[Federal Register Volume 62, Number 61 (Monday, March 31, 1997)]
[Rules and Regulations]
[Pages 15121-15127]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8041]


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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76

[CS Docket No. 95-174; FCC 97-86]


Uniform Cable Price-Setting Methodology

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Report and Order modifies rules and policies concerning 
cable systems. The Report and Order amends our regulations to permit 
the establishment by a cable operator of uniform rates for uniform 
services offered across multiple franchise areas

[[Page 15122]]

on a case-by-case basis upon the Commission's finding that the cable 
operator's submission of a proposed uniform rate proposal and 
supporting justification demonstrates that the proposed rate structure 
is reasonable. This item fulfills Congress' preference that rates be 
set pursuant to competition rather than regulation.

DATES: The amendments in this final rule impose information collection 
requirements and shall become effective upon approval by OMB but no 
sooner than April 30, 1997. The Commission will publish a document at 
that time confirming the effective date and notifying parties that 
these requirements and regulations have become effective. Written 
comments by the public on the proposed and/or modified information 
collections are due on or before May 30, 1997.


ADDRESSES: A copy of any comments on the information collection 
contained herein should be submitted to Dorothy Conway, Federal 
Communications Commission, Room 234, 1919 M Street, NW., Washington, DC 
20554.

FOR FURTHER INFORMATION CONTACT: Larry Walke, Cable Services Bureau, 
(202) 418-7200. For additional information concerning the information 
collections contained herein, contact Dorothy Conway at 202-418-0217, 
or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION:

    This is a synopsis of the Commission's Report and Order in CS 
Docket No. 95-174, FCC No. 97-86, adopted March 13, 1997 and released 
March 14, 1997. The full text of this decision is available for 
inspection and copying during normal business hours in the FCC 
Reference Center (room 239), 1919 M Street, NW, Washington, D.C. 20554, 
and may be purchased from the Commission's copy contractor, 
International Transcription Service, (202) 857-3800, 1919 M Street, NW, 
Washington, D.C. 20554.
    This Report and Order contains a new information collection. The 
Commission, as part of its continuing effort to reduce paperwork 
burdens, invites the general public to comment on the information 
collection contained in this Report and Order, as required by the 
Paperwork Reduction Act of 1995, Public Law 104-13. Public comments are 
due May 30, 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.
    A copy of any comments on the information collection contained 
herein should be submitted to Dorothy Conway, Federal Communications 
Commission, Room 234, 1919 M Street, N.W., Washington, D.C. 20554, or 
via the Internet to [email protected]. For additional information, 
contact Dorothy Conway at 202-418-0217 or via the Internet at the above 
address.
    OMB Approval Number: 3060-XXXX.
    Title: Implementation of Sections of the Cable Television Consumer 
Protection and Competition Act of 1992; Rate Regulation; Uniform Rate-
Setting Methodology.
    Type of Review: New Collection.
    Respondents: Businesses and other for-profit entities; state, local 
and tribal governments.
    Number of Responses: 60 (10 rate proposals and 50 LFA reviews).
    Estimated Time Per Response: 20-50 hours.
    Total Annual Burden to Respondents: 1,500 hours estimated as 
follows: We estimate that on an annual basis, cable operators will file 
no more than 10 uniform rate proposals with the Commission. We estimate 
that each operator will undergo an average burden of 50 hours to draft 
the rate proposal and to reply to comments received from interested 
parties. 10 rate proposals  x  50 hours = 500 hours. We estimate that 
each rate proposal will affect an average of five local franchise 
areas. The average burden for each LFA to review each rate proposal and 
file comments is estimated to be 20 hours. 10 rates proposals  x  5 
LFAs per proposal  x  20 hours = 1,000 hours.
    Total Estimated Cost to Respondents: $400, estimated as follows: 
Cable operators will have postage and stationery expenses of $15 per 
rate proposal to serve copies of the proposal and each set of replies 
on the Commission and affected LFAs. 10  x  $15 = $150. We estimate 
that postage and stationery expenses for each LFA will be $5 to file 
comments on each proposal. 10 proposals  x  5 LFAs per proposal  x  $5 
= $250.
    Needs and Uses: The information collections contained herein are 
necessary to implement the statutory provisions for cable operators 
contained in the 1992 Cable Act. Uniform rate proposals will be filed 
with the Commission and served on all affected LFAs. The rate 
proposals, comments received from LFAs and replies received from cable 
operators will be reviewed by the Commission in considering whether the 
interests of subscribers will be protected under the new rate proposal.

I. Introduction

    1. On November 29, 1995, the Commission issued a Notice of Proposed 
Rulemaking (``NPRM'') in which we explored the establishment of an 
optional rate-setting methodology where a cable operator could 
establish uniform rates for uniform cable service tiers offered in 
multiple franchise areas. Notice of Proposed Rulemaking in CS Docket 
No. 95-174 (Implementation of Sections of the Cable Television Consumer 
Protection and Competition Act of 1992--Rate Regulation, Uniform Rate-
Setting Methodology), 60 FR 63492 (December 11, 1995). We find that the 
establishment of such uniform rates would benefit both cable service 
subscribers and cable operators. We also find, however, that the 
implementation of uniform rates raises several complex case-by-case 
issues. Accordingly, we hereby permit the establishment of uniform 
rates across multiple franchise areas on a case-by-case basis upon the 
Commission's finding that the cable operator's submission of a proposed 
uniform rate proposal and supporting justification demonstrates that 
the proposed rate structure will be reasonable, taking into account all 
critical factors relevant to its implementation, and subject to one 
important condition. Under any uniform rates approach permitted by the 
Commission, rates for regulated basic service tiers (''BSTs'') may not 
exceed the BST rates that would be established under our existing 
regulations; thus, BST rates will either decrease or remain the same 
under a uniform rates mechanism.
    2. As discussed more fully below, we have concluded that permitting 
operators serving multiple franchise areas to establish uniform 
services at uniform rates in all areas would be beneficial for 
subscribers, franchising authorities (``LFAs''), and cable operators. 
Whether to seek to implement uniform rates, however, will be left to 
the discretion of cable operators. A uniform rates approach could 
facilitate an operator's ability to promote its service on a regional 
basis. This approach could better inform consumers and enable them to 
compare packages of services offered by competitors, thereby improving 
competition among providers. Increased competition could result in 
improved service and reduced rates for subscribers.

[[Page 15123]]

II. Background

    3. As stated in the NPRM, under the Cable Television Consumer 
Protection and Competition Act of 1992 (the ``1992 Cable Act''), Cable 
Television Consumer Protection and Competition Act, Public Law 102-385, 
106 Stat. 1460 (1992), and the Commission's implementing regulations, 
47 CFR Secs. 76.901-86, a cable operator serving multiple franchise 
areas must establish maximum permitted rates independently in each 
franchise area. Rate-regulated services consist of the basic service 
tier (``BST''), which includes, at a minimum, all local broadcast 
stations and public, educational, and governmental (``PEG'') access 
channels carried on the system, and the cable programming services tier 
(``CPST''), which includes all non-BST programming offered over the 
cable system, other than programming offered on a per channel or per 
program basis.
    4. We noted that enforcement of the rate regulations is divided 
between qualified local franchising authorities (``LFAs'') and the 
Commission. BST rate regulation is generally enforced by qualified 
LFAs. An operator's CPST, on the other hand, is subject to rate 
regulation directly by the Commission.
    5. We also discussed the situation where a cable operator acquires 
a number of contiguous systems from other entities and seeks to 
establish uniform rates and services for those systems. We stated that, 
under the Commission's ``going-forward'' rules, the operator will 
typically have the flexibility to add channels to certain systems and 
delete channels from others to establish a uniform programming line-up. 
The operator's efforts, however, to set a uniform rate will be 
constrained because the going-forward rules specifically dictate 
permitted rate changes that must accompany changes in the level of 
service and do not permit regional averaging of the data used to 
compute rates.
    6. In the NPRM we tentatively concluded that permitting operators 
serving multiple franchise areas to establish uniform services at 
uniform rates in all areas would be beneficial for subscribers, 
franchising authorities, and operators. We stated that such an approach 
could facilitate an operator's advertisement of a single rate for cable 
service over a broad geographic region, which could lower its marketing 
costs and enhance its ability to respond to competition from 
alternative service providers that may establish and market uniform 
services without regard to franchise area boundaries.
    7. In the NPRM we requested suggestions for an appropriate method 
for the establishment of uniform rates, and offered for comment two 
specific alternatives that would be revenue-neutral to an operator. 
Under the first approach, an operator generally would set BST rates 
equal to the lowest BST rate for any one franchise area as determined 
under our existing rate regulations and recoup the resulting foregone 
BST revenue in a new uniform CPST rate charged to CPST subscribers. 
Under the second approach, an operator would generally determine a 
blended average rate for BSTs and CPSTs, respectively, pursuant to a 
formula designed by the Commission.
    8. In the context of both approaches, we sought comment on various 
aspects of a cable operator's establishment of uniform rates for 
uniform services, including: (1) How an operator would determine 
equipment rates; (2) the costs and benefits of requiring an operator, 
if it chose to set the uniform rate in unregulated franchise areas, to 
base the uniform rate in part on data from unregulated areas; (3) how 
an operator would apply our going-forward policies; (4) whether this 
approach would protect cable subscribers from unreasonable rates in 
accordance with the 1992 Cable Act, and whether an operator should be 
required to phase-in any resulting CPST rate increases; (5) whether a 
cable operator's setting of uniform rates should be restricted to 
franchise areas located within some level of proximity to each other, 
such as the Area of Dominant Influence, the same county or state, or 
whether a cable operator should be permitted to select the region in 
which to set uniform rates; and (6) how PEG and other franchise-related 
expenses should be addressed in the context of uniform rates.

III. Discussion

    9. Much of the record submitted in response to the NPRM generally 
endorses our proposal to establish an optional approach under which a 
cable operator could set uniform rates for uniform services offered in 
multiple franchise areas, as stated in the NPRM. As a general matter, 
we believe that, under certain conditions, allowing a cable operator to 
establish uniform regulated cable service rates across multiple 
franchise areas could benefit consumers, LFAs and the cable operator. 
The record, however, indicates that the Commission's adoption of a 
specific methodology that would be applicable to all cable operators 
nationwide may not be the most feasible course of action, given 
variations in factors from system to system. We will, therefore, 
establish procedures to permit uniform rates across multiple franchise 
areas through the Commission's case-by-case review of a cable 
operator's proposed uniform rate structure. These procedures will 
permit the Commission to take account of the variations between cable 
systems and of the comments of affected LFAs. Accordingly, a cable 
operator seeking to establish uniform rates will be required to submit 
a proposal with supporting justification that states fully and 
precisely all pertinent facts and considerations relied on to 
demonstrate that the proposed rates will not be unreasonable.
    10. Under the rate-setting approach adopted herein, a cable 
operator may submit to the Commission a proposal for establishing 
uniform rates for uniform services offered in multiple franchise areas. 
The Commission, however, will not specify a particular methodology for 
setting uniform rates. The only condition we place on any proposed 
uniform rates mechanism is that the BST rates may not exceed the BST 
rates that would be established under our existing regulations. In 
addition, below we offer general guidelines that the Commission will 
consider in deciding whether to approve a particular proposed 
mechanism.
    11. A cable operator will be required to submit with its proposal a 
certificate of service showing that the proposal and its supporting 
justification have been served on all affected LFAs. The Commission 
will place the operator's filing on public notice. Interested persons, 
including the affected LFAs, may submit comments on the proposal within 
sixty days after the date of the public notice. The cable operator may 
file a reply to the comments within thirty days thereafter. The 
Commission will consider the justification, as well as all other 
submitted materials, and determine whether the proposed uniform rates 
will not be unreasonable. Pursuant to this Order and any conditions 
established in a Commission decision on a particular proposal, the 
Commission may approve uniform rates notwithstanding any differences 
between the uniform rates and the rates that would be determined under 
our existing benchmark rate formula.
    12. Some LFAs express concern that a uniform rates mechanism will 
not protect subscribers from unreasonable cable service rates, as 
required under the 1992 Cable Act. On the contrary, we believe that, in 
any event, rates will remain reasonable under any uniform rates 
approach approved by the Commission. First, it is important to note 
that, while the benchmark formula is the most widely used method for 
determining rates in compliance with

[[Page 15124]]

our rules, we have found rates other than, or that vary from, benchmark 
rates to be reasonable. For example, an operator may elect to justify 
BST and CPST rates based on a cost-of-service showing. The Commission 
has also eliminated the ``all rates in play'' approach so that, if no 
complaint concerning a CPST rate or rate increase was filed before 
November 6, 1995, the cable operator's CPST rate as of that date would 
be deemed not unreasonable under our rules. This may lead to a rate 
being deemed not unreasonable although the rate might not be accepted 
under our benchmark formula. We also note that the Commission has an 
on-going proceeding in which we are considering increased pricing 
flexibility for operators that may result in somewhat higher CPST and 
lower BST rates. See Memorandum Opinion and Order, and Notice of 
Proposed Rulemaking, MM Docket No. 92-266 and CS Docket No. 96-157, 61 
FR 45356 (August 29, 1996) (``Cable Pricing Flexibility NPRM''). 
Finally, the Commission has allowed, subject to certain conditions, 
agreements among LFAs and small cable operators to serve as yet another 
alternative method or process for establishing reasonable rates for 
regulated tiers of cable service.
    13. We further address the concerns of LFAs regarding the 
reasonableness of uniform rates by placing a condition on an operator's 
setting of uniform rates. That is, under any uniform rates structure 
established pursuant to this Order, BST rates for any subscriber in the 
affected areas may not exceed the BST rates that would be established 
under our existing regulations. Thus, LFAs can be assured that, at a 
minimum, BST rates will either decrease or remain unchanged. For 
example, if an operator sought to implement uniform rates for three 
franchise areas where the maximum permitted BST rates are $10.00, 
$11.00 and $12.00, respectively, any uniform rates proposal that 
resulted in a uniform BST rate greater than $10.00 would be 
disapproved.
    14. The fair implementation of a uniform rate approach is 
facilitated if the Commission can examine the methodology to be 
employed and the impact of that methodology on subscribers in advance 
of its implementation. Our approach will provide the Commission with 
the ability to render an informed and accurate decision on whether an 
operator's proposed uniform rates are not unreasonable. An operator's 
supporting justification must include a specific, detailed description 
of all relevant financial and economic data, and other factors 
(including particularly local factors) that demonstrate the impact of 
the proposal on subscriber rates, and that justify the uniform rates as 
not unreasonable. This approach also will allow the Commission to 
consider the views of LFAs and consider whether the interests of 
subscribers will be protected under the new rate structure.
    15. On a going-forward basis, we will require operators that 
establish initial uniform rates under the regulations we set forth here 
to adjust future rates on an annual basis, pursuant to FCC Form 1240. 
We believe that allowing rate changes no more frequently than annually 
will enhance the efficiency of rate review by LFAs. As under our 
current rules, review of adjustments to BST rates will be the 
responsibility of LFAs while the Commission will be responsible for 
review of CPST rates.
    16. We seek to provide guidance in this Order to cable operators 
that propose uniform rates. First, as we already have indicated, 
implementing any uniform rate approach across multiple franchise areas 
inevitably raises issues that do not lend themselves to a global 
resolution. The most difficult and common issue arises when a cable 
operator is regulated by multiple LFAs, as compared to a single state-
level or regional regulatory body. A methodology that would produce 
uniform rates throughout multiple franchise areas and would be 
applicable in one particular franchise area, for example, would be 
based in part on information that is particular to other franchise 
areas.
    17. The NPRM sought comment on how review by one LFA of a proposed 
uniform rate may affect implementation of that rate in other franchise 
areas. First, some LFAs contend that a uniform rate approach could 
increase their administrative burden by requiring them to review the 
underlying data and rates for all local franchising areas where the 
uniform rate is charged in order to review the uniform rate charged in 
its local franchising area. We disagree. The condition specified above, 
that requires that BST rates determined under a uniform rate approach 
may not exceed those established under our existing regulations, will 
ease LFAs' regulatory burdens by ensuring LFAs that any BST rates they 
must review will either decrease or remain unchanged. LFAs' 
administrative burdens therefore will not significantly increase.
    18. Other LFAs responded to this inquiry by arguing that their 
jurisdiction over basic cable rates could be compromised under a 
uniform rates approach. We also reject these arguments. First, we note 
the discussion above concerning an LFA's option to participate 
vigorously in the Commission's review of an operator's proposed uniform 
rates approach. Second, an LFA's authority will not be undermined 
because the overall process for establishing and regulating uniform 
rates will be parallel to that of our current regulatory framework. In 
the development of the benchmark formula, for example, the Commission, 
after notice and comment and the participation of LFAs, established and 
approved the regulatory methodology that sets forth reasonable rates 
for the BST. Using the benchmark formula, the operator then submits 
proposed initial BST rates for review by each affected LFA. If the BST 
rate is rejected by an LFA, the operator may appeal to the Commission, 
where the relevant LFA receives ample opportunity to defend its 
calculations and review of the operator's proposed BST rates. With 
respect to the optional rate-setting approach adopted herein, and as 
with our existing regulations, the Commission merely approves the 
general methodology to be employed by an operator, while jurisdiction 
over an operator's implementation of a BST rate remains the exclusive 
responsibility of LFAs. Thus, contrary to some commenting LFAs' 
arguments, LFAs' statutory responsibility and obligation with respect 
to BSTs will not be hindered under a uniform approach.
    19. Commenters suggest a variety of approaches for resolving 
conflicts that could arise if one LFA tolled the effectiveness of the 
proposed uniform rate in its franchise area while another LFA permitted 
the rate to take effect in its area. Generally, commenting LFAs seek to 
maintain their existing authority over BST rates. Although they do not 
specifically address the tolling of proposed uniform rates, presumably 
these parties might argue that uniform rates could be disapproved by 
any one of the affected LFAs, and that rates would be tolled in all the 
franchise areas until an appeal of the relevant rate decision was 
resolved. Cable operators, on the other hand, support allowing the 
proposed uniform rate to take effect immediately, subject to a later 
``true-up'' of any discrepancies which the Commission subsequently 
finds to exist. We believe that the current authority of LFAs should be 
preserved, and that subscribers must remain fully protected from 
unreasonable rate increases. Moreover, an operator seeking to take 
advantage of the benefits of establishing (or adjusting) uniform rates 
must also shoulder the risks of implementing

[[Page 15125]]

uniform rates. We therefore will prohibit a proposed uniform rate to 
take effect subject only to a subsequent true-up. Rather, an LFA that 
rejects a proposed uniform rate may toll the effectiveness of that rate 
in that particular franchise area. Alternatively, if the LFA so 
chooses, the rate may take effect, however, but only subject to refunds 
as later determined by the LFA. An LFA's decision with respect to 
proposed rates will only have effect within the LFA's particular local 
franchise area, and not the implementation of rates in other franchise 
areas.
    20. As indicated above, an operator may elect to implement a 
uniform rates structure in a region that covers both regulated and 
unregulated local franchise areas. Under this approach, an operator 
would include data from both the unregulated and regulated areas, and 
determine a uniform rate applicable in all such areas. We believe that 
permitting uniform rates to include unregulated franchise areas could 
benefit subscribers living in the uniform rate region. With respect to 
systems subject to effective competition, Congress determined that rate 
regulation was not necessary to ensure reasonable rates. With respect 
to cable systems potentially subject to regulation, but which are 
currently unregulated because no complaint has been filed, there is no 
evidence to suggest that these systems have unreasonable rates. Indeed, 
we would expect that if rates were unreasonable in these franchise 
areas, complaints would have been filed (especially prior to passage of 
the Telecommunications Act of 1996 when a single complaint was enough 
to trigger CPST rate review). Accordingly, we do not believe that 
including unregulated systems for purposes of determining uniform rates 
is more likely to lead to unreasonable rates than using exclusively 
regulated systems to determine uniform rates.
    21. With respect to the BST in regulated local franchise areas, the 
operator would submit to the LFA its proposed initial rates, and the 
regulating LFA would have authority to review and approve or disapprove 
the proposed rates. If the LFA determined that a reduction in BST rates 
is necessary to comply with the rules, the operator would be required 
to reflect this reduction in the rate charged in the region, if 
necessary. Again, nothing in this Order is intended to compromise LFAs' 
authority to regulate BST rates. With respect to CPST rates, we 
emphasize that, in reviewing a uniform rates proposal, we will closely 
examine the impact of the proposal on subscribers' rates, and would be 
disinclined to approve any scheme that results in a more than minimal 
increase in CPST rates for a large proportion of the affected 
subscribers.
    22. Commenting cable operators argue that they will require broad 
discretion with respect to several aspects of setting uniform rates, 
including: (1) the size of the region in which to establish uniform 
rates; (2) whether all franchise areas located within the uniform rate 
region must be included for purposes of calculating and offering the 
uniform rate; (3) which tiers of regulated cable service should be 
offered at a uniform rate; (4) the methodology employed to determine 
the uniform rate; (5) how to address variances in the numbers of 
channels offered in various franchise areas; and (6) how and whether to 
establish uniform rates for the installation or maintenance of 
equipment. Below we offer some general guidance regarding what a cable 
operator should follow to accomplish these goals.
    23. First, we anticipate that an operator's uniform rates proposal 
will be based on some meaningful neutral geographic measure, such as 
the Area of Dominant Influence (ADI), the Designated Market Area, the 
Basic Trading Area, or the Standard Metropolitan Statistical Area. 
Where the operator proposes to include additional franchise areas 
outside of such a region or measure, our case-by-case review will 
examine the operator's proposal and justification.
    24. Second, with respect to which franchise areas should be 
included in a uniform rate structure, we would be disinclined to 
approve a scheme in which an operator selects some of its franchise 
areas in a contiguous geographic region, but excludes others, unless 
compelling circumstances were shown to justify such an approach. An 
example of a situation presenting such circumstances could be one in 
which an upgrade was in progress and the uniform rates became 
applicable as the upgrade progressed. In this vein, we note that some 
commenting LFAs argue that a uniform rate structure may result in 
cross-subsidization among subscribers living in franchise areas where a 
cable operator's costs of providing service are relatively low costs 
and those subscribers in franchise areas where costs are higher. Any 
cross-subsidization that may occur under a uniform rates structure, 
however, will be neither significant nor unique. In addition, as stated 
above, we will be disinclined to approve any proposal that results in a 
more than minimal increase in CPST rates for a significant proportion 
of the affected subscribers.
    25. Third, with respect to which tiers of regulated service should 
be offered at uniform rates, we would be inclined generally to ratify a 
uniform rate proposal that covers all of an operator's BSTs within the 
proposed uniform rate region. Furthermore, any uniform rate proposal in 
which BST rates decrease likely will include offsetting CPST rate 
increases, assuming an operator's overall rates and revenues remain 
close to neutral under the uniform rate scheme. We believe that in 
light of the high penetration of at least one CPST in most multi-tiered 
systems, it will be possible to effect these offsets with minimal CPST 
rate increases. We also would entertain proposals to offer uniform 
rates on CPSTs generally, regardless of their penetration.
    26. Fifth, we note that in the NPRM we sought comment on whether 
the particular packages of programming services offered at a uniform 
rate in multiple franchise areas must be identical. In response, cable 
operators urge the Commission to allow an operator broad discretion in 
dealing with variances among numbers of channels offered in various 
areas. With respect to the cable operators' comments, we believe 
generally that the establishment of uniform rates across multiple 
franchise areas should be permitted where the cable operator is 
offering the same number of channels on its regulated tiers of 
programming services. Generally, subscribers in one franchise area 
should not pay the same rates as those in another franchise area if the 
amount of programming services received are not the same. Therefore, we 
would be inclined to accept uniform rate proposals that apply only to 
franchise areas that have identical numbers of channels on the 
respective BSTs and CPSTs.
    27. However, with respect to whether the packages of services need 
be identical, we recognize that there may be circumstances beyond the 
operator's control that cause dissimilarities among tiers of 
programming services. For instance, differences in PEG access and must-
carry requirements or leased access use are factors that might create 
deviations in the channel line-ups received by subscribers in a 
contiguous geographic area. Indeed, because of these circumstances, 
certain LFAs argue that any uniform rates mechanism implemented 
pursuant to this Order will not result in truly uniform rates, and thus 
will not succeed in reducing confusion for a subscriber moving between 
different parts of the same uniform rates region. In order to address

[[Page 15126]]

these concerns, as well as provide operators with a measure of 
flexibility in implementing a uniform rates structure, we will take 
care when evaluating a proposal for uniform rates across franchise 
areas that do not receive identical programming services to consider 
the extent and nature of the deviation in programming services, and 
whether the deviation's impact on subscriber rates is significant. In 
the event that a deviation based on PEG access costs or other external 
costs (including franchise-related external costs) is significant, we 
would consider a requirement that an operator's uniform rates be 
determined exclusive of such costs; in which case the operator likely 
would be permitted to add these costs onto the uniform rate on a 
franchise-by-franchise basis. In this vein, we note that our existing 
regulations have always permitted cable systems that cover multiple 
franchise areas having differing franchise fees or other franchise 
costs to advertise a ``fee plus'' rate that indicates the core rate 
plus the range of possible additions, depending on the particular 
location of the subscriber.
    28. Finally, we note that, under the Telecommunications Act of 
1996, cable operators may aggregate their equipment costs on a 
franchise, system, regional, or company level. The Commission has 
adopted regulations implementing this provision that, among other 
things, ease the burden of cable rate regulation on operators and 
increase administrative efficiency for both LFAs and cable operators. 
Cable operators seeking to implement uniform rates may avail themselves 
of those rules to bring uniformity to their equipment rates.
    29. Accordingly, we find that implementation of any uniform rate 
approach as offered in the NPRM requires resolving several issues, 
including those of a local nature, that do not lend themselves to 
global resolution. We find that it is preferable to base our approval 
of any uniform rate approach on data that accurately reflects the 
situation of a particular cable operator seeking to establish uniform 
rates, and the predicted impact on consumers of the operator's 
proposal. We therefore decline to specify a particular methodology for 
implementing uniform rates. Rather, as described above, cable operators 
may submit information in accordance with the procedures outlined above 
demonstrating that the proposed uniform rates will not be unreasonable. 
In light of this finding, we decline to reach the arguments presented 
by the commenters with respect to the appropriate methodology, region, 
and other aspects of uniform rates offered for comment in the NPRM.

IV. Regulatory Flexibility Act Certification

    30. As required by 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 CS Docket 95-174 
(the ``NPRM''). The Commission sought written public comments on the 
proposals in the NPRM including comments on the IRFA. No Comments were 
received.
    31. Although we performed an IRFA in the NPRM, there were no 
comments received in response to the IRFA and we believe that we can 
certify that no Regulatory Flexibility Act Analysis is now necessary.
    32. We do not believe that the final rule adopted in the Report and 
Order will have a significant economic impact on a substantial number 
of small entities, 5 U.S.C. Sec. 605(b). The uniform rate option 
described in this Report and Order gives cable operators an additional 
option when setting rates, and is not mandatory. This rate adjustment 
option will not force operators to forgo revenues as it is designed to 
be revenue neutral to cable operators. The Communications Act at 47 
U.S.C. Sec. 543(m)(2) defines a small cable operator as ``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.'' Under the 
Communications Act, at 47 U.S.C. Sec. 543(m)(1), a small cable operator 
is not subject to the rate regulation requirements of Sections 543(a), 
(b) and (c) on cable programming services tiers (``CPSTs'') in any 
franchise area in which it serves 50,000 or fewer subscribers.
    33. The Regulatory Flexibility Act defines at 5 U.S.C. Sec. 601(5) 
``small governmental jurisdictions'' as ``governments of cities, 
counties, towns, townships, villages, school districts or special 
districts with populations of less than 50,000.'' Under the Commissions 
current rules, if a local franchising authority (``LFA'') has elected 
to rate regulate the basic service tier (``BST''), a cable operator 
must submit rate justifications to the LFA on FCC Forms. We do not 
believe that small LFAs will face a significant economic impact due to 
this Report and Order. The change in our rules adopted herein would not 
have a significant economic effect on small LFAs because the burden 
associated with reviewing a uniform rate approach should be no more 
than the burden under the current regulations. If other rate 
adjustments are made to the BST at the time of the uniform rate 
adjustment, or at some time thereafter, the cable operator will be 
required to submit a rate justification to the LFA that is based on the 
operator's ``underlying rate,'' i.e., the rate the operator would be 
charging in the absence of the uniform rate adjustment. The LFA will 
engage in the same rate review process as would have otherwise occurred 
for these other rate adjustments. LFA review of the underlying rate 
entails the same rate review process that would occur normally, without 
the uniform pricing option adopted herein. Responsibility for the 
determination of the correctness of the uniform rate adjustment to CPST 
rates will rest with the Commission because the Commission, and not 
LFAs, is responsible for insuring that CPST rates are not unreasonable.
    34. The Commission will send a copy of this certification, along 
with this Report 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), and to the Chief Counsel for Advocacy of the Small 
Business Administration. A copy of this certification will also be 
published in the Federal Register.

V. Final Paperwork Reduction Act of 1995 Analysis

    35. This Report and Order contains a new information collection. 
The Commission, as part of its continuing effort to reduce paperwork 
burdens, invites the general public to comment on the information 
collection contained in this Report and Order, as required by the 
Paperwork Reduction Act of 1995, Public Law 104-13. Public comments are 
due May 30, 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.
    36. A copy of any comments on the information collection contained 
herein should be submitted to Dorothy Conway, Federal Communications 
Commission, Room 234, 1919 M Street, NW., Washington, DC 20554, or via 
the Internet to [email protected]. For

[[Page 15127]]

additional information, contact Dorothy Conway at 202-418-0217 or via 
the Internet at the above address.

VI. Ordering Clauses

    37. Accordingly, it is ordered that, pursuant to the authority 
granted in sections 4(i), 4(j), 303(r) and 623 of the Communications 
Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), 303(r) and 543, part 
76 of the Commission's rules is amended as set forth below. The 
amendments impose information collection requirements and shall become 
effective upon approval of the Office of Management and Budget 
(``OMB'') but no sooner than April 30, 1997. The Commission will issue 
a document at that time notifying parties that the regulations adopted 
herein have become effective.
    38. 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 96-354, 94 Stat. 1164, 5 U.S.C. Secs. 601 
et seq. (1981).

List of Subjects in 47 CFR Part 76

    Cable television.

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

Rule Changes

    Part 76 of the 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, 543, 544, 544a, 545, 548, 552, 554, 556, 558, 560, 
561, 571, 572, 573.

    2. Section 76.922 is amended by revising paragraph (c)(2) and 
adding a new paragraph (n) to read as follows:


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

* * * * *
    (c) * * *
    (2) The Commission's price cap requirements allow a system to 
adjust its permitted charges for inflation, changes in the number of 
regulated channels on tiers, or changes in external costs. After May 
15, 1994, adjustments for changes in external costs shall be calculated 
by subtracting external costs from the system's permitted charge and 
making changes to that ``external cost component'' as necessary. The 
remaining charge, referred to as the ``residual component,'' will be 
adjusted annually for inflation. Cable systems may adjust their rates 
by using the price cap rules contained in either paragraph (d) or (e) 
of this section. In addition, cable systems may further adjust their 
rates using the methodologies set forth in paragraph (n) of this 
section.
* * * * *
    (n) Further rate adjustments--Uniform rates. A cable operator that 
has established rates in accordance with this section may then be 
permitted to establish a uniform rate for uniform services offered in 
multiple franchise areas. This rate shall be determined in accordance 
with the Commission's procedures and requirements set forth in CS 
Docket No. 95-174.

[FR Doc. 97-8041 Filed 3-28-97; 8:45 am]
BILLING CODE 6712-01-P