NEWSReport No. CC 97-51   COMMON CARRIER ACTION              October 7, 1997
                                    
    Commission Initiates Proceedings to Reform Jurisdictional Separations
                Procedures, Amend Uniform System of Accounts
                (CC Docket No. 80-286) (CC Docket No. 97-212)
                                    
       The Commission today commenced proceedings to reform its jurisdictional
separations procedures and to update the Uniform System of Accounts (USOA) to
ensure that they meet the objectives of the Telecommunications Act of 1996 and
conform to changes in the law, technology, and market structure of the
telecommunications industry.  

       Jurisdictional separations is the process of apportioning regulated costs
between the interstate and intrastate jurisdictions.  The primary purpose of
separations is to determine whether a local exchange carrier (LEC)'s cost of
providing regulated services are to be recovered through its rates for intrastate
services or through its rates for interstate services. The first step in the current
separations process requires carriers to apportion regulated costs among categories of
plant and expenses.  In the second step of the current separations process, the costs in
each category are apportioned between the intrastate and interstate jurisdictions. 
Once costs are separated between the jurisdictions, carriers can then apportion their
interstate regulated costs among their interexchange services and their intrastate costs
among intrastate services. 

       Due to statutory, technological, and market changes in the telecommunications
industry, today's network architecture and service offerings differ in many important
ways from the network and services used to define the cost categories appearing in
the current separations rules. In addition, these rules evolved during a time when
common carrier regulation presumed that intrastate and interstate telecommunications
services must be provided through a regulated monopoly.  In a Notice of Proposed
Rulemaking (NPRM) released today, the Commission therefore asked commenters to
consider changes that may need to be made to the separations rules in light of
changes in the law, technology, and market structure of the telecommunications
industry.  The Commission referred the issues raised in the NPRM to the Federal-
State Joint Board on Separations for preparation of a recommended decision on these
matters. 

       In the NPRM, the Commission also asked for comment on issues related to
separations reform, including whether the separations rules are still needed in the
presence of regulation designed to foster competition, and what criteria should be
used to evaluate the existing separations process and proposals to reform that process.
In addition, the Commission seeks comment on industry separations proposals to
replace the current rules and how various separations reform options would affect
prices and revenue requirements.  The Commission also seeks comment on whether
the holding in Iowa Utilities Board v. FCC requires the assignment of all costs
associated with the provision of local exchange service to the intrastate jurisdiction. 
Finally, the Commission asked for comment on changes to its separations rules to
account for recent changes in the universal service support mechanisms, as well as
changes needed to allocate the costs of assisting law enforcement.

       The Commission today also released a companion NPRM which proposes new
revenue and expense accounts and subsidiary recordkeeping requirements to record
revenues and expenses associated with interconnection, access to unbundled network
elements, transport and termination, and resale.  The Commission tentatively
concluded that the amounts assigned to those subsidiary recordkeeping categories
should be based on the revenues received for providing the services and elements and
that the apportionment of the costs should be consistent with costs studies underlying
the charges.  These proposals are designed to promote uniformity in the USOA and
to provide the Commission with data to monitor and assess the development of local
competition.  

       Action by the Commission October 2, 1997, by Notices of Proposed
Rulemaking (FCC 97-354 and FCC 97-355).  Chairman Hundt, Commissioners
Quello, Ness, and Chong. 

                                           -FCC-

       News media contact:  Rochelle Cohen at (202) 418-0253.
       Common Carrier Bureau contacts:  Lynn Vermillera (202) 418-7120 and
               Matthew Vitale (202) 418-7166.