Federal Communications Commission DA 98-1294
Before the
Federal Communications Commission 
Washington, D.C. 20554
In the Matter of )
) CC Docket No. 98-104
1998 Annual Access ) 
Tariff Filings )
MEMORANDUM OPINION AND ORDER
Adopted: June 29, 1998 Released: June 29, 1998
By the Deputy Chief, Common Carrier Bureau:
I. INTRODUCTION
1. Local exchange carriers (LECs) are required by Section 69.3(a) of the Commission's rules, 
47 C.F.R. § 69.3(a), to file annual revisions to their interstate tariffs to become effective July 1, 1998. 
Price cap LECs filed tariff review plans (TRPs) on April 2, 1998, and AT&T, MCI, and ACTA filed 
comments on April 23, 1998.' The price cap LECs filed replies on April 30, 1998. Price cap LECs and 
LECs subject to rate of return regulation filed their tariff transmittals on June 16, 1998,2 with AT&T and 
MCI filing petitions to suspend and investigate on June 23, 1998. On June 26, 1998, the LECs filed 
replies to the petitions filed by AT&T and MCI.3
2. In this Memorandum Opinion and Order, we suspend for one day and set for investigation 
the price cap LECs' 1998 Annual Access Tariffs. As discussed below, because of the close relationships 
among the many changes that LECs made in their tariff transmittals, it is not possible at this time to 
exclude from our investigation any of the rate changes proposed by the price cap LECs. In addition, we 
also suspend for one day and set for investigation the tariffs of certain rate of return carriers, as discussed 
below. The Bureau will separately issue an order designating issues for investigation.
1 As pan of the annual access tariff filing, LECs subject to price cap regulation are required to file summary 
material, known as tariff review plans (TRP) to support the revisions to rates in their tariff filings. See Material to 
be Filed in Support of 1998 Annual Access Tariff Filings, 13 FCC Red 6702 (Com. Car. Bur., Comp. Pricing Div., 
released March 25, 1998). The TRPs partially fulfill the requirements of sections 61.38, 61.39, and 61.41 through 
61.50 of the Commission's rules. 47 C.F.R. §§ 61.38, 61.39, and 61.40-61.50.
1 Appendix A lists the price cap companies filing tariffs and their tariff transmittal numbers. The Sprint LTCs 
were granted permission to file their access tariff on June 19, 1998. In addition several LECs filed errata filings on 
June 19, 1998. The Competitive Pricing Division released an Order on June 18, 1998 that, among other things, 
extended the due date for petitions to reject or suspend and investigate the Sprint LTC and LEC errata flings to June 
24, 1998, with replies to any petitions against these tariff filings due on June 26, 1998. See Material to be Filed in 
Support of 1998 Annual Access Tariff Filings, Order Modifying Deadlines, DA 98-1192 (Com. Car. Bur., Comp. 
Pricing Division., rel. June 18, 1998).
3 Appendix B lists the petitions and replies to the tariff filings and identifies the abbreviated names for the 
parties.
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Federal Communications Commission DA 98-1294
H. DISCUSSION
3. We find that AT&T, MCI, and ACTA present arguments in support of their petitions to 
suspend and investigate the price cap LECs' 1998 Annual Access Tariffs that raise substantial questions 
of lawfulness that warrant investigation of these tariffs.4 These issues include, but are not limited to, the 
following: whether the price cap LECs have projected per-line base factor portion (BFP) costs that are 
unreasonable; whether the price cap LECs' forecasts of the line port component of the BFP are 
unreasonable; whether the price cap LECs have filed line counts that are unreasonable; whether U S West 
has correctly reflected the price cap index (PCI) changes in its proposed rates; whether U S West, GTE, 
BellSouth, Ameritech, and SNET have failed to make the correct "R" value adjustments for the reversal 
of exogenous cost changes; whether all the price cap LECs have failed to calculate correctly the revenue 
impact of the application of the three-part transport rate structure; and whether Sprint LTC's and 
Ameritech's proposed exogenous cost increases in connection with Sprint's sale of telephone exchanges 
to Ameritech violate the Commission's rules and policies.
4. Initial review of the LECs' base factor portion revenue requirement (BFPRR) and access 
lines forecasts raises substantial questions of reasonableness and of lawfulness. Our rules require that a 
telephone company use its expertise and the information available to it to forecast its BFPRR for the 
projected tariff year. Much of this information is available only to the telephone company. The telephone 
company is also to use its expertise and information to forecast its total access lines. These two forecasts 
produce the projected BFPRR per line. As discussed at length in our 7997 Annual Access Investigation 
Order,5 this projection is very significant in determining the levels of common line rate elements. As also 
discussed in that order, under certain circumstances LECs have a strong incentive to underestimate BFPRR 
per line.6
5. AT&T and MCI have also raised issues regarding the price cap LECs' compliance with 
the Commission's June 1, 1998 Order terminating the investigation of the price cap LECs' tariff revisions 
implementing the requirements of the Commission's Access Charge Reform Proceeding. 7 These issues 
include, but are not limited to, the following: whether the price cap LECs have overstated their common 
line revenue requirements due to historical understatements of BFP; whether BellSouth, Pacific Bell and 
Bell Atlantic have improperly estimated the impact on the transport interconnection charge (TIC) arising 
from the use of actual rather than assumed minutes of use; and whether the price cap LECs have 
improperly implemented the Commission's methodology for calculating exogenous adjustments that reflect 
cost reallocations.
6. In addition to the issues raised by the petitioners, we have identified other issues regarding
4 47 U.S.C. § 204(a).
5 Tariffs Implementing Access Charge Reform, CC Docket No. 97-250, Memorandum Opinion and Order, FCC 
98-106 (rel. June 1, 1998) (Access Charge Reform Tariffs Investigation Order).
6 Order at 122.
1 See Tariffs Implementing Access Charge Reform, CC Docket No. 97-250, Memorandum Opinion and Order, 
FCC 98-106 (rel. June 1, 1998) (Access Charge Reform Tariffs Investigation Order); Access Charge Reform, CC 
Docket No. 96-262, First Report and Order, 12 FCC Red 15982 (1997); Order on Reconsideration, 12 FCC Red 
10119 (1997); Second Order on Reconsideration, 12 FCC Red 16606 (1997) (collectively, Access Charge Reform 
Proceeding).
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Federal Communications Commission DA 98-1294
compliance with the Commission's^ccess Charge Reform Tariffs Investigation Order that raise substantial 
questions of lawfulness that warrant investigation of the price cap LECs' tariffs. These include, but are 
not limited to, the following: whether the price cap LECs complied with the Commission's methodology 
for calculating exogenous adjustments to recover SS7-STP costs; whether the price cap LECs properly 
calculated exogenous adjustments to the TIC and the tandem switched transport category; and whether 
Frontier Communications of Minnesota and Iowa, Frontier of Rochester, GTE, Nevada Bell, and Sprint 
LTC over-targeted the "GDP-PI minus X" factor to the non-facilities-based TIC.
7. We also find that the issues raised by AT&T in support of its petition to suspend and 
investigate the annual access tariffs filed by the rate of return carriers raise substantial questions of 
lawfulness that warrant investigation of several of the rate of return carriers' tariffs. These issues include 
whether Sugar Land Telephone Company, Century Telephone Company of Ohio, ALLTEL of Missouri, 
and ALLTEL of Georgia have understated their test-period demands.
8. The rate changes and exogenous adjustments, which include those required by the Access 
Charge Reform Tariffs Investigation Order, made by the price cap carriers in their tariff revisions are 
complex and interdependent. We are therefore unable at this time to limit our investigation to discrete rates 
or provisions of the price cap LECs' tariff filings. We will, accordingly, suspend all tariff revisions 
contained in the price cap LECs' 1998 Annual Access Tariff filings for one day and set those provisions 
for investigation. We will also suspend the above-named rate of return carriers' June 16, 1998 tariffs for 
one day and initiate an investigation into the lawfulness of the proposed tariffs. The specific, issues that 
will be the subject of the investigation will be identified in an upcoming designation order and may 
include, but may not be limited to, the issues identified in this Order. We may also, by order, identify 
discrete issues that do not warrant further investigation.
m. EXPARTE REQUIREMENTS
9. This investigation is a permit-but-disclose proceeding and subject to the requirements 
under Section 1.1206(b) of the rules, 47 C.F.R. § 1.1206(b), as revised. Persons making oral ex parte 
presentations are reminded that memoranda summarizing the presentation must contain a summary of the 
substance of the presentation and not merely a listing of the subjects discussed. More than a one or two 
sentence description of the views and arguments presented is generally required. See 47 C.F.R. § 
1.1206(b)(2), as revised. Other rules pertaining to oral and written presentations are set forth in Section 
1.1206(b), as well.
IV. ORDERING CLAUSES
10. ACCORDINGLY, IT IS ORDERED that, pursuant to Section 204 (a) of the 
Communications Act of 1934, as amended, 47 U.S.C. § 204 (a) and through the authority delegated 
pursuant to Sections 0.91 and 0.291 of the Commission's rules. 47 C.F.R. §§ 0.91 and 0.291, the tariff 
revisions filed by Aliant Communications Company, Ameritech Operating Companies, Bell Atlantic 
Operating Companies, NYNEX Telephone Companies, BellSouth Telecommunications, Inc., Cincinnati 
Bell Telephone Company, Citizens Telecommunications Companies, Frontier Communications of 
Minnesota and Iowa, Frontier Telephone of Rochester, GTE Systems Telephone Companies, GTE 
Telephone Operating Companies, Nevada Bell, Pacific Bell, Southern New England Telephone Company, 
Southwestern Bell Telephone Company, Sprint Local Telephone Companies, and U S West 
Communications, Inc., as detailed in Appendix A for price cap local exchange carriers, ARE 
SUSPENDED for one day and an investigation IS INSTITUTED.
11. IT IS FURTHER ORDERED that, pursuant to Sections 204(a) and 4(i) of the
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Federal Communications Commission DA 98-1294
Communications Act of 1934, as amended, 47 U.S.C. §§ 204(a), 154(i), and through the authority 
delegated pursuant to Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R. §§ 0.91 and 0.291, 
Aliant Communications Company, Ameritech Operating Companies, Bell Atlantic Operating Companies, 
NYNEX Telephone Companies, BellSouth Telecommunications,Inc., Cincinnati Bell Telephone Company, 
Citizens Telecommunications Companies, Frontier Communications of Minnesota and Iowa, Frontier 
Telephone of Rochester, GTE Systems Telephone Companies, GTE Telephone Operating Companies, 
Nevada Bell, Pacific Bell, Southern New England Telephone Company, Southwestern Bell Telephone 
Company, Sprint Local Telephone Companies, and U S West Communications, Inc. SHALL KEEP 
ACCURATE ACCOUNT of all amounts received that are associated with the rates that are subject to this 
investigation.
12. IT IS FURTHER ORDERED that, pursuant to Section 204(a) of the Communications Act 
of 1934, as amended, 47 U.S.C. § 204(a), and through authority delegated pursuant to Sections 0.91 and 
0.291 of the Commission's rules, 47 C.F.R. §§ 0.91 and 0.291, the tariff revisions filed by Sugar Land 
Telephone Company, Century Telephone Company of Ohio, ALLTEL of Missouri, and ALLTEL of 
Georgia ARE SUSPENDED for one day and an investigation IS INSTITUTED.
13. IT IS FURTHER ORDERED that, pursuant to Sections 204(a) and 4(i) of the 
Communications Act of 1934, as amended, 47 U.S.C. §§ 204(a), 154(i), and through authority delegated 
pursuant to Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R. §§ 0.91 and 0.291, Sugar Land 
Telephone Company, Century Telephone Company of Ohio, ALLTEL of Missouri, and ALLTEL of 
Georgia SHALL KEEP ACCURATE ACCOUNTS of all amounts received that are associated with the 
rates that are subject to this investigation.
14. IT IS FURTHER ORDERED that each local exchange carrier required to suspend its tariff 
revisions for one day pursuant to this Order, SHALL FILE a supplement advancing the currently 
scheduled effective date to June 30, 1998, and at the same time file a supplement reflecting the one day 
suspension. For this purpose, we waive Sections 61.58 and 61.59 of the Commission's rules, 47 C.F.R. 
§§ 61.58, 61.59. Carriers should cite the "DA" number on the instant Order as the authority for the 
filings.
15. IT IS FURTHER ORDERED that all local exchange carriers noted above SHALL FILE 
these supplements no late than five business days from the release date of this Order.
16. IT IS FURTHER ORDERED that the petitions to suspend and investigate or to reject the 
Annual 1998 Access Tariff Filings ARE GRANTED to the extent indicated herein and otherwise ARE 
DENIED.
FEDERAL COMMUNICATIONS COMMISSION
D. Schlichting 
Deputy Chief, Common Carrier Bureau
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Federal Communications Commission DA 98-1294
APPENDIX A
FILINGS MADE BY PRICE CAP CARRIERS FOR ANNUAL ACCESS 1998
June 16. 1998
Aliant Communications Company
Ameritech Operating Companies
Bell Atlantic Operating Companies
BellSouth Telecommunications, Inc.
Cincinnati Bell Telephone Company
Citizens Telecommunications Companies
Frontier Communications of Minnesota and Iowa
Frontier Communications of Rochester
GTE System Telephone Companies
GTE Telephone Operating Companies
Nevada Bell
New York Telephone Company
NYNEX Telephone Companies
Pacific Bell
Southern New England Telephone
Southwestern Bell Telephone Company
U S West Communications, Inc.
June 19. 1998
Southwestern Bell Telephone Company 
Sprint Local Telephone Companies 
U S West Communications, Inc.
June 22. 1998
GTE System Telephone Companies
GTE Telephone Operating Companies
June 23. 1998
New York Telephone Company
NYNEX Telephone Companies
June 25. 1998
Ameritech Operating Companies
Transmittal No. 17 
Transmittal No. 1160 
Transmittal No. 1057 
Transmittal No. 465 
Transmittal No. 722 
Transmittal No. 49 
Transmittal No. 15 
Transmittal No. 7 
Transmittal No. 247 
Transmittal No. 1155 
Transmittal No. 241 
Transmittal No. 1179 
Transmittal No. 505 
Transmittal No. 1988 
Transmittal No. 712 
Transmittal No. 2705 
Transmittal No. 926
Transmittal No. 2707 
Transmittal No. 57 
Transmittal No. 927
Transmittal No. 248 
Transmittal No. 1156
Transmittal No. 1180 
Transmittal No. 507
Transmittal No. 1163
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June 29. 1998
Bell Atlantic Operating Companies Transmittal No. 1059
BellSouth Telecommunications, Inc. Transmittal No. 467
NYNEX Telephone Companies Transmittal No. 508
Pacific Bell Transmittal No. 1990
Sprint Local Telephone Companies Transmittal No. 58
U S West Communications, Inc. Transmittal No. 928
FILINGS MADE BY RATE OF RETURN CARRIERS FOR ANNUAL ACCESS 1998
June 16, 1998
Alltel Telephone Services Corporation Transmittal No. 61
Century Tel Operating Companies Transmittal No. 2
Chillicothe Telephone Company Transmittal No. 61
Dunkirk and Fredonia Telephone Company Transmittal No. 25
ICORE Transmittal No. 14
Illinois Consolidated Telephone Company Transmittal No. 101
John Staurulakis, Inc. (JSI) Transmittal No. 31
Lufkin-Conroe Telephone Exchange, Inc. Transmittal No. 39
Minnesota Independent Equal Access Corp. Transmittal No. 11
National Exchange Carrier Association Transmittal No. 800
Puerto Rico Telephone Company Transmittal No. 30
Roseville Telephone Company Transmittal No. 57
South Dakota Network, Inc. Transmittal No. 7 
Telephone Utilities Exchange Carrier Association Transmittal No. 153
Utelco, Inc. Transmittal No. 6
Virgin Islands Telephone Corporation Transmittal No. 37
Winterhaven Telephone Company Transmittal No. 5
Wood County Telephone Company Transmittal No. 28
Note: Iowa Network Services filed a letter stating that it had made all calculations and no rate 
changes were necessary.
June 24. 1998
Anchorage Telephone Utility Transmittal No. 97
June 29. 1998
Century Tel Operating Companies Transmittal No. 3 
Roseville Telephone Company Transmittal No. 58
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Federal Communications Commission DA 98-1294
APPENDIX B
Petitions
The following parties filed petitions against the 1998 Annual Access Tariff Filings. The 
names in parenthesis are used for these parties throughout the Order.
AT&T Corp. (AT&T)
MCI Telecommunications Corporation (MCI)
Replies
ALLTEL Communications Services Corporation (ALLTEL)
Ameritech Operating Companies (Ameritech)
Bell Atlantic Telephone Companies and NYNEX Telephone Companies (Bell Atlantic)
BellSouth Telecommunictions, Inc. (BellSouth)
Century Tel Operating Companies (Century)
Chillicothe Telephone Company (Chillicothe)
GTE Telephone Operating Companies and GTE System Telephone Companies (GTE)
Illinois Consolidated Telephone Company (ICTC)
Luflcin-Conroe Telephone Exchange, Inc. (Lufkin-Conroe)
Puerto Rico Telephone Company (PRTC)
Roseville Telephone Company (Roseville)
SBC Communications Inc. (SBC)
Southern New England Telephone Company (SNET)
Sprint Local Telephone Companies (Sprint LTC)
Telephone Utilities Exchange Carrier Association (TUECA)
U S West Communications, Inc. (U S West)
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