FOR RECORD ONLY $//Appeal ORDER, in Springfield, IL, DA 95-155//$ $//76.986 A La Carte Offerings//$ $//76.944 Commission Review of Franchising Authority Decisions//$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-155 In the Matter of: ) ) TIMES MIRROR CABLE TELEVISION ) OF SPRINGFIELD, INC. ) ) Appeal of Local ) Rate Order of City of ) Springfield, Illinois ) ORDER Adopted: February 6, 1995 Released: February 7, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On August 18, 1994, Times Mirror Cable Television of Springfield, Inc. ("Times Mirror") filed with the Commission a Petition for Review of Rate Order ("Petition") of the local rate order ("local order") adopted by the City of Springfield, Illinois ("the City"). In its local order, the City established Times Mirror's rates for basic cable service, equipment, installations and hourly service charges. As part of this decision setting the basic tier rates, the City found Times Mirror's collective or package offering of certain individually offered ("a la carte") channels to be a regulated tier of service, and, therefore, included those channels as regulated channels for purposes of the local order. The City ordered Times Mirror to make refunds or to credit subscribers for all payments made in excess of the rates set forth in the local order for the period September 1, 1993 through July 13, 1994. 2. In its appeal, Times Mirror challenges the local order on two grounds. First, Times Mirror argues that the City's decision to treat the a la carte package as a regulated tier of service is contrary to the objectives of the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act") and the Commission's a la carte rules. Second, Times Mirror alleges that the City established a refund schedule that violates the Commission's procedural rules. The City responds that it properly applied the Commission's guidelines on a la carte packages and concluded that Times Mirror's package should be treated as a regulated tier, and that the procedural rules cited by Times Mirror do not pertain to rate orders issued by a franchising authority. 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. With respect to a determination made by a franchising authority on the regulatory status of an a la carte package as part of its final decision setting rates for the basic service tier, the Commission has stated that "the Commission will defer to the local authority's findings of fact if there is a reasonable basis for the local findings," and the Commission "will then apply FCC rules and precedent to those facts to determine the appropriate regulatory status of the [a la carte package] in question." II. DISCUSSION A. A LA CARTE 4. Times Mirror objects to Section 2(C) of the local order, where the City finds that Times Mirror's a la carte services (American Movie Classics, Turner Network Television, The Nashville Network and the Discovery Channel) "are in fact a regulated tier." Times Mirror argues that its a la carte package complies with the provisions of the 1992 Cable Act, which it contends encourage cable operators to unbundle programming services from regulated tiers and offer them on a per-channel basis. Times Mirror further argues that its a la carte package fully complies with Commission rules for unregulated treatment existing at the time the package was created. 5. The Times Mirror a la carte services at issue were first offered to subscribers on August 31, 1993, when Times Mirror restructured the service offerings on its Springfield system. Times Mirror states that its August 31, 1993 restructuring involved consolidating its two cable programming service tiers into one cable programming service tier and offering the four channels from one of the two former cable programming service tiers on an individual basis and also as a package that Times Mirror alleges is not subject to rate regulation. 6. The facts presented in this appeal closely resemble the facts presented in one of our letter of inquiry orders, Dimension Cable Services, Rancho Palos Verdes, California, LOI-93-37, DA 94-1309 (Cab. Serv. Bur. released Nov. 25, 1994), in which we resolved the regulatory status of an la carte package offered by Times Warner on its Rancho Palos Verdes system that is essentially the same as the a la carte package at issue in this appeal. Specifically, the Time Warner a la carte package at issue in the Dimension Cable Services order was a four channel package that was offered as part of a restructuring that also involved the consolidation of two cable programming services tiers into one. In the Dimension Cable Services case, we found we could not say that it was clear that the a la carte package at issue was not a permissible non-rate regulated offering under our rules. We further concluded that in light of the prior confusion over what constituted a permissible non- rate regulated a la carte offering, it would be inequitable to subject the operator to refund liability or to require the operator to restructure its tiers so as to return the channels offered in the a la carte package to regulated tiers. Instead, we found that, on a prospective basis, the a la carte package at issue may be treated as a new product tier under the Commission's Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, Sixth Order on Reconsideration and Fifth Report and Order, MM Docket Nos. 92-266 and 93-215, FCC 94-286 (released November 18, 1994) ("Going Forward Order"). 7. We find that the City's determination that Times Mirror's a la carte package is a regulated tier is inconsistent with the action taken in the letter of inquiry orders, and in particular, in Dimension Cable Services. We further find that, in accordance with Dimension Cable Services, Times Mirror's a la carte package should not be treated as a rate regulated tier of service. Accordingly, we are remanding this issue to the City so that it can enter an order consistent with our findings in Dimension Cable Services. B. Timing Of Compliance with Local Order 8. Additionally, Times Mirror objects to Section 7 of the local order in which the City orders reductions and subscriber refunds "within forty (40) days of the date of this ordinance." In its appeal, Times Mirror argues that the 40 day timetable mandated for compliance with the local order is insufficient and contrary to Commission rules. Times Mirror cites one of our public notices in arguing that a franchising authority must allow a cable operator at least thirty days' notice to its subscribers of a rate change and must take into consideration the amount of time necessary to prepare and send out notices and bills. Times Mirror states that the implementation schedule ordered by the City failed to take these considerations into account. Times Mirror also cites language from the Rate Order in which the Commission stated "cable operator[s] will be required to implement any reduction in rates or refunds within 60 days from the date the Commission releases an order finding the contested rate to be unreasonable and mandating a remedy" and that "[a]s to the mechanics of making refunds, . . . franchising authorities should follow the procedures which we are adopting for cable programming services." In its Opposition, the City responds that the implementation language cited by Times Mirror refers to compliance with rate orders that are issued by the Commission, not franchising authorities. 9. Our rules do not explicitly require franchising authorities to provide cable operators with 60 days to comply with local rate orders. The City correctly notes that the reference in the Rate Order to the 60 day timetable for compliance with rate orders is directed to rate orders issued by the Commission. In addition, the Rate Order language cited by Times Mirror, which states that franchising authorities should follow the refund procedures we established for cable programming services, does not require franchising authorities to provide cable operators with 60 days to comply with local rate orders. The refund procedures referenced in the Rate Order are those having to do with identification of subscribers for refund purposes and how that refund is paid (i.e., actual refund payment or one-time credit). The only Commission regulation relevant to the timing of compliance with local rate orders is Section 76.964(b) of our rules which provides that "cable systems shall give 30 days written notice to both subscribers and local franchising authorities before implementing any rate or service change." However, we also have stated in a Public Notice previously, and reiterate here that, in specifying an effective date [for its local order], a franchising authority should take into consideration the amount of time necessary to prepare and send out notices and bills reflecting a rate change, giving due regard to the impact of cycle billing, if applicable. The instruction to franchising authorities in the Public Notice is based on the same rationale we used in concluding that cable operators should have 60 days to implement a Commission order requiring refunds of cable programming service tier rates. In the Rate Order, we said a 60-day time period to implement remedial measures will better accommodate standard billing cycles than the 30-day period we proposed in the Notice, thus preventing undue burdens on operators --- without adversely affecting subscribers. Thus we find that, while a franchising authority may, in its discretion, specify a reasonable time period for compliance with its rate order, the time specified must be sufficient to allow preparation and distribution of notices and bills, and must accomodate the time demands of cycle billing. We found in the Rate Order that such a time period was at least 60 days. We have no reason to believe that implementation of a local order should be any less time- consuming than the implementation of our orders. 10. The City required Times Mirror to comply with the terms of the local order within 40 days of its effective date. Such a requirement, on its face, is not inconsistent with our requirement that cable systems give subscribers 30 days' notice of rate changes. However, it is inconsistent with the rationale we have used to support a 60-day period for implementation of our rate orders. The City does not provide us with any specifics in support of its decision to impose a different time period than the time period we have adopted to implement our rate decisions. We have no indication that the City gave the consideration necessary to ensure that the business demands of Times Mirror were accommodated. Accordingly, we remand this issue to the City to ensure that the implementation period of the local order does not unduly burden Times Mirror and is consistent with our findings herein. III. ORDERING CLAUSES 11. Accordingly, IT IS ORDERED that the appeal of the local order, with respect to the issue of the regulatory status of Times Mirror's a la carte package and the issue of a reasonable time period for compliance with City's local order, is REMANDED to the City 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