Price Cap Performance Review for Local Exchange Carriers

On March 30, 1995, the Federal Communications Commission adopted a First Report and Order revising its price cap regulations applicable to local exchange carriers (LECs). The Commission adopted these Rule revisions as a result of a performance review of LEC price cap regulation, which the Commission scheduled when it originally adopted LEC price cap regulation in 1990, to evaluate the price cap system as implemented and LEC performance under that system. The Commission's rule revisions increase value of the productivity offset factor in the price cap formula, provide three options for the productivity offset factor, revise the rules governing sharing obligations, and require a one-time reduction in the LECs' price cap indexes. The Commission also limits the number of cost changes resulting from changes in accounting rules that are eligible for exogenous cost treatment, and extends exogenous cost treatment to cost changes resulting from the sales or swaps of exchanges. In addition, the Commission states its intention to issue a further notice of proposed rulemaking in the near future, to consider adopting other rule changes on a long-term basis. Finally, the Commission delegates authority to the Common Carrier Bureau to determine appropriate adjustments for LECs to make appropriate adjustments to their price cap indexes, to account for these effects caused by rescheduling their 1995 annual access filings.