FOR RECORD ONLY $//MO&O, 34 Cable Operators, DA 95-252//$ $/76.1090 Temporary Freeze of Cable Rates/$ $/Letters of Inquiry/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-252 In the Matter of: ) ) C-TEC Cable Systems, et al. ) LOI-93-1; LOI-93-2; LOI-93-4; ) LOI-93-5; LOI-93-6; LOI-93-7; LOI-93-8; ) LOI-93-11; LOI-93-12; LOI-93-13; LOI-93-14; Letters of Inquiry ) LOI-93-15; LOI-93-16; LOI-93-17; LOI-93-18; ) LOI-93-19; LOI-93-21; LOI-93-22; LOI-93-23; ) LOI-93-24; LOI-93-25; LOI-93-26; LOI-93-27; ) LOI-93-28; LOI-93-29; LOI-94-2; LOI-94-3; ) LOI-94-4; LOI-94-6; LOI-94-7; LOI-94-8; ) LOI-94-9; LOI-94-10; LOI-94-11 MEMORANDUM OPINION AND ORDER Adopted: February 16, 1995 Released: February 17, 1995 By the Chief, Cable Services Bureau: I. Introduction 1. The Commission received letters and complaints from several cities and subscribers alleging that cable operators violated the Commission's temporary freeze of regulated cable service rates. In response to these letters and complaints, the Commission issued letters of inquiry to a number of cable operators. The LOI's asked the cable operators to provide information concerning, among other issues, their compliance with the Commission's Rate Freeze Order. II. Background 2. In the Rate Freeze Order, the Commission ordered that rates of cable services subject to regulation under the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act") be frozen as of April 5, 1993. The Rate Freeze Order sought to ensure that, pending implementation of cable service rate regulation, cable operators not continue to raise rates, "effectively undermining the statutory purpose of reasonable rates." The rate freeze afforded local franchising authorities an opportunity to become certified to regulate the basic service tier and allowed consumers to become familiar with and to exercise their rights to invoke Commission oversight of cable programming service tiers. The freeze was extended until May 15, 1994 in order to provide franchising authorities and other affected parties sufficient time to become familiar with pending modifications to the Commission's rate regulations before the freeze was lifted. 3. The Rate Freeze Order required that the average monthly subscriber bill for cable services subject to rate regulation under the 1992 Cable Act could not increase above the level determined under rates in effect on April 5, 1993. The freeze did not preclude cable operators from adding subscribers, programming offerings, equipment or other services as long as the average monthly subscriber bill was maintained during the freeze period. In addition, the freeze did not preclude cable operators from "increas[ing] the charge for a tier or provision of equipment as long as the average monthly subscriber bill [did] not increase" during the freeze period. The freeze thus permitted operators to make reasonable changes in the structures of their tiers of service in response to the Commission's rate regulations while still protecting consumers from overall rate increases. In particular, the freeze was "intended to permit changes in individual rate components while constraining increases in overall rate levels." III. Discussion 4. The letters of inquiry requested operators to complete a rate freeze computation form to determine whether the operator's average monthly subscriber bill for regulated cable services increased above the average monthly subscriber bill for regulated cable services determined under rates in effect on April 5, 1993. The rate freeze computation form requested information concerning operators' services and rates as of April 5, 1993 and for the first full monthly billing cycle after they made changes in rates or restructured their rates. 5. With the exception of C-TEC Cable Systems ("C-TEC") and Century Southwest Cable TV ("Century Southwest"), based upon our review of the responses to our letters of inquiry and the rate freeze computation forms of the operators listed in the attached Appendix, we cannot conclude that violations of the Rate Freeze Order occurred. In particular, the evidence presented in the cable operators' responses to our letters of inquiry and in the rate freeze computation forms does not permit us to conclude that the average monthly subscriber bill for regulated cable services for any of these operators increased above the average monthly subscriber bill for regulated cable services determined under rates in effect on April 5, 1993. In this regard it should be noted that while operators may have increased prices for some regulated cable services and equipment, such increases do not violate the rate freeze as long as the average monthly subscriber bill for regulated cable services did not increase above the average monthly subscriber bill for regulated cable services in effect on April 5, 1993. 6. Based upon our review of the responses to our letters of inquiry and rate freeze computation forms submitted by C-TEC and Century Southwest, it appears that C-TEC and Century Southwest may have been in violation of the rate freeze from the date they restructured their service offerings, September 1, 1993, until either May 15, 1994 or the date on which their basic service tiers became subject to regulation, whichever is earlier. In particular, the rate freeze computation forms show that for C-TEC's Zeeland Charter Township systems and Century Southwest's Beverly Hills system, the average monthly subscriber bill for regulated cable services as of the first full monthly billing cycle after changes in rates or restructuring occurred increased above the average monthly subscriber bill for regulated cable services determined under rates in effect on April 5, 1993. In calculating the average monthly subscriber bill as of the first full monthly billing cycle after restructuring occurred, we included revenues from C-TEC's and Century Southwest's collective or package offerings of certain individually offered ("a la carte") channels. These a la carte packges were the subject of our orders in C-TEC Cable Systems, McBain and Zeeland Charter Township, Michigan, LOI-93-1, DA 94-1622 (Cab. Serv. Bur., released Dec. 30, 1994) and Century Southwest Cable TV, Beverly Hills and Los Angeles, California, LOI-93-17, DA 94-1553 (Cab. Serv. Bur., released Dec. 22, 1993). In those orders, we found that a la carte package offerings of both C-TEC and Century Southwest must be treated as rate regulated as of September 1, 1993. 7. When the revenues from C-TEC's and Century Southwest's a la carte offerings are included in the calculation of revenues from regulated service offerings, C-TEC's rate freeze computation form shows that on its Zeeland Charter Township systems, the average monthly subscriber bill for regulated services as of April 5, 1993 was $21.98 and the average monthly subscriber bill for regulated services as of October 31, 1993 was $22.84, and Century Southwest's rate freeze computation form shows that on its Beverly Hills system, the average monthly subscriber bill for regulated services as of April 5, 1993 was $33.85 and the average monthly subscriber bill for regulated services as of October 31, 1993 was $35.02. 8. As indicated above, the evidence with respect to C-TEC and Century Southwest shows a violation of the rate freeze when revenues from their a la carte packages are included in the computation of revenues from rate-regulated service offerings. In our previous letter of inquiry orders we required C-TEC and Century Southwest to count as rate- regulated channels the channels comprising their a la carte packages going back to September 1, 1993. Therefore, these operators are subject to such refund liability as may be required to comply with the rate re-calculations reflecting the rate-regulated status of these packages required by of our previous letter of inquiry orders. Thus, C-TEC and Century Southwest's incorrect exclusion of the a la carte channels from the package of services subject to regulation referenced in the previous letter of inquiry orders and our present conclusion regarding the rate freeze violation relate to essentially the same legal controversy and conduct. Accordingly, we conclude that no further action, beyond that specified in our previous orders in C-TEC Cable Systems and Century Southwest Cable TV is warranted at this time. IV. Ordering Clauses 9. Accordingly, IT IS ORDERED, that the Commission's letters of inquiry with respect to allegations of rate freeze violations invoving C-TEC Cable Systems, McBain and Zeeland Charter Township, Michigan and Century Southwest Cable TV, Beverely Hills and Los Angeles, California are terminated subject to compliance by the systems' operators with our previous orders in C-TEC Cable Systems, McBain and Zeeland Charter Township, Michigan, LOI-93-1, DA 94-1622 (Cab. Serv. Bur., released Dec. 30, 1993) and Century Southwest Cable TV, Beverely Hills and Los Angeles, California, LOI-93-17, DA 94-1553 (Cab. Serv. Bur., released Dec. 22, 1994). 10. IT IS FURTHER ORDERED that the Commission's letters of inquiry with respect to the other allegations of rate freeze violation listed in the attached Appendix are terminated. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau APPENDIX C-TEC Cable Systems, McBain and Zeeland Charter Township, Michigan, LOI-93-1 (November 17, 1993) Comcast Cablevision, City of Tallahassee, Florida, LOI-93-2 (November 17, 1993) MetroVision, Prince George's County, Maryland, LOI-93-4 (November 17, 1993) Triax Cablevision, LOI-93-5 (November 17, 1993) Cable Satellite of South Miami, Dade County, Florida, LOI-93-6 (November 17, 1993) Meredith Cable, North Suburbs, Minnesota, LOI-93-7 (November 17, 1993) Crown Cable, Walnut, California, LOI-93-8 (November 17, 1993) Cablevision of Raleigh, Raleigh, North Carolina, LOI-93-11 (November 17, 1993) Cablevision of Boston, LOI-93-12 (November 17, 1993) US Cable, City of Lake Forest and Village of Lake Bluff, Illinois, LOI-93-13 (November 17, 1993) Warner Cable Communications, Milwaukee, Wisconsin, LOI-93-14 (November 17, 1993) MultiVision Cable TV, Prince George's County, Maryland, LOI-93-15 (November 17, 1993) Time Warner Cable, Everett, Winthrop, and Somerville, Massachusetts, LOI-93-16 (December 13, 1993) Century Southwest Cable TV, Beverly Hills and Los Angeles, California LOI-93-17 (December 13, 1993) Century Cable TV, Muncie, Indiana, LOI-93-18 (December 13, 1993) Comcast Cablevision, Mt. Clemens, Michigan, LOI-93-19 (December 13, 1993) United Artists Cable, Baltimore, Maryland, LOI-93-21 (December 13, 1993) Meredith Cable, North Central, Minnesota, LOI-93-22 (December 13, 1993) Nashoba Cable Services, Danvers, Massachusetts, LOI-93-23 (December 13, 1993) Vision Cable of North Carolina, Charlotte, North Carolina, LOI-93-24 (December 13, 1993) Paragon Cable, Irving, Texas, LOI-93-25 (December 13, 1993) CableVision of Central Florida, LOI-93-26 (December 13, 1993) St. Louis Tele-Communications, St. Louis, Missouri, LOI-93-27 (December 13, 1993) TCI Cablevision of Eastern Shore, Ocean City, Maryland, LOI-93-28 (December 13, 1993) Cablevision, Bedford Heights, Ohio, LOI-93-29 (December 13, 1993) Falcon Cable TV, Southern Shores, North Carolina, LOI-94-2 (February 22, 1994) Lexander Cablevision, Whigham, Georgia, LOI-94-3 (February 22, 1994) Century Cable TV, Brunswick, Georgia, LOI-94-4 (February 22, 1994) Cablevision of Raleigh, Hillsborough, North Carolina, LOI-94-6 (February 22, 1994) Cablevision Industries, Wake Forest, North Carolina, LOI-94-7 (February 22, 1994) Cablevision of Raleigh, Knightdale, North Carolina, LOI-94-8 (February 22, 1994) Cablevision Industries, Smithfield, North Carolina, LOI-94-9 (February 22, 1994) Cablevision Industries, Morrisville and Hillsborough, North Carolina, LOI-94-10 (February 22, 1994) Comcast Cablevision, Sterling Heights, Michigan, LOI-94-11 (February 22, 1994)