********************************************************    
                                       NOTICE
  ********************************************************
                              
              This document was converted from
         WordPerfect or Word to ASCII Text format.
                              
 Content from the original version of the document such as
headers, footers, footnotes, endnotes, graphics, and page numbers
           will not show up in this text version.
                              
All text attributes such as bold, italic, underlining, etc. from the
  original document will not show up in this text version.
                              
      Features of the original document layout such as
columns, tables, line and letter spacing, pagination, and margins
         will not be preserved in the text version.
                              
      If you need the complete document, download the
WordPerfect version or Adobe Acrobat version, if available.
                              
*****************************************************************
     FEDERAL COMMUNICATIONS COMMISSION
     WASHINGTON, D.C. 20554

                                       IN REPLY REFER TO: 1600E

                                        RAO Letter 30
                                        DA 00-355
                                        Adopted:  February 23, 2000
                                        Released:  February 24, 2000

Responsible Accounting Officer

Re:  Cost Allocation Uniformity for Carriers Filing Class B Cost Allocation Manuals

     I.   Introduction

This letter provides cost allocation uniformity for mid-sized incumbent local exchange carriers
(ILECs) who file cost allocation manuals (CAMs) at the Class B account level.  In Appendix A, we
specify the cost pools and allocation procedures for five Class B accounts.

     II.  Background

In the Joint Cost Order, the Commission established a mechanism for separating the costs of
regulated telephone services from the costs of nonregulated services.  The purpose of the Joint Cost
Order was to assure that regulated operations do not improperly subsidize nonregulated activities.  The
Commission established two separate but complementary sets of rules:  one which governs how carriers
allocate their costs between regulated and nonregulated activities and the other which governs transactions
between carriers and their affiliates.  The Commission required that carriers file CAMs setting out in detail the
manner in which they propose to implement those cost allocation and affiliate transactions rules.

Section 64.903 of the Commission's rules details the information required to be submitted in a carrier's CAM. 
The CAM requires, among other things, a cost apportionment table showing, for each Part 32 account
containing costs incurred in providing regulated services, the cost pools within that account, the procedures
used to place costs into each cost pool, and the method used to apportion the costs within each cost pool
between regulated and nonregulated activities.  In addition, ten of the Class A accounts must be assigned to
cost pools and allocated using specific procedures prescribed by the Common Carrier Bureau (Bureau) in the
CAM Uniformity Order.

The Accounting Reductions Report and Order streamlined our accounting requirements.  Specifically, we
streamlined the accounting requirements for mid-sized ILECs whose aggregate annual revenues are less than
$7 billion, by allowing those mid-sized ILECs to use the more streamlined Class B accounts, rather than the
more numerous, detailed Class A accounts.  Consistent with our change in the level of accounting detail
required, we concluded that mid-sized ILECs should also be permitted to submit their CAMs based upon the
Class B system of accounts, thereby reducing their reporting burden.  Mid-sized ILECs opting to file their
CAMs at the Class B account level must continue to comply with the Commission's requirement for uniform
cost pools and allocators as specified in the CAM Uniformity Order.

     III. Discussion

The Bureau hereby prescribes cost pool requirements and specific allocation procedures for the following five
Class B accounts:  Account 2110, Land and support assets; Account 2310, Information
origination/termination; Account 6110, Network support expenses; Account 6120, General support expenses;
and Account 6310, Information origination/termination expenses.  Specific cost pools and allocation
procedures for these five Class B accounts are contained in Appendix A.

On December 10, 1999, we granted a waiver extending the 1999 year-end CAM filing to March 15, 2000, for
mid-sized ILECs planning to file their CAMs at the Class B level.  This waiver allowed mid-sized ILECs
additional time to prepare and file their CAMs in accordance with Class B accounts.  It also allowed us time
to provide guidance to mid-sized ILECs filing their CAMs at the Class B level.  Mid-sized ILECs who did not
avail themselves of the waiver and formally filed their CAM changes at year-end 1999, must now submit
CAM revisions incorporating the changes to their cost apportionment tables required by this RAO letter. 
Changes required by this RAO letter will be effective retroactively to January 1, 2000.  By this letter we also
further extend the 1999 year-end CAM filing date for mid-sized ILECs planning to file their CAMs at the
Class B level from March 15, 2000, to April 3, 2000.

If you have any questions, please contact Debbie Weber or Ron Kaufman at 418-0810.

                                   Sincerely,



                                   Kenneth P. Moran, Chief
                                   Accounting Safeguards Division
                                   Common Carrier Bureau