FOR IMMEDIATE RELEASE:             NEWS MEDIA CONTACT: 
  November 15, 1999                       Mike Balmoris at (202) 418-0253
                                     Email:    mbalmori@fcc.gov
  
                   COMMON CARRIER ACTION
  
     FEDERAL COMMUNICATIONS COMMISSION SEEKS COMMENT ON
              PRICE CAP X-FACTOR PRESCRIPTION
  
  
       Washington, D.C.   The Federal Communications Commission (FCC) has adopted
  a Further Notice of Proposed Rulemaking seeking comment on the X-factor in the local
  exchange carrier (LEC) price cap formula.  The FCC's LEC price cap scheme allows
  prices to decrease by a measure of productivity offset, or X-factor, minus an inflation
  offset.  The X-factor represents the amount by which price cap LECs can be expected to
  outperform economy-wide productivity gains.  In 1997, the Commission re-prescribed the
  amount by which it annually adjusts price caps for incumbent LECs subject to the price
  cap rules.  The revised price cap adjustment required price cap LECs to reduce inflation-
  adjusted prices for interstate access services by an X-factor of 6.5 percent annually. 
  Pursuant to petitions for review of the Commission's order, the United States Court of
  Appeals for the District of Columbia Circuit reversed and remanded the Commission's
  decision on the productivity factor.  
  
       The Further Notice of Proposed Rulemaking seeks comment on the prescription of
  the X-factor retroactively for the period affected by the court's remand, July 1, 1997 to
  June 30, 2000, and prospectively from July 1, 2000 going forward.  Specifically, the
  Commission seeks comment on three possible bases for setting the historical component of
  the X-factor: 
  
     (1)    by relying on the results of the 1997 staff total factor productivity (TFP) study used in
     the 1997 order; 
     (2)    by relying on the results of a new 1999 staff TFP study that makes several adjustments
     to the 1997 staff study; or, 
     (3)    by relying on the results of a new staff Imputed X study that determines the X-factor
     that would have produced a competitive level of capital compensation in the interstate
     jurisdiction during the period between price cap performance reviews.
  
    
  
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  In addition, the Further Notice of Proposed Rulemaking seeks comment on
  whether to include a consumer productivity dividend (CPD) in the X-factor, to ensure that
  consumers receive a reasonable portion of the benefits of the elimination of LEC sharing
  requirements.  These requirements had compelled price cap LECs to share a portion of
  their earnings above set percentages with access customers.  The sharing requirements
  were eliminated in the 1997 order.  If a CPD is warranted, the Further Notice of Proposed
  Rulemaking seeks comment on how to quantify the CPD.  Comment is also sought on
  whether the Commission should correct for prior years when the X-factor may have been
  set too low.
  
    Comments on the Further Notice of Proposed Rulemaking must be filed with the
  Commission not later than December 30, 1999, and reply comments must be filed not later
  than January 14, 2000.
  
    Action by the Commission, November 12, 1999, by Further Notice of Proposed
  Rulemaking (FCC 99-345).  Chairman Kennard and Commissioners Ness, Furchtgott-
  Roth, Powell and Tristani.
  
  Report No. CC 99-52 
  CC Docket Nos. 94-1 and 96-262
  
                           -FCC-
  
  Common Carrier Bureau contact: Aaron Goldschmidt at (202) 418-1520
                                      TTY: (202) 418-2555
  
News about the Federal Communications Commission can also be found 
         on the Commission's web site www.fcc.gov.