********************************************************    
                         NOTICE
********************************************************

This document was converted from
WordPerfect to ASCII Text format.

Content from the original version of the document such as
headers, footers, footnotes, endnotes, graphics, and page numbers
will not show up in this text version.

All text attributes such as bold, italic, underlining, etc. from the
original document will not show up in this text version.

Features of the original document layout such as
columns, tables, line and letter spacing, pagination, and margins
will not be preserved in the text version.

If you need the complete document, download the
WordPerfect version or Adobe Acrobat version, if available.

*****************************************************************
                Federal Communications Commission
                      Washington, D.C. 20554


                                               In reply refer to:
                                                  RAO Letter 14

                                     Released: September 28, 1989

Responsible Accounting Officers:

Re:  Classification of Inside Wiring Services for Accounting Purposes

     In National Association of Regulatory Utility Commissioners v. FCC, No. 86- 1678 (D.C.
Car. July 7, 1989) (NARC v. FCC), the United States Court of Appeals for the District of
Columbia Circuit remanded the Commission's decisions preempting state regulation of inside
wiring services for further proceedings. This letter instructs carriers to continue classifying inside
wiring services as nonregulated for accounting purposes pending Commission action in those
proceedings.

     Section 32.23(a) of the Commission's Rules, 47 C.F.R.  32.23(a), describes the
circumstances under which carriers are to classify their activities as nonregulated for accounting
purposes.  That section provides, among other items, that preemptively deregulated activities must
be classified as nonregulated activities.  Prior to the decision in NARC v. FCC, carriers had relied
on this provision in classifying all their inside wiring services as nonregulated for accounting
purposes.

     Section 32.23(a) also provides that activities that have been deregulated at the interstate
level, but not preemptively deregulated, are to be classified as regulated activities until such time
as the Commission decides otherwise. Several carriers have inquired whether this provision
mandates that they reclassify their inside wiring services as regulated for accounting purposes.
Such a reclassification would subject costs incurred in providing inside wiring services to the
jurisdictional separations process and could result in changes in carriers' interstate revenue
requirements.  Reclassification might also require costly changes in the carriers' internal
accounting systems and cost allocation manuals.

     We believe it appropriate to resolve the carriers' questions and to avoid the consequences
described above during the period that the regulatory status of inside wiring is under
consideration.  Accordingly, we require that all subject carriers continue to classify all inside
wiring services as nonregulated for accounting purposes pending Commission action on remand
of NARC v. FCC.  See Separation of Costs of Regulated Telephone Service from Costs of
Nonregulated Activities, Report and Order, CC Docket 86-111, 2 FCC Rcd 1298 79 (1987) (Joint
Cost Order), recon., 2 FCC Rcd 6283 (1987) (Reconsideration Order), further recon., 3 FCC Rcd
6701 (1988) (Further Reconsideration Order), petition for review pending, Southwestern Bell
Corp. v. FCC, D.C. Circuit No. 87-1764 (filed Dec. 14, 1987).





     This letter is issued pursuant to authority delegated under Section 0.291 of the
Commission's Rules, 47 C.F.R.  0.291.  Applications for review under Section 1.115 of the
Commission's Rules, 47 C.F.R.  1.115, must be filed within 30 days of the date of this letter. 
See 47 C.F.R.  1.4(b)(2).


                                        Sincerely,

                                        Kenneth P. Moran
                                        Chief, Accounting and Audits Division