News media Information 202 / 418-0500 NEWS Federal Communications Commission TTY 202 / 418-2555 Fax-On-Demand 202 / 418-2830 Internet: http://www.fcc.gov ftp.fcc.gov 445 12th Street, S.W. Washington, D. C. 20554 This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974). FOR IMMEDIATE RELEASE: NEWS MEDIA CONTACT: December 17, 1999 Mike Balmoris at (202) 418-0513 Email: firstname.lastname@example.org COMMON CARRIER ACTION FEDERAL COMMUNICATIONS COMMISSION ADOPTS RULES TO GIVE CARRIERS FREEDOM FROM DEPRECIATION REQUIREMENTS Washington, D.C. – Today, the Federal Communications Commission (FCC) adopted rules that set forth conditions under which carriers may qualify for freedom from depreciation requirements and streamlined the depreciation requirements for carriers. These new rules will minimize the regulatory burden on incumbent local exchange carriers (LECs) and provide them with greater flexibility to adjust their depreciation rates while allowing the Commission to maintain adequate oversight. To be freed from the depreciation requirements an incumbent LEC must agree to the following conditions: It must adjust the net book costs on its regulatory books to the level currently reflected on its financial books by a below-the-line write-off. Currently, the largest incumbent LECs record approximately $30 billion less capital costs on their financial books than they include in their regulatory books. It must use the same depreciation factors and rates for both regulatory and financial accounting purposes. It must forego the opportunity to seek recovery of the write-off through a low-end adjustment, an exogenous adjustment, or an above-cap filing under price caps. It must agree to submit information concerning its depreciation accounts, including forecast additions and retirements for major network accounts and replacement plans for digital central offices. The Commission stated, however, that it would consider alternative proposals by carriers seeking a waiver of its depreciation requirements and that any alternative proposal must provide the same protections to guard against adverse impacts on consumers and competition as those provided by the conditions enumerated in the Order. For example, a carrier could propose an alternative method for adjusting its net book costs. -- more -- As a separate matter, the Commission streamlined the existing rules by establishing a range for depreciation factors for large price cap LECs, defined as those companies whose revenues exceed an indexed revenue threshold, currently set at $112 million in annual revenue. The streamlined procedures include the following: 1. carriers may make summary filings selecting depreciation factors from within the prescribed ranges; 2. the range of lives for digital electronic switching equipment is expanded from 16-18 years to 12-18 years; and, 3. incumbent LECs are no longer required to file annual theoretical reserve studies. Additionally, the FCC denied a petition filed by the United States Telephone Association (USTA) that sought forbearance from the depreciation prescription process for price cap incumbent LECs. The Commission stated that the above mentioned depreciation waiver process, rather than forbearance, will provide carriers the opportunity to free themselves of depreciation regulation while providing safeguards against the adverse effects that unrestricted changes in depreciation rates could have on consumers and competition. Specifically, increases in depreciation could affect rates for price cap carriers through the low-end adjustment, exogenous treatment, or above-cap filings. Additionally, forbearance from depreciation prescription could impact rates for interconnection and unbundled network elements, and could affect carrier’s universal service support amounts. Action by the Commission December 17, 1999, by Report and Order in CC Docket No. 98-137, Memorandum Opinion and Order in ASD 98-91 (FCC 99-397). Chairman Kennard, Commissioners Ness, and Tristani with Commissioner Powell concurring, and Commissioner Furchtgott-Roth dissenting and issuing a statement. - FCC - Report No. CC 99-59 CC Docket No. 98-137, ASD 98-91 Common Carrier Bureau Contact: JoAnn Lucanik at (202) 418-0873 News about the Federal Communications Commission can also be found on the Commission’s web site www.fcc.gov.
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