FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

(Mark One)
     |X|           Quarterly Report Pursuant to Section 13 or 15(d) of the
                       Securities Exchange Act of 1934

                     For the period ended March 31, 1997

                                      or

      |_|         Transition Report Pursuant to Section 13 or 15(d) of the
                       Securities Exchange Act of 1934

                 For the transition period from       to

                        Commission File Number 1-1414

                                 PACIFIC BELL

                           A California Corporation
               I.R.S. Employer Identification Number 94-0745535

          140 New Montgomery Street, San Francisco, California 94105
                       Telephone Number: (415) 542-9000

THE REGISTRANT,  A WHOLLY-OWNED  SUBSIDIARY OF PACIFIC TELESIS GROUP, WHICH IS A
WHOLLY-OWNED  SUBSIDIARY OF SBC  COMMUNICATIONS  INC.,  MEETS THE CONDITIONS SET
FORTH IN  GENERAL  INSTRUCTION  H(1)(a)  AND (b) OF FORM  10-Q AND IS  THEREFORE
FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL  INSTRUCTION
H(2).

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No


<PAGE>



PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements
<TABLE>

PACIFIC BELL
------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions
(Unaudited)
<CAPTION>
------------------------------------------------------------------------------------
                                                             Three months ended
                                                                   March 31,
                                                    --------------------------------
                                                               1997            1996
------------------------------------------------------------------------------------
<S>                                                         <C>               <C> 
Operating Revenues
Local service                                               $ 1,019           $ 960
Network access                                                  645             622
Long-distance service                                           305             312
Directory advertising                                           358             302
Other                                                           162             131
------------------------------------------------------------------------------------
Total operating revenues                                      2,489           2,327
------------------------------------------------------------------------------------

Operating Expenses
Cost of services and products                                   866             879
Selling, general and administrative                             451             388
Depreciation and amortization                                   478             455
------------------------------------------------------------------------------------
Total operating expenses                                      1,795           1,722
------------------------------------------------------------------------------------
Operating Income                                                694             605
------------------------------------------------------------------------------------

Other Income (Expense)
Interest expense                                               (98)            (88)
Other income (expense) - net                                      3               3
------------------------------------------------------------------------------------
Total other income (expense)                                   (95)            (85)
------------------------------------------------------------------------------------

Income Before Income Taxes and Cumulative
  Effect of Accounting Change                                   599             520
Income taxes                                                    239             212
------------------------------------------------------------------------------------

Income Before Cumulative Effect of Accounting
  Change                                                        360             308
Cumulative Effect of Accounting Change,
  net of tax                                                                     85
                                                             -
------------------------------------------------------------------------------------
Net Income                                                 $    360        $    393
------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>



<TABLE>

PACIFIC BELL
-------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS

Dollars in millions
<CAPTION>
-------------------------------------------------------------------------------------
                                                              March 31,  December 31,
                                                             ------------------------
                                                                        
                                                                   1997         1996
-------------------------------------------------------------------------------------
<S>                                                             <C>       <C>    
Assets                                                        (Unaudited)
Current Assets
Cash and cash equivalents                                    $       90   $       58                                                
of  $175 and $161                                                 2,200        2,133
Prepaid expenses                                                     55           37
Deferred charges                                                     26           45
Other current assets                                                103          156
-------------------------------------------------------------------------------------
Total current assets                                              2,474        2,429
-------------------------------------------------------------------------------------
Property, Plant and Equipment-at cost                            28,840       28,372
Less: Accumulated depreciation and amortization                  16,979       16,699
-------------------------------------------------------------------------------------
Property, Plant and Equipment-Net                                11,861       11,673
-------------------------------------------------------------------------------------
Other Assets                                                        422          547
-------------------------------------------------------------------------------------
Total Assets                                                 $   14,757   $   14,649                                                
-------------------------------------------------------------------------------------

Liabilities and Shareowner's Equity
Current Liabilities
Debt maturing within one year                                $      714   $      287                                               
Accounts payable and accrued liabilities                          2,266        2,546
-------------------------------------------------------------------------------------
Total current liabilities                                         2,980        2,833
-------------------------------------------------------------------------------------
Long-Term Debt                                                    5,370        5,364
-------------------------------------------------------------------------------------

Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes                                               494          476
Postemployment benefit obligation                                   900          671
Unamortized investment tax credits                                  225          236
Other noncurrent liabilities                                        669        1,142
-------------------------------------------------------------------------------------
Total deferred credits and other noncurrent liabilities           2,288        2,525
-------------------------------------------------------------------------------------
Commitments and contingencies
-------------------------------------------------------------------------------------
Shareowner's Equity
Common shares ($1 par value)                                        225          225
Capital in excess of par value                                    6,256        6,100
Accumulated deficit                                             (2,362)      (2,398)
-------------------------------------------------------------------------------------
Total shareowner's equity                                         4,119        3,927
-------------------------------------------------------------------------------------
Total Liabilities and Shareowner's Equity                    $   14,757   $   14,649                                               
-------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>



<PAGE>



<TABLE>
PACIFIC BELL
------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in millions, increase (decrease) in cash and
cash equivalents
(Unaudited)
------------------------------------------------------------------------------------
<CAPTION>
----------------------------------------------------------------------------
                                                        Three months ended
                                                            March 31,
                                                       ---------------------
                                                             1997      1996
----------------------------------------------------------------------------
<S>                                                     <C>       <C>
Operating Activities
Net income                                              $     360  $    393
Adjustments to reconcile net income to net cash
  provided by operating activities:
   Depreciation and                                           478       455
amortization
   Provision for uncollectible                                 57        48
accounts
   Amortization of investment tax                            (11)      (11)
credits
   Deferred income tax                                        100        21
expense
   Cumulative effect of accounting                              -      (85)
change
   Other - net                                              (633)     (301)
----------------------------------------------------------------------------
Total adjustments                                             (9)       127
----------------------------------------------------------------------------
Net Cash Provided by Operating Activities                     351       520
----------------------------------------------------------------------------

Investing
Activities
Construction and capital expenditures                       (583)     (469)
Other                                                           -       (7)
----------------------------------------------------------------------------
Net Cash Used in Investing Activities                       (583)     (476)
----------------------------------------------------------------------------

Financing
Activities
Net change in short-term borrowings with original
 maturities of three months or less                           424     (244)
Issuance of long-term debt                                      8       346
Dividends paid                                              (324)     (231)
Equity from parent                                            156        70
----------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities           264      (59)
----------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents           32      (15)
----------------------------------------------------------------------------
Cash and cash equivalents beginning of year                    58        68
----------------------------------------------------------------------------
Cash and Cash Equivalents End of Period                 $      90  $     53
----------------------------------------------------------------------------

Cash paid during the three months ended March 31 for:
    Interest                                            $     158  $    120
    Income taxes                                        $      36  $      6

<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>

<PAGE>








<TABLE>
PACIFIC BELL
----------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF SHAREOWNER'S EQUITY
Dollars in millions
(Unaudited)
<CAPTION>
----------------------------------------------------------------------------------

                                                            Capital
                                                                 in
                                                  Common     Excess     Accumulated
                                                                 of
                                                  Shares        Par         Deficit
                                                              Value
----------------------------------------------------------------------------------
<S>                                            <C>       <C>        <C>          
Balance, December 31, 1995                     $     225 $    5,387 $     (2,501)
                                                          
Net income                                             -          -          393
Dividends to shareowner                                -          -         (231)
Equity from parent                                     -         70             -
Other                                                  -          1           (1)
----------------------------------------------------------------------------------
                                                 
Balance, March 31, 1996                        $     225 $    5,458 $     (2,340)
----------------------------------------------------------------------------------


Balance, December 31, 1996                     $     225 $    6,100 $     (2,398)
Net income                                             -          -          360
Dividends to shareowner                                -          -         (324)
Equity from  parent                                    -        156             -
                                                 
Balance, March 31, 1997                        $     225 $    6,256 $     (2,362)
----------------------------------------------------------------------------------

<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>

                                      * * * *

<TABLE>
SELECTED FINANCIAL AND OPERATING DATA

<CAPTION>

At March 31, or for the three months then ended:                1997         1996
                                                             ---------------------
<S>                                                           <C>          <C> 

  Return on weighted average shareowners' equity  . . . . .   36.94%       37.80%

  Debt ratio . . . . . . . . . . . . . . . . . . . . . . .    59.63%       62.16%

  Network access lines in service (000)  . . . . . . . . .    16,273       15,674

  Access minutes of use (000,000) . . . . . . . . . . . . .   17,519       16,166

  Number of employees . . . . . . . . . . . . . . . . . . .   47,980       46,820

</TABLE>


<PAGE>


PACIFIC BELL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Dollars in millions

1. BASIS OF  PRESENTATION  - The  consolidated  financial  statements  have been
   prepared by Pacific Bell (PacBell ) pursuant to the rules and  regulations of
   the  Securities  and  Exchange  Commission  (SEC)  and,  in  the  opinion  of
   management,  include all  adjustments  (consisting  only of normal  recurring
   accruals)  necessary  to present  fairly the results for the interim  periods
   shown.  Certain  information and footnote  disclosures,  normally included in
   financial   statements   prepared  in  accordance  with  generally   accepted
   accounting  principles,  have been condensed or omitted  pursuant to such SEC
   rules and regulations.  Certain  reclassifications have been made to the 1996
   consolidated financial statements to conform with the 1997 presentation.  The
   results for the interim periods are not necessarily indicative of results for
   the full year. The consolidated  financial statements contained herein should
   be read in conjunction with the consolidated  financial  statements and notes
   thereto included in PacBell's 1996 Annual Report on Form 10-K (the Form 10-K)
   filed with the Securities and Exchange Commission.

    Prior to January 1, 1996,  Pacific Bell  Directory (a subsidiary of PacBell)
   recognized  revenues  and  expenses  related  to  publishing  directories  in
   California using the "amortization" method, under which revenues and expenses
   were recognized over the lives of the directories,  generally one year. Under
   the new "issue basis" method,  revenues and expenses are recognized  when the
   directories are issued. The change to the issue basis method was made because
   it is the method  generally  followed in the  publishing  industry and better
   reflects  the  operating  activity  of the  business.  The change was adopted
   during fourth quarter 1996. The cumulative  after-tax  effect of applying the
   change in method to prior  years was  recognized  as of  January 1, 1996 as a
   one-time,  non-cash gain applicable to continuing operations of $85. The gain
   is net of  deferred  taxes of $58.  The  first  three  quarters  of 1996 were
   restated in the Form 10-K to reflect the new method.

    In 1996,  management amended the salaried pension plan, which changed from a
   final pay plan to a cash balance plan.  Under the transition to the new plan,
   some  retirees  elected to receive  lump-sum  payments in  settlement  of the
   pension  liability.  These  lump-sum  payments  in the first  quarter of 1997
   exceeded the projected service and interest cost.  PacBell  recognized a gain
   on these settlements in first quarter 1997 that increased net income by $87.

2. CONSOLIDATION - The consolidated financial statements include the accounts of
   PacBell  and  its  majority-owned  subsidiaries.  PacBell  is a  wholly-owned
   subsidiary  of Pacific  Telesis  Group (PAC).  All  significant  intercompany
   transactions are eliminated in the consolidation process.

3. MERGER - On April 1, 1997,  SBC  Communications  Inc. (SBC) and PAC completed
   the merger of an SBC  subsidiary  with PAC,  in a  transaction  in which each
   share of PAC common stock was  exchanged for 0.73145 of a share of SBC common
   stock (equivalent to approximately 313 million shares).  With the merger, PAC
   became a wholly-owned subsidiary of SBC. The transaction was accounted for as
   a pooling of interests and a tax-free reorganization.



<PAGE>


PACIFIC BELL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) continued
Dollars in millions

    PacBell's  results will include merger  transaction costs and the effects of
   changes applied  retroactively to conform  accounting  methodologies  between
   PacBell and SBC for, among other items, pensions and postretirement benefits.
   These  changes  will be  recorded  by PacBell in the second  quarter of 1997,
   retroactive to January 1, 1997, as a cumulative effect of accounting  changes
   of $342 net of tax. Had the merger  occurred  January 1, 1997,  income before
   cumulative  effect of accounting  changes would have increased by $165. Among
   other  costs  relating to the close of the  merger,  PacBell  will record the
   present  value of  amounts  to be  returned  to  California  ratepayers  as a
   condition of the merger of $274, $165 net of tax.

       4.  COMMITMENTS AND CONTINGENCIES

   Purchase  Commitments - In December 1994, PacBell contracted for the purchase
   of up to $2,000 of Advanced  Communications  Network (ACN) facilities,  which
   incorporated  new  technologies.  During  1995,  the  ability  to deploy  the
   facilities outstripped the ACN vendor's ability to deliver necessary products
   and software.  Accordingly,  management  decided to suspend  construction  at
   certain  sites,  which  reduced the expected  cost to less than $700.  If ACN
   facilities meet certain quality and performance  criteria (the Network Test),
   PacBell is  committed  to purchase  the ACN  facilities  in 1998.  If the ACN
   facilities  are acquired,  due to  competition  and other  factors  affecting
   PacBell's ability to recover its investment in these facilities,  their value
   to PacBell could be materially  impaired.  If ACN facilities fail the Network
   Test,  PacBell will not be committed to buy the ACN  facilities  but might be
   liable to reimburse the principal ACN vendor for some  construction  costs up
   to $300, which could also result in a material charge.

   As of March  31,  1997,  PacBell  had  purchase  commitments  of  about  $176
   remaining in connection with its previously  announced  program for deploying
   an all digital switching platform with ISDN and SS-7 capabilities.

   Property Tax  Investigation  - In 1992, a  settlement  agreement  was reached
   between the State Board of Equalization,  all California counties,  the State
   Attorney  General,  and  28  utilities,  including  PacBell,  on  a  specific
   methodology  for valuing  utility  property  for  property tax purposes for a
   period of eight years.  The California  Public  Utilities  Commission  (CPUC)
   opened an  investigation  to determine if any resulting  property tax savings
   should be returned to  customers.  Intervenors  have asserted that as much as
   $20 of annual  property tax savings  should be treated as an  exogenous  cost
   reduction in PacBell's annual price cap filings.  These intervenors have also
   asserted that past property tax savings totaling as much as approximately $75
   as of March  31,  1997,  plus  interest  should  be  returned  to  customers.
   Management believes that, under the CPUC's regulatory framework, any property
   tax savings  should be treated  only as a  component  of the  calculation  of
   shareable earnings and not as an exogenous cost. In an Interim Opinion issued
   in June 1995,  the CPUC  decided  to defer a final  decision  on this  matter
   pending  resolution  in a separate  proceeding  of the criteria for exogenous
   cost treatment under its regulatory framework.




<PAGE>


PACIFIC BELL

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Dollars in millions

RESULTS OF OPERATIONS

Pacific Bell (PacBell) reported net income of $360 for the first quarter of
1997.  Financial results for the first quarters of 1997 and 1996 are
summarized as follows:
--------------------------------------------------------------------------------
                                                          First Quarter
                                                  ------------------------------

                                                                        Percent
                                                    1997      1996       Change
--------------------------------------------------------------------------------
Operating revenues                                $  2,489  $ 2,327        7.0%

Operating expenses                                $  1,795  $ 1,722        4.2%

Income before cumulative effect of accounting     $    360  $   308       16.9%
change
Cumulative effect of accounting change                   -  $    85        -
Net income                                        $    360  $   393       (8.4)%
                                                        
--------------------------------------------------------------------------------

The primary  factors  contributing  to the increase in income before  cumulative
effect  of  accounting  change  during  the  first  quarter  of 1997 were an $87
after-tax  settlement gain associated with lump-sum  pension payments and growth
in  demand  for  services  and  products  at  PacBell.  Excluding  this gain and
accounting  changes,  first  quarter  1997  results  decreased  slightly  due to
increased  expenses for start-up costs  associated with new growth  initiatives,
primarily Personal  Communications  Systems (PCS) wireless,  and expenses in the
wireline business including  preparation for increased competition and unusually
high expenses  associated  with damage caused by winter storms.  1996 net income
included a one-time, non-cash, after-tax gain of $85 associated with a change in
accounting for directory publishing revenues and expenses.

PacBell's  operating  revenues in the first quarter of 1997  increased  $162, or
7.0%.  Components of operating  revenues for the first quarters of 1997 and 1996
are as follows:

--------------------------------------------------------------------------------
                                                          First Quarter
                                                  ------------------------------

                                                                        Percent
                                                    1997      1996       Change
--------------------------------------------------------------------------------
Local service                                     $  1,019  $   960        6.1%
Network access
   Interstate                                          459      444        3.4
   Intrastate                                          186      178        4.5
Long-distance                                          305      312       (2.2)
service
Directory                                              358      302       18.5
advertising
Other                                                  162      131       23.7
     Total                                        $  2,489  $ 2,327        7.0%
--------------------------------------------------------------------------------


<PAGE>




PACIFIC BELL

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Dollars in millions

RESULTS OF OPERATIONS-Continued


      Local  service  revenues  increased  in the  first  quarter  of  1997  due
      primarily to increases in demand,  including increases in access lines and
      vertical services  revenues.  The number of access lines increased by 3.8%
      since March 31, 1996, with  approximately 13% of access line growth due to
      the sales of additional  access lines to existing  residential  customers.
      Vertical services revenues,  which include custom calling options,  Caller
      ID and other  enhanced  services,  increased by  approximately  21%. Local
      service  revenues  also  reflect  the  implementation  of  the  California
      Universal  Service Fund that went into effect  February 1, 1997. This fund
      is  intended to  subsidize  the  provision  of service to high cost areas.
      Amounts received from the fund resulted in a shift of equivalent  revenues
      from intraLATA  long-distance  and intrastate  network access  revenues to
      local service revenues in the first quarter of 1997. This shift is subject
      to final California Public Utilities Commission (CPUC) approval,  expected
      in second quarter 1997. Increases in revenues were slightly offset by rate
      reductions due to CPUC price cap orders.

      Network Access Interstate  network access revenues  increased in the first
      quarter of 1997 due primarily to an increase in demand for access services
      by  interexchange  carriers.  Growth  in  revenues  from end user  charges
      attributable  to an increasing  access line base also  contributed  to the
      increase.  Partially  offsetting  these  increases in  interstate  network
      access revenues were sharing accrual adjustments from prior periods.

      Intrastate  network access revenues increased in the first quarter of 1997
      due  primarily  to  increases in demand,  including  usage by  alternative
      intraLATA toll carriers, partially offset by the effects of the California
      Universal Service Fund described above.

      Long-Distance  Service revenues decreased slightly in the first quarter of
      1997 primarily due to the effects of the California Universal Service Fund
      described  above  primarily  offset by increases in demand  resulting from
      California's growing economy.

      Directory  advertising revenues increased in the first quarter of 1997 due
      mainly to the  publication of books not published in 1996 and, to a lesser
      extent, increased demand and earlier directory publication.

      Other  operating  revenues  increased  in the  first  quarter  of 1997 due
      primarily to increased  demand for  PacBell's  non-regulated  services and
      products.


<PAGE>



PACIFIC BELL

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Dollars in millions

RESULTS OF OPERATIONS-Continued

PacBell's operating expenses in the first quarter of 1997 increased $73 or 4.2%,
over the first quarter of 1996.  Components of operating  expenses for the first
quarters of 1997 and 1996 are as follows:

-------------------------------------------------------------------------------
                                                            First Quarter
                                                        -----------------------
                                                                         Percent
                                                         1997   1996     Change
--------------------------------------------------------------------------------

Cost of services and products                           $   866$   879    (1.5)%
                                                                          
Selling, general and                                        451    388
administrative                                                             16.2
Depreciation and amortization                               478    455      5.1
                                                            ----------
  Total                                                 $ 1,795$ 1,722      4.2%
--------------------------------------------------------------------------------

      Total  Operating  Expenses  Costs of services  and  products  and selling,
      general and  administrative  costs  increased on a combined  basis $50, or
      3.9% in the first  quarter of 1997.  The  increase  was due  primarily  to
      increases for employee  compensation,  costs incurred to prepare for local
      competition,  and expenses  associated  with damage from winter storms and
      other  increases   related  to  new  business   initiatives  for  Personal
      Communications  Services  (PCS) and the  Advanced  Communications  Network
      (ACN).  These  increases  were  partially  offset by savings due to a $146
      settlement gain associated with lump-sum pension payments, changes in plan
      assumptions and to changes in benefit plans made in 1996. Depreciation and
      amortization  increased  in the first  quarter  of 1997 due  primarily  to
      growth in plant levels.

Interest  Expense  increased  $10 in the first  quarter of 1997 due to increased
long term debt compared to the first  quarter of 1996 and increased  interest on
capital leases.  These  increases were somewhat offset by increased  capitalized
interest during construction.

Income taxes  increased $27 in the first quarter of 1997 primarily due to higher
income before income taxes.

Cumulative  Effect of Accounting  Change As discussed in Note 1 to the financial
statements,  Pacific Bell Directory changed its method of recognizing  directory
publishing  revenues  and  related  expenses  effective  January  1,  1996.  The
cumulative  after-tax  effect of  applying  the new  method  to prior  years was
recognized  as of January 1, 1996 as a one-time,  non-cash  gain  applicable  to
continuing  operations  of  $85.  The  gain  is net of  deferred  taxes  of $58.
Management  believes this change to the issue basis method is preferable because
it is the method  generally  followed  in the  publishing  industry,  and better
reflects the operating  activity of the business.  This accounting change is not
expected to have a significant net income effect on future periods.




<PAGE>


 PACIFIC BELL

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Dollars in millions

OPERATING ENVIRONMENT AND TRENDS OF THE BUSINESS

OTHER BUSINESS MATTERS

Restructuring Reserve -PacBell established a restructuring reserve at the end of
1993 to provide for the  incremental  cost of force  reductions  associated with
restructuring  business  processes  through 1997. A total of $22 in cash outlays
was charged to the reserve in the first  quarter of 1997.  As of March 31, 1997,
$72 remained in the restructuring reserve.

Merger - On April 1, 1997, SBC  Communications  Inc.  (SBC) and Pacific  Telesis
Group (PAC) completed the merger of an SBC subsidiary with PAC, in a transaction
in which each share of PAC common stock was  exchanged for 0.73145 of a share of
SBC common stock  (equivalent to  approximately  313 million  shares).  With the
merger,  PAC became a wholly-owned  subsidiary of SBC. The  transaction  will be
accounted for as a pooling of interests and a tax-free reorganization. (See Note
3 to the financial statements.)

Access Reform - On May 7, 1997,  the FCC adopted  orders on access charge reform
and local  exchange  carrier price caps which will reduce access  charges by, in
part,  adjusting  the  productivity  factor to be used in  interstate  price cap
calculations.  In presenting the orders, the FCC estimated there would be a $1.7
billion reduction in industry-wide interstate access charges which are estimated
to aggregate  $23 billion.  Management  is  evaluating  the effect of and is its
response to the orders.

Interconnection  Agreements - Companies  seeking to connect to PacBell's network
and  provide  local  service  must enter into  interconnection  agreements  with
PacBell which are then subject to approval by the CPUC. PacBell has entered into
agreements, some of which have been approved by the CPUC.

PacBell expects that it will  experience  local exchange  competition  both from
current   providers  and  other  new  entrants  in  1997.  PAC  intends  to  use
interconnection  agreements  to support  its  application  to the FCC to provide
interLATA long-distance service in California.

FCC  Apportionment  of Sharing  Obligations  - The price cap rules require Local
Exchange Carriers (LECs) to apportion sharing  obligations among their price cap
baskets based on "cost-causative"  methods. The FCC concluded that proportionate
revenues in each price cap basket  could be used as a proxy for cost.  For years
when PacBell had a sharing obligation,  it excluded interstate end user revenues
from the sharing  apportionment  methodology.  On April 17, 1997,  the FCC ruled
that  end user  revenues  must be  included  in the  base by  which  sharing  is
apportioned to the baskets.  The Order requires  PacBell to submit  recalculated
price cap indices  reflecting its  apportionment  methodology  and to revise its
tariff rates as of July 1, 1997.  Management  estimates  that the effect of this
order could be up to approximately $30 plus interest.



<PAGE>


PACIFIC BELL

2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
Dollars in millions

OPERATING ENVIRONMENT AND TRENDS OF THE BUSINESS

OTHER BUSINESS MATTERS (Continued)

Revision of FCC 800 Data Base Access Tariffs - In October 1996, the FCC issued a
Report & Order on the 800 Database  Access  Tariffs.  The Order required  tariff
revisions and largely  disallowed  PacBell's request for exogenous  treatment of
800 database costs. Rates were revised effective December 21, 1996. The original
rates took effect May 1, 1993 pursuant to potential  refund.  On April 14, 1997,
the FCC issued an Order that required refunds be made July 1, 1997. PacBell must
file a refund plan on May 14, 1997.  Currently,  management assesses this refund
to be approximately $22 plus interest.

Other Billing and Collection  Allocation  Methodology  Changes - The FCC adopted
new  separations  rules effective May 1, 1997 that shift recovery of substantial
other billing and collections  costs to the interstate  jurisdiction.  This rule
change  could  reduce  PacBell's  revenues by about $30 in 1997 and about $45 in
each subsequent year.  Management is evaluating  options to mitigate this effect
on net income.

Revenues Subject to Refund - In 1992, the CPUC issued a decision adopting,  with
modification,  Statement of Financial  Accounting Standards No. 106, "Employers'
Accounting  for  Postretirement  Benefits  Other than  Pensions"  (FAS 106), for
regulatory  accounting purposes.  Annual price cap decisions by the CPUC granted
PacBell  approximately  $100 in each of the years 1993-1996 for partial recovery
of higher costs under FAS 106. In October 1994 the CPUC reopened the  proceeding
to review the criteria for exogenous cost  treatment and whether  PacBell should
continue  to  recover  these  costs.  The CPUC's  order  also held that  related
revenues  collected after October 12, 1994, were subject to refund plus interest
pending future  proceedings.  These  proceedings were concluded on April 9, 1997
when the CPUC reaffirmed that  postretirement  benefits costs are  appropriately
recoverable in PacBell's price cap filings.





<PAGE>



PACIFIC BELL

PART II - OTHER INFORMATION


Item 6. Exhibits and Reports on Form 8-K

(a)   Exhibits

      Exhibit 4 No  instrument  which defines the rights of holders of long- and
      intermediate-term  debt of  Pacific  Bell is filed  herewith  pursuant  to
      Regulation S-K, Item 601 (b) (4) (iii) (A).  Pursuant to this  regulation,
      Pacific Bell hereby agrees to furnish a copy of any such instrument to the
      SEC upon request.

      Exhibit 12  Computation of Ratios of Earnings to Fixed Charges.

      Exhibit 27  Financial Data Schedule.

(b)   Reports on Form 8-K

      There  were no reports on Form 8-K filed  during the first  quarter  ended
      March 31, 1997.




<PAGE>




                                     SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                       Pacific Bell



                                       /s/ Michael F.G. Ashby
May 9, 1997                            ------------------------------
                                       Michael F.G. Ashby
                                       Vice President and Chief Financial
                                       Officer