NOTICE ********************************************************* NOTICE ********************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file pnmc5021. File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** FOR RECORD ONLY $//Appeal ORDER, TKR Cable Company, NJ, DA 95-1179//$ $/76.922 Rates for the basic service tier/$ $/76.923 Rates for equipment and installation/$ $/76.944 Commission Review of Franchising Authority Decisions/$ $/76.986 A La Carte Offerings/$ DA 95-1179 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of: ) ) Hamilton, NJ TKR CABLE COMPANY ) Elizabeth, NJ ) Wildwood, NJ ) Old Bridge, NJ ) Ramapo, NJ Appeal of Rate Orders ) Rockland, NJ of the State of New Jersey ) Tri-System, NJ Board of Public Utilities ) Warwick, NJ MEMORANDUM OPINION AND ORDER Adopted: May 30, 1995 Released: June 1, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On August 31, 1994, TKR Cable Company ("TKR") filed with the Commission a consolidated appeal of a series of eight local rate orders adopted by its franchising authority, the New Jersey Board of Public Utilities, Office of Cable Television (the "Board"). TKR also filed a petition for stay of the local rate orders at the same time. We granted the stay on October 6, 1994, pending resolution of the appeal. In its local rate orders, the Board established rates for basic tier service and associated equipment and installations and required TKR to refund overcharges to subscribers. As part of its decisions setting TKR's basic tier rates, the Board found in each case that an a la carte package offering, created by TKR on the eve of rate regulation, was a regulated tier of service. 2. The sole issue raised by TKR in its appeal centers on the proper regulatory treatment of these a la carte package offerings. TKR argues that the Board's decision to treat its a la carte packages as regulated tiers of service is contrary to the objectives of the 1992 Cable Act and the Commission's a la carte rules and, therefore, the Board's adverse ruling on TKR's a la carte offerings should be overturned. In response, the Board asserts that it properly applied the Commission's guidelines on a la carte packages in treating TKR's packages as regulated tiers. 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. The Commission will reverse a franchising authority's decision only if it is determined 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." II. DISCUSSION 4. TKR objects to the Board's findings in the local orders that the a la carte packages at issue are rate regulated offerings and therefore the channels comprising the packages must be treated as regulated channels in calculating TKR's permissible rates. TKR argues that each of its a la carte packages on all eight systems comply with the Commission's a la carte rules in effect at the time the packages were created and that the Board's reliance upon the 15 interpretive guidelines announced by the Commission in March 1994 to determine the regulatory status of TKR's a la carte channels constituted "retroactive ratemaking." 5. The a la carte packages at issue were first offered to TKR's subscribers on August 31, 1993, when TKR restructured the service offerings on its Hamilton, Wildwood, Elizabeth, Old Bridge, Ramapo, Rockland, Tri-System and Warwick systems. TKR states that each restructuring involved removing certain channels from the basic service tier or a cable programming services tier and then offering these particular channels on an individual basis and also as the package that TKR alleges is not subject to rate regulation. The packages at issue in this appeal are very similar and consist of between three and five channels. On its Hamilton system, TKR offered a four channel a la carte package consisting of American Movie Classics (AMC), the Discovery Channel, Turner Network Television (TNT), and CNBC/Madison Square Garden Network (MSG) (shared channel). On its Elizabeth system, TKR offered a three channel a la carte package consisting of TNT, WTBS and MSG/CNBC (shared channel). On its Warwick system, TKR offered a four channel a la carte package consisting of AMC, TNT, WTBS and MSG. On its Wildwood system, TKR offered a four channel a la carte package consisting of AMC, the Discovery Channel, TNT and Disney. On its Old Bridge system, TKR offered a five channel a la carte package consisting of AMC, the Discovery Channel, TNT, WTBS and MSG. On its Ramapo system, TKR offered a five channel a la carte package consisting of AMC, the Discovery Channel, TNT, WTBS and MSG/CNBC (shared channel). On its Rockland system, TKR offered a five channel a la carte package consisting of AMC, the Discovery Channel, TNT, WTBS and CNBC. Finally, on its Tri-System system, TKR offered a five channel a la carte package consisting of CNN, the Discovery Channel, TNT, WTBS and MSG. 6. The facts presented in this appeal with respect to TKR's Hamilton, Wildwood, Elizabeth, Old Bridge, Ramapo, Rockland, Tri-System and Warwick systems are similar to the facts presented in our letter of inquiry ("LOI") orders where we ruled that certain a la carte packages may be treated as new product tiers. In the case of TKR's Hamilton system the facts are identical to those presented in TKR Cable of Hamilton. In TKR Cable of Hamilton and the other LOI orders, we found that we could not say that it was clear that the a la carte package at issue 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 the operator to refund liability or to require the operator to restructure its tiers so as to return the channels offered in the a la carte package to regulated tiers. Instead, we found that the a la carte package at issue 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 and Fifth Report and Order, MM Docket Nos. 92-266 and 93-215, 10 FCC Rcd 1226 (994) ("Going Forward Order"). 7. We find that the Board's determination, that TKR's a la carte packages at issue in this appeal are regulated tiers, is inconsistent with the action taken in TKR Cable of Hamilton and our other LOI orders. We further find that, in accordance with these orders, TKR's a la carte packages provided by its Hamilton, Wildwood, Elizabeth, Old Bridge, Ramapo, Rockland, Tri-System and Warwick systems should not be treated as rate regulated tiers of service. Accordingly, we are remanding this issue to the Board so that it can enter orders consistent with our findings in TKR Cable of Hamilton and our other LOI orders. III. ORDERING CLAUSES 8. Accordingly, IT IS ORDERED that the appeal of the local rate orders, with respect to the issue of the regulatory status of TKR's a la carte packages on its Hamilton, Wildwood, Elizabeth, Old Bridge, Ramapo, Rockland, Tri-System and Warwick systems, is REMANDED to the Board for resolution in accordance with the terms of this Order. 9. IT IS FURTHER ORDERED that our stay of the local orders which was granted pending the resolution of this appeal is hereby VACATED. 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