Sec.  76.923   Rates for equipment and installation used to receive the basic
service tier.

   (a) Scope. (1) The equipment regulated under this section consists of all
   equipment in a subscriber's home, provided and maintained by the operator,
   that is used to receive the basic service tier, regardless of whether such
   equipment  is  additionally  used  to receive other tiers of regulated
   programming  service  and/or unregulated service. Such equipment shall
   include, but is not limited to:

   (i) Converter boxes;

   (ii) Remote control units; and

   (iii) Inside wiring.

   (2) Subscriber charges for such equipment shall not exceed charges based on
   actual costs in accordance with the requirements set forth in this section.

   Subscriber charges for such equipment shall not exceed charges based on
   actual costs in accordance with the requirements set forth below.

   (b) Unbundling. A cable operator shall establish rates for remote control
   units,  converter  boxes,  other customer equipment, installation, and
   additional  connections separate from rates for basic tier service. In
   addition, the rates for such equipment and installations shall be unbundled
   one from the other.

   (c) Equipment basket. A cable operator shall establish an Equipment Basket,
   which shall include all costs associated with providing customer equipment
   and installation under this section. Equipment Basket costs shall be limited
   to the direct and indirect material and labor costs of providing, leasing,
   installing, repairing, and servicing customer equipment, as determined in
   accordance with the cost accounting and cost allocation requirements of
    Sec. 76.924, except that operators do not have to aggregate costs in a manner
   consistent with the accounting practices of the operator on April 3, 1993.
   The Equipment Basket shall not include general administrative overhead
   including  marketing  expenses.  The  Equipment Basket shall include a
   reasonable profit.

   (1)  Customer  equipment.  Costs of customer equipment included in the
   Equipment Basket may be aggregated, on a franchise, system, regional, or
   company level, into broad categories. Except to the extent indicated in
   paragraph (c)(2) of this section, such categorization may be made, provided
   that each category includes only equipment of the same type, regardless of
   the  levels  of  functionality of the equipment within each such broad
   category. When submitting its equipment costs based on average charges, the
   cable  operator  must  provide  a general description of the averaging
   methodology employed and a justification that its averaging methodology
   produces reasonable equipment rates. Equipment rates should be set at the
   same organizational level at which an operator aggregates its costs.

   (2) Basic service tier only equipment. Costs of customer equipment used by
   basic-only subscribers may not be aggregated with the costs of equipment
   used by non-basic-only subscribers. Costs of customer equipment used by
   basic-only subscribers may, however, be aggregated, consistent with an
   operator's  aggregation  under  paragraph (c)(1) of this section, on a
   franchise, system, regional, or company level. The prohibition against
   aggregation applies to subscribers, not to a particular type of equipment.
   Alternatively, operators may base its basic-only subscriber cost aggregation
   on the assumption that all basic-only subscribers use equipment that is the
   lowest level and least expensive model of equipment offered by the operator,
   even  if  some basic-only subscribers actually have higher level, more
   expensive equipment.

   (3) Installation costs. Installation costs, consistent with an operator's
   aggregation under paragraph (c)(1) of this section, may be aggregated, on a
   franchise,  system,  regional,  or  company level. When submitting its
   installation costs based on average charges, the cable operator must provide
   a  general  description  of  the  averaging methodology employed and a
   justification that its averaging methodology produces reasonable equipment
   rates. Installation rates should be set at the same organizational level at
   which an operator aggregates its costs.

   (d) Hourly service charge. A cable operator shall establish charges for
   equipment  and  installation  using  the  Hourly  Service Charge (HSC)
   methodology. The HSC shall equal the operator's annual Equipment Basket
   costs, excluding the purchase cost of customer equipment, divided by the
   total person hours involved in installing, repairing, and servicing customer
   equipment during the same period. The HSC is calculated according to the
   following formula:
   [MATH:  :MATH]

   Where, EB=annual Equipment Basket Cost; CE=annual purchase cost of all
   customer equipment; and H=person hours involved in installing and repairing
   equipment per year. The purchase cost of customer equipment shall include
   the  cable operator's invoice price plus all other costs incurred with
   respect to the equipment until the time it is provided to the customer.

   (e) Installation charges. Installation charges shall be either:

   (1)  The  HSC  multiplied  by the actual time spent on each individual
   installation; or

   (2) The HSC multiplied by the average time spent on a specific type of
   installation.

   (f) Remote charges. Monthly charges for rental of a remote control unit
   shall consist of the average annual unit purchase cost of remotes leased,
   including  acquisition  price  and incidental costs such as sales tax,
   financing and storage up to the time it is provided to the customer, added
   to  the  product of the HSC times the average number of hours annually
   repairing or servicing a remote, divided by 12 to determine the monthly
   lease rate for a remote according to the following formula:
   [MATH:  :MATH]

   Where, HR = average hours repair per year; and UCE = average annual unit
   cost of remote.

   (g) Other equipment charges. The monthly charge for rental of converter
   boxes and other customer equipment shall be calculated in the same manner as
   for remote control units. Separate charges may be established for each
   category of other customer equipment.

   (h) Additional connection charges. The costs of installation and monthly use
   of additional connections shall be recovered as charges associated with the
   installation and equipment cost categories, and at rate levels determined by
   the actual cost methodology presented in the foregoing paragraphs (e), (f),
   and (g) of this section. An operator may recover additional programming
   costs and the costs of signal boosters on the customers premises, if any,
   associated with the additional connection as a separate monthly unbundled
   charge for additional connections.

   (i) Charges for equipment sold. A cable operator may sell customer premises
   equipment to a subscriber. The equipment price shall recover the operator's
   cost of the equipment, including costs associated with storing and preparing
   the equipment for sale up to the time it is sold to the customer, plus a
   reasonable  profit.  An  operator  may  sell service contracts for the
   maintenance and repair of equipment sold to subscribers. The charge for a
   service contract shall be the HSC times the estimated average number of
   hours for maintenance and repair over the life of the equipment.

   (j) Promotions. A cable operator may offer equipment or installation at
   charges below those determined under paragraphs (e) through (g) of this
   section, as long as those offerings are reasonable in scope in relation to
   the  operator's  overall  offerings  in  the  Equipment Basket and not
   unreasonably  discriminatory.  Operators may not recover the cost of a
   promotional  offering by increasing charges for other Equipment Basket
   elements, or by increasing programming service rates above the maximum
   monthly  charge per subscriber prescribed by these rules. As part of a
   general  cost-of-service  showing, an operator may include the cost of
   promotions in its general system overhead costs.

   (k) Franchise fees. Equipment charges may include a properly allocated
   portion of franchise fees.

   (l) Company-wide averaging of equipment costs. For the purpose of developing
   unbundled equipment charges as required by paragraph (b) of this section, a
   cable operator may average the equipment costs of its small systems at any
   level, or several levels, within its operations. This company-wide averaging
   applies only to an operator's small systems as defined in  Sec. 76.901(c); is
   permitted only for equipment charges, not installation charges; and may be
   established  only  for similar types of equipment. When submitting its
   equipment costs based on average charges to the local franchising authority
   or  the  Commission, an operator that elects company-wide averaging of
   equipment  costs  must  provide a general description of the averaging
   methodology employed and a justification that its averaging methodology
   produces reasonable equipment rates. The local authority or the Commission
   may require the operator to set equipment rates based on the operator's
   level of averaging in effect on April 3, 1993, as required by  Sec. 76.924(d).

   (m) Cable operators shall set charges for equipment and installations to
   recover Equipment Basket costs. Such charges shall be set, consistent with
   the level at which Equipment Basket costs are aggregated as provided in
    Sec. 76.923(c).  Cable  operators shall maintain adequate documentation to
   demonstrate  that  charges for the sale and lease of equipment and for
   installations have been developed in accordance with the rules set forth in
   this section.

   (n) Timing of filings. An operator shall file FCC Form 1205 in order to
   establish its maximum permitted rates at the following times:

   (1) When the operator sets its initial rates under either the benchmark
   system or through a cost-of-service showing;

   (2) Within 60 days of the end of its fiscal year, for an operator that
   adjusts its rates under the system described in Section 76.922(d) that
   allows it to file up to quarterly;

   (3)  On the same date it files its FCC Form 1240, for an operator that
   adjusts its rates under the annual rate adjustment system described in
   Section 76.922(e). If an operator elects not to file an FCC Form 1240 for a
   particular year, the operator must file a Form 1205 on the anniversary date
   of its last Form 1205 filing; and

   (4) When seeking to adjust its rates to reflect the offering of new types of
   customer equipment other than in conjunction with an annual filing of Form
   1205, 60 days before it seeks to adjust its rates to reflect the offering of
   new types of customer equipment.

   (o) Introduction of new equipment. In setting the permitted charge for a new
   type of equipment at a time other than at its annual filing, an operator
   shall only complete Schedule C and the relevant step of the Worksheet for
   Calculating Permitted Equipment and Installation Charges of a Form 1205. The
   operator shall rely on entries from its most recently filed FCC Form 1205
   for information not specifically related to the new equipment, including but
   not  limited  to  the Hourly Service Charge. In calculating the annual
   maintenance and service hours for the new equipment, the operator should
   base its entry on the average annual expected time required to maintain the
   unit, i.e. , expected service hours required over the life of the equipment
   unit being introduced divided by the equipment unit's expected life.

   [ 58 FR 29753 , May 21, 1993, as amended at  59 FR 17960 , 17973, Apr. 15, 1994;
    60 FR 52118 , Oct. 5, 1995;  61 FR 32709 , June 25, 1996]

   Effective Date Note:   At  60 FR 52118 , Oct. 5, 1995, in  Sec. 76.923, paragraphs
   (n) and (o) 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.