[Code of Federal Regulations] [Title 47, Volume 3] [Revised as of October 1, 2005] From the U.S. Government Printing Office via GPO Access [CITE: 47CFR54.301] [Page 111-114] TITLE 47--TELECOMMUNICATION CHAPTER I--FEDERAL COMMUNICATIONS COMMISSION (CONTINUED) PART 54_UNIVERSAL SERVICE--Table of Contents Subpart D_Universal Service Support for High Cost Areas Sec. 54.301 Local switching support. (a) Calculation of local switching support. (1) Beginning January 1, 1998, an incumbent local exchange carrier that has been designated an eligible telecommunications carrier and that serves a study area with 50,000 or fewer access lines shall receive support for local switching costs using the following formula: the carrier's projected annual unseparated local switching revenue requirement, calculated pursuant to paragraph (d) of this section, shall be multiplied by the local switching support factor. For purposes of this section, local switching costs shall be defined as Category 3 local switching costs under part 36 of this chapter. (2) Local switching support factor. (i) The local switching support factor shall be defined as the difference between the 1996 weighted interstate DEM factor, calculated pursuant to Sec. 36.125(f) of this chapter, and the 1996 unweighted interstate DEM factor. (ii) If the number of a study area's access lines increases such that, under Sec. 36.125(f) of this chapter, the weighted interstate DEM factor for 1997 or any successive year would be reduced, that lower weighted interstate DEM factor shall be applied to the carrier's 1996 unweighted interstate DEM factor to derive a new local switching support factor. (3) Beginning January 1, 1998, the sum of the unweighted interstate DEM factor, as defined in Sec. 36.125(a)(5) of this chapter, and the local switching support factor shall not exceed 0.85. If the sum of those two factors would exceed 0.85, the local switching support factor shall be reduced to a level that would reduce the sum of the factors to 0.85. (b) Submission of data to the Administrator. Each incumbent local exchange carrier that has been designated an eligible telecommunications carrier and that serves a study area with 50,000 or fewer access lines shall, for each study area, provide the Administrator with the projected total unseparated dollar amount assigned to each account listed [[Page 112]] below for the calendar year following each filing. This information must be provided to the Administrator no later than October 1 of each year. The Administrator shall use this information to calculate the projected annual unseparated local switching revenue requirement pursuant to paragraph (d) of this section. I Telecommunications Plant in Account 2001 Service (TPIS). Telecommunications Plant-- Accounts 2002, 2003, 2005 Other. General Support Assets....... Account 2110 Central Office Assets........ Accounts 2210, 2220, 2230 Central Office-switching, Account 2210, Category 3 Category 3 (local switching). Information Origination/ Account 2310 termination Assets. Cable and Wire Facilities Account 2410 Assets. Amortizable Tangible Assets.. Account 2680 Intangibles.................. Account 2690 II Rural Telephone Bank (RTB) Included in Account 1410 Stock. Materials and Supplies....... Account 1220.1 Cash Working Capital......... Defined in 47 CFR 65.820(d) III Accumulated Depreciation..... Account 3100 Accumulated Amortization..... Included in Accounts 2005, 2680, 2690, 3410 Net Deferred Operating Income Accounts 4100, 4340 Taxes. Network Support Expenses..... Account 6110 General Support Expenses..... Account 6120 Central Office Switching, Accounts 6210, 6220, 6230 Operator Systems, and Central Office Transmission Expenses. Information Origination/ Account 6310 Termination Expenses. Cable and Wire Facilities Account 6410 Expenses. Other Property, Plant and Account 6510 Equipment Expenses. Network Operations Expenses.. Account 6530 Access Expense............... Account 6540 Depreciation and Amortization Account 6560 Expense. Marketing Expense............ Account 6610 Services Expense............. Account 6620 Corporate Operations Expense. Account 6720 Operating Taxes.............. Accounts 7230, 7240 Federal Investment Tax Account 7210 Credits. Provision for Deferred Account 7250 Operating Income Taxes-Net. Allowance for Funds Used Included in Account 7300 During Construction. Charitable Contributions..... Included in Account 7300 Interest and Related Items... Account 7500 IV Other Non-Current Assets..... Included in Account 1410 Deferred Maintenance and Included in Account 1438 Retirements. Deferred Charges............. Included in Account 1438 Other Jurisdictional Assets Accounts 1500, 4370 and Liabilities. Customers' Deposits.......... Account 4040 Other Long-Term Liabilities.. Included in Account 4300 (c) Allocation of accounts to switching. The Administrator shall allocate to local switching, the accounts reported pursuant to paragraph (b) of this section as prescribed in this paragraph. [[Page 113]] (1) General Support Assets (Account 2110); Amortizable Tangible Assets (Account 2680); Intangibles (Account 2690); and General Support Expenses (Account 6120) shall be allocated according to the following factor: Account 2210 Category/3 (Account 2210 + Account 2220 + Account 2230 + Account 2310 + Account 2410). (2) Telecommunications Plant--Other (Accounts 2002, 2003, 2005); Rural Telephone Bank (RTB) Stock (included in Account 1410); Materials and Supplies (Account 1220.1); Cash Working Capital (Sec. 65.820(d) of this chapter); Accumulated Amortization (Included in Accounts 2005, 2680, 2690, 3410); Net Deferred Operating Income Taxes (Accounts 4100, 4340); Network Support Expenses (Account 6110); Other Property, Plant and Equipment Expenses (Account 6510); Network Operations Expenses (Account 6530); Marketing Expense (Account 6610); Services Expense (Account 6620); Operating Taxes (Accounts 7230, 7240); Federal Investment Tax Credits (Accounts 7210); Provision for Deferred Operating Income Taxes--Net (Account 7250); Interest and Related Items (Account 7500); Allowance for Funds Used During Construction (Included in Account 7300); Charitable Contributions (included in Account 7300); Other Non- current Assets (Included in Account 1410); Other Jurisdictional Assets and Liabilities (Accounts 1500, 4370); Customer Deposits (Account 4040); Other Long-term Liabilities (Included in Account 4300); and Deferred Maintenance and Retirements (Included in Account 1438) shall be allocated according to the following factor: Account 2210 Category 3 Account 2001. (3) Accumulated Depreciation for Central Office--switching (Account 3100 associated with Account 2210) and Depreciation and Amortization Expense for Central Office--switching (Account 6560 associated with Account 2210) shall be allocated according to the following factor: Account 2210 Category 3/Account 2210. (4) Accumulated Depreciation for General Support Assets (Account 3100 associated with Account 2110) and Depreciation and Amortization Expense for General Support Assets (Account 6560 associated with Account 2110) shall be allocated according to the following factor: Account 2210 Category 3 / Account 2001. (5) Corporate Operations Expenses (Account 6720) shall be allocated according to the following factor: [[Account 2210 Category 3 (Account 2210 + Account 2220 + Account 2230)]] x (Account 6210 + Account 6220 + Account 6230)] + [(Account 6530 + Account 6610 + Account 6620) x (Account 2210 Category 3 Account 2001)] (Account 6210 + Account 6220 + Account 6230 + Account 6310 + Account 6410 + Account 6530 + Account 6610 + Account 6620). (6) Central Office Switching, Operator Systems, and Central Office Transmission Expenses (Account 6210, Account 6220, Account 6230) shall be allocated according to the following factor: Account 2210 Category 3 / (Accounts 2210 + 2220 + 2230). (d) Calculation of the projected annual unseparated local switching revenue requirement. The Administrator shall calculate the projected annual unseparated local switching revenue requirement by summing the components listed in this paragraph. (1) Return on Investment attributable to COE Category 3 shall be obtained by multiplying the average projected unseparated local switching net investment by the authorized interstate rate of return. Projected unseparated local switching net investment shall be calculated as of each December 31 by deducting the accumulated reserves, deferrals and customer deposits attributable to the COE Category 3 investment from the gross investment attributable to COE Category 3. The average projected unseparated local switching net investment shall be calculated by summing the projected unseparated local switching net investment as of December 31 of the calendar year following the filing year and such investment as of December 31 of the filing year and dividing by 2. (2) Depreciation expense attributable to COE Category 3 investment, allocated pursuant to paragraph (c) of this section. (3) All expenses, excluding depreciation expense, collected in paragraph (b) [[Page 114]] of this section, allocated pursuant to paragraph (c) of this section. (4) Federal income tax attributable to COE Category 3 shall be calculated using the following formula; the accounts listed shall be allocated pursuant to paragraph (c) of this section: [Return on Investment attributable to COE Category 3--Included in Account 7300--Account 7500-Account 7210)] x [Federal Income Tax Rate (1--Federal Income Tax Rate)]. (e) True-up adjustment--(1) Submission of true-up data. Each incumbent local exchange carrier that has been designated an eligible telecommunications carrier and that serves a study area with 50,000 or fewer access lines shall, for each study area, provide the Administrator with the historical total unseparated dollar amount assigned to each account listed in paragraph (b) of this section for each calendar year no later than 12 months after the end of such calendar year. (2) Calculation of true-up adjustment. (i) The Administrator shall calculate the historical annual unseparated local switching revenue requirement for each carrier when historical data for each calendar year are submitted. (ii) The Administrator shall calculate each carrier's local switching support payment, calculated pursuant to 54.301(a), using its historical annual unseparated local switching revenue requirement. (iii) For each carrier receiving local switching support, the Administrator shall calculate the difference between the support payment calculated pursuant to paragraph (e)(2)(ii) of this section and its support payment calculated using its projected annual unseparated local switching revenue requirement. (iv) The Administrator shall adjust each carrier's local switching support payment by the difference calculated in paragraph (e)(2)(iii) of this section no later than 15 months after the end of the calendar year for which historical data are submitted. (f) Calculation of the local switching revenue requirement for average schedule companies. (1) The local switching revenue requirement for average schedule companies, as defined in Sec. 69.605(c) of this chapter, shall be calculated in accordance with a formula approved or modified by the Commission. The Administrator shall submit to the Commission and the Common Carrier Bureau for review and approval a formula that simulates the disbursements that would be received pursuant to this section by a company that is representative of average schedule companies. For each annual period, the Administrator shall submit the formula, any proposed revisions of such formula, or a certification that no revisions to the formula are warranted on or before December 31 of each year. (2) The Commission delegates its authority to review, modify, and approve the formula submitted by the Administrator pursuant to this paragraph to the Chief, Wireline Competition Bureau. [63 FR 2126, Jan. 13, 1998; 63 FR 33585, June 19, 1998, as amended at 67 FR 13226, Mar. 21, 2002; 67 FR 5701, Feb. 6, 2002]