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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 ) ) CENTURY COMMUNICATIONS ) CORPORATION ) ) Resolution of ) Rate Complaints ) ORDER Adopted: October 29, 1997 Released: October 31, 1997 By the Commission: I. INTRODUCTION 1. The Commission has before it a Resolution submitted by Century Communications Corporation ("Century") that will resolve 280 complaints filed against Century regarding the rates Century charged for cable programming services from September 1, 1993 through August 23, 1996 for its cable systems operating in Los Angeles, California and nearby communities ("Los Angeles Area Systems"). The Cable Services Bureau ("Bureau") issued orders in response to those complaints covering the period from September 1, 1993 through May 14, 1994, and Century filed applications for review of each of those orders, which are now pending before the Commission. Together these cases affect service for approximately 155,700 cable programming services subscribers. For the reasons stated below, and based on our review of the record, we find that the Resolution serves the interests of Century subscribers by, among other things, bringing stability to cable programming service tier ("CPST") and basic service tier ("BST") rates. Adoption of the Resolution, as amended herein, is consistent with the Commission's responsibility under the Cable Television Consumer and Competition Act of 1992 ("1992 Cable Act") to ensure that consumer interests are protected in the receipt of cable services and that regulated CPST rates are not unreasonable. II. BACK GROUND 2. The 1992 Cable Act gives the Commission and local franchising authorities jurisdiction over the cable programming and equipment rates of cable systems that do 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 local franchising authorities may regulate the rates for BSTs pursuant to regulations established by the Commission, and the Commission may regulate the rates for the CPSTs upon the filing of a complaint. The governing standard for reviewing CPST rates is that those 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 services." 3. On August 23, 1996, the Commission adopted an order instructing the Bureau to serve the Resolution as proposed ("Proposed Resolution") on all local franchising authorities for the franchises 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 comment period for comments on the proposal and a 15-day period for replies. The comment period was extended three times, until November 22, 1996, and the reply period was extended until December 23, 1996. 4. Century's refund liability is due principally to creation of its "Century Select" a la carte packages. In a Letter of Inquiry decision, the Bureau concluded that Century's attempt to remove up to 12 channels from its BST and CPST to its Century Select a la carte packages in Los Angeles and Beverly Hills constituted an evasion of rate regulation. The Bureau relied on this conclusion when counting all of the channels in Century Select packages as rate regulated in each of the Los Angeles Area Systems. Century applied for Commission review of each of these Bureau orders, including orders that did not find CPST refund liability. III. SUMMARY OF RATE RESOLUTION 5. The Resolution resolves all of the CPST rate cases filed against Century for the Los Angeles Area Systems through August 23, 1996, the date the Proposed Resolution was released for comment. The Resolution sets current rates for both CPST and BST tiers and provides for refunds for overcharges occurring until the new rates take effect. Subscribers in Beverly Hills, Los Angeles, Santa Monica, and West Hollywood will participate in refunds totaling $4.59 million, with individual subscribers receiving refunds ranging from approximately $7.72 to $66.14. Subscribers in all of the Los Angeles Area Communities will see reductions in their BST rates ranging from $1.38 to $5.53 and most will see reductions in their overall cable programming rates. Subject to the right of local franchising authorities to opt out of the BST refunds, the Resolution also resolves the BST cases pending before the Commission as of August 23, 1996. 6. During the course of the Bureau's discussions with Century, the Bureau and Century proposed to resolve the treatment of the Century Select channels by agreeing that Century 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 Commission and the Bureau have ruled that packages of small numbers of a la carte channels may be excluded from the channel count 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 Century is entitled to charge under our rules above the rate that would apply if the four channels were included in the benchmark channel count. A maximum permitted per-channel rate was then determined for each of the Los Angeles Area Systems reflecting the minus-four channel count. Century reconstructed its BST and CPST rates using this maximum permitted per-channel rate. 7. The refunds in Exhibit 1 to the Resolution are based on this recalculation and are for both BST and CPST. These refund amounts are based on unrefreshed inflation data and include offsets of CPST undercharges against BST overcharges within individual franchise areas, where relevant. The refund amounts shown in the Proposed Resolution, Exhibit 1, covered the period through October 31, 1996 and include interest calculated through October 31, 1997. These amounts have been adjusted in the Resolution to reflect corrections to Century's rate forms recommended by the local franchising authorities, Century's annual rate adjustment for 1997 on FCC Form 1240, and an extension of the period calculated in the refund amounts until August 31, 1997. Resolution sections 12(b), 12(c), and 12(d) have been amended to reflect this additional refund period. In addition, the refund amount will continue to increase until Century implements the rates in Exhibit 2 and interest will continue to accrue until the refunds are paid in full. 8. Refunds will be paid in Beverly Hills, Los Angeles, Santa Monica, and West Hollywood as credits on the bills of those who are subscribers as of the date of payment. Refunds will start no later than 90 days after the local franchising authorities' deadline for opting out of the refunds, the Implementation Deadline, and will be completed within a period no longer than 12 months from the first refund. At least one-twelfth of the refund must be paid each month. 9. The Resolution also sets new BST and CPST rates for the Los Angeles Area Systems. BST rates will decrease in each of the Los Angeles Area Systems, including those where rates are not being regulated by a local franchising authority. Because CPST rates have been below the maximum permitted for those tiers, CPST rates may increase, but in no case will the combined BST and CPST rates exceed current rates. The CPST rates in the Resolution reflect Century's agreement to defer an amount equal to a portion of the 1996 annual CPST increase as calculated on FCC Form 1240 for a twelve-month period commencing on the Implementation Deadline. The amount deferred is reflected in Exhibit 2 and the calculation is described in Exhibit 3. The four channels removed from the benchmark rate calculation were priced at the benchmark rate determined for the other channels. These channels are included in the largest CPST offered for each system shown in Exhibit 2. 10. Because we are calculating BST rates and refund liability, local franchising authorities are given the right to opt out of the BST refunds included in Exhibit 1 by giving notice of their intent to both Century and the Commission within 30 days of the effective date of the Resolution. If a local franchising authority exercises its right to opt out of the refunds, the Resolution provides that the BST rate for that jurisdiction will not be binding on Century. If a local franchising authority does opt out, however, it will be bound by the minus-four channel count for purposes of calculating refunds and establishing revised rates. Subject to the right of local franchising authorities to opt out of the refunds, the refunds issued pursuant to the Resolution will finally resolve all BST and CPST rate cases filed prior to August 23, 1996 and also the reasonableness of the rates specified in Exhibit 2. 11. The Resolution provides that, unless a local franchising authority opts out of the refunds for its community, Century will not seek repayment of approximately $199,783 in franchise fees to which it would otherwise be entitled when making refunds. 12. The Resolution vacates the Beverly Hills/Los Angeles LOI Order and the Bureau CPST orders, and upon our adoption of this Order, Century's applications for review of those orders will be deemed to be withdrawn, as provided in section 12(j) of the Resolution. 13. The Resolution allows Century to avail itself of any applicable modifications of the law or regulations governing rates charged for the Los Angeles Area Systems. Century also may adjust its rates in the event that such rates become unregulated for any reason. In either event, Century must still provide refunds according to the terms of the Resolution. IV. COMME NTS 14. A total of 289 copies of the Commission's Order and the Proposed Resolution were served on complainants and representatives of local franchising authorities. The Commission received comments from the Cities of Beverly Hills, Los Angeles, Santa Monica, and West Hollywood, California ("commenting cities") and from three individual complainants, supplemental comments from Beverly Hills, further comments from Los Angeles and Santa Monica, reply comments from the California Cable Television Association ("CCTA") and Century, and supplemental materials from Century. 15. The City of West Hollywood stated that it does not object to the concept of the rate resolution but seeks clarification on some points in the Proposed Resolution and asks that BST subscriber refunds for West Hollywood subscribers be computed over a longer period of time. The Cities of Beverly Hills, Los Angeles and Santa Monica objected to the refunds and going forward rates included in the Proposed Resolution and to the fact that they were not included in the Bureau's discussions with Century concerning the Proposed Resolution. Each of the commenting cities raised questions about errors in the operator's rate forms. In addition, Santa Monica asked for clarification about the treatment of its utility user's tax in Century's rates, an issue to which CCTA responded in reply comments. Santa Monica and West Hollywood asked for clarification regarding the impact of the Proposed Resolution on uncontested matters in local rate orders. Hector L. Camilleri complained about a rate increase near the time of the Proposed Resolution. Zahra M. Anise-Levine asked that refunds be paid to former as well as current subscribers. Kevin Laubach asked that the Commission address issues concerning converter boxes. In its Reply Comments, Century addressed the comments from the local franchising authorities. Its subsequently filed supplemental materials consist of revised rate forms and refund calculations, which it shared with the affected local franchising authorities. In their further comments, Los Angeles and Santa Monica argued that Century's corrections fall short of those needed for reasonable rates and fair refunds, and they requested assurance that local franchising authorities can enforce rates and refunds for equipment and installation charges. 16. On August 27, 1997, Century wrote to the Commission proposing to amend the Proposed Resolution to exclude any of the commenting communities which did not want to be included in the Proposed Resolution. On August 27, 1997, the Chief, Cable Services Bureau wrote to the commenting communities asking each to advise the Commission as to whether the community should be included in the Proposed Resolution. The Cities of Beverly Hills, Los Angeles, Santa Monica, and West Hollywood each responded through counsel that it would like to be included. V. DISCUS SION 17. As an initial matter, we find that the Commission has authority to approve the Proposed 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 the "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' dual objectives of simplifying cable rate regulation and protecting consumers. We have concluded in other recent proceedings that 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. 18. We find that the rates and refunds provided for in the Resolution are not unreasonable. The Bureau reviewed FCC Forms 393, 1200, 1210, and 1240 for the eight community unit identification numbers ("CUIDs") included in the Resolution. The Resolution takes into consideration certain offsets and channel count adjustments claimed by Century and also the 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. 19. Were the Commission to resolve the pending CPST complaints without addressing BST ratemaking and refunds and without the offsets and channel count adjustments incorporated in the Resolution, Century would be able to prolong the ultimate resolution of these matters by filing petitions for reconsideration of each order and by seeking review of our orders on reconsideration in a federal appeals court. Under the Resolution, Century will not seek reconsideration or appellate review of the channel count determined in the Resolution or of the refund levels and rate reductions required by the Resolution, and it will issue its first refunds and reduce rates within no more than 120 days of our adoption of this Order. 20. 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 likely to take several years -- would not benefit subscribers, given that the Resolution provides for reasonable rates and refunds immediately. 21. 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 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 specific ratemaking standards. To the extent that we diverge from these rules by adopting this Resolution, we find good cause to waive these rules pursuant to section 1.3 of our rules, because as further discussed herein, strict compliance with our rules would not serve the public interest under the circumstances before us. We find that a waiver furthers the purpose of the rules because the Resolution effectively achieves 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 refunds. We further observe that the Commission's authority to resolve cases in an analogous manner has been affirmed in other contexts. 22. The process followed here balances 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. Although our standard procedures for the review of CPST rates do not include an opportunity for local franchising authorities, complainants, or others to participate in our decisionmaking process prior to the issuance of an initial order resolving the complaint that triggered our review, 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. The Bureau also discussed the terms of the Resolution with local franchising authorities. The Bureau encouraged Century to discuss matters raised in comments with the local franchising authorities, which it has done, and it has adjusted its rate forms, BST rates and refund calculations as a result of those discussions. Furthermore, although the operator's discussions with the Commission included matters of refunds and rates applicable to BST service, local franchising authorities are not bound by the operator's choice to resolve BST matters through the Commission. They may opt out of the refund aspect of the Resolution and seek to enforce their own rate orders. 23. The 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 Century's removal of a large number of channels from its BST and CPST to an a la carte package in the systems covered by the Resolution. The Resolution provides that the benchmark rates are to be calculated as if Century initially had moved only four channels, rather than as many as twelve channels, into the Century Select a la carte package. The Commission has determined in other cases that an operator's movement of four channels out of the BST or CPST did not constitute evasion of our rules and therefore was not prohibited. However, instead of allowing Century to offer those four channels on a market-priced basis as a new product tier, which was permitted in cases in which only a few channels were actually removed, the Resolution provides that those four channels will be priced at the benchmark rate, continue to be regulated as part of a CPST, and subject to the price caps applicable to CPST under our rules. The Resolution resolves multiple CPST complaints, as well as issues raised in BST proceedings pending before the Commission, and will ensure prompt payment of refunds and immediate rate reductions. The implementation of these provisions will not be delayed by Century's attempt to modify or reverse them through review procedures, because the Resolution includes an agreement by Century to forego further Commission or appellate review of its terms. 24. 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 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. For these reasons, we believe that vacating the disputed Bureau LOI orders, rate orders, and local rate order appeal orders and implementing the minus-four channel count in the Resolution is warranted. 25. The Cities of Los Angeles and Santa Monica also question the treatment of channel changes made on April 1, 1994. They contend that Century's "1200 Rate Computation Addendum" attached to its FCC Forms 1200 erroneously shows that Century moved two channels from Century Select to BST on April 1, 1994, when these channels were actually moved to a CPST mini-tier on April 1 and not moved to BST until July 14, 1994. The two channels were replaced in the Century Select package with two new channels, for a net increase of two channels overall for each system. The two cities object to recouping costs attributable to the two channels from BST subscribers as of April 1, 1994 and also question the rates set for the mini-tiers. Century acknowledged in its reply comments that it moved the two channels to a mini-tier when it added them to each of the systems but treated them as BST channels from April 1 forward in its revised rate forms, because the channels "were provided on an unsecured basis to all subscribers, effectively rendering them BST services." Century has corrected its 1200 Rate Computation Addendums for its Los Angeles and Santa Monica systems to reflect that the mini-tier channels were added to CPST on April 1, 1994. This correction has slightly increased the Santa Monica refund amount, but does not affect refunds for the City of Los Angeles, where Century had previously settled BST refund issues through October 31, 1995. 26. For the purpose of the Resolution, Century reconstructed rate forms and set rates as if eight of its a la carte channels were regulated at the initial date of regulation. Four additional a la carte channels were excluded from the channel count for the purpose of setting the per channel rate. Using this adjusted channel count in its benchmark calculation on FCC Form 393, Century determined the per channel rate for its regulated channels as of the initial date of regulation, and it set the tier rates by multiplying the per channel rate by the number of channels in the tier. It applied this per channel rate to the four channels excluded from the channel count for purposes of determining the per channel rate. It applied this same per channel rate to the two channels added to the Los and Santa Monica systems when it created two-channel "mini-tiers" on April 1, 1994. Although the two cities question whether the mini-tier channels were appropriately priced, they were priced for the Resolution in the same way they were priced in the Bureau's rate orders for Los Angeles and Santa Monica, i.e, at the per channel rate determined as of the initial date of regulation. Century argues that this is consistent with past precedent. No local franchising authorities or other complainants sought reconsideration or review of the rate orders on this point. Treating the channels in the Resolution as they were treated in the rate orders has facilitated an expeditious resolution of the pending complaints, bringing subscribers certain refunds and reduced BST rates and eliminating the risks and delays of further litigation about the Bureau's rulings on Century's a la carte channels. Resolution section 12(e) leaves the question open in the event of an opt out, providing that the "effect on Century's maximum permitted rates of any additions, deletions, or substitutions of channels will be governed by Commission rules applicable at the time such channel additions, deletions or substitutions were made." (Citations omitted.) 27. Santa Monica asks that the Commission clarify the status of any equipment and installation refunds that may be owing pursuant to the City's July 19, 1994 local rate order. As the City notes, the Resolution states that it resolves BST and CPST rate cases filed prior to the Publication Date. Of particular concern to the City is whether the Resolution resolves any issues related to equipment and installation rates or refunds addressed in the local rate order but not raised in Century's appeal of the rate order to the Commission. Santa Monica argues that the Resolution should not resolve such issues, and seeks Commission clarification that a local franchising authority opting into the BST refunds retains the right to review the reasonableness of equipment and installation rates during the refund period covered by the Resolution and to order refunds, if any. Century disagrees with this request, arguing that resolving BST rates implicitly resolves equipment and installation rates because of the interdependence of the rates in the benchmark rate forms. In its view, if the City opts into the refunds and rates provided in the Resolution, it should not be able to further address equipment and installation issues in Century's FCC Form 393 or its first Form 1205. Century agrees that the "Proposed Resolution will not affect the review of any annual Form 1205 submission made by Century subsequent to the initial Form 1205." 28. The 1992 Cable Act requires that the rates for installation and equipment used by subscribers to receive the BST, including the installation and use of connections for additional television receivers, be based on actual cost, while the rates for the BST itself are to be reasonable. The Commission concluded that, to best implement the Act, equipment and installation rates should be included in an equipment "basket" and should be unbundled from programming service rates. FCC Form 393, which was used to establish initial regulated rates until May 15, 1994, and Form 1200, which has been used thereafter, provide for computing equipment basket rates based on costs, unbundling those costs from programming service charges, and then computing the maximum permitted unbundled programming service rates. Because the unbundling is achieved by first combining monthly revenues from programming service and equipment basket charges, the resulting rates are interdependent, which both Century and the City of Santa Monica acknowledge. A decrease in equipment basket rates, for example, results in a corresponding increase in the per channel programming service rate. 29. Exercising its jurisdiction over Century's equipment basket rates, Santa Monica specified in its July 19, 1994 local rate order what those rates should be for the period from September 1, 1993 through July 14, 1994. Century did not appeal this part of the local rate order and has made revisions to the equipment basket calculations in its FCC Forms 393, 1200 and 1205 submitted in this proceeding to reflect corrections requested by the City. With these corrections, the equipment basket rates shown it its Form 393 conform to the rates specified in the local rate order, and there appears to be no dispute about the equipment basket rates now shown in Century's Form 393 and first Form 1205. Because the BST rates determined in this proceeding from Forms 393 and 1200 reflect the City's order regarding equipment basket rates, and because reopening those equipment basket rates would reopen the BST rates and refunds determined in this Resolution, we view them as settled if the City opts into the Resolution. However, we agree with the City that, if it opts into the Resolution, it is not foreclosed from enforcing the equipment basket rates used to compute the Resolution BST rates. The refunds ordered in the Resolution do not take into account any overcharges for equipment basket rates Century might have collected. We note that the City's local rate order allows Century to offset equipment basket undercharges against both BST and installation overcharges. We have not considered equipment basket offsets in determining the BST refunds ordered pursuant to the Resolution. Because the Resolution incorporates other offsets into the BST refund calculation, no additional offsets from equipment charges should be applied to Santa Monica BST refunds if the City opts into the Resolution. Nothing herein precludes offsets within the equipment basket, however. 30. The City of Santa Monica asks the Commission to clarify that the permitted Santa Monica rates set forth in the Resolution are inclusive of the 10 % Santa Monica Utility User's Tax owed by Century's subscribers on charges for cable television service. Century collects this tax on behalf of the City, but the City enforces the tax obligation directly against delinquent subscribers. Century argues that the City's first local rate order did not question Century's practice of externalizing this tax, and that it is entitled to recover this tax from subscribers. We have reviewed the City's rate order and agree with Century that it does not appear to require any change in Century's treatment of the utility user's tax. Likewise, the Bureau's Santa Monica Rate Order left Century's treatment of the utility user's tax unchanged, and the City did not seek review on this point. In the context of the Resolution, we will not depart from these City and Bureau orders by raising for the first time issues not previously addressed or challenged in the context of Century's rates. 31. The City of West Hollywood seeks clarification about the status of its local rate orders. The City wants assurance that the Resolution will not invalidate its local refund order covering the period from July 14, 1994 through April 30, 1995, but it would like the Resolution to supplement the refunds ordered in the local rate order for that period and the previous period going back to September 1, 1993 in light of our resolution of the a la carte issue. The City argues that its local rate orders, Resolutions 94-1271 and 95-1467.1, reserved the right to revisit previously ordered refunds once the Commission resolved the a la carte issue. Century agrees that this Commission Resolution should not supplant the West Hollywood rate orders, because they are not the subject of pending appeals at the Commission, but disagrees with the request that the BST refund calculation for the Resolution be extended back from May 1, 1995, the date from which BST refunds are computed for West Hollywood subscribers in the Resolution. 32. The Resolution we are adopting is intended to resolve BST and CPST matters pending before the Commission but does not reach to local rate orders not before us on appeal or application for review. Thus, it does not affect the West Hollywood rate orders or preclude local enforcement of those rate orders. The BST refund liability in the Resolution was determined backward for one year from Century's May 1, 1996 rate increase, and liability continues to accrue until the rates agreed to in the Resolution are implemented. This treatment computes subscriber refunds in West Hollywood for a longer period than that provided for in the applicable Commission's rules. 33. The City of West Hollywood seeks clarification of section 12(f) of the Proposed Resolution, which provides that Century will not seek repayment of franchise fees from the local franchising authorities for the Los Angeles Area Systems with respect to the refunds paid pursuant to the Resolution. The City is concerned that Century could indirectly recover these franchise fee payments by using the issuance of subscriber bill credits to reduce the basis for determining future franchise fee payments. Century advises that it has no objection to revising the Proposed Resolution to make clear that indirect recovery of franchise fee overpayments is not permitted. Century states that is supports the following revision to paragraph 12(f), which was proposed by the City in discussions with Century regarding this issue: (f) Century will not seek repayment from any LFA of any Los Angeles Area System of franchise fee overpayments otherwise due Century as a result of the payment of the Refunds specified in Exhibit 1, nor will Century credit such Refunds against any past or future amounts used to determine franchise fee payments. We have amended the Resolution accordingly. 34. The City of West Hollywood also seeks clarification as to: (1) the period of time over which Century can recover the portion of its otherwise permitted CPST rate increase it has agreed to defer; and (2) the time cycle for Century's subsequent 1240 rate submissions. Century advises that it has discussed these issues with West Hollywood and has reached agreement on the language that will address the City's concerns by making clear that recovery of the deferred CPST rate increase will be spread over a twelve-month period (thereby minimizing the risk of a sudden, one-time rate spike) and that Century's next Form 1240 rate increase will be no earlier than August 1, 1997 (thereby minimizing the risk of multiple rate increases). Century proposes and West Hollywood agrees that paragraph 12(h) of the Proposed Resolution be amended to read as follows: (h) No later than the Implementation Deadline, Century will implement the BST and CPST rates specified in Column (A) of Exhibit 2. The implementation of these rates will result in a reduction in the BST rates in each of the Los Angeles Area Systems. In addition, CPST rates implemented pursuant to the subparagraph reflect Century's agreement to defer, for a twelve-month period commencing on the Implementation Deadline, a portion of the otherwise permitted Form 1240 increase in the CPST rates of the Los Angeles Area Systems, as reflected in Column (B) of Exhibit 2. In accordance with the Form 1240 calculations performed to determine maximum permitted BST and CPST rates for purposes of this Resolution, Century's next annual Form 1240 rate adjustments shall be no earlier than August 1, [1998]. Notwithstanding the scheduled date of its next subsequent annual Form 1240 adjustment, Century, at the end of the twelve-month deferral period, and upon thirty days notice to subscribers, may adjust its CPST rates to recover any amounts deferred under this paragraph, such recovery to be calculated over a period of at least twelve months, in accordance with the Commission's rules governing the recovery of deferred Form 1240 rate adjustments. Such adjustments may not include any adjustments for inflation, increases in external costs, or other adjustments that may be determined in connection with a regular Form 1240 filing. We have amended the Resolution accordingly, but have changed the date for the next Form 1240 rate adjustment to August 1, 1998 from August 1, 1997. 35. Hector L. Camilleri comments that he was encouraged by the proposed refunds but concerned about an intervening BST rate increase. The Resolution adjusts the rates and refunds in the Proposed Resolution to bring them current. Subscribers will receive refunds for BST rates put into effect in both the summer of 1996 and the summer of 1997. 36. Zahra M. Anise-Levine, a former subscriber who has moved from the area, objects to Century's plan to make refunds only to current subscribers. The Commission's rules allow an operator, at its discretion, to implement a refund in one of two ways -- either through identification of actual subscribers or through a prospective percentage reduction of the rates to the class of subscribers that currently subscribe to the service. Operators face constant changes to their subscriber base making it difficult, if not impossible, to identify all such former subscribers, maintain current address lists for them, and determine what portion of the refund amount should be remitted to any former subscriber for the period of that subscriber's subscription. We are convinced that the expense associated with giving refunds to all former subscribers would be large and that making such refunds would be unduly burdensome to Century. We conclude that the payment method proposed for the refunds, as credits to current subscribers, is consistent with our rules and is appropriate. 37. Kevin Laubach complains that, in West Hollywood, subscribers taking less than the full complement of services offered by Century must use Century's converter box. According to Mr. Laubach, this requires an installation charge and an extra remote control. He also complains that he must deal with special wiring and additional technical complexity in order to use his VCR with the converter. He advocates that basic service be provided without the need for a converter box, and complains that subscribers can avoid the inconvenience of the converter only by incurring the expense of subscribing to all of the services Century offers, whether or not they want or use the extra services. We recognize Mr. Laubach's concerns regarding the converter box and the difficulties of using his VCR with a converter, but addressing these concerns is beyond the scope of this proceeding. VI. CONCLUSION AND ORDERING CLAUSES 38. For the reasons discussed above, we conclude that it is in the public interest to adopt the Resolution as amended. 39. Accordingly, IT IS ORDERED that the March 28, 1997 Request for Leave to File Additional Pleading by the City of Los Angeles and the City of Santa Monica IS GRANTED. 40. IT IS FURTHER ORDERED that the Resolution attached to this Order as Attachment A IS ADOPTED AND INCORPORATED HEREIN. 41. IT IS FURTHER ORDERED that all CPST rate complaints under the jurisdiction of the Commission against Century Communications Corporation as of August 23, 1996 for its cable systems operating in Bell Canyon, Beverly Hills, Los Angeles, Marina Del Rey, Santa Monica, and West Hollywood, California ARE GRANTED to the extent necessary to effectuate the Resolution and ARE DENIED in all other respects. 42. IT IS FURTHER ORDERED that the orders in Century Southwest Cable TV, Beverly Hills, CA, DA 95-1135; and Century Southwest Cable Television, Santa Monica, CA, DA 95-123, ARE HEREBY VACATED and that all pending BST appeals, related petitions for stay, and applications for review filed by Century concerning rate orders that were issued by the communities of Beverly Hills and Santa Monica, California and that address rates subject to the Resolution ARE HEREBY DISMISSED as moot. 43. IT IS FURTHER ORDERED that Century Southwest Cable TV, Beverly Hills and Los Angeles, CA, LOI-93-17, DA 94-1553; Century Southwest Cable Television III, Marina Del Rey, CA (CUID No. CA 0550), DA 95-525; Century Southwest Cable Television, West Hollywood (CUID No. CA0254), DA 95-478; Century Southwest Cable Television I, Los Angeles, CA (CUID No. CA0253, Area G), DA 95-516; Century Southwest Cable Television, Beverly Hills, CA (CUID No. CA0457), DA 95-314; Century Southwest Cable Television III, Los Angeles, CA (CUID No. CA0253, Area F), DA 95-499; Century Southwest Cable Television III, Santa Monica, CA (CUID No. CA0456), DA 95-500; Century Southwest Cable Television II, Los Angeles, CA (CUID No. CA0253, Area H), DA 95-498; Century Southwest Cable Television, Bell Canyon, CA (CUID No. CA0726), DA 95-433, ARE HEREBY VACATED and that Century's Applications for Review of the foregoing orders ARE DEEMED WITHDRAWN. 44. 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), 76.962, 76.309(c)(3)(i)(B), and 76.964 as discussed herein, ARE GRANTED. 45. 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. 46. IT IS FURTHER ORDERED that the Cable Services Bureau IS GIVEN delegated authority to oversee implementation of this Resolution, as adopted. 47. IT IS FURTHER ORDERED that this Order IS EFFECTIVE upon adoption. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary TERMS OF RESOLUTION I. INTRODUCTION. 1. These terms constitute a resolution of refunds owed subscribers in certain Los Angeles cable communities in which cable systems (referred and defined herein as the "Los Angeles Area Systems") owned and operated by Century Communications Corporation and its affiliates and subsidiaries (collectively "Century") created packages of a la carte channels. CPST rate complaints are pending with respect to each of these communities. II. BACKGROUND. 2. In each of the Los Angeles Area Systems, Century began providing packages of a la carte channels (the "Century Select" offerings) between April 1, 1993 and September 30, 1994. On December 22, 1994, the Commission's Cable Services Bureau ("Bureau") released a Letter of Inquiry ("LOI") ruling finding that the Century Select offerings in Century's Los Angeles and Beverly Hills systems must be treated as regulated CPSTs (DA 94- 1553). Century has filed an Application for Review of the Los Angeles/Beverly Hills LOI ruling. In addition, the Bureau has issued eight CPST rate orders relying on the Los Angeles/Beverly Hills LOI ruling in finding that the Century Select offerings in the Los Angeles Area Systems must be treated as regulated CPSTs. (DA 95-314, DA 95-433, DA 95-478, DA 95-498, DA 95-499, DA 95-500, DA 95-516, DA 95-525). Century has filed Applications for Review of these rate orders. 3. Thereafter, the Bureau staff met with Century to discuss resolution of issues relating to the rate complaints and the LOI decision. Century 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 Century Select package was a lawful a la carte offering. Century further represented that, in light of the LOI decision, application of the benchmark formula produced different maximum permitted rates in the Los Angeles Area Systems than the rates actually charged by Century. As part of this process, Century submitted benchmark rate filings for the Los Angeles Area Systems premised on the exclusion of four of the Century Select channels from the count of regulated channels for purposes of calculating Century's maximum permitted benchmark rates (Forms 393, 1200 series, 1210, 1240). 4. Century maintains that it followed the letter and spirit of the Commission's rules and the 1992 Cable Act in creating its Century Select offerings and that those offerings should not be treated as regulated tiers. Century and the Commission desire to resolve the pending CPST rate cases involving the Los Angeles Area Systems and the various issues regarding the Century Select offerings described above under the terms set forth below. III. DEFINITIONS. 5. As used herein, the following definitions will apply: (a) "BST" means the tier of "Basic Service" as defined in Section 76.901 of the Commission's rules, 47 C.F.R.  76.901. (b) "CPST" means any tier of cable programming service as defined in Section 76.901 of the Commission's rules, 47 C.F.R.  76.901. (c) "Effective Date" means the date on which the Commission issues the Resolution Order. (d) "Implementation Deadline" means the date occurring 90 days after the Opt-Out Deadline or such earlier date as has been established in a separate agreement between Century and a local franchising authority for the adjustment of BST rates to the level set forth in the Resolution Order and/or commencement of the payment of Refunds for the period covered by the Resolution Order. (e) "Interest" means the Internal Revenue Service rate of interest for tax overpayments. (f) "Los Angeles Area Systems" means the cable systems owned and operated by Century serving the City of Los Angeles (Areas F, G, and H), Santa Monica, Beverly Hills, West Hollywood, Marina Del Rey, and Bell Canyon, California. (g) "Los Angeles Area System Eligible Subscribers" means all non-bulk, residential subscribers of record in the Century systems listed in Exhibit 1 as of the date bills are issued reflecting Refunds. (h) "Opt-Out Deadline" means the date occurring 30 days after the Effective Date. (i) "Publication Date" means the date on which the Commission releases its initial Order relating to this Proposed Resolution. (j) "Refunds" means credits on subscriber bills. (k) "Resolution Order" means an order issued by the Commission approving the terms of this Proposed Resolution. IV. TERMS. 6. Century accepts the jurisdiction of the Commission over it and the subject matter of these rate resolutions for purposes of the Resolution Order. 7. All of Century's CPST rate cases for the Los Angeles Area Systems for the period through the Publication Date are finally resolved under the terms provided herein. 8. Century agrees that the terms contained in this Proposed Resolution shall be incorporated by reference in the Resolution Order. Assuming the adoption of these terms in the Resolution Order, Century 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. Century and the Commission will reasonably cooperate in any such defense of these terms. 9. Assuming the adoption of these terms in the Resolution Order, Century 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. 10. These terms are for purposes of resolving outstanding CPST complaints in the Los Angeles Area Systems and the various issues regarding the Century Select offerings and do not constitute an admission by Century of any violation of, or failure to conform to, the 1992 Cable Act, Commission Rules, or any other applicable law, rule, or policy. 11. The Commission will not institute, on its own motion, any proceedings against Century based upon the information obtained during consideration of the Proposed Resolution. In addition, in the absence of additional facts, any allegations and other circumstances involved in consideration of this Proposed Resolution will not be used by any party against Century with respect to any future proceeding. 12. In settlement of all of Century's CPST rate cases enumerated above in the Los Angeles Area Systems and the various issues regarding the Century Select offerings, Century 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 Century's revised benchmark rate submissions (Forms 393, 1200 Series, 1210, and 1240) and has determined a maximum permitted per channel rate in each of the Los Angeles Area Systems reflecting the exclusion of four of the Century Select 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, Century shall issue Refunds to Los Angeles Area System Eligible Subscribers as set forth in Exhibit 1. Such Refunds cover the period through August 31, 1997 and already include applicable Interest through August 31, 1998. An LFA may elect to opt out of the Refunds established under this subparagraph and set forth in Exhibit 1 by providing notice to the Commission and Century 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 to Century Communications Corporation, 50 Locust Avenue, New Canaan, Connecticut 06840, attention: George Franciscovich, Senior Vice President, Legal Affairs, Cable Television Division; (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 a particular LFA to opt out of the Refunds under this subparagraph will not otherwise affect the applicability of the remaining provisions of this Proposed Resolution in the system regulated by such LFA, including but not limited to subparagraphs (e), (f), and (h) hereof. (c) With respect to the City of Los Angeles, the payment by Century of the Refunds specified in Exhibit 1 will be deemed to account for and finally resolve all BST and CPST amounts owed to subscribers in Areas F, G and H for the period beginning November 1, 1995 through August 31, 1997. The payment of such Refunds will have no effect on the refunds included in the resolution concerning Century's BST rates adopted by the Los Angeles City Council on June 12, 1996 with respect to BST refunds due for the period of September 1, 1993 through October 31, 1995 in Los Angeles Areas F, G, and H. In the event the City of Los Angeles exercises its right to opt out described in subparagraph (b) with respect to Areas F, G, and H, the terms of subparagraph (e) regarding the calculation of Century's rates under the Commission's benchmark rate rules shall apply for purposes of determining any rates or refunds in the City of Los Angeles (Areas F, G, and H). (d) Century will begin providing Refunds to Los Angeles Area System Eligible Subscribers no later than the Implementation Deadline and the provision of such Refunds will be completed in a period not to exceed 12 months. At least one-twelfth of the total Refunds in each of the Los Angeles Area Systems will be reflected in the form of credits on subscriber bills for each month of the payment period, provided further that in no case, except the final month of the payment period, will the amount of the monthly credit on subscriber bills calculated pursuant to this subparagraph be less than $1.00. In the event the Implementation Deadline is later than September 1, 1997, Century shall be required to calculate and pay additional Refunds and Interest based on the difference, if any, between the combined BST and CPST rates being charged from September 1, 1997 until the Implementation Deadline, and the combined BST and CPST rates put into effect as of the Implementation Deadline. Century also will be required to calculate and pay additional Interest through the date on which all Refunds are fully paid in the event that the date on which the payment of Refunds is due to be complete under this subparagraph is later than August 31, 1998. (e) Subject to the right of LFAs to opt out under subparagraph (b), and except as provided in subparagraph (c), the Refunds issued pursuant to subparagraph (b) shall account for and finally resolve (i) all BST and CPST rate cases filed prior to the Publication Date and (ii) the reasonableness of the BST and CPST rates specified on Exhibit 2. In the event that an LFA of a Los Angeles Area System 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 Century's Form 393 and Form 1200 series maximum permitted rates will reflect the exclusion of four of the Century Select channels from the count of regulated channels for purposes of applying the Commission's benchmark rate rules. The maximum permitted rate for those four Century Select 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 systems. The effect on Century's maximum permitted rates of any additions, deletions, or substitutions of channels will be governed by Commission rules applicable at the time such channel additions, deletions or substitutions were made. See, e.g., Warner Cable Communications (Milwaukee, WI), DA 94-1285 (CSB, rel. Nov. 18, 1994); Century Southwest Cable Television I (Los Angeles, Area G), DA 95-516 (CSB, rel. March 17, 1995). (f) Century will not seek repayment from any LFA of any Los Angeles Area System of franchise fee overpayments otherwise due Century as a result of the payment of the Refunds specified in Exhibit 1, nor will Century credit such Refunds against any past or future amounts used to determine franchise fee payments. This provision will not apply in any Los Angeles Area System as to which the LFA exercises its opt out election as described in subparagraph (b). (g) Century has calculated maximum permitted regulated BST and CPST rates for the Los Angeles Area Systems as of May 1, 1996 using Form 1240. In calculating such rates, for systems where the previous FCC Form 1210 maximum permitted rates exceeded the actual rates being charged as of April 30, 1996, Century has capped its previous Form 1210 maximum permitted CPST rates so that the combined Form 1210 maximum permitted BST and CPST rate did not exceed the combined BST and CPST rates actually being charged as of April 30, 1996. (h) No later than the Implementation Deadline, Century will implement the BST and CPST rates specified in Column (A) of Exhibit 2. The implementation of these rates will result in a reduction in the BST rates in each of the Los Angeles Area Systems. In addition, the CPST rates implemented pursuant to this subparagraph reflect Century's agreement to defer, for a twelve-month period commencing on the Implementation Deadline, a portion of the otherwise permitted Form 1240 increase in the CPST rates of the Los Angeles Area Systems, as reflected in Column (B) of Exhibit 2. In accordance with the Form 1240 calculations performed to determine maximum permitted BST and CPST rates for purposes of this Resolution, Century's next annual Form 1240 rate adjustments shall be no earlier than August 1, 1998. Notwithstanding the scheduled date of its next subsequent annual Form 1240 adjustment, Century, at the end of the twelve-month deferral period, and upon thirty days notice to subscribers, may adjust its CPST rates to recover any amounts deferred under this subparagraph, such recovery to be calculated over a period of at least twelve months, in accordance with the Commission's rules governing the recovery of deferred Form 1240 rate adjustments. Such adjustments may not include any adjustments for inflation, increases in external costs, or other adjustments that may be determined in connection with a regular Form 1240 filing. (i) The rate adjustments described herein will be binding on Century except that, in the event the LFA of a Los Angeles Area System exercises its opt out election pursuant to subparagraph (b), Century will not be required to implement any reduction in the BST rates of such system until such time as any rate order adopted by said LFA becomes final. Nothing in this Proposed Resolution limits Century's right to adjust its rates for unrecovered inflation and external costs pursuant to Commission rules. (j) As of the Effective Date, the Resolution Order will vacate and supersede the Los Angeles/Beverly Hills LOI ruling and the aforementioned CPST orders. The decision that four Century Select channels are to be excluded from the count of regulated channels for benchmark rate calculations, as incorporated in the Resolution Order, will be binding on any decision relating to Century's BST or CPST rates. Upon adoption of the Resolution Order, Century's applications for review of the LOI ruling and the CPST orders will be deemed to be withdrawn. (k) A copy of this Proposed Resolution shall be provided for comment to all LFAs in the Los Angeles Area Systems and to each additional party that filed a valid complaint on FCC Form 329, pursuant to 47 C.F.R.  76.950. (l) Except as provided in subparagraph (m) hereof, these terms may not be terminated or modified without the mutual written agreement of Century and the Commission. The Commission's consent to any such modification or termination shall be demonstrated by an order by the Bureau or, at the Commission's option, by the Commission itself. (m) Notwithstanding the terms hereof, Century may avail itself of any applicable modifications of any law or regulation governing the rates charged in the Los Angeles Area Systems, including the adoption by the Commission of any regulation governing rates as applied to the cable industry generally. If Century exercises this election, the terms contained herein shall be superseded upon the effective date of such law or regulation, except that Century shall provide Refunds to Los Angeles Area System Eligible Subscribers pursuant to the terms of this Proposed Resolution. (n) Nothing herein shall restrict the ability of Century to adjust its rates of any of the Los Angeles Area Systems in the event such rates are not regulated for any reason, including changes from the 1996 Telecommunications Act or relevant Commission rules. 13. 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 Century's compliance with the terms of the Proposed Resolution violates any Commission rule or order, and, in any proceeding before the Commission brought by a third party, a showing by Century that it has complied with these terms shall constitute a defense to any claim that Century's actions in meeting the terms constitute a violation of any applicable Commission rule or order. 14. Assuming the adoption of these terms, these terms shall become effective when the Commission issues the Resolution Order. 15. If any provision, clause, or part of this Proposed Resolution is invalidated, the remainder of this Proposed Resolution shall not be affected thereby and shall remain in effect; provided, however, that if such invalidation is material to this Proposed Resolution, Century and the Commission shall attempt in good faith to reconstitute the Proposed Resolution in a form that is, to the maximum extent possible, consistent with the original intent of the Proposed Resolution. EXHIBIT 1 REFUNDS Refund Interest Total Beverly Hills, CA (CA 0457) 476,580 106,654 583,234 Los Angeles, CA (CA 0253) Area F 934,820 91,943 1,026,763 Area G 244,613 30,733 275,346 Area H 316,757 30,897 347,654 TOTAL LOS ANGELES 1,496,190 153,573 1,649,763 Santa Monica, CA (CA 0456) 1,280,023 191,709 1,471,732 West Hollywood, CA (CA 0254) 742,869 144,177 887,046 TOTAL 4,591,775 EXHIBIT 2 A B Form 1240 Rates To Be Implemented On Implementation Date Amount Of Form 1240 CPST Increase Deferred Bell Canyon BST 28.55 --- CPST 9.77 .77 Beverly Hills BST 26.16 --- CPST 1 6.06 .43 CPST 2 6.26 .75 Los Angeles: Area F BST 26.37 --- CPST 10.77 .71 Area G BST 27.66 --- CPST 10.66 .78 Area H BST 23.41 --- CPST 9.40 .87 Marina Del Rey BST 25.65 --- CPST 1 6.15 .46 CPST 2 7.46 .28 Santa Monica BST 23.44 --- CPST 11.07 .64 West Hollywood BST 21.80 --- CPST 1 5.40 .38 CPST 2 5.44 .69 EXHIBIT 3 EXPLANATION OF DEFERRAL CALCULATION Under the terms of the Resolution, Century has agreed to defer for a twelve-month period (beginning on the Implementation Date) the recovery of a portion of the maximum permitted Form 1240 CPST rate(s) approved by the Commission for each of the Los Angeles Area Systems. The minimum amount to be deferred in each of the Los Angeles Area Systems is equal to one-half of the increase in the CPST rate(s) calculated on Century's first Form 1240. An additional amount of the otherwise permitted CPST rate(s) must be deferred, as necessary, so that the combined BST/CPST rates implemented pursuant to the Resolution is no greater than the combined BST/CPST rates in effect immediately prior to the Implementation Date. The calculation of the minimum deferral in each of the Los Angeles Area Systems is summarized as follows: Beginning Rate 1996 Form 1240, Line A1 End Rate 1996 Form 1240, Line I10 Minimum Deferral Col. 2 - Col. 1 2 Bell Canyon 8.54 10.05 .75 Beverly Hills CPST 1 5.32 6.19 .43 CPST 2 6.43 7.94 .75 Los Angeles Area F 9.40 10.83 .71 Area G 9.37 10.80 .71 Area H 8.17 9.47 .65 Marina Del Rey CPST 1 5.28 6.21 .46 CPST 2 6.37 6.93 .28 Santa Monica 8.76 10.04 .64 West Hollywood CPST 1 4.65 5.42 .38 CPST 2 5.52 6.90 .65 The calculation of the additional deferral is summarized as follows: Pre-Implementation Combined BST/CPST Post-Implementation Combined BST/CPST (With Minimum Deferral) Additional Deferral Required Total Deferral Bell Canyon 38.32 38.34 .02 .77 Beverly Hills 40.24 38.48 None .43 .75 Los Angeles Area F 37.43 37.14 None .71 Area G 38.32 38.39 .07 .78 Area H 32.81 33.03 .22 .87 Marina Del Rey 40.27 39.26 None .46 .28 Santa Monica 36.37 34.51 None .64 West Hollywood 35.91 32.64 None .38 .69