[Federal Register Volume 59, Number 203 (Friday, October 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26255]


[[Page Unknown]]

[Federal Register: October 21, 1994]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MM Docket No. 92-266, FCC 94-254]

 

Cable Television Act of 1992

AGENCY: Federal Communications Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Commission has adopted a Fourth Order on Reconsideration 
to revise and adopt further Commission cable rate regulations. The 
Fourth Order on Reconsideration addresses issues regarding external 
cost treatment of Commission cable television system regulatory fees 
and franchise fees. It is intended to provide for external cost 
treatment of Commission cable television system regulatory fees and 
permit cable operators to adjust rates for regulated cable services to 
reflect Commission regulatory fees and changes in franchise fees upon 
30 days' notice without receiving prior franchising authority or 
Commission approval, but subject to refund.

EFFECTIVE DATE: November 21, 1994.

FOR FURTHER INFORMATION CONTACT:
Leora Hochstein, (202) 416-0800.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Fourth Order on 
Reconsideration in MM Docket No. 92-266, FCC 94-254, adopted September 
30, 1994 and released October 5, 1994.
    The complete text of this Fourth Order on Reconsideration is 
available for inspection and copying during normal business hours in 
the FCC Reference Center (room 239), 1919 M Street, N.W., Washington, 
D.C., and also may be purchased from the Commission's copy contractor, 
International Transcription service at (202) 857-3800, 2100 M Street, 
N.W., Suite 140, Washington, D.C. 20037.

Synopsis of the Fourth Order on Reconsideration

I. Franchise Fees

    1. Cable systems are franchised by state or local governments or by 
a combination thereof or, in certain circumstances, by other 
governmental entities such as federal military installations. The 
payment of fees under the terms of any franchise is authorized by 
Section 622(a) of the Communications Act, is limited as to amount by 
Section 622(b), and such fees are to be accounted for in the 
establishment of rates under Section 623(b)(2)(c)(V).
    2. Under the Commission's price cap rules, a cable operator is 
permitted to adjust its maximum monthly charge for regulated service 
tiers to reflect changes in certain categories of external costs, 
including franchise fees. If an operator's basic service tier is being 
regulated in a particular franchise area by the franchising authority 
or by the Commission, the operator generally is not allowed under our 
rules to increase its rates for the basic service tier or related 
equipment and installations without first submitting the proposed 
increase to the franchising authority or the Commission, as the case 
may be, for review. Under our rules, a franchising authority reviewing 
a proposed increase in basic rates has an initial 30 day period to make 
its decision. The franchising authority may extend this period for an 
additional 90 days in a non-cost-of-service case or 150 days in a cost-
of-service case. During this period, the operator's proposed increase 
is not in effect. When the Commission is regulating basic rates, 
filings regarding rate increases must be made 30 days prior to the 
proposed effective date and such rate increases are effective on the 
date proposed unless the Commission issues an order deferring the 
effective date or denying the rate proposal. With respect to cable 
programming service (CPS) rates, an operator must file rate increases 
for prior review by the Commission if the Commission has ordered the 
operator to reduce its CPS rates within the prior 12 months or some 
other period specified by the Commission in a particular case. In 
addition, when a CPS complaint against the operator is pending before 
the Commission, an operator must give the Commission 30 days' notice of 
changes in any rates, including increases in rates attributable to 
increases in franchise fees.
    3. On reconsideration, on our own motion, we determine that we 
should permit adjustments to capped rates to reflect increases in 
franchise fees without prior regulatory approval. Since it is the 
franchising authority which has set the franchise fee, prior regulatory 
review appears less necessary from a consumer protection standpoint 
than it is for other categories of external costs. This decision 
supersedes Answer No. 5 in the Questions and Answers released by the 
Cable Services Bureau on May 18, 1994 which interpreted the 
Commission's price cap rules as requiring prior approval before 
franchise fee increases could be passed through.
    4. Accordingly, as of the effective date of this Order, where the 
franchising authority is regulating basic rates, increases in basic 
rates attributable to increases in franchise fees will not be subject 
to the prior approval requirements for proposed rates increases set 
forth in Sec. 76.933(a)-(c) of our rules. However, operators will 
continue to be required to abide by the notice provisions of our rules. 
When the operator provides the notice to the franchising authority, it 
must also provide documentation that demonstrates that the rate 
increase has been properly calculated. We find it unnecessary to 
prescribe the precise form of this documentation. The operator need not 
use FCC Form 1210 since Form 1210 was not specifically designated for 
use in calculating rate adjustments that reflect changes in franchise 
fees.
    5. As under existing rules, where the Commission is regulating 
basic service tier rates, operators must give the Commission 30 days' 
advance notice of any such increase attributable to franchise fee 
increases. Operators must also give subscribers and franchising 
authorities 30 days' advance notice of changes in basic rates 
attributable to increases in franchise fees as required by our rules. 
In addition, where the Commission is regulating basic service rates, 
the operator should submit with its filing to the Commission the same 
documentation which it would need to submit if the franchising 
authority were regulating basic service rates as outlined above.
    6. The franchising authority or the Commission, as appropriate, may 
then review the pass-through of increases in franchise fees and may 
order a prospective rate reduction and refunds in accordance with our 
rules in the event the operator has increased its basic service rates 
by more than the increase in franchise fees properly allocable to the 
basic tier. The burden of demonstrating that any such increases are 
proper shall remain on the operator as with any other rate adjustments. 
The procedures set forth in Sec. 76.933 of our rules will apply to a 
franchising authority review of rate increases resulting from franchise 
fee pass-throughs, except that the increased rate attributable to the 
increased franchise fee will be treated as an ``existing rate'' for the 
purposes of Sec. 76.933. Thus, franchising authorities will have an 
initial 30-day period, beginning on the date the operator provides 
notice and supporting documentation, whichever is later, to review the 
rates. The rate increase will go into effect at the end of this 30-day 
period. The franchising authority may extend the period for reviewing 
rates for an additional 90 days in a non-cost-of-service case or 150 
days in a cost-of-service case by issuing a tolling order within the 
initial 30-day period. It may further extend its period for review by 
issuing an accounting order prior to the expiration of the 90 or 150 
day additional period. See 47 CFR 76.933(a)-(c). However, during these 
periods the increased rate is in effect. The procedures set forth in 
Sec. 76.945 will apply to Commission review of rate increases resulting 
from franchise fee pass-throughs.
    7. Franchise fees will continue to be allocated in a manner that is 
most consistent with the assessment methodology used by franchising 
authorities. Under Sec. 76.924(f) of our rules, a portion of franchise 
fees may, in some circumstances, be allocated to cable programming 
service tiers. Operators that have had cable programming service rates 
deemed unreasonable within the prior 12 months, or some other period 
specified by the Commission in a particular case, must submit increases 
in CPS rates attributable to an increase in franchise fees to the 
Commission for its review. Rate justifications relating to franchise 
fee-related increases in CPS tier rates will be reviewed by the 
Commission according to existing rules for Commission review of basic 
service tier rates.
    8. These rule revisions do not change our rules governing rate 
adjustments attributable to decreases in external costs, including 
franchise fees. Decrease in franchise fees allocable to either the 
basic service or a CPS tier will continue to be treated as external 
cost decreases under our existing rules. Such decreases must be passed 
through to subscribers within the periods set forth in our rules for 
passing through decreases in external costs. The operator must provide 
30 days' notice to subscribers, the local franchising authority and the 
Commission, as appropriate. As with franchise fee increases, operators 
must provide documentation for the amount of the decrease. Consistent 
with the rules adopted in the Report and Order and Further Notice of 
proposed Rulemaking, 8 FCC Rcd 5631 (1993) (Rate Order), 58 FR 29736, 
May 21, 1993, our action herein with respect to the pass-through of 
franchise fees applies only to the extent there are net increases in 
the costs imposed on the system operator. Fees may not be passed 
through to the extent there are other fee changes that offset the 
increase.

II. Cable Television System Regulatory Fees

    9. Section 9 of the Communications Act of 1934, as amended, 
requires the Commission to collect cable system regulatory fees of $370 
per 1,000 subscribers from cable television systems on an annual basis. 
47 U.S.C. 159. The statute also permits the Commission to adjust the 
amount of the regulatory fees in subsequent years. The purpose of 
requiring cable systems to pay regulatory fees to the Commission is to 
permit the Commission to recover the annual cost of its various 
regulatory activities. In a Report and Order released June 8, 1994, in 
MD Docket No. 94-19, the Commission adopted implementing rules 
providing for the payment of regulatory fees in fiscal year 1994 and 
thereafter. Implementation of Section 9 of the Communications Act: 
Assessment and Collection of Regulatory Fees for the 1994 Fiscal Year, 
MD Docket No. 94-19, Report and Order, 59 FR 30984 (June 16, 1994). In 
that Report and Order, we decided to assess the cable system regulatory 
fee on an exact per subscriber basis (i.e., $0.37 per subscriber per 
year or approximately $0.03 per subscriber per month). We provided that 
regulatory fees be paid on this basis so that cable systems serving 
less than 1,000 subscribers would not pay a disproportionately high 
regulatory fee. The first cable system regulatory fee payments for 
fiscal year 1994 were due on August 12, 1994.
    10. Cable operators in MD Docket No. 94-19 urged the Commission to 
permit cable systems to pass regulatory fees through to subscribers as 
external costs. In our Report and Order in that docket, we concluded 
that the pass-through issue was not within the scope of the docket and 
should, therefore, be addressed separately.
    11. Cable television system regulatory fees are mandated by 
Congress, collected by the Commission, and are intended to reimburse 
the Commission for administering its regulatory responsibilities under 
the Communications Act of 1934. As such, they are exceptional, newly 
imposed, governmentally-assessed fees that further the purposes of the 
Communications Act. These fees are also beyond the control of the cable 
operator. Furthermore, the fees are easily measurable in amount. 
Consistent with the Commission's prior decision to determine on a case-
by-case basis whether categories of costs should be accorded external 
cost treatment, we determine that Commission cable television system 
regulatory fees should be accorded external cost treatment under our 
price cap rules governing cable service rates.
    12. We further determine that cable system regulatory fees should 
be directly assigned to the basic service tier. Direct assignment to 
the basic service tier is appropriate because the cable system 
regulatory fees are assessed on a per subscriber basis and all 
subscribers receive the basic service tier. Assignment to the basic 
service tier is also consistent with the fact that regulatory fees are 
intended to reimburse the Commission for the costs of regulating cable 
service, including Commission oversight of the basic service tier and 
other regulatory activities such as rulemaking, the direct regulation 
of some systems' basic tier rates and review of local franchising 
authorities' decisions.
    13. We believe that cable operators should be permitted to adjust 
rates on account of the regulatory fees without prior regulatory 
approval, subject to our requirements for 30 days' advance notice. 
Thus, operators may adjust rates to reflect the newly imposed 
regulatory fees, and any subsequent increases in the fees, in the same 
manner that rates may be adjusted for increases in franchise fees, as 
discussed above. Decreases in Commission regulatory fees will continue 
to be treated as external cost decreases under our existing rules and 
must be passed through to subscribers in accordance with those rules. 
In addition, fees may not be passed through to the extent that there 
are other offsetting fee decreases.
    14. Operators shall recover the annual regulatory fee according to 
the following schedule. Regulatory fees of $0.37 per subscriber that 
were due on August 12, 1994 and/or September 9, 1994 for fiscal year 
1994 (October 1, 1993-September 30, 1994) shall be recovered from 
subscribers over a ten month period beginning in December of 1994 and 
ending in September of 1995. For the first three months of this ten 
month period (December 1994-February 1995), operators shall recover 
$0.03 per month per subscriber. For the remaining seven months (March 
1995-September 1995), operators shall recover $0.04 per month per 
subscriber. Operators may provide notice of the entire fiscal year's 
regulatory fee pass-through in a single notice so long as that notice 
states that the fee pass-through will increase from $0.03 in February 
1995 to $0.04 in March 1995. Regulatory fees that are assessed for 
subsequent fiscal years shall be recovered in twelve monthly 
installments during the fiscal year following the fiscal year for which 
the payment was imposed. For example, operators may begin recovering 
regulatory fees paid for fiscal year 1995 during the 12 month period 
from October 1995 through September 1996. Payments shall be collected 
in equal monthly installments, except that for so many months as may be 
necessary to avoid fractional payments, an additional $0.01 payment per 
month may be collected. All such additional payments shall be collected 
in the last month or months of the fiscal year, so that once 
collections of such payments begin there shall be no month remaining in 
the year in which the operator is not entitled to such an additional 
payment. Recovery of regulatory fees paid for fiscal year 1995 and 
subsequent fiscal years is, of course, subject to the notice 
requirements contained in this Order and in our rules. We recognize 
that operators will not recover the regulatory fee until after they 
have paid it. However, operators may not assess interest on the amount 
charged to subscribers for regulatory fees in order to avoid the 
substantial administrative burdens on operators and regulators in 
determining and reviewing interest calculations.
    15. The Report and Order released June 8, 1994, implementing 
regulatory fees on cable television systems, also provided that, for 
fiscal year 1994, each Cable Television Antenna Relay Service (CARS) 
licensee would be assessed a regulatory fee of $220 per license by the 
Commission. We decline to provide for the external cost treatment of 
CARS regulatory fees. CARS license regulatory fees are assessed on a 
flat fee basis of $220 per license and should not represent significant 
amounts to most operators. We will consider the need to permit external 
cost treatment of CARS regulatory fees for small systems upon 
completion of our cost studies.

III. Administrative Matters

Regulatory Flexibility Act Analysis

    16. Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C. 
601-612, the Commission's final analysis with respect to the Fourth 
Order on Reconsideration is as follows:
    17. Need and purpose of this action. The Commission, in compliance 
with Section 3 of the Cable Television Consumer Protection and 
Competition Act of 1992, 47 U.S.C. 543 (1992) pertaining to rate 
regulation, adopts revised rules and procedures intended to ensure 
cable subscribers of reasonable rates for cable services with minimum 
regulatory and administrative burden on cable entities.
    18. Summary of issues raised by the public in response to the 
Initial Regulatory Flexibility Analysis. There were no comments 
submitted in response to the Initial Regulatory Flexibility Analysis. 
The Chief Counsel for Advocacy of the United States Small Business 
Administration (SBA) filed comments in the original rulemaking order. 
The Commission addressed the concerns raised by the Office of Advocacy 
in the Rate Order.
    19. Significant alternatives considered and rejected. Petitioners 
representing cable interests and franchising authorities submitted 
several alternatives aimed at minimizing administrative burdens. The 
Commission responded to these comments in previous Orders in this 
docket. Although the Commission is issuing this Order on its own 
motion, the Commission has attempted to accommodate commenters' 
concerns and to reduce administrative burdens by providing an expedited 
method to pass through franchise fees and Commission regulatory fees.

IV. Ordering Clauses

    20. Accordingly, it is ordered That, pursuant to Sections 4(i), 
303(r), and 623 of the Communications Act of 1934, as amended, 47 
U.S.C. 154(i), 303(r), and 543, that, Secs. 76.922, 76.924, and 76.933 
of the Commission's rules, 47 CFR 76.922, 76.924, and 76.933 are 
amended as set forth below.
    21. It is further ordered That, this Fourth Order on 
Reconsideration is effective November 21, 1994.

List of Subjects in 47 CFR Part 76

    Cable television.

Federal Communications Commission.
William F. Caton,
Acting Secretary.

Rule Changes

    Part 76 of Chapter I of Title 47 of the Code of Federal Regulations 
is amended as follows:

PART 76--CABLE TELEVISION SERVICE

    1. The authority citation for Part 76 continues to read as follows:

    Authority: Secs. 2, 3, 4, 301, 303, 307, 308, 309, 48 Stat., as 
amended, 1064, 1065, 1066, 1081, 1082, 1083, 1084, 1085, 1101; 47 
U.S.C. Secs. 152, 153, 154, 301, 303, 307, 308, 309, 532, 533, 535, 
542, 543, 552, as amended, 106 Stat. 1460.

    2. Section 76.922 is amended by adding paragraph (d)(3)(iv)(F) to 
read as follows:


Sec. 76.922  Rates for the basic service tier and cable programming 
services tiers.

* * * * *
    (d) * * *
    (3) * * *
    (iv) * * *
    (F) Commission cable television system regulatory fees imposed 
pursuant to 47 U.S.C. 159.
* * * * *
    3. Section 76.924 is amended by redesignating paragraphs (f)(5) and 
(f)(6) as paragraphs (f)(6) and (f)(7) and adding a new paragraph 
(f)(5) to read as follows:


Sec. 76.924  Cost accounting and cost allocation requirements.

* * * * *
    (f)(5) Commission cable television system regulatory fees imposed 
pursuant to 47 U.S.C. 159 shall be directly assigned to the basic 
service tier.
* * * * *
    4. Section 76.933 is amended by adding paragraphs (e) and (f) to 
read as follows:


Sec. 76.933  Franchising authority review of basic cable rates and 
equipment costs.

* * * * *
    (e) Notwithstanding paragraphs (a) through (d) of this section, 
when the franchising authority is regulating basic service tier rates, 
a cable operator may increase its rates for basic service to reflect 
the imposition of, or increase in, franchise fees or Commission cable 
television system regulatory fees imposed pursuant to 47 U.S.C. 159, 
upon 30 days' notice to subscribers and the franchising authority and, 
where required by Sec. 76.958, to the Commission. For the purposes of 
paragraphs (a) through (c) of this section, the increased rate 
attributable to Commission regulatory fees or franchise fees shall be 
treated as an ``existing rate,'' subject to subsequent review and 
refund if the franchising authority determines that the increase in 
basic tier rates exceeds the increase in regulatory fees or in 
franchise fees allocable to the basic tier. This determination shall be 
appealable to the Commission pursuant to Sec. 76.944. When the 
Commission is regulating basic service tier rates pursuant to 
Sec. 76.945 or cable programming service rates pursuant to Sec. 76.960, 
an increase in those rates resulting from franchise fees or Commission 
regulatory fees shall be reviewed by the Commission pursuant to the 
mechanisms set forth in Sec. 76.945. A cable operator must adjust its 
rates to reflect decreases in franchise fees or Commission regulatory 
fees within the periods set forth in Sec. 76.922(d)(3)(i) and (iii).
    (f) Cable television system regulatory fees assessed by the 
Commission pursuant to 47 U.S.C. 159 shall be recovered in monthly 
installments during the fiscal year following the fiscal year for which 
the payment was imposed. Payments shall be collected in equal monthly 
installments, except that for so many months as may be necessary to 
avoid fractional payments, an additional $0.01 payment per month may be 
collected. All such additional payments shall be collected in the last 
month or months of the fiscal year, so that once collections of such 
payments begin there shall be no month remaining in the year in which 
the operator is not entitled to such an additional payment. Operators 
may not assess interest. Operators may provide notice of the entire 
fiscal year's regulatory fee pass-through in a single notice.

[FR Doc. 94-26255 Filed 10-20-94; 8:45 am]
BILLING CODE 6712-01-M