FOR RECORD ONLY $// Appeal ORDER in Town of Gilford, NH, DA 95-148//$ $/76.922 Rates for the basic service tier/$ $/76.942 Refunds/$ $/76.944 Commission Review of Franchising Authority Decision/$ $/76.950 Complaints regarding CPS rates/$ $/76.951 Standard complaint form/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-148 In the Matter of: ) ) COMMUNITY TV CORPORATION ) ) Appeal of Local Rate Order ) of the Town of Gilford, NH ) ) 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 August 17, 1994 an appeal of the local rate order adopted on July 18, 1994 by its local franchising authority, the Town of Gilford, New Hampshire ("Gilford"). The rate order established a new regulated rate schedule for Community's basic service tier rates as well as for its cable programming service tier rates and for associated equipment. Gilford's rate order requires Community to implement certain rate reductions and to issue refunds to subscribers, dating back to September 1, 1993. 2. In its appeal, Community argues that Gilford does not have the authority to regulate Community's cable programming service tier rates and that Gilford improperly calculated Community's refund liability by neglecting to reduce that liability, which was due to Community's overcharges for basic service, additional outlet charges, and remote control rentals, by the amount of Community's undercharges for addressable converters. 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. Regulation of Cable Programming Services 4. Regulation of cable rates is conducted by either the Commission or by the state and local authorities depending on the tier of service involved. The basic service tier is the tier of service which includes, at a minimum, the local broadcast channels along with any public, education, and governmental channels. There can only be one basic service tier offered to a subscriber, but there can be more than one cable programming service tier. Cable programming service tiers are tiers of service which include all video programming distributed over the system that is not on the basic service tier and that is not offered on a per channel or per programming basis. The basic service tier and associated equipment are subject to regulation by the local franchising authority, upon certification by the Commission. Regulation of cable programming service tiers is conducted by the Commission. 5. After reviewing Community's Form 393, Gilford established a schedule of rates for both the basic service tier and the cable programming service tier, and ordered corresponding refunds. In an August 8, 1994 letter to Community, Gilford characterized the jurisdictional distinction between basic and cable programming service tiers as a "technical procedure" and warned that by refusing to refund cable programming charges Community would be categorized as "nonresponsive and oblivious to the public it serves." Gilford further instructed Community that, if it did not comply with that portion of the rate order dealing with the cable programming service tier, Community should comply with the remainder of the rate order and provide its basis for failing to comply completely. 6. Although the Commission will uphold the decisions of franchising authorities if there is a reasonable basis for doing so, the Commission also must enforce the regulatory framework we have adopted pursuant to the 1992 Cable Act. As a local franchising authority, Gilford does not have authority to regulate Community's cable programming service tier rates or order refunds for its cable programming service tier. If Gilford believed that Community had exceeded its maximum permitted rate for cable programming service, its proper course of action was to have filed a FCC Form 329 rate complaint with the Commission. Gilford overstepped the bounds of its authority when it prescribed rates for Community's cable programming service tier and should have limited its decision to rates for the basic service tier and associated equipment. Therefore, we are remanding this issue to Gilford with instructions to enter a ruling consistent with these findings. B. Calculation of Refunds 7. Community also appealed Gilford's rate order on the ground that Gilford did not offset against its maximum permitted basic service rates the charges it levies for addressable converters, which were below permitted levels. During the period under review, Community provided its subscribers with addressable converters free of charge. After determining the 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. Refund liability may be imposed when an operator's actual charges exceed maximum permitted levels during the applicable period of review. An operator's refund liability is calculated by comparing the aggregate revenues generated by its actual rates with the aggregate revenues that would have been generated by its permitted rates during the 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. Any refunds to be paid by Community should be calculated based on this method. 8. 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. For instance, in this case, Gilford 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 period of review. We are remanding this case to Gilford so that it can enter a ruling consistent with these findings. III. Ordering Clauses 9. Accordingly, IT IS ORDERED that Community TV Corporations's appeal of the Town of Gilford's local rate order, regarding the issues of Community TV's cable programming service tier rates and permitted charges for converter boxes and related refunds is REMANDED to the local franchising authority for resolution in accordance with the terms of this Order. 10. 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