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File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** $// Order, Waiver of Pt.69-Ameritech & SWBT, DA 96-268 //$ $/  69.1 Application of Access Charges /$ $/  69.3 Filing of Access Service Charges /$ $/  69.105 Carrier Common Line /$ DA 96-268 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Ameritech Operating Companies ) Petition for Waiver of Part 69 of the Commission's ) Rules to Restructure Its Rates to Establish a ) Pay Telephone Use Fee Rate Element ) ) Southwestern Bell Telephone Company ) Petition for Waiver of Part 69 of the Commission's ) Rules to Restructure Its Rates to Establish a ) Pay Telephone Use Fee Rate Element ) ORDER Adopted: February 29, 1996 Released: March 1, 1996 By the Chief, Common Carrier Bureau: TABLE OF CONTENTS Para. No. I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . 1 II. PETITIONS FOR WAIVER . . . . . . . . . . . . . . . . 2 A. Background . . . . . . . . . . . . . . . . . . . 2 B. Ameritech's Petition . . . . . . . . . . . . . . 4 C. SWBT's Petition. . . . . . . . . . . . . . . . . 6 III. COMMENTS . . . . . . . . . . . . . . . . . . . .10 A. Comments on Ameritech's Petition . . . . . . . .10 B. Comments on SWBT's Petition. . . . . . . . . . .16 IV. DISCUSSION. . . . . . . . . . . . . . . . . . . . . .24 A. Good Cause for the Waivers . . . . . . . . . . .24 B. Issues Raised by Commenters. . . . . . . . . . .27 C. Implementation . . . . . . . . . . . . . . . . .32 V. CONCLUSION. . . . . . . . . . . . . . . . . . . . . .35 VI. ORDERING CLAUSES . . . . . . . . . . . . . . . .36 I. INTRODUCTION 1. Ameritech Operating Companies (Ameritech) and Southwestern Bell Telephone Company (SWBT) currently recover the interstate portion of their payphone costs through the carrier common line charge, which is assessed on interexchange carriers (IXCs) as a per- minute charge for switched access. On April 26, 1995, Ameritech filed a petition requesting a waiver of the Commission's Part 69 rules that would permit it to recover the interstate portion of its payphone costs through a per-call charge to IXCs that receive interstate traffic originating at Ameritech payphones. On June 7, 1995, SWBT filed a similar petition. For the reasons stated below, we grant both petitions, subject to the conditions described herein. II. PETITIONS FOR WAIVER A. Background 2. Ameritech and SWBT presently assess a per-minute carrier common line charge on all interstate switched access traffic originating and/or terminating in their respective service areas. This charge recovers revenues associated with part of the interstate cost of subscriber lines, the long term support payments to other local exchange carriers (LECs) via the National Exchange Carrier Association (NECA), the costs associated with providing payphones, and other costs. In their petitions, Ameritech and SWBT seek waivers of the Commission's rules to remove payphone costs from the carrier common line charge and to establish a new rate element in the common line price cap basket consisting of a per-call charge to IXCs that carry interstate traffic originating at Ameritech and SWBT payphones. 3. Subsequent to the filing of the Ameritech and SWBT petitions, the Telecommunications Act of 1996 was enacted. The Act, among other things, directs the Commission to establish rules for compensating payphone providers on a per-call basis for payphone-originated intrastate and interstate calls. The Act also specifies that, upon the effective date of the per-call regulations, the Commission shall discontinue the LECs' current practice of recovering interstate payphone costs through their rates for switched access service. B. Ameritech's Petition 4. Ameritech proposes a methodology for calculating an initial per-call charge; subsequent rate changes would be governed by price caps. To determine the initial level of the per-call charge, Ameritech proposes to divide the number of interstate calls originating from Ameritech payphones into the total payphone costs recovered through Ameritech's originating and terminating carrier common line charges during the relevant base period. Ameritech proposes to estimate the number of interstate calls originating from Ameritech payphones using information gathered through its call tracking technology, which it first implemented in early 1995, and data extracted from its Carrier Access Billing System database for 1994. According to Ameritech, the payphone costs recovered through the carrier common line charges include the entire amounts assigned to Accounts 2351 and 6351, as well as interstate payphone costs that are assigned to other accounts. In subsequent years, as part of its price cap filing, Ameritech would forecast annually the payphone revenue requirement along with the number of payphone calls and would perform the same calculation to compute a per-call charge. To maintain revenue neutrality, Ameritech proposes to remove the costs comprising the interstate payphone revenue requirement from the common line price cap index and to treat the per-call fee as an exogenous adjustment. 5. Ameritech bases its waiver request on the fact that it now has the capability to identify all interstate traffic that originates from its payphones and the IXC to which such traffic is routed. By billing IXCs on a per-call basis, Ameritech would recover the interstate portion of payphone costs based on the actual number of calls delivered to an IXC from Ameritech payphones rather than through the common line charge, which is recovered from each IXC's total switched access minutes, regardless of the number of minutes originated from payphones. Ameritech maintains that its proposal is consistent with longstanding Commission policy to recover costs of a service from the users of that service. Moreover, Ameritech states that it will recover payphone costs in direct relation to the level of interstate traffic generated at each payphone location. According to Ameritech, this will "provide proper economic incentives" regarding the placement of payphones. C. SWBT's Petition 6. SWBT similarly seeks waivers of the Commission's rules to remove payphone costs from its carrier common line charge and to establish a new rate element called a "pay telephone use fee" in the Common Line price cap basket. The rate element would be assessed, on a per-call basis, on IXCs that carry interstate traffic originating at SWBT payphones. SWBT states that it will have the ability to identify all interstate traffic originating from its pay telephones and the IXC to which such traffic is routed, enabling it to apply the pay telephone use fee only to interstate calls originating from SWBT-provided pay telephones. The proposed rate element and structure would enable SWBT to recover the interstate portion of payphone costs based on the actual number of calls delivered to an IXC from SWBT payphones, rather than through the common line charge. SWBT maintains that its proposal is consistent with longstanding Commission policy to recover costs of a service from the users of that service. Moreover, SWBT states that it will recover payphone costs in direct relation to the level of interstate traffic generated at each payphone location. According to SWBT, this will "provide proper economic incentives" regarding the placement of payphones. 7. According to SWBT's Petition, a waiver of the Commission's rules is necessary to correct an imbalance between the carriers receiving pay telephone traffic and those paying for it. SWBT argues that the current method of recovering pay telephone costs through the carrier common line element charge is inefficient because every interstate call contributes to the recovery of pay telephone costs, even though the call may not have originated from a payphone. SWBT asserts that establishing the pay telephone use fee would help to improve this economically inefficient cost recovery scheme. In addition, SWBT states that its proposal would recognize "fair value" by imposing a per-call charge based upon the delivery of an interstate call originating from a pay telephone rather than upon the number of minutes of all interstate calls originating from all access lines. 8. SWBT proposes to calculate the initial level of the pay telephone use fee by dividing the number of interstate calls originating from SWBT payphones into the total payphone costs recovered through SWBT's originating and terminating carrier common line charges during the relevant base period. SWBT proposes to treat the identified pay telephone revenue amount as "a negative exogenous cost to reduce the common line basket [price cap index] and the maximum allowable [carrier common line charge]." SWBT's petition also seeks "to reclassify the pay telephone use fee rate element as a price cap excluded service," which SWBT asserts is "consistent with the proposed reduced regulation in the pay telephone business." 9. In its petition, SWBT compares its proposed charge to the per-call method of interstate access code compensation for competitive payphone owners which has been approved by the Commission. SWBT cites a Commission order which expressed a preference for a per-call charge in lieu of a per-minute charge. SWBT also asserts that the submission of specific costs and rate information would be appropriate in a tariff filing, but are not necessary in a waiver request. In its reply comments, SWBT responds that it would use the interstate Common Line Pay Telephone revenue requirement calculated pursuant to Part 69 of the rules. SWBT explains that the amount would include the interstate portion of investment in Account 2351, related Information Origination/Termination expenses, and other secondary costs, such as General Support Facilities and Corporate Operations. III. COMMENTS A. Comments on Ameritech's Petition 10. Of the nine parties filing comments on Ameritech's Petition, four supported Ameritech's waiver request -- BellSouth, Southwestern Bell, Pacific Bell, and the American Public Communications Council (APCC). The other six commenters, primarily IXCs, oppose Ameritech's waiver request. APCC supports Ameritech's waiver request for three reasons: the new payphone rate element would recover payphone costs from the cost-causers; it would address concerns about fairness to interexchange carriers; and it would provide more accurate economic incentives for the placement of payphones. APCC requests that the grant of Ameritech's waiver petition be conditioned, however, on Ameritech making its payphone call- tracking capabilities available to owners of independent payphones located in Ameritech's region. In its reply comments, Ameritech states that it will make its call-tracking technology available to private payphone providers on a tariffed basis. Ameritech states that it has already reached an agreement with the Illinois Public Telecommunications Association, which represents many independent payphone providers in Illinois, to make per-call tracking available for intrastate traffic originated on private payphones. BellSouth, Pacific Bell and Southwestern Bell also support Ameritech's petition, arguing that the per-call charge represents a more rational pricing system because it establishes a direct relationship between use of payphones and the parties from whom those costs are recovered. Southwestern Bell also contends that "reducing implicit support flows" is important in a "competitive environment." 11. Several parties question whether Ameritech's petition established the "special circumstances" necessary for a waiver of the Commission's rules. AT&T claims that Ameritech has not shown why the current rules impose a hardship on Ameritech. Frontier and CompTel contend that Ameritech's ability to track calls from its payphones to each IXC does not constitute special circumstances because other local exchange carriers could develop the same call-tracking technology. Sprint and AT&T argue that the fact that SWBT filed a similar petition claiming to have developed call-tracking capabilities for payphone-originated calls several weeks after Ameritech filed its petition negates any uniqueness that might otherwise support Ameritech's waiver request. Ameritech counters that special circumstances still exist because "the vast majority" of other LECs do not possess call- tracking technology and therefore a waiver, not a rulemaking, is the appropriate Commission vehicle for addressing Ameritech's situation. 12. In addition, AT&T argues that Ameritech should not be granted a waiver because it has not shown an imbalance between carriers receiving interstate payphone traffic and those paying for it that needs to be rectified. Similarly, Sprint notes that Ameritech did not provide evidence that its proposed rate restructuring would change the allocation of payphone costs among IXCs. Ameritech responds that both AT&T and Sprint have recently argued successfully before the Commission that a per-call method of recovering payphone costs is more economically rational than the existing mechanism. In these proceedings, Ameritech states that AT&T and Sprint were granted waivers of the compensation rules for private payphones without projecting how the per-call approach would affect individual IXCs' contributions to private payphone costs. Therefore, Ameritech argues, it is appropriate for the Commission to grant its waiver request without regard to the potential change in the amount recovered from individual IXCs. 13. Several commenters also raise procedural objections to Ameritech's petition. AT&T and CompTel assert that the issues involved in LEC recovery of payphone costs should be addressed in a rulemaking that examines all access charge rules and that applies throughout the industry. Sprint argues that because Ameritech's petition challenges the validity of the rule governing the recovery of payphone costs, Ameritech should have filed a petition for rulemaking concerning payphone cost recovery, not a waiver request. 14. Several parties assert that Ameritech's petition did not present sufficient information about the proposal. MCI claims that Ameritech put forth insufficient detail regarding the mechanics of restructuring its payphone recovery method. In particular, MCI notes that Ameritech did not explain whether or how long distance resellers would be billed. In its reply comments, Ameritech explained that it will use the Carrier Identification Code (CIC) to bill per-call payphone costs, thereby permitting the proper billing of resellers. CompTel questioned whether Ameritech's call-tracking technology could track 800 service calls from payphones. Ameritech responded that its technology is capable of tracking 800 service calls. In response to concerns expressed by Sprint, Ameritech stated that its call- tracking system is able to distinguish between completed and uncompleted calls, thereby preventing billing for uncompleted interexchange calls. 15. Several IXCs contend that Ameritech should not be granted a waiver that will allow it to continue to recover interstate payphone costs from IXCs because these commenters claim that end users, not IXCs, should be charged directly for the interstate portion of LEC payphone costs. Allnet asserts that the primary beneficiary of Ameritech's payphones is the Ameritech local network, and therefore Ameritech, not IXCs, should incur the costs of providing them. APCC argues that irrespective of cost-causation principles, IXCs derive "substantial revenues" from carrying interstate calls that originate on payphones and therefore should pay some portion of the cost of providing payphones. Allnet, CompTel, and MCI oppose a per-call charge because they claim it would produce certain inefficiencies. Allnet argues that a per-minute charge would more accurately reflect the manner in which Ameritech incurs payphone costs. CompTel maintains that a per-call approach would result in high- volume payphones subsidizing low-volume payphones. MCI contends that a per-call charge would result in Ameritech undercharging for calls of longer duration and overcharging for calls of shorter duration. Allnet also contends that Ameritech already has incentives based on revenues from local use of payphones to locate payphones where they will generate the most traffic. Therefore, Allnet maintains that Ameritech's waiver is unnecessary to create this incentive. In addition, Allnet asserts that a per-call method would raise the cost to 800 service subscribers of receiving payphone-originated calls. B. Comments on SWBT's Petition 16. Of the eight parties filing comments on SWBT's Petition, two -- BellSouth and APCC -- support the waiver request. Allnet, AT&T, CompTel, MCI, Sprint and Frontier oppose the request. APCC supports SWBT's waiver request for three reasons: the new payphone rate element would recover payphone costs from the cost-causers; it would address concerns about fairness to interexchange carriers; and it would provide more accurate economic incentives for the placement of payphones. APCC, however, requests that the grant of SWBT's waiver petition be conditioned on SWBT making its payphone call-tracking capabilities available to owners of independent payphones located in SWBT's region. In its reply comments, SWBT states that it will make its call-tracking technology available to private payphone providers. BellSouth also supports SWBT's petition, arguing that the per- call charge represents a more rational pricing system because it establishes a direct relationship between use of payphones and the parties from whom those costs are recovered. 17. Several IXCs question whether SWBT's petition established the "special circumstances" necessary for a waiver of the Commission's rules. AT&T claims that SWBT has not shown why the current rules impose a hardship on SWBT. MCI asserts that SWBT has not provided sufficient information to allow the Commission to determine the proposal's impact on the public interest. Frontier and CompTel contend that SWBT's ability to track calls from its payphones to each IXC does not constitute "special circumstances" because other local exchange carriers could develop the same call-tracking technology. AT&T argues that the fact that Ameritech filed a similar petition claiming to have developed call- tracking capabilities for payphone-originated calls a few weeks before SWBT filed its petition negates any uniqueness that might otherwise support SWBT's waiver request. In response, SWBT stated that the only issue to be decided in this case is whether the application of generally applicable Commission rules is in the public interest. SWBT argued that its waiver proposal serves the public interest by removing the inequity resulting from the application of current rules which cause pay telephone costs to be recovered from all access calls, whether or not they involve a pay telephone. 18. Some commenters assert that SWBT has not presented sufficient information about its proposal. Specifically, AT&T argues that SWBT should not be granted a waiver because it has not shown an imbalance between carriers receiving interstate payphone traffic and those paying for it that needs to be rectified. Similarly, Sprint notes that SWBT did not provide evidence that its proposed rate restructuring would change the allocation of payphone costs among IXCs. Sprint and Allnet state that SWBT has failed to quantify the amount by which pay telephone costs inflate the carrier common line charge. MCI claims that it is not clear how SWBT would address the issue of resellers with its new pay telephone use fee. AT&T asserts that the petition presents no evidence that a per-call charge rate structure is more efficient than the carrier common line charge structure. MCI states that the Petition is silent with respect to the impact of the negative exogenous cost adjustment on other accounts. 19. Several commenters raise procedural objections to SWBT's petition. AT&T, CompTel and Allnet believe the issues involved in LEC recovery of payphone costs should be addressed in a rulemaking that examines all access charge rules and that applies throughout the industry. MCI argues that because SWBT's petition challenges the validity of the rule governing the recovery of payphone costs, SWBT should have filed a petition for rulemaking concerning payphone cost recovery, not a waiver request. 20. SWBT disagrees, stating that a rulemaking would be appropriate if SWBT were seeking to require all local exchange carriers to remove the pay telephone element from the carrier common line charge. According to SWBT, however, it does not seek to impose a uniform scheme upon the industry, and therefore a waiver request is appropriate. SWBT notes that while it agrees that a complete access reform rulemaking will ultimately be necessary, its waiver request is an "interim step until full access reform." 21. Some IXCs contend that SWBT should not be granted a waiver that will allow it to continue to recover interstate payphone costs from IXCs because IXCs are not the "causers" of these costs. Other commenters claim that end users, not IXCs, should be charged directly for the interstate portion of LEC payphone costs. Allnet asserts that the primary beneficiary of SWBT's payphones is the SWBT local network, and therefore SWBT, not IXCs, should incur the costs of providing them. APCC argues that irrespective of cost- causation principles, IXCs earn "substantial revenue" from carrying interstate calls that originate on payphones and therefore should pay some portion of the cost of providing payphones. Allnet argues that the policies of the Commission's Caller ID proceeding prevent SWBT from imposing a separate charge upon IXCs, since the Commission determined in that case that "a carrier handing off a call to another carrier should not be allowed to charge that second carrier additional fees if the network capability already existed for providing the additional capability associated with that fee." 22. In its reply comments, SWBT states that it is not proposing to impose additional costs upon IXCs; rather, the pay telephone costs, which are included as part of the carrier common line charge and are already paid by IXCs for access service, would be "more narrowly focused" and recovered only from IXCs which carry calls originating from pay telephones. APCC adds that the Caller ID decision actually supports SWBT's proposal since, contrary to the Commission's finding in Caller ID, pay telephone costs are not part of a general network upgrade, and therefore are more appropriately applied to payphone calls than to all calls. 23. Several commenters oppose a per-call charge because they claim it would produce certain inefficiencies. CompTel and Frontier state that IXCs would have to create and install expensive systems to enable them to validate SWBT's data. Allnet argues that a per-minute charge would be more consistent with SWBT's billing system and would be easier for IXCs to track. Allnet avers that the Commission's assessment of local network access charges on a per minute basis reflects the efficiency of assessing charges on a per-minute basis. Allnet also argues that a per-call structure would overburden carriers who tend to carry shorter calls rather then longer calls. CompTel maintains that a per-call approach would result in high-volume payphones subsidizing low-volume payphones. Sprint and CompTel assert that SWBT's petition suggests that after the initial pay telephone use fee is set, SWBT would be able to raise its charges arbitrarily thereafter. SWBT counters by stating that its charge will be controlled by payphone costs and competition, and although the charge will not be regulated under the price cap mechanism, the charge will be subject to challenge as a tariffed fee. IV. DISCUSSION A. Good Cause for the Waivers 24. Section 1.3 of the Commission's rules permits us to grant a waiver of the rules upon a showing of "good cause." Courts have approved the Commission's use of its waiver authority when special circumstances warrant a deviation from the general rule and such deviation serves the public interest. We find that the newly developed capability of the Ameritech and SWBT networks to track interstate calls originating from pay telephones and to identify the interexchange carrier to which each call is routed constitutes special circumstances because the petitioners are apparently the only two LECs that possess this call-tracking technology. The Bureau recently determined that a technical advance by an IXC that allowed it to compensate providers of competitive payphones on a per-call basis constituted special circumstances justifying a waiver of our rules. In these cases, because Ameritech and SWBT have developed such a technological capability, we find that this payphone-call- tracking ability constitutes special circumstances for purposes of our waiver standard. We reject the suggestion of some commenters that Ameritech and SWBT should await a comprehensive rulemaking on access charges. Grant of the requested waivers, based on the special circumstances presented by the petitioners, will enable the public to receive promptly the benefits associated with recovering the costs of payphone common lines in a more cost- causative manner. 25. We also find that granting these waiver requests will better serve the public interest than requiring Ameritech and SWBT to follow our current rules. First, a per-call charge associated with the use of payphones is more efficient than recovering these costs through the carrier common line charge, which recovers interstate payphone costs from all switched access customers regardless of their use of payphones. The per-call charge made possible by the call-tracking technology will ensure that the amounts paid by IXCs to Ameritech and SWBT are related to the actual number of calls each IXC receives from payphones belonging to these local exchange carriers. Therefore, this waiver permits Ameritech and SWBT to recover payphone costs on a more cost-causative basis than do our current rules. Second, a per-call charge could also increase incentives for Ameritech and SWBT to place payphones in locations where they are likely to generate interstate traffic. In recent proceedings on payphone compensation, the Commission has consistently expressed a preference for a per-call method of compensation over other methods because of the improved incentives for providers of payphones. While it appears that, as certain commenters argue, the revenues from local use of payphones provide similar incentives for Ameritech and SWBT to place payphones in high-traffic areas, the additional incentives provided by per-call compensation would complement and strengthen such incentives based on intrastate revenues, resulting in more efficient placement of payphones. Third, this waiver will help align the price and cost of the carriers' switched access service by permitting Ameritech and SWBT to remove interstate payphone costs, which are not directly related to the provision of switched access, from their charges for switched access service. Switched access rates that more closely reflect the cost of providing switched access service will reduce the potential for inefficient entry into the exchange access market because the inclusion of unrelated costs provides a profit opportunity for potential entrants who do not have to recover such costs through their access charges. 26. In addition, we believe granting the waiver requests is consistent with the payphone provisions of the Telecommunications Act of 1996. In the Act, Congress directed the Commission to establish a per-call compensation plan in order to ensure fair compensation for all payphone service providers. In addition, that section requires the Commission to discontinue the LECs' recovery of interstate payphone costs through their rates for switched access service and to eliminate payphone subsidies from basic exchange and exchange access revenues. Obviously, these mandates cannot be fulfilled in the limited context of a waiver proceeding. Until the Commission begins the formal implementation of the statutory payphone provisions, however, we can move toward the fair compensation arrangement sanctioned by the Act by granting the waivers requested in this case. By permitting Ameritech and SWBT to remove interstate payphone costs from their charges for switched access service and to recover these costs from IXCs on a per-call basis, Ameritech and SWBT can implement, on an interim basis, pricing changes similar to those that all payphone providers eventually will be required to implement. Accordingly, we grant Ameritech and SWBT waivers of our rules to remove payphone costs from their originating and terminating carrier common line charges and to recover these costs from IXCs on a per-call basis, subject to the conditions described below. B. Issues Raised by Commenters 27. We disagree with those IXCs that argue that we should deny these waiver requests because they propose to continue recovering payphone costs from IXCs rather than through a direct charge on customers placing interstate calls from payphones. In 1983, the Commission initially ordered LECs to recover interstate payphone costs through a per-call charge on customers placing interstate payphone calls. On reconsideration, however, the Commission replaced this approach with the current cost recovery mechanism after determining that end users could avoid this charge by using collect, third party billing, or credit card payment methods. Today, credit payment for payphone-originated interstate calls is commonplace. Advocates of the per-call customer charge have not explained why adoption of a rule comparable to the Commission's original approach would not produce the same unequal treatment among interstate payphone callers that caused the Commission to reject that approach in 1983. The other option for recovering payphone common line costs directly from end users is to require all customers seeking to place interstate calls from LEC payphones, including calling card users, to deposit coins into the payphone before placing the call. This approach also was rejected by the Commission in 1983, and we find no basis in the record of this proceeding that would warrant a different outcome here. Accordingly, we reject the request of IXC commenters' that we require Ameritech and SWBT to impose a per- call charge on end users. 28. Contrary to Allnet's argument, we do not believe that the Commission's policies announced in the Caller ID proceeding precludes the grant of SWBT's petition. Allnet states accurately that, in the Caller ID proceeding, the Commission found that carriers must pass calling party information through to connecting carriers on interstate calls without charge. Allnet argues that the Commission's determination in Caller ID prevents a carrier from imposing additional costs upon another carrier if the network capability for providing the additional capability associated with the fee already exists. That decision, however, is inapposite since grant of SWBT's waiver would not impose additional costs on the IXCs. The payphone costs at issue in this case are already paid by IXCs as part of the carrier common line charge. Grant of SWBT's waiver request would simply enable SWBT to recover those costs only from IXCs that carry calls originating from payphones. Accordingly, we reject Allnet's contention that the Commission's decision in Caller ID bars us from granting SWBT's petition. 29. We disagree with the argument of Sprint and AT&T that we should deny the waiver petitions because Ameritech and SWBT have failed to state whether, or to what extent, the current allocation of interstate payphone costs among IXCs would be changed by the new recovery mechanism. The method prescribed by the current rules for LECs to recover their payphone costs was reasonable, given the statute in effect when those rules were adopted and the general absence of technology to measure and bill accurately the calls routed to particular IXCs. As we stated above, however, the per-call charge made possible by the call-tracking technology developed by Ameritech and SWBT would better serve the public interest because it would ensure that the amounts paid by IXCs to these carriers are related to the actual number of calls each IXC receives from Ameritech and SWBT payphones. The Commission recently granted waivers that permitted Sprint and AT&T to compensate competitive payphone providers (i.e., providers of payphones that are not owned by a LEC) on a per-call basis rather than on a per-phone basis. In granting those waivers, we did not require AT&T or Sprint to quantify the effect that a per-call compensation mechanism would have on their payments to competitive payphone providers. 30. In addition, we reject the arguments of Allnet, AT&T, Comptel and MCI that the petitions should be denied because the payphone costs of Ameritech and SWBT should be allocated among IXC interstate payphone calls on a per-minute rather than a per-call basis. First, it is not at all clear that recovery of the costs at issue on a per-minute basis rather than a per-call basis would be more efficient. Advocates of this argument have not substantiated their claims in the record of this proceeding. In a recent proceeding on competitive payphone compensation, the Commission observed that there may be little difference between the incentives created by per-call and per-minute methods. We cannot conclude, on the record before us, that a per-minute method is inherently superior to a per-call method, particularly in light of Congress's recently expressed preference for per-call compensation method for payphones. Moreover, Ameritech and SWBT state that they are capable of tracking and billing IXCs for these calls on a per-call basis, but they do not claim to be capable of tracking and billing such calls on a per-minute basis. Therefore, we reject the request by AT&T, Allnet, MCI and CompTel to deny SWBT's waiver petition or to condition it on SWBT's collecting payphone costs from interstate payphone calls on a per-minute basis. 31. We also reject the argument of CompTel and Frontier that SWBT's petition should be denied because it would force IXCs to create and install systems to enable them to validate SWBT's data. In light of the Congress's mandate to move toward a per-call compensation mechanism to govern payphones, IXCs would eventually develop such validation systems anyway. In this case, the public interest benefits in allowing SWBT to implement promptly a more efficient payphone cost recovery method outweighs the administrative inconvenience to IXCs claimed by CompTel and Frontier. C. Implementation 32. We conclude that the proposals of Ameritech and SWBT regarding the price cap treatment of the new payphone rate element should be modified in certain respects. We grant the carriers' requests to base the initial rate level of payphone charges on payphone costs derived from appropriate accounts, divided by the number of payphone calls during the base period. We will require Ameritech and SWBT to demonstrate, in the tariff process, that they have calculated these rate levels reasonably. The carriers' requests for the payphone rate structure change constitutes a restructuring of existing rate elements under the Commission's LEC price cap regulations. Pursuant to the Commission's rules, price cap LECs that restructure their access charges are required to demonstrate that the restructure results in rates that do not exceed applicable price cap index limits. In general, this requirement is satisfied if the rate restructure change is, on the whole, revenue neutral. Ameritech and SWBT will be required to demonstrate the revenue neutrality of their proposals in the tariff process. 33. We decline, however, to grant Ameritech's request to re-initialize the payphone charges annually using the same method it used to derive the initial level of those charges. Such a mechanism would be more consistent with rate-of-return regulation than with price caps, and we do not believe that it would serve the public interest to establish such a mechanism for Ameritech, which is subject to the price cap rules. We also decline to grant SWBT's request to exclude the pay telephone use fee rate element from price cap regulation. Although SWBT has shown special circumstances sufficient to justify removing payphone costs from its switched access charges, it has not presented any justification for removing the fee from price cap control. Removal of the rate element from price caps would remove a considerable degree of protection against the unreasonable exercise of market power provided by our rules. SWBT has not shown that it does not have market power over interstate payphone services, nor has it demonstrated that competition in the provision of payphone- originated interstate calls has developed to a sufficient extent to warrant removing the payphone use fee rate element from our price cap rules. Accordingly, we deny SWBT's proposal to remove the payphone use fee from price cap regulation at this time. 34. In light of the fact that, in the near future, the Commission will be initiating a proceeding to implement the payphone provisions of the Telecommunications Act of 1996, we do not prescribe a methodology for future pricing of the payphone use fee in this order. Instead, we permit Ameritech and SWBT to set the initial rate in accordance with their proposals, and we direct them not to propose increases or reductions in that rate until the conclusion of our proceeding implementing the payphone provisions of the Act. Because the Act requires Commission action on this issue before the end of the year, we believe the retention of the initial rate without change during this period will not be harmful to Ameritech, SWBT, or their customers. Accordingly, we grant the waivers requested by Ameritech and SWBT on an interim basis pending the conclusion of the Commission's proceeding implementing the payphone provisions of the Act. V. CONCLUSION 35. We conclude that Ameritech and SWBT have demonstrated good cause for grant of waivers of Sections 69.1, 69.3 and 69.105 of the Commission's rules. By permitting Ameritech and SWBT to collect interstate payphone costs from interstate payphone calls rather from all interstate long-distance calls, the requested waivers better serve the public interest in the circumstances of these two carriers than would requiring them to continue to abide by our current rules. Accordingly, we authorize Ameritech and SWBT to file tariffs under which compensation for the interstate portion of their payphone costs would be collected from IXCs on a per-call basis, consistent with the conditions described in this order. VI. ORDERING CLAUSES 36. Accordingly, IT IS ORDERED that, pursuant to Sections 4(i) and 5(c) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i) and 155(c), and Sections 0.91, 0.291, and 1.3 of the Commission's Rules, 47 C.F.R.  0.91, 0.291, and 1.3, the petitions for waiver filed by Ameritech Operating Companies and Southwestern Bell Telephone Company ARE GRANTED IN PART, to the extent described herein, and are otherwise DENIED. FEDERAL COMMUNICATIONS COMMISSION Regina M. Keeney Chief, Common Carrier Bureau