===============================
                         Before the
              FEDERAL COMMUNICATIONS COMMISSION
                   Washington, D.C. 20554




UNITED STATES TELEPHONE ASSOCIATION FILES             )
PETITION FOR FORBEARANCE FROM DEPRECIATION           )
REGULATION OF PRICE CAP LOCAL EXCHANGE CARRIERS  )


ASD 98-91





             COMMENTS OF NEW NETWORKS INSTITUTE



                                   
                                           Bruce A. Kushnick
                                           Executive Director
                                           New Networks Institute
                                           826 Broadway, Suite 900
                                           New York, NY 10003
                                   
                                           212-777-5418




Dated: October 25th, 1998

Do Not Grant the Bells and Other LECs Forbearance of
Depreciation Expenses.  Instead, We Call Upon the FCC to
Investigate $21 billion in Previous Depreciation Write-offs.


     On May 11th, 1998 NNI filed a formal complaint with the
Criminal Justice Division of the Internal Revenue Service to
investigate $20.8 billion dollars of questionable
Depreciation write-offs by the Regional Bell Operating
Companies, and other  local phone companies.
     
     Our claims, presented in the attached Complaint, and
summarized in our recent FCC filings for  the FCC
proceedings on Advanced Network Deployments, 98-146, and 98-
147, states the following:
     
     In the early 1990's,  the Regional Bell Holding
Companies and their local phone companies  promised to
deploy advanced networks, which would deliver very high
speed, 500 channel, full-motion video interactive services.
     
     These networks would be based on new fiber-optic
wiring, replacing the current copper wiring in use today.
By the end of next year, almost HALF of America's households
was supposed to have been upgraded.
     
     In exchange for these new services state Public Utility
Commissions and state legislatures granted Alternate
Regulations that allowed the Bells more profits which would
be used to fund these networks. Also, the Bells stated that
there was facing competition and that they needed to replace
their old business model with this new alternative, giving
them more financial  freedoms. This change was from a "Rate-
of-Return regulation to "Price Cap" regulation.
     
     Unfortunately, the Bells failed to deliver on their
promised deployments or services. Attached is a description
of how New Jersey's Alternate Regulation plan, "Opportunity
New Jersey", did nothing more than increase Bell Atlantic's
profits. Also, today, only 1% of residential customers and
businesses use competitive local services. There was
virtually NO local competition in 1993-1995.
     
     However,  from 1993 to 1995, the Bells took massive,
multiple-billion dollar depreciation deductions, $20.9
billion to be exact, writing-off most of the copper wiring -
the wiring that is still in place today and still being
used.
     
     If there was virtually no replacement of the copper
wire, or more importantly, new advanced services that would
require this new wiring, and if there was no substantial
competition in 1993 to 1995, then these deductions were, at
best, premature. However, the copper networks are still in
use today, and these deductions, as far as we can tell, were
not in the Public Interest, as monopoly phone companies are
obligated to do.
     
     Therefore:
     
     The FCC should not  grant any new forbearance in
depreciation until these issues are investigated.
     
     The FCC should rule as to the legality of these network
deductions and require customer reimbursements and
penalties.
     
     If the deductions were legal then the FCC should
consider that the Bells are still charging retail for
networks that have already been written off, and therefore,
all charges, from the "FCC Subscriber Line Charge" to
"Access Fees" should be reassessed.


                    Respectfully submitted,
                    
                    NEW NETWORKS INSTITUTE
                    
                    By:____________________
                    
                    
                    Bruce A. Kushnick
                    Executive Director
                    New Networks Institute
                    826 Broadway, suite 900
                    New York, NY 10003
                    
                    212-777-5418