STATE OF ILLINOIS

ILLINOIS COMMERCE COMMISSION

ILLINOIS PUBLIC TELECOMMUNICATIONS )

ASSOCIATION, an Illinois not for profit )

corporation, )

)

Petition to Determine Whether Certain Illinois ) ICC Docket No. 97-0225

Local Exchange Carriers Are In Compliance )

With The Illinois Public Utilities Act and Section )

276 of The Communications Act of 1934. )

AMENDED PETITION

The Illinois Public Telecommunications Association, by its attorneys O’Keefe, Ashenden, Lyons and Ward, pursuant to Section 276 of the Federal Communications Act of 1934, 47 U.S.C. §276, and Sections 9-250, 9-252, 10-101, 13-502(b), and 13-505.6 of the Illinois Public Utilities Act, 220 ILCS 5/9-250, 9-252, 10-101, 13-502(b) and 13-505.6, hereby petitions the Illinois Commerce Commission to initiate an investigation to determine whether the tariffs for payphone exchange services filed by Illinois Bell Telephone Company d/b/a/ Ameritech Illinois, GTE South Incorporated, GTE North Incorporated, Central Telephone Company of Illinois, and Illinois Consolidated Telephone Company (hereinafter "the LECs") comply with requirements of Section 276 of the Communications Act of 1934, 47 U.S.C. §276 (hereinafter the "FCA"), the Federal Communications Commissions orders in CC Docket No. 96-128, and Sections 13-505.1, 13-505.2, 13-505.3, and 13-505.4 of the Illinois Public Utilities Act (hereinafter the "IPUA"), 220 ILCS 5/13-505.1 - 13-505.4.

The Illinois Public Telecommunications Association further requests that the Commission investigate whether GTE South, Incorporated, GTE North, Incorporated, Centel, and Illinois Consolidated Telephone Co., have complied with the FCA’s mandate that each LEC’s payphone operations not be subsidized with revenue from noncompetitive exchange services or exchange access services. (47 U.S.C. § 276(a)(1)). The IPTA states as follows in support of its Petition.

1. The Illinois Public Telecommunications Association (the "IPTA") is a not-for-profit corporation organized and existing under the laws of the State of Illinois. The IPTA has its principal place of business located at 314 N. McHenry Road, Buffalo Grove, Illinois. The IPTA is an association of companies that provide pay telephone services in the State of Illinois. Most of the members of the IPTA are certified as telecommunications carriers under Section 13-202 of the Illinois Public Utilities Act, 220 ILCS 5/13-202.

2. Illinois Bell Telephone Company d/b/a Ameritech Illinois (hereinafter "Ameritech") is a corporation organized and existing under the laws of the State of Illinois. Ameritech is certified as a telecommunications carrier under the Illinois Public Utilities Act. Ameritech provides competitive payphone telecommunications services to consumers in Illinois, and provides noncompetitive local exchange telecommunications services to itself and to other payphone providers.

2. GTE North Incorporated is a corporation organized and existing under the laws of the State of Wisconsin. GTE North provides competitive payphone telecommunications services to consumers in Illinois, and provides noncompetitive local exchange telecommunications services to itself and to other payphone providers.

3. GTE South Incorporated is a corporation organized and existing under the laws of the State of Virginia. GTE South provides competitive payphone telecommunications services to consumers in Illinois, and provides noncompetitive local exchange telecommunications services to itself and to other payphone providers.

4. Central Telephone Company of Illinois, Inc. (hereinafter "Centel") is a corporation organized and existing under the laws of the State of Illinois. Centel provides competitive payphone telecommunications services to consumers in Illinois, and provides noncompetitive local exchange telecommunications services to itself and to other payphone providers.

5. Illinois Consolidate Telephone Company is a corporation organized and existing under the laws of the State of Illinois. Illinois Consolidated provides competitive payphone telecommunications services to consumers in Illinois, and provides noncompetitive local exchange telecommunications services to itself and to other payphone providers.

6. In February, 1996 President Clinton enacted the Telecommunications Act of 1996. Section 276 of that Act states in relevant part:

(a) Nondiscrimination Safeguards.--After the effective date of the rules prescribed pursuant to subsection (b), any Bell operating company that provides payphone service--

(1) shall not subsidize its payphone service directly or indirectly from its telephone exchange service operations or its exchange access operations; and

(2) shall not prefer or discriminate in favor of its payphone service.

(b) Regulations.--

(1) Contents of regulations.--In order to promote competition among payphone service providers and promote the widespread deployment of payphone services to the benefit of the general public, within 9 months after the date of enactment of the Telecommunications Act of 1996, the Commission shall take all actions necessary (including any reconsideration) to prescribe regulations that--

* * *

(B) discontinue the intrastate and interstate carrier access charge payphone service elements and payments in effect on such date of enactment, and all intrastate and interstate payphone subsidies from basic exchange and exchange access revenues . . . .;

(C) prescribe a set of nonstructural safeguards for Bell operating company payphone service to implement the provisions of paragraphs (1) and (2) of subsection (a), which safeguards shall, at a minimum, include the nonstructural safeguards equal to those adopted in the Computer Inquiry-III (CC Docket No. 90-623) proceeding;

* * *

(E) provide for all payphone service providers to have the right to negotiate with the location provider on the location provider's selecting and contracting with, and, subject to the terms of any agreement with the location provider, to select and contract with, the carriers that carry intraLATA calls from their payphones.

47 U.S.C. §276. (The full text of Section 276 is attached hereto as Exhibit A.)

7. Pursuant to Section 276(b) of the FCA, the Federal Communications Commission ("FCC") initiated an investigation to determine what regulations it would develop to implement Section 276. Beginning with its Payphone Order, the FCC issued several orders adopting regulations and procedures implementing Section 276 of the FCA.

8. The FCC held that several issues relating to the implementation of §276 would be the responsibility of state public service commissions. One such issue which has been delegated to states is whether network services provided to payphone providers by local exchange carriers are in compliance with the requirements of Section 276:

We require LECs to file tariffs for the basic payphone services and unbundled functionalities in the intrastate and interstate jurisdictions as discussed below. LECs must file intrastate tariffs for these payphone services and any unbundled features they provide to their own payphone services. The tariffs for these LEC payphone services must be: (1) cost based; (2) consistent with the requirements of Section 276 with regard, for example, to the removal of subsidies from exchange and exchange access services; and (3) nondiscriminatory. States must apply these requirements and the Computer III guidelines for tariffing such intrastate services. [fn.] . . . . We will rely on the states to ensure that the basic payphone line is tariffed by the LECs in accordance with the requirements of Section 276. . . . Where LECs have already filed intrastate tariffs for these services, states may, after considering the requirements of this order, the Report and Order, and Section 276, conclude: 1) that existing tariffs are consistent with the requirements of the Report and Order as revised herein; and 2) that in such case no further filings are required.

Order on Reconsideration, ¶163 [emphasis added]; See also Clarification Order at ¶11. The FCC vested the Illinois Commerce Commission with the obligation to investigate whether LEC access services are nondiscriminatory, cost-based, and are not being used to subsidize LEC payphone operations.

9. The FCC held that the Illinois Commerce Commission must determine whether LEC network services satisfy the New Services Test methodology for determining the rates at which payphone providers would purchase or impute (under Section 13-505.1 of the IPUA) network services. (See e.g. Order on Reconsideration, at ¶163, n. 492). Recently, the FCC further held:

Tariffs for payphone services, including unbundled features and functions filed with the states, pursuant to the Payphone Reclassification Proceeding, must be cost-based, consistent with Section 276, nondiscriminatory, and consistent with Computer III tariffing guidelines.

(Bureau Waiver Order, at ¶2; See also, Clarification Order, at ¶10.) The FCC reiterated that intrastate tariffs are subject to the "New Services Test" as the method to assure that rates are cost-based. (Bureau Waiver Order, fn. 5.) The New Services Test is intended to establish a price ceiling for noncompetitive payphone services, and is codified at 47 C.F.R. §61.49(g)(2). (A copy of §61.49(g)(2) is attached hereto as Exhibit B.)

10. The FCC also held that the Illinois Commerce Commission must determine whether each LEC has removed any subsidies flowing from the noncompetitive ratepayers’ basic exchange service revenue to the LECs’ competitive payphone services. (Order, at ¶180-187.) Recently, the FCC held:

In addition, the Payphone Reclassification Proceeding required states to ensure that payphone costs from unregulated equipment and subsidies are removed from intrastate local exchange service and exchange access service rates.

(Bureau Waiver Order, at ¶2; See also, Clarification Order, at ¶10.)

11. The FCC’s mandate that LEC’s restructure their operations to provide nondiscriminatory cost-based rates for noncompetitive services, and that the LECs’ competitive payphone operations not be subsidized with revenue from noncompetitive ratepayers, is consistent with the requirements imposed on LECs by the IPUA.

12. The FCC further held that all payphone providers were entitled to receive the benefit of cost-based rates for exchange services from local exchange carriers as of April 15, 1997. (Clarification Order, at ¶2.) The FCC held that to the extent that local exchange services are reduced as a result of an investigation applying the New Services Test, all payphone providers would be entitled to receive refunds for overpayments. (Id.)

13. The Illinois Commerce Commission has held that payphone services provided to end users through the deposit of coins is a competitive service in Illinois. (220 ILCS 5/13-209; ICC Docket No. 84-0442; ICC Docket No. 88-0412.) In each of the market service areas which are served by the LECs, payphone service is reasonably available from more than one provider, and therefore, payphone service is a service which is a "competitive services" under Illinois law. 220 ILCS 5/13-209.

14. GTE North, GTE South, Centel, and Illinois Consolidated have refused to classify their payphone services as competitive under the Public Utilities Act.

15. Like Section 276 of the FCA, the IPUA requires LECs to 1) not subsidize their competitive payphone services with revenue from noncompetitive services; and 2) not discriminate in favor of its competitive payphone services in the provision of noncompetitive services. (§13-507; §13-505.1; §13-505.2; §13-505.3; §13-505.4.)

16. At the time the Commission investigates whether Illinois LECs comply with Section 276 of the FCA and the FCC Orders adopted pursuant to the FCA, the Commission must also investigate whether LECs comply with the applicable requirements under the Illinois Public Utilities Act, including those sections which prohibit discrimination in the provision of noncompetitive services, and those sections which prohibit subsidization of competitive payphone services with revenue from noncompetitive services.

17. The FCC’s orders require LECs to provide nondiscriminatory COPT services, as well as nondiscriminatory coin line services which have traditionally been used by local exchange carriers. All the LECs are currently offering coin line services which would violate the IPUA. For example, the LECs have proposed a coin line service which requires any telecommunications carrier to adopt, for its own end user customers, the rate tables selected by the LEC payphone division for all intraLATA calls other than the initial coin drop. Under the LECs’ coin line offering, all competitors using the coin line service must charge the same rates for non-local sent-paid calls that are preprogrammed into the central office by each LEC’s own payphone division. Although the initial coin drop used to initiate a local call can be programmed at the phone, the rating for a local call (whether the $0.25 will allow an end user to complete a 3 minute local call, 5 minute local call, or an untimed local call) is preset at the central office according to the LEC payphone rates. There are other examples of how the coin line offered by LECs is discriminatory (e.g. the coin line subscriber is required to presubscribe all 0+ and 1+ calls to the intraLATA carrier selected by the LEC’s own payphone division.) The Commission should investigate whether the LECs’ coin line services are discriminatory.

18. In the alternative, the Commission should investigate whether the existing coin line functions should be unbundled pursuant to Section 13-505.6 of the IPUA, and whether such unbundling is in the public interest and is consistent with the policy goals and other provisions of the IPUA.

19. The FCC has mandated that the Illinois Commerce Commission investigate whether each LEC has done the following in compliance with Section 276 of the FCA:

A. Tariffed intrastate payphone services (both COPT and coin line) which are:

1) Cost-based and in compliance with the New Services Test pricing methodology;

2) Consistent with the requirements of Section 276, with regard for example the ability of a payphone provider to presubscribe its intraLATA operator services to the OSP of choice;

3) Nondiscriminatory.

B. Provided evidence of record that the payphone operations are not being subsidized with revenue from either basic exchange service or exchange access services.

20. Whether Illinois LECs are in compliance with Section 276 of the FCA and the IPUA, is an issue that has significant effect on the consumers of payphone services as well as consumers of LEC noncompetitive services. In order to foster the widespread availability of payphone services at the lowest price, it is imperative to follow through on the FCC’s directive that network services be nondiscriminatory and provided to payphone providers at a cost-based price. In addition, to maintain low rates for noncompetitive services, the Commission must investigate LEC payphone operations to assure that noncompetitive ratepayers are not subsidizing competitive payphone operations.

21. In order to fully investigate these issues, the IPTA requests that the Illinois Commerce Commission initiate an investigation of each LEC for the purpose of determining whether LEC network services are nondiscriminatory and cost based, and whether LEC payphone operations (with the exception of Ameritech) are being subsidized with revenue from noncompetitive exchange services.

22. To address the factual issues that necessarily arise in reviewing cost-based pricing of network services, the IPTA request that this matter be treated as a contested case, as defined by the Illinois Administrative Code, and conduct evidentiary hearings. 83 Ill.Adm.Code 200.40.

Wherefore, for each of the foregoing reasons, the Illinois Public Telecommunications Association respectfully requests that the Illinois Commerce Commission initiate an investigation naming Ameritech Illinois, GTE North, Incorporated, GTE South, Incorporated, Centel, and Illinois Consolidated as parties to this proceeding, and conduct hearings:

A. To determine the cost basis for each network service provided by the LECs to payphone providers, and specifically the cost under the New Services Test required by Section 276 of the FCA and the Federal Communications Commission;

B. To establish the cost-based price for each network service provided by the LECs to payphone providers under the New Services Test;

C. To determine whether the LECs have failed to comply with the law by classifying their payphone services as noncompetitive;

D. To determine whether the network services provided by the LECs to payphone providers discriminate in favor of the LEC’s own payphone operations;

E. To determine whether the LECs are subsidizing their payphone operations with revenue from noncompetitive services;

F. To determine whether it is in the public interest to require the LECs to provide unbundled network access services to payphone providers on a nondiscriminatory way; and,

G. To determine the amount of refunds, if any, which are due to payphone providers who purchased network services from LECs who failed to comply with the FCC’s mandate that network services be provided at cost-based rates.

Respectfully submitted,

ILLINOIS PUBLIC TELECOMMUNICATIONS

ASSOCIATION

Dated: June 16, 1997 __________________________________________

Henry T. Kelly, one of its attorneys.

Michael W. Ward

John F. Ward, Jr.

Henry T. Kelly

O’Keefe, Ashenden, Lyons and Ward

30 N. LaSalle St., Suite 4100

Chicago, Illinois 60602

(312) 621-0400

STATE OF ILLINOIS )

) SS.

COUNTY OF COOK )

VERIFICATION

I, Henry T. Kelly, first being duly sworn and upon oath, depose and state that I am counsel for the Illinois Public Telecommunications Association, that I have read the above and foregoing petition and know the contents thereof; that said contents are true in substance and in fact, except as to those matters stated upon information and belief, and as to those, I believe same to be true.

________________________________

Henry T. Kelly

Subscribed and sworn to before me

this 16th day of June, 1997

____________________________

Notary

EXHIBIT A

SEC. 276. [47 U.S.C. 276] PROVISION OF PAYPHONE SERVICE.

(a) Nondiscrimination Safeguards.--After the effective date of the rules prescribed pursuant to subsection (b), any Bell operating company that provides payphone service--

(1) shall not subsidize its payphone service directly or indirectly from its telephone exchange service operations or its exchange access operations; and

(2) shall not prefer or discriminate in favor of its payphone service.

(b) Regulations.--

(A) establish a per call compensation plan to ensure that all payphone service providers are fairly compensated for each and every completed intrastate and interstate call using their payphone, except that emergency calls and telecommunications relay service calls for hearing disabled individuals shall not be subject to such compensation;

(D) provide for Bell operating company payphone service providers to have the same right that independent payphone providers have to negotiate with the location provider on the location provider's selecting and contracting with, and, subject to the terms of any agreement with the location provider, to select and contract with, the carriers that carry interLATA calls from their payphones, unless the Commission determines in the rulemaking pursuant to this section that it is not in the public interest; and

(2) Public interest telephones.--In the rulemaking conducted pursuant to paragraph (1), the Commission shall determine whether public interest payphones, which are provided in the interest of public health, safety, and welfare, in locations where there would otherwise not be a payphone, should be maintained, and if so, ensure that such public interest payphones are supported fairly and equitably.

(3) Existing contracts.--Nothing in this section shall affect any existing contracts between location providers and payphone service providers or interLATA or intraLATA carriers that are in force and effect as of the date of enactment of the Telecommunications Act of 1996.

(c) State Preemption.--To the extent that any State requirements are inconsistent with the Commission's regulations, the Commission's regulations on such matters shall preempt such State requirements.

(d) Definition.--As used in this section, the term ''payphone service'' means the provision of public or semi-public pay telephones, the provision of inmate telephone service in correctional institutions, and any ancillary services.

EXHIBIT B

47 C.F.R. § 61.49 - Definition of the New Services Test.

Section 61.49 Supporting information to be submitted with letters of transmittal for tariffs of carriers subject to price cap regulation.

(a) Each price cap tariff filing must be accompanied by supporting materials sufficient to calculate required adjustments to each PCI, API, and SBI pursuant to the methodologies provided in §§ 61.44, 61.45, 61.46, and 61.47, as applicable.

(b) Each price cap tariff filing that proposes rates that are within applicable bands established pursuant to § 61.47, and that results in an API value that is equal to or less than the applicable PCI value, must be accompanied by supporting materials sufficient to establish compliance with the applicable bands, and to calculate the necessary adjustment to the affected APIs and SBIs pursuant to §§ 61.46 and 61.47, respectively.

(c) Each price cap tariff filing that proposes rates above the applicable band limits established in §§ 61.47 (e), (f)(1), (g) and (h), or above the limit on composite average residential rates established in § 61.47(f)(2), must be accompanied by supporting materials establishing substantial cause for the proposed rates.

(d) Each price cap filing that proposes service category rates below applicable band limits established in § 61.47(e), (g) and (h) of this part, must be accompanied by supporting materials establishing that the rates cover the service category's average variable cost, or equivalently, that the service category's net additional revenue resulting from the price change exceeds additional costs.

(e) Each price cap tariff filing that proposes rates that will result in an API value that exceeds the applicable PCI value must be accompanied by: (1) An explanation of the manner in which all costs have been allocated among baskets; and (2) within the affected basket, a cost assignment slowing down to the lowest possible level of disaggregation, including a detailed explanation of the reasons for the prices of all rate elements to which costs are not assigned.

(f) Each price cap tariff filing that proposes restructuring of existing rates must be accompanied by supporting materials sufficient to make the adjustments to each affected API and SBI required by §§ 61.46(c) and 61.47(d), respectively.

(g) (1) Each tariff filing by a dominant interexchange carrier, as specified by Commission order, that introduces a new service that will later be included in a basket must be accompanied by cost data sufficient to establish that the new service, and each unbundled element thereof, will generate a net revenue increase--measured against revenues generated from all services subject to price cap regulation, and calculated based upon present value--within the lesser of a 24-month period after an annual price cap tariff including the new service takes effect, or 36 months from the date the new service becomes effective. Each carrier making such a tariff filing must, at the time the new service is incorporated into the price cap index, submit data sufficient to make the API and PCI calculations required by §§ 61.46(b) and 61.44(c) of this part, and, as necessary, to make the SBI calculations provided in § 61.47 (b) or (c) of this part.

(2) Each tariff filing submitted by a local exchange carrier specified in § 61.41(a) (2) or (3) of this part that introduces a new service or a restructured unbundled basic service element (BSE) (as BSE is defined in § 69.2 (mm)) that is or will later be included in a basket must be accompanied by cost data sufficient to establish that the new service or unbundled BSE will not recover more than a reasonable portion of the carrier's overhead costs.

(h) Each tariff filing by a local exchange carrier subject to price cap regulation that introduces a new service or a restructured unbundled basis service element (BSE), as defined in § 69.2(mm) of this chapter, that is or will later be included in a basket, or that introduces or changes the rates for connection charge subelements for expanded interconnection, as defined in § 69.121 of this chapter, must also be accompanied by:

(1) The following, including complete explanations of the bases for the estimates.

(i) A study containing a projection of costs for a representative 12 month period; and

(ii) Estimates of the effect of the new tariff on the traffic and revenues from the service to which the new tariff applies, the carrier's other service classifications, and the carrier's overall traffic and revenues. These estimates must include the projected effects on the traffic and revenues for the same representative 12 month period used in paragraph (h)(1)(i) of this section.

(2) Working papers and statistical data.

(i) Concurrently with the filing of any tariff change or tariff filing for a service not previously offered, the Chief, Tariff Review Branch must be provided two sets of working papers containing the information underlying the data supplied in response to paragraph (h)(1) of this section, and a clear explanation of how the working papers relate to that information.

(ii) All statistical studies must be submitted and supported in the form prescribed in § 1.363 of the Commission's rules.

(i) Each tariff filing submitted by a local exchange carrier subject to price cap regulation that introduces or changes the rates for connection charge subelements for expanded interconnection, as defined in § 69.121 of this chapter, must be accompanied by cost data sufficient to establish that such charges will not recover more than a just and reasonable portion of the carrier's overhead costs.

(j) For a tariff filing that introduces or changes a contribution charge for special access and expanded interconnection, as defined in § 69.122 of this chapter, the carrier must submit information sufficient to establish that the charge has been calculated in a manner that complies with the Commission order authorizing the contribution charge.

(k) For a tariff that introduces a system of density pricing zones, as described in § 69.123 of this chapter, the carrier must, before filing its tariff, submit a density pricing zone plan including, inter alia, documentation sufficient to establish that the system of zones reasonably reflects cost- related characteristics, such as the density of total interstate traffic in central offices located in the respective zones, and receive approval of its proposed plan.