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A. 1. a.(1)(a) i) a) I. 1. 1. a.(1)(a) i) a)x1. ` ` In this Order we consider complaints against the January 15, 1996, and January 1, 1997  xkrate increases that the abovecaptioned operator ("Operator") implemented for its cable programming  S- xZservices tier ("CPST") in the community set forth above. X-ԍ #X\  P6G;IP# Prior to January 1, 1997, Operator provided services on two CPSTs, CPST1 and CPST2. Operator has attempted to justify its CPST rates  xMthrough a benchmark showing on FCC Forms 1240. We have already issued an order which resolved  S2- xcomplaints filed against Operator from September 1, 1993 through November 30, 1995.2y {OK-#X\  P6G;IP#э See Social Contract for Time Warner, 11 FCC Rcd 2788 (1996). Accordingly, this Order addresses the reasonableness of the Operator's CPST rates beginning January 15, 1996.  S- ` x2. ` ` The Communications Act  {Oe-#X\  P6G;IP#э Section 623(c) of the Communications Act of 1934, as amended, 47 U.S.C. Section 543(c) (1996). authorizes the Federal Communications Commission  x("Commission") to review the CPST rates of cable systems not subject to effective competition to ensure  xjthat rates charged are not unreasonable. If the Commission finds the rate unreasonable, it shall determine  SB- xthe correct rate and any refund liability.tB {O -#X\  P6G;IP#э See 47 C.F.R. Section 76.957.t The Cable Television Consumer Protection and Competition Act  S- xof 1992 ("1992 Cable Act")z/ yO"-#X\  P6G;IP#э Pub.L.No. 102385, 106 Stat. 1460 (1992).z required the Commission to review the CPST rates upon the filing of a valid  xLcomplaint by a subscriber or local franchising authority ("LFA"). The Telecommunications Act of 1996  S- x=("1996 Act") yO)&-#X\  P6G;IP#Ѝ Pub. L. No. 104104, 110 Stat. 56 (1996). and our rules implementing the new legislation ("Interim Rules"),O  {O'- x#X\  P6G;IP#Ѝ See Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996, 11 FCC Rcd 5937 (1996). require that complaints" ,**88"  xyagainst the CPST rates be filed with the Commission by an LFA that has received subscriber complaints.  xAn LFA may not file a CPST rate complaint unless, within 90 days after such increase becomes effective, it receives more than one subscriber complaint.  S`- ` 3x3. ` ` To justify rates for the period beginning May 15, 1994 through a benchmark showing,  S8- xoperators must use the FCC Form 1200 series.^\8v {O-#X\  P6G;IP#э 47 C.F.R. Section 76.922(b)(6); see also Second Order on Reconsideration, Fourth Report and Order, and Fifth Notice of Proposed Rulemaking, MM Docket No. 92266, FCC 9438, 9 FCC Rcd 4119, 4190 (1994)  {O2-("Second Order on Reconsideration").^ Operators may justify adjustments to their rates on an  xannual basis using FCC Form 1240 to reflect reasonably certain and quantifiable changes in external costs,  xinflation, and the number of regulated channels that are projected for the twelve months following the rate  S- xchange. \v {OL - xy#X\  P6G;IP#Ѝ See 47 C.F.R. Section 76.960; see In the Matter of Implementation of Sections of the Cable Television  xConsumer Protection and Competition Act of 1992: Rate Regulation, MM Docket No. 92266, Thirteenth Order on  {O -Reconsideration, ("Thirteenth Reconsideration Order") 11 FCC Rcd 388, 391 (1995). Any incurred cost that is not projected may be accrued with interest and added to rates at a later  S- xtime. v {OH-#X\  P6G;IP#Ѝ See Thirteenth Reconsideration Order at 392. If actual and projected costs are different during the rate year a "trueup" mechanism is available  Sp-to correct estimated costs with actual cost changes.Z pv {O-#X\  P6G;IP#э Id.Z   S - ` x4. ` ` On February 5, 1996, the Commission received a valid complaint against Operator's  xJanuary 15, 1996, CPST rate increases. On April 29, 1997, the LFA filed a complaint regarding the  xJanuary 1, 1997 increase in Operator's CPST rate in the community referenced above. In its complaint,  xthe LFA asserts that it has received more than one subscriber complaint against Operator's CPST rate  S - xincrease, thereby triggering the Commission's jurisdiction to review this complaint. 4 v yOT-#X\  P6G;IP#э The LFA received its first complaint on January 8, 1997. The valid complaint  x[from the LFA triggers an obligation on the cable operator to file a justification of its CPST rates with the  S0- xLFA.k 0 v yO-#X\  P6G;IP#э 47 C.F.R. Section 76.1402.k In this case, Operator is required to justify the increase in its CPST rate which is the subject of  xythe LFA's complaint. Thus, we have jurisdiction to review the complaints under the 1992 Cable Act and the 1996 Act.  S- ` Px5.` ` Operator has submitted FCC Form 1240 to justify the CPST rate increases that went into  xeffect on January 15, 1996. Upon review, we find that Operator has justified its CPST rates of $15.70  S@- xlfor CPST1 and $2.50 for CPST2 effective January 15, 1996. @T v yO4#-#X\  P6G;IP#э This finding is based solely on the representations of Operator. Should information come to our attention that these representations were materially inaccurate, we reserve the right to take appropriate action. This Order is not to be construed as a finding that we have accepted as correct any specific entry, explanation or argument made by any party to this proceeding not specifically addressed herein. On November 1, 1996, Operator  xjincreased the channel count on CPST1 without implementing a corresponding rate increase. In addition,"<,`(`(88b"  xeffective January 1, 1997, Operator merged CPST1 and CPST2 and began providing cable programming  S-services on one tier.v yO@-#X\  P6G;IP#э After Operator's tier restructuring, the former CPST2 customers continued to receive the same channels and the former CPST1 customers began receiving five additional channels.   S- ` x6.` ` Upon review of Operator's FCC Form 1240 to justify the January 1, 1997 CPST rate  xincrease, we find that Operator incorrectly calculated its maximum permitted rate ("MPR"). In particular,  xOperator made trueup adjustments through to the effective date of the rate increase. This is incorrect.  xThe annual adjustment afforded by FCC Form 1240 allows operators to project changes in external costs,  xinflation, and the number of regulated channels. This structure avoids the delay some operators  xexperienced in recouping costs through multiple rate adjustments throughout the year. Because projections  x[will not reflect the costs that actually occur, the Commission provided, as part of the annual adjustment,  xa "trueup" to correct projected cost changes with the actual cost changes. However, the Commission has  xnoted that, as FCC Form 1240 must be filed 90 days before an increase is to take effect, the period for  S - xthe trueup will not coincide with the previous year's projections. v yO-#X\  P6G;IP#э Thirteenth Reconsideration Order, 11 FCC Rcd 388, 420 fn 151 (1995). The trueup data is intended to  S - xindicate real, not projected data.Z v {OH-#X\  P6G;IP#э  Id.Z This policy is reflected in the instructions accompanying FCC Form  S -1240. Bv {O-#X\  P6G;IP#э  See FCC Form 1240 Instructions for Timing at 34.  S - ` x7. ` ` Based on this instruction and considering evidence in the filing,8z v yO-#X\  P6G;IP#э Operator, for instance, did not reflect in its trueup the inflation factor for the second quarter of 1996  {O-released by the Commission in November 1996. See Public Notice, "Inflation Adjustment Figures for Cable Operators Using FCC Form 1210 and 1240 Now Available," DA 961986, (November 27, 1996). Had this been available to Operator at time of filing, Operator would have been required to include the factor released (2.22%) for all months after March 1996 and for its projection period. Instead, Operator used the previous factor (2.39%) for all inflation adjustments and projections. It is evident, therefore, that Operator did not have November 1996 data available at the time it completed its FCC Form 1240.8 reasonable time for  xclosing accounts and completing forms, we have adjusted Operator's trueup period from 12 months to  x9 months. This adjustment required that we refresh Operator's inflation factors to 2.22 for the second  xquarter of 1996 and to 2.21 for the third quarter of 1996 and adjust Worksheet 1 accordingly. As a result,  xythe trueup inflation factor in Module C, Line C1 for the 9 month period was corrected to 1.0171 instead  xof the 1.0239 used by the Operator for a 12 month period. We have adjusted Module E, and have  xcorrected the number of months on Line E2 to 9 months and Line E3 to 3 months. We have also adjusted  x.the inflation segment in Module F, Line F5 to reflect the corrections made in Line C1. This has resulted in a corresponding adjustment on Line F9 (MPR for TrueUp Period 1).  S- ` $x8. ` ` The reduction in the length of the trueup period also results in a reduction in Line H2  x(Revenue From MPR for Period 1). This results in a corresponding reduction in Line I8 (TrueUp  xSegment for the Projected Period). In total, our adjustments to Operator's FCC Form 1240 result in a",`(`(88"  S- xreduction of the MPR for the Projected Period to $19.79 (Line I9). v yOh-#X\  P6G;IP#э Information regarding the specific adjustments made to Operator's FCC Form 1240 filing can be found in the public file for the community referenced above which is available in the Cable Services Bureau's public reference room, or through the Commission's copy contractor, International Transcription Services (ITS), 1919 M Street, N.W., Washington, DC 20554, or by calling ITS at (202) 8573800. Thus, Operator has failed to  x-demonstrate that its January 1, 1997 rate of $19.85 was not unreasonable. To the extent that external costs  S- x/from the three months disallowed from Operator's trueup period{v yO-#X\  P6G;IP#э As found on Operator's Worksheets 7 and 8.{ have been averaged into the rates  xcharged in the nine months allowed in Operator's trueup period, and have not been removed by our  x[adjustments, we will order Operator to make a monthbymonth accounting of such external costs. Such  x\accounting shall allow a comparison of the actual external costs for the permitted ninemonth trueup  xlperiod with the recovery of external costs afforded by the external cost segment for that period as  xcalculated on Worksheet 7. We will order Operator to incorporate this accounting report into its refund  xplan and refund any overrecovery, plus interest, to subscribers. We will also order Operator to submit  xan FCC Form 1240 for the projected period January 1, 1997 to December 31, 1997 which incorporates our revisions and the adjustments described above.  S - ` x9.` ` Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47  xC.F.R.  0.321, that Operator's CPST1 rate of $15.70 and CPST2 rate of $2.50, effective January 15, 1996 in the community set forth above, IS REASONABLE.   X` hp x (#%'0*,.8135@8: