FOR FCC RECORD ONLY $/ORDER remanding local rate order of Villa Park, CA DA95-262/$ $/76.922 Basic Tier Rates/$ $/76.942 Refunds/$ $/76.944 Commission Review of Franchising Authority rate Decisions/$ $/76.986 A La Carte Offerings/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of: ) DA 95-262 ) ML MEDIA PARTNERS, L.P. ) TRADING AS MULTIVISION CABLE TV ) ) Appeal of Local ) Rate Order of City of ) Villa Park, California ) ORDER Adopted: February 16, 1995 Released: February 17, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On September 22, 1994, ML Media Partners, L.P., trading as Multivision Cable TV ("Multivision") filed with the Commission an Appeal From a Rate Order of the City of Villa Park, California ("Appeal"). In Resolution No. 94-2201, adopted August 23, 1994 (the "local order"), the City of Villa Park, California ("the City") established Multivision'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 that the channels contained in Multivision's "Super Cable" package must be included as regulated channels. Further, in reaching its decision, pursuant to the Commission's "benchmark" approach for reviewing cable rates, the City was required to consider the number of regulated satellite channels offered by Multivision. The City ordered Multivision to make refunds or to credit subscribers for all payments made in excess of the rates for basic service and equipment and installations set forth in the local order for the period September 1, 1993 through July 15, 1994. 2. In its appeal, Multivision challenges the local order on two grounds. First, Multivision argues that the City's decision to treat the channels in the a la carte package as regulated channels is contrary to the objectives of the 1992 Cable Act and the Commission's a la carte rules. Second, Multivision alleges that the City miscalculated the benchmark channel rate by using an incorrect satellite channel count for September 30, 1992. The City responds that it properly applied the Commission's guidelines on a la carte packages and concluded that the channels in Multivision's package should be treated as regulated channels and that it properly relied upon information supplied by Multivision in determining the number of satellite channels. 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. Multivision objects to the City's finding in the local order that the channels comprising Multivision's Super Cable a la carte package must be included as regulated channels. Multivision argues that its a la carte package complies with the Commission's a la carte rules in effect at the time the package was created and that the City's reliance upon the 15 interpretive guidelines announced by the Commission in March 1994 to determine the regulatory status of Multivision's a la carte channels constituted "retroactive rulemaking." 5. The Multivision Super Cable package at issue was first offered to subscribers on September 1, 1993, when Multivision restructured the service offerings on its Villa Park system. Multivision states that its September 1, 1993 restructuring involved eliminating its 24 channel cable programming service tier and offering five channels (two from its former cable programming service tier (The Discovery Channel and Turner Network Television), two from its basic service tier (WTBS and WGN), and one new channel (ESPN2)) on an individual basis and also as the Super Cable package that Multivision alleges is not subject to rate regulation. 6. The facts presented in this appeal are similar to the facts presented in two of our recently issued letter of inquiry orders on a la carte packages, Century Cable TV, Brunswick, Georgia, LOI-93-44, LOI-94-4, DA 94-1426 (Cab. Serv. Bur., released Dec. 12, 1994) and Falcon Cable TV, Port Orchard, Washington, LOI-93-50 DA 94-1548 (Cab. Serv. Bur., released Dec. 22, 1994), in which we resolved the regulatory status of a la carte packages similar to the a la carte package at issue in this appeal. Specifically, the a la carte packages at issue in the Century Cable TV and Falcon Cable TV orders were six channel packages that were offered as part of a restructuring that also involved the elimination of all cable programming services tiers, whereas Multivision's a la carte package at issue here is a five channel package offered as part of a restructuring that involved the elimination of Multivision's only cable programming service tier. In the Century Cable TV and Falcon Cable TV 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 operators to refund liability or to require the operators to restructure their 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, 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 Multivision'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 Century Cable TV and Falcon Cable TV. We further find that, in accordance with Century Cable TV and Falcon Cable TV, Multivision'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 Century Cable TV and Falcon Cable TV. B. SATELLITE CHANNEL COUNT 8. Multivision further argues that the City, pursuant to the Commission's benchmark approach for reviewing cable rates, miscalculated the number of satellite channels offered by Multivision on September 30, 1992 and reported on FCC Form 393. 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. 9. 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 is below the applicable benchmark rate, then the operator's rate 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 to the applicable benchmark rate. If its September 30, 1992 per- channel rate is above the benchmark rate, it must reduce this rate to the benchmark rate or by 10%, whichever reduction is less. The adjusted rate will be its maximum permitted rate for programming. 10. Multivision argues that the City miscalculated Multivision's September 30, 1992 per-channel rate by using an incorrect satellite channel count on Line 220 of Form 393. In particular, Multivision argues that the City incorrectly identified two channels as satellite- delivered services on September 30, 1992, when the programming carried on one channel was a locally produced service and the other channel carried a local off-air broadcast station. The City responds that its satellite channel count is reasonable because it is based upon information provided by Multivision and because the City's count was available to Multivision without any claim of protest or error since January, 1994. 11. 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. In this case, the City must properly count the number of satellite channels in order to establish Multivision's September 30, 1992 per-channel rate. In addition, because the City in its local order prescribes a rate different than the rate proposed by Multivision, the City must affirmatively demonstrate why Multivision's proposed rate is unreasonable. The City does not contend that its channel count was correct, nor has it offered any evidence that the two channels which Multivision contends were not satellite channels as of September 30, 1992, were in fact satellite channels. Accordingly, we conclude that the City's satellite channel count is unreasonable and we remand that portion of the local order to the City for further proceedings consistent with this ruling. III. ORDERING CLAUSES 12. Accordingly, IT IS ORDERED that the appeal of the local order, with respect to the issue of the regulatory status of Multivision's a la carte package, is REMANDED to the City for resolution in accordance with the terms of this Order. 13. IT IS FURTHER ORDERED that the appeal of the local order, with respect to the satellite channel count, is REMANDED to the City for resolution in accordance with the terms of this Order. 14. 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