§  61.48   Transition rules for price cap formula calculations.

   (a)-(h) [Reserved]

   (i) Transport and Special Access Density Pricing Zone Transition Rules
   --(1) Definitions. The following definitions apply for purposes of
   paragraph (i) of this section:

   Earlier date is the earlier of the special access zone date and the
   transport zone date.

   Earlier service is special access if the special access zone date
   precedes the transport zone date, and is transport if the transport
   zone date precedes the special access zone date.

   Later date is the later of the special access zone date and the
   transport zone date.

   Later service is transport if the special access zone date precedes the
   transport zone date, and is special access if the transport zone date
   precedes the special access zone date.

   Revenue weight of a given group of services included in a zone category
   is the ratio of base period demand for the given service rate elements
   included in the category priced at existing rates, to the base period
   demand for the entire group of rate elements comprising the category
   priced at existing rates.

   Special access zone date is the date on which a local exchange carrier
   tariff establishing divergent special access rates in different zones,
   as described in § 69.123(c) of this chapter, becomes effective.

   Transport zone date is the date on which a local exchange carrier
   tariff establishing divergent switched transport rates in different
   zones, as described in § 69.123(d) of this chapter, becomes effective.

   (2) Simultaneous Introduction of Special Access and Transport Zones.
   Local exchange carriers subject to price cap regulation that have
   established density pricing zones pursuant to § 69.123 of this chapter,
   and whose special access zone date and transport zone date occur on the
   same date, shall initially establish density pricing zone SBIs and
   bands pursuant to the methodology in § § 61.47(e) through (f).

   (3) Sequential Introduction of Zones in the Same Tariff Year.
   Notwithstanding § § 61.47(e) through (f), local exchange carriers
   subject to price cap regulation that have established density pricing
   zones pursuant to § 69.123 of this chapter, and whose special access
   zone date and transport zone date occur on different dates during the
   same tariff year, shall, on the earlier date, establish density pricing
   zone SBIs and pricing bands using the methodology described in
   § § 61.47(e) through (f), but applicable to the earlier service only.
   On the later date, such carriers shall recalculate the SBIs and pricing
   bands to limit the pricing flexibility of the services included in each
   density pricing zone category, as reflected in its SBI, as follows:

   (i) The upper pricing band shall be a weighted average of the
   following:

   (A) The upper pricing band that applied to the earlier services
   included in the zone category on the day preceding the later date,
   weighted by the revenue weight of the earlier services included in the
   zone category; and

   (B) 1.05 times the SBI value for the services included in the zone
   category on the day preceding the later date, weighted by the revenue
   weight of the later services included in the zone category.

   (ii) [Reserved]

   (iii) On the later date, the SBI value for the zone category shall be
   equal to the SBI value for the category on the day preceding the later
   date.

   (4) Introduction of Zones in Different Tariff Years. Notwithstanding
   § § 61.47(e) through (f), those local exchange carriers subject to
   price cap regulation that have established density pricing zones
   pursuant to § 69.123 of this chapter, and whose special access zone
   date and transport zone date do not occur within the same tariff year,
   shall, on the earlier date, establish density pricing zone SBIs and
   pricing bands using the methodology described in § § 61.47(e) through
   (f), but applicable to the earlier service only.

   (i) On the later date, such carriers shall use the methodology set
   forth in paragraphs (a) through (d) of § 61.47 to calculate separate
   SBIs in each zone for each of the following groups of services:

   (A) DS1 special access services;

   (B) DS3 special access services;

   (C) DS1 entrance facilities, DS1 direct-trunked transport, and DS1
   dedicated signalling transport;

   (D) DS3 entrance facilities, DS3 direct-trunked transport, and DS3
   dedicated signalling transport;

   (E) Voice grade entrance facilities, voice grade direct-trunked
   transport, and voice grade dedicated signalling transport;

   (F) Tandem-switched transport; and

   (G) Such other special access services as the Commission may designate
   by order.

   (ii) From the later date through the end of the following tariff year,
   the annual pricing flexibility for each of the subindexes specified in
   paragraph (i)(4)(i) of this section shall be limited to an annual
   increase of five percent or an annual decrease of fifteen percent,
   relative to the percentage change in the PCI for the trunking basket,
   measured from the levels in effect on the last day of the tariff year
   preceding the tariff year in which the later date occurs.

   (iii) On the first day of the second tariff year following the tariff
   year during which the later date occurs, the local exchange carriers to
   which this paragraph applies shall establish the separate subindexes
   provided in § 61.47(e), and shall set the initial SBIs for those
   density pricing zone categories that are combined (specified in
   paragraphs (i)(4)(i)(A), (i)(4)(i)(B), (i)(4)(i)(C), (i)(4)(i)(D),
   (i)(4)(i)(E), and (i)(4)(i)(G) of this section) by computing the
   weighted averages of the SBIs that applied to the formerly separate
   zone categories, weighted by the revenue weights of the respective
   services included in the zone categories.

   (j)-(k) [Reserved]

   (l) Average Traffic Sensitive Revenues. (1) In the July 1, 2000 annual
   filing, price cap local exchange carriers will make an additional
   reduction to rates comprising ATS charge, and to associated SBI upper
   limits and PCIs. This reduction will be calculated to be the amount
   that would be necessary to achieve a total $2.1 billion reduction in
   carrier common line and ATS rates by all price cap local exchange
   carriers, compared with those rates as they existed on June 30, 2000
   using 2000 annual filing base period demand.

   (i) The net change in revenue associated with Carrier Common Line Rate
   elements resulting from:

   (A) The removal from access of price cap local exchange carrier
   contributions to the Federal universal service mechanisms;

   (B) Price cap local exchange carrier receipts of interstate access
   universal service support pursuant to subpart J of part 54;

   (C) Changes in End User Common Line Charges and PICC rates;

   (D) Changes in Carrier Common Line charges due to GDP-PI--X targeting
   for $0.0095 filing entities.

   (ii) Reductions in Average Traffic Sensitive charges resulting from:

   (A) Targeting of the application of the (GDP-PI--X) portion of the
   formula in § 61.45(b), and any applicable "g" adjustments;

   (B) The removal from access of price cap local exchange carrier
   contributions to the Federal universal service mechanisms;

   (C) Additional ATS charge reductions defined in paragraph (2) of this
   section.

   (2) Once the reductions in paragraph (l)(1)(i) and paragraphs
   (l)(1)(ii)(A) and (l)(1)(ii)(B) of this section are identified, the
   difference between those reductions and $2.1 billion is the total
   amount of additional reductions that would be made to ATS rates of
   price cap local exchange carriers. This amount will then be restated as
   the percentage of total price cap local exchange carrier Local
   Switching revenues as of June 30, 2000 using 2000 annual filing base
   period demand ("June 30 Local Switching revenues") necessary to yield
   the total amount of additional reductions and taking into account the
   fact that, if participating, a price cap local exchange carrier would
   not reduce ATS rates below its Target Rate as set forth in § 61.3(qq).
   Each price cap local exchange carrier then reduces ATS rate elements,
   and associated SBI upper limits and PCIs, by a dollar amount equivalent
   to the percentage times the June 30 Local Switching revenues for that
   filing entity, provided that no price cap local exchange carrier shall
   be required to reduce its ATS rates below its Target Rate as set forth
   in § 61.3(qq). Each carrier can take its additional reductions against
   any of the ATS rate elements, provided that at least a proportional
   share must be taken against Local Switching rates.

   (m) Pooled Local Switching Revenues. (1) Price cap local exchange
   carriers are permitted to pool local switching revenues in their CMT
   basket under one of the following conditions.

   (i) Any price cap local exchange carrier that would otherwise have July
   1, 2000 price cap reductions as a percentage of Base Period Price Cap
   Revenues at the holding company level greater than the industry wide
   total July 1, 2000 price cap revenue reduction as a percentage of Base
   Period Price Cap Revenues may elect temporarily to pool the amount of
   the additional reductions above 25% of the Local Switching element
   revenues necessary to yield that carrier's proportionate share of a
   total $2.1 billion reduction in switched access usage rates on July 1,
   2000. The basis of the reduction calculation will be R at PCIt-1for the
   upcoming tariff year. The percentage reductions per line amounts will
   be calculated as follows: (Total Price Cap Revenue Reduction -: Base
   Period Price Cap Revenues)

   Pooled local switching revenue for each filing entity within a holding
   company that qualifies under this paragraph (i) will continue until
   such pooled revenues are eliminated under this paragraph.
   Notwithstanding the provisions of § 61.45(b)(1), once the Average
   Traffic Sensitive (ATS) rate reaches the applicable Target Rate as set
   forth in § 61.3(qq), the Targeted Revenue Differential as defined in
   § 61.45(i) shall be targeted to reducing pooled local switching revenue
   until the pooled local switching revenue is eliminated. Thereafter, the
   X-factor for these baskets will be determined in accordance with
   § 61.45(b)(1).

   (ii) Price cap local exchange carriers other than the Bell companies
   and GTE with at least 20% of total holding company lines operated by
   companies that as of December 31, 1999 were certified to the Commission
   as rural carriers, may elect to pool up to the following amounts:

   (A) For a price cap holding company's predominantly non-rural filing
   entities ( i.e., filing entities within which more than 50% of all
   lines are operated by telephone companies other than those that as of
   December 31, 1999 were certified to the Commission as rural telephone
   companies), the amount of the additional reductions to Average Traffic
   Sensitive Charge rates as defined in paragraph (l)(2) of this section,
   to the extent such reductions exceed 25% of the Local Switching element
   revenues (measured in terms of June 30, 2000 rates times 1999 base
   period demand);

   (B) For a price cap holding company's predominantly rural filing
   entities ( i.e., filing entities with greater than 50% of lines
   operated by telephone companies that as of December 31, 1999 were
   certified to the Commission as rural telephone companies), the amount
   of the additional reductions to Average Traffic Sensitive Charge rates
   as defined in paragraph (l)(2) of this section.

   (2) Allocation of Pooled Local Switching Revenue to Certain CMT
   Elements

   (i) The pooled local switching revenue for each filing entity is
   shifted to the CMT basket within price caps. Pooled local switching
   revenue will not be included in calculations to determine the
   eligibility for interstate access universal service funding.

   (ii) Pooled local switching revenue will be capped on a revenue per
   line basis.

   (iii) Pooled local switching revenue is included in the total revenue
   for the CMT basket in calculating the X-factor reduction targeted to
   the traffic sensitive rate elements, and for companies qualified under
   paragraph (m)(1)(i) of this section, to pooled elements after the
   Average Traffic Sensitive Charge reaches the target level. For the
   purpose of targeting X-factor reductions, companies that allocate
   pooled local switching revenue to other filing entities pursuant to
   paragraph (m)(2)(vii) of this section shall include pooled local
   switching revenue in the total revenue of the CMT basket of the filing
   entity from which the pooled local switching revenue originated.

   (iv) Pooled local switching revenue shall be kept separate from CMT
   revenue in the CMT basket. CMT rate elements for each filing entity
   shall first be set based on CMT revenue per line without regard to the
   presence of pooled local switching revenue for each filing entity.

   (v) If the rates generated without regard to the presence of pooled
   local switching revenue for multi-line business PICC and/or multi-line
   business SLC are below the nominal caps of $4.31 and $9.20,
   respectively, pooled amounts can be added to these rate elements to the
   extent permitted by the nominal caps.

   (vi) Notwithstanding the provisions of § 69.152(k) of this chapter,
   pooled local switching revenue is first added to the multi-line
   business SLC until the rate equals the nominal cap ($9.20) or the
   pooled local switching revenue is fully allocated. If pooled local
   switching revenue remains after applying amounts to the multi-line
   business SLC, notwithstanding the provisions of § 69.153 of this
   chapter, the remaining pooled local switching revenue may be added to
   the multi-line business PICC until the rate equals the nominal cap
   ($4.31) or the pooled local switching revenue is fully allocated.
   Unallocated pooled local switching revenue may still remain. For
   companies pooling pursuant to paragraph (m)(1)(i) of this section,
   these unallocated amounts may not be recovered from the CCL charge, the
   primary residential and single-line business SLC, a non-primary
   residential SLC, or from CMT elements in any other filing entity.

   (vii) For companies pooling pursuant to paragraph (m)(1)(ii) of this
   section, pooled local switching revenue that can not be allocated to
   the multi-line business PICC and multi-line business SLC rates within
   an individual filing entity may not be recovered from the CCL charge,
   primary residential and single-line business SLC or
   residential/single-line business SLC charges, but may be allocated to
   other filing entities within the holding company, and collected by
   adding these amounts to the multi-line business PICC and multi-line
   business SLC rates. The allocation of pooled local switching revenue
   among filing entities will be re-calculated at each annual filing. In
   subsequent annual filings, pooled local switching revenue that was
   allocated to another filing entity will be reallocated to the filing
   entity from where it originated, to the full extent permitted by the
   nominal caps of $9.20 and $4.31.

   (viii) Notwithstanding the provisions of § 69.152(k) of this chapter,
   these unallocated local switching revenues that cannot be recovered
   fully pursuant to paragraph (m)(2)(vii) of this section are first added
   to the multi-line business SLC of other filing entities until the
   resulting rate equals the nominal cap ($9.20) or the pooled local
   switching revenue for the holding company is fully allocated. If the
   pooled local switching revenue can be fully allocated to the multi-line
   business SLC, the amount is distributed to each filing entity with a
   rate below the nominal cap ($9.20) based on its below-cap multi-line
   business SLC revenue as a percentage of the total holding company's
   below-cap multi-line business SLC revenue.

   (ix) If pooled local switching revenue remains after applying amounts
   to the multi-line business SLC of all filing entities in the holding
   company, pooled local switching revenue may be added to the multi-line
   business PICC of other filing entities. Notwithstanding the provisions
   of § 69.153 of this chapter, the remaining pooled local switching
   revenue is distributed to each filing entity with a rate below the
   nominal cap ($4.31) based on its below-cap multi-line business PICC
   revenue as a percentage of the total holding company's below-cap
   multi-line business PICC revenue.

   (x) If pooled local switching revenue is added to the multi-line
   business SLC but not to the multi-line business PICC for a filing
   entity that qualified to deaverage SLCs without regard to pooled local
   switching revenue, the resulting SLC rates can still be deaveraged.
   Total pooled local switching revenue is added to the deaveraged zone 1
   multi-line business SLC rate until the per line rate in zone 1 equals
   the rate in zone 2 or until the pooled local switching revenue is fully
   allocated to the deaveraged multi-line business SLC rate for zone 1. If
   pooled local switching revenue remains after the rate in zone 1 equals
   zone 2, the deaveraged rates of zone 1 and zone 2 are increased until
   the pooled local switching revenue is fully allocated to the deaveraged
   multi-line business SLC rates of zone 1 and 2 or until those rates
   reach the zone 3 multi-line business SLC rate level. This process
   continues until pooled local switching revenue is fully allocated to
   the zone deaveraged rates.

   (n) Establishment of the special access basket, effective July 1, 2000.

   (1) On the effective date, the PCI value for the special access basket,
   as defined in § 61.42(d)(5) shall be equal to the PCI for the trunking
   basket on the day preceding the establishment of the special access
   basket.

   (2) On the effective date, the API value for the special access basket,
   as defined in § 61.42(d)(5) shall be equal to the API for the trunking
   basket on the day preceding the establishment of the special access
   basket.

   (3) Service Category, Subcategory, and Density Zone SBIs and Upper
   Limits.

   (i) Interconnection, Tandem Switched Transport, and Signalling
   Interconnec- tion will retain the SBIs and upper limits and remain in
   the trunking basket.

   (ii) Audio/Video and Wideband will retain the SBIs and upper limits and
   be moved into the special access basket.

   (iii) For Voice Grade, the SBIs and upper limits in both baskets will
   be equal to the SBIs and upper limits in the existing trunking basket
   on the day preceding the establishment of the special access basket.
   Voice Grade density zones in the trunking basket will retain their
   indices and upper limits. Voice Grade density zones will be initialized
   in the special access basket when services are first offered in them.

   (iv) For High Cap/DDS, DS1, and DS3 category and subcategories, the
   SBIs and upper limits in both baskets will be equal to the SBIs and
   upper limits in the existing trunking basket on the day preceding the
   establishment of the special access basket. SBIs and upper limits for
   services that are in both combined density zones and either DTT/EF or
   special access density zones will be calculated by using weighted
   averages of the indices in the affected zones.

   (v) For each DTT/EF-related zone remaining in the trunking basket, the
   values will be calculated by taking the sum of the products of the
   DTT/EF revenues times the DTT/EF index (or upper limit) and the
   DTT/EF-related revenues in the combined zone times the combined index
   (or upper limit), and dividing by the total DTT/EF-related revenues for
   that zone.

   (vi) For each special access-related zone in the special access basket,
   the values will be calculated by taking the sum of the products of the
   special access revenues times the special access index (or upper limit)
   and the special access-related revenues in the combined zone times the
   combined index (or upper limit), and dividing by the total special
   access-related revenues for that zone.

   (o) Treatment of acquisitions of exchanges with different ATS Target
   Rates as set forth in § 61.3(qq):

   (1) In the event that a price cap local exchange carrier acquires a
   filing entity or portion thereof from a price cap local exchange
   carrier after July 1, 2000, and the price cap local exchange carrier
   did not have a binding and executed contract to purchase that filing
   entity or portion thereof as of April 1, 2000, those properties retain
   their pre-existing Target Rates as set forth in § 61.3(qq). If those
   properties are merged into a filing entity with a different Target Rate
   as set forth in § 61.3(qq), the Target Rate as set forth in § 61.3(qq)
   for the merged filing entity will be the weighted average of the Target
   Rates as set forth in § 61.3(qq) for the properties being combined into
   a single filing entity, with the average weighted by local switching
   minutes. When a property acquired as a result of a contract for
   purchase executed after April 1, 2000 is merged with $0.0095 Target
   Rate properties, the obligation to apply price cap reductions to reduce
   CCL, pursuant to § 61.45(b)(iii) does not apply to the properties
   purchased under contracts executed after April 1, 2000, but continues
   to apply to the other properties.

   (2) For sale of properties for which a holding company was, as of April
   1, 2000, under a binding and executed contract to purchase but which
   close after June 30, 2000, but during tariff year 2000, and that are
   subject to the $0.0095 Target Rate as set forth in § 61.3(qq), the
   Average Traffic Sensitive Rate charged by the purchaser for that
   property will be the greater of $0.0095 or the Average Traffic
   Sensitive Rate for that property.

   [ 54 FR 19843 , May 8, 1989, as amended at  55 FR 42384 , Oct. 19, 1990;  56 FR 21617 , May 10, 1991;  56 FR 55239 , Oct. 25, 1991;  59 FR 10302 , Mar.
   4, 1994;  60 FR 19528 , Apr. 19, 1995;  60 FR 52346 , Oct. 6, 1995;  62 FR 31932 , June 11, 1997;  64 FR 46590 , Aug. 26, 1999;  65 FR 38699 , June 21,
   2000;  65 FR 57742 , 57743, Sept. 26, 2000]