Modernization of Media Regulation Initiative: Revisions to Cable Television Rate Regulations, 60804-60818 [2018-25325]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 83, Number 228 (Tuesday, November 27, 2018)]
[Proposed Rules]
[Pages 60804-60818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-25325]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MB Docket Nos. 17-105, 02-144; MM Docket Nos. 92-266, 93-215; CS 
Docket No. 94-28; FCC 18-148]


Modernization of Media Regulation Initiative: Revisions to Cable 
Television Rate Regulations

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission seek comment on whether to 
replace and simplify the Commission's cable rate-regulation framework. 
We also seek comment on decisions to deregulate rates charged for 
equipment used to receive service tiers that have been deregulated, 
deregulate some small systems owned by small cable companies and 
clarify that the rate regulations do not apply to services provided to 
commercial entities. Lastly, we seek comment on our decision to

[[Page 60805]]

eliminate outdated forms and make changes to how regulated rates are 
calculated.

DATES: Submit comments on or before December 27, 2018; reply comments 
on or before January 28, 2019. Written comments on the Paperwork 
Reduction Act proposed information collection requirements must be 
submitted by the public, Office of Management and Budget (OMB), and 
other interested parties on or before January 28, 2019.

ADDRESSES: You may submit comments, identified by MB Docket Nos. 17-105 
and 02-144, by any of the following methods:
     Federal Communications Commission's website: https://apps.fcc.gov/ecfs//. Follow the instructions for submitting comments.
     People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by email: [email protected] or phone: 202-418-
0530 or TTY: 888-835-5322.
    For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: For additional information on this 
proceeding, contact Katie Costello, [email protected], of the 
Media Bureau, (202) 418-2233. For additional information concerning the 
information collection requirements contained in this document, send an 
email to [email protected] or contact Cathy Williams, (202) 418-2918.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Further Notice of Proposed Rulemaking, FCC 18-148, adopted and released 
on October 23, 2018. The full text of these documents is available for 
public inspection and copying during regular business hours in the FCC 
Reference Center, Federal Communications Commission, 445 12th Street 
SW, CY-A257, Washington, DC 20554. These documents will also be 
available via ECFS (https://www.fcc.gov/cgb/ecfs/). (Documents will be 
available electronically in ASCII, Word, and/or Adobe Acrobat.) The 
complete text may be purchased from the Commission's copy contractor, 
445 12th Street, SW, Room CY-B402, Washington, DC 20554. To request 
these documents in accessible formats (computer diskettes, large print, 
audio recording, and Braille), send an email to [email protected] or call 
the Commission's Consumer and Governmental Affairs Bureau at (202) 418-
0530 (voice), (202) 418-0432 (TTY).

Synopsis

    In this Further Notice of Proposed Rulemaking (FNPRM) we seek 
comment on updates to the cable television rate regulations in part 76 
of our rules. In the FNPRM, we seek comment on how to update our rules 
so that they reflect the current video marketplace. First, we seek 
comment on whether we should consider replacing our existing complex 
rate regulation framework with a new and simple methodology. Second, 
and in the alternative, we seek comment on, among other issues, whether 
to greatly streamline our existing initial rate-setting methodology by 
eliminating numerous rate forms that we believe are no longer necessary 
or useful, substantially reducing the amount of equipment subject to 
rate regulation, and ending rate regulation entirely for small cable 
systems owned by small operators.
    We first seek comment on whether to make fundamental changes to our 
existing cable rate regulatory regime based on recent developments in 
the competitive and regulatory landscape. Alternatively, we seek 
comment on ways to streamline and update our existing rules and forms 
to better serve cable operators and LFAs while still protecting 
subscribers from unreasonable prices. In this regard, we seek comment 
on whether to exempt from rate regulation equipment used to receive 
CPST service and also small cable systems owned by small cable 
operators, and we tentatively find that ``commercial cable service'' is 
exempt from rate regulation. We seek comment on ways to greatly 
simplify the process cable operators use to set their initial regulated 
Basic Service Tier (BST) rates and to justify subsequent rate 
increases. We seek comment on whether these changes would be consistent 
with section 623 of the Act, including the statutory purpose to protect 
subscribers from ``rates for the basic service tier that exceed the 
rates that would be charged for the basic service tier if such cable 
system were subject to effective competition,'' and whether they would 
reduce the burdens that cable operators and LFAs bear under our current 
rate regulation rules.
    We note that the Commission sought comment in 2002 in MB Docket No. 
02-144 on many of the proposals that we seek comment on in this FNPRM, 
but we seek to update the record on these proposals due to the passage 
of time and the significant changes that have since occurred in the 
marketplace, legal landscape, and technology. Those that commented in 
response to that 2002 Revised Order and NPRM (67 FR 56682) (Sept. 05, 
2002)) that wish to ensure their previous comments are considered in 
this proceeding with respect to the issues raised here should refile 
their comments in response to this FNPRM. We also seek comment on 
closing MB Docket No. 02-144.
    Fundamental Changes to Existing Framework. We seek comment on 
whether to adopt fundamental changes to our rate regulation framework 
and what those changes could be. We seek comment on whether there are 
simpler, more streamlined methods for determining reasonable rates that 
could be implemented and still satisfy our statutory obligations under 
section 623 of the Act. For example, should we significantly simplify 
our rate regulation regime by eliminating all of our existing rate 
regulation forms and directing those few Local Franchising Authorities 
(LFAs) that remain engaged in rate regulation to set reasonable BST 
rates based on the factors listed in section 623(b)(2)(C)? Under this 
proposal we would eliminate FCC Forms 1200, 1205, 1210, 1211, 1215, 
1220, 1225, 1230, 1235 and 1240. Similarly, under this approach, LFAs 
could set equipment rates that are based on the ``actual cost'' of the 
relevant equipment, as required by section 623(b)(3), without reliance 
on our existing forms. To the extent necessary, the Commission could 
adjudicate any disputes that arise on a case-by-case basis. Would this 
approach be consistent with the Act, including the Commission's 
obligation under section 623(b)(1) to ensure that BST rates are 
``reasonable'' and ``designed to achieve the goal of protecting 
subscribers of any cable system that is not subject to effective 
competition?'' Would this approach be consistent with the statutory 
directive that the Commission ``shall seek to reduce the administrative 
burdens on subscribers, cable operators, franchising authorities, and 
the Commission''? If the Commission adopted this approach, what new 
rules should we adopt? Should we retain any of our existing rules 
governing cable rates and, if so, which ones? What advantages or 
disadvantages would this type of approach have for subscribers, LFAs, 
and cable operators? We also seek comment on the type of adjudicatory 
process the Commission should implement to resolve disputes if we adopt 
the type of rate-setting approach described above. If the Commission 
adopts the rate-setting approach described above, should we continue to 
resolve disputes between cable

[[Page 60806]]

operators and LFAs by using the appeal process? If so, how should we 
determine whether the LFA's decision comports with the statutory 
factors? To what extent should we rely on existing rate appeal 
precedent for guidance? Should we adopt instead an alternative form of 
dispute resolution? For example, should Commission staff mediate rate 
disputes on an informal basis in the first instance? Alternatively, or 
if mediation is unsuccessful, should we consider adopting a more formal 
adjudicatory process and, if so, how should it work? We note that, in 
the program access context, the Commission has adopted merger 
conditions that impose baseball-style arbitration if parties cannot 
come to agreement. Would a similar arbitration process work as an 
option for parties to elect to resolve rate disputes, with the 
Commission or a designated Bureau acting as the decisionmaker? Are 
there other adjudicatory processes that would work better in this 
context? If the Commission were to take this type of approach, what 
other issues should we consider? Alternatively, should we consider a 
proposal submitted by NCTA that would allow a cable operator to justify 
its regulated BST and equipment rates by comparison to rates for 
comparable offerings in communities that are subject to effective 
competition? Under this framework, a cable operator would establish a 
national or regional rate, which NCTA refers to as an ``Updated 
Comparative Benchmark'' (UCB), that it would charge all BST 
subscribers. NCTA suggests that an ``[o]perator complying with the UCB 
could avoid all formal rate filings.'' It avers that this ``[a]pproach 
would benefit consumers by facilitating consistent, market-driven rates 
across an operator's cable systems'' and ``would provide a built-in 
incentive for operators to offer competitive prices to all subscribers, 
even in markets without effective competition.'' We seek comment on 
this framework. Would a UCB approach be consistent with section 623(b)? 
Given differences in channel lineups from system to system, how could 
``comparable offerings'' be defined for purposes of establishing and 
comparing a UCB to a regulated rate? NCTA states that, under its 
proposal, ``[o]perators would be allowed to calculate UCB rates based 
on reasonable system sampling'' of systems subject to effective 
competition. We seek comment on this idea. What type of sampling could 
be used to calculate the UCB? For example, should a sampling include 
only communities with a comparable channel lineup? NCTA's proposal 
refers to ``comparable offerings'' but also states that the national or 
regional rates would be ``compared to the regulated [BST] rate without 
regard to the particular number of BST channels offered in either 
regulated or unregulated communities, provided the [national or 
regional] rate encompasses at least the same services that must be 
included in a rate regulated BST (i.e., local broadcast channels and, 
PEG channels, where applicable).'' Is it appropriate to base rates for 
a regulated area's BST on a non-regulated area's rate for a system that 
carries different channels and/or a substantially different number of 
channels? How would ``comparable offerings'' be defined if it doesn't 
account for differences in the channel lineup? What if the cable 
operator has no systems that are subject to effective competition that 
it can use as a ``comparable offering'' to set its rate? If the 
Commission were to adopt this type of approach, to what extent should a 
cable operator be required to document and support its calculations? 
Should we adopt a presumption of reasonableness to such calculations 
that would be rebuttable by other interested parties? If so, what 
should such parties be required to demonstrate by way of rebuttal, and 
which party should bear the burden of persuasion? We also seek comment 
on the likely costs and benefits of this approach. NCTA proffers that, 
if we were to permit cable operators to use the UCB, we could retain 
our existing rate regime as ``alternative rate support.'' Would the 
addition of this layer of requirements to our existing rules be 
consistent with the goal of simplifying and eliminating outdated rate 
regulations? How would this process account for LFA review? For 
example, if we were to adopt a UCB approach, what formal process would 
a cable operator use to notify an LFA about the rate it plans to 
charge? What authority would the LFA have to review and approve the 
UCB, and what if the LFA doesn't approve the UCB? Would an LFA have an 
opportunity to appeal the UCB rate as unreasonable, and if so, under 
what process? When would the cable operator be allowed to implement its 
UCB? What specific changes would we need to make to our rules if we 
were to adopt this framework or would retaining our existing rules as 
NCTA suggests be sufficient? To the extent that commenters are 
concerned about this framework, we also seek input on ways to revise 
the process to make it more acceptable to all interested parties. We 
seek comment on any other proposals we should consider to restructure 
and simplify our existing rate regulation regime. Are there other 
processes that would reduce burdens on cable operators and local 
governments and achieve our statutory directive to ensure reasonable 
rates for subscribers? With respect to any alternative approaches we 
should consider, we ask commenters to explain and, if possible, 
quantify and provide support for their assessment of the relative costs 
and benefits vis-[agrave]-vis our existing regulatory framework; 
identify any uncertainties or limitations in their assessment of costs 
and benefits; and explain how their proposal would satisfy the 
requirements of section 623, whether and how it would be cost effective 
for LFAs, cable operators, and the Commission, and how it would fit in 
with today's marketplace realities.
    Reform of Existing Rules and Forms. In lieu of more extensive 
revisions to our overall rate regulation framework, we seek comment on 
eliminating, updating and streamlining our existing cable rate 
regulations. We first seek comment on eliminating rate regulation for 
cable equipment that is used to receive non-BST tiers of service and 
exempting small cable systems owned by small cable companies from rate 
regulation. Next, we tentatively find that rate regulation does not 
apply to commercial rates. These three areas appear to be ripe for 
deregulation, regardless of the regulatory framework that will apply 
going forward. Next, for those cable systems that remain subject to BST 
rate regulation, we seek comment on simplifying the process for 
establishing initial rates, discontinuing quarterly rate filings, and 
eliminating the cost of service methodology for setting rates. 
Collectively, these deregulatory steps would enable us to eliminate 
Forms 1200, 1210, 1220 and 1230. We also seek comment on clarifying the 
methodology cable operators use to adjust their BST rates and on 
whether certain of our rules are still relevant in light of the end of 
CPST rate regulation.
    Deregulation of Equipment, Small Systems and Commercial Rates. We 
seek comment on modifying our current rules regarding the regulation of 
equipment rates in light of the sunset of Cable Programming Service 
Tier (CPST) regulation. Section 76.923 of our rules provides that LFAs 
may regulate costs for equipment used to receive both the BST and 
additional tiers of service. While the Commission's original 
interpretation of section 623(b)(5) may have been appropriate when both 
the BST and CPST were rate regulated, we seek comment on whether our 
interpretation should be revisited and we should exempt from rate 
regulation equipment used by subscribers that receive additional tiers 
of service

[[Page 60807]]

beyond the BST, now that CPST rate regulation has sunset. Would it be 
consistent with section 623 to limit rate regulation to equipment used 
exclusively to receive the BST and non-tiered services? We seek comment 
on this approach and on any other approaches we should consider. Would 
this approach result in any complications or problems that we should 
consider? We seek comment on whether to exempt from rate regulation 
those small cable systems, defined by our rules as cable systems 
serving 15,000 or fewer subscribers, that are owned by small cable 
companies, defined by our rules as cable television operators serving 
400,000 or fewer subscribers. If we find that rate regulation is no 
longer necessary for such small systems owned by small cable companies, 
we propose to eliminate the rules establishing alternate methodologies 
for small systems as well as the Form 1230.Would an exemption for small 
systems be consistent with the Act, including section 623(i), which 
requires the Commission to ``reduce the administrative burdens and 
costs of compliance'' for cable systems that have ``1000 or fewer'' 
subscribers, and section 623(m), which exempts certain small cable 
operators from regulation of the BST? Are there any small systems 
serving 15,000 or fewer subscribers that are owned by small cable 
companies of 400,000 or fewer subscribers that are currently rate 
regulated? To the extent any such systems exist, would there be any 
benefit to retaining rate regulation for these cable systems? For 
example, should we retain our regulations on the premise that 
additional cable systems may become subject to regulation in the 
future? Should we create a different exemption for small entities or 
provide another form of relief short of a blanket exemption? What are 
the costs, if any, of retaining regulations for this class of 
providers, particularly where it appears no such providers are 
currently regulated? To the extent possible, commenters should quantify 
anticipated costs and benefits of this proposal or any proposed 
alternatives, provide support, and describe any uncertainties or 
limitations inherent in their analysis. We also seek comment on whether 
a cable operator that loses its deregulated status as a small system, 
small cable company or small cable operator because it gains 
subscribers and surpasses the maximum subscriber threshold for such an 
exemption should be required to notify its LFA that it no longer 
qualifies for the exemption. We tentatively conclude that cable 
services offered to commercial subscribers, such as bars and 
restaurants, are not subject to the Commission's rate regulations. 
Parties that previously filed comments on this issue should resubmit 
any comments they believe are still relevant. Section 623(a)(2) 
specifies that rate regulation shall not be imposed on a cable system 
that is subject to effective competition, and it defines ``effective 
competition'' based on the percentage of ``households'' subscribing to 
cable or the percentage of households to which competing service is 
available. In applying the test for effective competition, the 
Commission has concluded that the term ``household'' means ``occupied'' 
housing units. Given the use of the term ``households'' in section 623 
and the Commission's prior definition of that term in connection with 
the test for effective competition, we tentatively find that Congress 
did not intend to include cable service offered to commercial 
subscribers within the scope of rate regulation. We seek comment on 
this interpretation and, if we were to adopt it, on how we should 
define cable service offered to commercial subscribers for purposes of 
our rate regulation rules. One alternative would be to define it as a 
``cable service offered to locations that do not consist of households 
that are temporary or permanent, single housing units or multi-dwelling 
units.'' Both ``household'' and ``multi-dwelling unit'' are terms we 
have defined in Commission precedent regarding cable operators. 
``Household'' is an occupied housing unit. ``Multi-dwelling unit'' is a 
building or buildings with two or more residences, including apartment 
buildings, condominiums, hotels, hospitals, universities, and trailer 
parks. We seek comment on this definition and any alternatives we 
should consider.
    Setting Initial Regulated Rates (Forms 1200 and 1220). We seek 
comment on replacing our initial rate setting methodology, which 
requires using data from as far back as 1992, with one based on 
current, actual BST rates. This simplified practice would apply to 
cable operators that become regulated for the first time or that become 
re-regulated and would eliminate the need for Forms 1200 and 1220. For 
simplicity, we refer to first time or re-regulated cable operators as 
newly regulated cable operators throughout this document. Newly 
regulated cable operators may include those that are regulated for the 
first time, operators in communities where an LFA successfully rebuts 
the presumption of effective competition, or operators that lose their 
exemption from rate regulation because their status under our rules has 
changed. For all newly regulated operators, the initial or effective 
date of regulation would be the date that an LFA notifies the cable 
operator that the LFA is certified to regulate rates and that the basic 
service tier is subject to regulation under the generally applicable 
rate rules. We seek comment on whether to streamline our Form 1200 
process by accepting an operator's current, actual BST rate at the time 
it becomes subject to rate regulation in lieu of the benchmark rate 
calculated using the Form 1200. Under this approach, the BST rate would 
include the entire amount charged for the BST on the effective date of 
regulation, whether or not an operator had identified individual 
components of the rate on its subscribers' bills. It would not include 
promotional or discount rates nor include charges for equipment used to 
receive the BST. To the extent that any equipment or installation costs 
were included in the BST service charge, they would be removed using an 
off-form attachment. The initial or effective date of regulation would 
be the date that an LFA notifies the cable operator that the basic 
service tier is subject to regulation under the generally applicable 
rate rules. We seek comment on whether this approach will ensure that 
BST rates are kept within a reasonable range while creating a less 
burdensome process for cable operators and LFAs. Is it reasonable to 
presume under this proposal that the operator's rates in effect prior 
to becoming subject to regulation are reasonable? Does section 623, 
which prohibits rate regulation for communities that are subject to 
effective competition, support this presumption, at least with respect 
to cable operators that become newly regulated but were previously 
subject to effective competition? Is this presumption also reasonable 
in cases where an LFA decides to exercise its authority and has 
successfully rebutted the presumption of effective competition? In 
cases where an LFA previously had the authority to rate regulate, but 
chose not to do so, can we assume that the rates in effect before the 
LFA became certified to regulate were reasonable? Are there other 
approaches we should consider that would enable us to update and 
simplify our existing process for setting initial regulated cable 
rates? If we adopt this approach, we also seek comment on whether we 
should impose any restrictions on a cable operator's ability to use its 
actual current BST rate as its initial regulated rate. For example, 
should we restrict a cable operator's ability to use its actual BST 
rate as a starting point if there is a substantial spike in its BST 
rate

[[Page 60808]]

shortly before the initial date of regulation? This approach would be 
consistent with our precedent and would limit an operator's incentive 
to substantially raise its BST rates in anticipation of becoming newly 
regulated. It could also account for a large rate increase during the 
time period between when an operator is no longer subject to effective 
competition and the initial date of regulation. If we adopt such a 
restriction, how much of a rate increase should be considered as the 
threshold and what would be an appropriate period of time before rate 
regulation commences for us to restrict substantial increases? In the 
interest of uniformity and consistency, should we conform the three-
month period that applies to small cable operators who lose their 
deregulatory status as small cable operators to any newly proposed 
rule? If a cable system is not permitted to use its existing rate in 
certain cases, how should its initial rate be determined? For example, 
in such cases, should we allow LFAs to review the cable operator's most 
recent rate increase for compliance with our rules by using the last 
previous rate as the initial rate? Are there other approaches we should 
consider? We tentatively conclude that we would no longer need to 
retain our methodology for determining historical permitted charges 
using the Form 1200 if we use an operator's actual rate for the initial 
regulated rate. Consequently, if we adopt this approach, we propose to 
amend our rules to delete references to Form 1200 and its predecessor, 
Form 393, and to delete rules that relate solely to this methodology. 
If we adopt this proposal, should we also modify and streamline our 
refund liability rule in Sec.  76.942 to reflect the reduction in 
possible refund scenarios that could occur under our streamlined 
methodology for setting initial rates? Should we simplify the refund 
rule so that a cable operator's liability for refunds runs from the 
date of initial regulation until it reduces its rate in compliance with 
an LFA order? Are there any other rules we should delete or modify if 
we adopt this approach? We seek comment on eliminating the labor-
intensive Form 1220 cost of service methodology as an alternative means 
of setting initial regulated rates and on terminating pending 
rulemaking proceedings related to this methodology. With the demise of 
CPST regulation and the revised methodology for setting initial rates 
discussed above, the Form 1220 cost of service alternative may no 
longer be necessary to ensure that an operator receives an adequate 
return on its investment. Is there any compelling need for the 
Commission to retain Form 1220 or a cost of service methodology as an 
alternative way to set initial regulated rates? To what extent, if any, 
do cable operators use this process today? Would eliminating this 
alternative from our rules create any problems that we should consider? 
If we eliminate the Forms 1200 and 1220, should we eliminate references 
to the initial Form 1200 and cost of service methodologies in Sec.  
76.933, which addresses the process for filing these forms and their 
franchising authority review? Similarly, should we modify Sec.  76.942 
to delete references to those forms and the processes they use? What 
costs and benefits would result from eliminating the cost of service 
option for setting rates?
    Calculating Rate Increases (Forms 1210, 1240 and 1235). Under our 
current rules, once a regulated operator sets an initial BST rate, it 
justifies rate increases based on changes in external costs, changes in 
the number of channels on the BST, and inflation. In this section, we 
seek comment on ways to simplify the process for calculating these rate 
increases. We seek comment on the costs and benefits of these proposals 
or any alternatives that commenters may identify. Commenters should 
quantify costs and benefits to the extent possible, provide supporting 
information, and identify any limitations or uncertainties in their 
assessments. Currently, cable operators are permitted to justify 
changes to their rates either on a quarterly basis using Form 1210 or 
an annual basis using Form 1240. We seek comment on whether there is 
any benefit to retaining the Form 1210 quarterly adjustment option. We 
also seek input on whether the quarterly methodology should be removed 
from our rules. Is there any compelling reason for the Commission to 
retain the quarterly rate form? To what extent, if at all, do cable 
operators continue to use the Form 1210 and will eliminating it create 
any problems or disadvantages that we should consider? If we eliminate 
the Form 1210, should we eliminate references to this quarterly process 
in Sections 76.933 and 76.942, as discussed above? We seek comment on 
modifications to our Form 1240 instructions for adjusting rates when 
channels are added to or deleted from the BST. With the sunset of CPST 
regulation, we seek comment on whether we should eliminate two 
components of channel movement rate adjustment calculations: The 
``residual'' component and the ``channel number'' component. We seek 
comment on simplifying our rule so that (1) no per channel residual is 
moved to the BST along with a CPST channel and (2) no per channel 
residual is removed from the BST when a channel is removed from the BST 
unless the total number of channels on the BST falls below the total 
number of channels included in the initial regulated BST rate. We seek 
comment on eliminating from our rules the movement of CPST residual to 
the BST and on restricting the removal of BST residual and whether 
there are alternative mechanisms we should consider. With regard to the 
channel number component, our rules currently allow for a rate 
adjustment based on changes in the total number of channels on all 
regulated tiers. This ``per channel adjustment factor'' is calculated 
using a ``markup table,'' which is premised on having a regulated CPST 
and a system with fewer than 100 channels. Neither of those factors are 
valid today, so we seek comment on eliminating this adjustment and the 
accompanying table. Will this approach result in reasonable rate 
changes based on changes in the number of channels, and if not, what 
other methodologies should we consider? As noted above, the Form 1240 
allows an operator to calculate a maximum permitted rate using 
projected costs. The operator is then required to ``true up'' its rate 
by comparing the projected costs with actual costs once they are known. 
The operator is not required to pass through all of its costs to 
subscribers in its actual rate and may accrue costs to pass through at 
a later date. The Commission has stated that interest should not 
continue to accrue on these unrecovered costs, but subsequent decisions 
have created confusion in this area. When interest continues to accrue 
on these costs, it can result in excessive maximum permitted rates 
calculated on the Form 1240. We tentatively conclude that we should 
clarify our Form 1240 instructions to prevent cable operators from 
using the form to accrue interest on costs not passed through to 
subscribers when they are first entitled to recover those costs. We 
seek comment on our tentative conclusion. We seek comment on 
modifications to the Form 1235 instructions for calculating significant 
network upgrade costs to account for substantial changes in a system's 
channel count or number of subscribers. Through the Form 1235, cable 
operators are permitted to allocate a portion of their network upgrade 
costs to the BST based on the system channel capacity devoted to the 
BST. The cable operator then determines a per subscriber surcharge 
based on the

[[Page 60809]]

number of subscribers to the BST. Under our current instructions, the 
Form 1235 is filed only once and, if there is a subsequent substantial 
change in the number of subscribers or the number of channels allocated 
to the BST, the surcharge remains the same. This fails to account for 
system changes over time and could result in either over-inflated or 
under-inflated surcharges. Accordingly, we seek comment on whether to 
allow an LFA to require the cable operator to refile an updated Form 
1235 using the new channel ratio or subscriber count, when the change 
is substantial. If so, we seek comment on how we should define 
``substantial'' or otherwise establish a threshold upon which an LFA 
could require the operator to file a Form 1235 update. We also seek 
comment on modifying the Form 1235 instructions to prevent the double 
recovery of depreciation expense. Currently, Form 1235 calculates a 
rate of return on the initial net investment rather than calculating a 
return based on the average net investment, which would include a 
reduction for depreciation expense. At the same time, operators fully 
recover the upgrade investment over time as depreciation expense. As a 
result, operators have been able to recover a return on investment that 
has also been recovered through depreciation expense. Would a 
modification to the Form 1235 instructions, requiring operators to use 
the average net upgrade investment over the life of the upgrade rather 
than the initial net investment, prevent this double recovery? Would it 
allow the cable operator to earn a return on its investment and recover 
its network upgrade costs, while preventing subscribers from overpaying 
for network upgrade costs? If not, what other alternatives should be 
considered to address this issue?
    Elimination of Additional Forms. We seek comment on whether to 
eliminate a number of inactive or obsolete rate forms and delete 
references to them in our rules. These include: (1) Form 1211 (small 
system alternative to FCC Form 1210), which would be obsolete if we 
eliminate the Form 1210; (2) Form 1215 (a la carte channel offerings), 
which is a vestige of CPST regulation and is therefore no longer 
relevant; (3) Form 1225 (small systems cost of service form), which was 
superseded by the Form 1230; and (4) Form 329, an obsolete CPST 
complaint form. We seek comment on whether there is any reason to 
retain any of these forms.
    CPST Sunset Issues. In this Section, we seek comment on issues 
related to the sunset of CPST regulation. Commenters in the media 
modernization proceeding question whether specific rules have been 
rendered moot by the sunset of CPST regulation or by the passage of 
time. These rules include Sec.  76.980 (charges for customer changes in 
service tiers) and Sec.  76.984 (requiring a geographically uniform 
rate structure). In addition, we seek comment on whether there is any 
reason to retain Sec.  76.922(e)(2)(iii)(C) (mid-year rate adjustments) 
and Sec.  76.963 (forfeiture exceptions) in light of CPST deregulation. 
Additionally, we seek comment on the continued relevance of Sec.  
76.982 (continuation of certain types of rate agreements). We seek 
comment on how these rules might be affected by the sunset of CPST 
regulation and whether the rules continue to serve the public interest. 
We seek comment on eliminating our rule that allows cable operators 
using the annual rate adjustment methodology to make an additional rate 
adjustment to their CPST to reflect mid-year channel additions. Since 
the Commission adopted Sec.  76.922(e)(2)(iii)(C), both the CPST and 
most single tier systems have been deregulated. We seek comment on 
whether the rule including the single tier aspect of the rule, became 
meaningless after CPST deregulation because (1) there is no longer a 
need for a rule governing CPST rate adjustments and (2) in effect, all 
regulated systems now have only a single regulated tier, so the single-
tier exception (as written) would seem to be applicable to all 
regulated operators, undermining the policy of limiting BST rate 
adjustments to an annual event. We seek comment on whether there are 
any single tier systems still operating. Although we recognize that 
subscriber and market demand for channel line-ups may change during the 
course of a year, operators under the annual system can either project 
these changes to the BST at the time of their annual filing or accrue 
these costs and reflect them in their next annual filing.
    Section 76.980. Section 623(b)(5)(C) of the Act requires that 
Commission regulations include ``standards and procedures to prevent 
unreasonable charges for changes in the subscriber's selection of 
services or equipment subject to regulation under this section . . .'' 
Section 76.980, which limits charges cable operators may impose for 
changes in service tiers, was adopted pursuant to this statutory 
directive. This rule protects subscribers from paying excessive service 
charges just for dropping or adding tiers of service. NCTA argues that 
Sec.  76.980 is a rule that ``should be eliminated as a matter of 
regulatory clean-up.'' We seek comment on NCTA's claim. Did Congress 
provide for a sunset of the statutory requirement when it sunset CPST 
rate regulation, as NCTA suggests, or does the sunset apply only to 
regulations adopted under subsection (c) of section 623? Even if 
Congress did not sunset the statutory authority for Sec.  76.980, we 
seek comment on whether the rule is still necessary to implement 
section 623(b)(5)(C) of the Act. If not, should we eliminate or narrow 
the rule, or are there policy reasons to retain it?
    Section 76.982. Section 76.982 implements section 623(j) of the 
Act, which allows franchise agreements entered into before July 1, 1990 
to supersede section 623 of the Act and our implementing rules. Section 
76.982 requires a cable operator to notify the Commission of its intent 
to continue regulating basic cable rates in accordance with this 
exemption to our rules. Any such franchise agreements would be more 
than 28 years old and thus this notice requirement has very limited, if 
any, relevance today. In the unlikely event that this issue arises, 
section 623(j) of the Act would still allow the regulatory exemption. 
Accordingly, we seek comment on whether we should eliminate Sec.  
76.982.
    Section 76.984. Section 76.984 was adopted to carry out the mandate 
of section 623(d) of the Act, which prohibits cable operators from 
selling the same cable service at different prices in different parts 
of a given franchise area unless the franchise area as a whole faces 
effective competition. Although commenters claim that Sec.  76.984 
should no longer be in effect, we tentatively disagree and believe that 
this provision continues to prevent anti-competitive behavior and 
promote competition. As discussed above, the 1996 Act amended section 
623(c) to provide for the sunset of CPST rate regulation, but the 
requirement for uniform rates is found in section 623(d). Accordingly, 
we do not believe Sec.  76.984 is subject to the sunset provision, and 
we seek comment on this issue as well as on whether the rule continues 
to serve the public interest.
    Section 76.963. Section 76.963 was adopted to limit the 
Commission's existing forfeiture authority from being applied to 
Commission orders resolving complaints regarding CPST service and 
equipment rates. In implementing this rule, the Commission stated that 
it ``will not impose forfeitures on a cable operator simply because a 
rate for cable programming service is found to be unreasonable.'' It 
appears that this rule is no longer needed due to the sunset of CPST 
regulation. Eliminating this rule

[[Page 60810]]

does not affect the Commission's general authority to impose 
forfeitures for violations of specific rules or statutory provisions. 
We seek comment on eliminating this rule.
    Initial Regulatory Flexibility Act Analysis.--As required by the 
Regulatory Flexibility Act of 1980, as amended (RFA), the Commission 
has prepared an Initial Regulatory Flexibility Analysis (IRFA) relating 
to this FNPRM. The IRFA is set forth below.
    Paperwork Reduction Act.--The FNPRM may result in new or revised 
information collection requirements subject to the Paperwork Reduction 
Act of 1995, Public Law 104-13 (44 U.S.C. 3501 through 3520). If the 
Commission adopts any new or revised information collection 
requirement, the Commission will publish a notice in the Federal 
Register inviting the public to comment on the requirement, as required 
by the Paperwork Reduction Act of 1995, Public Law 104-13 (44 U.S.C. 
3501-3520). In addition, pursuant to the Small Business Paperwork 
Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the 
Commission seeks specific comment on how it might ``further reduce the 
information collection burden for small business concerns with fewer 
than 25 employees.'' In this present FNPRM, we have assessed the 
effects of the proposed changes to the Commission's rate regulations, 
including the modification of channel addition and deletion rules, the 
adoption of a streamlined process for establishing initial regulated 
rates, the sunset of a separate streamlined process for small systems, 
the sunset of the unabbreviated cost of service methodology, the 
modification of the Form 1235 methodology, and the clarification and or 
elimination of obsolete rules and forms and find that the policy 
changes are either neutral or reduce the burden on businesses with 
fewer than 25 employees.
    Ex Parte Rules.--This proceeding shall be treated as a ``permit-
but-disclose'' proceeding in accordance with the Commission's ex parte 
rules. Ex parte presentations are permissible if disclosed in 
accordance with Commission rules, except during the Sunshine Agenda 
period when presentations, ex parte or otherwise, are generally 
prohibited. Persons making ex parte presentations must file a copy of 
any written presentation or a memorandum summarizing any oral 
presentation within two business days after the presentation (unless a 
different deadline applicable to the Sunshine period applies). Persons 
making oral ex parte presentations are reminded that memoranda 
summarizing the presentation must (1) list all persons attending or 
otherwise participating in the meeting at which the ex parte 
presentation was made, and (2) summarize all data presented and 
arguments made during the presentation. Memoranda must contain a 
summary of the substance of the ex parte presentation and not merely a 
listing of the subjects discussed. More than a one or two sentence 
description of the views and arguments presented is generally required. 
If the presentation consisted in whole or in part of the presentation 
of data or arguments already reflected in the presenter's written 
comments, memoranda or other filings in the proceeding, the presenter 
may provide citations to such data or arguments in his or her prior 
comments, memoranda, or other filings (specifying the relevant page 
and/or paragraph numbers where such data or arguments can be found) in 
lieu of summarizing them in the memorandum. Documents shown or given to 
Commission staff during ex parte meetings are deemed to be written ex 
parte presentations and must be filed consistent with Section 1.1206(b) 
of the rules. In proceedings governed by Section 1.49(f) of the rules 
or for which the Commission has made available a method of electronic 
filing, written ex parte presentations and memoranda summarizing oral 
ex parte presentations, and all attachments thereto, must be filed 
through the electronic comment filing system available for that 
proceeding, and must be filed in their native format (e.g., .doc, .xml, 
.ppt, searchable .pdf). Participants in this proceeding should 
familiarize themselves with the Commission's ex parte rules.
    Filing Requirements.--Comments and Replies. Pursuant to Sec. Sec.  
1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, 
interested parties may file comments and reply comments on or before 
the dates indicated on the first page of this document. Comments may be 
filed using the Commission's Electronic Comment Filing System (ECFS). 
See Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 
24121 (1998).
    Electronic Filers: Comments may be filed electronically using the 
internet by accessing the ECFS: https://fjallfoss.fcc.gov/ecfs2/.
    Paper Filers: Parties who choose to file by paper must file an 
original and one copy of each filing. If more than one docket or 
rulemaking number appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number. Filings can be sent by hand or messenger delivery, 
by commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail. All filings must be addressed to the Commission's 
Secretary, Office of the Secretary, Federal Communications Commission. 
All hand-delivered or messenger-delivered paper filings for the 
Commission's Secretary must be delivered to FCC Headquarters at 445 
12th Street SW, TW-A325, Washington, DC 20554. The filing hours are 
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with 
rubber bands or fasteners. Any envelopes and boxes must be disposed of 
before entering the building. Commercial overnight mail (other than 
U.S. Postal Service Express Mail and Priority Mail) must be sent to 
9050 Junction Drive, Annapolis Junction, MD 20701. U.S. Postal Service 
first-class, Express, and Priority mail must be addressed to 445 12th 
Street SW, Washington, DC 20554.
    People with Disabilities. To request materials in accessible 
formats for people with disabilities (Braille, large print, electronic 
files, audio format), send an email to [email protected] or call the FCC's 
Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), 
(202) 418-0432 (TTY).
    Availability of Documents. Comments and reply comments will be 
publicly available online via ECFS. These documents will also be 
available for public inspection during regular business hours in the 
FCC Reference Information Center, which is located in Room CY-A257 at 
FCC Headquarters, 445 12th Street SW, Washington, DC 20554. The 
Reference Information Center is open to the public Monday through 
Thursday from 8:00 a.m. to 4:30 p.m. and Friday from 8:00 a.m. to 11:30 
a.m.
    Initial Regulatory Flexibility Analysis. As required by the 
Regulatory Flexibility Act of 1980, as amended (RFA), the Commission 
has prepared this Initial Regulatory Flexibility Analysis (IRFA) 
concerning the possible significant economic impact on small entities 
by the policies and rules proposed in this Further Notice of Proposed 
Rulemaking (FNPRM). Written public comments are requested on this IRFA. 
Comments must be identified as responses to the IRFA and must be filed 
by the deadlines for comments provided on the first page of the FNPRM. 
The Commission will send a copy of the FNPRM, including this IRFA, to 
the Chief Counsel for Advocacy of the Small Business Administration 
(SBA). In addition, the FNPRM and IRFA (or summaries thereof) will be 
published in the Federal Register.

[[Page 60811]]

    Need for, and Objectives of, the Proposed Rules. This FNPRM 
addresses ways to modernize, update and streamline the cable rate 
regulations in Part 76 of the Federal Communications Commission's rules 
governing multichannel video and cable television service. The FNPRM 
seeks comment on whether to replace the existing rate regulation 
framework and seeks proposals for that. Alternatively, if the 
Commission keeps the existing rate regulation framework in place, the 
FNPRM seeks comment on a number of proposals to update and simplify it. 
The FNPRM proposes to simplify the cable rate regulatory scheme by 
streamlining the initial rate-setting methodology, clarify how cable 
operators may adjust their rates every year, and eliminate rate 
regulation of some equipment used to receive cable signals and small 
systems owned by small cable companies. This would enable the 
Commission to eliminate several rate forms that would no longer be 
necessary. These changes would relieve regulatory burdens, modernize 
and streamline cable rate regulations, and update regulations to 
account for the deregulation of cable programming service tier rates.
    Legal Basis. The proposed action is authorized pursuant to sections 
1, 2(a), 3, 4(i), 4(j), 303(r), 601(3), 602, and 623 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 152(a), 153, 
154(i), 154(j), 303(r), 521, 522, 543.
    Description and Estimate of the Number of Small Entities to Which 
the Proposed Rules Will Apply. The RFA directs agencies to provide a 
description of, and where feasible, an estimate of the number of small 
entities that may be affected by the proposed rules, if adopted. The 
RFA generally defines the term ``small entity'' as having the same 
meaning as the terms ``small business,'' ``small organization,'' and 
``small governmental jurisdiction.'' In addition, the term ``small 
business'' has the same meaning as the term ``small business concern'' 
under the Small Business Act. A small business concern is one which: 
(1) Is independently owned and operated; (2) is not dominant in its 
field of operation; and (3) satisfies any additional criteria 
established by the SBA. Below, we provide a description of such small 
entities, as well as an estimate of the number of such small entities, 
where feasible.
    Cable Companies and Systems (Rate Regulation Standard). The 
Commission has also developed its own small business size standards, 
for the purpose of cable rate regulation. Under the Commission's rules, 
a ``small cable company'' is one serving 400,000 or fewer subscribers, 
nationwide. Industry data indicate that, of 1,076 cable operators 
nationwide, all but 11 are small under this size standard. In addition, 
under the Commission's rules, a ``small system'' is a cable system 
serving 15,000 or fewer subscribers. Industry data indicate that, of 
6,635 systems nationwide, 5,802 systems have under 10,000 subscribers, 
and an additional 302 systems have 10,000-19,999 subscribers. Thus, 
under this second size standard, the Commission believes that most 
cable systems are small.
    Cable System Operators. The Act also contains a size standard for 
small cable system operators, which is ``a cable operator that, 
directly or through an affiliate, serves in the aggregate fewer than 1 
percent of all subscribers in the United States and is not affiliated 
with any entity or entities whose gross annual revenues in the 
aggregate exceed $250,000,000.'' The Commission has determined that an 
operator serving fewer than 677,000 subscribers shall be deemed a small 
operator, if its annual revenues, when combined with the total annual 
revenues of all its affiliates, do not exceed $250 million in the 
aggregate. Industry data indicate that, of 1,076 cable operators 
nationwide, all but 10 are small under this size standard. We note that 
the Commission neither requests nor collects information on whether 
cable system operators are affiliated with entities whose gross annual 
revenues exceed $250 million, and therefore we are unable to estimate 
more accurately the number of cable system operators that would qualify 
as small under this size standard.
    Small Governmental Jurisdictions. The small entity described as a 
``small governmental jurisdiction'' is defined generally as 
``governments of cities, counties, towns, townships, villages, school 
districts, or special districts, with a population of less than fifty 
thousand.'' U.S. Census Bureau data from the 2012 Census of Governments 
indicates that there were 90,056 local governmental jurisdictions 
consisting of general purpose governments and special purpose 
governments in the United States. Of this number there were 37,132 
General purpose governments (county, municipal and town or township) 
with populations of less than 50,000 and 12,184 Special purpose 
governments (independent school districts and special districts) with 
populations of less than 50,000. The 2012 U.S. Census Bureau data for 
most types of governments in the local government category shows that 
the majority of these governments have populations of less than 50,000. 
Based on this data we estimate that at least 49,316 local government 
jurisdictions fall in the category of ``small governmental 
jurisdictions.'' As discussed in the FNPRM, however, local governments 
are certified to rate regulate in only about 100 jurisdictions, and 
that includes governmental jurisdictions that are not small. Therefore, 
we expect the number of small governmental jurisdictions to which these 
rule changes would apply is likely under 100.
    Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements. As indicated above, this FNPRM addresses ways 
to modernize, update and streamline the cable rate regulations in Part 
76 of the Federal Communications Commission's rules governing 
multichannel video and cable television service. The FNPRM proposes to 
modify channel addition and deletion rules, streamline the process for 
establishing initial regulated rates, sunset a separate streamlined 
process for small systems and further deregulate small entities, sunset 
the single tier system headend surcharge methodology, sunset the 
unabbreviated cost of service methodology, modify the FCC Form 1235 
methodology, clarify Commission jurisdiction over basic service tier 
rates, and the clarify and or eliminate obsolete rules and forms. These 
changes are necessary to relieve regulatory burdens, modernize and 
streamline cable rate regulations, and update regulations to account 
for the deregulation of cable programming service tier rates. All of 
the proposed rule changes are either neutral or reduce existing 
reporting, recordkeeping or other compliance requirements. 
Specifically, changes to the initial rate calculation methodology 
remove requirements that cable operators go back to 1992 records to 
justify their rate and systems serving 15,000 or fewer subscribers that 
are owned by small cable companies of 400,000 or fewer subscribers are 
relieved from all rate regulation.
    Steps Taken To Minimize Significant Economic Impact on Small 
Entities and Significant Alternatives Considered. The RFA requires an 
agency to describe any significant alternatives that it has considered 
in reaching its proposed approach, which may include the following four 
alternatives (among others): ``(1) the establishment of differing 
compliance or reporting requirements or timetables that take into 
account the resources available to small entities; (2) the 
clarification, consolidation, or simplification of compliance and 
reporting requirements under the rule for such small entities; (3) the 
use of performance, rather than design standards; and (4) an exemption

[[Page 60812]]

from coverage of the rule, or any part thereof, for small entities.'' 
The Commission expects to more fully consider the economic impact on 
small entities following its review of comments filed in response to 
the FNPRM and this IRFA. Generally, the FNPRM seeks comment on: ways to 
modernize, update and streamline the cable rate regulations in Part 76 
of the Federal Communications Commission's rules governing multichannel 
video and cable television service. The FNPRM proposes to modify 
channel addition and deletion rules, streamline the process for 
establishing initial regulated rates, sunset of a separate streamlined 
process for small systems and further deregulate small entities, sunset 
the single tier system headend surcharge methodology, sunset the 
unabbreviated cost of service methodology, modify the FCC Form 1235 
methodology, clarify Commission jurisdiction over basic service tier 
rates, and the clarify and or eliminate obsolete rules and forms. These 
changes are necessary to relieve regulatory burdens, modernize and 
streamline cable rate regulations, and update regulations to account 
for the deregulation of cable programming service tier rates. All of 
the proposed rule changes are either neutral or reduce existing 
reporting, recordkeeping or other compliance requirements. 
Specifically, changes to the initial rate calculation methodology 
remove requirements that cable operators go back to 1992 records to 
justify their rate and systems serving 15,000 or fewer subscribers that 
are owned by small cable companies of 400,000 or fewer subscribers are 
relieved from all rate regulation.
    Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rule. None.
    It is ordered that, pursuant to the authority found in sections 1, 
2(a), 3, 4(i), 4(j), 303(r), 601(3), 602, and 623 of the Communications 
Act of 1934, as amended, 47 U.S.C. 151, 152(a), 153, 154(i), 154(j), 
303(r), 521, 522, 543, this Further Notice of Proposed Rulemaking is 
adopted. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Notice of Proposed Rulemaking, including the Initial 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.

List of Subjects in 47 CFR Part 76

    Cable television; Reporting and recordkeeping requirements.

Federal Communications Commission.
Cecilia Sigmund,
Federal Register Liaison Officer, Office of the Secretary.

Proposed Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR part 76 as follows:

PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

0
1. The authority citation for part 76 continues to read as follows:

    Authority:  47 U.S.C. 151, 152, 153, 154, 301, 302, 302a, 303, 
303a, 307, 308, 309, 312, 315, 317, 325, 339, 340, 341, 503, 521, 
522, 531, 532, 534, 535, 536, 537, 543, 544, 544a, 545, 548, 549, 
552, 554, 556, 558, 560, 561, 571, 572, 573.

0
2. Amend Sec.  76.911 by revising paragraph (b)(3) to read as follows:


Sec.  76.911  Petition for reconsideration of certification.

* * * * *
    (b) * * *
    (3) In any case in which a stay of rate regulation has been 
granted, if the petition for reconsideration is denied, the cable 
operator may be required to refund any rates or portion of rates above 
the permitted tier charge or permitted equipment charge in accordance 
with Sec.  76.942.
* * * * *
0
3. Revise Sec.  76.922 to read as follows:


Sec.  76.922   Rates for the basic service tier.

    (a) Basic service tier rates. Basic service tier rates shall be 
subject to regulation by the Commission and by state and local 
authorities, as is appropriate, in order to assure that they are in 
compliance with the requirements of 47 U.S.C. 543. Rates that are 
demonstrated, in accordance with this part, not to exceed the permitted 
charge as described in this section, plus a charge for franchise fees, 
will be accepted as in compliance. The maximum monthly charges for 
regulated programming services shall not include any charges for 
equipment or installations. Charges for equipment and installations are 
to be calculated separately pursuant to Sec.  76.923. Equipment and 
installation rates that are demonstrated not to exceed the maximum 
permitted rates as specified in Sec.  76.923, will be accepted as in 
compliance. The initial rate-setting methodology used to set basic 
service tier rates shall continue to provide the basis for subsequent 
permitted charges.
    (b) Permitted charge. (1) The permitted charge for a tier of 
regulated program service shall be the maximum permitted rate 
calculated using FCC Forms 1240 and 1235. Permitted charges established 
prior to the effective date of this rule will be reviewed for 
conformance with the rules in effect at the time the permitted charges 
were established.
    (2) Establishment of newly regulated rates. (i) Cable systems shall 
use FCC Form 1240 to establish initial regulated rates.
    (ii) For newly regulated cable systems, including cable systems 
that are re-regulated following a change in regulatory status, the 
initial date of regulation for the basic service tier shall be the date 
on which notice is given by the local franchising authority that the 
basic service tier is subject to regulation under the generally 
applicable rate rules.
    (iii) For purposes of this section, rates in effect on the initial 
date of regulation shall be the rates charged to subscribers for 
service received on that date.
    (c) Annual rate adjustment method -- (1) Generally. Except as 
provided for in paragraph (c)(2)(iii)(B) of this section and Sec.  
76.923(o), operators using the annual rate adjustment method may not 
adjust their rates more than annually to reflect inflation, changes in 
external costs, changes in the number of regulated channels, and 
changes in equipment costs. Operators must file on the same date a Form 
1240 for the purpose of making rate adjustments to reflect inflation, 
changes in external costs and changes in the number of regulated 
channels and a Form 1205 for the purpose of adjusting rates for 
regulated equipment and installation. Operators may choose the annual 
filing date, but they must notify the franchising authority of their 
proposed filing date prior to their filing. Franchising authorities or 
their designees may reject the annual filing date chosen by the 
operator for good cause. If the franchising authority finds good cause 
to reject the proposed filing date, the franchising authority and the 
operator should work together in an effort to reach a mutually 
acceptable date. If no agreement can be reached, the franchising 
authority may set the filing date up to 60 days later than the date 
chosen by the operator. An operator may change its filing date from 
year to year, except, as described in paragraphs (c)(2)(iii)(B) of this 
section, at least twelve months must pass before the operator can 
implement its next annual adjustment.
    (2) Projecting inflation, changes in external costs, and changes in 
number of regulated channels. An operator using the annual rate 
adjustment

[[Page 60813]]

method may adjust its rates to reflect inflation, changes in external 
costs and changes in the number of regulated channels that are 
projected for the 12 months following the date the operator is 
scheduled to make its rate adjustment pursuant to Sec.  76.933.
    (i) Inflation adjustments. The residual component of a system's 
permitted charge may be adjusted annually to project for the 12 months 
following the date the operator is scheduled to make a rate adjustment. 
The annual inflation adjustment shall be based on inflation that 
occurred in the most recently completed quarter, converted to an annual 
factor. Adjustments shall be based on changes in the Gross National 
Product Price Index as published by the Bureau of Economic Analysis of 
the United States Department of Commerce.
    (ii) External costs. (A) Permitted charges for a tier may be 
adjusted annually to reflect actual changes in external costs 
experienced but not yet accounted for by the cable system, as well as 
for projections in these external costs for the 12-month period on 
which the filing is based. In order that rates be adjusted for 
projections in external costs, the operator must demonstrate that such 
projections are reasonably certain and reasonably quantifiable. 
Projections involving copyright fees, retransmission consent fees, 
other programming costs, Commission regulatory fees, and cable specific 
taxes are presumed to be reasonably certain and reasonably 
quantifiable. Operators may project for increases in franchise related 
costs to the extent that they are reasonably certain and reasonably 
quantifiable, but such changes are not presumed reasonably certain and 
reasonably quantifiable. Operators may pass through increases in 
franchise fees pursuant to Sec.  76.933.
    (B) In all events, a system must adjust its rates every twelve 
months to reflect any net decreases in external costs that have not 
previously been accounted for in the system's rates.
    (C) Any rate increase made to reflect increases or projected 
increases in external costs must also fully account for all other 
changes and projected changes in external costs, inflation and the 
number of channels on regulated tiers that occurred or will occur 
during the same period. Rate adjustments made to reflect changes in 
external costs shall be based on any changes, plus projections, in 
those external costs that occurred or will occur in the relevant time 
periods since the periods used in the operator's most recent previous 
FCC Form 1240.
    (iii) Channel adjustments. (A) Permitted charges for a tier may be 
adjusted annually to reflect changes not yet accounted for in the 
number of regulated channels provided by the cable system, as well as 
for projected changes in the number of regulated channels for the 12-
month period on which the filing is based. In order that rates be 
adjusted for projected changes to the number of regulated channels, the 
operator must demonstrate that such projections are reasonably certain 
and reasonably quantifiable.
    (B) An operator may make rate adjustments for the addition of 
required channels to the basic service tier that are required under 
federal or local law at any time such additions occur, subject to the 
filing requirements of Sec.  76.933(c)(5), regardless of whether such 
additions occur outside of the annual filing cycle. Required channels 
may include must-carry, local origination, public, educational and 
governmental access and leased access channels. Should the operator 
elect not to pass through the costs immediately, it may accrue the 
costs of the additional channels plus interest, as described in 
paragraph (c)(3) of this section.
    (3) True-up and accrual of charges not projected. As part of the 
annual rate adjustment, an operator must ``true up'' its previously 
projected inflation, changes in external costs and changes in the 
number of regulated channels and adjust its rates for these actual cost 
changes. The operator must decrease its rates for overestimation of its 
projected cost changes, and may increase its rates to adjust for 
underestimation of its projected cost changes.
    (i) Where an operator has underestimated costs, future rates may be 
increased to permit recovery of the accrued costs plus 11.25% interest 
between the date the costs are incurred and the date the operator is 
entitled to make its rate adjustment.
    (ii) If an operator has underestimated its cost changes and elects 
not to recover these accrued costs with interest on the date the 
operator is entitled to make its annual rate adjustment, the interest 
will cease to accrue as of the date the operator is entitled to make 
the annual rate adjustment, but the operator will not lose its ability 
to recover such costs and interest. An operator may recover accrued 
costs between the date such costs are incurred and the date the 
operator actually implements its rate adjustment.
    (d) External costs. (1) External costs shall consist of costs in 
the following categories:
    (i) State and local taxes applicable to the provision of cable 
television service;
    (ii) Franchise fees;
    (iii) Costs of complying with franchise requirements, including 
costs of providing public, educational, and governmental access 
channels as required by the franchising authority;
    (iv) Retransmission consent fees and copyright fees incurred for 
the carriage of broadcast signals;
    (v) Other programming costs;
    (vi) Commission cable television system regulatory fees imposed 
pursuant to 47 U.S.C. 159; and
    (vii) Headend equipment costs necessary for the carriage of digital 
broadcast signals.
    (2) The permitted charge for a regulated tier shall be adjusted on 
account of programming costs, copyright fees and retransmission consent 
fees only for the program channels or broadcast signals offered on that 
tier.
    (3) Adjustments for external costs in the true-up portion of the 
FCC Form 1240 may be made on the basis of actual changes in external 
costs only. The starting date for adjustments to external costs for 
newly regulated or re-regulated systems shall be the implementation 
date of the actual rate in effect as of the initial date of regulation 
or re-regulation.
    (4) Changes in franchise fees shall not result in an adjustment to 
permitted charges, but rather shall be calculated separately as part of 
the maximum monthly charge per subscriber for a tier of regulated 
programming service.
    (5) Adjustments to permitted charges to reflect changes in the 
costs of programming purchased from affiliated programmers, as defined 
in Sec.  76.901, shall be permitted as long as the price charged to the 
affiliated system reflects either prevailing company prices offered in 
the marketplace to third parties (where the affiliated program supplier 
has established such prices) or the fair market value of the 
programming.
    (i) For purposes of this section, entities are affiliated if either 
entity has an attributable interest in the other or if a third party 
has an attributable interest in both entities.
    (ii) Attributable interest shall be defined by reference to the 
criteria set forth in Notes 1 through 5 to Sec.  76.501 provided, 
however, that:
    (A) The limited partner and LLC/LLP/RLLP insulation provisions of 
Note 2(f) shall not apply; and
    (B) The provisions of Note 2(a) regarding five (5) percent 
interests shall include all voting or nonvoting stock or limited 
partnership equity interests of five (5) percent or more.
    (6) Adjustments to permitted charges on account of increases in 
costs of programming shall be further adjusted

[[Page 60814]]

to reflect any revenues received by the operator from the programmer. 
Such adjustments shall apply on a channel by channel basis.
    (7) In calculating programming expense, operators may add a mark-up 
of 7.5% for increases in programming costs. Operators shall reduce 
rates to reflect decreases in programming costs and remove the 7.5% 
mark-up, if any, taken on the removed costs.
    (e) Changes in the number of channels on the regulated basic 
service tier.--(1) Generally. A system must adjust annually the 
residual component of its permitted rate for the basic service tier 
(``BST'') to reflect any decreases in the number of channels that were 
on the BST as of the initial date of regulation or May 14, 1994, 
whichever is later. Cable systems shall use FCC Form 1240 to justify 
rate changes made on account of changes in the number of channels on 
the BST.
    (2) Deletion of channels. (i) When dropping a channel from a BST, 
operators shall reflect the net reduction in external costs in their 
rates. With respect to channels to which the 7.5% markup on programming 
costs was applied, the operator shall treat the markup as part of its 
programming costs and subtract the markup from its external costs.
    (ii) For channels added to the BST after the initial date of 
regulation or May 14, 1994, whichever is later, operators shall remove 
the actual per channel adjustment taken for that channel when it was 
added to the BST.
    (iii) When removing channels results in a total BST channel count 
that is less than the number of channels that were on the BST as of the 
initial date of regulation or May 14, 1994, whichever is later, 
operators shall also reduce the price of the BST by any ``residual'' 
associated with the channel removal. For purposes of this calculation, 
the per channel residual is the permitted charge for the BST, minus the 
external costs and any per channel adjustments included in the 
permitted charge, divided by the total number of channels on the BST as 
of the initial date of regulation or May 14, 1994, whichever is later.
    (3) Movement of channels to the BST. When a channel is moved from 
another tier of service to the BST, the moved channel shall be treated 
as a new channel.
    (4) Substitution of channels on a BST. An operator may substitute a 
new channel for an existing channel on a BST to prevent a reduction in 
the total BST channel count to less than the number of channels that 
were on the BST as of the initial date of regulation or May 14, 1994, 
whichever is later. The substituted channel will carry the same 
residual as the original channel for which it was substituted. 
Operators substituting channels on a BST shall be required to reflect 
any reduction in programming costs in their rates and may reflect any 
increase in programming costs, including the 7.5% markup.
    (f) Permitted charges for a tier shall be determined in accordance 
with forms and associated instructions established by the Commission.
    (g) Network upgrade rate increase. (1) Cable operators that 
undertake significant network upgrades requiring added capital 
investment may justify an increase in rates for regulated services on 
FCC Form 1235 by demonstrating that the capital investment will benefit 
subscribers, including providing television broadcast programming in a 
digital format.
    (2) A rate increase on account of upgrades shall not be assessed on 
customers until the upgrade is complete and providing benefits to 
customers of regulated services.
    (3) Cable operators seeking an upgrade rate increase have the 
burden of demonstrating the amount of the net increase in costs, taking 
into account current depreciation expense, likely changes in 
maintenance and other costs, changes in regulated revenues and expected 
economies of scale.
    (4) Cable operators seeking a rate increase for network upgrades 
shall allocate net cost increases in conformance with the cost 
allocation rules as set forth in Sec.  76.924.
    (5) Cable operators that undertake significant upgrades shall be 
permitted to increase rates by adding the benchmark/price cap rate to 
the rate increment necessary to recover the net increase in cost 
attributable to the upgrade.
    (h) Hardship rate relief. A cable operator may adjust charges by an 
amount specified by the Commission or the franchising authority for the 
basic service tier if it is determined that:
    (1) Total revenues from cable operations, measured at the highest 
level of the cable operator's cable service organization, will not be 
sufficient to enable the operator to attract capital or maintain credit 
necessary to enable the operator to continue to provide cable service;
    (2) The cable operator has prudent and efficient management; and
    (3) Adjusted charges on account of hardship will not result in 
total charges for regulated cable services that are excessive in 
comparison to charges of similarly situated systems.
0
4. Amend Sec.  76.923 by revising paragraphs (a)(1) and (n) to read as 
follows:


Sec.  76.923   Rates for equipment and installation used to receive the 
basic service tier.

    (a) * * *
    (1) The equipment regulated under this section consists of all 
equipment in a subscriber's home, provided and maintained by the 
operator, that is used to receive the basic service tier and video 
programming offered on a per channel or per program basis, if any, 
except if such equipment is additionally used to receive other tiers of 
programming service. Such equipment shall include, but is not limited 
to:
    (i) Converter boxes;
    (ii) Remote control units; and
    (iii) Inside wiring.
* * * * *
    (n) Timing of filings. An operator shall file FCC Form 1205 in 
order to establish its maximum permitted rates at the following times:
    (1) When the operator sets its initial regulated equipment rates;
    (2) On the same date it files its FCC Form 1240. If an operator 
elects not to file an FCC Form 1240 for a particular year, the operator 
must file a Form 1205 on the anniversary date of its last Form 1205 
filing; and
    (3) When seeking to adjust its rates to reflect the offering of new 
types of customer equipment other than in conjunction with an annual 
filing of Form 1205, 60 days before it seeks to adjust its rates to 
reflect the offering of new types of customer equipment.
0
5. Amend Sec.  76.924 by:
0
a. Revising paragraphs (a), (c), and (d)(1) introductory text;
0
b. Removing and reserving paragraph (d)(2); and
0
c. Revising paragraph (e).
    The revisions read as follows:


Sec.  76.924  Allocation to service cost categories.

    (a) Applicability. The requirements of this section are applicable 
to cable operators for which the basic service tier is regulated by 
local franchising authorities or the Commission. The requirements of 
this section are applicable for purposes of rate adjustments on account 
of external costs and for cost of service showings such as the FCC Form 
1235.
* * * * *
    (c) Accounts level. Cable operators making cost of service showings 
or seeking adjustments due to changes in external costs shall identify 
investments, expenses and revenues at the franchise, system, regional, 
and/or

[[Page 60815]]

company level(s) in a manner consistent with the accounting practices 
of the operator on its initial date of regulation or re-regulation. 
However, in all events, cable operators shall identify at the franchise 
level their costs of franchise requirements, franchise fees, local 
taxes and local programming.
    (d) * * * (1) Cable operators making cost of service showings shall 
report all investments, expenses, and revenue and income adjustments 
accounted for at the franchise, system, regional and/or company 
level(s) to the summary accounts listed below.
* * * * *
    (2) [Removed and Reserved]
    (e) Allocation to service cost categories. (1) For cable operators 
making cost of service showings, investments, expenses, and revenues 
contained in the summary accounts identified in paragraph (d) of this 
section shall be allocated among the Equipment Basket, as specified in 
Sec.  76.923, and the following service cost categories:
    (i) Basic service cost category. The basic service category, shall 
include the cost of providing basic service as defined by Sec.  
76.901(a). The basic service cost category may only include allowable 
costs as defined by Sec.  76.922.
    (ii) Cable programming services cost category. The cable 
programming services category shall include the cost of providing cable 
programming services as defined by Sec.  76.901(b). The cable 
programming service cost category may include only allowable costs as 
defined in Sec.  76.922.
    (iii) All other services cost category. The all other services cost 
category shall include the costs of providing all other services that 
are not included in the basic service or cable programming services 
cost categories as defined in paragraphs (e)(1)(i) and (ii) of this 
section.
    (2) Cable operators seeking an adjustment due to changes in 
external costs identified in FCC Form 1240 shall allocate such costs 
among the equipment basket, as specified in Sec.  76.923, and the 
following service cost categories:
    (i) The basic service category as defined by paragraph (e)(1)(i) of 
this section;
    (ii) The cable programming services category as defined by 
paragraph (e)(1)(ii) of this section;
    (iii) The all other services cost category as defined by paragraph 
(e)(1)(iii) of this section.
* * * * *
0
6. Revise Sec.  76.930 to read as follows:


Sec.  76.930  Initiation of review of basic cable service and equipment 
rates.

    A cable operator shall file its rate justifications 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, or within 30 
days from the date the franchising authority notifies the operator that 
the operator will be subject to the generally applicable rate rules 
because the operator's regulatory status has changed. Basic service and 
equipment rate filings for existing rates or proposed rate increases 
(including increases that result from reductions in the number of 
channels on 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.
0
7. Revise Sec.  76.933 to read as follows:


Sec.  76.933   Franchising authority review of basic cable rates and 
equipment costs.

    (a) A cable operator that submits for review its existing rates for 
the basic service tier and associated equipment costs may continue the 
existing rates in effect pending franchising authority review and 
subject to the refund liability provisions of Sec.  76.942.
    (b) A cable operator that submits for review a proposed change in 
its existing rates for the basic service tier and associated equipment 
costs, including a rate increase resulting from a network upgrade 
pursuant to Sec.  76.922(g), shall do so no later than 90 days prior to 
the effective date of the proposed rates.
    (c)(1) The franchising authority will have 90 days from the date of 
the rate filing to review it. However, if the franchising authority or 
its designee concludes that the operator has submitted a facially 
incomplete filing, the franchising authority's deadline for issuing a 
decision, the date on which a rate increase may go into effect if no 
decision is issued, and the period for which refunds are payable will 
be tolled while the franchising authority is waiting for this 
information, provided that, in order to toll these effective dates, the 
franchising authority or its designee must notify the operator of the 
incomplete filing within 45 days of the date the filing is made.
    (2) If there is a material change in an operator's circumstances 
during the 90 day review period and the change affects the operator's 
rate filing, the operator may file an amendment to its rate filing 
prior to the end of the 90 day review period. If the operator files 
such an amendment, the franchising authority will have at least 30 days 
to review the filing. Therefore, if the amendment is filed more than 60 
days after the operator made its initial filing, the operator's 
proposed rate change may not go into effect any earlier than 30 days 
after the filing of its amendment. However, if the operator files its 
amended application on or prior to the sixtieth day of the 90 day 
review period, the operator may implement its proposed rate adjustment, 
as modified by the amendment, 90 days after its initial filing.
    (3) If a franchising authority has taken no action within the 90 
day review period, then the existing rates may continue in effect or 
the proposed rates may go into effect at the end of the review period, 
subject to a prospective rate reduction and refund if the franchising 
authority subsequently issues a written decision disapproving any 
portion of such rates, provided, however, that in order to order a 
prospective rate reduction and refund, if an operator inquires as to 
whether the franchising authority intends to issue a rate order after 
the 90 day review period, the franchising authority or its designee 
must notify the operator of its intent in this regard within 15 days of 
the operator's inquiry. If the franchising authority has not issued its 
rate order by the end of the 90 day review period, the franchising 
authority will have 12 months from the date the operator filed for the 
rate adjustment to issue its rate order. In the event that the 
franchising authority does not act within the 12-month period, it may 
not at a later date order a refund or a prospective rate reduction with 
respect to the rate filing.
    (4) At the time an operator files its rate justifications with the 
franchising authority, the operator may give customers notice of the 
proposed rate changes. Such notice should state that the proposed rate 
change is subject to approval by the franchising authority. If the 
operator is only permitted a smaller increase than was provided for in 
the notice, the operator must provide an explanation to subscribers on 
the bill in which the rate adjustment is implemented. If the operator 
is not permitted to implement any of the rate increase that was 
provided for in the notice, the operator must provide an

[[Page 60816]]

explanation to subscribers within 60 days of the date of the 
franchising authority's decision. Additional advance notice is required 
if the rate to be implemented exceeds the previously noticed rate.
    (5) If an operator files for a rate adjustment for the addition of 
channels to the basic service tier that the operator is required by 
federal or local law to carry, the franchising authority has 60 days to 
review the requested rate. The proposed rate shall take effect at the 
end of this 60 day period unless the franchising authority rejects the 
proposed rate as unreasonable. The franchising authority shall be 
subject to the requirements described in paragraph (c)(1)-(3) of this 
section for ordering refunds and prospective rate reductions, except 
that the initial review period is 60 rather than 90 days.
    (6) When the franchising authority is regulating basic service tier 
rates, a cable operator may increase its rates for basic service to 
reflect the imposition of, or increase in, franchise fees or cable 
television system regulatory fees imposed pursuant to 47 U.S.C. 159. 
The increased rate attributable to Commission cable television system 
regulatory fees or franchise fees shall be subject to subsequent review 
and refund if the franchising authority determines that the increase in 
basic tier rates exceeds the increase in regulatory fees or in 
franchise fees allocable to the basic tier. This determination shall be 
appealable to the Commission pursuant to Sec.  76.944. When the 
Commission is regulating basic service tier rates pursuant to Sec.  
76.945, an increase in those rates resulting from franchise fees or 
Commission regulatory fees shall be reviewed by the Commission pursuant 
to the mechanisms set forth in Sec.  76.945.
    (d) If an operator files an FCC Form 1205 for the purpose of 
setting the rate for a new type of equipment under Sec.  76.923(o), the 
franchising authority has 60 days to review the requested rate. The 
proposed rate shall take effect at the end of this 60 day period unless 
the franchising authority rejects the proposed rate as unreasonable. 
The franchising authority shall be subject to the requirements 
described in paragraph (c)(1)-(3) of this section for ordering refunds 
and prospective rate reductions, except that the initial review period 
is 60 rather than 90 days.
0
8. Revise Sec.  76.934 to read as follows:


Sec.  76.934  Small systems and small cable companies.

    (a) For purposes of rules governing the regulatory status of small 
systems, the size of a system or company shall be determined by 
reference to its size as of the date the system files with its 
franchising authority or the Commission the documentation necessary to 
qualify for the relief sought. Where relief is dependent upon the size 
of both the system and the company, the operator must measure the size 
of both the system and the company as of the same date. A small system 
shall be considered affiliated with a cable company if the company 
holds a 20 percent or greater equity interest in the system or 
exercises de jure control over the system.
    (b) A franchising authority that has been certified, pursuant to 
Sec.  76.910, to regulate rates for basic service and associated 
equipment may permit a small system as defined in Sec.  76.901 to 
certify that the small system's rates for basic service and associated 
equipment comply with Sec.  76.922, the Commission's substantive rate 
regulations.
    (c) Regulation of small systems. A small system, as defined by 
Sec.  76.901(c), that receives a notice of regulation from its local 
franchising authority must respond within the time periods prescribed 
in Sec.  76.930.
    (d) Petitions for extension of time. Small systems may obtain an 
extension of time to establish compliance with rate regulations 
provided they can demonstrate that timely compliance would result in 
severe economic hardship. Requests for extension of time should be 
addressed to the local franchising authority. The filing of a request 
for an extension of time to comply with the rate regulations will not 
toll the effective date of rate regulation for small systems or alter 
refund liability for rates that exceed permitted levels.
    (e) Small Systems Owned by Small Cable Companies. Small systems 
owned by small cable companies are not subject to rate regulation as 
long as they meet the definitions of small system and small cable 
company. When a system no longer qualifies for deregulatory status, the 
system must give the franchising authority notice of its change in 
status. The system may maintain the actual rates it charged prior to 
its loss of small system status, but future rate adjustments will be 
subject to generally applicable rate regulations. After receiving 
notice of regulation from the franchising authority, the system shall 
file its schedule of rates consistent with Sec.  76.930 of this 
subpart.
    (f) For rules governing small cable operators, see Sec.  76.990 of 
this subpart.
0
9. Revise Sec.  76.935 to read as follows:


Sec.  76.935   Participation of interested parties.

    In order to regulate basic tier rates or associated equipment 
costs, a franchising authority must have procedural laws or regulations 
applicable to rate regulation proceedings that provide a reasonable 
opportunity for consideration of the views of interested parties. Such 
rules must take into account the time periods that franchising 
authorities have to review rates under Sec.  76.933.
0
10. Amend Sec.  76.937 by:
0
a. Removing paragraph (c);
0
b. Redesignating paragraphs (d) and (e) as paragraphs (c) and (d); and
0
c. Revising newly redesignated paragraph (d).
    The revision reads as follows:


Sec.  76.937   Burden of proof.

* * * * *
    (d) 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 (c) of this section, for the cable operator's failure to 
comply with the deadline or otherwise provide complete information in 
good faith.
0
11. Revise Sec.  76.938 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 for review, or have proposed 
rate increases. The franchising authority shall state a justification 
for each item of information requested and, where related to an FCC 
form 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.
0
12. Revise Sec.  76.939 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. Any 
information submitted to a franchising authority or

[[Page 60817]]

the Commission in making a rate determination pursuant to an FCC form 
filing is subject to the provisions of Sec.  1.17 of this chapter.
0
13. Revise Sec.  76.942 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. 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.
    (b) The refund period shall run as follows:
    (1) From the date the operator implements the rate under review 
until it reduces the rate in compliance with a valid rate order or 
justifies that rate or a higher rate in its next rate filing, whichever 
is sooner, however, the refund period shall not begin before the 
initial date of regulation.
    (2) For rates in effect and justified on rate forms filed before 
the effective date of this rule, as amended, the refund period shall be 
determined by the rules in effect at the time of filing.
    (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.
    (c) The cable operator, in its discretion, may implement a refund 
in the following manner:
    (1) By returning overcharges to those subscribers who actually paid 
the overcharges, either through direct payment or as a specifically 
identified credit to those subscribers' bills; or
    (2) By means of a prospective percentage reduction in the rates for 
the basic service tier or associated equipment to cover the cumulative 
overcharge. The refund shall be reflected as a specifically identified, 
one-time credit on prospective bills to the class of subscribers that 
currently subscribe to the cable system.
    (d) Refunds shall include interest computed at applicable rates 
published by the Internal Revenue Service for tax refunds and 
additional tax payments.
    (e) Once an operator has implemented a rate refund to subscribers 
in accordance with a refund order by the franchising authority (or the 
Commission pursuant to paragraph (a) of this section), 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. The franchising authority has the discretion to 
determine a reasonable repayment period, but interest shall accrue on 
any outstanding portion of the franchise fee starting on the date the 
operator has completed implementation of the refund order. In 
determining the amount of the refund, the franchise fee overcharge 
should be offset against franchise fees the operator holds on behalf of 
the franchising authority for lump sum payment. The interest rate on 
any refund owed to the operator presumptively shall be 11.25%.
0
14. Amend Sec.  76.944 by revising paragraph (c) as follows:


Sec.  76.944   Commission review of franchising authority decisions on 
rates for the basic service tier and associated equipment.

* * * * *
    (c) An operator that uses the annual rate adjustment method under 
Sec.  76.922(c) may include in its next true up under Sec.  
76.922(c)(3) any amounts to which the operator would have been entitled 
but for a franchising authority decision that is not upheld on appeal.
0
15. Revise Sec.  76.945 to read as follows:


Sec.  76.945  Procedures for Commission review of basic service rates.

    (a) Upon assumption of rate regulation authority, the Commission 
will notify the cable operator and require the cable operator to file 
its basic rate schedule with the Commission within 30 days, with a copy 
to the local franchising authority.
    (b) Basic service and equipment rate schedule filings for existing 
rates or proposed rate increases or adjustments (including increases 
that result 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(c).
    (c) Filings for existing rates or proposed rate increases or 
adjustments must be made 90 days prior to the proposed effective date 
and can become effective on the proposed effective date unless the 
Commission issues an order deferring the effective date or denying the 
rate proposal. Petitions opposing such filings must be filed within 15 
days of public notice of the filing by the cable operator and be 
accompanied by a certificate that service was made on the cable 
operator and the local franchising authority. The cable operator may 
file an opposition within five days of the filing of the petition, 
certifying to service on both the petitioner and the local franchising 
authority.


Sec.  76.963   [Removed]

0
16. Remove Sec.  76.963.


Sec.  76.982  [Removed]

0
17. Remove Sec.  76.982.
0
18. Amend Sec.  76.990 by:
0
a. Revising paragraphs (a) and (b)(2);
0
b. Removing paragraph (b)(3); and
0
c. Revising paragraph (c).
    The revisions read as follows:


Sec.  76.990   Small cable operators.

    (a) A small cable operator is exempt from rate regulation on its 
basic service tier if that tier was the only service tier subject to 
rate regulation as of December 31, 1994, in any franchise area in which 
that operator services 50,000 or fewer subscribers.
    (b) * * *
    (2) Once the operator has certified its eligibility for 
deregulation on the basic service tier, the local franchising authority 
shall not prohibit the operator from taking a rate increase and shall 
not order the operator to make any refunds unless and until the local 
franchising authority has rejected the certification in a final order 
that is no longer subject to appeal or that the Commission has 
affirmed. The operator shall be liable for refunds for revenues gained 
(beyond revenues that could be gained under regulation) as a result of 
any rate increase taken during the period in which it erroneously 
claimed to be deregulated, plus interest, in the event the operator is 
later found not to be deregulated. The limits on refund liability will 
not be applicable during that period to ensure that the filing of an 
invalid small operator certification does not reduce any refund 
liability that the operator would otherwise incur.
    (c) Transition from small cable operator status. If a small cable 
operator subsequently becomes ineligible for small operator status, the 
operator will become subject to regulation but may maintain the rates 
it charged prior to losing small cable operator status if such rates 
were in effect for three months preceding the initial date of 
regulation. Upon regulation, actual rates and subsequent rate increases 
will be subject to generally applicable regulations governing rates and 
rate increases. A cable operator must give its franchising authority 
notice of its change in status.

[[Page 60818]]

The system shall file its rate justifications consistent with Sec.  
76.930. For rules governing small cable systems and small cable 
companies, see Sec.  76.934.


Sec.  76.1805   [Removed]

0
19. Remove Sec.  76.1805.

[FR Doc. 2018-25325 Filed 11-26-18; 8:45 am]
 BILLING CODE 6712-01-P