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P6G;JP\0_=5,%&_*f9 xr G;&X Pg 2 Ln 1.54" Pos 4.52"  yO- X   / S-#&a\  P6G;&P#  Federal Communications Commission`}(#DA 97 2033 ă  yxdddy /Պv3 #X\  P6G;P#B efore the Federal Communications Commission  yO} Washing ton, D.C. 20554  yOX-  S-#&a\  P6G;&P#In the Matter of hh@)  S- x` `  hh@)  S-Bresnan Communications Company hh@)hCUID Nos. MI0101 (Bay City)  Sp-x` `  hh@)hppMI0102 (Essexville)  SH-x` `  hh@)hppMI0118 (Hampton)  S -x` `  hh@)hppMI0122 (Midland)  S-Complaints Regarding  hh@)(#h  S -Cable Programming Services Tier Rates@)(#  S -xand` `  hh@)  S -Petition for Reconsiderationhh@)  SX -#&a\  P6G;&P#  S0 -P ORDER ON RECONSIDERATION IWand  S-'hRATE ORDER TP  S-X` hp x (#%'0*,.8135@8:order which found that the Operator's rates in effect before May 15, 1994 were unreasonable ("Prior  S(- x=Order").|( {O-ԍ See In the Matter of Bresnan Communications Company, 10 FCC Rcd 7184 (1995).| Operator filed a Petition for Reconsideration ("Petition") of our Prior Order on July 28, 1995.  xOn August 10, 1995, the City of Midland (the "City") filed an Opposition to Petition for Reconsideration  x("Opposition"). Operator filed its Reply to Opposition to Petition for Reconsideration ("Reply") on August  x=21, 1995. Accordingly, this Order addresses Operator's Petition For Reconsideration of our Prior Order  xfor CUID Nos. MI0101, MI0102, MI0118 and MI0122 and the reasonableness of Operator's CPST rates in effect from May 15, 1994 to present for CUID No. MI0122.  S- ` x2.` ` The Communications ActZ {O "-ԍ 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  xthat rates charged are not unreasonable. The Cable Television Consumer Protection and Competition Act  S - xzof 1992X  yO$&-ԍ Pub. L. No. 102385, 106 Stat. 1460 (1992). X ("1992 Cable Act") required the Commission to review CPST rates upon the filing of a valid  xcomplaint by a subscriber or local franchise authority ("LFA"). If the Commission finds the rate to be"p!|,**88""  S- x.unreasonable, it shall determine the correct rate and any refund liability.M2 {Oh-ԍ See 47 C.F.R. Section 76.957.M The Telecommunications Act  S- xof 1996 ("1996 Act")Z2 yO-#X\  P6G;P#Ѝ#X\  P6G;P# Pub. L. No. 104104, 110 Stat. 56 (1996). and our rules implementing the new legislation,2 {Ob- x#X\  P6G;P#Ѝ#X\  P6G;P# See Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996, 11 FCC Rcd 5937 (1996). requires that complaints against  xCPST rates be filed with the Commission by a franchising authority that has received subscriber  xcomplaints. A franchising authority may not file a CPST rate complaint unless, within 90 days after such increase becomes effective, it receives more than one subscriber complaint.  S- ` Rx3.` ` The Commission's original rate regulations took effect on September 1, 1993.;D2 yO - x#X\  P6G;P#э #X\  P6G;P#Order in MM Docket No. 92266, Implementation of Sections of the Cable Consumer Protection and Competition Act of 1992: Rate Regulation, FCC 93372, 58 Fed. Reg. 41042 (Aug. 2, 1993).; The  S- xCommission revised its rate regulations effective May 15, 1994.^2 {O$- x#X\  P6G;P#э #X\  P6G;P#47 C.F.R. Section 76.922(b); see also Second Order on Reconsideration, Fourth Report and Order, and Fifth  {O- xKNotice of Proposed Rulemaking, MM Docket No. 92266, FCC 9438, 9 FCC Rcd 4119, 4190 (1994) ("Second  {O-Order on Reconsideration"). Operators with valid CPST complaints  xkfiled against them prior to May 15, 1994, were required to demonstrate that their CPST rates were in  xcompliance with the Commission's initial rules from the time the complaint was filed through May 14,  Sp- x1994, and that their prices were in compliance with the revised rules from May 15, 1994 forward.L p 2 {O-ԍ Id. at 4190, paras. 150152.L  xOperators attempting to justify their prices for the period prior to May 15, 1994, through a benchmark  S - x[showing had to complete and file FCC Form 393.  T 2 {O- xԍ Id. In general, in order to justify prices through a benchmark showing for the period beginning May 15,  yO-1994, operators must use the FCC Form 1200 series. 47 C.F.R.  76.922(b)(6). The period under review for the Prior Order was the  xearly period commencing from date of filing of the first valid CPST complaint with the Commission on October 12, 1993 to May 15, 1994.  S - ` nx4.` ` Cable operators attempting to justify rates for the period beginning May 15, 1994 through  SX- xa benchmark showing must use the FCC Form 1200 series. X2 {O-#X\  P6G;P#э #X\  P6G;P#47 C.F.R. Section 76.922 (b)(6); see also Second Order on Reconsideration, 9 FCC Rcd at 4189 n. 195. Cable operators may also justify rate  xincreases based on the addition and deletion of channels, changes in certain external costs, and inflation,  S- xby filing FCC Form 1210. @2 yO"-#X\  P6G;P#э #X\  P6G;P#47 C.F.R. Section 76.922 (d). FCC Form 1210 must be filed at least 30 days before new rates are  xscheduled to go into effect where the Commission has found the CPST rate to be unreasonable less than  S- xone year prior to the filing, or where there is a pending complaint against the CPST rate. 2 yO(&-#X\  P6G;P#э #X\  P6G;P#47 C.F.R. Sections 76.958 and 76.960.ģ Cable  xoperators may justify adjustments to their rates on an annual basis using FCC Form 1240 to reflect"` ,p(p(88"  xreasonably certain and quantifiable changes in external costs, inflation, and the number of regulated  S- x.channels that are projected for the twelve months following the rate change.\2 {O@- x#X\  P6G;P#Ѝ#X\  P6G;P# 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  S- xznot projected may be accrued with interest and added to rates at a later time.2 {O<-#X\  P6G;P#Ѝ#X\  P6G;P# See Thirteenth Reconsideration Order at 392. If actual and projected  x[costs are different during the rate year a "trueup" mechanism is available to correct estimated costs with  S`-actual cost changes.`~2 {O~ -#X\  P6G;P#э #X\  P6G;P# Id.  S- ` x5.` ` Cable operators that incur increases in operating costs associated with a significant network  S- xMupgrade will be permitted to charge additional rates as justified by their FCC Form 1235 filing. FCC  x Form 1235 is an abbreviated cost of service filing used in cases of network upgrades. It allows cable  xoperators to justify rate increases related to significant capital expenditures used to improve rate-regulated  xyservices. This option is extended only in cases of significant upgrades requiring added capital investment,  SH - x^such as bandwidth capacity and conversion to fiber optics, and for system rebuilds. H 2 yO- xԍ Implementation of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation  xand Adoption of Uniform Accounting System for Provision of Regulated Cable Service, 9 FCC Rcd 452/, par. 287  x- 289 (1994). See 47 C.F.R. Section 76.922(j). See also Public Notice: Cable Services Bureau Develops System Upgrade Form, 11 FCC Rcd 5554 (1995). Normal  x\improvements and expansions of service will remain subject to the usual rate adjustments allowed by filings of FCC Forms 1210, 1220 and 1240. x  S - ` x6.` ` In our Prior Order, we found that Operator had not correctly calculated the maximum  xpermitted rate ("MPR") for its CPST in Midland, Michigan, CUID No. MI0122. We concluded therefore  xthat, in order to arrive at a proper MPR, adjustments would be necessary. We reduced the number of  xzCPST channels from 24 to 22 on Form 393, Part I and Part II, Worksheet 1, Line 102 and the number  x=of rateregulated channels from 44 to 42 on Part II, Worksheet 1, Line 121. We also reduced the number  S- xof satellite channels used in calculating the benchmark from 24 to 22." 2 yOx- x;ԍ Operator offered "duplicate programming on Channels 19 and 21 in order to accommodate subscribers whose  xwtelevision sets could not receive Channels 40 through 42 without a converter box. Operator states that Channels 19  xand 21 were not normally used due to potential interference problems, but their use was deemed suitable for this  {O-purpose."  See Prior Order at para. 6.  Further, we corrected Columns  xA, B, C and D of Worksheet 1 of Part II of Forms 393 since Operator completed information for three  x^separate tiers although its rate cards showed only two tier offerings consisting of basic service  xprogramming and cable programming service with related charges. Worksheet 1 was adjusted to reflect  xonly the two tiers and to include tier channels and tier charge information consistent with the rate cards.  xMoreover, we adjusted Worksheet 1, Line 104 entries since they did not represent its current monthly  x.equipment revenue as of the initial date of regulation. Since Operator restructured its rates, including its  xLequipment rates, on September 1, 1993, in an attempt to comply with the Commission's regulations, the  xmonthly equipment costs figures it entered on Line 34 of Step G, Part III should have been close to the figure entered on Line 104, Worksheet 1, otherwise the subscribers paid in excess of a reasonable rate. "x,p(p(88"Ԍ S- ` 2ԙx7.` ` Another adjustment was a revision of the inflation adjustment figure for the period ending  xSeptember 1993, based upon the use of the Gross National Product Price Index ("GNPPI") data released  x/by the U.S. Department of Commerce ("Commerce") on July 29, 1994, rather than the GNPPI data  S- x[released on May 28, 1993, used by Operator to justify its rate. By "refreshing" the inflation adjustment  xfactor with the more recent and accurate July 29, 1994 data from Commerce, we determined that the MPR  xcalculated by Operator should be $10.98 (plus franchise fee) for Midland, Michigan, CUID No. MI0122.  xWe ordered Operator to refund to subscribers that portion of the amounts paid for cable programming service that exceeded the MPR of $10.98.  S-  S- ` Bx8.` ` In its Petition, Operator alleges that the Bureau erred in refreshing its Form 393 data.82 {O -ԍ Id at 2.8  xOperator argues that it was not until November 10, 1993, after Operator restructured its rates, that the  xCommission released a "Question and Answer" Sheet explaining that operators should complete the Form  S" - x393 using information updated as of the initial date of regulation." Z2 yO- x,ԍ Public Notice "Questions and Answers on Completion of FCC Form 393 and Associated Filing Requirements," (November 10, 1993). Operator contends that this approach  xcreates a serious problem for operators like Operator who had previously established regulated rates based  xon thenavailable information. Operator contends that in recognition of this problem, the Commission  xsubsequently "grandfathered" operators who had accurately relied on data available at the time they  S - xzrestructured their rates. Operator cites Third Order on Reconsideration, 9 FCC rcd 4216 at  9596  x(March 30, 1994 and 47 C.F.R. 76.922 (b)(9). Operator argues that its rates should be grandfathered.  x Moreover, Operator argues that if the Form 393 is to be refreshed, then the Bureau should have also refreshed Line 108 of Worksheet 1.  S-x9.` ` As we explained in Cencom Cable Income Partners II, L.P.,N2 yO-ԍ FCC 97205 (released June 13, 1997).N ("Cencom"): Xx(#   XxThe Commission is charged with protecting subscribers from paying unreasonable CPST rates,   while also providing system operators with a fair return. Accurate information, including accurate   inflation information, is central to setting an initial regulated rate that meets the standard. Thus,   the Commission requires that data used in setting a rate be refreshed with the most current data  S-  @available when an operator's rates become regulated and are justified.B2 {O- x,ԍ See Third Order on Reconsideration, 9 FCC Rcd at 434950; FCC Form 393 at 11 Instruction for Line 122 xGNPPI (Current) (Aug. 1993). The Bureau has explained the requirement to use current data in Cable Operators'  x-Rate Justification Filings, Sections 76.945, 76.946 of the Commission's Rules, 9 FCC Rcd 7752, 775455  3(8)  {O !- x(Cab. Serv. Bur. 1994) ("Rate Filings"); Nov. 10, 1993 Public Notice, Answer to Question No. 6, (in filing rate  x,justifications, operators must refresh data used in initial rates with most current information as of the date of initial regulation); July 30, 1993 Public Notice, Answer to Question 10. Because final inflation   "data for the period addressed in rate justifications may not be available when a justification is   !filed, the Commission directs operators to estimate inflation by using the most recently available   @inflation data published on an interim basis in the Commerce "Survey of Current Business" at  S.-  Table 7.3, Line 5.~. 2 {O'-ԍ See FCC Form 393 at 11 Instruction for Line 122GNPPI (Current) (Aug. 1993).~ The Bureau practice when reviewing rate justifications is to verify that the".P ,p(p(88{"   operator has used this inflation data. The Bureau also determines whether the other information   Oin the rate justification is correct, and on the basis of the inflation and other information in the   !form, including any corrections, whether the operator's rate meets the statutory requirement that   the rate not be unreasonable. The Bureau does not find a rate unreasonable solely because more   |accurate inflation data has become available by the time it makes its review. This would churn   rates, causing significant administrative expenses to operators and confusion to subscribers.   However, if a rate is unreasonable on its face or has to be adjusted for reasons other than the   availability of a more accurate inflation figure, e.g., because the operator failed to provide correct   information in its rate justification or failed to complete its rate justification form correctly, the   Bureau recalculates the MPR using the most accurate inflation information available, rather than  Sp-earlier estimates.p2 {O - x<ԍ See Public Notice, Cable Services Bureau Announces Policy Regarding Inflation Adjustment on FCC Form  x-393, DA 95999 at 2 (Cab. Serv. Bur. May 2, 1995). The Bureau gave operators the opportunity to review and  xcorrect errors in their benchmark rate filings. Operators who had not previously correctly calculated the inflation  xKadjustment factor were directed to use the accurate factors through June 30, 1994. Public Notice, Cable Services  xhBureau Announces Optional Procedures with Respect to Pending PreMay 15 Benchmark Cases, DA 941556 at 34 (Dec. 29, 1994). The Public Notice listed the inflation adjustment factors through June 30, 1994. This practice is consistent with 47 C.F.R. 76.922(b)(9)(iii), which provides:(#  ` (XxX` ` [I]f the rates charged by a cable operator are not justified by an analysis  ` based on the data available at the time it initially adjusted its rates, the  ` Ucable operator must adjust its rates in accordance with the most accurate  S -data available at the time of the analysis.A B2 {O-ԍ Cencom at par. 11.A x`  SX- ` x10.` ` Determining the most accurate maximum permitted rate possible when rate adjustment is  xneeded is not inconsistent with the instruction that operators use the best available information when filing  xrate forms. Moreover, where review indicates that an adjustment is required, it would be unfair to  xoperators and subscribers alike not to use the most recent and accurate figures applicable to that period,  xeven though those figures may not have been available to the cable operator at the time of its filing. In  xsome instances, such an adjustment may be advantageous to cable subscribers and, in others, to the  xoperator. In all instances, however, the required adjustment will more accurately ensure that the rates  x=being charged to subscribers are in fact not unreasonable. When inflation is refreshed, neither consumers  xnor the operator are harmed, because consumers pay only for the inflation experienced by the operator,  xand the operator recovers the full cost of the inflation it experienced. Since future rate adjustments are  xcomputed from the initial regulated rates, refreshing results in more accurate rates both initially and in the  S-future.G2 {O!-ԍ See Cencom at para. 12.G For these reasons, we reject Operator's arguments.  SP- ` x11.` ` Operator also argues that if the Bureau refreshes Operator's FCC Form 393, it must refresh  xall of the FCC Form 393, specifically Line 108 (Franchise Fee Expense). Operator contends that the Line  xj108 entry should be $0.50 for the basic service tier ("BST") and $0.60 for the CPST. Operator's reliance  xon the concept of refreshing is misplaced. The instructions for Line 108 require the operator to  x"[c]alculate the franchise fees [it] pay[s] for regulated tiers of service for the community unit during an"f ,p(p(88"  S- xMaverage month . . .[and] [e]nter that monthly total payment in Column E of Line 108."J2 yOh-ԍ FCC Form 393 Instructions, p. 11.J On its FCC  x Form 393, dated November 12, 1993, Operator entered $14,456.60 on Column E of Line 108. In its  xrevised FCC Form 393, the Bureau also entered $14,456.60 on Column E of Line 108. If the Bureau is  xrequired to refresh data, it must do so using the most accurate data available at the time of the analysis.  xThere was no more accurate data available to the Bureau when it reviewed Operator's Line 108 than the  xnumber submitted by Operator. The Bureau took into account the $0.50 BST franchise fee and the $0.60  xCPST franchise fee, as submitted by Operator, where it was relevant, specifically, when calculating  xOperator's Monthly Tier Charge (Line 101). Operator, however, did not submit a new figure for total  xjmonthly franchise fees paid. Consequently, the Bureau used the most accurate data available to it during  S-its analysis, the data filed provided by Operator.$X2 yO - xiԍ Contrary to Operator's allegation, the Bureau's replacement of data on Line 104 with the entry on Line 34  xwas not a product of refreshing. It was simply of correction of Operator's Line 104 entry pursuant to the  {O - xyCommission's Questions and Answers on Completion of FCC Form 393 and Associated Filing Requirements,  {O -Question and Answer No. 7 (released November 10, 1993).  SH - ` x12.` ` Operator also contends, in its Petition and Reply, that it should be allowed to count  xzchannels that provide duplicate programming as separate channels. Operator argues that the channels  xproviding duplicate programming were not added to evade rate restrictions, but as a "direct response to  xspecific requests from the local franchising authority and local subscribers." Operator's summary of its  xdecision to provide duplicate programming indicates that it upgraded its system on February 16, 1993.  xIn conjunction with its upgrade, Operator repositioned several channels to higher channel locations.  xOperator estimates that some 1,000 subscribers with an upper frequency level of 318 Mhz (36 channels)  xcould not receive the newly positioned channels. Operator resolved the issue by holding a public meeting  xand agreeing to offer a "revamped" channel lineup, which included duplicate programming on Channels  x19 and 21. The City indicates, in its Opposition, that it did not require Operator to provide duplicate  x-programming, but merely concurred with Operator's proposal to do so. The City also argues that Operator should not be permitted to recover twice for programming it pays for once.  S@- ` nx13.` ` As we determined in our Prior Order, Operator's arguments are not persuasive. In Warner  S- x/Cable Communications of Cincinnati, Inc. v. City of Cincinnati,D2 {O-ԍ See Warner Cable Communications of Cincinnati, Inc. v. City of Cincinnati, 10 FCC Rcd 6015 (1995). we indicated that channels offering  xidentical programming might be counted as separate units of cable service if our mustcarry rules were  S- x\implicated, technological limitations existed and more than a de minimis number of subscribers would  xbenefit from the offering. Here, although Operator alleges problems with potential interference, it was  xnot obligated by any local, state or federal authority to provide the additional channels of duplicate  xprogramming. And its provision of such channels did not separately benefit any subscriber. We affirm  xour finding in our Prior Order, and Operator may not charge subscribers for these channels as separate  S-units of cable service.2 {O|$-ԍ See In the Matter of Cox Cable Hampton Roads, Inc. Virginia Beach, 10 FCC Rcd 59 (1994).  S- ` x14.` ` Operator further argues that if we uphold the adjustments to its rate calculations, then it  xshould be allowed to offset any refund due to the CPST overcharges against Operator's BST undercharges. "h ,p(p(88"  x=Operator claims entitlement to an offset because it miscounted the number of CPST channels. It asserts  x/that failure to allow an offsetting adjustment would violate the Commission's policy of ensuring that  xoperators are not required to reduce rates beyond the maximum reduction that is determined under the  xbenchmark approach. In support of its argument that offsets should be allowed between different tiers  S`- xof service, Operator cites the Third Order on Reconsideration,E`2 yO-ԍ 9 FCC Rcd at 4353  104.E which allows operators to offset between  xlthe basic service rate and equipment charges. It also refers to Section 76.942 of the Commission's  S- x=Rules,? X2 yO -ԍ 47 C.F.R.  76.942.? which it maintains, provides for "balancing" refunds or the "offsetting" it is requesting. Finally,  S- xOperator contends that the decision in TCI Cablevision of North Central Kentucky ("TCI Cablevision")P!2 yOr -ԍ 10 FCC Rcd 926 (Cab. Serv. Bur. 1994).P  xremoved any doubt on the issue of refund balancing by reiterating that operators could calculate refunds  xzby comparing aggregate "actual" revenue with the aggregate "permitted" revenue, i.e., that overcharges  xmust be balanced against undercharges. Operator believes that the Commission should clarify here, before  xa refund plan is submitted, that it is entitled to calculate its refund liability by claiming credit for any past  x[undercharges. The City contends, in its Opposition, that Section 76.942 of the Commission's rules does  xnot permit offsetting as argued by the Operator. That section, it argues, allows an operator to base its  xrefund liability "on the difference between the sum of the old [program services and equipment] charges  x.and the sum of the new, unbundled program service and equipment charges." The City believes that the intent of the 1992 Cable Act and the Commission's rules would be violated by any other result. x  S4- ` x15.` ` We have previously addressed offsets between tiers in Cencom. The Communications Act  xsets up a dual regulatory structure for cable services, giving local franchising authorities jurisdiction to  xregulate BST and associated equipment rates, and giving the Commission jurisdiction to regulate CPST  S- xrates upon the filing of a valid complaint."x2 yO- xԍ Communications Act  623, 47 U.S.C.  543. Rates for equipment used exclusively for CPST are also within  {O-the Commission's jurisdiction. See 47 C.F.R  76.950. While the Commission has prescribed standards and  S- xprocedures for local rate regulation#2 yO-ԍ Communications Act  623(b)(1), (3), 47 U.S.C.  543(b)(1), (3); 47 C.F.R  76.922, 76.923. and is authorized to consider appeals from local rate orders,$b 2 yO-ԍ Communications Act  623(b)(5)(B), 47 U.S.C.  543(b)(5)(B); 47 C.F.R  76.944. the  Sn- xCommission generally is not otherwise involved in local rate regulationC%n 2 yO - xԍ Only if the franchising authority's certification is denied or revoked or if a franchising authority asks the  xYCommission to assume jurisdiction because it can not meet Commission certification standards, can the Commission  xdirectly regulate basic service and associated equipment rates until the franchising authority becomes qualified. 47  xC.F.R.  76.913. The Commission has not assumed such jurisdiction to date. The Commission's files reflect that  xthe Commission has received 123 requests from local franchising authorities representing 203 communities for  {O#-assistance in reviewing cost of service filings. See Third Order on Reconsideration, 9 FCC Rcd at 433839. C and is not in a position to  xevaluate offsets between tiers as a matter of routine. Absent an appeal, it may be uninformed about local  xmatters potentially affecting the BST rates. Its processes are not coordinated with local rate review  xprocesses. Allowing intertier offsets under the current statutory scheme would create practical problems"l%,p(p(884"  xin determining the correct BST rates for offset purposes, further burdening the administrative processes  S-of cable rate regulation, and would be discordant with the dual regulatory structure Congress envisioned.G&2 {O@-ԍ See Cencom at para. 20.G  S- ` ax16.` ` In the limited context of global resolutions of rate complaints for all or a substantial  xnumber of a company's cable systems, the Commission has allowed intertier offsets when determining  xrefund liability. But, it has done so only after reviewing rates for BSTs, and where both individual  xcomplainants and local franchising authorities were able to participate in the rate resolution through  xcomments on the proposal. We have learned from this process that there often are considerations affecting  x[rates at the local level that are not apparent from the face of the rate form filed to justify CPST rates and  x]to which the Commission is not normally privy. The special circumstances applicable to the rate  Sp-resolutions are not present here.G'pZ2 {Oj -ԍ See Cencom at para. 21.G  S - ` x17.` ` The rule and legal precedents cited by Operator address offsets within the BST and not  S - xkintertier offsets. Section 76.942 of the Commission's Rules and the Third Order on Reconsideration  S - xdirect local franchising authorities to base refunds on the amount by which aggregate actual revenues  xexceed aggregate permitted revenues for BST service and equipment rates under their regulatory  S - xLjurisdiction.(" 2 yO- xԍ This provision was intended to address the problem of refund computations where basic service rates and  x.associated equipment charges had been bundled but the maximum permitted rates were to be calculated on an  xunbundled basis. However, the Commission provided that franchising authorities should allow rate aggregation  {Of-whether or not rates had been bundled. Third Order on Reconsideration, 9 FCC Rcd at 4353. TCI Cablevision directed a local franchising authority to calculate refunds consistent with  S\- x. 76.942 and the Third Order on Reconsideration.)$\2 {O- xԍ TCI Cablevision is cited as authority in Cox Cable of San Diego, Inc., 10 FCC Rcd 10050, 10052 n.15 (Cab.  xServ. Bur. 1995) (local franchising authority directed to compute intratier offsets). There the Bureau also denied  xwa request for intertier offsets, noting "that none of our decisions to date have allowed for any type of refund offsets  {O,-between tiers." Id. at 10053 n.19. None of the authorities cited by Operator provides  xfor aggregating revenues for services and equipment costs from basic service and cable programming  xservice tiers. Indeed, Operator's refund offset request is inconsistent with the Commission's conclusion  x=in the Implementation of Sections of the Cable Television Consumer Protection and Competition Act of  x1992, Rate Regulation, MM Docket 92266, Report and Order and Further Notice of Proposed  S- xRulemaking, ("Rate Order")R* 2 yO-ԍ 8 FCC Rcd 5631, 5840  333, 584347. R that cable operators should not balance low BST rates with CPST rates that  Sp- xexceed the maximum permitted rate for the tier.+|BpR 2 {Ob"- xԍ Rate Order at 575960 (1993). The Commission's concern was twofold: (1) that programming might be  xmoved from the BST to tiers where the cable operator could receive relatively higher prices; and (2) that mandated  xseparate rate levels would increase both the burdens on cable operators and regulators and the complexity of their  {O$-decision making. See 47 C.F.R.  76.922(a) (tier neutral pricing structure required).   xMore recently, the Commission proposed to allow some flexibility in pricing cable service tiers by allowing  xKany operator who had set initial or adjusted rates in accordance with existing regulations to decrease its BST rate"'*,p(p(]'"  xand offset the lost revenue with a corresponding increase in CPST rates. To facilitate review of the offsets and  xunderlying BST rates by local franchising authorities or CPST rates by the Commission, operators would maintain  xrecords of what their maximum permitted rates would be if computed without the offsets. BST rates would be  xcapped at the offset amount, and operators justifying CPST rates would be required to show the offset amounts and  {O- xdemonstrate that the offsets would be revenue neutral. See Implementation of Sections of the Cable Television  xConsumer Protection and Competition Act of 1992: Rate Regulation, MM Docket No. 92266, and Cable Pricing  xFlexibility, CS Docket No. 96157, Memorandum Opinion and Order and Notice of Proposed Rulemaking, 11 FCC Rcd 9517, 952327 (1996). Operator is seeking to accomplish through the refund"p+,p(p(88"  x/process what it was prohibited from doing when setting its rates, without demonstrating any special  xcircumstances that justifies such treatment. We deny Operator's request and its Petition for  S-Reconsideration.  x  S`- ` 2x18.` ` Our Prior Order indicates that the findings in that review "do not in any way prejudge the  S8- xreasonableness of the prices for CPS service after May 14, 1994."|,82 {O -ԍ See In the Matter of Bresnan Communications Company, 10 FCC Rcd 7184 (1995).| Consequently, the CPST rates  x{beginning May 15, 1994, and subsequent rate increases, are subject to Commission review and are  S- xaddressed in this Order. On June 4, 1997, the LFA filed its complaint against Operator's April 1, 1997  S- xCPST rate of $16.85.-d 2 yO-#X\  P6G;P#э #X\  P6G;P#The first subscriber complaint concerning the CPST rate increase was received by the LFA on April 7, 1997. In its complaint, the LFA asserts that it has received more than one subscriber  x complaint against Operator's CPST rate increase, thereby triggering the Commission's jurisdiction to  xzreview this complaint. The valid complaint from the LFA triggers an obligation on behalf of the cable  SH - x=operator to file a justification of its CPST rates with the LFA..H 2 yO-#X\  P6G;P#э #X\  P6G;P#47 C.F.R Section 76.1402. Thus, in this case, Operator is required to justify the increase in its CPST rate which is the subject of the LFA's complaint.  S - ` }x19.` ` Upon review of Operator's FCC Forms 1200, 1210, 1235 and 1240, we find that Operator  S -has not correctly calculated its MPR beginning May 15, 1994, as discussed in the paragraphs below./  2 yO- xxԍ This finding is based solely on the representations of Operator. Should information come to our attention  xthat these representations were materially inaccurate, we reserve the right to take any appropriate action. This Order  xis 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.  SX- ` x20.` ` To justify CPST rates in effect from May 15, 1994 to November 7, 1994, Operator filed  xLFCC Form 1200 on August 15, 1994. Upon review of the FCC Form 1200, we revised the channels per  xtier in Module A, Line A1 and the monthly charge per tier in Module A, Line A6 to reflect instructions  x?given in our Prior Order. We also adjusted Module A, Line A10 to exclude franchise fees. These  xMadjustments resulted in an MPR of $10.83 instead of the $10.95 calculated and charged by Operator.  xConsequently, we find that the CPST rate in effect from May 15, 1994 to November 7, 1994 is  Sh-unreasonable.p0hl2 yOt%-ԍ Operator did not file a letter requesting deferral of refund liability.p "@ 0,p(p(88c"Ԍ S- ` 2x21.` ` On October 12, 1994, Operator filed its first FCC Form 1210, covering the period July1,  x 1994 to September 30, 1994, to justify its CPST rate of $11.51, effective November 8, 1994. Upon  xreview of this FCC Form 1210, we adjusted Operator's starting rates in Module A, Lines A1 and A2 to  xreflect the correct transition rate and permitted charge, respectively, from Operator's FCC Form 1200.  xlWe also adjusted Module C, Lines C1 and C3 to accurately reflect Operator's previous number of  x{regulated channels per tier. These adjustment resulted in an MPR of $11.43 instead of the $11.51  xcalculated and charged by Operator. Thus, Operator has failed to demonstrate that its November 8, 1994 CPST rate of $11.51 was not unreasonable.  S- ` Bx22.` ` On February 8, 1995,s12 yO -ԍ Operator faxed an amended version of this FCC Form 1210 on July 17, 1997.s Operator filed its second FCC Form 1210, covering the period  xOctober 1, 1994 to December 31, 1994, to justify a CPST rate of $11.72, effective March 8, 1995. We  xadjusted Module A, Line A2 to reflect the correct previous MPR of $11.43 brought forward from the prior  xFCC Form 1210. This adjustment resulted in a corrected MPR of $11.64. However, Operator was  xactually charging $11.72 for its CPST, in excess of the MPR. Thus, Operator has failed to demonstrate that its March 8, 1995 rate of $11.72 for its CPST was not unreasonable.  S - ` x23.` ` On May 23, 1995,s2 X2 yOx-ԍ Operator faxed an amended version of this FCC Form 1210 on July 18, 1997.s Operator filed its next FCC Form 1210, covering the period  xJanuary1, 1995 to March 31, 1995, to justify a CPST rate of $12.22, effective July 8, 1995 We adjusted  xModule A, Line A2 to reflect the correct previous MPR of $11.64 brought forward from the prior FCC  x>Form 1210. We also adjusted Module C, Line C14 to accurately reflect Operator's previous external  xcosts. These adjustments resulted in a corrected MPR of $11.74. However, Operator was actually  xcharging $12.22 for its CPST, in excess of the MPR. Thus, Operator has failed to demonstrate that its July 8, 1995 rate of $12.22 for its CPST was not unreasonable.  S@- ` x24.` ` Operator filed its last FCC Form 1210, covering the period April 1, 1995 to June 30,  x1995, to justify a CPST rate of $12.46, effective October 1, 1995 on August 31, 1995. We adjusted  xModule A, Line A2 to reflect the correct previous MPR of $11.74 brought forward from the prior FCC  xForm 1210. This adjustment resulted in a corrected MPR of $11.97. However, Operator was actually  xcharging $12.46 for its CPST, in excess of the MPR. Thus, Operator has failed to demonstrate that its October 1, 1995 rate of $12.46 for its CPST was not unreasonable.  S(- ` x25.` ` On March 1, 1996, Operator filed FCC Form 1240 to justify a CPST rate of $13.66  xjeffective April 1, 1996. We adjusted Module A, Line A1 of this FCC Form 1240 to reflect the corrected  xMPR of $11.97 brought forward from the prior FCC Form 1210. We adjusted Module C, Line C1 to  x[apply the correct published rate of 2.22% for the period July 1995 to December 1995 and 2.39% for the  xperiod January 1996 to February 1996. In addition, we adjusted Module C, Line C3 to apply the correct  x]published inflation factor of 2.39%. Our adjustments to Operator's FCC Form 1240 resulted in a  x<reduction of the MPR for CPST to $12.91. Thus, Operator has failed to demonstrate that its April 1, 1996 rate of $13.66 for its CPST was not unreasonable.  S!- ` ax26.` ` Upon review of Operator's FCC Form 1240 to justify the April 1, 1997 CPST rate  x.increase, we find that Operator incorrectly calculated its MPR. First, we adjusted Line A1 to $12.91 to  xcorrespond with the MPR on Operator's previous revised FCC Form 1240. We also adjusted Line C3"p# 2,p(p(88%"  x(Inflation Factor for TrueUp Period 1) to 1.0141. We also corrected Line D6 (Current TrueUp Segment)  xto $0.0600 and Line D7 (Current Inflation Segment) to $0.1929. We also corrected Line E2, Worksheet  x2 Caps Method (For the TrueUp Period) from 12 months to 8 months and Worksheet 8 (TrueUp Rate  xzCharged) from 12 months to 8 months. Finally, we adjusted Line F8 (TrueUp Segment for TrueUp Period 1) to $0.0600. In total, our adjustments reduced the MPR for the projected period to $15.00.  S- ` x27.` ` Operator's April 1, 1997 rate increase reflects not only the annual increase as reported on  xLFCC Form 1240, but also the recovery of costs for its network upgrade as reflected on FCC Form 1235.  x[The instructions to FCC Form 1235 set forth the minimal technical standards for an upgrade as requiring  xbandwidth to be increased to at least 550 MHz with upgrade capability to 750 MHz, and no more than  Sp- x?1,500 homes per node.N3p2 yO -ԍ FCC Form 1235, Instructions at p. 5.N Operator states that the upgrade is to 750 MHz with each node serving  SH - xapproximately 600 homes.t4H X2 {O@ -ԍ See Attachment 2 of Operator's FCC Form 1235 filed on March 1, 1996.t Operator has certified that the BST and the CPST will see improved picture  xquality as a result of this rebuild and that this increase in quality will come about because of a reduction  S - x]in cascade as well as the use of higher performance amplifiers.5  2 yO- xԍ Operator states that "these two factors will result in a higher carrier to noise ratio, thus significantly improving  xpicture quality. The carrier to noise ratio will be increasing from around 43 db to 49 db (a 4 to 1 improvement in  x,carrier to noise ratio). These significant improvements will benefit everyone from the Basic Only subscriber to the subscriber with multiple premium services." Operator's FCC Form 1235 at Attachment 2. Further, Operator states that the  xkarchitecture of the system is Hybrid Fiber Coax, generally recognized as the most current concept for  x.broadband systems. Consequently, we find that the Operator has met the minimum technical standards  S -and we accept Operator's FCC Form 1235.@  S0- ` ox28.` ` Upon review of Operator's FCC Form 1235, we adjusted Operator's allocations of rate  xbase and expense costs based on its channel ratios following its upgrade because Operator's tier charges  xare aligned with those ratios. We also based Operator's calculations on the maximum allowable Federal  S- xtax rate of 34% instead of the 35% reported by Operator. Our adjustments resulted in an MPR of $1.46.6 2 yO*- xԍ These findings are based solely on the representations of Operator. Should information come to our attention  xYthat these representations were materially inaccurate, we reserve the right to take appropriate action. This Order is  xnot 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.  xzWhen the FCC Form 1240 MPR of $15.00 is combined with the FCC Form 1235 MPR of $1.46, the  x\combined MPR is $16.46. However, Operator's actual combined rate is $16.85. Thus, Operator has  S@-failed to demonstrate that its April 1, 1997 rate of $16.85 for its CPST was not unreasonable.7 @ 2 yO!- xЍ Information regarding the specific adjustments made to Operator's FCC Forms 1200, 1210, 1235 and 1240  xfilings can be found in the public file for the Midland, Michigan, CUID No. MI0122 which is available in the Cable  x,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.  S- ` x29.` ` Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47  xC.F.R.  0.321, that the CPST rates charged by Operator in Midland, Michigan, CUID No. MI0122, from May 15, 1994 to the present ARE UNREASONABLE." 7,p(p(88"Ԍ S- `  ęx 30.` ` IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47  xC.F.R.  76.961, that Operator shall refund to subscribers in Midland, Michigan, CUID No. MI0122 that  xportion of the amount paid in excess of the maximum permitted CPST rate of $10.83 per month (plus  xjfranchise fees), plus interest to the date of the refund, for the period from May 15, 1994 to November 7,  S`-1994.g8X`2 yO- xYЍ Pursuant to the Commission's Prior Order regarding rates in Midland, Michigan, CUID No. MI0122, Operator  xwas ordered to reduce the current charge of $11.47 to the maximum permitted rate of $10.98. That Order, however, addressed only refunds up to the date of May 14, 1994. g  S- ` x31.` ` IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47  xC.F.R.  76.961, that Operator shall refund to subscribers in Midland, Michigan, CUID No. MI0122 that  xportion of the amount paid in excess of the maximum permitted CPST rate of $11.43 per month (plus  xfranchise fees), plus interest to the date of the refund, for the period from November 8, 1994 to March 7, 1995.  S - ` x32.` ` IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47  xC.F.R.  76.961, that Operator shall refund to subscribers in Midland, Michigan, CUID No. MI0122 that  xportion of the amount paid in excess of the maximum permitted CPST rate of $11.64 per month (plus franchise fees), plus interest to the date of the refund, for the period from March 8, 1995 to July 7, 1995.  SX- ` x33.` ` IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47  xC.F.R.  76.961, that Operator shall refund to subscribers in Midland, Michigan, CUID No. MI0122 that  xportion of the amount paid in excess of the maximum permitted CPST rate of $11.74 per month (plus  xLfranchise fees), plus interest to the date of the refund, for the period from July 8, 1995 to September 30, 1995.  Sh- ` x34.` ` IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47  xC.F.R.  76.961, that Operator shall refund to subscribers in Midland, Michigan, CUID No. MI0122 that  xportion of the amount paid in excess of the maximum permitted CPST rate of $11.97 per month (plus  x=franchise fees), plus interest to the date of the refund, for the period from October 1, 1995 to March 31, 1996.  S-  Sx- ` x35.` ` IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47  xC.F.R.  76.961, that Operator shall refund to subscribers in Midland, Michigan, CUID No. MI0122 that  xportion of the amount paid in excess of the maximum permitted CPST rate of $12.91 per month (plus  xzfranchise fees), plus interest to the date of the refund, for the period from April 1, 1996 to March 31, 1997.  S- ` x36.` ` IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47  xjC.F.R.  76.961, that Operator shall refund to subscribers in the Midland, Michigan, CUID No. MI0122  xthat portion of the amount paid in excess of the maximum permitted CPST rate of $16.46 per month (plus  xfranchise fees), plus interest to the date of the refund, for the period from April 1, 1997 to the day before Operator implements the maximum permitted CPST rate of $16.46.   x37. IT IS FURTHER ORDERED, that Operator shall promptly determine the overcharges to  xjCPST subscribers for the stated periods, including any overrecovery as detailed in its accounting report,"p# 8,p(p(88$"  xLand shall file, within 30 days of the release of this Order, a report with the Chief, Cable Services Bureau,  xstating the cumulative refund amounts so determined (including franchise fees and interest), describing  xthe calculation thereof, and describing its plan to implement the refund within 60 days of the Commission approval of the plan. x` `  S8- ` x38.` ` IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47  x]C.F.R. Section 0.321, that the complaints against the CPST rate charged by Operator in Midland, Michigan, CUID No. MI0122, ARE GRANTED TO THE EXTENT INDICATED HEREIN.  S- ` x39.` ` IT IS ORDERED, pursuant to Section 1.106 of the Commission's Rules, 47 C.F.R.   x1.106, that the Petition for Reconsideration seeking reversal of Bresnan Communications Company, 10 FCC Rcd 7184 (1995) IS DENIED. x` `  hh@FEDERAL COMMUNICATIONS COMMISSION x` `  hh@Meredith J. Jones x` `  hh@Chief, Cable Services Bureau