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U.S. Securities and Exchange Commission
Washington, D.C. 20549
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Form 10-Q
(Mark one)
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[x] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
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or
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[ ] Transition Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
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Commission File Number 1-6781
The Ohio Bell Telephone Company
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An Ohio Corporation
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45 Erieview Plaza
Cleveland, Ohio 44114
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I.R.S. Employer Identification
Number 34-0436390
Telephone number (800) 257-
0902
OHIO BELL IS A WHOLLY OWNED SUBSIDIARY OF AMERITECH CORPORATION AND MEETS
THE CONDITIONS IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q. WE
ARE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT UNDER GENERAL
INSTRUCTION H(2).
We have 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, and
have been subject to those filing requirements for the past 90 days.
Yes X No
---- ----
At July 31, 1997, one common share was outstanding.
TABLE OF CONTENTS
PART I
ITEM Page
- ---- ----
1. Financial Statements
Condensed Statements of Income and Accumulated Deficit for
the three and six months ended June 30, 1997 and 1996 1
Condensed Balance Sheets as of
June 30, 1997 and December 31, 1996 2-3
Condensed Statements of Cash Flows for
the six months ended June 30, 1997 and 1996 4
Notes to Condensed Financial Statements 5
2. Management's Discussion and Analysis
of Results of Operations 6-12
PART II
6. Exhibits and Reports on Form 8-K 13
Glossary 15-16
i
Part I - Financial Information
------------------------------
CONDENSED STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
(Dollars in Millions)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
---------------- ---------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues
Local service................. $ 343.6 $ 333.4 $ 675.0 $ 652.8
Interstate network access..... 130.8 117.8 259.6 233.7
Intrastate network access..... 32.4 35.8 64.0 71.6
Long distance services........ 35.5 42.7 73.0 84.8
Other......................... 46.7 40.4 86.9 79.9
--------- --------- --------- ---------
589.0 570.1 1,158.5 1,122.8
--------- --------- --------- ---------
Operating expenses
Employee-related expenses..... 109.4 106.7 216.2 212.6
Depreciation and amortization. 103.0 96.9 204.7 191.4
Other operating expenses...... 198.8 181.4 376.2 371.6
Taxes other than income taxes. 46.8 50.6 93.9 101.6
--------- --------- --------- ---------
458.0 435.6 891.0 877.2
--------- --------- --------- ---------
Operating income................ 131.0 134.5 267.5 245.6
Interest expense................ 15.5 14.1 29.9 28.0
Other income, net............... 1.5 2.1 3.3 5.0
--------- --------- --------- ---------
Income before income taxes...... 117.0 122.5 240.9 222.6
Income taxes.................... 39.7 40.4 81.8 73.3
--------- --------- --------- ---------
Net income...................... 77.3 82.1 159.1 149.3
Accumulated deficit,
beginning of period........... (97.7) (116.0) (98.1) (122.8)
Less, dividends declared.... 64.2 74.9 145.6 135.3
--------- --------- --------- ---------
Accumulated deficit,
end of period................. $ (84.6) $ (108.8) $ (84.6) $ (108.8)
========= ========= ========= =========
See Notes to Condensed Financial Statements.
Page 1
CONDENSED BALANCE SHEETS
(Dollars in Millions)
June 30, 1997 Dec. 31, 1996
-------------- -------------
(Unaudited) (Derived from
Audited
Financial
Statements)
ASSETS
Current assets
Cash and temporary cash investments......... $ 0.1 $ 0.1
Receivables, net
Customers................................. 470.0 466.3
Ameritech and affiliates.................. 3.4 1.6
Other..................................... 14.2 15.2
Material and supplies....................... 4.7 3.2
Prepaid and other........................... 17.8 8.9
--------- ---------
510.2 495.3
--------- ---------
Property, plant and equipment................ 6,153.5 6,021.6
Less, accumulated depreciation............... 3,819.5 3,691.4
--------- ---------
2,334.0 2,330.2
--------- ---------
Investments, primarily in affiliates......... 82.5 65.5
Other assets and deferred charges............ 193.7 195.6
--------- ---------
Total assets................................. $ 3,120.4 $ 3,086.6
========= =========
See Notes to Condensed Financial Statements.
Page 2
CONDENSED BALANCE SHEETS (continued)
(Dollars in Millions)
June 30, 1997 Dec. 31, 1996
-------------- -------------
(Unaudited) (Derived from
Audited
Financial
Statements)
LIABILITIES AND SHAREOWNER'S EQUITY
Current liabilities
Debt maturing within one year
Ameritech .................. $ 169.8 $ 68.5
Other ...................... 0.1 --
Accounts payable
Ameritech Services, Inc. (ASI)............ 124.5 93.6
Ameritech and affiliates.................. 31.6 34.3
Other..................................... 99.5 120.8
Other current liabilities.................. 195.1 270.7
--------- ---------
620.6 587.9
--------- ---------
Long-term debt.............................. 834.7 834.9
--------- ---------
Deferred credits and other long-term liabilities
Accumulated deferred income taxes.......... 101.2 101.7
Unamortized investment tax credits......... 32.3 35.1
Postretirement benefits
other than pensions...................... 537.5 542.3
Long-term payable to ASI................... 15.1 16.2
Other ..................................... 53.3 56.5
--------- ---------
739.4 751.8
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Shareowner's equity
Common shares - (one share issued
and outstanding without par value)....... 1,010.3 1,010.1
Accumulated deficit........................ (84.6) (98.1)
--------- ---------
925.7 912.0
--------- ---------
Total liabilities and shareowner's equity... $ 3,120.4 $ 3,086.6
========= =========
See Notes to Condensed Financial Statements.
Page 3
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
Six Months Ended
June 30
-------------
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................... $ 159.1 $ 149.3
Adjustments to net income
Depreciation and amortization............... 204.7 191.4
Deferred income taxes, net.................. (9.5) (7.0)
Investment tax credits, net................. (2.8) (3.8)
Capitalized interest........................ (1.9) (2.0)
Change in accounts receivable, net.......... (4.5) (30.0)
Change in material and supplies............. (6.0) (3.4)
Change in certain other current assets...... (8.9) 9.8
Change in accounts payable.................. 6.9 (64.7)
Change in certain other current
liabilities ............................. (66.6) (39.4)
Change in certain other noncurrent
assets and liabilities..................... (10.5) (13.9)
Other operating activities, net............ 4.8 2.2
-------- --------
Net cash from operating activities............ 264.8 188.5
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................... (206.0) (178.3)
Additional investments ..................... (21.6) --
Proceeds from disposals of
property, plant and equipment................ 7.3 2.7
Other investing activities, net............... -- 0.1
-------- --------
Net cash from investing activities............ (220.3) (175.5)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Intercompany financing, net................... 101.4 49.2
Retirements of long-term debt................. (0.5) (0.2)
Dividend payments............................. (145.6) (196.4)
Other financing activities, net ............ 0.2 --
-------- --------
Net cash from financing activities............ (44.5) (147.4)
-------- --------
Net decrease in cash and
temporary cash investments................... -- (134.4)
Cash and temporary cash investments,
beginning of period.......................... 0.1 134.5
-------- --------
Cash and temporary cash investments,
end of period................................ $ 0.1 $ 0.1
======== ========
See Notes to Condensed Financial Statements.
Page 4
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Dollars in Millions)
JUNE 30, 1997
NOTE 1: Preparation of Interim Financial Statements
We have prepared the unaudited condensed financial statements in this
report by following Securities and Exchange Commission rules that permit
reduced disclosure for quarterly period reports. These financial
statements include estimates and assumptions that affect the reported
amounts of assets and liabilities and the amounts of revenues and
expenses. Actual amounts could differ from those estimates. We believe
these statements include all adjustments necessary for a fair statement
of results for each period shown. We believe our disclosures are
adequate to make the presented information clear. You should read these
financial statements in conjunction with the financial statements and
notes included in our 1996 Annual Report on Form 10-K and the quarterly
report on Form 10-Q previously filed in 1997.
When reading these financial statements, you should be familiar with the
terminology unique to our business. We have defined a number of terms in
the glossary on pages 15 and 16.
NOTE 2: Investment in Affiliate
In June 1997, our parent company, Ameritech centralized the
administration of certain liabilities on behalf of the Company and other
participating operating subsidiaries. As a result, we hold approximately
$21.6 million in preferred stock issued by an Ameritech subsidiary.
Page 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
The following is a discussion and analysis of the changes in revenues,
operating expenses and other income and expenses for the first six months
of 1997 as compared with the first six months of 1996.
RESULTS OF OPERATIONS
- ---------------------
Revenues
- --------
Our revenues in the first six months of 1997 were $1,158.5 million and
were $1,122.8 million for the same period in 1996, an increase of $35.7
million. Growth in access lines and sales of call management services,
as well as increases in switched minutes of use resulting from higher
network usage volumes were the primary reasons for the increase. Net
rate reductions and decreased long distance revenues partially offset
these increases.
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Local service
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June 30 Increase Percent
------------
(dollars in millions) 1997 1996 (Decrease) Change
------------------- ---- ---- -------- ------
Six Months Ended $ 675.0 $ 652.8 $ 22.2 3.4
Local service revenues include basic monthly service fees and usage
charges, fees for call management services, installation and connection
charges and public phone revenues. Local service revenues increased for
the six months ended June 30, 1997 due largely to higher network usage
volumes, resulting primarily from access line growth of 3.6 percent over
the prior year period. Second line additions by residential and small
business customers contributed to the increase in access lines, as demand
for Internet access and data transport capabilities continued to grow.
Sales of call management services increased as well because of customer
demand for additional flexibility and convenience. Rate decreases
resulting from alternative regulation partially offset these increases.
There were 3,961,000 access lines in service as of June 30, 1997 compared
with 3,823,000 as of June 30, 1996.
- ----------------------------------------------------------------------
Network access
- --------------
June 30 Increase Percent
------------
(dollars in millions) 1997 1996 (Decrease) Change
------------------- ---- ---- -------- ------
Interstate
- ----------
Six Months Ended $ 259.6 $ 233.7 $ 25.9 11.1
Intrastate
- ----------
Six Months Ended $ 64.0 $ 71.6 $ (7.6) (10.6)
Network access revenues are fees charged to interexchange carriers that
use our local landline communications network to connect customers to
their long distance networks. In addition, end users pay flat rate
access fees to connect to the long distance network. These revenues
result from both interstate and intrastate services.
Page 6
Management's Discussion and Analysis
of Results of Operations (cont'd.)
Network access (cont'd.)
- ------------------------
Interstate network access revenues increased for the six months ended
June 30, 1997 due primarily to an increase in minutes of use, resulting
from overall growth in the volume of calls handled for interexchange
carriers. Greater demand for dedicated services by Internet service
providers and other high-capacity users also contributed to the increase,
as did rate increases. Interstate minutes of use for the six months
ended June 30, 1997 increased by 4.9 percent over the same period last
year.
Intrastate network access revenues decreased for the six months ended
June 30, 1997 due primarily to rate decreases, partially offset by
increased network usage volumes. Intrastate minutes of use for the six
months ended June 30, 1997 increased by 3.6 percent over the same period
last year.
- ---------------------------------------------------------------------
Long distance service
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June 30 Increase Percent
------------
(dollars in millions) 1997 1996 (Decrease) Change
------------------- ---- ---- -------- ------
Six Months Ended $ 73.0 $ 84.8 $ (11.8) (13.9)
Long distance service revenues result from customer calls to locations
outside of their local calling areas, but within the same Local Access
and Transport Area (LATA). Long distance service revenues decreased in
the first six months of 1997 due primarily to a decrease in network
usage, combined with a decrease in rates.
- ---------------------------------------------------------------------
Other
- -----
June 30 Increase Percent
------------
(dollars in millions) 1997 1996 (Decrease) Change
------------------- ---- ---- -------- ------
Six Months Ended $ 86.9 $ 79.9 $ 7.0 8.8
Other revenues include revenue derived from directory advertising,
billing and collection services, inside wire installation and maintenance
services and other miscellaneous services. Other revenues increased for
the six months ended June 30, 1997 due primarily to increased revenues
from inside wire installation and maintenance, combined with increases in
other nonregulated services, such as billing and collection and voice
messaging. Decreases in rent revenue and directory advertising revenues
partially offset these increases.
Page 7
Management's Discussion and Analysis
of Results of Operations (cont'd.)
Operating expenses
- ------------------
Total operating expenses for the six months ended June 30, 1997 increased
by $13.8 million or 0.7 percent to $891.0 million. Higher depreciation
and amortization expense, employee-related expenses and other operating
expenses, contributed to the increase. A decrease in taxes other than
income taxes partially offset the increases, as discussed below.
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Employee-related expenses
- -------------------------
June 30 Increase Percent
------------
(dollars in millions) 1997 1996 (Decrease) Change
------------------- ---- ---- -------- ------
Six Months Ended $ 216.2 $ 212.6 $ 3.6 1.7
Employee-related expenses increased for the six months ended June 30,
1997 due primarily to increases in employee medical benefits and other
employee-related expenses. Wage rate increases and higher average
employee levels also contributed to the increase. Decreases in overtime
and bonus expenses partially offset these increases.
We employed 8,665 employees as of June 30, 1997, compared with 8,750 as
of June 30, 1996.
- ---------------------------------------------------------------------
Depreciation and
amortization
- ------------------
June 30 Increase Percent
------------
(dollars in millions) 1997 1996 (Decrease) Change
------------------- ---- ---- -------- ------
Six Months Ended $ 204.7 $ 191.4 $ 13.3 6.9
Depreciation and amortization expense increased for the six months ended
June 30, 1997 due primarily to higher property, plant and equipment
balances. Higher depreciation rates on certain asset categories also
contributed to the increase as we used shorter depreciable lives for
newer technologies.
- ---------------------------------------------------------------------
Other operating expenses
- ------------------------
June 30 Increase Percent
------------
(dollars in millions) 1997 1996 (Decrease) Change
------------------- ---- ---- -------- ------
Six Months Ended $ 376.2 $ 371.6 $ 4.6 1.2
Other operating expenses increased for the six months ended June 30, 1997
due to increases in contract and affiliated services for systems
programming and data center management, as well as an increase in
uncollectibles. A decrease in cost of sales related to equipment sales,
as well as lower access charge expenses, partially offset these
increases.
Page 8
Management's Discussion and Analysis
of Results of Operations (cont'd.)
Taxes other than income taxes
- -----------------------------
June 30 Increase Percent
------------
(dollars in millions) 1997 1996 (Decrease) Change
------------------- ---- ---- -------- ------
Six Months Ended $ 93.9 $ 101.6 $ (7.7) (7.6)
Taxes other than income taxes consist of property taxes, gross receipts
taxes and other taxes not related to earnings. Taxes other than income
taxes decreased for the six months ended June 30, 1997 due primarily to a
decrease in property taxes resulting from favorable tax reform
legislation. A decrease in gross receipts taxes resulting from a lower
level of revenues subject to tax, also contributed to the decrease.
- ---------------------------------------------------------------------
Other income and expenses
- -------------------------
Interest expense
- ----------------
June 30 Increase Percent
------------
(dollars in millions) 1997 1996 (Decrease) Change
------------------- ---- ---- -------- ------
Six Months Ended $ 29.9 $ 28.0 $ 1.9 6.8
Interest expense increased for the six months ended June 30, 1997 due
primarily to an increase in interest on borrowings from the Ameritech
short-term funding pool. Lower miscellaneous interest expense partially
offset this increase.
- ---------------------------------------------------------------------
Other income, net
- -----------------
Change
June 30 Income Percent
------------
(dollars in millions) 1997 1996 (Expense) Change
------------------- ---- ---- -------- ------
Six Months Ended $ 3.3 $ 5.0 $ (1.7) (34.0)
Other income, net includes equity in earnings of affiliates, interest
income and other nonoperating items. Other income decreased for the six
months ended June 30, 1997 primarily due to a decrease in equity earnings
from Ameritech Services, Inc. (ASI), as well as a decrease in interest
earned on funds invested in the Ameritech short-term funding pool.
Higher miscellaneous interest income partially offset these decreases.
- ---------------------------------------------------------------------
Income taxes
- ------------
June 30 Increase Percent
------------
(dollars in millions) 1997 1996 (Decrease) Change
------------------- ---- ---- -------- ------
Six Months Ended $ 81.8 $ 73.3 $ 8.5 11.6
Income taxes increased for the six months ended June 30, 1997 due
primarily to the increase in pretax earnings discussed above.
Page 9
Management's Discussion and Analysis
of Results of Operations (cont'd.)
Other Matters
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Recent FCC Orders
- -----------------
On May 7, 1997, the FCC issued three closely-related orders addressing
revisions to the price cap plan for local exchange carriers (LECs),
interstate access charge reform and funding for universal service. In
its access charge reform order, the FCC adopted changes to its tariff
structure requiring LECs to use rates that reflect the type of costs
incurred. In general, the order ruled that:
- - only costs incurred on a minute-of-use basis should be included in per-
minute access charges;
- - costs not incurred on a minute-of-use basis should be recovered
through flat-rate charges; and
- - LECs may not assess interstate access charges on Internet service
providers.
The new price cap rules will reduce access charges by increasing the
price cap productivity offset factor to 6.5 percent from the current 5.3
percent and by applying this factor uniformly to all access providers.
The new rates were effective July 1, 1997 and LECs were to compute the
new rates as if the 6.5 percent productivity factor had been in effect
since July 1, 1996.
The new rules also create a multi-billion-dollar "universal service" fund
for linking schools and libraries to the Internet and subsidizing low-
income consumers and rural health care providers. Telecommunications
service providers will pay into the universal service fund starting
January 1, 1998, but regulators have not yet determined the size of the
fund. The FCC intends to develop suitable forward-looking cost studies
for determining the level of universal service support in a separate
proceeding later in 1997. State commissions may elect to use the FCC's
cost methodology or their own forward-looking mechanism. They will have
until August 15, 1997 to indicate which mechanism they intend to use.
The FCC expects to select a mechanism for determining support for
nonrural carriers by the end of this year. Subsidies to low-income and
rural customers will be available by January 1, 1998, and funds for
linking schools and libraries to the Internet will be available as
needed.
We do not expect these reforms to have a material impact on our revenue
streams; however, the nature and timing of these reforms may evolve as
the FCC considers input from state commissions, potential legal
challenges and the ongoing implementation of other provisions of the
Telecommunications Act of 1996.
Competition and the Telecommunications Act of 1996
- --------------------------------------------------
As a result of our plan to capture the full potential of the
communications industry and the supporting provisions of the
Telecommunications Act of 1996 (the 1996 Act), we have taken several key
steps toward fostering a fully competitive market. We have made our
network available for use by our competitors at unbundled cost-based
prices and at bundled prices representing discounts from established
retail levels. Additionally, we have entered into numerous
interconnection agreements with our local communications carriers,
indicating a growing wholesale business. As a fully competitive
communications market continues to develop, regulatory bodies will
periodically need to review interaction among industry members.
Page 10
Management's Discussion and Analysis
of Results of Operations (cont'd.)
Other Matters (cont'd.)
- ----------------------
Competition and the Telecommunications Act of 1996 (Cont'd.)
- ------------------------------------------------------------
In July 1997, the Federal Circuit Court in St. Louis struck down several
provisions of an August 1996 FCC order designed to implement the
interconnection provisions of the 1996 Act. The Court ruled that:
- - the FCC's pricing guidelines intrude upon the rights of state
commissions to implement key elements of the 1996 Act;
- - the FCC lacks jurisdiction to review state commission decisions
regarding interconnection agreements between incumbent LECs and their
competitors;
- - the FCC's rule that would allow requesting carriers to pick and choose
among individual provisions of other interconnection agreements does
not promote negotiated agreements and is unreasonable;
- - LECs must provide unbundled network elements in a manner that allows
competing carriers to combine them, but LECs need not actually combine
the elements; and,
- - the 1996 Act does not require incumbent LECs to provide competitors
with superior quality connections.
The Court upheld the FCC's interpretation of "network element" to include
operations support systems (OSS) and certain other services. It did not
rule on the LECs' claims regarding infringement of intellectual property
rights and Fifth Amendment confiscation.
The FCC has indicated that it may appeal this Circuit Court's ruling to
the U.S. Supreme Court. We do not believe that any such appeal would
itself delay Ameritech's entry into the long distance market. However,
FCC rules require that interLATA long distance service be offered by a
separate subsidiary of Ameritech. Accordingly, Ameritech's entry into
this market will not generate long distance revenues for Ohio Bell. As a
result, the potential revenue decline brought by local service
competition will not be offset at the Company by gains in long distance
revenue.
Due in part to the recent Circuit Court ruling, uncertainty over the
implementation of the 1996 Act continues. We are unable to predict the
impact that this ruling and related subsequent litigation may have on our
existing interconnection agreements. Although the potential for an
adverse effect on our revenue streams exists, we will continue to pursue
growth opportunities in our local exchange business.
Page 11
Management's Discussion and Analysis
of Results of Operations (cont'd.)
Other Matters (cont'd.)
- ----------------------
New Accounting Pronouncements
- -----------------------------
In June 1997, the FASB issued Statement of Financial Accounting Standards
(FAS) No. 130, "Reporting Comprehensive Income." This statement
establishes standards for reporting and display of comprehensive income
and requires that all components of comprehensive income be reported in a
financial statement having the same prominence as other financial
statements. FAS No. 130 is effective for fiscal years beginning after
December 15, 1997 and it requires reclassification of prior period
financial statements provided for comparative purposes. Adoption of this
standard should have little effect on our financial statements, since the
new requirements primarily involve modifications to the way that existing
information is displayed.
Also in June 1997, the FASB issued FAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement
supersedes FAS No. 14, "Financial Reporting of Segments of a Business
Enterprise," by establishing new standards for the way that a public
business enterprise reports operating segment information in its annual
and interim financial statements. In general, FAS No. 131 requires
reporting of financial information as it is used by senior company
management for evaluating performance and deciding how to allocate
resources. The statement is effective in 1998, but need not be applied
to interim financial statements in that year. Comparative information
for earlier years must be restated. We expect adoption of this standard
to have little effect on our financial statements.
Private Securities Litigation Reform Act Safe Harbor Statement
- --------------------------------------------------------------
The above discussion contains certain forward-looking statements that
involve potential risks and uncertainties. Our future results could
differ materially from those discussed here. Some of the factors that
could cause or contribute to such differences include:
- - changes in economic and market conditions;
- - effects of state and federal regulation;
- - the impact of new technologies.
You should not place undue reliance on these forward-looking statements,
which are applicable only as of August 12, 1997. We have no obligation
to revise or update these forward-looking statements to reflect events or
circumstances that arise after August 12, 1997 or to reflect the
occurrence of unanticipated events.
Page 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
--------
27 Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
We did not file a Form 8-K during the quarter ended June
30, 1997.
Page 13
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, an
authorized company official has signed this report on our behalf.
THE OHIO BELL TELEPHONE COMPANY
------------------------------
(Registrant)
Date: August 12, 1997 /s/ Ronald G. Pippin
----------------------
Ronald G. Pippin
Vice President and Comptroller
(Principal Accounting Officer)
Page 14
GLOSSARY
Access charges -
- --------------
fees that local phone companies charge to long distance carriers for
the handling of long distance calls on our local network.
Access line -
- -----------
a telephone line for voice, data or video reaching from a local phone
company to a home or business.
Call management services -
- ------------------------
services that add value and convenience for phone customers, such as
Call Waiting, Call Forwarding and Caller ID. These services are sold
to customers individually or in "packages".
Customer premises equipment (CPE) -
- ---------------------------------
communications equipment owned by customers, including telephones,
faxes and switches.
Dial 1 + -
- --------
a feature that allows local phone customers to designate a carrier
other than the local service provider for toll calls within their
calling area by simply dialing 1 plus the telephone number.
Digital -
- -------
an alternative to traditional analog communications, digital systems
transport information in computer code for improved clarity and
quality.
Federal Communications Commission (FCC) -
- ---------------------------------------
the federal agency responsible for regulating the interstate aspects
of telecommunications activities.
Financial Accounting Standards Board (FASB) -
- -------------------------------------------
the independent body responsible for setting accounting and financial
reporting standards to be followed by U.S. business enterprises.
Gross receipts taxes -
- --------------------
state and local taxes based upon the gross operating revenues earned
in a particular jurisdiction. These taxes may be imposed on general
businesses or public utilities in lieu of other taxes.
Interconnection -
- ---------------
allowing a competitive local service provider to use the local phone
company's network, or elements of the network, to provide local phone
service to its customers.
Interexchange carriers (IXCs) -
- -----------------------------
those companies primarily involved in providing long distance voice
and data transmission services, such as AT&T, MCI and Sprint.
Internet -
- --------
the global web of networks that connects computers around the world,
providing rapid access to information from multiple sources.
Internet service providers (ISPs) -
- ---------------------------------
those companies providing access to the Internet and other computer-
based information networks.
Intrastate revenues -
- -------------------
that portion of revenues regulated by state rather than federal
authorities.
Page 15
GLOSSARY (cont'd.)
Local access and transport area (LATA) -
- --------------------------------------
the boundary within which a local telephone company may provide phone
service. It is usually centered around a city or other identifiable
community of interest.
Local exchange carriers (LECs) -
- ------------------------------
those companies primarily involved in providing local phone service
and access to the local phone network, including Ameritech's landline
communications subsidiaries in Illinois, Indiana, Michigan, Ohio and
Wisconsin.
Operations support systems (OSS) -
- --------------------------------
the databases and information used to support the provision of
telephone service to end users.
Price caps -
- ----------
a form of regulation that sets maximum limits on the prices that LECs
can charge for access services instead of limits on rate of return or
profits.
Productivity factor -
- -------------------
a portion of the interstate price cap formula that requires LECs to
reduce the price cap based on an assumed increase in productivity.
Securities and Exchange Commission (SEC) -
- ----------------------------------------
the federal agency that regulates the issuance and trading of public
debt and equity securities in the United States and monitors
compliance with these regulations.
Universal service -
- -----------------
a concept designed to ensure access to the telecommunications network
in rural and low-income areas at affordable prices. Funding typically
comes from urban telecommunication operators.
Page 16