FOR FCC RECORD ONLY $/ORDER remanding local rate order of Washington/$ $/Court House, OH, DA95-479/$ $/76.922 Basic Tier Rates/$ $/76.933 Franchising Authority Review of basic cable rates and equipment costs/$ $/76.936 Written Decision/$ $/76.944 Commission Review of Franchising Authority Rate Decision/$ $/76.986 "A la carte" offerings/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of: ) ) CHILLICOTHE CABLEVISION, INC., ) D/B/A DIMENSION CABLE SERVICES ) DA 95-479 ) Appeal of Local ) Rate Order of City of ) Washington Court House, OH ) ORDER Adopted: March 13, 1995 Released: March 14, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On August 25, 1994, Chillicothe Cablevision, Inc., d/b/a Dimension Cable Services ("Dimension"), the franchisee in the above-matter, filed a Petition for Review ("appeal") of a local rate order adopted by its franchising authority, the City of Washington Court House, Ohio ("the City"). The City filed no opposition to the appeal. On July 26, 1994, the City adopted its local rate order, based on the FCC Form 393 filed by Dimension, requiring Dimension to establish a new rate schedule for its basic service tier and associated equipment and installations and to issue refunds to subscribers for charges in excess of the newly established rates. In its appeal, Dimension urges the Commission to vacate the City's rate order. 2. Dimension raises five separate issues in its appeal: (1) that the City unlawfully ordered subscriber refunds even though its authority to order refunds had expired; (2) that the City improperly imposed refund liability dating back to September 1992 and failed to follow the mathematical formula required by the Commission for calculating refunds; (3) that the City Council did not formally adopt the rate order; (4) that the City failed to disclose the basis for the rates set in the rate order; and (5) that the City incorrectly treated a package of a la carte channels as regulated offerings in issuing its rate order. Dimension claims that each of these actions resulted in a misapplication of the Commission's rate regulations and violated the 1992 Cable Act. Consequently, Dimension argues that the local rate order is defective on its face and must be vacated by the Commission. 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. II. DISCUSSION A. Refund Liability 4. When a cable operator files either a benchmark or cost-of-service rate justification, the Commission's rules provide a franchising authority 30 days in which to review the rate filing before the proposed rates become effective. In cases involving benchmark filings (i.e., filings based on FCC Form 393), a franchising authority may toll this deadline for an additional 90 days if it needs more time to review the filing, giving the franchising authority a total of 120 days to issue an order before the proposed rates go into effect. At the end of the 120-day period (the original 30 days plus the additional 90 days), the proposed rates will go into effect if the franchising authority has not issued a rate decision. The franchising authority, however, may still preserve its authority to order subscriber refunds based on the new rates by issuing an accounting order, directing the cable operator to keep an accurate account of its financial records. If a franchising authority has not rendered a decision within the available 120-day review period and has not issued an accounting order before that period has expired, the franchising authority may not later order subscriber refunds under our rules. We wish to be clear that our rules provide that the issuance of an accounting order is necessary only to preserve refund authority. A franchising authority that does not issue an accounting order before its allowable period of review expires may still prescribe rates and order a prospective rate reduction. 5. While we recognize that cable rate regulation is relatively new to all concerned parties, we must enforce both our substantive and procedural rules to maintain the integrity of the rate review process and to ensure consistency in decision-making. Just as it is important for cable operators to file their rate justifications in a timely manner, it is important that they be able to implement their proposed rates with as little delay as possible. Our rules attempt to ensure that this concern is balanced against the need for franchising authorities to have adequate time to carefully scrutinize and evaluate an operator's rate filing. Therefore, our rules permit a franchising authority to toll the deadline for its review for 90 days in a benchmark filing and, if necessary, to issue an accounting order to preserve refund liability beyond that period. Through these mechanisms, the franchising authority is given time to fully review a rate justification filing, while the cable operator is protected from having to operate in an uncertain regulatory environment for an indefinite period of time. Absent a waiver granted by the Commission, both parties are bound by the deadlines provided in our rules. Although Dimension appears to have voluntarily participated in the rate review process beyond the official review period, this activity does not constitute a waiver of our procedural deadlines. [A] local franchising authority and a cable operator may not agree to waive a procedural deadline contained in the Commission's rules. A franchising authority and a cable operator that mutually agree that an extension of time would be desirable may petition for a waiver of the Commission's rules establishing deadlines for filing rate justifications. 6. Because the City did not issue an accounting order before the conclusion of its review period, it lost the authority to order subscriber refunds. As a result of the City's failure to issue an accounting order, Dimension's second argument, in which it states that the City improperly imposed refund liability back to September 1992 and failed to follow the Commission's rate formula in calculating the refund liability, is rendered moot. We note, however, that, although Dimension will not be liable for the refunds ordered by the City with regard to its rates set under Form 393 in effect from September 1, 1993 until May 15, 1994, this order has no effect upon the City's authority to rule on the reasonableness of Dimension's rates as set by the Form 1200 series, nor does it impact upon the City's authority to order subscriber refunds subsequent to May 15, 1994. B. Formal Adoption of the Rate Order 7. Dimension alleges that the local rate order is invalid because it was never considered or adopted by the City Council, which Dimension claims is the lawful franchising authority, but instead was issued by the City Administrator. We have previously stated that a franchising authority may delegate its rate-making responsibilities to a subordinate entity if so authorized by state or local law. Any such subordinate entity will be acting as the authorized agent of and at the will and pleasure of the franchising authority, and its actions will be subject to at least the implicit, if not explicit, ratification of the full franchising authority. We believe that because of the many demands placed on municipalities and other entities that serve as franchising authorities, such flexibility is necessary to better enable franchising authorities to implement and enforce the Commission's regulations within the time frames specified in our procedural rules. We have further stated that rate decisions need not be issued by resolution or ordinance, but may be made by letter or other form, so long as they meet public notice requirements. Here, the City Administrator, a subordinate of the franchising authority, i.e., the City, has issued a rate order by way of a published letter on behalf of the City. This method appears to comport with our requirements in this regard. Furthermore, if local laws have been violated by this delegation of authority, the proper remedy would have to be found under local law. Because final resolution of this issue may rest with an interpretation of applicable local law and not federal law, a state or local court is the appropriate forum to hear this matter. For this reason, we deny Dimension's petition on this issue. C. Written Decision 8. Dimension also contends that the City's rate order should be remanded because it failed to disclose the basis for the rates set. The City's rate order was a one-page document, signed by the City Administrator, that stated the per-channel charge that Dimension was permitted to charge. The only piece of information relating to the City's rationale for setting the per-channel charge dealt with Dimension's a la carte package, discussed infra. The City did not state, nor does it appear from the record, that its rate- setting or refund decisions were based solely on its treatment of the a la carte package as a regulated tier. Moreover, the City did not state in the order what were Dimension's permitted charges for equipment and installation. 9. Dimension correctly notes that Commission rules require that the local franchising authority issue a written decision. Moreover, where the franchising authority prescribes a rate, as the City did here, the written decision must affirmatively demonstrate why the operator's proposed rate is unreasonable and why the prescribed rate is reasonable. It appears from the record below that the City's rate order did not comport with our rules in this area. Therefore, we remand this case for further proceedings not inconsistent with this decision. D. A la carte 10. Lastly, Dimension contends that the City improperly included in its total regulated channel count the channels offered in its a la carte package. Beginning on August 31, 1993, Dimension began offering a package that consisted of four channels -- AMC, The Discovery Channel, The Nashville Network, and TNT. Dimension states that its basic-only subscribers received the a la carte package at no additional cost. The record also indicates that all of its cable programming services subscribers received the package at no charge. All of Dimension's subscribers, therefore, apparently received all channels in the package at no additional cost and no subscriber received any less than all four channels in the package. Dimension in fact indicates that it lacked the technology to offer the four channels in the package on an individual basis. The City ruled that because Dimension alleged that it lacked the resources to separate the purported a la carte service from the basic service tier, the City would treat the channels as a regulated tier. Dimension argues that the package was a legitimate a la carte offering, and that subscribers merely received a bonus, however temporary, pending installation of the equipment necessary to prevent unauthorized viewing. 11. Dimension's package of four channels that it alleges is an a la carte package and thus not subject to regulation is not a true a la carte package and does not even meet the threshold requirement that channels be offered on a per channel basis. Our rules required that Dimension offer the channels in the package on an individual basis as well as a collective basis in order to be categorized as an unregulated a la carte package. Dimension did not, however, offer the four alleged a la carte channels individually to its subscribers. Its claim that the channels are not regulated is, therefore, not supported by our rules. Consequently, Dimension's alleged a la carte package is composed of regulated channels for purposes of its 393 filing. Dimension's appeal of the City's order holding that the four channels in Dimension's alleged a la carte package are regulated channels is denied. III. Ordering Clauses 12. Accordingly, IT IS ORDERED that the appeal of the local rate order adopted by the City of Washington Court House, Ohio with respect to Dimension Cable Service's refund liability and the necessity of providing a basis for the rates prescribed IS REMANDED to the local franchising authority for further proceedings consistent with this opinion. 13. IT IS FURTHER ORDERED that Dimension Cable Service's appeal with respect to formal adoption of the rate order by the City Council of the City of Washington Courthouse IS DENIED. 14. IT IS FURTHER ORDERED that Dimension Cable Service's appeal with regard to Dimension Cable Service's alleged a la carte package IS DENIED. 15. 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