FOR IMMEDIATE RELEASE:             News Media contact:
  December 17, 1999                       Mike Balmoris at (202) 418-0513
                                     Email:     MACROBUTTON
  HtmlResAnchor mbalmori@fcc.gov
  
                   COMMON CARRIER ACTION
                              
   FEDERAL COMMUNICATIONS COMMISSION ADOPTS RULES TO GIVE
      CARRIERS FREEDOM FROM DEPRECIATION REQUIREMENTS
                              
  Washington, D.C.   Today, the Federal Communications Commission (FCC)
  adopted rules that set forth conditions under which carriers may qualify for freedom from
  depreciation requirements and streamlined the depreciation requirements for carriers. 
  These new rules will minimize the regulatory burden on incumbent local exchange carriers
  (LECs) and provide them with greater flexibility to adjust their depreciation rates while
  allowing the Commission to maintain adequate oversight.
  
  To be freed from the depreciation requirements an incumbent LEC must agree to
  the following conditions:
  
  It must adjust the net book costs on its regulatory books to the level currently
  reflected on its financial books by a below-the-line write-off.  Currently, the largest
  incumbent LECs record approximately $30 billion less capital costs on their financial
  books than they include in their regulatory books.  
  It must use the same depreciation factors and rates for both regulatory and financial
  accounting purposes.
  
  It must forego the opportunity to seek recovery of the write-off through a low-end
  adjustment, an exogenous adjustment, or an above-cap filing under price caps.
  It must agree to submit information concerning its depreciation accounts, including
  forecast additions and retirements for major network accounts and replacement plans for
  digital central offices.  
  
  The Commission stated, however, that it would consider alternative proposals by
  carriers seeking a waiver of its depreciation requirements and that any alternative proposal
  must provide the same protections to guard against adverse impacts on consumers and
  competition as those provided by the conditions enumerated in the Order. For example, a
  carrier could propose an alternative method for adjusting its net book costs.
  
                        --  more  --
                              
       As a separate matter, the Commission streamlined the existing rules by establishing
  a range for depreciation factors for large price cap LECs, defined as those companies
  whose revenues exceed an indexed revenue threshold, currently set at $112 million in
  annual revenue.  The streamlined procedures include the following:
  
          1.     carriers may make summary filings selecting depreciation factors from within
          the prescribed ranges;
          2.     the range of lives for digital electronic switching equipment is expanded from
          16-18 years to 12-18 years; and,
          3.     incumbent LECs are no longer required to file annual theoretical reserve
          studies.
  
  Additionally, the FCC denied a petition filed by the United States Telephone
  Association (USTA) that sought forbearance from the depreciation prescription process
  for price cap incumbent LECs.  The Commission stated that the above mentioned
  depreciation waiver process, rather than forbearance, will provide carriers the opportunity
  to free themselves of depreciation regulation while providing safeguards against the
  adverse effects that unrestricted changes in depreciation rates could have on consumers
  and competition.  Specifically, increases in depreciation could affect rates for price cap
  carriers through the low-end adjustment, exogenous treatment, or above-cap filings. 
  Additionally, forbearance from depreciation prescription could impact rates for
  interconnection and unbundled network elements, and could affect carrier's universal
  service support amounts.
  
       Action by the Commission December 17, 1999, by Report and Order in CC
  Docket No. 98-137, Memorandum Opinion and Order in ASD 98-91 (FCC 99-397). 
  Chairman Kennard, Commissioners Ness, and Tristani with Commissioner Powell
  concurring, and Commissioner Furchtgott-Roth dissenting and issuing a statement.
  
                          
                          - FCC -
                              
  Report No.  CC 99-59
  CC Docket No. 98-137, ASD 98-91
  
  Common Carrier Bureau Contact:  JoAnn Lucanik at (202) 418-0873
          
News about the Federal Communications Commission can also be found
on the Commission's web site  MACROBUTTON HtmlResAnchor www.fcc.gov.