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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 ) ) Liberty Lake II, Inc. ) CUID No. IL0001 (City of Waukegan) ) ) Complaint Regarding ) Cable Programming Services Tier Rates) ORDER Adopted: November 6, 1997 Released: November 10, 1997 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider a complaint concerning the rates the above-captioned operator ("Operator") was charging for its cable programming services tier ("CPST") in the community referenced above. Operator has attempted to justify its CPST rates through benchmark showings on FCC Form 1200, multiple FCC Forms 1210, and FCC Forms 1240. We have already issued a separate order which found that the Operator's rates in effect before May 15, 1994 were unreasonable; but that the total overcharge per subscriber was de minimis. ("Prior Order"). Accordingly, this Order addresses the reasonableness of Operator's CPST rates in effect from May 15, 1994 to present. 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. The Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act") requires the Commission to review CPST rates upon the filing of a valid complaint by a subscriber or local franchise authority ("LFA"). If the Commission finds the rate to be unreasonable, it shall determine the correct rate and any refund liability. 3. The Commission's original rate regulations took effect on September 1, 1993. The Commission revised its rate regulations effective May 15, 1994. Cable operators that have 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. Cable operators must also demonstrate that their rates were in compliance with the revised rules from May 15, 1994 forward. Cable operators attempting to justify their rates for the period beginning May 15, 1994 by a benchmark showing must use 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 when the Commission has found the CPST rate to be unreasonable less than one year prior to the filing. In addition, FCC Form 1210 may be filed where there is a pending complaint against the CPST rate. 4. Operators may also 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 cost changes. 5. Our Prior Order indicates that the findings in that review "do not in any way prejudge the reasonableness of the prices for cable programming service after May 14, 1994." Consequently, the CPST rates beginning May 15, 1994, and subsequent rate increases, are subject to Commission review and are addressed in this Order. 6. Upon review of Operator's amended FCC Form 1200, filed October 17, 1995, we find that Operator correctly reduced Line A6(b) (Monthly Charge Per Tier as of March 31, 1994) to $11.77 pursuant to Commission instructions given in the Prior Order. However, Operator was actually charging $11.82 from May 15, 1994 through July 13, 1994. Operator elected to take advantage of the refund liability deferral period in accordance with the Commission's Rules. Consequently, Operator does not incur refund liability for charging in excess of the MPR calculated on its FCC Form 1200 until July 15, 1994. Because Operator's actual CPST rate of $11.82, effective May 15, 1994 through July 13, 1994 exceeds its revised MPR of $11.77 by $0.05, we find Operator's actual CPST rate of $11.82, to be unreasonable. However, we further determine that the total overcharge per subscriber is de minimis. Therefore, it would not serve the public interest to order a refund. 7. Upon review of Operator's subsequent FCC Forms 1210, we find that Operator has provided sufficient evidence to support the CPST rates it charged beginning July 14, 1994 through July 30, 1996. 8. We next reviewed Operator's FCC Form 1240 for the projected period August 1, 1996 to July 31, 1997. Our calculations reflect a CPST MPR of $13.35, rather than $13.36 as reported by Operator. Thus, Operator has failed to demonstrate that its August 1, 1996 CPST rate of $13.35 was not unreasonable. 9. Upon review of Operator's FCC Form 1240 for the projected period August 1, 1997 to July 31, 1998, we adjusted Line A1 to reflect the CPST MPR of $13.35, calculated in the previous FCC Form 1240. We have also adjusted Module F, Line F1 (Caps Method Segment For True-Up Period 1) from .2750 to .2700 to equal the amount reported on Line D3 (Current Caps Method Segment). These adjustments have resulted in a revised MPR of $14.31, rather than $14.30, as calculated by the Operator. Thus, Operator has failed to demonstrate that its CPST rate of $14.31, for the period beginning August 1, 1997 to the present, was not unreasonable. Operator has exceeded its MPR by $0.01. However, we determine that the total overcharge per subscriber is de minimis, and is subject to true-up on Operator's next FCC Form 1240. 10. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rates charged by Operator in the community referenced above, from May 15, 1994 to the present ARE UNREASONABLE TO THE EXTENT DISCUSSED HEREIN. 11. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rates charged by Operator in the community referenced above, from May 15, 1994 to July 13, 1994, ARE UNREASONABLE. 12. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rates charged by Operator in the community referenced above, from July 14, 1994 through July 30, 1996 ARE REASONABLE. 13. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rates charged by Operator in the community referenced above, for the projected periods beginning August 1, 1996 to the present ARE UNREASONABLE. 14. 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. 15. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the complaint against the CPST rates charged by Operator in the community referenced above, IS GRANTED TO THE EXTENT INDICATED HEREIN. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau