Federal Internet Law & Policy
An Educational Project

Accounting Safeguards

Dont be a FOOL; The Law is Not DIY
Computer Inquiries
- Computer I
- Computer II
- - Computer II Ref
- Computer III
- - Computer III Ref
- Information Service / ESP
- Timeline
- Net over Cable
- Net over DSL
- Net over Wireless
- Net Over Powerline
- Layered Model Regulation
- Access Charges
- Accounting
- Bundling
- - CPE
- - Info Services
- Network Info Disclosure
- Enforcement
- Notes
- Network Neutrality
- Common Carriage
- Broadband

These safeguards were created and implemented as a party of the Computer Inquiries, particularly set forth in Computer III.

Cross Subsidization

Pursuant to the Commission’s “Allocation of Cost” rules, a carrier may not use services not subject to competition to subsidize services that are subject to competition.138  In other words, a carrier could not use noncompetitive local telephone revenues to subsidize its Internet access services.

13847 C.F.R. § 64.901(c):

A telecommunications carrier may not use services that are not competitive to subsidize services subject to competition.  Services included in the definition of universal service shall bear no more than a reasonable share of the joint and common costs of facilities used to provide those services.

See also 47 U.S.C. § 254(k) (articulating same restriction).

  Accounting Safeguards

Carriers are subject to a series of accounting safeguards which can be found in Subpart I of Part 64 of Title 47, Code of Federal Regulations.   The rules require that certain carriers be subject to annual independent audits to ensure, for example, that they are not improperly cross subsidizing their services.   The final reports of these independent audits are publicly available and can be obtained by contacting the Accounting Safeguards Division of the FCC’s Common Carrier Bureau.  Information about Common Carriers accounting can be found in the Commission’s ARMIS database,  publicly available on the FCC website.  Pursuant to Section 64.903, the Commission has a cost allocation manual indicating how different common carrier costs should be allocated between regulated and unregulated services.

139  See 65 Fed. Reg. 16,328, 16,335 (Mar. 28, 2000) (to be codified at 47 C.F.R. § 64.904).
140  The Accounting Safeguards Division can be found online at <>.  You may also wish to contact the ITS to obtain copies of these reports.
141  The ARMIS database contains “financial, operational, service quality, and network infrastructure data from the largest local exchange carriers” and can be found online at <>.
142  See 65 Fed. Reg. at 16,335 (to be codified at 47 C.F.R. § 64.903).





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