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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** FOR FCC RECORD ONLY $//CONSOLIDATED ORDER Remanding Appeasl in Dana Point, Laguna Niguel, Lake Forest and Mission Viejo, California, DA 95-1177//$ $//76.944 Commission Review of Franchising Authority Decisions//$ $/76.922 Rates for the basic service tier/$ $/76.923 Rates for equipment and installation/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 ) DA 95-1177 In the Matter of: ) ) TIMES MIRROR CABLE ) TELEVISION OF ORANGE ) COUNTY, INC. d/b/a ) DIMENSION CABLE SERVICES, ) ) Appeals of Local Rate Orders ) of the following Cities: ) ) Dana Point, California ) Laguna Niguel, California ) Lake Forest, California ) Mission Viejo, California ) ) CONSOLIDATED ORDER Adopted: May 30, 1995 Released: June 1, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. By this Order, we consolidate four proceedings involving Times Mirror Cable Television of Orange County, Inc. d/b/a Dimension Cable Services ("Dimension") and rule on the merits in each proceeding. In deciding this matter, the Bureau has reviewed all the pleadings filed in the separate proceedings. We have determined that the proceedings are sufficiently similar to justify the resolution of all the issues raised by each of the concerned parties in one consolidated proceeding. Specifically, in this Consolidated Order, the Bureau resolves Dimension's four separate appeals of the local rate orders issued by the local franchising authorities: the Cities of Dana Point, Laguna Niguel, Lake Forest and Mission Viejo, California ("the Cities"). The rate orders establish new regulated rate schedules for Dimension's basic service tier and associated equipment and installations. Specifically, the Cities' rate orders require Dimension to implement certain rate reductions and to issue refunds to subscribers for overcharges for the period September 1, 1993 through July 14, 1994 (based on FCC Form 393), and for the period beginning July 15, 1994 (based on FCC Form 1200). The Cities did not file responses to Dimension's appeals. 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 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. FCC Form 393 3. FCC 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. 4. 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. Maximum permitted rates for equipment and installation are based on actual cost and are calculated in Part III of the Form 393. Equipment rates are derived from capital and maintenance costs per unit of equipment. Installation rates are derived from the calculation of a hourly service charge and application of that charge to different types of installations. Under our regulations, the maximum permitted rates are deemed to be reasonable, as required by the 1992 Cable Act. Requiring cable operators to set all or some of their rates for programming, equipment or installation below their maximum permitted levels would force them to charge rates at levels below those specifically allowed under our rules. B. Franchise Fees 5. Dimension first contends that the Cities improperly excluded a portion of its franchise fees ($33,703 in each City) from Dimension's rate justification calculations. Dimension included the franchise fees as part of its equipment revenue on Line 204 of Worksheet 2, in Part II of Dimension's Form 393. Dimension argues that the Commission's benchmark rates were calculated by excluding the franchise fee expense on programming service revenues, but not the franchise fee expense on equipment revenues. Dimension claims the Cities's exclusion of franchise fees from its equipment revenue resulted in a substantial understatement of its base per-channel rate. The Cities, however, concluded that allowing Dimension to include within Line 204 equipment revenues allocable to franchise fees would yield a double recovery, once for the amount that effectively becomes embedded in Line 204 and again as franchise fees are added as a pass-through to the maximum permitted rates. 6. The franchise fee issue raised in Dimension's appeals has been addressed in cable programming service (CPS) rate orders issued for each City. In the Times Mirror CPS Orders, we stated that, if franchise fees are both included in the base from which maximum permitted rates are calculated and permitted as an addition to maximum permitted rates (as a pass-through), the operator would recover these costs twice. We find that, in accordance with the Times Mirror CPS Orders, Dimension should not be allowed to include $33,703 of its franchise fees, as part of its equipment revenue on Line 204 of Worksheet 2, in Part II of Dimension's Form 393, in justifying its rates for basic cable service, equipment and installations. The Cities' decisions in this regard were therefore reasonable and Dimension's appeals of this issue are denied. C. Reserved Authority 7. Dimension next contends that, in both their 393 and 1200 based rate orders, the Cities exceeded their authority by reserving the right to order additional rate reductions and refunds based on any future Commission action. Dimension has not alleged, however, that the Cities have taken or have attempted to take any such actions. Until, if ever, the Cities attempt to revisit their 393 or 1200 based rate orders, however, there is no controversy to resolve. This issue is therefore dismissed. III. ORDERING CLAUSES 8. Accordingly, IT IS ORDERED that Dimension's appeals, with respect to the issue of including franchise fees as a part of equipment revenue on Form 393, ARE DENIED. 9. IT IS FURTHER ORDERED that Dimension's appeals, with respect to the issue of reserved authority, ARE DISMISSED. 10. 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