A new FCC plan for OVS? >BY Shira McCARTHY, Associate Editor-News

The Federal Communications Commission's proposed 50/50 cost split for open video systems is dead and has been replaced by a two-part formula more to telcos' liking, a source close to the commission said last week.

Under the new proposal, a Bell regional holding company would be subject to one of two allocation plans-whichever results in a lower allocation of costs to telephony. One RHC insider who asked not to be named said the plan is the FCC's way of escaping from an unworkable regulatory scheme.

"The folks at the commission want OVS to work, but they've been led by [an overly regulatory] mindset, and if they do that, it will never happen. They've been led down a blind alley, and now they're trying to get out," the source said.

The result is a "Rube Goldberg-type approach," a plan that doesn't really do anything, he said.

The first plan sets a price cap on the amount a telco can allocate to local loop costs in the regulated telephone business. The cap would initially be set at the plant cost for the previous year and would then be reduced each year in relation to a price cap index, which is based on the inflation rate, the carrier's productivity and other factors.

The second plan uses a formula that establishes the amount of loop costs that can be allocated to the telephony side by multiplying the loop cost by the percentage of telephony customers in relation to total customers.

Telcos are expected to support the second plan because many have advocated having cost-allocation regulations based on a per-subscriber formula, not on the number of potential video subscribers. Industry experts have predicted the order will be released this week.