I. Introduction

 These comments address the merits of four potential approaches to access 
charge reform, and, as requested by the Washington Utilities and Transportation 
Commission (Commission), assume that the Commission has established a 
competitively neutral mechanism to support universal service for customers in 
high-cost locations.   .  Notice of Opportunity to File Comments, January 21, 
1998, at 1.

 In its "Notice of Opportunity to File Comments" (Notice), the Commission 
solicits comments on four "alternative approaches" to access charge reform.  
These four proposals all contemplate a reduction in the overall level of access 
charges, and focus primarily upon different rate restructuring/rebalancing 
mechanisms.  The four options are:

A. Reduce terminating access charges by the amount of funding provided through 
the universal service mechanism.

B. Reduce access charges to offset universal service funding, and shift any 
terminating access charges in excess of the actual cost of terminating access, 
to originating elements.  The originating elements could be a combination of 
per-minute and per-line charges.

C. Reduce access charges to offset universal service funding, and shift part or 
all of remaining access charges to local rates.  If this approach is favored, 
the Commission seeks comment on how to determine the proportion of access 
charges to be shifted to local rates and the timing of such shifts.

D. Reduce access charges to offset universal service funding, and order an 
additional decrease in access charges with no offsetting local rate increase. 
If this approach is favored, the Commission seeks comment on how it should 
determine the appropriate decrease in access charges and the timing of such 
decrease.
 
 At the heart of the proposed access pricing reforms is the concept that rates 
for bottleneck access services should be based upon forward-looking incremental 
or "economic" cost,""Economic costs" as used herein is defined to include 
forward-looking TSLRIC (or TELRIC) cost, including a reasonable contribution to 
the joint and common operating costs of the firm. rather than upon historic 
"embedded" accounting costs as they generally are today. Because of the 
dramatic technological breakthroughs of the past decade, these historic 
accounting costs are, for the most part, much higher than the forward-looking 
"economic" costs that an incumbent local exchange carrier (ILEC) or a new 
entrant would incur in providing access services now and in the future.  Were 
the access service market fully and effectively competitive today, market 
forces would have already driven access prices down to levels close to the 
"economic" costs that this proceeding contemplates.

 In these Comments, Public Counsel recommends that the Commission take a 
gradual approach to reformation of the access charge system in Washington 
State.  A gradual approach is consistent with that taken by the FCC.  While it 
is appropriate for access charges to move toward cost, there is no crisis, nor 
is it necessary to engage in "rate rebalancing" in the name of access reform.  
Public Counsel's recommendation (see Section VII, infra) contains elements from 
all four of the "possible approaches" outlined above.  Additionally, Public 
Counsel recommends that the Commission require the incumbent local exchange 
carriers to define the nature of any "subsidies" inherent in their existing 
access rates.  Public Counsel further suggests that before the Commission makes 
any decision as to whether "offsetting" rate increases are appropriate, it 
investigate ILEC shareholder responsibility for "stranded investment."  Public 
Counsel recommends access rate reform in Washington specifically include the 
following elements:
•restructuring access charges over time into a uniform structure statewide with 
price levels moving toward "economic cost";

•creating a separate rate element that is collected from originating access 
minutes (collected from carriers not end users) that can be phased down and 
used as the mechanism for actually reducing the overall level of access service 
revenues;

•application of any additional USF funds to reduce the overall level of 
revenues collected from access charges;

•phasing in access reductions to allow evaluation of whether end user customers 
in Washington are seeing toll service reductions commensurate with the access 
charge reductions (using future access reductions as a "carrot" to encourage 
carriers to pass along access reductions more quickly than the market might 
otherwise dictate);

•allowing the ILECs unlimited downward flexibility on the new originating rate 
element, so long as any price reductions are applied uniformly throughout the 
ILECs' service area; and

•pending the outcome of the recommended "stranded investment" investigation, 
eliminate or reduce the specific mechanism used to recover these "stranded 
costs" in the interim.

II. Universal Service Funding Should Not Be Used As A "Make Whole" For Access 
Reform

 The Commission's Notice requests that parties address four potential 
approaches to access charge reform, all of which assume that "the Commission, 
with legislative authority as necessary, has established a competitively 
neutral mechanism to support universal service for customers in high-cost 
locations."Notice of Opportunity to File Comments, at 1.  The outcome of the 
universal service proceeding relates to access charge reform because fulfilling 
the Congressional mandate to transform implicit universal service support into 
explicit support potentially requires the Commission to determine the portion 
(if any) of access charges that support universal service.  

 First, however, in discussing implications of access charge reform for the 
Commission's universal service programs and goals (or vice-versa), it is 
critical to differentiate between the overarching and general goal of 
maintaining "affordable" rates for basic telephone service (which is one 
element of universal service) and the specific universal service support 
referenced in the Commission's Notice, that of high cost support.  

Impact of access charge reform on the affordability of basic telephone service

 Lowering access charges toward their forward-looking cost will necessarily 
reduce incumbent local exchange carriers' revenue stream (though not on a 
"dollar-for-dollar" basis because the rate reduction will stimulate new demand, 
thus partially offsetting the revenue impact).See Section IV, below, for 
further discussion of this issue.  Should the Commission allow an ILEC to raise 
rates for any basic telephone services in order to recover any portion of the 
otherwise foregone revenue (resulting from the access charge reform), such a 
rate increase(s) could, conceivably (but not necessarily), jeopardize the goal 
of maintaining affordable telephone service.  As a threshold matter, however, 
as we discuss below, Public Counsel opposes a "dollar-for-dollar" adjustment, 
and further we recommend a phasing in of rate changes if any.  Both of these 
measures will mitigate rate impact.  Indeed, if properly implemented, access 
charge reform need not hinder the achievement of affordable telecommunications 
service in the State of Washington.  Furthermore, as is discussed in the 
section that addresses so-called stranded investment, the amount by which 
ILECs' prices (for any of their services) exceed forward-looking costs — an 
amount that some refer to as "contribution" — should not be considered in its 
entirety as essential to the achievement of universal service.  In other words, 
universal service is only one of many factors contributing to the fact that 
access charges exceed cost. 

 In considering matters of affordability, the concern is potentially greatest 
for low-income customers and customers in high-cost areas.  However, Public 
Counsel believes that access charge reform need not jeopardize affordable 
service for either of these two populations:

 • Assuming access charge reductions appropriately flow through to end users, 
low-income customers — if using average levels of toll, should not face rate 
increases as a consequence of access charge reform.  Should any rate 
rebalancing occur, however, Public Counsel certainly would encourage the 
Commission to revisit whether the Lifeline subsidy adequately offsets the (new) 
price of basic telephone service.

 • High cost programs are intended to ensure that customers residing in areas 
that are relatively more costly to serve pay affordable basic telephone rates. 
Generally, there is no reason that access charge reform, per se, should 
jeopardize this goal.  Indeed, successfully implemented access charge reform 
should benefit customers in high cost areas because toll rates should decline, 
thus lowering rural customers' long-distance prices.There is potentially a 
computational link between access charge reform and high cost funding because 
the former could possibly affect the average per-loop revenue.  If the 
Commission establishes a revenue threshold for the purpose of calculating high 
cost requirements, any changes in the prices for any of the services that the 
revenue threshold encompasses could, in turn, affect the size of the average 
per-loop revenue.  The average revenue per household should include all 
revenues inextricably linked to the basic telephone
loop, however, including not only the revenues from basic telephone service, 
but also vertical services, and access services.  The Commission should also 
consider demand stimulation if it computes an average revenue per loop.    

Relationship of access charge reform to the high cost fund
 
 Presently, a $9-million universal service fund (supported by an assessment of 
$0.00152 on each minute of intrastate long distance access) subsidizes high 
cost telephone service in high cost regions of Washington.Staff's Draft Report 
to the Legislature on Universal Service, November 3, 1997, at 43, citing WUTC 
Docket No. U-85-23, Eighteenth Supplemental Order (Dec. 30, 1986) and 
Washington Exchange Carrier Association tariff WN U-1, Eighth revision of Sheet 
No. 9 (October 1, 1996).  Under the current Washington State high-cost program, 
only those companies with loop costs above 115% of the state-wide average loop 
costs receive high cost support.  Under the contemplated expansion of the high 
cost program, however, where, instead of examining a company's average costs, 
costs will be examined at a far more granular level, many areas of the state 
will necessarily "become" high cost,The significant change in the way high cost 
support requirements are computed does not of course alter the cost of 
providing basic telephone service.  However, the inevitable effect of examining 
costs at an exchange level rather than the entire serving territory of a 
company is necessarily to create below-average and above-average costs.  
Because an ILEC's below-average costs do not factor into high cost calculations 
(i.e., the "negative" requirement is not considered in the high-cost 
calculations), suddenly ILECs that have heretofore not received high cost 
support will become eligible for subsidies, thus substantially expanding high 
cost requirements.  thus causing the high cost program funding requirements to 
increase substantially.  Clearly if the present funding mechanism were 
continued — i.e., the assessment on access minutes — the high cost program and 
access charge reform would work at cross-purposes.

 Staff has recommended that an assessment be made on carriers' end user 
revenues and thus access charge reform could perhaps occur independently of 
universal service reform without one directly impeding the other.

 The four approaches set forth in the request for comments explicitly raise the 
issue of the link between the achievement of universal service objectives and 
access charge reform. Indeed the phrasing of the four approaches, as set forth 
in the Notice imply that access charge reform may be dependent on the 
development of the universal service mechanism, with access charges potentially 
being reduced only in the magnitude of the new high cost fund.  We encourage 
the Commission to coordinate policy initiatives in these two areas, however, 
the Commission may decide not to await the resolution of the universal service 
proceeding before it embarks on intrastate access charge reform.  The likely 
revenue implications of moving intrastate carrier access charges (which now 
yield approximately $254-million in revenues)Staff Report, at Appendix. 
overshadow any estimate of high cost support requirements.  In other words, 
making high cost universal service support explicit will not fully generate the 
offsetting revenues necessary to lower access charges to forward-looking 
costs.  As described below, the so-called "implicit subsidies" inherent in 
today's access charge pricing levels are not all (or even primarily) supporting 
local service and are greater than the targeted purpose of supporting basic 
telephone service in high-cost areas.  Public Counsel fully endorses the 
critical objective of ensuring that ILECs do not double-recover revenues (which 
could occur if new high cost support funds became available before other rates 
declined), and thus fully supports efforts by the Commission to consider the 
timing of access charge and universal service funding changes.
III. The Issue Is Not How To Rebalance Contribution Presently Flowing From 
Access To Local Service, But How To Recover The Gap Between Economic (i.e., 
Forward-Looking) Access Costs And Embedded Access Costs.

 As the Staff Report acknowledges, there is substantial agreement that access 
charges need to be reformed (i.e., reduced), and substantial disagreement about 
how to accomplish the reform.Staff Report, at 1.  While the primary dispute 
that has been teed up is how to recover the "lost-contribution" to the joint 
and common costs of the firm that would occur from a substantial reduction in 
access charge levels, that focus is somewhat misleading.  While there is 
"contribution" flowing from access to local service, much of the revenue 
"shortfall" that would occur from access reform is related to the gap between 
historic and forward-looking costs and has no relationship to "local service" 
or "universal service" at all.  In attempting to fashion a solution for 
"explicitly" recovering the revenue flows that are presently "implicit" in 
excessive access prices, it is absolutely essential to distinguish between the 
two:  i.e., revenues supporting joint and common overhead costs, and revenues 
recovering legacy investments.  Even if it is determined to be proper to shift 
some of the revenue short-fall from the first category of "implicit subsidy" to 
other basic services, it is inappropriate to shift the difference between 
forward-looking and embedded costs to other basic services. The difference 
between prices based upon "economic" costs and "embedded cost" is variously 
referred to as the "legacy gap" or "stranded investment."Note that in its 
January 13th Workshop presentation, the Washington Independent Telephone 
Association identified the difference between embedded and TELRIC costing as 
"Stranded" (SLIDE G).

 The practical effect of pricing access services at forward-looking cost, and 
rebalancing any revenue shortfall to end users is to cause those remaining 
services that presently are not priced at forward looking cost to recover not 
only their own embedded costs, but the embedded costs of access.  It would be 
entirely inappropriate to cause local service customers to pay prices for 
non-competitive services based upon embedded costsI.e., customers that are 
already being denied the efficiencies that would exist if these were a 
competitive market. and to also burden them with the legacy costs from 
intrastate access services.  Note that in its USF Order, the FCC's conclusion 
that the use of forward-looking economic costing should be used for determining 
high-cost support(¶¶  199, 224-231) clearly implies that ILECs will not be 
entitled to recovery of "legacy" of "stranded" costs through the USF.The FCC 
states, "No carrier, however, has presented any specific evidence that the use 
of forward-looking economic cost to determine support amounts will deprive it 
of property without just compensation."  ¶ 230.

 In this case, it is likely that virtually all of the revenue shortfall that 
would result from a movement to access charges based upon "economic costs" 
would fall into the category of "stranded investment."  In its investigation of 
local service pricing as part of UT-950200, this Commission found that 
"residential service covers its own costs and provides a reasonable 
contribution to the overhead of the Company."Fifteenth Supplemental Order, 
Washington Docket No. UT-950200, April 11, 1996, at 100.  That being the case, 
the question of how to "explicitly" recover "implicit" subsidies must be 
refocussed somewhat, with an understanding that unless some alternative 
treatment of the "legacy gap" is contemplated, this entire access reform 
exercise is essentially a shell game.  Regardless of where you hide the pea, 
the ratepayers of Washington state will end up paying for it - either through 
increased local service prices, new "end-user" access charges, or higher than 
necessary toll prices.  If the Commission's goal is truly to bring access 
prices down to "economic cost", then "economic cost" should be the basis for 
the overall revenue requirement associated with the access offerings.  It 
should not be taken as a "given" that any reduction in access charges should 
automatically be transferred to some other class of ratepayer.

 Public Counsel opposes any shift of gap or stranded investment-related revenue 
shortfall to end-users (either through an explicit end-user charge, billing of 
originating access charges to end users, or collection of universal service 
funds from end users) before this Commission undertakes an investigation of 
whether it is appropriate to allow continued recovery of such stranded 
investment.  It would be far better to transition access charge reform over a 
somewhat longer time frame, than to prematurely implement major rate 
rebalancing that could cause substantial rate-shock among Washington 
ratepayers, when it may be found that such rate rebalancing is not necessary.  
ILEC shareholders, and not just Washington ratepayers, should be prepared to 
assume greater responsibility for performance in a competitive environment.For 
further discussion of this issue, see Testimony of Dr. Lee L. Selwyn, filed on 
behalf of the Staff of the Washington Utilities and Transportation Commission 
in Docket No. UT-950200, August 11, 1995, at 48.  See also Dr. Selwyn's 
Testimony on behalf of the Public Counsel in Washington Docket No. UT-961638, 
October 31, 1997.  

 The options for dealing with any "Stranded Investment" found to exist are not 
strictly limited to requirements to "write-off" the investment, as some may 
believe.  In investigating methods of reforming interstate access charges in CC 
Docket 96-262, the FCC's NPRM presented several other specific alternatives for 
"sunsetting" the revenue requirement associated with  this investment as 
detailed below.  
 263.  If we conclude that a recovery mechanism is necessary, we could design a 
mechanism to recover a specific, fixed, dollar amount of remaining embedded 
costs, over a fixed period. ...  For example, one possible recovery mechanism 
might be to permit incumbent LECs to "amortize" their recovery of the 
difference, i.e., to permit incumbent LECs to include in their rates a certain 
fraction of the difference each year for a certain number of years. ...

 264.  Another option would be to establish a competitively-neutral recovery 
mechanism that is separate and distinct from access charges. ...  This 
mechanism could be similar to the mechanism for collecting universal service 
funds, except that this recovery fund would not be permanent, nor would 
payments be portable to other eligible telecommunications carriers. ...

 265.  In the event we adopt one of the special regulatory mechanisms described 
above or an alternative mechanism advocated by parties in this proceeding, as 
part of a transition to a competitive environment, we seek comment on whether 
some limitation on incumbent LECs' earnings is warranted.  For example, we 
invite parties to comment on whether, if we set up a special mechanism that 
permitted incumbent LECs a reasonable opportunity to recover certain costs, it 
would be appropriate to limit to a certain prescribed rate of return the 
incumbent LEC earnings on the investment portion of the costs designated for 
recovery, or to increase the incumbent LEC’s price cap sharing obligations, 
given the limited risk of non-recovery under such a mechanism.  Alternatively, 
we could permit incumbent LECs to select from two recovery options — cost 
recovery through market-based prices to the extent they are able in a 
competitive market; or cost recovery through a regulatory mechanism, with a 
greater sharing obligation under the price cap plan.254 ...  [Footnote 254:  
See Access Reform Presentation, Ad Hoc Telecommunications Users Committee, Oct. 
31, 1996.]

Although it has begun its reform of interstate access charges, the FCC has yet 
to deal with the issue of "legacy costs", indicating that this issue would be 
dealt with in a separate, yet to be initiated, rulemaking proceeding.CC Docket 
No. 96-263, In the Matter of Access Charge Reform, FCC 97-158, released May 16, 
1997, at ¶ 14. 

There is no erosion in the "going business" value of ILEC assets, and there is 
thus no "Stranded Investment" as an economic matter.

 Even if the value of certain individual ILEC rate base assets may have eroded, 
there is compelling evidence that the aggregate "going business" value of ILECs 
has escalated.  The persistence of premium (relative to book value) prices for 
ILEC shares demonstrates that investors view the potential opportunities 
available through competition and reduced regula- tion as more than offsetting 
any erosion in the value of individual ILEC assets.  Accordingly, no "make 
whole" policy is either required or appro-priate, and the adoption of any such 
program will serve only to increase the already formidable economic barriers to 
effective local competition.  Investment for which recovery can no longer be 
achieved is termed by ILECs as "stranded" — implying that it becomes 
effectively abandoned as an economic matter.  While  those arguments have not 
been fleshed out in this proceeding to date, the ILEC's appear to be claiming 
that it is the legal obligation of this Commission to reimburse ILECs for all 
incurred costs.
 
LEC Market-to-Book Ratios
as of December 31, 1997
(Estimated)
 
  Ameritech 4.27
  Bell Atlantic 3.98
  Bell South 3.23
  NYNEX 3.69
  Pacific Telesis N/A
  Southwestern Bell 5.63
  US West Communications 4.27
  GTE 5.68
  Cincinnati Bell 4.88
  SNET 5.06
  Rochester Telephone 3.20

Unadjusted for SFAS 71 Write-Offs
Source: Value Line, April 11, 1997
 Even assuming the "regulatory bargain" has not changed, the problem with these 
arguments is that as an economic matter there is no "stranded investment 
problem" – because the aggregate market value of the ILEC as a whole is still 
well in excess of the net book value of its embedded investment. The fact that 
the economic value of individual components of the ILECs' infrastructure may 
have fallen below book value is basically irrelevant as long as the aggregation 
of all ILEC rate base assets con-tinues to possess an economic value in excess 
of net book value, which is indis-put- ably the case.  The equity securities of 
each of the (pre-merger) RBHCs are trading well in excess of book value, (see 
the accom-pany-ing table).These ratios are unadjusted for the SFAS 71 
write-offs.  Even with such adjustments, the market to book ratios would all be 
well in excess of 2 to 1 (with some remaining greater than 4 to 1). On November 
1, 1995, US West was split into US West Communications Corp. and US West Media 
Group.  Moreover, since the break-up of the former Bell System in 1984, the 
market-to-book value ratios for each of the seven RBHCs has been steadily 
growing, despite con-sistently poor performance of most non-LEC business 
ini-tia-tives of these com-panies.  Hence the "regu-la-tory bargain" has been 
fully and indis- putably satisfied:  ILECs and ILEC share-hold-ers have not 
been denied the ability to recover and to earn a fair return on their 
investment; indeed, ILECs and ILEC share-hold-ers are today con-fron-ted with 
compe-titive and other oppor-tuni-ties that Wall Street, at least, is willing 
to pay a premium over book value to acquire.  As shown in Figure 1 below, over 
the decade following divestiture, the market-to-book value ratios grew 
steadily.  In 1996, RBOC and GTE market-to-book ratios were in the range of 2.3 
to 3.4 for RBOCs and 3.4 for GTE (calculated on a regulatory basis   .  
Financial book values reflect certain write-offs made by the RBHCs at the time 
of their respective elections to discontinue reporting under SFAS 71.  Since 
these write-offs were not made to the ILECs' regulatory books (i.e., to their 
rate base amounts), the financial statement values must be adjusted upward to 
reverse the effects of the write-offs.).  By contrast, the average 
market-to-book ratio for the major electric and gas utilities was in the range 
of 1.6 as of that same date.  By the end of 1997, the range for the RBOC's 
market-to-book ratios had increased to 2.6 to 4.4. 
Figure 3.  RBHCs' and Independents' Market-to-Book Value Ratios

 Although the absolute value of the market-to-book value ratio may be 
influenced by many factors, the persistent willingness of investors to pay 
considerable premiums for ILEC shares confirms the fact that investors do not 
perceive the cumulative and combined effect of regulatory actions as so 
adversely impacting the ILECs' ability to earn a fair return on their 
investment as to constitute confiscation of the ILECs' property.   .  Prof. 
Laurence Booth writes in his article The Importance of Market-to-Book Ratios in 
Regulation that  “normal business risk fluctuations cannot explain high 
market-to-book ratios... .  The only way that high market-to-book ratios can 
come about is if investors expect the situation to continue indefinitely.”  p. 
420  Booth concludes that “market-to-book ratios are an invaluable source of 
information.  If the information is in conflict with prior beliefs, I would 
strongly urge people to carefully reconsider their views, before ignoring the 
views of the market.” National Regulatory Research Institute Quarterly 
Bulletin, Winter 1997, Volume 18, Number 4, at 425.



Pricing interconnection and access at economic cost does not constitute a 
regulatory "Taking"

 ILECs have generally argued that setting interconnection and access rates at 
an economic, rather than historic, level constitutes confiscatory practice.  
However, individual regulatory actions or decisions are not per se confiscatory 
if the cumulative effect of the method of regulation provides the utility with 
an opportunity to recover its prudent investments and earn a fair return 
thereon.  The United States Supreme Court has authoritatively interpreted the 
constitutional guarantee against a regulatory taking in Duquesne Light Co. et 
al v. Barasch et al.   .  488 U.S. 299 (1988).  Confiscation does not occur 
unless the net effect of regulation on the business as an enterprise, after 
offsetting countervailing errors or allowances, precludes its successful 
operation.  

 Duquesne explicitly rejects the claim that the specific regulatory action by 
itself constitutes unconstitutional confiscation of a utility's property.  The 
Supreme Court held that:
‘It is not theory, but the impact of the rate order which counts."  The 
economic judgments required in rate proceedings are often hopelessly complex 
and do not admit of a single correct result.  The constitution is not designed 
to arbitrate these economic niceties.  Errors to the detriment of one party may 
well be cancelled out by countervailing errors or allowances in another part of 
the rate proceeding.  The constitution protects the utility from the net effect 
of the rate order on its property. Inconsistencies in one aspect of the 
methodology have no constitutional effect on the utility's property if they are 
compensated by countervailing factors in some other aspect.’Id., at 314, 
(emphasis added)(quoting Federal Power Comm'n v. Hope Natural Gas Co., 320 U.S. 
591@602 (1944)).

 Claims of "confiscation" related to the reduction of prices to "economic cost" 
levels that would occur naturally in a competitive environment appear to adopt 
a "five foot view" of an ILEC's business rather than the 50,000-foot view 
underlying Duquesne.  Suppose that an ILEC owned two assets, each one of which 
is carried on its books at a net book value of $1-million, and that as a result 
of regulatory changes asset "A" is now "worth" $300,000 while asset "B" is 
"worth" $3-million.  Under the "make whole" school of thought the ILEC is 
entitled to receive the $700,000 in eroded value of "A" but has no obligation 
to refund or even offset that eroded value of "A" with the $2-million increase 
in the value of "B". Duquesne holds that since the net effect of the regulatory 
change is an increase in the combined value of "A" and "B" from the original 
$2-million to $3.3-million, no "taking" has occurred at all.  A "heads I win, 
tails you lose" understanding of the Fifth Amendment Takings clause is clearly 
impermissible under the Duquesne decision.  

 Consistent with Duquesne the California PUC recently ruled that permitting 
competition does not constitute an unconstitutional taking and declined to 
require or authorize any "franchise impacts" compensation.  The Commission held:

We conclude that the introduction of competition into the local exchange 
markets, would not constitute a taking unless utility investors were deprived 
of the opportunity to earn a fair return on their investments.  We find that 
the opportunity to earn must be evaluated from the shareholder perspective 
..."California PUC Decision No.96-09-089, R.95-04-043/I.95-04-044, at 2.  In 
that ruling, the CPUC limited its consideration of earnings opportunities to 
"only those earnings from 'regulated assets.'"  It thus included yellow pages 
and any future services that may be derived from the ILECs' wireline network 
infrastructures, but excluded cellular from this calculus.  

 It is inappropriate, even from the perspective of rate of return analyses to 
look selectively at isolated elements of a complex financial and economic 
problem.  “Return” cannot be defined in terms of current, cash earnings, 
ignoring entirely any of the countervailing and (from the ILEC's perspective) 
highly salutary long run effects of the Telecommunications Act and the 
Commission's overall approach to regulating (and ultimately to deregulating) 
incumbent LECs.  Short term cash earnings are at best one of the variables 
affecting a company's long run ability to operate successfully.  To address the 
broad