[Federal Register Volume 62, Number 199 (Wednesday, October 15, 1997)]
[Rules and Regulations]
[Pages 53572-53577]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27151]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MM Docket Nos. 92-266 and 93-215; FCC 97-339]


Small Cable Television Systems; Rate Regulation

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission has adopted a Fourteenth Order on 
Reconsideration denying two petitions seeking reconsideration of the 
rules adopted for small cable television systems governing rates 
charged for regulated cable services in the Sixth Report and Order and 
Eleventh Order on Reconsideration in MM Docket Nos. 92-266 and 93-215, 
FCC 95-195. The Commission also adopted minor clarifications to the 
rate rules.

EFFECTIVE DATE: October 15, 1997.

FOR FURTHER INFORMATION CONTACT: Julie Buchanan, Cable Services Bureau, 
(202) 418-7200.

SUPPLEMENTARY INFORMATION: The following is a synopsis of the 
Commission's Fourteenth Order on Reconsideration in MM Docket Nos. 92-
266 and 93-215, adopted September 24, 1997 and released October 1, 
1997. The full text of this decision is available for inspection and 
copying during normal business hours in the FCC Reference Center (Room 
239), 1919 M Street, NW., Washington, DC 20554, and may be purchased 
from the Commission's copy contractor, International Transcription 
Services, Inc., (202) 857-3800, 1231 20th Street, NW., Washington, DC 
20036.

Synopsis

I. Introduction

    1. On May 5, 1995, the Commission adopted the Sixth Report and 
Order and Eleventh Order on Reconsideration in MM Docket Nos. 92-266 
and 93-215, FCC 95-196, 60 FR 35854 (July 12, 1995) (``Small System 
Order''), thereby modifying the rules governing rates charged for 
regulated cable services by certain smaller cable systems. In this 
order, we address petitions for reconsideration of the Small System 
Order.

II. Background

    2. Section 623(i) of the Communications Act of 1934, as amended 
(``Communications Act''), requires that the Commission design rate 
regulations to reduce the administrative burdens and the cost of 
compliance for cable systems with 1,000 or fewer subscribers. In the 
Small System Order, the Commission extended small system rate relief to 
small cable systems owned by small cable companies. The Small System 
Order defines a small system as any system that serves 15,000 or fewer 
subscribers, and it defines a small cable company as a cable operator 
that serves a total of 400,000 or fewer subscribers over all of its 
systems.
    3. In addition to adopting the new categories of small systems and 
small cable companies, the Small System Order introduced a form of rate 
regulation known as the small system cost of service methodology. This 
approach, which is available only to small systems owned by small cable 
companies, follows general principles of cost of service rate 
regulation. An eligible cable operator may establish a maximum 
permitted rate for regulated cable service equal to the amount 
necessary to cover its operating expenses plus a reasonable return on 
its prudent investment in the assets used to provide that service. The 
small system cost of service methodology differs both procedurally and 
substantively from the standard cost of service methodology available 
to cable operators generally.
    4. To implement the small system cost of service rules, we designed 
FCC Form 1230, a simplified one-page form, for use exclusively by 
operators eligible for these rules. This form is more streamlined than 
Form 1220 used for cost of service showings by larger operators. To use 
Form 1230, the operator must calculate five items of data pertaining to 
the system in question: annual operating expenses, net rate base, rate 
of return, channel count and subscriber count. Once these variables are 
calculated, the form generates the maximum per channel rate the 
operator may charge for regulated service. Although subject to 
regulatory review, this rate is presumed reasonable if it is no more 
than $1.24 per channel.
    5. When applicable, the presumption of reasonableness effectively 
exempts eligible cable operators from many of the proof burdens that 
apply under our standard cost of service rules. For example, eligible 
small cable companies have greater discretion than larger operators in 
determining how to allocate costs between regulated and unregulated 
services and between various levels of regulated services. Similarly, 
qualifying cable operators using Form 1230 are not subject to the 
presumption of unreasonableness that otherwise attaches when an 
operator seeks a rate of return higher than

[[Page 53573]]

11.25%. As noted, an eligible operator enjoys the presumption of 
reasonableness with respect to these and other factors only if the 
maximum permitted rate claimed on Form 1230 does not exceed $1.24 per 
channel. If the rate exceeds $1.24 per channel, the cable operator 
still may use Form 1230, but is subject to the same presumptions that 
apply in a standard cost of service showing. As with other rate-setting 
procedures, a cost of service showing involving Form 1230 is subject to 
review by the cable operator's local franchising authority and/or by 
the Commission.
    6. With respect to the effective date of the small system rules, we 
directed franchising authorities to apply the small system cost of 
service approach to rate cases pending as of the release date of the 
Small System Order because the record demonstrated that the pre-
existing rules were imposing a significant burden on small systems. The 
Small System Order was released on June 5, 1995.

III. Petitions for Reconsideration

    7. Two parties seek reconsideration of the Small System Order and a 
number of other parties oppose the petitions. In one petition, the 
Georgia Municipal Association (``GMA'') requests that we repeal the 
small system cost of service rules in their entirety. In the 
alternative, GMA urges the Commission to lower the maximum amount of 
$1.24 per channel at which an operator may set rates and still be 
entitled to a presumption of reasonableness. In support of its 
petition, GMA questions the accuracy of the underlying cost data that 
we used to set the $1.24 per channel rate. In addition, GMA claims that 
the new rules will increase burdens on franchising authorities and lead 
to unreasonable rates for regulated cable services. GMA also cites 
examples of what it claims are cable operators abusing the small system 
rules.
    8. The New Jersey Board of Public Utilities (``New Jersey Board'') 
seeks reconsideration of the Small System Order to the extent it 
permits application of the small system rules to rate cases that were 
pending as of the release date of the order. In support of its 
petition, the New Jersey Board describes the possible impact of the 
small system rules upon a rate case that was pending before it when the 
Commission released the Small System Order on June 5, 1995. According 
to the New Jersey Board, the cable operator in that case has given 
notice of its intent to attempt to justify its proposed rate increase 
by filing FCC Form 1230. The New Jersey Board complains that the rules 
governing the information that a franchising authority may seek in 
conjunction with its review of a Form 1230 are overly restrictive. The 
New Jersey Board also objects to having to bear the burden of showing 
the unreasonableness of the rate sought by the operator if that rate 
does not exceed $1.24 per regulated channel. As a result of the above, 
the New Jersey Board contends it will be ``precluded from establishing 
whether the cable operator's subscribers are being charged a reasonable 
rate,'' assuming the operator meets the small system and small cable 
company definitions. The New Jersey Board also asserts the alleged 
unfairness of applying the small system cost of service rules to the 
pending case in light of the resources that the Board already has 
expended in the case. Along with its petition for reconsideration, the 
New Jersey Board also filed a motion for stay of the Small System Order 
to the extent it mandates application of the new rules to pending 
cases.

IV. Discussion

    9. Neither petition challenges our determination that some measure 
of regulatory relief is appropriate for small systems owned by small 
cable companies. The petitioners do not dispute our conclusion that 
such systems face proportionately higher operating and capital costs 
than larger cable entities. Likewise, the petitioners do not contest 
that our standard cost of service rules may place ``an inordinate 
hardship'' on smaller systems ``in terms of the labor and other 
resources that must be devoted to ensuring compliance.'' Therefore, the 
petitions give us no reason to reconsider our decision to establish for 
eligible small systems a form of rate regulation that lessens some of 
the substantive and procedural burdens that otherwise would apply. 
Because the petitions raise separate issues, we will resolve the merits 
of each petition individually.
A. The GMA Petition
    10. GMA challenges the presumption of reasonableness that arises 
when an eligible small system uses Form 1230 to justify a regulated 
rate that does not exceed $1.24 per channel. As noted above, we 
established $1.24 per channel as the appropriate cut-off based on cost 
data previously submitted to the Commission by small cable companies 
seeking to establish regulated rates for their small systems by using 
Form 1220 in accordance with our standard cost of service rules. GMA 
asserts that a careful review of the Form 1220s that we relied on to 
set the $1.24 per channel rate ``would probably * * * [show] that 
corrections should be made to the operators' calculations in a large 
percentage of cases.'' In support of this prediction, GMA states that 
``several'' Georgia cable operators using FCC Form 1220 have overstated 
the value of the intangible assets in their ratebases. In addition, GMA 
states that the Commission found calculation or allocation errors in 
each of the nine cost of service cases that we had addressed as of the 
date GMA filed its petition. GMA cites three specific cost of service 
cases in which the Cable Services Bureau (``Bureau'') made adjustments 
to correct such errors. On this basis, GMA argues that ``there is a 
strong possibility that there are errors'' in the Form 1220s from which 
we gleaned the cost data to establish the presumptively reasonable rate 
of $1.24 per channel.
    11. We believe that the rate-setting mechanism we adopted in the 
Small System Order reflects a reasoned judgment as to the method for 
establishing the rates that an eligible small system may charge for 
regulated services. Neither GMA nor any other party challenges this 
mechanism. GMA objects only to the input data that produced the 
standard of $1.24 per regulated channel against which the rates of 
eligible small systems are measured. We determined in the Small System 
Order, however, that a more comprehensive review of small system cost 
data was not necessary to ensure that our small system rules were 
properly tailored to the conditions faced by such systems.
    12. GMA does not challenge our finding that small systems owned by 
small cable companies were in need of immediate relief. GMA suggests 
that the Form 1220 filings on which we relied were so facially 
inaccurate that we should have conducted a further analysis of small 
system cost data. We disagree. This approach would have delayed 
implementation of measures for which there was an immediate need and 
would have imposed additional administrative responsibilities (i.e., 
having to respond to Commission inquiries concerning small system 
costs) on the very entities that we found were the most burdened by 
regulation.
    13. GMA fails to persuade us that the benefits of further analysis 
of small system cost data would have outweighed the administrative 
costs and delay that such analysis would have entailed. While GMA does 
not dispute that such costs and delay would have been both inevitable 
and extremely burdensome, it fails to factor these considerations into 
its discussion. GMA bases its request for reconsideration on

[[Page 53574]]

the fact that the Bureau found allocation or calculation errors in the 
cost of service cases it cites. However, the impact of the Bureau's 
adjustments in the cited cases are overstated by GMA and do not 
undermine the formulation of the $1.24 standard.
    14. The Bureau decisions cited by GMA were based on general cost of 
service principles and not under the interim rules the Commission 
adopted in February 1994. As of the time of those filings, we had 
directed cost of service operators to justify their rates in accordance 
with traditional cost of service principles generally applicable in the 
field of utility rate regulation. After seeking and reviewing further 
public comment, we subsequently adopted more refined cost of service 
rules better tailored for use in the cable service context. At the same 
time, we designed Form 1220 for use in accordance with the new rules. 
The cost data used in the Small System Order were gleaned from Form 
1220s filed by small systems pursuant to cost of service rules adapted 
specifically for use by cable operators. The specificity of the new 
rules, combined with the uniformity of presentation required by Form 
1220, makes the latter submissions inherently more reliable than the 
earlier submissions cited by GMA. Thus, the errors in the filings 
relied on by GMA do not suggest the likelihood of material inaccuracies 
in the subsequent Form 1220 filings. This is particularly true given 
the nature of the errors in the cases cited by GMA. In each case, the 
errors were so minor that the Bureau found that the rates actually 
being charged by the cable operator were nevertheless justified and 
denied the complaint.
    15. We further note that in the Small System Order, we decided that 
standards applicable to cable systems generally were inappropriate for 
small systems owned by small cable companies. In particular, we decided 
that eligible small systems should be given more regulatory leeway than 
larger cable entities because small systems face disproportionately 
higher operating costs, capital costs, and regulatory compliance costs. 
In fact, with respect to eligible small systems, we relaxed the very 
standards that had caused the Bureau to make the adjustments described 
in the cost of service cases cited by GMA.
    16. GMA does not dispute that we should be less restrictive in 
applying cost of service principles to small systems owned by small 
cable companies. Yet it invites us to question cost information 
submitted by such systems by applying the stricter standards that we 
have found inappropriate for those systems. Because GMA's argument 
relies on overly restrictive standards, we find that it has not raised 
a material issue with respect to the reliability of those filings.
    17. In addition to its specific challenge to the per channel rate 
of $1.24, GMA recites several ``experiences'' of Georgia franchising 
authorities that purport to show that the small system rules ``are 
unfair to those franchising authorities who have invested a substantial 
amount of time and money in the rate regulation process.'' GMA further 
complains that these examples prove that ``the rules are unfair to 
subscribers, because some cable operators will increase rates well 
beyond the level which subscribers would pay if competition existed.'' 
These conclusory allegations do not refute the specific findings or 
analyses set forth in the Small System Order and do not state a basis 
for us to reconsider that order. Furthermore, franchising authorities 
had no reasonable reliance interest in our rules remaining unchanged. 
As for practices of the individual operators identified in the GMA 
petition, we do not believe it is appropriate for us to make specific 
findings in this context regarding the propriety of those practices. To 
the extent cable operators fail to abide by our rules, local 
franchising authorities may take appropriate action.
    18. For the reasons stated above, we hereby deny GMA's petition for 
reconsideration.
B. The New Jersey Board Petition
    19. The New Jersey Board objects to the Small System Order to the 
extent it requires local franchising authorities to permit eligible 
systems to use the small system cost of service methodology in cases 
pending as of the date the Small System Order was released. In support 
of its petition, the New Jersey Board describes the potential impact of 
the Small System Order upon a rate case pending before it. That case 
involves the rates charged by Service Electric Cable TV of Hunterdon 
(``Service Electric''). Service Electric filed a standard cost of 
service showing with the New Jersey Board on July 14, 1994. Pursuant to 
that showing, Service Electric sought to increase its monthly rates 
from $21.00 to $26.31 for its 60-channel basic service tier. That case 
was pending when the Commission released the Small System Order on June 
5, 1995, although the staff of the New Jersey Board had negotiated a 
tentative settlement with Service Electric that was subject to the 
approval of the New Jersey Board. Before such approval occurred, 
Service Electric gave notice of its intent to attempt to justify its 
proposed rate increase by filing FCC Form 1230.
    20. The New Jersey Board contends that under the small system cost 
of service rules, Service Electric might be able to justify the rate 
increase it sought in its initial showing to the Board or, potentially, 
an even greater increase. According to the New Jersey Board, the rules 
governing the information that a franchising authority may seek in 
conjunction with its review of Form 1230 are so restrictive that it 
will be ``difficult if not impossible to challenge'' the rate the 
operator seeks to justify. The New Jersey Board also notes that under 
the small system cost of service rules, the burden is on the 
franchising authority to show the unreasonableness of the rate sought 
by an eligible small system if that rate does not exceed $1.24 per 
regulated channel. The New Jersey Board asserts that this 
``unprecedented'' shift in the burden of proof will ``necessitate the 
use of Board and State resources not usually required'' in order to 
establish the unreasonableness of the rate sought by the cable 
operator.
    21. Based on the above, the New Jersey Board argues that it will be 
``precluded from establishing whether Service Electric's subscribers 
are being charged a reasonable rate,'' assuming the operator meets the 
small system and small cable company definitions. The New Jersey Board 
also asserts the alleged unfairness of applying the small system cost 
of service rules to the pending case in light of the resources that it 
already has expended in the case.
    22. As an initial matter, we note that the petition seeks 
reconsideration of a Commission rule of general applicability based 
solely on the potential effect of that rule on a single rate case 
affecting approximately 3,000 cable subscribers. The Commission is 
charged with structuring a national framework of rate regulation. A 
broader and more representative showing of the rule's impact is 
necessary for us to review the merits of a particular rule or 
regulatory approach.
    23. Further, the New Jersey Board fails to refute the underlying 
analysis supporting our decision to apply the new rules to pending 
cases. We adopted this approach based upon our balancing of various 
factors. With respect to rate regulation, Congress specifically 
directed us to reduce the administrative burdens and ease the costs of 
compliance for smaller systems. In the Small System Order, we concluded 
that our then existing rules ``have significantly burdened small 
systems.'' We designed the small system cost of service rules to remedy 
this problem.

[[Page 53575]]

Having determined small systems' need for immediate relief, we deemed 
it in the public interest to provide such relief accordingly. We 
believe that it is appropriate to apply a new rule to pending cases 
where the new rule serves to alleviate an existing restriction on 
regulated parties, as the small system cost of service rules did by 
creating an additional method for eligible systems to justify their 
rates. In addition, were pending cases not made subject to the new 
rules, subscribers in some areas might have received refunds when the 
pending cases were decided, followed immediately by rate hikes when the 
systems put new rates into effect prospectively in accordance with the 
small system cost of service methodology. Applying the new small system 
rules to pending cases avoids this confusing ``roller-coaster'' result.
    24. We decided that the small system cost of service rules would 
not affect final decisions of local franchising authorities made before 
the release of the Small System Order. In these cases, the public 
interest, and in particular the interests of administrative finality, 
dictated that the final decision of a local franchising authority 
should not be subject to reconsideration or appeal under the small 
system rules.
    25. By seeking reconsideration, the New Jersey Board suggests, 
implicitly, that we erred in finding a need for immediate relief. Yet 
it offers no arguments or evidence to refute this finding and thus 
presents no basis to reconsider it. The New Jersey Board's statement of 
a policy preference cannot overcome the evidence concerning the plight 
of smaller systems that was before us when we adopted the Small System 
Order. As James Cable Partners and Rifkin and Associates, Inc. argues, 
it makes no sense ``to complete pending cases under pre-existing 
criteria that do not embody the policy and statutory concerns that led 
to the adoption of the Small System Order in the first place.'' 
Likewise, the New Jersey Board does not dispute the ``roller-coaster'' 
effect on rates that would result if the new rules were not applied to 
pending cases.
    26. The New Jersey Board contends that application of the small 
system rules to the pending Service Electric case will result in a 
waste of the resources it already has expended in that case. It objects 
to our decision to place on the franchising authority the burden of 
proving the unreasonableness of a proposed rate that does not exceed 
$1.24 per regulated channel. The New Jersey Board suggests that the 
presumption of reasonableness that will attach to such a rate, coupled 
with the limitations on the information it can demand from the 
operator, effectively will preclude it from determining whether a 
particular rate is reasonable. We disagree.
    27. We understand the frustration of the New Jersey Board with 
respect to its prior expenditure of resources in accordance with the 
standard cost of service rules. We note, however, that those 
expenditures were made with notice of the possibility that we would 
modify the rules governing small systems. Unfortunately, rule changes 
and rule modifications sometimes lead to inefficiencies and disruptions 
for both the regulator and the regulated. We are forced to balance 
these factors against the impact of delaying implementation of the new 
rule. Since the Service Electric case is the only matter in which a 
franchising authority has articulated this concern, we cannot conclude 
that the problem is so significant to require us to reconsider our 
prior decision. We do not believe that the Small System Order will 
result in squandered resources even in the Service Electric case. The 
efforts already expended by the New Jersey Board in amassing data and 
making factual determinations will not have been wasted since they are 
relevant when the New Jersey Board decides the rate case in accordance 
with the small system rules.
    28. More generally, we disagree with the New Jersey Board's 
characterization of the permissible scope of information requests that 
a franchising authority may make when reviewing Form 1230. The Small 
System Order expressly recognizes the right of franchising authorities 
to obtain ``the information necessary for judging the validity'' of the 
filing. No information has been submitted to indicate that anything 
more than what this rule permits is necessary.
    29. We further find that the New Jersey Board has failed to raise a 
valid argument against imposing the burden of proof on the franchising 
authority when the rate in question does not exceed $1.24 per channel. 
What it terms an ``unprecedented shift in the burden of proof'' is the 
logical extension of our determination that rates at or below $1.24 per 
regulated channel appear reasonable. The New Jersey Board does not 
challenge the analysis by which we arrived at the rate of $1.24 per 
channel. While not disputing that rates at or below $1.24 per channel 
can be presumed reasonable, the New Jersey Board would ignore this 
finding in individual rate proceedings and continue to place upon the 
cable operator the burden of establishing the reasonableness of its 
requested rate, regardless of the amount. We believe that having made 
the determination that rates at or below $1.24 per channel may by 
presumed reasonable, we should shift the burden of proof to the 
franchising authority when the operator seeks to justify rates that do 
not exceed that amount. The New Jersey Board does not contest this 
analysis and therefore we have no basis to reconsider our decision.
    30. For these reasons, we hereby deny the New Jersey Board's 
Petition. The New Jersey Board presents the same arguments in its 
Motion for Stay as it does in its Petition. Therefore, for the same 
reasons that we deny its Petition, we also deny the New Jersey Board's 
Motion for Stay.
C. Other Matters
    31. On our own motion, we clarify one aspect of our rule that 
allocates the burden of establishing whether the rate claimed by a 
cable operator under the small system cost of service methodology is 
reasonable. As discussed above, the current rule states: ``If the 
maximum rate established on Form 1230 does not exceed $1.24 per 
channel, the rate shall be rebuttably presumed reasonable.'' Thus, the 
current wording of the rule suggests that the burden depends on the 
maximum rate permitted by Form 1230, not on the rate that the operator 
intends to charge. Such an interpretation would create an anomaly where 
an operator determines that its maximum permitted rate is above $1.24 
per regulated channel, but does not actually intend to charge more than 
$1.24. We did not intend for the operator to have the burden of 
overcoming all of the presumptions we generally found to be 
inappropriate for eligible small systems, if the actual rate the 
operator seeks to charge is within the zone of what we presume to be 
reasonable. To eliminate this potential confusion, we hereby clarify 
that the presumption of reasonableness shall apply as long as the 
actual rate to be charged does not exceed $1.24 per regulated channel, 
regardless of whether the maximum permitted rate, as calculated on Form 
1230, exceeds that amount. The burden shall shift back to the operator 
once it seeks to actually raise rates above the $1.24 per channel 
threshold.
    32. We also take this opportunity to correct three editing errors 
that appeared in the rules appendix to the Small System Order. These 
corrections do not amend the substance of the rules in any way.
    33. In the Small System Order, we provided for the treatment of a 
small system that properly sets its rates in

[[Page 53576]]

accordance with the small system cost of service methodology, but later 
experiences a change in its status, either because the system exceeds 
the 15,000-subscriber cap for a small system or because the operator 
exceeds the 400,000-subscriber threshold for a small cable company. 
While the text of the order explained the regulatory effect of such a 
transition, the accompanying rules did not. Here we amend the rules 
consistent with the text of the Small System Order.
    34. As discussed above, the Small System Order provided for the 
application of the small system cost of service rules to cases pending 
as of the release date of the order if the cable operator in question 
met the subscriber threshold criteria as of the release date and as of 
the date the system became subject to rate regulation. The rules 
appendix inadvertently referred to the effective date, instead of the 
release date, of the Small System Order for purposes of this rule. We 
hereby revise the text of Sec. 76.934(h)(9) of our rules to conform it 
with our intent as set forth in the Small System Order.
    35. Due to an editing error, the rules appendix to the Small System 
Order did not accurately indicate that we were revising the eligibility 
criteria for streamlined rate reduction to incorporate the new small 
system and small cable company definitions established in the Small 
System Order. We hereby amend Sec. 76.922(b)(5) of our rules to conform 
it with our intent as set forth in the Small System Order.

V. Final Regulatory Flexibility Certification

    36. As permitted by Section 605(b) of the Regulatory Flexibility 
Act, 5 U.S.C. 605(b), (``RFA''), we certify that a regulatory 
flexibility analysis is not necessary because the amendments to the 
rules adopted in this order will not impose a significant economic 
impact on a substantial number of small entities as defined by statute, 
by our rules, or by the Small Business Administration. 5 U.S.C. 605(b). 
Three of the amendments merely correct the rules and have no 
substantive effect. In addition, we clarified that the operator's 
presumption of reasonableness is preserved when the operator's actual 
rate charged does not exceed $1.24 per regulated channel, regardless of 
the maximum permitted rate calculated on Form 1230. Because this 
clarification will benefit small systems owned by small cable 
companies, we believe a regulatory flexibility analysis is unnecessary. 
This certification conforms to the RFA, as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996.
    37. The Commission will send a copy of this certification, along 
with this order, in a report to Congress pursuant to the Small Business 
Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 801(a)(1)(A), and 
to the Chief Counsel for Advocacy of the Small Business Association, 5 
U.S.C. 605(b).

VI. Ordering Clauses

    38. Accordingly, It Is Ordered that, pursuant to the authority 
granted in sections 4(i), 4(j), 303(r), and 623 of the Communications 
Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), 303(r), and 543, the 
petitions for reconsideration filed by the Georgia Municipal 
Association and the New Jersey Board of Public Utilities, and the 
Motion for Stay filed by the New Jersey Board of Public Utilities, are 
denied.
    39. It Is Further Ordered that, pursuant to the authority granted 
in sections 4(i), 4(j), 303(r), and 623 of the Communications Act of 
1934, as amended, 47 U.S.C. 154(i), 154(j), 303(r), and 543, 76.922 and 
76.934 of the Commission's rules, 47 CFR 76.922 and 76.934, are amended 
as set forth below.
    40. It Is Further Ordered that the Commission shall send a copy of 
this Fourteenth Order on Reconsideration, including the Final 
Regulatory Flexibility Certification, to the Chief Counsel for Advocacy 
of the Small Business Administration.

List of Subjects in 47 CFR Part 76

    Administrative practice and procedure, Cable television, Reporting 
and recordkeeping requirements.

Federal Communications Commission.
William F. Caton,
Acting Secretary.

Rule Changes

    Part 76 of Title 47 of the Code of Federal Regulations is amended 
as follows:

PART 76--CABLE TELEVISION SERVICE

    1. The authority citation for Part 76 continues to read as follows:

    Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a, 
307, 308, 309, 312, 315, 317, 325, 503, 521, 522, 531, 532, 533, 
534, 535, 536, 537, 543, 544, 544a, 545, 548, 552, 554, 556, 558, 
560, 561, 571, 572, 573.

    2. Section 76.922 is amended by revising paragraph (b)(5)(i) 
introductory text to read as follows.


Sec. 76.922  Rates for the basic service tier and cable programming 
services tiers.

* * * * *
    (b) * * *
    (5) Streamlined rate reductions. (i) Upon becoming subject to rate 
regulation, a small system owned by a small cable company may make a 
streamlined rate reduction, subject to the following conditions, in 
lieu of establishing initial rates pursuant to the other methods of 
rate regulation set forth in this subpart:
* * * * *
    3. Section 76.934 is amended by revising paragraphs (h)(5)(i) and 
(h)(9) and by adding paragraph (h)(11) to read as follows:


Sec. 76.934  Small systems and small cable companies.

* * * * *
    (h) * * *
    (5) * * *
    (i) If the maximum rate established on Form 1230 does not exceed 
$1.24 per channel, the rate shall be rebuttably presumed reasonable. To 
disallow such a rate, the franchising authority shall bear the burden 
of showing that the operator did not reasonably interpret and allocate 
its cost and expense data in deriving its annual operating expenses, 
its net rate base, and a reasonable rate of return. If the maximum rate 
established on Form 1230 exceeds $1.24 per channel, the franchising 
authority shall bear such burden only if the rate that the cable 
operator actually seeks to charge does not exceed $1.24 per channel.
* * * * *
    (9) In any rate proceeding before a franchising authority in which 
a final decision had not been issued as of June 5, 1995, a small system 
owned by a small cable company may elect the form of rate regulation 
set forth in this section to justify the rates that are the subject of 
the proceeding, if the system and affiliated company were a small 
system and small company respectively as of the June 5, 1995 and as of 
the period during which the disputed rates were in effect. However, the 
validity of a final rate decision made by a franchising authority 
before June 5, 1995 is not affected.
* * * * *
    (11) A system that is eligible to establish its rates in accordance 
with the small system cost-of-service approach shall remain eligible 
for so long as the system serves no more than 15,000 subscribers. When 
a system that has established rates in accordance with the small system 
cost-of-service approach exceeds 15,000 subscribers, the system

[[Page 53577]]

may maintain its then existing rates. After exceeding the 15,000 
subscriber limit, any further rate adjustments shall not reflect 
increases in external costs, inflation or channel additions until the 
system has re-established initial permitted rates in accordance with 
some other method of rate regulation prescribed in this subpart.

[FR Doc. 97-27151 Filed 10-14-97; 8:45 am]
BILLING CODE 6712-01-P