NEWSReport No. CC 95-72 COMMON CARRIER ACTION December 13, 1995 COMMISSION GRANTS WAIVER FOR PACIFIC BELL'S "EDUCATION FIRST" PROMOTION The Commission has granted a waiver of its rules to permit Pacific Bell to offer integrated services digital network (ISDN) telephone lines to the 8600 public and private schools, libraries, and community colleges in California for one year without charging participants in the program the interstate Subscriber Line Charges. When combined with action taken by the California Public Utilities Commission (CPUC), the FCC's decisions means that Pacific Bell can now offer ISDN services -- the fastest connections currently available to the Internet over ordinary telephone wires -- free to schools, libraries and community colleges for one year. The FCC concluded that Pacific Bell's goal of making advanced telecommunications services more accessible to California's schools and libraries provides significant public interest benefits that justify this limited waiver of its rules. The Commission conditioned this waiver on Pacific Bell's guarantee that it will not seek to recover any costs associated with this promotion by increasing its charges for interstate access services. Pacific Bell's Education First promotion involves the provision of up to four ISDN lines to all eligible institutions in California that enroll in the promotion for a period of one year, free of intrastate and interstate charges. In August 1994, the CPUC approved Pacific's proposal to provide ISDN service to eligible institutions free of intrastate charges. The Subscriber Line Charge, also known as the End User Common Line Charge, is a flat-rate charge assessed to all telephone subscribers to cover part of the cost of what is known as the local loop -- the telephone line that connects an end-user's premises to a LEC switch at a local central office. The balance of the cost of local loop is recovered from intrastate charges. The 12-month exemption from the interstate Subscriber Line Charge applies to any eligible institution that enrolls in Pacific Bell's promotion between January 1 and December 31, 1996. If a participating institution orders additional lines or services, Pacific's usual tariffed rates will apply to those lines and services. (over) -2- In granting this waiver, the Commission stated that a year of free ISDN service will allow schools to assess, without financial risk, the benefits of advanced telecommunications services. After the trial period, each school will be able to determine whether such service should be incorporated into its educational budget in the future. The Commission also noted that this limited waiver would not adversely affect competing providers of communication and information services to schools and libraries. The Commission concluded that such competitors have the ability to structure comparably attractive promotional offerings to schools and libraries. It further determined that Pacific would not be permitted to recover the revenues foregone from participants in the promotion by raising rates for interstate services. The Commission also noted that Pacific Bell's interstate rates, the only rates regulated at the federal level, are currently covered by a "no sharing" option which means that the company would not be able to use the costs of the program to justify increasing rates in the future. The Commission noted that, should Pacific Bell become subject to a sharing plan, under which earnings above a certain amount must be shared with ratepayers and earnings below a certain amount can trigger an allowed rate increase, the costs of this program could not be counted for that purpose. The Commission also required Pacific Bell to provide the FCC with copies of the monitoring reports it is providing to the CPUC. These reports contain data on the administrative costs of the promotion and on the demand for the ISDN service. Action by the Commission December 12, 1995, by Order (FCC 95-496). Chairman Hundt, Commissioners Quello, Barrett, Ness and Chong, with Commissioners Barrett and Chong issuing separate statements. -FCC- News media contact: David Fiske at (202) 418-0500. Common Carrier Bureau contact: Susan Lewis Sallet at (202) 418-1500.