FCC Proposes 15-Year Extension of Jurisdictional Separations Freeze; NARUC Official Critical
The FCC proposed to extend by 15 years a freeze on federal-state separations rules apportioning rate-of-return telco regulated costs and revenue between interstate and intrastate jurisdictions. The commission made the proposal in a unanimous Further NPRM in docket 80-286, noting the freeze was instituted in 2001 and repeatedly extended, with the current one to expire Dec. 31. Also Wednesday, NARUC passed a resolution saying any extension shouldn't last longer than two years (see 1807180018).
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"We propose to extend the freeze for 15 years and invite comment," said the FNPRM, noting the commission expects benefits to outweigh the costs of allowing it to end. Should the commission "alter the scope of its referral to the Joint Board regarding comprehensive separations reform," it asked. "We propose and seek comment on allowing rate-of-return carriers that elected to freeze their category relationships in 2001 to opt out of that freeze." The FNPRM noted, for example, 25 percent of message loops costs are allocated to the interstate jurisdiction, 75 percent to intrastate jurisdiction under the Part 36 rules. Comments will be due 30 days, and replies 45 days, after the Federal Register publishes an FNPRM summary.
Commissioner Mike O'Rielly called for a 15-year freeze extension in March, saying a federal-state joint board on separations he chairs probably wouldn't be able to reach agreement (see 1802230019). State members of the joint board didn't comment Wednesday.
"Separations procedures/Part 36 remain relevant and have real world impacts at the State and federal level," emailed NARUC General Counsel James Ramsay. "It is hard to make an argument otherwise as even the NPRM concedes the FCC is retaining 'frozen factors' and that companies come in from time to time to ask the FCC to temporarily ‘unfreeze’ factors. The original freeze was 'interim' for a reason. In 2001, which predates many significant FCC jurisdictional orders, both FCC and state commissioners recognized that the factors were already in need of adjustment. That misalignment, if anything, has been exacerbated in the intervening 17 years."
The separations joint board state and federal members "invested substantial resources in reviewing the separations procedures," Ramsay added. "An extension of the freeze is probably necessary -- if for no other reason -- to await the replacement of [departed] Commissioner [Mignon] Clyburn on the separations board. The board should be allowed to complete its work with a full complement of commissioners. A 15 year freeze is neither 'interim' nor an appropriate policy response."
The FNPRM said jurisdictional separations is the third of four regulatory steps. "First, a rate-of-return carrier records its costs and revenues in various accounts using the Uniform System of Accounts prescribed by the Commission’s Part 32 rules. Second, the carrier divides the costs and revenues in these accounts between regulated and nonregulated activities in accordance with the Commission’s Part 64 rules, a step that helps ensure that the costs of nonregulated activities will not be recovered through regulated interstate rates. Third, the carrier separates the regulated costs and revenues between the interstate and intrastate jurisdictions using the Commission’s Part 36 jurisdictional separations rules. Finally, the carrier apportions the interstate regulated costs among the interexchange services and the rate elements that form the cost basis for its exchange access tariffs."