FOR RECORD ONLY
$// Appeal ORDER in Town of Alton, NH, DA 95-147//$
$/76.922 Rates for the basic service tier/$
$/76.942 Refunds/$
$/76.944 Commission Review of Franchising Authority Decision/$


                                Before the 
                    FEDERAL COMMUNICATIONS COMMISSION
                         Washington, D.C. 20554
                                             
                           DA 95-147    
In the Matter of:          )
                           )
Community TV Corporation   )
                           )
                           )  
                           )
Appeal of                  )  
Franchising Authority's Resolution           )
and Order Regulating Basic Cable             )
Rates in the Town of Alton, New Hampshire    )
 

                                   ORDER

Adopted:  February 3, 1995                   Released:  February 6, 1995   

By the Chief, Cable Services Bureau:

I.   INTRODUCTION

     1.   Community TV Corporation ("Community"), the franchisee in the above
matter, filed on November 30, 1994 a Petition For Review of Rate Order adopted on
October 31, 1994 by its local franchising authority, the Town of Alton, New Hampshire
("Alton").  The rate order establishes a new regulated rate schedule for Community's basic
service tier rates and associated equipment.  Specifically, Alton's rate order requires
Community to implement certain rate reductions and to issue refunds to subscribers for
overcharges dating back to September 1, 1993.

     2.   In its review of Community's Form 393, Alton found that Community
accurately calculated the maximum permitted rates set forth in its Form 393 and ordered
Community to provide refunds to subscribers for overcharges resulting from Community
charging actual rates in excess of the maximum permitted rates for certain services and
equipment.  Community argues that Alton's rate order ignores the Commission's instructions
for the calculation of refunds, which it asserts require that its overcharges be offset by its
undercharges.  Specifically, it asserts it should be allowed to offset its overcharges for basic
cable service with its undercharges for addressable converters.  Community provided its
subscribers addressable converters free of charge.  Community's maximum permitted rate for
converters is listed on its Form 393 as $1.15 per month, while its actual charge is listed as
$0.00 per month.  Community also appealed on the ground that Alton imposed refund
liability for a period longer than the one-year period permitted by 47 C.F.R.  76.942(b)
and (c)(1).  Alton did not file a response to either of Community's petitions.

     3.   Under our rules, rate orders made by local franchising authorities may be
appealed to the Commission.  In ruling on appeals of local rate orders, 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 its 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.

II.  DISCUSSION
          
     A.   Calculation of Refunds

     4.   FCC Form 393 is the official form used by regulators to determine whether an
operator's regulated rates for programming, equipment and installations were reasonable
during the time period from September 1, 1993 until May 14, 1994.  Form 393 is divided
into three separate, but interrelated parts.  In Part II, the operator calculates its maximum
permitted programming rates, while in Part III, the operator calculates its maximum
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 of
review.

     5.   The operator's maximum permitted rates are derived by completing Parts II
and III of the 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 ("current rate") 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.  If an
operator's current per-channel rate level is below the applicable benchmark rate, then the
operator's rate level is deemed reasonable, but it must remain at its current level.  If its
current per-channel rate exceeds the benchmark rate, the operator must then compare its
September 30, 1992 per-channel rate level to the applicable benchmark rate.  If its September
30, 1992 per-channel rate level is above the benchmark rate, it must reduce this rate to the
benchmark rate or by 10%, whichever reduction is less.  Maximum permitted rates for
equipment and installation are based on actual cost and are calculated in Part III of the Form
393.  In this proceeding, Alton found that the maximum permitted rates calculated by
Community in its Form 393 were "reasonable," but did not provide for the possibility of
offsetting Community's undercharges for addressable converters against its service and
equipment overcharges.

     6.   After determining the various maximum rates that an operator is permitted to
charge on a prospective basis, a franchising authority should then determine if the operator is
liable for any subscriber refunds.  A refund liability can be imposed when an operator's
actual charges exceed maximum permitted levels during the applicable period of review.  If
an operator's aggregate revenues computed from its actual rates exceed its revenues
computed from its permitted rates during the period of review, the operator must refund the
difference to subscribers.  If the operator's aggregate revenues computed from its permitted
rates exceed its aggregate revenues computed from its actual rates, the operator will not be
required to issue any refunds for that period of review.  In this proceeding, any refunds to be
paid by Community should be calculated based on this method.

     7.   While the Commission will sustain the decisions of franchising authorities if
there is a reasonable basis for doing so, we expect franchising authorities to adhere to the
mathematical principles underlying the benchmark methodology, particularly when
calculating an operator's refund liability.  In this case, Alton must offset or reduce any
refunds it may order by the difference between the actual equipment rates that Community
charged and the maximum permitted rates that it could have charged during the applicable
period of review.  According to Community's uncontested submission, Alton has directed
Community to issue refunds without regard to the fact that some rates are below maximum
permitted levels.  We are remanding this issue to Alton so that it can enter a ruling
consistent with these findings.

     B.   Refund Liability Period
     
     8.   Alton's rate order, issued on October 31, 1994, requires Community to issue
refunds from September 1, 1993 through May 14, 1994.  The effect of the rate order is to
impose refund liability for rates charged fourteen months prior to the issuance of the order.
Our rules, however, provide that an operator's liability for refunds is limited to a one-year
period, which generally runs from the date the operator implements a prospective rate
reduction back to no more than one year or to September 1, 1993, whichever period is
shorter.  If an operator fails to comply with and does not implement a rate order, our rules
provide that the one-year period will run back from the effective date of the rate order. 
The operator in such a case is also responsible for refund liability which accrues until the
operator complies with the rate order.   

     9.   Neither party has indicated the effective date of the rate order or whether
Community complied with the rate order and rate reduction.  However, Community could
not have complied with the rate order any earlier than October 31, 1994, the date the order
was issued, therefore, the effective date of the rate order could not be any earlier than
October 31, 1994.  Thus, under either circumstance, Community's refund liability would not
begin earlier than October 31, 1993.  We remand this portion of Community's Appeal to
Alton so that it can enter an order consistent with our rules. 

III. Ordering Clauses
     
     10.  Accordingly, IT IS ORDERED that Community TV Corporation's appeal of
The Town of Alton's local rate order, regarding the issue of Community's permitted charges
for equipment and related refunds is REMANDED to the local franchising authority for
resolution in accordance with the terms of this Order.  

     11.  IT IS FURTHER ORDERED that Community TV Corporation's appeal of
The Town of Alton's local rate order, regarding the issue of refund liability period approved
by the Town is REMANDED to the local franchising authority for resolution in accordance
with the terms of this Order.
     
     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