5. True-up and Treatment of Balances in Memoranda Accounts

The FAR adopted in the ILS Interim Opinion ordered Pacific and GTE (now Verizon) each to maintain a memorandum account to record revenues from

the monthly recurring charge for access to the HFPL. The FAR also held that the memorandum account would be subject to interest, either by the application of interest on the balance, or the application of interest on any amounts later subject to true-up adjustments. (FAR at OP 8.)

In the FAR in our interim line sharing phase, we indicated that the amounts in the memoranda accounts would be subject to true-up. The purpose of a true-up is to reimburse carriers for overcharges or undercharges in the amount charged for the HFPL between the time the interim rates went into effect, and the implementation of permanent rates adopted in this decision. In this decision, we adopt a $0 HFPL rate for Pacific and Verizon, while the interim rates were $5.85 and $3.00, respectively. Pacific and Verizon shall reimburse carriers (including their respective affiliates, ASI and VADI) which purchased the HFPL over the past several months since the interim rates went into effect with $5.85 and $3.00 per month/per line, respectively, including interest. In its comments on the RDD, Pacific proposes that the three-month commercial paper interest rate be used; we concur with Pacific's proposal.

Parties were put on notice in the ILS phase of the possibility of a true-up,³¹ and in its Line Sharing Order, the FCC acknowledged that states might need to issue interim arbitration awards, subject to a true-up:

In addition, as explained in more detail below, we strongly encourage the states of issue interim arbitration awards setting out the necessary rates, terms, and conditions for access to this unbundled network element, with any unresolved issues subject to a true-up when the state commission completes its arbitration.³²

Returning the money to CLECs that purchased the HFPL will bring the balance in the memorandum accounts to zero. Since we are adopting a $0 rate for the HFPL in this decision, there will be no further need for the memorandum accounts.

The RDD proposed to return the revenues to CLECs, for return to their end-use customers. This prompted comments from Speakeasy et al., a group of Internet Service Providers (ISPs), which filed a motion to intervene in the proceeding. We have changed the refund mechanism from that in the RDD, and under this decision, the CLECs that purchased the HFPL will receive the refunds. Therefore, there is no need to grant the ISPs' request.