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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) C-TEC Cable Systems of Michigan, Inc. ) CUID No. MI0035 (Coldwater Township) ) ) Complaint Regarding ) Cable Programming Services Tier Rates ) ORDER Adopted: May 30, 1997 Released: June 3, 1997 By the Chief, Cable Services Bureau: 1. In this Order we consider a complaint against February 1, 1997 rate increase that the above-captioned operator ("Operator") implemented for its cable programming services tier ("CPST") in the community set forth above. Operator has attempted to justify its CPST rate increase through a benchmark showing on FCC Form 1240. We have already issued a separate order in which we found that Operator's February 1, 1996 CPST rate increase was unreasonable ("Prior Order"). Accordingly, this Order addresses the reasonableness of Operator's February 1, 1997 CPST rate increase. 2. The Communications Act authorizes the Federal Communications Commission ("Commission") to review the CPST rates of cable systems not subject to effective competition to ensure that rates charged are not unreasonable. If the Commission finds the rate unreasonable, it shall determine the correct rate and any refund liability. The Telecommunications Act of 1996 ("1996 Act"), and our rules implementing the new legislation ("Interim Rules"), require that complaints against CPST rates be filed with the Commission by a Local Franchising Authority ("LFA") that has received subscriber complaints. An LFA may not file a CPST rate complaint unless, within 90 days after such increase becomes effective, it receives more than one subscriber complaint. 3. Cable operators may justify adjustments to their rates on an annual basis using FCC Form 1240 to reflect reasonably certain and quantifiable changes in external costs, inflation, and the number of regulated channels that are projected for the twelve months following the rate change. Any incurred cost that is not projected may be accrued with interest and added to rates at a later time. If actual and projected costs are different during the rate year a "true-up" mechanism is available to correct estimated costs with actual cost changes. The "true-up" requires Operators to decrease their rates or alternatively permits them to increase their rates to make an adjustment for over or under estimations of these costs changes. 4. On March 19, 1997, the LFA filed a complaint regarding the February 1, 1997 increase in Operator's CPST rate in the community referenced above. The LFA asserts that it has received more than one subscriber complaint against Operator's CPST rate increase, thereby triggering the Commission's jurisdiction to review this complaint. The valid complaint from the LFA triggers an obligation on the cable operator to file a justification of its CPST rate with the LFA. Thus, in this case, Operator is required to justify the increase in its CPST rate which is the subject of the LFA's complaint. In its response to the complaint, Operator asserts that its CPST rate increase is justified by the FCC Form 1240 filed with the Commission along with the LFA's complaint. We note that Operator provides service on two CPSTs, CPST-1 and CPST-2. On February 1, 1997, however, Operator increased its rate for CPST-1 only. The rate for CPST-2 remained the same and Operator did not decrease the number of channels carried on that tier. Consequently, in this Order, the term CPST refers to CPST-1. 5. Upon review of Operator's FCC Form 1240, we find that Operator incorrectly calculated its maximum permitted rate ("MPR"). We have adjusted Operator's starting rate on Module A, Line A1 to reflect the corrected MPR of $10.75 that we calculated in the Prior Order. This adjustment required that we correct Module D, Line D8 (Base Rate), Module F, Line F4 (True- Up Period 1 Rate Eligible For Inflation), Line F5 (Inflation Segment For True-Up Period 1), Line F9 (Maximum Permitted Rate For True-Up Period 1), Module H (True-Up Adjustment Calculation), and Module I (New Maximum Permitted Rate). In total, our adjustments resulted in a corrected MPR of $11.17. Consequently, we find that Operator's CPST rate of $12.84, effective February 1, 1997, is unreasonable. 6. Accordingly, IT IS ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321 that Operator's CPST-1 rate of $12.84, effective February 1, 1997, in the community set forth above, IS UNREASONABLE. 7. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321, that the complaint referenced herein against the rate increases charged by Operator in the community set forth above, IS GRANTED. 8. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R. Section 76.961, that Operator shall refund to subscribers in the franchise area referenced in the caption that portion of the amount paid in excess of the maximum permitted CPST-1 rate of $11.17 per month (plus franchise fee) plus interest during the period from February 1, 1997 to the day before Operators reduces its CPST rate to $11.17. 9. IT IS FURTHER ORDERED, that Operator shall promptly determine the overcharges to CPST subscribers for the stated periods, and shall within 30 days of the release of this Order, file a report with the Chief, Cable Services Bureau, stating the cumulative refund amounts so determined (including franchise fees and interest), describing the calculation thereof, and describing its plan to implement the refund within 60 days of the Commission approval of the plan. 10. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321, that Operator revise the calculation of its maximum permitted CPST rate in its next FCC Form 1240 filing in accordance with our findings in this order. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau