[Federal Register Volume 60, Number 198 (Friday, October 13, 1995)] [Notices] [Pages 53373-53374] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 95-25318] ======================================================================= ----------------------------------------------------------------------- FEDERAL COMMUNICATIONS COMMISSION [DA 95-2083] Approval of Cost Accounting Plan AGENCY: Federal Communications Commission. ACTION: Notice. ----------------------------------------------------------------------- SUMMARY: This Order approves Southern New England Telephone Company's (SNET) cost accounting plan for its market trial of video dialtone service. Specifically, we approve the accounting plan filed by SNET in its Description and Justification filed in Transmittal No. 641, on March 9, 1995, as modified by a supplement filed on June 19, 1995. This approval is subject to the following three conditions that must be met within 30 days of publication in the Federal Register. SNET is required to: revise its accounting plan to include subsidiary records that reflect replacement of retired transmission plant with fiber optic and coaxial cable facilities within the VDT trial's geographic areas; provide a detailed explanation, including appropriate documentation, regarding the sufficiency of its internal controls and include an evaluation of internal controls for video dialtone service in its 1995 annual audit of its Cost Allocation Manual. The Commission, granted permission for SNET to perform a market trial of video dialtone service for video only, but stipulated that in the event SNET decided to offer exchange access telephone service over video dialtone facilities, it must first submit and obtain approval of an accounting and cost allocation plan. This action is taken because SNET, in Transmittal 641 proposed to perform its market test of video dialtone service to include both video and exchange access telephone service. FOR FURTHER INFORMATION CONTACT: Tom Quaile, Common Carrier Bureau, Accounting and Audits Division, (202) 418-0838. SUPPLEMENTARY INFORMATION: This is a Synopsis of the Commission's Order adopted September 29, 1995 and released September 29, 1995 The complete text of this Order is available for inspection and copying during normal business hours in the FCC Dockets Branch (Room 230), 1919 M Street, N.W., Washington, D.C. 20554 and also may be purchased from the Commission's copy contractor, ITS, at (202) 857-3822, Room 246, 1919 M Street, N.W., Washington, D.C. 20554. Synopsis of Order 1. This Order conditionally approves an accounting plan filed by SNET. The Commission granted SNET authority under Section 214 to construct a hybrid fiber optic/coaxial cable network for a one year market and technical trial. VDT is normally a combination of video and telephony service however, in its application to provide service, SNET stated that it would initially offer only video in its market trial. The Commission requires LECs that offer VDT and telephony, to establish two sets of subsidiary accounting records: one set to capture the investment, expense and revenue wholly dedicated to VDT; the other set to capture the investment, expense and revenue shared between VDT and other telephone services. Because SNET only proposed video service, the Commission did not impose this accounting requirement but stated that if SNET decided to offer telephone service over the upgraded network during the trial, it must submit and obtain approval of an accounting and cost allocation plan to implement the Commission's accounting requirements. SNET subsequently decided to offer telephony services over its upgraded network during the trial. It therefore filed accounting and cost allocation plans as required under the Commission's VDT specific accounting requirements contained in Responsible Accounting Officer Letter Number 25. 2. RAO 25 requires that LEC's maintain subsidiary records to identify the cost of plant that is replaced or retired due to either the deployment of video dialtone plant or the deployment of fiber optic upgrades as mandated under state authority in study areas where VDT deployment occurs. SNET claims that its decision to upgrade its network facilities with fiber optic coaxial-cable facilities was not influenced by its decision to offer VDT service and thus it is not required under RAO 25 to maintain subsidiary records for the costs of retired plant. We believe that SNET's accounting plan should contain provisions for recording retired plant irrespective of the underlying reasons that support SNET's decision to construct its I-SNET network. The data and information reported during the course of the trial will allow the Commission to make informed decisions regarding appropriate costing methodologies for VDT services. To ensure that the Commission has sufficient data to make such decisions, we require that SNET's accounting plan include subsidiary records that contain the costs for retirements of transmission facilities within the geographic area in which the trial is conducted. 3. RAO 25 requires that LECs have internal accounting controls and a complete audit trail for each subsidiary account record. SNET's accounting plan proposes to meet this requirement by establishing accounting codes and methods to ensure that employees apply the proper codes. Based on our review of SNET's accounting plan, it appears that SNET has developed adequate internal controls. Nevertheless, because we consider the development and maintenance of internal controls to be crucial to the accuracy of reported VDT costs, we require SNET to provide a more detailed explanation, including documentation, of how its controls provide sufficient safeguards to ensure accurate information. In addition, we require SNET to include an evaluation of its internal controls for VDT allocations and assignments as part of its annual independent CAM audits. 4. This Order addresses only SNET's accounting plan. We believe that, if VDT costs are properly recorded in the accounts, adjustments can be made at a later date if changes in allocation methodologies warrant changes to subsidiary records. Cost allocation issues pertaining to VDT will be addressed in the tariff review process. 5. Accordingly, it is ordered, pursuant to authority contained in Sections 1, 4(i), 218-220 and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 218-220 and 403 and Sections 0.91 and 0.291 of the Commission's rules, 47 CFR 0.91 and 0.291, that Southern New England Telephone Company's video dialtone marketing trial accounting plan, is approved subject to the following conditions: (a) That within 30 days of publication of this Order in the Federal Register, SNET shall revise its accounting plan to include subsidiary records that reflect [[Page 53374]] replacement of retired transmission plant with fiber optic and coaxial cable facilities within the VDT trial's geographic areas. (b) That within 30 days of the release of this Order, SNET shall provide a detailed explanation, including appropriate documentation, regarding the sufficiency of its internal controls. (c) That SNET's annual CAM audit for 1995 shall include an evaluation of VDT internal controls. 6. It is further ordered pursuant to authority contained in Sections 1, 4(i), 218-220 and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 218-220 and 403 and Sections 0.91 and 0.291 of the Commission's rule, 47 CFR 0.91 and 0.291, that the Cablevision Systems Corporation's and The New England Cable Television Association's Petition to Reject or, in the Alternative, to Suspend and Investigate SNET's Accounting and Cost Allocation plan is DENIED to the extent that petitioners seek rejection of the accounting plan. Federal Communications Commission. William F. Caton, Acting Secretary. [FR Doc. 95-25318 Filed 10-12-95; 8:45 am] BILLING CODE 6712-01-M