Report No. DC 95-40        COMMON CARRIER ACTION              July 19, 1995


                   COMMISSION AUTHORIZES PACIFIC BELL
                  VIDEO DIALTONE SYSTEMS IN CALIFORNIA

     The Commission has granted the Section 214 applications of
Pacific Bell to construct and operate common carrier video
dialtone systems in California, upon finding that a grant of
these applications, subject to certain conditions, will serve the
public interest, convenience, and necessity.  

     Pacific has proposed to construct an integrated hybrid
fiber-coaxial system that will provide both telephone and video
services over the same transmission path.  These applications
form part of Pacific Bell's overall plans to deploy an advanced
broadband network that the company anticipates will reach more
than 5 million homes by the end of the decade.  The applications
authorized today will pass approximately 1.3 million homes and
businesses in Orange County, the southern San Francisco Bay area,
the Los Angeles area, and the San Diego area in California.  The
Commission found that Pacific's proposals will produce new
investment in an advanced telecommunications infrastructure,
bring additional competition in the distribution of video
services, and give consumers in those areas additional choices in
video programming and interactive digital services.

     In the 1992 Video Dialtone Order, the Commission determined
that, through video dialtone, local telephone companies could
participate in the video marketplace consistent with the
statutory telephone company-cable television cross-ownership
restrictions.  The Commission defined video dialtone as the
provision by a local telephone company of a basic common carrier
platform with sufficient capacity to serve multiple video
programmers on a nondiscriminatory basis.

     The Commission found that Pacific Bell's proposed platform,
consisting of 70 analog channels and between 150 and 300 digital
channels, would offer sufficient capacity to serve multiple
programmers.  The Commission stated that, in order to ensure
there is sufficient capacity, Pacific must report to the Chief of
the Common Carrier Bureau within 30 days of an anticipated
capacity shortfall and that Pacific may not permit any programmer

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to lease initially more than 50 percent of the non-shared analog
channels.  The Commission declined, at the present time, to
approve Pacific's proposal for standard service channels (SSC),
which will carry over-the-air signals, and a SSC program
administrator or its proposal for public, educational and
governmental (PEG) channels and a PEG administrator, due to the
pendency of the Commission's rulemaking addressing those issues.

     Because the applications do not specifically propose that
Pacific or an affiliate directly provide video programming to
subscribers, the Order does not authorize Pacific or an affiliate
to provide such programming. 

     After carefully examining the cost and revenue data
submitted by Pacific, the Commission concluded that the proffered
economic justification for the construction was reasonable, and
that the new facilities would serve the public convenience and
necessity.  The economic data submitted by Pacific showed that it
would recover dedicated video dialtone costs and make a
significant contribution to the common costs of the dual-use
telephony-video dialtone systems.
     
     To protect telephone ratepayers, video programmers, and
subscribers, the Commission imposed a number of conditions on
Pacific's authorization.  Among other things, the Commission
required that Pacific: create two sets of subsidiary accounting
records to capture dedicated video dialtone costs and common
costs; file summaries of these records with the Commission; and
file all revisions to its Cost Allocation Manuals (CAM) within 30
days after release of this Order and at least sixty days before
providing non-regulated products or services related to video
dialtone.  

     Action by the Commission July 18, 1995, by Order and
Authorization (FCC 95-302).  Chairman Hundt, Commissioners
Quello, Ness, and Chong, with Commissioner Barrett concurring in
the result and issuing a separate statement.

                                   -FCC-

News media contact: Susan Lewis Sallet at (202) 418-1500.
Common Carrier Bureau contact: Donald Stockdale at (202) 418-
1589.