[Federal Register Volume 59, Number 73 (Friday, April 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-9050]
[[Page Unknown]]
[Federal Register: April 15, 1994]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[MM Docket Nos. 92-266, 92-262; FCC 94-40]
Cable Act of 1992
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: In furtherance of the Commission's implementation of the rate
regulation provision of the Cable Consumer Protection and Competition
Act of 1992 (``1992 Cable Act,'' ``Cable Act,'' or ``Act''), the
Commission adopted a Third Order on Reconsideration clarifying several
of the cable rate regulations. The action disposes principally of
issues unrelated to the calculation of rates that were raised on
reconsideration of the Report and Order in MM Docket No. 92-266 (``Rate
Order''), 58 FR 29736 (May 21, 1993), or that were encountered in the
Commission's initial implementation of rate regulation. Specifically,
the Commission further clarifies the definition of ``effective
competition'' in section 623(l) of the Act; affirms the rules regarding
tier buy-through prohibitions; addresses procedural and jurisdictional
issues pertaining to the regulatory process, including certification,
basic rate decisions, and refund issues; clarifies the rules governing
negative option billing practices, evasions, grandfathering of rate
agreements, subscriber bill itemization and advertising of rates;
considers remaining issues regarding equipment and installation; and
clarifies several points with regard to FCC Form 393 (the benchmark
calculation form) and FCC Forms 1200 and 1205 (the new calculation
forms).
EFFECTIVE DATE: May 15, 1994.
FOR FURTHER INFORMATION CONTACT:
Amy Zoslov, (202) 416-0808, or Julie Buchanan, (202) 416-1170, Cable
Services Bureau.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Third Order on
Reconsideration, adopted February 22, 1994, released March 30, 1994.
The complete text of this Order is available for inspection and copying
during normal business hours in the FCC Reference Center (room 239),
1919 M Street NW., Washington, DC, and also may be purchased from the
Commission's copy contractor, International Transcription Service, at
(202) 857-3800, 2100 M Street NW., suite 140, Washington, DC 20037.
Synopsis of the Third Order on Reconsideration
I. Introduction
1. In furtherance of the Commission's implementation of the rate
regulation provision of the Cable Consumer Protection and Competition
Act of 1992 (``1992 Cable Act,'' ``Cable Act,'' or ``Act''), the
Commission adopted a Third Order on Reconsideration clarifying several
of the cable rate regulations. The action disposes principally of
issues unrelated to the calculation of rates that were raised on
reconsideration of the Report and Order in MM Docket No. 92-266 (``Rate
Order''), 8 FCC Rcd 5631 (1993); 58 FR 29736 (May 21, 1993), or that
were encountered in the Commission's initial implementation of rate
regulation. Specifically, we further clarify the definition of
``effective competition'' in section 623(l) of the Act, 47 U.S.C.
543(1); affirm our rules regarding tier buy-through prohibitions;
address procedural and jurisdictional issues pertaining to the
regulatory process, including certification, basic rate decisions, and
refund issues; clarify our rules governing negative option billing
practices, evasions, grandfathering of rate agreements, subscriber bill
itemization and advertising of rates; consider remaining issues
regarding equipment and installation; and clarify several points with
regard to FCC Form 393 (the benchmark calculation form) and FCC Forms
1200 and 1205 (the new calculation forms).\1\
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\1\FCC Form 1200: ``Setting Maximum Initial Permitted Rates for
Regulated Cable Services Pursuant to Rules Adopted February 22,
1994--First-Time Filers Form''; FCC Form 1205: ``Determining Current
Equipment and Installation Rates--Equipment Form.''
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II. Competition Issues
A. Definitions and Findings of Effective Competition
2. Under the 1992 Cable Act, rate regulation applies only to cable
systems that are not subject to ``effective competition'' as defined in
that Act. 47 U.S.C. 543(a)(2). Section 623(l)(1) of the Act further
provides that ``effective competition'' exists if one of three tests is
met. Under the second test, effective competition exists if the
franchise area is (i) served by at least two unaffiliated multichannel
video programming distributors each of which offers comparable video
programming to at least 50% of the households in the franchise area;
and (ii) the number of households subscribing to programming services
offered by multichannel video programming distributors other than the
largest multichannel video programming distributor exceeds 15% of the
households in the franchise area.
47 U.S.C. 543(l)(1)(B).
3. Measurement of subscribership. We previously adopted various
rules to implement this second test for effective competition. One of
these rules provides that in calculating whether 15% or more of the
households in a franchise area subscribe to all but the largest
multichannel video programming distributor, we shall consider the
subscribership of competing multichannel distributors on a cumulative
basis. By this Order, we affirm our previous interpretation that only
the subscribers of those multichannel distributors that offer
programming to at least 50% of the households in the franchise area
shall be included in this cumulative measurement.
4. Presumption of availability--satellite-delivered services. The
second test for effective competition requires that at least two
unaffiliated multichannel distributors each offer comparable
programming to at least 50% of the households in a franchise area. We
previously concluded that multichannel programming is ``offered'' if it
is both technically available (i.e., it can be delivered to a household
with only minimal additional investment by the multichannel
distributor) and actually available (i.e., potential subscribers must
be aware of its availability from marketing efforts). 47 CFR 76.905(e).
The Rate Order stated that multichannel video programming distribution
service received from satellites via satellite master antenna
television service (``SMATV'') or television receive-only earth station
(``TVRO'') reception is technically available nationwide in all
franchise areas that do not, by regulation, restrict the use of home
satellite dishes. Rate Order, 8 FCC Rcd at 5659, 60.
5. Because subscription to satellite service is accomplished
alternatively through either SMATV or TVRO facilities, we permitted
each to be included toward meeting the 15% subscription test, even
through SMATV service, taken alone, might not be available to 50% of
the households in a franchise area. This Order affirms our belief that
satellite service is generally available from one or the other of these
complementary sources, and it is reasonable to measure actual
acceptance of satellite services in any area by collectively counting
both SMATV and TVRO subscribership toward the 15% test.
6. Program comparability. The Rate Order also adopted a rule
defining when a competing multichannel distributor is offering
``comparable programming'' under the second test for effective
competition. Rate Order, 8 FCC Rcd at 5666, 67. The rule provides that
``[i]n order to offer comparable programming * * * a competing
multichannel video programming distributor must offer at least 12
channels of video programming, including at least one channel of
nonbroadcast service programming.'' 47 CFR 76.905(g). Since we do not
believe that actual channel parity is necessary to provide a
competitive alternative, we reject the argument that multichannel
distributors must offer roughly the same number of channels in order to
meet the test for offering ``comparable programming.'' We also affirm
our belief that it is sufficient to use the minimum basic tier as the
basis for comparison. Accordingly, we will not change the definition of
``comparable programming'' adopted in the Rate Order.
7. Seasonal households and subscribers. The Rate Order stated that
``[e]ach separately billed or billable customer will count as a
household subscribing to or being offered video programming services *
* *.'' 47 CFR 76.905(c). In addition, individual units in multiple
dwellings buildings are counted as separate households even though they
may not be separately billed. Id.
8. The term ``household'' was defined for purposes of the 1990
Census as ``all the persons who occupy a housing unit'',\2\ while
``housing units'' was defined to include both occupied and vacant
units. Thus, ``housing units'' reflect the total dwelling units in a
community, while a count of ``households'' reflects only occupied
units. As used in the Cable Act, we presume that Congress did not
intend ``households'' to have a different meaning than in the 1990
Census. In any event, we believe that the best and most constant
indicator of local viewers' choices is represented by the full-time
residents of an area. Moreover, it is the full-time residents who are
most affected by the determination whether their cable rates are
subject to regulation. Consequently, the operator should measure its
penetration rate of full-time subscribers as a percentage of full-time
households, i.e., by excluding housing units used for seasonal,
occasional, or recreational use.\3\
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\2\Bureau of the Census, U.S. Dept. of Commerce, 1990 Census of
Population, CP-1-1B, Appendix B at B-8.
\3\We will use the U.S. Census Bureau definition for seasonal,
recreational, and occasional use:
These are vacant units used or intended for use only in certain
seasons or for weekend or other occasional use throughout the year.
Seasonal units include those used for summer or winter sports or
recreation, such as beach cottages and hunting cabins. Seasonal
units may also include quarters for such workers as herders and
loggers. Interval ownership units, sometimes called shared ownership
or time-sharing condominiums, are also included here.
1990 Census of Housing, General Housing Characteristics,
Maryland, at B-12.
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B. Geographically Uniform Rate Structure
9. The 1992 Cable Act requires cable operators to ``have a rate
structure, for the provision of cable service, that is uniform
throughout the geographic area in which cable service is provided over
its cable system''\4\ In the Rate Order, the Commission concluded that
this provision was applicable only to regulated services in regulated
markets. Rate Order, 8 FCC Rcd at 5896. The Commission then determined
that the provision would be enforced on a franchise area by franchise
area basis. Id. Finally, the Commission found that this provision did
not prohibit all differences in rates between customers. Cable
operators are not necessarily barred from distinguishing between
seasonal and full-time subscribers and from offering promotional rates
universally but for a limited time. Also, discounts for senior citizens
or economically disadvantaged groups may be set. Additionally,
nonpredatory bulk discounts to multiple dwelling units (``MDUs'') are
permissible if offered on a uniform basis. Id. at 5897, 98.
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\4\Communications Act of 1934, as amended, (``Communications
Act'') section 623(d), 47 U.S.C. 543(d).
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10. The Cable Act is unequivocal in requiring uniformity of rates
within a franchise area. The provision is not limited to any particular
class or classes of subscribers. In accordance with the statutory
mandate, the Rate Order also specifically noted the Commission's
concern that bulk discounts not be abused to displace other
multichannel video providers from MDUs, which have become important
footholds for the establishment of competition to incumbent cable
systems. Rate Order, 8 FCC Rcd at 5898. Cable operators are not
prevented from meeting competition--as long as the same rate structure
is offered to all MDUs in the franchise area. Moreover, cable operators
may offer different rates to MDUs of different sizes and may set rates
based on the duration of the contract, provided that the operator can
demonstrate that its cost savings vary with the size of the building
and the duration of the contract, and as long as the same rate is
offered to buildings of the same size and contracts of similar
duration. Thus, bulk arrangements on a variable basis between MDUs of
the same size and contractual duration, though currently allowed by
some franchising authorities, are specifically prohibited by the Act.
11. However, we will allow cable operators' existing contracts with
MDUs to be grandfathered. We believe that the elimination of existing
contracts would be unnecessarily disruptive to those subscribers
receiving discounts, as well as to those cable companies offering the
discounts. Thus, contracts between cable operators and MDUs entered
into on or before April 1, 1993, in which the contract rate is lower
than the permitted regulated rate, may remain in effect until their
previously agreed-upon expiration date. To the extent the Rate Order
may have been interpreted by private parties to supersede existing
contracts, which were accordingly rewritten, the terms of such
contracts may be reinstituted without violating Commission rules.
12. In addition, we conclude on reconsideration that the uniform
rate structure requirements of section 623(d), 47 U.S.C. 543(d), should
apply in all franchise areas, irrespective of the presence of
``effective competition'' as defined in the Act. The specific harms
that the rate uniformity provision is intended to prevent--charging
different subscribers different rates with no economic justification
and unfairly undercutting competitors' prices--could occur in areas
with head-to-head competition or low penetration sufficient to meet the
Act's definition of ``effective competition.'' This would not only
permit the charging of noncompetitive rates to consumers that are
unprotected by either rate regulation or competitive pressure on rates,
but also stifle the expansion of existing, especially nascent,
competition. As the Senate Report states: ``This provision is intended
to prevent cable operators from having different rate structures in
different parts of one cable franchise * * * (and) from dropping the
rates in one portion of a franchise area to undercut a competitor
temporarily.''\5\ The statutory language does not provide, and the
Senate Report does not suggest, that the rate uniformity provision
should be limited to franchise areas where ``effective competition'' is
absent.
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\5\Senate Committee on Commerce, Science and Transportation, S.
Rep. No. 92, 102d Cong., 1st Sess. at 76 (1991). This language also
indicates that the term ``geographic area'' was intended to refer to
``franchise area'' and not a broader geographic area. See Rate
Order, 8 FCC Rcd at 5896, where the Commission considered, and
rejected, arguments to define ``geographic area'' more broadly than
a franchise area.
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III. Tier Buy-Through Prohibition
13. The tier buy-through prohibition of the 1992 Cable Act
prohibits cable operators from requiring subscribers to purchase a
particular service tier, other than the basic service tier, in order to
obtain access to video programming offered on a per-channel or per-
program basis. 47 U.S.C. 543(b)(8). An exception is made for cable
operators that are not technically capable of complying with this
requirement during the next ten years. Id. In a previous decision, we
adopted an implementing rule that (1) prohibits discrimination between
subscribers of the basic service tier and other subscribers with regard
to rates charged for video programming offered on a per-channel or per-
program basis; (2) forbids any retiering of channels or services
intended to frustrate the purpose of the tier buy-through provision;
and (3) defines when cable systems are not technically capable of
complying with this requirement. Report and Order in MM Docket No. 92-
262 (``Tier Buy-Through Order''), 8 FCC Rcd 2274 (1993); 58 FR 19627
(Apr. 15, 1993); 47 CFR 76.921.\6\ At that time, we also determined
that all cable systems are subject to the tier buy-through prohibition
and our implementing rules.\7\ Id. at note 32.
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\6\This rule was originally adopted as Section 76.900, but was
renumbered and modified in the Rate Order.
\7\After the release of the Tier Buy-Through Order, the
Commission clarified in the Rate Order that the tier buy-through
provision of the 1992 Cable Act ``only precludes operators from
conditioning access to programming offered on a per-channel or per-
program basis on purchasing intermediate tiers.'' Rate Order, 8 FCC
Rcd at 5903, n. 435. Therefore, the provision does not prohibit
operators from requiring the purchase of an intermediate tier of
cable programming services in order to obtain access to another tier
of cable programming services. Id. See also 47 CFR 76.921(a). No
petitions for reconsideration were filed in the rate proceeding
regarding this clarification.
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14. We continue to believe that the tier buy-through provision
applies to all cable systems, regardless of whether they are subject to
rate regulation. The language of the provision clearly states, without
limitation or qualification, that ``a cable operator may not require
the subscription to any tier other than the basic service tier * * * as
a condition of access to video programming offered on a per channel or
per program basis.'' 47 U.S.C. 543(b)(8). Congress could have easily
limited this provision to regulated systems by expressly doing so.
Accordingly, to provide all cable subscribers with the maximum possible
flexibility in paying for those programs they desire, it is necessary
to apply the tier buy-through provision to all cable systems.
IV. Procedural and Jurisdictional Issues
A. Certification Process
15. Franchising authority's decision not to regulate. In the Rate
Order, we analyzed carefully whether we should assert the authority to
regulate basic rates when a franchising authority had not sought
certification. We emphasized that Congress had vested in local
franchising authorities the primary authority to regulate basic rates
and that we therefore did not want to override a locality's decision
not to regulate rates. We concluded that we would not assume
jurisdiction in cases where a franchising authority does not apply for
certification or directly request that the Commission regulate rates.
Rate Order, 8 FCC Rcd at 5676.
16. For the time being, we will continue to decline to assert
jurisdiction over basic cable service where franchising authorities do
not choose to regulate rates themselves. The Act's regulatory scheme
vests in franchising authorities the initial decision whether their
communities' basic cable service rates should be regulated. Rate Order,
8 FCC Rcd at 5676. In any case where this may work to the detriment of
subscribers, they can seek relief from their local authorities through
the political processes available to them. However, in the event that
basic cable rates remain unregulated in a large number of communities
despite evidence that cable operators in those communities are charging
unreasonable rates, we will reexamine this issue.
17. Franchise fee rebuttal showing. We stated in the Rate Order
that we would presume that franchising authorities receiving franchise
fees have the resources to regulate rates. A franchising authority
seeking to have the Commission exercise jurisdiction over basic rates
is thus required to rebut this presumption with evidence showing why
the proceeds of the franchise fees it obtains cannot be used to cover
the cost of rate regulation. Rate Order, 8 FCC Rcd at 5676. This
showing must consist of a detailed explanation of the franchising
authority's regulatory program that shows why funds are insufficient to
cover basic rate regulation. Id. The Commission will assume
jurisdiction only if it determines that the franchise fees cannot
reasonably be expected to cover the present regulatory program and
basic rate regulation. Id.
18. We continue to believe that the rebuttal showing requirement is
consistent with section 622(i) of the Communications Act. While the Act
provides that the Commission cannot directly control the franchising
authority's use of the proceeds from the franchise fees, nothing
prevents the Commission from basing a judgment on whether to assume
regulation of basic tier rates on whether the franchising authority
indeed lacks the funds to do so.
19. As to the specific showing required, the franchising authority
would simply have to document the funds it raises from franchise fees
and any general taxes, estimate the cost of rate regulation, and
provide an explanation as to why the funds are insufficient to cover
those costs. Some of these factors may include whether the franchise
fee collected is less than five percent of the cable operator's gross
revenues,\8\ and whether costs may be shared among several
municipalities by filing joint certifications. As we gain experience
reviewing such requests, we will establish standards on a case-by-case
basis to determine whether the franchising authority has sufficiently
justified its request that the Commission regulate basic cable rates in
a particular community.
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\8\Section 622(b) of the Communications Act allows franchising
authorities to collect franchise fees in an amount up to five
percent of a cable operator's gross revenues during any 12-month
period. 47 U.S.C. 542(b).
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20. Voluntary withdrawal of certification. Although Congress did
not specifically provide for the voluntary decertification of
franchising authorities, we believe Congress envisioned that
franchising authorities would ultimately decide whether rate regulation
is appropriate in their communities. Indeed, the fact that franchising
authorities have a choice as to whether to seek certification is part
of Congress's scheme to vest primary regulatory responsibility in
franchising authorities. Accordingly, we will allow certified
franchising authorities to notify the Commission that they have decided
not to regulate rates, upon their determination that rate regulation
would no longer serve the best interests of local cable subscribers.\9\
Franchising authorities are specifically prohibited from accepting
consideration in exchange for their decision to decertify.
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\9\The Commission retains the right to review such
determinations and seek an explanation from the franchising
authority concerning the factual finding underlying its decision to
decertify. We will not prohibit a franchising authority from again
seeking certification, even after it has decertified. However, if a
pattern of repeated certification and decertification develops, we
reserve the right to examine the situation to determine whether the
franchising authority can justify its determinations as to the
propriety of rate regulation in its community.
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21. Franchising authority's failure to meet certification
requirements. In the Rate Order, we stated that we would automatically
assume jurisdiction over basic cable rates when a franchising authority
seeking initial certification does not have the legal authority to
regulate rates or does not have rate regulations that are consistent
with those of the Commission. In accordance with the Act, we retain
jurisdiction in such cases only until the franchising authority has
qualified to exercise jurisdiction by submitting a new certification
and meeting the required statutory standard. See 47 U.S.C. 543(a)(6);
47 CFR 76.913(a). We indicated, however, that we would allow the
franchising authority to cure any defects in its procedural regulations
governing rate proceedings before we would assume jurisdiction. Rate
Order, 8 FCC Rcd at 5676, 77; 47 CFR 76.910.
22. We believe that our statutory obligations require us to assert
jurisdiction over basic rates when a franchising authority's
certification effort is denied for failure to adopt regulations that
are consistent with the Commission's rate rules. We do not believe
Congress intended for a franchising authority to regulate when its
regulations will substantially or materially conflict with federal
regulations.\10\ Nor do we believe Congress intended that there be a
regulatory vacuum when a franchising authority has affirmatively sought
certification. Once a franchising authority has affirmatively sought
certification because it believes basic rates to be unreasonable, and
has indicated a willingness to regulate, we will step in to ensure that
basic service rates are properly scrutinized until the franchising
authority can become certified.
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\10\Indeed, in revocation cases where the Commission determines
that a franchising authority's laws and regulations are not in
conformance with Commission regulations, the statute instructs the
Commission to assume jurisdiction directly. See Communications Act,
section 623(a)(5), 47 U.S.C. 543(a)(5).
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23. Revocation or certification. The 1992 Cable Act establishes
conditions for the denial or revocation of a franchising authority's
certification. As a threshold matter, a franchising authority that
seeks to exercise regulatory jurisdiction must meet certain statutory
requirements; otherwise the Commission can deny its request for initial
certification.\11\ If, after a franchising authority has been
certified, the Commission finds that the franchising authority has
acted inconsistently with the statutory requirements, ``appropriate
relief'' may be granted. However, if the Commission determines, after
the franchising authority has had a reasonable opportunity to comment,
that the state and local laws and regulations are not in conformance
with the regulations prescribed by the Commission to regulate rates,
then the Commission must revoke the jurisdiction of the authority. 47
U.S.C. 543(a)(5).
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\11\There are three statutory requirements. First, the
franchising authority must adopt and administer rate regulations
that are consistent with those of the Commission. Second, the
franchising authority must have the legal authority and personnel to
implement the necessary regulations. Third, the franchising
authority's procedural regulations for rate proceedings must provide
interested parties with a reasonable opportunity to comment. See
Communications Act, section 623(a)(3) (A)-(C), 47 U.S.C. 543(a)(3)
(A)-(C). See also Communications Act, 623(a)(4) (A)-(C), 47 U.S.C.
543(a)(4) (A)-(C) (setting forth that failure to meet three factors
is cause for certification disapproval).
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24. We will modify our position on Commission assumption of
jurisdiction in revocation cases involving nonconformance with
Commission regulations. As a general matter, we will allow a
franchising authority to cure any nonconformance with our rules that
does not involve a substantial or material regulatory conflict before
we will revoke its certification and assume jurisdiction. On the other
hand, we believe that the statute compels us to revoke the
certification of any franchising authority once we find, after there
has been an opportunity to comment, that state and local regulations
conflict with our regulations in a substantial and material manner.
More specifically, we will revoke the jurisdiction of a franchising
authority for nonconformance when the state and local laws involve a
substantial and material conflict with our rate regulations.
B. Franchising Authority's Basic Rate Decision
25. Cost-of-service showings for basic tier rates. Some local
franchising authorities may have resources and personnel sufficient to
conduct a review of a rate-setting justification based on an FCC Form
393 (and/or FCC Forms 1200/1205), but not to examine and review a cost-
based showing. This concern may have discouraged certification by many
local franchising authorities. We believe that the Commission,
consistent with the statutorily shared jurisdictional framework for
regulation of the basic service tier, should provide assistance to
certified local franchising authorities that are unable to conduct
cost-based proceedings. Accordingly, on our own motion, we have decided
to establish procedures under which the Commission, if requested by the
local franchising authority in a petition for special relief under
Sec. 76.7 of the Commission's rules, will issue a ruling that makes
cost determinations for the basic service tier. The ruling will also
set an appropriate cost-based rate and will become binding on the local
franchising authority and the cable operator. Specifically, local
franchising authorities receiving cost-of-service showings from cable
operators seeking to justify either initial rates or rate increases for
the basic service tier will be able to obtain such a Commission ruling
on their behalf for those submissions pending no more than 30 days
before May 15, 1994, or those made on or after that date.
26. Under these procedures, upon receipt of a cost-of-service
showing, a local franchising authority will have 30 days to decide
whether to seek Commission assistance.\12\ If the franchising authority
decides to seek Commission assistance, the franchising authority must
issue a brief order to that effect, and serve a copy (before the 30-day
deadline) on the cable operator submitting the cost showing. In its
request for Commission assistance, the local franchising authority must
explain its reasons for seeking Commission assistance, such as lack of
adequately trained personnel, lack of financial resources, or other
exigent circumstances. Upon receipt of the local authority's notice to
seek Commission assistance, the cable operator must deliver a copy of
the cost showing together with all relevant attachments to the
Commission within 15 days.\13\
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\12\Under the Commission's current rules, if a franchising
authority is able to determine that a cable operator's current rates
for the basic service tier and accompanying equipment are reasonable
under the Commission's rate regulations, the rates will go into
effect 30 days after they are submitted. If the franchising
authority is unable to determine the reasonableness of the rates
within this period, and the operator has submitted a cost-of-service
showing, the franchising authority may toll the effective date of
the rates in question for an additional 150 days to evaluate the
cost showing. See Rate Order, at para. 119; 47 CFR 76.930.
\13\We will classify referrals of cost-of-service cases from
local franchising authorities as restricted proceedings for purposes
of our ex parte rules. Accordingly, ex parte presentations are
prohibited. See 47 CFR 1.1208 (1992).
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27. The Commission's determination of cost-based rates for the
basic service tier will be governed by Section 76.945 of the
Commission's rules and will become binding upon the local franchising
authority. The Commission will notify the local franchising authority
and the cable operator of its determination and the basic service tier
rate, as established by the Commission. The rate will take effect upon
implementation by the local franchising authority and the appropriate
remedy, if applicable, will be determined by the franchising authority.
A cable operator or franchising authority may seek reconsideration by
Commission staff, or review by the full Commission, of the staff ruling
on the cost-based determination or the rate itself, pursuant to
Sec. 1.106 of Sec. 1.115 of the Commission's rules.
28. Delegation of authority and form of decision. The Commission
clarifies that the authority to make rate decisions and to issue
written orders may be delegated to specified governmental agents such
as a local cable commission. We find that the 1992 Cable Act does not
prohibit franchising authorities, if so authorized by state and/or
local law, from delegating their rate-making responsibilities to a
local commission or other subordinate entity, even if that entity is
not the ``franchising authority'' entitled to certification under the
Act.\14\ Any such subordinate entity will be acting as the authorized
agent of and at the will and pleasure of the franchising authority, and
its actions will be subject to at least the implicit, if not explicit,
ratification of the full franchising authorities. In addition, provided
that issuance of rate decisions satisfies the Rate Order's public
notice requirements,\15\ franchising authorities, or the state or local
governments, may determine the particular form such rate decisions will
take.
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\14\Section 602(10) of the Communications Act defines
franchising authority as any governmental entity empowered by
federal, state, or local law to grant a franchise. 47 U.S.C.
522(10).
\15\Rate Order, 8 FCC Rcd at 5715, 16.
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29. Due process concerns. In the Rate Order, we afforded
franchising authorities considerable flexibility regarding the manner
in which interested parties may participate in proceedings regarding
rates for the basic service tier and accompanying equipment, as long as
they provide a reasonable opportunity for consideration of the views of
interested parties and act within the prescribed time periods. Rate
Order, 8 FCC Rcd at 5716. We also gave franchising authorities the
flexibility to decide whether and when to conduct formal or informal
hearings, as long as they act on rate cases within the prescribed time
periods to provide interested parties with notice and a meaningful
opportunity to participate. Id.
30. Rather than impose specific procedural requirements on each
individual franchising authority, we find it more appropriate at this
juncture to remind franchising authorities to examine their current
procedural requirements for other local proceedings and determine the
best forum for providing due process to cable operators. In any event,
a cable operator is not without redress if it determines that the
franchising authority has denied the operator its due process rights.
Pursuant to Section 76.944 of the Commission's Rules, the cable
operator may raise that argument in its appeal to the local courts of
the franchising authority's written decision. Rate Order, 8 FCC Rcd at
5729, n. 388; 47 CFR 76.944.
31. Appeals. We stated in the Rate Order that cable operators must
file appeals of local rate decisions with the Commission within 30 days
of release of the text of the franchising authority's decision. Rate
Order, 8 FCC Rcd at 5730, 31; 47 CFR 74.944(b). Oppositions may be
filed within 15 days after the appeal is filed, and must be served on
the party or parties appealing the rate decision. Replies may be filed
seven days after the last day for oppositions and must be served on the
parties to the proceeding. 47 CFR 76.944(b).
32. We will amend Sec. 76.944(b) to require any party filing an
appeal of a local rate decision to serve a copy of the appeal on the
decisionmaking authority. Additionally, where the state is the
appropriate decisionmaking authority, the state must forward a copy of
the appeal to the appropriate local official(s).\16\
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\16\We will classify appeals of local rate decisions as
restricted proceedings for purposes of our ex parte rules.
Accordingly, ex parte presentations are prohibited. See 47 CFR
1.1208 (1992).
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33. Settlement of rate cases. We stated in the Rate Order that the
regulatory structure established by section 623 of the Communications
Act, 47 U.S.C. 543, does not appear to give cable operators the
latitude to settle rate cases. Rather, a franchising authority must
follow procedures that are consistent with the Commission's rate
regulations and make a reasoned decision based on the record. Rate
Order, 8 FCC Rcd at 5715, n. 337.
34. For largely the same reasons that we prohibited agreements not
to regulate basic rates,\17\ we affirm our intention to disallow
settlement agreements that are based on factors outside the record of a
rate proceeding. permitting such settlements could potentially allow
franchising authorities to bargain away subscribers' statutory
protection against unreasonable rates. Furthermore, the availability of
settlements could increase the number of cost-of-service showings,
which would be more suited to negotiated resolutions. Parties in a
rate-setting procedure may, of course, stipulate to particular facts
and even the final rate level itself, as long as the basis for each
such stipulation is clearly articulated, there is some support for each
stipulation in the record, and it does not circumvent our rate
regulations.
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\17\First Order on Reconsideration, Second Report and Order, and
Third Notice of Proposed Rulemaking in MM Docket No. 92-266, 9 FCC
Rcd 1164 (1993); 58 Fed. Reg. 46718 (Sept. 2, 1993) at para. 72
[hereinafter First Rates Reconsideration].
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35. Effective date of rate increases. In the Rate Order, we noted
that unless the franchising authority finds that a proposed increase in
basic tier rates is unreasonable, the increase will go into effect 30
days after filing with the franchising authority. If the franchising
authority is unable to determine whether the proposed rate increase is
reasonable, or if the cable operator has submitted a cost-of-service
showing seeking to justify a rate above the presumptively reasonable
level, the franchising authority may delay the effective date of the
proposed rate for 90 days, or 150 days, respectively. Rate Order, 8 FCC
Rcd at 5709.\18\
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\18\To toll the effective date of the proposed rate, the
franchising authority must issue a brief order, within the initial
30-day period, explaining that it needs additional time to review
the proposed rate. Id.
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36. In this Order, we find that where the franchising authority is
unable to determine whether a particular portion of a proposed rate
increase is reasonable and the questionable portion is clearly
severable, a franchising authority may, at its discretion, permit the
implementation of portions of a rate increase it finds reasonable while
it reviews the reasonableness of other portions. This policy will
permit cable operators to recoup as promptly as possible those costs
that are deemed acceptable by the franchising authority.
37. Proprietary information. In the Rate Order, we stated that
franchising authorities will have the right to collect additional
information--including proprietary information--to make a rate
determination in those cases where cable operators have submitted
initial rates or have proposed increases that exceed the Commission's
presumptively reasonable level. Rate Order 8 FCC Rcd at 5718-19. We
also required franchising authorities to adopt procedures analogous to
those contained in Section 0.459 of the Commission's Rules.\19\ Id., n.
349. See 47 CFR 76.938.
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\19\Section 0.459 provides that a party submitting information
may request confidentiality with respect to specific portions of the
material submitted. The party must make a showing, by a
preponderance of the evidence, that non-disclosure is consistent
with Exemption 4 of the Freedom of Information Act, 5 U.S.C. 552,
which authorizes the Commission to withhold from public disclosure
confidential commercial or financial information.
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38. With respect to the franchising authority's right of access to
the cable operator's confidential business records, we find that
franchising authorities and the parties to a rate proceeding must have
access to the information upon which the rate justification is based.
Such access is essential to permit the franchising authority to make an
informed evaluation, based on complete information, of the
reasonableness of the rate in question. Parties participating in the
rate proceeding must have access to proprietary information submitted
to the franchising authority in order to evaluate the arguments
advanced by the cable operator and to help focus the issues. We clarify
that franchising authorities are entitled to request information,
including proprietary information, that is reasonably necessary to make
a rate determination, whether pursuant to a cost-of-service showing or
when applying the competitive differential, as clearly stated in the
text of the final rule adopted. 47 CFR 76.938. Each request should
clearly state the reason the information is needed, and where related
to an FCC Form 393 (and/or FCC Form 1200/1205), indicate the question
or section of the form to which the request specifically relates.
39. This right of access is limited to that information necessary
to support the elements of the particular rate justification at issue,
and extends to the franchising authority and, in appropriate
circumstances, to the actual parties to a rate proceeding.\20\ Section
76.938 governs such access and, to the extent that any state or local
laws provide for more limited access to information than the federal
rule, they are accordingly preempted.
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\20\Franchising authorities should, in appropriate
circumstances, adopt procedures or craft protective agreements to
ensure that proprietary information is not disclosed publicly by the
parties.
---------------------------------------------------------------------------
40. With respect to franchising authorities' obligations regarding
public disclosure of proprietary information submitted by cable
operators, we find on further reflection that we should not require
franchising authorities to adopt procedures that mirror Sec. 0.459,
although they may do so in their discretion. We find it neither
necessary nor desirable to preempt state and local laws governing
access to information. Thus, while as a general matter we believe
franchising authorities should consider the interests of cable
operators in protecting proprietary information, we now conclude that
franchising authorities should proceed in accordance with applicable
local and state law rather than mandating the adoption of procedures
analogous to our rules. We therefore amend Section 76.938 accordingly.
41. Forfeitures and fines. To the extent that franchising
authorities may be concerned with the enforcement of their own orders,
decisions, and requests for information, we clarify that if a
franchising authority has the power under state or local law to impose
forfeitures or fines for violations of its rules, orders, or decisions,
including filing deadlines and orders to provide information, we see
nothing in the Cable Act or our rules which would prevent the
franchising authority from taking such action.\21\ A franchising
authority would be free to report to us any apparent violation of our
rules, and we could take appropriate enforcement action.\22\ In
addition, we are modifying our rules to require cable operators to
respond to franchising authorities' reasonable requests for
information, as well as our own such requests.\23\
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\21\See 47 CFR 76.943. As stated in the regulation, however, a
franchising authority may not impose a forfeiture or fine simply
because an operator's rates are unreasonable.
\22\See Communications Act, 503, 47 U.S.C. 503; 47 CFR 76.943,
76.963.
\23\See 47 CFR 76.943 (as modified).
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42. Franchising authority discretion. We also take this opportunity
to reiterate our general philosophy regarding rate proceedings before
franchising authorities. Congress generally allocated to franchising
authorities responsibility for reviewing basic service rates under the
Act. While we have set out the general rules for regulation, we have
not attempted, nor could we address, every detail of the rate
regulation process. Certain latitude has been left to franchising
authorities. As we stated in the Rate Order, we will not review
decisions of franchising authorities de novo, but rather will sustain
their decisions as long as there is a reasonable basis for those
decisions. Rate Order, 8 FCC Rcd at 5731. This standard of review will
apply as well with respect to franchising authority interpretations of
any ambiguities in evaluating the responses or information provided on
the FCC Form 393 or in a cost-of-service showing.
C. FCC Form 393 (FCC Forms 1200/1205) Issues/Failure to File
43. Failure to file rate justification. Under our rules, a cable
operator has the burden of proving that its rates for regulated cable
services are in compliance with the law.\24\ An operator justifies its
rates by submitting its rate schedule and by also filing a completed
FCC Form 393 (and/or FCC Forms 1200/1205) or a cost-of-service showing.
Our rules regarding regulated upper service tiers explicitly provide
that if a cable operator fails to file and serve a rate justification
as required, we may deem the operator in default and enter an order
finding the operator's rates unreasonable and mandating appropriate
relief.\25\ However, the rules do not explicitly provide parallel
remedies where an operator fails to timely justify its rates for the
basic service tier.
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\24\47 CFR 76.937, 76.956(b).
\25\47 CFR 76.956(e).
---------------------------------------------------------------------------
44. On our own motion, we hereby correct the oversight. An operator
that does not attempt to demonstrate the reasonableness of its rates
has failed to carry its burden of proof. We are therefore amending our
rules to make clear that authorities regulating basic service rates
have authority to deem a non-responsive operator in default and enter
an order finding the operator's rates unreasonable and mandating
appropriate relief. This relief could include, for example, ordering a
prospective rate reduction and a refund. Such a refund would be based
on the best information available at the time. We note, however, that
in the Second Order on Reconsideration, we establish certain
adjustments to the timeframes set out in Secs. 76.930 and 76.933 due to
the transition from existing rules to the rules we establish today.\26\
A franchising authority will be permitted to find in default a cable
operator that files its rate justification in accordance with the
scheme set forth in the Second Order on Reconsideration at paras. 144-
149.
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\26\Second Order on Reconsideration, Fourth Report and Order,
and Fifth Notice of Proposed Rulemaking in MM Docket 92-266, FCC 94-
38, adopted February 22, 1994 [hereinafter Second Order on
Reconsideration].
---------------------------------------------------------------------------
45. Deficient rate justifications; additional information. In the
event a cable operator files a facially incomplete rate justification,
viz., fails to complete the FCC Form 393 or fails to include supporting
information called for by the form, the franchising authority or the
Commission may order the cable operator to file supplemental
information. While the francishing authority is waiting to receive this
information from the cable operator, the deadlines for the franchising
authority to rule on the reasonableness of the proposed rates are
tolled.
46. We distinguish an incomplete filing (for example, a form filed
without a required explanation) from one which is complete and
submitted in good faith, but about which the regulating authority has
certain questions or reasonably feels it requires clarifying or
substantiating information. However, we will not automatically toll the
deadlines for franchising authorities to act in these circumstances, as
we do for incomplete filings. If the information sought, however, is of
such significance as to delay examination of the rest of the rate
justification, or if the operator fails to supply the information
promptly, the franchise authority could be justified in delaying its
ruling accordingly.
47. In either case, it is obviously necessary for the franchising
authority or the Commission to set reasonable deadlines for the
submission of supplemental information in order to avoid delaying for
consumers the benefits of rate regulation.\27\ If the cable operator
fails to provide the requested information within the required time or
fails to provide complete information in good faith, the franchising
authority or the Commission may then hold the cable operator in default
and mandate appropriate sanctions as discussed elsewhere in this
section, as if the operator failed to submit a response at all. We
again emphasize that such authority must be exercised in a reasonable
manner.
---------------------------------------------------------------------------
\27\Supporting information that is called for in the FCC Form
393 itself should have been submitted with the form, and could
reasonably be demanded within a short period of time.
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48. Finally, in order to assist the Commission and franchising
authorities in verifying information contained in rate filings, cable
operators filing after the effective date of our revised rules must
include rate cards and channel line-ups along with their benchmark or
cost-of-service filings. If there is any difference between the numbers
on these documents and the numbers in the rate filing, the capable
operator must attach an explanation. Rate cards and channel line-ups
must be included for September 30, 1992, September 1, 1993, and for the
rates being reviewed.
49. Updating rate calculations. We now turn to the issue that
arises for numerous operators that promptly revised their rates in
response to our rules, based on rate-setting facts in existence at the
time of the revisions. These operators have not been required to
justify those rates until recently, however, and several months after
the revisions, some of the facts or data on which the rate-setting is
based may have changed.\28\ For example, tentative inflation
adjustments have since become definite, equipment costs may have
varied, or broadcast channels may have been added. We recognize that
rates adopted in an effort to comply with our rules as quickly as
possible may become unreasonable solely as a result of using later data
to refresh the calculations. Operators should not be penalized for
making good faith attempts to comply with our rules in a timely manner.
In addition, if the cable operators are required to revise their rates
immediately based on refreshed data, the changes will result in
administrative expenses to the operators and confusion for subscribers.
In most cases, we expect the resulting rate change would be minimal and
would be in effect only until the cable operator seeks a rate change.
At the same time, it is important that regulatory authorities are able
to verify accurately the reasonableness of a current rate, and to avoid
compounding any inaccuracies as subsequent rate increases are
introduced, which are a function of the level of initial rates.
---------------------------------------------------------------------------
\28\The same problem could arise any time rates are established
at one point in time but subject to justification as of a later
date.
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50. Accordingly, we will require the following actions when
different rates are dictated by data used in initial rate-setting than
by data current as of the time an FCC Form 393 (and/or FCC Forms 1200/
1205) is actually submitted to the franchising authority or the
Commission. When current rates are accurately justified by analysis
using the old data (and that data was accurate at the time), cable
operators will not be required to change their rates. In these
circumstances, however, when such operators make any subsequent changes
in their rates, (such as when seeking their annual inflation increase),
those changes must be made from rates levels derived from the updated
information.\29\ When current rates are not justified by analysis using
the old data (so that a rate adjustment would be necessary in any
event), cable operators will be required to correct their rates
pursuant to current data. In these circumstances, the resulting rates
must be based on current data.\30\
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\29\We take this action on the assumption that any rate
differentiation between analysis based on old and current data is
quite small, so that the harm to consumers is small compared to the
negative effects discussed above. In a particular case where this is
not so, the franchising authority can petition for a waiver of our
rules to impose an immediate rate reduction.
\30\In any case, the franchising authority retains the
discretion to permit retention of an established rate that is close
to, but not exactly, the rate justified by our rate formula, with a
corresponding reduction taken from the next rate increase, in order
to reduce rate churn, if it determines that this best serves the
interests of the cable subscribers within its jurisdiction.
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51. Computer-generated forms. Many cable operators have filed their
rate justifications on various substitute versions of FCC Form 393,
often computer-generated. Indeed, our November 10, 1993 Public Notice
specifically contemplated such substitutes, provided ``the form is
identical in overall appearance and format to FCC Form 393'' (emphasis
added). Unfortunately, our initial review of such filings has revealed
a wide variety of substitute forms, none of which appears to be
``identical in overall appearance and format to FCC Form 393.''
52. Given the variations in these forms as filed and the difficulty
in verifying their conformance to the official FCC Form 393, we
conclude that the burden on franchising authorities and on the
Commission of processing such non-standard forms would be substantial.
We therefore decide that such substitute forms are unacceptable. All
rate filings must be made on an actual FCC Form 393 (and/or FCC Forms
1200/1205), a copy of the actual form, or a copy generated by
Commission software.
53. Accordingly, any future rate filing not made on an official FCC
Form 393 (and/or FCC Forms 1200/1205), a copy of the form, or a copy
generated by Commission software shall be deemed not to have been
filed, and appropriate sanctions for failure to file may be imposed.
For example, under appropriate circumstances, regulatory authorities
may treat non-complying forms as patently defective, thus not requiring
an opportunity to cure the defect as would be the case for a filing
that is merely incomplete. Obviously, this sanction should not be
imposed where an operator has made a good faith effort to comply with
our rules. If, however, a cable operator has already made a rate filing
on a non-FCC form prior to the effective date of these rules, the
franchising authority may order that the form be refiled within 14 days
of the effective date of this Order. The cable operator shall then have
14 days to submit its rate filing on an FCC Form 393 (and/or FCC Forms
1200/1205), during which time the deadline for the cable authority to
rule on the reasonableness of the rates shall be tolled. Although we
considered deeming non-standard forms already filed acceptable, we
believe the administrative burden of attempting to implement the rules
based on non-complying forms unacceptable. We hereby order all cable
operators who have filed benchmark showings with us on a non-FCC form
to refile within 14 days of the effective date of this Order.
Furthermore, any benchmark showing that comes to the Commission on
appeal must be on an official FCC Form 393 (and/or FCC Forms 1200/
1205), a copy of the form, or a copy generated by Commission software.
D. Refund Issues
54. Commission authority to allow franchising authority to order
refunds on basic tier rates. We stated in the April 1993 Rate Order
that refunds are available with respect to basic tier service pursuant
to our authority under sections 623(b) and 4(i) of the Communications
Act, 47 U.S.C. 543(b), 154(i). We determined that the Communications
Act's explicit reference to refund authority with respect to upper tier
service should not be construed to bar refunds of unreasonable basic
tier rates. Rate Order, 8 FCC Rcd at 5725. We noted that section
623(b)(5)(A), 47 U.S.C. 543(b)(5)(A), grants wide discretion to adopt
procedures so that franchising authorities can enforce reasonable
rates.
55. This Order affirms our belief that section 623(b)(5) grants the
Commission wide discretion to craft procedures governing the
enforcement of its overall regulatory regime with respect to basic tier
rates. The mere fact that section 623(c) provides for refunds in the
upper tier context does not persuade us that the Commission's authority
under section 4(i), in conjunction with its rulemaking power under
section 623(b), is not broad enough to permit the Commission to adopt
rules providing for refunds with respect to basic tier rates.
56. Refund computations. Another issue which we need to address is
that of refund computations for bundled charges. Our rules state that a
franchising authority ``may order a cable operator to refund to
subscribers that portion of previously paid rates determined to be in
excess of the permitted tier charge or above the actual cost of
equipment * * *.''\31\ Whereas maximum permitted rates are always
determined on an unbundled basis, i.e., separately for tier service and
equipment, refund liability may stem from bundled rates.
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\31\47 CFR 76.942(a).
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57. We conclude that the refund liability should be calculated
based on the difference between the old bundled rates and the sum of
the new unbundled program service charge(s) and the new unbundled
equipment charge(s). The intent of the refund mechanism is to place
subscribers in the same position they would be had they been subject to
``reasonable'' rates. To not allow cable operators to factor in
equipment charges could result in an operator being required to make a
rate reduction that is greater than the maximum reduction required
under application of the benchmark approach. This analysis is
consistent with our earlier statement that ``the cable operator must
make prospective billing adjustments to refund overcharges (and offset
any undercharges) in a reasonable manner.''\32\ This analysis also
applies to unbundled charges where an operator was charging separately
for program services and equipment but the rates did not comply with
our rules (because, for example, the equipment rates were higher than
actual cost). In this situation, the operator's overall refund
liability will be calculated by adding the old charges together and
comparing the total with the sum of the new, unbundled program service
and equipment charges.
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\32\Order in MM Docket No. 92-266, 58 FR 41042, 41044 n.21 (Aug.
2, 1993) (discussing this issue in the context of cable operators
not being able to adjust their rates in time when the effective date
of regulation was moved from October 1, 1993 to September 1, 1993).
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58. Refunds as affecting franchise fee liability. Section 622(b) of
the Communications Act provides that ``[f]or any twelve-month period,
the franchise fees paid by a cable operator with respect to any cable
system shall not exceed five percent of such cable operator's gross
revenues derived in such period from the operation of the cable
system.'' 47 U.S.C. 542(b). We recognize that when a refund is ordered,
a cable operator's gross revenue has been reduced, and its franchise
fee may have to be reduced proportionately. We amend Sec. 76.942 to
provide that, to the extent that a franchise fee is calculated as a
percentage of the cable operator's gross revenues and those revenues
are reduced on account of refunds, the franchising authority must
promptly return to the cable operator the amount that was overpaid as a
result of the cable operator's newly-diminished gross revenues.\33\
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\33\With respect to money that constitutes a franchise fee
overcharge resulting from a refund to subscribers pursuant to a
rate-setting procedure, and thus owed by a franchising authority to
a cable operator, the cable operator may deduct the amount from
future franchise fees, rather than have the franchising authority
return it in one immediate lump sum payment.
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59. Calculation of refunds on basic rates. In the Rate Order and in
subsequent orders addressing the effective date of rate regulation,\34\
we indicated that cable systems would be subject to potential refund
liability for the basic service tier as of the effective date of our
rules, which we ultimately determined to be September 1, 1993. See
e.g., Rate Order, 8 FCC Rcd at 5725, 26.\35\ We will maintain September
1 as the earliest date for refund liability to begin. Any refund
liability for this period will be based, of course, on the rate-setting
rules and formulas in effect at that time. The new rate-setting rules
adopted in the companion Second Order on Reconsideration will be
applied prospectively only. The new rules will determine future rates
and refund liability only after the effective date of those rules.
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\34\As we have explained before, administrative difficulties
necessitated deferral of the original June 21, 1993, effective date
for rate regulation to September 1, 1993. See Order in MM Docket No.
92-266, FCC 93-304, 58 FR 33560 (June 18, 1993); Order in MM Docket
No. 92-266, FCC 93-372, 58 FR 41042 (August 2, 1993). In all of
these orders, we made clear that refund liability would begin as of
the effective date of the rules.
\35\Our rules provide that an operator's liability for refunds
for basic tier rates is limited to a one-year period, except in
cases where an operator fails to comply with a valid rate order
issued by a franchising authority or the Commission. In such cases,
the operator can be held liable for refunds commencing from the
effective date of the order until such time as the operator complies
with the order. In all other cases, the refund period shall run as
follows: (1) From the date the operator implements a prospective
rate reduction back in time to the effective date of the rules, or
one year, whichever is shorter; or (2) from the date a franchising
authority issues an accounting order, and ending on the date the
operator implements a prospective rate reduction ordered by a
franchising authority, then back in time from the date of the
accounting order to the effective date of the rules, or one year,
whichever is sooner. See 47 CFR 76.942 (b) and (c). The effect of
these provisions is that refund liability cannot extend back before
the effective date of our rates rules.
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60. Calculation of refunds on cable programming service complaints.
Section 623(c)(1)(C) of the Communications Act, 47 U.S.C. 543(c)(1)(C),
requires the Commission to establish procedures (1) to reduce rates for
upper tier services that the Commission determines to be unreasonable
and (2) to refund overcharges paid by subscribers after the filing of a
complaint that the Commission determines to have merit. In the Rate
Order, we established that under our refund procedures the cumulative
refund due subscribers would be calculated from the date a valid
complaint is filed until the date a cable operator implements the
reduced rate prospectively in bills to subscribers. Rate Order, 8 FCC
Rcd at 5865.\36\ We affirm this timeframe for the calculation of
refunds and refuse to adopt a time limit on refund liability for
unreasonable cable programming service tier rates.
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\36\We further provided that refunds would include interest
computed at applicable rates published by the Internal Revenue
Service for tax refunds and additional tax payments. Also, interest
would accrue from the date a valid complaint is filed until the
refund issues. Rate Order, 8 FCC Rcd at 5867. See also 47 CFR
76.961(a)-(d).
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E. Cable Programming Service Complaint Process
61. Effective date of cable programming service regulation. We
reject suggestions that regulation of upper tier service should
commence on the date the Commission's regulations take effect, rather
than on the date a complaint is filed. Congress intended regulation of
cable programming services to be complaint-driven (see 47 U.S.C.
543(c)(1)(B) and 543(c)(3)). The Commission cannot act on upper tier
rates until a complaint is filed. We have decided that complaints that
are filed before the effective date of the new rate reductions ordered
today in the companion Second Order on Reconsideration will be
adjudicated as follows: refunds for the time period in which the old
rules were in effect will be based on the old rules, while refunds for
the time period in which the new rules are in effect will be based on
the new rules.
62. Section 623(c)(3) of the Act directs that complaints must be
filed ``within a reasonable period of time following a change in rates
that is initiated after that effective date, including a change in
rates that results from a change in that system's service tiers.'' 47
U.S.C. 543(c)(3). In the Rate Order, we interpreted that provision to
require complainants to file such complaints within 45 days from the
time a subscriber receives a bill from the cable operator that reflects
the rate increase. Rate Order, 8 FCC Rcd at 5840 (emphasis supplied).
We clarify that a subscriber may file a complaint any time there is a
rate change, including an increase or decrease in rates, or a change in
rates that results from a change in a system's service tiers. See 47
U.S.C. 543(c)(3). Such rate changes may involve implicit rate increases
(such as deleting channels from a tier without a corresponding lowering
of the rate for that tier).\37\ As we stated in the Rate Order, the
triggering mechanism for the filing of the complaint will be a
reflection of any rate change on a subscriber's monthly bill. Id.\38\
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\37\See discussion of implicit rate increases in Rate Order, 8
FCC Rcd at 5917.
\38\We amend Sec. 76.953(b), accordingly, to reflect this
clarification.
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IV. Provisions Applicable to Cable Service Generally
A. Negative Option Billing Practices
63. Section 3(f) of the 1992 Cable Act provides that ``a cable
operator shall not charge a subscriber for any service or equipment
that the subscriber has not affirmatively requested by name.''\39\
Unlike other subsections of Section 3, this provision does not
specifically delineate the jurisdictional role, if any, of state and
local governments in addressing negative option billing practices of
cable operators.\40\ Language in previous decisions in this proceeding
has created confusion concerning this issue. Based on our careful
examination of the 1992 Cable Act and its legislative history, we
conclude that the Commission as well as state and local governments
have concurrent jurisdiction to regulate negative option billing.
---------------------------------------------------------------------------
\39\Communications Act, Section 623(f), 47 U.S.C. 543(f).
\40\Compare section 3(f) with section 3(a) (2), (3), providing
that local franchising authorities may obtain jurisdiction to
regulate basic service tier rates upon certification by the
Commission. Communications Act, section 623(a) (2), (3), 47 U.S.C.
543(a) (2), (3).
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64. On reconsideration, on our own motion, we examine in greater
detail whether, and under what circumstances, state and local
governments have authority to regulate negative option billing
practices of cable operators. We conclude that the 1992 Cable Act
permits state and local governments to employ state or local consumer
protection laws to regulate negative option billing. State and local
government jurisdiction to regulate negative option billing under
consumer protection laws is concurrent with the Commission's
jurisdiction to regulate negative option billing under the
Communications Act. Therefore, based on our close examination of the
preemption issue in this order, we hereby substitute this analysis for
two statements made in previous orders which could be read to preempt
state and local government jurisdiction to regulate negative option
billing practices under state and local consumer protection laws.\41\
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\41\One of these statements, in footnote 1095 of the Rate Order,
provides that ``[w]e do not preclude state and local authorities
from adopting rules or taking enforcement action relating to basic
services or associated equipment consistent with the implementing
rules we adopt and their powers under state law to impose
penalties.'' Rate Order, 8 FCC Rcd at 5905 n.1095. The other
statement, in footnote 127 of the First Rates Reconsideration,
provides that:
We similarly affirm that franchising authorities may not
regulate tier restructuring in a manner that is inconsistent with
the 1992 Cable Act. See Communications Act, Sections 623 (a)(1),
(f), 47 U.S.C. 543 (a)(1), (f). In particular, local authorities are
precluded from regulating negative option billing to prevent tier
restructuring regardless of how the local requirement is
characterized. The Commission has ruled that cable operators may
engage in revenue-neutral tier restructuring without violating the
negative option billing procedure.
Id. at 46 n.127 (internal citation omitted).
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65. The negative option billing provision appears in section 3 of
the 1992 Cable Act, the section of the statute governing rate
regulation. Unlike most of the other provisions of Section 3, however,
the negative option billing provision is not limited in its application
to those cable services and cable operators subject to rate regulation.
Rather, than unqualified negative option billing prohibition applies to
all cable services offered by all cable operators, regardless of
whether the operators are subject to effective competition.\42\ Thus,
it appears that the negative option billing provision is more in the
nature of a consumer protection measure rather than a rate regulation
provision per se. Section 8(c)(1) of the 1992 Cable Act provides that
``[n]othing in this title [Title VI] shall be construed to prohibit any
State or any franchising authority from enacting or enforcing any
consumer protection law, to the extent not specifically preempted by
this title.''\43\ Therefore, given that section 3(f) appears to be a
consumer protection measure, unless ``specifically preempted''
elsewhere in title VI, section 8(c)(1) preserves the ability of a state
or local government to exercise any authority it may have under state
or local consumer protection laws to regulate negative option billing.
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\42\The legislative history confirms this conclusion. House
Committee on Energy and Commerce, H.R. Conf. Rep. No. 862, 102d
Cong., 2d Sess. at 65 (1992) (the prohibition covers, inter alia,
``individually-priced programs or channels'' that are not subject to
rate regulation under the 1992 Cable Act); 138 Cong. Rec. S567-68
(daily ed. Jan. 29, 1992) (remarks of Sen. Gorton, sponsor of the
provision).
\43\Communications Act, Section 632(c)(1), 47 U.S.C. 552(c)(1).
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B. Prevention of Evasions
66. The 1992 Cable Act requires the Commission to establish and
periodically review regulations to prevent evasion of the rate
regulations, including evasion resulting from retiering. 47 U.S.C.
543(h). The Rate Order defined a prohibited evasion as ``any practice
or action which avoids the rate regulation provision of the Act or
Commission rules contrary to the intent of the Act or its underlying
policies.'' Rate Order, 8 FCC Rcd at 5915. The Commission generally
opted for a case-by-case approach and declined to delineate specific
actions that might constitute evasion. Id.\44\
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\44\In the Rate Order, the Commission did cite three practices
that, if established by the evidence, would constitute evasions.
This list, however, was not meant to be an exhaustive delineation of
rate regulation evasions, but rather was to serve as the foundation
for developing policies in this area. Rate Order, 8 FCC Rcd at 5917.
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67. In the Rate Order, we stated our belief that it would be
virtually impossible to list potentially evasive practice or to
determine that a practice constitutes evasion in the absence of a
specific factual context, while expressing our expectations that
evasions would be remedied by this Commission and local franchising
authorities. Id. at 5915, 5916. While we still may be unable to list
all prohibited practices at this time, certain patterns of conduct have
emerged since the adoption of the rate regulations that we can
characterize as creating, under certain circumstances, a possible
evasion of the rate regulation rules. For example, moving groups of
programming services that were offered in tiered packages to a la carte
packages may be considered, in certain circumstances, an attempt to
avoid the rate regulation of those services that had traditionally been
offered to customers as part of the programming package intended for
regulation by Congress. Such practices may not, depending on the
particular circumstances, provide subscribers with the realistic option
to purchase unregulated channels on an individual basis, a requirement
set forth in the Rate Order.\45\ Generally, as discussed in further
detail in the Second Order on Reconsideration at Section II C (``A la
carte'' packages''), collective offerings of otherwise exempt per
channel or per program services will not be considered an evasion if
(1) the price for the combined package does not exceed the sum of the
individual charges for each component of service; and (2) the cable
operator continues to provide the component parts of the package
separately (which requirement will be met if the a la carte offering
constitutes a realistic service choice.\46\
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\45\Id. at 5837, n.808.
\46\See also interpretive guidelines on whether collective
offerings of a la carte channels should be accorded regulated or
nonregulated treatment, as discussed in the Second Order on
Reconsideration at Section II C. As noted therein, packages of a la
carte channels offered prior to April 1, 1993 will be accorded
nonregulated treatment.
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68. Collapsing multiple tiers of service into the basic tier of
service, which ultimately eliminates the service choice previously
available to customers and that raises the price of cable service for
all basic tier subscribers may also be considered an evasion by
circumventing the rules intended to reduce the cost of cable service
and to provide for the buy-through of only desired services.\47\ Upon
receipt of a complaint on any potential evasion, we will consider,
inter alia, such circumstances as the timing of the cable operator's
actions (e.g., whether it occurred on the eve of regulation or in
response to the filing of a complaint), the price to subscribers before
and after the actions, a comparison of the level of service received by
the subscriber before and after the cable operator's actions, and
whether the action resulted in the avoidance of the tier buy-through
prohibition. Practices that have the effect of increasing subscriber
choice and/or reducing rates generally will not be found evasive of our
rules.
---------------------------------------------------------------------------
\47\The ``price to subscribers'' and ``comparison of the level
of service'' for purposes of determining whether an operator's
collective offering of a la carte channels should be accorded
regulated or nonregulated treatment or will be considered an evasion
will be evaluated within the context of the factors set forth in the
Second Order on Reconsideration.
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69. Numerous other practices that have developed since the advent
of rate regulation might also be found, depending on individual
circumstances, to constitute evasions of the rules or to violate the
rules themselves. For instance, operators cannot now charge for
services previously provided without extra charge (e.g., routine
service calls, program guides) unless the value of that service, as now
reflected in the new charges, was removed from the base rate number
when calculating the reduction in rates necessary to establish
reasonable rates. Also, a single channel provided to the customer that
may consist of two or more programming services can be counted only as
one channel of service provided for rate-setting purposes. Charging
customers to downgrade from service packages that were added without
their explicit consent, even where those service packages include
previously subscribed services, may be a violation or an evasion of the
negative option prohibition. In addition, the delivery of new packages
(ironically intended to represent subscriber choice) without an
affirmative assent from the subscriber may violate negative option
requirements and result in a refund to the customer. Adding previously
unneeded equipment and charging for that equipment in order to provide
customers with the same services they received previously may also be
an evasion of our rules. Operators must realize that these and similar
practices, and other practices which directly violate or evade our
rules will not be permitted, and that sanctions will be imposed in
appropriate circumstances.
C. Grandfathering of Rate Agreements
70. The 1992 Cable Act's grandfather clause allows a franchising
authority with a franchise agreement executed before July 1, 1990, that
was regulating basic cable rates at that time, to continue such
regulation for the remaining term of that agreement without following
the Commission's substantive rate standards. 47 U.S.C. 543(j). The Rate
Order correctly limited this provision to its explicit terms. Rate
Order, 8 FCC Rcd at 5926.
D. Subscriber Bill Itemization
71. Special taxes. The 1992 Cable Act allows a cable operator to
separately identify certain charges on its bill. i.e. the amounts of
the bill (1) assessed as a franchise fee (as well as the identity of
the franchising authority); (2) assessed to satisfy any requirements
the franchise agreement imposes on the operator for costs related to
public, educational, or governmental (PEG) channels; and (3)
attributable to charges a governmental authority imposes on the
transaction between the operator and the subscriber. 47 U.S.C. 542(c).
The Rate Order limited the itemization provision to its express terms
and found that itemized costs must be direct and verifiable,\48\ as
well as a reasonable allocation of overhead, and for PEG costs, the sum
of the per-channel costs for the number of channels used to meet
franchise requirements. Rate Order, 8 FCC Rcd at 5967, 68. The Rate
Order also made clear that section 622(c) does not require operators to
undertake itemization of any costs. Id. at 5967. In the Rate Order, the
Commission specifically determined that taxes imposed on rights-of-way
and also applicable to other utilities would not be part of a franchise
fee and thus could not be itemized, and specifically excluded from
itemization California's possessory interest tax. Id. at 5968, n. 1399.
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\48\The House Report states that a cable operator shall itemize
``only [the] direct and verifiable costs'' associated with the
categories of costs the Act specifies and should ``not include in
itemized costs indirect costs.'' House Committee on Energy and
Commerce, H.R. Rep. No. 628, 102d Cong., 2d Sess. at 86 (1992).
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72. We have already found ourselves unable to conclude that the
California possessory interest tax is, in every instance, a tax on the
transaction between the operator and subscriber. See First Rates
Reconsideration, supra note 17, at para. 106. We found that with
varying applications of the tax in different jurisdictions within
California, different treatments under our rules would pertain from
case to case. Where the assessment of the possessory interest tax is
directly related to subscriber revenues, such as where the tax is based
on a value of intangible assets formula affectively calculated from the
operator's income for the provision of cable service, then it could be
accorded external cost treatment, and it similarly would be eligible
for itemization on subscriber bills. Id. at para. 107. Otherwise it is
eligible for neither treatment. As we stated in that earlier decision,
we are prepared to allow itemization of utility user taxes in
California, or any other jurisdiction, if additional evidence regarding
their application in specific instances demonstrates such treatment is
warranted under this analytical framework.
73. Advertising of rates. The Rate Order prohibited cable operators
from advertising prices for cable service that do not include the
amount of franchise fees. Rate Order, 8 FCC Rcd at 5972, n. 1415. We
remain concerned that consumers could be misled as to the cost of cable
services by advertisements which do not include complete rates, and
cable operators generally will be required to advertise rates that
include all costs and fees. However, in those cases where a system
covers multiple franchise areas that have differing franchise fees or
other franchise costs, different channel line-ups, or have slightly
different rate structures, an operator should be permitted some
flexibility for efficient advertising that will reasonably advise
potential subscribers of the true cost of service. In such
circumstances, an operator can advertise a range of fees, or a ``fee
plus,'' rate that indicates the core rate plus the range of possible
additions, based on the particular location of the subscriber.\49\ An
operator need not indicate the total rate for each individual area in
such circumstances.
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\49\For instance, an advertisement might declare that basic
service is $14.00 per month plus a franchise fee of 28 cents to
70 cents, depending on location, or that it is $14.28 to $14.70,
depending on location.
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74. Itemization of ``Franchise Related'' costs. We clarify that the
costs required under a franchise agreement for ``support of
institutional networks, free wiring of public buildings, provision of
special municipal video services and voice and data transmissions'' are
properly classified as PEG-related and are therefore itemizable under
section 622(c)(2). Rate Order, 8 FCC Rcd at 5967-69.
V. Equipment and Installation
A. Promotions
75. In the Rate Order we stated that operators would be afforded
substantial discretion to offer promotions, including a below cost
offering for some equipment and installations. Rate Order, 8 FCC Rcd at
5819, 20. Additionally, we stated that certain limits would apply. Id.
at 5820-21. Consistent with these statements, Section 76.923(j) of our
rules allows promotions but limits the recovery, stating: ``Operators
may not recover the cost of promotional offerings by increasing program
service rates above the maximum monthly charge per subscriber
prescribed by these rules.'' Although the rules do not state how in the
normal course of setting rates such recovery is to be effected, they do
allow that ``as part of a general cost-of-service showing, an operator
may include the cost of promotions in its general system overhead
costs.''\50\
---------------------------------------------------------------------------
\50\47 CFR 76.923(j).
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76. We believe that our rules do not prevent the recovery of costs
of equipment and installations provided to customers free or at reduced
rates for the purpose of promoting services. Further, we expect that
the benchmark rates already reflect an element of promotional costs
because, prior to the inception of benchmark rates, it was fairly
routine in the cable industry to periodically run promotional offerings
to entice customers to purchase cable services. Considering this, we
believe that we have adequately provided for the recovery of
promotional offerings when setting the benchmark rates themselves. To
the extent that this does not apply to any operator, that operator may
attain recovery, if justified, by making a cost-of-service showing. In
such case, the costs of promotional offerings may be included, pursuant
to Sec. 76.924, in general system overheads. We will, however, continue
to monitor this issue. If we find that over time there is evidence that
such costs have not been adequately provided for under our existing
approach, we will consider any appropriate revisions to our rules or
policies at that time.
B. Seasonal Property Related Charges
77. Some operators experience seasonally high maintenance costs
associated with the need to turn service on and off at the beginning
and end of the season for resort properties. Others provide special
maintenance at a special fee that allows seasonal subscribers to avoid
the inconvenience of having to disconnect and reconnect at the end and
beginning of each season. We do not find that provision should be made
for such operators to allow the rates for service to remain higher than
average by allowing the cost for the seasonal turn-on and turn-off to
remain in the rates for programming service. First of all, these
operators are allowed to include the revenues from seasonal orders in
their benchmark calculations of rates per channel in effect at
September 30, 1992 and on the initial date of regulation.\51\ They
eliminate the associated costs in determining the maximum allowable
rates because these costs are recoverable from separate rates for
equipment. If seasonal operators wish to provide special charges for
seasonal connect/disconnect services or for off-season maintenance,
they may calculate rates for such on Line 7e of Form 393, Part III (or
Line 7.e Step B, Equipment and Installation Worksheet, FCC Form 1205),
in accordance with our rules.
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\51\47 CFR 76.922.
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C. Sale of Home Wiring
78. The Commission requires that upon termination of service, home
wiring must be offered for sale to subscribers. Such wiring is to be
priced at the replacement cost of the installed material on a per foot
basis.\52\ There is currently no required schedule for calculation of
the charges allowable for home wiring sold to cable customers. It has
not been demonstrated that a significantly unique and complicated
situation prevails for pricing of home wiring and consequently that a
special form is needed. We thus will not impose the additional burden
of a special schedule for home wiring. Nevertheless, we clarify that
adequate documentation should be maintained to demonstrate compliance
with Commission pricing requirements for home wiring as well as for
other equipment sold and for installations.
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\52\See Report and Order in MM Docket No. 92-260, 8 FCC Rcd
1435, 1437 (1993); 58 Fed. Reg. 11970 (Mar. 2, 1993), petitions for
recon. pending. See also Communications Act, Section 624(i); 47
U.S.C. 544(i).
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D. Time Lag
79. In the Rate Order, the Commission directed operators to
establish an equipment basket for accumulation of equipment and
installation costs but did not establish the time periods for measuring
equipment basket costs. The Form 393 and related instructions, however,
generally require inclusion of historical costs rather than
historically-based projected costs. In other words, the actual costs of
the year ending are used for the development of rates for the upcoming
year instead of projected costs. However, we believe that our
methodology, as modified on reconsideration, does not prevent timely
recovery of unusually high costs for equipment and installation. We
have provided a methodology that eliminates the cost of equipment from
service rate calculation because there is a provision to calculate
separate rates for installations and equipment. Further, we have
clarified in the First Rates Reconsideration that adjustments for
unusual changes in operations are permitted, subject to regulatory
approval, by using a representative month for developing equipment
rates. First Rates Reconsideration, supra note 17, at para. 67. Since
we believe that this provision will allow operators to recover the full
cost of equipment, we will not allow cable operators to use pro forma
expense figures averaged over the life of the franchise.
VI. Ordering Clauses
80. Accordingly, It is Ordered That part 76 of the Commission's
rules, 47 U.S.C. part 76, Is Amended, as indicated below, May 15, 1994.
81. It is Further Ordered That the Petitions for Reconsideration
Are Granted in part, Denied in part, as indicated above, and to the
extent that Petitions raise issues concerning leased access rates, they
will be disposed of in future orders.
List of Subjects in 47 CFR Part 76
Cable television.
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: 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 76.905 is amended by revising paragraph (c) to read as
follows:
Sec. 76.905 Standards for identification of cable systems subject to
effective competition.
* * * * *
(c) For purposes of paragraphs (b)(1) through (b)(3) of this
section, each separately billed or billable customer will count as a
household subscribing to or being offered video programming services,
with the exception of multiple dwelling buildings billed as a single
customer. Individual units of multiple dwelling buildings will count as
separate households. The term ``households'' shall not include those
dwellings that are used solely for seasonal, occasional, or
recreational use.
* * * * *
3. Section 76.914(a)(1) is revised to read as follows:
Sec. 76.914 Revocation of certification.
(a) A franchising authority's certification shall be revoked if:
(1) After the franchising authority has been given a reasonable
opportunity to comment and cure any minor nonconformance, it is
determined that state and local laws and regulations are in substantial
and material conflict with the Commission's regulations governing cable
rates.
* * * * *
4. Section 76.917 is added to subpart N to read as follows:
Sec. 76.917 Notification of certification withdrawal.
A franchising authority that has been certified to regulate rates
may, at any time, notify the Commission that it no longer intends to
regulate basic cable rates. Such notification shall include the
franchising authority's determination that rate regulation no longer
serves the interests of cable subscribers served by the cable system
within the franchising authority's jurisdiction, and that it has
received no consideration for its withdrawal of certification. Such
notification shall be served on the cable operator. The Commission
retains the right to review such determinations and to request the
factual finding of the franchising authority underlying its decision to
withdraw certification. The franchising authority's withdrawal becomes
effective upon notification to the Commission.
5. Section 76.922(b) is amended by adding paragraph (b)(9) to read
as follows:
Sec. 76.922 Rates for the basic service tier and cable programming
services tiers.
* * * * *
(b) * * *
(9) Updating Data Calculations.
(i) For purposes of this section, if:
(A) A cable operator, prior to becoming subject to regulation,
revised its rates to comply with the Commission's rules; and
(B) The data on which the cable operator relied was current and
accurate at the time of revision, and the rate is accurate and
justified by the prior data; and
(C) Through no fault of the cable operator, the rates that resulted
from using such data differ from the rates that would result from using
data current and accurate at the time the cable operator's system
becomes subject to regulation;
then the cable operator is not required to change its rates to reflect
the data current at the time it becomes subject to regulation.
(ii) Notwithstanding the above, any subsequent changes in a cable
operator's rates must be made from rate levels derived from data [that
was current as of the date of the rate change].
(iii) For purposes of this subsection, if the rates charged by a
cable operator are not justified by an analysis based on the data
available at the time it initially adjusted its rates, the cable
operator must adjust its rates in accordance with the most accurate
data available at the time of the analysis.
* * * * *
6. Section 76.923 is amended by adding paragraph (m) to read as
follows:
Sec. 76.923 Rates for equipment and installation used to receive the
basic service tier.
* * * * *
(m) Cable operators shall maintain adequate documentation to
demonstrate that charges for the sale and lease of equipment and for
installations have been developed in accordance with the rules set
forth in this section.
7. Section 76.930 is revised to read as follows:
Sec. 76.930 Initiation of review of basic cable service and equipment
rates.
A cable operator shall file its schedule of rates for the basic
service tier and associated equipment with a franchising authority
within 30 days of receiving written notification from the franchising
authority that the franchising authority has been certified by the
Commission to regulate rates for the basic service tier. Basic service
and equipment rate schedule filings for existing rates or proposed rate
increases (including increases in the baseline channel change that
results from reductions in the number of channels in a tier) must use
the appropriate official FCC form, a copy thereof, or a copy generated
by FCC software. Failure to file on the official FCC form, a copy
thereof, or a copy generated by FCC software, may result in the
imposition of sanctions specified in Sec. 76.937(d). A cable operator
shall include rate cards and channel line-ups with its filing and
include an explanation of any discrepancy in the figures provided in
these documents and its rate filing.
8. Section 76.933 is amended by adding paragraph (d) to read as
follows:
Sec. 76.933 Franchising authority review of basic cable rates and
equipment costs.
* * * * *
(d) A franchising authority may request, pursuant to a petition for
special relief under Sec. 76.7, that the Commission examine a cable
operator's cost-of-service showing, submitted to the franchising
authority as justification of basic tier rates, within 30 days of
receipt of a cost-of-service showing. In its petition, the franchising
authority shall document its reasons for seeking Commission assistance.
The franchising authority shall issue an order stating that it is
seeking Commission assistance and serve a copy before the 30-day
deadline on the cable operator submitting the cost showing. The cable
operator shall deliver a copy of the cost showing, together with all
relevant attachments, to the Commission within 15 days of receipt of
the local authority's notice to seek Commission assistance. The
Commission shall notify the local franchising authority and the cable
operator of its ruling and of the basic tier rate, as established by
the Commission. The rate shall take effect upon implementation by the
franchising authority of such ruling and refund liability shall be
governed thereon. The Commission's ruling shall be binding on the
franchising authority and the cable operator. A cable operator or
franchising authority may seek reconsideration of the ruling pursuant
to Sec. 1.106(a)(1) of this chapter or review by the Commission
pursuant to Sec. 1.115(a) of this chapter.
9. Section 76.937 is amended by adding paragraphs (d) and (e) to
read as follows:
Sec. 76.937 Burden of proof.
* * * * *
(d) A franchising authority or the Commission may find a cable
operator that does not attempt to demonstrate the reasonableness of its
rates in default and, using the best information available, enter an
order finding the cable operator's rates unreasonable and mandating
appropriate relief, as specified in Secs. 76.940, 76.941, and 76.942.
(e) A franchising authority or the Commission may order a cable
operator that has filed a facially incomplete form to file supplemental
information, and the franchising authority's deadline to rule on the
reasonableness of the proposed rates will be tolled pending the receipt
of such information. A franchising authority may set reasonable
deadlines for the filing of such information, and may find the cable
operator in default and mandate appropriate relief, pursuant to
paragraph (d) of this section, for the cable operator's failure to
comply with the deadline or otherwise provide complete information in
good faith.
10. Section 76.938 is revised to read as follows:
Sec. 76.938 Proprietary information.
A franchising authority may require the production of proprietary
information to make a rate determination in those cases where cable
operators have submitted initial rates, or have proposed rate
increases, pursuant to an FCC Form 393 (and/or FCC Forms 1200/1205)
filing or a cost-of-service showing. The franchising authority shall
state a justification for each item of information requested and, where
related to an FCC Form 393 (and/or FCC Forms 1200/1205) filing,
indicate the question or section of the form to which the request
specifically relates. Upon request to the franchising authority, the
parties to a rate proceeding shall have access to such information,
subject to the franchising authority's procedures governing non-
disclosure by the parties. Public access to such proprietary
information shall be governed by applicable state or local law.
11. Section 76.939 is added to subpart N to read as follows:
Sec. 76.939 Truthful written statements and responses to requests of
franchising authority.
Cable operators shall comply with franchising authorities' and the
Commission's requests for information, orders, and decisions. No cable
operator shall, in any information submitted to a franchising authority
or the Commission in making a rate determination pursuant to an FCC
Form 393 (and/or FCC Forms 1200/1205) filing or a cost-of-service
showing, make any misrepresentation or willful material omission
bearing on any matter within the franchising authority's or the
Commission's jurisdiction.
12. Section 76.942 is amended by revising paragraphs (a), (c)(2),
and adding paragraphs (c)(3) and (f) to read as follows:
Sec. 76.942 Refunds.
(a) A franchising authority (or the Commission, pursuant to
Sec. 76.945) may order a cable operator to refund to subscribers that
portion of previously paid rates determined to be in excess of the
permitted tier charge or above the actual cost of equipment, unless the
operator has submitted a cost-of-service showing which justifies the
rate charged as reasonable. An operator's liability for refunds shall
be based on the difference between the old bundled rates and the sum of
the new unbundled program service charge(s) and the new unbundled
equipment charge(s). Where an operator was charging separately for
program services and equipment but the rates were not in compliance
with the Commission's rules, the operator's refund liability shall be
based on the difference between the sum of the old charges and the sum
of the new, unbundled program service and equipment charges. Before
ordering a cable operator to refund previously paid rates to
subscribers, a franchising authority (or the Commission) must give the
operator notice and opportunity to comment.
* * * * *
(c) * * *
(2) From the date a franchising authority issues an accounting
order pursuant to Sec. 76.933(c), to the date a prospective rate
reduction is issued, then back in time from the date of the accounting
order to the effective date of the rules; however, the total refund
period shall not exceed one year from the date of the accounting order.
(3) Refund liability shall be calculated on the reasonableness of
the rates as determined by the rules in effect during the period under
review by the franchising authority or the Commission.
* * * * *
(f) At the time a franchising authority (or the Commission,
pursuant to paragraph (a) of this section) orders a cable operator to
pay refunds to subscribers, the franchising authority must return to
the cable operator an amount equal to that portion of the franchise fee
that was paid on the total amount of the refund to subscribers. The
franchising authority must promptly return the franchise fee overcharge
either in an immediate lump sum payment, or the cable operator may
deduct it from the cable system's future franchise fee payments.
13. Section 76.943 is amended by revising paragraph (b) and adding
paragraph (c) to read as follows:
Sec. 76.943 Fines.
* * * * *
(b) If a cable operator willfully fails to comply with the terms of
any franchising authority's order, decision, or request for
information, as required by Sec. 76.939, the Commission may, in
addition to other remedies, impose a forfeiture pursuant to section
503(b) of the Communications Act of 1934, as amended, 47 U.S.C. 503(b).
(c) A cable operator shall not be subject to forfeiture because its
rate for basic service or equipment is determined to be unreasonable.
14. Section 76.944 is amended by revising paragraph (b) to read as
follows:
Sec. 76.944 Commission review of franchising authority decisions on
rates for the basic service tier and associated equipment.
* * * * *
(b) Any participant at the franchising authority level in a
ratemaking proceeding may file an appeal of the franchising authority's
decision with the Commission within 30 days of release of the text of
the franchising authority's decision as computed under Sec. 1.4(b) of
this chapter. Appeals shall be served on the franchising authority or
other authority that issued the rate decision. Where the state is the
appropriate decisionmaking authority, the state shall forward a copy of
the appeal to the appropriate local official(s). Oppositions may be
filed within 15 days after the appeals is filed, and must be served on
the party(ies) appealing the rate decision. Replies may be filed 7 days
after the last day for oppositions and shall be served on the parties
to the proceeding.
15. Section 76.945(b) is revised to read as follows:
Sec. 76.945 Procedures for Commission review of basic service rates.
* * * * *
(b) Basic service and equipment rate schedule filings for existing
rates or proposed rate increases (including increases in the baseline
channel change that results from reductions in the number of channels
in a tier) must use the official FCC form, a copy thereof, or a copy
generated by FCC software. Failure to file on the official FCC form or
a copy may result in the imposition of sanctions specified in
Sec. 76.937(d). Cable operators seeking to justify the reasonableness
of existing or proposed rates above the permitted tier rate must submit
a cost-of-service showing sufficient to support a finding that the
rates are reasonable.
* * * * *
16. Section 76.946 is added to subpart N to read as follows:
Sec. 76.946 Advertising of rates.
Cable operators that advertise rates for basic service and cable
programming service tiers shall be required to advertise rates that
include all costs and fees. Cable systems that cover multiple franchise
areas having differing franchise fees or other franchise costs,
different channel line-ups, or different rate structures may advertise
a complete range of fees without specific identification of the rate
for each individual area. In such circumstances, the operator may
advertise a ``fee plus'' rate that indicates the core rate plus the
range of possible additions, depending on the particular location of
the subscriber.
17. Section 76.953(b) is revised to read as follows:
Sec. 76.953 Limitation on filing a complaint.
* * * * *
(b) Complaint regarding a rate change. Except as provided in
paragraph (a) of this section, a complaint alleging an unreasonable
rate for cable programming service or associated equipment may be filed
against a cable operator only in the event of a rate change, including
an increase or decrease in rates, or a change in rates that results
from a change in a system's service tiers. A rate change may involve an
implicit rate increase (such as deleting channels from a tier without a
corresponding lowering of the rate for that tier). A complaint
regarding a rate change for cable programming service or associated
equipment may be filed against a cable operator only in the event of a
rate change. A complaint regarding a rate change for cable programming
service or associated equipment must be filed with the Commission
within 45 days from the date the complainant receives a bill from the
cable operator that reflects the rate change.
* * * * *
18. Section 76.956(a) is revised to read as follows:
Sec. 76.956 Cable operator response.
(a) Unless the Commission notifies a cable operator to the
contrary, the cable operator must file with the Commission a response
to the complaint filed on the applicable form, within 30 days of the
date of service of the complaint. The response shall indicate when
service occurred. Service by mail is complete upon mailing. See
Sec. 1.47(f) of this chapter. The response shall include the
information required by the appropriate FCC form, including rate cards,
channel line-ups, and an explanation of any discrepancy in the figures
provided in these documents and the rate filing. The cable operator
must serve its response on the complainant (and, if the complainant is
a subscriber, the relevant franchising authority) via first class mail.
* * * * *
19. Section 76.961 is amended by revising paragraph (b) and adding
paragraph (e) to read as follows:
Sec. 76.961 Refunds.
* * * * *
(b) The cumulative refund due subscribers shall be calculated from
the date a valid complaint is filed until the date a cable operator
implements a prospective rate reduction as ordered by the Commission
pursuant to Sec. 76.960. The Commission shall calculate refund
liability according to the rules in effect for determining the
reasonableness of the rates for the period of time covered by the
complaint.
* * * * *
(e) At the time the Commission orders a cable operator to pay
refunds to subscribers, the franchising authority must return to the
cable operator an amount equal to that portion of the franchise fee
that was paid on the total amount of the refund to subscribers. The
franchising authority may return the franchise fee overcharge either in
an immediate lump sum payment, or the cable operator may deduct it from
the cable system's future franchise fee payments.
20. Section 76.984 is revised to read as follows:
Sec. 76.984 Geographically uniform rate structure.
(a) The rates charged by cable operators for basic service, cable
programming service, and associated equipment and installation shall be
provided pursuant to a rate structure that is uniform throughout each
franchise area in which cable service is provided.
(b) This section does not prohibit the establishment by cable
operators of reasonable categories of service and customers with
separate rates and terms and conditions of service, within a franchise
area. Cable operators may offer different rates to multiple dwelling
units of different sizes and may set rates based on the duration of the
contract, provided that the operator can demonstrate that its costs
savings vary with the size of the building and the duration of the
contract, and as long as the same rate is offered to buildings of the
same size with contracts of similar duration.
(c) Contracts between cable operators and multiple dwelling units
entered into on or before April 1, 1993 may remain in effect until
their previously agreed-upon expiration date.
[FR Doc. 94-9050 Filed 4-14-94; 8:45 am]
BILLING CODE 6712-01-M
