[Federal Register Volume 62, Number 199 (Wednesday, October 15, 1997)]
[Rules and Regulations]
[Pages 53572-53577]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27151]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[MM Docket Nos. 92-266 and 93-215; FCC 97-339]
Small Cable Television Systems; Rate Regulation
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Commission has adopted a Fourteenth Order on
Reconsideration denying two petitions seeking reconsideration of the
rules adopted for small cable television systems governing rates
charged for regulated cable services in the Sixth Report and Order and
Eleventh Order on Reconsideration in MM Docket Nos. 92-266 and 93-215,
FCC 95-195. The Commission also adopted minor clarifications to the
rate rules.
EFFECTIVE DATE: October 15, 1997.
FOR FURTHER INFORMATION CONTACT: Julie Buchanan, Cable Services Bureau,
(202) 418-7200.
SUPPLEMENTARY INFORMATION: The following is a synopsis of the
Commission's Fourteenth Order on Reconsideration in MM Docket Nos. 92-
266 and 93-215, adopted September 24, 1997 and released October 1,
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, DC 20554, and may be purchased
from the Commission's copy contractor, International Transcription
Services, Inc., (202) 857-3800, 1231 20th Street, NW., Washington, DC
20036.
Synopsis
I. Introduction
1. On May 5, 1995, the Commission adopted the Sixth Report and
Order and Eleventh Order on Reconsideration in MM Docket Nos. 92-266
and 93-215, FCC 95-196, 60 FR 35854 (July 12, 1995) (``Small System
Order''), thereby modifying the rules governing rates charged for
regulated cable services by certain smaller cable systems. In this
order, we address petitions for reconsideration of the Small System
Order.
II. Background
2. Section 623(i) of the Communications Act of 1934, as amended
(``Communications Act''), requires that the Commission design rate
regulations to reduce the administrative burdens and the cost of
compliance for cable systems with 1,000 or fewer subscribers. In the
Small System Order, the Commission extended small system rate relief to
small cable systems owned by small cable companies. The Small System
Order defines a small system as any system that serves 15,000 or fewer
subscribers, and it defines a small cable company as a cable operator
that serves a total of 400,000 or fewer subscribers over all of its
systems.
3. In addition to adopting the new categories of small systems and
small cable companies, the Small System Order introduced a form of rate
regulation known as the small system cost of service methodology. This
approach, which is available only to small systems owned by small cable
companies, follows general principles of cost of service rate
regulation. An eligible cable operator may establish a maximum
permitted rate for regulated cable service equal to the amount
necessary to cover its operating expenses plus a reasonable return on
its prudent investment in the assets used to provide that service. The
small system cost of service methodology differs both procedurally and
substantively from the standard cost of service methodology available
to cable operators generally.
4. To implement the small system cost of service rules, we designed
FCC Form 1230, a simplified one-page form, for use exclusively by
operators eligible for these rules. This form is more streamlined than
Form 1220 used for cost of service showings by larger operators. To use
Form 1230, the operator must calculate five items of data pertaining to
the system in question: annual operating expenses, net rate base, rate
of return, channel count and subscriber count. Once these variables are
calculated, the form generates the maximum per channel rate the
operator may charge for regulated service. Although subject to
regulatory review, this rate is presumed reasonable if it is no more
than $1.24 per channel.
5. When applicable, the presumption of reasonableness effectively
exempts eligible cable operators from many of the proof burdens that
apply under our standard cost of service rules. For example, eligible
small cable companies have greater discretion than larger operators in
determining how to allocate costs between regulated and unregulated
services and between various levels of regulated services. Similarly,
qualifying cable operators using Form 1230 are not subject to the
presumption of unreasonableness that otherwise attaches when an
operator seeks a rate of return higher than
[[Page 53573]]
11.25%. As noted, an eligible operator enjoys the presumption of
reasonableness with respect to these and other factors only if the
maximum permitted rate claimed on Form 1230 does not exceed $1.24 per
channel. If the rate exceeds $1.24 per channel, the cable operator
still may use Form 1230, but is subject to the same presumptions that
apply in a standard cost of service showing. As with other rate-setting
procedures, a cost of service showing involving Form 1230 is subject to
review by the cable operator's local franchising authority and/or by
the Commission.
6. With respect to the effective date of the small system rules, we
directed franchising authorities to apply the small system cost of
service approach to rate cases pending as of the release date of the
Small System Order because the record demonstrated that the pre-
existing rules were imposing a significant burden on small systems. The
Small System Order was released on June 5, 1995.
III. Petitions for Reconsideration
7. Two parties seek reconsideration of the Small System Order and a
number of other parties oppose the petitions. In one petition, the
Georgia Municipal Association (``GMA'') requests that we repeal the
small system cost of service rules in their entirety. In the
alternative, GMA urges the Commission to lower the maximum amount of
$1.24 per channel at which an operator may set rates and still be
entitled to a presumption of reasonableness. In support of its
petition, GMA questions the accuracy of the underlying cost data that
we used to set the $1.24 per channel rate. In addition, GMA claims that
the new rules will increase burdens on franchising authorities and lead
to unreasonable rates for regulated cable services. GMA also cites
examples of what it claims are cable operators abusing the small system
rules.
8. The New Jersey Board of Public Utilities (``New Jersey Board'')
seeks reconsideration of the Small System Order to the extent it
permits application of the small system rules to rate cases that were
pending as of the release date of the order. In support of its
petition, the New Jersey Board describes the possible impact of the
small system rules upon a rate case that was pending before it when the
Commission released the Small System Order on June 5, 1995. According
to the New Jersey Board, the cable operator in that case has given
notice of its intent to attempt to justify its proposed rate increase
by filing FCC Form 1230. The New Jersey Board complains that the rules
governing the information that a franchising authority may seek in
conjunction with its review of a Form 1230 are overly restrictive. The
New Jersey Board also objects to having to bear the burden of showing
the unreasonableness of the rate sought by the operator if that rate
does not exceed $1.24 per regulated channel. As a result of the above,
the New Jersey Board contends it will be ``precluded from establishing
whether the cable operator's subscribers are being charged a reasonable
rate,'' assuming the operator meets the small system and small cable
company definitions. The New Jersey Board also asserts the alleged
unfairness of applying the small system cost of service rules to the
pending case in light of the resources that the Board already has
expended in the case. Along with its petition for reconsideration, the
New Jersey Board also filed a motion for stay of the Small System Order
to the extent it mandates application of the new rules to pending
cases.
IV. Discussion
9. Neither petition challenges our determination that some measure
of regulatory relief is appropriate for small systems owned by small
cable companies. The petitioners do not dispute our conclusion that
such systems face proportionately higher operating and capital costs
than larger cable entities. Likewise, the petitioners do not contest
that our standard cost of service rules may place ``an inordinate
hardship'' on smaller systems ``in terms of the labor and other
resources that must be devoted to ensuring compliance.'' Therefore, the
petitions give us no reason to reconsider our decision to establish for
eligible small systems a form of rate regulation that lessens some of
the substantive and procedural burdens that otherwise would apply.
Because the petitions raise separate issues, we will resolve the merits
of each petition individually.
A. The GMA Petition
10. GMA challenges the presumption of reasonableness that arises
when an eligible small system uses Form 1230 to justify a regulated
rate that does not exceed $1.24 per channel. As noted above, we
established $1.24 per channel as the appropriate cut-off based on cost
data previously submitted to the Commission by small cable companies
seeking to establish regulated rates for their small systems by using
Form 1220 in accordance with our standard cost of service rules. GMA
asserts that a careful review of the Form 1220s that we relied on to
set the $1.24 per channel rate ``would probably * * * [show] that
corrections should be made to the operators' calculations in a large
percentage of cases.'' In support of this prediction, GMA states that
``several'' Georgia cable operators using FCC Form 1220 have overstated
the value of the intangible assets in their ratebases. In addition, GMA
states that the Commission found calculation or allocation errors in
each of the nine cost of service cases that we had addressed as of the
date GMA filed its petition. GMA cites three specific cost of service
cases in which the Cable Services Bureau (``Bureau'') made adjustments
to correct such errors. On this basis, GMA argues that ``there is a
strong possibility that there are errors'' in the Form 1220s from which
we gleaned the cost data to establish the presumptively reasonable rate
of $1.24 per channel.
11. We believe that the rate-setting mechanism we adopted in the
Small System Order reflects a reasoned judgment as to the method for
establishing the rates that an eligible small system may charge for
regulated services. Neither GMA nor any other party challenges this
mechanism. GMA objects only to the input data that produced the
standard of $1.24 per regulated channel against which the rates of
eligible small systems are measured. We determined in the Small System
Order, however, that a more comprehensive review of small system cost
data was not necessary to ensure that our small system rules were
properly tailored to the conditions faced by such systems.
12. GMA does not challenge our finding that small systems owned by
small cable companies were in need of immediate relief. GMA suggests
that the Form 1220 filings on which we relied were so facially
inaccurate that we should have conducted a further analysis of small
system cost data. We disagree. This approach would have delayed
implementation of measures for which there was an immediate need and
would have imposed additional administrative responsibilities (i.e.,
having to respond to Commission inquiries concerning small system
costs) on the very entities that we found were the most burdened by
regulation.
13. GMA fails to persuade us that the benefits of further analysis
of small system cost data would have outweighed the administrative
costs and delay that such analysis would have entailed. While GMA does
not dispute that such costs and delay would have been both inevitable
and extremely burdensome, it fails to factor these considerations into
its discussion. GMA bases its request for reconsideration on
[[Page 53574]]
the fact that the Bureau found allocation or calculation errors in the
cost of service cases it cites. However, the impact of the Bureau's
adjustments in the cited cases are overstated by GMA and do not
undermine the formulation of the $1.24 standard.
14. The Bureau decisions cited by GMA were based on general cost of
service principles and not under the interim rules the Commission
adopted in February 1994. As of the time of those filings, we had
directed cost of service operators to justify their rates in accordance
with traditional cost of service principles generally applicable in the
field of utility rate regulation. After seeking and reviewing further
public comment, we subsequently adopted more refined cost of service
rules better tailored for use in the cable service context. At the same
time, we designed Form 1220 for use in accordance with the new rules.
The cost data used in the Small System Order were gleaned from Form
1220s filed by small systems pursuant to cost of service rules adapted
specifically for use by cable operators. The specificity of the new
rules, combined with the uniformity of presentation required by Form
1220, makes the latter submissions inherently more reliable than the
earlier submissions cited by GMA. Thus, the errors in the filings
relied on by GMA do not suggest the likelihood of material inaccuracies
in the subsequent Form 1220 filings. This is particularly true given
the nature of the errors in the cases cited by GMA. In each case, the
errors were so minor that the Bureau found that the rates actually
being charged by the cable operator were nevertheless justified and
denied the complaint.
15. We further note that in the Small System Order, we decided that
standards applicable to cable systems generally were inappropriate for
small systems owned by small cable companies. In particular, we decided
that eligible small systems should be given more regulatory leeway than
larger cable entities because small systems face disproportionately
higher operating costs, capital costs, and regulatory compliance costs.
In fact, with respect to eligible small systems, we relaxed the very
standards that had caused the Bureau to make the adjustments described
in the cost of service cases cited by GMA.
16. GMA does not dispute that we should be less restrictive in
applying cost of service principles to small systems owned by small
cable companies. Yet it invites us to question cost information
submitted by such systems by applying the stricter standards that we
have found inappropriate for those systems. Because GMA's argument
relies on overly restrictive standards, we find that it has not raised
a material issue with respect to the reliability of those filings.
17. In addition to its specific challenge to the per channel rate
of $1.24, GMA recites several ``experiences'' of Georgia franchising
authorities that purport to show that the small system rules ``are
unfair to those franchising authorities who have invested a substantial
amount of time and money in the rate regulation process.'' GMA further
complains that these examples prove that ``the rules are unfair to
subscribers, because some cable operators will increase rates well
beyond the level which subscribers would pay if competition existed.''
These conclusory allegations do not refute the specific findings or
analyses set forth in the Small System Order and do not state a basis
for us to reconsider that order. Furthermore, franchising authorities
had no reasonable reliance interest in our rules remaining unchanged.
As for practices of the individual operators identified in the GMA
petition, we do not believe it is appropriate for us to make specific
findings in this context regarding the propriety of those practices. To
the extent cable operators fail to abide by our rules, local
franchising authorities may take appropriate action.
18. For the reasons stated above, we hereby deny GMA's petition for
reconsideration.
B. The New Jersey Board Petition
19. The New Jersey Board objects to the Small System Order to the
extent it requires local franchising authorities to permit eligible
systems to use the small system cost of service methodology in cases
pending as of the date the Small System Order was released. In support
of its petition, the New Jersey Board describes the potential impact of
the Small System Order upon a rate case pending before it. That case
involves the rates charged by Service Electric Cable TV of Hunterdon
(``Service Electric''). Service Electric filed a standard cost of
service showing with the New Jersey Board on July 14, 1994. Pursuant to
that showing, Service Electric sought to increase its monthly rates
from $21.00 to $26.31 for its 60-channel basic service tier. That case
was pending when the Commission released the Small System Order on June
5, 1995, although the staff of the New Jersey Board had negotiated a
tentative settlement with Service Electric that was subject to the
approval of the New Jersey Board. Before such approval occurred,
Service Electric gave notice of its intent to attempt to justify its
proposed rate increase by filing FCC Form 1230.
20. The New Jersey Board contends that under the small system cost
of service rules, Service Electric might be able to justify the rate
increase it sought in its initial showing to the Board or, potentially,
an even greater increase. According to the New Jersey Board, the rules
governing the information that a franchising authority may seek in
conjunction with its review of Form 1230 are so restrictive that it
will be ``difficult if not impossible to challenge'' the rate the
operator seeks to justify. The New Jersey Board also notes that under
the small system cost of service rules, the burden is on the
franchising authority to show the unreasonableness of the rate sought
by an eligible small system if that rate does not exceed $1.24 per
regulated channel. The New Jersey Board asserts that this
``unprecedented'' shift in the burden of proof will ``necessitate the
use of Board and State resources not usually required'' in order to
establish the unreasonableness of the rate sought by the cable
operator.
21. Based on the above, the New Jersey Board argues that it will be
``precluded from establishing whether Service Electric's subscribers
are being charged a reasonable rate,'' assuming the operator meets the
small system and small cable company definitions. The New Jersey Board
also asserts the alleged unfairness of applying the small system cost
of service rules to the pending case in light of the resources that it
already has expended in the case.
22. As an initial matter, we note that the petition seeks
reconsideration of a Commission rule of general applicability based
solely on the potential effect of that rule on a single rate case
affecting approximately 3,000 cable subscribers. The Commission is
charged with structuring a national framework of rate regulation. A
broader and more representative showing of the rule's impact is
necessary for us to review the merits of a particular rule or
regulatory approach.
23. Further, the New Jersey Board fails to refute the underlying
analysis supporting our decision to apply the new rules to pending
cases. We adopted this approach based upon our balancing of various
factors. With respect to rate regulation, Congress specifically
directed us to reduce the administrative burdens and ease the costs of
compliance for smaller systems. In the Small System Order, we concluded
that our then existing rules ``have significantly burdened small
systems.'' We designed the small system cost of service rules to remedy
this problem.
[[Page 53575]]
Having determined small systems' need for immediate relief, we deemed
it in the public interest to provide such relief accordingly. We
believe that it is appropriate to apply a new rule to pending cases
where the new rule serves to alleviate an existing restriction on
regulated parties, as the small system cost of service rules did by
creating an additional method for eligible systems to justify their
rates. In addition, were pending cases not made subject to the new
rules, subscribers in some areas might have received refunds when the
pending cases were decided, followed immediately by rate hikes when the
systems put new rates into effect prospectively in accordance with the
small system cost of service methodology. Applying the new small system
rules to pending cases avoids this confusing ``roller-coaster'' result.
24. We decided that the small system cost of service rules would
not affect final decisions of local franchising authorities made before
the release of the Small System Order. In these cases, the public
interest, and in particular the interests of administrative finality,
dictated that the final decision of a local franchising authority
should not be subject to reconsideration or appeal under the small
system rules.
25. By seeking reconsideration, the New Jersey Board suggests,
implicitly, that we erred in finding a need for immediate relief. Yet
it offers no arguments or evidence to refute this finding and thus
presents no basis to reconsider it. The New Jersey Board's statement of
a policy preference cannot overcome the evidence concerning the plight
of smaller systems that was before us when we adopted the Small System
Order. As James Cable Partners and Rifkin and Associates, Inc. argues,
it makes no sense ``to complete pending cases under pre-existing
criteria that do not embody the policy and statutory concerns that led
to the adoption of the Small System Order in the first place.''
Likewise, the New Jersey Board does not dispute the ``roller-coaster''
effect on rates that would result if the new rules were not applied to
pending cases.
26. The New Jersey Board contends that application of the small
system rules to the pending Service Electric case will result in a
waste of the resources it already has expended in that case. It objects
to our decision to place on the franchising authority the burden of
proving the unreasonableness of a proposed rate that does not exceed
$1.24 per regulated channel. The New Jersey Board suggests that the
presumption of reasonableness that will attach to such a rate, coupled
with the limitations on the information it can demand from the
operator, effectively will preclude it from determining whether a
particular rate is reasonable. We disagree.
27. We understand the frustration of the New Jersey Board with
respect to its prior expenditure of resources in accordance with the
standard cost of service rules. We note, however, that those
expenditures were made with notice of the possibility that we would
modify the rules governing small systems. Unfortunately, rule changes
and rule modifications sometimes lead to inefficiencies and disruptions
for both the regulator and the regulated. We are forced to balance
these factors against the impact of delaying implementation of the new
rule. Since the Service Electric case is the only matter in which a
franchising authority has articulated this concern, we cannot conclude
that the problem is so significant to require us to reconsider our
prior decision. We do not believe that the Small System Order will
result in squandered resources even in the Service Electric case. The
efforts already expended by the New Jersey Board in amassing data and
making factual determinations will not have been wasted since they are
relevant when the New Jersey Board decides the rate case in accordance
with the small system rules.
28. More generally, we disagree with the New Jersey Board's
characterization of the permissible scope of information requests that
a franchising authority may make when reviewing Form 1230. The Small
System Order expressly recognizes the right of franchising authorities
to obtain ``the information necessary for judging the validity'' of the
filing. No information has been submitted to indicate that anything
more than what this rule permits is necessary.
29. We further find that the New Jersey Board has failed to raise a
valid argument against imposing the burden of proof on the franchising
authority when the rate in question does not exceed $1.24 per channel.
What it terms an ``unprecedented shift in the burden of proof'' is the
logical extension of our determination that rates at or below $1.24 per
regulated channel appear reasonable. The New Jersey Board does not
challenge the analysis by which we arrived at the rate of $1.24 per
channel. While not disputing that rates at or below $1.24 per channel
can be presumed reasonable, the New Jersey Board would ignore this
finding in individual rate proceedings and continue to place upon the
cable operator the burden of establishing the reasonableness of its
requested rate, regardless of the amount. We believe that having made
the determination that rates at or below $1.24 per channel may by
presumed reasonable, we should shift the burden of proof to the
franchising authority when the operator seeks to justify rates that do
not exceed that amount. The New Jersey Board does not contest this
analysis and therefore we have no basis to reconsider our decision.
30. For these reasons, we hereby deny the New Jersey Board's
Petition. The New Jersey Board presents the same arguments in its
Motion for Stay as it does in its Petition. Therefore, for the same
reasons that we deny its Petition, we also deny the New Jersey Board's
Motion for Stay.
C. Other Matters
31. On our own motion, we clarify one aspect of our rule that
allocates the burden of establishing whether the rate claimed by a
cable operator under the small system cost of service methodology is
reasonable. As discussed above, the current rule states: ``If the
maximum rate established on Form 1230 does not exceed $1.24 per
channel, the rate shall be rebuttably presumed reasonable.'' Thus, the
current wording of the rule suggests that the burden depends on the
maximum rate permitted by Form 1230, not on the rate that the operator
intends to charge. Such an interpretation would create an anomaly where
an operator determines that its maximum permitted rate is above $1.24
per regulated channel, but does not actually intend to charge more than
$1.24. We did not intend for the operator to have the burden of
overcoming all of the presumptions we generally found to be
inappropriate for eligible small systems, if the actual rate the
operator seeks to charge is within the zone of what we presume to be
reasonable. To eliminate this potential confusion, we hereby clarify
that the presumption of reasonableness shall apply as long as the
actual rate to be charged does not exceed $1.24 per regulated channel,
regardless of whether the maximum permitted rate, as calculated on Form
1230, exceeds that amount. The burden shall shift back to the operator
once it seeks to actually raise rates above the $1.24 per channel
threshold.
32. We also take this opportunity to correct three editing errors
that appeared in the rules appendix to the Small System Order. These
corrections do not amend the substance of the rules in any way.
33. In the Small System Order, we provided for the treatment of a
small system that properly sets its rates in
[[Page 53576]]
accordance with the small system cost of service methodology, but later
experiences a change in its status, either because the system exceeds
the 15,000-subscriber cap for a small system or because the operator
exceeds the 400,000-subscriber threshold for a small cable company.
While the text of the order explained the regulatory effect of such a
transition, the accompanying rules did not. Here we amend the rules
consistent with the text of the Small System Order.
34. As discussed above, the Small System Order provided for the
application of the small system cost of service rules to cases pending
as of the release date of the order if the cable operator in question
met the subscriber threshold criteria as of the release date and as of
the date the system became subject to rate regulation. The rules
appendix inadvertently referred to the effective date, instead of the
release date, of the Small System Order for purposes of this rule. We
hereby revise the text of Sec. 76.934(h)(9) of our rules to conform it
with our intent as set forth in the Small System Order.
35. Due to an editing error, the rules appendix to the Small System
Order did not accurately indicate that we were revising the eligibility
criteria for streamlined rate reduction to incorporate the new small
system and small cable company definitions established in the Small
System Order. We hereby amend Sec. 76.922(b)(5) of our rules to conform
it with our intent as set forth in the Small System Order.
V. Final Regulatory Flexibility Certification
36. As permitted by Section 605(b) of the Regulatory Flexibility
Act, 5 U.S.C. 605(b), (``RFA''), we certify that a regulatory
flexibility analysis is not necessary because the amendments to the
rules adopted in this order will not impose a significant economic
impact on a substantial number of small entities as defined by statute,
by our rules, or by the Small Business Administration. 5 U.S.C. 605(b).
Three of the amendments merely correct the rules and have no
substantive effect. In addition, we clarified that the operator's
presumption of reasonableness is preserved when the operator's actual
rate charged does not exceed $1.24 per regulated channel, regardless of
the maximum permitted rate calculated on Form 1230. Because this
clarification will benefit small systems owned by small cable
companies, we believe a regulatory flexibility analysis is unnecessary.
This certification conforms to the RFA, as amended by the Small
Business Regulatory Enforcement Fairness Act of 1996.
37. The Commission will send a copy of this certification, along
with this order, in a report to Congress pursuant to the Small Business
Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 801(a)(1)(A), and
to the Chief Counsel for Advocacy of the Small Business Association, 5
U.S.C. 605(b).
VI. Ordering Clauses
38. 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, the
petitions for reconsideration filed by the Georgia Municipal
Association and the New Jersey Board of Public Utilities, and the
Motion for Stay filed by the New Jersey Board of Public Utilities, are
denied.
39. It Is Further 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, 76.922 and
76.934 of the Commission's rules, 47 CFR 76.922 and 76.934, are amended
as set forth below.
40. It Is Further Ordered that the Commission shall send a copy of
this Fourteenth Order on Reconsideration, including the Final
Regulatory Flexibility Certification, to the Chief Counsel for Advocacy
of the Small Business Administration.
List of Subjects in 47 CFR Part 76
Administrative practice and procedure, Cable television, Reporting
and recordkeeping requirements.
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. 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 76.922 is amended by revising paragraph (b)(5)(i)
introductory text to read as follows.
Sec. 76.922 Rates for the basic service tier and cable programming
services tiers.
* * * * *
(b) * * *
(5) Streamlined rate reductions. (i) Upon becoming subject to rate
regulation, a small system owned by a small cable company may make a
streamlined rate reduction, subject to the following conditions, in
lieu of establishing initial rates pursuant to the other methods of
rate regulation set forth in this subpart:
* * * * *
3. Section 76.934 is amended by revising paragraphs (h)(5)(i) and
(h)(9) and by adding paragraph (h)(11) to read as follows:
Sec. 76.934 Small systems and small cable companies.
* * * * *
(h) * * *
(5) * * *
(i) If the maximum rate established on Form 1230 does not exceed
$1.24 per channel, the rate shall be rebuttably presumed reasonable. To
disallow such a rate, the franchising authority shall bear the burden
of showing that the operator did not reasonably interpret and allocate
its cost and expense data in deriving its annual operating expenses,
its net rate base, and a reasonable rate of return. If the maximum rate
established on Form 1230 exceeds $1.24 per channel, the franchising
authority shall bear such burden only if the rate that the cable
operator actually seeks to charge does not exceed $1.24 per channel.
* * * * *
(9) In any rate proceeding before a franchising authority in which
a final decision had not been issued as of June 5, 1995, a small system
owned by a small cable company may elect the form of rate regulation
set forth in this section to justify the rates that are the subject of
the proceeding, if the system and affiliated company were a small
system and small company respectively as of the June 5, 1995 and as of
the period during which the disputed rates were in effect. However, the
validity of a final rate decision made by a franchising authority
before June 5, 1995 is not affected.
* * * * *
(11) A system that is eligible to establish its rates in accordance
with the small system cost-of-service approach shall remain eligible
for so long as the system serves no more than 15,000 subscribers. When
a system that has established rates in accordance with the small system
cost-of-service approach exceeds 15,000 subscribers, the system
[[Page 53577]]
may maintain its then existing rates. After exceeding the 15,000
subscriber limit, any further rate adjustments shall not reflect
increases in external costs, inflation or channel additions until the
system has re-established initial permitted rates in accordance with
some other method of rate regulation prescribed in this subpart.
[FR Doc. 97-27151 Filed 10-14-97; 8:45 am]
BILLING CODE 6712-01-P