Sec. 76.923  Rates for equipment and installation used to receive the 
          basic service tier.

    (a) Scope. (1) The equipment regulated under this section consists 
of all equipment in a subscriber's home, provided and maintained by the 
operator, that is used to receive the basic service

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tier, regardless of whether such equipment is additionally used to 
receive other tiers of regulated programming service and/or unregulated 
service. Such equipment shall include, but is not limited to:
    (i) Converter boxes;
    (ii) Remote control units; and
    (iii) Inside wiring.
    (2) Subscriber charges for such equipment shall not exceed charges 
based on actual costs in accordance with the requirements set forth in 
this section.
    Subscriber charges for such equipment shall not exceed charges based 
on actual costs in accordance with the requirements set forth below.
    (b) Unbundling. A cable operator shall establish rates for remote 
control units, converter boxes, other customer equipment, installation, 
and additional connections separate from rates for basic tier service. 
In addition, the rates for such equipment and installations shall be 
unbundled one from the other.
    (c) Equipment basket. A cable operator shall establish an Equipment 
Basket, which shall include all costs associated with providing customer 
equipment and installation under this section. Equipment Basket costs 
shall be limited to the direct and indirect material and labor costs of 
providing, leasing, installing, repairing, and servicing customer 
equipment, as determined in accordance with the cost accounting and cost 
allocation requirements of Sec. 76.924, except that operators do not 
have to aggregate costs in a manner consistent with the accounting 
practices of the operator on April 3, 1993. The Equipment Basket shall 
not include general administrative overhead including marketing 
expenses. The Equipment Basket shall include a reasonable profit.
    (1) Customer equipment. Costs of customer equipment included in the 
Equipment Basket may be aggregated, on a franchise, system, regional, or 
company level, into broad categories. Except to the extent indicated in 
paragraph (c)(2) of this section, such categorization may be made, 
provided that each category includes only equipment of the same type, 
regardless of the levels of functionality of the equipment within each 
such broad category. When submitting its equipment costs based on 
average charges, the cable operator must provide a general description 
of the averaging methodology employed and a justification that its 
averaging methodology produces reasonable equipment rates. Equipment 
rates should be set at the same organizational level at which an 
operator aggregates its costs.
    (2) Basic service tier only equipment. Costs of customer equipment 
used by basic-only subscribers may not be aggregated with the costs of 
equipment used by non-basic-only subscribers. Costs of customer 
equipment used by basic-only subscribers may, however, be aggregated, 
consistent with an operator's aggregation under paragraph (c)(1) of this 
section, on a franchise, system, regional, or company level. The 
prohibition against aggregation applies to subscribers, not to a 
particular type of equipment. Alternatively, operators may base its 
basic-only subscriber cost aggregation on the assumption that all basic-
only subscribers use equipment that is the lowest level and least 
expensive model of equipment offered by the operator, even if some 
basic-only subscribers actually have higher level, more expensive 
equipment.
    (3) Installation costs. Installation costs, consistent with an 
operator's aggregation under paragraph (c)(1) of this section, may be 
aggregated, on a franchise, system, regional, or company level. When 
submitting its installation costs based on average charges, the cable 
operator must provide a general description of the averaging methodology 
employed and a justification that its averaging methodology produces 
reasonable equipment rates. Installation rates should be set at the same 
organizational level at which an operator aggregates its costs.
    (d) Hourly service charge. A cable operator shall establish charges 
for equipment and installation using the Hourly Service Charge (HSC) 
methodology. The HSC shall equal the operator's annual Equipment Basket 
costs, excluding the purchase cost of customer equipment, divided by the 
total person hours involved in installing, repairing, and servicing 
customer equipment during the same period. The HSC

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is calculated according to the following formula:
[GRAPHIC] [TIFF OMITTED] TC01MR91.116

Where, EB=annual Equipment Basket Cost; CE=annual purchase cost of all 
customer equipment; and H=person hours involved in installing and 
repairing equipment per year. The purchase cost of customer equipment 
shall include the cable operator's invoice price plus all other costs 
incurred with respect to the equipment until the time it is provided to 
the customer.
    (e) Installation charges. Installation charges shall be either:
    (1) The HSC multiplied by the actual time spent on each individual 
installation; or
    (2) The HSC multiplied by the average time spent on a specific type 
of installation.
    (f) Remote charges. Monthly charges for rental of a remote control 
unit shall consist of the average annual unit purchase cost of remotes 
leased, including acquisition price and incidental costs such as sales 
tax, financing and storage up to the time it is provided to the 
customer, added to the product of the HSC times the average number of 
hours annually repairing or servicing a remote, divided by 12 to 
determine the monthly lease rate for a remote according to the following 
formula:
[GRAPHIC] [TIFF OMITTED] TR25JN96.006

Where, HR=average hours repair per year; and UCE=average annual unit 
cost of remote.

    (g) Other equipment charges. The monthly charge for rental of 
converter boxes and other customer equipment shall be calculated in the 
same manner as for remote control units. Separate charges may be 
established for each category of other customer equipment.
    (h) Additional connection charges. The costs of installation and 
monthly use of additional connections shall be recovered as charges 
associated with the installation and equipment cost categories, and at 
rate levels determined by the actual cost methodology presented in the 
foregoing paragraphs (e), (f), and (g) of this section. An operator may 
recover additional programming costs and the costs of signal boosters on 
the customers premises, if any, associated with the additional 
connection as a separate monthly unbundled charge for additional 
connections.
    (i) Charges for equipment sold. A cable operator may sell customer 
premises equipment to a subscriber. The equipment price shall recover 
the operator's cost of the equipment, including costs associated with 
storing and preparing the equipment for sale up to the time it is sold 
to the customer, plus a reasonable profit. An operator may sell service 
contracts for the maintenance and repair of equipment sold to 
subscribers. The charge for a service contract shall be the HSC times 
the estimated average number of hours for maintenance and repair over 
the life of the equipment.
    (j) Promotions. A cable operator may offer equipment or installation 
at charges below those determined under paragraphs (e) through (g) of 
this section, as long as those offerings are reasonable in scope in 
relation to the operator's overall offerings in the Equipment Basket and 
not unreasonably discriminatory. Operators may not recover the cost of a 
promotional offering by increasing charges for other Equipment Basket 
elements, or by increasing programming service rates above the maximum 
monthly charge per subscriber prescribed by these rules. As part of a 
general cost-of-service showing, an operator may include the cost of 
promotions in its general system overhead costs.
    (k) Franchise fees. Equipment charges may include a properly 
allocated portion of franchise fees.
    (l) Company-wide averaging of equipment costs. For the purpose of 
developing unbundled equipment charges as required by paragraph (b) of 
this section, a cable operator may average the equipment costs of its 
small systems at any level, or several levels, within its operations. 
This company-wide averaging applies only to an operator's small systems 
as defined in Sec. 76.901(c); is permitted only for equipment charges, 
not

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installation charges; and may be established only for similar types of 
equipment. When submitting its equipment costs based on average charges 
to the local franchising authority or the Commission, an operator that 
elects company-wide averaging of equipment costs must provide a general 
description of the averaging methodology employed and a justification 
that its averaging methodology produces reasonable equipment rates. The 
local authority or the Commission may require the operator to set 
equipment rates based on the operator's level of averaging in effect on 
April 3, 1993, as required by Sec. 76.924(d).
    (m) Cable operators shall set charges for equipment and 
installations to recover Equipment Basket costs. Such charges shall be 
set, consistent with the level at which Equipment Basket costs are 
aggregated as provided in Sec. 76.923(c). 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.
    (n) Timing of Filings. An operator shall file FCC Form 1205 in order 
to establish its maximum permitted rates at the following times:
    (1) When the operator sets its initial rates under either the 
benchmark system or through a cost-of-service showing;
    (2) Within 60 days of the end of its fiscal year, for an operator 
that adjusts its rates under the system described in Section 76.922(d) 
that allows it to file up to quarterly;
    (3) On the same date it files its FCC Form 1240, for an operator 
that adjusts its rates under the annual rate adjustment system described 
in Section 76.922(e). If an operator elects not to file an FCC Form 1240 
for a particular year, the operator must file a Form 1205 on the 
anniversary date of its last Form 1205 filing; and
    (4) When seeking to adjust its rates to reflect the offering of new 
types of customer equipment other than in conjunction with an annual 
filing of Form 1205, 60 days before it seeks to adjust its rates to 
reflect the offering of new types of customer equipment.
    (o) Introduction of new equipment. In setting the permitted charge 
for a new type of equipment at a time other than at its annual filing, 
an operator shall only complete Schedule C and the relevant step of the 
Worksheet for Calculating Permitted Equipment and Installation Charges 
of a Form 1205. The operator shall rely on entries from its most 
recently filed FCC Form 1205 for information not specifically related to 
the new equipment, including but not limited to the Hourly Service 
Charge. In calculating the annual maintenance and service hours for the 
new equipment, the operator should base its entry on the average annual 
expected time required to maintain the unit, i.e., expected service 
hours required over the life of the equipment unit being introduced 
divided by the equipment unit's expected life.

[ 58 FR 29753 , May 21, 1993, as amended at  59 FR 17960 , 17973, Apr. 15, 
1994;  60 FR 52118 , Oct. 5, 1995;  61 FR 32709 , June 25, 1996]

    Effective Date Note: At  60 FR 52118 , Oct. 5, 1995, in Sec. 76.923, 
paragraphs (n) and (o) were added. This amendment contains information 
collection and recordkeeping requirements and will not become effective 
until 30 days after approval has been given by the Office of Management 
and Budget.