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H !!!Hoooo!o ho`  oooo !!!!!!!!!!!!    !!!!!!pF ppp  !z p! !! !H ! WxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN!!!\```doo0!00dd"!!!!!dd``r4`!`!!!!!!!!!!`! !!7!!!!!!!!!!!!!!!!M 7!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!o  M  !! 7!!%!hh@@hxxhhhhhh@xxhPPPP``H(( @`hhhxxxp8((hhhh(hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh@@hhhhhhhh8888hh````hhHHH88888hh X-      gH  $//Appeal ORDER, TCI CABLEVISION OF OREGON, INC., DA 952269/$ $/76.922 Rates for the basic service tier/$ $/76.923 Rates for equipment and installation/$  X-$/76.944 Commission Review of Franchising Authority Decisions/$ Đ X-lX01Í ÍX01Í Í #Xw PE37 -ԍSee Order (Request for Emergency Stay of Local Rate Order of the Mt. Hood Cable Regulatory Commission), DA 951047 (Cab. Serv. Bur., released May 8, 1995).  Y_-3.` ` TCI raises six issues on appeal. First, TCI argues that the MHCRC improperly rejected its entry for additional outlets on Form 1200, Line 6, simply because the additional charge was bundled with the monthly programming service fee, rather than separately assessed. Second, TCI argues that the MHCRC erred by requiring it to reset equipment rates less than a year from its initial unbundling and before the end of its 1994 fiscal year. Third, TCI argues that the MHCRC also erred by regulating its charges for A/B switch installations. Fourth, TCI argues that the MHCRC exceeded its authority by prescribing rates for TCI's inside wiring maintenance plan. Fifth, TCI argues that it was improper for the MHCRC to deny it the ability to offset any refund liability with intervening upward rate adjustments otherwise permitted under the Commission's regulations. Sixth, TCI argues that it was also improper for the MHCRC to deny it the ability to increase existing rates up to the maximum permitted level. We address each of these issues in turn.  X4- II.DISCUSSION  Y-4.` ` Under our rules, rate orders made by local franchising authorities may be  Y-appealed to the Commission.Q< Y<-ԍSee 47 C.F.R. 76.944.Q In ruling on appeals of local rate orders, the Commission will  Y-not conduct a de novo review, but instead will sustain the franchising authority's decision as  Y-long as there is a reasonable basis for that decision.oO < Y"-ԍSee Report and Order and Further Notice of Proposed Rulemaking in MM Docket 92 Y#-266, 8 FCC Rcd 5631, 5731(1993) ("Report and Order"); Third Order on Reconsideration in  Y$-MM Docket 92266, 9 FCC Rcd 4316, 4345 (1994) ("Third Recon. Order").o The Commission will reverse a franchising authority's decision only if it determines that the franchising authority acted" 0*(("  Y-unreasonably in applying the Commission's rules in rendering its local rate order.:< Yy-ԍId.: 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  Y-case consistent with the Commission's decision on appeal.:{< Y-ԍId.:  Y-5.` ` The local rate order issued by the MHCRC was based on its review of TCI's FCC Form 1200. Form 1200 is the official form used to determine whether initial regulated rates for programming are reasonable under the revised benchmark rules which apply to operators beginning May 15, 1994 or upon the expiration of the deferral period provided  Y1-under our rules for operators to comply with the revisions to our rules.1 1.< Y-ԍ#Xw PE37 < Y:-ԍSee FCC Form 1205.I Form 1205 has two distinct uses. First, Form 1205 is submitted along with a Form 1200 and is used to establish equipment and installation costs in determining initial rates for regulated cable services. These equipment and installation costs are converted to a monthly per subscriber cost that is subtracted from figures derived from programming and equipment revenues in the Form 1200 in order to determine maximum permitted programming service rates. In following the mathematical principles embodied in these calculations, lower equipment basket costs lead to higher programming rates, while higher equipment basket costs lead to lower programming rates.  Y|-17.` ` The second use for Form 1205 is to update permitted regulated equipment and"| 0*((|" installation charges based on equipment basket costs. Higher equipment basket costs on Form 1205 (resulting in lower programming rates on Form 1200) correlate with higher equipment and installation rates. Conversely, lower equipment basket costs on Form 1205 (resulting in higher programming rates on Form 1200) correlate with lower equipment and installation rates. In its appeal, TCI is contending that, even though the data in its attached Form 1205 affects its Form 1200 maximum permitted basic service tier rates, it is not required to make concomitant adjustments to its equipment and installation rates until after it files a new Form 1205 after the close of its next fiscal year. We agree.  Y1-18.` ` The MHCRC is correct in asserting that Forms 1200 and 1205 establish a direct linkage between programming service rates and equipment and installation costs and charges. When setting rates or calculating refund liability, a franchising authority should normally adhere to the mathematical principles underlying the benchmark methodology described above, thereby assuring that an operator is allowed to earn neither more nor less  Y -than its maximum permitted revenues."  < Y7-ԍ See Paragon Cable (Portland, Multnomah County and Linton, Oregon), 9 FCC Rcd 4091 (Cab. Serv. Bur., released August 9, 1994); Ventura County Cablevision (City of Thousand Oaks, California), DA 951196 (Cab. Serv. Bur., released June 5, 1995)." Therefore, Form 1205 calculations resulting in lower equipment basket costs should normally lead to higher programming service rates and correspondingly lower equipment and installation rates. However, when the Commission initially promulgated FCC Forms 1200 and 1205 it created an exception to this direct linkage. The instructions to Form 1205 state that, if an operator has already unbundled equipment and installation charges at cost, the operator must wait one year from the date on  Y4-which it unbundled equipment and installation charges before changing these charges.D!4M< Y2-ԍFCC Form 1205 at 2.D The instructions go on to state that an operator does not even need to complete the Worksheet for Calculating Permitted Equipment and Installation Charges or Schedule D, which lists the averages hours by type of installation, if the operator is filing Form 1205 only as part of  Y-establishing its initial maximum permitted rates for programming services.D"< Y-ԍId. at 3, 13.D These instructions comport with our previous determination that equipment rates can only be  Y-changed annually.#< Y !-ԍSee Public Notice, Cable Television Rate Regulation Questions and Answers, Question No. 33 (released May 13, 1993). Since TCI had restructured its rates on September 1, 1993, we find that  Y-TCI could not change its equipment and installation rates before September 1, 1994.P$M < Y$-ԍ We realize that this finding will enable operators who are charging more for equipment than is justified by their Form 1205 costs, to receive in excess of their maximum permitted revenues for some period of time. However, the Form 1205 instructions and this ruling apply to "changes" in equipment rates and therefore other operators who are charging"L'#0*((p'" less than their maximum permitted rates under their initial Form 1205 filing will earn less than their maximum permitted revenues for a similar period of time.P " b$0*(("Ԍ Y-ԙ19.` ` Finally, we do not agree with the MHCRC that TCI, at a minimum, should be required to adjust its equipment and installation charges, effective September 1, 1994. We believe that the postponement of equipment and installation rates changes until the filing of the first fiscal year Form 1205, which takes place at least one year after the operator unbundled its equipment and installation rates, is permissible since it could serve to limit administrative expenses for the operators and limit confusion for consumers. If we were to require changes to these rates to become effective on September 1, 1994, operators may have to adjust their rates twice in a relatively short time period. In this case, TCI would be faced with adjusting rates in September, 1994 and then again in early 1995, following its fiscal year filing. We find that TCI reasonably relied on the form instructions and is not required to file its next Form 1205 until after the close of its fiscal year on December 31, 1994. It is at that time that TCI should change its equipment and installation rates if its filing indicates a change in its maximum permitted rates. This issue is therefore remanded to the MHCRC for further proceedings consistent with these findings.  X - C.` ` A/B Switch Installation  Yy-20.` ` Relying on our decisions in TCI of Northern New Jersey and SBC Media  Yd-Ventures,x%db< Yw-ԍSee TCI of Northern New Jersey, 10 FCC Rcd 1657, 16581659 ( Cab. Serv. Bur.,  Yb-released January 10, 1995) ("TCI of Northern New Jersey"); SBC Media Ventures  YM-(Montgomery County, MD), 9 FCC Rcd 7175, 7180 (Cab. Serv. Bur. 1994) ("SBC Media  Y8-Ventures"). x where we held that A/B switches are not subject to rate regulation, TCI argues that the MHCRC erred in regulating its charge for A/B switch installations. The MHCRC's rate order determined that TCI's charge for the installation of A/B switches was above the maximum permitted level, and ordered that the charge be reduced by $.04 in Portland and  Y -Multnomah County.S& < Y-ԍMHCRC Rate Order at 6,  2.2. S In its Opposition, the MHCRC asserts, and we agree, that the authorities TCI relies upon dealt with the sale of and not installation charges for A/B  Y-switches.' < Y!-ԍAt issue in SBC Media Ventures was the local franchising authorities' decision to "set  Y!-a rate of $3.00 per switch for the sale of A/B switches to subscribers by SBCMV." SBC  Y"-Media Ventures, 9 FCC Rcd at 7180 (emphasis added). See also TCI of Northern New  Y#-Jersey, 10 FCC Rcd at 16581659. However, the logic we applied in determining that the sale of A/B switches is not subject to regulation also applies to operator charges for the installation of such unregulated equipment. The 1992 Cable Act directed us to establish rate standards for" '0*(("  Y-"installation and lease of equipment used by subscribers to receive the basic service tier."z(< Yy-ԍSee Communications Act,  623(b)(3), 47 U.S.C.  543(b)(3). z  Y-In SBC Media Ventures, we concluded that A/B switches were not used to receive the basic  Y-service tier.]){< Y-ԍSBC Media Ventures, 9 FCC Rcd at 7180.] Because A/B switches are not devices used to receive basic cable service,  Y-neither the sale of such devices nor charges for their installation are regulated.*.< Y-ԍCf. TCI of Northern New Jersey, 10 FCC Rcd at 1659, where we stated, "[s]ince VCRs are, indeed, used to 'receive the basic service iter,' TCI's charges for VCR installations are subject to our rate regulations."  We remand this issue back to the MHCRC for resolution consistent with our ruling herein.  Xx- D.` ` Inside Wiring Maintenance Plan  YJ-21.` ` TCI argues that the MHCRC exceeded its authority by prescribing rates for  Y3-TCI's inside wiring maintenance plan._+3< Y-ԍThe MHCRC determined that TCI's proposed monthly charge for inside cable wiring maintenance contracts was a regulated rate, and determined that the maximum monthly  Yi-charge for Portland was $.11 for Portland and $.12 for Multnomah County. See MHCRC Rate Order at 6,  2.3. _ TCI contends that its inside wiring maintenance plan should not be subject to regulation. In support of its plea for unregulated status, TCI argues that its service contract is analogous to equipment sales by cable operators. Relying on the  Y -First Order on Reconsideration, TCI asserts that the Commission has concluded that such sales are unregulated if the cable operator also offers the equipment for lease under regulated  Y -rates., ! < Y-ԍTCI notes in its Appeal that we have previously stated that "equipment sales by an operator will be unregulated where the operator offers subscribers the same equipment under regulated leased rates." Appeal at 8 (quoting First Order on Reconsideration, Second Report and Order, and Third Notice of Proposed Rulemaking in MM Docket No. 92266, 9 FCC  Y8-Rcd 1164, 1192 (1993) ("First Recon. Order")).  TCI claims that the option it offers its subscribers of asneeded service, with the charge based on actual hours times the hourly service charge ("HSC"), is the "regulated" alternative to its "unregulated" inside wiring maintenance service contract. In addition, TCI argues that because its contract for maintaining inside cable wiring is "optional" to the subscriber, its service contract should not be subject to regulation.  Y8-22.` ` In response, the MHCRC maintains that it has properly interpreted Commission rules in determining that TCI's service contract for maintenance of inside wiring was subject to regulation. The MHCRC asserts that charges for service and maintenance of customer premises equipment, such as inside cable wiring, should be regulated on the basis of hourly service charges regardless of (1) whether the cable operator or the subscriber owns" x,0*((" the equipment, (2) whether such services were sold by the hour at the time of service need or on the basis of a onetime, monthly, or periodic fee, or (3) whether the purchase of the service from the cable operator was optional or not. The MHCRC points out that it has no evidence to indicate that TCI's service charge is based on the HSC. The MHCRC argues that TCI's argument that the service contract is optional should not be a controlling factor in determining the regulatory status of the service contract, nor TCI's assertion that there may be other sources for obtaining such services.  YH-23.` ` We recently ruled on this issue and made the following determinations.-H< Y -ԍSee M.L. Media Partners, L.P., Trading as MultiVision Cable TV (Fairfield, California), DA 951352 (Cab. Serv. Bur., released June 19, 1995).  Y1-Inside wiring is customer equipment,Q.1d< YF -ԍSee 47 C.F.R.  76.923.Q the regulatory treatment of which depends upon who owns it. The record in this appeal with regard to the ownership of the inside wiring is unclear. An operator is not likely to be the owner of a subscriber's inside wiring if it did not install the wiring in the subscriber's premises. In addition, an operator is not the owner if the operator installed the wiring but transferred ownership of the wiring to the subscriber. However, if an operator installs the inside wiring and retains ownership of that wiring, our  Y -rules specifically provide that the rate for the lease of that equipment must be justified. K/ < Yo-ԍUnder our rules, subscriber charges for inside wiring shall not exceed actual costs.  YX-See 47 C.F.R.  76.923(a). Section 76.923(a) of our rules identifies equipment subject to price regulation as including but not limited to "other cable home wiring." K  Y-The rate for operatorowned wiring includes a component for maintenance costs. ]0< Y-ԍFirst Recon. Order, 9 FCC Rcd at 1200.] Under  Yy-such circumstances, TCI's subscribers can not also be charged a separate wire maintenance  Yb-fee.W1bO < Yb-ԍSee 47 C.F.R.  76.923(a)(4).W On the other hand, if TCI's subscribers own their inside wiring, no lease rate would  YK-apply, obviously, but TCI's costs of providing any maintenance and repair of that wiring  Y4-may be recovered through a service contract. T24 < Y-ԍSee 47 C.F.R.  76.923(i).T Our rules provide that charges for such  Y-service contracts must be based on the operator's HSC3 < Y"-ԍWe note that the operator's HSC should include the cost of repair of inside cable wiring. multiplied by either the estimated  Y-average number or the actual number of hours for maintenance and repair.w4vO< Y&-ԍId. Rates for service contracts are subject to rate regulation for the same reason that  Y&-sales of equipment are regulated.#Xw PE37" MHCRC requesting a basic service rate adjustment, which is why the MHCRC has not made any rulings in its rate order on this issue.  Y-26.` ` Under our rules, a rate adjustment with respect to basic rates only becomes effective once it has been approved by the regulator or once the review period for such  Y-approval has lapsed.@8< Y-ԍ 47 C.F.R.  76.933.@ An operator's per month refund liability, i.e., the difference between the amount actually charged and the permitted rate, continues at the same level until the operator reduces its actual rate or the operator, in accordance with our rules, obtains increases in its maximum permitted rate. The per month refund liability does not decrease  Y3-just because the operator might be able to propose an increase in its rates but did not do so.9f3y< Y] -ԍ Operators may not set programming service rates at higher than permitted maximum rates to recover lost equipment revenues when they voluntarily price equipment rates below their maximum permitted levels. To permit operators to do so would undermine Congress's intention to create a competitive market of cable equipment providers. United Cable Television of California, Inc., d/b/a TCI Cablevision of Davis (Davis, California), DA 95 Y-784,  7 n.12 (Cab. Serv. Bur., released Apr. 12, 1995). See Communications Act,  Y- 624A(c)(2)(C), 47 U.S.C.  544A(c)(2)(C); Implementation of Section 17 of the Cable Television Consumer Protection and Competition Act of 1992: Compatibility Between Cable Systems and Consumer Electronics Equipment, First Report and Order, 9 FCC Rcd 1981, 1982 (1994). TCI also claims that operators would be encouraged to file and implement every Form 1210 adjustment "as quickly as possible" if operators cannot use intervening cost increases to offset their refund liability. While our current rules do not prohibit the scenario that TCI envisions, we expect that operators will comply with our rules with respect to the filing  Y-requirements for Form 1210s. See, e.g., 47 C.F.R.  76.922(d); Falcon Cable Systems Company (San Luis Obispo County, California), DA 951136 (Cab. Serv. Bur., released May 23, 1995).   Y -27.` ` TCI's reference to our offsetting cases, in which we have held that refund liability is computed by comparing the operator's aggregate revenues to revenues that would have been realized from maximum permitted rates, is misplaced. Those decisions hold that the franchising authority must offset any undercharges in rates against overcharges in other  Y -rates.: < Y#-ԍ See TCI Cablevision of North Central Kentucky. See also Third Recon. Order, 9 FCC Rcd at 4353. This is unrelated to the situation TCI poses here, where subsequent cost increases have occurred which it claims reduce its refund liability. Our current rules do not authorize  Y{-rate increases until approved by the local franchising authority.?;{C< Yo'-ԍ 47 C.F.R.  76.933.? We allow offsets of rate"{;0*((" undercharges and overcharges which the operator has adopted in an effort to comply with our rate regulations. The refund calculation is dependent upon a comparison of permitted rates and aggregate rates during the period of review. We will not allow offsets of potential rate increases, such as those proposed by TCI here, because such increases are not permitted rates, and cannot be effective, until authorized by the local authority. Only after that approval has been obtained can the operator's refund liability be reduced. For the reasons set forth above, we find that the MHCRC's rate order with respect to calculation of TCI's  Y_-refunds are reasonable, and therefore TCI's appeal on this issue is denied.<_< Y-ԍ See TCI Cablevision of Washington at  1114 (TCI's appeal of the same issue denied); TCI Cablevision of Washington, Inc. (Aberdeen, Washington), DA 951495,  1316 (Cab. Serv. Bur., released July 10, 1995) (same). We note that, if, prior to TCI's implementation of its refund, the MHCRC approves a higher basic rate, we assume that the MHCRC will adjust TCI's refund liability accordingly.  X1- F.` ` Increasing Rates  Y -28.` ` TCI argues that the MHCRC's rate order denies it the right to increase existing rates to maximum permitted levels and potentially subjects such rate increases to a "second round of local review." The challenged provision of the rate order states: The [MHCRC] is authorized under FCC Rules to review and establish rates for basic service and associated equipment and installation charges. This order does not authorize TCI to increase any rates or charges under the jurisdiction of the  Yb-[MHCRC], even where the maximum permitted rate may exceed the actual rate (#(#charged by TCI. Pursuant to applicable federal law, TCI shall not increase any basic  Y4-rates or associated equipment and installation charges to any subscriber or group of (#(# Y-subscribers without prior review and approval by the [MHCRC].[R=< Y-ԍMHCRC Rate Order at 7,  2.7. R] TCI asserts that this provision contravenes the Commission's previous decisions permitting operators to increase "actual" rates to "maximum permitted levels."  Y-29.` ` In response, the MHCRC asserts (and TCI does not dispute) that TCI has no existing rates for basic services or charges for equipment and installation which are below  Y|-maximum permitted levels.L>|< Y"-ԍSee Opposition at 21.L The MHCRC states that the rate order does not prevent TCI from seeking rate increases under a Form 1210 filing, or as otherwise provided under by the  YN-Commission's rules.;?N < Y&-ԍId. ; The MHCRC further states that the rate order only requires TCI to make adjustments to existing rates that are above maximum permitted levels in compliance"76 ?0*((L" with FCC regulations, and does not require TCI to keep any existing rates below maximum  Y-permitted levels.;@< Yb-ԍId. ;  Y-30.` ` In reply, TCI asserts that the MHCRC misinterpreted its objections to the  Y-challenged provision.=A{< Y-ԍReply at 10.= TCI states that it "simply objects to the suggestion that a subbenchmark rate (were it to exist) could not be increased without another round of local review, if at all. [TCI] is asking here only for the Commission to clarify that cable operators retain the right to increase any rate component determined through regulatory review to have  YH-been set below the applicable benchmark level.":BH,< Y% -ԍId.:  Y -31.` ` The challenged provision in the MHCRC's rate order appears to be simply a savings clause, intended to preserve the MHCRC's regulatory authority. We are satisfied with the MHCRC's statements in its Opposition that the challenged provision is not intended to prevent TCI from increasing its rates, nor does it require TCI to keep any existing rates  Y -below maximum permitted rates, to the extent consistent with the Commission's rules.OC < YN-ԍSee Opposition at 2021.O Because TCI has no existing rates below maximum permitted levels, and in light of the MHCRC's statements on this point, TCI's appeal of this issue presents no controversy. Accordingly, we will dismiss this issue as moot.  XK- III.ORDERING CLAUSES  Y-32.` ` Accordingly, IT IS ORDERED that TCI's appeal of the MHCRC's rate  Y-order, with respect to the issue of additional outlets, IS DENIED .  Y-33.` ` IT IS FURTHER ORDERED that TCI's appeal of the MHCRC's rate order,  Y-with respect to the issue of resetting equipment rates, IS REMANDED to the MHCRC for resolution in accordance with the terms of this Order.  Y-34.` ` IT IS FURTHER ORDERED that TCI's appeal of the MHCRC's rate order,  Yj-regarding the regulatory status of installation charges for A/B switches, IS REMANDED to the MHCRC for resolution in accordance with the terms of this Order.  Y&-35.` ` IT IS FURTHER ORDERED that TCI's appeal of the MHCRC's rate order,  Y-with respect to the issue of TCI's inside wiring maintenance plan, IS REMANDED to the MHCRC for resolution in accordance with the terms of this Order. "C0*(( !"Ԍ Y-36.` ` IT IS FURTHER ORDERED that TCI's appeal of the MHCRC's rate order,  Y-with respect to the refund liability issue, IS DENIED.  Y-37. ` ` IT IS FURTHER ORDERED that TCI's appeal of the MHCRC's rate order,  Y-regarding the issue of increasing rates, IS D ISMISSED as moot.  Yz-38.` ` IT IS FURTHER ORDERED that our stay of the MHCRC's rate order  Yd-pending the resolution of this appeal is hereby VACATED .  Y7-39.` ` 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. ` `  hh,FEDERAL COMMUNICATIONS COMMISSION ` `  hh,Meredith J. Jones ` `  hh,Chief, Cable Services Bureau