[Federal Register Volume 60, Number 75 (Wednesday, April 19, 1995)]
[Rules and Regulations]
[Pages 19528-19531]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-9575]
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 69
[CC Docket No. 93-6; FCC 95-94]
Safeguards To Improve Administration of the Interstate Access
Tariff and Revenue Distribution Processes
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Federal Communications Commission (``FCC'' or
``Commission'') has adopted a Report and Order and Order to Show Cause
(``Order'') adopting new rules to reform the interstate access tariff
and revenue distribution processes administered by the National
Exchange Carrier Association, Inc. (``NECA''). The Order amends the
rules to include five directors from outside the local exchange carrier
(``LEC'') industry on NECA's Board of Directors. The Order adopts
additional measures to increase NECA and LEC accountability to the FCC,
and strengthen NECA's internal operations. In addition, the Order
directs NECA to show cause why it should not be required to amend its
incentive compensation plan to eliminate any incentive based upon
common line or traffic sensitive pool earnings, or that might otherwise
induce NECA officers or employees to violate Commission requirements.
The FCC adopted this Order to assure that NECA
[[Page 19529]] administers the interstate access tariff and revenue
distribution processes in accordance with FCC rules.
EFFECTIVE DATE: May 19, 1995. NECA shall submit its response to the
Commission's order to show cause on or before June 19, 1995.
FOR FURTHER INFORMATION CONTACT:
William A. Kehoe III, telephone number 202-418-0850, or John Hays,
telephone number 202-418-0875.
SUPPLEMENTARY INFORMATION: This is a summary of the FCC's Report and
Order and Order to Show Cause (``Order'') in Safeguards to Improve the
Administration of the Interstate Access Tariff and Revenue Distribution
Processes, FCC 95-94, CC Docket No. 93-6, adopted March 3, 1995 and
released March 8, 1995. The full text of the Order is available for
inspection and copying during normal business hours in the FCC
Reference Center, room 239, 1919 M St., NW., Washington, DC. The full
text will be published in the FCC Record and may also be purchased from
the Commission's copy contractor, the International Transcription
Service, at 2100 M Street, NW., suite 140, Washington, DC 20037,
telephone number 202-857-3800.
Regulatory Flexibility Analysis
In the Notice of Proposed Rulemaking\1\ in this proceeding, the
Commission certified that the Regulatory Flexibility Act of 1980 does
not apply to this rulemaking proceeding because if the proposals in
this proceeding were adopted, there will not be a significant economic
impact on a substantial number of small business entities, as defined
by section 601(3) of the Regulatory Flexibility Act.\2\ Those proposals
addressed by the administration of the interstate access tariff and
revenue distribution processes by NECA, which is an association of
LECs. Because of the nature of local exchange and access service, the
Commission has concluded that LECs, including small LECs, are dominant
in their fields of operation and therefore are not ``small entities''
as defined by that act.\3\ The Secretary has sent a copy of this Notice
of Proposed Rulemaking, including the certification, to the Chief
Counsel for Advocacy of the Small Business Administration in accordance
with section 603(a) of that act.\4\
\1\Safeguards to Improve the Administration of the Interstate
Access Tariff and Revenue Distribution Processes, Notice of Proposed
Rulemaking, 8 FCC Rcd 1503, 1510, 58 FR 11203, 11204 (1993)
(Notice).
\2\5 U.S.C. 601(3).
\3\See MTS and WATS Market Structure, 93 FCC 2d 241, 338-39
(1983).
\4\5 U.S.C. 603(a).
---------------------------------------------------------------------------
Synopsis of the Report and Order and Order to Show Cause
The NECA is an association of LECs established in 1984, at the
direction of the Federal Communications Commission, to administer
important Commission programs. These programs now include the common
line (``CL'') and traffic sensitive pools, the universal service fund,
the lifeline assistance program, and the long term support program. The
Commission's rules require LECs to report revenue, cost, and demand
data to NECA so that NECA can administer these programs in accordance
with Commission requirements.\5\
\5\47 CFR 69.116(c), 69.117(c), 69.605(a).
---------------------------------------------------------------------------
In 1989 and 1990, the Common Carrier Bureau (``Bureau'') audited
certain data that the Bell Operating Companies (``BOCs'') had reported
to NECA's CL pool during late 1988 and early 1989. That audit disclosed
that several NECA directors appeared to have participated in an attempt
to influence improperly the CL pool earnings for 1988 by inducing
certain large LECs to report data to NECA that were inconsistent with
our accounting, separations, and access charge rules. In a November 9,
1990 letter to NECA,\6\ the Commission expressed concern regarding the
directors' apparent misconduct. The Commission required NECA to hire an
independent auditor to recommend safeguards to prevent manipulation of
NECA's processes. NECA hired Ernst & Young, which filed its report on
this audit with the Commission on December 9, 1991.\7\ This report
acknowledged NECA's improvement since the Bureau audit and recommended
additional measures to improve the interstate access tariff and revenue
distribution processes further.\8\ NECA has implemented many of the
recommendations that required no Commission action and has asked the
Commission to act when such action was required.\9\
\6\Letter from Donna R. Searcy, Secretary, FCC, to Lawrence C.
Ware, Chairman of the Board of Directors, NECA, 5 FCC Rcd 7183
(1990) (November 9 Letter).
\7\Ernst & Young, Review and Recommended Pool Safeguards, AAD
91-24 (filed Dec. 9, 1991) (Safeguards Report).
\8\The improvements included a new emphasis on rule compliance,
changes to NECA's bylaws that make NECA's Board deliberations more
systematic, and better methods for ensuring that the data LECs
submit to NECA comply with Commission requirements. We discuss these
improvements in subsequent portions of this Order.
\9\For instance, after the independent auditor recommended that
the NECA Board include directors from outside the LEC industry, NECA
petitioned the Commission for a rule change to add two outside
director positions to its Board.
---------------------------------------------------------------------------
In the Notice in this Docket, the Commission proposed to adopt
those recommendations of the independent auditor that it found
warranted Commission action. The Commission's proposals focused on the
composition and operation of NECA's Board, on the relationship between
NECA and the Commission, and on methods for strengthening NECA's
internal operations. Sixteen parties filed comments on the Notice, and
five parties replied.
In this Order, the Commission adopts many of its proposals. To
bring independent views to NECA's deliberations and to help ensure that
NECA complies with Commission requirements, the Commission changes the
composition of NECA's Board. Effective January 1, 1996, NECA's Board
will consist of five directors from outside the LEC industry, two
directors representing the BOCs, two directors representing other LECs
having annual operating revenues in excess of $40 million, and six
directors representing LECs having annual operating revenues of less
than $40 million. These directors will serve one-year terms, but, if
they seek reelection, must face contested elections at least every
three years. The Commission requires that each NECA Board committee
include at least one outside director, and eliminates restrictions on
the membership of NECA's CL and traffic sensitive committees.
In the Order, the Commission reiterates that, in preparing
interstate access tariff filings and distributing interstate revenue,
NECA must correct any data that it reasonably believes do not comply
with our rules. To help ensure that NECA receives complete and accurate
data from LECs, the Commission requires that responsible LEC officers
or employees certify data submissions to NECA. The Commission also
requires NECA to report annually to the Commission on the results of
its cost study review process. In addition, the Commission orders NECA
to show cause why it should not be required to amend its incentive
compensation plan for its officers and employees to eliminate any
incentives that may reward rule violations. The Commission, however,
declines to require LECs that do not participate in NECA's pools to
obtain independent audits of their costs studies. It also declines to
require NECA to provide it with on-line access to NECA data bases at
this time.
In taking these actions, the Commission emphasized that it has no
wish to superintend NECA's day-to-day operations, and that it does not
believe [[Page 19530]] that its actions intrude upon NECA's managerial
discretion. NECA, however, is an organization established at the
Commission's direction, whose structure and principal functions are
specified by Commission rules.\10\ The Commission believes that, to
discharge its own responsibility to ensure the reasonableness of
interstate telephone rates, it must ensure that NECA is discharging its
responsibilities under the Commission's rules.
\10\See 47 CFR 69.601-69.612.
---------------------------------------------------------------------------
Ordering Clauses
Accordingly, It Is Ordered, pursuant to Sections 1, 4(i), 201-205,
218-220, and 403 of the Communications Act of 1934, as amended, 47
U.S.C. 151, 154(i), 201-05, 218-20, and 403, that Part 69 of the
Commission's rules, 47 CFR Part 69, IS AMENDED, as specified below.
It Is Further Ordered, pursuant to Sections 1, 4(i), 201-205, 218-
220, and 403 of the Communications Act of 1934, as amended, 47 U.S.C.
151, 154(i), 201-05, 218-20, and 403, that NECA shall file an annual
report as specified in paragraphs 64 and 65 of the Report and Order.
It Is Further Ordered, pursuant to Sections 1, 4(i), 201-205, 218-
220, and 403 of the Communications Act of 1934, as amended, 47 U.S.C.
151, 154(i), 201-05, 218-20, and 403, that NECA shall show cause why it
should not be required to amend its incentive compensation plan to
eliminate any incentive based upon common line or traffic sensitive
pool earnings or that might otherwise induce NECA officers or employees
to violate Commission requirements.
It Is Further Ordered, pursuant to Sections 1, 4(i), 201-205, 218-
220, and 403 of the Communications Act of 1934, as amended, 47 U.S.C.
151, 154(i), 201-05, 218-20, and 403, that, pending further Commission
order, NECA shall not make any incentive payments based on the rates of
return earned by the common line or traffic sensitive pools.
List of Subjects in 47 CFR Part 69
Access charges, Telephone.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Rule Amendments
Part 69 of Title 47 of the CFR is amended as follows:
PART 69--ACCESS CHARGES
1. The authority citation for part 69 continues to read as follows:
Authority: Secs. 4, 201, 202, 203, 205, 218, 403, 48 Stat. 1066,
1070, 1072, 1077, 1094, as amended, 47 U.S.C. 154, 201, 202, 203,
205, 218, 403.
2. Section 69.601 is amended by adding a new paragraph (c) to read
as follows:
Sec. 69.601 Exchange carrier association.
* * * * *
(c) All data submissions to the association required by this Title
shall be accompanied by the following certification statement signed by
the officer or employee responsible for the overall preparation for the
data submission:
Certification
I am (title of certifying officer or employee). I hereby certify
that I have overall responsibility for the preparation of all data
in the attached data submission for (name of carrier) and that I am
authorized to execute this certification. Based on information known
to me or provided to me by employees responsible for the preparation
of the data in this submission, I hereby certify that the data have
been examined and reviewed and are complete, accurate, and
consistent with the rules of the Federal Communications Commission.
Date:------------------------------------------------------------------
Name:------------------------------------------------------------------
Title:-----------------------------------------------------------------
(Persons making willful false statements in this data submission can
be punished by fine or imprisonment under the provisions of the U.S.
Code, Title 18, Section 1001).
3. Section 69.602 is revised to read as follows:
Sec. 69.602 Board of directors.
(a) For purposes of this section, the association membership shall
be divided into three subsets:
(1) The first subset shall consist of the telephone companies owned
and operated by the seven Regional Bell Holding Companies;
(2) The second subset shall consist of all other telephone
companies with annual operating revenues in excess of forty million
dollars;
(3) The third subset shall consist of all other telephone
companies. All commonly controlled companies shall be deemed to be one
company for purposes of this section.
(b) There shall be fifteen directors of the association.
(c) Until 1996, three directors shall represent the first subset,
three directors shall represent the second subset, and nine directors
shall represent the third subset. In 1996 and thereafter, two directors
shall represent the first subset, two directors shall represent the
second subset, six directors shall represent the third subset, and five
directors shall represent all three subsets.
(d) No director who represents all three subsets shall be a current
or former officer or employee of the association or of any association
member, or have a business relationship or other interest that could
interfere with his or her exercise of independent judgment.
(e) Each subset shall select the directors who will represent it
individually through an annual election in which each member of the
subset shall be entitled to vote for the number of directors that will
represent such members' subset.
(f) The association membership shall select the directors for the
following calendar year who will represent all three subsets through an
annual election in which each member of the association shall be
entitled to one vote for each director position. There shall be at
least two candidates meeting the qualifications in paragraph (d) of
this section for each such director position:
(1) In any election in which the most recently elected director for
such position is not a qualified candidate;
(2) If there has been no election for such position having more
than one qualified candidate during the present and the two preceding
calendar years; and
(3) In any election for which the ballot lists two or more
qualified candidates.
(g) At least one director representing all three subsets shall be a
member of each committee of association directors.
(h) For each access element or group of access elements for which
voluntary pooling is permitted, there shall be a committee that is
responsible for the preparation of charges for the associated access
elements that comply with all applicable sections in this part.
(i) Directors shall serve for a term of one year commencing January
1 and concluding on December 31 of each year.
4. Section 69.605 is amended by adding a new paragraph (e) to read
as follows:
Sec. 69.605 Reporting and distribution of pool access revenues.
* * * * *
(e) The association shall submit a report on or before February 1
of each calendar year describing the association's cost study review
process for the preceding calendar year as well as the results of that
process. For any revisions to cost study results made or recommended by
the association that would change the respective carrier's calculated
annual common line or traffic sensitive revenue requirement by ten
percent or more, the report shall include the following
information: [[Page 19531]]
(1) The name of the carrier;
(2) A detailed description of the revisions;
(3) The amount of the revisions;
(4) The impact of the revisions on the carrier's calculated common
line and traffic sensitive revenue requirements; and
(5) The carrier's total annual common line and traffic sensitive
revenue requirement.
[FR Doc. 95-9575 Filed 4-18-95; 8:45 am]
BILLING CODE 6712-01-M