§ 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 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 § 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)

   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 § 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 § 76.901(a).
   The basic service cost category may only include allowable costs as
   defined by § § 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 § 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 § 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 § 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 § 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 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 § 76.924(i)(1) through 76.924(i)(4), costs shall be
   determined in accordance with the standards and procedures specified in
   § 76.922 and paragraphs (b) and (d) of this section.

   (6) For purposes of this section, entities are affiliated if either
   entity has an attributable interest in the other or if a third party
   has an attributable interest in both entities.

   (7) Attributable interest shall be defined by reference to the criteria
   set forth in Notes 1 through 5 to § 76.501 provided, however, that:

   (i) The limited partner and LLC/LLP/RLLP insulation provisions of Note
   2(f) shall not apply; and

   (ii) The provisions of Note 2(a) regarding five (5) percent interests
   shall include all voting or nonvoting stock or limited partnership
   equity interests of five (5) percent or more.

   (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, 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;  64 FR 67197 , Dec. 1, 1999]

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