§  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 §  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:
   eCFR graphic ec01mr91.116.gif

   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:
   eCFR graphic er25jn96.006.gif

   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 §  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 §  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 §  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]

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