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File how2ftp (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** $//Appeal ORDER,CENTURY COMMUICATIONS CORPORATION, D/B/A YUMA CABLEVISION, DA 95-2111/$ $/76.922 Rates for the basic service tier/$ $/76.923 Rates for equipment and installation/$ $/76.944 Commission Review of Franchising Authority Decisions/$ $/1.45 Request for Stay/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of: ) ) CENTURY COMMUNICATIONS ) CORPORATION, D/B/A YUMA ) CABLEVISION ) DA 95-2111 ) Appeal of Local Rate Order of ) the City of Yuma, Arizona ) MEMORANDUM OPINION AND ORDER Adopted: October 3, 1995 Released: October 12, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On September 30, 1994, Century Communications Corporation d/b/a Yuma Cablevision ("Century") filed with the Commission an appeal of a local rate order adopted on August 31, 1994 by its local franchising authority, the City of Yuma, Arizona ("the City"). In its rate order, based on the FCC Form 393 filed by Century, the City established rates for basic tier service and associated equipment and installations and required Century to I.II.III.refund overcharges to subscribers dating back to September 1, 1993. On October 17, 1994, the City filed an opposition to Century's appeal, and on October 27, 1994, Century filed a reply to the City's opposition. 1. Century raises three issues on appeal: (1) the City improperly treated Century's "Century Select" a la carte offerings as a regulated service; (2) the City impermissibly ordered Century to reduce all of its non-grandfathered bulk rates to the lowest non-grandfathered bulk rate that Century offers; and (3) the City improperly prohibited Century from charging its hourly service charge ("HSC") for repair calls. We consider each issue in turn. II. STANDARD OF REVIEW 2. Under the Commission's rules, appeals of franchising authorities' local rate orders are reviewed by 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 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. III. DISCUSSION A. TREATMENT OF A LA CARTE PACKAGE 1. Positions of the Parties 3. As part of its decision setting Century's basic tier rates, the City found Century's package offering of three individually available channels (TNT, CNN, and the Family Channel), known as the Century Select package, to be a regulated tier of service. This a la carte package was first offered to Century's subscribers on September 1, 1993, when Century restructured its service offerings to comply with the Commission's rules. Century states that its restructuring involved eliminating two cable programming services ("CPS") tiers and offering TNT, CNN, and the Family Channel on an individual basis and also as a package that Century alleges is not subject to rate regulation. Century moved the remaining channels from its CPS tiers to its basic service tier. 4. Century argues that the City's decision to treat its a la carte package as a regulated tier of service is contrary to the objectives of the 1992 Cable Act and the Commission's a la carte rules. Century contends that it was the Commission's prerogative, not the City's, to determine the validity of Century's a la carte package as part of the Commission's inquiry into Century's a la carte package. Century further argues that its Century Select package complies with the Commission's a la carte rules in effect at the time the package was created and that the Cities' reliance upon the 15 interpretive guidelines announced by the Commission in March 1994 to determine the regulatory status of Century's a la carte channels constituted an unlawful retroactive application of the Commission's rules. However, Century claims that the Century Select tier comports with both the interpretative guidelines the Commission established in its Second Reconsideration Order and the original standards the Commission adopted in its Rate Order. In response, the City asserts that it properly applied the Commission's guidelines on a la carte packages in treating Century's package as a regulated tier and, therefore, its decision is reasonable and should be sustained. 2. Discussion 5. The a la carte package at issue was first offered to Century's subscribers on September 1, 1993, the effective date of our regulations. As a result of Century's tier restructuring, Century began offering the three channels at issue on an individual basis and also as a package that Century alleges is not subject to regulation. TNT and CNN were originally offered as part of Century's Gold tier and the Family Channel was originally offered as part Century's Silver tier. 6. We examined this precise issue in our decision resolving the letter of inquiry we issued to Century regarding its a la carte offerings. In that decision, Century Cable TV of Yuma, we found that we could not say that it was clear that the a la carte package at issue in this appeal 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 in this appeal may be treated as a new product tier under the Commission's Going Forward Order. 7. We find that the City's determination that Century's Century Select package is a regulated tier is inconsistent with the action taken in Century Cable TV of Yuma. We further find that, in accordance with that decision, Century's a la carte package should not be treated as a rate regulated tier of service. Accordingly, we are remanding this issue to the City so that it can enter a revised order consistent with our findings in Century Cable TV of Yuma. B. ADJUSTMENTS TO BULK ACCOUNT RATES 1. Positions of the Parties 8. During its rate review proceeding, the City found that Century was charging non-uniform rates to its various bulk account customers. As a result, the City requested more information from Century to support its existing bulk account rate structure. In its rate order, the City concluded that Century had failed to establish any basis for charging different rates to different bulk account customers. As a result, the City ordered that "bulk rate customers subject to bulk rate agreements with Century that are not grandfathered under FCC rules, shall receive the lowest bulk rate offered by Century that is not grandfathered, unless Century first received authority from the Council to charge a higher rate, based on justified costs." 9. On appeal, Century argues that the City does not have the authority to require Century to set all non-grandfathered bulk account rates at the lowest non-grandfathered bulk rate because the Commission's rules specifically allow operators to establish different bulk rates so long as they are based on cost savings and offered on a uniform basis to similarly- situated customers. Century maintains that "it is the cable operator's option either to charge the standard residential rate (not to exceed the maximum permitted rate) or to establish a uniform, nonpredatory discounted bulk rate applicable to the class in which the particular MDU [multiple dwelling unit] in question falls." According to Century, because bulk accounts are offered at the operator's discretion, a franchising authority must either approve the discounted rates offered by the operator or require the operator to discontinue the offerings. Finally, Century argues that the effect of the City's order "will be to create anticompetitive pricing by reducing the rates for certain bulk customers to predatory levels." 10. In its opposition, the City maintains that although the Commission's rules allow an operator to charge different rates to multiple dwelling units ("MDUs"), the operator must affirmatively demonstrate that it experiences identifiable cost savings from serving various MDUs that justify charging different rates to each of them. These cost savings may be based upon building size and type and the duration of the contract, while the same bulk rate must be offered to the same class of MDU subscribers. The City claims that, despite being provided numerous opportunities, Century never submitted sufficient evidence to support its different levels of bulk rates, but only stated that its bulk rates were based on numerous factors, which were never explained in sufficient detail or specifically applied to separately justify each of its bulk rates. 11. The City further argues that requiring Century to charge all of its non- grandfathered MDUs the lowest rate offered to any non-grandfathered MDU is an appropriate remedy and is consistent with the 1992 Cable Act's objective to require operators to offer all similarly-situated customers the same competitive rate. The City disputes Century's position that the City's remedial authority is limited to requiring Century to discontinue its bulk rate offerings and, instead, charging these subscribers the benchmark rate. The City argues that, under this theory, the City would be required to prohibit Century from offering lower rates in an effort to compete with the service offered by a competitor, which is clearly contrary to the Commission's rules. The City maintains that it was reasonable to assume that the lowest non-grandfathered bulk rate offered by Century best approximates the rate that would be charged in a competitive environment. Therefore, requiring an operator to charge a rate set by competitive forces (e.g., the lower discounted rate) to all similarly-situated customers "is a better approach than requiring the operator to charge a higher benchmark rate, which at best is a proxy for competition." 2. Discussion 12. Franchising authorities have the authority to ensure that an operator's rate structure is in compliance with the uniform rate provisions of the 1992 Cable Act. In rate proceedings, the cable operator, not the local franchising authority, bears the burden of proving the reasonableness of its proposed regulated rates. After providing the cable operator with an opportunity to participate in the rate review process and to submit documentation supporting its proposed rates, the local franchising authority is fully justified in making its findings based on the best information available to it at the time it issues its rate order. Under the Commission's rules, cable operators may offer different nonpredatory bulk rates to MDUs that vary with the size of the MDUs and the duration of the contracts, provided the operator is able to justify the rate differences based on relative cost savings. Cable operators must, therefore, provide franchising authorities with adequate information to determine if their bulk agreements are in compliance with the Commission's rules. 13. As noted above, we will sustain the franchising authority's decision as long as there is a reasonable basis for that decision. In this case, we will not disturb the City's finding that Century failed to justify its bulk rates. The record demonstrates that the City provided Century with several opportunities to supply information that sufficiently explained and justified Century's various bulk rates. In its appeal, Century does little to counter the City's allegation that the information it submitted to the City to justify its bulk rates was incomplete and inadequate. The record indicates that Century provided the City with a rate schedule that identified the various types and sizes of its MDUs, the durations of the particular bulk contracts, and the rates offered to each category of MDUs. However, there is no evidence that Century provided the City with data regarding the underlying cost savings that form the basis for its varying bulk rates. In the absence of this information, the City was unable to determine whether the bulk contracts were in conformance with the Commission's rules. We find that the City had reasonable grounds upon which to conclude that Century had not adequately justified its bulk rates. 14. However, we find that the City's remedy of requiring Century to reduce all of its non-grandfathered bulk rates to the lowest non-grandfathered bulk rate is inconsistent with our rules. As noted earlier, our rules allow cable operators to offer different bulk rates to MDUs that vary according to the size and type of the MDU and the duration of the contracts, provided the operator can justify the rate differences based on relative cost savings. In a previous order resolving an appeal of a local rate order, SBC Media Ventures, Inc., we explained that where an operator fails to meet this burden, the local franchising authority may require that the rates for one MDU be reduced to a lower rate established by the operator for another MDU of the same size under the same conditions -- i.e., a similarly-situated MDU. We noted, however, that the local franchising authority may not simply reduce all bulk rates offered by the operator to the lowest bulk rate offered to any MDU. In this case, the City may only require Century to reduce its non- grandfathered bulk rates to the lowest rate offered to non-grandfathered MDUs of the same class and category. Century has provided the City with enough information to distinguish between classes of MDUs. Therefore, the City may not claim that all MDUs served by Century are similarly-situated. Accordingly, we remand this issue to the City so that it may enter an order in accordance with our findings herein. C. DISALLOWANCE OF REPAIR CHARGES 1. Positions of the Parties 15. In its rate review proceeding, the City noted that although Century's rate card indicated that Century intended to charge for repairs of subscriber equipment based on its HSC, Century had not justified such a charge for repairs on its Form 393. Although the City approved Century's proposed HSC, it did so subject to the condition, inter alia, that "the HSC may not be charged for repair calls, because those costs are supposed to be recovered through the basic rate, unless separately justified." 16. In its appeal, Century argues that the City may not prohibit Century from charging the HSC for repair calls. Century maintains that the City is incorrect in asserting that repair costs are to be recovered through basic service rates. Century acknowledges that repair costs for leased equipment are to be recovered through leased equipment rates, but argues that repair calls "unrelated to leased equipment -- such as service calls resulting from the malfunction or misconnection of the subscriber's own equipment -- may be charged to the customer at the regulated, HSC rate." 17. In its opposition, the City maintains that it reasonably concluded that Century should not be allowed to charge the HSC for repair calls because Century did not separately justify such a charge on its rate filing. The City contends that Century's rate filing only requested approval of the HSC for installation-related activities. The City is concerned that Century's rate card indicates that it will charge the HSC for a broader range of activities than Century's rate filing incorporates into its HSC. Although the City agrees with Century's position on appeal that the HSC may not be charged for the maintenance of leased equipment in addition to the monthly rates for the lease of that equipment, the City contends that Century's rate card does not limit this charge in such a manner. Specifically, the City asserts that the description of the charge on the rate card does not distinguish between repairs to leased equipment and repairs to customer-owned equipment. Thus, the City claims that it reasonably concluded that the rate card suggests that Century may attempt to impose this charge for all repair calls, including those involving leased equipment. 18. In reply, Century claims that the Commission's rules allow cable operators to establish maintenance charges for customer-owned equipment based on the system's HSC, and, therefore, the City may not prohibit Century from charging customers for service calls that relate to maintenance of the subscriber's own equipment. Century contends that once it has established an HSC, no further approval should be necessary for Century to use the HSC as the basis for repair charges related to service calls of customer-owned equipment. 2. Discussion 19. Under our rules, a cable operator is required to establish an Equipment Basket to which it will assign the direct costs of service installation, additional outlets, and leasing and repairing of equipment. From this Equipment Basket, an operator calculates its rates for the lease, repair and maintenance of equipment and for installation-related activities. As part of this process, an operator must derive a standard Hourly Service Charge applicable to regulated activities. The HSC is calculated by dividing the total number of labor hours associated with regulated installations, maintenance and repairs by the total costs associated with such activities. For each type of regulated equipment, the costs of the repair and maintenance of such equipment are included in the calculation of the monthly lease rate. For installations or services not associated with the maintenance or repair of leased equipment, the operator may charge subscribers either the HSC multiplied by the actual time necessary to complete the service or a flat rate based on the HSC multiplied by the average number of hours required to complete the service. However, an operator may only establish installation-related charges based on the HSC for those activities where the underlying labor hours and costs were first included in the calculation of the HSC on its rate filing. 20. Rates for regulated equipment repairs are subject to the franchising authority's review. In rate proceedings, the cable operator, not the local franchising authority, bears the burden of proving the reasonableness of its proposed regulated rates. Consequently, it was incumbent upon Century to establish in its rate filing the reasonableness of charging its HSC for repairs. We agree with the City that Century's rate card ambiguously establishes a service rate applicable to "connections and repair calls," suggesting that Century may intend to apply the HSC to a broader range of activities than indicated in its rate filing. Although in its appeal Century attempts to limit the application of this charge to repairs of customer- owned equipment, the rate card suggests otherwise. As the City correctly argues, our rules provide that maintenance costs associated with equipment that is leased by the subscriber are to be recovered through a component of the equipment's monthly lease charge. 21. Even if Century only intends to charge the HSC for service calls not related to leased customer equipment, Century would need to demonstrate that its calculation of the HSC included all of the labor hours and costs attributable to the repair and connection services to which it intends to apply the HSC. It is unclear from the pleadings filed by both parties exactly what activities were incorporated into Century's HSC. Therefore, we are unable to determine whether the City's decision was reasonable or not. The resolution of this issue depends solely upon factual determinations that have not been established by the pleadings and appear to not have been clearly established during the rate proceeding. Therefore, we will remand this issue to the City for resolution in accordance with the terms of this memorandum opinion and order. On remand, we will require Century to provide the City with a list of the specific activities for which it intends to charge subscribers. We will also require Century to explain how each of these activities was incorporated into the HSC on its rate filing. The City must then allow Century to charge the HSC for those activities that are incorporated into the HSC. IV. ORDERING CLAUSES 22. Accordingly, IT IS ORDERED that the appeal by Century Communications Corporation regarding the City of Yuma's treatment of Century's Century Select package IS REMANDED to the City so that it may enter an order consistent with our findings in Century Cable TV of Yuma. 23. IT IS FURTHER ORDERED that the appeal by Century of the City's adjustment to Century's bulk account rates IS REMANDED to the City so that it may enter an order in accordance with the terms of this memorandum opinion and order. 24. IT IS FURTHER ORDERED that the appeal by Century of the City's disallowance of Century's repair charges IS REMANDED to the City so that it may enter an order in accordance with the terms of this memorandum opinion and order. 25. 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