<PAGE>

                                   FORM 10-Q


                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C. 20549


          (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934


               For the quarterly period ended September 30, 1995

                                      OR

         ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934


                         Commission File Number 1-1414


                                 PACIFIC BELL


                        I.R.S. Employer No. 94-0745535
                           A California Corporation


          140 New Montgomery Street, San Francisco, California 94105

                     Telephone - Area Code (415) 542-9000



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    .
                                               ---      ---

       At October 31, 1995, 224,504,982 common shares were outstanding.


THE REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF PACIFIC TELESIS GROUP, 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).

















                                    <PAGE>

                         PACIFIC BELL AND SUBSIDIARIES

                               TABLE OF CONTENTS


                                                                 
                                                              
                                                                    

                                                                     Page 
PART I.  FINANCIAL INFORMATION                                      Number
------------------------------                                      ------

Item 1.  Financial Statements

           Review Report of Independent Accountants ..............     1  

           Condensed Consolidated Statements of Income ...........     2  

           Condensed Consolidated Balance Sheets .................     3  

           Condensed Consolidated Statements of Shareowner's
              Equity..............................................     4  

           Condensed Consolidated Statements of Cash Flows .......     5  

           Notes to Condensed Consolidated Financial Statements ..     7  

Item 2.  Management's Discussion and Analysis of Results of
           Operations ............................................    12


PART II.  OTHER INFORMATION
---------------------------

Item 6.  Exhibits and Reports on Form 8-K ........................    29

SIGNATURE ........................................................    30




























                                    <PAGE>

PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements


                   REVIEW REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Shareowners of Pacific Bell:

We have  reviewed the  accompanying  condensed consolidated  balance sheet  of
Pacific  Bell and  Subsidiaries  as of  September  30, 1995,  and the  related
condensed  consolidated statements  of income  for the  three- and  nine-month
periods  ended September  30, 1995  and 1994,  and the  condensed consolidated
statements  of shareowner's equity and  cash flows for  the nine-month periods
ended  September 30,  1995  and  1994.  These  financial  statements  are  the
responsibility of the Company's management.

We  conducted our  review  in accordance  with  standards established  by  the
American  Institute  of Certified  Public Accountants.    A review  of interim
financial information consists principally  of applying analytical  procedures
to financial data, and  making inquiries of persons responsible  for financial
and  accounting matters.   It  is substantially  less in  scope than  an audit
conducted  in  accordance  with  generally accepted  auditing  standards,  the
objective  of which  is the expression  of an opinion  regarding the financial
statements taken as a whole.  Accordingly, we do not express such an opinion.

Based  on our  review, we  are not  aware of  any material  modifications that
should be made to the accompanying condensed consolidated financial statements
for them to be in conformity with generally accepted accounting principles.

As  discussed in  Note B on  page 8,  the Company  discontinued application of
Statement of  Financial Accounting Standards  No. 71  effective third  quarter
1995.

We have  previously audited,  in accordance  with generally  accepted auditing
standards,  the consolidated balance sheet of Pacific Bell and Subsidiaries as
of  December  31, 1994,  and the  related  consolidated statements  of income,
shareowner's  equity, and cash  flows for the  year then  ended (not presented
herein);  and  in  our  report  dated  February  23,  1995,  we  expressed  an
unqualified  opinion  on  those consolidated  financial  statements.   In  our
opinion, the information set forth in the accompanying  condensed consolidated
balance  sheet as  of December  31, 1994,  is fairly  stated, in  all material
respects, in relation to the consolidated balance sheet from which it has been
derived.



/s/Coopers & Lybrand L.L.P.
San Francisco, California

November 13, 1995





                                       1








                                    <PAGE>

                         PACIFIC BELL AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                  (Unaudited)


                             For the 3 Months Ended   For the 9 Months Ended
                                   September 30,            September 30,
                             ----------------------   ----------------------
(Dollars in millions)               1995     1994         1995         1994
----------------------------------------------------------------------------
OPERATING REVENUES
Local service.................... $  944   $  858       $2,803       $2,525
Network access:
  Interstate.....................    413      387        1,257        1,171
  Intrastate.....................    179      191          522          532
Toll service.....................    306      491          910        1,485
Other service revenues...........    386      358        1,134        1,028
                                 -------   ------      -------       ------
TOTAL OPERATING REVENUES.........  2,228    2,285        6,626        6,741
                                 -------   ------      -------       ------
OPERATING EXPENSES
Cost of products and services        399      468        1,323        1,415
Customer operations and 
  selling expenses...............    476      452        1,351        1,335
General, administrative, and
  other expenses.................    340      296          959          908
Property and miscellaneous taxes.     45       45          141          135
Depreciation and amortization....    461      444        1,381        1,312
                                 -------   ------      -------       ------
TOTAL OPERATING EXPENSES.........  1,721    1,705        5,155        5,105
                                 -------   ------      -------       ------
OPERATING INCOME.................    507      580        1,471        1,636
Interest expense.................    110      103          327          324
Miscellaneous income.............     17        2           45            1
                                 -------   ------      -------       ------
INCOME BEFORE INCOME TAXES
 AND EXTRAORDINARY ITEM              414      479        1,189        1,313
Income taxes.....................    156      187          442          489
                                 -------   ------      -------       ------
INCOME BEFORE
 EXTRAORDINARY ITEM..............    258      292          747          824
Extraordinary item, net of tax
  (Note B)....................... (3,360)       -       (3,360)           -
                                  -------  ------       -------      ------
NET INCOME (LOSS)................
                                 $(3,102)  $  292      $(2,613)      $  824
                                 ========  ======      ========      ======

The accompanying Notes are an integral part of the Condensed Consolidated
Financial Statements.








                                       2








                                    <PAGE>

                        PACIFIC BELL AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                             

                                              September 30,       December 31,
(Dollars in millions)                             1995                1994    
---------------------------------------------------------------------------
ASSETS:                                       (Unaudited)

Cash and cash equivalents...................      $    66          $    62 
Accounts receivable -(net of allowances for
  uncollectibles of $135 and $143 in 1995 and 
  1994, respectively).......................        1,486            1,531 
Prepaid expenses and other current assets...          891              950 
                                                  -------          ------- 
Total current assets........................        2,443            2,543 
                                                  -------          ------- 
Property, plant, and equipment - at cost....       26,389           26,107 
  Less:  accumulated depreciation...........       15,563           10,243 
                                                  -------          ------- 
Property, plant, and equipment - net........       10,826           15,864 
                                                  -------          ------- 
Deferred charges and other noncurrent assets          123              963 
                                                  -------          ------- 
TOTAL ASSETS................................      $13,392          $19,370 
                                                  =======          ======= 
LIABILITIES AND SHAREOWNER'S EQUITY:
 
Accounts payable............................      $ 1,212          $ 1,580 
Debt maturing within one year...............          375              255 
Other current liabilities...................        1,374            1,366 
                                                  -------          ------- 
Total current liabilities...................        2,961            3,201 
                                                  -------          ------- 
Long-term obligations.......................        5,103            4,752 
                                                  -------          ------- 
Deferred income taxes.......................            6            2,315 
                                                  -------          ------- 
Other noncurrent liabilities and  
  deferred credits..........................        2,414            2,878 
                                                  -------          ------- 
Commitments and contingencies (Note C)......

Total shareowners' equity...................        2,908            6,224 
                                                  -------          ------- 
TOTAL LIABILITIES AND SHAREOWNER'S EQUITY...      $13,392          $19,370 
                                                  =======          ======= 

The accompanying Notes are an integral part of the Condensed Consolidated
Financial Statements.







                                       3








                                    <PAGE>

                         PACIFIC BELL AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF SHAREOWNER'S EQUITY
                                 (Unaudited)

                                                     For the 9 Months Ended
                                                           September 30,    
                                                     ---------------------
(Dollars in millions)                                      1995         1994  
---------------------------------------------------------------------------
COMMON STOCK
  Balance at beginning of period......................  $   225   $   225 
                                                         ------    ------ 
  Balance at end of period............................      225       225 
                                                         ------    ------ 
ADDITIONAL PAID-IN CAPITAL
  Balance at beginning of period......................    5,169     5,168 
  Other Changes ......................................       58         1 
                                                         ------    ------ 
  Balance at end of period............................    5,227     5,169 
                                                         ------    ------ 
REINVESTED EARNINGS 
  Balance at beginning of period......................      830       761 
  Net income (loss)...................................   (2,613)      824 
  Dividends declared..................................     (763)     (747)
  Other changes.......................................        2        (4)
                                                         ------    ------ 
  Balance at end of period............................   (2,544)      834 
                                                         ------    ------ 

TOTAL SHAREOWNER'S EQUITY ............................   $2,908    $6,228 
                                                         ======    ====== 


The accompanying Notes are an integral part of the Condensed Consolidated
Financial Statements.






















                                       4








                                    <PAGE>

                         PACIFIC BELL AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)


                                                     For the 9 Months Ended
                                                           September 30,    
                                                     ----------------------
(Dollars in millions)                                      1995         1994  
---------------------------------------------------------------------------
CASH FROM (USED FOR) OPERATING ACTIVITIES:
Net income (loss).....................................   $(2,613)  $  824 
Adjustments to net income (loss):
Extraordinary item (Note B) ..........................     3,360        - 
  Depreciation and amortization.......................     1,381    1,312 
  Deferred income taxes...............................        53      (23)
  Unamortized investment tax credits .................       (37)     (49)
  Allowance for funds used during construction .......       (36)     (22)
  Changes in operating assets and liabilities:
    Accounts receivable...............................        49       (4)
    Prepaid expenses and other current assets.........       (22)      16 
    Deferred charges and other noncurrent assets......       135      (16)
    Accounts payable and accrued liabilities..........      (115)     (18)
    Other current liabilities.........................        24       68 
    Noncurrent liabilities and deferred credits.......      (343)      26 
  Other adjustments, net..............................        44        6 
                                                          ------   ------ 
Cash from operating activities........................     1,880    2,120 

CASH FROM (USED FOR) INVESTING ACTIVITIES:
Additions to property, plant, and equipment...........    (1,285)  (1,041)
Other investing activities, net.......................        (1)     (11)
                                                          ------   ------ 
Cash used for investing activities....................    (1,286)  (1,052)
                                                          ------   ------ 
CASH FROM (USED FOR) FINANCING ACTIVITIES:
Equity infusion from parent ..........................        57        - 
Dividends paid........................................      (763)    (747)
Increase (decrease) in short-term borrowings, net.....       120     (331)
Principal payments under capital lease obligations....        (4)      (3)
Other financing activities, net ......................         -        1 
                                                          ------   ------ 
Cash used for financing activities....................      (590)  (1,080)
                                                          ------   ------ 

Increase (decrease) in cash and cash equivalents .....         4      (12)
Cash and cash equivalents at January 1................        62       57 
                                                          ------   ------ 
Cash and cash equivalents at September 30.............    $   66   $   45 
                                                          ======   ====== 

                           (Continued on next page)





                                       5








                                    <PAGE>

                         PACIFIC BELL AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)


                                                     For the 9 Months Ended
                                                           September 30,    
                                                     ----------------------
(Dollars in millions)                                      1995         1994  
---------------------------------------------------------------------------
Cash payments for:
  Interest............................................    $ 317     $ 315 
  Income taxes........................................    $ 396     $ 540 
----------------------------------------------------------------------------

The accompanying Notes are an integral part of the Condensed Consolidated
Financial Statements.








































                                       6








                                    <PAGE>

                         PACIFIC BELL AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

A. BASIS OF PRESENTATION

   The  Condensed Consolidated  Financial Statements  include the  accounts of
   Pacific Bell,  and its  wholly owned  subsidiaries, Pacific Bell  Directory
   ("Directory")  Pacific Bell  Information  Services  ("PBIS"), Pacific  Bell
   Mobile Services  ("PBMS"), and Pacific Bell  Internet Services, hereinafter
   referred  to as the "Company."   All significant  intercompany balances and
   transactions  have  been  eliminated.  The  Condensed  Consolidated  Income
   Statement  and   Statement  of   Cash  Flows   for  1994   reflect  certain
   reclassifications made to conform with the current presentation.

   The  Condensed  Consolidated Financial  Statements  have  been prepared  in
   accordance  with the rules and  regulations of the  Securities and Exchange
   Commission ("SEC")  applicable to  interim financial information.   Certain
   information and  footnote  disclosures  included  in  financial  statements
   prepared in  accordance with generally accepted  accounting principles have
   been condensed or omitted in these  interim statements pursuant to such SEC
   rules and regulations.  Management  recommends that these interim financial
   statements be read in conjunction with the Company's 1994  annual report on
   Form 10-K  that includes the  audited 1994 financial  statements. Effective
   third  quarter 1995, the Company discontinued accounting under Statement of
   Financial  Accounting Standards  No. 71  ("SFAS 71"),  "Accounting  for the
   Effects of Certain  Types of Regulation." (See Note B  - "Discontinuance of
   Regulatory Accounting - SFAS 71" on page 8.)

   In management's  opinion, the  Condensed Consolidated  Financial Statements
   include all  adjustments (consisting of only  normal recurring adjustments,
   except for the  extraordinary charge  of $3.4 billion  associated with  the
   discontinuance of  SFAS 71  as stated  in Note  B on page  8) necessary  to
   present  fairly the financial position  and results of  operations for each
   interim period shown.  The Condensed Consolidated Financial Statements have
   been reviewed by  Coopers & Lybrand L.L.P.,  independent accountants. Their
   report is on page 1.




















                                       7








                                    <PAGE>

                         PACIFIC BELL AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


B. DISCONTINUANCE OF REGULATORY ACCOUNTING - SFAS 71

   Effective  third quarter 1995, the  Company discontinued its application of
   SFAS  71  in  accordance with  the  provisions  of  Statement of  Financial
   Accounting Standards  ("SFAS") No. 101, "Accounting  for the Discontinuance
   of  Application  of FASB  Statement  No. 71."    As a  result,  the Company
   recorded  a non-cash,  extraordinary charge  of $3.4 billion,  during third
   quarter which is net of a deferred income tax benefit of $2.4 billion.  The
   charge includes  a write-down of net telephone plant and the elimination of
   net regulatory assets as summarized in the following table.

   ($ millions)                                      Pre-tax    After-tax
   ----------------------------------------------------------------------
   Increase in telephone plant and equipment     
     accumulated depreciation                         $4,819       $2,714
   Elimination of net regulatory assets                  962          646
                                                      ------       ------
   Total                                              $5,781       $3,360
=========================================================================

   The  Company  has  historically  accounted  for  the  economic  effects  of
   regulation in accordance with the provisions of SFAS 71. Under SFAS 71, the
   Company  has   depreciated  telephone  plant  using   lives  prescribed  by
   regulators  and, as  a  result  of  actions  of  regulators,  has  deferred
   recognizing certain  costs or has recognized  certain liabilities (referred
   to as "regulatory assets" and "regulatory liabilities").

   Effective  third quarter  1995,  management determined  that, for  external
   financial reporting purposes, it  is no longer appropriate for  the Company
   to  use  the  special SFAS  71  accounting rules  for  entities  subject to
   traditional  regulation. Management's  decision  to change  to the  general
   accounting  rules  used  by  competitive  enterprises  was  based  upon  an
   assessment  of the emerging competitive environment in California.   Prices
   for  the Company's products and  services are being  driven increasingly by
   market forces instead of regulation.

   The $4.8  billion increase in  accumulated depreciation  for the  Company's
   telephone plant reflects  the adoption of new, shorter  depreciation lives.
   The estimated useful  lives historically prescribed  by regulators did  not
   keep up with  the rapid pace of technology. The  Company's previous and new
   asset lives are compared in the following table.











                                       8








                                    <PAGE>

                         PACIFIC BELL AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


   ASSET LIVES (in years)                                 Old        New
   -------------------------------------------------------------------------
   Copper ........................................      19 - 26       14
   Digital Switches ..............................         16.5       10
   Digital Circuits ..............................   9.6 - 11.5        8
   Fiber .........................................      28 - 30       20
   Conduit .......................................           59       50
   =========================================================================

   The discontinuance  of SFAS 71  for external  financial reporting  purposes
   also required the elimination of the Company's net regulatory assets, which
   totaled  $962 million.   Regulators  sometimes include  costs  in allowable
   costs for  ratemaking purposes in a  period other than the  period in which
   those costs would be charged to expense under general accounting rules. The
   accounting  for  these timing  differences  created  regulatory assets  and
   regulatory  liabilities on the balance sheet. Details of the net regulatory
   assets which have been eliminated are displayed in the following table.

   ($ millions)
   -------------------------------------------------------------------------
   Regulatory assets (liabilities) due to:
   Deferred pension costs*............................. $  460 
   Unamortized debt redemption costs**.................    337 
   Deferred compensated absence costs*.................    206 
   Unamortized purchases of property,     
    plant, and equipment under $500....................     82 
   Deferred income taxes***............................   (159)
   Other...............................................     36 
                                                         ------
   Total...............................................  $ 962 
   =========================================================================

   *    Previously included primarily in "deferred charges and other 
        noncurrent assets" in the Company's balance sheets.

   **   Previously included in "long-term obligations."

   ***  Previously included in "other current liabilities" and "other 
        noncurrent liabilities and deferred credits."













                                       9








                                    <PAGE>

                         PACIFIC BELL AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

   The $460 million regulatory  asset for deferred pension costs  reflected an
   order by the California Public Utilities Commission ("CPUC")  requiring the
   Company  to  use the  "aggregate  cost  method"  for regulatory  accounting
   purposes for  its intrastate operations. This  regulatory asset represented
   differences between the Company's intrastate pension costs calculated using
   this  actuarial  method,  subject  to Internal  Revenue  Service  and other
   limitations, and costs  determined under the  provisions of  SFAS No. 87  ,
   "Employers'  Accounting  for  Pensions,"   and  SFAS  No.  88,  "Employers'
   Accounting  for Settlements  and  Curtailments of  Defined Benefit  Pension
   Plans and for Termination Benefits."

   Previously, when  debt  was refinanced  before  maturity, the  Company  had
   amortized to expense any  difference between net book value  and redemption
   price evenly  over the term of  the replacing issue in  accordance with the
   ratemaking  treatment of such  costs by  regulators. The  above unamortized
   debt  redemption  costs  of  $337  million  represented  costs  deferred in
   accordance with the previous  ratemaking treatment. The elimination of  the
   $337  million  unamortized  debt  redemption  costs  balance  for  external
   reporting  purposes  has  resulted  in  a  corresponding  increase  in  the
   Company's reported amount of long-term obligations.

   In  prior years, the CPUC and the Federal Communications Commission ("FCC")
   changed the required accounting for the costs of compensated absences, such
   as  vacation days,  from a  cash basis  to an  accrual basis.  A transition
   liability  for  earned  but  unused  compensated  absence  days  was  being
   amortized to expense over  periods prescribed by each regulator.   However,
   the  CPUC had required the Company to recognize certain compensated absence
   costs  on a cash basis for ratemaking.   The above regulatory asset of $206
   million for compensated absences reflected those costs which  were deferred
   in accordance with this ratemaking treatment.

   In  1989  and  1990,  respectively, the  FCC  and  the  CPUC increased  the
   threshold  for  directly  expensing   purchases  of  property,  plant,  and
   equipment from  $200 to  $500.   Purchases  of less  than  $500 which  were
   previously  capitalized  were  being  amortized  to  expense  over  periods
   prescribed by regulators.

   Specific  provisions  of  SFAS  No.  109,  "Accounting  for Income  Taxes,"
   requires regulated companies to  record a regulatory asset or  a regulatory
   liability when recognizing  deferred income  taxes if it  is probable  that
   these deferred taxes would be reflected in future rates. The net regulatory
   liability for deferred income taxes reflected this regulatory treatment.











                                      10








                                    <PAGE>

                         PACIFIC BELL AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

   Due to its discontinued application of SFAS 71, the Company  will no longer
   account  for the  economic  effects of  regulation  for external  financial
   reporting  purposes. The  Company's reported  depreciation expense  will be
   based  on estimated economic asset lives. Pension costs for both intrastate
   and interstate operations will be determined under SFAS No. 87 and SFAS No.
   88. Capitalized interest cost will be reported as a cost of telephone plant
   and equipment and a reduction in interest expense, as required  by SFAS No.
   34,  "Capitalization of Interest Cost." Prior to the discontinuance of SFAS
   71, the Company recorded  an allowance for funds used  during construction,
   which  included both  interest and equity  return components, as  a cost of
   plant and as an  item of miscellaneous income. The Company's accounting and
   reporting  for regulatory  purposes are  not  affected by  the discontinued
   application of SFAS 71 for external financial reporting purposes.

C. COMMITMENTS AND CONTINGENCIES

   Broadband Network

   In  December 1994,  the Company  contracted for  the purchase  of up  to $2
   billion  of broadband  network facilities  which will  incorporate emerging
   technologies.  The  Company is  committed to purchase  these facilities  in
   1998 if they meet certain quality and performance criteria.

   Revenues Subject to Refund

   In 1992, the CPUC  issued a decision adopting, with  modification, SFAS No.
   106,  "Employers'   Accounting  for  Postretirement   Benefits  Other  than
   Pensions," for regulatory accounting purposes.   Annual price cap decisions
   by the CPUC granted the Company $100 million in each of  the years 1995 and
   1994 for partial recovery of higher costs under SFAS No. 106.  However, the
   CPUC in October 1994 reopened the proceeding to determine the criteria  for
   exogenous cost treatment and whether the Company should continue to recover
   these  costs. The CPUC's order  held that related  revenues collected after
   October 12, 1994 are subject to refund. 

   Beginning August  1, 1995,  approximately $25  million annually  of 1993-94
   postretirement  benefits costs  are  being recovered  subject to  potential
   refund   in  the  interstate  jurisdiction.    The  FCC  is  examining  the
   appropriateness  of this  cost recovery  in a  new proceeding.   Management
   believes postretirement benefits costs are appropriately recoverable in the
   Company's price  cap filings, but is  unable to predict the  outcome of the
   CPUC's or FCC's proceedings.











                                      11








                                    <PAGE>

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
----------------------------------------------------------------------

RESULTS OF OPERATIONS

The  following discussions  and  data compare  the  results of  operations  of
Pacific  Bell and subsidiaries (the "Company") for the nine-month period ended
September  30, 1995 to  the same period in  1994.  Results  for the first nine
months of 1995 may not be indicative of results for the full year.

A summary of selected operating data is shown below:

                                 For the 9 Months Ended
                                      September 30,            Change
                                 ----------------------   -----------------
Selected Operating Data                 1995      1994    Amount    Percent
---------------------------------------------------------------------------
Return on shareowner's equity (%)      -57.5      17.6     -75.1         -
Operating ratio* (%)..............      77.8      75.7       2.1         -
Revenues per employee*                                          
  ($ thousands) .................        137       130         7       5.4
Total employees .................     48,359    51,757    -3,398      -6.6
Employees per ten thousand                                      
  access lines** ................       29.8      32.8      -3.0      -9.1
==========================================================================
*  Restated
** Excludes Pacific Bell Directory and Pacific Bell Mobile Services
   employees


Earnings
--------
                                 For the 9 months ended
                                      September 30,           Change
                                 ----------------------  -----------------
($ millions)                            1995      1994    Amount   Percent
--------------------------------------------------------------------------
Net income                           -$2,613      $824   -$3,437         -
--------------------------------------------------------------------------

The Company reported a  loss for the nine  months ended September 30, 1995  of
$2,613 million.  The  reported loss reflects a non-cash,  extraordinary charge
to net  income during third quarter  of $3.4 billion, after  taxes. The charge
results  from the  discontinued application  of special  accounting  rules for
entities subject to  traditional regulation  and the Company's  change to  the
general accounting rules used by competitive enterprises. As a result of  this
extraordinary  charge, the Company expects to record  a net loss for the year.
(See "Extraordinary Item" on page 18.)

Earnings  for  the  first  nine  months  of  1995 decreased  $3.4  billion  in
comparison  to  the same  period last  year  reflecting this  year's one-time,
extraordinary  third quarter charge.   Revenue shortfalls  also contributed to
the decline in earnings.  Demand growth as a result of the January 1995 intra-




                                      12








                                    <PAGE>


service area toll ("local toll") price reductions fell far short  of the level
anticipated  by the  California  Public Utilities  Commission  ("CPUC"). As  a
result,  the revenue neutrality intended by the CPUC's price rebalancing order
was not achieved.  Price cap revenue  reductions ordered by  the CPUC and  the
Federal Communications Commission ("FCC") further reduced earnings. Additional
pressure on earnings  resulted from incremental labor expense  associated with
the severe  storms in  early 1995.  Last  year's results  included a  one-time
after-tax charge  of about $29  million for a  CPUC refund order.   Management
believes 1995 earnings  without one-time  charges could be  about ten  percent
less  than 1994  due  primarily to  the  revenue rebalancing  shortfall.  (See
"Revenue Rebalancing Shortfall Filing" on page 23.)

Volume Indicators
------------------
                                 For the 9 months ended
                                        September 30,         Change
                                 ----------------------   ------------------
Volume Indicators                      1995      1994     Amount     Percent
----------------------------------------------------------------------------
Customer switched access lines                                  
  in service at
  September 30 (thousands)..........  15,358    14,955       403       2.7
Interexchange Carrier access
  minutes-of-use (millions) ........  43,210    39,155     4,055      10.4
  Interstate .......................  23,715    22,934       781       3.4
  Intrastate .......................  19,495    16,221     3,274      20.2
Toll messages (millions) ...........   3,596     3,326       270       8.1
============================================================================

The  total  number of  access lines  in service  grew  to 15,358  thousand, an
increase  of 2.7  percent  for the  twelve months  ended  September 30,  1995,
unchanged from last  year.  The growth  rate in business access lines  was 4.4
percent  this year,  up from  3.9 percent  last year.  The growth  in business
access  lines reflects  increased  employment levels  in California.  Business
Centrex lines grew 12.1 percent during the same period as businesses continued
to  link multiple locations and improve disaster  preparedness.  The number of
ISDN  lines in  service grew  to 42,635,  an increase of  127 percent  for the
twelve  months ended  September 30,  1995, as  customers demanded  faster data
transmission and Internet  access.   The residential access  line growth  rate
declined  to 1.8 percent for the twelve  months ended September 30, 1995, from
1.9 percent  last year. Last  year's figure included  the results of  a second
line  sales promotion.   The  lower residential  growth rate  compared to  the
business growth rate reflects weak residential construction in California.

Access minutes-of-use represent the volume of traffic carried by interexchange
carriers  over the Company's local  network.  Total  access minutes-of-use for
the nine  months ended September 30,  1995 increased by 10.4  percent over the
same period  last year.  The  increase in access minutes-of-use  was primarily
attributable to economic growth  and the effect of toll  services competition.
The official introduction of toll services competition in January 1995 had the
effect of increasing  intrastate access minutes-of-use.  The  Company provides
access service to competitors who complete local toll calls over the Company's
network.



                                      13








                                    <PAGE>

Toll messages  are comprised  of Message Telecommunications  Service, Optional
Calling  Plans, WATS and terminating 800 messages.   For the nine months ended
September 30,  1995, toll  messages increased  by 8.1 percent  compared to  an
increase of  4.7 percent for the  corresponding period in 1994.   The increase
was driven primarily by  economic growth as well as lower  prices.  On January
1, 1995,  the Company  lowered  the price  of its  local toll  services by  an
average of 40 percent.   The Company also began offering new  discount calling
plans.  Residential customers receive an automatic 15 percent off toll charges
above five dollars  per month while businesses receive an automatic 20 percent
off toll  charges over $15 per month.   High volume customers can receive even
larger discounts.   Price decreases  have stimulated demand  slightly but  the
increase falls  far short of levels  included in the CPUC's order.   (See also
"Competitive Risk" on page 26.)


Operating Revenues
------------------
                                 For the 9 Months Ended
                                      September 30,            Change
                                ------------------------  -----------------
($ millions)                            1995      1994    Dollar   Percent
---------------------------------------------------------------------------
Total operating revenues              $6,626    $6,741     -$115      -1.7
---------------------------------------------------------------------------

Revenues  for the nine months ended September  30, 1995, were reduced from the
same period  last year primarily  because demand growth  as a result  of lower
prices was lower than assumed in the CPUC-ordered price rebalancing.  Revenues
were also reduced because of price cap revenue reductions ordered  by the CPUC
under incentive-based regulation and the effects of toll services competition.

Effective January 1, 1995, the CPUC allowed long-distance companies and others
to officially compete  with the Company  in providing  local toll services  in
California.   That decision also  rebalanced prices for most  of the Company's
regulated  services so that  the Company could  remain competitive in  the new
environment.  The CPUC intended this decision to be initially revenue neutral.
Revenue  reductions due to  lower prices were  intended to be  offset by other
price increases and by increased network  usage generated by the lower prices.
Although  the Company  observed some  increased usage  during the  nine months
ended September 30, 1995, calling volumes were far below levels  forecasted by
the  CPUC and far below  levels necessary to  achieve revenue neutrality. (See
"Revenue Rebalancing Shortfall Filing" on page 23.)

The decrease in total operating revenues from  price rebalancing and price cap
orders  were partially  offset  by $232  million  in revenues  from  increased
customer  demand. The increase in  customer demand resulted  both from general
economic growth and the effect of price rebalancing. 










                                      14








                                    <PAGE>

The  revenue decreases were also partially  offset by a CPUC-ordered refund in
the second quarter of 1994 related to past problems with the Company's payment
processing  system.   Due  to the  1994  refund, miscellaneous  other  service
revenues  for the nine-month period  ending September 30,  1995, increased $27
million  compared to  last  year.    Factors  affecting  revenue  changes  are
summarized in the following table.

                                        Price
                            Price Re-     Cap              Customer   Total
($ millions)                balancing   Orders     Misc.    Demand   Change
---------------------------------------------------------------------------
Local service..............    $289     -$ 93      $ 61      $ 21      $278
Network access                                                   
   Interstate..............      16       -18        31        57        86
   Intrastate..............    -171       -12        12       161       -10
Toll service...............    -454       -37       -22       -62      -575
Other service revenues.....      12        -1        40        55       106
                              -----     -----     -----     -----     -----
Total operating revenues...   -$308     -$161      $122      $232     -$115
===========================================================================

The increases  in revenues due to  customer demand in the  above table reflect
growth in  key volume indicators.   The increase in customer  demand for local
service revenues  is the result of  growth in access lines  and custom calling
services generated by the improved economy in California.

The  increase in  interstate network  access revenues  due to  customer demand
reflects  increased interexchange  carrier access  minutes-of-use, as  well as
increased access lines.  Demand-related increases in intrastate network access
revenues  also  result from  growth in  access  minutes-of-use.   The official
introduction of competition in the  local toll market in January 1995  had the
effect of increasing access usage revenues.

The  decrease  in  customer  demand-related toll  service  revenues  primarily
results from competition (see "Competitive Risk" on page 26). In addition, the
Company  has lost  and continues  to  lose WATS  and 800  service business  to
interexchange carriers who  have the  competitive advantage of  being able  to
offer  these  services  both within  and  between  service  areas.   Partially
offsetting  these  reductions were  increased  usage  revenues resulting  from
general economic growth.

The demand-related increase in other service revenues reflects  the continuing
success of the Company's voice mail products and directory operations.














                                      15








                                    <PAGE>

Operating Expenses
------------------
                                 For the 9 Months Ended
                                      September 30,             Change
                               ------------------------  -------------------
($ millions)                          1995        1994     Dollar   Percent
----------------------------------------------------------------------------
Total operating expenses            $5,155      $5,105       $50       .1
----------------------------------------------------------------------------

Total  operating  expenses  for the  nine  months  ended  September 30,  1995,
increased when  compared with 1994 reflecting  increased depreciation expense,
costs resulting from severe storm damage in early 1995, and increased customer
education and  software expenses.  These expenses were partially offset by the
Company's continuing cost reduction efforts and reduced settlements expense as
displayed in the table below.

                     Salaries  Employee   Settle-           Subsid-   Total
($ millions)          & Wages  Benefits    ments    Misc.    iaries  Change  
---------------------------------------------------------------------------
Costs of products
 & services            -$ 4      -$20      -$58      -$14       $ 4    -$92
Customer operations
 & selling expense       -7       -13         -        29         7      16
General, admin.
 & other expense        -24        14         -       -12        73      51
Property
 & misc. taxes            -         -         -         6         -       6
Depreciation
 & amortization           -         -         -        66         3      69
                       ----      ----      ----      ----      ----    ----
Total operating
 expenses              -$35      -$19      -$58       $75       $87     $50
===========================================================================

Salaries  and wages  for  the nine-month  period  ending September  30,  1995,
decreased  compared  to  the same  period  in  1994  primarily  due  to  force
reduction.  Force reduction  savings were partially offset by  higher overtime
expense for storm and flood repairs in  the first half of 1995. Lower employee
benefits expense was primarily due to the Company's ongoing health  care cost-
reduction efforts. Certain  nonrecurring adjustments in  the third quarter  of
1994 partially offset these decreases.

Settlements  expense  decreased  primarily   due  to  the  CPUC-ordered  price
rebalancing which  eliminated reimbursements  to certain other  local exchange
carriers for calls terminating in their territories. 

Miscellaneous customer operations and  selling expense increased primarily due
to customer education expenses in the third quarter of 1995.








                                      16








                                    <PAGE>

Depreciation  expense increased  primarily  due to  higher depreciation  rates
ordered by  the CPUC  effective January 1,  1995, and  higher telephone  plant
balances.

Pacific  Bell's  subsidiaries' general  and  administrative expense  increased
primarily due to increased software expense in the third quarter of 1995.

Interest Expense
----------------

                            For the 9 Months Ended
                                  September 30,             Change
                            ------------------------  ----------------------
($ millions)                1995         1994          Change      Percent
----------------------------------------------------------------------------
Interest expense            $327         $324             $3         1.0
----------------------------------------------------------------------------

Interest  expense for the nine-month period in 1995 compared to 1994 increased
slightly primarily due  to interest  adjustments on capital  leases offset  by
last year's interest expense associated with a CPUC refund order.


Miscellaneous Income
--------------------
                            For the 9 Months Ended
                                  September 30,             Change
                            ------------------------  --------------------
($ millions)                1995         1994          Change      Percent
--------------------------------------------------------------------------
Miscellaneous income         $45           $1            $44           -
--------------------------------------------------------------------------

Miscellaneous  income for  the  nine-month period  in  1995 compared  to  1994
increased primarily  due to interest income  of $18 million from  a tax refund
received  in 1995  related to  prior years.   Also,  the late  payment charges
penalty  recorded in 1994  increased comparative  miscellaneous income  by $10
million.   A change in the FCC calculation of "Allowance for Funds Used During
Construction" also contributed  to the  increase.  In  addition, the  increase
reflected unrealized  gains on  trust assets  under an  executive compensation
deferral plan  which will fluctuate throughout  the year and may  be offset by
unrealized losses depending on market conditions. 















                                      17








                                    <PAGE>

Income Taxes
------------
                            For the 9 Months Ended
                                  September 30,             Change
                            ------------------------  --------------------
($ millions)                1995         1994          Change      Percent
--------------------------------------------------------------------------
Income taxes                $442         $489           -$47        -9.6
----------------------------------------------------------------------------
Income tax  expense decreased for  the nine-month  period in 1995  compared to
1994 primarily due  to lower pre-tax  income partially  offset by last  year's
accelerated  recognition of prior period investment tax credits due to shorter
plant lives.

Extraordinary Item 
-------------------
    
The  Company historically has accounted for the economic effects of regulation
in  accordance  with  the  provisions  of  Statement of  Financial  Accounting
Standards No. 71 ("SFAS 71"), "Accounting for the Effects of  Certain Types of
Regulation."  Under SFAS 71, the Company has depreciated telephone plant using
lives  prescribed  by  regulators  and,  as  a  result  of  other  actions  of
regulators, has deferred recognizing  certain costs or has  recognized certain
liabilities (referred to as "regulatory assets" and "regulatory liabilities").

Effective  third  quarter  1995,  management  determined  that,  for  external
financial reporting purposes,  it is no longer appropriate for  the Company to
continue to use the special  SFAS 71 accounting rules for entities  subject to
traditional  regulation.  Management's  decision  to  change  to  the  general
accounting  rules used by competitive enterprises was based upon an assessment
of  the  emerging  competitive  environment  in  California.  Prices  for  the
Company's products and services are being driven increasingly by market forces
instead of regulation.

The discontinued application  of SFAS  71 required the  Company, for  external
financial  reporting  purposes,  to write  down  the  carrying  amount of  its
telephone  plant and to eliminate its regulatory  assets and liabilities. As a
result, the Company recorded  in third quarter 1995 a  non-cash, extraordinary
charge of $3.4 billion, which is net  of a deferred income tax benefit of $2.4
billion.  The telephone plant write-down portion of the charge reflects a pre-
tax increase in the  Company's accumulated depreciation of  approximately $4.8
billion to  recognize shorter  estimated lives in  a competitive market.   The
extraordinary charge also  includes a  pre-tax adjustment of  $962 million  to
eliminate the Company's regulatory  assets and liabilities. The discontinuance
of  SFAS 71  was  made in  accordance with  Statement of  Financial Accounting
Standards No. 101, "Accounting  for the Discontinuance of Application  of FASB
Statement  No.  71."    (See also  Note  B  -  "Discontinuation of  Regulatory
Accounting - SFAS 71" on page 8.)

In future years, the discontinuance of SFAS 71 by Pacific Bell is not expected
to  materially  affect depreciation  expense, net  income  or cash  flow. This
action  will  not  affect  the  Company's  planned  network  investments.  The
discontinuance  of  SFAS  71 is  a  change  for  external financial  reporting
purposes only and has no effect on the Company's customers.



                                      18








                                    <PAGE>

Status of Restructuring Reserve
-------------------------------

As previously reported, the Company established a restructuring reserve at the
end of 1993 to provide for the  incremental cost of force reductions and other
related costs  to restructure its  internal business  processes through  1997.
After new hires, net force loss for Pacific Bell (excluding  subsidiaries) was
approximately  1,700  for the  first nine  months of  1995.   A total  of $215
million was charged to the reserve in the first nine months of 1995  primarily
for  reengineering projects.   As  of September  30, 1995,  a balance  of $619
million remained in the restructuring reserve.

The Company continues to refine its reengineering and force reduction plans in
order  to maximize  cost  savings.   Management  expects fourth  quarter  1995
charges  to the  reserve  to exceed  the  $108 million  charged  in the  third
quarter.   Actual charges  to the reserve  in 1995 are not  expected to differ
materially from the previous estimate of $386 million.

During the  second quarter of 1995, the Company announced that it will further
consolidate  its  network operations  centers to  two  by first  quarter 1996,
rather than  four centers as previously  announced.  This move  is expected to
result  in investment  savings of  $20 million  during 1995  without affecting
customer service.

Capital Expenditures
--------------------

The  Company  invested  about  $1.2 billion  during  the  first  half  of 1995
primarily to modernize  and expand the  network.  The  Company now expects  to
invest about $1.7 billion in 1995 excluding broadband costs.

BOND RATING

In May 1995, Duff and  Phelps, Inc. lowered the rating of  the Company's bonds
from Double-A ("AA") to  Double-A-Minus ("AA-").   At September 30, 1995,  the
Company  had approximately  $5  billion of  long-  and intermediate-term  debt
outstanding.  The rating  action reflected price cap revenue  reductions, toll
services   competition,  and   proposed  interim   rules  on   local  services
competition.    The  rating  action  also  reflected  the  expected  financing
requirements of the Company's broadband and PCS networks. In addition, Moody's
Investors Services, Inc. has changed its outlook on the long-term  debt of the
Company to  "negative" from "stable,"  citing concerns about  risks associated
with  deployment  of  the broadband  network  and  potential  pressure on  the
financial  profile and  performance of  the Company.   Moody's  also expressed
concern  about  the   timetable  for  introduction  of   competition  for  all
telecommunications  services  in  California  and  the  risk  that  the  rules
governing the competitive environment will be unbalanced.

In  August 1995,  Standard &  Poor's Corporation  removed bond  and commercial
paper ratings of the Company from "CreditWatch," where they were placed in May
1995 following  the release by the CPUC of its proposed interim rules on local
services competition.  Standard & Poor's Corporation stated that the long-term
rating outlook for the Company is negative.




                                      19








                                    <PAGE>

LABOR AGREEMENT

On August 8, 1995, the  Company reached a tentative three-year  agreement with
the Communications Workers of America which represents about 33,000 employees.
The agreement was ratified by the union membership in September  1995. The new
agreement features a 10.5 percent wage increase over three years, a 14 percent
pension  increase,  a  $16 million  training  and  retraining  program, a  new
voluntary early retirement option,  continued employment security and improved
health  benefits.   Agreements  were  also  reached  with  two  other  unions.
Management estimates that  the agreements  will result in  increased costs  of
approximately  $550 million over three  years. This estimate  does not include
savings which  may result from  future force reductions. In  October 1995, the
Company  began offering the new  voluntary early retirement  option to certain
non-management employees.  

PENDING REGULATORY ISSUES

Telecommunications Legislation
------------------------------

In June 1995,  the U.S. Senate approved a telecommunications  bill which would
ease certain restrictions imposed by the Communications  Act of 1934, the 1982
Consent Decree  and the 1984 Cable Act.   Among the provisions, the bill would
allow  telephone companies and cable  television companies to  compete in each
others' markets.   In August 1995, similar legislation was passed by the House
of Representatives.    In  October  1995,  the bills  went  to  conference  to
reconcile the  differences.   Management believes that  the telecommunications
reform  legislation pending  before Congress  is a  balanced plan  that, after
reconciliation and if enacted, would begin to offer consumers the  benefits of
real competition.   The President of the U. S. has  indicated that he may veto
the legislation unless certain changes are made. 

Calling Party Identification
----------------------------

In  May 1995,  the  FCC established  national  rules affecting  how  telephone
companies,  including  the Company,  may  offer  calling party  identification
services  ("Caller ID").    Caller ID  displays the  telephone  number of  the
calling party on a device that attaches to a customer's telephone unless it is
blocked  by the calling  party. Caller ID  is already available  in most other
states   but  has  not  been  offered  in  California  due  to  CPUC  blocking
requirements  that  make the  service uneconomic  to  provide. The  FCC ruling
preempts certain of  the CPUC's  restrictions which made  providing Caller  ID
uneconomic.   In June  1995, the CPUC  appealed the FCC's  ruling to  the U.S.
Court of Appeals for the Ninth Circuit.  The appeal is pending.












                                      20








                                    <PAGE>

FCC Regulatory Framework Review
--------------------------------

In March 1995,  the FCC adopted  new interim price  cap rules that  govern the
prices  that  the  larger  local  exchange carriers  ("LECs"),  including  the
Company, charge interexchange carriers ("IECs") for access to  local telephone
networks.

The interim rules  require LECs to adjust their maximum  prices for changes in
inflation,  productivity  and certain  costs beyond  the  control of  the LEC.
Under the interim plan, LECs may choose  from three productivity factors: 4.0,
4.7, or 5.3 percent.  Election  of the 5.3 percent productivity factor permits
the  LEC to retain  all of its  earnings whereas the  other lower productivity
factors require earnings to be shared with customers.  In adopting the interim
plan, the  FCC required LECs to  prospectively reduce their price  caps by 0.7
percent  for each  year the  LEC elected  the lower  3.3 percent  productivity
factor during  1991-94.   For  the Company,  this resulted  in  a 2.1  percent
reduction.  The Company has formally contested this reduction as well as other
adjustments associated  with the interim plan in the U.S. Court of Appeals for
the District of Columbia (the "Court").   In August 1995, the Court agreed  to
expedite review of these adjustments. 

The FCC  plans  to  adopt  permanent rules  in  1996  following  a  rulemaking
proceeding.  Management continues  to believe that  the FCC should adopt  pure
price cap  regulation  and eliminate  the  productivity factor,  sharing,  and
earnings caps.

The  Company's 1995 annual access  filing implementing the  interim rules took
effect  August 1,  1995.   As a  result, the  Company's revenues  were reduced
approximately  $123 million through June 30, 1996. Of this amount, $69 million
was  reflected in the  Company's 1994 financials.   The Company  chose the 5.3
percent productivity  factor that  enables it  to retain  all of  its earnings
after  July  1, 1995.    The  higher productivity  factor  was  chosen because
management  believes that it  will be more  than offset by  elimination of the
sharing mechanism.

Video Dialtone Applications Approval
------------------------------------

In July 1995,  the FCC approved  the Company's applications  for authority  to
offer video  dialtone services in  specific locations in  four of its  service
areas.  The approval allows the Company to begin installing the video-specific
components  of its advanced communications network. Construction of the video-
specific   elements  of  the  network  will  give  customers  access  to  such
interactive services  as movies  and television  shows on  demand, interactive
news,  tele-education,  home  shopping,  video  games,  community  information
listings, high-speed Internet  access and broadcast  programming. Construction
of the telephone portion of the network began in May 1994. 









                                      21








                                    <PAGE>

In September 1995, management announced it would concentrate deployment of the
advanced communications  network in  the San Francisco  Bay Area,  one of  the
Company's most competitive markets. Management had previously planned to build
an  advanced communications  network  simultaneously  in Southern  California.
Pacific Telesis Group's acquisition of Cross Country Wireless, Inc., a company
with rights to deliver wireless  digital television to more than five  million
homes,  allows  the Company  to introduce  services  more rapidly  in Southern
California without the immediate deployment of wireline video technology. 

The  Company's approved video  dialtone applications,  filed in  late December
1993, cover  approximately 1.3 million homes throughout  California. With this
approval, the Company is on track to be the first company in the United States
to offer a single full service network supporting telephony, data, and  video.
Technology trials will be conducted during the second half of 1995 in  the San
Francisco  Bay  Area,  with  paying  customers  connected  early   next  year.
Interactive services will be offered to consumers beginning mid-1996. 

The  Company  has selected  the  state-of-the-art  hybrid fiber/coaxial  cable
architecture.   The technology is  cost effective to  deploy and operate,  and
allows Pacific Bell to achieve significant operational savings.   Furthermore,
the architecture is flexible enough to meet customer needs today while network
capacity can be expanded easily as demand grows. 

There are still  critical regulatory issues to resolve  before the Company can
deliver the  full benefits of the "communications superhighway".  The FCC must
still  resolve  the  issue of  whether  programming  affiliates  of the  video
dialtone providers  will be regulated under  cable television rules.   While a
cable  television  system  allows  the  owner  sole  discretion  to  determine
programming, a video  dialtone platform is  a common carrier platform  open to
any programmer.   Management believes that telephone companies providing video
dialtone should be  regulated solely as common  carriers even if  they provide
some programming on the video dialtone platform.

CPUC Annual Price Cap Filing
----------------------------

In  October 1995,  the Company  filed its  annual, mandated  price  cap advice
letter  filing  for 1996  with  the CPUC.    However, this  year's  filing was
complicated by  the fact that the  CPUC has not adopted  a productivity factor
for the Company for  1996 for use in the price cap formula.   As a result, and
solely at  the CPUC's request, the  Company included in its  price cap filing,
"for illustrative purposes only", the revenue decrease that would result using
the  productivity factor of five percent that had been adopted for use in 1994
and 1995.   The resulting "illustrative" revenue  decrease from our price  cap
filing would be $63  million, consisting of an illustrative  revenue reduction
of $116 million due to the "inflation minus productivity" portion of the price
cap formula  and a  proposed  revenue increase  of $53  million  due to  other
partially offsetting items.  The CPUC is currently examining whether to modify
or  eliminate  the "inflation  minus productivity"  portion  of the  price cap
formula and has indicated that it  could reach a decision by the end  of 1995.
(See "CPUC Regulatory Framework Review" below.)






                                      22








                                    <PAGE>

Uniform Systems of Account ("USOA") Turnaround Adjustment
---------------------------------------------------------

In May 1995, the  Company filed an application with the CPUC  to eliminate the
USOA  Turnaround  Adjustment  effective  January  1, 1995.    This  Turnaround
adjustment  is a vestige of traditional rate-of-return regulation and has been
in effect  since 1988.  Because of the adjustment, the Company's revenues have
been reduced  by  approximately  $23 million  each  year since  1988.    These
adjustments  were intended  to reflect  annual revenue  requirement reductions
resulting from the CPUC's adoption  of a capital-to-expense accounting  change
in 1988.   The CPUC  held evidentiary  hearings in  September 1995  addressing
whether the USOA Turnaround  Adjustment should be eliminated. The  Company has
strongly recommended that this adjustment be discontinued effective January 1,
1995, which would result in a one-time revenue increase to Pacific Bell of $23
million for 1995.   The  CPUC's Division of  Ratepayer Advocates has  proposed
that the Company be ordered to permanently reduce its revenues by $106 million
effective January 1, 1996.  AT&T Corp. has proposed that the Company should be
ordered to  reduce its revenues permanently  by an $112 million  over the next
ten  years and reduce its revenues by an  additional $43 million on January 1,
1996. Management is unable to predict the outcome of this matter.

Revenue Rebalancing Shortfall Filing
------------------------------------

In September  1995, the Company filed  for $214 million  of revenue increases.
The request was to address the revenue shortfall as a result of the CPUC price
rebalancing decision which  was intended  to be revenue  neutral.   Management
cannot predict the outcome of this matter.

CPUC Regulatory Framework Review
--------------------------------
In June 1995, the Company filed an emergency petition with the CPUC requesting
an expeditious review of  its current regulatory framework. In July  1995, the
CPUC granted the Company's request and announced the first phase of the review
which is addressing three issues:

1. Should the inflation minus productivity portion of the price cap formula be
   modified or eliminated?
2. Should the price  cap formula be applied  to all of the  services placed in
   the categories  for non-competitive  and partially competitive  services or
   only to services placed in the category for non-competitive services?
3. Should  any modifications to the regulatory framework be ordered in stages,
   contingent on reviewing milestones?

Management believes  that the inflation  minus productivity factor  portion of
the price cap  formula should be eliminated.  As the Company operates under an
increasingly competitive environment, competition itself replaces the need for
formula based adjustments  to rates. The CPUC has indicated  that it wishes to
conclude the first phase of  its review by the end of 1995.  Management cannot
predict the future effect of the CPUC's review on revenues.







                                      23








                                    <PAGE>

Depreciation Filing
-------------------

The CPUC evaluates and  prescribes depreciation rates each year. In June 1995,
the Company  requested technical changes which  would result in a  $34 million
decrease  in  annual depreciation  expense. This  request  was not  related to
management's decision  to discontinue  accounting under SFAS  71 for  external
financial reporting purposes. In November 1995, the CPUC granted the Company's
request with new depreciation rates to become effective January 1, 1996.

Local Services Competition
--------------------------

In July 1995, the CPUC issued initial rules opening the  local exchange market
to  competition.   Facilities-based  competitive local  carriers ("CLCs")  are
authorized to begin providing  local phone service beginning January  1, 1996.
Those  companies leasing lines for resale will  be able to offer phone service
by  March  1, 1996.    No  CLC may  begin  operating  until all  certification
requirements  are  satisfied  and the  CPUC  grants  a  certificate of  public
convenience and  necessity.  As of  October 1995, 67 companies  had filed with
the CPUC for  authority to offer local phone service  in the Company's service
areas.

The  CPUC  expects  to resolve  remaining  issues and  issue  final  rules for
implementing full competition in  all California telecommunications markets by
January  1,  1997.    The  CPUC  has  been  taking  testimony  and is  holding
evidentiary  hearings   on  specific   unresolved  issues  related   to  local
competition.  These issues  include LEC pricing flexibility, resale  terms and
conditions  including prices,  points of  network interconnection,  prices for
interim  number portability  and whether  the rules provide  the LECs  with an
opportunity to earn a fair rate of return.

In  October 1995  the Company  filed proposed  guidelines for  selling network
services and capabilities to CLCs.  The proposal outlines  plans for wholesale
pricing,  universal service funding, joint  marketing and other concerns which
management  believes  must  be  addressed  before  local  competition  can  be
introduced next year.  The  Company has also filed testimony showing  that the
effect  of the  CPUC's initial  local competition  rules, taken  together with
possible  unfavorable  decisions on  other  pending  regulatory issues,  would
deprive the Company  of the opportunity  to earn a fair  rate of return.   The
CPUC denied the Company's Application for Rehearing of the initial rules.

Although  management supports the expansion of local telephone competition, it
is  concerned that under the CPUC's initial  rules competitors will be able to
package and  resell local phone  service together with  long-distance service,
while the Company will still not be  able to offer customers the same array of
services.  This would be a significant competitive disadvantage to the Company
since it is prohibited by the 1982 Consent Decree from providing long-distance
service between service areas.








                                      24








                                    <PAGE>

Universal Service
-----------------

In July 1995, in  connection with its local services competition decision, the
CPUC  affirmed  its commitment  to universal  service,  and proposed  rules to
assure  the continuation  of affordable,  high quality  service in  the coming
competitive  local  phone  services   market.  Universal  service  issues  are
fundamental  to the ongoing CPUC  proceeding to allow  local and long-distance
companies to  compete in  providing basic local  phone services, just  as they
already compete in providing local toll services.

The CPUC has stated  that companies that  want to compete  in the local  phone
services  market  will  have the  opportunities  as  well  as the  obligations
associated  with universal  service.  Hearings  have been held  to seek public
comment on universal service in California. Management believes that universal
service issues  should be  resolved before resale  competition is  authorized.
Resale competition is currently scheduled to begin March 1, 1996.

Revenues Subject to Refund
--------------------------

In 1992, the CPUC issued a decision adopting, with modification, SFAS No. 106,
"Employers' Accounting  for Postretirement Benefits Other  than Pensions," for
regulatory  accounting purposes.    Annual price  cap  decisions by  the  CPUC
granted the  Company $100  million in  each of  the  years 1995  and 1994  for
partial recovery  of higher costs  under SFAS No. 106.   However, the  CPUC in
October 1994 reopened the  proceeding to determine the criteria  for exogenous
cost treatment and whether the Company should continue to recover these costs.
The CPUC's  order held that related revenues  collected after October 12, 1994
are subject to refund. 

Beginning  August  1,  1995, approximately  $25  million  annually of  1993-94
postretirement benefits costs are being recovered subject to  potential refund
in  the interstate jurisdiction.  The  FCC is examining the appropriateness of
this  cost recovery in a  new proceeding.   Management believes postretirement
benefits  costs  are appropriately  recoverable  in  the Company's  price  cap
filings,  but  is  unable  to  predict the  outcome  of  the  CPUC's  or FCC's
proceedings.



















                                      25








                                    <PAGE>

Property Taxes
--------------

In  1992,  a  settlement agreement  was  reached  between the  State  Board of
Equalization,  all  California counties,  the State  Attorney General,  and 28
utilities, including  the  Company,  on  a specific  methodology  for  valuing
utility property for property tax purposes.  The 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  million of annual
property tax savings should be  treated as an exogenous cost reduction  in the
Company's annual price cap filings.  These intervenors have also asserted that
past property tax savings totaling as much as $60 million plus interest should
be  returned  to  customers.    Management  believes  that  under  the  CPUC's
regulatory  framework, any  property tax savings  should only be  treated as a
component of the  calculation of  shareable earnings.   In an Interim  Opinion
issued in June 1995, the CPUC decided to defer a final decision on this matter
pending  resolution of  the criteria  for exogenous  cost treatment  under its
regulatory  framework.    The criteria  are  being  considered  in a  separate
proceeding initiated for rehearing of the CPUC's postretirement benefits other
than pensions decision.

DISPOSITION OF BELLCORE

In  April 1995,  Bellcore announced  a decision  by its  owners to  pursue the
disposition of their interests in Bellcore.  Bellcore is a leading provider of
communications software and consulting  services.  It is owned by Pacific Bell
and six of the telephone regional  holding companies formed at the divestiture
of  AT&T  Corp. in  1984.    A final  decision  regarding  the disposition  of
interests and  the structure of such  a transaction has yet  to be determined.
Any transaction will be subject to necessary approvals. 

COMPETITIVE RISK

Regulatory,   legislative  and  judicial  actions,  as  well  as  advances  in
technology,  have expanded the types  of available communications products and
services and the number of companies offering such services.  Various forms of
competition  are growing  steadily and  are already  having an  effect  on the
Company's earnings.   An increasing amount  of this competition is  from large
companies with  substantial capital,  technological, and  marketing resources.
Currently,   competitors   primarily   consist   of   interexchange  carriers,
competitive  access providers and wireless  companies.  Soon  the Company will
also face competition from cable television companies and others.















                                      26








                                    <PAGE>

Effective January  1,  1995, the  CPUC authorized  toll services  competition.
Toll service revenues  represented approximately 14  percent of the  Company's
total operating revenues for the first  nine months of 1995. In May  1995, the
CPUC  issued a decision that requires the  Company to permit Centrex customers
who purchase certain  optional routing  features to  route intra-service  area
calls to the toll carrier of their choice.  Since the official introduction of
competition  in January 1995, management estimates that the Company lost about
five to six percent of the total local toll services market to other providers
by the end  of third quarter 1995.  Management estimates  that, as a result of
official  competition and unofficial  competitive losses  in prior  years, the
Company currently serves  less than 60  percent of  the business toll  market.
Changes  contemplated by the CPUC and  the effects of pending legislation make
it  too early  to predict  when,  or at  what  level, market  share loss  will
stabilize.

The CPUC  has also ordered  the Company  to offer expanded  interconnection to
competitive  access  providers. These  competitors  are allowed  to  carry the
intrastate portion of long-distance and local toll calls between the Company's
central offices  and long-distance carriers.   As a result of  the CPUC order,
competitors  may choose to locate their transmission facilities within or near
the Company's central offices. Intrastate access revenues subject to increased
competition represent about five percent of the Company's total revenues. 

In addition,  the CPUC  has issued  initial rules to  open the  local exchange
market  to  competition  beginning January  1,  1996.    (See "Local  Services
Competition" on page 24.)  Local service revenues represented approximately 42
percent of the Company's total operating revenues for the first nine months of
1995.  Local exchange competition will also affect  network access revenues as
CLCs provide access services.  

Because of the unique characteristics of the California market, the Company is
vulnerable  to competition.  The Company's business and residence revenues and
profitability are highly concentrated among a portion of its customer base and
geographic areas.  Competitors need only serve portions of our service area to
compete  for  the  majority of  the  Company's  business  and residence  usage
revenues.  High-margin customers are  clustered in high density areas  such as
Los  Angeles and  Orange County,  the San  Francisco Bay  Area, San  Diego and
Sacramento.

Competitors can  be expected to  target the high-usage,  high-profit customers
and can do this  by targeting only a small  part of our geographic area  and a
small part of  our customer  base.  Large  and well-capitalized  long-distance
carriers,   wireless  companies,  competitive   access  providers   and  cable
television companies are preparing to compete in major local exchange markets.
In some  cases they are already  deploying switches and other  facilities.  In
California,  cable television companies currently pass more than 90 percent of
the Company's residential customers.  Cable television companies have  already
announced plans for major  build-outs to compete in the local exchange market.
All  of the Company's customers  have already chosen  a long-distance company,
and  there  is  more  advertising  from   long-distance  companies  than  from
traditional local exchange companies including Pacific Bell.






                                      27








                                    <PAGE>

Market research has shown  that a substantial majority of  residence customers
prefer  using one  company for  all  telecommunications services.   This  is a
significant  competitive disadvantage to the Company since it is prohibited by
the 1982 Consent  Decree from providing long-distance  service between service
areas.  Similar market research shows  that a substantial majority of business
customers  would  select  one of  the  major  long-distance  companies over  a
combination  of Pacific  Bell and  a long-distance  company because  using one
carrier would permit them to apply all of their traffic toward volume discount
plans offered by the long-distance companies.

For these reasons, management believes that implementation of local exchange
competition  prior to  the Company  being allowed  to enter  the long-distance
market  would   provide  already  strong  competitors   an  unfair  advantage.
Management also  believes that a truly open competitive market would allow for
the simultaneous entry of all telecommunications competitors into each others'
markets  on an  equal  footing.   Although the  Company  is facing  increasing
competition  for all of  its services, management  believes that  a truly open
competitive market,  in which  the Company  can compete  without restrictions,
offers long-term opportunity to grow the business.






































                                      28








                                    <PAGE>

PART II.  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K.

    (a)  Exhibits.

     Exhibits identified as  on file with  the SEC are incorporated  herein by
     reference as exhibits hereto.

Exhibit
Number                            Description
-------                           -----------

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.

15   Letter re unaudited interim financial information.

27   Article 5 FDS for 3rd Quarter 1995 Form 10-Q.


The  Company will  furnish to  a security  holder upon request  a copy  of any
exhibit at cost.

(b)  Reports on Form 8-K.

Form 8-K, Date of Report September 7, 1995, was filed with the SEC, under Item
5, announcing the discontinuance of SFAS 71.


























                                      29








                                    <PAGE>


FORM 10-Q



                                  SIGNATURE
                                  ---------

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



                               By   /s/Peter A. Darbee
                                    ---------------------------------------
                                    Peter A. Darbee
                                    Vice President, Chief Financial Officer
                                      and Controller



November 13, 1995




























                                      30








                                    <PAGE>

                                 EXHIBIT INDEX



Exhibits  identified as  on  file  with the  SEC  are  incorporated herein  by
reference as exhibits hereto.  All other exhibits are provided as  part of the
electronic transmission.

Exhibit
Number                            Description
-------                           -----------

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.

15   Letter re unaudited interim financial information.

27   Article 5 FDS for 3rd Quarter 1995 Form 10-Q.




































                                      31