WPC< 2B'J  CourierCG TimesCG Times BoldCG Times ItalicE37XPCG Timeset 4_230_1HPLAS4.PRS 4x  @\oeX@2 6F mf w3|wCG TimesCG Times BoldCG Times Italic",tB^ f ^;C]ddCCCdCCCCddddddddddCCY~~vCN~sk~CCCddCYdYdYCdd88d8ddddJN8ddddYYdYd4dddddCddddddddd8YYYYYY~Y~Y~Y~YC8C8C8C8ddddddddddYdddddsdXdXXXddx|X~d~d|XdddddddC8ddddCdoddd|8|H~d<|8dtddddHHdlLlLlLkd|H|8~ddddddddXXXd~ddkd~ddxCddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCYQQddddddFddddFCChhd44ddzzdddvooChdF"dhd9dCCzCddoddCdYds]zUvdYYCCCCz~ozoY~NYdYC8YooYdYzsdzdd~YYzozzz~CdzYzzzzCCdddddddzCsdYC\   pxtll\tll@\@\`L2 Z vi p kOHP LaserJet 4_230_1HPLAS4.PRS 4Xw PE37\oeXPa8DocumentgDocument Style StyleXX` `  ` a4DocumentgDocument Style Style . a6DocumentgDocument Style Style GX  2kWvtra5DocumentgDocument Style Style }X(# a2DocumentgDocument Style Style<o   ?  A.  a7DocumentgDocument Style StyleyXX` ` (#` BibliogrphyBibliography:X (# 2  U a1Right ParRight-Aligned Paragraph Numbers:`S@ I.  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A. a.(1)(a) i) a)Documentg2%a ee$$J%PleadingHeader for Numbered Pleading PaperE!n    X X` hp x (#%'0*,.8135@8:Ttoc 2toc 2;` hp x (#` !(#B` !(#B` hp x (#toc 3toc 3<` hp x (#` !(# ` !(# ` hp x (#toc 4toc 4=` hp x (# !(#  !(# ` hp x (#toc 5toc 5>` hp x (#h!(# h!(# ` hp x (#24]?dV@vXAXB[toc 6toc 6?` hp x (#!(#!(#` hp x (#toc 7toc 7@ toc 8toc 8A` hp x (#!(#!(#` hp x (#toc 9toc 9B` hp x (#!(#B!(#B` hp x (#26dCf]D_EaFvcindex 1index 1C` hp x (#` !(# ` !(# ` hp x (#index 2index 2D` hp x (#` !(#B` !(#B` hp x (#toatoaE` hp x (#!(# !(# ` hp x (#captioncaptionF 2pvGlhdHrdf Fep_Equation Caption_Equation CaptionG endnote referenceendnote referenceH ",tB^ f ^;C]ddCCCdCCCCddddddddddCCdxN`xoCCCddCdoYoYFdo8Co8odooYNCodddYdddd4dddddCddddddddo8dddddYYYYYN8N8N8N8oddddooooddpddddxodddXXddXddXdddddooL8doddNorddo8PdN8ppoddXXdpLoNpLodPDdopoopodXYXodoodddCddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCdUUddddddFddddFCCssd44ddzzddd~ooCsdF"dsd9dCCzCddoddCdYds`zUvdddCCCCzozoYNYYYN8YooYdYzzdzddYYzozzzNdzYzzzzCCdddddddzCzdYC\   pxtll\tll@\@\`L"i~'K2^$(8<><q*"xxxxWWxxxWWkkxxx < Y -ԍId.:   Y-4. ` ` FCC Form 393 is the official form used by regulators to determine whether an operator's regulated rates for programming, equipment and installations were reasonable" 0*(("  Y-during the time period from September 1, 1993 until May 14, 1994._x< Yy-ԍ#Xw PE37 -ԍSee Communications Act,  622, 47 U.S.C.  622. n The amount of franchise fees imposed by a local franchising authority on a cable operator is generally set by the franchising authority and the fees are generally used by the franchising  Y -authority for the regulation of the basic service tier and associated equipment.@ < Y-ԍId.@ The franchise fee specificed in the franchise agreement between the City and UACB is five  Y -percent of UACB's "gross revenues."G < Y1-ԍOpposition, Exhibit D.G The City argues that UACB's method of itemization has resulted in the City receiving less than five percent of the amount that UACB collects from subscribers. The City contends that "the franchise fee must equal 5 percent of the total amount that a subscriber pays; it is not a 5 percent charge on top of what the subscriber  Y-would otherwise pay."aE < Y-ԍOpposition at 6. For example, if the total bill for cable services is $32.00, exclusive of franchise fees, under the City's method of calculation, UACB's total subscriber bill would be $33.68. Of that amount, UACB would keep $32.00, and a franchise fee of $1.68 which is five percent of the total bill would be remitted to the City. In essence, this results in a franchise fee on the franchise fee. By contrast, under UACB's method, the City would receive only $1.60 (or five percent of $32.00) and the total subscriber bill would be  Y-$33.60. See id. at 911.  In its Opposition, the City proposes several methods that UACB can use in calculating franchise fees. In its proposed method of calculating franchise fees, it is the City's understanding that an operator's "gross revenues" include the franchise fee it collects on behalf of the franchising authority. In essence, the City asserts that it should be able to assess from UACB as part of the franchise fee a percentage of the franchise fees. We disagree.  Y-8.` ` To clarify the proper method of calculating franchise fees, we must first define a cable operator's "gross revenues" under the Communications Act. We note that the Act does not state that any franchise fee collected by a cable system is to be included in totalling"n0*((" its gross revenues. The Act does, however, impose a limit on how much cable operators may be charged in franchise fees. Franchise authorities are permitted to assess a fee on an operator's gross revenues, but "[f]or any twelvemonth period, the franchise fees paid by the cable operator with respect to any cable system shall not exceed 5 percent of such cable  Y-operator's gross revenues derived in such period from the operation of the cable system."u4 Y-ԍxSee Communications Act,  622(b), 47 U.S.C.  542(b). u Consequently, if we allowed the franchise fee itself to be subject to a franchise fee, as the City urges, and if the franchise agreement required a five percent assessment the maximum under the law a cable operator could end up paying more than the maximum franchise fee  YH-permitted under the Act.H{4 Yt -ԍxFor example, if the total charge for cable services alone, exclusive of any franchise fee, is $32.00, a five percent franchise fee of that amount is $1.60. Under the City's method  YF -of calculation (see note 22, supra), cable operators have to pay 5.26% of $32.00 in order for the City to collect $1.68 for a franchise fee. A 5.26% franchise fee assessment exceeds the maximum allowed under the Act.  Furthermore, under the Act, a cable operator's gross revenues are  Y1-revenues derived "from the operation of the cable system."r14 Y-ԍxSee Communications Act,  622(b), 47 U.S.C.  542(b).r Franchise fees, on the other  Y -hand, are not revenues derived "from the operation of the cable system," 4 YP-ԍxSee 47 C.F.R.  76.5 (Cable system is defined as "[a] facility consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to multiple subscribers within a community . . . ."). but rather are a charge levied by the franchising authority and, therefore, should not be included in totalling  Y -an operator's gross revenues. Therefore, we find that an operator's "gross revenues" do not include the franchise fees it collects from subscribers. We are remanding this franchise fee calculation issue to the City so that it can enter a ruling consistent with these findings.  X-x C.` ` A/B Switches and VCR Installations  Yy-  Yb-x9.` ` UACB argues that the City, in its rate order, incorrectly determined that A/B switches should be regulated. We have previously held that switches are not devices directly related to the delivery of basic cable service and therefore their price should remain  Y-unregulated. 4 Y"-ԍxSee TCI of Northern New Jersey, DA 9525, at  9 (Cab. Serv. Bur., released  Y#-January 10, 1995); SBC Media Ventures (Montgomery County, MD), DA 941251, 9 FCC Rcd 7175, 7180 (Cab. Serv. Bur. 1994).  Regulated equipment consists of equipment in the subscriber's home that is  Y-used to receive regulated cable service.Tx4 Y/'-ԍxSee 47 C.F.R.  76.923(a).T A/B switches are used by subscribers to switch off"+0*((" cable services and to receive, instead, overtheair broadcast signals. Since the switches are not "equipment used by subscribers to receive the basic service tier" within the meaning of  Y-Section 3(b)(3) of the 1992 Cable Act,x4 YK-ԍxSee Communications Act,  623(b)(3), 47 U.S.C.  543(b)(3).x their price is not subject to regulation.  Y- x10.` ` We disagree with UACB that the regulatory treatment accorded to A/B switches should be accorded to VCR installations as well. We have previously held that, since VCRs are used "to receive the basic service tier," they are subject to our rate  Y_-regulations.a_{4 Y -ԍxSee TCI of Northern New Jersey at  10.a UACB had established two different charges to install a subscriber's VCR by connecting the VCR to the subscriber's cable service. One charge applied to the operator's installation of the VCR during the subscriber's initial installation of cable service. A second, and higher, charge applied to the operator's installation of the subscriber's VCR if a separate trip by the cable technician were required. The 1992 Cable Act directed us to establish rate  Y -standards for "installation and lease of equipment used to receive the basic service tier." .4 Y-ԍxSee Communications Act,  623(b)(3), 47 U.S.C.  543(b)(3). See also 47 C.F.R.  Y- 76.923(a).Ľ Our rules provide that regulated equipment consists of all equipment in a subscriber's home  Y -used to receive basic service.J 4 Y;-ԍx47 C.F.R.  76.923(a).J Rates for installation of such equipment must be based on  Y -actual costs and must be "unbundled" or priced separately.! }4 Y-ԍx47 C.F.R.  76.923(b). See also Report and Order, 8 FCC Rcd at 5810 ("[W]e will require separate charges for each significantly different type of . . . installation."). When basic service is installed  Y-through a subscriber's VCR, the VCR is used "to receive the basic service tier."[" 4 YZ-ԍxReport and Order, 8 FCC Rcd at 5810.[ Since VCRs are, indeed, used "to receive the basic service tier," UACB's charges for VCR installations are subject to our rate regulations. Those charges must comport with the actual cost standard of our rules.  X-x  D.` ` Refund Plans  Y-x11.` ` The Commission's rules permit a cable operator, at its discretion, to implement a refund under one of two methodologies: (1) by returning overcharges to those subscribers who actually paid the overcharges, or (2) by giving a prospective percentage  Y-reduction on future bills to those subscribers who actually paid the overcharges.T# 4 Y'&-ԍxSee 47 C.F.R.  76.942(d).T In this case, UACB has chosen the second method of giving refunds. UACB contends, however,"#0*((" that the City, by requiring UACB to submit its refund methodology for approval, is in effect restricting an operator's discretion to select which refund methodology it wants to use. The City counters that there is nothing in the rate order that restricts UACB's selection of a refund method from the two refund methodologies allowed by the Commission's rules. According to the City, the rate order simply requires UACB to submit its refund plan to the City so the City may assess its consistency with the Commission's rules.  Y_-x12.` ` One way in which a franchising authority may be assured that an operator is in compliance with a refund order is by reviewing and, thereafter, approving the cable operator's proposed refund plan. We agree with the City that the conditions imposed on  Y -UACB by the challenged provision in the rate order  i.e., that UACB identify the basis for calculating its refunds, that UACB identify the applicable interest rate and how it was calculated, and that UACB explain how rate refunds will be implemented do not restrict UACB's ability to select a particular rate refund methodology under the Commission's  Y -rules.g$ < Y9-ԍxSee Appeal, Exhibit 1 (City's Rate Order at 7). g Therefore, the City can require UACB to submit its refund plan to the City to ensure that it complies with the City's rate order and that it is consistent with the Commission's rules.  X{-  Xd-III.xORDERING CLAUSES  Y6-x13.` ` Accordingly, IT IS ORDERED that United Artists Cable of Baltimore's appeal of the City of Baltimore's local rate order, regarding the issue of UACB's permitted  Y -charges for converter boxes and remote controls is DISMISSED as moot.  Y-x 14.` ` IT IS FURTHER ORDERED that United Artists Cable of Baltimore's appeal of the City of Baltimore's local rate order, regarding the issue of franchise fee itemization  Y-and the issue of franchise fee calculation are REMANDED to the local franchising authority for resolution in accordance with the terms of this Order.  Yk-x15.` ` IT IS FURTHER ORDERED that United Artists Cable of Baltimore's appeal of the City of Baltimore's local rate order, regarding the regulatory status of UACB's A/B  Y>-switches is REMANDED to the local franchising authority for resolution in accordance with the terms of this Order.  Y- x 16.` ` IT IS FURTHER ORDERED that United Artists Cable of Baltimore's appeal of the City of Baltimore's local rate order, regarding the regulatory status of UACB's VCR  Y -installations is DENIED .  Y"-x17.` ` IT IS FURTHER ORDERED that United Artists Cable of Baltimore's appeal  Y#-of the City of Baltimore's local rate order, regarding the issue of refund plans is DENIED . "t${$0*((%"Ԍ Y-ԙx18.` ` This action is taken by the Chief, Cable Services Bureau, pursuant to authority delegated by Section 0.321 of the Commission's rules. 47 C.F.R. 0.321. x` `  hhFEDERAL COMMUNICATIONS COMMISSION x` `  hhMeredith J. Jones x` `  hhChief, Cable Services Bureau