Report No. CC 99-3               COMMON CARRIER ACTION               February 25, 1999

     FCC RELEASES AUDIT REPORTS ON RBOCs' PROPERTY RECORDS

     Yesterday, February 24, 1999, the Commission adopted orders to release certain staff-level Audit Reports
concerning property records of the Regional Bell Operating Companies (RBOCs).  Continuing Property Records
(CPRs) are a component of the telephone company's accounting records that provide descriptive inventories and
cost documentation of the company's plant, property, and equipment used for providing regulated
telecommunications services.  Approximately one-half of a telephone company's costs are associated with the
capital investment that is recorded in its CPRs.

     The Common Carrier Bureau's Accounting Safeguards Division audited the CPRs of the RBOCs to assess
the accuracy and reliability of the CPRs and of the companies' regulatory plant accounts.  The auditors compared
CPR entries to the physical assets in the central offices to verify whether these items were in use.

     The audits examined the hard-wired central office equipment of the companies.  "Hard-wired" equipment
in central offices represents the items generally fixed in place (frames, switches, batteries), as opposed to "plug-
ins," which are relatively portable (line cards).  The hard-wired investment in central offices represents
approximately one-fourth of the total capital investment for a telephone company.  For example, for the RBOCs,
the total investment in network plant is about $200 billion; of this, hard-wired central office equipment represents
approximately $47 billion.  The audit reports found that the RBOCs' book costs may be overstated by
approximately $5 billion.  The RBOCs disagree with these audit reports and have filed their responses with the
Division.  The RBOCs have waived claims of confidentiality concerning the audit reports and their responses.

     The Commission found that release of the audit reports serves the public interest by providing interested
State regulatory commissions and ratepayers with information gathered during the audit. In releasing the Division
auditors' reports and the companies' responses to the audit reports, the Commission did not pass any judgment on
the accuracy of these reports, the reasonableness of their conclusions or recommendations, or the RBOCs'
responses.  In accordance with generally accepted government auditing standards, the Commission does, however,
respect the auditors' independence.  The Commission indicated that the next step will be to solicit public comment
on the audit reports.  It is anticipated that the Commission will shortly take action to seek public comment on the
issues raised by the audit reports.  

     Action by the Commission February 24, 1999, by Orders (FCC 99-29, 99-30, 99-31, 99-32, 99-33, 99-34,
and 99-35).  Chairman Kennard, Commissioners Ness and Tristani, with Commissioners Furchtgott-Roth and
Powell dissenting in part and   Commissioners Ness, Furchtgott-Roth and Powell issuing separate statements.

                                                                                 -FCC-

     News Media contact:  Emily Hoffnar at (202) 418-0253 or Audrey Spivack at (202) 418-0500
     Common Carrier Bureau contact: Ken Moran at (202) 418-0800