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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 ) ) Margate Video Systems, Inc. ) CUID No. FL0368 (City of Margate) d/b/a TCI of North Broward, Inc.) ) Complaint Regarding ) Cable Programming Services Tier ) Rate Increase ) ORDER Adopted: August 24, 1997 Released: August 26, 1997 By the Chief, Cable Services Bureau: 1. In this Order we consider a complaint against the June 1, 1997 rate increase that the above- captioned operator ("Operator") implemented for its cable programming services tier ("CPST") in the community referenced 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 ("Prior Order") which found that Operator's CPST rate implemented on June 1, 1996 was not unreasonable. Accordingly, this Order addresses the reasonableness of Operator's CPST rate of $11.30, effective June 1, 1997. 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, requires that complaints against CPST rates be filed with the Commission by a franchising authority that has received subscriber complaints. A franchising authority 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 attempting to justify their rates for the period beginning May 15, 1994 using a benchmark showing must complete and file the FCC Form 1200 series. Cable operators may also justify rate increases based on the addition and deletion of channels, changes in certain external costs, and inflation, by filing FCC Form 1210. FCC Form 1210 must be filed at least 30 days before new rates are scheduled to go into effect where the Commission has found the cable programming service rate to be unreasonable less than one year prior to the filing, or where there is a pending complaint against the CPST rate. 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. 4. On June 17, 1997, the local franchising authority ("LFA") filed its complaint against Operator's June 1, 1997 CPST rate increase. In its complaint, 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 behalf of the cable operator to file a justification of its CPST rates 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. As required by our rules, Operator filed an FCC Form 1240 with the LFA as justification for this rate increase. 5. Our review of Operator's FCC Form 1240 to justify its CPST rate of $11.30, effective June 1, 1997, indicates that Operator has miscalculated its maximum permitted rate ("MPR") by incompletely incorporating adjustments from its previous FCC Form 1240. Previously, the Commission granted Operator a waiver to allow Operator, in its initial filing of FCC Form 1240, to include cost adjustments over the period of time between the last date for which actual cost data is available and the effective date of Operator's new rates. The cost adjustments included for this period are subject to a true-up at the same time that the required true-up is performed on Operator's initial FCC Form 1240 Projected Period Rates. See In the Matter of Annual Rate Adjustment System for Cable Services Rates - Request for Waiver of Requirements Contained in the Thirteenth Order on Reconsideration. Pursuant to this waiver, Operator filed a separate attachment to its initial FCC Form 1240 entitled "Gap Period Calculation." Specifically, Operator did not include figures from its "Gap Period Calculation" in its Line D6 (Current True-Up Segment) calculations on its FCC Form for the projected period June 1, 1997 to May 31, 1998. We, therefore, adjusted Line D6 of Operator's FCC Form 1240 to reflect the figure reported in Line 19 of Operator's "Gap Period Calculation." Normally, Line D6 (Current True-Up Segment) is reported from Line I8 (True-Up Segment for Projected Period) of the Operator's previous FCC Form 1240 filing. However, in this case the use of the figure reported on that line is incorrect because it does not include the "Gap Period" adjustments from Line 19 of Operator's "Gap Period Calculation" Attachment. 6. Further, Operator increased its number of subscribers on Line B1 (Average Subscribership for True-Up Period 1) from 13,544 to 32,810, thereby switching from franchise level to system level reporting. We, therefore, adjusted Line D6 to reflect this increase. With this adjustment, Operator's costs are reported on Line D6 at the system level, consistent with the rest of its filing. Once the final figure for Line D6 was calculated, we replaced the figure in Line F8 (True-Up Segment for Period 1) with the same figure, because the figures from both Lines are derived from the same underlying formula. Our corrections to Lines D6 and F8 resulted in a reduction to Line D8 (Base Rate) and Line F9 (Max Perm Rate for True-Up Period 1). The reduction in these Lines also impacted Modules H and I. As a result of our adjustments, we have calculated a corrected MPR for the Projected Period of $10.75 (Line I9). Thus, Operator has failed to demonstrate that its June 1, 1997 rate of $11.30 is not unreasonable. 7. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the monthly CPST rate of $11.30 implemented by Operator on June 1, 1997, in the community referenced above IS UNREASONABLE. 8. 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 rate of $11.30 per month (plus franchise fees), plus interest to the date of the refund, for the period from June 6, 1997 to the day before Operator implements a CPST rate of $10.75 per month (plus franchise fees). 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 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. 10. 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. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau