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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)CUID Nos.CA0680 (Los Osos) )CA0706 (Garden Farms) )CA0707 (Santa Margarita) Falcon Cable Systems Company)CA0709 (Cambria) )CA0927 (Templeton) ) Complaint Regarding) Cable Programming Services Tier Rates) ) ORDER Adopted: June 18, 1997 Released: June 20, 1997 By the Deputy Chief, Cable Services Bureau: 1.In this Order we consider a complaint against the January 17, 1997 rate increase of the above-referenced operator ("Operator") for its cable programming services tier ("CPST") in the communities referenced above. We also dismiss a complaint filed on June 19, 1995 because the complaint concerns a rate that is outside the jurisdiction of the Federal Communications Commission ("Commission"). We have already issued orders dismissing previous complaints against Operator's rates. Therefore, this Order addresses only the reasonableness of Operator's January 17, 1997 CPST rate. 2.Under the Communications Act, the Commission is authorized 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 a rate to be 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 the CPST rates be filed with the Commission by a local franchising authority ("LFA") that has received more than one subscriber complaint. 3.The LFA for the franchise areas referenced above filed a complaint with the Commission on June 19, 1995 against Operator's CPST rate of $7.03. The LFA filed its June 19, 1995 complaint in response to Operator's filing an FCC Form 1210 with the LFA in March of 1995 to justify an increase in Operator's basic tier rate. In a Motion to Dismiss, Operator argues that the complaint was untimely filed under the Commission's rules as its CPST rate of $7.03 took effect on July 14, 1994. In subsequent documentation, the LFA admitted that it had missed the opportunity to complain about Operator's CPST rate of $7.03. Based on our review of the record, we agree that the complaint was not timely filed. Consequently, the complaint does not trigger the Commission's jurisdiction and Operator's Motion to Dismiss is granted. 4.On March 28, 1997, the LFA filed a timely complaint with the Commission against Operator's January 17, 1997 CPST rate increase. The LFA verified that it received more than one subscriber complaint for each community referenced above and that the first valid complaint for each of the communities referenced above was received by the LFA on January 21, 1997. Along with its complaint, the LFA filed FCC Forms 1200, 1210 and 1240 which had been submitted by the Operator. Operator filed amended FCC Forms 1210 and 1240 with the Commission on April 14, 1997. The filing of a complete and timely LFA complaint triggers an obligation upon the cable operator to file a justification of its CPST rates. The Operator has the burden of demonstrating that the CPST rates complained about are reasonable. 5.To justify rates for the period beginning May 15, 1994 through a benchmark showing, operators must use the FCC Form 1200 series. Operators are permitted to make changes to their rates on a quarterly basis using FCC Form 1210. Operators may alternatively 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. 6.In its complaint, the LFA argues that Operator has incorrectly completed its forms. Specifically, the LFA states that Operator has used a rate other than the maximum permitted rate ("MPR") from a prior FCC Form 1210 or 1200 as the starting rate on Line A2 (Permitted Charge) in its FCC Form 1210 for the period January 1, 1995 to December 31, 1995 ("1995 Form 1210"). The LFA argues that this is inconsistent with the Commission's rules. In a letter to the LFA, dated February 26, 1997, Operator argues it should be permitted to use a "grandfathered" rate, i.e., an actual rate, as the starting rate on Line A2 of its 1995 Form 1210. It then argues that the resulting MPR from the 1995 Form 1210 should be used as the beginning rate on Line A1 of its FCC Form 1240. Operator contends that the Commission, when it created FCC Form 1240, intended to amend FCC Form 1210 so that, regardless of Operator's prior MPR, an actual rate could be used on Line A2 in the same way an actual rate is used on Line A1 on FCC Form 1240. 7. We disagree with Operator. Other than that FCC Form 1240 was created after the Commission order adopting the annual rate adjustment methodology ("Annual Rate Adjustment Order"), as opposed to FCC Form 1210, which was created prior to the Annual Rate Adjustment Order, Operator has provided no basis for its argument. Pursuant to FCC Form 1210, the Permitted Charge, to be inserted on Line A2, "is the rate determined by either [the operator's] Form 1200 filing (Full Reduction Rate), a previously filed 1210 (Maximum Permitted Rate), a Cost of Service Showing, or election of the streamlined rate reduction for qualifying small systems (Streamlined Rate)." The FCC Form 1240 allows the operator to use, as its beginning rate on Line A1, the MPR calculated on a prior FCC Form, or, if the FCC Form 1240 is being filed in response to a CPST rate complaint and the operator is not currently regulated on its CPST, the rate the operator was charging prior to the rate increase which triggered the complaint. The Commission also permits an operator that is filing an FCC Form 1240 in response to a CPST rate complaint, and is not currently regulated on its CPST, to use, as its current MPR on Line A1, an MPR calculated on FCC Forms 1200, 1210 and 1240, even if the MPR has never been put into effect by the operator. 8.The Commission will not accept an FCC Form 1210 to justify an MPR unless that FCC Form 1210 is being used to adjust a rate previously calculated by an FCC Form 1200 or a cost- of-service showing. The purpose of the FCC Form 1210 is "to adjust [the operator's] maximum permitted rate, which was determined on [its] Form 1200, a previously filed 1210, or a cost-of- service showing." Before an operator completes Form 1210 it "must complete and file Form 1200 with the FCC or [its] local franchising authority." Contrary to Operator's argument, the creation of a new FCC Form does not automatically amend all preceding FCC Forms and the policies reflected by those forms, unless the Commission acts to amend those forms. That FCC Form 1240 was created two years ago, and the Commission has not amended FCC Form 1210 to conform to Operator's interpretation of the Commission's intention, indicates that Operator's interpretation is incorrect. We will adjust Line A2 on Operator's 1995 FCC Form 1210 to reflect the MPR as calculated on its preceding FCC Form 1210. We will also review the other FCC Forms filed by Operator to justify its January 17, 1997 CPST rate. 9.Upon review of Operator's FCC Form 1200, multiple FCC Form 1210s and FCC Form 1240, for the period May 15, 1994 through September 30, 1997, we find that Operator has not correctly calculated its MPR and has charged in excess of its MPR beginning January 21, 1997. We made no adjustments to Operator's FCC Form 1200. Upon review of Operator's FCC Form 1210 for the period July 1, 1994 through September 30, 1994, we adjusted Line E5 (Inflation Adjustment Factor) from 1.0215 to 1.000 because Operator did not adjust its rates to account for the Inflation Adjustment Factor until October 15, 1995. This resulted in a revised MPR of $6.41 rather than Operator's MPR of $6.51. Upon review of Operator's FCC Form 1210 filing for the period October 1, 1994 through December 31, 1994, we brought forward the revised MPR from the prior FCC Form 1210. This resulted in a revised MPR of $6.59, effective January 1, 1995, rather than Operator's MPR of $6.69. 10.We next reviewed Operator's FCC Form 1210 for the period January 1, 1995 through December 31, 1995. We changed the beginning rate at Line A2 to $6.59 to conform to the MPR on the previous FCC Form 1210. This change resulted in a revised MPR of $8.59, rather than Operator's MPR of $9.99. 11.We next reviewed Operator's FCC Form 1240 for the projected period October 1, 1996 through September 30, 1997. We adjusted Operator's Line A1 to reflect the revised MPR of $8.59 from the previous FCC Form 1210. We also adjusted Operator's inflation factor at Line C1 to 1.15 percent to reflect a six-month true-up. We also reduced Line C3 from 2.39 percent to 1.83 percent. These calculations resulted in a revised MPR for the projected period of $9.32 rather than Operator's MPR for the projected period of $11.69. Because Operator's actual CPST rate of $10.67 exceeds its revised MPR for the projected period of $9.32, we find that Operator's actual CPST rate of $10.67, effective January 17, 1997, is unreasonable. 12.Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, and Section 623(a)(2)(A) and (B) of the Communications Act of 1934, as amended, 47 U.S.C. Section 543(a)(2)(A) and (B), that the June 19, 1995 complaint against the CPST rate charged by Operator in the communities referenced above IS DISMISSED and the motion to dismiss that complaint IS GRANTED. 13.IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rate of $10.67, charged by Operator in the franchise area referenced above beginning January 17, 1997, IS UNREASONABLE. 14.IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the franchise area referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of $9.32 per month (plus franchise fees), plus interest to the date of the refund, for the period January 21, 1997 through the day before Operator implements the maximum permitted CPST rate of $9.32. 15.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 amount so determined (including franchise fees and interest), describing the calculation thereof, and describing its plan to implement the refund within 60 days of Commission approval of the plan. 16.IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that Operator take into account our FCC Form 1240 adjustments when calculating its maximum permitted rate and performing the true-up calculation on its next FCC Form 1240. 17.IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the March 28, 1997 complaint against the CPST rate charged by Operator in the communities referenced above IS GRANTED. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Deputy Chief, Cable Services Bureau