Report No. CC95-1          COMMON CARRIER ACTION            January 4, 1995

 
                COMMISSION DENIES RECONSIDERATION OF ACCESS
                            SUBELEMENTS FOR ONA

     The Commission has denied various petitions for
reconsideration of it order revising the cost support standards
applicable to new services as defined by the price cap rules. 
The Ameritec Operating companies, MCI Telecommunications
corporation, and Williams Telecommunications Group, Inc., sought
reconsideration of the order.

     In the Part 69 Open Network Architecture (ONA) Order, the
Commission established a flexible, cost-based upper bound for
prices of new services provided by local exchange carriers (LECs)
pursuant to price cap regulation.  New services are defined as
those that expand the range of service options available to
consumers.  LECs introducing new services are required to show
that they have used a consistent costing methodology for direct
costs for all related services.  The Commission allowed LECs to
establish a methodology for determining overhead costs loaded
onto new services.  The Commission gave LECs an opportunity to
recover a "risk premium" to provide incentives for the
development of new and potentially risky services.  Finally, the
Commission required LECs to establish a methodology for
determining overhead costs loaded onto new services, and to
justify that it would evaluate the reasonableness of the overhead
costs that are loaded on the direct cost of the new service.

     On Second Reconsideration, the Commission modified the new
services test to encourage the introduction of services that are
close substitutes for existing services.  For new services that
are lower priced substitutes for existing services, use of a
uniform overhead loading factor could tend to lower revenues,
creating a disincentive to introduce new services based on new
technology.  Also in the Second Reconsideration Order, the
Commission specifically authorized the use of non-uniform
loadings for new services to enable a LEC to break even in
revenues.


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     Seeking reconsideration of the revision, the petitioners
contended that the revised new services test will permit carriers
to charge unreasonably high new service rates, and that the
Commission should include safeguards to protect against
unreasonable discrimination in the provision of new services.

     The Commission stated that the new services test encourages
the availability of less expensive services that offer improved
quality.  Also, the new services test requires examination of the
carrier's direct costs for reasonableness and compels carriers to
file direct cost factors in support of each rate element. 
Consequently, the Commission disagreed with petitioners that the
new services cost support requirement s produced a rate that is
unreasonable.

     The Commission, in adopting the new services text, did not
intend to imply that the anti-discrimination provisions contained
in Section 202(a) of the Communications Act would not apply to
evaluating new service pricing.  The Commission said the
potential for unreasonable discrimination between a new service
and an existing service remains if 1) the two services are "like"
services; 2) the two services are priced differently; and, 3)
there is no cost justification or other basis to support the
discrimination.  The Commission said that while it agreed with
petitioners that new services may potentially raise
discrimination.  The Commission said that while it agreed with
petitioners that new services may potentially raise
discrimination concerns, it disagreed that the Second
Reconsideration Order foreclosed its ability to examine
discrimination issues.

     Action by the Commission December 23, 1994, by Memorandum
Opinion and Order on Third Further Reconsideration (FCC 94-348), 
Chairman Hundt, Commissioners Quello, Barrett, Ness, and Chong. 

                                   -FCC-

     News Media contact:  Patricia A. Chew at (202) 418-0500.
     Common Carrier Bureau contact:  Steve Spaeth at (202) 418-
1530.