€recoupment,€where€appropriate.׃«ð ×Ý ƒŠÿÿÝò…òÚ  Ú280Ú  Úó…óÝ  Ý×  ×€€Ð  P  ÐÌòòòòóóóóà  àÔ2ÿÿ®ÔÚ  Ú175Ú  Ú.Ô3  Ô€€òòòòóóóóThus,€for€each€of€the€price€cap€LECs'€methods€found€unreasonable€in€this€Order,€we€have€three€options€for€addressing€the€resulting€provisional€rates:€(1)Ð Ÿ `  Ðorder€the€price€cap€LECs€to€make€refunds€for€overcharges;€(2)€order€the€price€cap€LECs€to€make€refunds€for€overcharges€but€permit€these€LECs€to€offset€refunds€with€amountsÏallowed€for€recoupment€of€rates€that€were€lower€than€they€could€have€been;€or€(3)€decline€to€order€refunds€(and€thus€no€recoupment€permitted).€€òòòòóóóóIn€determining€which€option€toÐ ¯p Ðselect,€we€will€consider€for€each€issue€addressed€in€this€Order€the€following€factors:€(a)€whether€the€particular€price€cap€LEC€method€found€unreasonable€resulted€in€one€rateÏthat€is€higher€than€justified€and€another€rate€that€is€lower€than€it€could€have€been,€other€than€as€a€result€of€the€constraints€generally€imposed€by€the€PCIs€and€SBIs€under€priceÏcap€regulation;׃¬€ ×Ý ƒŠÿÿÝò…òÚ  Ú281Ú  Úó…óÝ  Ý×  ×€(b)€if€there€are€such€corresponding€high€and€low€rates,€whether€the€same€general€group€of€customers€were€affected€by€both€rates;׃­×Ý ƒŠÿÿÝò…òÚ  Ú282Ú  Úó…óÝ  Ý×  ×€(c)€the€administrativeÐ G  Ðcosts€of€implementing€refund€plans;€and€(d)€other€equities€applicable€to€a€particular€case.€€òòòòóóóóÐ Ï  ÐÌà  àÔ2ÿÿ¯ÔÚ  Ú176Ú  Ú.Ô3  Ô€€The€manner€in€which€we€will€òòòòóóóóconsider€these€factors€can€be€illustrated€as€follows.€€If€the€price€cap€LECs'€method€simply€produces€an€unreasonably€high€rate,Ð ß   Ðwithout€a€correspondingly€low€rate,€then€offsetting€compensation€is€not€applicable.€€In€that€case,€we€will€require€refunds€unless€administrative€costs€or€other€equities€weigh€inÏfavor€of€refraining€from€ordering€refunds.€€On€the€other€hand,€if€the€price€cap€LECs'€method€results€in€one€rate€that€is€higher€than€justified€and€another€rate€that€is€lower€than€itÏcould€have€been,€we€will€consider€whether€the€same€general€group€of€customers€were€affected€by€both€rates.€€If€it€is€the€same€general€group€of€customers€affected€by€both€rates,Ïwe€may€permit€the€price€cap€LECs€to€offset€any€refunds€to€a€customer€to€reflect€the€fact€that€other€charges€to€that€customer€were€lower€than€they€could€have€been,€unlessÏadministrative€costs€or€other€equities€weigh€in€favor€of€refraining€from€ordering€refunds€or€offsets.€€If€it€is€not€the€same€general€group€of€customers€affected€by€both€rates,€weÏmay€not€require€refunds€if€administrative€costs€or€other€equities€warrant€not€requiring€refunds,€or€we€may€require€a€refund€to€one€group€and€permit€or€deny€recoupment€from€theÏother.òòòòóóóó€€Below,€we€apply€these€factors€to€each€issue€in€this€investigation€where€we€have€found€that€price€cap€LECs€must€adjust€their€rates€to€correct€an€unreasonableÐ —X Ðmethodology.ÌÌà  àÔ2ÿÿ°ÔÚ  Ú177Ú  Ú.Ô3  Ô€€Each€company€required€to€make€the€refunds€specified€below€must€submit€plans€for€issuing€refunds€to€the€Common€Carrier€Bureau€for€review€and€approvalÏpursuant€to€our€delegation€of€authority€within€90€days€of€the€release€of€this€Order.€€Refunds€shall€be€payable€with€interest€on€the€principal€amount€owed€computed€on€a€dailyÏcompounded€basis€at€the€underpayment€rate(s)€established€by€the€U.S.€Internal€Revenue€Service€pursuant€to€section€6621(a)(2)€of€the€Internal€Revenue€Code€of€1986,€asÏamended,€26€U.S.C€ðð€6621(a)(2),€for€the€period€between€January€1,€1998€until€the€date€of€payment.€€These€companies'€refund€plans€must€contain€full€explanations€of€how€theyÏhave€complied€with€the€findings€of€this€Order.€ÌÌà  àà ` à2.à0 ¸ àAdjustments€based€on€Our€Adoption€of€a€Permitted€Revenue€Methodology€for€Exogenous€Cost€ChangesÐ_ $¸ (#¸ (# ÐÌà  àÔ2ÿÿ±ÔÚ  Ú178Ú  Ú.Ô3  Ô€€As€discussed€in€Section€III,€we€find€that€the€price€cap€LECs'€use€of€a€revenue€requirement€methodology€to€calculate€the€exogenous€cost€changes€implementedÏin€their€January€1,€1998€tariff€filings€is€unreasonable€because€it€does€not€fully€allocate€the€permitted€revenues€in€price€cap€baskets.€€As€a€result€of€the€price€cap€LECs'€use€of€aÏrevenue€requirement€methodology,€some€rates€were€higher€than€justified,€such€as€local€switching€and€the€TIC,€and€other€rates€were€lower€than€they€could€have€been,€such€as€theÏCCL,€PICCs€(for€carriers€with€MLB€PICC€below€the€$2.75€cap),€and€rate€elements€for€end€office€trunk€ports,€tandem€trunk€ports,€and€multiplexers.׃® ×Ý ƒŠÿÿÝò…òÚ  Ú283Ú  Úó…óÝ  Ý×  ×€€Moreover,€the€rates€thatÐ È) Ðwere€higher€than€justified€and€the€rates€that€were€lower€than€they€could€have€been€generally€were€paid€by€the€same€group€of€customers,€the€IXCs.€€Because€generally€the€sameÏgroup€of€customers€that€were€harmed€by€unreasonably€high€rates€benefitted€from€correspondingly€lower€rates€and€the€òòAccess€Charge€Reform€Orderóó€involved€a€unique€andРLj Ðfundamental€restructuring€of€access€rates,€we€find€that€equity€warrants€some€measure€of€recoupment€to€the€price€cap€LECs.€€Rather€than€requiring€price€cap€LECs€to€calculateÏrefunds€and€a€surcharge€or€offsetting€the€refunds€by€the€amount€of€charges€that€were€lower€than€they€could€have€been,€we€conclude€that€the€price€cap€LECs'€recoupment€shouldÏbe€accomplished€by€not€ordering€any€refunds.€€We€recognize€that€for€each€particular€IXC,€the€additional€payment€caused€by€unreasonably€high€rates€did€not€exactly€equal€theÏsavings€from€correspondingly€lower€rates.׃¯°×Ý ƒŠÿÿÝò…òÚ  Ú284Ú  Úó…óÝ  Ý×  ×€€We€find,€however,€that€the€significant€administrative€costs€„„€both€to€industry€and€to€the€Commission€„„€of€implementing€a€planÐ ç ¨ Ðfor€refunds€and€either€a€surcharge€or€an€offset€outweighs€the€benefit€that€would€be€gained€from€determining€precisely€which€particular€IXC€paid€more€in€some€rates€than€it€savedÏin€other€rates€and€which€paid€less€than€it€saved.€€Accordingly,€we€will€not€order€the€price€cap€LECs€to€make€refunds€for€overcharges€resulting€from€the€LECs'€use€of€a€revenueÏrequirement€methodology€to€make€the€exogenous€cost€changes€implemented€in€their€January€1,€1998€tariff€filings.€ÌÌà  àà ` à3.à ¸ àCommon€Line€AdjustmentsÐ  P  ÐÌà  àÔ2ÿÿ²ÔÚ  Ú179Ú  Ú.Ô3  Ô€€òòNon„Primary€Line€Countsóó.€€As€discussed€in€Section€II.A,€we€find€that€Pacific€Bell€and€GTE€underestimated€their€non„primary€residential€line€counts.€Ð Ÿ `  ÐConsequently,€during€the€course€of€this€investigation€these€price€cap€LECs€assessed€upon€the€end€users€of€some€non„primary€lines€a€SLC€of€$3.50€instead€of€$5.00.€€In€addition,ÏPacific€Bell€and€GTE€assessed€upon€the€presubscribed€IXCs€for€these€non„primary€residential€lines€a€$0.53€PICC€instead€of€$1.50€PICC.€€As€a€result€of€these€companies'Ïundercount€of€their€non„primary€residential€lines,€any€residual€charges€assessed€by€these€companies€were€increased.׃°¸ ×Ý ƒŠÿÿÝò…òÚ  Ú285Ú  Úó…óÝ  Ý×  ×€€In€the€case€of€Pacific€Bell,€this€undercount€producedÐ 7ø ÐMLB€PICCs,€and€possibly€non„primary€residential€PICCs,€that€were€higher€than€our€rules€permit.€€In€the€case€of€GTE,€this€undercount€produced€residual€per„minute€rates€thatÏwere€higher€than€our€rules€permit.€€We€order€Pacific€Bell€and€GTE€to€make€refunds€for€any€overcharges€in€MLB€PICCs,€non„primary€residential€PICCs,€or€residual€per„minuteÏrates€that€resulted€from€the€undercount€of€their€non„primary€residential€lines.€€We€note€that,€although€IXCs€were€disadvantaged€by€these€overcharges,€they€also€benefitted€byÏpaying€the€primary€residential€PICC€instead€of€the€higher€non„primary€residential€PICC€for€those€lines€that€were€not€correctly€identified.€€It€is€not€possible,€however,€toÏdetermine€the€amount€that€any€particular€IXC€saved€by€paying€the€primary€residential€PICC€instead€of€the€higher€non„primary€residential€PICC€because€Pacific€Bell€and€GTEÏhave€not€identified€these€lines.€€Thus,€we€will€not€permit€Pacific€Bell€and€GTE€to€offset€refunds€to€an€IXC€for€MLB€PICC,€non„primary€residential€PICC,€or€residual€per„minuteÏovercharges€by€the€amount€that€the€IXC€saved€by€paying€the€primary€residential€PICC€instead€of€the€higher€non„primary€residential€PICC.€€ò òó óIn€addition,€we€do€not€permit€theseÐ ï°  Ðprice€cap€LECs€to€recover€from€end€users€the€difference€between€the€primary€residential€SLC€and€the€higher€non„primary€residential€SLC€for€several€reasons.€€First,€the€chargesÏare€already€at€their€cap.€€Second,€these€customers€were€less€likely€to€be€aware€of€the€notice€in€the€òòAccess€Reform€Tariffs€Suspension€Orderóó€that€we€might€order€recoupment.€Ð ÿÀ  ÐFinally,€end€users€are€a€different€class€of€customers€from€the€IXCs€that€were€overcharged.€€As€we€noted€in€the€òò1997€Annual€Access€Reconsideration€Orderóó,€our€general€policyÐ ‡H  Ðto€not€allow€carriers€at€the€end€of€a€tariff€investigation€to€offset€revenues€foregone€from€one€rate€element€against€refunds€ordered€for€overcharges€absent€unusual€circumstancesÏand€prior€notice€to€customers€is€particularly€applicable€where€"a€different€class€of€customers€received€the€benefits€of€the€low€rate€from€the€one€that€was€subjected€to€theÏunlawfully€high€rate."׃±H ×Ý ƒŠÿÿÝò…òÚ  Ú286Ú  Úó…óÝ  Ý×  ×€€It€was€within€the€control€of€Pacific€Bell€and€GTE€to€identify€their€non„primary€residential€lines.€€We€find€no€equities€in€favor€of€permitting€them€toÐ à Ðrecover€foregone€revenues€from€their€end€users€in€this€instance.€€ÌÌà  àÔ2ÿÿ³ÔÚ  Ú180Ú  Ú.Ô3  Ô€€òòInward€Only€Linesóó.€€ò òó óAmeritech€chose€not€to€include€inward„only€lines€in€its€PICC€counts€for€the€January€1,€1998€tariff€filing,€thus€increasing€its€per„minuteÐ ·x Ðresidual€charges׃²Ø×Ý ƒŠÿÿÝò…òÚ  Ú287Ú  Úó…óÝ  Ý×  ×€in€all€jurisdictions€except€Illinois€and€its€MLB€PICC€in€Illinois.׃³h×Ý ƒŠÿÿÝò…òÚ  Ú288Ú  Úó…óÝ  Ý×  ×€€This€was€a€clear€violation€of€our€price€cap€rules.׃´ø×Ý ƒŠÿÿÝò…òÚ  Ú289Ú  Úó…óÝ  Ý×  ×€€There€is€no€provision€in€theÐ ?  ÐòòAccess€Charge€Reform€Orderóó€that€exempts€inward„only€lines€from€being€included€in€either€the€SLC€or€PICC€count.׃µˆ×Ý ƒŠÿÿÝò…òÚ  Ú290Ú  Úó…óÝ  Ý×  ×€€Although€Ameritech€assesses€a€SLC€on€inward„onlyРLj! Ðlines,€it€chose€not€to€assess€an€MLB€PICC€on€these€lines.€€Accordingly,€we€require€Ameritech€to€make€refunds€to€IXCs€for€overcharges€that€resulted€from€Ameritech's€failure€toÏinclude€inward„only€lines€in€its€PICC€counts€and€to€any€of€its€Illinois€multi„line€business€customers€that€paid€the€PICC€themselves.׃¶×Ý ƒŠÿÿÝò…òÚ  Ú291Ú  Úó…óÝ  Ý×  ×€€Presumably,€none€of€the€inward„onlyРLj Ðlines€are€presubscribed€to€an€IXC.€€We€recognize€that€customers€with€inward„only€lines€could€have€been€assessed€a€PICC.€Ameritech's€decision€to€forego€recovery€from€PICCsÏon€inward„only€lines,€however,€was€entirely€voluntary.€€We€find€no€equities€that€favor€permitting€Ameritech€to€recoup€their€foregone€revenues€from€their€inward„only€lineÏcustomers.€€In€the€event€that€there€exist€some€inward„only€lines€that€are€presubscribed€to€an€IXC,€Ameritech€may€not€recoup€any€of€their€foregone€revenues€from€IXCs€to€whomÏthese€lines€are€presubscribed.€€We€note€that,€as€discussed€above,€Ameritech€filed€tariff€revisions€on€March€17,€1998€which€recalculated€its€CCL€rates€for€the€period€startingÏApril€1,€1998.׃·X×Ý ƒŠÿÿÝò…òÚ  Ú292Ú  Úó…óÝ  Ý×  ×€€Thus,€Ameritech€only€is€liable€for€refunds€for€the€period€from€January€1,€1998€to€April€1,€1998,€the€effective€date€of€Ameritech's€tariff€revision.Ð o 0 ÐÌò òó óà  àÔ2ÿÿ´ÔÚ  Ú181Ú  Ú.Ô3  Ô€€òòHistoric€Understatement€of€BFPóó.€€As€discussed€in€Section€II.D,€we€find€that€Ð  @ ÐBell€Atlantic,€the€Sprint€LTCs,€GTE,€SWBT,€and€U€S€West€historically€have€understated€their€BFP.€€As€a€result€of€the€understatement€of€the€BFP,€these€companies€assessedÏupon€IXCs€CCL€rates€that€were€higher€than€justified€during€the€course€of€this€investigation.€€We€order€Bell€Atlantic,€the€Sprint€LTCs,€GTE,€SWBT,€and€U€S€West€to€refund€theÏdifference€between€the€new€CCL€rate€they€calculate€and€the€rate€that€was€in€effect€during€this€investigation.€€The€correction€we€have€ordered€will€eliminate€the€lingering€impactÏof€historic€understatement€of€BFP€in€CCL€rates.€€Any€increase€in€maximum€SLC€rates€that€resulted€from€the€òò1997€Annual€Access€Investigation€Orderóó,€however,€have€alreadyÐ Ÿ `  Ðbeen€implemented.€€This€Order,€therefore,€will€not€result€in€any€increase€in€the€maximum€SLC€rates€that€these€companies€could€charge.€€Therefore,€no€customers€were€chargedÏless€than€they€might€have€been,€and€there€is€no€recoupment€issue.€€Bell€Atlantic€and€U€S€West€argue€that€if€the€Commission€were€to€require€price€cap€LECs€to€make€refundsÏbased€on€an€adjustment€of€CCL€rates€to€eliminate€any€lingering€effect€of€previous€understatements€of€the€BFP,€such€action€would€constitute€an€impermissible€retroactiveÏapplication€of€a€new€rule.׃¸°×Ý ƒŠÿÿÝò…òÚ  Ú293Ú  Úó…óÝ  Ý×  ×€€As€discussed€in€Section€II.D.2€òòsupraóó,€however,€our€requirement€that€price€cap€LECs€adjust€their€CCL€rates€to€eliminate€any€lingering€impact€ofÐ ¿€ Ðhistoric€understatements€of€the€BFP€does€not€represent€a€new€rule,€but€rather€an€exercise€of€our€authority€under€Section€201(b)€of€our€rules,€47€U.S.C.€ðð€201(b),€to€ensure€thatÏprice€cap€LEC€rates€are€just€and€reasonable.ÌÌà  àà ` à4.à ¸ àTrunking€Basket€AdjustmentsÐ ß   ÐÌà  àÔ2ÿÿµÔÚ  Ú182Ú  Ú.Ô3  Ô€€òòóóAs€discussed€in€Section€IV,€we€find€that€€price€cap€LECs'€calculations€of€the€following€changes€to€the€trunking€basket€are€unreasonable:€(1)€the€removal€ofÐ ï°  ÐSS7€costs€from€the€TIC;€(2)€the€use€of€actual€minutes€as€an€allocator€for€the€TST€common€transport€rate€element;€(3)€the€targeting€of€productivity€factor€reductions€to€theÏresidual€TIC;€and€(4)€the€allocation€of€marketing€and€COE€maintenance€costs€among€service€categories€in€the€trunking€basket.€€In€some€cases,€these€calculations€produced€ratesÏthat€were€higher€than€justified,€such€as€the€rates€for€CCL,€MLB€PICC€(for€carriers€with€MLB€PICC€below€the€$2.75€cap),€local€switching,€and€unbundled€signalling.€€At€theÏsame€time,€these€calculations€correspondingly€produced€rates€that€were€lower€than€they€could€have€been,€such€as€the€rates€for€TST€common€transport.€€In€some€cases,€theseÏcalculations€caused€the€TIC€to€be€higher€than€our€rules€permit,€while€others€resulted€in€the€TIC€being€less€than€it€otherwise€could€have€been.€€The€rates€affected€by€theseÏcalculations€generally€are€paid€by€the€same€class€of€customers,€the€IXCs.€€òòóóBecause€generally€the€same€class€of€customers€that€was€harmed€by€unreasonably€high€rates€benefittedÐ à Ðfrom€correspondingly€lower€rates€and€the€òòAccess€Charge€Reform€Orderóó€involved€a€unique€restructuring€of€access€rates,€we€find€that€equity€warrants€some€measure€ofÐ §h Ðrecoupment€to€the€price€cap€LECs.€€We€conclude€that€it€would€not€be€in€the€public€interest€to€permit€recoupment€by€requiring€price€cap€LECs€to€calculate€refunds€and€aÏsurcharge€or€offsetting€the€refunds€by€the€amount€rates€were€lower€than€they€could€have€been.€€Instead,€we€find€that€the€price€cap€LECs€recoupment€should€be€accomplished€byÏnot€ordering€refunds.€€We€recognize€that€for€each€particular€IXC,€the€additional€payment€caused€by€rates€that€were€higher€than€justified€as€a€result€of€the€calculations€at€issueÏdid€not€exactly€equal€the€savings€from€rates€that€were€lower€than€they€could€have€been€as€a€result€of€the€calculations€at€issue.€€We€find,€however,€that€the€significantÏadministrative€costs€„„€both€to€industry€and€to€the€Commission€„„€of€implementing€a€plan€for€refunds€and€either€a€surcharge€or€an€offset€outweighs€the€benefit€that€would€beÏgained€from€determining€precisely€which€particular€IXC€paid€more€in€some€rates€than€it€saved€in€others€and€which€paid€less€than€it€saved.€€Accordingly,€we€will€not€order€theÏprice€cap€LECs€to€make€refunds€for€overcharges€resulting€from€the€changes€to€the€trunking€basket€listed€above.€€€€ÌÌà  àà ` à5.à ¸ àUSF€AdjustmentsÐ o0& ÐÌà  àÔ2ÿÿ¶ÔÚ  Ú183Ú  Ú.Ô3  Ô€€òòóóAs€discussed€in€Section€V,€we€require€some€price€cap€LECs€to€revise€their€calculations€of€the€inter„basket€allocation€of€USF€recovery.€€We€expect€that€theseÐ @( Ðrevisions€will€produce€only€minor€changes€in€the€allocation€of€USF€recovery€among€CCL€rates,€PICCs€(where€the€MLB€PICC€is€less€than€the€$2.75€cap),€the€interexchangeÏbasket,€direct„trunked€transport€and€special€access€rates.€€IXCs€pay€rates€for€CCL,€direct„trunked€transport,€and€some€special€access;€end€users€pay€rates€for€interexchange€andÏsome€special€access.€€It€is€not€clear€at€this€time€which€rates€will€increase€and€which€ones€will€decrease€after€the€price€cap€LECs€implement€the€USF€revisions€that€we€order.€€WeÏfind€that€the€significant€administrative€costs€to€industry€and€to€the€Commission€of€implementing€a€plan€for€refunds€and€either€a€surcharge€or€an€offset€outweighs€the€benefit€thatÏwould€be€gained€from€determining€which€customers€were€affected€by€overcharges€and€which€ones€benefitted€from€rates€that€were€lower€than€they€could€have€been,€particularlyÏin€light€of€the€fact€that€we€expect€that€the€USF€revisions€required€in€this€Order€will€have€only€a€minor€effect€on€rates.€€Accordingly,€we€will€not€order€the€price€cap€LECs€toÏmake€refunds€to€reflect€the€difference€in€rates€resulting€from€the€revisions€that€we€require€in€this€Order€for€USF€recovery.ÌÌò òVII.à  àCompliance€Filingsó óÐ G!1 ÐÌà  àÔ2ÿÿ·ÔÚ  Ú184Ú  Ú.Ô3  Ô€€We€order€Aliant€Communications€Company,€Ameritech€Operating€Companies,€Bell€Atlantic€Operating€Companies,€BellSouth€Telecommunications,€Inc.,ÏCincinnati€Bell€Telephone€Company,€Citizens€Telecommunications€Companies,€Frontier€Communications€of€Minnesota€and€Iowa,€Frontier€Telephone€of€Rochester,€GTEÏSystem€Telephone€Companies,€GTE€Telephone€Operating€Companies,€Nevada€Bell,€Pacific€Bell,€òòóóSouthern€New€England€Telephone€Company,€Southwestern€Bell€TelephoneÐ c#$5 ÐCompany,€Sprint€Local€Telephone€Companies,€and€€U€S€West€Communications,€Inc.€to€revise€their€tariffs€to€establish€their€rates€in€accordance€with€the€requirements€of€thisÏOrder.€€These€LECs€must€submit€tariff€revisions€establishing€new€rates,€effective€July€1,€1998.€€They€may€file€these€revisions€as€a€part€of€their€1998€annual€access€tariff€filingsÏor€through€separate€tariff€filings.€€The€tariff€revisions€filed€by€these€price€cap€LECs€must€include€full€explanations€of€how€they€have€complied€with€the€requirements€of€thisÏOrder.€€Their€explanations€must€include€complete€descriptions€of€the€data,€assumptions,€and€the€methodologies€used€for€all€adjustments€required€by€this€Order.€€These€LECsÏalso€must€submit,€as€a€part€of€this€documentation,€worksheets€showing€the€data€and€calculations€that€underlie€all€adjustments.ÌÌò òVIII.à  àOrdering€Clausesó óÐ 'Ü< ÐÌà  àÔ2ÿÿ¸ÔÚ  Ú185Ú  Ú.Ô3  Ô€€Accordingly,€IT€IS€ORDERED,€that,€pursuant€to€Sections€4(i),€4(j),€201(b),€202(a),€203(a),€204(a),€205,€and€403€of€the€Communications€Act€of€1934,€asÏamended,€47€U.S.C.€ðððð€154(i),€154(j),€201(b),€202(a),€203(a),€204(b),€205,€and€405,€Pacific€Bell,€GTE€System€Telephone€Companies,€and€GTE€Telephone€OperatingÐ ¯(p!? ÐCompanies€SHALL€FILE€REVISED€RATES€to€be€effective€July€1,€1998,€and€SHALL€ISSUE€REFUNDS,€plus€interest,€for€the€period€from€January€1,€1998€through€July€1,Ï1998,€reflecting€adjustments€to€their€non„primary€residential€lines€as€prescribed€in€Section€II.A€of€this€Memorandum€Opinion€and€Order.€€These€companies€ARE€ORDERED€toÏsubmit€plans€for€issuing€refunds€to€the€Common€Carrier€Bureau€for€review€and€approval€pursuant€to€our€delegation€of€authority€under€Section€0.291€of€the€Commission's€rules,Ï47€C.F.R.€ðð€0.291,€within€90€days€of€the€release€of€this€Memorandum€Opinion€and€Order.€€Refunds€shall€be€calculated€in€accordance€with€the€requirements€of€Section€VI€ofÏthis€Memorandum€Opinion€and€Order.€ÌÌà  àÔ2ÿÿ¹ÔÚ  Ú186Ú  Ú.Ô3  Ô€€IT€IS€FURTHER€ORDERED,€that,€pursuant€to€Sections€4(i),€4(j),€201(b),€202(a),€203(a),€204(a),€205,€and€403€of€the€Communications€Act€of€1934,€asÏamended,€47€U.S.C.€ðððð€154(i),€154(j),€201(b),€202(a),€203(a),€204(b),€and€205,€BellSouth€Telecommunications,€Inc.€and€Southern€New€England€Telephone€Company€shallÏrevise€their€tariffs,€effective€July€1,€1998,€to€include€a€new€definition€of€non„primary€line€counts€as€required€by€Section€II.B€of€this€Memorandum€Opinion€and€Order.ÌÌà  àÔ2ÿÿºÔÚ  Ú187Ú  Ú.Ô3  Ô€€IT€IS€FURTHER€ORDERED,€that,€pursuant€to€Sections€4(i),€4(j),€201(b),€202(a),€203(a),€204(a),€205,€and€403€of€the€Communications€Act€of€1934,€asÏamended,€47€U.S.C.€ðððð€154(i),€154(j),€201(b),€202(a),€203(a),€204(b),€and€205,€that€Cincinnati€Bell€Telephone€Company€shall€revise€its€tariff,€effective€July€1,€1998,€to€excludeÏthe€statement€that€it€does€not€include€inward„only€lines€in€its€subscriber€line€and€presubscribed€interexchange€carrier€line€count€as€required€by€Section€II.C€of€this€MemorandumÏOpinion€and€Order.ÌÌà  àÔ2ÿÿ»ÔÚ  Ú188Ú  Ú.Ô3  Ô€€IT€IS€FURTHER€ORDERED,€that,€pursuant€to€Sections€4(i),€4(j),€201(b),€202(a),€203(a),€204(a),€205,€and€403€of€the€Communications€Act€of€1934,€asÏamended,€47€U.S.C.€ðððð€154(i),€154(j),€201(b),€202(a),€203(a),€204(b),€and€205,€that€the€Ameritech€Operating€Companies€SHALL€ISSUE€REFUNDS,€plus€interest,€for€theÏperiod€from€January€1,€1998€through€March€31,€1998,€reflecting€the€inclusion€of€inward„only€lines€in€its€subscriber€line€and€presubscribed€interexchange€carrier€line€count€asÏrequired€by€Section€II.C€of€this€Memorandum€Opinion€and€Order.€€The€Ameritech€Operating€Companies€ARE€ORDERED€to€submit€plans€for€issuing€refunds€to€the€CommonÏCarrier€Bureau€for€review€and€approval€pursuant€to€our€delegation€of€authority€under€Section€0.291€of€the€Commission's€rules,€47€C.F.R.€ðð€0.291,€within€90€days€of€the€releaseÏof€this€Memorandum€Opinion€and€Order.€€Refunds€shall€be€calculated€in€accordance€with€the€requirements€of€Section€VI€of€this€Memorandum€Opinion€and€Order.€ÌÌà  àÔ2ÿÿ¼ÔÚ  Ú189Ú  Ú.Ô3  Ô€€IT€IS€FURTHER€ORDERED,€that,€pursuant€to€Sections€4(i),€4(j),€201(b),€202(a),€203(a),€204(a),€205,€and€403€of€the€Communications€Act€of€1934,€asÏamended,€47€U.S.C.€ðððð€154(i),€154(j),€201(b),€202(a),€203(a),€204(b),€and€205,€that€Bell€Atlantic€Operating€Companies,€the€Sprint€Local€Telephone€Companies,€GTE€SystemÏTelephone€Companies,€GTE€Telephone€Operating€Companies,€Southwestern€Bell€Telephone€Company,€and€U€S€West€Communications,€Inc.€SHALL€FILE€REVISEDÏCARRIER€COMMON€LINE€RATES€to€be€effective€July€1,€1998,€and€SHALL€ISSUE€REFUNDS,€plus€interest,€for€the€period€from€January€1,€1998€through€July€1,€1998,Ïreflecting€removal€of€the€past€effects€that€understating€their€BFP€revenue€requirements€has€had€on€their€carrier€common€line€rates€as€required€by€Section€II.D€of€thisÏMemorandum€Opinion€and€Order.€€These€companies€ARE€ORDERED€to€submit€plans€for€issuing€refunds€to€the€Common€Carrier€Bureau€for€review€and€approval€pursuant€toÏour€delegation€of€authority€under€Section€0.291€of€the€Commission's€rules,€47€C.F.R.€ðð€0.291,€within€90€days€of€the€release€of€this€Memorandum€Opinion€and€Order.€€RefundsÏshall€be€calculated€in€accordance€with€the€requirements€of€Section€VI€of€this€Memorandum€Opinion€and€Order.€€€ÌÌà  àÔ2ÿÿ½ÔÚ  Ú190Ú  Ú.Ô3  Ô€€IT€IS€FURTHER€ORDERED,€that,€pursuant€to€Sections€4(i),€4(j),€201(b),€202(a),€203(a),€204(a),€205,€and€403€of€the€Communications€Act€of€1934,€asÏamended,€47€U.S.C.€ðððð€154(i),€154(j),€201(b),€202(a),€203(a),€204(b),€and€205,€that€Aliant€Communications€Company,€Ameritech€Operating€Companies,€Bell€AtlanticÏOperating€Companies,€BellSouth€Telecommunications,€Inc.,€Cincinnati€Bell€Telephone€Company,€Citizens€Telecommunications€Companies,€Frontier€Communications€ofÏMinnesota€and€Iowa,€Frontier€Telephone€of€Rochester,€GTE€System€Telephone€Companies,€GTE€Telephone€Operating€Companies,€Nevada€Bell,€Pacific€Bell,€òòóóSouthern€NewÐ O" ÐEngland€Telephone€Company,€Southwestern€Bell€Telephone€Company,€Sprint€Local€Telephone€Companies,€and€€U€S€West€Communications,€Inc.€SHALL€FILE€REVISEDÏRATES€to€be€effective€July€1,€1998,€reflecting€exogenous€adjustments€for€recovery€of€reallocations€identified€in€Section€III€of€this€Memorandum€Opinion€and€Order€and€usingÏthe€permitted€revenue€methodology€as€required€by€Section€III.€€ÌÌà  àÔ2ÿÿ¾ÔÚ  Ú191Ú  Ú.Ô3  Ô€€IT€IS€FURTHER€ORDERED,€that,€pursuant€to€Sections€4(i),€4(j),€201(b),€202(a),€203(a),€204(a),€205,€and€403€of€the€Communications€Act€of€1934,€asÏamended,€47€U.S.C.€ðððð€154(i),€154(j),€201(b),€202(a),€203(a),€204(b),€and€205,€that€Aliant€Communications€Company,€Ameritech€Operating€Companies,€Bell€AtlanticÏOperating€Companies,€BellSouth€Telecommunications,€Inc.,€Cincinnati€Bell€Telephone€Company,€Citizens€Telecommunications€Companies,€Frontier€Communications€ofÏMinnesota€and€Iowa,€Frontier€Telephone€of€Rochester,€GTE€System€Telephone€Companies,€GTE€Telephone€Operating€Companies,€Nevada€Bell,€Pacific€Bell,€òòóóSouthern€NewÐ P* ÐEngland€Telephone€Company,€Southwestern€Bell€Telephone€Company,€Sprint€Local€Telephone€Companies,€and€€U€S€West€Communications,€Inc.€SHALL€FILE€REVISEDÏRATES€to€be€effective€July€1,€1998,€reflecting€the€methodology€for€making€the€exogenous€adjustments€for€recovery€of€SS7„STP€costs€as€required€by€Section€IV.A€of€thisÏMemorandum€Opinion€and€Order.€€ÌÌà  àÔ2ÿÿ¿ÔÚ  Ú192Ú  Ú.Ô3  Ô€€IT€IS€FURTHER€ORDERED,€that,€pursuant€to€Sections€4(i),€4(j),€201(b),€202(a),€203(a),€204(a),€205,€and€403€of€the€Communications€Act€of€1934,€asÏamended,€47€U.S.C.€ðððð€154(i),€154(j),€201(b),€202(a),€203(a),€204(b),€and€205,€that€Nevada€Bell,€Pacific€Bell,€and€Southwestern€Bell€Telephone€Companyò òòòóóó ó€SHALL€FILEÐ ¿ €0 ÐREVISED€RATES€to€be€effective€July€1,€1998,€reflecting€the€requirement€in€Section€IV.A€of€this€Memorandum€Opinion€and€Order€that€these€companies€exclude€STP€portÏrevenues€from€the€calculation€of€their€SS7€exogenous€adjustments€to€the€TIC€and€the€Traffic€Sensitive€basket.ÌÌà  àÔ2ÿÿÀÔÚ  Ú193Ú  Ú.Ô3  Ô€€IT€IS€FURTHER€ORDERED,€that,€pursuant€to€Sections€4(i),€4(j),€201(b),€202(a),€203(a),€204(a),€205,€and€403€of€the€Communications€Act€of€1934,€asÏamended,€47€U.S.C.€ðððð€154(i),€154(j),€201(b),€202(a),€203(a),€204(b),€and€205,€that€U€S€West€Communications,€Inc.ò òòòóóó ó€SHALL€FILE€REVISED€RATES€to€be€effective€July€1,Ð g#(5 Ð1998,€reflecting€the€requirement€in€Section€IV.A€of€this€Memorandum€Opinion€and€Order€that€the€Company€exclude€SS7„STP€costs€associated€with€contracted€and€separatelyÏtariffed€STP€Services€when€adjusting€its€reallocation€of€the€tandem€switching€revenue€requirement.ÌÌà  àÔ2ÿÿÁÔÚ  Ú194Ú  Ú.Ô3  Ô€€IT€IS€FURTHER€ORDERED,€that,€pursuant€to€Sections€4(i),€4(j),€201(b),€202(a),€203(a),€204(a),€205,€and€403€of€the€Communications€Act€of€1934,€asÏamended,€47€U.S.C.€ðððð€154(i),€154(j),€201(b),€202(a),€203(a),€204(b),€and€205,€that€Aliantò òòòóóó ó€Communications€Company€SHALL€FILE€REVISED€RATES€to€be€effective€July€1,Ð &Ð: Ð1998,€reflecting€the€requirement€in€Section€IV.B€of€this€Memorandum€Opinion€and€Order€that€the€Company€allocate€the€entire€amount€of€its€central€office€equipmentÏmaintenance€expense€adjustment€among€all€seven€Trunking€basket€service€categories€on€the€basis€of€relative€revenues.ÌÌà  àÔ2ÿÿÂÔÚ  Ú195Ú  Ú.Ô3  Ô€€IT€IS€FURTHER€ORDERED,€that,€pursuant€to€Sections€4(i),€4(j),€201(b),€202(a),€203(a),€204(a),€205,€and€403€of€the€Communications€Act€of€1934,€asÏamended,€47€U.S.C.€ðððð€154(i),€154(j),€201(b),€202(a),€203(a),€204(b),€and€205,€that€Cincinnati€Bell€Telephone€Companyò òòòóóó ó€SHALL€FILE€REVISED€RATES€to€be€effective€JulyÐ ·(x!? Ð1,€1998,€reflecting€the€requirement€in€Section€IV.B€of€this€Memorandum€Opinion€and€Order€that€the€Company€remove€marketing€expenses€from€the€transport€interconnectionÏcharge€based€on€the€ratio€of€transport€interconnection€charge€revenues€to€total€Trunking€basket€switched€access€revenues.ÌÌà  àÔ2ÿÿÃÔÚ  Ú196Ú  Ú.Ô3  Ô€€IT€IS€FURTHER€ORDERED,€that,€pursuant€to€Sections€4(i),€4(j),€201(b),€202(a),€203(a),€204(a),€205,€and€403€of€the€Communications€Act€of€1934,€asÏamended,€47€U.S.C.€ðððð€154(i),€154(j),€201(b),€202(a),€203(a),€204(b),€and€205,€that€Aliant€Communications€Company,€Ameritech€Operating€Companies,€Bell€AtlanticÏOperating€Companies,€BellSouth€Telecommunications,€Inc.,€Cincinnati€Bell€Telephone€Company,€Citizens€Telecommunications€Companies,€Frontier€Communications€ofÏMinnesota€and€Iowa,€Frontier€Telephone€of€Rochester,€GTE€System€Telephone€Companies,€GTE€Telephone€Operating€Companies,€Nevada€Bell,€Pacific€Bell,€òòóóSouthern€NewÐ o,0%F ÐEngland€Telephone€Company,€Southwestern€Bell€Telephone€Company,€Sprint€Local€Telephone€Companies,€ò òòòóóó óand€U€S€West€Communications,€Inc€SHALL€FILE€REVISEDÐ ÷,¸%G ÐRATES€to€be€effective€July€1,€1998,€reflecting€the€requirement€of€Section€IV.C€of€this€Memorandum€Opinion€and€Order€that,€with€the€exception€of€the€minutes€of€use€variable,Ïthese€companies€shall€use€1993€data€for€the€purpose€of€making€exogenous€cost€adjustments€to€the€transport€interconnection€charge€and€the€tandem€switched€transport€category.Ìâ âÐ .P'J Ðà  àÔ2ÿÿÄÔÚ  Ú197Ú  Ú.Ô3  Ô€€IT€IS€FURTHER€ORDERED,€that,€pursuant€to€Sections€4(i),€4(j),€201(b),€202(a),€203(a),€204(a),€205,€and€403€of€the€Communications€Act€of€1934,€asÏâ âamended,€47€U.S.C.€ðððð€154(i),€154(j),€201(b),€202(a),€203(a),€204(b),€and€205,€that€Frontier€Communications€of€Minnesota€and€Iowa,€Frontier€Telephone€of€Rochester,€GTEÏSystem€Telephone€Companies,€GTE€Telephone€Operating€Companies,€Nevada€Bell,€and€the€Sprint€Local€Telephone€Companiesò òòòóóó ó€SHALL€FILE€REVISED€RATES€to€beÐ O Ðeffective€July€1,€1998,€reflecting€the€requirement€in€Section€IV.D€of€this€Memorandum€Opinion€and€Order€that€these€Companies€overtargeted€their€July€1,€1997€"GDP„PI€minusÏX€factor"€to€the€non„facilities„based€residual€transport€interconnection€charge€using€the€AT&T€Worksheet€as€modified€by€this€Memorandum€Opinion€and€Order.ÌÌà  àÔ2ÿÿÅÔÚ  Ú198Ú  Ú.Ô3  Ô€€IT€IS€FURTHER€ORDERED,€that,€pursuant€to€Sections€4(i),€4(j),€201(b),€202(a),€203(a),€204(a),€205,€and€403€of€the€Communications€Act€of€1934,€asÏamended,€47€U.S.C.€ðððð€154(i),€154(j),€201(b),€202(a),€203(a),€204(b),€and€205,€that€Aliant€Communications€Company,€BellSouth€Telecommunications,€Inc.,€CitizensÏTelecommunications€Companies,€Frontier€Communications€of€Minnesota€and€Iowa,€Frontier€Telephone€of€Rochester,€GTE€System€Telephone€Companies,€GTE€TelephoneÏOperating€Companies,€Nevada€Bell,€Pacific€Bell,€òòóóSouthwestern€Bell€Telephone€Company,€Sprint€Local€Telephone€Companies,€ò òòòóóó óand€U€S€West€Communications,€Inc.ò òòòóóó ó€SHALLÐ  È  ÐFILE€REVISED€RATES€to€be€effective€July€1,€1998,€reflecting€the€requirements€in€Section€V€of€this€Memorandum€Opinion€and€Order€for€recovering€universal€service€supportÏobligations.ÌÌÔ& P Ôà  àÔ2ÿÿÆÔÚ  Ú199Ú  Ú.Ô3  Ô€€IT€IS€FURTHER€ORDERED,€that€the€investigation€and€accounting€order€imposed€by€the€Common€Carrier€Bureau€in€CC€Docket€No.€97„250€with€respect€toÏthe€LECs€specified€in€Appendix€A€for€the€designated€issues€as€discussed€herein€IS€TERMINATED.ÌÌÑ€¹ÑÌà  àà ` àà ¸ àà  àà h àà À àFEDERAL€COMMUNICATIONS€COMMISSIONÌÌÌÌà  àà ` àà ¸ àà  àà h àà À àà  àMagalie€Roman€SalasÌà  àà ` àà ¸ àà  àà h àà À àà  àSecretaryÔ'P'ØvÔ