[Federal Register Volume 61, Number 61 (Thursday, March 28, 1996)]
[Proposed Rules]
[Pages 13803-13809]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7221]



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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[CS Docket No. 96-57; FCC 96-117]


Telecommunications Act of 1996

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission is issuing this Notice of Proposed Rulemaking 
(``NPRM'') in order to solicit comment on the proper implementation of 
Section 623(a)(7)(A) of the Communications Act. This NPRM is necessary 
to fulfill the statutory requirement in Section 301(j) of the 
Telecommunications Act of 1996 that the Commission allow cable 
operators to aggregate, on a franchise, system, regional, or company 
level, their equipment costs into broad categories regardless of the 
varying levels of functionality of the equipment within each such broad 
category. This proceeding will permit the Commission to issue final 
rules.

DATES: Comments are due April 12, 1996. Reply comments are due April 
22, 1996.

FOR FURTHER INFORMATION CONTACT: Ibn Spicer, Cable Services Bureau, 
Financial Analysis Division (202) 418-2296.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Notice of Proposed 
Rulemaking in CS Docket No. 96-57, FCC 96-117, adopted March 18, 1996 
and released March 20, 1996. The complete text of this Notice of 
Proposed Rulemaking is available for inspection and copying during 
normal business hours in the FCC Reference Center (room 239), 1919 M 
Street N.W., Washington, DC, and also may be purchased from the 
Commission's copy contractor, International Transcription Services, 
Inc. (``ITS Inc.'') at (202) 857-3800, 2100 M Street N.W., Suite 140, 
Washington, DC 20017.

Synopsis of Notice of Proposed Rulemaking

    1. In this Notice of Proposed Rulemaking (``NPRM''), we propose to 
amend our rules to implement Section 301(j) of the Telecommunications 
Act of 1996 (``1996 Act'') which adds a new Section 623(a)(7) to the 
Communication Act of 1934, as amended (``Communications Act''). Section 
301(j) of the 1996 Act requires that the Commission allow cable 
operators to aggregate, on a franchise, system, regional, or company 
level, their equipment costs into broad categories regardless of the 
varying levels of functionality of the equipment within each such broad 
category. That section also provides that ``[s]uch aggregation shall 
not be permitted with respect to equipment used by subscribers who 
receive only a rate regulated basic tier.''

Discussion

A. Cost Categorization

    2. Section 301(j) of the 1996 Act requires the Commission to allow 
regulated operators to aggregate ``their [customer] equipment costs 
into broad categories, such as converter boxes, regardless of the 
varying levels of functionality of the equipment within each such broad 
category.'' We tentatively conclude that the statute intends that 
equipment be classified and placed in categories based on the primary 
purpose of the equipment.
    3. We propose to amend the Equipment Basket provisions in Section 
76.923(c) to allow categorization of customer equipment costs into 
broad categories. We further propose eliminating the language in 
Sections 76.923(f) and (g) that requires separate charges for each 
significantly different type of remote control device, converter box, 
and other customer equipment. We propose amending the rules to require 
that equipment be categorized based on its primary purpose. Thus, 
customer equipment, except equipment used by basic-only subscribers, 
that is used for the same purpose may be aggregated into the same broad 
category and priced at the same rate, regardless of the level of 
functionality. We seek comment on whether the Commission should 
establish a definition of the term ``level of functionality'' in order 
to bring more certainty to these new rules. If commenters believe we 
should do so, they should propose a definition of that term. Because 
equipment rates to subscribers must be based on actual costs, operators 
must base equipment charges on the same aggregation level as their 
costs. We propose amending our rules to make this explicit. Section 
76.923(l) currently permits small systems to average costs for 
``similar types of equipment'' on a company-wide basis. We propose 
eliminating this section since all systems shall be permitted to 
aggregate equipment

[[Page 13804]]
pursuant to the new provisions in the 1996 Act.
    4. Section 76.923(h) currently contains language that effectively 
requires separate charges for connections, which includes inside wire, 
additional outlets and signal boosters, if needed, used to provide 
cable service to additional television receivers. That language was 
included to implement Section 623(b)(3) of the Communications Act of 
1934, as amended, which specifically required rates for installation 
and monthly use of connections for additional television receivers be 
separate from rates for the initial receiver. Therefore, we tentatively 
conclude that additional connections may not be aggregated with initial 
connections into a broad category.

B. Organizational Levels

    5. In light of new section 623(a)(7), we propose that Section 
76.923(c) of our rules be amended to specifically permit customer 
equipment cost aggregation at the franchise, system, regional, or 
company level. Because equipment rates to subscribers must be based on 
actual costs, operators must base equipment charges on the same 
aggregation level as their costs. We propose amending our rules to make 
this explicit. Furthermore, to the extent that our current rules permit 
cost aggregation of equipment only in a manner consistent with an 
operator's practices on April 3, 1993, we propose eliminating this date 
restriction. We tentatively conclude that such a restriction would 
improperly prevent an operator from aggregating costs at higher 
organizational levels, as specifically permitted in the statute.
    6. We tentatively conclude that Congress did not intend that cost 
aggregation be permitted to the same extent for installation charges. 
We reach this tentative conclusion because Section 301(j) of the 1996 
Act refers only to equipment and not to installations, whereas the 1992 
Cable Act separately mentions installations. Consistent with our small 
system rules, we believe that customer equipment charges are less 
likely to vary significantly between systems, whereas installation 
charges are more dependent on local labor and other costs that can vary 
between communities. We recognize, however, that this requirement could 
impose additional burdens on cable operators, since customer equipment 
rates could be set at higher organizational levels than installation 
rates. We therefore propose that operators be permitted to aggregate 
installation costs based on specific service areas designated for the 
aggregation of those costs. Under this approach, a rate could be 
established for installation for a specific service area that is chosen 
by the operator because the costs of providing installation are 
substantially similar throughout all franchises in that chosen service 
area. We seek comment on this approach. We also seek comment on whether 
there are alternative levels at which installation costs could be 
identified that would ease burdens on operators, yet still comport with 
Congressional intent.

C. Basic-Only Subscriber Equipment

    7. The 1996 Act prohibits ``[s]uch aggregation * * * with respect 
to equipment used by subscribers who receive only a rate regulated 
basic service tier.'' We tentatively conclude that Congress was 
concerned that basic-only subscribers not subsidize the costs of more 
sophisticated equipment used by subscribers taking services in addition 
to basic. Therefore, we tentatively conclude that equipment used by 
basic-only subscribers may not be aggregated into broad categories. We 
propose amending Section 76.923(c) to provide that the cost of 
equipment used by basic service-only customers may not be averaged with 
other customer equipment. However, the statute is not clear as to 
whether a cable operator may aggregate the costs of equipment used by 
basic-only customers at higher organizational levels and developing 
system, regional, or company average prices for such equipment. 
Although we recognize this ambiguity, we believe that allowing cable 
companies to aggregate the costs of equipment used by basic service-
only customers at a higher organizational level and develop a rate 
based upon such aggregation does not contravene Congress' concern that 
basic-only subscribers not subsidize the costs of more sophisticated 
equipment used by subscribers taking other services in addition to 
basic. Any aggregation of the costs of basic service-only equipment at 
a higher organizational level will still only include equipment for 
that level of service. We seek comment on this issue.

D. Equipment Rates Jurisdiction and Review

    8. Affected local franchising authorities will continue to review 
the equipment rates and supporting aggregated cost data as part of the 
review of the cable operators' rate justifications for basic rates. We 
recognize that the review of aggregated cost data regarding equipment 
by each of the affected local franchising authorities could lead to 
varying analyses and potentially inconsistent orders regarding that 
data. We seek comment on whether there is an alternative that could be 
more administratively efficient for local franchising authorities and 
cable operators alike.

E. FCC Form 1205

    9. Because of our above tentative conclusions and proposed rules 
changes, we believe that FCC Form 1205 will need to be modified. We are 
proposing revisions to Form 1205 and seek comment on these revisions. 
The pages of Form 1205 containing revisions are set forth below.

Procedural Provisions

A. Ex Parte Presentations

    10. This is a non-restricted notice-and-comment rulemaking 
proceeding. Ex parte presentations are permitted, except during the 
Sunshine Agenda period, provided that they are disclosed as provided in 
the Commission's rules. See generally 47 CFR Sections 1.1202, 1.1203, 
1.1206(a).

B. Initial Regulatory Flexibility Analysis

    11. Pursuant to Section 603 of the Regulatory Flexibility Act, the 
Commission has prepared the following initial regulatory flexibility 
analysis (``IRFA'') of the expected impact of these proposed policies 
and rules on small entities. Written public comments are requested on 
the IRFA. These comments must be filed in accordance with the same 
filing deadlines as comments on the rest of the NPRM, but they must 
have a separate and distinct heading designating them as responses to 
the IRFA. Our initial regulatory flexibility analysis under the 
Regulatory Flexibility Act indicates that if the proposed rule changes 
are promulgated, there will not be a significant economic impact on a 
substantial number of small business entities, as defined by Section 
601(3) of the Regulatory Flexibility Act and that any impact will be to 
give operators new, less burdensome options to comply with our rules. 
We are committed to reducing the regulatory burdens on small cable 
operators whenever possible, consistent with our other public interest 
responsibilities. The Secretary shall send a copy of this NPRM of 
Proposed Rulemaking to the Chief Counsel for Advocacy of the Small 
Business Administration in accordance with Section 603(a) of the 
Regulatory Flexibility Act, 5 U.S.C. Sections 601 et seq. (1981).
    12. The Commission issues this NPRM to consider the changes needed 
to permit cable operators to aggregate equipment costs into broad 
categories

[[Page 13805]]
and at the organizational level of their choice, as required by Section 
301(j)) of the 1996 Act.
    13. Objectives. To solicit comments on the rule changes needed to 
implement Section 301(j) of the 1996 Act.
    14. Legal Basis. Action as proposed for this rulemaking is 
contained in Section 301(j) of the 1996 Act.
    15. Description, Potential Impact and Number of Small Entities 
Affected. The proposals, if adopted, will not have a significant effect 
on a substantial number of small entities. The proposed rules changes 
would provide all regulated entities with new options, but would not 
require them to change the methodology by which they currently justify 
equipment rates. Thus, any economic impact of the rule changes will be 
positive.
    16. Reporting, Recordkeeping and Other Compliance Requirements. 
None.
    17. Federal Rules which Overlap, Duplicate or Conflict with these 
Rules. None.
    18. Any Significant Alternatives Minimizing Impact on Small 
Entities and Consistent with Stated Objectives. None.

C. Comment Filing Procedures

    19. Pursuant to applicable procedures set forth in Sections 1.415 
and 1.419 of the Commission's rules, 47 CFR Sections 1.415, 1.419, 
interested parties may file comments on April 12, 1996, and reply 
comments on April 22, 1996. To file formally in this proceeding, 
interested parties must file an original and four copies of all 
comments, reply comments, and supporting comments. We find these 
periods for the filing of comments and reply comments to be reasonable 
in light of the 1996 Act's mandate that the Commission issue revisions 
to the appropriate rules and forms concerning the aggregation of 
equipment costs within 120 days of enactment. See Florida Power & Light 
Co. v. United States, 846 F.2d 765 (D.C. Cir. 1988) cert. denied, 490 
U.S. 1045 (1989). Any party that wishes each Commissioner to receive a 
personal copy of its comments, must file an original and nine copies. 
Comments and reply comments should be limited to 25 pages, with 
reasonable margins and font size of at least 12 points, and sent to 
Office of the Secretary, Federal Communications Commission, 1919 M 
Street, N.W., Room 222, Washington, D.C. 20554, with a copy to Lenworth 
Smith, Jr. of the Cable Services Bureau, 2033 M Street, N.W., Room 
805E, Washington, D.C. 20554. Comments and reply comments will be 
available for public inspection during regular business hours in the 
FCC Reference Center, 1919 M Street, N.W., Room 239, Washington, D.C. 
20554.

D. Paperwork Reduction Act

    20. Initial Paperwork Reduction Act of 1995 Analysis. This NPRM 
proposes a modified information collection for FCC Form 1205. As part 
of its continuing effort to reduce paperwork burdens, we invite the 
general public and the OMB to take this opportunity to comment on the 
information collections contained in this NPRM, as required by the 
Paperwork Reduction Act of 1995, Public Law 104-13. Public and agency 
comments are due at the same time as other comments on this NPRM; OMB 
comments are due 60 days from date of publication of this NPRM in the 
Federal Register. Comments should address: (a) whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information 
shall have practical utility; (b) the accuracy of the Commission's 
burden estimates; (c) ways to enhance the quality, utility, and clarity 
of the information collected; and (d) ways to minimize the burden of 
the collection of information on the respondents, including the use of 
automated collection techniques or other forms of information 
technology.
    21. Written comments by the public on the proposed and/or modified 
information collections are due on or before 15 days after publication 
in the Federal Register, and reply comments on or before 10 days after 
the comment due date. Written comments must be submitted by the Office 
of Management and Budget (``OMB'') on the proposed and/or modified 
information collections on or before 60 days after date of publication 
in the Federal Register. In addition to filing comments with the 
Secretary, a copy of any comments on the information collections 
contained herein should be submitted to Dorothy Conway, Federal 
Communications Commission, Room 234, 1919 M Street, N.W., Washington, 
DC 20554, or via the Internet to [email protected] and to Timothy Fain, 
OMB Desk Officer, 10236, NEOB, 725 - 17th Street, N.W., Washington, DC 
20503 or via the Internet to [email protected].
    OMB Approval Number: 3060-0603.
    Title: Rates for equipment and installation used to receive the 
basic service tier
    Type of Review: Revision of existing collection
    Respondents: Businesses or other for profit; state, local or tribal 
government
    Number of Respondents: 2,000.
    Estimated Time Per Response: The commission estimates an average 
burden of 4 hours for cable operators to maintain in-house accounting 
records pertaining to 76.923. The Commission estimates a burden of 1 
hour for cable operators contracting out for accounting services.
    Total Annual Burden: We estimate 75% of respondents maintain 
records in-house and 25% contract out. 1,500 (75% in-house)  x  4 hours 
= 6,000. 500 (25% contracted out)  x  1 hour = 500. 6,000 + 500 = 6,500 
hours.
    Estimated costs per respondent: We estimate that operators 
contracting out accounting assistance will pay $100 per hour for the 
maintenance of their accounting systems. 500 (25% contracted out) 
accounting systems  x  4 hours @ $100 per hour = $200,000.
    Needs and Uses: The information is used by cable operators in their 
accounting systems to justify rates for equipment and installations.

    OMB Approval Number: 3060-0592.
    Title: FCC Form 1205 Determining Costs of Regulated Cable Equipment 
and Installation.
    Form No.: FCC Form 1205.
    Type of Review: Revision of existing collection
    Respondents: Business and other for profit; state, local and tribal 
government
    Number of Respondents: 8,800.
    Estimated Time Per Response: The Commission estimates an average 
burden of 12 hours for operators to complete the FCC Form 1205 in-
house. For operators contracting out accounting and legal assistance 
for completing the FCC Form 1205, we estimate an average burden of 1 
hour.
    Total Annual Burden: We estimate 75% of operators complete the FCC 
Form 1205 in-house and 25% contract out for assistance. 6,600 (75% in-
house)  x  12 hours = 79,200. 2,200 (25% contracted out)  x  1 hour = 
2,200 hours. 79,200 + 2,200 = 81,400 hours. The average burden to local 
franchising authorities to review FCC Form 1205s is estimated to be 8 
hours per filing. We estimate local franchising authorities review 
approximately 8,000 FCC Form 1205 filings annually. 8,000  x  8 hours = 
64,000. 81,400 + 64,000 = 145,400 hours.
    Estimated costs per respondent: We estimate postage and 
photocopying costs of $2 per filing. 8,800  x  $2 = $17,600. We 
estimate that operators contracting out accounting assistance will pay 
$100 per hour to complete FCC Form 1205. 2,200 (25% contracted out)  x  
12 hours @ $100 per hour = $2,640,000. $17,600 + $2,640,000 = 
$2,657,600.

[[Page 13806]]

    Needs and Uses: Information derived from FCC Form 1205 filings 
facilitates the review of equipment and installation rates when 
reviewed by applicable local franchising authorities.

Ordering Clauses

    22. Accordingly, it is Ordered that, pursuant to Sections 4(i), 
4(j), 303(r), and 623 of the Communications Act of 1934, as amended, 47 
U.S.C. Sections 154(i), 154(j), 303(r), and 543, Notice is Hereby Given 
of proposed amendments to Part 76, in accordance with the proposals, 
discussions, and statement of issues in the Notice of Proposed 
Rulemaking, and that Comment is Sought regarding such proposals, 
discussion, and statement of issues.
    23. It is Further Ordered that, the Secretary shall send a copy of 
this Notice of Proposed Rulemaking, including the regulatory 
flexibility certification, to the Chief Counsel for Advocacy of the 
Small Business Administration, in accordance with paragraph 603(a) of 
the Regulatory Flexibility Act, 5 U.S.C. Sections 601 et seq. (1981).

List of Subjects in 47 CFR Part 76

    Cable television.

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

Proposed Amendatory Text

    Part 76 of Title 47 of the Code of Federal Regulations is proposed 
to be amended as follows:

PART 76--[AMENDED]

    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, 535, 542, 
543, 552, as amended, 106 Stat. 1460.

    2. Section 76.923 is amended by revising paragraphs (c), (f), and 
(g), removing paragraph (l) and redesignating paragraphs (m) through 
(o) as as paragraphs (l) through (n)and revising redesignated paragraph 
(l) to read as follows:


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

* * * * *
    (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 having the same 
primary purpose, 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.
    (2) Basic Service Tier Only Equipment. Costs of customer equipment 
included in the Equipment Basket, which is used by subscribers who 
receive only a rate regulated basic service tier, shall not be 
aggregated into broad cost categories. Costs of each significantly 
different type of equipment must be classified into specific equipment 
cost categories. The costs shall not be averaged with the costs of 
equipment that is used by subscribers who receive only a rate regulated 
basic service tier.
    (3) Installation Costs. Installation costs may be aggregated only 
for a specific service area, to the extent that the costs of providing 
installation are substantially similar throughout all franchises in 
that service area.
* * * * *
    (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:
[GRAPHIC] [TIFF OMITTED] TP28MR96.005

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.
* * * * *
    (l) 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.
* * * * *

Attachment--Changes to the Instructions for FCC Form 1205

    Note: This attachment will not appear in the Code of Federal 
Regulations.

FCC Form 1205--Instructions for Determining Costs of Regulated Cable 
Equipment and Installation

``Equipment Form''

     Schedule B: Annual Operating Expenses for Service 
Installation and Maintenance of Equipment. This schedule collects 
total annual operating expenses for installation and maintenance of 
cable facilities. The costs collected here include salaries, 
benefits, and supplies.
     Schedule C: Capital Costs of Leased Customer Equipment. 
This schedule computes the annual capital costs for each type or 
category of customer premises equipment that you offer in connection 
with regulated service. The method of computing capital costs is the 
same as that used in Schedule A.
     Schedule D: Average Hours Per Installation. This 
schedule is used only if you choose to charge average rates for 
different types of installation services, as opposed to an hourly 
service charge. This schedule collects the average hours required to 
complete various types of installations.
     Worksheet for Calculating Permitted Equipment and 
Installation Charges. You must complete this worksheet only if you 
are calculating the costs of specific equipment and installations to 
derive the maximum rates you may charge for regulated equipment and 
installations.
     Worksheet for Calculating Total Equipment and 
Installation Costs. Utilizing

[[Page 13807]]
the data collected and computed in Schedules A through D, this 
worksheet calculates a monthly per subscriber cost of regulated 
equipment and installations that is used to separate these costs 
from cable services rates. You must complete this worksheet only if 
you are filing this form in conjunction with a FCC Form 1200, Form 
1220, or Form 1225 to establish maximum permitted rates for 
regulated cable services.
     Summary Schedule: Current Equipment and Installation 
Rates. This Schedule collects information determined on the 
Worksheet for Calculating Permitted Equipment and Installation 
Charges and presents it in summary form together with your actual 
equipment and installation charges.

General Instructions

    You should complete this Form using financial data from the 
company's general ledger and subsidiary records maintained in 
accordance with generally accepted accounting principles. The 
Commission's cost accounting rules require that cable operators 
maintain their accounts in accordance with these requirements and in 
a manner that will enable identification of appropriate costs and 
application of the Commission's cost assignments and allocation 
procedures (see 47 CFR Sec. 76.924). The data submitted in this Form 
1205 should be from the operator's fiscal year indicated on the 
cover sheet. However, when there has been an unusual change in 
operations, data from a representative month may be used for the 
calculation of rates, subject to acceptance by the franchising 
authority or, when applicable, by the FCC. You must attach 
justification for this approach.
    To the extent you have not previously maintained accounts in a 
manner consistent with our rules, and do not have fully developed 
cost data, you must indicate on this Form that you are using 
estimates, where necessary, in calculating equipment and 
installation costs and rates, and provide justification that the 
estimates are reasonable.
    The data for installations (includable in Schedules A and C) may 
be identified only for a specific service area, to the extent that 
the costs of providing installations are substantially similar 
throughout all franchises in that service area. The data for 
customer equipment (includable in Schedule C) may be identified on a 
franchise, system, regional, or company level. For purposes of 
calculating cable service rates on an FCC Form 1200, 1220, or 1225, 
the cost data developed on this Form 1205 must be adjusted to the 
franchise area level (see Worksheet for Calculating Permitted 
Equipment and Installation Charges or Worksheet for Calculating 
Total Equipment and Installation Costs below for instructions).
    Cable operators completing this Form in conjunction with FCC 
Form 1200 should be aware that the figure entered on line 14 of the 
Worksheet for Calculating Total Equipment and Installation Costs 
will be entered on either line D2 or line E2, and on line I2 of FCC 
Form 1200.

Precision of Calculation; Rounding

    If you are performing the calculations required by this form by 
hand, you must display at least four decimal places. If you are 
using a calculator or computer, you must carry out the calculation 
to the full precision afforded by your calculator or computer and 
display at least four decimal places. If you are using the 
spreadsheet version of this form, the spreadsheet will round 
calculations for you; you do not need to display additional decimal 
places.
    The only place you should round the figures is in the Summary 
Schedule. These figures should be rounded to the nearest cent.

About the Spreadsheet

    The FCC has developed an electronic spreadsheet to assist you in 
making the necessary calculations on the Form 1205. We strongly 
recommend that you make use of this spreadsheet.
    If you use the spreadsheet, the values for the shaded boxes on 
the Form 1205 will be calculated automatically and filled in for 
you. Instructions for the corresponding line numbers are italicized. 
You may submit a completed version of an official Form 1205, an 
exact photocopy of that form, or a copy generated by Commission 
software, provided that it has the appearance of an actual Form 
1205.

If You Need Help

    If you have any questions while completing this Form, please 
call the FCC's Cable Services Bureau between 9:30 a.m. and 5:30 p.m. 
Eastern Standard Time on Monday through Friday at (202) 418-2381.

FCC Notice to Individuals Required by the Privacy Act and the Paperwork 
Reduction Act

    The solicitation of personal information in this form is 
authorized by the Communications Act of 1934, as amended. The 
Commission and/or the local franchising authority will use the 
information provided in this form to determine the reasonableness of 
a cable company's rates. In reaching that determination, or for law 
enforcement purposes, it may become necessary to provide personal 
information contained in this form to another government agency. If 
information requested on this form is not provided, processing may 
be delayed. All information provided in this form will be available 
for public inspection. Your response is required to apply the 
Commission's cable rate standards and to provide a response to 
consumer complaints. Respondents are not required to respond to this 
collection of information unless it displays a currently valid 
Office of Management and Budget control number.
    Public reporting burden for this information is estimated to 
average 20 hours per response, including the time for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing the burden, to the Federal 
Communications Commission, Records Management Division, Washington, 
D.C. 20554. Do not send completed forms to this address.
    The foregoing notice is required by the Privacy Act of 1974, 
Pubic Law 93-579, December 31, 1975, 5 U.S.C. 522a(e)(3) and the 
Paperwork Reduction Act of 1995, 104-13, May 22, 1995, 47 U.S.C. 
3507.

Instructions for Schedule C--Capital Costs of Leased Customer Equipment

    Schedule C computes the annual capital costs of equipment leased 
to customers. Follow the instructions below for each type or 
category of leased equipment.

    Note: Subscriber drops up to the Commission-defined cable 
network demarcation point at the customer's premises are considered 
network equipment and may not be included as customer equipment on 
Schedule C.

    Line A--Equipment. List all customer equipment for which you 
wish there to be a separate charge. You may calculate separate 
charges for specific types of equipment including different models 
of remote control units, different types of converter boxes, and 
other equipment (e.g., splitters and amplifiers). However, at your 
option, customer equipment may instead be listed in broad 
categories, provided that each category includes only equipment 
having the same primary purpose, regardless of the levels of 
functionality of the equipment within each broad category. Except, 
customer equipment which is used by subscribers who receive only a 
rate regulated basic service tier, shall not be aggregated into 
broad cost categories. Costs of each significantly different type of 
equipment must be classified into specific equipment cost 
categories.
    The costs shall not be averaged with the costs of equipment that 
is used by subscribers who receive only a rate regulated basic 
service tier. In addition, with respect to the lease of cable 
connections, the cost of additional connections may not be 
aggregated with the cost of initial connections.
    On an attached sheet, list separately each type or category of 
other equipment for which you plan to develop a separate charge and 
provide the necessary information as required on lines A through K 
of Schedule C to compute the charge. A separate charge must be 
developed for each type or category of other customer equipment. 
Enter in the ``Other Equipment'' column of Schedule C the total 
figures for the equipment included on your attachment.
    Line B--Total Maintenance/Service Hours. Enter the total 
maintenance and/or service hours. Attach a Schedule explaining how 
you calculated these figures.
    Line C--Total Number of Units in Service. Enter the total number 
of units in service for leased remotes and converter boxes. For 
other leased equipment, list the total number of units in service or 
the total number of subscribers using this equipment, whichever is 
appropriate. Use either the number of units or subscribers for the 
last day of the fiscal year covered by this Form 1205.
    Line D--Gross Book Value. Enter the gross book value of the 
listed equipment as of the date you closed books for the time period 
covered by the filing of this Form. The gross book value includes 
the cost of a reasonable number of spare customer equipment units 
that the operator keeps on-hand as replacements for broken 
equipment.
    Schedule D asks for information about four categories of 
installations: (a) installations of

[[Page 13808]]
unwired homes; (b) installations of already wired homes; (c) 
installations of additional connections at the time of initial 
installation; and (d) installations of additional connections after 
initial installation. These data are needed in the first worksheet 
below to calculate the four separate average charges that the 
Commission requires for an operator choosing to exercise the average 
charge option. Spaces also are included for other specific types of 
installations (such as those requiring extra long drops to the 
home). Attach additional sheets as needed.

Worksheet for Calculating Permitted Equipment and Installation Charges

    Step A: Hourly Service Charge (HSC).
    The Hourly Service Charge (HSC) is designed to recover the costs 
of service installation and maintenance of customer equipment. The 
HSC will be used as a factor in developing permitted charges for 
installation and monthly lease of individual pieces of equipment. To 
calculate the HSC, you will compute your annual capital costs plus 
expenses for the maintenance of customer equipment and the 
installation of basic tier service. You will divide the total costs 
and expenses by the total number of person-hours spent on those 
activities over the past year.
    The HSC includes the annual capital costs for installing, 
maintaining, and repairing customer equipment for the specific 
service area to which this filing applies; the capital cost of the 
customer equipment itself, however, is not recovered through the 
HSC. That cost is recovered through the lease of that type of 
equipment (see Steps C through E of the Worksheet for Calculating 
Permitted Equipment and Installation Charges).

    Note 1: If an expense amount is included on Schedule B for 
equipment sent out for repair, an appropriate adjustment to the 
total labor hours reported on this Form must be made. This 
adjustment adds ``equivalent labor hours'' to the total company 
labor hours. This may be calculated, for example, as total costs 
included on Schedule B for work sent out for repair divided by the 
average company technician wage rate. The total cost may be 
recovered by including the average hours in the computation for the 
appropriate equipment charges computed in Steps C through E. In any 
case that an amount is included on Schedule B for work sent out for 
repair, explain all the adjustments made on the Worksheet. This 
explanation must include the number of hours added on line 6 below 
as well as a description of and the number of hours added into the 
charges developed in Steps C through E.

    Note 2: With respect to the calculation for labor costs 
associated with installation of the drop up to the Commission-
defined cable network demarcation point at the customer's premises, 
you have two options. The first option is to include the labor costs 
associated with subscriber drops in the charges for installations. 
The second option is to capitalize such costs in distribution plant 
as part of the cost of drops. (In this case, the labor cost for 
drops is recovered in the charges for cable services only--not in 
installation or customer equipment charges.) If the second option is 
chosen, the costs and the associated hours must be eliminated from 
the charges for all customer equipment and installation charges.
    Line 9d1--HSC. Enter the HSC from line 7.
    Line 9d2--Average Hours Per Additional Connection Installation 
Requiring Separate Installation. Enter the figure from line D of 
Schedule D.
    Line 9d3--Charge per Additional Connection Installation 
Requiring Separate Installation. Multiply line 9d1 by line 9d2.
    Line 9e--Other Installations (As specified in Schedule D, Line 
E).
    If there are more than three other types of installations, 
attach a separate sheet showing how the charges for these other 
installations are calculated.
    Line 9e1--HSC. Enter the HSC from line 7.
    Line 9e2--Average Hours Per Installation of Item 1. Enter the 
figure on Schedule D, line E, Item 1.
    Line 9e3--Charge per Installation of Item 1. Multiply line 9e1 
by line 9e2.
    Line 9e4--HSC. Enter the HSC from line 7.
    Line 9e5--Average Hours Per Installation of Item 2. Enter the 
figure on Schedule D, line E, Item 2.
    Line 9e6--Charge per Installation of Item 2. Multiply line 9e4 
by line 9e5.
    Line 9e7--HSC. Enter the HSC from line 7.
    Line 9e8--Average Hours Per Installation of Item 3. Enter the 
figure on Schedule D, line E, Item 3.
    Line 9e9--Charge per Installation of Item 3. Multiply line 9e7 
by line 9e8.
    Step C. Charges for Leased Remotes.
    The rental charge for remote control units is designed to 
recover the costs of providing and maintaining each type or category 
of remote control unit leased by subscribers and includes a 
reasonable profit. The charge determined in this step will not 
reflect the costs of installation. You must repeat the following 
substep calculations for each significantly different type or 
category of remote listed in Schedule C. Describe each type or 
category of remote in detail sufficient to identify differences 
among types and/or categories. Attach extra sheets as needed.
    Line 10--Total Maintenance/Service Hours. Enter the total 
maintenance and/or service hours for each type or category of remote 
from the corresponding column on Schedule C, line B.
    Line 11--HSC. Enter the HSC from line 7.
    Line 12--Total Maintenance and Service Cost. Multiply line 10 by 
the HSC listed on line 11. The result is the total annual cost for 
repairing and servicing each type or category of remote.
    Line 13--Annual Capital Costs. Enter the annual capital costs 
for each type or category of remote from the corresponding column of 
line K on Schedule C.
    Line 14--Total Cost of Remote. Add line 12 to line 13. The sum 
is the total annual cost for each type or category of remote.
    Line 15--Number of Units in Service. Enter the number of units 
of each type or category of remote in service from the appropriate 
column of line C on Schedule C.
    Line 16--Unit Cost. Divide line 14 by 15. The result is the 
annual unit cost of each type or category of remote.
    Line 17--Rate per Month. Divide the figure from line 16 by the 
number 12. The result will be the monthly cost of each type or 
category of remote including a reasonable profit. This figure is the 
maximum permitted monthly lease charge for each type or category of 
remote.
    Step D. Charges for Leased Converter Boxes.
    The rental charge for a converter box is designed to recover the 
costs of providing and maintaining that type or category of 
converter box leased by a subscriber and includes a reasonable 
profit. You must repeat the calculations in the following substeps 
for each type or category of converter box listed in Schedule C. 
Describe each type or category of converter box in detail sufficient 
to identify differences among types and/or categories. Attach extra 
sheets as needed.
    Line 18--Total Maintenance/Service Hours. Enter the total 
maintenance and/or service hours for each type or category of 
converter box from the corresponding column of line B on Schedule C.
    Line 19--HSC. Enter the HSC from line 7.
    Line 20--Total Maintenance and Service Cost. Multiply the figure 
from line 18 by the HSC listed on line 19. The result is the total 
annual cost for repairing and servicing each type or category of 
converter box.
    Line 21--Annual Capital Costs. Enter the annual capital costs 
for each type or category of converter box from the corresponding 
column of line K on Schedule C.
    Line 22--Total Cost of Converters. Add line 20 to line 21. The 
sum is the total annual cost for each type or category of converter 
box.
    Line 23--Number of Units in Service. Enter the number of units 
of each type or category of converter box from the corresponding 
column of line C on Schedule C.
    Line 24--Unit Cost. Divide line 22 by line 23. The result is the 
annual unit cost of each type or category of converter box.
    Line 25--Rate per Month. Divide the figure on line 24 by the 
number 12. The result is the monthly cost of each type or category 
of converter box including a reasonable profit. This figure is the 
maximum permitted monthly lease charge for each type of converter 
box.
    Step E. Charges for Other Leased Equipment.
    The rental charge for other leased equipment is designed to 
recover the costs of providing and maintaining that equipment leased 
by a subscriber and includes a reasonable profit. An operator 
choosing to establish charges for different types of other equipment 
must repeat the calculations in the following substeps for each type 
or category of other equipment listed in Schedule C. Describe each 
type or category of additional leased equipment in detail, e.g., 
additional connections. Attach extra sheets as needed.
    Commission rules permit operators to charge for power boosters 
installed in connection with additional connections. Operators may 
establish a separate charge for the power boosters or may establish 
a separate charge for additional connections with power boosters. 
Such charges should be identified and included in Step E.
    Line 26--Total Maintenance/Service Hours. Enter the total 
maintenance and/or

[[Page 13809]]
service hours for this other equipment. Enter the figure from the 
corresponding column on Schedule C, line B.
    Line 27--HSC. Enter the HSC from line 7.
    Line 28--Total Maintenance and Service Cost. Multiply the figure 
on line 26 by the HSC listed on line 27. The result is the total 
annual cost for repairing and servicing other equipment.

[FR Doc. 96-7221 Filed 3-27-96; 8:45 am]
BILLING CODE 6712-01-P