HomeMy WebLinkAboutNew York State Commission on Cable TelevisionTHEIGOV,ERNOR NELSONJA rROCKEFELLE
4 611,1401___:E TATE PLAZA
GORNING2TOWER, ALBANY, NY,122-23
(518) 474-1359
JOHN L. GROW
Counsel
STATE OF NEW YORK
Commission on Cable Television
Tower Building - Empire State Plaza
Albany, NY 12223
Before the
FEDERAL OCN U ICATICNS O mmissiCN
Washington, D.C. 20554
JAN - 4 1993
In the Matter of
Implementation of Sections of
the Cable Television Consumer
Protection and Competition Act
of 1992
Rate Regulation
MM Docket 92-266
)
Notice of Proposed Rulemaking
FCC 92-544
Adopted: December 10, 1992 Released: December 24, 1992 uJ
By the Commission:
Comment Date: January 27, 1993
Reply Comment Date: February 11, 1993
Table of Contents
I. Introduction
II. Proposed Implementations
A. Rate Regulation of Cable Service
1. General Issues
2. Standards and Procedures for
Identification of Cable Systems
Subject to Effective Competition
3. Regulation of the Basic Service Tier Rates
a. Cortiponents of the Basic Service Tier
Subject to Regulation
iD. Regulation of the Basic Service Tier
by Local Franchising Authorities
and the Commission
c. Regulations Governing Rates of the
Basic Service Tier
d. Regulation of Rates for,Equipment
e. Costs of Franchise Requirements
f. Customer Changes
g. Implementation and Enforcement
Paragraphs:
1-2
3-5
6-9
10 - 13
14 - 29
30- 61
62 -71
72 - 73
74 - 78
79 - 89
4. Regulation of Cable Programming Services
a. Regulations Governing Rates 90- 96
b. Camlaint Procedures; Rate Reduction 97-110_
and Refund Procedures for Rates
Found to be Unreasonable
5. Provisions Applicable to Cable Service Generally
a. Geographically Uniform Rate Structure 111-115
b. Discrimination 1167117
c. Negative Option Billing 118-121
d. Collection of Information 122-124
e. Prevention of Evasions 125-127
f. Small System Burdens 128-133
g. Grandfathering of Rate Agreements 134-135
h. Reports on Average Prices 136-139
i. Definitions 140-141
j. Effective Date 142-143
B. Leased Commercial Access
1. Statutory Requirements 144-145
2. Discussion
a. Maximum Reasonable Rates 146-154
b. Reasonable Terms and Conditions of Use 155-161
c. Procedures for Expedited 162-170
Resolution of Disputes
d. Leased Access for 171-173
Q ta 1 ity Minority Programming and
Qualified Educational Programming
C. Subscriber Bill Itemizatioin 174-175
III. Initial Regulatory Flexibility Analysis 176-183
IV. Paperwork Reduction Act 184
.V. Procedural Provisions 185-186
VI. Ordering Clauses 187-188. .
Appendices
I. Introduction
1. In this Notice of Proposed Rule Making (NMI) we propose to
amend our rules to implement Sections 623, 612, and 622(c), of the
Communications Act of 1934, as amendedl by the Cable Television Consumer
Protection and Competition Act of 1992 ("Cable Act of 1992").2 These
statutory provisions concern regulation of rates for cable service and for
leased commercial access.
2. We solicit comment to help us craft a comprehensive regulatory
model that will best fulfill statutory objectives related to rate regulation
for the cable industry. Section II of this NPRM describes and proposes
alternative procedural and substantive regulations through which the
requirements of these statutory provisions could be implemented. It also
•discusses the advantages and disadvantages of each alternative. We
tentatively conclude that we should not select cost -of -service regulation as
the primary mode of regulation of cable service rates. Later, we initially
find that we should adopt a benchmark regulatory alternative for regulation
of cable service rates under which the Commission would establish a benchmark
rate, or a simile formula which could be used to derive such a rate. Rates
above the benchmark would be presumed unreasonable. At the same time, .
cost -of -service regulation on an individual system basis could be applied to
cable systems seeking to justify a rate above the benchmark. We also
solicit comment generally on how the different rate regulation proposals
presented herewould affect, and be affected by, othe parts of the Cable Act
of 1992 addressed in separate Commission proceedings. •
1 47 U.S.C. Sections 543, 532, and 542(c).
2 Cable Television Consumer Protection and Competition Act, Pub. L. No.
102-385, §§ 3,9,14, 106 Stat. 1460 (1992) (hereinafter Cable Act of 1992).
• 3 Implementation of the Cable Television Consumer Protection and
Competition Act of 1992, Cable Home Wiring, MSS Docket No. 92-260,•Notice of
Proposed Rulemaking, FCC 92-500 (released Nov. 6, 1992); Implementation of
• Section 10 of the Cable Consumer Protection and Competition Act of 1992 --
Indecent Programming and Other Types of Materials on Cable Access Channels,
MM Docket No. 92-258, Notice of Proposed Rulemaking, FCC 92-498 (released
Nov. 10, 1992) (Indecent Programming on Cable Access Channels Proceeding) ;
Implementation of the Cable Television Consumer Protection Act of 1992,
Broadcast Signal Carriage Issues, MM Docket No. 92-259, Notice of Proposed
Rulemaking, FCC 92-499 (released Nov. 19, 1992) (Must Carry/Retransmission
Consent Proceeding); Implementation of Section 22 of the'Cable Television
Consumer Protection and Competition Act of 192 -- Equal Employment
Opportunities, NM Docket No. 92-261, Notice of Proposed Rulemaking, FCC 92-
539 (adopted Dec. 10, 1992); Implementation of Section 3 of the Cable
Television Consumer Protection and Competition Act'of 1992 -- Tier Buy -
Through Prohibitions, MM Docket No. 91-262, Notice of Proposed Rulemaking,
FCC 92-540 (released Dec. 11, 1992); Implementation of Section 8 of the Cable
Television Consumer Protection and Competition Act of 1992 -- Consumer'
Protection and Customer Service, MM Docket No. 92-263, Notice of Proposed
3
A.•
II. Proposed Implementation
A. Regulation of Cable Service Rates
1. General Issues
3. The Cable Act of 1992 directs the Commission to establish
rules to govern rate regulation of cable service tiers offered by cable
systems not subject to effective competition.4 The Commission must
establish, first, regulations that assure that rates for the basic service
tier are reasonable, and, second, standards that permit identification, in
'individual cases, of rates for cable programming services that are
unreasonable.5 In this section, we propose regulatory alternatives to give
effect to the specific obligations and prohibitions the Act imposes on
regulators and cable. operators as part of its statutory scheme for rate
regulation of the basic service tier and cable programming services:. We
solicit comment here on whether these proposals would fulfill these statutory
requirements, and, if not, how they should be modified to do so.
4. The Cable Act of 1992 states that since the rate deregulation
triggered by the Cable Communications Policy Act of 1984,6 monthly rates for
the lowest priced basic cable service have increased by 40 percent or more
for 28 percent of•cable subscribers. Acknowledging that since 1984 the
average number of basic channels has increased frau about 24 to 30, the Act
still finds that average monthly rates have risen 29 percent during the same
period and that the average monthly cable rate has grown almo§t three times
as fast as the Consumer Price Index .(CPI) since deregulation. The Cable Act --
Rulemaking,. FCC 92-541 (released Dec. 11, 1992); Implementation of Sections
11 and 13 of the Cable Television Consumer Protection and Competition Act of
1992 -- Horizontal and Vertical Ownership Limits, Cross-OWnsership •
Limitations and Anti -Trafficking Provisions, MM Docket No. 92-264, Notice of
Proposed Rulemaking and Notice of Ingpiry, FCC 92-542 (adopted Dec. 10,
1992); Imrplementation of Sections 12 and 19 of the Cable Television Consumer
Protection and Competition Act of 1992 -- Program Access and Carriage
Regulation, Mei Docket 92-265, Notice of Proposed Rulemakinq, FCC 92-543
(adopted Dec. -10, 1992).
4 "Subject to effective competition" is a term defined in Section
623(1)(1) of the Cable.Act of 1992, 47 U.S.C. Section 623(1)(1), and
discussed, inlbra, at paras. 17-18:
5 "Cable programming service" is a term defined in Section 623(1)(2), •
47 U.S.C. Section 543(1)(2), and discussed infra at paras. 90-110.
6 Pub. L. No. 98-549, 98 Stat. 2779 (1984).
7 fee Cable Act of 1992, Pub. L. No. 102-385 §2(a), 106 Stat. 1460; lee
also H.R. Conf. Rep. No. 862, .102d Cong., 2d Sess. at 49, 53, 56 (1992)
(hereinafter "Conference Report").
of 1992 also requires that regulations governing rates for cable service be
based on, among other factors, the rates charged -by cable systems subject to
'effective competition.8 This leads to the basic question of whether the
purpose and the terms of the Cable Act embody a congressional intent thatour
rules produce rates generally lower than those in effect when the Cable Act
of 1992 was enacted (and if so, to what degree), or, rather a congressional
intent that regulatory standards serve primarily as a check on prospective
.rate increases. To the extent Congress envisioned reductions in rates, we
solicit comment on the extent to which this should be acclished for the
basic service tier and/or for cable programming services. We solicit
comment generally on the impact of rate reductions, or of limits on
prospective rate increases, on the ability of cable operators to provide
service to subscribers on the basic or higher level service tiers. If
Congress intended for -rules to lead to rate reductions, what are the defining
characteristics of those systems for which Congress intended cable service
rates be reduced?
5. The Cable Act of 1992 permits, and to some extent may
encourage, if not require, a restructuring of.service offerings.1U We
solicit comment on the impact of the rate regulation alternatives presented
in this NPRM on the ability and incentive of cable operators to create
packages.of programming at different tier levels that will be useful and
valuable to subscribers. We solicit comment on whether any regulatory
alternative would, as a practical matter, unduly'restrict the ability of
cable operators to provide a full range of services on either the basic or
higher level service tiers. We seek comment generally on the impact upon
the cable industry, its investors, subscribers, future growth of services and
of programming, and service quality of the different approaches to rate -
regulation that we present in this section.
2. Standards and Procedures for Identifying Cable Systems Subject
to Rate Regulation for Provision of Cable Service.
a. Statutory Requirements
6. The Cable Act permits regulation of a cable system's subscriber
rates only if this Commission finds that the cable system is "not subject to
effective competition." If we find that a cable system is subject to
effective competition, the Cable Act prohibits the regulation of rates for
that system. Where effective competition does not exist, the Cable Act
• 8 Communications Act, Sections ; 623 (b) (2) (C) , 623(c)(2), 47 U.S.C.
Sections 543(b) (2) (C) , 623(c)12).
9 We discuss in more detail in later sections•of this NPPM issues
concerning reduced or low rates for the basic service tier and/or cable
programming services. 222 paras. 32, 94 infra.
10 See, e.., Communications Act, Section 623.(a) (7) (A), (B) , 47 U.S.C.
Section 543 (a)(7)(A),(B). We discuss implementation of statutory provisions
that limit cable systems' retiering discretion at paras. 125-27, infra.
5
states that rates for the provision of "basic cable service" are to be
regulated by the franchising authority (or by this Commission in particular
circumstances discussed below), while rates for "cable programming services"
shall be subject to regulation only by this Commission.11 "Effective
competition", 'basic cable service" and "cable programming services" are
statutorily defined terms that we discuss in more detail below.
b. Discussion
7. The statute establishes three separate tests, any one of which,
if met, would establish that a cable system is subject to effective
competition. The first is satisfied if fewer than 30 percent of the
households in the franchise area subscribe to a cable system. The second test
is met if: the franchise area is (i) "served by at least two unaffiliated
multichannel video programming distributors each of which offers comparable
video programming to at least 50 percent of the households in the franchise
area;" and (ii) "the number of households subscribing to programming services
offered by multichannel video programming distributors other than the largest
multichannel video programming distributor exceeds 15 percent of the
households in the franchise area." The third way effective competition may
arise is if the franchising authority in the subject franchise area is itself
a multichannel video programming distributor and "offers video Rrogramming to
at least 50 percent of the households in that franchise area."1'
8. We also seek comment on whether the standard for gauging
whether households are "offered" video programming under -the second an0 third
tests should be that service is actually available to such households.13 We
plan to count each separately billed or billable customer as a "household"_ -
subscribing tb or being offered cable or other video programming service .
We seek comment on this tentative view. Comments are also sought on sources
for data needed to evaluate such criteria, and their current availability.
9. We also seek. comment on what services qualify as "a
multichannel video programming distributor" for purposes of the second and
third tests. The Cable Act defines multichannel- video programming
distributor as an entity who makes multiple channels of video programming
available for purchase by subscribers or customers. As examples of such
entities, Section 602(12) of the Communications Act lists: a cable operator,
a DBS satellite service provider, a television receive -only satellite program
11 Communications Act, § 623(a) (2) (A) , (B) , 47 U.S.C. § 543(a) (2) (A) , a”.
12 Communications Act, § 623 (1)(1)m), (C) ; .47 U.S.C. § 543
(1) (1) (B)-, (C) .
13 We observe in this regard that many cable source materials contain
statistics for homes "passed", a term of art that refers to actual
availability of cable service to potential cable subscribers, but -does not
account for noncable program delivery services such as those offered by
wireless technologies. , e.g.,, Television and Cable Factbook: Cable and
Services Volume D-12 (warren Publishing 1992).
6
distributor, sand an MMDS provider. That section also states that this term -
is not limited to these specific examples. In assessing cable competition
previously, this Commission has considered whether to take into account
alternative or substitute delivery services readily available to subscribers
in the home.14- In this regard, we seek comment on whether a telephone
company offering of "video dialtone" (i.e.,, transmission capacity for video
programming) service or a'television broadcast station offering multiplexed
multichannel service would qualify as a "multichannel video programming
distributot."13 We also seek comment on our tentative view that we should
14 See generally Reexamination of the Effective Competition Standard
for the Regulation of Cable Television Basic Service Rates, 6 FCC Rcd 4545,
4551-54 (1991) .
15 Sed generally Telephone Company -Cable Television Cross -Ownership
Rules, Sections 63.54-63.58, Second Report and Order, Recommendation to
Congress, and Second Further Notice of Proposed Rulemakinc, 7 FCC Rcd 5781
(1992), Petitions for recon. pending, Petitions for review docketed Ilm.
Mankato Citizens Telephone Co. v. FCC, No. 92-1404 (D.C. Cir. filed Sept. 9,
1992), Northwestern Indiana Telephone Co., Inc. v. FCC, No. 92-1406 (D.C.
Cir. Filed Sept. 9, 1992), National Cable Television Ass'n v. FCC, No. 92-
1530 (D.C. Cir. filed Oct. 6, 1992), and Community Antenna Television Ass'n
Inc. v. FCC, No. 92-1539 (D:C. Cir. filed Oct. .9, 1992); Memorandum Opinion
and Order on Reconsideration, 7 FCC Rcd 5069 (1992), petitions for review
docketed, (video dialtone proceeding); Review of the Commission's
Regulations Governing Television Broadcasting, Notice of Proposed Rulemaking,
7 FCC Rcd 4111 (1992) (proceeding on future of video marketplace). In our. —
rulemaking addressing broadcast signal carriage issues raised by the Act, we
address several other questions relating to this definition, including
whether it encompasses master antenna television. systems and satellite master
antenna systems. Implementation of the Cable Television Consumer Protection
Act of 1992, Broadcast Signal Carriage Issues, NM Docket No. 92-259, FCC 92-
499. para. 42 (released Nov. 19, 1992) (Must Carry/Retransmission Consent
Proceeding). In this docket, we will take into account any responses to
those questions received in that docket.
A related issue is whether a leased access user offering compressed,
multichannel service, or a leased access user or a franchising authority
offering multichannel programming on the operator's leased access or PEG
channels, on either a per -channel or a multiplexing basis, would be a
"multichannel video programming distributor." Under one proposed
interpretation of the Cable Act, the services the third party offered would
not be available unless a customer also subscribes to the Operator's basic
tier. • Thus, under this interpretation, a third party's services would not
independently compete with a cable oprator's services, and would not seem
appropriately considered in our effective competition analysis. However, it
may also be possible to interpret the Act as permitting the "a la carte"
offering of indiviciiia1 program services without first purchasing the basic
tier. See discussion of this issue infra; para. 12. In such case, would it
be appropriate to consider the a la carte offering of a third party's
services in an effective competition analysis? We seek comment on whether a
7
measure penetration for purposes of the second test cumulatively, ., by
adding the subscribership of all alternative multichannel video programming
distributors (other than the largest) together. Thus, the 15 percent
penetration figure could be met if together two competitors (other than the
largest) had subscribers totalling 15 percent of the households in a
franchise area, even though individually each competitor might not meet that
figure. In addition, we.ask parties to address whether any minimums amount of
programming or minimum number of separate channels must be provided by an
entity for it to qualify as a "multichannel video programming distributor."
With respect to "comparable video programming," we might presume that such
comparability exists under the second statutory test for effective
competition if a competitor offers multiple channels of. video programming and
the numerical tests for the offering of and subscription to competitive
service under the second test are met.16 This presumption might be subject
to rebuttal by an opposing party. We. seek comment on this approach.
3. Basic Cable Service Regulation
a. Components of the Basic Service Tier Subject to Regulation
i. Statutory Requirements
10; Under the Cable Act, each cable operator must offer its
subscribers a separately available basic service. tier t44 which subscription
is required for access to "any other tier of service."17• Qualified
franchising authorities are to be the primary regulators of rates for this
basic tier of service, with the Commission regulating only in certain
circumstances. The statute provides that the basic service tier must
include: (1) all local commercial and noncommercial educational television
and qualified low power station signals carried.to meet carriage obligations
imposed by Sections 614 and 615 of the Cable Act; (2) any public,
educational, and governmental access programming required by the franchise to
be provided to subscribers; and (3) any signal of any television broadcast
station that the cable operator offers to any subscriber, unless it is a
signal that is secondarily transmitted by a satellite carrier beyond the
local service area of such a station.18 Section 623(b)(7)(3) permits the
operator to include additional video programming signals or services in the
basic tier as long as the charges for their services conform to our basic
rate regulations.
third party offering services on an.operator's own system should be
considered a "multichannel video programming distributor" for purposes of
determining whether that cable system is subject to effective competition.
16 The term "video programming" is defined in Section 602 (19) as
"programming provided by, or generally considered comparable to, programming
provided by, a television broadcast station."
17 Communications Act, § 623 (b) (7) (A), 47 U.S.C. § 543 (b).(7)
18 Communications Act, § 623(b) (7) (A) , 47 U.S.C. § 543(b) (7) (A) .
8
ii. Discussion
11._ The statute requires that "must -carry" local television
signals, as defined by Sections 614 and 615 of the Communications Act, must
be included in the basic service tier. However, the Cable Act authorizes
local television stations to exercise "retransmission consent" rights in lieu
of mandatory carriage. Parties are requested to comment on how the
retransmission consent provisions will affect or shape the composition of the
basic service tier.19 In particular, Section 623 (b) (7) (A) (air would appear
to make any local signal carried pursuant to retransmission r�gnsent a basic
tier channel. We seek comment on this tentative conclusion. We also seek
comment on whether channels carried pursuant to retransmission consent would
be classified as mandatory basic service channels, even if an operator had
already satisfied his signal carriage obligations. We also seek comment on
our tentative finding that cable operators may add.any and as many video
programming services to the basic tier as they wish, provided that such
services are subject to basic rate regulation.
12. The statute defines basic service as a tier "to wh'.h
subscription is required for access to any other tier of service."4-L We seek
comment on whether this language. establishes a "basic buy through"
'requirement, i.e.,, whether it precludes the offering of video services
completely "a la carte" and without prior subscription to the basic service
tier. Particularly in light of the plain language of the statute which
limits any such "basic buy.through" to other tiers of service, we also ask
interested parties to comment on whether Congress intended to permit
consumers the option of purchasing services, such as premium channels, or
the services of a leased access programmer, on a stand-alone basis, . In
addition, we interpret Section 623 (b) (8) (A) as precluding an operator's
requiring the purchase of services in additiq to the basic tier as a
precondition for ordering other programming.-' Are there alternative
interpretations which would also preclude subscribers from purchasing a
separate offering of a nonvideo or "institutional network" without first
purchasing the basic tier.
13. The definition of what services are subject to rate regulation
19 Communications Act, § 325(b), 47 U.S.C. § 325(b). The Commission is
considering issues relating to must -carry and retransmission consent
provisions of the Cable Act in the Must Carry/Retransmission Consent Proceeding.
20 We note that we have tentatively concluded in 1t4 Docket:No. 92-259 .
that retransmission consent channels may be used to meet the signal carriage
requirements of § 614. Must Carry/Retransmission Consent Proceeding, para. 54.
21 Communications Act, § 623 (b) (7) (A), 47 U.S.C. § 543 (b) (7)
22 f:f. discussion Via, paragraph 127, of Communications Act § 623(h),
47 U.S.C. § 543(h) (dealing with prevention of evasions, including by
retiering) .
as part of the basic service tier appears to contemplate only a single tier,
thereby effectively amending the general "basic tie" definition that remains
in the Communications Act from the 1984 Cable Act. Section 602 (3) defines
"basic cable service" as "only service tier which includes thee retransmission
of local television broadcast signals" (emphasis supplied).4zi
particular, it appears that the 1992 Cable Act contemplates that there be a
single "basic tier" of service that is subject to local regulation and that
includes the services defined in Section 623 (b)(7)(A)(i),(ii)and (iii). If
this were not the case; the anti -buy through provisions of -Section 623 (b) (8)
could be frustrated through the marketing of cumulative tiers of "basic"
,service. Further, the singular references in the statute to "the" 0,asic tier
suggest that Congress intended the existence of only one such tier. We
seek comment on our tentative interpretation.
b. Regulation of the Basic Service Tier by Local Franchising
Authorities and the Commission
i.
Statutory.Requirements
14. The Cable Act of 1992 permits regulation of the rates for
"basic cable service" only if effective competition does not exist. A
franchising authority wishing to exert such regulatory jurisdiction must
certify in writing to the Commission that: (1) the franchising authority
23 Communications Act, § 602 (3), 47 U.S.C. § 522 .(3).
24 The court of appeals held, under the•1984 Act, that a tier of _
service that incorporates, in a marketing sense, the basic tier is itself
also a basic tier service, although a tier added to a basic tier for a
separate charge would not be considered a basic service. American Civil,
Liberties Union v. FCC, 823 F. 2d 1554 (D.C. Cir. 1987). The court observed
that otherwise, "use of the section 602(2) definition could lead.to two
different cable companies offering identical services having a different
number of service tiers being considered 'basic cable service'; this
critical difference would thus be based solely on the way these two
hypothetical cable operators chose to market their services." ACLU, 823 F.
2d 1566. Thus, for example, if.an operator sells a $10 basic tier and offers
an additional set of channels for $5, these would be a basic ($10) and•non-
basic ($5) service. However, if the operator offers a $10 basic and a $15
tier that includes the basic service as well as additional service, both the
$10 service and the $15 service are basic services under the ACLU holding.
ACLU, 823 F. 2d at 1566 n.31 (giving more detailed, analogous hypothetical
and noting that operator employing a cumulative, rather than an incremental,
marketing and pricing approach faced the•prospect of having•such cumulative
tiers all potentially subject to rate regulation as basic services under the
Section 602(2) definition). We seek comment on the effect of the 1992 Cable
Act on the ACLU interpretation of basic service.
25 See, e.a., House Committee on Energy and Commerce, H.R. Rep. No.
102-628, 102d Cong., 2d Sess. 83 (House Report) ("The purpose of Section 3 is
to create a tier of low cost basic cable service.")
10
will. adopt and administer rules with respect to the rates subject to
regulation that are consistent with the regulations prescribed by the
Commission; (2) the franchising authority has the legal authority to adopt,
and the personnel to administer, such regulations; and (3) procedural laws
and rules -governing rate regulation proceedings by such authority provide a
reasonable opportunity for consideration of the views of interested
parties. Such a certification filed with this Commission by a franchising
authority will become effective 30 days after filing unlesg the Commission
finds, after notice and a reasonable opportunity for the authority to
comment, that the franchising authority has not met one of the three criteria
listed above.27 If we disapprove the certification, the Commission :rust
notify the franchise authority of any revisions,or modifications necessary to
obtain approval. Further, if we disapprove or revoke a certification,
Section 623(a) (6) requires the Commission to exercise the franchise
authority's regulatory jurisdiction until that authority becomes qualified by
filing a new certification that meets the requirements set forth above. Such
new certifications become effective upon approval by this Commissi9nn, which
approval (or disapproval) must be issued within 90 days of filing.ZZ
ii. Discussion
aa. Jurisdictional Division
15. We interpret Section 623 of the Communications Act, as amended
by the Cable Act;.to permit certified local franchising authorities to•
regulate the rates for basic cable service in'areas that are not subject to
effective competition unless we disallow or revoke an authority's
certification. The scope of our authority to regulate directly basic cable
service rates under the statute appears quite limited. We tentatively -
conclude that we have the power to regulate basic cable service rates only if
we have disallowed or revoked the franchise authority's certification. The
Act'states that rates for basic cable service "shall be subject to regulation
by a franchising authority" gx "by the C9mmission if the Commission exercises
jurisdiction pursuant to paragraph (6).1'49 Paragraph (6) of Section 623(a)
only permits this Commission to exercise "the franchising authority's
regulatory jurisdiction" when a franchise authority's certification is
disapproved or revoked, and then only until a new certification is
approved.iu Thus, it appears that, unless a local franchise authority seeks
to assert regulatory jurisdiction over basic cable service, we would have no
26
27
28
29
Communications Act, § 623(a)(3), 47 U.S.C. § 543(a)(3).
Communications Act, § 623(a)(4), 47-U.S.C: § 543(a)(4).
Communications Act, § 623(a)(6), 47 U.S.C. § 543(a)(6).
Communications Act, § 623(a)(2), 47 U.S.C. § 543(a)(2).
30 The House Report explicitly states that Section 623(a)(6) was
intended to "specif[y] the scope of the FCC's authority to regulate rates in
lieu of a franchising authority." House Report at 81.
11 •
independent authority to initiate regulation of basic service rates. We seek
comment on this tentative interpretation.
216—.....An alternative interpretation, although one at odds with the
aforementioned specific language of the act; might emanate from the broad
language of the Section 623(b) mandate that we ensure by regulation that the
rates for the basic tier are reasonable.31 Under this interpretation, we
might exercise jurisdiction over basic service rates either through
individual petitions or complaints or through requiring notice from the
operator and possibly regulatory approval prior to a rate increase, even
where local authorities have not sought certification from the Commission.32
We seek comment on whether this (or any other alternative) jurisdictional
division was intended by Congress, given the terms of the Cable Act as•
amended.
bb. Finding of Effective Competition
17.- The Cable Act requires the Commission to "find" that a cable
system is not subject to effective competition before authorizing rate
regulation.- We propose to base our independent findings initially on the
determination by the franchising authority that effective competition does
not exist. 'We propose to have the franchise authority submit its finding and
the basis for this finding to us as part of the process, discussed below, by
which local authorities are certified to regulate basic service rates. These
findings should take into account information submitted by cable operators to
the Commission in response to any effort to collect information or data
requests concerning rates of systems subject to eff ive cotpetition.33
Given the large number of franchise areas nationallyand their varied
31 Communications Act, § 623(b), 47 U.S.C. § 543(b). Zee also
Conference Report at 62 (The goal of Section 623(b) "is to protect
subscribers of any cable system that is not subject to effective competition
from rates that exceed the rates that would be charged if such a cable system
were subject to effective competition").
32 If we adopted this approach, there may be a case in which a
franchising authority believes that rate regulation is required, but for
other reasons, such as lack of personnel, is unable to make th,a requisite
certification. We seek cement on whether we.should permit a local
franchising authority to file a statement explaining why the authority cannot
submit a certification and requesting that we assert jurisdiction. Parties
advocating this approach should explain how this is consistent with the
jurisdictional framework of the Cable Act.
33 .Zie infra note 63.
34 According to current Commission records, there are approximately
33,000 cable "community units" (as defined in Section 76.5(dd) of the
Commission's Rules) nationally which are subject to the jurisdiction of local
franchising authorities. Although the number of "franchise areas" is lower, .
12
competitive characteristics,35 this approach appears to be reasonable and
realistic. First, the statute on its face states that local authorities may
exercise regulatory jurisdiction over cable rates only if the authority
certifies shat_it has "the legal authority to adopt ... such regulations."36
Since the Cable Act makes the absence of effective competition a prerequisite
to regulators' legal authority over basic cable rates, we find it reasonable
to require that local franchising authorities provide evidence of the lack of
effective competition as a threshold matter of jurisdiction. In addition,
franchising authorities may be in a superior position to gather relevant
local facts and to test the accuracy of operators' representations regarding
competition. Economic, statistical and other relevant data may be routinely
submitted or otherwise available to local authorities as part of multichannel
video programming distributors' ongoing franchise or other obligations
associated with doing business in that community. Local authorities can take
such information into account. We also expect that they will consider any
data operators submit to the Commission as a result of data requests or
reporting obligations. Our proposal, we believe, would permit in many cases
a more accurate and expeditious initial effective competition analysis than
the Commission could undertake without local assistance. We seek comment on
this proposa1.37 Parties may also wish to comment on whether challenges to a
determination of lack of effective competition may approExiately be made as
part of a revocation proceeding under Section 623(a)(5), as discussed in •
more detail below, as part of our normal procedures for reconsideration and
review, or, should it prove feasible to fashion procedures for taking
oppositions prior to certification approval, as part of such streamlined
since a franchise may span more than. one community unit operating within a- ---
distinct geographic "franchise area," we believe that this number would be
large enough to make initial FCC findings of effective competition an
extremely difficult task administratively. (A community.unit is defined as a
cable television system, or portion of a cable television system, that
operates or will operate within a separate and distinct community or
municipal entity, including unincorporated communities within unincorporated
areas and including single, discrete unincorporated areas. 47 C.F.R. § 76.5(dd)).
'35 We also seek comment on whether multichannel video programming
distributors who are competitors to cable systems should be required to
disclose the number of their subscribers and any other data relevant to a
finding of effective competition; whether such information (e.g.-, as to
number of subscribers) is likely to be proprietary and entitled to special
protection and, if so, what such protection should be.
• 36 Communications Act, § 623 (a) (3), 47 U.S.C. § 543 (a) (3) .
37 We propose to -make effective competition determinations on an
individual case basis in connection with evaluation of complaints concerning
cable programming service with respect to systems in areas where a
franchising authority has not sought certification for regulation of the
basic service tier. 5ge infra paras. 97-110.
38 Communications Act, § 623(a)(5), 47 U.S.C. § 543(a)(5).
13
processes.39 We observe that this last alternative would give operators an
opportunity to challenge an effective competition finding prior to imposition
of rate regulation.
18. We also tentatively find that the language of Section
623(1)(1), which expresses the tests for the presence or absence of effective
competition in terms of a "franchise area", implies that determinations that
effective competition is absent should be made on a franchise -area basis.
Thus, if a cable system serves more than one franchise area in a geographic
region, separate effective competi ion determinations would have to be made
for each distinct franchise area.4u Moreover, we tentatively find that if
more than one cable system is authorized to operate in a given franchise
area, the requisite effective competition analysis must be applied to each
system. We seek comment on these tentative conclusions. We also seek
comment on whether a determination of effective competition for cable
programming services, which this Commission is charged'with regulating, could
be made on a system -wide, as opposed to franchise -area, basis. Such larger
geographic units would appear to be more appropriate for federal regulation.
Moreover, system -wide regulation might help ensure uniformity in rates across
a geographic region, harmonizing with other provisions of the Cable Act
requiring a uniform rate structure "throughoutthe4 geographic area.in which
cable service is provided over [a] cable system." 1
cc. Filing of Franchise Authority Certification
19. We propose that a franchise authority intending to regulate
the rates for basic cable service be required to submit a certification
meeting the requirements of Section 623(a)(3)(A-C), set forth above, and _
additionally stating the basis for its finding that its franchisee is not
subject to effective competition. We tentatively conclude that a
standardized and simple form can and should be used for certifying to the
three criteria of Section 623 (a) (3), and that this form should include a
section for the authority's statement and explanation of its initial finding
that effective competition is lacking, with reference to documentable data,
including any submissions made to the Commission. We seek comment on thi
tentative conclusion, as well as on the specific format for such a form.44
We also invite comment on any other administratively efficient method for
certification. Parties proposing -such an alternative should also explain how
their proposal is consistent with the goals of the Cable Act.
20. Section 623(a) (3) (B) of the Communications Act, as amended,
. 39 52g infra para. 23.
40 mic cf. paragraph 21, infra (proposal to permit joint certifications
by franchising authorities in a geographic area).
41 Communications Act, § 623(d), 47 U.S.C. § 543(d). , infra paras.
111-15.
42 52g Appendix D for proposed form.
14
requires that a franchising authority be able legally to adopt regulations
consistent with those we establish for basic cable rate regulation.. The
Communications Act, as amended by the 1984 Cable Act, appeared to assume that
a franchisa-authority derives its powers including those to regulate rates,
from state law or franchise agreements.sThe- legislative history -of the
Cable Act of 1992, however, suggests that the Act itself may abrogate
franchise agreements in certain circumstances to permit rate regulation
consistent with our rules.44 If this were the case, however, what meaning
should we give to Section 623 (a)(3)(B)? We seek comment on whether
franchising authorities derive their powers to regulate from state and local
laws alone, or whether the Cable Act may itself be an independent source of
authority to .regulate rates. To the extent the authority is not derived from
state law, are there issues that need to be addressed as to which specific
authorities within state and local government are entitled to exercise this
authority? If the Cable Act grants franchise authorities rate regulation
powers irrespective of state law, what did Congress intend by enacting
Section 623 (a)(3)(B)? We also seek comment on whether exercise by this
Commission of basic service rate regulation authority pursuant to Section
623(a)(6)in a state prohibiting rate regulation by local authorities would in
fact constitute preemption of state law. If so, we also ask whether such
preemption not only could take the form of the FCC taking jurisdiction over
basic service rate regulation, but also could extend to conferring the power
to regulate basic service rates on franchising authorities where they
otherwise would be without such power.
21. The legislative history also appears to contemplate that two
or more communities served by the.same cable system couldile a joint
certification and exercise joint regulatory jurisdiction.43 We propose to -
allow this and seek comment on this proposal, as well as on the content of
rules required to give effect to this proposal. It is conceivable that
franchising authorities may not choose voluntarily to make such joint
filings. Are there actions we should take to provide incentives for local
entities regulating a single economic entity to coordinate their activities?
Should such coordination be required• as part of the- certification process?
We seek comment on the impact of franchising authorities' decisions to
proceed independently on the Act's requirement that an operator'srate
structure be uniform throughout a geographic area.46 How, under such
circumstances, might a cable operator be assured that it can fulfill the
43 Cf. Communications Act, § 602 (10), 47 U.S.C. 522 (10).
44 Cf. House Report at 81 ("The Committee intends that, as a matter of
law, except as provided in Subsection 3(j) all franchising authorities,
regardless of -the provisions in a franchise agreement, shall have the right
to regulate basic cable service rates if -they meet the conditions in section
.623(a)(4).").
.45 House Report at 80.
46 Communications Act, § 623(d), 47 U.S.C. § 543(d). 5e2 further
discussion of § 623(d) at paras. 111-15 infra.
15
uniform rate structure requirement?
dd. Approval of Certification by the Commission
22. The Cable Act states that the written certification.sutmitted
by a franchising authority to the Commission shall be effective 30 days after
it is filed, unless we find, after notice to the authority and a reasonable
opportunity for the authority to comment, that (1) the authority has adopted
or is administering basic cable service rate regulations that are
inconsistent with those we prescribe, (2) the authority lacks the legal
authority to adopt, or the personnel to administer, such regulations, or (3)
procedural laws and regulations applicable to the authority's rate regulation
proceedings do not provide a -reasonable opportunity for consideration of the
views of interested parties.47 The Act thus contemplates that unless we take
explicit action within 30 days, a certification will be effective. The Act
also appears to contemplate that any decision denying certification must be
made within 30 days.
23. Given the expedited deadlines the Act imposes, we assume that
Congress did not intend that the FCC establish a full pleading cycle with
opportunity for interested parties, including the cable operator, to comment
prior to expiration of the initial 30 -day period. Thus, although we propose
that each certification application be served on the franchisee cable system,
we propose to base our decision on certification on the submission by the
franchising authority alone. If a certification appears defective on its
face, the franchise authority will be given notice, and the opportunity to
submit additional information prior to our decision. Other interested
parties, including cable operators, could subsequently challenge a
certification by filing a petition for revocation once a certification is
effective.4b We seek comment on this approach, and on whether, in addition
to this avenue of relief, cable operators or other interested parties would
be allowed to seek reconsideration of our decision regarding the existence of
effective competition and certification. We also ask interested parties to
comment on what procedures we might adopt for the giving'of notice and the
submission of'additional information by a franchise authority that would
enable us to render decisions within the.30-day statutory period. We also
seek comment on whether it would be possible and consistent with legislative
intent to establish a highly expedited pleading cycle permitting interested
parties, including cable operators, to comment prior to the 30 -day deadline
24. The Cable Act requires that, in disapproving a franchising
authority's certification, we'notify the authority of any revisions or
modifications necessary to obtain approval. We propose to reflect this
requirement in our ±ales. We tentatively conclude that denial of
certification would be subject to our normal procedures for reconsideration,
47 Communications Act, § 623 (a) (4), 47 U.S.C. § 543 (a) (4) .
48 5e2 infra paras. 25-28.
16
review and appea1.49 We also propose that, absent a stay, we will assume
regulation of basic service rates in a franchise area after we deny a
certification (assuming that we have also found the cable system is not
subject to effective competition). If we certify an authority, we propose to
require the authority to notify each franchisee within 10 days of this
decision. We seek comment on these proposals and tentative conclusion.
ee. Revocation of Certification
25. Subsection 623(a)(5) requires that "upon petition by a cable
operator or other interested party," we "rview the regulation of cable
system rates by a franchising authority."Su If we find that the franchising
authority has acted inconsistently with the requirements of Section
623(a)-(3), we are directed to "grant appropriate relief." If, after giving
the franchising authority a reasonable opportunity to comment, we find the
state and local laws and regulations do not conform to Commission rules
governing basic service rate regulation, we must revoke the jurisdiction of
such authority.
26. We interpret this subsection to require us to revoke an
authority's certification whenever the noncompliance involves a violation of
Section 623 (a)(3)(A), i.e., where local or state laws are inconsistent with
our regulations concerning basic service rates.. However, the statute appears
to contemplate other lesser remedies where the noncompliance involved Section
623 (a) (3)(B) or (C), i.e., where local and state laws may be facially
consistent with our regulations, but the authority has applied them
inconsistently or has otherwise departed from the terms of its
certification.51 We seek comment on this interpretation. We also ask
parties to comment on how their analysis of our power to act where local or
state regulations are inconsistent with our rate regulations harmonizes with
their analysis of our preemptive powers. Does the 1992 Cable Act
effectively preempt state or local laws, 2,g., concerning the methodology of
rate regulation, that may conflict with the rules that we establish? Can or
should actions other than inconsistent local and state laws, 2,g., lack of
adequate personnel, which would have caused us to disallow a certification in
the first instance, also be the basis for revocation,. or should some lesser
remedy be applied? We also seek comment on what types of relief, short of
revocation, we could apply. Could we, for example, suspend a certification,
or impose a.reporting requirement on a local authority? In cases of
suspension, could we, 'consistent with the Cable Act, assume the local =
authority's rate regulation authority and obligations?
49 47 C.F.R. §§ 1.101-1.120; 47 U.S.C. §§ 402, 405.
50 Communications Act, § 623 (a) (5), 47 U.S.C. § 543 (a) (5),
51 For example, a franchise authority might adopt rateregulation
standards consistent with those we establish, but fail to apply them in a
particular case.
52 122 Supra para. 20.
17
27. We also propose that a petitioner for revocation or other
relief against a franchising authority serve a copy of its petition on the
franchising authority, as required by statute, and that the petition contain
a statement -that such service was made. We also propose to permit an .
authority 15 days in which to file an opposition to such a petition, and a
cable operator or other party ten days in which to reply. We seek comment on
these proposals.
28. Finally, we seek comment on what procedures should apply if an
operator in a particular franchise area, once not subject to effective
competition, becomes subject to it. We tentatively find that a cable
operator should be required to petition a franchising authority for a change
in its regulatory status. This petition should be•subject to public comment.
We believe that an abbreviated pleading cycle would be appropriate, with
oppositions to be filed in for example, seven or ten days. A franchising
authority shall promptly inform the Commission that a cable operator has
petitioned for a change in regulatory status and shall forward its findings
to the Commission, including the basis for those findings. We propose to
require franchising authorities to so notify the FCC within ten days of their
decision. If we ratify an initial. determination of the franchising
authority that effective competition now exists, the franchising authority
would then cease regulating basic cable service rates, and our regulatory
authority over cable programming services for this system in this franchise
area would also cease. Cable operators denied a change in status by a •
franchising authority would be entitled to seek review of that determination
with this Commission, with pleadings subject to the standard filing
periods.53 We seek comment on these tentative conclusions. We also seek
comment on whether a challenge to a denial of change in status regarding
effective competition could or should be made as part of a petition for
revocation.
ff. Assumption of Jurisdiction by the Commission
29. The Act requires that if we disapprove or revoke a franchise
certification, we shall exercise the franchising authority's regulatory
jurisdiction until it qualifies to exercise that jurisdiction by filing a new
certification, and that we must act on the new certification within 90 days •
after it is filed.54 We seek comment on the procedures that we should employ
when we assume a franchising authority's jurisdiction over basic service
rates. In cases of. disapproval, should we require a cable operator to file
its schedule of basic service rates with us, in a fashion analogous to the
procedures we propose below for local implementation of basic service rate
procedures? For both disapproval and revocation cases, should we follow
53 47 C.F.R. § 1.45.
54 Communications Act, § 623' (a) (6), 47 U.S.C. § 543 W(6). Of course,
if we dismissed a request for certification on the ground that effective
competition existed in the franchise area, we would not assume rate
regulation jurisdiction.
18
basic rate regulation procedures regarding notice of rate increases and
resolution of disputes similar to -those we propose for franchising
authorities?55 Parties are encouraged to specify any alternatives that they
believe would .be more appropriate, and in particular to comment on whether
the same deadlines applied to local franchising. authorities would be
administratively feasible for the Commission.
c. Regulations Governing Rates of the Basic Service Tier
i. Statutory Requirements
30. The Act requires the Commission to ensue, by regulation,
that rates for the basic service tier are reasonable. Such regulations
are to be designed to protect subscribers of any cable system not subject to
effective competition from paying rates higher than those tha5 would be
charged if the system were subject to effective competition. In
establishing regulations governing rates for the basic service tier, the
Commission must seek to reduce the administrative burdens on subscribers,
cable operators, franchising authorities, and itself, and it may adopt
formulas or other mechanisms and procedures to achieve this objective.58
Our rate regulations must additionally take into account seven factors:
(1) the rates for cable systems that are subject to effective
competition;
(2) ,the direct costs (and changes in such costs) of obtaining,
transmitting, and providing signals carried on the basic tier
including additional video programming signals or services beyond
the "must carry" local broadcast television signals, and any
public, educational, and governmental access -programming required
by the franchising authority;
(3) only a reasonable and properly allocable portion, as determined by
the Commission, of the joint and common costs of obtaining,
transmitting, and providing signals on the basic service tier;
(4) cable operator revenues from advertising on the basic tier or other
consideration obtained in connection with the basic tier;
(5) the reasonably and properly allocable portion of taxes and fees
imposed by any state or local authority on transactions between
cable operators and subscribers or assessments of general
55 • infra paras. 79-89.
56 . Cam Iiications Act, Section 623(b) (1) , 47 U.S.C. Section 543(b) (1) .
57 Id.
58 Communications Act, Section 623(b)(2)(A) and (B), 47 U.S.C. Section
543(b) (2) (A) and (B) .
19
applicability imposed by a governmental entity applied against
cable operators or cable subscribers;
(6) -the-cost of satisfying franchise requirements to support public,
educational, or governmental channels or the use of such channels
or any other services required under the franchise; and
(7) a reasonable profit, as defined by the Commission consistent with
the Commission's obligations to ensure that rates are reasonable
and the goal of protecting subscribers of any cable system not
subject to effective competition from paying more for basic tier
service than subscriber§ would pay if the system were subject to
effective competition.5
ii. Discussion
31. The statute requires that our rules ensure reasonable rates
for the basic service tier. The statute does not explicitly define
"reasonable", instead requiring the Commission to establish regulations
designed to achieve the goals set forth in the statute and reflective of the
enumerated factors. We tentatively conclude that Congress. intended the
Commission to embody in these regulations a standard of reasonableness for
basic tier ra es that reflects a reasoned balancing of these statutory goals
and factors.6U We further tentatively conclude that Congress did not intend
that we give greater or primary weight to any of the statutory goals as we
formulate regulations to govern rates for the basic service tier, but did
intend to leave'the Omission discretion to determine in the rulemaking
59 Communications Act, Section 623(b)(2)(C), 47 U.S.C. Section
543(b) (2)M.
60 Section 325 of the Communications Act as amended by the Cable Act of
1992 requires the Commission to consider the impact of -retransmission consent
on rates for the basic service tier and to ensure that our retransmission
consent regulations do not conflict with our obligation under Section 623 to
ensure that the rates for the basic service tier are reasonable. In the Mist
Carry/Retransmission Consent proceeding, we stated that we would consider the
appropriate treatment of retransmission consent compensation in establishing
regulations governing rates for the basic service tier in the instant
proceeding. As indicated, one of the seven statutory -factors that we must
take into account is the direct costs of providing signals to subscribers.
We tentatively conclude that our obligation under Section 325 to consider the
impact of retransmission consent on rates for the basic service•tier will be
fully discharged by our balancing of the enumerated statutory factors,
including the direct costs of signals. We will embody the seven factors in
the standard of reasonableness that will govern the lawfulness of rates for
the basic service tier. We solicit comments on this analysis. We solicit
comment generally on how we should take into account retransmission consent
compensation in establishing regulations governing rates for the basic
service tier.
20
process the comparative weight to be assigned to each of the seven factors.61
We solicit comment on this analysis.
412. --We note that a low priced basic service tier could enhance the
ability of potential subscribers, especially those with low incomes,, to
receive the minimum components of the basic service tier mandated by the
statute.62 On the other hand, rules designed to assure a low priced basic
service tier that either' formally or as a practical matter restrict the
ability of cable systems to incur and recover appropriate costs could create
incentives for cable systems to limit the basic service tier to the statutory
minimum components. We solicit comment on the extent to which Congress
intended a low priced basic service tier, and the extent to which our rate
regulations should not effectively restrict a cable operator's discretion to
provide programming on the basic service tier beyond the minimum statutory
components. If our regulations produce low rates for the basic service
tier, would'this in turn require 'us to permit more flexibility in pricing for
higher tiers? If so, would such pricing flexibility limit access by
subscribers to popular cable programming services that are bumped to 'the
higher.priced tiers? What might be the impact of a low priced basic service
tier on cable systems' investment in programming? We believe that any rate
regulation approach should effectuate fully the goals of the Cable Act
without creating unintended limits on a cable operator's discretion to tier
programming services, and, indirectly, on the continued growth of cable
programming services.
33. We have identified two generic approaches -f9 regulation of
rates for basic tier service: benchmarking and cost-ioased.°J In the next
61 We solicit comment on whether Congress intended that we should give
primary weight to the goal of protecting subscribers of any cable system from
rates higher than those that would be charged if the system were subject to
effective competition. We observe that the statute lists rates for cable
systems subject to effective competition as only one of seven factors to be
taken into account in establishing regulations governing the basic tier. We
tentatively conclude that, while requiring reasonable rates, the statute does
not per SQ require that aggregate rates for the basic tier of a cable'system
not subject to effective competition be no higher than the rates charged by
systems subject to effective competition. We solicit comment on this
analysis. We further solicit comment on the extent to which we should design
our regulations to produce rates for the basic service tier that are
generally lower than those in effect in the cable industry for the lowest
service tier at the time of enactment. of the Cable Act of 1992. Should we
seek to do so, we solicit comment on the balancing of the statutory
factors for the basic service tier that would accomplish this result.
62 ae Communications Act 623(b)(7)(10, 47 U.S.C. Section 543(b)C6 CFO.
We discuss the components of the basic service tier at paras. 1013, supra.
63 As we explain at para. 92, infra, these generic approaches could
also be applied to regulation of rates for cable programming services. In a
separate Order, we have directed cable systems to submit to the Commission by
21
few paragraphs we describe these two generic approaches generally and explain
how we believe each would satisfy congressional objectives. We then present
specific regulatory alternatives falling within the two generic approaches
and seek comment on the extent to which a specific regulatory alternative
should be Zmade a component of the comprehensive scheme by which we will
assure reasonable cable rates. Among the alternatives we describe -is one
based on the cost -of -service regulation model upon which this Commission and
state public services commissions have relied in the past to regulate public
utility rates. More, recently, this Commission and some state public service
commissions have concluded that incentive regulatiQn is a more effective
means of achieving reasonable rates for consumers.64 In our common carrier
price cap orders we have discussed at lenge the disadvantages associated
with traditional rate of return regulation.v5 Among the most significant
of its disadvantages is that it is neither simple nor inexpensive to
administer. Because the Cable Act of 1992 directs us to craft rules that
will reduce burdens on- cable. operators, franchising authorities, this
Commission, and consumers, we tentatively conclude that we should not select
a cost -of -service alternative. as the primary mode of cable rate regulation
unless we are unable to gather the information needed to develop one of the
other alternatives described in the following paragraphs. We propose to
adopt one of the benchmarking alternatives as the primary mode of regulation
of -basic service tier rates. We tentatively conclude that each of these
benchmarking alternatives could achieve reasonable rates at lower costs and
with less administrative burdens than could traditional cost -of -service
regulation. We nonetheless conclude that.cost-of-service regulatory•
principles could have a secondary role for cable operators seeking to justify
the reasonableness of rates that do not meet our primary benchmarking
standard.66 We seek comment on these tentative conclusions.
January 22, 1993, rate and other information. 5gg Order, FCC 92-545,
released December 23, 1992. This information will assure that we have an
adequate record on which to fully assess the alternatives for regulation of
the basic service tier and cable programming services that we discuss in this
NPRM.
64 Policy and Rules Concerning Rates for Dominant Carriers, CC Docket
87-313, Report and Order and Second Further Notice, 4 FCC Rcd 2873 (1989)
(Price Cap Order) and Erratum,, 4 FCC Rcd 3379 (1989) , modified on recon. 6
FCC Rcd 665 (1991)rev'd in part on other grounds AT&T v. FCC, No. 91-1178
(D.C. Cir. Sept. 8, 1992); Second Report and Order, 5 FCC Rcd 6786 (1990)
(Second Price Cap Order) and Erratum 5 FCC Rcd 7664 (1990), modified on
recon.•6 FCC Rcd 2637 (1991), Appeal docketed, D.C. PSC v. FCC, No. 91-1279
.(D.C. Cir. June 14, 1991).
65 Price Cap Order, 4 FCC Rcd 2873, 2889-93 (1989);- Second Price Cap
Order, 5 FCC Rcd 6786, 6789-92.
66 The Fifth Amendment'to the United States Constitution prohibits
taking of private property for public use without just compensation. A
substantial body of judicially approved principles has been established
.affecting the limits of rate regulation of public utilities, including
22
34. Benchmarking. By a benchmark rate we mean a price against
which a given cable system's basic tier rate would be compared. The
system's rate _would be presumed reasonable if it did not exceed the
benchmark. Under a benchmarking approach to rate regulation, the Commission
would establish a benchmark rate, or a simple formula which could be used' to
derive such a rate. Cable systems with rates exceeding the benchmark price
by a significant amount as determined by.the Commission would be required to
reduce their rates to the benchmark level unless the system could justify a
rate higher than the benchmark.67 The benchmark would permit identification
of systems with presumptively unreasonable rates, while establishing a zone
of reasonableness for systems with rates below the benchmark. Relying on a
benchmark alone to define a reasonable rate would allow those systems with
rates below the benchmark to raise rates to the benchmark level. We solicit
comment, however, on whether to include as a component of any benchmark
alternative a price cap formula to limit how quickly systems with rates below
the benchmark could raise their rates to that benthmark price. We solicit
comment on what such.a price cap formula should be.6S We also propose to
establish mechanisms to adjust the benchmark itself over time. The
adjustment mechanism might be a formula or, if the benchmark itself is
calculated pursuant to a formula, might be incorporated within the formula.
telecommunications companies. We solicit comment on the extent to which
these principles control the rate regulation of cable service that we could
undertake under this statute. We solicit comment on whether the various
alternatives we have set• forth for rate regulation of cable service in this
NPRM are acceptable under the Fifth Amendment. We solicit comment on - --•
whether, in determining a regulatory framework's consistency with the Fifth
Amendment, we may or must consider the impact of regulation on an individual
tier, cable service as a whole including both regulated and nonregulated
services, and/or company enterprises as a whole, if any, including other
cable systems and lines of business. We solicit comment generally on
circumstances under which rate regulation of cable service would lead to an
unlawful taking.
67 We solicit comment identifying the standards we should employ for
this showing. One possibility would be to apply cost -of -service principles
as discussed at. paras. 57-61 Via. Alternatively, we could require cable
systems to show that as applied to then the benchmark would be confiscatory
under applicable constitutional standards. We solicit =merit on these
alternatives.
•68 We address in paras. 49-52, „tam price caps as one benchmarking
alternative for regulating rates on the basic service tier. The issues
raised there concerning a price cap benchmarking alternative generally are
also relevant to consideration of possible application of price caps to
govern rates below a benchmark rate. We request commenters to address the
issues raised in paras. 49-52 in the portion of their comments concerning
possible application of price caps to govern cable system rates below a
benchmark rate, as well as in the portion of their comments addressing a
price cap benchmarking alternative generally.
23
The Commission could also review the benchmark price and adjust it
periodically based on appropriate empirical or market considerations.69
35._ The benchmark itself would be based on selected general
industry characteristics and, if well designed, could assure that the rates
of each individual system subject to it are reasonable. The benchmark would
embody a balancing of the various statutory factors and goals that govern
regulation of rates for cable service. A well designed benchmark would
additionally assure that almost all cable systems subject to it would have
neither the incentive nor the ability to show that the benchmark as applied
to them produces confiscatory rates under applicable constitutional
principles.
36. We recognize the potential tension. between the need, on the
one hand, to establish an accurate benchmark using sound data collection
processes and ratemaking methodologies, and the command of the Act, on the
other hand, to simplify regulation. Using a very simple formula to set the
benchmark may'produce a standard that is only a rough indicator of whether a
cable system's basic tier rates lie within a reasonable range. Even the
simile formula, however, would protect consumers from excessive rates and, by
eliminating the need for detailed cost -based regulation in many
jurisdictions, would keep the costs of administration and compliance low.
Because the franchising authority or local citizens could easily verify a
system's compliance under a benchmark model, benchmark regulation would meet
the legislative goal of reducing the administrative burdens on cable
operators and franchising authorities•. Like the price caps used in telephone
regulation, a benchmark not based on the costs of individl1a1 systems could
also provide an incentive for systems to be efficient by allowing low -cost -
systems
_...
to keep any savings achieved through increased efficiencies. A
trade-off would exist between the costs of developing a more refined set of
benchmarks tailored to reflect more closely the particular conditions facing
individual systems, and the costs of a coarser set of benchmarks that might
either allow low-cost systems to charge rates substantially above cost or
require higher -cost systems to charge below=cost rates. Allowing higher -cost --
systems to opt for cost -based regulation if the benchmark rate proved
unreasonably low would, however, provide a safety valve to prevent
confiscatory rates.
• 37. Under a benchmark alternative, the Commission could separate
cable systems into distinct classes based upon specified variables and then
define a benchmark for each class of systems. The benchmarks might then be
set forth in a matrix or table. The variables used to separate cable systems
into distinct classes might include such cost -defining characteristics. as: •
hones passed per mile, number of subscribers, number of channels, system age,
69 We have proposed a similar approach in -our recent proposal to reform
the process we use to set the rate of return for certain telephone companies'
interstate services. Amendment of Parts 65 and 69 of the Commission's Rules
to Reform the Interstate Rate of Return Represcription and Enforcement
Process, CC Docket No. 92-133, Notice of Proposed Rulemaking and Order, 7 FCC
Rcd 4688 (1992) .
24
miles of underground cable, terrain crossed, above average programming costs,
or readily identifiable costs. Another variable could be the local price
level in comparison to the national price level as measured by appropriate
indexes. For each of the benchmarking alternatives that we discuss below,
we solicit cottanent on what'variables should be used for defining the classes
of systems to which a different benchmark rate should apply. We recognize
that the extent to which a system of simple rate' benchmarks would meet
statutory goals would depend on the criteria used to determine the individual
benchmark. One effect of benchmarks could be to cause the rates of the
systems subject to the same benchmark to converge over time to that
benchmark. We solicit comment on whether this would be a desirable result.
If we were to conclude that such a result would not be desirable, we could
also permit some benchmark adjustment based upon individual system
characteristics. For example, we could adjust the benchmark applicable to an
individual system based on such system costs as franchise fees or the costs
of franchise requirements such as PEG channels. While "customizing" the
benchmark, this might also make it less simple to administer. We solicit
comment on whether we should permit individual system adjustment to otherwise
widely applicable benchmarks and what measures should and could be
established to -permit such adjustments. We solicit comment on appropriate
indexes for local and national price levels that we could use as a variable
in establishing benchmarks.
38. Another important adjustment factor is a general change'in the
cost of doing business. Such changes often are represented by the general
consumer price index (CPI) or producer price index (PPI) compiled on a
national or regional basis by the Bureau of the Census and Bureau of Labor
Statistics. While readily available, the CPI or PPI are baskets of goods and
services that may not be useful to a local service business such as cable
television. We therefore seek comment on the tentative conclusion that a
local service price index (SPI) would be more appropriate than the CPI or
PPI for adjusting cable rate benchmarks, if such an index can be easily
determined. We also seek comment on the composition of such a local SPI,70
how such an index would be created, what services should be included, where
data would come from, and what geographical area would be appropriate for
comparison.
70 It would appear that such an index should be comprised of a variety
of local and popular service items from categories including: education
(e.g., two-year and four-year part-time tuition); indoor entertainment (e.g.,
movie ticket prices, museum admission, cable monthly rates); outdoor
entertainment (e.g., amusement park,' public park, and zoo admission/rides;
lodging (e.g., high volume hotels/motels); medical services (e.c7., dental
tooth filing, physician office visits); personal services (e.g., baby sitter
rates, newspaper classified ad rates; woman's/men's haircuts); participant
sports (e.g., bowling, public golf green fees, weekend ski lift ticket);
spectator sports.(e.g., major league/"Grapefruit League"/"Cactus
League"/minor league baseball, professional/college basketball,
professional/college football, professional/college hockey); transportation
(e.c., bus/subway/train/cab fares, airport parking); and utilities (e.g.,
residential electric/gas/telephone rates).
25
.39. Cost -of -Service. Under a cost -of -service approach, the
reasonableness of a cable system's rates would be determined by examining of
the particula..costs of the individual cable system using ratemaking
•principles set by the Commission. The primary advantage of a cost based
alternative is that it would permit close supervision of rates. As
discussed above, a primary disadvantage is that it would be more burdensome
on cable systems and regulatory authorities. We assess .more fully the
advantages and disadvantages of cost -of -service regulation below in
paragraphs 53-61.
40. As indicated, we have tentatively concluded that cost -of -
service regulation should not be adopted as the primary mode•of cable rate
'regulation, but that it could nonetheless have a place in our regulatory •
framework for cable operators seeking to justify rates higher than would be
considered reasonable under the benchmark standard we could adopt to regulate
cable rates. In the following sections, we discuss specific benchmarking and
cost -based alternatives for regulating rates. In addition to the
benchmarking alternatives, we solicit comment on another alternative called
the "Direct Cost of Signals Plus Nominal Contribution to Joint and Common
Costs" for regulating basic service tier rates, discussed at paras. ,
infra. We solicit comment generally on which.among our specific.proposals
should be incorporated in our comprehensive framework for regulating basic
rates, or how they could be combined to govern rates for the basic service
tier. We also seek comment on how these proposals might be modified to
achieve more effectively the goals of Section 623(b) of the Cable Act of
1992. We also solicit comment on whether we should consider adopting
alternative approaches to determining the reasonableness of rates for the - -
basic service tier, from among which either the cable system or the
regulatory authority might have some discretion to choose.
aa. Benchmark Alternatives
• 41. •Rates charged by systems facing effective competition. One
potential benchmark would be defined using the average of rates currently
charged by systems facing effective competition, as the Cable Act.of 1992
defines that term. This benchmark would appear to meet the statutory goal
of "protecting subscribers of any cable system that is not subject to
effective competition from rates for. the basic service tier that exceed the
rates that would be charged for the bas service tier if such cable system
were subject to effective competition." To use a.benchmark•based on rates
charged by systems facing effective competition, however, the Commission
would first have to identify those systems. Moreover, basic service tier
rates of systems facing effective competition would reflect the different
numbers of channels in different systems' basic tiers. To perform the
necessary computations the Commission would thus need to know, at a minimnsn,
the basic service tier rates and the number of chainels in the basic tier for
systems facing effective competition. This information would permit us to
compute a single average rate. We might then define the benchmark to be the
71 Corirn.inications Act §623 (b) (1) .
26
sum of computed average plus an additional amount. defined by a percentage
selected by the Commission of that average. Alternatively we could define a
per channel benchmark using those data. Refining this process, we could
instead group ,hese systems based upon the number of channel§in their basic
tiers and then compute a simple average rate for each group.t-
42. To create benchmarks that more accurately reflect conditions
facing individual systems, the Commission might seek to determine how rates
vary with cost characteristics of the systems facing competition. If
sufficient data were available, regression analysis or some other
statistical technique could be used to determine how rates varied with such
characteristics affecting costs as homes passed per mule, number of channels,
number of subscribers, the relative mix of buried and overhead cable, and the
other factors described in Section 623(b). With this information,. we could
create a benchmark formula based upon systems subject to effective
competition that shared at least some of the regulated systems' underlying
cost characteristics. The ability of the Commission to arrive at an
appropriate benchmark formula using systems subject to effective competition
will, however, depend upon, among other things, the number of systems in
competitive markets, and our ability to,collect and analyze data on these
systems within the limited time allotted to complete this rulemaking.
Whether it is appropriate to employ a benchmark based on the rates of systems
facing effective competition to govern the rates of cable systems generally
will also depend upon whether the systems facing effective competition are
representative of cable systems in their costs and other characteristics.
43. .We request comment on the feasibility of using the rates
charged by cable systems facing effective competition to define a benchmark ---
for basic service tier rate regulation. In particular, we request any
information commenters can assemble on systems in competitive markets and on
the sources of dna that might be used to develop a set of benchmarks based
upon their rates.?3 Are there any characteristics of some "effectively
competitive" markets or the systems that operate in them that differ from
other systems --or markets -to an extent that would make them unsuitable for
consideration in establishing the benchmark? We also ask whether it would be
desirable and feasible to adjust this benchmark based oh the costs of systems
subject to it, and whether we have data to do so. If not, what other methods
might be used to make such adjustments? Commenters are invited to suggest
and comment on methodologies for making such adjustments.
44. Past regulated rates. A second alternative would•be to
develop a benchmark for basic•service tier rates based on rates charged in.
1986 before the Cable Communications Policy Act of 1984 effectively
72 For example, if systems subject to effective competition reported
between 5 and 33 channels in their basic tiers, we could group all systems
with 10 or fewer channels together; those with 11 to 20 together; and those
with more than 30 together.
73 For a discussion of the potential difficulties associated with
identifying these systems, see the discussion sum at paras. 17-18.
27
prohibited local rate regulation of most cable systems. It may be acceptable
to assume that rates in -1986 were reasonable because they resulted from a
competitive bidding process for the franchise and subsequent rate adjustments
were made under local franchise authority oversight. Using these data we
could develop individual benchmark rates for systems orating in 1986 based
upon the 1986 per -channel rate for their lowest tiers. As in the previous
case, some adjustment might be made in individual cases for factors generally
agreed to affect costs: We could also permit an adjustment upward from 1986
rates based on construction and rebuild costs incurred by the cable system
since that time. We solicit comment on the appropriate treatment of
construction and rebuild costs incurred since 1986 if we adopt a benchmark
based on past regulated rates. For systems not operating in 1986 we would
propose a benchmark expressed on a per -channel basis to account for
differences in the number of channels offered on the basic tier and based on
the per channel rates of the systems operating in.that year.
45. We request comment on the advantages and disadvantages of
using a benchmark• based on past regulated rates. If such a benchmark were
used, would it be better to base it on rates charged by individual systems,
or on an average of rates for all systems, or on some other formula? If we
were. to use this type of benchmark,. would a starting year other than 1986 be
preferable for any reason? Are there factors, other than inflation, that
might cause per -channel rates from 1986 to be inappropriate in 1993? Should
we permit cable systems to select a starting year prior to 1986? How might
our proposed benchmark formula be adjusted to'capture the effects of these
other factors? We also request information on what data -are available on
rates charged in this period that might be used to compute such a benchmark.
Would data from the General Accounting °Moe surveys of cable rates be -
adequate to compute a reasonable benchmark. Are any data available that
would allow estimation of the effects of various cost elements (particularly
the elements enumerated in Section 623(b)(2)(C) of the Act) on prices? How
might that data reflect the cost elements specifically described in the Act?
Commenters are invited to submit data that will enable us to determine
whether benchmarks based on lowest tier rates -prior to deregulation would
lead to rates reasonable to both consumers and operators.
46. Average rates of cable systems. A third alternative would use
data for all cable systems operating in 1992 to develop a benchmark from the
average per -channel rate for their lowest service tier. Per -channel rates
would be considered reasonable if they did not exceed that average by more
than some fixed amount. Systems whose rates exceeded the average rate for
all systems by more than a specified amount, •or by more than a specified.
74 For example, the benchmark per channel rate could be an individual
system's 1985 basic tier per channel rate adjusted by using changes -in the
Consumer Price Index (or a service price index) between 1985 and.1993 to
capture the effect of inflation in "the intervening years.
75 U.S. General Accounting Office, National Survey of Cable Television
Rates and Services, GAO/RCID-89-193, August 1989. See also House Report at
31-33 (discussing 1989, 1990, and 1991 GAO reports).
28
percent, or systems which ranked among the highest few percent (e.g., top 2-
5%) in terms of rates would be assumed not to have rates that were
reasonable. Thus, this benchmark. would identify those systems whose rates
were unusually high or substantially above the average.
• 47. This standard would have the advantage that data would be more
readily available for calculating the benchmark, and consumers would be
protected against rates far exceeding the general industry practice.
Unadjusted, however, the benchmark would not reflect competition but merely
average performance in the industry; if monopoly profits were reflected in
the rates of at least some industry segments, they would be incorporated in
the average rate. In addition, over time the average rates would be affected
by regulation and would cease to be an independent measure of industry
performance. Nonetheless, at'least in the initial period following passage
of the Cable Act of 1992, -national average rate data might be readily
available and appropriate for defining an initial set of benchmark rates. We
request comment on the validity of a measure based on average industry rates.
We also inquire as to the best source of data for calculating the benchmark
if such a standard were adopted.
48. Cost -of -Service Benchmark. Under this approach to developing
a benchmark, we would use engineering, operating, programming and other cost
data gathered in this rulemaking to construct the costs of an "ideal" or
"typical" cable system or systems, possibly on a per channel or per
subscriber basis. As with other benchmark alternatives, we could•establish a
single national benchmark for all cable systems, several benchmarks
reflecting significant characteristics of cable systems, or a formula for
calculating benchmarks, including cost differences across different
geographic areas. This approach could produce a benchmark roughly related -to --
cost without requiring detailed examination of actual costs of indivi&, 1
systems. For this reason, this approach might•be a useful alternative if
implementation of other benchmark alternatives proves infeasible to
implement. We seek comment on the feasibility and desirability of developing
and'applying a benchmark based upon constructing "ideal" or "typical" system
costs. Parties supporting this approach should submit specific and detailed
cost data to be included in such a benchmark, along with detailed information
about how the.data were developed, including data sources, validity, and
reliability.
49. Price CApe. A price cap benchmark would be a.formula set by
the Commission to define reasonable increases in rates for the basic tier.
For this reason, we would not intend to use the price.cap formula to assess
initially whether a system's rates were reasonable. The price cap formula
'would instead govern changes t� rates that have been found reasonable under
some other alternative, either based upon cost -of -service or another
benchmark alternative.
50. A price -cap formula permits the regulated company to adjust
its prices when certain variables contained in the price cap'formula change.
For example, in the price cap regime governing the interstate service rates
of AT&T and the large local telephone companies, price ceilings are
periodically revised to reflect easily observable changes in costs generally
29
lying beyond company control. .The ceiling can also be lowered to reflect
industry or nationwide gains in productivity and raised to,allow for
inflation. As for AT&T and the telephone companies, under the price cap
alternative-eaeh cable system could have a different rate cap determined by
the prescribed formula. The price cap formula would apply to an existing
rate and would control changes to the cable system's prices over time. We
solicit comment on the price cap alternative generally and whether we should
make it a component of a comprehensive regulatory scheme for rates. Is a
price cap approach consistent with the intent and legislative history of the
statute? Could the Commission reasonably arrive at a price cap methodology
for an industry that historically has not been subject to rate regulation?
Are certain characteristics of the cable industry.less conducive to price cap
regulation than other industries? We ask for comment generally.on whether
the price cap model applied to AT&T and the telephone companies is
appropriate for the cable industry, and, if not, what modifications should be
made to it should we adopt a price cap alternative for regulation of the
basic service tier.
51. The Commission has found the price cap approach to be an
attractive alternative to cost -of -service regulation in the telephone
industry.. Under a.price cap, companies have an incentive to reduce costs and
operate efficiently. It avoids the perverse incentives of rate of return
regulation under which, for example, more expense can mean higher rates, not
less profit. Price caps also minimize regulatory intervention and thus the
cost to government and to the companies dealing with government. With its
emphasis on prices, a price cap alternative permits companies reducing costs
faster than the industry, or the nation as a whole, to earn higher profits
than other companies. We ask for comment on whether the Cable Act of 1992 -
would require a company earning such profits to reduce its rates. We also
ask for comment on whether we should permit a price higher than the cap for
companies demonstrating that their costs are increasing faster than the
industry or national average.
52. If 'we adopt a price cap alternative to govern rates for the
basic tier, we would propose to define and to control rate changes permitted
under this alternative. We would additionally need to determine how and when
to revise the cap, and to select an appropriate price index to include among
permitted adjustments. An overly .rigid price cap formula could frustrate
cable operators' ability to meet subscribers' needs. We seek comment on
whether and, if so, how a price cap formula might accommodate rate
adjustments to reflect: changes in*subscriber penetration, channel capacity,
the nationwide level of prices, the relative contribution of regulated
revenues to total cable revenues, franchise fees and equirements, and other
factors relevant to the Act's regulatory objectives.76 We seek comment on
how directly changes in cable operating costs are captured or reflected by
76 The relative contribution of regulated revenues to total cable •
revenues could become an increasingly significant factor if cable operators
elect to use their distribution. plant also for personal communications
services or to lease their excess capacity for telecommunications services.
L22, e.g., Into the Fibersohere, George Gilder, Forbes, December 7, 1992.
30
changes in the Gross National Product- Producer Index (GNP -PI) and whether
another index would more accurately reflect inflation's impact on cable
operations.17 Also, we seek comment on how the price cap should be adjusted
to reflect -additions or reductions to the number of channels included on the
basic tier. For example, is an adjustment based on short term incremental
cost changes a reasonable standard or would another test better achieve the
goals of the statute?
bb. Individual System Cost -Based Alternatives
53. Direct Costs of Signals plus Nominal Contribution to Joint
and Common Costs. Under this alternative, the Commission would prescribe
guidelines for basic service tier rate regulation by the local franchise
authority that used an individual system's costs to define reasonable rates.
Cable systems would be required to keep their accounting records according to
generally accepted accounting principles (GAAP) ani to provide those records,
as requested, to the local franchising authority.?
54. The franchise authority would be required to find reasonable
basic service tier rates that allowed recovery of at least the direct costs
of the channels in the basic tier:7We envision that the major component of
such direct costs would be programming costs, including both payments to
cable networks and retransmission fees to broadcast stations. Allowing cable
systems to pass the former costs through to subscribers might reduce
•operators' incentives to remove highly -valued programming from the basic
tier. 880 Not allowing operators to pass on programming costs might force
operators to provide the basic tier at a loss and require them to make up the
loss on other programming services. Whatever equipment used and operating ---
costs incurred to activate additional indivici+,a1 channels in this tier would
also be covered.
55. In addition, the rates for the basic service tier would
include a nominal contribution to the joint and common costs of the system
as a whole.�l Under the statute, basic service tier rates can recover "only*
77 See para. 38, supra.
78 See note 84 infra.
79 Because rates determined using this alternative would not
necessarily permit full recovery of basic service tier costs, it would. •
generally not offer cable operators relief from benchmark rates that the
operators believed were confiscatorily low. Therefore, this alternative
would not be suitable for use as a "safety valve" mechanism by which cable
systems could seek to justify rates higher than a benchmark rate.
•
80 we note that such a pass-through is contemplated in the -legislative
history of the Act. See, e.g., House Report at 82.
81 Communications Act, Section 623(b)(2) (iii), 47 U.S.C. Section
543 (b) (2) (C) (iii) .5ee also Conference Report at 63.
31
such portion of the joint and common costs .as is . . . reasonably and
properly allocable to the basic service tier.84 'This requirement would set
an upper bound on basic service tier rates that could be considered
reasonable -under Commission guidelines. Within this limit, the Commission
has several options for treatment of joint and common costs in basic service
tier regulation. The Commission could set guidelines that resulted in rates
that recovered far less than the fully distributed cost of providing the
service in order to provide assurance of service for lower-income viewers.83
This would likely lead to a basic service tier composed primarily or solely
of local broadcast channels and public, educational, and governmental
channels. Alternatively, the Commission could set guidelines that would
permit higher basic service tier rates in order not to discourage offering of
a broader basic service tier with a larger number of channels, including
popular cable channels. This alternative would, however, require more
elaborate cost allocation rules. Rules that the Commission might apply to
the allocation of joint and common costs, and to the determination of
allowable costs, are proposed in Appendix A. The Commission might also
leave to the franchise authority some discretion in setting the level of
basic service tier rates, as long as they recovered at least the direct costs
82 47 U.S.C. Section 543 (b) (2) (c) (iii) .
83 The Commission and the states have established mechanisms to provide
"Lifeline" service for lower-income telephone subscribers. These mechanisms
seek to ensure access for lower income telephone subscribers by lowering the
monthly recurring charge for basic telephone service and recovering costs
that would otherwise be charged to such subscribers from interexchange
carriers on a per -line charge for interstate costs and by varying mechanisms
for intrastate costs.
84 Some of the alternatives that we present for regulating cable
service rates are cost based. The Cable Act of 1992 could be interpreted to
permit, while not mandating, cost -based regulation of sone or all aspects of
rates of cable service. L22 Communications Act §623(b)(2)(c)(including
direct costs. of signals and joint and common costs as factors in determining
reasonable basic tier rates); Communications Act §623(b)(3) (basing rates for
equipment on actual costs); Communications Act §623(c)(2)(including capital
and operating costs as a factor in determining unreasonable rates for cable
programming service). In order to assure that local franchising authorities
and the Commission would be able to implement cost -based regulation, if that
regulatory alternative is adopted for some or all aspects• of cable service,
this NPRM proposes simplified cost accounting requirements for cable systems.
These cost accounting requirements, set forth in Appendix A, are based on
Generally Accepted Accounting Principles (GAAP), and should be sizple for
cable systems to use and regulatory authorities to administer. They would be
adequate to implement the cost -based regulatory alternatives that we describe
in the rulemaking, but would not be necessary for other non -cost -based
alternatives. If we adapt a regulatory alternative that does not rely on
cost -based regulation we may not adopt these proposed cost accounting
requirements. We solicit comment on these proposed simplified cost
accounting requirements.
32
of the basic service tier channels but no more than those costs plus a
maximum share of joint and common costs permitted by Commission rule.
55. _We request comment on the above proposal to adopt Commission
guidelines for cost -based basic service tier rate regulation. We request
comment on the appropriate criteria for setting basic tier rate ceilings, and
on the amount of discretion we should accord local franchise authorities in
setting basic service tier rates.
57. Cost of Service. Under this alternative, a cable system's
rates would be reviewed using the established standards of cost -of -service
regulation traditionally applied to public utilities, including common
carriers providing interstate communications servic�. The broad principles
of cost -of -service regulation are well established. While these
.principles could be implemented in a rigorous fashion with extensive cost -
accounting requirements, we believe such an approach would be inconsistent
with legislative intent.86 For this reason, we propose to use simplified
cost accounting requirements described in Appendix A if cost -of -service
regulation becomes a component of our comprehensive model for regulating
cable rates.
58. Like the other alternatives, cost -of -service regulation has
advantages and disadvantages. Companies can meet service demand because
service revenues may be set to cover operating expenses and capital costs.
Yet, since cost -based rates only compensate for the cost of providing
service, if the cost -of -service regulation is properly applied, companies
cannot extract monopoly rents from consumers. On the other hand, cost -of -
service regulation gives regulated companies little incentive to be -
efficient, to improve service, or otherwise to make regulated service more
attractive to consumers. Cost -of -service regulation also imposes high costs
on the regulators and regulatees. It forces companies to devote substantial
resources to participating in the regulatory process, burdening them with
accounting and reporting requirements. We are concerned that cost -of -service
accounting may require a significant (and potentially expensive) departure
from current industry accounting practices. We seek coma on the relative
advantages and disadvantages of applying cost -of -service regulation to the
.basic tier.
.59. Because of its disadvantages, we tentatively conclude that
cost -of -service regulation should nbt be the primary method of regulating
rates for basic tier service if the record that we gather in this proceeding
85 See, e.g., Bluefield Water Works v. PSC, 262 U.S. 679 (1923) and ERIC
v. Hope Natural Gas, 320 U.S. 591 (1944) (Bl uefieldlHooe) .
86 The statute requires the Commission in establishing regulations for
the basic service tier to seek to reduce administrative burdens on
subscribers, cable operators, franchising authorities, and the Commission.
Communications Act, §623(b)(2) UO, 47 U.S.C. §543 (b) (2) (A) . 2eg also House
Report at 83.
33
will support a benchmark alternative.87 Our preferred approach would be for
rates to be governed generally by a benchmark, with cable operators permitted
to attempt to justify higher rate levels based on cost -of -service ratemaking
principles. Under the cost -of -service approach, the local franchising
authority, or the Commission where the local authority's application for
certification has been denied or its certification has been revoked, would
apply cost -of -service ratemaking principles to determine whether the cable
system's rates for its basic tder service are reasonable, based on showings
made by each cable operator.SB We solicit comment on these tentative
conclusions.
60. we additionally seek comment generally on the impact of cost -
of -service regulation on the cable industry. We ask how such regulation
would affect the ability of cable operators to expand their channel capacity
and program offerings. We also seek comment on the implications of cost -of -
service ratemaking on the industry's ability to recover its investment,
including goodwill, and to service its current capital debt We request
comment on whether we would need to include transition mechanisms if we were
to adopt a cost -of -service regulatory model. We also seek comment on whether
cost -of -service regulation would require cable operators to deaverage rates
for franchise areas served by a common cable system in circumstances where
cableoperators now average rates on a system -wide basis, and:the impact of
this•deaveraging on both the cable industry and subscribers. We seek
comment on the optimal degree of cost averaging and the feasibility of
establishing system-wide'basic tier rates.
61. If cost of service ratemaking is used as a "safety net" to
allow cable operators to defend rates challenged under.a benchmark test, we
believe that the efficiency of the appeal process could be greatly enhanced
by establishing standards for the showings that should be made in such an
appeal process. We note that cost -of -service regulation requires the
regulatory authority to make determinations relating to four major cost
components: rate base, the cost of capital, depreciation, and operating
expenses. It also generally requires rules to govern the design of rates
once determinations have been made in these four areas. In order to
establish standards for the showings that should be made by cable systems
87 This conclusion is fully supported in the legislative history of the
Act. See, e.g., House Report at 83 ("The FCC should create a formula that is
uncomplicated to implement, administer, and enforce, and should avoid
creating a cable equivalent of a common carrier 'cost allocation manual.'").
88 As we discuss at para. 48, zgy, cost -of -service principles could•
be applied to representative industry cost'data to'design cost -of -service
benchmarks, avoiding consideration on an individual basis of the costs of
every cable company subject to regulation. This atrproach•assumes the
availability of sufficient representative industry cost data. This
Commission sets a single cost of capital for interstate access for 1,400
local exchange telephone companies. Some 700 small local exchange carriers
file rates based not on their own actual costs, but on an average cost
schedule.
34
seeking to defend rates higher than the benchmark, we propose to adopt
guidelines in each of these areas. We solicit comment on what requirements
we would need to adopt in these areas and on the impact on the cable industry
and subscribers of those requirements. We set forth in more detail in
Appendix B the issues in each of these four areas that would require
resolution for cost -of -service regulation to be implemented, ams solicit
comment on those issues.
d. Regulation of Rates for Equipment
i. Statutory Requirements
62. The Cable Act of 1992 directs the Commission to establish
standards for setting, on the basis of actual cost, the rate for installation
and lease of equipment used by subscribers to receive the basic service tier,
including converter boxes and remote control units, and installat 4n and
lease of monthly connections for additional'television receivers. 99
ii. Proposals
63. Based on the language and legislative history of Section
623(b)(3), we tentatively conclude that Congress. intended to separate rates
for'equipment.and installations from other basic tier rates. The statute
itself addresses rates for equipment used to receive basic tier service and
related installation in a subsection separate frau those dealing with cable
service rates. The statute requires cable companies to base their rates for
this equipment and installation on actual costs, while cost is.only•one of
several factors we are directed to consider in determining rates for basic- ---
tier or cable programming services. We also tentatively conclude that, to be
consistent with the statute's intent, the rates for installation should not
be bundled with rates for the lease of equipment. We believe that this
unbundling could help to establish an environment j�..nm�m which a competitive
market for equipment and installation may develop.'° We seek comment on
these tentative conclusions, especially on the feasibility bf a competitive
market for installation services.
S9 Communications Act § 623(b)(3), 47 U.S.C. § 543(b)(3).
90 This would be consistent with Section 17 of the'Cable Act of 1992,
which requires us to adopt regulations "to promote the commercial
availability, frau cable operators and retail vendors that are not affiliated
with cable systems, of converter boxes and of remote control devices
compatible with converter boxes." Communications Act § 624, 47 U.S.C. §544.
We recognize, however, that installation by those unaffiliated with the cable
operator might increase theft of service, and we seek comment on safeguards
which might alleviate this problem. We also recognize the .potential signal
leakage problem posed by third -party wiring of homes for cable, which we
intend to address in the proceeding on. hone wiring. (implementation of the
Cable Television Consumer Protection and Competition Act of 1992, Cable Hare
Wiring, mm Docket No. 92-260, Notice of Proposed Raulema'inq, FCC 92-500
(released Nov. 6, 1992).
35
64. Although we tentatively conclude that equipment covered under
this section of the Act includes the converter box, remote control unit,
connecti4n,S_fo additional television receivers, and wiring other inside
cabling, 91 we seek comment on the extent of this coverage.2 We believe
that our rules should clarify the relationship between Section 623(b)(3),
which requires regulating, on the basis of actual cost, "equipment used for
the basic tier," and Section.623(c), requiring regulations for cable
programing services, which includes the installation or rental of equipment
used for the receipt of such programming services. For the latter, the
Commission must establish standards for determining whether the rates are
unreasonable and, as for basic tier service, cost is to be only one of
several factors to consider.
65. On the one hand, it appears that Congress may not have
intended to limit regulation, on the basis of actual cost, to that equipment
only used for basic tier service. For example, Section 623(b)(3)(A)
specifically lists an addressable converter box needed to access video
programming on a per -channel gr per -program basis among the equipment subject
to the actual cost standard.93 On the other hand, the Act includes
equipment and installation in the definition of cable programming services•.94
If we assume that Congress intended different standards for determining the
reasonableness of rates for equipment used to receive cable programming
91 The requirement that cable systems base rates for inside cabling on
actual costs may affect the charge to a customer who discontinues service.
Implementation of the Cable Television Consumer Protection and- ____
Competition Act of 1992, Cable Hone Wiring, MK Docket No. 92-260, Notice of
Proposed Rulemaking, FCC 92-500 (released Nov. 6, 1992).
92 We solicit comment on whether Section 623(b)(3) would apply to
equipment used to receive audio services if offered as part of the basic
tier. We also tentatively conclude that equipment used by a cable operator
to trap programming so that a subscriber can receive only basic tier service
is not subject to Section 623(b)(3) because this equipment is not intended
for direct use and control by the subscriber. We request comment on this
tentative conclusion and whether any other equipment exists that is covered
under this provision of the Act. Indecent Programming on Cable Access
Channels Proceeding at para. 9 (discussing lock boxes to block certain leased
commercial access programming) .
93 In addition, the legislative history indicates a change in wording.
from "equipment necessary by subscribers to receive the basic service tier"
in the original House bill, to "equipment used by subscribers to.receive..the
basic tier." 'The Conference Report says that this language•is meant to give
the Commission greater authority to protect the interests of the consumer.
Conference Report at 64.
94 In fact, the definition of cable programming service was amended in
conference to include installation and lease of equipment. See Conference
Report at 66.
36
services, it is unclear how to treat equipment that is used for the provision
of both basic tier service and cable programming services. Therefore, we
request comment identifying any equipment not used for basic tier service and
the extent._.to _which the actual cost standard of Section 623 (b) (3) ,controls
the rates charged for equipment used for more than just basic tier service.
We solicit comment on whether the only equipment that should be subject to
Section 623(b) (3) should be equipment that is necessary to receive basic
service tier programming, and whether equipment, if any, used only to receive
cable programming services would not be subject to Section 623(b)(3).
66. We propose requiring operators tto base charges for equipment
covered by Section 623(b)(3) on direct costs,95 and indirect cost
allocations, including reasonable general administrative•loadings and a
reasonable profit. Cable operators would amortize the costs of equipment _
over the average life of that equipment to determine the monthly equipment
rate. The cost of maintaining and servicing equipment should be factored
into leased rates for equipment.96 If the Commission adopts a cost -of -
service showing requirement for basic tier rates, -cable companies could
allocate a share of the general administrative overhead expenses on the same
basis that they allocate to basic t' r services, which would simplify the
rate setting process for equipment' If we adopt the proposal that basic
tier rates include only a nominal contribution to overhead, it is unclear
whether the same loading should apply to equipment. It appears that Congress
intended low rates for equipment and installation, but Congress might have
intended actual costs to include a share of joint and common costs allocated'
using a fully distributed cost methodology. We seek comment on which
allocation rule would more accurately reflect congressional intent concerning
rates for equipment covered by Section 623(b)(3).
95 A cable operator may determine direct costs for equiperent in several
manners. One option -is to use the invoice price to the operator of the
equipment actually used by the customer. Another possibility is to use•the
cost of all equipment acquired in one year (or another'appropriate period of
time) and allocate these costs among indivichial customers. A third
alternative would be to develop a benchmark by taking an average (national
or regional) of equipment costs for cable operators similar to a benchmark
•approach for regulating the basic tier. We believe that the last alternative
would require that high cost operators be given the opportunity to justify
higher than average rates. We seek comment on which of these alternatives
strikes the optimal balance among our goals of simplicity, satisfying the
actual cost standard, and fairness for consumers and operators. •
96 The House Report says that actual cost includes normal business .
costs such as depreciation and service. House Report at 83. However, a
separate charge for servicing equipment might encourage a competitive market
for equipment repair.
97 If basic tier rates are not based on costs plus overhead loadings,
companies would have to make a separate showing of overhead expenses to be.
allocated to equipment, which could be burdensome.
37
67. Aernatively, cable operators may wish to sell equipment to
their customers." The sale may occur as a one-time payment or over a
period of time. The Act,' however, appears to contemplate that cable
operators would be limited to recovery of actual costs, however we define
that term.- We recognize that actual costs may vary depending on the length
of payment schedule. The purchaser would probably be independently
responsible for repair of the equipment, unless a service contract were also
purchased. In addition, cable operators may have a competitive advantage as
an alternative market for cable equipment develops because customers will not
have or may not know of other equipment suppliers. .Therefore, we ask whether
customers purchasing on time from the cable operator should be permitted to
change their minds and purchase equipment from an alternative source. If
this occurred, the cable operator would have to discontinue that customer's
monthly equipment charge, but the equipment could be sold or leased to
another customer as used equipment at a rate reflecting recovered costs. We
seek comment on this alternative.
68. We propose determining the actual costs for installation on
the same basis as for equipment. Because we believe that this determination
will require allocating many joint and common costs (g.g., the amount of time
or the number of trucks used for installations versus other company
functions), we propose not to prescribe any allocation rules but rather to
require the cable operator to bear the' burden of showing that it§
implementation of those general allocation rules is reasonable." To the '
extent that installation costs have traditionally been recovered through a
one-time charge, and because the length of time a subscriber will continue
service is unpredictable, it appears reasonable that c es be permitted
to continue recovering these costs as one-time charges.1l
69. The Commission recognizes that costs for installation will
vary depending on whether the dwelling has inside cabling already.101 It may
thus be more reasonable to require two installation rates, one for previously
98 Although the statute refers to the lease of equipment, this
alternative assumes that Congress's main concern was preventing customers
from paying for equipment many times over through monthly rental fees. .522
House Report at 83-84.
99 We have indicated that if the cost -based regulation alternative
discussed above becomes part of our comprehensive regulatory framework, we
intend also to adopt some simple allocation rules. If we.adopt such rules
for cost -of -service rate regulation, we would propose that they also apply
for determining the actual costs of equipment and installation covered by •
Section 623(b)(3).
100 On the other hand, we do not intend to =Quire that these costs be
recovered through a one-time charge. .Cable operators would be free to
recover those costs through a series of• monthly charges.
101 Whether the franchise has matured might be an important factor
because dwellings are more likely to have been wired previously.
38
wired dwellings and one rate for new inside cabling. This could encourage
competition,l�lpecially for simple installations (or customers could do it
themselves). We request consent on whether costs vary enough to
reasonably require cable operators to develop two separate rates for
installation or use an average rate and whether that decision should be left
to the discretion of the local franchising authority.. Should there also be
provision for a surcharge when the distance between a customer's premises and
the operator's distribution plant is substantial? Commenters supporting such
a surcharge should discuss when its application would be reasonable and also
how it should be calculated.
70. Many operators charge less than actual costs for service
installation as part of their marketing efforts. We seek comment on whether
§623(b)(3) reflects a legislative intent to prohibit such promotional
offerings. Or can the continuation of these promotional offerings be
harmonized with the "actual cost" language of section 623(b)(3)? We also ask
whether promotional offerings can increase cable service penetration, thereby
resulting in economies of scale that could reduce costs overall of providing
equipment to subscribers. We ask whether it would be consistent with
congressional intent to therefore permit certain types of promotional
offerings. Finally, we ask whether'the actual cost provision of the statute
is contravened if individual promotions do not fully recover costs as long as
provision of equipment in general does. recover "actual costs."
71. Section 623 (b) (3) (3) also specifically directs the Commission
to establish, on the basis of actual cost, rates for installation and monthly .
use of connections for additional television receivers. We tentatively.
conclude that cable operators should use the same cost methodology they use .
for installation of other equipment to ca ulate the rates for installation
of connections for additional receivers.)" If additional connections are
installed at the same time a subscriber's initial service is installed, we
propose that cable operators be limited to recovering the incremental costs
of the additional installation. We request comment on the costs associated
exclusively with providing connections for additional television receivers.
We tentatively conclude that the cost of cabling used for additional
connections should be recovered through one-time charges or charges that
would end when the operator had recovered those costs. We specifically
request comment identifying any costs associated with technical requirements,
such as.boosting a signal, involved in providing.additional connections.
e. Costs of Franchise Requirements
i. Statutory Requirements
•
102 But see note 90, supra for a discussion of problems that may result
from third party installations.
103 We seek comment on difficulties associated with splitting a signal
for additional connections that might require that only cable operators
provide installations.
39
72. The statute requires that regulations governing the basic
service tier shall include standards to identify costs attributable to
satisfying franchise requirements to support public, educational, and
governmental channels or the u e of such channels or any other services
required under the franchise.1'4
ii. Discussion
73. We have tentatively concluded that the purpose of this
statutory requirement is to assure the establishment of standards that will
permit the cable operator to identify on subscriber bills pursuant to Seem�° on
622(c) (2) the amount of the bill attributable to franchise requirements.10
We do not interpret this section as mandating that we establish separate
cost -based charges apart from those for the basic service tier generally for
either the customer or the users of public, educational, and governmental
channels for costs attributable to franchise requirements. We solicit
comment on this tentative conclusion. We further tentatively conclude that
we should require that the costs attributable to satisfying franchise
requirements should include (1) any direct costs of providing any services
required under the franchise, (2) the sum of per channel costs for the number
of channels used to meet franchise requirements for, public, educational, and
governmental channels, and (3) a reasonable allocation of overhead. In
Appendix A we set forth accounting and cost allocation requirements that
could be used with the cost -based regulatory alternatives for regulation of
rates for cable service. Should we at least in part adopt a cost -based •
regulatory alternative, we propose to require that the per channel costs and
allocation of overhead for purposes of implementing Section 622 (c)(2) be
determined in accordance with the proposed accounting and cost allocation
requirements set forth in Appendix A. If we do not adopt a cost -based
regulatory alternative, we propose to require that cable systems use
reasonable methods to determine per channel costs and allocations of
overhead. We solicit comments on these proposals.
f. Customer changes.
i. 'Statutory Requirements
74. The Cable Act of 1992 requires that regulations for the basic
tier also include standards and procedures to prevent unreasonable charges
for changing equipment or scKvice tiers. Charges for changing the service
tier must be based on cost.
ii. Proposals
104 Catnnunications'Act, §623(b)(4), 47 U.S.C. S543(b) (4) .
105.E para. 175, infra. for our proposals to implement amendments to
Section 622(c).
106 Communications Act § 623(b) (5) (C) , 47 U.S.C. § 543(b) (5) (C)
40
75. It appears that that Congress broadly intended to prgQct
subscribers from unreasonable charges for changes in service tiers.lui We
tentatively conclude, therefore, that regulations adopted to implement
Section 623(b)(5)(C) should apply to any changes in the number of service
tiers that -are- int iated at the subscriber's request after installation of
initial service.lo° We tentatively propose to require that charges for
changing service tiers not exceed a nominal amount "when the system's
configuration permits changes in service tier selection to be effected solely
by coded entry on a computer terminal or by other similarly sidle
method."109 The Commission seeks comment on whether and, if so, at what
level we should set the nominal amount when this condition is met. We also
seek comment on what constitutes "similarly simple methods," as that term is
used in the statute.
76. To otherwise assure that subscribers -do not pay unreasonable
charges for changes in service tiers not made by coded entry on a computer
terminal or by other simple methods, we solicit comment on two alternatives.
First, we could require that charges be based on the.actual costs of making
service tier changes at the subscriber's request, including any direct costs
and a reasonable allocation of indirect costs and overhead and a reasonable
profit. This would assure that cable operators recover the costs of making
customer changes plus a reasonable profit frau the charges for that activity,
but this could result in higher charges to subscribers than our second
alternative. Under the second alternative, as for changes effected by coded
entry on a computer terminal, we could require that charges for changes in
services tiers effected by other means recover only nominal costs. This
could help to keep charges for changes in service tiers low, but could
increase burdens and costs on cable operators for this activity by
encouraging subscribers to order service changes more frequently. In
addition, it would require that costs of customer changes be recovered from
other services. We solicit comment on the advantages and disadvantages of
these alternatives, and whether Congress intended cable operators to make a
reasonable profit on changes in service tiers.
77. We similarly solicit comment on applying these alternatives
• 107 See House Report at 84.
108 In paras. 12 and 13, supra, we solicit comment on whether Congress
intended for there to be a single basic service tier that the subscriber must
purchase as a precondition of ordering other programming. We tentatively
.conclude here that rules adopted pursuant to Section 623(b)(5) should apply
to any changes in service tiers after installation of initial service
regardless of whether we adopt a final conclusion that Congress intended for
there to be a single basic service' tier that the subscriber must purchase as
a precondition of ordering programming.
109 Communications Act § 623(b) (5) (C) , 47 U.S.C. § 543(b) (5) (C) .
41
to define reasonable.charges for changing equipment.110 Should we select the
first alternative for equipment, we observe that the charge for a change in
equipment would be generally based on actual cost, j., direct costs plus an
allocation of indirect costs and a reasonable profit. Lge para. 66, supra.
We seek criton whether Congress intended for cable operators to make a
reasonable profit on changes in equipment. We also seek comment on our
tentative conclusions and proposals relating to customer changes and on how
best to implement them. •
78. In addition, we request comment on whether the implementation
of this rulemaking could encourage customers to change service tiers.
Subscribers may wish to alter their service.should cable operators retier
their programming to create a less expensive or fewer channeled basic tier or
because of anti -buy -through provisions. We solicit comment on whether costs
associated with initial retiering should be treated in a different manner
from subsequent customer changes in service.
g.
Implementation and Enforcement.
i. Statutory Requirements
79. The Cable Act requires that our regulations regarding basic
service rates include procedures for implementation by cable operators, for
enforcement by franchising authorities, and for our expeditious resolution of
disputes between cable operators and franchising authorities. We must also
establish regulations to assure that subscribers are informed that basic
service,aas.defined in Section 623, is available to them and that a cable
operator notify franchising authorities 30 days in advance of any proposed_
increase in rates for the basic service tier.ill
ii. Discussion
80. We seek comment on.an expeditious way to trigger initial
review of a cable operator's current basic tier rate once a local franchising
authority has.been certified to regulate those rates.: One alternative would
be to require that the operator file its schedule of basic tier rates with
the franchising authority within a relatively brief period, e.g., after
receiving notice11L4 from the authority that it has been certified by this
Commission. Under this alternative, the authority would have a relatively
brief period, but one still permitting meaningful review, to consider the
schedule. Upon expiration of this time, the rates would be presumed
reasonable absent a negative finding. This. would. be analogous to our
•procedures for reviewing common carrier tariffs, which must be completed
110 ye solicit comment on whether Congress intended.for Section.
623(b).(5) to apply to changes in equilOment generally or only to changes in
equipment associated with changes in service tiers.
111 Communications Act, §§ 623 (b) (5) , (6) , 47 U.S.C. §§ 543 (b) (5) , (6) .
112 ag surra para. 24.
42
within 120 days.113 We believe the same deadline should apply to review of
both an operator's initial filing and any later -filed proposed rate increases
and service changes that involve rate increases. Without such a deadline, a
franchisingauthority could by inaction delay new services reaching the
public and deny a reasonable price change which could be critical to an
operator's ability to serve the community. We seek comment on this proposed
approach.
81. Section 623(b) (6) requires 30 days' notice of proposed
increases in basic service rates.11 We might infer from this language not
only that a franchising authority is expected to review rate increases, but
also that if the authority does not render a decision within this period, the
proposed increase would automatically become effective. We observe that
Section 623(a) requires that basic tier rate proceedings provide a reasonable
opportunity for consideration of the views of interested parties. It would
be difficult for interested parties to file and the local authority to
consider their pleadings all within a 30 -day period. Thus, we seek comment
on whether an additional period of time should be granted for a franchising
authority to review proposed rate increases and, if so, what time period
would best balance the need for expedition with the need to render an
informed and judicious rate determination.
82. Another alternative would be to establish relatively brief
notice periods (e.g., 60 or 90 days) after which an increase would become
effective unless a franchising authority had rejected it, but also to allow
for the tolling of the franchising authority's deadline in particular
circumstances. For example, the deadline might be suspended for complex
cases where the franchising authority needs additional information from the.
cable operator before it can render a decision. The disadvantage to this
second alternative is that it might deprive the public of new services and
the operator of a reasonable price increase for long periods of time. We
also observe that in some areas, a franchising authority's rate determination
may be subject to review by a higher level of local or state authority, .
further delaying a final determination.
83. A third possibility, therefore, might be to permit rate
increases to go into effect automatically after the 30 -day notice period
expires, subject to refund if the franchising authority ultimately determines
the increase to be unjustified. This alternative would permit ample time for
interested parties to present their views. It could, however, undercut the
intent of Congress -- a,s•expressed in the legislative history of the Act --
to protect consumers' interests against potentially unreasonable rate
increases.115 We seek comment on these various alternatives, on any others
commenters suggest for implementing basic tier rate regulation, and •
particularly on the time constraints that should govern determinations on
113 47 C.F.R. § 61.58, 47 U.S.C. § 203(b)(2).
114 Communications Act, § 623(b)(6), 47 U.S.C. § 543(b)(6).
115 52g House Report at 82.
43
proposed rate increases. We also seek comment on whether, depending on the
Oratemaking methodology adopted., certain price changes caused by factors
outside the operator's control, e.a.,, increases in taxes or programming
costs, should not be deemed price "increases" subject to the notice
requirement, and should be permitted to be passed through without prior
regulatory review. Those advocating such an approach should fully discuss
its relationship to the ratemaking methodology they recommend.
84. We seek comment on how to achieve expedition in ratemaking
procedures while at the same time ensuring that all parties receive the due
process.to which they are entitled. To ensure that interested parties have
an adequate opportunity to comment; we propose to require that an operator
notify subscribers in writing of a proposed rate increase at approximately
the same time it notifies the franchising authority, Le., at the billing .
cycle closest to 30 days before any proposed increase is effective. We also
propose to permit any interested parties, including subscribers, to
participate in the local authority's ratemaking decisions.1 We seek
comment on this proposal, on what the appropriate pleading cycle might be,
and on how such a cycle could be harmonized with the statutory goal that
disputes between cable operators and franchising authorities be resolved
expeditiously. We ask whether we should require the operator,.for.its
initial filing and any subsequently proposed rate increase, to show that its
submission complies with Section 623 and our implementing regulations.
Placing the burden'of demonstrating compliance on the operator could expedite
decision-making, as the operator possesses the factual information necessary
for such a demonstration.
.85. Given th;e statutory emphasis on expedition,. we do not propose
to provide for formal hearings on proposed rate increases or rate -related
disputes. We also propose to require the authority to issue written
decisions explaining its disposition of each rate increase request. We
propose also to adopt rules allowing local authorities to obtain additional
information from operators requesting a rate increase and to establish
proprietary information procedures analogous to those proposed below for •
cable programming service complaints. We seek comment on these tentative
conclusions and proposals. We also ask interested parties to comment on what
oversight procedures franchising authorities may need to ensure compliance
with the Cable Act.
86. When franchising authorities regulate rates for basic cable
service consistent with the Act, they would be in the best position to
monitor an operator's canpliance.with our rate regulations. Consequently, we
tentatively find that enforcement of cable regulation should occur at the
local level in these circumstances. We seek catment•on whether'a franchising
authority has the power under the Cable Act, if it denies a rate -increase, to
set a rate for basic cable service itself, or. whether formulation of a new •
116. The Act'requires franchising authorities to certify that their
rate regulation procedures "provide a reasonable opportunity for
consideration of the views of interested parties." Canrninications Act, § 623
(a) (3) (C), 47 U.S.C. § 543 (a) (3) (C) .
44
rate should be left to the cable operator. We also seek comment on whether,
in the event an operator should fail to comply with a rate decision, the
Cable Act gives an authority the power to order refunds, or whether the .
authority must_obtain an order from a court or -other governmental entity with
the power to order refunds.In order to obtain a refund, would an -authority
have to employ special procedures to ensure that the due process rights of an
operator were not violated?117 We also seek comment on what forms of relief
would be available under local law. For those authorities with franchise
agreements that do not provide for rate regulation, could franchise
agreements be revoked or not renewed for lack of compliance with rate
decisions? We seek comment on whether other remedies, such as fines, would
be available under state or local law. We also seek comment on whether the
FCC could impose forfeitures upon cable"operators failing to comply with
local authorities' Oeterminations that were consistent with our basic service
rate regulations.11
87. We invite interested parties to comment on the appropriate
fo_*in for appeals of local authorities' rate decisions. One approach would
be to rely on the local courts, -and not this Commission, to resolve what is
essentially a local dispute between an operator or subscriber and a
franchising authority. An alternative would be for this Commission to
resolve such disputes. This approach might assure a more uniform
interpretation of the standards and procedures adopted pursuant to the Cable
Act. We seek comment on these alternatives. In particular, we ask whether
the jurisdictiomial framework of the Cable Act permits us to exercise
jurisdiction over an authority's rate regulation decision in the absence of .
our disallowing or revoking its certification.119
88. We also seek comment here on whether, when we assert our
jurisdiction in cases of revocation or disallowance, we should apply the
same procedures to basic service rate petitions as those we. would apply to
cable programming services co plaints;11 whether we should apply procedures
more closely analogous to those proposed for local franchising authority's
regulation of basic service rates; or whether some combination of the two
would be most appropriate.
89.- The Cable Act also requires that we establish rules to assume
that operators inform subscribers that a basic service tier is available.141
We tentatively conclude that we should require the operator to give initial
written notice of basic tier availability to existing subscribers within 90
days or three billing cycles from the effective date of our rules governing
117
118
119
120
121
222 inf/g para. 109.
47 U.S.C. § 503(b) (2) . .
See Apra paras. 15-16.
See infra paras 97-110.
Communications Act, § 623(b) (5) (D) , 47 U.S.C. §543(1D) (5) (D)
45
cable rates. Additionally, we propose to require operators to notify
subscribers in any sales information dis buted prior to installation and
hook up and at the time of'installation.144 We seek comment on this
proposal. We Iso seek comment on the appropriate format and content of any
such notice.lz In addition, we seek comment on any other means by which we
can ensure that subscribers receive meaningful notice of basic tier
availability.
4. Regulation of Cable Programming Services
a. Regulations Governing Rates
i. Statutory Requirements
90. The statute requires that the Commission establish criteria
for identifying, in individual cases, rates for the acquisition an0
distribution of cable programming services that are unreasonable.) 4 The
statute provides that in establishing such criteria the'Commission must
•
consider:
(1) rates for similarly situated systems taking into account
similarities in costs and other relevant factors;
(2) rates of systems subject to effective competition;
(3) the history of rates for the system including their relationship to
changes in general consumer prices;
(4) the systems' rates as a whole for all cable services;
(5) capital and operating costs of the system; and
(6) advertising revenues.125
The stat) e� also permits the Commission to consider other relevant
factors.
ii. Discussion
• 122 See cenerall' 47 C.F.R. Section 76.66(c)(under now obsolete AJB
switch rules, information on availability of switch required by date certain,
at time of installation,. and annually thereafter . )
123 See aenerally, 47 C.F.R. Section 76.66(c)(describing information
which notice of AJB switch availability must contain.)
124 Communications Act, § 623(c) CO (A), 47 U.S.G. § 543(c) (1) (A) .
125 Communications Act, § 623 (c) (2) , 47 U.S.C. § 543(c)(2).
126 Communications Act, § 623(c) (1) (A), 47 U.S.C. § 543(c) (1) (A) .
46
91. We tentatively conclude that.the statute intends for the
Commission to establish criteria to govern the determination in an individual
case of whether rates for cable programming service are unreasonable based on
a reasoned balancing of the factors enumerated in the statute and other
factors that the Commission in its discretion may choose to consider. We
tentatively conclude that the statute affords the Commission substantial
discretion in establishing these criteria. We solicit comment on this
analysis and on whether we shou4d give any of the statutory factors primary
.or greater weight than others.1 7 We also solicit comment on what factors •
other than those enumerated in the statute we should consider in establishing
the criteria called for in the statute.
92. We have already described regulatory approaches and
alternatives that could be adopted to govern rates for the.basic service
tier. With the exception of the "Direct Costs of Signals/Nominal
Contribution to Joint and Common Costs" alternative, all could also be used
to determine in inSividual cases whether rates for cable programming service
are unreasonable.1G8 For example, a benchmark based on the rates for cable
programming service of systems subject to effective competition could be used
in an individual case to judge whether the rates of the system are
unreasonable: if they were higher than the benchmark they' would be presumed
unreasonable. We believe that the advantages and disadvantages of the
regulatory approaches and alternatives that.we'discussed for basic tier
127 The statute requires the Commission to establish regulations that
assure that rates for the basic service tier are reasonable, whereas for _
cable programming services we must establish standards that permit
identification in individual cases of rates that are unreasonable. We
solicit comment on whether this difference in statutory language creates a
different standard of reasonableness for the basic service' tier and for cable '
programming services. We ask whether our regulations identifying
unreasonable cable programming services rates will necessarily define the
"reasonable" rates for such services as well and, therefore, whether Congress
instead intended more of an "egregious" standard for cable programming •
services. We solicit comment on the extent to which our regulations should
produce lower rates for higher tier services than those generally in effect
at the time of enactment of the Cable Act of 1992. If so, we solicit comment
on what balancing of the statutory factors for cable programming services
would accomplish that result.
128 The "Direct Costs of Signals, Nominal Contribution to Joint and
Common Costs" approach is not feasible for tiers higher than the basic tier...
Requiring only a nominal contribution to joint and common costs frau higher .
tiers would require the cable operator to seek a larger contribution frau the
basic tier, or frau the premium channels and/or pay-per-view. Larger
contributions to overhead frau pay-per-view, with its smaller unstable
subscriber base, would threaten the operator's ability to recover operational
costs or any reasonable profit. Requiring larger contributions from the
basic tier would conflict with congressional intent that rates for the basic
tier be kept low. ,gym Conference Report at 63.
47
service are equally applicable to cable programming service.129 As with the
basic service tier, we tentatively conclude that traditional cost -of -service
regulation would not be the best alternative to select as the primary method
of regulating_rates for cable programming services. We seek comment on this
tentative conclusion and on which alternatives we should incorporate in the
'comprehensive plan we will adopt for regulating cable programming service
rates. Parties suggesting modifications to proposed alternative or different
alternatives to those discussed above should explain how their proposal
better meets the objectives set forth in the Cable Act of 1992 in general and
Section 623(c) in particular.
93. We posed many questions about each of the alternatives
presented in the subsection discussing basic tier rate regulation. Those
questions were designed to identify the optimal regulatory structure for
assuring reasonable rates for basic tier service.. We ask commenters to •
indicate whether their answers to those questions would be different if a
given alternative were being applied to cable programming service. We
additionally ask how each alternative could be implemented if a cable
operator had more than one tier of cable programming services. Also, we ask
commenters to discuss which combination of alternatives for regulating the
basic tier and for cable programming services will best serve statutory
objectives.
94. We are aware that we must balance (a) the need to ensure that
cable rates are not reasonable and do not include monopoly rents, against (b)
the need to ensure that cable systems earn a reasonable return so that they
can continue to attract capital necessary to operate and to expand the
services they provide to their subscribers. To the extent that local or - ---
state regulation of basic rates constrains the revenue and profits obtained
from the basic tier, cable operators may seek to earn relatively more revenue
and higher profits on their programming services beyond the basic tier.
Hence, there may be a tradeoff between the severity of the restrictions that
may be placed on basic tier rates and rates for other programming services.
We seek comment on whether we will be confronted with such a tradeoff and, if
so, how it can best be made in our cable rate regulations. In particular, we
solicit comment on the extent to which regulations designed to produce low
rates for the basic service tier require permitting relatively higher rates
for cable. programming services.13u We also solicit comment on what
129 We previously asked what customer equipment, if any, Congress
intended to include within the definition of cable programming services.
5ga para. 65, gum. If such equipment is not subject to regulation
pursuant to Section 623(b)(3) as equipment used by subscribers to receive the
basic service tier, we ask whether the Act contemplates any regulations
applicable to such equipment beyond those applicable to cable programming
services generally. In particular we seek comment on whether we should adopt
uniform rules to govern regulation of rates for equipment used to receive the
basic tier and for equipment.falling within the definition of cable
programming service.
130 5gg discussion at paras. 31-32, suQra.
48
combination of rate regulations applicable to the basic service tier and
cable programming services would best promote statutory objectives. Can our
regulations be designed to produce low rates for both the basic service tier
and cable programming services? Should our regulations intend that cable
systems recover most costs and earn most profits from per channel and per
event programming?
95. The Cable Act defines "cable programming service" as
any video programming provided over a cable system, regardless of
service tier, including -installation or rental of equipment used for the
receipt of such video programming, other than (A) video programming
carried on the basic service tier, and.(3) video programming offered on
a per channel or per program basis.131
' Thus, cable programming service encompasses all video "tiered" programming,
other than that included in the basic service tier, and would exclude all
pay -per -channel or per -program material. As noted in the legislative history
of the Cable Act, some cable systems_ are "experimenting with 'multiplexing' -
- the offering of multiple channels of commonly -identified video programming
as a separate tier (e.g.,•HB01, HB02 and HB03)." The House Report states
that Congress intended for these "'multiplexed' premium services to be exempt
from rate regulation to the same extent as traditional single channel premium
services when they3s.re offered as a separate rate tier or as a stand-alone
purchase option. We'thus propose to exclude from the definition of
"cable programming service," pay -per -channel or pay -per -program services
offered on a multiplexed or time -shifted basis. We seek comment on whether,
-for a tiered offering of a multiplexed premium service to be exempt from rate_.
regulation, the multiple channels offered would have to consist of
essentially the same programming offered on a time -shifted basis. We also
. ask interested parties to comment on how we should define "same programming"
for purposes of any such exemption.
96. We also seek comment'on the circumstances under which a tier
consisting of different premium services, could be subject to rate
regulation. If such a tier were offered at a single package price, as
opposed to separate charges for each channel, would it automatically be
subject to regulation? Would this be so even if the package price were the
sum of the charges for each separate channel added together? Assuming that
we were to exempt such premium tiers from regulation, does the Cable Act •
nevertheless require us to regulate the rates of any premium tiers offered at
either a discount from, or an added charge to price composed of the
separate charges for each individia1 channel?13-3 To what extent did Congress
131
132
COmtunications Act, § 623 (1) (2), 47 U.S.C.- § 543 (1) (2) .
House Report at 80.
133 we address here the scope of the rate regulation provisions of the
Cable Act as they relate to the "packaging" of premium channels. We observe
that related issues are raised by the Act's prohibition on discrimination -in
49
intend that imposition of rate regulation would influence or limit an
operator's discretion to arrange its services in tiers?
b. Complaint Procedures; Rate Reduction and Refund Procedures for
— Rates Found to be Unreasonable
i. Statutory Requirements
97. The Cable Act requires that we establish "fair and expeditious
procedures" for receiving, considering and resolving complaints from "any
subscriber, franchising authority, or other relevant State or local
government entity" alleging that rates for cable programming services are
unreasonable pursuant to our rules. The statute specifically states that we
must specify the tninimun showing require0 for a complaint to obtain
Commission consideration and resolution.134 A complaint is timely only if
filed during the 180 -day period following the effective date of our
regulations governing unreasonable rates for cable programming services or,
.thereafter, within a reasonable period of time after the cable operator •
changes its rates. This time constraint -on filing complaints also applies to
complaints concerning changes in rates that result from changes in the
system's service tiers.135
ii. Discussion
98. The legislative history indicates that Congress intended our
regulations not to be "so technical or complicated as to. require subscribers •
to retain the services of a lawyer to file a complaint and obt>sn Commission
consideration of the reasonableness of the rate .in question."1-" We thus
plan to devise procedures that are not only fair to all parties, but are also
simple and expeditious.
99. One alternative is to require that complaints concisely state
facts showing how an operator has violated our rate regulations. We
recognize, however, that the ratemaking methodology we adopt, even if very
simple, may not be readily accessible to the ordinary subscriber. In
addition, the legislative history indicates that Congress deliberately
excluded the requirement that a complaint demonstrate a "prima facie
the•anti-buy-through provisions of the statute. Communications Act, § 623
(b) (8) (A) , 47 U.S.C. § 543 (b) '(8) (A) ;lementation of Section of the Cable
Television Consumer Protection and Competition Act.of 1992, Notice of
Proposed Rulemakina, NM Dodcet.No. 92-262, FCC 92-540 (released Dec. 11,
1992). We ask interested parties to comment -on the interrelationship between
these statutory provisions and to suggest a unified approach that would be.
consistent with the Act's objectives.
134 Communications Act, § 623 (c) (1) (B), 47 U.S.C. § 543 (c) (1) (B) .
135 Communications Act, § 623 M(3), 47 U.S.C. § 543 (c) (3) .
136 Conference Report at 64.
50
case".137 Thus, if we adopted this requirement, where a subscriber's
complaint failed to conform, instead of dismissing it out of hand,.we might
send the subscriber an informational letter describing what a complaint
should state and permit refiling within a set period (for example, 30 days).
The filing of the first complaint would serve to toll the time limit on
complaints, which we discuss below. On the other hand, although rigorous
technical requirements should not be.imposed, this Commission and cable
operators need assurance that our procedures permit only genuine allegations
of illegal rates to go forward and do not permit complaints that are
frivolous or lack any serious substantive allegation to proceed.
100. A second alternative, therefore, is to set an even simpler
standard'for a subscriber complaint, and to make this a minimum standard
which would have to be met in order to avoid dismissal. For example, a
subscriber might be required to allege that cable rates have risen
unreasonably within a given period and give the specific range of rates and
years involved. The complaint would have to allege that the complainant was a
subscriber of a cable system named in the complaint, and also state the name
of the franchising authority. The simplicity of this second approach would
facilitate the filing of subscriber complaints. We observe that if a
relatively straightforward benchmark approach is adopted, requiring a
subscriber to state facts showing that rates were above the benchmark might
be a single minimum standard that a layman could easily meet. It is also
conceivable, however, that use of a minimum standard of sufficiency for
complaints might not give a cable operator sufficient notice of the precise
claims made and might place greater demands. on Commission staff seeking to
determine the issues and resolve the dispute. Should a benchmark alternative
for rate regulation not be adopted, or should a benchmark not prove workable_.._
as a procedural standard, use of some other minimal standard might also not
adequately screen frivolous or unsubstantiated complaints. We seek comment
on these alternatives for defining the minimum showing required for
substantive complaints. We also invite additional suggestions.
101. Interested parties are also asked to comment on specific forms
or language that might be standardized for use by subscribers in filing rate -
related complaints. We also ask for comment on how such standardized
information might be made widely available. For example, should it be given
to local franchising authorities for local distribution? We also seek
coMment on whether complaints filed by franchising authorities or parties
represented by counsel could or should be held to a different pleading
standard and, if so, what that standard should be.
102. The, difficulties that ordinary subscribers may face in
drafting complaints may make it advisable to enlist the franchising
authorities' expertise in this process. Having a franchising authority
provide a statement or decision concerning the alleged violation as part of a
subscriber's complaint might facilitate the drafting of the complaint,
provide better notice to a cable operator of the allegations, and expedite
resolution of the dispute. In cases where a refund is ordered to a class of
137 Conference Report at 64.
51
subscribers,138 the concurrence of the local franchising authority would help
ensure that an individual complaint was truly representative of the class.
It might also ensure that our resolution of a cable programming service rate
dispute did not undermine the franchising authority's regulation of basic
cable service rates. This could otherwise occur, for example, if a -different
ratemaking methodology were applied to basic and cable programming services.
We thus seek comment on whether subscribers should be permitted, or required,
to obtain a franchising authority's decision or concurrence as a precondition
to the filing of a valid complaint. Parties advocating that such a decision
or concurrence be required are asked to reconcile such a requirement with the
amendment incorporated in the Cable Act which specifically permits
subscribers, as well as franchising authorities and other relevant local and
state governmental entities, to file complaints.139
103. We propose to require that all complaints be served on both
the cable operator and the franchising authority by the complaining parties.
After a complaint"is served, an operator would have a reasonable period of
time in which to file a response, e.g.,, 15 or 30 days. Based on the
complaint and response, we would make a determination of whether a
complainant had made a minimum showing to permit the case to go forward. We
thus would look to both the complaint and response before deciding whether
there was a minimum showing to allow the complainant to proceed. This would
appear to be consistent with Congressional intent that a complaint not be
required to demonstrate a prima facie case.140 Once we had determined, based
on a review of the two documents, that a minimum showing of a violation of
our rules had been established, we would issue an order asking for further
information from the operator. and setting a further pleading schedule, if
necessary. At this point the operator would have the burden of producing _
evidence to disprove the allegations. This alternative should prove
expeditious and easy for non -lawyers to use. As the cable operator is likely
to be the party in possession of the data necessary for a resolution of the
dispute, placing the burden on the operator once a minimum showing has been
made appears reasonable and consistent with the statute. We also observe
that if we adopted a benchmark model for regulation, if an operator could
simply show that its rates were within the benchmark, it would be able to
avoid extensive showings related to costs and other factors that might
justify an above -benchmark rate. We seek comment on these tentative
conclusions and proposals. In particular, we ask interested parties to
comment on what the appropriate pleading cycle should be, taking into account
the statute's (tIR1 objectives of expedition and fairness.
104. Alternatively, we seek comment on whether we should
automatically require that cable operators answer complaints that we have
determined are in good faith and raise a genuine substantive issue. Under
138aa a para. 108.
139 Communications Act, § 623 (c) (1) (B), 47 U.S.C. § 543 (c) (1) (B);
Conference Report at 64.
140 Conference Report at 64.
52
this approach, a cable operator would not be required to respond
automatically to all complaints. Rather, we (or the subscriber) would notify
the operator of a complaint after it had been initially reviewed by
Commission_staff and found to meet our minimum showing.141 In this
connection, we observe that under a benchmark approach, an operator would be
required to respond only if the allegations were that rates were outside the
benchmark.
105. The Cable Act provides that, with one exception, our
procedures for cable programming service complaints shall be available only
to those filing within a "reasonable period" after a ghange in rates,
including a change resulting from a tiering change.1414 We tentatively find
that a time limit of 30 days from the time that.a subscriber received
notification of such a rate change would provide adequate opportunity for a
subscriber to formulate a complaint under the simplified procedures we
contemplate. We seek comment.on whether this would be a reasonable period of
time within the meaning of the statute. We also ask for comment on *whether
we should allow an additional 30 days if we require the concurrence of a
franchising authority for the filing of.a complaint as discussed above.
Section 623. (c) (3) excepts from the "reasonable period of time" requirement
complaints filed within 180 days following the effective date of our
regulations concerning cable programming service rates. Thereafter,
subscribers and other interested parties will have become familiar with our
new regulations. We thus interpret this exception to permit subscribers to
complain of any cable programming service rates within that 180 -day period,
regardless of when those rates•were-initially effective.. Although we would
be able to rollback prospectively any such rates in violation of our rate
regulations, we do not believe that we would be able to order refunds for -
unreasonable rates in effect prior to the effective date of our regulations.
After this 180 -day period passes, subscribers would be held to the 30 -day
time limitation. We seek comment on these tentative conclusions. .
106. We also seek comment on how to treat information which may be
necessary to a decision, but which the cable operator regards as proprietary.
Our existing rules authorize the withholding of trade secrets or confidential
financial or commercial information from routine disclosure to the public.14
As a general matter, however, we believe the burden should be firmly on the
cable operator involved to demonstrate that significant competitive injury
might result from any disclosure of information used in the rate regulation
process and that.as full a disclosure as is reasonably possible should be
mandated. We seek comment on whether our existing rules would be adequate
in a cable rate dispute, and whether they.are sufficiently flexible to permit,
an opposing party to have access to the information necessary for its case.
In particular, we also ask whether we should devise procedures permitting the
parties to a dispute limited access to proprietary information in specific
141 See supra para 100.
142 Communications Act, Section 623 (c) (3), 47 U.S.C. § 543 (c) (3).
143 47 C.F.R. § 0.457 (d) .
53
cases, and in what cases such limited access would be appropriate. Should we
permit an operator to redact confidential information in the first instance,
with Commission staff retaining the ability to seek further information if
necessary? In such cases, should we confine distribution of such information
to designated—representatives of parties and Commission staff? We also
invite comment on the types of information relevant to a cable rate
determination which would likely be considered proprietary by any of the
parties involved and, in particular, on any special problems that may arise
from use of data proprietary to third parties.
107. Once a decision is made, we seek comment on what types of
relief are available. We assume that our authority under the Cable Act to.
prevent unreasonable rates at a minimum authorizes us to order prospective
reductions of rates we have found to be unreasonable. We propose to require.
operators to make such reductions promptly, for example within 30 days of a
Commission decision finding existing rates unreasonable. We seek comment on
this tentative conclusion and proposal. In addition, we ask interested
parties to comment on whether our ability to order prospective rate
reductions would extend to prescription of specific rates.
108. We tentatively find that our authority under Section 623
(c)(2)(C) permits us to reduce rates determined to be unreasonable and to
refund to subscribers the portion of such rates found to be unreasonable that
subscribers paid after -the filing of a complaint. We propose in the first'
instance to determine the amount of overcharge and to order a refund to the -
actual subscribers who paid this overage. It may, however, be
administratively infeasible or unreasonably burdensome to determine the
actual subscribers who paid the unreasonable rate. In such cases, we propose
to order a prospective percentage reduction in the unreasonable service rate
to cover the cumulative overcharge, and to have that reduction made in the
bills sent to the class of subscribers that had'been unjustly charged. This
reduction would be in addition to the rate reduction necessary to eliminate
prospective overcharges, and would end when compensation for the overcharge
had been made. We interpret our authority under Section 623(c) as permitting
us to reduce rates for the class of subscribers who paid for a service the
rate for which was determined to be unreasonable, even if this finding was
based upon a complaint filed by a single subscriber. We believe that this
construction is necessary to fulfill the purposes of this statutory
provision. We seek comment on these tentative findings and proposals.
109. In keeping with Congressional intent, we envision the above-
described procedures as operating simply and informally.' At the same time we
intend to fashion them so as to safeguard the due process rights -of all
participants.144 We seek comment On how best to. devise procedures that will
144 Cf. Northwestern Indiana. Telephone Co. v. FCC, 824 F: 2d 1205,
1211 '(D.C. Cir. 1987) (in complaint over telco -cable affiliation rules, due
process did not require an evidentiary hearing where there was no material
issue of fact). But gf. Connecticut Office of Consumer Counsel v. FCC, 915
F. 2d 75, 81 (2d Cir. 1990), cert. denied, 111 S. Ct. 1310 (1991)(upholding
decision not to hold hearing on complaint brought pursuant to 47 U.S.C. §
54
effectuate these objectives. One option would be to treat cable programming
service complaints as informal adjudications and apply the streamlined
procedures outlined just above. If this option were adopted, would it also
be advisable to adopt relaxed (e.g., permit but disclose) az parte rules to
facilitate -staff resolution of a dispute in which presumably .non -lawyers were
participating? Another approach might be to style cable programming services
complaints as ratemaking proceedings, using procedures analogous to those
followed in our tariff review process.145 These procedures would be the
sole means by'which the Cable Act empowers us to regulate cable programming
service rates and determine liability for overcharges on a prospective basis
only (from the time the complaint was filed). They thus reasonably could be
analogized to ratemaking proceedings. Under this option, we would also
consider cable programming service proceedings to be non -restricted
proceedings under o46 QX parte rules, subject to "permit but disclose" ez
parte obligations. 4° This approach would give Commission staff maximum
flexibility to gather relevant information, flexibility particularly helpful
in disputes where one or more parties were not represented by counsel. This
approach thus also serves our objective of crafting procedures which do not
require parties to have professional representation. We seek comment on our
proposed complaint procedures and on whether they would adequately
accommodate the various policy objectives and legal constraints just
articulated. Should it be necessary to establish moreformal proceedings in
cases involving factual disputes or potential refund liability, we seek
comment on how we might accomplish this and still make these proceedings
accessible to non -lawyers and to parties located in areas distant from.
Commission offices in Washington, D.C. We also seek comment on whether
alternative dispute resolution would be one possible solution, should the
parties agree to employ it.147
110. Once relief is ordered, we must ensure that our decision is
properly effectuated. We seek comment on whether operators should be
required to certify that they have implemented our decision. We tentatively
find that noncomplying operators would be subject to forfeitures.148 We seek
comment on this tentative conclusion and on other remedies such as reporting
requirements, that may be appropriate in specific circumstances.
5. Provisions Applicable to Cable Service Generally
208) .
145
146
, e.g„ 47 C.F.R. Part 61.
47 C.F.R. § 1.1206.
147 Use of Alternative Dispute Resolution Procedures in Commission
proceedings and Proceedings in which the Commission Is a Party, 6 FCC Rod
5669 (1991) (committing the Commission to the use of ADR techniques to
expedite'and improve its administrative process whenever feasible•and
consistent with our statutory mandate).
148 47 U.S.C. § 503(b).
55
a. Geographically Uniform Rate Structure.
i. Statutory Requirements
111. The Cable Act of 1992 requires Cable operators to "have a
rate structure, for the provision of cable service, that is uniform
throughout thelgeographic area in which cable service is provided over its
cable system." gr
ii. Discussion
112. In accordance with the above provision of the Cable Act, we
propose to incorporate into implementing regulations a provision that cable
systems must have a uniform rate structure throughout the geographic area
served by the cable system. We solicit comment generally on the extent to
which cable operators' ability to establish service categories with separate
rates and terms and conditions of service is limited by the requirement for a
geographically uniform rate structure. We also seek information on the
extent to which cable operators currently enter into special service
arrangements with some customers or types of customers, such as long-term
service contracts with certain types of customers (educational and medical
institutions, large residential communities or buildings) with discounted
rates and other special terms and conditions. In addition, we solicit
comment on whether cable operators should be afforded the flexibility to
establish bona fide service categories with separate rates and service terms
and conditions.
113. We tentatively conclude that the statutory requirement of a
geographically uniform rate structure.does not prohibit establishment of
reasonable categories of service with separate rates and terms and
conditions of service. We tentatively conclude that the requirement for a:
uniform rate structure should be read in conjunction with the amendments to .
Section 623.(e), which authorize regulatory authorities to -prohibit
discrimination, but do not require that they do so. We do not interpret the.
statutory mandate for uniform rate structures as precluding reasonable
discriminations in rate levels among different categories of customers
provided that the rate structure containing such discriminations is uniform
throughout a cable system's geographic service area. .Such categories of
customers with different rate levels might include, for example, those
specifically identified in Section 623(e) -- senior citizens or other
economically disadvantaged groups. We reach this. conclusion notwithstanding
some language in the legislative history suggesting that rates should be
uniform throughout the geographic service area.150 We solicit comment on
149 Communication Act § 623(d), 47 U.S.C. § 543(d).
150 Senate Report at 76. The Conference Report says that § 3(d) of the
Cable Act was taken directly from the Senate version of the bill. Conference
Report at 65. It also would not prohibit promotional rates or differences
among rates charged seasonal and full -year customers per se. The
56
this conclusion.
114. We seek comment on the meaning of the term "geographic area"
as used in this section of the Act. One possible interpretation is that
Congress intended this phrase to mean a franchise area. Lending support to
this interpretation, the legislative history indicates that Congress was
concerned about cable operators having different rates within a'franchise
area.151 We recognize, however, that many cable systems provide service for
more than one franchise area. If Congress intended to limit the meaning of
geographic area to a franchise area, it could have used the less ambiguous
term. In addition, if the meaning of geographic area is limited to a
franchise area, Section 623(d) of the Communications Act would be duplicative
of Section 623(e); different rate structures within a franchise area could be
prevented by' antidiscrimination rules.
115. If the Commission assumes that geographic area refers to an
area greater than a franchise, the Act appears to limit the region to the
contiguous area served by the cable system. Under this more inclusive
interpretation, we would require a uniform rate structure throughout a cable
system. This might cause problems under a cost -of -service alternative for
regulating cable services because different franchises within a system could
have differing costs. For example, costs may vary due to differing franchise
fees, density of homes passed, the age of facilities, or many other factors.
We request comment on -whether Congress intended to require or to permit -
cross -subsidization to maintain uniform rates within a cable system. We
solicit comment on the advantages and disadvantages generally of interpreting
geographic area as synonymous with franchise area or as referring to a
greater area. We solicit comment on our discretion to adopt these different _..
interpretations.
b. Discrimination.
i. Statutory- Requirements
116. The Cable Act permits local and federal authorities to
prohibit. discrimination in provision of cable service, except that (1) cable
operators may establish reasonable i}scounts for senior citizens or other
economically disadvantaged groups,1 and (2) local and federal authorities
may regulate installation or rental of equipment for the hearing impaired.153
ii. Discussion
reasonableness of such rates would, however, still turn on operators'
compliance with the substantive ratemaking standards we ultimately adopt.
151 Senate Report at 76.
152 Communications Act, § 623(e)(1), 47 U.S.C. § 543(e)(1).
153 Communications Act, § 623(e)(2), 47 U.S.C. § 543(e)(2).
57 •
117. Based on this provision, we tentatively conclude that we
should explicitly permit the discounts contemplated in the statute. Local
authorities would also - be free to adopt anti -discrimination provisions
consistent with the statute and our implementing regulations. We seek
comment on these tentative conclusions. We seek comment in particular on
whether differences in rates among different classes of customers based on
differences in costs of providing services should not be prohibited under
this provision. We also seek comment on what economically disadvantaged
groups other than senior citizens may be awarded reasonable discounts by
cable operators. The Act does not preclude authorities from adopting
regulations concerning equipment and installation which facilitate reception
by. the hearing impaired that are consistent with other provisions of the
Cable Act. We seek comment on whether there is any need at this time to
adopt specific rules at the federal level as well.
c. Negative Option Billing.
i. Statutory Requirements
118. The Cable Act provides that an operator may not charge a
subscriber for "any service or _equipment that the subscriber has not
affirmatively requested by name." The Act further provides that a
subscriber's failure to refuse*a proposal to provide such service or
equipment "shall not be deemed to be an affirmative request for such service
or equipment."154 The legislative history indicates that Congress did not
intend this Section to apply to "changes in the mix of programming services
that are included in various tiers of cable service."15
ii. Discussion
119. We interpret this provision to mean that, in order to be
billed for any cable service (either tiers or indivic-►ia1ly priced programs or
channels) or equipment, a subscriber previously must have affirmatively
requested that particular.service or equipment. - A cable operator may not
take a subscriber's inaction following the operator's proposal to provide
such service.or equipment as an affirmative request for the same. We
tentatively conclude that an affirmative request for service or equipment may
occur orally or in writing so that subscribers are given flexibility to order
by either method. We also tentatively conclude that an operator should not
be permitted to charge for any service or equipment provided in violation of
Section 623(f) of the Act and our implementing rules.16 We seek comment on
this tentative conclusion. It would appear that under such a regime,
154 Communications Act, § 623(f), 47 U.S.C. § 543(f).
155 Conference Report.at 65.
156-n.ggenerally 39 U.S.C. § 3009 (b) (stating that unordered -
merchandise may be treated as a gift by the recipient); N.Y.Gen.Bus.L. §
396(2a) .(McKinney Supp. 1992) (deeming unsolicited goods, wares or
merchandise an unconditional gift to the recipient).
58
subscribers that had been charged in violation of our rules would simply not
pay the illegal charge, with the onus on the cable operator to attempt to
collect through the local judicial process. We thus seek comment on whether
disputes between the operator and subscriber arising under this provision
would prifflaiI7 be subject to resolution in the local courts. This remedy
would be in addition to the forfeiture provisions applicable to the op9rator
that fails to comply with Section 623 (f) and our implementing rules.157 We.
remain concerned, however, that our enforcement procedures be adequate to
correct any practices or patterns on the part of operators that violate our
rules, and seek comment on how we can ensure our ability to do so.
120. The legislative history states that Section 623(f) does not
apply to "changes in the mix of programming services that are included in
various tiers of cable service.i15$- We seek comment on the types of tier
changes that may be made without violating the negative option billing
restriction and whether such tier changes must be revenue neutral. Can they
involve additions or deletions of services? We tentatively find that a .
change in the composition of a tier that was accompanied by a price increase
justified under our rate regulations would not be subject to the negative
option billing prohibition. We believe that this interpretation will avoid
an undesirable stalemate in system offerings that could disserve subscribers
overall. We also do not believe that Congress intended the negative option
billing provision to apply to system -wide upgrades in equipment accompanied
by a justified price increase.* Otherwise the provision might discourage
operators from making beneficial system improvements. We seek comment on
these tentative conclusions. However, we also seek comment on whether
subscribers should be given notice of such changes. Should we require, for
example, that an operator notify subscribers at least 30 days in advance of a
change in a system's offering, such as an addition to a'tier or an equipmeizt ""
upgrade, accompanied by a price increase? We also seek comment on the
interplay between the negative option billing provision and the prohibition
on evasions set forth in Section 623(h).159
121. We also seek comment on how this provision should apply to
initial implementation of the basic cable service rate structure. For.
example, an operator may have been offering a basic service consisting of
more channels than are now required under the Cable Act's definition of basic
service. It may now effectively be required to split its former basic service
into the Act's formulation of basic service and an expanded basic tier. If
some subscribers do not affirmatively request both basic and expanded basic,
we seek comment on whether the operator may nevertheless continue to bill
them at the old rate. That if the operator has also changed the rates?
d. Collection of Information.
157 47 U.S.C. § 503(b) (2) and (6) (B) .
158 Conference Report at 65.
159 Communications Act, § 623 (h), 47 U.S.C. § 543 (h).
59
i. Statutory Requirements
122 The statute requires cable operators to file annually with
the Commission or franchising authorities, as appropriate, beginning one year
from the date of enactment, such financia; information as is necessary to
administer and enforce rate regulation.16u
.ii. Discussion
123. In this NPRM we have proposed several alternatives for
implementation of Section 623 of the Communications Act as amended by the
Cable Act of 1992, The information that regulators will need to assure that
they can effectively administer and enforce the requirements of Section 623
will be determined by the alternative that we ultimately adopt. In order to
assure that we can adopt a collection of information requirement that will
permit effective administration and enforcement of Section 623, we are
proposing to collect on an annual basis the information
C and the information collected bythe" specifiede O, MM in Appendix
92-266, FCC 92-545, adopted December 10, 1992. We will also need tocoollect�
information concerning rates of systems subject, and not subject, to
effective competition to enable us tq publish the annual reports on average
prices required by'section 623(k).161 This information may be more
comprehensive than is necessary to implement some of the alternatives
proposed in this NPRM. We intend to tailor the collection of information to
the method of implementing Section 623 that we ultimately adopt; less
information
Y r attion than that specified in Appendix C may be ultimately required, in
t.
124. We solicit comment generally on the appropriate scope of
information that we should collect pursuant to Section 623(k). We solicit
comment on the availability of the information specified in Appendix C, on
whether cable systems will ordinarily have developed this information, and
the burdens that the collection of this information would impose. To the
extent this information is not already developed by cable systems, we solicit
comment on the extent to which we should require that they develop it, and on
time periods that we should permit for its development. We solicit comment
on whether we should require the information
C to be
submitted by every cable system. Alternatively, we seek comment ified in n whether
we should rely instead on a sampling of systems, and, if so, what sampling
methodology we should use. While this latter approach could ease
administrative burdens, but may not achieve the same
more broadly imposed reporting r� of eQuirement would. We also solicit ccturocy as oa
whether, in order to reduce comment on
burdens on systems. with 1000 or fewer
subscribers, we should require less information, or no information, from such
systems.
e. Prevention of Erasions.
160 Communications Act, Section 623(g), 47 U.S.C. Section 643(g).
161 paras. 138-39, infra.
60
i. Statutory Requirements
125._ The Cable Act requires us to promulgate regulations that will
prevent evasion of its rat regulation provisions and, specifically, evasions
resulting from retiering•163 The statute requires that we periodidally
review these regulations.
ii. Discussion
126. We propose generally to prohibit evasion of our rate
regulations by cable operators. We propose to allow interested parties to
avail themselves of the expedited procedures we establish for rate relief to
seek redress of evasions of our rate regulations. We plan to periodically
review the standards we establish pursuant to this subsection, with the first
review occurring two years from the rules' effective date, and with periodic
reviews every three years thereafter. We seek comment on these proposals.
127. As the legislative history contemplates, we propose to
prohibit an unjustified increase in rates to subscribers for cable service
resulting from retiering that "shifts] cable programs out of the basic
service tier into other packages."1. At the same time, the -Cable Act of
1992 permits, and indeed appears to require in some cases, a. restructuring of
service offerings.165 We invite comment on how. specifically we can prohibit
unjustified rate increases that through retiering might otherwise evade our
rate regulation regime. Retiering necessary to comply with basic tier
requirements, retiering that did not change the ultimate price for the same
mix of Channels in issue to the subscriber, or retiering accompanied by a ..
price change that complied with our rate regulations would not be deemed an
evasion. We seek comment on this proposal. It is also possible that our
substantive rate regulations will lessen the potential for evasions through
retiering as well. Should we adopt a.parallel rate regulation regime for
both the basic tier and cable programming services,. this uniformity of
approach might eliminate the incentive for operators to move services from
basic to cable programming services tiers in order to evade rate regulation.
We seek comment on the interplay between our substantive rate regulati99
responsibility and our obligation to adopt.rules preventing evasions. We
162 Communications Act, § 623(h), 47 U.S.C. § 543(h).
163. .
164 Conference Report at 65.
165 - , ga,, Communications Act, Section 623(a) (7) (A), (B), 47 U.S.C:
Section 543(a)r0 (A) , (B) .
166 The legislative history specifically states that we must adopt
regulations to prevent evasions of the "anti -buy -through" provisions of the
Cable Act. Conference Report at 65; Communications Act, § 623(b)(8), 47
U.S.C. § 543(b)(8). These provisions are the subject of a separate
61
also seek comment on whether we need to establish specific rules regarding
evasions of rate regulation through charges for changes in equipment,
particularly in light of the specific rules we are adopting regarding such
charges.167 Finally, we seek comment on other specific evasive acts and
practices that should be prohibited. .For example, we seek comment -on whether
retiering and repricing of cable services between the effective date of the
Act and the implementation of these regulations could, if found to be
unreasonable or evasive, raise specific concerns under our proposed
.enforcement scheme.
f. Small System Burdens.
i. Statutory Requirements
128. The Cable Act requires that we develop and prescribe cable
rate regulations that reduce the administrative burdens and cost of
compliance for cable systems that have 1000 or fewer subscribers. 168
ii. Discussion
129. We seek comment on how best to effectuate this statutory
requirement. Our current rules exempt operators of cable systemof fewer
than 1000 subscribers from certain administrative requirements. 169@ We
similarly could exempt cable systems of fewer than 1000 subscribers from
certain administrative burdens associated with the rate regulations we
establish. Depending on the substantive ratemaking standard adopted, we
might, for example, exempt small systems from certain accounting requirements
or the -obligation to submit certain O.ta. With respect to the data - �.
collection requirements of the Act,l we might rely on external sources of
data or, if necessary, special studies instead of requiring individual
.reports from small systems. We seek comment on this general proposal, as
well as on the specific requirements frau which small systems might
appropriately be exempted. Parties are also invited to comment on other
alternatives, e.g., the. filing of abbreviated reports or other streamlining
of administrative obligations that also might be appropriate. We also seek
comment on ways we might coordinate any administrative requirements with the
actual operations of small cable systems, e.g., coordinating reporting with
proceeding and we will consider how to prevent their evasion in that proceeding.
167 supra paras, 62-71.
168 Carnninications Act, § 623(i), 47 U.S.C. § 543(i).
169 fag, e.g., 47 C.F.R. § 76.300 (b) (exempting small systems from
maintaining a public inspection file containing records required to be kept
regarding political rules, sponsorship identification, EEA performance, and
commercial limits in children's programming, signal leakage logs, And repair
records).
170 See supra paras. 122-24.
62
systems' billing cycles or internal budgetary processes.
130. We also seek comment on whether we should exempt small
systems from any substantive or procedural rate regulation requirements and,
if so, which ones. Our current rules exempt small systems from network non -
duplication protection requirements, 171 syndicated exclusivity rules,172 and
from certain technical standards and performance testing requirements.173 A
community unit having fewer than 10p9 subscribers currently is exempt from
the sports broadcast blackout rule.I/4 Are there requirements in our
proposed rate regulation regime from which small systems may also
appropriately be exempt?
131. In this regard we also seek comment on whether we should
establish a presumption that systems with under 1000 subscribers are, because
.of the underlying costs involved and the small base over which these costs
can be spread, unlikely to be earning returns or charging rates that could
effectively be altered to the benefit of subscribers through detailed
regulatory oversight. There is evidence that small systems tend to have
higher costs and to charge lower rates.175 Under such an approach, a small
cable system might be deemed to be in compliance with our rate regulations
until it was affirmatively demonstrated -- by a franchising authority in.the
case of basic service rates or by a subscriber or other interested party in
the case of cable programming service rates -- that a small system's rates
were unreasonably high. A second option might be to permit small companies
to certify their compliance with our rate regulations. A third option might
be to tailor our rate regulations specifically to small companies.' We might,
for example, devise basic cable rate regulations that assure that high-cost
small systems will be able to fully recover their costs. We seek comment on
these substantive approaches to alleviating regulatory burdens on small
systems and on whether they harmonize with the general objectives of the
171 47 C.F.R. 76.95(a).
172 47 C.F.R. § 76.156(b).
173 47 C.F.R. § 76.601(e) (exempting systems with under 1000
subscribers which do not use frequency spectrum other than that allocated to
over -the -air television and FM broadcasting from testing requirements).
also Cable Television Technical and Operational Requirements, 7 FCC.Rcd 2021
(1992) .
174 47 C.F.R. § 76.67 (f) . A community unit, as stated ,sera note 36,
is a cable system, or portion thereof, operating within a separate and
distinct community or municipal entity.
175 Competition, gate Deregulation and the Commission's Policies
Relating to the Provision of Cable Television Service, 5 FCC Rod 4962,
Appendix -F, Tables 2F and 2H (1990) (average rates of 1-1,000 subscriber
system as of 12/31/89 $14.46, compared to $16.75 for systems with over 50,000
subscribers, while average cost per channel to the operator was 90 cents for
a 1-1,000 subscriber system and 45 cents for a 50,000 -plus subscriber system).
63
Cable Act.
132. In addition, we tentatively conclude that we should exempt
small systems -from certain procedural requirements, including, for example,
the filing of rate schedules. We seek.comment on this tentative conclusion.
We might also modify requirements such as burden of proof or information
production for small systems -in contested cases. We seek comment on such
procedural approaches to alleviating regulatory burdens on -small systems.
133. Finally, in making some or all of these small system
exceptions, should we distinguish between independently owned stand-alone
systems of under 1000 subscribers and systems of under 1000 subscribers which
are owned by a large MSO? Although the plain language of the statute makes
no such distinction, we question whether systems in the'latter case need such
regulatory protection. A small cable system affiliated with an MSO may enjoy
advantages such as program discounts or access to corporate resources that
stand-alone small systems do not, and thus may not need the protection
Section 623(i) offers. It might also be appropriate to distinguish between
larger and smaller MSOs if we distinguished between MSO and independently
owned systems. For example, we might distinguish a system directly or
indirectly owned by a•cable operator .that directly.or indirectly owns other
cable systems, which altogether serve some specific number of subscribers.176
Parties advocating such an option are encouraged to suggest specific
subscriber numbers that,might serve to distinguish large. from small MSOs.
With the exception of the sports blackout rule, the size of a cable system is
determined under our current rules accoring�to the number of subscribers
served by a single integrated headend.17 In contrast, the community unit
measurement used in the sports blackout rule defines a system in a narrower ---
manner, according to what is essentially the cable franchise area.17 ' Use of
the single integrated headend might help ensure that what is in practice a
large system fully capable of meeting our requirements does not qualify
merely because it covers numerous franchise areas, each under 1,000
subscribers. We seek comment on whether either of these two definitions might
be appropriately applied in the context of rate regulation of small cable
systems. We also ask interested parties to suggest any alternative
definitions they believe would be appropriate under the Cable Act. Finally,
we seek comment on whether a system's qualifying for small system treatment
should be based upon the average number of subscribers over a period of
years, rather than the number of subscribers as of a specific date. The
former standard would avoid abrupt or frequent changes in regulatory status
176 We would propose using our existing attribution rules to determine
ownership. Cf. Implementation of Sections 11 and.13 of. the Cable Television
Consumer Protection Act of 1992, Horizontal and Vertical Ownership Limits,.
Cross -Ownership Limitations, MM Docket 92-264 (adopted Dec. 10, 1992)
(dSCUSsion of using current attribution rules for deterrtmining horizontal
ownership).
177 5.eg 47 C.F.R. § 76.5(a) .
178 3gg 47 C.F.R. § 76.5 (dd) .
64
resulting from seasonal or other brief fluctuations in the subscriber base.
g.
Grandfathering of rate agreements.
i. Statutory Requirements
134. The Cable Act provides that the statute and its implementing •
regulations do not supersede franchising agreements made before July 1, 1990
that authorize regulation of basic cabl service rates if there was not
effective competition as of that date.l�9 The provision states that such
agreements are to remain in effect "during the term" of such agreements.
ii. Discussion•
135. We tentatively conclude that this provision authorizes a
franchising authority with a franchise agreement executed before July 1,
1990, that was regulating basic cable rates at that time to continue
regulating basic cable rates for the remaining term of that agreement without
certification from this Commission. We tentatively conclude that such
franchising authorities (who are not required to apply for certification)
should nevertheless be required to notify this Commission that they intend to
continue to regulate basic cable rates under the provisions of Section
623(j). This notification will give the Commission information we need to
compile the annual reports on average prices required under the Cable Act. 180
We seek comment on these tentative conclusions. We also seek comment on
whether an agreement that falls within the terms of Section 623(j) would
supersede Commission regulations governing the rates for cable programming
services that are not part of the basic tier as defined in the agreement and
thus not subject to regulation under the. agreement. We also seek comment on
how franchising authorities now regulating rates and not covered by the
grandfathering provision just discussed should make the transition to rate
regulation under our new rules.
h. Reports on Average Prices.
i. Statutory Requirements
136. The statute requires the Commission to publish annual
statistical reports comparing"charges for. the basic tier, cable programming
services, and equipment offered by cable systems subject to effective
competition, with those charges made by systems not subject to effective
competition.181 "
ii. Proposals
179 Communications Act, § 623(j), 47 U.S.C. § 543(j).
180 Communications Act,"§ 623(k), 47 U.S.C. § 543(k).
181 Communications Act, Section 623(k), 47 U.S.C. Section 543(k).
65
137. In order to comply with these requirements, we will need to
collect certain cable system data. These data include rates charged for
basic cable service, expanded basic service, and other cable programming; and
fees for converter boxes, remote control units, program guides, installation
and disconnection charges, and any other charges for equipment or service.
Because we may wish to compare systems of similar sizes or other
characteristics, we propose also to collect information on system size
(measured by number of subscribers), system channel capacity, and possibly
other characteristics such as percent of distribution plant above or below
ground, length of distribution plant, and subscriber density per mile. We
envision that the annual statistical report will consist of a compilation of
the above data elements.
138. There are a number of possible ways to c.)11ect the specific
data. Trade publications such as the Cable Fact Book collect much of the
data we require, but such data are collected on a voluntary basis and are not
always complete for each individual cable system. It appears to be
necessary, therefore, to require cable operators to submit certain
information' directly to us on a regular basis. Such information obtained
directly from cable operators would be reliable, complete and comparable. We
request comment on the specific data to be collected. For example, should
the data submitted be on a per system rather than a per franchise basis?
Further, we note that the data we propose to collect for the annual -report on
rates may duplicate in part the data needed to carry out the ongoing rate
regulation provisions of the Cable Act. These rate regulation
responsibilities will likely require that we obtain rate -and service data as
described above. In addition, depending on the particular rate standard we
ultimately -adopt, we may also need data on various costs and other financial
information. We tentatively conclude that we should combine all data
requirements on a single form and request comment on that conclusion.
139. We realize that annual collection of data will be costly for
both the industry and the Commission. One option for minimizing these costs
would be to collect data from a sample of cable systems rather than from the
industry as a whole. We propose to obtain information from a simple random
sample of cable systems or, alternatively, from all the largest companies as
well as from a sample of the smaller cable firms. The information would be
reliable and comparable but not necessarily as complete as a survey of the
entire industry. For example, since so few cable systems ;now face effective
competition, a simple random sample of the industry may not yield reliable
measures of rates for those systems. Hence, we might need to do a full
survey of all systems facing effective competition. We seek comment on this.
issue. We.also seek comment on how to identify systems subject to effective
competition. Finally, commenters are invited to suggest other ways we may
obtain the data needed to fulfill the annual reporting requirements -specified
in Section 623 00.
i. Definitions
i. Statutory Requirements
140. The statute includes definitions of effective competition,
66
cable programing service, and mu1ichannel video programing distributor
8t
which we have already set forth. 22
ii. Discussion
141. In order to implement the statutory definitions and rules to
incorporate these terms, we propose to adopt the definitions without change.
We solicit comment on this proposal. We additionally solicit comment on
whether we should establish any additional definitions in our rules.
j Effective Date
i. Statutory Requirements
142. The statute provides that the amendments to Section 623
establishing rate regulation of cable systems not subject to effective
competition shall be effective 180 days from the date of enactment. The
statute gives the Commission authority to prescribe regulations effective'on
the date of.enactment. The statute expressly requires the Commission to
establish regulations concerning rates for the basic service tier, rates for
cable programing service, and prevention of evasions within 180 days of
enactment.183
ii. Discussion
143. In order to assure that we meet the statutory deadline for
implementing regulations, we propose to adopt implementing rules prior by
April 3, 1993 and to make them effective as rapidly thereafter as is -
reasonably feasible. We seek comment on.this proposal and on what if any
interim requirements may be necessary as the rules come into force. We have
tentatively concluded that, while our regulations must be in place 180 days
from the date of enactment, the statute does not require that all
implementing steps that cable systems must take to meet the obligations of
the statute or our rules must be completed on that date.
D. Leased Commercial Access
1. Statutory Requirements
144. The 1984 Cable Act required cable operators to designate a
percentage of their channel capacity for commercial use by unaffiliated
persons, with the exact percentage varying depending on the system's total
182 2.eg Communications Act §623 (1) (1)-(2), 47 U.S.C. §543 (1) (1)-(2) .
183 Communications Act, Sections 623 (b) (2) , (c) (1) , (h) ; 47. U.S.C.
Sections 543 (b) (2) , (c) (1) , (h) .
67
channel capacity. The purpose of the leased access Section of the 1984
Act was to assure diversity of information sources to the Milo in a manner
consistent with growth and development of cable systems." Congress
recognized that cable operators might not.have the incentive to offer such
diversity, -4f -a particular programmer's offering represented a viewpoint
conflicting with the operat9rr's or competed with a program service the
operator already provided. At the same time, however, the terms of a
leased access arrangement were not to adversely affect the 9peration,
financial condition, or market development of the system.18' It was the
operator's editorial control, not his economic power, which was of concern to
the Congress at this point in time. While the price, terms and conditions
for leased access were subject to a standard of reasonableness, the
operator's terms were presumed reasonable unless the unaffiliated programmer
could make a clear and convincing demonstration that this was not the
case.188 Congress specifically contemplated permitting an operator to
establish discriminatory rates, terms and conditions.109 It also provided
that any court reviewing a leased access dispute should not consider the
price, terms or conditions established between an operator and affiliate for
comparable service.100
145. As stated above, Section 612 of the Communications Act states
that its purpose is to assure that the widest possible diversity of
184 Communications Act, 47 U.S.C. § 612 (b) (1), 47 U.S.C. § 532 (b) (1)
(36 -to -54 channel system to designate ten percent of channels not otherwise
required for use by federal law or regulation; 55 -to -100 channel system to
designate 15 percent of channels not otherwise required for use by federal
law or regulation; over -100 channel system to designate 15 percent of all
channels).
185 Communications Act, § 612 (a), 47 U.S.C. § 532 (a).
186 House Committee on Energy and Commerce, H.R. Rep. No. 934, 98th
Cong. 2nd Sess. 48 (1984) (1984 House Report).
187 Communications Act, § 612 (c)(1), 47 U.S.C. § 532 (c)(1); 1984
House Report at. 50.
188 Communications Act, § 612 (f), 47 U.S.C.. § 532 (f); 1984 House
Report at 50-51.
• 189. Congress stated that otherwise an operator might be forced to
charge an average price lower than the fair market price for some services,
but higher than the fair price for others. Congress stated that this might
make it impossible for services offered by non-profit entities to obtain
access. It noted that prices for premium services should probably be higher
than for news or public affairs service, and that both would be priced very
differently from an educational or instructional service. 1984 House Report
at 51.
•
190 Communication Act, § 612 (d) , 47 U.S.C. § 532 (d)
68
information sources is made available to the public from cable systems in a
manner consistent with growth and development of cable systems. The
amendments to Section 612 of the Communications Act contained in the Cable
Act of 1992 add an additional purpose to the section: toromote competition
in the delivery of diverse sources of video programming. 11 Other amendments
to Section 612 grant the Commission authority: to determine the maximum
allowable rates that a cable operator may establish for leased commercial
access,. including the rate charged for billing and collection services; to
establish reasonable terms and conditions for commercial use of the system,
including those to govern billing and collection; and to establishocedures
for expedited resolution of disputes concerning rates or carriage.l�4 The
Commission is required within 180 days of enactment to adopt regulations
exercising authority in these areas.
2. Discussion
a. Maximum Reasonable Rates
146. The language of Section 612, as amended by the Cable Act of
1992, that governs leased commercial access does not limit its application to
only cable/ ystems not subject to. effective competition as the Act defines
that term. 33 Accordingly, we tentatively conclude that our regulations
governing the maximum reasonable rate for leased commercial access will apply
to all cable systems. We also tentatively conclude that the Cable Act of
1992 does not necessarily require cable operators to provide billing and
collection services. Rather, we believe that Congress intended only that we
establish regulations governing the maximiun rate for such services if an
operator chooses to offer them. We also tentatively conclude that we should__
.require that any charges for billing and collection services that a cable -
operator may elect to provide be unbundled from other charges for leased
commercial access. We solicit comment on these tentative conclusions.
147. We have initially identified three alternative standards for
determining maximum reasonable rates for leased commercial access and for
billing and collection services: reliance on benchmark rates based on costs
of typical cable systems, reliance on the cost -of -service principles we have
described previously at paras. -, supra, and reliance on the marketplace
where effective competition exists. A fourth possibility, not explored in
detail herein but on which comments are solicited, would be for the
Commission to establish a mechanism or formula under which subscriber rates
for the basic -service. tier and/or cable programming services could be used to
compute a rate for leased commercial access. We solicit comment on
191 Communications Act, Section 612(a),'47 U.S.C. Section 532(a)..
• 192 Communications Act, Section 612(c)(4)(A), 47:U.S.C. Section
532(c) (4) (A) .
193 In order to faciliate our review of issues concerning leased
commercial access, we are directing commenters. to address in a separate
section of comments issues concerning leased commercial access.
69
mechanisms for formulas that could be used for this purpose.194
Additionally, we seek comment on whether we should establish additional rate
ceilings to govern rates for not-for-profit programmers.
148. Benchmark Based on Typical System Costs. Under this
alternative, rates for leased commercial access would be governed by a
benchmark based on costs incurred by a typical or ideal cable system for
constructing and operating channel capacity. Such a benchmark would be
particularly useful for cable systems whose rates for.basic tier service and
cable programming service were not subject to individual system cost -based
regulation, possibly because they also met a benchmark. We solicit comment.
on the use of such a benchmark for regulating commercial access rates. We
also seek comment on whether there are bases other than costs for setting a
benchmark that we might use to establish maximum rates reasonable to both
lessees and system operators.
149. Cost -of -Service. Under this alternative, the maximum
reasonable rates for leased commercial access and for billing and collection
services would be designed to recover the costs of providing those services.
The advantage of this alternative is that it permits cable operators to
recover costs of providing leased commercial access, but also promotes the
statutory goal of assuring the widest possible diversity of information
sources because rates would be based on costs. In addition, efficiencies
that the cable operators can capture by virtue of their holding local
franchises are passed on to the programmers.
150. Under this alternative,•we would require that the maximum
reasonable rate would be based on all direct Costs, an allocation of the
joint and common costs of access and of providing other cable services, an
allocation of general and administrative overheads, and a reasonable profit
determined under cost -of -service regulatory principles that we have already
discussed. Should we select the cost -of -service alternative, we solicit
comment on whether we should require a fully distributed cost methodology to
identify the joint and common costs to be recovered through rates for leased
channel access or for billing and collection services.
151. The Cable Act of 1992 left unchanged the language of Section
623(c)(1) stating that the price, terms and conditions under which leased
access occurs should be at least sufficient to assure that such use would not
"adversely affect the operation, financial condition, or market development
of the system." We ask for comment on whether a strictly cost -of -service
method of setting maximum reasonable rates would be consistent with
congressional concern that leased access not harm the financial condition of
cable systems. We also seek comment on how demand for leased access should
be factored into setting rates, particularly for less than full time use of
the access channel, should we select a -cost -of -service approach for
194 Comment is also requested on the manner and extent to which costs
incurred in prohibiting or blocking indecent programming in accordance with
the provisions of Section 10 of the Cable Act of 1992 should be factored into
any of the above approaches.
70
determining the maximum reasonable rate for leased commercial access.
152. Marketplace Rates. Under this alternative, we would
determine that_where a competitive market exists for leased commercial access
or for billing and collection services there would be no prescribed price or
ratemaking methodology, i.e., the cable operator would be able to charge the
market price for leased commercial access and billing and collection
services. The advantage of this approach is that it would eliminate the
costs of regulation, while providing an expectation grounded in established
economic theory that price§ will remain reasonable and be driven to costs
where competition exists.1 5 We solicit comment on this approach generally
and, in particular, on whether it is consistent with congressional intent and
whether the Cable Act of 1992 authorizes us to rely on market forces to set
such maximum rates.. We also solicit comment on the extent to which a
competitive market for leased commercial access currently exists. The
Commission has already determined that a competitive market exists for
billing and collection services jgu§tifying the detariffing of such services
provided by telephone companies. We solicit comment on whether the
billing and collection services that were considered by the Commission in
connection with telephone companies are the same as, or relevant to
determining proper treatment of, the billing and collection services that
cable systems might offer in connection with leased commercial access. We
also ask whether the previous finding of the Commission concerning telephone
companies' billing and collection services warrants adoption of a marketplace
approach for determining the maximum reasonable rate for. billing and
collection services offered by cable operators.
153. Special Rates for Not -for -Profit Programmers. The
legislative history of the Cable Communications Policy Act of 1984 indicates
that Congress may have contemplated that cable operators. be permitted to
establish separate rate ceilingsQr different categories of programers
taking commercial leased access.lt
We seek comment on whether the Cable
195 Stigler, The Theory of Price, 4th ed. at 178-192 (1987).
196 Detariffing of Billing and Collection•Services, CC Docket No-. 85-
88, Report and Order, 102 FCC 2d-1150 (1986), recon. denied 1 FCC Rcd 445 .
(1986) . •
197 "...[N]othing in these provisions is intended to impose on a cable
operator the requirement'that he make available on a non-discriminatory
basis, channel capacity set aside for commercial use by unaffiliated persons.
[N]on-discriminatory access requirements could well undermine diversity goals
... [B]y establishing one rate for all leased access users, a price might be
set which would render it impossible for certain classes of cable services, •
such as those offered by not-for-profit entities, to have any reasonable
access to a cable system. ... A premium movie service will obviously warrant
a very different and, in all probability, a higher price than a news.or
public affairs service, and both of these would pose a different pricing
situation from an educational or instructional services." Report on HR 4103,
Report 98-934 at p. 51.
71
Act of 1992 empowers us to set a lower maximum rate for leased commercial
access for not-for-profit programmers, and ask whether this could help assure
the diversity of programming sources on cable systems sought.by the drafters
of Section 612. We ask to what extent we can permit costs of providing
leased commercial access to not-for-profit programers to be recovered from
other leased access customers or from cable subscribers on all tiers
generally. We also solicit comment on the impact on operators and
subscribers of requiring that leased access be provided at special rates to
such programmers. We solicit comment generally on the need for special rates
for not-for-profit programners.198
154. In addition to the above proposals, we solicit comment on
whether we need to take any measures to assure that our regulations
gc-:erning maximum resale rates for leased commercial access are fulfilling
the statutory objectives of Section 612. We solicit comment on relying on
the complaint process to monitor the effectiveness of our regulations.
Alternatively, or in•addition ta.the complaint process, we could establish a
reporting requirement that will enable us to track the use of leased
commercial access and rates charged for that use. Specifically, we could
require cable operators to provide on an annual basis the following
information: set-aside capacity required, percentage of set aside capacity
used, percentage of set- aside capacity used by not-for-profit programmers,
and prices charged for leased access. We solicit comment on this
alternative, and, should we adopt it, ask whether we should exemmpt•small
systems from compliance with sbme or all of these reporting requirements.
b. Reasonable Terms and Conditions of Use
i. Statutory Requirements
155. Section'612 (c) (4) (A) (ii)
"establish reasonable terms and conditions
access cable channels.'
ires the Commission to
for commercial use of leased
ii. Discussion
156. In enacting Section 612 (c)(4) (A) (ii) in 1992, Congress
apparently was particularly concerned that leased access programmers be
198 Should we establish special provisions for not-for-profit
programmers, •we propose to make these provisions applicable to entities that
are tax exempt because of their not-for-profit status as defined by the
Internal Revenue Service. §501(c)(3). We solicit comments on this proposal.
199 Communications Act, §612 (c) (4) (A) (ii), 47 U.S.C. §532(c) (4) (A) (ii) .
200 See supra pias, 146-54 addressing terms and conditions for
billing and collection. •
72
offered a "genuine outlet" for their product.201 Thus, we seek comment -on
whether we need to address in our rules tier location, channel position, and
time scheduling for leased access use. Such regulation might bring more
uniformity to the terms and conditions governing leased access use. It also
could increase -certainty in the leased access market and thus, in rease usage
of leased access channels, consistent with Congressional intent.2)2 We seek
comment on this alternative and on what factors we should take into account
if we adopted it, e.ct., channel capacity of the system, number of channels
required to•be designated for leased access use, or nature of the leased
access material. We also seek comment on how such an alternative could be
fashioned so that it intruded minimally upon programming decisions negotiated
by private parties and on the discretion of the cable operator with respect
to channel positioning and configuration of its system. Balancing Congress'.
concern that leased access channels provide a genuine outlet for programmers
with the fact that the Cable Act • of 1992 leaves. intact the general
prohibition on the cable operator's exercising editorial control over leased
access, we seek comment on what the appropriate scope of the operator's
iscrretion regarding tiering and channel location for leased access should
157. We tentatively. conclude that we should establish guidelines
for technical standards and conditions for leased access.' We propose to
require that operators apply the same. technical standards they apply to
programs to be carried on public, educational, and governmental access
Channels to leased access programs. Thus, an operator could not reject for
technical reasons a program for leased access airing if it would not reject
the program for the same reasons for airing on public, educational or
governmental access channels. We seek comment on this proposal. We also
seek comment on what, if any, technical and -production facilities the cable --•
operator should be expected to offer leased access users. For example,
should the operator be required to provide only minimal technical support,
e.a., the playing of a tape, or should more advanced equipment and support be
made available? Presumably the leased access programmer would be required to
pay for the technical support it used. Would we base the necessary level of
technical support on the size of the cable system, the capabilities of the
programmer, or both? • Should a satellite programmer desire leased access,
would an operator be required to provide satellite receive facilities?
158. If a programmer receives access to a commercial leased
channel without prepayment in full for such access, we ask when the operator
should be able to require posting of a bond or deposit. We also seek comment
on the impact of any bond or deposit requirement on programmers' ability to
secure access to leased channels.
201 Senate Report at 79.
202 Senate Report at 31-32.
203 Under § 10 of the Act, a cable operator is not precluded from
exercising editorial control over indecent speech. Communications Act, § 612
(c) (2), 47 U.S.C. § 532 (c) (2) .
73
159. While the Communications Act does not give cable operators
editorial control over leased access programming,204 the Cable Act does
permit optQrs*to prohibit or to channel indecent material on leased access
channels.4Y° We are presently considering how to implement these provisions
of the Act.206 Thus, we propose generally to prohibit a cable operator from
setting terms or conditions for leased access use based.on content, with the
exception that an operator "may consider such content to the minimum extent
necessary to establish a reasonable price for the commecjal use of
designated channel 'capacity by an unaffiliated person. We also propose
to except from this prohibition on influencing content those terms and
conditions relating to indecent material that would be consistent with the
Cable Act and the implementing regulations we ultimately adopt. We seek
comment on this approach.
160. Existing Section 612 (c) (1) provides that an operator shall
establish prices, terms and conditions for leased access to an unaffiliated
user at least sufficient to ensure that such use "not adversely affect the
operation financial condition, or market development of the cable
system."2b8 We seek comment on how to ensure that regulations we establish
for leased access terms and conditions are consistent with this provision and
do not undermine the financial condition of the cable system, while at the
same time harmonizing with the statutory provisions governing the maximu m
rate for based access. The legislative history of the 1984 Act indicates
that Congress contemplated different treatment of lea§e0 access providers,
who by definition are unaffiliated with the operator, and of affiliated
entities.who may also lease a channel or have an equivalent arrangement.210
It is unclear whether in passing the 1992 Cable Act, and requiring us to
establish reasonable terms and conditions for leased access use, Congress
intended to reinforce or reduce such differentiation. We thus seek comment
on whether -we have the authority to and, if so, whether we should require
204 Communications Act, § 612 ((:) (2), 47 U.S.C. § 532 (c) (2) .
205 Communications Act, § 612 (h), (j), 47 U.S.C. § 532 (h), (j) .
206 See Implementation of Section 10 of the Cable Consumer Protection
and Competition Act of 1992. Indecent Programming and Other Types of
Materials on Cable Access Channels, Notice of Proposed R ulermaking, I21 Docket
No. 92-258, FCC 92-498 (released Nov.10, 1992).
207
Communications Act, § 612 (c) (3) , 47 U.S.C. § 532. (c) (3) .
208 Communications Act, § 612 (c) (1), 47 U.S.C. § 532 (c) (1) .
209 Communications Act, § 612 (b) (1), 47 U.S.C. § 532 (b) (1) (a cable
operator shall designate channel capacity for commercial use by persons
"unaffiliated" with the operator).
210 1984 House Report at 53. 5e2 also Communications Act, § 612 (d) , 47
U.S.C. 532 (d).
74
operators to apply the same terms and conditions to the leasing of channel
capacity by both affiliated and nonaffiliated users. If so, would this
requirement extend to services such as billing and collection? We also seek
comment on how our regulations might permit the beneficial discrimination .
which Congress considered might be necessary to -establish terms and
conditions that might be needed, for example, by non-profit program
suppliers.211
161. We also seek comment on whether there is any need to
reconcile the amendments made by the Cable Act of 1992 with the existing
statute and its underlying objective of promoting diversity. For example,
one may speculate that if rates for leased access are low enough,
unaffiliated programmers may seek to move their program offerings from other
channels to those set aside for leased access, thereby diminishing the number
of channels available for leased access without adding to the diversity of
programming offered on the system.. We seek comment on the probability of
such migration occurring,- the likely impact of such actions, and whether
there is any need to take regulatory action at this time to prevent it.
c. Procedures for Expedited Resolution of Disputes
i. Statutory Requirements
162. The Cable Act requires that we establish procedures "for the
expeditresolution of disputes concerning rates or carriage" of leased
access. 12
ii. Discussion -
163. The legislative history of Section 612(c)(4)(A) indicates
that Congress believed that existing provisions of the Cable Act of 1984
entitling aggrieved leased access users to bring action in federal district
court or to file complaints at the Commission were too cumbersome. Congress
believed these provisions, together with the imposition of a high burden9g
proof on access users, may have led to limited demand for leased access.
164. .One means of fulfilling Congressional intent to increase use
of leased access channels would be to streamline this Commission's dispute
resolution procedures for aggrieved leased access users. Thus, we propose
to permit an aggrieved access user to file a petition for relief alleging
that an operator's rates or terms and conditions for use of leased access
capacity violate our rules. The petition could consist of a short and plain
statement of the facts constituting the violation and the specific rule or
regulation allegedly violated. We would require service of the petition bn
211 311a bra para. 153.
212 Communications Act, §612 (c) (4) (A) (iii) , 47 U.S.C. § 532 (c) (4) (A) (iii) .
213 House Report at 39-40.
75 •
the cable operator. The cable operator would have a relatively brief
period, e.g., 10 or 15 days, in which to respond.
165. If, at that point, the Commission determines that a prima
faci@ case of violation'of our rules pursuant to Section 612(c) has been
made, the burden of production would then shift to the operator to disprove
the allegations. At this stage, we might also issue an order requesting
further information from the operator, under procedures analogous to those
established for complaints of unreasonable rates. 14 We seek comment on
this approach. We also ask whether it would be consistent with Section
612(h) of the Communications Act, which creates a presumption that,
the prices, terms and conditions for use of channel
capacity designated pursuant to subsection (b) (of
Section 612] are reasonable and in good -faith unless
shown by clear and convincing evidence to the•contrary.215
166. We propose that if a petitioner has made'out a prima facie
case of a violation of our rules promulgated pursuant to Section 612(c),
this case would be sufficient to rebut the presumption that the prices,
terms and conditions for leased access are reasonable. If such allegations
are proven, they would constitute clear and convincing evidence of
unreasonable practices or.rates and meet the burden of proof imposed under
the Act. We•seek comment on this approach. We also seek comment on
alternative approaches to reconciling the provisions of the 1984 Act, which
presume that the operator's good faith prices, terms and conditions are- '
reasonable, with the provisions of the 1992 Act, which require us to
establish reasonable terms and conditions and to determine maximum
reasonable rates for leased access.
167. As a matter of general policy, we also believe that parties
should bring complaints to the Commission's attention in a•timely manner.
This policy will help to guard against determinations based on a sae
record, as well as forestall development of any patterns of abuse.21 We
also propose to give oral rulings in those situations in which time is of
the essence, to be followed by a written formal ruling. We seek comment on
what types of cases might be appropriate for such emergency treatment. We
tentatively find that rate disputes, which are generally complex in nature,
should not be the subject of emergency action at the Commission. Moreover,
we believe that it would+be possible in such cases to devise procedures that
will enable a user to have access before a Commission decision is made. We _
propose .to require that the user provide some form of security, e.a.,
establish an escrow account, while the rate dispute is being determined, and
214 See generally paras. 97-110 supra.
215 Communications Act, § 612(f), 47 U:S.C. § 532.(f) .
216 Furthermore, hermore, the Communications Act also provides for time
limitations on the assessment of forfeitures. 52ka, e.g., Communications
Act, § 503(b) (6) (5) , 47 U.S.C. § 503(b) (6) (B) .
76
seek comment on the fairness of this procedure to all parties involved.
168. We seek comment on the use of Alternative Dispute Resolution
("ADR") for leased access petitions filed at.the Commission. The
legislative history, as indicated above, reflects concern that "cumbersoow�"
administrative procedures may have limited usefulness for leased access.217
In light of this history, when the circumstances of a given case are fairly
straightforward, we tentatively conclude that ADR may be the most
appropriate means of resolving conflicts by providing both expedition and
cost-effectiveness.18 We also assume that it could be made available to .
-parties in the franchise area in which they are located, adding the benefit
of geographic convenience in such cases. The election of mediation by the
parties would be purely voluntary, under the Administrative Dispute
Resolution Act, 5 U.S.C. §582(c) (1990).
169. We seek comment on this approach, and on whether we should
encourage its use. We also seek comment on whether parties should be
permitted to elect ADR at the outset of a dispute or whether election should
take place only at the time we rule that a prima facie case has been
established. We also seek suggestions on what types of disputes would be
most suitable for ADR. Specifically, we seek comment on whether conflicts
concerning rates, credit terms, technical quality, or other terms or
conditions would reasonably lend themselves to resolution by mediation, or
whether certain categories of disputes would be better resolved by other
means: •
170. We also seek comment on.whether and how we might enlist the
assistance of local franchising authorities in resolving leased access
disputes. Disputes concerning leased access may be so time sensitive that ---
they would be better handled by local decision makers. We thus ask whether
parties should be permitted to seek resolution of leased access disputes by
franchising authorities. We seek comment on whether this option should be
voluntary, or possibly be required as a prerequisite to review by this
Commission. On the latter point, we seek comment on whether such a
requirement would be -consistent with the language and intent of the Cable
Act. Finally, we seek comment on what types of leased access disputes may
be suitable for franchising authority resolution. •
d. Leased Access for Minority and Educational Programmers
i. Statutory Requirements
171. The Cable Act permits a cable operator to place programming from
a qualified minority or educational programming source on up to 33 percent of
the cable system's designated leased access channels.. Programming already
217 House Report, supra, at 40. See also Senate Report at 31.
218 See Use of Alternative Dispute Resolution Procedures in Commission
Proceedincrs and Proceedings in which the Commission is a Party, 6 FCC Rcd
5669, 5670 (1991) .
77
carried by a cable system as of July 1, 1990 does not ify as minority or
educational programming for purposes of this section.2The Act defines a
qualified minority. programming source as one that devotes substantially all
of its programming to coverage of minority viewpoints, or to programming
directed at -members of minority groups, and which is over 50 percent
minority-owned, as the term minority is defined in Section 309(i)(3)(C)(ii)
of the Communications Act. The Act defines a qualified educational
programming source as one that devotes substantially all of its programming
to educational or instructional programming that promotes public
understanding of mathematics, the sciences, the humanities, and the arts a�nn0
has a documented annual expenditure on programming exceeding $15 million.22
ii. Discussion
-172. We propose to adopt this subsection as part of our rules. The
Cable Act defines "minority" with reference to Section 309(i)(3)(C)(ii) of
the Communications Act, which identifies Blacks, Hispanics, American Indians,
Alaska Natives, Asians, and Pacific Islanders as minority groups. We thus
tentatively find that, for purposes of the. minority programming provision,
programming that covers "minority viewpoints" or is "directed at members of
minority groups." would have to coyer the viewpoints of or be targeted to.
members of the above -listed groups. We seek comment on this proposal and
tentative conclusion. We also propose to reflect the statutory definition
pf educational programming source described above in our rules. We seek
comment on this proposal.
173. The Act qualifies minority and educational programming sources
for leased access under this section if they devote "substantially all" of
their programming to the c9y rage of minority viewpoints or to educational or-- --
instructional programming.z We seek comment on the amount or proportion of
programming necessary to fulfill this requirement.
C. Subscriber Bill Ite izat cci
1. Statutory Requirements
174. Section 622(c) of the Communications Act, as amended by the Cable
Act, permits a cable operator to itemize, on separate lines on each regular
subscriber bill, (1) the amount of that bill attributable to the franchise
fee, together with the identj.ty of the franchising authority to which the fee
is paid, (2) the amount attributable to the support or use of public,
educational, or governmental channels which is required under a franchise
agreement, and (3) the amount of the total bill attributable to any other
governmental assessments on transactions between the operator and the
219 Communications Act, § 612(i), 47 U.S.C. § 532(i).
220 Communications Act, § 623(i)(3), 47 U.S.C. § 532(i)(3).
221 Communications Act, § 612(i)(2), § 612(i)(3); 47 U.S.C. §
532(i)(2), 47 U.S.C. § 532 (i) (3) .
78
subscriber.222
2. Discussion
175. 'The•Conference Report states that an amendment was made to the
legislation to clarify that itemization must be Oone in a manner consistent
with our regulations implementing Section 623.2 .i The House Report indicates
that only direct and verifiable costs within the above -listed categories may
be so itemized/24 Section 623 provides that rules governing basic service
rates shall take into account "the reasonably and properly allocable
portion" of amounts assessed as franchise fees, taxes, or governmental
charges assessed on operator/subscriber transactions, and any amount required
to satisfy franchise requirements to support public, educational, or
governmental channels, or the use of such channels under a franchise.225 We
seek comment on the possible differences and the interrelationships between
Section 622(c) and Section 623.,The House Report also indicates that
Congress explicitly intended that2such costs be itemized as part of the total
bill, but not separately billed. 22 We propose to reflect this Congressional
intent in our rules incorporating Section 622(c). We seek comment on this
proposal, and on any other regulations that may be necessary to adequately
implement this provision.
III. Initial Regulatory Flexibility Act Analysis
176. Pursuant to Section 603 of the Regulatory Flexibility Act, the
Commission has prepared the following initial regulatory flexibility
analysis (IRFA) of the expected impact of these proposed policies and rules
on small entities. Written public comments are requested on the IRFA. These --
comments must be filed in accordance with the same filing deadlines as
• comments on the rest of the Notice, but they must have a separate and
distinct heading• designating them as responses to the regulatory flexibility
analysis. The Secretary shall cause a copy of this Notice, including the
initial regulatory flexibility analysis, to be sent to the Chief Counsel for
Advocacy of the Small Business Administration in accordance with Section
603(a) of the Regulatory Flexibility Act, Pub. L. No. 96-354, 94 Stat. 1164,
5 U.S.C. Section 601 et sea. (1981).
•
. 222 Communications Act, § 622.(c), 47 U.S.C. § 542(c).
223 Conference Report at 84.
224 House Report at 86.
• 225' Communications Act, § 623 (b)(2)(C)(v), (vi), 47 U.S.C. § 543 (v),
MO. Section 623'(b) (2) (C) (v) also requires that our rules take into
account assessments of "general applicability" imposed on cable operators dr
subscribers. We do not interpret Section 622(c) as applying to such
generally applicable assessments and seek comment on this view.
226 House Report at 86.
• 79
177. Reason for action. The Cable Television Consumer Protection and
Competition Act of 1992 requires the Commission to prescribe rules and
regulations for determining reasonable rates for basic tier cable service,
including rates for equipment and installation, and procedures for
implementation and enforcement' of those rules. The Cable Act of 1992 also
requires the Commission to establish criteria for identifying unreasonable
rates for cable programming services, and procedures for resolving complaints
regarding cable programing services. In addition, the statute requires the
Commission to establish rules for determining the reasonable terms and
conditions and maximum reasonable rates for leased commercial assess,
including billing and collection.
178. Objectives. To propose rules to.inplement Sections 3 and 14 and
those portions of Section 9'pertaining to rate regulation, of the Cable
Television Consumer Protection and Competition Act of 1992. We also desire
to adopt rules that will be easily interpreted and readily applicable and,
whenever possible, minimize the regulatory burden on affected parties.
179. Legal basis. Action as proposed for this rulemaking is
contained in Sections 4 (i) ,. 4(j), 303(r), 612(c), 622 (c) and 623 of the
Communications Act of 1934,• as amended.
180. Description, potential imoact and number of small entities
affected. Until we receive more data, we are unable to estimate the number
of small cable systems that would be affected by any of the proposals
discussed in the Notice of Proposed Rulemaking. We have► however, attempted
to reduce the administrative burdens and cost of compliance for cable systems
that have 1,000 or fewer subscribers as required by Section 3(i) of the Cable—
Act of 1992.
181. Reporting, record keeping and other compliance requirements.
The proposals under consideration in this Notice of Proposed Rulemaking
include the possibility of new reporting and record keeping requirements for
cable systems. •
182. Federal rules which overlap, d.plicate or conflict with this
rule. None.
183. Any significant alternatives minimizing impact on small entities
and consistent with stated objectives. Wherever possible, the Notice
•
proposes general rules, or alternative rules for small systems, to reduce the
administrative burdens and cost of compliance for cable systems that have
1,000 or fewer subscribers as required by Section 3(i) of the Cable Act of
1992.
IV. Paperwork Reduction Act
184. The proposal contained herein has been analyzed with respect to
the Paperwork Reduction Act of 1980 and found to impose a new or modified
information collection requirement on the public. Implementation of any new
or modified requirement will be subject to approval by the Office of
80
Management and Budget as prescribed by the Act.
V% Procedural Provisions
185. For purposes of this non -restricted informal rulemaking
proceeding, members of the public are advised that ez parte contacts are
permitted from the time of issuance of a notice of proposed rulemaking until
the time a draft Order proposing a substantive disposition of the proceeding
is placed on the Commission's Open Meeting Agenda. In general, an gx parte
presentation is any written or oral communication (other than formal written
comments or pleadings and oral arguments) between a person outside this
Commission and a Commissioner or a member of this Commission's staff which
addresses the merits of the proceeding. Any person who submits a written
parte presentation must serve a copy of that presentation on this
Commission's Secretary for inclusion in the public file. Any person who
makes an oral ex parte presentation addressing matters not fully covered in
any written comments previously filed in the. proceeding must prepare a
written summary of that presentation. On the day of the oral presentation,
that written summary must be served•on this Commission's Secretary for
inclusion in the public file, with a copy to the Commission official
receiving the oral presentation. Each ejs parte'presentation discussed above
must state on its face that the Secretary has been served, and must also
state by docket number the proceeding to which it relates. See generally
Section 1.1231 of the Commission's Rules. 47 C.F.R. § 1.1231.
186.. Pursuant to applicable procedures set forth in Sections 1.415
and 1.419 of the Commission's Rules, 47 C.F.R. Sections 1.415 and 1.419,
interested parties may file comments on or before•January 27, 1993 and reply
--
comments on or before February 11, 1993. To file formally in this
proceeding, you must file an original plus four copies of all comments, reply
comments, and supporting comments. If you want each Commissioner to receive
a personal copy of your comments, you mist file an original plus nine copies.
You should send comments and reply comments to Office of the Secretary,
Federal Communications Commission, Washington, D.C. 20554. Comments and
reply comments will be available for public inspection during, regular
business hours in •the FCC Reference Center, Room 239, Federal Communications
Commission, 1919 M Street, N.W., Washington, D.C. 20554. For further
information on this proceeding contact Patrick Donovan at (202) 632-1295,
Regina Harrison at (202)•632-7792, Jay Atkinson at (202) 634-1861, Hugh Boyle
at (202 634-1861, Alan Aronowitz at (202) 632-7792, or Nancy Boocker at (202)
632-6917.
V. ORDERING Rfl CSAMES
187. Accordingly, IT IS OPDEAED, that, pursuant to Sections 4(i),
4(j), 303(r), 612(c), 622 (c) and 623 of the Communications Act of 1934, 47
• U.S.C. §§ 154(i), 154(j), 303(r), 532(c), 542(c), 543, NOTICE IS HEREBY GIVEN
of adoption of proposed regulatory changes and amendments to the
Commission's rules and regulations in accordance with the proposals,
discussions, and statements of issues in this Notice of Proposed Rulemaking,
and that COMMENT.IS SOUGHT regarding such proposals, discussion, and
81
statements of issues.
188. IT IS FURTHER ORDERED, that a rulemaking proceeding IS INSTITUTED
to implement Sections 623, 612, and 622(c) of the Communications Act of 1934,
as amended by the the Cable Television Consumer Protection and Competition
Act of 1992.
189. IT IS FURTHER ORDERED, that commenters SHALL ADDRESS in a
separate section of their comments issues concerning leased commercial access
raised in paragraphs 144-73, supra.
FEDERAL COMMUNICATIONS COMMISSION
Donna R. Searcy
Secretary
82
Appendix A
Proposed Cost Accounting Requirements
Part 76 of the Commission's rules is amended to add a new•Subpart L --
Accounting and Cost Allocation Requirements to read as follows: •
Subpart L -- Accounting and Cost Allocation Requirements
76.701 General Accounting Requirement
For the purpose of making cost determinations required by the Commission,
cable operators shall maintain their accounts in accordance with generally -
accepted accounting principles except as otherwise directed by the
Commission. For purposes of this section, cable service includes all -
programming services offered to subscribers and leased commercial access.
Each cable operator shall maintain accounts in a manner that will enable it
to identify on a system basis and to apply assignment and allocation •
procedures where specified by the Commission, to the following categories of
expenses and. revenues:
Expenses:
Operating Expenses:
Technical (operation and maintenance of cable system)
Programming •
Marketing
General & Administrative
Depreciation on Fixed Assets
Amortization on Intangibles including Goodwill
Interest on Debt:
• Debt associated with•allowable ratebase as defined in §76.702.
Other Debt
Income Taxes
Revenues:
Subscription Fees:
Basic•Tier
Other Tiers
Advertising
Equipment:
Installation
Maintenance and Repair
Sale
Lease
Pay-per-view
Leased Access:
Access
Billing and Collection Service
Other
83
76.702 Cost Categories
Costs recoverable for cable services regulated by this Commission shall
include operating expenses, and depreciation, amortization, return and taxes
on the allowable ratebase. The allowable ratebase shall include, -except as
limited by the Commission, the average annual investment in the following
categories:
Net Working Capital (Current Assets - Current Liabilities)
Fixed Assets (Net of Accumulated Depreciation):
Land and Buildings
Headend
Trunk and Distribution System
Program Origination Equipment
Construction Work in Progress
Other Fixed Assets
Other Assets excluding Goodwill (Net of Accumulated Amortization)
Goodwill (Net of Accumulated Amortization) •
76.703 Joint and Common Costs
Allowable costs as specified in §76.702 which cannot be directly assigned to
cable services (all tier services, leased access, and pay channels), to •
installation, maintenance, and repair of customer equipment, or to other
services, shall be described as joint or common costs. 'Cable operators shall
be capable of determining on a system level the joint and -common costs for
providing cable services. System level joint and common costs shall include--•
corporate level overheads allocated proportionately to the system on the
basis of the number of subscribers served by the system over the total number
of subscribers served by the corporation.
Joint and common costs shall• be. allocated among service categories (e.g.,
cable services, equipttent installation services) as follows:
(a) Wherever possible, joint and common costs are to'be allocated to
service categories based on direct analysis of the origin of the
costs themselves.
(b) When direct analysis isnot possible, joint and common costs
shall be allocated to service .categories based on an indirect,
cost -causative linkage to other costs directly assigned or
allocated to the service category.
(c) When neither direct nor indirect measures of cost allocation can
be found, the joint and common costs shall be allocated to each .
service category based on the ratio of all costs directly
assigned and attributed to a service category over total costs
directly assignable and attributable.
76.704 Per Channel Costs
84
Cable systems shall determine per channel costs on a system basis. Per
channel cost determinations for a system shall employ the following general
methodology_ for tier -services and leased access capacity:
(a) The per -channel cost for any particular channel shall include the
direct assignment of any costs associated With the programming of
such channel.
(b) Where a per -channel cost determination is required for a leased
access service channel, a portion of the joint and common costs
of providing cable service as determined under Section 76.703
shall be included. The amount of joint and common costs
allocated to a leased access channel shall be the total amount of
joint and common costs of providing cable service divided by the
total number of usable activated channels over which cable
service including leased commercial access is being provided on
the system.
(c) The joint and common costs included in the cable services
category shall be allocated to tier= services on the basis of the .
ratio of the number of tier -services channels used to the total
number of usable activated channels over which service is being
provided in the system. This amount shall then be allocated to
each tier -service channel on the basis of the proportion of the
direct expenses assigned to each channel over the total expenses
directly assigned to tier -services channels.
76.705 Tier Services Costs
Cable systems shall determine the total costs for each service tier by
assigning to each tier the total of any non -programming and programming costs
directly assignable to the tier, and the joint and common costs and return
element allocated to each channel in the tier, less that portion of
advertising revenues on the channels in the tier determined by the
Commission.
76.706 Leased Access Services Costs
The cost of lease access service shall be based on the per channel costs
for leased access service plus any direct costs associated with the lease
access activity.
76.707 Equipment Services Costs
(a) The cost of installation., lease, maintenance and repair of customer
equipment shall include all direct material and labor costs associated'with
those activities, plus any joint and common costs assignable to the activity
as determined by the methodology specified in §76.703.
85
APPENDIX B'
Cost -of Service Standards
1. Cost -of -service regulation requires the regulatory authority to
make determinations relating to four major cost components: rate base, the
cost of capital, depreciation, and operating expenses. Cost -of -service
regulation also generally requires rules governing the design of rates once
determinations have been made concerning the four major cost components.
In order to permit adoption of standards for cost -of -service showings for
cable operators seeking to justify rates above a benchmark, we solicit
comment on the what requirements we should adopt in each of these areas and
on the particular issues raised below.
2. Rate Base. Rate base determines the investment upon which a
company is allouied to base depreciation and to earn a return. The costs the
regulated company may include in the rate base have traditionally been
determined by applying the used and useful standard to original
construction cost of the assets dedicated to service.42 ' Under full rate
of return regulation, cost allowances or disallowances can be made, for
example, for cash working capital, excess spare capacity, plant under
construction, and plant held for future use. We.seek comment on whether we
should apply the used. and useful standard to govern what cable operators may
include in the rate base for cable service.
3. Goodwill is the accounting term for the premium paid over original
cost to acquire an existing system including the franchise and the existing
plant and equipment. The direct benefit of the premium is to the operator
selling the system, not the cable customer, since it contributes nothing to
the plant supporting service to customers. Indirectly, customers may benefit
from the•sale if.the purchaser is able to realize operating efficiencies
unobtainable by the seller. In competitive markets, premiums over original
cost are presumably rooted in potential operating efficiencies. In non-
competitive markets, however, premiums may, at least in part, be predicated
227 This Commission has applied the used and useful standard to
communications common carriers under rate of return regulation. 21,2,
American Telephone and Telegraph Company, 9 FCC 2d 30 (interim Decision),
aff'd on recon. 9 FCC 2d 960 (Docket 16258) (1967)1 American Telephone and.
Telegraph Co., 64 FCC 2d 1 (Docket 19129 Phase II Decision) (1977), recon. in
part, 67 FCC 2d 1429 (Docket 19129 Reconsideration Order) (1978). For the
concept of basing utility rates. on used and useful assets, , Munn v.
Illinois, 94 US 113, 134 (1877); Stone v. Farmer's Loan and Trust Co., 116 US
307 (1886); Meagan v. Farmer's Loan and Trust Co., 154 US 362 (1894). For
valuation of used and useful assets at net investment in plant and property,
gg2, Los Angeles Gas and Electric. Co. v Railroad Commission of California,
289 US 287 (1933); Missouri ex rel. Southwestern Bell Telephone Co. v. Public
'Service Commission, 262 US 276 (1923); Minnesota Rate Cases (Simpson v.
Shepard), 230 US 352 (1913); San Diego Land and Town Co. v. National City,
174 US 739 (1899) .
86
on the expectation that customers have no alternative to paying a rate for
service that includes a monopoly rent component.
4. The Cable. Act of 1992 found that cable operators face no effective
competition in most markets, and that cable service customers have_
experienced rapidly increasing rates since deregulation. It is possible
therefore that at least in some cases purchase premiums for cable franchises
reflect some expectation of monopoly profits. We seek comment on the extent
to which goodwill represents the capitalization of operating efficiencies
that could not have been realized by the original cable system operator and,
therefore, should be included in the rate base, and on how this element of
goodwill can be quantified. To the extent goodwill does not represent such a
capitalization of operating efficiencies, we ask whether we should limit a
cable system's ability to recover goodwill from its subscribers by excluding
some or all of it from rate base. We seek comment on the impact of this
determination on the cable industry, investors, and subscribers.
5. We also seek comment on how customer equipment should be treated in
terms of a cable system's rate base. Should it be treated as a current
expense and excluded from the rate base or should it be included and
permitted to earn revenue over time? Should. it be treated differently
depending on the extent to which the cost is recovered when the equipment is
placed in use or the installation complete? It would be unrealistic and
unfair to burden early subscribers with peak investment made for anticipated
future increases in subscribership. One way to avoid this outcome would be
to exclude part of first building investment from the rate base by including
in that base only a portion of this investment, for example, twice the
subscriber penetration percentage, during an introductory period of the
shorter of 5 years or until 50% penetration is achieved, and capitalizing the
identifiable interest expense associated with excluded plant. A somewhat
more favorable treatment for cable operators would be to allow all investment
in rate base, but, during an introductory period, reduce the revenue
requirement by capitalizing the interest expense on the complement of
investment times twice the penetration percentage. Investments in periodic
rebuilds to add channel capacity would be excluded from rate base as plant
held for future use until the channels are in service. Comment is sought on
ways fair to bbth subscribers and operators of reducing the burden on
ratepayers of cyclical investment. Comment is also sought on the impact of
such changes on cable systems.
- 6. We also seek comment on whether a cable system's rate base should
exclude customer equipment and be reduced by investment associated with •
.customer equipment installation and maintenance. Customer equipment
includes converter boxes, remote dontrol units and any other equipment
furnished to the customer subscribing to -the basic tier or programming
services. For purposes of ratemaking, the Cable Act of 1992 separates -the
installation an leasing of customer equipment from the provision of basic
tier services•248 The Commission has relied on time reporting -and other
228 See discussion in paras. 62-71, supra, concerning ratemaking for
customer equipment and installation.
87
allocation methods to apportion maintenance costs between the regulated and
non-regulated functions of common carriers. Comment is sought on how to
apportion joint and common costs of providing basic tier service and
equipment between these two functions. What methods or rules do operators
use today to identify the share of such costs associated with the provision
of basic tier service?
7. Cost -of -Capital. Generally the largest single expense after
depreciation for a capital intensive industry is the cost of borrowing
capital. Under applicable standards governing cost -of -service regulation,
rates for a public utility must be set to permit it to earn a return on its
capital investment that is sufficient to assure confidence in the capital
soundness of -the utility, to maintain its credit, and to attract capital.229
This is usually referred to as the capital attraction standard. In order to
assure that this standard is met, it is necessary for the regulatory
authority to determine the cost of capital for the regulated enterprise.
This is usually done on an industry -wide basis. Thus, it may be necessary to
establish a cost of capital for cable companies seeking to make a cost -of -
service showing._
8. The capital structure and debt and equity costs of many cable
companies are different than that of mature public utility companies. Much
of the debt and equity invested in the cable industry is not publiclyheld
and 'poses evaluation and confidentiality problems. Of the few cable
Companies with widely traded public stock, several have in the recent past
posted large losses in equity value and appear to be trading on the
expectation that the long-term growth rate in earnings will be extremely
9. The cost of capital for canes facing effective competition is
predicated on the expectation that it is difficult to exceed the competitive
return. The return stock holders expect and debt holders demand thus
primarily reflects investor perception of the financial and business risk of
the individual company. The Cable Act of 1992 reflects the view that many
cable markets are not competitive and that the resulting industry market
powerbeen used its market power to raise rates above competitive
levels -1l
10. The cost of capital for cable companies may be substantially
influenced by investor hopes for profits in excess of what competition would
allow and fears of government intervention to reduce those profits. We ask
whether expectations of future government regulation could cause the
229 -SSee e.g., Bluefield Water Works Improvement Co. v. PSC, 262 U.S.
679 (1923),.FPC v. Hope Natural Gas, 320 U.S.
230 ate Institutional Brokers Estimate
Data Book (July 18, 1991) , Lynch, Jones, and
York, N.Y. 10014
231 Cable Act of 1992, § 2 (a) (1)-(5).
88
591. (1944) .
System (TBFS), Monthly Summary
Ryan, 345 Hudson Street, New
observed cost of capital for cable companies to be far higher than would be
necessary to induce investors to supply capital for providing cable service
under a cost -of -service regulatory regime. We ask whether it is correct that
providing basic tier cable service and cable programming services is no more
risky thartr far example, what the -Standard & Poors 400 industrial companies
do.
11. In the 1990 LEC Represcription Order232 this Commission used the
S&P 400 companies to establish equity market benchmarks in setting a cost of
equity for interstate access service. We found that there was no convincing
evidence that the riskiness of regulated monopoly telephone operations
exceeds the riskiness of non-regulated firms subject to full competition. We
concluded that the cost of ity for interstate access should be well below
the median for the S&P 400. We seek comment on how a fair cost of capital
for cable services should compare to the average cost of capital for the
companies in the S&P 400. We seek comment on .whether the prescribed cost of
capital for the cable industry should be higher, lower or the same as that
allowed other regulated industries. We seek comment generally on if and how
we should determine the cost -of -capital of cable companies.
13. Depreciation. Depreciation affects revenue requirements in two •
ways. Depreciation expense, calculated as the depreciation rate times gross
plant, spreads the recovery of the capital, invested in plant over its useful
life. Accumulated depreciation reserve is the sum of returned capital and is
subtracted from gross plant to calculate the rate base to which the
prescribed rate of return is applied. Traditionally this Commission has
reviewed the depreciation rates and practices of the companies it regulates.
Allowable depreciation expense has been defined using straight line
depreciation over the expected service life of plant investment. We seek
comment on the expected service life of cable plant and current industry
depreciation practices, and the methods the industry now uses to determine
annual depreciation expense, e.g., straight line vintage life group or
straight line equal life group.
14. The use of an original cost rate base requires a determination of
the -depreciation reserve. The book reserves of cable"companies were not
accumulated on the basis of prescribed depreciation rates. Comment is sought
on the impact of using existing book reserves -and prescribing depreciation
expense on the basis of expected remaining service life.
15. To the extent that we deferred recovery of capital costs of
certain facilities during.some introductory period to avoid ratepayer burden,
we would propose also to defer recovery of the associated depreciation
'232 Represcribing the Authorized Rate of Return for Interstate Services
of Local Exchange Carriers, Order, 5 FCC Rcd 7507 (1990) (1990 LEC
Represcription Order), recon. denied, 6 FCC Red 7193 (1991), petitions for .
'review docketed sub nom., Illinois Bell Telephone Co., et al. v. FCC, No. 91
1020 (D.C. Cir. filed January -ll, 1991).
233 1990 LEC Represcription Order 5 FCC Rcd at 7528.
89
expense. One way to accomplish this is to allocate depreciation on the units
of production method. Each year's depreciation expense would be related to
its fraction of the total paying subscriber years of service expected over
the life of the investment.
16. We solicit comment on requiring that goodwill, to the ektent that
it is allowed in the rate base, be amortized over the remaining life of the
associated franchise or, alternatively, over 40 years the generally accepted
practice under GAAP. We ask whether this would be appropriate for the cable
industry. We also seek comment on whether the amortization of goodwill not
in rate base should be an allowable expense and what is the appropriate
amortization period.
17. operating Extense. Operating expenses include plant specific
costs (e.g., maintenance), plant non-specific costs (e.a., power, engineering
and testing), customer operations (e.g., marketing, billing and collection),
and corporate operations (e.g., planning, accounting, finance, and legal).
Operating costs would also include the costs of obtaining and transmitting
programming. For a cable operator serving a single franchise and having no
other operations, we seek a simple method of identifying the operating
expenses that should be recoverable from cable services. We note that the
Cable Act of 1992 appears to require that the investment, expenses, and
revenue associated with the installation, maintenance, and leasing of
customer equipment used to receive the basic tier be segregated for
determining the costs recoverable from equipment charges. For multi -
franchise operators, allowable costs may be directly attributable to a
particular service within a franchise area or apportioned on the basis of
relative number of subscribers or households passed, relative plant
investment, or actual use factors (e.g., maintenance trips.) We seek comment
on whether cable systems' property records are.sufficientiy detailed to
support apportionment based on plant investment and what actual use factors
are widely available.
18. Design of Rates. The revenue requirement consists of operating
expenses, depreciation expense, franchise fees and related costs, taxes and
return on rate base. The link between the revenue requirements and rates is
the apportionment of. cost recovery among services and ultimately
subscribers. We solicit comment on two alternative methods of identifying
the portion of the revenue requirement recoverable in basic service rates.
We could calculate the basic tier costs as -direct channel costs, less direct
Channel revenues, plus an allocation of other costs based on relative number
of channels in use. This would represent the maximum cost recoverable in
rates for that tier under the Cable Act of 1992. If that cost were divided
by the projected number of subscribers, the entire cost would be recovered
from the .rates for the basic tier. Alternatively, the costs of the basic
tier could be calculated as direct channel costs, minus advertising revenue,
plus an allocation of other costs based on relative direct channel costs. If
the costs for programming on basic tier channels were lower than for other
tiers, this method would allocate fewer costs to the basic tier than the per -
Channel method. It would also be consistent with this Commission's Part 64
rules, which require .that joint and common costs not directly assignable, or
attributable using a cost -causative linkage to a directly assignable cost, be
90
•
allocated based on a general allocator camped using the ratio of all
expenses directly assigned or attributed."'' We seek comment on the
proportion of costs directly assignable, on relative direct channel costs,
and on whether a direct cost plus. general allocator formula would produce a
fair and reasonable rate for the basic tier.
19. We seek comment on these two alternatives for design of rates for
the basic service tier. Other allocation methods may also be consistent
with our rules. We note that, for example, the methods -we have proposed may
be combined. Joint and common costs could be allocated on relative number of
channels between pay, leased access, and all other. Within the all other
category, joint and common costs could be allocated on relative direct
channel costs. We seek comment on other allocation methods that would
produce a basic tier rate reasonable for both subscribers and operators.
We seek comment generally on requirements that should be established for
design of rates by cable operators seeking to justify rates higher than the
benchmark.
234 5ee Separation of Costs of Regulated Telephone Service from Costs
of Nonregulated Activities, CC Docket No. 86-111, 2 FCC Rod. 1298 (1987),
paragraph 161 (a)(3)(iii), recon., 2 FCC Rod 6283 (1987), further recon, 3
FCC Rcd 6701 (1988), aff'd sub nom. Southwestern Bell Com. v. FCC, 896 F.2d
1378 (D.C. Cir. 1990) .
91
APPENDIX C
FEDERAL COMMUNICATIONS COMMISSION
ANNUAL REPORT O' CABLE TELEVISION SYSTEMS
FINANCIAL UNIT DATA
FCC FORM 326, SCI-EIDULE 1
This is Schedule 1 of YOUR FCC FORM 326. It Waist be colleted and/or
corrected and returned to the Commission with Schedules 2 through 5. If the
communities listed do not reflect your present consolidation, add.or delete
as necessary. If the pay cable fee is a "per program", rather than "per .
month" charge, attach a rate schedule. Include cents with all fee data.
PREVIOUSLY FILED.
SYSTEM oasurrnms 02.PRISIM THIS FILIAL UNIT
IDENP
NAME •
TYPE
C1PERATIONAL STATUS
INSTAT T ATIQ FEE
SUBSCRIDER EEE
MENTHLY PM CABIE EEE
92
SCHEDULE 2 CABLE TELEVISION ISICN REVENJES AND EXPENSE
SES
FOR PERIOD BEGINNING: 191 1 I mol 1 1_ dyl 1 1 ending: 191 l 1 mol 1 1 dyl 1 1
Line AMOUNT
No. ITEM (OMIT CENTS)
1 OPERATING REVENUES
11 Installation Revenue 1 1 1_ 1
2 Regular Subscriber Revenue 1 1 1 1
31 Pet Program or Per Channel Gross Revenue (Pay Television) 1 I 1 1
41 Advertising Revenue I I. I 1
51 Special Service Revenue 1 1 1 1
61 Other Revenue 1 1 1 1
71 Total Operating Revenues 1 1 1 1
1 ATD EXPENSES
SERVICE EXPENSES:
81 Salaries, Wages, and Employee Benefits
91 Pole Rentals
101 Duct Rentals
111' Private Microwave Service (CARS)
121 Common Carrier Microwave Service
1
1 Total Tariff (Leaseback) Charges (Applies only to
131 Systems receiving telephone company channel service.)
141 All Other Service Expenses
15 I
PAYMENTS TO PAY CABLE PROGRAM ,SUPPLIES
ORICTICN
161 Salaries. Wages, and Employee Benefits
171 All Other Origination Expenses
SELLING, C2iAL, AND N1 1NIS RATIVE EXPENSES:
181 Salaries. Wages, and Employee Benefits
191 Franchise Fees
201 Copyright Fees
211 All .Other Selling: General, and Administrative Expenses
221 TOTAL CIPS RATIM EXPENSE
231 TOTAL I C INCOME
1 ATICN AND -AMRIIZATICN
241 Depreciation
251 Amortization •
• 1 O►II ER 1LCC rE AND EXPENSES
1 C)MER INCOME
261 Total Other Income
1 OTHER :
271 Interest
281 Miscellaneous
291 TOTAL �1R INCOME OR. IOSS)
301 BINARY ITIS
93
I I I
I I I
I I I
I I I
•
I I I
LI 1 1 1 1 1
1 1 1 1 1 1
1 1 1 1 1
1 1 1 1 1 1
1 1 1 1 1 1
e
. 311 TOTAL INCOME CCR DOSS) BEFORE TAXES 1 1 1 1 1 1 1 1
1 TOTAL ASSET'S: 1
32,1 To be entered only for those systems (fewer than 1,000 1
1 _s.ubscribers) exempted from filing schedule 3. 1
-I 1 1 1 1 1 1 1
SCHEDULE 3
Line
No. ITEM
ASSE'T'S
CURRENT ASSETS:
1 Cash
2 Accounts Receivable
3 Other Current Assets
4 Total Current Assets
FIXED ASSETS:
5 Land and Buildings
6 Headend
7 Trunk and Distribution System
8 Subscriber Devices
9 Program Origination Eauicment
1Q Construction Work.in Proaress
11 Other Fixed Assets
12 Plant Adjustment
13 Less: Accumulated Depreciation
14 Total Fixed Assets
MUE : ASSETS:
15 Other Assets
16 Less: Accumulated Amortization
17 Total Other Assets
18 TOTAL ASSETS
LIABILITIES
ES
CURRENT LIABILITIES.
19 Loans Payable
20 Accounts Payable
21 Other Current Liabilities
22 Total Current Liabilities
DEFERRED CREDITS
23 Total Deferred Credits
ICIGIERIM DSP:
24 Total Long Term Debt
OWNER'S EQUITY:
25 Total Stock Issued
26 Proprietor's Equity
27 Retained Earnings
2.8 Other Owner's Eouity
*-29 Total Owner's Equity
30 TOTAL LIABILITY AM CWNR' S EQ[TITY
CHECK METHOD CF DEPREt=EATICH USED
94
BADE SHEET INFCRI TION
L
III
1 1 1
(1) Straight line (2) Declining Balance
(3)Double Declining Balance
(4) Sum -of -the -Year -Digits
(5) Other
SCHEDULE 4 supPlawkrrx, Paccurnic INKFM.TICts1
PART A IAmCrtiza-IAmortiza- 1 Amount 1 Amount
1tion tenn1tion method1capitalzed1amortzed
lin year 'used (code)Iduring yr.Iduring yr.
1. Deferred System Development Costs I I 1 1$11 I 11$1 I I 1 1
2 Franchise Costs (recorded as assetsl 1 I I$ 1 1 1 1 1&I 1 1 1 1
3. Goodwill 1 I I I$ 1 1 1 1 ISI 11 1 I
CCDES1(1)Straight line (3)Double declining balance (5) Other
1(2)Declinina balance (4)Sum-of-the-vears digits
PART B I Total 'Amt. cap.talized1 Useful Life
ICapitalizedlDurina year I years
4. Capitalized Interest on System! 1 - I
Construction 1$ 1 1 1 1.1 1 1 l 1 1 1 I 1$ 1 1 1 I I I I
PART C .I Total Amt.I Amount NOT I Amount Being
I•of Asset I Being Amortized' Amortized
5. Deferred Sys. Develt.costsl$ 1 1 1 L 1$ Ill 1 1 1 I IS I I 1 1 1 1 1
6. Franchise Costs
(recorded as assets) I$ 1 1 1 I !SIM 1 1. 1 'I S 1 I 1 III 1
7. Goodwill 1$ 1. 1 1 1 1$ 1 I I 1 I 1 1 1$ 1 1 I 1
PART D ITotal Amt. of 1 Method Used To
!Allocated Costs1Allocate Costs To System Code
8. Overhead Costs Allocated
To System IS 1111 1$ 1 1 1 1 III 1$ 1 •I 1 1 1 1 1 1
PART E I Amount
9. Original Cost of Fixed
Assets (Seller's Book Value) I$ I I 1 II I I
10. Portion of Purchase Price Allocated I •
to Seller's Book Value I$ 1 1 1 I 1 I
11. Recorded Cost of Fixed Assets by Purchaser IS II 1 1 1 1 1 •
PART F 'Fixed asset) 'Useful' 'Useful)
Iclassifica-I Amount (Life I Amount 1Life I
Ition 1 IYears 1 (Years 1
12. Estimated Useful l IS•1 1 1 1 1 IS 1-1 1 1 l
Lives of Fixed I 1$ 1 l 1 1 I I$ 11 I I I
Assets • 1 14 1 I I I I 1$ 1 1 1 1 1
IS -1 11 I I IS 1 I 1 I 1
PART G • 1 Amount 1Number
1 lof Persons
13. Salaries to Owners IS I I 1 I
14. Other Direct Payment Included in Total !Total Amount Tvice
15. Expense Payments to Spouse or Relatives I$ 1 1 1 1
95
16. Expense Payments to.$pouse or Relatives 1$ 1 1 1 1
TYPE I (1) Rent - (3) Payment for equipment (5) Travel & Entertainment
1 (2) Payments for services (4) Payments for supplies (6) Other
SCHEDULE- 5 — Er
Indicate the number of employees for the work 1NUMBER OF EMPLOYEES
week in which the last day of the IFOLL TIME ill 1111
Fiscal Year fell. IPART TIME 11 1 1 1 1 1 1
CERTIFICATICN
THIS REPORT MUST BE CERTIFIED.BY THE INDIVIDUAL OWNING THE REPORTING CABLE
TELEVISION SYSTEM. IF INDIVIDUALLY OWNED; BY A PARTNERSHIP; BY AN OFFICER OF
THE CORPORATION, IF A CORPORATION; OR BY A REPRESENTATIVE HOLDING POWER OF
ATTORNEY IN A CASE OF PHYSICAL DISABILITY OF AN INDIVIDUAL OWNER OR HIS/HER
ABSENCE FROM THE'UNITED STATES.
I CERTIFY THAT I HAVE EXAMINED THIS REPORT, AND THAT ALL STATEMENTS OF FACT .
CONTAINED THEREIN ARE TRUE, COMPLETE, AND CORRECT TO THE BEST OF MY KNOWLEDGE,
INFORMATION, AND BELIEF, AND ARE MADE IN GOOD FAITH. .
SIGNATURE
PRINTED NAME OF PERSON SIGNING .
1 DATE
1
LEGAL NAME OF RESPONDENT
!street address
RESPONDENTS1
ADDRESS 1
1city
1 •
!state !DATE
1 1
FCC Form 326
96
FCC
APPEMIX D
. PROPOSED FORM FOR LOCAL FRANCHISING AUTHORITY CERTIFICATION
APPROVED OMB
FEDERAL COMMUNICATIONS COMMISSION
WASHINGTON, D.C. 20554
CERTIFICATION OF FRANCHISING AUTHORITY TO REGULATE BASIC CABLE SERVICE RATES
. AND INITIAL FINDING OF LACK OF EFFECTIVE COMPETITION
(Under 47 C.F.R.
1. a) Name of Franchising Authority:
b) Address:
c) Telephone:
2. a) Name(s) and address(es) of cable system(s) within your jurisdiction.
b) Name(s) of system(s) you claim to be subject to regulation.
c) Have you served a copy of this form on all parties listed in b?
Yes No
3) Will your franchising authority adopt and administer regulations with
respect to basic cable service that are consistent with the regulations
adopted by the FCC pursuant to 47 U.S.C. § 543 (b)?
Yes No
4) With respect to the franchising authority's regulations referred to in
Question 3:
a) Does your franchising authority have the legal authority to adopt them?
Yes No
b) Does your franchising authority have the personnel to administer them?
Yes No
5) Do the procedural laws and regulations applicable to rate regulation
proceedings by your franchising authority provide a reasonable opportunity
for consideration of the views of interested parties?
Yes No
•
6) Is (are)• the cable system(s) listed in 2b subject to effective competition?
(Effective competition means that (a) fewer than 30 percent of the households
in the franchise area subscribe to the cable service of a cable system; (B)
the franchise area is (i) served by at least two unaffiliated multichannel -
video programming distributors each of which offers comparable. video
programming to at least 50 percent of the households in the franchise area;.
_ and (ii) the number of households subscribing to programming services offered
by multichannel video programming distributors other than the largest
multichannel video programming distributor exceeds 15 percent of the
households in the franchise area; or (C) a multichannel video programming
97
distributor operated by the franchising authority for that franchise area
offers video programming to at least 50 percent of the households in that
franchise area.)
Yes No
98
Before the
FEDERAL IIC ' IC S OOMKISSIc2
Washington, D.C. 20554
In the Matter of
)
Implementation of the Cable
Television -Consumer Protection
and Competition Act of 1992:
Rate Regulation
Order.
Adopted: December 10, 1992
By the Commission:
Response Date:- January 22,. 1992
FCC 92-545
MM Docket No. 92-266
Released: December 23, 1992
1. The Commission has adopted a Notice of Proposed Rulemaking
("NPRM")1 that proposes and discusses alternative procedural and substantive
regulations to implement the requirements of Secions 623, 612, and 622(c)
of the Communications Act of 1934, as amended' by 'the Cable Television
Consumer Protection and Competition Act of 1992 ("Cable Act of 1992").3
These statutory provisions direct the Commission to adopt rules to govern
rates for cable service and for leased commercial access.
2. .Section 623 . as . amended by the Cable Act of 1992 requires the
Commission to establish rules to govern rate regulation of cable services
offered by cable systems not subject to effective competition. The statute.
requires the Commission in .establishing such regulations to consider the
rates for cable systems that are subjectto effective competition.4 Section
623 additionally requires the Commission t� consider other factors in
fashioning regulations governing rates for cable sezvice.5 We must also seek
to reduce administrative burdens on cable systems, franchising authorities,
1 Implementation •of the Cable Television Consumer Protection and
Competition Act. of 1992, Rate Regulation (Notice of Proposed
Ruiernaking) (" NPPM") , Nei Docket No. 92.-'4M6, FCC 92-544, adopted De amt er 10, 1992.
2 47 U.S.C. Sections 543, 532, and 542(c).
3 Cable Television Consumer Protection and Competition Act, Pub. L: No.
102-385, §§ 3,9,14, 106 Stat. 1460 (1992).
4 Communications Act Section 623(b)(2), 47 U.S.C. Section 543(b)(2)..
5 Id.
consumers, and the Commission.6
regulatory alternatives based on
implementation of the statute
administrative burdens.
1
As discussed in the NPRM, benchmark
industry data may permit an effective
that significantly reduces overall
3. In order to assure that we may adequately consider the rates of
systems subject to effective competition, as required by the Cable Act of
1992, and in order to permit the Commission and interested parties to fully
consider benchmark regulatory alternatives, we have determined to collect
data from a sample of cable systems. The sample of systems from whom we will
collect data includes a group consisting of cable systems identified as
likely to be operating in competitive markets, a random sample of cable
system community units, and a group of large systems added to compensate for
the small number of large systems likely to appear in a random sample. The
sample will consist of approximately 850 community units. The data we will
collect from these systems 'will provide representative rate and other
information that could be useful in establishing benchmarks, if the
Commission elects to adopt that regulatory alternative.7
•
4. This collection of infonttiation.is mandatory.8 The systems we
have identified in our sampling of community units must complete and return
the questionnaire set forth in the attached Appendix by January 22, 1992.9
In order to facilitate the completion'of this questionnaire by the respondent
cable systems, we have prepared a cover letter and instructions. •These
materials are also included in the attached Appendix. The cover letter,
instructions, and questionnaire will be sent to the respondent cable systems
by certified mail.
6 Communications Act, Section 623(b) (2) (A), 47 U.S.C. Section
543(b) (2)
7 We have not requested data on system costs because of lack of uniform
accounting categories by cable systems and the unavailability of
disagreggated system specific data within the time constraints imposed by the
Cable Act of. 1992. -• To the extent parties support a cost -of -service
•benchmark, however, they should provide specific and detailed cost data in
response to the NPRt.
•
8 The_ Office of Management and Budget approved this collection of data
under the Paperwork Reduction Act of 1980 on December 21, 1992, OMB Control
No. 3060-0529. Approval for this collection of information will expire on
March 15, 1993.
9 We have associated• with the public file in MM Docket 92-266 a list of
the 850 systems subject to this data collection. This list is available for
inspection and copying in Room 239, Federal Communications Commission, 1919
M. Street, N.W., Washington, D.C. 20554 9:00AM - 5:30PM,• Monday - Friday.
Copies may also be obtained from the Commission's contractor for public
records duplication, .Downtown Copy Center, 'Suite 640, 1990 M. Street, N.W.,
Washington, D.C. 20036, (202) 452-1422.
2
5. We do not anticipate that the information specified in the
Appendix will be competitively sensitive. If a respondent believes that
• this information should not be released to the public, it should submit its
responses pursuant to Section 0.459 of the Commission's rules.l0 -
6. Respondents shall file an original.and three copies of the
questionnaire with the Cable Television Branch, Attn: Rate Questionnaire,.
Federal Communications Commission, Room 244, Washington, D.C. 20554.
7. Accordingly, IT IS ORDERED, pursuant to Sections 4(i), and 403,
of the Communications Act of 1934, as amended, 47 U.S.C.'Section 154(i), and
403, That cable systems subject to this data collection shall complete.and
return the questionnaire set forth in the attached Appendix by January 22,
1992.
10 47 C.F.R. Section 0.459
FEDERAL COMMUNICATIONS COMMISSION
Donna R. Searcy
Secretary
3
Appendix
4
• •
FEDERAL COMMUNICATIONS COMMISSION •
WASHINGTON
December 23, 1992
Approved by OMB
3060-0529
Expires March 15, 1993
Estimated average burden
hours per response: 20 hrs.
To the cable system operator:
In order to implement the Cable Television Consumer Protection
and Competition Act.of-1992, the Federal Communications
Commission is collecting information from certain cable systems
concerning the rates they charge, competition in their franchise
areas, and other system characteristics. The information is
needed in order for the Commission to devise procedures for .
determining whether rates are reasonable or unreasonable. The
information provided will be used for determining overall
conditions in the industry, and not to identify individual
systemsfor enforcement purposes.
As described in a Commission Order, FCC 92-545, you are required,
pursuant to 47 U.S.C. Section 403, to fill out and return the
attached questionnaire. Failure to respond to the questionnaire
or misrepresentation of information may result in'enforcement
action under 47 U.S.C. Section 503. Careful and complete
responses are extremely important for enabling the Commission to
devise sensible rate policies.
Though the questionnaire is being mailed to the community unit,
it should be forwarded to the system manager to be completed. .A
signed original and three:copies should be returned by January
22, 1993; to the following address:
Cable Television Branch
Federal Communications Commission
Room 244
Washington, DC 20554
Attn: Rate Questionnaire
The public reporting burden for this collection of information is
estimated to average 20 hours per response, including the time
for reviewing instructions, searching existing data sources,
gathering and maintaining the data needed and completing and
reviewing the collection of information. Comments regarding this
burden estimate or any other aspect of this collection of
!
information; including suggestions for reducing the burden, may
be. sent to the Federal Communications Commission, Records •
Managemerit Division, Room 416, Paperwork Reduction Project (3060-
0529), Washington, DC 20554, and to the Office of Management •and
Budget, Paperwork Reduction Project (3060-0529),. Washington, DC
20503.:
•':
2
C
• Cable Television Branch
Room 244
Federal Communications Commission
Washington DC 20554
Attn: Rate Questionnaire
CABLE TV SYSTEM OPERATORS RATE STRUCTURE QUESTIONNAIRE
ISSUED PURSUANT TO FCC ORDER 92-545
This questionnaire is intended to provide the FCC with
information regarding rates and other characteristics of the
cable industry. The data will be used to assess general cable
industry rate relationships. Your response is mandatory.
Legal Name of Cable System:
Doing Business As:
I certify that I have examined the attached report, that to the
best of my knowledge, information and belief, all statements of
fact contained in this report are true and that said report is an
accurate statement of the affairs of• the above named respondent
in respect of the data set forth herein:
Signature of respondent:
Title of respondent
/ / Date signed
THIS COVER PAGE MUST BE SIGNED AND RETURNED WITH THE ORIGINAL AND
3 COPIES OF THE FULL QUESTIONNAIRE BY FRIDAY JANUARY 22, 1993 TO:
Cable Television Branch
Room 244, FCC
Washington DC, 20554
Attn: Rate Questionnaire
HOW TO COMPLETE THIS QUESTIONNAIRE
The franchise area to.which this 'questionnaire is addressed has
been selected by random or other means to form part of a
representative sample of the cable industry. The questionnaire
seeks rate and other information for:
(i) this franchise area;
(ii) the whole cable system to which it belongs; and
(iii) one other franchise area in the same cable system.
You should read the attached instructions before completing this
questionnaire. Provide the best information currently available.
If the requested information is not precisely known provide your
best estimate. For further assistance in completing this
questionnaire, contact:
Ms. Florence Setzer at (202) 653-5940 or
Ms. Jane Frenette at (202) 634 -1861. -
There are 13 schedules in this questionnaire:
SCHEDULE 1
SCHEDULE 2
SCHEDULE 3
SCHEDULE 4 •
SCHEDULE 5.
SCHEDULE 6
SCHEDULE 7
SCHEDULE 8
SCHEDULE 9
SCHEDULE 10
SCHEDULE 11
SCHEDULE 12
SCHEDULE 13
CABLE SYSTEM INFORMATION
CABLE SYSTEM CHARACTERISTICS
CABLE SYSTEM ANNUAL REVENUE
COMPETITION IN FRANCHISE AREAS
FIRST FRANCHISE AREA.: CHARACTERISTICS
FIRST FRANCHISE AREA: FRANCHISE FEES AND CHARGES
FIRST FRANCHISE AREA: 1992 CHANNELS AND CHARGES
FIRST FRANCHISE AREA: 1986 CHANNELS AND CHARGES
SECOND FRANCHISE AREA SERVED BY SYSTEM
SECOND FRANCHISE AREA: CHARACTERISTICS
SECOND FRANCHISE AREA: FRANCHISE FEES AND CHARGES
SECOND FRANCHISE AREA: 1992 CHANNELS AND CHARGES
SECOND FRANCHISE AREA: 1986 CHANNELS AND CHARGES
Schedules 1 thrbugh 4 must be completed for the whole cable •
system including the franchise area to'which the questionnaire
has been addressed and all other franchise areas in the sysstem..
Schedules 5 through 8 must•be completed for the franchise area to
which this questionnaire is addressed. This franchise area is'
.referred to in the questionnaire as "the first franchise area".
Schedule 9 must be completed to select a second franchise area in
the system. Where prices and channels are'the same for all
franchise areas in the system, Schedules 10 and 11 must be
completed for this second franchise area. Where prices or
channels differ among franchise areas in the system, all of
Schedules 10 through 13 must be completed for this second
franchise area. (If the system has only one franchise area you
do not need to complete Schedules 9 through 13.)
2
FCC USE Identifier:IMIMIBI 1 1 1 1 I 1 10111
SCHEDULE 1 CABLE SYSTEM INFORMATION
Line
1
2
Item:
Legal name of cable system
System is "Doing Business As"
3
City or town,
county and state in
which system is located
4
5.
6
7
8
9
10
11
12
List all communities served by this system, zip code -of
community, Community Unit ID Number and the name of each
community's Franchise Authority
Community
Zip
Code
Community
Unit ID No
Franchise
Authority
13
14
Name of cable system owner
City or town
and state location
of cable system owner
Name of cable system -
contact officer responsible
15 for completing this form
16
Phonenumber of cable
system contact officer
Name of franchise
17 authority contact officer r
•
Phone number of franchise"
18 authority contact officer
* Provide a contact officer name and phone number for the
franchise authority for the franchise area to which this
questionnaire is addressed.
3
FCC USE
SCHEDULE 2
Identifier:IMIMIBI 1 1 1 1 1 110121
CABLE SYSTEM CHARACTERISTICS
All information provided should be as of September 30, 1992.
Line
1
2
3
4
Item:
Number of households in the system area 1 1 1 1 I 1 I I
Number of households passed 1 1 1 1 1 1 1 I
Number of households subscribing 1 .1 1 1 1 1 1 1
5
Number of addressable subscribers 1 I 1 1 1 1 1 1
What is the main type of addressability? (e.g., one.way,
two-way, impulse) 1
-6
7
8
12-
•
13
14
Number of headends serving the system
Age of principal headend
-Total line miles of distribution plant
in the system
'1
1 1 'years
1 1 C 1 1 1 (miles
Percentage of line miles of distribution plant which is: 1
- above around: 1 1 1 I%1
- below around: 1 1 1 1%I
- fiber: 1 1 1 1%1
Is the system required to bury 1
' all cable drops?' : (Circle one.) . 1 -Yes No 1
1
Is.the system part of a Multiple System Operator (MSO) .I
of 2 or more systems? ('Circle one.) •
1 Yes 1 No 1
1
If you responded "Yes" on line 13, how many systems are 1
in the. MSO? 1
1 1 1
4
.FCC USE Identifier:IMIMIBI 1 I 1 I I 110131
SCHEDULE 3 CABLE SYSTEM ANNUAL -REVENUE
All information should be for the latest complete fiscal year.
Line 1 Item:
1 1 Fiscal year ending date: Month 11 I Day 11 1 Year! 11
Revenue from: AMOUNT (omit cents)I
I I
2 I- subscriptions to your basic tier $1 1 111111
3I- other tier subscriptions $I 11' 1 I I I 1 I
.
4 .1 - pay channel subscriptions $I 1 I I. 1 l I 1
5 1- pay-per-view charges $l I I 1 I 1 I
.6 - 1- advertising -on basic tier* $I 11 11 I
.
7 1- advertising on other tiers $1 11 11 I
-
8 1- advertising on pay and nay -per -view $1 11 I I
9 1- installation charges $1 I I I I
10 1- equipment rental $l 1 1 I I
11 1 - additional outlet charges $I 1 1 1. 1
12 - other revenue $1 11 1 I I
13 Total revenue $I I I I 1 I I. I
If you show an amount on line 12 .for other revenue,
indicate the type(s) of revenue: -
14
.What is the value of -any non -revenue .berief.ts, such as
'promotional advertising, received by the system for
• •1 providing cable services during the fiscal year?
15 1 • $1 F 1 I 1• I I I 1
Specify the type(s) of non -revenue benefits received:
16
5
....i.... ',�..�.L :aJ.Y.L ':!�...::.1.. �_. FJa:...n�....� �.a...._w.��.�..w..:...r��.�t�.................._�v.a. __. ..1 _.-... ....�.____ ...., ..Y.� ._... _. w.......... ....�..... �.�.. �_.�_____—__
FCC USE Identifier:IMIMIBI I l I 1 1 1 10141A1
SCHEDULE 4 COMPETITION IN FRANCHISE AREAS
Line
1.
Item:
Do fewer than 30 percent of the households in any
franchise area served by the system subscribe to any
cable services (of this or any cable system)?
(Circle one.)
1 Yes 1 No
If you answered "Yes" on line 1, list the franchise
areas with less than 30 percent of households subscribing
to this or any cable service and the estimated percentage
of households subscribing to any cable service in these
franchise areas:
Franchise areas with less than
30% of households subscribing
to this or any cable service
Estimated % of households
subscribing to this
or any cable service.
3
Does any competitor* offer similar service to at
least 50 percent of households in any franchise area
'served by this system? (Circle one.)
1 Yes I No
* For the purposes of Schedule 4,' a competitor could include:
another unaffiliated cable.operator;
- a multi -channel multi -point distribution service (MMDS);
- a direct broadcast satellite (DBS) service;
- a television receive -only (TVRO) satellite program
distributor; or
a satellite master antenna television (BMATV) system.
However, a competitor' must offer a similar service by making
available for purchase by subscribers or customers multiple
channels of video programming.
FCC USE Identifier:IMIMIBI 1 1 1 1 1 1 10141BI
SCHEDULE 4 CONTINUED COMPETITION•IN FRANCHISE AREAS
Line
Item:
4
If you answered "Yes"'on line 3, list the franchise
areas which have competitors which offer similar
services to at least 50a of households, the name of all
such.competitors in each franchise area and your estimate
of the percentage of households in each franchise area to
which each competitor offers similar services.
Name of franchise area
in which a competitor
offers similar service
to at least 50% of
households
Name
of all such
competitors
in each
franchise area
Percentage of
of households
to which such
competitors
offer service
Does a franchising authority offer video programming
service to at least 50• percent of households in any
franchise area served by this system? (Circle one.) .
5
6
1 'Yes I• No
If you answered "Yes" on line 5, list the franchise .areas
in which franchise authorities offer video programming
services td at. least 50% of households, the name of the
franchise authority and your estimate of the percentage
of households in the franchise area to which they offer
services.
Name of franchise area
in which franchise '
authority offers
video proarammina
Name of •
franchise
authority
Percentage
.of
households
7
FCC USE Identifier:IMIMIBI I I I I I 110151
SCHEDULE 5 FIRST FRANCHISE AREA: CHARACTERISTICS
The first franchise area is the one to which this questionnaire
is addressed. All information.provided should be as of September
30, 1992..
Line
Item:
1.
Name of franchise area
2
Community Unit ID No. of
this franchise area I I I I I I
Number of households in this
franchise area
I I 1 I 1 1 •I I
4
5
Number of households in this
franchise. area which are passed
by system distribution plant
I I 1 1 1 1 1 1
Number of households in this franchise area
which subscribe to this system I 1 1 1 1 1 1 1
Number of addressable
subscribers in this franchise area 11 1 1.1 1 1 I
What is the main type of addressability? (.g.,.one-way,
two-way, impulse)
7
8
9
10.
Number of headends serving franchise area I I I.
Age of principal headend 1 .1 lyearsl
Line miles of distribution plant
in this franchise area 11 1 1 1 1 Imilesl
14
Percentage of line miles of distribution. plant in
line 10 which is:
- above around: 1 1 1 11%I
- below around: 1 1 1 1%1
- fiber: I I 1 1%1
1
Is the franchise required to bury
all cable drops? (Circle one.) ' 1 Yes I No 1
8
FCC USE Identifier:IMIMIBI I I I I I 1 10161
SCHEDULE 6 FIRST FRANCHISE AREA:
FRANCHISE AUTHORITY FEES AND CHARGES
All information provided should be for the latest fiscal year.
Line
Item:
•What is the total of franchise fees paid in the last
completed fiscal year for this franchise area?
1
2
3
4
5
SI I I I I 1 I I 1
Show how this•payment is calculated and incurred. Show
either the amount per subscriber or the percentage of
basic or total subscriber revenue, as appropriate:
ISI I I . 1 Iger subscriber per year
or I I . 1 I% of basic subscriber revenue
or 1 I . 1 1% of total subscriber revenue
Does the franchise fee appear as a separate line item on
on the subscriber's monthly bill? (Circle one.•)
6
1 Yes 1 No
Apart from those.in lines 2, 3 or 4, specify any other
fees, taxes or charges by the franchise authority paid
for this franchise (e.g., fixed amounts, equipment -
related charges). Specify the amount,. how the total
payment is calculated and the frequency of payment.
Include only fees, taxes and charges specific to the
cable industry. Do not include general fees, taxes or
charges such as sales tax or corporate income tax.
Which, if any, of the fees, taxes or charges shown on
line.6 appear as separate line items on the subscriber's
monthly bill?
7
9
FCC USE • •Identifier:IMfMIBI 11 1 1 1 1 10171A1
SCHEDULE 7 FIRST FRANCHISE AREA:
1992 TIERS, CHANNELS AND CHARGES
Provide the information required for each of:
o equipment and supplementary charges;
o the basic tier as provided in the franchise area;
o each of the two other tiers which have the most subscribers;
and
o all channels in the franchise.
All charges, channels and -subscriber information provided should
be as of September 30, 1992.
Line
1
2
3
4
5
6
7
8
Item:
EQUIPMENT AND SUPPLEMENTARY CHARGES
Average charges:
— installation fee $
- -disconnect fee $ .
- reconnect fee $
- monthly converter box rental $
- monthly remote control rental '$
- monthly additional outlet fee $ .
- -tier changing fee ' $
List any other equipment and supplementary charges whi▪ ch
are not included in lines 1 through 7. (Show amount and
type of charge . ),
9
' 10
11
• 1.2
• 13
14
15
16
For the last completed •fiscal year give the number of:
- installations provided 1 1 1 1 1
- disconnections L .I 1 1.1.
- reconnections • 11 1 I 1
For the last fiscal year, give the average number of:
- converter boxes rented .1 1 1 I 1
- remote control units rented • l 1 1 I 1
- additional outlets charged for I .1 1. I 1
- tier changes charged for 11 1 I 1
If you listed any additional charges on line 8, list
the average volumes for each item in the last fiscal
year: '
10
FCC USE Identifier:IMIMIBI I I 111-1 10171B1
SCHEDULE 7 CONTINUED FIRST FRANCHISE AREA:
1992 TIERS, CHANNELS AND CHARGES
Line
Item:
. 17
BASIC TIER
Subscribers to the basic tier 1 I 1 I 1 1
18
19
20
21
22
23
24
Number of:
- local TV broadcast stations
- distant TV broadcast stations
- satellite -delivered cable network channels
- public educational government access channels
- other channels in the basic tier
Total number of channels in the basic tier
25
Monthly subscription charge $1 I .
What other charges are incurred for the basic service
tier? (Show amount and type of charge.)
SECOND TIER
26.
27
28.
29
30
31
32
33
j
j
Subscribers to this tier 1 I 1 1 I L 1 1
Number of
- local TV broadcast stations
- distant TV broadcast stations
- satellite -delivered cable network channels-
- public educational government access channels
- other channels in this tier
Total number' of .channels in this tier
34
1 Monthly subscription charge *for tis tier only $ 1 I .
What other charges are incurred for the second tier?
(Show amount and type of charge.)
11
FCC USE
Identifier:IMIMIBI I I I I I 110171CI
SCHEDULE 7 CONTINUED FIRST FRANCHISE AREA:.
1992 TIERS, CHANNELS AND CHARGES
35
36
37
'38
39
40
41
THIRD TIER
Subscribers to this tier 11 I I 1 I 1
Number of:
- local TV broadcast stations
- distant TV broadcast stations
- satellite -delivered cable network channels
- public educational government access channels
- other channels in this tier •
42
43
Total number of channels in this tier
Monthly subscription charge for this tier only SI 1 .
What other. charges are incurred for the third•tier?
(Show amount and•type of charge.)
44
45
46
47
48
49
50
ALL CHANNELS IN THIS FRANCHISE AREA
Total channels in basic tier (as in line 23)
Total channels in second tier (as in line 32)
Total channels in third tier (as in line 41)
Total channels in any other tiers
Total pay channels
Total pay-per-view channels •
51
Any other channels in this franchise area•'
Total of all channels in this franchise area 1
12
FCC USE Identifier:IMIMIBI I I I I 1.1 10181AI
SCHEDULE 8
FIRST FRANCHISE AREA:
1986 TIERS, CHANNELS AND CHARGES
Line I Item:
1
1 Did the system
1 franchise area
A.1.I
provide programming services in this
in November 1986? (Circle one.)
If you answered "Yes" on line A.1, you must
Schedule 8 to the best of your ability.
I Yes I No I
complete the rest of
If you answered "No" on rine A.1, skip the'rest of Schedule 8 and
go to Schedule 9.
I .
1 As of November 30, 1986, was the
1 regulated? (Circle one.)
A.2 I
franchise area rate
I Yes I No
Provide the information required on €he next three pages for:
o equipment and supplementary charges; -
o the basic tier as provided in this franchise area;
o each of the two other tiers which had the most subscribers;
and
O all channels in the franchise. '
All charges and subscriber information provided in this Schedule
should be as of November 30, 1986.
13
FCC USE Identifier:IMIMIBI 1 1 1 1 1 t_ 1018181
SCHEDULE 8 CONTINUED
FIRST FRANCHISE AREA:
1986 TIERS, CHANNELS AND CHARGES
Line Item:
EQUIPMENT AND SUPPLEMENTARY CHARGES
Average charges as of November - 30, 19864. $
1 - installation fee $
2 - disconnect fee $
3 - reconnect fee
4 monthly converter box rental $
5 - monthly remote control rental $
6 - monthly additional outlet fee .
7 - tier changing fee $ .
List any other equipment and supplementary charges which
are not included in lines 1 through 7. (Show amount and
type of charge.)
8
9
10
11
12
13
14
15
16
For the fiscal year which included. November 30, 1986,
give the number of:
- installations provided 1 1 1 1 1
- disconnections 1 1 1 1 1
- reconnections 1 1 1 1 1
For the same fiscal year, give the.average number of:
- converter boxes rented 1 1 1 1 1
- remote control units rented II 1 I I
- additional outlets charged for . 1 1 1. I. 1
- tier changes charged for 1 1 1 1 1
If you listed any additional charges on line 8, list
the average volumes for each item in•the same fiscal
year:
F E Id-ntifi-r• M M B
SCHEDULE 8 CONTINUED FIRST FRANCHISE AREA:
1986 TIERS, CHANNELS AND CHARGES
Line
Item
17
18
19
20
21
22
23
t.
BASIC TIER
As of November 30, 1986, give the number of:
Subscribers to the basic tier 1 1 1 1 1 1
- .local TV broadcast stations
- distant TV broadcast stations
- satellite -delivered cable network channels
- public educational government access channels
- other channels in the basic tier
Total number of channels in the basic tier
24
25
Monthly subscription charge $1 1 .
What other charges were incurred for the basic service
tier? (Show amount and type of charge.)
SECOND TIER
As of November 30, 1986, give the number of:
26
27
28
29
30
31
32
3�
34
Subscribers to the second tier I. 1 1 1 1 1
- local TV'broadcast stations
- distant TV broadcast stations
- satellite -delivered cable network channels
- public educational government access channels
- other channels in this tier
Total number of channels in this tier
Monthly subscri tion charge for this tier only $1 ' 1 .
What other charges were incurred for the second tier?
(Show amount and type of charge.)
15
FCC USE Identifier:IMLMIBI 1 1 1 1 1 1 10181•D1
SCHEDULE 8 CONTINUED FIRST FRANCHISE AREA:.
1986 TIERS, CHANNELS AND CHARGES
35
36
37
38
39
40
41
THIRD TIER
As of November 30, 1986, give. the number of:
Subscribers to the third tier 1 1 1 1 1 1 1
Number o f :
- local TV broadcast stations
- distant TV broadcast stations
- satellite -delivered cable network channels
- public educational government access channels
- other channels in this tier
Total number of channels in this tier
42
43
Monthly subscription charge for this tier only $l 1. .
What other charges are inc.urred'for the third tier?
(Show amount and type of charge.)
44
ALL CHANNELS IN THIS FRANCHISE AREA -
As of November 30, 1986, give the number of:
Total channels in basic tier (as in' line 231
45
46
Total channels in second tier Las in liie 32)
Total channels in third tier (as in line 41)
47
Total channels in any other tiers
.48
49-
50 9•
50
51
Total, pay channels
Total oay-per-view.channels
Anv other channels in this franchise area '
Total of all channels in this franchise area
16
FCC USE
Identifier; IMIMIBI 1 1 1 1 •1- 1 14191'AI
SCHEDULE 9 SECOND FRANCHISE AREA SERVED BY. SYSTEM
This, schedule is intended to provide information on differences
in services and charges among franchise areas served by the
system. Your answers to the questions in this schedule will
determine which franchise area - the second franchise area -
should provide the information in Schedules 10 through 13.
The second franchise area should be the franchise area other than
the one reported in• Schedules 5 through 8 with the most
subscribers and which has competition, as determined by
completing Schedule 4. If there are no franchise areas with
competition, the second•franchise area should be the remaining
franchise area with the most subscribers. In addition, however,
if prices and channel lineups differ among franchise areas, the
second franchise area should also be one that has different
prices and channel lineups from the first franchise area used in
Schedules 5 through 8. Answer the questions in this schedule to
choose the correct second franchise area.
All information provided should be as of September. 30, 1992.
(If the system has only one franchise area - as listed in
Schedule 1 - you do not need to complete Schedules 9 through 13.)
Line 1 Item•
Do all franchise areas served by this system have the.
same prices? (Circle one.) -
1 Yes ` I No
If you answered "No" on line 1, hlow many different• price
structures are therein the system?
2 I I
Do•all franchise areas served by this system have the
same channel lineup? (Circle one.)
3 •1 Yes 1 No
If you .answered "No" on line 3, how many different
channel lineups are there in the system?
4 1 1
If you answered "Yes" on both lines 1 and 3, that is if all
franchise areas in the system have the same prices and channel
lineup, go to. line 5 on the next page.
If you answered "No" on either, or both, of lines 1 and 3, skip
lines 5 through 7 and go to line 8 on page 19.
17 •
FCC USE Identifier:IMIM[BI 1 1 1 1 1 1 10191B1
SCHEDULE 9 CONTINUED FRANCHISE AREAS SERVED BY SYSTEM
If all franchise areas have the same prices and channels,
complete line 5.
Refer to Schedule 4: Did you list any franchise areas on
lines 2, 4 or -6 of Schedule 4, other than the franchise
area to which the questionnaire was addressed? (Circle
one.)
'Yes I Go, to line 6.
No 1 Skip line 6,
I ao to line 7.
If you answered "Yes" on line 5, which of the franchise
areas listed in Schedule 4 has the most subscribers (not
including the franchise area to which the questionnaire
was addressed)?
7
If you answered "No" on line 5, refer to Schedule 1:
Which of the franchise areas in Schedule 1 has the most
subscribers'(not including the franchise area to which
the questionnaire was addressed)?
You should complete Schedules 10 and 11 for the franchise area
identified on line 6 or 7.
Ydu do not need to complete Schedules 12 or'13 if all franchise
areas in -the system.have the same prices and 'channels.
18 •
FCC USE Identifier:IMIMIBI I I 111.I 1019101
SCHEDULE 9 CONTINUED FRANCHISE AREAS SERVED BY SYSTEM
If some or_all franchise areas have different prices or channels,
complete line 8.
Refer to Schedule 4: Did you list any franchise. areas on
lines 2,. 4 or 6 of Schedule 4, other than the franchise
area to which the questionnaire was addressed? (Circle
one.)
1 1
1 Yes IComplete lines 9 to 11.
I I
8
I No I Skip lines 9 to 11,
1 1 complete line 12.
If you answered "Yes" on line 8, of the franchise areas
listed in Schedule 4, how many different price structures
are there? •
9
10
11
Of the franchise areas listed in Schedule 4, how many
different channel lineups are there?
I .1
1 I
Of the franchise areas listed in Schedule 4, which one
has:
- the most subscribers (not including the franchise,
area to which the questionnaire was addressed), And
- different.prices or.channel lineup from the
franchise area to which the questionnaire was
addressed?
If you answered "No" on line 8, refer to Schedule 1.
Of all the .franchise areas listed on lines 4 through 12
of Schedule 1, which one has:
the most subscribers (not including the franchise
area•to which the questionnaire was addressed), 'and
- different prices or channel lineup from the
franchise area to which.the questionnaire was
' addressed?
12
You should complete Schedules 10 through 13 for the franchise
area identified on line 11 or 12.
19
FCC USE Identifier•:IMIMIBI 1 I' 1 1 1 1 11101
SCHEDULE 10 SECOND FRANCHISE AREA: CHARACTERISTICS
• The second franchise area is -the one identified on line 6, 7, 11
or 12 of Schedule 9. All information provided should be as of
September 30, 1992.
Line 1 Item:
1 1 Name. of second franchise area 1
Community Unit ID No. 'of
2 1 this franchise area 1 1•l 1 I I
Number of households in this
3 1 franchise, area 1 I 1 1 1 1 l 1
{ Number of households in this
I franchise area which are passed
4 1 by system distribution plant 1 I 1 I 1 1 1 I
Number of households in this franchise area
5 l which subscribe to this system I I I I 1 I 1 1
I Number of addressable
6 1 subscribers in this franchise area I I I I I 1 1 1
I What is the main type.of addressability? (e.g., one-way,
I two-way, impulse) 1'
7 1 I
8 Number of headends serving franchise area ' I I 1
9 Acte of principal' headend I I I years
Line miles of distribution plant .
10 in this franchise area 1 1 1•! 1 I Imilesl
Percentage bf line miles of distribution plant in
line 10 which is: •
11 - above around: I l I lit
12 - below around: 1 I I I%l
13 - fiber: 1 1 1 lel
1
Is the franchise required to bury
14 all .cable drops? (Circle one.) I Yes 1 No. 1
20
FCC USE
Identifier:IMIMIBI 1 1 1 1 1 1 11111
SCHEDULE 11 SECOND FRANCHISE AREA:
FRANCHISE AUTHORITY FEES AND CHARGES
A11 information provided should be for the latest fiscal year.
Line Item:
What is the total of franchise fees paid in the last
completed fiscal year for this franchise area?
1 SL 1 1 I 1 1 1 1 1
Show how this payment is calculated and incurred. Show
either the amount per subscriber or the percentage of
basic or total subscriber revenue, as appropriate:
2 ISI 1 1 . 1 Iger subscriberer
p year
3 or 1 1 . I I% of basic subscriber revenue
4 or I 1 1 I% of total subscriber revenue
Does the franchise fee appear as a separate line item on
on the subscriber's monthly bill? (Circle one.)
5
6
I Yes I No
Apart from those in lines 2, 3 or 4, specify any other
fees, taxes or charges by the franchise authority paid
for this' franchise (e.g., fixed amounts, equipment -
related charges). Specify the amount, how the total
payment is calculated and the frequency of payment.
Include only fees, taxes and charges.specific to the
cable industry. Do not include general fees, taxes or
charges such as sales tax or.corporate income tax. •
Which, if any, of the fees, taxes or charges shown on. .
line 6 appear as separate line items on the subscriber's
monthly bill?
7
21
ECLD3B ,jentifier:IMIMIBI 1 I 1 I I 11121A1
..SCHEDULE 12
)ND FRANCHISE AREA:
? TIERS, CHANNELS AND CHARGES
Provide the informatiorlred for each of:
o equipment and sumary charges;
o the basic tier as ied in the franchise area;
o each of the two oters which have the most subscribers;
and
o all channels in thichise.
Allcharges and subscriiformation provided should be as of
September 30, 1992.
Line
1
2
3
4
56
7
Item:
8
EQUIPMENT. AND SUZITARY CHARGES
Average charges:
- installation f . $ -.
- disconnect fee $ .
- reconnect fee • $ .
- monthly convenx rental .$ .
-r monthly remoteol rental $ .
- monthly additiiutlet fee $ .
- tier changing : $
List any other eent and supplementary charges whi▪ ch
are not includednes 1 thrOugh 7. (Show amount and.
type of charge.)
For the last coml, fiscal year give the number of:
9 • - installations led 1 I I 1 1
10 - disconnections _ 1 1. 4 1
11 - reconnections 1 1 I i. 1
For the last fistar, give the average number of:
• 12 - converter boxed .1 1. 1 1 I
13 - remote control rented . 1 1 I 1 1
14 - additional out:barged for 1 I 1 1 I
15 - tier changes cl for 1 I I 1 1
If you listed an!tional charges on line 8, list
the average velum. each item in the last fiscal
year.:
16
22
FCC USE Identifier:IMIMIBI 11 1 1 f 1 11121B1
SCHEDULE 12 CONTINUED FIRST FRANCHISE AREA:
1992 TIERS, CHANNELS AND CHARGES
Line
Item:
17
18
19
20
21
22
23
BASIC TIER
Subscribers to the basic tier I I 1 I.1 l 11-
Number of: •
- local TV broadcast stations
- distant TV broadcast stations
- satellite -delivered cable network channels
- public educational.aovernment access channels
- .other channels in the basic tier
24
25
Total number of channels in the basic tier
Monthly subscription charge •$1--1
What other charges are incurred for the basic. service
tier? (Show amount and type of charge.)
•
26
27
28 •
29
'30
31
32
33
34
SECOND TIER
Subscribers to this tier I I 1 I 1 1.1 1
Number of: .
- local TV broadcast stations
- distant TV broadcast stations
- satellite -delivered cable network channels
- public educational government access channels
- other channels -in this tier
Total number of channels in this tier
Monthly subscription dharge'for this tier only $1 I'.
What other charges are incurred for the• second tier?
(Show amount and type of charge.)
23
FCC USE
Identifier:IMIMIBI 11 I I 1 1 1112ICI
SCHEDULE 12 CONTINUED FIRST FRANCHISE AREA:
1992 TIERS, CHANNELS AND CHARGES
35
THIRD TIER
36
37'
38
39
40
41
42
Subscribers to this tier 1 1 1 I I I I I
Number of:
- local TV broadcast stations
- distant TV broadcast stations
- satellite -delivered cable'network.channels
- public educational government access channels
- other channels in this tier
43
Total number of channels in this tier
Monthly subscription charge for this tier only SI I
What other charges are incurred for the third tier?
(Show amount and type of charge.) •
44
45
46
47
48
49
5G
51
ALL CHANNELS IN THIS FRANCHISE AREA•
Total channels
Total channels
Total channels
Total channels
in basic tier (as in line 23)
in second tier (as in line 32)
in third tier (as in line 41)
in any other tiers
Total pay channels
Total pay-per-view channels
Any other channels in this franchise area
Total of all channels in this franchise area
24
FCC USE Identifier:IMIMIBI 11.1 1 1 1 11131A1
SCHEDULE 13 FIRST FRANCHISE AREA:
1986 TIERS, CHANNELS AND CHARGES
Line I Item:
1 • - 1
1 Did the system provide programming services in this 1
1 franchise area in November 1986? (Circle one.) 1
1 1
A.1 1 1 Yes I No 1
If you answered "Yes" on line A.1, you must complete the rest of -
Schedule 13 to the best of your ability.
If you answered "No" on line A.1, skip the rest of Schedule 13.
1 - 1
1 As of November 30, 1986, was the franchise•area rate 1
1 regulated? (Circle one.). 1
A.2 1 I Yes 1 No 1.
Provide the information required on the next.three pages for:
o equipment and supplementary charges;
o the basic tier as provided in this franchise area-;
o each of the two other tiers which had the most subscribers;
and
o all channels in the franchise.
All charges and subscriber information provided in this Schedule
should be as of November 30, 1986.
25
FCC USE Identifier:IMIMIBI 1 1 1 1 1 1'11131E1
SCHEDULE 13 CONTINUED FIRST FRANCHISE AREA:
1986 TIERS, CHANNELS AND CHARGES
Line Item:
'EQUIPMENT AND SUPPLEMENTARY CHARGES
Average charges as of November 30, 19861
1 - installation fee $1- .
Z -. disconnect fee
3 :- reconnect fee SI
4 -*monthly converter box rental V
5 - monthly remote -control rental
6 - monthly additional outlet fee St
7 - tier chancing fee $1 .
List.anyother equipment and supplementary charges which
are not included in lines 1 -through 7? (Show amount and
type of charge.)
8
9
10
11
12
13
14
16
For the fiscal year -Which included November 30, 1986,
give the number of:
- installations provided 1 1 1 1 1
- disconnections 1 1 1 1 1
- reconnections • 1 1 1 1 1
For the same fiscal year, give the average number of:
converter boxes rented 1 1 1 1 1
- remote control units rented 1 1 '1 1 1
- additional outlets charaed for 1 1 1.1 1
- tier chances charaed for 1 1 1 1 1
If you listed any additional charges on line 81.1ist
the. average volumes for each item in the same fiscal
year:
26
FCC USE Identifier:IMIMIB1 I 1.1 I 1 1 11131C1
SCHEDULE 133D.
Line
17
18
19
20
21
• 22
23
24
25
FIRST FRANCHISE AREA:
198.6 TIERS, CHANNELS AND CHARGES
Item;
BASIC
As ofx 30,
1986, give the number of:
Subsco the basic tier 1 I 1 I I 1.
- locioadcast stations
dis1broadcast stations
- satEelivered cable network dhann-els
- Publational government access channels
othlels in the basic tier
Total of channels in the basic tier
Monthlription charge $1 I
What ctrges were incurred for the basic service
tier? mount and type of charge.)
SECOND
As of lc 30, 1986, give the number of:
2121 Ukaag the second tier
1_:_
22_as2=2.4_dasln_ •
-
1 1 1 1 1 1 1 1
L,L1
•
W.
government access channels 1 1 1
. 1-
aa.__a,TQtALDf•channel.s in this tier
22.---1M=III:ion charge for this tier only $Li
What otl,rges were'incurred for the second tier?
(Show ar.nd type of charge.).
34
27
ifi-r•
SCHEDULE 13 CONTINUED FIRST FRANCHISE AREA:
19.86 TIERS, CHANNELS AND CHARGES
35
THIRD TIER.
As of November 30, 1986, give the number of:
Subscribers to the third tier
36
37
38
39
40'
41
Number of: .
- local TV broadcast stations
- distant TV broadcast stations
- satellite -delivered cable network channels
- public educational government access channels
- other channels in this tier
Total number of channels in this tier
42
43
Monthly subscription charge for this tier only $1 1
What other charges are incurred for the third tier?
(Show -amount and type of charge.)
44
45
46
47
.4$
49
50
51•
ALL CHANNELS IN THIS FRANCHISE AREA
I As of November 30, 1986, give the number of:
Total channels in basic tier (as in line 23)
Total channels in second tier (as in line. 32)
Total channels in third tier. (•as in line Al)
Tota•1 channels in anv other tiers
Total Dav channels
Total pav-per-view channels
Any other channels in•this franchise area
Total of all channels in this franchise area 1
28.
Respondents Guide to
Cable TV System Operators Rate Structure Questionnaire
GENERAL INFORMATION
The purpose of this questionnaire is to provide information to
aid the Federal Communications Commission's implementation of .
rate regulation required as part of the Cable Television Consumer
Protection and Competition Act of 1992 (the 1992 Cable Act).
This questionnaire is issued pursuant to FCC Order 92-545.
The questionnaire has been sent to selected franchise areas or
community units as recorded on current FCC and other information
systems. (For the purposes of this questionnaire, the _terms
franchise area and community unit are 'synonymous.) However, the
questionnaire is aimed at system information and should be
completed on a system -wide basis. In many instances, systems
completing this questionnaire will comprise many franchise areas.
For systems that are part of a multiple system operator (MSO),
some. questions may 'require information from regional, state or
corporate center management. Use your best judgement about which
officers in the MSO organization are best suited to respond to,
or provide information for, particular questions.
The information required by the questionnaire is necessary to
help provide an understanding of what determines charges in the
cable industry. The data collected will be used in an analytical
database to assess general cable industry -rate relationships.
This information could be used to establish rate regulations of
general applicability to. the cable industry. The information
will not be used for separate regulation of individual systems
required to respond to this questionnaire:..
Some of the questions require information which you may not know
precisely. The Commission does not expect you to undertake
significant additional analysis in order to respond to the:
questionnaire, but all questions should be answered to the best
'of your ability with the best information readily, available.
If, after you have read each question and the related part of the
guidelines, the information required by the Commission is not
clear, you shduld discuss the question with the appropriate
officers of the Federal Communications Commission. If you have
any questions contact:
o Ms. Florence Setzer (202) 653-5940 or
o Ms. Jane Frenette (202) 634-1861.
Unless otherwise stated, all information should be provided as of
September 30, 1992.
1
COVER PAGE
You should give both the legal name of the system and the name
under which it does business on the spaces provided on the cover
page.
A responsible officer of the organization is required to sign at
the bottom of the cover page that the questionnaire has been
examined by the officer, that the reported facts are true and
that the data reported in the questionnaire provide an accurate
statement of the affairs of the respondent in respect to the data
set forth.
The signed cover page, including the label, must be returned with
the original and three copies of the'full questionnaire by
Friday; January 22, 1993 to:
Cable Television Branch
Room 244
Federal - Communications Commission
Washington DC, 20554
Attn: Rate Questionnaire
SCHEDULE 1
On lines 1 and 2 of Schedule 1, identify the cable system
responding to .the questionnaire by both its legal name and the
name under which it does business. On line 3 give the city (or
town), county and state in which the system is located.
On lines 4 throucrh 12 list all community units in the cable
system, the zip code of the community unit, the six digit FCC
community unit ID number and the name of the franchise authority
responsible for each community unit's cable service. If there
are not enough lines available you should copy Schedule 1,
complete one line for each community served by the cable system,
and attach the copy to the original Schedule 1.
On lines 13 and 14 give.the name and city (or town) and state
location of the individual(s) or organization with controlling
Ownership interest in the cable system.
•
•On lines. 15 and 16 give the name and telephone number of the
contact officer responsible for ensuring the questionnaire is
accurately completed. The Commission may address follow up
questions for clarification to this contact officer. The contact
officer should keep a copy of the completed questionnaire in a
convenient.location.
On lines 17 and 18 give the name and phone number of a contact
officer at the franchise authority for the franchise area to
2
ti s
which this questionnaire. is addressed. The Commission may also
address follow up questions for clarification to this officer.
SCHEDULE 2
The second Schedule requires information about characteristics of
the cable system. This information will be .used to generalize
rate and other data provided in response to this questionnaire.
On lines 1 through 4 give the best readily available estimates of
the number of households in the area served by the system,
households passed by system distribution plant, the number of
subscribing households and the number of addressable subscribers.
These are general terms frequently used in the cable industry.
On line 5 describe the type of addressability in general terms.
If there is more than one type of addressability used describe
the main type in use as of September 30, 1992.
On lines 6 through 11 provide the best readily available
information about the physical structure of the system.
"Headend" is the generally.understood term for a reception center
from which trunk and distribution cable carry cable programs.
The age of the headend is the number of years since the main
reception equipment *was put in place at the principal headend.
The line miles of distribution.plant includes trunk lines and
feeder lines. Lines 9 and 10 should add to 100%. Line 11,•should
usually be less than 100%.
Indicate your answer *to the questions on lines 12 and.13 by •
circling the appropriate response. If your answer on line 13 is
"Yes", give' the total number of systems operated by the MSO on
line 14.
SCHEDULE 3
Schedule 3 requires information on system revenues for the latest
completed fiscal year. •In some systems the revenue information
may not be kept with local system management. In this case, •
Schedule 3 should be completed by the part of the organization
responsible for recording revenue and maintaining revenue
records.
All revenue figures should be'provided in dollars; cents should
be omitted. You may round the revenue figure to the nearest
thousand dollars.
The ending date of the latest completed fiscal year should be
shown on line 1.
On lines 2 through 12 provide the best available estimate of
annual system revenue for each of the items listed.
3
On line 13 give the total of all annual system revenue. This
should be the sum of -amounts on lines 2 through 12.
On line 14 list all of the significant items of "other revenue"
included in the figure on line 12.
On line 15 you should provide an objective judgement about the
value of any non -revenue benefits derived from owning or
operating the cable system. These would include all taxable
benefits and the value of any unpaid promotional advertising or
other benefits received by the system.
On line 16 list all of .the significant items of "non -revenue
benefits" included in'the figure on line 15..
SCHEDULE 4
Schedule 4 requires information about farms of possible:
competition in any franchise areas in the system. You are
required to indicate if any franchise areas in the system meet
the three definitions outlined _on lines 1, 3 and 5 by circling
"Yes" or "No".
If the answer to any of these questions is "Yes", on the
following lines you must list the franchise areas which meet each
definition and provide your best estimate of the other
information required.
SCHEDULE 5
Schedule 5 requires information on the characteristics.of the
franchise area to which this questionnaire is addressed. This is
the "first franchise area".
On lines 1 and 2 give the name of the franchise area to which
this questionnaire is addressed and its six digit FCC Community ,
Unit ID number.
•
The remaining information required in Schedule 5 for the first
.franchise area is of the same type as required on Schedule 2 for '
the whole system.. Schedule 5 should therefore be completed .in a
• similar way as Schedule 2. Responses in Schedule 5 should be
consistent with those in Schedule 2.
SCHEDULE 6
Schedule 6 requires information on franchise authority fees and
charges for the latest completed fiscal.year (the same year as in
line 1 of Schedule 3)- for the franchise area to which the
questionnaire was addressed. The schedule requires both the
total paid and how it is calculated.
4
You should include only fees, taxes and charges which are
specific to the cable industry. Do not include general taxes
such as sales tax or company tax.
You should give the total franchise fees paid for this franchise
area on line 1. On lines 2, 3 and 4 you should show how this
amount is calculated or charged by the franchise authority. You
should provide either the amount per subscriber, the percentage
of basic subscriber revenue or the percentage of total subscriber
revenue, whichever best reflects the way the fee is incurred.
If the fee is incurred in some other way, or if there are any
other fees, taxes or charges by the franchise authority, you
should show these on line 6.
If there are any other fees, taxes or charges included on line 6,
you should show the charge, the frequency of payment and how the
total amount is calculated for each type of franchise fee, tax or
charge. 'For example, the charge.multiplied by the number of
subscribers multiplied by the frequency of payment equals the
total amount paid in the latest fiscal year.
You should indicate on lines 5 and 7, as appropriate, if any of
these fees, taxes or charges appear on subscriber's monthly bills
as separate line items. •
SCHEDULE 7
Schedule 7 requires charges and volume information for the first
franchise area including equipment and supplementary charges and
total channels and, for each of threetiers, information on
subscribers, channels and charges.
All charges, channels and subscriber information should be as of
September 3.0, 1992.
On•lines 1 through•8 you should provide all equipment and
supplementary charges. Supplementary charges include charges for
any service other than programming related to providing cable TV.
services.. Where any .charge varies within a category (for
instance if advertised or listed charges are not always charged)
you should show the amount charged on average.
All equipment and supplementary •charges not provided in lines 1
through 7 should be shown on line 8. You should show both the
type of charge and the average amount charged.
On lines 9 through 16 you should provide the volumes of all
equipment and supplementary items. On lines 9, 10 and 11 give
the total number of installations, disconnections and
reconnections charged for in the last completed fiscal year.
5
On lines 12, 13 and 14 you should provide either. the .number of
converter boxes, remote control units and additional outlets
rented on September 30, 1992 or the average number rented over
the last completed fiscal year, whichever best represents the
average volume. On line 15 you should provide the total number
of tier changes which were charged for in the last completed
fiscal year.
On line 16 you should provide the volumes in the last completed
fiscal year of any other equipment and supplementary items listed
on line 7.
On lines 17 through 43, charges and other information are • •
required for each of three different tiers of service. The three
tiers are:
(i) the basic tier, as it was provided in the franchise area;
(ii) after basic, the tier with the most subscribers; and
(iii) after basic, the tier with the second most subscribers.
The basic tier is the lowest tier provided by the system and.
generally includes retransmitted over -the -air signals. Tiers do
not include single pay channels (such as separately charged
premium channels), groups of channels offering the same pay
service with different scheduling or pay-per-view channels.
Where tiers are provided on a "buy -through" basis, you should not
include the price for any "buy -through" tiez' in your responses to
the charge questions. All prices should be provided as the•
additional amounts charged for that tier only.
Your responses for each of the three tiers should include all
prices. and all channels in the relevant tiers but should not show
any franchise fees, taxes or charges where these. appear as
separate line items �n subscribers monthly bills:
On lines 44 through 47.give the total number of channels in each
of the basic tier,. the second tier and the third tier (which are
the same amounts shown at lines 23, 32 and 41) as well as the •
total channels in any.other tiers.
On lines 48 through 50 give the number of pay channels, pay-per-
view channels and any•other channels provided.
On line 51 give the total number of channels provided in the
franchise. This should be the total of all the channels given in
lines•44 through 50. •
6
SCHEDULE 8
On line A.1 of Schedule 8 indicate whether the system provided
program services in November, 1986 by circling the appropriate
response. If the system did provide such services you must show
on line A.2 whether the system'was subject to rate regulation on
November 30, 1986 (by circling the appropriate response) and then
complete the rest of Schedule 8 to the best of your ability.
If the system did not provide programming services in this
franchise area in November 1986 you may skip the rest of Schedule
8 and go to Schedule 9.
The remainder of.Schedule 8 requires much the same information as
Schedule 7, but for the earlier date, including all equipment and
supplementary charges and volumes and all charges and channels
for each of the three service tiers.
You should use whatever records are available to complete
Schedule 8 to the best of your ability including any rate cards,
subscriber bills, promotional, material and management or company
reports or records from that period.
• SCHEDULE 9
Schedule 9 isintended to provide information.on differences in'
. services and:harges among franchise areas served by the system.
Among other tings, you will use this information to determine
the franchisEarea for which to provide information in Schedules
10 through 1:- the second franchise area.
If the systelhas only one franchise area (as listed on Schedule
1) you do no need to complete Schedules 9 through 13.
On lines 1 al 3 of Schedule.9 indicate whether all franchise
areas servecDy the system have the same prices and channel
lineups by =ling the appropriate response.
If you answe "No"' on line 1, show on line 2• how many different
price schedos there are in franchise areas. in the system..
If you answ( "No"' on line 3, show on line 4 how many different
channel lips there are in franchise areas in the'system.
Differentpsces means either different amounts of charges dr a
differeritsructure of charges (different types of charges for'
equipment/tiers). _Different channel lineup means a different
number.ochannels or stations or different channels or stations
in any tr. (It does not refer to the channel number or the
positioif channels or stations on the dial of -a television
set!)
7
4
If all franchise areas have thesame prices and channels (that
is, if you have answered "Yes" on -both lines 1 and 3) you should
go to line 5 on page 18. _Otherwise you should go to line 8 on
page 19.
If all franchise areas have the same prices and channels:
- Refer to Schedule 4 and indicate by circling "Yes" or "No"
on line 5 of Schedule 9 whether you listed any franchise
areas on lines 2, 4 or 6 of. Schedule 4 (other than the
franchise area to which the questionnaire is addressed: the
first franchise area). '
- If you did list any franchise•areas in Schedule 4, you
should give the name on line 6 (of Schedule 9) of the
franchise area listed in Schedule 4 which has the most'
subscribers (not -including the first franchise area).
- If you did not list any franchise areas in. Schedule 4, you
should refer to Schedule 1 and give the name on line 7, (of
Schedule 9) of the franchise area listed'in Schedule 1 which
has the most subscribers (not including the first franchise
area) .
If some or all franchise areas have different prices and
channels:
- Refer to Schedule 4 and indicate. by circling "Yes" or "No"
on line 8 of Schedule 9 whether you listed any franchise
areas on lines 2, 4 or 6 of Schedule 4 (other than the
franchise area to which the questionnaire is addressed: the
first franchise area) . .
- If you did'list any franchise areas in Schedule 4, you
should:
(i) on line 9 give the number of different -price structures
which apply in the franchise areas listed in Schedule 4;
(ii) on line 10 give the number of different channel lineups
which apply in the franchise areas listed in Schedule 4; and
(iii)on%line 11 give the naive of the franchise area listed
in Schedule 4 which has the most subscribers (not including
the first franchise area) and different prices or channel
lineup to the first franchise area.
- If you did not list any franchise areas in Schedule 4, you
should refer to Schedule 1 and give the name on line 12 (of
Schedule -9) of the franchise area listed in Schedule 1. which
has the most subscribers (not including the first franchise
area) and different prices or channel lineup from the first
8
franchise area.
Once you have completed Schedule 9 you should have provided the
name of a second franchise area (other than .the franchise area to
which the questionnaire is addressed) on either of lines 6, 7, 11
.or 12.
If all franchise areas have the same prices and channels you
should now complete Schedules 10' and 11 for the second franchise
area identified on line 6 or 7. You do not need .to complete
Schedules 12 and 13 if all franchise areas in the system have the
same prices and channels.
If some or all franchise areas have different prices and channels
you should now complete Schedules 10• through 13 for the second
franchise area identified on line 11 or 12.
SCHEDULES 10 THROUGH 13'
Schedules 10'through 13 require the same information for the
second franchise area as •Schedules 5 through 8 required for the
first franchise area. You should follow the same instructions as
for Schedules 5 through.8.
9