*Pages 1--10 from  Microsoft Word - 53878.doc*
 Federal  Communications  Commission  DA  05-  3250 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 
 In  the  Matter  of 
 Comcast  of  Minnesota,  Inc.  Order  Setting  Basic  Service  and  Equipment  Rates 
 Arden  Hills  MN  (MN0297)  Falcon  Heights  MN  (MN0298) 
 Lauderdale  MN  (MN0299)  Little  Canada  MN  (MN0300) 
 Mounds  View  MN  (MN0301)  New  Brighton  MN  (MN0302) 
 North  Oaks  MN  (MN0303)  Roseville  MN  (MN0304) 
 St.  Anthony  MN  (MN0305)  Shoreview  MN  (MN0306) 


 Comcast  of  Minnesota,  Inc.  Order  Setting  Basic  Service  and  Equipment  Rates 
 Birchwood  MN  (MN  0313)  Dellwood  MN  (MN  0314) 
 Grant  MN  (MN  0323)  Lake  Elmo  MN  (MN  0315) 
 Mahtomedi  MN  (MN  0316)  Maplewood  MN  (MN  0317) 
 North  St.  Paul  MN  (MN  0318)  Oakdale  MN  (MN  0319) 
 Vadnais  Heights  MN  (MN  0320)  White  Bear  Lake  MN  (MN  0321) 
 White  Bear  Township  MN  (MN  0324)  Willernie  MN  (MN0322) 


 Comcast  of  Minnesota,  Inc.  Order  Setting  Basic  Service  and  Equipment  Rates 
 Burnsville  MN  (MN  0439)  Eagan  MN  (MN  0440) 


 Comcast  of  Minnesota/  Wisconsin,  Inc.  Order  Setting  Basic  Service  and  Equipment  Rates 
 Cottage  Grove  MN  (MN0396)  Grey  Cloud  Island  Township  MN  (MN  0400) 
 Newport  MN  (MN  0397)  St.  Paul  Park  MN  (MN0401) 
 Woodbury  MN  (MN  0395) 


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 CSB-  A-  0731 
 CSB-  A-  0732 
 CSB-  A-  0734 
 CSB-  A-  0735 
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 Federal  Communications  Commission  DA  05-  3250 
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 Comcast  of  Minnesota,  Inc.  Order  Setting  Basic  Service  and  Equipment  Rates 
 Coon  Rapids  MN  (MN0373) 
 )  ) 
 )  CSB-  A-  0736 


 ORDER 
 Adopted:  December  19,  2005  Released:  December  21,  2005 
 By  the  Deputy  Chief,  Policy  Division,  Media  Bureau: 


 I.  INTRODUCTION 
 1.  In  this  Order,  we  decide  five  appeals  filed  by  two  Comcast  companies  against  rate  orders  issued  by  five  franchising  authorities  that  set  rates  for  the  Basic  Service  Tier  (  BST)  of  cable  service  in 


 30  communities  in  Minnesota.  Each  appeal  consists  of  an  Appeal  by  one  of  the  Comcast  companies,  1  an  Opposition  by  the  franchising  authority,  2  and  a  Reply  by  Comcast.  3  All  the  appeals  present  the  same 
 material  facts  and  issues.  Accordingly,  in  the  interests  of  administrative  efficiency,  we  are  deciding  all  the  appeals  in  this  one  Order.  4 


 1  Appeal  of  Local  Rate  Order  (  Arden  Hills  Appeal),  filed  Feb.  2,  2005  by  Comcast  of  Minnesota,  Inc.,  in 
 CSB-  A-  0731;  Appeal  of  Local  Rate  Order  (  Birchwood  Appeal),  filed  Feb.  15,  2005,  by  Comcast  of  Minnesota,  Inc.,  in  CSB-  A-  0732;  Appeal  of  Local  Rate  Order  (  Burnsville  Appeal),  filed  Feb.  25,  2005  by  Comcast  of 


 Minnesota,  Inc.,  in  CSB-  A-  0734;  Appeal  of  Local  Rate  Order  (  Cottage  Grove  Appeal),  filed  Feb.  28,  2005,  by  Comcast  of  Minnesota/  Wisconsin,  Inc.,  in  CSB-  A-  0735;  Appeal  of  Local  Rate  Order  (  Coon  Rapids  Appeal),  filed 
 March  3,  2005  by  Comcast  of  Minnesota,  Inc.,  in  CSB-  A-  0736.  The  term  Comcast  will  be  used  to  refer  to  both  Comcast  of  Minnesota,  Inc.,  and  Comcast  of  Minnesota/  Wisconsin,  Inc. 


 2  Opposition  of  the  North  Suburban  Commun.  Commn  to  Appeal  of  Local  Rate  Order  (  Arden  Hills 
 Opposition),  filed  March  2,  2005;  Opposition  of  the  Ramsey/  Washington  Counties  Suburban  Cable  Commun.  Commn  II  to  Appeal  of  Local  Rate  Order,  filed  March  2,  2005  (  Birchwood  Opposition);  Opposition  of  the 


 Burnsville/  Eagan  Telecommun.  Commn  to  Appeal  of  Local  Rate  Order  (  Burnsville  Opposition),  filed  March  11,  2005;  Opposition  of  the  South  Washington  County  Telecommun.  Commn  to  Appeal  of  Local  Rate  Order  (  Cottage 
 Grove  Opposition),  filed  March  15,  2005;  Opposition  of  the  City  of  Coon  Rapids,  Minnesota  to  Appeal  of  Local  Rate  Order,  filed  March  18,  2005. 


 3  Reply  to  Opposition  to  Appeal  of  Local  Rate  Order,  filed  March  11,  2005,  by  Comcast  of  Minnesota, 
 Inc.;  Reply  to  Opposition  to  Appeal  of  Local  Rate  Order,  filed  March  11,  2005,  by  Comcast  of  Minnesota,  Inc.;  Reply  to  Opposition  to  Appeal  of  Local  Rate  Order  (  Burnsville  Reply),  filed  March  11,  2005,  by  Comcast  of 


 Minnesota,  Inc.;  Reply  to  Opposition  to  Appeal  of  Local  Rate  Order,  filed  March  23,  2005,  by  Comcast  of  Minnesota/  Wisconsin,  Inc.;  Reply  to  Opposition  to  Appeal  of  Local  Rate  Order,  filed  March  23,  2005,  by  Comcast 
 of  Minnesota,  Inc. 
 4  Comcast  Cablevision  of  Dallas,  Inc.,  19  FCC  Rcd  10628,  10630    2,  reconsidered  on  other  grounds,  19 
 FCC  Rcd  22687  (2004);  Frontiervision  Operating  Partners,  18  FCC  Rcd  20416,  20417  (2003)    3,  application  for  review  denied  on  other  grounds,  19  FCC  Rcd  23096  (2004),  appeal  pending  sub  nom.  City  of  Winchester  v.  FCC, 


 Case  No.  05-  3083  (6  th  Cir.,  filed  Jan.  13,  2005). 
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 2.  The  appeals  raise  two  issues  about  what  costs  cable  operators  may  incorporate  in  our  Form  1240  --  the  Form  on  which  the  cable  operator  submits  data  to  the  franchising  authority  annually  and  based 
 on  which  the  franchising  authority  reviews  proposed  rates  for  the  cable  operators  BST.  In  brief,  we  conclude  that  the  franchising  authorities  erred  when  they  directed  Comcast  to  incorporate  certain 
 franchise  fees  on  Form  1240.  We  conclude  that  the  franchising  authorities  were  correct,  however,  when  they  directed  Comcast  to  separately  incorporate  its  federal  regulatory  fees  on  the  Form. 


 II.  BACKGROUND 
 3.  The  Communications  Act  of  1934,  as  amended  (  the  Act)  5  provides  that,  where  effective  competition  is  absent,  rates  for  the  BST  and  associated  equipment  are  subject  to  regulation  by  franchising 


 authorities.  6  Rates  for  the  BST  and  equipment  should  not  exceed  rates  that  would  be  charged  by  systems  facing  effective  competition,  as  determined  in  accordance  with  Commission  regulations  for  setting  rates.  7 
 If  the  cable  operator  fails  to  meet  its  burden  of  proof,  has  improperly  calculated  its  rates,  or  is  unresponsive  to  requests  for  relevant  information,  the  franchising  authority  may  use  the  best  information 
 available  to  review  the  operators  proposed  rates  and,  if  appropriate,  adjust  them  and  order  refunds.  8 
 4.  Rate  orders  issued  by  franchising  authorities  may  be  appealed  to  the  Commission  pursuant  to  Commission  rules.  9  In  ruling  on  appeals  of  local  rate  orders,  the  Commission  will  not  conduct  a  de  novo 


 review,  but  instead  will  sustain  the  franchising  authority's  decision  as  long  as  a  rational  basis  for  that  decision  exists.  10  The  Commission  will  reverse  a  franchising  authority's  rate  decision  only  if  it 
 determines  that  the  franchising  authority  acted  unreasonably  in  applying  the  Commission's  rules.  If  the  Commission  reverses  a  franchising  authority's  decision,  it  will  not  substitute  its  own  decision  but  instead 
 will  remand  the  issue  to  the  franchising  authority  with  instructions  to  resolve  the  case  consistent  with  the  Commission's  decision  on  appeal. 


 III.  DISCUSSION 
 A.  Franchise  Fees 
 5.  Section  622  of  the  Act  authorizes  franchising  authorities,  in  return  for  permitting  a  cable  operator  to  occupy  public  rights  of  way,  to  charge  the  cable  operator  a  franchise  fee  of  no  more  than  five 


 5  47  U.  S.  C.    151  et  seq. 
 6  47  U.  S.  C.    543(  a)(  2). 
 7  47  U.  S.  C.    543(  b)(  1);  47  C.  F.  R.    76.922. 
 8  47  C.  F.  R.    76.937(  d);  Falcon  Classic  Cable,  15  FCC  Rcd  5717,  5720  (2000)    10;  Western  Reserve 
 Cablevision,  Inc.,  14  FCC  Rcd  13391,  13398  (1999)    12. 
 9  47  U.  S.  C.    543(  b)(  5)(  B);  47  C.  F.  R.    76.944. 


 10  Harron  Commun.  Corp.,  15  FCC  Rcd  7901  (2000)    2;  Implementation  of  Sections  of  the  Cable 
 Television  Consumer  Protection  &  Competition  Act,  8  FCC  Rcd  5631  (1993),  9  FCC  Rcd  4316,  4346  (1994)    81. 
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 percent  of  its  gross  revenues.  11  The  cable  operator  may  seek  recovery  of  the  fee  entirely  from  subscribers  to  cable  service  even  though  the  recovery  may  be  based,  in  part,  on  the  cable  operators  revenues  from 
 advertising  and  home  shopping  commissions  (collectively,  non-  subscriber  revenues).  12 
 6.  In  preparation  for  the  rate  orders  here  under  review,  the  franchising  authorities  retained  a  consultant  who  found  what  it  thought  were  errors  in  how  Comcast  recovered  from  its  subscribers  the  parts 


 of  its  franchise  fees  that  were  attributable  to  non-  subscriber  revenues  (  non-  subscriber  fees).  13  The  consultant  opined  that  non-  subscriber  fees  are  not  subscriber  franchise  fees  and  therefore  can  be 
 afforded  franchise-  related  cost  treatment  on  Line  707  (  Franchise  Related  Costs  for  Period)  of  Worksheet  7  of  Form  1240.  14  The  rate  orders  adopted  the  consultants  recommendation,  15  finding  that  it 
 would  make  for  stability,  uniformity,  verifiability,  and  soundness.  16 


 11  47  U.  S.  C.    542  (b). 
 12  City  of  Pasadena,  California,  18  FCC  Rcd  18192    3,  18198    15  (2001),  petition  for  review  denied, 
 Texas  Coalition  of  Cities  for  Utility  Issues  v.  FCC,  324  F.  3d  802  (5  th  Cir.  2003). 
 13  Resolution  No.  2005-  01a,  Order  Regarding  the  Maximum  Permitted  Basic  Programming  Service  Rate 
 Set  Forth  in  the  Federal  Communications  Commission  Form  1240  Filed  by  Comcast  of  Minnesota,  Inc.  on  or  About  March  1,  2004  (  Arden  Hills  et  al.  Local  Rate  Order),  adopted  Jan.  6,  2005,  by  the  North  Suburban  Commun. 


 Commn,    6-  7  at  3;  Resolution  No.  2005-  01-  13-  B,  Order  Regarding  the  Maximum  Permitted  Basic  Programming  Service  Rates  Set  Forth  in  the  Federal  Communications  Commission  Forms  1240  Filed  by  Comcast  of  Minnesota, 
 Inc.  on  or  About  March  1,  2004  (  Birchwood  et  al.  Rate  Order),  adopted  Jan.  13,  2005,    5-  6  at  3;  Resolution  No.  2005-  01,  Order  Regarding  the  Maximum  Permitted  Basic  Programming  Service  Rates  Set  Forth  in  the  Federal 
 Communications  Commission  Forms  1240  Filed  by  Comcast  of  Minnesota,  Inc.  on  or  About  March  1,  2004  (  Burnsville  et  al.  Local  Rate  Order),  adopted  Jan.  26,  2005,  by  the  Burnsvile/  Eagan  Telecommun.  Commn,    6- 
 7  at  3-  4;  Resolution  No.  1.  27.  05,  Order  Regarding  the  Maximum  Permitted  Basic  Programming  Service  Rate  Set  Forth  in  the  Federal  Communications  Commission  Form  1240  Filed  by  Comcast  of  Minnesota/  Wisconsin,  Inc.  on  or 
 About  March  1,  2004  (  Cottage  Grove  et  al.  Local  Rate  Order),  adopted  Jan.  27,  2005,  by  the  South  Washington  County  Telecommun.  Commn,    6-  7  at  3;  Resolution  No.  05-  24,  Order  Regarding  the  Maximum  Permitted  Basic 
 Programming  Service  Rate  Set  Forth  in  the  Federal  Communications  Commission  Form  1240  Filed  by  Comcast  of  Minnesota,  Inc.  on  or  About  March  1,  2004  (  Coon  Rapids  Local  Rate  Order),  adopted  Feb.  1,  2005,  by  the  City  of 
 Coon  Rapids,    6-  7  at  3. 
 14  Arden  Hills  Appeal,  Attachment  B  (Front  Range  Consulting,  Inc.,  Final  Report  to  Bradley  &  Guzzetta, 
 LLC  Regarding  the  Pass-  Through  of  Non-  Subscriber-  Based  Franchise  Fees  by  Comcast  of  Minnesota,  Inc./  Comcast  of  Minnesota/  Wisconsin,  Inc./  Comcast  Cable  Communications,  Inc.  (  Consultants  Final  Report), 


 which  is  an  attachment  to  Letter  from  Front  Range  Consulting,  Inc.,  to  Stephen  J.  Guzzetta,  Esquire,  Bradley  &  Guzzetta,  LLC,  dated  Sept,  22,  2004)  at  12  (italics  in  original).  More  precisely,  the  consultant  contemplates 
 incorporating  only  the  portion  of  the  non-  subscriber  fees  that  reflects  the  ratio  of  the  [cable  operators]  Basic  Service  video  tier  revenues  to  the  total  video  service  tier  subscriber  revenues.  Instructions  for  completing 
 Supplemental  Worksheet  7    Line  707    Franchise  Related  Costs,  which  is  the  second  attachment  to  the  Consultants  Final  Report. 


 15  Arden  Hills  et  al.  Local  Rate  Order,  Ordering  Clause  #3  at  5;  Birchwood  et  al.  Rate  Order,  Ordering 
 Clause  #4  at  4-  5;  Burnsville  et  al.  Local  Rate  Order,  Ordering  Clause  #4  at  5;  Cottage  Grove  et  al.  Local  Rate  Order,  Ordering  Clause  #3  at  5;  Coon  Rapids  Local  Rate  Order,  Ordering  Clause  #3  at  5. 


 16  Arden  Hills  et  al.  Local  Rate  Order,    8-  10  at  3-  4;  Birchwood  et  al.  Rate  Order,    7-  9  at  3-  4; 
 Burnsville  et  al.  Local  Rate  Order,    8-  10  at  4;  Cottage  Grove  et  al.  Local  Rate  Order    8-  10  at  3-  4;  Coon  Rapids  Local  Rate  Order,    8-  10  at  3-  4. 
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 7.  Comcast  appeals  from  this  decision,  arguing  that  non-  subscriber  fees  may  not  be  included  on  Form  1240    that,  in  fact,  no  part  of  franchise  fees  may  be  included  on  Form  1240.  17  Comcast  also  argues 
 that  including  them  there,  even  if  it  were  permissible,  would  not  achieve  the  stability  and  other  good  effects  that  the  franchising  authorities  anticipate.  18  Comcast  emphasizes  that  it  is  not  trying  to  bar  inquiry 
 into  how  it  recovers  the  franchise  fees  it  pays.  Its  only  challenge  to  the  rate  orders  is  their  moving  that  inquiry  into  Form  1240.  19 


 8.  The  franchising  authorities  claim  non-  subscriber  fees  need  to  be  included  in  Comcasts  Form  1240  because  the  company  made  errors  in  calculating  them.  20  Therefore,  the  franchising  authorities  say, 
 their  rate  orders  adopted  their  own  reasonable,  simple  and  verifiable  method,  which  is  based  on  the  Commissions  standards  and  procedures  and  uses  Form  1240.  21 


 9.  After  reviewing  all  the  parties  contentions,  we  conclude  that  including  non-  subscriber  fees  in  Form  1240  is  erroneous.  First,  it  contradicts  the  plain  commands  of  the  Form  and  a  recent  Commission 
 decision.  Page  2  of  the  Instructions  for  Form  1240  states  that 
 The  Commissions  rules  recognize  seven  categories  of  external  costs:  retransmission  consent  fees,  copyright  fees,  programming  costs,  certain  cable  specific  taxes,  franchise-related 


 costs,  franchise  fees  and  Commission  regulatory  fees.  You  may  adjust  your  maximum  permitted  rate  for  changes  in  these  categories  of  costs  except  for  franchise  fees, 
 which  are  not  included  in  your  permitted  rates  but  rather  are  simply  added  to  them.  22 
 Page  5  of  the  Instructions  lists  the  six  external  costs  which  operators  are  allowed  to  pass  through  directly  to  subscribers  and  conspicuously  omits  franchise  fees.  23  No  Instruction,  Worksheet,  or  Line  in  Form 


 1240  calls  for  franchise  fees  to  be  incorporated  into  the  Form  1240  calculation  in  part.  On  the  contrary,  page  25  of  the  Instructions  includes  an  entry  titled  Exclusion  of  Franchise  Fees,  which  provides 
 Franchise  fees  have  been  excluded  from  this  analysis  .  .  .  24  It  is  clear  that  franchise  fees,  including  the  part  of  them  that  is  attributable  to  non-  subscriber  revenues,  are  not  to  be  stated  on  Form  1240. 


 10.  The  Instruction  indented  above,  by  listing  franchise-  related  costs  and  franchise  fees  separately,  makes  clear  that  they  are  distinct  categories.  Likewise,  the  Instructions  for  Line  707,  which  is 


 17  Birchwood  Appeal  at  2. 
 18  Cottage  Grove  Appeal  at  7-  10. 
 19  Coon  Rapids  Appeal  at  2-  3. 
 20  Arden  Hills  Opposition  at  4-  5. 
 21  Birchwood  Opposition  at  4. 
 22  Instructions  for  FCC  Form  1240,  Annual  Updating  of  Maximum  Permitted  Rates  for  Regulated  Cable 
 Services,  Annual  Update  Form  (  Form  1240  Instructions),  available  at  http://  www.  fcc.  gov/  formpage.  html,  at  2  (italics  added). 


 23  Id.  at  5. 
 24  Id.  at  25. 
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 for  Franchise  Related  Costs,  state  Do  not  include  franchise  fees.  25  These  show  that,  contrary  to  the  opinion  of  the  franchising  authorities  consultant,  franchise  fees  are  not  a  subset  of  the  franchise-  related 
 costs  to  be  stated  on  Line  707  of  Form  1240. 
 11.  Second,  around  the  time  these  appeals  began,  we  decided  Charter  Communications  Entertainment  I,  LLC,  an  appeal  from  a  franchising  authoritys  decision  to  require  its  cable  operator  to 


 include  non-  subscriber  fees  in  its  FCC  Form  1240  calculations.  26  We  overturned  the  authoritys  decision  and  granted  the  appeal,  stating  that  the  Commission  has  consistently  excluded  franchise  fee  calculations 
 from  the  maximum  permitted  rate  calculation  on  the  FCC  Form  1240  and  the  Commission  [has  a]  long-standing  practice  of  excluding  franchise  fees  from  FCC  Form  1240.  27 


 12.  In  these  appeals,  the  franchising  authorities  seek  to  distinguish  Charter  by  pointing  out  that  in  that  case  the  cable  operator  was  not  yet  charging  its  subscribers  for  non-  subscriber  fees.  28  Therefore, 
 the  cable  operator  in  Charter  had  not  yet  committed  the  errors  in  calculating  those  fees  that  the  franchising  authorities  found  Comcast  had  committed  here.  In  the  present  cases,  however,  the  franchising 
 authorities  continue,  Comcast  has  calculated  those  fees  inaccurately  and  is  charging  them  to  its  subscribers.  The  best  way  to  make  the  necessary  corrections,  in  the  franchising  authorities  opinion,  is  by 
 following  the  FCCs  existing,  and  well-  established  rate  regulation  standards  and  procedures,  namely  subjecting  them  to  the  review  that  is  imposed  on  costs  that  are  incorporated  in  Form  1240.  29 


 13.  We  reject  the  franchising  authorities  distinction.  Charters  outcome  would  have  been  no  different  if  the  cable  operator  there  had  already  been  charging  its  subscribers  for  non-  subscriber  fees. 
 Form  1240  has  finite  purposes,  and  the  recovery  of  franchise  fees  is  not  one  of  them.  30  Indeed,  as  noted  in  Charter,  adding  the  franchising  authorities  new  calculations  to  Form  1240  would  only  complicate  its 
 application.  Doing  so 
 would  require  additional  calculations  to  correct  for  the  inclusion  of  non-  subscriber  revenue-  based  franchise  fees  as  external  costs  in  the  maximum  permitted  rate.  The 


 maximum  permitted  rate  is  the  basis  for  setting  rates  used  to  generate  subscriber  revenues  upon  which  the  subscriber  revenue-  based  franchise  fees  are  calculated.  Failure  to  remove 


 25  Id.  at  42. 
 26  Charter  Commun.  Entertainment  I,  LLC  (  Charter),  20  FCC  Rcd  3503  (2005). 
 27  Id.,  20  FCC  Rcd  at  3504    5. 


 28  Appeal  of  Local  Rate  Order,  File  No.  CSB-  A-  0720,  filed  by  Charter  Commun.  Entertainment  I,  LLC, 
 Aug.  23,  2004,  Attachment  A,  Resolution  Number  100  of  the  Board  of  Aldermen  of  the  City  of  St.  Louis,  Missouri,  Ordering  a  2004  Rate  for  Cable  Cards  Pursuant  to  an  Abbreviated  FCC  Form  1205,  an  Accounting  of  Charges  for 


 Unreturned  Equipment[,  and]  Methodology  for  Calculating  Certain  External  Costs,  at  2    E  (adopted  July  9,  2004)  (requiring  Charter  to  use  .  .  .  Form  1240  .  .  .  if  and  when  .  .  .  Charter  should  elect  recovery  from  cable  subscribers 
 of  costs  of  franchise  fees  on  non-  subscriber  revenues  .  .  .). 
 29  Burnsville  Opposition  at  4. 


 30  See  Instructions  quoted  supra    9. 
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 the  additional  franchise  fees  from  this  rate  could  result  in  excess  subscriber  revenue-based  franchise  fees  being  calculated  and  passed  through  to  subscribers.  31 
 14.  In  addition,  Comcast  adds  that  the  franchising  authorities  would  add  to  Form  1240  only  a  small  part  of  non-  subscriber  fees,  namely  that  which  is  attributable  to  Basic  Service.  32  Because  basic 
 service  revenues  are  only  a  small  proportion  of  total  cable  service  revenues,  any  error  thus  revealed  and  corrected  would  be  only  a  small  proportion  of  any  harm  done  to  subscribers.  33  Also,  incorporating  such 
 fees  in  Form  1240  would  ensnare  them  in  the  relatively  complicated  process  by  which  the  cable  operator  prepares  the  Form  and  the  franchising  authority  reviews  it.  This  would  slow  the  passing  through  of  any 
 change  in  franchise  fees  to  subscribers  bills,  which  is  supposed  to  occur  promptly.  34  On  the  whole,  we  find  that  incorporating  franchise  fees  in  Form  1240  as  required  by  the  franchising  authorities  would 
 significantly  complicate  the  rate-  setting  and  fee-  recovering  process  and  would  not  produce  any  greater  benefit  for  subscribers. 


 15.  Finally,  including  franchise  fee  calculations  in  Form  1240  would  be  inconsistent  with  an  important  policy.  The  primary  purpose  of  Form  1240  is  to  develop  the  rate  for  the  BST.  Section 
 622(  a)(  1)  of  the  Act,  however,  permits  cable  operators  to  state  franchise  fees  in  their  bills  on  a  line  separate  from  that  for  the  BST.  35  This  itemization  on  bills  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.  36  It  permit[  s]  subscribers  to  be  fully  apprised  of  the  effect  of  the  enumerated 
 governmentally  imposed  costs  on  their  bills.  37  We  do  not  wish  to  undermine,  or  complicate  the  execution  of,  the  policy  that  favors  informing  subscribers  of  how  much  they  are  paying  for  the  cable 
 operators  service  and  how  much  they  are  paying  to  the  franchising  authority  for  the  fees  it  charges  the  cable  operator.  For  all  the  foregoing  reasons,  we  grant  Comcasts  appeal  from  the  part  of  the  rate  orders 
 that  directed  Comcast  to  incorporate  certain  franchise  fees  on  Form  1240. 
 16.  One  group  of  franchising  authorities  asks  that,  if  we  conclude  that  nonsubscriber  fees  should  not  be  incorporated  in  Form  1240,  we  give  guidance  on  the  correct  method  for  calculating  them.  38  For 


 example,  among  the  issues  that  arose  in  the  litigations  below  were  whether  it  was  proper  for  Comcast  to  project  its  payments  of  non-  subscriber  fees  for  2004  using  certain  actual  data  from  nine  months  of  2003.  39 


 31  Charter,  20  FCC  Rcd  at  3504-  05    5;  see  also  Arden  Hills  Appeal  at  8-  9. 
 32  See  note  14  supra. 
 33  Arden  Hills  Appeal  at  7-  8. 
 34  See  47  C.  F.  R.    76.933(  e),  Arden  Hills  Appeal  at  8. 
 35  47  U.  S.  C.    542(  c)(  1);  47  C.  F.  R.    76.985(  a)(  1). 
 36  Pasadena,  18  FCC  Rcd  at  18201    23. 
 37  Id.  at  18195    7. 
 38  Cottage  Grove  Opposition  at  6. 
 39  See,  e.  g.,  Cottage  Grove  Appeal,  Attachment  A  (South  Washington  County  Telecommun.  Commn, 
 Resolution  No.  1.  27.  05,  Order  Regarding  the  Maximum  Permitted  Basic  Programming  Service  Rate  Set  Forth  in  the  Federal  Communications  Commission  Form  1240  Filed  by  Comcast  of  Minnesota/  Wisconsin,  Inc.  on  or  about 


 March  1,  2004)  at  3    7;  Consultants  Final  Report,  supra  note  14,  at  3,  5;  id.,  attached  Letter  from  John  F.  Gibbs,  (continued.) 
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 Another  issue  below  was  whether  Comcast,  in  calculating  its  franchise  fee  based  on  its  gross  revenues,  should  exclude  from  gross  revenues  what  subscribers  pay  towards  the  Commissions  regulatory  fees.  40 
 17.  Comcast  did  not  raise  these  issues  in  these  appeals,  claiming  error  only  in  the  franchising  authorities  mandate  that  Comcast  incorporate  non-  subscriber  fees  in  future  Form  1240  filings.  41  Also, 
 we  do  not  usually  provide  advisory  opinions,  42  especially  on  issues  that  the  parties  have  not  briefed.  Accordingly,  we  limit  our  decision  on  this  issue  in  this  case  to  concluding  that  the  franchising  authorities 
 erred  when  they  ordered  Comcast  to  include  the  recovery  of  franchise  fees  attributable  to  non-  subscriber  revenues  in  Form  1240. 


 B.  Commission  Regulatory  Fees 
 18.  Cable  operators  pay  the  Commission  certain  fees  to  maintain  its  operations.  43  Form  1240s  Worksheet  7,  at  line  708,  calls  for  the  cable  operator  to  state  Commission  Regulatory  Fees  For  Period.  44 


 As  made  clear  in  paragraph  9  above,  the  Instructions  for  Form  1240  identify  seven  categories  of  external  costs,  including  Commission  regulatory  fees,  and  provide  further  that  an  operator  may  adjust  its 
 maximum  permitted  rate  for  changes  in  these  costs.  More  specifically,  the  Instruction  for  Line  708  directs  the  operator  to  Enter  the  total  Commission  regulatory  fees  for  the  period  45  on  Line  708. 


 19.  Four  of  the  franchising  authorities  noted  that  Comcast,  in  its  Form  1240,  did  not  include  the  fees  it  paid  the  Commission  on  Line  708.  Comcast  had  chosen  to  separately  pass  through  the  regulatory 
 fees  as  a  pro-  rated  figure  on  each  subscribers  monthly  bill.  46  The  four  franchising  authorities  ordered  Comcast  to  treat  those  fees  as  an  external  cost  and  to  include  them  in  Worksheet  7  for  Form  1240.  47 


 20.  Comcast  appeals,  claiming  that  it  has  the  option  to  treat  Commission  regulatory  fees  as  an  external  cost  or  not,  and  to  include  them  in,  or  omit  them  from,  its  Form  1240.  It  argues  that  this  option  is 


 (Continued  from  previous  page)  Comcast  Cable  Communications,  Inc.,  to  Steven  J.  Guzzetta,  Creighton,  Bradley  &  Guzzetta  (  Gibbs  Letter),  dated 
 May  5,  2004,  at  1. 
 40  Consultants  Final  Report,  supra  note  14,  at  7-  8;  Gibbs  Letter,  supra  note  39,  at  2.  Concerning 
 Commission  regulatory  fees,  see  infra    18-  22. 
 41  See,  e.  g.,  Cottage  Grove  Appeal  at  3  n.  4. 


 42  Time  Warner  Cable,  13  FCC  Rcd  13795,  13796  (1998)    3  n.  9. 
 43  47  U.  S.  C.    159. 
 44  See  also  47  C.  F.  R.    76.922  (e)(  2)(  ii)(  A),  l  (vi). 
 45  Form  1240  Instructions,  supra  note  22,  at  42. 
 46  Arden  Hills  Appeal  at  10. 
 47  Arden  Hills  et  al.  Local  Rate  Order,  Ordering  Clause  #4  at  5;  Burnsville  et  al.  Local  Rate  Order, 
 Ordering  Clause  #5  at  5;  Cottage  Grove  et  al.  Local  Rate  Order,  Ordering  Clause  #4  at  5;  Coon  Rapids  Local  Rate  Order,  Ordering  Clause  #4  at  5. 
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 created  by  the  permissive  word  may  in  the  Instruction  quoted  in  paragraph  9  above  48  and  by  the  Commissions  Rate  Regulation  Fourth  Order  on  Reconsideration.  49  It  also  claims  that  its  practice  has 
 long  been  followed  by  numerous  cable  operators  across  the  country.  50 
 21.  We  disagree  with  Comcasts  interpretation  of  our  regulations.  First,  the  word  may  in  the  Instructions  for  Form  1240  merely  permits  cable  operators  to  refrain  from  passing  cost  increases  on  to 


 their  subscribers.  The  word  may  is  not  intended  to  allow  a  cable  operator  to  omit  from  Form  1240  its  Commission  regulatory  fees  or  the  host  of  other  external  costs  covered  by  the  same  sentence  in  our 
 Instructions  --  retransmission  consent  fees,  copyright  fees,  programming  costs,  certain  cable  specific  taxes,  and  franchise-  related  costs.  51 


 22.  Second,  the  sentences  from  the  Rate  Regulation  Fourth  Order  on  Reconsideration  that  Comcast  relies  on  do  not  address  the  omission  of  Commission  regulatory  fees  from  Form  1240.  Those 
 sentences  address  the  billing  of  subscribers  pursuant  to  the  original  quarterly  filing  methodology.  52  The  Rate  Regulation  Fourth  Order  on  Reconsideration  preceded  adoption  of  the  Form  1240  annual  filing 
 methodology,  which  is  the  methodology  Comcast  uses  in  the  Minnesota  communities  here.  The  annual  filing  methodology,  adopted  in  our  Rate  Regulation  Thirteenth  Order  on  Reconsideration,  permits  an 
 operator  to  adjust  its  rates  to  reflect  projected  costs  that  are  reasonably  certain  and  reasonably  quantifiable.  53  Cable  operators  who  use  the  annual  filing  methodology  should  treat  changes  in 
 Commission  regulatory  fees  as  reasonably  certain  and  reasonably  quantifiable  and  should  project  those  changes  through  the  Form  1240  computations.  54  This  decision  applies  to  all  external  costs  other  than 
 franchise  fees  and  is  implemented  in  Worksheet  7  of  our  Form  1240,  with  which  the  four  franchising  authorities  directed  Comcast  to  comply.  The  franchising  authorities  acted  reasonably.  We  deny 
 Comcasts  appeal  on  this  issue. 


 IV.  ORDERING  CLAUSES 
 23.  Accordingly,  IT  IS  ORDERED  that  the  Appeals  filed  by  Comcast  of  Minnesota,  Inc.,  in  CSB-  A-  0731,  CSB-  A-  0732,  CSB-  A-  0734,  and  CSB-  A-  0736,  and  by  Comcast  of  Minnesota/  Wisconsin, 


 48  Coon  Rapids  Appeal  at  11. 
 49  Cottage  Grove  Appeal  at  11-  12,  citing  and  quoting  Implementation  of  the  Cable  Television  Consumer 
 Protection  &  Competition  Act  of  1992:  Rate  Regulation  (  Rate  Regulation  Fourth  Order  on  Reconsideration),  9  FCC  Rcd  5795,  5798  (1994)    14;  Burnsville  Reply  at  3. 


 50  Arden  Hills  Appeal  at  10. 
 51  Arden  Hills  Opposition  at  6. 
 52  Burnsville  Opposition  at  5. 
 53  Implementation  of  the  Cable  Television  Consumer  Protection  &  Competition  Act  of  1992:  Rate 
 Regulation  (  Rate  Regulation  Thirteenth  Order  on  Reconsideration),  11  FCC  Rcd  388,  394  (1995)    13,  417    68,  418    72,  419    74. 


 54  Id.,  11  FCC  Rcd  at  414-  15    58,  note  206:  Operators  that  elect  the  new  annual  rate  filing  methodology 
 incorporate  changes  in  Commission  regulatory  fees  into  their  annual  filings. 
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 Inc.,  in  CSB-  A-  0735  ARE  GRANTED  IN  PART  and  DENIED  IN  PART  and  ARE  REMANDED  for  further  consideration  consistent  with  this  Order. 
 24.  This  action  is  taken  pursuant  to  authority  delegated  by  Section  0.283  of  the  Commission's  rules.  47  C.  F.  R.    0.283. 


 FEDERAL  COMMUNICATIONS  COMMISSION 


 John  B.  Norton  Deputy  Chief,  Policy  Division,  Media  Bureau 
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