SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported): September 26, 1994
NEW YORK TELEPHONE COMPANY
A New York Commission File I.R.S. Employer Identification
Corporation Number 1-3435 No. 13-5275510
1095 Avenue of the Americas, New York, New York 10036
Telephone number (212) 395-2121
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Form 8-K New York Telephone Company
September 26, 1994
Item 5. Other Events
On September 26, 1994, New York Telephone Company
("the Company"), the New York State Department of
Public Service staff and 15 other parties filed a
proposed Regulatory Plan (the "Plan") for approval
by the New York State Public Service Commission
("NYSPSC"). The Plan would modify the manner in
which the Company is regulated by the NYSPSC over
the next seven years. The Plan was developed by
the parties in the second phase of the incentive
regulation proceeding that the NYSPSC instituted
in 1992. As previously reported (see the
Company's Annual Report on Form 10-K for the year
ended December 31, 1993 and Quarterly Report on
Form 10-Q for the period ended June 30, 1994), in
the first phase of the proceeding, the NYSPSC
ordered the Company's rates to be reduced by $170
million annually, effective January 1, 1994. The
NYSPSC also ordered that an additional $153
million in revenues be "set aside" for short-term
service incentive plans and a longer term plan for
performance-based earnings incentives and network
improvements to be determined in the second phase.
The Plan is a performance-based plan that, if
approved by the NYSPSC, will operate as follows:
(1) The new framework would replace the
traditional way the Company's operations have
been regulated in New York - a method based on
limited earnings - with incentives to invest
in new technologies and improve service. Rate
of return would no longer be the focus of
regulation. The Plan will cap, at current
rates, the prices for such "basic" services as
residence and business exchange access,
residence and business local calling and
LifeLine service. In addition, by the end of
the seven-year term of the Plan, the Company's
prices will have been decreased by an amount
that would produce a $425 million reduction in
annual revenue based on current volumes of
business. This reduction will be accomplished
primarily by reducing the average prices of
toll and carrier access services. The first
price reduction, estimated at $100 million in
annual revenue, will be effective January 1,
1995. During its term, the Plan allows
certain prices to be adjusted to take into
account inflation in excess of 4 percent
annually or costs associated with government
mandates and other "exogenous" events.
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Form 8-K New York Telephone Company
September 26, 1994
Item 5. Other Events (Continued)
(2) The Company will commit to maintain and
improve its service quality over the term of
the Plan, with rebates to customers if it
fails to meet the specified service quality
standards. If the Company does not meet
specified service quality criteria, the Plan
will terminate at the end of five years.
(3) The Plan will encourage the Company to achieve
substantial productivity gains over the term
of the Plan. The NYSPSC may terminate the
Plan at the end of five years unless the
Company's prices, as measured by an index, are
at least 4.5 percentage points lower than a
price index of national telecommunications
companies.
(4) The Plan includes competitive enhancements,
including a specific schedule to provide
IntraLATA Presubscription ("ILP") by 1996.
ILP will give a customer the option of
designating, in advance, a carrier that would
carry the customer's intraLATA toll calls
without the necessity of dialing extra digits.
(5) Approximately $122 million of the $153 million
"set aside" ordered by the NYSPSC in the first
phase of the incentive regulation proceeding
will be released to the Company in exchange
for the various commitments the Company has
made under the Plan. $31 million of the $153
million has already been dedicated to a
service improvement plan that is being
implemented in 1994.
It is expected that the Plan will be reviewed by
the NYSPSC by the end of 1994.
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Form 8-K New York Telephone Company
September 26, 1994
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
New York Telephone Company
By Mel Meskin
Mel Meskin
Vice President-Finance and Treasurer
October 4, 1994
