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File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** $//ORDER Remanding Appeal in Thousand Oaks, DA 96-223//$ $//76.944 Commission Review of Franchising Authority Decisions//$ $/76.922 Rates for the basic service tier/$ $/76.923 Rates for equipment and installation/$ Before The Federal Communications Commission Washington, D.C. 20554 In the Matter of ) DA 96-223 ) VENTURA COUNTY CABLEVISION, ) ) Petitioner,) ) v. ) ) CITY OF THOUSAND OAKS, CALIFORNIA, ) ) Respondent.) ) Appeal of Local Rate Order based ) on FCC 1200 Series Forms of City ) of Thousand Oaks, California. ) MEMORANDUM OPINION AND ORDER Adopted: February 22, 1996 Released: March 2, 1996 By the Chief, Cable Services Bureau: I. Introduction 1. On April 20, 1995, Ventura County Cablevision ("Ventura"), the franchisee in the above matter, filed an appeal of a local rate order. The local rate order was adopted on March 21, 1995 by Ventura's franchising authority, the City of Thousand Oaks, California ("the City"). In the local rate order, the City established regulated rates for basic cable service and associated equipment, provided by Ventura, as allowed by the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act"). The local order requires Ventura to implement certain rate reductions and to issue refunds for overcharges to subscribers for a period dating back to July 15, 1994. The City opposes Ventura's appeal. 2. In its review of Ventura's Form 1200, the City approved Ventura's maximum permitted rate for equipment and installation, but ordered Ventura to keep its rates for its basic service tier at the current level, rather than at the higher, maximum permitted level. Ventura argues that because of this alleged misapplication of the Commission's rate regulations, the City has improperly reduced Ventura's regulated revenues by setting the rate for its basic service tier below the level permitted under the benchmark regime and has imposed a refund liability that is greater than the level allowed under our rules. Ventura argues that it should be permitted to offset its refund liability for its equipment and installation rates with the undercharges for its basic service tier rate. Ventura also contends that since its refund liability is de minimis the City should not have ordered it returned to subscribers. Ventura further contends that the City improperly disallowed an equipment rate increase because it found that Ventura did not timely file Form 1205 prior to increasing its rates. We consider each of these issues in turn. II. DISCUSSION 3. Under our rules, rate orders issued 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. Therefore, 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 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. A. Refund Offsets 4. The first issue raised by Ventura concerns the proper method used to calculate an operator's refund liability under FCC Form 1200. FCC Form 1200 is the official form used to determine whether regulated rates for programming, equipment and installations 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. Through the use of Form 1200, an operator calculates three sets of figures: (1) the operator's actual March 31, 1994 rate level; (2) the operator's March 31, 1994 benchmark rate level; and (3) the operator's "full reduction" rate level. These figures are used to derive an operator's maximum permitted rates. 5. The operator first completes Module A of the Form 1200 to calculate its March 31, 1994 per subscriber monthly regulated revenue. Next, the operator completes Module B to calculate changes in external costs which the operator is entitled to reflect in its rates but have not yet been passed through to its subscribers. In Module C the operator enters its data with respect to a number of variables to calculate its March 31, 1994 benchmark rate level on a per subscriber, per month basis. The operator's March 31, 1994 actual rate level (Module A plus external costs calculated in Module B) is then compared to the benchmark rate level derived in Module C, with the operator carrying forward the smaller of the two. If the March 31, 1994 actual rate level is smaller, the operator completes Module D, subtracting the monthly per subscriber equipment cost calculated in Form 1205 and adding external costs calculated from Module B. If the benchmark rate level is smaller, the operator completes Module E, subtracting the monthly per subscriber equipment cost taken from Form 1205. Depending on which is used, either Module D or E establishes per-tier rates, which the operator carries forward into Module F, as its so-called provisional rates. 6. In the second part of Form 1200, the operator derives its full reduction rate based on its September 30, 1992 rates. To compute this rate, in Module G, the operator calculates its September 30, 1992 total monthly regulated revenues per subscriber, reduces that amount by 17%, and adjusts upward by 3% to reflect the inflation from September 30, 1992 until September 30, 1993. In Module H, the operator then adjusts the results from Module G for changes since September 30, 1992 with respect to subscribers, regulated channels, and satellite channels. In Module I, the operator subtracts a monthly per subscriber equipment cost amount from Form 1205, establishes per-tier rates, and adjusts for changes in external costs. In Module J, the operator compares its aggregate provisional rate with its aggregate full reduction rate. The maximum permitted rates an operator is actually allowed to charge are either the provisional rates (Module F) or the full reduction rates (Module I), depending on whether the aggregate provisional rate is greater or less than the aggregate full reduction rate, and are entered into Module K. In addition to Form 1200, an operator may file Form 1210, up to quarterly, to claim changes in external costs and inflation that justify rate increases. 7. In a previous order resolving an appeal of the City's local rate order with respect to Form 393, we held that, unless the City questions the bases for the figures in Ventura's Form 393 or discovers mathematical errors or other mistakes in the Form, the City should allow Ventura to charge up to its maximum permitted rates. We also held that the City must permit Ventura to offset or reduce any refunds it may order by the difference between the actual basic service tier rate that Ventura charged and the maximum permitted rate that it could have charged during the applicable period of review. Though the present appeal is related to Ventura's Form 1200, we reach the same result here that we did in Ventura I. According to Ventura's submission, the City has directed Ventura to charge less than its maximum permitted levels for certain components of its regulated service and to issue refunds without regard to the fact that some rates are below maximum permitted levels. We are remanding this case to the City so that it can reconsider its ruling in a manner consistent with our findings here and in Ventura I. B. De Minimis Refund Liability 8. Ventura next contends that even if the City's calculations are accepted, the refund liability amount at issue is de minimis and should therefore not be returned to subscribers. Since we are remanding the local rate order for further proceedings related to Ventura's refund liability, this issue is dismissed as moot. C. Equipment Rate Increase 9. Ventura next contends that the City improperly ruled that Ventura's October 1, 1994, increase in its converter rate was premature. The City ruled that Ventura did not file FCC Form 1205 with the City in a timely fashion prior to increasing the rate. Ventura states that it filed its Form 1205 with the City on August 14, 1994 and then increased the converter rate on October 1, 1994, more than 30 days after the Form was filed. The City responds that the Form 1205 filed on August 14, 1994 did not contain the rate increase imposed by Ventura on October 1, 1994. The City further states that because Ventura initially unbundled its rates in March, 1994, it could not file for an increase until one year later, i.e., March, 1995. Ventura replies that it unbundled its equipment and installation rates prior to September 1, 1993 and therefore did not have to wait until March, 1995. 10. FCC Form 1205 is the official form used to determine the costs of regulated cable equipment and installation. 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. The second use for Form 1205 is to update permitted regulated equipment and installation charges based on equipment basket costs. 11. 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 which it unbundled equipment and installation charges before changing these charges. 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 establishing its initial maximum permitted rates for programming services. These instructions comport with our previous determination that equipment rates can only be changed annually. 12. The City is therefore correct in stating that Ventura must wait one year before filing for an equipment and installation rate increase. It appears, however, that though Ventura may not have filed rate justification forms with the City until March, 1995, Ventura's rates were actually unbundled prior to September 1, 1993. If Ventura restructured its rates on or prior to September 1, 1993, then Ventura was permitted to file for an equipment and installation rates on or after September 1, 1994. If Ventura did not restructure until March, 1994, then it had to wait until March, 1995 before it could file for an increase. Since we are unable to discern with certainty from the parties' pleadings when Ventura restructured, we must remand this issue to the City for further proceedings consistent with our opinion here. III. Ordering Clauses 13. Accordingly, IT IS ORDERED that Thousand Oaks' local rate order IS REMANDED, with the above instructions, to the City of Thousand Oaks, California for further action in accordance with this order. 14. IT IS FURTHER ORDERED that Ventura County Cablevision's appeal with respect to de minimis refund liability IS DISMISSED. 15. IT IS FURTHER ORDERED that Ventura County Cablevision's request for an emergency stay IS DISMISSED. 16. This action is taken by the Chief, Cable Services Bureau, pursuant to authority delegated by  0.321 of the Commission's rules. 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau