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Federal Register / Vol. 86, No. 160 / Monday, August 23, 2021 / Rules and Regulations
similar retirements will occur again in the future.
99. Regarding the second prong, the question of whether charging a retirement against a particular carriers reserve would unduly deplete that reserve is normally determined on a case-by-case basis. The retirements at issue here, however, are compulsory, and the Commission finds that conducting case-by-case reviews for each carrier would be unduly burdensome for the Commission and for the carriers, particularly given the critical importance of these retirements for ensuring the security of the nations infrastructure. Accordingly, on its own motion, the Commission finds there is good cause to waive the second prong to allow a USOA carrier to treat the retirements required by this docket as extraordinary retirements. The Commission therefore establishes a uniform process for addressing significant reserve deficiencies.
100. As part of this process, the Commission directs USOA carriers that take advantage of the waiver to credit Account 3100, Accumulated Depreciation, and charge Account 1438, Deferred Maintenance, retirements and other deferred charges, with the unprovided-for loss in service value resulting from the actions the Commission has taken in this docket.
The amount of the unprovided-for loss in service value is recorded in Account 1438 and shall be amortized to Account 6561, Depreciation expense Telecommunications plant in service, or Account 6562, Depreciation expense property held for future telecommunications use. This treatment will reflect the amortization of the amounts in Account 1438 as depreciation expenses, thereby allowing carriers to include those amounts in their revenue requirement.
101. The asset category for the type of equipment subject to removal, replacement, and disposal is largely circuit equipment, and has an expected life in the 10-year range. To mitigate the effects of any excess depletion in the depreciation expense, the Commission waives its rules to allow carriers to use the following amortization schedules for covered equipment they are required to retire. First, if the expected remaining service life of the covered equipment being retired is two years or less, a USOA carrier may amortize one-half of the balance from Account 1438 each of the next two years. Second, if the covered equipment being retired has an expected remaining service life of between three and five years, the USOA
carrier may amortize one-third of the balance from Account 1438 each of the
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next three years. If the covered equipment being retired has an expected remaining service life of more than six years, the USOA carrier will may amortize one-fourth of the balance from Account 1438 each of the next four years.
102. Accounting for Reimbursement.
The Reimbursement Program will reimburse providers for some or all of the costs of removal, replacement, and disposal of covered communications equipment or services. The Commission clarifies that, consistent with the limitation on reimbursements, USOA
carriers should account for reimbursed amounts as contributions by crediting the asset account charged with the reimbursed amount of the plant or equipment. This accounting treatment is appropriate because the contributions are not investor-supplied funds and should not be accorded a return on investment. This approach also conforms with the treatment of contribution to capital addressed in section 32.2000a2 of the Commissions rules, and is consistent with how the accounting was handled for support payments awarded in the 2012 BTOP/BIP stimulus funding.
103. Delegation to the Office of the Managing Director. In the 2020 Supply Chain Order, the Commission directed OMD to develop a system to audit the Reimbursement Program. In this Third Report and Order, the Commission delegates financial oversight of the Reimbursement Program to the Commissions Office of the Managing Director and direct OMD to work in coordination with the Wireline Competition Bureau to ensure that all financial aspects of the program have adequate internal controls. These duties fall within OMDs current delegated authority to ensure that the Commission operates in accordance with federal financial statutes and guidance. Such financial oversight must be consistent with this Third Report and Order and the rules adopted in the 2020 Supply Chain Order. OMD performs this role with respect to the Universal Service Administrative Companys administration of the Commissions Universal Service programs, the COVID19 Telehealth program, and the Emergency Broadband Benefit Program, and the Commission anticipates that OMD will leverage existing policies and procedures, to the extent practicable and consistent with section 904, to ensure the efficient and effective management of the program. Finally, the Commission notes that OMD is required to consult with the Wireline Competition Bureau on any policy matters affecting the program, consistent
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with section 0.91a of the Commissions rules. OMD, in coordination with the Wireline Competition Bureau, may issue additional directions to Program Administrator Ernst and Young LLC
Ernst & Young and program participants in furtherance of its responsibilities.
G. Cost-Benefit Analysis 104. Based on presently available information obtained from the 2019
information collection, the Commission estimated the cost of the removal, replacement, and disposal of Covered List equipment and services subject to the Designation Orders and the process set forth in the 2019 Supply Chain Order to be $1.62 billion for ETCs with two million or fewer customers, and at least $1.837 billion for providers with 10 million or fewer customers. As the Commission recognized in the Information Collection Results Public Notice, there may be other providers of advanced communications who may not have participated in the information collection and yet still are eligible for reimbursement under the terms of the Secure Networks Act. Though Congress appropriated $1.895 billion to the Reimbursement Program in the CAA, it also expanded the eligibility criteria for participation in the Reimbursement Program. The Commission does not have cost estimates for the cost of the removal, replacement, and disposal of eligible equipment for the entire potential pool of eligible providers.
105. Nevertheless, this Third Report and Order implements requirements from the CAA, and the Commission has no discretion to ignore such congressional direction. The Commission also concludes that even if the total replacement cost exceeds the $1.837 billion reported by providers with 10 million or fewer customers, that cost will be far exceeded by the benefits obtained in addressing the important national security concerns posed by the equipment and services eligible for reimbursement. The $1.895 billion reimbursement appropriation suggests that Congress anticipated great costs and even greater benefits would be generated by the Secure Networks Act.
As the Commission explained in the 2019 Supply Chain Order, the benefits of removing covered equipment and services extend to hard to quantify matters, such as preventing untrustworthy elements in the communications network from impacting its nations defense, public safety, and homeland security operations, its military readiness, and its critical infrastructure, let alone the
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