Discussion

Because the incumbent cable operators were not eligible for state franchises until January 2, 2008, they correctly reported no state video revenue for calendar year 2007. Since the fees for the 2008-2009 would be based on revenues booked in calendar year 2007, the entire burden of the user fee would be borne by the new entrants, in this case principally Verizon and AT&T, in the 2008-2009 fiscal year. Clearly, basing fees for the 2008-2009 fiscal year on revenues accrued in 2007 would not result in a reasonable allocation of the DIVCA-related costs between the new entrants and the incumbent video service providers, who are making a transition to a state franchise during this year and thereby triggering costs in the Commission's franchising program.

Nor is the revenue-based approach a good one to use in Fiscal Year 2009-2010, as basing the user fees on reported revenue for calendar year 2008 would impose almost all costs on the incumbent video service providers. This result would arise because of the very low video penetration by the new entrants in 2008. As a result, the revenue-based financing scheme would result in a very large percentage of the Commission's DIVCA costs being borne by the incumbent cable operators because of their legacy customer bases. Thus, even though the costs of the franchising program arise from both the new entrants and incumbents, the revenue-based approach in this year would impose most of the costs on the incumbents. Moreover, the fees imposed on the companies would be highly unstable.

CCTA "supports the proposal to extend the" the interim fee methodology.⁷ Verizon "agrees that the continued calculation of the Commission's user fee based on the number of households, rather than revenues, through the 2012- 2013 fiscal year is a sound proposal for the reasons set forth in the ACR."⁸

Thus, for the reasons cited above, we decide to continue basing user fees for video franchise holders on a pro-rata apportionment of our budgeted costs based on households in each franchise holder's video service territory through the 2012-2013 fiscal year. For Fiscal Year 2008-2009, for example, we will apportion user fee based on the total households at the end of 2008.

After the 2012-2013 fiscal year, it is likely that revenues earned by the incumbents and new entrants will have stabilized enough to result in a reasonable apportionment of the cost burden if determined on a pro-rata revenue basis. The methodology was adopted in D.07-03-014.

Therefore, we modify the adopted user fee procedures for Fiscal Year 2008-2009 through Fiscal Year 2012-2013 to be based on a pro-rata share of households in each state video franchise holder's video service territory.

In addition to commenting on the proposal to extend the interim methodology for calculating franchise fees, CCTA requested "that the requirement to report those revenues be eliminated until the year prior to assessment of the User Fee" but, if the Commission does not agree to the waiver of this requirement, CCTA "requests that the revenues of each provider be filed under seal and kept confidential, similar to the remaining data filed by state video franchise holders."⁹

In response, Verizon "agrees that unnecessary data should not be required, and believes CCTA's suggestion has merit. However, the Commission has already determined that revenue data submitted for purposes of its user fee calculation is subject to confidential treatment under Public Utilities Code § 583, and no further order on this point is required."¹⁰

We decline to exempt the franchise holders from the reporting of revenues on the basis of this abbreviated record. We see no need to act on CCTA's request for confidential treatment of this data because we have already ordered such treatment in D.07-03-014.¹¹

Comments on Proposed Decision

The proposed decision of the Commissioner in this matter was mailed to the parties in accordance with Pub. Util. Code § 311 and comments were allowed under Rule 14.3 of the Commission's Rules of Practice and Procedure. No comments were filed.

⁷ CCTA Opening Comments at 1.

⁸ Verizon Reply Comments at 1.

⁹ CCTA Opening Comments.

¹⁰ Verizon Reply Comments at 1.

¹¹ D.07-03-014 at