FOR FCC RECORD ONLY
$/Appeal ORDER of Local Order of Gaffney,SC, DA 95-266/$
$/76.923 Rates for basic service tier/$
$/76.923 Rates for equipment and installation/$
$/76.944 Commission review of franchising authority decisions/$

                               Before the
                    FEDERAL COMMUNICATIONS COMMISSION
                         Washington, D.C. 20554

In the Matter of:                    )          DA 95-266
                                     )
MASADA CABLE PARTNERS II, L.P.       )
                                     )
                                     )
Appeal of Local                      )
Rate Order of City of                )
Gaffney, South Carolina              )

                                   ORDER

Adopted: February 16, 1995           Released: February 21, 1995

By the Chief, Cable Services Bureau:

I.   BACKGROUND

     1.   Masada Cable Partners II, L.P. ("Masada"), the franchisee in the above matter,
filed with the Commission on July 18, 1994 an Appeal of [a] Local Rate Order adopted by its
franchising authority, the City of Gaffney, South Carolina (the "City"), on June 16, 1994. 
The local rate order establishes a new regulated rate schedule for Masada's basic service tier
rates and associated equipment and installations.  The order requires Masada to implement
certain rate reductions and to issue refunds to subscribers, dating back to September 1, 1993.

     2.   On November 15, 1993, the City of Gaffney filed for certification with the
Commission to regulate rates for cable television service and adopted regulations in
accordance with the Commission's rules.  Masada filed its original Form 393 with the City
on December 10, 1993, within the 30-day time limit prescribed by the Commission's rules. 
Subsequently, upon its own initiative, Masada filed a revised version of its Form 393 with the
City on January 11, 1994.  Along with this second filing, Masada included a "Statement From
Director of Operations," a nine-page document that appears to be an explanation of the
general theory underlying Form 393 and of Masada's completion of the form.  On January 17,
1994, the City notified Masada that it was releasing an order tolling the deadline for issuing
its rate decision and extending its review period, as allowed under the Commission's rules. 
On June 16, 1994, the City issued its rate order, setting Masada's rates for basic tier service
and associated equipment and installations, based upon the data contained in Masada's original
Form 393 filing.  In issuing its order, the City rejected the information in Masada's revised
Form 393 as both untimely and defective.

     3.   In its appeal, Masada challenges the City's rejection of the revised Form 393,
and disputes the rates that the City approved for Masada's regulated services.  According to
Masada, these rates were based on incomplete and inaccurate data contained in its original
Form 393.  As a basis for its appeal, Masada asserts that the City had a duty to consider and
review Masada's revised Form 393 and that the revised filing should not have been barred
from review due to untimeliness.  Masada also disputes the City's determination that the
revised Form 393 was defective.  Specifically, Masada challenges the City's determination
with regard to the following issues: (1) that Masada attempted in its revised Form 393 to
justify programming rates that were in effect prior to the initial date of regulation; (2) that
Masada did not use the correct number of subscribers in Line 103 of Worksheet 1 and Line
203 of Worksheet 2 on the revised Form 393; and (3) that Masada used an incorrect inflation
factor as derived by Lines 122-127 of Worksheet 1 in the revised Form 393.  Masada asserts
that its revised Form 393 should have been considered by the City in rendering its rate order,
and that the rates derived by the revised form should have been the rates adopted by the City
as Masada's reasonable rates for service.

     4.   In response, the City claims that it was under no legal obligation to consider
any revised filings from Masada and, consequently, was justified in basing its rate
determination on Masada's original Form 393, which was filed within the requisite time
period, as provided for under the Commission's rules.  The City claims that because Masada
filed the original Form 393 in a timely fashion, Masada had the responsibility to explain to
the City why this filing was no longer accurate and should be superseded by the revised
filing.  Because Masada did not do so, the City adopted the rates derived by the original Form
393 and claims that those rates are reasonable.  In the alternative, the City also argues that the
revised Form 393 was defective.  The City asserts that the revised Form 393 contained
inaccurate data and therefore could not be relied upon to establish Masada's reasonable rates
for service.

II.  DISCUSSION

     5.   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.  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.

     6.   In this case, the City reviewed Masada's second, albeit unsolicited, filing, and
rejected it on two alternative bases.  First, the City determined that the revised filing was not
submitted to the City within the 30-day deadline required under the Commission's rules for
the filing of rate justifications and, therefore, the City had no obligation to consider the
revised filing.  Second, the City found that the revised form was defective in several respects
and, therefore, did not merit consideration.  We find that the City's actions were reasonable. 

     A. Rejection of Masada's Revised Form 393 As Untimely

     7.   In this proceeding, we must determine whether the City's rejection of Masada's
revised Form 393 as untimely was reasonable.  If a franchising authority elects to toll the
deadline for review of a cable operator's rate filing, as the City did here, we have stated that
the solicitation and collection of additional information during the review period will be at the
franchising authority's discretion.  However, our rules also provide that, where the
franchising authority is unable to rule on the reasonableness of the proposed rate, the tolling
order should provide the cable operator an opportunity to cure any deficiencies in its original
filing.  Under such circumstances, a local franchising authority should accept for review
amended or supplemental filings to an original Form 393 if an operator submits the new
information within a reasonable period of time and presents an adequate explanation or
justification for its necessity.  

     8.   A cable operator bears the burden of justifying its rates as reflected in FCC
Form 393.  Therefore, Masada had the responsibility to explain and to justify the information
contained in its original FCC Form 393 and any subsequent modifications to the original
filing.  When Masada refiled, it did not attempt to explain why its modifications were
necessary or why they had not been included in the previous filing.  Even though Masada had
ample opportunity to ensure that the City was aware of the rationale behind its revised
submission, Masada chose not to offer any explanation for the modifications it made. 
Although Masada did include a "Statement from its Director of Operations" with its revised
filing, this statement attempted to explain in the abstract the general theory of the Form 393;
it did not explain any of the specific changes that Masada made in the revised filing.  This
statement did not constitute an adequate explanation or justification so as to compel the City
to consider Masada's revised filing.  Therefore, it was reasonable for the City not to consider
Masada's revised FCC Form 393.

     B. The City's Finding Regarding Masada's Revised Programming Rates

     9.   We also agree with the City that Masada's revised Form 393 was defective in
several key substantive respects.  The first of these substantive flaws involves the
programming rate Masada used in its revised filing.  Masada's revised Form 393 did not
reflect Masada's then current programming rates on Line 101 of Worksheet 1 or on the Part I
Cover Sheet as the instructions to the form require.  Instead, Masada attempted to justify
programming rates that were in effect prior to the initial date of regulation.  Worksheet 1 of
Form 393 clearly asks for the rates in effect on the initial date of regulation.  Form 393 is
not used to justify rates offered to subscribers prior to the initial date of regulation.  The
Commission's rules and the instructions to Form 393 do not ask a cable operator to justify
such rates nor does Form 393 contemplate their use in deriving an operator's reasonable
permitted rates.  There was thus no reason for the City to consider Masada's revised FCC
Form 393 which attempted to justify rates charged at a date prior to the initial date of
regulation.

     C. The City's Finding Regarding Masada's Revised Bulk Subscriber Count

     10.  We also find reasonable the City's finding that Masada's revised subscriber
count information was defective.  Masada claims that it counted its bulk subscribers as full
subscribers on Lines 103 and 203 of its original Form 393, rather than as Equivalent Billing
Units ("EBUs").  Masada claims in its filings in this record that its revised Form 393
corrects this error and that the effect is a lower overall subscriber count, but a higher
maximum permitted rate for the basic service tier.  However, Masada made no attempt at the
time it made its revised filing to explain to the City the difference between the new subscriber
numbers listed in the revised Form 393 and the subscriber numbers listed in its original Form
393.  Furthermore, Masada did not explain the derivation or the source of these new
subscriber numbers.  Finally, the guidance made available by the Commission in a Public
Notice regarding the treatment of EBUs was available to Masada long before Masada filed its
original Form 393.  In fact, this Public Notice was released by the Commission in July of
1993, five months before Masada filed its original Form 393.  The City was under no
obligation to accept the new numbers presented in Masada's revised filing without any type of
explanation or justification of these numbers from Masada.  Masada was ultimately
responsible for the treatment and inclusion of EBUs in its original filing.  Although Masada
defined the term "EBUs" in its "Statement from Director of Operations" filed along with its
revised Form 393, it did not indicate that this definition was the reason for its new subscriber
numbers to the City.  Without an adequate explanation for why the subscriber numbers were
different in the revised Form 393 from the numbers in the original Form 393, the City was
justified in relying upon Masada's original filing.

     D. The City's Finding Regarding Masada's Revised Inflation Adjustment

     11.  In its rate order, the City held that in the revised Form 393 Masada used an
incorrect number of months in determining the adjustment time period (Line 124) and the
GNP-PI time period (Line 125), and that Masada used the incorrect inflation factor in Line
123.  Masada claims that the data used to calculate the inflation factor in the revised Form
393 is correct and should have been accepted by the City.  We agree with the City. 

     12.  With respect to the adjustment time period and the GNP-PI time period
calculations, in its revised filing Masada changed the information on Lines 122 to 125 to
conform to the date of Masada's revised filing, rather than the date of the original filing. 
This is not permissible under our rules.  An operator may only account for inflation up until
the operator's original Form 393 filing date.  Even if a franchising authority allowed a cable
operator to submit a revised Form 393 to correct errors in an original submission, the operator
is still required to use inflation data from the period corresponding to the original filing date,
not the filing date of the revised form.  A cable operator is not allowed to continuously
recalculate the inflation adjustment over longer time periods in revised Form 393 filings and
resubmit those new calculations during the franchising authority's review period.  Thus, the
City correctly held that Masada's revised Form 393 utilized the incorrect inflation adjustment
and GNP-PI time periods on Lines 124 and 125.

     13.  With respect to the calculation of the inflation factor on Line 123, Masada
claims that it could reasonably rely upon the third quarter 1992 GNP-PI inflation estimate as
printed on Line 123 of Worksheet 1 of Form 393 (121.8), and that it was not required to
adjust this figure to reflect updates or revisions made to that estimate by the Department of
Commerce subsequent to the printing of Form 393.  Generally, an operator should use for
inflation adjustment calculations the most recent, publicly available data applicable to the
period in which the operator must file its Form 393.  In a Public Notice released on
November 10, 1993, the Commission clarified that the correct figure to be used in the Line
123 calculation for the third quarter 1992 GNP-PI figure is 122.5, not 121.8.  Masada had
ample opportunity to account for this change in both its original filing and its revised filing
given that Masada made its original filing one month after the Public Notice release date and
made its revised filing two months after that date. 

     14.  Moreover, we are unpersuaded by Masada's argument that use of the estimate
is justified by the Commission's statement that "[r]ates set in accordance with then-current
inflation and other data will not be deemed unreasonable solely on account of subsequent
changes in that data."  This statement is not determinative in Masada's situation because
Masada was not uniform in its use on Lines 122-127 of "then-current" data (i.e., data
available when Masada made its original filing) and "updated" data (i.e., data available when
Masada made its revised filing).  Specifically, while Masada relied on the pre-September 1993
GNP-PI estimate of 121.8 on Line 123 (which would be the "then-current" data), Masada used
updated data (125.6) on Line 122.  Masada is not permitted to rely partially upon then-current
data and partially upon updated data.  In computing its inflation adjustment factor, Masada
either must use then-current data on each of Lines 122-127, or it must use updated data for
each line; it cannot use a combination of both.  Accordingly, it was reasonable for the City to
find Masada's inflation calculations to be defective.

     15.   For all these reasons, we will defer to the franchising authority's decision to
rely on the information provided in Masada's original Form 393.  The City's adoption of rates
derived from Masada's original filing was a reasonable decision based on the best information
available and does not constitute grounds for reversal.  Because Masada bears the burden of
proving the reasonableness of its rates, the City was under no legal obligation to consider
Masada's revised Form 393 without an adequate explanation or justification from Masada,
requiring the City to accept it for review.  However, in this case, the City did review
Masada's second filing and made a reasonable finding that it was defective.  Therefore, by
this order, we will uphold the City's rate order and deny Masada's appeal.
     
III. ORDERING CLAUSES

     16.  Accordingly, IT IS ORDERED that the appeal filed by Masada Cable Partners
II, L.P. with regard to a local rate order adopted by the City of Gaffney, South Carolina IS
DENIED.  The City of Gaffney's rate order should be implemented by Masada without
modification and within the time period specified by the terms of the rate order.

     17.  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