FCC Simplifies Telco Accounting Rules, Gives Price-Cap Carriers GAAP Option
The FCC adopted an order to streamline telco accounting duties, including by scrapping a requirement that large, price-cap carriers maintain regulatory reporting books in addition to financial reporting books. The large telcos will be given the option of shifting from a Part 32 uniform system of accounts to generally accepted accounting principles (GAAP), subject to conditions intended to prevent spikes in pole-attachment rates, said officials and a release Thursday. The vote was 3-0, though Commissioner Mignon Clyburn concurred in part. AT&T (here), CenturyLink and USTelecom (here) statements applauded the action.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
“There is simply no need to continue requiring these and only these carriers to waste time and money keeping two sets of books," said Chairman Ajit Pai, referring to the price-cap telcos. He said the added expense "isn't chump change" and could be better used "to build 21st-century networks." Commissioner Michael O'Rielly called the order "an important first step" and backed abolishing the Part 32 rules as well as "unnecessary" Part 36 jurisdictional separations requirements. Clyburn said she supported streamlining, but voiced concern the commission was "acting too soon," and in a way that could still lead to pole-attachment "rate shock" and encourage state regulators to deregulate prematurely.
The order streamlines Part 32 rules for all price-cap and rate-of-return telcos in many respects, said Robin Cohn, a Wireline Bureau assistant division chief, at Thursday's meeting. She said Part 32 would be more closely aligned with GAAP, including by allowing carriers to carry an asset at its purchase price even if its value has gone up or down as a regulated service. Carriers would also be allowed to reprice an asset at market value after a merger or acquisition, use GAAP principles to determine allowances for funds during construction and employ the GAAP standard of "materiality," she said.
The item allows price-cap carriers to use GAAP for all regulatory accounting purposes as long as they comply with targeted rules, Cohn said. Carriers would be subject to a commitment to mitigate any GAAP impact on pole-attachment rates, and to specific steps regarding rate differences between the two methodologies and rate adjustments over a 12-year period, she said.
Pai said the changes wouldn't impair the government's ability to perform its duties. When queried, FCC staffers were unaware of any recent federal reliance on such data, he said. "The bureau said that going forward, none of the changes in this order would prevent them from having the necessary accounting data to carry out any of the agency’s statutory duties.”
Pai also addressed concerns about the impact on pole-attachment rates: "A change in accounting methodology does not affect what costs are includable in pole attachment rates, but only when they are recognized. The solution we adopt mitigates any rate shock. Moreover, the Commission will monitor pole attachment rates and will take appropriate action should the need arise.”
O'Rielly said the Part 32 rules had outlived any purpose. "These requirements are like an old sweater that you keep in the back of the closet, haven’t worn in years, and aren’t sure still fits, but continue to store just in case it comes back into style," he said. "I hope to work with my colleagues and interested parties on other ideas to remove similarly situated outdated burdens." Noting a "narrow" FCC referral to a federal-state joint board on separations that he chairs, O'Rielly said he was "eager to take a broader view" and seek "comprehensive reform.”
Clyburn said the order gives carriers more flexibility, and the result "will be less uniformity and certainty going forward, which in turn, may mean comparing apples to oranges when we look at carrier costs. And because I am not wholly convinced that we are completely free of our need for this data in the future, I respectfully concur in part."