DEPRECIATION RATESETTING AND ITS IMPLICATIONS IN A MORE COMPETITIVE ENVIRONMENT During 1980 and 1981, the Commission made changes to its methods and practices for setting depreciation rates. These changes, allowing faster capital recovery, have been largely in response to the rapid changes in technology and reflect the Commission's overall thrust for a more competitive environment. In implementing its changes, however, the Commission has not resolved questions regarding the methods and procedures needed to set new depreciation rates. For example, the proper method for allocating the depreciation reserve account to individual plant accounts has not been determined and requirements for setting depreciation rates for that part of the depreciable plant from the telephone pole to the customer's premises have not been developed. Before proceeding to set revised depreciation rates, GAO recommends the Commission address these and other questions. Doing so will place the Commission in a position to avoid accepting and approving depreciation rates with less than the rigorous review needed. (See p. 159.) Commission action is also needed before implementing that part of its Computer II Decision relating to customer premises equipment-telephones, computer terminals, and other equipment which may be located at the customer's premises and attached to the communications network. The Commission has proposed to deregulate as of March 1, 1982, new customer premises equipment and to continue to regulate existing customer premises equipment. (See p. 160.) ENSURING FAIR, NON- Since competition was first allowed in interstate telecommunications services, the Commission has required that all carriers offering authorized interstate communications services be allowed access to local exchange facilities on a nondiscriminatory basis. Such access is virtually the only means for local distribution of interstate telephone services. The Commission and the courts have, however, continued to identify access discrimination problems involving both Tear Sheet the types of access services provided and the During recent years, the local exchange costs assigned to interstate services have also gradually increased, giving rise to the allegation that rates for such services subsidize intrastate rates. The existence and magnitude of any such subsidy, however, is unclear. The Commission is addressing the problem of access discrimination. Neither the Commission's past actions nor its present proposals, however, resolve the following questions. -What types of interconnection should telephone companies be required to provide to new carriers? --What rates should be charged to new carriers for access to local exchanges? --What are the effects of competition on any subsidies which may have been provided between interstate services and intrastate services? --Can nondiscriminatory access conditions be GAO recommends that the Congress address On June 30, 1981, GAO requested Commission THE DEVELOPMENT OF COMPETITION IN DOMESTIC COMMON CARRIER TELECOMMUNICATIONS The domestic common carrier telecommuni- cations industry--who are the players? Competitive status of the telecommunica- Will the common carrier industry become PRICE/EARNINGS REGULATION--ITS APPLICATION Concepts of price/earnings regulation FCC's efforts to establish and monitor FCC's review of rate base and expense Alternatives to and abandonment of the traditional regulatory process Outline for improving FCC's rate of return/rate base regulatory program The importance of costing methodologies in Establishing costing principles--the road to fully distributed cost method 7 The implementation of FDC-7--a troubled and ultimately futile exercise FCC adopts an interim cost manual which offers little improvement over FDC-7 Tariff provisions of the Communications Act impede FCC's ability to obtain DEREGULATION OF ENHANCED SERVICES AND CUSTOMER PREMISES EQUIPMENT--USING SEPARATE SUBSID- |