FCC 76.922 Revised as of October 1, 2007
Goto Year:2006 |
2008
Sec. 76.922 Rates for the basic service tier and cable programming services
tiers.
(a) Basic and cable programming service tier rates. Basic service tier and
cable programming service rates shall be subject to regulation by the
Commission and by state and local authorities, as is appropriate, in order
to assure that they are in compliance with the requirements of 47 U.S.C.
543. Rates that are demonstrated, in accordance with this part, not to
exceed the “Initial Permitted Per Channel Charge” or the “Subsequent
Permitted Per Channel Charge” as described in this section, or the equipment
charges as specified in Sec. 76.923, will be accepted as in compliance. The
maximum monthly charge per subscriber for a tier of regulated programming
services offered by a cable system shall consist of a permitted per channel
charge multiplied by the number of channels on the tier, plus a charge for
franchise fees. The maximum monthly charges for regulated programming
services shall not include any charges for equipment or installations.
Charges for equipment and installations are to be calculated separately
pursuant to Sec. 76.923. The same rate-making methodology (either the benchmark
methodology found in paragraph (b) of this section, or a cost-of-service
showing) shall be used to set initial rates on all rate regulated tiers, and
shall continue to provide the basis for subsequent permitted charges.
(b) Permitted charge on May 15, 1994. (1) The permitted charge for a tier of
regulated program service shall be, at the election of the cable system,
either:
(i) A rate determined pursuant to a cost-of-service showing;
(ii) The full reduction rate;
(iii) The transition rate, if the system is eligible for transition relief;
or
(iv) A rate based on a streamlined rate reduction, if the system is eligible
to implement such a rate reduction. Except where noted, the term “rate” in
this subsection means a rate measured on an average regulated revenue per
subscriber basis.
(2) Full reduction rate. The “full reduction rate” on May 15, 1994 is the
system's September 30, 1992 rate, measured on an average regulated revenue
per subscriber basis, reduced by 17 percent, and then adjusted for the
following:
(i) The establishment of permitted equipment rates as required by Sec. 76.923;
(ii) Inflation measured by the GNP-PI between October 1, 1992 and September
30, 1993;
(iii) Changes in the number of program channels subject to regulation that
are offered on the system's program tiers between September 30, 1992 and the
earlier of the initial date of regulation for any tier or February 28, 1994;
and
(iv) Changes in external costs that have occurred between the earlier of the
initial date of regulation for any tier or February 28, 1994, and March 31,
1994.
(3) March 31, 1994 benchmark rate. The “March 31, 1994 benchmark rate” is
the rate so designated using the calculations in Form 1200.
(4) Transition rates —(i) Termination of transition relief for systems other
than low price systems. Systems other than low-price systems that already
have established a transition rate as of the effective date of this rule may
maintain their current rates, as adjusted under the price cap requirements
of Sec. 76.922(d), until two years from the effective date of this rule. These
systems must begin charging reasonable rates in accordance with applicable
rules, other than transition relief, no later than that date.
(ii) Low-price systems. Low price systems shall be eligible to establish a
transition rate for a tier.
(A) A low-price system is a system:
( 1 ) Whose March 31, 1994 rate is below its March 31, 1994 benchmark rate,
or
( 2 ) Whose March 31, 1994 rate is above its March 31, 1994 benchmark rate,
but whose March 31, 1994 full reduction rate is below its March 31, 1994
benchmark rate, as defined in Sec. 76.922(b)(2), above.
(B) The transition rate on May 15, 1994 for a system whose March 31, 1994
rate is below its March 31, 1994 benchmark rate is the system's March 31,
1994 rate. The March 31, 1994 rate is in both cases adjusted:
( 1 ) To establish permitted rates for equipment as required by Sec. 76.923 if
such rates have not already been established; and
( 2 ) For changes in external costs incurred between the earlier of initial
date of regulation of any tier or February 28, 1994, and March 31, 1994, to
the extent changes in such costs are not already reflected in the system's
March 31, 1994 rate. The transition rate on May 15, 1994 for a system whose
March 31, 1994 adjusted rate is above its March 31, 1994 benchmark rate, but
whose March 31, 1994 full reduction rate is below its March 31, 1994
benchmark rate, is the March 31, 1994 benchmark rate, adjusted to establish
permitted rates for equipment as required by Sec. 76.923 if such rates have not
already been established.
(iii) Notwithstanding the foregoing, the transition rate for a tier shall be
adjusted to reflect any determination by a local franchising authority
and/or the Commission that the rate in effect on March 31, 1994 was higher
(or lower) than that permitted under applicable Commission regulations. A
filing reflecting the adjusted rate shall be submitted to all relevant
authorities within 30 days after issuance of the local franchising authority
and/or Commission determination. A system whose March 31, 1994 rate is
determined by a local franchising authority or the Commission to be too high
under the Commission's rate regulations in effect before May 15, 1994 will
be subject to any refund liability that may accrue under those rules. In
addition, the system will be liable for refund liability under the rules in
effect on and after May 15, 1994. Such refund liability will be measured by
the difference in the system's March 31, 1994 rate and its permitted March
31, 1994 rate as calculated under the Commission's rate regulations in
effect before May 15, 1994. The refund liability will accrue according to
the time periods set forth in Sec. Sec. 76.942, and 76.961 of the Commission's
rules.
(5) Streamlined rate reductions. (i) Upon becoming subject to rate
regulation, a small system owned by a small cable company may make a
streamlined rate reduction, subject to the following conditions, in lieu of
establishing initial rates pursuant to the other methods of rate regulation
set forth in this subpart:
(A) Small systems that are owned by small cable companies and that have not
already restructured their rates to comply with the Commission's rules may
establish rates for regulated program services and equipment by making a
streamlined rate reduction. Small systems owned by small cable companies
shall not be eligible for streamlined rate reductions if they are owned or
controlled by, or are under common control or affiliated with, a cable
operator that exceeds these subscriber limits. For purposes of this rule, a
small system will be considered “affiliated with” such an operator if the
operator has a 20 percent or greater equity interest in the small system.
(B) The streamlined rate for a tier on May 15, 1994 shall be the system's
March 31, 1994 rate for the tier, reduced by 14 percent. A small system that
elects to establish its rate for a tier by implementing this streamlined
rate reduction must also reduce, at the same time, each billed item of
regulated cable service, including equipment, by 14 percent. Regulated rates
established using the streamlined rate reduction process shall remain in
effect until:
( 1 ) Adoption of a further order by the Commission establishing a schedule
of average equipment costs;
( 2 ) The system increases its rates using the calculations and time periods
set forth in FCC Form 1211; or
( 3 ) The system elects to establish permitted rates under another available
option set forth in paragraph (b)(1) of this section.
(C) Implementation and notification. An eligible small system that elects to
use the streamlined rate reduction process must implement the required rate
reductions and provide written notice of such reductions to subscribers, the
local franchising authority and the Commission according to the following
schedule:
( 1 ) Within 60 days from the date it receives the initial notice of
regulation from the franchising authority or the Commission, the small
system must provide written notice to subscribers and the franchising
authority, or to the Commission if the Commission is regulating the basic
tier, that it is electing to set its regulated rates by the streamlined rate
reduction process. The system must then implement the streamlined rate
reductions within 30 days after the written notification has been provided
to subscribers and the local franchise authority or Commission.
( 2 ) If a cable programming services complaint is filed against the system,
the system must provide the required written notice, described in paragraph
(b)(5)(iii)(C)( 1 ) of this section, to subscribers, the local franchising
authority or the Commission within 60 days after the complaint is filed. The
system must then implement the streamlined rate reductions within 30 days
after the written notification has been provided.
( 3 ) A small system is required to give written notice of, and to
implement, the rates that are produced by the streamlined rate reduction
process only once. If a system has already provided notice of, and
implemented, the streamlined rate reductions when a given tier becomes
subject to regulation, it must report to the relevant regulator (either the
franchising authority or the Commission) in writing within 30 days of
becoming subject to regulation that it has already provided the required
notice and implemented the required rate reductions.
(ii) The stremlined rate for a tier on May 15, 1994 shall be the system's
March 31, 1994 rate for the tier, reduced by 14 percent. A small system that
elects to establish its rate for a tier by implementing this streamlined
rate reduction must also reduce, at the same time, each billed item of
regulated cable service, including equipment, by 14 percent. Regulated rates
established using the streamlined rate reduction process shall remain in
effect until:
(A) Adoption of a further order by the Commission establishing a schedule of
average equipment costs;
(B) The system increases its rates using the calculations and time periods
set forth in FCC Form 1211; or
(C) The system elects to establish permitted rates under another available
option set forth in paragraph (b)(1) of this section.
(iii) Implementation and notification. An eligible small system that elects
to use the streamlined rate reduction process must implement the required
rate reductions and provide written notice of such reductions to
subscribers, the local franchising authority and the Commission according to
the following schedule:
(A) Where the franchising authority has been certified by the Commission to
regulate the small system's basic service tier rates as of May 15, 1994, the
system must notify the franchising authority and its subscribers in writing
that it is electing to set its regulated rates by the streamline rate
reduction process. Such notice must be given by June 15, 1994, and must also
describe the new rates that will result from the streamlined rate reduction
process. Those rates must then be implemented within 30 days after the
written notification has been provided to subscribers and the local
franchising authority.
(B) Where the franchising authority has not been certified to regulate basic
service tier rates by May 15, 1994, the small system must provide the
written notice to subscribers and the franchising authority, described in
paragraph (b)(5)(iii)(A) of this section, within 30 days from the date it
receives the initial notice of regulation from the franchising authority.
The system must then implement the streamlined rate reductions within 30
days after the written notification has been provided to subscribers and the
local franchise authority.
(C) Where the Commission is regulating the small system's basic service tier
rates as of May 15, 1994, the system must notify the Commission and its
subscribers in writing that it is electing to set its regulated rates by the
streamlined rate reduction process. Such notice must be given by June 15,
1994, and must also describe the new rates that will result from the
streamlined rate reduction process. Those rates must then be implemented
within 30 days after the written notification has been provided to
subscribers and the Commission.
(D) Where the Commission begins regulating basic service rates after May 15,
1994, the small system must provide the written notice to subscribers and
the Commission, described in paragraph (b)(5)(iii)(C) of this section,
within 30 days from the date it receives an initial notice of regulation.
The system must then implement the streamlined rate reductions within 30
days after the written notification has been provided to subscribers and the
Commission.
(E) If a complaint about its cable programming service rates has been filed
with the Commission on or before May 15, 1994, the small system must provide
the written notice described in paragraph (b)(5)(iii)(A) of this section, to
subscribers, the local franchising authority and the Commission by June 15,
1994. If a cable programming services complaint is filed against the system
after May 15, 1994, the system must provide the required written notice to
subscribers, the local franchising authority or the Commission within 30
days after the complaint is filed. The system must then implement the
streamlined rate reductions within 30 days after the written notification
has been provided.
(F) A small system is required to give written notice of, and to implement,
the rates that are produced by the streamlined rate reduction process only
once. If a system has already provided notice of, and implemented, the
streamlined rate reductions when a given tier becomes subject to regulation,
it must report to the relevant regulator (either the franchising authority
or the Commission) in writing within 30 days of becoming subject to
regulation that it has already provided the required notice and implemented
the required rate reductions.
(6) Establishment of initial regulated rates. (i) Cable systems, other than
those eligible for streamlined rate reductions, shall file FCC Forms 1200,
1205, and 1215 for a tier that is regulated on May 15, 1994 by June 15,
1994, or thirty days after the initial date of regulation for the tier. A
system that becomes subject to regulation for the first time on or after
July 1, 1994 shall also file FCC Form 1210 at the time it files FCC Forms
1200, 1205 and 1215.
(ii) A cable system will not incur refund liability under the Commission's
rules governing regulated cable rates on and after May 15, 1994 if:
(A) Between March 31, 1994 and July 14, 1994, the system does not change the
rate for, or restructure in any fashion, any program service or equipment
offering that is subject to regulation under the 1992 Cable Act; and
(B) The system establishes a permitted rate defined in paragraph (b) of this
section by July 14, 1994. The deferral of refund liability permitted by this
subsection will terminate if, after March 31, 1994, the system changes any
rate for, or restructures, any program service or equipment offering subject
to regulation, and in all events will expire on July 14, 1994. Moreover, the
deferral of refund liability permitted by this paragraph does not apply to
refund liability that occurs because the system's March 31, 1994 rates for
program services and equipment subject to regulation are higher than the
levels permitted under the Commission's rules in effect before May 15, 1994.
(7) For purposes of this section, the initial date of regulation for the
basic service tier shall be the date on which notice is given pursuant to
Sec. 76.910, that the provision of the basic service tier is subject to
regulation. For a cable programming services tier, the initial date of
regulation shall be the first date on which a complaint on the appropriate
form is filed with the Commission concerning rates charged for the cable
programming services tier.
(8) For purposes of this section, rates in effect on the initial date of
regulation or on September 30, 1992 shall be the rates charged to
subscribers for service received on that date.
(9) Updating data calculations. (i) For purposes of this section, if:
(A) A cable operator, prior to becoming subject to regulation, revised its
rates to comply with the Commission's rules; and
(B) The data on which the cable operator relied was current and accurate at
the time of revision, and the rate is accurate and justified by the prior
data; and
(C) Through no fault of the cable operator, the rates that resulted from
using such data differ from the rates that would result from using data
current and accurate at the time the cable operator's system becomes subject
to regulation; then the cable operator is not required to change its rates
to reflect the data current at the time it becomes subject to regulation.
(ii) Notwithstanding the above, any subsequent changes in a cable operator's
rates must be made from rate levels derived from data [that was current as
of the date of the rate change].
(iii) For purposes of this subsection, if the rates charged by a cable
operator are not justified by an analysis based on the data available at the
time it initially adjusted its rates, the cable operator must adjust its
rates in accordance with the most accurate data available at the time of the
analysis.
(c) Subsequent permitted charge. (1) The permitted charge for a tier after
May 15, 1994 shall be, at the election of the cable system, either:
(i) A rate determined pursuant to a cost-of-service showing,
(ii) A rate determined by application of the Commission's price cap
requirements set forth in paragraph (d) of this section to a permitted rate
determined in accordance with paragraph (b) of this section, or
(iii) A rate determined by application of the Commission's price cap
requirements set forth in paragraph (e) of this section to a permitted rate
determined in accordance with paragraph (b) of this section.
(2) The Commission's price cap requirements allow a system to adjust its
permitted charges for inflation, changes in the number of regulated channels
on tiers, or changes in external costs. After May 15, 1994, adjustments for
changes in external costs shall be calculated by subtracting external costs
from the system's permitted charge and making changes to that “external cost
component” as necessary. The remaining charge, referred to as the “residual
component,” will be adjusted annually for inflation. Cable systems may
adjust their rates by using the price cap rules contained in either
paragraph (d) or (e) of this section. In addition, cable systems may further
adjust their rates using the methodologies set forth in paragraph (n) of
this section.
(3) An operator may switch between the quarterly rate adjustment option
contained in paragraph (d) of this section and the annual rate adjustment
option contained in paragraph (e) of this section, provided that:
(i) Whenever an operator switches from the current quarterly system to the
annual system, the operator may not file a Form 1240 earlier than 90 days
after the operator proposed its last rate adjustment on a Form 1210; and
(ii) When an operator changes from the annual system to the quarterly
system, the operator may not return to a quarterly adjustment using a Form
1210 until a full quarter after it has filed a true up of its annual rate on
a Form 1240 for the preceding filing period.
(4) An operator that does not set its rates pursuant to a cost-of-service
filing must use the quarterly rate adjustment methodology pursuant to
paragraph (d) of this section or annual rate adjustment methodology pursuant
to paragraph (e) of this section for both its basic service tier and its
cable programming services tier(s).
(d) Quarterly rate adjustment method —(1) Calendar year quarters. All
systems using the quarterly rate adjustment methodology must use the
following calendar year quarters when adjusting rates under the price cap
requirements. The first quarter shall run from January 1 through March 31 of
the relevant year; the second quarter shall run from April 1 through June
30; the third quarter shall run from July 1 through September 30; and the
fourth quarter shall run from October 1 through December 31.
(2) Inflation adjustments. The residual component of a system's permitted
charge may be adjusted annually for inflation. The annual inflation
adjustment shall be used on inflation occurring from June 30 of the previous
year to June 30 of the year in which the inflation adjustment is made,
except that the first annual inflation adjustment shall cover inflation from
September 30, 1993 until June 30 of the year in which the inflation
adjustment is made. The adjustment may be made after September 30, but no
later than August 31, of the next calendar year. Adjustments shall be based
on changes in the Gross National Product Price Index as published by the
Bureau of Economic Analysis of the United States Department of Commerce.
Cable systems that establish a transition rate pursuant to paragraph (b)(4)
of this section may not begin adjusting rates on account of inflation before
April 1, 1995. Between April 1, 1995 and August 31, 1995 cable systems that
established a transition rate may adjust their rates to reflect the net of a
5.21% inflation adjustment minus any inflation adjustments they have already
received. Low price systems that had their March 31, 1994 rates above the
benchmark, but their full reduction rate below the benchmark will be
permitted to adjust their rates to reflect the full 5.21% inflation factor
unless the rate reduction was less than the inflation adjustment received on
an FCC Form 393 for rates established prior to May 15, 1994. If the rate
reduction established by a low price system that reduced its rate to the
benchmark was less than the inflation adjustment received on an FCC Form
393, the system will be permitted to receive the 5.21% inflation adjustment
minus the difference between the rate reduction and the inflation adjustment
the system made on its FCC Form 393. Cable systems that established a
transition rate may make future inflation adjustments on an annual basis
with all other cable operators, no earlier than October 1 of each year and
no later than August 31 of the following year to reflect the final GNP-PI
through June 30 of the applicable year.
(3) External costs. (i) Permitted charges for a tier may be adjusted up to
quarterly to reflect changes in external costs experienced by the cable
system as defined by paragraph (f) of this section. In all events, a system
must adjust its rates annually to reflect any decreases in external costs
that have not previously been accounted for in the system's rates. A system
must also adjust its rates annually to reflect any changes in external
costs, inflation and the number of channels on regulated tiers that occurred
during the year if the system wishes to have such changes reflected in its
regulated rates. A system that does not adjust its permitted rates annually
to account for those changes will not be permitted to increase its rates
subsequently to reflect the changes.
(ii) A system must adjust its rates in the next calendar year quarter for
any decrease in programming costs that results from the deletion of a
channel or channels from a regulated tier.
(iii) Any rate increase made to reflect an increase in external costs must
also fully account for all other changes in external costs, inflation and
the number of channels on regulated tiers that occurred during the same
period. Rate adjustments made to reflect changes in external costs shall be
based on any changes in those external costs that occurred from the end of
the last quarter for which an adjustment was previously made through the end
of the quarter that has most recently closed preceding the filing of the FCC
Form 1210 (or FCC Form 1211, where applicable). A system may adjust its
rates after the close of a quarter to reflect changes in external costs that
occurred during that quarter as soon as it has sufficient information to
calculate the rate change.
(e) Annual rate adjustment method—(1) Generally. Except as provided for in
paragraphs (e)(2)(iii)(B) and (e)(2)(iii)(C) of this section and Section
76.923(o), operators that elect the annual rate adjustment method may not
adjust their rates more than annually to reflect inflation, changes in
external costs, changes in the number of regulated channels, and changes in
equipment costs. Operators that make rate adjustments using this method must
file on the same date a Form 1240 for the purpose of making rate adjustments
to reflect inflation, changes in external costs and changes in the number of
regulated channels and a Form 1205 for the purpose of adjusting rates for
regulated equipment and installation. Operators may choose the annual filing
date, but they must notify the franchising authority of their proposed
filing date prior to their filing. Franchising authorities or their
designees may reject the annual filing date chosen by the operator for good
cause. If the franchising authority finds good cause to reject the proposed
filing date, the franchising authority and the operator should work together
in an effort to reach a mutually acceptable date. If no agreement can be
reached, the franchising authority may set the filing date up to 60 days
later than the date chosen by the operator. An operator may change its
filing date from year-to-year, but except as described in paragraphs
(e)(2)(iii)(B) and (e)(2)(iii)(C) of this section, at least twelve months
must pass before the operator can implement its next annual adjustment.
(2) Projecting inflation, changes in external costs, and changes in number
of regulated channels. An operator that elects the annual rate adjustment
method may adjust its rates to reflect inflation, changes in external costs
and changes in the number of regulated channels that are projected for the
12 months following the date the operator is scheduled to make its rate
adjustment pursuant to Section 76.933(g).
(i) Inflation Adjustments. The residual component of a system's permitted
charge may be adjusted annually to project for the 12 months following the
date the operator is scheduled to make a rate adjustment. The annual
inflation adjustment shall be based on inflation that occurred in the most
recently completed July 1 to June 30 period. Adjustments shall be based on
changes in the Gross National Product Price Index as published by the Bureau
of Economic Analysis of the United States Department of Commerce.
(ii) External costs. (A) Permitted charges for a tier may be adjusted
annually to reflect changes in external costs experienced but not yet
accounted for by the cable system, as well as for projections in these
external costs for the 12-month period on which the filing is based. In
order that rates be adjusted for projections in external costs, the operator
must demonstrate that such projections are reasonably certain and reasonably
quantifiable. Projections involving copyright fees, retransmission consent
fees, other programming costs, Commission regulatory fees, and cable
specific taxes are presumed to be reasonably certain and reasonably
quantifiable. Operators may project for increases in franchise related costs
to the extent that they are reasonably certain and reasonably quantifiable,
but such changes are not presumed reasonably certain and reasonably
quantifiable. Operators may pass through increases in franchise fees
pursuant to Section 76.933(g).
(B) In all events, a system must adjust its rates every twelve months to
reflect any net decreases in external costs that have not previously been
accounted for in the system's rates.
(C) Any rate increase made to reflect increases or projected increases in
external costs must also fully account for all other changes and projected
changes in external costs, inflation and the number of channels on regulated
tiers that occurred or will occur during the same period. Rate adjustments
made to reflect changes in external costs shall be based on any changes,
plus projections, in those external costs that occurred or will occur in the
relevant time periods since the periods used in the operator's most recent
previous FCC Form 1240.
(iii) Channel adjustments. (A) Permitted charges for a tier may be adjusted
annually to reflect changes not yet accounted for in the number of regulated
channels provided by the cable system, as well as for projected changes in
the number of regulated channels for the 12-month period on which the filing
is based. In order that rates be adjusted for projected changes to the
number of regulated channels, the operator must demonstrate that such
projections are reasonably certain and reasonably quantifiable.
(B) An operator may make rate adjustments for the addition of required
channels to the basic service tier that are required under federal or local
law at any time such additions occur, subject to the filing requirements of
Section 76.933(g)(2), regardless of whether such additions occur outside of
the annual filing cycle. Required channels may include must-carry, local
origination, public, educational and governmental access and leased access
channels. Should the operator elect not to pass through the costs
immediately, it may accrue the costs of the additional channels plus
interest, as described in paragraph (e)(3) of this section.
(C) An operator may make one additional rate adjustment during the year to
reflect channel additions to the cable programming services tiers or, where
the operator offers only one regulated tier, the basic service tier.
Operators may make this additional rate adjustment at any time during the
year, subject to the filing requirements of Section 76.933(g)(2), regardless
of whether the channel addition occurs outside of the annual filing cycle.
Should the operator elect not to pass through the costs immediately, it may
accrue the costs of the additional channels plus interest, as described in
paragraph (e)(3) of this section.
(3) True-up and accrual of charges not projected. As part of the annual rate
adjustment, an operator must “true up” its previously projected inflation,
changes in external costs and changes in the number of regulated channels
and adjust its rates for these actual cost changes. The operator must
decrease its rates for overestimation of its projected cost changes, and may
increase its rates to adjust for underestimation of its projected cost
changes.
(i) Where an operator has underestimated costs, future rates may be
increased to permit recovery of the accrued costs plus 11.25% interest
between the date the costs are incurred and the date the operator is
entitled to make its rate adjustment.
(ii) Per channel adjustment. Operators may increase rates by a per channel
adjustment of up to 20 cents per subscriber per month, exclusive of
programming costs, for each channel added to a CPST between May 15, 1994,
and December 31, 1997, except that an operator may take the per channel
adjustment only for channel additions that result in an increase in the
highest number of channels offered on all CPSTs as compared to May 14, 1994,
and each date thereafter. Any revenues received from a programmer, or shared
by a programmer and an operator in connection with the addition of a channel
to a CPST shall first be deducted from programming costs for that channel
pursuant to paragraph (d)(3)(x) of this section and then, to the extent
revenues received from the programmer are greater than the programming
costs, shall be deducted from the per channel adjustment. This deduction
will apply on a channel by channel basis. With respect to the per channel
adjustment only, this deduction shall not apply to revenues received by an
operator from a programmer as commissions on sales of products or services
offered through home shopping services.
(iii) If an operator has underestimated its cost changes and elects not to
recover these accrued costs with interest on the date the operator is
entitled to make its annual rate adjustment, the interest will cease to
accrue as of the date the operator is entitled to make the annual rate
adjustment, but the operator will not lose its ability to recover such costs
and interest. An operator may recover accrued costs between the date such
costs are incurred and the date the operator actually implements its rate
adjustment.
(iv) Operators that use the annual methodology in their next filing after
the release date of this Order may accrue costs and interest incurred since
July 1, 1995 in that filing. Operators that file a Form 1210 in their next
filing after the release date of this Order, and elect to use Form 1240 in a
subsequent filing, may accrue costs incurred since the end of the last
quarter to which a Form 1210 applies.
(4) Sunset provision. The Commission will review paragraph (e) of this
section prior to December 31, 1998 to determine whether the annual rate
adjustment methodology should be kept, and whether the quarterly system
should be eliminated and replaced with the annual rate adjustment method.
(f) External costs. (1) External costs shall consist of costs in the
following categories:
(i) State and local taxes applicable to the provision of cable television
service;
(ii) Franchise fees;
(iii) Costs of complying with franchise requirements, including costs of
providing public, educational, and governmental access channels as required
by the franchising authority;
(iv) Retransmission consent fees and copyright fees incurred for the
carriage of broadcast signals;
(v) Other programming costs; and
(vi) Commission cable television system regulatory fees imposed pursuant to
47 U.S.C. Sec. 159.
(vii) Headend equipment costs necessary for the carriage of digital
broadcast signals.
(2) The permitted charge for a regulated tier shall be adjusted on account
of programming costs, copyright fees and retransmission consent fees only
for the program channels or broadcast signals offered on that tier.
(3) The permitted charge shall not be adjusted for costs of retransmission
consent fees or changes in those fees incurred prior to October 6, 1994.
(4) The starting date for adjustments on account of external costs for a
tier of regulated programming service shall be the earlier of the initial
date of regulation for any basic or cable service tier or February 28, 1994.
Except, for regulated FCC Form 1200 rates set on the basis of rates at
September 30, 1992 (using either March 31, 1994 rates initially determined
from FCC Form 393 Worksheet 2 or using Form 1200 Full Reduction Rates from
Line J6), the starting date shall be September 30, 1992. Operators in this
latter group may make adjustment for changes in external costs for the
period between September 30, 1992, and the initial date of regulation or
February 28, 1994, whichever is applicable, based either on changes in the
GNP-PI over that period or on the actual change in the external costs over
that period. Thereafter, adjustment for external costs may be made on the
basis of actual changes in external costs only.
(5) Changes in franchise fees shall not result in an adjustment to permitted
charges, but rather shall be calculated separately as part of the maximum
monthly charge per subscriber for a tier of regulated programming service.
(6) Adjustments to permitted charges to reflect changes in the costs of
programming purchased from affiliated programmers, as defined in Sec. 76.901,
shall be permitted as long as the price charged to the affiliated system
reflects either prevailing company prices offered in the marketplace to
third parties (where the affiliated program supplier has established such
prices) or the fair market value of the programming.
(i) For purposes of this section, entities are affiliated if either entity
has an attributable interest in the other or if a third party has an
attributable interest in both entities.
(ii) Attributable interest shall be defined by reference to the criteria set
forth in Notes 1 through 5 to Sec. 76.501 provided, however, that:
(A) The limited partner and LLC/LLP/RLLP insulation provisions of Note 2(f)
shall not apply; and
(B) The provisions of Note 2(a) regarding five (5) percent interests shall
include all voting or nonvoting stock or limited partnership equity
interests of five (5) percent or more.
(7) Adjustments to permitted charges on account of increases in costs of
programming shall be further adjusted to reflect any revenues received by
the operator from the programmer. Such adjustments shall apply on a
channel-by-channel basis.
(8) In calculating programming expense, operators may add a mark-up of 7.5%
for increases in programming costs occurring after March 31, 1994, except
that operators may not file for or take the 7.5% mark-up on programming
costs for new channels added on or after May 15, 1994 for which the operator
has used the methodology set forth in paragraph (g)(3) of this section for
adjusting rates for channels added to cable programming service tiers.
Operators shall reduce rates by decreases in programming expense plus an
additional 7.5% for decreases occurring after May 15, 1994 except with
respect to programming cost decreases on channels added after May 15, 1994
for which the rate adjustment methodology in paragraph (g)(3) of this
section was used.
(g) Changes in the number of channels on regulated tiers —(1) Generally. A
system may adjust the residual component of its permitted rate for a tier to
reflect changes in the number of channels offered on the tier on a quarterly
basis. Cable systems shall use FCC Form 1210 (or FCC Form 1211, where
applicable) or FCC Form 1240 to justify rate changes made on account of
changes in the number of channels on a basic service tier (“BST”) or a cable
programming service tier (“CPST”). Such rate adjustments shall be based on
any changes in the number of regulated channels that occurred from the end
of the last quarter for which an adjustment was previously made through the
end of the quarter that has most recently closed preceding the filing of the
FCC Form 1210 (or FCC Form 1211, where applicable) or FCC Form 1240.
However, when a system deletes channels in a calendar quarter, the system
must adjust the residual component of the tier charge in the next calendar
quarter to reflect that deletion. Operators must elect between the channel
addition rules in paragraphs (g)(2) and (g)(3) of this section the first
time they adjust rates after December 31, 1994, to reflect a channel
addition to a CPST that occurred on or after May 15, 1994, and must use the
elected methodology for all rate adjustments through December 31, 1997. A
system that adjusted rates after May 15, 1994, but before January 1, 1995 on
account of a change in the number of channels on a CPST that occurred after
May 15, 1994, may elect to revise its rates to charge the rates permitted by
paragraph (g)(3) of this section on or after January 1, 1995, but is not
required to do so as a condition for using the methodology in paragraph
(g)(3) of this section for rate adjustments after January 1, 1995. Rates for
the BST will be governed exclusively by paragraph (g)(2) of this section,
except that where a system offered only one tier on May 14, 1994, the cable
operator will be allowed to elect between paragraphs (g)(2) and (g)(3) of
this section as if the tier was a CPST.
(2) Adjusting rates for increases in the number of channels offered between
May 15, 1994, and December 31, 1997, on a basic service tier and at the
election of the operator on a cable programming service tier. The following
table shall be used to adjust permitted rates for increases in the number of
channels offered between May 15, 1994, and December 31, 1997, on a basic
service tier and subject to the conditions in paragraph (g)(1) of this
section at the election of the operator on a CPST. The entries in the table
provide the cents per channel per subscriber per month by which cable
operators will adjust the residual component using FCC Form 1210 (or FCC
Form 1211, where applicable) or FCC Form 1240.
Average No. of regulated channels Per-channel adjustment factor
7 $0.52
7.5 0.45
8 0.40
8.5 0.36
9 0.33
9.5 0.29
10 0.27
10.5 0.24
11 0.22
11.5 0.20
12 0.19
12.5 0.17
13 0.16
13.5 0.15
14 0.14
14.5 0.13
15–15.5 0.12
16 0.11
16.5–17 0.10
17.5–18 0.09
18.5–19 0.08
19.5–21.5 0.07
22–23.5 0.06
24–26 0.05
26.5–29.5 0.04
30–35.5 0.03
36–46 0.02
46.5–99.5 0.01
In order to adjust the residual component of the tier charge when there is
an increase in the number of channels on a tier, the operator shall perform
the following calculations:
(i) Take the sum of the old total number of channels on tiers subject to
regulation ( i.e., tiers that are, or could be, regulated but excluding New
Product Tiers) and the new total number of channels and divide the resulting
number by two;
(ii) Consult the above table to find the applicable per channel adjustment
factor for the number of channels produced by the calculations in step (1).
For each tier for which there has been an increase in the number of
channels, multiply the per-channel adjustment factor times the change in the
number of channels on that tier. The result is the total adjustment for that
tier.
(3) Alternative methodology for adjusting rates for changes in the number of
channels offered on a cable programming service tier or a single tier system
between May 15, 1994, and December 31, 1997. This paragraph at the
Operator's discretion as set forth in paragraph (g)(1) of this section shall
be used to adjust permitted rates for a CPST after December 31, 1994, for
changes in the number of channels offered on a CPST between May 15, 1994,
and December 31, 1997. For purposes of paragraph (g)(3) of this section, a
single tier system may be treated as if it were a CPST.
(i) Operators cap attributable to new channels on all CPSTs through December
31, 1997. Operators electing to use the methodology set forth in this
paragraph may increase their rates between January 1, 1995, and December 31,
1997, by up to 20 cents per channel, exclusive of programming costs, for new
channels added to CPSTs on or after May 15, 1994, except that they may not
make rate adjustments totalling more than $1.20 per month, per subscriber
through December 31, 1996, and by more than $1.40 per month, per subscriber
through December 31, 1997 (the “Operator's Cap”). Except to the extent that
the programming costs of such channels are covered by the License Fee
Reserve provided for in paragraph (g)(3)(iii) of this section, programming
costs associated with channels for which a rate adjustment is made pursuant
to this paragraph (g)(3) of this section must fall within the Operators' Cap
if the programming costs (including any increases therein) are reflected in
rates before January 1, 1997. Inflation adjustments pursuant to paragraph
(d)(2) or (e)(2) of this section are not counted against the Operator's Cap.
(ii) Per channel adjustment. Operators may increase rates by a per channel
adjustment of up to 20 cents per subscriber per month, exclusive of
programming costs, for each channel added to a CPST between May 15, 1994,
and December 31, 1997, except that an operator may take the per channel
adjustment only for channel additions that result in an increase in the
highest number of channels offered on all CPSTs as compared to May 14, 1994,
and each date thereafter. Any revenues received from a programmer, or shared
by a programmer and an operator in connection with the addition of a channel
to a CPST shall first be deducted from programming costs for that channel
pursuant to paragraph (f)(7) of this section and then, to the extent
revenues received from the programmer are greater than the programming
costs, shall be deducted from the per channel adjustment. This deduction
will apply on a channel by channel basis.
(iii) License fee reserve. In addition to the rate adjustments permitted in
paragraphs (g)(3)(i) and (g)(3)(ii) of this section, operators that make
channel additions on or after May 15, 1994 may increase their rates by a
total of 30 cents per month, per subscriber between January 1, 1995, and
December 31, 1996, for license fees associated with such channels (the
“License Fee Reserve”). The License Fee Reserve may be applied against the
initial license fee and any increase in the license fee for such channels
during this period. An operator may pass-through to subscribers more than
the 30 cents between January 1, 1995, and December 31, 1996, for license
fees associated with channels added after May 15, 1994, provided that the
total amount recovered from subscribers for such channels, including the
License Fee Reserve, does not exceed $1.50 per subscriber, per month. After
December 31, 1996, license fees may be passed through to subscribers
pursuant to paragraph (f) of this section, except that license fees
associated with channels added pursuant to this paragraph (3) will not be
eligible for the 7.5% mark-up on increases in programming costs.
(iv) Timing. For purposes of determining whether a rate increase counts
against the maximum rate increases specified in paragraphs (g)(3)(i) through
(g)(3)(ii) of this section, the relevant date shall be when rates are
increased as a result of channel additions, not when the addition occurs.
(4) Deletion of channels. When dropping a channel from a BST or CPST,
operators shall reflect the net reduction in external costs in their rates
pursuant to paragraphs (d)(3)(i) and (d)(3)(ii) of this section, or
paragraphs (e)(2)(ii)(A) and (e)(2)(ii)(B) of this section. With respect to
channels to which the 7.5% mark-up on programming costs applied pursuant to
paragraph (f)(8) of this section, the operator shall treat the mark-up as
part of its programming costs and subtract the mark-up from its external
costs. Operators shall also reduce the price of that tier by the
“residual” associated with that channel. For channels that were on a BST or
CPST on May 14, 1994, or channels added after that date pursuant to
paragraph (g)(2) of this section, the per channel residual is the charge for
their tier, minus the external costs for the tier, and any per channel
adjustments made after that date, divided by the total number of channels on
the tier minus the number of channels on the tier that received the per
channel adjustment specified in paragraph (g)(3) of this section. For
channels added to a CPST after May 14, 1994, pursuant to paragraph (g)(3) of
this section, the residuals shall be the actual per channel adjustment taken
for that channel when it was added to the tier.
(5) Movement of Channels Between Tiers. When a channel is moved from a CPST
or a BST to another CPST or BST, the price of the tier from which the
channel is dropped shall be reduced to reflect the decrease in programming
costs and residual as described in paragraph (g)(4) of this section. The
residual associated with the shifted channel shall then be converted from
per subscriber to aggregate numbers to ensure aggregate revenues from the
channel remain the same when the channel is moved. The aggregate residual
associated with the shifted channel may be shifted to the tier to which the
channel is being moved. The residual shall then be converted to per
subscriber figures on the new tier, plus any subsequent inflation
adjustment. The price of the tier to which the channel is shifted may then
be increased to reflect this amount. The price of that tier may also be
increased to reflect any increase in programming cost. An operator may not
shift a channel for which it received a per channel adjustment pursuant to
paragraph (g)(3) of this section from a CPST to a BST.
(6) Substitution of channels on a BST or CPST. If an operator substitutes a
new channel for an existing channel on a CPST or a BST, no per channel
adjustment may be made. Operators substituting channels on a CPST or a BST
shall be required to reflect any reduction in programming costs in their
rates and may reflect any increase in programming costs pursuant to
paragraphs (d)(3)(i) and (d)(3)(ii), or paragraphs (e)(2)(ii)(A) and
(e)(2)(ii)(B) of this section. If the programming cost for the new channel
is greater than the programming cost for the replaced channel, and the
operator chooses to pass that increase through to subscribers, the excess
shall count against the License Fee Reserve or the Operator Cap when the
increased cost is passed through to subscribers. Where an operator
substitutes a new channel for a channel on which a 7.5% mark-up on
programming costs was taken pursuant to paragraph (f)(8) of this section,
the operator may retain the 7.5% mark-up on the license fee of the dropped
channel to the extent that it is no greater than 7.5% of programming cost of
the new service.
(7) Headend upgrades. When adding channels to CPSTs and single-tier systems,
cable systems that are owned by a small cable company and incur additional
monthly per subscriber headend costs of one full cent or more for an
additional channel may choose among the methodologies set forth in
paragraphs (g)(2) and (g)(3) of this section. In addition, such systems may
increase rates to recover the actual cost of the headend equipment required
to add up to seven such channels to CPSTs and single-tier systems, not to
exceed $5,000 per additional channel. Rate increases pursuant to this
paragraph may occur between January 1, 1995, and December 31, 1997, as a
result of additional channels offered on those tiers after May 14, 1994.
Headend costs shall be depreciated over the useful life of the equipment.
The rate of return on this investment shall not exceed 11.25 percent. In
order to recover costs for headend equipment pursuant to this paragraph,
systems must certify to the Commission their eligibility to use this
paragraph, and the level of costs they have actually incurred for adding the
headend equipment and the depreciation schedule for the equipment.
(8) Sunset provision. Paragraph (g) of this section shall cease to be
effective on January 1, 1998 unless renewed by the Commission.
(h) Permitted charges for a tier shall be determined in accordance with
forms and associated instructions established by the Commission.
(i) Cost of Service Charge. (1) For purposes of this section, a monthly
cost-of-service charge for a basic service tier or a cable programming
service tier is an amount equal to the annual revenue requirement for that
tier divided by a number that is equal to 12 times the average number of
subscribers to that tier during the test year, except that a monthly charge
for a system or tier in service less than one year shall be equal to the
projected annual revenue requirement for the first 12 months of operation or
service divided by a number that is equal to 12 times the projected average
number of subscribers during the first 12 months of operation or service.
The calculation of the average number of subscribers shall include all
subscribers, regardless of whether they receive service at full rates or at
discounts.
(2) A test year for an initial regulated charge is the cable operator's
fiscal year preceding the initial date of regulation. A test year for a
change in the basic service charge that is after the initial date of
regulation is the cable operator's fiscal year preceding the mailing or
other delivery of written notice pursuant to Section 76.932. A test year for
a change in a cable programming service charge after the initial date of
regulation is the cable operator's fiscal year preceding the filing of a
complaint regarding the increase.
(3) The annual revenue requirement for a tier is the sum of the return
component and the expense component for that tier.
(4) The return component for a tier is the average allowable test year
ratebase allocable to the tier adjusted for known and measurable changes
occurring between the end of the test year and the effective date of the
rate multiplied by the rate of return specified by the Commission or
franchising authority.
(5) The expense component for a tier is the sum of allowable test year
expenses allocable to the tier adjusted for known and measurable changes
occurring between the end of the test year and the effective date of the
rate.
(6) The ratebase may include the following:
(i) Prudent investment by a cable operator in tangible plant that is used
and useful in the provision of regulated cable services less accumulated
depreciation. Tangible plant in service shall be valued at the actual money
cost (or the money value of any consideration other than money) at the time
it was first used to provide cable service, except that in the case of
systems purchased before May 15, 1994 shall be presumed to equal 66% of the
total purchase price allocable to assets (including tangible and intangible
assets) used to provide regulated services. The 66% allowance shall not be
used to justify any rate increase taken after the effective date of this
rule. The actual money cost of plant may include an allowance for funds used
during construction at the prime rate or the operator's actual cost of funds
during construction. Cost overruns are presumed to be imprudent investment
in the absence of a showing that the overrun occurred through no fault of
the operator.
(ii) An allowance for start-up losses including depreciation, amortization
and interest expenses related to assets that are included in the ratebase.
Capitalized start-up losses, may include cumulative net losses, plus any
unrecovered interest expenses connected to funding the regulated ratebase,
amortized over the unexpired life of the franchise, commencing with the end
of the loss accumulation phase. However, losses attributable to accelerated
depreciation methodologies are not permitted.
(iii) An allowance for start-up losses, if any, that is equal to the lesser
of the first two years of operating costs or accumulated losses incurred
until the system reached the end of its prematurity stage as defined in
Financial Accounting Standards Board Standard 51 (“FASB 51”) less
straight-line amortization over a reasonable period not exceeding 15 years
that commences at the end of the prematurity phase of operation.
(iv) Intangible assets less amortization that reflect the original costs
prudently incurred by a cable operator in organizing and incorporating a
company that provides regulated cable services, obtaining a government
franchise to provide regulated cable services, or obtaining patents that are
used and useful in the provision of cable services.
(v) The cost of customer lists if such costs were capitalized during the
prematurity phase of operations less amortization.
(vi) An amount for working capital to the extent that an allowance or
disallowance for funds needed to sustain the ongoing operations of the
regulated cable service is demonstrated.
(vii) Other intangible assets to the extent the cable operator demonstrates
that the asset reflects costs incurred in an activity or transaction that
produced concrete benefits or savings for subscribers to regulated cable
services that would not have been realized otherwise and the cable operator
demonstrates that a return on such an asset does not exceed the value of
such a subscriber benefit.
(viii) The portion of the capacity of plant not currently in service that
will be placed in service within twelve months of the end of the test year.
(7) Deferred income taxes accrued after the date upon which the operator
became subject to regulation shall be deducted from items included in the
ratebase.
(8) Allowable expenses may include the following:
(i) All regular expenses normally incurred by a cable operator in the
provision of regulated cable service, but not including any lobbying
expense, charitable contributions, penalties and fines paid on account of
violations of statutes or rules, or membership fees in social, service,
recreational or athletic clubs or organizations.
(ii) Reasonable depreciation expense attributable to tangible assets
allowable in the ratebase.
(iii) Reasonable amortization expense for prematurely abandoned tangible
assets formerly includable in the ratebase that are amortized over the
remainder of the original expected life of the asset.
(iv) Reasonable amortization expense for start-up losses and capitalized
intangible assets that are includable in ratebase.
(v) Taxes other than income taxes attributable to the provision of regulated
cable services.
(vi) An income tax allowance.
(j) Network upgrade rate increase. (1) Cable operators that undertake
significant network upgrades requiring added capital investment may justify
an increase in rates for regulated services by demonstrating that the
capital investment will benefit subscribers, including providing television
broadcast programming in a digital format.
(2) A rate increase on account of upgrades shall not be assessed on
customers until the upgrade is complete and providing benefits to customers
of regulated services.
(3) Cable operators seeking an upgrade rate increase have the burden of
demonstrating the amount of the net increase in costs, taking into account
current depreciation expense, likely changes in maintenance and other costs,
changes in regulated revenues and expected economies of scale.
(4) Cable operators seeking a rate increase for network upgrades shall
allocate net cost increases in conformance with the cost allocation rules as
set forth in Sec. 76.924.
(5) Cable operators that undertake significant upgrades shall be permitted
to increase rates by adding the benchmark/price cap rate to the rate
increment necessary to recover the net increase in cost attributable to the
upgrade.
(k) Hardship rate relief. A cable operator may adjust charges by an amount
specified by the Commission for the cable programming service tier or the
franchising authority for the basic service tier if it is determined that:
(1) Total revenues from cable operations, measured at the highest level of
the cable operator's cable service organization, will not be sufficient to
enable the operator to attract capital or maintain credit necessary to
enable the operator to continue to provide cable service;
(2) The cable operator has prudent and efficient management; and
(3) Adjusted charges on account of hardship will not result in total charges
for regulated cable services that are excessive in comparison to charges of
similarly situated systems.
(l) Cost of service showing. A cable operator that elects to establish a
charge, or to justify an existing or changed charge for regulated cable
service, based on a cost-of-service showing must submit data to the
Commission or the franchising authority in accordance with forms established
by the Commission. The cable operator must also submit any additional
information requested by franchising authorities or the Commission to
resolve questions in cost-of-service proceedings.
(m) Subsequent cost of service charges. No cable operator may use a
cost-of-service showing to justify an increase in any charge established on
a cost-of-service basis for a period of 2 years after that rate takes
effect, except that the Commission or the franchising authority may waive
this prohibition upon a showing of unusual circumstances that would create
undue hardship for a cable operator.
(n) Further rate adjustments—Uniform rates. A cable operator that has
established rates in accordance with this section may then be permitted to
establish a uniform rate for uniform services offered in multiple franchise
areas. This rate shall be determined in accordance with the Commission's
procedures and requirements set forth in CS Docket No. 95–174.
[ 58 FR 29753 , May 21, 1993]
Editorial Note: ForFederal Registercitations affecting Sec. 76.922 see the
List of CFR Sections Affected, which appears in the Finding Aids section of
the printed volume and on GPO Access.
Effective Date Notes: 1. At 60 FR 62633 , Dec. 6, 1994, in Sec. 76.922,
paragraph (e) was revised. Paragraphs (e)(1) and (e)(2) contain information
collection and recordkeeping requirements and will not become effective
until approval has been given by the Office of Management and Budget.
2. At 60 FR 52113 , Oct. 5, 1995, in Sec. 76.922, paragraphs (e) through (k) were
redesignated as (g) through (m); (c), (d), and new (g) through new (m) were
revised; a new (e) and a new (f) were added. This amendment contains
information collection and recordkeeping requirements and will not become
effective until 30 days after approval has been given by the Office of
Management and Budget.
3. At 61 FR 9367 , Mar. 8, 1996, in Sec. 76.922, paragraphs (i)(6)(i) and (i)(7)
were revised; (i)(6)(ii) through (vii) were redesignated as (i)(6)(iii)
through (viii); a new (i)(6)(ii) was added. This amendment contains
information collection and recordkeeping requirements and will not become
effective until approval has been given by the Office of Management and
Budget.
4. At 62 FR 6495 , Feb. 12, 1997, in Sec. 76.922, paragraph (f)(4) was revised.
This amendment contains information collection and recordkeeping
requirements and will not become effective until approval has been given by
the Office of Management and Budget.
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