FOR RECORD ONLY $//Appeal ORDER in Bridgeport, CT, et al, DA 95-58//$ $/76.922 Rates for the basic service tier/$ $/76.923 Rates for equipment and installation/$ $/76.944 Commission Review of Franchising Authority Decisions/$ $/1.45(d)Request for Stay/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) Bridgeport, CT DA 95-58 ) Fairfield, CT CABLEVISION SYSTEMS OF ) Milford, CT SOUTHERN CONNECTICUT, ) Orange, CT LIMITED PARTNERSHIP ) Stratford, CT ) Woodbridge, CT Appeal of Local Rate Order of the ) Connecticut Department of ) Public Utility Control ) ) Request for Stay ) of Local Rate Order of the ) Connecticut Department of ) Public Utility Control ) ORDER Adopted: January 18, 1995 Released: January 19, 1995 By the Chief, Cable Services Bureau: I. Introduction 1. Cablevision Systems of Southern Connecticut, Limited Partnership ("Cablevision"), filed on September 13, 1994 an Appeal ("Appeal") of a local rate order ("Local Rate Order") of the Connecticut Department of Public Utility Control ("DPUC"), dated August 17, 1994, and served on Cablevision on August 23, 1994, for the communities of Bridgeport, Ct.; Fairfield, Ct.; Milford, Ct.; Orange, Ct.; Stratford, Ct.; and Woodbridge, Ct. On September 13, 1994, Cablevision also filed a Request for Stay of the Local Rate Order. 2. In the Local Rate Order, the DPUC established regulated rates for Cablevision's basic cable service and associated equipment, pursuant to the Cable Television Consumer Protection and Competition Act of 1992. The DPUC also ordered Cablevision to issue refunds or credits to subscribers for those charges collected between September 1, 1993 and July 14, 1994, which were in excess of Cablevision's maximum permitted rates. 3. In its Appeal, Cablevision challenges only that portion of the Local Rate Order in which the DPUC reduced Cablevision's benchmark per channel rate on Line 121 of FCC Form 393 from $0.636, which Cablevision derived by interpolation from the Commission's benchmark tables, to $0.633, which the DPUC calculated using the Commission's benchmark formula. This change resulted in a reduction of Cablevision's maximum permitted rate for basic service from $9.10 per month to $9.05 per month. Cablevision contends that it is entitled to use either the benchmark tables or the benchmark formula to calculate its benchmark per channel rate, and that the DPUC erred when it did not allow Cablevision to interpolate its per channel rate from the benchmark tables contained in FCC Form 393. Accordingly, Cablevision requests that the Local Rate Order be modified (1) to allow Cablevision to use the value of $0.636 as its benchmark per channel rate on Line 121 of FCC Form 393; and (2) to set its maximum permitted rate for basic service at $9.10 per month. II. Standard of Review 4. Under the Commission's rules, appeals of franchising authorities' local rate orders are reviewed by the Commission. In ruling on an appeal of a local rate order, the Commission will not conduct a de novo review, but instead will sustain the franchising authority's decision as long as there is a reasonable basis for that decision. Therefore, the Commission will reverse a franchising authority's decision only if it determines that the franchising authority acted unreasonably in applying the Commission's rules in rendering a local rate order. If the Commission reverses a franchising authority's decision, it will not substitute its own decision but instead will remand the issue to the franchising authority with instructions to resolve the case consistent with the Commission's decision on appeal. III. Discussion 5. The sole issue raised in Cablevision's Appeal involves the calculation of its benchmark per channel rate on Line 121 of FCC Form 393. FCC Form 393 is the official form used by cable operators to determine whether their regulated rates for programming, equipment and installations are reasonable. FCC Form 393 is divided into three (3) separate, but interrelated parts. In Part II, the operator calculates its permitted programming rates, while in Part III, the operator calculates its permitted equipment and installation rates. Part I is a cover sheet that lists the various programming, equipment and installation rates that have been calculated in Parts II and III and compares them to the rates the operator has actually charged during the period under review. 6. The operator's maximum permitted rates are derived by completing Parts II and III of FCC Form 393, pursuant to which the operator calculates the actual aggregate revenues collected by the operator for regulated programming, equipment and installation, as of the initial date of regulation or as of September 30, 1992. After calculating actual aggregate revenues, the operator converts those revenues to a per-channel rate, and then compares the per-channel figures to the applicable benchmark rate. The benchmark rate is determined by use of either the benchmark tables that are part of FCC Form 393 or by use of the benchmark formula. If the appropriate benchmark for a particular operator falls between two numbers listed in the benchmark tables, then the operator may either interpolate the appropriate benchmark number or derive it using the benchmark formula. If the per- channel rate exceeds the benchmark rate, the operator must reduce the per-channel rate to the benchmark rate or by 10%, whichever is less. Maximum permitted rates for equipment and installation are based on actual cost and are calculated in Part III of FCC Form 393. 7. Cablevision claims that the DPUC unjustifiably substituted its calculation of Cablevision's benchmark rate using the Commission's formula in place of the benchmark rate which Cablevision derived by interpolating from the benchmark tables contained in FCC Form 393. The DPUC ordered Cablevision to issue additional refunds based upon the new, and lower, maximum permitted rate which the DPUC derived from the benchmark formula. The DPUC contends that a cable operator is not automatically entitled to the higher of the two values produced by the two methods of determining the benchmark per channel rate. The DPUC believes that a franchising authority should not be bound by a cable operator's choice of methodology where the calculation of the benchmark rate under the Commission's formula is available, because the formula provides a more precise and consistent regulatory analysis for all cable companies in Connecticut. 8. A cable operator's benchmark per channel rate represents the rate that a comparable cable system that is subject to competition would charge. An operator derives its benchmark per channel rate by using either the benchmark tables in Attachment A to FCC Form 393, or the benchmark formula on page 33 of that form. The benchmark tables set forth various benchmark per channel rates, based upon the number of regulated channels and satellite-delivered signals for an operator's community unit, as well as the number of subscribers on an operator's system. If the appropriate benchmark for a particular operator falls between two numbers listed in the benchmark tables, then the operator may interpolate the appropriate benchmark per channel rate from the data in the benchmark tables. Alternatively, an operator may calculate its benchmark per channel rate by inserting its benchmark data (i.e., the number of regulated channels and satellite-delivered signals for the operator's community unit, and the number of subscribers on an operator's system) into the Commission's benchmark formula. 9. The instructions for completing Line 121 of FCC Form 393, which are found on page 11 of FCC Form 393, explain how an operator must interpolate its correct benchmark per channel rate if the appropriate benchmark for a particular operator falls between two numbers listed in the benchmark tables. These instructions go on to state, "[a]lternatively, you may apply the FCC's benchmark formula to calculate your benchmark rate." Furthermore, the "Instructions for Identifying the Appropriate Benchmark Rate from the Tables in Attachment A" on page 22 of FCC Form 393, state, "[i]f either the total number of channels on the regulated tiers or the total number of satellite channels on those regulated tiers for your community unit does not equal the channels displayed in the selected table, you may determine your benchmark rate per channel by using the Commission's formula, or you can perform one of the following [interpolation] calculations." We find that it is clear from these two separate sets of instructions that cable operators may determine their benchmark per channel rate by employing either the Commission's benchmark formula or by interpolating the correct benchmark rate from the benchmark tables in Attachment A to FCC Form 393. Cablevision followed the instructions on the Commission's Form 393 when it chose to interpolate its benchmark per channel rate from the benchmark tables. The DPUC's insistence that Cablevision use the Commission's benchmark formula to calculate its benchmark rate is contrary to the Commission's instructions on FCC Form 393, which provide the operator, not the regulator, with the option of calculating its benchmark rate by using either the benchmark formula or the benchmark tables. Accordingly, we find that the DPUC's decision to substitute its calculation of Cablevision's benchmark rate using the Commission's formula for Cablevision's calculation of its benchmark rate, which Cablevision derived by interpolation from the benchmark tables, was unreasonable. In order to comply with the requirements of FCC Form 393, the DPUC must recalculate Cablevision's maximum permitted rate for the basic service tier using the value of $0.636 as Cablevision's benchmark per channel rate on Line 121 of FCC Form 393, and modify its Local Rate Order accordingly. IV. Ordering Clauses 10. Accordingly, IT IS ORDERED that the Appeal filed by Cablevision Systems of Southern Connecticut, Limited Partnership is REMANDED to the Connecticut Department of Public Utility Control for resolution in accordance with the terms of this Order. 11. IT IS FURTHER ORDERED that, in light of the resolution of its Appeal herein, the Request for Stay filed by Cablevision Systems of Southern Connecticut, Limited Partnership IS DISMISSED as moot. 12. This action is taken by the Chief, Cable Services Bureau, pursuant to authority delegated by Section 0.321 of the Commission's rules. 47 C.F.R. 0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau