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On December 13, 1995, the Commission put TCI and TKR's  Xj- xwaiver requests on public notice.dj yO-ԍxPublic Notice, DA 952462 (rel. December 13, 1995).d The Commission received comments regarding the waiver  xrequest from the National Association of Telecommunications Officers and Advisors ("NATOA"),  x=the National Cable Television Association, Inc. ("NCTA"), and TCI filed a reply. On February  X%- xj22, 1996, the Bureau released an Order ("Waiver Order"), granting the requested waiver to TCI  X- xand TKR cable companies.ax {O9"-ԍxOrder, DA 96220 (rel. February 22, 1996).a Subsequent to the Waiver Order, several other cable companies  X- x=requested and received waivers for the same purpose.  yO$-  ԍxSee letter to Seth S. Davidson, Esq. from Meredith J. Jones, DA 96379 (March 19, 1996), granting waiver to Century Communications Corp., PostNewsweek Cable, Inc., Marcus Cable and Prime Cable. Because of the general applicability of  xthe requested relief to cable operators, regardless of their particular circumstance, we hereby grant  xMa waiver that can be used by any cable operator in conjunction with its first FCC Form 1240 filing."b ,))ZZ<"Ԍ X- Ù"BACKGROUND ă  X- ` x2.` ` Under the Cable Consumer Protection and Competition Act of 1992 ("1992 Cable  X- xzAct");XGx yO4- xԍ Cable Television Consumer Protection and Competition Act ("1992 Cable Act"), Pub. L. No. 102385, 106  x,Stat. 1460 (1992), Sections 623(b), (c) of the Communications Act of 1934, as amended ("Communications Act"), 47 U.S.C.  543(b), (c). ;, cable rate regulation is undertaken jointly by the Commission and by state and local  xgovernments. For purposes of allocating regulatory responsibility over the rates for services  xoffered by cable system operators, the 1992 Cable Act divides regulated cable services into two categories.  XH- ` x3.` ` The first category is the basic service tier ("BST") which includes, at a minimum,  xthe local broadcast signals distributed by the cable operator and any public, educational, and  X - xgovernmental access channels.E Gx yO-ԍ 47 C.F.R.  76.901(a). E Regulation of rates for BSTs is the responsibility of certified  xstate and local governments, pursuant to standards and procedures established by the  X - xLCommission. xGx yO- xwԍ Communications Act,  623(a)(2)(A). Under certain circumstances, the Commission will directly regulate BST rates, 47 C.F.R. 76.944(a). The second category is the cable programming services tier(s) ("CPST"), which  xincludes all video programming distributed over the system that is not on the BST and for which  X - x>the operator does not charge on a per channel or per program basis.M Gx yO?-ԍ Communications Act,  623(l)(2).M CPSTs are subject to  xregulation by the Commission only if the Commission receives a complaint from a local  X-regulatory authority regarding an operator's CPST rate.M ` Gx yO-ԍ Communications Act,  623(c)(3).M  Xb- ` x4.` ` Pursuant to the 1992 Cable Act's rate regulation requirements, we designed a  xsystem of rate regulation that ensures subscribers pay reasonable rates for regulated cable services.  xUnder our rules, we required most regulated cable operators to either reduce their regulated rates  xto a level that represented their September 30, 1992 regulated revenues reduced by a 17%  x"competitive differential" (adjusted for annual inflation increases, changes in external costs and  xichanges in the number of programming channels) or submit a costofservice showing supporting  X- xhigher rates.  Gx {Oy"- xԍ See Second Order on Reconsideration, Fourth Report and Order, and Fifth Notice of Proposed Rulemaking, MM Docket No. 92266, FCC 9428, 9 FCC Rcd at 4124 (1994). The 17% "competitive differential" represented the average difference that the  X- xCommission determined existed between the rates of competitive and noncompetitive systems.3 J Gx {O%-ԍ Id.3 " ,-(-(ZZ"Ԍ X- ` ԙx5.` ` We also adopted a price cap approach to govern how operators can adjust their  xrates on a going forward basis following the establishment of initial rates. Under the original  xprice cap approach ("quarterly rate adjustment system"), operators adjust their rates to reflect  xchanges in external costs and changes in the number of regulated channels up to four times per  xyear. Operators make these rate adjustments by filing an FCC Form 1210 pursuant to a streamlined rate review process.  X_- ` _x6.` ` After gaining experience with the quarterly rate adjustment system, we found that  x-the process creates incentives for operators to file for multiple rate adjustments during each year.  x[This process can be costly for operators and regulators. In addition, multiple rate adjustments  x"in one year may create subscriber confusion. Multiple rate adjustments also impose  xyadministrative burdens on regulatory authorities because they must review each proposed rate adjustment.  X - ` x7.` ` We also found that under the quarterly rate adjustment framework, some operators  xare delayed when attempting to recover their costs because they are not permitted to file for  x<recovery of external cost increases and additions of new channels until the quarter after costs are  xincurred or channel changes are made. Operators may experience further delay while regulatory  xauthorities review the proposed adjustments. Moreover, operators are never able to recover costs between the date they are incurred and the date a rate adjustment is permitted.  X- ` x8.` ` In order to address these concerns, we adopted an optional rate adjustment  xmethodology where cable operators are permitted to make annual rate changes to their BSTs and  X- xCPSTs. According to the Order, operators that elect to use the methodology will adjust their  xrates once per year to reflect reasonably certain and reasonably quantifiable changes in external  xcosts, inflation, and the number of regulated channels that are projected for the 12 months  xfollowing the rate change. We have permitted operators to estimate cost changes that will occur  x0in the 12 months following the rate filing in order to limit delays in recovering costs that  xoperators may experience under the quarterly system. Any incurred cost that is not projected may  x/be accrued with interest and added to rates at a later time. If actual and projected costs are  xdifferent during the rate year, a "true up" mechanism is available to correct differences between  xthe revenues the operator collected with actual cost changes. The true up requires operators to  xdecrease their rates or alternatively, permits them to increase their rates to make adjustments for over or under estimations of these cost changes.  X- ` x9.` ` The annual projection and trueup is reflected on an FCC Form 1240. Regulated  x-operators using the annual methodology that seek to adjust rates on the BST must file Form 1240  xywith local franchising authorities a minimum of 90 days before the rate adjustment is scheduled  xto go into effect, and with the Commission a minimum of 30 days before a CPST rate adjustment  X#-is scheduled to go into effect. #Gx {O%-ԍ See Order at  92104 for a more detailed explanation of filing requirements. "j$Z ,-(-(ZZF#"Ԍ X- ` ~x 10.` ` The Order states that, because the trueup examines costs which were actually  X- xLincurred, it can only examine costs as of the date the Form 1240 is filed.LGx {Od-ԍ Id. at  79 and note 151.L For basic service tier  x.regulated operators, for example, this date will be at least 90 days before the rate adjustment is  xscheduled to go into effect, because the rules require an operator to file the Form 1240 with a  x=local franchising authority 90 days prior to the proposed effective date. In addition, operators may lack actual cost data for a short time period preceding the date the Form 1240 is filed.  Xa-( DISCUSSION ă  X3- ` x 11.` ` As noted above, we have previously waived, for certain cable operators, the  x=Commission's requirement that only costs that have actually been incurred may be included in  xthe trueup period of an operators first Form 1240 filing. Specifically, we permitted the  xoperators' initial Form 1240 filings to include projected changes in costs, inflation, channels and  xjsubscriber information attributable to the period between the last date for which historical cost  xdata is available and the effective date of the new rates. The waivers stipulated that these  xyprojections must be accompanied by a separate calculation and explanation of the basis for the costs.  Xd- ` x 12.` ` The operators that initially requested the waiver argued that the Order created a  x{cost recovery delay for the time period from the last date for which historical cost data is  xyavailable until the date the new rates are scheduled to go into effect. The operators stated that  x\this period will start at least 90 days prior to the date the new rates are scheduled to go into  x=effect, due to the 90 day regulatory review period after FCC Form 1240 is filed. In addition, the  xLoperators argued that this period will likely extend back even further, due to the fact that many  xcable operators will not have historical cost data for the period immediately prior to the filing of  x.Form 1240. According to the operators, because many operators cannot submit this historical  X- xLcost data, and because the Order does not allow projected data to be used to account for cost  xincreases incurred during the 90 day review period, there will be a delay in cost recovery for cost increases which occur during that time period.  XT- ` x 13.` ` In the Waiver Order, we stated that our requirement that only costs that have  xactually been incurred be used for trueup periods was not intended to create significant delays  xxin cost recovery. As both NATOA and TCI agreed, however, as a result of the requirement, costs  X- xincurred before the effective date of an operator's first annual filing (during the period beginning  x=with the last date for which historical cost data is available and ending on the effective date of  xthe new rates) generally would not be recoverable until the effective date of the rates justified by  X - xzan operator's second annual filing. We found that this delay in cost recovery could act as a  xdisincentive for operators to begin using the annual rate adjustment methodology, and that the potential benefits of the new streamlined system would go unrealized. "#Z,-(-(ZZe""Ԍ X- ` Px 14.` ` In the Waiver Order, we stated that we believed that the waiver, if granted, would  xonly add incrementally to any burden placed on the operators' local franchising authorities when  xlreviewing Form 1240. We noted that any additional burden the waiver initially creates is  xoutweighed by the benefits the waiver offers both subscribers and operators. With the waiver,  xoperators will not be in the position of having to absorb and accrue cost increases that occur  xiduring the period in question. Local franchising authority review of projected cost data is already  xa component of the Form 1240, for cost increases expected to occur after the date the Form 1240  x\is filed. In addition, we noted that the waiver request is for a one time only exception to the  x[requirement that only actual cost data can be used to perform a trueup calculation. We found  x[that allowing first time filers of Form 1240 to include data based on projected costs in their first  xtrueup calculation would not produce significant burdens on local regulatory authorities.  xZFurthermore, we noted that consumers would be protected because any rate adjustment based on  xprojected costs must be trued up during the second rate adjustment period. As stated in the  X -Order, any overcharges must be returned to subscribers, with interest.  X - ` x15.` ` Subsequent to the release of the Waiver Order, we have received requests from  xseveral cable operators requesting the same relief granted to TCI and TKR. Without a similar  xwaiver, operators using our annual rate adjustment method would be unable to include the costs  xat issue in their first annual filing, and the benefits to operators and subscribers as described  XQ- xabove would not be realized.\QGx yO-  LԍxA waiver is appropriate in this situation as all operators using the annual rate adjustment methodology would  {O- x<be similarly situated to the operators for which individual waivers were granted. See WAIT Radio v. FCC, 418 F.  {O\-2d 1153, 1159 (D.C. Cir. 1969); Northeast Cellular Telephone Co. v. FCC, 897 F. 2d 1164, 1166 (D.C. Cir. 1990). Accordingly, we hereby grant, for all operators' initial Form 1240  xfiling, a waiver of the requirement that only costs that have actually been incurred may be  X#- xincluded in the trueup period.#Gx {O-  ԍxBecause our initial Public Notice did not specify that the waiver, if granted, would only be applicable to  xthe cable operators that initially requested the waiver, we recognize that there may have been some uncertainty on  xthe part of cable operators and franchising authorities as to the general applicability of the relief granted in the  {O- xWaiver Order. Therefore, an operator without an individualized waiver that included the costs estimates for the  xYperiod at issue in their initial Form 1240 filing may recover these costs so long as the local franchising authority did  xnot deny the inclusion of these costs. We will not overturn the decision of any local franchising authority that  {Ot- xjdenied, prior to the release date of this Order, the inclusion of these costs into the initial Form 1240 rate for  x;operators that did not receive an individual waiver. As noted above, an operator without the waiver will in any case be able to recover these costs in its second Form 1240 filing. Specifically, an operator's initial Form 1240 filing may include  xprojected changes in costs, inflation, channels and subscriber information attributable to the period  xbetween the last date for which historical cost data is available and the effective date of the new  xrates. These projections must be accompanied by a separate calculation and explanation of the  xbasis for the costs (for the period between the last full month for which actual cost data is  xavailable and the effective date of the new rate) in accordance with the guidelines set forth in  xAppendixA. This waiver applies solely to an operator's first Form 1240 filing; trueups in subsequent filings will only encompass the period for which actual cost data is available.  Xk- "k ,-(-(ZZ"Ԍ X- ORDERING CLAUSES ă  X-x16.` ` Accordingly, IT IS ORDERED that the waiver IS GRANTED .  X- ` x17.` ` This Order contains a modified information collection. As part of its continuing  xLeffort to reduce paperwork burdens, pursuant to the Paperwork Reduction Act of 1995, Pub. L.  xNo. 10413, the Bureau will publish a notice in the Federal Register soliciting public comment on the modified information collection requirement in order to obtain OMB approval.  X3- ` x18.` ` This action is taken by the Deputy Chief, Cable Services Bureau, pursuant to  X -authority delegated by Section 0.321 of the Commission's rules, 47 C.F.R. 0.321. x` `  hh@FEDERAL COMMUNICATIONS COMMISSION x` `  hh@John E. Logan x` `  hh@Deputy Chief, Cable Services Bureau"{,-(-(ZZ"  X- Appendix  a!6V A a!6V   X-#Xj\  P6G;9XP#   !xIn order for the operators to implement the Commission's waiver of the requirement that  xonly actual cost data may be included in the operator's first annual rate adjustment filing (for the  x\time period just prior to the effective date of the new rate), the operators must adhere to the  xfollowing guidelines. In order to use the cost estimations permitted by the waiver in the first  xMannual Form 1240 filing, the operator may incorporate the calculations directly into its Form  x1240, or the calculations may be reflected in an alternative manner, provided the calculations are  xperformed in conformance with the "General Guidelines" as set forth in Section 1 below, and  xMprovided the appropriate regulatory authority agrees to the manner in which the alternative  xshowing is made. Section 2 below sets forth the steps necessary to incorporate the calculations into the operators' first Form 1240 filing.  X -  mx1)  General Guidelines. In the initial filing of the Form 1240, the period of time for  xywhich actual data is available (the "Actual TrueUp Period") must be separated from the period  x of time for which actual data is not available (the "Estimated TrueUp Period"). A separate  xMaximum Permitted Rate for the TrueUp Period should be calculated for each of these periods.  xLThis is done so that when the system files its second Form 1240 and performs a trueup on the  xyEstimated TrueUp Period a second time, the effects of the trueup performed in the initial filing can be taken into account.   xThere are two elements of the first filing which must be accounted for in the second  xfiling. First, the Inflation Segment for the Estimated TrueUp Period in the first filing must be  xremoved from the Base Rate of the second filing. Second, the adjustment calculated in Module  xH of the form (and the interest earned on that adjustment) for the Estimated TrueUp Period must be removed from the Total TrueUp Adjustment in the second filing.   `xBelow are a set of instructions describing how to use the existing Form 1240 in  xconjunction with this waiver. If a system is using an alternative method for performing a trueup  xmon the Estimated TrueUp Period, it should make sure that it follows the same general procedures.  X -  X -x 2) Guidelines for Operators that use Form 1240.   xThe following instructions are to be used by the operators that choose to take advantage  X -of the waiver by using Form 1240 instead of an alternative method.#Xw PE37XP#   X"- #Xj\  P6G;9XP# xInitial Filing of Form 1240#X\  P6G;P#:  X#-#Xj\  P6G;9XP#  Vh$- x Module E: Timing Information  X:&-  XxWhen completing Form 1240, Module E is used to define which parts of True Up Periods   l1 and 2 are eligible to receive interest. This information is then entered into the formulas"#',-(-(ZZ%"   in Module H. In a standard filing, TrueUp Period 2 is only used if TrueUp Period 1   is longer than 12 months, and the instructions are written with that assumption. Systems   filing in accordance with this waiver may have a TrueUp Period 1 which is less than 12   months long. Therefore, Module E should be completed following the methodology used in the following example.(#   XxAn operator intends to file on March 1, 1996 to set a new rate starting on June 1, 1996   }with an Actual TrueUp Period running from July 1, 1995 to December 31, 1995 (six   Nmonths) and an Estimated TrueUp Period running from January 1, 1996 to May 31, 1996   (five months). Lines E2, E3, E4, and E5 should be all be completed. Line E1 should be   Oleft blank. Line E2 (the length of the Actual TrueUp Period) should equal 6. Line E3   (the length of time between the end of the Actual TrueUp Period and the beginning of   the Projected Period, which is another way of saying the length of the Estimated TrueUp   @Period) should equal 5. Line E4 (the portion of the Estimated TrueUp Period eligible   0for interest) should also equal 5. Because all of the Estimated TrueUp Period is eligible for interest, line E5 should be 0.(#  Vy- x Modules F and G: Maximum Permitted Rate for the TrueUp Period   |XxComplete Module F (which is normally used to calculate the Maximum Permitted Rate   for TrueUp Period 1) for the Actual TrueUp Period. Complete Module G (which is   1normally used to calculate the Maximum Permitted Rate for TrueUp Period 2) for the Estimated TrueUp Period.(#  V- x Module H: TrueUp Adjustment Calculation   ^XxIn Module H (which calculates the Total TrueUp Adjustment), complete to Lines H1   through H8 and lines H12 through H14 of Module H. The instructions for lines H1, H2,   and H4 set forth two formulas; the first formula should be used for each of those three   lines. Lines H1 through H4 calculate the total amount by which subscribers were over   mor undercharged (and the interest on that amount) during the Actual TrueUp Period.   Lines H5 through H8 calculate the total amount by which subscribers were over or undercharged (and the interest on that amount) during the Estimated TrueU(#