WPC7 2a BKf Z CG Times3|jJ}Xw PE37XP",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@\@\`LHP4Si; Rm. 900_1; LPT2onal)HPLA4SAD.PRSXw PE37\MKXP2~ E <  Z$  c-#XR  P7jQ}XP#Times New RomanTimes New Roman BoldTimes New Roman Italic3|jJHP4Si; Rm. 900_1; LPT2onal)HPLA4SAD.PRSXj\  P6G;\MKXP2 K vp{"i~'^:DPddDDDdp4D48dddddddddd88pppX|pDL|pp||D8D\dDXdXdXDdd88d8ddddDL8ddddX`(`lD4l\DDD4DDDDDDDDd8XXXXXX|X|X|X|XD8D8D8D8ddddddddddXdbdddpdXXXXXlX~|X|X|X|XdddldldD8DdDDDdplld|8|P|D|D|8dvddddDDDpLpLpLpl|T|8|\ddddddl|X|X|Xd|DdpL|Dd~4ddC$CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxH\dDXddddd8@d<@d<DDXXdDDxddzHxxHvppDXd<"dxtldpxxda8DocumentgDocument Style StyleXX` `  ` a4DocumentgDocument Style Style . 2kkva6DocumentgDocument Style Style GX  a5DocumentgDocument Style Style }X(# a2DocumentgDocument Style Style<o   ?  A.  a7DocumentgDocument Style StyleyXX` ` (#` 2t@ N BibliogrphyBibliography:X (# a1Right ParRight-Aligned Paragraph Numbers:`S@ I.  X(# a2Right ParRight-Aligned Paragraph Numbers C @` A. ` ` (#` a3DocumentgDocument Style Style B b  ?  1.  2  v +a3Right ParRight-Aligned Paragraph Numbers L! ` ` @P 1. ` `  (# a4Right ParRight-Aligned Paragraph Numbers Uj` `  @ a. ` (# a5Right ParRight-Aligned Paragraph Numbers _o` `  @h(1)  hh#(#h a6Right ParRight-Aligned Paragraph Numbersh` `  hh#@$(a) hh#((# 2]a7Right ParRight-Aligned Paragraph NumberspfJ` `  hh#(@*i) (h-(# a8Right ParRight-Aligned Paragraph NumbersyW"3!` `  hh#(-@p/a) -pp2(#p Tech InitInitialize Technical Style. k I. A. 1. a.(1)(a) i) a) 1 .1 .1 .1 .1 .1 .1 .1 Technicala1DocumentgDocument Style Style\s0  zN8F I. ׃  2Ka5TechnicalTechnical Document Style)WD (1) . a6TechnicalTechnical Document Style)D (a) . a2TechnicalTechnical Document Style<6  ?  A.   a3TechnicalTechnical Document Style9Wg  2  1.   2!$ !a4TechnicalTechnical Document Style8bv{ 2  a.   a1TechnicalTechnical Document StyleF!<  ?  I.   a7TechnicalTechnical Document Style(@D i) . a8TechnicalTechnical Document Style(D a) . 2'3!"e'f'Doc InitInitialize Document Stylez   0*0*0*  I. A. 1. a.(1)(a) i) a) I. 1. A. a.(1)(a) i) a)DocumentgPleadingHeader for Numbered Pleading PaperE!n    X X` hp x (#%'0*,.8135@8: -ԍxSee Fourth Report and Order at para. 246; 47 C.F.R.  76.922(d)(3)(xi).  X3-x3. ` ` In the Sixth Reconsideration Order, the Commission, inter alia, supplemented its existing going forward rules by creating an alternative channel adjustment methodology. Cable operators adding channels to CPSTs or singletier systems may recover from subscribers (a) a flat per channel markup of up to 20 cents per subscriber per month, subject to a cap on the total amount recovered through December 31, 1997, and (b) programming  X -costs, subject to a cap that applies through December 31, 1996. y& XR-ԍxSee Sixth Reconsideration Order at paras. 6483 (describing in detail going forward rules). Operators adding channels to CPSTs or singletier systems on and after May 15, 1994 may use either the new rules or the existing rules to adjust rates after December 31, 1994, but must use either the existing rules or  X}-the new rules consistently with respect to all channels added after December 31, 1994.}{y& X-ԍxId.; Letter to Peter H. Feinberg, DA941508 (from Chief, Cable Services Bureau, December 19, 1994) (waiver allowing operators to raise rates under the existing going forward rules after December 31, 1994 for channels added by that date, and then adjust rates under the new "going forward" rules for channels added after that date).   XO-x4. ` ` In the Sixth Reconsideration Order, the Commission also adopted a special streamlined costofservice procedure that permits independent small systems and small systems owned by small multiple system operators ("MSOs") to recover the costs of  X -upgrading their headend equipment when they add new channels to CPSTs.[|  y& X"-ԍxSee Sixth Reconsideration Order at paras. 8794. A small system is a cable system that serves 1,000 or fewer subscribers from the system's principal headend, including any  Xz$-technically integrated headends and microwave receive sites. See 47 C.F.R.  76.901(c). A small MSO is defined as a MSO that has 250,000 or fewer total subscribers, owns only systems with less than 10,000 subscribers each, and has an average system size of 1,000 or  X7'-fewer subscribers.  See 47 C.F.R.  76.922(b)(5).[ To prevent the" -0*((" potential for unreasonably sharp rate increases to small system subscribers, the amount a small system can recover for each channel added was limited to programming costs incurred plus the lesser of the actual cost of the headend equipment or $5,000. Headend costs that are to be recovered through increased rates must be depreciated over the useful life of the equipment. In addition, the rate of return the small system may earn on such headend costs may not exceed 11.25%. Small systems that increase rates as a result of any channel additions pursuant to this methodology may be reimbursed for the addition of a maximum of seven  X_-channels to CPSTs between May 15, 1994 and December 31, 1997.g_y& X-ԍxSee Sixth Reconsideration Order at paras. 9394.g Qualifying small systems adding channels to CPSTs were allowed to choose between this streamlined costof X1-service procedure and the going forward rules applicable to all systems.K 1{y& X] -ԍxSee id. at para. 91.K x  X -x5. ` ` In adopting this streamlined costofservice procedure for independent small systems and small systems owned by small MSOs, the Commission relied in part on comments filed by the Cable Telecommunications Association ("CATA"), a cable industry  X -trade association.o .y& X-ԍxSee CATA Comments in MM Docket 92 266 (June 29, 1994). o In its comments, CATA suggested that special attention should be paid to small systems because the equipment costs associated with adding channels were fixed and  X-small systems must spread those costs over a small subscriber base. y& X"-ԍx CATA Comments at 57. The Small Cable Business Association ("SCBA") also participated in an ex parte meeting with Commission staff on this issue. In order to give small systems incentives to add channels, CATA suggested that the Commission adopt a sliding scale that would permit higher rates to be charged for new channels as the subscriber base  XK-decreases from 1,000 to 100.F K{y& Xw-ԍxCATA Comments at 57.F According to CATA, typical per channel equipment costs associated with the addition of satellitedelivered channels are $500 to $1,000 for a receiver to convert from satellite frequencies to video baseband, $800 for a descrambler, $1,250 for a  X-signal processor and approximately $2,500 for an additional satellite dish where necessary.C , y& X-ԍx Id. at 6.C x  X-x B. ` ` Comments (#`  X-x6. ` ` Since the Sixth Reconsideration Order was released, two industry trade groups have suggested that small systems are denied the incentives necessary for them to add channels to CPSTs by the requirement that they choose between the per channel adjustment of up to 20 cents and the streamlined costofservice procedure for upgrading headend"g 0*((1"  X-equipment.y& Xy-ԍ See CATA Letter to Chairman Hundt, November 23, 1994 ("CATA Letter"); Small Cable Business Association Letter to Chairman Hundt, December 7, 1994 ("SCBA Letter") CATA stated that for a 1,000 subscriber system adding a channel at a cost of $5,000 in additional headend equipment, the rate increase to each subscriber per month over the useful life of the equipment would average only $.06 to $.07. It adds that only for systems of 200 to 300 subscribers does the streamlined costofservice procedure yield a monthly per subscriber rate increase approaching the 20 cents permitted under the new going forward rules. CATA also states that the streamlined costofservice procedure denies even  Xv-the smallest system any profit for adding a channel.Gvdy& X -ԍxCATA Letter at 12. G CATA urges that small systems be permitted the same profit as other systems in addition to being able to pass through headend  XH-costs.FHy& X-ԍxId. at 3.F The Small Cable Business Association ("SCBA") argues that the going forward rules are unfair to small systems because "small systems are either prohibited from recovering their headend costs altogether or can elect to recover them with a profit of 11.25% on the hardware, but lose the $.20 per channel" adjustment, while the per channel adjustment of up  X -to 20 cents allows larger systems to "recover all their costs, both hardware and programming,  X -and still maintain a markup."a y& XP-ԍxSCBA Letter at 23 (emphasis in original).a SCBA asks the Commission to allow operators to recover the cost of additional headend equipment associated with channel additions in addition to the per  X -channel adjustment of up to 20 cents.: yy& X-ԍxId.:  X{-x7. ` ` CATA also argues that the streamlined costofservice procedure should be available to all small systems and was improperly limited to independent small systems and  XM-small systems owned by small MSOs.KM, y& X*-ԍxCATA Letter at 2. K SCBA argues that no subscriber cap is necessary because the headend costs quickly decrease to less than one cent per subscriber per month as  X-the size of the system increases.B y& X -ԍxSCBA Letter at 2.B x` `  X- Xx C.X` ` Discussion (#`  X-x8. ` ` On our own motion, we find our requirement that qualifying small systems elect between the per channel adjustment methodology and the streamlined costofservice procedure for upgrading headend equipment insufficient to give qualifying systems an appropriate incentive to add new channels. Although the return of up to 11.25% on the cost"~ 0*((n" of headend equipment was intended to allow small systems a profit when they added channels, we now believe that our formula as a whole may give such systems an insufficient incentive to add channels. This is the case because, except for very small systems, the per subscriber rate adjustment associated with the streamlined costofservice showing would be less than the 20 cents per subscriber per month allowed under our general going forward regulations. If the maximum $5,000 in headend costs is depreciated by a 1,000 subscriber system with an 11.25% rate of return, for example, the monthly per subscriber cost would be  X_-just over five cents, assuming a 15 year depreciation period.9_y& X-ԍxThe Commission has not prescribed depreciation rates for headend equipment, but requires cable operators to follow reasonable depreciation practices in depreciating equipment  X -over its useful life.  See  Sixth Reconsideration Order at para 93 and note 38*. The Cable Services Bureau, acting on delegated authority in examining costofservice rate justifications, concluded that operators generally assign 15year useful lives to headend equipment and  Xg -adjusted cable operator's proposed useful lives upward to reflect that norm. See, e.g., In re  XR-U.S. Cable Corp., DA 941145 (adopted by Chief, Cable Services Bureau and released  X=-November 9, 1994); In re United Video Cablevision, Inc., DA 941144 (adopted by Chief, Cable Services Bureau and released November 9, 1994).   X1-x9.` ` Accordingly, independent small systems and small systems owned by small MSOs will not be required to choose between the per channel adjustment methodology and the streamlined costofservice procedure for upgrading headend equipment. Instead, we will allow independent small systems and small systems owned by small MSOs to recover for each channel added by using both the per channel adjustment methodology and the streamlined costofservice procedure for upgrading headend equpipment in the following manner. First, such operators may recover the lesser of the actual cost of the headend equipment or $5,000 associated with the channel addition. The recovery of the lesser of the actual cost of the headend equipment or $5,000 shall otherwise remain subject to the conditions set forth in the  Xb-Sixth Reconsideration Order, namely that the headend costs be depreciated over the useful life  XM-of the equipment, the rate of return on this investment not exceed 11.25%,M y& X-ԍ Operators are permitted to recover an 11.25% rate of return on the lesser of the actual cost of the headend equipment associated with adding a channel or $5,000. Therefore, if the cost of the headend equipment associated with adding a channel is $5,000 or more, the operator is entitled to recover $5,000 plus an 11.25% rate of return on the $5,000 investment. and the headend  X6-costs may be recovered for no more than seven channels through December 31, 1997.g65y& X"-ԍxSee Sixth Reconsideration Order at paras. 9194.g Second, in addition to recovery of headend upgrade costs in a streamlined costofservice proceeding, such operators may make rate adjustments to reflect channel additions and programming expenses that all other operators are permitted to make under the existing going  X-forward rules._y& Xs'-ԍ See 47 C.F.R.  76.922(d)(3), 76.922(e)._ Specifically, operators may make per channel adjustments under either the"0*((r"  X-new or the "old" going forward rules.py& Xy-ԍ Id.; see also Sixth Reconsideration Order at paras. 6465.p As explained in the Sixth Reconsideration Order, operators that elect the new going forward rules are allowed to recover programming expenses  X-associated with adding channels subject to the License Fee Reserve and the Operator's Cap.{y& X-ԍxId. at paras. 6667. Of course, headend costs are not included in the Operator's Cap.  X-x 10. ` ` In addition, we believe that limiting eligibility to use the streamlined costofservice procedure for upgrading headend equipment to independent small systems and small systems owned by small MSOs may fail to give slightly larger systems an appropriate incentive to add channels. Accordingly, we have decided to allow larger systems to use the streamlined cost of service approach subject to the same conditions as independent small systems and small systems owned by small MSOs provided that (a) the systems are either independently owned or owned by small MSOs and (b) the monthly per subscriber cost of the  X -additional headend equipment necessary to receive an additional channel is one cent or more. .y& X-ԍxThe monthly per subscriber cost of the additional headend equipment necessary to receive the additional channel must be one full cent or more. For this purpose, operators may not round up monthly per subscriber costs of less than one cent. Additionally, operators must depreciate these costs at the same rate as they depreciate all similar equipment.  We are providing this relief for systems that are slightly larger than those that fall under the definition of a small system because we believe that such operators may have higher than average costs and may not always have access to the financial resources or other purchasing discounts of larger companies. However, since average equipment costs were built into the per channel adjustment of up to 20 cents, we believe that it is unnecessary to allow systems with additional per subscriber headend equipment costs of less than one cent for each channel added to use the streamlined costofservice procedure for upgrading headend equipment. We believe that such operators may have sufficient resources to add channels without the additional incentive created by the streamlined costofservice procedure. However, we note that we may reconsider this issue in light of the comments we have received in response to  X-our Fifth Order on Reconsideration and Further Notice of Proposed Rulemaking.xy& XS-ԍx FCC 94234, summarized at 59 Fed. Reg. 51,869 (1994), at paras. 912.x In that notice, the Commission solicited comments on whether it should retain its current definitions of small operators and small systems owned by small MSOs and whether it should employ the current Small Business Administration definition of small cable company. The definitions of  X-these terms in the instant item may be affected by the outcome of the Further Notice.  X-x 11.` ` In the Sixth Reconsideration Order, the Commission provided that rates for the BST will continue to be governed exclusively by our current rules, except that where a system offered only one tier on May 14, 1994, the cable operator will be allowed to use the revised"VK 0*(("  X-per channel adjustment of up to 20 cents._y& Xy-ԍxSixth Reconsideration Order at para. 65._ We did not, however similarly provide that the streamlined costofservice procedure for headend upgrades by eligible small systems would  X-be available to operators of singletier systems.G{y& X-ԍxId. at para. 91.G We did not intend to exclude singletier systems from this procedure and, therefore, on our own motion, we reconsider the limitation of the streamlined costofservice procedure for headend upgrades to CPSTs. We conclude that the streamlined costofservice procedure should also apply to singletier systems because we recognize that qualifying systems have the same small customer base over which to spread the cost of new equipment associated with providing additional channels, whether or not they have CPSTs. We also recognize that singletier systems are commonly smaller systems. Accordingly, we believe that the streamlined costofservice procedure for headend upgrades associated with channel additions should apply to singletier systems as well as CPSTs. x` `  X - IV. xRegulatory Flexibility Act Analysis  X -x 12. ` ` Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C.  601612, the  X -Commission's final analysis with respect to the Seventh Order on Reconsideration  is as follows:  Xd-x 13.` ` Need and purpose of this action. The Commission, in compliance with  3 of the Cable Television Consumer Protection and Competition Act of 1992, 47 U.S.C.  543 (1992), pertaining to rate regulation, adopts revised rules and procedures intended to ensure that cable services are offered at reasonable rates with minimum regulatory and administrative burdens on cable entities.  X-x 14.` ` Summary of issues raised by the public in response to the Initial Regulatory  X-Flexibility Analysis. There were no comments submitted in response to the Initial Regulatory Flexibility Analysis. The Chief Counsel for Advocacy of the United States Small Business Administration (SBA) filed comments in the original rulemaking order. The Commission  X~-addressed the concerns raised by the Office of Advocacy in the Report and Order and Further  Xi-Notice of Proposed Rulemaking.Hi.4Y XH -ԍx8 FCC Rcd 5631 (1993). H Consistent with our rules, the SBA also filed an ex parte  XT-letter on August 3, 1994  .  X&-x15.` ` Significant alternatives considered and rejected. In the course of this proceeding, petitioners representing cable interests and franchising authorities submitted several alternatives aimed at minimizing administrative burdens. The Commission has attempted to accommodate the concerns expressed by these parties. In this order, the Commission is providing additional incentives to qualifying small systems to add channels to  X!-CPSTs and singletier systems. "!0*(( "Ԍx  X-V. xPaperwork Reduction Act  X-x16.` ` The requirements adopted herein have been analyzed with respect to the Paperwork Reduction Act of 1980 and found not to impose a new or modified information collection requirement on the public.  Xv-  X_-VI.Xx Ordering Clauses (#  X1-x17.` ` Accordingly, IT IS ORDERED that, pursuant to Sections 4(i), 4(j), 303(r), 612, 622(c) and 623 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 303(r), 532, 542(c) and 543, the rules, requirements and policies discussed in this  X -Seventh Order on Reconsideration, ARE ADOPTED and Part 76 of the Commission's rules, 47 C.F.R. Part 76, IS AMENDED as set forth in Appendix C. x  X -x18. ` ` IT IS FURTHER ORDERED that the Secretary shall send a copy of this Order to the Chief Counsel for Advocacy of the Small Business Administration in accordance with paragraph 603(a) of the Regulatory Flexibility Act. Pub. L. No. 96354, 94 Stat. 1164, 5  Xb-U.S.C.  601 et seq. (1981).  X6-x19. ` ` IT IS FURTHER ORDERED that the requirements and regulations established in this decision shall become effective 30 days following publication in the Federal Register. x` ` hhFEDERAL COMMUNICATIONS COMMISSION x` ` hhWilliam F. Caton x` ` hhActing Secretary"90*((?" x  X-) APPENDIX A ă Title 47, Part 76 of the Code of Federal Regulations is amended as follows: PART 76 CABLE TELEVISION SERVICE  X -1.xThe authority citation for Part 76 continues to read as follows: xAuthority: Secs. 2, 3, 4, 301, 303, 307, 308, 309, 48 Stat. as amended, 1064, 1065, 1066, 1081, 1082, 1083, 1084, 1085, 1101; 47 U.S.C. Secs. 152, 153, 154, 301, 303, 307, 308, 309, 532, 535, 542, 543, 552 as amended, 106 Stat. 1460.  X-2.xSection 76.922 is amended to revise paragraphs (e)(7) to read as follows:  Xb-xSection 76.922 Rates for the basic service tier and cable programming service tiers.  <l* * * * *TP  X-x(7) ` ` Headend upgrades. When adding channels to CPSTs and singletier systems, cable systems that (a) are either independently owned or owned by small MSOs and incur additional monthly per subscriber headend costs of one full cent or more for an additional channel or (b) are either independently owned or owned by small MSOs as defined in Section 76.922(b)(5), may choose among the methodologies set forth in paragraphs (e)(2) and (e)(3) of this Section. In addition, such systems may increase rates to recover the actual cost of the headend equipment required to add up to seven such channels to CPSTs and singletier systems, not to exceed $5,000 per additional channel. Rate increases pursuant to this paragraph may occur between January 1, 1995, and December 31, 1997, as a result of additional channels offered on those tiers after May 14, 1994. Headend costs shall be depreciated over the useful life of the headend equipment. The rate of return on this investment shall not exceed 11.25 percent. In order to recover costs for headend equipment pursuant to this paragraph, systems must certify to the Commission their eligibility to use this paragraph, the level of costs they have actually incurred for adding the headend equipment and the depreciation schedule for the equipment. l<* * * * *X1Í.X1Í.҃