Cable Television Act of 1992

Federal RegisterApr 15, 1994

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MM Docket No. 93-215, CS Docket No. 94-28; FCC 94-39]

Cable Television Act of 1992

agency: Federal Communications Commission.

action: Further Notice of Proposed Rulemaking.

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summary: The Commission has adopted both a Report and Order and a

Further Notice of Proposed Rulemaking regarding implementation of the

Cable Television Consumer Protection and Competition Act of 1992. In

the Report and Order, the Commission establishes interim rules

implementing a cost-of-service alternative to our primary benchmark and

price cap approach to setting regulated cable service rates.\1\ (The

Report and Order may be found elsewhere in this Federal Register). In

this Further Notice of Proposed Rulemaking, we propose that these

interim requirements become permanent; we propose a productivity factor

that could be incorporated into the price cap mechanism governing cable

service rates; and we solicit comment on a permanent upgrade incentive

plan for regulated cable service. We also announce initiation of cable

industry cost studies that will be used to develop average cost

schedules for regulated cable services and equipment, and to evaluate

whether we should require full competitive rate reductions for systems

currently eligible for transition relief. We solicit comment on rate of

return prescription methodologies, and on proposed rules for an

accounting system and for affiliate transactions. This action will

provide notice to the public that the Commission intends to amend its

rate regulations governing regulated cable services. This action is

intended to provide a record on which the Commission can establish

further requirements governing regulated cable services.

\1\In a separate decision, the Commission is adopting

significant modifications to the benchmark and price cap approach to

setting regulated cable service rates. Implementation of sections of

the Cable Television Consumer Protection and Competition Act of

1992: Rate Regulation, MM Docket 92-266, Second Order on

Reconsideration, Fourth Report and Order, and Fifth Notice of

Proposed Rulemaking, FCC 94-38 (Benchmark Order). That decision does

not alter our determination in the Rate Order to afford cable

operators an opportunity to set rates based on costs.

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dates: Comments due July 1, 1994; Reply Comments due August 1, 1994.

addresses: Federal Communications Commission, 1919 M Street, NW.

Washington, DC 20554.

for further information contact: JoAnn Lucanik (202) 416-1163; Paul

D'Ari (202) 416-1166; John Adams (202) 416-1165.

supplementary information:

Synopsis of Notice

In this Further Notice, we seek comment on the following matters.

(1) Establishment of Final Rules

In the Report and Order, we establish a comprehensive interim

regulatory framework for setting cost-based rates for regulated cable

service. We tentatively conclude that the rules adopted here reflect

goals and policies that will continue to apply, and that those rules

may therefore appropriately be adopted on a final basis. We request

comment on whether we should adopt these requirements as our final cost

rules in this proceeding.

(2) Rate of Return Prescription

In the Report and Order, we establish an interim overall rate of

return of 11.25% for use in cable cost-of-service proceedings. We

invite comment on whether we should establish a different permanent

rate of return for regulated cable service, including the equipment

basket. In this regard, we request interested persons to submit data

and expert analyses regarding the risks of regulated cable service, and

on how those risks are affected by our cost-of-service and our

benchmark/price cap rules for cable. We also invite commenters to

submit data and expert analyses regarding equity and debt costs for

regulated cable service, and the capital structure we should use in

determining any permanent rate of return for that service. We also

invite comment on whether we should adopt fixed cost of debt and

capital structure methodologies for possible use in changing the rate

of return for cable in the future and, if so, what those methodologies

should be.

(3) Cable Accounting System

In the Report and Order we have decided to establish a uniform

accounting system for cable operators electing cost-of-service

regulation. In a separate attachment to the Report and Order, we set

forth a draft system that we intend to serve as a starting point for

development of a uniform accounting system for cable operations. This

proposal is attached to the FNPRM. We seek comment on this proposal. In

order to facilitate administration of establishment of a uniform

accounting system for cable services, we are removing this issue from

MM Docket 92-666 and designating it as CS Docket No. 94-28. The Cable

Services Bureau will obtain suggestions on how to improve this proposal

through informal meetings with representatives from the cable industry

and other interested parties. Such cooperative efforts will, of course,

be subject to relevant ex parte rules. (47 CFR 1.1206). Following these

meetings and the completion of the initial comment cycle, we may seek

comment on a revised proposal for a uniform system of accounts for

provision of regulated cable service.

The system of accounts that we are proposing is adapted from the

USOA for Class B telephone companies contained in part 32 of the

Commission's rules, (47 CFR 32.11) and from NARUC model cable

accounting rules. (Uniform System of Accounts for Class A Community

Antenna (CATV) Utilities, (National Association of Regulatory Utility

Commissioners 1977)). This proposed system of accounts is highly

aggregated and is, therefore, far less burdensome than the USOA for

Class A telephone companies. We seek comment, however, on whether we

should adopt an accounting system for cable that is disaggregated to a

greater extent than that which we have proposed. We have relied on Part

32 in developing an accounting system for cable because it was designed

as a functional accounting system that would be adaptable to changes in

communications technology. (47 CFR 32.2(d), (e)). We tentatively

conclude that we can accommodate the cable technology of signal

transport by adding certain cable-specific accounts and by modifying

account definitions to include cable-specific equipment and activities

within existing functions.

We also seek comment on whether smaller cable systems that elect

cost-of-service regulation should be required to maintain their books

in accordance with the accounting system we adopt for cable or with

some alternative system of accounts. In addition, we seek comment on

accounting requirements for cable operators seeking rate adjustments

due to changes in their external costs under the benchmark/price cap

approach. Although we conclude in the Report and Order the operators

regulated under that approach should not be subject to the uniform

system of accounts that we adopt for cable, we believe further

accounting requirements may be necessary to ensure that external cost

adjustments are correct. Finally, we propose an exemption from these

requirements for companies that are currently required to maintain

their accounts in accordance with Part 32 of our rules. We tentatively

conclude that it would be unduly burdensome to require such companies

to follow separate accounting procedures for their telephone and cable

operators.

(4) Affiliate Transactions

In the Report and Order, we adopt affiliate transaction

requirements that will govern the costs incurred that can be recovered

in rates for regulated cable service. These requirements are

substantially similar to our proposals in the notice in this

proceeding. Subsequent to the release of that notice, however, we

conducted a detailed analysis of each of these transaction methods for

telephone companies. In the Telco notice, (Notice of Proposed

Rulemaking in CC Docket No. 93-251, FCC 93-453, 58 FR 62080, Nov. 24,

1993) we proposed to sharply curtail prevailing company pricing for

transactions between telephone companies and their nonregulated

affiliates. We also proposed to require telephone companies to value

affiliate transactions for which we do not permit prevailing company

pricing at the higher of cost and estimated fair market value when the

telephone company is the seller, and at the lower of cost and estimated

fair market value when the telephone company is the buyer.

We tentatively conclude that the general changes we have proposed

for telephone companies should be applied to cable operators as well.

Therefore, we propose to limit the application of the prevailing

company price as a measure of a reasonable price for an affiliate

transaction. We tentatively conclude that we should not permit

prevailing company pricing as a valuation method for transactions

between cable operators and their affiliates when a primary purpose of

the non-cable affiliate in transactions is to serve the cable operator

and its affiliates. We tentatively conclude that prevailing company

pricing for affiliate transactions should only be utilized where the

predominant purpose of the non-cable affiliate in the transaction is to

serve nonaffiliates. We believe that we can identify when the non-cable

affiliates' predominant purpose is to serve nonaffiliates by measuring

the percentage of each non-cable affiliate's total output that is sold

to nonaffiliates.

Accordingly, we propose that any non-cable affiliate that sells

less than 75 percent of its output to non-affiliates has too large a

volume of affiliate transactions to be deemed to have a predominant

purpose of serving non-affiliates. Therefore, we propose to continue to

allow prevailing company pricing only for affiliate transactions in

which the non-cable affiliate sells at least 75 percent of its output

to non-affiliates. We invite the commenters to discuss this proposal as

well as alternative percentages we might use. We also invite comment on

whether we should abandon prevailing company pricing as a valuation

method for all affiliate transactions if we find no workable test for

determining when prevailing company prices provide reliable measures of

how affiliate transactions should be valued.

For those affiliate transactions that do not meet the prevailing

company price test, we propose to require cable operators to value all

affiliate transactions at the higher of cost and estimated fair market

value when the cable operator is the seller, and at the lower of cost

and estimated fair market value when the cable operator is the

purchaser. Since this proposal applies to the sale of both assets and

services, it would, in effect, retain the existing standard that

applies to affiliate transactions that involve the sale of assets and

it would expand the application of this rule to affiliate transactions

that involve the sale of services. Hence, our proposal would change the

requirement under the rules we have adopted with this Report and Order,

which provides that affiliate transactions that do not meet the

prevailing company price test and involve the sale of services shall be

recorded at cost. We invite comment on this proposal.

We propose to retain the definition of affiliate that we adopt in

the Report and Order. Under that definition, an entity is affiliated

with a cable system operator when it has a five percent or greater

ownership interest in the cable system operator. That definition also

specifies that a cable system operator is affiliated with another

entity when it has a five percent or greater interest in that entity

and that two companies that do not own each other are affiliates when a

single entity has a five percent or greater interest in each of the two

companies. We also propose that our final affiliate transactions rules

for cable, like the interim rules, apply to cable operators who either

elect cost-of-service regulation or seek to adjust benchmark/price cap

rates for affiliated programming costs. We propose, in addition, to

require cable operators to apply the costing methods and rate of return

we adopt for cable in determining the costs of affiliate transactions.

we propose to include our final affiliate transactions rules in the

uniform system of accounts we adopt for cable. We invite comment on

these proposals. Consistent with our approach with regard to the

uniform system of accounts, we also invite comment on whether we should

adopt alternative affiliate transactions rules for small cable

companies.

(5) Establishment of Productivity Offset

In the Rate Order, we incorporated an annual inflation adjustment

into our price cap mechanism governing rates for cable television

service. (See Report and Order and Further Notice of Proposed

Rulemaking in MM Docket No. 92-266, FCC 93-177, 58 FR 29736, May 21,

1993). Specifically, we adopted the Gross National Product Price Index

(GNP-PI) as the annual adjustment index for the cap for basic service

tier rates. As a result, regulated cable operators are permitted to

adjust the capped based per channel rate for the basic service tier

annually by the GNP-PI. In addition, there are certain categories of

costs that cable operators are generally permitted to ``pass through''

to subscribers without a cost-of-service showing, even if the resulting

rates exceed the applicable price cap. These costs include

retransmission consent fees, programming costs, taxes, franchise fees,

and the costs of other franchise requirements.

In the Rate Order, we declined to adopt a productivity offset to

the GNP-PI for the non-programming costs incurred by cable companies

given the paucity of information in the record that would provide a

basis for determining productivity in the cable industry. We made it

clear, however, that we should seek such information in the notice.

In the notice, we solicited comment on whether there is a valid

economic basis for assuming that cable television service has been, and

will be, experiencing efficiency gains. We observed that there had been

insufficient information in the record to adopt a productivity offset

in the price cap mechanism for cable operators. In considering a

regulatory framework to govern cost-of-service ratemaking for cable

service, we invited the submission of industry studies or other expert

economic analysis to examine four possible options:

(1) No productivity offset;

(2) A consumer productivity dividend of 0.5 percentage points;

(3) a ``telecommunications'' industry adjustment of between 3.0

(for AT&T) and 3.3 (for the local exchange carriers) percentage points;

and

(4) A different productivity offset for cable operators.

The comments received in response to the notice provided three

general perspectives on the use of a productivity offset in cost-of-

service ratemaking. The first perspective, which incorporates the views

of cable operators and programmers, generally supports the first

option--that is, no productivity offset under the cost-of-service

rules. The second perspective, articulated by New Jersey, supports the

use of a productivity offset of 2% as reflecting the known benefits of

technology improvement in the cable industry. The third perspective,

which includes CFA, municipal franchising authorities, local exchange

carriers, and ETS, generally supports the adoption of a 3.3%

productivity offset, the standard imposed on the local exchange

carriers, to be the standard for the cable television companies that

choose cost-of-service ratemaking.

In this Further Notice, we affirm our tentative decision to

incorporate an annual inflation adjustment into our price cap mechanism

governing rates for cable television service. We believe that the use

of the GNP-PI index in the price cap mechanism will help achieve the

statutory goal of reducing administrative burdens on cable systems,

consumers and regulators by permitting rate increases when cable

operators experience increases in the cost of doing business shared by

all sectors of the economy, without requiring cable operators to make,

and regulators to consider, cost-of-service showings.

We also tentatively conclude that cable operators should reasonably

be expected to achieve productivity gains in the future analogous to

those historically realized by other communications firms. Cable

television networks are similar in many ways to telephone networks, and

both have benefited from advances in telecommunications technology in

the past; both are likely to see benefits in the future, especially as

cable and telephone networks converge. Both are likely to have

opportunities to improve their productivity in other aspects of their

operations, including customer service and maintenance. In the near

term, however, the productivity growth that cable operators may

reasonably be expected to achieve may differ from that of telephone

companies, because of the current differences in their networks,

operators, services, and histories. For example, local telephone

companies have benefited from advances in computerized local switches,

which are not in general use by cable systems. Moreover, the

productivity offsets selected for telephone companies reflect

adjustments to conform them with Commission policy goals. While we

recognize the merits of moving toward regulatory parity for cable and

telephone regulation, we do not believe the current record provides

adequate support for the automatic adoption of the same productivity

factor for cable systems as for local telephone companies subject to

price caps.

The only evidence of record for productivity growth by cable

systems appears to be that submitted by New Jersey, supporting a 2

percent productivity offset. We take note, however, of comments from

cable operators that there is not sufficient evidence to adopt a

productivity offset, without providing them the opportunity to develop

such data. We will accordingly allow them another opportunity to

provide this data. Based on the current record, we tentatively propose

to adopt a 2 percent productivity offset as part of the price cap

mechanism for regulated cable rates. Any interested party seeking to

justify a different productivity offset will of course be expected to

provide reliable, detailed, and credible evidence that some other

figure represents the productivity gains, after inflation, that cable

systems can reasonably be expected to achieve. In particular, cable

systems should not expect that their failure to provide any evidence of

cable system productivity gains, information they are best able to

provide, should justify the conclusion that cable systems cannot

reasonably be expected to achieve productivity improvements.

The Commission envisions the productivity offset as a basic part of

the two alternatives open to cable operators for setting rates. Under

the first, the price cap, including the productivity factor, would

apply to all regulated rates. Under the second, an operator can elect

to use cost-of-service regulation, using the standards discussed in the

Report and Order. Once the operator's rates are set based upon actual

costs of service, however, we would ordinarily expect that the operator

could achieve the same future productivity gains as other operators. We

therefore propose that future rate changes should at least meet the

productivity offset, absent a credible demonstration in the cost-of-

service showing that this will not be the case.

We do not, however, wish indirectly to restrict the ability of

cable programmers to obtain fair value for their products. As a result,

we tentatively conclude that programming costs should not be included

within the productivity offset for cable system technological and

operational improvement.

We invite comment on these proposals, including the 2 percent

productivity offset and exemption of programming costs from the effects

of the offset. We emphasize that comments should be supported by

relevant evidence, such as detailed industry studies and expert

economic analysis.

(6) Experimental Upgrade Incentive Plan

In the Report and Order, we adopted an Upgrade Incentive Plan that

we will implement on an experimental, case-by-case basis. The Upgrade

Incentive Plan is intended to provide greater assurance of reasonable,

stable rates to customers for existing services, while also generating

profit incentives to operators to upgrade their systems in cost-

effective ways that will benefit subscribers. The basic approach of the

plan is to establish a type of social contract between customers and

operators, under which the rates for current regulated services are

frozen or limited to changes permitted by the benchmark/price cap

mechanism, while the quality of service is at least maintained at

current levels by some reasonable measure. For their part, operators

are given substantial rate flexibility for the new services and

capabilities they introduce. The operator thus gains the opportunity to

earn higher profits as an incentive and reward for successful

innovations. The contract would remain in effect for a fixed, minimum

term of years.

Developing a permanent incentive plan for cable systems is also

likely to raise other issues, including issues that might suggest

different regulations than in the case of the incentive programs we

have adopted for telephony. One issue involves enrollment. We might,

for example, require cable systems to seek enrollment in the incentive

plan in advance of any system upgrade if it wishes to claim the rate

and profit flexibility accorded to additional regulated services and

capabilities. Enrollment would make clear to this Commission and to

customers that the operator was committing itself to keeping existing

service rates and quality within the bounds set by the plan. We request

comment on these issues.

Another issue involves coordination with the regulation of basic

service tier rates exercised by local franchising authorities. Setting

price and quality limits on regulated services above the basic tier may

encourage operators to attempt to shift costs to the basic tier. It may

be difficult to identify such cost-shifting in a cost-of-service study

review. One remedy for this problem, which may also reduce regulatory

burdens for operators, franchising authorities, and this Commission,

may be to require the operator to commit to maintaining its basic

service tier rates and quality within baseline/price cap guidelines set

by a certified franchise authority. We request comment on this or

approaches to coordinating FCC and local regulation of cable rates

within the Plan.

An important part of any incentive plan that limits prices is to

assure that the value of the service provided to customers under those

prices does not suffer. The customer should be assured that the

regulated company is not evading the intent of the plan by increasing

profits not through improved efficiency or added services, but by

adulterating the products or services the customer receives. For cable

service, assuring that appropriate standards are maintained includes

assuring that programming services valued by customers are not shifted

out of current tiers and into the additional tiers for which the

operator would seek to claim rate flexibility. We seek comment on

appropriate standards to assure that operators subject to the incentive

plan provide services equal to or better than that offered under

current rates applicable to those services.

One possible approach to maintaining the value of current services

while permitting flexibility to adjust tiers might be to require

operators to seek the approval of its customers to changes in the

composition or rates for current regulated services, in effect

empowering customers to decide whether the change is worthwhile. If

most of the operator's customers affirmatively agreed by ballot to

revise regulated services subject to the incentive plan, this

Commission could be confident that the change was reasonable. In any

case, of course, operators would be free to offer new services, and we

expect this Plan will encourage them to do so. The only issue would be

whether the operator had fulfilled its commitment to maintain or

improve the quality of the service provided at regulated rates. We

request comment on this and other approaches that would permit

reasonable revisions to the current services and rates subject to the

incentive plan, especially approaches that take into account the views

of the customers using those services.

We request comment on whether we should adopt rules for our Upgrade

Incentive Plan. We request that commenters address how the plan, if

adopted permanently, might best be structured to maximize the benefits

to consumers and operators and to encourage efficient operation and

innovative services, and what procedures should govern implementation

of the Upgrade Incentive Plan by operators. We solicit comment on what

standard we should adopt to measure quality of service for existing

services; we seek comment also on the extent to which we should permit

operators to move existing channels to new regulated tiers eligible for

pricing flexibility under an upgrade incentive plan.

(7) Development and Use of Average Cost Schedules

The Cable Act of 1992 instructs us to consider administrative

burdens in establishing rate regulation, and to design rate regulation

in a manner that reduces ``the administrative burdens and cost of

compliance of cable systems that have 1,000 or fewer subscribers.'' (47

U.S.C. 543(i)). We have met this mandate by providing in the Benchmark

Order for streamlined rate reductions for small systems; by providing

in the Report and Order here for abbreviated Cost of Service filings by

small systems; and by other measures adopted in this Rate Order.

We sought comment in the notice regarding the desirability of

allowing cable operators to justify rates based on average costs of

providing regulated cable service, in an approach similar to the

``average schedule'' regulatory scheme for provision of interstate

access by some telephone companies. We believe that average cost

schedules could provide administrative relief for cable operators and

regulators by permitting setting of rates for regulated equipment and

cable service by reference to average costs rather than an evaluation

of each individual operator's costs. Accordingly, we tentatively

conclude that we should establish average cost schedules for provision

of regulated cable service and equipment.

We will obtain necessary cost information through our industry cost

studies as described below. In addition, operators and other interested

parties may submit other cost information that they believe will be

useful. The Cable Service Bureau will additionally work informally with

interested organizations to facilitate the compilation, analysis and

development of average cost schedules.

We solicit comment on whether average cost schedules should be

available for all operators, or only small systems. We note that the

average schedules developed for use by telephone companies in

calculating access charges are not restricted to small telephone

companies, although that has been their principal use. (47 CFR 69.606).

If use of average cost schedules should be limited to small entities,

we solicit comment on how we should define small systems for this

purpose. Commenters suggesting the restriction of average schedules to

small entities, or suggesting a particular threshold or definition for

``small,'' should support their recommendations with data, including

differences in costs, efficiencies, corporate structures or other

factors, that would necessitate the proposed differences in treatment.

Initiation of Cost Studies

In the notice we stated that we would conduct cost studies of the

cable industry to provide information that could be useful to develop

requirements to set rates based on costs. We have additionally

tentatively concluded in this proceeding to develop average cost

schedules for provision of regulated cable service and equipment. In

the Benchmark Order, we have determined that we will collect

information on costs with respect to small operators and systems with

relatively low prices. Accordingly, we are initiating at this time

general cost studies of the cable industry that will be used for these

purposes as well as to provide information that will help us determine

whether any changes should be made in our interim framework for cost-

of-service regulation. We delegate to the Chief, Cable Services Bureau

authority to conduct these studies. Since the cost studies will be part

of this rulemaking proceeding, the ex parte rules for non-restricted

proceedings apply. Requests for confidentiality may be made pursuant to

section 0.459 of the Commission's rules.

Initial Regulatory Flexibility Analysis for the Further Notice

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 Further 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 Further 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, Public Law No. 96-354, 94 Stat. 1164, 5

U.S.C. section 601 et seq. (1981).

Reason for Action

The Cable Television Consumer Protection and Competition 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 has adopted rate regulations that

require a comparison to the rate of cable systems subject to effective

competition, as defined in the Cable Act of 1992, and interim

regulations for setting rates for regulated services based on cost.

This Further Notice proposes to establish additional and permanent

regulations governing the setting of rates for regulated cable service

based on costs.

Objectives

To propose rules to implement section 623 of the Cable Television

Consumer Protection and Competition Act of 1992. We also desire to

adopt rules that will be easily interpreted and readily applicable and,

whenever possible, minimize the regulatory burden on affected parties.

Legal Basis

Action as proposed for this rulemaking is contained in sections

4(i), 4(j), 612(c), and 623 of the Communications Act of 1934, as

amended.

Description, Potential Impact and Number of Small Entities Affected

Until we receive more data, we are unable to estimate the number of

small cable systems that would be affected by any of the proposals

discussed in the Further Notice. We have, however, attempted to reduce

the administrative burdens and cost of compliance for cable systems

that have 1,000 or fewer subscribers as required by section 623(i) of

the Cable Act of 1992.

Reporting, Record Keeping and Other Compliance Requirements

The proposals under consideration in this Further Notice include

new and revised reporting and record keeping requirements for cable

systems. These reporting requirements include the filings by cable

operators of financial and/or leased access data annually at the

Commission or participating in an annual survey. Additionally, this

Further Notice proposes the permanent use of forms to submit data that

is to be presented to the regulating entity in a cost-of-service

showing by a cable operator. Furthermore, the Further Notice proposes

general cost accounting and cost allocation requirements that could be

imposed on the cable industry.

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

None.

Any significant alternatives minimizing impact on small entities

and consistent with stated objectives. Wherever possible, the Further

Notice proposes general rules, or alternative rules for small systems,

to reduce the administrative burdens and cost of compliance for cable

systems that have 1,000 or fewer subscribers as required by section

3(i) of the Cable Act of 1992.

Paperwork Reduction Act

The proposal contained herein has been analyzed with respect to the

Paperwork Reduction Act of 1980 and found to impose a new or modified

information collection requirement on the public. Implementation of any

new or modified requirement will be subject to approval by the Office

of Management and Budget as prescribed by the Act.

Procedural Provisions

For purposes of this non-restricted informal rulemaking proceeding,

members of the public are advised that ex parte contacts are permitted

from the time of issuance of a notice of proposed rulemaking until the

time a draft Order proposing a substantive disposition of the

proceeding is placed on the Commission's Open Meeting Agenda. In

general, an ex parte presentation is any written or oral communication

(other than formal written comments or pleadings and oral arguments)

between a person outside this addresses the merits of the proceeding.

Any person who submits a written ex parte presentation addressing

matters not fully covered in any written summary must be served on this

Commission's Secretary for inclusion in the public file, with a copy to

the Commission official receiving the oral presentation. Each ex parte

presentation discussed above must state on its face that the Secretary

has been served, and must also state by docket number the proceeding to

which it relates. See generally Sec. 1.1231 of the Commission's Rules.

47 CFR 1.1231.

Pursuant to applicable procedures set forth in Sec. Sec. 1.415 and

1.419 of the Commission's Rules, 47 CFR Sec. Sec. 1.415 and 1.419,

interested parties may file comments on or before July 1, 1994 and

reply comments on or before August 1, 1994. 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 an original plus nine copies. You should send comments and

reply comments to Office of the Secretary, Federal Communications

Commission, 1919 M Street, NW. Washington, DC 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 NW., Washington DC 20554.

Ordering Clause

Accordingly, it is ordered That, pursuant to sections 4(i), 4(j),

612, 622(c) and 623 of the Communications Act of 1934, as amended, 47

U.S.C. 154(i), 154(j), 532, 542(c) and 543, that authority is delegated

to the Chief, Cable Services Bureau to conduct cost studies in

conjunction with this proceeding and to develop forms necessary and

appropriate to implement this Order.

List of Subjects in 47 CFR Part 76

Cable television.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Part 76 of title 47 of the CFR is amended as follows:

Part 76--CABLE TELEVISION SERVICE

1. The authority citation for part 76 continues to read as follows:

Authority: 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, 533, 535,

542, 543, 552, as amended, 106 Stat. 1460.

2. Part 76 is proposed to be amended by adding Subpart P,

consisting of Secs. 76.1100-76.1241, to read as follows:

Subpart P--Uniform System of Accounts for Cable System Operators

Sec.

76.1100 Background.

76.1101 Reporting companies.

76.1102 Records.

76.1103 Accounts--General.

76.1104 Regulated accounts.

76.1105 Interpretation of accounts.

76.1106 Waivers.

76.1107 Address for reports and correspondence.

76.1108 Number convention.

76.1109 Sequence of accounts.

76.1110 Nonregulated activities.

76.1111 Compensated absences.

76.1112 Materiality.

76.1113 Nonregulated investments.

Current Assets

76.1114 Cash and equivalents.

76.1115 Accounts receivable--cable services.

76.1116 Accounts receivable allowance--cable services.

76.1117 Other accounts receivable.

76.1118 Accounts receivable allowance--other.

76.1119 Notes receivable.

76.1120 Notes receivable allowance.

76.1121 Interest and dividends receivable.

76.1122 Inventories.

76.1123 Prepayments.

76.1124 Other current assets.

Noncurrent Assets

76.1125 Investments in affiliated companies.

76.1126 Investments in nonaffiliated companies.

76.1127 Nonregulated investments.

76.1128 Unamortized debt issuance expense.

76.1129 Sinking funds.

76.1130 Other noncurrent assets.

76.1131 Deferred maintenance and retirements.

76.1132 Deferred charges.

Regulated Plant

76.1133 Instructions for cable services plant accounts.

76.1134 Cable services plant in service.

76.1135 Property held for future use.

76.1136 Cable service plant adjustment.

76.1137 Nonoperating plant.

76.1138 Goodwill.

76.1139 Land.

76.1140 Buildings.

76.1141 Head end equipment.

76.1142 Distribution system.

76.1143 Drops.

76.1144 Production equipment.

76.1145 Customer premises equipment.

76.1146 Maintenance and warehouse equipment.

76.1147 Furniture.

76.1148 Office equipment.

76.1149 Capital leases.

76.1150 Leasehold improvements.

76.1151 Intangibles.

76.1152 Accumulated depreciation.

76.1153 Accumulated depreciation held for future use.

76.1154 Accumulated depreciation--nonoperating.

76.1155 Accumulated amortization--capitalized leases.

76.1156 Accumulated amortization--leasehold improvements.

76.1157 Accumulated amortization--intangible.

76.1158 Accumulated amortization--other.

Current Liabilities

76.1159 Accounts payable.

76.1160 Notes payable.

76.1161 Advance billing and payments.

76.1162 Customers' deposits.

76.1163 Current maturities--long-term debt.

76.1164 Current maturities--capital leases.

76.1165 Income taxes--accrued.

76.1166 Other taxes--accrued.

76.1167 Net current deferred operating income taxes.

76.1168 Net current deferred nonoperating income taxes.

76.1169 Other accrued liabilities.

76.1170 Other current liabilities.

76.1171 Funded debt.

76.1172 Premium on long-term debt.

76.1173 Discount on long-term debt.

76.1174 Reacquired debt.

76.1175 Obligations under capital leases.

76.1176 Advances from affiliated companies.

76.1177 Other long-term debt.

76.1178 Other long-term liabilities.

76.1179 Unamortized operating investment tax credits--net.

76.1180 Unamortized nonoperating investment tax credits--net.

76.1181 Net noncurrent deferred operating income taxes.

76.1182 Net noncurrent deferred nonoperating income taxes.

76.1183 Other deferred credits.

76.1184 Capital stock.

76.1185 Additional paid--in capital.

76.1186 Treasury stock.

76.1187 Other capital.

76.1188 Retained earnings.

Revenue Accounts

76.1189 Instructions for revenue accounts.

76.1190 Basic service tier revenues.

76.1191 Cable programming services revenues.

76.1192 Equipment and installation revenues.

76.1193 Nonregulated cable programming services.

76.1194 Other cable revenues.

76.1195 Uncollectible revenue--cable services.

76.1196 Uncollectible revenue--other.

Expense Accounts

76.1197 Instructions for expense accounts.

76.1198 Property held for future use expense.

76.1199 Land and building expense.

76.1200 Headend equipment expense.

76.1201 Distribution system expense.

76.1202 Drops expense.

76.1203 Production equipment expense.

76.1204 Customer premises equipment expense.

76.1205 Maintenance and warehouse equipment expense.

76.1206 Furniture and artworks expense.

76.1207 Office equipment expense.

76.1208 Basic cable programming expense.

76.1209 Basic cable satellite programming expense.

76.1210 Retransmission consent expense.

76.1211 Public, educational, governmental access expense.

76.1212 Local origination expense.

76.1213 Other basic cable programming expense.

76.1214 Cable programming service expense.

76.1215 Cable programming service satellite programming expense.

76.1216 Cable programming service retransmission consent expense.

76.1217 Cable programming service local origination expense.

76.1218 Other cable programming service expense.

76.1219 Accumulated depreciation and amortization expense.

76.1220 Accumulated depreciation expense--cable services plant in

service.

76.1221 Accumulated depreciation expense--property held for future

cable services use.

76.1222 Amortization expense--tangible.

76.1223 Amortization expense--intangible.

76.1224 Amortization expense--other.

76.1225 Other property, plant and equipment expenses.

76.1226 Cable system operations expenses.

76.1227 Marketing.

76.1228 Customer services.

76.1229 Executive and planning.

76.1230 General and administrative.

76.1231 Provision for uncollectible notes receivables.

76.1232 Instructions for other income accounts.

76.1233 Contents of accounts.

76.1234 Other operating income and expenses.

76.1235 Operating taxes.

76.1236 Nonoperating income and expense.

76.1237 Nonoperating taxes.

76.1238 Interest and related items.

76.1239 Extraordinary items.

76.1240 Nonregulated net income.

76.1241 Glossary of terms.

Subpart P--Uniform System of Accounts for Cable System Operators

Sec. 76.1100 Background.

The Uniform System of Accounts (USOA) for cable systems is designed

for those cable operators that elect cost of service regulation. The

purpose of the USOA is to help ensure that in cost of service

proceedings, regulators will have accurate records of cable operators'

revenues, operating expenses, depreciation expenses and capital

investments. In order for an accounting system to fulfill this purpose,

it must exhibit consistency and stability in financial reporting. This

USOA has, therefore, been designed to reflect stable, recurring,

financial data, based to the extent regulatory considerations permit,

upon the consistency of the well established body of accounting

theories and principles commonly referred to as generally accepted

accounting principles.

Sec. 76.1101 Reporting companies.

(a) Cable operators, that elect cost of service regulation must

have or develop accounting records in accordance with this Subpart for

the relevant test year in the cost of service proceeding.

(b) If a cable operator does not develop or maintain its accounting

records in accordance with this subpart for the relevant test year, the

cable operator's cost of service application will be dismissed.

Sec. 76.1102 Records.

(a) The reporting company's financial records shall be kept in

accordance with generally accepted accounting principles to the extent

permitted by this system of accounts.

(b) The reporting company's financial records shall be kept with

sufficient particularity to show fully the facts pertaining to all

entries in these accounts. The detail records shall be filed in such

manner as to be readily accessible for examination by representatives

of this Commission.

and other subsidiary records in such a manner that specific

information, of a type not warranting disclosure as an account or

subaccount, will be readily available. When this occurs, or where the

full information is not otherwise recorded in the general books, the

subsidiary records shall be maintained in sufficient detail to

facilitate the reporting of the required specific information. The

subsidiary records, in which the full details are shown, shall be

sufficiently referenced to permit ready identification and examination

by representatives of this Commission.

Sec. 76.1103 Accounts--General.

(a) As a general rule, all accounts kept by reporting cable

companies shall conform in numbers and titles to those prescribed

herein. However, reporting companies may use different numbers for

internal purposes when separate accounts (or subaccounts) maintained

are consistent with the title and content of accounts and subaccounts

prescribed in this system. A company may subdivide any of the accounts

prescribed. The titles of all such subaccounts shall refer by number or

title to the controlling account.

(b) A company may make any such subdivisions,reclassifications or

consolidations of existing balances as are necessary to meet

requirements of this system of accounts.

Sec. 76.1104 Regulated accounts.

(a) In the context of this subpart, regulated accounts shall be

interpreted to include the investments, revenues and expenses

associated with basic cable service, cable programming services,

equipment and installation and other cable activities. For those cable

operators that elect cost of service regulation, these regulated

products and services are fully subject to the accounting requirements

in this subpart.

(b) In the application of detailed accounting requirements

contained in this subpart, when a regulated activity involves the

common or joint use of assets and resources in the provision of

regulated and nonregulated products and services, companies shall

account for these activities within the accounts prescribed in this

system. Assets and expenses shall be subdivided in subsidiary records

among amounts solely assignable to basic cable services, amounts solely

assignable to cable programming services, amounts solely assignable to

equipment and installation, amounts solely assignable to nonregulated

cable programming services, amounts solely assignable to other cable

activities, amounts solely assignable to noncable activities and

amounts related to assets used and expenses incurred jointly or in

common, which will be allocated among these service cost categories.

Companies shall submit reports identifying regulated and nonregulated

amounts in the manner and at the times prescribed by this Commission.

Nonregulated revenue items not qualifying for incidental treatment

shall be recorded in the Nonregulated Operating Revenue account.

regulated products and services shall be accounted for as regulated

activities.

Sec. 76.1105 Interpretation of accounts.

In order to maintain uniform accounting within the prescribed

system, questions involving matters of significance which are not

clearly provided for, shall be submitted to the Chief, Cable Services

Bureau, for explanation, interpretation, or resolution. Questions and

answers thereto with respect to this system of accounts will be

maintained by the Cable Services Bureau.

Sec. 76.1106 Waivers.

A waiver from any provision of this system of accounts shall be

made by the Federal Communications Commission upon its own initiative

or upon the submission of written request therefore from any reporting

company, provided that such waiver is in the public interest and each

request for waiver expressly demonstrates that: Existing peculiarities

or unusual circumstances warrant a departure from a prescribed

procedure or technique; a specifically defined alternative procedure

will result in substantially equivalent or more accurate portrayal of

operating results or financial condition, consistent with the

principles embodied in the provisions of this system of accounts; and

the application of such alternative procedure will maintain or improve

uniformity in substantive results as among reporting companies.

Sec. 76.1107 Address for reports and correspondence.

Reports, statements, and correspondence submitted to the Federal

Communications in accordance with or relating to instructions and

requirements contained herein shall be addressed to the Cable Services

Bureau, Federal Communications Commission, Washington, DC 20554.

Sec. 76.1108 Number convention.

(a) The number ``76'' (appearing to the left of the first period)

indicates the part number.

(b) The numbers immediately following to the right of the period

indicate, respectively, the section or account. All account numbers

contain 4 digits to the right of the period.

numbers to the right of the period; e.g., Account 1114, rather than the

corresponding complete reference number 76.1114.

Sec. 76.1109 Sequence of accounts.

The order in which the accounts are presented in this system of

accounts is not to be considered as necessarily indicative of the order

in which they will be scheduled at all times in reports to this

Commission.

Sec. 76.1110 Nonregulated activities.

(a) This section describes the accounting treatment of activities

classified for accounting purposes as ``nonregulated.'' Activities

classified as ``nonregulated cable programming services'' and

``noncable activities'' will be classified for accounting purposes as

``nonregulated.'' Activities that qualify for incidental treatment

under the policies of this Commission will be classified for accounting

purposes as regulated activities. The treatment of nonregulated

activities shall differ depending on the extent of the common or joint

use of assets and resources in the provision of both regulated and

nonregulated products and services.

(b) When a nonregulated activity does not involve the joint of

common use of assets and resources in the provision of both regulated

and nonregulated products and services, reporting companies shall

account for these activities on a separate set of books. In the

separate set of books, reporting companies may establish whatever

detail they deem appropriate beyond what is necessary to provide this

Commission with the information required in this subpart.

use of assets and resources in the provision of regulated and

nonregulated products and services, the reporting company shall account

for these activities within accounts prescribed in this system. Assets

and expenses shall be subdivided in subsidiary records among amounts

solely assignable to nonregulated cable programming activities, amounts

solely assignable to other cable activities, amounts solely assignable

to noncable activities, amounts solely assignable to basic cable

services, amounts solely assignable to cable programming services,

amounts solely assignable to equipment and installation, and amounts

related to assets used and expenses incurred jointly or in common,

which will be allocated among these service costs categories. Companies

shall submit reports identifying regulated and nonregulated amounts in

the manner and at the times prescribed by this Commission. Nonregulated

revenue items not qualifying for incidental treatment shall be recorded

in the nonregulated operating revenue account.

Sec. 76.1111 Compensated absences.

Reporting companies shall record a liability and charge the

appropriate expense accounts for compensated absences (vacations, sick

leave, etc.) in the year in which these benefits are earned by

employees.

Sec. 76.1112 Materiality.

Reporting companies shall follow this system of accounts in

recording all financial and statistical data irrespective of an

individual item's materiality under GAAP, unless a waiver has been

granted under the provisions of Sec. 76.1106 to do othewise.

Sec. 76.1113 Nonregulated investments.

Nonregualted investments shall include the investments in

nonregulated activities that are conducted through the same legal

entity as the cable operator, but does not involve the joint or common

use of assets or resources in the provision of both regulated and non-

regulated products and services.

Current Assets

Sec. 76.1114 Cash and equivalents.

This account shall include the following:

(a) The amount of current funds available for use on demand in the

hands of financial officers and agents, deposited in banks or other

financial institutions and also funds in transit for which agents have

received credit.

(b) The amount of cash on special deposit, other than in sinking

and other special funds provided for elsewhere, to pay dividends,

interest, and other debts, when such payments are due one year or less

from the date of deposit; the amount of cash deposited to insure the

performance of contracts to be performed within one year from date of

the deposit; and other cash deposits of a special nature not provided

for elsewhere. Cash on special deposit shall include the amount of cash

deposited with trustees to be held until mortgaged property sold,

destroyed, or otherwise disposed of is replaced, and also cash realized

from the sale of the company's securities and deposited with trustees

to be held until invested in physical property of the company or for

disbursement when the purposes for which the securities were sold are

accomplished. Cash on special deposit to be held for more than one year

from the date of deposit shall be included in the Other Noncurrent

Assets Account.

others as petty cash or working funds from which expenditures are to be

made and accounted for.

(d) The cost of securities acquired for the purpose of temporarily

investing cash, such as time drafts receivable and time loans,

bankers's acceptances, United States Treasury certificates, marketable

securities, and other similar investments of a temporary character.

Accumulated changes in the net unrealized losses of current marketable

equity securities shall be included in the determination of net income

in the period in which they occur in the Other Nonoperating Income

Account.

Sec. 76.1115 Accounts receivable--cable services.

This account shall include all amounts due from customers for

services rendered or billed and from agents and collectors authorized

to make collections from customers. This account shall also include all

amounts due from customers or agents or products sold. This account

shall be kept in such manner as will enable the company to make the

following analysis:

(a) Amounts due from customers who are receiving cable service.

(b) Amounts due from customers who are not receiving service and

whose accounts are in process of collections.

credited to and carried in this account until applied against charges

for services rendered or until refunded.

Sec. 76.1116 Accounts receivable allowance--cable services.

(a) This account shall be credited with amounts charged to the

Uncollectible Revenue Account, to provide for uncollectible amounts

included in the Accounts Receivable--Cable Services account. There

shall be credited to this account amounts collected which previously

had been written off through charges to this account and credits to the

Accounts Receivable--Cable Services account. There shall be charged to

this account any amounts covered thereby which have been found to be

impracticable of collection.

(b) If no such allowance is maintained, uncollectible amounts shall

be charged directly to the Uncollectible Revenue account.

Sec. 76.1117 Other accounts receivable.

This account shall include all amounts currently due, and not

provided for in other accounts, such as divisions of revenue, material

and supplies, matured rents, and interest receivable under monthly

settlements on short term loans, advances, and open accounts.

Sec. 76.1118 Accounts receivable allowance--other.

(a) This account shall be credited with amounts charged to

Uncollectible Revenue--Other account to provide for uncollectible

amounts included in Other Accounts Receivable account. There shall also

be credited to this account amounts collected which previously had been

written off through charges to this account and credits to the Other

Accounts Receivable account. There shall be charged to this account any

amounts covered thereby which have been found to be impracticable of

collection.

(b) If no such allowance is maintained, uncollectible amounts shall

be charged directly to the Uncollectible Revenue--Other account.

Sec. 76.1119 Notes receivable.

This account shall include the cost of demand or time notes, bills

and drafts receivable, or other similar evidences (except interest

coupons) of money receivable on demand or within a time not exceeding

one year from date of issue.

Sec. 76.1120 Notes receivable allowance.

(a) This account shall be credited with amounts charged to the

Provision for Uncollectible Notes Receivable account to provide for

uncollectible amounts included in the Notes Receivable account. There

shall also be credited to this account amounts collected which

previously had been written off through charges to this account and

credits to the Notes Receivable account. There shall be charged to this

account any amounts covered thereby which have been found to be

impracticable of collection.

(b) If no such allowance is maintained, uncollectible amounts shall

be charged directly to the Provision for Uncollectible Notes Receivable

account.

Sec. 76.1121 Interest and dividends receivable.

(a) This account shall include the amount of interest accrued to

the date of the balance sheet on bonds, notes and other commercial

paper owned, on loans made, and the amounts of dividends receivable on

stocks owned.

(b) This account shall not include dividends or other returns on

securities issued or assumed by the company and held by or for it,

whether pledged as collateral, or held in its treasury, in special

deposits, or in sinking and other funds.

loans, advances, and open accounts, shall be included in the Accounts

Receivable--Cable Services account or the Accounts Receivable--Other

account, as appropriate.

(d) Dividends received and receivable from affiliated companies

accounted for on the equity method shall be included in the Investments

in Affiliated Companies account, as a reduction of the carrying value

of the investment.

Sec. 76.1122 Inventories.

(a) This account shall include the cost of materials and supplies

held in stock and inventories of goods held for resale or lease. This

investment in inventories shall include materials and supplies and

property held for sale or lease. This account shall not include items

which are related to a nonregulated activity unless that activity

involves joint or common use of assets and resources in the provision

of regulated and nonregulated products and services.

(b) This account shall include cost of material and supplies held

in stock, including plant supplies, motor vehicles supplies, tools,

fuel, other supplies and material and articles of the company in

process of manufacture for supply stock.

use taxes, so far as practicable, as a part of the cost of the

particular material to which they relate. Transportation and sales and

use taxes which are not included as part of the cost of a particular

material shall be equitably apportioned among the detail accounts to

which material is charged.

(d) So far as practicable, cash and other discount on material

shall be deducted in determining cost of the particular material to

which they relate or credited to the account to which the material is

charged. When such deduction is not practicable, discounts shall be

equitably apportioned among the detail accounts to which material is

charged.

(e) Material recovered in connection with construction, maintenance

or retirement of property shall be charged to this account as follows:

(1) Reusable items that, when installed or in service, were

retirement units, shall be included in this account at the original

cost, estimated if not known.

(2) Reusable minor items that, when installed or in service, were

not retirement units, shall be included in this account at current

prices new.

(3) The cost of repairing reusable material shall be charged to the

appropriate account in the Plant Specific Operations Expense accounts.

(4) Scrap and nonusable material included in this account shall be

carried at the estimated amount which will be received therefor. The

difference between the amounts realized for scrap and nonusable

material sold and the amounts at which it is carried in this account,

so far as practicable, shall be adjusted in the accounts credited when

the material was taken up in this account.

Sec. 76.1123 Prepayments.

(a) This account shall include the following:

(1) The amounts of rents paid in advance of the period in which

they are chargeable to income, except amounts chargeable to cable plant

under construction and minor amounts which may be charged directly to

the final accounts.

(2) The balance of all taxes, other than amounts chargeable to

cable services plant under construction and minor amounts which may be

charged to the final accounts, paid in advance and which are chargeable

to income within one year.

(3) The amount of insurance premiums paid in advance of the period

in which they are chargeable to income, except premiums chargeable to

cable services plant under construction and minor amounts which may be

charged directly to the final accounts.

(b) As the term expires for which any prepayment applies, this

account shall be credited monthly and the appropriate account charged.

Sec. 76.1124 Other current assets.

This account shall include the amount of all current assets which

are not includable in Accounts 1115 through 1123.

Noncurrent Assets

Sec. 76.1125 Investments in affiliated companies.

(a) This account shall include the acquisition cost of the

company's investment in equity or other securities issued or assumed by

affiliated companies, other than securities held in special funds which

shall be charged to the Sinking Funds account. The carrying value of

the investment (securities) accounted for on the equity method shall be

adjusted to recognize the company's share of the earnings or losses and

dividends received or receivable of the affiliated company from the

date of acquisition.

(b) Declines in value of investments accounted for under the cost

method shall be charged to the Other Capital account, if temporary and

as a current period loss if permanent. Detail records shall be

maintained to reflect unrealized losses for each investment.

accounts only with respect to which it is agreed or intended that they

shall be either settled by issuance of capital stock or debt; or shall

not be subject to current cost settlement.

(d) A subsidiary record shall be kept identifying separately common

stocks, preferred stocks, long-term debt, investment advances and

special deposits of cash for more than one year from the date of

deposit. Further, the company's record shall identify the securities

pledged as collateral for any of the company's long-term debt or short-

term loans or to secured performance of contracts.

(e) Amounts due from nonaffiliated companies which are subject to

current settlement shall be included in the Accounts Receivable--Cable

Services account or the Notes Receivable account, as appropriate.

(f) Subsidiary record categories shall be maintained in order that

the entity may separately report the amounts contained herein that

relate to the equity method and the cost method.

Sec. 76.1126 Investments in nonaffiliated companies.

(a) This account shall include the acquisition cost of the

company's investment in securities issued or assumed by nonaffiliated

companies and individuals, other than securities held in special funds

which shall be charged to the Sinking Funds account, and also its

investment advances to such parties and special deposits of cash for

more than one year from date of deposit.

(b) Declines in value of investment shall be charged to the Other

Capital account, if temporary and as a current period loss if

permanent. Detail records shall be maintained to reflect unrealized

losses for each investment.

accounts only with respect to which it is agreed or intended that they

shall be either settled by issuance of capital stock or debt; or shall

not be subject to current cost settlement.

(d) A subsidiary record shall be kept identifying separately common

stocks, preferred stocks, long-term debt, investment advances and

special deposits of cash for more than one year from the date of

deposit. Further, the company's record shall identify the securities

pledged as collateral for any of the company's long-term debt or short-

term debt or short-term loans or to secure performance of contracts.

(e) Amounts due from nonaffiliated companies which are subject to

current settlement shall be included in the Accounts Receivable--Cable

Services account, the Accounts Receivable--Other account, or the Notes

Receivable account, as appropriate.

Sec. 76.1127 Nonregulated investments.

This account shall include the reporting company's investment in

nonregulated activities accounted for in a separate set of books as

provided in Sec. 76.1110(b).

Sec. 76.1128 Unamortized debt issuance expense.

(a) This account shall include the total unamortized balance of

debt issuance expense for all classes of outstanding long-term debt.

Amounts included in this account shall be charged to Interest and

similar items of expenses.

(ii) Engineering, which includes the portion of the wages and

expenses of engineers, draftsmen, inspectors, and their direct

supervision applicable to construction work. It includes expenses

directly related to an employee's wages, such as worker's compensation

insurance, payroll taxes, benefits and other similar items of expense.

(iii) Material and supplies, which includes the purchase price of

material used at the point of free delivery plus the costs of

inspection, loading and transportation, and an equitable portion of

provisioning expense. In determining the cost of material used, proper

allowance shall be made for unused material, for material recovered

from temporary structures used in performing the work involved, and for

discounts allowed and realized in the purchase of material. This item

does not include construction material that is stolen or rendered

unusable due to vandalism. Such material should be charged to the

applicable plant specific operations expense accounts.

(iv) Transportation, which includes the cost of transportating

employees, material and supplies, tools and other work equipment to and

from the physical construction location. It includes amounts paid

therefor to other companies or individuals and the cost of using the

company's own motor vehicles or other transportation equipment.

(v) Contract work, which includes amounts paid for work performed

under contract or other agreement by other companies, firms or

individuals; engineering and supervision applicable to such work; cost

incident to the award of contracts; and the inspection of such work.

The cost of construction work performed by affiliated companies and

other details relating thereto shall be available from the work in

progress and supporting records.

(vi) Protection, which includes the cost of protecting the

company's property from fire or other casualties and the cost of

preventing damages to others or the property of others.

(vii) Privileges, Permits and Rights of Way, which includes such

costs incurred in obtaining these privileges, permits, or rights of way

in connection with construction work, such as for use of private

property, streets or highways. The cost of such privileges and permits

shall be included in the cost of the work for which the privileges or

permits are obtained, except for costs includable in the Land account

and the Intangibles account.

(viii) Taxes, which includes taxes properly includable in

construction costs before the facilities are completed for service,

which taxes are assessed separately from taxes on operating property or

under conditions that permit separate identification of the amount

chargeable to construction.

(ix) Special machine service, which includes the cost of labor

expended, materials and supplies consumed and other expenses incurred

in the maintenance, operation and use of special and other labor saving

machines (other than transportation equipment) such as trenching

equipment, cable plows and pole setting trucks. Also included are

expenditures for rental, maintenance and operation of such machines

owned by others. When a construction job requires the purchase of

special machines, the cost thereof, less the appraised or salvage value

at the time of release from the job, shall be included in the cost of

construction.

(x) Insurance, which includes premiums paid specifically for

protection against loss and damage in connection with the construction

of cable services plant due to fire or other casualty, injury to or

death of employees or others, damages to property of others,

defalcations of employees and agents, and the nonperformance of

contractual obligations of others.

(xi) Construction services, which includes the cost of cable,

electricity, power, construction quarters, office space and equipment

directly related to the construction project.

(xii) Indirect construction costs, which includes indirect costs

such as general engineering, supervision and support. Such costs, in

addition to direct supervision, shall include indirect plant operations

and engineering supervision up to, but not including, supervision by

executive officers whose pay and expenses are chargeable to the

Executive and Planning account. The records supporting the entries for

indirect construction cost shall be kept so as to show the nature of

the expenditures, the individual jobs and accounts charged, and the

bases of the distribution. The amounts charged to each plant account

for indirect costs shall be readily determinable. The instructions

contained herein shall not be interpreted as permitting the addition to

plant of amounts to cover indirect costs based on arbitrary

allocations.

(xiii) The cost of construction shall not include any amounts

classifiable as Corporate Operations Expense.

Sec. 76.1134 Cable services plant in service.

This account shall include the original cost of the investment

included in Accounts 1139 through 1151.

Sec. 76.1135 Property held for future use.

(a) This account shall include the original cost of property owned

and held for no longer than two years under a definite plan for use in

cable service. If at the end of two years the property is not in

service, the original cost of the property shall be transferred to the

Nonoperating Plant account.

(b) Subsidiary records shall be maintained to show the character of

the amounts carried in this account.

Sec. 76.1136 Cable service plant adjustment.

(a) This account shall include amounts determined in accordance

with Sec. 76.1133(b) representing the difference between

(1) The fair market value of the cable services plant acquired,

plus preliminary expenses incurred in connection with the acquisition;

and

(2) The original cost of such plant, governmental franchises and

similar rights acquired, less the amounts of reserve requirements for

depreciation and amortization of the property acquired. If the actual

original cost is not known, the entries in this account shall be based

upon an estimate of such costs.

(b) The amounts recorded in this account with respect to each

property acquisition (except land and artworks) shall be disposed of,

written off, or provision shall be made for the amortization thereof,

as follows:

(1) Debit amounts may be charged to, in whole or in part, or

amortized over a reasonable period through charges to the Other

Nonoperating Income Account. When the provisions of paragraph (b)(3) of

this section apply, debit amounts shall be amortized to the

Amortization Expense--Other account.

(2) Credit amounts shall be disposed of in such manner as this

Commission may approve or direct, except for credit amounts referred to

in paragraph (b)(3) of this section.

(3) Within one year from the date of inclusion in this account of a

debit or credit amount with respect to a current acquisition, the

company may dispose of the total amount from an acquisition of cable

services plant by a lump-sum charge or credit, as appropriate, to the

Amortization Expense--Other account without further approval of this

Commission, provided that such amount does not exceed $100,000 and that

the plant was not acquired from an affiliated company.

Sec. 76.1137 Nonoperating plant.

(a) This account shall include the company's investment in

regulated property which is not includable in the plant accounts as

operating cable services plant. It shall include the company's

investment in cable services property held for sale.

(b) Subsidiary records shall be maintained to show the character of

the amounts carried in this account.

Sec. 76.1138 Goodwill.

This account shall include any portion of the plant purchase price

that cannot be assigned to specifically identifiable property acquired

and such amount should be identified as ``goodwill''.

Sec. 76.1139 Land.

(a) This account shall include the original cost of all land held

in fee and of easements, and similar rights in land having a term of

more than one year used for purposes other than the location of outside

plant. It shall also include special assessments upon land for the

construction of public improvements.

(b) When land, together with buildings thereon, is acquired, the

original cost shall be fairly apportioned between the land and the

buildings and accounted for accordingly. If the plan of acquisition

contemplates the removal of buildings, the total cost of the land and

buildings shall be accounted for as the cost of the land, and the

salvage value of the buildings when disposed of shall be deducted from

the cost of the land so determined.

recorded in the rent subsidiary record category for the Land and

Building Expense.

(d) When land is acquired for which there is not a definite plan

for its use in cable service, its costs shall be included in the

Nonoperating Plant account.

(e) When land is acquired in excess of that required for cable

purposes, the cost of such excess land shall be included in the

Nonoperating Plant account.

(f) Installments of assessments for public improvement, including

interest, if any, which are deferred without option to the company

shall be included in this account only as they become due and payable.

Interest on assessments which are not paid when due shall be included

in the Interest and Related Items account.

Sec. 76.1140 Buildings.

(a) This account shall include the original cost of buildings, and

the cost of all permanent fixtures, machinery, appurtenances and

appliances installed as a part thereof. It shall include costs incident

to the construction or purchase of a building and to securing

possession and title.

(b) When land, together with the buildings thereon, is acquired,

the original cost shall be fairly apportioned between the land and

buildings, and the amount applicable to the buildings shall be included

in this account. The amount applicable to the land shall be included in

the Land account.

equipment or wiring apparatus for generating or controlling electricity

for operating the cable system.

Sec. 76.1141 Headend equipment.

This account shall include the original cost of headend equipment.

It shall include the original cost of towers and antennas comprising

the headend tower assemblies or arrays, headend receiving and signal

processing equipment, all power supply and distribution equipment

serving as or associated with the prime source of power used in headend

operations, and miscellaneous equipment devoted to general station use.

Sec. 76.1142 Distribution system.

This account shall include the following:

(a) The original cost installed of towers and poles together with

appurtenant fixtures used for supporting overhead distribution

conductors and service wires;

(b) The original cost installed of underground conduit and tunnels

used for housing distribution cables or wires.

distribution purposes.

(d) The original cost of all power supply and distribution

equipment serving as or associated with the prime source of power used

in signal distribution. This account shall include also the cost of

power rectifiers or motor generator installations (not forming an

integral part of the transmitting or head end stations) that are

provided as a source of power for the distribution system.

Sec. 76.1143 Drops.

This account shall include the original cost of overhead and

underground conductors leading from the pressure tap to the point of

connection with the customers outlet or wiring. This account includes

conduit used for underground service conductors.

Sec. 76.1144 Production equipment.

This account shall include the original cost of all production

equipment owned by the reporting company that is used for the

production of programming, including public, educational, and

governmental access and local origination programming.

Sec. 76.1145 Customer premises equipment.

This account shall include the original cost of equipment on

customers' premises, leased or loaned to customers, but not including

property held for sale. This account also shall include the cost

installed of equipment on customer's premises when the reporting

company incurs such cost and when the reporting company retains title

to and assumes full responsibility for maintenance and replacement of

such property.

Sec. 76.1146 Maintenance and warehouse equipment.

This account shall include the original cost of the following:

(a) Motor vehicles of the type which are designed and routinely

licensed to operate on public streets and highways.

(b) Special purpose vehicles.

paragraphs (a), (b) and (d) of this section.

(d) Power operated equipment, general purpose tools and other items

of work equipment.

Sec. 76.1147 Furniture.

This account shall include the original cost of furniture in

offices, storerooms, shops, and all other quarters. This account shall

also include the cost of objects which possess aesthetic value, are of

original or limited edition, and do not have a determinable useful

life. The cost of any furniture attached to and constituting a part of

a building shall be charged to the Buildings account.

Sec. 76.1148 Office equipment.

This account shall include the original cost of office equipment in

offices, shops and all other quarters. The cost of any equipment

attached to and constituting a part of a building shall be charged to

the Building account.

Sec. 76.1149 Capital leases.

(a) This account shall include all property acquired under a

capital lease. A lease qualifies as a capital lease when one or more of

the following criteria is met:

(1) By the end of the lease term, ownership of the leased property

is transferred to the leasee.

(2) The lease contains a bargain purchase option.

(3) The lease term is substantially (75% or more) equal to the

estimated useful life of the leased property. However, if the beginning

of the lease term falls within the last 25% of the total estimated

economic life of the leased property, including earlier years of use,

this criterion shall not be used for purposes of classifying the lease.

(4) At the inception of the lease, the present value of the minimum

lease payments, excluding that portion of the payments representing

executory costs to be paid by the lessor, including any profit thereon,

equals or exceeds 90% or more of the fair value of the leased property.

However, if the beginning of the lease term falls within the last 25%

of the total estimated economic life of the leased property, including

earlier years of use, this criterion shall not be used for purposes of

classifying the lease.

(b) All other leases are operating leases.

capital lease shall be equal to the original cost, if known, or to the

present value not to exceed fair value, at the beginning of the lease

term, of minimum lease payments during the lease term, excluding that

portion of the payments representing executory costs to be paid by the

lessor, together with any profit thereon.

Sec. 76.1150 Leasehold improvements.

(a) This account shall include the original cost of leasehold

improvements made to cable services plant held under a capital or

operating lease, which are subject to amortization treatment. This

account shall also include those improvements which will revert to the

lessor.

(b) Improvements to leased cable services plant which are of a

relatively minor cost or short life or for which the period of the

lease is one year or less shall be charged to the account chargeable

with the cost of repairs to such plant.

term of the related lease.

Sec. 76.1151 Intangibles.

(a) This account shall include the cost of organizing and

incorporating the company, the original cost of government franchises,

the original cost of patent rights, and other intangible property

having a life of more than one year and used in connection with the

company's cable operations.

(b) Subsidiary records for this account shall include a description

of each class of intangible property.

or less shall be charged directly to the Amortization Expense--

Intangible account. Such intangibles acquired at small cost may also be

charged to the Amortization Expense--Intangibles account, irrespective

of their term of life.

(d) This account shall not include any discounts on securities

issued, nor shall it include costs incident to negotiating loans,

selling bonds or other evidences of debt, or expenses in connection

with the authorization, issuance, sale or resale of capital stock.

(e) When charges are made to this account for expenses incurred in

mergers, consolidations, or reorganizations, amounts previously

included in this account on the books of the various companies

concerned shall not be carried over.

(f) Franchise taxes payable annually or more frequently shall be

charged to Operating Taxes account.

(g) This account shall not include the cost of plant, material and

supplies, or equipment furnished to municipalities or other

governmental authorities when given other than as initial consideration

for franchises or similar rights.

(h) This account shall not include the original cost of easements,

rights of way, and similar rights in land having a term of more than

one year. Such amounts shall be recorded in the Land account, or in the

appropriate outside plan account.

76.1152 Accumulated depreciation.

(a) This account shall include the accumulated depreciation

associated with the investment contained in Cable Services Plant in

Service account.

(b) This account shall be credited with depreciation amounts

concurrently charged to the Depreciation Expense--Cable Services Plant

in Service account.

services plant, this account shall be charged with the original cost of

the property, retired plus the cost of removal and credited with the

salvage value and any insurance proceeds recovered.

(d) This account shall be credited with amounts charged to the

Deferred Maintenance and Retirements account. This account shall be

credited with amounts charged to the Depreciation Expense--Cable

Services Plant in Service account with respect to other than relatively

minor losses in service values suffered through terminations of service

when charges for such terminations are made to recover the losses.

76.1153 Acculated depreciation held for future use.

(a) This account shall include the accumulated depreciation

associated with the investment contained in the Property Held for

Future Use account.

(b) This account shall be credited with amounts concurrently

charged to the Depreciation and Amortization Expense account.

76.1154 Accumulated depreciation--nonoperating.

(a) This account shall include the accumulated amortization and

depreciation associated with the investment contained in the

Nonoperating Plant account.

(b) This account shall be credited with amortization and

depreciation amounts concurrently charged to the Nonoperating Income

and Expense account.

disposed of, this account shall be charged with the amount previously

credited hereto with respect to such property and the book cost of the

property so retired less the amount chargeable to this account and less

the value of the salvage recovered or the proceeds from the sale of the

property shall be included in the Nonoperating Income and Expense

account. In case the property had been used in cable service previous

to its inclusion in the Nonoperating Plant account, the amount accrued

for depreciation thereon after its retirement from cable service shall

be charged to this account and credited to the Accumulated Depreciation

account, and the accounting for its retirement from the Nonoperating

Plant account shall be in accordance with that applicable to cable

services plant retired.

76.1155 Accumulated amortization--capitalized leases.

(a) This account shall include the accumulated amortization

associated with the investment contained in the Capital Leases account.

(b) This account shall be credited with amounts for the

amortization of capital leases concurrently charged to the Amortization

Expense--Tangible account. (Note also the Accumulated Depreciation--

Nonoperating account.)

relinquished, or is otherwise retired from service, this account shall

be charged with the cost of the retired item. Remaining amounts

associated with the item shall be debited to the Nonoperating Income

and Expense account.

Sec. 76.1156 Accumulated amortization--leasehold improvements.

(a) This account shall include the accumulated amortization

associated with the investment contained in the Leasehold Improvements

account.

(b) This account shall be credited with amounts for the

amortization leasehold improvements concurrently charged to the

Amortization Expense--Tangible account. (Note also the Accumulated

Depreciation--Nonoperating account.)

sold, is relinquished, or is otherwise retired from service, this

account shall be charged with the cost of the retired item. Remaining

amounts associated with the item shall be debited to the Nonoperating

Income and Expense account.

Sec. 76.1157 Accumulated amortization--intangible.

(a) This account shall include the accumulated amortization

associated with the investment contained in the Intangibles account.

(b) This account shall be credited with amortization amounts

concurrently charged to the Amortization Expense--Intangible account.

(Note also the Accumulated Depreciation--Nonoperating account.)

relinquished, or otherwise retired from service, this account shall be

charged with the cost of the retired item. Remaining amounts associated

with the item shall be debited to the Nonoperating Income and Expense

account.

Sec. 76.1158 Accumulated amortization--other.

(a) This account shall include the accumulated amortization

associated with the investment contained in the Plant Adjustment

account.

(b) This account shall be credited with amortization amounts

concurrently charged to the Amortization Expense--Other. (Note also the

Accumulated Depreciation--Nonoperating account.)

relinquished, or otherwise retired from service, this account shall be

charged with the cost of the retired item. Remaining amounts associated

with the item shall be debited to the Nonoperating Income and Expense

account.

Current Liabilities

Sec. 76.1159 Accounts payable.

(a) This account shall include all amounts currently due to others

for recurring trade obligations, and not provided for in other

accounts, such as those for material and supplies, repairs to cable

services plant, matured rents, and interest payable under monthly

settlements on short-term loans, advances, and open accounts. It shall

also include amounts of taxes payable that have been withheld from

employees' salaries.

(b) Subsidiary record categories shall be maintained for this

account in order that the company may separately report the amounts

contained herein that relate to nonaffiliates and affiliates.

sharing of revenues.

Sec. 76.1160 Notes payable.

(a) This account shall include the face amount of notes, drafts,

and other evidences of indebtedness issued or assumed by the company

(except interest coupons) which are payable on demand or not more than

one year or less from the date of issue.

(b) Subsidiary record categories shall be maintained for this

account in order that the company may separately report the amounts

contained herein that relate to nonaffiliates and affiliates.

account matures more than one year from date of issue, it shall be

included in the Funded Debt account, the Advances from Affiliated

Companies account, or other appropriate account.

(d) The records supporting the entries to this account shall be

kept so that the company can furnish complete details as to each note,

when it is issued, the consideration received, and when it is payable.

Sec. 76.1161 Advance billing and payments.

This account shall include the amount of advance billing creditable

to revenue accounts in future months; also advance payments made by

prospective customers prior to the establishment of service. Amounts

included in this account shall be credited to the appropriate revenue

accounts in the months in which the service is rendered or cleared from

this account as refunds are made.

Sec. 76.1162 Customers' deposits.

(a) This account shall include the amount of cash deposited with

the company by customers as security for the payment for cable

services.

(b) Advance payments made by prospective customers prior to the

establishment of service shall be credited to the Advance Billing and

Payments account.

Sec. 76.1163 Current maturities--long-term debt.

This account shall include the amount (including any obligations

for premiums) of long-term debt matured and unpaid without any specific

agreement for extension of maturity, including unpresented bonds drawn

for redemption through the operation of sinking and redemption fund

agreements.

Sec. 76.1164 Current maturities--capital leases.

This account shall include the current portion of obligations

applicable to property obtained under capital leases.

Sec. 76.1165 Income taxes--accrued.

(a) This account shall be credited or charged with the offsetting

amount of current year income taxes (Federal, state and local) accrued

during the period or adjustments to prior accruals.

(b) If significant, current year income taxes paid in advance shall

be reclassified to the Prepayments account.

Sec. 76.1166 Other taxes--accrued.

(a) This account shall be credited or charged and the Operating

Taxes account, or the Nonoperating Taxes account, or, for payroll

related costs, the appropriate expense accounts shall be charged or

credited for all taxes, other than Federal, State and local income

taxes, accrued or adjusted for previous accruals during the period.

Among the taxes includable in this account are property, gross

receipts, franchise, capital stock, social security and unemployment

taxes.

(b) Taxes paid in advance of the period in which they are

chargeable to income shall be included in the Prepayments account or

the Other Noncurrent Assets account, as appropriate.

Sec. 76.1167 Net current deferred operating income taxes.

(a) This account shall include the balance of income tax expense

related to current items from regulated operations which have been

deferred to later periods as a result of the normalized method of

accounting for tax differentials authorized by this Commission and not

provided for elsewhere.

(b) As regulated assets or liabilities which generated the deferred

income tax are reclassified from long-term or noncurrent status to

current, the appropriate deferred income tax shall be reclassified from

the Net Noncurrent Deferred Operating Income Taxes account, to this

account.

debited or credited to the Provision for Deferred Operating Income

Taxes--Net account.

(d) The classification of deferred income taxes as current or

noncurrent shall follow the classification of the asset or liability

that gave rise to the deferred income tax. If there is no related asset

or liability, classification shall be based on the expected turnaround

of the tax timing difference.

(e) Subsidiary record categories shall be maintained in order that

the company may separately report the amounts contained herein that are

property related and those that are nonproperty related.

Sec. 76.1168 Net current deferred nonoperating income taxes.

(a) This account shall include the balance of income tax expense

resulting from comprehensive interpreted tax allocation which has been

deferred to later periods.

(b) As other assets or liabilities which generated the deferred

income tax are reclassified from long-term or noncurrent status to

current, the appropriate deferred income tax shall be reclassified from

the Net Noncurrent Deferred Nonoperating Income Taxes account, to this

account.

credited or debited to the Provision for Deferred Nonoperating Income

Taxes--Net account.

(d) This account shall also include the balance of the income taxes

(Federal, state and local) related to current extraordinary items which

have been deferred to later periods resulting from comprehensive

interperiod tax allocation.

(e) As the extraordinary item which generated the deferred income

tax becomes current, the appropriate deferred income tax shall be

reclassified from the Net Noncurrent Deferred Nonoperating Income Taxes

account, to this account.

(f) This account shall be debited or credited with the amount being

credited and debited to the Extraordinary Items account.

(d) The classification of deferred income taxes as current or

noncurrent shall follow the classification of the asset or liability

that gave rise to the deferred income tax. If there is no related asset

or liability, classification shall be based on the expect turnaround.

(h) Subsidiary record categories shall be maintained in order that

the company may separately report the amounts contained herein that are

property related and those that are nonproperty related.

Sec. 76.1169 Other accrued liabilities.

(a) This account shall include the amount of wages, compensated

absences, interest on indebtedness of the company, dividends on capital

stock, and rents accrued to the date for which the balance sheet is

made, but not payable until after that date.

(b) This account shall be maintained so as to show separately the

amount and nature of the items accrued to the date of the balance

sheet.

Accounts Payable account.

(d) Interest payable under monthly settlements on short-term loans,

advances, and open accounts shall be included in the Accounts Payable

account.

Sec. 76.1170 Other current liabilities.

This account shall include liabilities of current character which

are not includable in Accounts 1160 through 1169.

Sec. 76.1171 Funded debt.

(a) This account shall include the total face amount of unmatured

debt, maturing more than one year from date of issue, issued by the

company and not retired, and the total face amount of similar unmatured

debt of other companies, the payment of which has been assumed by the

company, including funded debt the maturity of which has been extended

by specific agreement.

(b) This account shall include such items as mortgage bonds,

collateral trust bonds, income bonds, convertible debt, debt securities

with detachable warrants and other similar obligations maturing more

than one year from date of issue.

account shall include only the face amount of the security at the time

of issuance. The value of detachable warrants shall be charged to

either the Premium on Long-Term Debt account, or the Discount on Long-

Term Debt account, as appropriate, and credited to the Additional Paid-

in Capital account, in the case of capital stock warrants or retained

in this account as a separately identifiable amount in the case of

detachable long-term debt warrants. No similar allocation shall be made

for the issuance of either convertible debt or debt securities with

non-detachable warrants.

(d) Subsidiary records shall be maintained for each issue.

(e) Securities maturing in one year or less, including securities

maturing serially, shall be included in the Current Maturities--Long-

Term Debt account.

(f) Investment advances, including those represented by notes,

shall be included in the Other Long-Term Debt account.

Sec. 76.1172 Premium on long-term debt.

(a) This account shall include the premium associated with all

classes of long-term debt. Premium, as applied to securities issued or

assumed by the company, means the excess of the current money value

received at their sale over the sum of their book or face amount and

interest or dividends accrued at the date of the sale.

(b) Amounts included in this account shall be amortized monthly by

the interest method and credited to the Interest and Related Items

account.

attributable to each issue.

Sec. 76.1173 Discount on long-term debt.

(a) This account shall include the discount associated with all

classes of long-term debt. Discount, as applied to securities issued or

assumed by the company, means the excess of the book or face amount of

the securities plus interest or dividends accrued at the date of the

sale over the current money value of the consideration received at

their sale.

(b) Amounts included in this account shall be amortized monthly by

the interest method and charged to the Interest and Related Items

account.

attributable to each issue.

Sec. 76.1174 Reacquired debt.

This account shall include the face amount of debt reacquired prior

to maturity that has not been retired. Gain or loss shall be recognized

at the time of reacquisition by credits or charges to the Nonoperating

Income and Expense account, except that material gains or losses shall

be treated as extraordinary. (See Extraordinary Income Credits account

and Extraordinary Items account.)

Sec. 76.1175 Obligations under capital leases.

(a) This account shall include the noncurrent portion of

obligations applicable to property obtained under capital leases.

(b) Amounts subject to current settlement shall be included in the

Current Maturities--Capital Leases account.

Sec. 76.1176 Advances from affiliated companies.

(a) This account shall include the amount of advances from

affiliated companies.

(b) Amounts due affiliated companies which are subject to current

settlement shall be included in the Notes Payable account or the

Accounts Payable account, as appropriate.

Sec. 76.1177 Other long-term debt.

This account shall include long-term debt not provided for

elsewhere.

Sec. 76.1178 Other long-term liabilities.

(a) This account shall include amounts accrued to provide for such

items as unfunded pensions (if actuarially determined), death benefits,

deferred compensation costs and other long-term liabilities not

provided for elsewhere.

(b) Subsidiary records shall be maintained to identify the nature

of the items included herein.

Sec. 76.1179 Unamortized operating investment tax credits--net.

(a) This account shall be credited and the Operating Taxes account

shall be debited with investment tax credits generated from qualified

expenditures related to regulated operations which the company defers

rather than recognizes currently in income.

(b) This account shall be debited and the Operating Taxes account

credited with a proportionate amount determined in relation to the

period of time used for computing book depreciation on the property to

which the tax credit relates.

Sec. 76.1180 Unamortized nonoperating investment tax credits--net.

(a) This account shall be credited and the Nonoperating Taxes

account shall be debited with investment tax credits generated from

qualified expenditures related to other operations which the company

has elected to defer rather than recognize currently in income.

(b) This account shall be debited and the Nonoperating Taxes

account credited with a proportionate amount determined in relation to

the useful book life of the property to which the tax credit relates.

Sec. 76.1181 Net noncurrent deferred operating income taxes.

(a) This account shall include the balance of income tax expense

related to noncurrent items from regulated operations which have been

deferred to later periods as a result of comprehensive interperiod tax

allocation related to timing differences that arise from regulated

operations.

(b) This account shall be credited or debited, as appropriate, and

the Operating Taxes account shall reflect the offset for the tax effect

of revenues and expenses from regulated operations which have been

included in the determination of taxable income, but which will not be

included in the determination of book income or for the tax effect of

revenues and expenses from regulated operations which have been

included in the determination of book income prior to the inclusion in

the determination of taxable income.

income tax or deferred income tax are reclassified from long-term or

noncurrent status to current status, the appropriate deferred income

tax shall be reclassified from this account to the Net Current Deferred

Operating Income Taxes account.

(d) The classification of deferred income taxes as current or

noncurrent shall follow the classification of the asset or liability

that gave rise to the deferred income tax. If there is no related asset

or liability, classification shall be based on the expected turnaround

of the tax timing difference.

(e) Subsidiary record categories shall be maintained in order that

the company may separately report the amounts contained herein that are

property related and those that are nonproperty related.

Sec. 76.1182 Net noncurrent deferred nonoperating income taxes.

(a) This account shall include the balance of income tax expense

(Federal, state and local) that has been deferred to later periods as a

result of comprehensive interperiod tax allocation related to

nonoperating timing differences.

(b) This account shall be credited or debited, as appropriate, and

the Nonoperating Taxes account, shall reflect the offset for the tax

effect of revenues from other operations and extraordinary items and

nonoperating expense which have been included in the determination of

taxable income, but which will not be included in the determination of

book income or for the tax effect of nonoperating expenses and

extraordinary items and nonoperating income which have been included in

the determination of book income prior to the inclusion in the

determination of taxable income.

income tax or deferred income tax are reclassified from long-term or

non-current status to current status, the appropriate deferred income

tax shall be reclassified from this account to the Net Current Deferred

Nonoperating Income Taxes account.

(d) This account shall also include the balance of the income tax

effect (Federal, State and local) related to noncurrent extraordinary

items which have been included in the determination of taxable income

in a period different from when it is included in the determination of

book income, that is, more than one year.

(e) This account shall be charged or credited with the contra

amount recorded to the Extraordinary Items account.

(f) As the extraordinary item which generated the deferred income

tax becomes current, the appropriate deferred income tax shall be

reclassified from this account to the Net Current Deferred Nonoperating

Income Taxes account.

(g) The classification of deferred income taxes as current or

noncurrent shall follow the classification of the asset or liability

that gave rise to the deferred income tax. If there is no related asset

or liability, classification shall be based on the expected turnaround

of the tax timing difference.

(h) Subsidiary record categories shall be maintained in order that

the company may separately report the amounts contained herein that are

property related and those that are nonproperty related.

Sec. 76.1183 Other deferred credits.

This account shall include the amount of all deferred credits not

provided for elsewhere, such as amounts awaiting adjustment between

accounts; and revenue, expense, and income items in suspense.

Sec. 76.1184 Capital stock.

(a) This account shall include the par value, stated amount, or in

the case of no-par stock the amount received for capital stock issued

and outstanding.

(b) Subsidiary records shall be maintained so as to show separately

each class of stock.

retired.

Sec. 76.1185 Additional paid-in capital.

(a) This account shall include the difference between the net

proceeds (including discount, premium and stock issuance expense)

received from the issuance of capital stock and the amount includable

in the Capital Stock account, unless such difference results in a debit

balance for that class of stock, in which case the amount shall be

charged to the Retained Earnings account.

(b) This account shall also include gains arising from the

retirement and cancellation of capital stock. Losses from the

retirement and cancellation of capital stock shall be charged to this

account to the extent that there exist credits in this account for the

same class of stock; otherwise to the Retained Earnings account.

Sec. 76.1186 Treasury stock.

This account shall include the cost of the company's own capital

stock which has been issued and subsequently reacquired but not retired

or resold.

Sec. 76.1187 Other capital.

This account shall include amounts which are credits arising from

the donation by stockholders of the company's capital stock, capital

recorded upon the reorganization or recapitalization of the company and

temporary declines in the value of marketable securities held for

investment purposes. (See also the Investment in Affiliated Companies

account.)

Sec. 76.1188 Retained earnings.

(a) This account shall include the undistributed balance of

retained earnings derived from the operations of the company and from

all other transactions not includable in the other accounts appropriate

for inclusion of stockholders' equity.

(b) Subsidiary records shall be maintained wherein are recorded all

entries to retained earnings during the year such that the detail of

the entries may be disclosed to the Commission.

Revenue Accounts

Sec. 76.1189 Instructions for revenue accounts.

(a) Purpose of revenue accounts. The revenue accounts are intended

to include the actual cash inflows (or equivalents) that have or will

occur as a result of the company's ongoing major or central operations

during the period. They will include the revenues which arise from

furnishing regulating cable services such as basic cable services,

cable programming services, equipment and installation, and

nonregulated cable services such as pay per view, and pay per channel

services.

(b) Deductions from revenue. Corrections of overcharges, authorized

refunds of overcollections previously credited to revenue, authorized

refunds and adjustments on account of failure in service, and other

corrections shall be charged to the revenue account previously credited

with the amounts involved.

of compensation or salaries for services rendered shall be charged to

the Customer Services account, and not to the revenue accounts.

(d) Revenue recognition. Credits shall be made to the appropriate

revenue accounts when such revenue is actually earned. When the billing

cycle encompasses more than one accounting period, adjustments are

necessary to properly recognize the revenue applicable to the current

accounting period under report. Revenues recorded under the terms of

two-tier contracts or other variable payment plans should be deferred,

if necessary, and recognized ratably with expenses over the term of

related contract. Any amounts deferred shall be credited to the Other

Deferred Credits account.

(e) Structure of revenue accounts.

(1) The revenue section of the system of accounts shall be

organized by revenue group summary account, account and subsidiary

record category (if required).

(2) The revenue section of this system of accounts shall be

comprised of five major groups--Basic Service Revenues, Cable

Programming Service Revenues, Equipment and Installation Revenues,

Nonregulated Cable Programming Service Revenues, Other Cable Revenues,

Noncable Revenues, and Uncollectible Revenues.

(3) Summary accounts within revenue groups shall be used to

describe aggregations of two or more accounts having a certain

commonality.

Sec. 76.1190 Basic service tier revenues.

This account shall report all revenues derived from the provision

basic cable service as defined by Sec. 76.901(a). These revenues shall

include:

(a) Revenues derived from subscriptions to basic cable;

(b) Revenues derived from advertising on channels carried on the

basic cable service tier; and

Sec. 76.1191 Cable programming services revenues.

This account shall report all revenues derived from the provision

cable programming services as defined by Sec. 76.901(b). These revenues

shall include:

(a) Revenues derived from subscriptions to cable programming

services;

(b) Revenues derived from advertising on channels carried on the

cable programming service tiers; and

Sec. 76.1192 Equipment and installation revenues.

This account shall include all revenues derived from the following

activities:

(a) Customer service installation fees.

(b) Lease of basic converters.

(d) Lease of two-way addressable converters.

(e) Lease of remotes.

Sec. 76.1193 Nonregulated cable programming services.

This account shall include all revenues from the provision of any

cable service other than basic cable service and cable programming

service, such as, per-channel or per-program premium services. These

revenues shall include:

(a) Revenues derived from subscriptions to other cable programming

services;

(b) Revenues derived from advertising on channels carried on other

cable programming services; and

Sec. 76.1194 Other cable revenues.

This account shall include all revenues that are derived from the

provision of cable services that are not derived from basic cable

services, cable programming services or nonregulated cable programming

services. Other cable revenues include revenues from leased access,

billing and collection services, studio equipment engineering and

rental services, sale of equipment, and maintenance of equipment sold

to customers.

Sec. 76.1195 Uncollectible revenue--cable services.

This account shall be charged with amounts concurrently credited to

the Receivable Allowances--Cable Services account.

Sec. 76.1196 Uncollectible revenue--other.

This account shall be charged with amounts concurrently credited to

the Other Accounts Receivable account or the Accounts Receivable

Allowance--Other account, when such allowance is maintained.

Expense Accounts

Sec. 76.1197 Instructions for expense accounts.

(a) Structure of the expense accounts.

(1) The expense section of the system of accounts shall be

organized by expense group summary account, and subsidiary record

category (if required).

(2) The expense section of this system of accounts shall be

comprised of four major expense groups--Plant Specific Operations,

Plant Nonspecific Operations, Customer Operations and Corporate

Operations. Expenses to be recorded in Plant Specific and Plant

Nonspecific Operations Expense Groups generally reflect cost associated

with the various kinds of equipment identified in the plant asset

accounts. Expenses to be recorded in the Customer Operations and

Corporate Operations accounts reflect the costs of, or all associated

with, functions performed by people, irrespective of the organization

in which any particular function is performed.

(3) Summary accounts within expense groups shall be used to

describe aggregations of two or more accounts having a certain

commonality.

(b) Plant Specific Operations Expense.

(1) The Plant Specific Operations Expense Accounts are used to

record costs related to specific kinds of cable services plant.

(2) The Plant Specific Operations Expense accounts predominantly

mirror the cable services plant in service detail accounts and are

numbered consistently with them; the first two digits of the expense

account being one, eight (18) and the remaining digits being the same

as the last two numbers of the related plant account. In classifying

Plant Specific Operations expenses, the text of the corresponding plant

account should be consulted to ensure appropriateness.

(3) The Plant Specific Operations Expense accounts shall include

the costs of inspecting, testing and reporting on the condition of

cable plant to determine the need for repairs, replacements,

rearrangements and changes; performing routine work to prevent trouble,

replacing items of plant other than retirement units; rearranging and

changing the location of plant not retired; repairing material for

reuse; restoring the condition of plant damaged by storms, floods, fire

or other casualties (other than the cost of replacing retirement

units); inspecting after repairs have been made; and receiving training

to perform these kinds of work. Also included are the costs of direct

supervision (immediate or first-level) and office support of this work.

(4) In addition to the activities specified in paragraph (b)(3) of

this section, the appropriate Plant Specific Operations Expense

accounts shall include the cost of personnel whose principal job is the

operation of plant equipment. However, when the operation of equipment

is performed as part of other identifiable functions (such as the use

of office equipment, capital tools or motor vehicles) the operators'

cost shall be charged to accounts appropriate for those functions.

Operations Expense accounts shall include expenses related to property

held for future use, provisioning expenses, and depreciation and

amortization expenses. Accounts in this group shall include the costs

of performing activities described in narratives for individual

accounts. These costs shall also include the costs of supervision and

office support of these activities.

(d) Customer Operations Expense. The Customer Operations Expense

accounts shall include the cost of performing customer related

marketing and services activities described in narratives for

individual accounts. These costs shall also include the costs of

supervision, office support and training for these activities.

(e) Corporate Operations Expense. The Corporate Operations Expense

accounts shall include the costs of performing executive and planning

activities and general and administrative activities described in

narratives for individual accounts. These costs shall also include the

costs of supervision, office support and training for these activities.

(f) Expense matrix. The expense accounts shall be maintained by the

following subsidiary record categories, as appropriate to each account.

(1) Salaries and wages. This subsidiary record category shall

include compensation to employees, such as; wages, salaries,

commissions, bonuses, incentive awards and termination payments.

(2) Benefits. This subsidiary record category shall include payroll

related benefits on behalf of employees such as the following:

(i) Pensions.

(ii) Savings plan contributions (company portion).

(iii) Worker's compensation required by law.

(iv) Life, hospital, medical, dental, and vision plan insurance.

(v) Social Security and other payroll taxes.

(3) Rents.

(i) This subsidiary record category shall include amounts paid for

the use of real and personal operating property. Amounts paid for real

property shall be included in Land and Buildings Expense account. This

category includes payments for operating leases but does not include

payments for capital leases.

(ii) This subsidiary record category is applicable only to the

Plant Specific Operations Expense accounts. Incidental rents, e.g.,

short-term rental car expense, shall be categorized as Other Expenses

(see paragraph (f)(4) of this section) under the account which reflects

the function for which the incidental rent was incurred.

(4) Other expenses. This subsidiary record category shall include

costs which cannot be classified to the other subsidiary record

categories. Included are material and supplies, including provisioning

(note also the Provisioning Expense account); contracted services;

accident and damage payments, insurance premiums; traveling expenses

and other miscellaneous costs.

(5) Clearances. This subsidiary record category shall include

amounts transferred to Construction accounts (see

Sec. 76.1133(c)(2)(iii)), the Other Plant Specific Operations Expense

account, and/or the Accumulated Depreciation account, as appropriate,

from the Maintenance and Warehouse Equipment account.

(g) Reimbursements. Reimbursements of actual costs incurred in

connection with joint operations or projects repairing plant due to

damages by others, and obligations to make changes in cable plant (such

as highway relocations), shall be credited to the accounts originally

charged.

Sec. 76.1198 Property held for future use expense.

This account shall include expenses associated with property held

for future use.

Sec. 76.1199 Land and building expense.

This expense shall include expenses associated with land and

buildings (excluding amortization of leasehold improvements). This

amount shall also include janitorial service, cleaning supplies, water,

sewage, fuel and guard service, and electrical power.

Sec. 76.1200 Headend equipment expense.