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A. a.(1)(a) i) a)DocumentgPleadingHeader for Numbered Pleading PaperE!n    X X` hp x (#%'0*,.8135@8:><q*"xxxxWWxxxWWkkxxxdstoc 2toc 2;` hp x (#` !(#B` !(#B` hp x (#toc 3toc 3<` hp x (#` !(# ` !(# ` hp x (#toc 4toc 4=` hp x (# !(#  !(# ` hp x (#toc 5toc 5>` hp x (#h!(# h!(# ` hp x (#2|?u@vwAHxBfztoc 6toc 6?` hp x (#!(#!(#` hp x (#toc 7toc 7@ toc 8toc 8A` hp x (#!(#!(#` hp x (#toc 9toc 9B` hp x (#!(#B!(#B` hp x (#2C|D~EFvindex 1index 1C` hp x (#` !(# ` !(# ` hp x (#index 2index 2D` hp x (#` !(#B` !(#B` hp x (#toatoaE` hp x (#!(# !(# ` hp x (#captioncaptionF 2GlHr$IJ}_Equation Caption_Equation CaptionG endnote referenceendnote referenceH head1 #I'd#2p}wC@ #a1Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfJ$ 2&KąLLM߆N}a2Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfK/` ` ` a3Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfL:` ` `  a4Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfME` ` `  a5Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfNP  ` ` ` hhh 2OXP Qˉa6Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfO[   a7Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfPf  a8Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfQq $//Appeal ORDER, TCI CABLEVISION OF SAN JOSE, DA 952270/$ $/76.922 Rates for the basic service tier/$ $/76.923 Rates for equipment and installation/$ $/76.944 Commission Review of Franchising Authority Decisions/$ Y-TX01Í ÍX01Í Í#Xw PE37}XP# T  Xv-2(   I. A. 1. a.(1)(a) i) a) I. 1. 1. a.(1)(a) i) a)ي Before the W FEDERAL COMMUNICATIONS COMMISSION  XH-Washington, D.C. 20554 TP  X - `*(#DA 95 2270 ă  Y - In the Matter of:R) R) TCI Cablevision of San Jose, R)  Y -R)hpp  xx 0(#(#X x` ` PetitionerR) R) x` ` v.R) R) City of Sunnyvale, CA,R) R) x` ` RespondentR) R)TPAppeal of Local Rate Order ofR) Sunnyvale CA R)  Y-}  MEMORANDUM OPINION AND ORDER ă  Xf-  YO-Adopted :` ` October 30, 1995hh@hpp Released :  November 15, 1995 By the Chief, Cable Services Bureau:  X- I.xINTRODUCTION  Y -x1.` ` On April 24, 1995, TCI Cablevision of San Jose ("TCI"), filed an appeal of a local rate order of the City of Sunnyvale, California (the "City"), which was adopted on  Y"-March 22, 1995.y" Y%-ԍ Although TCI's appeal was due no later than April 21, 1995, i.e., 30 days from the date of adoption of the local rate order, we will accept the appeal because on April 21, 1995, the Commission unexpectedly closed early in the day. The next business day on which pleadings could have been filed with the Commission was April 24, 1995. y The City filed an opposition to TCI's appeal on May 12, 1995."4 Y-ԍ On May 5, 1995, the City requested a one week extension of time (from May 9, 1995 to May 16, 1995) within which to file its opposition to TCI's appeal. TCI did not oppose the City's request. On May 8, 1995, the Cable Services Bureau granted the City's request for a one week extension of time. Accordingly, the City's opposition was timely filed. TCI""40*0*0*#" filed a reply to the City's opposition on May 22, 1995. In its local rate order, the City denied a $0.21 rate increase for TCI's basic cable service that TCI had proposed in its FCC  Y-Form 1210 rate filing on September 29, 1994.  Y -#Xw PE37}XP#э Under the Cable Television Consumer Protection and Competition Act of 1992, and the Commission's implementing regulations, local franchising authorities may regulate rates  Y-for basic cable service, associated equipment, and installations. See Cable Television Consumer Protection and Competition Act, Pub. L. No. 102385, 106 Stat. 1460 (1992); Communications Act, 623(b), 47 U.S.C. 543(b).  Of that amount, $0.02 was for increases in the number of basic tier channels and $0.19 was for increases in programming costs from April 1, 1994 through September 30, 1994. The City's rejection of TCI's proposed rate increase was based upon TCI's failure to substantiate its increased programming costs.  YH-x2.` ` The record shows the following facts. Prior to the adoption of its local rate order, the City twice requested "credible documentation" from TCI regarding its basic tier programming costs, although it did not specifically ask to see TCI's programming contracts. TCI's first response was a brief letter explaining that the $0.19 increase in programming costs was related to the movement of four channels from the expanded to the basic tier. Its second response was another letter to the City, which again emphasized that most of the increased programming costs were related to the movement of four channels from the expanded to the basic tier. Because the City did not find that these responses sufficiently addressed its concerns regarding the validity of the increase in TCI's basic tier programming costs, the City requested further documentation regarding TCI's basic tier programming costs. TCI refused to comply with this request because it claimed that providing details of the actual programming costs would require the release of proprietary information from its programming contracts. TCI then offered to have an independent accounting firm review its programming contracts to certify the accuracy of the data contained in its FCC Form 1210  Y-submission.x  Y$-ԍxAs part of its suggestion that an independent accounting firm verify the data regarding its programming costs, TCI also proposed to the City that this Commission review the  Y&-contracts in camera if the City should desire further verification of TCI's programming costs after its receipt of the independent accountant's certification. In support of this proposition, TCI argued that: (1) the likelihood of leaks of confidential information would be reduced if only one federal agency reviews the contracts, rather than a number of franchising"=)0*0*0*m)" authorities; (2) since most programming is priced the same to companies owned by a single multiple system operator, the Commission's review of one contract could apply potentially to thousands of franchises; (3) the Commission could review the same material in the context of cable programming service ("CPS") rate reviews, reducing duplication of local and federal efforts; (4) the Commission is better equipped to deal with the complexities of the pricing structures involved; (5) franchising authorities would save money on consultants' fees; (6) knowing that Commission review was available, franchising authorities would recognize that operators would have no incentive to misrepresent their programming costs; and (7) the Commission's authority to impose refunds and sanctions on a national basis for inaccurate rate justifications would ensure that such inaccuracies would not occur. Appeal at 45.  At the time, the City declined this offer." 0*0*0*"Ԍx  Y-x3.` ` In its local rate order, the City denied TCI's proposed basic rate increase until the programming cost data contained in TCI's FCC Form 1210 submission could be substantiated. However, in its rate order, the City also agreed to adopt TCI's proposal to have an independent accounting firm review TCI's programming contracts to certify the accuracy of the data regarding TCI's programming costs. The City set forth the following two conditions for such a process: (a) TCI must bear the cost of the process and (b) the City would formulate the questions to be used in the certification process. The City's rate order stated that, once TCI's programming cost data could be verified, the City would rule upon TCI's proposed $0.21 basic rate increase.  Y -x4.` ` TCI's appeal raises two separate issues. The first issue is whether the supplementary information requested by the City in this case is reasonably necessary to verify the basic tier programming costs contained in TCI's FCC Form 1210. It is TCI's position that the supplementary information requested by the City is not reasonably necessary for the City's FCC Form 1210 review and, thus, impermissibly threatens the confidentiality of proprietary information. TCI contends that a franchising authority is only entitled to request information that is reasonably necessary for it to review an operator's rates and to prepare a local rate order. It is TCI's position that the City's request for information regarding TCI's programming costs is neither reasonable nor necessary. TCI states that the City's request threatens the confidentiality of critical proprietary information because making that information available to individual franchising authorities will ensure that the information will become public at some point.  Y-x5.` ` The second issue raised in TCI's appeal involves the certification of TCI's programming costs by an independent accounting firm. TCI contends that the review of its programming cost information by the City is unnecessary because the certification of its  Y-programming data by an independent accounting firm, or, alternatively, in camera review by the Commission, would ensure the validity of the information provided and avoid the unnecessary disclosure of confidential programming information. While TCI notes the City's willingness to attempt to avoid confidentiality problems by allowing certification of the data by an independent accounting firm, it states that the conditions required by the City may make the data certification process unworkable. TCI contends that it is unnecessary for the City to have total control over the formulation of the questions used in the certification process because accounting firms have strict rules regarding the manner in which they operate and the efficacy of TCI's certification proposal depends upon the accounting firm"0*(( " following its predesignated procedures. Accordingly, TCI asks that the local rate order be remanded to the City with instructions that the City's rejection of TCI's FCC Form 1210 be reversed and, at a minimum, that the City be required either to accept a reasonable cost certification from an independent accounting firm or to ask for Commission review of TCI's programming contracts.  Yv-x6.` ` In its opposition, the City argues that it would be virtually impossible for it to make an informed evaluation of TCI's proposed rate increase without information about the increase in TCI's basic tier programming costs. The City states that while it has proposed  Y1-pursuing a modified form of the data certification method proposed by TCI, the City believes that the Commission's regulations support its right to request, and to receive, any information that it needs to make a rate determination, including proprietary information. Although the City emphasizes in its opposition that it did not ask to review TCI's programming contracts, but rather asked for credible information to substantiate the programming costs that formed the basis for the proposed rate increase, it does believe that it has the authority to request additional information from TCI, including information of a proprietary nature such as programming contracts. The City also states that it not only has the administrative ability to maintain confidential information, but also a legal obligation to do so under the franchise agreement between the City and TCI. Finally, the City contends that its proposed modified data certification method is necessary to prevent the accounting firm performing the certification of TCI's programming costs from simply serving as an "expert witness" that will certify whatever TCI requests.  Y-x7.` ` In its reply, TCI states that by proposing a modified method of data certification, the City has effectively concluded that the disclosure of all proprietary information is not reasonably necessary. TCI asks that the Commission reject the City's efforts to deny TCI's proposed rate increase based on a failure to produce proprietary programming contracts, when other means, such as an accounting firm's certification, are available to give the franchising authority a reasonable degree of comfort concerning the legitimacy of the request for a rate increase.  X7- II.xSTANDARD OF REVIEW x  Y -x8.` ` Under the Commission's rules, appeals of franchising authorities' local rate  Y-orders are reviewed by the Commission.f Yk!-#Xw PE37  YQ-ԍ 47 C.F.R.  76.937(a).C In determining whether the operator's increase is in conformance with our rules, a franchising authority has  Y4-the right to direct that the operator provide supporting information.Q 4  Y -ԍ Rate Order, 8 FCC Rcd at 571819.Q Where appropriate, the franchising authority, in reviewing a rate justification, may require that the operator provide  Y-proprietary information.{  YY$-ԍ Id.; Third Recon. Order, 9 FCC Rcd at 434345; 47 C.F.R.  76.938.{ In so doing, the franchising authority should state the justification"U 0*((" for each item of information requested, and should state the section of the form to which the  Y-request relates.@ Yb-ԍ 47 C.F.R.  76.938.@  Y-x 11.` ` In response to a request for clarification,y Y-ԍ Letters from Wesley R. Heppler, Esq. and Paul Glist, Esq., Cole, Raywid & Braverman, to Meredith Jones, Chief, Cable Services Bureau (Aug. 8, Sept. 19, and Oct. 28, 1994). we recently addressed the issue of whether operators are required to provide franchising authorities with copies of programming contracts, which the operators maintain are confidential, to support rate  Yv-increases based on increases in programming costs.v Y# -ԍ See Letter from Meredith Jones, Chief, Cable Services Bureau, to Wesley R. Heppler, Esq. and Paul Glist, Esq., DA 951175 (May 26, 1995) ("Letter"). We stated that Commission rules require that, upon proper request by the franchising authority, an operator must disclose to the franchising authority material, even proprietary information, determined by the franchising authority to be reasonably necessary in making a determination regarding the  Y -operator's maximum permitted rates.{  Yc-ԍ The franchising authority must state clearly the reason for the request, and to which  YL-portion on the FCC form the requested information specifically relates. Letter at 4; Third  Y7-Recon. Order, 9 FCC Rcd at 4344. Here, TCI does not challenge whether the City properly submitted its request. { At that time, we declined to address the merits of an alternative proposal contained in the request which is similar to the request presented by TCI in the present appeal. We concluded that adopting an alternative would require a change in  Y -our rules and that we could not change our rules in the absence of a rulemaking proceeding.8   Y-ԍ Letter at 45.8  Y -x 12.` ` In the instant case, the City has concluded that the review of TCI's programming costs may be reasonably necessary if the modified data certification process does not produce the necessary substantiation of programming cost increases. It is the City's position that it cannot properly evaluate TCI's FCC Form 1210 filing without verifying the increased basic tier programming costs which account for $0.19 of TCI's proposed $0.21 rate increase. We believe it is reasonable for the City to conclude that further substantiation of TCI's increased programming costs is necessary. We emphasize, however, that franchising authorities should be judicious in their requests for proprietary data, make sure that such information is needed, and narrow their requests, if appropriate, to permit cable  Y-operators to submit only the specific information requested.@ YB&-ԍ See Letter at 5.@ In light of the City's stated need for verification of TCI's programming costs, as well as the specificity of the"l0*((" information requested by the City and the City's pledge to maintain the confidentiality of this information, we conclude that the City's request for supplementary information was reasonable.  Y-x 13.` ` As noted in paragraphs 11 and 12, supra, the City has the right to examine supplemental information regarding TCI's programming costs since this information is reasonably necessary to its review of TCI's FCC Form 1210. However, in the instant case, although the City has the right to examine proprietary information, it has proposed a modified data certification method under which it is willing to have an independent accounting firm verify the accuracy of TCI's programming cost data, as well as the methodology by which this data was derived. Thus, the City may require TCI to provide  Y -the supplementary information which it has requested,H  Y~ -ԍ As noted in paragraph 6, supra, under the terms of its franchise agreement with TCI, the City must maintain the confidentiality of TCI's proprietary information. The City has acknowledged this duty and has pledged to maintain the confidentiality of all proprietary information. H or, if an agreement can be reached between it and TCI, permit TCI to proceed under the terms of the modified data certification process proposed by the City.  Y -x 14. ` ` As noted in paragraph 12, supra, it is our determination that it was reasonable for the City to conclude that it could not properly evaluate TCI's FCC Form 1210 filing without verifying the increased basic tier programming costs which account for $0.19 of TCI's proposed $0.21 rate increase. Accordingly, in light of this finding, as well as the fact that the City will revisit TCI's proposed $0.21 basic rate increase once its programming costs are verified, we find that the City acted reasonably in denying TCI's proposed rate increase until its increased programming costs could be verified. x  X- IV.xORDERING CLAUSE  Y-  Y-x15.` ` Accordingly, IT IS ORDERED that the appeal by TCI Cablevision of San  Y-Jose is DENIED .  Y-x16.` ` 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.  YT- x` ` x` `  hhFEDERAL COMMUNICATIONS COMMISSION x` `  hhMeredith J. Jones x` `  hhChief, Cable Services Bureau