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FCC-14-123A2

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STATEMENT OF COMMISSIONER AJIT PAI

Re:

Comprehensive Review of the Part 32 Uniform System of Accounts, WC Docket No. 14-130.

Today’s Notice of Proposed Rulemaking has been a long time coming. The FCC first adopted

detailed accounting rules for telephone companies in the 1930s, when command-and-control was the

preferred approach to regulation and legal monopolies dominated. But since the passage of the

Telecommunications Act of 1996, competition has blossomed and our Part 32 accounting rules now apply

to a small and shrinking percentage of the market. Indeed, these rules require some competitors (but not

others) to divert funds from building broadband networks to hiring and training specialized accountants to

maintain a reticulated set of 148 accounts and subaccounts designed for TDM-based telephone service—

and to do so even when there is no federal use for such data. We have repeatedly acknowledged the need

to revise and update these rules to reflect the changing regulatory landscape, both in last year’s bipartisan

USTelecom Forbearance Order1 and again today as we commence this proceeding.

I am particularly grateful that my colleagues agreed to adopt a number of my suggestions to

improve this Notice and make regulatory reform a priority. Specifically, we now propose to consolidate

the Class A and Class B accounts2 and to better align our asset accounting rules,3 our materiality rules,4

and our preapproval-for-extraordinary-items rules with generally accepted accounting principles

(GAAP).5 These are changes that will reduce the burdens of compliance for everyone subject to Part 32

accounting, rate-of-return and price-cap carriers alike. I also appreciate their willingness to explore

eliminating entirely the Part 32 rules for price-cap carriers and replacing them with targeted accounting

rules to satisfy the statutory obligations we identified in the USTelecom Forbearance Order.6

I look forward to working with my colleagues to complete this important proceeding—and the

other proceedings launched by last year’s order7—in the near future. Exploring arcana like the distinction

between our rules and GAAP with respect to the allowance for funds used during construction (or

AFUDC) or the cost basis of telecommunications assets may not catch the headlines, but it is important if

our rules are going to keep pace with the modern world.

Finally, today’s Notice would not have been possible but for our dedicated staff. I want to thank

Robin Cohn, Victoria Goldberg, Diane Griffin Holland, Kalpak Gude, Athula Gunaratne, Doug Klein,

Marcus Maher, Rick Mallen, Carol Mattey, Deena Shetler, Doug Slotten, Jamie Susskind, and Julie

Veach for their dedicated work in poring over—and helping us decipher—the dozens of dense pages of

Part 32 accounting rules. Their expertise and stamina are critical Commission assets.

1 Petition of USTelecom for Forbearance Under 47 U.S.C. § 160(c) from Enforcement of Certain Legacy

Telecommunications Regulations et al., WC Docket No. 12-61 et al., Memorandum Opinion and Order and Report

and Order in WC Docket No. 10-132 and Further Notice of Proposed Rulemaking and Second Further Notice of

Proposed Rulemaking, WC Docket No. 12-61 et al., 28 FCC Rcd 7627 (2013), pets. for review pending, Verizon

and AT&T, Inc., v. FCC & USA, No. 13-1220 (D.C. Cir. filed July 15, 2013).

2 Notice at paras. 11–13.

3 Notice at para. 18.

4 Notice at para. 26.

5 Notice at para. 29.

6 Compare Notice at paras. 36–49, with USTelecom Forbearance Order, 28 FCC Rcd at 7658–61, paras. 63–68.

7 See US Telecom Forbearance Order, 28 FCC Rcd at 7712–7720, paras. 194–210 (seeking comment on

streamlining or eliminating legacy regulations contained in the Computer Inquiry proceedings); id. at 7720–36,

paras. 211–43 (seeking comment on eliminating the structural separation requirements for rate-of-return carriers

providing facilities-based long-distance services).

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