Federal Communications Commission FCC 96-389
Before the
FEDERAL COMMUNICATIONS COMMISSION 
Washington, D.C. 20554
In the Matter of )
 )Pacific Bell Petition for Interim )
Waiver of Part 69 to Offer )
ISDN-Equipped Access Lines )
to California Schools, Libraries, )
and Community Colleges )
MEMORANDUM OPINION AND ORDER ON RECONSIDERATION
Adopted: September 20, 1996 Released: September 24, 19% 
By the Commission:
I. INTRODUCTION
1. On December 11, 1995, the Commission adopted an order waiving application 
of Section 69.104 of its rules so that Pacific Bell (Pacific) could provide integrated services 
digital network (ISDN)-equipped access lines to public and private schools, libraries, and 
community colleges at no charge.1 The Pacific program associated with this waiver is called 
"Education First." On January 11, 1996, MCI Telecommunications Corporation (MCI) filed 
a petition for clarification or, in the alternative, reconsideration of the Waiver Order.2 Only 
Pacific responded to MCI's petition. For the reasons set forth below, we deny MCI's petition.
n. BACKGROUND AND SUMMARY OF PLEADINGS
2. Section 69.104 of the Commission's rules requires local exchange carriers (LECs) 
to assess a charge on end users that subscribe to local exchange service   the end user common 
line (EUCL) charge.3 The EUCL charge, which is also known as the subscriber line charge,
1 Pacific Bell Petition for Interim Waiver of Part 69 to Offer ISDN-Equipped Access Lines to California 
Schools, Libraries, and Community Colleges, Order, 11 FCC Red 4870 (1995) (Waiver Order).
2 Pleading Cycle Established for Comments on MCI's Petition for Clarification or, in the Alternative, 
Reconsideration of the Order Granting Pacific Bell's Petition for Interim Waiver of Part 69 to Offer ISDN-Equipped 
Access Lines to California Schools, Public Notice, CCBPol 96-02, 11 FCC Red 1884 (1996).
J   47 C.F.R. § 69.104(a). The only exception to this requirement fells under the Lifeline program, in which 
eligible, low income households in 41 participating jurisdictions receive a reduction in their monthly rates up to the 
full amount of the maximum $3.50 per line federal residential EUCL charge. See Sections 36.701 Ğr seq., 
69.104(jMO, 69.117, and 69.603(d) of the Commission's rules, 47 C.F.R §§ 36.701 et seq., 69.104GMO, 65.117,
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Federal Communications Commission FCC 96-389
is part of a comprehensive system of tariffed access charges for recovery of LEG costs 
associated with the origination and termination of interstate calls.4 Twenty-five percent of the 
costs of the local loop - the telephone lines that connect end-users' premises to LEG switches 
at local central offices - are assigned to the interstate jurisdiction.5 The EUCL charge is a 
monthly charge intended to recover a major portion of a LEC's interstate loop costs from 
subscribers on a flat-rate basis. The portion of local loop costs that is assigned to the interstate 
jurisdiction but not recovered through the EUCL charge is recovered from interexchange carriers 
through the per-minute carrier common line (CCL) charge.6
3. Section 61.46(d) of the Commission's rules sets forth a formula by which LECs 
that are subject to price cap regulation, such as Pacific, must calculate the mflTiTniiffi allowable 
CCL charge.7 Essentially, the CCL charge is calculated by subtracting the revenues to be 
recovered through EUCL charges from the common line revenue requirement and dividing by
and 69.603(d).
4 See MTS and WATS Market Structure, CC Docket No. 78-72, Phase I, Third Report and Older, 93 FCC 
2d 241 (1983).
* See Section 36.154 of the Commission's rules, 47 C.F.R. § 36.1S4, Subcategory 1.3.
6 See MTS and WATS Market Structure - Amendment of Part 67 of the Commission's Rules and Establishment 
of a Joint Board, Report and Order, CC Docket Nos. 78-72, 80-286, 2 FCC Red 2953, 2954, 2957, 11 10, 29 
(1987). To the extent that an end user is required to pay CCL charges, it is not required also to pay the EUCL. 
47 C.F.R. § 69.104(a).
On May 30, 1995, the Commission released a Notice of Proposed Rulemaking seeking comment on how 
to assess EUCL charges on derived channel services, such as ISDN. See generally End User Common Line 
Charges, Notice of Proposed Rulemaking, 10 FCC Red 8565 (1995). The issues raised in that rulemaking concern 
the amount of EUCL revenues that LECs may obtain from end users.
7 47 C.F.R. §61.46(d).
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'Federal Communications Commission FCC 96-389 
historical common line minutes of use.8
4. In the Waiver Order, the Commission granted Pacific a limited waiver of
Section 69.104 of its rules to provide ISDN-equipped access lines to public and private schools,
. libraries/and community colleges without charge. Pursuant to the Waiver Order, Pacific may
' foregp charging eligible schools and libraries the EUCL for two years, as long as the benefits
of me waiver apply to each institution for no more than one 12-month period. This waiver is
subject to'three conditions.9 First, Pacific was required to guarantee that it would not attempt
, to recover any costs associated with its Education Fust program by increasing its interstate
access rates, including CCL charges. Second, in the event that Pacific elects an "X"-Factor that
males it subject to a potential sharing obligation or potentially eligible for a low-end
adjustment,10 the Commission required Pacific to impute the revenues foregone under the Waiver
Order for purposes of calculating its interstate access earnings. Third, Pacific was required to
submit to the Common Carrier Bureau those portions of the state monitoring reports that contain
' Ml The formula also adjusts toe revenue requirement each year to account for both inflation and growth 
in the number of access lines.
CCLnoo * \CLuoo * 0 * * A CL PCI)] -
wfiere.*
The sum of each of the proposed carrier common line rates multiplied by its corresponding base 
period carrier common line minutes of use, divided by the sum of all types of base period carrier 
common line minutes of use;
The sum of each existing maximum allowable carrier common line rates multiplied by its 
corresponding base period carrier common line minutes of use plus each existing EUCL rate 
multiplied by its corresponding base period lines, divided by the sum of all types of base period 
carrier common line minute* of use; 
* Proposed end user line rates multiplied by the base period lines and divided by the sum of all
types of base period minutes of use; and 
g = Theratioof minutes of use per access line during the base period to minutes of use per access line 
during the previous base period, minus 1.
9 Waiver Order, 1 1 FCC Red at 4878-79, 11 20-23.
10 In April 199S, the Commission adopted interim changes to the original LEC price cap plan. Price Cap 
Performance Renew for Local Exchange Carriers, First Report and Order, 10 FCC Red 8961 (1995). In that order, 
we established three productivity factors, or "X'-FactDts, and determined that the highest "X'-Factor, 5.3 percent, 
presented a sufficiently challenging target to permit us to eliminate sharing. Consequently, Pacific and other LECs 
that elected the 5.3 percent "X "-Factor for the 1995 annual access tariff filings do not incur any sharing obligations 
and are also not entitled to a low-end adjustment based on interstate earnings performance during the period that 
their tariffs are in effect. Id. at 8970-71, 11 19-20.
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Federal Communications CommissioD PCC 96-389
data on administrative costs and on the amount of service being provided under its Education 
First program."
5. In its petition, MCI asks the Commission to clarify that, "in computing the CCE 
cap, Pacific must use the EUCL rate that is being waived, not the zero rate that results from the 
waiver."12 In essence, MCI wants this Commission to ensure mat Pacific does not-inflate its 
CCL rate cap by not assessing a EUCL charge on the access lines provided under the Education 
First program, MCI contends that, *[i]f tbe rates and demand for the ISDN lines sold to the 
schools are not treated consistently in the computations of the [common line] per minute rate and 
the EUCL per minute rate, the CCL cap may be higher than it otherwise would be, in violation 
of the [Waiver] Order.'13 MCI also contends that such a clarification is consistent with the 
conditions imposed on Pacific in granting the waiver.14 In the alternative, MCI asks tfiaf3he 
Commission reconsider its order if this was not its original intent
6. Pacific responds by urging the Commission to dismiss summarily MCI's petition. a 
Pacific contends that MCI's petition serves only to create delay and administrative cost because 
the issue MCI raises is not in controversy. 16 Pacific notes that, in its original petition for 
waiver, it stated that its shareholders would absorb the cost of the Education First program. 
Pacific asserts that, for purposes of calculating its CCL rate, it will treat the telephone tines 
provided pursuant to the Education First program as if they were assessed EUCL charges,17
m. DISCUSSION
7. In the Waiver Order, the Commission found that Pacific's proposal to offer free 
ISDN-equipped access lines to schools and libraries would not create a new internal subsidy 
because the waiver would neither result in increasing other rates nor affecting sharing or low-end
11 Waiver Order, 11 FCC Red at 4878-79, 11 20-23.
12 MCI Petition at 5. MCI explains that, under the Commission's price cap rales, the CCL charge is capped 
by a formula based on EUCL and CCL revenue, growth in minutes of use per line, and the change in the common 
line price cap index (PCI). To compute the CCL cap, a price cap LEG computes a hypothetical common line per 
minute rate, which is the- sum of all EUCL and CCL revenues divided by the sum of all CCL minutes." According 
to MCI, this hypothetical rate is then increased or decreased by the percentage change in the common line PCI. 
from this new hypothetical rate is subtracted the EUCL per minute rate, increased by half the growth in minutes 
of use per line. Id. at 4.
Id. at 4-5.
Id. at 5.
15 Pacific Comments at 2. 
" Id. atl. 
17 Id.
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Federal Communications Commission *"CC 96-389
adjustments. 18 As a condition to granting the waiver, the Commission required Pacific to 
guarantee that it would not attempt to recover any costs associated with its Education First 
program by increasing interstate access rates, including the CCL charge. 19 MCI's concern is 
that Pacific might inflate the CCL rate cap by not assessing a EUCL charge on the access lines 
provided under the Education First program. This concern is addressed by the condition that 
the Commission placed on grant of Pacific's request in the Waiver Order. That order clearly 
prohibits Pacific from increasing its interstate access rates, including its CCL rate, to recover 
the costs of its Education First program. Moreover, for purposes of calculating the level of its 
CCL charge pursuant to Section 61.46(d), Pacific has committed to treating the telephone lines 
provided to the schools and libraries under the Education First program as if they were assessed 
EUCL charges.20 Accordingly, we conclude that our Waiver Order does not require the 
clarification or reconsideration that MCI requests.
IV. ORDERING CLAUSE
8. Accordingly, IT IS ORDERED that, pursuant to Sections 201-205 and Section 4(i) 
of the Communications Act of 1934, as amended, 47 U.S.C. §§ 201-205 and 154(i), MCI's 
petition for clarification or, in the alternative, reconsideration IS DENIED.
FEDERAL COMMUNICATIONS COMMISSION
William F. Caton 
Acting Secretary
" Weaver Order. 11 FCC Red at 4877, 1 19.
19 Id. at 4878. 121.
20 Pacific Comments at 1. We note that, in its 1996 annual access tariff filing. Pacific decreased by 5 percent 
its CCL rate for premium interstate access. See Pacific Bell Tariff F.C.C. No. 128, Transmittal No. 1864, filed 
April 2,1996. That tariff transmittal took effect on July 1,1996. 7996 Annual Access Tariff Filings, Memorandum 
Opinion and Order. Transmittal No. 710, DA 96-1022 (released June 24,1996), erratum (released June 27, 199o).
  U.S. GOVERNMENT PRINTING OFFICE: 1996-^17-484/60002 11983