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File how2ftp (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** I.II.$// Appeal ORDER in City of Garland, TX, DA 95-2275//$ $/76.922 Rates for basic service tier/$ $/76.938 Proprietary information/$ $/76.944 Commission review of franchising authority decision/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-2275 In the Matter of: ) ) TCI CABLEVISION OF THE ) METROPLEX, INC. ) ) Appeal of Local Rate Order of ) Garland, Texas TX0554 ) MEMORANDUM OPINION AND ORDER Adopted: October 30, 1995 Released: November 9, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On February 23, 1995, TCI Cablevision of the Metroplex, Inc. ("TCI"), filed an appeal of a local rate order of the City of Garland, Texas (the "City"), dated January 24, 1995. The City filed an opposition to Cablevision's appeal on March 9, 1995. Cablevision filed a reply to the City's opposition on March 20, 1995. In the local rate order, the City denied a proposed rate increase for basic cable service. 2. The City rejected the proposed rate increase because TCI failed to provide any supporting documentation for the increase which was based on claimed increased programming costs. In its appeal, 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, and that the City's request for supporting documentation is neither reasonable nor necessary. TCI states that the supporting documentation requested by the City is in its programming contracts. TCI contends that the City's request for the information in the programming contracts is not reasonable because the requested information is confidential, and that making the information available to individual franchising authorities will ensure that the information will become public at some point. TCI also argues that review of programming costs by local franchising authorities is not necessary to ensure the validity of TCI's cost increases because an independent accounting firm retained by TCI could review the contracts and verify the cost increases. 3. In its opposition, the City argues that in order to review the merits of a rate increase filing, the City must have documentation supporting the basis for the rate increase. The City states that it told TCI that if the only source of the supporting documentation is TCI's programming contracts, TCI need not identity its programmers to the City. In addition, the City has expressed its intent to maintain the confidentiality of TCI's programming contracts. However, the City contends that TCI cannot simply refuse to provide any documentation for its rate increase on grounds that an employee of the City might disclose the information. Finally, the City observes that TCI's argument is focused on to whom TCI should be required to submit its contracts for review and not on whether review of the programming contracts is reasonably necessary to determine the merits of the rate justification. The City argues that the Commission has already identified the franchising authority as the proper reviewing body. 4. In its reply, TCI concedes that the City is correct in asserting that TCI wants a party other than the City to review programming contracts, but that the City fails to identify any compelling reason why it should be the reviewing party. 5. Under the Commission's rules, appeals of franchising authorities' local rate orders are reviewed by the Commission. In ruling on an appeal of a local rate order, 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 a 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. II. DISCUSSION 6. FCC Form 1200 is the official form used to determine whether an operator's initial regulated programming rates are reasonable under the revised benchmark rules which apply to operators beginning May 15, 1994 or upon the expiration of the deferral period provided under our rules for operators to comply with the revisions to our rules. In the Form 1200, an operator calculates its provisional rates and its full reduction rates. An operator uses FCC Form 1210 to justify adjustments to the initial rates it computed on its FCC Form 1200. An operator may adjust its rates to reflect changes in certain external costs, including programming costs, channel additions and deletions, and inflation. 7. TCI filed a Form 1210 to reflect an increase in programming costs it alleged it incurred between April 1, 1994 and June 30, 1994. The City requested that TCI supply documentation supporting the increase in programming costs. The City rejected the rate increase because TCI failed to provide any supporting documentation for the claimed increase in programming costs. 8. A cable operator that wishes to increase its basic service tier rate has the burden of demonstrating that the increase is in conformance with our rules. In determining whether the operator's increase is in conformance with our rules, a franchising authority has the right to collect additional information from the operator. Where appropriate, the franchising authority, in reviewing a rate justification, may require that the operator provide proprietary information. In so doing, the franchising authority should state the justification for each item of information requested, and should state the section of the form to which the request relates. 9. In response to a request for clarification we received, 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 increases based on increases in programming costs. We stated that our 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 operator's maximum permitted rates. At that time, we declined to address the merits of an alternative proposal contained in the request which is the same as the request presented by TCI in the present appeal. We concluded that we could not change those rules in the absence of a rulemaking proceeding. 10. In the instant case, we believe it reasonable to conclude that programming contracts, which TCI maintains are confidential, may be "reasonably necessary" for the review of a rate increase based on increases in programming costs reflected in those contracts. Indeed, in its reply, TCI does not contest that review of supporting documentation from its programming contracts is necessary. Its objection lies with whether a franchising authority is the proper party to review such programming contracts. As stated in our recent letter discussed above, we have concluded that a franchising authority is, in fact, an appropriate party to review those contracts. We again emphasize, however, that franchising authorities should "be judicious in their requests for programming contracts, to make sure that the information is needed, and to narrow their requests, if appropriate, to permit cable operators to submit only the specific information requested." In this case, the City intends to maintain the confidentiality of TCI's programming contracts and has advised TCI that it need not identify the programmers in those contracts subject to the City's review. Accordingly, we conclude that the City acted reasonably in its request. 11. For the above-stated reasons, we also find that the City acted reasonably in denying the rate increase. However, TCI may resubmit to the City the underlying data in support of its proposed rate increase as long as it has not already made an adjustment in its rates for this or any subsequent period. Our rules state that a proposed rate increase that is due to changes in external costs, must fully reflect all changes in external costs, inflation and the number of channels that occurred "from the end of the last quarter for which an adjustment was previously made" through the end of the quarter that has most recently closed. Accordingly, if TCI has made no further adjustments to its rates following the City's denial of its proposed rate increase, our rules permit TCI to incorporate the cost increases that were the basis of the proposed increase that was denied by the City into a subsequent rate increase proposal. Little may come of a decision by an operator to resubmit a proposed increase to a local franchising authority that had been denied on the merits, but where, as here, the increase was denied because of the refusal of TCI to supply necessary supporting data, and TCI subsequently supplies that data, the City could approve the previously denied increase as part of a rate increase proposal submitted subsequently. III. ORDERING CLAUSE 12. Accordingly, IT IS ORDERED that the appeal by TCI Cablevision of the City of Garland's local rate order, regarding the City's requirement that TCI make its programming contracts available as part of the rate review process, is DENIED. 13. 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