[Federal Register Volume 61, Number 123 (Tuesday, June 25, 1996)]
[Rules and Regulations]
[Pages 32707-32709]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16104]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[CS Docket No. 96-57; FCC 96-257]
Telecommunications Act of 1996
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Commission issues this Report and Order to implement
Section 623(a)(7)(A) of the Communications Act of 1934, as amended
(``Communications Act''). The Report and Order is necessary to fulfill
the statutory requirement in Section 301(j) of the Telecommunications
Act of 1996 (``1996 Act'') that the Commission allow cable operators to
aggregate, on a franchise, system, regional, or company level, their
equipment costs into broad categories regardless of the equipment's
level of functionality. In the Report and Order, the Commission also
issues final rules.
EFFECTIVE DATE: July 25, 1996.
FOR FURTHER INFORMATION CONTACT: Tim J. Bellamy, Cable Services Bureau,
(202) 418-7200.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Report and Order
in CS Docket No. 96-57, FCC 96-257, adopted June 6, 1996 and released
June 7, 1996. The complete text of this Report and Order is available
for inspection and copying during normal business hours in the FCC
Reference Center (room 239), 1919 M Street N.W., Washington, DC, and
also may be purchased from the Commission's copy contractor,
International Transcription Services, Inc. (``ITS Inc.'') at (202) 857-
3800, 2100 M Street N.W., Suite 140, Washington, DC 20017. This Report
and Order contains modified information collection requirements
approved by OMB under control number 3060-0703 for use through June 30,
1999.
Synopsis of Report and Order
1. In this Report and Order, the Commission amends its rules to
implement Section 301(j) of the 1996 Act which adds a new Section
623(a)(7) to the Communications Act. Section 301(j) of the 1996 Act
requires the Commission to allow cable operators to aggregate, on a
franchise, system, regional, or company level, their equipment costs
into broad categories regardless of the varying levels of functionality
of the equipment within each such broad category. That section also
provides that ``[s]uch aggregation shall not be permitted with respect
to equipment used by subscribers who receive only a rate regulated
basic tier.''
Discussion
A. Equipment Aggregation
2. Section 301(j) of the 1996 Act requires the Commission to allow
regulated operators to aggregate ``their [customer] equipment costs
into broad categories, such as converter boxes, regardless of the
varying levels of functionality of the equipment within each such broad
category.'' The Commission concludes, and amends its rules accordingly,
that Congress intended to permit operators to aggregate equipment costs
into broad categories, limited only by the requirement that equipment
so aggregated be of the same type. The language in Sections 76.923 (f)
and (g) of the Commission's rules that requires separate charges for
each significantly different type of remote control device, converter
box, and other customer equipment was eliminated. The ``primary
purpose'' test, proposed in the Notice of Proposed Rulemaking
(``NPRM''), 61 FR 13803 (March 28, 1996), for categorizing equipment
will not be used, nor will it be incorporated into our rules. The term
``level of functionality'' is not further defined.
3. Under the rules adopted in this Report and Order, there are
three types of customer equipment: converter boxes, remote controls and
inside wiring. Consistent with this fact, the Commission concluded that
costs of equipment used in the installation of initial and additional
outlets may be aggregated into the same broad category, inside wiring.
In addition, the Commission will maintain a flexible approach with
respect to categorization of new technology. Operators also have the
flexibility to average some equipment of the same type, but not all
equipment of that type. In other words, operators may choose how
broadly to categorize equipment if they choose to do so at all.
4. Though the Commission tentatively concluded otherwise in the
NPRM, Section 76.923(l) of the Commission's rules, which permits cost
aggregation specifically for small cable systems is not eliminated. The
Commission believes eliminating that section might increase regulatory
burdens on some smaller cable systems, a result Congress did not
intend.
[[Page 32708]]
B. Organizational Levels
5. Section 76.923(c) of the Commission's rules is amended to
specifically permit operators to aggregate its customer equipment costs
at the organizational level of its choosing, namely, the franchise,
system, regional, or company level. To the extent that current
Commission rules permit cost aggregation of equipment only in a manner
consistent with an operator's practices on April 3, 1993, that date
restriction is eliminated. Such a restriction might have improperly
prevented an operator from aggregating costs at higher organizational
levels, as specifically permitted in the 1996 Act.
6. The Commission concludes that Congress intended that
installation be subsumed under its general statutory reference to
equipment and that the same cost aggregation rules apply to both. Cable
operators are therefore permitted to aggregate installation costs at
the same organizational level at which the operator aggregates its
equipment costs. In addition, because Commission rules require
equipment rates to be based on actual cost, those rules are amended to
state that equipment and installation rates must be set at the same
organizational level at which an operator chooses to aggregate its
costs.
C. Basic-Only Subscriber Equipment
7. The 1996 Act prohibits ``[s]uch aggregation * * * with respect
to equipment used by subscribers who receive only a rate regulated
basic service tier.'' The Commission concludes that Congress was
concerned that basic-only subscribers not subsidize the costs of
equipment used by subscribers taking services in addition to basic. The
Commission further concludes that costs of equipment used by basic-only
subscribers may not be aggregated into broad categories. An operator is
permitted, however, to aggregate the costs of equipment used by basic
service-only customers at the same organizational level at which the
operator chooses to aggregate its other costs. Section 76.923(c) of the
Commission's rules is amended accordingly. As an alternative, for
purposes of establishing equipment rates for basic-only subscribers, an
operator may assume that all basic-only subscribers use equipment that
is the lowest level and least expensive model of equipment offered by
the operator, even if some basic-only subscribers actually have higher
level, more expensive equipment. Because there is not always one type
of equipment which may be deemed ``basic-only equipment,'' the
Commission shall also permit an operator to aggregate costs of types of
equipment used by non-basic-only subscribers with other non-basic-only
equipment when setting rates for non-basic-only subscribers, even if
the same type of equipment is also used by basic-only subscribers.
D. Equipment Rates Jurisdiction and Review
8. Local franchising authorities affected by the new cost
aggregation rules will continue to review the equipment and
installation rates and supporting aggregated cost data as part of the
review of the cable operators' rate justifications for basic rates,
with the operator retaining the right to appeal the local rate order to
the Commission.
E. FCC Form 1205
9. Because of the Commission's conclusions and revisions to its
rules, FCC Form 1205 is modified accordingly.
Procedural Provisions
A. Final Regulatory Flexibility Analysis
10. Pursuant to Section 603 of the Regulatory Flexibility Act, the
Commission has prepared the following final regulatory flexibility
analysis (``FRFA'') of the expected impact of these proposed policies
and rules on small entities. The Commission's final regulatory
flexibility analysis under the Regulatory Flexibility Act indicates
that the rule changes adopted in the Report and Order will not cause a
significant economic impact on a substantial number of small business
entities, as defined by Section 601(3) of the Regulatory Flexibility
Act and that any impact will be to give operators new, less burdensome
options to comply with our rules. The Commission is committed to
reducing the regulatory burdens on small cable operators whenever
possible, consistent with our other public interest responsibilities.
The Secretary shall send a copy of this Report and Order to the Chief
Counsel for Advocacy of the Small Business Administration in accordance
with Section 603(a) of the Regulatory Flexibility Act, 5 U.S.C.
Sections 601, et seq. (1981).
11. The Commission issues this Report and Order to effectuate the
changes needed to permit cable operators to aggregate equipment costs
into broad categories and at the organizational level of their choice,
as required by Section 301(j)) of the 1996 Act.
12. Objective. To implement Section 301(j) of the 1996 Act.
13. Legal Basis. Action adopted in this Report and Order is
contained in Section 301(j) of the 1996 Act.
14. Description, Potential Impact and Number of Small Entities
Affected. The rule changes in this Report and Order will not have a
significant effect on a substantial number of small entities. The rule
changes provide all regulated entities with new options and do not
require them to change the methodology by which they currently justify
equipment rates. Thus, any economic impact of the rule changes will be
positive.
15. Reporting, Recordkeeping and Other Compliance Requirements.
None.
16. Federal Rules which Overlap, Duplicate of Conflict with these
Rules. None
17. Any Significant Alternatives Minimizing Impact on Small
Entities and Consistent with Stated Objectives. None.
C. Paperwork Reduction Act
18. Final Paperwork Reduction Act of 1995 Analysis. This Report and
Order has been analyzed with respect to the Paperwork Reduction Act of
1995 and found to contain modified information collection requirements
on the public. The information collection requirements contained herein
have been approved by the Office of Management and Budget under control
number 3060-0703 for use through June 30, 1999.
Ordering Clauses
19. Accordingly, it is ordered, pursuant to Sections 4(i), 4(j) and
623(a) of the Communications Act of 1934, as amended, 47 U.S.C.
Secs. 154(i), 154(j) and 543, the rules, requirements and policies
discussed in this Report and Order are adopted and Sections 76.923(a),
(c), (f), (g) and (m) of the Commission's rules, 47 CFR
Secs. 76.923(a), (c), (f), (g) and (m), are amended as set forth below.
20. It is further ordered that the requirements and regulations
established in this decision shall become effective July 25, 1996.
21. It is further ordered that the Secretary shall send a copy of
this Report and Order, including the Final Regulatory Flexibility
Analysis, to the Chief Counsel for Advocacy of the Small Business
Administration in accordance with paragraph 603(a) of the Regulatory
Flexibility Act, Public Law No. 96-354, 94 Stat. 1164, 5 U.S.C.
Secs. et seq. (1981).
List of Subjects in 47 CFR Part 76
Cable television.
[[Page 32709]]
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:
PART 76--CABLE TELEVISION SERVICE
1. The authority citation for Part 76 continues to read as follows:
Authority: 47 U.S.C. Secs. 151, 152, 153, 154, 301, 302, 303,
303a, 307, 308, 309, 312, 315, 317, 325, 503, 521, 522, 531, 532,
533, 534, 535, 536, 537, 543, 544, 544a, 545, 548, 552, 554, 556,
558, 560, 561, 571, 572, 573.
2. Section 76.923 is amended by revising paragraphs (a), (c), (f),
(g) and (m) to read as follows:
Sec. 76.923 Rates for equipment and installation used to receive the
basic service tier.
(a) Scope. (1) The equipment regulated under this section consists
of all equipment in a subscriber's home, provided and maintained by the
operator, that is used to receive the basic service tier, regardless of
whether such equipment is additionally used to receive other tiers of
regulated programming service and/or unregulated service. Such
equipment shall include, but is not limited to:
(i) Converter boxes;
(ii) Remote control units; and
(iii) Inside wiring.
(2) Subscriber charges for such equipment shall not exceed charges
based on actual costs in accordance with the requirements set forth in
this section.
* * * * *
(c) Equipment basket. A cable operator shall establish an Equipment
Basket, which shall include all costs associated with providing
customer equipment and installation under this section. Equipment
Basket costs shall be limited to the direct and indirect material and
labor costs of providing, leasing, installing, repairing, and servicing
customer equipment, as determined in accordance with the cost
accounting and cost allocation requirements of Sec. 76.924, except that
operators do not have to aggregate costs in a manner consistent with
the accounting practices of the operator on April 3, 1993. The
Equipment Basket shall not include general administrative overhead
including marketing expenses. The Equipment Basket shall include a
reasonable profit.
(1) Customer equipment. Costs of customer equipment included in the
Equipment Basket may be aggregated, on a franchise, system, regional,
or company level, into broad categories. Except to the extent indicated
in paragraph (c)(2) of this section, such categorization may be made,
provided that each category includes only equipment of the same type,
regardless of the levels of functionality of the equipment within each
such broad category. When submitting its equipment costs based on
average charges, the cable operator must provide a general description
of the averaging methodology employed and a justification that its
averaging methodology produces reasonable equipment rates. Equipment
rates should be set at the same organizational level at which an
operator aggregates its costs.
(2) Basic service tier only equipment. Costs of customer equipment
used by basic-only subscribers may not be aggregated with the costs of
equipment used by non-basic-only subscribers. Costs of customer
equipment used by basic-only subscribers may, however, be aggregated,
consistent with an operator's aggregation under paragraph (c)(1) of
this section, on a franchise, system, regional, or company level. The
prohibition against aggregation applies to subscribers, not to a
particular type of equipment. Alternatively, operators may base its
basic-only subscriber cost aggregation on the assumption that all
basic-only subscribers use equipment that is the lowest level and least
expensive model of equipment offered by the operator, even if some
basic-only subscribers actually have higher level, more expensive
equipment.
(3) Installation costs. Installation costs, consistent with an
operator's aggregation under paragraph (c)(1) of this section, may be
aggregated, on a franchise, system, regional, or company level. When
submitting its installation costs based on average charges, the cable
operator must provide a general description of the averaging
methodology employed and a justification that its averaging methodology
produces reasonable equipment rates. Installation rates should be set
at the same organizational level at which an operator aggregates its
costs.
* * * * *
(f) Remote charges. Monthly charges for rental of a remote control
unit shall consist of the average annual unit purchase cost of remotes
leased, including acquisition price and incidental costs such as sales
tax, financing and storage up to the time it is provided to the
customer, added to the product of the HSC times the average number of
hours annually repairing or servicing a remote, divided by 12 to
determine the monthly lease rate for a remote according to the
following formula:
[GRAPHIC] [TIFF OMITTED] TR25JN96.006
Where, HR=average hours repair per year; and UCE=average annual unit
cost of remote.
(g) Other equipment charges. The monthly charge for rental of
converter boxes and other customer equipment shall be calculated in the
same manner as for remote control units. Separate charges may be
established for each category of other customer equipment.
* * * * *
(m) Cable operators shall set charges for equipment and
installations to recover Equipment Basket costs. Such charges shall be
set, consistent with the level at which Equipment Basket costs are
aggregated as provided in Sec. 76.923(c). Cable operators shall
maintain adequate documentation to demonstrate that charges for the
sale and lease of equipment and for installations have been developed
in accordance with the rules set forth in this section.
* * * * *
[FR Doc. 96-16104 Filed 6-24-96; 8:45 am]
BILLING CODE 6712-01-P