§ 54.301   Local switching support.

   (a) Calculation of local switching support.(1) Beginning January 1,
   1998 and ending December 31, 2011, an incumbent local exchange carrier
   that has been designated an eligible telecommunications carrier and
   that serves a study area with 50,000 or fewer access lines shall
   receive support for local switching costs using the following formula:
   The carrier's projected annual unseparated local switching revenue
   requirement, calculated pursuant to paragraph (d) of this section,
   shall be multiplied by the local switching support factor. Beginning
   January 1, 2012 and ending June 30, 2012, a rate-of-return carrier, as
   that term is defined in § 54.5 of this chapter, that is an incumbent
   local exchange carrier that has been designated an eligible
   telecommunications carrier and that serves a study area with 50,000 or
   fewer access lines and is not affiliated with a price cap carrier, as
   that term is defined in § 61.3(aa) of this chapter, shall receive
   support for local switching costs frozen at the same support level
   received for calendar year 2011, subject to true-up. For purposes of
   this section, local switching costs shall be defined as Category 3
   local switching costs under part 36 of this chapter. Beginning January
   1, 2012, no carrier that is a price cap carrier, as that term is
   defined in § 61.3(aa) of this chapter, or a rate-of-return carrier, as
   that term is defined in § 54.5 of this chapter, that is affiliated with
   a price cap carrier, shall receive local switching support. Beginning
   July 1, 2012, no carrier shall receive local switching support.

   (2) Local switching support factor. (i) The local switching support
   factor shall be defined as the difference between the 1996 weighted
   interstate DEM factor, calculated pursuant to § 36.125(f) of this
   chapter, and the 1996 unweighted interstate DEM factor.

   (ii) If the number of a study area's access lines increases such that,
   under § 36.125(f) of this chapter, the weighted interstate DEM factor
   for 1997 or any successive year would be reduced, that lowered weighted
   interstate DEM factor shall be applied to the study area's 1996
   unweighted interstate DEM factor to derive a new local switching
   support factor. If the number of a study area's access lines decreases
   or has decreased such that, under § 36.125(f) of this chapter, the
   weighted interstate DEM factor for 2010 or any successive year would be
   raised, that higher weighted interstate DEM factor shall be applied to
   the study area's 1996 unweighted interstate DEM factor to derive a new
   local switching support factor.

   (3) Beginning January 1, 1998, the sum of the unweighted interstate DEM
   factor, as defined in § 36.125(a)(5) of this chapter, and the local
   switching support factor shall not exceed 0.85. If the sum of those two
   factors would exceed 0.85, the local switching support factor shall be
   reduced to a level that would reduce the sum of the factors to 0.85.

   (b) Submission of data to the Administrator. Until October 1, 2011,
   each incumbent local exchange carrier that has been designated an
   eligible telecommunications carrier and that serves a study area with
   50,000 or fewer access lines shall, for each study area, provide the
   Administrator with the projected total unseparated dollar amount
   assigned to each account listed below for the calendar year following
   each filing. This information must be provided to the Administrator no
   later than October 1 of each year. The Administrator shall use this
   information to calculate the projected annual unseparated local
   switching revenue requirement pursuant to paragraph (d) of this
   section.
   I
   Telecommunications Plant in Service (TPIS) Account 2001
   Telecommunications Plant--Other Accounts 2002, 2003, 2005
   General Support Assets Account 2110
   Central Office Assets Accounts 2210, 2220, 2230
   Central Office-switching, Category 3 (local switching) Account 2210,
   Category 3
   Information Origination/termination Assets Account 2310
   Cable and Wire Facilities Assets Account 2410
   Amortizable Tangible Assets Account 2680
   Intangibles Account 2690
   II
   Rural Telephone Bank (RTB) Stock Included in Account 1410
   Materials and Supplies Account 1220.1
   Cash Working Capital Defined in 47 CFR 65.820(d)
   III
   Accumulated Depreciation Account 3100
   Accumulated Amortization Included in Accounts 2005, 2680, 2690, 3410
   Net Deferred Operating Income Taxes Accounts 4100, 4340
   Network Support Expenses Account 6110
   General Support Expenses Account 6120
   Central Office Switching, Operator Systems, and Central Office
   Transmission Expenses Accounts 6210, 6220, 6230
   Information Origination/Termination Expenses Account 6310
   Cable and Wire Facilities Expenses Account 6410
   Other Property, Plant and Equipment Expenses Account 6510
   Network Operations Expenses Account 6530
   Access Expense Account 6540
   Depreciation and Amortization Expense Account 6560
   Marketing Expense Account 6610
   Services Expense Account 6620
   Corporate Operations Expense Account 6720
   Operating Taxes Accounts 7230, 7240
   Federal Investment Tax Credits Account 7210
   Provision for Deferred Operating Income Taxes-Net Account 7250
   Allowance for Funds Used During Construction Included in Account 7300
   Charitable Contributions Included in Account 7300
   Interest and Related Items Account 7500
   IV
   Other Non-Current Assets Included in Account 1410
   Deferred Maintenance and Retirements Included in Account 1438
   Deferred Charges Included in Account 1438
   Other Jurisdictional Assets and Liabilities Accounts 1500, 4370
   Customers' Deposits Account 4040
   Other Long-Term Liabilities Included in Account 4300

   (c) Allocation of accounts to switching. The Administrator shall
   allocate to local switching, the accounts reported pursuant to
   paragraph (b) of this section as prescribed in this paragraph.

   (1) General Support Assets (Account 2110); Amortizable Tangible Assets
   (Account 2680); Intangibles (Account 2690); and General Support
   Expenses (Account 6120) shall be allocated according to the following
   factor:

   Account 2210 Category-:3 (Account 2210 + Account 2220 + Account 2230 +
   Account 2310 + Account 2410).

   (2) Telecommunications Plant--Other (Accounts 2002, 2003, 2005); Rural
   Telephone Bank (RTB) Stock (included in Account 1410); Materials and
   Supplies (Account 1220.1); Cash Working Capital (Sec. 65.820(d) of this
   chapter); Accumulated Amortization (Included in Accounts 2005, 2680,
   2690, 3410); Net Deferred Operating Income Taxes (Accounts 4100, 4340);
   Network Support Expenses (Account 6110); Other Property, Plant and
   Equipment Expenses (Account 6510); Network Operations Expenses (Account
   6530); Marketing Expense (Account 6610); Services Expense (Account
   6620); Operating Taxes (Accounts 7230, 7240); Federal Investment Tax
   Credits (Accounts 7210); Provision for Deferred Operating Income
   Taxes--Net (Account 7250); Interest and Related Items (Account 7500);
   Allowance for Funds Used During Construction (Included in Account
   7300); Charitable Contributions (included in Account 7300); Other
   Non-current Assets (Included in Account 1410); Other Jurisdictional
   Assets and Liabilities (Accounts 1500, 4370); Customer Deposits
   (Account 4040); Other Long-term Liabilities (Included in Account 4300);
   and Deferred Maintenance and Retirements (Included in Account 1438)
   shall be allocated according to the following factor:

   Account 2210 Category 3 Account 2001.

   (3) Accumulated Depreciation for Central Office--switching (Account
   3100 associated with Account 2210) and Depreciation and Amortization
   Expense for Central Office--switching (Account 6560 associated with
   Account 2210) shall be allocated according to the following factor:

   Account 2210 Category 3-:Account 2210.

   (4) Accumulated Depreciation for General Support Assets (Account 3100
   associated with Account 2110) and Depreciation and Amortization Expense
   for General Support Assets (Account 6560 associated with Account 2110)
   shall be allocated according to the following factor:

   Account 2210 Category 3 -: Account 2001.

   (5) Corporate Operations Expenses (Account 6720) shall be allocated
   according to the following factor:

   [[Account 2210 Category 3 (Account 2210 + Account 2220 + Account
   2230)]] * (Account 6210 + Account 6220 + Account 6230)] + [(Account
   6530 + Account 6610 + Account 6620) * (Account 2210 Category 3 Account
   2001)] (Account 6210 + Account 6220 + Account 6230 + Account 6310 +
   Account 6410 + Account 6530 + Account 6610 + Account 6620).

   (6) Central Office Switching, Operator Systems, and Central Office
   Transmission Expenses (Account 6210, Account 6220, Account 6230) shall
   be allocated according to the following factor:

   Account 2210 Category 3 -: (Accounts 2210 + 2220 + 2230).

   (d) Calculation of the projected annual unseparated local switching
   revenue requirement. The Administrator shall calculate the projected
   annual unseparated local switching revenue requirement by summing the
   components listed in this paragraph.

   (1) Return on Investment attributable to COE Category 3 shall be
   obtained by multiplying the average projected unseparated local
   switching net investment by the authorized interstate rate of return.
   Projected unseparated local switching net investment shall be
   calculated as of each December 31 by deducting the accumulated
   reserves, deferrals and customer deposits attributable to the COE
   Category 3 investment from the gross investment attributable to COE
   Category 3. The average projected unseparated local switching net
   investment shall be calculated by summing the projected unseparated
   local switching net investment as of December 31 of the calendar year
   following the filing year and such investment as of December 31 of the
   filing year and dividing by 2.

   (2) Depreciation expense attributable to COE Category 3 investment,
   allocated pursuant to paragraph (c) of this section.

   (3) All expenses, excluding depreciation expense, collected in
   paragraph (b) of this section, allocated pursuant to paragraph (c) of
   this section.

   (4) Federal income tax attributable to COE Category 3 shall be
   calculated using the following formula; the accounts listed shall be
   allocated pursuant to paragraph (c) of this section:

   [Return on Investment attributable to COE Category 3--Included in
   Account 7300--Account 7500-Account 7210)] * [Federal Income Tax Rate
   (1--Federal Income Tax Rate)].

   (e) True-up adjustment--(1) Submission of true-up data. Until December
   31, 2012, each incumbent local exchange carrier that has been
   designated an eligible telecommunications carrier and that serves a
   study area with 50,000 or fewer access lines shall, for each study
   area, provide the Administrator with the historical total unseparated
   dollar amount assigned to each account listed in paragraph (b) of this
   section for each calendar year no later than 12 months after the end of
   such calendar year

   (2) Calculation of true-up adjustment. (i) The Administrator shall
   calculate the historical annual unseparated local switching revenue
   requirement for each carrier when historical data for each calendar
   year are submitted.

   (ii) The Administrator shall calculate each carrier's local switching
   support payment, calculated pursuant to 54.301(a), using its historical
   annual unseparated local switching revenue requirement.

   (iii) For each carrier receiving local switching support, the
   Administrator shall calculate the difference between the support
   payment calculated pursuant to paragraph (e)(2)(ii) of this section and
   its support payment calculated using its projected annual unseparated
   local switching revenue requirement.

   (iv) The Administrator shall adjust each carrier's local switching
   support payment by the difference calculated in paragraph (e)(2)(iii)
   of this section no later than 15 months after the end of the calendar
   year for which historical data are submitted.

   [ 63 FR 2126 , Jan. 13, 1998;  63 FR 33585 , June 19, 1998, as amended at
    67 FR 13226 , Mar. 21, 2002;  67 FR 5701 , Feb. 6, 2002;  75 FR 17874 , Apr.
   8, 2010;  76 FR 73870 , Nov. 29, 2011;  77 FR 14302 , Mar. 9, 2012]

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