Sec.  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  Sec. 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  Sec. 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  Sec. 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  Sec.  Sec. 61.47(e) through (f).

   (3)  Sequential  Introduction  of  Zones  in  the  Same  Tariff  Year.
   Notwithstanding  Sec.  Sec. 61.47(e) through (f), local exchange carriers subject to
   price cap regulation that have established density pricing zones pursuant to
    Sec. 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  Sec.  Sec. 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
    Sec.  Sec. 61.47(e) through (f), those local exchange carriers subject to price cap
   regulation that have established density pricing zones pursuant to  Sec. 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  Sec.  Sec. 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  Sec. 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
    Sec. 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
    Sec. 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  Sec. 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
    Sec. 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  Sec. 61.45(b)(1), once the Average Traffic Sensitive (ATS) rate
   reaches the applicable Target Rate as set forth in  Sec. 61.3(qq), the Targeted
   Revenue Differential as defined in  Sec. 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  Sec. 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  Sec. 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  Sec. 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  Sec. 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  Sec. 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  Sec. 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  Sec. 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  Sec. 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  Sec. 61.3(qq). If those properties are merged into a filing entity
   with a different Target Rate as set forth in  Sec. 61.3(qq), the Target Rate as
   set forth in  Sec. 61.3(qq) for the merged filing entity will be the weighted
   average of the Target Rates as set forth in  Sec. 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  Sec. 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  Sec. 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]