FCC Record, Volume 3, No. 14, Pages 4085 to 4354, July 5 - July 15, 1988 Page: 4,153
xiii, 4085-4354 p. ; 28 cm.View a full description of this book.
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3 FCC Rcd No. 14
Federal Communications Commission Record
company.27 We have reviewed each United manual's list
and descriptions of nonregulated activities and have identified
two activities for which United should expand its
descriptions.
14. Derived Local Channel. The United of Pennsylvania
Manual and the United of Indiana Manual identify
"Derived Local Channel" as a nonregulated activity. Each
manual states that a portion of this service will be transmitted
by telephone lines used in tariffed services.28 United
indicates that shared use of network plant will be
charged at tariff rates. The definition of "Derived Local
Channel." however, implies that there may be some nontransmission
shared use that is not offered under tariff.
This implication appears to conflict with United's reply
which states that there will be no shared use of network
investment by nonregulated activities.29 United needs to
explain how this apparent contradiction will affect the
sharing of network investment. If there is indeed a sharing,
United needs to revise its manuals to apportion the
shared plant, revenues and expenses between regulated
and nonregulated operations.
15. Training Services. As mentioned in Section II. A.,
supra, the United descriptions of training services and the
related apportionment procedures are inadequate and require
further explanation. Our instructions in Section II.
A. direct United to revise the Training Services section of
its manuals.
C. Incidental Activities
16. The Joint Cost Order recognized that carriers provide
a number of miscellaneous activities that should not
be classified as regulated but that have traditionally been
recorded in regulated books of account as a matter of
convenience. The Joint Cost Order required carriers to
include a list of these incidental activities in their manuals
along with the justification for treating these activities as
incidental.30 The four criteria for classifying an activity as
incidental are: (a) the activity must be an outgrowth of
regulated operations; (b) it cannot constitute a separate
line of business: (c) it must have traditionally been treated
as incidental for accounting purposes; and (d) the total of
all incidental activities must not exceed one percent of a
carrier's total revenues.
17. As mentioned earlier,31 the United manuals differ
with respect to incidental and nonregulated activities. All
six of the United companies list the following as incidental
activities: "pole attachment fees;" "conduit rental fees;"
"rent of office space;" and "strand rental fees." In addition
to these activities, the United of Florida also lists: "billing
and collection fees for state and local sales tax billed to
the Company's customers and paid to the state;" "billing
and collection fees for local and franchise fees billed to
the Company's customers and paid to the city or county;"
"billing and collection fees for 911 emergency service
billed to the Company's customers and paid to the county;"
and "fees charged a subscriber to provide copies and
listings of telephone bills when requested by the subscriber."
18. We have identified several aspects of the incidental
activities section that must be addressed by United in
amendments to its manuals. United must clarify that "rent
of office space" meets the Commission's criteria for incidental
activities. To the extent that "rent of office space"
is an activity that is provided to affiliates, it may constitute
an affiliate transaction, and its costs must be recordedaccording to the affiliate transaction rules. United must
also explain how United of Florida's additional incidental
activities meet the criteria for incidental activities. United
has not demonstrated that these activities traditionally
have been treated as incidental for accounting purposes,
nor has it explained why these activities are outgrowths of
regulated activities. United must amend its manuals to
make the specific showings required in the Joint Cost
Order.32
D. Affiliate Transactions
19. The Joint Cost Order establishes specific rules governing
the provision of assets and services to and from
affiliates. These rules were created in order to discourage
carriers from avoiding the cost allocation rules. If a carrier
sought to avoid the application of fully distributed costing,
it could, in the absence of the affiliate transaction rules,
provide assets or services to, or obtain assets or services
from, a separate but affiliated company in a manner that
would allow nonregulated operations to bear less than
fully distributed costs. The affiliate transaction rules specify
the valuation standards that will be applied in accounting
for transactions between affiliates. Those rules vary
depending upon whether the transaction involves assets or
services.33 The Joint Cost Order also required that carriers
include in their cost allocation manuals "[a] statement
identifying affiliates that engage in or will engage in transactions
with the carrier entity and describing the nature,
terms, and frequency of such transactions."34
20. Our review of United's treatment of affiliate transactions
reveals that United has not fully complied with the
requirements of the Joint Cost Order. As an initial matter,
it is not always clear from United's descriptions of its
transactions whether the assets or services rules would
apply. For example, United states in its manuals that
North Supply Company provides "materials and supplies"
to operating telephone companies, but does not indicate
whether these transactions involve the transfer of assets.
the provision of services, or both. United must amend its
manuals to correct this ambiguity.
21. We also observe that all of the transactions listed in
the manuals are provided to United by its affiliates. This
implies that United is not involved in any transactions in
which it provides an asset or service to an affiliate. If the
implication created by the manuals is correct, then United
must clarify in amendments to its manuals that it provides
no affiliate with any assets or services. If the implication is
incorrect, United must amend its manuals to include all
requisite information for each affiliate transaction for assets
or services, including assets or services provided at
tariff rates, that it provides to affiliates.
22. The description of transactions contained in United's
manuals includes those with United Data Services, Inc.,
but does not indicate the terms or frequency of these
transactions. United must amend it manuals to include
this information. Additionally, at several places in its descriptions.
United states that prices for services are "based
on market prices" or "based on the cost of service."
United is unclear as to the meaning of "based on." For
example, "based on market prices" might mean "at market
prices, plus a certain percentage," or "based on cost of
service" might mean "at the cost of service, plus an absolute
amount." United must clarify the meaning of
"based on" in these contexts. Finally, United's manuals
fail to comply with the Commission's requirement to submit
a "chart" of its corporate structure. Although its manuals
contain documents that it refers to as "charts," these
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United States. Federal Communications Commission. FCC Record, Volume 3, No. 14, Pages 4085 to 4354, July 5 - July 15, 1988, book, July 1988; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc1623/m1/85/: accessed March 28, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.