FOR RECORD ONLY $//Appeal ORDER, in Lower Merion, PA, DA 95-159//$ $/76.986 A La Carte Offerings/$ $/76.944 Commission Review of Franchising Authority Decisions/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-159 In the Matter of: ) ) COMCAST CABLEVISION OF ) LOWER MERION, INC. ) ) Appeal of Local ) Rate Order of the Township ) of Lower Merion, PA ) ORDER Adopted: February 6, 1995 Released: February 7, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On September 2, 1994, Comcast Cablevision of Lower Merion, Inc. ("Comcast"), filed with the Commission a Petition for Review of Rate Order of the supplemental local rate order adopted by the Township of Lower Merion, Pennsylvania (the "Township"). In its supplemental local order, the Township established Comcast's rates for basic cable service, equipment, installations and hourly service charges. As part of this decision setting the basic tier rates, the Township found Comcast'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 supplemental local order. The Township ordered Comcast to make refunds to subscribers for all payments made in excess of the rates set forth in the supplemental local order for the period September 1, 1993 through July 14, 1994. 2. In its Petition, Comcast challenges the Township's characterization in the supplemental local order of Comcast's a la carte package as a regulated tier. Comcast argues that the package complies with the Commission's rules and interpretative guidelines regarding a la carte channels. Specifically, Comcast asserts that (1) the package price is less than the sum of its individual components; (2) the individual a la carte channels are offered to subscribers at a rate lower than the package rate; and (3) the package offers subscribers a meaningful choice. Comcast further argues that, contrary to the Township's findings, the package conforms to a majority of the interpretative guidelines adopted in the Second Reconsideration Order. The Township responds that it properly applied the Commission's guidelines on a la carte packages and concluded that the four Value Pak channels should be treated as rate regulated. 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 the Commission 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 4. Comcast objects to Ordering Clause No. 1 of the supplemental local order, where the Township finds that maximum initial permitted rates for basic services shall be calculated by treating Comcast's a la carte package, consisting of American Movie Classics, Turner Network Television, WTBS and WWOR, as a rate regulated offering. Comcast argues that its a la carte package conforms with Commission rules for unregulated treatment of a la carte packages. 5. The Comcast a la carte services at issue were first offered to subscribers on September 1, 1993, when Comcast restructured the service offerings on its Lower Merion system. Comcast states that its September 1, 1993 restructuring involved moving a total of four channels from regulated tiers (two from its basic tier and two from its cable programming service tier) and offering the four channels both on an individual basis and as a package that Comcast alleges is not subject to rate regulation. 6. The facts presented in this appeal closely resemble the facts presented in two of our recently issued letter of inquiry orders on a la carte packages, Comcast Cablevision, City of Tallahassee, Florida, LOI 93-2, DA 94-1275 (Cab. Serv. Bur., released Nov. 18, 1994) and Comcast Cablevision, Howard County, Maryland, LOI 93-3, DA 94-1423 (Cab. Serv. Bur., released Dec. 12, 1994), in which we resolved the regulatory status of la carte packages offered by Comcast on its Tallahassee and Howard County systems that are essentially the same as the a la carte package at issue in this appeal. Specifically, the Comcast a la carte packages at issue in the above orders were four channel packages that were offered as part of a restructuring that also involved the consolidation of two cable programming services tiers into one. In the Comcast Cablevision cases, we found we could not say that it was clear that the a la carte packages at issue were not permissible non-rate regulated offerings 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 packages to regulated tiers. Instead, we found that the a la carte packages at issue may be treated as new product tiers 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 Township's determination that Comcast's a la carte package on its Lower Merion system is a regulated tier is inconsistent with the action taken in the letter of inquiry orders, and in particular, in the Comcast Cablevision cases. We further find that, in accordance with the Comcast Cablevision cases, Comcast's a la carte package should not be treated as a rate regulated tier of service. Accordingly, we are remanding this issue to the Township so that it can enter an order consistent with our findings in the Comcast Cablevision cases. III. ORDERING CLAUSES 8. Accordingly, IT IS ORDERED that the Petition of the supplemental local order, with respect to the issue of the regulatory status of Comcast's a la carte package, is REMANDED to the Township for resolution in accordance with the terms of this Order. 9. 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