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                                Before the
                     Federal Communications Commission
                          Washington, D.C. 20554

                                     )
In the Matter of                     )
                                     )
Pacific Bell Petition for Interim    )               )                     CCBPol 96-21
Waiver of Part 69 to Offer           )
ISDN-Equipped Access Lines to        )
California Schools, Libraries,       )
and Community Colleges               )


                                  ORDER
                                     

        Adopted:  October 1, 1997       Released:  October 1, 1997

By the Acting Chief, Common Carrier Bureau:


                             I.  INTRODUCTION

     1.   On October 11, 1996, Pacific Bell and Nevada Bell (Pacific) filed a petition
requesting that the Commission extend for two years the waiver of Part 69 of the
Commission's rules originally granted in December 1995 to allow Pacific to provide
integrated services digital network (ISDN)-equipped access lines to California schools,
libraries, and community colleges free of charge for a one-year period following initiation of
service to the eligible institution.  Pacific seeks an extension of the waiver so that it may
continue to offer the interstate component of its "Education First" program.  The waiver is
scheduled to expire on December 31, 1997. For the reasons set forth below, we conclude that
Pacific has demonstrated good cause for a waiver of section 69.152 of the Commission's
rules.  Accordingly, we grant Pacific the requested extension of the Part 69 waiver.

                              II.  BACKGROUND

     2.   Section 69.152 of the Commission's rules states, in part, that local exchange
carriers (LECs) that are subject to price cap regulation may assess a per-line, per-month
charge, called the end user common line (EUCL) charge or subscriber line charge, on all end
users that subscribe to local exchange service, up to a specified maximum, but may not
differentiate the amount charged among similar types of end users.  The Commission created
the EUCL charge to recover a major part of the interstate portion of the costs of the local
loop, the connection between the customer's premises and the telephone company's central
office.  LECs recover the remaining portion of local loop costs assigned to the interstate
jurisdiction from interexchange carriers, pursuant to a per-minute carrier common line (CCL)
charge, and beginning on January 1, 1998, a flat rated presubscribed interexchange carrier
charge (PICC).    

     3.   On December 13, 1995, the Commission relieved Pacific of its obligation to
assess the EUCL charge on ISDN-enhanced lines provided to public and private schools,
libraries, and community colleges in California as part of Pacific's Education First program. 
Pursuant to that program, Pacific offers public and not-for-profit private elementary and
secondary schools, libraries, and community colleges a 100 percent discount on installation
and on 12 months of recurring service charges for up to five ISDN-enhanced lines used for
telelearning or telecomputing applications, including Internet access.  Prior to filing its initial
waiver request, Pacific had received authorization for the intrastate component of the program
from the California Public Utilities Commission.  In the Waiver Order, the Commission
found that the California Commission's prior approval of Pacific's promotional offering of
local service under the Education First program and the public interest benefits of increasing
the accessibility of advanced telecommunications services to California's schools and libraries
provided good cause for granting a limited waiver of then section 69.104 of its rules.  The
Commission granted the waiver for a two-year period beginning in January 1996, with a
requirement that each institution benefit from the waiver for no more than a 12-month
period.  

     4.   The Commission imposed three conditions on the December 1995 waiver. 
First, the Commission required Pacific to guarantee that it would not attempt to recover any
costs associated with its Education First program by increasing its interstate access rates,
including CCL charges.  Second, the Commission mandated that Pacific impute revenues
foregone pursuant to the waiver for purposes of calculating its interstate access earnings,
should Pacific become "subject to an X-Factor that makes it subject to a potential sharing
obligation or potentially eligible for a low-end adjustment."  Third, the Commission
instructed Pacific to submit to the Common Carrier Bureau those portions of the state
monitoring reports, which Pacific was required to submit to the California Commission, that
contain data on administrative costs and on the amount of service being provided under the
program.  

     5.   Pacific now seeks an extension of the December 1995 waiver.  Arguing that
the Education First program has improved California students' opportunities to develop new,
information age skills, Pacific emphasizes that since the program took effect in December
1994, approximately 1,400 eligible institutions in Pacific Bell's operating area have installed
ISDN service and approximately 1,000 applications are being processed currently.  Pacific
agrees to abide by the conditions that the Commission imposed on its December 1995 waiver,
if Pacific's current waiver request is granted.

     6.   Subsequent to filing its extension request, Pacific clarified that it seeks a two-
year extension of the waiver, through December 31, 1999.  Pacific reports that the
California Commission granted a one-year extension of the period during which eligible
institutions may request inclusion in the Education First program (the sign-up period), from
December 31, 1996, to December 31, 1997.  The California Commission extended the
terms and conditions of its previous resolutions approving the intrastate portion of Pacific's
Education First program, so that Pacific may waive the intrastate usage rates and charges of
specified services for a 12-month period, beginning on the installation date of the selected
service, for customers who commit during the extended sign-up period.  Pacific seeks a
two-year extension of the Commission's previous waiver for the interstate portion of the
Education First program through December 1999, so that it may continue to install and
provide free ISDN-equipped access lines to customers who commit to the Education First
program during the extended sign-up period.  Moreover, Pacific contends that the strong
emphasis in the Telecommunications Act of 1996 on education and the fact that the Education
First program facilitates the use of technology in schools establish the special circumstances
necessary to justify a waiver of the Commission's rules.  The Commission received no
comments regarding Pacific's request.      

                             III.  DISCUSSION

     7.   Pursuant to section 1.3 of the Commission's rules, the Commission may grant
a waiver of a provision of those rules upon a showing of "good cause."  As construed by
the U.S. Court of Appeals for the District of Columbia Circuit, section 1.3 allows us to grant
a waiver "only if special circumstances warrant a deviation from the general rule and such
deviation will serve the public interest." 

     8.    For the reasons discussed below, we conclude that Pacific has demonstrated
"good cause" for the grant of an extension of the Commission's December 1995 waiver.  As
an initial matter, consistent with our approach in the Waiver Order, we find that the
California Commission's extension of its waiver for the intrastate portion of the Education
First plan creates special circumstances that warrant an extension of the Commission's
previous waiver of section 69.104, now section 69.152 of the Commission's rules. 

     9.   We further conclude that this deviation from the general rule will serve the
public interest.  As we determined previously in the Waiver Order, a limited waiver to
facilitate Pacific's Education First program "is consistent with our statutory mandate to
increase public access to the telecommunications network."  We note, moreover, that section
254(b)(6) of the Telecommunications Act of 1996 establishes as a principle of universal
service that "[e]lementary and secondary schools and classrooms . . . and libraries should
have access to advanced telecommunications services."  We believe that Pacific's Education
First program provides public interest benefits without adversely affecting either ratepayers
that subscribe to Pacific's other services or competing providers of communication and
information services to schools and libraries.  Therefore, we will extend the waiver
previously granted to Pacific.

     10.  As noted above, Pacific seeks to extend its waiver for a two-year period, so
that it will have an additional two years following the close of the Education First sign-up
period to install ISDN-equipped lines for participating customers and to provide those
customers with 12 months of free service.  Therefore, if the waiver is granted, Pacific would
be required to resume collecting the EUCL charge from affected customers on January 1,
1999.  Moreover, although we extend the term of this waiver for two years, the benefits of
this waiver apply to each institution for not more than one 12-month period.

     11.  In extending this waiver, we re-adopt two of the three conditions imposed in
the Waiver Order.  Specifically, we need not re-impose the requirement that Pacific not
attempt to recover any costs associated with its Education First program by increasing its
interstate access rates, including CCL charges, because, under our revised access charge
rules, Pacific and other LECs subject to price cap regulation that charge less than the
maximum EUCL charge may not recover the difference between the amount collected and the
maximum from CCL charges or PICCs.  Pacific, however, will be required to impute
revenues foregone as a result of the extended waiver for purposes of calculating its interstate
rate of return.  Although the Commission eliminated sharing from price cap regulation in the
Price Cap Fourth Report and Order, it retained the low-end adjustment mechanism, which
is triggered by a carrier's interstate earnings falling below a presubscribed level.  We further
condition this waiver on Pacific continuing to submit to the Common Carrier Bureau those
portions of the state monitoring reports, which it currently submits to the California
Commission, that contain data on administrative costs and on the amount of service being
provided under the program.  
                              IV.  CONCLUSION

     12.  We conclude that Pacific has shown good cause for a waiver of section 69.152
of the Commission's rules, so that it may forgo assessing EUCL charges on ISDN-enhanced
lines installed to serve public and private schools (kindergarten through grade 12), public
libraries, and community colleges in California pursuant to Pacific's Education First program. 
Therefore, we grant Pacific a waiver of those rules and permit Pacific to forego collecting
EUCL charges for a 12-month period from such entities through December 1999.  Pacific
must begin collecting EUCL charges from those entities for their ISDN lines on January 1,
2000.  Pacific must continue to comply with the terms and conditions adopted in the Waiver
Order, except as discussed above.

                            V.  ORDERING CLAUSE

     13.  Accordingly, IT IS ORDERED that, pursuant to sections 201-205 and section
4(i) of the Communications Act of 1934, as amended, 47 U.S.C.  201-205 and  154(i), 
authority delegated pursuant to Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.
 0.91 and 0.291, and Section 1.3 of the Commission's rules, 47 C.F.R.  1.3, the petition
for waiver filed by Pacific Bell and Nevada Bell IS GRANTED to the extent provided herein,
and subject to the conditions set forth herein.

                         FEDERAL COMMUNICATIONS COMMISSION



                         A. Richard Metzger, Jr.
                         Acting Chief, Common Carrier Bureau