(a) Basic service tier rates. Basic service tier rates for cable service provided to residential subscribers shall be subject to regulation by the Commission and by state and local authorities, as is appropriate, in order to assure that they are in compliance with the requirements of 47 U.S.C. 543. For purposes of this section, residential subscribers are defined as subscribers residing in an occupied housing unit, such as a house, an apartment, a mobile home or trailer, a group of rooms, or a single room occupied as separate living quarters. Rates that are demonstrated, in accordance with this part, not to exceed the permitted charge as described in this section, plus a charge for franchise fees, will be accepted as in compliance. The maximum monthly charges for regulated programming services shall not include any charges for equipment or installations. Charges for equipment and installations are to be calculated separately pursuant to § 76.923. Equipment and installation rates that are demonstrated not to exceed the maximum permitted rates as specified in § 76.923, will be accepted as in compliance.

(b) Permitted charge—(1) Establishment of initial regulated rates. The initial maximum permitted rate for newly regulated cable systems shall be the actual rate in effect on the date 60 days prior to the date the local franchising authority (LFA) files its certification to regulate rates. The cable operator may establish its initial basic service tier rate by providing to the LFA written notice of its rate in effect on the date 60 days prior to the date the local franchising authority files its certification to regulate rates, along with a rate card or other supporting documentation. This initial basic service tier rate is not subject to review by the LFA.

(2) Subsequent permitted charge. Subsequent permitted charges for the basic service tier shall be the maximum permitted rate calculated using FCC Form 1240. Regulated basic service tier rates established prior to August 13, 2025, will be reviewed for conformance with the rules in this part in effect at the time the basic service tier rates were established.

(c) Annual rate adjustment method—(1) Generally. Except as provided for in paragraph (c)(2)(iii)(B) of this section and § 76.923(o), operators using the annual rate adjustment method may not adjust their rates more than annually to reflect inflation, changes in external costs, changes in the number of regulated channels, and changes in equipment costs. Operators must file on the same date a Form 1240 for the purpose of making rate adjustments to reflect inflation, changes in external costs and changes in the number of regulated channels and a Form 1205 for the purpose of adjusting rates for regulated equipment and installation. Operators may choose the annual filing date, but they must notify the franchising authority of their proposed filing date prior to their filing. Franchising authorities or their designees may reject the annual filing date chosen by the operator for good cause. If the franchising authority finds good cause to reject the proposed filing date, the franchising authority and the operator should work together to reach a mutually acceptable date. If no agreement can be reached, the franchising authority may set the filing date up to 60 days later than the date chosen by the operator. An operator may change its filing date from year to year, except, as described in paragraph (c)(2)(iii)(B) of this section, at least twelve months must pass before the operator can implement its next annual adjustment.

(2) Projecting inflation, changes in external costs, and changes in number of regulated channels. An operator using the annual rate adjustment method may adjust its rates to reflect inflation, changes in external costs and changes in the number of regulated channels that are projected for the 12 months following the date the operator is scheduled to make its rate adjustment pursuant to § 76.933.

(i) Inflation adjustments. The residual component of a system's permitted charge may be adjusted annually to project for the 12 months following the date the operator is scheduled to make a rate adjustment. The annual inflation adjustment shall be based on inflation that occurred in the most recently completed quarter, converted to an annual factor. Adjustments shall be based on changes in the Gross National Product Price Index as published by the Bureau of Economic Analysis of the United States Department of Commerce.

(ii) External costs. (A) Permitted charges for the basic service tier may be adjusted annually to reflect actual changes in external costs experienced but not yet accounted for by the cable system, as well as for projections in these external costs for the 12-month period on which the filing is based. In order that rates be adjusted for projections in external costs, the operator must demonstrate that such projections are reasonably certain and reasonably quantifiable. Projections involving copyright fees, retransmission consent fees, other programming costs, Commission regulatory fees, and cable specific taxes are presumed to be reasonably certain and reasonably quantifiable. Operators may project for increases in franchise related costs to the extent that they are reasonably certain and reasonably quantifiable, but such changes are not presumed reasonably certain and reasonably quantifiable. Operators may pass through increases in franchise fees pursuant to § 76.933.

(B) In all events, a system must adjust its rates every twelve months to reflect any net decreases in external costs that have not previously been accounted for in the system's rates.

(C) Any rate increase made to reflect increases or projected increases in external costs must also fully account for all other changes and projected changes in external costs, inflation and the number of channels on a regulated basic service tier that occurred or will occur during the same period. Rate adjustments made to reflect changes in external costs shall be based on any changes, plus projections, in those external costs that occurred or will occur in the relevant time periods since the periods used in the operator's most recent previous FCC Form 1240.

(iii) Channel adjustments. (A) Permitted charges for a basic service tier may be adjusted annually to reflect changes not yet accounted for in the number of regulated channels provided by the cable system, as well as for projected changes in the number of regulated channels for the 12-month period on which the filing is based. In order that rates be adjusted for projected changes to the number of regulated channels, the operator must demonstrate that such projections are reasonably certain and reasonably quantifiable.

(B) An operator may make rate adjustments for the addition of required channels to the basic service tier that are required under Federal or local law at any time such additions occur, subject to the filing requirements of § 76.933(c)(5), regardless of whether such additions occur outside of the annual filing cycle. Required channels may include must-carry, local origination, public, educational and governmental access and leased access channels. Should the operator elect not to pass through the costs immediately, it may accrue the costs of the additional channels plus interest, as described in paragraph (c)(3) of this section.

(3) True-up and accrual of charges not projected. As part of the annual rate adjustment, an operator must “true up” its previously projected inflation, changes in external costs and changes in the number of regulated channels and adjust its rates for these actual cost changes. The operator must decrease its rates for overestimation of its projected cost changes and may increase its rates to adjust for underestimation of its projected cost changes.

(i) Where an operator has underestimated costs, future rates may be increased to permit recovery of the accrued costs plus 11.25% interest between the date the costs are incurred and the date the operator is entitled to make its rate adjustment.

(ii) If an operator has underestimated its cost changes and elects not to recover these accrued costs with interest on the date the operator is entitled to make its annual rate adjustment, the interest will cease to accrue as of the date the operator is entitled to make the annual rate adjustment, but the operator will not lose its ability to recover such costs and interest. An operator may recover accrued costs between the date such costs are incurred and the date the operator implements its rate adjustment.

(d) External costs. (1) External costs shall consist of costs in the following categories:

(i) State and local taxes applicable to the provision of cable television service;

(ii) Franchise fees;

(iii) Costs of complying with franchise requirements, including costs of providing public, educational, and governmental access channels as required by the franchising authority;

(iv) Retransmission consent fees and copyright fees incurred for the carriage of broadcast signals;

(v) Other programming costs;

(vi) Commission cable television system regulatory fees imposed pursuant to 47 U.S.C. 159; and

(vii) Headend equipment costs necessary for the carriage of digital broadcast signals.

(2) The permitted charge for a regulated basic service tier shall be adjusted on account of programming costs, copyright fees and retransmission consent fees only for the program channels or broadcast signals offered on that tier.

(3) Adjustments for external costs in the true-up portion of the FCC Form 1240 may be made on the basis of actual changes in external costs only. The starting date for adjustments to external costs for newly regulated systems shall be the implementation date of the initial maximum permitted rate established in paragraph (b)(1) of this section.

(4) Changes in franchise fees shall not result in an adjustment to permitted charges, but rather shall be calculated separately as part of the maximum monthly charge per subscriber for a regulated basic service tier.

(5) Adjustments to permitted charges to reflect changes in the costs of programming purchased from affiliated programmers, as defined in § 76.901, shall be permitted as long as the price charged to the affiliated system reflects either prevailing company prices offered in the marketplace to third parties (where the affiliated program supplier has established such prices) or the fair market value of the programming.

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

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

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

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

(6) Adjustments to permitted charges on account of increases in costs of programming shall be further adjusted to reflect any revenues received by the operator from the programmer. Such adjustments shall apply on a channel by channel basis.

(7) In calculating programming expense, operators may add a mark-up of 7.5% for increases in programming costs. Operators shall reduce rates to reflect decreases in programming costs and remove the 7.5% mark-up, if any, taken on the removed costs.

(e) Changes in the number of channels on the regulated basic service tier—(1) Generally. A system must adjust annually the residual component of its permitted rate for the basic service tier to reflect any decreases in the number of channels that were on the that tier as of the date used for determining the initial maximum permitted rate on its initial Form 1240. Cable systems shall use FCC Form 1240 to justify rate changes made on account of changes in the number of channels on the basic service tier and include any off-form calculations.

(2) Deletion of channels. (i) When dropping a channel from a basic service tier, operators shall reflect the net reduction in external costs in their rates. With respect to channels to which the 7.5% markup on programming costs was applied, the operator shall treat the markup as part of its programming costs and subtract the markup from its external costs.

(ii) When the removal of channels results in a reduction of the total basic service tier channel count that existed when the initial maximum permitted rate was established (Initial Channel Count), an operator shall also reduce the price of the basic service tier by any “residual” associated with the removed channels. For subsequent Form 1240 updates, if the number of channels included in the current maximum permitted rate on the Form 1240 is less than the Initial Channel Count, the operator shall reduce the price of the basic service tier by any “residual” associated with the subsequently removed channels. For purposes of this calculation, the per channel residual is the permitted charge for the basic service tier, minus the external costs, divided by the total number of channels on the basic service tier.

(3) Movement of channels to the basic service tier. When a channel is moved from another tier of service to the basic service tier, the moved channel shall be treated as a new channel.

(4) Substitution of channels on a basic service tier. An operator may substitute a new channel for an existing channel on a basic service tier. The substituted channel will carry the same residual as the original channel for which it was substituted. Operators substituting channels on a basic service tier shall be required to reflect any reduction in programming costs in their rates and may reflect any increase in programming costs, including the 7.5% markup.

(f) Forms and attachments. Permitted charges for a basic service tier shall be determined in accordance with forms and associated instructions established by the Commission, this part, and any Commission orders. Off-form calculations shall be included as attachments with the established forms.

(g) Hardship rate relief. A cable operator may adjust charges by an amount specified by the Commission or the franchising authority for the basic service tier if it is determined that:

(1) Total revenues from cable operations, measured at the highest level of the cable operator's cable service organization, will not be sufficient to enable the operator to attract capital or maintain credit necessary to enable the operator to continue to provide cable service;

(2) The cable operator has prudent and efficient management; and

(3) Adjusted charges on account of hardship will not result in total charges for regulated cable services that are excessive in comparison to charges of similarly situated systems.

[90 FR 31151, July 14, 2025]