Sec. 76.924  Allocation to service cost categories.

    (a) Applicability. The requirements of this section are applicable 
to cable operators for which the basic service tier is regulated by 
local franchising authorities or the Commission, or, with respect to a 
cable programming services tier, for which a complaint has been filed 
with the Commission. The requirements of this section are applicable for 
purposes of rate adjustments on account of external costs and for cost-
of-service showings.
    (b) Accounting requirements. Cable operators electing cost-of-
service regulation or seeking rate adjustments due to changes in 
external costs shall maintain their accounts:
    (1) in accordance with generally accepted accounting principles; and
    (2) in a manner that will enable identification of appropriate 
investments, revenues, and expenses.
    (c) Accounts level. Except to the extent indicated below, cable 
operators

[[Page 586]]

electing cost of service regulation or seeking adjustments due to 
changes in external costs shall identify investments, expenses and 
revenues at the franchise, system, regional, and/or company level(s) in 
a manner consistent with the accounting practices of the operator on 
April 3, 1993. However, in all events, cable operators shall identify at 
the franchise level their costs of franchise requirements, franchise 
fees, local taxes and local programming.
    (d) Summary accounts. (1) Cable operators filing for cost-of-service 
regulation, other than small systems owned by small cable companies, 
shall report all investments, expenses, and revenue and income 
adjustments accounted for at the franchise, system, regional and/or 
company level(s) to the summary accounts listed below.

                                Ratebase

Net Working Capital
Headend
Trunk and Distribution Facilities
Drops
Customer Premises Equipment
Construction/Maintenance Facilities and Equipment
Programming Production Facilities and Equipment
Business Offices Facilities and Equipment
Other Tangible Assets
Accumulated Depreciation
Plant Under Construction
Organization and Franchise Costs
Subscriber Lists
Capitalized Start-up Losses
Goodwill
Other Intangibles
Accumulated Amortization
Deferred Taxes

                           Operating Expenses

Cable Plant Employee Payroll
Cable Plant Power Expense
Pole Rental, Duct, Other Rental for Cable Plant
Cable Plant Depreciation Expense
Cable Plant Expenses--Other
Plant Support Employee Payroll Expense
Plant Support Depreciation Expense
Plant Support Expense--Other
Programming Activities Employee Payroll
Programming Acquisition Expense
Programming Activities Depreciation Expense
Programming Expense--Other
Customer Services Expense
Advertising Activities Expense
Management Fees
General and Administrative Expenses
Selling General and Administrative Depreciation Expenses
Selling General and Administrative Expenses--Other
Amortization Expense--Franchise and Organizational Costs
Amortization Expense--Customer Lists
Amortization Expense--Capitalized Start-up Loss
Amortization Expense--Goodwill
Amortization Expense--Other Intangibles
Operating Taxes
Other Expenses (Excluding Franchise Fees)
Franchise Fees
Interest on Funded Debt
Interest on Capital Leases
Other Interest Expenses

                     Revenue and Income Adjustments

Advertising Revenues
Other Cable Revenue Offsets
Gains and Losses on Sale of Assets
Extraordinary Items
Other Adjustments

    (2) Except as provided in Sec. 76.934(h), small systems owned by 
small cable companies that file for cost-of-service regulation shall 
report all investments, expenses, and revenue and income adjustments 
accounted for at the franchise, system, regional and/or company level(s) 
to the following summary accounts:

                                Ratebase

Net Working Capital
Headend, Trunk and Distribution System and Support Facilities and 
Equipment
Drops
Customer Premises Equipment
Production and Office Facilities, Furniture and Equipment
Other Tangible Assets
Accumulated Depreciation
Plant Under Construction
Goodwill
Other Intangibles
Accumulated Amortization
Deferred Taxes

                           Operating Expenses

Cable Plant Maintenance, Support and Operations Expense
Programming Production and Acquisition Expense
Customer Services Expense
Advertising Activities Expense
Management Fees
Selling, General and Administrative Expenses
Depreciation Expense
Amortization Expense--Goodwill
Amortization Expense--Other Intangibles
Other Operating Expense (Excluding Franchise Fees)

[[Page 587]]

Franchise Fees
Interest Expense

                     Revenue and Income Adjustments

Advertising Revenues
Other Cable Revenue Offsets
Gains and Losses on Sale of Assets
Extraordinary Items
Other Adjustments

    (e) Allocation to service cost categories.
    (1) For cable operators electing cost-of-service regulation, 
investments, expenses, and revenues contained in the summary accounts 
identified in paragraph (d) of this section shall be allocated among the 
Equipment Basket, as specified in Sec. 76.923, and the following service 
cost categories:
    (i) Basic service cost category. The basic service category, shall 
include the cost of providing basic service as defined by 
Sec. 76.901(a). The basic service cost category may only include 
allowable costs as defined by Secs. 76.922(g) through 76.922(k).
    (ii) Cable programming services cost category. The cable programming 
services category shall include the cost of providing cable programming 
services as defined by Sec. 76.901(b). This service cost category shall 
contain subcategories that represent each programming tier that is 
offered as a part of the operator's cable programming services. All 
costs that are allocated to the cable programming service cost cateogry 
shall be further allocated among the programming tiers in this category. 
The cable programming service cost category may include only allowable 
costs as defined in Sec. 76.922(g) through 76.922(k).
    (iii) All other services cost category. The all other services cost 
category shall include the costs of providing all other services that 
are not included the basic service or a cable programming services cost 
categories as defined in paragraphs (e)(1)(i) and (ii) of this section.
    (2) Cable operators seeking an adjustment due to changes in external 
costs identified in FCC Form 1210 shall allocate such costs among the 
equipment basket, as specified in Sec. 76.923, and the following service 
cost categories:
    (i) The basic service category as defined by paragraph (e)(1)(i) of 
this section;
    (ii) The cable programming services category as defined by paragraph 
(e)(1)(ii) of this section;
    (iii) The all other services cost category as defined by paragraph 
(e)(1)(iii) of this section.
    (f) Cost allocation requirements. (1) Allocations of investments, 
expenses and revenues among the service cost categories and the 
equipment basket shall be made at the organizational level in which such 
costs and revenues have been identified for accounting purposes pursuant 
to Sec. 76.924(c).
    (2) Costs of programming and retransmission consent fees shall be 
directly assigned or allocated only to the service cost category in 
which the programming or broadcast signal at issue is offered.
    (3) Costs of franchise fees shall be allocated among the equipment 
basket and the service cost categories in a manner that is most 
consistent with the methodology of assessment of franchise fees by local 
authorities.
    (4) Costs of public, educational, and governmental access channels 
carried on the basic tier shall be directly assigned to the basic tier 
where possible.
    (5) Commission cable television system regulatory fees imposed 
pursuant to 47 U.S.C. 159 shall be directly assigned to the basic 
service tier.
    (6) All other costs that are incurred exclusively to support the 
equipment basket or a specific service cost category shall be directly 
assigned to that service cost category or the equipment basket where 
possible.
    (7) Costs that are not directly assigned shall be allocated to the 
service cost categories in accordance with the following allocation 
procedures:
    (i) Wherever possible, common costs for which no allocator has been 
specified by the Commission are to be allocated among the service cost 
categories and the equipment basket based on direct analysis of the 
origin of the costs.
    (ii) Where allocation based on direct analysis is not possible, 
common costs for which no allocator has been specified by the Commission 
shall, if possible, be allocated among the service costs categories and 
the equipment

[[Page 588]]

basket based on indirect, cost-causative linkage to other costs directly 
assigned or allocated to the service cost categories and the equipment 
basket.
    (iii) Where neither direct nor indirect measures of cost allocation 
can be found, common costs shall be allocated to each service cost 
category based on the ratio of all other costs directly assigned and 
attributed to a service cost category over total costs directly or 
indirectly assigned and directly or indirectly attributable.
    (g) Cost identification at the franchise level. After costs have 
been directly assigned to and allocated among the service cost 
categories and the equipment basket, cable operators that have 
aggregated costs at a higher level than the franchise level must 
identify all applicable costs at the franchise level in the following 
manner:
    (1) Recoverable costs that have been identified at the highest 
organizational level at which costs have been identified shall be 
allocated to the next (lower) organizational level at which recoverable 
costs have been identified on the basis of the ratio of the total number 
of subscribers served at the lower level to the total number of 
subscribers served at the higher level.
    (2) Cable operators shall repeat the procedure specified in 
paragraph (g)(1) of this section at every organizational level at which 
recoverable costs have been identified until such costs have been 
allocated to the franchise level.
    (h) Part-time channels. In situations where a single channel is 
divided on a part-time basis and is used to deliver service associated 
with different tiers or with pay per channel or pay per view service, a 
reasonable and documented allocation of that channel between services 
shall be required along with the associated revenues and costs.
    (i) Transactions and affiliates. Adjustments on account of external 
costs and rates set on a cost-of-service basis shall exclude any amounts 
not calculated in accordance with the following:
    (1) Charges for assets purchased by or transferred to the regulated 
activity of a cable operator from affiliates shall equal the invoice 
price if that price is determined by a prevailing company price. The 
invoice price is the prevailing company price if the affiliate has sold 
a substantial number of like assets to nonaffiliates. If a prevailing 
company price for the assets received by the regulated activity is not 
available, the changes for such assets shall be the lower of their cost 
to the originating activity of the affiliated group less all applicable 
valuation reserves, or their fair market value.
    (2) The proceeds from assets sold or transferred from the regulated 
activity of the cable operator to affiliates shall equal the prevailing 
company price if the cable operator has sold a substantial number of 
like assets to nonaffiliates. If a prevailing company price is not 
available, the proceeds from such sales shall be determined at the 
higher of cost less all applicable valuation reserves, or estimated fair 
market value of the asset.
    (3) Charges for services provided to the regulated activity of a 
cable operator by an affiliate shall equal the invoice price if that 
price is determined by a prevailing company price. The invoice price is 
the prevailing company price if the affiliate has sold like services to 
a substantial number of nonaffiliates. If a prevailing company price for 
the services received by the regulated activity is not available, the 
charges of such services shall be at cost.
    (4) The proceeds from services sold or transferred from the 
regulated activity of the cable operator to affiliates shall equal the 
prevailing company price if the cable operator has sold like services to 
a substantial number of nonaffiliates. If a prevailing company price is 
not available, the proceeds from such sales shall be determined at cost.
    (5) For purposes of Sec. 76.924(i)(1) through 76.924(i)(4), costs 
shall be determined in accordance with the standards and procedures 
specified in Sec. 76.922 and paragraphs (b) and (d) of this section.
    (j) Unrelated expenses and revenues. Cable operators shall exclude 
from cost categories used to develop rates for the provision of 
regulated cable service, equipment, and leased commercial access, any 
direct or indirect expenses and revenues not related to the provision of 
such services. Common costs of providing regulated cable service,

[[Page 589]]

equipment, and leased commercial access and unrelated activities shall 
be allocated between them in accordance with paragraph (f) of this 
section.

[ 58 FR 29753 , May 21, 1993, as amended at  59 FR 17990 , Apr. 15, 1994;  59 FR 53115 , Oct. 21, 1994;  60 FR 35865 , July 12, 1995;  61 FR 9367 , Mar. 8, 
1996]

    Effective Date Note: At  61 FR 9367 , Mar. 8, 1996, in Sec. 76.924, 
the section heading and paragraphs (e)(1)(iii) and (2)(iii) were 
revised; (e)(1)(iv), (v), (2)(iv), and (v) were removed. This amendment 
contains information collection and recordkeeping requirements and will 
not become effective until approval has been given by the Office of 
Management and Budget.