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Reg. 2d (P&F) 1111 (1986) (creating Part 32 of the Commission's rules).  Sh( 12.` ` In the Accounting Notice, we proposed to streamline accounting requirements for certain midsized ILECs based on the aggregate revenues of the ILEC and any ILEC that it controls, is"Bx0*&&``V"  S(controlled by, or with which it is under common control. {Oh(ԍSee 47 C.F.R.  32.9000. Our rules define "control" as "the possession directly or indirectly, of the power to direct or cause the direction of the management and policies of a company, whether such power is exercised through one or more intermediary companies, or alone, or in conjunction with, or pursuant to an agreement with, one or more other companies, and whether such power is established through a majority or minority ownership or voting of securities, common directors, officers, or stockholders, voting trusts, holding trusts, affiliated companies, contract, or any other direct or indirect means." We proposed that if the aggregate revenues of these affiliated ILECs are less than $7 billion, then each ILEC within that group would be eligible for Class B accounting, even if the annual operating revenue of any individual ILEC equals or exceeds $112 million.  S8( 13.` ` The large ILECs the Bell operating companies (BOCs) and GTE contend that Class A accounting is not needed and the Commission should adopt a single accounting system for all  S(ILECs;7ZB {O (ԍSee Bell Atlantic Comments at 79; BellSouth Comments at 912; US West Comments at 7; Ameritech Comments at 49; SBC Comments at 517; GTE Comments at 911. In addition, USTA recommends eliminating Class A accounting for all ILECs. USTA Comments at 611.7 most of the remaining commenters support our proposal.d  {O(ԍSee, e.g., CBT Comments at 2; ALLTEL Comments at 4; Comsat Comments at 12; Sprint Comments at 23; Texas PUC Reply Comments at 56. Several commenters observe, and we agree, that our Class A accounting requirements play a significant role in ensuring that all rates,  S(including intrastate rates, remain just and reasonable.   {O(ԍSee, e.g., GSA Reply Comments at 6; MCI Comments at 35 & Reply Comments at 9; PUCO Reply Comments at 3; AT&T Reply Comments at 58; Texas PUC Reply Comments at 45; Florida PSC Reply Comments at 12; PaPUC Reply Comments at 78. The following are several examples of recent actions  {OP(dependent on Class A accounting: In our Access Reform proceeding we modified Part 69 to assign maintenance expense to the central office switching based on Class A accounting that separately records maintenance expense for each major class of network facility. This significantly improved the assignment of cost to local switching and resulted in substantial shifts in permitted revenues between price cap baskets. In addition, we created a new basket for marketing expense. Class A accounting separates marketing expense from other customer operations  {O:(expenses. In the Expanded Interconnection physical collocation tariff investigation we focussed on LEC assignments of land, buildings, and other support assets and expenses. This investigation of various common  {O(cost and overhead loadings would have been far more difficult without Class A account detail. In the GSF  {O(Order, we reassigned general purpose computers to nonregulated billing and collection which required the  {O`(existence of Class A account 2124. Finally, in the Number Portability proceeding the charges will be established based on additional costs the LECs will incur to provide this additional network functionality. Class B accounts do not provide sufficient detail to identify portability related costs clearly.  SH ( 14.` ` We adopt the proposal in the Accounting Notice. Among ILECs, this revision would limit Class A accounting to the BOCs and GTE. All other ILECs may use the Class B system of  S (accounts. J yO$(ԍCarriers that qualify for Class B accounting may, at their discretion, maintain a Class A accounting  {O%(structure upon the submission of written notification to the Commission. See 47 C.F.R.  32.11. We believe we can satisfy our oversight responsibilities and meet the Commission's needs" 0*&&`` " by employing the more streamlined Class B account structure on midsized ILECs and retaining the more detailed Class A account structure for the largest ILECs at this time. As we discussed above, the Common Carrier Bureau has initiated a comprehensive review of its accounting and reporting requirements which will address current accounting and reporting requirements that can be eliminated or streamlined and longterm changes needed as local exchange markets become competitive. We note that the Commission has previously reduced reporting and accounting requirements imposed on interexchange carriers as competition in that market developed and we fully expect to provide similar regulatory relief in the local exchange and exchange access markets as circumstances warrant.   S(15.` ` Pole Attachment Fees. The Commission reviews complaints about pole attachment  Sr(rates under section 224 of the Communications Act.Dr yO (ԍ47 U.S.C.  224.D In reviewing the rates charged by ILEC owners  SJ (of poles, ducts, conduits and rightsofway, the Commission applies data taken from ARMIS reports.YJ X yOB (ԍ47 C.F.R.  1.14011.1416 (1997).Y Under the Class B accounting structure we adopt for midsized ILECs, detailed accounts needed to calculate pole attachment fees using the pole attachment formulas would no longer be reported in their  S (ARMIS reports.R|  yOZ(ԍClass B carriers record their investment associated with poles in Account 2410 (Cable and wire facilities). Account 2410 includes the investment associated with poles, as well as the investment associated with aerial cable, underground cable, buried cable, submarine cable, deep sea cable, intrabuilding network cable, aerial  {O(wire, and conduit systems. See 47 C.F.R.  32.24102441. Likewise, Class B carriers record their expenses associated with poles in Account 6410 (Cable and wire facilities expenses), which contains aggregated expense data related to aerial cable, underground cable, buried cable, submarine cable, deep sea cable, intrabuilding  {O (network cable, aerial wire, and conduit systems. See 47 C.F.R.  32.64106441. R In our Accounting Notice, we sought comment on whether midsized ILECs should be required to maintain this accounting data in subsidiary records to report in ARMIS the information  S (in the noted accounts as well as other information required by the pole attachment formulas.  ,  yOP(ԍFor example, the current and proposed pole attachment formulas require accumulated depreciation as detailed in ARMIS Report 4302, Table B5 for the Poles and Conduit System accounts.  S\(Although several carriers argue that a subsidiary record requirement is unnecessary,!\  {O(ԍSee GTE Comments at 13; SBC Comments at 6; Frontier Comments at 2; Sprint Comments at 4. we conclude that the midsized companies should continue to maintain this information in subsidiary records. We believe it is necessary to require subsidiary records to assure that the data is publicly available, uniformly maintained among the carriers, and maintained in a manner that can be audited. We therefore require midsized ILECs to maintain subsidiary record categories to provide the pole attachment data currently provided in the Class A accounts, and we require these carriers to report the information necessary for the Commission to calculate pole attachment rates based on their ARMIS  SD(reports./"\D {O#(ԍSee 1998 Biennial Regulatory Review Review of ARMIS Reporting Requirements, Petition for Forbearance of the Independent Telephone and Telecommunications Alliance, CC Docket No. 98117 and AAD  {O%(File No. 9843, Report and Order in CC Docket 98117, Fifth Memorandum and Opinion in AAD File No. 98"%!0*&&%"ԫ {O(43, FCC 99106#C\  P6QIP# (rel. June 30, 1999)#^Az0rQL^0#. / We note that the Commission is currently considering issues regarding the pole attachment"D Z"0*&&``V"  S(formulas.#Z {O(ԍSee Amendment of Rules and Policies Governing Pole Attachments, CS Docket No. 9798, Notice of  {O(Proposed Rulemaking, 12 FCC Rcd 7449 (1997). When we issue a report and order in that proceeding, we will specify the subsidiary record categories carriers must maintain in order to provide data for the finalized pole attachment formulas.  S(16.` ` Jurisdictional Separations. In the Accounting Notice, we asked commenters to address  Sb(any possible effects on jurisdictional separations that could result from adopting our proposals.f$b {O (ԍAccounting Notice, 13 FCC Rcd at 12975,  5.f We note that we are not changing our Part 36 jurisdictional separations rules today. In adopting the streamlined accounting rules for midsized ILECs, we recognize that certain costs will now be allocated between the state and interstate jurisdictions differently. As GTE and USTA observe, the midsized ILECs that become subject to Class B accounting will separate their General Support Facilities (GSF) investment between the state and interstate jurisdictions based on Combined Central Office Equipment, Information Origination/Termination, and Cable & Wire Facilities investment. Class A ILECs allocate GSF investment based on Plant Specific Expenses, Plant NonSpecific Expenses (network operations expenses), and Customer Operations Expenses (marketing and  S (services).%X H yO(ԍGTE Comments at 12; USTA Comments at 11. Ameritech observes that if we adopt Class B accounting for all carriers there would be no effect on the jurisdictional separations process. Ameritech Comments at 8.  S (17.` ` Application of Threshold. In the Accounting Notice, we proposed eliminating the difference between the application of the indexed revenue threshold for Parts 32 and 64 because the difference provided unnecessary complexity to our rules. Although the same indexed revenue threshold is applied for Part 32 carrier classification purposes and Part 64 cost allocation purposes, the threshold is met at different times. For Part 32 purposes, the accounting classification for a carrier is determined by its lowest annual operating revenues from regulated operations for the five immediately preceding years. For Part 64 cost allocation purposes, however, carriers must file CAMs and obtain independent audits of their cost allocations based upon those CAMs once carriers equal or exceed the indexed revenue threshold. In this Order, we adopt our proposal and eliminate the difference between the application of the indexed revenue threshold for Part 32 and Part 64 cost allocation purposes. Carriers will be classified as Class A or Class B at the start of the calendar year following the first  S(time their annual operating revenues equal or exceed the indexed revenue threshold.v&h  yO (ԍAlthough we sought comment on this issue, no commenters addressed it.v  S(18.` ` The $7 billion threshold will not be indexed for inflation annually, but instead will be a fixed threshold that the Commission will monitor on a regular basis. If we determine that the $7 billion threshold is no longer appropriate due to inflation or any other change in market conditions, we will revise the threshold to reflect those changes. " &0*&&``x"Ԍ S( B.Reduced Cost Allocation Manual Procedures for MidSized ILECs  S(19.` ` Section 64.903 of the Commission's rules requires ILECs with $112 million or more in annual operating revenues to file CAMs setting forth the cost allocation procedures that they use to  S`(allocate costs between regulated and nonregulated services.'x` yO(ԍ47 C.F.R.  64.903. These CAMs include the following: (a) a description of the company's nonregulated activities; (b) a list of the activities that the company accords incidental accounting treatment; (c) a chart showing all of its corporate affiliates; (d) a statement identifying affiliates that engage in or will engage in transactions with the carrier entity and describing the nature, terms, and frequency of such transactions; (e) detailed specifications for each USOA account and subaccount, of the cost categories to which amounts in the account or subaccount will be assigned and of the basis on which each cost category will be apportioned; and (f) a description of the carrier's time reporting procedures. Carriers that are required to file CAMs  S8(are also required by section 64.904 to perform an independent audit of reported cost allocation data.B(X8 yO (ԍThe audit must provide a positive opinion that the reported data is presented fairly in all material respects and that the audit shall be conducted in accordance with generally accepted auditing standards, except as otherwise directed by the Chief, Common Carrier Bureau. B  S(20.` ` In the Accounting Notice we proposed to reduce CAM requirements for midsized  S(ILECs.q)(  {O(ԍAccounting Notice, 13 FCC Rcd at 1298081,  1012.q The proposal would allow these companies to submit their CAMs based upon the Class B system of accounts and would relax the current annual audit requirements for cost allocations related  Sr(to the CAM by permitting midsized ILECs to obtain an attestation every two years.*r  yO(ԍIn such an audit, the independent auditor expresses an opinion about whether the carriers' accounting and cost allocation procedures are in accordance with the Commission's rules. Each such attestation would cover the previous two years. Specifically, the proposed action would reduce the reporting requirements related to the nonregulated activity matrix and the cost apportionment section of the CAM. In addition, midsized ILECs would be subject to fewer audit reporting requirements and a significantly less stringent standard for testing, reporting, and expression of opinion than currently  S (required. +x  yO\(ԍThe current financial audit is a comprehensive examination requiring a positive opinion that the data shown in the carrier's ARMIS 4303 report are fairly presented in accordance with the carrier's cost allocation manual and the Commission's rules. In an attest engagement, the independent auditor merely expresses an opinion that the carrier's accounting and cost methodologies are in accordance with the Commission's rules. Financial audits are considerably more expensive than attest audits because they require the auditor to express an opinion, not only on whether the methodologies are in compliance with our rules, but that the data are presented fairly. This requires more extensive audit work to substantiate the data.  " R+0*&&`` "Ԍ S(21.` ` The large ILECs contend that this proposal should be extended to all carriers;, {Oh(ԍSee, e.g., GTE Comments at 1316; BellSouth Comments at 12; SBC Comments at 1920; US West Comments at 810; Ameritech Comments at 1011. other  S(commenters support the proposal.-" {O(ԍSee, e.g., Sprint Comments at 56; Comsat Comments at 12; CBT Comments at iii; ITTA Comments at 2. In section III. A above, we concluded that midsized ILECs may maintain their accounts at the Class B level. Consistent with our change in the level of accounting detail required, we conclude that mid S`(sized ILECs may also submit their CAMs based upon the Class B system of accounts..`| yO| (ԍCarriers qualifying for this less burdensome treatment may, at their discretion, opt to prepare their CAM based on the Class A system of accounts. Allowing midsized ILECs to submit their CAMs based upon the Class B system of accounts reduces the  S(reporting burden of the nonregulated activity matrix and the cost apportionment section of the CAM./ yO(ԍClass A carriers are required to provide cost allocation procedures for 178 of the Part 32 accounts. Class B carriers are required to provide cost allocation procedures for 55 accounts. We also conclude that midsized ILECs only need to obtain an attestation every two years, that covers the prior two years. Such attestation would require significantly less stringent standards of testing, reporting, and expression of opinion than the present audit requirement. We reach these conclusions based on the reasoning supporting our decision to streamline the accounting requirements for midsized ILECs. Our experience with midsized ILECs leads us to conclude that we can maintain the necessary degree of oversight and monitoring to protect consumers' interests, while imposing less administratively burdensome requirements on such carriers.  S (22.` ` Under the current Part 64 rules, carriers with operating revenues below the indexed revenue threshold (currently $112 million in operating revenues) are not required to file a CAM or conduct external audits. USTA requests that we grant this status to all carriers that fall under the $7 billion revenue threshold determining midsized ILEC status, and that we find that companies under  S(the $7 billion revenue threshold are not required to file CAMs or conduct external audits.E0,  yO(ԍUSTA Comments at 13.E We do not find such treatment appropriate. We believe that obtaining Class B information will provide us with needed data. The requirement to file CAMs based on Class B accounts and obtain an attest audit every two years therefore applies to midsized ILECs with aggregate revenues below $7 billion but  Sh(equal to or above the indexed revenue threshold (i.e., currently $112 million). Thus, we are not imposing new requirements on carriers that are below the current indexed revenue threshold. Instead, we meet our objective to reduce the burdens on midsized ILECs by permitting certain carriers who would otherwise be required to file CAMs based on Class A accounts to file CAMs based on Class B accounts. For the large ILECs, we take no action at present but we direct the Common Carrier Bureau, as part of its comprehensive accounting review, to examine alternatives that will reduce the burden on large ILECs for undertaking annual CAMs while ensuring that the public interest is protected. "* 00*&&``"Ԍ S( C.Independent Telephone and Telecommunications Alliance Petition for Forbearance  S(23.` ` On February 17, 1998, ITTA filed a petition for forbearance requesting that the Commission forbear from applying to midsized ILECs, among other things, several reporting and recordkeeping requirements, including Class A accounting rules, CAM filings, audits, and detailed  S8(property records.F1D8 yO(ԍPetition for Forbearance of the Independent Telephone and Telecommunications Alliance, filed February 17, 1998 (ITTA Petition). The deadline for the Commission's action on ITTA's petition was extended by 90  {O0(days to May 18, 1999. See Petition for Forbearance of the Independent Telephone and Telecommunications  {O(Alliance, ASD File No. 9843, Order, 14 FCC Rcd 1018 (1999). Comments were filed by GTE Service Corporation (GTE), United States Telephone Association (USTA), the Telecommunications Resellers Association (TRA), General Communication, Inc. (GCI), Ameritech, SBC Communications, Inc. (SBC), AT&T, and Bell Atlantic. Reply Comments were filed by Cincinnati Bell Telephone Company (CBT), ITTA, and ATU Telecommunications (ATU).F Two commenters, CBT and ATU, support the ITTA petition;p28 {O (ԍSee CBT Reply Comments at 511; ATU Reply Comments at 2. p five commenters  S(would have the relief sought by ITTA extended to all carriers.3f  {O(ԍSee Ameritech Comments at 24; SBC Comments at 12; Bell Atlantic Comments at 25; USTA Comments at 711; GTE Comments at 48. This Order will address ITTA's forbearance request regarding these financial reporting and recordkeeping requirements. The  S(remaining issues raised in the ITTA petition will be addressed in other proceedings.N4  {O (ԍSee note 5 supra.N  Sp(24.` ` The ITTA petition is filed under section 10 of the Communications Act.D5pR  yOb(ԍ47 U.S.C.  160.D Specifically, section 10 provides that the Commission shall forbear from applying any regulation or any provision of the Communications Act to a telecommunications carrier or telecommunications service, or class of telecommunications carriers or telecommunications services, in any or some of its or their geographic markets, if the Commission determines that: X(1) enforcement of such regulation or provision is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory; (# X(2) enforcement of such regulation or provision is not necessary for the protection of consumers; and (# X(3) forbearance from applying such provision or regulation is consistent with the public  S(interest.G6 yO%(ԍ47 U.S.C.  160(a).G (#" r60*&&``"Ԍ S(ԙ25.` ` Class A accounting requirements. ITTA contends that we should not require Class A accounting requirements on midsize LECs and that Class B accounting requirements should be  S(sufficient.E7 yO(ԍITTA Petition at 16.E Essentially, ITTA is asking us to change our rules, not to forbear from applying the  S(current rules. As discussed above, we are adopting the proposal in the Accounting Notice to streamline accounting requirements for midsized ILECs based on the aggregate revenues of the ILEC  S:(and any ILEC that it controls, is controlled by, or with which it is under common control.R8:X {O2(ԍSee 47 C.F.R.  32.9000.R If the aggregate revenues of these affiliated ILECs are less than $7 billion, then each ILEC within that group will now be eligible for Class B accounting, even if the annual operating revenue of any individual ILEC equals or exceeds $112 million. This rule change limits Class A accounting to the BOCs and  S(GTE. All other ILECs, i.e., the midsize ILECs, may use the Class B system of accounts.9 yO$ (ԍCarriers that qualify for Class B accounting may, at their discretion, maintain a Class A accounting  {O (structure. See 47 C.F.R.  32.11(d). We are providing the relief sought by ITTA by permitting midsized ILECs to use Class B system of accounts. With this rule modification, there is no longer an accounting rule from which forbearance  S$ (can be sought.:$ D {O(ԍITTA observes that adoption of the modifications proposed in the Accounting Notice may moot some of the issues raised in the ITTA Petition. ITTA Comments at 6. ITTA's petition for forbearance is therefore moot with respect to this issue.  S (26.` ` CAM filings, audits, and property records. Section 64.903 of the Commission's rules requires ILECs with $112 million or more in annual operating revenues to file CAMs setting forth the  S (cost allocation procedures that they use to allocate costs between regulated and nonregulated services.G;  yO(ԍ47 C.F.R.  64.903.G ITTA argues that the Commission should forbear from requiring midsize LECs (1) to file detailed CAMs; (2) to undergo annual audits; and (3) to maintain detailed property records under section  S (32.2000(e)(f).O< .  yO(ԍITTA Petition at 1415 & n.36.O For the reasons set forth below, we conclude that ITTA has not demonstrated that  S(the three requirements of section 10 have been satisfied and we deny the petition for forbearance.(=Z  yOB(ԍAT&T and GCI argue that ITTA has failed to show that the elimination of these accounting safeguards  {O (meets the standards set forth in section 10(a) of the Communications Act. See AT&T Comments at 16; GCI Comments at 46.(  S(27.` ` With respect to the first and second prongs of the section 10 standard for forbearance, we are not convinced by ITTA's assertion that compliance with Parts 64 and 32 of the Commission's rules can be adequately monitored through the tariff review and complaint process or through random  S(audits.O> {O%(ԍSee ITTA Petition at 16.O We cannot assume, based on ITTA's unsupported assertion, that the tariff review and"r>0*&&``Z" complaint process and random audits will adequately ensure that charges, practices, classifications, and services of the midsized ILECs are just and reasonable and are not unjustly or unreasonably discriminatory and that enforcement of these regulations is not necessary for the protection of consumers. ITTA has not brought such evidence to our attention. We fail to see how ITTA's proposal to eliminate reporting requirements that show how costs are allocated between regulated and nonregulated services would adequately protect consumers. Therefore, we conclude that the first and second prongs of the section 10 forbearance test have not been satisfied.  S(28.` ` With respect to the third prong, we find that ITTA has not shown that any burden resulting from these reporting requirements and audits outweighs the public interest benefits. In evaluating whether forbearance is consistent with the public interest, we must "consider whether forbearance from enforcing the provision or regulation will promote competitive market conditions, including the extent to which forbearance will enhance competition among providers of  S (telecommunications services."G?  yO` (ԍ47 U.S.C.  160(b).G We note that the midsize LECs are dominant in their market areas.@" X yO(ԍIn its December 1998 report, the Industry Analysis Division concluded that for 1997, the most recent year for which data was available, the ILECs' share of nationwide local revenue was 97 percent, a decline of  {O(only three percent from 1993. See "Local Competition Report," Industry Analysis Division, Common Carrier Bureau (December 1998). We reject ITTA's contentions that the costs imposed by these regulations are disproportionate to their regulatory purpose and that these requirements are wholly unnecessary to curb anti-competitive pricing  S (or to protect consumers.HA B yOb(ԍITTA Petition at 1718.H The record does not show that eliminating CAMs, audits, and continuing property records will promote competitive market conditions or will enhance competition among local exchange providers. Neither does the record show that eliminating these reporting requirements will protect ratepayers and ensure that the midsized carriers' rates will be just, reasonable, and nondiscriminatory. We believe that protecting ratepayers and ensuring that the midsized carriers' rates are just, reasonable, and nondiscriminatory are significant elements of our public interest analysis. We therefore conclude that ITTA has not satisfied the third prong of the section 10 forbearance standard. For these reasons, we deny ITTA's petition for forbearance from CAM filing requirements, audit requirements, and detailed property record requirements.  S(29.` ` In conclusion, we note that in this Order we are significantly streamlining accounting requirements for midsized ILECs. We are reducing our accounting requirements to permit midsize  S(LECs to use Class B system of accounts. Additionally, midsized ILECs are permitted to submit their CAMs based on the Class B system of accounts, thereby reducing the reporting burden of carriers subject to CAM requirements. We are also modifying our audit requirements, so that midsized ILECs will now only be required to obtain an attestation every two years, instead of an annual financial audit requiring a positive opinion. Finally, the Common Carrier Bureau has initiated a broad comprehensive review of all of our accounting and reporting requirements. Thus, a significant amount of the relief sought by ITTA in the Petition for Forbearance is realized through the rule changes adopted in this proceeding."A0*&&``"Ԍ S(ԙ 8D.Revising the Uniform System of Accounts for All Carriers  S(30.` ` We have conducted a review of our USOA accounts and conclude that a number of accounts or filing requirements may be reduced or eliminated. A description of these changes and a 8discussion of our rationale for our conclusions are set forth below. These modifications will apply to all carriers subject to Part 32 of the Commission's rules.  S(31.` ` Combining Accounts 2114, 2115, and 2116.UB yOP(ԍ47 C.F.R.  32.211432.2116. U In the Accounting Notice, we proposed adopting USTA's recommendation that we combine Account 2114, Special purpose vehicles, Account  S(2115, Garage work equipment, and Account 2116, Other work equipment, into a single new account.CX {O (ԍAccounting Notice, 13 FCC Rcd at 1298182,  14 & n.34, citing letter dated February 19, 1998 from Porter E. Childers, USTA, to Kenneth P. Moran, FCC.  Sr(The assets recorded in these accounts are similar in nature, have similar prescribed depreciation rates,Dr {O(ԍSee Simplification of the Depreciation Prescription Process, CC Docket No. 92296, Second Report and  {O(Order, 9 FCC Rcd 3206, Appendix B (1994).  SJ (and are treated identically under the jurisdictional separations rules set forth in Part 36 of our rules.SEJ  yO(ԍ47 C.F.R.  36.111, 36.112.S  S" (Commenters support this proposal.FZ"  {O`(ԍSee, e.g., SBC Comments at 2526; USTA Comments at 20; ITTA Comments at 2; Lexcom Comments at 5; Comsat Comments at 12; Sprint Comments at 7; MCI Reply Comments at 12; PaPUC Reply Comments at 8. We therefore conclude that these accounts should be combined into a single account entitled Account 2114, Tools and other work equipment, because combining these accounts would reduce the carriers' accounting and reporting burdens, would not affect the amounts separated between the interstate and intrastate jurisdictions, and would not affect our ability to protect the public interest.  S2(32.` ` Combining Accounts 6114, 6115, and 6116.UG2  yO(ԍ47 C.F.R.  32.611432.6116. U In the Accounting Notice, we also proposed combining Account 6114, Special purpose vehicles expense, Account 6115, Garage work equipment expense, and Account 6116, Other work equipment expense, into a single new account  S(entitled Account 6114, Tools and other work equipment expense.lHP  {O (ԍSee Accounting Notice, 13 FCC Rcd at 12982,  15. l These accounts are similar in nature and are treated identically under the jurisdictional separations rules set forth in Part 36 of our  Sl(rules.SIl yO#(ԍ47 C.F.R.  36.111, 36.112.S Commenters support this proposal.Jlr {O(ԍSee, e.g., ITTA Comments at 2; Lexcom Comments at 5; Comsat Comments at 12; Sprint Comments at 7; Texas PUC Reply Comments at 7; PaPUC Reply Comments at 8. We conclude that these accounts should be combined"l"J0*&&``" into a single account because combining these accounts would reduce the carriers' accounting and reporting burdens, would not affect the amounts separated between the interstate and intrastate jurisdictions, and would not affect our ability to protect the public interest.  S`( 33.` ` Accounting for Nonregulated Revenues. In the Accounting Notice, we proposed  S:(adopting USTA's request-KX:" yO(ԍPetition for Rulemaking of the United States Telephone Association, filed Sept. 16, 1997 (USTA  yO (Petition). As noted in Appendix A, the comments filed in this proceeding were filed in CC Docket No. 9881 and ASD File No. 9864.- that the Commission amend sections 32.23(c) and 32.5280 to allow carriers  S(to record revenues from all nonregulated activities in Account 5280, Nonregulated operating revenue.HLB yO (ԍ47 C.F.R.  32.5280.H Such an amendment would modify the current rule that instructs carriers to record revenue from nonregulated activities in Account 5280 only if there is no other operating revenue account to which the revenue relates. USTA argues that the use of specific regulated accounts for individual nonregulated activities places carriers at a competitive disadvantage because competitors could  SJ (determine productspecific revenue amounts related to ILECs' nonregulated products and services.MJ  {O(ԍSee USTA Petition at 2. See also SBC Comments at 2930; Ameritech Comments at 12; Lexcom Comments at 5; Sprint Comments at 7.  S" (USTA also requests that the Commission eliminate Account 5010, Public telephone revenue.N$" ,  yO(ԍUSTA also requested a waiver of the rules to permit the accounting practice described above pending  {O(the outcome of its rulemaking petition. The waiver was granted on December 31, 1997. See United States  {O(Telephone Association Petition for Waiver of Part 32 of the Commission's Rules, AAD 97103, Order, 13 FCC Rcd 214 (1997). ILECs  S (record message revenue derived from public and semipublic telephone services provided within their basic service areas in account 5010. USTA argues that Account 5010 is no longer needed as a result  S (of the deregulation of payphone servicesO$  yOb(ԍImplementation of the Pay Telephone Reclassification and Compensation Provisions of the  {O*(Telecommunications Act of 1996, CC Docket No. 96128, Report and Order, 11 FCC Rcd 20541 (1996), Order  {O(on Reconsideration, 11 FCC Rcd 21233 (1996), aff'd in part and remanded in part, sub nom. Illinois Public Telecommunications Ass'n v. FCC, 117 F.3d 555 (D.C.Cir. 1997). as well as the changes it proposed with respect to Account  S (5280.UP  {O&!(ԍSee USTA Petition at 5. U  S2(!34.` ` We conclude that the Commission's interest in protecting the public interest by ensuring that nonregulated revenues are segregated from the carriers' regulated revenues would continue to be served by allowing carriers to combine revenues for all nonregulated activities into one"P0*&&``T"  S(account.Q yOh(ԍIn the order adopting section 32.5280, the Commission stated that it had no regulatory need for servicespecific revenue data for nonregulated activities and that its regulatory objectives were satisfied by using a single  {O(account for this purpose. See Separation of Costs of Regulated Telephone Service from Costs of Nonregulated  {O(Activities, CC Docket No. 86-111, Order on Further Reconsideration, 3 FCC Rcd 6701, 670203,  13 (1988),  {O(aff'd sub nom. Southwestern Bell Corp. v. FCC, 896 F.2d 1378 (D.C.Cir. 1990).  Thus, we grant USTA's petition, eliminating Account 5010 and revising the language in sections 32.23(c) and 32.5280(a), to require that all nonregulated revenues be recorded in Account  S(5280.R~ yO(ԍWe note the concerns expressed by the PaPUC and the OCC on this matter. They argue that consolidating these accounts will, among other things, make it more difficult for regulators to determine whether  {O^ (carriers are engaged in anticompetitive behavior.  See PaPUC Reply Comments at 9; OCC Reply Comments at 1. For federal purposes, we do not require this additional detail. States are free to require such detail for their purposes.  S`("35.` ` Revision to Section 32.16, Changes in Accounting Standards.  Section 32.16 of the Commission's rules requires carriers to revise their records and accounts to reflect new accounting standards prescribed by the Financial Accounting Standards Board (FASB). This section provides that Commission approval of a change in an accounting standard shall automatically take effect 90 days after a carrier notifies the Commission of its intention to follow a new standard. In the notification to the Commission, carriers are required to provide a revenue requirement study that analyzes the effects  Sr(of the accounting change for the current year and a projection for three years into the future.ISr0  yOB(ԍ47 C.F.R.  32.16(a).I In the  SJ (Accounting Notice, we proposed to relieve carriers of the requirement to file the projected future  S$ (effects of an accounting change in their notifications.gT$  {O(ԍAccounting Notice, 13 FCC Rcd at 12983,  17.g Several large ILECs argue that we should go beyond our proposal and allow price cap ILECs to adopt new accounting standards prescribed by the  S (FASB without any requirement to notify, or obtain approval from the Commission.U R  {O(ԍSee, e.g., GTE Comments at 18; SBC Comments at 30; Ameritech Comments at 3; USTA Comments at 27. MCI argues that  S (the review process should be retained to assure uniformity in accounting practice.TV  {O(ԍSee MCI Reply Comments at 14.T After considering  S (the comments, we have decided to adopt the proposal in the Accounting Notice. We conclude that we no longer need to receive projected effects of an accounting change routinely. Although this information was used in the past to assess the volatility of an accounting change over time, we have found that for most changes, an analysis of current effects is adequate to determine whether the change should be adopted. To the extent that projections are needed in the future, we can obtain them on an  S(ad hoc basis as necessary. We do not adopt the ILECs' recommendation that price cap ILECs should be allowed to adopt new standards with no notification at all. Accounting standard changes often raise questions regarding exogenous treatment under price cap rules. When they do, cost data must be available to resolve such issues."H>V0*&&``t"Ԍ S(ԙ#36.` ` Revision to Section 32.2000(b), Telecommunications Plant Acquired. Section 32.2000(b)(4) of the Commission's rules requires carriers to submit for Commission approval the journal entries made to record acquisitions from other entities of telecommunications plant that cost  S(more than $1 million for Class A carriers and $250,000 for Class B carriers.NW yO(ԍ47 C.F.R.  32.2000(b)(4).N In the Accounting  Sd(Notice, we proposed to eliminate this filing requirement.lXdX {O\(ԍAccounting Notice, 13 FCC Rcd at 1298384,  18. l Commenters support our proposal.mYd {O(ԍSee, e.g., Sprint Comments at 7; Lexcom Comments at 5.m We conclude that this requirement, which was established to ensure that plant acquired from other carriers is recorded at original cost as required in section 32.2000(b), is no longer necessary. The requirement to record plant acquired from other entities at original cost is well established, and we believe that other accounting safeguards such as ARMIS reporting and our audit program, together with our ability to obtain additional information as necessary, are sufficient to assure that carriers will comply with this  Sv(accounting requirement. Accordingly, we adopt the proposal in the Accounting Notice and eliminate the requirement for routine filing of these journal entries.  S ( E.XOrder on Reconsideration in CC Docket No. 96150 Section 274(f) Reporting  S (Requirements (#  S ($37.` ` In the Accounting Safeguards Order, we addressed the accounting safeguards necessary to satisfy the requirements of sections 260 and 271 through 276 of the Communications Act, as  S:(amended by the 1996 Act.Z:| yOV(ԍTelecommunications Act of 1996, Pub. L. No. 104104, 110 Stat. 56 (1996 Act). The 1996 Act amended the Communications Act of 1934. Section 274(a) prohibits any "Bell operating company or any affiliate [from] engag[ing] in the provision of electronic publishing that is disseminated by means of such Bell operating company's or any of its affiliates' basic telephone service," other than through "a separated  S(affiliate or electronic publishing joint venture."G[ yO6(ԍ47 U.S.C.  274(a).G This separated affiliate or electronic publishing joint venture must, among other requirements, "maintain separate books, records, and accounts and prepare  Sr(separate financial statements."I\rd  yOv(ԍ47 U.S.C  274(b)(1).I Section 274(f) establishes a reporting requirement for separate  SJ(electronic publishing affiliates created pursuant to section 274.K]J  yO (ԍ47 U.S.C.  274(f). K In the Accounting Safeguards Order, we concluded that in order to satisfy sections 274(b) and 254(k), we must apply our affiliate transactions rules, as modified in that order, to transactions between BOCs and their "separated"  S(electronic publishing affiliates or joint ventures.u^  {O$(ԍAccounting Safeguards Order, 11 FCC Rcd at 1763839,  218.u We concluded that our rules should require those"^0*&&``"  S(section 274 affiliates that already file an SEC Form 10K to file a copy with this Commission.N_ {Oh(ԍId. at 17645,  230.N For those section 274 affiliates that were not required to file a Form 10K with the SEC, we required them  S(to file an identical form with us.:`Z {O(ԍId.:  S`(%38.` ` SBC Communications, Inc. (SBC) filed a Petition for Reconsideration=a` yO(ԍPetition for Reconsideration of SBC Communications, Inc., filed Feb. 20, 1997 ("SBC Petition"). Petitions for reconsideration on other issues were filed by Ameritech, GTE, American Public Communications Council, Cincinnati Bell Telephone Company, Southern New England Telephone Company, MCI Telecommunications Corporation, and Cox Communications, Inc. The SBC Petition also addressed other issues. This order is limited to the section 274 issue. The remaining issues will be addressed in another Order on Reconsideration.= of the  S8(Accounting Safeguards Order asserting, among other things, that a simplified report for "separated entities" not already subject to the SEC's Form 10K requirements will satisfy the intent of section  S(274(f) because the phrase "substantially equivalent," as used in the statute, does not mean "identical."bXd  yO(ԍSBC Petition at 16. The following comments or responses were filed in CC Docket No. 96150 supporting SBC's argument: Ameritech Comments at 56; BellSouth Comments at 67; US West Comments at 6; Bell Atlantic/NYNEX Comments at 6. In addition, SBC recommended that the Commission accept unaudited financial statements that contain substantially the same financial information as the audited financial statements required by Item 8 of  Sr(Form 10K.cr  {O(ԍSBC Petition at 17. See also Ameritech Comments at 6; US West Comments at 6. BellSouth asserted that, because the SEC has adopted reduced reporting requirements for wholly owned companies, the Commission should omit certain items from the section 274(f) Form  S" (10K filing requirement.Kd"  yO(ԍBellSouth Comments at 67.K None of the parties specifically opposed SBC's petition. Cox, however, argued in its petition that our accounting rules do not provide interested parties with the data necessary  S (to detect crosssubsidization.Oe  {O(ԍSee Cox Petition at 69.O  S (&39.` ` In this Order, we grant SBC's petition in part and deny it in part. We agree that the reporting requirements can be streamlined for those entities that are not required by the SEC to file a Form 10K, but we decline to adopt SBC's proposal to submit unaudited information in its substantially equivalent form. Audited data provides a level of assurance that the company's internal controls are in place and functioning. In light of the private right of action permitted under section 274(e), third parties require assurances of the reliability and accuracy of the information reported in the Form 10K. Failure to require audited data could potentially undermine the analysis conducted by a third party to ascertain the existence of anti-competitive conduct. "B8e0*&&``"Ԍ S('40.` ` The SEC Form 10K is a voluminous report that contains a description of the company filing the report and its operations, financial statements with supporting financial data and major legal and financial disclosures concerning the company. The SEC Form 10K is comprised of the following items: Item 1, Business; Item 2, Properties; Item 3, Legal Proceedings; Item 4, Submission of Matters to a Vote of Security Holders; Item 5, Market for Registrant's Common Equity and Related Stockholder Matters; Item 6, Selected Financial Data; Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations; Item 8, Financial Statements and Supplementary Data; Item 9, Changes in and Disagreements with Accountants on Accounting and Financial Disclosure; Item 10, Directors and Executive Officers of the Registrant; Item 11, Executive Compensation; Item 12, Security Ownership of Certain Beneficial Owners and Management; Item 13, Certain Relationships and Related Transactions; and Item 14, Exhibits, Financial Statement Schedules and Reports on Form 8K. The SEC also has a limited version of the Form 10K for wholly owned subsidiaries. The limited version omits Items 4, 10, 11, 12, and 13, which are items that generally address issues related to investor information. The limited version also streamlines Items 6 and 7, which require data spanning a fiveyear period.  S ((41.` ` We conclude that the information contained in the limited version of SEC Form 10K, with certain modifications, will enable the Commission to monitor the electronic publishing affiliate's compliance with the section 274 requirements. We modify the limited Form 10K filing requirements to exclude Item 5 and include Item 10. Item 5 is related to stockholder matters that are not relevant to section 274. We retain Item 10 for section 274 affiliates because Item 10 contains information on directors and officers that would assist the Commission in monitoring the prohibition against sharing directors and officers. We find that these modifications will ensure that BOCs disclose key information about their electronic publishing affiliates in a manner that both satisfies the section 274(f) disclosure requirements and reduces their reporting burden.  S( F.Accounting for Computer Software Costs  S()42.` ` Generally accepted accounting principles (GAAP). Since 1985, the Commission has followed a policy of conforming regulatory accounting for carriers to GAAP, including new FASB  SR(standards, unless the principle or practice conflicts with the Commission's regulatory objectives.hf\R {O(ԍSee RAO Letter 20 Concerning Uniform Accounting for Postretirement Benefits Other Than Pensions, et  {O(al., 12 FCC Rcd 2321, (1997), citing Revision of Uniform System of Accounts for Telephone Companies to Accommodate Generally Accepted Accounting Principles, 102 FCC 2d 964 (1985).h Accordingly, several parties have taken the Commission up on its request for the submission of additional proposals for accounting changes by suggesting the adoption of GAAP accounting in lieu of  S(current Commission accounting for various purposes.g$ {Of!(ԍSee, e.g., Bell Atlantic Comments at 79; BellSouth Comments at 2021; SBC Comments at 3; Ameritech Comments at 8; US West Comments at 47; GTE Comments at 1819; USTA Comments at 3, 2125; ALLTEL Comments at 4. Some commenters opposed the use of GAAP in lieu of Commission accounting rules.  {O#(See, e.g., Oklahoma Corporation Commission Reply Comments; Ohio PUC Reply Comments at 214.  While a wholesale replacement of our accounting rules with GAAP is not warranted at this time as requested by some parties such issues will be considered as part of the Common Carrier Bureau's recently initiated comprehensive"g0*&&``" accounting review we do change our accounting rules relating to the use of GAAP in one respect in this order.  S(*43.` ` Specifically, when the Commission adopted the uniform system of accounts, we required that the original cost of operating system software be recorded in the same account as the  S8(associated plant rather than a separate software account.h8 {O(ԍSee Revision of the Uniform System of Accounts and Financial Reporting Requirements for Class A and  {Oj(Class B Telephone Companies (Parts 31, 33, 42, and 43 of the FCC's Rules), CC Docket No. 78196, Report  {O4(and Order, 60 Rad. Reg. 2d (P&F) 1111 (1986) at  132; 47 C.F.R. 32.2000(i). The Commission believed that this struck a balance between capitalization and expensing that was (a) more consistent with current industry practice, (b) reduced difficulties associated with segregations of costs and identifying periods of benefit when classifying software, and (c) gave greater weight to consideration of individual circumstances. The Commission further required that the  S(cost of subsequent additions and modifications be expensed barring exceptional circumstances.:iF {O (ԍId.: Later, the Commission clarified the requirements relating to software costs by directing that the cost of  S(all software not considered initial operating system software (i.e., application software) be recorded in conformance with GAAP, which could result in the expensing or capitalization of such software costs  Sr(depending on the circumstances.jr {O(ԍResponsible Accounting Officer Letter No. 7 (RAO 7), Part 32, Uniform System of Accounts for Class  {O(A and Class B CarriersQuestions and Answers (Issued July 7, 1987) at 4.  S" (+44.` ` In a related matter concerning GAAP, on March 4, 1998, the American Institute of Certified Public Accountants issued Statement of Position 981 ("SOP 981") to provide authoritative guidance on accounting for the costs of computer software effective for financial statements for fiscal  S (years beginning after December 15, 1998.0kX 4  yO~(ԍAmerican Institute of Certified Public Accountants (AICPA) Statement of Position 981, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, Issued by the Accounting Standards Executive Committee, March 4, 1998, at Summary.0 SOP 981 generally requires the capitalization of  S (software costs.@l\ T  {Ov(ԍId. at 5. SOP 981 requires that "once the capitalization criteria of the SOP have been met, external direct costs of materials and services consumed in developing or obtaining internaluse computer  {O(software...should be capitalized." Id.@ SOP 981 also requires the cost of upgrades and enhancements to be capitalized if  SZ(they result in additional functionality.:mZx {Or (ԍId.:  S (,45.` ` On August 3, 1998, Bell Atlantic and BellSouth ("Joint Petitioners") filed a petition for rulemaking to amend the Commission's existing Part 32 rules in order to accommodate recent" m0*&&``T"  S(changes in GAAP.n yOh(ԍPetition for Rulemaking to Amend Part 32 of the Commission's Rules, Uniform System of Accounts for Class A and Class B Telephone Companies, to Adopt the Accounting for Software Required by Statement of Position 981, filed August 3, 1998 ("Petition"). On August 13, 1998, the Commission released a Public Notice seeking comment on the petition. "BellSouth and Bell Atlantic File a Petition for Rulemaking to Amend Part 32 of the Commission's Rules to Adopt the Accounting for Software Required by Statement of Position 981,"  {OP(Public Notice, RM9341, 13 FCC Rcd 15524 (1998). Six parties submitted comments ("RM9341 Comments"): MCI Telecommunications Corporation (MCI); Cincinnati Bell Telephone (CBT); GTE Services Corporation (GTE); Ameritech; United States Telephone Association (USTA); Southwestern Bell Telephone Company, Pacific Bell, and Nevada Bell (collectively, SBC). Five parties submitted reply comments ("RM9341 Reply Comments"): Joint Petitioners; MCI WorldCom; GTE; Ameritech; SBC. All of the foregoing parties also filed comments or reply comments in this proceeding (CC Docket No. 9881). The Joint Petitioners request that the Commission change its rules governing the  S(treatment of software costs to conform with SOP 981.Eo*  yO (ԍPetition at 2.E Joint Petitioners request that capitalized  S(software costs be classified as an intangible asset to Account 2690, Intangibles.@p  {O (ԍId. at 4.@ Joint Petitioners also seek a waiver of the requirement to provide a revenue requirement study under section 32.16,  S`(Changes in accounting standards,Fq`L  yOL(ԍ47 C.F.R.  32.16.F of the Commission's rules.r"` yO(ԍPetition at 6. Joint Petitioners claim that good cause exists for the grant of a waiver because the Commission has modified the price cap rules to exclude exogenous treatment for accounting changes that have no cash flow impact. Therefore, because the accounting change has no impact on rates, a revenue requirement  {O4(study would serve no useful purpose. Id.IJ  S(-46.` ` All commenters, except MCI, agree with Joint Petitioners that software meets the definition of an intangible asset and that capitalized computer software costs should be treated as an  S(intangible asset in Account 2690, Intangibles.s {O&(ԍSee, e.g., Petition at 45; Ameritech RM9341 Comments at 2; CBT RM9341 Comments at 34; GTE RM9341 Comments at 36; USTA RM9341 Comments at 2. Joint Petitioners argue that their Petition seeks to avoid the inconsistency associated with the separate treatment of application and operating system software, which have the same physical properties and cannot be differentiated except for the type of  SH (program instructions the computer uses to perform its tasks.btH  {O (ԍSee Joint Petitioner's Reply Comments at 2.b MCI, on the other hand, contends that the Commission should continue to require the treatment of operating system software as a tangible asset, capitalized to the same account as the associated hardware, and depreciated over the economic  S (useful life of the plant.Mu  yO"$(ԍMCI RM9341 Comments at 34.M MCI claims that intangible treatment of operating system software would" Bu0*&&`` " severely complicate both cost accounting and service cost studies as well as increase the possibilities  S(of inaccurate or improper cost allocations.:v {O@(ԍId.:  S(.47.` ` We conclude that the facts and circumstances differ in each situation regarding types of software, and thus, it would not be appropriate to adopt a rule strictly requiring all software costs to be capitalized to a plant account or an intangible account. Instead, we find that SOP 981 and current  S(authoritative accounting guidance (i.e., GAAP) are sufficient to determine whether capitalizable software costs should be treated as an intangible asset recorded in the intangible asset account or  S(treated as a tangible asset classified to the same account as the associated hardware.ywZZ yO (ԍThe Accounting Standards Executive Committee, the senior technical body of the AICPA, decided that it was not necessary to characterize computer software as either intangible assets or tangible assets when similar  {OL (characteristics have not been made for most other assets. See SOP 981, p. 28,  65.y Accordingly,  S(all carriers must account for computer software costs in accordance with GAAP.Sx| {O(ԍSee 47 C.F.R.  32.12(a).S  SJ (/48.` ` Amortization. Commenters agree with Joint Petitioners that there is no need for the Commission to define specific amortization periods for software capitalized to the intangible asset  S (account. yZ  {O(ԍSee, e.g., Joint Petitioner's RM9341 Reply Comments at 46; Ameritech RM9341 Comments at 23; CBT RM9341 Comments at 46; GTE RM9341 Comments at 67; SBC RM9341 Comments at 3; USTA RM9341 Comments at 23.  Commenters recommend that amortization periods be determined by each company based on the estimated useful life of the software at the time it is placed into service consistent with  S (GAAP.\zZ 0  yO|(ԍCBT argues that the Commission should either not prescribe amortization periods at all or should adopt the ranges suggested in CBT's Comments (1 to 3 years for network based software and 2 to 5 years for general  {O (and administrative software). See CBT RM9341 Comments at 4.\ We agree with this position. We believe that GAAP and the Commission's rules concerning amortization accounting provide adequate guidance to ensure accurate and reliable cost information. Therefore, we do not elect to set amortization periods or amortization period ranges for software in this order. We expect, however, that amortization periods based on GAAP adopted for regulatory purposes will not be less than amortization periods used for external financial reporting purposes. We require any carrier wishing to adopt software amortization periods for regulatory purposes that are less than amortization periods used for external reporting purposes to obtain prior Commission approval.  SD(049.` ` In order to monitor the recording and reporting of capitalizable software costs in the intangible asset account for regulatory purposes, we require that carriers establish and maintain subsidiary record categories for general purpose computer ("GPC") software and network software within the intangible asset account. The cost of software upgrades and enhancements will continue to"R z0*&&``"  S(be expensed or capitalized in accordance with GAAP.{ yOh(ԍThe term "upgrades and enhancements" as used in this order and SOP 981 is synonymous with the term "subsequent additions and modifications" referred to and addressed in CC Docket 78196. We will also allow nonprice cap carriers to capitalize software upgrades and enhancements that may cause large onetime expense "spikes" regardless of whether such upgrades or enhancements result in additional functionality required for  S(capitalization under SOP 981.|(  {OH(ԍSee Revision of the Uniform System of Accounts and Financial Reporting Requirements for Class A and  {O(Class B Telephone Companies (Parts 31, 33, 42, and 43 of the FCC's Rules), CC Docket No. 78196, Report  {O(and Order, 60 Rad. Reg. 2d (P&F) 1111 (1986) at  132; Chouteau Telephone Company, et al., RM6911,  {O (Memorandum Opinion and Order, 5 FCC Rcd 2795, 279697,  13 (1990).  S8(150.` ` Expense limit requirement. As a result of the changes we are making in this Order adopting GAAP treatment for all computer software costs we must address the expense limit  S(requirements for general purpose computers in section 32.2000(a)(4)N} yO(ԍ47 C.F.R.  32.2000(a)(4).N of the Commission's rules. In  S(the Expense Limit Order, the Commission specifically retained the $500 expense limit for personal computers falling within Account 2124, General purpose computers, that includes the cost of operating  St(system software.c~Zt yO(ԍRevision to Amend Part 32, Uniform System of Accounts for Class A and Class B Telephone Companies to Raise the Expense Limit for Certain Items of Equipment from $500 to $750, CC Docket No. 95 {OD(60, Report and Order, 12 FCC Rcd 7566, 7572,  10 (1997) (Expense Limit Order).c In this Order, however, we eliminate the distinction between application and operating system software and adopt GAAP for the recording of computer software costs in Part 32. As a result, the cost of operating system software, classifiable to Account 2690, will no longer be recorded in Account 2124. Therefore, we must modify our rules to exclude the cost of operating system software from the $500 expense limit for personal computers falling within Account 2124.  S (251.` ` Other issues. We do not address Joint Petitioners' request for a waiver of the revenue requirement study because our action in this Order renders this request moot. A revenue requirement study is irrelevant and would serve no useful purpose because we are amending our rules to adopt the new accounting guidance in SOP 981. Similarly, we do not address exogenous treatment of the accounting change. We note that Joint Petitioners and all commenting parties agree that the accounting change does not necessitate an exogenous price cap adjustment because it does not affect a  S(carrier's cash flow, only the timing of the recovery of costs.  {O(ԍSee, e.g., SBC RM9341 Comments at 4; USTA RM9341 Comments at 3; GTE RM9341 Comments at 8; Ameritech RM9341 Comments at 3; MCI RM9341 Comments at 7.  SF( IV. CONCLUSION ă  S(352.` ` In this Order, we streamline the accounting requirements for midsized ILECs whose aggregate revenues are less than $7 billion. We also conclude that midsized ILECs should be permitted to submit their CAMs based on the Class B system of accounts, thereby reducing the"0*&&``v" reporting burden of carriers subject to CAM requirements. Midsized ILECs will now only be required to obtain an attestation every two years, instead of an annual financial audit requiring a positive opinion. For all carriers subject to our accounting rules, we reduce or eliminate a number of accounting requirements that are no longer necessary. In addition, we modify our holding in the  S`(Accounting Safeguards Order and conclude that the information contained in the limited version of the SEC Form 10K, with certain modifications, is sufficient to enable the Commission to monitor electronic publishing affiliates' compliance with the section 274 requirements. We deny ITTA's petition for forbearance on the issue that the Commission forbear from applying to midsized ILECs several reporting and recordkeeping requirements, including Class A accounting rules, CAM filings, audits, and detailed property records. We also amend our requirements regarding the accounting for computer software costs: the cost of all software must be recorded in conformance with GAAP. Finally, we recognize that our accounting and cost allocation rules need to be streamlined, and, as announced recently, the Common Carrier Bureau has initiated a comprehensive review of our accounting and reporting requirements.  S (u V. PROCEDURAL ISSUES ă  SZ( A.Regulatory Flexibility Analysis  S (X 1.X` ` Final Regulatory Flexibility Certification Report and Order in CC Docket No.  S(9881, RM9341 (#`  S(453.` ` The Regulatory Flexibility Act (RFA).Z {O(ԍThe RFA, 5 U.S.C.  601 et seq., has been amended by the Contract With America Advancement Act of 1996, Pub. L. No. 104121, 110 Stat. 847 (1996) (CWAAA). Title II of the CWAAA is the Small Business Regulatory Enforcement Act of 1996 (SBREFA).. requires that an agency prepare a regulatory flexibility analysis for notice-and-comment rulemaking proceedings, unless the agency certifies that "the rule will not, if promulgated, have a significant economic impact on a substantial number of small  S(entities."F yO(ԍ5 U.S.C.  605(b).F In the Accounting Notice,z yO4(ԍ1998 Biennial Regulatory Review Review of Accounting and Cost Allocation Requirements, CC  {O(Docket No. 9881, Notice of Proposed Rulemaking, 13 FCC Rcd 12973 (1998). the Commission certified that the proposed rules would not have a significant economic impact on a substantial number of small entities because such rules would reduce certain reporting requirements for midsized incumbent local exchange carriers (ILECs) and the  S(changes would be easy and inexpensive for midsized ILECs to implement.z" yO!(ԍWith respect to the Petition for Rulemaking filed by Bell Atlantic and BellSouth to amend the Commission's existing Part 32 rules in order to accommodate recent changes in generally accepted accounting  {O"(principles (GAAP), see Petition for Rulemaking to Amend Part 32 of the Commission's Rules, Uniform System of Accounts for Class A and Class B Telephone Companies, to Adopt the Accounting for Software Required by Statement of Position 981, filed August 3, 1998, the Commission concluded in the Report and Order that the facts and circumstances differ in each situation regarding types of software, thus it would not be appropriate to adopt a rule strictly requiring all software costs to be capitalized to a plant account or an intangible account. "%0*&&%" Instead, the Commission required that all carriers must account for computer software costs in accordance with  {OX(GAAP. See 47 C.F.R.  32.12(a), requiring financial records to be "kept in accordance with generally accepted accounting principles to the extent permitted by this system of accounts." This rule modification does not impose any additional compliance burden on small entities. No comments were"0*&&``" received concerning this certification. The Commission now reaffirms this certification with respect to the rules adopted in this Report and Order. The Commission anticipates that the rule changes adopted here will reduce regulatory and procedural burdens on small entities. The rule modifications do not impose any additional compliance burden on persons dealing with the Commission, including small entities. Accordingly, the Commission certifies, pursuant to section 605(b) of the RFA, that the rules adopted herein will not have a significant economic impact on a substantial number of small business entities, as defined by the RFA.  S(X 2.X` ` Supplemental Final Regulatory Flexibility Analysis Order on Reconsideration  S(in CC Docket No. 96150 (#`  SH (554.` ` As required by the Regulatory Flexibility Act (RFA), as amended,NH  {O(ԍSee 47 U.S.C.  603.N an Initial  S (Regulatory Flexibility Analysis (IRFA) was incorporated in the Notice of Proposed Rulemaking D {O(ԍSee Accounting Safeguards Under the Telecommunications Act of 1996, CC Docket No. 96112, Notice  {O(of Proposed Rulemaking, 11 FCC Rcd 9054 (1996). and  S (a Final Regulatory Flexibility Analysis (FRFA) was incorporated into the Report and Order in CC  S (Docket No. 96150.  {O(ԍSee Accounting Safeguards Under the Telecommunications Act of 1996, CC Docket No. 96150, Report  {O(and Order, 11 FCC Rcd 17539 (1996).  S (655.` ` In the RFA, the Commission certified that the rules adopted in the Report and Order  S\(would not have a significant economic impact on a substantial number of small entities.F\  yO(ԍ5 U.S.C.  605(b).F For the reasons stated below, the Commission certifies that the rule adopted herein in this Order on Reconsideration will not have a significant economic impact on a substantial number of small entities. This Supplemental Final Regulatory Flexibility Analysis (Supplemental FRFA) conforms to the RFA,  S(as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA).  yO(ԍ5 U.S.C.  601611. SBREFA was enacted a Subtitle II of the Contract with America Advancement Act of 1996 (CWAAA), Pub. L. No. 104121, 110 Stat. 847 (1996).  Sl(756.` ` Need for, and Objectives of, this Order on Reconsideration: In this Order on Reconsideration the Commission grants, in part, a petition for reconsideration regarding filing a "substantially equivalent" report for electronic publishing affiliates not already subject to Security and Exchange Commission (SEC) Form 10K requirements. The Commission finds that the reporting requirements can be streamlined for such entities, and concludes that the information contained in the"0*&&``" limited version of SEC Form 10K, with certain modifications, will enable monitoring of electronic publishing affiliate's compliance with section 274 of the Communications Act. The Commission therefore permits the limited SEC Form 10K, with the exclusion of Item 5 and inclusion of Item 10, to satisfy the section 274 requirements for electronic publishing affiliates not already subject to SEC Form 10K requirements.  S(857.` ` Summary of Significant Issues Raised by Reconsideration Petitions. No petitions were  S(received in direct response to the FRFA in the Report and Order, nor were small business issues raised.  Sr(958.` ` Description and Estimate of the Number of Small Entities to which the Rules Will  SJ (Apply. The RFA generally defines "small entity" as having the same meaning as the terms "small  S" (business," "small organization," and "small governmental jurisdiction."L"  yO (ԍ5 U.S.C.  601(6).L In addition, the term "small  S (business" has the same meaning as the term "small business concern" under the Small Business Act.C X yO(ԍ5 U.S.C.  601(3) (incorporating by reference the definition of "small business concern" in Small Business Act, 15 U.S.C.  632). Pursuant to 5 U.S.C.  601(3), the statutory definition of a small business applies "unless an agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition(s) in the Federal Register."C A small business concern is one which: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business  S (Administration (SBA).X  yO*(ԍSmall Business Act, 15 U.S.C.  632.X Section 121.201 of the SBA regulations defines a small telecommunications entity in SIC code 4812 (Telephone Companies Except Radio Telephone) as any entity with 1,500 or  S2(fewer employees at the holding company level.H2 yOj(ԍ13 C.F.R.  121.201.H As explained below, the terms "small entities" and "small businesses" do not encompass the Bell operating companies (BOCs), the parties affected by this Order in Reconsideration.  S(:59.` ` As noted in the associated Final Regulatory Flexibility Certification in CC Docket No.  Sj(96150, the RFA directs agencies to provide a Regulatory Flexibility Analysis in noticeandcomment rulemaking proceedings, unless the agency certifies that "the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities." The Commission's action on reconsideration in CC Docket No. 96150 affects only BOCs' affiliate entities engaged in electronic publishing. These rules do not apply to small entities because all entities subject to this rule are BOCs or entities associated or affiliated with BOCs. None of the BOCs is a small entity, since each BOC is an affiliate of a Regional Holding Company (RHC), and all the BOCs or their RHCs have more than 1,500 employees. Moreover, the entities affected by this rule that are associated or affiliated with the BOCs are not independently owned and operated, and therefore do not meet the definition of small entities. The Commission therefore certifies that the SEC Form 10K filing requirement adopted in"( 0*&&``x" this Order on Reconsideration will not have a significant economic impact on a substantial number of small entities.  S(;60.` ` Description of Projected Reporting, Recordkeeping, and Other Compliance  S`(Requirements. As discussed above, in this Order on Reconsideration the Commission concludes that the information contained in the limited version of SEC Form 10K, with the exclusion of Item 5 and inclusion of Item 10, will satisfy the section 274 requirements for electronic publishing affiliates not already subject to SEC Form 10K requirements. This reduces the reporting burden for BOC affiliates while providing sufficient information to the Commission to satisfy section 274 of the Communications Act.  SH (<61.` ` Report to Congress. The Office of Public Affairs, Reference Operations Division, shall provide a copy of this certification and Supplemental Final Regulatory Flexibility Analysis to the Chief Counsel for Advocacy of the SBA, and include it in the report to Congress pursuant to the  S (SBREFA.V  {O8(ԍSee 5 U.S.C.  801(a)(1)(A).V The certification and Supplemental Final Regulatory Flexibility Analysis will also be  S (published in the Federal Register.P Z {O(ԍSee 5 U.S.C.  605(b).P  SX( B.Final Paperwork Reduction Act Analysis  S(=62.` ` The decision herein, in CC Docket No. 9881 and ASD File No. 9864, has been analyzed with respect to the Paperwork Reduction Act of 1995, Pub. L. 104-13, and has been approved in accordance with the provisions of that Act. The Office of Management and Budget  S((OMB) approved the requirements under OMB control number 3060-0847 which expires October 31,  Sh(2001.  S(: VI. ORDERING CLAUSES ă  S(>63.` ` Accordingly, IT IS ORDERED that, pursuant to Sections 1, 2, 4, 11, 201205, and 218220 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 152, 154, 161, 201205, and 218220, Parts 32 and 64 of the Commission's rules, 47 C.F.R. Parts 32 and 64, is AMENDED, as shown in Appendix B below.  S(?64.` ` IT IS FURTHER ORDERED that, pursuant to Section 220(g) of the Communications Act of 1934, as amended, 47 U.S.C.  220(g), changes to our Part 32, System of Accounts, adopted in this Order shall take effect six months after publication in the Federal Register. We will, however, permit carriers to implement changes with respect to accounting for computer software costs, discussed  S`(in Section III. F., supra, as of January 1, 1999.  S (@65.` ` IT IS FURTHER ORDERED that, pursuant to Sections 1, 4, and 220 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154, and 220, and Section 1.401 of the" 0*&&``" Commission's rules, 47 C.F.R.  1.401, the Petition for Rulemaking of the United States Telephone Association is GRANTED to the extent indicated herein.  S(A66.` ` IT IS FURTHER ORDERED that, pursuant to Sections 1, 4, and 220 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154, and 220, and Section 1.401 of the  S8(Commission's rules, 47 C.F.R.  1.401, the Petition for Reconsideration of the Accounting Safeguards  S(Order of SBC Communications, Inc. is GRANTED in part and DENIED in part. The requirements and regulations adopted with respect to changes to section 274(f) reporting requirements shall become effective upon approval by OMB of the new information collection requirements adopted herein, but no sooner than 30 days after date of publication in the Federal Register.   SL (B67. ` ` IT IS FURTHER ORDERED that, pursuant to Sections 1, 4, and 220 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154, and 220, and Section 1.401 of the Commission's rules, 47 C.F.R.  1.401, the Independent Telephone and Telecommunications Alliance Petition for Forbearance is DISMISSED in part and DENIED in part to the extent indicated herein.  S (C68.` ` IT IS FURTHER ORDERED that, pursuant to Sections 1, 4, and 220 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154, and 220, and Section 1.401 of the Commission's rules, 47 C.F.R.  1.401, the Petition for Rulemaking of Bell Atlantic and BellSouth is GRANTED in part, to the extent indicated herein, and DENIED in part.  S(D69.` ` IT IS FURTHER ORDERED that the Commission's Office of Public Affairs, Reference Operations Division, shall send a copy of this Report and Order, including the Final Regulatory Flexibility Certification and Supplemental Final Regulatory Flexibility Analysis, to the  SD(Chief Counsel for Advocacy of the Small Business Administration.PD {O(ԍSee 5 U.S.C.  605(b).P ` `  ,hFEDERAL COMMUNICATIONS COMMISSION ` `  ,hMagalie Roman Salas ` `  ,hSecretary",Z0*&&``V"  S( APPENDIX A ă  UParties Filing Comments and Reply Comments J D(in CC Docket No. 9881 and ASD File No. 9864)  S(Parties Filing Comments ALLTEL Communications Service Corporation (ALLTEL) Ameritech AT&T Corporation (filed in ASD File No. 9864 only) Bell Atlantic Telephone Companies (Bell Atlantic) BellSouth Corporation and BellSouth Telecommunications, Inc. (BellSouth) Cincinnati Bell Telephone Company (CBT) COMSAT Mobile Communications (COMSAT) GTE Service Corporation (GTE) Frontier Telephone of Rochester, Inc. (Frontier) Independent Telephone & Telecommunications Alliance (ITTA) Lexcom Telephone Company (Lexcom)  S0(MCI Telecommunications Corporation (MCI) Southwestern Bell Telephone Company, Pacific Bell, and Nevada Bell (SBC) Sprint Local Telephone Companies (Sprint) US West, Inc. United States Telephone Association (USTA)  S@(Parties Filing Reply Comments ALLTEL Ameritech AT&T Bell Atlantic BellSouth Florida Public Service Commission (Florida PSC) General Services Administration (GSA) GTE MCI Oklahoma Corporation Commission (OCC) Pennsylvania Public Utility Commission (PaPUC) Public Service Commission of Wisconsin (PSCW) Public Utility Commission of Ohio (PUCO) Public Utility Commission of Texas (Texas PUC) State Members of the Joint Board in CC Docket No. 80286 US West, Inc. USTA "H$0*&&``!"  S(   uAPPENDIX B FINAL RULES ă Part 32 of Title 47 of the C.F.R. is amended as follows:  S`( PART 32 UNIFORM SYSTEM OF ACCOUNTS FOR TELECOMMUNICATIONS  S8(COMPANIES  S(1.The authority citation for Part 32 continues to read as follows: Authority: 47 U.S.C. 154(i), 154(j) and 220 as amended, unless otherwise noted.  S (2.Table of Contents, Part 32Uniform System of Accounts for Telecommunications Companies, Subpart C Instructions for Balance Sheet Accounts is revised to rename 32.2114 Special purpose vehicles to 32.2114 Tools and other work equipment and to delete 32.2115 Garage work equipment, and 32.2116 Other work equipment.  S0(3.Table of Contents, Part 32Uniform System of Accounts for Telecommunications Companies, Subpart D Instructions for Revenue Accounts is revised to delete 32.5010 Public telephone revenue.  S(4.Table of Contents, Part 32Uniform System of Accounts for Telecommunications Companies, Subpart E Instructions for Expense Accounts is revised to rename 32.6114 Special purpose vehicles expense to 32.6114 Tools and other work equipment expense and to delete 32.6115 Garage work equipment expense and 32.6116 Other work equipment expense.  S(5.Section 32.11 Classification of companies is amended by revising paragraphs (b), (c), (d), and (e) to read as follows:  S((  32.11 Classification of companies .  S(` `  ,*h*hh*** (b) Class A companies, except midsized incumbent local exchange carriers, as defined by  32.9000, shall keep all the accounts of this system of accounts which are applicable to their affairs and are designated as Class A accounts. Class A companies which include midsized incumbent local exchange carriers shall keep Basic Property Records in compliance with the requirements of  32.2000(e) and (f) of subpart C. (c) Class B companies shall keep all accounts of this system of accounts which are applicable to their affairs and are designated as Class B accounts. Class B companies shall keep Continuing Property Records in compliance with the requirements of  32.2000(e)(7)(A) and 32.2000(f) of subpart C. "% 0*&&``(#"Ԍ(d) Class B companies and midsized incumbent local exchange carriers, as defined by  32.9000, that desire more detailed accounting may adopt the accounts prescribed for Class A companies upon the submission of a written notification to the Commission. Midsized incumbent local exchange carriers shall maintain subsidiary record categories necessary to provide the pole attachment data currently provided in the Class A accounts. (e) The classification of a company shall be determined at the start of the calendar year following the first time its annual operating revenue from regulated operations equals, exceeds, or falls below the indexed revenue threshold.  SH (6.Section 32.16 Changes in accounting standards is amended by revising paragraph (a) to read as follows:  S (  32.16 Changes in accounting standards. (a) The company's records and accounts shall be adjusted to apply new accounting standards prescribed by the Financial Accounting Standards Board or successor authoritative accounting standardsetting groups, in a manner consistent with generally accepted accounting principles. The change in an accounting standard will automatically take effect 90 days after the company informs this Commission of its intention to follow the new standard, unless the Commission notifies the company to the contrary. Concurrent with informing this Commission of its intent to adopt an accounting standards change, the company shall also file a revenue requirement study for the current year analyzing the effects of the accounting standards change. Furthermore, any change subsequently adopted shall be disclosed in annual reports to this Commission.  S((b)` ` * ,*h*hh  Sx(7.Section 32.23 Nonregulated activities is amended by revising paragraph (c) to read as follows:  S((  32.23 Nonregulated activities   S(` `  ,h*hh***ppX* (c) When a nonregulated activity does involve the joint or common use of assets and resources in the provision of regulated and nonregulated products and services, carriers shall account for these activities within accounts prescribed in this system for telephone company operations. Assets and expenses shall be subdivided in subsidiary records among amounts solely assignable to nonregulated activities, amounts solely assignable to regulated activities, and amounts related to assets and expenses incurred jointly or in common, which will be allocated between regulated and nonregulated activities. Carriers shall submit reports identifying regulated and nonregulated amounts in the manner and at the times prescribed by this Commission. Nonregulated revenue items not qualifying for incidental treatment as provided in 32.4999(1), shall be recorded in separate subsidiary record categories of Account 5280, Nonregulated operating revenue. Amounts assigned or allocated to regulated products or services shall be subject to part 36 of this chapter. "%!0*&&``(#"Ԍ  S(8.Section 32.2000 Instructions for telecommunications plant accounts is amended by revising subparagraph (4) of paragraph (a) and deleting the contents of paragraph (i) as follows:  S`(  32.2000 Instructions for telecommunications plant accounts .  X(a) ***(# X` ` (4) The cost of the individual items of equipment, classifiable to Accounts 2112, Motor vehicles; 2113, Aircraft; 2114, Special purpose vehicles; 2115, Garage work equipment; 2116, Other work equipment; 2122, Furniture; 2123, Office equipment; 2124, General purpose computers, costing $2,000 or less or having a life of less than one year shall be charged to the applicable expense accounts, except for personal computers falling within Account 2124. Personal computers classifiable to Account 2124, with a total cost for all components of $500 or less, shall be charged to the applicable Plant Specific Operations Expense accounts. If the aggregate investment in the items is relatively large at the time of acquisition, such amounts shall be maintained in an applicable material and supplies account until items are used.(# X(i) Reserved(#  S(9.Paragraph 32.2000(b)(4) is deleted.   S(10.Paragraph 32.2000(j) Plant accounts to be Maintained by Class A and Class B telephone companies is revised as follows:  S( ` `  ,*h*hh***  Sx( (j) Plant Accounts to be Maintained by Class A and Class B telephone companies as indicated:  S(` `  ,hhhClass A  Class B H S(Account Title` `  ,hhhAccount  Account REGULATED PLANT  S (` `  ,*h*hh*** TELECOMMUNICATIONS PLANT IN SERVICE (TPIS) TPISGeneral Support assets: " %"0*&&```""Ԍ` ` Special purpose vehicles 2114 is renamed Tools and other work equipment 2114, and Garage work equipment 2115 and Other work equipment 2116 are deleted.  S(` `  ,*h*hh***  S(11.Section 32.2003 Telecommunications plant under construction is amended by revising paragraph (a) as follows:  S(  32.2003 Telecommunications plant under construction. (a) This account shall include the original cost of construction projects (note also  32.2000(c)) and the cost of software development projects that are not yet ready for their intended use. ` `  S (12.Section 32.2114 Special purpose vehicles is renamed and revised to read as follows:  SX(  32.2114 Tools and other work equipment. This account shall include the original cost of special purpose vehicles and the original cost of tools and equipment used to maintain special purpose vehicles and items included in Accounts 2112 and 2113. This account shall also include the original cost of poweroperated equipment, general purpose tools, and other items of work equipment.  S(13.Section 32.2115 Garage work equipment is deleted.  S(14.Section 32.2116 Other work equipment is deleted.  S((15.Section 32.2124 General purpose computers is amended by deleting paragraph (c) and revising paragraph (d) as follows:  S(  32.2124 General purpose computers. * * * * * (c) Reserved (d) This account does not include the cost of computers and their associated peripheral devices associated with switching, network signaling, network operations, or other specific telecommunications plant. Such computers and peripherals shall be classified to the appropriate  SH$(switching, network signaling, network expense, or other plant account. "%#0*&&``(#"Ԍ S(16.Section 32.2311 Station apparatus is amended to revise paragraph (d) as follows:  S(  32.2311 Station apparatus .  S`(` `  ,*h*hh*** ` ` (d) Operator head sets and transmitters in central offices and at private branch exchanges, and test sets such as those used by wire chiefs, outside plant technicians, and others, shall be included in Account 2114, Tools and other work equipment, Account 2220, Operator systems, or Account 2341, Large Private Branch Exchanges, as appropriate.  SH (` `  ,*h*hh***  S (17.Section 32.2690 Intangibles is amended by revising paragraph (c) as follows:  S (  32.2690` ` Intangibles. (#` * * * * * (c) The cost of other intangible assets, not including software, having a life of one year or less shall be charged directly to Account 6564, Amortization Expense Intangible. Such intangibles acquired at small cost may also be charged to Account 6564, irrespective of their term of life. The cost of software having a life of one year or less shall be charged directly to the applicable expense account with which the software is associated.  S(18.Section 32.3500 Accumulated amortization intangible is amended by revising paragraph (c) and adding paragraph (d) as follows:  Sx(  32.3500 Accumulated amortization intangible. * * * * * (c) When any item carried in Account 2690, other than software, is sold, relinquished, or otherwise retired from service, this account shall be charged with the cost of the retired item. Remaining amounts associated with the item shall be debited to Account 7360, Other Nonoperating Income. (d) When software that is classified to Account 2690 is sold, relinquished, or otherwise retired from service, this account shall be credited, and Account 6564, Amortization expense intangible, shall be charged with the unamortized cost of the existing software.  SH$(19.Section 32.4999 General is amended by revising paragraph (1) as follows:  S%(  32.4999 General. "%$0*&&``(#"Ԍ*****  S((l) Nonregulated revenues. The nonregulated revenue account shall be used for nonregulated operating revenues when a nonregulated activity involves the common or joint use of assets or resources in the provision of regulated and nonregulated products or services as required in  32.23(c) of this subpart. Revenues from nontariffed activities offered incidental to tariffed services may be accounted for as regulated revenues, provided the activities are outgrowths of regulated operations and the revenues do not exceed, in the aggregate, one percent of total revenues for three consecutive years. Such activities must be listed in the Commissionapproved Cost Allocation Manual for any company required to file a Cost Allocation Manual.  SJ ((m) *** (n) Revenue Accounts to be Maintained as indicated:  S (` `  ,hhhClass A  Class B H S (Account Title` `  ,hhhAccount  Account Local Network Services Revenues: Public telephone revenue 5010 is deleted.  Sj(20.Section 32.5010 Public telephone revenue is deleted.  S(21.Section 32.5280 Nonregulated operating revenue is amended by revising paragraph (a) as follows:  Sz(  32.5280 Nonregulated operating revenue . (a) This account shall include revenues derived from a nonregulated activity involving the common or joint use of assets or resources in the provision of regulated and nonregulated products or services.  Sb(22.Section 32.5999 General is amended by revising paragraph (f)(5) and (h) as follows:  S (  32.5999 General .  S!(` `  ,h*hh***ppX*  Sr#((f)(5) Clearances. This subsidiary record category shall include amounts transferred to Construction accounts (see  32.2000(c)(2)(iii)), other Plant Specific Operations Expense accounts and/or Account 3100, Accumulated Depreciation (cost of removal; see  32.2000(g)(l)(iii)), as"$%%0*&&```"" appropriate, from Accounts 6112, Motor vehicles expense, 6114, Tools and other work equipment expense, 6534, Plant operations and administration expense, . . .  S((g)` ` * ,*h*  S8((h) Expense accounts to be maintained.  S(` `  ,hhhppXClass A  xx Class B  S(Account Title ,hhhppXAccount  xx Account  SJ (INCOME STATEMENT ACCOUNTShh  Plant specific operations expense:  X` hp x (#%'0*,.8135@8: