FCC's Progress in Developing and Planning the Implementation of a New Accounting System for the Telephone Industry

The Federal Communications Commission's (FCC) efforts to revise the existing uniform regulatory accounting system were reviewed with regard to evaluating the FCC approach to developing and planning the implementation of the proposed new system. Although the telephone industry has been historically regulated on the premise that it is a natural monoply, FCC over the past several years has allowed competition in some areas of the industry. Because a more competitive industry requires a new regulatory approach, about 4 years ago FCC began to develop a revised Uniform System of Accounts for the industry to provide more relevant information to Federal and State regulators, industry management, and other users. The new system is intended to make it possible to determine the cost of specific telephone services, to improve regulatory rate review, and detect anticompetitive pricing practices. However, GAO believes that unless many problems are solved, the outlook is poor for early implementation and effective use of the new system as proposed. GAO based this opinion on weaknesses in the FCC approach to developing the system and planning for its implementation, concerns raised by State regulatory commissions about some aspects of the proposed system, and criticisms by industry representatives and other interested parties. The FCC approach to developing the system has been characterized by a lack of continuous overall direction and coordination by high-level officials; a limited involvement of the FCC accounting staff; assignment of various staff members on a sporadic and fragmented basis; a lack of involvement in system conceptualization by the system's ultimate users; and minimal contact with representatives of State regulatory commissions and the industry during systems conceptualization. State regulatory commissions identified several major problems that could arise if they used the revised system and expressed concerns about the complexity, cost, and time frame for revising the system. A well coordinated development and implementation approach is essential to successful revision of the accounting system if early implementation remains an important goal to Congress and FCC. FCC stated that the GAO report was very critical, but constructive, and would be useful in the future development of the Uniform System of Accounts.