******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. 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 ) ) ) Casco Cable Television, Inc. ) CUID Nos. ME0055 (Topsham) Casco Cable Television of Bath, Maine, Inc. )ME0057 (Brunswick) ) ME0083 (Bath) ) Complaints Regarding ) Cable Programming Services Tier ) Rate Increase ) ORDER Adopted: September 23, 1997 Released: September 26, 1997 By the Chief, Cable Services Bureau: 1. In this Order we consider complaints concerning the rates charged by the above- referenced operator ("Operator") for its cable programming services tier ("CPST") in the communities referenced above. Operator has attempted to justify its CPST rates through benchmark justifications on FCC Form 393, a cost of service filing on FCC Form 1220 and FCC Form 1210. 2. The Communications Act authorizes the Federal Communications Commission ("Commission") to review the CPST rates of cable systems not subject to effective competition. This is to ensure that rates charged are not unreasonable. The filing of a valid complaint triggers an obligation on behalf of the cable operator to file a justification of its CPST rates. Under our rules, an operator may attempt to justify its prices through either a benchmark showing or a cost-of-service showing. In either case, the operator has the burden of demonstrating that its CPST rates are not unreasonable. 3. The Commission's original rate regulations took effect on September 1, 1993. The Commission subsequently revised its rate regulations effective May 15, 1994. Operators with valid CPST complaints filed against them prior to May 15, 1994 must demonstrate that their CPST rates were in compliance with the Commission's initial rules from the time the complaint was filed through May 14, 1994, and that their prices were in compliance with the revised rules from May 15, 1994 forward. Operators attempting to justify their prices for the period prior to May 15, 1994 through a benchmark showing must complete and file FCC Form 393. Operators attempting to justify their prices for the period prior to May 15, 1994 through a cost of service showing must complete and file FCC Form 1220. 4. To justify rates for the period beginning May 15, 1994 through a benchmark or cost of service showing, operators must use the FCC Form 1200 series. Cable operators may file an FCC Form 1210 to justify rate increases based on the addition and deletion of channels, changes in certain external costs, and inflation. In addition, Operators must file FCC Form 1210 with the Commission within thirty days of the date of service of the complaint regarding the new rate. 5. The Commission's rules also provide for a refund liability deferral period, if timely requested by Operator, beginning May 15, 1994 and ending July 14, 1994, for any overcharges resulting from Operator's calculation of a new maximum permitted rate ("MPR") on FCC Form 1200. Operator elected to defer refund liability pursuant to the Commission's Rules. This deferral of refund liability, however, does not apply to refund liability that may have occurred because Operator's March 31, 1994 rates for its CPST subject to regulation were higher than levels permitted under the Commission's rules in effect before May 15, 1994. Accordingly, while the liability period for Operator's overcharges associated with its FCC Form 1200 filing may not begin to run until July 15, 1994, Operator will incur refund liability between May 15, 1994 and July 14, 1994 for any CPST rates charged above the MPR approved by the Commission on Operator's FCC Form 393. 6. The first valid CPST complaints in the communities referenced above were received by the Commission on the dates set forth on Appendix A. Operator filed FCC Form 393, FCC Form 1220, FCC Form 1210 and FCC Form 1230. 7. Operator initially filed FCC Form 393 for the communities referenced above to demonstrate that its CPST rates could not be justified under the Benchmark methodology. Operator subsequently filed FCC Form 1220 filings dated July 14, 1994 to justify its CPST rates in the three communities referenced above. All three filings contain essentially the same system-level data, and the channel line-ups and rates charged for each community are similar. Therefore, we reviewed the cost-of- service filings for the communities referenced above concurrently. 8. On November 13, 1995, Operator filed FCC Form 1230 requesting small cable system status. Because Operator is affiliated with Lenfest York, Inc. and Susquehanna Cable Company, it is not eligible for small system status under the Commission's rules. 9. Upon review of Operator's FCC Form 1220, we find that Operator has not correctly calculated its maximum permitted rate ("MPR"). We adjusted the maximum permitted rate calculated by Operator as follows: Operator allocated common costs to its tiers primarily on a weighted channel basis, i.e. a ratio of the number of tier channels times tier subscribers to total channels times total subscribers. We find that this method causes a biased allocation of common costs to regulated service tiers, and overlooks the cost causative relationship between plant usage and the number of channels supported. Moreover, we affirmed our rejection of weighted channels as an appropriate allocation methodology in the Final Cost Rules at paragraph 123. Consequently, we redistributed Operator's common costs on a channel ratio basis. 10. Operator's income tax allowance calculations were based on an assumption of minimal interest expenses. However, Operator applied statutory Federal and State tax rates when calculating its income tax allowance and, to be consistent, should have recorded normalized interest expenses as described in paragraph 104 of the Final Cost Rules. Consequently, we revised Operator's claimed income tax allowances to account for normalized interest expenses and our adjustments to tier revenue requirements. 11. As a result of these adjustments, we determined that Operator's MPR for its CPST is $10.57 effective September 1, 1993. Because Operator's actual CPST rate of $11.28 is more than its MPR, we find Operator's actual CPST rate of $11.28 to be unreasonable. 12. Upon review of the record herein, and having incorporated the adjustments discussed above, we conclude that Operator has failed to justify the rates it was charging during the periods in question. Operator's showings justify the maximum reasonable CPST rates shown on Appendix B (plus franchise fee) for the period from the filing of the earliest complaint in each franchise area (as set forth in Appendix A) to September 30, 1994. 13. Upon review of Operator's FCC Form 1210 covering the period July 1, 1994 to September 30, 1994, we found that Operator has not correctly calculated its MPR. We adjusted Line A2 so that it agreed with the adjusted MPR of the prior FCC Form 1220. This resulted in a new MPR, effective October 1, 1994, of $11.11 versus $12.13 claimed by Operator. Because Operator's actual rate of $11.69 is more than its revised MPR of $11.11, we find Operator's CPST rate for the period October 1, 1994 to the present, to be unreasonable. 14. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that Operator's rate of $11.28 in the communities referenced above, effective September 1, 1993 through September 30, 1994, IS UNREASONABLE. 15. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that Operator's rate of $11.69 in the communities referenced above, which went into effect October 1, 1994 through the present, IS UNREASONABLE. 16. 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 communities shown in Appendix B that portion of the amounts paid for cable programming service for the period from the filing of the first valid complaint in each community (as set forth on Appendix A) to September 30, 1994 which exceeded the MPR of $10.57 for each community set forth in Appendix B (plus franchise fee) per month, plus interest to the date of the refund. 17. 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 communities shown in Appendix B that portion of the amounts paid for cable programming service for the period from October 1, 1994 to the day before Operator implements the maximum permitted CPST rate of $11.11 for each community set forth in Appendix B (plus franchise fee) per month, plus interest to the date of the refund. 18. 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. 19. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the complaints referred to in Appendix A, ARE GRANTED TO THE EXTENT INDICATED HEREIN. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau Appendix A CUID No.Date First Complaint Filed with FCC ME0055 December 17, 1993 ME0057 December 20, 1993 ME0083 November 15, 1993 Appendix B CUID No.Actual Rate Maximum Permitted Rate September 1, 1993 through September 30, 1994 ME0055 $11.28$10.57 ME0057 $11.28$10.57 ME0083 $11.28$10.57 Actual Rate Maximum Permitted Rate October 1, 1994 to the present ME0055 $11.69$11.11 ME0057 $11.69$11.11 ME0083 $11.69$11.11