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                            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:                            )
                                         )
Southwestern Bell Telephone              )


                  MEMORANDUM OPINION AND ORDER


   Adopted:  January 7, 1999            Released: January 8, 1999

By the Commission:   Commissioner Furchtgott-Roth issuing a statement.

                         I. INTRODUCTION 

     1.   On July 30, 1998, Southwestern Bell Telephone ("SBC") filed a request that the
Commission prescribe revised depreciation rates pursuant to Section 220(b) of the Communications
Act of 1934 ("Act").   In this Memorandum Opinion and Order, we adopt these rates.   

                          II. BACKGROUND

     2    Under 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.  The depreciation rate
for an account is a function of the associated plant's average remaining life, future net salvage, and
depreciation reserve ratio.  The depreciation rate is calculated using the following formula:


Depreciation rate = 100% - depreciation  reserve  ratio % - future net salvage %
                              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.  In 1993, the Commission established
procedures that allow streamlined studies for review, provided that carriers select life and salvage
factors from within the prescribed ranges.

                       III. DISCUSSION    

     3.   On December 19, 1997, SBC submitted a depreciation rate study to the Common
Carrier Bureau ("Bureau") proposing revisions to its depreciation rates for facilities in Kansas,
Missouri, and Texas.  On March 6, 1998 and April 2, 1998, SBC provided additional information
regarding its proposed depreciation rates.  Bureau staff reviewed this proposal and on July 23, 1998
convened a video teleconference with representatives of SBC and the Kansas Corporation
Commission, Missouri Public Service Commission, and Texas Public Utility Commission.  With the
exception of two accounts, all of the parties participating in the teleconference agreed to equipment
life and salvage factors that should be used to compute SBC's depreciation rates.  The exceptions are
Account 2212, Digital Electronic Switching, and Account 2423, Buried Cable - Metallic for the
Kansas jurisdiction.  For these accounts, SBC and the Bureau staff agreed to factors, but the Kansas
staff did not agree.      

     4.   On July 30, 1998, SBC formally filed a request that the Commission prescribe revised
depreciation rates for its Kansas, Missouri, and Texas facilities.  The Bureau staff reviewed the filing
and determined that: (1) the proposed rates were based on the factors agreed to in the teleconference;
(2) SBC did not propose, except for two accounts, to move its life factors outside the prescribed
ranges; and (3) the proposed rates were calculated consistently with our rules.
                                 
     5.   On August 26, 1998, the Bureau released a Public Notice seeking comments on SBC's
proposed rates.  Only Kansas submitted comments.  Kansas agreed to the proposed rates with the
exception of Accounts 2212 and 2423.  For those accounts, Kansas reserved judgment pending the
resolution of a Kansas Commission proceeding in which those depreciation rates may be resolved for
state ratemaking purposes.  

     6.   Based on our review of the record, we find that SBC's proposed depreciation rates
were prepared in accordance with the Commission's depreciation prescription process and that the
proposed rates are reasonable and consistent with our rules and orders. We therefore adopt SBC's
proposed rates as specified in the Appendix.

     7.   In addition, SBC proposed that the revised rates become effective on January 1, 1998. 
SBC'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.  We hereby set the effective date of these rates as January 1,
1998.

                       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, 1998.

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

                         FEDERAL COMMUNICATIONS COMMISSION


                         Magalie Roman Salas
                         Secretary


                          STATEMENT OF
              COMMISSIONER HAROLD FURCHTGOTT-ROTH

      Re: The Prescription of Revised Percentages of Depreciation Pursuant to the
     Communications Act of 1934, as amended, for Southwestern Bell Telephone 

     I support today's Order revising the depreciation rate for Southwestern Bell Telephone.  I
write separately to express my continued concern with the Commission's micromanagement of
LECs in general.  The Commission's authority to prescribe depreciation rates for LECs is a mere
vestige of outdated rate of return regulation.  I note that the Commission has initiated a
proceeding to review the depreciation rules, along with many of its other detailed accounting
regulations, in the context of its biennial review proceedings.  I await anxiously the opportunity to
address more fully these issues and the circumstances under which dominant LECs should be
accorded a simpler form of price cap regulation. 

     In today's increasingly competitive telecommunications marketplace, the Commission
should be focusing its efforts on transitioning to this more competitive environment.   The amount
of detailed information and regulatory scrutiny required under our current price cap rules is
inordinate and should be reduced.  This seemingly anachronistic regulatory regime should be
reformed to provide further pricing flexibility, eliminating altogether such relics as the low-end
adjustment.  I am becoming increasingly convinced that the current regulatory mechanisms -- and
certainly the level of detail -- are no longer necessary in today's increasingly competitive
marketplace.  We must develop a more forward-looking blueprint to guide the transition from
regulation to competition.  As I have stated previously, regulation is merely designed, to the
extent possible, to replicate a competitive marketplace, but any form of regulation is an imperfect
surrogate for full-fledged competition.   I believe the Commission must consider even further
deregulation as these cumbersome regulations become unnecessary.  
                FEDERAL COMMUNICATIONS COMMISSION                       APPENDIX
       Schedule of Annual Percentages of Depreciation for             PAGE 1
           SOUTHWESTERN BELL TELEPHONE COMPANY - KANSAS

                    Effective January 1, 1998


                                                   Remaining
                               Average         Future         Life
                              Remaining          Net    Accumulated       Depreciation
Rate Category Description               Life       Salvage      Depreciation            Rate
____________________                    ________      _______    __________     _____________
                               (years)                 (%)      (%)      (%)
                                  A     B     C   D=(100%-B-C)/A

2112      MOTOR VEHICLES                          3.6                              11           56.9                 8.9
2115      GARAGE WORK EQPT      3.8                              0          57.1                    11.3
2116      OTHER WORK EQPT                 5.7                             0           53.1                 8.2
2121      BUILDINGS                        25.0                                6           27.3                 2.7     
2122      FURNITURE                7.0                                0          27.6                    10.3
2123      OFFICE SUPPORT                  4.9                             0           49.7                10.3
2123      COMPANY COMMUNICATIONS EQPT                      3.7                                0           58.9           11.1
2124      GEN'L PURPOSE COMPUTERS                    2.4            2            71.9                          10.9
2211      ANALOG ELECT SWITCHING                           0.9           -3           75.3           30.8
2212      DIGITAL ELECT SWITCHING                          7.8            2           33.1            8.3
2220      OPERATOR SYSTEMS                 3.9               0         46.1           13.8
2231      RADIO               @                            1.8           -5           87.5            9.7
2232      DIGITAL DATA SYSTEMS                      3.5             0            57.3                12.2
2232      DIGITAL CIRCUIT                           5.7             0            40.3                10.5
2232      ANALOG CIRCUIT                          3.0          -4           72.5                10.5
2311      STATION APPARATUS                2.9              -2         70.0                    11.0
2341      LARGE PBX                        3.2              -5         71.2                    10.6
2362      OTHER TERMINAL EQPT                       3.3            -2             8.3                28.4
2411      POLE LINES                             10.2        -108          118.2                    8.8
2421      AERIAL CABLE-METALLIC                              10.5            -42           62.9                 7.5
2421      AERIAL CABLE-NONMETAL                  13.0                        -25           22.3            7.9
2422      UG CABLE-METALLIC          14.3         -12        62.8            3.4
2422      UG CABLE-NONMETAL                13.1             -9         32.6            5.8
2423      BURIED CABLE-METALLIC                            9.4          -10           55.4            5.8
2423      BURIED CABLE-NONMETAL                  14.8             -10            24.3            5.8
2424      SUBMARINE CABLE                        11.3               0            68.9            2.8
2426      INTRABLDG NETWORK CABLE-METAL          13.3             -17            63.6            4.0
2426      INTRABLDG NETWORK CABLE-NONMET         12.3              -5            49.2            4.5
2431      AERIAL WIRE                             2.1            -145           161.7           39.7
2441      CONDUIT SYSTEMS                        31.0             -10            30.8            2.6


The figures in Columns B, C, and D are percentages of gross book costs.

    @   The January 1, 1998 reserve imbalance of $8,840,000 for the Radio Systems Account is to be amortized over a twenty-four
    month period ending December 31, 1999.
             FEDERAL COMMUNICATIONS COMMISSION              
                                                   APPENDIX
    Schedule of Annual Percentages of Depreciation for                PAGE 2
       SOUTHWESTERN BELL TELEPHONE COMPANY - MISSOURI

                 Effective January 1, 1998

                                                       
                         
                                                   Remaining
                               Average         Future                    Life
                              Remaining      Net    Accumulated  Depreciation
Rate Category Description                    Life    Salvage    Depreciation            Rate
____________________               ________  _______  __________ _____________
                               (years)                 (%)      (%)      (%)
                                  A            B        C  D=(100%-B-C)/A

2112      MOTOR VEHICLES                                  3.6            10           55.8            9.5
   
2115      GARAGE WORK EQPT                 7.4              0          34.5            8.9
2116      OTHER WORK EQPT                                 6.0             0           52.8            7.9
2121      BUILDINGS                                      41.0             4           22.4            1.8
2122      FURNITURE                               7.9                     0            3.7           12.2
2123      OFFICE SUPPORT                                  5.2             0           42.7           11.0
2123      COMPANY COMMUNICATIONS EQPT                     4.0             5           34.1           15.2
2124      GEN'L PURPOSE COMPUTERS                         3.0             2           47.8           16.7
2211      ANALOG ELECT SWITCHING                          2.5            -3           57.0           18.4
2212      DIGITAL ELECT SWITCHING                         8.0             2           30.1            8.5
2220      OPERATOR SYSTEMS                 7.0              0          44.3            8.0
2231      RADIO     @                             1.0                    -5           95.8            9.2
2232      DIGITAL DATA SYSTEMS                            3.4             0           71.2            8.5
2232      DIGITAL CIRCUIT                                 5.7             0           44.3            9.8
2232      ANALOG CIRCUIT                                  2.9            -3           70.9           11.1
2311      STATION APPARATUS                 2.5            -2          82.1            8.0
2341      LARGE PBX                        2.7             -5          54.8           18.6
2362      OTHER TERMINAL EQPT                             3.4            -5            7.9           28.6
2411      POLE LINES                       13.1          -116          87.9            9.8
2421      AERIAL CABLE-METALLIC                          10.7            49           62.0            8.1
2421      AERIAL CABLE-NONMETAL                          13.2           -25           17.4            8.2
2422      UG CABLE-METALLIC                13.5           -21          62.8            4.3
2422      UG CABLE-NONMETAL                      13.2                   -10           30.3            6.0
2423      BURIED CABLE-METALLIC                          10.0           -10           48.7            6.1
2423      BURIED CABLE-NONMETAL                          14.7           -10           25.5            5.7
2424      SUBMARINE CABLE                                11.6             0         -158.0           22.2
2426      INTRABLDG NET WORK CABLE-METAL                 12.8           -17           53.4            5.0
2426      INTRABLDG NET WORK CABLE-NONMET  11.9            -5          20.3            7.1
2431      AERIAL WIRE                             3.6                  -287          228.4           44.1
2441      CONDUIT SYSTEMS                                32.0            -6           28.0            2.4

The figures in Columns B, C, and D are percentages of gross book costs.

          @         The January 1, 1998 reserve imbalance of $10,878,000 for the Radio Account is to be amortized over a twenty-four month period
          ending December 31, 1999.



             FEDERAL COMMUNICATIONS COMMISSION              
                                                   APPENDIX
    Schedule of Annual Percentages of Depreciation for                PAGE 3
        SOUTHWESTERN BELL TELEPHONE COMPANY - TEXAS

                 Effective January 1, 1998



                                                       
                         
                                                   Remaining
                               Average         Future                    Life
                              Remaining      Net    Accumulated  Depreciation
Rate Category Description                    Life    Salvage    Depreciation            Rate
____________________               ________  _______  __________ _____________
                               (years)                 (%)      (%)      (%)
                                  A            B        C  D=(100%-B-C)/A

2112      MOTOR VEHICLES                       3.5              9                53.7                10.7
2115      GARAGE WORK EQPT           4.6               -51       94.3            12.3
2116      OTHER WORK EOPT                         5.8               0            49.5            8.7
2121      BUILDINGS                                      29.0             4           25.5            2.4
2122      FURNITURE                        7.6              4          69.6            3.5
2123      OFFICE SUPPORT                                  4.6             0           58.4            9.0
2123      COMPANY COMMUNICATIONS EQPT                     4.2             0           48.7           12.2
2124      GEN'L PURPOSE COMPUTERS                         3.0             2           52.9           15.0
2211      ANALOG ELECT SWITCHING                          2.2            -2           73.5           13.0
2212      DIGITAL ELECT SWITCHING                         8.1             2           30.5            8.3
2220      OPERATOR SYSTEMS                 4.7              0          52.1           10.2
2231      RADIO                                   2.2              -5            63.7           18.8
2232      DIGITAL DATA SYSTEMS                            3.6             0           54.3           12.7
2232      DIGITAL CIRCUIT                                 5.8             0           43.0            9.8
2232      ANALOG CIRCUIT                                  3.1            -5           82.4            7.3
2311      STATION APPARATUS                2.7             -2          62.3           14.7
2341      LARGE PBX                        2.9             -5          62.3           14.7
2362      OTHER TERMINAL EQPT                             3.6            -2            4.6           27.1
2411      POLE LINES                       13.4          -155          92.1           12.2
2421      AERIAL CABLE-METALLIC                          10.7           -49           67.9            7.6
2421      AERIAL CABLE-NONMETAL                          15.0           -25           17.6            7.2
2422      UG CABLE-METALLIC                12.4           -16          58.5            4.6
2422      UG CABLE-NONMETAL                      15.2             -10            26.1            5.5
2423      BURIED GABLE-METALLIC                          11.1           -13           56.6            5.1
2423      BURIED CABLE-NONMETAL                          14.5           -10           24.3            5.9
2424      SUBMARINE CABLE                                14.5            -2           15.9            5.9
2426      INTRABLDG NETWORK GABLE-METAL                  11.9           -17           73.4            3.7
2426      INTRABLDG NETWORK CABLE-NONMET                 11.6           -10           19.3            7.8
2431      AERIAL WIRE                             4.5             -79           179.0            0.0
2441      CONDUIT SYSTEMS                                33.0           -10           25.9            2 5

The figures in Columns B, C, and D are percentages of gross book costs.

@ The amortization amount for the Aerial Wire Account ordered in FCC 96-22 released January 26. 1996 is continued.