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A. a.(1)(a) i) a)DocumentgPleadingHeader for Numbered Pleading PaperE!n    X X` hp x (#%'0*,.8135@8:><q*"xxxxWWxxxWWkkxxxp?rtoc 3toc 3<` hp x (#` !(# ` !(# ` hp x (#toc 4toc 4=` hp x (# !(#  !(# ` hp x (#toc 5toc 5>` hp x (#h!(# h!(# ` hp x (#toc 6toc 6?` hp x (#!(#!(#` hp x (#2|@vDuAuBwCytoc 7toc 7@ toc 8toc 8A` hp x (#!(#!(#` hp x (#toc 9toc 9B` hp x (#!(#B!(#B` hp x (#index 1index 1C` hp x (#` !(# ` !(# ` hp x (#2dDF|Ed~FvGlindex 2index 2D` hp x (#` !(#B` !(#B` hp x (#toatoaE` hp x (#!(# !(# ` hp x (#captioncaptionF _Equation Caption_Equation CaptionG 2HrQM/qendnote referenceendnote referenceH 2: X-   FOR RECORD ONLY $//Appeal ORDER, Staten Island Cable, Staten Island, NY, DA 95704//$ $/76.922 Rates for the basic service tier/$ $/76.923 Rates for equipment and installation/$ $/76.944 Commission Review of Franchising Authority Decisions/$  Y-  Xv-2( Before the W FEDERAL COMMUNICATIONS COMMISSION  XH-Washington, D.C. 20554 TP  Y -In the Matter of:R)hpp DA 95704 R) STATEN ISLAND CABLER) OF NEW YORK CITYR) R) Appeal of Local Rate OrderR) of the City of New York, New YorkR) (Staten Island, CUID No. NY1312)R)  Y-}  MEMORANDUM OPINION AND ORDER ă  Y- Adopted : March 31, 1995hh@h Released : April 4, 1995 By the Chief, Cable Services Bureau:  X- I.xINTRODUCTION  YQ-x1.` ` On October 31, 1994, Staten Island Cable, the franchisee in the above matter, filed an appeal of a local rate order adopted on September 30, 1994 by its local franchising authority, the City of New York, New York ("the City") for the borough of Staten Island. On November 15, 1994, the City filed an opposition, urging the Commission to reject Staten Island Cable's appeal and to allow the City's rate order to go into effect unchanged. Staten Island Cable filed a reply on November 22, 1994 claiming that the City's interpretation of the Commission's rules was incorrect. In its rate order, the City established permitted rates for the basic service tier and associated equipment and installations and required Staten Island  Y"-Cable to refund overcharges to subscribers." Y%-ԍ Under the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act") and the Commission's implementing regulations, local franchising authorities  Y&-may regulate rates for basic cable service and associated equipment. See Cable Television"&0*(('" Consumer Protection and Competition Act, Pub. L. No. 102385, 106 Stat. 1460 (1992); Communications Act, 623(b), 47 U.S.C. 543(b).""b0*((#"Ԍ Y-ԙx2.` ` In its appeal, Staten Island Cable alleges that the City inappropriately based its  Y-rate order on the use of updated data on Staten Island Cable's FCC Form 393,&b= Y-ԍ The Commission's Form 393 ("Determination of Maximum Initial Permitted Rates for Regulated Cable Programming Services and Equipment") directs a cable operator to determine its maximum permitted rates for regulated service, equipment, and installations.& which  Y-resulted in an improper reduction of Staten Island Cable's basic service tier rate.H= Yh -ԍ Staten Island Cable added a single channel to its cable programming service ("CPS") tier prior to its initial date of regulation, but after it restructured its rates on September 1, 1993, pursuant to the Commission's rules. The City recalculated Staten Island Cable's basic service tier rates based on the new channel lineup, which resulted in a slightly lower maximum permitted perchannel rate and, therefore, a lower overall rate for the basic service tier. The City's rate order requires Staten Island Cable to issue refunds to subscribers based on the difference between the rate that Staten Island Cable established using the old channel lineup and the rate calculated by the City based on the new channel lineup. Staten Island Cable argues that the Commission's rules, which limit a regulatory authority's ability to update or "refresh" data on an operator's rate filing, prevent the City from ordering refunds based solely on the substitution of updated data. Staten Island Cable argues, in the alternative, that it should at least be permitted to reduce its refund liability by offsetting undercharges for rates it charged for its cable programming services ("CPS") tier.  Y1-x3.` ` In response, the City argues that Staten Island Cable's Form 393 was based on data that was not current as of the initial date of regulation, as required by our rules, and, therefore, the City was justified in making revisions to Staten Island Cable's rate filing. The City disputes Staten Island Cable's interpretation of the Commission's "refreshing" policy. The City also argues that there is no basis under the 1992 Cable Act or the Commission's rules to allow Staten Island Cable to offset the refunds ordered by the City for the basic tier with alleged undercharges of its CPS tier rates.  Yy- x4.` ` Under the Commission's rules, appeals of franchising authorities' local rate  Yb-orders are reviewed by the Commission.@b= Y!-ԍ 47 C.F.R. 76.944.@ In ruling on appeals of local rate orders, the  YK-Commission will not conduct a de novo review, but instead will sustain the franchising  Y6-authority's decision as long as there is a reasonable basis for that decision._6= Y$-ԍ See Report and Order and Further Notice of Proposed Rulemaking, MM Docket 92 Yx%-266, 8 FCC Rcd 5631, 5731 (1993) ("Rate Order"); Third Order on Reconsideration, MM  Yc&-Docket 92266, 9 FCC Rcd 4316, 4346 (1994) ("Third Recon. Order")._ Therefore, the Commission will reverse a franchising authority's decision only if we determine that the"/0*((" franchising authority acted unreasonably in applying the Commission's rules in rendering its  Y-local rate order.3= Yb-ԍ Id.3 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  Y-instructions to resolve the case consistent with the Commission's decision on appeal.3{= Y-ԍ Id.3  X- II.xDISCUSSION  Y_-x5.` ` On September 1, 1993, the Commission's rate regulations implementing the 1992 Cable Act became effective. On this date, Staten Island Cable restructured its rates in an effort to comply with those rules. At that time, Staten Island Cable offered a 29channel basic service tier for $10.45, and a 23channel CPS tier for $8.29. Subsequently, on October 1, 1993, pursuant to the terms of a then recentlynegotiated retransmission consent agreement, Staten Island Cable added a new service, ESPN2, to its CPS tier, increasing the number of offerings on this tier to 24 channels and, therefore, increasing the total number of regulated offerings, including both the basic service and CPS tiers, to 54 channels from the previous 53 channels. However, Staten Island Cable made no rate adjustment to account for this new additional channel, leaving intact the rates it had initially set for its basic service tier and its CPS tier on September 1, 1993.  YK-x6.` ` On October 15, 1993, the City filed with the Commission its certification to regulate rates and notified Staten Island Cable that it had 30 days to submit its rate filing, in  Y-accordance with our rules.@.= Y-ԍ 47 C.F.R.  76.930.@ On November 15, 1993, Staten Island Cable, justifying its rates using the benchmark methodology, submitted to the City a FCC Form 393, which relied on the same data that it used to restructure its rates on September 1, 1993. Staten Island Cable had adjusted neither its basic service tier rate nor its CPS tier rate to account for the channel it added in October. In the City's rate order, it adjusted Staten Island Cable's rate to account for the added channel and found that its permitted basic service tier rate should be reduced from $10.45 to $10.27, solely because the increase in the total number of channels resulted in a reduced permitted perchannel rate. Because CPS tier rates are regulated by the Commission, not local franchising authorities, the City's rate order did not address Staten Island Cable's CPS tier rate. Staten Island Cable claims that the rates that it established on September 1, 1993 were based on a channel lineup that was accurate at the time of its restructuring and, therefore, the City should have approved them.  Y-x7.` ` The issue here is whether Staten Island Cable should have reduced its basic service rate when it submitted its rate filing to the City to account for the channel added in October. Under the benchmark regulations, an operator's perchannel rate, as derived by Form 393, is determined by a formula that includes as variables the number of subscribers"!0*(("" served by the system, the number of regulated channels offered, and the number of satellite  Y-channels offered on regulated tiers.N = Yb-ԍ Rate Order, 8 FCC Rcd at 5768.N Therefore, an adjustment in the total number of channels available on regulated service tiers would have an impact on an operator's permitted  Y-perchannel rate for each regulated service tier.  Y-x8.` ` The Commission's rules generally require an operator to measure its maximum  Yv-permitted rates from data that is current as of the initial date of regulation. v{= Y -ԍ 47 C.F.R.  76.922(b)(1)(ii) (superseded); Form 393, Worksheet 1 "Calculation of Rates in Effect on Initial Date of Regulation and Benchmark Comparison." With respect to the basic service tier, the initial date of regulation is the date on which the franchising  YH-authority certifies to regulate rates.m H= Y-ԍ 47 C.F.R.  76.922(b)(7) (formerly 47 C.F.R.  76.922(b)(2)).m Therefore, the number of channels that Staten Island Cable offered on October 15, 1993, not September 1, 1993, would ordinarily be used to determine Staten Island Cable's maximum permitted rates because October 15th was the initial date of regulation. However, the Commission has created an exception to this general  Y -rule. = Yc-ԍ See Third Recon. Order, 9 FCC Rcd at 43494350; 47 C.F.R. 76.922(b)(9).  Y -x9.` ` In the Third Recon. Order, the Commission addressed the issue of updating rate calculations due to changes in data that are material to determining an operator's permitted rates, after an operator has already restructured its rates in accordance with the  Y{-Commission's rules.[ {y= Y-ԍ Third Recon. Order, 9 FCC Rcd at 43494350.[ In the Third Recon. Order, the Commission stated that "[o]perators should not be penalized for making good faith attempts to comply with our rules in a timely  YO-manner."VO, = Y,-ԍ Third Recon. Order, 9 FCC Rcd at 4349.V The Commission was concerned that operators, who attempted to comply with the Commission's rules when they became effective and who set their rates based on data that was current at the time of their restructuring, could see their rates become unreasonable  Y -solely due to replacing that data with data that became subsequently available.3  = Y!-ԍ Id.3 The Commission determined that if an operator was required to immediately adjust its rates in accordance with the new data, operators would face significant administrative expenses and  Y-subscribers would be confused by another adjustment in their rates.3 = Y&-ԍ Id.3 However, the Commission was also cognizant of the need for regulatory authorities to accurately verify the"E0*((" reasonableness of an operator's rates and to ensure that any inaccuracies were not  Y-compounded in future rate increases or adjustments.3= Yb-ԍ Id.3 In order to balance these concerns, the Commission determined that an operator's rates that are justified by using data that was available at the time of an operator's rate restructuring should not be required to adjust its  Y-rates to reflect current data.[{= Y-ԍ Third Recon. Order, 9 FCC Rcd at 43494350.[ If its rates are not justified by using that data, an operator would be required to adjust its rates using data that was current as of the initial date of  Yv-regulation. v.= YU -ԍ Id. ("Accordingly, we will require the following actions when different rates are dictated by data used in initial ratesetting than by data current as of the time an FCC Form 393 (and/or FCC Forms 1200/1205) is actually submitted to the franchising authority or the Commission. When current rates are accurately justified by analysis using the old data (and that data was accurate at the time), cable operators will not be required to change their rates. In these circumstances, however, when such operators make any subsequent changes in their rates (such as when seeking their annual inflation increase), those changes must be made  Y-from rates levels derived from the updated information. When current rates are not justified by analysis using the old data (so that a rate adjustment would be necessary in any event), cable operators will be required to correct their rates pursuant to current data. In these circumstances, the resulting rates must be based on current data.")     YH-x10.` ` We agree with Staten Island Cable and find that the City should have reviewed Staten Island Cable's rates using the data that was available at the time Staten Island Cable  Y -initially restructured its rates (i.e., old data).- = Y-ԍ Because we agree with Staten Island Cable that the City should not have ordered any subscriber refunds, we need not address the issue of Staten Island Cable's offsetting its refund liability from the basic tier overcharges with undercharges from the CPS tier.- Staten Island Cable restructured its rates in accordance with the Commission's rules on September 1, 1993. Staten Island Cable added a single channel subsequent to its initial restructuring on October 1, 1993. The initial date of regulation for its rates for the basic service tier and associated equipment and installations  Y -was October 15, 1993. However, the Third Recon. Order specifically mentions the addition of channels as an example of the type of information that may have changed between the time operators initially set their rates and the time those rates were reviewed by a regulatory  Y}-authority.}~= Y#-ԍ Third Recon. Order, 9 FCC Rcd at 4349. ("For example, tentative inflation adjustments have since become definite, equipment costs may have varied, or channels may have been added.") Under the terms of the exception described above, because the permitted perchannel rate that Staten Island Cable calculated in its initial attempt to restructure its rates was based on data available at the time of restructuring and because the City did not find that"O0*((" Staten Island Cable's rates were not justified using this old data, Staten Island Cable should be permitted to use its September 1, 1993 benchmark calculations to justify its rates in its  Y-November 15, 1993 rate filing with the City.5z= YK-ԍ See Third Recon. Order, 9 FCC Rcd at 43494350; 47 C.F.R. 76.922(b)(9). However, any subsequent changes in Staten Island Cable's rates, such as when seeking an annual inflation adjustment or adjusting for changes in external costs, must reflect rate levels  Y-based on the updated data, not the old data. Id. In this case, Staten Island Cable would be required to account for the channel addition when filing its Form 1200 to set its rates under the Commission's revised the rate rules.5 We will remand this matter to the City so  Y-that it can enter a ruling consistent with the terms of this Order.v = Yv -ԍ The City also argues that Staten Island Cable knew when it initially restructured its rates in September, 1993 that it would be adding a channel in the near future and therefore, it should have accounted for this change when it set its rates. Staten Island Cable established its rates on September 1, 1993 based on its thencurrent channel lineup, in conformity with our rules. Our rules do not require an operator to set its initial rates based on anticipated adjustments to its channel lineup.  X- III.XxORDERING CLAUSE (#  Y_-x11.` ` Accordingly, IT IS ORDERED that Staten Island Cable's appeal of New  YI-York City's rate order regarding the City's use of updated data to justify subscriber refunds  Y2-IS REMANDED to the City for resolution in accordance with the terms of this Order.  Y -x12.` ` 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. x` `  hhFEDERAL COMMUNICATIONS COMMISSION x` `  hhMeredith J. Jones x` `  hhChief, Cable Services Bureau