[Federal Register Volume 62, Number 29 (Wednesday, February 12, 1997)]
[Rules and Regulations]
[Pages 6491-6496]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3454]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MM Docket No. 92-266; FCC 96-491]


Cable Television Consumer Protection and Competition Act of 1992

AGENCY: Federal Communications Commission.

ACTION: Final Rule.

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SUMMARY: In this Memorandum Opinion and Order, we adopt rule changes 
responsive to the decision of the court in Time Warner Entertainment 
Co. v. FCC, 56 F.3d 151 (D.C. Cir. 1995). In its decision, the court 
considered rules adopted by the Commission to implement rate regulation 
and related provisions of the Cable Television Consumer Protection and 
Competition Act of 1992 (``1992 Cable Act''). The rules were largely 
affirmed by the court. In five discrete areas, however, the court 
reversed the Commission's implementing decisions and rules. The order 
is intended to conform the rules to the court's decision.
DATES: The amendments to 47 CFR Sections 76.905 and 76.921 shall become 
effective March 14, 1997, and the amendments to 47 CFR Sections 76.922 
and 76.913 will become effective upon approval by the Office of 
Management and Budget of the information collection requirements, but 
no sooner than March 14, 1997. The Commission will publish a document 
at a later date establishing this effective date. Written comments by 
the public on the modified information collections are due April 14, 
1997.
ADDRESSES: A copy of any comments on the information collections 
contained herein should be submitted to Dorothy Conway, Federal 
Communications Commission, Room 234, 1919 M Street, N.W., Washington, 
DC 20554, or via the Internet to [email protected].

FOR FURTHER INFORMATION CONTACT: For additional information concerning 
this rulemaking contact Meryl S. Icove or Hugh Boyle, Cable Services 
Bureau, (202) 418-7200. For additional information concerning the 
information collections contained in this rulemaking contact Dorothy 
Conway at (202) 418-0217, or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a synopsis of the Memorandum Opinion 
and Order in MM Docket No. 96-266, FCC 96-491, adopted December 23, 
1996 and released December 31, 1996. The complete text of this Order is 
available for inspection and copying during normal business hours in 
the FCC Reference Center (room 239), 1919 M Street, NW., 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, NW., Suite 140, Washington, DC 20017.

PAPERWORK REDUCTION ACT: This rulemaking contains modified information 
collections. The Commission, as part of its continuing effort to reduce 
paperwork burdens, invites the general public to comment on the 
information collections contained in this rulemaking, as required by 
the Paperwork Reduction Act of 1995. Public comments are due April 14, 
1997. Comments should address: (a) whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information 
collected; and (d) ways to minimize the burden of the collection of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology.
    OMB Approval Number: 3060-0561
    Title: Section 76.913 Assumption of jurisdiction by the Commission.
    Type of Review: Revision of existing collection.
    Respondents: State, local and tribal governments.
    Number of Respondents: 50.
    Estimated Time Per Response: 8 hours.
    Total Annual Burden: 400 hours.
    Estimated costs per respondent: $500. Postage and stationery costs 
are estimated at an average of $10 per petition. 50 petitions  x  $10 = 
$500.
    Needs and Uses: 76.913 permits local franchising authorities 
(``LFAs'') that are unable to meet certification standards to petition 
the Commission to regulate the rates for basic cable service and 
associated equipment of their respective franchisees. The Commission 
has amended its rules as follows: If the local franchising authority 
lacks the resources to administer rate regulation, its petition no 
longer must be accompanied by a demonstration that franchise fees are 
insufficient to fund any additional activities required to administer 
basic service rate regulation. Elimination of this requirement 
constitutes a modified information collection; all other requirements 
remain intact.
    The information in the petitions is used by Commission staff to 
identify situations where it should exercise jurisdiction over basic 
service and equipment rates in place of a local franchising authority. 
If the information were not collected, the basic cable rates of some 
franchise areas not subject to effective competition would remain 
unregulated in contravention of the goals of the 1992 Cable Act.
    OMB Approval Number: 3060-0607.
    Title: Section 76.922 Rates for Basic Service Tiers and Cable 
Programming Tiers.
    Type of Review: Revision of existing collection.

[[Page 6492]]

    Respondents: Businesses and other for profit entities; State, local 
and tribal governments.
    Number of Respondents: 2,200 operators filing gap period rate 
adjustments + 1,100 LFAs reviewing such adjustments + 25 small systems 
opting for the streamlined rate reduction process + 600 headend upgrade 
certifications = 3,925.
    Estimated Time Per Response: 1-12 hours.
    Total Annual Burden: 4,400 + 2,200 + 300 + 600 = 7,500 hours as 
explained below.
    76.922(d)(3)(vii) contains a one-time only information collection 
requirement. We estimate that the average burden for operators to 
supply gap period data on their next rate adjustment filing will be 2 
hours per filing and that there will be approximately 2,200 such 
filings made in the next year (1,100 filed with the Commission, 1,100 
filed with LFAs). The burden to operators to file = 2,200 filings  x  2 
hours = 4,400 hours. The burden to LFAs to review this information is 
estimated to be an average of 2 hours per filing, therefore 1,100 
filings reviewed by LFAs  x  2 hours = 2,200 hours.
    76.922(b)(5) streamlined rate reduction process. We estimate that 
25 systems per year use this process. The average burden for undergoing 
all aspects of each streamlined rate reduction process (all rate 
calculation, notice and reporting requirements) is estimated to be 12 
hours per respondent. 25 systems  x  12 hours = 300 hours.
    76.922(e)(7) headend upgrade certification process. Qualifying 
cable systems owned by small cable companies may certify their 
eligibility to use the Commission's headend upgrade incentive. The 
average burden to complete the certification process is estimated to be 
1 hour. We estimate 600 certifications are currently filed per year. 
600 certifications  x  1 hour = 600 hours.
    Estimated costs per respondent: $250 + $3,000 = $3,250 for all 
respondents as explained as follows. There are no costs incurred for 
gap period rate adjustments because they are made as part of regular 
rate adjustment filings. Postage and stationery costs are estimated at 
an average of $10 per each complete streamlined rate reduction process. 
25  x  $10 = $250. Postage and stationery costs are estimated at an 
average of $5 per each headend upgrade certification. 600  x  $5 = 
$3,000.
    Needs and Uses: 76.922(d)(3)(vii) has been amended to permit cable 
operators to adjust their current permissible rates to reflect the 
rates the operators would currently be charging if they had been 
permitted to include increases in external costs occurring between 
September 30, 1992 and their initial date of regulation (this period of 
time is also referred to as the ``gap period'') reduced by inflation 
increases already received with respect to those costs. The increase in 
rates due to external cost changes that occurred during the gap period 
shall be reflected in the cable operator's next rate adjustment filing 
in accordance with the Commission's current rules. The burden imposed 
by reporting gap period cost data is reported under this OMB control 
number 3060-0607 for the following reasons: 1) to avoid confusing this 
requirement as being an additional filing requirement, 2) because it is 
a temporary one-time only information collection, and 3) because 
neither of the Commission's cable rate adjustment forms [FCC Form 1210 
approved under OMB control number 3060-0595 and FCC Form 1240 approved 
under OMB control number 3060-0601] have been modified to furnish this 
data.
    All other information collection requirements contained in 76.922 
and reported under this OMB control number 3060-0607 remain intact. 
Those requirements are found in 76.922(b)(5) (Streamlined rate 
reduction process) and 76.922(e)(7) (Headend upgrades).
    76.922(b)(5) provides that an eligible small system that elects to 
use the streamlined rate reduction process must implement the required 
rate reductions and provide written notice of such reductions to local 
subscribers, the local franchising authority (``LFA''), and the 
Commission.
    76.922(e)(7) permits qualified small systems and small systems 
owned by small multiple system operators to increase rates to recover 
the actual cost of the headend equipment required to add up to seven 
channels to Cable Programming Service Tiers (``CPSTs'') and single-tier 
systems, not to exceed $5,000 per additional channel. These rate 
increases may occur between January 1, 1995 and December 31, 1997, as a 
result of additional channels offered on those tiers after May 14, 
1994. In order to recover costs for headend equipment pursuant to this 
paragraph, systems must certify to the Commission their eligibility to 
use this paragraph, and the level of costs they have actually incurred 
for adding the headend equipment and the depreciation schedule for the 
equipment.

Synopsis of Order

    1. In this Memorandum Opinion and Order, we adopt rule changes 
responsive to the decision of the court in Time Warner Entertainment 
Co. v. FCC, 56 F.3d 151 (D.C. Cir. 1995). In its decision, the court 
considered rules adopted by the Commission to implement rate regulation 
and related provisions of the Cable Television Consumer Protection and 
Competition Act of 1992 (``1992 Cable Act''). The rules were largely 
affirmed by the court. In five discrete areas, however, the court 
reversed the Commission's implementing decisions and rules. First, the 
court concluded that the Commission construed the term ``effective 
competition'' too narrowly in terms of the entities that could be 
counted as providing direct competition to existing cable operators. 
Second, the Commission erred in concluding that the requirement for a 
uniform rate structure applies to all systems, including those facing 
effective competition and not otherwise subject to rate regulation 
under the statute. Third, the Commission's conclusion that the 
statute's tier buy-through provision applies to systems subject to 
effective competition was found to conflict with the structure and the 
language of the statute. Fourth, the Commission was found to have 
exceeded its authority by establishing a presumption that franchising 
authorities seeking to cede the basic rate regulation function to the 
Commission could themselves fund rate regulation locally if they were 
collecting franchise fees. Fifth, the court vacated the Commission's 
rules relating to so-called gap period external costs. The following 
sections address each of these findings in relation to our previous 
decisions and rules.
    2. Effective Competition. The 1992 Cable Act defined three types of 
systems that are subject to ``effective competition'' and therefore 
exempt from rate regulation: low penetration systems, competing 
provider systems, and municipal systems.\1\ Effective competition 
resulting from a competing provider exists if the franchise area is--
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    \1\ The definition of effective competition is found in 47 CFR 
Sec. 543(l)(1). The Telecommunications Act of 1996 amends Section 
543(l)(1) by adding a subsection (D), which contains a fourth test 
for effective competition. See Telecommunications Act of 1996, 
Section 301(b)(3). The Commission has incorporated this new test 
into its rules. See 47 CFR Sec. 76.905(b)(4). See also 
Implementation of Cable Act Reform Provisions of the 
Telecommunications Act of 1996, Order and Notice of Proposed 
Rulemaking (``Cable Act Reform''), CS Docket No. 96-85, FCC 96-154 
(released April 9, 1996), 11 FCC Rcd 5937 (1996), 61 FR 19013 (April 
30, 1996); 47 CFR Sec. 76.1401. All references herein to Section 
543(l)(1) do not include this amendment.
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    (i) served by at least two unaffiliated multichannel video 
programming distributors each of which offers

[[Page 6493]]

comparable video 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 percent 
of the households in the franchise area * * *.
    On review, the court concluded that, although the Commission's 
definition of competing providers was theoretically sound, it 
conflicted with the plain language of the statute, and Congress did not 
limit the 15% threshold in Section 543(l)(1)(B)(ii) to those cable 
systems that satisfy the requirements of Section 543(l)(1)(B)(i).
    3. In response to the court's decision we are amending the rules 
relating to the definition of effective competition as reflected below. 
With this change in place, a demonstration of ``competing provider'' 
effective competition requires only evidence that the franchise area is 
served by at least two unaffiliated multichannel video programming 
distributors each of which offers comparable video programming to at 
least 50% of the households in the franchise area and that 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.
    4. Uniform Rate Structure. Section 543(d) 2 provides:
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    \2\ Section 301(b)(2) of the Telecommunications Act of 1996 
amends Section 543(d). All references herein to Section 543(d) do 
not include this amendment.
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    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.
    The Commission initially determined that the focus of this uniform 
rate structure provision was properly ``on regulated systems in 
regulated markets,'' that is, systems that did not face effective 
competition as defined by the 1992 Cable Act. On reconsideration, 
however, the Commission decided that the uniform rate structure 
provision applied not only to regulated systems, but also to systems 
subject to effective competition and otherwise exempt from rate 
regulation under the 1992 Cable Act. The Commission reasoned that the 
harms targeted by the uniform rate provision--``charging different 
subscribers different rates with no economic justification and unfairly 
undercutting competitors' prices''--exist equally in areas where 
``effective competition'' exists.
    5. The court concluded the latter interpretation conflicts with the 
language and legislative purpose of the 1992 Cable Act. Because it 
found that Section 543(d) regulates rates within the meaning of Section 
543(a)(2), the court concluded that the Commission's uniform rate 
structure regulation was contrary to the statute insofar as it applied 
to cable operators subject to ``effective competition.'' The court 
stated that, by requiring competitive systems to charge uniform rates, 
the Commission undermined a hallmark purpose of the 1992 Cable Act, 
which is to allow market forces to determine the rates charged by cable 
systems that are subject to ``effective competition'' as defined by 
Congress.
    6. Section 310(b)(2) of the Telecommunications Act of 1996 amended 
Section 543(d) by adding, inter alia, the following language to the end 
of that section:
    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, * * *.
    The Commission has amended its rules to reflect this statutory 
amendment, and in so doing has complied with the court's decision with 
respect to the uniform rates requirement.
    7. Tier Buy-through. In an order, the Commission concluded that the 
tier buy-through provision applies not only to regulated systems, but 
also to systems subject to ``effective competition'' and thus not 
subject to rate regulation under the 1992 Cable Act. The court found 
that the Commission's interpretation of the tier buy-through provision 
was not permissible under the 1992 Cable Act. In response to the 
court's decision, we are amending our rules as reflected in below to 
provide that the tier buy-through requirement applies only to systems 
not subject to effective competition.
    8. Franchising Authorities/Franchise Fees. The Commission, 
reasoning that some franchising authorities might wish to have basic 
rates regulated but lack the legal power or resources to do so at the 
local level, concluded that its general mandate to ``ensure that the 
rates for the basic service tier are reasonable'' empowered it to 
regulate basic rates upon the request of such franchising authorities. 
Rather than requiring these franchising authorities to file a 
certification application that was intended to be denied in order to 
establish their lack of power or resources, the Commission decided to 
allow the authorities affirmatively to request federal regulation of 
basic rates. However, the Commission decided to require a showing that 
the franchising authority could not afford to regulate when a 
franchising authority that collects franchise fees claims financial 
incapacity. The Commission established a presumption that franchising 
authorities receiving franchise fees have the resources to regulate and 
required any franchising authority seeking to have the Commission 
exercise jurisdiction over basic rates to rebut this presumption with 
evidence showing why the proceeds of the franchise fees could not be 
used to cover the cost of rate regulation.
    9. The court concluded, however, that the Commission erred in 
establishing this presumption because the presumption implies that the 
franchising authority must use any available franchise fees for 
purposes of rate regulation. In response to the court's decision, we 
will no longer establish a relationship between the franchising 
authority's ability to regulate and its franchise fee collection. The 
Commission will continue, however, to exercise authority over the basic 
tier in response to a franchising authority's request only when 
justified by a franchising authority's financial or legal inability to 
proceed on its own. We are amending our rules as reflected below to 
incorporate the court's decision regarding franchising authorities 
requests for Commission assumption of jurisdiction.
    10 External Costs Treatment. The court held that the Commission's 
decision to preclude a rate adjustment designed to recover changes in 
external costs increases resulting from the period between September 
30, 1992 and an operator's initial date of regulation was arbitrary and 
capricious. In response to the court's decision, we are amending our 
rules to permit operators to adjust their current permissible rates to 
reflect the rates the operators would currently be charging if they had 
been permitted to include increases in external costs occurring between 
September 30, 1992 and their initial date of regulation reduced by 
inflation increases already received with respect to those costs.
    11. The operator will calculate an adjustment which will be 
incorporated into a Form 1210 or Form 1240, and which will be added to 
the operator's rate. To calculate the adjustment, the operator will use 
information from a previously filed Form 1200. A more detailed 
explanation of how to make the

[[Page 6494]]

adjustment is provided below. The general methodology is as follows: 
the operator should calculate and subtract (a) the ``average monthly 
external cost per subscriber per tier as of September 30, 1992, as 
adjusted for inflation through the initial date of regulation'' from 
(b) the ``average monthly external cost per subscriber per tier as of 
the initial date of regulation.'' To determine (a), the operator would 
increase the average monthly external cost per subscriber per tier as 
of September 30, 1992 by the same inflation factor as was applied in 
the calculation of initial maximum permitted rates. The difference 
between (a) and (b) is the allowed adjustment. When using Form 1210 or 
Form 1240 to reflect these adjustments, the operator shall disclose 
that the adjustment has been included in rates and shall provide its 
calculations.

Final Regulatory Flexibility Act Analysis.

    12. As required by Section 603 of the Regulatory Flexibility Act, 5 
U.S.C. Sec. 603 (RFA), an Initial Regulatory Flexibility Analysis 
(IRFA) was incorporated in the Notice of Proposed Rulemaking in MM 
Docket 92-266 and in several further notices of proposed rulemaking. 
The Commission therein sought written public comments on the proposals, 
including comments on the IRFAs, and addressed these comments in 
previous orders. See, e.g., 8 FCC Rcd 5631, 5978 (1993), 58 FR 29736 
(May 21, 1993); 9 FCC Rcd 1164, 1253 (1993), 58 FR 46718 (September 2, 
1993); 9 FCC Rcd 4119, 4249 (1994), 59 FR 17943 (April 15, 1994). This 
FRFA thus addresses the impact of regulations on small entitities only 
as adopted or modified in the action and not as adopted or modified in 
earlier stages of this rulemaking proceeding. The Commission's Final 
Regulatory Flexibility Analysis (FRFA) conforms to the RFA, as amended 
by the Contract with America Advancement Act of 1996 (CWAAA), Public 
Law No. 104-121, 110 Stat. 847.
    13. Need and Purpose for Action: This action is taken to conform 
the Commission's rules to the court's decision in Time Warner 
Entertainment Co. v. FCC, 56 F.3d 151 (D.C. Cir. 1995).
    14. Summary of Issues Raised by the Public Comments in Response to 
the Initial Regulatory Flexibility Analysis: This order is adopted in 
direct response to a judicial remand and has been adopted without a 
further notice and comment cycle.
    15. Description and Estimate of the Number of Small Entities 
Impacted: Cable Systems: SBA has developed a definition of small 
entities for cable and other pay television services, which includes 
all such companies generating less than $11 million in revenue 
annually. This definition includes cable system operators, closed 
circuit television services, direct broadcast satellite services, 
multipoint distribution systems, satellite master antenna systems and 
subscription television services. According to the Census Bureau, there 
were 1,323 such cable and other pay television services generating less 
than $11 million in revenue that were in operation for at least one 
year at the end of 1992. The Commission has developed its own 
definition of a small cable system operator for the purposes of rate 
regulation. Under the Commission's rules, a ``small cable company,'' is 
one serving fewer than 400,000 subscribers nationwide. Based on our 
most recent information, we estimate that there were 1,439 cable 
operators that qualified as small cable system operators at the end of 
1995. Since then, some of those companies may have grown to serve over 
400,000 subscribers, and others may have been involved in transactions 
that caused them to be combined with other cable operators. 
Consequently, we estimate that there are fewer than 1,439 small entity 
cable system operators that may be affected by the decisions and rules 
adopted in this Memorandum Opinion and Order. The Communications Act 
also contains a definition of a small cable system operator, which is 
``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.'' The Commission 
has determined that there are 61,700,000 subscribers in the United 
States. Therefore, we found that 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. Based on available data, 
we find that the number of cable operators serving 617,000 subscribers 
or less totals 1,450. Although it seems certain that some of these 
cable system operators are affiliated with entities whose gross annual 
revenues exceed $250,000,000, we are unable at this time to estimate 
with greater precision the number of cable system operators that would 
qualify as small cable operators under the definition in the 
Communications Act.
    16. Municipalities: The term ``small governmental jurisdiction'' is 
defined as ``governments of * * * districts, with a population of less 
than fifty thousand.'' There are 85,006 governmental entities in the 
United States. This number includes such entities as states, counties, 
cities, utility districts and school districts. We note that any 
official actions with respect to cable systems will typically be 
undertaken by LFAs, which primarily consist of counties, cities and 
towns. Of the 85,006 governmental entities, 38,978 are counties, cities 
and towns. The remainder are primarily utility districts, school 
districts, and states, which typically are not LFAs. Of the 38,978 
counties, cities and towns, 37,566 or 96%, have populations of fewer 
than 50,000. Thus, approximately 37,500 ``small governmental 
jurisdictions'' may be affected by the rules adopted in this Memorandum 
Opinion and Order.
    17. Reporting, Recordkeeping, and Other Compliance Requirements: 
The rules do not establish any filing requirements. However, an 
operator choosing to adjust its rates to account for changes in its 
external costs as permitted by the rule adopted here will have to make 
additional calculations in conjunction with the filing of its form. The 
franshising authority will review these calculations in conjunction 
with its review of the form. The rule will not require any additional 
special skills beyond any which are already needed in the cable rate 
regulatory context.
    18. Steps Taken to Minimize the Economic Impact on Small Entities 
and Significant Alternatives Rejected: The rule changes adopted in this 
Order are required by the court's decision, and, if anything, they 
result in decreasing the regulatory burdens on cable operators. If the 
revised interpretation of the statutory definition of effective 
competition results in a system being subject to effective competition, 
then the system will not be subject to rate regulation. The amendment 
to the tier buy-through rule provides more flexibility for cable 
systems subject to effective competition. The requirement that the 
Commission not establish a relationship between the franchising 
authority's ability to regulate and its franchise fee collection may 
simplify the franchising authority's request that the Commission assume 
jurisdiction. The cable operator may choose whether or not to adjust 
its rate to account for changes in external costs as permitted by the 
rule. If a system is regulated and it chooses to adjust its rate, it 
can do so the next time it is scheduled to file a form.

[[Page 6495]]

    19. Report to Congress: The Commission shall send a copy of this 
Final Regulatory Flexibility Analysis, along with this Memorandum 
Opinion and Order, in a report to Congress pursuant to the Small 
Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 
Sec. 801(a)(1)(A). A copy of this FRFA will also be published in the 
Federal Register.
    20. Accordingly, it is ordered that, pursuant to the authority 
contained in Section 4(i) and (j) and 303 of the Communications Act of 
1934, as amended, and the Cable Television Consumer Protection and 
Competition Act of 1992, Public Law No. 102-385, Part 76 of the 
Commission Rules, 47 CFR Part 76, IS AMENDED as set forth below.
    21. It is further ordered that the amendments to 47 CFR Sections 
76.905 and 76.921 shall become effective March 14, 1997, and the 
amendments to 47 CFR Sections 76.922 and 76.913 will become effective 
upon approval by the Office of Managment and Budget of the information 
collection requirements, but no sooner than March 14, 1997.

List of Subjects in 47 CFR Part 76

    Cable television.

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

Rule Changes

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

PART 76--CABLE TELEVISION SERVICE

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

    Authority: 47 U.S.C. 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 76.905 is amended by revising paragraph (f) to read as 
follows:


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

* * * * *
    (f) For purposes of determining the number of households 
subscribing to the services of a multichannel video programming 
distributor other than the largest multichannel video programming 
distributor, under paragraph (b)(2)(ii) of this section, the number of 
subscribers of all multichannel video programming distributors that 
offer service in the franchise area will be aggregated.
* * * * *
    3. Section 76.913 is amended by revising paragraph (b)(1) to read 
as follows:


Sec. 76.913  Assumption of jurisdiction by the Commission.

* * * * *
    (b) * * *
    (1) The franchising authority lacks the resources to administer 
rate regulation.
* * * * *
    4. Section 76.921 is revised to read as follows:


Sec. 76.921  Buy-through of other tiers prohibited.

    (a) No cable system operator, other than an operator subject to 
effective competition, may require the subscription to any tier other 
than the basic service tier as a condition of subscription to video 
programming offered on a per channel or per program charge basis. A 
cable operator may, however, require the subscription to one or more 
tiers of cable programming services as a condition of access to one or 
more tiers of cable programming services.
    (b) A cable operator not subject to effective competition may not 
discriminate between subscribers to the basic service tier and other 
subscribers with regard to the rates charged for video programming 
offered on a per-channel or per-program charge basis.
    (c) With respect to cable systems not subject to effective 
competition, prior to October 5, 2002, the provisions of paragraph (a) 
of this section shall not apply to any cable system that lacks the 
capacity to offer basic service and all programming distributed on a 
per channel or per program basis without also providing other 
intermediate tiers of service:
    (1) By controlling subscriber access to nonbasic channels of 
service through addressable equipment electronically controlled from a 
central control point; or
    (2) Through the installation, noninstallation, or removal of 
frequency filters (traps) at the premises of subscribers without other 
alteration in system configuration or design and without causing 
degradation in the technical quality of service provided.
    (d) With respect to cable systems not subject to effective 
competition, any retiering of channels or services that is not 
undertaken in order to accomplish legitimate regulatory, technical, or 
customer service objectives and that is intended to frustrate or has 
the effect of frustrating compliance with paragraphs (a) through (c) of 
this section is prohibited.
    5. Section 76.922 is amended by revising paragraph (f)(4) to read 
as follows:


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

* * * * *
    (f) * * *
    (4) The starting date for adjustments on account of external costs 
for a tier of regulated programming service shall be the earlier of the 
initial date of regulation for any basic or cable service tier or 
February 28, 1994. Except, for regulated FCC Form 1200 rates set on the 
basis of rates at September 30, 1992 (using either March 31, 1994 rates 
initially determined from FCC Form 393 Worksheet 2 or using Form 1200 
Full Reduction Rates from Line J6), the starting date shall be 
September 30, 1992. Operators in this latter group may make adjustment 
for changes in external costs for the period between September 30, 
1992, and the initial date of regulation or February 28, 1994, 
whichever is applicable, based either on changes in the GNP-PI over 
that period or on the actual change in the external costs over that 
period. Thereafter, adjustment for external costs may be made on the 
basis of actual changes in external costs only.
* * * * *
    This attachment will not be published in the Code of Federal 
Regulations.

Attachment

    This adjustment may be made only to rates set under the 
benchmark methodology on the basis of rates in effect at September 
30, 1992 (using either March 31, 1994 rates initially determined 
from FCC Form 393 Worksheet 2 or using Form 1200 Full Reduction 
Rates from Line J6). This is a one-time adjustment to rates and may 
be made on a FCC Form 1210 or FCC Form 1240. To adjust such rates to 
include fully the change in external costs occurring between 
September 30, 1992 and the initial date of regulation or February 
28, 1994, whichever is earlier, the operator will make the 
adjustments pursuant to the procedure outlined below.
    Step 1. Identify the average external cost per subscriber per 
tier as of the initial date of regulation or February 28, 1994, as 
applicable.
    This information is found on Line B7 of Form 1200.
    Step 2. Identify the average monthly external cost per 
subscriber per tier as of September 30, 1992.
    This should be calculated using the same methodology used to 
determine the external cost per subscriber per tier on the initial 
date of regulation, and the operator shall therefore follow the 
instructions for Lines B2 through B7 on FCC Form 1200. In such case 
``Beginning Date'' shall be considered to be September 30, 1992 for 
purposes of following these instructions.

[[Page 6496]]

    Step 3. Determine the inflation factor applied in the 
calculation of initial maximum permitted rates to adjust for 
inflation for the period from September 30, 1992 to the initial date 
of regulation or February 28, 1994, as applicable.
    If the rates being adjusted were determined on FCC Form 1200 
based on rates in effect on September 30, 1992 under the FCC Form 
1200 Full Reduction Methodology (i.e., the rates on both Line I18 
and Line J6 of FCC Form 1200), the inflation factor applied is 3%. 
In determining Full Reduction Rates on FCC Form 1200, the September 
30, 1992 rates were adjusted to September 30, 1993 (on Line G10) 
using 3%.
    If the rates being adjusted were determined on FCC Form 1200 
based on rates current at March 31, 1994 but initially determined on 
FCC Form 393 from September 30, 1992 rates (under the Worksheet 2 
methodology), the inflation factor applied from September 30, 1992 
to the initial date of regulation is the factor found on Line 401 of 
FCC Form 393. This is the factor used by the operator initially to 
set rates using FCC Form 393, unless a corrected factor was ordered 
by a regulatory authority. If the factor was corrected, the 
regulator-ordered factor for Line 401 shall be used.
    Step 4. Adjust the amount from Step 2 by the factor identified 
in Step 3.
    Step 5. Subtract the amount calculated in Step 4 from the amount 
determined in Step 1, i.e., from the average monthly external cost 
per subscriber per tier as of the initial date of regulation. The 
resultant amount is the permanent adjustment--a one-time average 
monthly per subscriber per tier adjustment to the operator's maximum 
permitted rate.
    Step 6. Complete FCC Form 1210 or FCC Form 1240 in accordance 
with Commission rules and procedures for the applicable form, but 
include the adjustment calculated in Step 5.
    If a FCC Form 1210 is used, the resultant adjustment amount from 
Step 5 should be added to the amount on Line J8 (Aggregate Full 
Reduction Rate) or, if transition rates are being adjusted, the 
adjustment should be added to the amounts on Lines I8 (Updated 
Transition Rate per Tier) and J8.
    If a FCC Form 1240 is used, the resultant adjustment amount from 
Step 5 should be added to Line H9 (Maximum Permitted Rate for 
Projected Period).
    Along with the FCC Form 1210 or FCC Form 1240 adjusted, the 
operator shall disclose that the adjustment has been included in 
rates and shall provide its calculations of the adjustment amount.
    The operator shall provide the level of external cost adjustment 
disclosure shown in Module B, Line B2 through B14 of FCC Form 1200, 
except that it shall also disclose the adjustment for inflation 
applied to the average monthly external cost per subscriber per tier 
as of September 30, 1992.

[FR Doc. 97-3454 Filed 2-11-97; 8:45 am]
BILLING CODE 6712-01-P