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$//MO&O, United Artists Cable of Baltimore, FCC 96-188//$
$/47 U.S.C.  542, Franchise Fees/$
                                                                           FCC 96-188
 Before the
                                   FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of:                    )
                                     )
UNITED ARTISTS CABLE                 )
OF BALTIMORE                         )
                                     )
Petitions for Reconsideration of     )
Order Issued by the Chief, Cable     )
Services Bureau, in United Artist    )
Cable of Baltimore's Appeal of Local )
Rate Order Adopted by the City of    )
Baltimore, Maryland                  )
                       MEMORANDUM OPINION AND ORDER
Adopted:  April 24, 1996                            Released:  April 26, 1996
By the Commission:
I.     INTRODUCTION
       1.      On May 8, 1995, several local franchising authorities and associations
representing local franchising authorities ("Petitioners") separately filed petitions with the
Commission, seeking reconsideration of the Cable Services Bureau's ("the Bureau") order in
United Artists Cable of Baltimore (Baltimore, Maryland), 10 FCC Rcd 7250 (1995) ("Bureau
Order").  Although petitions seeking reconsideration of final actions taken pursuant to
delegated authority may be acted upon by the designated authority, pursuant to Section
1.106(a)(1) of the Commission's rules, this matter has been referred by the Cable Services
Bureau to us for review.  Petitioners asked the Bureau to reconsider and to vacate only
paragraphs 7 and 8 of the Bureau's April 6, 1995 order, where the Bureau, acting pursuant to
delegated authority, issued a ruling regarding franchise fees.  Under the Cable Act, local
franchising authorities may assess the cable operator a franchise fee.  The Cable Act
authorizes cable operators to pass through the franchise fee imposed by local franchising
authorities to subscribers and to itemize the fee on subscribers' cable bills.  Section 622(b) of
the Cable Act states, in relevant part, "[f]or any twelve-month period, the franchise fees paid
by a cable operator with respect to any cable system shall not exceed 5 percent of such cable
operator's gross revenues derived in such period from the operation of the cable system."  In
its order, the Bureau concluded that, based upon its interpretation of Section 622(b), the
franchise fees a cable operator collects from its subscribers are not part of a cable operator's
"gross revenues" for the purpose of determining the operator's franchise fee obligation to the
local franchising authority.  Petitioners contend that this holding is incorrect on the merits and
that the Bureau should have declined to rule on this franchise fee issue.  After careful review
of all the authorities, arguments, and comments submitted by the parties on the issues raised
in this proceeding, for the reasons set forth below, we deny the petitions for reconsideration
and affirm the Bureau Order.
II.    THE PARTIES
       2.      Separate petitions for reconsideration were filed on May 8, 1995 by (1) the
City of Baltimore, Maryland, et al. ("Baltimore Petitioners"); (2) the City of Los Angeles,
California, et al. ("Los Angeles Petitioners"); (3) the City of Dallas, Texas, et al. ("Dallas
Petitioners"); and (4) Hillsborough County, Florida ("Hillsborough Petitioner").  On May 22,
1995, separate oppositions to the petitions for reconsideration were filed by (1) United Artists
Cable of Baltimore, (2) the Cable Telecommunications Association ("CATA"), (3) the
National Cable Television Association, Inc. ("NCTA"), and (4) M.L. Media Partners, L.P.,
trading as MultiVision Cable TV.  Replies to the oppositions were filed by Dallas Petitioners
on May 30, 1995, and by Baltimore and Hillsborough Petitioners on June 1, 1995.
       3.      On June 5, 1995, the cities of Cape Coral, Jupiter, Lantana, Miami Beach,
Village of Miami Shores, Miramar, North Miami, South Miami, Tamarac, and West Palm
Beach, all franchising authorities in the State of Florida, jointly filed a "Motion to Stay" the
effectiveness of the Bureau's April 6, 1995 order.  On May 5, 1995, the law firm of Duncan,
Weinberg, Miller & Pembroke, P.C., on behalf of unnamed municipal cable television
franchising authorities, filed a "Petition for Special Relief," seeking resolution of the same
issues raised by Petitioners here.  Because we are reviewing the merits of the petitions for
reconsideration, the request for stay and the request for special relief have been rendered
moot.
       4.      This rate appeal proceeding has been treated, for ex parte purposes, as a "non-
restricted" proceeding and subject to the "permit but disclose" requirements under Section
1.1206 of the Commission's rules in order to provide a broader range of views and
participation on the franchise fee issue and to provide a fuller record upon which a final
decision may be made.  A list of the parties that submitted written comments is contained in
Appendix 2.
       5.      We have carefully considered the issues and arguments raised in the written
comments, as well as those in the request for stay and request for special relief.  We note that
these issues and arguments are subsumed in the issues and arguments raised by petitioners in
their petitions or by respondents in their oppositions.  Therefore, in the interest of
administrative efficiency, we make specific reference in this order only to the issues and
arguments raised by petitioners and those raised by respondents.  We will refer to all the
parties seeking reconsideration of the Bureau Order as "Petitioners," and those seeking
affirmance of the Bureau's appeal order as "Respondents."
III.   BACKGROUND
       6.      Prior to the passage of the Cable Communications Policy Act of 1984 ("1984
Cable Act"), the Communications Act did not have occasion to speak directly to regulation of
cable television and the permissible level of franchise fees.  Before enactment of the 1984
Cable Act, the Commission exercised authority over the imposition of franchise fees pursuant
to 47 C.F.R.  76.31.  Section 76.31 limited franchise fees to three percent of an operator's
"gross subscriber revenues," with the potential of raising the limit to five percent upon a
showing of reasonableness.  Since Congress in 1984 imposed a uniform, federal standard on
the level of franchise fees in subsection (b) of Section 622, the Commission eliminated
Section 76.31 from its rules, allowing franchising authorities to charge operators up to the
maximum permitted under the 1984 Cable Act.  Section 622(b) of the 1984 Cable Act
provides that an annual franchise fee may not exceed five percent of a cable operator's "gross
revenues" derived from the operation of the cable system.  A franchise fee is defined by
Section 622(g)(1) of the 1984 Cable Act to include "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."
     7.    In 1992, Congress enacted the Cable Television Consumer Protection and
Competition Act ("1992 Cable Act"), which, among other things, amended the franchise fee
provision (i.e., Section 622) of the 1984 Cable Act.  Section 622(c) of the 1984 Cable Act
was amended to permit cable operators to identify, in accordance with standards prescribed by
the Commission, as a separate line item on each bill of each subscriber:  (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; and (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.  The 1992 Cable Act did not amend the other
subsections of Section 622, including subsection (b) -- the provision setting the limit on
franchise fees.
IV.  THE BUREAU'S ORDER
     8.     On July 29, 1994, United Artists Cable of Baltimore ("UACB"), the
franchisee, filed an appeal of a local cable rate order adopted on June 29, 1994, by its
franchising authority, the City of Baltimore, Maryland ("the City").  The City's rate order
established a new regulated rate schedule for UACB's basic service tier rates and associated
equipment and required UACB to implement certain rate reductions and to issue refunds to its
subscribers, dating back to September 1, 1993.  In its appeal, UACB raised three issues, only
one of which was raised in the petitions for reconsideration.  In relevant part, UACB
challenged the provision in the City's rate order stating that UACB was unlawfully itemizing
franchise fees on subscriber bills.  UACB argued that it was properly itemizing franchise fees
and that it correctly excluded franchise fees from gross revenues.  The Cable Act authorizes
cable operators to pass through franchise fees imposed by local franchising authorities to
subscribers and to itemize such fees on subscribers' cable bills.  The City concluded,
however, that UACB's "method" of itemizing franchise fees as a separate line item on
UACB's bills resulted in an under-calculation of UACB's franchise fee obligation to the City
(the franchise agreement between the City and UACB calls for a franchise fee of five percent
of UACB's "gross revenues.").  The City argued that UACB should not have added the
franchise fee to other cable charges.  Rather, the City continues, the franchise fee should be a
percentage of the total amount collected from subscribers.  In essence, the City asserted that it
should be able to assess from UACB as part of UACB's franchise fee obligation to the City,
not only five percent of the total amount that subscribers pay for cable services, but also an
additional five percent of the five percent franchise fee UACB collects from subscribers.
     9.    Upon examination of the relevant statutory section in question, Section 622(b),
the Bureau concluded that the franchise fees that a cable operator collects from its subscribers
are not part of an operator's "gross revenues" for purposes of calculating the total amount of
franchise fees owed by the operator to its local franchising authority.  The Bureau reached
this conclusion based on the language in Section 622(b) of the Cable Act which limits the
amount of franchise fees paid by a cable operator to five percent of its "gross revenues,"
which, under that section, consist of only those revenues derived "from the operation of the
cable system."  The Bureau concluded that because franchise fees are a charge levied by the
franchising authority, rather than revenues derived from the operation of the cable system, the
franchise fee a cable operator collects from subscribers should not be included in calculating
an operator's "gross revenues."  Furthermore, given the statutory franchise fee caps, the
Bureau determined that if the franchise fee itself was subject to a franchise fee, as the City
urged, and if the franchise agreement required a five percent assessment (as here), a cable
operator could end up paying more than the maximum franchise fee permitted under the
Cable Act.  Accordingly, the Bureau remanded this franchise fee calculation issue back to the
City for further proceedings consistent with the Bureau's findings.
V.   GROSS REVENUES AND FRANCHISE FEES
     A.    Contentions of the Parties
     10.   In its April 6, 1995 appeal order, the Bureau held that, under Section 622(b) of
the Cable Act, a cable operator's "gross revenues" do not include the franchise fees it collects
from subscribers.  Petitioners contend that this holding is incorrect on the merits and will
result in the underpayment of franchise fees to local franchising authorities.  Specifically,
Petitioners argue that the language of Section 622(b) and the legislative history to the 1992
Cable Act support their method of calculating franchise fees.  They assert that nothing in the
language of Section 622(b) states that amounts received from subscribers for franchise fees
should be deducted from "gross revenues."  They rely on a statement contained in the House
Report to the 1992 Cable Act which addresses the franchise fee itemization provision, Section
622(c) of the 1992 Cable Act.  It states:
     For example, a cable operator might itemize pursuant to [Section 622(c)] a $1.50 per
     month charge to account for a five percent franchise fee obligation.  If a cable
     operator charges $30 per month for basic cable service, the $1.50 itemized charge
shall      be included in such amount; the cable operator cannot provide the cable subscriber a
     basic bill for $28.50, with a $1.50 additional charge added as a franchise fee.  Thus,
     the bill would show a total charge of $30, but the cable operator would have the right
     to include in a legend a statement that the $30 basic cable service rate includes a five
     percent franchise fee, which amounts to $1.50.
Petitioners assert that this example illustrates that "if the total amount paid by a subscriber is
$30.00, the maximum franchise fee is 5% of that figure, or $1.50."  This example, they
argue, suggests that the amount paid with respect to franchise fees is included in the
operator's "gross revenues."
     11.   Petitioners further argue that the Bureau's decision is contrary to analogous
court cases.  Petitioners rely heavily on Stiehler v. Public Service Comm'n of the District of
Columbia.  According to Petitioners, the District of Columbia Court of Appeals in Stiehler
considered the "proper way" to calculate a 9.7% tax imposed on the "gross receipts" of public
utilities and telephone companies.  Petitioners state that "the court interpreted the term `gross
receipts' to `include all money collected,' including money collected to pay the tax," which
Petitioners assert is consistent with their own conclusion.  They also rely on State Tax
Comm'n v. Quebedeaux Chevrolet, which involved a tax for the
privilege of engaging in business measured by the taxpayer's "gross income" or "gross
proceeds."  In that case, the Arizona Supreme Court considered whether an automobile dealer
could exclude from its "gross proceeds" and "gross income" the amount of the tax which it
passed through and stated separately on its bills to its customers.  The court held that the
terms "gross income" and "gross proceeds" included "any and all sums received, regardless of
whether or not the retailer separately bill[ed] to his customers the privilege tax he [passed] on
to them, and whether or not he segregate[d] the amounts thus received."  Petitioners argue
that Stiehler and Quebedeaux support their contention that just because a cable operator may
pass the cost of franchise fees through to its subscribers, it does not mean that operators can
exclude the franchise fee it receives from subscribers from its "gross revenues."
     12.   Separately, Dallas and Hillsborough Petitioners argue that the Bureau Order is
inconsistent with "accepted accounting standards" regarding the nature of a franchise fee.
Petitioners cite to the Financial Accounting Standard Board's Statement of Financial
Accounting Standards No. 51 ("FAS 51"), which, they state, recognizes that "cable franchise
fees are costs no different than the general manager's salary, marketing costs, and
programming costs."  Therefore, they assert, franchise fees are an "expense, no more
deductible from `gross revenues' than are other expenses."
     13.   Respondents contend that the Bureau reasonably determined that amounts
received from customers for franchise fees are not included in the definition of "gross
revenues" under the Cable Act.  Respondents allege that Petitioners are seeking to evade the
statutory cap in Section 622(b) by including the franchise fee in the calculation of "gross
revenues."  Respondents assert that Petitioners' "accounting mechanism" "would require
cable operators to pay a franchise fee on the franchise fee" collected from subscribers.
Respondents contend that, contrary to petitioners' assertion, the plain language in Section
622(b) "strongly" supports the Bureau's conclusion.  Respondents further assert that, if
Congress had intended for franchise fees to be included in "gross revenues," Congress
certainly could have so provided, but Congress instead adopted a specific and narrow
definition.  Respondents argue, therefore, that Petitioners' reliance on the legislative history
is not appropriate in light of the plain language of the Act.  Moreover, Respondents state,
the legislative history relied upon by Petitioners was not even intended to address the
franchise fee dispute at issue in this case and Petitioners provide no evidence to  indicate that
the statement in the 1992 House Report was intended to interpret "gross revenues."  Finally,
Respondents argue that the court cases and accounting standards relied upon by Petitioners
are misplaced and "simply irrelevant" and that, in fact, a court decision exists that supports
the Bureau's conclusion.
     B.    Discussion
     14.   Contrary to Petitioner's assertion, we find that the statutory provisions and
legislative history of both the 1984 and 1992 Cable Acts do not state that the franchise fees
operators collect from subscribers are to be included in "gross revenues," nor do they state
how franchise fees are to be calculated.   We agree with Respondents that the Bureau
correctly held that the franchise fees cable operators collect from subscribers are not included
in the operator's "gross revenues."  We find that the Bureau's holding is the most reasonable
and correct interpretation of the statutory language at issue that is consistent with
Congressional intent.  Nothing in the statutory provisions of the Cable Act states that
franchise fees are to be included in calculating an operator's "gross revenues."
     15.   In the 1984 Cable Act, Congress stated that the "gross revenues" upon which
franchise fees are to be calculated include only those revenues an operator had "derived . . .
from the operation of the cable system."  The statute does not expressly address whether
franchise fees fall within the scope of this definition.  We believe the most reasonable
interpretation is that they do not.  Congress defined franchise fees as "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."  These
definitions are unchanged in the 1992 Cable Act.  Because Congress included taxes, fees and
assessments imposed on cable subscribers, as well as those imposed by the local franchising
authority on operators, in the definition of franchise fees, we believe that the most reasonable
interpretation is that Congress did not view franchise fees as part of an operator's gross
revenues derived from the operation of the cable system, but instead as a separately collected
sum, for which either operators or subscribers could be liable.
     16.   In footnote 1 of their Petition for Reconsideration, Baltimore Petitioners give
the following example to support their approach to the franchise fee calculation:
     Assume that the sum of an operator s maximum permitted rates for a
     subscriber, exclusive of franchise fees is $32.  The Bureau would add a
     franchise fee of $1.60 (5% of $32) to this amount for a total charge of $33.60.
     This method of calculation, however, means that the franchise fee is less than
     5% of the total amount received from the subscriber.  ($1.60 is only 4.76% of
     $33.60.)  Under the City s [Baltimore s]  method, the total bill should be
     $33.68, representing the same $32 of maximum permitted rates plus a franchise
     fee of $1.68, which is 5% of the gross revenues of $33.68.  In this example,
     the Bureau s method results in an underpayment by the cable operator of $.08
     per subscriber.
In Petitioners  example the franchise fee is $1.68, which is 5 percent of the total charge of
$33.68.  However, this amount is 5.5 percent of the subscriber's total bill, excluding the
franchise fee, of $32.  This method of calculation amounts to a 5 percent franchise fee being
charged on top of the 5 percent franchise fee, a result not supported by the statute.
     17.    We further note that Congress has exhibited a strong desire to prevent
attempts by local franchising authorities to evade the statutory five percent cap on franchise
fees.  During floor debate on the 1984 bill, Senator Goldwater pointed out that "the overriding
purpose of the 5 percent fee cap was to prevent local governments from taxing private
operators to death as a means of raising local revenues for other concerns.  This would be
discriminatory and would place the private operator/owners at a disadvantage with respect to
their competitors."  As Senator Goldwater stated, "[i]t was the intent of the committee, in
crafting this definition [of "franchise fees"], to prevent cities from circumventing the 5
percent cap on franchise fees as set out in the bill by establishing a new sort of tax on cable
operators or subscribers."   We find that to allow for a "franchise fee on franchise fee"
effect, as Petitioner's desire, would be contrary to this Congressional intent that the 5% cap
be strictly applied.
     18.   With respect to the court cases cited by Petitioners, we note, first, that no case
has been uncovered deciding what Congress meant in using the term "gross revenues" in
Section 622(b) of the Cable Act.  Like Petitioners and Respondents, we are aware of only one
federal court case, Kansas City Cable Partners v. City of Kansas, that addresses a similar
issue.  In this unpublished decision, the District Court, in interpreting a contractual term in a
local franchise agreement (and not, as here, the construction of a federal statute), rejected the
local franchising authority's argument that franchise fees are part of the cost of serving
subscribers and that therefore such fees should be included in the operator's "gross subscriber
revenues."  The court found that because the definition of "gross subscriber revenues" in the
franchise agreement did not specifically include amounts paid for franchise fees, those fees
cannot be assumed to have been included in the operator's revenue base.  However, the
decision seeks to interpret a contractual term in a local franchise agreement rather than the
federal statute at issue here.   Further, because our decision rests on construction of a federal
statute, we are not persuaded by court decisions cited by Petitioners (such as Stiehler and
Quebedeaux) which deal with irrelevant interpretations of state or local laws which are wholly
unrelated to the issue before the Commission.  Not only do those cases have no precedential
value in this proceeding, but also, as Respondent UACB points out, the "taxes at issue" in
those cases applied to "gross receipts," "gross income," or "gross proceeds," which the courts
interpreted to include "all money collected" or "any and all sums received."  We agree with
UACB that "all money collected" is a different, and larger, amount than "gross revenues"
"derived . . . from the operation of the cable system" in Section 622(b) of the Act.  We find
no merit in Petitioners' attempt to support their arguments with the cited cases and, instead,
find that the Bureau Order reflects the correct interpretation of the federal statutory language
at issue.
     19.    We are not persuaded by Petitioners' argument that the legislative history
regarding the franchise fee itemization provision of the 1992 Cable Act (i.e., Section 622(c))
is dispositive of or even necessarily relevant to the issue.  Petitioners provide no evidence that
the statements in the 1992 House Report addressing subsection (c) of Section 622 were
intended to address or change the construction of the statutory language regarding gross
revenues contained in subsection (b) of Section 622.  We agree with Respondents that the
legislative history from the 1992 Cable Act relied upon by Petitioners simply illustrates the
proper format of subscribers' cable bills, and does not seek to define differently the term
"gross revenues" or prescribe a particular method of calculating franchise fees.  The purpose
of Section 622(c) is to permit the identification of the source of the franchise fee, i.e., the
local franchising authority, not the cable operator.  As Senator Lott stated, in introducing the
final version of Section 622(c) as an amendment to the Senate bill:
     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 consumers . . . .[]
Thus, in light of Senator Lott's statement, we concluded in the Report and Order "that the
purpose of Section 622(c) is to ensure that cable operators are not prevented, by a franchise
agreement or otherwise, from itemizing the specific costs enumerated in that section."
Section 622(c) was intended to prevent subscriber confusion as to what is or is not part of
their bill for cable services and is not meant to dictate how the actual numbers at issue should
be calculated.  In any event, even if the statements in the 1992 House Report were relevant
to Section 622(b), such subsequent legislative history would be given little, if any, weight, in
interpreting the statute.
     20.   We also find no merit in Dallas and Hillsborough Petitioners' suggestion that
we look to accounting standards to determine whether franchise fees are included in "gross
revenues."  As Respondent UACB points out, and we agree, the FAS-51 treatment relied upon
by Dallas and Hillsborough Petitioners says nothing about the method or percentage of
franchise fee calculation.  Furthermore, we find that the fact that franchise fees collected by
cable operators may be part of "gross revenues" under Petitioners' particular reading of
generally accepted accounting principles does not establish Congressional intent as to whether
franchise fees are included in "gross revenues" in the context of cable television.  We find
that the Bureau Order, not FAS-51 and Petitioner's interpretation thereof, represents the
correct interpretation of Congressional intent in this matter.
     21.   Therefore, after careful review of the authorities, arguments, and comments
submitted by the parties on this issue, we find that the Bureau Order accurately concluded
that the franchise fees that a cable operator collects from its subscribers are not part of an
operator's "gross revenues" for purposes of calculating the total amount of franchise fees
owed by the operator to its local franchising authority.  Accordingly, we deny Petitioner's
request for reconsideration and affirm the Bureau Order on this issue.
VI.  CHARACTERIZATION OF FRANCHISE FEES
     A.    Contentions of the Parties
     22.   Paragraph 7 of the Bureau Order states that "[f]ranchise fees are taxes imposed
by local franchising authorities on the earnings of cable operators."  While that statement was
not material to the Bureau's holding with respect to its interpretation of "gross revenues,"
Petitioners, nevertheless, dispute the Bureau's characterization of franchise fees as a tax
imposed by local franchising authorities.  Petitioners argue that franchise fees are not "taxes"
but are intended to be "fees" or function like "rent" or compensation for the operator's right
to place wires and other equipment in public rights-of-way.  In response, UACB argues that
franchise fees are properly characterized as "taxes."  However, UACB also states that, in
deciding the franchise fee calculation issue, it does not matter whether the assessments are
characterized as a "fee" or a "tax."  In reply, Baltimore Petitioners agree and state that, "[i]n
any event, it is not necessary to decide whether franchise fees are taxes in order to resolve
this case."
     B.    Discussion
     23.   We agree that characterizing franchise fees as either a "fee" or a "tax" is not
material to our resolution of the issue of whether the Bureau properly held that an operator's
"gross revenues" include the franchise fee that an operator collects from subscribers.  We
find, however, our characterization of a franchise fee as a tax was not exactly accurate.
Although a tax may be a type of franchise fee, a franchise fee is not necessarily a tax.  In this
regard Section 622(g)(1) defines the term "franchise fee" as "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."
VII. REVIEW OF FRANCHISE FEE DISPUTES
     A.    Background
     24.   As stated above, prior to passage of the 1984 Cable Act, the Commission
exercised authority over the imposition of franchise fees.  Shortly after passage of the 1984
Cable Act, the Commission initiated a rulemaking to implement the Act's various provisions.
In the Commission's Report and Order, In the Matter of Amendments of Parts 1, 63 and 76
of the Commission's Rules to Implement the Provisions of the Cable Communications Policy
Act of 1984:  Report and Order ("Amendments of Parts 1, 63 and 76"), the Commission
addressed the issue of franchise fees and considered whether to continue the Commission's
past practice of adjudicating disputes over whether a particular tax, fee or assessment imposed
on cable operators constituted a "franchise fee."  In Amendments of Parts 1, 63 and 76, the
Commission announced that it would refuse to adjudicate disputes over whether particular
taxes, fees or assessments could be deemed "franchise fees" under the definition provided by
Congress in the statute, and would instead relegate that responsibility to the courts.  In 1986,
the Commission reexamined and modified its policy regarding hearing such disputes in
response to a petition for reconsideration in In re Amendment to Parts 1, 63 and 76 of the
Commission's Rules to Implement the Provisions of the Cable Communications Policy Act of
1984: Memorandum Opinion and Order ("1986 Reconsideration Order").  In that Order, the
Commission modified its earlier policy regarding franchise fees and announced that, while
most franchise fee disputes were best resolved through the courts, it would retain jurisdiction
to adjudicate franchise fee disputes arising under the Cable Act to the extent the claim
"directly impinge[d]" on a "national policy concerning cable communications" and implicated
the Commission's expertise.  In accordance with this policy, the Commission announced that
it would not resolve disputes over whether particular taxes could be considered "franchise
fees" within the meaning of the 1984 Cable Act.  The Commission reasoned, among other
things, that it possessed no expertise in the matters of local taxation, that local courts were
better situated to resolve such issues, and that the relevance of such matters to a national
policy concerning cable communications was "slight."  The Commission also indicated that
it would decline to hear franchise fee related disputes that pertained to payments made under
the Copyright Act, incidental payments made under the terms of the franchise, or challenges
to the constitutionality of a particular fee.  All of these types of proceedings implicated local
law or would call for the presentation of evidence best presented in a local forum.
However, the Commission made clear in the  1986 Reconsideration Order that it would
continue to hear franchise fee related disputes that "arise directly under specific provisions of
the Cable Act and that may call upon the expertise of the Commission for their
interpretation."
     B.    Contentions of the Parties
     25.   Petitioners contend that the Bureau should have declined to rule on the
franchise fee calculation issue, asserting that the Bureau Order is inconsistent with the
Commission's stated policy with respect to franchise fee issues announced in the 1986
Reconsideration Order.  They argue that, in this instance, forbearance is appropriate because
the franchise fee dispute in this case does not impinge on a "national policy concerning cable
communications."  Petitioners further argue that forbearance is appropriate because the
resolution of franchise fee disputes will require the Commission to interpret franchise
agreements that have been negotiated between cable operators and franchising authorities and
will contravene the "historical" method by which cable operators and franchising authorities
have calculated franchise fees.  Baltimore Petitioners contend that the burden of resolving
such disputes should be left to the courts or otherwise left to the franchising authority to
make such determinations so long as there is a rational basis for the franchising authority's
decision.
     26.   In response, UACB argues that the 1992 Cable Act changed the "national
policy concerning cable communications" to include franchise fee disputes where franchise
fee calculations impact on the national rate regulatory scheme.  UACB asserts that there is
no justification for a forbearance policy that allows franchising authority actions that are
inconsistent with the standards of the 1992 Cable Act.  UACB argues that Petitioners'
reference to the "historical method" by which cable operators and franchising authorities have
calculated franchise fees is immaterial and inaccurate.  In support of that argument, UACB
asserts that the Commission, as a result of its "forbearance policy," had little opportunity to
review local franchise fee calculations.  UACB asserts that Commission review, which was
commonplace prior to the 1984 Cable Act, was unnecessary until rate regulation was
reintroduced by the 1992 Cable Act.
     C.    Discussion
     27.   We agree with Respondent UACB's arguments.  We are not persuaded by
Petitioners' contentions that the Bureau Order is inconsistent with the Commission's
previously stated policy with respect to the adjudication of franchise fee issues and that the
Bureau should have deferred resolution of this franchise fee dispute to the courts or to
franchising authorities.  First, neither the franchise fee provision, Section 622(b) of the Cable
Act, nor the legislative history to this provision precludes the Commission from ruling on the
franchise fee issue here.  Moreover, as the agency responsible for implementing the
Communications Act, we have the discretion to interpret the franchise fee provision, which
was incorporated into the Communications Act and to have such interpretations serve as
precedent for future disputes.
     28.   Further, contrary to Petitioners' claim, the Bureau's decision to resolve this
issue is not inconsistent with our policy on resolving franchise fee disputes.  As we stated in
that policy, we will exercise jurisdiction over franchise fee disputes that impinge on a
"national policy concerning cable communications."  As an example, we indicated that we
would exercise jurisdiction over disputes arising directly under the provisions of the statute as
opposed to specific factual patterns involving local issues.  Section 622(b) states that
franchise fees are to be calculated based on "gross revenues...derived from the operation of
the cable system."  The issue of what constitutes "gross revenues...derived from the operation
of a cable system" arises from a specific provision of the statute and not, as some
commenters appear to claim from individual franchise agreements.  Moreover, in enacting this
provision, Congress established a uniform federal standard governing how franchise fees were
to be calculated.  The issue of how franchise fees are calculated necessarily impinges a
national policy on cable franchise fees.  It is fully consistent with our policy on resolving
franchise fee disputes and appropriate for the Commission to exercise jurisdiction over this
issue in order to provide a Commission interpretation of this statutory term that can serve as
precedent in future cases.
VIII.ADMINISTRATIVE PROCEDURE ACT
     29.   Separately, Dallas Petitioners allege that the Bureau's decision to rule on the
franchise fee calculation issue deprived them of an opportunity for notice and comment in
violation of the Administrative Procedure Act ("APA") and their rights to due process.  See
Dallas Petition at 5-7.  Specifically, they assert that the Bureau announced a rule of general
applicability without providing local authorities, like themselves, any opportunity for notice
and comment.  Id. at 7.  We find no merit in these arguments.  We note that we have fully
considered the views and arguments contained in the pleadings filed by Dallas Petitioners.
Thus, Dallas Petitioners' participation in this proceeding and our consideration of their
arguments makes their due process argument moot.  The Bureau's action  was an
interpretation of a statutory provision in the context of an adjudicatory proceeding, which is
entirely appropriate.
IX.  CONCLUSION
     30.   After review of the all the authorities cited by the parties and the arguments
contained in their respective briefs and letters, we find that the Bureau's determination on the
franchise fee issue is based on an accurate construction of Section 622(b) of the Cable Act
and is reasonable.  We are not persuaded by Petitioners' contention that the word "gross
revenues," as used in Section 622(b), encompasses the franchise fees collected by cable
operators from subscribers.  Accordingly, we deny Petitioners' request for reconsideration of
the Bureau Order, and affirm the Bureau Order to the extent consistent with this order.
X.   ORDERING CLAUSES
     31.   Accordingly, in view of the foregoing, it is ORDERED, that the petitions for
reconsideration are DENIED.
     32.   IT IS FURTHER ORDERED that, in light of the resolution of the petitions
for reconsideration, the joint motion for stay filed by the cities of Cape Coral, Jupiter,
Lantana, Miami Beach, Village of Miami Shores, Miramar, North Miami, South Miami,
Tamarac, and West Palm Beach, Florida; and the petition for special relief filed by the law
firm of Duncan, Weinberg, Miller & Pembroke, P.C., on behalf of municipal television
franchising authorities, ARE DISMISSED as moot.
     FEDERAL COMMUNICATIONS COMMISSION
     William F. Caton
     Acting Secretary
                                APPENDIX 1
Petitions for Reconsideration were filed on May 8, 1995 by:
(1)  The City of Baltimore, Maryland, the National Association of Telecommunications
     Officers and Advisors ("NATOA"), the National League of Cities, and the City of
     New York, New York (collectively, "Baltimore Petitioners");
(2)  The City of Los Angeles, California, and the City and County of San Francisco,
     California (collectively, "Los Angeles Petitioners");
(3)  The City of Dallas, Texas, the City of Dubuque, Iowa, the City of Indianapolis,
     Indiana, the City of Laredo, Texas, Montgomery County, Maryland, the Miami
     Valley Cable Council, Ohio, the City of St. Louis, Missouri, and the City of
     Tallahassee, Florida (collectively, "Dallas Petitioners"); and,
(4)   Hillsborough County, Florida ("Hillsborough Petitioner").
Oppositions to the Petitions for Reconsideration were filed on May 22, 1995 by:
(1)   United Artists Cable of Baltimore;
(2)  The Cable Telecommunications Association ("CATA");
(3)  The National Cable Television Association, Inc. ("NCTA"); and,
(4)  M.L. Media Partners, L.P., trading as MultiVision Cable TV.
Replies to the oppositions were filed on May 30, 1995 by:
(1)   Dallas Petitioners;
(2)   Baltimore Petitioners; and,
(3)   Hillsborough Petitioners.
                                APPENDIX 2
The following parties submitted written comments with the Commission, urging
reconsideration of the Bureau's April 6, 1995 order  with respect to that part of the order
addressing franchise fees:  the City of Santa Ana, California; the Executive Director,
Recreation and Community Services of Santa Ana, California; the City of Garden Grove,
California; the City of Orange, California; Video Communications Assistance on behalf of the
City of Beverly Hills, California; the City of Chino, California; the City of Buenaventura,
California; the Public Cable Television Authority of Fountain Valley, California; the County
Council of Baltimore County; the City of Gainesville, Florida; the Greater Metro Cable
Consortium, a joint agency of 24 local governments in the City of Denver, Colorado; the law
firm of Curtis, Oetting, Heinz, Garrett & Soule, P.C., on behalf of 22 municipalities in St.
Louis County, Missouri, and 10 located in Madison County, Illinois; the Board of Public
Service Communications Division in St. Louis, Missouri; the City of Rock Hill, South
Carolina; Piedmont Triad Council of Governments, which represents six counties and 25 cities
in the State of North Carolina; the Communications & Information Systems Department on
behalf of the City of Charlotte and Mecklenburg County, North Carolina; Telecommunications
Management Corporation, a consultant to more than 250 franchising authorities; the Rainier
Cable Commission, representing 13 local governments on matters relating to cable television;
and the Executive Director and president of the Michigan chapter of NATOA on behalf of the
Intergovernmental Cable Communications Authority.
Cablevision Systems Corporation and the Armstrong Group of Companies of Place Butler,
Pennsylvania submitted written comments to the Commission urging affirmance of the
Bureau's order.