FOR FCC RECORD ONLY $//ORDER Remanding Appeal in Long Beach, CA, DA 95-370//$ $//76.986 A La Carte Offerings//$ $//76.944 Commission Review of Franchising Authority Decisions//$ $/76.922 Rates for the basic service tier/$ $/76.923 Rates for equipment and installation/$ $/1.45(d)Request for Stay/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of: ) ) DA 95-370 LONG BEACH ACQUISITION ) CORP., d/b/a CABLEVISION ) INDUSTRIES ) ) Appeal of Local Rate ) Order of the City of ) Long Beach, California ) ORDER Adopted: February 27, 1995 Released: February 28, 1995 By the Chief, Cable Services Bureau: I. Introduction 1. On August 31, 1994, Cablevision Industries ("CVI") filed an Appeal and an Ex Parte Petition for Stay of Enforcement pending Commission review of the local rate order, adopted on August 16, 1994 by the City of Long Beach, California ("the City") and pending resolution of a Letter of Inquiry ("LOI") issued by the Commission to CVI, regarding its a la carte package offerings in Long Beach. CVI's Petition for Stay of the local order was granted pending the resolution of this appeal. The local rate order establishes a new schedule of basic service and equipment rates and directs CVI to issue refunds to subscribers for all payments made in excess of the rates set forth in the local order for the period September 1, 1993 through July 14, 1994. As part of its decision setting basic tier rates, the City found CVI'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. 2. 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." 3. CVI objects to the City's decision that maximum initial permitted rates for basic services shall be calculated by treating CVI's a la carte package ("Expanded Program Package"), consisting of American Movie Classics, Cable New Network, Turner Network Television, The Discovery Channel and The Nashville Network, as a rate regulated offering. CVI argues that its a la carte package conforms with Commission rules for unregulated treatment of a la carte packages. CVI also objects to the City's manual recomputation of CVI's rates on Form 393. We address each issue in turn. II. DISCUSSION A. CVI's A La Carte Offerings 3. CVI objects to the City's finding that the channels comprising its Expanded Program Package must be included as regulated channels. CVI 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, and that the package complies with the Commission's a la carte rules in effect at the time the package was created. CVI further argues that the City's reliance upon the 15 interpretive guidelines announced by the Commission in March, 1994 to determine the regulatory status of CVI's a la carte channels constituted "retroactive rulemaking." The City responds that it properly applied the Commission's guidelines on a la carte packages and concluded that the channels in CVI's package should be treated as regulated channels. 4. The CVI a la carte package at issue was first offered to subscribers on September 1, 1993, when CVI restructured the service offerings on its system that serves the City. CVI states that its September 1, 1993 restructuring involved offering five channels that previously had been offered on its former cable programming service tier on an individual basis and also as a package that CVI alleges is not subject to rate regulation. 5. The issue raised by CVI's appeal already has been resolved in one of our letter of inquiry orders, Cablevision Industries, Long Beach, California, LOI-93-40, DA 94-1424 (Cab. Serv. Bur., released Dec. 12, 1994) ("Cablevision Industries"). In Cablevision Industries, we found we could not say that it was clear that the Expanded Program Package offered by CVI its system which serves Long Beach, California 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 CVI to refund liability or to require CVI 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 Expanded Program Package 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, Fifth Report and Order, MM Docket Nos. 92-266 and 93-215, FCC 94-286 (released November 18, 1994) ("Going Forward Order"). 6. We find that the City's determination in its rate order that the channels comprising CVI's a la carte package must be included as regulated channels is inconsistent with the action taken in Cablevision Industries. We further find that, in accordance with Cablevision Industries, CVI's a la carte package should not be treated as a rate-regulated tier of service. Accordingly, CVI's appeal is granted on this issue and we remand the decision to the City for further proceedings consistent with this ruling. B. Manual Recomputation of CVI's Rates 7. CVI also contends that the City erred by manually recomputing its rates on Form 393 instead of relying on the Commission's computer spreadsheet version of Form 393 which is how CVI calculated its rates. CVI claims that the computer version of Form 393 resulted in rates that differed by one cent for each tier/package of service. In its opposition, the City states that CVI submitted a certified copy of the spreadsheet that reflects the $0.01 increase. The City further states that it will make the appropriate adjustment in CVI's rates and this issue is therefore dismissed as moot. III. ORDERING CLAUSES 8. Accordingly, IT IS ORDERED that CVI's appeal of the local rate order, with respect to the issue of the regulatory status of its a la carte package, IS REMANDED to the City for resolution in accordance with the terms of this Order. 9. IT IS FURTHER ORDERED that CVI's appeal of the local rate order, with respect to the issue of manual recomputation of its rates, IS DISMISSED as moot. 10. IT IS FURTHER ORDERED that our stay of the local rate order which was granted pending resolution of this appeal IS VACATED. 11. 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 (1993). FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau