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"7>NGI "qOaOb#Xv P7XP##Xv P7XP#annotation tK&7>annotation textGw/ "7>NGI "r2c(d"i~'^:LpddDDDdp4D48ddddddddddDDpppdLd||p|||D8DpdDddXdXDdp88d8pdddLL8pXdXLD,DpD4ppDDD4DDDDDDdDd8dddddXXXXXL8L8L8L8pddddpppp|Xdddd|Xd|ddddXXpXXXXXdddpdppL8LdLDLdpppd|8|h|D|L|8pppddLLLpLpLpLpp|l|8|ppppppp|p|L|L|Ld|DppL|D|d4ddC8CWddddddddddddddddddddddddddddddddddddddddNHxxHddLdddddd4\4  pG; W!@(#,h@\  P6G;hP!H5!,),5\  P6G;,P\"{,W80,-BZW*f9 xr G;X \#5hC:,-rXh*f9 xr G;XX Fz-X80,D|X9 xOG;6jC:,D̃Xj9 xOG;X `  Times New RomanN:\WINAPPMAIL\B&ARROW.INI X- X- w Federal Communications Commission`(# FCC 98249 ă  yxdddy   x` `  hh@hpp  xx  X- #X\  P6G;ɒP##Xj\  P6G;ynXP#`(#(#X ă  X-+2 Before the w Federal Communications Commission  X-Washington, D.C. 20554 ă In the Matter of R) R)  XH-Tariffs Implementing R)hppCC Docket 97250 Access Charge ReformR) T  X - MEMORANDUM OPINION AND ORDER ON RECONSIDERATION ă   X -x Adopted:  September 29, 1998@hpp Released:   September 29, 1998 By the Commission:  X4-I.x Introduction x1. On June, 1, 1998, the Commission released an order concluding an investigation of  X-the tariffs implementing access reform filed by the price cap local exchange carriers (LECs). {Oh-ԍxTariffs Implementing Access Charge Reform, CC docket No. 97250, Memorandum Opinion & Order,  {O2-FCC 98107 (rel. June 1, 1998)(Access Reform Implementation Order).  X-SBC Communications, Inc. (SBC)$ yO-ԍxSBC filed on behalf of Southwestern Bell Telephone Company, Pacific Bell, and Nevada Bell, referred to jointly as "the SBC Companies." has filed a petition for reconsideration of the Access  X-Reform Implementation Order. In this Order, we grant SBC's petition in part and deny it in part.  X- II.xDefinitions of Primary and Nonprimary Residential Lines  XR-x2. SBC seeks reconsideration of the Commission's decision in the Access Reform  X=-Implementation Order to require refunds of excess charges that resulted from the undercount of Pacific Bell's nonprimary residential lines.  X-x A.` ` Background  X -x3. The Commission's rules permit price cap LECs to recover their permitted common" |0*''ZZ" CfT M|Cline revenues through: (1) a monthly perline subscriber line charge (SLC) billed to end users; (2) a monthly perline presubscribed interexchange carrier charge (PICC) billed to the IXCs to whom the end user has presubscribed; and (3) a perminute carrier common line (CCL)  X-charge billed to IXCs. {O4-#C\  P6QɒP##X\  P6G;ɒP#эx Access Charge Reform, CC Docket No., 96262, First Report and Order, 12 FCC Rcd 15982, 16005  {O-(1997) (Access Charge Reform Order); Southwestern Bell Telephone Company, et al, v. Federal Communications  {O-Commission, 1998 WL 485387 (8th Cir., August 19, 1998); Order on Reconsideration, 12 FCC Rcd 10119  {O-(1997); Second Order on Reconsideration, 12 FCC Rcd 16606 (1997) (collectively, Access Charge Reform  {O\-Proceeding).đ Effective January 1, 1998, the SLC is capped at $3.50 for primary residential lines and single line businesses, $5.00 for nonprimary residential lines, and $9.00  X-for multiline businesses (MLB).J yO -ԍx47 C.F.R.  69.152(e).J Permitted interstate common line revenues not recoverable from SLCs because of the caps may be recovered through PICCs. PICCs are capped at $.53 for primary residential lines and singleline business lines, $1.50 for nonprimary residential  XH-lines, and $2.75 for MLB lines in 1998.KH yO -ԍx47 C.F.R.  69.153(d). K The remainder of permitted common line revenues  X1-is recoverable through the CCL charge. In the Access Charge Reform Order, the Commission intended LECs to recover nontraffic sensitive costs through flat fees, such as SLCs and PICCs, and to eliminate implicit crosssubsidies between classes of end users. x4. If price cap LECs' nonprimary residential line counts are too low, revenues recoverable through SLCs and PICCs are understated, and the maximum CCL charge is too high. For price cap LECs that no longer have a CCL charge or other perminute residual  X-charges, {O-#X\  P6G;ɒP#эxSee 47 C.F.R.  69.155, 69.156(d)(e). nonprimary residential lines not identified as nonprimary make a smaller contribution to permitted common line revenues than they should, and the maximum multiline business PICC is too high.  X6-x5. On January 28, 1998, the Common Carrier Bureau (Bureau) designated for investigation the line counts for primary and nonprimary residential lines for all price cap  X-LECs.W^4  {O-#X\  P6G;ɒP#эxTariffs Implementing Access Charge Reform, CC Docket No. 97250, Order Designating Issues for  {O -Investigation and Order on Reconsideration, 13 FCC Rcd 2249 (1998) (Access Reform Tariffs Designation  {O!-Order).W The Bureau observed that nonprimary residential line counts were lower than various published estimates and price cap LECs' public statements. The Bureau required the price"Z 0*$$ZZ"  X-cap LECs to identify the number of linesEX yOy-#X\  P6G;ɒP#эxNumber of lines are reported in price cap LECs' tariffs as demand figures over a twelvemonth period. In their Tariff Review Plans (TRPs), price cap LECs report the number of lines as the actual number of residential loops times twelve.E in each of the following categories: (1) primary residential lines; (2) singleline business lines; (3) nonprimary residential lines; and (4) Basic  X-Rate Interface Integrated Services Digital Network (BRIISDN) lines.  {Ok-#X\  P6G;ɒP#эxAccess Reform Tariffs Designation Order, 13 FCC Rcd at 2257.  X-x6. The Access Charge Reform Order did not provide a definition of primary and nonprimary residential lines. Instead, the Commission initiated a rulemaking proceeding that  Xx-sought comment on how to define primary and nonprimary residential lines. xz {O -#X\  P6G;ɒP#эxAccess Charge Reform Order, 12 FCC Rcd at 16016. Incumbent LECs, therefore, developed their own definitions of primary and nonprimary residential lines in order to comply with the access reform rate structure reforms, which became effective  X3-January 1, 1998. In the Access Reform Tariffs Designation Order, the Bureau designated for investigation, for all price cap LECs, the issues of whether their definitions of primary and nonprimary lines were reasonable, and whether the definitions were applied consistently and  X -in a reasonable manner in calculating the number of primary and nonprimary lines.  {O-#X\  P6G;ɒP#эxAccess Reform Tariffs Designation Order, 13 FCC Rcd at 2257. The Bureau also tentatively concluded that the definition used by SBC, among others, was unclear and required further elaboration. SBC filed additional language attempting to clarify its  X -definition.  {O-#X\  P6G;ɒP#эxSee SBC Direct Case at 2; see also Access Reform Implementation Order at  37.  X}-x7. In the Access Reform Implementation Order, the Commission calculated the percentage of nonprimary residential lines to total residential lines reported by the price cap LECs and compared these percentages with data collected by the Commission staff, independent studies of additional residential line penetration levels, and price cap LECs'  X#-public statements.D #0  {O-ԍxAccess Reform Implementation Order, at  11. The two Commission staff studies, the Additional Line Study and Excess Residential Loop Study, are based on data filed on the record in that proceeding by the  {O -Commission staff. See Letter from David L. Hunt, Staff Attorney, FCC to Magalie Roman Salas, Commission Secretary (dated May 27, 1998). The independent studies and public statements made by price cap LECs were  {O("-also made part of the record in that proceeding. Id.D Upon completing the investigation, the Commission determined that SBC reported unreasonably low percentages of Pacific Bell's nonprimary residential lines. Pacific Bell reported nonprimary residential line counts of only 2.67 percent, the lowest penetration" 0*$$ZZ" level reported by any price cap LEC. This estimate is approximately 15 percentage points lower than the 17.61 percent nonprimary residential line count reported by the Additional Line Study for Pacific Bell. Thus, Pacific Bell reported only 15 percent of the nonprimary  X-residential lines identified in the Additional Line Study.h {O4-ԍxAccess Reform Implementation Order, at  25. h The Commission ordered Pacific Bell to make refunds for any overcharges in multiline PICCs, nonprimary residential PICCs, or residual perminute rates that resulted from the undercount of its nonprimary residential  Xv-lines.gvZ {O -ԍxAccess Reform Implementation Order, at  179.g The Commission prescribed a nonprimary line count that was 70 percent of the non X_-primary line count identified by the Additional Line Study.o_ {O -ԍxAccess Reform Implementation Order, at  2931.o Additionally, the Commission investigated the issue of whether the definitions of primary and nonprimary lines provided by all price cap LECs were reasonable. The Commission concluded that SBC's definition of nonprimary lines, as applied by Pacific Bell, was unreasonable. The Commission stated that Pacific Bell's application of SBC's definition "is patently unreasonable because it fails to identify additional residential lines even when the lines are billed to the same name and  X -location."f ~ {O-ԍxAccess Reform Implementation Order, at  38.f  X -x B.` ` SBC's Petition for Reconsideration  Xy-x8. SBC contends that the Access Reform Implementation Order forces Pacific Bell to  Xd-implement retroactively a heretofore unstated Commission definition of nonprimary lines.}d yO%-ԍxPetition for Reconsideration of SBC Communications, Inc. (SBC Petition) 24.} SBC argues that the Commission should reverse its order for Pacific Bell to make refunds to  X6-those customers that would have paid lower PICC rates.C6 yO-ԍxSBC Petition at 2.C SBC further maintains that, in the  X-Access Reform Implementation Order, the Commission made its finding based on irrelevant evidence to which SBC did not have an opportunity to respond. Alternatively, SBC argues that even if the evidence would justify the Commission's result, a refund is not warranted in  X-this matter.C0  yO!-ԍxSBC Petition at 2.C x  X-x C.` ` Discussion " 0*$$ZZ"Ԍ X-ԙx9. The Commission did not promulgate a new definition of nonprimary lines in the  X-Access Reform Implementation Order. In the Access Reform Tariffs Designation Order, the Bureau stated that the purpose of the investigation of the definitions used by some price cap LECs to identify primary and nonprimary residential lines was "to determine whether the definitions that price cap LECs did use are reasonable, and whether these definitions were applied consistently and in a reasonable manner in calculating the number of primary and  Xx-nonprimary residential lines."nx {O-ԍxAccess Reform Tariffs Designation Order, at 2255.n As stated by AT&T, "the Commission undertook an  Xa-extensive investigation of the nonprimary line issue" (emphasis in original).,\aZ {Ol -ԍxEx Parte AT&T Opposition to Petition for Reconsideration of SBC Communications, Inc., Tariffs  {O6 -Implementing Access charge Reform, CC Docket No. 97250 (filed July 1, 1998) (filed August 4,1998) (AT&T Opposition) at 2., Upon the conclusion of its investigation, the Commission found one aspect of Pacific Bell's definition to be unreasonable. Specifically, the Commission found unreasonable the definition of nonprimary lines applied by the SBC Companies in cases where a company does not identify as  X -nonprimary the additional residential lines billed under the same name at the same location.m ~ {O4-ԍxAccess Reform Implementation Order, at  33, 3738.m In finding the definition of nonprimary lines as used by Pacific Bell to be unreasonable, the Commission did not adopt a new definition of nonprimary lines, but simply acted pursuant to  X -its wellestablished authority to make interpretations of its rules and orders.h  {O-ԍxStinson v. United States, 508 U.S. 36, 45 (1993).h When the Commission thus exercises its discretion to develop the meaning of its rules on a casebycase basis, applying an interpretation in the case in which it is developed is in no sense  X{-"retroactive."l{ {O-ԍx SEC v. Chenery Corp., 332 U.S. 194, 203 (1947).l Indeed, such interpretations must be applied in the cases in which the interpretations are made.  X8-x 10. SBC argues that it was not afforded an opportunity to respond to evidence, including a staff study, placed into the record on May 27, 1998, and was therefore denied due  X -process.L 4  yO-ԍxSBC Petition at 56. L SBC's opportunity to respond to the evidence filed on May 27, 1998, in its instant Petition for Reconsideration, satisfies due process requirements. As the Commission has stated previously, as long as a petitioner is able to petition for reconsideration, "there has been" 0*$$ZZ"  X-no deprivation to which a due process claim might apply." {Oy-ԍxSee, e.g.,Ten Applications For Authority To Construct And Operate MultiPoint Distribution Service  {OC-Stations At Five Transmitter Sites, 10 FCC Rcd 11671 at  57. Indeed, SBC, in its Petition for Reconsideration, addresses its concerns with the May 27, 1997, evidence. Specifically, SBC claims that the materials used by the Commission in the investigation of primary and nonprimary line counts are irrelevant. SBC also claims that the studies included: (a) an unidentified number of facilities which may not have had "working number[s]," and (b) an unidentified number of reported households which may have contained "multiple family units." SBC also asserts that the studies produced by Merrill Lynch and Salomon Brothers were "estimates," not "facts." Although the studies by Commission staff, Merrill Lynch, and Salomon Brothers may not be without flaws, they were and continue to be the best objective analyses available to the Commission for determining whether Pacific Bell's nonprimary line count was reasonable. In attacking the two Commission staff studies, SBC is essentially stating that the Commission cannot base its findings on data and materials compiled by its staff. This Agency's mission would be severely impaired if it could not rely on materials and analyses of its staff. Additionally, both the Additional Line Study and the Excess Residential Loop Study relied heavily on data that was more than three years old and available to the  X -public.M $ {O|-ԍxSee 5 U.S.C.  552.M If anything, the use of such data inured to the benefit of SBC because the record  X-showed that the growth rate for nonprimary lines exceeds the growth rate for primary lines.f {O-ԍxAccess Reform Implementation Order, at  21.f Furthermore, the Commission accounted for the imprecision in the studies, and the lack of a definition for primary and nonprimary lines, by prescribing a nonprimary residential line count of 70 percent of the Additional Line Study, instead of applying 100 percent of the  X4-Additional Line Study, also inuring to the benefit of Pacific Bell.m4H {O--ԍxAccess Reform Implementation Order, at  2930.m  X-x  11. Although SBC objects to the studies used by the Commission, SBC does not argue that the Commission prescription overstates the nonprimary line count that would result  X-if a reasonable nonprimary line definition were applied to Pacific's actual billing records." {Oc-ԍxSee MCI Opposition to SBC Petition for Reconsideration (MCI Opposition) Tariffs Implementing Access  {O- -charge Reform, CC Docket No. 97250 (filed July 1, 1998) (filed July 14, 1998) (MCI Opposition) at 5. " In fact, in the past year, SBC has made several statements extolling Pacific Bell's percentage of residential secondary line penetration. As recently as July 16, 1998, SBC released a statement that asserted Pacific Bell's residential line growth was driven by, "additional residential lines which increased 14.8 percent over the last 12 months, pushing total"|6 0*$$ZZ2"  X-penetration to an industry-leading 30.8 percent."  {Oy-ԍxSee SBC Press Release, July 14, 1998, SBC Grows Second Quarter Earnings Per Share Broad  {OC-Customer Demand Drives Results; see also, SBC Press Release, October 22, 1997, SBC Announces ThirdQuarter  {O -Results; Record Gains in Access Lines;  SBC Press Release, May 27, 1998, SBC Communications Announces  {O-Broad ADSL Deployment Across California ("The California marketplace already has the highest percentage of  yO-'wired' households and the greatest number of second phone lines of any state in the country.") (Emphasis added.) By comparison, the Access Reform  X-Implementation Order prescribed a revised nonprimary line count of 15.14 percent.  X-x 12. SBC challenges the Commission's inclusion of lifeline lines in the calculation of total residential lines. SBC claims that none of the approximately 29 million lifeline lines in Pacific Bell's territory could be classified as nonprimary, because, in order to obtain and  Xz-keep a lifeline line, a customer may only have one line for the household.C!zH yOs -ԍxSBC Petition at 7.C SBC argues that  Xc-the Commission's method unfairly skews Pacific Bell's percentage lower. In the Access  XN-Reform Implementation Order, the Commission includes lifeline lines in the calculation of total residential lines, because the Additional Line Study included customers with lifeline lines. An accurate comparison of the percentage of nonprimary lines reported by LECs to the percentage of nonprimary lines in the Additional Line Study requires the inclusion of lifeline lines in the calculation of total residential lines. In any case, even if the lifeline lines were removed from the calculation of total residential lines, Pacific Bell's percentage of non X -primary lines would only change from 2.67 percent to 3.52 percent.C"  yOO-ԍxSBC Petition at 7.C This is still far short of  X -the 17.61 percent of nonprimary residential lines identified by the Additional Line Study.m# h  {O-ԍx  Access Reform Implementation Order, at Figure 2.m Revising our calculations in this way would not, therefore, persuade us to change our decision to prescribe a nonprimary residential line count for Pacific.  XS-x  13. SBC's other specific criticisms of the Additional Line Study do not lead us to alter our conclusion. There is no reason to expect that the Additional Line Study included an unidentified number of facilities which may not have had "working numbers." As noted in  X-the Access Reform Implementation Order, the survey upon which the Additional Line Study  X-was based asked respondents: "Does your household have more than one telephone line (i.e.,  X-more than one telephone number)?"n$  {O"-ԍxAccess Reform Implementation Order, at  17, fn. 29.n There is no reason to believe that respondents would have answered this question if only one phone number were operational. Although the" $0*$$ZZ" Additional Line Study may have included an unidentified number of households with multiple family units, we specifically accounted for that, and other possible inaccuracies, when we chose to prescribe only 70 percent of the total of nonprimary lines identified by the  X-Additional Line Study.f% {O4-ԍxAccess Reform Implementation Order, at  30.f Further, as noted in the Access Reform Implementation Order, the Additional Line Study contained a countervailing downward bias because the survey did not distinguish among households with multiple residential lines between those with only two residential lines and those with more than two residential lines, and the survey did not identify  Xa-oneline households that have ISDN service.&aZ {Ol -ԍxAccess Reform Implementation Order, at  16, as amended by Errata Order (Rel., June 10,1998) 97250  yO6 -at  4. Finally, as the United States Court of Appeals for the 8th circuit recently acknowledged, the Commission may properly employ "a number of shortterm, transitional solutions to protect against needless disruption and unfairness. . ." in reforming its access charge system. Reliance on the Additional Line Study is just one of many shortterm, transitional solutions this Agency must adopt to ensure an orderly transition  X -during the implementation of access reform.'&  {OS-ԍxSee Southwestern Bell Telephone Company, et al, v. Federal Communications Commission, 1998 WL  {O-485387, *18. See also, The Lincoln Telephone and Telegraph Company v. Federal Communications  {O-Commission, 659 F.2d 1092, 1101 (D.C. Cir. 1981) ("And by not specifying the procedure to be employed, Congress allowed the Commission flexibility to mold its procedures to the needs of the situation.") In light of these factors and SBC's public statements, we reaffirm our conclusion that our line number prescription for SBC was both reasonable and conservative, and based on the best evidence available.  X-x 14. SBC puts forth a procedural argument under the Paperwork Reduction Act of  X{-1996, Pub. L. No. 10413.q({ {O-ԍx44 U.S.C.  35013520. See  SBC Petition at 1112.q SBC argues that the Access Reform Implementation Order "improperly require[d] a new information collection" without first obtaining Office of  XO-Management and Budget (OMB) approval.G)O4  yO4-ԍxSBC Petition at 1112.G SBC claims that the Commission's "new definition" of nonprimary residential lines requires Pacific Bell to gather information not previously required of it, specifically, the number of residential lines billed to the same name  X -at the same location.D*   yO!-ԍxSBC Petition at 11.D This argument is meritless because the Access Reform Implementation  X-Order does not define nonprimary residential lines and it does no impose an information collection requirement on Pacific Bell. The Commission has merely required Pacific Bell to"T *0*$$ZZ" make refunds to IXCs. Calculating this refund does not require Pacific Bell to perform any "information collection" within the meaning of the Paperwork Reduction Act, and therefore OMB approval was not required. Even if it could be argued that the Commission has required Pacific Bell to undertake an information collection, those requirements could stem  X-only from the original Access Charge Reform Order and the Access Reform Tariffs  X-Designation Order, not the Access Reform Implementation Order.M+ yO-ԍxAT&T Opposition at 4, fn. 5.M The Access Charge  Xz-Reform Order placed Pacific Bell on notice that it would have to develop and apply a reasonable definition of nonprimary lines for its 1998 access reform filings, and the OMB  XN-expressly approved all of the Commission information collection requirements in that order.z,NX {OW -ԍxAccess Charge Reform Order, 12 FCC Rcd at 16016 and 16169. z  X7-Moreover, the Access Reform Tariffs Designation Order expressly required all price cap LECs, including Pacific Bell, to develop, defend, and apply a reasonable definition of non X -primary lines, and the OMB issued the necessary approvals for that order as well.-  {O-ԍxAccess Reform Tariffs Designation Order, 13 FCC Rcd at 22552257, 2288; Notice of Office of Management and Budget Action, OMB No. 30600760 (January 29, 1998).  X -x15. SBC argues that the required refund of overcharges resulting from  X -misclassification of residential lines is unwarranted under the Access Reform Implementation  X -Order's own guidelines for refunds.D. D yO-ԍxSBC Petition at 10.D SBC notes that the  Access Reform Implementation  X-Order permits "offsets" when the "same general group of customers" was affected by rates that were too high and rates that were lower than they could have been. SBC contends that a refund of overcharges resulting from misclassification of residential lines is unwarranted because "the IXCs that will be recipients of the refund will also be the same entities that were  XB-not charged the nonprimary line rate."D/B yO-ԍxSBC Petition at 10.D As we stated in the Access Reform Implementation  X--Order, it is not possible to determine the amount that any particular IXC saved by paying the primary residential PICC instead of the higher nonprimary residential PICC because Pacific Bell has not identified these lines. Pacific Bell does not, and cannot, refute this observation. Thus, we will not permit Pacific Bell to offset refunds to an IXC for MLB PICC, nonprimary residential PICC, or residual perminute overcharges by the amount that the IXC saved by paying the primary residential PICC instead of the higher nonprimary residential  X-PICC.k0d  {O#-ԍxSee Access Reform Implementation Order, at  179.k" 00*$$ZZQ"Ԍ X-ԙx III.` ` Historical Understatement of the BFP  X-  X-x16. In the Access Reform Implementation Order, the Commission ordered several price cap LECs, including SWBT, to file tariff revisions with new maximum permitted carrier common line (CCL) rates in order to remove the past effects of understating their base factor portion (BFP) revenue requirements. The Commission further required these price cap LECs to refund the difference between their new CCL rates and the CCL rates in effect during the investigation. SBC states that SWBT does not have to make adjustments to its maximum CCL rate and is not required to make any refunds due to historical understatement of the BFP. SBC states that SWBT's initial filing revises the CCL1 Chart it submitted for the 1997 annual tariff filing, and the revision showed that SWBT's maximum permitted CCL rates and common line revenues are no longer inflated due to the alleged historic understatement of BFP. We have reviewed the materials presented by SBC, and we are satisfied that SWBT has revised the CCL1 Chart it submitted for the 1997 annual tariff filing and does not need to recalculate its maximum CCL rate nor issue refunds with regard to this matter.  X-x IV.` ` Ordering Clause  Xd-x17. Accordingly, IT IS ORDERED, pursuant to sections 1,2, 4(i), 4(j), 201205, and 405 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 152, 154(i), 154(j), 201205, and 405, that the petition for reconsideration filed by SBC Communications, Inc., IS GRANTED to the extent indicated in paragraph 16, and IS OTHERWISE DENIED. x` `  hhFEDERAL COMMUNICATIONS COMMISSION x` `  hhMagalie Roman Salas x` `  hhSecretary