Sec.  76.924   Allocation to service cost categories.

   (a) Applicability. The requirements of this section are applicable to cable
   operators for which the basic service tier is regulated by local franchising
   authorities or the Commission, or, with respect to a cable programming
   services tier, for which a complaint has been filed with the Commission. The
   requirements of this section are applicable for purposes of rate adjustments
   on account of external costs and for cost-of-service showings.

   (b) Accounting requirements. Cable operators electing cost-of-service
   regulation or seeking rate adjustments due to changes in external costs
   shall maintain their accounts:

   (1) in accordance with generally accepted accounting principles; and

   (2) in a manner that will enable identification of appropriate investments,
   revenues, and expenses.

   (c) Accounts level. Except to the extent indicated below, cable operators
   electing cost of service regulation or seeking adjustments due to changes in
   external costs shall identify investments, expenses and revenues at the
   franchise, system, regional, and/or company level(s) in a manner consistent
   with the accounting practices of the operator on April 3, 1993. However, in
   all events, cable operators shall identify at the franchise level their
   costs of franchise requirements, franchise fees, local taxes and local
   programming.

   (d) Summary accounts. (1) Cable operators filing for cost-of-service
   regulation, other than small systems owned by small cable companies, shall
   report all investments, expenses, and revenue and income adjustments
   accounted for at the franchise, system, regional and/or company level(s) to
   the summary accounts listed below.

   Ratebase

   Net Working Capital

   Headend

   Trunk and Distribution Facilities

   Drops

   Customer Premises Equipment

   Construction/Maintenance Facilities and Equipment

   Programming Production Facilities and Equipment

   Business Offices Facilities and Equipment

   Other Tangible Assets

   Accumulated Depreciation

   Plant Under Construction

   Organization and Franchise Costs

   Subscriber Lists

   Capitalized Start-up Losses

   Goodwill

   Other Intangibles

   Accumulated Amortization

   Deferred Taxes

   Operating Expenses

   Cable Plant Employee Payroll

   Cable Plant Power Expense

   Pole Rental, Duct, Other Rental for Cable Plant

   Cable Plant Depreciation Expense

   Cable Plant Expenses—Other

   Plant Support Employee Payroll Expense

   Plant Support Depreciation Expense

   Plant Support Expense—Other

   Programming Activities Employee Payroll

   Programming Acquisition Expense

   Programming Activities Depreciation Expense

   Programming Expense—Other

   Customer Services Expense

   Advertising Activities Expense

   Management Fees

   General and Administrative Expenses

   Selling General and Administrative Depreciation Expenses

   Selling General and Administrative Expenses—Other

   Amortization Expense—Franchise and Organizational Costs

   Amortization Expense—Customer Lists

   Amortization Expense—Capitalized Start-up Loss

   Amortization Expense—Goodwill

   Amortization Expense—Other Intangibles

   Operating Taxes

   Other Expenses (Excluding Franchise Fees)

   Franchise Fees

   Interest on Funded Debt

   Interest on Capital Leases

   Other Interest Expenses

   Revenue and Income Adjustments

   Advertising Revenues

   Other Cable Revenue Offsets

   Gains and Losses on Sale of Assets

   Extraordinary Items

   Other Adjustments

   (2) Except as provided in  Sec. 76.934(h), small systems owned by small cable
   companies that file for cost-of-service regulation shall report all
   investments, expenses, and revenue and income adjustments accounted for at
   the franchise, system, regional and/or company level(s) to the following
   summary accounts:

   Ratebase

   Net Working Capital

   Headend, Trunk and Distribution System and Support Facilities and Equipment

   Drops

   Customer Premises Equipment

   Production and Office Facilities, Furniture and Equipment

   Other Tangible Assets

   Accumulated Depreciation

   Plant Under Construction

   Goodwill

   Other Intangibles

   Accumulated Amortization

   Deferred Taxes

   Operating Expenses

   Cable Plant Maintenance, Support and Operations Expense

   Programming Production and Acquisition Expense

   Customer Services Expense

   Advertising Activities Expense

   Management Fees

   Selling, General and Administrative Expenses

   Depreciation Expense

   Amortization Expense—Goodwill

   Amortization Expense—Other Intangibles

   Other Operating Expense (Excluding Franchise Fees)

   Franchise Fees

   Interest Expense

   Revenue and Income Adjustments

   Advertising Revenues

   Other Cable Revenue Offsets

   Gains and Losses on Sale of Assets

   Extraordinary Items

   Other Adjustments

   (e) Allocation to service cost categories. (1) For cable operators electing
   cost-of-service regulation, investments, expenses, and revenues contained in
   the summary accounts identified in paragraph (d) of this section shall be
   allocated among the Equipment Basket, as specified in  Sec. 76.923, and the
   following service cost categories:

   (i) Basic service cost category. The basic service category, shall include
   the cost of providing basic service as defined by  Sec. 76.901(a). The basic
   service cost category may only include allowable costs as defined by
    Sec.  Sec. 76.922(g) through 76.922(k).

   (ii) Cable programming services cost category. The cable programming
   services category shall include the cost of providing cable programming
   services as defined by  Sec. 76.901(b). This service cost category shall contain
   subcategories that represent each programming tier that is offered as a part
   of the operator's cable programming services. All costs that are allocated
   to the cable programming service cost cateogry shall be further allocated
   among the programming tiers in this category. The cable programming service
   cost category may include only allowable costs as defined in  Sec. 76.922(g)
   through 76.922(k).

   (iii) All other services cost category. The all other services cost category
   shall include the costs of providing all other services that are not
   included the basic service or a cable programming services cost categories
   as defined in paragraphs (e)(1)(i) and (ii) of this section.

   (2) Cable operators seeking an adjustment due to changes in external costs
   identified in FCC Form 1210 shall allocate such costs among the equipment
   basket, as specified in  Sec. 76.923, and the following service cost categories:

   (i) The basic service category as defined by paragraph (e)(1)(i) of this
   section;

   (ii) The cable programming services category as defined by paragraph
   (e)(1)(ii) of this section;

   (iii) The all other services cost category as defined by paragraph
   (e)(1)(iii) of this section.

   (f) Cost allocation requirements. (1) Allocations of investments, expenses
   and revenues among the service cost categories and the equipment basket
   shall be made at the organizational level in which such costs and revenues
   have been identified for accounting purposes pursuant to  Sec. 76.924(c).

   (2) Costs of programming and retransmission consent fees shall be directly
   assigned or allocated only to the service cost category in which the
   programming or broadcast signal at issue is offered.

   (3) Costs of franchise fees shall be allocated among the equipment basket
   and the service cost categories in a manner that is most consistent with the
   methodology of assessment of franchise fees by local authorities.

   (4) Costs of public, educational, and governmental access channels carried
   on the basic tier shall be directly assigned to the basic tier where
   possible.

   (5) Commission cable television system regulatory fees imposed pursuant to
   47 U.S.C. 159 shall be directly assigned to the basic service tier.

   (6) All other costs that are incurred exclusively to support the equipment
   basket or a specific service cost category shall be directly assigned to
   that service cost category or the equipment basket where possible.

   (7) Costs that are not directly assigned shall be allocated to the service
   cost categories in accordance with the following allocation procedures:

   (i) Wherever possible, common costs for which no allocator has been
   specified by the Commission are to be allocated among the service cost
   categories and the equipment basket based on direct analysis of the origin
   of the costs.

   (ii) Where allocation based on direct analysis is not possible, common costs
   for which no allocator has been specified by the Commission shall, if
   possible, be allocated among the service costs categories and the equipment
   basket based on indirect, cost-causative linkage to other costs directly
   assigned or allocated to the service cost categories and the equipment
   basket.

   (iii) Where neither direct nor indirect measures of cost allocation can be
   found, common costs shall be allocated to each service cost category based
   on the ratio of all other costs directly assigned and attributed to a
   service cost category over total costs directly or indirectly assigned and
   directly or indirectly attributable.

   (g) Cost identification at the franchise level. After costs have been
   directly assigned to and allocated among the service cost categories and the
   equipment basket, cable operators that have aggregated costs at a higher
   level than the franchise level must identify all applicable costs at the
   franchise level in the following manner:

   (1) Recoverable costs that have been identified at the highest
   organizational level at which costs have been identified shall be allocated
   to the next (lower) organizational level at which recoverable costs have
   been identified on the basis of the ratio of the total number of subscribers
   served at the lower level to the total number of subscribers served at the
   higher level.

   (2) Cable operators shall repeat the procedure specified in paragraph (g)(1)
   of this section at every organizational level at which recoverable costs
   have been identified until such costs have been allocated to the franchise
   level.

   (h) Part-time channels. In situations where a single channel is divided on a
   part-time basis and is used to deliver service associated with different
   tiers or with pay per channel or pay per view service, a reasonable and
   documented allocation of that channel between services shall be required
   along with the associated revenues and costs.

   (i) Transactions and affiliates. Adjustments on account of external costs
   and rates set on a cost-of-service basis shall exclude any amounts not
   calculated in accordance with the following:

   (1) Charges for assets purchased by or transferred to the regulated activity
   of a cable operator from affiliates shall equal the invoice price if that
   price is determined by a prevailing company price. The invoice price is the
   prevailing company price if the affiliate has sold a substantial number of
   like assets to nonaffiliates. If a prevailing company price for the assets
   received by the regulated activity is not available, the changes for such
   assets shall be the lower of their cost to the originating activity of the
   affiliated group less all applicable valuation reserves, or their fair
   market value.

   (2) The proceeds from assets sold or transferred from the regulated activity
   of the cable operator to affiliates shall equal the prevailing company price
   if the cable operator has sold a substantial number of like assets to
   nonaffiliates. If a prevailing company price is not available, the proceeds
   from such sales shall be determined at the higher of cost less all
   applicable valuation reserves, or estimated fair market value of the asset.

   (3) Charges for services provided to the regulated activity of a cable
   operator by an affiliate shall equal the invoice price if that price is
   determined by a prevailing company price. The invoice price is the
   prevailing company price if the affiliate has sold like services to a
   substantial number of nonaffiliates. If a prevailing company price for the
   services received by the regulated activity is not available, the charges of
   such services shall be at cost.

   (4) The proceeds from services sold or transferred from the regulated
   activity of the cable operator to affiliates shall equal the prevailing
   company price if the cable operator has sold like services to a substantial
   number of nonaffiliates. If a prevailing company price is not available, the
   proceeds from such sales shall be determined at cost.

   (5) For purposes of  Sec. 76.924(i)(1) through 76.924(i)(4), costs shall be
   determined in accordance with the standards and procedures specified in
    Sec. 76.922 and paragraphs (b) and (d) of this section.

   (6) 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.

   (7) Attributable interest shall be defined by reference to the criteria set
   forth in Notes 1 through 5 to  Sec. 76.501 provided, however, that:

   (i) The limited partner and LLC/LLP/RLLP insulation provisions of Note 2(f)
   shall not apply; and

   (ii) 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.

   (j) Unrelated expenses and revenues. Cable operators shall exclude from cost
   categories used to develop rates for the provision of regulated cable
   service, equipment, and leased commercial access, any direct or indirect
   expenses and revenues not related to the provision of such services. Common
   costs of providing regulated cable service, equipment, and leased commercial
   access and unrelated activities shall be allocated between them in
   accordance with paragraph (f) of this section.

   [ 58 FR 29753 , May 21, 1993, as amended at  59 FR 17990 , Apr. 15, 1994;  59 FR 53115 , Oct. 21, 1994;  60 FR 35865 , July 12, 1995;  61 FR 9367 , Mar. 8, 1996;
    64 FR 67197 , Dec. 1, 1999]

   Effective Date Note:   At  61 FR 9367 , Mar. 8, 1996, in  Sec. 76.924, the section
   heading and paragraphs (e)(1)(iii) and (2)(iii) were revised; (e)(1)(iv),
   (v), (2)(iv), and (v) were removed. 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.