******************************************************** 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. ***************************************************************** October 28, 1998 The Honorable Joseph P. Mettner Chairman Public Service Commission of Wisconsin P.O. Box 7854 Madison, WI 53707-7854 Re: Public Service Commission of Wisconsin letter order in Docket 05-TI-156, dated November 6, 1997 Dear Chairman Mettner: Pursuant to the request of the Wisconsin Pay Telephone Association (WPTA), the Common Carrier Bureau (Bureau) recently completed its review of the letter order issued by the Public Service Commission of Wisconsin (Wisconsin Commission) on November 6, 1997, in the above-referenced proceeding. In the letter order, the Wisconsin Commission held that its own jurisdiction to investigate the rates charged by local exchange carriers (LECs) to pay phone providers "is very narrowly circumscribed to enforcing a prohibition on cross subsidy . . . and discriminatory practices." The Wisconsin Commission also stated that the statutory remedies available under Wisconsin law "only address whether the retail rates charged by telecommunications utilities for competitive telecommunications service recover the underlying cost for that service." Accordingly, the Wisconsin Commission has found that it lacks jurisdiction under state law to ensure that the rates, terms, and conditions applicable to providing basic pay phone services comply with the requirements of Section 276 of the Communications Act of 1934, as amended, and the FCC's implementing rules. Because the Wisconsin Commission's inability to review these pay phone service offerings implicates the FCC's obligations under Section 276, we are writing to advise you that we intend to require the four largest LECs in Wisconsin to file with the FCC tariffs that set forth the rates, terms, and conditions associated with pay phone services, along with the required supporting documentation. Section 276 of the Act establishes requirements designed to promote competition among payphone service providers and promote the widespread deployment of payphone services to the benefit of the general public. In its Payphone Reclassification Proceeding, the FCC adopted regulatory requirements implementing Section 276. The FCC required, inter alia, that incumbent LECs file tariffs for basic payphone lines at the state level only, and that unbundled features and functions provided by LECs to their own payphone operations or to others be tariffed at both the state and federal levels. The FCC required that all incumbent LEC payphone tariffs filed at the state level be cost-based, nondiscriminatory, and consistent with both Section 276 and the Commission's Computer III tariffing guidelines. The FCC determined that the rates assessed by LECs for payphone services tariffed at the state level must satisfy the requirements that the FCC applies to new interstate access services proposed by incumbent LECs subject to price cap regulation (the "new services test"). The new services test is a cost-based test that establishes the direct cost of providing the new service as a price floor. LECs then add a reasonable amount of overhead to derive the overall price of the new service. The FCC stated that it would rely initially on state commissions to ensure that the rates, terms, and conditions applicable to the provision of basic payphone lines comply with the requirements of Section 276. The FCC determined that state commissions that are unable to review these tariffs may require incumbent LECs operating in their states to file these tariffs with the FCC. The Bureau has emphasized that the FCC retains jurisdiction under Section 276 to ensure that all requirements of Section 276 and the Payphone Reclassification Proceeding are met. In its November 6, 1997 decision in Docket 05-TI-156, the Wisconsin Commission indicated that it was unable to review incumbent LECs' rates for existing payphone service offerings because it lacked the authority and jurisdiction to determine whether these service offerings comply with the FCC implementing rules. Furthermore, your letter reflects that the Wisconsin Commission did not review any of the incumbent LEC pay phone filings nor affirmatively conclude that the rates for incumbent LEC payphone services in Wisconsin satisfy the Act's pricing requirements. In light of these circumstances, we will need to require the federal tariffing and federal review of payphone services offered by the four largest LECs operating in Wisconsin and that the Wisconsin Commission has not reviewed and found to be in compliance with Section 276 and applicable FCC rules. We plan to issue an order that will direct all incumbent LECs in Wisconsin to file with the FCC tariffs for such services together with the supporting documentation necessary to demonstrate compliance with the requirements of Section 276 and our implementing rules. If you have any questions concerning this matter, please do not hesitate to contact me at (202) 418- 1500. Sincerely, Kathryn C. Brown Chief, Common Carrier Bureau