**Before the**

**FEDERAL COMMUNICATIONS COMMISSION**

#  Washington, D.C. 20554

In the Matter of

The Prescription of Revised Percentages of )

Depreciation pursuant to the Communications )

Act of 1934, as amended for: )

)

GTE North, Incorporated )

GTE South, Incorporated )

**MEMORANDUM OPINION AND ORDER**

**Adopted: November 23, 1999 Released: December 1, 1999**

By the Commission:

**I. INTRODUCTION**

1\. On July 23, 1999, GTE Service Corporation ("GTE") requested that the
Commission prescribe revised depreciation rates pursuant to Section
220(b) of the Communications Act of 1934 (\"Act\")[^1] for two of its
telephone operating companies, GTE North and GTE South.[^2] In this
Memorandum Opinion and Order, we grant GTE's request.

**II. BACKGROUND**

2 Under Section 220(b) of the Communications Act of 1934, as amended,
the Commission may prescribe depreciation rates that are used to compute
depreciation expense for incumbent local exchange carriers (\"LECs\").
Our rules provide that prescribed depreciation rates shall allocate the
carriers\' plant investments on a straight-line basis over the life of
the associated plant.[^3] The depreciation rate for an account is a
function of the associated plant\'s average remaining life, future net
salvage, and depreciation reserve ratio.[^4] The depreciation rate is
calculated using the following formula:

Depreciation rate = [100% - depreciation reserve ratio % - future net
salvage %]{.underline}

average remaining life

Both the average remaining life and the future net salvage factors are
based upon estimates that require periodic review to ensure their
reasonableness.

**III. DISCUSSION**

3\. On April 14, 1999, GTE submitted a depreciation rate study to the
Common Carrier Bureau (\"Bureau\") proposing revisions to its
depreciation rates for its facilities in Ohio (GTE North-Ohio) and
Virginia (GTE South-Virginia).[^5] On May 14, 1999, GTE provided
additional information regarding its proposed depreciation rates.[^6]
Bureau staff reviewed this proposal and on July 8-9, 1999 convened a
three-way meeting with representatives of GTE, the Public Utilities
Commission of Ohio, and the Virginia State Corporation Commission
("Virginia Commission Staff"). All of the parties participating in the
three-way meeting agreed to life and salvage factors that should be used
to compute GTE North-Ohio\'s and GTE South-Virginia's depreciation
rates.

4\. On July 23, 1999, GTE formally filed a request that the Commission
prescribe revised depreciation rates for its Ohio and Virginia
facilities.[^7] The Bureau staff reviewed the filing and determined
that: (1) the proposed rates were based on the factors agreed to at the
three-way meeting; and (2) the proposed rates were calculated in
accordance with our rules.[^8]

5\. On August 5, 1999, the Bureau released a Public Notice seeking
comments on GTE North-Ohio's and GTE South-Virginia's proposed rates.
The Virginia Commission Staff filed comments on September 7, 1999,
concurring with the proposed depreciation rates for GTE's facilities in
the State of Virginia.[^9]

6\. Based on our review of the record, we find that GTE North-Ohio's and
GTE South-Virginia's proposed depreciation rates were prepared in
accordance with the Commission\'s depreciation prescription procedures
and that the proposed rates are reasonable and consistent with our rules
and orders. We therefore adopt GTE North-Ohio\'s and GTE
South-Virginia's proposed rates as specified in the Appendix.

7\. In addition, GTE proposed that the revised rates become effective on
January 1, 1999. GTE\'s request is consistent with our rules that allow
rates to be made retroactive to the beginning of the year in which the
filing is made.[^10] We hereby set the effective date of these rates as
January 1, 1999.[^11]

**IV. ORDERING CLAUSES**

8\. ACCORDINGLY IT IS ORDERED, pursuant to Sections 4(i), 201-205 and
220(b) of the Communications Act of 1934, as amended, 47 U.S.C. Sections
154(i), 201-205 and 220(b), that the percentages of depreciation set
forth in the Appendix to this Order ARE PRESCRIBED, effective January 1,
1999.

9\. IT IS FURTHER ORDERED that this Order is effective upon release.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

[^1]: *See* 47 U.S.C. § 220 (b).

[^2]: *See* Letter from Allen E. Sovereign, Group Manager -- Capital
    Recovery, GTE Service Corporation, to Magalie R. Salas, Esq,
    Secretary, Federal Communications Commission, July 23, 1999.

[^3]: *See* 47 C.F.R. § 32.2000(g)(2)(ii).

[^4]: ^?^ The average remaining life is the average of the future life
    expectancy of the various items in a plant account. The future net
    salvage is the estimated gross salvage derived from the disposal of
    the plant less the estimated cost of removal. The depreciation
    reserve ratio represents the portion of a carrier\'s plant
    investment that has been depreciated or charged against income. This
    is the ratio of a carrier\'s respective accumulated depreciation and
    plant investment accounts.

[^5]: ^    ?^ *See* Letter from Allen E. Sovereign, Group Manager --
    Capital Recovery, GTE Service Corporation, to Fatina K. Franklin,
    Accounting Safeguards Division, Federal Communications Commission,
    April 14, 1999.

[^6]: ^    ?^ *See* Letter from Allen E. Sovereign, Group Manager --
    Capital Recovery, GTE Service Corporation, to Fatina K. Franklin,
    Accounting Safeguards Division, Federal Communications Commission,
    May 14, 1999.

[^7]: ^   ?^ *See* *supra* n. 2

[^8]: ^  \ ?^ *See* 47 C.F.R. § 32.2000(g).

[^9]: ^?^ *See* Virginia Commission Staff comments at 1*.*

[^10]: ^ ?^ *See* The Prescription of Revised Percentages of
    Depreciation pursuant to the Communications Act of 1934, as amended
    for: Alascom, Inc., *et. al*, 6 FCC Rcd 750 (1991).

[^11]: ^ ?^ *See* 47 C.F.R. § 43.43(e).