NEWSReport No.  DC 95-118                  ACTION IN DOCKET CASESeptember 14, 1995

               COMMISSION ADOPTS LEC VDT PRICE CAP RULES; 
                COMMENTS SOUGHT ON TWO ADDITIONAL ISSUES
                             (CC DOCKET 94-1)

     In order to ensure that telephone ratepayers do not subsidize new video dialtone
services, the Commission has adopted rules regarding the price cap treatment of common
carrier video dialtone (VDT) services provided by the local exchange carriers (LECs).  The
Commission also asked for comment on two additional issues.

     In February 1995, the Commission issued a Notice of Proposed Rulemaking in which
it tentatively concluded that a separate basket for video dialtone service should be established
within the LEC price cap plan.  The rules adopted today affirm that tentative conclusion and
establish a separate LEC price cap basket for video dialtone service. 

     The establishment of a separate basket for video dialtone service prevents a LEC from
offsetting rate reductions for video dialtone service with higher charges to telephone
ratepayers for other services that are in other price cap baskets.    

     In addition to establishing a separate basket for video dialtone, the rules adopted
today:

      (1) Assign a zero productivity or "X-Factor" to the VDT services in this basket
because the record does not demonstrate that LEC productivity gains in the provision of these
services will equal or exceed historic productivity gains in the provision of telephony;

      (2) Set the initial price cap indices for the VDT basket to reflect the VDT rates in
effect when the service is brought under price cap regulation; 

     (3) Require LECs to segregate VDT costs and revenues from those for telephony
service for purposes of sharing and the low-end adjustment once LEC provision of VDT
exceeds a de minimis threshold;

     (4) Decline to establish sharing and low-end adjustments for the new VDT basket for
LECs whose VDT investment exceeds the de minimis threshold; and

     (5) Decline to include any other broadband services in the VDT basket, finding that
technical similarity alone is not a sufficient basis for their inclusion at this time.

                                  (over)
                                   - 2 -


     The Commission also concluded that dividing the VDT basket into service categories
was unnecessary at this time, but did impose a 15 percent lower pricing band.  VDT is a
nascent service for which the LECs have just begun to file tariffs, and the Commission
expects that the LECs will employ a variety of architectures.   As a result, it would be
difficult to create a stable set of service categories within the new video dialtone basket at
this time. 

     The Commission also issued a Further Notice of Proposed Rulemaking seeking
comment on the proper level for the de minimis threshold, as well as on procedures for
allocating costs to the VDT basket for LECs that have selected an X-Factor applicable to
their other price cap baskets once a LEC has exceeded the threshold.

     Action by the Commission September 14, 1995, Second Report and Order and Fourth
Further Notice of Proposed Rule Making (FCC 95-394).  Chairman Hundt, Commissioners
Quello, Barrett, Ness and Chong. 
  -FCC-

     News Media contact: Susan Lewis Sallet at (202) 418-1500.
     Common Carrier Bureau contacts: Cheryl Lynn Schneider at (202) 418-1382
and Claudia Pabo at (202) 418-1595.