Obtaining Fair Market Value (FMV)

FCC requirements

The FCC requires a good faith effort at determining fair market value for each service when the total annual value of the service reaches or exceeds $500,000 on a legal entity basis. The baseline for a good faith determination of fair market value requires the use of methods that are routinely used by the general business community.

Methodology

As stated in Section I, it is the responsibility of the Service Provider to obtain the FMV for the service to be provided. The AE or RE may engage Corporate Sourcing (212) 338-1086 to assist in obtaining FMV through means available in the public domain or by engaging an independent party. If it is determined to engage an independent party to perform a market study, the associated fee charged to Verizon is paid by the Service Provider.

Sources for determining FMV include, but are not limited to, the following:

· Catalog listings

· Public information on the Internet (e.g., salary.com for wage information)

· Competitive bids

· Industry publications

· Company/Departmental benchmarking studies

· Significant sales to third parties

· Appraisals

· Replacement cost of an asset

All documentation supporting FMV must be retained by the Service Provider. Affiliate Billing should retain the appropriate supporting documentation needed for audit purposes.

Frequency

A review and update if deemed necessary of the FMV study should be conducted at no more than three year intervals, when a new contract arrangement has been entered into with an affiliate, or when any material change to the ILEC's or non-regulated affiliate's cost structure has occurred. Note: When FMV studies are reviewed and updated on three year intervals, transactions with Verizon California require a Consumer Price Index (CPI)² adjustment to be added to the FMV amount in the interim years. This adjusted FMV must then be compared to FDC to determine the appropriate transaction price. When FMV studies are reviewed and updated more frequently than every three years, no CPI adjustment to the FMV amount is required for determining the pricing for transactions with Verizon California.

Section V

FDC to FMV Comparison

Products or Services provided from the ILEC to a non-regulated affiliate

Upon completion of the development of FDC and obtaining FMV, the Service Provider must provide all pricing documentation to Affiliate Billing for determining the transaction price for billing.

Products or Services provided from a non-regulated affiliate to the ILEC

Upon completion of the development of FDC and obtaining FMV, the Service Provider must review all documentation with AICO for concurrence the resulting transaction price meets the FCC guidelines.

NOTE: In ALL instances where FMV cannot be obtained, the Service Provider must contact their business unit attorney and AICO PRIOR to any service or billing taking place to validate support documentation is maintained for audit and regulatory purposes.

² The rate for CPI - For All Urban Consumers should be used in the annual adjustment. This rate is published by U.S. Department of Labor's Bureau of Labor Statistics in its Monthly Review.