Federal Communications Commission FCC 13-69 
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of 
Petition of USTelecom for Forbearance Under 47 
U.S.C. § 160(c) from Enforcement of Certain 
Legacy Telecommunications Regulations
Review of Wireline Competition Bureau Data 
Practices 
Petition of Cincinnati Bell Telephone Company 
LLC for Waiver from Application of the Equal 
Access Scripting Requirement
Petition of United States Telecom Association for 
Waiver from Application of the Equal Access 
Scripting Requirement
Service Quality, Customer Satisfaction, 
Infrastructure and Operating Data Gathering 
Petition of Verizon for Forbearance, 47 U.S.C. 
§ 160(c) from Enforcement of Certain of the 
Commission’s Recordkeeping and Reporting 
Requirements
Petition of Qwest Corporation for Forbearance 
from Enforcement of the Commission’s ARMIS 
and 492A Reporting Requirements Under 47 
U.S.C. § 160(c); Petition of the Embarq Local 
Operating Companies for Forbearance Under 47 
U.S.C. § 160(c) from Enforcement of Certain of 
ARMIS Reporting Requirements; and Petition of 
Frontier and Citizens ILECs for Forbearance 
Under 47 U.S.C. § 160(c) from Enforcement of 
Certain of the Commission’s ARMIS Reporting 
Requirements
Petition of AT&T Inc. for Forbearance Under 47 
U.S.C. § 160(c) from Enforcement of Certain of 
the Commission’s ARMIS Reporting 
Requirements
Petition of AT&T Inc. for Forbearance Under 47 
U.S.C. § 160(c) from Enforcement of Certain of 
the Commission’s Cost Assignment Rules
Petition of BellSouth Telecommunications, Inc. 
for Forbearance Under 47 U.S.C. § 160 from 
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WC Docket No. 12-61
WC Docket No. 10-132
WC Docket No. 09-206
WC Docket No. 08-225
WC Docket No. 08-190
WC Docket No. 07-273
WC Docket No. 07-204
WC Docket No. 07-139
WC Docket No. 07-21
WC Docket No. 05-342
Federal Communications Commission FCC 13-69 
2
Enforcement of Certain of the Commission’s Cost 
Assignment Rules
Notice of Inquiry Concerning a Review of the 
Equal Access and Nondiscrimination Obligations 
Applicable to Local Exchange Carriers
2000 Biennial Regulatory Review
Separate Affiliate Requirements of Section
64.1903 of the Commission’s Rules
Computer III Further Remand Proceedings:  Bell 
Operating Company Provision of Enhanced 
Services; 1998 Biennial Regulatory Review –
Review of Computer III and ONA Safeguards and 
Requirements
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CC Docket No. 02-39
CC Docket No. 00-175
CC Docket Nos. 95-20, 98-10
MEMORANDUM OPINION AND ORDER AND
REPORT AND ORDER AND
FURTHER NOTICE OF PROPOSED RULEMAKING AND 
SECOND FURTHER NOTICE OF PROPOSED RULEMAKING
Adopted:  May 10, 2013            Released:  May 17, 2013
Comment Date:  [30 days after date of publication of the Further Notice of Proposed Rulemaking 
and Second Further Notice of Proposed Rulemaking in the Federal Register]
Reply Comment Date:  [60 Days after date of publication of the Further Notice of Proposed 
Rulemaking and Second Further Notice of Proposed Rulemaking in the Federal Register]
By the Commission: Chairman Genachowski issuing a statement; Commissioner Pai approving in part, 
concurring in part and issuing a statement; Commissioner McDowell not participating.
TABLE OF CONTENTS
Heading Paragraph #
I. INTRODUCTION.................................................................................................................................. 1
II. BACKGROUND.................................................................................................................................... 5
A. The USTelecom Petition.................................................................................................................. 5
B. Forbearance Standard....................................................................................................................... 7
III. DISCUSSION ........................................................................................................................................ 8
A. General Arguments .......................................................................................................................... 8
B. Rules Addressed in This Order ...................................................................................................... 11
1. Equal Access Scripting Requirement ...................................................................................... 11
2. BOC ONA, CEI, Structural Separation and All-Carrier Computer Inquiry Rules.................. 18
3. Cost Assignment Rules ........................................................................................................... 30
4. Part 32 Uniform System of Accounts...................................................................................... 56
5. Property Record Rules............................................................................................................. 78
6. Part 42 Recordkeeping Requirements ..................................................................................... 93
Federal Communications Commission FCC 13-69 
3
7. ARMIS Report 43-01 (“Annual Summary Report”)............................................................. 101
8. Annual Revenue and Total Communications Plant Reporting.............................................. 110
9. Rules Governing Notice of Network Changes ...................................................................... 116
10. Service Discontinuance Approval Requirements .................................................................. 126
11. Structural Separation Requirements for Independent ILECs ................................................ 135
12. “Cash Working Capital Allowance” Requirement................................................................ 163
13. Rules Governing Extension of Unsecured Credit for Interstate and Foreign 
Communications Services to Candidates for Federal Office................................................. 167
14. Recording of Telephone Conversations with Telephone Companies.................................... 171
15. Prepaid Calling Card Reporting Requirements (§ 64.5001).................................................. 176
IV. REPORT AND ORDER IN WC DOCKET NO. 10-132................................................................... 188
A. CEI/ONA Notice and Background ............................................................................................... 188
B. Discussion.................................................................................................................................... 190
V. COMPUTER III FURTHER NOTICE OF PROPOSED RULEMAKING ....................................... 194
A. Introduction.................................................................................................................................. 194
B. Background.................................................................................................................................. 195
C. Discussion.................................................................................................................................... 199
VI. SECOND FURTHER NOTICE OF PROPOSED RULEMAKING.................................................. 211
A. Introduction.................................................................................................................................. 211
B. Background.................................................................................................................................. 214
1. Section 64.1903 of the Commission’s Rules......................................................................... 214
2. Historical Regulation of Independent ILEC Long Distance Services ................................... 215
3. Related Proceedings .............................................................................................................. 223
4. Marketplace Developments................................................................................................... 230
C. Discussion.................................................................................................................................... 237
1. Analyzing Potential for Cost Misallocation .......................................................................... 238
2. Analyzing Potential for Unlawful Non-Price Discrimination and Price Squeezes ............... 241
3. Costs and Benefits of the Separate Affiliate Requirements of Section 64.1903 ................... 242
VII. PROCEDURAL MATTERS............................................................................................................. 244
A. Memorandum Opinion and Order................................................................................................ 244
B. Report and Order in WC Docket No. 10-132 .............................................................................. 245
1. Final Paperwork Reduction Act Analysis ............................................................................. 245
2. Congressional Review Act .................................................................................................... 246
3. Final Regulatory Flexibility Analysis ................................................................................... 247
C. Computer III Further Notice ........................................................................................................ 250
1. Paperwork Reduction Act Analysis....................................................................................... 250
2. Initial Regulatory Flexibility Analysis .................................................................................. 251
3. Ex Parte Presentations........................................................................................................... 253
4. Comment Filing Procedures.................................................................................................. 254
D. Second Further Notice of Proposed Rulemaking......................................................................... 256
1. Paperwork Reduction Act Analysis....................................................................................... 256
2. Initial Regulatory Flexibility Analysis .................................................................................. 257
3. Ex Parte Presentations........................................................................................................... 272
4. Comment Filing Procedures.................................................................................................. 273
VIII. ORDERING CLAUSES .............................................................................................................. 275
Appendix A – Comments, Oppositions, & Replies
Appendix B – Forbearance Granted in this Order
Federal Communications Commission FCC 13-69 
4
I. INTRODUCTION
1. In this Memorandum Opinion and Order (Order), we address the outstanding portions of 
a petition for forbearance filed by the United States Telecom Association (USTelecom) pursuant to 
section 10 of the Communications Act of 1934, as amended (the Act).
1
The USTelecom Petition seeks 
forbearance from 17 different categories of rules, which USTelecom argues are “legacy 
telecommunications regulations” that are unnecessary and outdated.
2
  On February 19, 2013, the 
Commission granted USTelecom’s request with respect to Category 11 (Traffic Damage Claims), a 
portion of Category 13 (Extension of Unsecured Credit for Communications Services to Candidates for 
Federal Office), and Category 14 (Furnishing of Facilities to Foreign Governments for International 
Communications).
3
2. With this Order, combined with the USTelecom Short Order, we grant forbearance from 
126 of the approximately 141 rules and requirements covered by USTelecom’s petition.
4
  In so doing, we 
further our commitment to eliminate burdens on industry and promote innovation while ensuring our 
statutory objectives are met.
5
  We grant forbearance to the full extent supported by the record.  Where we 
cannot forbear from a requirement completely, we in several instances reduce burdens by granting partial 
or conditional forbearance. This allows us to modernize our rules by removing outmoded requirements, 
while preserving requirements that remain essential to our fundamental mission to ensure competition, 
consumer protection, universal service, and public safety.  However, we emphasize that nothing in this 
Order is intended to preempt any state or local requirements adopted under state law.  Nothing in this 
Order prevents states from enforcing existing state requirements and/or lawfully adopting new provisions 
similar or equivalent to any of those from which we forbear here based on authority they have under state 
law.
3. The Commission is committed to removing unnecessary requirements to reflect new 
technologies and changing market conditions.  Nevertheless, decisions about eliminating or removing 
regulations must be based on record evidence regarding each requirement. In instances where 
                                                          
1
Petition of USTelecom for Forbearance Pursuant to 47 U.S.C. § 160(c) from Enforcement of Certain Legacy 
Telecommunications Regulations, WC Docket No. 12-61 (filed Feb. 16, 2012) (USTelecom Petition).  On February 
7, 2013, pursuant to § 10(c) of the Act, the Wireline Competition Bureau (Bureau) extended until May 17, 2013, the 
date on which the USTelecom Petition shall be deemed granted in the absence of a Commission decision that the 
petition fails to meet the standard for forbearance under § 10(a) of the Act.  See Petition of USTelecom for 
Forbearance Pursuant to 47 U.S.C. § 160(c) from Enforcement of Certain Legacy Telecommunications Regulations, 
WC Docket No. 12-61, Order, 28 FCC Rcd 1077 (Wireline Comp. Bur. 2013).
2
USTelecom Petition at 1; see also Pleading Cycle Established for Comments on United States Telecom Association 
Petition for Forbearance from Certain Telecommunications Regulations, WC Docket No. 12-61, Public Notice, 27 
FCC Rcd 2326 (Wireline Comp. Bur. 2012) (USTelecom Forbearance PN).  In some instances, USTelecom seeks 
forbearance for all telecommunications carriers, and in other instances only for a subset of telecommunications 
carriers.  
3
Petition of USTelecom for Forbearance Pursuant to 47 U.S.C. § 160(c) from Enforcement of Certain Legacy 
Telecommunications Regulations, WC Docket No. 12-61, Order, 28 FCC Rcd 2605 (2013) (USTelecom Short 
Order).
4
These rules include those from which we granted forbearance in the USTelecom Short Order and rules we grant 
partial or conditional forbearance from in this Order.  Id.; see also Appendix B.
5
Since 2009, the Commission has eliminated 219 regulations and developed a plan for retrospective analysis of its 
rules.  Final Plan for Retrospective Analysis of Existing Rules, at 3 (rel. May 18, 2012) (FCC Plan), available at
http://http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-314166A1.pdf.
Federal Communications Commission FCC 13-69 
5
USTelecom has not substantiated its forbearance request, and the record or information otherwise 
available to the Commission does not support forbearance, we deny forbearance.  
4. However, to reduce existing burdens and explore whether, on a more fulsome record, we 
could determine that certain regulations are no longer needed or could be modified to be less burdensome, 
we take additional actions.  First, we adopt a Report and Order in WC Docket No. 10-132 (Reporting 
Requirement Order), relieving the Bell Operating Companies (BOCs) of legacy reporting obligations 
associated with the Computer Inquiry requirements.
6
  Second, in the attached Further Notice of Proposed 
Rulemaking (FNPRM) in CC Docket Nos. 95-20 and 98-10, we examine whether to retain, modify, or 
eliminate the comparably efficient interconnection (CEI) and open network architecture (ONA) 
requirements as well as the “All Carrier Rule.”
7
Finally, we grant USTelecom’s petition for forbearance 
from the separate affiliate requirement, 47 C.F.R. § 64.1903, for independent incumbent local exchange 
carriers (LECs) that are subject to price cap regulation, and adopt a Second Further Notice of Proposed 
Rulemaking (NPRM) to consider whether we should modify or eliminate the separate affiliate 
requirement for independent incumbent LECs that are subject to rate-of-return regulation.
II. BACKGROUND
A. The USTelecom Petition
5. As noted above, we previously granted USTelecom’s request with respect to three 
categories enumerated in the USTelecom Petition.
8
  The remaining categories of rules from which 
USTelecom seeks forbearance, and which we address in this Order, are:  
? Category 1:  Equal Access Scripting Requirement; 
? Category 2:  Open Network Architecture and Comparably Efficient Interconnection 
Requirements, Enhanced Services Structural Separation Rule (47 C.F.R. § 64.702), and All-
Carrier Computer Inquiry Rules; 
? Category 3:  Cost Assignment Rules; 
? Category 4:  Part 32 Uniform System of Accounts (47 U.S.C. § 220(a)(2), 47 C.F.R. §§ 32.1-
32.9000); 
? Category 5:  Property Record Rules (47 C.F.R. §§ 32.2000(e), (f)); 
? Category 6:  Part 42 Recordkeeping Requirements (47 C.F.R. §§ 42.4, 42.5, 42.7, 42.10(a)); 
? Category 7: Automated Reporting Management Information System (ARMIS) Report 43-01; 
? Category 8:  Annual Revenue and Total Communications Plant Reporting (47 C.F.R. 
§ 43.21(c); 
? Category 9:  Rules Governing Notices of Network Changes (47 C.F.R. §§ 51.329(a)(2), 
51.333(a)-(f), 52.333(b));
? Category 10:  Service Discontinuance Approval Requirements (47 U.S.C. § 214, 47 C.F.R. 
§§ 63.30, 63.61, 63.62, 63.63, 63.71(a)(5), 63.71(c), 63.90(a)(8)); 
? Category 12:  Structural Separation Requirements for Independent ILECs (47 C.F.R. 
§ 64.1903); 
? Category 13:  Rules Governing Extension of Unsecured Credit for Interstate and Foreign 
Communications Services to Candidates for Federal Office (47 C.F.R. §§ 64.801, 64.804(a)-
(f)); 
? Category 15:  “Cash Working Capital Allowance” Requirement (47 C.F.R. § 65.820(d)); 
                                                          
6
USTelecom did not seek forbearance from these requirements.  See infra n.59.
7
See Section V, infra.
8
See USTelecom Short Order (granting forbearance from application of 47 C.F.R. §§ 64.1, 64.301, and 64.801(g)).
Federal Communications Commission FCC 13-69 
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? Category 16:  Rules Governing Recording of Telephone Conversations with Telephone 
Companies (47 C.F.R. § 64.501); and
? Category 17:  Prepaid Calling Card Reporting Requirements (47 C.F.R. § 64.5001).
9
6. USTelecom generally claims that the rules from which it seeks forbearance are based on 
outdated assumptions about technologies and business models that do not reflect the current 
communications industry.
10
  USTelecom asserts that these regulations no longer serve any regulatory 
purpose or provide the Commission with information necessary to perform its regulatory functions.
11
  
USTelecom further states that the regulations at issue impose undue costs and burdens and impose an 
unwarranted competitive disadvantage on incumbent local exchange carriers (ILECs) or a small subset of 
ILECs because other competitors, including cable operators, wireless carriers, and Voice over Internet 
Protocol (VoIP) providers are not subject to these rules.
12
  USTelecom argues that these regulations 
adversely affect competition and are therefore detrimental to consumers, and that the elimination of the 
legacy telecommunications regulations at issue is necessary to realize the pro-competitive goals of the 
1996 Act.
13
B. Forbearance Standard
7. The Commission is required to forbear from any statutory provision or regulation if it 
determines that: (1) enforcement of the regulation is not necessary to ensure that the telecommunications 
carrier’s charges, practices, classifications, or regulations are just, reasonable, and not unjustly or 
unreasonably discriminatory; (2) enforcement of the regulation is not necessary to protect consumers; and 
(3) forbearance from applying such provision or regulation is consistent with the public interest.
14
In 
determining whether forbearance is consistent with the public interest, the Commission also must 
consider “whether forbearance from enforcing the provision or regulation will promote competitive 
market conditions.”
15
  Forbearance is warranted under section 10(a) only if all three elements of the 
forbearance criteria are satisfied.
16
  In a forbearance proceeding, the petitioner has the burden of proof, 
including both the burden of production and the burden of persuasion.
17
Finally, as the D.C. Circuit has 
                                                          
9
See USTelecom Forbearance PN.
10
USTelecom Petition at 2-3.
11
Id. at 3.
12
Id. at 5.
13
Id.
14
47 U.S.C. § 160(a).  
15
47 U.S.C. § 160(b) (providing that, in making the determination under § 10(a)(3), the Commission shall consider 
whether forbearance will promote competitive market conditions).  
16
See Cellular Telecomms. & Internet Ass’n v. FCC, 330 F.3d 502, 509 (D.C. Cir. 2003) (explaining that the three 
prongs of § 10(a) are conjunctive and that the Commission could properly deny a petition for failure to meet any one 
prong).
17
Petition to Establish Procedural Requirements to Govern Proceedings for Forbearance Under Section 10 of the 
Communications Act of 1934, as Amended, WC Docket No. 07-267, Report and Order, 24 FCC Rcd 9543 (2009) 
(Forbearance Procedures Order).  Thus, in addition to the burden of production of stating a prima facie case in the 
petition, “the petitioner’s evidence and analysis must withstand the evidence and analysis propounded by those 
opposing the petition for forbearance” (i.e., the burden of persuasion).  Id. at 9556, para. 21.
Federal Communications Commission FCC 13-69 
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held, section 10 “imposes no particular mode of market analysis or level of geographic rigor,” but rather 
“allow[s] the forbearance analysis to vary depending on the circumstances.”
18
III. DISCUSSION
A. General Arguments
8. The Bureau sought comment on USTelecom’s petition.
19
  The majority of filers addressed 
only certain of the 17 categories of rules raised in USTelecom’s petition.  In addition, some commenters 
opposed USTelecom’s petition generally, contending that USTelecom has not properly sought 
forbearance relief under section 10(c) because it is not a “telecommunications carrier,” and because it 
seeks relief for a class of carriers without demonstrating that all members of the class are members of 
USTelecom.
20
  We rejected these arguments in the USTelecom Short Order and found that the filing 
appropriately is considered a petition for forbearance under section 10(c).
21
  
9. In the USTelecom Short Order, we also rejected arguments that USTelecom’s petition 
was not “complete as filed” as required by our rules, and found that, on its face, the petition satisfied that 
forbearance procedural rule for the three categories of rules in that Order.
22
We reach the same 
conclusion for the remaining categories of rules from which USTelecom seeks forbearance addressed in 
this Order, and find that USTelecom provides the minimum information necessary to satisfy the 
“complete as filed” requirement in our forbearance procedural rules.
23
10. We reject the general argument by a number of commenters that USTelecom overall has 
not met its evidentiary burden.
24
In particular, we disagree with commenters that we should deny or 
dismiss the petition for USTelecom’s failure to meet its burden of proof as applied to its entire request. In 
evaluating whether a forbearance petitioner has met its burden of proof, we look at the totality of the 
                                                          
18
EarthLink Inc. v. FCC, 462 F.3d 1, 6 (D.C. Cir. 2006) (using the Chevron framework to review the Commission’s 
forbearance analysis, under which the court “will uphold the FCC’s interpretation as long as it is reasonable, even if 
‘there may be other reasonable, or even more reasonable views’” (quoting AT&T Corp. v. FCC, 220 F.3d 607, 621 
(D.C. Cir. 2000)); see also Petition of Qwest Phoenix for Forbearance Pursuant to 47 U.S.C. § 160(c) in the 
Phoenix, Arizona Metropolitan Statistical Area, WC Docket No. 09-135, Report and Order, 25 FCC Rcd 8622, 
8632-33, at para. 21 (2010) (Qwest Phoenix Forbearance Order) (the Commission used a competitive analysis that 
defines the relevant product and geographic markets).
19
USTelecom Forbearance PN.
20
See, e.g., COMPTEL Comments at 2-3; Broadview et al. Opposition at 2; Michigan PUC Reply at 2-3.
21
USTelecom Short Order, 28 FCC Rcd at 2607-08, paras. 6-7. 
22
Id. at 2607 n.17.  Full Service Network made a general argument asserting that the Petition lacks adequate 
information to provide a basis to analyze its impact on consumers, competition and the public interest, and is 
therefore not “complete as filed.”  See, e.g., Full Service Reply at 2; Ad Hoc Comments at 2-5.  The Commission 
has defined “complete as filed” to mean that a petition explicitly states the scope of the relief requested, addresses 
each prong of the statute as it applies to the rules or provisions from which the petitioner seeks relief, identifies any 
other proceedings pending before the Commission where the petitioner speaks to the relevant issues and complies 
with format requirements.  Forbearance Procedures Order, 24 FCC Rcd at 9553-54, paras.16-19.  
23
We reject the Ad Hoc Telecommunications Users Committee’s request to dismiss or deny USTelecom’s petition 
in its entirety.  See Ad Hoc Comments and Request for Summary Dismissal.  We address whether the forbearance 
criteria have been met, individually, for each of the categories of rules from which USTelecom requests forbearance.
24
See, e.g., Pennsylvania PUC Reply at 13; Michigan PSC Comments at 3. The burden of proof is on the petitioner 
in forbearance proceedings.  
Federal Communications Commission FCC 13-69 
8
record before us.
25
On that basis, and in light of our authority to make predictive judgments, we are able 
to grant forbearance from enforcement of many of the requirements addressed in USTelecom’s petition.  
Although we reject requests to dismiss USTelecom’s petition in its entirety for failing to satisfy its burden 
of proof, we find, as set forth herein, that USTelecom did not meet its burden in all instances.  While the 
Commission must forbear from applying a regulation or statutory provision when the statutory 
forbearance criteria are met, in a petition for forbearance “it is for the petitioner to convince the 
Commission to make those determinations in the petitioner’s favor.”
26
For certain categories of rules,
USTelecom does not address each rule individually. As explained below, this approach is persuasive
where its arguments and evidence apply to the entire category of rules, but is not persuasive when 
forbearance may only be appropriate for individual rules within the category. In these instances, and 
where USTelecom has failed to support its argument with the necessary data and there is not a sufficient 
basis in the record to justify forbearance, we find that USTelecom has not met its burden of proof, and we 
conclude that forbearance is not warranted.  
B. Rules Addressed in This Order
1. Equal Access Scripting Requirement
a. USTelecom’s Request
11. USTelecom requests forbearance from application of the Equal Access Scripting 
Requirement (EA Scripting Requirement) to all ILECs that remain subject to the rule.
27
The EA Scripting 
Requirement mandates that the ILEC (1) inform customers calling to obtain new local exchange service 
that they may obtain stand-alone, presubscribed, long distance service from other carriers, and (2) upon 
request, read customers a list of carriers offering such long distance service.  USTelecom argues that there 
is no justification to continue the EA Scripting Requirement.
28
  GCI and California PUC opposed 
elimination of the rule in certain areas where the ILEC is the only provider of wireline local exchange 
telephone service.
29
  There are several other proceedings that address equal access issues, including the 
EA scripting requirement, currently pending before the Commission.
30
  
                                                          
25
Forbearance Procedures Order, 24 FCC Rcd at 9557, para. 21.
26
Id. at 9557, para. 22. 
27
USTelecom Petition at 21; see also USTelecom Forbearance PN, 27 FCC Rcd 2326.  This requirement still 
applies to the independent ILECs, although in 2007, the Commission forbore from applying it to the Bell Operating 
Companies (BOCs) and waived the requirement for their independent ILEC affiliates.  See, e.g., Section 272(f)(1) 
Sunset of the BOC Separate Affiliate and Related Requirements; 2000 Biennial Regulatory Review Separate Affiliate 
Requirements of Section 64.1903 of the Commission’s Rules; Petition of AT&T Inc. for Forbearance Under 47 
U.S.C. § 160(c) with Regard to Certain Dominant Carrier Regulations for In-Region, Interexchange Services, WC 
Docket Nos. 02-112, 06-120, CC Docket No. 00-175, Report and Order, 22 FCC Rcd 16440, 16501-02, paras. 125-
26 (2007) (Section 272 Sunset Order) (forbearing from the EA scripting requirement for Verizon, Qwest, and 
AT&T, and waiving the requirement for their non-BOC affiliates).
28
USTelecom Petition at 23.
29
See generally CPUC Comments at 2-7; GCI Comments at 1-3; but see ACS Reply at1-5.
30
The Commission launched a broad Inquiry in 2002 to address all equal access and nondiscrimination 
requirements, including the EA scripting requirement.  Review of the Equal Access and Nondiscrimination 
Obligations Applicable to Local Exchange Carriers, CC Docket No. 02-39, Notice of Inquiry, 17 FCC Rcd 4015 
(2002) (Equal Access NOI).  In 2008, USTelecom asked the Commission to waive the EA Scripting Requirement as 
applied to its small and midsized members.  USTelecom Petition for Waiver, WC Docket No. 08-225, at 1, 4.  
Cincinnati Bell subsequently filed a petition asking the Commission for waiver of the EA Scripting Requirement. 
Cincinnati Bell Petition for Waiver, WC Docket No. 09-206 (filed Sept. 11, 2009); see also Wireline Competition 
(continued....)
Federal Communications Commission FCC 13-69 
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b. Background
12. The EA Scripting Requirement grew out of the 1982 AT&T Divestiture.
31
Divestiture 
opened up opportunities for new companies other than AT&T to offer long distance service that could 
compete more effectively with AT&T.
32
  The federal district court handling the Divestiture required all of 
the BOCs to “inform . . . customers . . . of their options with respect to the various interexchange 
carriers.”
33
  The Commission subsequently addressed this issue
34
and stated that: 
LEC personnel taking the verbal order should provide new customers with the names 
and, if requested, the telephone numbers of the IXCs and should devise procedures to 
ensure that the names of IXCs are provided in random order.
35
The Commission later applied this requirement to ILECs beyond the BOCs.
36
  The Commission limited 
the scope of the EA Scripting Requirement in several subsequent decisions.
37
(Continued from previous page)                                                          
Bureau Seeks Comment on Petition of Cincinnati Bell Telephone Company LLC for Waiver from Application of the 
Equal Access Scripting Requirement, WC Docket No. 09-206, Public Notice, 24 FCC Rcd 13877 (Wireline Comp. 
Bur. 2009).
31
Modification of Final Judgment, U.S. v. Western Elec. Co., 552 F. Supp. 131 (D.D.C. 1982) (requiring completion 
of AT&T’s reorganization within 18 months of release of the order).
32
Prior to the implementation of equal access, competitive long distance carriers could not provide mass market 
long distance service that was comparable in quality to that provided by AT&T.  The implementation of equal 
access changed this and allowed customers to choose a carrier other than AT&T as their presubscribed long distance 
carrier.  
33
U.S. v. Western Elec. Co., 578 F. Supp. 668, 676 (D.D.C. 1983).
34
See Investigation of Access and Divestiture Related Tariffs, CC Docket No. 83-1145, Memorandum Opinion and 
Order, 101 FCC 2d 911, 912-13, paras. 3-5 (1985) (Access and Divestiture Tariffs Order).  The Commission 
required that the LECs implement a balloting system that allowed their customers to choose among interexchange 
carriers. See id. at 928-30, App. B at paras. 4-8.  The Commission stated, “[n]ew customers are to be handled by the 
Business Office according to the LEC’s new customer presubscription procedures.  These procedures should provide 
new customers with an opportunity to obtain a ballot and make an interexchange carrier selection.”  See id. at 931, 
App. B at para. 22.
35
Investigation of Access and Divestiture Related Tariffs:  Allocation Plan Waivers and Tariffs, CC Docket No. 83-
1145, Memorandum Opinion and Order, 101 FCC 2d 935, 950, para. 40 (1985).
36
The Commission stated that this plan applies to “Bell Operating Companies pursuant to the Modification of Final 
Judgment, GTE pursuant to its Consent Decree, Independent Companies pursuant to Commission Order, and all
local exchange companies that provide equal access on a voluntary basis.”  See Access and Divestiture Tariffs 
Order, 101 FCC 2d at 928, App. B, para. 1. The EA Scripting Requirement is preserved by § 251(g) of the Act, 
which requires that carriers provide wireline services in compliance with pre-existing equal access and non-
discrimination requirements until the requirements are explicitly superseded by subsequent Commission action.  47 
U.S.C. § 251(g).
37
In 1997, the Commission held that “a BOC, during an inbound telephone call, should be allowed to recommend its 
own long distance affiliate, as long as it contemporaneously states that other carriers also provide long distance
service and offers to read a list of all available interexchange carriers in random order.”  Application of BellSouth 
Corp., et al. Pursuant to Section 271 of the Communications Act of 1934, as amended, to Provide In-Region, 
InterLATA Services in South Carolina, Memorandum Opinion and Order, 13 FCC Rcd 539, 670-72, paras. 237, 239 
(1997) (BellSouth South Carolina Section 271 Order) (emphasis added).  Later, the Commission concluded that the 
EA Scripting Requirement applied only to calls from customers seeking “new service” and did not apply to calls 
from existing customers requesting an additional line. See AT&T Corp v. New York Tel. Co., File No. EB-00-MD-
011, Memorandum Opinion and Order, 15 FCC Rcd 19997, 19998, para. 5 (2000) (Bell Atlantic Order).  The 
(continued....)
Federal Communications Commission FCC 13-69 
10
13. In the 2007 EA Scripting Forbearance Order, the Commission forbore from application 
of the EA Scripting Requirement to Verizon, Qwest, and AT&T, and waived the rule for their 
independent ILEC affiliates.
38
  In reaching its decision, the Commission noted that the services customers 
use to make long distance calls have changed, and concluded that there was “significant evidence the 
stand-alone long distance market [was] becoming a fringe market.”
39
  The Commission recognized that 
“the stand-alone long distance competition that the EA Scripting Requirement was designed to protect has 
largely given way to competition between service bundles.”
40
  The Commission also noted that 
“[w]ireless telephone subscribers . . . regularly use their ‘any distance’ minutes for long distance 
calling.”
41
  In addition, the Commission found that “all residential customers also have the option of 
making long distance calls using transaction services, such as prepaid calling cards.”
42
  The Commission 
found that the EA Scripting Requirement could confuse customers because it identified only one 
competitive option – stand-alone, presubscribed long distance service.
43
  Based on this and other analysis, 
the Commission concluded that the EA Scripting Requirement was no longer needed in the BOC service 
areas.
44
  However, the Commission declined to extend forbearance to the independent ILECs out of 
concern that the market circumstances in their service areas may differ from those in the BOC service 
areas.
45
c. Discussion
14. While the EA Scripting Requirement originally served an important purpose in making
consumers aware of new competitive options and fostering the development of nascent competition in the 
provision of pre-subscribed stand-alone long distance service,
46
we find that it is no longer necessary.  
First, the market has changed dramatically in the more than 25 years since the requirement was 
established.  When the Commission granted forbearance from the EA Scripting Requirement for the 
BOCs in 2007, it stated that stand-alone long distance service was becoming a fringe market, adding that 
stand-alone long distance competition had largely given way to competition between service bundles that 
included both local and long distance calling.
47
  These trends appear to have continued in the intervening 
years.  Thus, we can see minimal if any public interest benefit in requiring ILECs to inform customers 
(Continued from previous page)                                                          
Commission specified that “new service” referred only to situations in which “customers . . . either (1) receive 
service from Bell Atlantic for the first time, or (2) move to another location within Bell Atlantic’s area.”  Id. at 
20003, para. 15.
38
Section 272 Sunset Order, 22 FCC Rcd at 16501-02, paras. 125-26.
39
Id. at 16499, para. 121.
40
Id.
41
Id. at 16499-500, para. 121.
42
Id. at 16500, para. 122.
43
Id.
44
Id. at 16501-02, paras. 125-26.
45
Id. at 16501, para. 125.
46
See id. at 16499, para. 120; CenturyLink et al. Comments, WC Docket No. 08-225, at 3-4 (“This new policy was 
designed to help allow a competitive long distance market to develop, by providing consumers information about 
alternatives to AT&T’s dominant long distance service.”); TWC Comments, WC Docket No. 08-225, at 2-3. 
47
Section 272 Sunset Order, 22 FCC Rcd at 16452-54, para 23, 16499, para. 121. 
Federal Communications Commission FCC 13-69 
11
about options for stand-alone long distance service.
48
  Second, consumers today can obtain information on 
options for satisfying their voice communications needs, including long distance calling needs, in ways 
that did not exist when the Commission imposed the EA Scripting Requirement.  In particular, such 
information is available on the Internet.  Third, the EA Scripting Requirement provides consumers with 
information about only one competitive alternative—stand-alone long distance service.  It does not reflect 
options involving bundled offerings, nor does it remind consumers of the availability of over-the-top 
VoIP services, dial-around long distance services, and calling cards.  By focusing on stand-alone long 
distance service options, the EA Scripting Requirement is likely to distort, rather than illuminate,
competitive choices.
15. The arguments raised by GCI and the California PUC do not justify retention of the EA 
Scripting Requirement in areas where the ILEC is the only provider of wireline local exchange service.
49
  
We recognize that stand-alone long distance service may represent a more significant competitive 
alternative in these areas, but we do not conclude that this warrants retention of the requirement.  Even 
where the ILEC is the only local exchange carrier, consumers can find information about service options,
including information on stand-alone long distance service, in other ways, including on the Internet.  And
even in these areas, the EA Scripting Requirement does not notify consumers of other competitive calling 
options such as calling cards, dial-around service or over-the-top VoIP. 
16. For the reasons discussed above, we conclude that continued application of the EA 
Scripting Requirement is not necessary to ensure that the charges, practices, and classifications, or 
regulations by, for, or in connection with independent ILECs’ mass market long distance calling services 
are just and reasonable and are not unjustly or unreasonably discriminatory pursuant to section 10(a)(1) of 
the Act.
50
  In today’s telecommunications marketplace, the EA Scripting Requirement does little to foster 
competition, as it only addresses the availability of stand-alone long distance service, which has become a 
fringe market.
51
Thus, advising customers of the availability of stand-alone long distance service is 
unlikely to ensure that independent ILEC rates, terms and conditions for long distance service are just and 
reasonable and not unjustly or unreasonably discriminatory. For the same reasons, we conclude that 
retention of the EA Scripting Requirement is not “necessary for the protection of consumers” pursuant to 
Section 10(a)(2) of the Act.
52
17. We also conclude, pursuant to section 10(a)(3) of the Act, that forbearance from 
enforcement of the EA Scripting Requirement “is consistent with the public interest”
53
because the costs 
                                                          
48
The fact that customers typically purchase local and long distance services in a bundle does not address whether 
the ILEC is likely to have market power over the bundled offering.  
49
GCI does not posit that the EA Scripting Requirement should be retained in areas served by multiple LECs.  GCI 
Opposition at 2 (“GCI agrees, however, that scripting is not required where the ILEC does not assert a 251(f)(1) 
rural exemption for the purposes of negotiation of an interconnection and traffic exchange agreement, permits 
collocation in conjunction with interconnection, and the ILEC has entered into interconnection agreements with a 
CLEC or unaffiliated CMRS provider.”) (footnotes omitted).
50
47 U.S.C. § 160(a)(1).
51
The Commission noted that this market was becoming a fringe market in 2007.  See Section 272 Sunset Order, 22 
FCC Rcd at 16501, para. 123.  MCI and AT&T stopped providing presubscribed, stand-alone, long distance service 
in 2004.  See id. at 16463, para. 44.  
52
47 U.S.C. § 160(a)(2).
53
47 U.S.C. § 160(a)(3).  47 U.S.C. § 160(b) states that, when considering the public interest evaluation called for in 
47 U.S.C. § 160(a)(3), the Commission “shall consider whether forbearance from enforcing the provision or 
regulation will promote competitive market conditions, including the extent to which such forbearance will enhance 
competition among providers of telecommunications services.”
Federal Communications Commission FCC 13-69 
12
associated with this requirement exceed the benefits.  For the reasons described above, we conclude that 
the EA Scripting Requirement provides de minimis, if any, benefits.  At the same time, it imposes costs 
on independent ILECs.  Their customer service representatives must spend time advising customers that 
they can obtain stand-alone long distance service and be prepared to read lists of carriers that can provide 
such service if customers request this.  Given the lack of benefits generated by this requirement, we also 
conclude that its removal would foster competition by removing regulatory requirements and the resulting 
costs that affect only ILECs subject to the rule and not their competitors. We therefore forbear from the 
requirement for all ILECs that have not previously been granted forbearance.
54
  In reaching this decision, 
we emphasize that customers will retain the right to select a presubscribed long distance carrier other than 
the ILEC or a provider affiliated with the ILEC,
55
and that the ILECs must ensure that their customer 
service representatives accurately answer any questions in this regard. 
2. BOC ONA, CEI, Structural Separation and All-Carrier Computer Inquiry
Rules
a. USTelecom’s Request
18. USTelecom seeks forbearance for the BOCs from application of the “substantive CEI and 
ONA requirements and the structural separation requirements in section 64.702 of the Commission’s 
rules.”
56
  It also requests forbearance from “applying to all covered carriers the legacy All-Carrier 
Computer Inquiry rule.”
57
  USTelecom asserts that we should forbear from enforcing these substantive 
                                                          
54
In the interest of administrative simplicity, we include in this grant of forbearance the independent ILEC affiliates 
of the BOCs (also referred to as the non-BOC affiliates) that were granted waivers of this requirement as part of the 
Commission decision to forbear from application of this requirement to the Bell Operating Companies.  See Section 
272 Sunset Order, 22 FCC Rcd at 16502, para. 126.
55
Id. at 16501, para. 124 (“Even without the EA Scripting Requirement, the BOCs’ local customers will retain the 
right to obtain long distance service from a long distance carrier other than the BOC.”).
56
USTelecom Petition at 25 (citing Computer III Further Remand Proceedings:  Bell Operating Company Provision 
of Enhanced Services, CC Docket No. 95-20; 1998 Biennial Regulatory Review—Review of Computer III and ONA 
Safeguards and Requirements, CC Docket No. 98-10, Report and Order, 14 FCC Rcd 4289, 4308-09, para. 29 
(1999) (Computer III Further Remand Order)).  See infra n.63. The Commission has explained that the BOCs have 
previously obtained significant relief from Computer III requirements.  See, e.g., Petitions of the Verizon Telephone 
Companies for Forbearance Pursuant to 47 U.S.C. § 160(c) in the Boston, New York, Philadelphia, Pittsburgh, 
Providence, and Virginia Beach Metropolitan Statistical Areas, WC Docket No. 06-172, Memorandum Opinion and 
Order, 22 FCC Rcd 21293, 21318, para. 45 (2007) (Verizon 6 MSA Forbearance Order); Petitions of Qwest 
Corporation for Forbearance Pursuant to 47 U.S.C. § 160(c) in the Denver, Minneapolis-St. Paul, Phoenix, and 
Seattle Metropolitan Statistical Areas, WC Docket No. 07-97, Memorandum Opinion and Order, 23 FCC Rcd  
11729, 11760, para. 44 (2008) (Qwest 4 MSA Forbearance Order) (citing Appropriate Framework for Broadband 
Access to the Internet over Wireline Facilities, CC Docket No. 02-33, Report and Order and Notice of Proposed 
Rulemaking, 20 FCC Rcd 14853, 14875-76, para. 41 (2005), aff’d, Time Warner Telecom v. FCC, No. 05-4769 (and 
consolidated cases) (3rd Cir. 2007); Petition of AT&T, Inc. for Forbearance Under 47 U.S.C. § 160(c) from Title II 
and Computer Inquiry Rules with Respect to its Broadband Services; Petition of BellSouth Corporation for 
Forbearance 47 U.S.C. § 160(c) from Title II and Computer Inquiry Rules with Respect to its Broadband Services, 
WC Docket No. 06-125, Memorandum Opinion and Order, 22 FCC Rcd 18705, 18733-35, paras. 52-58 (2007) 
(granting forbearance from application of BOC-specific Computer Inquiry rules to the extent that AT&T offers 
information services in conjunction with its existing non-time division multiplexing (TDM)-based, packet-switched 
broadband services or its existing non-TDM-based, optical transmission services).  USTelecom currently seeks relief 
from the remaining Computer III requirements that apply to narrowband service offerings.  USTelecom Petition at 
24-31.
57
USTelecom Petition at 28 (citing Amendment of Section 64.702 of the Commission’s Rules and Regulations 
(Computer II), 77 FCC 2d 384, 474-75, para. 231 (1980) (Computer II Final Decision), recon., 84 FCC 2d 50 
(continued....)
Federal Communications Commission FCC 13-69 
13
Computer Inquiry requirements because they have no utility in the current marketplace and are 
unnecessary to ensure just, reasonable, and non-discriminatory rates or to protect consumers.
58
  
USTelecom’s petition requests the broadest possible, nationwide elimination of all non-structural and 
structural safeguards,
59
and we find that it has not satisfied the section 10 standard at this time.  However, 
we find that it is appropriate to examine the rules as they are currently structured.
19. We grant the BOCs permanent relief in the Reporting Requirement Order from the 
legacy reporting obligations associated with the Computer III requirements, thereby eliminating the 
companies’ costs and burdens associated with filing thousands of pages of yearly compliance reports that 
are no longer necessary. We find that the burdens associated with these monitoring and compliance 
requirements outweigh the benefits and that eliminating them furthers our goal of improving the way we 
collect, use, and disseminate data, including by altering or eliminating collections that are no longer 
useful or necessary to carry out our statutory responsibilities.
60
We also seek comment in the FNPRM on 
whether we should eliminate or substantially reduce remaining narrowband requirements.
b. Background  
20. In the Computer II and Computer III proceedings, the Commission established safeguards 
for the provision of enhanced services by the BOCs.  In Computer II, the Commission promulgated 
section 64.702 of its rules, which required AT&T (and, subsequently, the BOCs) to offer unregulated 
enhanced services through structurally separate subsidiaries.
61
  The Commission also adopted the “All-
Carrier Rule,” which required other facilities-based common carriers to provide the basic transmission 
services underlying their enhanced services on a nondiscriminatory basis, pursuant to tariffs governed by 
Title II of the Act.  These carriers must offer the underlying basic service at the same prices and on the 
(Continued from previous page)                                                          
(1980), further recon., 88 FCC 2d 512 (1981), affirmed sub nom. Computer and Communications Industry Ass’n v. 
FCC, 693 F.2d 198 (D.C. Cir. 1982), cert. denied, 461 U.S. 938 (1983)).
58
USTelecom Petition at 28-31.  USTelecom notes that the Commission has proposed eliminating all narrowband 
reporting requirements for CEI and ONA services and states that it requests relief from the underlying substantive 
CEI and ONA obligations in its petition.  Id. at 28 (citing Review of Wireline Competition Bureau Data Practices, 
Computer III Further Remand Proceedings:  Bell Operating Company Provision of Enhanced Services; 1998 
Biennial Regulatory Review – Review of Computer III and ONA Safeguards and Requirements, Notice of Proposed 
Rulemaking, WC Docket No. 10-132, CC Docket Nos. 95-20, 98-10, 25 FCC Rcd 1579 (2011) (CEI/ONA Notice)).  
The Wireline Competition Bureau on its own motion waived the reporting requirements pending resolution of the 
Notice.  Review of Wireline Competition Bureau Data Practices, Computer III Further Remand Proceedings:  Bell 
Operating Company Provision of Enhanced Services; 1998 Biennial Regulatory Review – Review of Computer III 
and ONA Safeguards and Requirements, Notice of Proposed Rulemaking, WC Docket No. 10-132, CC Docket Nos. 
95-20, 98-10, 26 FCC Rcd 11280 (2011) (CEI/ONA Reporting Waiver).
59
The petition asks for forbearance from the “substantive CEI and ONA requirements.”  USTelecom Petition at 25.  
USTelecom states, “[i]n proposing to eliminate the outdated and meaningless narrowband reporting obligations 
associated with the CEI and ONA requirements, the Commission recognized that these reports suffer from a ‘lack of 
continuing relevance and utility.’  The same is true for the substantive CEI and ONA requirements and the structural 
separation rule, to which only the BOCs and none of their competitors remain subject and which have no utility 
whatsoever in today’s marketplace.”  Id. at 28 (citing CEI/ONA Notice, 26 FCC Rcd at 1579, para. 1; 2010 Biennial 
Review of Telecommunications Regulations, WC Docket No. 10-272, Public Notice, 26 FCC Rcd 16943, 16945 
(Wireline Comp. Bur. 2011)).  
60
See Pleading Cycle Established for Comments on Review of Wireline Competition Bureau Data Practices, WC 
Docket No. 10-132, Public Notice, 25 FCC Rcd 8213 (Wireline Comp. Bur. 2010) (WCB Data Innovation Initiative 
Public Notice).
61
Computer II Final Decision, 77 FCC 2d at 386-87, 417-35, 457-87, paras. 2-7, 86-132, 190-264.
Federal Communications Commission FCC 13-69 
14
same terms and conditions to all enhanced service providers (ESPs), including their own enhanced 
services operations.
62
  Subsequently, the Commission implemented CEI and ONA requirements in the 
Computer III proceedings.  CEI and ONA are non-structural safeguards that permit the BOCs to compete 
in the unregulated enhanced services market while preventing them from using local exchange market 
power to engage in improper cost allocation and unlawful discrimination against enhanced service 
competitors.
63
  The BOCs’ CEI and ONA plans offer nondiscriminatory interconnection to basic 
transmission services that competitors purchase to provide enhanced services, primarily to customers that 
use narrowband telephone technology.
64
  Examples of narrowband enhanced services that use CEI and 
ONA include voicemail, store and forward services, data processing, alarm monitoring, and dial-up 
gateways to on-line databases.
65
  BOCs must comply with CEI and ONA requirements in order to offer 
                                                          
62
Id. at 474-75, para. 231.  The Commission granted nondominant carriers permissive detariffing of interstate 
interexchange access services, and non-incumbent local exchange carriers need not offer the basic transmission 
services underlying their enhanced services pursuant to tariff.  See Hyperion Telecommunications, Inc. Petition 
Requesting Forbearance, Time Warner Communications Petition for Forbearance, Complete Detariffing for 
Competitive Access Providers and Competitive Exchange Carriers, CCB/CPD Nos. 96-3, 96-7, CC Docket No. 97-
146, Memorandum Opinion and Order and Notice of Proposed Rulemaking, 12 FCC Rcd 8596 (1997).
63
Amendment of Section 64.702 of the Commission’s Rules and Regulations, CC Docket No. 85-229, Phase I, 104 
FCC 2d 958 (1986) (Computer III Phase I Order), recon., 2 FCC Rcd 3035 (1987) (Computer III Phase I 
Reconsideration Order), further recon., 3 FCC Rcd 1135 (1988) (Computer III Phase I Further Reconsideration 
Order), second further recon., 4 FCC Rcd 5927 (1989) (Computer III Phase I Second Further Reconsideration 
Order); Phase I Order and Phase I Recon. Order vacated sub nom. California v. FCC, 905 F.2d 1217 (9th Cir. 
1990) (California I); CC Docket No. 85-229, Phase II, 2 FCC Rcd 3072 (1987) (Computer III Phase II Order), 
recon., 3 FCC Rcd 1150 (1988) (Computer III Phase II Reconsideration Order), further recon., 4 FCC Rcd 5927 
(1989) (Phase II Further Reconsideration Order); Phase II Order vacated, California I, 905 F.2d 1217 (9th Cir. 
1990); Computer III Remand Proceeding, CC Docket No. 90-368, 5 FCC Rcd 7719 (1990) (ONA Remand Order), 
recon., 7 FCC Rcd 909 (1992), pets. for review denied sub nom. California v. FCC, 4 F.3d 1505 (9th Cir. 1993) 
(California II); Computer III Remand Proceedings:  Bell Operating Company Safeguards and Tier 1 Local 
Exchange Company Safeguards, CC Docket No. 90-623, 6 FCC Rcd 7571 (1991) (BOC Safeguards Order), BOC 
Safeguards Order vacated in part and remanded sub nom. California v. FCC, 39 F.3d 919 (9th Cir. 1994) 
(California III), cert. denied, 514 U.S. 1050 (1995); Computer III Further Remand Proceedings:  Bell Operating 
Company Provision of Enhanced Services, CC Docket No. 95-20, Notice of Proposed Rulemaking, 10 FCC Rcd 
8360 (1995) (Computer III Further Remand Notice), Further Notice of Proposed Rulemaking, 13 FCC Rcd 6040 
(1998) (Computer III FNPRM); Computer III Further Remand Order, 14 FCC Rcd 4289, recon., 14 FCC Rcd 
21628 (1999) (Computer III Further Remand Reconsideration Order); see also Further Comment Requested to 
Update and Refresh Record on Computer III Requirements, CC Docket Nos. 95-20, 98-10, Public Notice, 16 FCC 
Rcd 5363 (2001) (collectively referred to as Computer III).
64
The Commission defined basic services as the offering of “a pure transmission capability over a communications 
path that is virtually transparent in terms of its interaction with customer supplied information.”  Computer II Final 
Decision, 77 FCC 2d at 415-16, para. 83, 420, para. 96.  Enhanced services, in turn, were defined as services that 
“combine[] basic service with computer processing applications that act on the format, content, code, protocol or
similar aspects of the subscriber’s transmitted information, or provide the subscriber additional, different, or 
restructured information, or involve subscriber interaction with stored information.”  Id. at 387, para. 5.  In other 
words, an “enhanced service is any offering over the telecommunications network which is more than a basic 
transmission service.”  Id. at 420, para. 97. 
65
Computer III FNPRM, 13 FCC Rcd at 6042, para. 1 (examining the continued application of the CEI and ONA 
non-structural safeguards after the passage of the Telecommunications Act of 1996).  In 1999, the Commission 
addressed certain CEI requirements but did not reach other issues raised in the FNPRM, which remains pending.  
Computer III Further Remand Order, 14 FCC Rcd at 4291-92 n.11 (listing examples of enhanced services); Bell 
Operating Companies Joint Petition for Waiver of Computer II Rules, Order, 10 FCC Rcd 13758, 13768-70, paras. 
68-75 (1995) (CEI Plan Order) (discussing alarm monitoring services as enhanced services).
Federal Communications Commission FCC 13-69 
15
these enhanced services on an “integrated” basis (i.e., through the regulated telephone company) instead 
of through a structurally separate affiliate, as required by section 64.702 of the Commission’s rules.
66
  
21. The BOCs’ CEI plans detail how they provide unaffiliated enhanced services providers 
with interconnection to basic transmission services on the same terms and conditions that the BOCs use 
for their own enhanced services offerings.
67
  The BOCs originally filed their CEI plans on paper and 
needed approval from the Commission before the plans could take effect.  In 1999, the Commission 
streamlined the CEI process, permitting the companies to post their plans on the Internet and then notify 
the Bureau at the time of the postings with no pre-approval required.
68
  The BOCs’ ONA plans offer 
competitive enhanced services providers unbundled access to basic transmission services, regardless of 
whether the BOCs’ affiliated enhanced services offerings use the same components.
69
c. Discussion
22. Although we recognize that the market has changed dramatically since the Commission 
first imposed the Computer Inquiry requirements, USTelecom has not demonstrated that market 
conditions warrant the broad forbearance it requests.  As we stated above, USTelecom is required to 
substantiate its request with record evidence, and it has not done so.  We thus deny forbearance.  
However, we have identified a path toward potential relief from these legacy requirements.  This path will 
modernize our regulations in a way that is consistent with the public interest and protects consumers who 
still rely on narrowband services, while also eliminating unnecessary burdens on carriers.  The first step 
on the path is the permanent elimination of the BOCs’ obligation to file reports regarding CEI and ONA.
70
The second step is a rulemaking to gather data that will help the Commission make a reasoned, fact-based 
decision about whether to retain, modify, or eliminate the CEI and ONA requirements and the All-Carrier 
Rule.
71
Although we conclude that USTelecom has not met its burden of proof with respect to its request 
for nationwide forbearance, we recognize that parties might be able to demonstrate that relief is warranted 
in specific locations, or for particular services, given the competitive circumstances.
23. The Commission historically has evaluated requests for forbearance by reviewing record 
evidence of actual and potential competition to determine if competition is sufficient to satisfy the section 
10 criteria.
72
  When addressing previous requests for forbearance from the Computer Inquiry
requirements, the Commission explained that it adopted the structural and non-structural safeguards for 
BOC provision of enhanced services in order to prevent the BOCs from using “exclusionary market 
power” arising from their control over ubiquitous local telephone networks to impede competition in the 
enhanced services market.
73
  The Commission stated that exercise of market power could lead to 
                                                          
66
47 C.F.R. § 64.702.  
67
CEI/ONA Notice, 26 FCC Rcd at 1580, para. 3 (listing nine CEI parameters); Computer III Further Remand 
Order, 14 FCC Rcd at 4291, para. 4; Computer III Further Remand Reconsideration Order, 14 FCC Rcd at 21629, 
para. 6; see Computer III Phase I Order, 104 FCC 2d at 1039-42, paras. 155-65.  
68
Computer III Further Remand Order, 14 FCC Rcd at 4297, paras. 11-12.
69
CEI/ONA Notice, 26 FCC Rcd at 6050, para. 11; Computer III Phase I Order, 104 FCC 2d at 1064, para. 214; 
Computer III FNPRM, 13 FCC Rcd at 6050, para. 11. 
70
See infra Section IV.B.
71
See infra Section V.
72
See, e.g., Qwest Phoenix Forbearance Order, 25 FCC Rcd at 8645-8647, paras. 41-45.
73
See, e.g., Verizon 6 MSA Forbearance Order, 22 FCC Rcd at 21318, para. 45; Qwest 4 MSA Forbearance Order, 
23 FCC Rcd at 11760, para. 44. 
Federal Communications Commission FCC 13-69 
16
“charges, practices, classifications, or regulations . . . for[] or in connection with the [the BOCs’ services] 
that are unjust, unreasonable, or unjustly or unreasonably discriminatory” and could harm consumers.
74
  
Here, USTelecom seeks the immediate and nationwide elimination of all narrowband Computer Inquiry 
requirements.  It seeks this sweeping relief without providing any evidence of what alternative network 
inputs would be available for narrowband enhanced services, where they would be available, or on what 
terms they might be available from other competitive network platforms.  We therefore cannot determine 
on this record that enforcement of the regulation is unnecessary to ensure that the telecommunications 
carrier’s charges, practices, classifications, or regulations are just, reasonable, and not unjustly or 
unreasonably discriminatory under section 10(a)(1).
24. USTelecom asserts generally that competitive conditions have changed, and narrowband 
CEI and ONA offerings have no utility in the current marketplace.
75
  It argues that the incumbent LEC
platform is no longer the only platform available to ESPs, and that the CEI and ONA safeguards are no 
longer required because competitors do not have to rely anywhere in the country on narrowband facilities 
from the BOCs or from incumbent LECs subject to the All-Carrier Rule.
76
  USTelecom argues generally 
that cable providers and broadband network platforms could offer alternative sources of inputs for 
competitive ESPs.
77
  However, USTelecom does not address the fact that many residential and business 
consumers still use narrowband telephone services that could include enhanced service features and 
functions.
78
  We know that ESPs are purchasing access to the BOCs’ legacy network to serve some of 
these consumers using ONA service inputs.  ONA reports from as recently as 2011 contain data for 
reporting categories, such as business and Centrex-based services, for which it appears that the BOCs are 
provisioning tens of thousands of orders for unaffiliated ESPs.
79
  Despite specific requests from Bureau 
staff, USTelecom has failed to offer any data to show that substitutes from other providers are available 
ubiquitously or on competitive terms.  The Pennsylvania PUC points out that it is concerned about the 
impact of eliminating CEI and ONA on interconnection obligations and on other requirements for non-
discriminatory access to the incumbent LECs’ network facilities.  It states that USTelecom has not made 
clear what ONA elements its members will provide and under what conditions.
80
USTelecom has failed 
                                                          
74
Qwest 4 MSA Forbearance Order, 23 FCC Rcd at 11760-61, para. 44.
75
USTelecom Petition at 25, 28-31.
76
USTelecom Petition at 29-30; USTelecom Reply at 17-18; Letter from Glenn T. Reynolds, USTelecom, to 
Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-61, Att. at 11-12 (filed Aug. 29, 2012); Letter from Robert 
W. Quinn, Jr., AT&T, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-61, et al., Att. at 2 (filed Aug. 30, 
2012) (stating that the Commission should facilitate the retirement of legacy TDM services and eliminate 
“regulatory underbrush/superstructure” such as “residual CEI/ONA” that accompanies those services).
77
USTelecom Reply at 17-18.
78
The Commission’s most recent local telephone data states that there were 84,746,000 retail switched access lines 
provided by incumbent LECs as of December 31, 2011 (48,364,000 residential lines and 36,382,000 business lines).  
FEDERAL COMMUNICATIONS COMMISSION, WIRELINE COMPETITION BUREAU, INDUSTRY ANALYSIS AND 
TECHNOLOGY DIVISION, Local Telephone Competition:  Status as of December 31, 2011, at 5, Fig. 4. (Jan. 2013), 
available at http://transition.fcc.gov/Daily_Releases/Daily_Business/2013/db0114/DOC-318397A1.pdf.
79
See, e.g., Qwest Corporation ONA Nondiscrimination Report, CC Docket No. 88-2, Phase 1, CC Docket No. 96-
128 (filed Aug. 1, 2011) (showing 62,135 business line orders provisioned for unaffiliated ESPs in its second quarter 
ONA installation detail report); Installation and Maintenance Nondiscrimination Reports for Southwestern Bell 
Telephone, L.P., Ameritech, Pacific Bell, Nevada Bell, and BellSouth Telecommunications, CC Docket No. 88-2, 
Phase I (filed July 29, 2011) (showing 220,944 business lines and 144,434 Centrex lines provisioned for unaffiliated 
ESPs in second quarter ONA parity report).
80
Pennsylvania PUC Reply at 8-9.
Federal Communications Commission FCC 13-69 
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to demonstrate that the flash cut elimination of Computer Inquiry safeguards would not cause consumers 
to lose service because ONA inputs are either no longer technically available or because they are no 
longer available at non-discriminatory rates, thereby impacting ancillary features on which consumers 
rely.  
25. We seek to avoid stranding narrowband consumers who may rely on any type of 
enhanced service provided by competitors.  The record contains evidence for specific enhanced services 
that could be impacted by an immediate elimination of ONA inputs.  The record contains, in particular, 
evidence that the immediate elimination of ONA inputs would have a detrimental impact on alarm 
monitoring and voice mail services.  The Alarm Industry Communications Committee (AICC) states that 
its members, many of which provide security services to government facilities, power plants, dams, and 
banking operations, rely on the availability of narrowband network elements to provide enhanced 
services, and they urge the Commission to maintain the substantive ONA and CEI requirements.
81
  AICC 
asserts that it is still heavily dependent on narrowband voice grade services to provide life and safety 
alarm services for large scale commercial as well as residential customers.
82
  It further states that 
narrowband ONA elements are not available on broadband platforms.
83
  The Michigan PSC states that it 
is concerned about the effect in its state of eliminating CEI and ONA services for customers who require 
access to the telephone network for alarm and home security services and maintains that USTelecom has 
provided no technical analysis to demonstrate the consumer impact of eliminating the requirement.
84
  Full 
Service Network LP (FSN) states that it relies heavily on ONA basic service offerings to provide 
voicemail, directory assistance, and operator services.
85
  It asserts that, if the BOCs are no longer required 
to offer non-discriminatory access to ONA service elements, competitors will be impeded in their ability 
to offer resold local exchange service packaged with enhanced service features requested by customers.
86
  
26. To the extent that there are cable and broadband entities that offer alternatives to allow 
competitive ESPs to bypass the legacy narrowband networks, USTelecom has not demonstrated where, or 
on what terms, such alternatives are available.  Other than referencing some general alarm monitoring 
services advertised by cable companies and VoIP providers, USTelecom has not shown that competitive 
ESPs have viable alternatives to connect to end users.
87
  The Commission has required carriers seeking 
                                                          
81
AICC Comments in WC Docket No. 10-132, at 1, 4; AICC Committee Reply in WC Docket No. 10-132, at 2-3.
82
AICC Comments at 2; Letter from Benjamin H. Dickens, Jr., Counsel for AICC, to Marlene H. Dortch, Secretary, 
FCC, WC Docket No. 12-61, at 3-5 (filed Apr. 3, 2013) (stating that the alarm industry depends on copper-based 
narrowband ONA services to provide line security, which is a functionality employed in high-security installations 
to detect a break or cut in a line between a protected premise and alarm monitoring station, and that alternative 
platforms, such as wireless transmission, complement rather than replace existing BOC services AICC requires); 
Letter from Benjamin H. Dickens, Jr. and Salvatore Taillefer, Jr., Counsel for AICC, and James C. Falvey, Counsel 
for Full Service Network LP, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-61, at 1 (filed May 6, 
2013) (AICC/FSN May 6 Ex Parte Letter)
83
AICC Reply at 4.
84
Michigan PSC Reply at 6-7.
85
FSN Comments at 4-6.
86
Letter from James C. Falvey, Counsel for FSN, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-61 at 
2-3 (filed Mar. 29, 2013) (stating that FSN uses ONA voicemail inputs for 70-75% of its resold lines in the 
Pittsburgh metro area and that, if FSN could not also offer operator services through the use of ONA inputs, it would 
immediately face a significant increase in its cost of resale services in Pennsylvania); AICC/FSN May 6 Ex Parte 
Letter at 1-2.
87
USTelecom Petition at 29; USTelecom Reply at 17-18.
Federal Communications Commission FCC 13-69 
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forbearance from wholesale obligations in other contexts, such as loop unbundling, to demonstrate that 
there is sufficient competition to ensure that, if we provide the requested relief, the carriers will be unable 
to raise prices, discriminate unreasonably, or harm consumers.
88
  The Commission has found in some 
cases that competitors, including cable companies, may not provide wholesale connections to end users 
and that their networks, even if extensive in residential areas, may reach fewer office buildings or 
commercial facilities.
89
  USTelecom has not provided any evidence regarding which ONA elements the 
BOCs would eliminate or to what extent the BOCs would offer the elements outside of the Computer III
context or in transition or grandfathering arrangements, for example, through contractual offers.  
CenturyLink states that ONA inputs may be available as generally tariffed service offerings, unless a 
particular service has been deregulated at the state or federal level.
90
While tariffed offerings might offer 
an alternative, this vague claim does not offer customers transparent information about what services and 
functionalities the BOCs would immediately discontinue in their long-standing ONA plans.  They also 
have not addressed what facilities-based carriers subject to the All-Carrier Rule would offer in terms of a 
transition plan, or the extent to which there are competitive narrowband options available in their service 
territories.  We are therefore unable to find that enforcement of the Computer Inquiry regulations as they 
apply to narrowband competitive enhanced service offerings throughout the country is unnecessary to 
ensure that charges, practices, and classifications are just and reasonable and are not unjustly or 
unreasonably discriminatory.  Because BOCs must comply with the Computer III CEI and ONA 
requirements in order to avoid providing enhanced service through a Computer II structurally separate 
affiliate under section 64.702 of the Commission’s rules, the Computer II and Computer III regulatory 
regimes are interrelated (i.e., a BOC choosing not to comply with Computer III would need to follow 
Computer II).  We therefore deny USTelecom’s request for relief from both the substantive CEI and ONA 
requirements and section 64.702 of the rules.
27. For these reasons, we cannot find, based on the record presented, that enforcement of the 
Computer Inquiry regulations is unnecessary for the protection of consumers, or that forbearance from 
application of the requirements is consistent with the public interest.  USTelecom asserts that Computer 
Inquiry safeguards have no continued utility.  But the BOCs themselves use their legacy facilities to 
provide their own enhanced services, suggesting that these enhanced services are still valuable.
91
  While 
we cannot on the current record determine that the underlying inputs need not be provided to other ESPs 
pursuant to the rules, the FNPRM seeks information that will allow us to make that determination.  A 
primary goal of CEI and ONA unbundling and the All-Carrier Rule is to ensure the efficient and 
transparent availability of inputs that the carriers use to provide their own retail enhanced services and 
what competitors may purchase.  Such transparency serves the public interest by preventing unreasonable 
discrimination against competitors and increasing consumers’ choice.  
                                                          
88
Qwest Phoenix Forbearance Order, 25 FCC Rcd at 8658-62, paras. 70-74. 
89
See id. at 8658-61, paras. 69-73.
90
Letter from Timothy M. Boucher, CenturyLink, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-61 at 
4-5, 7 (filed Apr. 12, 2013) (CenturyLink April 12 Ex Parte Letter).
91
See, e.g., April 15, 2011 Annual ONA Report of Qwest Corporation, Filing and Review of Open Network 
Architecture Plans, CC Docket No. 88-2, at 8-11 (filed Apr. 15, 2011) (showing that Qwest is using an extensive list 
of ONA basic service elements in the provisioning of its enhanced services, including service elements for 
audiotext, electronic messaging, enhanced facsimile, on-line database access, and voice messaging services); 2011 
Verizon East Annual ONA Report, CC Docket No. 88-2, at Att. A-11 (filed Mar. 30, 2011) (listing many basic 
service elements Verizon uses in provisioning its own enhanced services in the former NYNEX region).
Federal Communications Commission FCC 13-69 
19
28. USTelecom and the BOCs argue that complying with the substantive CEI and ONA 
requirements imposes “cost and complexity” on their development of new narrowband services.
92
  They 
argue that they have to undertake a resource-intensive “compliance review before any new service can be 
deployed.”
93
  CenturyLink asserts that costs of ONA compliance are difficult to determine, but that it 
estimates that it had between 55 and 60 employees who worked on CEI/ONA compliance activities in the 
last year.
94
  As we stated above, USTelecom and the BOCs may be able to demonstrate that the targeted 
elimination of the requirements is warranted, which will reduce costs.  The Commission has already taken 
significant steps to lower compliance costs.  For example, for CEI, the Commission found, when it 
modified the CEI filing requirements to eliminate pre-approval requirements and allow Internet posting of 
the plans, that it had removed the “chief burdens” associated with CEI requirements.
95
  In addition, our 
decision in the Reporting Requirement Order to eliminate CEI and ONA reporting requirements reflects 
our commitment to eliminating unnecessary regulatory costs.
96
Moreover, the attached FNPRM is a 
further effort to eliminate unnecessary regulatory burdens.
29. In summary, although we deny USTelecom’s request for nationwide forbearance from 
the Computer Inquiry safeguards, we agree that there have been substantial changes to the enhanced 
services market.  Today, competitors and consumers likely use different enhanced service offerings from 
different providers in different places, and it may no longer be necessary to require unbundled access to 
basic network services under the complex CEI/ONA regime.
97
  We look forward to reviewing the record 
in our FNPRM in the Computer III docket to find ways to streamline or eliminate requirements where 
possible.
3. Cost Assignment Rules
a. USTelecom’s Request 
30. USTelecom requests forbearance from the Cost Assignment Rules for all price cap 
carriers substantially the same as that already granted to AT&T, Qwest, and Verizon in previous 
                                                          
92
Verizon Comments at 3.
93
USTelecom Reply at 19.
94
CenturyLink April 12 Ex Parte Letter at 5.  Despite staff requests for data, the record does not provide specific 
information on other carriers’ costs of compliance.
95
Computer III Further Remand Order, 14 FCC Rcd at 4297, para. 12. 
96
The BOCs are not currently required to comply with CEI and ONA narrowband annual, semi-annual, and 
quarterly reporting requirements because the Bureau has waived them pending resolution of the CEI/ONA Notice to 
eliminate them permanently.  The BOCs, therefore, have not had compliance costs associated with those 
requirements since 2011.  See supra n.58.
97
The Commission has sought comment on a petition by AT&T urging, among other things, that the Commission 
consider conducting trials regarding the technology transition from TDM to IP and wireline to wireless.  AT&T 
Petition to Launch a Proceeding Concerning TDM-to-IP Transition, GN Docket No. 12-353 (filed Nov. 7, 2012) 
(AT&T Petition); Pleading Cycle Established on AT&T and NTCA Petitions, GN Docket No. 12-353, Public Notice, 
27 FCC Rcd 15766 (Wireline Comp. Bur. 2012).  AT&T states that the Commission could use such a trial to 
determine if forbearance from CEI and ONA regulations is appropriate.  AT&T Petition at 20.  See Technology 
Transitions Policy Task Force Seeks Comment on Potential Trials, GN Docket No. 13-5, Public Notice, DA 13-
1016 (rel. May 10, 2013), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-13-1016A1.pdf.
Federal Communications Commission FCC 13-69 
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forbearance orders.
98
  USTelecom argues that the Commission’s prior forbearance analysis “applies with 
equal force to any carrier subject to price cap regulation.”
99
  
b. Background
31. The Cost Assignment Rules generally require carriers to assign costs to build and 
maintain the network and revenues from services provided to specific categories.  Categories include non-
regulated or regulated service, the intrastate or interstate jurisdiction, and specific access services, such as 
local switching or common line.
100
  The Cost Assignment Rules also govern the accounting treatment of 
transactions between a carrier and its affiliate, such as the sale or transfer of assets between regulated and 
nonregulated affiliates.
101
  In addition, the rules include certain reporting requirements, which depend on 
the availability of data produced by the Cost Assignment Rules.
102
32. As part of the accounting process, carriers first record their costs, including investments 
and expenses, into various accounts in accordance with the Uniform System of Accounts (USOA) 
prescribed by Part 32 of the Commission’s rules.
103
  Next, using the Cost Assignment Rules in Part 64, 
carriers directly assign, or allocate if direct assignment is not possible, the costs and revenues associated 
with their regulated and nonregulated activities.
104
  After costs and revenues are divided between those 
that are regulated and nonregulated, interstate and intrastate costs and revenues are separated as provided 
in Part 36.
105
  The federal and state regulatory jurisdictions apply their own ratemaking processes to the 
amounts assigned to each jurisdiction.
106
  Finally, the access charge rules in Part 69 require carriers to 
                                                          
98
USTelecom Petition at 31-34.  (“USTelecom uses the term ‘Cost Assignment Rules’ to refer collectively to the 
same statutory provisions and Commission rules from which AT&T requested and the Commission granted 
forbearance.”).  Id. at 32 n.65 and App. A (listing the rules and specifically citing Att. 1 of the underlying AT&T 
Forbearance Petition in the Petition of AT&T Inc. for Forbearance under 47 U.S.C. § 160 from Enforcement of 
Certain of the Commission’s Cost Assignment Rules, WC Docket Nos. 07-21, 05-342, Memorandum Opinion and 
Order, 23 FCC Rcd 7302, para. 1 n.2 (2008) (AT&T Cost Assignment Forbearance Order), pet. for recon. pending, 
pet. for review pending, NASUCA v. FCC, Case No. 08-1226 (D.C. Cir. filed June 23, 2008) (“Attachment 1 of the 
AT&T Petition lists each rule from which Legacy AT&T seeks forbearance”).  We therefore define the scope of 
USTelecom’s requested relief in the same manner as that requested by AT&T in the AT&T Cost Assignment 
Forbearance Order. See Petition of AT&T, Inc. for Forbearance Under 47 U.S.C. § 160(c) From Enforcement of 
Certain of the Commission’s Cost Assignment Rules, WC Docket No. 07-21 (filed Jan. 25, 2007) (AT&T Petition).  
99
USTelecom Reply at 20.
100
See 47 C.F.R. Parts 36, 64, 69.
101
See 47 C.F.R. § 32.27.
102
These reports include the ARMIS 43-04, the Rate-of-Return Monitoring Report (FCC Form 492), the Reg/Non-
Reg Forecast Report (FCC Form 495A) and the Reg/Non-Reg Actual Usage Report (FCC Form 495B).  See AT&T 
Cost Assignment Forbearance Order, 23 FCC Rcd at 7307-08, para. 12.  
103
See 47 C.F.R. Part 32.
104
See 47 C.F.R. §§ 64.901-64.905.
105
See 47 C.F.R. Part 36.
106
See Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, WC Docket Nos. 05-
271, 04-242, CC Docket Nos. 02-33, 01-337, 95-20, 98-10, Report and Order and Notice of Proposed Rulemaking, 
20 FCC Rcd 14853, 14925, para. 129 (2005) (Wireline Broadband Order), aff’d, Time Warner Telecom v. FCC, 507 
F.3d 205 (3rd Cir. 2007).
Federal Communications Commission FCC 13-69 
21
separate regulated interstate costs into interexchange costs and access costs, and then apportion the latter 
among specific access categories or elements.
107
  
33. The Commission adopted the Cost Assignment Rules to help ensure just and reasonable 
rates and to protect consumers by requiring ILECs to divide their costs and revenues in a specified 
manner.  For example, as telecommunications technology advanced, the Commission adopted Part 64 
because it was concerned with the opportunities for carriers with market power to subsidize the 
development of new technologies and services with increased rates for noncompetitive services.
108
  As a 
result, Part 64 rules sought to ensure that carriers do not impermissibly “impos[e] on ratepayers for 
regulated interstate services the costs and risks of nonregulated ventures” and “that ratepayers would 
share in any savings achieved through the integrated provision of regulated and nonregulated 
activities.”
109
  
34. The Commission adopted the Cost Assignment Rules prior to 1991 when all ILECs were 
subject to rate-of-return regulation, so that it could set rates targeted to levels that allowed carriers to 
recover their costs and earn a specific return on their regulated investment.  However, after that time, the 
Commission moved away from rate-of-return regulation for the larger ILECs.
110
  In its place, it adopted 
price cap regulation, a form of incentive regulation that seeks to “harness the profit-making incentives 
common to all businesses to produce a set of outcomes that advance the public interest goals of just, 
reasonable, and nondiscriminatory rates, as well as a communications system that offers innovative, high 
quality services.”
111
  Since the adoption of price cap regulation, certain carriers have moved from rate-of-
return regulation to price cap regulation.
112
35. In 2008, the Commission granted AT&T conditional forbearance from the Cost 
Assignment Rules.
113
  The Commission conditioned the forbearance on, among other things, requiring 
AT&T to retain Part 32 Uniform System of Accounts data and submit a compliance plan describing in 
detail how it would fulfill its statutory and regulatory requirements.
114
  The Commission granted similar 
                                                          
107
See 47 C.F.R. § 69.4(b) (including the following elements:  common line, local switching, information, tandem-
switched transport, direct-trunked transport, special access, line information database, entrance facilities, and 
recovery of contributions to universal service support mechanisms by ILECs).   
108
See Separation of Costs of Regulated Telephone Service from Costs of Nonregulated Activities, CC Docket No. 
86-111, Report and Order, 2 FCC Rcd 1298, 1300, para. 10 (Joint Cost Order), recon. 2 FCC Rcd 6283 (1987), 
further recon. 3 FCC Rcd 6701 (1988)), aff'd sub nom. Southwestern Bell Corp. v. FCC, 896 F.2d 1378 (D.C. Cir. 
1990).
109
Joint Cost Order, 2 FCC Rcd at 1299, para. 1; Wireline Broadband Order, 20 FCC Rcd at 14925, para. 131.
110
Policy and Rules Concerning Rates for Dominant Carriers, CC Docket No. 87-313, Second Report and Order, 5 
FCC Rcd 6786, para. 2 (1990) (Price Cap Order), aff’d, National Rural Telecom Ass’n  v. FCC, 988 F.2d 174 (D.C. 
Cir. 1993).
111
Id.
112
See, e.g., Windstream Petition for Conversion to Price Cap Regulation and for Limited Waiver Relief, WC 
Docket No. 07-171, Order, 23 FCC Rcd 5294 (2008); CenturyTel, Inc., Petition for Conversion to Price Cap 
Regulation and Limited Waiver Relief, WC Docket No. 08-191, Order, 24 FCC Rcd 4677 (2009); Frontier Petition 
for Limited Waiver Relief upon Conversion of Global Valley Networks, Inc., to Price Cap Regulation, WC Docket 
No. 08-18, Order, 23 FCC Rcd 7353 (2008); Joint Petition of Price Cap Holding Companies for Conversion of 
Average Schedule Affiliates to Price Cap Regulation and for Limited Waiver Relief, WC Docket No. 12-63, Order, 
27 FCC Rcd 15753 (2012).
113
See generally AT&T Cost Assignment Forbearance Order, 23 FCC Rcd 7302.  
114
See id. at 7314, para. 21, 7319-20, para. 31.
Federal Communications Commission FCC 13-69 
22
conditional forbearance from the Cost Assignment Rules to Verizon and Qwest.
115
  Subsequently, Qwest, 
Verizon, and AT&T obtained conditional forbearance from certain financial reporting requirements that 
relied on the Cost Assignment Rules.
116
  Specifically, the forbearance from financial reporting 
requirements was conditioned on approval of a compliance plan and continued filing of certain pole 
attachment data publicly with the Commission.
117
  The Bureau approved the compliance plans filed by all 
three carriers.
118
c. Discussion
36. We grant forbearance from the Cost Assignment Rules for all price cap carriers, subject 
to four conditions set forth below.
119
  The conditions are necessary to ensure that charges and practices are 
                                                          
115
Service Quality Customer Satisfaction, Infrastructure and Operating Data Gathering, Petition of AT&T Inc. for 
Forbearance Under 47 U.S.C. § 160(c) from Enforcement of Certain of the Commission’s ARMIS Reporting 
Requirements et. al., WC Docket Nos. 08-190, 07-139, 07-204, 07-273, 07-21, Memorandum Opinion and Order and 
Notice of Proposed Rulemaking, 23 FCC Rcd 13647 (ARMIS Forbearance Order) pet. for recon. pending, pet. for 
review pending, NASUCA v. FCC, Case No. 08-1353 (D.C. Cir. filed Nov. 4, 2008).  In this Order, the Commission 
granted Qwest and Verizon the same conditional forbearance from the Cost Assignment Rules it granted to AT&T.  
However, in addition, the Commission conditioned relief on requiring the carriers to describe in their compliance 
plans how they will maintain and provide accounting data in study areas where the carriers receive rural high-cost 
universal service support.  See id. at 13663, para. 30.  The Order also granted conditional forbearance from ARMIS 
Reports 43-05, 43-06, 43-07 and 43-08 for all carriers (not just Verizon and Qwest).  See id. at 13652, para. 7.
116
Petition of Qwest Corporation for Forbearance from Enforcement of the Commission’s ARMIS and 492A Reporting 
Requirements Pursuant to 47 U.S.C. § 160(c),et al., Memorandum Opinion and Order, WC Docket Nos. 07-204, 07-
273, 23 FCC Rcd 18483, 18484, para 1., 18487, para. 8 (2008) (Qwest ARMIS Forbearance Order).  The reports, for 
which conditional forbearance was granted, are ARMIS Reports 43-01, 43-02, and 43-03 (collectively, the ARMIS 
Financial Reports).  We discuss the importance of the pole attachment data in Section III.B.4 infra. 
117
Id. at 18490, para. 13.  
118
Wireline Competition Bureau Approves Compliance Plans, WC Docket Nos. 07-21, 07-204, 07-273, Public 
Notice, 23 FCC Rcd 18417 (2008).  Two applications for review are pending.  Application for Review of Action 
Taken Pursuant to Delegated Authority filed by the AdHoc Telecommunications Users Committee and COMPTEL, 
WC Docket Nos. 07-21, 07-204, 07-273 (filed Jan. 30, 2009); and Application for Review of the Wireline 
Competition Bureau Approval of the Compliance Plans of AT&T, Verizon and Qwest, filed by the National 
Association of State Utility Consumer Advocates and the New Jersey Division of Rate Counsel, WC Docket No. 07-
21 (filed Jan. 30, 2009). 
119
We grant forbearance here, subject to conditions, from the same statutory provision and Commission rules, 
(subject to the three exceptions listed below) which AT&T requested in its original forbearance petition and which 
we granted in the AT&T Cost Assignment Forbearance Order.  AT&T Cost Assignment Forbearance Order, 23 FCC 
Rcd at 7303, para. 1 n.2; see also supra n.98.  This includes limited forbearance from section 220(a)(2) of the Act to 
the extent that this provision contemplates separate accounting of nonregulated costs.  47 U.S.C. § 220(a)(2).  We 
also grant forbearance from various Commission rules or portions thereof including the following:  section 32.23 
(nonregulated activities); section 32.27 (transactions with affiliates); section 32.5280 (nonregulated operating 
revenue); Part 64 Subpart I, including the requirement to file Cost Allocation Manuals (CAMs) (allocation of costs); 
Part 36 (jurisdictional separations procedures); Part 69, Subparts D and E (cost apportionment).  See, e.g., 47 C.F.R. 
§§ 32.23, 32.27, 32.5280, Part 64 Subpart I, Part 36, Part 69 Subparts D and E.  The AT&T Forbearance Petition
underlying the AT&T Cost Assignment Forbearance Order lists each rule from which Legacy AT&T and Legacy 
BellSouth were granted forbearance.  See Petition of AT&T Inc. For Forbearance Under 47 U.S.C. § 160(c) From 
Enforcement of Certain of the Commission’s Cost Assignment Rules, WC Docket No. 07-21 (filed Jan. 25, 2007), 
Attach. 1.  Though we grant forbearance for most of the same rules, sections 1.795 and 43.21(d) and (f) in AT&T’s 
petition are only applicable to AT&T, Qwest, and Verizon.  Therefore, there is no need to grant forbearance from 
those rules to the other price cap carriers in this proceeding because they are not affected by these rules.  To the 
extent that there are any inconsistencies between this Order and the Appendix, the Order controls.
Federal Communications Commission FCC 13-69 
23
just, reasonable, and not unjustly or unreasonably discriminatory; to protect consumers; and to protect the 
public interest.
120
  We agree with USTelecom that much of the reasoning in our earlier decisions to grant 
the BOCs forbearance from the Cost Assignment Rules applies equally to all price cap carriers.
121
37. USTelecom contends that the rules are “inextricably tied” to rate-of-return regulation, 
and that once a carrier has transitioned to price cap regulation, the Cost Assignment Rules serve “no 
continuing purpose in assuring just and reasonable rates.”
122
  As discussed above, the Cost Assignment 
Rules were developed when the ILECs’ interstate rates and many of their intrastate rates were set under 
rate-based, cost-of-service regulation.
123
  The Commission has explained that, “because price cap 
regulation severs the direct link between regulated costs and prices, a carrier is not able automatically to 
recoup misallocated non-regulated costs by raising basic service rates,” thus reducing incentives to shift 
non-regulated costs to regulated services.
124
  To the extent incentives remain, we find that price cap 
regulation in combination with the protections provided by the implementation of conditions as reflected 
in carrier compliance plans will continue to protect consumers from unjust, unreasonable, and unjustly or 
unreasonably discriminatory charges, practices, classifications, and regulations post-forbearance.
125
  We 
disagree with commenters that assert that the Cost Assignment Rules remain necessary in order for the 
Commission to complete its work with respect to special access and intercarrier compensation reforms.
126
We are convinced that a more targeted, less onerous set of conditions will be adequate to meet our 
ongoing needs in these and other proceedings.
38. We cannot rule out all “possible future need for cost data” even under price cap 
regulation.
127
  And there are several instances in which we have a specific need for some data related to 
costs for price cap carriers in order to ensure just and reasonable rates, protect consumers and serve the 
public interest.
128
  Given this continued need for some of the data currently available through our Cost 
Assignment Rules, we find that forbearance is appropriate only subject to the conditions set forth herein, 
                                                          
120
Because the price cap carriers that are granted forbearance relief in this Order include Frontier, Windstream, and 
the operating companies formerly owned by Embarq, the pending petition for reconsideration filed by these carriers 
seeking this relief is moot and hereby dismissed.  See Service Quality, Customer Satisfaction, Infrastructure and 
Operating Data Gathering, et al., WC Docket Nos. 08-190, 07-139, 07-204, 07-273, 07-21, Petition for 
Reconsideration of Embarq, Frontier, and Windstream (filed Oct. 6, 2008).  
121
USTelecom Petition at 33; see generally AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7302.
122
USTelecom Petition at 33.
123
AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7311, para. 17.
124
See Wireline Broadband Order, 20 FCC Rcd at 14925-26, para. 133.  We note that the fact that price cap rates 
cannot be raised automatically does not mean that the relationship between costs and prices is entirely eliminated.  
While the direct link between costs and price cap carriers’ access rates no longer exists, costs still have an impact on 
other rates price cap carriers charge.  See infra Section III.B.4.c.(i) for examples of the continued relevance of cost 
to price cap carriers’ rates; see also Special Access Rates for Price Cap Local Exchange Carriers; AT&T Petition 
for Rulemaking to Reform Regulation of Incumbent Local Exchange Carrier Rates for Interstate Special Access 
Services, WC Docket No. 05-25, RM-10593, Order and Notice of Proposed Rulemaking, 20 FCC Rcd 1994, 1999, 
at para. 12 (2005) (2005 Special Access NPRM) (“Although price cap regulation diminished the direct link between 
changes in allocated accounting costs and change in prices, it did not sever the connection between accounting costs 
and prices entirely.”).
125
See infra Section III.B.3.(i).
126
Sprint Opposition at 3; see also Consumer Advocates Comments at 27.
127
AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7312, para. 18.
128
See infra Section III.B.4.c.(i).
Federal Communications Commission FCC 13-69 
24
which generally mirror those we required from the BOCs in 2008.  As we explained in the 2008 AT&T 
Cost Assignment Forbearance Order, there is no reason to impose on price cap carriers cost assignment 
requirements that were “designed to parallel the level of detail in the cost-of-service calculations that 
LECs performed to develop their rates for interstate access services.”
129
  
39. The conditions we adopt today, along with continued price cap regulation, permit us to 
forbear from the Cost Assignment Rules under the three prongs of the statutory forbearance analysis.  
First, subject to the conditions described below, enforcement of the Cost Assignment Rules is not 
necessary to ensure just, reasonable and not unjustly or unreasonably discriminatory charges, practices, 
classifications, and regulations.  Second, the rules are not needed for the protection of consumers; as 
conditioned, consumers will remain protected from unjust, unreasonable, and unjustly or unreasonably 
discriminatory rates, practices, classifications, and regulations.  Third, this conditioned forbearance is 
consistent with the public interest.  The Commission adopted the Cost Assignment Rules in part to help 
protect consumers from improper cross-subsidization of competitive services provided on an integrated 
basis with noncompetitive services by dominant providers with individual market power.
130
We find that 
we can achieve these same public interest benefits through conditional forbearance.  
40. Likewise, we find that continued enforcement of the Cost Assignment Rules is not 
necessary to protect consumers with respect to support from the Universal Service Fund. Specifically, the 
Commission recently froze price cap carriers’ universal service support with the intention of transitioning 
distribution of that support to mechanisms based on a combination of a forward-looking cost model and 
competitive bidding.
131
  This reform removes, for most purposes, the need to provide evidence of 
historical cost to justify support levels.
132
  As a result, we find that conditional forbearance is consistent 
with the public interest.  
41. Finally, section 10(b) requires the Commission to consider, as part of its analysis of the 
public interest prong, whether forbearance will promote competitive market conditions.  USTelecom and 
other commenters contend that forbearance will enhance competition.
133
  While the record does not offer 
                                                          
129
AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7311 para. 17.
130
See, e.g., Wireline Broadband Order, 20 FCC Rcd at 14925, para. 131 (explaining that the purpose of the cost 
allocation rules “was to ensure that telephone ratepayers would continue to receive reasonable protections against 
improper cross-subsidization in the event the BOCs provided enhanced service on an integrated basis, rather than 
through separate subsidiaries”).
131
Connect America Fund, A National Broadband Plan for Our Future, Establishing Just and Reasonable Rates for 
Local Exchange Carriers, High-Cost Universal Service Support, Developing an Unified Intercarrier Compensation 
Regime, Federal-State Joint Board on Universal Service, Lifeline and Link-Up, Universal Service Reform —
Mobility Fund, WC Docket No. 10-90, GN Docket No. 09-51, WC Docket No. 07-135, WC Docket No. 05-337, CC 
Docket No. 01-92, CC Docket No. 96-45, WC Docket No. 03-109, WT Docket No. 10-208, Report and Order and 
Further Notice of Proposed Rulemaking, 26 FCC rcd 17663, 17725, para. 156 (2011) (USF/ICC Transformation 
Order), pets. for review pending sub nom. In re:  FCC, No. 11-9900 (10th Cir. filed Dec. 8, 2011).
132
Cost accounting data will continue to be necessary in some circumstances.  The Commission’s grant of 
forbearance from the Cost Assignment Rules for Verizon and Qwest was conditioned on their providing in their 
compliance plans the cost data and calculations necessary to continue to calculate the cost-based high cost support 
they received at that time.  USTelecom’s request here includes other price cap carriers that formerly received 
universal service support based on their embedded costs.  We note, however, that in the USF/ICC Transformation 
Order, the Commission froze all price cap carriers’ universal service support and plans to transition distribution of 
that support to mechanisms based on a model or competitive bidding.  Given that these reforms eliminate the need 
for cost-based data and calculations to determine universal service support, we decline to impose this condition here 
and no longer require price cap carriers to include this specific commitment in their compliance plans. 
133
USTelecom Petition at 42; Verizon Comments at 10.
Federal Communications Commission FCC 13-69 
25
concrete evidence of how competition will be enhanced, we agree as a general matter that eliminating 
unnecessary regulation will generally reduce providers’ costs and, in turn, benefit consumers through 
lower rates and/or more vibrant competitive offerings and promotes competition by providing a more 
level playing field because other providers of similar services are not subject to the rules.  Moreover, as 
noted above, we find that, as conditioned, sufficient protections remain in place to prevent anti-
competitive cross-subsidization.  
(i) Conditions
42. We adopt four conditions to our forbearance from the Cost Assignment Rules.  These 
generally mirror the conditions we imposed on the BOCs in 2008, with a few modifications to reflect 
changes in our universal service and intercarrier compensation rules since that time. Following the same 
procedures as we did previously, we establish a less burdensome framework and require a price cap 
carrier seeking to take advantage of this relief to explain in a compliance plan how it will comply with 
these conditions.  This plan should also include a schedule of how the carrier will transition to the new 
framework.  As USTelecom notes, compliance plan requirements such as these reduce “the burdens of 
maintaining this intricate system of regulatory accounting.”
134
43. First, we require price cap carriers to continue complying with the Part 32 Uniform 
System of Accounts rules, and to provide Part 32 data on request by the Commission for use in 
rulemakings, adjudications, or for other regulatory purposes.
135
  As commenters note, Part 32 USOA data
are the underlying raw data used in the Cost Assignment Rules, such as Part 36 separations and Part 64 
allocation rules.
136
  Requiring the retention and submission of the underlying raw data gives the 
Commission the tools to reconstruct the information necessary to gauge whether improper cost 
accounting has occurred, should it need to do so. This enables the Commission to ensure charges, 
practices, classifications, or regulations are just, reasonable, and not unjustly or unreasonably 
discriminatory.  This condition is consistent with precedent, and we emphasize that it requires the 
submission of Part 32 USOA data, upon request by the Commission.  
44. Second, we require independent price cap carriers seeking to take advantage of this relief 
to file access imputation plans similar to those previously filed by the BOCs if the independent price cap 
carriers plan to provide in-region long distance service without a section 64.1903 separate affiliate.
137
  
They must also ensure that any BOC properties they purchased or purchase in the future continue to 
satisfy the applicable section 272 access charge imputation requirements.
138
  These price cap carriers need 
                                                          
134
USTelecom May 3, 2012 Ex Parte Letter at 2.
135
See infra Part III.B.4 (denying forbearance from the Part 32 Uniform System of Accounts rules but committing to 
open a proceeding to streamline those rules).  This is the same conditional Cost Assignment Rules forbearance relief 
that was granted to AT&T, Qwest and Verizon.  See AT&T Cost Assignment Forbearance Order, 23 FCC Rcd 7314 
at para. 21; see also ARMIS Forbearance Order, 23 FCC Rcd at 13663, para. 28.  We disagree with USTelecom’s 
characterization that Part 32 accounting was not required by the AT&T Cost Assignment Forbearance Order.  See
USTelecom Petition at 36-37.  USTelecom is attempting to draw a distinction without a difference.  Forbearance 
was expressly premised on the continued availability of Part 32 accounting and the filing of compliance plans 
consistent with that condition.  AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7314, para. 21 (“USOA 
account data will continue to be maintained and available to the Commission on request”).  All three carriers filed 
compliance plans that detailed their commitment to continue to maintain Part 32 accounting.  The Commission 
approved the plans on that basis.
136
See Landis Comments at 3 (noting that Part 32 provides the underlying data required for performing separations).
137
See infra Section III.B.11 (Structural Separation Requirements for Independent ILECs).
138
We note that the BOCs are to continue complying with their existing imputation requirements under section 
272(e)(3) and their compliance plans.  47 U.S.C. § 272(e)(3); Wireline Competition Bureau Approves Compliance 
(continued....)
Federal Communications Commission FCC 13-69 
26
not file another imputation compliance plan for their BOC properties if one has already been approved by 
the Commission.  This requirement is similar to the condition imposed on AT&T, Qwest, and Verizon 
when they were granted forbearance from the Cost Assignment Rules.
139
  Section 272(e)(3) requires each 
BOC to charge its section 272 separate affiliates, or “impute to itself (if using the access for its provision 
of its own services), an amount for access to its telephone exchange service and exchange access that is 
no less than the amount charged to any unaffiliated interexchange carriers for such service.”
140
  This
condition prevents anticompetitive cross-subsidization and is consistent with precedent.
141
  
45. Third, we require price cap carriers to certify, on an annual basis, that they have complied 
with section 254(k) of the Act, and will maintain and provide any requested cost accounting information 
necessary to prove such compliance in the event of an administrative action, investigation, or audit.
142
  
This condition is necessary to ensure compliance with the language of the Act that prohibits a 
telecommunications provider from “us[ing] services that are not competitive to subsidize services that are 
subject to competition.”
143
  This condition is consistent with precedent.
144
  
46. Fourth, we condition this forbearance for each price cap carrier on Bureau approval of its 
compliance plan describing in detail how it will continue to fulfill its statutory and regulatory obligations, 
including sections 272(e)(3), 254(k), and the conditions outlined above.  The relief granted in this section 
of this Order will not become effective with respect to a price cap carrier unless and until the Office of 
Management and Budget approves any information collections associated with these conditions in 
accordance with the Paperwork Reduction Act and the Bureau approves that price cap carrier’s
compliance plan.
145
47. We delegate authority to the Chief of the Wireline Competition Bureau to prescribe the 
administrative requirements for the filing of the compliance plans and to approve the plans when the 
Bureau is satisfied that the plans fulfill the requirements set forth in this Order.
146
  This delegation of 
(Continued from previous page)                                                          
Plans, WC Docket Nos. 07-21, 07-204, 07-273, Public Notice, 23 FCC Rcd 18417 (2008).  These requirements also 
apply to any non-BOC affiliate of a BOC that was granted a waiver of the separate affiliate requirement.  Section 
272 Sunset Order, 22 FCC Rcd at 16483-84, paras. 87-88.  We note that if an independent price cap carrier elected 
not to be subject to forbearance relief from the Cost Assignment Rules and desired to provide in-region long 
distance service through a separate affiliate, it would be subject to those rules and not be required to file imputation 
plans.
139
See, e.g., AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7317-19, paras. 26-29, 31.
140
47 U.S.C. § 272(e)(3). 
141
See AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7318-19, paras. 28-29; ARMIS Forbearance 
Order, 23 FCC Rcd at 13662, para 27, 13664, para. 32.  Subsequent forbearance from the requirement to provide 
ARMIS financial reports was also expressly conditioned on the filing and approval of the compliance plans required 
by these two previous orders.  Qwest ARMIS Forbearance Order, 23 FCC Rcd at 18489-90, para. 12.
142
This is similar to the conditional forbearance granted to AT&T, Verizon and Qwest.  See, e.g., AT&T Cost 
Assignment Forbearance Order, 23 FCC Rcd at 7319, para. 30.  These certification and record-retention obligations 
qualify as an “information collection” subject to the approval of the Office of Management and Budget under the 
terms of the Paperwork Reduction Act of 1995.
143
47 U.S.C. § 254(k).
144
See AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7319, para. 30.
145
Obligations associated with the third and fourth conditions of this forbearance are “information collections” as 
defined by the Paperwork Reduction Act and must be approved by the Office of Management and Budget.  
Paperwork Reduction Act of 1995, Pub. L. No. 104-13, 109 Stat. 163.
146
The Bureau will release a public notice or notices announcing the approval of the plans as it approves them.
Federal Communications Commission FCC 13-69 
27
authority to the Bureau is consistent with delegations in previous analogous forbearance orders
147
and 
with our rules.
148
  
(ii) Other Concerns
48. Separations.  We also note that subsequent regulatory events may give us reason to 
modify this forbearance with respect to Part 36 separations rules.  The on-going work by the Federal–
State Joint Board on Separations has a broad referral from the Commission, and may recommend reforms 
to the jurisdictional separations process.
149
  Section 10 of the Act does not permit us to defer forbearance 
decisions by reference to a different regulatory process, as some commenters have requested.
150
  We 
highlight, however, that the scope of separations reform and its applicability to price cap or other carriers 
is a subject for the Joint Board to address in its recommended decision.  In taking any subsequent action, 
such as in a rulemaking to implement the Joint Board’s recommendations on separations reform, the 
Commission may reach different decisions.
151
49. State Need for Cost Assignment Rules.  We disagree with commenters contending that 
forbearance should be denied, or corresponding conditions should be adopted, solely on the basis of 
states’ need for the Cost Assignment Rules.
152
  As the Commission explained in the AT&T Cost 
Assignment Forbearance Order, “we do not in this Order preempt any state accounting requirements
adopted under state authority.”
153
  Similarly here, we do not preempt states’ ability to establish intrastate 
cost allocations for its own purposes, and our forbearance from the Cost Assignment Rules does not
otherwise affect a state’s ability to do so.
154
  In the AT&T Cost Assignment Forbearance Order, the 
Commission stated that “[w]e believe that AT&T, working cooperatively with the state commissions in 
                                                          
147
See AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7319-20, para. 31; ARMIS Forbearance Order, 
23 FCC Rcd at 13661, para. 24.  
148
The Chief of the Bureau has delegated authority to “[d]evelop and administer rules and policies relating to 
incumbent local exchange carrier accounting.” 47 C.F.R. §§ 0.91(e), 0.291.
149
See, e.g., Jurisdictional Separations and Referral to the Federal–State Joint Board, CC Docket No. 80-286, 
Report and Order, 27 FCC Rcd 5593 (2012).  
150
AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7309, para. 13; CPUC Comments at 8; Larry S. 
Landis Comments at 3; Pennsylvania PUC Reply at 11.
151
The Commission may reach certain decisions with respect to implementing the Joint Board’s recommendations 
on separations reform, notwithstanding comments to the contrary in the record.  See AT&T Reply at 24 n.57 (“But 
in any event, any jurisdictional separations reforms currently being considered would not apply to carriers, such as 
AT&T, that have secured forbearance from the Commission’s jurisdictional separations rules.”).  As the D.C. 
Circuit has pointed out, the Commission remains free to revisit its forbearance decisions, including grants.  See 
Earthlink, Inc. v. FCC, 462 F.3d 1, 12 (D.C. Cir. 2006).
152
See, e.g., Consumer Advocates Comments at 23-26.
153
AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7321, para. 33.
154
See AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7320-22, paras. 32-35.  The Commission 
explained it does not have the authority under sections 2(a) and 10 of the Act to maintain federal regulatory 
requirements that meet the three-prong forbearance criteria for interstate services in order to maintain regulatory 
burdens that may produce information helpful to state commissions for intrastate regulatory purposes solely without 
a federal purpose.  Id. at 7321, para. 32.  At the same time, we expect that, similar to the precedent set with AT&T, 
price cap carriers will work with state commissions so that they will be able to obtain intrastate revenue data and all 
cost accounting information from the carriers needed for state regulatory purposes following forbearance from the 
Cost Assignment Rules.  See id. at 7321-22, para. 34.  Moreover, as noted above, forbearance does not prevent states 
from obtaining such data pursuant to state law.
Federal Communications Commission FCC 13-69 
28
its region, can develop methods of separating costs, satisfying any remaining need states have for 
jurisdictional separations information.”
155
  AT&T confirmed that this arrangement has worked since 
2008.
156
  We also recognize that some price cap carriers have operating companies that are regulated on a 
rate-of-return basis on the state level or for whom alternative regulation periodically requires cost-based 
accounting data.  
50. We likewise disagree with commenters contending the Cost Assignment Rules are 
necessary to support a federal role in intrastate ratemaking, such as with respect to UNE and resale 
pricing under section 251, which we noted in the AT&T Cost Assignment Forbearance Order.
157
  Thus, 
we reiterate our conclusion that denying forbearance from the Cost Assignment Rules based solely on 
state needs would be inappropriate.  However, we remind price cap carriers that section 251 of the Act 
requires such carriers “to continue to provide to state commissions, on request, any accounting data that 
states need to implement our pricing methodologies.”
158
  We emphasize that forbearance adopted herein 
does not impact the states’ ability to require carriers to submit such data.
51. Other Relief Using Cost Assignment Data.  We note that there still may be instances in 
which a price cap carrier seeks relief from the Commission that requires supporting cost assignment 
data. In such instances, the burden is on the carrier to retain data sufficient to make the required showing 
to the Commission in support of such a carrier-initiated request.  For example, a separations study would 
be required if carriers seek additional support under our Total Cost and Earnings Review (TCER) waiver 
process adopted in the USF/ICC Transformation Order.
159
  Under the TCER process, ILECs may request 
a waiver and seek additional support beyond that already provided by the existing recovery mechanism.  
Thus, price cap carriers that request a TCER must retain the records needed to undergo a separations 
study consistent with the terms of the USF/ICC Transformation Order.
160
(iii) Petitions for Reconsideration
52. We deny three petitions requesting that the Commission reconsider its decisions to grant 
forbearance from the Cost Assignment Rules to AT&T, Qwest, and Verizon.
161
  We agree with 
                                                          
155
Id. at 7316-17, para. 25.
156
AT&T Reply at 23 (“Indeed, since that order, AT&T has fully cooperated with the handful of state commissions 
that have requested information and has been able to fulfill their regulatory needs.”).
157
AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7322, para. 35; see, e.g., Consumer Advocate 
Comments at 21-22.  
158
Id.
159
USF/ICC Transformation Order, 26 FCC Rcd at 17996-18002, paras. 924-32.
160
We note that USTelecom has not requested forbearance from the TCER waiver standard.  With respect to the 
separations study, the USF/ICC Transformation Order noted:  “Although this is a burdensome requirement, it is not 
unduly so given the importance of protecting consumers and the universal service fund.”  Id. at 18002, para. 932.  
We note that, as a condition of forbearance from the Cost Assignment Rules, AT&T, Qwest and Verizon filed 
compliance plans to satisfy the Commission’s requirement to provide accounting and cost allocated data if the 
Commission determines such data are necessary for federal regulatory rules.  See, e.g., AT&T Compliance Plan at 
11-13.
161
Two of these petitions request that the Commission reconsider its decision in the ARMIS Forbearance Order 
granting forbearance from the Cost Assignment Rules to Qwest and Verizon.  See AdHoc Telecommunications 
Users Committee Petition for Reconsideration, WC Docket Nos. 08-190, 07-139, 07-204, 07-273 and 07-21 (filed 
Oct. 6, 2008) (AdHoc Oct. 26 Petition); see also Sprint Nextel Corporation, COMPTEL, tw telecom inc., and One 
Communications Corp. Petition for Reconsideration, WC Docket Nos. 07-21, 07-204 and 07-273 (filed Oct. 6, 
2008) (Joint Oct. 26 Petition).  The third petition requests that the Commission reconsider its decision in the AT&T 
(continued....)
Federal Communications Commission FCC 13-69 
29
commenters that petitioners have not presented any new or compelling arguments that persuade us to 
reconsider those decisions.
162
  After reviewing the petitions, we find that petitioners raise issues that the 
Commission addressed in the 2008 Cost Assignment Forbearance Orders and also elaborates on 
elsewhere in this Order.  
53. Although generally mirroring the conditions the Commission adopted in the AT&T Cost 
Assignment Forbearance Order, this Order provides additional explanations of the protections that are 
afforded by the Commission’s conditional requirement that carriers retain their Part 32 Uniform System 
of Accounts, which applies to AT&T, Qwest, and Verizon as well as the other price cap carriers that are 
granted forbearance from the Cost Assignment Rules.
163
  The Commission thus ensures its ability to 
obtain the underlying data necessary to reconstruct information to determine whether improper cost 
accounting has occurred or to make determinations about just and reasonable rates where the Commission 
finds competition is not constraining rates, should it need to do so in the absence of the Cost Assignment 
Rules.  
54. In particular, the Commission has considered and responded to petitioners’ claims that, 
contrary to the Commission’s findings, the Cost Assignment Rules are necessary for several reasons, 
including guarding against possible exercise of market power;
164
complying with the Section 272 Sunset 
Order;
165
adjusting rates subject to price cap regulation, including special access;
166
evaluating exogenous 
cost relief and jurisdictional and intercarrier compensation reform;
167
aiding state regulatory functions;
168
enforcing section 208 complaints,
169
and ensuring compliance with section 254(k).
170
(Continued from previous page)                                                          
Cost Assignment Forbearance Order granting forbearance from these same rules to AT&T.  Sprint Nextel 
Corporation, COMPTEL, AdHoc Telecommunications Users Committee, and Time Warner Telecom Inc. Petition 
for Reconsideration, WC Docket Nos. 07-21 and 05-342 (filed May 27, 2008) (Joint May 27 Petition).  All three 
petitions for reconsideration raise essentially the same or related issues.
162
See, e.g., Opposition of Verizon to Petition for Reconsideration, WC Docket Nos. 07-21, -05-342 (filed June 11, 
2008).
163
See infra Section III.B.4.
164
See, e.g., Joint May 27 Petition at 5; AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7314-17, paras. 
21-26; see also infra Section III.B.4.
165
See, e.g., Joint May 27 Petition at 12-15; AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7317-19, 
paras. 26-29; see also infra Section III.B.4.
166
See, e.g., Joint May 27 Petition at 6-10; AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7312-13, 
paras. 18-19, and 7326-27, para. 45; see also infra Section III.B.4.
167
Joint May 27 Petition at 11-12; AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7326-27, para. 45; 
see also supra para. 51.  
168
See, e.g., Joint May 27 Petition at 12; AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7320-22, 
paras. 32-35; see also infra para 63.
169
See, e.g., Joint May 27 Petition at 22-24; AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7311-12, 
paras. 16-18, and 7315, para. 22; see also infra Section III.B.4. Petitioners express concerns that the Commission’s 
decisions will adversely affect the public availability of information needed for parties to bring a section 208 
complaint challenging a rate under section 201.  Joint May 27 Petition at 23-24.  We emphasize that our formal 
complaint and discovery rules are designed to ensure that parties acting in good faith are not denied the ability to file 
complaints.  47 C.F.R. §§ 1.720-1.736.
170
See, e.g., Joint May 27 Petition at 16-18; AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7319, para. 
30; see also infra Section III.B.4.
Federal Communications Commission FCC 13-69 
30
55. In conditionally forbearing from the Cost Assignment Rules, the Commission carefully 
balanced its obligation to remove costly, overly broad, and outmoded requirements and burdens in 
response to changes in markets and regulatory needs, against preserving requirements or creating a less 
costly and administratively burdensome alternative that enables it to ensure just and reasonable rates, 
protect consumers, and act in the public interest.  Contrary to petitioners’ assertions, the conditions and 
safeguards, which were implemented in compliance plans subject to the Commission’s approval, enable 
us to properly strike this balance and are responsive to petitioners’ concerns.
171
  In sum, we believe the 
modified regulatory framework created by the conditions imposed by the Commission sufficiently 
address the issues petitioners have raised.  Accordingly, we affirm the Commission’s decisions granting 
conditional forbearance from the Cost Assignment Rules to AT&T, Qwest, and Verizon.
4. Part 32 Uniform System of Accounts 
a. USTelecom’s Request
56. USTelecom requests forbearance from the Part 32 Uniform System of Accounts (USOA) 
for all price cap carriers.
172
  USTelecom claims that “there is no clear use for or relevance to the Part 32 
information being collected; [it] imposes requirements that in some cases duplicate and in other cases 
conflict with GAAP; and [it] distorts competition by being applicable only to one subset of service 
providers.”
173
  USTelecom also asserts that “Part 32 requirements serve no regulatory purpose.”
174
  
b. Background
57. The USOA was adopted pursuant to section 220 of the Act, which requires the 
Commission to “prescribe a uniform system of accounts for use by telephone companies.”
175
  It was 
originally adopted in 1935 as Parts 31 and 33 of the Commission’s rules and was subsequently replaced 
with the current Part 32 USOA in 1986.
176
  The current USOA is “a historical financial accounting system 
that reports the results of operational and financial events in a manner which enables both management 
and regulators to assess these results.”
177
  The USOA provides a consistent framework for recording and 
reporting a company’s balance sheet, revenues, and expenses. 
                                                          
171
Contrary to petitioners’ assertions, the Commission has fully explained, in the AT&T Cost Assignment 
Forbearance Order as well as elsewhere in this Order, why the compliance plans can be relied upon to replace the 
Cost Assignment Rules.  
172
USTelecom Petition at 34-43.  Specifically, USTelecom requested forbearance for all price cap carriers from 
§ 220(a)(2) of the Act, Part 32 subparts A-G of the Commission’s rules, and the prior approval requirement of 
changes in statistical sampling processes.  USTelecom Petition, App. A at A-8, A-9.  Given our determination 
elsewhere in this Order to forbear conditionally from the Commission’s Cost Assignment Rules for price cap 
carriers not previously granted forbearance, including sections 32.23 and 32.27 of our accounting rules (see supra
Section III.B.3), we exempt these sections from our review of Part 32 here.  
173
Id. at 35.
174
Id. at 37.
175
47 U.S.C. § 220(a)(2).  
176
Revision of the Uniform System of Accounts and Financial Reporting Requirements for Class A and Class B 
Telephone Companies (Parts 31, 33, 42, and 43 of the FCC’s Rules), CC Docket No. 78-196, Report and Order, 60 
RR2d 1111 (1986).
177
47 C.F.R. § 32.1.
Federal Communications Commission FCC 13-69 
31
c. Discussion
58. As an initial matter, USTelecom argues that “the Commission ‘shall forbear’ from the 
continued application of rules that are ‘not necessary for a current, federal need.’”
178
  We note that in 
determining whether forbearance is warranted under section 10, we perform the analysis specified by the 
terms of that statutory provision.  The Commission previously has considered whether there must be a 
current need to determine that a rule is “necessary” under the first two prongs of the three-part section 10 
forbearance test.
179
59. For the reasons discussed below, we find that USTelecom has not demonstrated that Part 
32 is not necessary to ensure that charges and practices are just and reasonable, that Part 32 is not 
necessary for the protection of consumers, and that forbearance from Part 32 would be consistent with the 
public interest.  Therefore, we find that forbearance from the Part 32 Uniform System of Accounts is not 
warranted under the section 10 criteria.
60. A uniform accounting system has historically been the linchpin of the Commission’s 
ability to ensure reasonable rates for residential and business services and to perform a number of other 
statutory responsibilities.  The Commission has previously stated that “protecting ratepayers from unjust 
and unreasonable interstate rates . . . is the purpose behind all of our accounting . . . rules.”
180
  The Part 32 
USOA has been the necessary precondition for previous forbearance grants, including our conditional 
grants of forbearance from the Cost Assignment Rules for the BOCs in 2008.
181
  Despite the considerable 
changes that have taken place in Commission regulations in recent years, our review of the record in this 
proceeding leads us to conclude that retaining a uniform accounting system remains important to the 
Commission’s ability to conduct its oversight, investigatory, and regulatory responsibilities.
182
  
(i) Section 10(a)(1):  Just and Reasonable Rates
61. Under the first prong of our forbearance analysis, section 10(a)(1) requires the 
Commission to determine whether the Part 32 accounting rules are “necessary to ensure that the charges, 
practices, classifications or regulations by, for, or in connection with [price cap carriers] are just and 
reasonable and are not unjustly or unreasonably discriminatory.”
183
  USTelecom contends that “Part 32 
                                                          
178
USTelecom April 18, 2013 Ex Parte Letter at 2 (“[N]one of those purported justifications constitutes a ‘current 
federal need’ for the rules in question, which is the standard adopted by the Commission in applying the section 10 
forbearance test.”).
179
AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7313-14, para. 20 (concluding that a rule is not 
“necessary” under section 10(a)(1) where there is not a current need, and citing Cellular Telecommunications & 
Internet Ass’n v. FCC, 330 F.3d 502, 512 (2003), which was interpreting the term “necessary” in the context of 
section 10(a)(2)).  As explained in this section, the Commission has “ongoing needs” for the regulations in question; 
we therefore disagree with USTelecom that there is no current need.  See generally USTelecom April 18, 2013 Ex 
Parte Letter.
180
Separation of Costs of Regulated Telephone Service from Costs of Nonregulated Activities; Amendment of Part 
31, the Uniform System of Accounts for Class A and Class B Telephone Companies to Provide for Nonregulated 
Activities and to Provide for Transactions Between Telephone Companies and their Affiliates, CC Docket No. 86-
111, Report and Order, 2 FCC Rcd 1298, at 1303, para. 37 (1987), petition for review denied, Southwestern Bell
Corp. v. FCC, 896 F.2d 1378 (D.C. Cir. 1990).
181
See AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7314, para. 21; ARMIS Forbearance Order, 23 
FCC Rcd at 13662, para. 27, n.82.  
182
See Consumer Advocates Comments at 21 (“Consistent and uniform reports are essential tools for diverse 
regulatory purposes.”).
183
47 U.S.C. § 160(a)(1).
Federal Communications Commission FCC 13-69 
32
requirements are unnecessary to ensure that price cap carriers charge just, reasonable, and 
nondiscriminatory rates.”
184
  Other commenters, however, underscore the continued importance of Part 32 
accounting rules.
185
  
62. We recognize that, in certain respects, price cap regulation and our reform of universal 
service and intercarrier compensation have altered the manner in which accounting data may be used. 
USTelecom has not, however, offered evidence to show that those reforms have eliminated the need for 
Part 32 accounting data.  We identify below, consistent with the first prong of our forbearance analysis, a 
variety of current circumstances for which the Commission relies on Part 32 accounting to ensure just and 
reasonable rates.
186
  Given these uses and the benefits of Part 32 rules in general, including providing 
uniformity and continuity in the Commission’s accounting data,
187
we find that USTelecom has not shown 
that the data are unnecessary or that there are less burdensome alternatives to accomplish these 
responsibilities.
63. Pole Attachments.  The Commission regulates pole attachment rates under section 224 of 
the Act and depends on data developed from Part 32 accounts to calculate and verify the reasonableness 
of pole attachment rates.
188
  These data are routinely relied on by parties both in private negotiation of 
pole attachment rates and in pole attachment complaint filings.
189
  For example, the Commission’s rules 
require a party filing a pole attachment rate complaint to include cost data “based on historical or original 
cost methodology” and “derived from ARMIS . . . or other reports filed with state or federal regulatory 
agencies.”
190
  The cost data for pole attachment rates come from various Part 32 accounts (e.g., gross pole 
investment, gross plant investment, accumulated depreciation—poles, maintenance expense—poles, 
                                                          
184
USTelecom Petition at 37 (“Part 32 has no bearing on the rates charged by price cap carriers.”).  Several
commenters echo these assertions.  AT&T Reply at 22 (“These rules were designed for a rate-of-return era that has 
long since passed.”); CenturyLink Comments at 5 (“Many of the rules covered by the Petition are holdovers from 
the long-past days when rate-of-return regulation was the norm in the telecommunications industry, including Part 
32.”); ACS Comments at 5; Cincinnati Bell Comments at 9; USTelecom Reply at 21; Verizon Comments at 13 (“It 
is now apparent that Part 32 information is not needed by the Commission to conduct its routine business.”).  
185
Sprint Opposition at 4 (“[I]t is critical that the Commission retain the ability to review the cost and other 
information currently recorded and reported by ILECs in order to fulfill its statutory obligation of ensuring that 
customers obtain service at just and reasonable rates.”); CCIA Reply at 3-4; NCTA Comments at 3; NARUC April 
22, 2013 Ex Parte Letter at 3-4 (“A number of State commissions and a State public utility commissioner have 
timely and actively opposed USTA’s request for the elimination of the Part 32 USOA requirements for price cap 
ILECs.”).  
186
USTelecom asserts that the Commission has not requested the data maintained in the 2008 compliance plans. 
See, e.g., USTelecom Petition at 37.  As we detail in this section, however, the Commission has had a number of on-
going uses for the Part 32 data the carriers committed to maintain.
187
See infra para. 72.  
188
47 U.S.C. § 224.  Certain states have asserted jurisdiction over pole attachment rates pursuant to section 224(c).  
See 47 U.S.C. § 224(c).  As noted in Section III.B.7 infra, price cap carriers are generally not required to submit to 
the Commission pole attachment data for those states.  See infra para. 109; see also Qwest ARMIS Forbearance 
Order, 23 FCC Rcd at 18491, para. 14.
189
Under the Commission’s rules, pole attachment rates are set in the first instance through private negotiation using 
cost data reported by carriers.  In the event that negotiations are unsuccessful, attaching parties may file a complaint 
with the Commission based on the same cost data.  See 47 C.F.R. Part 1, Subpart J.
190
47 C.F.R. § 1.1404(g)(2).  
Federal Communications Commission FCC 13-69 
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etc.).
191
  When the Commission granted forbearance to three price cap carriers from filing ARMIS Report 
43-01, which contains cost data for rate calculations required by its pole attachment rules, it did so on the 
condition that those carriers continue to publicly file the relevant revenue and expense data.
192
  Without 
ongoing access to the data derived from Part 32 accounts, neither the Commission nor interested parties 
could ascertain or verify that pole attachment rates based on the Commission’s rate formula reflect actual 
costs, or that these calculations produce just and reasonable rates in accordance with our rules.
193
64. Moreover, the Commission has used Part 32 data to modify the formula by which 
telecom rates for pole attachments are calculated.  Specifically, in the 2010 Pole Attachment Order and 
NPRM, which implemented recommendations of the National Broadband Plan, the Commission sought to 
modify the telecom rate for pole attachments.  In so doing, the Commission sought comment on a specific 
rate proposal based on an analysis of incumbent LEC pole attachment rates that was calculated using 
publicly filed Part 32 account cost-related data.
194
The Commission ultimately adopted a modified form 
of its proposal as the new telecom rate for pole attachments the following year.
195
  
65. USTelecom contends that the Commission’s pole attachment rules do not require the use 
of Part 32.
196
  However, we expressly conditioned forbearance from our ARMIS financial reporting 
requirements on “the continued annual public filing . . . of the pole attachment cost data currently filed as 
part of ARMIS Report 43-01.”
197
In that proceeding, the Commission considered whether that “data in 
alternative forms filed with the Commission would be sufficient” but concluded that “[t]he record does 
not reveal other sources of such data that would meet that standard [set by our rules] and could be used 
today in the absence of the ARMIS data.”
198
  Similarly, in this proceeding, the record contains no 
                                                          
191
In 2000 and 2001, the Commission established the Part 32 accounts used in calculating pole attachment rental 
rates for poles owned by local exchange carriers.  See Amendment of Commission’s Rules and Policies Governing 
Pole Attachments; Implementation of Section 703(e) of the Telecommunications Act of 1996, CS Docket Nos. 97-98, 
97-151, Consolidated Partial Order on Reconsideration, 16 FCC Rcd 12103, 12122-27, paras. 32-42, 12155-59, 
paras. 108-15 (2001).
192
Qwest ARMIS Forbearance Order, 23 FCC Rcd at 18490-91, para. 13.  See, e.g., Letter from Linda Vandeloop, 
Director-Federal Regulatory, AT&T, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 07-204 (filed Apr. 2, 
2012).  
193
See NCTA Comment at 3-4.  USTelecom concedes this need elsewhere in its petition by expressly conditioning 
its request for forbearance from ARMIS 43-01 reporting requirements “subject to the same conditions as adopted in 
the Qwest Forbearance Order.”  USTelecom Petition at 52.  That Order conditioned forbearance on the “continued 
annual public filing, without any assertion of confidentiality, of the pole attachment cost data currently filed as part 
of ARMIS Report 43-01 in WC Docket No. 07-204.”  Qwest ARMIS Forbearance Order, 23 FCC Rcd at 18490-91, 
para. 13.  
194
Implementation of Section 224 of the Act; A National Broadband Plan for Our Future, WC Docket No. 07-245, 
GN Docket No. 09-51, 25 FCC Rcd 11864, 11923, para. 140 n.378 (2010) (2010 Pole Attachment Order and 
NPRM) (explaining the calculation and analysis in App. A).
195
Implementation of Section 224 of the Act; A National Broadband Plan for Our Future, WC Docket No. 07-245, 
GN Docket No. 09-51, 26 FCC Rcd 5240, 5298-5305, paras. 135-52 and n.456 (2011) (2011 Pole Attachment 
Order) (referencing the Commission’s rate calculations using Part 32 data from ARMIS that formed the basis of its 
telecom rate proposal).
196
USTelecom April 18, 2013 Ex Parte Letter at 4-6.
197
Qwest ARMIS Forbearance Order, 23 FCC Rcd at 18490-91, para. 13.
198
Id.
Federal Communications Commission FCC 13-69 
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reference to alternative sources of pole attachment data that would meet the standard set by our rules.
199
  
USTelecom’s suggestion that price cap carriers could provide the same expense information using GAAP 
accounting would actually alter the rates price cap carriers charge for pole attachments since GAAP 
treatment of certain pole attachment expenses differs from that of Part 32.
200
  
66. Section 272(e)(3) Imputation.  Section 272(e)(3) of the Act requires a BOC that offers 
integrated interexchange service to “impute to itself . . . an amount for access to its telephone exchange 
service and exchange access that is no less than the amount charged to any unaffiliated interexchange 
carriers for such service.”
201
  In the Section 272 Sunset Order, the Commission permitted BOCs to offer 
interexchange and exchange access services on a vertically integrated basis, contingent on those carriers’ 
compliance with cost allocation rules that would prevent improper cost shifting, and on their inclusion of 
section 272 imputation charges in the relevant Part 32 account.
202
  Though the Commission subsequently 
relieved the BOCs from compliance with the Cost Assignment Rules, that forbearance was conditioned 
on the carriers’ continued maintenance of Part 32 accounting and continued imputation as required by 
section 272(e)(3) using data from the relevant Part 32 accounts to ensure against the threat of cross 
subsidization identified in the statute.
203
  
67. Section 254(k) Compliance.  Section 254(k) of the Act prohibits a telecommunications 
provider from “us[ing] services that are not competitive to subsidize services that are subject to 
competition.”
204
  As discussed above, we condition our forbearance from the Cost Assignment Rules on a 
requirement for price cap carriers to certify, on an annual basis, that they have complied with section 
254(k) of the Act, and will maintain and provide any requested cost accounting information necessary to 
prove such compliance in the event of an administrative action, investigation, or audit.
205
  Absent 
continued retention of Part 32 data, the Commission would be unable to verify the accuracy of that data.  
68. We note further that we have relied on the continuing application of the Part 32 
accounting rules to justify reducing or eliminating other requirements in this Order and in prior 
                                                          
199
The flexibility that our rules allow was intended to facilitate compliance with our rules by non-ILECs that are not 
subject to the requirements of Part 32.  See 47 C.F.R. §§ 1.1404(g)(2), (h)(2).  
200
See USTelecom May 3, 2013 Ex Parte Letter at 4.  USTelecom cites “(1) depreciable lives; (2) accounting for 
retirement of equipment and other facilities, including obsolescence, cost of removal and salvage; (3) capitalization 
limits and (4) the tax effects of these differences” as “areas that give rise to significant Part 32/GAAP differences.”  
Id.  We will explore more fully the suggestions USTelecom makes in its ex parte regarding possible modification of 
GAAP pole attachment data in the context of a future NPRM on Part 32.  See infra para. 77.  
201
47 U.S.C. § 272(e)(3).
202
Section 272 Sunset Order, 22 FCC Rcd at 16486-87, para. 94, 16491-92, para. 104 (2007).
203
AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7318-19, para. 29 (“AT&T ‘will continue to 
journalize revenue to Account 5280’ as required by section 32.5280(a) of the Commission’s rules.”).  We decline 
USTelecom’s proposal that we replace this familiar and commonly understood accounting requirement with a 
commitment to create an ill-defined “annual subaccount/identifier or other record” to account for these transactions.  
USTelecom April 18, 2013 Ex Parte Letter at 7.  We extend this requirement to all price cap carriers as a condition 
of granting forbearance from the Cost Assignment Rules.  See supra Section III.B.3.
204
47 U.S.C. § 254(k).
205
See supra para. 45.  This is similar to the conditional forbearance granted to AT&T, Verizon and Qwest.  See, 
e.g., AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7319, para. 30.  This certification and record-
retention obligation qualifies as an “information collection” subject to the approval of the Office of Management 
and Budget under the terms of the Paperwork Reduction Act of 1995.
Federal Communications Commission FCC 13-69 
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forbearance orders.
206
  If we were to forbear from the Part 32 rules, we would need to consider the impact 
of such forbearance on the protections such conditions were imposed to address in those decisions.  For 
example, when the Commission granted forbearance from the Cost Assignment Rules and ARMIS 
reporting requirements, it made clear that it would not have granted that forbearance absent the existence 
of our Part 32 accounting rules and the data they generate.
207
Indeed, we rely on compliance plans filed 
by each carrier that obtained relief to explain the transition process it would undertake without the Cost 
Assignment Rules and ARMIS rules to “maintain its accounting procedures and data in a manner that will 
allow it to provide usable information on a timely basis if requested by the Commission” for regulatory 
purposes.
208
  The Commission concluded that there may be a “federal need for this accounting 
information in the future to adjust our existing price cap regime or in our consideration of reforms moving 
forward.”
209
  Additionally, it asserted that the Commission “will have continuing responsibilities under 
the Act to ensure that rates are just and reasonable, and not unjustly or unreasonably discriminatory, and 
we need the tools, possibly including accounting data, to accomplish our statutory responsibilities.”
210
Accordingly, the Commission “expressly condition[ed]” forbearance “on the provision by AT&T of 
accounting data on request by the Commission. . . .  Thus, this USOA account data will continue to be 
maintained and available to the Commission on request.”
211
69. As discussed above, the Commission has various ongoing needs for Part 32 accounting 
data to ensure just, reasonable, and nondiscriminatory charges, practices, classifications, and regulations, 
which USTelecom has failed adequately to address.
212
  We thus find that USTelecom has not met its 
burden of establishing that Part 32 accounting rules as a whole are not necessary to ensure that price cap 
carriers’ rates are just and reasonable and are not unjustly or unreasonably discriminatory.
(ii) Section 10(a)(2):  Protection of Consumers
70. Section 10(a)(2) of the Act also requires the Commission to determine whether the 
enforcement of its Part 32 accounting rules for price cap carriers is “not necessary for the protection of 
                                                          
206
See supra Section III.B.3; infra Section III.B.7; supra n.186.  
207
See AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7325, para. 41 (discussing the Commission’s 
significant reliance on Part 32 USOA as a condition for granting forbearance from the Cost Assignment Rules), and 
id. at 7326, para. 44 (referencing “the modification of our regulatory framework” in conjunction with “compliance 
with our remaining rules and conditions”); see also Qwest ARMIS Forbearance Order, 23 FCC Rcd at 18490-91, 
paras. 12, 15. 
208
See AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7319-20, para. 31; see also, e.g., Verizon 
Compliance Plan at 2-3.
209
AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7313, para. 19.  Even under price cap regulation, 
allegations of unjust, unreasonable, or unreasonably discriminatory rates can arise.  In anticipation, the original 
Price Cap Order emphasized the Commission’s section 208 enforcement responsibilities (“our investigation and 
complaint processes will remain important tools in ensuring just, reasonable, and non-discriminatory rates”).  Price 
Cap Order, 5 FCC Rcd at 6836, para. 406.  The requisite accounting data could be necessary to evaluate such 
allegations.  Such assertions have been made, for example, with regard to certain special access rates. See, e.g., 
2005 Special Access NPRM; Special Access for Price Cap Local Exchange Carriers; AT&T Corporation Petition 
for Rulemaking to Reform Regulation of Incumbent Local Exchange Carrier Rates for Interstate Special Access 
Services, WC Docket No. 05-25, RM 10593, Report and Order, 27 FCC Rcd 10557 (2011) (Pricing Flexibility 
Suspension Order).
210
AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7314, para. 21.  
211
Id.  
212
See supra paras 61-72.
Federal Communications Commission FCC 13-69 
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consumers.”
213
  USTelecom asserts that price cap regulation provides sufficient protection for consumers 
in the absence of Part 32 accounting rules, stating that “as the Commission has found, any remaining 
concerns about such cross-subsidization are adequately addressed by price cap regulations.”
214
We 
disagree.  In the same order cited by USTelecom, the Commission found that price cap regulation alone is 
insufficient to protect consumers, noting that “[w]e can only reach our conclusion that the three-prong 
forbearance test is satisfied because we impose conditions that mitigate factors that would otherwise lead 
us to conclude that the Cost Assignment Rules remain necessary under section 10.”
215
  Those conditions 
included the continued maintenance of Part 32 accounting.
216
71. USTelecom asserts that other accounting systems and safeguards, such as GAAP, the 
Sarbanes-Oxley Act (Sarbanes-Oxley), and the Foreign Corrupt Practices Act (FCPA) that price cap 
carriers would remain subject to would “adequately protect” consumers if the Commission forbears from 
the Part 32 accounting requirements.
217
Based on the record before us here, we disagree.  First, while 
GAAP accounting, for example, provides important protections to investors and assists federal agencies 
like the Securities and Exchange Commission in executing its financial oversight responsibilities, it is not 
designed to protect ratepayers, particularly from unjust and unreasonable rates.  GAAP accounting is 
based on the central premise that notice and transparency are sufficient to protect investors.
218
The 
Commission’s statutory duties to protect consumers are broader,
219
and USTelecom does not demonstrate 
why other accounting systems such as those mandated by GAAP, Sarbanes-Oxley, or the FCPA are 
sufficient to meet those broader duties.  Second, other accounting systems such as GAAP, Sarbanes-
Oxley, or the FCPA do not provide the same level of disaggregation of costs and geographic specificity 
                                                          
213
47 U.S.C. § 160(a)(2).
214
USTelecom Reply at 22.
215
AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7314, para. 21.  
216
The AT&T Cost Assignment Forbearance Order relied on the continued maintenance of Part 32 accounting as a 
premise for granting forbearance:  “AT&T states . . . its revenue can be identified by jurisdiction through the Part 32 
accounts.  Thus, this USOA account data will continue to be maintained and available to the Commission on 
request.”  Id.
217
USTelecom Petition at 40; see also Verizon Reply at 13.  But see Michigan PSC Reply at 10-11 (“But, the 
Petitioners neglect to mention that they have had great success in the individual states, and other jurisdictions, in 
reducing their reporting and regulatory requirements by arguing that the USOA accounting information is all 
reported at the federal level.”).
218
“The objective of general purpose financial reporting is to provide financial information about the reporting 
entity that is useful to existing and potential investors, lenders, and other creditors. . . .”  Statement of Financial 
Accounting Concepts No. 8, Conceptual Framework for Financial Reporting (Financial Accounting Standards 
Board, 2010) at 1 (OB2) (FASB Conceptual Framework).  “Other parties, such as regulators . . . also may find 
general purpose financial reports useful.  However, those reports are not primarily directed to these other groups.”  
Id. at 3 (OB10). 
219
The purpose of the Act is to regulate “interstate and foreign commerce in communication by wire and radio so as 
to make available . . . to all the people of the United States . . . a rapid, efficient, Nation-wide, and world-wide wire 
and radio communication service with adequate facilities at reasonable charges, for the purpose of the national 
defense, for the purpose of promoting safety of life and property through the use of wire and radio, and for the 
purpose of securing a more effective execution of this policy by centralizing authority . . . and by granting additional 
authority with respect to interstate and foreign commerce in wire and radio communication.”  47 U.S.C. § 151.
Federal Communications Commission FCC 13-69 
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that Part 32 provides.
220
  The USOA is uniquely tailored to provide the financial data regarding telephone 
companies necessary for the Commission to fulfill its statutory obligations and protect consumers by 
ensuring that the rates consumers pay for telecommunications services are just and reasonable.  
72. Moreover, Part 32 ensures uniformity of accounting in a way that other accounting 
systems such as those required by GAAP, Sarbanes-Oxley, or the FCPA do not.  For example, GAAP 
accounting requires conformity to a set of principles but does not require uniform treatment of plant-
specific assets as required by Part 32 (e.g., aerial, underground and buried cable, central office switching, 
etc.).  Uniformity in regulatory accounting is essential to conduct consistent, industry-wide analysis and 
oversight.  For example, without uniform accounting data, the process of developing a forward looking 
cost model could be more complicated.
221
  Additionally, the Commission will need a uniform accounting 
system to the extent it is to revisit price cap carriers’ special access rates based on the CALLS Plan, which 
expired in 2005 but continues to govern such rates.
222
  In contrast, the Financial Accounting Standards 
Board (FASB) identifies “comparability” as one of the core principles of GAAP accounting but distances 
itself from uniformity (“Comparability is not uniformity.”).
223
  Continuing to require compliance with Part 
32 accounting rules also ensures data continuity, which enables industry analysis based on historical 
trends.  We conclude, therefore, that USTelecom has failed to establish that Part 32 accounting rules are 
not “necessary for the protection of consumers.”
224
(iii) Section 10(a)(3):  Public Interest
73. Section 10(a)(3) of the Act requires us to determine whether forbearance from Part 32 
requirements is consistent with the public interest.
225
  We conclude that forbearance from Part 32 is not in 
the public interest.  
74. USTelecom alleges that forbearance from Part 32 will eliminate unnecessary regulatory 
costs that burden only a few competitors and would therefore be in the public interest.  It asserts that, 
“forbearance from Part 32 would allow price cap carriers to . . . avoid incurring unnecessary costs 
associated with accounting rules that serve no regulatory purpose and to which only a limited number of 
                                                          
220
For example, we are not aware of any GAAP requirement to disaggregate the various types of cable plant (aerial, 
underground, buried, etc.) nor are we aware of any GAAP requirement to report data according to study area, the 
basis on which tariffs are typically filed.  
221
See Consumer Advocates Comments at 26.
222
Access Charge Reform, Price Cap Performance Review for Local Exchange Carriers, CC Docket Nos. 96-262 
and 94-1, Sixth Report and Order, Low-Volume Long Distance Users, CC Docket No. 99-249, Report and Order, 
Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Eleventh Report and Order, 15 FCC Rcd 
12962 (2000) (CALLS Order), aff’d in part, rev’d in part, and remanded in part, Texas Office of Public Util. 
Counsel et al. v. FCC, 265 F.3d 313 (5
th
Cir. 2001), cert. denied, National Ass’n of State Utility Consumer 
Advocates v. FCC, 535 U.S. 986 (2002); on remand, Access Charge Reform; Price Cap Performance Review for 
LECs; Low-Volume Long Distance Users; Federal-State Joint Board on Universal Service, CC Docket Nos. 96-262, 
94-1, 99-249 and 96-45, Order on Remand, 18 FCC Rcd 14976 (2003) (CALLS Order on Remand).
223
FASB Conceptual Framework at 19 (QC23).
224
47 U.S.C. § 160(a)(2).  USTelecom proposed that if the Commission were to forbear from Part 32, individual 
price cap carriers that elected that forbearance would commit to (1) retain the ability to map their GAAP accounting 
data to Part 32 accounts for five years and (2) produce data from the two calendar years immediately preceding a 
request by the Commission.  USTelecom May 3, 2013 Ex Parte Letter at 2-3.  We find, as discussed in para. 77, that 
a better approach is to undertake a rulemaking to examine on a full record what changes to Part 32 will meet the 
Commission’s long term needs. 
225
47 U.S.C. § 160(a)(3).
Federal Communications Commission FCC 13-69 
38
competitors are subject, which would serve the public interest.”
226
Several price cap commenters 
generally cite the costs they incur in complying with Part 32, but there is little quantitative evidence in the 
record to estimate with any accuracy the costs that are attributable to compliance with Part 32 beyond 
normal GAAP accounting.
227
For example, USTelecom asserts a high-level estimate of burden for one 
carrier without providing the additional information necessary to enable us to assess the relevance of that 
estimate for the industry as a whole.
228
  We are thus unable to objectively assess the overall burdens of our 
Part 32 rules.  Moreover, USTelecom has not demonstrated that the costs saved by forbearing from this 
rule would outweigh the important uses described above, or that the savings would have any effect on 
competition.  
75. Section 10 also requires us to determine whether forbearance from Part 32 accounting 
requirements will “promote competitive market conditions,” including whether forbearance “will enhance 
competition among providers of telecommunications services.”
229
  Some price cap carriers contend that 
these additional costs impair price cap carriers’ competitiveness, noting they are the only carriers to bear 
this burden in a competitive marketplace.  Cincinnati Bell, for example, states that “only a handful of 
companies remain subject to these unique regulations” and that forbearance would place price cap carriers 
“on a more equal footing with their competitors who are not subject to these rules.”
230
Other commenters, 
however, contend that Part 32 is essential to preserving certain pro-competitive aspects of our rules.  For 
example, Consumer Advocates states, “[e]ffective competition depends on rivals’ ability to obtain access 
to essential wholesale facilities at economically efficient, cost-based rates.”
231
  We have identified above 
how the Commission relies on the Part 32 rules to ensure that cable providers and other non-ILEC 
telecommunications service providers have access to ILECs’ poles—network facilities that are key to 
these providers’ ability to provide competition—at reasonable, cost-based rates.
232
  We do not have 
enough evidence in the record to address these purposes, or demonstrate that these pro-competitive 
protections can otherwise be achieved if we forbear from the requirements.  We thus find, on balance, that 
the Part 32 rules enhance competition which, in turn, benefits the public.
76. Although we are conscious of our obligation to reduce administrative burdens when 
possible, such decisions must be based on record evidence, which is lacking here.  Accordingly, we 
                                                          
226
USTelecom Petition at 42.
227
The attempts that were made to quantify costs were insufficient. For example, Cincinnati Bell estimates that over 
13% of its annual accounting budget is spent on personnel and systems to “maintain several legacy accounting 
systems solely to comply with Part 32, cost allocation, and property records rules.”  Cincinnati Bell Comments at 
10.  This estimate does not provide a financial context for this assertion, such as how much of the operating budget 
this affects, nor does it compare this cost to the total interstate costs of the company.  ACS states that its “cost of 
maintaining two sets of books, one for financial and another for regulatory purposes, is extraordinarily high—as 
much as $1 million per year,” but does not identify what fraction of these costs are incurred to maintain its 
regulatory accounts.  ACS Comments at 4.  See also USTelecom Petition at 46 (offering only general assertions 
about alleged efficiencies of VoIP and wireless providers).  Thus, we cannot determine what any cost saving might 
be, much less whether it would be substantial or significant, or what effect it might have on allowing a carrier to 
compete more effectively.
228
USTelecom April 18, 2013 Ex Parte Letter at 13.
229
47 U.S.C. § 160(b).
230
Cincinnati Bell Comments at 10.  
231
Consumer Advocates Comments at 22.
232
See supra paras. 63-65.
Federal Communications Commission FCC 13-69 
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conclude that the benefit of maintaining Part 32 accounting rules outweighs their cost, making 
forbearance of Part 32 rules inconsistent with the public interest.
233
  
77. As we recognize above, in certain respects, price cap regulation and our reform of 
universal service and intercarrier compensation have altered the manner in which accounting data may be 
used.
234
  While we conclude that those reforms have not eliminated the need for accounting data, we 
acknowledge that further streamlining of our rules is likely appropriate.  Accordingly, we intend to 
initiate a Notice of Proposed Rulemaking within 90 days and thereby conduct a comprehensive review of 
the Part 32 Uniform System of Accounts, as it applies to price cap carriers, and to evaluate the continuing 
role these rules play in fulfilling our statutory and regulatory obligations.  This proceeding will give the 
Commission flexibility to consider ways to minimize the compliance burdens of our regulations while 
ensuring our continued access to the relevant financial information necessary to fulfill our duties.
235
5. Property Record Rules 
a. USTelecom’s Request
78. USTelecom seeks forbearance for price cap carriers from a specific set of rules within the 
Part 32 USOA containing basic and continuing property record requirements in sections 32.2000(e) and 
(f).
236
  USTelecom asserts that these requirements cause excessively detailed and unnecessary record-
keeping.
237
  USTelecom’s petition initially requests relief only for price cap carriers.
238
  USTelecom 
clarified subsequently that its request includes rate-of-return carriers.
239
  Finally, the petition’s appendix 
                                                          
233
Our forbearance in Section III.B.7 of this Order from requiring mid-sized ILECs to file ARMIS Report 43-01 is 
consistent with and in part premised on our denial of forbearance from Part 32 here.  Forbearing from a discrete 
reporting requirement is an altogether different matter than forbearing from the requirement that carriers keep 
consistent, uniform accounting data.  Moreover, in the Qwest ARMIS Forbearance Order, we expressly premised 
forbearance from filing ARMIS Reports 43-01, 43-02 and 43-03 on the continued availability of Part 32 and other 
accounting data.  Qwest ARMIS Forbearance Order, 23 FCC Rcd at 18489-90, para. 12. (“Qwest, AT&T, and 
Verizon remain subject to the Part 32 USOA requirements.  Thus, this USOA account data will continue to be 
maintained and available to the Commission on request.  Moreover, the Commission also expressly conditioned the 
forbearance granted in the AT&T Cost Assignment Forbearance Order and the ARMIS Forbearance Order on the 
provision by Qwest, AT&T, and Verizon of accounting data on request by the Commission”).
234
See infra para. 62.
235
We distinguish the review we announce here from the current 2012 Biennial Review.  See Commission Seeks 
Public Comment in 2012 Biennial Review of Telecommunications Regulations, CG Docket No. 13-29, EB Docket 
No. 13-35, IB Docket No. 13-30, ET Docket No. 13-36, PS Docket No. 13-31, WT Docket No. 13-32, WC Docket 
No. 13-29, Public Notice, 28 FCC Rcd 1556 (2013).  That review is mandated by section 11 of the Act, which 
establishes a narrower standard by which the Commission is to review its rules (“determine whether any such 
regulation is no longer necessary in the public interest as a result of meaningful economic competition between 
providers of such service”).  47 U.S.C. § 11(a)(2).  
236
USTelecom Petition at 43-47, App. A at A-9 (seeking forbearance from basic and continuing property record 
(CPR) requirements in § 32.2000(e) and (f)).
237
Id. at 43-47.
238
“Regardless of whether the Commission forbears from applying its Part 32 to price cap carriers, the Commission 
should forbear from application to price cap carriers of its property record requirements.”  Id. at 43.
239
“Even for carriers that continue to operate under rate-of-return regulation, the Commission’s property record 
rules are unnecessary.”  Id. at 44.
Federal Communications Commission FCC 13-69 
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requests relief for all carriers.
240
  Accordingly, we take the opportunity here to address the application of 
these rules to rate-of-return carriers as well as price cap carriers.
241
b. Background
79. Under these requirements, carriers maintain property records that include:  (1) a 
description of the property; (2) its specific location; (3) the identification of the work order under which 
the unit was installed; (4) the year of installation; and (5) any other information necessary to determine 
the original cost of the property.
242
The rules also prescribe standards for establishing and maintaining 
continuing property records.
243
The requirements provide that the property be described in sufficient 
detail that the property may be spot-checked for physical verification of its existence.
244
  
c. Discussion
80. We grant forbearance to price cap carriers from applying the property record 
requirements in section 32.2000(e) and (f) of the Commission’s rules subject to certain conditions.  We 
deny forbearance for rate-of-return carriers but seek to refresh the record in the open rulemaking related 
to property records in order to allow appropriate rule changes to reduce the burdens of property records 
rules on rate-of-return carriers.
245
81. Price Cap Carriers.  Property records serve an important purpose for rate-of-return and 
price cap carriers.  We find, however, that we can “eliminate regulations that are ‘outmoded’ and 
‘excessively burdensome’”
246
here where the regulatory purpose of property records for price cap carriers 
may be achieved in a less burdensome, more targeted manner, given the differences between price cap 
and rate-of-return regulation.  Thus, we take affirmative steps to reduce the burden of property record 
requirements for price cap carriers by granting conditional forbearance.  These conditions provide the 
necessary assurances that will enable the Commission to meet its statutory responsibilities and enable 
price cap carriers to satisfy the forbearance standard.  Accordingly, we grant forbearance subject to the 
condition that price cap carriers demonstrate in compliance plans that, in the absence of sections 
32.2000(e) and (f), they will track their substantial assets and investment in an accurate, auditable manner 
that enables them to verify account balances in their Uniform System of Accounts and make such 
property record information available to the Commission upon request for regulatory purposes.
                                                          
240
Id. App. A at A-9.
241
Forbearance Procedures Order, 24 FCC Rcd at 9553, para 16 (“In particular, the petition must state the 
following with specificity:  . . . each carrier, or group of carriers, for which forbearance is sought. . . .”).  In a 
subsequent filing, USTelecom noted that it requested forbearance from CPR rules “on behalf of all incumbent local 
exchange carriers.”  USTelecom April 18, 2013 Ex Parte Letter at 1.
242
47 C.F.R. § 32.2000(e); Ameritech Corporation Telephone Operating Companies’ Continuing Property Records 
Audit, CC Docket No. 99-117, Notice of Inquiry, 14 FCC Rcd 7019, 7020, para. 2 (1999).
243
47 C.F.R. § 32.2000(f).
244
See 47 C.F.R. § 32.2000(e), (f).
245
2000 Biennial Regulatory Review, Comprehensive Review of the Accounting Requirements and ARMIS Reporting 
Requirements for Incumbent Local Exchange Carriers: Phase 2; Amendments to the Uniform System of Accounts for 
Interconnection, Jurisdictional Separations Reform and Referral to the Federal-State Joint Board, Local 
Competition and Broadband Reporting, CC Docket Nos. 00-199, 97-212, 80-286, 99-301, Report and Order in CC 
Docket Nos. 00-199, 97-212, and 80-286, Further Notice of Proposed Rulemaking in CC Docket Nos. 00-199, 99-
301, and 80-286, 16 FCC Rcd 19911, 19987, para. 212 (2001) (Property Records FNPRM)).  
246
USTelecom May 3, 2013 Ex Parte Letter at 1; see also USTelecom Petition at 35.
Federal Communications Commission FCC 13-69 
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82. Property records allow companies to track and account for their assets, although the detail 
of these records may vary depending on the purpose for which they are required.
247
  Our USOA rules 
provide specific requirements for recording investment in property plant and equipment and for the 
underlying support the Commission needs in property record.
248
  The continuing property records
requirements of sections 32.2000(e) and (f) assure the Commission that amounts reflected in its Part 32 
accounting system are accurate and auditable, and provide the Commission with certainty and uniformity 
of how accounting information is maintained.
249
  
83. USTelecom does not argue that there is no need at all for property records but requests 
that price cap carriers be relieved of the degree of record-keeping detail required by the present rule.
250
It 
asserts that, in the absence of these requirements, price cap carriers could provide the Commission with 
the record-keeping it needs under other accounting systems, such as GAAP, Sarbanes-Oxley, or the 
FCPA.
251
  USTelecom does not, however, sufficiently identify what these requirements are.  GAAP, for 
example, provides only general accounting principles and concepts, and USTelecom has not explained 
how carriers would maintain their records, what information they would contain, or what would otherwise 
replace the present rule if forbearance is granted.
252
  Neither does USTelecom address how it will be able 
to verify Part 32 USOA accounts. 
84. Although we disagree with USTelecom’s generalized assertions that other accounting 
safeguards, including GAAP, are sufficient to provide property records that ensure just and reasonable 
rates or protect consumers, we nevertheless believe that the property record requirements in sections 
32.2000(e) and (f) are overly broad for purposes of regulating price cap carriers and not necessary to 
ensure just and reasonable rates.
253
  
85. As explained below, property records for rate-of-return carriers provide the data 
necessary to validate and determine the costs of providing interstate telecommunications service, which 
enables the Commission to set just and reasonable rates.
254
The rates of price cap carriers, however, are 
constrained by the Commission’s price cap methodology that, in combination with other protections, 
protects against the ability of price cap carriers to raise rates inappropriately.
255
Because price cap 
carriers’ rates are generally not directly tied to costs reflected in the rate base in the same manner as the 
                                                          
247
GAAP, for example, provides general accounting principles and does not address specific accounting procedures 
and record-keeping.  See, e.g., supra Section III.B.4.
248
Companies are required to account for investment in property, plant, and equipment in the 2000 series of 
accounts in Part 32.  The requirements for maintaining basic property records and CPR are contained in, 
respectively, 47 C.F.R. § 32.2000(e) and (f).
249
See, e.g., 47 C.F.R. § 32.2000(e)(2).
250
USTelecom Petition at 44 (“Under price cap regulation, there is no need for a carrier to document the costs that 
make up its plant asset base to the extreme detail mandated by the Commission’s rules.”).
251
Id. at 17, 44; USTelecom April 18, 2013 Ex Parte Letter at 14-15.
252
In addition, the FCPA requires internal controls that allow companies to validate their assets but does not address 
specific requirements as to how these are to be implemented. 
253
See, e.g., USTelecom Petition at 44.
254
See infra para. 90.
255
See, e.g., 47 C.F.R. §§ 61.41-61.47.
Federal Communications Commission FCC 13-69 
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rates of rate-of-return carriers, we recognize that it is not necessary to document those costs that make up 
the plant asset base of price cap carriers in the same degree of detail in property records.
256
  
86. We thus grant forbearance to price cap carriers from the property record requirements,
subject to certain conditions.  We find that forbearance from sections 32.2000(e) and (f) is warranted 
subject to the ability of price cap carriers to demonstrate in compliance plans, to be approved by the 
Bureau, how they will maintain the records necessary to track substantial assets and investment in an
accurate, auditable manner that enables them to verify account balances in their Part 32 Uniform System 
of Accounts, make such property information available to the Commission upon request, and ensure 
maintenance of such data.
257
  This provides carriers with an opportunity to demonstrate precisely how, for 
example, “GAAP-compliant financial accounting would be available to provide such records,” and will 
enable carriers to propose in their compliance plans what property constitutes substantial assets and 
investment and what does not for purposes of keeping records, verifying the accuracy of their Part 32 
accounts, and complying with GAAP.
258
  In addition, to the extent carriers propose to rely on 
requirements in the FCPA, Sarbanes-Oxley, or other accounting requirements as they have asserted, 
carriers should identify in their plans what specific rules and requirements they propose to replace which 
specific requirements in section 32.2000(e) and (f).
87. The relief granted in this Order will not become effective with respect to a price cap 
carrier unless and until the Office of Management and Budget approves any information collections 
associated with these conditions in accordance with the Paperwork Reduction Act
259
and the Bureau 
approves that price cap carrier’s compliance plan.  We delegate authority to the Chief of the Wireline 
Competition Bureau to prescribe the administrative requirements for the filing of the compliance plans 
and to approve the plans when the Bureau is satisfied that the plans fulfill the requirements set forth in 
this Order.
260
  This delegation of authority to the Bureau is consistent with delegations in previous 
analogous forbearance orders
261
and with our rules.
262
  Accordingly, we find that price cap carriers satisfy 
the first prong of the forbearance test as long as they satisfy these conditions. 
88. We also find that the property record rules for price cap carriers are not necessary to 
protect consumers as long as carriers comply with these conditions.  These conditions form the basis of an 
alternative framework for property records that, in the absence of the rules, helps the Commission protect 
consumers from unjust and unreasonable rates and practices.
89. Additionally, we find that forbearance serves the public interest.  We find the rules are 
overly broad for price cap carriers, and the burden of the rules outweighs the benefits.  Similar to the 
                                                          
256
As we have explained above, price cap regulation reduces incentives to shift non-regulated costs to regulated 
services, and to the extent incentives remain, price cap regulation in combination with the protections provided by 
conditions in carrier compliance plans subject to the Commission’s approval will continue to ensure just and 
reasonable rates.  See supra Section III.B.3.c.
257
We note that our grant of conditional forbearance from sections 32.2000(e), (f) does not affect obligations by 
carriers to comply with other rules related to property records.
258
USTelecom April 18, 2013 Ex Parte at 14.
259
Paperwork Reduction Act of 1995, Pub. L. No. 104-13, 109 Stat. 163.
260
The Bureau will release a public notice or notices announcing the approval of the plans as it approves them.
261
See AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7320, para. 31; ARMIS Forbearance Order, 23 
FCC Rcd at 13661, para. 24.  
262
The Chief of the Bureau has delegated authority to “[d]evelop and administer rules and policies relating to 
incumbent local exchange carrier accounting.” 47 C.F.R. §§ 0.91(e), 0.291.
Federal Communications Commission FCC 13-69 
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Commission’s forbearance from the Cost Assignment Rules, we are able here to craft a less burdensome 
and more focused approach to accomplish the regulatory goals of requirements that were developed under 
rate-of-return regulation and needed to be updated.  For example, the new framework allowing the 
carriers to identify the records necessary to accurately audit substantial assets and investments should
provide greater flexibility in record-keeping.
263
  As we also have found, this new framework ensures just 
and reasonable rates and protects consumers.  For these reasons, we conclude that conditional forbearance 
from applying sections 32.2000(e) and (f) to price cap carriers is in the public interest.
90. Rate-of-Return Carriers.  We find that USTelecom’s forbearance request for rate-of-
return carriers fails to establish that the property record requirements in question are not necessary to 
ensure just and reasonable and nondiscriminatory rates.  With regard to rate-of-return carriers, the 
property record requirements provide the data necessary to validate and determine the costs of providing 
interstate telecommunications service, which enables the Commission to set just and reasonable rates.
264
  
Under rate-of-return regulation, these records provide information used to determine the costs of 
telecommunications networks and facilities that are considered to be interstate and allowable in the rate 
base.
265
In other words, the prices rate-of-return carriers are allowed to charge are directly tied to their 
costs, and verifying the accuracy of a rate-of-return carrier’s reported costs thus directly impacts the 
reasonableness of the rates charged by rate-of-return carriers.  The record here does not explain why the 
property record requirements are no longer necessary to meet these needs.
266
  Thus, these records, like the 
                                                          
263
USTelecom April 18, 2013 Ex Parte Letter at 14-15.
264
The USOA accounts reflect total plant in service. See 47 C.F.R. § 32.2000(j) (listing various types of total plant 
investment, such as land, buildings, switching equipment, and cable and wire facilities).  Property records provide 
the underlying information that validates certain financial accounts recorded in the Part 32 USOA.  See 47 
C.F.R.§ 32.2000(e) and (f) (requiring certain information to be provided in property records, including identifying 
what the property is and its vintage, location, and original cost). Using Part 64 rules, the total plant investment is 
divided between how much is used to provide regulated (as opposed to non-regulated) service.  See 47 C.F.R. Part 
64.  Then, using Part 36 rules, the regulated plant investment is divided into how much is used to provide interstate 
(as opposed to intrastate) service.  See 47 C.F.R. Part 36. The interstate portion of the plant investment goes into the 
interstate rate base, upon which a rate-of-return carriers’ revenue requirement and rates are determined.  See 47 
C.F.R. §§ 65.800, 65.820.
265
For example, the property records may be analyzed to determine detailed cost allocations of facilities in a 
network—like cable and wire facilities (Account 2410)—that are used to provide regulated services.  See, e.g., 47 
C.F.R. § 36.151(b) (“For separations purposes, it is necessary to analyze the cable and wire facilities classified in 
subordinate records in order to determine their assignment.”).  These records are required under § 32.2000(e)(4) and 
include the property records that provide detailed information about the accounts underlying Telecommunications 
Plant in Service (Account 2001), such as Cable and Wire Facilities (Account 2410), that are used for setting 
interstate rates.  Section 32.2000(j) lists facilities and equipment that comprise the plant in service category of 
property records, including cable and wire in the above example.  47 C.F.R. § 32.2000(j).  In addition, the Part 36 
rules cite to location information contained in the CPR, 47 C.F.R. § 32.2000(e)(1)(i), (e)(2), that is used to perform 
the separations process for certain investments.  47 C.F.R. § 36.1(b).
266
In its petition, USTelecom asserts that property records required by GAAP should replace Part 32 CPR but fails 
to identify what these property records are.  See USTelecom Petition at 46.  In a subsequent ex parte filing, 
USTelecom also argues that Part 32 CPR “far exceeds the record keeping necessary to verify the existence of plant 
assets and support the asset balances presented in financial statements” and notes only a few examples to compare 
property records under GAAP to Part 32.  USTelecom April 18, 2013 Ex Parte Letter at 14-15.  We find that 
USTelecom’s attempt to justify its request by listing a few examples is insufficient evidence upon which to grant the 
broad relief requested.  Moreover, USTelecom does not cite to specific property record or GAAP rules, and 
Commission staff has been unable to identify property record requirements pursuant to GAAP.  Given the technical 
nature of these rules, USTelecom’s general assertions are insufficient to allow us to conduct the kind of analysis 
(continued....)
Federal Communications Commission FCC 13-69 
44
other accounting data in the USOA, are important to enable the Commission to determine what costs a 
rate-of-return carrier may recover from its customers, and thereby what interstate rates it is allowed to 
charge.
267
91. For these same reasons, we find that USTelecom has not shown that these requirements 
are not necessary to protect consumers of rate-of-return carriers nor that forbearing from section 
32.2000(e) and (f) for rate-of-return carriers would be in the public interest.
268
  On the latter point, 
USTelecom asserts that the property records rule is burdensome because “compliance requires an 
unnecessary investment of resources by only a few competitors among many, which distorts 
competition.”
269
  As is the case for USTelecom’s request to forbear from the other Part 32 Uniform 
System of Account rules, there is insufficient evidence in the record by USTelecom or other parties to 
show or quantify what costs are directly attributable to maintaining property records, again despite staff 
requests for such data.  Given this, we cannot properly evaluate whether any costs saved by eliminating 
this rule would outweigh the several important uses described above, or whether the savings would have 
any effect on competition. 
92. USTelecom asserts that burdens associated with the cost of maintaining property records 
related to capitalizing low-cost assets are too high and believes carriers should be allowed greater 
flexibility such as that provided under GAAP.
270
  Although USTelecom has not demonstrated that 
forbearance from application of the property record requirements meets the forbearance test, we agree 
that continuing to apply the property record rules of 32.2000(e) and (f) may be more burdensome than 
necessary.
271
  Accordingly, we find that it is appropriate to examine further whether there are changes we 
can make to our property records rules that would reduce record-keeping burdens for rate-of-return 
carriers by focusing on substantial assets and investments while maintaining sufficiently detailed records 
for the Commission’s needs.  The Commission has an open rulemaking on these issues.  Comments were 
last filed in 2002, and significant regulatory and marketplace changes have occurred since that time.  So 
that we may move forward on a full record on this issue, we seek updated comments and replies on the 
issues concerning changes to the property records rules raised in the open rulemaking on property 
records.
272
  Comments will be due 30 days after and replies will be due 45 days after publication of the 
accompanying Report and Order in the Federal Register.
273
  To ensure appropriate notice of our request to 
refresh the record, the Bureau will release a Public Notice restating this request to refresh the record and 
announcing the comment and reply dates once they have been established.
(Continued from previous page)                                                          
required under section 10 to find the forbearance criteria are satisfied with regard to the entire set of property record 
rules for rate-of-return carriers.
267
See, e.g., 47 C.F.R. § 65.800.  
268
USTelecom Petition at 44-6.
269
Id. at 46.
270
USTelecom April 18, 2013 Ex Parte Letter at 16.
271
Note that we make no finding here of what constitutes substantial assets and investment for rate-of-return carriers 
but instead look forward to reviewing comments on that topic through the rulemaking process.
272
Property Records FNPRM, 16 FCC Rcd 19911.  
273
See infra Section IV. 
Federal Communications Commission FCC 13-69 
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6. Part 42 Recordkeeping Requirements 
a. USTelecom’s Request
93. USTelecom requests forbearance for all carriers from several rules that impose record-
keeping obligations.  Specifically, USTelecom seeks forbearance from sections 42.4, 42.5, 42.7 and 
42.10(a) of the Commission’s rules.
274
  USTelecom argues that these rules “impose inefficient 
recordkeeping and storage requirements.”
275
  USTelecom states that, “[w]hile it is important to maintain 
accurate records and to make sufficient information available to the Commission and the public, the rules 
in question refer to the maintenance of physical records or copies in obsolete formats.”
276
b. Background
94. Section 42.4 requires each carrier to maintain at its operating company headquarters a 
master index of records.
277
  The rule predates the routine use of computerized recordkeeping, and thus 
appears to require maintenance of physical documents at a specific location.  Section 42.5 sets forth 
requirements about how a carrier may “use a retention medium of its choice to preserve records in lieu of 
original records.”
278
  The rule sets forth options for how carriers may reproduce records.
279
  Section 42.7 
specifies how long records listed in the master index must be retained and when records must be added to 
the index.
280
  Section 42.10(a) requires nondominant interexchange carriers (IXCs) to make information 
about their current rates, terms, and conditions available in at least one location during business hours.
281
  
Section 42.10(b) (from which USTelecom does not seek forbearance) requires that this information be 
made available on the IXC’s website, if it maintains one.
282
  
c. Discussion
95. We grant the forbearance requested regarding part 42 of our rules, except that we 
condition forbearance from section 42.10(a) as set forth below.  Section 42.4 requires each carrier to 
maintain a master index of the records it keeps.  The rule does not require carriers to maintain specific 
records.  We find no need to continue the maintenance of a master index, in hard copy or any other form.  
                                                          
274
USTelecom further clarifies that it is “seeking forbearance from any obligation to maintain the ‘master index of 
records’ required under these rules, whether in paper or electronic format.”  Letter from Bennett L. Ross, Counsel 
for USTelecom, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-61, at 1 (filed Jan. 31, 2013).  No party 
specifically opposed this request. 
275
USTelecom Petition at 47; see also CenturyLink Comments at 3-4; Sprint Comments at 7-8 (both supporting 
USTelecom’s petition for forbearance from these Part 42 rules).  No party makes a specific argument against 
forbearance from these rules.  
276
USTelecom Petition at 47. 
277
47 C.F.R. § 42.4.
278
47 C.F.R. § 42.5(a).
279
47 C.F.R. § 42.5.
280
Section 42.7 requires carriers to retain records identified in the master index for the period established therein.  It 
also requires “records pertaining to complaint proceedings” and records “that a carrier is directed to retain as the 
result of a proceeding or inquiry by the Commission” to be included in the master index of records.  47 C.F.R. 
§ 42.7.
281
47 C.F.R. § 42.10(a).
282
47 C.F.R. § 42.10(b).
Federal Communications Commission FCC 13-69 
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In the event that the Commission wants to know what records a carrier has, or obtain copies of a 
particular record, it has various means of doing so.
283
  
96. We further find that, because we are no longer requiring carriers to maintain a master 
index, there is no longer a need for a rule specifying how long records listed in the master index must be 
retained and when records must be added to the index.  Therefore, we also forbear from section 42.7 (the 
basic retention rule).  
97. Section 42.5 addresses how records may be reproduced.  USTelecom argues that this rule 
is no longer relevant because most records are currently created in, rather than copied to, an electronic 
format, and requiring certifications for every electronic record would waste resources and provide no 
corresponding benefit.
284
  We agree with USTelecom that advances in technology have made these 
requirements outmoded, and that the rule does not reflect current practices.  We thus forbear from 
application of section 42.5.  Again, we emphasize that forbearance from these storage requirements does 
not relieve carriers of obligations to retain records as required by other sections of our rules.  
98. We conclude that forbearance from application of section 42.10(a) is warranted for IXCs 
that maintain an Internet website, subject to one condition.  Specifically, we condition this grant on a 
requirement that IXCs maintain and make available on their websites the information about the rates, 
terms, and conditions of their services.
285
  IXCs that do not maintain Internet websites are required to 
continue to make this information available at physical locations consistent with section 42.10(a).  In 
granting this conditional forbearance, however, we remind IXCs that some consumers do not have access 
to the Internet.  Therefore, those carriers should facilitate and accommodate consumer requests when a 
consumer does not have Internet access.  It is important to ensure that consumers continue to have access 
to this information to enable them to select services that meet their needs and to ensure compliance with 
the Act.
286
  This condition is consistent with USTelecom’s stated rationale for forbearance that 
eliminating the physical location element of the rule is appropriate because the same information is 
available through easier-to-access online websites.
287
  It is also consistent with Sprint’s 
recommendation.
288
99. The Commission adopted the public disclosure rule to ensure that nondominant IXCs 
provide complete information about their rates, terms, and conditions, so customers would have sufficient 
information to choose calling plans that best meet their needs and enable them to bring potential 
violations of the Act to the Commission’s attention.
289
  As CenturyLink points out, the requirement that 
                                                          
283
See 47 U.S.C. §§ 154(i), 218-220.  We are not modifying or forbearing from any underlying obligation to retain 
records.  Rather, we are forbearing from the requirement to maintain an index of any records the carrier is required 
to keep or keeps in the ordinary course of business.
284
USTelecom Petition at 50.  CenturyLink supports forbearance from this rule.  CenturyLink Comments at 4, n.4.
285
As written, § 42.10(b) only requires that such information be posted if the nondominant IXC maintains a website; 
the rule does not require the IXC to maintain a website.  47 C.F.R. § 42.10(b).
286
See, e.g., Policy and Rules Concerning the Interstate, Interexchange Marketplace; Implementation of Section 
254(g) of the Communications Act of 1934, as amended, CC Docket No. 96-61, Second Order on Reconsideration 
and Erratum, 14 FCC Rcd 6004, 6009-10, at para. 9 (1999) (IXC Second Order on Reconsideration).
287
USTelecom Petition at 51.
288
Sprint Comments at 7-8 (“the Commission should require records that previously were kept in a physical 
location . . . to be posted online where they will be more easily accessible to the public”).
289
IXC Second Order on Reconsideration, 14 FCC Rcd at 6009-10, para. 9 (citing Policy and Rules Concerning the 
Interstate, Interexchange Marketplace; Implementation of Section 254(g) of the Communications Act of 1934, as 
(continued....)
Federal Communications Commission FCC 13-69 
47
providers maintain rate information about services at their offices arose before advances in electronic 
recordkeeping and more widespread Internet adoption.
290
  For example, in 1999, when the rule was 
adopted, the Commission reported that broadband service, which provides high-speed access to the 
Internet, was in the early stages of deployment to residential customers, with only a .4 percent residential 
penetration rate.
291
  The nation has made significant progress since that time, expanding broadband 
Internet access to approximately 94 percent of the population, with the Commission, other government 
agencies, and private industry taking steps to promote broadband deployment to those who still lack 
access.
292
  These trends lend support to USTelecom’s contention that customers are likely to obtain 
relevant information about an IXC’s rates, terms and conditions from the IXC’s Internet website rather 
than traveling to an IXC’s office location.
293
  The conditional forbearance we adopt here provides the 
public with more convenient means by which to access the same information.  
100. We find that forbearance from the recordkeeping requirements as described and 
conditioned above is warranted under section 10.  First, requiring carriers to maintain a master index, 
retain records in obsolete formats, and requiring IXCs to provide information in hard copy at their offices 
does not reflect current storage or consumer practices.  It is not necessary to ensure just and reasonable
rates, terms, and conditions for telecommunications services, subject to the conditions above.  For the 
same reasons, under the second prong of our forbearance analysis, we find that these rules are not 
necessary to protect consumers, subject to the conditions noted.
294
  Under the third prong of our 
forbearance analysis, we find that forbearance (from sections 42.4, 42.5 and 42.7) and conditional 
forbearance (from section 42.10(a)) is also in the public interest.  In the circumstances here, where a 
petitioner has demonstrated that a requirement has become outdated by technology, we find the potential 
costs of maintaining such requirements are inconsistent with competitive market conditions and outweigh 
any potential benefits.  As CenturyLink noted, “[u]nnecessary reporting and record keeping requirements 
(Continued from previous page)                                                          
amended, CC Docket No. 96-61, Second Report and Order, 11 FCC Rcd 20730, 20745-46, at para. 25 (1996) (IXC 
Second Report and Order)).
290
CenturyLink Comments at 3; see also USTelecom Petition at 48.
291
Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a 
Reasonable and Timely Fashion and Possible Steps to Accelerate Such Deployment  Pursuant to Section 706 of the 
Telecommunications Act of 1996, CC Docket No. 98-146, Report, 14 FCC Rcd 2398, 2446, at para. 91 (1999).
292
Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a 
Reasonable and Timely Fashion and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the 
Telecommunications Act of 1996, GN Docket No. 11-121, Eighth Broadband Progress Report, 27 FCC Rcd 10342, 
10370, para. 46 (2012) (Eighth Broadband Progress Report) (finding that about 6% of the population lacks access to 
fixed broadband service at threshold speeds).  Businesses and consumers have also shown an increased reliance on 
the Internet as an important source of business and information since the rule was adopted in 1999.  Between 2002 
and 2011, e-commerce sales have more than tripled.  See, e.g., U.S. E-COMMERCE SALES GROWTH FROM 2002 TO 
2011 (2013), available at www.statista.com (showing an increase in e-commerce sales from $72 billion to $256 
billion).  The Internet has surpassed newspapers as the primary source of information for most consumers, to the 
point where 91% of online searchers say they always or most of the time find the information they are seeking when 
they use search engines.  Id.; see also PEW INTERNET AND AMERICAN LIFE PROJECT REPORT, WHERE PEOPLE GET 
INFORMATION ABOUT RESTAURANTS AND OTHER LOCAL BUSINESSES (2012), available at 
http://pewinternet.org/Reports/2011/Local-business-info/Overview.aspx (stating that people looking for information 
about local businesses rely on the Internet ahead of any other source); KRISTEN PURCELL, JOANNA BRENNER AND 
LEE RAINIER, PEW INTERNET AND AMERICAN LIFE PROJECT, SEARCH ENGINE USE 2012, 3 (2013), available at 
http://www.pewinternet.org/Reports/2012/Search-Engine-Use.aspx.
293
USTelecom Petition at 51.
294
47 U.S.C. § 160(a).
Federal Communications Commission FCC 13-69 
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add to the expense of providing telecommunications services . . . [and] consume resources that could 
otherwise be invested in the network.”
295
  The conditional forbearance we grant promotes the wide 
availability of information to consumers, which is beneficial to competitive markets.
296
  We therefore 
forbear from sections 42.4, 42.5, and 42.7.  We forbear from section 42.10(a), subject to the conditions 
described above.  
7. ARMIS Report 43-01 (“Annual Summary Report”)
a. USTelecom’s Request
101. USTelecom requests forbearance from the filing requirement for ARMIS Report 43-01, 
the “Annual Summary Report.”
297
  USTelecom notes that smaller carriers are not required to file ARMIS 
reports, and forbearance has been granted to the BOCs, so only mid-size price cap carriers remain subject 
to this filing requirement.
298
  USTelecom asserts that forbearance for these carriers is warranted.
299
b. Background
102. ARMIS Report 43-01 contains a highly aggregated and comprehensive view of the 
carrier’s financial data, as well as a summary of demand in minutes of use and billable access lines.  Since 
the adoption of price cap regulation in 1990, many carriers, including Qwest, AT&T, and Verizon, have 
moved from rate-of-return regulation to price cap regulation, and the Commission has modified its 
regulation of price cap carriers over time to reflect changing circumstances. The Commission has found 
that when interstate rates are regulated under price caps, the ARMIS Financial Reports are unnecessary.
300
The Commission has granted requests from AT&T, Verizon, and Qwest to forbear from the requirement 
to file ARMIS Report 43-01.
301
  The Commission found that this Report, as well as ARMIS Reports 43-
02 and 43-03, is not “‘necessary to ensure that the charges, practices, classifications or regulations by, for, 
or in connection with that telecommunications carrier . . . are just and reasonable and are not unjustly or 
unreasonably discriminatory’” or to protect consumers.
302
  
103. The Commission concluded that the Report imposed burdens on AT&T, Verizon, and 
Qwest, and the information collected no longer served any federal purpose, so forbearance was consistent 
                                                          
295
CenturyLink Comments at 4.
296
See, e.g., IXC Second Order on Reconsideration, 14 FCC Rcd at 6013, para. 15. 
297
USTelecom Petition at 51-53.
298
Id. at 52.
299
Id.  
300
See generally ARMIS Forbearance Order, 23 FCC Rcd 13647.  We address forbearance from related Cost 
Assignment Rules in section III.B.3 supra.
301
Qwest ARMIS Forbearance Order, 23 FCC Rcd at 18484, para. 1.
302
Id. at 18487-88, paras. 9-10 (quoting 47 U.S.C. § 160(a)(1)).  We note that this grant of forbearance was 
conditioned on the filing of compliance plans to ensure the Commission will be able to obtain this information if 
necessary.  See supra para. 68.  We also note that the fact that price cap rates cannot be raised automatically does not 
mean that the relationship between costs and prices is entirely eliminated.  While the direct link between costs and 
price cap carriers’ access rates no longer exists, costs still have an impact on other rates price cap carriers charge.  
See, e.g., supra paras. 63-68 for examples of the continued relevance of cost to price cap carriers’ rates; see also 
2005 Special Access NPRM, 20 FCC Rcd at 1999, para. 12 (“Although price cap regulation diminished the direct 
link between changes in allocated accounting costs and change in prices, it did not sever the connection between 
accounting costs and prices entirely.”).
Federal Communications Commission FCC 13-69 
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with the public interest, subject to certain conditions.
303
The Commission conditioned this relief on 
approval of a compliance plan describing in detail how each carrier will continue to fulfill certain 
statutory and regulatory obligations, and on carriers continuing to file pole attachment data with the 
Commission.
304
c. Discussion
104. We find that forbearance from this requirement is warranted under section 10, subject to 
the same conditions imposed on the BOCs.  We agree with USTelecom’s claims that the Commission’s 
justifications for granting forbearance to the BOCs apply equally to all price cap carriers – namely,
“ARMIS Report 43-01 is unnecessary in determining whether the carrier’s rates are just, reasonable, and 
nondiscriminatory, . . . price cap regulation of that carrier’s rates will remain in place to protect 
consumers, [and] there are sufficient sources of necessary data other than the ARMIS reports that provide 
accounting information that may be needed by the Commission.”
305
  
105. Sprint argues that the information in this Report may be required as part of the 
Commission’s intercarrier compensation and special access inquiries.
306
  The Consumer Advocates note 
that the Commission may need access to detailed accounting data to assess cost models to be used for 
distribution of Phase II broadband subsidies.
307
  We find that these issues can be addressed through less 
burdensome measures, including data that carriers are required to retain with respect to our Part 32 
rules.
308
  If we do need these data, “the Act provides the Commission with ample authority [to require 
carriers] to produce any accounting data that the Commission needs for regulatory purposes, including 
rulemakings or adjudications, in the future.”
309
106. The Michigan PSC, the Pennsylvania PUC, and Consumer Advocates argue that the 
Commission should not grant forbearance because some states still rely on this information, and it should 
remain a resource for state and federal regulators.
310
  While we find that forbearance is warranted under 
section 10 of the Act, nothing in this Order should be construed as preempting or otherwise limiting the 
independent authority of any state to collect this information.
107. For the same reasons that we granted forbearance to AT&T, Verizon, and Qwest, we find 
that forbearing from requiring all price cap carriers to file ARMIS Report 43-01 meets the requirements 
of Section 10.
311
  Under the first two prongs of our forbearance analysis, the data is not needed to ensure 
                                                          
303
Qwest ARMIS Forbearance Order at 18492, para. 16.
304
Id. at 18484, para. 1.
305
USTelecom Petition at 53 (citations omitted). Cincinnati Bell and CenturyLink support USTelecom’s request 
and agree that the information contained in Report 43-01 is unnecessary under price cap regulation.  Cincinnati Bell 
Comments at 11; CenturyLink Comments at 7.
306
Sprint Opposition at 5-6.
307
Consumer Advocates Comments at 26.
308
See supra Section III.B.4.
309
Qwest ARMIS Forbearance Order, 23 FCC Rcd at 18489, para. 12 (footnote omitted).
310
Michigan PSC Reply at 12-13; Pennsylvania PUC Reply Comments at 10-11; Consumer Advocates at 23-25.
311
Our forbearance from ARMIS Report 43-01 encompasses forbearance from applying the codified rule imposing 
that filing requirement, 47 C.F.R. § 43.21(e)(2), to all price cap carriers.  The Commission is not aware of any 
carrier that currently files ARMIS Report 43-01 that is still subject to rate-of-return regulation.  However, if any 
such company exists, it would continue to be required to file this Report.
Federal Communications Commission FCC 13-69 
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just and reasonable rates, terms, and conditions or to protect consumers.  As we have previously 
concluded, price cap regulation, in combination with the protections provided by the compliance plan
312
and the continued maintenance of Part 32 accounting data,
313
is sufficient to “protect consumers from 
unjust, unreasonable, and unjustly or unreasonably discriminatory charges, practices, classifications and 
regulations.”
314
  Requiring carriers to compile and submit a report containing information that can be 
obtained through less burdensome means is not in the public interest.
315
  Imposing these costs on some 
competitors but not others may undermine competition.
108. We agree with COMPTEL that we should condition the grant of forbearance on the same 
conditions as those imposed on the BOCs.
316
  Those conditions include filing a data compliance plan with 
the Commission and continued public filing of certain pole attachment data.  As we have done previously, 
we condition this forbearance on a carrier’s receiving Commission approval of a compliance plan, as 
outlined in the AT&T Cost Assignment Forbearance Order,
317
and each carrier’s continued annual public 
filing with the Commission of the pole attachment cost data currently submitted in ARMIS Report 43-01. 
109. The Commission regulates pole attachments pursuant to section 224 of the Act, except 
for those states that certify to the Commission that they regulate pole attachments.  Because pole 
attachment data contained in ARMIS Report 43-01 may be needed to address complaints regarding pole 
attachment rates
318
and the Commission is not aware of any other source for these data,
319
we condition
our grant of forbearance for pole attachment data upon the continued annual public filing, without any 
assertions of confidentiality, of the pole attachment cost data currently filed as part of ARMIS Report 43-
01 in WC Docket No. 07-204.  For those states that have certified that they will regulate pole attachments 
themselves (and thus where the Commission no longer has jurisdiction), filing of pole attachment cost 
data with the Commission is no longer necessary on an ongoing basis.  If states that adjudicate pole 
attachment complaints believe they need access to annual data for their own use, we expect that they may 
exercise their regulatory authority to require carriers to file data in those states.  In order to give states 
affected by this Order time to implement their own regulations, if they so choose, our forbearance 
condition requires that any carriers affected by this Order file pole attachment data for all states in the 
next annual filing after approval of their compliance plan, but subsequent filings with the Commission 
need not include data for those states that have certified to regulation of pole attachments.
                                                          
312
See supra para. 47.  
313
Qwest ARMIS Forbearance Order, 23 FCC Rcd at 18489, para. 12 (“Qwest, AT&T and Verizon remain subject 
to the Part 32 USOA requirements.  Thus, this USOA account data will continue to be maintained and available to 
the Commission on request.” (footnote omitted)).
314
Id. at 18488, para. 10 (footnote omitted).  Sprint, Consumer Advocates, and New Networks argue that 
eliminating ARMIS Report 43-01 would have a negative effect on rates.  Sprint Comments at 4; Consumer 
Advocates Comments at 26-27; New Networks Comments at 1-2.  We disagree.  Because price cap regulation, while 
not eliminating entirely the relationship between costs and prices, “severs the direct link between regulated costs and 
prices,” and given that the Commission has otherwise assured itself of sufficient access to data to meet its 
obligations, ARMIS Report 43-01 no longer serves any purpose.  Qwest ARMIS Forbearance Order, 23 FCC Rcd at 
18488, para. 10 (quoting AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7305-06, para. 8).
315
CenturyLink notes that there are costs associated with preparing these reports.  CenturyLink Comments at 3.
316
COMPTEL Comments at 22-23.
317
AT&T Cost Assignment Forbearance Order, 23 FCC Rcd at 7319-20, para. 31.
318
Qwest ARMIS Forbearance Order, 23 FCC Rcd at 18490, para. 13.
319
See supra paras. 63-64.
Federal Communications Commission FCC 13-69 
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8. Annual Revenue and Total Communications Plant Reporting
a. USTelecom’s Request
110. USTelecom requests forbearance for all carriers from section 43.21(c) of the 
Commission’s rules, which requires that common carriers with revenue exceeding a certain threshold 
provide the Bureau with a letter showing:  (1) operating revenues; and (2) the value of the carrier’s total 
communications plant.
320
  USTelecom argues that these requirements are outdated for carriers subject to 
price cap regulations because information regarding a carrier’s revenues and costs has no relevance to 
rates.
321
  In addition, USTelecom claims that this information is already available to the Commission, such 
as through Form 499-A, which requires similar revenue information as Section 43.21(c).
322
  Further, 
USTelecom states that information regarding the revenues and assets of publicly-traded 
telecommunications companies is available in those carriers’ filings with the Securities and Exchange 
Commission (SEC).
323
  
111. CenturyLink supports USTelecom’s request for forbearance, arguing that the reports 
required by section 43.21(c) are outdated and “rarely read.”
324
  The Michigan PSC agrees that “aspects of 
the rule are outdated” but argues that USTelecom did not meet its burden of proof.
325
  The Michigan PSC 
claims that the information required by section 43.21(c) is still relevant for regulators because total plant 
value is still used for cost studies, and that the requirement imposes minimal burdens on the carriers.
326
b. Background
112. The requirement for common carriers to report revenue and capital amounts has been in 
effect since the 1930s, and originally required monthly filings.
327
  Since that time, the Commission has 
modified the rule to require annual filings, and increased the price threshold for carriers subject to the 
filing requirements.
328
  The Commission has also adopted another requirement that captures similar 
information.  Form 499-A allows the Commission to calculate contributions to the universal service 
support mechanisms; the telecommunications relay services support mechanism; the cost recovery 
mechanisms for numbering administration; Interstate Telecommunications Service Provider (ITSP) 
                                                          
320
USTelecom Petition at 54; 47 C.F.R. § 43.21(c).  
321
USTelecom Petition at 54-55.
322
Id. at 55.
323
Id.
324
CenturyLink Comments at 3 (footnote omitted).
325
Michigan PSC Reply at 4. 
326
Id. at 4-5. 
327
These filings were previously required by 47 C.F.R. § 43.31.  See 28 Fed. Reg. 13214 (Dec. 5, 1963).
328
See Elimination of Part 34, Uniform System of Accounts for Radiotelegraph Carriers, and Part 35, Uniform 
System of Accounts for Wire-Telegraph and Ocean-Cable Carriers, of the Commission’s Rules and Regulations, and 
Elimination of Annual Reports Form R, for Radio-Telegraph Carriers, and Form O, for Wire-Telegraph and Ocean-
Cable Carriers and Amendment of Part 1 and Part 43 of the Commission’s Rules, CC Docket No. 92-145, Report 
and Order, 8 FCC Rcd 4318 (1993).
Federal Communications Commission FCC 13-69 
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regulatory fees; and the cost recovery mechanism for shared costs of long-term number portability.
329
Those entities required to complete and file Form 499-A must provide detailed revenue information.
330
c. Discussion
113. We find that forbearance from the requirement that carriers file operating revenues is 
warranted because carriers are filing equivalent information with the Commission in other contexts.  We 
agree with USTelecom that similar revenue information is filed annually at the Commission as part of 
Form 499-A, which, with few exceptions, is required of all intrastate, interstate, and international 
providers of telecommunications in the United States.
331
  We do not find, nor did any other party provide, 
any reason why the Commission should continue to require duplicative submission of this information.  
114. We also find that conditional forbearance from the requirement that carriers file 
information regarding the value of their total communications plant is warranted.  As USTelecom noted, 
information regarding the value of a publicly-traded carrier’s total communications assets is included in 
carriers’ SEC filings.
332
  For carriers that meet the revenue threshold for submission of this information 
but that are not publicly traded (and therefore not required to file similar information with the SEC), 
forbearance is conditioned on those carriers providing the value of total communications plant to the 
Commission in a timely manner if the Commission requests this information to conduct an investigation.  
With this condition, forbearance is in the public interest, as it relieves carriers from the burden of filing 
this information with the Commission while ensuring that the Commission still has access to the 
information.  If Michigan or other states require total communications plant information for their cost 
studies, this Order does not preempt or otherwise prevent them from adopting provisions pursuant to state 
law to collect this information.
115. We conclude that forbearance from application of section 43.21(c), as conditioned above, 
is warranted under the section 10 criteria.  USTelecom’s argument that the Commission can obtain this 
information from other required Commission filings or SEC filings convinces us that these rules are not 
necessary to ensure that the charges, practices, classifications, or regulations are just, reasonable, and not 
unjustly or unreasonably discriminatory; that these rules are no longer needed to protect consumers; and 
that continued enforcement would not serve the public interest.  We find that forbearing from enforcing 
these rules will promote competitive market conditions and promote competition among providers of 
telecommunications services because it removes duplicative obligations that only apply to certain 
carriers.
333
  These rules are duplicative of other requirements imposed on these carriers, and duplicative 
filings do not serve the public interest.  Therefore, forbearing from the rules will lift unnecessary burdens 
                                                          
329
2013 Instructions to the Telecommunications Reporting Worksheet, Form 499-A, at 2 (available at
http://www.fcc.gov/document/form-499-instructions) (2013 499A Instructions). 
330
Id. at 13-29.
331
2013 499A Instructions at 2.  “All telecommunications carriers providing interstate telecommunications services, 
interconnected VoIP providers that provide interstate telecommunications, providers of interstate
telecommunications that offer interstate telecommunications for a fee on a non-common carrier basis, and payphone 
providers that are aggregators to contribute to the universal service fund (USF) and file Form 499-Q on February 1, 
May 1, August 1, and November 1 each year.”  Wireline Competition Bureau Releases 2013 Telecommunications 
Reporting Worksheets and Accompanying Instructions, WC Docket No. 06-122, Public Notice, DA 13-306, at 1 n.2 
(Wireline Comp. Bur. rel. Mar. 1, 2013).  Generally, carriers whose universal service contribution would be less 
than $10,000 in any given year are not required to file Form 499-Q.  See 47 C.F.R. § 54.708.
332
Under Regulation S-K, Part 10, public companies are required to annually and quarterly submit balance sheets 
for the prior two years, income statements for three years, and cash flow for three years.  17 C.F.R. § 210.1-01.
333
47 U.S.C. § 160(b).
Federal Communications Commission FCC 13-69 
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from the carriers, which in turn will reduce their costs of providing service and ensure that competing 
providers face a level playing field.  We therefore forbear from section 43.21(c), subject to carriers 
providing the value of total communications plant to the Commission in a timely manner if the 
Commission requests this information.  
9. Rules Governing Notice of Network Changes
a. USTelecom’s Request
116. USTelecom requests that the Commission forbear for all carriers from application of 
portions of Part 51 of the Commission’s rules.
334
  USTelecom specifically seeks forbearance from 
sections 51.329(a)(2), 51.329(c)(2), and 51.333(a)-(f) to the extent that these provisions require the 
Commission to issue a public notice before network changes can be implemented.
335
  USTelecom claims 
that the Commission’s rules currently require “multiple duplicative public filings and involve unnecessary 
delay and uncertainty.”
336
b. Background
117. Section 251(c)(5) of the Act requires that an incumbent local exchange carrier “provide 
reasonable public notice of changes in the information necessary for the transmission and routing of 
services using that local exchange carrier’s facilities or networks, as well as of any other changes that 
would affect the interoperability of those facilities and networks.”
337
  The Commission has adopted rules 
to implement this statutory requirement, and has concluded that “[r]equiring disclosure about network 
changes promotes open and vigorous competition contemplated by [the Act].”
338
  The Commission has 
further concluded that widespread “availability of pertinent network change information effectively 
removes potential barriers to entry, which could otherwise frustrate the efforts of new competitors.”
339
  
118. The Commission’s rules describe how ILECs should provide notice.
340
  Carriers can use a 
wide variety of methods to disclose the necessary information, including public notice through industry 
fora, industry publications, and the Internet.  The Commission also functions as a “backstop” source of 
                                                          
334
USTelecom Petition at 56.  
335
Id. at 57-58, n.90.  USTelecom seeks forbearance from the public notice requirement only in situations when the 
carrier has provided notice on its Internet website, served the appropriate interconnecting service providers, and filed 
with the Commission.  See also USTelecom Reply at 28-29 (seeking only to eliminate the Commission’s public 
notice requirement so that the clock for the effective date of changes runs from the date of compliance with an 
ILEC’s remaining requirements to post notice on its publicly accessible Internet site and to serve relevant service 
providers).
336
USTelecom Petition at 56-57.
337
47 U.S.C. § 251(c)(5).
338
See 47 C.F.R. §§ 51.325-51.335; see also Implementation of the Local Competition Provisions of the 
Telecommunications Act of 1996, CC Docket Nos. 96-98, 95-185, 92-237, Second Report and Order and 
Memorandum Opinion and Order, 11 FCC Rcd 19392, 19471, para. 171 (1996) (Local Competition Second Report 
and Order).
339
Id., 11 FCC Rcd at 19483, para. 199.
340
The Commission’s rules state that ILECs generally should provide public notice of planned network changes at 
the “make/buy point” or at least 12 months before implementation of the network change.  See 47 C.F.R. 
§ 51.331(a).  The Commission recognizes, however, that many changes subject to disclosure under § 251(c)(5) can 
be implemented less than 12 months after the make/buy point.  As a result, the rules still allow for ILECs to provide 
public notice without additional safeguards as long as the notice is provided at least six months before 
implementation.  See 47 C.F.R. § 51.331(a)(1).
Federal Communications Commission FCC 13-69 
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information by alternatively allowing ILECs to file network change information directly with the 
Commission.
341
  ILECs that choose to provide public notice by methods other than filing notice with the 
Commission can simply file a certification with the Commission that, among other things, identifies the 
location of the change information and indicates that public notice has been provided in accordance with 
the Commission’s rules.
342
119. The rules differ depending on when the ILEC provides notice of the proposed change and 
implementation date, and whether the change involves retirement and replacement of copper loops or 
subloops with fiber-to-the-home (FTTH) loops or fiber-to-the-curb (FTTC) loops.  In instances of 
network changes six or more months before a proposed implementation date, changes may occur without 
the need for comment from potentially affected parties.  However, the Commission has determined that 
additional safeguards are necessary for more potentially disruptive changes, such as those involving short-
term notice given less than six months before a proposed implementation date, and those involving the 
retirement and replacement of copper loops or subloops with FTTH loops or FTTC loops.
343
  The 
Commission’s rules require that any ILEC that plans to make these kinds of changes must assure 
disclosure to affected parties by serving a copy of its public notice on providers that directly interconnect 
with the ILEC’s network, and by including a certificate with its Commission filing to demonstrate 
compliance with this notice requirement.
344
  In addition, the effective date of these kinds of changes is 
subject to comment from those information service providers or telecommunications service providers 
that directly interconnect with the ILEC’s network, and changes shall not be deemed final or approved 
until a certain time after the Commission’s release of a public notice seeking comment on the proposed 
change(s).
345
c. Discussion
120. USTelecom has not satisfied the statutory standard for forbearance from the 
Commission’s network change disclosure rules as requested in its application.  USTelecom asserts that
the Commission’s public notice requirements are duplicative and cause unnecessary delay and 
uncertainty; however, USTelecom does not acknowledge or address the fact that the Commission’s public 
                                                          
341
Local Competition Second Report and Order, 11 FCC Rcd at 19483, para. 199; see also 47 C.F.R. § 51.329(a).
342
See 47 C.F.R. §§ 51.329(a)(2), (c)(2).
343
47 C.F.R. § 51.333; see Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange 
Carriers, CC Docket No. 01-338, Implementation of the Local Competition Provisions of the Telecommunications 
Act of 1996, CC Docket No. 96-98, Deployment of Wireline Services Offering Advanced Telecommunications 
Capability, CC Docket No. 98-147, Report and Order and Order on Remand and Further Notice of Proposed 
Rulemaking, 18 FCC Rcd 16978, 17146-17148, paras. 281-84 (2003) (subsequent history omitted) (Triennial 
Review Order) (establishing additional safeguards under the network change disclosure rules to govern the 
replacement of copper loops or subloops with FTTH loops); Review of the Section 251 Unbundling Obligations of 
Incumbent Local Exchange Carriers, CC Docket No. 01-338, Implementation of the Local Competition Provisions 
of the Telecommunications Act of 1996, CC Docket No. 96-98, Deployment of Wireline Services Offering Advanced 
Telecommunications Capability, CC Docket No. 98-147, Order on Reconsideration, 19 FCC Rcd 20293 (2004)
(subsequent history omitted) (Triennial Review FTTC Reconsideration Order) (amending several Commission rules, 
including the rules for notice of network changes, in order to allow replacement of copper with FTTC loops to be 
treated similarly to replacement of copper with FTTH loops under the rules).
344
See 47 C.F.R. § 51.333(a).
345
See 47 C.F.R. § 51.333(b)-(c) (indicating that objections may be filed no later than the ninth business day, short 
term notices will be deemed final on the tenth business day, and notices of replacement of copper loops or copper 
subloops with FTTH loops or FTTC loops will be deemed approved on the 90th day after the release of the 
Commission’s notice, unless objections are filed).
Federal Communications Commission FCC 13-69 
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notices serve several purposes that are distinct from the notice that the ILEC provides.  First, the 
Commission’s public notices provide information about the opportunity to comment and establish a clear 
time frame for doing so.  We agree with COMPTEL and state commenters that the Commission’s public 
notices inform competitive service providers of their right to file an objection and of the appropriate 
timing and method for filing objections.
346
  Second, the broader notice provided by the Commission’s 
public notices promotes the widespread availability of pertinent network change information and helps 
ensure that a carrier has given adequate and consistent notice to all potentially interested parties.
347
  In 
addition to notifying directly interconnected service providers, this public notice may also alert interested 
parties that have no reason to check the ILEC’s website and that are not entitled to service of notice of the 
proposed change.  Finally, the public notice process enables the Commission to monitor industry changes 
and identify the extent to which such changes concern other service providers.
121. The record does not demonstrate that the Commission’s public notices cause unnecessary 
delay.
348
  The date used to determine whether the ILEC is implementing a long- or short-term change is 
the date on which the ILEC provides adequate notice of the change.
349
  The public notice requirement for 
long-term network change notices does not trigger any comment period or alter the ILEC’s 
implementation date.  For short-term notices, the changes can be implemented within the ILEC’s 
preferred time frame, as long as the ILEC provides sufficient advance notice of the change (i.e., allowing 
a reasonable amount of time for the Commission to review the filing and release a public notice at least 
ten (or, as applicable, 90) days before the proposed implementation date) and no comments are 
received.
350
  USTelecom submits that in practice there is often a delay between the date when a carrier 
                                                          
346
See COMPTEL Comments at 15; CACTC Comments at 5 (stating that USTelecom’s petition is requesting that 
the Commission eliminate “the only backstop currently available to competitive carriers to object to [changes], and 
attempt to accommodate and make other arrangements for, service to affected end-user customers.”); CPUC 
Comments at 10-11 (indicating that the Commission’s rules allow competitors to file objections in order to allow 
time for a smooth transition, especially with the retirement of copper facilities, and also disagreeing with 
USTelecom’s assertion that the Commission’s rules require multiple duplicative public filings and involve 
unnecessary delay and uncertainty); DC PSC Reply at 2 (noting that issuance of the Commission’s public notice 
commences the period for affected telecommunications carriers to file objections to proposed copper loop 
retirements, and stating that it is unclear whether there would be an opportunity to object to such retirements in the 
absence of this notice); Michigan PSC Reply at 13 (echoing COMPTEL’s statements that the Commission’s public 
notice provides critical information not included on the carrier’s web postings).
347
See supra para. 117.
348
USTelecom and some commenters submit that the filings and public notice required under certain network 
change provisions of Part 51 are unnecessarily redundant, and that the Commission’s public notices are “not 
necessary to ensure that carrier charges, practices, or classifications are just and reasonable because they do not 
improve the quality or scope of the notice given.”  USTelecom Petition at 56-58; see also ACS Comments at 6; 
AT&T Reply at 4-5; Verizon Comments at 8-10 (also suggesting “there is no reason why the Commission cannot 
rely on the carrier’s notice, instead of a Bureau-initiated notice, to act as the trigger to start any necessary waiting 
periods or related obligations”).
349
The date on which the Commission issues its public notice then determines when comments (if required) should 
be filed; the notice is released in time to allow for implementation of the change on the requested date unless 
comments are filed in opposition.
350
The required comment period for short term notices of network changes and for notices of network changes 
involving the retirement and replacement of copper loops or subloops with FTTH loops or FTTC loops is 9 business 
days. In the absence of objections, short-term notices of network change will be deemed final on the 10th business 
day, and notices of network changes involving the retirement and replacement of copper loops or subloops with 
FTTH loops or FTTC loops will be deemed approved on the 90th day after release of the Commission’s PN.  47 
C.F.R. § 51.333(c) & 51.333(b).  See, e.g., Wireline Competition Bureau Short Term Network Change Notification 
(continued....)
Federal Communications Commission FCC 13-69 
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posts notice online and the date when the Commission releases a public notice announcing the change.
351
  
USTelecom has provided no data to support the suggestion that any such delay has led to delay in the 
actual implementation of proposed network changes.  The Commission prioritizes release of public 
notices according to the implementation dates proposed in ILEC filings; USTelecom has provided no 
evidence that the Commission’s rules have delayed implementation of network changes.  
122. USTelecom also asserts that these rules cause unnecessary uncertainty, but the record 
does not offer any support for this claim.  In fact, the process provides certainty by setting forth a 
standardized process and a clear deadline by which interested parties must comment.  The ILEC controls 
when it provides notice.  
123. USTelecom asserts that there is “no countervailing public interest that would justify 
delaying implementation” of proposed network changes and upgrades, in light of the other process 
requirements the Commission has in place.
352
  We, however, find that the public notice and comment 
period allowed under the Commission’s current rules is necessary to ensure the public interest and the 
interest of competing providers in maintaining interoperability between networks.  As the Commission 
has noted, the inability to maintain a high level of interoperability could degrade the quality of 
transmission between networks or, in a worse case, could interrupt service between providers.
353
  The 
rules thus also serve to protect consumers from possible service interruptions or outages.
354
  We also are 
not persuaded that reasonable public notice can be presumed to occur when an ILEC simply announces it 
is making a short-term network change without at least an opportunity for providers potentially affected 
by the change to provide input regarding difficulties.  The Commission’s rules thus provide an 
opportunity to comment on proposed network changes that would occur in less than six months, or that 
involve retirement and replacement of copper loops or subloops with FTTH loops or FTTC loops.  
124. For the reasons stated above, we conclude that USTelecom has failed to demonstrate that 
the Commission’s applicable network change disclosure rules are unnecessary to ensure that carrier 
charges, practices, or classifications are just and reasonable, or to protect consumers.  USTelecom has 
also failed to demonstrate that forbearance from these rules would be in the public interest.  We find that 
the widespread availability of network change information, which these rules ensure, is an important 
factor in removing potential barriers to competition. Widespread access to network change information 
helps ensure continuous interoperability between networks, which benefits the public and competing 
providers. We find that the Commission’s current network change disclosure rules provide an appropriate 
(Continued from previous page)                                                          
Filed By CenturyLink (Qwest), Report No. NCD-2258, Public Notice (WCB rel. March 13, 2013); Wireline 
Competition Bureau Short Term Network Change Notification Filed By Verizon Florida LLC, Report No. NCD-
2207, Public Notice (Wireline Comp. Bur. rel. Aug. 31, 2012).
351
USTelecom Petition at 57; see also AT&T Reply at 20, Verizon Comments at 9.  
352
USTelecom Petition at 59; see also AT&T Reply at 20-21; Verizon Reply at 7.
353
See Local Competition Second Report and Order, 11 FCC Rcd at 19491, para. 216.  The Commission has noted, 
for example, that changes that affect transmission, signaling standards, call routing, network configuration, logical 
elements, electronic interfaces, data elements, and transactions that support ordering, provisioning, maintenance, and 
billing would trigger public disclosure obligations.  See id. at 19476, para. 182.
354
See id. at 19495, para. 227 (stating that the “primary concern reflected in § 251(c)(5) is continued interconnection 
and interoperability.”).  See also Wireline Competition Bureau Short Term Network Change Notification Filed By 
CenturyLink, Report No. NCD-1996, Public Notice (Wireline Comp. Bur. rel. June 23, 2011) (CenturyLink 
announced the retirement of copper facilities in Illinois and the movement of all working services to a fiber fed 
digital loop carrier system.  Competitive LEC customer, NTS Services Corp., filed an objection in this proceeding 
expressing its need for more time to adjust to the changes in order to continue providing services to twenty-three 
customers, and CenturyLink was able to accommodate this request).
Federal Communications Commission FCC 13-69 
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balance between all of these interests as the record does not convince us that the rule imposes significant
burdens on ILECs.  We therefore deny USTelecom’s request for forbearance from the provisions of Part 
51 discussed above.  
125. Several commenters also suggest that the Commission should not grant USTelecom’s 
request for forbearance while broader issues related to the transition from the copper PSTN to IP 
networks are under consideration.
355
While we need not address those arguments here, given our 
conclusion that the broad forbearance from these rules that USTelecom requests is unwarranted, we agree 
that that proceeding could provide an opportunity for a more detailed look at our current requirements.
10. Service Discontinuance Approval Requirements
a. USTelecom’s Request
126. USTelecom requests forbearance from section 214 of the Act and the Commission’s 
associated rules requiring a carrier to obtain Commission approval prior to discontinuing “legacy”
offerings where that carrier offers IP broadband services as “replacement services” (at least 4 Mbps 
download, 1 Mbps upload).
356
  USTelecom asserts that, under these circumstances, customers are not 
losing service but are instead receiving new broadband or IP services via a new, more technologically 
advanced platform—the IP network.  USTelecom further submits that, under these circumstances, 
forbearance is in the public interest, and that requiring Commission approval prior to the discontinuance 
of legacy services is unnecessary to protect consumers and unnecessary to ensure just, reasonable, and 
nondiscriminatory rates and practices.
357
  USTelecom maintains that forbearance is consistent with the 
Commission’s desire to promote broadband and accelerate the transition from circuit-switched to IP 
networks, and USTelecom emphasizes that nothing in its petition is intended to disturb the requirement 
that carriers provide notice to customers.
358
b. Background
127. Section 214(a) of the Act states in part that “[n]o carrier shall discontinue, reduce, or 
impair service to a community, or part of a community, unless and until there shall first have been 
obtained from the Commission a certificate that neither the present nor future public convenience and 
necessity will be adversely affected thereby.”
359
  This statutory requirement is implemented under Part 63 
of the Commission’s rules to ensure that customers of domestic telecommunications and interconnected 
                                                          
355
See Broadview, et al. Comments at 11 (urging the Commission to deny USTelecom’s request for forbearance 
while the Commission’s Technical Advisory Council is considering related issues regarding the transition from the 
PSTN to IP networks); CACTC Comments at 3, 7-15 (submitting that petitions for rulemaking in RM-11358 
requested additional safeguards regarding ILEC copper loop retirement under the same rules, and that USTelecom, 
AT&T and Verizon have all filed comments and ex partes in that proceeding).
356
USTelecom Petition at 59.  USTelecom uses the term “legacy” offerings but does not define it.  For purposes of 
this section of the forbearance order, we understand legacy offerings to mean narrowband voice offerings. 
USTelecom lists 47 U.S.C. § 214 and 47 C.F.R. §§ 63.60, 63.61, 63.62, 63.63, 63.71(a)(5), 63.71(c) and 63.90(a)(8), 
but does not otherwise reference any other specific Commission rules under its discussion of service discontinuance 
approval requirements.  See also ACS Comments at 8-10 (suggesting that forbearance should likewise apply for 
competing providers once broadband service is offered in a service area by any provider); AT&T Reply at 2-4; 
Verizon Comments at 5-8.
357
USTelecom Petition at 60-62.
358
Id. at 59 and 62.
359
47 U.S.C. § 214(a).  The discontinuance, reduction or impairment of service to a community will be generally 
referred to herein as a discontinuance unless otherwise specified.
Federal Communications Commission FCC 13-69 
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VoIP services receive sufficient notice of planned discontinuances of service, and have an opportunity to 
inform the Commission of any anticipated difficulties before the Commission approves the proposed 
discontinuance.
360
  The Commission’s rules require that providers inform customers of a proposed 
discontinuance, and further require that providers include specific language in their notice in order to 
assure that customers are aware of their right to object to the proposed discontinuance of service.
361
  
Providers also are required to notify and submit a copy of their section 214 application to the public 
utility commission and Governor of each state in which the discontinuance is proposed, and to the 
Secretary of Defense.
362
128. Providers must file a section 214 application with the Commission on or after the date on 
which notice has been given to affected customers.
363
  The application must contain: the information 
provided in the notice to customers, as well as a brief description of the dates and methods of notice to 
customers; a statement regarding the provider’s status as a dominant or nondominant provider with 
respect to the services to be discontinued; and any other information the Commission may require.
364
  The 
public notice that the Commission releases then announces receipt of the provider’s complete application, 
provides more specific information about how and where interested parties may file comments on the 
proposed discontinuance, and sets the deadline for comments and the date by which the application will 
be deemed automatically approved unless the Commission notifies the applicant otherwise.
365
c. Discussion
129. We find that USTelecom has failed to demonstrate that forbearance from the 
Commission’s discontinuance rules is warranted.  Section 214(a) of the Act specifically requires the 
Commission to determine whether the present or future public convenience and necessity would be 
adversely affected by any carrier’s discontinuance, reduction, or impairment of service to a community.  
USTelecom and some commenters suggest that the public interest safeguards under section 214 and 
related rules are not necessary when a carrier discontinues legacy services as long as it provides 
“replacement” broadband services.
366
  
                                                          
360
See 47 C.F.R. §§ 63.60-63.601; see also Policy and Rules Concerning Rates for Competitive Common Carrier 
Services and Facilities Authorizations Therefor, CC Docket No. 79-252, First Report and Order, 85 FCC 2d 1 
(1980) (Competitive Carrier First Report and Order); Implementation of Section 402(b)(2)(A) of the 
Telecommunications Act of 1996, Petition for Forbearance of the Independent Telephone & Telecommunications 
Alliance, CC Docket No. 97-11, Report and Order and Second Memorandum Opinion and Order, 14 FCC Rcd 
11364 (1999); Biennial Regulatory Review of Regulations Administered by the Wireline Competition Bureau, WC 
Docket No. 02-313, Report and Order, 21 FCC Rcd 9937 (2006); IP-Enabled Services, WC Docket No. 04-36, 
Report and Order, 24 FCC Rcd 6039 (2009).  For purposes of the Commission’s discontinuance rules at §§ 63.60-
63.90, the term “carrier” is defined to include interconnected VoIP providers when used to refer either to all 
telecommunications carriers or more specifically to nondominant telecommunications carriers.  See 47 C.F.R. 
§ 63.60(a).
361
See 47 C.F.R. § 63.71(a).
362
Id.
363
See 47 C.F.R. § 63.71(b).
364
Id.
365
Unless the Commission notifies a provider otherwise, discontinuance applications for dominant and nondominant 
providers will be automatically granted on the 60th and 31st day, respectively, after the Commission’s release of a 
public notice for the application.  See 47 C.F.R. § 63.71(c).
366
USTelecom Petition at 60; ACS Comments at 8-9; Verizon Comments at 5-6; AT&T Reply at 2-4; USTelecom 
Reply at 30-31; Verizon Reply at 3.
Federal Communications Commission FCC 13-69 
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130. The Commission has recognized that “broadband is becoming a necessity of modern life, 
and [that] the benefits of broadband are immense and growing rapidly” including enabling users to 
“originate and receive high-quality voice, data, graphics, and video telecommunications.”
367
  As the 
Commission previously noted, “[b]roadband can drive local and national economic growth, as well as 
improve education, healthcare, and energy efficiency.”
368
  The question of whether specific broadband 
services are a replacement for particular legacy services, however, has no general answer.
369
  For purposes 
of our analysis here, we need only conclude that application of the discontinuance rules remains necessary 
and in the public interest.
131. The discontinuance rules are designed to ensure that the Commission is fully informed of 
any public interest concerns during an orderly transition to alternative services.
370
  Commenters are able to 
inform the Commission of concerns with the existence of reasonable alternatives or concerns with the 
proposed timing of the discontinuance.  Notice and opportunity to comment prior to service 
discontinuance provide important consumer protections.
371
  USTelecom has not demonstrated that the 
                                                          
367
See Eighth Broadband Progress Report, 27 FCC Rcd at 10349, para 7, 10394, para. 120 (2012).
368
See Acceleration of Broadband Deployment: Expanding the Reach and Reducing the Cost of Broadband 
Deployment by Improving Policies Regarding Public Rights of Way and Wireless Facilities Siting, WC Docket No. 
11-59, Notice of Inquiry, 26 FCC Rcd 5384, para. 1 (2011).
369
See, e.g., FCC Announces First Technology Transitions Policy Task Force Workshop, GN Docket No. 13-5, 
Public Notice, 28 FCC Rcd 1150 (Wireline Comp. Bur. 2013) (announcing March 18, 2013 workshop to gather data 
and analysis in order to establish a factual baseline understanding of important transitions including the market’s 
transition to new technologies); Pleading Cycle Established On AT&T And NTCA Petitions, GN Docket No. 12-353, 
Public Notice, 27 FCC Rcd 15766 (Wireline Comp. Bur. 2012) (announcing the filing of AT&T’s Petition 
requesting that the Commission open a proceeding “to facilitate the ‘telephone’ industry’s continued transition from 
legacy transmission platforms and services to new services based fully on the Internet Protocol); FCC Announces 
Technological Advisory Council Meeting, Public Notice, 26 FCC Rcd 15290 (2011) (announcing December 20, 
2011 meeting to explore, inter alia, public safety, disability access, and other matters that might be affected by a 
move to an all-IP network).
370
We agree with commenters who assert that the Commission’s discontinuance rules permit fact-specific review of 
a LEC’s plans to withdraw services from the market, which allows for a more detailed examination of the consumer 
and public interest impact of each proposed withdrawal and replacement of service.  See Full Service Reply at 5.
371
The NY PSC asserts that an opportunity for comment and Commission review are especially important for low 
income customers receiving Lifeline services because it is not yet clear that service providers would offer Lifeline 
services over broadband networks.  NY PSC Comments at 1-4; see also DC PSC Reply at 4 (concurring with the 
NY PSC regarding Lifeline services and also submitting that an opportunity for comment and Commission approval 
are still important because replacement broadband services are not regulated by state Commissions); Michigan PSC 
Reply at 16-17; Pennsylvania PUC Reply at 3-7 (stating that USTA’s forbearance request also could impact the 
basic Carrier of Last Resort (COLR) obligations that protect end-user customers and are administered by the FCC 
and state commissions).  But see USTelecom Reply at 31 (maintaining that the Commission should not “dis-incent 
the deployment of broadband IP-based networks” to low income customers by denying forbearance and thus 
refusing to permit carriers to transition services to these networks).  As discussed below, we find that the prior 
approval requirements of the Commission’s discontinuance rules are consistent with the Commission’s other 
interests in promoting broadband services.  See infra para. 132.  We note that the Commission is currently 
conducting a pilot program to test different approaches to increasing broadband adoption among low-income 
Americans.  See Lifeline and Link Up Reform and Modernization, WC Docket No. 11-42, Order, 27 FCC Rcd 15842 
(Wireline Comp. Bur. 2012) (announcing the selection of 14 projects for the broadband adoption Lifeline pilot 
program).
Federal Communications Commission FCC 13-69 
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notice requirement is no longer necessary to address these policy interests or that it imposes substantial 
burden or delay in introducing new services.
372
132. USTelecom asserts that forbearance from the Commission’s discontinuance rules would 
be consistent with the Commission’s other “initiatives to promote broadband” and its desire to “accelerate 
the transition from circuit-switched to IP networks.”
373
  According to USTelecom, requiring prior 
approval under the rules when a carrier seeks to discontinue legacy services and replace them with 
broadband services would cause a delay for both broadband providers and consumers in the delivery and 
receipt of new broadband services.
374
  The Commission’s rules, however, do not prevent service providers 
from introducing broadband services, even before obtaining approval to discontinue legacy services.
375
  
Moreover, the discontinuance rules do not dictate the time when carriers may introduce new broadband 
services or the time when customers may choose to subscribe to new broadband offerings.
376
  Although 
USTelecom suggests that the discontinuance process may include a delay between the receipt of a 
discontinuance application and the release of a public notice after Commission review, USTelecom fails 
to demonstrate that any such delay has occurred or presents a significant threat of delay in the future.
377
133. USTelecom also maintains that forbearance when a carrier plans to discontinue legacy 
services and replace them with broadband services would be consistent with the forbearance previously 
granted to CMRS providers.
378
  When the Commission granted forbearance from the discontinuance 
requirements for CMRS providers, they were offering relatively new wireless services, and the 
                                                          
372
See Full Service Reply at 11-12; see also Broadview, et al. Comments at 21-22 (noting that USTelecom seeks 
forbearance that would also apply to the discontinuance of wholesale services and submitting that USTelecom 
nevertheless fails to explain how forbearance under these circumstances would be in the public interest); 
Pennsylvania PUC Reply at 5 & 7 (agreeing that USTA’s forbearance request does not sufficiently distinguish 
between retail and wholesale services and that it has the potential for adversely impacting wholesale access service 
obligations and interconnection).
373
USTelecom Petition at 59.
374
USTelecom suggests that there would be a potential for delay in the introduction of new services under the 
discontinuance rules due to the fact that applications are not deemed filed until the Commission releases public 
notice of the filing, and because the Commission can release public notice weeks after receiving an application.  Id.
at 60-61; see also Verizon Comments at 8.
375
See Michigan PSC Reply at 14-15 (submitting that the Commission’s stated goal of encouraging a transition to a 
modern IP-network can still be accomplished without eliminating public comment and Commission oversight under 
the discontinuance rules).
376
See COMPTEL Comments at 11-12.
377
See Michigan PSC Reply at 15-16 (submitting that USTelecom has failed to demonstrate actual harm caused by 
the general discontinuance timeframes and suggesting that applicants should account for the approval process in 
their planning).
378
USTelecom Petition at 61 (citing to Implementation of Sections 3(n) and 332 of the Communications Act, 
Regulatory Treatment of Mobile Services, Second Report and Order, 9 FCC Rcd 1411, 1481, para. 182 (1994); 47 
C.F.R. § 20.15(b)(3) for CMRS § 214 forbearance).  USTelecom specifically refers to the Commission 
determination there that a discontinuance application was unnecessary to protect consumers given the presence of 
adequate and abundantly available substitute services.
Federal Communications Commission FCC 13-69 
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Commission recognized the abundant availability of existing alternatives.
379
  We thus do not find that 
decision analogous to the forbearance request here.
380
  
134. We find that USTelecom has not demonstrated that forbearance from the discontinuance 
rules is justified.  Enforcement of these rules is necessary to ensure that charges, practices, classifications,
or regulations are just and reasonable, and not unjustly or unreasonably discriminatory.  The 
Commission’s rules implementing this requirement strike a balance between a provider’s interest in 
discontinuing services and the important consumer protection interests central to section 214(a) of the 
Act.
381
For the reasons set forth above, we find that USTelecom has failed to satisfy the statutory 
standards necessary to merit forbearance from the requirements regarding service discontinuance.
11. Structural Separation Requirements for Independent ILECs
a. USTelecom’s Request
135. USTelecom requests that the Commission forbear from application of the section 64.1903 
separate affiliate requirement for independent ILEC provision of in-region, interstate interexchange 
services and in-region, international interexchange services (in-region long distance service).  It also 
requests forbearance from application of dominant carrier regulation of in-region long distance service by 
independent ILECs in the absence of a separate affiliate.
382
  USTelecom asserts that “[i]n light of the 
dramatic changes in the competitive landscape in the intervening 15 years since [r]ule 64.1903 was 
adopted, there is no longer any justification for the rule, and the Commission should forbear from its 
continued application.”
383
  USTelecom asserts that “there are no dominant IXCs, and ILECs currently face 
                                                          
379
See also Broadview, et al., Comments at 18-19 (stating that the Commission’s decision with respect to 
forbearance for CMRS providers was also based on extensive market analysis and a determination that CMRS 
providers generally lack market power).
380
The USTelecom Petition seeks authority for existing participants in the marketplace to discontinue legacy 
services without obtaining prior section 214 authority, which is in contrast to the Commission grant of forbearance 
for newly-competitive CMRS providers.  We note that when the Commission granted forbearance for CMRS 
providers, it relied on the record established in response to its NPRM and found that § 214 barriers to exit could 
deter potential entrants from entering the marketplace.  We agree with Broadview, et al. that the Commission has 
not done the same market analysis or reached the same conclusions regarding the competitive marketplace for 
legacy services.  Broadview, et al. Comments at 18.
381
In the Competitive Carrier First Report and Order, the Commission explained that Congress added the 214 
discontinuance requirements in 1943, in part, due to concerns that discontinuance (by the only carrier serving a 
market) could leave the public without adequate communications service.  The Commission also noted that in a 
competitive marketplace, ease of exit is essential.  Nevertheless, the Commission concluded that § 63.71 strikes a 
good balance between the need to reduce regulatory barriers to exit from competitive markets and the Commission’s 
responsibility to ensure that the public is given a reasonable period of time to make other service arrangements.  
Competitive Carrier First Report and Order, 85 FCC 2d at 49.
382
USTelecom Petition at 64-67.  Throughout this subsection, paras. 135-162, we use the term “integrated basis” to 
mean providing long distance services without complying with structural separations requirements contained in 
section 64.1903.  We note that USTelecom subsequently clarified that it believes that, under the best reading of 
relevant precedent, independent ILECs by default would not be subject to dominant carrier regulation even when 
providing long distance service on an integrated basis, although it argues that forbearance would be warranted if the 
Commission disagreed with that interpretation.  See, e.g., Letter from Bennett L. Ross, Wiley Rein, LLP, Counsel to 
USTelecom, to Marlene H. Dortch, Secretary, FCC, Docket No. 12-61, at 3-6 (filed Mar. 28, 2013) (USTelecom 
Mar. 28, 2013 Ex Parte Letter).
383
USTelecom Petition at 66.
Federal Communications Commission FCC 13-69 
62
robust competition for all-distance services.”
384
  In Appendix B of its filing, USTelecom argues that “[t]he 
Commission’s legacy telecommunications regulations are largely predicated on the historical assumption 
that a telephone line from an [ILEC] was the only means for a consumer to communicate[,]” and that 
“[t]his assumption is not valid in today’s marketplace where consumers . . . can choose from telephony 
services provided by Competitive Local Exchange Carriers (‘CLECs’), cable operators, and fixed and 
mobile wireless providers.”
385
b. Background
136. Section 64.1903 of the Commission’s rules requires that independent ILECs providing 
long distance service in whole or in part over their own switching or transmission facilities do so through 
an affiliate that is a separate legal entity from the local exchange company.
386
  The separate affiliate must: 
(1) maintain books of account separate from those of the independent ILEC; (2) not jointly own 
transmission or switching facilities with the independent ILEC; and (3) purchase tariffed services from 
the independent ILEC only pursuant to the independent ILEC’s tariffs.
387
  Independent ILECs that provide 
in-region long distance service exclusively through resale may do so through an affiliate that is a separate 
corporate division rather than a separate legal entity.
388
  Independent ILECs have been classified as 
nondominant in their provision of in-region long distance services,
389
and therefore they are not required 
to file tariffs for these services.
390
137. Section 64.1903 was adopted in the 1997 LEC Classification Order, although it has its 
origins in the Commission’s Competitive Carrier Proceedings.
391
  In the LEC Classification Order, the 
                                                          
384
Id.
385
Id., App. B at 1.  “USTelecom estimates that ILEC switched access lines accounted for approximately 45% of 
U.S. telephone households as of year-end 2010.” Id., App. B at 2 & n.5.  USTelecom states that “[a]s of this same 
time period, approximately 32% of U.S. households with a telephone were wireless only” and that “approximately 
19% were served by cable telephony, and approximately 3% utilized ‘over the top’ interconnected VoIP service.” 
Id. at nn.5-8.  USTelecom also states that “more than 99% of the country’s rural population is covered by at least 
one wireless provider, and approximately 97% is covered by at least two providers.”  Id. at 5 & n.17.  USTelecom 
further notes that “more than 93% of U.S. homes [are] passed by cable high-speed broadband infrastructure.” Id. at 
8.  USTelecom also cites the availability of other competitive offerings, including Skype, Facebook and Google. Id.
at 8-10.  
386
47 C.F.R. § 64.1903 (b).  
387
Id. § 64.1903(a)(1)-(3).  The separate affiliate also may acquire UNEs and exchange services pursuant to an 
approved interconnection agreement.  Id. § 64.1903(a)(3).  
388
An independent ILEC provides in-region long distance services exclusively through resale if it provides those 
services without using its own “interexchange switching or transmission facilities or capability.”  Id. 
§ 64.1903(b)(1).  
389
Regulatory Treatment of LEC Provision of Interexchange Services Originating in the LEC’s Local Exchange 
Area and Policy and Rules Concerning the Interstate, Interexchange Marketplace, CC Docket Nos. 96-149, 96-61, 
Second Report and Order in CC Docket No. 96-149 and Third Report and Order in CC Docket No. 96-61, 12 FCC 
Rcd 15756, 15763, para. 7 (1997) (LEC Classification Order), recon. denied, Second Order on Reconsideration and 
Memorandum Opinion and Order, 14 FCC Rcd 10771 (1999) (LEC Classification Second Reconsideration Order).  
390
47 C.F.R. § 61.19 (mandatorily detariffing all nondominant carrier interstate and international, long distance 
services, other than dial-around 1+ services, certain LEC-initiated services during the first 45 days of service, 
international inbound collect calls, and certain on-demand mobile satellite services).
391
See Policy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations 
Therefor, CC Docket No. 79-252, Fourth Report and Order, 95 FCC 2d 554, 575-76, para. 31 (1983) (Competitive 
Carrier Fourth Report and Order); Policy and Rules Concerning Rates for Competitive Common Carrier Services 
(continued....)
Federal Communications Commission FCC 13-69 
63
Commission found that the independent ILECs did not possess “classical” market power in the provision 
of in-region long distance services, and therefore could not raise the prices of these services above 
competitive levels.
392
  On this basis, the Commission classified independent ILECs “as nondominant in 
the provision of in-region, interstate, domestic, interexchange services.”
393
  Despite this classification of 
nondominance, however, the Commission remained concerned with the independent ILECs’ control over 
local bottleneck facilities, which theoretically gave them the ability to exercise “exclusionary” market 
power in order to raise rivals’ costs.
394
  The Commission concluded that independent ILECs had the 
incentive to engage in cost misallocation between local and long distance operations; unlawful, non-price 
discrimination involving inputs used by long distance competitors; and price squeezes.
395
  Accordingly, 
notwithstanding its conclusion to classify independent ILECs as nondominant, the Commission adopted 
the current regulatory framework requiring the provision of long distance service through a separate 
affiliate that “would aid in the detection and prevention of such anticompetitive conduct.”
396
  
138. Beginning in 2007, the Commission permitted the BOCs to provide long distance service 
without a section 272 separate affiliate, i.e., on an integrated basis or through an affiliate other than a 
section 272 affiliate, subject to nondominant carrier regulation.
397
  However, the Commission applied a 
set of alternative safeguards to the BOCs’ provision of in-region long distance services outside of a 
section 272 affiliate.  These safeguards included: (1) special access performance metrics to monitor for 
(Continued from previous page)                                                          
and Facilities Authorizations Therefor, CC Docket No. 79-252, Fifth Report and Order, 98 FCC 2d 1191 1195-
1201, paras. 3-12 (1984) (Competitive Carrier Fifth Report and Order).  Prior to the LEC Classification Order, it 
was clear that an independent ILEC had a “choice” between offering in-region long distance service through a 
separate affiliate or being regulated as a dominant carrier.  Competitive Carrier Fifth Report and Order, 98 FCC 2d 
at 1198-99, para. 9 (“Interstate services provided directly by exchange telephone companies (not through affiliates) 
are regulated as dominant.”); LEC Classification Order, 12 FCC Rcd at 15767-68, para. 14 (“In the Competitive 
Carrier Fourth Report and Order, the Commission determined that interexchange carriers affiliated with 
independent ILECs would be regulated as nondominant interexchange carriers. . . . . The Commission [in the 
Competitive Carrier Fifth Report and Order] added that any interstate, interexchange services offered directly by an 
independent LEC (rather than through a separate affiliate) or through an affiliate that did not satisfy the specified 
conditions would be subject to dominant carrier regulation.”).  As discussed infra paras. 154-162, the Commission 
subsequently removed, in the LEC Classification Order, the independent ILECs’ ability to “choose” between the 
separate affiliate structure or dominant carrier regulation.   
392
See LEC Classification Order, 12 FCC Rcd at 15847-8, paras. 157-58.   The Commission stated that “classical” 
(or “Stiglerian”) market power refers to “the ability of a firm profitably to raise and sustain its price above the 
competitive level by restricting its own output.”  Id. at 15847-48, para. 156. 
393
Id., 12 FCC Rcd at 15763, para. 7; see also id. at 15840-41, para. 143 (“We therefore, classify independent 
ILECs as nondominant in the provision of these [in-region long distance services.]”); id. at 15855, para. 171 (“As 
previously stated, we conclude that we should not apply dominant carrier regulation to independent ILECs.”); LEC 
Classification Second Reconsideration Order, 14 FCC Rcd at 10777, para. 8 (“Similarly, the Commission found that 
independent ILECs should be classified as nondominant because they do not have the ability profitably to raise and 
sustain prices of in-region, interstate, domestic, interexchange services by restricting output, but that such LECs 
should be required to provide these services subject to the Competitive Carrier Fifth Report and Order separation 
requirements in order to prevent and detect cost misallocation, access discrimination, and price squeeze.”).  
394
Exclusionary (or Bainian) market power refers to “the ability of a firm profitably to raise and sustain its price 
significantly above the competitive level by raising its rivals’ costs and thereby causing the rivals to restrain their 
output.”  LEC Classification Order, 12 FCC Rcd at 15803, para. 83 n.214.  
395
Id. at 15848-49, paras. 159-60, and 15654, para. 171. 
396
Id. at 15859, para. 163.
397
See Section 272 Sunset Order, 22 FCC Rcd at 16488-92, paras. 95-105.
Federal Communications Commission FCC 13-69 
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non-price discrimination against competitors; (2) imputation requirements for access charges to guard 
against the use of access pricing to impede long distance competition; and (3) two consumer protection 
measures to address the needs of customers with low long distance calling volumes.
398
c. Discussion
139. We grant in part, subject to the conditions described below, USTelecom’s request for 
forbearance from the requirement that an independent ILEC provide in-region long distance services 
through the use of a separate affiliate.  We conclude that forbearance from section 64.1903 is warranted 
for independent ILECs subject to price cap regulation.  We find that forbearance from this requirement 
for independent ILECs subject to rate-of-return regulation is not warranted due to the continuing potential 
for cost misallocation.
399
  In the attached Second Further Notice of Proposed Rulemaking, we seek 
comment, though, on potential alternatives that would reduce regulatory burdens while accomplishing the 
same objectives as the current requirements.
140. We need not formally grant USTelecom’s separate request for forbearance from 
dominant carrier regulation when in-region long distance services are provided by an independent ILEC 
on an integrated basis because we conclude that those requirements do not apply in the first instance 
under existing precedent.  As discussed below, we hold that the Commission’s prior classification of 
independent ILECs as nondominant in their provision of in-region long distance services applies 
regardless of whether we amend, eliminate, or forbear from the application of section 64.1903.
(i) Forbearance from Separate Affiliate Requirement
141. When the Commission adopted the separate affiliate requirement, it identified three 
reasons for prohibiting independent ILECs from providing long distance service on an integrated basis:  
concerns about cost misallocation, non-price discrimination, and price squeezes – all related to the 
exercise of exclusionary market power.
400
  The Commission subsequently concluded in the Section 272 
Sunset Order that BOC exclusionary market power should be addressed through non-structural safeguards 
rather than structural safeguards such as a separate affiliate.  We follow this paradigm in analyzing 
USTelecom’s request for forbearance from the separate affiliate requirement for the independent ILECs.  
USTelecom has not demonstrated that independent ILECs either individually or collectively lack 
exclusionary market power within their service areas.  We therefore have no evidence to use as a basis for 
determining that they lack exclusionary market power in their respective areas.
401
  Nonetheless, as we 
have held previously for the BOCs, we find that the original concerns are not significant in the case of 
price cap carriers (cost misallocation) or can be addressed through measures less burdensome than 
requiring a separate affiliate (non-price discrimination and price squeezes).  As explained below, we 
cannot make the same finding, based on this record, for rate-of-return carriers.
                                                          
398
Id. at 16487-94, paras. 95-108.
399
Rate-of-return carriers include both cost companies and average schedule companies.  Establishing Just and 
Reasonable Rates for Local Exchange Carriers, WC Docket No. 07-135, Notice of Proposed Rulemaking, 22 FCC 
Rcd 17989, 17992, para. 6 (2007).  “Average schedule” companies are those ILECs that receive compensation for 
use of their interstate common carrier services on the basis of formulas that are designed to simulate the 
disbursements that would be received by a cost company that is representative of average schedule companies.  See 
Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Order, 25 FCC Rcd 7252, 7256 (2010).
400
See supra para.138; LEC Classification Order, 12 FCC Rcd at 15848-49, paras. 159-60, 15654, para. 171.
401
This approach is consistent with Commission precedent.  See Section 272 Sunset Order, 22 FCC Rcd at 16473, 
para. 64.
Federal Communications Commission FCC 13-69 
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142. Price Cap Carriers.  The Commission has recognized that the separate affiliate 
requirement imposes significant cost and non-cost burdens on carriers and the Commission.
402
  The 
Commission also noted that the requirement to provide long distance service using a separate affiliate 
may impair a carrier’s ability to compete.
403
  The Commission previously found, with respect to the 
BOCs, that an array of nonstructural safeguards could obviate the need for the separate affiliate rule, 
while imposing fewer costs and burdens.  We find that a similar set of safeguards would be equally 
effective to curtail the potential exercise of exclusionary market power by independent price cap carriers.  
Specifically, we will forbear from section 64.1903 for price cap carriers if they (1) submit and obtain 
Bureau approval of special access performance metrics, and (2) satisfy imputation requirements, 
including the submission of an imputation plan for review and approval by the Bureau.  In addition, 
independent ILECs subject to price cap regulation remain subject to a number of legal obligations that 
will limit their ability to exercise exclusionary market power.  In particular, the independent ILECs 
remain subject to: dominant carrier regulation, Part 32 accounting rules, equal access obligations under 
longstanding Commission precedent and section 251(g) of the Act;
404
section 251 obligations;
405
and the 
continuing general obligation to provide service on just, reasonable, and not unreasonably discriminatory 
rates, terms, and conditions pursuant to sections 201 and 202 of the Act.
406
143. Special Access Performance Metrics.  As a condition of the relief it granted in the Section 
272 Sunset Order, the Commission required the BOCs and their independent incumbent LEC affiliates to 
implement special access performance metrics addressing the order taking, provisioning, and maintenance 
and repair of those carriers’ DS0, DS1, DS3, and OCN services.
407
  This was designed in part to 
implement the requirement for the non-discriminatory provisioning of wholesale services by the BOCs 
that is contained in section 272(e)(1) of the Act.
408
  The Commission also required the BOCs and their 
independent incumbent LEC affiliates to provide the Commission with their performance measurement 
results on a quarterly basis.
409
  The Commission reasoned that these metrics and the associated filing 
requirement were necessary to monitor whether the BOCs and their independent incumbent LEC affiliates 
engaged in non-price discrimination in the provision of special access services to unaffiliated entities.
410
                                                          
402
Section 272 Sunset Order, 22 FCC Rcd at 16480, para. 82, 16482, para. 85.
403
Id. at 16481, para. 82. 
404
47 U.S.C. § 251(g); Section 272 Sunset Order, 22 FCC Rcd at 15855-56, para. 172; see MTS and WATS Market 
Structure, Phase III, Docket No. 78-72, Report and Order, 100 FCC 2d 860 (1985); Investigation into the Quality of 
Equal Access Services, Memorandum Opinion and Order, 60 Rad. Reg. 2d (P&F) 417, 419, 1986 WL 291752 
(1986).
405
47 U.S.C. § 251.
406
47 U.S.C. §§ 201, 202.
407
Section 272 Sunset Order, 22 FCC Rcd at 16488-89, paras. 97-98.
408
47 U.S.C. § 272(e)(1) (requiring a BOC and an affiliate that is subject to the requirements of section 251(c) to 
“fulfill any requests from an unaffiliated entity for telephone exchange service and exchange access within a period 
no longer than the period in which it provides such telephone exchange service and exchange access to itself or to its 
affiliates”).
409
Id. at 16488, para. 98.
410
Id. at 16488-89, paras. 97-98 (“The information that AT&T, Qwest and Verizon record and report to the 
Commission under these metrics will provide the Commission and other interested parties with reasonable tools to 
monitor each BOC’s performance in providing these special access services to itself and its competitors. . . . We 
conclude that the metrics and the associated reporting requirements that we impose in this Order adequately address 
commenters’ concerns about the BOCs’ and their independent incumbent LEC affiliates’ incentives and ability to 
(continued....)
Federal Communications Commission FCC 13-69 
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144. For reasons similar to those set forth in the Section 272 Sunset Order, we find that 
implementation of these metrics is needed to monitor whether price cap independent ILECs engage in 
anticompetitive non-price discrimination in the provision of special access services to unaffiliated entities.  
We therefore require, as a condition of the relief granted in this Order, that each price cap independent 
ILEC submit a plan to measure special access performance, and receive Bureau approval of that plan, 
prior to providing long distance service on an integrated basis.
411
  In addition, the price cap independent 
ILEC must then implement these metrics and file its performance results, on a quarterly basis, with the 
Commission.  An independent ILEC taking advantage of this relief shall implement these metrics to the 
extent that it provides one or more of the covered special access services to itself, to any affiliate, or to 
third parties.  The reports are intended to provide the Commission and other interested parties with 
reasonable tools to monitor the independent ILEC’s performance in providing these special access 
services to itself and its competitors, and evaluating whether any disparities in performance are 
statistically significant.
412
145. Imputation.  As a separate condition of the relief it granted in the Section 272 Sunset 
Order, the Commission required the BOCs and their independent ILEC affiliates to impute access charges 
to themselves for access services that the LECs would be using in the provision of their own services (and 
that were previously being purchased by the long distance separate affiliate).  This was designed to 
implement the requirement for access charge imputation by the BOCs that is contained in section 
272(e)(3) of the Act.
413
146. For reasons articulated in the Section 272 Sunset Order, we find that a similar 
requirement is necessary to provide transparency regarding whether price cap independent ILECs engage 
in anticompetitive discrimination in the provision of access services to unaffiliated entities.  To help 
protect against possible cost misallocation and price squeezes, each price cap independent ILEC taking 
advantage of this relief must impute to itself its highest tariffed rate for access, including access provided 
over joint-use facilities, with regard to the independent ILEC’s provision of access for any in-region, 
interstate and international, long distance services that it provides directly.
414
  We also require each such 
(Continued from previous page)                                                          
engage in non-price discrimination in their provisioning of special access services in order to impede competition in 
the market for in-region, interstate, long distance services.”).
411
When the Commission granted relief to the BOCs from the structural separations requirement, the BOCs had 
“implemented special access performance metrics designed to help ensure that they refrain from non-price 
discrimination in their provision of special access services,” and the Commission had approved those metrics.  
Section 272 Sunset Order, 22 FCC Rcd at 16487, paras. 96-97.  Here, the independent ILECs have not yet 
developed or received approval of such performance metrics.
412
We note that these non-price performance metrics involve issues distinct from the special access pricing 
flexibility matters also before the Commission, and in no way reflect a pre-judgment of those distinct issues.  
413
47 U.S.C. § 272(e)(3) (requiring a BOC and an affiliate that is subject to the requirements of section 251(c) to 
“charge the affiliate . . . or impute to itself (if using the access for its provision of its own services), an amount for 
access to its telephone exchange service and exchange access that is no less than the amount charged to any 
unaffiliated interexchange carriers for such service”).
414
See Section 272 Sunset Order, 22 FCC Rcd at 16490, para. 100 (imposing an identical requirement on the BOCs’ 
independent incumbent LEC affiliates).  Imputation is an accounting and regulatory device that is used in 
recognizing intra-company transactions.  In the context of access services, this Commission and state commissions 
have long recognized the potential for incumbent LECs to use their control over their local networks to impede 
competition in services for which local network access is a needed input.  Imputation requirements address this 
concern by requiring the incumbent LEC to recognize for accounting and other regulatory purposes charges for local 
network access equal to the amounts that an unaffiliated third party would pay for comparable access.  See, e.g., id.
at 16489-90, para. 287; Application of Access Charges to the Origination and Termination of Interstate, IntraLATA 
(continued....)
Federal Communications Commission FCC 13-69 
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price cap independent ILEC to charge any non-rule 64.1903 separate affiliate through which it provides 
in-region, interstate or international, long distance services the same amount for access that it would have 
charged itself.
415
  These requirements will assure that the degree of protection against improper cost 
shifting does not vary with the independent ILEC’s choice of corporate structure for the provision of 
in-region, interstate and international, long distance services.
416
147. In order to implement this requirement, we also require, as a condition of the relief 
granted in this Order, that price cap independent ILECs submit access imputation plans similar to those 
filed by the BOCs and receive Bureau approval of such plans, prior to providing long distance service on 
an integrated basis.
417
  
148. We find that granting relief from the separate affiliate requirement, subject to these 
conditions, is consistent with our prior decisions.  In light of the safeguards we adopt in this order, we 
conclude that enforcement of the separate affiliate requirement for the provision of in-region long 
distance service by independent ILECs subject to price cap regulation is not necessary to ensure that the 
charges, practices, classifications, or regulations by, for, or in connection with in-region long distance 
service are just and reasonable and are not unjustly or unreasonably discriminatory.  In particular, we are 
limiting relief to price cap carriers, which have little if any incentive to engage in cost misallocation, and 
we are applying safeguards designed to address price squeezes and non-price discrimination.  For the 
same reasons, we conclude that retention of the separate affiliate requirement for the provision of in-
region long distance service by independent ILECs operating under price cap regulation is not necessary 
for the protection of consumers. We also find that the above conditions will ensure that independent 
ILECs subject to price cap regulation provide long distance service on an integrated basis in a manner that 
is consistent with the public interest.  The relief granted in this Order from the separate affiliate 
requirement will not become effective unless and until the Office of Management and Budget approves 
any information collections associated with these conditions in accordance with the Paperwork Reduction 
Act and the Bureau approves the price cap carrier’s plans.
418
  
149. Rate-of-return Carriers.  We find that USTelecom has not met its burden of showing that 
it is appropriate to forbear from the separate affiliate requirement for carriers that are not subject to price 
cap regulation.  As a preliminary matter, we note that, when the Commission granted the BOCs relief 
(Continued from previous page)                                                          
Services and Corridor Services, Memorandum Opinion and Order, FCC 85-172, 57 RR2d (P&F) 1558, 1985 FCC 
Lexis 3510, para. 9 & n.22 (Apr. 12, 1985) (Corridor Services Order) (requiring that LECs impute access charges to 
themselves in calculating their interstate, intraLATA toll rates); see also 1998 Biennial Regulatory Review – Part 61 
of the Commission’s Rules and Related Tariffing Requirements, CC Docket No. 98-131, Report and Order and First 
Order on Reconsideration, 14 FCC Rcd 12293, 12312, para. 53 (1999) (requiring that price cap LECs offering 
interexchange services impute to themselves the same access charges that they impose on interexchange carriers).
415
See Section 272 Sunset Order, 22 FCC Rcd at 16490, para. 100.
416
See id.
417
We note that in the section of this Order addressing forbearance from the Commission’s cost assignment rules, 
we require price cap independent ILECs to file imputation plans showing how they would comply with the access 
imputation requirement in the absence of the cost assignment rules.  See supra Section III.B.3, Cost Assignment 
Rules.
418
Obligations associated with the conditions of this forbearance order are information collections as defined by the 
Paperwork Reduction Act and must be approved by the Office of Management and Budget.  Paperwork Reduction 
Act of 1995, Pub. L. No. 104-13, 109 Stat. 163.
Federal Communications Commission FCC 13-69 
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from the structural separation requirement, the BOCs were subject to price cap regulation, and our 
analysis was premised on that fact.
419
150. The ability and incentive of independent ILECs to misallocate costs between their 
interexchange and exchange access services was one of the major concerns underlying adoption of the 
separate affiliate requirement in the Commission’s 1997 LEC Classification Order.
420
  Price cap 
regulation “severs the direct link between regulated costs and prices,” and “a carrier is not able 
automatically to recoup misallocated non-regulated costs by raising basic service rates thus reducing 
incentives to shift non-regulated costs to regulated services.”
421
  Independent ILECs providing service 
pursuant to price cap regulation thus are unlikely to engage in cost misallocation because their interstate 
access rates and compensation are not tied to cost allocations.
422
  In particular, misallocating costs from 
their long distance service operations to their interstate access offerings will not allow them to increase 
charges for their interstate access services.  
151. In contrast, cost misallocation is still a concern for independent ILECs that operate under 
rate-of-return cost regulation because a portion of their interstate access charge compensation and 
universal service support is based on their costs of providing service.  This gives them an incentive to 
engage in cost misallocation and facilitate a price squeeze.  The Commission’s 2011 intercarrier 
compensation rules cap or reduce interstate switched access charges, but allow increases in common line 
and special access rates.  Thus, these changes in the access charge rules reduce, but do not eliminate, the 
incentives for cost misallocation and potential access charge rate increases.
423
  We find that it would be 
unwise to forbear from the separate affiliate requirement for rate-of-return independent ILECs subject to 
cost regulation.  To do so would potentially further increase opportunities for cost misallocation at a time 
when the Commission has just embarked on a significant transformation of intercarrier compensation and 
universal service.
424
  Accordingly, we do not forbear from application of the separate affiliate requirement 
to rate-of-return independent ILECs subject to cost-based regulation.
152. We recognize that independent ILEC cost companies participating in the National 
Exchange Carrier Association (NECA) pools may have somewhat less incentive to misallocate costs than 
such companies that have their own access tariffs.  The NECA pool access rates are based on the average 
costs for all companies that participate in the NECA pools.  While those companies have less direct 
ability to increase access rates and engage in a price squeeze than do cost companies that file individual 
tariffs, USTelecom has not shown that they lack any ability or incentive to misallocate costs.  To the 
contrary, they still have an incentive to misallocate costs because disbursements from the NECA pools for 
services other than switched access are based on participating companies’ costs, and cost misallocation 
would allow them to underprice competitive long distance service.  In light of these concerns, and the fact 
that USTelecom has not specifically addressed the appropriate treatment of these companies, we will treat 
them like other cost companies. 
                                                          
419
See, e.g., Section 272 Sunset Order, 22 FCC Rcd at 16484, para. 90 (noting that the BOCs “remain subject to 
price cap regulation of exchange access services”).
420
Id.
421
See Wireline Broadband Order, 20 FCC Rcd at 14925-26.
422
See generally Special Access for Price Cap Local Exchange Carriers: AT&T Corp. Petition for Rulemaking to 
Reform Regulation of Incumbent Local Exchange Carrier Rates for Interstate Special Access Services, WC Docket 
No 05-25 & RM-10593, Report and Order, 27 FCC Rcd 10557, 10562-64, paras. 8-12 (2012).  
423
See USF/ICC Transformation Order, 26 FCC Rcd at 17936, para. 804.
424
Id. at 17667, para. 1.
Federal Communications Commission FCC 13-69 
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153. As described above, rate-of-return carriers subject to cost regulation continue to have 
incentives and the potential ability to misallocate costs from their long distance operations to their access 
services, to increase rates for access services that are not capped or being phased down, and to engage in 
price squeezes.  In light of this, we cannot find that the separate affiliate requirement is not necessary to 
ensure that the charges, practices, classifications, or regulations by, for, or in connection with these 
carriers’ telecommunications services are just and reasonable and not unjustly or unreasonably 
discriminatory.
425
  
(ii) Dominant Carrier Regulation
154. We conclude that we do not need to formally grant USTelecom’s related request for 
forbearance from dominant carrier treatment of its long distance services that are provided other than in 
compliance with section 64.1903 because the Commission has already classified the independent ILECs 
as nondominant in the provision of these services.  The practical consequence of this is that once the 
Commission has forborne from the section 64.1903 requirements for a class of independent ILECs, there 
is no requirement under existing precedent to file tariffs for such services or otherwise comply with 
dominant carrier regulation of those services as a result of providing long distance services on an 
integrated basis.
426
155. As a general matter, a carrier that has been classified as dominant is subject to dominant 
carrier regulation of its services unless the Commission classifies the carrier as nondominant for a 
particular service or class of services or forbears from dominant carrier treatment under section 10.
427
  
USTelecom asserts that the Commission has already largely addressed the issue of dominant carrier 
regulation for the independent ILECs in the LEC Classification Order: “after analyzing ‘traditional 
                                                          
425
Rate-of-return carriers include a small number of average schedule companies.  USTelecom has not met its 
burden of demonstrating that these companies should be granted relief from the separate subsidiary requirement.  In 
light of this and the issues discussed below, we treat the average schedule carriers like other rate-of-return carriers.  
At the outset, we note that average schedule companies appear to have limited incentives to misallocate costs as long 
as they continue to use the average schedules for access compensation.  However, such companies can convert to 
cost-based regulation without Commission approval.  Thus, an average schedule company could provide in-region 
long distance service without a separate affiliate, and then convert to cost-based regulation.  At that point, the 
Commission could require the company to change its operations and provide in-region long distance service through 
a separate affiliate, which would be administratively burdensome, and create an artificial incentive for carriers to 
remain on the average schedules when they would otherwise convert to cost-based regulation.  We do not believe 
that this is a desirable result.  Nor do we find on this record that it is desirable to allow average schedule companies 
to convert to cost and continue the provision of in-region long distance service without an affiliate.  
426
As the LEC Classification Order made clear, section 63.10 of the Commission’s rules continues to apply with 
respect to a carrier being classified as dominant or nondominant for the provision of particular international 
communications services on particular routes, e.g., based on an affiliation with a foreign carrier.  LEC Classification 
Order, 12 FCC Rcd at 15863, para. 189; see 47 C.F.R. § 63.10.
427
See, e.g., Competitive Carrier First Report and Order, 85 FCC 2d at 65 (classifying independent incumbent 
LECs as dominant with respect to both interstate access services and interstate long distance services); Motion of 
AT&T Corp. to be Reclassified as a Nondominant Carrier, CC Docket No. 79-252, Order, 11 FCC Rcd 3271, 3357, 
para. 169 (1995) (reclassifying AT&T as a nondominant carrier in the market for interstate, domestic, interexchange 
telecommunications services); Petition of the Embarq Local Operating Companies for Forbearance under 47 U.S.C. 
§ 160(c) from Application of Computer Inquiry and Certain Title II Common-Carriage Requirements; Petition of 
the Frontier and Citizens ILECs for Forbearance under Section 47 U.S.C. § 160(c) from Title II and Computer 
Inquiry Rules with Respect to their Broadband Services, WC Docket No. 06-147, Memorandum Opinion and Order, 
22 FCC Rcd 19478 (2007) (forbearing from application of dominant carrier requirements to certain special access 
services of particular dominant carriers). 
Federal Communications Commission FCC 13-69 
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market power factors—market share, supply and demand substitutability, cost structure, size, and 
resources—,’ the Commission concluded that ‘independent ILECs do not have the ability to raise prices 
by restricting their own output.’”
428
  While there is some ambiguity in the Commission’s precedent, we 
agree that the better reading of the LEC Classification Order is that the Commission classified 
independent ILECs as nondominant in their provision of long distance services generally and was not 
only describing the provision of long distance services through a separate affiliate structure.
429
  We 
recognize that the intervening precedent has not always been clear in this regard, so we explain our 
interpretation.
156. First, the LEC Classification Order examined independent ILECs’ ability to exercise 
market power.  Instead of simply referencing prior Competitive Carrier orders in which it had previously 
classified long distance services provided by independent ILECs, the independent ILEC section of the 
LEC Classification Order noted that the Commission was newly considering the types of information that 
it traditionally looked at when engaging in classification of carriers as dominant or nondominant:  market 
shares, supply and demand substitutability, among others.  We interpret this as demonstrating that the 
Commission was taking a fresh look at the provision of these services and the applicability of dominant 
carrier treatment on a more general basis.  Moreover, in applying this analytical approach, the text of the 
LEC Classification Order treats as distinct the classification finding and the imposition of separate 
affiliate requirements.  For example, in that Order, the Commission stated generically that “[w]e also 
classify the independent ILECs as nondominant in the provision of in-region, interstate, domestic, 
interexchange services, because the independent ILECs do not have the ability profitably to raise and 
sustain prices of in-region, interstate, domestic, interexchange services above competitive levels by 
restricting their own output of these services.”
430
  The Commission then went on to “conclude, however, 
that the independent ILECs’ control of local exchange and exchange access facilities potentially enables 
them to misallocate costs from their in-region, interexchange services, discriminate against rivals of their 
interLATA affiliates, and engage in other anticompetitive conduct,” and this “therefore require[d] the 
independent ILECs to provide their in-region, interstate, domestic, interexchange services through 
separate affiliates that satisfy the separation requirements adopted in the Competitive Carrier Fifth Report 
and Order.”
431
  By distinguishing between these two sets of issues—the ability to raise prices to supra-
                                                          
428
USTelecom Mar. 28, 2013 Ex Parte Letter at 3 (quoting LEC Classification Order, 12 FCC Rcd at 15847, para. 
157). 
429
See, e.g., Competitive Carrier Fifth Report and Order, 98 FCC 2d at 1198, para. 9 (“Interstate services provided 
directly by exchange telephone companies (not through affiliates) are regulated as dominant.”).
430
LEC Classification Order, 12 FCC Rcd at 15763, para. 7.  In discussing dominant carrier regulation, the 
Commission noted that there are two ways in which a carrier can profitably raise and sustain prices above 
competitive levels and thereby exercise market power:  “First, a carrier may be able to raise prices by restricting its 
own output (which usually requires a large market share); second, a carrier may be able to raise prices by increasing 
its rivals' costs or by restricting its rivals' output through the carrier's control of an essential input, such as access to
bottleneck facilities, that its rivals need to offer their services.”  Id. at 15802-03, para. 83.  Dominant carrier 
regulation addresses the first concern.  Id. at 15846, para. 156 (“[D]ominant carrier regulation is generally designed 
to prevent a carrier from raising prices by restricting its own output of interexchange services.”).  The separate 
affiliate requirement addresses the second concern.  Id. at 15852, para. 167 (finding continued imposition of the 
Fifth Report and Order separation requirements was “necessary to prevent and detect any anticompetitive conduct 
that may arise as a result of an independent LEC's control of bottleneck facilities.”).
431
Id. at 15763, para. 7; see also, e.g., id. at 15847, para. 157 (similarly treating as distinct the classification decision 
and the separate affiliate requirements); id. at 15854-55, para. 171 (reiterating the general holding that “we should 
not apply dominant carrier regulation to independent ILECs” and explaining that such regulation is not needed to 
address the types of concerns that were the target of the separate affiliate requirement).
Federal Communications Commission FCC 13-69 
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competitive levels and the ability to engage in anti-competitive conduct—the text of the LEC 
Classification Order reinforces our interpretation that the Commission’s nondominant classification for 
independent ILECs’ provision of long distance services was not tied to their use of a separate affiliate.
432
157. Second, the Commission certainly knew how to specify a conditional classification—
such as classifying a service as subject to nondominant treatment only when provided through a separate 
affiliate—as it had done earlier in the Competitive Carrier Fourth Report and Order and the Competitive 
Carrier Fifth Report and Order, but did not do so for independent ILECs in the LEC Classification 
Order.
433
In fact, the BOC portion of the same LEC Classification Order was itself clear that the 
classification it was making regarding nondominant treatment did not pertain to the BOCs themselves, but 
only to the BOCs’ long distance affiliates.
434
  The contrast between that discussion for the BOCs and the 
language used in the LEC Classification Order with respect to independent ILECs reinforces our 
interpretation.
435
158. Third, it certainly would have been rational for the Commission in 1997 to have treated 
the BOCs and independent ILECs differently on the question of dominant carrier treatment, given that 
some of the factors it had considered in its market power analysis of the independent ILECs were “cost 
structure, size and resources.”
436
It also would have been consistent with the Telecommunications Act of 
                                                          
432
See id. at 15804, para. 85 (finding that dominant carrier regulations are generally designed to prevent a carrier 
from raising prices by restricting its output rather than to prevent a carrier from raising its prices by raising its rivals'
costs, such regulations were adopted at a time when AT&T was essentially a monopoly provider of domestic long 
distance services, and application of these regulations to a carrier that does not have the ability to raise long distance 
prices by restricting its own output could lead to incongruous results).
433
Id. at 15767-68, para. 14 (“The Commission [in the Competitive Carrier Fifth Report and Order] added that any 
interstate, interexchange services offered directly by an independent LEC (rather than through a separate affiliate) or 
through an affiliate that did not satisfy the specified conditions would be subject to dominant carrier regulation.”); 
Competitive Carrier Fifth Report and Order, 98 FCC 2d at 1198-99, para. 9 (“Interstate services provided directly 
by exchange telephone companies (not through affiliates) are regulated as dominant.”); Competitive Carrier Fourth 
Report and Order, 95 FCC 2d at 575-79, paras. 31-37 (concluding that interexchange carriers affiliated with 
independent ILECs would be regulated as nondominant interexchange carriers).
434
Compare LEC Classification Order, 12 FCC Rcd at 15835, para. 134 (“We emphasize that our decision to accord 
non-dominant treatment to the BOCs' provision of in-region, interLATA services is predicated upon their full 
compliance with the structural, transactional, and nondiscrimination requirements of section 272 and our 
implementing rules.”), with id. at 15842, para. 145 (noting that in an NPRM leading up to the LEC Classification 
Order, “[w]e suggested that, regardless of our determination of whether independent LECs should be classified as 
dominant or non-dominant, some level of separation may be necessary between an independent LEC's interstate, 
domestic, interexchange operations and its local exchange operations to guard against cost misallocation, unlawful 
discrimination, or a price squeeze”).
435
Compare id. at 15763, para. 7 (“We classify the independent ILECs as nondominant in the provision of in-region, 
interstate, domestic, interexchange services, because the independent ILECs do not have the ability profitably to 
raise and sustain prices of in-region, interstate, domestic interexchange services above competitive levels by 
restricting their own output of these services.”); id. at 15840-41, para. 143 (“We, therefore, classify independent 
ILECs as nondominant in the provision of these [long distance] services.”); id. at 15855, para. 171 (“As previously 
stated, we conclude that we should not apply dominant carrier regulation to independent ILECs.”), with id. at 15786, 
para. 50 (evaluating product market definitions for “BOC interLATA affiliates or independent ILECs”); id. at 
15799, para. 76 (“In evaluating whether BOC interLATA affiliates and independent ILECs possess market power in 
the interstate, domestic, long distance market, we conclude that we generally will follow the approach proposed in 
the Non-Accounting Safeguards NPRM.”).
436
Id. at 15847, para. 157.
Federal Communications Commission FCC 13-69 
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1996 and Commission precedent distinguishing between the BOCs and smaller independent ILECs for 
purposes of dominant carrier regulation.
437
Furthermore, it made sense for the Commission in the LEC 
Classification Order to assess the classical market power of “BOC affiliates” and “independent ILECs” in 
1997 because, with respect to the BOCs, only BOC affiliates would be permitted to provide long distance 
service for a period of years under section 271/272 requirements in the Telecommunications Act of 1996, 
whereas with respect to the independent ILECs, both independent ILECs and their affiliates could 
provide, and in fact were providing, long distance services at that time.
438
159. Although there are some references in the LEC Classification Order that arguably could 
be viewed as tying the conclusion about whether the independent ILECs are dominant for long distance 
services to the existence of the separate affiliate requirement, we find that those references appear to be 
focused on the potential for a price squeeze and other concerns about exclusionary behavior rather than 
the question of dominance based on classical market power concerns such as high market shares and 
supply and demand elasticities.
439
In the preceding section, we describe how, for price cap carriers, these 
concerns are adequately addressed with alternative safeguards that are less burdensome than structural 
separation.  
160. In addition, certain Commission decisions, including some following shortly after the 
LEC Classification Order, support our interpretation of that decision.  For example, the Commission 
previously has characterized the LEC Classification Order as having “classified independent incumbent 
LECs and their affiliates as nondominant in the provision of interstate, interexchange services,” 
indicating that the nondominant classification extended to the independent ILECs themselves.
440
In 
another order, the Commission likewise interpreted the LEC Classification Order as finding “that 
independent ILECs should be classified as nondominant because they do not have the ability profitably to 
raise and sustain prices of in-region, interstate, domestic, interexchange services by restricting output, but 
that,” notwithstanding that general finding, “such LECs should be required to provide these services 
subject to the Competitive Carrier Fifth Report and Order separation requirements in order to prevent and 
detect cost misallocation, access discrimination, and price squeeze,” consistent with the LEC 
Classification Order’s textual distinction between those two sets of issues discussed above.
441
  We 
                                                          
437
See, e.g., 47 U.S.C. § 251(f).
438
LEC Classification Order, 12 FCC Rcd at 15856, para. 173 (discontinuing the ability of independent ILECs to 
choose whether to be regulated as a dominant carrier when providing in-region, interstate, domestic interexchange 
services or provide such services through the separate affiliate structure).   See id. at 15835, para. 134 n.391 (noting 
significant uncertainty about how competition would develop and what types of safeguards would be necessary and 
appropriate for the BOCs upon expiration of the section 272 safeguards that were subject to a sunset date).
439
See, e.g., id. at 15840-41, para. 143 (“[W]e conclude that the requirements established in the Fifth Report and 
Order, together with other existing rules, sufficiently limit an independent LEC's ability to exercise its market power 
in the local exchange and exchange access markets so that the LEC cannot profitably raise and sustain the price of 
in-region, interstate, domestic, interexchange services by restricting its own output.  We, therefore, classify 
independent ILECs as nondominant in the provision of these services.”); id. at 15848-49, para. 158 (“We noted in 
the Non-Accounting Safeguards NPRM that an independent LEC may be able to use its control over local exchange 
and exchange access services to disadvantage its interexchange competitors to such an extent that it will quickly 
gain the ability profitably to raise the price of in-region, interstate, interexchange services above competitive levels. . 
. . . We find, as we did with regard to the BOCs, that independent ILECs providing in-region, interstate, 
interexchange services do not have the ability to engage in these actions to such an extent that they would have the 
ability to raise prices by restricting output.”). 
440
Policy and Rules Concerning the Interstate, Interexchange Marketplace, Further Notice of Proposed 
Rulemaking, 13 FCC Rcd 21562, 21544-45, para. 24 (1998).
441
LEC Classification Second Reconsideration Order, 14 FCC Rcd at 10777, para. 8.
Federal Communications Commission FCC 13-69 
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acknowledge that certain other, more recent decisions could be read to suggest that, under the LEC 
Classification Order, independent ILECs would be subject to dominant carrier regulation of long distance 
services that were not provided using the section 64.1903 separate affiliate structure.  For instance, in a 
2010 bureau order waiving section 64.1903 requirements for Puerto Rico Telephone Company, Inc. 
(PRT), the Bureau stated that “[a] straightforward application of precedent dictates that PRT should be 
classified as dominant in the provision of in-region, interstate and international, long distance services in 
the event it provides them through an entity other than a rule 64.1903 separate affiliate.”
442
  The fact that 
the Bureau said it was making a “straightforward application of precedent” indicates that there may have 
been some doubt about whether it was making the correct interpretation and it was choosing the most 
conservative approach.  To resolve uncertainty regarding the proper interpretation of the LEC 
Classification Order arising from the mixed precedent, we expressly overrule the interpretations reflected 
in the Bureau’s PRTC Order and any other intervening interpretations of the LEC Classification Order
insofar as they could be read as contrary to our interpretation in this section regarding dominant carrier 
treatment of independent ILECs’ long distance services.  
161. Having found that lack of compliance with the section 64.1903 requirements for 
independent ILECs no longer results in dominant carrier treatment of their long distance services, as it did 
prior to the LEC Classification Order, we also are not required to affirmatively take up that issue 
ourselves to resolve USTelecom’s forbearance petition.  We do note, however, that based on this record 
we see no need to revisit that Order’s classification of such services at this point in time.  Although we 
certainly could revisit such classification of telecommunications services at any time if the marketplace 
developed in ways that were adverse to consumers’ interests, we do not find reason to do so today based 
on the following considerations:  (1) an increase in facilities-based alternatives for voice services from 
cable operators and wireless service providers since 1997;
443
(2) the development of broadband services 
enabling VoIP services (e.g., Vonage, Skype) to be provided over the broadband service provider’s 
                                                          
442
Petition of Puerto Rico Telephone Company, Inc. and Puerto Rico Telephone Larga Distancia, Inc. for Waiver of 
Section 64.1903 of the Commission’s Rules, WC Docket No. 10-52, Memorandum Opinion and Order, 25 FCC Rcd 
17704, 17713, para. 18 (Wireline Comp. Bur. 2010) (granting a temporary waiver of section 64.1903 and deferring 
application of dominant carrier regulation until PRT filed an interstate tariff or made a showing that it should be 
classified as nondominant in the provision of in-region long distance services on an integrated basis); see also, e.g., 
Section 272 Sunset Order, 22 FCC Rcd at 16476, para. 72 (finding the BOCs’ independent ILEC affiliates to be 
nondominant in the provision of in-region, long distance services either directly or through affiliates that are not 
§ 64.1903 separate affiliates); Review of Regulatory Requirements for Incumbent LEC Broadband 
Telecommunications Services, CC Docket No. 01-337, Notice of Proposed Rulemaking, 16 FCC Rcd 22745, 22753-
54, para. 16  (2001) (“[T]he Commission determined that BOC affiliates and independent incumbent LEC affiliates 
should be classified as nondominant in the provision of in-region, interstate, domestic, long distance services”).
443
By the end of 2011, non-ILECs’ share of residential voice service connections had grown to approximately 37 
percent.  2013 Local Competition Report at Table 10 (30.5 million is approximately 37 percent of 83.0 million).  As 
of December 2011, only 3.7 million of the 30.5 million non-ILEC residential voice service connections were 
reported to be switched access lines.  Id.  Cable-based connections constituted 51 percent of non-ILEC connections.  
Id. at Table 6 (27.8 million cable-based connections is approximately 51 percent of 54.1 million non-ILEC 
connections.).  There also has been an increase in households subscribing to mobile wireless services.  For example, 
the National Center for Health Statistics estimates that between 2003 and 2012, the percentage of households 
subscribing to mobile wireless services grew from approximately 46 percent to 88 percent, and the percentage of 
households subscribing only to a mobile wireless service increased from 3.2 percent to 35.8 percent.  Stephen J. 
Blumberg and Julian V. Luke, National Center for Health Statistics, Centers for Disease Control, Wireless 
substitution: Early release of estimates from the National Health Interview Survey, January–June 2012 at Table 1 
(Dec. 2012), available at http://www.cdc.gov/nchs/data/nhis/earlyrelease/wireless201212.pdf (CDC Wireless 
Survey).
Federal Communications Commission FCC 13-69 
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facilities;
444
(3) an absence of record evidence of complaints in regulatory filings about long distance 
prices for any type of ILEC in the more than 15 years since the LEC Classification Order adopted 
nondominant treatment of long distance services; and (4) an absence of record evidence of complaints 
regarding BOC long distance prices in the more than five years since the BOCs have been providing long 
distance services on a nondominant basis without the use of a separate affiliate.  Further, as the 
Commission recognized in the Section 272 Sunset Order, other continuing legal obligations remain in 
place to help address potential concerns, including the continued regulation of special access services, 
substantive equal access obligations, section 251 requirements, and carriers’ obligations under sections 
201 and 202 of the Act.
445
In addition to the continuing legal obligations cited in the Section 272 Sunset 
Order, the rate averaging and rate integration requirements of section 254(g) and the Commission’s 
implementing rules also will continue to apply to these carriers.
162. Finally, we note that one price cap carrier, PRTC, is operating under a temporary waiver 
of the separate affiliate requirement in section 64.1903, which expires on May 17, 2013.
446
  PRTC is an 
independent incumbent LEC serving the Commonwealth of Puerto Rico.  During 2008, PRTC converted 
its interstate access services from rate-of-return regulations to price cap regulations.
447
  Thus, PRTC is 
now covered by the forbearance from section 64.1903 that is granted to price cap carriers in this Order
and will be treated as nondominant, consistent with our interpretation of Commission precedent above.
12. “Cash Working Capital Allowance” Requirement 
a. USTelecom’s Request
163. USTelecom requests forbearance from section 65.820(d), the cash working capital 
allowance rule, for price cap carriers.
448
  USTelecom argues that the rule is not useful for ratemaking 
purposes and serves no regulatory purpose.
449
b. Background
164. The term “cash working capital” means “[t]he average amount of investor-supplied 
capital needed to provide funds for a carrier’s day-to-day interstate operations” and is part of a carrier’s 
regulated rate base.
450
  The cash working capital rule derives from traditional rate-of-return regulation.
451
  
                                                          
444
Eighth Broadband Progress Report, 27 FCC Rcd 10342 (2012).
445
See, e.g., Section 272 Sunset Order, 22 FCC Rcd at 16484, para. 90.
446
Petition of Puerto Rico Telephone Company, Inc. and Puerto Rico Telephone Larga Distancia, Inc. for Waiver of 
Section 64.1903 of the Commission's Rules, WC Docket No. 10-52, Order, 28 FCC Rcd 1072, 2496, para. 4 
(Wireline Comp. Bur. 2013).
447
See Petition of Puerto Rico Telephone Company, Inc. for Election of Price Cap Regulation and Limited Waiver 
of Pricing and Universal Service Rules; Consolidated Communications Petition for Conversion to Price Cap 
Regulation and for Limited Waiver Relief; Frontier Petition for Limited Waiver Relief upon Conversion of Global 
Valley Networks, Inc., to Price Cap Regulation, WC Docket Nos. 07-292, 07-291, 08-18, Order, 23 FCC Rcd 7353 
(Wireline Comp. Bur. 2008)).
448
47 C.F.R. § 65.820(d); USTelecom Petition at 68-69, App. A at A-12.
449
USTelecom Petition at 68.
450
47 C.F.R. § 65.820(d).  Telecommunications companies, as other businesses, have day-to-day expenses that have 
to be met, and as a result they are required to have a source of funds – working capital – in order to pay these 
obligations.  JAMES C. BONBRIGHT, ALBERT L. DANIELSEN &DAVID R. KAMERSCHEN, PRINCIPLES OF PUBLIC 
UTILITY RATES 243 (Public Utilities Reports, Inc. 1988).  Cash working capital may be described as an estimate of 
investor-supplied cash used to finance operating costs during the time lag before revenues are collected.  Id. at 244.
Federal Communications Commission FCC 13-69 
75
Rate-of-return carriers are allowed to include the working capital allowance in the rate base, upon which 
these carriers are allowed the opportunity to earn a rate of return.
452
  The rule provides that larger carriers 
may calculate the cash working capital allowance either by performing a lead-lag study of interstate 
revenue and expense items or by using a specified formula, and that smaller carriers, in lieu of using these 
methods, may make this calculation using a standard established by the Commission.
453
Currently, price 
cap carriers other than AT&T, Qwest, and Verizon are required under section 65.600 to file the annual 
Price-Cap Regulation Rate-of-Return Monitoring Report (FCC Form 492A), which includes a cash 
working capital calculation.
454
  To the extent that price cap carriers meet the conditions for forbearance 
from our Cost Assignment Rules, set forth above, that report will no longer be required for regulatory 
purposes because that rule is part of the Cost Assignment Rules.
455
c. Discussion
165. We grant USTelecom’s request to forbear from the application of this rule to price cap 
carriers, with one exception described below.  USTelecom asserts that “this calculation is detailed, time 
consuming, and resource-intensive,” but is not required for any regulatory or ratemaking purpose for price 
cap carriers.
456
  We agree in general that the rule does not continue to be necessary for price cap carriers, 
whose rates are not set so as to earn a particular rate of return on rate base; instead, these carriers’ rates 
are constrained by the Commission’s price cap methodology.
457
166. We maintain the rule for price cap carriers, however, to the extent they seek relief based 
on a rate-of-return methodology.  Under our rules, price cap carriers may seek relief – such as a TCER –
that is based on a rate-of-return methodology and thus requires a cash working capital calculation to 
determine a carrier’s cost in that case.
458
  If a price cap carrier seeks such relief, it must comply with the 
methodology as provided in the rule.
459
  Otherwise, however, we conclude that the requirement is not 
necessary to ensure just and reasonable rates as it is not generally used in regulating price cap carriers’
(Continued from previous page)                                                          
451
See Letter from Glenn T. Reynolds, Vice President, Policy, USTelecom, to Marlene Dortch, Secretary, FCC, WC 
Docket No. 12-61, at 26 (filed June 5, 2012).
452
For rate-of-return carriers, an allowance for cash working capital is included in the rate base so that investors are 
compensated for capital they have supplied to a utility. CHARLES F. PHILLIPS, JR., THE REGULATION OF PUBLIC 
UTILITIES 348 (Public Utilities Reports, Inc. 1993).
453
47 C.F.R. § 65.820(d).
454
47 C.F.R. § 65.600.  In its petition, USTelecom asserted the calculation was required for certain annual reports 
that are filed.  USTelecom Petition at 68.  In a subsequent filing, however, it indicated that this calculation was not 
included in carrier reports filed with the Commission.  Letter from Glenn Reynolds, Vice President, Policy, 
USTelecom, to Marlene Dortch, Secretary, FCC, WC Docket No. 12-61 (filed March 8, 2013).
455
USTelecom Petition, App. A at A-7; see also AT&T Cost Assignment Order, 23 FCC Rcd at 7308, para. 12; 
ARMIS Forbearance Order, 23 FCC Rcd at 13662, para. 27, n.82.  We note that the cash working capital calculation 
was also required for ARMIS Report 43-01, but we grant conditional forbearance from that report elsewhere in this 
Order.  See supra Section III.B.7.
456
USTelecom Petition at 68.
457
See, e.g., 47 C.F.R. §§ 61.41-.47.  
458
See, e.g., USF/CC Transformation Order, 26 FCC Rcd at 17997, para. 924 (Total Cost and Earnings Review).
459
The Michigan PSC is the only party that opposes USTelecom’s request to forbear from this rule.  It argues that 
USTelecom did not sufficiently support its claim that the cash working capital calculation serves no regulatory 
purpose for price cap carriers.  Michigan PSC Reply at 5.  We disagree consistent with our finding that the 
calculation is not necessary, subject to the condition we adopt here.
Federal Communications Commission FCC 13-69 
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rates.  We also find that the cash working capital requirement is not necessary to protect consumers and 
that forbearance is consistent with the public interest.  
13. Rules Governing Extension of Unsecured Credit for Interstate and Foreign 
Communications Services to Candidates for Federal Office
a. USTelecom’s Request
167. USTelecom seeks forbearance for all relevant carriers from 47 C.F.R. §§ 64.801 and 
64.804, which require certain carriers to file periodic reports with the Commission detailing the terms of 
any unsecured credit extended by the carrier to, or on behalf of, a candidate for federal office.
460
Carriers 
must extend unsecured credit on substantially equal terms to all candidates or persons on the candidate’s 
behalf.
461
USTelecom argues that, since these provisions were adopted, numerous laws have been enacted 
governing campaign finance, gifts to government officials or candidates, and credit arrangements that 
obviate the need for our rules.  There were no objections or comments filed in the record regarding these 
rules or contradicting USTelecom’s claims.
b. Background
168. This reporting requirement was established pursuant to the Commission’s authority under 
the Act and Section 401 of the Federal Election Campaign Act of 1971, and was intended to serve as a 
check on implied contributions by carriers to candidates for Federal office.
462
  The regulations were 
adopted in response to congressional concerns regarding substantial outstanding balances remaining on 
1968 campaign accounts.
463
  The Commission concluded that inadequate credit practices and procedures, 
laxity in the administration of the carriers’ then-current credit practices and procedures, failure to monitor 
the candidates’ accounts, delays in billing, and lack of appropriate collection efforts were among the 
major factors contributing to the unpaid balances accrued during the 1968 political campaign.
464
  By 1972, 
when the rules were first proposed, the Commission noted that the major carriers had already revised their 
credit, billing and collection practices and procedures, and commented, “we would expect that adherence 
to these revised practices and procedures would help to prevent a recurrence of the unpaid balances that 
occurred during the 1968 campaign. Nevertheless, we are of the view that the rules we propose herein 
will act as additional safeguards against a repetition of the 1968 experience and will assure equality of 
treatment among qualified candidates.”
465
c. Discussion
169. In the USTelecom Short Order, we agreed with USTelecom that these rules were ripe for 
forbearance, but declined to forbear from application of all provisions in Subpart H due to the 
requirement of the Federal Election Campaign Act of 1971, as amended, that the Commission “maintain[] 
                                                          
460
USTelecom Petition at 67; see also 47 C.F.R. §§ 64.801-64.804.  
461
47 C.F.R. § 64.804(b).  
462
See Amendment of Part 64 of the Rules to Provide for Regulations Covering the Extension of Credit to 
Candidates for Federal Office, Docket No. 19476, Report and Order, 34 FCC 2d 768, 771 (1972) (citing “sections 
4(i), 201(b), 202(a), 203, 218 and 219 of the Communications Act of 1934, as amended, and § 401 of the Federal 
Election Campaign Act of 1971” as authority for the regulations).  
463
Amendment of Part 64 of the Rules to Provide for Regulations Covering the Extension of Credit to Candidates 
for Federal Office, Docket No. 19476, Notice of Proposed Rulemaking, 33 FCC 2d 999 (1972).
464
Id. 
465
Id. at 1000 (emphasis added).
Federal Communications Commission FCC 13-69 
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its own regulations with respect to the extension of credit, without security” by regulated entities.
466
  We 
read this provision of the statute as requiring the Commission to maintain a codified and effective rule on 
the subject of carriers’ extensions of unsecured credit to candidates for federal office.  However, we do 
find that some additional forbearance relief is warranted.  The Commission acknowledged as early as 
1972 that changes to carrier practices were likely on their own to prevent a recurrence of the problems 
Congress sought to address through section 401.  Some 41 years later, we find no evidence that carriers’
billing and collections procedures have reverted to the level of laxity found in 1968.
467
  
170. In addition to our earlier grant of forbearance from the reporting requirement in 
§ 64.804(g) of our rules, we grant USTelecom’s request for forbearance with respect to the recordkeeping 
and collection action requirements of § 64.804(c)-(f).
468
  Given changes in both technology and carriers’
practices, these rules are not necessary to ensure that charges, practices, classifications, or regulations are 
just, reasonable, and not unjustly or unreasonably discriminatory; are no longer needed to protect 
consumers; and continued enforcement of these requirements would not serve the public interest. 
However, we deny USTelecom’s request with respect to the nondiscrimination requirements 
encompassed in § 64.804(a)-(b) of the rules. Section 64.804(a) provides that, while carriers are under no 
obligation to extend unsecured credit for communications services to candidates for federal office, if they 
choose to do so, they must comply with the remaining requirements of section 64.804.
469
  In the event a 
carrier does extend unsecured credit to any candidate, section 64.804(b) requires the carrier to extend 
unsecured credit on substantially equal terms and conditions to all candidates.
470
  The record does not 
suggest that the obligation to extend credit on substantially equal terms creates any burden or is 
unnecessary to protect the public interest.  Moreover, we find that retaining this rule is consistent with the 
directive to maintain regulations pursuant to the Federal Election Campaign Act of 1971 while imposing 
minimal burdens on carriers.  
14. Recording of Telephone Conversations with Telephone Companies
a. USTelecom’s Request
171. USTelecom requests forbearance for all carriers from rules governing the recording of 
telephone conversations between a telephone company and the public.
471
  USTelecom argues that section 
64.501 “has been rendered moot by the development of a robust body of privacy laws at the federal and 
state level,” and relies on the Federal Wiretap Act in support of that argument.  It further asserts that there 
is no reason to treat telephone companies differently from other companies when it comes to rules 
                                                          
466
2 U.S.C. § 451; USTelecom Short Order at para. 12.  
467
We have not found evidence of any carrier reports filed with the Commission pursuant to § 64.804(g) regarding 
federal candidates’ unpaid balances for communications services resulting from the extension of unsecured credit.  
To the contrary, at least one carrier reports that neither it nor its wholly-owned affiliates extend unsecured credit for 
communications services to any candidates for Federal office.  See Letter from Victoria Carter-Hall, Manager-
Federal Regulatory, AT&T, to Julie Veach, Bureau Chief, Wireline Competition Bureau, FCC, Re:  Unsecured 
Political Accounts, dated January 29, 2013.  
468
47 C.F.R. § 64.804(c)-(f).  Although we are forbearing from applying the recordkeeping rules of this section, we 
remind carriers that we still retain authority under the Act to seek information regarding their practices with regard 
to any unsecured credit they might extend to a candidate for federal office.  See, e.g., 47 U.S.C. §§ 220, 405.
469
47 C.F.R. § 64.804(a).  To be clear, if a carrier chooses to extend such unsecured credit, the obligation in 
subsection (b) will apply, but the obligations in subsections (c) through (g) will not.
470
47 C.F.R. § 64.804(b).
471
USTelecom Petition at 70; see also 47 C.F.R. § 64.501.
Federal Communications Commission FCC 13-69 
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governing the recording of conversations with customers, and also claims that the rule represents an 
obligation imposed unnecessarily on only a subset of competitors in the communications marketplace.
472
b. Background
172. Section 64.501 is the present-day iteration of rules first promulgated in 1947 to govern 
the recording of telephone conversations between telephone companies and members of the public.
473
  
The Commission instituted a proceeding investigating the use of recording devices in connection with toll 
telephone service and facilities in 1945, due to the conflict between carriers’ then-existing tariff 
provisions prohibiting such use and the demand for such use that became apparent during and after World 
War II.
474
  At that time, the carriers themselves raised privacy concerns with respect to allowing such 
recordings, and the need for adequate notice to the parties that their conversations were being recorded.
475
  
173. The California PUC (CPUC) opposes eliminating this rule, contending that it has not 
been rendered moot by the Federal Wiretap Act, which provides less stringent protection to consumers, or 
by state laws.
476
The CPUC further argues that it is appropriate to treat telephone companies differently 
from other companies because telephone companies control the network over which communications are 
sent.
477
c. Discussion
174. As USTelecom acknowledges, businesses routinely announce that a call “may be 
recorded for quality control or training purposes.”
478
  Thus, we question whether the rule imposes a 
substantial burden.  Nonetheless, for carriers that operate exclusively in jurisdictions that permit one 
caller to record the call without the other party’s knowledge, the rule does impose burdens.  Moreover, we 
agree that, since we initiated the rule more than 60 years ago, the Federal Wiretap Act, as well as State 
laws, have addressed the same issue in a more comprehensive fashion.  Notwithstanding the CPUC’s 
arguments, we are not convinced that a telephone company’s position as its customers’ network provider 
puts it in a different position when speaking to its customers than any other business.
479
That is, we see 
                                                          
472
USTelecom Petition at 70-71.
473
See Use of Recording Devices in Connection with Telephone Service, Docket No. 6787, Report, 11 FCC 1033 
(1947).
474
Id.  (“[T]his matter became acute because of the widespread use of such devices during and since World War II.  
The Bell System companies withheld enforcement of the pertinent tariff regulations during the war since it was 
indicated that the recording devices were being used in war activities.  With the termination of hostilities, however, 
the question of the status of these devices is presented.”)
475
In its 1947 order, the Commission said, “[t]he telephone companies submit that the fundamental principle in 
solving the problem of the use of recorders in connection with telephone service is that any use without the full 
knowledge and consent of all parties to the conversation must be prohibited.”  Id.  The Commission agreed, noting 
that it was “keenly appreciative of the importance and desirability of privacy in telephone conversations.  Such 
conversations should be free from any listening-in by others that is not done with the knowledge and authorization 
of the parties to the call . . . .”  Id.
476
California PUC Comments at 11-12.  The CPUC notes that the Commission rule requires consent of all parties to 
the conversation, whereas the Federal Wiretap Act only requires one party to have knowledge that the call is being 
recorded, and only 12 states, including California, require all parties to consent to interception or recording when 
that interception is done by a private party not under the color of law.
477
Id. at 12-13.
478
USTelecom Petition at 70.
479
Our decision to forbear from applying § 64.501 should not be construed as preferring a single-party consent rule.
Federal Communications Commission FCC 13-69 
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no reason that a telephone company should be subject to different requirements with respect to its
recording of conversations with its customers than should other businesses.
480
  
175. We find that enforcement of this rule is not necessary to ensure that charges, practices, 
classifications or regulations are just and reasonable, and not unjustly or unreasonably discriminatory, nor 
is enforcement of the rule necessary to ensure the public interest, in light of other pertinent rules regarding 
recording of telephone conversations.  Competitive market conditions will not be harmed, and might be 
enhanced, by relieving telephone companies of this burden.  We thus conclude that forbearance from this 
rule is warranted.  However, we emphasize that our decision here is not intended to preempt any state 
requirements regarding such recordings, nor does it preclude any state from adopting rules, like those in 
California and other states, that require all parties to consent to recording.  
15. Prepaid Calling Card Reporting Requirements (§ 64.5001)
a. USTelecom’s Request
176. USTelecom requests forbearance from section 64.5001, which establishes reporting and 
certification requirements for prepaid calling card providers.
481
  USTelecom argues that there is no need 
for any of these requirements.
482
b. Background
177. Sections 64.5001(a) and (b) require prepaid calling card providers to report to their 
transport providers specific information, including percentage of interstate usage (PIU) factors and call 
volumes for which these factors were calculated.
483
  Section 64.5001(c) requires that the officer of each 
prepaid calling card provider submit a quarterly certification to the Commission stating:  (1) the 
percentage of intrastate, interstate, and international calling card minutes for the reporting period;
484
(2) the percentage of total prepaid calling card revenue attributable to interstate and international calls for 
the reporting period;
485
(3) that the provider “is making the required Universal Service Fund 
contribution”;
486
(4) that this contribution is “based on the reported information”;
487
and (5) that the 
prepaid calling card provider has complied with the reporting requirements as to carriers from which it 
purchases transport services.
488
                                                          
480
The rule governs the telephone company’s conversations with customers, and does not address the very different 
issue of recording third-party conversations.  
481
USTelecom Petition at 72.  Prepaid calling card providers are treated as telecommunications carriers and are 
subject to the Act and the Commission’s rules.  Regulation of Prepaid Calling Card Services, WC Docket No. 05-
68, 21 FCC Rcd 7290, 7293, 7298, paras. 10, 21 (2006) (Prepaid Calling Card Services Order).  
482
USTelecom Petition at 72.
483
47 C.F.R. § 64.5001(a), (b).  
484
Id. § 64.5001(c)(1).  
485
Id. § 64.5001(c)(2).
486
Id. § 64.5001(c)(3).
487
Id. § 64.5001(c)(3); see also Prepaid Calling Card Services Order, 21 FCC Rcd at 7298, para. 22 (stating that 
“prepaid calling card providers must contribute to the federal USF based on interstate and international 
telecommunications revenues”); id. at 7304, para. 38.  
488
47 C.F.R. § 64.5001(c)(4) (requiring the certification by the calling card provider to include a statement that it 
has complied with the reporting requirements in § 64.5001(a)).  
Federal Communications Commission FCC 13-69 
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c. Discussion
178. We grant USTelecom’s request for forbearance from the reporting and certification 
requirements in this rule, except for one provision in section 64.5001(c)(3) as it applies to certain prepaid 
calling card providers.  The provision for which we deny forbearance in part requires an officer of a 
prepaid calling card provider to certify it “is making the required Universal Service Fund contribution 
based on the reported information” to the Commission.
489
For that provision, we grant forbearance only 
to those prepaid calling card providers that have a two-year track record of timely filing required annual 
and quarterly Telecommunications Reporting Worksheets (FCC Forms 499-A and 499-Q).  Once a 
prepaid calling card provider has established that track record, it need not comply further with section 
64.5001(c)(3).
490
  
179. The Commission adopted section 64.5001 on an interim basis for two reasons.  First, the 
Commission adopted this rule to establish “certification and reporting requirements that compel the 
prepaid calling card provider to share the necessary information with the carriers that it uses to transport 
traffic.”
491
  Second, it adopted the rule to address the potential for evasion of universal service 
contributions that arose from the difficulty in determining whether prepaid calling card calls were used to 
provide interstate or intrastate traffic.
492
  
180. With respect to the first and second prongs of our forbearance analysis, we find that the 
requirements in rule 64.5001 related to reporting and certifying prepaid calling card traffic for the purpose 
of distinguishing minutes of use between interstate and intrastate jurisdictions are no longer necessary to 
ensure just and reasonable rates or to prevent unreasonable or unjust discrimination.
493
  As USTelecom 
explains, and no commenter disputes, “[c]arriers have established business practices for exchanging 
required data” in the absence of these requirements.
494
  Thus, continued enforcement of rules to force that 
information exchange to ensure just and reasonable rates or to prevent unreasonable or unjust 
discrimination are no longer necessary.
181. For the same reasons, under the second prong of our analysis, we find that these 
provisions are not necessary to protect consumers, and note recent consumer protection efforts by the 
Commission involving the prepaid calling card industry.
495
  Because these requirements are no longer 
                                                          
489
47 C.F.R. § 64.5001(c)(3).  The rule requires the calling card provider to file a certified “statement that it is 
making the required Universal Service Fund contribution based on the reported information.”  Id. (emphasis added).  
As a result of our forbearance grant, the “based on the reported information” requirement is no longer applicable.   
490
We note prepaid calling card providers are not required to pay USF contributions on revenue generated from 
prepaid calling cards sold by, to, or pursuant to contract with the Department of Defense, as a result of the 
Commission’s prior forbearance decision.  Prepaid Calling Card Services Order, 21 FCC Rcd at 7299, para. 25.  
The grant of forbearance from rule 64.5001(c)(2) does not affect this universal service fund exemption. 
491
Prepaid Calling Card Services Order, 21 FCC Rcd at 7300, para. 29.
492
Id. at 7293, 7300-01, paras. 8, 29.  
493
Specifically, we refer to subsections 64.5001(a), (b), (c)(1), (c)(2), and (c)(4).  See 47 C.F.R. § 64.5001 (a), (b), 
(c)(1), (c)(2), (c)(4).
494
See USTelecom Petition at 72.
495
The Commission has found that unfair and deceptive marketing practices are a violation of section 201(b) of the 
Act, see, e.g., Business Discount Plan, Inc., Order of Forfeiture, 15 FCC Rcd 14461 (2000), and has issued Notices 
of Apparent Liability (NALs) against prepaid calling card providers with respect to such activity.  See, e.g., STi 
Telecom Inc. (formerly Epana Networks, Inc.), Notice of Apparent Liability for Forfeiture, 26 FCC Rcd 12808, 
12810-11, paras. 6-7 (2011) (finding that the marketing materials used to sell prepaid calling cards were misleading 
and deceptive regarding the rates and charges applicable to the service and therefore apparently violated Section 
(continued....)
Federal Communications Commission FCC 13-69 
81
necessary to ensure just and reasonable rates or to prevent unreasonable or unjust discrimination, and are 
not necessary to protect consumers, we also find forbearance here to be in the public interest.  As 
discussed above, the industry has established business practices to achieve the same purposes, and it is in 
the public interest to remove duplicative, outmoded and unnecessary requirements in response to the 
marketplace.  We find that elimination of these unnecessary requirements will foster competition by 
removing regulatory burdens and the resulting costs.
182. We also grant in part, under our three-part forbearance analysis, USTelecom’s request to 
forbear from 47 C.F.R. 64.5001(c)(3), the provision of the rule requiring an officer of each prepaid calling 
card provider to certify quarterly to the Commission, under penalty of perjury, that the provider “is 
making the required Universal Service Fund contribution.”
496
We grant forbearance only to those prepaid 
calling card providers that have a two-year track record of complying with their obligations to file annual 
and quarterly Telecommunications Reporting Worksheets, FCC Forms 499-A and 499-Q.
497
  A provider 
will be treated as complying with those obligations if it receives a waiver from the Commission or USAC 
for an untimely filing.  In establishing eligibility for forbearance, the two-year period extends backwards 
from the due date of each quarterly certification under section 64.5001(c)(3).  Thus, for the next quarterly 
certification, due August 1, 2013, the period will extend back to August 1, 2011.  For the subsequent 
quarterly certification, due November 1, 2013, the period will extend back to November 1, 2011.  This 
will allow a provider that does not currently meet the condition for full forbearance from section 
64.5001(c)(3) to meet that condition through compliance with Form 499-A and 499-Q filing obligations 
for any two-year period.  Once a prepaid calling card provider has established that track record, it need 
not comply further with section 64.5001(c)(3).
183. Forms 499-A and 499-Q, which are used to calculate USF contribution assessments, 
provide historical and projected data on filers’ telecommunications revenues, including prepaid calling 
card revenues.  We find that prepaid calling card providers who have submitted their Forms 499-A and 
499-Q in a timely manner over a two-year period have sufficiently guaranteed, by virtue of having their 
executive officers certify as to the truth and accuracy of the underlying reporting,
498
that enforcement of 
the rules is no longer necessary to ensure just and reasonable rates and practices, and not unjustly or 
unreasonably discriminatory rates and practices or to protect consumers.  For the same reason, we also 
find that retaining that certification requirement for those “compliant” providers would not serve the 
public interest.
184. We deny forbearance from the USF-related certification in section 64.5001, however, for 
those prepaid calling card providers that lack a track record.  The Commission explained that “preserving 
(Continued from previous page)                                                          
201(b)); see also Locus Telecommunications, Inc., Notice of Apparent Liability for Forfeiture, 26 FCC Rcd 12818, 
12820-21, paras. 7-8 (2011) (same); Lyca Tel, LLC, Notice of Apparent Liability for Forfeiture, 26 FCC Rcd 12827, 
12829, paras. 6-7 (2011) (same), Touch-Tel USA, LLC, Notice of Apparent Liability for Forfeiture, 26 FCC Rcd 
12836, 12838, paras. 6-7 (2011) (same); Simple Network, Inc., Notice of Apparent Liability for Forfeiture, 26 FCC 
Rcd 16669, 16671-72, paras. 6-7 (2011) (same); NobelTel, LLC, Notice of Apparent Liability for Forfeiture, 27 FCC 
Rcd 11760, 11762-63, paras. 6-7 (2012) (same).  
496
47 C.F.R. § 64.5001(c).  The forbearance we grant applies to all of the data reporting obligations, including those 
in section 64.5001(c)(3) requiring certification that the Universal Service Fund contribution be “based on the 
reported information,” (i.e., “[t]he percentages of intrastate, interstate, and international calling card minutes for that 
reporting period”).  See 47 C.F.R. § 64.5001(a), (c)(1).
497
See Letter from Glenn Reynolds, Vice President, Policy, USTelecom, to Marlene H. Dortch, Secretary, FCC, WC 
Docket No. 12-61, at 1 (filed Apr. 18, 2013).
498
47 C.F.R. § 54.711(a) (“an executive officer of the contributor must certify to the truth and accuracy” of the 
information report on Forms 499-A and 499-Q).
Federal Communications Commission FCC 13-69 
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and advancing universal service” was a primary purpose of adopting section 64.5001.
499
Prepaid calling 
card providers that fail to file required Forms 499-A and 499-Q also have a history of not contributing 
fully to the USF.
500
  Retaining the USF-related certification requirement for those prepaid calling card 
providers should help ensure that each of them makes “an equitable and nondiscriminatory” contribution 
to support universal service in compliance with section 254(d) and the Commission’s USF contribution 
rules.
501
  Thus, we cannot find that this certification requirement, established to protect the federal 
universal service program, is not still necessary to ensure that the practices of these noncompliant prepaid 
calling card providers are just and reasonable in this regard.  
185. More specifically, making an officer of each prepaid calling card provider that lacks a 
two-year record of compliance with required filings of Forms 499-A and 499-Q directly accountable for 
the provider’s adherence to the USF contribution rules increases the likelihood of compliance.
502
In 
addition to requiring each such prepaid calling provider to evaluate in the first instance whether it must 
contribute to the USF, the need to recertify quarterly should induce the responsible officer to evaluate 
whether a prepaid calling card provider that has previously been a de minimis carrier for USF contribution 
purposes now must contribute.
503
  
186. We also note that universal service supports services for the benefit of consumers, by 
reducing retail rates for low-income consumers in the Lifeline program, by reducing the costs of 
broadband-capable networks in high-cost, rural areas, and by ensuring that school, libraries, and health 
care providers have access to the communications services they need at affordable rates.  To the extent a 
provider does not comply with universal service contribution rules, it increases the burden on other 
carriers to contribute, which burden is passed on to consumers in their bills.  We thus conclude that the 
certification requirement for prepaid calling card providers lacking a history of Form 499-A and 499-Q 
compliance is necessary to protect consumers.   
187. Lastly, we deny in part USTelecom’s request to forbear from this universal service 
certification requirement because we also find, for the reasons explained above, that retaining this part of 
the rule for providers lacking a history of Form 499-A and 499-Q compliance is consistent with the public 
interest.  Furthermore, the filing itself only requires a one-page certified report to the Commission.
504
                                                          
499
See Prepaid Calling Card Services Order, 21 FCC Rcd at 7314, para. 70.
500
See, e.g., ADMA Telecom, Inc., Forfeiture Order, 26 FCC Rcd 4152, 4162, para. 28 (2011) (forfeitures totaling 
$361,835 assessed against prepaid calling card provider for failing to file required Forms 499-A and 499-Q and for 
failing to make required USF contributions); see also Kajeet, Inc. and Kajeet/Airlink, LLC, Notice of Apparent 
Liability for Forfeiture and Order, 26 FCC Rcd 16684, 16695-96, paras. 25–26 (2011) (proposing to assess a 
$455,185 forfeiture against a provider of prepaid calling card services and other telecommunication services for 
failing to timely and fully contribute to USF; provider also had failed to timely file Form 499 documents); Compass
Global, Inc., Notice of Apparent Liability for Forfeiture, 23 FCC Rcd 6125, 6138 (2008) (proposing to assess a 
$519,503 forfeiture against a prepaid calling card provider for failing to make required USF contributions; provider  
also had failed to timely file Form 499 documents).
501
47 U.S.C. § 254(d).  
502
Cf. Lifeline and Link Up Reform and Modernization et al., WC Docket Nos. 12-23, 11-42, 03-109, CC Docket 
No. 96-45, Report and Order and Further Notice of Proposed Rulemaking, 27 FCC Rcd 6656, 6714, paras. 125-28 
(Lifeline Reform Order) (requiring that eligible telecommunications officers certify to compliance with certain 
Lifeline program rules).
503
See 47 C.F.R. § 54.708.
504
See, e.g., Clear Choice Telecom, Inc. Quarterly Report of Prepaid Calling Card Service Providers, WC Docket 
No. 05-68 (filed Jan. 24, 2013) (certifying by an officer of the corporation, among other things, that Clear Choice is 
making all required USF contributions based on the reported information).  
Federal Communications Commission FCC 13-69 
83
Indeed, in adopting section 64.5001, the Commission rejected additional reporting and certification 
requirements because it sought to minimize the burden on carriers.
505
We conclude that the benefits of the 
continued certification described above outweigh the costs associated with this requirement, particularly 
in light of the steps we have taken here to significantly reduce the burdens of this rule and make it 
administratively simple.  We therefore find that, going forward, it is in the public interest for each prepaid 
calling card provider lacking a two-year history of timely Form 499-A and 499-Q compliance to certify 
quarterly that “it is making the required Universal Service Fund contribution,” which must reflect full 
compliance with Commission rules.
506
IV. REPORT AND ORDER IN WC DOCKET NO. 10-132
A. CEI/ONA Notice and Background
188. On February 8, 2011, the Commission proposed eliminating the legacy CEI/ONA 
narrowband reporting requirements required under the Computer III safeguards “due to a lack of 
continuing relevance and utility.”
507
  It explained that, since it raised the issue in the 2006 and 2008 
Biennial Review proceedings, no commenter opposed eliminating the reporting requirements or 
advocated retaining them.
508
  The CEI/ONA Notice stated that the Commission does not rely on any of the 
submissions in the course of its decision making.
509
  On August 11, 2011, the Bureau granted on its own 
motion a waiver of the CEI/ONA narrowband reporting requirements pending resolution of the CEI/ONA
Notice.
510
  The Bureau stated that, while it did not prejudge the outcome of the rulemaking, the record 
suggested that the reports are of limited utility and did not justify the burden and expense of preparing 
them.
511
  No commenter to the CEI/ONA Notice supports retaining the reporting requirements.
189. The CEI/ONA Notice sought comment on eliminating the BOCs’ annual, semi-annual, 
quarterly, and non-discrimination reporting requirements.  Prior to the waiver described above, the BOCs 
filed annual reports containing projected deployment schedules for ONA services by type of service and 
percentage of access lines and by market area; disposition of individual requests for ONA services, 
                                                          
505
See, e.g., Prepaid Calling Card Services Order, 21 FCC Rcd at 7301-02, para. 31; id. at 7314, para. 70 (“In 
weighing these alternatives we tried to balance our desire not to unduly burden small entities (small prepaid card 
providers, as well as small LECs and small IXCs) with our goals of ensuring regulatory certainty, preserving and 
advancing universal service, and avoiding market disruption during the pendency of other rulemakings.  The Order
we adopt achieves this balance.”). 
506
47 C.F.R. § 64.5001(c)(3).
507
Review of Wireline Competition Bureau Data Practices, Computer III Further Remand Proceedings:  Bell 
Operating Company Provision of Enhanced Services; 1998 Biennial Regulatory Review – Review of Computer III 
and ONA Safeguards and Requirements, Notice of Proposed Rulemaking, WC Docket No. 10-132, CC Docket Nos. 
95-20, 98-10, Notice of Proposed Rulemaking, 25 FCC Rcd 1579 (2011) (CEI/ONA Notice).
508
Id. at 1583, para. 9 (and citations therein).
509
Id.
510
Review of Wireline Competition Bureau Data Practices, Computer III Further Remand Proceedings:  Bell 
Operating Company Provision of Enhanced Services; 1998 Biennial Regulatory Review – Review of Computer III 
and ONA Safeguards and Requirements, Notice of Proposed Rulemaking, WC Docket No. 10-132, CC Docket Nos. 
95-20, 98-10, 26 FCC Rcd 11280, 11280-81, para. 3 (2011) (CEI/ONA Reporting Waiver).
511
Id.  The Bureau stated that it found good cause to waive the reporting rules as it would allow the BOCs to avoid 
or at least delay incurring the expense of preparing reports that the Commission had proposed to eliminate, and that 
temporarily waiving the reporting requirements would preserve BOC and Commission resources and thus would 
serve the public interest.  This waiver applies to all BOCs subject to these requirements.  Id.
Federal Communications Commission FCC 13-69 
84
including action on requests deemed technically infeasible; information about ONA services that were 
offered through technologies that were new at the time the Commission adopted the requirements, such as 
Signaling System 7 and Integrated Services Digital Network systems; information about operations 
support services and billing; and extensive lists of services that the BOC used for its own enhanced 
services operations.
512
  The BOCs were also required to file semi-annual reports containing a consolidated 
nationwide matrix of ONA services and corresponding state and federal tariff descriptions, computer 
diskettes and printouts of all tariffs, information on 118 categories of network capabilities requested by 
ESPs, and the BOC’s “ONA Services User Guide,” all on paper and diskette.
513
  They filed non-
discrimination reports or affidavits, most on a quarterly basis, that published intervals for installation, 
repair dates, trouble reports, and timelines for BOC operations as compared to BOC provisioning of 
service to competitors.
514
  For CEI, the Commission permits the BOCs to post their substantive CEI plans 
on the Internet and then notify the Bureau at the time of the postings.  The BOCs are no longer required to 
obtain Commission pre-approval before posting the plans, but CEI reporting obligations required the 
BOCs to file paper reports demonstrating compliance with certain nondiscrimination standards.
515
B. Discussion
190. We eliminate the CEI/ONA narrowband reporting requirements.  As we stated in the 
CEI/ONA Notice, the Commission no longer relies on any of the reports in the course of its decision 
making, and there is nothing in the record indicating that the reports contain information that remains 
useful to competitive ESPs.
516
  As we explained above, while certain commenters emphasize that they still 
rely on narrowband CEI and ONA services, they do not object to eliminating these reports.
517
  No 
commenter has indicated that it uses the reported data.
518
                                                          
512
Computer III Further Remand Proceedings:  Bell Operating Company Provision of Enhanced Services, CC 
Docket No. 95-20; 1998 Biennial Regulatory Review – Review of Computer III and ONA Safeguards and 
Requirements, CC Docket No. 98-10, 13 FCC Rcd 6040, 6095-99, paras. 103-11 (1998) (Computer III FNPRM).  
See generally Filing and Review of Open Network Architecture Plans, CC Docket No. 88-2, Memorandum Opinion 
and Order, 6 FCC Rcd 7646 (1991) (ONA Reporting Order) (establishing reporting requirements for ONA services).  
In 1994, the Commission extended to GTE Corporation the Commission’s requirements regarding ONA unbundling, 
ONA reporting, and other Computer III requirements.  Application of Open Network Architecture and 
Nondiscrimination Safeguards to GTE Corporation, CC Docket No. 92-256, Report and Order, 9 FCC Rcd 4922 
(1994). 
513
Computer III FNRPM, 13 FCC Rcd at 6095-99, paras. 103-11; ONA Reporting Order, 6 FCC Rcd at 7678-79, 
App. B.
514
Computer III FNPRM, 13 FCC Rcd at 6099-6103, paras. 112-16 (citing Amendment of Section 64.702 of the 
Commission’s Rules and Regulations (Computer II), CC Docket No. 85-229, Phase II, 2 FCC Rcd 3072 (1987)).
515
Computer III Further Remand Proceedings:  Bell Operating Company Provision of Enhanced Services, CC 
Docket No. 95-20; 1998 Biennial Regulatory Review – Review of Computer III and ONA Safeguards and 
Requirements, CC Docket No. 98-10, Report and Order, 14 FCC Rcd 4289, 4297, paras. 11-12 (1999) (Computer III 
Further Remand Order); Amendment of Section 64.702 of the Commission’s Rules and Regulations, CC Docket No. 
85-229, Phase I, 104 FCC 2d 958, 964, para. 4 (1986) (Computer III Phase I Order) (subsequent citations omitted).
516
In 1998, the Commission stated that a number of years had passed since the Commission imposed the reporting 
requirements and said some of the information required to be disclosed “may no longer be useful, relevant, or 
related to either the safeguard or competition functions” and  began an inquiry to determine if the reporting 
requirements should be eliminated or modified.  Computer III FNPRM, 13 FCC Rcd at 6093-94, para. 100.
517
See supra para. 25.
518
CEI/ONA Notice, 26 FCC Rcd at 1583, para. 9.
Federal Communications Commission FCC 13-69 
85
191. The narrowband reporting requirements are outdated in many respects.  For example, the 
BOCs are required to report on installation and maintenance intervals for detailed categories of ONA 
service that the Commission established in 1990.
519
  Those reporting categories were based on service 
codes that were in use by the BOCs’ provisioning systems during the 1980s.
520
  Recent ONA reports 
contain data for reporting categories that are still active, such as business and Centrex-based services, but 
many of the original category codes contain no provisioning data.
521
192. The BOCs argue that the reports increased their costs of providing service.
522
  
CenturyLink states that, for each semi-annual report, which was over 500 pages and filed in older file 
formatting technology, it incurred internal costs plus the cost of outside consultants to prepare the 
reports.
523
  It further states that it incurred costs associated with having to prepare the reports jointly with 
other BOCs.
524
  The Commission itself has identified inefficiencies associated with requiring each BOC to 
file its own ONA information even though some of this information does not vary among providers.  For 
example, each BOC reported on the network capabilities it used to provide basic narrowband services 
even if the capabilities did not vary in the industry.
525
  In addition, the Commission has previously 
inquired about whether the annual and semi-annual reports required redundant information on ONA 
service availability, some of which is already delineated in state and federal tariffs filed by the BOCs.
526
  
Overall, the record in the CEI/ONA Notice contains no evidence that continuing the reports would provide 
useful information, and we are convinced that the costs and burdens of preparing them outweigh the 
benefits.  The Commission has stated that it must “collect the data it needs, and only the data it needs to 
carry out its statutory responsibilities.”
527
  Unnecessary filing and reporting requirements impose 
administrative costs on carriers that can lead to increased rates for consumers and are not in the public 
interest.
528
193. In light of these conclusions, we find that continued application of the narrowband CEI 
and ONA reporting requirements is no longer necessary.  Since the Bureau waived the requirements in 
2011, no commenters have indicated that the elimination of the required reports has impeded their 
                                                          
519
Filing and Review of Open Network Architecture Plans, CC Docket No. 88-2 Phase I, Memorandum Opinion and 
Order and Order on Reconsideration, 5 FCC Rcd 3084, 3093, paras. 73-80 and App. B (1990).
520
Id. at 3093, para. 77.
521
See, e.g., Qwest Corporation ONA Nondiscrimination Report, CC Docket No. 88-2, Phase 1; CC Docket No. 96-
128 (filed Aug. 1, 2011); Installation and Maintenance Nondiscrimination Reports for Southwestern Bell Telephone, 
L.P., Ameritech, Pacific Bell, Nevada Bell, and BellSouth Telecommunications, CC Docket No. 88-2, Phase I (filed 
July 29, 2011). 
522
CEI/ONA Reporting Waiver, 26 FCC Rcd at 11280, para. 2.
523
CenturyLink Comments, WC Docket No. 10-132, at 2-3.  See Verizon Comments, WC Docket No. 10-132, at 7-
10.
524
CenturyLink Comments, WC Docket No. 10-132, at 2-3.
525
Computer III FNPRM, 13 FCC Rcd at 6098-99, paras. 108-11.
526
Id. at 6099, para. 110.
527
Reporting Requirements for U.S. Providers of International Telecommunications Services, Amendment of Part 43 
of the Commission's Rules, IB Docket No. 04-112, First Report and Order and Further Notice of Proposed 
Rulemaking, 26 FCC Rcd 7274, 7275, para. 1 (2011).
528
Id. at 7282-85, paras. 17-27 (eliminating multiple reporting requirements that were outdated, no longer served a 
useful purpose, and otherwise did not justify the burden of preparing them); CEI/ONA Notice, 26 FCC Rcd at 1583, 
para. 9.
Federal Communications Commission FCC 13-69 
86
enhanced service offerings or otherwise prevented them from obtaining non-discriminatory access to 
CEI/ONA services.  We find that it is more efficient to detect possible access discrimination by looking at 
specific, focused information in the context of an individual complaint proceeding under section 208 of 
the Act than through these outdated monitoring reports.
V. COMPUTER III FURTHER NOTICE OF PROPOSED RULEMAKING
A. Introduction
194. In this Further Notice, we seek comment on how we should streamline or eliminate 
legacy regulations contained in the Computer Inquiry proceedings.  We seek data on the changing market 
for narrowband enhanced services, in particular, the extent to which ESPs continue to need access to the 
BOCs’ basic network transmission services offered through CEI and ONA services.  We propose 
eliminating CEI requirements and seek comment on whether we should retain only limited ONA inputs 
that ESPs require in areas where there are no competitive alternatives.  We also seek comment on the 
need for the continuing application of the All-Carrier Rule that requires non-BOC incumbent LECs to 
offer non-discriminatory access to basic network services for unaffiliated ESPs.  We undertake this 
examination of legacy telephone regulations as part of our commitment to adapt requirements that may no 
longer be necessary as the nation transitions from TDM- to Internet Protocol (IP)-based networks.  The 
Further Notice also advances our efforts to “conduct a data-driven review and provide recommendations 
to modernize the Commission’s policies in a process that encourages the technological transition, 
empowers and protects consumers, promotes competition, and ensures network resiliency and 
reliability.”
529
B. Background
195. In its Computer II proceedings, the Commission required AT&T (and subsequently the 
BOCs) to offer enhanced services through structurally separate subsidiaries.
530
  In the subsequent 
Computer III proceedings, the Commission determined that the benefits of structural separation were 
outweighed by the costs and that non-structural safeguards could protect competing ESPs from improper 
cost allocation and discrimination by the BOCs while avoiding the inefficiencies of structural 
separation.
531
  The Commission adopted CEI and ONA as non-structural safeguards that require the BOCs 
                                                          
529
FCC Chairman Julius Genachowski Announces Formation of ‘Technology Transitions Policy Task Force,’ News 
Release (Dec. 10, 2012), available at http://transition.fcc.gov/Daily_Releases/Daily_Business/2012/db1210/DOC-
317837A1.pdf.
530
Amendment of Section 64.702 of the Commission’s Rules and Regulations (Computer II Final Decision), 77 FCC 
2d 384 (1980), recon., 84 FCC 2d 50 (1980), further recon., 88 FCC 2d 512 (1981), affirmed sub nom. Computer 
and Communications Industry Ass’n v. FCC, 693 F.2d 198 (D.C. Cir. 1982), cert. denied, 461 U.S. 938 (1983).  The 
Commission required other facilities-based common carriers to provide the basic transmission services underlying 
their enhanced services on a nondiscriminatory basis pursuant to tariffs governed by Title II of the Act, referred to as 
the All-Carrier Rule. Computer II, 77 FCC 2d at 474-75, para. 231.  These carriers must offer the underlying basic 
service at the same prices, terms, and conditions to all ESPs, including their own enhanced services operations.  The 
Commission ordered mandatory detariffing of interstate interexchange access services, and competitive local 
exchange carriers (LECs) need not offer the basic transmission services underlying their enhanced services pursuant 
to tariff.  Policy and Rules Concerning the Interstate, Interexchange Marketplace; Implementation of Section 245(g) 
of the Communications Act of 1934, CC Docket No. 96-61, Second Report and Order, 11 FCC Rcd 20730 (1996) 
(adopting mandatory detariffing of most domestic interstate, interexchange services); Order on Reconsideration, 12 
FCC 15014 (1997); Second Order on Reconsideration and Erratum, 14 FCC Rcd 6004 (1999), aff'd, MCI 
WorldCom, Inc. v. FCC, 209 F.3d 760 (D.C. Cir. 2000).  
531
Amendment of Section 64.702 of the Commission’s Rules and Regulations, CC Docket No. 85-229, Phase I, 104 
FCC 2d 958 (1986) (Computer III Phase I Order), recon., 2 FCC Rcd 3035 (1987) (Computer III Phase I 
(continued....)
Federal Communications Commission FCC 13-69 
87
to offer nondiscriminatory interconnection to basic transmission services that competitors purchase to 
provide enhanced services, primarily to end users that use narrowband telephone technology.
532
  The 
Commission has identified examples of narrowband enhanced services as voice mail, store and forward 
services, fax, data processing, alarm monitoring, and dial-up gateways to on-line databases.
533
  BOCs 
must comply with CEI and ONA requirements in order to offer enhanced services on an “integrated” 
basis (i.e., through the regulated telephone company) instead of through a structurally separate affiliate as 
required by section 64.702 of the Commission’s rules.
534
  
196. The BOCs’ CEI plans detail how they provide unaffiliated ESPs with interconnection to 
basic transmission services on the same terms and conditions that the BOCs use for their own enhanced 
services offerings.
535
  The BOCs’ ONA plans, based on the architecture of the BOCs’ networks as they 
(Continued from previous page)                                                          
Reconsideration Order), further recon., 3 FCC Rcd 1135 (1988) (Computer III Phase I Further Reconsideration 
Order), second further recon., 4 FCC Rcd 5927 (1989) (Computer III Phase I Second Further Reconsideration 
Order); Phase I Order and Phase I Recon. Order vacated sub nom. California v. FCC, 905 F.2d 1217 (9th Cir. 
1990) (California I); CC Docket No. 85-229, Phase II, 2 FCC Rcd 3072 (1987) (Computer III Phase II Order), 
recon., 3 FCC Rcd 1150 (1988) (Computer III Phase II Reconsideration Order), further recon., 4 FCC Rcd 5927 
(1989) (Phase II Further Reconsideration Order); Phase II Order vacated, California I, 905 F.2d 1217 (9th Cir. 
1990); Computer III Remand Proceeding, CC Docket No. 90-368, 5 FCC Rcd 7719 (1990) (ONA Remand Order), 
recon., 7 FCC Rcd 909 (1992), pets. for review denied sub nom. California v. FCC, 4 F.3d 1505 (9th Cir. 1993) 
(California II); Computer III Remand Proceedings:  Bell Operating Company Safeguards and Tier 1 Local 
Exchange Company Safeguards, CC Docket No. 90-623, 6 FCC Rcd 7571 (1991) (BOC Safeguards Order), BOC 
Safeguards Order vacated in part and remanded sub nom. California v. FCC, 39 F.3d 919 (9th Cir. 1994) 
(California III), cert. denied, 514 U.S. 1050 (1995); Computer III Further Remand Proceedings:  Bell Operating 
Company Provision of Enhanced Services, CC Docket No. 95-20, Notice of Proposed Rulemaking, 10 FCC Rcd 
8360 (1995) (Computer III Further Remand Notice), Further Notice of Proposed Rulemaking, 13 FCC Rcd 6040 
(1998) (Computer III FNPRM); Report and Order, 14 FCC Rcd 4289 (1999) (Computer III Further Remand Order), 
recon., 14 FCC Rcd 21628 (1999) (Computer III Further Remand Reconsideration Order); see also Further 
Comment Requested to Update and Refresh Record on Computer III Requirements, CC Docket Nos. 95-20, 98-10, 
Public Notice, 16 FCC Rcd 5363 (2001) (collectively referred to as Computer III).
532
The Commission defined basic services as the offering of “a pure transmission capability over a communications 
path that is virtually transparent in terms of its interaction with customer supplied information.”  Computer II Final 
Decision, 77 FCC 2d at 415-16, para. 83, 420, para. 96.  Enhanced services, in turn, were defined as services that 
“combine[] basic service with computer processing applications that act on the format, content, code, protocol or 
similar aspects of the subscriber's transmitted information, or provide the subscriber additional, different, or 
restructured information, or involve subscriber interaction with stored information.”  Id.  In other words, an 
“enhanced service is any offering over the telecommunications network which is more than a basic transmission 
service.”  Id. at 420, para. 97.  The Commission has concluded that the services the Commission has considered 
“enhanced services” are “information services” as defined in the Communications Act.  See Implementation of the 
Non-Accounting Safeguards of Section 271 and 272 of the Communications Act of 1934, as amended, CC Docket 
No. 96-149, First Report and Order and Further Notice of Proposed Rulemaking, 11 FCC Rcd 21905, 21955, para. 
102 (1996); 47 U.S.C. § 153(24).  This Further Notice generally addresses legacy Computer Inquiry requirements 
and uses the term “enhanced services.”  
533
Computer III FNPRM, 13 FCC Rcd at 6042, para. 1; Computer III Further Remand Order, 14 FCC Rcd at 4291-
92, n.11 (listing examples of enhanced services); Bell Operating Companies Joint Petition for Waiver of Computer 
II Rules, Order, 10 FCC Rcd 13758, 13768-70, paras. 68-75 (1995) (CEI Plan Order) (discussing alarm monitoring 
services as enhanced services).
534
47 C.F.R. § 64.702.  
535
Review of Wireline Competition Bureau Data Practices, Computer III Further Remand Proceedings:  Bell 
Operating Company Provision of Enhanced Services; 1998 Biennial Regulatory Review – Review of Computer III 
and ONA Safeguards and Requirements, Notice of Proposed Rulemaking, WC Docket No. 10-132, CC Docket Nos. 
(continued....)
Federal Communications Commission FCC 13-69 
88
existed in the late 1980s, offer ESPs unbundled, tariffed access to basic transmission services regardless 
of whether the BOCs’ affiliated enhanced services offerings use the same components.
536
197. The Commission has had in place a long-standing examination of the substantive 
Computer III structure and what safeguards are appropriate to ensure the continued competitiveness of the 
enhanced services market.  In 1998, the Commission sought comment on what safeguards for BOC 
provision of enhanced services made sense in light of technological, market, and legal conditions, 
particularly the passage of the market opening provisions in the Telecommunications Act of 1996 (1996 
Act), such as the section 251 unbundling requirements.
537
  The Commission stated that it wanted to strike 
a balance between the goal of reducing or eliminating regulatory requirements when competition 
supplants the need for such requirements and a recognition that, until full competition is realized, 
safeguards may be necessary.
538
  Among other items, the Commission sought comment on whether the 
ONA model offers ESPs sufficient network functionalities they need, whether the model requires ESPs to 
purchase unnecessary services or functionalities embedded within the BOCs’ networks, and whether 
(Continued from previous page)                                                          
95-20, 98-10, Notice of Proposed Rulemaking, 25 FCC Rcd 1579, 1580, para. 3 and n.9 (2011) (CEI/ONA Notice) 
(listing nine CEI parameters); Computer III Further Remand Order, 14 FCC Rcd at 4291, para. 4; Computer III 
Further Remand Reconsideration Order, 14 FCC Rcd at 21629, para. 6; see Computer III Phase I Order, 104 FCC 
2d at 1039-42, paras. 155-65.  
536
CEI/ONA Notice, 26 FCC Rcd at 6050, para. 11; Computer III Phase I Order, 104 FCC 2d at 1064, para. 214; 
Computer III FNPRM, 13 FCC Rcd at 6050, para. 11.  Under ONA, ESPs obtain access to various unbundled ONA 
services, termed Basic Service Elements (BSEs), through access links described as Basic Service Arrangements 
(BSAs).  Examples of narrowband BSAs include line side and trunk side circuit switched service.  BSAs must be 
included in a BOC’s interstate access tariff, as well as tariffed at the state level.  ESPs use BSEs to configure their 
services.  Other ONA elements include Complementary Network Services (CNSs), which are optional unbundled 
basic service features (such as stutter dial tone) that an end user may obtain from carriers in order to obtain access to 
or receive enhanced services, and Ancillary Network Services (ANSs), which are non-Title II services, such as 
billing and collection.  Filing and Review of Open Network Architecture Plans, CC Docket No. 88-2, Phase I, 
Memorandum Opinion and Order, 4 FCC Rcd 1, 116, 143-44, paras. 226, 276 (1988) (BOC ONA Order) 
(subsequent citations omitted).  In the Computer III proceeding, the Commission also adopted, as a non-structural 
safeguard, a framework governing dominant carrier use of customer proprietary network information to prevent 
anticompetitive uses of customers' local and long distance services information.  The pre-1996 Act CPNI framework 
was eliminated when the Commission implemented section 222 of the Act.  See Implementation of the 
Telecommunications Act of 1996: Telecommunications Carriers' Use of Customer Proprietary Network Information 
and Other Customer Information, CC Docket No. 96-115, Second Report and Order and Further Notice of Proposed 
Rulemaking, 13 FCC Rcd 8061, 8184-93, paras. 176-89 (1998) (CPNI Order), on recon., 14 FCC Rcd 14409 (1999) 
(CPNI Reconsideration Order), vacated sub nom. U.S. West v. FCC, 182 F.3d 1224 (10th Cir. 1999), cert. denied, 
530 U.S. 1213 (2000); see also Implementation of the Telecommunications Act of 1996, Telecommunications 
Carriers’ Use of Customer Proprietary Network Information and Other Customer Information, CC Docket No. 96-
115; Implementation of the Non-Accounting Safeguards of Sections 271 and 272 of the Communications Act of 
1934, as Amended, CC Docket No. 96-149; 2000 Biennial Regulatory Review—Review of the Policies and Rules 
Concerning Unauthorized Changes of Consumers’ Long Distance Carriers, CC Docket No. 00-257, Third Report 
and Order and Third Further Notice of Proposed Rulemaking, 17 FCC Rcd 14860, 14894-96, paras. 79-82 (2002) 
(affirming previous determinations that the Tenth Circuit vacated only the specific portion of the Commission’s 
CPNI rules relating to the opt-in mechanism).  In 1994, the Commission extended to GTE Corporation the 
Commission’s requirements regarding ONA unbundling, ONA reporting, and other Computer III requirements.  
Application of Open Network Architecture and Nondiscrimination Safeguards to GTE Corporation, CC Docket No. 
92-256, Report and Order, 9 FCC Rcd 4922 (1994).
537
Computer III FNPRM, 13 FCC Rcd at 6042-48, paras. 1-8.
538
Id. at 6406, para. 7.
Federal Communications Commission FCC 13-69 
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ESPs have other means of obtaining such services to enable offerings to their customers.
539
  For CEI, the 
Commission sought comment on streamlining steps it could take to eliminate outdated requirements.
540
  
198. Since 1998, the Commission has modified or eliminated many of the Computer III non-
structural separation requirements. In 1999, it streamlined the CEI requirements.
541
  In 2005, the 
Commission granted the BOCs significant relief from Computer III requirements for wireline broadband 
Internet access services.
542
It stated that these requirements were “adopted based on assumptions 
associated with narrowband services, single purpose network platforms, and circuit-switched 
technology,” and that broadband platforms had emerged that would generally exert competitive pressure 
for BOC services.
543
  The Commission has also granted forbearance from application of Computer Inquiry
rules to the extent that the carriers offer other broadband services.
544
  In light of these changes, the 
Computer III requirements currently apply only to the provision of enhanced services using narrowband 
telephone technology.  Above, we have permanently eliminated for the BOCs the requirement that they 
file annual, semi-annual, quarterly, and non-discrimination compliance reports for CEI and ONA service 
offerings.
545
  
C. Discussion
199. In order to determine how we may streamline or eliminate the remaining legacy 
Computer III obligations, we seek comment on the continued viability of the substantive CEI and ONA 
narrowband requirements.  Recognizing that the enhanced services provider industry may continue to use 
the BOCs’ narrowband networks to serve customers, we seek comment on how we might simplify and 
                                                          
539
Id. at 6085-89, paras. 78-91.
540
Id. at 6076-79, paras. 60-65.
541
Computer III Further Remand Order, 14 FCC Rcd at 4297, paras. 11-12.  A BOC must file paper reports to 
demonstrate that it is complying with the CEI nondiscrimination standards.  Computer III Phase I Order, 104 FCC 
2d at 964, para. 4.
542
Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, CC Docket No. 02-33, 
Report and Order and Notice of Proposed Rulemaking, 20 FCC Rcd 14853, 14875-76, para. 41 (2005) (WBIAS 
Order), aff’d, Time Warner Telecom v. FCC, 507 F.3d 205 (3
rd
Cir. 2007).
543
WBIAS Order, 20 FCC Rcd at 14876-86, paras. 42-64.
544
See, e.g., Petitions of the Verizon Telephone Companies for Forbearance Pursuant to 47 U.S.C. § 160(c) in the 
Boston, New York, Philadelphia, Pittsburgh, Providence, and Virginia Beach Metropolitan Statistical Areas, WC 
Docket No. 06-172, Memorandum Opinion and Order, 22 FCC Rcd 21293, 21318, para. 45 (2007) (Verizon 6 MSA 
Forbearance Order); Petitions of Qwest Corporation for Forbearance Pursuant to 47 U.S.C. § 160(c) in the 
Denver, Minneapolis-St. Paul, Phoenix, and Seattle Metropolitan Statistical Areas, WC Docket No. 07-97, 
Memorandum Opinion and Order, 23 FCC Rcd at 11729, 11760, para. 44 (2008) (Qwest 4 MSA Forbearance 
Order) (citing WBIAS Order, 20 FCC Rcd at 14875-76, para. 41); Petition of AT&T, Inc. for Forbearance Under 47 
U.S.C. § 160(c) from Title II and Computer Inquiry Rules with Respect to its Broadband Services; Petition of 
BellSouth Corporation for Forbearance 47 U.S.C. § 160(c) from Title II and Computer Inquiry Rules with Respect 
to its Broadband Services, WC Docket No. 06-125, Memorandum Opinion and Order, 22 FCC Rcd 18705, 18733-
35, paras. 52-58 (2007); Verizon Telephone Companies' Petition for Forbearance from Title II and Computer 
Inquiry Rules with Respect to their Broadband Services Is Granted by Operation of Law, WC Docket No. 04-440, 
News Release (rel. Mar. 20, 2006); Petition of the Verizon Telephone Companies for Forbearance under 47 U.S.C. 
§ 160(c) from Title II and Computer Inquiry Rules with Respect to Their Broadband Services, WC Docket No. 04-
440, Order, 20 FCC Rcd 20037 (2004); Qwest Petition for Forbearance Under 47 U.S.C. § 160(c) from Title II and 
Computer Inquiry Rules with Respect to Broadband Services, WC Docket No. 06-125, Memorandum Opinion and 
Order, 23 FCC Rcd 12260 (2008).
545
See supra paras. 192-95.
Federal Communications Commission FCC 13-69 
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modernize efficient access to service elements that competitors still need while at the same time 
eliminating services that are no longer necessary.  Below, we propose to eliminate CEI requirements and 
seek comment on a specific streamlined process we might adopt to review BOC requests to eliminate or 
modify their ONA offerings.  As explained above, the BOCs requested forbearance from enforcement of 
all CEI and ONA requirements—relief that would have resulted in an immediate, universal elimination of 
wholesale access to their narrowband networks for ESPs.
546
  We have denied the immediate relief that the 
BOCs requested because the record in that proceeding did not support granting relief.
547
We expect that 
this Further Notice will provide data that may allow us to grant some relief from these legacy regulations 
in an efficient and comprehensive manner.
200. The Commission made clear when it adopted the Computer III requirements that a 
“major goal of ONA is to increase opportunities for ESPs to use the BOCs’ regulated networks in highly 
efficient ways, enabling ESPs to expand their markets for their present services and develop new 
offerings as well, all to the benefit of consumers.”
548
  The Commission intended the ONA framework to 
evolve.  It did not prescribe a specific network design for ONA services and stated that the BOCs, with 
input from the enhanced services industry, should implement ONA in a way that matched the capabilities 
of their networks, “both current and future, with needs of the ESPs.”
549
  The Commission intended 
originally that CEI plans would be an interim measure until the BOCs fully implemented ONA.
550
  
Referring to CEI as a “first phase,” the Commission intended CEI to provide ESPs with interconnection 
to the BOCs’ networks that was substantially equivalent to the interconnection the BOCs provided for 
their own enhanced services until the BOCs fully unbundled their networks to ESPs through ONA.
551
  
Although the Commission eliminated formal approval of CEI plans in the Computer III Further Remand 
Order, we have continued to require the BOCs to maintain their CEI plans and post them on the Internet.  
201. We propose to eliminate the requirement that BOCs maintain and post their CEI plans on 
the Internet.  CEI plans were always intended to be an interim measure, designed to bridge the gap 
between the Commission's decision to lift structural separation in Computer III and the implementation of 
ONA.
552
  In light of the changing market for narrowband enhanced services, we expect that CEI plans are 
not necessary to protect against access discrimination.  We seek comment on this proposal.  ONA has 
provided ESPs a greater level of protection against access discrimination than CEI.  Under ONA, not only 
must the BOCs offer network services to competing ESPs in compliance with the nine CEI “equal access” 
parameters,
553
but they must also unbundle and tariff key network service elements beyond those they use 
                                                          
546
See supra paras. 22-29.  
547
Id. 
548
ONA Remand Order, 5 FCC Rcd at 7720, paras. 7, 11.
549
BOC ONA Order, 4 FCC Rcd at 11, para. 3.  
550
See Computer III FNPRM, 13 FCC Rcd at 6077, para. 61.
551
Id. at 6049, para. 10.
552
See id. at 6077, para. 61.
553
A CEI plan details how a BOC would comply with nine CEI “equal access” parameters with respect to the 
provision of a specific enhanced service. These parameters include: (1) interface functionality; (2) unbundling of 
basic services; (3) resale; (4) technical characteristics; (5) installation, maintenance, and repair; (6) end user access; 
(7) CEI availability as of the date the BOC offers its own enhanced service to the public; (8) minimization of 
transport costs; and (9) availability to all interested ESPs.  See Computer III Phase I Order, 104 FCC 2d at 1039-42, 
paras. 154-66.
Federal Communications Commission FCC 13-69 
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to provide their own enhanced services offerings.
554
  To the extent that we find it necessary to retain any 
limited ONA requirements, we expect that ESPs will have adequate access to the BOCs’ legacy network 
through those arrangements.   
202. In light of the time that has passed since the Computer III FNPRM, we seek current 
information on whether ONA offerings continue to be an effective means of providing competitive ESPs 
with access to unbundled network services they need to structure efficient service offerings.  To the extent 
that the requirements or offerings are ineffective, we request that commenters cite to specific instances to 
support their claims.  The Commission is now examining the technological transition of legacy networks 
and protocols toward modern networks and services in several contexts.
555
  ONA requirements are legacy 
regulations aimed at giving competitors wholesale access to narrowband technologies for the provision of 
enhanced services, and we are therefore interested in whether competitors are using narrowband ONA 
offerings to offer new services or whether they are transitioning away from narrowband products.  We 
seek comment on that question.  We also ask the BOCs to provide information on specific narrowband 
ONA offerings that they currently provision for unaffiliated ESPs.  In particular, we seek information 
about specific service inputs that ESPs may still require from the BOCs to serve narrowband customers 
and on whether we should eliminate all other services.
203. We seek comment on the extent to which the BOCs themselves continue to provide 
narrowband enhanced services and whether there are sufficient alternatives such that the BOCs are 
prevented, at least in some areas, from engaging in harmful discrimination against unaffiliated ESPs.  We 
seek data on the alternatives available and the specific markets in which such alternatives are available.  
Do ESPs still rely primarily on narrowband ONA services, or do they use other means to obtain services?  
We are interested in whether enhanced service competitors use a combination of inputs from different 
providers.
204. The Commission originally required the BOCs to maintain a sufficient level of 
uniformity among their ONA services, in part so that ESPs could market national offerings.
556
Is this 
requirement still necessary today for narrowband offerings or do ESPs seek more tailored arrangements 
based on their customer base?  Commenters should identify what other network platforms, such as cable 
or broadband, offer viable options for re-structuring existing enhanced services that customers still use 
and whether ESPs would have access to those options in the areas in which their customers are located, 
including in rural areas.  If alternatives are available, do they enable functionalities that ESPs require for 
specific narrowband products, such as alarm monitoring services or voice mail?  Commenters should 
explain whether ESPs use ONA offerings for any public safety related offerings.  In addition, we seek 
comment on whether ESPs obtain from the BOCs unbundled network elements under section 251 of the 
                                                          
554
Computer III FNPRM, 13 FCC Rcd at 6077, para. 61 (citing Computer III Phase I Order, 104 FCC 2d at 1019-
20, para. 113; Computer III Further Remand Proceedings, 10 FCC Rcd at 8373, para. 18).
555
See, e.g., Pleading Cycle Established for AT&T and NTCA Petition, GN Docket No. 12-353, Public Notice, 27 
FCC Rcd 15766 (rel. Dec. 14, 2012) (seeking comment on AT&T and National Telecommunications Cooperative 
Association petitions to open proceedings on the transition from TDM to IP networks); FCC Chairman Julius 
Genachowski Announces Formation of “Technology Transitions Policy Task Force,” News Release (Dec. 10, 
2012); Technology Transitions Policy Task Force Seeks Comment on Potential Trials, GN Docket No. 13-5, Public 
Notice, DA 13-1016 (rel. May 10, 2013), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-13-
1016A1.pdf.
556
BOC ONA Order, 4 FCC Rcd at 13-16, 95-110, paras. 6, 9, 15, 185-213. 
Federal Communications Commission FCC 13-69 
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Act if the providers are also telecommunications carriers or if they can obtain basic services from 
competitive telecommunications providers.
557
  
205. The ONA framework consists of multiple requirements in addition to the tariffing of 
basic service offerings.  These include the ONA amendment process under which a BOC that seeks to 
offer an enhanced service that uses a new basic service element, or otherwise uses different configurations 
of underlying basic services than those in its approved ONA plan, must amend its ONA plan at least 90 
days before it offers the new enhanced service.
558
  In addition, an ESP can request a new ONA basic 
service from the BOC and must receive a response from the BOC within 120 days regarding whether the 
BOC will provide the service.  The BOC must evaluate and justify its response using specific factors, 
including market area demand, utility to ESPs as perceived by the providers themselves, and cost and 
technical feasibility.
559
  We are interested in obtaining information about how often the BOCs received a 
request under the 120 day process, including the date of the most recent request, and the outcome of the 
request.  The BOCs should also address the last time they amended their ONA plans.  ESPs should 
address whether the 120 day process continues to be of value and whether they contemplate using it in the 
future.  We seek comment on the extent to which the narrowband ONA obligations may increase the 
BOCs’ costs of providing enhanced services.  Commenters should identify costs with specificity 
wherever possible.  We also ask commenters to address whether there are continuing benefits associated 
with the obligations that justify the costs.
206. At the beginning of the ONA implementation process, the Commission found that it 
would not be reasonable for BOCs to withdraw any services listed in their approved ONA plans and that 
it would not look favorably on requests for withdrawal.
560
  It did, however, outline a process for BOCs to 
withdraw ONA services.  It stated that, once an ONA service element was federally tariffed, the BOC 
must request and receive advance approval in writing before filing tariff revisions to discontinue offering 
of that service.
561
  The Commission, acting through the Bureau, has granted such approvals in a few 
limited circumstances, each involving an extended proceeding.  In those proceedings, the Bureau 
evaluated the reasonableness of the withdrawal request to see if circumstances justified the elimination of 
specific ONA services.  It reviewed criteria including whether the BOC had existing customers for the 
service and whether suitable alternative services existed.  It also accepted BOC proposals that existing 
customers should have an opportunity to continue to purchase the withdrawn ONA service element on a 
grandfathered basis.
562
  We seek comment on what type of simplified process might now be feasible for 
                                                          
557
The Commission has explained that section 251 requires incumbent LECs to offer physical facilities of the 
network to telecommunications providers while unbundling under ONA is, in contrast, the unbundling of basic 
services, not the substitution of underlying facilities.  ONA unbundling also does not mandate interconnection of 
facilities.  Computer III FNPRM, 13 FCC Rcd at 6090-91, para. 93. 
558
Computer III Phase I Order, 104 FCC 2d at 1068, para. 221; see Filing and Review of Open Network 
Architecture Plans, CC Docket No. 88-2, Phase I, Memorandum Opinion and Order, 6 FCC Rcd 7646, 7654-55, 
paras. 14-19 (1991) (BOC ONA Further Amendment Order).
559
BOC ONA Order, 4 FCC Rcd at 205-08, paras. 205-08; BOC ONA Further Amendment Order, 6 FCC Rcd at 
7654-555, paras. 14-19.
560
BOC ONA Further Amendment Order, 6 FCC Rcd at 7652-53, para. 10.
561
Id.
562
See BellSouth Open Network Architecture Plan Amendment, CC Docket No. 88-2, Memorandum Opinion and 
Order, 18 FCC Rcd 15844, 15847-48, para. 5 (Wireline Comp. Bur. 2003); Qwest Petition for Permission to 
Withdraw ONA Services, WC Docket No. 02-355, Memorandum Opinion and Order, 19 FCC Rcd 7164, 7167, para. 
6 (Wireline Comp. Bur. 2004).
Federal Communications Commission FCC 13-69 
93
BOCs to use to withdraw ONA service elements that they assert are no longer useful or for which there 
are alternative offerings.  Should we use the same criteria the Bureau relied upon in reviewing past 
requests?  We seek comment on how precisely a BOC should define the service area in which it requests 
to eliminate services.  By requiring BOCs to demonstrate with specificity which ONA services they seek 
to retire and what alternatives are available, we can move toward an orderly and efficient process for 
eliminating services that may no longer be necessary.
207. We seek comment on what type of process would be most efficient for us to review 
requests to reduce or eliminate ONA service offerings that are included in the BOCs’ ONA plans and 
tariffs.  Because the elimination of basic narrowband service elements currently available under the ONA 
plans could impact ESPs that have limited alternatives for these services, we seek comment on adopting a 
discontinuance process that allows for comments, a notice period, and affirmative action by the 
Commission.  This would allow more time for ESPs to transition to other arrangements whether from the 
BOCs, themselves, or alternative providers.  We seek comment on adopting a process that is similar to the 
standard streamlined process for service discontinuance applications under section 214 of the Act.
563
  
Under the section 214 process, a dominant carrier such as a BOC that seeks to discontinue, reduce, or 
impair service must notify affected customers and file an application with the Commission.
564
  The 
application is automatically granted on the 60
th
day after its filing unless the Commission has notified the 
applicant that the grant will not automatically be effective.
565
Specifically, we seek comment on the 
following proposal:
A BOC that seeks to withdraw and discontinue narrowband Open Network Architecture (ONA)-
related services shall be subject to the following procedures:
The BOC shall notify all affected customers of the planned withdrawal and discontinuance in 
writing.  The notification shall include the name and address of the carrier, date of planned 
service withdrawal and discontinuance, points of geographic areas of service affected, and a 
brief description of the type of service affected.  The notification shall also include a statement to 
customers as follows:
The FCC will normally authorize this proposed withdrawal and discontinuance of 
service unless it is shown that customers would be unable to receive service or a 
reasonable substitute from another carrier or that the public convenience and 
necessity is otherwise adversely affected.  If you wish to object, file your comments 
as soon as possible, but no later than 30 days after the Commission releases public 
notice of the proposed withdrawal or discontinuance.  Comments should include 
specific information about the impact of this proposed withdrawal and 
discontinuance on you or your company, including any inability to acquire 
reasonable substitute service.  Comments must be filed electronically using the 
Internet through the Commission’s Electronic Comment Filing System (ECFS) and 
reference the proceeding number on the public notice.  ECFS is accessible at 
http://apps.fcc.gov/ecfs/.
The BOC shall file with this Commission, on or after the date on which it has given notice to all 
affected customers, an application which shall contain the name and address of the carrier, date 
                                                          
563
47 U.S.C. § 214.
564
47 C.F.R. § 63.71.
565
47 C.F.R. § 63.71(c).
Federal Communications Commission FCC 13-69 
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of planned service withdrawal and discontinuance, points of geographic areas of service affected, 
brief description of the type of service affected, brief description of the dates and methods of 
notice to all affected customers, or a statement that no customers are currently using the service, 
and any other supplemental information the Commission may require.
The application to withdraw and discontinue ONA services shall be automatically granted on the 
60
th
day after its filing with the Commission without any notification to the applicant unless the 
Commission has notified the applicant that the grant will not be automatically effective.  For 
purposes of this section, an application will be deemed filed on the date the Commission releases 
public notice of the filing.
208. Such a process would set a threshold showing for a BOC to withdraw an ONA service 
and allow ESPs an orderly notice and comment process to object to the withdrawal.  We seek comment 
on whether we should permit BOCs to include multiple services in a single notice for a particular 
geographic area.  The process would also allow affected ESPs the opportunity to address whether they 
would be unable to serve customers without access to the service.
209. Because we propose to eliminate CEI and seek comment on streamlining or eliminating 
ONA requirements, it is important for ESPs to have sufficient detail to understand the impact of any 
possible reduction in availability.  BOCs should comment on what types of transition arrangements might 
be possible to ensure that ESPs can still serve their narrowband customers.  We seek comment on whether 
BOCs would continue to make CEI and ONA service offerings and network functionalities available 
through alternative means, including through the use of other tariffed services.  Would they be available 
through a transition to unbundled network elements or resold services?  We seek information from the 
BOCs on whether grandfathering arrangements would be available based on existing prices, terms, and 
conditions.  Should we require BOCs to grandfather existing customers for a period of time (e.g., three 
years), and if so, what would be an appropriate time limit?
210. Non-BOC facilities-based common carriers must provide the basic transmission services 
underlying their enhanced services on a nondiscriminatory basis pursuant to tariffs under the All-Carrier 
Rule.
566
  The rule requires common carriers to provide basic transmission services at the same prices, 
terms, and conditions to all ESPs, including themselves.
567
  We seek comment on the extent to which 
ESPs continue to rely on these tariffed transmission services to provide narrowband services to customers 
and whether there are alternative providers available.  In particular, we seek comment on whether we 
should retain network access requirements under the All-Carrier Rule beyond the time that CEI and ONA 
may sunset.  Would ESPs, including those offering certain services such as alarm monitoring, continue to 
require access to incumbent LEC networks in non-BOC territory because there are more limited 
alternatives in those areas, or do cable, wireless, and VoIP platforms offer ESPs viable alternatives?  We 
also seek comment on whether the incumbent carriers themselves continue to provide narrowband 
enhanced services such that is important to retain the All-Carrier Rule to prevent discriminatory conduct 
against unaffiliated ESPs.
VI. SECOND FURTHER NOTICE OF PROPOSED RULEMAKING
A. Introduction
211. In furtherance of our commitment to revisit “rules that may be outmoded, ineffective, 
insufficient, or excessively burdensome,” while continuing to promote competition and consumer 
                                                          
566
Computer II Final Decision, 77 FCC 2d at 474-75, para. 231.  
567
Id.
Federal Communications Commission FCC 13-69 
95
protection consistent with the Act,
568
we evaluate in this Second Further Notice of Proposed Rulemaking 
(Second FNPRM) the structural separation requirements of section 64.1903 of the Commission’s rules,
569
as they apply to rate-of-return carriers providing facilities-based in-region, interexchange, interstate long 
distance services (in-region long distance services).
570
Through this proceeding, we intend to modernize 
our rules to reflect the competitive and marketplace realities for long distance service—at one time an 
expensive service, today one frequently offered on an unlimited basis by numerous facilities-based 
providers.
212. Section 64.1903, as written, requires independent ILECs providing long distance services 
using their own facilities to do so through a separate corporate subsidiary that does not jointly own 
transmission or switching equipment with the local exchange company.
571
  The Commission promulgated 
section 64.1903 against a regulatory backdrop in which local telephone service, interstate long distance, 
and intrastate long distance were distinct services, for which consumers often chose separate providers.
572
  
Since the codification of section 64.1903 more than fifteen years ago, we have seen transformative 
marketplace and regulatory changes, calling into question whether the current rule is the least burdensome 
way to ensure that our goals of competition and consumer protection are met.  The Commission has 
acknowledged these changes,
573
and in 2007 granted relief to the Bell Operating Companies (BOCs) from 
a regulatory framework with similar structural separation requirements as section 64.1903.
574
                                                          
568
See Exec. Order No. 13,579, Regulation and Independent Regulatory Agencies, 76 Fed. Reg. 41587 (2011) 
(Executive Order 13,579).  
569
47 C.F.R. § 64.1903.
570
We use the term “in-region long distance service” to refer collectively to the telecommunications services that 
this Second FNPRM addresses.  This term encompasses the in-region, domestic, interstate, interexchange 
telecommunications services and the in-region, international telecommunications services that independent ILECs 
are required to provide only through section 64.1903 separate affiliates or divisions.  See 47 C.F.R. § 64.1903.  
These services include both traditional voice services and broadband telecommunications services.
571
Id.  Independent ILECs providing services exclusively through resale may do so through a separate corporate 
division.  47 C.F.R. § 64.1903(b)(1).
572
See, e.g., Section 272(f)(1) Sunset of the BOC Separate Affiliate and Related Requirements, 2000 Biennial 
Regulatory Review Separate Affiliate Requirements of Section 64.1903 of the Commission’s Rules; Petition of AT&T 
Inc. for Interexchange Services, WC Docket Nos. 02-112, 06-120, CC Docket No. 00-175, Report and Order and 
Memorandum Opinion and Order, 22 FCC Rcd 16440, 16455, paras. 26-27, 16500, para.121 (2007) (Section 272 
Sunset Order).
573
Between September 2001 and May 2003, the Commission released three notices of proposed rulemaking that 
raised the question of what safeguards, if any, independent ILECs and BOCs should be subject to in their provision 
of in-region long distance services.  See 2000 Biennial Regulatory Review Separate Affiliate Requirements of 
Section 64.1903 of the Commission’s Rules, CC Docket No. 00-175, Notice of Proposed Rulemaking, 16 FCC Rcd 
17270 (2001) (Independent Incumbent LEC Separate Affiliate NPRM) (asking whether structural safeguards should 
apply to independent ILEC provision of in-region long distance services); Section 272(f)(1) Sunset of the BOC 
Separate Affiliate and Related Requirements, WC Docket No. 02-112, Notice of Proposed Rulemaking, 17 FCC Rcd 
9916 (2002) (Section 272 Sunset NPRM) (asking whether structural safeguards should apply to BOC provision of in-
region, interLATA telecommunications services); Section 272(f) Sunset of the BOC Separate Affiliate and Related 
Requirements, WC Docket No. 02-112, Further Notice of Proposed Rulemaking, 18 FCC Rcd 10914 (2003) (BOC 
and Independent Incumbent LEC FNPRM) (asking whether the Commission should classify the independent ILECs 
and BOCs as dominant in the provision of in-region long distance services in the event those carriers were allowed 
to provide those services outside of separate affiliates). 
574
See Section 272 Sunset Order, 22 FCC Rcd at 16442, para. 2; see also 47 U.S.C. § 272.
Federal Communications Commission FCC 13-69 
96
213. Today, the Commission adopts, above, the USTelecom Forbearance Order,
575
which, 
among other things, grants the request of the United States Telecom Association (USTelecom) for 
forbearance from section 64.1903 as it applies to price cap carriers that comply with certain conditions.
576
  
Based on the record in that proceeding, however, the USTelecom Forbearance Order denies similar relief 
to independent ILECs subject to rate-of-return regulation “due to the continuing potential for cost 
misallocation.”
577
  In this Second FNPRM, we take the next steps toward modernizing our rules for the 
non-BOC ILECs.  Considering developments in today’s marketplace, we seek comment on the costs and 
benefits of continuing to apply section 64.1903 to rate-of-return carriers, and whether such carriers
continue to have the ability and incentive to engage in anticompetitive behavior.
B. Background
1. Section 64.1903 of the Commission’s Rules
214. Section 64.1903 of the Commission’s rules sets forth the structural requirements that 
apply to an independent ILEC’s provision of in-region long distance services.
578
  That rule as written 
requires every independent ILEC providing those services using its own switching or transmission 
facilities to do so only through a separate affiliate that: (1) maintains books of account separate from 
those the independent ILEC maintains; (2) does not jointly own transmission or switching facilities with 
its independent ILEC; and (3) purchases tariffed services from the independent ILEC only pursuant to the 
ILEC’s tariffs, except that the separate affiliate also may acquire unbundled network elements (UNEs) 
and exchange services pursuant to an approved interconnection agreement.
579
  Independent ILECs that 
provide long distance service exclusively through resale, however, may do so through a separate 
corporate division rather than an entirely separate company.
580
2. Historical Regulation of Independent ILEC Long Distance Services
215. In the 1980s and 1990s, the Commission developed a regulatory framework to ensure that 
ILECs could not unduly extend their market power in the local market to the provision of long distance 
services.  When those regulations were created, local telephone service, interstate long distance, and 
intrastate long distance were distinct services, for which consumers often chose separate carriers.  The 
long distance marketplace has changed dramatically since then, warranting a review of these rules. 
216. Competitive Carrier Proceedings.  Section 64.1903 is rooted in the Competitive Carrier
proceeding.
581
  In a series of orders that began in 1979, the Commission distinguished between carriers 
                                                          
575
In this Second FNPRM, we refer to the Order above (paras. 1-187) as the USTelecom Forbearance Order.  The 
relevant section of the USTelecom Forbearance Order corresponding to this Second FNPRM is section III.B.11, 
“Structural Separation Requirements for Independent ILECs,” supra paras. 135-162; see also infra para. 228.
576
See infra paras. 227-228.
577
USTelecom Forbearance Order, supra at para. 139.
578
47 C.F.R. § 64.1903.
579
Id.  
580
An independent ILEC provides in-region long distance services exclusively through resale if it provides those 
services without using its own “interexchange switching or transmission facilities or capability.”  47 C.F.R. 
§ 64.1903(b)(1).  
581
Policy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations 
Therefor, CC Docket No. 79-252, Notice of Inquiry and Proposed Rulemaking, 77 FCC 2d 308 (1979); Policy Rules 
Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations Therefor, CC Docket 
No. 79-252, First Report and Order, 85 FCC 2d 1 (1980) (Competitive Carrier First Report and Order); Policy and 
Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations Therefor, CC 
(continued....)
Federal Communications Commission FCC 13-69 
97
with individual market power (dominant carriers) and those without market power (nondominant 
carriers).
582
  The Commission found it appropriate to continue subjecting dominant carriers to full 
regulation under Title II of the Act.
583
  The Commission further found that because nondominant carriers 
lacked market power, it was appropriate to reduce their regulatory obligations.
584
217. In the Competitive Carrier First Report and Order, the Commission classified 
independent ILECs as dominant with respect to both interstate access services and interstate long distance 
services.
585
  As competition emerged in the long distance marketplace, the Commission began 
reexamining whether it should apply dominant carrier regulation to the interstate long distance services 
provided by independent ILECs.  In the Competitive Carrier Fourth Report and Order, the Commission 
concluded that interexchange carriers affiliated with independent ILECs would be regulated as 
nondominant interexchange carriers.
586
  In the Competitive Carrier Fifth Report and Order, the 
Commission adopted requirements for these separate affiliates that, with minor modifications, are now 
codified in section 64.1903.
587
  In that order, the Commission did not require that every independent ILEC 
provide interstate long distance services through a separate affiliate.
588
  If, however, such a carrier did not 
provide service through an affiliate, the independent ILEC would be subject to dominant carrier 
regulation in its provision of domestic, interstate, interexchange services.
589
218. LEC Classification Order and Second Reconsideration Order. In the LEC Classification 
Order, the Commission classified all in-region long distance services provided by an incumbent ILEC as 
(Continued from previous page)                                                          
Docket No. 79-252, Further Notice of Proposed Rulemaking, 84 FCC 2d 445 (1981); Policy and Rules Concerning 
Rates for Competitive Common Carrier Services and Facilities Authorizations Therefor, CC Docket No. 79-252, 
Second Further Notice of Proposed Rulemaking, FCC 82-187, 47 Fed. Reg. 17308 (1982); Policy and Rules 
Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations Therefor, CC Docket 
No. 79-252, Second Report and Order, 91 FCC 2d 59 (1982); Policy and Rules Concerning Rates for Competitive 
Common Carrier Services and Facilities Authorizations Therefor, CC Docket No. 79-252, Order on 
Reconsideration, 93 FCC 2d 54 (1983); Policy and Rules Concerning Rates for Competitive Common Carrier 
Services and Facilities Authorizations Therefor, CC Docket No. 79-252, Third Further Notice of Proposed 
Rulemaking, 48 Fed. Reg. 28292 (1983); Third Report and Order, 48 Fed. Reg. 46791 (CCB 1983); Policy and 
Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations Therefor, CC 
Docket No. 79-252, Fourth Report and Order, 95 FCC 2d 554 (1983) (Competitive Carrier Fourth Report and 
Order), vacated, AT&T v. FCC, 978 F.2d 727 (D.C. Cir. 1992), cert. denied, MCI Telecomm Corp. v. AT&T, 509 
U.S. 913 (1993); Policy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities 
Authorizations Therefor, CC Docket No. 79-252, Fifth Report and Order, 98 FCC 2d 1191 (1984) (Competitive 
Carrier Fifth Report and Order); Policy and Rules Concerning Rates for Competitive Common Carrier Services and 
Facilities Authorizations Therefor, CC Docket No. 79-252, Sixth Report and Order, 99 FCC 2d 1020 (1985), 
vacated, MCI Telecomm Corp. v. FCC, 765 F.2d 1186 (D.C. Cir. 1985), aff’d, MCI Telecomm Corp. v. AT&T, 512 
U.S. 218 (1994) (MCI v. AT&T) (collectively, the Competitive Carrier proceeding); see 47 C.F.R. § 61.3(q), (y).
582
See, e.g., Competitive Carrier First Report and Order, 85 FCC 2d at 10-11, paras. 25-27.
583
Id. at 10-11, para. 26.
584
Id. at 11, para. 27.
585
Id. at 24-25, para. 65.
586
Competitive Carrier Fourth Report and Order, 95 FCC 2d at 575-79, paras. 31-37.
587
Competitive Carrier Fifth Report and Order, 98 FCC 2d at 1198, para. 9.
588
Id.
589
Id. at 1198-99, para. 9 (“Interstate services provided directly by exchange telephone companies (not through 
affiliates) are regulated as dominant.”).
Federal Communications Commission FCC 13-69 
98
nondominant.
590
  In its discussion of whether to apply dominant carrier regulation, the Commission 
focused on the difference between classical (or Stiglerian) market power, which refers to “the ability of a 
firm profitably to raise and sustain its price above the competitive level by restricting its own output,”
591
and exclusionary (or Bainian) market power, which refers to “the ability of a firm profitably to raise and 
sustain its price significantly above the competitive level by raising its rivals’ costs and thereby causing 
the rivals to restrain their output.”
592
  The Commission found that dominant carrier regulation was 
generally designed to address classical, rather than exclusionary, market power.
593
  
219. In analyzing classical market power, the Commission found that independent ILECs did 
not have the ability to raise the prices of those services above competitive levels by restricting their own 
output.
594
  The Commission also found that the independent ILECs would be unable to use their control of 
bottleneck local exchange and exchange access facilities to such an extent that they would have the ability 
to raise prices by restricting their own output.
595
  The Commission therefore held that dominant carrier 
regulation of the independent ILECs’ long distance services would be “inappropriate.”
596
  
220. Despite that classification decision, the Commission was concerned about independent 
ILECs’ ability to exercise exclusionary market power.  The Commission suggested that an independent 
ILEC could allocate the costs of its long distance services to monopoly local exchange and exchange 
access services, an action that the Commission believed could, under certain circumstances, give the 
independent ILEC an unfair advantage over its long distance competitors.
597
Further, the Commission 
indicated that the independent ILEC could gain an unfair advantage over those competitors by 
discriminating against them in the provisioning of exchange and exchange access services.
598
  Finally, the 
                                                          
590
Regulatory Treatment of LEC Provision of Interexchange Services Originating in the LEC’s Local Exchange 
Area and Policy and Rules Concerning the Interstate, Interexchange Marketplace, CC Docket Nos. 96-149, 96-61, 
Second Report and Order in CC Docket No. 96-149 and Third Report and Order in CC Docket No. 96-61, 12 FCC 
Rcd 15756, 15763, para. 7 (1997) (LEC Classification Order) recon. denied, Second Order on Reconsideration and 
Memorandum Opinion and Order, 14 FCC Rcd 10771 (1999) (LEC Classification Second Reconsideration Order); 
see also supra paras. 154-62.
591
LEC Classification Order, 12 FCC Rcd at 15803, para. 83, n.214.
592
Id.
593
Id. at 15847, para. 156.
594
Id. at para. 157.
595
Id. at 15848, para. 158.
596
Id.  The Commission also found that independent ILECs were unlikely to be able unilaterally to raise the prices 
of in-region long distance services except with regard to international routes where the ILECs have market power as 
a result of affiliations with foreign carriers having bottleneck control in the foreign destination market.  Id. at 15862-
63, paras. 188-89.  The Commission therefore classified independent ILECs as nondominant in the provision of in-
region long distance services except with regard to those international routes.  Id. at 15863, para. 189.  The 
Commission also classified the independent ILECs as nondominant in the provision of out-of-region, interstate, 
interexchange services.  Id. at 15873-77, paras. 206-11.  We note that an independent ILEC that is classified as 
dominant on an international route because of an affiliation with a foreign carrier is not subject to the tariffing and 
many of the other requirements that otherwise apply to dominant interstate and international, long distance carriers.  
That independent ILEC, however, must comply with a different set of requirements set forth in section 63.10(c) 
through (e) of the Commission’s rules, 47 C.F.R. § 63.10(c)-(e).
597
LEC Classification Order, 12 FCC Rcd at 15848, para. 159. 
598
Id. at 15849, para. 160.
Federal Communications Commission FCC 13-69 
99
Commission found that the independent ILEC could potentially initiate a price squeeze to increase its 
long distance market share.
599
  
221. The Commission determined that the section 64.1903 requirements would “aid in the 
prevention and detection of such anticompetitive conduct”
600
and would be more effective than dominant 
carrier regulation in doing so.
601
  Although the Commission recognized that those requirements would 
impose some burdens on independent ILECs, it found that these burdens were reasonable relative to the 
resulting protections against cost misallocation, unlawful non-price discrimination, and price squeezes.
602
  
The Commission thus mandated that facilities-based, independent ILECs provide long distance services 
only through section 64.1903 separate affiliates.
603
222. In the LEC Classification Second Reconsideration Order, the Commission relaxed its 
requirement for the use of a separate affiliate and allowed independent ILECs providing long distance 
services exclusively on a resale basis to do so through a separate corporate division.
604
The Commission 
concluded that independent ILEC long distance resellers were less likely than facilities-based providers to 
be able to engage in anti-competitive behavior in connection with their long distance services.
605
  The 
Commission determined, however, that these resellers still possessed some ability to engage in anti-
competitive behavior.
606
  The Commission therefore required that the resellers’ separate divisions 
maintain separate books of account and take services from the parent corporation pursuant to tariff or on 
the same basis as requesting carriers that have negotiated interconnection agreements pursuant to section 
251 of the Act.
607
3. Related Proceedings
223. 2001 and 2003 NPRMs.  Between September 2001 and May 2003, the Commission 
released three NPRMs that raised the question of what safeguards, if any, independent ILECs and BOCs 
should be subject to in their provision of in-region long distance services.
608
  In the 2001 Independent 
                                                          
599
Id. at para. 161.
600
Id. at 15850, para. 163.
601
Id. at 15854, para. 170.
602
Id. at 15852, para. 167.
603
Id. at 15856, para. 173.  Because it found that structural requirements were not necessary to prevent the 
independent ILECs from engaging in anticompetitive conduct in relation to out-of-region, interstate, interexchange 
services, the Commission did not require those LECs to comply with section 64.1903 in providing those services.  
Id. at 15878, para. 213.
604
See LEC Classification Second Reconsideration Order, 14 FCC Rcd at 10789-90, para. 25; 47 C.F.R. 
§ 64.1903(b)(1).
605
LEC Classification Second Reconsideration Order, 14 FCC Rcd at 10787-88, para. 22.
606
Id. at 10788-90, paras. 24-25.
607
Id. at 10790-91, paras. 25-26.  The Commission also required that transactions between the separate divisions and 
the LEC operations comply with its affiliate transactions rules.  Id. at 10789-90, para. 26 (citing 47 C.F.R. § 32.27).  
The Commission rejected proposals for removing the separate affiliate requirement for all rural telephone companies 
or for all LECs with fewer than two percent of the nation’s subscriber lines.  Id. at 10784-85, para. 17; Petition for 
Forbearance of the Independent Telephone and Telecommunications Alliance, AAD File No. 98-43, Third 
Memorandum Opinion and Order, 14 FCC Rcd 10816, 10822-28, paras. 8-16 (1999) (denying forbearance from 
application of the independent ILEC separate affiliate requirements to rural telephone companies and LECs with 
fewer than 2 percent of the nation’s subscriber lines).
608
See supra n.573.
Federal Communications Commission FCC 13-69 
100
Incumbent LEC Separate Affiliate NPRM, the Commission sought to develop a record on whether the 
benefits of the independent ILEC separate affiliate requirements outweighed their costs and whether 
alternative safeguards would provide the same benefits but impose fewer costs.
609
  In the 2002 Section 
272 Sunset NPRM, the Commission undertook a similar cost-benefit analysis regarding the requirements 
in section 272 of the Act and the Commission’s implementing rules regarding the BOCs’ in-region, 
interLATA telecommunications services.
610
  In the 2003 BOC and Independent LEC Further NPRM, the 
Commission set out to define and analyze the markets in which the BOCs and independent ILECs provide 
long distance services, and determine whether these LECs should be classified as dominant in the 
provision of any of those services that they provided outside of section 272 or section 64.1903 separate 
affiliates.
611
  The 2003 BOC and Independent LEC Further NPRM also invited comment on whether the 
Commission should adopt alternative safeguards to detect or deter any anticompetitive conduct by 
independent ILECs in the provision of long distance services.
612
224. Section 272 Sunset Order.  In the LEC Classification Order, the Commission concluded 
that, so long as the BOCs provided in-region long distance services through section 272 separate 
affiliates, these affiliates should be treated as nondominant in the provision of such services.
613
  The 
Commission stated that it could not predict how competition would develop once the BOCs received in-
region interLATA authority or what safeguards, if any, would be needed after the section 272 safeguards 
sunset.
614
Subsequently, the Commission made clear that, following sunset of the section 272 safeguards, 
to the extent a BOC chose to provide in-region long distance services either directly or through an 
affiliate that is not a section 272 separate affiliate, it would be subject to dominant carrier regulation.
615
225. In 2007, the Commission comprehensively addressed the long distance services provided 
by the BOCs and their independent ILEC affiliates.  Rather than applying structural safeguards or 
traditional dominant carrier regulation to these services, the Commission adopted a new framework 
focusing on targeted safeguards including, among other things, requiring BOCs to provide:  (1) special 
access performance metrics designed to prevent non-price discrimination in the provision of special 
access services,
616
(2) imputation requirements to help monitor the provision of access services for 
possible price discrimination,
617
(3) low-volume calling plans intended to prevent customers from having 
to purchase expensive, high-volume calling plans that were replacing metered long distance calling,
618
and 
(4) monthly usage information intended to allow subscribers to choose long distance plans that fit their 
                                                          
609
Incumbent LEC Separate Affiliate NPRM, 16 FCC Rcd at 17270, para 1.
610
Section 272 Sunset NPRM, 17 FCC Rcd at 9922, para. 17.
611
BOC and Independent Incumbent LEC FNPRM, 18 FCC Rcd at 10918-36, paras. 8-43.
612
Id. at 10936-38, paras. 45-49.
613
LEC Classification Order, 12 FCC Rcd at 15834-35, paras. 133-34.
614
Id. at 15835, para. 134 n.391.
615
Section 272(f)(1) Sunset of the BOC Separate Affiliate and Related Requirements, WC Docket No. 02-112, 
Memorandum Opinion and Order, 17 FCC Rcd 26869, 26870, paras. 1-2, nn.5, 8 (2002) (citing LEC Classification 
Order, 12 FCC Rcd at 1576, para. 4 n.12); see also Competitive Carrier Fifth Report and Order, 98 FCC 2d at 
1198-99, para. 9 n.23 (determining that the Commission would classify the BOCs as dominant in the provision of 
interstate, interLATA telecommunications services until it determined what safeguards, if any, would be necessary 
for the BOCs or their affiliates to qualify for nondominant treatment).
616
Section 272 Sunset Order, 22 FCC Rcd at 16487-89, paras. 97-98.
617
Id. at 16489-16492, paras. 99-105.
618
Id. at 16492-93, paras. 106-07.
Federal Communications Commission FCC 13-69 
101
calling patterns.
619
  The Commission concluded that these alternative safeguards, as well as other 
continuing statutory and regulatory obligations,
620
would sufficiently address any concerns regarding the 
BOCs’ and their independent ILEC affiliates’ exclusionary market power and would adequately protect 
consumers who make relatively few interstate long distance calls, while imposing fewer costs than either 
structural safeguards or dominant carrier regulation.
621
  The Commission therefore allowed the BOCs and 
their independent ILEC affiliates to provide long distance services free of structural requirements and 
subject to nondominant carrier regulation, as long as they complied with certain targeted safeguards and 
continuing statutory and regulatory obligations.
622
  The Section 272 Sunset Order applies exclusively to 
the BOCs and their independent ILEC affiliates,
623
and does not address the regulatory framework under 
which other independent ILECs provide long distance services.
226. Puerto Rico Telephone Company Waiver Order.  In December 2010, in response to a 
waiver request, the Wireline Competition Bureau (Bureau) temporarily waived application of section 
64.1903 to allow the Puerto Rico Telephone Company (an independent ILEC) and its affiliate Puerto Rico 
Telephone Larga Distancia (together, PRT) to provide long distance services without doing so through a 
separate affiliate.
624
  The Bureau also deferred application of dominant carrier regulation to PRT in order 
to give PRT time to file an interstate tariff or make a showing that nondominant carrier regulation of its 
long distance services is appropriate.
625
  These actions were conditioned on PRT’s compliance with 
certain safeguards patterned after those applied in the Section 272 Sunset Order.
626
  PRT subsequently 
made a timely filing purporting to demonstrate that it is nondominant.
627
PRT’s temporary waiver from 
                                                          
619
Id. at 16493-94, para. 108.
620
In the Section 272 Sunset Order, the Commission noted that, in the absence of structural separations requirements 
contained in section 272, the BOCs remained subject to a number of statutory and regulatory measures designed to 
detect and deter anticompetitive behavior.  These measures include:  (1) dominant carrier regulation of interstate 
exchange access services; (2) equal access obligations under longstanding Commission precedent and section 251(g) 
of the Act; (3) section 251 obligations; (4) the obligation to provide service on just, reasonable, and not unreasonably 
discriminatory rates, terms, and conditions pursuant to sections 201 and 202 of the Act.  See id. at 16484-87, paras. 
90-94.  The Commission also noted that the Commission’s section 208 complaint process may also be used in the 
event it is believed that an independent ILEC violated the Act or the Commission’s rules.  Id. at 16497, para. 115.
621
Id. at 16494-95, paras. 109-11.
622
Id. at 16488-92, paras. 95-105.
623
AT&T’s Southern New England Telephone Company (SNET) and Woodbury Telephone Company (Woodbury) 
affiliates and Verizon’s former GTE LECs are classified as independent ILECs because they are ILECs that fall 
outside the definition of “BOC’ in section 3(4) of the Communications Act.  See 47 U.S.C. § 153(4).
624
Petition of Puerto Rico Telephone Company, Inc. and Puerto Rico Telephone Larga Distancia, Inc. for Waiver of 
Section 64.1903 of the Commission’s Rules, WC Docket No. 10-52, Memorandum Opinion and Order, 25 FCC Rcd 
17704, 17711-12, paras. 14-16 (Wireline Comp. Bur. 2010).  This waiver was based on findings that compliance 
with section 64.1903 had reduced PRT’s operational efficiency and ability to maintain and expand telephone 
subscribership throughout Puerto Rico and that alternative safeguards would provide sufficient protection against 
possible cost misallocation, unlawful discrimination, and price squeezes.  Id. at 17711-12, paras. 15-16.
625
Id. at 17704-05, para. 1.
626
Id. at 17717-18, paras. 29-32.  The temporary deferral was also conditioned on PRT’s not increasing existing 
rates for the services at issue during the deferral period.  Id. at 11714, para. 21.
627
Letter from Bennett L. Ross, Counsel for PRT, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 10-52 
(filed Mar. 23, 2011).
Federal Communications Commission FCC 13-69 
102
the separate affiliate requirement contained in section 64.1903 expires on May 17, 2013.
628
PRT is an 
independent incumbent LEC serving the Commonwealth of Puerto Rico.  During 2008, PRTC converted its 
interstate access services from rate-of-return regulations to price cap regulations.
629
  In the USTelecom 
Forbearance Order, above, we hold that “PRT is now covered by the forbearance from section 64.1903 
that is granted to price cap carriers in this Order, and will be treated as nondominant consistent with our 
interpretation of Commission precedent above.”
630
  
227. USTelecom Forbearance Order.  On February 16, 2012, USTelecom filed a petition for 
forbearance.
631
  Among other things, USTelecom asked the Commission to forbear from applying the 
structural separation requirements of section 64.1903 and forbear from applying dominant carrier 
regulation for long distance services offered on an integrated basis by independent ILECs.
632
  USTelecom 
asserted that “[i]n light of the dramatic changes in the competitive landscape in the intervening 15 years 
since section 64.1903 was adopted, there is no longer any justification for the rule, and the Commission 
should forbear from its continued application.”
633
  The primary assumption underlying USTelecom’s 
forbearance request was that “there are no dominant IXCs, and ILECs currently face robust competition 
for all-distance services.”
634
  
228. Above, in the USTelecom Forbearance Order, we relieve independent ILECs subject to 
price caps of the separate affiliate requirements in section 64.1903.
635
  Based on the record, however, we 
deny relief from section 64.1903 for independent ILECs subject to rate-of-return regulation “due to 
continuing potential for cost misallocation.”
636
  Specifically, we hold that “cost misallocation is still a 
concern for independent ILECs that operate under rate-of-return cost regulation because a portion of their 
interstate access charge compensation and universal service support is based on their costs of providing 
service.  This gives them an incentive to engage in cost misallocation, increase certain access charges, and 
facilitate a price squeeze.”
637
  We also hold that there was no reason to formally grant USTelecom’s 
related request for forbearance from dominant carrier treatment of its long distance services that are 
provided other than in compliance with section 64.1903 because “the Commission has already classified 
the independent ILECs as nondominant in the provision of these services.”
638
  We conclude that “the 
                                                          
628
Petition of Puerto Rico Telephone Company, Inc. and Puerto Rico Telephone Larga Distancia, Inc. for Waiver of 
Section 64.1903 of the Commission's Rules, WC Docket No. 10-52, Order, 28 FCC Rcd 1072, 1073, para. 4 (2013).
629
See Petition of Puerto Rico Telephone Company, Inc. and Puerto Rico Telephone Larga Distancia, Inc. for
Election of Price Cap Regulation and Limited Waiver of Pricing and Universal Service Rules, WC Docket No. 07-
292, Order, 23 FCC Rcd 7353 (2008).
630
USTelecom Forbearance Order, supra at para. 162.
631
See USTelecom Petition at 1.
632
USTelecom subsequently clarified that it believes that, under the best reading of relevant precedent, independent 
ILECs by default would not be subject to dominant carrier regulation even when providing long distance service on 
an integrated basis, although it argues that forbearance would be warranted if the Commission disagreed with that 
interpretation.  See, e.g., Letter from Bennett L. Ross, Wiley Rein, LLP, Counsel to USTelecom, to Marlene H. 
Dortch, Secretary, FCC, Docket No. 12-61, at 3-6 (filed Mar. 28, 2013).
633
USTelecom Petition at 65.
634
Id. at 66.
635
USTelecom Forbearance Order, supra at para. 139.
636
Id. 
637
Id. at para. 151.
638
Id. at para. 154.
Federal Communications Commission FCC 13-69 
103
practical consequence of this is that once the Commission has forborne from the section 64.1903 
requirements for a class of independent ILECs, there is no requirement under existing precedent to file 
tariffs for such services or otherwise comply with dominant carrier regulation of those services as a result 
of providing long distance services on an integrated basis.”
639
229. USTelecom Petition for Declaratory Ruling. On December 19, 2012, USTelecom filed a 
petition seeking a declaratory ruling by the Commission that ILECs—BOCs as well as independents—
should no longer be presumptively dominant when providing interstate mass market and enterprise 
switched services.
640
  USTelecom argues that dominant carrier regulation is inappropriate because the 
public switched telephone network no longer constitutes a monopoly platform for the delivery of voice 
services.
641
  In support, USTelecom offers data stating that, “the number of switched access lines has 
fallen at least 50% and continues to decline; and ILEC switched access minutes of use have dropped by 
more than 70%, all despite an increased population.”
642
  USTelecom further asserts that wireless and 
voice over Internet Protocol (VoIP) connections are responsible for this marketplace shift; that only 
“about one-third of American households purchase an ILEC switched access service”; and that 
“approximately 40% have ‘cut the cord’ and rely totally on wireless for their voice service.”
643
This 
matter is pending before the Commission.
644
4. Marketplace Developments
230. A number of significant marketplace changes have taken place since the Commission 
adopted section 64.1903 in 1997.  Those changes call into question whether this rule remains the best 
alternative for promoting competition and protecting consumers in the long distance market.
a. Decline in Interexchange Revenues 
231. In the 13 years following the breakup of AT&T, the revenues of reporting long distance 
carriers more than doubled, from $38.8 billion in 1984 to $82.0 billion in 1996, while the (primarily 
intrastate) long distance service revenues of local exchange companies declined slightly, from $12.4 
billion in 1984 to $11.2 billion in 1996.
645
  By 1997, the long distance services market was dominated by 
four major long distance carriers: AT&T Corp., MCI, WorldCom, and Sprint.
646
  With combined revenues 
                                                          
639
Id.
640
United States Telecom Association Petition for Declaratory Ruling, WC Docket No. 13-3, at 9 (filed Dec. 19, 
2012).
641
Id. at ii-iii.
642
Id. at iii. 
643
Id.  But see Stephen J. Blumberg and Julian V. Luke, National Center for Health Statistics, Centers for Disease 
Control, Wireless substitution: Early release of estimates from the National Health Interview Survey, January–June 
2012 at Table 1 (Dec. 2012), available at http://www.cdc.gov/nchs/data/nhis/earlyrelease/wireless201212.pdf (CDC 
Wireless Survey) (reporting approximately 35.8% of homes with only wireless phones).
644
See Wireline Competition Bureau Seeks Comment on United States Telecom Ass’n Petition for Declaratory 
Ruling that Incumbent Local Exchange Carriers are Non-Dominant in the Provision of Switched Access Services, 
WC Docket No. 13-3, Public Notice, 28 FCC Rcd 107 (Wireline Comp. Bur. 2013) (comment cycle closed on Mar. 
12, 2013).
645
See Trends in Telephone Service, Federal Communications Commission, Common Carrier Bureau, Industry 
Analysis and Technology Division at Table 11.2 (Sept. 1999), available at
http://transition.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/trend299.pdf.  
646
Competition also increased significantly, with AT&T’s share of total (intrastate and interstate) long distance 
revenues plummeting from 68 percent in 1984 to 39 percent in 1997.  Id. at Table 11.4.  Among the carriers 
(continued....)
Federal Communications Commission FCC 13-69 
104
(including intrastate and interstate toll) of $71.2 billion, these four companies held 71 percent of the total 
long distance marketplace,
647
while ILECs and their affiliates had a combined total of $10.2 billion toll 
revenues, accounting for 10 percent of the long distance marketplace.
648
At that time, ILECs and their 
affiliates provided intraLATA toll service but were the presubscribed, or “+1”, carrier for interLATA 
long distance service for only about 2 percent of ILEC switched access lines.
649
From 1999 through 2003, 
however, the BOCs acquired authority under section 271 to provide interstate, in-region, interLATA 
services, which permitted them to enter the long distance markets in full.
650
  By December 2011, affiliates 
of ILECs—including the BOCs—were the “+1” long distance carrier for 61 percent of ILEC switched 
access lines.
651
232. While the ILECs’ share of traditional long distance service lines increased dramatically 
by 2011, the amount of traditional long distance calling declined.  In particular, interstate telephone traffic 
passing through ILEC switches (“interstate switched access minutes of use”) declined by 58 percent from 
1997 through 2011.
652
  Similarly, between 1997 and 2009, toll service revenues (including both interstate 
and intrastate toll, often now provided as part of a bundle, which can include unlimited long distance 
calling) declined from 47 percent of total retail (end user) telecommunications revenues reported to the 
Commission in 1997 ($89 billion out of a total $189 billion) to 19 percent in 2009 ($43 billion out of a 
total $225 billion).
653
We note that these declines occurred while overall telecommunications revenues 
(Continued from previous page)                                                          
providing primarily long distance service at that time, AT&T’s revenue share dropped even more sharply, from 90 
percent in 1984 to 44 percent in 1997.  Id. at Table 11.3.
647
Id. at Table 11.2.
648
Id.  Additionally, long distance carriers other than the largest four held about 19 percent of total toll revenues and 
competitive local exchange carriers held less than 1 percent.  Id.
649
Compare Historical Patterns of Entry into Long Distance by Local Exchange Carriers, Federal Communications 
Commission, Common Carrier Bureau, Industry Analysis and Technology Division at Table 5 (Sept. 1998), 
available at http://transition.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/ilec-ld.pdf (reporting 
four million lines presubscribed to ILECs at the end of 1996) with Trends in Telephone Service, Federal 
Communications Commission, Industry Analysis and Technology Division at Table 7.1 (Sept. 2010), available at
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-301823A1.pdf (2010 Trends in Telephone Service) 
(reporting 165 million ILEC access lines in 1996).   
650
See Section 271 Applications Filed with FCC, at http://transition.fcc.gov/Bureaus/Common_Carrier/in-
region_applications/.
651
Local Telephone Competition: Status as of December 31, 2011, Federal Communications Commission, Wireline 
Competition Bureau, Industry Analysis and Technology Division at Table 7 (Jan. 2013), available at
http://transition.fcc.gov/Daily_Releases/Daily_Business/2013/db0114/DOC-318397A1.pdf (2013 Local 
Competition Report).  Through industry consolidation in the past decade, RBOC successor entities AT&T, Inc. (the 
successor to AT&T Corp. and SBC Communications, Inc.) and Verizon Communications, Inc. are now included 
among the five companies reporting the most toll service revenue.  See 2010 Trends in Telephone Service at Table 
9.1.
652
Interstate switched access minutes of use declined 6% a year, on average, from 1997 through 2011, with the 2011 
level (209 billion minutes) being only 42% of the 1997 level (497 billion minutes).  2012 Universal Service 
Monitoring Report, CC Docket No. 98-202, at 5-2, 5-3, Chart 5.1, Table 5.1 (2013), available at
http://transition.fcc.gov/Daily_Releases/Daily_Business/2013/db0403/DOC-319744A1.pdf.  
653
Telecommunications Industry Revenues:  2009, Federal Communications Commission, Wireline Competition 
Bureau, Industry Analysis and Technology Division at Table 1 (May 2011), available at
http://transition.fcc.gov/wcb/iatd/lec.html.  Toll services are telecommunications services—wireline, wireless, or 
interconnected VoIP services—that enable customers to communicate outside local exchange calling areas.  Toll 
service revenues include revenues from intrastate, interstate, and international long distance services.  Id. at 6.
Federal Communications Commission FCC 13-69 
105
reported to the Commission (including both end user and carrier’s carrier—provided for resale—
revenues) increased, from $231 billion in 1997 to $281 billion in 2009.
654
b. Increased Subscription to Cable-Based Local Services and Mobile 
Wireless Services 
233. During the same period described above, consumers increasingly turned to providers 
other than their ILEC for their voice service needs.  As of December 2005, coaxial cable lines constituted 
only 16 percent of reported non-ILEC voice service lines,
655
and only 13 percent of residential lines were 
provided by non-ILECs.
656
  By the end of 2011, non-ILECs’ share of residential voice service connections 
had grown to approximately 37 percent,
657
and cable-based connections constituted 51 percent of non-
ILEC connections.
658
  By 2011, many cable-based services were interconnected VoIP—a generally “all 
distance” service with no differentiation in price based on calls within the United States.
659
  
234. There also has been an increase in households subscribing to mobile wireless services.  
For example, the National Center for Health Statistics estimates that between 2003 and 2012, the 
percentage of households subscribing to mobile wireless services grew from approximately 46 percent to 
88 percent, and the percentage of households subscribing only to a mobile wireless service increased from 
3.2 percent to 35.8 percent.
660
  When combined with households that subscribe to both landline and 
mobile services but rely primarily on their mobile service, the total percentage of households relying 
primarily or exclusively on wireless rises to 51.7 percent.
661
c. The Rise of Bundled Local and Long Distance Subscription 
235. The Commission has recognized that stand-alone long distance marketed to U.S. 
consumers is becoming a fringe market,
662
and that today, “consumers predominantly purchase local and 
                                                          
654
Id.
655
Local Telephone Competition:  Status as of December 31, 2005, Federal Communications Commission, Wireline 
Competition Bureau, Industry Analysis and Technology Division at Table 5 (July 2006), available at
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-266595A1.pdf. 
656
Id. at Table 6 (13.9 million is approximately 13 percent of 108.3 million).
657
2013 Local Competition Report at Table 10 (30.5 million is approximately 37% of 83.0 million).  As of 
December 2011, only 3.7 million of the 30.5 million non-ILEC residential voice service connections were reported 
to be switched access lines.  Id.  These figures include all over the top interconnected VoIP residential connections.  
In staff’s judgment, non-ILECs’ share of residential connections is approximately 35%, excluding staff estimates of 
non-cable based over the top services such as Vonage.  See id. at Tables 6, 8-11, Figures 6, 7.
658
Id. at Table 6 (27.8 million cable-based connections is approximately 51% of 54.1 million non-ILEC 
connections.).
659
Compare, for example, the 23.9 million interconnected VoIP connections provided to cable Internet customers in 
December 2011 to the 1.9 million non-ILEC cable based switched access lines reported.  Id. at Figures 6, 7.
660
CDC Wireless Survey at Table 1.
661
Id. at 1 (reporting 35.8% of homes with only wireless phones plus 15.9% of homes that received all or almost all 
calls on wireless phones despite also having a landline phone).  See also supra n.643.
662
See, e.g., Verizon Communications Inc. and MCI, Inc. Applications for Approval of Transfer of Control, WC 
Docket No. 05-75, Memorandum Opinion and Order, 20 FCC Rcd 18433, 18483, para. 92 (2005) (Verizon/MCI 
Merger Order); SBC Communications Inc. and AT&T Corp. Applications for Approval of Transfer of Control, WC 
Docket No. 05-65, Memorandum Opinion and Order, 20 FCC Rcd 18290, 18342, para. 91 (2005) (AT&T/SBC 
Merger Order); AT&T Inc. and Bellsouth Corp. Application for Transfer of Control, WC Docket No. 06-74, 
Memorandum Opinion and Order, 22 FCC Rcd 5662, 5715, para. 97 (2007); Section 272 Sunset Order, 22 FCC Rcd 
(continued....)
Federal Communications Commission FCC 13-69 
106
long distance services from a single provider.  Evidence suggests that this trend is continuing as the stand-
alone wireline long distance market is steadily declining relative to the bundled services market.”
663
Between 2008 and 2011, the proportion of residential switched access lines and interconnected VoIP 
subscriptions with “+1” access to the local provider’s long distance services increased from 75 to 80 
percent.
664
  
236. In 2011, the Commission noted in the USF/ICC Transformation Order that many 
providers no longer distinguish between local and long distance usage.
665
  As a result, the Commission 
concluded that it was appropriate to eliminate the distinction between such services for purposes of 
supported services and instead to “describe the core functionalities of the supported services as ‘voice 
telephony service.’”
666
  More recently, the Commission revised the Lifeline rules and determined that 
“ETCs are not required to offer toll limitation service to low-income consumers if the Lifeline offering 
provides a set amount of minutes that do not distinguish between toll and non-toll calls.”
667
  The 
Commission reached this decision because “[m]any carriers no longer distinguish between toll and non-
toll calls in how they price voice telephony.”
668
C. Discussion
237. The Commission adopted section 64.1903 based on the findings in the LEC 
Classification Order emphasizing the need to protect against the exercise of exclusionary market power 
by independent ILECs—the ability to raise rivals’ costs of providing competitive services, including the 
misallocation of costs (for example misallocating costs from nonregulated to regulated services), non-
price discrimination (for example, lower quality wholesale services provided to a competitor), and a price 
squeeze based on inputs that long distance competitors need, such as access services (for example, raising 
(Continued from previous page)                                                          
at 16452, para. 23; Petition of Qwest Communications International Inc. for Forbearance from Enforcement of the 
Commission’s Dominant Carrier Rules As They Apply After Section 272 Sunsets, WC Docket No. 05-333, 
Memorandum Opinion and Order, 22 FCC Rcd 5207, 5217, para. 16 (2007).
663
Verizon/MCI Merger Order, 20 FCC Rcd at18485-86, para. 96; AT&T/SBC Merger Order, 20 FCC Rcd at 
18344, para. 95.
664
See 2013 Local Competition Report at Tables 8, 10; Local Telephone Competition:  Status as of December  31, 
2008, Federal Communications Commission, Wireline Competition Bureau, Industry Analysis and Technology 
Division, at Tables 7, 9 (June 2010), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-
299052A1.pdf.  (The percentage is calculated by adding together residential presubscribed switched access lines, 
ILEC residential interconnected VoIP subscriptions, and non-ILEC residential interconnected VoIP subscriptions, 
and dividing the resulting sum by total residential switched access lines and interconnected VoIP subscriptions.) 
665
See Connect America Fund, A National Broadband Plan for Our Future, Establishing Just and Reasonable Rates 
for Local Exchange Carriers, High-Cost Universal Service Support, Developing an Unified Intercarrier 
Compensation Regime, Federal-State Joint Board on Universal Service, Lifeline and Link-Up, Universal Service 
Reform — Mobility Fund, WC Docket No. 10-90, GN Docket No. 09-51, WC Docket No. 07-135, WC Docket No. 
05-337, CC Docket No. 01-92, CC Docket No. 96-45, WC Docket No. 03-109, WT Docket No. 10-208, Report and 
Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd 17663, 17691-92, para. 76 (2011) (USF/ICC 
Transformation Order), pets. for review pending sub nom. In re: FCC, No. 11-9900 (10th Cir. filed Dec. 8, 2011).  
666
Id. at 17692, para. 77.
667
Lifeline and Link Up Reform and Modernization, Lifeline and Link Up, Federal-State Joint Board on Universal 
Service, Advancing Broadband Availability Through Digital Literacy Training, WC Docket Nos. 11-42, 03-109, 12-
23, CC Docket No. 96-45, Report and Order and Further Notice of Proposed Rulemaking, 27 FCC Rcd 6656, 6679, 
para. 49 (2012).
668
Id. at 6756, para. 229.
Federal Communications Commission FCC 13-69 
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prices for access services, including both switched and special access, or reducing prices for retail 
services).
669
  In light of the market changes described above, we consider whether the rule continues to 
offer benefits and whether the benefits justify the regulatory burdens and costs of compliance for rate-of-
return ILECs.  We also recognize that market conditions alone might justify eliminating the separate 
affiliate requirement, at least for some independent ILECs subject to rate-of-return regulation, and seek 
comment on the relevant market characteristics and how they should affect our evaluation of the 
continued need for the separate affiliate rule.
1. Analyzing Potential for Cost Misallocation 
238. The USTelecom Forbearance Order granted forbearance from section 64.1903 to 
independent ILECs subject to price cap regulation but denied this relief to such carriers subject to rate-of-
return regulation, including both independent ILECs subject to average schedules
670
and cost 
companies.
671
  Rate-of-return regulation, which preceded price cap regulation, focuses on an ILEC’s costs 
and fixes the profits an ILEC may earn based on those costs.
672
A rate-of-return ILEC may recover only 
its costs plus a prescribed return on investment.
673
Unlike price cap carriers, rate-of-return carriers are 
typically small, rural telephone companies concentrated in one area.
674
  Also unlike price cap carriers, 
non-average schedule rate-of-return independent ILEC has the ability and incentive to over allocate costs 
to common line and special access services because its interstate compensation for those services remains 
based directly on company-specific costs.
675
  We seek comment on this view.  The Commission’s 2011 
reforms to intercarrier compensation rules cap and/or reduce interstate switched access charges, but allow 
increases in common line and special access rates.
676
  Thus, we believe that these changes in the access 
                                                          
669
See, e.g., LEC Classification Order, 12 FCC Rcd at 15847-57, paras. 158-75 (describing the incentives, ability, 
and means for an incumbent LEC to improperly allocate costs, engage in price and non-price discrimination, and 
engage in a price squeeze). 
670
USTelecom Forbearance Order, supra at n.425.
671
Id. at para. 151.  
672
Special Access for Price Cap Local Exchange Carriers, WC Docket No. 05-25, Report and Order and Further 
Notice of Proposed Rulemaking, 27 FCC Rcd 16318, 16320, para. 2 (2012).  
673
Special Access for Price Cap Local Exchange Carriers Order, WC Docket No. 05-25, Report and Order, 27 FCC 
Rcd 10557, 10562, para. 8 (2012).
674
Multi-Association Group (MAG) Plan for Regulation of Interstate Services of Non-Price Cap Incumbent Local 
Exchange Carriers and Interexchange Carriers, CC Docket Nos. 00-256, 96-45, 98-77, 98-166, Second Report and 
Order and Further Notice of Proposed Rulemaking, 16 FCC Rcd 19613, 19617, para. 4 (2001).
675
Matter of Computer III Remand Proceedings:  Bell Operating Company Safeguards and Tier 1 Local Exchange 
Company Safeguards, CC Docket No. 90–623, Report and Order, 6 FCC Rcd 7571, 7596, para. 55 (1991); see also
Matter of 2000 Biennial Regulatory Review— Comprehensive Review of the Accounting Requirements and ARMIS 
Reporting Requirements for Incumbent Local Exchange Carriers:  Phase 2, Amendments to the Uniform System of 
Accounts for Interconnection, Jurisdictional Separations Reform and Referral to the Federal-State Joint Board, 
Local Competition and Broadband Reporting, Report and Order in CC Docket Nos. 00-199, 97-212, and 80-286, 
Further Notice of Proposed Rulemaking in CC Docket Nos. 00-199, 99-301, and 80-286, 16 FCC Rcd 19911, 
19946, para. 85 (2001).
676
See USF/ICC Transformation Order, 26 FCC Rcd at 17936, para. 805.  In the USTelecom Forbearance Order 
we note that “[t]he Commission’s 2011 intercarrier compensation rules freeze or reduce most interstate access 
charges, but allow increases in common line and special access rates.  Thus, these changes in the access charge rules 
reduce, but do not eliminate, the incentives for cost misallocation and potential access charge rate increases.  We 
find that it would be unwise to forbear from the separate affiliate requirement for rate-of-return independent ILECs 
subject to cost regulation.  To do so would potentially further increase opportunities for cost misallocation at a time 
(continued....)
Federal Communications Commission FCC 13-69 
108
charge rules reduce, but may not eliminate, incentives for cost misallocation and potential access charge 
rate increases.  We seek comment on this view and on the interplay between section 64.1903 and our 
intercarrier compensation and universal service reforms.  We seek comment on whether we could address 
concerns about cost misallocation equally well, and in a less burdensome manner, in ways other than 
requiring that service be provided through a separate affiliate. 
239. The Commission has previously recognized that concerns about cost misallocation are 
strongest when carriers provide long distance services in whole or in part through their own switching or 
transmission facilities.
677
  When these carriers provide long distance service exclusively through resale, 
the risk of cost misallocation is reduced, and they operate pursuant to a lesser safeguard—a separate 
corporate division rather than a separate subsidiary.
678
  We seek comment on the extent to which rate-of-
return independent ILECs provide long distance service using their own facilities.  Could we deter and 
detect cost misallocation by requiring that independent ILECs offering long distance over their own 
facilities provide those services through a separate corporate division?
240. We also seek comment on whether we can reduce the burdens on average schedule 
carriers.  Average schedule carriers are a subset of rate-of-return carriers that receive access compensation 
and universal service support through the use of “average schedules” to avoid the difficulties and 
expenses involved with conducting company-specific cost studies.
679
Average schedule companies appear 
to have limited incentives to misallocate costs as long as they continue to use the average schedules for 
access compensation.  However, these companies are permitted to convert to cost-based regulation 
without Commission approval.  Thus, an average schedule company could, in theory, provide in-region 
long distance service without a separate affiliate, and then convert to cost-based regulation.  We seek 
comment on how we could grant relief from the separate affiliate requirement for average schedule 
companies and also prevent them from misallocating costs in the future.  We could condition relief from 
section 64.1903 on a commitment not to convert to rate-of-return regulation, or require them to reinstitute 
a separate affiliate if they do so.  We seek comment on these and alternative suggestions.  How should the 
Commission treat cost companies participating in NECA pools?  Do these companies possess the ability 
and incentive to misallocate costs because disbursements from the NECA pools are based on participating 
(Continued from previous page)                                                          
when the Commission has just embarked on a significant transformation of intercarrier compensation and universal 
service.  Accordingly, we do not forbear from application of the separate affiliate requirement to rate-of-return 
independent ILECs subject to cost-based regulation.”  USTelecom Forbearance Order, supra at para. 151.
677
LEC Classification Second Reconsideration Order, 14 FCC Rcd at 10787-88, para. 22 (concluding that 
independent ILEC resellers were less likely than facilities-based providers to be able to engage in anti-competitive 
behavior in connection with their long distance services).
678
47 C.F.R. § 64.1903(b)(1).
679
See National Exchange Carrier Association, Inc., 2013 Modification of Average Schedule Universal Support 
Formula, WC Docket No. 05-337, Order, 27 FCC Rcd 15178, 15179, para. 5 (Wireline Comp. Bur. 2012) (2013 
Modification Order).  Average schedule carriers “have been assumed, because of their small size, not to have 
sufficient financial resources or expertise to justify a requirement that they perform jurisdictionally separated cost 
studies for determining their compensation in originating and terminating interstate telecommunications services.”  
MTS and WATS Market Structure: Average Schedule Companies, CC Docket No. 78-72, Report and Order, 103 
FCC2d 1017, 1018-19 (1986).  “These formulas are developed by NECA using data from a sample group of average 
schedule carriers and from similarly situated companies that file cost data, and are used to determine support 
amounts for all average schedule carriers.”  2013 Modification Order, 27 FCC Rcd at 15179, para. 5.  Thus, average 
schedule carriers charge rates that are not directly tied to their costs but are tied to the average costs of similarly 
situated companies.  Average schedule companies, however, may easily move back and forth between average 
schedules and cost-based rate-of-return regulation. 
Federal Communications Commission FCC 13-69 
109
companies’ costs?
680
  In the USTelecom Forbearance Order, we grant relief to price cap carriers if they: 
(1) submit and obtain Bureau approval of special access performance metrics, and (2) satisfy imputation 
requirements, including the submission of an imputation plan for review and approval from the Bureau.
681
  
Will such nonstructural safeguards obviate the need for section 64.1903, while imposing fewer costs and 
burdens, for rate-of-return carriers?  How should our analysis for rate-of-return carriers differ, if any, 
from our analysis for price cap carriers? 
2. Analyzing Potential for Unlawful Non-Price Discrimination and Price 
Squeezes
241. Section 64.1903 was intended to prevent unlawful non-price discrimination and price 
squeezes.
682
  Do these concerns remain relevant in light of changes in the market, including the prevalence 
of bundled local, intrastate long distance, and interstate long distance services?  Is the separate affiliate 
requirement an effective, cost-effective way to prevent these anticompetitive practices?  Could the 
Commission effectively address these concerns through ex-post facto investigations, such as under a 
section 208 complaint process?  Are existing statutory and regulatory safeguards sufficient to deter these 
anticompetitive practices?
683
  
3. Costs and Benefits of the Separate Affiliate Requirements of Section 64.1903
242. How many independent ILECs use separate affiliates pursuant to section 64.1903?  What 
costs, if any, would be saved if we eliminate section 64.1903 for independent ILECs subject to rate-of-
return regulation?  Would the same savings be realized if the independent ILEC were required instead to 
provide long distance services through a separate division?  For example, what incremental costs does an 
independent ILEC incur in maintaining separate books of account for its long distance services, as 
opposed to including those costs and revenues in the accounts for its LEC operations?  How does that 
differ depending on whether the separate books of account are for a separate division versus a separate 
corporation?  We particularly seek empirical data on costs and burdens from independent ILECs that have 
experience providing long distance service through a separate corporate affiliate or a separate division so 
that we can analyze the differences between these structures.
                                                          
680
We recognize that independent ILEC cost companies participating in the NECA pool may have somewhat less 
incentive to misallocate costs than such companies that have their own access tariffs.  The NECA pool access rates 
are based on the average costs for all companies that participate in the NECA pools.  See Investigations of Certain 
2007 Annual Access Tariffs, WC Docket No. 07-184, WCB Pricing No. 07-10, Order Designating Issues for 
Investigation, 22 FCC Rcd 16109, 16110, para. 4 (2007). While these companies have less ability to increase access 
rates and engage in a price squeeze, they still theoretically retain an incentive to misallocate disbursements from the 
NECA pools, which are based on a company’s costs.  
681
USTelecom Forbearance Order at paras. 145-148;  We also note in the USTelecom Forbearance Order that “[i]n 
addition, independent ILECs subject to price cap regulation remain subject to a number of legal obligations that will 
limit their ability to exercise exclusionary market power.”  USTelecom Forbearance Order at para. 142; see also 
infra n.683.
682
See supra para. 237.
683
ILECs are subject to a number of statutory and regulatory measures designed to detect and deter anticompetitive 
behavior.  These include: (1) dominant carrier regulation of interstate exchange access services; (2) equal access 
obligations under longstanding Commission precedent and section 251(g) of the Act; (3) section 251 obligations; 
and (4) the obligation to provide service on just, reasonable, and not unreasonably discriminatory rates, terms, and 
conditions pursuant to sections 201 and 202 of the Act.  See Section 272 Sunset Order, 22 FCC Rcd at 16484-87, 
paras. 90-94.  The Commission’s section 208 complaint process may also be used in the event it is believed that an 
independent ILEC has violated the Act or the Commission’s rules.  Id. at 16497, para. 115.
Federal Communications Commission FCC 13-69 
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243. What effect, if any, does the prohibition against joint ownership of switching and 
transmission equipment have on an independent ILEC’s operational efficiency and ability to offer 
innovative services?  Does that prohibition significantly limit the independent ILEC’s opportunities to 
take advantage of economies of scope and scale associated with integrated operations?  Does the 
prohibition make it more difficult for an independent ILEC to transform its network from a traditional 
Time-Division Multiplexing (TDM) network to an all-Internet Protocol (all-IP) network?
684
  If so, how?  
Does section 64.1903 reduce independent ILECs’ ability to increase telephone subscribership or extend 
broadband services to additional areas?  If ILECs transition to offering only VoIP services, should section 
64.1903 continue to apply?  Finally, we seek comment on whether complying with nonstructural 
safeguards such as special access performance metrics and imputation requirements adequately address 
issues of non-price discrimination and/or price squeezes.
685
  We ask commenters to provide detailed 
information on the overall costs and burdens of the section 64.1903 requirements on independent ILECs 
and their customers.  
VII. PROCEDURAL MATTERS
A. Memorandum Opinion and Order
244. This document contains new information collection requirements subject to the 
Paperwork Reduction Act of 1995 (PRA), Public Law 104-13.  It will be submitted to the Office of 
Management and Budget (OMB) for review under Section 3507 of the PRA, 44 U.S.C. § 3507.  Prior to 
submission to OMB, the Commission will publish a notice in the Federal Register seeking public 
comment on the information collection requirement.  In addition, that notice will also seek comment on 
how the Commission might “further reduce the information collection burden for small business concerns 
with fewer than 25 employees” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 
107-198, see 44 U.S.C. § 3506(c)(4).  The information collection contained in this Memorandum Opinion 
and Order will not go into effect until OMB approves the collection and the Commission has published a 
notice in the Federal Register announcing the effective date of the information collection.
B. Report and Order in WC Docket No. 10-132
1. Final Paperwork Reduction Act Analysis
245. This Report and Order does not contain new or modified information collection 
requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13.
686
In addition, 
therefore, it does not contain any new or modified information collection burden for small business 
concerns with fewer than 25 employees, pursuant to the Small Business Paperwork Relief Act of 2002, 
Public Law 107-198, see 44 U.S.C. § 3506(c)(4).  
2. Congressional Review Act
246. The Commission will send a copy of this Report and Order to Congress and the 
Government Accountability Office pursuant to the Congressional Review Act.
687
                                                          
684
See Pleading Cycle Established on AT&T and NTCA Petitions, Public Notice, GN Docket No. 12-353, 27 FCC 
Rcd 15766 (Wireline Comp. Bur. 2012) (requesting comments on petitions concerning the transition of telephone 
networks and services to Internet Protocol); Technology Transitions Policy Task Force Seeks Comment on Potential 
Trials, GN Docket No. 13-5, Public Notice, DA 13-1016 (rel. May 10, 2013), available at
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-13-1016A1.pdf.
685
See supra paras. 225, 241; see also USTelecom Forbearance Order, supra paras. 143-148.
686
Pub. L. No. 104-13; 44 U.S.C. §§ 3501-3520.
687
5 U.S.C. § 801(a)(1)(A).
Federal Communications Commission FCC 13-69 
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3. Final Regulatory Flexibility Analysis
247. Final Regulatory Flexibility Certification. The Regulatory Flexibility Act of 1980, as 
amended (RFA),
688
requires that a regulatory flexibility analysis be prepared for rulemaking proceedings, 
unless the agency certifies that “the rule will not have a significant economic impact on a substantial 
number of small entities.”
689
  The RFA generally defines “small entity” as having the same meaning as the 
terms “small business,” “small organization,” and “small governmental jurisdiction.”
690
  In addition, the 
term “small business” has the same meaning as the term “small business concern” under the Small 
Business Act.
691
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 Administration (SBA).
692
248. This Report and Order eliminates CEI/ONA narrowband reporting requirements that 
have been in place to monitor the BOCs’ compliance with access and interconnection services that they 
must offer to competitive ESPs.  It finds that the Commission does not rely on any of the reports in the 
course of its decision making, and there is nothing in the record indicating that the reports contain 
information that is currently useful to competitive ESPs.  In addition, no commenter to the proceeding 
indicated that we should retain the reports.
693
  The underlying substantive requirements associated with 
CEI and ONA with which the BOCs must comply will remain in effect.  
249. SBA defines small telecommunications entities as those with 1,500 or fewer 
employees.
694
  This proceeding pertains to the BOCs, which, because they would not be deemed a “small 
business concern” under the Small Business Act and have more than 1,500 employees, do not qualify as 
small entities under the RFA. Therefore, we certify that the requirements of this Report and Order will 
not have a significant economic impact on a substantial number of small entities.  The Commission will 
send a copy of the Report and Order including a copy of this final certification in a report to Congress 
pursuant to the Small Business Regulatory Enforcement Fairness Act of 1996.
695
  In addition, the Report 
and Order and this certification will be sent to the Chief Counsel for Advocacy of the Small Business 
Administration, and will be published in the Federal Register.
696
                                                          
688
The RFA, see 5 U.S.C. § 601 et seq., has been amended by the Contract With America Advancement Act of 
1996, Pub. L. No. 104-121, 110 Stat. 847 (1996) (CWAAA).  Title II of the CWAAA is the Small Business 
Regulatory Enforcement Fairness Act of 1996 (SBREFA).
689
5 U.S.C. § 605(b).
690
5 U.S.C. § 601(6).
691
5 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.
692
Small Business Act, 15 U.S.C. § 632.
693
See supra paras. 8-11.
694
See generally 13 C.F.R. § 121.201, NAICS Code 517110, Wired Telecommunications Carriers.
695
See 5 U.S.C. § 801(a)(1)(A).
696
See 5 U.S.C. § 605(b).
Federal Communications Commission FCC 13-69 
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C. Computer III Further Notice
1. Paperwork Reduction Act Analysis
250. This document contains proposed new or modified information collection requirements. 
The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public 
and the Office of Management and Budget (OMB) to comment on the information collection 
requirements contained in this document, as required by the Paperwork Reduction Act of 1995, Public 
Law 104-13. In addition, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-
198, see 44 U.S.C. § 3506(c)(4), we seek specific comment on how we might further reduce the 
information collection burden for small business concerns with fewer than 25 employees.
2. Initial Regulatory Flexibility Analysis
251. The Regulatory Flexibility Act of 1980, as amended (RFA),
697
requires that an initial 
regulatory flexibility analysis be prepared 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 entities.”
698
The RFA generally defines the term “small entity” as having the 
same meaning as the terms “small business,” “small organization,” and “small governmental 
jurisdiction.”
699
  In addition, the term “small business” has the same meaning as the term “small business 
concern” under the Small Business Act.
700
  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 Administration (SBA).
701
  SBA defines small telecommunications 
entities as those with 1,500 or fewer employees.
702
  This proceeding pertains to the BOCs, which, because 
they would not be deemed a “small business concern” under the Small Business Act and have more than 
1,500 employees, do not qualify as small entities under the RFA. Therefore, we certify that the proposals 
in this Further Notice, if adopted, will not have a significant economic impact on a substantial number of 
small entities.  
252. The Commission will send a copy of the Notice, including a copy of this Initial 
Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the SBA.
703
  This initial 
certification will also be published in the Federal Register.
704
                                                          
697
See 5 U.S.C. § 603.  The RFA, see 5 U.S.C. §§ 601-612, has been amended by the Small Business Regulatory 
Enforcement Fairness Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996).
698
5 U.S.C. § 605(b).
699
5 U.S.C. § 601(6).
700
5 U.S.C. § 601(3) (incorporating by reference the definition of “small-business concern” in the 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.”
701
15 U.S.C. § 632.
702
See generally 13 C.F.R. § 121.201, NAICS Code 517110, Wired Telecommunications Carriers.
703
5 U.S.C. § 605(b).
704
Id.
Federal Communications Commission FCC 13-69 
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3. Ex Parte Presentations
253. This proceeding shall be treated as a “permit-but-disclose” proceeding in accordance with 
the Commission's ex parte rules.
705
Persons making ex parte presentations must file a copy of any written 
presentation or a memorandum summarizing any oral presentation within two business days after the 
presentation (unless a different deadline applicable to the Sunshine period applies).  Persons making oral 
ex parte presentations are reminded that memoranda summarizing the presentation must (1) list all 
persons attending or otherwise participating in the meeting at which the ex parte presentation was made, 
and (2) summarize all data presented and arguments made during the presentation.  If the presentation 
consisted in whole or in part of the presentation of data or arguments already reflected in the presenter’s 
written comments, memoranda or other filings in the proceeding, the presenter may provide citations to 
such data or arguments in his or her prior comments, memoranda, or other filings (specifying the relevant
page and/or paragraph numbers where such data or arguments can be found) in lieu of summarizing them 
in the memorandum.  Documents shown or given to Commission staff during ex parte meetings are 
deemed to be written ex parte presentations and must be filed consistent with rule 1.1206(b).  In 
proceedings governed by rule 1.49(f) or for which the Commission has made available a method of 
electronic filing, written ex parte presentations and memoranda summarizing oral ex parte presentations, 
and all attachments thereto, must be filed through the electronic comment filing system available for that 
proceeding, and must be filed in their native format (e.g., .doc, .xml, .ppt, searchable .pdf).  Participants in 
this proceeding should familiarize themselves with the Commission’s ex parte rules.
4. Comment Filing Procedures
254. Pursuant to sections 1.415 and 1.419 of the Commission’s rules, 47 CFR §§ 1.415, 1.419, 
interested parties may file comments and reply comments on or before the dates indicated on the first 
page of this document.  All pleadings are to reference CC Docket Nos. 95-20, 98-10.  Comments may be 
filed using the Commission’s Electronic Comment Filing System (ECFS).  See Electronic Filing of 
Documents in Rulemaking Proceedings, 63 FR 24121 (1998).
? Electronic Filers:  Comments may be filed electronically using the Internet by accessing the 
ECFS:  http://fjallfoss.fcc.gov/ecfs2/.  
? Paper Filers:  Parties who choose to file by paper must file an original and one copy of each 
filing.  If more than one docket or rulemaking number appears in the caption of this proceeding, 
filers must submit two additional copies for each additional docket or rulemaking number.
? Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-
class or overnight U.S. Postal Service mail.  All filings must be addressed to the Commission’s 
Secretary, Office of the Secretary, Federal Communications Commission.
? All hand-delivered or messenger-delivered paper filings for the Commission’s Secretary must 
be delivered to FCC Headquarters at 445 12
th
St., SW, Room TW-A325, Washington, DC 
20554.  The filing hours are 8:00 a.m. to 7:00 p.m.  All hand deliveries must be held together 
with rubber bands or fasteners.  Any envelopes and boxes must be disposed of before
entering the building.  
? Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) 
must be sent to 9300 East Hampton Drive, Capitol Heights, MD  20743.
                                                          
705
47 C.F.R. §§ 1.1200 et seq.
Federal Communications Commission FCC 13-69 
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? U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12
th
Street, SW, Washington DC  20554.
255. People with Disabilities:  To request materials in accessible formats for people with 
disabilities (braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call 
the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty).
D. Second Further Notice of Proposed Rulemaking
1. Paperwork Reduction Act Analysis
256. This document contains proposed new or modified information collection requirements.  
The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public 
and the Office of Management and Budget (OMB) to comment on the information collection 
requirements contained in this document, as required by the Paperwork Reduction Act of 1995, Public 
Law 104-13. In addition, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-
198, see 44 U.S.C. § 3506(c)(4), we seek specific comment on how we might further reduce the 
information collection burden for small business concerns with fewer than 25 employees.
2. Initial Regulatory Flexibility Analysis
257. As required by the Regulatory Flexibility Act of 1980, as amended (RFA),
706
the 
Commission has prepared this Supplemental Initial Regulatory Flexibility Analysis (Supplemental IRFA) 
of the possible significant economic impact on a substantial number of small entities by the policies 
proposed in this Second NPRM.  Written comments are requested on this Supplemental IRFA.  
Comments must be identified as responses to the Supplemental IRFA and must be filed by the deadlines 
for comments on the Second FNPRM.  The Commission will send a copy of the Second FNPRM, 
including this Supplemental IRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration (SBA).
707
  In addition, the Second FNPRM and Supplemental IRFA (or summaries 
thereof) will be published in the Federal Register.
708
(i) Purpose of the Proposed Rules
258. In the Second FNPRM, we explore the costs and benefits of continuing to apply the 
structural separation requirements contained in section 64.1903 of the Commission’s rules, 47 C.F.R. 
§ 64.1903, to independent incumbent local exchange carriers (ILECs) subject to rate-of-return regulation 
and providing in-region, interexchange, interstate long distance services (in-region long distance services) 
in today’s marketplace.  
259. In the Second FNPRM, we seek comments addressing marketplace changes such as the 
decline of stand-alone long distance services, the rise of facilities-based “all-distance services” 
competition from cable and wireless, and the role of bundles in today’s long distance market.  We 
therefore seek comment addressing whether incentives for anticompetitive behavior exist for independent 
ILECs subject to rate-of-return regulation, and whether granting relief from section 64.1903 is 
appropriate. 
                                                          
706
See 5 U.S.C. § 603.  The RFA, see 5 U.S.C. §§ 601-612, has been amended by the Small Business Regulatory 
Enforcement Fairness Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996).
707
See 5 U.S.C. § 603(a).
708
See id.
Federal Communications Commission FCC 13-69 
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(ii) Legal Basis
260. The legal basis for any action that may be taken pursuant to the Second Further NPRM is 
contained in sections 4(i), 4(j), 10, 201-204, 214, 220(a), and 303(r) of the Communications Act of 1934, 
as amended, 47 U.S.C. §§ 154(i), 154(j), 160, 201-204, 214, 220(a), and 303(r).
(iii) Description and Estimate of the Number of Small Entities to Which 
the Proposed Rules Will Apply
261. The RFA directs agencies to provide a description of and, where feasible, an estimate of 
the number of small entities that may be affected by the proposed rules, if adopted.
709
  The RFA generally 
defines the term “small entity” as having the same meaning as the terms “small business,” “small 
organization,” and “small governmental jurisdiction.”
710
  In addition, the term “small business” has the 
same meaning as the term “small-business concern” under the Small Business Act.
711
  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 SBA.
712
262. Small Businesses.  Nationwide, there are a total of approximately 27.5 million small 
businesses, according to the SBA.
713
  
263. Wired Telecommunications Carriers.  The SBA has developed a small business size 
standard for Wired Telecommunications Carriers, which consists of all such companies having 1,500 or 
fewer employees. According to Census Bureau data for 2007, there were 3,188 firms in this category, 
total, that operated for the entire year.
714
  Of this total, 3144 firms had employment of 999 or fewer 
employees, and 44 firms had employment of 1000 employees or more.
715
  Thus, under this size standard, 
the majority of firms can be considered small.
264. Incumbent Local Exchange Carriers (ILECs).  Neither the Commission nor the SBA 
has developed a size standard for small businesses specifically applicable to incumbent local exchange 
services.  The closest applicable size standard under SBA rules is for Wired Telecommunications 
Carriers.  Under that size standard, such a business is small if it has 1,500 or fewer employees.
716
According to Commission data, 1,307 carriers reported that they were incumbent local exchange service 
providers.
717
  Of these 1,307 carriers, an estimated 1,006 have 1,500 or fewer employees and 301 have 
                                                          
709
See 5 U.S.C. § 603(b)(3).
710
See 5 U.S.C. § 601(6).
711
See 5 U.S.C. § 601(3) (incorporating by reference the definition of “small-business concern” in the 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.”
712
See 15 U.S.C. § 632.
713
See SBA, Office of Advocacy, “Frequently Asked Questions,” http://www.sba.gov/advo/stats/sbfaq.pdf    
(accessed Jan. 2012).
714
U.S. Census Bureau, 2007 Economic Census, Subject Series:  Information, Table 5, “Establishment and Firm 
Size: Employment Size of Firms for the United States: 2007 NAICS Code 517110” (issued Nov. 2010).
715
See id.  
716
See 13 C.F.R. § 121.201, NAICS code 517110.
717
See Trends in Telephone Service, Federal Communications Commission, Wireline Competition Bureau, Industry 
Analysis and Technology Division at Table 5.3 (Sept. 2010) (Trends in Telephone Service). 
Federal Communications Commission FCC 13-69 
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more than 1,500 employees.
718
  Consequently, the Commission estimates that most providers of 
incumbent local exchange service are small businesses that may be affected by rules adopted pursuant to 
the Second FNPRM.  
265. We have included small incumbent LECs in this present RFA analysis.  As noted above, 
a “small business” under the RFA is one that, inter alia, meets the pertinent small business size standard 
(e.g., a telephone communications business having 1,500 or fewer employees), and “is not dominant in its 
field of operation.”
719
  The SBA’s Office of Advocacy contends that, for RFA purposes, small incumbent 
LECs are not dominant in their field of operation because any such dominance is not “national” in 
scope.
720
We have therefore included small incumbent LECs in this RFA analysis, although we 
emphasize that this RFA action has no effect on Commission analyses and determinations in other, non-
RFA contexts.
266. Interexchange Carriers (IXCs).  Neither the Commission nor the SBA has developed a 
size standard for small businesses specifically applicable to interexchange services.  The closest 
applicable size standard under SBA rules is for Wired Telecommunications Carriers.  Under that size 
standard, such a business is small if it has 1,500 or fewer employees.
721
According to Commission data, 
359 companies reported that their primary telecommunications service activity was the provision of 
interexchange services.
722
  Of these 359 companies, an estimated 317 have 1,500 or fewer employees and 
42 have more than 1,500 employees.
723
  Consequently, the Commission estimates that the majority of 
interexchange service providers are small entities that may be affected by rules adopted pursuant to the 
Order.
(iv) Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities
267. In this Second FNPRM, the Commission proposes additional or modified information 
collections that would impose reporting and recordkeeping on current independent ILECs subject to rate-
of-return regulation, including small entities.  Specifically, the Second FNPRM invites comment on 
whether the Commission should replace its legacy framework for the provision of in-region, interstate 
long distance services provided by independent ILECs subject to rate-of-return regulation with a 
framework more closely tailored to the needs of consumers and competitors in today’s marketplace.  The 
central feature of this proposal is to amend or eliminate the application of section 64.1903 to independent 
ILECs subject to rate-of-return regulation.
268. Based on these questions, the Commission anticipates that a record will be developed 
concerning actual burdens and alternative ways in which the Commission could lessen the burdens on 
small entities subject to these requirements throughout the nation.
                                                          
718
See id.
719
5 U.S.C. § 601(3). 
720
See Letter from Jared W. Glover, Chief Counsel for Advocacy, SBA, to William E. Kennard, Chairman, FCC 
(May 27, 1999).  The Small Business Act contains a definition of “small business concern,” which the RFA 
incorporates into its own definition of “small business.”  See 15 U.S.C. § 632(a); see also 5 U.S.C. § 601(3).  SBA 
regulations interpret “small business concern” to include the concept of dominance on a national basis.  See 13 
C.F.R. § 121.102(b).
721
See 13 C.F.R. § 121.201, NAICS code 517110.
722
See Trends in Telephone Service at Table 5.3.
723
See id.
Federal Communications Commission FCC 13-69 
117
(v) Steps Taken to Minimize the Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
269. The RFA requires an agency to describe any significant, specifically small business, 
alternatives that it has considered in reaching its proposed approach, which may include the following 
four alternatives (among others): “(1) the establishment of differing compliance or reporting requirements 
or timetables that take into account the resources available to small entities; (2) the clarification, 
consolidation, or simplification of compliance and reporting requirements under the rules for such small 
entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of 
the rule, or any part thereof, for such small entities.”
724
270. The overall objective of this proceeding is to reduce regulatory burdens on independent 
ILECs to the extent consistent with the public interest, and is part of the Commission’s ongoing efforts 
under Executive Order 13,579 to revisit “rules that may be outmoded, ineffective, insufficient, or 
excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has 
been learned.” The Second FNPRM seeks specific proposals as to which existing regulations might be 
removed or streamlined in their application to provision of in-region, interstate and international 
interexchange services by independent ILECs subject to rate-of-return regulation absent current 
safeguards, and asks parties to comment on whether such independent ILECs should continue to be 
classified as nondominant in the provision of such services if section 64.1903 is repealed. The Second 
FNPRM also asks parties to discuss whether, and to what extent, dominant carrier regulation is aptly 
suited to achieving the Commission’s objectives to promote competition and to deter anticompetitive 
behavior by independent ILECs subject to rate-of-return regulation.  The Second FNPRM seeks comment 
on these matters, especially as they might affect small entities subject to the rules.
(vi) Federal Rules that May Duplicate, Overlap, or Conflict with the 
Proposed Rules
271. None.  
3. Ex Parte Presentations
272. This proceeding shall be treated as a “permit-but-disclose” proceeding in accordance with 
the Commission's ex parte rules.
725
Persons making ex parte presentations must file a copy of any written 
presentation or a memorandum summarizing any oral presentation within two business days after the 
presentation (unless a different deadline applicable to the Sunshine period applies).  Persons making oral 
ex parte presentations are reminded that memoranda summarizing the presentation must (1) list all 
persons attending or otherwise participating in the meeting at which the ex parte presentation was made, 
and (2) summarize all data presented and arguments made during the presentation.  If the presentation 
consisted in whole or in part of the presentation of data or arguments already reflected in the presenter’s 
written comments, memoranda or other filings in the proceeding, the presenter may provide citations to 
such data or arguments in his or her prior comments, memoranda, or other filings (specifying the relevant 
page and/or paragraph numbers where such data or arguments can be found) in lieu of summarizing them 
in the memorandum.  Documents shown or given to Commission staff during ex parte meetings are 
deemed to be written ex parte presentations and must be filed consistent with rule 1.1206(b).  In 
proceedings governed by rule 1.49(f) or for which the Commission has made available a method of 
electronic filing, written ex parte presentations and memoranda summarizing oral ex parte presentations, 
and all attachments thereto, must be filed through the electronic comment filing system available for that 
                                                          
724
5 U.S.C. § 603(c)(1)-(c)(4).
725
47 C.F.R. §§ 1.1200 et seq.
Federal Communications Commission FCC 13-69 
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proceeding, and must be filed in their native format (e.g., .doc, .xml, .ppt, searchable .pdf).  Participants in 
this proceeding should familiarize themselves with the Commission’s ex parte rules.
4. Comment Filing Procedures
273. Pursuant to sections 1.415 and 1.419 of the Commission’s rules, 47 CFR §§ 1.415, 1.419, 
interested parties may file comments and reply comments on or before the dates indicated on the first 
page of this document.  All pleadings are to reference CC Docket No. 00-175.  Comments may be filed 
using the Commission’s Electronic Comment Filing System (ECFS).  See Electronic Filing of Documents 
in Rulemaking Proceedings, 63 FR 24121 (1998).
? Electronic Filers:  Comments may be filed electronically using the Internet by accessing the 
ECFS:  http://fjallfoss.fcc.gov/ecfs2/.  
? Paper Filers:  Parties who choose to file by paper must file an original and one copy of each 
filing.  If more than one docket or rulemaking number appears in the caption of this proceeding, 
filers must submit two additional copies for each additional docket or rulemaking number.
? Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-
class or overnight U.S. Postal Service mail.  All filings must be addressed to the Commission’s 
Secretary, Office of the Secretary, Federal Communications Commission.
? All hand-delivered or messenger-delivered paper filings for the Commission’s Secretary must 
be delivered to FCC Headquarters at 445 12
th
St., SW, Room TW-A325, Washington, DC 
20554.  The filing hours are 8:00 a.m. to 7:00 p.m.   All hand deliveries must be held together 
with rubber bands or fasteners.  Any envelopes and boxes must be disposed of before
entering the building.  
? Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) 
must be sent to 9300 East Hampton Drive, Capitol Heights, MD  20743.
? U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12
th
Street, SW, Washington DC  20554.
274. People with Disabilities: To request materials in accessible formats for people with 
disabilities (braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call 
the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty).
VIII. ORDERING CLAUSES
275. Accordingly, IT IS ORDERED, pursuant to section 10(c) of the Communications Act of 
1934, as amended, 47 U.S.C. § 160(c), that USTelecom’s petition for forbearance IS GRANTED IN 
PART, to the extent described above, and conditioned on fulfillment of the obligations set forth herein, 
AND DENIED IN PART, to the extent described above, AND IS OTHERWISE DENIED.
276. IT IS FURTHER ORDERED, pursuant to sections 1, 4(i) and 4(j), 47 U.S.C. §§ 151, 
154(i) and 154(j), that USTelecom’s Petition for Waiver in WC Docket No. 08-225 and Cincinnati Bell’s 
Petition for Waiver in WC Docket No. 09-206 ARE DISMISSED as moot, in light of the relief granted 
herein.  
277. IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 4(j), and 405 of the 
Communications Act, as amended, 47 U.S.C. §§ 151, 154(i), 154(j), and 405, that the Petition for 
Reconsideration of Embarq, Frontier, and Windstream in WC Docket Nos. 08-190, 07-139, 07-204, 07-
273, and 07-21 IS DISMISSED as moot, in light of the relief granted herein.  
Federal Communications Commission FCC 13-69 
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278. IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 4(j), and 405 of the 
Communications Act, as amended, 47 U.S.C. §§ 151, 154(i), 154(j), and 405 that the Petition for 
Reconsideration by Sprint Nextel Corporation, AdHoc Telecommunications Users Committee, 
COMPTEL, and Time Warner Telecom Inc. in WC Docket Nos. 07-21 and 05-342 filed on May 27, 2008
in WC Docket Nos. 07-21 and 05-342; the Petition for Reconsideration by AdHoc Telecommunications 
Users Committee, filed on October 6, 2008 in WC Docket Nos. 08-190, 07-139, 07-204, 07-273, and 07-
21; and the Petition for Reconsideration by Sprint Nextel Corporation, COMPTEL, tw telecom inc., and 
One Communications Corp., filed on October 6, 2008 in WC Docket Nos. 08-190, 07-139, 07-204, 07-
273, are DENIED.  
279. IT IS FURTHER ORDERED that, pursuant to Sections 1, 2, 4, 11, 201-205, 251, 272, 
274-276, and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 152, 154,  161, 
201-205, 251, 272, 274-276, and 303(r) this Report and Order in WC Docket No. 10-132 IS ADOPTED.  
The requirements of this Report and Order shall become effective 30 days after publication in the Federal 
Register.
280. IT IS FURTHER ORDERED that the Commission’s Consumer and Governmental 
Affairs Bureau, Reference Information Center, SHALL SEND a copy of this Report and Order in WC 
Docket No. 10-132, including the Final Regulatory Flexibility Certification, to the Chief Counsel for 
Advocacy of the Small Business Administration. 
281. IT IS FURTHER ORDERED that, pursuant to Sections 1, 2, 4, 11, 201-205, 251, 272, 
274-276, and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 152, 154, 161, 
201-205, 251, 272, 274-276, and 303(r) this Further Notice of Proposed Rulemaking in CC Docket Nos. 
95-20 and 98-10 IS ADOPTED.
282. Accordingly, IT IS ORDERED that, pursuant to Sections 1, 2, 4(i), 4(j), 201-205, 220(a), 
251, 272, and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 152, 154(i), 
154(j), 201-205, 220(a), 251, 272, and 303(r) this Second Further Notice of Proposed of Rulemaking in 
CC Docket No. 00-175 IS ADOPTED.
283. IT IS FURTHER ORDERED that the Commission’s Consumer and Governmental 
Affairs Bureau, Reference Information Center, SHALL SEND a copy of this Further Notice of Proposed 
Rulemaking in CC Docket Nos. 95-20 and 98-10 and this Second Further Notice of Proposed Rulemaking 
in CC Docket No. 00-175, including the Initial Regulatory Flexibility Certifications, to the Chief Counsel 
for Advocacy of the Small Business Administration.
284. IT IS FURTHER ORDERED, pursuant to section 10 of the Communications Act of 
1934, as amended, 47 U.S.C. § 160, and section 1.103(a) of the Commission’s rules, 47 U.S.C. 
§ 1.103(a), that this decision SHALL BE EFFECTIVE upon release.  Pursuant to sections 1.4 and 1.13 of 
the Commission’s rule, 47 C.F.R. §§ 1.4, 1.13, the time for appeal SHALL RUN from the release date of 
this Order.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
Federal Communications Commission FCC 13-69 
120
APPENDIX A
Comments, Oppositions, & Replies
Comments
Ad Hoc Telecommunications Users Committee (Ad Hoc)
Alarm Industry Communications Committee (AICC)
Alaska Communications Systems Group, Inc. (ACS)
California Association of Competitive Telecommunications Companies (CACTC)
California Public Utilities Commission (CPUC)
CenturyLink
Cincinnati Bell Telephone Company LLC (Cincinnati Bell)
General Communication, Inc. (GCI)
Larry S. Landis
Michigan Public Service Commission (Michigan PSC)
NASUCA, Maine Office of the Public Advocate, and New Jersey Rate Counsel (Consumer Advocates)
National Cable & Telecommunications Association (NCTA)
New York Public Service Commission (NY PSC)
Verizon
Vermont Public Service Board (Vermont PSB)
Oppositions
Broadview Networks, MegaPath Corp., and XO Communications (Broadview, et al.)
COMPTEL
Full Service Network LP (Full Service)
New Networks Institute (New Networks)
Maneesh Pangasa
Sprint Nextel Corporation (Sprint)
Reply Comments
Alarm Industry Communications Committee (AICC)
Alaska Communications Systems Group, Inc. (ACS)
AT&T
Computer & Communications Industry Association (CCIA)
Frontier Communications (Frontier)
Full Service Network LP (Full Service)
Michigan Public Service Commission (Michigan PSC)
National Telecommunications Cooperative Association (NTCA)
Pennsylvania Public Utility Commission (Pennsylvania PUC)
Public Service Commission of the District of Columbia (DC PSC)
SureWest Telephone (SureWest)
United States Telecom Association (USTelecom)
Verizon
Federal Communications Commission FCC 13-69 
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APPENDIX B
Forbearance Granted in this Order
Category of Rule Applicable C.F.R. or U.S.C. sections Scope of 
Forbearance
Conditions
Equal Access 
Scripting
Not applicable All No
Cost Assignment 
Rules
726
47 C.F.R. § 32.23
47 C.F.R. § 32.27(a)-(e)
47 C.F.R. § 32.5280(b)-(c)
47 C.F.R. §§ 36.1-36.2
47 C.F.R. §§ 36.3(a)-(d)
47 C.F.R. §§ 36.101-36.102
47 C.F.R. § 36.111
47 C.F.R. § 36.112(a)
47 C.F.R. §§ 36.121-36.124
47 C.F.R. §§ 36.125(a), (b), (g)-(j)
47 C.F.R. § 36.126
47 C.F.R. §§ 36.141-36.142
47 C.F.R. §§ 36.151-36.153
47 C.F.R. §§ 36.154(a)-(c), (e)-(g)
47 C.F.R. §§ 36.155-157
47 C.F.R. §§ 36.161-36.162
47 C.F.R. § 36.171
47 C.F.R. § 36.172(a), (b)
47 C.F.R. §§ 36.181-36.182
47 C.F.R. § 36.191
47 C.F.R. §§ 36.201-2
47 C.F.R. §§ 36.211-36.216
47 C.F.R. §§ 36.221-36.225
47 C.F.R. §§ 36.301-36.302
47 C.F.R. §§ 36.310-36.311
47 C.F.R. § 36.321
47 C.F.R. § 36.331
47 C.F.R. § 36.341
47 C.F.R. §§ 36.351-36.354
47 C.F.R. § 36.361
47 C.F.R. §§ 36.371-36.382
47 C.F.R. §§ 36.391-36.392
47 C.F.R. §§ 36.411-36.412
47 C.F.R. § 36.421
47 C.F.R. §§ 36.501-36.507
Appendix to Title 47 Part 36
47 C.F.R. §§ 64.901-64.904
Price cap 
carriers only
Yes 
                                                          
726
See supra n. 119.  To the extent that there are any inconsistencies between this Appendix and the Order, the 
Order controls.
Federal Communications Commission FCC 13-69 
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47 C.F.R. § 65.600
47 C.F.R. §§ 69.301-69.306
47 C.F.R. §§ 69.307(a), (b), (d)
47 C.F.R. §§ 69.309-69.310
47 C.F.R. §§ 69.401-69.409
47 C.F.R. §§ 69.411-69.414
47 U.S.C. § 220(a)(2) (limited to the extent that 
this provision contemplates separate accounting of 
nonregulated costs)
Part 42 Recording 
keeping 
Requirements 
47 C.F.R. §§ 42.4-42.5
47 C.F.R. § 42.7
47 C.F.R. § 42.10(a)
All Yes; 
forbearance 
from 47 
C.F.R. 
§ 42.10(a) 
applies 
only to 
IXCs that 
maintain a 
website
ARMIS Report 43-
01
47 C.F.R. § 43.21(e)(2) Price cap 
carriers only
Yes 
Annual Revenue 
and Total 
Communications 
Plant Reporting-
47 C.F.R. § 43.21(c) All Yes
Cash Working 
Capital Allowance” 
Requirement
47 C.F.R. § 45.820(d) Price cap 
carriers only
Yes 
Recording of 
Telephone 
Conversation with 
Phone companies
47 C.F.R. § 64.501 All No
Partial Forbearance Granted in this Order
Category of Rule Applicable C.F.R. or U.S.C. Sections Scope of 
Forbearance
Conditions
Property Record 
Rules
47 C.F.R. §§ 32.2000(e) and (f) Price cap 
carriers only
Yes
Structural 
Separation 
Requirement for 
Independent ILECs
47 C.F.R. § 64.1903 Price cap 
carriers only
Yes 
Rules Governing 
Extension of 
unsecured Credit 
for Interstate and 
Foreign 
Communications 
Services to 
47 C.F.R. § 64.804(c)-(f) All No
Federal Communications Commission FCC 13-69 
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Candidates for 
Federal Office 
Prepaid Calling 
Card Reporting 
Requirements
47 C.F.R. § 64.5001(a), (b), (c)(1), (c)(2), c(4) 47 C.F.R. 
§ 64.5001 
(c)(3) only 
applies to 
certain 
providers
No
Federal Communications Commission FCC 13-69 
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STATEMENT OF
CHAIRMAN JULIUS GENACHOWSKI
Re: Petition of USTelecom for Forbearance Under 47 U.S.C. § 160(c) from Enforcement of Certain 
Legacy Telecommunications Regulations et al., WC Docket Nos. 12-61, 10-132, 09-206, 08-225, 
08-190, 07-273, 07-204, 07-139, 07-21, 05-342, CC Docket Nos. 02-39, 00-175, 95-20, 98-10
With today’s Order and accompanying rulemakings, the Commission takes another step forward 
in our ongoing efforts to retool the agency for the digital age and to remove barriers to private investment, 
innovation and job creation. 
We live in a world imagined by Steve Jobs, Bill Gates, Marc Andreessen and other visionaries, 
but too many of the FCC rules and processes we inherited were built for the world of Alexander Graham 
Bell.  
That’s why I made agency reform a top priority when I arrived in 2009. One of my first acts was 
to appoint a special counsel for FCC reform, and I directed her to lead an agency-wide effort to look hard 
and honestly at our rules, to propose eliminating ones that don’t make sense or have outlived their 
usefulness, and to make sure that the benefits of any rule we adopt outweigh the costs. 
I also welcomed President Obama’s Executive Order calling on all executive departments and 
agencies to review rules and regulations to ensure they are designed “in a cost-effective manner consistent 
with the goals of promoting economic growth, innovation, competitiveness, and job creation” – and we 
have done just that here at the FCC, even as an independent agency not covered by the Order.
These efforts have yielded results. Since January 2010, the Commission has eliminated more 
than 300 outdated regulations and eliminated dozens of reporting requirements.  We have also 
streamlined data collections, reduced backlogs, and sped processing times. For example, we’ve cut the 
time to review routine wireless transactions by more than half, and we’ve almost entirely eliminated our 
satellite space station licensing backlog – cutting it from 90 applications in June 2009 to just seven in 
April 2013.
In every case, we’ve preserved or strengthened vital protections for consumers and competition, 
as well as the Commission’s access to the data it genuinely needs, even while eliminating rules and 
reports that no longer make sense.  
We brought this same approach to today’s Order.  Last year, USTelecom, on behalf of its member 
telephone companies, sought broad forbearance relief from dozens of regulatory requirements in 17 
different categories.  In February, the Commission granted forbearance from three categories of rules that 
were unnecessary or outdated.  
Today, the Commission removes the majority of burdens identified by USTelecom and grants 
forbearance from an additional 123 regulations in 11 categories covered by USTelecom’s petition. For 
example: We forbear from prepaid calling card reporting requirements that required over 15,000 hours of 
compliance work each year. We eliminate requirements that phone companies keep certain paper records, 
which make little sense in the age of digital databases.  And we streamline requirements for companies’ 
property records, which previously required a level of detail that has not been used by the Commission in 
over a decade.  With 126 regulations removed, we’re talking about millions of dollars in savings, which 
will ultimately result in a more dynamic, competitive market and lower prices for consumers. 
Even where USTelecom failed to show that forbearance is appropriate under the statute, the 
Commission is taking steps on its own, through Notices of Proposed Rulemaking or Public Notices 
Federal Communications Commission FCC 13-69 
125
refreshing the record, to examine more deeply whether some of the remaining requirements may be 
streamlined or reduced.
At the same time, today’s order unanimously preserves those requirements that remain essential 
to our fundamental mission to ensure competition, consumer protection, universal service, and public 
safety, and rejects requests that would short-circuit the ongoing work of the Technology Transitions Task 
Force. For example, we protect consumers’ right to notice when services are being eliminated, a vital 
protection as we move forward on trials of wireline to wireless, TDM to IP, and copper to fiber 
technology transitions.
Likewise, even as we eliminate reporting and recordkeeping requirements, it remains critical that 
the Commission have access to timely, relevant data to drive smart decisionmaking, particularly as we 
move to broadband all-IP networks.  Which is why the kind of relief we grant in today’s Order goes hand 
in hand with the essential work we’re doing to strengthen the Commission’s broadband data, on 
initiatives like the National Broadband Map, Form 477 reform, the Measuring Broadband America report, 
and our business broadband data collection in the special access proceeding.
I thank my colleagues for their contributions, which have helped improve this item. And I 
particularly thank the excellent teams in the Wireline and Enforcement Bureaus and the Office of General 
Counsel for many long hours and late nights in getting today’s detailed and comprehensive Order and 
NPRMs over the finish line.
Federal Communications Commission FCC 13-69 
126
STATEMENT OF 
COMMISSIONER AJIT PAI
APPROVING IN PART AND CONCURRING IN PART
Re: Petition of USTelecom for Forbearance Under 47 U.S.C. § 160(c) from Enforcement of Certain 
Legacy Telecommunications Regulations et al., WC Docket Nos. 12-61, 10-132, 09-206, 08-225, 
08-190, 07-273, 07-204, 07-139, 07-21, 05-342, CC Docket Nos. 02-39, 00-175, 95-20, 98-10
It’s amazing (and somewhat disturbing) what you can find when you crack open Title 47 of the 
U.S. Code of Federal Regulations.  Take the Commission’s rules on basic property records and 
continuing property records.
727
  These rules require a company to label each and every piece of central 
office equipment, from a million-dollar switch down to a $10 plug-in circuit board, to track how much it 
cost to buy, and to detail exactly where it’s located (with specificity, meaning where on what shelf in 
which room in which building).  If the $10 plug-in circuit board lasts 30 years, the company has to keep 
records for 30 years and update them each time the plug-in circuit board moves.
728
  The only silver lining?  
These rules burden only a subset of companies (i.e., incumbent local exchange carriers) and cover only 
regulated assets (i.e., plant for the public switched telephone network).
Or ponder Commission rule 64.1903, which requires a telephone company that offers long-
distance service to do so through a separate affiliate—the old structural separation requirement crafted in 
the 1980s.
729
  Of course, it doesn’t apply if a company entered the telephone business after 1996.  Or is a 
reseller.  Or a cable operator.  Or a commercial mobile radio service provider.  Or a mobile satellite 
service provider.  Or an interconnected Voice-over-Internet-Protocol service provider.  Or one of the three 
Bell operating companies.  In other words, we still have structural separation requirements, but only for 
the independent companies that encompass a fraction of the market and were never part of Ma Bell in the 
first place.
Or consider the comparably efficient interconnection (CEI) requirements, a regulatory penumbra 
around rule 64.702 created by the Computer Inquiry III orders of the late 1980s.  Under this regime, when 
a telephone company wants to “enhance” its basic telephone service, such as by letting customers dial *98 
to access voicemail,
730
it must post a CEI plan that goes through a multi-step checklist designed to protect 
non-facilities-based narrowband competitors.  Although the Commission intended the filing of CEI plans 
to be an interim measure
731
designed to protect the then-nascent enhanced services industry, the 
requirement remains on our books over two decades later.  And while independent voicemail, facsimile 
services, and the like may be worthwhile services, one can only wonder why the Commission should 
spend its limited resources protecting these narrowband, legacy industries in the era of ubiquitous 
broadband and mobile apps.
                                                          
727
47 C.F.R. § 32.2000(e), (f).
728
See Letter from Bennett L. Ross, Counsel for United States Telecom Association, to Marlene H. Dortch, 
Secretary, FCC, WC Docket No. 12-61, at 15 (Apr. 18, 2013).
729
47 C.F.R. § 64.1903.
730
See, e.g., Amendment to Comparably Efficient Interconnection Plan for Voice-Mail Services for AT&T Inc.’s 
Operating Companies, available at https://ebiznet.att.com/cei/plans/amendment_vm_plan_star98_113012.doc.
731
Amendment of Section 64.702 of the Commission’s Rules and Regulations, CC Docket No. 85-229, Further 
Notice of Proposed Rulemaking, 13 FCC Rcd 6040, 6077, para. 61 (1998).
Federal Communications Commission FCC 13-69 
127
No more—or at least not much longer.  Today we establish a process to relieve carriers of some 
of these outdated rules so long as they draw up, file, and get FCC approval of a compliance plan that 
better matches the Commission’s needs with the carrier’s obligations.  We also launch several 
rulemakings aimed at repealing and streamlining other rules.
I will be the first to admit that I wish we had gone further, faster.  For example, much sooner than 
fifteen months after the petition was filed, I would have granted the same relief to independent carriers 
that we previously afforded AT&T, Verizon, and Qwest—especially as no one opposed that part of the 
petition.
But today’s order is a product of bipartisan compromise, an important first step that holds out the 
hope for continuing reform.  As the proverb goes, “a journey of a thousand miles begins with a single 
step.”  I look forward to continuing to working with my colleagues as we continue this journey.
Finally, I want to thank the Commission staff who spent countless hours working on this item, 
including Julie Veach, Claude Aiken, Eric Bash, Michele Berlove, Bill Dever, Lisa Gelb, Victoria 
Goldberg, Kalpak Gude, Athula Gunaratne, Paul Hartman, Sherry Herauf, Diane Griffin Holland, John 
Hunter, Alex Johns, William Kehoe, Christopher Killion, Doug Klein, Robert Krinsky, Greg Kwan, Sean 
Lev, Travis Litman, Marcus Maher, Carol Mattey, Jodie May, Rodney McDonald, Betsy McIntyre, 
Claudia Pabo, Wesley Platt, Jennifer Prime, Marv Sacks, Deena Shetler, Chris Sova, Steve Steckler, 
Jamie Susskind, Suzanne Tetreault, Matthew Warner, Rodger Woock, Suzanne Yelen, David Zesiger, and 
Cathy Zima.  Your dedication to rigorous analysis and the public interest will be all the more necessary as 
the Commission proceeds with the rulemakings we launch today to reform our accounting systems.  But 
take heart; as a sage government employee once said, “It ain’t government work if you don’t have to do it 
twice.”
732
                                                          
732
Jerry Gergich, Parks and Recreation (ep. 418, 2012).