[Federal Register Volume 61, Number 84 (Tuesday, April 30, 1996)]
[Rules and Regulations]
[Pages 18968-18981]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10173]



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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[CS Docket No. 96-85, FCC 96-154]


Telecommunications Act of 1996

AGENCY: Federal Communications Commission.

ACTION: Interim and final rules.

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SUMMARY: This Order implements sections of the Telecommunications Act 
of 1996 (``1996 Act''). The Order establishes rules conforming the 
Commission's rules to statutory mandates that became effective upon 
enactment of the 1996 Act. Although all rules promulgated pursuant to 
this Order are ``final,'' the Commission recognizes that some rules, 
apart from those implementing the explicit language of the 1996 Act, 
should be viewed as ``interim'' rules subject to revision in the near 
future based on comments and information received in an associated 
Notice of Proposed Rulemaking (``NPRM'') that has been released 
concurrently with this Order and published in this issue of the Federal 
Register. This Order implements rules related to the 1996 Act's cable 
reform provisions, including the definition of effective competition, 
the cable rate complaint process, the sunset of cable programming 
service tier regulation, small cable operators, uniform rate 
requirements, subscriber notice of service and rate changes, technical 
standards, cable system buy out restrictions, program access, the 
definitions of cable system and cable

[[Page 18969]]

service, operator refusals to carry indecent programming, and prior 
year losses. The intended effect of this action is to implement 
provisions of the 1996 Act that revised the Cable Television Consumer 
Protection and Competition Act of 1992.

DATES: The statutory requirements reflected in the final rules adopted 
in this Order were effective February 8, 1996, the date of enactment of 
the Telecommunications Act of 1996. The effective date for the final 
rule changes (47 C.F.R. 76.5 (a) and (ff), 76.309(c)(3)(i)(B), 76.505, 
76.605 Note 6, 76.701, 76.702, 76.905(b)(4), 76.933 (e) and (g)(5), 
76.950, 76.951, 76.953(a), 76.956(a), 76.964, 76.984(c) as established 
herein is April 30, 1996. The effective date of the interim rules (47 
C.F.R. 76.1400-76.1404) is April 30, 1996. Procedures for submitting 
comments can be found in the companion NPRM issued with this Order. The 
companion NPRM can be found elsewhere in this issue of the Federal 
Register.

FOR FURTHER INFORMATION CONTACT:
Tom Power, Paul Glenchur, Nancy Stevenson, Cable Services Bureau, (202) 
416-0800.

SUPPLEMENTARY INFORMATION: This is a synopsis of a Commission Order in 
CS Docket No. 96-85, FCC 96-154, adopted April 5, 1996 and released 
April 9, 1996. The complete text of this document is available for 
inspection and copying during normal business hours in the FCC 
Reference Center, 1919 M St., N.W., Washington, D.C., and also may be 
purchased from the Commission's copy contractor, International 
Transcription Services, Inc. at (202) 857-3800, 2100 M Street, N.W., 
Suite 140, Washington, D.C. 20017.

Synopsis of Order

Table of Contents

                                                                        
                                                              Paragraph 
                                                                        
I. Introduction............................................            1
II. Order..................................................            5
  A. Effective Competition.................................            5
  B. CPST Rate Complaints..................................           16
  C. Small Cable Operators.................................           20
  D. Uniform Rate Requirement..............................           30
  E. Subscriber Notice.....................................           34
  F. Technical Standards...................................           37
  G. Buy Out Prohibitions..................................           40
  H. Program Access........................................           43
  I. Sunset of Upper Tier Rate Regulation..................           46
  J. Definition of ``Cable System''........................           48
  K. Definition of ``Cable Service''.......................           55
  L. Cable Operator Refusal To Carry Certain Programming...           58
III. Regulatory Flexibility Analyses.......................           71
IV. Initial Paperwork Reduction Act of 1995 Analysis.......           75
V. Effective Date..........................................           76
VI. Ordering Clauses.......................................           77
                                                                        

I. Introduction

    1. In this item we amend the Commission's rules relating to cable 
television to conform them to changes in the Communications Act 
enacted, on February 8, 1996, in the Telecommunications Act of 1996 
(the ``1996 Act''). In addition, in an associated Notice of Proposed 
Rulemaking (``NPRM''), we propose further rules to the extent necessary 
to implement various provisions of the 1996 Act. Finally, because many 
of these statutory provisions were effective upon enactment, we 
establish interim rules to govern implementation of the 1996 Act 
pending adoption of final rules.
    2. Our intent in this item is to conform our rules promptly to 
statutory requirements that are already in effect, to bring certainty 
to cable operators and local regulators, and to achieve as quickly as 
possible the deregulation intended by Congress. Further, we seek to 
streamline our procedural regulations and, of course, to continue to 
protect consumers, consistent with congressional intent.
    3. Much of the 1996 Act consists of clear, self-effectuating 
revisions to prior federal statutory provisions. The Order portion of 
this item conforms our rules to meet these new statutory requirements. 
We are revising these rules without providing prior public notice and 
an opportunity for comment because the rule modifications are mandated 
by the applicable provisions of the 1996 Act. We find that notice and 
comment procedures are unnecessary, and that therefore this action 
falls within the ``good cause'' exception of the Administrative 
Procedure Act. 5 U.S.C. Sec. 553(b)(B). The final rules adopted in this 
Order do not involve discretionary action on the part of the 
Commission. Rather, they simply implement provisions of the 1996 Act 
according to the specific terms set forth in the legislation.
    4. Other provisions of the 1996 Act are already effective, but 
require further rulemaking in order to be fully and clearly 
implemented. The companion NPRM addresses these issues. We find it in 
the public interest to adopt interim rules immediately and find good 
cause to establish them without the benefit of the traditional notice 
and comment process. Of course, our final rules will be crafted to take 
into account public comment to the same extent as would be the case in 
a rulemaking that was not preceded by the adoption of interim policies. 
However, we intend the interim rules to create a safe harbor, i.e., 
operators can be assured that if they comply with these interim rules, 
their behavior will not later be subject to challenge based upon the 
ultimate outcome of the rulemaking.

II. Order

A. Effective Competition

1. Final Rule Change
    5. Since passage of the Cable Television Consumer Protection and 
Competition Act of 1992 (the ``1992 Cable Act''), regulation of cable 
television has been guided by Congress' intent to ``rely on the 
marketplace, to the maximum extent feasible . . . .'' The 1992 Cable 
Act required the Commission to prescribe rate regulations that protect 
subscribers from having to pay unreasonable rates by ensuring that 
rates for regulated services do not exceed rates that would be charged 
in the presence of effective competition. Thus, regulations governing 
the rates charged for cable services do not apply to cable systems that 
actually face effective competition. For a system that is not subject 
to effective competition, the Commission is obligated to ensure the 
reasonableness of rates charged for the basic service tier (``BST'') 
and for the cable programming service tier (``CPST''). The BST, which a 
subscriber must purchase in order to have access to any other tier of 
service, must include all of the local broadcast television stations 
that the operator offers over its system, plus any public, educational, 
or government access channels that the operator is required to provide 
to subscribers under the terms of its franchise. A CPST is any tier of 
programming, other than the basic service tier, that a cable operator 
offers. Where effective competition is present, certain other 
regulatory requirements also become inapplicable, including the uniform 
rate requirement, the ``tier buy through'' requirement, and certain of 
the ownership rules.
    6. Section 76.905(b) of our rules incorporates the statutory 
definition of ``effective competition'' as set forth in the 1992 Cable 
Act. Pursuant to that rule, a system is subject to effective 
competition in the area covered by its local franchise if any one of 
the following three tests are met:


[[Page 18970]]


    (1) Fewer than 30 percent of the households in its franchise 
area subscribe to the cable service of a cable system.
    (2) The franchise area is:
    (i) Served by at least two unaffiliated multichannel video 
programming distributors each of which offers comparable programming 
to at least 50 percent of the households in the franchise area; and
    (ii) the number of households subscribing to programming 
services offered by multichannel video programming distributors 
other than the largest multichannel video programming distributor 
exceeds 15% of the households in the franchise area.
    (3) A multichannel video programming distributor, operated by 
the franchising authority for that franchise area, offers video 
programming to at least 50 percent of the households in the 
franchise area.

    7. The three effective competition test categories described above 
are not altered by the 1996 Act. However, Section 301(b)(3) of the 1996 
Act creates a fourth test, finding that effective competition exists 
when video programming is offered by, or over the facilities of, a 
local exchange carrier (``LEC'') or its affiliate. Thus, effective 
competition now exists if a:

    Local exchange carrier or its affiliate (or any multichannel 
video programming distributor using the facilities of such carrier 
or its affiliate) offers video programming services directly to 
subscribers by any means (other than direct-to-home satellite 
services) in the franchise area of an unaffiliated cable operator 
which is providing cable service in that franchise area, but only if 
the video programming services so offered in that area are 
comparable to the video programming services provided by the 
unaffiliated cable operator in that area.

This provision was effective upon enactment. Therefore, we amend our 
rules to incorporate this additional prong of the definition of 
effective competition. Consistent with Section 623 of the statute, we 
seek to adopt interim and permanent rules that will allow the 
Commission to determine when the level of competition provided by a LEC 
or its affiliate is sufficient to have a restraining effect on cable 
rates.
2. Definitions of ``offer'' and ``in the franchise area''
    8.-9. The Commission's pre-existing definition of ``offer'' will 
apply under the new test for effective competition:

    Service of a multichannel video programming distributor will be 
deemed offered: (1) When the multichannel video programming 
distributor is physically able to deliver service to potential 
subscribers, with the addition of no or only minimal additional 
investment by the distributor, in order for an individual subscriber 
to receive service; and (2) When no regulatory, technical or other 
impediments to households taking service exist, and potential 
subscribers in the franchise area are reasonably aware that they may 
purchase the services of the multichannel video programming 
distributor.

    10. The legislative history to the 1996 Act indicates congressional 
intent to apply this definition of ``offer'' for purposes of the new 
test for effective competition.
    11. An operator should focus on each element of the ``offer'' 
definition, in the context of the new test for effective competition, 
when attempting to prove that the service offered by the LEC-affiliated 
multichannel video programming distributor (``MVPD'') is effective in 
restraining cable rates. For example, a cable operator seeking to prove 
effective competition will have to show that the competitor is 
``physically able'' to offer service to subscribers ``in the franchise 
area.'' Where the competitor's service area does not follow the borders 
of the local cable franchise areas, a cable operator should describe 
the extent of the overlap between its franchise area and the actual or 
planned service area of the competitor. With respect to multichannel 
multipoint distribution service (``MMDS''), for example, we previously 
have determined that the potential subscribers include only those who 
reside in ``areas to which the MMDS operator is capable of providing 
video programming.'' We note that the zone in which our rules protect a 
MMDS licensee from harmful electrical interference is a circle with a 
radius of 35 miles centered on the MMDS transmitter site. Thus, in 
seeking to establish effective competition from a LEC-affiliated MMDS 
operator, a cable operator should provide the location of the MMDS 
transmitter and the 35-mile protected zone. The cable operator also 
should provide any other reasonably available technical and geographic 
information, as well as information about the geographic scope of the 
competitor's marketing efforts, to help establish that service is being 
offered to subscribers in the franchise area. Such data, whether with 
respect to a MMDS operator or some other LEC-affiliated MVPD, will also 
be relevant to a showing that there are no technical or other 
impediments to households taking service from the MVPD. Where 
appropriate, we will request additional relevant information from the 
competing MVPD.
    12. In addition, the cable operator must establish that ``potential 
subscribers in the franchise area are reasonably aware'' that they may 
purchase the competitor's service. The marketing efforts of the LEC or 
its affiliate often will be directly related to this issue. As we 
previously have observed, ``potential subscribers may be made 
reasonably aware of the availability of a competing service, for 
example, through advertising in regional or local media, direct mail, 
or any other marketing outlet.'' (Rate Order), 58 FR 29736 (May 21, 
1993). Thus, cable operators may rely on marketing information to the 
extent necessary to show consumer perceptions of the availability and 
comparability of the competing service. Again, the Commission may seek 
information directly from the competitor in appropriate circumstances.
3. Definition of ``comparable programming''
    13. The legislative history reveals Congress's intent that video 
programming be deemed ``comparable'' for purposes of this test if the 
competing service ``includes access to at least 12 channels of 
programming, at least some of which are television broadcasting 
signals.'' On an interim basis we will require the broadcast 
programming to include the signals of local broadcasters. Broadcast 
programming delivered by satellite (e.g., ``superstations'') shall not 
be deemed broadcast programming for purposes of the interim application 
of the new effective competition test.
4. MMDS Provision of Local Broadcast Channels
    14. The definitions of ``offer'' and ``comparable programming'' 
require us to address a further question that arises specifically in 
the context of MMDS. An MMDS operator has two ways of ensuring that its 
subscribers receive local broadcast programming. The operator can pull 
in the broadcast signals itself via its own centrally located broadcast 
antenna and then retransmit the entire package of broadcast and non-
broadcast signals to the microwave antenna located at the subscriber's 
residence, or the operator can install a separate broadcast antenna to 
complement the microwave antenna at each subscriber location. We must 
determine whether the wireless cable operator should be deemed to be 
``offering'' broadcast programming in the latter situation, i.e., when 
the operator does not transmit the broadcast signals to the subscriber 
via microwave. In that situation, the operator must join the broadcast 
signals to the microwave signals at some point. One approach is to join 
those signals in a single cable that runs to the back of the customer's 
television set or to a settop converter box. Another approach is to run 
separate cable lines from each antenna to an A/B switch from which a 
single line is connected to the television set.

[[Page 18971]]

The subscriber pushes the switch back and forth between the A position 
and the B position, depending upon whether the subscriber wants to see 
the broadcast channels or the microwave channels.
    15. On an interim basis, we will resolve this issue as follows. If 
the broadcast channels are available to the subscriber without an A/B 
switch or similar device, the MMDS operator will be deemed to be 
offering them within the meaning of Section 301(b)(3) of the 1996 Act. 
If an A/B switch or similar device is required, we will still deem the 
broadcast stations offered if the MMDS operator is responsible for the 
installation. However, if the customer must install his or her own A/B 
switch to receive the broadcast channels, the MMDS operator will not be 
deemed to be offering those channels. Inclusion of broadcast channels 
on the MMDS operator's rate card, advertising, or other marketing 
materials may be evidence that the MMDS operator offers the broadcast 
channels in accordance with our definition of ``offer.'' We note the 
significance of marketing materials because it is arguable that an MMDS 
operator that markets itself as a provider of local broadcast channels 
will take the steps necessary to ensure that subscribers receive those 
channels. In those circumstances, the broadcast channels would seem to 
be a part of the programming package that the MMDS operator is offering 
and providing, regardless of the technical means employed.
5. Definition of ``affiliate''
    16. Under our interim rules implementing this statute, an entity 
will be considered affiliated with a LEC if it meets the definition of 
``affiliate'' set forth in Section 3 of the 1996 Act:

    The term ``affiliate'' means a person that (directly or 
indirectly) owns or controls, is owned or controlled by, or is under 
common ownership or control with another person. For purposes of 
this paragraph, the term ``own'' means to own an equity interest (or 
the equivalent thereof) of more than 10 percent.

    17. We note that this definition of ``affiliate,'' which has been 
incorporated in Title I of the Communications Act, does not strictly 
apply to matters under Title VI, since Title VI contains a separate 
definition of that term that does not set a percentage threshold as to 
what constitutes ownership. We believe this gives us discretion to 
establish an ownership threshold other than 10% for purposes of Title 
VI. However, because a determination of the precise threshold must 
await the rulemaking we initiate in the accompanying NPRM, on an 
interim basis we find it reasonable to use the Title I ownership 
threshold that Congress has prescribed for purposes of most other 
provisions of the Communications Act. Therefore, effective competition 
under the new test may be established when a LEC owns an active or 
passive equity interest, or the equivalent thereof, of more than 10% in 
the competing MVPD. We will determine what constitutes the 
``equivalent'' of an equity interest on a case-by-case basis. 
Affiliation also can be shown through de facto control, regardless of 
the actual ownership interest. The ownership threshold we adopt in the 
interim does not in any way preclude the establishment of a permanent 
rule that incorporates a different threshold.
6. Procedures
    18. A cable system that meets all of the relevant criteria in the 
new effective competition test is exempt from rate regulation as of 
February 8, 1996, the date the 1996 Act was enacted. Such an operator 
may file a petition for a determination of effective competition with 
the Commission. The petition should demonstrate that all the relevant 
criteria are satisfied. We note that, by necessity, we have adopted the 
substantive requirements discussed above on an interim basis without 
the usual notice and comment proceeding. Accordingly, petitioners 
seeking a declaration of effective competition under the new test are 
free to provide additional information, consistent with the statute, 
that the operator believes proves the existence of effective 
competition that must exist in order to exempt an operator from rate 
regulation.
    19. This petition may be filed with the Commission at any time, 
including in response to a notice from the local franchising authority 
(``LFA'') that it intends to file a CPST rate complaint. (A LFA 
certified to regulate rates can simply withdraw its certification at 
any time if it believes the cable operator is subject to effective 
competition, or for any other reason.) The operator shall provide a 
copy of the petition to the LFA. The Commission will provide public 
notice of the petition's filing to enable interested parties to file 
responses to the petition. Thereafter, we will determine whether 
effective competition exists and may issue an order granting the 
petition. As we have noted, the Commission may issue an order directing 
one or more persons to produce information relevant to the operator's 
petition. For example, the order may be directed to a LEC that is 
asserted to hold an interest in an MVPD sufficient to reach affiliation 
levels that would trigger a finding of effective competition. The 
Commission will act promptly on these petitions. A Commission 
determination regarding effective competition will be applicable to 
both the BST and CPST.

B. CPST Rate Complaints

    20. Under existing regulations, adopted pursuant to Section 
623(c)(1)(B) of the Communications Act as it existed prior to the 1996 
Act, subscribers were allowed to file complaints concerning CPST rates 
directly with the Commission. Section 301(b)(1)(C) of the 1996 Act 
alters the manner in which the Commission reviews complaints concerning 
rates charged for a CPST. In particular, that Section provides:

    The Commission shall review any complaint submitted by a 
franchising authority after the date of enactment of the 
Telecommunications Act of 1996 concerning an increase in rates for 
cable programming services and issue a final order within 90 days 
after it receives such a complaint, unless the parties agree to 
extend the period for such review. A franchising authority may not 
file a complaint under this paragraph unless, within 90 days after 
such increase becomes effective, it receives subscriber complaints.

    21. Accordingly, we amend our rule to incorporate the self-
effectuating language of Section 301(b)(1)(C). In addition, we have 
eliminated the requirement in Section 76.964 of our rules that 
operators notify subscribers of their right to file complaints with the 
Commission. Also in Section 76.964, we eliminate the requirement that 
operators notify subscribers of the Commission's address and phone 
number for purposes of filing rate complaints. Subscriber complaints 
received by the Commission after February 8, 1996 are being returned to 
the subscriber with a notice of this change.
    22. We also establish interim rules governing the filing of rate 
complaints by LFAs. Section 301(b)(a)(C) authorizes an LFA to file a 
rate complaint with the Commission if the LFA receives subscriber 
complaints within 90 days after an operator's rate increase becomes 
effective. Although the statute allows only LFAs to file rate 
complaints directly with the Commission, subscribers now have twice as 
long to complain about a rate increase as they did under our previous 
rules. We provide in this interim rule that an LFA may file rate 
complaints with the Commission when the LFA receives more than one 
subscriber complaint concerning an operator's rate increase. 
Modifications to the Commission cable rate complaint form, Form 329, 
will be made accordingly. The records

[[Page 18972]]

maintained by an LFA in accordance with its regular business practice 
should be sufficient to establish that the LFA received the subscriber 
complaints within 90 days of a rate increase.
    23. If the LFA receives more than one subscriber complaint within 
the 90-day period and decides to file its own complaint with the 
Commission, it must do so no more than 180 days after the rate increase 
became effective. Before filing a complaint with the Commission, the 
LFA shall first give the cable operator written notice of its intent to 
do so and give the operator a minimum of 30 days to file with the LFA 
the relevant FCC Forms used to justify a rate increase. The LFA shall 
then forward its complaint and the operator's response to the 
Commission within the 180 day deadline specified above. If the operator 
fails to respond, the LFA should file its complaint and specify that 
the operator has not filed a response. We will then decide the case 
based upon the information before us. This procedure shall not apply to 
LFA complaints filed on or before the 15th day following the release 
date of this item. We will address those complaints filed prior to such 
date on an individual basis.

C. Small Cable Operators

1. Final Rule Change
    24. The 1996 Act exempts certain smaller cable systems from certain 
provisions of Section 623 of the Communications Act that authorize the 
Commission and LFAs to regulate cable rates. Specifically, Section 
301(c) of the 1996 Act amends Section 623 of the Communications Act by 
adding the following subsection:
    (m) Special Rules For Small Companies.
    (1) In General. Subsections (a), (b), and (c) do not apply to a 
small cable operator with respect to--
    (A) cable programming services, or
(B) a basic service tier that was the only service tier subject to 
regulation as of December 31, 1994,
in any franchise area in which that operator services 50,000 or fewer 
subscribers.
    (2) Definition of Small Cable Operator. For purposes of this 
subsection, the term ``small cable operator'' means a cable operator 
that, directly or through an affiliate, serves in the aggregate fewer 
than 1 percent of all subscribers in the United States and is not 
affiliated with any entity or entities whose gross annual revenues in 
the aggregate exceed $250,000,000.
    25. We amend our rules, to reflect the exceptions to rate 
regulation created by section 301(c) of the 1996 Act.
    26. Because Section 301(c) was effective upon enactment of the 
statute, we will establish in this Order interim rules to apply pending 
adoption of final rules.
2. Definition of ``small cable operator''
    27. With respect to the definition of a small cable operator, and 
for interim purposes only, we find that there are 61,700,000 cable 
subscribers in the United States. Therefore, an operator serving fewer 
than 617,000 subscribers shall be deemed a small operator if its annual 
revenues, when combined with the total annual revenues of all of its 
affiliates, do not exceed $250 million in the aggregate. Further, to 
implement the small operator provisions pending adoption of final 
rules, we will use the definition of ``affiliate'' that we adopted last 
year for purposes of our small system cost-of-service rules. Therefore, 
an entity shall be deemed affiliated with a small cable operator if 
that entity has a 20% or greater equity interest in the operator 
(active or passive) or holds de jure or de facto control over the 
operator. In the present context, we believe it is reasonable to apply 
our definition of affiliation as it exists under our small system 
rules, given that those rules and the small cable operator provisions 
of the 1996 Act all have the same intent of minimizing regulation and 
ensuring access to needed capital for smaller cable entities.

3. Scope of Deregulation

    28. Assuming an operator is eligible for deregulation under the 
statutory subscriber and revenue criteria, the scope of deregulation 
will depend, at least on an interim basis, upon the number of tiers of 
service that were subject to rate regulation as of December 31, 1994. 
We believe it to be Congress's intent that any qualifying system that 
had only a single tier of cable service subject to regulation as of 
December 31, 1994 shall be exempt from rate regulation as to all of its 
programming services, regardless of the number of tiers it now offers. 
By contrast, a qualifying system that had more than one tier subject to 
regulation as of December 31, 1994 shall remain regulated on the BST.
4. Procedures
    29. A cable operator that satisfies all of the relevant criteria is 
exempt from rate regulation as to the extent provided above effective 
February 8, 1996, the date the 1996 Act was enacted. If such an 
operator had only a single tier as of December 31, 1994, and the LFA 
for the franchise area in which that operator offers service is 
certified to regulate cable rates under the 1992 Cable Act, the 
operator should certify in writing to such LFA that the operator meets 
all of the criteria for deregulation of the BST. It may make this 
certification at any time. Upon request of the LFA, the operator shall 
identify in writing all of its affiliates that provide cable service, 
the total cable subscriber base of itself and each affiliate, and the 
aggregate gross revenues of all its cable and non-cable affiliates. 
Within 90 days of the original certification, the LFA shall determine 
whether the operator qualifies for deregulation and shall notify the 
operator in writing of its decision, although this 90-day period shall 
be tolled for so long as it takes the operator to respond to a proper 
request for information by the LFA. If the LFA finds that the operator 
does not qualify for deregulation, its notice shall state the grounds 
for that decision. The operator may challenge that decision by filing 
an appeal with the Commission within 30 days.
    30. Once the operator has certified its eligibility for 
deregulation on the BST, the LFA shall not prohibit the operator from 
taking a rate increase and shall not order the operator to make any 
refunds, unless and until the LFA has rejected the certification in a 
final order that is no longer subject to appeal or that the Commission 
has affirmed. Thus, the operator may take rate increases while its 
certification is pending. However, the operator shall be liable for 
refunds for the revenues it gains (beyond those revenues that it could 
have gained under regulation) as a result of any rate increase taken 
during the period in which it claimed to be deregulated, plus interest, 
in the event it is later found not to be deregulated. In addition, the 
running of the standard one-year limitation on refund liability will be 
tolled during that period to ensure that the filing of an invalid small 
operator certification does not reduce any refund liability that the 
operator otherwise would incur.
    31. A system that qualifies under the new small operator subscriber 
and revenue requirements and that had more than one tier as of December 
31, 1994 is deregulated on all its CPSTs as of February 8, 1996. Within 
30 days of being served with a LFA's notice that it intends to file a 
CPST rate complaint, such an operator shall certify to the LFA that it 
meets the relevant small operator criteria, in accordance with the new 
CPST rate complaint procedure described above. This certification shall 
be in lieu of the rate justification that an operator otherwise would 
submit. The LFA may either resolve the issue itself in accordance with 
the procedures set

[[Page 18973]]

forth immediately above, or it may forward its notice and the 
operator's response for Commission review in accordance with the new 
procedures for CPST rate complaints. No certification is necessary if 
the operator does not receive notice that the LFA intends to file a 
CPST rate complaint. If a pending CPST rate complaint was filed with 
the Commission before the effective date of these interim rules, the 
operator should file its certification of small operator status 
directly with the Commission within 15 days of that effective date.
    32. We adopt these interim rules solely for the purpose of 
implementing Section 301(c) of the 1996 Act pending our adoption of 
final rules. These interim rules in no way alter or amend our small 
system cost-of-service rules or any other rules applicable to small 
systems or small cable companies, except to the extent such rules no 
longer apply to systems deregulated under Section 301(c) of the 1996 
Act.
4. Relationship With Preexisting Small System Rules
    33. In the interests of eliminating confusion and uncertainty, we 
will summarize the separate treatment available to small systems as 
defined by our preexisting rules. Last year, the Commission adopted 
rules streamlining cost-of-service rate regulation for any system 
serving fewer than 15,000 subscribers (a ``small system''), as long as 
the system is owned by an operator that serves no more than 400,000 
subscribers over all of its systems (a ``small cable company''). Once a 
system qualifies under these criteria, it remains subject to the 
relaxed rules for so long as the system serves fewer than 15,000 
subscribers, even if the company later exceeds 400,000 subscribers or 
if the small system is acquired by an operator with more than 400,000 
subscribers. When the system exceeds 15,000 subscribers, it may 
maintain its current rates but cannot seek an increase until such an 
increase is permitted under our standard rate rules applicable to 
systems generally. Our small system rules are unaffected by the 1996 
Act or this rulemaking.

D. Uniform Rate Requirement

    34. Prior to enactment of the 1996 Act, Section 623(d) of the 
Communications Act provided in full: ``A cable operator shall have a 
rate structure, for the provision of cable service, that is uniform 
throughout the geographic area in which cable service is provided over 
its cable system.'' Section 76.984 of the Commission's rules was 
adopted to implement this requirement. The Commission interpreted the 
rules (and the statutory requirement) as applying to systems not facing 
effective competition as well as to those facing effective competition. 
Upon review, the court in Time Warner Entertainment Co. v. FCC found 
this interpretation to be incorrect, holding that ``[a]pplication of 
the uniform rate provision to competitive systems violates 47 U.S.C. 
Sec. 543(a)(2). . . .''
    35. Section 301(b)(2) of the 1996 Act addresses the uniform rate 
structure through a statutory amendment which, in relevant part, is 
consistent with the action of the court. It amends the uniform rate 
provision by adding the following at the end of Section 623(d):

    This subsection does not apply to (1) a cable operator with 
respect to the provision of cable service over its cable system in 
any geographic area in which the video programming services offered 
by the operator in that area are subject to effective competition, 
or (2) any video programming offered on a per channel or per program 
basis. Bulk discounts to multiple dwelling units shall not be 
subject to this subsection, except that a cable operator of a cable 
system that is not subject to effective competition may not charge 
predatory prices to a multiple dwelling unit. Upon a prima facie 
showing by a complainant that there are reasonable grounds to 
believe that the discounted price is predatory, the cable system 
shall have the burden of showing that its discounted price is not 
predatory.

    36. Accordingly, we amend Section 76.984 of our rules to conform to 
the new statutory language.
    37. Until final rules are adopted, the complaint process 
established by Section 301(b)(2) of the 1996 Act shall be governed by 
the provisions of Section 76.7 of our rules applicable to petitions for 
special relief generally.

E. Subscriber Notice

    38. Section 301(g) of the 1996 Act adds a new subsection to Section 
632 of the Communications Act. The new subsection reads as follows:

    Subscriber Notice. A cable operator may provide notice of 
service and rate changes to subscribers using any reasonable written 
means at its sole discretion. Notwithstanding section 623(b)(6) or 
any other provision of this Act, a cable operator shall not be 
required to provide prior notice of any rate change that is the 
result of a regulatory fee, franchise fee, or any other fee, tax 
assessment, or charge of any kind imposed by any Federal agency, 
State, or franchising authority on the transaction between the 
operator and the subscriber.

    39. Accordingly, we modify our rules pursuant to Section 301(g) of 
the 1996 Act to provide that a cable operator may provide notice of 
service and rate changes to subscribers using any reasonable written 
means at its sole discretion, and that a cable operator shall not be 
required to provide prior notice of any rate change that is the result 
of a regulatory fee, franchise fee, or any other fee, tax assessment, 
or charge of any kind imposed by any Federal agency, State, or 
franchising authority on the transaction between the operator and the 
subscriber.
    40. We note that previously the Commission distinguished written 
notice sent to subscribers from written announcements on the cable 
system or in the newspaper. We made these distinctions in an effort to 
ensure that notice was adequate depending upon the circumstances. We 
now note the legislative history of the House amendment, which was 
ultimately adopted by the Conference Committee, states that ``[n]otice 
need not be inserted in the subscriber's bill.'' Given the cited 
statutory provision and its legislative history, a change in our 
current rules is justified so that notice provided through written 
announcements on the cable system or in the newspaper will be presumed 
sufficient. We believe this furthers Congressional intent regarding the 
adequacy of any required notice. We will address any disputes that may 
arise in this area on a case-by-case basis.

F. Technical Standards

    41. Pursuant to Section 624(e) of the Communications Act, the 
Commission has adopted technical standards that govern the picture 
quality performance of cable television systems. Prior to enactment of 
the 1996 Act, Section 624(e) provided, in part:

    A franchising authority may require as part of a franchise 
(including a modification, renewal, or transfer thereof) provisions 
for the enforcement of the standards prescribed under this 
subsection. A franchising authority may apply to the Commission for 
a waiver to impose standards that are more stringent than the 
standards prescribed by the Commission under this subsection.

    42. Section 301(e) of the 1996 Act strikes the above two sentences 
and adds the following:

    No State or franchising authority may prohibit, condition, or 
restrict a cable system's use of any type of subscriber equipment or 
any transmission technology.

    43. Thus, we eliminate the language in Note Six to Section 76.605 
of our rules which permitted a franchising authority to apply to the 
Commission for a waiver to impose cable technical standards that are 
more stringent than the standards prescribed by the Commission. We 
insert the new language from Section 301(e) in Note Six.

[[Page 18974]]

G. Buy Out Prohibitions

    44. Section 302(a) of the 1996 Act creates a new Section 652 of the 
Communications Act that provides as follows:

    (a) Acquisitions By Carriers. No local exchange carrier or any 
affiliate of such carrier owned by, operated by, controlled by, or 
under common control with such carrier may purchase or otherwise 
acquire directly or indirectly more than a 10 percent financial 
interest, or any management interest, in any cable operator 
providing cable service within the local exchange carrier's 
telephone service area.
    (b) Acquisitions By Cable Operators. No cable operator or 
affiliate of a cable operator that is owned by, operated by, 
controlled by, or under common ownership with such cable operator 
may purchase or otherwise acquire, directly or indirectly, more than 
a 10 percent financial interest, or any management interest, in any 
local exchange carrier providing telephone exchange service within 
such cable operator's franchise area.
    (c) Joint Ventures. A local exchange carrier and a cable 
operator whose telephone service area and cable franchise area, 
respectively, are in the same market may not enter into any joint 
venture or partnership to provide video programming directly to 
subscribers or to provide telecommunications services within such 
market.
    (d) Exceptions.
    (1) Rural Systems. Notwithstanding subsections (a), (b), and (c) 
of this section, a local exchange carrier (with respect to a cable 
system located in its telephone service area) and a cable operator 
(with respect to the facilities of a local exchange carrier used to 
provide telephone exchange service in its cable franchise area) may 
obtain a controlling interest in, management interest in, or enter 
into a joint venture or partnership with the operator of such system 
or facilities for the use of such system or facilities to the extent 
that--
    (A) such system or facilities only serve incorporated or 
unincorporated--
    (i) places or territories that have fewer than 35,000 
inhabitants; and
    (ii) are outside an urbanized area, as defined by the Bureau of 
the Census; and
    (B) in the case of a local exchange carrier, such system, in the 
aggregate with any other system in which such carrier has an 
interest, serves less than 10 percent of the households in the 
telephone service area of such carrier.
    (2) Joint Use. Notwithstanding subsection (c), a local exchange 
carrier may obtain, with the concurrence of the cable operator on 
the rates, terms, and conditions, the use of that part of the 
transmission facilities of a cable system extending from the last 
multi-user terminal to the premises of the end user, if such use is 
reasonably limited in scope and duration, as determined by the 
Commission.
    (3) Acquisitions in Competitive Markets. Notwithstanding 
subsections (a) and (c), a local exchange carrier may obtain a 
controlling interest in, or form a joint venture or other 
partnership with, or provide financing to, a cable system 
(hereinafter in this paragraph referred to as ``the subject cable 
system'') if--
    (A) the subject cable system operates in a television market 
that is not in the top 25 markets, and such market has more than 1 
cable system operator, and the subject cable system is not the cable 
system with the most subscribers in such television market;
    (B) the subject cable system and the cable system with the most 
subscribers in such television market held on May 1, 1995, cable 
television franchises from the largest municipality in the 
television market and the boundaries of such franchises were 
identical on such date;
    (C) the subject cable system is not owned by or under common 
ownership or control of any one of the 50 cable system operators 
with the most subscribers as such operators existed on May 1, 1995; 
and
    (D) the system with the most subscribers in the television 
market is owned by or under common ownership or control of any one 
of the 10 largest cable system operators as such operators existed 
on May 1, 1995.
    (4) Exempt Cable Systems. Subsection (a) does not apply to any 
cable system if--
    (A) the cable system serves no more than 17,000 cable 
subscribers, of which no less than 8,000 live within an urban area, 
and no less than 6,000 live within a nonurbanized area as of June 1, 
1995;
    (B) the cable system is not owned by, or under common ownership 
or control with, any of the 50 largest cable system operators in 
existence on June 1, 1995; and
    (C) the cable system operates in a television market that was 
not in the top 100 television markets as of June 1, 1995.
    (5) Small Cable Systems In Nonurban Areas. Notwithstanding 
subsections (a) and (c), a local exchange carrier with less than 
$100,000,000 in annual operating revenues (or any affiliate of such 
carrier owned by, operated by, controlled by, or under common 
control with such carrier) may purchase or otherwise acquire more 
than a 10 percent financial interest in, or any management interest 
in, or enter into a joint venture or partnership with, any cable 
system within the local exchange carrier's telephone service area 
that serves no more than 20,000 cable subscribers, if no more than 
12,000 of those subscribers live within an urbanized area, as 
defined by the Bureau of the Census.
    (6) Waivers. The Commission may waive the restrictions of 
subsections (a), (b), or (c) only if:
    (A) the Commission determines that, because of the nature of the 
market served by the affected cable system or facilities used to 
provide telephone exchange service--
    (i) the affected cable operator or local exchange carrier would 
be subjected to undue economic distress by the enforcement of such 
provisions;
    (ii) the system or facilities would not be economically viable 
if such provisions were enforced; or
    (iii) the anticompetitive effects of the proposed transaction 
are clearly outweighed in the public interest by the probable effect 
of the transaction in meeting the convenience and needs of the 
community to be served; and
    (B) the local franchising authority approves of such waiver.
    (e) Definition Of Telephone Service Area. For purposes of this 
section, the term ``telephone service area'' when used in connection 
with a common carrier subject in whole or in part to title II of 
this Act means the area within which such carrier provided telephone 
exchange service as of January 1, 1993, but if any common carrier 
after such date transfers its telephone exchange service facilities 
to another common carrier, the area to which such facilities provide 
telephone exchange service shall be treated as part of the telephone 
service area of the acquiring common carrier and not of the selling 
common carrier.

    45. Accordingly, we add a new section to our rules regarding the 
ownership of cable systems to incorporate the provisions of Section 
302(a) of the 1996 Act described above.
    46. With respect to the joint use provisions of Section 302(a), the 
Commission will make such determinations on a case-by-case basis using 
the following procedures in accordance with Section 76.7 of our rules. 
Within ten days of final execution of a contract permitting a local 
exchange carrier to use that part of the transmission facilities of a 
cable system extending from the last multi-user terminal to the 
premises of the end user, the parties shall submit a copy of such 
contract, along with an explanation of how such contract is reasonably 
limited in scope and duration, to the Commission for review. The 
parties shall serve a copy of this submission on the LFA, along with a 
notice of the deadline by which the LFA must file comments, if any, 
with the Commission. Based upon the record before it, the Commission 
shall then determine whether the local exchange carrier's use of that 
part of the transmission facilities of a cable system extending from 
the last multi-user terminal to the premises of the end user is 
reasonably limited in scope and duration. In determining whether such 
use is reasonably limited in scope and duration, the Commission will 
look to the underlying policy goals of the legislation: To promote 
competition in both services and facilities, and to encourage long-term 
investment in the infrastructure.

H. Program Access

    47. Section 628 of the Communications Act governs access to 
programming. These program access provisions are intended to eliminate 
unfair competitive practices and facilitate competition by providing 
competitive access to certain defined categories of programming. 
Generally speaking, the restrictions in Section 628 are applicable to 
cable operators, satellite cable programming vendors in which a cable 
operator has an attributable interest, and satellite broadcast 
programming vendors. The

[[Page 18975]]

Commission rules implementing Section 628 appear at Section 76.1000 et 
seq.

    48. Section 301(j) of the 1996 Act amends section 628 by adding 
the following: (j) Common Carriers.--Any provision that applies to a 
cable operator under this section shall apply to a common carrier or 
its affiliate that provides video programming by any means directly 
to subscribers. Any such provision that applies to a satellite cable 
programming vendor in which a cable operator has an attributable 
interest shall apply to any satellite cable programming vendor in 
which such common carrier has an attributable interest. For the 
purposes of this subsection, two or fewer common officers or 
directors shall not by itself establish an attributable interest by 
a common carrier in a satellite cable programming vendor (or its 
parent company).

    49. Accordingly, we add a new section to the program access rules 
to broaden their scope as described above. We also note that the 
meaning of the term ``attributable interest'' as defined in our program 
access rules shall also apply to common carriers, subject to the last 
sentence of Section 301(j) of the 1996 Act, for purposes of program 
access.

I. Sunset of Upper Tier Rate Regulation

    50. Consistent with the 1992 Cable Act, the Commission established 
rules to ensure that rates for cable programming services are not 
unreasonable. The 1996 Act adds a provision to the Communications Act 
that provides a sunset date for regulation of CPST rates. Specifically, 
rate regulation ``shall not apply to cable programming services 
provided after March 31, 1999.''
    51. Accordingly, to implement this mandate, we are amending our 
rules to include the statutory sunset provision.

J. Definition of ``Cable System''

    52. Prior to enactment of the 1996 Act, and subject to four 
specific exceptions, Section 602(7) of the Communications Act defined 
the term ``cable system'' to include:

    A set of closed transmission paths and associated signal 
generation, reception, and control equipment that is designed to 
provide cable service which includes video programming and which is 
provided to multiple subscribers within a community. . . .

    53. The four exceptions to this definition included

    . . . (B) a facility that serves only subscribers in 1 or more 
multiple unit dwellings under common ownership, control, or 
management, unless such facility or facilities uses any public right 
of way; [and] (C) a facility of a common carrier which is subject, 
in whole or in part, to the provisions of Title II of this Act, 
except that such facility shall be considered a cable system (other 
than for purposes of section 621(c)) to the extent such facility is 
used in the transmission of video programming directly to 
subscribers. . . .

    54. This statutory definition and the four exceptions were 
incorporated into Section 76.5(a) of the Commission's rules.
    55. The 1996 Act revises the definition of a cable system by 
amending the two exceptions cited above and by adding a third 
exception. Section 301 of the 1996 Act amends the first exception cited 
above, subsection (B), by striking the quoted language and inserting 
the following: ``(B) a facility that serves subscribers without using 
any public right-of-way.'' Section 302 of the 1996 Act amends the 
second exception quoted above, subsection (C), by adding the following 
clause at the end of that subsection: ``, unless the extent of such use 
is solely to provide interactive on-demand services.'' In addition, 
Section 302 creates a new exception to the cable systems definition as 
follows: ``(D) an open video system that complies with section 653 of 
this title.'' Finally, Section 302 of the 1996 Act moves what had been 
the fourth exception, subsection (D), to new subsection (E) of section 
602(7) of the Communications Act.
    56. In order to conform Section 76.5(a) to the new statutory 
definition, we amend our rules accordingly.
    57. Section 302 of the 1996 Act also adds the following definition 
corresponding to one of the exceptions to the cable system definition:

    The term ``interactive on-demand services'' means a service 
providing video programming to subscribers over switched networks on 
an on-demand, point-to-point basis, but does not include services 
providing video programming prescheduled by the programming 
provider;

    58. Section 76.5 of our rules is amended to add this definition.

K. Definition of ``Cable Service''

    59. Section 602(6) of the Communications Act defines the term 
``cable service.'' Cable service is also defined in Section 76.5(ff) of 
the rules. The 1996 Act amends that statutory definition by adding the 
bracketed words:

    (ff) Cable service. The one-way transmission to subscribers of 
video programming, or other programming service; and, subscriber 
interaction, if any, which is required for the selection [or use] of 
such video programming or other programming service. For the 
purposes of this definition, ``video programming'' is programming 
provided by, or generally considered comparable to programming 
provided by, a television broadcast station; and, ``other 
programming service'' is information that a cable operator makes 
available to all subscribers generally.

    60. According to the legislative history of this provision, it 
reflects the evolution of cable to include interactive services such as 
game channels, information services made available to subscribers by 
the cable operator, and enhanced services. This amendment is not 
intended to affect Federal or State regulations of telecommunications 
service offered through cable system facilities, or to cause dial-up 
access to information services over telephone lines to be classified as 
a cable service.
    61. Accordingly, we amend our rules to conform Section 76.5(ff) to 
the new statutory definition.

L. Cable Operator Refusal To Carry Certain Programming

    62. Sec. 506(a) of the 1996 Act amends Sec. 611(e) of the 
Communications Act, which governs public, educational, and governmental 
access channels, by providing that ``a cable operator may refuse to 
transmit any public access program or portion of a public access 
program which contains obscenity, indecency, or nudity.''
    63. Therefore, we amend the first sentence of Section 76.702 of the 
Commission's rules by adding the bracketed language:

    Any cable operator may prohibit the use on its system of any 
channel capacity of any public, educational, or governmental access 
facility for any programming which contains obscene material, 
indecent material as defined in Sec. 76.701(g), [nudity], or 
material soliciting or promoting unlawful conduct.

    64. The 1996 Act contains a similar provision concerning 
programming provided over leased access channels. Specifically, Section 
506(b) of the 1996 Act amends Section 612(c)(2) of the Communications 
Act, which restricts a cable operator's exercise of editorial control 
over leased access programming, to provide that ``a cable operator may 
refuse to transmit any leased access program or portion of a leased 
access program which contains obscenity, indecency, or nudity . . . .''
    65. However, the 1996 Act does not alter Section 612(h) of the 
Communications Act which permits a cable operator

    to enforce prospectively a written and published policy of 
prohibiting programming that the cable operator reasonably believes 
describes or depicts sexual or excretory activities of organs in a 
patently offensive manner as measured by contemporary community 
standards.


[[Page 18976]]


    66. Section 76.701(a) of the Commission's rules parallels Section 
612(h) of the 1996 Act. The remaining subsections of Section 76.701 
contain related provisions. Under sections 76.701(b) and (c), an 
operator that chooses to carry leased access programming falling within 
the description contained in Section 76.701(a) must place all such 
programming on channels made available only to subscribers who have 
made a written request for the program and have certified to being at 
least 18 years old. Subsections (d) and (e) require a person providing 
leased access programming to identify, upon request of the cable 
operator, any indecent programming or to certify that the programming 
is not indecent or obscene. Subsection (f) permits the cable operator 
to withhold access from a program provider that does not comply with an 
operator request made under this rule. Subsection (g) defines 
``indecent programming'' and subsection (h) requires operators to 
maintain records verifying their compliance with these rules.
    67. Reading the amended version of Section 612(c)(2) of the 
Communications Act together with the pre-existing provisions of Section 
612(h), we amend Section 76.701 such that its various subsections now 
apply to ``any leased access program or portion of a leased access 
program which the cable operator reasonably believes contains 
obscenity, indecency, or nudity.''
    68. The underlying Commission rules being amended here (Sections 
76.701 and 76.702, 47 CFR Secs. 76.701 and 76.702) were adopted to 
implement Section 10 of the 1992 Cable Act. These provisions are the 
subject of the litigation in Alliance for Community Media v. FCC. In 
that case, a panel of the D.C. Circuit Court of Appeals reversed and 
remanded the rules to the Commission on the grounds that Section 10 of 
the 1992 Act violated the First Amendment or raised serious 
constitutional questions that warranted Commission reconsideration. The 
full court vacated the panel's judgment and found the requirements 
constitutional. The rules were stayed after the initial decision 
finding them unconstitutional and that stay has been continued in force 
pending Supreme Court review. Oral argument before the Supreme Court 
took place on February 24, 1996. Nothing herein is intended to affect 
the status of that stay. Accordingly, these amendments are stayed for 
as long as the Alliance stay remains effective.

III. Regulatory Flexibility Analysis

    69. Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C. 
Secs. 601-612, the Commission's Flexibility Analysis with respect to 
the Report and Order is as follows:
    70. Need and purpose of this action: The Commission issues this 
Report and Order to enact or revise rules in response to the 1996 Act.
    71. Significant Alternatives considered: Not applicable because 
action is taken pursuant to statutory directive.
    72. Federal rules that overlap, duplicate or conflict with these 
rules: None.

IV. Inital Paperwork Reduction Act of 1995 Analysis

    73. This Order contains modified information collection 
requirements. As part of our continuing effort to reduce paperwork 
burdens, we invite the general public and the Office of Management and 
Budget (``OMB'') to take this opportunity to comment on the information 
collections contained in this Order, as required by the Paperwork 
Reduction Act of 1995, Pub. L. No. 104-13. Public and agency comments 
are due at the same time as other comments on the NPRM; OMB comments 
are due 60 days from the date of publication of this Order in the 
Federal Register. Comments should address: (a) Whether the 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.

V. Effective Date

    74. The statutory requirements reflected in the final rules adopted 
in the Order were effective February 8, 1996, the date of enactment of 
the 1996 Act. The interim rules adopted in the Order are effective upon 
publication of the Order in the Federal Register. We find good cause 
for making these rule changes effective upon publication in the Federal 
Register because the rules merely either implement statutory language 
from the 1996 Act, or establish interim procedures (pending the 
adoption of final rules) in response to immediately effective statutory 
provisions in the 1996 Act. We also find notice and comment is not 
necessary or in the public interest in this limited context. 
Accordingly, the Commission will forego notice and comment pursuant to 
the ``good cause'' exception of the Administrative Procedure Act. See 5 
U.S.C. Sec. 553(d).

VI. Ordering Clauses

    79. It is Ordered that pursuant to sections 4(i), 4(j) of the 
Communications Act of 1934, as amended, 47 U.S.C. Secs. 154(i), 154(j), 
303(r), and Telecommunications Act of 1996, Sec. 301, the Commission's 
Rules are amended as set forth below, effective April 30, 1996.
    80. It is further ordered that we are revising these rules without 
providing prior public notice and an opportunity for comment because 
the rule modifications are mandated by the applicable provisions of the 
1996 Act. We find that notice and comment procedures are unnecessary, 
and that therefore this action falls within the ``good cause'' 
exception of the Administrative Procedure Act. 5 U.S.C. Sec. 553(b)(B). 
The final rules adopted in this Order do not involve discretionary 
action on the part of the Commission. Rather, they simply implement 
provisions of the 1996 Act according to the specific terms set forth in 
the legislation, or establish interim procedures (pending the adoption 
of final rules) in response to immediately effective statutory 
provisions in the 1996 Act. For the same reasons, we find good cause to 
make the rules effective April 30, 1996.
    81. It is further ordered that the Secretary shall send a copy of 
this Order, including the IRFA, to the Chief Counsel for Advocacy of 
the Small Business Administration in accordance with paragraph 603(a) 
of the Regulatory Flexibility Act, Pub. L. No. 96-354, 94 Stat. 1164, 5 
U.S.C. Secs. 601, et seq. (1981).
    82. For additional information regarding this proceeding, contact 
Tom Power, Paul Glenchur, or Nancy Stevenson, Policy and Rules 
Division, Cable Services Bureau (202) 416-0800.

List of Subjects in 47 CFR Part 76

    Cable television.

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

 Rule Changes

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

[[Page 18977]]

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. Sec. 152, 153, 154, 301, 303, 307, 308, 309; Secs. 612, 614-
615, 623, 632 as amended, 106 Stat. 1460, 47 U.S.C. 532; Sec. 623, 
as amended, 106 Stat. 1460; 47 U.S.C. 532, 533, 535, 543, 552.

    2. Section 76.5 is amended by revising paragraphs (a) and (ff) to 
read as follows:


Sec. 76.5  Definitions.

    (a) Cable system or cable television system. A facility consisting 
of a set of closed transmission paths and associated signal generation, 
reception, and control equipment that is designed to provide cable 
service which includes video programming and which is provided to 
multiple subscribers within a community, but such term does not 
include:
    (1) A facility that services only to retransmit the television 
signals of one or more television broadcast stations;
    (2) A facility that serves subscribers without using any public 
right-of-way;
    (3) A facility of a common carrier which is subject, in whole or in 
part, to the provisions of Title II of the Communications Act of 1934, 
as amended, except that such facility shall be considered a cable 
system to the extent such facility is used in the transmission of video 
programming directly to subscribers, unless the extent of such use is 
solely to provide interactive on-demand services;
    (4) An open video system that complies with Section 653 of the 
Communications Act; or
    (5) Any facilities of any electric utility used solely for 
operating its electric utility systems.

    Note to paragraph (a): The provisions of Subparts D and F of this 
part shall also apply to all facilities defined previously as cable 
systems on or before April 28, 1985, except those that serve 
subscribers without using any public right-of-way.
* * * * *
    (ff) Cable service. The one-way transmission to subscribers of 
video programming, or other programming service; and, subscriber 
interaction, if any, which is required for the selection or use of such 
video programming or other programming service. For the purposes of 
this definition, ``video programming'' is programming provided by, or 
generally considered comparable to programming provided by, a 
television broadcast station; and, ``other programming service'' is 
information that a cable operator makes available to all subscribers 
generally.
* * * * *
    3. Section 76.309 is amended by revising paragraph (c)(3)(i)(B) to 
read as follows:


Sec. 76.309  Customer service obligations.

* * * * *
    (c) * * *
    (3) * * *
    (i) * * *
    (B) Customers will be notified of any changes in rates, programming 
services or channel positions as soon as possible in writing. Notice 
must be given to subscribers a minimum of thirty (30) days in advance 
of such changes if the change is within the control of the cable 
operator. In addition, the cable operator shall notify subscribers 
thirty (30) days in advance of any significant changes in the other 
information required by paragraph (c)(3)(i)(A) of this section. 
Notwithstanding any other provision of Part 76, a cable operator shall 
not be required to provide prior notice of any rate change that is the 
result of a regulatory fee, franchise fee, or any other fee, tax, 
assessment, or charge of any kind imposed by any Federal agency, State, 
or franchising authority on the transaction between the operator and 
the subscriber.
* * * * *
    4.-5. A new Sec. 76.505 is added to read as follows:


Sec. 76.505   Prohibition on buy outs.

    (a) No local exchange carrier or any affiliate of such carrier 
owned by, operated by, controlled by, or under common control with such 
carrier may purchase or otherwise acquire directly or indirectly more 
than a 10 percent financial interest, or any management interest, in 
any cable operator providing cable service within the local exchange 
carrier's telephone service area.
    (b) No cable operator or affiliate of a cable operator that is 
owned by, operated by, controlled by, or under common ownership with 
such cable operator may purchase or otherwise acquire, directly or 
indirectly, more than a 10 percent financial interest, or any 
management interest, in any local exchange carrier providing telephone 
exchange service within such cable operator's franchise area.
    (c) A local exchange carrier and a cable operator whose telephone 
service area and cable franchise area, respectively, are in the same 
market may not enter into any joint venture or partnership to provide 
video programming directly to subscribers or to provide 
telecommunications services within such market.
    (d) Exceptions:
    (1) Notwithstanding paragraphs (a), (b), and (c) of this section, a 
local exchange carrier (with respect to a cable system located in its 
telephone service area) and a cable operator (with respect to the 
facilities of a local exchange carrier used to provide telephone 
exchange service in its cable franchise area) may obtain a controlling 
interest in, management interest in, or enter into a joint venture or 
partnership with the operator of such system or facilities for the use 
of such system or facilities to the extent that:
    (i) Such system or facilities only serve incorporated or 
unincorporated :
    (A) Places or territories that have fewer than 35,000 inhabitants; 
and
    (B) Are outside an urbanized area, as defined by the Bureau of the 
Census; and
    (ii) In the case of a local exchange carrier, such system, in the 
aggregate with any other system in which such carrier has an interest, 
serves less than 10 percent of the households in the telephone service 
area of such carrier.
    (2) Notwithstanding paragraph (c) of this section, a local exchange 
carrier may obtain, with the concurrence of the cable operator on the 
rates, terms, and conditions, the use of that part of the transmission 
facilities of a cable system extending from the last multi-user 
terminal to the premises of the end user, if such use is reasonably 
limited in scope and duration, as determined by the Commission.
    (3) Notwithstanding paragraphs (a) and (c) of this section, a local 
exchange carrier may obtain a controlling interest in, or form a joint 
venture or other partnership with, or provide financing to, a cable 
system (hereinafter in this paragraph referred to as ``the subject 
cable system'') if:
    (i) The subject cable system operates in a television market that 
is not in the top 25 markets, and such market has more than 1 cable 
system operator, and the subject cable system is not the cable system 
with the most subscribers in such television market;
    (ii) The subject cable system and the cable system with the most 
subscribers in such television market held on May 1, 1995, cable 
television franchises from the largest municipality in the television 
market and the boundaries of such franchises were identical on such 
date;
    (iii) The subject cable system is not owned by or under common 
ownership or control of any one of the 50 cable system operators with 
the most subscribers as such operators existed on May 1, 1995; and

[[Page 18978]]

    (iv) The system with the most subscribers in the television market 
is owned by or under common ownership or control of any one of the 10 
largest cable system operators as such operators existed on May 1, 
1995.
    (4) Paragraph (a) of this section does not apply to any cable 
system if:
    (i) The cable system serves no more than 17,000 cable subscribers, 
of which no less than 8,000 live within an urban area, and no less than 
6,000 live within a nonurbanized area as of June 1, 1995;
    (ii) The cable system is not owned by, or under common ownership or 
control with, any of the 50 largest cable system operators in existence 
on June 1, 1995; and
    (iii) The cable system operates in a television market that was not 
in the top 100 television markets as of June 1, 1995.
    (5) Notwithstanding paragraphs (a) and (c) of this section, a local 
exchange carrier with less than $100,000,000 in annual operating 
revenues (or any affiliate of such carrier owned by, operated by, 
controlled by, or under common control with such carrier) may purchase 
or otherwise acquire more than a 10 percent financial interest in, or 
any management interest in, or enter into a joint venture or 
partnership with, any cable system within the local exchange carrier's 
telephone service area that serves no more than 20,000 cable 
subscribers, if no more than 12,000 of those subscribers live within an 
urbanized area, as defined by the Bureau of the Census.
    (6) The Commission may waive the restrictions of paragraphs (a), 
(b), or (c) of this section only if:
    (i) The Commission determines that, because of the nature of the 
market served by the affected cable system or facilities used to 
provide telephone exchange service:
    (A) The affected cable operator or local exchange carrier would be 
subjected to undue economic distress by the enforcement of such 
provisions;
    (B) The system or facilities would not be economically viable if 
such provisions were enforced; or
    (C) The anticompetitive effects of the proposed transaction are 
clearly outweighed in the public interest by the probable effect of the 
transaction in meeting the convenience and needs of the community to be 
served; and
    (ii) The local franchising authority approves of such waiver.
    (e) For purposes of this section, the term ``telephone service 
area'' when used in connection with a common carrier subject in whole 
or in part to title II of the Communications Act means the area within 
which such carrier provided telephone exchange service as of January 1, 
1993, but if any common carrier after such date transfers its telephone 
exchange service facilities to another common carrier, the area to 
which such facilities provide telephone exchange service shall be 
treated as part of the telephone service area of the acquiring common 
carrier and not of the selling common carrier.
    6. Section 76.605 is amended by revising paragraph (b) Note 6 to 
read as follows:


Sec. 76.605  Technical standards.

* * * * *
    Note 6: No State or franchising authority may prohibit, condition, 
or restrict a cable system's use of any type of subscriber equipment or 
any transmission technology.

    7. Section 76.701 is amended by adding new paragraph (i) to read as 
set forth below. Effective April 30, 1996, paragraph (i) is stayed.


Sec. 76.701  Leased access channels.

* * * * *
    (i) Paragraphs (a) through (h) of this section apply to any leased 
access program or portion of a leased access program which the cable 
operator reasonably believes contains obscenity, indecency, or nudity.
    8. Section 76.702 is revised to read as set forth below. Effective 
April 30, 1996, Sec. 76.702 is stayed.


Sec. 76.702  Public, educational and governmental access.

    Any cable operator may prohibit the use on its system of any 
channel capacity of any public, educational, or governmental access 
facility for any programming which contains nudity, obscene material or 
indecent material as defined in Sec. 76.701(g), or material soliciting 
or promoting unlawful conduct. For purposes of this section, ``material 
soliciting or promoting unlawful conduct'' shall mean material that is 
otherwise proscribed by law. A cable operator may require any access 
user, or access manager or administrator agreeing to assume the 
responsibility of certifying, to certify that its programming does not 
contain any of the materials described in this section and that 
reasonable efforts will be used to ensure that live programming does 
not contain such material.
    9. Section 76.905 is amended by adding new paragraph (b)(4) to read 
as follows:


Sec. 76.905  Standards for identification of cable systems subject to 
effective competition.

* * * * *
    (b) * * *
    (4) A local exchange carrier or its affiliate (or any multichannel 
video programming distributor using the facilities of such carrier or 
its affiliate) offers video programming services directly to 
subscribers by any means (other than direct-to-home satellite services) 
in the franchise area of an unaffiliated cable operator which is 
providing cable service in that franchise area, but only if the video 
programming services so offered in that area are comparable to the 
video programming services provided by the unaffiliated cable operator 
in that area.
* * * * *
    10. Section 76.933 is amended by revising paragraphs (e) and (g)(5) 
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 that sets its rates pursuant to the quarterly rate 
adjustment system pursuant to Sec. 76.922(d) 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. 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),(iii).
* * * * *
    (g) * * *
    (5) Notwithstanding paragraphs (a) through (f) 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. The increased rate 
attributable to Commission regulatory

[[Page 18979]]

fees or franchise fees shall be 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.
* * * * *
    11. Section 76.950 is revised to read as follows:


Sec. 76.950  Complaints regarding cable programming service rates.

    (a) A franchising authority may file with the Commission a 
complaint challenging the reasonableness of its cable operator's rate 
for cable programming service, or the reasonableness of the cable 
operator's charges for installation or rental of equipment used for the 
receipt of cable programming service. The franchise authority may file 
a complaint with the Commission only upon receipt of more than one 
subscriber complaint made to the franchise authority within 90 days 
after the effective date of the challenged rate increase.
    (b) The Commission shall not review any complaint with respect to 
cable programming services filed after March 31, 1999.
    12. Section 76.951 is revised to read as follows:


Sec. 76.951  Standard complaint form; other filing requirements.

    (a) Any complaint regarding a cable operator's rate for cable 
programming service or associated equipment must be filed using 
standard complaint form, FCC 329.
    (b) The following information must be provided on the standard 
complaint form:
    (1) The name, mailing address and phone number of the franchising 
authority that is filing the complaint;
    (2) The name, mailing address, and FCC community unit identifier of 
the relevant cable operator;
    (3) A description of the cable programming service or associated 
equipment involved and, if applicable, how the service or associated 
equipment has changed;
    (4) The current rate for the cable programming service or 
associated equipment at issue and, if the complainant is challenging 
the reasonableness of a rate increase, the most recent rate for the 
service or associated equipment immediately prior to the rate increase;
    (5) If the complainant is filing a corrected complaint, an 
indication of the date the complainant filed the prior complaint and 
the date the complainant received notification from the Commission that 
the prior complaint was defective;
    (6) A certification that a copy of the complaint, including all 
attachments, is being served contemporaneously via certified mail on 
the cable operator;
    (7) An indication that the complainant franchising authority 
received more than one subscriber complaint within 90 days of the 
operator's imposition of the rate in question; and
    (8) A certification that, to the best of the complainant's 
knowledge, the information provided on the form is true and correct.
    13. Section 76.953 is amended by revising paragraph (a) to read as 
follows:


Sec. 76.953  Limitation on filing a complaint.

    (a) Complaint regarding a rate change. A complaint alleging an 
unreasonable rate for cable programming service or associated equipment 
may be filed against a cable operator only in the event of a rate 
change, including an increase or decrease in rates, or a change in 
rates that results from a change in a system's service tiers. A rate 
change may involve an implicit rate increase (such as deleting channels 
from a tier without a corresponding lowering of the rate for that 
tier). A complaint regarding a rate change for cable programming 
service or associated equipment may be filed against a cable operator 
only in the event of a rate change.
 * * * * *
    14. Section 76.956 is amended by revising paragraph (a) to read as 
follows:


Sec. 76.956  Cable operator response.

    (a) Unless the Commission notifies a cable operator to the 
contrary, the cable operator must file with the Commission a response 
to the complaint filed on the applicable form, within 30 days of the 
date of service of the complaint. The response shall indicate when 
service occurred. Service by mail is complete upon mailing. See 
Sec. 1.47(f) of this chapter. The response shall include the 
information required by the appropriate FCC Form, including rate cards, 
channel line-ups, and an explanation of any discrepancy in the figures 
provided in these documents and the rate filing. The cable operator 
must serve its response on the complainant via first class mail.
* * * * *
    15. Section 76.964 is revised to read as follows:


Sec. 76.964  Written notification of changes in rates and services.

    (a) In addition to the requirement of Sec. 76.309(c)(3)(i)(B) 
regarding advance notification to customers of any changes in rates, 
programming services or channel positions, cable systems shall give 30 
days written notice to both subscribers and local franchising 
authorities before implementing any rate or service change. Such notice 
shall state the precise amount of any rate change and briefly explain 
in readily understandable fashion the cause of the rate change (e.g., 
inflation, changes in external costs or the addition/deletion of 
channels). When the change involves the addition or deletion of 
channels, each channel added or deleted must be separately identified. 
Notices to subscribers shall inform them of their right to file 
complaints about changes in cable programming service tier rates and 
services, shall state that the subscriber may file the complaint within 
90 days of the effective date of the rate change, and shall provide the 
address and phone number of the local franchising authority.
    (b) To the extent the operator is required to provide notice of 
service and rate changes to subscribers, the operator may provide such 
notice using any reasonable means at its sole discretion.
    (c) Notwithstanding any other provision of Part 76, a cable 
operator shall not be required to provide prior notice of any rate 
change that is the result of a regulatory fee, franchise fee, or any 
other fee, tax, assessment, or charge of any kind imposed by any 
Federal agency, State, or franchising authority on the transaction 
between the operator and the subscriber.
    16. Section 76.984 is amended by revising paragraph (c) to read as 
follows:


Sec. 76.984  Geographically uniform rate structure.

* * * * *
    (c) This section does not apply to:
    (1) A cable operator with respect to the provision of cable service 
over its cable system in any geographic area in which the video 
programming services offered by the operator in that area are subject 
to effective competition, or
    (2) Any video programming offered on a per channel or per program 
basis. Bulk discounts to multiple dwelling units shall not be subject 
to this section, except that a cable operator of a cable system that is 
not subject to effective

[[Page 18980]]

competition may not charge predatory prices to a multiple dwelling 
unit. Upon a prima facie showing by a complainant that there are 
reasonable grounds to believe that the discounted price is predatory, 
the cable system shall have the burden of showing that its discounted 
price is not predatory.
    17. A new Sec. 76.1004 is added to subpart O to read as follows:


Sec. 76.1004  Applicability of program access rules to common carriers 
and affiliates.

    Any provision that applies to a cable operator under Secs. 76.1000 
through 76.1003 shall also apply to a common carrier or its affiliate 
that provides video programming by any means directly to subscribers. 
Any such provision that applies to a satellite cable programming vendor 
in which a cable operator has an attributable interest shall apply to 
any satellite cable programming vendor in which such common carrier has 
an attributable interest. For the purposes of this section, two or 
fewer common officers or directors shall not by itself establish an 
attributable interest by a common carrier in a satellite cable 
programming vendor (or its parent company).
    18. A new subpart R is added to read as follows:

Subpart R--Telecommunications Act implementation

Sec. 76.1400  Purpose.
Sec. 76.1401  Effective competition and local exchange carriers.
Sec. 76.1402  CPST rate complaints.
Sec. 76.1403  Small cable operators.
Sec. 76.1404  Use of cable facilities by local exchange carriers.

Subpart R--Telecommunications Act implementation


Sec. 76.1400  Purpose.

    The rules and regulations set forth in this subpart provide 
procedures for administering certain aspects of cable regulation. These 
rules and regulations provide guidance for operators, subscribers and 
franchise authorities with respect to matters that are subject to 
immediate implementation under governing statutes but require specific 
regulatory procedures or definitions.


Sec. 76.1401   Effective competition and local exchange carriers.

    (a) As used in Sec. 76.905(b)(4), the term ``comparable'' 
programming means access to at least 12 channels of programming, at 
least some of which are local television broadcasting signals.
    (b) As used in Sec. 76.905(b)(4), the term ``affiliate'' means a 
person that (directly or indirectly) owns or controls, is owned or 
controlled by, or is under common ownership or control with another 
person. For purposes of the section, the term ``own'' means to own an 
equity interest (or the equivalent thereof) of more than 10 percent.
    (c) An operator meeting the relevant criteria under 
Sec. 76.905(b)(4), may, at any time, file a petition for a 
determination of effective competition with the Commission. The 
petition should set forth information supporting a determination that 
effective competition exists as defined in Sec. 76.905(d)(4).
    (d) Upon filing of a petition described in paragraph (c) of this 
section with the Commission, the operator filing the petition shall 
provide a copy of the petition to the local franchise authority. The 
Commission will issue a public notice of the petition's filing to allow 
interested parties to respond. The Commission may then issue an order 
granting or denying the petition. The Commission may issue an order 
directing one or more persons to produce information relevant to the 
petition's disposition.


Sec. 76.1402   CPST rate complaints.

    (a) A local franchise authority may file rate complaints with the 
Commission within 180 days of the effective date of a rate increase on 
the cable operator's cable programming services tier if within 90 days 
of that increase the local franchise authority receives more than one 
subscriber complaint concerning the increase.
    (b) Before filing a rate complaint with the Commission, the local 
franchise authority must first give the cable operator written notice, 
including a draft FCC Form 329, of the local franchise authority's 
intent to file the complaint. The local franchise authority must give 
an operator a minimum of 30 days to file with the local franchise 
authority the relevant FCC forms that must be filed to justify a rate 
increase or, where appropriate, certification that the operator is not 
subject to rate regulation. The operator must file a complete response 
with the local franchise authority within the time period specified by 
the local franchise authority. The local franchise authority shall file 
with the Commission the complaint and the operator's response to the 
Complaint. If the operator's response to the complaint asserts that the 
operator is exempt from rate regulation, the operator's response can be 
filed with the local franchise authority without filing specific FCC 
Forms.


Sec. 76.1403   Small cable operators.

    (a) Effective February 8, 1996, a small cable operator is exempt 
from rate regulation on its cable programming services tier, or on its 
basic service tier if that tier was the only service tier subject to 
rate regulation as of December 31, 1994, in any franchise area in which 
that operator services 50,000 or fewer subscribers.
    (b) A small cable operator is an operator who, directly or through 
an affiliate, serves in the aggregate fewer than 617,000 subscribers in 
the United States and whose annual revenues, when combined with the 
total annual revenues of all of its affiliates, do not exceed $250 
million in the aggregate.
    (c) As used in this section, an operator shall be deemed affiliated 
with another entity if that entity holds a 20 percent or greater equity 
interest, passive or active, in the operator or exercises de jure or de 
facto control over the operator.
    (d) Procedures. (1) If a small cable operator has only a single 
tier that is subject to regulation, the operator, at any time, may 
certify in writing to its local franchise authority that it meets all 
criteria necessary to qualify as a small operator. Upon request of the 
local franchising authority, the operator shall identify in writing all 
of its affiliates that provide cable service, the total subscriber base 
of itself and each affiliate, and the aggregate gross revenues of its 
cable and non-cable affiliates. Within 90 days of receiving the 
original certification, the local franchising authority shall determine 
whether the operator qualifies for deregulation and shall notify the 
operator in writing of its decision, although this 90-day period shall 
be tolled for so long as it takes the operator to respond to a proper 
request for information by the local franchising authority. If the 
local franchising authority finds that the operator does not qualify 
for deregulation, its notice shall state the grounds for that decision. 
The operator may appeal the local franchising authority's decision to 
the Commission within 30 days.
    (2) Once the operator has certified its eligibility for 
deregulation on the basic service tier, the local franchising authority 
shall not prohibit the operator from taking a rate increase and shall 
not order the operator to make any refunds unless and until the local 
franchising authority has rejected the certification in a final order 
that is no longer subject to appeal or that the Commission has 
affirmed. The operator shall be liable for refunds for revenues gained 
(beyond revenues that could be gained under regulation) as a result of 
any rate increase taken during the period in which it claimed to be 
deregulated, plus interest, in the event the operator is later

[[Page 18981]]

found not to be deregulated. The one-year limitation on refund 
liability will not be applicable during that period to ensure that the 
filing of an invalid small operator certification does not reduce any 
refund liability that the operator would otherwise incur.
    (3) Within 30 days of being served with a local franchising 
authority's notice that the local franchising authority intends to file 
a cable programming services tier rate complaint, an operator may 
certify to the local franchising authority that it meets the criteria 
for qualification as a small cable operator. This certification shall 
be filed in accordance with the cable programming services rate 
complaint procedure set forth in Sec. 76.1402. Absent a cable 
programming services rate complaint, the operator need not file for 
small cable operator certification in order to treat its cable 
programming services tier as deregulated.
    (4) If a pending CPST rate complaint was filed with the Commission 
before April 30, 1996 the operator should file its certification of 
small cable operator status directly with the Commission within 15 days 
of that date.


Sec. 76.1404   Use of cable facilities by local exchange carriers.

    For purposes of Sec. 76.505(d)(2), the Commission will determine 
whether use of a cable operator's facilities by a local exchange 
carrier is reasonably limited in scope and duration according to the 
following procedures:
    (a) Within 10 days of final execution of a contract permitting a 
local exchange carrier to use that part of the transmission facilities 
of a cable system extending from the last multi-user terminal to the 
premises of the end use, the parties shall submit a copy of such 
contract, along with an explanation of how such contract is reasonably 
limited in scope and duration, to the Commission for review. The 
parties shall serve a copy of this submission on the local franchising 
authority, along with a notice of the local franchising authority's 
right to file comments with the Commission consistent with Sec. 76.7.
    (b) Based on the record before it, the Commission shall determine 
whether the local exchange carrier's use of that part of the 
transmission facilities of a cable system extending from the last 
multi-use terminal to the premises of the end user is reasonably 
limited in scope and duration. In making this determination, the 
Commission will evaluate whether the proposed joint use of cable 
facilities promotes competition in both services and facilities, and 
encourages long-term investment in telecommunications infrastructure.

[FR Doc. 96-10173 Filed 4-26-96; 8:45 am]
BILLING CODE 6712-01-P