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                         January 8, 1997                 DA 97-36

                                       Released: January 10, 1997


Mark J. Palchick, Esq.
Vorys, Sater, Seymore and Pease 
1828 L Street, NW
Washington, DC 20036-5109

Dear Mr. Palchick: 

     This letter is in response to your letter on behalf of your client, the Cable
Telecommunications Association.  You state that at a date on or before December 30, 1996,
WWOR-TV ceased delivering its signal via satellite to cable operators around the country and that
the satellite transponder commenced delivering Discovery's Animal Planet in its place.  You state
that this substitution took place in the absence of notice to many cable operators and was not
voluntary on the part of the cable operators.  You ask whether a cable operator using FCC Form
1240 ("Form 1240") annually must also file a FCC Form 1210 ("Form 1210") to reflect this channel
adjustment in the quarter following the quarter that WWOR-TV ceased being carried, or if a cable
operator can instead include the channel adjustment in the true-up portion of its next annual Form
1240 filing.  In addition, you ask if a cable operator may, subject to its contractual obligations, move
the programming substituted for WWOR to a New Product Tier ("NPT").

     You note that Section 76.922(g)(1) of the Commission's rules indicates that when a system
deletes channels in a calendar quarter, the system must adjust the residual component in the next
calendar quarter to reflect that deletion.  However, you also note that Section 76.922(e) of the rules
provides that operators that use the annual rate adjustment Form 1240 may not adjust their rates
more than once annually to reflect changes regulated channels.  You ask for clarification that the
Form 1240, and not a Form 1210, should be used to reflect the channel adjustment you describe.  

     Accordingly, we hereby clarify that, for operators using the annual Form 1240 rate
adjustment method, channel deletions should be reflected on an operators next annual Form 1240
filing.  Such an operator need not file a Form 1210 in the quarter following the channel deletion. 
As we have stated, the annual adjustment was designed to reduce the number of rate adjustments
experienced by subscribers by allowing operators to project estimated costs annually.  If actual and
projected costs are different during the rate year, a true up mechanism is available to correct
differences between the revenues the operator collected with actual cost changes.  The true up
requires operators to decrease their rates or alternatively, permits them to increase their rates to make
adjustments for over or under estimations of these cost changes.  Any overestimation of costs must
be returned to subscribers, plus interest, in an operators next Form 1240 filing.

     You also ask if an operator may move the programming substituted for WWOR-TV to an
NPT from either the basic service tier ("BST") or the cable programming services tier ("CPST"). 
You state that the Commission's rules provide that, prior to a channel addition to an NPT, the
channel may be temporarily placed on a CPST for marketing purposes.  You note that the rule does
not specifically mention movement of a channel to an NPT that was temporarily placed on the
BST.  

     Given the circumstances you describe, we find that an operator may move the channel
substituted for WWOR-TV, from the BST or a CPST, to an NPT.  As we have previously stated,
operators may place new programming services on existing CPSTs and, at any time, move them to
an NPT.  In addition, operators may drop channels from a tier entirely, as long as the changes do
not constitute a fundamental change to the BST or CPST(s).  You state that the deletion of
WWOR-TV and the substitution of another channel was not within the control of the cable operators,
and many of the operators received no notice of the change.  Because some of the affected operators
had offered WWOR-TV on the BST, while others had offered WWOR-TV on a CPST, the
substituted channel is now offered on either the operators' BST or CPST.  As you note in your letter,
our rules provide that, prior to a channel addition to an NPT, the channel may be temporarily placed
on a CPST.  While our rules do not specifically address temporary placement of a channel on the
BST, we believe that the operators currently in the position of offering the substitute channel on the
BST should likewise be able to move that channel from the BST to an NPT.

                              Sincerely, 



                              Meredith J. Jones
                              Chief, Cable Services Bureau