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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 ) ) Adelphia Communications Corporation) ) Final Resolution of ) Cable Programming Service ) Rate Complaints ) ) ORDER Adopted: May 1, 1997 Released: May 5, 1997 By the Commission: I. INTRODUCTION 1. The Commission has before it a Resolution submitted by Adelphia Communications Corporation ("Adelphia"), which will resolve 66 cable rate complaints filed against Adelphia by subscribers in 40 communities in eight states for cable programming service offerings from September 1, 1993, through December 31, 1995, including complaints as to which the Cable Services Bureau ("Bureau") has issued orders. Together these cases affect service for approximately 320,000 subscribers. For the reasons stated below, and based upon our review of the record, we find that the Resolution serves the interests of Adelphia's subscribers by, among other things, bringing finality and stability to basic service tier ("BST") and cable programming service tier ("CPST") rates and improving the availability of customer programming choices. Adoption of the Resolution is consistent with the Commission's responsibility under the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act") to ensure that consumers' interests are protected in the receipt of cable services and that regulated CPST rates are not unreasonable. II. BACKGROUND 2. The 1992 Cable Act gave the Commission and local franchising authorities jurisdiction over the cable programming and equipment rates of cable systems that did not face effective competition, as defined by that Act. Specifically, with respect to cable systems that are not subject to effective competition, the 1992 Cable Act provides that franchising authorities may regulate the rates for BSTs pursuant to guidelines established by the Commission, and the Commission may regulate the rates for CPSTs upon the filing of a complaint. The governing standard for resolving CPST complaints is that rates not be unreasonable. In enacting the legislation, Congress stated its intent that the 1992 Cable Act be implemented to "ensure that consumer interests are protected in the receipt of cable service." 3. On September 10, 1996, the Commission adopted an order instructing the Bureau to serve the Resolution as proposed ("Proposed Resolution") on all local franchising authorities in the benchmark and cost-of-service franchise areas covered by the Proposed Resolution and on any party other than a local franchising authority that filed a valid complaint. The order provided a 30-day period for comments on the proposal and a 15-day period for replies. 4. The Resolution resolves complaints regarding CPST rates and pending BST proceedings in the franchise areas listed in Exhibit 1 for the period ending December 31, 1995. Although it does not admit that it violated Commission rules, Adelphia agrees to make refunds totaling approximately $2.45 million, which includes interest computed through December 31, 1996, plus additional interest computed from January 1, 1997, through the date of payment. Adelphia also will reduce rates in 17 communities. Because the Resolution affects matters within the jurisdiction of local franchising authorities, they may opt out of certain aspects of it. 5. Adelphia's refund liability is due principally to its decision to remove all of its programming from its CPSTs and offer it individually and also in a la carte packages (known as "CableSelect") to subscribers. On November 18, 1994, the Bureau released a Letter Of Inquiry decision ("South Dade County") concluding that the CableSelect a la carte package Adelphia offered in South Dade County, Florida, which included all 32 channels that Adelphia had offered previously on its CPST, constituted an evasion of regulation and must be treated as a regulated CPST. The Commission denied Adelphia's Application for Review of the Bureau's order. The Bureau issued similar orders ("Bucyrus Order" and "Charlottesville Order") concluding that Adelphia's a la carte packages in Bucyrus, Ohio, and Charlottesville, Virginia, constituted evasions and should be treated as regulated CPSTs. Adelphia filed Applications for Review in both of those cases, which are now pending. Adelphia also had sought court review of the Commission's Going Forward Order with regard to the Commission's regulation of a la carte packages. In the Going Forward Order, the Commission concluded that a la carte packages are CPSTs within the meaning of Section 3(l)(2) of the 1992 Cable Act. On July 23, 1996, the United States Court of Appeals for the District of Columbia Circuit upheld the Commission's regulations and denied Adelphia's appeal. 6. During the course of the Bureau's discussions with Adelphia, the Bureau and Adelphia proposed to resolve the treatment of the CableSelect channels by agreeing that Adelphia would include all but four of the channels in its benchmark channel counts (hereinafter referred to as the "minus-four channel count") for the purpose of determining the maximum permitted CPST and BST rates from September 1993 forward. The Bureau has ruled that packages of small numbers of a la carte channels may be excluded from CPSTs for such purposes in orders involving other cable operators that adjusted their channel offerings on the eve of regulation by moving a small number of channels into such packages. The effect of this aspect of the Resolution is to increase the per- channel rate Adelphia is entitled to charge under our rules above the rate that would apply if the four channels were included in the benchmark channel count. 7. In addition, with respect to several of Adelphia's Form 393, 1200, and 1210 filings, Adelphia demonstrated that, after giving effect to the removal of four channels, its BST and/or CPST rates were lower than the maximum permitted rates authorized under the Commission's rules. Under the Resolution, in any community in which BST or CPST rates still exceed maximum permitted levels, the overcharges will be offset, or reduced, by any undercharges in the corresponding CPST or BST rates in that community for purposes of determining refund amounts. III. SUMMARY OF RATE RESOLUTION 8. All 320,000 subscribers in the 40 communities that are included in the Resolution will participate in the refunds of $2.45 million that Adelphia will make under the terms of the Resolution. The Resolution provides a minimum $3.00 refund per subscriber, with larger refunds for subscribers in 17 communities. The minimum refund condition will benefit subscribers in the 23 communities in which the Resolution rates produced no refund liability. 9. Refunds will vary from $3.00 per subscriber to as much as $55.22 per subscriber. The per-subscriber refunds are shown in Exhibit 2 of the Resolution. Adelphia will pay the appropriate refund to individuals in each of the communities who are subscribers as of the date of payment. Refunds will be paid in the form of monthly billing credits of at least $0.50, and payment will start no later than 120 days after the Commission adopts this Order. Refunds will be paid in full within 12 months of the date Adelphia commences refund payments. Interest will accrue until refunds are fully paid. Adelphia will not seek to recover approximately $94,000 in overpayments of franchise fees from those communities to which it is making refunds. 10. Adelphia also will reduce current BST and CPST rates in all communities in which existing rates exceed the benchmark rates. The monthly reductions in BST rates range from $0.17 to $5.17 per subscriber. The reductions in CPST rates range from $0.09 to $2.48 per subscriber. These rate reductions are shown in Exhibit 3 of the Resolution. Adelphia agrees to cap its BST and CPST rates at current levels (after any applicable reductions are implemented), subject to any inflation and external cost increases Adelphia is entitled to recover, including any Form 1240 increases that Adelphia may implement. 11. In certain communities, Adelphia will create a low-cost "Lifeline Rate" for BST service, which is calculated by including in the benchmark channel count the four a la carte channels that were excluded in calculating refund liability. This will result in a lower per-channel rate and a lower overall rate for the BST. The affected communities are listed in Exhibit 3. Adelphia will implement Lifeline Rates no later than 120 days after the Commission adopts the Resolution. The BST rate reduction necessary to implement Lifeline Rates will vary by community. In those communities where the actual BST rate is low already, little or no reduction will occur. In those communities with relatively high BST rates, current rates will be reduced by as much as $5.17 per month when Adelphia implements the Lifeline Rates. Adelphia may increase CPST rates by an amount up to the amount by which the BST rate is reduced from the maximum permitted level (using a minus-four channel count), except that CPST rates will be further capped so that the combined actual BST and CPST rates do not exceed the combined maximum permitted rates for both tiers. As a result, Adelphia will not be able to fully recover the aggregate BST rate reductions through CPST rate increases. 12. In addition, Adelphia may create a single Migrated Product Tier ("MPT") on each of the systems subject to the Resolution by moving a maximum of four regulated services to the MPT. Adelphia may also include in the MPT up to two services that Adelphia added to the system after September 30, 1994. The migrated channels in each system will be priced at the per-channel rate applicable to the system's regulated tiers; however, an unlimited number of additional new channels can be added to each MPT, and the MPT rate may be increased for each new channel by up to $0.20 plus license fees. Adelphia may also increase the price of an MPT for inflation and external costs as allowed by Section 76.922 of the Commission's rules governing CPST rates. As of January 1, 1998, the MPTs may be treated as New Product Tiers ("NPTs") under the Commission's Going Forward Rules. 13. Adelphia may not require MPT subscribers to take any programming service except basic service, and it may not require CPST subscribers to take the MPT. If it does create an MPT, Adelphia will not have to re-market it to subscribers who previously received the migrated services. Services added to an MPT will not be considered new services for the purpose of the limit on service additions and rate increases under the Commission's Going Forward Rules. 14. Because we are calculating BST rates and refund liability, the Proposed Resolution includes an "opt-out" provision under which a local franchising authority may decide to opt out of the refund portion of the Resolution and make its own refund calculations. However, even if a local authority does opt out, it will be bound to our minus-four channel count for purposes of calculating refunds and establishing revised rates. Adelphia will not be required to create a Lifeline Rate in such communities or forego collection of franchise fee overpayments associated with any refund liability. Regardless of whether they opt out, local franchising authorities will be bound by the Resolution provisions governing future rate increases (except with respect to CPST offsets related to the creation of Lifeline Rates) and the creation of MPTs and NPTs. 15. The Resolution vacates the Charlottesville Order and the Bucyrus Order, and upon our adoption of this Order, Adelphia will be deemed to have withdrawn its Applications for Review of those orders. The Resolution also effectuates Adelphia's withdrawal of its petition for reconsideration of our order denying its Application for Review in South Dade County. The Resolution resolves all pending CPST rate complaints and BST proceedings filed or initiated as of December 31, 1995, in the affected communities, other than CPST complaints for which Adelphia submitted cost-of-service justifications. 16. The Resolution allows Adelphia to avail itself of existing laws and regulations, including applicable modifications of any laws or regulations governing the CPST. However, notwithstanding such laws and regulations or modifications thereto, Adelphia must provide refunds according to the terms of the Resolution. IV. COMMENTS 17. Eighteen parties submitted comments. Adelphia filed reply comments and supplemental reply comments. Thirteen of the commenters, all local franchising authorities, support adoption of the Proposed Resolution. Another local franchising authority, the New Jersey State Board of Public Utilities ("New Jersey Board" or "Board"), supports adoption of the Proposed Resolution with one modification concerning the distribution of refunds. The remaining four commenters oppose the Proposed Resolution. Lee and Judith Borland object generally to the level of the refunds and prospective rate reductions. Anthony W. Daniel enumerates several concerns and objects generally to the "level of compensation, and the manner in which it is proposed . . . ." The Village of Saranac Lake ("Saranac Lake") echoes the sentiments expressed by Mr. Daniel and states that "an appropriate penalty should be added to the repayment plan." A group of six local franchising authorities in Southwestern Pennsylvania ("Southwestern Pennsylvania Communities") opposes the Resolution and requests that we reject it on the grounds that local franchising authorities were not included in the Bureau's discussions with Adelphia concerning the Proposed Resolution and that the refunds are too low as a result of the channel count used to derive them. In its reply comments, Adelphia addresses the comments in opposition to the Resolution and the comments of the New Jersey Board. Adelphia also submitted a schedule of revised and reduced refunds for three New York communities. In its supplemental reply comments, however, Adelphia reiterates its support for the Resolution even without the revised refund levels. The comments opposing the Resolution, the comments of the New Jersey Board, and Adelphia's reply comments and supplemental reply comments are discussed more fully below. V. DISCUSSION 18. As an initial matter, we find that the Commission has authority to approve the Resolution. The Communications Act of 1934 provides the Commission with wide discretion to resolve rate cases. Section 4(i) of the Communications Act authorizes the Commission to "perform any and all acts . . . not inconsistent with [the] Act, as may be necessary in the execution of its functions." Section 4(j) provides that "[t]he Commission may conduct its proceedings in such manner as will best conduce to the proper dispatch of business and to the ends of justice. . . ." Our action in this case is fully consistent with the 1992 Cable Act and with Congress's dual objectives of simplifying cable rate regulation and protecting consumers. As we have concluded in other recent proceedings, the Commission has authority to consider the Proposed Resolution and to determine, after review and consideration of comments, that the rates set forth in the Resolution are not unreasonable. 19. We find that the rates and refunds provided for in the Resolution are not unreasonable within the meaning of section 623(c)(1) of the Communications Act. The Bureau reviewed FCC Form 393s, Form 1200s, and Form 1210s for the 40 community unit identification numbers ("CUIDs") included in the Resolution. The Resolution takes into consideration certain offsets and channel count adjustments claimed by Adelphia and also the public interest benefit to consumers of prompt, certain relief. The major features of the Resolution reflect principles that have been adopted by the Commission in previous rate orders. 20. Were the Commission to resolve the pending CPST complaints by ordering Adelphia to issue refunds and reduce rates without the offsets and channel count adjustments incorporated in the Resolution, Adelphia would be able to prolong the ultimate resolution of these matters by filing petitions for reconsideration of each such order and by seeking review of our orders on reconsideration in a federal appeals court. Under the Resolution, Adelphia will not seek reconsideration or appellate review of the refund levels and rate reductions required by the Resolution, and it will issue its first refunds and reduce rates within 120 days of our adoption of this Order. 21. The courts have long recognized that regulatory agencies have broad discretion to choose among ratemaking methods and procedures in ratemaking determinations, provided that the resulting rates are within a range of reasonableness. The process of adjudicating each of the rate complaints individually and litigating those rulings through the courts -- a process that would likely take several years -- would not be in the public interest, given that the Resolution ensures that subscribers will benefit from reasonable rates and will receive refunds immediately. 22. To the extent that adoption of the Resolution requires waiver of any of our rules, or modifications to the information required on Commission forms, we find that such waiver or modification is in the public interest, because the Resolution will ensure the expeditious resolution of a large number of rate complaints while protecting consumers' statutory interest in CPST rates that are not unreasonable. We recognize that our rules contemplate an adjudication of each CPST rate complaint pursuant to specified ratemaking standards. To the extent that we have diverged from these rules by adopting this Resolution, we find good cause to waive these rules pursuant to section 1.3 of our rules. Specifically, we find that such a waiver furthers the purpose of the rules and advances the public interest because the Resolution will effectively achieve the objectives of the 1992 Cable Act by ensuring the expeditious resolution of all pending benchmark rate complaints regarding the affected systems while protecting consumers from unreasonable BST and CPST rates through rate reductions and prompt issuance of refunds. We further observe that the Commission's authority to resolve cases in an analogous manner has been affirmed in other contexts. 23. The Southwestern Pennsylvania Communities object to the Commission's adoption of the Resolution in part because the Bureau did not permit local franchising authorities to participate in discussions with Adelphia about the Proposed Resolution before it was finalized. Instead, the Commission sought, received, and reviewed their positions through the written comment procedure after the Proposed Resolution had been developed. The Southwestern Pennsylvania Communities state that the exclusion of local franchising authorities from the Commission's rate resolution discussions with operators "permits cable operators to have separate private discussions with a local franchising authority and also with the FCC and permits the operator to then adopt the settlement proposal which is in the best interest of the cable operator, and not the subscribers." They aver that the Commission should reform the "rules that are construed to permit such a system." 24. No party has submitted information indicating that a local franchising authority or other party has been prejudiced by our process. We have sought to balance the need to present a reasonable resolution of a myriad of contested rate complaints with a real opportunity for those interested to present their views. We think we have done so here. The Bureau complied with all applicable rules in conducting its communications with Adelphia, including the requirement that it make additional information provided by Adelphia available to the public. We note that our standard procedures for the review of CPST rates do not include an opportunity for local franchising authorities, complainants, or other members of the public to participate in our decisionmaking process prior to the issuance of an initial order resolving the complaint that triggered our review. Here, in contrast, interested parties were given the opportunity to review and comment on the Proposed Resolution. We find no basis for adopting the Southwestern Pennsylvania Communities' suggestion that we reform our rules pertaining to public participation in the resolution of CPST rate complaints. In any case, the suggestion that we modify our rules is outside the scope of this adjudicatory proceeding. 25. Local franchising authorities and other interested parties were given a full and fair opportunity to participate in our deliberative process by submitting comments on the Proposed Resolution, which, by its terms, was not binding on any party prior to our adoption of it in this Order as a final Resolution. We afforded ample time for initial comments. We extended the original 30- day comment period by 14 days in response to a request by the New Jersey Board. Commenters had over six weeks to develop and submit their initial comments. The Southwestern Pennsylvania Communities have not alleged that the timing of their opportunity to present their views (i.e., after, as opposed to before, the Proposed Resolution was developed) impaired their ability to present their views fully and effectively. All commenters had the opportunity to offer detailed explanations of their concerns and to propose alternative approaches. 26. Contrary to the Southwestern Pennsylvania Communities' assertion, our procedures do not allow cable operators to negotiate separate arrangements with both the Commission and local franchising authorities and then choose the more favorable agreement. In this instance, the operator's discussions with the Commission included the matter of refunds and rates applicable to BST service. Local franchising authorities are not bound by the operator's choice to resolve BST rate matters through the Commission. They may opt out of the refund aspect of the Resolution and seek to enforce their own rate orders. 27. The Southwestern Pennsylvania Communities also object to the channel count used in the Resolution. They assert that the "District Court" affirmed the Commission's determination that Adelphia should count all of its CPST channels for purposes of deriving permissible rates; that the Resolution would "reverse" the Commission's earlier determination that all of the CableSelect channels should be regulated as part of the CPST; and that the minus-four channel count "rewards recalcitrant behavior by the cable operator and also constitutes a hardship on local franchising authorities that spent significant amounts of money regulating cable television rates and trying to comply with Commission rules." They also point out that each of the six local franchising authorities issued rate orders in the summer of 1995 "which adhered to the principles of the South Dade County decision of the Cable Services Bureau and ordered rate rollbacks and refunds." They note that Adelphia has appealed all of the rate orders and has filed lawsuits in state court and that the BST appeals and CPST complaints for all six communities are pending before the Commission. The Southwestern Pennsylvania Communities argue that the refunds "do not at all take into account the fact that the refund orders issued by the . . . communities have been pending for well over one year, in addition to the time that the refund orders related back prior to the date of issuance." 28. We believe that our calculation of the benchmark rates using the minus-four channel count instead of the full channel count is a reasonable means of resolving the dispute regarding Adelphia's removal of all of its CPST channels from the CPSTs in the systems covered by the Resolution. We do not agree that this aspect of the Resolution "rewards recalcitrant behavior," as the Southwestern Pennsylvania Communities assert. The Resolution requires Adelphia to offer all but four of the former CableSelect channels on the CPST for each system. The minus-four per- channel rate will apply to the four excluded channels even though they may be included in an MPT instead of or in addition to the CPST. We are calculating the benchmark rates as if Adelphia initially had moved only four CPST channels, rather than all of those channels, into the CableSelect a la carte package. The Commission has determined in other cases that an operator's movement of four channels out of the CPST did not constitute evasion of our rules and therefore was not prohibited. However, instead of allowing Adelphia to offer those four channels on a market-priced basis, the Resolution ensures that the four channels will continue to be regulated as part of an MPT and subject to the price caps specified in the Resolution until January 1, 1998, when Adelphia may convert the MPT to an NPT. As the Commission concluded in the Going Forward Order, the conditions for offering NPTs will ensure that NPT rates will not be unreasonable. In addition, the Lifeline Rates for BST service will be calculated using a full channel count, and the combined charge for a Lifeline Rate BST and a CPST may not exceed the charge that could have been imposed on the basis of a minus-four channel count. 29. The Southwestern Pennsylvania Communities believe the minus-four channel count reverses a prior Commission decision and state that there is "no legal or public policy reason" for the reversal "other than FCC workload." We assume the referenced Commission decision is the South Dade County order finding that all of Adelphia's packaged a la carte channels should be treated as regulated CPST channels. While South Dade County was not reviewed by any court, the D.C. Circuit subsequently affirmed the Commission's determination in the Going Forward Orderthat, with limited exceptions, it would regulate as CPSTs a la carte packages created between April 1, 1993, and September 30, 1994. Adelphia's CableSelect packages were created during this period. 30. The Resolution does not reverse the South Dade County decision. The Resolution does not include the South Dade County system, and the South Dade County orders are not affected by the Resolution, except that Adelphia withdraws its petition for reconsideration of our order on review in South Dade County. The conditions imposed on Adelphia by the Resolution do differ from the remedy ordered in South Dade County in that the latter mandated the inclusion of all a la cartepackage channels in the computation of maximum permitted rates, whereas the Resolution uses a minus-four channel count. However, the Resolution, unlike the South Dade County order, resolves multiple CPST complaints, as well as BST proceedings, and will ensure prompt payment of refunds and immediate rate reductions. The implementation of these provisions will not be delayed by Adelphia's attempt to modify or reverse them through review procedures because the Resolution includes an agreement by Adelphia to forego further Commission or appellate review of its terms. 31. Administrative agencies are not precluded from modifying their approach to particular issues when circumstances warrant such action. Agencies may depart from prior decisions so long as they have a rational basis for doing so and explain their reasoning. We have explained our rationale for departing in the Resolution from the rate calculation methodology we mandated in South Dade County. We believe that the resulting refund levels and rate reductions required by the Resolution strike an appropriate balance between maximizing the compensation due subscribers for past overcharges and minimizing delay and uncertainty in the payment of refunds and the implementation of prospective rate reductions. 32. The resolution of multiple CPST complaints and BST proceedings in a consolidated fashion and by agreement with Adelphia does reduce Commission workload and conserve administrative resources. We do not believe this conflicts with our statutory duties to ensure that rates for cable services are reasonable. It certainly is not the only goal the Resolution promotes or the most important goal. In furtherance of our duty to protect consumer interests, the Resolution also implements reasonable BST and CPST rates and ensures that subscribers will benefit from immediate rate reductions and refunds, which Adelphia will not challenge at the Commission or in court. 33. We do not agree with the Southwestern Pennsylvania Communities' claim that the Resolution "constitutes a significant hardship on local franchising authorities that spent significant amounts of money regulating cable television rates and trying to comply with Commission rules." Local franchising authorities are free to opt out of the refund aspect of the Resolution. 34. Section 76.986(d) and (f) of the Commission's rules gives local franchising authorities the right to determine initially whether a la carte packages are to be treated as CPST or NPT packages for purposes of determining maximum permitted rates. An operator or subscriber may appeal a local franchising authority's initial determination to the Commission, and the Commission's ruling on appeal will govern the BST rate calculation. Our enforcement of the minus-four channel count with respect to local franchising authorities that opt out of the Resolution departs from those provisions to the extent it would prevent a local franchising authority from enforcing an initial decision that uses a full channel count to calculate benchmark rates. We believe the combined benefits of the Resolution outweigh the potential adverse effect on local franchising authorities and subscribers that may be caused by our enforcement of the minus-four channel count with respect to BST rates in opt-out communities. Accordingly, we find that waiver of the foregoing provisions is appropriate in this instance. 35. Mr. Daniel and Saranac Lake are concerned that Adelphia's restructuring and its resulting service offering above the BST level on an a la carte basis occurred during the Commission's rate freeze and constitute an evasion of rate regulation in violation of the 1992 Cable Act. They assert that many subscribers were subject to negative option billing for both service and equipment charges. Mr. Daniel and Saranac Lake also question whether Adelphia will offer service above the BST level "except as is currently provided" and ask, "What consideration is given to those subscribers that were upgraded to an expanded and increased cost level of service?" Saranac Lake states that it "does not consider the repayment of overcharges to the consumer (without interest) adequate restitution for the above practices" and contends that "an appropriate penalty should be added to the repayment plan." Mr. Daniel also believes subscribers should receive "some additional compensation above the proposed level to send the message to Adelphia that this type of action is unacceptable." 36. Adelphia disagrees with Mr. Daniel's and Saranac Lake's assertions that Adelphia violated the Commission's rate regulations and subjected subscribers to negative option billing. Adelphia also objects to the allegation that it upgraded subscribers to a service they were not previously receiving. Adelphia explains that it "simply unbundled an existing tier; no subscribers were forced to receive more service than they were previously receiving." Adelphia also asserts that it did not violate the rate freeze. 37. The concerns raised by Mr. Daniel and Saranac Lake do not convince us that modification or rejection of the Resolution is warranted. Although Adelphia moved services from a regulated tier to an a la carte package, Adelphia's restructuring of its services did not violate our rules against negative option billing because subscribers were not forced to receive and pay for services that they had not previously requested. Any unjustified rate increases that Adelphia implemented as a result of the restructuring, including any rate increases during the rate freeze and any retiering that could be construed as an evasion of Commission regulations, were considered in the Commission's evaluation of the Proposed Resolution and, in our view, are intended to be remedied by the refunds and proposed rate reductions that will be implemented by the Resolution. 38. Likewise, we conclude that a penalty per se is not necessary to protect subscribers or deter Adelphia from unlawful conduct. Among other things, the Resolution provides for minimum $3.00 per-subscriber refunds in communities that would not otherwise receive any refund, Lifeline Rates for BST service, and a cap on the CPST rate increase designed to offset rate reductions associated with the creation of Lifeline Rates. Together with the refunds and rate reductions ordered by the Resolution and the provisions governing Adelphia's creation of an MPT, the Resolution assures that subscribers will receive immediate benefits at a not inconsequential cost to Adelphia. We do not believe Adelphia will interpret the Resolution as a green light to violate our rate regulations. 39. Mr. Daniel and Saranac Lake also contend that Adelphia should pay refunds to each subscriber in the form of a lump sum check, rather than as a credit against subscribers' regular monthly charges. In addition, Saranac Lake apparently believes the refunds will not include interest. 40. The Commission's regulations allow an operator, at its discretion, to implement a refund in one of two ways -- either through identification of actual subscribers or through a one-time credit that results in a prospective percentage reduction of the rates to current subscribers. We conclude that Adelphia's payment of refunds through a credit to current subscribers instead of through a lump- sum check is consistent with our rules. The Resolution deviates from our rules only by allowing Adelphia to pay refunds through a series of credits instead of through a one-time credit. We believe waiver of this aspect of our rules is appropriate under the circumstances because Adelphia's payment of the refund through a series of credits will not adversely affect subscribers and is not unreasonable. Interest will accrue on the unrefunded amount (contrary to Saranac Lake's belief) until the full amount of the refund is credited, and the length of the payout period is limited. 41. Mr. Daniel and Saranac Lake state that the Resolution provision allowing Adelphia to create an MPT would confer "an unfair advantage for Adelphia in calculating the rate per channel." 42. We disagree. The Resolution allows Adelphia to create MPTs that do not exceed rate- regulated prices on a per-channel basis, until the channels are later converted to NPTs. Furthermore, as Adelphia notes in its reply comments, the creation of an MPT will not affect the calculation of Adelphia's per-channel benchmark rates in the future. Channels may be added to MPTs only at the per-channel price found acceptable in our Going Forward Rules. The price for the tiers from which services are migrated will decrease to the extent channels are removed from them, so that subscribers will not pay more per channel for the channels remaining in the rate-regulated tiers. 43. The creation of MPTs and NPTs is intended to expand the programming choices available to subscribers. Subscribers need only buy the BST in order to select service on the MPT; they are not required to purchase the CPST in order to obtain MPT service. Adelphia has an incentive to maintain the quality of the CPSTs to avoid losing revenue, because subscribers perceiving a decrease in quality in a CPST may discontinue that CPST service. Subscribers will have the choice to continue or discontinue services on any tier, except the BST, without affecting the receipt of any other tier of service. Thus, the Resolution does not have the effect of forcing subscribers to receive and pay for unwanted services. The creation of the MPT also has the potential for increasing subscriber choices because where both the CPST and the MPT will be offered, consumers can choose to take either or both. In addition, new channels can be added to both tiers. For these reasons, we believe that permitting the formation of an MPT and the later movement of those channels to an NPT without requiring Adelphia to re-market the service is in the public interest in the overall context of the Resolution. We therefore find good cause for granting waivers, to the limited extent necessary to effectuate this Resolution, of Section 76.922(e) of the Commission's rules, which governs changes in the number of channels on a regulated tier, as well as Section 76.987(b)(2) and (b)(3), which (i) prohibits operators from dropping channels that were offered on their BSTs or CPSTs on September 30, 1994, and moving them to NPTs unless they wait at least two years from the dates the channels were dropped and (ii) requires them to re-market their BSTs and CPSTs when they create an NPT. 44. The Borlands believe the proposed refunds and rate reductions are "a step in the right direction" but nevertheless are insufficient "to atone for the years of rate hike abuse we have had and continue to experience with Adelphia Cable." The Borlands suggest that the Commission "roll back the cable rates to the 1986 level, add the actual cost of living increases for each of the following years, and add a maximum of 2% additional per year to take into consideration factors such as facility upgrading, channel enhancements, etc." 45. The Borlands' suggested methodology, while it appears to reflect some of the rate principles we have adopted in our rules, is inconsistent with our regulations. Our rules prescribe a benchmark formula for determining maximum permitted BST and CPST rate levels in instances in which an operator does not submit a cost-of-service showing. The refund levels are derived from our established rate methodology and, though they are less than the full refund amount that Adelphia might be liable for in some communities absent the tier offsets and with a full channel count, other communities that had forfeited the right to order BST refunds or rate reductions will nevertheless receive minimum refunds of $3.00 per subscriber. 46. The New Jersey Board requests that we modify the Resolution with respect to the BST refunds to be credited to subscribers in the four New Jersey communities that are covered by the Resolution by distributing the total refund due these subscribers among subscribers in all 16 communities served by Adelphia's subsidiary Clear Cablevision, Inc. ("Clear"). The Board, which is the local franchising authority for cable television operators in the State of New Jersey, explains that it regulates BST rates on a system-wide basis, rather than on a CUID basis, and that state law requires it to ensure that regulated rates are uniform for contiguous systems in the same geographic region regardless of CUID boundaries. Stating that the subscribers in the four covered communities represent approximately 33% of all of Clear's New Jersey subscribers, the Board acknowledges that distribution of the total refund to all such subscribers would reduce the per- subscriber refund set forth in the Resolution. The Board asserts, however, that its proposed re- distribution of the refund to all of Clear's New Jersey subscribers "would represent an equitable distribution . . . and would result in consistent treatment of rates within the New Jersey franchise area." 47. Adelphia replies that it does not oppose the Board's request, based on its understanding that the re-distribution of refunds would not increase Adelphia's total refund liability. Adelphia cautions, however, that other communities in which a CPST complaint was not filed should not be included in the Resolution. 48. We deny the Board's request. The Resolution covers only those communities from which the Commission received a valid CPST complaint. We do not regulate the CPST rates charged by cable operators unless we receive a valid complaint with respect to the operator in question. 49. Adelphia raises one new issue in its reply comments, which concerns adjustments to the refunds to be paid to subscribers in the New York communities of Lake Placid, Saranac Lake, and Tupper Lake. In a supplemental filing, however, Adelphia reiterates its support for the Resolution in all respects, even if the Commission does not adjust the refund levels reflected in the Proposed Resolution. We adopt the Resolution without changes in the refund amounts for the New York communities. VI. CONCLUSION AND ORDERING CLAUSES 50. For the reasons discussed above, we conclude that it is in the public interest to adopt the Resolution. 51. Accordingly, IT IS ORDERED that the Resolution attached to this Order as Attachment A IS ADOPTED AND INCORPORATED HEREIN. 52. IT IS FURTHER ORDERED that all CPST rate complaints under the jurisdiction of the Commission against Adelphia Communications Corporation as of December 31, 1995, ARE GRANTED to the extent necessary to effectuate the Resolution and ARE DENIED in all other respects. 53. IT IS FURTHER ORDERED that all pending BST appeals filed by Adelphia concerning rate orders that were issued by the communities listed in Exhibit 1 to the Resolution and that address rates subject to the Resolution ARE HEREBY DISMISSED as moot. 54. IT IS FURTHER ORDERED that the Bucyrus Order (DA 95-662) and Charlottesville Order (DA 95-157) ARE HEREBY VACATED. 55. IT IS FURTHER ORDERED that Adelphia's Applications for Review of the foregoing orders and its petition for reconsideration of our order in South Dade County (FCC 95-378) ARE DEEMED WITHDRAWN. 56. IT IS FURTHER ORDERED that waivers of 47 C.F.R.  76.942(d)(2), 76.961(c)(2), 76.942(f), 76.961(e), 76.922(e), 76.987(b)(2)-(b)(3), and 76.986(d) and (f), as discussed herein, ARE GRANTED. 57. IT IS FURTHER ORDERED that waivers of 47 C.F.R.  76.922 and 76.950-963, to the extent individual adjudication of CPST rate complaints is required thereby, ARE GRANTED. 58. IT IS FURTHER ORDERED that the requests for modification and the request for rejection of the Resolution ARE DENIED. 59. IT IS FURTHER ORDERED that the Cable Services Bureau IS GIVEN delegated authority to oversee implementation of this Resolution, as adopted. 60. IT IS FURTHER ORDERED that this Order IS EFFECTIVE upon adoption. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary ATTACHMENT A TERMS OF RESOLUTION I. INTRODUCTION. 1. These terms constitute a resolution of cable programming services tier ("CPST") complaints in certain cable communities in which cable systems owned and operated by Adelphia Communications Corporation and its affiliates and subsidiaries (collectively "Adelphia") created packages of a la carte channels. Cable programming services tier ("CPST") rate complaints are pending with respect to each of these communities (herein referred to and defined as the "Resolution Communities"). II. BACKGROUND. 2. In each of the Resolution Communities, Adelphia began offering one or more packages of a la carte channels (the "CableSelect" offerings) between April 1, 1993 and September 30, 1994. In general, the CableSelect offerings were created by unbundling all of the channels from the Resolution Communities' CPSTs and making those channels available for purchase individually as well as in a package. 3. The Bureau has issued Orders finding that CableSelect offerings should be treated as regulated CPSTs in Bucyrus, Ohio (DA 95-662, rel. March 31, 1995) and Charlottesville, Virginia (DA 95-157, rel. Feb. 7, 1995). Adelphia has filed Applications for Review of each of these Orders. 4. Thereafter, the Bureau staff met with Adelphia to discuss resolution of issues relating to the rate complaints and the Bucyrus and Charlottesville decisions. Adelphia represented to the Commission that its initial decision to use the Commission's benchmark formula to establish its rates was premised upon its good-faith assumption that its CableSelect package was a lawful a la carteoffering. Adelphia further represented that, in light of the Bucyrus and Charlottesville decisions, application of the benchmark formula produced different rates in the affected communities than the rates actually charged by Adelphia and, in some instances, produced rates under which Adelphia would not be able to recover its costs. As part of this process, Adelphia submitted revised benchmark rate filings for the Resolution Communities premised on the treatment of four of the CableSelect channels as unregulated channels. For several additional communities, Adelphia submitted cost-of-service showings which will be reviewed pursuant to our cost-of-service rate review process and which are not encompassed within the terms of this Resolution. 5. Adelphia and the Commission desire to resolve the pending CPST benchmark rate cases involving the Resolution Communities and the various issues regarding the CableSelect offerings described above. III. DEFINITIONS. 6. As used herein, the following definitions will apply: (a) "Resolution Communities" means the communities served by cable systems owned and operated by Adelphia listed in Exhibit 1. (b) "Resolution Community Eligible Subscribers" means all non-bulk, residential subscribers of record in the Adelphia systems listed in Exhibit 2 as of the date bills are issued reflecting Refunds. (c) "Effective Date" means the date on which the Commission adopts the Resolution Order. (d) "Going Forward Rules" means the Commission's rules adopted in the Sixth Order on Reconsideration, MM Docket No. 92-266, 76 RR 2d 859 (1994), including all subsequent clarifications and amendments. (e) "Implementation Deadline" means the date occurring 120 days after the Effective Date. (f) "Interest" means the Internal Revenue Service rate of interest for tax payments. (g) "Lifeline BST Rate" means a maximum permitted rate for the basic service tier calculated by counting all of the CableSelect channels offered on September 1, 1993 as regulated channels. (h) "Migrated Product Tier" or "MPT" means a tier consisting of up to four (4) services packaged together as described below in paragraph 13(g) and any services added to such package in accordance with said paragraph 13(g). (i) "Refunds" means credits on subscriber bills. (j) "Resolution Order" means an order issued by the Commission approving the terms of this Resolution. IV. TERMS. 7. Adelphia accepts the jurisdiction of the Commission over it and the subject matter of these rate resolutions for purposes of the Resolution Order. 8. All of Adelphia's CPST rate cases for the Resolution Communities for the period through December 31, 1995 are finally resolved under the terms provided herein. 9. Adelphia agrees that the terms contained in this Resolution shall be incorporated by reference in the Resolution Order. Assuming the adoption of these terms in the Resolution Order, Adelphia and the Commission will each actively defend the Resolution Order against any appeal of, or other legal challenge to, the Resolution Order by any third party. Adelphia and the Commission will reasonably cooperate in any such defense of these terms. 10. Assuming the adoption of these terms in the Resolution Order, Adelphia agrees that any violation of the Resolution Order shall constitute a violation of a Commission order, entitling the Commission to exercise any rights and remedies attendant to the enforcement of a Commission order. 11. These terms are for purposes of resolving outstanding CPST complaints in the Resolution Communities and the various issues regarding the CableSelect offerings and do not constitute an admission by Adelphia of any violation of, or failure to conform to, the 1992 Cable Act, Commission Rules, or any other applicable law, rule, or policy, nor constitute an admission by the Commission of any error in the implementation of its a la carte regulations. 12. The Commission will not institute, on its own motion, any proceedings against Adelphia based upon the information obtained during consideration of the Resolution. In addition, in the absence of additional facts, any allegations and other circumstances involved in consideration of this Resolution will not be used by any party against Adelphia with respect to any future proceeding. 13. In settlement of Adelphia's CPST rate cases for the period through December 31, 1995 in the Resolution Communities and the various issues regarding the CableSelect offerings offered by its cable systems, Adelphia hereby agrees to the following terms, conditions, and procedures which will facilitate a fair and expeditious resolution of those matters in a manner that serves the public interest: (a) The Bureau has reviewed Adelphia's revised benchmark rate submissions and has determined a maximum permitted per channel rate in each Resolution Community reflecting the exclusion of four of the CableSelect channels from the count of regulated channels for purposes of applying the Commission's benchmark rate rules. (b) Subject to the right of local franchising authorities ("LFAs") to opt out under this subparagraph, Adelphia shall issue Refunds to Resolution Community Eligible Subscribers as set forth in Exhibit 2. Such Refunds already include applicable Interest through December 31, 1996. An LFA of an Resolution Community listed in Exhibit 1 may elect to opt out of the Refunds established under this subparagraph by providing notice to the Commission and Adelphia no later than 30 days following the Effective Date. Such notice shall: (a) be in writing; (b) be addressed to the Office of the Secretary, Federal Communications Commission, 1919 M Street, N.W., Washington, D.C. 20554, with a copy by certified mail to Adelphia Communications Corp., 5 West Third Street, Coudersport, PA 16915, attention: Randall D. Fisher, Esq., Vice President and General Counsel; (c) identify the local franchising authority and community unit identification number for the franchise area; and (d) reflect the clear intent to opt out of the Refund provision of this subparagraph. However, such notice need not meet any other requirements and may be in letter form. An election by an LFA in a particular Resolution Community to opt out of the Refunds under this subparagraph will not otherwise affect the applicability of the remaining provisions of this Resolution in such community, including but not limited to subparagraphs (d), (e), and (f) hereof. (c) Adelphia will begin providing refunds to Resolution Community Eligible Subscribers no later than the Implementation Deadline. Refunds will be reflected on subscriber bills as equal monthly credits of at least $0.50 until full payment is made, except that the last payment may be credited in an amount of less than $0.50. In all cases, the Refund payment period shall not exceed 12 months. In the event the Refund amounts are not fully paid by the date through which Interest has been calculated (as noted in subparagraph (b)), Adelphia shall be required to calculate and pay additional Interest through the date on which all Refunds are fully paid. (d) Subject to the right of LFAs to opt out under subparagraph (b), the Refunds issued to the Resolution Communities pursuant to that subparagraph shall account for and finally resolve (i) all BST and CPST rate cases filed in the Resolution Communities prior to December 31, 1995 and (ii) the reasonableness of the BST and CPST rates in the Resolution Communities on that date. In the event that an LFA of an Resolution Community exercises its right to opt out of the Refunds under subparagraph (b), any rate order adopted by said LFA or by the Commission with respect to Adelphia's Form 393 and Form 1200 series maximum permitted rates will reflect the exclusion of four of the CableSelect channels from the count of regulated channels for purposes of applying the Commission's benchmark rate rules. The maximum permitted rate for those four channels, on a per channel basis, will be equal to the maximum permitted rate, on a per channel basis, for the other CPST channels in such community. (e) Adelphia will not seek repayment from any LFA of any Resolution Community of franchise fee overpayments otherwise due Adelphia as a result of the payment of the Refunds specified in Exhibit 2. This provision will not apply in any Resolution Community as to which the LFA exercises its opt out election as described in subparagraph (b). (f) Adelphia agrees to cap its combined regulated BST and CPST rates in the Resolution Communities so that they do not increase on an overall basis as a result of this Resolution; provided, however, that Adelphia may include in any BST and CPST rates established pursuant to this resolution, or thereafter, such inflation and external costs as Adelphia is entitled to recover pursuant to the Commission's rules, including any Form 1240 increases which Adelphia has previously implemented or becomes entitled to implement. Subject to the foregoing, Adelphia, no later than the Implementation Deadline, will make such adjustments to the regulated BST and CPST rates in the Resolution Communities as are necessary (i) to reduce the BST rate so that it reflects the calculation of a Lifeline BST Rate and (ii) to increase CPST rates by an amount per subscriber no greater than the per subscriber reduction in the BST rate from the maximum permitted rate, but such CPST rate, as adjusted, shall be capped so as to not exceed the maximum permitted rate calculated using the channel count described in subparagraph (d). See Exhibit 3. In the event the LFA of an Resolution Community exercises its right to opt out under subparagraph (b), Adelphia will not be required to make the adjustments described in this subparagraph and will be permitted to establish BST and CPST rates equal to the maximum permitted rates calculated using the channel count described in subparagraph (d). (g) At any time at its discretion, Adelphia may package four of the services that were available as CableSelect offerings on September 1, 1993, together with up to two new services (i.e., services first added to the system after September 30, 1994), as a single "Migrated Product Tier" in any Resolution Community. Adelphia may not require the subscription to any other tier, other than the BST, as a condition for subscribing to any MPT created pursuant to this subparagraph and may not require subscription to any such MPT as a condition for subscription to any other tier. The retiering of these services is permitted under Section 76.981(b) of the Commission's rules, 47 C.F.R.  76.981(b); does not constitute a negative option under the Cable Television Consumer Protection and Competition Act of 1992; and, when the MPT is offered, Adelphia will not be required to re-market the MPT to existing subscribers who previously received all of the migrated services contained in the MPT. These actions can be taken without regard to any state or local law which may be inconsistent with the terms of this subparagraph. (h) In any community in which Adelphia creates an MPT pursuant to subparagraph (g), Adelphia will set the initial rate for said MPT, (i) with respect to the four services that were available as Cable Select offerings on September 1, 1993, on a per channel basis, at a level equal to the rate then being charged for any CPST offered in such community, calculated consistent with this resolution, and (ii) with respect to the two new services referred to in subparagraph (g), at $0.20 per channel plus the amount of program license fees for each of such services. Adelphia may thereafter add any number of new services to its MPT and may increase the price for the MPT up to $0.20 plus the amount of the program license fee for each new service added. Adelphia may increase the price of an MPT for inflation and external costs and new services consistent with the Commission's rate regulations governing CPSTs, and these new services shall not be considered new services added for purposes of the limit on service additions and rate increases pursuant to the Going Forward Rules. (i) On or after January 1, 1998, Adelphia may reclassify any MPT created pursuant to subparagraphs (g) and (h) as a New Product Tier ("NPT"), as defined in Section 76.987 of the Commission's rules, 47 C.F.R.  76.987, including subsequent clarifications or amendments thereto. These NPTs will be treated as all other NPTs under the Commission's rules. The reclassification is permitted under Section 76.981(b) of the Commission's rules, 47 C.F.R.  76.981(b); does not constitute a negative option under the 1992 Cable Act; and does not require Adelphia to re-market the reclassified NPT to existing MPT subscribers. Nothing in the Resolution shall be construed to prevent Adelphia from creating other NPTs and/or offering a la carte channels pursuant to the Commission's rules. These actions can be taken without regard to any state or local law which may be inconsistent with the terms of this subparagraph. (j) The Commission, consistent with the terms set forth herein, hereby reconsiders on its own Motion, the Bucyrus, Ohio and Charlottesville, Virginia Orders, and Adelphia hereby petitions to withdraw its pending applications for review of said Orders and such petitions to withdraw are hereby granted by the Commission. The decision that four CableSelect channels will not be counted as regulated channels for benchmark rate calculation purposes will be deemed incorporated in such reconsidered Orders and shall be binding on any decision relating to Adelphia's BST or CPST rates. As of the Effective Date, the Resolution Order will vacate and supersede the Bucyrus, Ohio and Charlottesville, Virginia Orders. Upon the vacating of these rulings, Adelphia's pending applications for review concerning said rulings will be deemed to be withdrawn. In addition, Adelphia's pending petition for reconsideration of the Commission's decision (FCC 95-378) denying Adelphia's application for review of the Bureau's South Dade County Letter-of-Inquiry ruling (DA 94-1277) also will be deemed to be withdrawn. (k) A copy of this Resolution shall be provided for comment to all LFAs in the Resolution Communities and to each additional party that filed a valid complaint on FCC Form 329, pursuant to Section 76.950 of the Commission's rules, 47 C.F.R.  76.950. (l) Except as provided in subparagraph (m) hereof, the terms of this Resolution may not be terminated or modified without the mutual written consent of Adelphia and the Commission. The Commission's consent to any such modification or termination shall be demonstrated by an order of the Commission. (m) Notwithstanding the terms hereof, Adelphia may avail itself of any applicable modifications of any law or regulation governing the rates charged in any community that it serves, including the adoption by the Commission of any regulation governing rates as applied to the cable industry generally. If Adelphia exercises this election, the terms contained herein shall be superseded upon the effective date of such law or regulation, except that Adelphia shall provide Refunds to Resolution Community Eligible Subscribers pursuant to the terms of this Resolution. (n) Nothing herein shall restrict the ability of Adelphia to adjust its rates of any community that it serves in the event such rates are not regulated for any reason, including changes from the 1996 Telecommunications Act or relevant Commission rules. 14. The Resolution Order shall affirmatively state that any and all waivers of Commission Rules, and any modifications to Commission forms, necessary to effectuate these terms are deemed to be granted. The Commission will not assert in any proceeding that Adelphia's compliance with the terms of the Resolution violates any Commission rule or order, and, in any proceeding before the Commission brought by a third party, a showing by Adelphia that it has complied with these terms shall constitute a defense to any claim that Adelphia's actions in meeting the terms constitute a violation of any applicable Commission rule or order. 15. Assuming the adoption of these terms, these terms shall become effective when the Commission issues the Resolution Order. 16. If any provision, clause, or part of this Resolution as embodied in the Resolution Order is invalidated by a court, the remainder of this Resolution shall not be affected thereby and shall remain in effect; provided, however, that if such invalidation is material to this Resolution, Adelphia and the Commission shall attempt in good faith to reconstitute the Resolution in a form that is, to the maximum extent possible, consistent with the original intent of the Resolution. If any such good faith effort to reconstitute the Resolution is not successful, neither Adelphia nor the Commission will be bound by its terms. EXHIBIT 1 ADELPHIA CABLE COMMUNICATIONS COMMUNITIES SUBJECT TO RESOLUTION COMMUNITY Syracuse West Seneca Amherst Cheektowaga Colden Lake Placid Saranac Lake Tupper Lake Berkeley Ocean Lacey Island Heights Lorain Hudson Macedonia Hiram Bucyrus Haverford Marple Peters Upper St. Clair Pleasant Hills West Mifflin Mt. Oliver Mt. Lebanon Bethel Park Suterville Murrysville Charlottesville Crozet Waynesboro Frederick Hilton Head Palm Beach Shores Greenacres CUID NY0728 NY0320 NY0353 NY0319 NY1341 NY0001 NY0002 NY0003 NJ0086 NJ0216 NJ0153 NJ0198 OH0202 OH0923 OH0926 OH1288 OH0054 PA1140 PA1131 PA1519 PA1459 PA1232 PA0666 PA1245 PA1231 PA1344 PA1355 PA0153 VA0039 VA0202 VA0040 VA0121 SC0058 FL0088 FL0481 SUBSCRIBERS BST 40,217 14,803 32,149 27,111 668 1,106 2,118 1,744 18,442 2,139 9,114 697 18,210 5,408 2,187 136 5,012 12,479 6,371 4,948 5,885 2,924 7,573 1,229 11,160 11,187 292 5,676 12,353 847 7,075 6,815 17,688 556 3,427 SUBSCRIBERS CPST 30,807 14,117 30,346 25,847 645 1,022 1,935 1,691 17,649 2,046 8,773 675 17,863 5,269 2,139 131 4,883 12,284 6,221 4,760 5,725 2,813 7,327 1,196 10,611 10,763 292 5,676 11,639/8,920* 801/705* 6,600 6,474 16,379 480 3,312 COMMUNITY Greenacres Delray Beach Wellington Palm Beach Gardens Williamstown Total CUID FL0522 FL0749 FL0420 FL0087 MA0005 SUBSCRIBERS BST 481 1,707 7,950 9,354 2,511 321,749 SUBSCRIBERS CPST 464 1,644 7,640 8,901 2,368/612* 300,208 * denotes existence of more than one CPST. EXHIBIT 2 - REFUNDS CUID BST SUBS CPST SUBS* REFUND PER CUID REFUND PER BST SUB* REFUND PER CPST SUB* NY0728 40,217 $120,651 $3.00 NY0320 14,803 44,409 3.00 NY0353 32,149 96,447 3.00 NY0319 27,111 81,333 3.00 NY1341 668 2,004 3.00 NY0001 1,106 33,854 30.61 NY0002 2,118 116,958 55.22 NY0003 1,744 86,224 49.44 NJ0086 18,442 17,649 311,855 3.00 17.54 NJ0216 2,139 2,046 42,045 3.00 20.41 NJ0153 9,114 8,773 149,006 3.00 16.87 NJ0198 697 675 2,091 3.00 OH0202 18,210 462,499 25.40 OH0923 5,408 5,269 151,467 3.00 28.67 OH0926 2,187 2,139 30,943 3.00 14.40 OH1288 136 131 896 3.00 6.72 OH0054 5,012 15,036 3.00 PA1140 12,479 37,437 3.00 PA1131 6,371 19,113 3.00 PA1519 4,948 22,934 4.63 PA1459 5,885 17,655 3.00 PA1232 2,924 2,813 41,064 5.91 9.08 PA0666 7,573 7,327 101,053 4.78 8.85 PA1245 1,229 3,687 3.00 PA1231 11,160 33,480 3.00 PA1344 11,187 33,561 3.00 PA1355 292 292 2,730 3.00 9.35 PA0153 5,676 17,028 3.00 VA0039 12,353 177,798 14.39 VA0202 847 2,541 3.00 VA0040 7,075 6,600 42,107 3.00 6.16 VA0121 6,815 20,445 3.00 SC0058 17,688 53,064 3.00 FL0088 556 1,668 3.00 FL0481 3,427 10,281 3.00 FL0522 481 1,443 3.00 FL0749 1,707 5,121 3.00 FL0420 7,950 23,850 3.00 FL0087 9,354 28,062 3.00 MA0005 1,899 612 9,132 3.00 5.61 TOTAL $2,452,957 * Refunds per subscriber may be higher or lower than amounts indicated, depending on final subscriber count prior to payment date and on final interest calculations; provided, however, that all subscribers will receive at least $3.00 in refunds. In the case of CPST subscribers, the $3.00 minimum refund is incorporated in the Refund Per CPST Subscriber amounts listed above. The number of CPST subscribers is omitted in those communities where CPST subscribers are not due any additional refunds beyond the $3.00 minimum refund. EXHIBIT 3 REDUCTIONS IN BST RATES TO LIFELINE BASIC MAXIMUM PERMITTED LEVELS* COMMUNITY CUID BST REDUCTION Lake Placid, NY NY0001 $4.13 Saranac Lake, NY NY0002 $4.44 Tupper Lake, NY NY0003 $4.44 Berkeley, NJ [rebuild] NJ0086 $1.17 Ocean, NJ NJ0216 $1.17 Lacey, NJ NJ0153 $1.17 Hudson, OH OH0923 $1.26 Pleasant Hills, PA PA1232 $0.17 Palm Beach Shores, FL FL0088 $5.17 Greenacres, FL FL0481 $4.32 Greenacres, FL FL0522 $2.57 * Not all communities receive reductions because BST rate is already at or below Lifeline calculation or because BST rate is not regulated at the local level. REDUCTIONS IN CPST RATES TO MAXIMUM PERMITTED LEVELS* COMMUNITY CUID CPST REDUCTION Berkeley (nonrebuild) NJ0086 $2.48 Hiram, OH OH1288 $0.73 Suterville, PA PA1355 $0.98 Charlottesville, VA VA0039 $0.17 [CPST 1] Waynesboro, VA VA0040 $0.73 Palm Beach Shores, FL FL0088 $0.09 Williamstown, MA MA0005 $1.21 [CPST 2] * Only communities whose CPST rates, as of December 31, 1995, exceeded maximum permitted levels are affected.