**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

The City of Pasadena, California ) CSR 5441-R

)

The City of Nashville, Tennessee ) CSR 5373

)

and )

)

The City of Virginia Beach, Virginia ) CSR 5282-R

)

Petitions for Declaratory Ruling on Franchise )

Fee Pass Through Issues )

**MEMORANDUM OPINION AND ORDER**

**Adopted: October 1, 2001 Released: October 4, 2001**

By the Commission: Commissioners Abernathy and Martin issuing a joint
statement.

I.  **INTRODUCTION**

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1.  The City of Pasadena, California ("Pasadena"), the City of
    Nashville, Tennessee ("Nashville") and the City of Virginia Beach,
    Virginia ("Virginia Beach") (the "Cities") have filed separate
    requests with the Commission asking for clarification of whether
    Federal law authorizes the "pass through" of franchise fees to
    subscribers on cable television bills based on gross revenues that
    encompass non-subscriber related revenue, specifically income
    generated by advertising sales and home shopping commissions. The
    Cities also question certain itemization practices of cable
    operators stemming from the pass through of such non-subscriber
    revenue. These requests are supported by the National Association of
    Telecommunications Officers and Advisors ("NATOA") and a number of
    individual municipalities. The requests are opposed by the National
    Cable and Telecommunications Association ("NCTA") and a number of
    individual cable operators. The Commission's Local and State
    Government Advisory Committee ("LSGAC") adopted and filed an
    Advisory Recommendation supporting the grant of the City of
    Pasadena's petition.[^1]

2.  Cable operators have traditionally passed through to subscribers
    franchise fees based on a percentage of gross revenues. Where cable
    rates are subject to rate regulation, this pass through is
    specifically provided for in the Commission's rate rules. Cable
    operators, such as Charter which serves the City of Pasadena, have
    begun to itemize and pass through to subscribers franchise fees
    imposed on non-subscriber revenue sources. This pass through gives
    rise to the instant proceeding.

3.  The Order concludes that franchise fees based on non-subscriber
    revenues can properly be passed through by cable operators to
    subscribers. In addition, the Order finds that cable operators may
    pass through the entire amount of the franchise fee assessed by the
    local franchising authority at any time regardless of whether the
    cable operator passed through the entire amount of the franchise fee
    at the first opportunity, or subsequently opted to do so. Finally,
    the Order determines that cable operators are permitted to itemize
    on a subscriber's monthly bill the full amount assessed by the LFA
    as a franchise fee, including non-subscriber related revenues.

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II. **BACKGROUND**

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4.  Three separate but related provisions of the Communications Act
    ("Act") relating to franchise fees are involved in this proceeding.
    Section 622(b) limits the amount a cable operator may be required to
    pay as a franchise fee under the terms of a franchise.[^2] The term
    \"franchise fee\" includes any tax, fee, or assessment of any kind
    imposed by a franchising authority or other governmental entity on a
    cable operator or cable subscriber, or both, solely because of their
    status as such.[^3] The Act prohibits Federal agencies from
    regulating the amount of the franchise fees paid by a cable operator
    or regulating the use of funds derived from such fees, except as
    provided in Section 622.[^4]

5.  Section 623 directs the Commission to adopt regulations, to be
    applied by local franchise authorities, specifying the process for
    regulating basic tier and equipment rates where effective
    competition is absent. In devising the rules governing basic cable
    service, the Commission was instructed to take into account amounts
    assessed as franchise fees.[^5] In implementing this statutory
    provision, the Commission permitted the total amount of franchise
    fees to be accorded external treatment (*i.e.*, added back to the
    rate after other calculations are performed) at the time the system
    becomes subject to regulation, rather than only the amount of
    additional franchise fees incurred after that date. Section
    76.924(f)(3) of the Commission's rules provides that the costs of
    franchise fees shall be allocated among the equipment and the
    service cost categories in a manner that is most consistent with the
    methodology of assessment of franchise fees by local
    authorities.[^6]

6.  Section 622(c) permits cable operators to identify as a separate
    line item on each regular subscriber bill the amount of the total
    bill assessed to satisfy any franchise fee obligation, stating:

> Each cable operator may identify, consistent with the regulations
> prescribed by the Commission pursuant to section 623, as a separate
> line item on each regular bill of each subscriber, each of the
> following:

(1) The amount of the total bill assessed as a franchise fee and the
    identity of the franchising authority to which the fee is paid.

(2) The amount of the total bill assessed to satisfy any requirements
    imposed on the cable operator by the franchise agreement to support
    public, educational, or governmental channels or the use of such
    channels.

(3) The amount of any other fee, tax, assessment, or charge of any kind
    imposed by any governmental authority on the transaction between the
    operator and the subscriber.[^7]

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7.  The legislative history accompanying Section 622 states that a cable
    operator shall itemize \"only \[the\] direct and verifiable costs\"
    associated with the above-listed categories of costs and should
    \"not include in itemized costs indirect costs.\"[^8] The Conference
    Report adopted Section 622(c), with the specific amendment that
    Section 622(c) be construed consistently with the Commission's rate
    regulations implementing Section 623 of the Cable Act.[^9] In
    implementing this provision, the Commission noted that the purpose
    of Section 622(c) was to assure that there were no regulations
    preventing cable systems from identifying certain governmentally
    imposed costs on subscriber bills.[^10] The Commission held that
    operators are not required by this provision to undertake any such
    itemization, nor does the provision, by itself, preclude the
    itemization of additional costs (whether or not governmentally
    imposed) or otherwise mandate that subscriber bills have any
    particular format or content.[^11] The Commission noted that the
    policy of Section 622(c) was to permit subscribers to be fully
    apprised of the effect of the enumerated governmentally imposed
    costs on their bills.[^12] The Commission believed that the intent
    of the statute would be frustrated if a franchising authority
    imposed burdensome additional itemization restrictions on an
    operator or otherwise attempted to nullify the effect of a Section
    622(c) itemization through local regulations.[^13]

**III. DISCUSSION**

III. 

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8.  We are presented three related questions regarding the appropriate
    regulatory treatment of franchise fees resulting from non-subscriber
    revenue. First, may such revenues, together with subscriber-related
    revenue, be passed through to subscribers in accordance with Section
    623(b)(2)(C)(v) of the Communications Act and Section 76.924(f)(3)
    of the Commission's rules? Second, if franchise fees resulting from
    non-subscriber revenue can be passed through to subscribers, do our
    rules permit the entire fee, or only increases thereto, to be passed
    through to subscribers? Third, if such non-subscriber related
    revenue can appropriately be passed through to subscribers, does
    Section 622 of the Communications Act permit the amount of the total
    franchise fee, including non-subscriber related revenue, to be
    separately itemized on a subscriber's bill?[^14] We address each
    question below.

9.  Pasadena and its supporters, as well as Nashville and Virginia Beach
    in their separate requests, generally ask that the Commission
    determine the legality of passing through franchise fees based on
    gross revenues that include cable advertising revenue and home
    shopping commissions.[^15] The LFAs argue that there is no basis,
    legal or equitable, for allowing a cable operator to add onto and
    increase rates based on non-subscriber revenues that are not
    legitimately connected to the subscriber.[^16] NATOA argues that
    while much of the franchise fee paid by a cable operator is related
    to cable services in general, the pass through of non-subscriber
    related revenue has no relationship to basic cable services.[^17]

10. The LFAs contend that those portions of the franchise fee payment
    derived from non-subscriber sources should not be charged to
    subscribers.[^18] Rather, non-subscriber based fees should be
    allocated to the entities from which the revenues are derived.
    Pasadena suggests that Charter should absorb the franchise fee on
    non-subscriber revenue or incorporate it into the rates that
    advertisers pay for cable advertising time instead of having its
    subscribers subsidize the cost of franchise fees paid to the LFA
    based on advertising and home shopping revenue.[^19] La Canada
    Flintridge argues that a subscriber who does not purchase goods from
    the Home Shopping Network and who does not benefit from increased
    advertising revenue should not be required to pay a franchise fee
    based on revenue from these activities.[^20] LSGAC argues that
    because franchise fees are the rent cable operators pay for the use
    of public rights-of-way, they should not pass through to basic
    subscribers those rental expenses associated with non-subscriber
    services.[^21]

11. NCTA comments that the Commission has made clear that all franchise
    fees, regardless of the source of the revenue, may be passed through
    to subscribers.[^22] Comcast contends that Section 622 confirms that
    Congress intended to provide cable operators with the discretion to
    pass through all franchise fees to subscribers.[^23] Comcast
    believes that neither Section 622(c) nor (f) condition in any way
    the right of a cable operator to pass through or itemize franchise
    fees in their entirety.[^24] Comcast believes that the requirement
    in 622(e) that operators pass through any decrease in franchise fees
    implies that Congress assumed cable operators would assess the
    entire franchise fee on subscribers.[^25]

12. LSGAC argues that a cable operator should not allocate 100% of its
    franchise fee expense to subscribers. It states that the Commission
    should clarify that cable operators do not have discretion under the
    rate regulation rules to pass through expenses related to
    competitive services to the subscribers of monopoly basic
    services.[^26] LSGAC states that Generally Accepted Accounting
    Principles ("GAAP") require that rent, like any other expense of
    doing business, be proportionally allocated among the various
    sources of revenues.[^27] It also states that antitrust law and
    regulatory principles prohibit the use of cross subsidies between
    competitive and monopoly services, and to allow more than a
    proportional pass through is to permit an explicit cross
    subsidy.[^28]

13. In response to LGSAC, Charter contends that the Committee cannot
    contest the fact that operators are permitted to assess their
    customers the cost of this "rent."[^29] Charter states that LGSAC's
    objection in this proceeding is premised on the fact that a cable
    operator's "rental" obligation is often expressed in terms of
    revenue, rather than a flat fee.[^30] Charter argues that it is
    immaterial whether the revenue was generated directly from
    subscribers, through monthly subscriber fees, or indirectly, through
    advertising and home shopping revenues; franchise fees are based on
    all gross revenues and may be passed on to subscribers in their
    entirety.[^31] Charter argues that there is no reason to deny an
    operator the right to pass through to customers its entire franchise
    fee cost, regardless of whether that cost is expressed in terms of a
    flat fee or a gross revenue calculation---the fact that some of the
    franchise fee obligation is derived from non-subscriber revenues
    should have no bearing on the subscriber pass through.[^32]

14. We first address the question of whether, under any circumstances,
    franchise fees based on non-subscriber revenue can be passed through
    to subscribers. The Commission's rate regulation rules provide that
    rates are to be calculated initially without franchise fees
    included. After the proper rates are calculated, franchise fees are
    added on as an "external cost."[^33] The rate rules further provide
    that the "costs of franchise fees shall be allocated among the
    equipment basket and the service cost categories in a manner that is
    most consistent with the methodology of assessment of franchise fees
    by local authorities."[^34] These rules have their origin in Section
    623(b)(2)(C)(v) of the Communications Act, which provides that in
    establishing rate rules the Commission shall take into account "the
    reasonably and properly allocable portion of any amount assessed as
    a franchise fee. . . ."[^35]

15\. There is no dispute among the parties to this proceeding, or in
relevant precedent, that advertising revenue and home shopping
commissions can be considered part of an operator\'s gross revenues for
franchise fee calculation purposes. The Fifth Circuit's decision in
*Dallas v. FCC* makes clear that gross revenues are derived from \"all
money collected\" by the cable operator.[^36] The initial question
presented in this proceeding is whether franchise fees based on such
revenues can properly be passed through to subscribers. We find that
they can. Section 623 does not expressly speak to this question other
than to provide that the Commission shall establish rate regulations
that take into account "the reasonably and properly allocable portion of
*any amount* assessed as a franchise fee. . . ."[^37] In the absence of
a specific statutory provision on this matter, we must examine the
overall structure of this Section and the Act's legislative history.
There is nothing in either the text or legislative history of Section
623 to indicate that Congress intended other than the full amount of the
franchise fee to be reflected in a cable operator's rates, or that a
specific class of franchise fee should be excluded from such rates. If
Congress was concerned about increases in franchise fees, it could have
enacted language limiting the pass through to particular sources of
gross revenue. It did not expressly do so, and there is no legislative
history suggesting that such intent was implied. Indeed, an amendment
made to a companion provision of the Act appears to support the opposite
inference.[^38] We believe that if the cable operator agrees to include
non-subscriber revenue in the definition of gross revenues, the operator
is permitted to pass through any portion of the total franchise fee,
based on that definition, to subscribers.[^39] If the local franchising
authority includes advertising revenue and home shopping commissions in
the definition of gross revenue, Section 623 permits the entire amount
of the franchise fee to be passed through to subscribers.

16\. We are cognizant of the fact that our decision herein can lead to
the result that, as a cable operator's home shopping and advertising
revenues increase and consequently the non-subscriber revenue portion of
the LFAs franchise fee increases, so too will the rates charged to
subscribers. We are nevertheless constrained by our determination that
such pass through is permissible under the Communications Act and our
rules and that this process is consistent with the political
accountability purposes of Section 622. We note that cable operators and
LFAs may, through contractual agreement, modify the definition of gross
revenues during the franchising process, if no pertinent state or local
law otherwise prohibits. If LFAs and cable operators do not want to
burden subscribers with higher franchise fee pass throughs, they may
expressly omit certain items, such as advertising revenue and home
shopping commissions, from the gross revenue definition. If the parties
so limit the amount of gross revenues paid to the LFA to exclude
non-subscriber revenue, there would be no franchise fee based on these
amounts for the cable operator to pass through to subscribers. In such a
case and as advocated by Pasadena and the Cities in this proceeding, the
cable subscriber would be required to pay a franchise fee pass through
based solely on subscriber-related gross revenues.

17\. A related matter, raised in some of the filings, involves the
second question of whether, under the rate rules, in those situations
where there is no dispute that the category of fee involved can be
itemized and passed-through, can the entire fee be itemized and
passed-through or only increases in such fee. According to Pasadena,
Charter has begun billing subscribers for the entire franchise fee
amount sixteen years after the operator signed the franchise agreement.
Pasadena complains that this action does not comport with the
Commission's rate regulation rules because only real changes in external
costs may be passed on to subscribers, not a change due to a different
method of accounting.[^40] Los Angeles County maintains that under
Section 76.933, a franchise authority has the power to review and refund
an increase in pass-through of franchise fees to subscribers upon
determining that the increase exceeds the amount of franchise fees
allocable to the basic tier.[^41]

18\. Charter contends that the fee as specified in the franchise had
been the same since the franchise was enacted, but that nevertheless,
its method of accounting and payment has changed.[^42] Charter maintains
that it developed a methodology for estimating franchise fees based upon
third party revenues from prior quarters, and has subsequently provided
its calculations to the City of Pasadena.[^43] Comcast argues that under
Pasadena's "use it or lose it" approach, an operator would be required
to pass-through the full amount of the franchise fee from the onset of
rate regulation or otherwise forfeit the right to pass it through at a
later date.[^44] Comcast argues that franchise fees form a unique class
of external costs that may be passed through to subscribers at any
time.[^45] NCTA argues that the Commission has determined that franchise
fees, unlike other external costs, are to be recovered separate and
apart from the maximum permitted subscriber rate, making them outside of
the rate regulation formula and always subject to external cost
pass-through.[^46] NCTA asserts that there is nothing in the rules that
prohibits a cable operator that has elected not to recover all of the
franchise fee payments to later decide to exercise its statutory and
regulatory right to pass the entirety of its payments through and to
itemize them on the subscriber's bill.[^47]

19\. We do not agree with the arguments raised by Pasadena and the other
local franchising authorities that only fee increases are eligible for
pass-through under the Commission's rate rules. It does not matter
whether Charter's action in passing through increased franchise fees can
be considered a "change" for the purposes of Section 76.922 because, as
discussed above, the Commission's rate regulation rules permit cable
operators to pass through franchise fees in their entirety as external
costs. Indeed, prior to the enactment of the 1992 Cable Act, Section
622(c) expressly limited a cable operator's franchise fee pass through
to fee increases and provided that "a cable operator may pass through to
subscribers the amount of any increase in a franchise fee, unless the
franchising authority demonstrates that the rate structure specified in
the franchise reflects all costs of franchise fees and so notifies the
cable operator in writing."[^48] This version of Section 622(c) was
repealed by the 1992 Cable Act and replaced with the current version of
Section 622(c) that permits the cable operator to itemize "the amount of
the total bill assessed as a franchise fee. . . ."[^49] The apparent
intent of this amendment was to enable cable operators to pass through
to subscribers the entire amount of the franchise fee assessed by the
LFA at any time regardless of whether the cable operator passed through
the entire amount of the franchise fee at the first opportunity, or
subsequently opted to do so.

20\. Nor do we find the Commission rule provisions cited by the Cities
to be persuasive evidence to the contrary. Section 76.922(e)(2)(ii)(A)
provides that cable operators may project increases in related costs to
the extent they are reasonably certain and reasonably quantifiable.[^50]
Section 76.933(g)(5) provides that an LFA regulating the basic service
tier may review and order refund of rate increases based on increased
franchise fees if such increased rates exceed the increased franchise
fee allocable to the basic tier.[^51] These rule provisions merely
acknowledge the fact that franchise fees can increase over time. The
provisions do not, however, stand for the proposition, as asserted by
the Cities, that only increases in franchise fees are permitted to be
passed through to subscribers, or that cable operators that have elected
not to pass through the entire amount of a franchise fee are prohibited
from subsequently so doing.

21\. We now move to the related issue of whether Section 622 permits a
cable operator to itemize the full amount of the franchise fee,
including non-subscriber related revenue, on a subscriber's bill. We
find that it does. Pasadena and the LFAs generally argue that Charter
and other cable operators misrepresent the rate of the franchise fee on
subscribers' bills when they itemize and add to subscriber bills fees on
non-subscriber revenues. Pasadena maintains that the change in
subscriber billing practices undermines subscribers' expectations that
the franchise fees they pay will be directly related to the dollar
amount of the monthly cable services that they purchase from the cable
operator.[^52]

22\. In opposition, Charter maintains that by itemizing the full amount
of the franchise fee, subscribers are fully informed of the scope of the
franchise fee assessments, which was the purpose intended by Congress in
enacting Section 622.[^53] Charter argues that line itemization prevents
franchising authorities from evading political accountability.[^54] NCTA
argues that the function of the pass through is to inform subscribers as
to what portion of their cable bill goes to the government.[^55] NCTA
submits that LFAs are preempted from determining the extent to which
franchise fees may be identified as a separate line item on monthly
bills by Section 622.[^56]

23\. Fee itemization under Section 622, as is reflected in the
legislative history quoted above, is intended to inform subscribers that
local elected officials are imposing franchise fees so that there will
be a measure of political accountability for fees and fee
increases.[^57] Section 622 expressly permits the itemization of "the
amount of the total bill assessed as a franchise fee"[^58] and further
provides that the operator may "designate that portion of a subscriber's
bill attributable to the franchise fee as a separate item on the
bill."[^59] We have already concluded that Section 623 permits a cable
operator to pass through, as an external cost, the total franchise fee,
including non-subscriber related franchise fees, in its regulated rates.
The itemization provisions of Section 622 and the rate provisions of
Section 623 are intended to work in tandem so that the amount of
franchise fee added as an external cost is the same as the amount
itemized on a subscriber's bill. Permitting cable operators to itemize
on a subscriber's monthly bill the full amount assessed by the LFA,
including non-subscriber related revenue, best effectuates this intent.

24\. In this proceeding, we have provided clarification regarding the
appropriate allocation of non-subscriber related franchise fees. The
parties also have raised a variety of peripheral franchise fee matters
in their pleadings.[^60] We believe that these other matters are not
appropriately addressed in the context of this order and are more
appropriately resolved in proceedings related to the specific factual
circumstances in which they arise.

**IV. ORDERING CLAUSE**

25\. Accordingly, **IT IS ORDERED** that the requests of the Cities
**ARE DENIED** to the extent indicated herein.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

**APPENDIX A**

######### COMMENTS IN SUPPORT OF PASADENA

1.  Azusa, Duarte, and West Covina, CA (jointly)

2.  Burbank, CA

3.  Calabasas, CA

4.  Glendale, CA

5.  La Canada Flintridge, CA

6.  Los Angeles County, CA

7.  Milpitas, CA

8.  Monterey Park, CA

9.  Temple City, CA

10. The Communications Support Group (on behalf of unnamed California
    municipalities)

11. Lexington Fayette Urban County Government, KY

12. Michigan Coalition to Protect Public Rights of Way ("Protec")

13. N. Charleston and Charleston County, NC

14. Plano, Texas

15. Texas Coalition of Cities on Franchised Utility Issues; Fairfax
    County, VA; Montgomery County, MD; St. Louis, MO; and National
    Association of Telecommunications Officers and Advisors ("NATOA")
    (filing jointly)

16. Bowling Green, KY

17. The Local and State Government Advisory Committee ("LSGAC")

    **COMMENTS IN OPPOSITION TO PASADENA**

    1.  Charter

    2.  Comcast --Cox (filing jointly)

    3.  California Cable Television Association ("CCTA")

    4.  National Cable Television Association ("NCTA")

**Separate Statement of Commissioners Kevin Martin and Kathleen
Abernathy**

*Re: The City of Pasadena, California, the City of Nashville, Tennessee,
and the City of Virginia Beach, Virginia, Petitions for Declaratory
Ruling on Franchise Fee Pass Through Issues*

We agree with today's Order that the Communications Act does not
prohibit cable operators from itemizing and passing through to their
cable television subscribers the full amount of franchise fees, even
when those fees are based partially on revenues not related to the
subscribers' services. We write separately to emphasize two points.

First, nothing in today's Order prevents local franchising authorities
("LFAs") and cable operators from reaching an agreement through contract
to change how franchise fees are calculated or passed through. As the
Order explains, "If LFAs and cable operators do not want to burden
subscribers with higher franchise fee pass throughs, they may expressly
omit certain items, such as advertising revenue and home shopping
commissions, from the gross revenue definition." *Order* at ¶17.

Second, nothing in today's Order authorizes a cable operator to collect
more money from subscribers as a franchise fee pass-through than the
operator ultimately pays as a franchise fee to the LFAs. Thus, if a
cable operator unintentionally over-collects from subscribers---due, for
instance, to a mis-calculation or estimation of gross revenues---the
cable operator must take some action to correct the discrepancy.

With the above two concerns addressed, we support today's Order.

[^1]: Appendix A lists the specific parties filing in support of, or in
    opposition to, the Pasadena request. Pasadena has informed
    Commission staff that several local governments informally expressed
    support for its petition, including: Santa Barbara, CA; Hidden
    Hills, CA; Malibu, CA; Agoura Hills, CA; Thousand Oaks, CA;
    Riverside, CA; Norco, CA; Tallahassee, FL; and Albuquerque, NM.
    Pasadena *ex parte* letter of April 11, 2000. We refer to city
    commenters as local franchising authorities or "LFAs" where
    applicable. Intermedia Partners Southeast (\"Intermedia\") filed an
    Opposition to the request filed by the City of Nashville.
    Cox-Comcast filed an Opposition to the request filed by the City of
    Virginia Beach.

[^2]: 47 U.S.C. § 542(b).

[^3]: 47 U.S.C. § 542(g)(1).

[^4]: 47 U.S.C. § 542(i).

[^5]: 47 U.S.C. § 543(b)(2)(C)(v).

[^6]: 47 C.F.R. § 76.924(f)(3). The Commission has stated that:

    > \[c\]able operators will be required to identify certain locally
    > incurred costs such as franchise fees and local taxes at the
    > franchise level. Instead of mandating that other costs be
    > identified at any level, we require that cable operators, for
    > purposes of calculating external costs and costs in a
    > cost-of-service showing, identify costs at the level at which they
    > identified the category of costs for accounting purposes on April
    > 3, 1993. . . . Because franchise fee determinations may be
    > revenue, tier, or subscriber sensitive, we require that franchise
    > fees be allocated between tiers and subscribers in a manner most
    > consistent with the way the franchise fee is assessed by franchise
    > authorities. We believe that this overall approach will minimize
    > rate impacts that could otherwise occur if we adopt more
    > definitive requirements at this time.

    *Implementation of Sections of the Cable Television Consumer
    Protection and Competition Act of 1992: Rate Regulation,* Report and
    Order and Further Notice of Proposed Rulemaking, 8 FCC Rcd 5631,
    5976-7 (1993)(footnote omitted)("*Rate Order*"); s*ee also
    Implementation of Sections of the Cable Television Consumer
    Protection and Competition Act of 1992: Rate Regulation and Adoption
    of a Uniform Accounting System for Provision of Regulated Cable
    Service,* Second Report and Order, First Order on Reconsideration
    and Notice of Proposed Rulemaking, 11 FCC Rcd 2220, 2264 (1996); 47
    C.F.R.

    § 76.924(e)(4).

[^7]: 47 U.S.C. § 542(c). Section 622(f) states that "\[a\] cable
    operator may designate that portion of a subscriber's bill
    attributable to the franchise fee as a separate item on the bill."
    47 U.S.C. § 542(f). Section 622(c) of the Act, as adopted in 1984,
    had a provision discussing cable franchise fee pass through. This
    section stated that "a cable operator may pass through to
    subscribers the amount of any increase in a franchise fee, unless
    the franchising authority demonstrates that the rate structure
    specified in the franchise reflects all costs of franchise fees and
    so notifies the cable operator in writing.\" *See* former Section
    622(c), *repealed by* The Cable Television Consumer Protection and
    Competition Act of 1992, Pub. L. No. 102-385, 106 Stat. 1460
    (1992).^?^ This version of Section 622(c) was repealed by the 1992
    Cable Act and replaced with a new provision, as quoted in paragraph
    5 above, that permits the itemization of the total fee, rather than
    just fee increases.

[^8]: *See* H.R. Rep. 102-628, 102d Cong., 2d Sess. at 86 (1992).

[^9]: ^?^ *See* H.R. Conf. Rep. No. 862, 102d Cong., 2d Sess. at 84
    (1992).

[^10]: *See Rate Order*, 8 FCC Rcd at 5967.

[^11]: *Id.* Section 622(c) affects the format, not the content of
    subscriber bills. It is intended to disclose costs attributable to
    governmental authorities and not to directly affect the amount of
    these costs. *Id.* at 5973.

[^12]: *Id.* at 5973.

[^13]: *Id.* The Commission cited the following statement of Senator
    Lott introducing what became the final version of Section 622(c) as
    reflecting the objective of this provision:

    I would like to offer my amendment . . . dealing with subscriber
    bill itemization, to give the cable companies an opportunity to
    itemize these so-called hidden costs to explain to people what is
    involved in the charges so they will know it is not just the cable
    company jacking up the prices. . . . The fact is sometimes the rates
    have gone up because of hidden, unidentified increases in fees or
    taxes which the cable \[company\] has to pay and . . . passes on to
    the consumer. . . "

    *Id*. at 5967, *quoting* 138 Cong. Rec. S569 (Jan. 29, 1992).

[^14]: While we recognize that the subscriber pass-through amount on
    franchise fees is limited by the 5% cap set forth in Section 622(b),
    we do not reach the issue of whether this provision has been
    breached by any cable operator. We also note that the Commission has
    not been asked to interpret the statutory definitions of "franchise
    fee" and "gross revenues" in this case.

[^15]: Petition at 16 and Nashville and Virginia Beach, generally; *see
    also* Burbank Comment at 1; Calabasas Comment at 1; Glendale Comment
    at 1; La Canada Flintridge Comments at 1; Los Angeles Comments at 2;
    Milpitas Comments at 1; Monterey Park Comments at 1; North
    Charleston Comments at 1; Plano Comments at 2; Rutan & Tucker
    Comments at 3; Temple City at 1.

[^16]: Los Angeles County Comments at 2; North Charleston Comments at 7.

[^17]: NATOA Reply at 2.

[^18]: Glendale Comments at 3; Los Angeles Comments at 6.

[^19]: Pasadena Reply at 9.

[^20]: La Canada Flintridge Comments at 2.

[^21]: *See* LSGAC Advisory Recommendation Number 21 at point 4 (*ex
    parte* letter filed May 3, 2000).

[^22]: NCTA Comments at 7, *citing* Public Notice, Cable Television Rate
    Regulation Questions and Answers on Form 393, Question 31(rel. May
    13, 1993) ("the entire amount of franchise fees may be passed
    through to subscribers").

[^23]: Joint Comments of Comcast and CoxCom at 3.

[^24]: *Id.* at 4.

[^25]: *Id.*

[^26]: *See* LSGAC Advisory Recommendation Number 21 at point 5.

[^27]: *Id.*

[^28]: *Id.*

[^29]: Charter's Response to LSGAC's Recommendation at 3.

[^30]: *Id.*

[^31]: *Id.*

[^32]: *Id.*

[^33]: *Implementation of Sections of the Cable Television and Consumer
    Protection and Competition Act of 1992: Rate Regulation,* First
    Order on Reconsideration, Second Report and Order, and Third Notice
    of Proposed Rulemaking, 9 FCC Rcd 1164, 1209 (1993).

[^34]: 47 C.F.R. § 76.924(f)(3).

[^35]: 47 U.S.C. § 543(b)(2)(C)(v).

[^36]: The Court provides a litany of references supporting its holding
    stating, *inter alia,* that \"gross revenues is defined by Black\'s
    \[Law Dictionary\] as receipts of a business before deduction for
    any purpose except those items specifically exempted\" and \"the
    term \'all gross revenue\'. . . is to be construed in the broadest
    sense, i.e. all money received.\" *Dallas v. FCC,* 118 F.3d 393, 395
    (5^th^ Cir. 1997).

[^37]: 47 U.S.C. § 543(b)(2)(C)(v) (emphasis added).

[^38]: *See infra* at ¶ 19 (discussing the 1992 Cable Act amendment to
    Section 622(c) of the Communications Act).

[^39]: One city, during the course of the *Dallas v. FCC* franchise fee
    litigation, seemingly admitted that a cable operator can pass
    through the entire franchise fee to subscribers. *See Petition for
    Review of an Order of the Federal Communications Commission*, Reply
    Brief of Petitioner, City of Laredo, Texas at 12 (the cable operator
    has an "admittedly understandable desire to pass through all the
    effects of an increased expense in its retail price to
    subscribers---something that the Cable Act and the FCC rate rules
    allow (but do not require) the operator to do.").

[^40]: Petition at 13, *citing* 47 C.F.R. § 76.922(e)(2)(ii)(A)
    ("Operators may project for increases in franchise related costs to
    the extent that they are reasonably certain and reasonably
    quantifiable.").

[^41]: Los Angeles Comments at 5, *citing* 47 C.F.R. §76.933. Section
    76.933 permits a franchising authority to review basic cable rates
    and equipment costs.

[^42]: Charter Comments at 15.

[^43]: *Id.* at 4.

[^44]: Joint Comments of Comcast and CoxCom at 9.

[^45]: *Id.* at 8.

[^46]: NCTA Comments at 6.

[^47]: *Id*.

[^48]: *See* former Section 622(c), *repealed by* The Cable Television
    Consumer Protection and Competition Act of 1992, Pub. L. No.
    102-385, 106 Stat. 1460 (1992).

[^49]: 47 U.S.C. § 542(c).

[^50]: 47 C.F.R. § 76.922(e)(2)(ii)(A).

[^51]: 47 C.F.R. § 76.933(g)(5).

[^52]: Petition at 33.

[^53]: Charter Comments at 7.

[^54]: *Id.* at 11.

[^55]: NCTA Comments at 11.

[^56]: *Id.* at 12.

[^57]: *See supra* n.13 and accompanying text (Statement of Senator
    Lott).

[^58]: 47 U.S.C. § 542(c).

[^59]: 47 U.S.C. § 542(f).

[^60]: For example, Los Angeles maintains that Charter should provide a
    detailed projection of non-cable revenues and a description of that
    accounting process. Los Angeles Comments at 5. This, and similar
    issues, are more suitable for resolution in the context of a local
    rate proceeding.