$//ORDER Granting Stay in Derby, CT, et al, DA 95-2296//$ $/76.922 Rates for the basic service tier/$ $/76.923 Rates for equipment and installation/$ $/1.45(d) Request for Stay/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-2296 In the Matter of: ) Derby, CT ) Ansonia, CT TELE-MEDIA COMPANY OF ) Seymour, CT WESTERN CONNECTICUT ) Shelton, CT ) Naugatuck, CT Petition for Stay of Local Rate Orders) Oxford, CT of the Connecticut Department ) Beacon Falls, CT of Public Utility Control ) Bethany, CT ORDER Adopted: November 6, 1995 Released: November 16, 1995 By the Chief, Cable Services Bureau: I. Introduction 1. On August 24, 1995, Tele-Media Company of Western Connecticut ("Tele- Media") filed an Emergency Petition for Stay of rate orders of the Connecticut Department of Public Utility Control ("DPUC") pending a ruling on Tele-Media's appeal of those orders. Tele-Media's appeal was filed with the Commission on June 21, 1995. The subject of both the stay request and the appeal are two local cable rate orders issued by the DPUC on May 22, 1995. The DPUC has indicated orally that it does not intend to oppose the stay request. 2. The DPUC's local rate orders address the rates Tele-Media charged for basic cable service, associated equipment and installations for the period of time from September 1, 1993 to May 15, 1994, and the period subsequent to May 15, 1994. In the DPUC rate proceedings, Tele-Media elected to use the cost of service approach in order to justify its rates. 3. The DPUC conducted in-depth cost of service proceedings and issued two comprehensive decisions. In the decisions at issue here, the DPUC found that Tele-Media's basic service rates exceeded the company's costs, and ordered the company to reduce its rates and refund to subscribers the overcharges levied since September 1, 1993. Tele-Media states that the DPUC's local rate orders require Tele-Media to refund $8.6 million for the period from September 1, 1993 through August 1, 1995 and impose a revenue reduction of $360,000 per month once the lowered rates are implemented. Tele-Media asserts that it does not have access to the capital necessary to make the mandated refunds. Further, Tele- Media states that the revenue loss caused by the ordered rate reductions could force Tele- Media into bankruptcy. Tele-Media seeks a stay of the local rate orders pending the resolution of its appeal on the merits. II. Standard of Review 4. The Commission evaluates petitions for stays under well-settled principles. To support a stay, a petitioner must demonstrate: (1) that it is likely to prevail on the merits; (2) that it will suffer irreparable harm if a stay is not granted; (3) that other interested parties will not be harmed if the stay is granted; and (4) that the public interest favors the granting of a stay. As discussed below, resolution of this stay petition centers primarily on the strength of Tele-Media's argument regarding the second and third prongs of this test. III. Discussion 5. The Commission's rules permit operators to implement refunds in either of the following methods: (1) by returning overcharges directly to those subscribers who actually paid the overcharges; or (2) by means of a prospective percentage reduction in the rates for the basic service tier or associated equipment for current subscribers via a specifically identified, one-time credit. Thus, the Commission's rules are structured so that individuals who were actually overcharged might not receive refunds in the future. Thus, a delay in the implementation of the refunds owed by Tele-Media will not harm any interested party, since if Tele-Media must implement refunds, it can choose to do so by way of credits to the then- current class of subscribers. 6. A stay of the local rate orders would prevent Tele-Media from being subjected to the irreparable economic harm it could face if it were required to issue the refunds directed by the DPUC. Given our findings herein, and the fact that the DPUC does not oppose Tele-Media's Petition for Stay, we will grant Tele-Media's request that the DPUC orders in the above-referenced proceedings be stayed pending our full review of this case on the merits. Based on our preliminary review of Tele-Media's pleadings, we will not require Tele-Media to establish an escrow account or post a bond in the amount of the refunds ordered by the DPUC. Tele-Media states that the rate approved by the DPUC is nearly 50 percent less than what its benchmark rate would have been had Tele-Media not proceeded with a cost-of-service showing. Tele-Media states further that the costs and obligations associated with the establishment of an escrow account or even the posting of a bond of the size indicated by the DPUC order would have the same effect on Tele-Media as having to implement the DPUC order itself, namely "the specter of bankruptcy and cessation of service." However, we have a continuing obligation to protect the interests of Tele- Media's subscribers, which we cannot ignore even in these circumstances. Accordingly, we will require Tele-Media to establish an escrow account or post a bond in the amount of $1,000,000 while the requested stay is in effect. The requirement is intended to provide some degree of security for Tele-Media's subscribers without causing the collapse of the entity. IV. Ordering Clauses 7. Accordingly, IT IS ORDERED that the Petition for Stay filed by Tele-Media IS GRANTED pending the resolution of Tele-Media's appeal on the merits. 8. IT IS FURTHER ORDERED that Tele-Media SHALL PLACE $1,000,000 in an interest-bearing escrow account OR SHALL SECURE that amount by the posting of a bond for the benefit of the DPUC, plus interest on that amount for a 12 month period from the date of this Order. Proof of Tele-Media's compliance with this Order shall be filed with the Commission within 30 days of the release of this Order. Interest shall accrue, or be computed, at the prevailing U.S. Internal Revenue Service Rate for tax refunds and additional tax payments. 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