[Federal Register Volume 59, Number 203 (Friday, October 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26255]
[[Page Unknown]]
[Federal Register: October 21, 1994]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[MM Docket No. 92-266, FCC 94-254]
Cable Television Act of 1992
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Commission has adopted a Fourth Order on Reconsideration
to revise and adopt further Commission cable rate regulations. The
Fourth Order on Reconsideration addresses issues regarding external
cost treatment of Commission cable television system regulatory fees
and franchise fees. It is intended to provide for external cost
treatment of Commission cable television system regulatory fees and
permit cable operators to adjust rates for regulated cable services to
reflect Commission regulatory fees and changes in franchise fees upon
30 days' notice without receiving prior franchising authority or
Commission approval, but subject to refund.
EFFECTIVE DATE: November 21, 1994.
FOR FURTHER INFORMATION CONTACT:
Leora Hochstein, (202) 416-0800.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Fourth Order on
Reconsideration in MM Docket No. 92-266, FCC 94-254, adopted September
30, 1994 and released October 5, 1994.
The complete text of this Fourth Order on Reconsideration is
available for inspection and copying during normal business hours in
the FCC Reference Center (room 239), 1919 M Street, N.W., Washington,
D.C., and also may be purchased from the Commission's copy contractor,
International Transcription service at (202) 857-3800, 2100 M Street,
N.W., Suite 140, Washington, D.C. 20037.
Synopsis of the Fourth Order on Reconsideration
I. Franchise Fees
1. Cable systems are franchised by state or local governments or by
a combination thereof or, in certain circumstances, by other
governmental entities such as federal military installations. The
payment of fees under the terms of any franchise is authorized by
Section 622(a) of the Communications Act, is limited as to amount by
Section 622(b), and such fees are to be accounted for in the
establishment of rates under Section 623(b)(2)(c)(V).
2. Under the Commission's price cap rules, a cable operator is
permitted to adjust its maximum monthly charge for regulated service
tiers to reflect changes in certain categories of external costs,
including franchise fees. If an operator's basic service tier is being
regulated in a particular franchise area by the franchising authority
or by the Commission, the operator generally is not allowed under our
rules to increase its rates for the basic service tier or related
equipment and installations without first submitting the proposed
increase to the franchising authority or the Commission, as the case
may be, for review. Under our rules, a franchising authority reviewing
a proposed increase in basic rates has an initial 30 day period to make
its decision. The franchising authority may extend this period for an
additional 90 days in a non-cost-of-service case or 150 days in a cost-
of-service case. During this period, the operator's proposed increase
is not in effect. When the Commission is regulating basic rates,
filings regarding rate increases must be made 30 days prior to the
proposed effective date and such rate increases are effective on the
date proposed unless the Commission issues an order deferring the
effective date or denying the rate proposal. With respect to cable
programming service (CPS) rates, an operator must file rate increases
for prior review by the Commission if the Commission has ordered the
operator to reduce its CPS rates within the prior 12 months or some
other period specified by the Commission in a particular case. In
addition, when a CPS complaint against the operator is pending before
the Commission, an operator must give the Commission 30 days' notice of
changes in any rates, including increases in rates attributable to
increases in franchise fees.
3. On reconsideration, on our own motion, we determine that we
should permit adjustments to capped rates to reflect increases in
franchise fees without prior regulatory approval. Since it is the
franchising authority which has set the franchise fee, prior regulatory
review appears less necessary from a consumer protection standpoint
than it is for other categories of external costs. This decision
supersedes Answer No. 5 in the Questions and Answers released by the
Cable Services Bureau on May 18, 1994 which interpreted the
Commission's price cap rules as requiring prior approval before
franchise fee increases could be passed through.
4. Accordingly, as of the effective date of this Order, where the
franchising authority is regulating basic rates, increases in basic
rates attributable to increases in franchise fees will not be subject
to the prior approval requirements for proposed rates increases set
forth in Sec. 76.933(a)-(c) of our rules. However, operators will
continue to be required to abide by the notice provisions of our rules.
When the operator provides the notice to the franchising authority, it
must also provide documentation that demonstrates that the rate
increase has been properly calculated. We find it unnecessary to
prescribe the precise form of this documentation. The operator need not
use FCC Form 1210 since Form 1210 was not specifically designated for
use in calculating rate adjustments that reflect changes in franchise
fees.
5. As under existing rules, where the Commission is regulating
basic service tier rates, operators must give the Commission 30 days'
advance notice of any such increase attributable to franchise fee
increases. Operators must also give subscribers and franchising
authorities 30 days' advance notice of changes in basic rates
attributable to increases in franchise fees as required by our rules.
In addition, where the Commission is regulating basic service rates,
the operator should submit with its filing to the Commission the same
documentation which it would need to submit if the franchising
authority were regulating basic service rates as outlined above.
6. The franchising authority or the Commission, as appropriate, may
then review the pass-through of increases in franchise fees and may
order a prospective rate reduction and refunds in accordance with our
rules in the event the operator has increased its basic service rates
by more than the increase in franchise fees properly allocable to the
basic tier. The burden of demonstrating that any such increases are
proper shall remain on the operator as with any other rate adjustments.
The procedures set forth in Sec. 76.933 of our rules will apply to a
franchising authority review of rate increases resulting from franchise
fee pass-throughs, except that the increased rate attributable to the
increased franchise fee will be treated as an ``existing rate'' for the
purposes of Sec. 76.933. Thus, franchising authorities will have an
initial 30-day period, beginning on the date the operator provides
notice and supporting documentation, whichever is later, to review the
rates. The rate increase will go into effect at the end of this 30-day
period. The franchising authority may extend the period for reviewing
rates for an additional 90 days in a non-cost-of-service case or 150
days in a cost-of-service case by issuing a tolling order within the
initial 30-day period. It may further extend its period for review by
issuing an accounting order prior to the expiration of the 90 or 150
day additional period. See 47 CFR 76.933(a)-(c). However, during these
periods the increased rate is in effect. The procedures set forth in
Sec. 76.945 will apply to Commission review of rate increases resulting
from franchise fee pass-throughs.
7. Franchise fees will continue to be allocated in a manner that is
most consistent with the assessment methodology used by franchising
authorities. Under Sec. 76.924(f) of our rules, a portion of franchise
fees may, in some circumstances, be allocated to cable programming
service tiers. Operators that have had cable programming service rates
deemed unreasonable within the prior 12 months, or some other period
specified by the Commission in a particular case, must submit increases
in CPS rates attributable to an increase in franchise fees to the
Commission for its review. Rate justifications relating to franchise
fee-related increases in CPS tier rates will be reviewed by the
Commission according to existing rules for Commission review of basic
service tier rates.
8. These rule revisions do not change our rules governing rate
adjustments attributable to decreases in external costs, including
franchise fees. Decrease in franchise fees allocable to either the
basic service or a CPS tier will continue to be treated as external
cost decreases under our existing rules. Such decreases must be passed
through to subscribers within the periods set forth in our rules for
passing through decreases in external costs. The operator must provide
30 days' notice to subscribers, the local franchising authority and the
Commission, as appropriate. As with franchise fee increases, operators
must provide documentation for the amount of the decrease. Consistent
with the rules adopted in the Report and Order and Further Notice of
proposed Rulemaking, 8 FCC Rcd 5631 (1993) (Rate Order), 58 FR 29736,
May 21, 1993, our action herein with respect to the pass-through of
franchise fees applies only to the extent there are net increases in
the costs imposed on the system operator. Fees may not be passed
through to the extent there are other fee changes that offset the
increase.
II. Cable Television System Regulatory Fees
9. Section 9 of the Communications Act of 1934, as amended,
requires the Commission to collect cable system regulatory fees of $370
per 1,000 subscribers from cable television systems on an annual basis.
47 U.S.C. 159. The statute also permits the Commission to adjust the
amount of the regulatory fees in subsequent years. The purpose of
requiring cable systems to pay regulatory fees to the Commission is to
permit the Commission to recover the annual cost of its various
regulatory activities. In a Report and Order released June 8, 1994, in
MD Docket No. 94-19, the Commission adopted implementing rules
providing for the payment of regulatory fees in fiscal year 1994 and
thereafter. Implementation of Section 9 of the Communications Act:
Assessment and Collection of Regulatory Fees for the 1994 Fiscal Year,
MD Docket No. 94-19, Report and Order, 59 FR 30984 (June 16, 1994). In
that Report and Order, we decided to assess the cable system regulatory
fee on an exact per subscriber basis (i.e., $0.37 per subscriber per
year or approximately $0.03 per subscriber per month). We provided that
regulatory fees be paid on this basis so that cable systems serving
less than 1,000 subscribers would not pay a disproportionately high
regulatory fee. The first cable system regulatory fee payments for
fiscal year 1994 were due on August 12, 1994.
10. Cable operators in MD Docket No. 94-19 urged the Commission to
permit cable systems to pass regulatory fees through to subscribers as
external costs. In our Report and Order in that docket, we concluded
that the pass-through issue was not within the scope of the docket and
should, therefore, be addressed separately.
11. Cable television system regulatory fees are mandated by
Congress, collected by the Commission, and are intended to reimburse
the Commission for administering its regulatory responsibilities under
the Communications Act of 1934. As such, they are exceptional, newly
imposed, governmentally-assessed fees that further the purposes of the
Communications Act. These fees are also beyond the control of the cable
operator. Furthermore, the fees are easily measurable in amount.
Consistent with the Commission's prior decision to determine on a case-
by-case basis whether categories of costs should be accorded external
cost treatment, we determine that Commission cable television system
regulatory fees should be accorded external cost treatment under our
price cap rules governing cable service rates.
12. We further determine that cable system regulatory fees should
be directly assigned to the basic service tier. Direct assignment to
the basic service tier is appropriate because the cable system
regulatory fees are assessed on a per subscriber basis and all
subscribers receive the basic service tier. Assignment to the basic
service tier is also consistent with the fact that regulatory fees are
intended to reimburse the Commission for the costs of regulating cable
service, including Commission oversight of the basic service tier and
other regulatory activities such as rulemaking, the direct regulation
of some systems' basic tier rates and review of local franchising
authorities' decisions.
13. We believe that cable operators should be permitted to adjust
rates on account of the regulatory fees without prior regulatory
approval, subject to our requirements for 30 days' advance notice.
Thus, operators may adjust rates to reflect the newly imposed
regulatory fees, and any subsequent increases in the fees, in the same
manner that rates may be adjusted for increases in franchise fees, as
discussed above. Decreases in Commission regulatory fees will continue
to be treated as external cost decreases under our existing rules and
must be passed through to subscribers in accordance with those rules.
In addition, fees may not be passed through to the extent that there
are other offsetting fee decreases.
14. Operators shall recover the annual regulatory fee according to
the following schedule. Regulatory fees of $0.37 per subscriber that
were due on August 12, 1994 and/or September 9, 1994 for fiscal year
1994 (October 1, 1993-September 30, 1994) shall be recovered from
subscribers over a ten month period beginning in December of 1994 and
ending in September of 1995. For the first three months of this ten
month period (December 1994-February 1995), operators shall recover
$0.03 per month per subscriber. For the remaining seven months (March
1995-September 1995), operators shall recover $0.04 per month per
subscriber. Operators may provide notice of the entire fiscal year's
regulatory fee pass-through in a single notice so long as that notice
states that the fee pass-through will increase from $0.03 in February
1995 to $0.04 in March 1995. Regulatory fees that are assessed for
subsequent fiscal years shall be recovered in twelve monthly
installments during the fiscal year following the fiscal year for which
the payment was imposed. For example, operators may begin recovering
regulatory fees paid for fiscal year 1995 during the 12 month period
from October 1995 through September 1996. Payments shall be collected
in equal monthly installments, except that for so many months as may be
necessary to avoid fractional payments, an additional $0.01 payment per
month may be collected. All such additional payments shall be collected
in the last month or months of the fiscal year, so that once
collections of such payments begin there shall be no month remaining in
the year in which the operator is not entitled to such an additional
payment. Recovery of regulatory fees paid for fiscal year 1995 and
subsequent fiscal years is, of course, subject to the notice
requirements contained in this Order and in our rules. We recognize
that operators will not recover the regulatory fee until after they
have paid it. However, operators may not assess interest on the amount
charged to subscribers for regulatory fees in order to avoid the
substantial administrative burdens on operators and regulators in
determining and reviewing interest calculations.
15. The Report and Order released June 8, 1994, implementing
regulatory fees on cable television systems, also provided that, for
fiscal year 1994, each Cable Television Antenna Relay Service (CARS)
licensee would be assessed a regulatory fee of $220 per license by the
Commission. We decline to provide for the external cost treatment of
CARS regulatory fees. CARS license regulatory fees are assessed on a
flat fee basis of $220 per license and should not represent significant
amounts to most operators. We will consider the need to permit external
cost treatment of CARS regulatory fees for small systems upon
completion of our cost studies.
III. Administrative Matters
Regulatory Flexibility Act Analysis
16. Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C.
601-612, the Commission's final analysis with respect to the Fourth
Order on Reconsideration is as follows:
17. Need and purpose of this action. The Commission, in compliance
with Section 3 of the Cable Television Consumer Protection and
Competition Act of 1992, 47 U.S.C. 543 (1992) pertaining to rate
regulation, adopts revised rules and procedures intended to ensure
cable subscribers of reasonable rates for cable services with minimum
regulatory and administrative burden on cable entities.
18. Summary of issues raised by the public in response to the
Initial Regulatory Flexibility Analysis. There were no comments
submitted in response to the Initial Regulatory Flexibility Analysis.
The Chief Counsel for Advocacy of the United States Small Business
Administration (SBA) filed comments in the original rulemaking order.
The Commission addressed the concerns raised by the Office of Advocacy
in the Rate Order.
19. Significant alternatives considered and rejected. Petitioners
representing cable interests and franchising authorities submitted
several alternatives aimed at minimizing administrative burdens. The
Commission responded to these comments in previous Orders in this
docket. Although the Commission is issuing this Order on its own
motion, the Commission has attempted to accommodate commenters'
concerns and to reduce administrative burdens by providing an expedited
method to pass through franchise fees and Commission regulatory fees.
IV. Ordering Clauses
20. Accordingly, it is ordered That, pursuant to Sections 4(i),
303(r), and 623 of the Communications Act of 1934, as amended, 47
U.S.C. 154(i), 303(r), and 543, that, Secs. 76.922, 76.924, and 76.933
of the Commission's rules, 47 CFR 76.922, 76.924, and 76.933 are
amended as set forth below.
21. It is further ordered That, this Fourth Order on
Reconsideration is effective November 21, 1994.
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: Secs. 2, 3, 4, 301, 303, 307, 308, 309, 48 Stat., as
amended, 1064, 1065, 1066, 1081, 1082, 1083, 1084, 1085, 1101; 47
U.S.C. Secs. 152, 153, 154, 301, 303, 307, 308, 309, 532, 533, 535,
542, 543, 552, as amended, 106 Stat. 1460.
2. Section 76.922 is amended by adding paragraph (d)(3)(iv)(F) to
read as follows:
Sec. 76.922 Rates for the basic service tier and cable programming
services tiers.
* * * * *
(d) * * *
(3) * * *
(iv) * * *
(F) Commission cable television system regulatory fees imposed
pursuant to 47 U.S.C. 159.
* * * * *
3. Section 76.924 is amended by redesignating paragraphs (f)(5) and
(f)(6) as paragraphs (f)(6) and (f)(7) and adding a new paragraph
(f)(5) to read as follows:
Sec. 76.924 Cost accounting and cost allocation requirements.
* * * * *
(f)(5) Commission cable television system regulatory fees imposed
pursuant to 47 U.S.C. 159 shall be directly assigned to the basic
service tier.
* * * * *
4. Section 76.933 is amended by adding paragraphs (e) and (f) to
read as follows:
Sec. 76.933 Franchising authority review of basic cable rates and
equipment costs.
* * * * *
(e) Notwithstanding paragraphs (a) through (d) of this section,
when the franchising authority is regulating basic service tier rates,
a cable operator may increase its rates for basic service to reflect
the imposition of, or increase in, franchise fees or Commission cable
television system regulatory fees imposed pursuant to 47 U.S.C. 159,
upon 30 days' notice to subscribers and the franchising authority and,
where required by Sec. 76.958, to the Commission. For the purposes of
paragraphs (a) through (c) of this section, the increased rate
attributable to Commission regulatory fees or franchise fees shall be
treated as an ``existing rate,'' subject to subsequent review and
refund if the franchising authority determines that the increase in
basic tier rates exceeds the increase in regulatory fees or in
franchise fees allocable to the basic tier. This determination shall be
appealable to the Commission pursuant to Sec. 76.944. When the
Commission is regulating basic service tier rates pursuant to
Sec. 76.945 or cable programming service rates pursuant to Sec. 76.960,
an increase in those rates resulting from franchise fees or Commission
regulatory fees shall be reviewed by the Commission pursuant to the
mechanisms set forth in Sec. 76.945. A cable operator must adjust its
rates to reflect decreases in franchise fees or Commission regulatory
fees within the periods set forth in Sec. 76.922(d)(3)(i) and (iii).
(f) Cable television system regulatory fees assessed by the
Commission pursuant to 47 U.S.C. 159 shall be recovered in monthly
installments during the fiscal year following the fiscal year for which
the payment was imposed. Payments shall be collected in equal monthly
installments, except that for so many months as may be necessary to
avoid fractional payments, an additional $0.01 payment per month may be
collected. All such additional payments shall be collected in the last
month or months of the fiscal year, so that once collections of such
payments begin there shall be no month remaining in the year in which
the operator is not entitled to such an additional payment. Operators
may not assess interest. Operators may provide notice of the entire
fiscal year's regulatory fee pass-through in a single notice.
[FR Doc. 94-26255 Filed 10-20-94; 8:45 am]
BILLING CODE 6712-01-M
