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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 ) ) FALCON CABLEVISION ) ) Appeal of Local Rate Order ) Of the City of Thousand Oaks, California) ) MEMORANDUM OPINION AND ORDER Adopted: June 16, 1997Released: June 18, 1997 By the Chief, Cable Services Bureau: I. INTRODUCTION 1.On December 9, 1996, Falcon Cablevision ("Falcon") filed a petition for review of a local rate order adopted on November 19, 1996, by the City of Thousand Oaks, California ("City"), in which the City established a maximum permitted rate ("MPR") for the basic service tier based on its review of Falcon's FCC Form 1210. The City filed a response to the petition for review on December 23, 1996, and Falcon filed a reply to the City's response on December 31, 1996. 2.In its local rate order, the City approved the entire rate increase Falcon sought but reduced the base rate Falcon used on its Form 1210 to the level the City earlier found to be reasonable based on its review of Falcon's previous Form 1220 and 1210 filings. As a result, the City determined that Falcon's MPR should be reduced from $22.93, which is the level Falcon reported on the Form 1210 at issue here (i.e., the second Form 1210), to $19.57, which is the sum of the rate level the City found to be reasonable on review of the Form 1220, the increase the City permitted on review of Falcon's first Form 1210, and the increase the City permitted on review of the second Form 1210. The City ordered Falcon to reduce its rates in compliance with the local rate order and submit a refund plan to the City within 30 days of the order. 3.In its petition for review, Falcon argues that the City's order was premature because the reasonableness of the Form 1220 and earlier Form 1210 rates had not yet been finally determined. The City's order on the Form 1220, which Falcon had also appealed, was remanded by the Commission on September 10, 1996, with instructions for the City to reconsider certain matters ("Remand Order"). 4.As of December 31, 1996, when Falcon submitted its reply to the City's response in the instant appeal, the City had not yet issued an order in response to the Commission's Remand Order. Falcon, however, has submitted revised Form 1220 information to the City. Falcon contends that the local rate order under review should be remanded with instructions that the City issue a revised determination on the second Form 1210 only after, or at the same time as, it reconsiders its Form 1220 rate determination in compliance with the Commission's Remand Order. 5.On April 24, 1997, we issued an order finding that Falcon is subject to effective competition as a result of the offering of cable television service by GTE Media Ventures ("GTE") ("Falcon Effective Competition Order"). In conjunction with that finding, we revoked the City's certification to regulate Falcon's rates. II. STANDARD OF REVIEW 6.Under our rules, rate orders adopted 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 so 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 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 in a manner that is consistent with the Commission's decision on appeal. III. BACKGROUND 7.On May 3, 1993, the Commission released its order ("Rate Order") establishing rules to implement the cable television rate regulation provisions of the Cable Television Consumer Protection and Competition Act of 1992. In the Rate Order, the Commission determined that a benchmark approach should serve as the primary method for regulating equipment and installations and basic and cable programming service tier rates. The Commission also concluded that because the benchmark methodology might not produce fully compensatory rates in all cases, it was appropriate to permit operators, as an alternative, to justify rates based on costs, using individual cost-of-service showings. The cost-of-service approach was intended to be used only if an operator believed that the maximum rate permitted under the benchmark formula would not enable the operator to recover costs reasonably incurred in providing rate-regulated cable services. FCC Form 1220 is used by operators to justify the need for rates that exceed the otherwise applicable benchmark rates. The rates that are justified through the Form 1220 become the MPRs. 8.Thereafter, operators may justify rate increases based on the addition and deletion of channels, changes in certain external costs, and inflation by filing FCC Form 1210. Such increased rates will become effective 30 days after the operator submits the Form 1210 to its local franchising authority, unless the local franchising authority acts within the 30-day period by either rejecting the rate increase or issuing a tolling order stating that it requires more time in which to complete its review. A franchising authority may toll the effective date of the rate increase for an additional 90 days. 9.The information requested in Form 1210 builds on information provided in earlier rate filings, including previously filed Form 1210s. To determine the updated MPR, which is calculated in Modules J and K of the Form 1210, the operator must start with the MPR reported on its most recently filed Form 1210 or on its Form 1200 or 1220 if it has not previously filed a Form 1210. The previously determined MPR is reported in Module A, line A2, of the 1210 ("Permitted Charge"). IV. DISCUSSION 10.We will grant Falcon's appeal in part and deny it in part. We remand the local rate order with instructions for the City to re-calculate Falcon's MPR based on the MPRs calculated by the City in response to our Remand Order. The Form 1220 MPR should be entered on line A2 of the first Form 1210, and the MPR calculated on the first Form 1210 should be entered on line A2 of the second Form 1210. The resulting MPR calculated on the second Form 1210 should include the rate increase the City approved in its local rate order. 11.The City's revision of Falcon's second Form 1210 MPR to incorporate the MPRs it had found reasonable in its review of the Form 1220 and first Form 1210 cannot be sustained on appeal. The City issued its order on the second Form 1210 after its order on the Form 1220 had been remanded. The MPR set forth in the Form 1220 order therefore could not be used as the basis for the City's calculation of the second Form 1210 MPR. Nor could the City have used Falcon's filed Form 1220 as the basis for calculating the MPR on the second Form 1210 because the Remand Order upheld the City's Form 1220 rulings in certain respects. 12.Although we find here that the City erred in using its remanded Form 1220 rate to calculate the MPR on Falcon's second Form 1210, Falcon also erred when it filed its second Form 1210 by using its own Form 1220 rate as the base rate. When Falcon submitted its second Form 1210, we had not yet ruled on the City's Form 1220 order, and the order was not subject to a stay. Falcon should have used the City-ordered Form 1220 rate as the base rate in its second Form 1210 filing. 13.In addition, because the Remand Order upheld the City's Form 1220 order in certain respects and dismissed Falcon's request for a stay of the City's Form 1220 order, Falcon could not lawfully continue to charge rates that were based on its filed Form 1220. Our rulings on each of the Form 1220 issues were clear and unambiguous. Falcon could have and should have re-calculated and re-submitted its Form 1220 and Form 1210 rates, and it should have implemented the revised rates, subject to the City's right to review them, without waiting for the City to issue an order on remand. 14.The record in this proceeding does not indicate whether the City has issued an order in response to our Remand Order. If the City has done so, then Falcon must re-calculate, re-file and implement its Form 1210 rates to reflect the City's rulings in response to the Remand Order. If the City has not yet done so, then Falcon should re-calculate and re-file its Form 1220 and Form 1210 rates, and implement its revised Form 1210 rates, to reflect the rulings in the Remand Order without waiting for the City to issue an order on remand. The City shall have the right to review Falcon's filings in accordance with the Commission's rules. Falcon may not charge rates in excess of the rates supported by its revised filings. 15.Our recent issuance of the Falcon Effective Competition Order does not abrogate the City's jurisdiction to respond to this Order. The rate filing and part of the rate-effective period at issue in this proceeding predate our finding of effective competition. However, the City may not prescribe rates after March 5, 1997, the date on which Falcon filed its effective competition petition, and Falcon shall not be liable for refunds related to rates charged after that date. V. ORDERING CLAUSES 16.Accordingly, IT IS ORDERED, that Falcon Cablevision's appeal of the November 19, 1996 rate order of the City of Thousand Oaks, California, is GRANTED to the extent discussed herein and DENIED to the extent discussed herein. 17.IT IS FURTHER ORDERED that the foregoing order is REMANDED to the City for resolution in accordance with the terms of this Memorandum Opinion and Order. 18.IT IS FURTHER ORDERED that Falcon Cablevision's appeal of the October 1, 1996 rate order of the City of Thousand Oaks, California, is DISMISSED AS MOOT. 19.IT IS FURTHER ORDERED that within 60 days of the date of this Order, Falcon is directed to revise and re-file its rate forms with the City and, subject to the City's right to review the filings, implement revised rates to reflect the rulings discussed herein and in the Remand Order or in the City's order in response to the Remand Order if it has issued one. 20.This action is taken by the Chief, Cable Services Bureau, pursuant to authority delegated by Section 0.321 of the Commission's rules. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau