FCC Uniform System of Accounts for Telecommunications Companies — Mandatory Accounting Rules for Local Exchange Carriers
Legal Authority
- 47 U.S.C. § 219 — Communications Act § 219: authorizes the FCC to prescribe a uniform system of accounts for incumbent local exchange carriers; requires carriers to keep accounts in the form and manner prescribed by the FCC
- 47 U.S.C. § 220 — Communications Act § 220: authorizes the FCC to examine carrier accounts, prescribe accounting methods, and obtain financial reports for rate-setting and regulatory purposes
- 47 CFR Part 32 — FCC Uniform System of Accounts (USOA): the mandatory chart of accounts for ILECs specifying how to classify assets, liabilities, revenues, and expenses
Key Mechanics
The USOA creates a dual-accounting system for regulated telephone companies: ILECs must maintain Part 32-compliant books (for regulatory purposes) alongside their GAAP financial statements. The Part 32 accounts are organized into plant accounts (physical infrastructure — poles, wires, central office equipment), operating expense accounts (by service type and cost category), and revenue accounts. The primary regulatory purpose is cost separation: Part 32 requires ILECs to separate costs between regulated services (voice, access charges) and non-regulated services (internet, competitive services) and between different jurisdictions (interstate vs. intrastate) — the separations process is specified in FCC Part 36 regulations. Interstate access charges (what long-distance and wireless carriers pay ILECs to complete calls) and universal service fund payments are both calculated from Part 32 accounts, making the accounting system a direct determinant of ILEC revenue.
Current Rule (2026)
| Parameter | Value |
|---|---|
| Citation | 47 CFR Part 32 |
| Issuing agency | Federal Communications Commission (FCC) |
| Statutory authority | 47 U.S.C. § 219 (Communications Act — accounts and records) |
| Last major amendment | No major amendments in recent years |
What This Rule Does
Every incumbent local exchange carrier (ILEC) — the traditional telephone company that owns the last-mile copper or fiber connection to homes and businesses in a service territory — must keep its financial books according to the FCC's Uniform System of Accounts (USOA). The USOA, codified at 47 CFR Part 32, is a mandatory chart of accounts prescribing exactly how an ILEC must classify every asset, liability, revenue stream, and expense category on its books. AT&T, Verizon, Lumen, Frontier, CenturyLink, and hundreds of smaller rural telephone companies all maintain their regulated books under Part 32's structure — not simply under Generally Accepted Accounting Principles (GAAP).
Why does the FCC mandate a separate accounting system for telephone companies? The answer lies in telecommunications economics and regulation. ILECs provide services across two regulatory regimes: regulated services (local telephone service, network interconnection, wholesale access for competing carriers) and nonregulated services (internet access, competitive enterprise services, equipment sales). Rates for regulated services — particularly access charges that long-distance carriers and wireless companies pay to complete calls across local networks — are set by the FCC based on cost studies derived from Part 32 accounts. Without a standardized, mandatory accounting system, carriers could allocate costs between regulated and nonregulated activities in ways that artificially inflate regulated costs and shift profits to unregulated lines of business. Part 32 prevents this by specifying exactly which assets and expenses go into which accounts, creating an auditable, comparable record across all ILECs.
The Part 32 system also underpins universal service fund (USF) support calculations — the subsidies that flow to rural ILECs through the Connect America Fund and other programs to support the deployment of broadband and voice service in areas where a competitive market would not support investment. Carriers receiving USF support must demonstrate that their costs meet Part 32 standards; the subsidies are calibrated against the Part 32 cost structure.
Key Provisions
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§ 32.11 — Companies subject to this Part: every ILEC (as defined in 47 U.S.C. § 251(h)) must maintain its accounts in conformance with Part 32; the FCC may require other carriers to use Part 32 accounts as a condition of regulatory approval; non-ILEC carriers (competitive local exchange carriers, wireless carriers, cable companies) are not subject to Part 32 unless the FCC specifically orders it
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§ 32.12 — Records: an ILEC's financial records must be kept under Part 32 to the extent it prescribes, and under GAAP where Part 32 is silent; the records must support the reports the FCC requires; a carrier that keeps Part 32 accounts must make them available to the FCC upon request
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§ 32.14 — Regulated accounts: "regulated accounts" means the investments, revenues, and expenses associated with services subject to FCC jurisdiction; these are the accounts used for cost studies in access charge proceedings, and are the basis for universal service fund support calculations; the segregation between regulated and nonregulated accounts is the fundamental organizing principle of the USOA
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§ 32.23 — Nonregulated activities: expenses and revenues from nonregulated activities must be separately tracked; the FCC's jurisdictional separations rules (47 CFR Part 36) then allocate costs between state-regulated and federally regulated accounts; this three-layer system (regulated vs. nonregulated, then state vs. federal) ensures that costs are not double-counted or hidden across jurisdictional lines
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§ 32.22 — Comprehensive interperiod tax allocation: carriers must apply tax normalization to all book/tax temporary differences — the USOA requires deferred tax accounting consistent with GAAP; this prevents carriers from accelerating tax deductions on their regulated books in ways that would understate the true cost of regulatory assets
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Subpart C — Balance Sheet Accounts (83 sections): prescribes the specific account codes for every asset and liability category — from Account 2001 (Telecommunications Plant in Service) and Account 1120 (Cash and Equivalents) through the full range of receivables, inventories, construction-in-progress, and intangible assets; each account has a defined scope limiting what costs may be booked to it
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Subpart D — Revenue Accounts (15 sections): prescribes specific revenue account codes separating local exchange revenues, network access revenues (access charges), long distance revenues, and other revenues; the distinction between access revenues and other revenues is central to the FCC's intercarrier compensation rules
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Subpart E — Expense Accounts (56 sections): prescribes plant-specific operations expense accounts, depreciation accounts, customer operations expenses, corporate operations expenses, and access expenses; the granularity allows the FCC to verify that network maintenance costs are properly reflected in access charge cost studies
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§ 32.18 — Waivers: a carrier may request a waiver of any Part 32 requirement; the FCC may grant a waiver on its own initiative or on petition; in practice, waivers are granted to accommodate unusual transactions (mergers, divestitures, novel services) where strict application of Part 32 would produce misleading results
How It Affects You
Incumbent local exchange carriers and their finance teams: Part 32 is a parallel accounting universe alongside GAAP — you maintain two sets of books. The USOA specifies account codes for every category of plant, expense, and revenue; cost study teams then pull from these accounts when filing access charge tariffs or applying for universal service fund support. Deviations from Part 32 account classifications can result in FCC audits, adjustments to tariffed rates, and recovery of USF over-payments. If your company undergoes a merger, acquisition, or significant network investment, coordinate early with regulatory counsel on how to book the transaction in conformance with Part 32.
Competitive carriers and access charge payers (long-distance carriers, wireless companies, other ILECs): The access charges you pay to ILECs to originate and terminate calls on their networks are derived from Part 32 cost studies. If an ILEC misclassifies costs into its regulated accounts — inflating the cost basis for access charges — you pay higher rates than justified. The FCC's access charge reform proceedings, and state commission proceedings reviewing intrastate access charges, audit ILECs' Part 32 classifications. Intervening in those proceedings and scrutinizing Part 32 accounts is the mechanism by which access charge payors challenge inflated costs.
State public utility commissions: Part 32 governs federal accounts, but state regulatory accounting is heavily derivative of Part 32. Most state commissions have adopted Part 32-based accounting standards for their own rate proceedings; some require carriers to file Part 32-derived financial data in state proceedings. If you practice before a state commission on telephone company rate cases, understanding Part 32 account definitions is foundational to cross-examining the carrier's cost testimony.
Universal service fund applicants and analysts: Rural carriers receiving Connect America Fund support, Rate-of-Return carriers under legacy USF programs, and carriers seeking high-cost loop support all submit Part 32-derived cost data to the FCC and USAC (the Universal Service Administrative Company). The reasonableness of claimed costs is measured against Part 32 standards; unsupported costs or misclassified expenses can trigger demand letters and repayment obligations.
Statutory Authority
This rule implements:
- 47 U.S.C. § 219 — Communications Act § 219; authorizes the FCC to require every common carrier subject to the Act to keep such accounts, records, and memoranda as the Commission may prescribe; the accounts must be kept in the manner and form prescribed; this is the foundational grant of authority for the entire Part 32 USOA
Recent Rulemakings
No major Federal Register amendments to Part 32 in recent years. The USOA structure has been largely stable since the FCC's 2011 intercarrier compensation reform order (26 FCC Rcd 17663), which set a glide path for transitioning from per-minute access charges to a bill-and-keep system. The Part 32 account structure will remain relevant as long as legacy ILEC networks carry traffic subject to intercarrier compensation arrangements or receive USF cost-based support.