WPC 2BJZ Courier#|x >fx6X@`7X@HP LaserJet 4M (PCL) ROOM 224HPLA4MPC.PRSx  @\wfx6X@`7X@?xxx,x `7XESET_F WP51STRICMPiDBMCHECKPOPUPMENUITEM CLRCMYKTORGB WP51STRNCMPjRXCREATCHBRUSHDEFYXFRMUSIPCGROUPTOFLOOR"IPCAPPENUMERATEMNUDELETEMENUITEMb LMEa8DocumentgDocument Style StyleXX` `  ` a4DocumentgDocument Style Style . 2JkYk/va6DocumentgDocument Style Style GX  a5DocumentgDocument Style Style }X(# a2DocumentgDocument Style Style<o   ?  A.  a7DocumentgDocument Style StyleyXX` ` (#` 2t|  -BibliogrphyBibliography:X (# a1Right ParRight-Aligned Paragraph Numbers:`S@ I.  X(# a2Right ParRight-Aligned Paragraph Numbers C @` A. ` ` (#` a3DocumentgDocument Style Style B b  ?  1.  2   g & a3Right ParRight-Aligned Paragraph Numbers L! ` ` @P 1. ` `  (# a4Right ParRight-Aligned Paragraph Numbers Uj` `  @ a. ` (# a5Right ParRight-Aligned Paragraph Numbers _o` `  @h(1)  hh#(#h a6Right ParRight-Aligned Paragraph Numbersh` `  hh#@$(a) hh#((# 2   a7Right ParRight-Aligned Paragraph NumberspfJ` `  hh#(@*i) (h-(# a8Right ParRight-Aligned Paragraph NumbersyW"3!` `  hh#(-@p/a) -pp2(#p Tech InitInitialize Technical Style. k I. A. 1. a.(1)(a) i) a) 1 .1 .1 .1 .1 .1 .1 .1 Technicala1DocumentgDocument Style Style\s0  zN8F I. ׃  2.Ra5TechnicalTechnical Document Style)WD (1) . a6TechnicalTechnical Document Style)D (a) . a2TechnicalTechnical Document Style<6  ?  A.   a3TechnicalTechnical Document Style9Wg  2  1.   2`Na4TechnicalTechnical Document Style8bv{ 2  a.   a1TechnicalTechnical Document StyleF!<  ?  I.   a7TechnicalTechnical Document Style(@D i) . a8TechnicalTechnical Document Style(D a) . 2"39e=Doc InitInitialize Document Stylez   0*0*0*  I. A. 1. a.(1)(a) i) a) I. 1. A. a.(1)(a) i) a)DocumentgPleadingHeader for Numbered Pleading PaperE!n    X X` hp x (#%'0*,.8135@8:$( CX< x<ԍ PaOCA/NJDRC Request at 3, incorporating by reference  x<PaOCA/NJDRC Request for Consumer Safeguards in WPC 6838, New  xx<Jersey Bell Telephone Company (Florham Park) (PaOCA/NJDRC Florham Request) at 16; NCTA Petition at 45. 9 Commenters on the Amended Application contend that  x<NJB still has not identified all of the common costs related to  C< x<video dialtone.Y?( C<ԍ NCTA Comments on Amended Application, pp. 6, 11.Y PaOCA/NJDRC also state that the revenue  x<projections by NJB indicate that "[b]roadcast CATV revenues are  x<only able to cover 30% of New Jersey Bell's own estimated video  xh<dial tone costs," and that the remainder of revenues must come from  x<"programming customers who apparently have not yet committed to  C< xh<providing video services . . . ."@H( CX < x<ԍ PaOCA/NJDRC Request at 3, incorporating by reference PaOCA/NJDRC Florham Request at 17, n. 4. If the Commission approves this  x<application, PaOCA proposes that the Commission require NJB to  x<maintain records of the actual costs and revenues and provide this  C<information for public review.A( C< x <ԍ PaOCA/NJDRC Request at 3, incorporating by reference  x <PaOCA/NJDRC Florham Request at 17. According to PaOCA, this  x<monitoring would assist the parties and the Commission in  x<determining the actual economic feasibility of video dialtone services furnished through the systems proposed by NJB.  ?p <  0<x24. In its opposition, NJB claims that its video dialtone  x<service is economically justified, and that the cost and revenue  x<estimates provided are the type of support the Commission has  C < xh<previously found to be adequate.B\ X ( C< x<ԍ NJB Opposition at 7, 9. NJB relies on Century Federal, 846  x<F.2d at 1481, to support its use of summary cost estimates and a table of revenues and expenses. In addition, NJB states that all  xx<incremental costs to add video dialtone capability to its network  x<have been included in its economic justification, including the  C$< x<cost of coaxial drops.KC$|( C0 <ԍ NJB Opposition at 1011, note 38.K NJB states that the addition of a video  xh<dialtone capability is the only subject of the Commission's Section  xx<214 review, not the overall deployment of fiber, which provides a  C< xh<variety of benefits unrelated to video.?D( C $<ԍ Id. at 1213. ? In any event, NJB asserts"D0*((d"  C< x<that even if the net costE( CX< x<ԍ As used by NJB, "net cost" is cost of the investment less  x<savings generated by the investment. According to NJB, savings  x<would be realized because of the generally lower maintenance costs  x<of a network upgraded from copper to fiber. NJB Opposition, Decl. of Brian Oliver at  12.  of all fiber cabling is  x<attributed to video dialtone, it will reach the breakeven point  C< xx<near the end of the year 2003.dFD( Ch <ԍ NJB Opposition, Declaration of Brian Oliver at  13. d NJB further contends that because  x<service prices are not established in a Section 214 proceeding,  xh<there are no issues to be decided as to how NJB should allocate the  C< x<costs among its regulated services in order to set prices.:G( CX <ԍ Id. at 15.:  x0<According to NJB, these issues are premature and should be  x<addressed when NJB files a tariff to provide video dialtone  CL<service.3HLl ( CH<ԍ Id.3  ?<x 2. Discussion  ?p <x` ` a. Section 214 Legal Standard  ? <  <x25. In order to grant an application for authorization under  x0<Section 214 of the Communications Act, the Commission must  xx<determine whether a grant would serve the "public convenience and  CX < x<necessity." I\X ( C< x <ԍ 47 U.S.C.  214(a); see also Washington Utilities and  ?< x<Transportation Commn. v. FCC, 513 F.2d 1142, 1157 (9th Cir.  ?|<1976)(Washington Utilities).  Courts have found that this statutory standard "is to  xx<be construed so as to secure for the public the broad aims of the  C< xx<Communications Act,"KJ\$( C< xh<ԍ Western Union Division, Commercial Telegrapher's Union, A.F.  ?l< xx<of L. v. U.S., 87 F. Supp. 324, 335 (D.D.C.), aff'd, 338 U.S. 864  ?4 <(1949)(Western Union Division); Washington Utilities at 1157. K including the overarching goal expressed in  C< x<Section 1 of the Communications Act.;KH( C"<ԍ Id at 335. ; Section 1 of the  xx<Communications Act charges the Commission with the task of making  x`<available to the nation a "rapid, efficient, Nation xh<wide...communication service with adequate facilities at reasonable  C< x<charges . . . ."<L( CH'<ԍ 47 U.S.C.  151.< Administration of this standard is generally"pL0*((R"  xh<left to the discretion of the Commission: "[I]t is entirely within  x<the Commission's discretion to accept even a minimal showing of  xP<financial justification" for approval of a Section 214  CX<application.YMX( C<ԍ Century Federal, 846 F.2d at 1481. Y  ?<   <x26. In its analysis of the public convenience and necessity  x<under Section 214, the Commission has generally focused on the  xh<"added," or "incremental," costs and revenues of the facilities for  CD< x<which authorization is sought.N D\( C0 < x<ԍSee, e.g., Tropical Radio Telegraph Co., 35 FCC 2d 950, 952,  ? < x<957 (1972), aff'd on recon., 40 FCC 2d 1168 (1974) (TRT's  x <methodology "to estimate the added revenue and costs for the  xh<proposed service is adequate to satisfy the requirements of Section  ?T < xh<63.01(m)"); Policy to be Followed in Future Licensing of Facilities  ?< x<for Overseas Communications, 67 FCC 2d 358, 394 (1977) (Overseas  ?< xh<Communications), recon. granted in part, 70 FCC 2d 1348 (1978); All  ?< x<American Cables and Radio, Inc., File No. WPC 4990 (Com. Car.  ?t<Bur., released May 7, 1986) (All American Cables) at 6. We have generally interpreted  x<Section 214 to require some showing that existing or future demand  xh<for services provided over the proposed facility will justify these  C< x<added costs within some reasonable period of time.O0 ( C`< x<ԍ See, e.g., Communications Satellite Corp., 80 FCC 2d 170,  ?,< x<1812 (1980), vacated on other grounds, 86 FCC 2d 712 (1981). See  ?< xx<also American Telephone and Telegraph Company, 7 FCC Rcd 445, 446  xh<(1992) ("Under the traditional form of demand analysis that we have  x<applied in authorizing the construction and operation of submarine  x<cable systems, we conclude that projected circuit demand, along  x<with other factors, supports the operation of [the proposed  xh<facility] in 1992 to meet the telecommunications needs of the Joint  ?< xh<Applicants..."); American Telephone & Telegraph Co., 8 FCC 2d 1007,  x<1012 (1967) ("It appears...that the proposed facilities... will be required to meet...demand for telephone service in this area").  We note,  x<however, that the Commission has approved Section 214 applications  C4 <in circumstances where this test was not met.UP|4 ( CX< x<ԍ In American Satellite Corp., we stated that in the "young  xh<and evolving" domestic satellite market "we do not require a common  x<carrier applicant . . . to demonstrate that sufficient revenues  x<will be obtained for that facility to cover its construction and  xh<operating costs over its anticipated lifetime." 65 FCC 2d 279, 288  ?D#< xh<(1977), aff'd sub nom., Hawaiian Telephone Company v. FCC, 589 F.2d 647 (1978).U  ? <  <x27. Our rules expressly ask for the "added revenues and costs"" P0*(("  C< x<generated by the proposed project.NQ( CX< x<ԍ 47 C.F.R.  63.01(m)(emphasis supplied). Section 63.01,  x<which specifies the contents of a  214 application, repeatedly  x<speaks in terms of an accounting of the "added" facilities, costs,  x<and revenues generated by the proposed construction. Subsection  xh<(e) speaks of facilities that "extend" or "supplement." Subsection  xx<(h)(2) inquires about "additional channels of communication," and  x<Subsection (i) asks about increased traffic loads. Subsection  x<(k)(3) specifically requests information on the labor and material  xh<costs of the proposed facilities, and for "added equipment cost and each other added cost to the applicant." N Commission orders interpreting  xh<our Section 214 rules have relied on an examination of added costs.  x<The Commission has determined, for example, that "estimates of  x<additional . . . costs . . . are the relevant costs to be  x<considered," and that we will not take into consideration "sunk  x<costs" or "embedded costs" already invested in existing  C<facilities.XR$d ( C< x<ԍ Overseas Communications, 67 FCC 2d at 394; see also, All  ?t< x<American Cables, supra at  5 (authorization granted where the  x<applicant relied solely on "incremental costs without allocating common costs").X  ?H<  <x28. Section 214 authorizations do not require the level of  ?< xP<detail demanded by petitioners. For instance, in AT&T  ?< x<Authorization we stated that "[g]enerally the Section 214  x<proceeding examines cost only insofar as it is necessary to  ?h < xh<determine, on a prima facie basis, whether costs are so substantial  xx<relative to benefits that the public interest would not be served  C < x<by construction of the project."TS P ( C<ԍ AT&T Authorization, at  7. T Similarly, in a cable channel  x<service application, we found it sufficient to rely on summary  C < x<charts submitted by the applicant.cT ( C<ԍ Century Federal, 846 F.2d at 1481.c A "[d]etailed economic  xh<justification . . . by a carrier [is] not required in a Section 214  x<authorization. In a Section 214 proceeding, costs are examined  C<only generally . . . ."Ux( C <ԍ All American Cables at  6 (quoting AT&T Authorization at  8).  ?|<   <x29. Nor have we required the level of certainty demanded by  x<petitioners. We have only required a finding that the estimates"DU0*((6"  C< x<"do not appear unreasonable."kV( CX< xh<ԍ In Pacific Bell, the Bureau found that "[t]hese estimates do  xh<not appear unreasonable . . . . Century has not presented evidence  ?< x0<warranting a finding that Pacific's request is prima facie  ?< xx<unjustified or that a hearing is necessary." 60 RR 2d 1175, 1180  ?|< x<(Com. Car. Bur., released July 22, 1986), recon. denied, 2 FCC Rcd  ?D<265 (1987), aff'd sub nom. Century Federal.k In examining an application for  xh<cable channel service, the Bureau recognized that "a degree of risk  x<is inevitable if service offerings of this type are to be  C\< x<developed."MW\\D( C0 < xx<ԍ Wisconsin Bell, 56 RR 2d 1262, 1267 (Com. Car. Bur. 1984),  ? < xh<application for review denied, FCC 84618 (released Dec. 13, 1984),  ? <recon. denied, FCC 85348 (released July 11, 1985). M Rather than denying the application, the Bureau  x<granted it conditioned on a separate accounting of costs so that  C< x<shareholders and not ratepayers would bear the burden of failure.^X$h ( C< xh<ԍ The Bureau concluded there that the basis of the applicant's  x<revenue estimate was not "so suspect that it requires further  x<investigation," and that the projections "do not appear  ?D<unreasonable." Id. at 1267.^  xh<In the early stages of the domestic satellite market we stated that  x<"[i]f a carrier waited until it was sure of a large demand for  x<traffic, few stations would ever be built, while initial service  C<demands go unsatisfied."ZYT ( C<ԍ American Satellite Corp., 65 FCC 2d at 288.Z  ?<  P<x30. Finally, the Commission's review of a Section 214  x<application is not restricted merely to the financial aspects of  x<the application. As stated above, the range of the Commission's  x<inquiry into the "public convenience and necessity" is at least as  xh<broad as the purposes of the Communications Act. Where a carrier's  x<estimates of viability are not free from doubt, the Commission has  x<found that public interest benefits to be gained from the new  x<technology may nonetheless support a grant of a Section 214  C< x<application.fZ( C`<ԍ See AT&T Co., 84 F.C.C. 2d 303, 311 (1981).f Thus, in AT&T, where the applicant proposed  x<supplementing existing facilities with a fiber lightguide cable,  x<the Commission stated that "[t]his experience is necessary to  xx<foster the technological developments that will lead to 'learning  xx<curve' decreases in cost. Without experience in the early stages  x<of development we may never see some of the advances that fiber  C<technology promises to bring to telecommunications users."@[|( C%<ԍ Id. at 312.@  ?0< x b. Application of Section 214 Standard to NJB Application"0[0*(("Ԍ ?<  `< ęx31. We conclude that a conditioned grant of the NJB  xx<application will serve the public convenience and necessity under  xh<Section 214. We find that NJB's showings of economic justification  xh<satisfy the requirements of our regulations. Our statutory finding  x<is premised as well on the public interest benefits we find in the  x<construction of the video dialtone system and on our imposition of  xx<conditions in this authorization for a separate accounting of the  xx<costs of the video dialtone system. As part of this examination,  x<we have reassessed the adequacy of our safeguards that would apply  x<to this specific Section 214 application, and conclude, at least  x`<during the pendency of the various petitions seeking  ?< xx<reconsideration of the VDT Order, that those safeguards, with the  xx<conditions we impose on this authorization, will be sufficient to  C( < x<protect against possible anticompetitive conduct by NJB.m\( ( C <ԍ Existing safeguards are described in the VDT Order at  89.m We note  x<that petitions to deny in this proceeding and petitions for  ? < x<reconsideration of the VDT Order raise issues regarding the need  x0<for additional codified safeguards against anticompetitive  CL < xh<conduct.]L \( C8< x<ԍ See VDT Order, pets. for recon. pending; see also,  ?< xh<Amendments of Parts 32, 36, 61, 64 and 69 of the Commission's Rules  xh<to Establish and Implement Regulatory Procedures for Video Dialtone  x<Services, RM8221, filed by the Consumer Federation of America and NCTA, April 8, 1993 (CFA/NCTA Joint Petition).  Our decision in this adjudication, based on the record in  xh<this proceeding, is without prejudice to, and in no way constrains,  ?< x<any action that we may take on reconsideration of the VDT Order.  x<In addition, we condition our grant on the requirement that NJB  x<comply prospectively with any rule changes made on reconsideration  ?8<of the VDT Order, or other applicable rulemaking proceeding.  ?<x i. Economic Justification  ?X<  <x32. We find that under the standards of Section 214, NJB has  xh<submitted sufficient cost and revenue support for the Commission to  ?< x<grant the application. NJB has supplied summaries of the  x<incremental plant investment cost that will be incurred by its  x<proposals. NJB has also supplied a breakeven analysis consisting  x<of projected annual revenue and annual costs of the video dialtone  xx<system. These summaries appear to include all added revenues and  C< x<costs directly attributable to the proposed system.^| ( Cp"< xx<ԍ NJB Amended Application at 1012; NJB Reply to Comments on  ?<#< x<Amended Application at 15, citing Amendment of Part 69 of the  x <Commission's Rules Relating to the Creation of Access Charge  x<Subelements for Open Network Architecture: Policy and Rules  xh<Concerning Rates for Dominant Carriers, Report and Order & Order on  x<Further Reconsideration & Supplemental Notice of Proposed  xx<Rulemaking, CC Docket Nos. 8979 and 87313, 6 FCC Rcd 4524,  42"$']0*((.("  ?< xx<(1991) (Part 69/ONA Order); second further recon., 7 FCC Rcd 5235  ?X< x<(1992) (Part 69/ONA Reconsideration), ("a LEC introducing new  xh<services will be required to identify the direct costs of providing the new service, absent overheads...."). Under the"^0*((,"  x<applicable legal standard, NJB need not include any additional  x<costs. For purposes of this proceeding, we believe NJB has  x<provided the categories and types of costs required by our Section  xh<214 rules, and in sufficient specificity, to enable us to determine  x<that the public convenience and necessity will be served by construction and operation of the proposed facilities.  ?x<  <x 33. We also find NJB's revenue estimates generally reasonable.  xx<NJB projects an enduser subscriber signup rate of approximately  C< x<35% of the 38,000 homes passed.d_( CH <ԍ NJB Opposition at 8 and Decl. of Brian Oliver at  11. d This rate, NJB states, reflects  x<the fact that there are two competing cable companies already  x<operating in Dover Township, the proposed video dialtone service  xx<area. NJB estimates that in the early years, one hundred percent  x<of revenues will be generated by services analogous to current  x<video entertainment services, such as cable, broadcast and video  x<rentals. Ultimately that percentage is expected to decline to 40 x<50% with the balance of the revenues to be obtained from other  CL < xx<services.O`L D( C <ԍ NJB Opposition, Weber Decl. at  5.O NJB cites statements in the VDT OrderaL ( C< x<ԍ NJB Opposition at 8, and NJB Opposition, Decl. of Joseph  ?<Weber at  9, citing VDT Order at 5794. and in a study  x<commissioned by the New Jersey Board of Public Utilities as  x<evidence of latent demand for these new services, which range from  C<home shopping to health, education and multimedia research.Ob4 ( Cl<ԍ NJB Opposition, Weber Decl. at  9.O  ?<<  <x!34. NJB's revenue figures appear consistent with the available  x<market evidence. NJB estimates that in ten years its monthly  C< xx<revenuepersubscriber will be $73.>c$ ( C$ <ԍ NJB Opposition, Oliver Decl., Attachment A; Weber Decl.,  xx< 5. Weber estimated monthly revenues at $25.55 per homepassed.  x<On a persubscriber basis, at an estimated 35% signup rate, NJB's estimated revenues come to $73 per month.> Of this amount, $30, or 41%,  x<will be for conventional entertainment services available today,  C`< x<such as cable TV and moviesondemand.Ed`( C%<ԍ Id., Weber Decl. at 4.E NJB cites a trade study  x<showing that in ten years consumers will be willing to pay $70 a  x<month for these services, which NJB estimates will be divided"Hd0*(("  C< x,<evenly among the telephone company and programmers.e( CX< x<ԍ Id. Weber Decl. at  2224, citing a 1991 LINK Resources, Inc. survey. The remaining  x<$43 (59% of $73) of the monthly revenue estimate will be generated  xx<by other video information services. Current video trade revenue  x<figures do not include revenues from these other video information  x<services, enhanced and otherwise, but these services also should  x<bring additional revenues to the NJB platform. The Commission has  x<stated that there appears to be a potential market for such  C|<services,f|$( C0 < x<ԍ There is "substantial evidence of potential demand for  x<technologically advanced telephone company participation in the  x<video market," and that "the potential demand for video network  xx<capabilities is evidenced by the growing interest of educational,  ?T < x<medical, governmental and business institutions." VDT Order at  2224. and NJB has cited its own evidence.Yg|( C<ԍ NJB Opposition, Decl. of Joseph Weber at  9.Y x  ?<  <x"35. We also find that the discount rate of 11.25% selected by  x<NJB is not unreasonable. That rate is the rate of return for  x0<interstate regulated services for rateofreturn telephone  Ch < x<companies, h\h 4 ( C,< x,<ԍ Represcribing the Authorized Rate of Return for Interstate  ?< x<Services of Local Exchange Carriers, 5 FCC Rcd 7507,  1 (1990)  ?<(Rate of Return Order).  and this rate is normally used in pricing new regulated  x<services, such as video dialtone basic common carrier platform  C < x<services, under price cap regulation.i X ( C< x<ԍ Open Network Architecture Tariffs of Bell Operating  ?<Companies, 9 FCC Rcd 440, 45051,  25 (1993). Even though different local  x<telephone companies and different regulated services are today  x<subject to varying degrees of competition, we have prescribed a  x0<unitary rate of return for all exchange carriers and their  xx<interstate regulated service offerings. This approach recognizes  xx<the fact that the capital marketplace generally rates the risk of  x@<entire companies and not individual services. Moreover,  xh<determining a reasonable rate of return for individual services can  C@< xL<be difficult._j@( C"<ԍ See Rate of Return Order at  1, 3._ Petitioners cite no precedent in which we have  x<required a local telephone company to use a discount rate that  xx<exceeds a carrier's authorized rate of return to justify approval  xh<under Section 214. For these reasons, we decline to require NJB to  x<justify its Dover Township video dialtone system using a higher"dHj0*(("  C<discount rate.k|( CX< xL<ԍ We also are unconvinced by the specific higher discount  x<figures urged by petitioners for the video entertainment business.  ?< x<In our recent Report and Order and Further Notice of Proposed  ?< xx<Rulemaking, FCC 9439, MM Docket No. 93215, CS Docket No. 9428,  ?|< x<Released March 30, 1994, at  147, we required cable television  x<companies to use a 11.25% rate of return in any costofservice showing to charge prices higher than the relevant benchmark. x  ?< ` P<x#36.` ` NJB's economic justification statement indicates that,  x<with volume equipment discounts from suppliers, the project is  C$< x,<expected to break evenl$ ( C < x<ԍ "Breakeven" means that on a cumulative present worth basis, revenues will equal costs. NJB Opposition, Attachments B & C. in as early as four years. Without volume  xx<discounts the projected breakeven time period is six years. NJB  C< xL<adds that even if the net costm\h ( C< x<ԍ The "net cost" of an investment is the cost of the  x<investment less savings generated by the investment. NJB Opposition, Decl. of Brian Oliver, at  13. of the common fiber cabling is  x<included in the overall cost figures, and volume discounts are  CL<included, a breakeven point of five years is projected.dnL ( Ch<ԍ NJB Opposition, Decl. of Brian Oliver, Attachments B and C.d  ?<  <x$37. Without endorsing either NJB's specific figures or  x<projected breakeven estimates, we conclude that NJB has made a  ?p < x<prima facie showing of the reasonableness of its estimated costs  x<and revenues, sufficient to satisfy the economic justification  C < x<<requirements of Section 214.o ( C< x,<ԍ In Pacific Bell the Bureau concluded a prima facie case was  x<made where revenues would cover expenses in approximately 4 years.  ?D< x<Pacific Bell at 1180. Pacific Bell involved common carrier  xh<construction of broadband transmission facilities for the holder of a nonexclusive cable franchise. NJB's figures reasonably relate to  x<a known current market, the home video market, and that market has  xh<demonstrated a consistent demand for vido services, as evidenced by  xh<the success of the cable industry. NJB also has presented evidence  x<of the potential for revenue from other noncable related video  x<information services. In all, NJB has presented estimates and  C< x<other evidence that "do not appear unreasonable."Dp( C$<ԍ Pacific Bell at 1180.D Finally, as  x<described below, we do agree with petitioners' arguments that we  x<should require NJB to account separately for its video dialtone costs. "hp0*((4"Ԍ ?<x ii. ` ` Public Interest Benefits of This Video Dialtone System(#`  ?<  ?<  <x%38. In finding that video dialtone is in the public interest,  x<the Commission identified various potential benefits that this  x0<service is likely to produce. These benefits include: (1)  x<promoting private investment in an advanced telecommunications  x<infrastructure, (2) providing additional competition in the  x<provision of video services, and (3) providing additional  x<opportunities for consumer choice through a diversity of video  C< x<services.Cq( C` <ԍ VDT Order at  9.C We believe that the NJB Dover video dialtone system  xx<will provide these and other benefits. Therefore, in addition to  x<finding that NJB has satisfied the economic justification  x<requirements of Section 214, we also find that NJB's application  x<will help secure for the public the broad aims of the  xh<Communications Act, including the provision of a "rapid, efficient,  xh<Nationwide . . . communication service with adequate facilities at  C <reasonable charges."r \( Cp< x<<ԍ See Western Union Division, 87 F Supp at 335; 47 U.S.C.  151.   ?<  <x&39. NJB's proposal clearly will produce new investment in an  x<advanced telecommunications infrastructure. The proposed  x<integrated broadband and narrowband digital networks capable of  x<providing at least 384 video channels would stand at the cutting  xx<edge of technology. Video servers, video administration modules,  x<remote access modules, host digital terminals, multisubscriber  x<optical network units and associated software are among the  x<advanced infrastructure elements under development. Some of the  x<plant necessary for video dialtone will be used for services other  x<than video dialtone, so there are benefits from the plant beyond  xx<the benefits generated by video dialtone. In addition, investment  xh<in these elements benefit the nation in other important ways. Such  x<investment stimulates manufacturing of high technology products,  x <increases employment opportunities, creates potential export  x<markets, and provides many indirect benefits in other fields, including marketing, training, and education.  ?`<  <x'40. The proposal also promises additional competition in the  x<provision of video services. The system in Dover will compete  x<directly with the two existing cable television systems. The  x@<planned 384 channels to be offered by NJB would increase  x<dramatically the number of video channels available to enduser  x<subscribers in the proposed service area of Dover Township.  x<Creating new outlets and opportunities for programmers and other  xx<users of system capacity will result in many of the same kinds of  x<economic benefits that arise from investments in advanced  x0<infrastructure. These include employment opportunities in"h"r0*((|)"  xh<information services, potential export opportunities, and secondary stimulative effects on supporting services and industries.  ?X<  @<x(41. Finally, the proposals will give consumers in Dover  x<additional choices. NJB states the system will offer a minimum of  x<384 channels. While we, and NJB, can anticipate the likely and  x<potential users of system capacity, there is no way of knowing  x@<either the precise choices that endusers will find most  xx<attractive, or the new choices that will become available in five  x <or ten years. The system will offer open access to multiple  x<service providers, and access to those providers for consumers.  x<This access is consistent with the nation's fundamental commitment  x<to diversity and competition in the flow of ideas, not only with  x <respect to entertainment but also with respect to education, health, and commerce.  ? <x iii. Accounting Conditions and the Tariffing Process x  ?<  <x)42. As in Wisconsin Bell, we condition this authorization on  xx<a requirement that NJB establish subsidiary accounting records to  x<capture the revenues, investments and expenses associated with the  xx<provision of video dialtone service. These subsidiary accounting  x<records shall include the direct costs and overheads associated  xx<with video dialtone service. A summary of these records shall be  x<reported to the Commission on a quarterly basis. We delegate to  x<the Chief, Common Carrier Bureau the authority to determine the  x<content and format of the subsidiary accounting records as well as  x<the quarterly reports. Of course, as generally required by our  xh<cost allocation rules, any enhanced and noncommon carrier services  C< x<<must be reflected in NJB's Cost Allocation Manual (CAM),>s( C<ԍ 47 C.F.R. 64.903.> and we  xx<condition its authorization by requiring NJB to make revisions to  x<its manual to ensure that the costs of nonregulated ventures are  x<segregated from the costs of regulated activities in order to  xx<prevent any crosssubsidization. At a minimum, we require NJB to  x<revise its CAM to include a list of all accounts affected by its  xh<provision of nonregulated video dialtone services and a description  xx<of each of those services. Again, we emphasize that the decision  x<we make here, and the conditions we attach to it, are without  x<prejudice to, and in no way constrain, any action that we may take  ?|< x<on reconsideration of the VDT Order or other applicable rulemaking proceeding.  ? <  <x*43. Our action in this proceeding in no way limits our  x<ability to ensure, in the subsequent tariff review process, that  x <NJB's tariffed rates for video dialtone service are just and  xx<reasonable. It is clear that consideration of costs in a Section  x<214 proceeding is distinct from the examination of rates in the"#\s0*((>+"  C< x<<tariff review process.Ot( CX<ԍ All American Cables at  5. O As the Commission staff stated in a 1986  x<decision, "[a] detailed inquiry into tariff related matters ...  x<would vitiate the distinction between tariff and facilities  xh<authorization procedures and would require the Commission to engage  C$< x<in duplicative processes." u\$\( C< x<ԍ AT&T Request for Authorization to Supplement Existing Lines,  ?< x<WPC 5560, Mem. Op. and Order (released March 10, 1986)(AT&T  ?<Authorization) at  8.  Prior to providing service, NJB must  xh<file tariffs, and cost support information, which will be available  ?< x0<for review. In the Part 69 ONA Proceeding, the Commission  xx<established pricing standards for new services ("the new services  x<test") offered by companies subject to the price cap method of  C< x<regulation.dv( C <ԍ Part 69/ONA Order; Part 69/ONA Reconsideration.d In setting an upper bound for such services, the  xx<Commission adopted a "flexible costbased approach to pricing new  C< xl<services."w( CH< x<<ԍ Part 69/ONA Order, para. 38; Part 69/ONA Reconsideration, paras. 23, & 6. Under this test, the Commission requires LECs  x<introducing new services to submit engineering studies, time and  x<wage studies or other cost accounting studies to identify the  C < x,<direct costs of providing the new service, absent overheads.x p ( C< x<ԍ Part 69/ONA Order, para. 42; Part 69/ONA Order  ?<Reconsideration, para. 12. Once  xh<the direct costs have been identified, LECs may add an "appropriate  x<level of overhead costs to derive the overall price of the new  C\ < x<service."y\ ( C< x<ԍ Part 69/ONA Order, para. 3839, 4142, & 44; Part 69/ONA  ?<Order Reconsideration, paras. 23 & 12. To provide the flexibility needed to achieve efficient  x <pricing while protecting against excessively high rates, the  xx<Commission did not mandate uniform loading, but expected the LECs  x<to justify the loading methodology they selected as well as any  C< xL<deviations from that loading methodology.z(( C8 < x<ԍ Part 69/ONA Order, paras. 3839, 4142 & 44; Part 69/ONA  ?!<Reconsideration, paras. 3, 8, & 11. The purpose of this  xx<approach is to provide the LECs sufficient pricing flexibility to  xh<encourage innovation and efficient pricing while protecting against  x<either excessively high rates or unreasonably discriminatory or  C< xL<predatory pricing.{( C%< x<<ԍ Part 69/ONA Order, para. 38; Part 69/ONA Reconsideration, para. 12. It is against these standards that we will  xh<judge the reasonableness of the tariffed rates NJB proposes for its"p{0*((P"  x<video dialtone services. Finally, we note that parties to this  x<proceeding raised no concerns about the illustrative tariff  x<submitted by NJB with the Application beyond the concerns about  CX<rates, revenues and costs discussed above.F|X( C<ԍ NJB Application at Exhibit 5.F  ?<x` ` IV. NCTA'S MOTION FOR INVESTIGATION  ?|< ` <x+44.` ` On May 4, 1994, the National Cable Television  x<Association, Inc. (NCTA) filed a Motion for Investigation. The  x<Motion alleges that NJB is violating Section 214 of the  x <Communications Act by constructing interstate video dialtone  x <facilities before obtaining the necessary authority from the  xx<Commission. We are not persuaded that the evidence in the record  x<demonstrates a violation of Section 214, or that there is any need to investigate further.  ? <x A. The NCTA Motion and Responses  ?L <  ?< ` `< x,45.` ` NCTA argues that the Commission has long interpreted  x <Section 214 as requiring telephone companies to obtain prior  C< xL<authorization to construct video distribution facilities.:}\( C<ԍ NCTA Motion at 1.: In  ?p< xx<addition, notes NCTA, the VDT Order specifically requires Section  C8< x<<214 authorization for the provision of video dialtone services.:~8( C<ԍ NCTA Motion at 1.:  x<NCTA cites a press story in which an official of NJB's parent  xx<company, Bell Atlantic, is reported to have said that substantial  xh<construction has already taken place for the Dover system, and that  x<"all that's left to do is insert electronics to make the network  C$< xL<capable of delivering video.":$( C8<ԍ NCTA Motion at 2.: According to NCTA, NJB's video  xh<dialtone application identifies much more investment for interstate  C< x<video dialtone than merely electronics.U|( C`< x<<ԍ NCTA cites from the Dover application 11 broad categories  x<of capital costs including: remote terminal equipment host  xh<digital terminal; remote terminal equipment HDT software; central  x<office electronics; fiber headend to CO; fiber CO to HDT;  xx<supertrunk transmitters arrangements; supertrunk transmitters  x<cards; audio/video preprocessing; optical network unit; video administration module; drop/network interface. NCTA Motion at 3.U NCTA argues that if the  x<press statement is true, NJB appears to be in violation of Section  x<214's bar on interstate construction prior to Commission approval.  x<NCTA urges the Commission to delay action on NJB's Section 214 application until completion of an investigation. "\ 0*(("Ԍ ?< ` <ԙx-46.` ` In its response to the NCTA motion, NJCTA raises  x<additional allegations. NJCTA contends that in addition to  x<extensive deployment of fiber optic cables in the Dover Township  xh<area, much of the video dialtone equipment and facilities described  x0<in NJB's applications are already "on the poles and in the  C< x<<ground.">( C@<ԍ NJCTA Response at 3. > NJCTA presents affidavits and photographs alleging to  x<show extensive construction activity relating to video dialtone  C|< xl<service.E|\( Ch <ԍ NJCTA Response, Exhibit A. E NJCTA points to two general types of facilities  x<installed by NJB that it alleges are related to video dialtone:  C< x<fiber and related equipment, and drops.?( C <ԍ NJCTA Response at 46.? Specifically, NJCTA  xx<asserts that NJB has installed optical network units (ONUs) and a  x0<number of drops that include both twisted pair and coaxial  x<components. For instance, NJCTA submits a photograph that it  x<describes as showing an ONU in Dover with six video outputs  C < x<connected to coaxial drop cables.b ( C<ԍ See NJCTA Response, Exhibit A, photograph number 5.b According to NJCTA, the  x<installations it describes are impermissible pending grant of Section214 authority.  ? < ` <x.47.` ` In addition, NJCTA argues that NJB's activities are not  x<consistent with New Jersey's regulatory proceedings, or with "Bell  x<Atlantic's state regulatory activities," because the New Jersey  x <Board of Regulatory Commissioners (New Jersey Board) clearly  xh<understood that NJB's deployment of an advanced network is far more  x <than an upgrade of the existing network to provide telephone  xh<service. Rather, according to NJCTA, one of its principal purposes  C<is to deploy video services.@( C@<ԍ NJCTA Response at 712.@  ?,< ` <x/48.` ` NJB denies that it has constructed video facilities  xh<covered by its Section 214 application. NJB argues that all of the  x<fiber and equipment that it is deploying are needed to provide  xh<telephone service. NJB states that, for the most part, it "has not  xx<. . . taken delivery of video equipment and facilities covered by  C< x<its application, let alone installed them." \( CP#< x<<ԍ NJB Opposition to NCTA at 2; see Declaration of Dennis M.  x<Bone, VPExternal Affairs, Bell Atlantic, attached to NJB  ?$<Opposition to NCTA (Bone Declaration), at 2.  NJB, however, does  xh<note one apparent exception to this statement. NJB states that, in  x<investigating NJCTA's allegations, it determined that it had taken  x<delivery of a number of reels of coaxial and composite cable and"p 0*((!"  xh<connectors. According to NJB, a previous search to confirm that no  x<video equipment had been delivered did not reveal these items,  x<"presumably because they are normal inventory items in [NJB's]  CX<warehouse data base."X( C< x,<ԍ Supplemental Declaration of Dennis M. Bone, attached to NJB  ?|<Reply to NJCTA (Supplemental Declaration) at 3.  ?< ` P<x049.` ` In the case of equipment that could be used to provide  x<both telephone service and video dialtone service, Bell Atlantic  x<says that it is installing only the portions of the equipment  x<needed for telephone service, and not the additional components  x<needed to add video dialtone capability, pending approval of its  C< x,<Section214 application.h$( C <ԍ NJB Reply to NJCTA at 13; Supplemental Declaration at 2.h For example, NJB states that it has not  x<installed any of the line card components that are needed to add a  Ch <video dialtone capability to the ONUs.h ( C< x\<ԍ NJB Reply to NJCTA at 2 n.5; Bone Declaration at 23;  ?|<Supplemental Declaration at 2.  ? <   <x150. With regard to the installation of cable coaxial drops,  xx<NJB states that the bulk of these drops were connected to ONUs as  x<part of the vendor selection process during a test of the  CT < x,<capabilities of four competing vendors.jT ( C<ԍ Supplemental Declaration at 23; NJB Reply to NJCTA at 23.j NJB states that a "small  xx<number" of additional composite drops, which contain both coaxial  x<and twisted pair wire in a single common sheath, were installed in  x<1993. NJB asserts that these drops are needed to provide local  x<telephone service as well as video dialtone service, and that it  xx<had initially planned to deploy such common facilities along with  x<the network upgrade. NJB asserts that the drops could permissibly  x<have been installed without Section 214 authority, but that it has  x<ceased the installation of such drops pending Section 214  C`<authorization "out of an abundance of caution."h`( C<ԍ NJB Reply to NJCTA at 23; Supplemental Declaration at 3.h  ?< ` <x251.` ` NJB argues that while the Commission has required Section  x<214 approval to provide video dialtone capability, it has never  x<suggested that such approval is needed to upgrade the underlying  x<network to the extent that it will be used to provide local  x<telephone exchange service. NJB argues that any facilities needed  x<to provide local telephone service may be installed as part of its  x <underlying network upgrade, without awaiting approval of its  Cl< x,<application.Cl< ( C8'<ԍ NJB Reply to NJCTA at 36.C Bell Atlantic asserts that the Commission could not"l 0*((f!"  x0<require Section 214 certification for two reasons. First,  x<according to NJB, Section 214(a) expressly provides that no  x<authorization is required "for any installation, replacement, or  xx<other changes in plan, operation, or equipment." NJB asserts that  x<its underlying network upgrades that will be used to provide local telephone service fall within the scope of this exemption.  ?x< ` p<x352.` ` Second, NJB argues that facilities used to provide  x <telephone exchange service continue to be regulated by state  x<authorities, and that such facilities are excluded from the  C< x<Commission's reach by both Section 214 and Section 221 of the Act.<( C( <ԍ Id. at 46. <  ?< xh<Citing Kitchen v. Bell Telephone Co. of Pennsylvania, 31 FCC 2d 604  ?d < xx<(1971) (Kitchen), aff'd 464 F.2d 801 (D.C. Cir. 1972), NJB states  x0<that the Commission has recognized that while the services  xh<travelling over local telephone networks may be both interstate and  x<intrastate, the local exchange facilities are predominantly  C <intrastate in nature, and do not require Section 214 approval.A \( Cp<ԍ NJB Reply to NJCTA at 5.A  ?< ` @<x453.` ` Finally, NJB argues that its construction activities are  xx<fully consistent with New Jersey's regulatory requirement that it  C<provide broadband capability throughout the state by 2010.:( C(<ԍ Id. at 67.:  ?<< ` <x554.` ` In reply, NCTA states that NJB's response lacks  x <specificity and that NJB has failed to clarify exactly which  x<"electronics to make the network capable of delivering video"  C< x<remain to be put in place.Q( C<ԍ NCTA Reply to Opposition to Motion at 1.Q It states that the Commission must  xx<determine the purpose of the ONUs and the cable drops referred to  x<in NJCTA's Response before taking action on NJB's Section 214  C< x<<applications.8( C<ԍ Id. at 2.8 NCTA denies that NJB's network upgrade is beyond  x<the scope of Section 214. NCTA notes that "twentyfive percent of  x<the intrastate access telephone plant and 100 percent of the video  CL< x,<plant is assigned to the federal jurisdiction,"2L( C"<ԍ Id.2 and asserts that  xh<state jurisdiction cannot usurp Congressionallyestablished federal  C< x<responsibility in Section 214.@ ( C%< x<ԍ Id. at 23 (citing Louisiana Public Service Comm'n v. FCC, 476 U.S. 355 (1986)). NCTA concludes that "[i]t is  x<impossible based on the evidence submitted by NCTA and NJCTA to" 0*(( "  C<conclude that premature construction has not occurred."Q( CX<ԍ NCTA Reply to Opposition to Motion at 3.Q  ?<  ?<x B. Discussion  ?$< ` <x655.` ` The issue posed by the NCTA motion and the NJCTA response  x<is whether NJB's construction of facilities as part of its network  x<upgrade before receiving Section214 certification constitutes a  xh<violation of Section214 of the Communications Act. NCTA and NJCTA  x<have not persuaded us that NJB has violated Section214, or that  x<any further investigation of this issue is warranted. We conclude  x<that the network upgrades that NJB has undertaken to provide local exchange service do not require Section214 certification.  ?, < ` <x756.` ` Section 214(a) of the Communications Act, as amended,  x<prohibits a carrier from constructing a "new line" or an extension  x<of a "new line," or from engaging in transmission over or by means  x<of such a line, "unless and until there shall first have been  xx<obtained from the Commission" a certificate of public convenience  x<and necessity. The Act defines "line" as "a channel of  x<communication established by use of appropriate equipment, other  x<than a channel of communication established by the interconnection  Cl< x<of two or more existing channels."?l\( CX<ԍ 47 U.S.C. 214(a).? Section 214 specifically  x<exempts from the certification requirement "a line within a single  C<State unless such line constitutes part of an interstate line."3( C<ԍ Id. 3  ?< ` `<x857.` ` There are three types of facilities at issue in this  x<case: facilities to be used solely for the provision of local  x0<exchange telephone service; facilities to be used for both  x<telephony and video dialtone service; and facilities to be used  xh<solely for the provision of video dialtone. NJB states that it has  x<begun construction on the first two types of facilities, but not  CD< x<<the third those facilities used only for video dialtone.D( CX< x,<ԍ See NJB Opposition to NCTA at 12; Bone Declaration at 23;  ?$ <NJB Reply to NJCTA at 23; Supplemental Declaration at 23. NJB  x<certifies that, with the exception of some reels of coaxial and  xx<composite cable and connectors, it has not even taken delivery of  C< x<the video facilities or equipment covered by its application.\( C$< x<<ԍ See supra note [9]; NJB Opposition to NCTA at 2 n.4; Bone  ?$< x <Declaration at 2; see also, NJB Reply to NJCTA; Supplemental  ?%<Declaration at 12. NJB  x<avers that for those facilities that have jointuse capabilities  x0<(such as optical network units), it is only deploying "the"4  0*((V""  x<components ... needed to provide telephone service, not the  C< x,<additional components needed to add a video dialtone capability."M( C <ԍ Supplemental Declaration at 2.M  x<With respect to NJCTA's photograph number 5, showing video outputs  C\< x<<connected to coaxial drop cables,=\\( CH<ԍ NJCTA Response at 2.= NJB indicates that some drops  x<connected to the video posts on the ONUs were installed only as  C< x<<part of its vendor selection process.M( Cp <ԍ Supplemental Declaration at 2.M The number of such drops,  C< x<moreover, appears to be de minimis.( C < x,<ԍ In its application, NJB estimates that its system will pass  x<38,000 homes in Dover Township. NJB states that in the vendor  ?d < x<selection process four competing vendors placed 70 drops each. Id.  x<Moreover, the record indicates that the vendor selection test took  ?<place during June and July, 1993, and is therefore complete. Id. NJB also explains that the  x@<ONUs are not operational because no line cards have been  CP< x<<installed.8P8 ( C<ԍ Id.8 NJB further explains that neither line cards nor any  x<other video facilities will be installed until Commission approval  C< x<is granted.l ( C@<ԍ Bone Declaration at 12; Supplemental Declaration at 2.l Thus, with the minimal exception noted above, the  x0<record indicates that the facilities that NJB is currently  x<constructing are all needed for the provision of local exchange  x<service. The issue, then, is whether such facilities should be  x<viewed as intrastate, or as part of an interstate line. If the former, no Section214 certification is necessary at this time.  ?` < ` <x958.` ` The courts have recognized that whether a facility is  x<intrastate or interstate depends on the character of service for  C< x,<which it is used.` ( C< x<ԍ See, e.g., General Telephone Company of California v. FCC, 413 F.2d 390 (D.C. Cir. 1969). Because local exchange facilities almost always  x<connect at some level with facilities dedicated to interexchange  x<interstate services, one could read Section214 to require FCC  xh<certification before construction of any local exchange facilities.  x <That reading, however, would eviscerate the notion of purely  ?< x<intrastate facilities, and has not been our practice. In Kitchen,  ?< x<supra, the Commission found that no Section214 authority was  x <needed to construct a building to house switching equipment,  x0<stating that "clearly some division between interstate and  x <intrastate authority must be made, and [what is proposed] is  x<primarily, if not exclusively, related to an intrastate activity"!0*(("  C<under the jurisdiction of the State regulatory Commission."I( CX<ԍ Kitchen, 31 FCC 2d at 608.I  ?< ` < x:59.` ` In this case, prior to approval of NJB's video dialtone  x0<Section214 application, intrastate telephone service will  xh<constitute the primary, if not the exclusive, use of the facilities  ?< x<constructed by NJB. Much like the building at issue in Kitchen,  xx<the upgraded network construction that Bell Atlantic will use for  x@<local exchange service is primarily, if not exclusively,  x<intrastate. We conclude, therefore, that it is not subject to the  x<requirement of Section214 certification. In sum, no Section214  x<certification is required because the record shows that the  xh<facilities that NJB has constructed to date will be used to provide local exchange, but not video dialtone, service.  ? < ` <x;60.` ` NJCTA argues that NJB's network upgrade is inconsistent  xx<with "Bell Atlantic's New Jersey regulatory activities," and that  x<it cannot be viewed as just local exchange service construction  xh<because video dialtone was understood by the New Jersey Board to be  x<part of NJB's plan. We disagree with the contention that NJB's  x<plans to add video dialtone capability in the future turn its  x<network upgrade into an interstate construction. Section 214 does  xh<not require NJB to obtain authorization before its network upgrades  xh<begin, but only before those facilities unrelated to local exchange  xx<service that will allow for interstate (video dialtone) usage are actually constructed.  ?T< ` <x<61.` ` As the Common Carrier Bureau held in Northwestern  C< x<<Telephone Systems, Inc.,\( C< x<ԍ Northwestern Telephone Systems, Inc., 5 FCC Rcd 876, 877  ?<(Com. Car. Bur. 1990). a carrier can construct facilities for  x<intrastate use without obtaining a Section214 certification, even  xx<if it plans further construction to allow for interstate use, "as  x<long as the interstate use of the lines does not occur prior to  C@< xL<acquisition of necessary federal authority."8@( C<ԍ Id.8 The Bureau there  xh<rejected a claim that the applicant should have filed a Section214  x<application before constructing a purely intrastate special access  x<facility, even though the applicant intended to use the facility  x<for interstate service in the future after connecting it with  xx<additional facilities. The Bureau stated that the applicant only  xh<need obtain a Section214 certificate before using the facility for  C<interstate service.2L( C%<ԍ Id.2  ?P< ` <x=62.` ` Here, NJB need not obtain Section214 authorization until"P"0*((%"  x<it begins to construct the videodialtoneonly portions of its  x<network. Before adding video dialtone facilities unrelated to the  x<provision of local exchange service, however, NJB must obtain  CX< x<Section214 certification,ZX( C<ԍ See VDT Order at  72.Z as the addition of video dialtone  x<capability will alter the character of the service provided over  x<these facilities. We emphasize that this conclusion does not in  x0<any way impair our jurisdiction to regulate any interstate  x<services, such as interstate access, that may be provided over those facilities once constructed.  ?< ` <x>63.` ` Our interpretation of the application of Section214 of  xx<the Act to NJB does not place interstate ratepayers at risk. The  ?d < x@<Commission stated in the VDT Order that it would use the  x <Section214 process to apply its antidiscrimination and cost  x<allocation safeguards to specific video dialtone proposals, and we  C < x<<have done so here.[ \( C<ԍ See Section III, B, 2, b, supra.[ NJB's construction of part of its broadband  x<network pursuant to the decision of the New Jersey Board before  x <obtaining a Section214 certification will not eliminate the  x<Commission's ability to apply its safeguards. No costs related  xx<specifically to video dialtone can be allocated to the interstate jurisdiction until the Commission grants Section214 certification.  ?8< ` <x?64.` ` To the extent that NJCTA is arguing that the New Jersey  x<Board would not have approved NJB's plans as a local exchangeonly  xx<upgrade, we see no reason to withhold approval of the Section214  x<application or to investigate further. NJCTA, while citing to  x<several sections of the New Jersey Board order, cites to no  x<language that we can interpret as conditioning approval of the  x<"Opportunity New Jersey" plan on the provision of interstate video  xh<dialtone services. Nor have we identified any such language in our  xx<own review. At the time that the New Jersey Board approved NJB's  xh<"Opportunity New Jersey" plan, it was clearly aware that New Jersey  x<Bell's Section214 application for video dialtone was still  C< x,<pending, and had not been granted.( CP< x<ԍ See Exhibit G to NJCTA Response, Decision and Order of the  x<New Jersey Board of Regulatory Commissioners on Motion of NJCTA to  x<Reopen Record, dated February 26, 1993, referring to the filing by  x <NJB of an application with the FCC to provide video dialtone pursuant to Section214 of the Communications Act. As the New Jersey Board chose  x<to go forward in approving the plan nevertheless, we must assume  x<that it was willing to bear the risk that the network upgrades might be used only for telephony.  ?<x C. Other Allegations and Issues "#0*(($"Ԍ ?<  <x@65. NJCTA contends that a software licensing agreement  x<between NJB and FutureVision may violate the telephone company x <cable television crossownership rules regarding permissible  CX< x,<affiliations.AX( C<ԍ NJCTA Response at 1314.A According to NJCTA, a trade press article reporting  xx<that NJB and FutureVision have entered into a licensing agreement  x0<for providing software for the Dover video dialtone system  xx<indicates a closer relationship than is revealed in NJB's Section  C|< x<214 application. |\( Ch < x<ԍ Id. at 13, citing "Bell Atlantic Installs Multimedia Network  ?4 < x<Software," Multichannel News, Jan. 3, 1994, at 2324. Since the  x<agreement between FutureVision and NJB was reached after revisions  x0<to NJB's Dover application were made, NJCTA states that no  xh<information regarding the software or equipment is accounted for in  ?T <NJB's revised exhibits. Id. at 13.  In addition, NJCTA states that, based on  x<information in the trade press article, NJB plans to engage in  x <crosspromotional activities among programmers and local and  x<national advertisers to provide subscribers coupons and other  x<promotional items after the subscriber has made specific service  Ch < x<choices over the interactive system.2h ( C<ԍ Id.2 NJCTA asserts that these and  C4 <other services may impact NJB's cost allocation methodology.94 l ( C0<ԍ Id. at 14.9  ? <   <xA66. NJB states that the software that is the subject of the  x<FutureVisionNJB licensing agreement "is not part of the regulated  x<video dial tone service and therefore is irrelevant to Bell  C < x<Atlantic's 214 applications."  ( C< xL<ԍ Reply of Bell Atlantic (New Jersey Bell) to Response in Support of Motion for Investigation at 7. NJB explains that in order to  x<interconnect with its basic service platform, video programmer x0<customers must have software to interface with NJB's video  C|< x<administration module (VAM), which is part of the network.4|\ ( Ch<ԍ Id. 4 NJB  x<states that interconnection with the VAM is necessary so that  x<programmercustomers can add and delete individual subscribers'  x<video service, schedule video programming, retrieve billing  C< x,<information, and edit individual channel parameters.>( C $<ԍ Id. at 8, n.24.> According to  xh<NJB, FutureVision developed its own version of this software, based  xx<on technical data purchased from NJB, and subsequently offered to  x <allow NJB to license the software to other video programmer"$0*(("ԫ C< x<customers.8( CX<ԍ Id. at 8.8 NJB states that other programmercustomers can license  x <the software from NJB, or directly from FutureVision, or can  C< x,<develop their own software.9\( C<ԍ Id., n.26.9 NJB also states that NJB obtained no  x<ownership interest in FutureVision by virtue of the licensing  C(<agreement.2(( C<ԍ Id.2  ?<  < xB67. The telephone companycable television crossownership  x0<rules allow telephone companies to exceed the carrieruser  x<relationship with a video programmer by providing services and  x<engaging in activities, not related to the provision of video  C< xL<programming directly to subscribers by the telephone company.D( C<ԍ 47 C.F.R.  63.54(d)(2).D  xx<Telephone companies may provide services and engage in activities  xx<related to video programming as long as the video programmer is a  x<customer of, interconnects with, or shares the construction and/or  C < x<operation of, the basic common carrier platform.c| ( C< x<ԍ Id. A telephone company may not (1) determine how video  x<programming is presented for sale to consumers (including making  x<decisions concerning the bundling or tiering, or the price, terms,  x<and conditions of programming offered to consumers), or (2)  x<otherwise have a cognizable financial interest in, or exercise  x<editorial control over, video programming provided directly to  ?\<subscribers within its telephone service area. Id.c We conclude that  x<the software licensing agreement between NJB and FutureVision does  ? < xh<not violate the crossownership rules. In the VDT Order, we stated  x<that joint ventures, interconnection agreements, consultantclient  x<relationships, and other relationships that do not constitute  x<ownership or control of the video programmer are permitted between  x<telephone companies and video programmers provided that the  xx<affiliation does not involve telephone company provision of video  CD< xL<programming directly to subscribers.JD\ ( C0 <ԍ VDT Order at 5798,  31.J The licensing agreement  x0<concerns software necessary to facilitate video programmer  x<interconnection to NJB's basic platform. Based on the information  x<in the record, this agreement does not involve the provision of  xh<video programming directly to subscribers by NJB. Furthermore, NJB  xx<avers that it obtained no ownership interest in FutureVision as a  x<result of the licensing agreement. Thus, NJB does not appear to  x<have a cognizable financial interest in video programming provided directly to subscribers. "P%0*(("Ԍ ?<  P<xC68. In connection with NJCTA's allegation that cross x<promotional activities may impact its cost allocation methodology,  x<we require that to the extent NJB provides enhanced and noncommon  x <carrier services, these services are reflected in NJB's cost  x<allocation manual (CAM) and are provided in compliance with the  C<conditions set forth above.Z( C@<ԍ See Section III, B, 2, B, iii, supra.Z  ?|< V. CONCLUSION ă  ? <  0<xD69. We find that NJB's proposed video dialtone system for  xh<Dover Township, as presented in the Amended Application, will serve  x<the public convenience and necessity. NJB has supplied the  x<information necessary to demonstrate the fulfillment of the  ?, < x<requirements set forth in the VDT Order and our rules. With the  x<conditions we attach to the grant of authority, we assure  xh<sufficient protections to guard against unreasonable discrimination  x<and improper crosssubsidy. The public interest will be served by  xx<expeditious implementation of the projects. Our action herein is  xx<without prejudice to any subsequent action that might be taken in  xx<response to tariffs filed for these projects, or in rulemaking or other proceedings.  ?4< <VI. ORDERING CLAUSES ă  ?<  <xE70. Accordingly, IT IS ORDERED that, pursuant to Section 214  xh<of the Communications Act of 1934, as amended, 47 U.S.C.  214, the  x<application of New Jersey Bell Telephone Company (File No. WPC  x<6840), subject to the conditions stated below, IS GRANTED,  x0<effective upon the release of this order. New Jersey Bell  xx<Telephone Company is authorized to provide video dialtone, within its service area as described in its application.  ?<  <xF71. IT IS FURTHER ORDERED that the petitions to deny filed by  xh<Adelphia Communications Corporation, the Association of Independent  xP<Television Stations, Inc., the National Association of  x<Broadcasters, the National Cable Television Association, the New  x<Jersey Cable Television Association, the Monmouth Cablevision  x<Associates, and the Public Service Commission of the District of  xh<Columbia ARE DENIED; that the Request by the Pennsylvania Office of  xh<Consumer Advocate and the New Jersey Department of Public Advocate,  x<Division of Rate Counsel for Consumer Safeguards is DENIED; that  x<the requests in the Consumer Federation of America's Letter of  xh<Opposition are DENIED; that the Motion for Extension of Time by the  x<New Jersey Cable Television Association is GRANTED IN PART, and  xh<time to file comments on the New Jersey Bell Amended Application IS  x<EXTENDED until September 30, 1993; and that the National Cable Television Association's Motion for Investigation is DENIED. "$&\0*((.,"Ԍ ?<  <xG72. IT IS FURTHER ORDERED, that grant of this application IS SUBJECT TO the following conditions:  ` P<x` ` a) That New Jersey Bell obtain Commission approval of  x0<any revisions to its Cost Allocation Manual (CAM) prior to providing any enhanced and noncommon carrier services.  ` <x` ` b) That New Jersey Bell create subsidiary accounting  x<records to capture the revenues, investments and expenses  x<associated with the provision of video dialtone service and file  x<accurate copies of those records for public inspection with the  xx<Secretary of the Federal Communications Commission on a quarterly  x<basis. We delegate to the Chief, Common Carrier Bureau the  x<authority to determine the content and format of the subsidiary  x <accounting records as well as the quarterly reports. NJB is  x<further required to keep subsidiary accounting records to identify  x<by each Part 32 account the amount of all plant that is being  x<replaced (that is, no longer used or useful) as a result of the deployment of video dialtone plant.  ` P<x` ` c) That New Jersey Bell provide all video programmers  xx<access to the basic platform under the same terms and conditions;  x <In addition, that New Jersey Bell shall report to the Chief,  x <Common Carrier Bureau, within five days of denying any video  xx<programmer access to the platform due to capacity limitations, in  x<whole or in part, and on the steps taken to expand the capacity of the platform to accommodate demand.  ` <x` ` d) That any video dialtone service offered in Dover  xx<Township through January 3, 1995, must have at least 64 channels,  x<and that after January 3, 1995 any such service must have a capacity of at least 384 channels.  ` <x` ` e) That New Jersey Bell comply prospectively with any  x<changes in our rules that result from rulemakings or from  ?X<reconsideration of our Second Report and Order in CC Docket 87266.  ` `<x` ` f) That NJB and its affiliates not directly provide video programming on this video dialtone system.  ? <   <xH73. Pursuant to Section 214(c) of the Communications Act of  x<1934, as amended, 47 U.S.C.  214 (c), the grant of New Jersey  x <Bell's application to provide each video dialtone service is  xx<subject from the date of issuance of this grant to the conditions  xh<provided herein, and is also subject to any Commission rules and/or  x <orders that result from any existing or future proceeding or  x<proceedings that address video dialtone cost allocations, jurisdictional separations, and pricing issues. "''0*((/"Ԍx` ` hh@FEDERAL COMMUNICATIONS COMMISSION x` ` hh@William F. Caton x` ` hh@Acting Secretary"(0*(("  ?< APPENDIX: Pleadings Filed ă Application, New Jersey Bell (Application) Petitions to Deny: xAdelphia Communications Corp. (Adelphia Petition) xAssociation of Independent Television Stations, Inc. x` ` (INTV Petition) xNational Association of Broadcasters (NAB Petition) xNational Cable Television Association (NCTA Petition) xNew Jersey Cable Television Association (NJCTA Petition)  ?<xMonmouth Cablevision Associates (Monmouth Petition) 0 xPublic Service Commission of the District of Columbia x` ` DCPSC (DCPSC Petition) Letter of Opposition to the Application, Consumer Federation of x` ` America (CFA Opposition)  xx<Request for Consumer Safeguards, The Office of Consumer Advocate  ?< ` @< x` ` for the Commonwealth of Pennsylvania (PaOCA) and the New  ` P<x` ` Jersey Department of Public Advocate, Division of Rate x` ` Counsel (NJDRC), jointly (PaOCA/NJDRC Request) Opposition to Petitions to Deny, New Jersey Bell (NJB Opposition) Replies to Opposition to Petitions to Deny: xAdelphia (Adelphia Reply) xMonmouth (Monmouth Reply) xNCTA (NCTA Reply) xNJCTA (NJCTA Reply) Response to Informal FCC Questions, NJB (NJB Answers) Comments on NJB Answers xAdelphia Comments (Adelphia Response) xNJCTA Replies (NJCTA Response) NJB Amendment and Clarification (Amended Application) Erratum to New Jersey Bell Amended Section 214 Application Comments on the Amendment and Clarification: xAdelphia (Adelphia Comments) xDCPSC (DCPSC Comments) xNAB (NAB Comments) xNCTA (NCTA Comments)  ?$< xNJCTA (NJCTA Comments)  ?%< xMonmouth (Monmouth Comments) PaOCA/NJDRC (PaOCA/NJDRC Response) "')0*((/"ԌReply to Comments, NJB (NJB Reply) Motion for Investigation, NCTA (NCTA Motion) Opposition to Motion for Investigation, NJB (NJB Opposition to xNCTA)  ?x<Response in Support of Motion for Investigation, NJCTA (NJCTA (#(#XxResponse)  x<Reply of Bell Atlantic (New Jersey Bell) to Response in Support of xMotion for Investigation, NJB (NJB Reply to NJCTA)  xx<Reply to Opposition to Motion for Investigation, NCTA (NCTA Reply xto Opposition to Motion)