The FCC updated accounting requirements for all carriers and eliminated the requirement for large carriers to maintain two separate sets of books. Currently, regulated carriers must maintain two sets of books – one for financial reporting and another for regulatory purposes under the FCC’s rules (Part 32 Uniform System of Accounts).
This can be costly, requiring additional training for accountants, a second set of customized software, and two sets of audits. During the vote on this item at the FCC’s meeting last week, Commissioner Michael O’Rielly said he’s long questioned the need for the two-book rule for large carriers that serve 95 percent of the nation’s wirelines, given that marketplace and regulatory changes “have substantially diminished the need” for the specialized accounting rules.
“These requirements are like an old sweater that you keep in the back of your closet, haven’t worn for years, and aren’t sure it still fits, but continue to store it just in case it comes back into style,” he said to laughter from his fellow commissioners and the audience. When he met with agency staff about the issue in 2014, O’Rielly said it quickly became apparent that the data required under the existing accounting system “would only be used in extremely few instances, if ever. And, except for pole attachments, most of these potential uses were highly speculative.”
The Order gives so-called “price cap” carriers the option to elect generally accepted accounting principles. Financial accounting that conforms to GAAP will still provide the FCC with the data required for regulatory purposes.
Commissioner Mignon Clyburn voted for the item, but was concerned the agency is acting too soon. She’s also worried about possible rate shock over pole attachments. “Costs related to pole attachments are still critically relevant, regardless of accounting method, I am pleased that we act to make sure, that data regarding pole costs remain transparent and easily accessible for several years. I only wish we could have gone further to protect attachers from rate shock, as this may happen as pole owners switch to GAAP accounting.”
Chairman Ajit Pai acknowledged the possible impact on pole attachment has gotten attention. “But 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.”
The millions of dollars that carriers spend now to comply with the rules can now be spent on building out carriers’ broadband networks, Pai said.
February 27, 2017
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