Before the FEDERAL COMMUNICATIONS COMMISSION FCC 94-40 Washington, DC 20554 In the Matter of ) ) Implementation of Sections of the ) Cable Television Consumer Protection and ) Competition Act of 1992: ) ) Rate Regulation ) MM Docket No. 92-266 ) Buy-Through Prohibition ) MM Docket No. 92-262 Third Order on Reconsideration Adopted: February 22, 1994 Released: March 30, 1994 By the Commission: Commissioner Barret issuing a statement. TABLE OF CONTENTS Paragraph Introduction 1 I. Competition Issues 2 A. Definitions and Findings of Effective Competition 3 1. Measurement of Subscribership 5 2. Presumption of Availability -- Satellite-Delivered Services 8 3. Program Comparability 11 4. Seasonal Households and Subscribers 15 B. Geographically Uniform Rate Structure 18 II. Tier Buy-Through Prohibition 25 III. Procedural and Jurisdictional Issues 31 A. Certification Process 31 1. Franchising Authority's Decision Not to Regulate 36 2. Franchise Fee Rebuttal Showing 39 3. Voluntary Withdrawal of Certification 44 4. Franchising Authority's Failure to Meet Certification Requirements 47 5. Revocation of Certification 51 B. Franchising Authority's Basic Rate Decision 1. Cost-of-Service Showings for Basic Tier Rates 58 2. Delegation of Authority and Form of Decision 62 3. Due Process Concerns 64 4. Appeals 67 5. Settlement of Rate Cases 70 6. Effective Date of Rate Increases 72 7. Proprietary Information 74 8. Forfeitures and Fines 80 9. Franchising Authority Discretion 81 C. FCC Form 393 (FCC Forms 1200/1205) Issues/Failure to File 1. Failure to File Rate Justification 82 2. Deficient Rate Justifications; Additional Information 86 3. Updating Rate Calculations 93 4. Computer-generated Forms 95 D. Refund Issues 1. Commission Authority to Allow Franchising Authority to Order Refunds on Basic Tier Rates 99 2. Refund Computations 103 3. Refunds as Affecting Franchise Fee Liability 105 4. Calculation of Refunds on Basic Rates 107 5. Calculation of Refunds on Cable Programming Service Complaints 110 E. Cable Programming Service Complaint Process 1. Effective Date of Cable Programming Service Regulation 118 IV. Provisions Applicable to Cable Service Generally 122 A. Negative Option Billing Practices 123 B. Prevention of Evasions 132 C. Grandfathering of Rate Agreements 137 D. Subscriber Bill Itemization 1. Special Taxes 139 2. Advertising of Rates 142 3. Itemization of "Franchise Related" Costs144 E. Effective Date 145 V. Equipment and Installation 147 A. Promotions 148 B. Seasonal Property Related Charges 151 C. Sale of Home Wiring 154 D. Time Lag 157 VI. Ordering Clauses 159 Appendices INTRODUCTION 1. In recent months, this Commission has taken a number of steps to implement the rate regulation provision of the Cable Consumer Protection and Competition Act of 1992 ("1992 Cable Act," "Cable Act," or "Act"). In May 1993, we issued our Report and Order and Further Notice of Proposed Rule Making in MM Docket No. 92-266 ("Rate Order" and "First Further Notice"), 8 FCC Rcd 5631 (1993), which: 1) developed a process for identifying those situations where effective competition exists, and rate regulation is thus precluded; 2) established the boundaries between federal responsibilities, on the one hand, and state and local responsibilities, on the other hand; and 3) developed procedural and substantive rules to govern the regulation of basic service tier rates, regulated upper tier rates, equipment rates, and rates for leased access channels. In this Third Order on Reconsideration, we dispose principally of those issues raised on reconsideration of the Rate Order or encountered in our initial implementation of rate regulation that do not relate to the calculation of rates. Specifically, we further clarify the definition of "effective competition" in Section 623(l) of the Act, 47 U.S.C. 543(l); affirm our rules regarding tier buy-through prohibitions; address procedural and jurisdictional issues pertaining to the regulatory process, including certification, basic rate decisions, and refund issues; clarify our rules governing evasions, grandfathering of rate agreements, subscriber bill itemization and advertising of rates; consider remaining issues regarding equipment and installation; and clarify several points with regard to FCC Form 393 (the benchmark calculation form) and FCC Forms 1200 and 1205 (the new calculation forms). Two companion Orders dispose of reconsideration issues involving calculation of rates, provide special regulatory relief for small systems, adopt additional regulations to govern rate increases, and adopt interim cost-of-service rules. Issues raised on reconsideration of the leased access provisions adopted in the Rate Order will be considered in a future order. I. COMPETITION ISSUES 2. In considering the legislation that was to become the 1992 Cable Act, Congress noted that "[w]hile cable passes more than 95 percent of U.S. television households, and presently more than 60 percent of households subscribe to cable, cable's competitors service, in the aggregate, fewer than 5 percent of American households." Congress further found that without the presence of other multichannel video programming distributors, a cable system faces no local competition, which results in undue market power for the cable operator as compared to that of consumers and video programmers. Our rate regulations are designed to set "reasonable" rates, which we construe to be rates that would be charged by cable operators subject to effective competition. A. Definitions and Findings of Effective Competition 3. Under the 1992 Cable Act, rate regulation applies only to cable systems that are not subject to "effective competition" as defined in that Act. 47 U.S.C.  543(a)(2). Section 623(l)(1) of the Act further provides that "effective competition" exists if one of three tests is met: (A) fewer than 30 percent of the households in the franchise area subscribe to the cable service of a cable system; (B) . . . the franchise area is (i) served by at least two unaffiliated multichannel video programming distributors each of which offers comparable video programming to at least 50% of the households in the franchise area; and (ii) the number of households subscribing to programming services offered by multichannel video programming distributors other than the largest multichannel video programming distributor exceeds 15% of the households in the franchise area; or (C) a multichannel video programming distributor operated by the franchising authority for that franchise area offers video programming to at least 50 percent of the households in that franchise area. 47 U.S.C.  543(l)(1). 4. Our First Order on Reconsideration ("First Rates Reconsideration") addressed issues concerning the first of these statutory tests (i.e., the "low penetration" systems listed in Section 623(l)(1)(A)) and procedures for demonstrating the presence of "effective competition" as defined by the Act. We here consider several remaining issues, most of which involve situations arising under the second statutory test, in which a second cable operator, or other multichannel video provider, actually competes with the subject cable operator. 5. Measurement of Subscribership. As stated above, under the second statutory test, a cable operator is not subject to rate regulation if a competing multichannel distributor serves at least 50% of the households in the subject system's franchise area and more than 15% of the subscribers in the franchise area subscribe to the competitive service (or services). 47 U.S.C.  543(l)(1)(B). We previously adopted various rules to implement this test. One of these rules provides that, in calculating whether 15% or more of the households in a franchise area subscribe to all but the largest multichannel video programming distributor, we shall consider the subscribership of competing multichannel distributors on a cumulative basis. However, only the subscribers of those multichannel distributors that offer programming to at least 50 percent of the households in the franchise area shall be included in this cumulative measurement. 47 C.F.R.  76.905(f); Rate Order, supra at 5665. 6. Time Warner argues that the statute does not allow us to include only those multichannel distributors that offer programming to at least 50% of the households in the franchise area. It contends that the two tests in subsections 543(l)(1)(B)(i) and (ii) may be met independently, i.e., that all competitors' subscribers should be counted, however small their areas of service, if any competitor reaches 50% of the households in the franchise area. Time Warner also argues that its interpretation addresses the Commission's concern with eliminating rate regulation when only "select portions of a franchise area might receive a choice of several multichannel video programming distributors, while the remainder of the franchise area is left without such alternatives." See Rate Order, supra at 5663. It contends that the 50% reach requirement assures the presence of a competitive alternative for most of the franchisee's customers. 7. Time Warner has not persuaded us to change our interpretation. As we stated in the Rate Order, we interpret Section 623(l)(1)(B) as providing that effective competition exists only where competitive multichannel service is a viable alternative in a significant portion of the franchise area at issue. Id. at 5665. This interpretation ensures that a cable operator is not subject to rate regulation where a substantial number of subscribers have alternative competitive choices, so that the remaining subscribers have the benefit of the price discipline imposed by the cable operator's need to meet competition in a significant portion of its market. The contrary interpretation advanced by Time Warner would permit a cable company to escape rate regulation even if it faced only a single, ineffective competitor in a majority of its territory, along with a variety of niche competitors to whom it would not necessarily be compelled to provide a competitive response and to whom few of its customers could turn for a competitive alternative. Moreover, in light of the almost universal "offering" of multichannel satellite service, the Time Warner proposal would make the 15% actual subscribership test the sole determinative factor in almost all situations, rendering Section 623(l)(2)(B)(i) superfluous. Thus, we affirm our original interpretation of the test adopted in the Rate Order. 8. Presumption of Availability -- Satellite-Delivered Services. The second statutory test for effective competition requires, in part, that at least two unaffiliated multichannel distributors each offer comparable programming to at least 50% of the households in a franchise area. 47 U.S.C.  543(l)(1)(B). We previously concluded that multichannel programming is "offered" if it is both technically available (i.e., it can be delivered to a household with only minimal additional investment by the multichannel distributor) and actually available (i.e., potential subscribers must be aware of its availability from marketing efforts). 47 C.F.R.  76.905(e). Furthermore, as discussed below, the Rate Order stated that multichannel video programming distribution service received from satellites via satellite master antenna television service ("SMATV") or television receive-only earth station ("TVRO") reception is technically available nationwide in all franchise areas that do not, by regulation, restrict the use of home satellite dishes. Rate Order, supra at 5659, 60. 9. Three parties, the National Association of Telecommunications Officers and Advisors (NATOA), King County, and Bellsouth Telecommunications, seek elimination of the presumption that satellite service is available, as a technical matter, on a nationwide basis where the use of satellite dishes is not restricted by, for example, local zoning laws. Noting that SMATV service is available only in buildings with multiple dwelling units, they contend that it is incorrect to presume that SMATV service is available to 50% of the households in all franchise areas because there may not be enough multiple dwelling units in a specific franchise area to account for 50% of its households. 10. These parties appear to misunderstand the analysis set forth in the Rate Order. There is no dispute that multichannel video programming is available throughout the United States from satellite stations (except where there are reception obstacles such as zoning restrictions). Because subscription to satellite service is accomplished alternatively through either SMATV or TVRO facilities, we permitted both to be included toward meeting the 15 percent subscription test, even though SMATV service, taken alone, might not be available to 50% of the households in a franchise area. We clearly recognized that SMATV service is generally available only in multiple dwelling units and were not suggesting, contrary to petitioners' filings, that SMATV service by itself might in some theoretical sense be capable of serving the entire nation. Rather, we concluded, and continue to believe, that satellite service is generally available from one or the other of these complementary sources, and it is reasonable to measure actual acceptance of satellite services in any area by collectively counting both SMATV and TVRO subscribership toward the 15 percent test. The fact that it may be the building owner or the manager or the residents of a building collectively who select SMATV service, rather than individual households, does not mean that households in multiple dwelling units do not have a competitive option to cable service. Moreover, where satellite-delivered services achieve a penetration rate of 15%, or are sufficient to contribute meaningfully to a 15% overall penetration rate for competitors, the cable operator presumably will respond to that competition with a competitive offering of its own with no less vigor than if that level of competition came from a terrestrially-based medium. 11. Program Comparability. The Rate Order also adopted a rule defining when a competing multichannel distributor is offering "comparable programming" under the second statutory test for effective competition. Id. at 5666, 67. The rule provides that "[i]n order to offer comparable programming . . . a competing multichannel video programming distributor must offer at least 12 channels of video programming, including at least one channel of nonbroadcast service programming." 47 C.F.R.  76.905(g). 12. NATOA argues that the failure to adopt an earlier Senate version of the second statutory test for effective competition, which was based inter alia on the presence of "a sufficient number of local television broadcast signals" in a franchise area, indicates Congress's intent that broadcast stations not be taken into account in determining what constitutes comparable programming. NATOA thus concludes that our definition of "comparable programming" is inconsistent with this legislative intent that broadcast service programming cannot be considered at all when determining the presence of effective competition. There is no specific language in the Conference Report indicating why the Senate version was not adopted, and NATOA is merely speculating as to the meaning of the omission of the Senate language from the final version. Moreover, NATOA's interpretation of the legislative intent is not supported by the plain meaning of subsection (i), which contains no language prohibiting the Commission from taking into account broadcast service programming in determining when competing multichannel distributors are offering "comparable programming." Indeed, we believe that the failure to include such a prohibition in subsection (i) may be more properly interpreted as an intent by Congress to give the Commission flexibility in crafting a definition of "comparable programming." Thus, contrary to NATOA's claim, Congress's apparent decision that over-the-air broadcast signals alone do not constitute "effective competition" does not prohibit us from taking account of broadcast stations delivered by cable. 13. NATOA also contends that a multichannel distributor offering 12 channels of video programming is not offering programming "comparable" to a cable system that provides, for example, 60 channels of programming. It suggests that the Commission should consider a multichannel distributor to be offering programming comparable to a local cable system only if there is a 20% or less difference in the number of channels of nonbroadcast programming offered by the distributors. This argument was specifically rejected in our Rate Order, and NATOA has offered no new argument. (See id. at 5666, 67, and n. 126.) While we recognize that a 12- channel video delivery system is not identical to a 60-channel system, we do not believe that actual channel parity is necessary to provide a competitive alternative. In fact, some disparity in the number of channels offered should lead to a greater price difference, which may enhance the choice presented to subscribers. In addition, as we noted in the Rate Order, any definition of "comparable programming" will be complemented by the 15% penetration requirement which will, in effect, measure subscribers' evaluation of the comparability of the program offering. 14. NATOA also questions the Commission's conclusion that our "definition of 'comparability' should ensure alternative service is competitively comparable to a minimum basic tier service that an incumbent cable operator could offer." Rate Order, supra at 5666. The petitioner contends that this is too narrow a reading of "comparable programming" or "effective competition" and that these terms should include entities that provide competition to the package of services offered by cable operators, and not just to the basic service tier of the incumbent cable operator. We do not agree. Since there is a wide variety in the number and types of channels that different cable systems offer, we believe that it is reasonable to take into account the minimum basic service tier in determining when competing multichannel distributors are offering programming comparable to that of a local cable system. Such an approach will ensure that competing multichannel distributors have at least the programming characteristics common to all cable systems. Accordingly, we will not change the definition of "comparable programming" adopted in the Rate Order. 15. Seasonal Households and Subscribers. The Rate Order defined the term "households" as follows: "[e]ach separately billed or billable customer will count as a household subscribing to or being offered video programming services. . . ." 47 C.F.R.  76.905(c). In addition, individual units in multiple dwelling buildings are counted as separate households even though they may not be separately billed. Id. 16. Higgins Lake Cable, Inc., a small cable system operator, reports that its subscribership fluctuates significantly during different seasons of the year, so that it may be a "low penetration system" within the meaning of Section 623(l)(1)(A), 47 U.S.C. 543(l)(1)(A), at some times but not others. It suggests that the Commission define the term "households" to include all dwelling units, whether they are seasonal or not, in determining whether a system is a low penetration system. Higgins Lake believes that such an approach would relieve operators of administrative burdens in determining the total number of households within their franchise areas that are occupied on a full-time as opposed to a seasonal basis. 17. The term "household" was defined for purposes of the 1990 Census as "all the persons who occupy a housing unit," while "housing units" was defined to include both occupied and vacant units. Thus, "housing units" reflect the total dwelling units in a community, while a count of "households" reflects only occupied units. As used in the Cable Act, we presume that Congress did not intend "households" to have a different meaning than in the 1990 Census that would include vacant units or even partial-year vacant units. In any event, to permit an operator to include dwelling units that are empty for a significant portion of the year in determining its penetration rate would eviscerate the validity of this measure as an indicator of the presence of effective competition. People who are not present cannot be presumed to be choosing local competitive alternatives. We believe that the best and most constant indicator of local viewers' choices is represented by the full-time residents of an area. Moreover, it is the full-time residents who are most affected by the determination whether their cable rates are subject to regulation. Consequently, the operator should measure its penetration rate of full-time subscribers as a percentage of full-time households, i.e., by excluding housing units used for seasonal, occasional, or recreational use. No party has demonstrated why this calculation should be a particular administrative burden, and we believe that it should be easily made from readily available information. B. Geographically Uniform Rate Structure. 18. The 1992 Cable Act requires cable operators to "have a rate structure, for the provision of cable service, that is uniform throughout the geographic area in which cable service is provided over its cable system." 47 U.S.C.  543(d). In the Rate Order, the Commission concluded that this provision was applicable only to regulated services in regulated markets. Rate Order, supra at 5896. The Commission then determined that the provision would be enforced on a franchise area by franchise area basis. Id. Finally, the Commission found that this provision did not prohibit all differences in rates between customers. Cable operators are not necessarily barred from distinguishing between seasonal and full-time subscribers and from offering promotional rates universally but for a limited time. Also, discounts for senior citizens or economically disadvantaged groups may be set. Additionally, nonpredatory bulk discounts to multiple dwelling units (MDUs) are permissible if offered on a uniform basis. Id. at 5897, 98. 19. A number of cable operators petition the Commission to allow negotiation of rates on a building-by-building basis and to clarify that the "competitive necessity" doctrine applies. Booth American, for example, argues that this is necessary to maintain flexibility to compete with multichannel video providers that target particular MDUs. Time Warner asserts that pervasive competition from alternate service providers exists in communities with significant numbers of MDUs, and Comcast fears that the Commission's current approach virtually guarantees a loss in cable's market share, since cable operators are prevented from responding to competitors' individual bids to MDUs. 20. The Cable Act is unequivocal in requiring uniformity of rates within a franchise area. It states: A cable operator shall have a rate structure, for the provision of cable service, that is uniform throughout the geographic area in which cable service is provided over its cable system. This language does not limit the provision to any particular class or classes of subscribers. In accordance with the statutory mandate, the Rate Order also specifically noted the Commission's concern that bulk discounts not be abused to displace other multichannel video providers from MDUs, which have become important footholds for the establishment of competition to incumbent cable systems. Id. at 5898. As King County points out, cable operators are not prevented from meeting competition -- as long as the same rate structure is offered to all MDUs in the franchise area. Moreover, cable operators may offer different rates to MDUs of different sizes and may set rates based on the duration of the contract, provided that the operator can demonstrate that its cost savings vary with the size of the building and the duration of the contract, and as long as the same rate is offered to buildings of the same size and contracts of similar duration. Thus, bulk arrangements on a variable basis between MDUs of the same size and contractual duration, though currently allowed by some franchising authorities, are specifically prohibited by the Act. 21. Continental and TCI urge the Commission to grandfather cable operators' existing contracts with MDUs. Continental argues that if these contracts are not grandfathered, cable operators will be forced to breach them, and TCI contends that the rates in these contracts are already at competitive levels and thus need not be regulated. 22. We believe that the elimination of existing contracts would be unnecessarily disruptive to those subscribers receiving discounts, as well as to those cable companies offering the discounts. Thus, contracts between cable operators and MDUs entered into on or before April 1, 1993, in which the contract rate is lower than the permitted regulated rate, may remain in effect until their previously agreed-upon expiration date. To the extent the Rate Order may have been interpreted by private parties to supersede existing contracts, which were accordingly rewritten, the terms of such contracts may be reinstituted without violating Commission rules. 23. King County requests reconsideration of the Commission's decision to limit the geographic uniformity requirement to regulated services in regulated markets. Rate Order at 5896. The Commission reasoned that while Section 623(d) contained no limiting provisions, the general thrust of the Act's rate regulation provisions was to rely more on general legal prohibitions against anticompetitive behavior, and less on cable industry-specific regulation, as markets become more competitive. Id. King County contends that the Commission's interpretation would permit operators to subsidize low rates in one franchise area (or portion thereof) that faces competition by charging excessive rates in a noncompetitive franchise area, and insists that this is exactly what Congress intended to prevent. 24. On reconsideration, we conclude that the uniform rate structure requirements of Section 623(d), 47 U.S.C.  543(d), should apply in all franchise areas, irrespective of the presence of "effective competition" as defined in the Act. The specific harms that the rate uniformity provision is intended to prevent -- charging different subscribers different rates with no economic justification and unfairly undercutting competitors' prices -- could occur in areas with head-to-head competition or low penetration sufficient to meet the Act's definition of "effective competition." This would not only permit the charging of noncompetitive rates to consumers that are unprotected by either rate regulation or competitive pressure on rates, but also stifle the expansion of existing, especially nascent, competition. As the Senate Report states: "This provision is intended to prevent cable operators from having different rate structures in different parts of one cable franchise ... [and] from dropping the rates in one portion of a franchise area to undercut a competitor temporarily." The statutory language does not provide, and the Senate Report does not suggest, that the rate uniformity provision should be limited to franchise areas where "effective competition" is absent. For example, if a wireless cable operator served 60% of the homes passed by a cable system in a franchise area and achieved a 30% penetration rate, effective competition would be found. Under our current rule, the cable operator would be free to charge one price where the wireless cable signal reaches and a higher price where it does not. That could result in the subsidization of the cable operator's competitive responses to the wireless cable operator by the 40% of consumers who do not have a choice of competing operators. Accordingly, we will apply the uniform rate structure requirement to all franchise areas, whether or not the cable system is exempted from rate regulation by the "effective competition" provisions of Section 623(b). II. TIER BUY-THROUGH PROHIBITION 25. The tier buy-through prohibition of the 1992 Cable Act prohibits cable operators from requiring subscribers to purchase a particular service tier, other than the basic service tier, in order to obtain access to video programming offered on a per-channel or per-program basis. 47 U.S.C.  543(b)(8). An exception is made for cable operators that are not technically capable of complying with this requirement during the next ten years. Id. In a previous decision, we adopted an implementing rule that (1) prohibits discrimination between subscribers of the basic service tier and other subscribers with regard to rates charged for video programming offered on a per-channel or per-program basis; (2) forbids any retiering of channels or services intended to frustrate the purpose of the tier buy-through provision; and (3) defines when cable systems are not technically capable of complying with this requirement. Report and Order in MM Docket No. 92-262 ("Tier Buy-Through Order"), 8 FCC Rcd 2274 (1993); 47 C.F.R.  76.921. At that time, we also determined that all cable systems are subject to the tier buy-through prohibition and our implementing rules. Id. at note 32. 26. Prime Cable, the operator of a cable system that is not subject to rate regulation because it has a low penetration rate, requests that the Commission reconsider its determination that the tier buy-through prohibition applies to all cable systems, including those subject to rate regulation. Petitioner argues that the placement of the buy-through prohibition within Section 623(b) of the 1992 Cable Act, 47 U.S.C. 543(b), limits the provision's scope to cable systems that are regulated since Section 623(b) generally relates to basic tier regulation. The petitioner contends that if Congress had intended a broader application of the buy- through prohibition, it would have placed the provision in a different section of the statute. 27. After considering the petitioner's arguments, we continue to believe that the tier buy-through provision applies to all cable systems, regardless of whether they are subject to rate regulation. The language of the provision clearly states, without limitation or qualification, that "a cable operator may not require the subscription to any tier other than the basic service tier . . . as a condition of access to video programming offered on a per channel or per program basis." 47 U.S.C.  543(b)(8). Congress could have easily limited this provision to regulated systems by expressly doing so. 28. This interpretation is necessary to fulfill the purpose of this provision and the general purposes of the 1992 Cable Act. As explained in the legislative history, the purpose of the tier buy-through provision "is to increase the options for consumers who do not wish to purchase upper cable tiers but who do wish to subscribe to premium or pay-per-view programs." Other parts of the legislative history indicate that one of the purposes of the Act is to encourage a greater unbundling of programming offerings and greater choice for subscribers. For example, in the context of defining the term "cable programming services," the Senate Report stated that "[t]hrough unbundling, subscribers have greater assurance that they are choosing only those program services they wish to see and are not paying for programs they do not desire." Applying the tier buy-through provision to all cable systems will accomplish this purpose more effectively than limiting the provision to cable systems subject to rate regulation. It is not apparent that cable systems exempted from rate regulation, i.e., those facing "effective competition" as defined for this purpose by the statute, are any more likely to provide buy-through capability of their own volition than those whose rates are regulated. Accordingly, to provide all cable subscribers with the maximum possible flexibility in paying for those programs they desire, it is necessary to apply the tier buy-through provision to all cable systems. 29. Prime Cable has not set forth convincing arguments for applying the tier buy-through provision only to rate regulated systems. The placement of the tier buy-through provision in Section 623(b) of the Communications Act does not suggest limited applicability. The tier buy-through provision is in a stand-alone paragraph of Section 623(b) that, unlike many of the other paragraphs of that section, does not deal with rate regulation. Senate Report at 77. We have also concluded in this Order that another paragraph of Section 623 that similarly lacks any limiting or qualifying language -- the geographically uniform rate structure provision -- applies to all cable systems. See para. 24, supra. Likewise, the provisions regarding negative option billing, also found in Section 623 of the Act, apply to all cable systems without regard to the presence or absence of effective competition. See discussion at para. 127, infra. Additionally, like the buy- through provision, the requirement that all "must-carry" channels be included on the basic tier shares the same subsection (623(b)) with the rate regulations, yet the must-carry requirement is also applicable to all cable systems. 30. Prime Cable's reference to a passage in the House Report explaining that the buy-through provision "prohibits cable operators from requiring subscribers to purchase any tier of service other than the regulated basic tier before being permitted to purchase programming offered on a per-channel or per-program basis" is not persuasive. Prime Cable contends that the House Report would not have used the term "regulated" unless the tier buy-through provision was intended to apply only in a rate regulated environment. We believe, however, that the legislative history was using the term descriptively in reference to basic tier service, which in most instances is subject to rate regulation, unlike per-channel or per-program offerings, which are not subject to regulation. We thus do not believe that a single reference to "the regulated basic tier" in the House Report should be read to add a limiting regulatory gloss to the plain language of the tier buy-through provision, which on its face refers to "cable operator" without limitation or qualification as to whether that operator's rates are subject to regulation. III. PROCEDURAL AND JURISDICTIONAL ISSUES A. Certification Process. 31. The 1992 Cable Act provides that primary responsibility for regulation of rates for basic tier service lies with local franchising authorities, and that the Commission will regulate the rates for all other regulated tiers of programming service. 47 U.S.C.  543(a)(2). All of our procedural rules and policies that implement rate regulation are designed to meet the twin goals of: 1) observing the prerogative and authority of local franchising authorities to determine whether to regulate basic rates and 2) protecting subscribers from excessive cable rates. 47 U.S.C.  543(b)(1). 32. In the April 1993 Rate Order, the Commission stated that the franchising authority must take the initiative to either regulate rates or seek the Commission's intervention and have us regulate basic tier rates, with the obvious implication that basic tier rates deemed acceptable by local authorities would not be regulated. We stated that we would not seek to regulate basic tier rates unless requested, or unless a franchising authority sought to regulate rates but was prevented from doing so because of a legal or regulatory obstacle. In devising this delineation of responsibilities, we declared that if this regulatory scheme failed to protect subscribers, we would reconsider its efficacy and, if appropriate, adopt another implementation scheme. Id. at 5640. 33. Before a franchising authority may regulate basic tier rates, it must first seek certification of its capability to regulate, adopt appropriate regulations, and then notify the cable operator that its rates are to be regulated. To qualify for certification, the franchising authority must possess the legal authority to adopt, and the personnel to administer, appropriate rate regulations. 47 U.S.C.  543(a)(3)(B). We provided that where certification is denied or revoked, we would exercise the franchising authority's regulatory jurisdiction until the franchising authority became certified or recertified. Id. at 5677, 5699. 34. On reconsideration, petitioners have challenged four different aspects of the certification process: 1) the Commission's decision not to assume jurisdiction over basic rates where the franchising authority chooses not to seek certification; 2) the Commission's automatic exercise of jurisdiction over basic rates upon denial of a franchising authority's request for certification; 3) the Commission's standards for revocation of certifications; and 4) the Commission's requirement that franchising authorities seeking to have the Commission regulate basic rates show that their franchise fees are insufficient to fund rate regulation at the local level. Each of these topics is taken up individually below. 35. At the outset, however, it is important to reiterate our firm resolve to effectively implement the Act's provisions to protect subscribers from unreasonable cable rates. It appears that many franchising authorities have not yet filed for certification to regulate rates. We believe that franchising authorities (i) are either uninformed (or misinformed) as to the simplicity and implications of seeking certification, (ii) have decided to wait until other franchising authorities have tested the water or shown them the way, or (iii) are awaiting the Commission's decision on reconsideration of the rate regulations before commencing regulation of basic rates. We intend to undertake a robust and widespread educational effort, and also expect that publicity about the regulatory results achieved by those franchising authorities that are in the forefront of rate regulation will greatly increase the number of authorities seeking certification to regulate rates. Given this expectation, we are reluctant to infringe on local authorities' regulatory prerogatives at this time. However, if our expectations are not promptly borne out, and too many subscribers are deprived of the benefits of the 1992 Cable Act due to inaction by their franchising authorities, we will revisit our stance on any and all of the certification- related issues discussed here. 36. Franchising Authority's Decision Not to Regulate. In the Rate Order, we analyzed carefully whether we should assert the authority to regulate basic rates when a franchising authority had not sought certification. We emphasized that Congress had vested in local franchising authorities the primary authority to regulate basic rates and that we therefore did not want to override a locality's decision not to regulate rates. We concluded that we would not assume jurisdiction in cases where a franchising authority does not apply for certification or directly request that the Commission regulate rates. Rate Order, supra at 5676. 37. Bell Atlantic and Bellsouth Telecommunications argue that by declining to regulate basic cable rates where authorities do not regulate these rates themselves, the Commission has created a regulatory "no-man's land" in which basic rates are free of any regulation at all. The petitioners argue that creating such a regulatory vacuum is contrary to a stated purpose of the Act, to ensure that rates for basic service are reasonable. In opposition, Viacom argues that franchising authorities are best able to determine whether to regulate basic service rates. 38. These arguments were squarely before us when we made our determination in the Rate Order and, for the time being, we will continue to decline to assert jurisdiction over basic cable service where franchising authorities do not choose to regulate rates themselves. The Act's regulatory scheme vests in franchising authorities the initial decision whether their communities' basic cable service rates should be regulated. Rate Order, supra at 5676. Any regulatory "no- man's land" will be created by the intentional action or inaction of the local franchising authority. In any case where this may work to the detriment of subscribers, they can seek relief from their local authorities through the political processes available to them. However, as noted in paragraph 35, above, in the event that basic cable rates remain unregulated in a large number of communities , we will reexamine this issue. 39. Franchise Fee Rebuttal Showing. We stated in the Rate Order that we would presume that franchising authorities receiving franchise fees have the resources to regulate rates. A franchising authority seeking to have the Commission exercise jurisdiction over basic rates is thus required to rebut this presumption with evidence showing why the proceeds of the franchise fees it obtains cannot be used to cover the cost of rate regulation. Rate Order, supra at 5676. This showing must consist of a detailed explanation of the franchising authority's regulatory program that shows why funds are insufficient to cover basic rate regulation. Id. The Commission will assume jurisdiction only if it determines that the franchise fees cannot reasonably be expected to cover the present regulatory program and basic rate regulation. Id. 40. NATOA and King County argue that the franchising authorities should not have to justify their inability to regulate rates through a rebuttal showing based on franchise fee inadequacy. They argue that such a requirement would directly contradict Section 622(i) of the Communications Act, 47 U.S.C. 542(i), which prohibits federal agencies from regulating the use of funds derived from franchise fees. NATOA argues that the municipalities may be required to demonstrate that they lack resources to regulate rates, but not through a specific showing related to franchise fees. Rather, NATOA proposes, the showing should consist of a simple certification that the franchising authority does not have the resources to regulate, similar to the certification requirement for franchise authorities wishing to regulate (FCC Form 328). NATOA also points out that, in any event, the rules provide no guidance as to the level of funding that would be considered adequate or the type of showing required. The municipalities also argue that, regardless of the franchising authority's ability to regulate rates, the Cable Act requires the Commission to regulate rates if the franchising authority so elects. 41. We continue to believe that the rebuttal showing requirement is consistent with Section 622(i) of the Communications Act. While the Act provides that the Commission cannot directly control the franchising authority's use of the proceeds from the franchise fees, nothing prevents the Commission from basing a judgment on whether to assume regulation of basic tier rates on whether the franchising authority indeed lacks the funds to do so. The Commission's requirement is not a regulation of "the use of funds derived from such fees" within the meaning of Section 622(i), but is merely a test for determining which regulatory efforts should receive the benefit of the Commission's limited resources, based on the importance placed on that regulation by the respective franchising authority. The emphasis the franchising authority has placed on rate regulation will be demonstrated by whether the franchising authority will expend already available funds raised from the operation of the subject cable system in that effort. Such a requirement also ensures that the Commission expends its resources only where local regulation is most clearly shown not to be a viable alternative. Cf. Grove City College v. Bell, 465 U.S. 555 (1984) (reasonable conditions may attach to federal financial assistance). Finally, we note that some courts have recognized that the purpose of the franchise fee is not only to compensate the franchising authority for the use of the public rights-of-way, but also for the costs of administering the franchise. See, e.g., Telesat Cablevision, Inc. v. the City of Riviera Beach, 773 F. Supp. 383, 406 (S.D.Fla. 1991) (franchise fee constitutional under Cable Act because it related directly to costs of administering franchise as well as rental for rights-of-way); see also Erie Telecommunications, Inc. v. City of Erie, 659 F. Supp. 580 (W.D. Pa. 1987) (subsequent history omitted) (general flat tax can be tied to administrative or regulatory expenses incurred by governmental entity). 42. As to the specific showing required, the franchising authority would simply have to document the funds it raises from franchise fees and any general taxes, estimate the cost of rate regulation, and provide an explanation as to why the funds are insufficient to cover those costs. Some of these factors may include whether the franchise fee collected is less than five percent of the cable operator's gross revenues, and whether costs may be shared among several municipalities by filing joint certifications. As we gain experience reviewing such requests, which we intend to resolve expeditiously, we will establish standards on a case-by-case basis to determine whether the franchising authority has sufficiently justified its request that the Commission regulate basic cable rates in a particular community. 43. With respect to the municipalities' argument that the Cable Act requires the Commission to regulate rates, regardless of the franchising authority's ability to so regulate, we already addressed this argument in the Rate Order. We stated that Congress envisioned local franchising authorities as the primary regulators of basic service rates under the Act's framework, and that we would not assume jurisdiction at this time where a franchising authority does not apply for certification. Rate Order at 5676. 44. Voluntary Withdrawal of Certification. Under the 1992 Cable Act, once a franchising authority is certified, only the emergence of effective competition nullifies the regulatory jurisdiction of both the authority and the Commission over basic cable rates. Specifically, the Act provides that in franchise areas where the Commission determines that effective competition exists, neither the local franchising authorities nor the Commission has the jurisdiction to regulate rates. 45. On reconsideration of the Rate Order, Baraff, Koerner, Olender & Hochberg, and Booth American Company request that the Commission establish procedures for a franchising authority to voluntarily withdraw its certification to regulate basic rates. They observe that, under the 1992 Cable Act and the Rate Order, franchising authorities can avoid regulatory responsibility for basic cable service by not seeking initial certification from the Commission or by not asserting jurisdiction even after they are certified. They argue that franchising authorities should also be allowed to voluntarily decertify their regulatory authority in the face of operational experience that shows that rate regulation is not in the best interests of the community. 46. Although Congress did not specifically provide for the voluntary decertification of franchising authorities, we believe Congress envisioned that franchising authorities would ultimately decide whether rate regulation is appropriate in their communities. Indeed, the fact that franchising authorities have a choice as to whether to seek certification is part of Congress's scheme to vest primary regulatory responsibility in franchising authorities. Accordingly, we will allow certified franchising authorities to notify the Commission 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. Franchising authorities are specifically prohibited from accepting consideration in exchange for their decision to decertify. 47. Franchising Authority's Failure to Meet Certification Requirements. In the Rate Order, we stated that we would automatically assume jurisdiction over basic cable rates when a franchising authority seeking initial certification does not have the legal authority to regulate rates or does not have rate regulations that are consistent with those of the Commission. In accordance with the Act, we retain jurisdiction in such cases only until the franchising authority has qualified to exercise jurisdiction by submitting a new certification and meeting the required statutory standard. See 47 U.S.C.  543(a)(6); 47 C.F.R.  76.913 (a). We indicated, however, that we would allow the franchising authority to cure any defects in its procedural regulations governing rate proceedings before we would assume jurisdiction. Rate Order, supra at 5676, 77; 47 C.F.R.  76.910. 48. A number of cable operators request that the Commission refrain from exercising jurisdiction over basic rates where a franchising authority's initial certification is denied for failure to adopt regulations consistent with the Commission's rate rules. Petitioners express their concern that the Commission's present jurisdictional approach will discourage otherwise resourceful franchising authorities from adopting consistent regulations, so as to force the Commission to assume jurisdiction and allow the franchising authority to bypass the franchise fee rebuttal showing. 49. We believe that our statutory obligations require us to assert jurisdiction over basic rates when a franchising authority's certification effort is denied for failure to adopt regulations that are consistent with the Commission's rate rules. We do not believe Congress intended for a franchising authority to regulate when its regulations will substantially or materially conflict with federal regulations. Nor do we believe Congress intended that there be a regulatory vacuum when a franchising authority has affirmatively sought certification. Once a franchising authority has affirmatively sought certification because it believes basic rates to be unreasonable, and has indicated a willingness to regulate, we will step in to ensure that basic service rates are properly scrutinized until the franchising authority can become certified. 50. With respect to petitioners' argument that franchising authorities may use our jurisdictional scheme to evade the franchise fee rebuttal showing, we emphasize that our assumption of jurisdiction in such cases is meant to serve only as an interim solution, where possible, until the franchising authority can conform its regulations or overcome its legal impediment to satisfy federal regulations and become certified. We will therefore monitor such cases carefully and will expect franchising authorities to act in good faith to meet their certification obligations. Therefore, we reserve the right to treat a franchising authority's continued failure to meet certification requirements as if it were directly asking us to regulate. Regulation by us would, of course, be subject to the franchise fee rebuttal showing. See paras. 39-43, supra. 51. Revocation of Certification. The 1992 Cable Act establishes conditions for the denial or revocation of a franchising authority's certification. As a threshold matter, a franchising authority that seeks to exercise regulatory jurisdiction must meet certain statutory requirements; otherwise the Commission can deny its request for initial certification. If, after a franchising authority has been certified, the Commission finds that the franchising authority has acted inconsistently with the statutory requirements, "appropriate relief" may be granted. However, if the Commission determines, after the franchising authority has had a reasonable opportunity to comment, that the state and local laws and regulations are not in conformance with the regulations prescribed by the Commission to regulate rates, then the Commission must revoke the jurisdiction of the authority. 47 U.S.C.  543(a)(5). 52. In the Rate Order, we viewed the foregoing provisions as granting the Commission a degree of flexibility in revoking franchising authority certifications. Thus, we decided that if a franchising authority's actions are inconsistent with the statutory conditions for certification, we would issue a remand order directing the franchising authority to correct its defects before revoking certification and exercising jurisdiction. We observed that providing authorities with an opportunity to cure is supported by the language in the Act that calls for the granting of "appropriate relief" in such cases. Rate Order, supra at 5699. 53. By contrast, the Rate Order also indicated that we would directly revoke the certification of a franchising authority if we found, after an opportunity for comment, that state and local laws and regulations do not conform to our rate regulations. We indicated that we took the directive of Section 623(a)(5), 47 U.S.C. 543(a)(5) -- that the Commission "shall revoke" certification if "state or local laws and regulations are not in conformance" with our rate regulations -- to apply to local and state rules that on their face conflict with ours, and which have been interpreted by state and local authorities to so conflict. We indicated that we would assume jurisdiction in such cases only until the authority could become recertified. Id. 54. NATOA requests that the Commission reconsider its rules for revocation of certification and include provisions that (1) clarify that a certification will be revoked only upon a showing that any nonconformance with the Cable Act or the Commission's rules is substantial; and (2) permit a franchising authority to cure any nonconformance with the Commission's regulations. NATOA observes that the Commission's rules permit a franchising authority to cure any defects in local regulations if such regulations are inconsistent with the statutory certification requirements expressed in Section 623(a)(3) of the 1992 Cable Act, 47 U.S.C.  543(a)(3). NATOA indicates that, by contrast, a franchising authority is not given an opportunity to cure defects when its regulations are not in conformance with the rate provisions established by the Commission pursuant to Section 623(b). NATOA argues that the distinction between the two grounds for revocation serves no purpose and that providing a franchising authority an opportunity to cure any nonconformance with the Commission's rules preserves the scarce resources of both the Commission and franchising authorities. In the absence of the opportunity to cure, NATOA points out, franchising authorities will be forced to file requests for recertification, which requests must be reviewed by the Commission. Additionally, NATOA contends that the Commission would preserve scarce resources if we revoke certifications only upon a finding that the nonconformance or inconsistency is substantial and material. 55. In response to NATOA's concerns, we will modify our position on Commission assumption of jurisdiction in revocation cases involving nonconformance with Commission regulations. As a general matter, we will allow a franchising authority to cure any nonconformance with our rules that does not involve a substantial or material regulatory conflict before we will revoke its certification and assume jurisdiction. On the other hand, we believe that the statute compels us to revoke the certification of any franchising authority once we find, after there has been an opportunity to comment, that state and local regulations conflict with our regulations in a substantial and material manner. More specifically, we will revoke the jurisdiction of a franchising authority for nonconformance when the state and local laws involve a substantial and material conflict with our rate regulations. 56. A twofold jurisdictional approach, one that allows franchising authorities to retain jurisdiction when there is a minor rule conflict but empowers the Commission to assume jurisdiction when there is a major rule conflict, makes good regulatory sense. In particular, we agree with NATOA that it preserves the scarce resources of the Commission and the franchising authorities to revoke only those certifications in nonconformance cases involving a substantial or material regulatory conflict. Otherwise, in every case of nonconformance, regardless of how insignificant the rule conflict, we would be revoking certifications and forcing franchising authorities to file petitions for recertification. The Commission would bear the additional burden in such cases of assuming regulatory authority over basic cable rates and reviewing the recertification requests of the local authorities. We conclude there is no good reason for such requirements when a franchising authority that has been proceeding under Commission-certified regulatory authority can easily "cure" a rule conflict. 57. We believe the statute provides us with the flexibility to undertake this approach. The Act's provision for "appropriate relief" in Section 623(a)(5), 47 U.S.C. 543(a)(5), permits us to establish a procedure by which franchising authorities can "cure" certification inconsistencies -- even those involving minor regulatory conflict. Rate Order, supra at 5699. We believe that it is reasonable to interpret Section 623(a)(5)'s concomitant requirement, that the Commission revoke the jurisdiction of a franchising authority administering nonconforming state and local laws and regulations, to apply to cases involving only substantial or material regulatory conflict, as described above. B. Franchising Authority's Basic Rate Decision. 58. Cost-of-Service Showings for Basic Tier Rates. Some local franchising authorities may have resources and personnel sufficient to conduct a review of a rate-setting justification based on an FCC Form 393 (and/or FCC Forms 1200/1205), but not to examine and review a cost-based showing. This concern may have discouraged certification by many local franchising authorities. We believe that the Commission, consistent with the statutorily shared jurisdictional framework for regulation of the basic service tier, should provide assistance to certified local franchising authorities that are unable to conduct cost-based proceedings. Accordingly, on our own motion, we have decided to establish procedures under which the Commission, if requested by the local franchising authority in a petition for special relief under Section 76.7 of the Commission's rules, 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 local franchising authority and the cable operator. Specifically, local franchising authorities receiving cost-of-service showings from cable operators seeking to justify either initial rates or rate increases for the basic service tier will be able to obtain such a Commission ruling on their behalf for those submissions pending no more than 30 days before May 15, 1994, or those made on or after that date. 59. Under these procedures, upon receipt of a cost-of-service showing, a local franchising authority will have 30 days to decide whether to seek Commission assistance. If the franchising authority decides to seek Commission assistance, the franchising authority must issue a brief order to that effect, and serve a copy (before the 30-day deadline) on the cable operator submitting the cost showing. In its request for Commission assistance, the local franchising authority must explain its reasons for seeking Commission assistance, such as lack of adequately trained personnel, lack of financial resources, or other exigent circumstances. Upon receipt of the local authority's notice to seek Commission assistance, the cable operator must deliver a copy of the cost showing together with all relevant attachments to the Commission within 15 days. 60. The Commission's determination of cost-based rates for the basic service tier will be governed by Section 76.945 of the Commission's rules, and will become binding upon the local franchising authority. The Commission will notify the local franchising authority and the cable operator of its determination and the basic service tier rate, as established by the Commission. The rate will take effect upon implementation by the local franchising authority and the appropriate remedy, if applicable will be determined by the franchising authority. A cable operator or franchising authority may seek reconsideration by Commission staff, or review by the full Commission, of the staff ruling on the cost-based determination or the rate itself, pursuant to Section 1.106 or Section 1.115 of the Commission's rules. 61. We believe that this procedure will not present significant burdens to the Commission. Pursuant to our rate regulations, operators facing regulation of both the basic and cable programming services tiers already are required to select the same method of initial regulation for both tiers. Thus, for example, if a cable operator, in response to a subscriber complaint, chooses to justify cable programming service rates with a cost showing to the Commission, the operator is required to submit a cost-of-service showing to the local franchising authority in response to an initial notice of regulation concerning basic service received within one year of the initial date of regulation of the cable programming services tier. Therefore, in many cases, the Commission will simply conduct parallel cost determinations for both tiers of service rather than only for the cable programming service tier, thereby creating efficiencies by eliminating duplicative analyses. Further, this approach will permit many local authorities to focus their resources on administering and enforcing the cost-based rate established by the Commission, rather than on reviewing the operator's cost showing. This, in turn, should increase incentives for local franchising authorities to certify and regulate basic cable service. Thus, we believe this approach will benefit consumers. 62. Delegation of Authority and Form of Decision. King County asks the Commission to clarify that the authority to make rate decisions and to issue written orders may be delegated to specified governmental agents such as a local cable commission. In the Rate Order, we noted that a state, while remaining the franchising authority, may delegate its rate regulating power to localities if the state's statutory scheme permits it. Rate Order, supra at 5685. Similarly, we find that the 1992 Cable Act does not prohibit franchising authorities, 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. Any such subordinate entity will be acting as the authorized agent of and at the will and pleasure of the franchising authority, and its actions will be subject to at least the implicit, if not explicit, ratification of the full franchising authority. We believe that because of the many demands placed on municipalities and other entities that serve as franchising authorities, such flexibility is necessary to better enable franchising authorities to implement and enforce the Commission's regulations within the time frames specified in our procedural rules. 63. These petitioners also request that the Commission clarify that rate decisions need not be issued by resolution or ordinance, but may be made by letter or any other form, as long as they meet the public notice requirements. In the Rate Order, we required that a franchising authority issue a written decision to the public and give public notice of such decision whenever it disapproves, in whole or in part, either initial rates or an increase in rates or when it approves a proposed rate over the objections of interested parties. Id. at 5715, 16. Provided that issuance of the decision satisfies the Rate Order's public notice requirements, franchising authorities, or the state or local governments, may determine the particular form such rate decisions will take. 64. Due Process Concerns. In the Rate Order, we afforded franchising authorities considerable flexibility regarding the manner in which interested parties may participate in proceedings regarding rates for the basic service tier and accompanying equipment, as long as they provide a reasonable opportunity for consideration of the views of interested parties and act within the prescribed time periods. Rate Order, supra, at 5716. We also gave franchising authorities the flexibility to decide whether and when to conduct formal or informal hearings, as long as they act on rate cases within the prescribed time periods to provide interested parties with notice and a meaningful opportunity to participate. Id. 65. Colony Communications and Viacom take exception to our provision of flexibility regarding rate hearings. They request that we clarify that due process concerns may require a formal hearing under certain circumstances. Specifically, petitioners argue that informal procedures, while reducing administrative burdens on franchising authorities and cable operators, may not be sufficient to protect cable operators' rights under the Due Process Clauses of the Fifth and Fourteenth Amendments, particularly where there are material issues of fact in dispute. Thus, petitioners suggest, in cases where material issues are in dispute and the cable operator has requested a formal hearing and has submitted a reasoned analysis to support its request, the franchising authority must convene a formal hearing. 66. Our determination in the Rate Order that franchising authorities may decide whether and when formal hearings are necessary is not inconsistent with petitioners' contentions. This determination will rest largely upon whether the particular rate issue presents a material issue of fact that can be resolved only through an adjudicative trial-type hearing. See K. Davis, Administrative Law Treatise  12:1; Northwestern Indiana Telephone Co. v. FCC, 824 F.2d 1205 (D.C. Cir. 1987); Connecticut Office of Consumer Council v. FCC, 915 F.2d 15 (2d Cir. 1990), cert. denied, 111 S. Ct. 1310 (1991). Rather than impose specific procedural requirements on each individual franchising authority, we find it more appropriate at this juncture to remind franchising authorities to examine their current procedural requirements for other local proceedings and determine the best forum for providing due process to cable operators. In any event, a cable operator is not without redress if it determines that the franchising authority has denied the operator its due process rights. Pursuant to Section 76.944 of the Commission's Rules, the cable operator may raise that argument in its appeal to the local courts of the franchising authority's written decision. 47 C.F.R.  76.944; Rate Order, supra at 5729, n. 388. 67. Appeals. We stated in the Rate Order that cable operators must file appeals of local rate decisions with the Commission within 30 days of release of the text of the franchising authority's decision. Id. at 5730, 31; 47 C.F.R.  74.944(b). Oppositions may be filed within 15 days after the appeal is filed, and must be served on the party or parties appealing the rate decision. Replies may be filed seven days after the last day for oppositions and must be served on the parties to the proceeding. 47 C.F.R.  76.944(b). 68. NATOA requests that the Commission add a provision requiring parties filing appeals with the Commission to serve a copy of the appeal on the franchising authority or the delegated authority that issued the basic rate decision. NATOA contends that such a requirement is consistent with other provisions in the Commission's Rules, such as Section 76.914. This request is unopposed. 69. We will amend Section 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 decisionmaking authority. Additionally, where the state is the appropriate decisionmaking authority, the state must forward a copy of the appeal to the appropriate local official(s). This requirement would serve Congress's mandate in Section 623(b)(5)(B) of the Communications Act, 47 U.S.C. 543(b)(5)(B), that the Commission establish procedures for the expeditious resolution of disputes between cable operators and franchising authorities, and would not impede the filing process nor delay Commission consideration of appeals. 70. Settlement of Rate Cases. We stated in the Rate Order that the regulatory structure established by Section 623 of the Communications Act, 47 U.S.C. 543, does not appear to give cable operators the latitude to settle rate cases. Rather, a franchising authority must follow procedures that are consistent with the Commission's rate regulations and make a reasoned decision based on the record. Rate Order, supra at 5715, n. 337. Several cable operators argue that they should be permitted to enter into settlement agreements with franchising authorities, because such agreements would save the resources of all parties. 71. For largely the same reasons that we prohibited agreements not to regulate basic rates, we affirm our intention to disallow settlement agreements that are based on factors outside the record of a rate proceeding. Permitting such settlements could potentially allow franchising authorities to bargain away subscribers' statutory protection against unreasonable rates. Furthermore, the availability of settlements could increase the number of cost-of-service showings, which would be more suited to negotiated resolutions. Parties in a rate-setting procedure may, of course, stipulate to particular facts and even the final rate level itself, as 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 our rate regulations. 72. Effective Date of Rate Increases. In the Rate Order, we noted that unless the franchising authority finds that a proposed increase in basic tier rates is unreasonable, the increase will go into effect 30 days after filing with the franchising authority. If the franchising authority is unable to determine whether the proposed rate increase is reasonable, or if the cable operator has submitted a cost-of- service showing seeking to justify a rate above the presumptively reasonable level, the franchising authority may delay the effective date of the proposed rate for 90 days, or 150 days, respectively. Rate Order, supra at 5709; 47 C.F.R. 76.930. Viacom now requests modification of our rules to allow a reviewing authority that is unable to determine whether a particular portion of a proposed rate increase is reasonable to permit those portions of the rate increase it finds reasonable to go into effect immediately. Viacom argues that delays in the approval of new increases limit the operator's ability to recover its full costs. 73. We find that where the questionable portion is clearly severable, a franchising authority may, at its discretion, permit the implementation of portions of a rate increase it finds reasonable while it reviews the reasonableness of other portions. This policy will permit cable operators to recoup as promptly as possible those costs that are deemed acceptable by the franchising authority. 74. Proprietary Information. In the Rate Order, we stated that franchising authorities will have the right to collect additional information -- including proprietary information -- to make a rate determination in those cases where cable operators have submitted initial rates or have proposed increases that exceed the Commission's presumptively reasonable level. Rate Order supra at 5718-19. We also required franchising authorities to adopt procedures analogous to those contained in Section 0.459 of the Commission's Rules. Id., n. 349. See 47 C.F.R.  76.938. 75. King County requests that the Commission clarify whether the requirement that they adopt procedures "analogous" to Section 0.459 permits them to follow the corresponding state or local freedom of information, open records, and other sunshine-type laws, or whether the Commission intended Section 0.459 to preempt all state and local laws governing access to information. They are concerned that cable operators may choose not to submit confidential business information requested by the franchising authority if they believe it is not protected under the state or local law, whose exemptions may differ from those of the federal Freedom of Information Act. Michigan C-TEC Communities also points out that the city itself could be subject to attorney's fees under some state access laws under Section 623(a)(4)(A), 47 U.S.C.  543(a)(4)(A). Michigan C-TEC Communities also fears that cable operators could use the inconsistent state and local access laws to argue that the franchising authority's certification is invalid under Section 623(a)(4)(A). Time Warner argues that Section 623(b)(2)(A), which directs the Commission to prescribe regulations that reduce administrative burdens on the parties, supports the adoption of a single standard to govern the protection of proprietary information. 76. With respect to the franchising authority's right of access to the cable operator's confidential business records, Booth American Company requests that we reconcile a perceived inconsistency between the Rate Order and the rule. It asks us to clarify whether the franchising authority can request proprietary information only in reviewing a cost-of-service showing (as the petitioner believes the Rate Order implies) or in all rate cases. Petitioner argues that, according to the Rate Order, the right to proprietary information arises where the rates in question already "exceed the Commission's presumptively reasonable level," which petitioner interprets to refer only to cost-of-service showings. Rate Order, supra at 5718. The text of the rule itself, however, according to petitioner, specifically allows the franchising authority to request such information "to make a rate determination," which would presumably allow franchising authorities to request such information for proceedings to apply the competitive differential, as well as cost-of-service proceedings. 47 U.S.C.  76.938. NATOA opposes the suggestion that franchising authorities may request such information only with respect to cost-of-service showings and argues that Section 623(g) gives franchising authorities clear access to necessary information to administer the statute in all proceedings. 77. Petitioners raise two distinct issues, one relating to the franchising authority's access to the cable operator's confidential business records in making a rate determination, the other relating to the scope of the franchising authority's obligations regarding public disclosure of the operator's proprietary information after it is submitted. With respect to the first issue, we find that franchising authorities and the parties to a rate proceeding must have access to the information upon which the rate justification is based. Such access is essential to permit the franchising authority to make an informed evaluation, based on complete information, of the reasonableness of the rate in question. Parties participating in the rate proceeding must have access to proprietary information submitted to the franchising authority in order to evaluate the arguments advanced by the cable operator and to help focus the issues. Without such access, franchising authorities may be frustrated in their attempts to set reasonable rates. See 47 U.S.C.  543(b). With respect to any arguable inconsistency between the text of the Rate Order and the rule itself, we clarify that franchising authorities are entitled to request information, including 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, as clearly stated in the text of the final rule adopted. 47 C.F.R.  76.938. Each request should state clearly the reason the information is needed, and where related to an FCC Form 393 (and/or FCC Form 1200/1205), indicate the question or section of the form to which the request specifically relates. This specificity will enable franchising authorities to ensure the validity of the information provided in order to arrive at a determination of the reasonableness of the rates proposed, while at the same time ensuring that cable operators are not required to provide additional data that is not germane to the rate-setting process. This interpretation is consistent with Section 623(g) of the Act, which requires cable operators to file with franchising authorities financial information "as may be needed for purposes of administering and enforcing this section." 47 U.S.C.  543(g). 78. This right of access is limited to that information necessary to support the elements of the particular rate justification at issue, and extends to the franchising authority and, in appropriate circumstances, to the actual parties to a rate proceeding. Section 76.938 governs such access and, to the extent that any state or local laws provide for more limited access to information than the federal rule, they are accordingly preempted. As a general matter, we have the authority to preempt state or local laws that are inconsistent with federal law and regulations. City of New York v. FCC, 486 U.S. 57, 64 (1988); Fidelity Federal Savings and Loan Ass'n v. De la Cuesta, 458 U.S. 141, 153 (1982) (the statutorily authorized regulations of an agency will preempt any state or local law that conflicts with such regulations or frustrates the purposes thereof). It was never our intention to allow cable operators to use any state or local law to withhold business information it would otherwise have to produce under the federal rule. State or local laws that conflict with the federal right of access embodied in our rule would frustrate the purpose of the rule -- that is, to permit the franchising authority to make an informed evaluation of the rate in question so as to ensure the reasonableness of basic tier rates as required by Section 623(b) of the Act. Preemption is therefore permitted and necessary. 79. With respect to the public disclosure issue, we find on further reflection that we should not require franchising authorities to adopt procedures that mirror Section 0.459, although they may do so in their discretion. We find it neither necessary nor desirable to preempt state and local laws governing access to information. Rate regulation of basic cable services has been designated by the Congress and this Commission as an essentially local matter, and it involves local businesses providing local services. Local (including state) governments have instituted access laws to govern the confidentiality of the business information of the business entities in their respective jurisdictions as they have seen fit for their particular circumstances and interests. We see no justification sufficiently compelling to override that prerogative. Additionally, as one municipality points out, many state utility commissions are subject to the same state laws as franchising authorities, many of which differ from the federal FOIA, and "there is no good reason why claimed proprietary information of a cable operator should be treated differently than comparable information of another regulated entity." Moreover, requiring adoption of local rules that would implement Commission access rules would invoke this agency's oversight by review of all local access decisions. Such a situation could hopelessly paralyze the local rate-setting proceedings throughout the country. While we acknowledge that consistent treatment of the public's access to proprietary information could lessen the burden in some cases for some multiple system operators whose systems may be subject to varying disclosure laws in different jurisdictions, this possibility is outweighed by the other considerations just cited. Thus, while as a general matter we believe franchising authorities should consider the interests of cable operators in protecting proprietary information, we now conclude that franchising authorities should proceed in accordance with applicable local and state law rather than mandating the adoption of procedures analogous to our rules. We therefore amend Section 76.938 accordingly. 80. Forfeitures and fines. To the extent that franchising authorities may be concerned with the enforcement of their own orders, decisions, and requests for information, we clarify that if a franchising authority has the power under state or local law to impose forfeitures or fines for violations of its rules, orders, or decisions, including filing deadlines and orders to provide information, we see nothing in the Cable Act or our rules which would prevent the franchising authority from taking such action. A franchising authority would be free to report to us any apparent violation of our rules, and, should we determine that a violation has in fact occurred, we could take appropriate enforcement action. In addition, we are modifying our rules to require cable operators to respond to franchising authorities' reasonable requests for information, as well as our own such requests. 81. Franchising authority discretion. We also take this opportunity to reiterate our general philosophy regarding rate proceedings before franchising authorities. Congress generally allocated to franchising authorities responsibility for reviewing basic service rates under the Act. While we have set out the general rules for regulation, we have not attempted, nor could we address, every detail of the rate regulation process. A certain amount of latitude has been left to franchising authorities. As we stated in the Rate Order, we will not review decisions of franchising authorities de novo, but rather will sustain their decisions as long as there is a reasonable basis for those decisions. Id. at 5731. This standard of review will apply as well with respect to franchising authority interpretations of any ambiguities in evaluating the responses or information provided on the FCC Form 393 (and/or FCC Forms 1200/1205) or in a cost-of-service showing. C. FCC Form 393 (FCC Forms 1200/1205) Issues/Failure to File. 82. Failure to file rate justification. Under our rules, a cable operator has the burden of proving that its rates for regulated cable services are in compliance with the law. It must justify its rates within 30 days of either (1) receiving notification from a franchising authority that it is commencing regulation of basic service rates or (2) the service date of a complaint regarding the reasonableness of cable programming service tier rates. An operator justifies its rates by submitting its rate schedule and by also filing a completed FCC Form 393 (and/or FCC Forms 1200/1205), or a cost-of-service showing. 83. Our rules regarding regulated cable programming service tiers explicitly provide that if a cable operator fails to file and serve a rate justification as required, we may deem the operator in default and enter an order finding the operator's rates unreasonable and mandating appropriate relief. However, the rules do not explicitly provide parallel remedies where an operator fails to timely justify its rates for the basic service tier. 84. On our own motion, we hereby correct the oversight. An operator that does not attempt to demonstrate the reasonableness of its rates has failed to carry its burden of proof. We are therefore amending our rules to make clear that authorities regulating basic service rates have authority to deem a non-responsive operator in default and enter an order finding the operator's rates unreasonable and mandating appropriate relief. This relief could include, for example, ordering a prospective rate reduction and a refund. Such a refund would be based on the best information available at the time. We note, however, that in the Second Order on Reconsideration, we establish certain adjustments to the timeframes set out in Sections 76.930 and 76.933 due to the transition from existing rules to the rules we establish today. A franchising authority will not be permitted to find in default a cable operator that files its rate justification in accordance with the scheme set forth in the Second Order on Reconsideration at paras. ______. 85. We believe that rate regulators must have this authority to allow them to deal swiftly and effectively with non-compliant operators. Otherwise, non-compliant operators could subvert the regulatory system we have set in place to ensure reasonable rates. Of course, such remedial power is not unbounded and must be exercised reasonably. It should not be exercised in a case of a de minimis failure on the part of the cable operator to respond. We do not mean to countenance over- zealous behavior by franchising authorities. Rather, we wish to make clear that franchising authorities have this power to deal with operators who ignore their legal obligations. 86. Deficient rate justifications; additional information. Our early experience with FCC Form 393 rate justifications has also revealed instances where cable operators have apparently filed justifications that are incomplete in various respects, or that require clarification or substantiation. We will here outline how such filings should be treated. 87. We have considered various options for resolving these problems, including declaring that an incomplete filing may be rejected automatically and treated as a non-filing. However, this would produce an unduly harsh result for cable operators, especially small system operators, who have filed in good faith but have for some reason left a portion of their filing incomplete or unclear. We therefore adopt a more moderate approach that will present cable operators with an opportunity to cure defects in their filings or supply additional information as necessary. 88. In the event a cable operator files a facially incomplete rate justification, viz., fails to complete the form or fails to include supporting information called for by the form, the franchising authority or the Commission may order the cable operator to file supplemental information. While the franchising authority is waiting to receive this information from the cable operator, the deadlines for the franchising authority to rule on the reasonableness of the proposed rates are tolled. 89. We distinguish an incomplete filing (for example, a form filed without a required explanation) from one which is complete and submitted in good faith, but about which the regulating authority has certain questions or reasonably feels it requires clarifying or substantiating information. As we confirm in paragraphs 74- 77, supra, the regulatory authority in such a situation has the right to request and receive clarifying or substantiating information. However, we will not automatically toll the deadlines for franchising authorities to act in these circumstances, as we do for incomplete filings. If the information sought, however, is of such significance as to delay examination of the rest of the rate justification, or if the operator fails to supply the information promptly, the franchising authority could be justified in delaying its ruling accordingly. 90. In either case, it is obviously necessary for the franchising authority or the Commission to set reasonable deadlines for the submission of supplemental information in order to avoid delaying for consumers the benefits of rate regulation. If the cable operator fails to provide the requested information within the required time or fails to provide complete information in good faith, the franchising authority or the Commission may then hold the cable operator in default and mandate appropriate sanctions as discussed elsewhere in this section, as if the operator failed to submit a response at all. We again emphasize that such authority must be exercised in a reasonable manner. 91. We take this opportunity to re-emphasize that any and all information submitted as part of the rate-setting process must be truthful in all respects, just as any information must be truthful when supplied in a Commission proceeding. Misrepresentation or willful concealment of any relevant matter in a rate proceeding may result in, among other things, Commission-ordered forfeitures and/or the denial of renewal or revocation of any Commission license held by the offending cable operator. 92. Finally, in order to assist the Commission and franchising authorities in verifying information contained in rate filings, cable operators filing after the effective date of our revised rules must include rate cards and channel line-ups along with their benchmark or cost-of-service filings. If there is any difference between the numbers on these documents and the numbers in the rate filing, the cable operator must attach an explanation. Rate cards and channel line-ups must be included for September 30, 1992, September 1, 1993, and for the rates being reviewed. 93. Updating rate calculations. We now turn to the issue that arises for numerous operators that promptly revised their rates in response to our rules, based on rate-setting facts in existence at the time of the revisions. These operators have not been required to justify those rates until recently, however, and several months after the revisions, some of the facts or data on which the rate-setting is based may have changed. For example, tentative inflation adjustments have since become definite, equipment costs may have varied, or channels may have been added. We share National Cable Television Association's concern that rates adopted in an effort to comply with our rules as quickly as possible may become unreasonable solely as a result of using later data to refresh the calculations. Operators should not be penalized for making good faith attempts to comply with our rules in a timely manner. In addition, if the cable operators are required to revise their rates immediately based on refreshed data, the changes will result in significant administrative expenses to the operators and confusion for subscribers. In most cases, we expect the resulting rate change would be minimal and would be in effect only until the cable operator seeks a rate change. At the same time, it is important that regulatory authorities are able to verify accurately the reasonableness of a current rate, and to avoid compounding any inaccuracies as subsequent rate increases are introduced, which are a function of the level of initial rates. 94. Accordingly, we will require the following actions when different rates are dictated by data used in initial rate-setting than by data current as of the time an FCC Form 393 (and/or FCC Forms 1200/1205) is actually submitted to the franchising authority or the Commission. When current rates are accurately justified by analysis using the old data (and that data was accurate at the time), cable operators will not be required to change their rates. In these circumstances, 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 rates 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), cable operators will be required to correct their rates pursuant to current data. In these circumstances, the resulting rates must be based on current data. 95. Computer-generated forms. Many cable operators have filed their rate justifications on various substitute versions of FCC Form 393, often computer- generated. Indeed, our November 10, 1993 Public Notice specifically contemplated such substitutes, provided "the form is identical in overall appearance and format to FCC Form 393" (emphasis added). Unfortunately, our initial review of such filings has revealed a wide variety of substitute forms, none of which appears to be "identical in overall appearance and format to FCC Form 393." 96. Given the variations in these forms as filed and the difficulty in verifying their conformance to the official FCC Form 393, we conclude that the burden on franchising authorities and on the Commission of processing such non-standard forms would be substantial. If each cable operator submitted its own version of FCC Form 393, it would be virtually impossible to establish any uniform system of review or to verify the accuracy of the filings with any degree of certainty. 97. We therefore decide that such substitute forms are unacceptable. All rate filings must be made on an actual FCC Form 393, (and/or FCC Forms 1200/1205), a copy of the actual form, or a copy generated by Commission software. The burden on cable operators to use the Commission's form is small, since they may generate the data in whatever form they wish and simply transfer it to the official form. By contrast, this requirement should significantly reduce the processing burden and increase the accuracy of review by regulatory authorities and other interested parties. 98. Accordingly, any future rate filing not made on an official FCC Form 393 (and/or FCC Forms 1200/1205), a copy of the form, or a copy generated by Commission software, shall be deemed not to have been filed, and appropriate sanctions for failure to file may be imposed. For example, under appropriate circumstances, regulatory authorities may treat non-complying forms as patently defective, thus not requiring an opportunity to cure the defect as would be the case for a filing that is merely incomplete. Obviously, this sanction should not be imposed where an operator has made a good faith effort to comply with our rules. If a cable operator has made a rate filing on a non-FCC form prior to the effective date of these rules, the franchising authority may order that the form be re-filed within 14 days. The cable operator shall then have 14 days to submit its rate filing on an FCC Form 393 (and/or FCC Forms 1200/1205), during which time the deadline for the cable authority to rule on the reasonableness of the rates shall be tolled. Although we considered deeming non-standard forms already filed acceptable, we believe the administrative burden of attempting to implement the rules based on non-complying forms is unacceptable. We hereby order all cable operators who have filed benchmark showings with us on a non-FCC form to refile within 14 days of the effective date of this Order. Furthermore, any benchmark showing that comes to the Commission on appeal must be on an official FCC Form 393 (and/or FCC Forms 1200/1205), a copy of the form, or copy generated by Commission software. D. Refund Issues. 99. Commission Authority to Allow Franchising Authority to Order Refunds on Basic Tier Rates. We stated in the April 1993 Rate Order that refunds are available with respect to basic tier service pursuant to our authority under Sections 623(b) and 4(i) of the Communications Act, 47 U.S.C.  543(b), 154(i). We determined that the Communications Act's explicit reference to refund authority with respect to cable programming service tier service should not be construed to bar refunds of unreasonable basic tier rates. Rate Order, supra at 5725. We noted that Section 623(b)(5)(A), 47 U.S.C. 543(b)(5)(A), grants wide discretion to adopt procedures so that franchising authorities can enforce reasonable rates. 100. The National Cable Television Association, Time Warner, and the Arizona Cable Television Association argue that the Communications Act does not give the Commission the authority to order refunds for the basic tier services. They note that Section 623(a)(1), 47 U.S.C. 543(a)(1), provides that "[n]o federal agency or state may regulate the rates for the provision of cable service except to the extent provided" under the statute. They also repeat the argument that, although Congress specifically authorized refunds for cable programming tier services, it did not provide a parallel authorization for basic tier service. Petitioners contend that the Commission has violated the principle of statutory construction that "where Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion." 101. Petitioners' argument ignores the breadth of the Commission's mandate and authority in this area. As we noted in the Rate Order, Section 623(b)(1), 47 U.S.C. 543(b)(1), gives the Commission broad rulemaking power to "ensure that the rates for the basic service tier are reasonable" and to "protect[] subscribers of any cable system that is not subject to effective competition from rates for the basic service tier that exceed the rates that would be charged for the basic service tier if such cable system were subject to effective competition." Moreover, Section 623(b)(5) directs the Commission to adopt procedures by which "franchising authorities may enforce the [rate] regulations prescribed by the Commission... ." Section 623(b)(5) thus grants the Commission wide discretion to craft procedures governing the enforcement of its overall regulatory regime with respect to basic tier rates. Finally, Section 4(i) of the Communications Act, 47 U.S.C. 154(i), expressly authorizes the Commission to issue orders "not inconsistent with this Act, as may be necessary in the execution of its functions." Requiring cable operators to return to subscribers unreasonable basic tier charges effectuates the express requirements of Section 623(b) and is fully within the Commission's authority. 102. The fact that Section 623(b) does not mirror the remedial procedures in Section 623(c), which governs cable programming service tier rate complaints and contains an express provision for refunds, does not change our conclusion. In New England Tel. & Tel. Co. v. FCC, 826 F.2d 1101 (D.C. Cir. 1987), cert. denied, 490 U.S. 1039 (1989), the court held that, pursuant to Section 4(i), the Commission may require carriers to refund earnings in excess of a Commission-prescribed authorized rate-of-return even though refunds are not expressly authorized, and even though another part of Title II of the Communications Act expressly permits an award of damages against carriers for other types of violations. Thus, the mere fact that Section 623(c) provides for refunds in the upper tier context does not persuade us that the Commission's authority under Section 4(i), in conjunction with its rulemaking power under Section 623(b), is not broad enough to permit the Commission to adopt rules providing for refunds with respect to basic tier rates. This is especially true when refunds are necessary in order to achieve compliance with Section 623(b)'s directive that the Commission shall "ensure that rates for the basic service tier are reasonable." We thus conclude again that we may permit refunds for unreasonable basic tier rates to enforce the provisions of Section 623(b) pursuant to our authority under Sections 623(b)(1), (b)(5), and 4(i) of the Communications Act. 103. Refund Computations. Another issue which we need to address is that of refund computations for bundled charges. Our rules state that a franchising authority "may order a cable operator to refund to subscribers that portion of previously paid rates determined to be in excess of the permitted tier charge or above the actual cost of equipment . . . ." Although maximum permitted rates are always determined on an unbundled basis, i.e., separately for program service and equipment, refund liability may stem from bundled rates. 104. We conclude that the refund liability should be calculated 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). The intent of the refund mechanism is to place subscribers in the same position they would be had they been subject to "reasonable" rates. To not allow cable operators to factor in equipment charges could result in an operator being required to make a rate reduction that is greater than the maximum reduction required under application of the benchmark approach. This analysis is consistent with our earlier statement that "the cable operator must make prospective billing adjustments to refund overcharges (and offset any undercharges) in a reasonable manner" (emphasis supplied). This analysis also applies to unbundled charges where an operator was charging separately for program services and equipment but the rates did not comply with our rules (because, for example, the equipment rates were higher than actual cost). In this situation, the operator's overall refund liability will be calculated by adding the old charges together and comparing the total with the sum of the new, unbundled program service and equipment charges. 105. Refunds as Affecting Franchise Fee Liability. Section 622(b) of the Communications Act provides that "[f]or any twelve-month period, the franchise fees paid by a cable operator with respect to any cable system shall not exceed five percent of such cable operator's gross revenues derived in such period from the operation of the cable system." 47 U.S.C.  542(b). Booth American Company notes that when a refund is ordered, a cable operator's gross revenue has been reduced, and that its franchise fee should be reduced proportionately. Petitioners request that the Commission modify its regulations to provide that any amount over the percentage of gross revenues that represents the franchise fee, calculated without including the amount of the refunds, should be returned to the cable operator. 106. We will grant petitioners' request, and amend Section 76.942 accordingly. To the extent that a franchise fee is calculated as a percentage of the cable operator's gross revenues and those revenues are reduced on account of refunds, the franchising authority must promptly return to the cable operator the amount that was overpaid as a result of the cable operator's newly-diminished gross revenues. 107. Calculation of Refunds on Basic Rates. In the Rate Order and in subsequent orders addressing the effective date of rate regulation, we indicated that cable systems would be subject to potential refund liability for the basic service tier as of the effective date of our rules, which we ultimately determined to be September 1, 1993. See e.g., Rate Order, supra at 5725, 26. On reconsideration, some municipalities argue that refund liability for the basic service tier should extend back to the effective date of the rules we announced originally, June 21, 1993. They contend that an extended refund period is more consistent with the intent of Congress and is more beneficial to consumers. 108. We decline to extend the refund liability for the basic service tier back to June 21, 1993, for several reasons. First, as a legal matter, we doubt that we may extend cable operators' refund liability back to a date before the rate regulations became effective. Operators at that time were not governed by any formal authority that would have defined their regulatory obligations (i.e., including any recordkeeping or administrative matters that would facilitate the refund process). Second, as a practical matter, setting the refund liability date at a date 2 1/2 months prior to the effective date of the rules would present significant recordkeeping and administrative problems that make the approach unworkable. Third, we believe our decision to adopt a September 1, 1993, date for refund liability satisfies the intent of Congress, which was most recently expressed in the Conference Report accompanying the Commission's 1993 supplemental appropriation to implement the 1992 Cable Act. Specifically, the Conference Report stated: [T]he conferees intend that the Commission shall establish a date as soon as possible after enactment of this Act, but that date shall be no later than September 1, 1993, as the date from which consumers may obtain refunds of excessive rates for the basic service tier of cable television service and for cable programming services. Thus, a September 1 refund date was clearly contemplated as reasonable by Congress. 109. Therefore, we will maintain September 1 as the earliest date for refund liability to begin. We also note that by our advancement of refund liability from October 1, 1993, to September 1, 1993, in conjunction with our adoption of that earlier effective date for our rules, consumers will realize greater savings through refunds to an earlier time than the municipalities contemplated when filing their petitions. Any refund liability for this period will be based, of course, on the rate-setting rules and formulas in effect at that time. The new rate-setting rules adopted in the companion Second Order on Reconsideration will be applied prospectively only. The new rules will determine future rates and refund liability only after the effective date of those rules. 110. Calculation of Refunds on Cable Programming Service Complaints. Section 623(c)(1)(C) of the Communications Act, 47 U.S.C. 543(c)(1)(C), requires the Commission to establish procedures (1) to reduce rates for upper tier services that the Commission determines to be unreasonable and (2) to refund overcharges paid by subscribers after the filing of a complaint that the Commission determines to have merit. In the Rate Order, we established that under our refund procedures the cumulative refund due subscribers would be calculated from the date a valid complaint is filed until the date a cable operator implements the reduced rate prospectively in bills to subscribers. Id. at 5865. 111. On reconsideration, Time Warner requests that we revise our cable programming services refund procedures to impose a one-year limitation similar to the time restriction imposed on basic rate refunds. Thus, under Time Warner's proposal, a cable operator would be liable for refunds on initial rates from the date the complaint is filed until the Commission's decision ordering the refund, or for a one-year period prior to that decision, whichever is shorter. Additionally, Time-Warner seeks a six-month time limit on refund liability pursuant to a complaint on rate increases. 112. Time Warner argues that under the existing approach cable operators could face contingent liability for refunds for an unreasonably long period because the Commission could take years to resolve rate complaints. According to Time Warner, no matter what the final outcome of a complaint, this contingent liability will adversely affect the cable operator's ability to secure or maintain financing arrangements. Time Warner asserts that lenders are less likely to fund cable operators, or may require additional security and/or a higher rate of interest, if the operator faces potential refund liability that could languish for years at the Commission. 113. Furthermore, Time Warner believes, consumers would benefit from the Commission imposing a time limit on cable programming service tier refund liability. Such a limit, states Time Warner, would encourage the Commission to resolve rate complaints on a more timely basis, thus providing quicker relief for subscribers than under the current rules. Time Warner contends that timely resolution of refund claims would also reduce the operator's administrative burden of locating subscribers, which furthers the Commission's preferred remedy of granting a direct refund to those subscribers affected by the unreasonable rates. 114. We will not adopt a time limit on refund liability for unreasonable cable programming service tier rates. We believe our refund procedures for the cable programming service tier accurately reflect the mandate of Congress, which is to reimburse subscribers for unreasonable rate payments that occur while a complaint is pending before the Commission. Specifically, the Act directs the Commission to establish procedures to be used "to refund such portion of the rates or charges that were paid by subscribers after the filing of such complaint and that are determined to be unreasonable." See 47 U.S.C.  543(c)(1)(C) (emphasis added). Additionally, in the House Report, Congress explained that this subsection "ensures the consumer's right to a refund for unreasonable rate payments between the filing of a rate complaint and the determination that the rate is unreasonable." House Report at 88. That explicit statutory authority and legislative history indicates that Congress did not contemplate placing a cap or time limit on cable programming service refund liability. Indeed, Congress clearly intended that consumers be made whole for the charging of unreasonable cable programming services rates during the pendency of the complaint. 115. We are also unpersuaded that the amount of contingent liability cable operators might face as a result of pending cable programming service rate complaints will seriously harm the industry's ability to raise capital and borrow money. Time- Warner has not shown how outstanding contingent liabilities in specific situations have actually stymied the ability of any cable operator to attract investors or obtain capital, and has not convinced us that the degree of contingent liability potentially involved in such cases is more burdensome or problematic than that which it faces in other contexts. 116. As for influencing the disposition of rate cases before the Commission, we intend to devote substantial resources to disposing of rate cases as promptly as possible, irrespective of any external time constraints. Imposition of such a limit would unfairly deprive consumers of their full rights in those cases which might defy prompt resolution by us. While it is indeed desirable to grant refunds to the parties overcharged, operators' difficulty in so doing after one year is not sufficient reason to deprive the majority of customers of any refunds due to the operators' overcharging for cable service and to permit the operator to keep the proceeds of such overcharging. 117. We note also that our rationale for adopting a one-year cap on a cable operator's refund liability for the basic service tier does not support adoption of similar limit in the cable programming services refund context. We adopted a one-year limit in the basic service context because franchising authorities might not assert jurisdiction over rates, or even seek certification, until some time in the future. Cable operators cannot reasonably be exposed to refund liability for an indefinite period that could last up to several years and cover a period during which the franchising authority saw no need to regulate rates and the operator need not have anticipated oversight of its uncontested rates or the need to justify them at a later date. Franchising authorities must assume some measure of responsibility for prompt action to assert jurisdiction over rates they believe may be unreasonable. Moreover, the calculations themselves would get extremely complex and burdensome as unregulated rate changes begin to accrue over any period greater than a year. Any refunds of cable programming service tier rates, however, will date back to a date certain, from which time the cable operator was explicitly advised that its rates were under regulatory scrutiny. Moreover, the refund liability period will be limited, effectively, to the time period of the rate proceeding itself, and any shorter refund liability would provide an incentive for cable operators to unduly complicate, or otherwise engage in stalling tactics in the course of the rate- setting proceeding. E. Cable Programming Service Complaint Process. 118. Effective Date of Cable Programming Service Regulation. Several municipalities request that the Commission determine that regulation of cable programming services commences on the date the Commission's regulations take effect, rather than on the date a complaint is filed. We decline to do so. First, we note that Congress intended regulation of cable programming services to be complaint-driven (see 47 U.S.C.  543(c)(1)(B) and 543(c)(3)). The Commission cannot act on cable programming service tier rates until a complaint is filed. Second, insofar as the petitioners are suggesting that the Commission should calculate refund liability back to the effective date of our regulations, Section 623(c)(1)(C) of the Act prohibits the Commission from doing so. 119. NATOA also requests that the Commission grandfather cable programming service complaints filed within 180 days of the effective date of the Commission's regulations for purposes of permitting additional rate decreases after expiration of the 180-day period. NATOA argues that such a provision is necessary to ensure that complainants filing during the 180-day period receive the full reduction in rate to which they are entitled. NATOA's argument references the Commission's prior statement that we would "seek to refine our analysis through further industry surveys and order additional rate reductions if appropriate." Rate Order at 5644. 120. We have decided that complaints that are filed before the effective date of the revised rate regulations adopted in the Second Order on Reconsideration, will be adjudicated as follows: Refunds for the time period in which the old rules were in effect will be based on the old rules, while refunds for the time period in which the new rules are in effect will be based on the new rules. (See discussion at para. 110, supra). This approach will achieve for ratepayers the maximum possible benefit from our revised rules consistent with the general prohibition on retroactive rulemaking. 121. Section 623(c)(3) of the Act directs that complaints must be filed "within a reasonable period of time following a change in rates that is initiated after that effective date, including a change in rates that results from a change in that system's service tiers." 47 U.S.C.  543(c)(3). In the Rate Order, we interpreted that provision to require complainants to file such complaints within 45 days from the time a subscriber receives a bill from the cable operator that reflects the rate increase. Rate Order, supra, at 5840 (emphasis supplied). We clarify that a subscriber may file a complaint any time there is a rate change, including an increase or decrease in rates, or a change in rates that results from a change in a system's service tiers. See 47 U.S.C.  543(c)(3). Such rate changes may involve implicit rate increases (such as deleting channels from a tier without a corresponding lowering of the rate for that tier). As we stated in the Rate Order, the triggering mechanism for the filing of the complaint will be a reflection of any rate change on a subscriber's monthly bill. Id. IV. PROVISIONS APPLICABLE TO CABLE SERVICE GENERALLY 122. Introduction. The Rate Order set out a number of regulations generally applicable to all cable systems. These include provisions governing negative option billing practices, prevention of evasions, grandfathering of rate agreements, subscriber bill itemization, advertising of rates, and effective date. Petitioners have challenged and/or sought clarification of the provisions governing evasions, grandfathering of rate agreements, subscriber bill itemization, and the effective date of the rules, and these are discussed below. A. Negative Option Billing Practices 123. Section 3(f) of the 1992 Cable Act provides: A cable operator shall not charge a subscriber for any service or equipment that the subscriber has not affirmatively requested by name. For purposes of this subsection, a subscriber's failure to refuse a cable operator's proposal to provide such service or equipment shall not be deemed to be an affirmative request for such service or equipment. Unlike other subsections of Section 3, this provision does not specifically delineate the jurisdictional role, if any, of state and local governments in addressing negative option billing practices of cable operators. Language in previous decisions in this proceeding has created confusion concerning this issue. Based on our careful examination of the 1992 Cable Act and its legislative history, as discussed below, we conclude that the Commission as well as state and local governments have concurrent jurisdiction to regulate negative option billing. 124. In the Rate Order the Commission addressed in footnote 1095 an argument by municipalities that state and local governments should have concurrent enforcement powers over negative option billing practices. In response, we stated that "[w]e do not preclude state and local authorities from adopting rules or taking enforcement action relating to basic services or associated equipment consistent with the implementing rules we adopt and their powers under state law to impose penalties." Similarly, on reconsideration we reaffirmed our prior determination in the Rate Order that Section 3(b)(7) of the 1992 Cable Act, which establishes the minimum contents of the basic service tier, preempts franchise agreements that purport to require cable operators to provide basic tier services beyond the statutory minimum requirements. In discussing the basic service tier definition, we stated in footnote 127: We similarly affirm that franchising authorities may not regulate tier restructuring in a manner that is inconsistent with the 1992 Cable Act. See Communications Act, Sections 623(a)(1), (f), 47 U.S.C. Sections 543(a)(1), (f). In particular, local authorities are precluded from regulating negative option billing to prevent tier restructuring regardless of how the local requirement is characterized. The Commission has ruled that cable operators may engage in revenue-neutral tier restructuring without violating the negative option billing procedure. 125. These two brief statements did not specifically mention preemption nor were they accompanied by any preemption analysis. Nevertheless, our footnotes may be construed as attempting to preempt states and local franchising authorities from regulating negative option billing in a manner inconsistent with our rate regulation rules generally and our specific rule addressing negative option billing. In fact, we understand that the possible preemptive effect of these statements is at issue in at least two pending lawsuits in federal district courts. 126. Accordingly, on reconsideration on our own motion, we examine in greater detail whether, and under what circumstances, state and local governments have authority to regulate negative option billing practices of cable operators. As discussed below, we conclude that the 1992 Cable Act permits state and local governments to employ state or local consumer protection laws to regulate negative option billing. State and local government jurisdiction to regulate negative option billing under consumer protection laws is concurrent with the Commission's jurisdiction to regulate negative option billing under the Communications Act. Therefore, based on our close examination of the preemption issue in this order, we hereby substitute the following analysis in place of the two statements in our previous orders noted above. 127. The negative option billing provision appears in Section 3 of the 1992 Cable Act, the section of the statute governing rate regulation. Unlike most of the other provisions of Section 3, however, the negative option billing provision is not limited in its application to those cable services and cable operators subject to rate regulation. Rather, the unqualified negative option billing prohibition applies to all cable services offered by all cable operators, regardless of whether the operators are subject to effective competition. Moreover, unlike many other provisions of the 1992 Cable Act, the negative option billing provision does not specifically direct the Commission to adopt implementing rules, nor does it specifically vest jurisdiction in the Commission to enforce the provision to the exclusion of state and local governments. 128. While the negative option billing provision is codified in Section 3 governing rate regulation, it appears that it is more in the nature of a consumer protection measure rather than a rate regulation provision per se. In this regard, the negative option billing provision governs the circumstances under which a cable operator may bill a subscriber for a particular service, rather than the reasonableness of the actual rate charged a subscriber for that service. Thus, Section 8 of the 1992 Cable Act regarding consumer protection is relevant to the preemption analysis. Section 8(c)(1) provides that "[n]othing in this title [Title VI] shall be construed to prohibit any State or any franchising authority from enacting or enforcing any consumer protection law, to the extent not specifically preempted by this title." Therefore, given that Section 3(f) appears to be a consumer protection measure, unless "specifically preempted" elsewhere in Title VI, Section 8(c)(1) preserves the ability of a state or local government to exercise any authority it may have under state or local consumer protection laws to regulate negative option billing. 129. We find nothing in Title VI that specifically preempts state or local regulation of negative option billing. There is nothing in the language of Section 3(f) or its legislative history to suggest that the Commission has exclusive jurisdiction over negative option billing or that state and local governments are precluded from addressing such practices. Indeed, in proposing the negative option billing prohibition, Senator Gorton referred to the efforts of state attorneys general in this area. Given congressional recognition of the states' role, it seems reasonable to assume that if Congress intended to supplant state or local efforts in this area, it would have said so specifically. 130. Therefore, reading Sections 3(f) and 8(c)(1) of the 1992 Cable Act together, we conclude that the Commission as well as state and local governments have concurrent jurisdiction to regulate cable operators' negative option billing practices. Our general rulemaking power under Sections 303(r) and 4(i) of the Communications Act authorizes us to adopt rules to implement Section 3(f) of the 1992 Cable Act regarding negative option billing. States and local franchising authorities, by virtue of the preservation of authority under Section 8(c)(1) of the 1992 Cable Act, may regulate negative option billing practices of cable operators to the extent authorized under state or local consumer protection laws. 131. Consistent with this view, we believe that the 1992 Cable Act generally does not preempt state and local governments from regulating negative option billing practices of cable operators under state or local consumer protection law. We note, however, that Section 3(a) of the 1992 Cable Act provides that states and franchising authorities may regulate "the rates for the provision of cable service" only to the extent provided by the statute in accordance with rules established by the Commission. As explained above, we believe that in typical circumstances regulation of negative option billing does not implicate "rates for the provision of cable service," but rather simply addresses billing practices of cable operators, activity which seems more in the nature of consumer protection than rate regulation. Therefore, we conclude that Section 3(a) of the 1992 Cable Act generally does not "specifically preempt" state and local governments from enacting and enforcing state or local consumer protection laws that may address negative option billing practices of cable operators. Should we become aware of a particular situation, (e.g., through a petition for declaratory ruling), in which state or local regulation of negative option billing goes beyond consumer protection and instead approaches actual regulation of "rates for the provision or cable service," or otherwise goes beyond consumer protection law, we will consider the question of federal preemption in that specific factual context. B. Prevention of Evasions. 132. The 1992 Cable Act requires the Commission to establish and periodically review regulations to prevent evasion of the rate regulations, including evasion resulting from retiering. 47 U.S.C.  543(h). The Rate Order defined a prohibited evasion as "any practice or action which avoids the rate regulation provision of the Act or Commission rules contrary to the intent of the Act or its underlying policies." Rate Order at 5915. The Commission generally opted for a case-by-case approach and declined to delineate specific actions that might constitute evasion. Id. 133. Various petitioners urge the Commission to classify certain practices as evasions or to declare that certain actions will not be deemed evasions. In the Rate Order, we stated our belief that it would be virtually impossible to list every potentially evasive practice or to determine that a practice constitutes evasion in the absence of a specific factual context, while expressing our expectation that evasions would be remedied by this Commission and local franchising authorities. Id. at 5915, 5916. While we still may be unable to list all prohibited practices at this time, certain patterns of conduct have emerged since the adoption of the rate regulations that we can characterize as creating, under certain circumstances, a possible evasion of the rate regulation rules. For example, moving groups of programming services that were offered in tiered packages to a la carte packages may be considered, in certain circumstances, an attempt to avoid the rate regulation of those services that had traditionally been offered to customers as part of the programming package intended for regulation by Congress. Such practices may not, depending on the particular circumstances, provide subscribers with the realistic option to purchase unregulated channels on an individual basis, a requirement set forth in the Rate Order. Generally, as discussed in further detail in the Second Order on Reconsideration at Section II C ("A la carte packages"), collective offerings of otherwise exempt per channel or per program services will not be considered an evasion if (1) the price for the combined package does not exceed the sum of the individual charges for each component of service, and (2) the cable operator continues to provide the component parts of the package separately (which requirement will be met if the a la carte offering constitutes a realistic service choice). 134. Collapsing multiple tiers of service into the basic tier of service, which ultimately eliminates the service choice previously available to customers and that raises the price of cable service for all basic tier subscribers may also be considered an evasion by circumventing the rules intended to reduce the cost of cable service and to provide for the buy-through of only desired services. Upon receipt of a complaint on any potential evasion, we will consider, inter alia, such circumstances as the timing of the cable operator's actions (e.g., whether they occurred on the eve of regulation or in response to the filing of a complaint), the price to subscribers before and after the actions, a comparison of the level of service received by the subscriber before and after the cable operator's actions, and whether the action resulted in the avoidance of the tier buy-through prohibition. Practices that have the effect of increasing subscriber choice and/or reducing rates generally will not be found evasive of our rules. 135. Numerous other practices that have developed since the advent of rate regulation might also be found, depending on individual circumstances, to constitute evasions of the rules or to violate the rules themselves. For instance, operators cannot now charge for services previously provided without extra charge (e.g., routine service calls, program guides) unless the value of that service, as now reflected in the new charges, was removed from the base rate number when calculating the reduction in rates necessary to establish reasonable rates. Also, a single channel provided to the customer that may consist of two or more programming services can be counted only as one channel of service provided for rate-setting purposes. Charging customers to downgrade from service packages that were added without their explicit consent, even where those service packages include previously subscribed services, may be a violation or an evasion of the negative option prohibition. In addition, the delivery of new packages themselves (ironically intended to represent subscriber choice) without an affirmative assent from the subscriber may be a violation or an evasion of the negative option requirements and result in a refund to the customer. Adding previously unneeded equipment and charging for that equipment in order to provide customers with the same services they received previously may also be an evasion of our rules. Operators must realize that these and similar practices, and other practices which directly violate or evade our rules will not be permitted, and that sanctions will be imposed in appropriate circumstances. 136. We have now undertaken the first steps of an enforcement effort directed at specific practices by individual operators. The Commission has sent 62 letters of inquiry to various cable operators, primarily in response to complaints from local governments and consumers about rate and service changes and certain other practices. The letters of inquiry generally require the operators to provide information on, and a justification for, recent rate and service changes and practices that were raised by the complaints. Principal subjects addressed in the letters of inquiry include: (1) possible violations of the Commission's freeze on regulated cable service revenues; (2) the removal of programming from existing service tiers and the offering of such programming both on an individual or a la carte basis and on a collective or package basis; and (3) possible violations of the negative option billing prohibition. We intend to pursue vigorously these and other appropriate enforcement actions in individual cases to bring the full measure of benefits of the 1992 Cable Act to cable subscribers where the purposes of the Act are being thwarted by the evasive or unlawful actions of cable operators. C. Grandfathering of Rate Agreements. 137. The 1992 Cable Act's grandfather clause allows a franchising authority with a franchise agreement executed before July 1, 1990, that was regulating basic cable rates at that time to continue such regulation for the remaining term of that agreement without following the Commission's substantive rate standards. 47 U.S.C.  543(j). The Commission limited this provision to its explicit terms. Rate Order, supra, at 5926. 138. King County contends that the grandfather clause should encompass all rate agreements whether executed before or after July 1, 1990 because such agreements may benefit franchising authorities, cable operators, and subscribers. King County's argument was considered and rejected in the Rate Order, where the Commission found that an expansive interpretation of the grandfather clause conflicted with the literal terms of the provision and with the Cable Act's intent that local franchising agreements are abrogated unless they conform with the Act and the Commission's Rules. Id. King County has presented no justification for departing from the literal terms, and the intent, of the Cable Act, and the interpretation set forth in the Rate Order stands. D. Subscriber Bill Itemization. 139. Special Taxes. The 1992 Cable Act allows a cable operator to separately identify certain charges on its bill, i.e. the amounts of the bill (1) assessed as a franchise fee (as well as the identity of the franchising authority); (2) assessed to satisfy any requirements the franchise agreement imposes on the operator for costs related to public, educational, or governmental (PEG) channels; and (3) attributable to charges a governmental authority imposes on the transaction between the operator and the subscriber. 47 U.S.C.  542(c). The Rate Order limited the itemization provision to its express terms and found that itemized costs must be direct and verifiable, as well as a reasonable allocation of overhead, and for PEG costs, the sum of the per-channel costs for the number of channels used to meet franchise requirements. Rate Order, supra at 5967, 68. The Rate Order also made clear that Section 622(c) does not require operators to undertake itemization of any costs. Id. at 5967. In the Rate Order, the Commission specifically determined that taxes imposed on rights-of-way and also applicable to other utilities would not be part of a franchise fee and thus could not be itemized, and specifically excluded from itemization California's possessory interest tax. Id. at 5968, n. 1399. 140. Several petitioners object to the Commission's exclusion from itemization of the California possessory interest tax and seek itemization for the California utility user tax, contending that both of these taxes are imposed on the transaction between the operator and subscriber and thus squarely within Section 622(c)(3), which allows itemization of charges imposed by a governmental authority on the transaction between operator and subscriber. 47 U.S.C.  542(c). The California possessory interest tax, InterMedia asserts, purports to be an assessment based only on the fair market rent for the use of the right-of-way but is applied differently to cable systems than to other businesses subject to the tax. It contends that in the cable context, the tax is not based on the value of the right-of-way itself, but on the system's profitability, which is derived from the transactions between the operator and subscribers. California Cable Television Association states that the utility user tax is assessed directly as a percentage of subscriber charges each month. 141. These arguments are essentially the same as those raised by the same parties in conjunction with our recent consideration of whether these same taxes should be afforded treatment as external costs when calculating permissible rates. See First Rates Reconsideration, supra, at paras. 103-107. Our analysis in the subscriber bill itemization context will be similar, as well. In considering the application of external treatments, the underlying consideration is the same as it is in determining eligibility for itemization on subscriber bills: whether the particular levy is a tax on the transaction between the operator and subscriber. Compare 47 U.S.C.  543(b)(2)(C)(v) with  542(c)(3). With the same record before us as here, we have already found ourselves unable to conclude that the California possessory interest tax is, in every instance, the type of tax that would fit within this characterization. Id. at para. 106. We found that with varying applications of the tax in different jurisdictions within California, different treatments under our rules would pertain from case to case. Where the assessment of the possessory interest tax is directly related to subscriber revenues, such as where the tax is based on a value of intangible assets formula effectively calculated from the operator's income for the provision of cable service, then it could be accorded external cost treatment, and it similarly would be eligible for itemization on subscriber bills. Id. at para. 107. Otherwise it is eligible for neither treatment. As we stated in that earlier decision, we are prepared to afford utility user taxes in California, or any other jurisdiction, the requested treatment if additional evidence regarding their application in specific instances demonstrates such treatment is warranted under this analytical framework. 142. Advertising of Rates. Several petitioners object to the Commission's prohibition on advertising prices for cable service that do not include the amount of franchise fees. Rate Order, supra at 5972, n. 1415. Petitioners argue that this decision will require many different prices to be quoted for a system serving multiple franchise areas, thus hindering cross-franchise area marketing efforts. Petitioners dispute the Commission's assertion that allowing operators to advertise a rate for service "plus franchise fees" would confuse subscribers about the cost of cable service, contending that goods are often marketed at a price exclusive of applicable taxes and/or shipping charges. 143. We remain concerned that consumers could be misled as to the cost of cable services by advertisements which do not include complete rates, and cable operators will generally be required to advertise rates that include all costs and fees. However, in those cases where a system covers multiple franchise areas that have differing franchise fees or other franchise costs, different channel line-ups, or have slightly different rate structures, an operator should be permitted some flexibility for efficient advertising that will reasonably advise potential subscribers of the true cost of service. In such circumstances, an operator can advertise a range of fees, or a "fee plus," rate that indicates the core rate plus the range of possible additions, based on the particular location of the subscriber. An operator need not indicate the total rate for each individual area in such circumstances. 144. Itemization of "Franchise Related" Costs. NATOA urges clarification of the decision to allow itemization of costs required under a franchise agreement for "support of institutional networks, free wiring of public buildings, provision of special municipal video services and voice and data transmissions." Id. at 5967-69. NATOA contends that such costs cannot be considered "franchise fees" within the definition of Section 622(g). Petitioner does not seem to raise any arguments that PEG-related costs cannot be itemized at all under Section 622(c), and the costs to which it refers, essentially costs to support PEG-related activities, are specifically provided for in subpart (2) of Section 622(c). We believe that these costs are properly classified as PEG-related and are therefore itemizable under Section 622(c)(2). E. Effective Date. 145. In the Rate Order, we announced an effective date of June 21, 1993, for the rules adopted in that decision. Rate Order, supra, at 5932-33. Subsequently, after examining the feasibility of implementing cable rate regulation in light of the Commission's funding shortfall for Fiscal Year 1993, the effective date was deferred until October 1, 1993. On June 30, however, the Congress appropriated supplemental funding, and the accompanying Conference Report expressed the intent of Congress that the Commission establish an effective date of September 1. The Commission then established September 1, 1993, as the effective date for the rate regulation rules, and provided certain mechanisms to facilitate a smooth transition. 146. In its petition for reconsideration, Wometco urges the Commission to delay the effective date at least 60 days beyond the completion of the reconsideration process and any further rulemakings implementing the 1992 Act's rate regulation provisions. Wometco argues that this 60-day period is necessary for affected parties to become familiar with the Commission's final decisions. Since our rules went into effect on September 1, Wometco's petition to delay the effective date is moot. V. EQUIPMENT AND INSTALLATION 147. In the Rate Order, we established standards for the regulation of equipment and installation charges for basic cable and cable programming services based on actual cost. Cable operators are required to unbundle each piece of equipment and must separate equipment from installation. They must establish an Equipment Basket that includes all costs associated with the equipment for and installation of regulated cable service. FCC Form 393 (and/or FCC Form 1205) provides the methodology and guidelines for determining the actual cost of each piece of equipment and of installations. Id. at 5815-16. In the First Rates Reconsideration we responded to petitions concerning: (1) the equipment covered by basic service regulation; (2) the application of the actual cost standard; (3) additional connections; and (4) most of the issues raised regarding the guidelines for determining equipment and installation charges. First Rates Reconsideration, supra, at paras. 37-69. Here we consider several remaining issues, including the treatment of the cost of promotions, seasonal property related charges, the methodology for determining the cost of home wiring and other issues concerning our Equipment Basket approach. A. Promotions. 148. In the Rate Order we stated that operators would be afforded substantial discretion to offer promotions, including a below cost offering for some equipment and installations. Id. at 5819, 20. Additionally, we stated that certain limits would apply. Id. at 5820-21. Consistent with these statements, Section 76.923(j) of our rules allows promotions but limits the recovery, stating: "Operators may not recover the cost of promotional offerings by increasing program service rates above the maximum monthly charge per subscriber prescribed by these rules." Although the rules do not state how in the normal course of setting rates such recovery is to be effected, they do allow that "as part of a general cost-of-service showing, an operator may include the cost of promotions in its general system overhead costs." 149. Petitioners claim that the FCC Form 393 methodology (which is also employed on FCC Form 1205) does not allow for recovery of past costs associated with equipment and installation promotions. In many cases equipment and installations have been provided to customers "free" in the past with the expectation of recovering such costs over time in the rates for services. Since the required calculations remove the full cost of equipment and installations from the benchmark rate calculations, operators claim that they will not be able to recover such past promotional costs as planned. Further, they claim that they will be able to recover the full cost of future equipment and service installations only by discontinuing promotional offerings. 150. We do not agree with petitioners that our rules do not allow for the recovery of costs of equipment and installations provided to customers free or at reduced rates for the purpose of promoting services. Our rules allow operators to recover all of their equipment and installation costs in the charges for those items if they so wish. Further, we expect that the benchmark rates already reflect an element of promotional costs because, prior to the inception of benchmark rates, it has been fairly routine in the cable industry to periodically run promotional offerings to entice customers to purchase cable services. Considering this, we believe that we have already adequately provided for the recovery of promotional offerings when setting the benchmark rates themselves. To the extent that this does not apply to any operator, that operator may attain recovery, if justified, by making a cost-of-service showing. In such case, the costs of promotional offerings may be included, pursuant to Section 76.924, in general system overheads. We will, however, continue to monitor this issue. If we find that over time there is evidence that such costs have not been adequately provided for under our existing approach, we will consider any appropriate revisions to our rules or policies at that time. B. Seasonal Property Related Charges. 151. Baraff Koerner and Higgins Lake claim that the benchmark design did not adequately consider companies with extraordinary churn associated with seasonal property. They claim that since the benchmarks did not include revenues for seasonal connect, disconnect, and maintenance orders, the elimination of the associated seasonal costs results in the elimination of an amount that was not included in the benchmarks. Some operators experience seasonally high maintenance costs associated with the need to turn service on and off at the beginning and end of the season for resort properties. Others provide special maintenance at a special fee that allows seasonal subscribers to avoid the inconvenience of having to disconnect and reconnect at the end and beginning of each season. Petitioners claim that since the benchmark compilations did not include revenues for the seasonal items, the elimination of the seasonal related costs results in the elimination of an amount that was not included in the benchmarks. They claim that the treatment of the revenues for seasonal items needs to be clarified or that some consideration should be given to the seasonal issue by making some special allowance for the fact that seasonal churn is not built into the compiled benchmarks. 152. We do not find that provision should be made for such operators to allow the rates for service to remain higher than average by allowing the cost for the seasonal turn-on and turn-off to remain in the rates for programming service. First of all, these operators are allowed to include the revenues from seasonal orders in their benchmark calculations of rates per channel in effect on September 30, 1992 and on the initial date of regulation. They eliminate the associated costs in determining the maximum allowable rates because these costs are recoverable from separate rates for equipment. If seasonal operators wish to provide special charges for seasonal connect/disconnect services or for off-season maintenance, they may calculate rates for such on Line 7.e of Form 393, Part III (or Line 7.e Step B, Equipment and Installation Worksheet, FCC Form 1205), in accordance with our rules. 153. It should also be noted that the benchmark rates are essentially average rates and as such will not precisely consider every operational factor of each individual cable operator. In the Rate Order, we noted that we originally solicited comment on the specific system characteristics or variables that we could or should use to separate systems into distinct categories for which we should establish different benchmarks and/or define different rates. Id. at 5767-68. We did not find seasonality to be a factor requiring special consideration. Nor is it a statistically significant factor in setting rates under our revised benchmark analysis. Accordingly, we will not modify our equipment rules or rate-setting rules based on seasonal changes. C. Sale of Home Wiring. 154. The Commission requires that upon termination of service, home wiring must be offered for sale to subscribers. Such wiring is to be priced at the replacement cost of the installed material on a per foot basis. NATOA claims that a schedule is needed for calculation of the charges allowable for home wiring sold to cable customers. 155. There is currently no required schedule for any equipment sold. Requirements for pricing of equipment leased involves calculation of a ratebase type of profit element, allocation of overheads, inclusion of depreciation on equipment leased, and the estimation of the maintenance element includible in the equipment charges. Considering the requirements for equipment pricing, we provided schedules to guide operators in calculating rates. These schedules also documented the rate calculations for review by regulating authorities. Equipment sold is less involved and does not require the level of monitoring that equipment leased does. It is not, therefore, necessary to provide the kind of guidance for pricing computation and documentation. While the home wiring is somewhat unique in that there is a special requirement for sale upon service termination, the pricing for the sale of home wiring does not appear to be any more complicated than the sale of other regulated equipment. 156. We do not find that it has been demonstrated that a significantly unique and complicated situation prevails for pricing of home wiring and consequently that a special form is needed. We thus will not impose the additional burden of a special schedule for home wiring. Nevertheless, we clarify that adequate documentation should be maintained to demonstrate compliance with Commission pricing requirements for home wiring as well as for other equipment sold and for installations. D. Time Lag. 157. In the Rate Order, the Commission directed operators to establish an equipment basket for accumulation of equipment and installation costs but did not establish the time periods for measuring equipment basket costs. Rate Order, supra, at 5815-16. The FCC Form 393 and related instructions, however, generally require inclusion of historical costs rather than historically-based projected costs. With respect to this, Time Warner states that the equipment basket approach is flawed because it has a built-in time lag that effectively does not allow costs incurred in a given year to be recovered until the following year. This is because the actual costs of the year ending are used for the development of rates for the upcoming year instead of projected costs. Petitioner claims that this particularly penalizes systems with unusually high installation expenses arising from high levels of new construction. The petitioner contends that systems that have, for example, recently installed many new subscribers or have added addressable converters will have to back out these high costs from their program service rates, even if they intended to recover such costs gradually over time. Petitioner recommends that cable operators be permitted to use pro forma expense figures averaged over the life of the franchise instead. 158. We believe our methodology, as modified on reconsideration, will allow recovery of unusually high costs. We have provided a methodology that eliminates the cost of equipment from service rate calculation because there is a provision to calculate separate rates for installations and equipment. Further, we have clarified in the First Rates Reconsideration that adjustments for unusual changes in operations are permitted, subject to regulatory approval, by using a representative month for developing equipment rates. First Rates Reconsideration, supra, at para. 67. See also FCC Form 1205, General Instructions. We believe that this provision will allow operators to recover the full cost of equipment and we are denying Time Warner's request to use pro forma expense figures averaged over the life of the franchise. VI. ORDERING CLAUSES 159. Accordingly, IT IS ORDERED that Part 76 of the Commission's rules, 47 U.S.C. Part 76, IS AMENDED, as indicated below, May 15, 1994. 160. IT IS FURTHER ORDERED that the Petitions for Reconsideration ARE GRANTED in part, DENIED in part, as indicated above, and to the extent that Petitions raise issues concerning leased access rates, they will be disposed of in future orders. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary APPENDIX A Part 76 of Title 47 of the Code of Federal Regulations is amended to read as follows: Part 76 Cable Television Service 1. The authority citation for Part 76 continues to read as follows: AUTHORITY: Secs. 2, 3, 4, 301, 303, 307, 308, 309, 48 Stat., as amended, 1064, 1065, 1066, 1081, 1082, 1083, 1084, 1085, 1101; 47 U.S.C. Secs. 152, 153, 154, 301, 303, 307, 308, 309, 532, 533, 535, 542, 543, 552 as amended, 106 Stat. 1460. 2. Section 76.905 is amended by revising paragraph (c) to read as follows:  76.905 Standards for identification of cable systems subject to effective competition. * * * * * (c) For purposes of paragraphs (b)(1) through (b)(3) of this section, each separately billed or billable customer will count as a household subscribing to or being offered video programming services, with the exception of multiple dwelling buildings billed as a single customer. Individual units of multiple dwelling buildings will count as separate households. The term "households" shall not include those dwellings that are used solely for seasonal, occasional, or recreational use. * * * * * 3. Section 76.914(a)(1) is revised to read as follows:  76.914 Revocation of certification. (a) A franchising authority's certification shall be revoked if: (1) After the franchising authority has been given a reasonable opportunity to comment and cure any minor nonconformance, it is determined that state and local laws and regulations are in substantial and material conflict with the Commission's regulations governing cable rates. * * * * * 4. Section 76.917 is added to Subpart N to read as follows:  76.917 Notification of certification withdrawal. A franchising authority that has been certified to regulate rates may, at any time, notify the Commission that it no longer intends to regulate basic cable rates. Such notification shall include the franchising authority's determination that rate regulation no longer serves the interests of cable subscribers served by the cable system within the franchising authority's jurisdiction, and that it has received no consideration for its withdrawal of certification. Such notification shall be served on the cable operator. The Commission retains the right to review such determinations and to request the factual finding of the franchising authority underlying its decision to withdraw certification. The franchising authority's withdrawal becomes effective upon notification to the Commission. 5. Section 76.922(b) is amended by adding paragraph (b)(9) to read as follows:  76.922 Rates for the basic service tier and cable programming services tiers. * * * * * (b) * * * (9) Updating Data Calculations. (i) For purposes of this section, if: (A) A cable operator, prior to becoming subject to regulation, revised its rates to comply with the Commission's rules; and (B) The data on which the cable operator relied was current and accurate at the time of revision, and the rate is accurate and justified by the prior data; and (C) Through no fault of the cable operator, the rates that resulted from using such data differ from the rates that would result from using data current and accurate at the time the cable operator's system becomes subject to regulation; then the cable operator is not required to change its rates to reflect the data current at the time it becomes subject to regulation. (ii) Notwithstanding the above, any subsequent changes in a cable operator's rates must be made from rate levels derived from data [that was current as of the date of the rate change]. (iii) For purposes of this subsection, if the rates charged by a cable operator are not justified by an analysis based on the data available at the time it initially adjusted its rates, the cable operator must adjust its rates in accordance with the most accurate data available at the time of the analysis. * * * * * 6. Section 76.923 is amended by adding paragraph (m) to read as follows:  76.923 Rates for equipment and installation used to receive the basic service tier. * * * * * (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. 7. Section 76.930 is revised to read as follows:  76.930 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 a franchising authority within 30 days of receiving written notification from the franchising authority that the franchising authority 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 reductions in the number 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  76.937(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. 8. Section 76.933 is amended to add paragraph (d) to read as follows:  76.933 Franchising authority review of basic cable rates and equipment costs. * * * * * (d) A franchising authority may request, pursuant to a petition for special relief under  76.7, that the Commission examine a cable operator's cost-of-service showing, submitted to the franchising authority as justification of basic tier rates, within 30 days of receipt of a cost-of-service showing. In its petition, the franchising authority shall document its reasons for seeking Commission assistance. The franchising authority shall issue an order stating that it is seeking Commission assistance and serve a copy before the 30-day deadline on the cable operator submitting the cost showing. The cable operator shall deliver a copy of the cost showing, together with all relevant attachments, to the Commission within 15 days of receipt of the local authority's notice to seek Commission assistance. The Commission shall notify the local franchising authority and the cable operator of its ruling and of the basic tier rate, as established by the Commission. The rate shall take effect upon implementation by the franchising authority of such ruling and refund liability shall be governed thereon. The Commission's ruling shall be binding on the franchising authority and the cable operator. A cable operator or franchising authority may seek reconsideration of the ruling pursuant to  1.106(a)(1) of this chapter or review by the Commission pursuant to  1.115(a) of this chapter. 9. Section 76.937 is amended to by adding paragraphs (d) and (e) to read as follows:  76.937 Burden of proof * * * * * (d) A franchising authority or the Commission 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  76.940, 76.941, and 76.942. (e) A franchising authority or the Commission may order a cable operator that has filed a facially incomplete form to file supplemental information, and the franchising authority's deadline to rule on the reasonableness of the proposed rates will be tolled pending the receipt of such information. A franchising authority may set reasonable deadlines for the filing of such information, and may find the cable operator in default and mandate appropriate 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. 10. Section 76.938 is revised to read as follows:  76.938 Proprietary information. A franchising authority may require the production of proprietary information to make a rate determination in those cases where cable operators have submitted initial rates, or have proposed rate increases, pursuant to an FCC Form 393 (and/or FCC Forms 1200/1205) filing or a cost-of-service showing. The franchising authority shall state a justification for each item of information requested and, where related to an FCC Form 393 (and/or FCC Forms 1200/1205) filing, indicate the question or section of the form to which the request specifically relates. Upon request to the franchising authority, the parties to a rate proceeding shall have access to such information, subject to the franchising authority's procedures governing non-disclosure by the parties. Public access to such proprietary information shall be governed by applicable state or local law. 11. Section 76.939 is added to Subpart N to read as follows:  76.939 Truthful written statements and responses to requests of franchising authority. Cable operators shall comply with franchising authorities' and the Commission's requests for information, orders, and decisions. No cable operator shall, in any information submitted to a franchising authority or the Commission in making a rate determination pursuant to an FCC Form 393 (and/or FCC Forms 1200/1205) filing or a cost-of-service showing, make any misrepresentation or willful material omission bearing on any matter within the franchising authority's or the Commission's jurisdiction. 12. Section 76.942 is amended by revising paragraphs (a), (c)(2), and adding (c)(3) and (f) to read as follows:  76.942 Refunds. (a) A franchising authority (or the Commission, pursuant to  76.945) may order a cable operator to refund to subscribers that portion of previously paid rates determined 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. 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 Commission'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, a franchising authority (or the Commission) must give the operator notice and opportunity to comment. * * * * * (c) * * * (1) * * * (2) From the date a franchising authority issues an accounting order pursuant to  76.933(c), 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; 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 franchising authority or the Commission. * * * * * (f) At the time a franchising authority (or the Commission, pursuant to paragraph (a) of this section) orders a cable operator to pay refunds to subscribers, the franchising authority must 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 franchising authority must 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. 13. Section 76.943 is amended by revising paragraph (b) and adding paragraph (c) to read as follows:  76.943 Fines * * * * * (b) If a cable operator willfully fails to comply with the terms of any franchising authority's order, decision, or request for information, as required by  76.939, the Commission may, in addition to other remedies, impose a forfeiture pursuant to Section 503(b) of the Communications Act of 1934, as amended, 47 U.S.C.  503(b). (c) A cable operator shall not be subject to forfeiture because its rate for basic service or equipment is determined to be unreasonable. 14. Section 76.944 is amended by revising paragraph (b) to read as follows:  76.944 Commission review of franchising authority decisions on rates for the basic service tier and associated equipment. * * * * * (b) Any participant at the franchising authority level in a ratemaking proceeding may file an appeal of the franchising authority's decision with the Commission within 30 days of release of the text of the franchising authority's decision as computed under  1.4(b) of this chapter. Appeals shall be served on the franchising authority or other authority that issued the rate decision. Where the state is the appropriate decisionmaking authority, the state shall forward a copy of the appeal to the appropriate local official(s). Oppositions may be filed within 15 days after the appeals is filed, and must be served on the party(ies) appealing the rate decision. Replies may be filed 7 days after the last day for oppositions and shall be served on the parties to the proceeding. 15. Section 76.945(b) is revised to read as follows:  76.945 Procedures for Commission review of basic service rates. * * * * * (b) Basic service and equipment rate schedule filings for existing rates or proposed rate increases (including increases in the baseline channel change that results from reductions in the number of channels in a tier) must use the official FCC form, a copy thereof, or a copy generated by FCC software. Failure to file on the official FCC form or a copy may result in the imposition of sanctions specified in  76.937(d). Cable operators seeking to justify the reasonableness of existing or proposed rates above the permitted tier rate must submit a cost-of-service showing sufficient to support a finding that the rates are reasonable. * * * * * 16. Section 76.946 is added to Subpart N to read as follows:  76.946 Advertising of rates. Cable operators that advertise rates for basic service and cable programming service tiers shall be required to advertise rates that include all costs and fees. Cable systems that cover multiple franchise areas having differing franchise fees or other franchise costs, different channel line-ups, or different rate structures may advertise a complete range of fees without specific identification of the rate for each individual area. In such circumstances, the operator may advertise a "fee plus" rate that indicates the core rate plus the range of possible additions, depending on the particular location of the subscriber. 17. Section 76.953(b) is revised to read as follows:  76.953 Limitation on filing a complaint. * * * * * (b) Complaint regarding a rate change. Except as provided in paragraph (a) of this section, a complaint alleging an unreasonable rate for cable programming service or associated equipment may be filed against a cable operator only in the event of a rate change, including an increase or decrease in rates, or a change in rates that results from a change in a system's service tiers. A rate change may involve an implicit rate increase (such as deleting channels from a tier without a corresponding lowering of the rate for that tier). A complaint regarding a rate change for cable programming service or associated equipment may be filed against a cable operator only in the event of a rate change. A complaint regarding a rate change for cable programming service or associated equipment must be filed with the Commission within 45 days from the date the complainant receives a bill from the cable operator that reflects the rate change. * * * * * 18. Section 76.956(a) is revised to read as follows:  76.956 Cable operator response. (a) Unless the Commission notifies a cable operator to the contrary, the cable operator must file with the Commission a response to the complaint filed on the applicable form, within 30 days of the date of service of the complaint. The response shall indicate when service occurred. Service by mail is complete upon mailing. See  1.47(f) of this chapter. The response shall include the information required by the appropriate FCC form, including rate cards, channel line-ups, and an explanation of any discrepancy in the figures provided in these documents and the rate filing. The cable operator must serve its response on the complainant (and, if the complainant is a subscriber, the relevant franchising authority) via first class mail. * * * * * 19. Section 76.961 is amended by revising paragraph (b) and adding paragraph (e) to read as follows:  76.961 Refunds * * * * * (b) The cumulative refund due subscribers shall be calculated from the date a valid complaint is filed until the date a cable operator implements a prospective rate reduction as ordered by the Commission pursuant to  76.960. The Commission shall calculate refund liability according to the rules in effect for determining the reasonableness of the rates for the period of time covered by the complaint. * * * * * (e) At the time the Commission orders a cable operator to pay refunds to subscribers, the franchising authority must 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 franchising authority may 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. 20. Section 76.984 is revised to read as follows:  76.984 Geographically uniform rate structure. (a) The rates charged by cable operators for basic service, cable programming service, and associated equipment and installation shall be provided pursuant to a rate structure that is uniform throughout each franchise area in which cable service is provided. (b) This section does not prohibit the establishment by cable operators of reasonable categories of service and customers with separate rates and terms and conditions of service, within a franchise area. Cable operators may offer different rates to multiple dwelling units of different sizes and may set rates based on the duration of the contract, provided that the operator can demonstrate that its cost savings vary with the size of the building and the duration of the contract, and as long as the same rate is offered to buildings of the same size with contracts of similar duration. (c) Contracts between cable operators and multiple dwelling units entered into on or before April 1, 1993 may remain in effect until their previously agreed-upon expiration date. APPEN DIX B MM Do cket No. 92-266 Petitions for Reconsideration of Report and Order and Further Notice of Proposed Rulemaking in MM Docket No. 92-266, 8 FCC Rcd 5631 (1993) Affiliated Regional Communications, Ltd. Alaska Cablevision, Inc. Alsea River Cable TV Arizona Cable Television Association, et al. Atlanta Interfaith Broadcasters, Inc. Bank of New York Baraff, Koerner, Olender & Hochberg, P.C. Bell Atlantic Black Entertainment Television, Inc. Blade Communications, Inc. Booth American Company, et al. C-SPAN Cable Services Cablevision Systems Corporation California Cable Television Association Center for Media Education, et al. Century Communications Corp. Coalition of Small System Operators Colony Communications, Inc., et al. Comcast Cable Communications, Inc. Community Antenna Television Association, Inc. Community Broadcasters Association Continental Cablevision, Inc. Corning Incorporated; Scientific Atlanta, Inc. Crown Media, Inc. Discovery Communications, Inc. The Disney Channel E! Entertainment Television, Inc. Encore Media Corporation Fairmont Cable Harron Communications Corp. Higgins Lake Cable, Inc. Inland Bay Cable TV Associates InterMedia Partners King County, Wash., et al. Liberty Media Corp. Longview Cable Television Michigan C-TEC Communities Mountain Cablevision, Inc. Multichannel Communication Sciences, Inc. Municipal Franchising Authorities National Association of Telecommunications Officers and Advisors, et al. National Cable Television Association, Inc. Newhouse Broadcasting Corporation Northland Communications Corp. Paradise Television Network, Inc. Searle, Stanley M. SuperStar Connection Sur Corporation Tele-Communications, Inc. Time Warner Entertainment Company, L.P. TKR Cable Company/TKR Cable of Kentucky Turner Broadcasting System, Inc. Valuevision International, Inc. Viacom International, Inc. Video Data Systems Video Jukebox Network, Inc. Wometco Cable Corp. Comments/Oppositions to Petitions for Reconsideration Ad Hoc Rural Consortium Advanced Communications, Inc. Affiliated Regional Communications, Ltd. Arizona Cable Television Association Bell Atlantic Bellsouth Telecommunications Bend Cable Communications, Inc., et al. Cable TV of Jersey City, Inc. Cablevision Industries Corporation, et al. Cablevision Systems Corporation Center for Media Education, et al. Consumer Electronics Group of the Electronic Industries Association Consumer Federation of America C-TEC Cable Systems Continental Cablevision, Inc. General Instrument Corporation GTE Service Corporation Home Recording Right Coalition Home Shopping Network, Inc. King County, et al. Liberty Cable Company, Inc. Medium-Sized Operators Group Michigan Communities National Association of Telecommunications Officers and Advisors, et al. National Association of Towns and Townships National Cable Television Association, Inc. National Telephone Cooperative Association Prevue Networks, Inc. Time Warner Entertainment Company, Inc. United States Telephone Association USA Networks Valuevision International, Inc. Viacom International, Inc. Videomaker Magazine Replies to Oppositions to Petitions for Reconsideration Cablevision Industries Corp., et al. Cablevision Systems Corporation Center for Media Education, et al. City of Saint Paul Coalition of Small System Operators Continental Cablevision, Inc. Corning Incorporated; Scientific-Atlanta, Inc. Discovery Communications, Inc. Engle Broadcasating King County, Wash., et al. Liberty Media Corporation Medium-Sized Operators Group Michigan C-TEC Corporation National Association of Telecommunications Officers and Advisors, et al. National Cable Television Association, Inc. Paradise Television Network, Inc. Puerto Rico Cable Television Association State of Hawaii Sur Corporation Televista Communications, Inc. Time Warner Entertainment Company, L.P. United Video, Inc. Valuevision International, Inc. Viacom International, Inc. Petitions for Reconsideration of First Order on Reconsideration, Second Report and Order and Third Notice of Proposed Rulemaking in MM Docket No. 92-266, FCC 93-428, released August 27, 1993. New York Telephone Company and New England Telephone and Telegraph Company ("NYNEX") Attorney General of the State of Connecticut (Statement in support of NYNEX) Oppositions to Petitions for Reconsideration Cablevision Industries Corporation, et al. Continental Cablevision, Inc. Time Warner Entertainment Company, L.P. Viacom International, Inc. Reply to Oppositions to Petitions for Reconsideration NYNEX MM Docket No. 92-262 Petition for Reconsideration of Report and Order in MM Docket No. 92-262, 8 FCC Rcd 2274 (1993) Prime Cable February 22, 1994 SEPARATE STATEMENT OF COMMISSIONER ANDREW C. BARRETT RE: In the Matter of Implementation of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation and Buy-Through Prohibition Third Order on Reconsideration MM Docket Nos. 92-266 and 92-262, respectively In this action, the Commission has resolved numerous issues on reconsideration regarding the implementation of its cable rate regulations. I write separately to address the issue of evasion.It is imperative that the patterns of conduct cited in this Order (e.g., the collapsing of multiple tiers of service into the basic tier) not be viewed as per se evasions of the Commission's rules. Rather these actions will be viewed on a case- by-case basis subject to a showing which can rebut any presumption of evasion. Without more specific information, I believe the Commission should not make a final determination about cable operator conduct in this regard.