Cable Television Act of 1992

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MM Docket No. 92-266 and 93-215, FCC 94-286]

Cable Television Act of 1992

AGENCY: Federal Communications Commission.

ACTION: Seventh Notice of Proposed Rulemaking.

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SUMMARY: This seventh notice of proposed rulemaking is one segment of

the Sixth Order on Reconsideration, Fifth Report and Order and Seventh

Notice of Proposed Rulemaking in this proceeding. The final rules

adopted in this decision may be found elsewhere in this issue. In the

Seventh Notice of Proposed Rulemaking, the Commission sought comment on

whether cable operators electing to use the per channel adjustment

under the Commission's new rules should be allowed to take the 7.5%

mark-up on programming cost increases for channels added to the system

before May 15, 1994; and whether operators electing to use the current

going forward rules should be permitted to pass-through the 7.5% mark-

up on new programming cost increases after the initial mark-up on

programming costs of new channels. The intended effect of this proposal

is to eliminate the pass-through to subscribers of unnecessary cost

increases.

DATES: Comments are due on or before January 13, 1995 and reply

comments are due on or before February 13, 1995.

ADDRESSES: Federal Communications Commission, Washington, DC, 20554.

FOR FURTHER INFORMATION CONTACT:

Paul D'Ari or Joel Kaufman, (202) 416-0800.

SUPPLEMENTARY INFORMATION: This is the proposed rules segment of the

Commission's Sixth Order on Reconsideration, Fifth Report and Order and

Seventh Notice of Proposed Rulemaking in MM Docket No. 92-266 and MM

Docket No. 93-215, FCC 94-286, adopted November 10, 1994, and released

November 18, 1994. The complete text of this document is available for

inspection and copying during normal business hours in the FCC

Reference Center (room 239), 1919 M Street, NW., Washington, DC, and

also may be purchased from the Commission's copy contractor,

International Transcription Services, Inc. (``ITS, Inc.'') at (202)

857-3800, 2100 M Street, NW., Suite 140, Washington, DC 20037.

Seventh Notice of Proposed Rulemaking

Background

A. The Commission's existing rate regulation rules permit operators

to increase rates by a per channel amount when channels are added to

basic service tiers (BSTs) and cable programming service tiers (CPSTs),

with the per channel amount decreasing as the number of channels on a

system increases. 47 CFR 76.922(e). These rules also permit operators

to pass through to subscribers the costs of obtaining programming plus

a 7.5% mark-up on new programming costs. 47 CFR 76.922(d)(3)(xi).

B. The revised regulations adopted pursuant to the Sixth Order on

Reconsideration and Fifth Report and Order provide that operators may

adjust their rates after December 31, 1994, for channel additions

occurring after May 14, 1994. Operators electing to use the new rules

will be allowed to take a per channel mark-up of up to 20 cents for

each channel added to cable programming service tiers (``CPSTs).

Operators may make rate adjustments under this rule at any time during

the three-year period beginning on January 1, 1995. They may not make

per channel adjustments to monthly rates totalling more than $1.20 per

subscriber over the first two years of the three-year period for new

channels added on CPSTs or by more than $1.40 over the full three-year

period. Operators may use any portion of the Operator's Cap to recover

license fees associated with adding new channels to CPSTs. In addition,

operators may recover an additional amount of not more than 30 cents

per subscriber per month for license fees associated with adding new

channels during the first and second years the Operator's Cap is in

effect. In the third year, license fees will not be subject to special

rules, but will be subject to the general rate rules.

C. In addition, the Commission determined that operators electing

to use the 20 cent per channel adjustment may not take the 7.5% mark-up

on programming cost increases, including retransmission consent fees

and copyright fees incurred for carriage of broadcast signals, for

channels added on or after May 15, 1994. The Commission made this

determination because its analysis indicates that the 20 cent per

channel adjustment will provide full and fair compensation to operators

adding new channels to CPSTs.

Discussion

D. The Commission believes that for operators using the per channel

adjustment of up to 20 cents, maintaining the 7.5% mark-up on

programming cost increases for channels offered before May 15, 1994,

may no longer be necessary given the total incentive structure provided

in the revised going forward rules. In addition, the 7.5% mark-up on

such channels may create an artificial incentive for the operator to

continue to offer programming that the operator would not otherwise

continue to offer. For these reasons, the Commission tentatively

concludes that the 7.5% mark-up is unnecessary for such operators with

respect to increases in programming costs for channels offered before

May 15, 1994. The Commission solicits comment on whether operators

electing to use the per channel adjustment of up to 20 cents under the

new rules should be allowed to take the 7.5% mark-up on increases in

programming costs, including retransmission consent fees and copyright

fees incurred for carriage of broadcast signals, for channels added

before May 15, 1994. If the Commission decides that such operators may

not take a 7.5% mark-up on increases in programming costs, it will not

consider requiring cable operators to prospectively remove from rates

any 7.5% mark-up added prior to the effective date of a final rule on

this issue.

E. The Commission believes that the 7.5% mark-up on new programming

costs when channels are initially added to a system ought be preserved

for systems that continue to use the existing going forward rules

because the 7.5% mark-up is an important part of the total package of

incentives to add new programming under the existing rules. The

Commission's rules permitting operators to pass through external costs

are generally intended to compensate for added costs outside the

operators' control and not to provide an additional mark-up without a

clear policy purpose. In contrast to the situation where the goal of

providing incentives to add new programming services justifies a mark-

up, there appears to be no strong reason to allow a mark-up programming

cost increases for a service already being offered. The Commission

therefore solicits comment on whether operators electing to use the

current going forward rules should be permitted to pass-through the

7.5% mark-up on programming cost increases after the initial mark-up on

the programming cost of new channels. The Commission will not, however,

consider prospectively removing from rates any 7.5% mark-up that was

reflected in rates prior to our reaching a decision on this issue.

Administrative Matters

F. Initial Regulatory Flexibility Analysis. Pursuant to Section 603

of the Regulatory Flexibility Act, the Commission has prepared the

following initial regulatory flexibility analysis (IRFA) of the

expected impact of these proposed policies and rules on small entities.

Written public comments are requested on the IRFA. These comments must

be filed in accordance with the same filing deadlines as comments on

the rest of the Notice, but they must have a separate and distinct

heading designating them as responses to the regulatory flexibility

analysis. The Secretary shall cause a copy of the Notice, including the

initial regulatory flexibility analysis, to be sent to the Chief

Counsel for Advocacy of the Small Business Administration in accordance

with Section 603(a) of the Regulatory Flexibility Act, Pub. L. No. 96-

354, 94 Stat. 1164, 5 U.S.C. Section 601 et seq. (1981).

I. Reason for action. The Cable Television Consumer Protection and

Completion Act of 1992 requires the Commission to prescribe rules and

regulations for determining reasonable rates for basic tier cable

service and to establish criteria for identifying unreasonable rates

for cable programming services. The Commission's existing rate

regulations permit operators to pass through to subscribes the costs of

obtaining programming plus a 7.5% mark-up on new programming costs. The

revised rules, adopted pursuant to the Sixth Order on Reconsideration

and Fifth Report and Order, permit operators to use a new per channel

adjustment methodology for channels added on or after May 15, 1994, and

to eliminate the 7.5% mark-up on new programming costs for those

channels. This Notice proposes to determine extent to which cable

operators electing to use either the existing or the new going forward

rules, can continue to pass through to subscribers a 7.5% mark-up on

increases on new programming costs.

II. Objectives. To propose rules to implement Section 3 of the

Cable Television Consumer Protection and Competition Act of 1992. The

Commission also desires to adopt rules that will be easily interpreted

and readily applicable and, whenever possible, minimize the regulatory

burden on affected parties.

III. Legal Basis. Action as proposed for this rulemaking is

contained in Sections 4(j), 303(r) and 623 of the Communications Act of

1934, as amended.

IV. Description, potential impact and number of small entities

affected. The Commission anticipates a possible impact on small

entities because the Notice addresses the extent to which cable

operators, including small cable operators, electing to use either the

existing or the new going forward rules, can continue to pass through

to subscribers a 7.5% mark-up on increases on new programming costs.

V. Reporting, record keeping and other compliance requirements.

None.

VI. Federal rules which overlap, duplicate or conflict with this

rule. None.

VII. Any significant alternatives minimizing impact on small

entities and consistent with stated objectives. None.

G. Paperwork reduction Act. The requirements adopted herein have

been analyzed with respect to the Paperwork Reduction Act of 1980 and

found to impose no new or modified information collection requirements

on the public.

Procedural Provisions

H. Ex parte Rules-Non-Restricted Proceeding. This is a non-

restricted notice and comment rulemaking proceeding. Ex parte

presentations are permitted, except during the Sunshine Agenda period,

provided that they are disclosed as provided in Commission rules. See

generally 47 CFR 1.11202, 1.1203, and 1.1206(a).

I. Pursuant to applicable procedures set forth in 1.415 and 1.419

of the Commission's Rules, 47 CFR Sections 1.415 and 1.419, interested

parties may file comments on or before January 13, 1995, and reply

comments on or before February 13, 1995. To file formally in this

proceeding, you must file an original plus four copies of all comments,

reply comments, and supporting comments. If you want each Commissioner

to receive a personal copy of your comments and reply comments, you

must file on original plus nine copies. You should send comments and

reply comments to Office of the Secretary, Federal Communications

Commission, 1919 M Street, N.W. Washington, D.C. 20554. Comments and

reply comments will be available for public inspection during regular

business hours in the FCC Reference Center, Room 239, Federal

Communications Commission, 1919 M Street N.W., Washington D.C. 20554.

Ordering Clauses

J. Authority for this Further Notice of Proposed Rulemaking is

contained in 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(c) and 543.

K. It is ordered, That, pursuant to Sections 4(i), 4(j), 303(r),

and 623 of the Communications Act of 1934, 47 U.S.C. Secs. 154(i),

154(j), 303(r), and 543, Notice is hereby given of proposed amendments

to Part 76, in accordance with the proposals, discussions, and

statement of issues in this Further Notice of Proposed Rulemaking, and

that Comment is Sought regarding such proposals, discussion, and

statement of issues.

List of Subjects in 47 CFR Part 76

Cable television

Federal Communications Commission.

LaVera F. Marshall,

Acting Secretary.

[FR Doc. 94-29444 Filed 12-5-94; 8:45 am]

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