II. Background

III. Issues
The Payphone Marketplace
Compensation for Each and Every Completed Intrastate and Interstate Call Originated by Payphones
1. Payphone Calls Subject to this Rulemaking and Compensation Amount
2. Entities Required to Pay Compensation
3. Ability of Carriers to Track Calls from Payphones
4. Administration of Per-Call Compensation
5. Interim Compensation Mechanism

Reclassification of LEC-Owned Payphones
1. Classification of LEC Payphones as CPE
2. Transfer of Payphone Equipment to Unregulated Status
3. Termination of Access Charge Compensation and Other Subsidies
4. Deregulation of AT&T Payphones

Nonstructural Safeguards for BOC Provision of Payphone Service

Ability of BOCs to Negotiate with Location Providers on the Presubscribed InterLATA Carrier

Ability of Payphone Service Providers to Negotiate with Location Providers on the Presubscribed IntraLATA Carrier

Establishment of Public Interest Payphones

Other Issues
1. Dialing Parity
2. Letterless Keypads on Payphones
3. Oncor Petition

IV. Procedural Matters
1. Petitions for Reconsideration
2. Paperwork Reduction Act Analysis
3. Regulatory Flexibility Act Analysis

Conclusion

Ordering Clauses

Appendix A
Text of Section 276
Appendix B
List of Parties Filing Comments
Appendix C
List of Parties Filing Replies
Appendix D
Immediate Rules Adopted by This Order
Appendix E
Rules Adopted by This Order
Appendix F
Interim Compensation Obligations

Deregulation of AT&T Payphones

a. The Notice

188. In the Notice, we tentatively concluded that payphones provided by AT&T should be classified as CPE, finding that discontinuing possible subsidies for AT&T payphones would be congruent with the 1996 Act's requirement that the Commission discontinue subsidies for other payphones (i.e., those owned by incumbent LECs) and would provide for symmetrical regulation of the payphone industry. We cited two other reasons why this proposed action is in harmony with the other rules we proposed in this proceeding. First, since Tonka Tools, AT&T payphones have been subject to the same regulatory treatment as BOC payphones. Once LEC telephones, including those provided by the BOCs, are declared to be CPE, the basis for treating AT&T payphones as network equipment no longer exists. Second, we believe that deregulating AT&T payphones is consistent with our general policy to deregulate non-dominant carriers. In the Notice, we also tentatively concluded that the bundling of pay telephone equipment with underlying transmission capacity would be treated pursuant to the rules proposed in the Interstate, Interexchange Marketplace proceeding.

      

     b. Comments

189. Those commenting on AT&T payphones were unanimous in concluding that AT&T payphones should be deregulated. The RBOCs assert that AT&T payphones should be deregulated in the same manner as LEC payphones. AT&T argues, however, that AT&T payphones should not be treated like LEC CPE but should be removed from all regulation except Part 68 registration and treated like independent payphone providers.

      

     c. Discussion

190. We conclude that AT&T payphones must be deregulated, detariffed and treated as CPE. As we concluded above, there is a competitive market for payphones, and, pursuant to Section 276, subsidies must be removed from payphone service. AT&T payphones have been treated like BOC payphones for regulatory purposes. It would be incongruous to deregulate payphone equipment owned by all other carriers except AT&T. We conclude, therefore, that AT&T payphones must be removed from regulation and treated as independent PSPs' payphones. Accordingly, we require that AT&T follow the same procedures discussed above for valuing LEC payphone assets and transferring them to nonregulated status. After deregulation, AT&T payphones will be subject to the same requirements as independent payphone provider payphones.

      

191. With regard to the issue of bundling of transmission capacity and payphone CPE, we note that in the Interstate, Interexchange Marketplace Notice, we stated that we would consider in this proceeding "the issue of bundling pay telephone equipment with the underlying transmission capacity." In the Notice, we tentatively concluded that other IXC bundling issues should be treated under the same rules that we proposed in the Interstate, Interexchange Marketplace proceeding. We decline to adopt in this proceeding any rules regarding the bundling of payphone CPE with the underlying transmission capacity. We do not have a sufficient record to revise, with regard to payphone CPE, the Commission's conclusion in the Computer II proceeding that there are public interest benefits in unbundling CPE from the underlying transmission service. The issue of IXC CPE bundling will be addressed in the Interstate, Interexchange Marketplace proceeding.