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A. 1. a.(1)(a) i) a) 1. 1. 1. a.(1)(a) i) a)  X_-1.` ` In this item we amend the Commission's rules relating to cable television to conform them to changes in the Communications Act enacted, on February 8, 1996, in the  X1-Telecommunications Act of 1996 (the "1996 Act").1t X -#XP\  P6QyoXP#э Telecommunications Act of 1996, Pub. L. No. 104104, 100 Stat. 56, approved February 8, 1996. In addition, we propose further rules to the extent necessary to implement various provisions of the 1996 Act. Finally, because many of these statutory provisions were effective upon enactment, we establish interim rules to govern implementation of the 1996 Act pending adoption of final rules.  X -2.` ` Our intent in this item is to conform our rules promptly to statutory requirements that are already in effect, to bring certainty to cable operators and local regulators, and to achieve as quickly as possible the deregulation intended by Congress. Further, we seek to streamline our procedural regulations and, of course, to continue to protect consumers, consistent with congressional intent.  X4-3.` ` Much of the 1996 Act consists of clear, selfeffectuating revisions to prior  X-federal statutory provisions. The Order portion of this item conforms our rules to meet these new statutory requirements. We are revising these rules without providing prior public notice and an opportunity for comment because the rule modifications are mandated by the applicable provisions of the 1996 Act. We find that notice and comment procedures are unnecessary, and that therefore this action falls within the "good cause" exception of the  X-Administrative Procedure Act.Ibt X-ԍ5 U.S.C.  553(b)(B).I The final rules adopted in this Order do not involve discretionary action on the part of the Commission. Rather, they simply implement provisions of the 1996 Act according to the specific terms set forth in the legislation.  XR-4. ` ` Other provisions of the 1996 Act are already effective, but require further  X;-rulemaking in order to be fully and clearly implemented. The Notice portion of this item addresses these issues. As we initiate those rulemakings herein, we find it in the public interest to adopt interim rules immediately and find good cause to establish them without the benefit of the traditional notice and comment process. Of course, our final rules will be crafted to take into account public comment to the same extent as would be the case in a rulemaking that was not preceded by the adoption of interim policies. However, we intend the interim rules to create a safe harbor, i.e., operators can be assured that if they comply with"!0*(( " these interim rules, their behavior will not later be subject to challenge based upon the ultimate outcome of the rulemaking.  X-  X-II.ORDER  X- A.` ` Effective Competition  V_-` ` 1. Final Rule Change   X1-5.` ` Since passage of the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), regulation of cable television has been guided by  X -Congress's intent to "rely on the marketplace, to the maximum extent feasible . . . ."E t X| -ԍ Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102385, 106 Stat. 1460 (1992),  2(b)(2). The 1992 Cable Act amended Title 6 of the  XN-Communications Act, as amended, 47 U.S.C.  521 et seq. ("Communications Act").E The 1992 Cable Act required the Commission to prescribe rate regulations that protect subscribers from having to pay unreasonable rates by ensuring that rates for regulated services do not  X -exceed rates that would be charged in the presence of effective competition.Z Kt X-ԍCommunications Act,  623(a)(2).Z Thus, regulations governing the rates charged for cable services do not apply to cable systems that  X-actually face effective competition.@t X=-ԍId.@ For a system that is not subject to effective competition, the Commission is obligated to ensure the reasonableness of rates charged for the basic  Xb-service tier ("BST") and for the cable programming service tier ("CPST").:bt X-ԍId.: The BST, which a subscriber must purchase in order to have access to any other tier of service, must include all of the local broadcast television stations that the operator offers over its system, plus any public, educational, or government access channels that the operator is required to provide to  X-subscribers under the terms of its franchise.Wb t X-ԍCommunications Act,  623(b)(7)(A).W A CPST is any tier of programming, other than  X-the basic service tier, that a cable operator offers.M t X!-ԍId.,  623(l)(2). M Where effective competition is present, certain other regulatory requirements also become inapplicable, including the uniform rate  X-requirement,H  t X8%-ԍId.,  623(d).H the "tier buy through" requirement,K yt X&-ԍId.,  623(b)(7).K and certain of the ownership rules. ,t X-ԍSee 1996 Act,  202(i), to be codified at Communications Act,  613(a)(3); Order in CS Docket No. 9656, FCC 96112 (rel. March 18, 1996)."d 0*(("Ԍ X-ԙ6.` ` Section 76.905(b) of our rules incorporates the statutory definition of  X-"effective competition" as set forth in the 1992 Cable Act.x dt X-ԍ47 C.F.R.  76.905(b); see Communications Act,  623(l)(1).x Pursuant to that rule, a system is subject to effective competition in the area covered by its local franchise if any one of the following three tests are met: X` ` (1) Fewer than 30 percent of the households in its franchise area subscribe to the cable service of a cable system.  X` ` (2) The franchise area is:  X` ` (i) Served by at least two unaffiliated multichannel video programming distributors each of which offers comparable programming to at least 50 percent of the households in the franchise area; and  X` ` (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.  X` ` (3) A multichannel video programming distributor, operated by the franchising authority for that franchise area, offers video programming to at  Xy-least 50 percent of the households in the franchise area.=  yt XA-ԍ47 C.F.R.  76.905(b). With respect to the second test for effective competition, the Commission concluded that in determining whether 15% of households in the franchise area subscribe to cable services, "only those multichannel video programming distributors that offer  X-programming to at least 50 percent of the households in the franchise area should be included  X-. . . ." Report and Order and Further Notice of Proposed Rulemaking ("Rate Order") in MM Docket 92266, FCC 93177, 8 FCC Rcd 5631, 5664-65 (1993). On review, the court in  X-Time Warner Entertainment Co. v. FCC concluded that Congress intended to include the subscribers of all multichannel video programming distributors ("MVPDs") offering service in the franchise area, not just those offering service to 50% of the households in the area, in applying the 15% threshold. 56 F.3d 151, 189 (D.C. Cir. 1995). The Commission will address the decision of the Court in a separate proceeding.=   XK-7. ` ` The three effective competition test categories described above are not altered by the 1996 Act. However, Section 301(b)(3) of the 1996 Act creates a fourth test, finding that effective competition exists when video programming is offered by, or over the facilities  X-of, a local exchange carrier ("LEC")Jt X%-ԍ Section 3(a) of the 1996 Act defines "local exchange carrier" as follows:  X "o' 0*((&"ԌThe term "local exchange carrier" means any person that is engaged in the provision of telephone exchange service or exchange access. Such term does not include a person insofar as such a person is engaged in the provision of a commercial mobile service under section 332(c), except to the extent that the Commission finds that such service should be included in the definition of such term.  X- 1996 Act,  3(a), to be codified at Communications Act,  153(r).  or its affiliate. Thus, effective competition now exists"0*((" if a: XX` ` local exchange carrier or its affiliate (or any multichannel video programming distributor using the facilities of such carrier or its affiliate) offers video programming services directly to subscribers by any means (other than directtohome satellite services) in the franchise area of an unaffiliated cable operator which is providing cable service in that franchise area, but only if the video programming services so offered in that area are comparable to the video  XH-programming services provided by the unaffiliated cable operator in that area.Ht X-ԍ1996 Act,  301(b)(3)(C), to be codified at Communications Act,  623(l)(1)(D).(#` This provision was effective upon enactment. Therefore, we amend our rules to incorporate this additional prong of the definition of effective competition. While we believe that further  X -clarification is needed to fully implement this provision on a permanent basis,P t X*-ԍSee infra at Sec. III, A.P in the following sections we adopt interim rules regarding certain definitional and procedural issues. Consistent with Section 623 of the statute, we seek to adopt interim and permanent rules that will allow the Commission to determine when the level of competition provided by a LEC or  X-its affiliate is sufficient to have a restraining effect on cable rates.@ t X-ԍCommunications Act,  623; see H.R. Conf. Rep. No. 862, 102d Cong., 2d Sess. at 62 (1992).   Vb-` ` 2. Definitions of "offer" and "in the franchise area"   X4-8.` ` The Commission's preexisting definition of "offer" will apply under the new test for effective competition:  XX` ` Service of a multichannel video programming distributor will be deemed offered: (1) When the multichannel video programming distributor is physically able to deliver service to potential subscribers, with the addition of no or only minimal additional investment by the distributor, in order for an individual"0*((" subscriber to receive service; and (2) When no regulatory, technical or other impediments to households taking service exist, and potential subscribers in the franchise area are reasonably aware that they may purchase the services of the  X-multichannel video programming distributor.Lt X-ԍ47 C.F.R.  76.905(e). L x`  Xv-9.` ` The legislative history to the 1996 Act indicates congressional intent to apply  X_-this definition of "offer" for purposes of the new test for effective competition._yt X -ԍTelecommunications Act of 1996 Conference Report, S. Rep. 104230 at 170 (Feb. 1, 1996) ("Conference Report").  X1- 10.` ` An operator should focus on each element of the "offer" definition, in the context of the new test for effective competition, when attempting to prove that the service offered by the LEC affiliated MVPD is effective in restraining cable rates. For example, a cable operator seeking to prove effective competition will have to show that the competitor is "physically able" to offer service to subscribers "in the franchise area." Where the competitor's service area does not follow the borders of the local cable franchise areas, a cable operator should describe the extent of the overlap between its franchise area and the actual or planned service area of the competitor. With respect to multichannel multipoint distribution service ("MMDS"), for example, we previously have determined that the potential subscribers include only those who reside in "areas to which the MMDS operator is capable  XK-of providing video programming."\Kt X-ԍRate Order, 8 FCC Rcd at 5658, n. 90.\ We note that the zone in which our rules protect a MMDS licensee from harmful electrical interference is a circle with a radius of 35 miles  X-centered on the MMDS transmitter site.Jt X-ԍ47 C.F.R.  21.902(d).J Thus, in seeking to establish effective competition from a LECaffiliated MMDS operator, a cable operator should provide the location of the MMDS transmitter and the 35mile protected zone. The cable operator also should provide any other reasonably available technical and geographic information, as well as information about the geographic scope of the competitor's marketing efforts, to help establish that service is being offered to subscribers in the franchise area. Such data, whether with respect to a MMDS operator or some other LECaffiliated MVPD, will also be relevant to a showing that there are no technical or other impediments to households taking service from the MVPD. Where appropriate, we will request additional relevant information from the competing MVPD.  X - 11.` ` In addition, the cable operator must establish that "potential subscribers in the franchise area are reasonably aware" that they may purchase the competitor's service. The marketing efforts of the LEC or its affiliate often will be directly related to this issue. As we"w0*((Z" previously have observed, "potential subscribers may be made reasonably aware of the availability of a competing service, for example, through advertising in regional or local  X-media, direct mail, or any other marketing outlet."Xt XK-ԍRate Order, 8 FCC Rcd at 565657.X Thus, cable operators may rely on marketing information to the extent necessary to show consumer perceptions of the availability and comparability of the competing service. Again, the Commission may seek information directly from the competitor in appropriate circumstances.  V_-` ` 3. Definition of "comparable programming"   X1- 12.` ` The legislative history reveals Congress's intent that video programming be deemed "comparable" for purposes of this test if the competing service "includes access to at least 12 channels of programming, at least some of which are television broadcasting  X -signals."J {t X-ԍConference Report at 170.J Although we solicit comment as to this definition, on an interim basis we will require the broadcast programming to include the signals of local broadcasters. Broadcast programming delivered by satellite (e.g., "superstations") shall not be deemed broadcast programming for purposes of the interim application of the new effective competition test.  Vy-` ` 4. MMDS Provision of Local Broadcast Channels   XK- 13. ` ` The definitions of "offer" and "comparable programming" require us to address a further question that arises specifically in the context of MMDS. An MMDS operator has two ways of ensuring that its subscribers receive local broadcast programming. The operator can pull in the broadcast signals itself via its own centrally located broadcast antenna and then retransmit the entire package of broadcast and nonbroadcast signals to the microwave antenna located at the subscriber's residence, or the operator can install a separate broadcast antenna to complement the microwave antenna at each subscriber location. We must determine whether the wireless cable operator should be deemed to be "offering" broadcast programming in the latter situation, i.e., when the operator does not transmit the broadcast signals to the subscriber via microwave. In that situation, the operator must join the broadcast signals to the microwave signals at some point. One approach is to join those signals in a single cable that runs to the back of the customer's television set or to a settop converter box. Another approach is to run separate cable lines from each antenna to an A/B switch from which a single line is connected to the television set. The subscriber pushes the switch back and forth between the A position and the B position, depending upon whether the subscriber wants to see the broadcast channels or the microwave channels.  X - 14. ` ` On an interim basis, we will resolve this issue as follows. If the broadcast channels are available to the subscriber without an A/B switch or similar device, the MMDS operator will be deemed to be offering them within the meaning of Section 301(b)(3) of the"",0*((!" 1996 Act. If an A/B switch or similar device is required, we will still deem the broadcast stations offered if the MMDS operator is responsible for the installation. However, if the customer must install his or her own A/B switch to receive the broadcast channels, the MMDS operator will not be deemed to be offering those channels. Inclusion of broadcast channels on the MMDS operator's rate card, advertising, or other marketing materials may be evidence that the MMDS operator offers the broadcast channels in accordance with our definition of "offer." We note the significance of marketing materials because it is arguable that an MMDS operator that markets itself as a provider of local broadcast channels will take the steps necessary to ensure that subscribers receive those channels. In those circumstances, the broadcast channels would seem to be a part of the programming package that the MMDS  X -operator is offering and providing, regardless of the technical means employed. t X -ԍNothing herein affects the determination of when an MVPD must obtain retransmission  X| -consent with respect to local broadcast signals. See 47 C.F.R.  76.64(e).   V -` ` 5. Definition of "affiliate"   X -15.` ` Under our interim rules implementing this statute, an entity will be considered affiliated with a LEC if it meets the definition of "affiliate" set forth in Section 3 of the 1996 Act: XThe term "affiliate" means a person that (directly or indirectly) owns or controls, is owned or controlled by, or is under common ownership or control with another person. For purposes of this paragraph, the term "own" means to  X-own an equity interest (or the equivalent thereof) of more than 10 percent.dt X2-ԍ1996 Act,  3(a)(2), to be codified at Communications Act,  3(33).   X-16.` ` We note that this definition of "affiliate," which has been incorporated in Title I of the Communications Act, does not strictly apply to matters under Title VI, since Title VI contains a separate definition of that term that does not set a percentage threshold as to what  X-constitutes ownership.Qt Xr-ԍCommunications Act,  602(2).Q We believe this gives us discretion to establish an ownership threshold other than 10% for purposes of Title VI. However, because a determination of the  X|-precise threshold must await the rulemaking we initiate in the accompanying Notice, on an interim basis we find it reasonable to use the Title I ownership threshold that Congress has prescribed for purposes of most other provisions of the Communications Act. Therefore, effective competition under the new test may be established when a LEC owns an active or passive equity interest, or the equivalent thereof, of more than 10% in the competing MVPD. We will determine what constitutes the "equivalent" of an equity interest on a casebycase basis. Affiliation also can be shown through de facto control, regardless of the actual" 0*((<"  X-ownership interest.Yt Xy-ԍSee 47 C.F.R.  76.501, Note 1.Y The ownership threshold we adopt in the interim does not in any way preclude the establishment of a permanent rule that incorporates a different threshold. ` `  V-` ` 6. Procedures  X-17.` ` A cable system that meets all of the relevant criteria in the new effective competition test is exempt from rate regulation as of February 8, 1996, the date the 1996 Act was enacted. Such an operator may file a petition for a determination of effective  XH-competition with the Commission.OH{t Xt -ԍSee 47 C.F.R.  76.7.O The petition should demonstrate that all the relevant criteria are satisfied. We note that, by necessity, we have adopted the substantive requirements discussed above on an interim basis without the usual notice and comment proceeding. Accordingly, petitioners seeking a declaration of effective competition under the new test are free to provide additional information, consistent with the statute, that the operator believes evidence the existence of effective competition that must exist in order to exempt an operator from rate regulation.   X-18.` ` This petition may be filed with the Commission at any time, including in  Xy-response to a notice from the LFA that it intends to file a CPST rate complaint.Py.t XX-ԍSee infra at Sec. II (B).P (A LFA certified to regulate rates can simply withdraw its certification at any time if it believes the  XK-cable operator is subject to effective competition, or for any other reason.GKt X-ԍ47 C.F.R.  76.917.G) The operator shall provide a copy of the petition to the LFA. The Commission will provide public notice of the petition's filing to enable interested parties to file responses to the petition. Thereafter, we will determine whether effective competition exists and may issue an order granting the petition. As we have noted, the Commission may issue an order directing one or more persons to produce information relevant to the operator's petition. For example, the order may be directed to a LEC that is asserted to hold an interest in an MVPD sufficient to reach affiliation levels that would trigger a finding of effective competition. The Commission will act promptly on these petitions. A Commission determination regarding effective competition will be applicable to both the BST and CPST.   XN- B.` ` CPST Rate Complaints  X -19.` ` Under existing regulations, adopted pursuant to Section 623(c)(1)(B) of the Communications Act as it existed prior to the 1996 Act, subscribers were allowed to file"  0*((y"  X-complaints concerning CPST rates directly with the Commission.t Xy-ԍSee 47 C.F.R.  76.950 ("Any subscriber, franchising authority, or other relevant state or local government entity may file with the Commission a complaint challenging the reasonableness of a cable operator's rate for cable programming service, or the reasonableness of a cable operator's charges for installation or rental of equipment used for the receipt of cable programming service"). Section 301(b)(1)(C) of the 1996 Act alters the manner in which the Commission reviews complaints concerning rates  X-charged for a CPST. t X -ԍ1996 Act,  301(b)(1)(C), to be codified at Communications Act,  623(c)(3). In particular, that Section provides: XX` ` The Commission shall review any complaint submitted by a franchising authority after the date of enactment of the Telecommunications Act of 1996 concerning an increase in rates for cable programming services and issue a final order within 90 days after it receives such a complaint, unless the parties agree to extend the period for such review. A franchising authority may not file a complaint under this paragraph unless, within 90 days after such increase  X -becomes effective, it receives subscriber complaints.! t X-ԍ1996 Act,  301(b)(1)(C), to be codified at Communications Act,  623(c)(3). X(#`  X -20.` ` In Appendix A hereto, we amend our rule to incorporate the selfeffectuating language of Section 301(b)(1)(C). In addition, we have eliminated the requirement in Section 76.964 of our rules that operators notify subscribers of their right to file complaints with the Commission. Also in Section 76.964, we eliminate the requirement that operators notify subscribers of the Commission's address and phone number for purposes of filing rate  Xy-complaints.|"y t X-ԍ In the Notice, we seek comment on eliminating our requirement contained in 47 C.F.R.  76.952, which states that operators must include the name, mailing address, and telephone  X-number of the Cable Services Bureau of the Commission on monthly subscriber bills. See  Xl-infra, Sec. III B.| Subscriber complaints received by the Commission after February 8, 1996 are being returned to the subscriber with a notice of this change.  X4-21.` ` We also establish interim rules governing the filing of rate complaints by LFAs. Section 301(b)(a)(C) authorizes an LFA to file a rate complaint with the Commission if the LFA receives subscriber complaints within 90 days after an operator's rate increase becomes effective. Although the statute allows only LFAs to file rate complaints directly with the Commission, subscribers now have twice as long to complain about a rate increase as they did under our previous rules. We provide in this interim rule that an LFA may file rate complaints with the Commission when the LFA receives more than one subscriber complaint concerning an operator's rate increase. Modifications to the Commission cable rate complaint form, Form 329, will be made accordingly, as shown in Exhibit B. The records maintained"| "0*((" by an LFA in accordance with its regular business practice should be sufficient to establish that the LFA received the subscriber complaints within 90 days of a rate increase.  X-22.` ` If the LFA receives more than one subscriber complaint within the 90day period and decides to file its own complaint with the Commission, it must do so no more than 180 days after the rate increase became effective. Before filing a complaint with the Commission, the LFA shall first give the cable operator written notice of its intent to do so and give the operator a minimum of 30 days to file with the LFA the relevant FCC Forms  XH-used to justify a rate increase.#Ht X -ԍWhere appropriate, the operator should submit to the LFA a certification that it is not  X -subject to regulation, in lieu of rate justification forms. The LFA shall then forward its complaint and the operator's response to the Commission within the 180 day deadline specified above. If the operator fails to respond, the LFA should file its complaint and specify that the operator has not filed a response. We will then decide the case based upon the information before us. This procedure shall not apply to LFA complaints filed on or before the 15th day following the release date of this item. We will address those complaints filed prior to such date on an individual  X -basis.p$ bt X-ԍOf course, those complaints remain subject to the provisions of Section 301(b)(1)(c) conditioning any LFA rate complaint upon the filing of subscriber complaints with the LFA within 90 days of the CPST rate increase, and requiring the Commission to issue a final order within 90 days after it receives an LFA complaint.p  X- C.` ` Small Cable Operators  Xy-   Vb-` ` 1. Final Rule Change   X4-23.` ` The 1996 Act exempts certain smaller cable systems from certain provisions of Section 623 of the Communications Act that authorize the Commission and LFAs to regulate cable rates. Specifically, Section 301(c) of the 1996 Act amends Section 623 of the Communications Act by adding the following subsection: X(m) Special Rules For Small Companies.  X` ` (1) In General. Subsections (a), (b), and (c) do not apply to a small cable operator with respect to  X` `  (A) cable programming services, or  X` `  (B) a basic service tier that was the only service tier subject to ` ` regulation as of December 31, 1994,  Xin any franchise area in which that operator services 50,000 or fewer subscribers.   X -X` ` (2) Definition of Small Cable Operator. For purposes of this xx- X-subsection, the term "small cable operator" means a cable operator that,  X" $0*(("ԑdirectly or through an affiliate, serves in the aggregate fewer than 1 percent of  X-all subscribers in the United States and is not affiliated with any entity or  X X-entities whose gross annual revenues in the aggregate exceed $250,000,000.%t XK-ԍSee 1996 Act,  301(c), to be codified at Communications Act,  623(m).   X-24.` ` We amend our rules, as set forth in Appendix A, to reflect the exceptions to rate regulation created by section 301(c) of the 1996 Act.  X_-25.` ` In the accompanying Notice, we propose to adopt additional rules to implement Section 301(c). However, because this provision was effective upon enactment of the statute,  X3-we will establish in this Order interim rules to apply pending adoption of final rules.  V -` ` 2. Definition of "small cable operator"   X -26.` ` With respect to the definition of a small cable operator, and for interim  X -purposes only, we find that there are 61,700,000 cable subscribers in the United States. & {t X-ԍSecond Annual Assessment of the Status of Competition in the Market for the  X-Delivery of Video Programming ("Second Annual Report"), CS Docket No. 9561, FCC 95491, App. G (rel. Dec. 11, 1995).  Therefore, an operator serving fewer than 617,000 subscribers shall be deemed a small operator if its annual revenues, when combined with the total annual revenues of all of its affiliates, do not exceed $250 million in the aggregate. Further, to implement the small operator provisions pending adoption of final rules, we will use the definition of "affiliate"  XO-that we adopted last year for purposes of our small system costofservice rules.P'Ot X-ԍ47 C.F.R.  76.934(a).P Therefore, an entity shall be deemed affiliated with a small cable operator if that entity has a 20% or greater equity interest in the operator (active or passive) or holds de jure or de facto control  X -over the operator.:( t Xl-ԍId.: In the present context, we believe it is reasonable to apply our definition of affiliation as it exists under our small system rules, given that those rules and the small cable operator provisions of the 1996 Act all have the same intent of minimizing regulation  X-and ensuring access to needed capital for smaller cable entities.z)d t X!-ԍThe small system definition of "affiliate" that we adopt here was derived from the definition set forth in Title VI, 47 U.S.C. 522(2), a definition which remains unaltered despite the inclusion of a separate definition of "affiliate" set forth in the 1996 Act for other purposes.  X$-See supra at para. 16.z  V-` ` 3. Scope of Deregulation " )0*((2"Ԍ X-27.` ` Assuming an operator is eligible for deregulation under the statutory subscriber and revenue criteria, the scope of deregulation will depend, at least on an interim basis, upon  X-the number of tiers of service that were subject to rate regulation as of December 31, 1994.*t XK-ԍSee 1996 Act,  301(c), to be codified at Communications Act,  623(m)(1). We believe it to be Congress' intent that any qualifying system that had only a single tier of cable service subject to regulation as of December 31, 1994 shall be exempt from rate regulation as to all of its programming services, regardless of the number of tiers it now  Xv-offers.:+v{t X -ԍId.: By contrast, a qualifying system that had more than one tier subject to regulation as  X_-of December 31, 1994 shall remain regulated on the BST.:,_.t X> -ԍId.:  X1-` ` 4. Procedures  X -28.` ` A cable operator that satisfies all of the relevant criteria is exempt from rate regulation as to the extent provided above effective February 8, 1996, the date the 1996 Act was enacted. If such an operator had only a single tier as of December 31, 1994, and the LFA for the franchise area in which that operator offers service is certified to regulate cable rates under the 1992 Cable Act, the operator should certify in writing to such LFA that the operator meets all of the criteria for deregulation of the BST. It may make this certification at any time. Upon request of the LFA, the operator shall identify in writing all of its affiliates that provide cable service, the total cable subscriber base of itself and each affiliate, and the aggregate gross revenues of all its cable and noncable affiliates. Within 90 days of the original certification, the LFA shall determine whether the operator qualifies for deregulation and shall notify the operator in writing of its decision, although this 90day period shall be tolled for so long as it take the operator to respond to a proper request for information by the LFA. If the LFA finds that the operator does not qualify for deregulation, its notice shall state the grounds for that decision. The operator may challenge that decision by filing an appeal with the Commission within 30 days.  X-29.` ` Once the operator has certified its eligibility for deregulation on the BST, the LFA shall not prohibit the operator from taking a rate increase and shall not order the operator to make any refunds, unless and until the LFA has rejected the certification in a final order that is no longer subject to appeal or that the Commission has affirmed. Thus, the operator may take rate increases while its certification is pending. However, the operator shall be liable for refunds for the revenues it gains (beyond those revenues that it could have gained under regulation) as a result of any rate increase taken during the period in which it claimed to be deregulated, plus interest, in the event it is later found not to be deregulated. In addition, the running of the standard oneyear limitation on refund liability will be tolled during that period to ensure that the filing of an invalid small operator certification does not" ,0*(("  X-reduce any refund liability that the operator otherwise would incur.Q-t Xy-ԍSee 47 C.F.R.  76.942.Q  X-30.` ` A system that qualifies under the new small operator subscriber and revenue requirements and that had more than one tier as of December 31, 1994 is deregulated on all its CPSTs as of February 8, 1996. Within 30 days of being served with a LFA's notice that it intends to file a CPST rate complaint, such an operator shall certify to the LFA that it meets the relevant small operator criteria, in accordance with the new CPST rate complaint  X_-procedure described above.O._{t X -ԍSee supra at Sec. II, B.O This certification shall be in lieu of the rate justification that an operator otherwise would submit. The LFA may either resolve the issue itself in accordance with the procedures set forth immediately above, or it may forward its notice and the operator's response for Commission review in accordance with the new procedures for CPST  X -rate complaints.P/ .t X-ԍSee supra at para. 2122.P No certification is necessary if the operator does not receive notice that the LFA intends to file a CPST rate complaint. If a pending CPST rate complaint was filed with the Commission before the effective date of these interim rules, the operator should file its certification of small operator status directly with the Commission within 15 days of that effective date.   Xy-31.` ` We adopt these interim rules solely for the purpose of implementing Section 301(c) of the 1996 Act pending our adoption of final rules. These interim rules in no way alter or amend our small system costofservice rules or any other rules applicable to small systems or small cable companies, except to the extent such rules no longer apply to systems deregulated under Section 301(c) of the 1996 Act.  V-` ` 4. Relationship With Preexisting Small System Rules  X-32.` ` In the interests of eliminating confusion and uncertainty, we will summarize the separate treatment available to small systems as defined by our preexisting rules. Last year, the Commission adopted rules streamlining costofservice rate regulation for any system serving fewer than 15,000 subscribers (a "small system"), as long as the system is owned by an operator that serves no more than 400,000 subscribers over all of its systems (a "small  XN-cable company").0Nt X"-ԍSixth Report and Order and Eleventh Order on Reconsideration in MM Docket Nos.  X#-92266 & 93215, FCC 95196, 10 FCC Rcd 7393 (1995) ("Small System Order"); see 47 C.F.R.  76.934(h). Obviously, a large number of systems in this category will qualify for partial or total deregulation under the small cable operator provisions of the 1996 Act. Once a system qualifies under these criteria, it remains subject to the relaxed rules for so long as the system serves fewer than 15,000 subscribers, even if the company later exceeds 400,000 subscribers or if the small system is acquired by an operator" Q 00*(("  X-with more than 400,000 subscribers.^1t Xy-ԍSmall System Order, 10 FCC Rcd at 7413.^ When the system exceeds 15,000 subscribers, it may maintain its current rates but cannot seek an increase until such an increase is permitted under  X-our standard rate rules applicable to systems generally.C2{t X-ԍId. at 7428.C Our small system rules are unaffected by the 1996 Act or this rulemaking.  X-  X-D.` ` Uniform Rate Requirement  X_- 33.` ` Prior to enactment of the 1996 Act, Section 623(d) of the Communications Act provided in full: "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." Section 76.984 of the Commission's rules was adopted to implement  X -this requirement.G3 .t X-ԍ47 C.F.R.  76.984.G The Commission interpreted the rules (and the statutory requirement) as applying to systems not facing effective competition as well as to those facing effective  X -competition.4 t Xe-ԍThird Order on Reconsideration in MM Docket Nos. 92266 & 92262, FCC 9440, 9 FCC Rcd 4316, 4327 (1994). Upon review, the court in Time Warner Entertainment Co. v. FCC found this interpretation to be incorrect, holding that "[a]pplication of the uniform rate provision to  X -competitive systems violates 47 U.S.C. 543(a)(2). . . ."5 {t X-ԍ56 F. 3d 151, 190 (D.C. Cir. 1995). This case is pending before the Commission on remand.  X{-!34.` ` Section 301(b)(2) of the 1996 Act addresses the uniform rate structure through a statutory amendment which, in relevant part, is consistent with the action of the court. It amends the uniform rate provision by adding the following at the end of Section 623(d): XThis subsection does not apply to (1) a cable operator with respect to the provision of cable service over its cable system in any geographic area in which the video programming services offered by the operator in that area are subject to effective competition, or (2) any video programming offered on a per channel or per program basis. Bulk discounts to multiple dwelling units shall not be subject to this subsection, except that a cable operator of a cable system that is not subject to effective competition may not charge predatory prices to a multiple dwelling unit. Upon a prima facie showing by a complainant that there are reasonable grounds to believe that the discounted price is predatory, the cable system shall have the burden of showing that its discounted price is"P 50*(("  X-not predatory.6t Xy-ԍ1996 Act,  301(b)(2), to be codified at Communications Act,  623(d).   X-"35.` ` Accordingly, in Appendix A we amend Section 76.984 of our rules to conform  X-to the new statutory language.  X-#36.` ` In the Notice, we seek comment as to several aspects of this amendment, including whether we need to implement procedures to govern the complaint process established by Section 301(b)(2) of the 1996 Act. Until final rules are adopted, such complaints shall be governed by the provisions of Section 76.7 of our rules applicable to  X3-petitions for special relief generally.E73{t X_ -ԍ47 C.F.R.  76.7.E  X - E.` ` Subscriber Notice  X -  $37.` ` Section 301(g) of the 1996 Act adds a new subsection to Section 632 of the Communications Act. The new subsection reads as follows: XSubscriber Notice. A cable operator may provide notice of service and rate changes to subscribers using any reasonable written means at its sole discretion. Notwithstanding section 623(b)(6) or any other provision of this Act, a cable operator shall not be required to provide prior notice of any rate change that is the result of a regulatory fee, franchise fee, or any other fee, tax assessment, or charge of any kind imposed by any Federal agency, State, or franchising  X-authority on the transaction between the operator and the subscriber.y8,t X-ԍ 1996 Act,  310(g), to be codified at Communications Act,  632(c).y   X-%38.` ` Accordingly, as shown in Appendix A, we modify our rules pursuant to Section 301(g) of the 1996 Act to provide that a cable operator may provide notice of service and rate changes to subscribers using any reasonable written means at its sole discretion, and that a cable operator shall not be required to provide prior notice of any rate change that is the result of a regulatory fee, franchise fee, or any other fee, tax assessment, or charge of any kind imposed by any Federal agency, State, or franchising authority on the transaction  XP-between the operator and the subscriber.m9Pt X"-ԍWe will amend 47 C.F.R.  76.933, 76.964 accordingly.m  X"-&39.` ` We note that previously the Commission distinguished written notice sent to""90*(("  X-subscribers from written announcements on the cable system or in the newspaper.:t Xy-ԍ See 47 C.F.R. 76.964(c); see also, Report and Order and Further Notice of Proposed  Xd-Rulemaking in MM Docket No. 92266, FCC 93177, 8 FCC Rcd 5631, 571314 (1993). We made these distinctions in an effort to ensure that notice was adequate depending upon the circumstances. We now note the legislative history of the House amendment, which was ultimately adopted by the Conference Committee, states that "[n]otice need not be inserted in  X-the subscriber's bill."C;ft X-ԍ Conference Report at 169.C Given the cited statutory provision and its legislative history, a change in our current rules is justified so that notice provided through written announcements on the cable system or in the newspaper will be presumed sufficient. We believe this furthers congressional intent regarding the adequacy of any required notice. We will address any disputes that may arise in this area on a casebycase basis.  X - F .` ` Technical Standards  X -'40.` ` Pursuant to Section 624(e) of the Communications Act, the Commission has adopted technical standards that govern the picture quality performance of cable television  X -systems.Y< t X-ԍSee 47 C.F.R., Part 76, Subpart K.Y Prior to enactment of the 1996 Act, Section 624(e) provided, in part: XA franchising authority may require as part of a franchise (including a modification, renewal, or transfer thereof) provisions for the enforcement of the standards prescribed under this subsection. A franchising authority may apply to the Commission for a waiver to impose standards that are more stringent  X4-than the standards prescribed by the Commission under this subsection.J=4t X-ԍ Communications Act,  624(e).J   X-(41.` ` Section 301(e) of the 1996 Act strikes the above two sentences and adds the following: XNo State or franchising authority may prohibit, condition, or restrict a cable system's use of any type of subscriber equipment or any transmission  X-technology.y>{t X"-ԍ 1996 Act,  301(e), to be codified at Communications Act,  624(e).y   Xe-)42.` ` As set forth in Appendix A, we eliminate the language in Note Six to Section 76.605 of our rules which permitted a franchising authority to apply to the Commission for a waiver to impose cable technical standards that are more stringent than the standards"7. >0*(("  X-prescribed by the Commission.,?t Xy-ԍ  See Memorandum Opinion and Order, DA 92260, CSR4291Z (released February 29, 1996). In that item, the Cable Services Bureau concluded that state and local laws prohibiting the use of converter boxes were preempted by Section 301(e) of the 1996 Act. , We insert the new language from Section 301(e) in Note  X-Six. In the Notice, we seek comment regarding any additional issues.  X- G.` ` Buy Out Prohibitions  X-*43.` ` Section 302(a) of the 1996 Act creates a new Section 652 of the Communications Act that provides as follows: X(a) Acquisitions By Carriers. No local exchange carrier or any affiliate of such carrier owned by, operated by, controlled by, or under common control with such carrier may purchase or otherwise acquire directly or indirectly more than a 10 percent financial interest, or any management interest, in any cable operator providing cable service within the local exchange carrier's telephone service area.  X(b) Acquisitions By Cable Operators. No cable operator or affiliate of a cable operator that is owned by, operated by, controlled by, or under common ownership with such cable operator may purchase or otherwise acquire, directly or indirectly, more than a 10 percent financial interest, or any management interest, in any local exchange carrier providing telephone exchange service within such cable operator's franchise area.   X6-X(c) Joint Ventures.A local exchange carrier and a cable operator whose telephone service area and cable franchise area, respectively, are in the same market may not enter into any joint venture or partnership to provide video programming directly to subscribers or to provide telecommunications services within such market.   X-X(d)` ` Exceptions.  X` ` (1) Rural Systems. Notwithstanding subsections (a), (b), and (c) of this section, a local exchange carrier (with respect to a cable system located in its telephone service area) and a cable operator (with respect to the facilities of a local exchange carrier used to provide telephone exchange service in its cable franchise area) may obtain a controlling interest in, management interest in, or enter into a joint venture or partnership with the operator of such system or facilities for the use of such system or facilities to the extent that  XX` `  (A) such system or facilities only serve incorporated or unincorporated x` XX` ` X (i) places or territories that have fewer than 35,000 inhabitants; and  XX` ` X (ii) are outside an urbanized area, as defined by the Bureau of the Census; and  ""M?0*((!"ԌXX` `  (B) in the case of a local exchange carrier, such system, in the aggregate with any other system in which such carrier has an interest, serves less than 10 percent of the households in the telephone service area of such carrier.x` X` ` (2) Joint Use. Notwithstanding subsection (c), a local exchange carrier may obtain, with the concurrence of the cable operator on the rates, terms, and conditions, the use of that part of the transmission facilities of a cable system extending from the last multiuser terminal to the premises of the end user, if such use is reasonably limited in scope and duration, as determined by the Commission.   X -X` ` (3) Acquisitions in Competitive Markets.ppNotwithstanding subsections (a) and (c), a local exchange carrier may obtain a controlling interest in, or form a joint venture or other partnership with, or provide financing to, a cable system (hereinafter in this paragraph referred to as "the subject cable system") if  XX` `  (A) the subject cable system operates in a television market that is not in the top 25 markets, and such market has more than 1 cable system operator, and the subject cable system is not the cable system with the most subscribers in such television market;x` XX` `  (B) the subject cable system and the cable system with the most subscribers in such television market held on May 1, 1995, cable television franchises from the largest municipality in the television market and the boundaries of such franchises were identical on such date;x` XX` `  (C) the subject cable system is not owned by or under common ownership or control of any one of the 50 cable system operators with the most subscribers as such operators existed on May 1, 1995; andx` XX` `  (D) the system with the most subscribers in the television market is owned by or under common ownership or control of any one of the 10 largest cable system operators as such operators existed on May 1, 1995.x`  X -X` ` (4) Exempt Cable Systems.VSubsection (a) does not apply to any cable system if  XX` `  (A) the cable system serves no more than 17,000 cable subscribers, of which no less than 8,000 live within an urban area, and no less than 6,000 live within a nonurbanized area as of June 1, 1995;x` XX` `  (B) the cable system is not owned by, or under common ownership or control with, any of the 50 largest cable system operators in existence on June 1, 1995; andx` XX` `  (C) the cable system operates in a television market that was not in the top 100 television markets as of June 1, 1995.x` "#'?0*((%"ԌX` ` (5) Small Cable Systems In Nonurban Areas. Notwithstanding subsections (a) and (c), a local exchange carrier with less than $100,000,000 in annual operating revenues (or any affiliate of such carrier owned by, operated by, controlled by, or under common control with such carrier) may purchase or otherwise acquire more than a 10 percent financial interest in, or any management interest in, or enter into a joint venture or partnership with, any cable system within the local exchange carrier's telephone service area that serves no more than 20,000 cable subscribers, if no more than 12,000 of those subscribers live within an urbanized area, as defined by the Bureau of the Census.  X` ` (6) Waivers. The Commission may waive the restrictions of subsections (a), (b), or (c) only if:  XX` `  (A) the Commission determines that, because of the nature of the market served by the affected cable system or facilities used to provide telephone exchange servicex` XX` ` X (i) the affected cable operator or local exchange carrier would be subjected to undue economic distress by the enforcement of such provisions;  XX` ` X (ii) the system or facilities would not be economically viable if such provisions were enforced; or  XX` ` X (iii) the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served; and  XX` `  (B) the local franchising authority approves of such waiver.x` X(e) Definition Of Telephone Service Area. For purposes of this section, the term "telephone service area" when used in connection with a common carrier subject in whole or in part to title II of this Act means the area within which such carrier provided telephone exchange service as of January 1, 1993, but if any common carrier after such date transfers its telephone exchange service facilities to another common carrier, the area to which such facilities provide telephone exchange service shall be treated as part of the telephone service area of the acquiring common carrier and not of the selling common carrier.   X"-+44.` ` Accordingly, as set forth in Appendix A, we add a new section to our rules regarding the ownership of cable systems to incorporate the provisions of Section 302(a) of the 1996 Act described above.  X:&-,45.` ` With respect to the joint use provisions of Section 302(a), the Commission will make such determinations on a casebycase basis using the following procedures in"#'?0*((%" accordance with Section 76.7 of our rules. Within ten days of final execution of a contract permitting a local exchange carrier to use that part of the transmission facilities of a cable system extending from the last multiuser terminal to the premises of the end user, the parties shall submit a copy of such contract, along with an explanation of how such contract is reasonably limited in scope and duration, to the Commission for review. The parties shall serve a copy of this submission on the LFA, along with a notice of the deadline by which the LFA must file comments, if any, with the Commission. Based upon the record before it, the Commission shall then determine whether the local exchange carrier's use of that part of the transmission facilities of a cable system extending from the last multiuser terminal to the premises of the end user is reasonably limited in scope and duration. In determining whether such use is reasonably limited in scope and duration, the Commission will look to the underlying policy goals of the legislation: to promote competition in both services and facilities, and to encourage longterm investment in the infrastructure.  X - H.` ` Program Access   X--46.` ` Section 628 of the Communications Act governs access to programming. These program access provisions are intended to eliminate unfair competitive practices and facilitate competition by providing competitive access to certain defined categories of programming. Generally speaking, the restrictions in Section 628 are applicable to cable operators, satellite cable programming vendors in which a cable operator has an attributable interest, and satellite broadcast programming vendors. The Commission rules implementing  X-Section 628 appear at Section 76.1000 et seq.O@t X-ԍ47 C.F.R.  76.1000 et seq.O  X-.47.` ` Section 301(j) of the 1996 Act amends section 628 by adding the following:  X- X(j) Common Carriers. - Any provision that applies to a cable operator under this section shall apply to a common carrier or its affiliate that provides video programming by any means directly to subscribers. Any such provision that applies to a satellite cable programming vendor in which a cable operator has an attributable interest shall apply to any satellite cable programming vendor in which such common carrier has an attributable interest. For the purposes of this subsection, two or fewer common officers or directors shall not by itself establish an attributable interest by a common carrier in a satellite cable programming vendor (or its parent company).   X -/48.` ` Accordingly, in Appendix A we add a new section to the program access rules to broaden their scope as described above. We also note that the meaning of the term "attributable interest" as defined in our program access rules shall also apply to common carriers, subject to the last sentence of Section 301(j) of the 1996 Act, for purposes of"#y@0*((e""  X-program access.QAt Xy-ԍ47 C.F.R.  76.1000(b).Q  X-  X- I.` ` Sunset of Upper Tier Rate Regulation  X-049.` ` Consistent with the 1992 Cable Act, the Commission established rules to ensure  X-that rates for cable programming services are not unreasonable.GByt X-ԍ47 C.F.R.  76.922.G The 1996 Act adds a provision to the Communications Act that provides a sunset date for regulation of CPST rates. Specifically, rate regulation "shall not apply to cable programming services provided after  XH-March 31, 1999."CH*t X# -ԍ1996 Act,  301(b)(4), to be codified at Communications Act,  623(c)(4).  X -150.` ` Accordingly, to implement this mandate, we are amending our rules as set forth in Appendix A to include the statutory sunset provision.  X -X J.` ` Definition of "Cable System" (#  X -251. Prior to enactment of the 1996 Act, and subject to four specific exceptions, Section 602(7) of the Communications Act defined the term "cable system" to include: Xa set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to multiple subscribers within a community . . . .   X-352.` ` The four exceptions to this definition included X. . . (B) a facility that serves only subscribers in 1 or more multiple unit dwellings under common ownership, control, or management, unless such facility or facilities uses any public right of way; [and] (C) a facility of a common carrier which is subject, in whole or in part, to the provisions of title II of this Act, except that such facility shall be considered a cable system (other than for purposes of section 621(c)) to the extent such facility is used in the  X7-transmission of video programming directly to subscribers . . . .[D7t X#-ԍCommunications Act,  602(7) (amended).[   X -453.` ` This statutory definition and the four exceptions were incorporated into Section" D0*((y"  X-76.5(a) of the Commission's rules.HEt Xy-ԍ47 C.F.R.  76.5(a).H  X-554.` ` The 1996 Act revises the definition of a cable system by amending the two exceptions cited above and by adding a third exception. Section 301 of the 1996 Act amends the first exception cited above, subsection (B), by striking the quoted language and inserting  X-the following: "(B) a facility that serves subscribers without using any public right-of-way."Fyt X-ԍ1996 Act,  301(a)(2), to be codified at Communications Act,  602(7). Section 302 of the 1996 Act amends the second exception quoted above, subsection (C), by adding the following clause at the end of that subsection: ", unless the extent of such use is  XH-solely to provide interactive ondemand services."GH,t X% -ԍId.,  302(b)(2)(A), to be codified at Communications Act,  602(7). In addition, Section 302 creates a new exception to the cable systems definition as follows: "(D) an open video system that complies  X -with section 653 of this title.":H t X-ԍId.: Finally, Section 302 of the 1996 Act moves what had been the fourth exception, subsection (D), to new subsection (E) of section 602(7) of the  X -Communications Act.:I t X/-ԍId.:  X -655.` ` In order to conform Section 76.5(a) to the new statutory definition, it is amended as reflected in Appendix A.  Xy-756.` ` Section 302 of the 1996 Act also adds the following definition corresponding to one of the exceptions to the cable system definition: Xthe term "interactive ondemand services" means a service providing video programming to subscribers over switched networks on an ondemand, pointtopoint basis, but does not include services providing video programming  X-prescheduled by the programming provider;JE t X-ԍId.,  302(b)(2)(C), to be codified at Communications Act,  602(12).   X-857.` ` Section 76.5 of our rules is amended to add this definition.  X-  X-K.` ` Definition of "Cable Service"  Xe-958.` ` Section 602(6) of the Communications Act defines the term "cable service." Cable service is also defined in Section 76.5(ff) of the rules. The 1996 Act amends that statutory definition by adding the bracketed words:"7 J0*(("Ԍ` ` (ff) Cable service. The one-way transmission to subscribers of video programming, or other programming service; and, subscriber interaction, if any, which is required for the selection [or use] of such video programming or other programming service. For the purposes of this definition, "video programming" is programming provided by, or generally considered comparable to programming provided by, a television broadcast station; and, "other programming service" is information that a cable operator  XH-makes available to all subscribers generally.KHt X -ԍId.,  301(a)(1), to be codified at Communications Act,  602(6)(B).x`   X -:59.` ` According to the legislative history of this provision, it ` ` reflects the evolution of cable to include interactive services such as game channels, information services made available to subscribers by the cable operator, and enhanced services. This amendment is not intended to affect Federal or State regulations of telecommunications service offered through cable system facilities, or to cause dialup access to information services over  Xy-telephone lines to be classified as a cable service.JLy{t X-ԍConference Report at 169.J(#`  XK-;60.` ` In order to conform Section 76.5(ff) to the new statutory definition, it is  X4-amended as reflected in Appendix A.  X- L.` ` Cable Operator Refusal To Carry Certain Programming  X-<61.` ` Sec. 506(a) of the 1996 Act amends Sec. 611(e) of the Communications Act, which governs public, educational, and governmental access channels, by providing that "a cable operator may refuse to transmit any public access program or portion of a public access program which contains obscenity, indecency, or nudity."  Xe-=62.` ` Therefore, we amend the first sentence of Section 76.702 of the Commission's rules by adding the bracketed language: XX` ` Any cable operator may prohibit the use on its system of any channel capacity of any public, educational, or governmental access facility for any programming which contains obscene material, indecent material as defined in  76.701(g), [nudity], or material soliciting or promoting unlawful conduct.x`  X"->63.` ` The 1996 Act contains a similar provision concerning programming provided"",L0*((!" over leased access channels. Specifically, Section 506(b) of the 1996 Act amends Section 612(c)(2) of the Communications Act, which restricts a cable operator's exercise of editorial control over leased access programming, to provide that "a cable operator may refuse to transmit any leased access program or portion of a leased access program which contains obscenity, indecency, or nudity . . . ."  Xv-?64.` ` However, the 1996 Act does not alter Section 612(h) of the Communications Act which permits a cable operator XX` ` to enforce prospectively a written and published policy of prohibiting programming that the cable operator reasonably believes describes or depicts sexual or excretory activities of organs in a patently offensive manner as measured by contemporary community standards.x`  X -@65.` ` Section 76.701(a) of the Commission's rules parallels Section 612(h) of the 1996 Act. The remaining subsections of Section 76.701 contain related provisions. Under sections 76.701(b) and (c), an operator that chooses to carry leased access programming falling within the description contained in Section 76.701(a) must place all such programming on channels made available only to subscribers who have made a written request for the program and have certified to being at least 18 years old. Subsections (d) and (e) require a person providing leased access programming to identify, upon request of the cable operator, any indecent programming or to certify that the programming is not indecent or obscene. Subsection (f) permits the cable operator to withhold access from a program provider that does not comply with an operator request made under this rule. Subsection (g) defines "indecent programming" and subsection (h) requires operators to maintain records verifying their compliance with these rules.  X|-A66.` ` Reading the amended version of Section 612(c)(2) of the Communications Act together with the preexisting provisions of Section 612(h), we amend Section 76.701 such that its various subsections now apply to "any leased access program or portion of a leased access program which the cable operator reasonably believes contains obscenity, indecency, or  X -nudity." In the Notice, we seek comment regarding the proper construction of the word "nudity."  X-B67.` ` The underlying Commission rules being amended here (Sections 76.701 and 76.702, 47 C.F.R.  76.701 and 76.702) were adopted to implement Section 10 of the 1992  X!-Cable Act. These provisions are the subject of the litigation in Alliance for Community Media  X"-v. FCC. In that case, a panel of the D.C. Circuit Court of Appeals reversed and remanded the rules to the Commission on the grounds that Section 10 of the 1992 Act violated the First Amendment or raised serious constitutional questions that warranted Commission"n$L0*(((#"  X-reconsideration.yMt Xy-ԍAlliance for Community Media v. FCC, 10 F.3d 812 (D.C. Cir. 1993).y The full court vacated the panel's judgment and found the requirements  X-constitutional.yN{t X-ԍAlliance for Community Media v. FCC, 56 F.3d 105 (D.C. Cir. 1995).y The rules were stayed after the initial decision finding them unconstitutional  X-and that stay has been continued in force pending Supreme Court review.O.t X-ԍAlliance for Community Media v FCC, Case No. 931169 (D.C. Cir. July 10, 1995).Č Oral argument before the Supreme Court took place on February 24, 1996. Nothing herein is intended to affect the status of that stay. Accordingly, these rules as amended herein are stayed for as  X-long as the Alliance stay remains effective.   Xa- III.NOTICE OF PROPOSED RULEMAKING  X3-C68.` ` In this Notice, we propose final rules implementing certain provisions of the 1996 Act. We seek to adopt clear rules streamlining our processes, establishing certainty for cable operators, LFAs and subscribers, and effectuating the intent of Congress. A number of  X -the issues discussed below are also the subject of the foregoing Order. In commenting on  X -such issues, parties should consider the discussion and treatment of them in the Order.  X - A.` ` Effective Competition  V-` ` 1. Generally   XS-D69.` ` The new test for effective competition requires that the LECdelivered  X<-programming be "comparable" to that of the cable operator.P<t X-ԍ1996 Act, 301(b)(3), to be codified at Communications Act,  623(l)(1). X The Conference Report states that video programming services are comparable if they "include access to at least 12 channels  X-of programming, at least some of which are television broadcasting signals."JQt XS-ԍConference Report at 170.J We tentatively conclude that this definition of comparable programming should be adopted. We note that after defining "comparable" in this manner, the Conference Report cites Section 76.905(g) of  X-our rules which in fact has a slightly different definition of comparable.JRE t X!-ԍ47 C.F.R.  76.905(g).J The rule defines "comparable" as meaning a minimum of 12 channels of programming, "including at least one  X-channel of nonbroadcast service programming.":S t XB%-ԍId.: Commenters should consider this factor in addressing the meaning of "comparable" programming for purposes of the new test for effective competition."m S0*((O"Ԍ X-ԙE70.` ` In light of our tentative conclusion that "comparable programming" requires access to broadcast channels, commenters should address whether this could include satellitedelivered broadcast channels (e.g., "superstations"). In the same context, commenters should address whether an MMDS subscriber should be deemed a recipient of "comparable programming" if the broadcast stations are received by way of an overtheair antenna located at the subscriber's residence, rather than as part of the MMDS operator's microwave signals. Would it matter if the antenna was provided by the subscriber as opposed to the MMDS operator? We believe that a single definition of "comparable programming" should apply to both prongs of the effective competition test in which that term is used. Commenters who disagree with this conclusion should provide a justification for having a different definition of comparable programming in different prongs of the effective competition test.  X -F71.` ` We tentatively conclude that the new test for effective competition applies with equal force regardless of whether the LEC or its affiliate is merely the video service provider, as opposed to the licensee or owner of the facilities. We seek comment on this tentative conclusion. Further, we seek comment as to whether the type of service provided by, or over the facilities of, the LEC or its affiliate should be relevant. For example, we seek comment as to whether satellite master antenna television ("SMATV") systems constitute directtohome satellite services and hence do not fall within the class of video providers that can be a source  XK-of effective competition under the new test.TKt X-ԍSee Third Order on Reconsideration in MM Docket Nos. 92266 & 92262, FCC 9440, 9 FCC Rcd 4316, 4322 (1994).   X-G72.` ` In accordance with the Conference Report, the term "offer" will be applied as  X-currently defined by Section 76.905(e) of the Commission's Rules, 47 C.F.R.  76.905(e).JUdt X-ԍConference Report at 170.J  X-In the Order, we have established interim standards by which cable operators may show that the competing MVPD is offering service in the franchise area, based on the statutory requirements. Accordingly, we seek comment on whether we should follow these standards for purposes of the permanent rule. We note that the new definition of effective competition does not, unlike the other three effective competition tests, include a percentage pass or penetration rate. We seek comment as to whether Congress intended effective competition to be found if a LEC's, or its affiliate's, service was offered to subscribers in any portion of the franchise area, or whether the competitor's service must be offered to some larger portion of the franchise area to constitute effective competition. In addressing this issue, commenters should consider what level of competition provided by a LEC or its affiliate is sufficient to have a restraining effect on cable rates. Commenters also should address the likelihood that an incumbent cable operator's response to the presence of a competitor may depend not just upon the current pass rate of the competitor, but also on its potential pass rate. That is, a LEC that offers service to 5% of the residents in a franchise area and that, due to technical constraints, will never exceed this reach would seem to pose less of a competitive threat than"!U0*(( " a LEC with a 5% pass rate that eventually will be able to offer service throughout the franchise area. We seek comment as to whether to take account of this factor in implementing the new test for effective competition.  X-H73.` ` We have adopted interim filing procedures by which regulated operators may seek to establish the presence of effective competition under the new statutory test. We tentatively conclude that we should adopt these procedures as a final rule and conform our  X_-existing proceduresFV_t X-ԍ47 C.F.R.  76.915F accordingly, such that all tests for effective competition would be determined in a uniform manner. We seek comment on this tentative conclusion.  X1-  V -2.` ` Definition of "Affiliate"   X -I74.` ` With respect to the definition of "affiliate" for purposes of the new prong of the effective competition test, we note that the 1996 Act does not specifically alter the following definition of "affiliate" which remains applicable for purposes of cable regulation under Title VI of the Communications Act: Xthe term "affiliate," when used in relation to any person, means another person who owns or controls, is owned or controlled by, or is under common  XK-ownership or control with, such person;nWKyt Xu-ԍCommunications Act,  602(2); see supra at para. 12.n   X-J75.` ` Although this definition remains unchanged, the following definition of "affiliate" is now found in Title I as a result of the enactment of the 1996 Act: XThe term "affiliate" means a person that (directly or indirectly) owns or controls, is owned or controlled by, or is under common ownership or control with, another person. For purposes of this paragraph, the term "own" means to  X-own an equity interest (or the equivalent thereof) of more than 10 percent.X,t Xp-ԍ1996 Act,  3(a)(2), to be codified at Communications Act,  3(33).   Xe-K76.` ` As engrafted into Sec. 3 of the Communications Act, this definition of "affiliate" now applies "[f]or purposes of this [Communications] Act, unless the context  X7-otherwise requires . . . ."nY7t X#-ԍCommunications Act,  3. See 1996 Act,  3 (b). n Commenters should address whether, for purposes of the new effective competition test, "the context . . . require[s]" a definition of "affiliate" other than the one now contained in Title I.  X-L77.` ` We tentatively conclude that the Title I definition of "affiliate" should be"Y0*((;" adopted for purposes of the new effective competition test. While we do not believe that Congress mandated the use of this definition for purposes of Title VI, incorporating the Title I definition for purposes of Title VI is not inconsistent with Congressional intent and would create some uniformity throughout the Commission's rules. We also tentatively conclude that both passive and active ownership interests are attributable and seek comment accordingly. We also seek comment on whether a beneficial interest in a cable operator would be "equivalent" to an equity interest under this proposed definition of "affiliate" and, if so, how "beneficial interest" should be defined. Commenters should address whether the affiliation standard has to be met by a single LEC or whether the interests of more than one LEC can be aggregated.  X - B.` ` CPST Rate Complaints  X -M78.` ` In the Order, we amended our rules to conform them to statutory requirements, regarding the filing of rate complaints by LFAs. We also adopted interim procedures to govern our implementation of this provision pending final rules. Here we propose to adopt the interim rules as final rules and solicit comment accordingly.  Xd-N79.` ` In addition to addressing the interim procedures, parties should comment on whether we should establish a deadline by which LFA complaints must be filed. Although Section 301(b)(1)(C) permits the LFA to file a CPST rate complaint with the Commission only if the LFA has received subscriber complaints within 90 days of a CPST rate increase, it specifies no deadline for the LFA complaint. Commenters should propose possible deadlines, taking into account the steps that a LFA may be required to follow following the close of the 90day window on subscriber complaints in order to file its own complaint with the Commission. Finally, because Section 301(b)(1)(C) alters the rate complaint process, we propose eliminating the requirement contained in Section 76.952 of our rules that operators must include the name, mailing address, and telephone number of the Cable Services Bureau  X~-of the Commission on monthly subscriber bills.~Z|~t X-ԍ47 C.F.R.  76.952. See supra, Sec. II B. The Cable Services Bureau of the Commission released a Public Notice recognizing that, according to the 1996 Act, cable operators should no longer inform subscribers that they may place complaints directly with the  X-Cable Services Bureau. See Public Notice, Report No. CS 9612 (February 27, 1996). In addition, operators need not include the name, address and phone number of the Commission  X -on subscriber bills, at least pending the adoption of a final rule in this proceeding. Id.~   XP- C.` ` Small Cable Operators  V"-` ` 1. National Subscriber Count   X-O80.` ` Here we propose specific rules to clarify implementation of Section 301(c) which provides for greater deregulation of small cable operators. We first must determine the" Z0*((" method by which we will establish the total number of cable subscribers in the United States, since only operators serving fewer than 1% of all subscribers qualify as small cable  X-operators.[t XK-ԍ1996 Act,  301(c), to be codified at Communications Act,  623(m)(2). We propose to establish such a number on an annual basis and to have that number serve as the applicable threshold until a new number is calculated the following year. While the number of subscribers varies daily, we tentatively conclude that fixing a number on an annual basis will produce certainty and reduce administrative burdens for operators, LFAs, and the Commission. Commenters should address these tentative conclusions and propose any reasonable alternatives.  X1-P81.` ` As noted, the method we select to count the total number of subscribers should minimize administrative burdens as well as ensure a subscriber count that is as accurate and reliable as is reasonably possible. We are aware that industry groups, trade journals, and other private concerns already attempt to track subscriber figures. We tentatively conclude that using the most reliable of these figures, or perhaps some average of these figures, would best further our goals. We solicit comment on this tentative conclusion and on what data would be the most reliable for this purpose.  Vy-` ` 2. Definition of "Affiliate"   XK-Q82.` ` In addition, we seek comment on the proper definition of "affiliate" for  X4-purposes of the small operator provisions.:\4{t X`-ԍId.: We already have discussed the separate  X-definitions of "affiliate" contained in Title I and Title VI.W].t X-ԍSee supra at para. 1516, 7477.W We note that the Title I definition of "affiliate" does not strictly apply to matters under Title VI, since Title VI contains a separate definition of that term that, unlike the Title I definition, does not set a percentage  X-threshold as to what constitutes ownership.Q^t Xj-ԍCommunications Act,  602(2).Q We believe this gives us discretion to establish a  X-percentage ownership threshold other than 10% for purposes of Title VI.F_t X -ԍ See supra at para. 16.F  X-R83.` ` As for the precise threshold we should establish here, we note that last year in applying the Title VI definition in the context of our small system rules, we concluded that a 20% ownership interest, active or passive, would be deemed affiliation. There we observed: "Relaxing regulatory burdens should free up resources that affected operators currently devote to complying with existing regulations and should enhance those operators' ability to attract"7E _0*(("  X-capital, thus enabling them to achieve the goals of Congress . . . ."^`t Xy-ԍSmall System Order, 10 FCC Rcd at 7407.^ We believe that Congress had a similar intent when it crafted the small cable operator provisions of the 1996 Act and, therefore, we tentatively conclude that the affiliation standard applicable under our small system costofservice rules also should be applied for present purposes. Under this approach, an entity would be affiliated with a cable operator if the entity held an ownership interest of 20% or more, either active or passive, in the cable operator. De facto control also would constitute affiliation. We seek comment on this proposed definition.  XH-` ` 3. Definition of "Gross Revenues"  X -S84. ` ` Once a cable operator identifies its affiliates under whatever rule we adopt, it will have to calculate the gross annual revenues of those affiliates. We have defined "gross revenues" in other contexts, such as determining eligibility for certain licenses for frequencies devoted to personal communications services: XGross revenues shall mean all income received by an entity, whether earned or passive, before any deductions are made for costs of doing business (e.g., cost of goods sold), as evidenced by audited quarterly financial statements for the  Xd-relevant period.Jad{t X-ԍ47 C.F.R.  76.720(f).J   X6-T85.` ` We tentatively conclude that this definition should be applied under the small cable operator provisions of the 1996 Act, although we do not intend to require that all entities produce audited financial statements. If an entity maintains such statements as a matter of course, they would seem to be the best record of its gross revenues. However, we realize that some smaller business may not go to the expense of having their financial statements audited; certainly they should not be required to do so on the basis of legislation intended to minimize burdens for smaller businesses. Therefore, we propose to adopt the definition of "gross revenues" quoted above, as modified to eliminate any requirement that the operator or its affiliates produce audited financial statements. Commenters should address the propriety of this definition for establishing operator eligibility for small cable operator treatment. We also seek comment as to how the revenues of natural persons should be measured and verified under this rule.  X -U86.` ` The plain language of the statute appears to require an operator with multiple affiliates to aggregate the gross annual revenues of all of the affiliates and to compare this  X-aggregate figure to the $250 million threshold.b,t X%-ԍ1996 Act,  301(c), to be codified at Communications Act,  623(m)(2). We tentatively conclude that if the gross revenues of all affiliates, when aggregated in this manner, exceed $250 million, the operator does not qualify as small, even if no single affiliate has revenues in excess of that amount. "! b0*(( " We also solicit comment as to whether the statute should be read to exclude the revenues of the operator itself for purposes of applying the $250 million threshold. Finally, we solicit comment on whether only affiliates of the cable operator that are also cable operators should be included when aggregating gross annual revenues with respect to the $250 million threshold.  Vv-` ` 4. System and Franchise Area Subscribers   XH-V87.` ` Rate regulation is reduced or eliminated for a small cable operator "in any  X1-franchise area in which that operator services 50,000 or fewer subscribers."c1t X -ԍ1996 Act,  301(c), to be codified at Communications Act,  623(m)(1). Although a single cable system can serve more than one franchise area, deregulation under this provision of the 1996 Act appears to be determined on a franchise areabyfranchise area basis, without regard to the total number of system subscribers. Under this analysis, a system serving well over 50,000 subscribers spread over multiple franchise areas could qualify for deregulation throughout the entire system as long as no individual franchise area contained more than 50,000 subscribers. Likewise, a single system could be subject to regulation in one franchise area but not in another because its subscriber counts are over and under the 50,000 mark in the two areas, respectively. We seek comment on our tentative conclusion that system size is irrelevant for purposes of this provision.  X4-W88.` ` In other contexts in which subscriber counts are important, such as determining whether effective competition exists in a franchise area, we have directed operators how to measure subscribership to take account of various circumstances, such as in vacation areas that  X-experience seasonal shifts in population.Jd{t X-ԍ47 C.F.R.  76.905(c).J However, in limited circumstances we have allowed operators to count subscribers residing in multiple dwelling units ("MDUs") based on  X-the equivalent billing unit methodology.e,t X-ԍQuestions and Answers on Cable Television Regulation, pp. 12 (rel. July 27, 1994). We seek comment on the proper methodology to be used for purposes of the 50,000 subscriber limit under Section 301(c).  V|-` ` 5. BST and CPST deregulation   XN-X89.` ` The 1996 Act plainly eliminates CPST rate regulation for systems that qualify  X7-under the revenue and subscriber criteria.f7t X#-ԍ1996 Act,  301(c), to be codified at Communications Act,  623(m)(1)(A). For qualifying systems that do not offer a CPST, the statute eliminates BST regulation if that tier "was the only service tier subject to  X -regulation as of December 31, 1994 . . . ."g t XJ'-ԍ1996 Act,  301(c), to be codified at Communications Act,  623(m)(1)(B). With respect to qualifying systems that had" !C g0*((y" only a single tier subject to regulation as of that date, we seek comment as to whether Congress intended the BST to be deregulated even if the operator has created a CPST since then or creates a CPST hereafter. In other words, can a qualifying system with both a BST and a CPST be exempt from rate regulation on both tiers, as long as it had only a single tier as of December 31, 1994? Assume, for example, that as of December 31, 1994 an operator had only a single regulated tier, consisting of all of the channels that an operator is required  Xv-to carry on its BSThvt X-ԍSee Communications Act, 623(b)(7) (mandating carriage of certain channels on the BST). plus a large number of additional channels. Thereafter, the operator creates a CPST and migrates from the BST to the new CPST some or all of the channels that are not mandatory BST channels, including all of the most popular satellitedelivered cable networks. Arguably, the system's resulting BST would be exempt from regulation on the grounds that the BST "was the only service tier subject to regulation as of December 31, 1994 . . . ." It is also arguable, however, that the resulting BST should be subject to regulation because the fundamental nature of the original BST was significantly altered after December 31, 1994.  X -Y90.` ` We tentatively conclude that the scope of deregulation depends solely upon the number of tiers that were subject to regulation as of December 31, 1994. Under this construction of the statute, a system currently offering two or more tiers would be deregulated on all tiers if the BST was the only tier subject to regulation as of December 31, 1994, but would be deregulated only on its CPST(s) if it had more than one tier subject to regulation as of December 31, 1994. We seek comment on this construction of the statute.  V-` ` 6. Procedures   X-Z91.` ` As for procedures, we seek to design a mechanism by which an operator can obtain a prompt determination of small operator status with a minimum of paperwork, while still giving LFAs and the Commission the ability to verify, when necessary, the subscriber and revenue data relied on by the operator in seeking such status. We understand that a large number of operators entitled to deregulation under the 1996 Act have subscriber and revenue figures that fall far below the statutory thresholds. We tentatively conclude that the procedures we adopt in this regard should be such that these systems can obtain a prompt declaration of their deregulatory status without having to comply with the rules that may be necessary for systems whose eligibility is not so certain. Accordingly, we propose to adopt  X -on a permanent basis the interim procedures described above.Oi dt X#-ԍSee supra at Sec. II, C.O  X-[92.` ` While designed to simplify the process in the case of operators who clearly meet the statutory criteria, this process could be applied to all operators, even though further scrutiny may be required for operators that come closer to those statutory criteria. We seek"!"i0*(( " comment on this approach and invite commenters to propose other mechanisms that would minimize the administrative burdens on operators and franchising authorities, particularly in cases where there will be no dispute as to the operator's eligibility for deregulation. We further seek comment as to the procedures to be followed where a determination of the operator's status will require further examination.  Xv-\93.` ` We also must determine the treatment of systems that qualify for deregulation now, but later exceed the subscriber or revenue thresholds. We tentatively conclude that the plain language of the statute indicates that a deregulated system would become subject to regulation upon exceeding the statutory thresholds. Under this approach, would a system that qualifies for deregulation instantly lose that status the moment its subscriber base exceeds 50,000 in the franchise area, or at the moment its operator starts to serve more than 1% of subscribers nationwide? Is deregulated status lost immediately upon the accumulation of annual revenues above $250 million? We tentatively conclude that an instantaneous shift from complete deregulation to full regulation may not be in the public interest because it could be disruptive to consumers and operators. The addition of subscribers by a system or operator would seem to indicate that the company is responding to consumer demand. We would not want to discourage such responsiveness on the part of cable operators. Nevertheless, we tentatively conclude that the language of the 1996 Act requires the transition into regulation to begin as soon as the system no longer qualifies under the subscriber or revenue criteria. We seek comment on these issues.  X-]94.` ` We note that last year the Commission adopted rules streamlining costofservice rate regulation for any system serving fewer than 15,000 subscribers, as long as the  X-system is not owned by an operator serving more than 400,000 subscribers.jt XQ-ԍSee supra at para. 32. Obviously, a large number of systems in this category will qualify for partial or total deregulation under the small cable operator provisions of the 1996 Act. Once a system qualifies under these criteria, it remains subject to the relaxed rules for so long as the system  X-serves fewer than 15,000 subscribers.^kMt X-ԍSmall System Order, 10 FCC Rcd at 7413.^ When the system exceeds 15,000 subscribers, it may maintain its current rates, but it is then subject to our standard rate rules applicable to systems generally, and therefore cannot seek an increase until such an increase is permitted under our  Xe-standard rate rules.Clet X"-ԍId. at 7428.C We seek comment as to whether this transition mechanism could be applied to systems when they exceed the statutory criteria, or whether some other approach would be more appropriate.   X - D.` ` Definition Of "Affiliate" In The Context Of Open Video Systems And  X-` ` CableTelco Buy Outs "#l0*(("Ԍ X-^95. ` ` We recently initiated a rulemaking to implement the provisions of Section  X-302(a) of the 1996 Act establishing open video systems.mt Xb-ԍReport and Order and Notice of Proposed Rulemaking in CS Docket No. 9646, FCC 9699 (rel. March 11, 1996). Open video systems represent a new medium for the provision of video programming to subscribers. The 1996 Act specifically authorizes a LEC to provide cable service over an open video system within its  X-own telephone service area.nbt X-ԍ1996 Act,  302(a), to be codified at Communications Act,  653(a)(1). The 1996 Act also provides that, to the extent permitted by Commission regulation, a cable operator or any other person may provide video programming  Xv-through an open video system.:ovt X< -ԍId.: As with other portions of the 1996 Act, Section 302(a) requires that we define the term "affiliate" in order to implement its provisions. Although Section 3 of the 1996 Act defines "affiliate," Congress did not alter the separate definition of  X1-"affiliate" set forth in Title VI._p1t X-ԍSee supra at Sec. II(A)(3) and II(C)(2)._ Thus, we solicit comment regarding the definition of "affiliate" in the context of the new statutory provisions governing open video systems.   X -_96. ` ` The cabletelco buy out provisions of Section 302 of 1996 Act also refer to the "affiliates" of such entities. We request comment regarding the definition of "affiliate" in this context as well.   X- E.` ` Uniform Rate Requirement   Xb-`97.` ` As discussed above, Section 301(b)(2) of the 1996 Act amends the preexisting requirement that a cable operator maintain a uniform rate structure throughout its franchise area by, among other things, exempting from that requirement bulk discounts offered to multiple dwelling units. We have amended the rule to comfort with the exact statutory language. Here we solicit comment on the meaning of several terms in the statutory language.  X-a98.` ` We tentatively conclude that the bulk rate exception does not permit a cable operator to offer discounted rates on an individual basis to subscribers simply because they are residents of a multiple dwelling unit, but rather requires a "bulk discount[ ]," to use the language of the statute, that is negotiated by the property owner or manager on behalf of all of the tenants. We seek comment on this tentative conclusion. We also seek comment as to whether the bulk discounts permitted under Section 301(b)(2) include discounts offered to MDU residents who are billed individually, or should only be permitted where the discount is deducted from a bulk payment paid to the cable operator by the property owner or manager on behalf of all of its tenants. "${p0*((Z"Ԍ X-b99.` ` We further seek comment as to the meaning of the term "multiple dwelling units" as used in Section 301(b)(2). The Commission has a longstanding definition of "multiple unit dwellings" that historically has been significant in determining whether certain  X-cable facilities fell within the private cable exemption to the definition of a cable system.qt X4-ԍSee First Report and Order in Docket No. 20561, FCC 77205, 63 FCC 2d 956, 99697 (1977). As noted above, prior to the passage of the 1996 Act the definition of a cable system excluded facilities serving subscribers "in 1 or more multiple unit dwellings under common ownership, control, or management, unless such facility or facilities uses any public right of  X_-way . . . ."Or_dt Xt -ԍSee supra at Sec. II, J.O In that context, we defined a multiple unit dwelling to include a single building that contains multiple residences, and to exclude developments consisting of detached singlefamily residences, such as mobile home parks, planned and resort communities, and military  X -installations.s t X-ԍSee First Report and Order in Docket No. 20561, 63 FCC 2d at 99697; In Re  X-Massachusetts Community Antenna Television Commission, FCC 87372, 2 FCC Rcd 7321 (1987). Congress now has expanded the private cable exemption to include all facilities located wholly on private property, without regard to the nature or common  X -ownership of the property served.Ot t X;-ԍSee supra at Sec. II, J.O Thus, operators of private cable systems (e.g., SMATV systems) now may serve mobile home parks and planned developments without being subject to regulations applicable to cable systems. Since Section 301(b)(2) clearly authorizes a cable operator to deviate from its standard rate structure in order to respond to competition at multiple dwelling units, commenters should address whether we should interpret "multiple dwelling units" to correspond to the expanded private cable exemption to the cable system definition.  X4-c100.` ` Substantively, we believe that allegations of predation should be made and reviewed under principles of federal antitrust law as applied and interpreted by the federal courts. Commenters should address what standards should be applied to determine whether a complainant has made out a prima facie case "that there are reasonable grounds to believe that  X-the discounted price is predatory . . . ."uQ t X!-ԍ1996 Act,  301(a)(2), to be codified at Communications Act,  623(d). Because complaints in this connection are likely to involve some measure of discovery, we propose the adoption of procedures set forth in our  X-rules for the adjudication of program access complaints.Rv t X_%-ԍSee 47 C.F.R.  76.1003.R Commenters should address whether that section, or some modified version of procedures set forth in that section, should apply on a permanent basis. "|% v0*((P"Ԍ  X-  F.` ` Technical Standards  X-d101.` ` The Commission has adopted technical standards that govern the picture quality performance of cable television systems. The rules generally have preemptive force in situations where there is any conflict between the Commission's requirements and those that  Xv-might be imposed by state or local governments.4wvt X-ԍSee e.g., City of New York v. FCC, 486 U.S. 57 (1988); In the Matter of Cable Television Technical and Operational RequirementsReview of Technical and Operational Requirements of Part 76, Report and Order in Docket 91169, 7 FCC Rcd 2021 (1992).4 Section 624(e) of the Communications Act, as adopted in the 1992 Cable Act, provided that the Commission should prescribe minimum technical standards.  X -e102.` ` Current Commission rules dictate specific technical standards and provide for  X -enforcement by LFAs.Nx Mt X-ԍ47 C.F.R.  76.60176.630.N For example, the Commission's rules provide that, upon request by a LFA, an operator must be prepared to demonstrate compliance with the Commission's  X -technical standards.Yy t X-ԍ47 C.F.R.  76.601(a),(d) and (Note).Y In addition, the rules provide that, in some instances, an operator may negotiate with its LFA for standards less stringent than otherwise prescribed by the  X -Commission's rules.Wz t X-ԍ47 C.F.R.  76.605 (Notes 1 and 2).W Section 76.607 of the Commission's rules require an operator to establish a process for receiving signal quality complaints, and subscriber complaints must be referred to the franchising authority and the operator before being referred to the  Xb-Commission.G{b` t Xs-ԍ47 C.F.R.  76.607.G  X4-f103.` ` In the Order issued herewith, we eliminate, pursuant to the 1996 Act, the language in Note Six of Section 76.605 of our rules, which states that "[a] franchising authority may apply to the Commission for a waiver to impose cable technical standards that are more stringent than the standards prescribed by the Commission." We replace that  X-language with the new language in Section 301(e) of the 1996 Act.E| t X"-ԍ See supra, Sec. II F.E  X-g104.` ` Here, we seek comment on the overall scope and meaning of new Section 624(e) of the Communications Act, as amended by Section 301(e) of the 1996 Act. For example, how does this provision affect the Commission rules cited above? How does the 1996 Act's amendments to Section 624(e) affect the scope of the cable franchising, renewal or"g& |0*((1" transfer process in the area of the technical considerations allowed in those situations? Commenters should bear in mind that the 1996 Act did not amend the franchising or the renewal provisions of the Communications Act. Specifically, Section 626 of the Communications Act provides that, "subject to Section 624" an operator's proposal for franchise renewal "shall contain such material as the franchising authority may require,  X-including proposals for upgrade of the cable system."U}t X-ԍCommunications Act,  626(b)(2).U In addition, Section 626 provides for franchising authority consideration of the "quality of the operator's service, including signal  X_-quality" during the course of a renewal under Section 626.X~_yt X -ԍCommunications Act,  626(c)(1)(B).X Section 621 provides, in part, that a franchising authority awarding a franchise "may require adequate assurance that the  X1-cable operator has the. . . technical. . . qualifications to provide cable service."W1*t X -ԍCommunications Act,  621(a)(4)(C).W  X -  ` `  X -  G.` ` Prior Year Losses  X -h105.` ` Section 301(k)(1) of the 1996 Act amends Section 623 of the Communications Act by adding the following provision: X(n) Treatment of Prior Year Losses.--Notwithstanding any other provision of this section or of section 612, losses associated with a cable system (including losses associated with the grant or award of a franchise) that were incurred prior to September 4, 1992, with respect to a cable system that is owned and operated by the original franchisee of such system shall not be disallowed, in whole or in part, in the determination of whether the rates for any tier of service or any type of equipment that is subject to regulation under this section are lawful.   X-i106.` ` This amendment was effective upon enactment and "shall be applicable to any rate proposal filed on or after September 4, 1993, upon which no final action has been taken  X-by December 1, 1995."Jt X -ԍ1996 Act,  301(k)(2).J  Xe-j107.` ` We note that this provision is similar to a rule change we recently made in the  VN-Second Report and Order, First Order on Reconsideration, and Further Notice of Proposed  X7-Rulemaking ("Final Cost Order") that we adopted in December, 1995.7t Xt%-ԍ See Second Report and Order, First Order on Reconsideration, and Further Notice of Proposed Rulemaking in MM Docket 93215, FCC 95502, para. 6472 (rel. January 26,"H'0*((s&"  Xy-1996); see also Media General Cable of Fairfax ("Media General"), FCC 9613, para. 1419 (rel. January 26, 1996).  The Final Cost"7'M0*(("  X-Order established final rules applicable to operators that establish regulated rates in accordance with our cost of service rules, one of the two general approaches we have implemented with respect to rate regulation. The other, and primary, method of rate regulation is the benchmark approach. The cost of service rules, intended as a safety valve for operators unable to generate reasonable revenues under the benchmark mechanism, involve a detailed analysis of an operators investment, expenses, and revenues. One of the issues in such an analysis is the extent to which an operator should be permitted to recover "start up losses" incurred by the system. Start up losses occur in the early years of operation when rates are set more to attract customers than to fully cover the significant capital and operating  X3-costs that an operator incurs before and in the first years after initiating service.w3Mt X1-ԍFinal Cost Order, at para. 64; Media General, at para. 17.w Prior to  X -adoption of the Final Cost Order, we presumptively limited the recovery of start up losses to  X -those losses incurred in the first two years of operation. t X-ԍReport and Order and Further Notice of Proposed Rulemaking in MM docket no. 93215 and CS Docket no. 9428 , FCC 9439, 9 FCC Rcd 4527, 456365 (1994). We eliminated this presumption in  X -the Final Cost Order and now permit operators to recover start up loses over whatever period  X -of time such losses were actually incurred.X t X&-ԍFinal Cost Order, at para. 7172.X   X -k108.` ` We tentatively conclude that the statutory requirement of Section 301 (k)(1) is applicable to an operator's costofservice justification, but differs somewhat from the rule  X-adopted in the Final Cost Order. First, our rule permitting the recovery of start up losses applies to all cable operators, while the recovery of prior year losses under Section 301(k)(1) is limited to "a cable system that is owned and operated by the original franchisee of the system." Second, under our existing rule, reasonable start up losses may be recovered regardless of when they were incurred, while Section 301(k)(1) permits the recovery only of losses incurred prior to September 4, 1992. Third, while start up losses are those incurred in the early years of a system's operation, Section 301(k)(1) contains no such limitation. We seek comment on these tentative conclusions. Further, we seek comment as to whether Congress intended to permit the recovery of prior year losses attributable to imprudent or unreasonable expenditures.  X- H.` ` Advanced Telecommunications Incentives  XV-l109.` ` Subsection 706(a) of the 1996 Act requires the Commission to "encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans (including, in particular, elementary and secondary schools and classrooms) by"((M 0*((z" utilizing, in a manner consistent with the public interest, convenience and necessity, price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure  X-investment."Gt X4-ԍ1996 Act,  706(a).G We seek comment on how we can advance Congress' goal within the context of our cable services regulation. The Commission has solicited such information in other proceedings and reserves its right to address the implementation of Subsection 706(a) in a consolidated action.   XH- I.` ` Cable Operator Refusal To Carry Certain Programming  X -m110.` ` In the Order, we amended our rules to conform them to the statutory requirements regarding cable operator refusal to carry programming that contains nudity on leased access channels and public, educational, and government ("PEG") access channels. Here we solicit comment on the proper interpretation of the term "nudity" as used in Sections 506(a) and (b) of the 1996 Act.  X-n111.` ` We tentatively conclude that the term "nudity" should be interpreted in  X{-accordance with the decision of the Supreme Court in Erznoznik v. City of Jacksonville.Y{yt X-ԍ422 US 205, 95 S. Ct. 2278 (1975).Y In that decision, the Supreme Court found invalid a city ordinance that prohibited showing films containing nudity at drivein theaters visible from public places. The Court found the restriction overly broad because it was not directed against sexually explicit nudity or otherwise limited. Accordingly, we tentatively conclude that the term "nudity" as used in Sections 506(a) and (b) of the 1996 Act should be interpreted to mean nudity that is obscene or indecent. We seek comment on this tentative conclusion.  X- J.` ` Other Matters  X-o112.` ` We recognize that the cable reform subsections of the 1996 Act that we address  X-in this Notice are broad in scope, and that there may be additional issues regarding those  Xk-subsections that we have not specifically addressed in the Notice. Commenters may submit proposals or concerns regarding the implementation of these cable reform subsections, including their impact on other parts of the 1996 Act that are to be addressed in separate proceedings. We also seek proposals to ease the burdens of regulation for interested parties.  X- IV.XREGULATORY FLEXIBILITY ANALYSES (#  X - A.` ` Initial Regulatory Flexibility Analysis for the Notice of Proposed  X!-Rulemaking (#` "")*0*((!"Ԍ X-p113. ` ` Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C.  601612, the Commission's Initial Regulatory Flexibility Analysis with respect to the Notice is as follows:  X-q114. ` ` Reason for action: The Commission is issuing this Notice to seek comment on various issues concerning implementation of the 1996 Act.  Xv-r115. ` ` Objectives: To provide an opportunity for public comment and to provide a  X_-record for a Commission decision on the issues discussed in the Notice.  X1-s116. ` ` Legal Basis: The Notice is adopted pursuant to Section 301 of the 1996 Act; and sections 4(i), 602, 614, 617, 623, 624, 628, 632, of the Communications Act of 1934, as amended, 47 U.S.C.  154, 522, 534, 537, 543, 544, 548, 552, and 548.  X -t117. ` ` Description, potential impact, and number of small entities affected: Amending our rules will directly affect entities which are small business entities, as defined in Section 601(3) of the Regulatory Flexibility Act. The 1996 Act reduces or eliminates rate regulation for many such entities.  Xb-u118. ` ` Reporting, recordkeeping, and other compliance requirements: None.  X4-v119. ` ` Federal rules which overlap, duplicate, or conflict with the Commission's  X-proposal: None.  X-w120. ` ` Any significant alternatives minimizing the impact on small entities and  X-consistent with state objectives: The Notice seeks to minimize burdens on small entities in conformance with the 1996 Act.  X-x121. ` ` Comments are solicited: Written comments are requested on this Initial Regulatory Flexibility Analysis. These comments must be filed in accordance with the same  Xe-filing deadlines set for comments on the other issues in this Notice, but they must have a separate and distinct heading designating them as responses to the Regulatory Flexibility Analysis. The Secretary shall send a copy of the Notice to the Chief Counsel for Advocacy of the Small Business Administration in accordance with Section 603(a) of the Regulatory  X -Flexibility Act, 5 U.S.C.  601, et seq.  X- B.` ` Final Analysis for the Order (#`  X!-y122. ` ` Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C.  601612, the  X"-Commission's Flexibility Analysis with respect to the Order is as follows:  Xj$-z123. ` ` Need and purpose of this action: The Commission issues this Order to enact or revise rules in response to the 1996 Act.  X%'-{124. ` ` Significant Alternatives considered: Not applicable because action is taken"%'*0*((%" pursuant to statutory directive.  X-|125. ` ` Federal rules that overlap, duplicate or conflict with these rules: None.  X- V. X INITIAL PAPERWORK REDUCTION ACT OF 1995 ANALYSIS (#  X_-}126. ` ` This Order and Notice contain either proposed or modified information collections. The Commission has obtained Office of Management and Budget (OMB) approval, under the emergency processing provisions of the Paperwork Reduction Act of 1995 (5 CFR 1320.13), of the information contained in this rulemaking. Approval is effective no later than the date that the summary for the Order and Notice appears in the Federal Register. Emergency OMB approval for the information collections expires June 30, 1996. The Commission, as part of its continuing effort to reduce paperwork burdens and to obtain regular OMB approval of the information collections, invites the general public and OMB to comment on the information collections contained in this rulemaking, as required by the Paperwork Reduction Act of 1995. Public and agency comments are due at the same time as other comments on this Order and Notice; OMB notification of action is due 60 days from date of publication of this Notice in the Federal Register. Comments should address: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology.  X- VI.XEFFECTIVE DATE (#  X|-~127. ` ` The statutory requirements reflected in the final rules adopted in the Order were effective February 8, 1996, the date of enactment of the 1996 Act. The interim rules  XP-adopted in the Order are effective upon publication of the Order in the Federal Register. We find good cause for making these rule changes effective upon publication in the Federal Register because the rules merely either implement statutory language from the 1996 Act, or establish interim procedures (pending the adoption of final rules) in response to immediately effective statutory provisions in the 1996 Act. We also find notice and comment is not necessary or in the public interest in this limited context. Accordingly, the Commission will forgo notice and comment pursuant to the "good cause" exception of the Administrative  X!-Procedure Act. See 5 U.S.C.  553(d).  X"-   X#-V II.PROCEDURAL PROVISIONS  XW%-128. ` ` Ex parte Rules NonRestricted Proceeding. This is a nonrestricted notice and comment rulemaking proceeding. Ex parte presentations are permitted, except during the Sunshine Agenda period, provided that they are disclosed as provided in Commission's rules. "+'+0*((%"  X-See generally 47 C.F.R.  1.1202, 1.1203, and 1.1206(a).  X-129. ` ` Pursuant to applicable procedures set forth in Sections 1.415 and 1.419 of the Commission's rules, 47 C.F.R.  1.415, 1.419, interested parties may file comments  X-on or before May 28, 1996 and reply comments on or before June 28, 1996. To file formally in this proceeding, you must file an original and six copies of all comments, reply comments, and supporting comments. Parties are also asked to submit, if possible, draft rules that reflect their positions. If you want each Commissioner to receive a personal copy of your comments, you must file an original and eleven copies. Comments and reply comments should be sent to Office of the Secretary, Federal Communications Commission, 1919 M Street, N.W., Room 222, Washington, D.C. 20554, with a copy to Nancy Stevenson of the Cable Services Bureau, 2033 M Street, N.W., Room 408A, Washington, D.C. 20554. Parties should also file one copy of any documents filed in this docket with the Commission's copy contractor, International Transcription Services, Inc., 2100 M Street, N.W., Suite 140, Washington, D.C. 20037. Comments and reply comments will be available for public inspection during regular business hours in the FCC Reference Center, 1919 M Street, N.W., Room 239, Washington, D.C. 20554.  Xd-130. ` ` Parties are also asked to submit comments and reply comments on diskette, where possible. Such diskette submissions would be in addition to and not a substitute for the formal filing requirements addressed above. Parties submitting diskettes should submit them to Nancy Stevenson of the Cable Services Bureau, 2033 M Street, N.W., Room 408A, Washington, D.C. 20554. Such a submission should be on a 3.5 inch diskette formatted in an IBM compatible form using MS DOS 5.0 and WordPerfect 5.1 software. The diskette should be submitted in "read only" mode. The diskette should be clearly labelled with the party's name, proceeding, type of pleading (comment or reply comments) and date of submission. The diskette should be accompanied by a cover letter.  X~-131. ` ` Written comments by the public must be submitted by the Office of Management and Budget (OMB) on the proposed and/or modified information collections on or before 60 days after publication of the Order and Notice in the Federal Register. In addition to filing comments with the Secretary, a copy of any comments on the information collections contained herein should be submitted to Dorothy Conway, Federal Communications Commission, Room 234, 1919 M Street, N.W., Washington, D.C. 20054, or via the Internet to dconway@fcc.gov, and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 72517th Street, N.W., Washington, D.C. 20503 or via the Internet to fain_t@al.eop.gov.  X"- VIII.ORDERING CLAUSES  Xj$- 132. ` ` IT IS ORDERED that pursuant to Section 301 of the 1996 Act; and Sections 4(i), 602, 623, 624, 628, 632, of the Communications Act of 1934, as amended, 47 U.S.C.  154, 522, 543, 544, 548 and 552, NOTICE IS HEREBY GIVEN of proposed amendments to  X%'- Part 76, in accordance with the proposals, discussions, and statements of issues in this Notice"%',0*((%"  X-and that COMMENT IS SOUGHT regarding such proposals, discussion, and statements of  X-issues.  X-133. ` ` Pursuant to sections 4(i), 4(j) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 303(r), and Telecommunications Act of 1996,  301, IT IS FURTHER ORDERED that the Commission's Rules ARE AMENDED as set forth in Appendix A, EFFECTIVE upon publication in the Federal Register.  XH-134. ` ` IT IS FURTHER ORDERED that we are revising these rules without providing prior public notice and an opportunity for comment because the rule modifications are mandated by the applicable provisions of the 1996 Act. We find that notice and comment procedures are unnecessary, and that therefore this action falls within the "good cause" exception of the Administrative Procedure Act. 5 U.S.C.  553(b)(B). The final rules  X -adopted in this Order do not involve discretionary action on the part of the Commission. Rather, they simply implement provisions of the 1996 Act according to the specific terms set forth in the legislation, or establish interim procedures (pending the adoption of final rules) in response to immediately effective statutory provisions in the 1996 Act.. For the same reasons, we find good cause to make the rules effective upon publication in the Federal Register.   XM-135.` ` IT IS FURTHER ORDERED that the Secretary shall send a copy of this  X6-Notice, including the IRFA, to the Chief Counsel for Advocacy of the Small Business Administration in accordance with paragraph 603(a) of the Regulatory Flexibility Act, Pub. L.  X-No. 96354, 94 Stat. 1164, 5 U.S.C.  601, et seq. (1981).  X-136. ` ` For additional information regarding this proceeding, contact Tom Power, Paul Glenchur, or Nancy Stevenson, Policy and Rules Division, Cable Services Bureau (202) 4160800. ` ` hh,FEDERAL COMMUNICATIONS COMMISSION  ` ` hh,William F. Caton ` ` hh,Acting Secretary" -0*(("  X-   BAPPENDIX A ă  1. 1. 1. a.(1)(a) i) a) 1. 1. 1. a.(1)(a) i) a) Part 76 of Title 47 of the Code of Federal Regulations is amended as follows:  X- ` ` PART 76 CABLE TELEVISION SERVICE  X_-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.  152, 153, 154, 301, 303, 307, 308, 309; Secs. 612, 614-615, 623, 632 as amended, 106 Stat. 1460, 47 U.S.C. 532; Sec. 623, as amended, 106 Stat. 1460; 47 U.S.C. 532, 533, 535, 543, 552.  X -2. ` ` Section 76.5 is amended by revising paragraphs (a) and (ff) to read as follows: Sec. 76.5 Definitions. (a) Cable system or cable television system. A facility consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to multiple subscribers within a community, but such term does not include: (1) A facility that services only to retransmit the television signals of one or more television broadcast stations; (2) A facility that serves subscribers without using any public right-of-way; (3) A facility of a common carrier which is subject, in whole or in part, to the provisions of Title II of the Communications Act of 1934, as amended, except that such facility shall be considered a cable system to the extent such facility is used in the transmission of video programming directly to subscribers, unless the extent of such use is solely to provide interactive ondemand services; (4) An open video system that complies with section 653 of the Communications Act; or (5) any facilities of any electric utility used solely for operating its electric utility systems. Note: The provisions of Subparts D and F of this part shall also apply to all facilities defined previously as cable systems on or before April 28, 1985, except those that serve subscribers without using any public rightofway.  X#-*` ` * **hh,*  (ff) Cable service. The one-way transmission to subscribers of video programming, or other programming service; and, subscriber interaction, if any, which is required for the  X#'-selection or use of such video programming or other programming service. For the purposes of this definition, "video programming" is programming provided by, or generally considered comparable to programming provided by, a television broadcast station; and, "other"(.0*0*0*'" programming service" is information that a cable operator makes available to all subscribers generally.  X-*` ` * **hh,*  Xv-3.` ` Section 76.309 is amended by revising paragraph (c)(3)(i)(B) to read as follows: Sec. 76.309 Customer service obligations.  X -*` ` * **hh,*hh,*hh, (c)(3)(i)(B) Customers will be notified of any changes in rates, programming services or channel positions as soon as possible in writing. Notice must be given to subscribers a minimum of thirty (30) days in advance of such changes if the change is within the control of the cable operator. In addition, the cable operator shall notify subscribers thirty (30) days in advance of any significant changes in the other information required by the preceeding paragraph. Notwithstanding any other provision of Part 76, a cable operator shall not be required to provide prior notice of any rate change that is the result of a regulatory fee, franchise fee, or any other fee, tax, assessment, or charge of any kind imposed by any Federal agency, State, or franchising authority on the transaction between the operator and the subscriber.  X- 5. ` ` A new Section 76.505 is added to read as follows:  X- Sec. 76.505 Prohibition on buy outs. X(a) No local exchange carrier or any affiliate of such carrier owned by, operated by, controlled by, or under common control with such carrier may purchase or otherwise acquire directly or indirectly more than a 10 percent financial interest, or any management interest, in any cable operator providing cable service within the local exchange carrier's telephone service area.(# X(b) No cable operator or affiliate of a cable operator that is owned by, operated by, controlled by, or under common ownership with such cable operator may purchase or otherwise acquire, directly or indirectly, more than a 10 percent financial interest, or any management interest, in any local exchange carrier providing telephone exchange service within such cable operator's franchise area.(# X(c) A local exchange carrier and a cable operator whose telephone service area and cable franchise area, respectively, are in the same market may not enter into any joint venture or partnership to provide video programming directly to subscribers or to provide telecommunications services within such market.(# X(d) Exceptions: (# X` ` (1) Notwithstanding paragraphs (a), (b), and (c) of this section, a local exchange carrier (with respect to a cable system located in its telephone service area) and a cable operator (with respect to the facilities of a local exchange carrier used to"(/0*0*0*'" provide telephone exchange service in its cable franchise area) may obtain a controlling interest in, management interest in, or enter into a joint venture or partnership with the operator of such system or facilities for the use of such system or facilities to the extent that:(# XX` `  (i) Such system or facilities only serve incorporated or unincorporated x` XX` ` X (A) Places or territories that have fewer than 35,000 inhabitants; and  XX` ` X (B) Are outside an urbanized area, as defined by the Bureau of the Census; and  XX` `  (ii) In the case of a local exchange carrier, such system, in the aggregate with any other system in which such carrier has an interest, serves less than 10 percent of the households in the telephone service area of such carrier.x` X` ` (2) Notwithstanding paragraph (c) of this section, a local exchange carrier may obtain, with the concurrence of the cable operator on the rates, terms, and conditions, the use of that part of the transmission facilities of a cable system extending from the last multiuser terminal to the premises of the end user, if such use is reasonably limited in scope and duration, as determined by the Commission.  X` ` (3) Notwithstanding paragraphs (a) and (c) of this section, a local exchange carrier may obtain a controlling interest in, or form a joint venture or other partnership with, or provide financing to, a cable system (hereinafter in this paragraph referred to as "the subject cable system") if:  XX` `  (i) The subject cable system operates in a television market that is not in the top 25 markets, and such market has more than 1 cable system operator, and the subject cable system is not the cable system with the most subscribers in such television market;x` XX` `  (ii) The subject cable system and the cable system with the most subscribers in such television market held on May 1, 1995, cable television franchises from the largest municipality in the television market and the boundaries of such franchises were identical on such date;x` XX` `  (iii) The subject cable system is not owned by or under common ownership or control of any one of the 50 cable system operators with the most subscribers as such operators existed on May 1, 1995; andx` XX` `  (iv) The system with the most subscribers in the television market is owned by or under common ownership or control of any one of the 10 largest cable system operators as such operators existed on May 1, 1995.x` X` ` (4) paragraph (a) of this section does not apply to any cable system if:  XX` `  (i) The cable system serves no more than 17,000 cable subscribers, of which no less than 8,000 live within an urban area, and no less than 6,000 live within a nonurbanized area as"(00*0*0*'" of June 1, 1995;x` XX` `  (ii) The cable system is not owned by, or under common ownership or control with, any of the 50 largest cable system operators in existence on June 1, 1995; andx` XX` `  (iii) The cable system operates in a television market that was not in the top 100 television markets as of June 1, 1995.x` X` ` (5) Notwithstanding paragraphs (a) and (c) of this section, a local exchange carrier with less than $100,000,000 in annual operating revenues (or any affiliate of such carrier owned by, operated by, controlled by, or under common control with such carrier) may purchase or otherwise acquire more than a 10 percent financial interest in, or any management interest in, or enter into a joint venture or partnership with, any cable system within the local exchange carrier's telephone service area that serves no more than 20,000 cable subscribers, if no more than 12,000 of those subscribers live within an urbanized area, as defined by the Bureau of the Census.  X` ` (6) The Commission may waive the restrictions of paragraphs (a), (b), or (c) of this section only if:  XX` `  (i) The Commission determines that, because of the nature of the market served by the affected cable system or facilities used to provide telephone exchange servicex` XX` ` X (A) The affected cable operator or local exchange carrier would be subjected to undue economic distress by the enforcement of such provisions;  XX` ` X (B) The system or facilities would not be economically viable if such provisions were enforced; or  XX` ` X (C) The anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served; and  XX` `  (ii) The local franchising authority approves of such waiver.x` X(e) For purposes of this section, the term "telephone service area" when used in connection with a common carrier subject in whole or in part to title II of this Act means the area within which such carrier provided telephone exchange service as of January 1, 1993, but if any common carrier after such date transfers its telephone exchange service facilities to another common carrier, the area to which such facilities provide telephone exchange service shall be treated as part of the telephone service area of the acquiring common carrier and not of the selling common carrier.   X:&-  X (-6. ` ` Section 76.605 is amended by revising paragraph (b) Note 6 to read as follows: "(10*0*0*'"ԌSec. 76.605 Technical standards.  X-*` ` * **hh,* Note 6: No State or franchising authority may prohibit, condition, or restrict a cable system's use of any type of subscriber equipment or any transmission technology.  XH-7.` ` Section 76.701 is amended by adding new paragraph (i) to read as follows: Sec. 76.701 Leased access channels.  X -*` ` * **hh,*V* (i) The preceding paragraphs apply to any leased access program or portion of a leased access program which the cable operator reasonably believes contains obscenity, indecency, or nudity.  XK-8.` ` Section 76.702 is amended to read as follows: Sec. 76.702 Public, educational and governmental access. Any cable operator may prohibit the use on its system of any channel capacity of any public, educational, or governmental access facility for any programming which contains nudity, obscene material or indecent material as defined in  76.701(g), or material soliciting or promoting unlawful conduct. For purposes of this section, "material soliciting or promoting unlawful conduct" shall mean material that is otherwise proscribed by law. A cable operator may require any access user, or access manager or administrator agreeing to assume the responsibility of certifying, to certify that its programming does not contain any of the materials described above and that reasonable efforts will be used to ensure that live programming does not contain such material.  X-9.` ` Section 76.905 is amended by adding new paragraph (b)(4) to read as follows: Sec. 76.905 Standards for identification of cable systems subject to effective competition.  X"-*` ` * **hh,* (4) A local exchange carrier or its affiliate (or any multichannel video programming distributor using the facilities of such carrier or its affiliate) offers video programming services directly to subscribers by any means (other than direct-to-home satellite services) in the franchise area of an unaffiliated cable operator which is providing cable service in that franchise area, but only if the video programming services so offered in that area are comparable to the video programming services provided by the unaffiliated cable operator in  X(-that area. "(20*0*0*'"Ԍ  X-10.` ` Section 76.933 is amended by revising paragraphs (e) and (g)(5) to read as follows: Sec. 76.933 Franchising authority review of basic cable rates and equipment costs.  X_-*` ` * **hh,* (e) Notwithstanding the foregoing, when the franchising authority is regulating basic service tier rates, a cable operator that sets its rates pursuant to the quarterly rate adjustment system pursuant to Section 76.922(d) may increase its rates for basic service to reflect the imposition of, or increase in, franchise fees or Commission cable television system regulatory fees imposed pursuant to 47 U.S.C.  159. For the purposes of paragraphs (a) through (c) of this section, the increased rate attributable to Commission regulatory fees or franchise fees shall be treated as an "existing rate", subject to subsequent review and refund if the franchising authority determines that the increase in basic tier rates exceeds the increase in regulatory fees or in franchise fees allocable to the basic tier. This determination shall be appealable to the Commission pursuant to Section 76.944. When the Commission is regulating basic service tier rates pursuant to Section 76.945 or cable programming service rates pursuant to Section 76.960, an increase in those rates resulting from franchise fees or Commission regulatory fees shall be reviewed by the Commission pursuant to the mechanisms set forth in Section 76.945. A cable operator must adjust its rates to reflect decreases in franchise fees or Commission regulatory fees within the periods set forth in Section 76.922(d)(3)(i),(iii).  X-*` ` * **hh,*V* (5) Notwithstanding the foregoing, when the franchising authority is regulating basic service tier rates, a cable operator may increase its rates for basic service to reflect the imposition of, or increase in, franchise fees. The increased rate attributable to Commission regulatory fees or franchise fees shall be subject to subsequent review and refund if the franchising authority determines that the increase in basic tier rates exceeds the increase in regulatory fees or in franchise fees allocable to the basic tier. This determination shall be appealable to the Commission pursuant to Section 76.944. When the Commission is regulating basic service tier rates pursuant to Section 76.945 or cable programming service rates pursuant to Section 76.960, an increase in those rates resulting from franchise fees or Commission regulatory fees shall be reviewed by the Commission pursuant to the mechanisms set forth in Section 76.945.  X"-*` ` * **hh,*  Xh$-11.` ` Section 76.950 is revised to read as follows:  X:&-Sec. 76.950 ` ` Complaints regarding cable programming service rates. (a) A franchising authority may file with the Commission a complaint challenging the reasonableness of its cable operator's rate for cable programming service, or the"(30*0*0*'" reasonableness of the cable operator's charges for installation or rental of equipment used for the receipt of cable programming service. The franchise authority may file a complaint with the Commission only upon receipt of more than one subscriber complaint made to the franchise authority within 90 days after the effective date of the challenged rate increase. (b) The Commission shall not review any complaint with respect to cable programming services filed after March 31, 1999.   X1-12.` ` Section 76.951 is amended to read as follows:  X - 76.951` ` Standard complaint form; other filing requirements (a) Any complaint regarding a cable operator's rate for cable programming service or associated equipment must be filed using standard complaint form, FCC 329.  X-(b)` ` The following information must be provided on the standard complaint form:  Xb-(1)` ` The name, mailing address and phone number of the franchising authority that is filing the complaint;  X-(2)` ` The name, mailing address, and FCC community unit identifier of the relevant cable operator;  X-(3)` ` A description of the cable programming service or associated equipment involved and, if applicable, how the service or associated equipment has changed;  X-(4)` ` The current rate for the cable programming service or associated equipment at issue and, if the complainant is challenging the reasonableness of a rate increase, the most recent rate for the service or associated equipment immediately prior to the rate increase;  X7-(5)` ` If the complainant is filing a corrected complaint, an indication of the date the complainant filed the prior complaint and the date the complainant received notification from the Commission that the prior complaint was defective;  X-(6)` ` A certification that a copy of the complaint, including all attachments, is being served contemporaneously via certified mail on the cable operator;  X"-(7)` ` An indication that the complainant franchising authority received more than one subscriber complaint within 90 days of the operator's imposition of the rate in question; and   XQ%-(8)` ` A certification that, to the best of the complainant's knowledge, the information provided on the form is true and correct.  X (-13.` ` Section 76.953 is amended by deleting the remaining portion of that section following "only in the event of a rate change.""(40*0*0*'"Ԍ X-ԙ14.` ` Section 76.956 is amended by deleting the parenthetical text in the last sentence of  76.956(a).  X-15. ` ` Section 76.964 is amended by revising paragraphs (a), (b) and (c) to read as follows:  Sec. 76.964 Written notification of changes in rates and services.  XH-*` ` * **hh,* (a) In addition to the requirement of Section 76.309(c)(3)(i)(B) regarding advance notification to customers of any changes in rates, programming services or channel positions, cable systems shall give 30 days written notice to both subscribers and local franchising authorities before implementing any rate or service change. Such notice shall state the precise amount of any rate change and briefly explain in readily understandable fashion the cause of the rate change (e.g., inflation, changes in external costs or the addition/deletion of channels). When the change involves the addition or deletion of channels, each channel added or deleted must be separately identified. Notices to subscribers shall inform them of their right to file complaints about changes in cable programming service tier rates and services, shall state that the subscriber may file the complaint within 90 days of the effective date of the rate change,  XK-and shall provide the address and phone number of the local franchising authority . (b) To the extent the operator is required to provide notice of service and rate changes to subscribers, the operator may provide such notice using any reasonable means at its sole discretion. (c) Notwithstanding any other provision of Part 76, a cable operator shall not be required to provide prior notice of any rate change that is the result of a regulatory fee, franchise fee, or any other fee, tax, assessment, or charge of any kind imposed by any Federal agency, State, or franchising authority on the transaction between the operator and the subscriber.  X|-*` ` * *  X7-16. ` ` Section 76.984 is amended by revising paragraph (c) to read as follows: Sec. 76.984 Geographically uniform rate structure.  X-*` ` * **hh,*  X - (c)This section does not apply to:  (1) A cable operator with respect to the provision of cable service over its cable system in any geographic area in which the video programming services offered by the operator in that area are subject to effective competition, or  (2) Any video programming offered on a per channel or per program basis. Bulk discounts to multiple dwelling units shall not be subject to this subsection, except that a cable operator of a cable system that is not subject to effective competition may not charge predatory prices to a multiple dwelling unit. Upon a prima facie showing by a complainant that there are reasonable grounds to believe that the discounted price is predatory, the cable"(50*0*0*'" system shall have the burden of showing that its discounted price is not predatory.   X-17. ` ` A new Section 76.1004 is added to subpart O to read as follows: Sec. 76.1004 Applicability of program access rules to common carriers and affiliates. Any provision that applies to a cable operator under sections 76.1000 through 76.1003 shall also apply to a common carrier or its affiliate that provides video programming by any means directly to subscribers. Any such provision that applies to a satellite cable programming vendor in which a cable operator has an attributable interest shall apply to any satellite cable programming vendor in which such common carrier has an attributable interest. For the purposes of this section, two or fewer common officers or directors shall not by itself establish an attributable interest by a common carrier in a satellite cable programming vendor (or its parent company).  X -18.` ` A new subpart R is added to read as follows: Subpart R Telecommunications Act implementation 76.1400 Purpose 76.1401 Effective competition and local exchange carriers. 76.1402 CPST rate complaints. 76.1403 Small cable operators. 76.1404 Use of cable facilities by local exchange carriers. Subpart R Telecommunications Act implementation  X- 76.1400` ` Purpose The rules and regulations set forth in this subpart provide interim procedures for administering certain aspects of cable regulation. These rules and regulations provide guidance for operators, subscribers and franchise authorities with respect to matters that are subject to immediate implementation under governing statutes but require specific regulatory procedures or definitions. The rules set forth in this subpart are interim because the Commission has solicited comment regarding the specific matters addressed in these rules and may modify their operation when they are promulgated in final form.  X!- 76.1401` ` Effective competition and local exchange carriers. (a) As used in Section 76.905(b)(4), the term "comparable" programming means access to at  Xh$-least 12 channels of programming, at least some of which are local television broadcasting signals. (b) As used in Section 76.905(b)(4), the term "affiliate" means a person that (directly or indirectly) owns or controls, is owned or controlled by, or is under common ownership or control with another person. For purposes of the section, the term "own" means to own an"(60*0*0*'" equity interest (or the equivalent thereof) of more than 10 percent.  X-(c) An operator meeting the relevant criteria under Section 76.905(b)(4), may, at any time,  X-file a petition for a determination of effective competition with the Commission. The petition should set forth information supporting a determination that effective competition exists as defined in 76.905(d)(4). (d) Upon filing of a petition described in paragraph (d) of this section with the Commission, the operator filing the petition shall provide a copy of the petition to the local franchise authority. The Commission will issue a public notice of the petition's filing to allow interested parties to respond. The Commisison may then issue an order granting or denying the petition. The Commission may issue an order directing one or more persons to produce information relevant to the petition's disposition.  X - 76.1402` ` CPST rate complaints (a) A local franchise authority may file rate complaints with the Commission within 180 days of the effective date of a rate increase on the cable operator's cable programming services tier if within 90 days of that increase the local franchise authority receives more than one subscriber complaint concerning the increase. (b) Before filing a rate complaint with the Commission, the local franchise authority must first give the cable operator written notice, including a draft FCC Form 329, of the local franchise authority's intent to file the complaint. The local franchise authority must give an operator a minimum of 30 days to file with the local franchise authority the relevant FCC forms that must be filed to justify a rate increase or, where appropriate, certification that the operator is not subject to rate regulation. The operator must file a complete response with the local franchise authority within the time period specified by the local franchise authority. The local franchise authority shall file with the Commission the complaint and the operator's  Xe-response to the Complaint. If the operator's response to the complaint asserts that the operator is exempt from rate regulation, the operator's response can be filed with the local  X7-franchise authority without filing specific FCC Forms.  X - 76.1403` ` Small cable operators (a) Effective February 8, 1996, a small cable operator is exempt from rate regulation on its cable programming services tier, or on its basic service tier if that tier was the only service tier subject to rate regulation as of December 31, 1994, in any franchise area in which that operator services 50,000 or fewer subscribers. (b) A small cable operator is an operator who, directly or through an affiliate, serves in the aggregate fewer than 617,000 subscribers in the United States and whose annual revenues, when combined with the total annual revenues of all of its affiliates, do not exceed $250 million in the aggregate. (c) As used in this section, an operator shall be deemed affiliated with another entity if that"(70*0*0*'" entity holds a 20 percent or greater equity interest, passive or active, in the operator or exercises de jure or de facto control over the operator. (d) Procedures (1) If a small cable operator has only a single tier that is subject to regulation, the  Xv-operator, at any time, may certify in writing to its local franchise authority that it meets all  X_-criteria necessary to qualify as a small operator. Upon request of the local franchising authority, the operator shall identify in writing all of its affiliates that provide cable service, the total subscriber base of itself and each affiliate, and the aggregate gross revenues of its cable and noncable affiliates. Within 90 days of receiving the original certification, the local franchising authority shall determine whether the operator qualifies for deregulation and shall notify the operator in writing of its decision, although this 90day period shall be tolled for so long as it takes the operator to respond to a proper request for information by the local franchising authority. If the local franchising authority finds that the operator does not qualify for deregulation, its notice shall state the grounds for that decision. The operator may appeal the local franchising authority's decision to the Commission within 30 days. (2) Once the operator has certified its eligibility for deregulation on the basic service tier, the local franchising authority shall not prohibit the operator from taking a rate increase and shall not order the operator to make any refunds unless and until the local franchising authority has rejected the certification in a final order that is no longer subject to appeal or that the Commission has affirmed. The operator shall be liable for refunds for revenues gained (beyond revenues that could be gained under regulation) as a result of any rate increase taken during the period in which it claimed to be deregulated, plus interest, in the event the operator is later found not to be deregulated. The oneyear limitation on refund liability will not be applicable during that period to ensure that the filing of an invalid small  X-operator certification does not reduce any refund liability that the operator would otherwise incur. (3) Within 30 days of being served with a local franchising authority's notice that the local franchising authority intends to file a cable programming services tier rate complaint, an operator may certify to the local franchising authority that it meets the criteria for qualification as a small cable operator. This certification shall be filed in accordance with the cable programming services rate complaint procedure set forth in Section 76.1402. Absent a cable programming services rate complaint, the operator need not file for small cable operator certification in order to treat its cable programming services tier as deregulated. (4) If a pending CPST rate complaint was filed with the Commission before the effective date of these interim rules, the operator should file its certification of small cable operator status directly with the Commission within 15 days of the effective date of these interim rules.  X#'- 76.1404` ` Use of cable facilities by local exchange carriers. For purposes of Section 76.505(d)(2), the Commission will determine whether use of a cable"(80*0*0*'" operator's facilities by a local exchange carrier is reasonably limited in scope and duration according to the following procedures: (a) Within 10 days of final execution of a contract permitting a local exchange carrier to use that part of the transmission facilities of a cable system extending from the last multiuser terminal to the premises of the end use, the parties shall submit a copy of such contract, along with an explanation of how such contract is reasonably limited in scope and duration, to the Commission for review. The parties shall serve a copy of this submission on the local franchising authority, along with a notice of the local franchising authority's right to file comments with the Commission consistent with Section 76.7. (b) Based on the record before it, the Commission shall determine whether the local exchange carrier's use of that part of the transmission facilities of a cable system extending from the last multiuse terminal to the premises of the end user is reasonably limited in scope and duration. In making this determination, the Commission will evaluate whether the proposed joint use of cable facilities promotes competition in both services and facilities, and encourages longterm investment in telecommunications infrastructure. "y90*0*0*"  P-? #Xm2PG;XP#APPENDIX B l l 7 FCC FORM 329  P-CABLE PROGRAMMING SERVICE RATE COMPLAINT FORM  P-5 INSTRUCTIONS  Rv-l  X UX` hp x (#%'0*,.8135@8:"ybest of its knowledge and belief, the following is true and correct:  R- 1) The local franchise authority has received subscriber complaints in accordance with the Commission's rules regarding a rate increase to the cable programming services tier(s) provided by the cable system within 90 days of the date of the increase first appearing on the subscriber's cable bill. 2) Consistent with the requirements of this form, the cable system was provided a draft copy of this form by certified mail and given a minimum of 30 days from that date to give the local franchise authority a rate justification on the appropriate FCC Form or, alternatively, a certification that it is not subject to rate regulation. 3) Consistent with the requirements of this form, this information provided by the cable system is attached to and made a part of this filing by the local franchise authority. If no such attachments are filed with this form, the franchise authority certifies that the cable system operator failed to file the appropriate information with the local franchise authority within the specified time period, and requests that the FCC act upon the information as submitted. 4) In the event additional information relevant to the filing of this FCC Form 329 is obtained by the local franchise authority prior to the Commission taking final action thereon, the local franchise authority will immediately notify the Commission of such additional information and provide the same to the Commission.    5) The local franchise authority has filed this complaint with the Commission within 180 days of the date the rate increase became effective.  R -        P- Name` `  Signaturepp    xx- Date The Commission has obtained Office of Management and Budget (OMB) approval, under the emergency processing provisions of the Paperwork Reduction Act of 1995 (5 CFR 1320.13), of the information contained in this form. Approval is effective no later than the date that the summary for the Order and Notice of Proposed Rulemaking (CS Docket 9685, FCC 96154) appears in the Federal Register. Emergency OMB approval for the information collections expires June 30, 1996. X:&>,,,`'3 v% >\F _Equation CaC^X  H  R- H =# H  Separate Statement  H e H of  H Commissioner James H. Quello  H Re:Implementation of Cable Reform Provisions of the Telecommunications Act of 1996, CS Docket No. 9685  R - This item goes a long way toward implementing, in as straightforward a manner as possible, the cablerelated provisions of the Telecommunications Act of 1996: adopting rules where possible, seeking comment where necessary, and adopting  R -interim rules in the meantime. Thus, I generally support adoption of this Order and  R-Notice of Proposed Rule Making. With one exception. I fail to understand why there is any need to seek comment on how we should permanently implement one of the more important and straightforward provisions of the 1996 Act: the new fourth prong of the effective competition test. This prong provides that effective competition exists if a LEC or its affiliate "offers video programming services directly to subscribers by any means (other than directtohome satellite services) in the franchise area of an unaffiliated cable operator...." Perhaps as important as what this provision says is what it does not say: this prong does not include, as do the other three prongs, a pass and/or penetration test. Did Congress omit a number intentionally, so that the Commission would find effective competition whenever a LEC offers service in the franchise area, regardless of the extent of such offering? I believe so. This interpretation of the Act is consistent with both the explicit language of Section 301(b)(3), and with the underpinnings of the 1996 Act, which eliminates rate regulation on the cable programming services tier in three years, and in many other respects minimizes the regulatory burden on cable operators. Thus, I would have felt entirely comfortable adopting the straightforward language of the Act without seeking further comment in an NPRM. However, while this was my preferred approach, I voted for this item confident that the record will ultimately support my reading of the 1996 Act, and that the Commission will act expeditiously to adopt final rules in this very important proceeding. We should strive to promptly provide certainty to the cable industry on the matters contained in the NPRM portion of this item in order to end the roller coaster ride of regulation that cable operators have had to endure since passage of the 1992 Cable Act. "%'?,,,P("  P-( H  (  SEPARATE STATEMENT OF l  P-v COMMISSIONER RACHELLE B. CHONG ĐlUl lU  R-Re: XImplementation of Cable Reform Provisions in the Telecommunications Act of 1996: (# XCS Docket No. 9685, Order and Notice of Proposed Rulemaking(#  R1-   In this item, we implement certain sections of the Telecommunications Act of 1996 ("1996 Act") pertaining to reform of cable television regulation. It is my view that most of these statutory sections are clear, selfeffectuating provisions which require only conforming rule changes. We determined, however, that a few of the sections require further rulemaking in order to be fully and clearly implemented. Although I agree with most of the determinations to seek additional comment, I write separately to express my concern about one such determination. Specifically, I do not believe that we need to seek comment on the portion of Section 301(l)(1) of the 1996 Act that provides that effective competition exists if a local exchange carrier ("LEC") offers video programming services "in the franchise area" of a cable operator. Prior to the enactment of the 1996 Act, Section 623(l)(1) of the Communications Act of 1934, as amended, found that effective competition existed if any one of the following three tests were met: X` ` (A) fewer than 30 percent of the households in its franchise area subscribe to the cable service of a cable system;   XX` ` (B) the franchise area is x` ` `  (i) served by at least two unaffiliated multichannel video programming distributors each of which offers comparable programming to at least 50 percent of the households in the franchise area; andx` ` `  (ii) the number of households subscribing to multichannel video programming other than the largest multichannel video programming distributor exceeds 15% of the households in the franchise area; orx` X(# X` ` (C) a multichannel video programming distributor operated by the franchising authority for that franchise area offers video programming to  RQ%-at least 50 percent of the households in the franchise area.IQ% X'-ԍ47 U.S.C. 623(l)(1).I  ` ` Section 301(b)(3) of the 1996 Act added a fourth effective competition test to Section 623(l)(1). The new test provides that effective competition exists when a:"(@y,,,?*"ԌX  Xlocal exchange carrier or its affiliate (or any multichannel video programming distributor using the facilities of such carrier or its affiliate) offers video programming services directly to subscribers by any means (other than directtohome satellite services) in the franchise area of an unaffiliated cable operator which is providing cable service in that franchise area, but only if the video programming services so offered in that area are comparable to the video programming services provided by the unaffiliated cable operator in that area.   R -Unlike the other three "effective competition" tests, this fourth test does not include a percentage penetration or pass rate. Nevertheless, in our Notice, we ask how much of the franchise area must be served by the LEC to constitute effective competition. In adopting an effective competition test without a specific pass or penetration rate, Congress made its intention clear that this fourth effective  R -competition test would be met if the LEC offered service in any portion of the franchise area. If Congress had intended a higher standard, I believe that it would have specified a pass or penetration rate as it did in the other three effective competition tests. Accordingly, I do not believe that we need to ask for comment on this issue. I am further troubled by the notion, expressed several times in the effective competition section of the item, that it is the Commission's role to determine when competition provided by a LEC reaches a "sufficient" level that will have "a restraining  R-effect on cable rates."h XQ-ԍXSee Order & Notice  7, 17 and 72.(#h In my view, Congress made that determination when it adopted each of the four effective competition tests. The Commission's role is to determine whether those tests established by Congress have been met not to independently evaluate whether the level of competition is "sufficient" to have "a restaining effect on cable rates." Only in cases where there is some ambiguity in the statutory language, should the Commission look to the underlying purpose of the  RN-statute for guidance in determining how to interpret the statute.N{ Xz-ԍ Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843 (1984). I do not believe this situation is one of those cases.