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 how2ftp. File how2ftp (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-2257 In the Matter of: ) ) TCI OF ILLINOIS, INC. ) City of Macomb, Illinois ) ) Appeal of Local ) Rate Order of City of ) Macomb, Illinois) MEMORANDUM AND ORDER Adopted: September 27, 1995 Released: November 8, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On January 19, 1995, TCI of Illinois, Inc. ("TCI-I") filed with the Commission an appeal of the local rate order adopted by the City of Macomb, Illinois (the "City") on December 20, 1994. In its local order, the City approved TCI-I's proposed rate reduction for its basic service tier from $9.30 to $8.86 and ordered TCI-I to make refunds to its subscribers in the amount of $1.10 per subscriber for the period May 15, 1994 through August 1, 1994. The City did not file an opposition to the appeal. 2. In its appeal, TCI-I challenges the City's refund order on the ground that TCI-I had complied with Commission rules governing deferral of an operator's refund liability and, therefore, TCI-I was exempt from refund liability during the period at issue. TCI-I states that, on May 13, 1994, it notified the City that it was electing to defer its refund liability. TCI-I further states that it did not change its rates or service offerings during the period from March 30, 1994 through July 14, 1994, that it completed its repricing by July 14, 1994 and that it did not charge subscribers the new rate until August 1, 1994. On August 10, 1994, TCI-I filed its FCC Form 1200 with the City. II. STANDARD OF REVIEW 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. III. BACKGROUND 4. Under the Commission's initial rate regulations pursuant to the Cable Act of 1992, regulated cable systems were required to apply a benchmark formula to determine their maximum permitted rates. Those systems whose rates were above the benchmark on September 30, 1992 were required to reduce their September 30, 1992 rates by 10 percent or to the benchmark, whichever was less. This 10 percent reduction stemmed from the Commission's initial finding that there was, on average, a 10 percent difference (the so-called "competitive differential") between the rates charged by competitive and noncompetitive cable systems. Under the Commission's revised benchmark regulations adopted on February 22, 1994, regulated cable systems were required to set their rates at a level equal to their September 30, 1992 rates minus a revised competitive differential of 17 percent. In order to comply with the new rules, cable operators were required to collect necessary rate-setting information, complete FCC Form 1200 to determine their new permitted rates, and give 30 days notice of any rate changes to their subscribers and to franchising authorities. Systems that were not in compliance with the new rules by May 15, 1994 were subject to refund liability for the period May 15, 1994 through July 14, 1994. Recognizing that many systems would have difficulty complying with the new regulatory scheme by May 15, 1994, the Commission gave operators the option of deferring refund liability for an additional 60 days after May 15, 1994 or until July 14, 1994. Operators wishing to take advantage of this deferral of refund liability were required to meet certain conditions. Those conditions are as follows: (1) the cable operator could not change its rates for any regulated service or equipment or restructure any regulated service or equipment offering between March 30, 1994 and July 14, 1994; (2) the operator had to give subscribers at least 30 days' notice of any rate or service change made pursuant to the new rules; and (3) all rate and service restructuring must have been completed by July 14, 1994. Section 76.922 (b)(6)(ii) of our rules codifies the first and third of these prerequisites. Section 76.964 effectively codifies the second requirement because even though this section does not refer to any prerequisites for qualifying for the deferral period this section does require that an operator give 30 days' written notice to subscribers before implementing any rate change. With respect to operators such as TCI- I, which were "involved in proceedings concerning basic cable rates" at the time of the release of the Second Recon. Order, that Order imposes two additional conditions for qualifying for refund deferral. The Order required that any such operator which "elects to take advantage of the refund deferral period," had to notify the local franchising authority by June 14, 1994 that it intended to do so. The Order also provides that such an operator had to submit the relevant FCC rate justification forms to the local franchising authority no later than August 15, 1994. IV. DISCUSSION 5. TCI-I asserts that it complied with all of the conditions specified by our rules for deferring refund liability. Specifically, TCI-I alleges that it notified the City of its intention to defer refund liability on May 13, 1994 and that it filed its FCC Form 1200 with the City on August 10, 1994 thereby complying with the refund deferral rules on notice and filing pertaining to the local franchising authority. With respect to the remaining conditions of refund liability deferral, TCI-I alleges that it gave subscribers notice of impending rate changes, that it did not change any rate for regulated service or equipment offering between March 31, 1994 and July 14, 1994, and that it established a permitted rate under the Commission's revised rules by July 14, 1994. Finally, TCI-I alleges that it sent bills reflecting the new restructured rates to its subscribers at the end of July. 6. As noted above, one of the conditions operators must have met for exercising refund liability deferral was the provision of at least 30 days notice to subscribers of any rate or service change. Operators who completed restructuring on July 14, 1994 must have provided notice to their subscribers by June 14, 1994, which was 30 days before the July 14, 1994 deadline for restructuring. TCI-I's notice to its subscribers of the restructured rates did not comply with the notice required by our rules as a condition of refund deferral. TCI-I, by its own admission, states that it "notified customers of the rate change at the end of June," not by June 14 as required. TCI-I's subscribers therefore did not receive the requisite 30 days notice before the rate changes became effective on July 14, 1994. 7. The Commission also required operators, as a condition of refund liability deferral, to complete restructuring by July 14, 1994 and considered restructuring to be complete "when bills reflecting the rate and service changes ha[d] been issued to subscribers." Operators wishing to defer refund liability should have issued subscriber bills reflecting the restructured rates by July 14, 1994, unless advance billing was prohibited by the franchising authority or the operator was using cycle billing. In this case, those exceptions are not applicable. TCI-I states that it operated on a "once a month billing cycle." Further, TCI-I does not allege that the City prohibited advance billing. Instead of sending subscriber bills by July 14 as required, TCI-I states that it issued subscriber bills reflecting the new rates "at the end of July." As a result of the untimeliness of its subscriber bills, TCI-I did not meet the requirement that all restructuring be completed by July 14, 1994. In order to meet this condition of refund deferral, TCI-I should have sent out its subscriber bills with the restructured rates by July 14, 1994. It did not. Our rules require that operators who wished to defer refund liability must have complied with each specified condition, which TCI failed to do. TCI did not qualify for deferral of refund liability for the period May 15, 1994 through July 14, 1994 because it failed to provide subscribers with at least 30 days notice of the rate changes and because it failed to complete restructuring by July 14, 1994. Accordingly, TCI-I's appeal is denied. V. ORDERING CLAUSE 8. Accordingly, IT IS ORDERED that TCI-I's appeal of the local order of the City of Macomb, Illinois is DENIED. 9. 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