020-94-Ordinance-Amending Cable TV Rate Regulations-10/03/1994GITY sEmEwy
CITY OF SANGER, TEXAS ORIGINAL Copy
ORDINANCE NO. #020-94
AN ORDINANCE AMENDING MODEL CABLE TV RATE REGULATION
ORDINANCE; PROVIDING FOR REPEAL OF ORDINANCES IN
CONFLICT; PROVIDING A SEVERABILITY CLAUSE; AND, PROVIDING
FOR AN EFFECTIVE DATE.
SECTION 1.
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF SANGER, TEXAS:
SECTIONS 1 - 21 - Amendments to Cable T.V. Rate Regulation with
Annotated Version For Discussion Only.
SECTION 2. Definitions.
(g) 2 Small system. A small system is a cable television
system that serves 1,000 or fewer subscribers. The service area of a
small system is determined by the number of subscribers that are
served by a syste&s principal headend, including any other
headends or microwave receive sites that are technically
integrated to the system's principal headend.
Section 3.3 Information to be provided by cable operator on monthly
bills.
A cable operator must provide the following information to subscribers
on monthly bills:
(a) A statement substantially the same as the following:
"The basic service tier rates and related equipment and installation
charges are regulated by the City. If you have any questions or
comments regarding these rates, you may call or write the City at P. O.
Box 578, Sanger, Texas 76266, 817-458-7930";
TFor all cable systems subject to regulation, the rates permitted between September 1,
1993 and May 16, 1994, and refund liability with respect to such rates, will be determined by
the initial FCC regulations adopted on April 1, 1993, on which the original rate regulation
ordinance was based. The lawfulness of rates in effect on or after May 15, 1994, and refund
liability with respect to such rates, will be determined in accordance with the FCC's revised
rules effective on May 15, 1994, upon which these ordinance amendments are based.
2§ 7CL901 (c). Change from "system that serves fewer than 1,000 subscribers" to
0system, that serves 1,000 or fewer subscribers.
3 § 76.952 The 5/15/94 revision adds subparagraph (b).
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(b) The name, mailing address and phone number of the
Cable Services Bureau of the FCC; and
(c) The FCC community unit identifier for the cable
system.
Section 4. Negative Option Billing.`
Section 6.5 Rates for the basic service tier.'
(a) Basic service tier rates. Basic service tier rates are
subject to regulation by the City in order to assure that they are
in compliance with the requirements of 47 U.S.C. § 543. Rates
that are demonstrated, in accordance with this ordinance, not to
exceed the "Initial Permitted Per Channel Charge" or the
"Subsequent Permitted Per Channel Charge" as described below, or
the equipment charges as specified in Section 7, will be accepted
as in compliance. The maximum monthly charge per subscriber for
the basic service tier offered by a cable operator shall consist
of a permitted per channel charge multiplied by the number of
`The FCC has clarified that the negative option billing prohibition applies
to all cable services offered by all cable operators, regardless of whether the
operators are subject to effective competition. The FCC has stated that this
is more in the nature of a consumer protection measure rather than a rate
regulation provision per se. As such, it could just as well fit into a franchise
ordinance as in a rate regulation ordinance. There is no change to the text of
this section.
s§ 76.922. With the exception of subparagraph (a), the 5/15/94 revision
substantially rewrote and reorganized this section.
`The FCC has clarified that the Act requires a uniform rate structure
throughout the operator's franchise areas, regardless of whether the operator
is exempted from rate regulation in some portions of its service area by the
"effective competition" provisions of the Act.
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channels on the tier, plus a charge for franchise fees. The
maximum monthly charges for the basic service tier shall not
include any charges for equipment or installations. Charges for
equipment and installations are to be calculated separately
pursuant to Section 7 of this ordinance.
(b) Permitted Charge on May 15, 1994. (1) For purposes of
this section, the initial date of regulation for the basic service
tier shall be the date on which the City gives written notice to
the cable operator that (A) the City has been certified by the
Commission to regulate rates for the basic service tier' and (B)
this ordinance has been adopted by the City.'
(2) For purposes of this section, rates "in effect on the
initial date of regulation" or "in effect on September 30, 1992,"
shall be the rates charged to subscribers for service received on
that respective date.
'The FCC has determined that it will allow certified cities to notify the
FCC that they have decided not to regulate rates, upon their determination that
rate regulation would no longer serve the best interests of local cable
subscribers. Cities are specifically prohibited from accepting consideration
in exchange for their decision to decertify. The FCC has retained, however, the
right to review such determinations and seek an explanation from the City
concerning the factual finding underlying its decision to decertify. The FCC
will not prohibit a City from again seeking certification, even after it has
decertified.
'The FCC will continue to assert jurisdiction over basic rates when the
City's certification is denied for failure to adopt regulations that are
consistent with the FCC's rate rules. This is intended to be an interim
solution, to avoid a regulatory vacuum when the City has affirmatively sought
certification, until the City can conform its regulations or overcome its legal
impediment to satisfy federal regulations and become certified.
The FCC will, however, allow a City to cure any nonconformance with the
FCC rules that does not involve a substantial or material regulatory conflict
before it will revoke the City's certification and assume jurisdiction. The FCC
will revoke the jurisdiction of the City for non-conformance when the state and
local laws involve a substantial and material conflict with the FCC's
regulations.
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(3) The permitted charge for the basic service tier shall be,
at the election of the cable operator, either:
(i) A rate determined pursuant to a cost -of -service
proceeding;
(ii) The full reduction rate;
(iii) The transition rate, if the system is eligible
for transition relief; or
(iv) A rate based on a streamlined rate reduction, if the
system is eligible to implement such a rate reduction. Except
where noted, the term "rate" in this subsection means a rate
measured on an average regulated revenue per subscriber basis.
(4) Full reduction rate.' The "full reduction rate" on May
15, 1994, is the system's September 30, 1992 rate, measured on an
average regulated revenue per subscriber basis, reduced by 17
percent, and then adjusted for the following:
(i) the establishment of permitted equipment rates as
required by Section 7;
(i i) inflation measured by the GNP -PI between October
1, 1992 and September 30, 1993;10
9A system whose rate level being justified is below the full reduction rate
will be permitted to raise its rate level up to the full reduction rate level.
This is because the full reduction level establishes the reasonable rate level
for that system under these rate regulations. Any system that sets its rates
at the full reduction level will be entitled to adjust those rates in the future
for annual inflation, changes in external costs, and changes in the number of
regulated channels.
10Inflation adjustments are allowed on an annual basis. Cable systems will
be able to file for an inflation adjustment for the period beginning October 1,
1993 and ending June 30, 1994 once the final GNP -PI for the quarter ending June
30, 1994 is released. The FCC is using a June 30 cycle for inflation because
the final GNP -PI is generally released 90 days after the end of each quarter.
The FCC anticipates that operators will have the final GNP -PI figure for June,
30, 1994 by September 30, 1994, in time for their first annual rate adjustment.
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(iii) changes in the number of program channels subject
to regulation that are offered on the system's basic service
tier between September 30, 1992 and the earlier of the initial
date of regulation for basic service or February 28, 1994;11
and
(iv) changes in external costs that have occurred between
the earlier of the initial date of regulation for basic
service tier or February 28, 1994, and March 31, 1994.
(5) March 31 1994 benchmark rate.12 The "March 31, 1994
benchmark rate" is the rate so designated using the calculations
in Form 1200.13
11Channels added to or deleted from regulated tiers between September 30,
1992 and the date of initial regulation (or February 28, 1994, whichever occurs
earlier) are handled through application of the old benchmark methodology
pursuant to the calculations set forth in FCC Form 393. Channel changes that
occur between the date of initial regulation (or February 28, 1994, where
applicable) and the effective date of the new rules are accorded external cost
treatment only (to reflect changes in programming costs), since going -forward
rules to govern those changes had not yet been adopted. Channel changes
occurring after 5/15/94 will be governed by the going -forward methodology adopted
in these rules.
12March 31, 1994 is used as the measure for determining transition treatment
because that date is the end of the first quarter in calendar year 1994. The
FCC has adopted standardized quarters for calculating quarterly changes in
external costs (and annual changes for inflation).
11 To compare its rates to the benchmark, a cable system will first calculate
its "regulated revenue per subscriber" for the franchise area at issue as of
March 31, 1994. The "regulated revenue per subscriber" is the cable system's
revenue from its basic and cable programming service tiers, plus its regulated
equipment revenue, divided by its number of subscribers. The cable system will
then calculate its "benchmark regulated revenue per subscriber" using the revised
benchmark formula. This benchmark rate will be based on the system's
characteristics as of March 31, 1994. The benchmark rate will incorporate the
17W competitive differential and will be adjusted for inflation to enable the
cable system to make a proper comparison between its actual March 31, 1994 rates
and the benchmark. The inflation adjustment is necessary because the benchmark
formula is based on data reflecting industry rates as of September 30, 1992.
The formula therefore must be inflated forward to March 31, 1994 to permit a
comparison with a system's actual March 31, 1994 rates.
If, on March 31, 1994, a system is involved in a pending rate proceeding
before either the City or the FCC, its March 31, 1994 rate will be the rate that
the regulator ultimately decides is reasonable. If the March 31, 1994 rates used
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(6) Transition rates." (A) A "system owned by a small
operator" is a system owned by an operator that has a total
subscriber base of 15,000 or fewer subscribers as of March 31,
1994. Such systems shall be eligible to establish a transition
rate for the basic tier in accordance with 47 CFR § 76.922.15
(B) A "low -price system" is a system (i) whose March 31, 1994
rate is below its March 31, 1994 benchmark rate, or (ii) whose
March 31, 1994 rate is above its March 31, 1994 benchmark rate, but
whose March 31, 1994 full reduction rate is below its March 31,
1994 benchmark rate, as defined above. Such systems shall be
eligible to establish a transition rate for the basic tier in
accordance with 47 CFR § 76.922,16
(C) Notwithstanding paragraphs (A) and (B) above, the
transition rate for the basic service tier shall be adjusted to
by the operator on FCC Form 1200 are subsequently found not to be lawful by the
City or the FCC, the operator will be required to update the rates submitted in
the form to reflect the proper rates.
"Systems eligible for transition relief will not be required to make the
full reduction otherwise required until the FCC has collected and analyzed data
about such operators' prices and costs, and determined whether such a reduction
is not inappropriate. The FCC anticipates that the price/cost data will be
collected through a cost study to be conducted by the FCC staff over a period
of six to nine months, beginning March 30, 1994. At the conclusion of the FCC's
analysis, systems eligible for transition relief will be required to make the
full reduction unless the analysis reveals that application of the 17W
competitive differential to these systems is inappropriate.
15The transition rate for qualifying systems with below -benchmark rates will
be their March 31, 1994 rates, as appropriately updated since that date. For
qualifying systems whose March 31, 1994 rate is above the benchmark, but whose
full reduction rate is below the benchmark, their transition rate will be the
benchmark rates, as appropriately updated.
"Although systems qualifying for transition treatment are relieved from
immediate application of the full competitive differential, they are not relieved
from other requirements, and must (1) set equipment rates at cost, (2) unbundle
equipment charges from programming rates, and (3) apply an average rate per
channel when setting program tier charges.
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reflect any determination by the City that the rate in effect on
March 31, 1994 was higher (or lower) than that permitted under
applicable regulations. Refund liability for such rates shall be
as set forth in 47 CFR § 76.922.
(7) Streamlined rate reductions.l' Small systems that are not
owned by or affiliated with any other system ("independent
systems"), and small systems owned by small multiple system
operators ("MSG's"), that have not already restructured their rates
to comply with the City's ordinance, may establish rates for the
basic service tier and related equipment by making a streamlined
rate reduction, in accordance with 47 CFR § 76.922.182 "Small
MSO's" are those multiple system operators that:
(i) service 250,000 or fewer total subscribers,
(ii) own only systems with less than 10,000 subscribers each,
"The FCC intends to develop average cost schedules for equipment. Until
this is accomplished, eligible small operators may make rate reductions by
reducing each regulated billed item by 14% (which equals the 17% competitive
differential reduced by approximately 3V inflation that occurred between October
1992 and September 1993). These systems are not required to file Form 1200.
All operators of small systems that do file FCC Form 1200 may aggregate their
equipment costs for their small systems when establishing equipment rates. Rates
established using the streamlined rate reduction process shall remain in effect
until (1) adoption of a further order by the FCC establishing a schedule of
average equipment costs; (2) the system increases its rates using the
calculations and time periods set forth in FCC Form 1211; or (3) the system
elects to establish permitted rates under another available option.
"If the City has been certified as of May 15, 1994, the operator must
notify the City and its subscribers in writing that it is electing to set its
rates by the streamlined rate reduction process. Such notice must be given by
June 15, 1994, and must also describe the new rates that will result from the
streamlined rate reduction process. These rates must then be implemented within
30 days after the written notification has been provided. If the City has not
been certified as of May 15, 1994, the small system must provide written notice
to the City and subscribers, as previously mentioned, within 30 days from the
date it receives the initial notice of regulation from the City. The rates must
then be implemented 30 days after the written notification. A small system is
required to give written notice of, and to implement, the rates that are produced
by the streamlined rate reduction process only once.
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(iii) have an average system size of 1,000 or fewer
subscribers.
(8) Establishment of initial regulated rates. Cable systems,
other than those eligible for streamlined rate reductions, shall
file FCC Forms 1200, 1205, and 1215 for the basic service tier by
June 15, 1994, or thirty days after the initial date of regulation.
A system that becomes subject to regulation for the first time on
or after July 1, 1994, shall also file Form 1210 at the time it
files FCC Forms 1200, 1205 and 1215.
(c) Subsequent Permitted Charge. The permitted charge for
the basic service tier after May 15, 1994 shall be, at the election
of the cable operator, either:
(1) A rate determined pursuant to a cost -of -service
showing, or
(2) a rate determined by application of the price cap
requirements set forth below to a permitted rate determined
in accordance with this section.
(d) Price cap requirements. After May 15, 1994, adjustments
for changes in external costs shall be calculated by subtracting
external costs from the system's permitted charge and making
changes to that "external cost component" as necessary. The
remaining charge, referred to as the "residual component," will be
adjusted annually for inflation. Cable systems shall use FCC Form
1210 (or Form 1211 where applicable) to justify changes in
permitted rates made pursuant to the price cap requirements.
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(1) Calendar year quarters. All systems must use a
calendar year quarter when adjusting rates under the price cap
requirements. The starting date of adjustments on account of
external costs for the basic service tier shall be the earlier
of the initial date of regulation or February 28, 1994.
(2) Inflation adjustments. The residual component of
a system's permitted charges for the basic service tier may
be adjusted annually on account of inflation. The annual
inflation adjustment shall be based on inflation occurring
from June 30 of the previous year to June 30 of the year in
which the inflation adjustment is made, except that the first
annual inflation adjustment shall cover inflation from
September 30, 1993 until June 30 of the year in which the
inflation adjustment is made. The adjustment may be made
after September 30, but no later than August 31 of the next
calendar year. Adjustments shall be based on changes in the
Gross National Product Price Index ("GNP -PI") published by the
Bureau of Economic Analysis of the United States Department
of Commerce. Cable systems that establish a transition rate
pursuant to 47 CFR § 76.922, shall not be permitted to adjust
rates on account of inflation until the transition rate
adjusted for external costs and changes in numbers of
regulated channels is less than, or equal to, the system's
full reduction rate adjusted for inflation, external costs and
changes in numbers of regulated channels.
(3) External costs.
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(i) Permitted charges for the basic service tier may
be adjusted up to quarterly to reflect changes in external
costs experienced by the cable system. In all events, a
system must adjust its rates annually to reflect any decreases
in external costs that have not previously been accounted for
in the system's rates. A system must also adjust its rates
annually to reflect any changes in external costs, inflation
and the number of channels on the basic tier that occurred
during the year if the system wishes to have such changes
reflected in its regulated rates. A system that does not
adjust its permitted rates annually to account for these
changes will not be permitted to increase its rates
subsequently to reflect the changes.
(ii) A system must adjust its rates in the next calendar
year quarter for any decrease in programming costs that
results from the deletion of a channel or channels from the
basic service tier.
(iii) Any rate increase made to reflect an increase in
external costs must also fully account for all other changes
in external costs, inflation and the number of channels on the
basic service tier that occurred during the same period. Rate
adjustments made to reflect changes in external costs shall
be based on any changes in those external costs that occurred
from the end of the last quarter for which an adjustment was
previously made through the end of the quarter that has most
recently closed preceding the filing of the FCC Form 1210 (or
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FCC Form 1211, where applicable). A system may adjust its
rates after the close of a quarter to reflect changes in
external costs that occurred during that quarter as soon as
it has sufficient information to calculate the rate change.
(iv) External costs shall consist of costs in the
following categories:
(1) State and local taxes applicable to provision of
cable television service;
(2) Franchise fees, which shall be calculated separately
as part of the maximum monthly charge per subscriber for the
basic service tier;
(3) Costs of complying with franchise requirements,
including costs of providing public, educational, and
governmental access channels as required by the City;
(4) Copyright fees incurred for the carriage of
broadcast signals offered on the basic service tier;
(5) Retransmission consent fees incurred after October
6, 1994, for the program channels or broadcast signals offered
on the basic service tier; and
(6) Other programming costs for the program channels or
broadcast signals offered on the basic service tier.
Adjustments to permitted charges to reflect changes in the
costs of programming purchased from affiliated programmers,
as defined in Section 2, shall be permitted as long as the
price charged to the affiliated system reflects either
prevailing company prices offered in the marketplace to third
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parties (where the affiliated program supplier has established
such prices) or the fair market value of the programming.
Adjustments to permitted charges on account of increases in
costs of programming shall be further adjusted to reflect any
revenues received by the operator from the programmer. In
calculating programming expense, operators may add a mark-up
of 7.5% for new programming added after May 15, 1994, and
shall reduce rates by decreases in programming expense plus
an additional 7.5t for decreases occurring after May 15, 1994.
(e) Changes in the number of channels on regulated tiers.
A system may adjust the residual component of its permitted rate
for the basic service tier to reflect change in the number of
channels offered on the tier on a quarterly basis, in accordance
with 47 CFR § 76.922.19
(f) Cost of Service Charge. A monthly cost -of -service charge
for the basic service tier is an amount that is calculated in
accordance with 47 CFR § 76.922(g).20
(g) Network upgrade rate increase.
(1) Cable operators that undertake significant network
upgrades requiring added capital investment may justify an
"Cable systems must use FCC Form 1210 to justify rate changes made on
account of changes in the number of channels on a regulated tier. § 76.922(e)
provides a table indicating the cents per channel per subscriber per month by
which cable operators will adjust the residual component of their rates using
FCC Form 1210.
20§ 76.922(g) sets out detailed requirements for a cost -of -service showing
whereby an operator will compute a monthly cost -of -service charge based on its
annual revenue requirement for the basic service tier. The FCC's rules follow
the utility model in describing the revenue requirement, the return component,
the expense component, and the rate base.
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increase in rates for the basic service tier by demonstrating
that the capital investment will benefit subscribers.
(2) A rate increase on account of upgrades shall not be
assessed on customers until the upgrade is complete and
providing benefits to customers of the basic service tier.
(3) Cable operators seeking an upgrade rate increase
have the burden of demonstrating the amount of the net
increase in costs, taking into account current depreciation
expense, likely changes in maintenance and other costs,
changes in regulated revenues, and expected economies of
scale.
(4) Cable operators seeking a rate increase for network
upgrades shall allocate net cost increases in conformance with
the cost allocation rules as set forth in 47 CFR § 76.924.
(5) Cable operators that undertake significant upgrades
shall be permitted to increase rates by adding the
benchmark/price cap rate to the rate increment necessary to
recover the net increase in cost attributable to the upgrade.
(h) Hardship rate relief. A cable operator may adjust
charges by an amount specified by the City for the basic service
tier if it is determined that:
(1) Total revenues from cable operations, measured at
the highest level of the cable operator's cable service
organization, will not be sufficient to enable the operator
to attract capital or maintain credit necessary to enable the
operator to continue to provide cable service;
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(2) The cable operator has prudent and efficient
management; and
(3) Adjusted charges on account of hardship will not
result in total charges for regulated cable services that are
excessive in comparison to charges of similarly situated
systems.
(i) Cost of service showing. A cable operator that elects
to establish a charge, or to justify an existing or changed charge
for the basic service tier, based on a cost -of -service showing must
submit data to the City in accordance with forms established by the
FCC. The cable operator must also submit any additional
information requested by the City to resolve questions in cost -
of -service proceedings.
(j) Subsequent Cost of Service Charges. No cable operator
may use a cost -of -service showing to justify an increase in any
charge established on a cost -of -service basis for a period of 2
years after that rate takes effect, except that the City may waive
this prohibition upon a showing of unusual circumstances that would
create undue hardship for a cable operator.
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(a) Cumulative offerings of unregulated per -channel or per -
program ("a la carte") video programming is not regulated if:
(i) the price for the combined package does not exceed
the sum of the individual charges for each component of
service, and
(ii) the cable operator continues to provide the
component parts of the package to subscribers separately in
addition to the collective offering.
The second condition will be met only when the per channel offering
provides consumers with a realistic service choice. Collective
offerings available on April 1, 1993 shall not be regulated if
subsequently offered on the same terms and conditions as were in
effect on that date.
(b) In reviewing a basic service rate filing, the City shall
make an initial decision addressing whether a collective offering
of "a la carte" channels will be treated as an unregulated service
or a regulated tier. The City shall make this initial decision
within the 30 day period established for review of basic cable
rates and equipment costs in Section 13, or within the first 60
days of an extended 120 day period (if the City has requested an
2'47 CFR § 76.986.
22Under the 1992 Cable Act, video programming offered on a per channel or
per program ("a la carte") basis is not subject to rate regulation. The FCC is
concerned that operators have been removing programming from regulated tiers in
an effort to circumvent regulation. Under its revised regulations, the FCC is
permitting cities to make the initial determination as to whether a collective
offering of "a la carte" channels should be considered a regulated tier, even
if the collective offering would be a cable programming service tier if it were
regulated.
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additional 90 days) pursuant to Section 13. The City shall provide
notice of its decision to the cable operator and shall provide
public notice of its initial decision within seven days. Operators
or consumers may make an interlocutory appeal of the initial
decision to the FCC. Operators shall provide notice to the City
of their decision whether or not to appeal to the FCC within this
period. Consumers shall provide notice to the City of their
decision to appeal to the FCC within this period.
(c) A limited initial decision under paragraph (b) shall toll
the time periods under Section 13 within which the City must decide
a rate case. The time period shall resume running seven days after
the FCC decides the interlocutory appeal, or seven days following
the expiration of the period in which an interlocutory appeal
pursuant to paragraph (b) may be filed.
(d) The City may alternatively decide whether a collective
offering of "a la carte" channels will be treated as an unregulated
service or a cable programming services tier as part of its final
decision setting rates for the basic service tier. That decision
may then be appealed to the FCC as provided in the FCC's rules.
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Section 7.23Rates for equipment and installation used to receive
the basic service tier.
(1) Company -wide averaging of equipment costs. For the
purpose of developing unbundled equipment charges as required by
Section 7(b), a cable operator may average the equipment costs of
its small systems at any level, or several levels, within its
operations. This company -wide averaging applies only to an
operator's small systems as defined in Section 2 above; is
permitted only for equipment charges, not installation charges; and
may be established only for similar types of equipment. When
submitting its equipment costs based on average charges to the
City, an operator that elects company -wide averaging of equipment
costs must provide a general description of the averaging
methodology employed and a justification that its averaging
methodology produces reasonable equipment rates. The City may
require the operator to set equipment rates based on the operator's
level of averaging in effect on April 3, 1993, as required by
Section 8(c).
(m) Cable operators shall maintain adequate documentation to
demonstrate that charges for the sale and lease of equipment and
for installations have been developed in accordance with the rules
set forth in this section.
21 § 76.923. The 5/15/94 revisions add paragraphs (1) and (m).
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Section 8.24 Cost accounting and cost allocation requirements.
(a) Applicability. The requirements of this section are
applicable for purposes of rate adjustments on account of external
costs and for cost -of -service showings.
(b) Accounting requirements. Cable operators electing cost -
of -service regulation or seeking rate adjustments due to changes
in external costs shall maintain their accounts:
(1) in accordance with generally accepted accounting
principles; and
(2) in a manner that will enable identification of
appropriate investments, revenues, and expenses.
(c) Accounts level. Except to the extent indicated below,
cable operators electing cost -of -service regulation or seeking
adjustments due to changes in external costs shall identify
investments, expenses, and revenues at the franchise, system,
regional, and/or company level(s) in a manner consistent with the
accounting practice of the operator on April 3, 1993. However, in
all events, cable operators shall identify at the franchise level
their costs of franchise requirements, franchise fees, local taxes,
and local programming.
(d) Summary accounts.
(1) Cable operators filing for cost -of -service regulation
shall report all investments, expenses, and revenue and income
24 § 76.924. The 5/15/94 revisions require cable operators to keep their
accounts according to a Uniform System of Accounts, similar to that system
required of telephone companies. The revisions also clarified several allocation
issues that had proved troublesome under the original regulations.
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adjustments accounted for at the franchise, system, regional,
and/or company level(s) to the summary accounts listed in 47 CFR
§ 76.924(d).
(2) Cable operators shall not be required to report their
investments, expenses and revenues to the summary accounts listed
in 47 CFR § 76.924(d) for the purposes of adjusting rates based on
changes in their external costs.
(e) Allocation to service cost categories.
(1) For cable operators electing cost -of -service regulation,
investments, expenses, and revenues contained in the summary
accounts identified in 47 CFR § 76. 924 (d) , shall be allocated among
the Equipment Basket, as specified in Section 7 (c) , and the service
cost categories specified in 47 CFR § 76.924(e).
(2) Cable operators seeking an adjustment due to changes in
external costs identified in FCC Form 1210 shall allocate such
costs among the Equipment Basket and the service cost categories
specified in 47 CFR § 76.924(e)(2).
(f) Cost Allocation Requirements.
(1) Allocations of investments, expenses and revenues among
the service cost categories and the Equipment Basket shall be made
at the organizational level in which such costs and revenues have
been identified for accounting purposes pursuant to Section 8(c).
(2) Costs of programming and retransmission consent fees
shall be directly assigned or allocated only to the service cost
category in which the programming or broadcast signal at issue is
offered.
1206\000-007.ORD 19
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ORIGINAL COPY
(3) Costs of franchise fees shall be allocated among the
Equipment Basket and the service cost categories in a manner that
is most consistent with the methodology of assessment of franchise
fees by the City.
(4) Costs of public, educational, and governmental access
channels carried on the basic tier shall be directly assigned to
the basic tier where possible.
(5) All other costs that are incurred exclusively to support
the Equipment Basket or a specific service cost category shall be
directly assigned to that service cost category or the Equipment
Basket where possible.
(6) Costs that are not directly assigned shall be allocated
to the service cost categories in accordance with the following
allocation procedures:
(i) Wherever possible, common costs for which no
allocator has been specified are to be allocated among the
service cost categories and the Equipment Basket based on
direct analysis of the origin of the costs.
(ii) Where allocation based on direct analysis is not
possible, common costs for which no allocator has been
specified shall, if possible, be allocated among the service
cost categories and the Equipment Basket based on indirect,
cost -causative linkage to other costs directly assigned or
allocated to the service cost categories and the Equipment
Basket.
120e\000-007.ORD 2 0
ORIGINAL CCPy
(iii) Where neither direct nor indirect measures of cost
allocation can be found, common costs shall be allocated to
each service cost category based on the ratio of all other
costs directly assigned and attributed to a service cost
category over total costs directly or indirectly assigned and
directly or indirectly attributable.
(g) Cost identification at the franchise level. After costs
have been directly assigned to and allocated among the service cost
categories and the Equipment Basket, cable operators that have
aggregated costs at a higher level than the franchise level must
identify all applicable costs at the franchise level in the
following manner:
(1) Recoverable costs that have been identified at the
highest organizational level at which costs have been identified
shall be allocated to the next (lower) organizational level at
which recoverable costs have been identified on the basis of the
ratio of the total number of subscribers served at the lower level
to the total number of subscribers served at the highest level.
(2) Cable operators shall repeat the procedure specified in
subsection (1) of this section at every organizational level at
which recoverable costs have been identified until such costs have
been allocated to the franchise level.
(h) Part-time channels. In situations where a single channel
is divided on a part-time basis and is used to deliver service
associated with different tiers or with pay per channel or pay per
view service, a reasonable and documented allocation of that
120e\000-007.ORD 2 1
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channel between services shall be required along with the
associated revenues and costs.
(i) Transactions with affiliates. Adjustments on account of
transactions with affiliates shall be determined as set forth in
47 CFR § 76.924 (i) .25
(j) Unrelated expenses and revenues. Cable operators shall
exclude from cost categories used to develop rates for the
provision of basic service tier and equipment, any direct or
indirect expenses and revenues not related to the provision of such
services. Common costs of providing basic service tier and
equipment, and unrelated activities shall be allocated between them
in accordance with paragraph (f) of this section.
Section 11.26 Notification of proposed rate increase.
(a) A cable operator shall provide written notice to a
subscriber and the City of any increase in the price to be charged
for the basic service tier or associated equipment at least 30 days
before any proposed increase is effective. The notice shall state
the precise amount of any rate change and briefly explain in
readily understandable fashion the cause of the rate change (e.g.,
inflation, changes in external costs or the addition/deletion of
2S§ 76.924(i) provides detailed instructions for adjustments on account of
affiliate transactions in order to ensure that the expenses and revenues are
properly allocated.
"§ 76.964. The 5/15/94 revisions require more explanation to be given by
the operator regarding proposed rate increases, and also require the operator
to provide to subscribers the address and phone number of the Cable Services
Bureau of the FCC, and inform the subscribers of their right to file complaints
with the Bureau.
1206\000-007.OM 22
channels). When the change involves the addition or deletion of
channels, each channel added or deleted must be separately
identified.
(b) The notice to subscribers shall include a provision
stating that protests to such prices for the basic service tier and
related equipment may be filed with the City at Sanger,201 Bolivar,
Sanger, TX
[address of City]. The notice shall also include a statement that
such protests must be filed with the City no later than 30 days
after the notice is received by the subscriber. Notices to
subscribers shall also inform them of their right to file
complaints about changes in cable programming service tier rates
and services with the FCC within 45 days of the rate or service
change being reflected in their bill, and shall provide the address
and phone number of the Cable Services Bureau of the FCC.
Section 12.17 Initiation of review of basic cable service and
equipment rates.
A cable operator shall file its schedule of rates for the
basic service tier and associated equipment with the City within
30 days of receiving written notification from the City that the
City has been certified by the Commission to regulate rates for the
basic service tier. Basic service and equipment rate schedule
filings for existing rates or proposed rate increases (including
increases in the baseline channel change that results from
"§ 76.930. The 5/15/94 revisions require the operator to use the
appropriate FCC forms, and to include rate cards and channel line-ups in their
rate filings.
1206\000-007.ORD 2 3
reductions in the numbers of channels in a tier) must use the
appropriate official FCC form, a copy thereof, or a copy generated
by FCC software.'' Failure to file on the official FCC form, a copy
thereof, or a copy generated by FCC software, may result in the
imposition of sanctions specified in Section 15(d). A cable
operator shall include rate cards and channel line-ups with its
filing and include an explanation of any discrepancy in the figures
provided in these documents and its rate filing."
"If a cable operator has made a rate filing on a non -FCC form prior to
5/15/94, the City may order that the form be ref iled within 14 days. The City's
deadline to rule on the reasonableness of the rates is tolled pending receipt
of the correct form.
"The FCC has recognized that some operators promptly revised their rates
in response to the first FCC rules, based on rate -setting facts in existence at
the time of the revisions. Some of the facts upon which the rate -setting is
based may have changed, and, therefore, these rates may not now be reasonable.
The FCC has stated that it is important that regulatory authorities be able to
verify accurately the reasonableness of a current rate, and avoid compounding
any inaccuracies as subsequent rate increases are introduced, which are a
function of the level of initial rates.
Therefore, when current rates are accurately justified by analysis using
the old data (and that data was accurate at the time), operators will not be
required to change their rates. However, when such operators make any subsequent
changes in their rates (such as when seeking their annual inflation increase),
those changes must be made from rate levels derived from the updated information.
When current rates are not justified by analysis using the old data (so that a
rate adjustment would be necessary in any event), the operator will be required
to correct its rates pursuant to current data.
The FCC has stated that in any case, the City retains the discretion to
permit retention of an established rate that is close to, but not exactly, the
rate justified by the benchmark system, with a corresponding reduction taken from
the next rate increase, in order to reduce rate churn, if it determines that this
best serves the interests of the cable subscribers within its jurisdiction.
1206\000-007.ORD 2 4
Section 13.30 City review31 of basic cable rates and equipment
costs."
(a) After a cable operator has submitted to the City for
review its existing rates for the basic service tier and associated
equipment costs, or a proposed increase in these rates (including
increases in the baseline channel charge that results from
reductions in the number of channels in a tier), the existing rates
will remain in effect or the proposed rates will become effective
after 30 days from the date of submission to the City. Provided,
however, that the City may toll this 30-day deadline for an
additional time by issuing a brief written order as described in
paragraph (d) within 30 days of the rate submission explaining that
it needs additional time to review the rates. The City may, at any
time, require the cable operator to produce additional information,
including proprietary information, that the City deems necessary
30§ 76.933. The 5/15/94 revisions added the provisions found in (f) and
"The Act does not prohibit cities, if so authorized by state and/or local
law, from delegating their rate -making responsibilities to a local commission
or other subordinate entity, even if that entity is not the "franchising
authority" entitled to certification under the Act.
"The FCC continues to defer to the City in determining the most appropriate
use of formal hearings. The FCC suggests, however, that the City examine its
current procedural requirements for other local proceedings (such as zoning) and
determine the best forum for providing due process to cable operators. If the
cable operator believes that the City has denied the operator due process,
pursuant to § 76.944, the operator may raise that argument in its appeal to the
local courts of the City's written decision.
Although not specifically included within this ordinance, it should be
noted that the FCC has amended § 76.944(b) to require any party filing an appeal
of a local rate decision to serve a copy of the appeal on the appropriate
decision -making authority.
120e\000-007.0RD 2 5
in order to make a rate determination.33 The City shall state a
justification for each item of information requested and, where
related to a specific FCC Form, indicate the question or section
of the form to which the request specifically relates. If
proprietary information is provided, the provisions of Section 14
hereof will apply to such information."
(f) The City reserves the right to request that the FCC
examine a cable operator's cost -of -service showing, in accordance
with 47 CFR 9 76 . 933 (d) .35
(g) Cable operators shall comply with the City's requests for
information, orders, and decisions. No cable operator shall, in
any information submitted to the City in making a rate
determination pursuant to a Form 393 or Form 1200 filing, or a
cost -of -service showing, make any misrepresentation or willful
"The FCC clarified that the City can request proprietary information that
is reasonably necessary to make a rate determination, whether pursuant to a cost -
of -service showing or when applying the competitive differential.
"If the City is unable to determine whether a particular portion of a
proposed rate increase is reasonable, and if that portion is clearly severable,
the City may, in its discretion, permit the implementation of those portions of
a rate increase it finds reasonable while it reviews the reasonableness of other
portions.
'SIn order to request the FCC's assistance, the City must file a petition
for special relief under § 76.7 of the FCC's rules, within 30 days of receipt
of a cost -of -service showing. The City must, prior to the 30-day deadline, issue
a brief order that it is seeking assistance from the FCC, and it must serve a
copy of the order on the cable operator. In its request for FCC assistance, the
City must explain its reasons for seeking such assistance, such as lack of
adequately trained personnel, lack of financial resources, or other
circumstances. When the operator is notified of the City's request, it must
deliver its cost showing to the FCC within 15 days. The FCC will issue a ruling
that makes cost determinations for the basic service tier. The ruling will also
set an appropriate cost -based rate, and will become binding on the City and the
cable operators. The operator or the City may seek reconsideration by the staff,
or review by the full Commission.
1206\000-007.ORD 2 6
material omission bearing on any matter within the City's
jurisdiction.
Section 14.36 Proprietary Information.
Section 15." Burden of proof.
(d) The City may find a cable operator that does not attempt
to demonstrate the reasonableness of its rates in default and,
using the best information available, enter an order finding the
cable operator's rates unreasonable and mandating appropriate
relief, as specified in Sections 18 and 19 hereof.38
(e) The City may order a cable operator that has filed a
facially incomplete form to file supplemental information, and the
City's deadline to rule on the reasonableness of the proposed rates
will be tolled pending receipt of such information. The City may
set reasonable deadlines for the filing of such information, and
may find the cable operator in default and mandate appropriate
"§ 76.938. The FCC has made it clear that the City should proceed in
accordance with applicable local and state law rather than mandating the adoption
of procedures analogous to the FCC's rules. The existing Section 14 in the
ordinance complies with the Texas Open Records Act, Chapter 552 Government Code,
and need not be revised.
"§ 76.937. The 5/15/94 revisions set out the ability of the City to
declare an operator in default, and to toll its action deadlines pending receipt
of information from the operator. The FCC has further clarified that to the
extent the City has the power, under state or local law, to impose forfeitures
or fines for violation of its rules, orders, or decisions, including filing
deadlines and orders to provide information, there is nothing in the Act or the
FCC's rules which would prevent the City from taking such action. The City can
also report to the FCC any violations of the FCC's rules, and the FCC will take
appropriate action. Because the City's rules are almost identical to the FCC's
rules, a violation of one will almost always be a violation of the other.
"The appropriate relief can include, for example, ordering a prospective
rate reduction and a refund, based on the best information available at the time.
1206\000-007.0" 2 7
relief, pursuant to paragraph (d) of this section, for the cable
operator's failure to comply with the deadline or otherwise provide
complete information in good faith.
Section 16.39 Small systems.40
Option 1: (a) A small system, as defined in Section 2, may certify
that the small system's initial rates for basic service and
associated equipment comply with Section 6 hereof. A certification
by a small system under this Section shall be filed with the City
within 30 days of receiving written notification from the City that
the City has been certified by the Commission to regulate rates for
the basic service tier. The certification shall be in writing,
shall be signed by the General Manager of the system, and shall be
verified.
(b) Such certification shall be subject to verification by
the City on its own motion or upon complaint by a subscriber. The
City may request additional information from the operator in order
to verify the certification. In the event proprietary information
is requested by the City, the provisions of Sections 13 and 14
hereof shall control the request for and the availability of such
information to the public.
79S 76.934
"Although small systems can use the streamlined rate filing process, these
options are still available to the City. For cities that have already provided
initial notices of regulation to operators during the stay of regulation, the
notices are deemed to have been made as of May 15, 1994.
1206\000-007.oen 2 8
(c) As used in this section, "initial rates" shall mean those
rates charged by the small system operator on the date on which the
City gives written notice to the cable operator that (A) the City
has been certified by the Commission to regulate rates for the
basic service tier and (B) this ordinance has been adopted by the
City.
(d) If the City determines that the small system's
certification is in error, it shall so notify the small system
operator and shall require the small system to comply with all
filing requirements for non -small systems in this ordinance.
(e) Subsequent rate filings by a small system operator shall
comply in all respects with the provisions of this ordinance.
(f) Small systems may obtain an extension of time to
establish compliance with rate regulations, provide they can
demonstrate that timely compliance would result in severe economic
hardship. Requests for extension of time are to be addressed to
the City. The filing of a request for an extension of time to
comply with the rate regulations will not toll the effective date
of rate regulation for small systems or alter refund liability for
rates that exceed permitted levels after May 15, 1994.
Option 2: (a) A small system, as defined in Section 2, may certify
that the small system's rates for basic service and associated
equipment, and subsequent rate increases, comply with Section 6
hereof. A certification by a small system under this Section for
its initial rates shall be filed with the City within 30 days of
receiving written notification from the City that the City has been
1206\000-007.oen 2 9
certified by the Commission to regulate rates for the basic service
tier. Certifications for subsequent rate increases shall be filed
with the City at the same time that notice is given to the small
system's subscribers of the proposed rate increase, in conformance
with Section 11 hereof. All certifications shall be in writing,
shall be signed by the General Manager of the system, and shall be
verified.
(b) Such certification shall be subject to verification by
the City on its own motion or upon complaint by a subscriber. The
City may request additional information from the operator in order
to verify the certification. In the event proprietary information
is requested by the City, the provisions of Sections 13 and 14
hereof shall control the request for and availability of such
information to the public.
(c) If the City determines that the small system's
certification is in error, it shall so notify the small system
operator and shall require the small system to comply with all
filing requirements for non -small systems in this ordinance.
(d) Small systems may obtain an extension of time to
establish compliance with rate regulations, provide they can
demonstrate that timely compliance would result in severe economic
hardship. Requests for extension of time are to be addressed to
the City. The filing of a request for an extension of time to
comply with the rate regulations will not toll the effective date
of rate regulation for small systems or alter refund liability for
rates that exceed permitted levels after May 15, 1994.
120e\000-007.oen 3 0
Section 17. Written Decision.41
Section 18. Reduction of Rates; Prescription of Rates.42
Section 19." Refunds."
(a) The City may order a cable operator to refund to
subscribers that portion of previously paid rates determined by the
City to be in excess of the permitted tier charge or above the
actual cost of equipment, unless the operator has submitted a cost -
of -service showing which justifies the rate charged as reasonable.
"Although the 5/15/94 revisions do not amend this section, the FCC's report
and order clarifies that provided the issuance of the decision by the City
satisfies the public notice requirements, the City may determine the particular
form such rate decisions will take.
"The FCC affirmed its intention to disallow settlement agreements that are
based on factors outside the record of a rate proceeding. Parties in a rate -
setting proceeding may stipulate to particular facts and even the final rate
level itself, so long as the basis for each such stipulation is clearly
articulated, there is some support for each stipulation in the record, and it
does not circumvent the FCC's rate regulations.
"§ 76.942. The 5/15/94 revisions clarified the procedure for ordering
refunds, and provided for a refund of franchise fees by the City if a refund of
rates is ordered.
"In general, regulated systems who select the benchmark approach to setting
rates will be required to comply with the revised rules by May 15, 1994, in order
to avoid refund liability. For those systems that cannot comply in this time
period, they are not subject to refund liability for an additional 60 days after
May 15, 1994, as long as certain conditions are met:
(1) the system may not change any rate for regulated service or equipment,
or restructure any regulated service or equipment offering between March
30 and July 14, 1994;
(2) the system must still give at least 30 days notice to subscribers for
any rate or service changes they ultimately make in response to the new
rules;
(3) all rate and service restructuring must be completed by July 14, 1994
in order to avoid refund liability. Restructuring is completed when bills
reflecting the rate and service change have been issued to subscribers.
1206\000-007.oan 3 1
An operator's liability for refunds shall be based on the
difference between the old bundled rates and the sum of the new
unbundled program service charge(s) and the new unbundled equipment
charge(s). Where an operator was charging separately for program
services and equipment but the rates were not in compliance with
the City's rules, the operator's refund liability shall be based
on the difference between the sum of the old charges and the sum
of the new, unbundled program service and equipment charges.
Before ordering a cable operator to refund previously paid rates
to subscribers, the City shall give the operator notice and
opportunity to comment. The operator's opportunity to comment upon
the proposed refunds may be at any meeting of the City Council
during the City's period of review of the operator's rates. If the
City has extended its review period under Section 13, and has
issued an accounting order under Section 13(e), then the operator,
prior to refunds being ordered, may request an opportunity to
appear before the City Council to comment upon the proposed
refunds.
(c) The refund period shall run as follows:
(1) From the date the operator implements a prospective
rate reduction back in time to September 1, 1993, or one year,
whichever is shorter.
(2) From the date the City issues an accounting order
pursuant to Section 13(d) hereof, to the date a prospective
rate reduction is issued, then back in time from the date of
the accounting order to the effective date of the rules;
1206\000-007.oan 3 2
however, the total refund period shall not exceed one year
from the date of the accounting order.
(3) Refund liability shall be calculated on the
reasonableness of the rates as determined by the rules in
effect during the period under review by the City.
(f) At the time the City orders a cable operator to pay
refunds to subscribers, the City shall return to the cable operator
an amount equal to that portion of the franchise fee that was paid
on the total amount of the refund to subscribers. The City shall
promptly return the franchise fee overcharge either in an immediate
lump sum payment, or the cable operator may deduct it from the
cable system's future franchise fee payments.
1206\000-007,oxn 3 3
however, the total refund period shall not exceed one year from the
date of the accounting order.
(3) Refund liability shall be calculated on the reasonableness of the
rates as determined by the rules in effect during the period under review by
the City.
(f) At the time the City orders a cable operator to pay refunds to
subscribers, the City shall return to the cable operator an amount equal to
that portion of the franchise fee that was paid on the total amount of the
refund to subscribers. The City shall promptly return the franchise fee
overcharge either in an immediate lump sum payment, or the cable operator
may deduct it from the cable system's future franchise fee payments.
SECTION 20.
It is hereby declared to be the intention of the City Council that the
sections, paragraphs, sentences, clauses, and phrases of this Ordinance are
severable and, if any phrase, clause, sentence, paragraph, or section of this
Ordinance shall be declared unconstitutional by the valid judgment or
decree of any court of competent jurisdiction, such unconstitutionality shall
not affect any of the remaining phrases, clauses, sentences, paragraphs, and
sections of this Ordinance, since the same would have been enacted by the
City Council without the incorporation in this Ordinance of any such
unconstitutional phrase, clause, sentence, paragraph, or section.
SECTION 21.
This Ordinance will take effect immediately from and after its passage
and the publication of the caption as the law in such cases provides.
PASSED AND APPROVED this 3rd day of _ October 1994,
by the City Council of the City of Sanger, Texas.
ATTES
Rosalie Chavez
City Se t,
n (�B
0 0
A®L � 33
APPROVED:
Nel Armstrong
Mayor