QUESTIONS AND ANSWERS ON CABLE TELEVISION RATE REGULATION July 27, 1994 The Cable Services Bureau has received questions from cable operators, franchising authorities and other interested parties concerning the Commission's revised rules governing cable rate regulation. The following questions and answers provide guidance on a variety of issues of general interest regarding the revised rules. Previous sets of Questions and Answers were released on April 26, May 6, May 18, June 1, and June 14, 1994. Equivalent Billing Unit Q1: If a cable operator operates its business using subscriber counts based on the "equivalent billing unit" (EBU) methodology, and does not have an accurate count of actual individual recipients of service must it do a subscriber survey to determine the number of actual subscribers in order to complete FCC Form 1200? A1: Although certain of the current Form 1200 instructions ask for subscriber numbers that are not based on the EBU methodology (e.g., instruction Line A2), it appears that actual counts of subscribers receiving service under bulk-rate contracts are sometimes not available and not readily obtainable, and further that using an EBU count throughout a rate justification generally provides an accurate approximation of maximum permitted rates. Nevertheless, we are concerned that regular subscribers not subsidize the rates that bulk-rate subscribers pay. Accordingly, a cable operator who does not have an actual subscriber count may instead use an EBU count where at least 90% of external costs (as defined in Section 76.922(d)(3)(iv) and as reflected on Form 1200) are charged to the operator based either on a percentage of revenue received basis (for example, franchise fees) or on the operator's EBU count (for example, programming fees). An operator that elects this method must attach an explanation to the Form 1200 (or 1210) stating that it has selected this method. Either an EBU count or an actual subscriber count must be used consistently throughout a rate justification, between and in all subsequent rate justifications. Likewise, actual subscriber counts, if elected, must be used throughout, between and in all subsequent rate justifications. The instructions will be revised at a later date to reflect this change. Form 1201 Q2: May a franchising authority submit a FCC Form 1201 in order to determine the median household income for the franchise area? A2: The FCC Form 1201 was created in order to help cable operators obtain information necessary to complete the FCC Form 1200. We recognize that this information is equally important to franchising authorities who need to consider cable operators' Form 1200 submissions. However, a franchising authority need not request this information from the Commission, as it should be made available to the authority by the cable operator. Cable operators are encouraged to submit copies of their Forms 1201 with their rate filings; if they do not, franchising authorities may request this information from the operator in accordance with 47 C.F.R.  76.937(e), with the attendant remedies under 47 C.F.R.  76.937(d), 76.940, 76.941, and 76.942 available should the cable operator fail to comply with the request. If the cable operator did not complete a Form 1201, it should be able to document to the franchising authority the basis for its census information. If the franchising authority is dissatisfied with this explanation, it may then submit a Form 1201, complete with all requested information (including the community unit identifier), to the Cable Services Bureau (Fax number (202) 416-0885). The franchising authority must attach to the form a letter identifying the sender as a franchising authority and noting the steps previously taken to seek to obtain the information from the cable operator. Small System Streamlined Rate Justification Q3: How does a small system wishing to take advantage of streamlined rate regulation justify its initial rates in response to the filing of an FCC Form 329 with the Commission or a request by the local franchising authority? A3: To justify its initial rates, a small system must submit its rate card (i.e., a list of all of its rates for regulated services) as of March 31, 1994, a current rate card demonstrating that its rates have been uniformly reduced by fourteen percent, and any supporting information the operator, franchising authority, or Commission may request. Basic Tier Rates-Prior Approval Q4: May cable operators make their basic tier rates, established on or before July 14, 1994 (or in the case of small operators, September 1, 1994) in accordance with the Commission's revised rate regulations, effective on 30 days' notice without prior approval from the local franchising authority? A4: Yes. It is not contemplated under our rules that local authorities or the Commission approve the revised rates before they become effective. The Second Reconsideration Order generally requires that regulated systems bring their rates into compliance with the revised rules by either May 15 or, if they use the refund deferral period of Section 76.922(b)(6)(B) of the Rules, July 14, 1994. See Second Reconsideration Order at para. 135 & n.183. Rate justifications need not be filed until June 15 (Form 1200), July 14 (Form 1220 or Form 1225) or, if refund deferral is used, as late as August 15, 1994 (Forms 1200, 1220 or 1225). See Second Reconsideration Order at paras. 144- 149 and Order, DA 94-619 (released June 14, 1994). Small operators must restructure under the revised rules by September 1, 1994 and must file their rate justifications by October 1, 1994. See Order, DA94-592 (released June 7, 1994). Thus, restructuring is required to be completed before the rate justification form is required to be filed. Prior approval of the rates would not be possible pursuant to this chronology. If, upon subsequent examination of a rate justification, a franchising authority found an erroneously restructured rate to be higher than the permitted rate, the franchising authority could order refunds of the excess amounts charged. Section 76.933(a) of the Commission's rules provides that after a cable operator has submitted for review its existing rates for the basic service tier and associated equipment costs, the franchising authority has 30 days to review those rates and may toll the rates for an additional period if necessary to facilitate review. Restructured rates constitute "existing rates" for purposes of this rule and the review period would begin with the filing of the rate justification form. Section 76.942 provides for refunds of previously paid rates found to be in excess of the permitted tier charge or the actual cost of equipment. Forms 393 and 1200 - Satellite and Non-Broadcast Signals Q5: On Form 393, on the Benchmark Cable Rates Table, one of the variables is "Satellite Channels." If two satellite signals are delivered to a subscriber over one channel (each shown during a different part of the day), does this count as one or two satellite channels? How about on Form 1200, Module H, Lines H3 and H7? How about with respect to non-broadcast channels on Form 1200, Module C, Line C2? A5: In each of these instances, the channel should be counted as only one satellite or non- broadcast channel. Franchising Authorities-Forfeitures Q6: May a local franchising authority that is reviewing a FCC Form 393 rate justification that was pending on May 15, 1994 apply forfeitures and fines for violations of its rules, orders and decisions? A6: The Commission's Third Order on Reconsideration provides that if a franchising authority has the power under state or local law to impose forfeitures or fines for violations of its rules, orders or decisions, including filing deadlines and orders to provide information, the 1992 Cable Act does not prevent such action. See Third Order on Reconsideration at para. 80 Because this interpretation does not involve any new regulation, franchising authorities having such power under state or local law were free to take such action even prior to May 15, 1994, the effective date of the revised rules. In addition, Section 76.943 of the Commission's accompanying rules provide that if a cable operator willfully fails to comply with the terms of any franchising authority's order, decision, or request for information, the Commission may impose a forfeiture. This rule was effective May 15, 1994 and may be applied to operator noncompliance on or after May 15, 1994, whether the relevant proceeding began before or after that date. If a franchising authority issued an order, decision, or request before May 15, 1994, that has not been complied with, it may issue an additional order directing compliance for purposes of invoking the new remedies. Billing Requirements Q7: Does the FCC require that cable operators whose basic tier rates are not regulated put the address and phone number of the local franchising authority and the FCC on their bills? A7: Yes. This requirement applies to all cable operators. - F C C -