Sec.  36.2   Fundamental principles underlying procedures.

   (a) The following general principles underlie the procedures outlined in
   this part:

   (1)  Separations  are  intended to apportion costs among categories or
   jurisdictions by actual use or by direct assignment.

   (2)  Separations  are  made  on  the  “actual  use” basis, which gives
   consideration to relative occupancy and relative time measurements.

   (3) In the development of “actual use” measurements, measurements of use are
   (i)  determined  for telecommunications plant or for work performed by
   operating forces on a unit basis (e.g., conversation-minute-kilometers per
   message, weighted standard work seconds per call) in studies of traffic
   handled or work performed during a representative period for all traffic and
   (ii) applied to overall traffic volumes, i.e., 24-hour rather than busy-hour
   volumes.

   (b) Underlying the procedures included in this manual for the separation of
   plant costs is an over-all concept which may be described as follows:

   (1) Telecommunications plant, in general, is segregable into two broad
   classifications,  namely, (i) interexchange plant, which is plant used
   primarily to furnish toll services, and (ii) exchange plant, which is plant
   used primarily to furnish local services.

   (2) Within the interexchange classification, there are three broad types of
   plant, i.e., operator systems, switching plant, and trunk transmission
   equipment. Within the exchange classification there are four board types of
   plant,  i.e.,  operator  systems, switching plant, truck equipment and
   subscriber plant. Subscriber plant comprises lines to the subscriber.

   (3) In general, the basis for apportioning telecommunications plant used
   jointly for state and interstate operations are:

   (i) Operator work time expressed in weighted standard work seconds is the
   basis for measuring the use of operator systems.

   (ii) Holding-time-minutes is the basis for measuring the use of local and
   toll switching plant.

   (iii) Conversation-minute-kilometers or conversation minutes is the basis
   for  measuring the use of interexchange circuit plant and holding-time
   minutes is the basis for measuring the use of exchange trunk plant. While
   the  use  of  holding-time-minute-kilometers  is the basic fundamental
   allocation factor for interexchange circuit plant and exchange trunk plant,
   the use of conversation-minute-kilometers or conversation-minutes for the
   allocation of interexchange circuit plant and holding-time minutes for the
   allocation of exchange trunk plant are considered practical approximations
   for separations between state and interstate operations when related to the
   broad types of plant classifications used herein.

   (iv) Message telecommunications subscriber plant shall be apportioned on the
   basis  of a Gross Allocator which assigns 25 percent to the interstate
   jurisdiction and 75 percent to the state jurisdiction.

   (c) Property rented to affiliates, if not substantial in amount, is included
   as used property of the owning company with the associated revenues and
   expenses treated consistently: Also such property rented from affiliates is
   not included with the used property of the company making the separations;
   the rent paid is included in its expenses. If substantial in amount, the
   following treatment is applied:

   (1) In the case of property rented to affiliates, the property and related
   expenses and rent revenues are excluded from the telephone operations of the
   owning company, and

   (2) In the case of property rented from affiliates, the property and related
   expenses are included with, and the rent expenses are excluded from, the
   telephone operations of the company making the separation.

   (d) Property rented to or from non-affiliates is usually to be included as
   used  property  of the owning company with the associated revenues and
   expenses treated consistently. In the event the amount is substantial, the
   property involved and the revenues and expenses associated therewith may be
   excluded  from or included in the telecommunications operations of the
   company.  When  required,  the  cost  of  property  rented  to or from
   non-affiliates is determined using procedures that are consistent with the
   procedures for the allocation of costs among the operations.

   (e) Costs associated with services or plant billed to another company which
   have once been separated under procedures consistent with general principles
   set forth in this part, and are thus identifiable as entirely interstate or
   State in nature, shall be directly assigned to the appropriate operation and
   jurisdiction.

   [ 52 FR 17229 , May 6, 1987, as amended at  58 FR 44905 , Aug. 25, 1993;  71 FR 65745 , Nov. 9, 2006]