Goto Section: 76.933 | 76.935 | Table of Contents
Revised as of September 1, 2021
Goto Year:2020 |
§ 76.934 Small systems and small cable companies.
(a) For purposes of rules governing the reasonableness of rates charged
by small systems, the size of a system or company shall be determined
by reference to its size as of the date the system files with its
franchising authority or the Commission the documentation necessary to
qualify for the relief sought or, at the option of the company, by
reference to system or company size as of the effective date of this
paragraph. Where relief is dependent upon the size of both the system
and the company, the operator must measure the size of both the system
and the company as of the same date. A small system shall be considered
affiliated with a cable company if the company holds a 20 percent or
greater equity interest in the system or exercises de jure control over
(b) A franchising authority that has been certified, pursuant to
§ 76.910, to regulate rates for basic service and associated equipment
may permit a small system as defined in § 76.901 to certify that the
small system's rates for basic service and associated equipment comply
with § 76.922, the Commission's substantive rate regulations.
(c) Initial regulation of small systems:
(1) If certified by the Commission, a local franchising authority may
provide an initial notice of regulation to a small system, as defined
by § 76.901(c), on May 15, 1994. Any initial notice of regulation issued
by a certified local franchising authority prior to May 15, 1994 shall
be considered as having been issued on May 15, 1994.
(2) The Commission will accept complaints concerning the rates for
cable programming service tiers provided by small systems on or after
May 15, 1994. Any complaints filed with the Commission about the rates
for a cable programming service tier provided by a small system prior
to May 15, 1994 shall be considered as having been filed on May 15,
(3) A small system that receives an initial notice of regulation from
its local franchising authority, or a complaint filed with the
Commission for its cable programming service tier, must respond within
the time periods prescribed in § § 76.930 and 76.956.
(d) Statutory period for filing initial complaint: A complaint
concerning a rate for cable programming service or associated equipment
provided by a small system that was in effect on May 15, 1994 must be
filed within 180 days from May 15, 1994.
(e) Petitions for extension of time: Small systems may obtain an
extension of time to establish compliance with rate regulations
provided they can demonstrate that timely compliance would result in
severe economic hardship. Requests for extension of time should be
addressed to the local franchising authority concerning basic service
and equipment rates and to the Commission concerning rates for a cable
programming service tier and associated equipment. The filing of a
request for an extension of time to comply with the rate regulations
will not toll the effective date of rate regulation for small systems
or alter refund liability for rates that exceed permitted levels after
May 15, 1994.
(f) Small Systems Owned by Small Cable Companies. Small systems owned
by small cable companies shall have 90 days from their initial date of
regulation on a tier to bring their rates for that tier into compliance
with the requirements of Sections 76.922 and 76.923. Such systems shall
have sixty days from the initial date of regulation to file FCC Forms
1200, 1205, 1210, 1211, 1215, 1220, 1225, 1230, and 1240 and any
similar forms as appropriate. Rates established during the 90-day
period shall not be subject to prior approval by franchising
authorities or the Commission, but shall be subject to refund pursuant
to sections 76.942 and 76.961.
(g) Alternative rate regulation agreements:
(1) Local franchising authorities, certified pursuant to § 76.910, and
small systems owned by small cable companies may enter into alternative
rate regulation agreements affecting the basic service tier and the
cable programming service tier.
(i) Small systems must file with the Commission a copy of the operative
alternative rate regulation agreement within 30 days after its
(2) Alternative rate regulation agreements affecting the cable
programming service tier shall take into account, among other factors,
(i) The rates for similarly situated cable systems offering comparable
cable programming services, taking into account similarities in
facilities, regulatory and governmental costs, the number of
subscribers, and other relevant factors;
(ii) The rates for cable systems, if any, that are subject to effective
(iii) The history of the rates for cable programming services of the
system, including the relationship of such rates to changes in general
(iv) The rates, as a whole, for all the cable programming, cable
equipment, and cable services provided by the system, other than
programming provided on a per channel or per program basis;
(v) Capital and operating costs of the cable system, including the
quality and costs of the customer service provided by the cable system;
(vi) The revenues received by a cable operator from advertising from
programming that is carried as part of the service for which a rate is
being established, and changes in such revenues, or from other
considerations obtained in connection with the cable programming
services concerned. The rate agreed to in such an alternative rate
regulation agreement shall be deemed to be a reasonable rate.
(3) Certified local franchising authorities shall provide a reasonable
opportunity for consideration of the views of interested parties prior
to finally entering into an alternative rate regulation agreement.
(4) A basic service rate decision by a certified local franchising
authority made pursuant to an alternative rate regulation agreement may
be appealed by an interested party to the Commission pursuant to
§ 76.944 as if the decision were made according to § § 76.922 and 76.923.
Note to paragraph (g) of § 76.934: Small systems owned by small cable
companies must comply with the alternative rate agreement filing
requirements of § 76.1805.
(h) Small system cost-of-service showings:
(1) At any time, a small system owned by a small cable company may
establish new rates, or justify existing rates, for regulated program
services in accordance with the small cable company cost-of-service
methodology described below.
(2) The maximum annual per subscriber rate permitted initially by the
small cable company cost-of-service methodology shall be calculated by
(i) The system's annual operating expenses to
(ii) The product of its net rate base and its rate of return, and then
dividing that sum by (iii) the product of
(A) The total number of channels carried on the system's basic and
cable programming service tiers and
(B) The number of subscribers. The annual rate so calculated must then
be divided by 12 to arrive at a monthly rate.
(3) The system shall calculate its maximum permitted rate as described
in paragraph (b) of this section by completing Form 1230. The system
shall file Form 1230 as follows:
(i) Where the franchising authority has been certified by the
Commission to regulate the system's basic service tier rates, the
system shall file Form 1230 with the franchising authority.
(ii) Where the Commission is regulating the system's basic service tier
rates, the system shall file Form 1230 with the Commission.
(iii) Where a complaint about the system's cable programming service
rates is filed with the Commission, the system shall file Form 1230
with the Commission.
(4) In completing Form 1230:
(i) The annual operating expenses reported by the system shall equal
the system's operating expenses allocable to its basic and cable
programming service tiers for the most recent 12 month period for which
the system has the relevant data readily available, adjusted for known
and measurable changes occurring between the end of the 12 month period
and the effective date of the rate. Expenses shall include all regular
expenses normally incurred by a cable operator in the provision of
regulated cable service, but shall not include any lobbying expense,
charitable contributions, penalties and fines paid one account of
statutes or rules, or membership fees in social service, recreational
or athletic clubs or associations.
(ii) The net rate base of a system is the value of all of the system's
assets, less depreciation.
(iii) The rate of return claimed by the system shall reflect the
operator's actual cost of debt, its cost of equity, or an assumed cost
of equity, and its capital structure, or an assumed capital structure.
(iv) The number of subscribers reported by the system shall be
calculated according to the most recent reliable data maintained by the
(v) The number of channels reported by the system shall be the number
of channels it has on its basic and cable programming service tiers on
the day it files Form 1230.
(vi) In establishing its operating expenses, net rate base, and
reasonable rate of return, a system may rely on previously existing
information such as tax forms or company financial statements, rather
than create or recreate financial calculations. To the extent existing
information is incomplete or otherwise insufficient to make exact
calculations, the system may establish its operating expenses, net rate
base, and reasonable rate of return on the basis of reasonable, good
(5) After the system files Form 1230, review by the franchising
authority, or the Commission when appropriate, shall be governed by
§ 76.933, subject to the following conditions.
(i) If the maximum rate established on Form 1230 does not exceed $1.24
per channel, the rate shall be rebuttably presumed reasonable. To
disallow such a rate, the franchising authority shall bear the burden
of showing that the operator did not reasonably interpret and allocate
its cost and expense data in deriving its annual operating expenses,
its net rate base, and a reasonable rate of return. If the maximum rate
established on Form 1230 exceeds $1.24 per channel, the franchising
authority shall bear such burden only if the rate that the cable
operator actually seeks to charge does not exceed $1.24 per channel.
(ii) In the course of reviewing Form 1230, a franchising authority
shall be permitted to obtain from the cable operator the information
necessary for judging the validity of methods used for calculating its
operating costs, rate base, and rate of return. If the maximum rate
established in Form 1230 does not exceed $1.24 per channel, any request
for information by the franchising authority shall be limited to
existing relevant documents or other data compilations and should not
require the operator to create documents, although the operator should
replicate responsive documents that are missing or destroyed.
(iii) A system may file with the Media Bureau an interlocutory appeal
from any decision by the franchising authority requesting information
from the system or tolling the effective date of a system's proposed
rates. The appeal may be made by an informal letter to the Chief of the
Media Bureau, served on the franchising authority. The franchising
authority must respond within seven days of its receipt of the appeal
and shall serve the operator with its response. The operator shall have
four days from its receipt of the response in which to file a reply, if
desired. If the maximum rate established on Form 1230 does not exceed
$1.24 per channel, the burden shall be on the franchising authority to
show the reasonableness of its order. If the maximum rate established
on Form 1230 exceeds $1.24 per channel, the burden shall be on the
operator to show the unreasonableness of the order.
(iv) In reviewing Form 1230 and issuing a decision, the franchising
authority shall determine the reasonableness of the maximum rate
permitted by the form, not simply the rate which the operator intends
(v) A final decision of the franchising authority with respect to the
requested rate shall be subject to appeal pursuant to § 76.944. The
filing of an appeal shall stay the effectiveness of the final decision
pending the disposition of the appeal by the Commission. An operator
may bifurcate its appeal of a final rate decision by initially limiting
the scope of the appeal to the reasonableness of any request for
information made by the franchising authority. The operator may defer
addressing the substantive rate-setting decision of the franchising
authority until after the Commission has ruled on the reasonableness of
the request for information. At its option, the operator may forego the
bifurcated appeal and address both the request for documentation and
the substantive rate-setting decision in a single appeal. When filing
an appeal from a final rate-setting decision by the franchising
authority, the operator may raise as an issue the scope of the request
for information only if that request was not approved by the Commission
on a previous interlocutory appeal by the operator.
(6) Complaints concerning the rates charged for a cable programming
services tier by a system that has elected the small cable company
cost-of-service methodology may be filed pursuant to § 76.957. Upon
receipt of a complaint, the Commission shall review the system's rates
in accordance with the standards set forth above with respect to basic
(7) Unless otherwise ordered by the franchising authority or the
Commission, the system may establish its per channel rate at any level
that does not exceed the maximum rate permitted by Form 1230, provided
that the system has given the required written notice to subscribers.
If the system establishes its per channel rate at a level that is less
than the maximum amount permitted by the form, it may increase rates at
any time thereafter to the maximum amount upon providing the required
written notice to subscribers.
(8) After determining the maximum rate permitted by Form 1230, the
system may adjust that rate in accordance with this paragraph. Electing
to adjust rates pursuant to one of the options set forth below shall
not prohibit the system from electing a different option when adjusting
rates thereafter. The system may adjust its maximum permitted rate
without adjusting the actual rate it charges subscribers.
(i) The system may adjust its maximum permitted rate in accordance with
the price cap requirements set forth in § 76.922(d).
(ii) The system may adjust its maximum permitted rate in accordance
with the requirements set forth in § 76.922(e) for changes in the number
of channels on regulated tiers. For any system that files Form 1230, no
rate adjustments made prior to the effective date of this rule shall be
charged against the system's Operator's Cap and License Reserve Fee
described in § 76.922(e)(3).
(iii) The system may adjust its maximum permitted rate by filing a new
Form 1230 that permits a higher rate.
(iv) The system may adjust its maximum permitted rate by complying with
any of the options set forth in § 76.922(b)(1) for which it qualifies or
under an alternative rate agreement as provided in paragraph (g) of
(9) In any rate proceeding before a franchising authority in which a
final decision had not been issued as of June 5, 1995, a small system
owned by a small cable company may elect the form of rate regulation
set forth in this section to justify the rates that are the subject of
the proceeding, if the system and affiliated company were a small
system and small company respectively as of the June 5, 1995 and as of
the period during which the disputed rates were in effect. However, the
validity of a final rate decision made by a franchising authority
before June 5, 1995 is not affected.
(10) In any proceeding before the Commission involving a cable
programming services tier complaint in which a final decision had not
been issued as of June 5, 1995, a small system owned by a small cable
company may elect the form of rate regulation set forth in this section
to justify rates charged prior to the adoption of this rule and to
establish new rates. For purposes of this paragraph, a decision shall
not be deemed final until the operator has exhausted or is time-barred
from pursuing any avenue of appeal, review, or reconsideration.
(11) A system that is eligible to establish its rates in accordance
with the small system cost-of-service approach shall remain eligible
for so long as the system serves no more than 15,000 subscribers. When
a system that has established rates in accordance with the small system
cost-of-service approach exceeds 15,000 subscribers, the system may
maintain its then existing rates. After exceeding the 15,000 subscriber
limit, any further rate adjustments shall not reflect increases in
external costs, inflation or channel additions until the system has
re-established initial permitted rates in accordance with some other
method of rate regulation prescribed in this subpart.
Note: For rules governing small cable operators, see § 76.990 of this
[ 60 FR 35865 , July 12, 1995, as amended at 60 FR 52120 , Oct. 5, 1995;
62 FR 53576 , Oct. 15, 1997; 64 FR 35950 , July 2, 1999; 65 FR 53617 ,
Sept. 5, 2000; 67 FR 13235 , Mar. 21, 2002]
Goto Section: 76.933 | 76.935
Goto Year: 2020 |
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