§76.933. Franchising authority review of basic cable rates and equipment costs. — Inbound Citations

(2) An operator using the annual rate adjustment method may adjust its rates to reflect inflation, changes in external costs and changes in the number of regulated channels that are projected for the 12 months following the date the operator is scheduled to make its rate adjustment pursuant to § 76.933.

(i) The residual component of a system's permitted charge may be adjusted annually to project for the 12 months following the date the operator is scheduled to make a rate adjustment. The annual inflation adjustment shall be based on inflation that occurred in the most recently completed quarter, converted to an annual factor. Adjustments shall be based on changes in the Gross National Product Price Index as published by the Bureau of Economic Analysis of the United States Department of Commerce.

(A) Permitted charges for the basic service tier may be adjusted annually to reflect actual changes in external costs experienced but not yet accounted for by the cable system, as well as for projections in these external costs for the 12-month period on which the filing is based. In order that rates be adjusted for projections in external costs, the operator must demonstrate that such projections are reasonably certain and reasonably quantifiable. Projections involving copyright fees, retransmission consent fees, other programming costs, Commission regulatory fees, and cable specific taxes are presumed to be reasonably certain and reasonably quantifiable. Operators may project for increases in franchise related costs to the extent that they are reasonably certain and reasonably quantifiable, but such changes are not presumed reasonably certain and reasonably quantifiable. Operators may pass through increases in franchise fees pursuant to § 76.933.

(B) In all events, a system must adjust its rates every twelve months to reflect any net decreases in external costs that have not previously been accounted for in the system's rates.

(C) Any rate increase made to reflect increases or projected increases in external costs must also fully account for all other changes and projected changes in external costs, inflation and the number of channels on a regulated basic service tier that occurred or will occur during the same period. Rate adjustments made to reflect changes in external costs shall be based on any changes, plus projections, in those external costs that occurred or will occur in the relevant time periods since the periods used in the operator's most recent previous FCC Form 1240.

(A) Permitted charges for a basic service tier may be adjusted annually to reflect changes not yet accounted for in the number of regulated channels provided by the cable system, as well as for projected changes in the number of regulated channels for the 12-month period on which the filing is based. In order that rates be adjusted for projected changes to the number of regulated channels, the operator must demonstrate that such projections are reasonably certain and reasonably quantifiable.

(B) An operator may make rate adjustments for the addition of required channels to the basic service tier that are required under Federal or local law at any time such additions occur, subject to the filing requirements of § 76.933(c)(5), regardless of whether such additions occur outside of the annual filing cycle. Required channels may include must-carry, local origination, public, educational and governmental access and leased access channels. Should the operator elect not to pass through the costs immediately, it may accrue the costs of the additional channels plus interest, as described in paragraph (c)(3) of this section.

In order to regulate basic service tier rates or associated equipment costs, a franchising authority must have procedural laws or regulations applicable to rate regulation proceedings that provide a reasonable opportunity for consideration of the views of interested parties. Such rules must take into account the time periods that franchising authorities have to review rates under § 76.933.

(2) By means of a prospective percentage reduction in the rates for the basic service tier or associated equipment to cover the cumulative overcharge. The refund shall be reflected as a specifically identified, one-time credit on prospective bills to the class of subscribers that currently subscribe to the cable system.

(5) If an operator files for a rate adjustment for the addition of channels to the basic service tier that the operator is required by Federal or local law to carry, the franchising authority has 60 days to review the requested rate. The proposed rate shall take effect at the end of this 60 day period unless the franchising authority rejects the proposed rate as unreasonable. The franchising authority shall be subject to the requirements described in paragraphs (c)(1) through (3) of this section for ordering refunds and prospective rate reductions, except that the initial review period is 60 rather than 90 days.

(5) If an operator files for a rate adjustment for the addition of channels to the basic service tier that the operator is required by Federal or local law to carry, the franchising authority has 60 days to review the requested rate. The proposed rate shall take effect at the end of this 60 day period unless the franchising authority rejects the proposed rate as unreasonable. The franchising authority shall be subject to the requirements described in paragraphs (c)(1) through (3) of this section for ordering refunds and prospective rate reductions, except that the initial review period is 60 rather than 90 days.

(5) If an operator files for a rate adjustment for the addition of channels to the basic service tier that the operator is required by Federal or local law to carry, the franchising authority has 60 days to review the requested rate. The proposed rate shall take effect at the end of this 60 day period unless the franchising authority rejects the proposed rate as unreasonable. The franchising authority shall be subject to the requirements described in paragraphs (c)(1) through (3) of this section for ordering refunds and prospective rate reductions, except that the initial review period is 60 rather than 90 days.

(B) An operator may make rate adjustments for the addition of required channels to the basic service tier that are required under Federal or local law at any time such additions occur, subject to the filing requirements of § 76.933(c)(5), regardless of whether such additions occur outside of the annual filing cycle. Required channels may include must-carry, local origination, public, educational and governmental access and leased access channels. Should the operator elect not to pass through the costs immediately, it may accrue the costs of the additional channels plus interest, as described in paragraph (c)(3) of this section.

(i) When dropping a channel from a basic service tier, operators shall reflect the net reduction in external costs in their rates. With respect to channels to which the 7.5% markup on programming costs was applied, the operator shall treat the markup as part of its programming costs and subtract the markup from its external costs.

(ii) When the removal of channels results in a reduction of the total basic service tier channel count that existed when the initial maximum permitted rate was established (Initial Channel Count), an operator shall also reduce the price of the basic service tier by any “residual” associated with the removed channels. For subsequent Form 1240 updates, if the number of channels included in the current maximum permitted rate on the Form 1240 is less than the Initial Channel Count, the operator shall reduce the price of the basic service tier by any “residual” associated with the subsequently removed channels. For purposes of this calculation, the per channel residual is the permitted charge for the basic service tier, minus the external costs, divided by the total number of channels on the basic service tier.