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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. MI0673 (City of Rockford) ) ) Complaint Regarding ) Cable Programming Services Tier Rates) ORDER Adopted: July 15, 1997 Released: July 16, 1997 By the Deputy Bureau Chief, Cable Services Bureau: 1.In this Order we consider complaints against the February 13, 1996 and February 13, 1997 rate increases 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 increases through benchmark showings on FCC Forms 1240. 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 Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act") required the Commission to review CPST rates upon the filing of a valid complaint by a subscriber or a local franchising authority ("LFA"). 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 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 February 6, 1996, the Commission received a complaint filed by the LFA for the community set forth above against Operator's February 13, 1996 CPST rate increase. On October 16, 1996, Operator filed with the Commission its FCC Form 1240 for the period February 1, 1996 through January 31, 1997 to justify its CPST rate increase as an alternative to its previously filed FCC Form 1230. 5.Section 76.953 of the Commission's rules in effect at the time the complaint was filed provides that complaints regarding a rate change for the CPST or associated equipment must be filed with the Commission within 45 days from the date the complainant receives a bill from a cable operator that reflects the rate change. Although the LFA contends that it received a bill on January 14, 1996 which contained a CPST rate increase, the customer notification information that the LFA attached to its complaint contains notice of a proposed rate change for the next month. The LFA filed the complaint with the Commission on February 6, 1996 prior to the effective date of the rate increase. Consequently, the complaint does not trigger the Commission's jurisdiction to review Operator's February 13, 1996 CPST rate increase. 6.On April 18, 1997, the LFA filed a complaint regarding the February 13, 1997 increases in Operator's CPST rates 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 LFA complaint, Operator asserts that its February 13, 1997 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. Our review of Operator's filing indicates that Operator deleted a channel from CPST-2 without implementing a corresponding rate decrease for the tier on February 13, 1997. This constitutes an implicit rate increase under Section 76.953(a) of our rules. 7.Upon review of Operator's FCC Form 1240 for the projected period February 1, 1996 to January 31, 1997, we have made the following adjustments. Because Operator was not previously subject to CPST regulation and because this FCC Form 1240 was filed in response to a CPST rate complaint, Operator was not entitled to claim a true-up period in this FCC Form 1240. Consequently, we disallowed the seven-month true-up period claimed in this FCC Form 1240. This adjustment reduced Operator's maximum permitted rate ("MPR") for CPST-1 from $11.83 to $11.46. It also reduced the MPR for CPST-2 from $6.55 to $6.49. However, because we have found that the February 6, 1996 complaint was invalid, Operator incurs no refund liability for these overcharges. 8.Upon review of Operator's FCC Form 1240 for the projected period February 1, 1997 to January 31, 1998, we adjusted the starting rates at Line A1 for CPST-1 and CPST-2 to conform with the MPRs from the previous FCC Form 1240. Because of this adjustment, we also corrected the Current FCC Inflation Factor at Line C5 to 1.0183. These adjustments reduced the MPR for CPST-1 from $11.34 to $10.48. They also reduced the MPR for CPST-2 from $8.29 to $8.03. Operator's actual rate for CPST-1, effective February 13, 1997 is $12.00. Operator's actual rate for CPST-2, effective February 13, 1997 is $5.60. Consequently, we find that Operator's rate for CPST-1 is unreasonable while Operator's rate for CPST-2 is reasonable. 9. 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 rate of $12.00 for CPST-1, effective February 13, 1997, in the community set forth above, IS UNREASONABLE. 10.IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321 that Operator's CPST rate of $5.60 for CPST-2, effective February 13, 1997, in the community set forth above, IS NOT UNREASONABLE. 11.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 increase charged by Operator in the community set forth above, effective February 13, 1996, IS DISMISSED. 12.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 increase charged by Operator in the community set forth above, effective February 13, 1997, IS GRANTED TO THE EXTENT INDICATED HEREIN. 13.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 community referenced above that portion of the amount paid in excess of the maximum permitted CPST-1 rate of $10.48 per month (plus franchise fee) plus interest during the period from February 19, 1997 to the day before Operator reduces its CPST rate to $10.48. 14.IT IS FURTHER ORDERED, that Operator shall promptly determine the overcharges to CPST subscribers for the stated period, 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. FEDERAL COMMUNICATIONS COMMISSION William H. Johnson Deputy Chief, Cable Services Bureau