PUBLIC NOTICE  DA 98-1198

                  Released: June 19, 1998

PLEADING CYCLE ESTABLISHED FOR COMMENT ON REMAND ISSUES IN THE
PAYPHONE PROCEEDIN                    G

                             (CC Docket No. 96-                  128)

      
Comments Due:     July 13, 1998      
Reply Comments Due:     July 27, 1998 

                  I.  Introduction

      This Public Notice seeks further comment on certain issues raised by the decision of the United
States Court of Appeals for the District of Columbia Circuit in MCI Telecommunications Corporation, et
al. v. FCC.  In MCI v. FCC, the court granted in part and denied in part petitions for review of the
Commission's Second Order, and remanded, but did not vacate, the case to the Commission for further
proceedings.  Therefore, all of the requirements of the Second Order including those portions that were
remanded to the Commission remain in effect pending further action by the Commission on remand. 
The court further held that the Commission has authority to readjust the compensation rate retroactively. 
Accordingly, we place the industry on notice that should the equities so dictate, payphone compensation
payment obligations (or the absence of such obligations) incurred by providers of interexchange services
and compensation levels paid or received under our existing rules pending action on remand may be
subject to retroactive adjustment in order to undo the effects of applying aspects of the current rules that
were identified by the court as potentially arbitrary.  

II.   Issues for Comment
            
     In MCI v. FCC, the court concluded that the Commission did not adequately justify the derivation
of a compensation rate for coinless payphone calls.  In particular, the court held that the Commission
failed to explain why a market-based rate for coinless calls could be derived by subtracting avoided costs
from a market rate charged for coin calls.  The court noted that the Commission's reasoning may have
depended on the premise that the market rate for coin calls generally reflects the costs for those calls.  The
court stated that this assumption would be true in a competitive market where costs and rates converge,
but that the Commission did not connect this premise with its reasoning in the Second Order.  Moreover,
the court noted that the Commission did not claim that costs and rates do in fact converge in the coin call
market.  

     In light of the court's decision in MCI v. FCC, we seek comment on competition in the payphone
market since the deregulation of payphones and the impact of deregulation on the local coin rate.  To that
end, we seek comment and evidence on whether the local coin rate reflects competitive market conditions
and the extent to which costs and rates converge in the coin call market.  We also seek comment on the
similarities and differences between the market segments for coin and coinless calls and the factors
attributable to these similarities and differences, including the use of payphones to initiate both types of
calls.  We further seek comment on whether, and how, the distinctions between these market segments
should affect the determination of a reasonable default compensation amount for coinless calls.  Parties
should address any market imperfections that might affect the use of the local coin rate as a market-based
surrogate for coinless calls, including locational monopolies, and limitations on the use of pennies in
payphones.

     The Second Order concluded that coin and coinless calls share certain joint and common costs, 
because each type of call generally uses the same piece of equipment.  Therefore, we seek comment on
the reasonableness of adjusting the local coin rate for cost differences between providing coin and coinless
calls as a market-based mechanism for deriving fair compensation for coinless calls.  We ask that parties
respond specifically to the concerns raised by the court in establishing the appropriate per-call
compensation amount using this approach.   We also seek comment on other market-based methodologies
that could be used to establish a per-call compensation rate for coinless calls.  In suggesting alternative
market approaches, parties should address, for example, how a payphone service provider would use the
market-based approach to set a price for coinless calls in a deregulated market when providing a number
of related types of services using substantially the same payphone equipment.
  
     We will incorporate in this proceeding the comments and reply comments filed in the Second
Order proceeding and in response to petitions for reconsideration of the Second Order.  Parties may also
file additional information regarding specific payphone costs for providing coinless calls and the
differences in costs for providing coin calls. 

III.   Ex Parte Presentations

     This is a "permit-but-disclose proceeding" and subject to the "permit-but-disclose" requirements
under Section 1.1206(b) of the rules, 47 C.F.R.  1.1206(b), as revised.  Ex Parte presentations are
permitted, except during the Sunshine Agenda period, provided that they are disclosed as stated in the
Commission's rules.  Persons making oral ex parte presentations are reminded that memoranda
summarizing the presentation must contain a summary of the substance of the presentation and not merely
a listing of the subjects discussed.  More than a one or two sentence description of the views and
arguments presented is generally required. See 47 C.F.R. 1.1206 (b)(2), as revised.  Other rules pertaining
to oral and written presentations are set forth in Section 1.1206 (b), as well.  The Commission requires
all written ex parte presentations or summaries of oral ex parte presentations in this proceeding to be
served on all parties to this proceeding. 

IV.  Comment Filing Dates

     Pursuant to applicable procedures set forth in Sections 1.415 and 1.419 of the Commission's rules,
47 C.F.R.  1.415, 1.419, interested parties may file comments with the Office of the Secretary, Federal
Communications Commission, Room 222, 1919 M St. N.W., Washington, D.C. 20554 on or before July
13, 1998, and reply comments on or before July 27, 1998.  To file formally in this proceeding, participants
must file an original and four copies of all comments, reply comments, and supporting comments.  In
addition, parties should file two copies of any such pleadings with the Chief, Enforcement Division,
Common Carrier Bureau, Stop 1600A, Room 6008, 2025 M Street, N.W., Washington, D.C. 20554. 
Parties should also file one copy of any documents filed in this docket with the Commission's copy
contractor, International Transcription Services, Inc., 1231 20th Street, N.W., Washington, D.C. 20036. 
Comments and reply comments will be available for public inspection during regular business hours in
the FCC Reference Center (Room 239), 1919 M Street, N.W., Washington, D.C. 

For further information, contact Greg Lipscomb, Enforcement Division, Common Carrier Bureau, 202/418-
0960.

                    Action by the Chief, Common Carrier Bureau