Sec. 76.942  Refunds.

    (a) A franchising authority (or the Commission, pursuant to 
Sec. 76.945) may order a cable operator to refund to subscribers that 
portion of previously paid rates determined to be in excess of the 
permitted tier charge or above the actual cost of equipment, unless the 
operator has submitted a cost-of-service showing which justifies the 
rate charged as reasonable. An operator's liability for refunds shall be 
based on the difference between the old bundled rates and the sum of the 
new unbundled program service charge(s) and the new unbundled equipment 
charge(s). Where an operator was charging separately for program 
services and equipment but the rates were not in compliance with the 
Commission's rules, the operator's refund liability shall be based on 
the difference between the sum of the old charges and the sum of the 
new, unbundled program service and equipment charges. Before ordering a 
cable operator to refund previously paid rates to subscribers, a 
franchising authority (or the Commission) must give the operator notice 
and opportunity to comment.
    (b) An operator's liability for refunds in limited to a one-year 
period, except that an operator that fails to comply with a valid rate 
order issued by a franchising authority or the Commission shall be 
liable for refunds commencing from the effective date of such order

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until such time as it complies with such order.
    (c) The refund period shall run as follows:
    (1) From the date the operator implements a prospective rate 
reduction back in time to September 1, 1993, or one year, whichever is 
shorter.
    (2) From the date a franchising authority issues an accounting order 
pursuant to Sec. 76.933(c), to the date a prospective rate reduction is 
issued, then back in time from the date of the accounting order to the 
effective date of the rules; however, the total refund period shall not 
exceed one year from the date of the accounting order.
    (3) Refund liability shall be calculated on the reasonableness of 
the rates as determined by the rules in effect during the period under 
review by the franchising authority or the Commission.
    (d) The cable operator, in its discretion, may implement a refund in 
the following manner:
    (1) By returning overcharges to those subscribers who actually paid 
the overcharges, either through direct payment or as a specifically 
identified credit to those subscribers' bills; or
    (2) By means of a prospective percentage reduction in the rates for 
the basic service tier or associated equipment to cover the cumulative 
overcharge. This shall be reflected as a specifically identified, one-
time credit on prospective bills to the class of subscribers that 
currently subscribe to the cable system.
    (e) Refunds shall include interest computed at applicable rates 
published by the Internal Revenue Service for tax refunds and additional 
tax payments.
    (f) Once an operator has implemented a rate refund to subscribers in 
accordance with a refund order by the franchising authority (or the 
Commission, pursuant to paragraph (a) of this section), the franchising 
authority must return to the cable operator an amount equal to that 
portion of the franchise fee that was paid on the total amount of the 
refund to subscribers. The franchising authority must promptly return 
the franchise fee overcharge either in an immediate lump sum payment, or 
the cable operator may deduct it from the cable system's future 
franchise fee payments. The franchising authority has the discretion to 
determine a reasonable repayment period, but interest shall accrue on 
any outstanding portion of the franchise fee starting on the date the 
operator has completed implementation of the refund order. In 
determining the amount of the refund, the franchise fee overcharge 
should be offset against franchise fees the operator holds on behalf of 
the franchising authority for lump sum payment. The interest rate on any 
refund owed to the operator presumptively shall be .25%.

[58 11 FR 29753 , May 21, 1993, as amended at  58 FR 46736 , Sept. 2, 1993;  59 FR 17974 , Apr. 15, 1994;  60 FR 52120 , Oct. 5, 1995]

    Effective Date Note: At  60 FR 52120 , Oct. 5, 1995, in Sec. 76.942, 
paragraph (f) was revised. Paragraph (f) contains information collection 
and recordkeeping requirements and will not beecome effective until 30 
days after approval has been given by the Office of Management and 
Budget.