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A. 1. a.(1)(a) i) a) 1. 1. 1. a.(1)(a) i) a)#X\  P6G;IP#X01Í ÍX01Í Í#&a\  P6G;0&P#"i~'^5>g\\>>>\g0>03\\\\\\\\\\>>ggg\yyrF\yrgyy>3>j\>\gQgQ>\g3>g3g\ggQF>g\\\QI(I_>0_j>>>0>>>>>>\>g3\\\\\QyQyQyQyQD3D3D3D3g\\\\gggg\\g\\\\pg\\\QQ_QyQyQyQyQ\\\_\gjF3FgF>Fgg__gy3ySy>yIy3ggg\\QQQgFgFgFg_y^y>yjgggggg_yQyQyQgy>ggFy>\0\\=2=WxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNBnnBa\>\\\\\\7>\7>\7>>\\\??n\\pBnnBsgg>\\7"yyyy\nlc\gnn\2RK& KqKK"i~'^ %,77\V%%%7>%7777777777>>>0eOIIOD>OO%*ODaOO>OI>DOOgOOD%%37%07070%777V7777%*77O77055;%;3%%%%%%%%%%%7O0O0O0O0O0aHI0D0D0D0D0%%%%O7O7O7O7O7O7O7O7O7O7O0O7O6O7O7O7>7O0O0O0I0I0I;I0OED0D0D0D0O7O7O7O;O7O;O7%%7%%%7M>;;O7DD,D%D%DO7AO7O7O7O7aOI%I%I%>*>*>*>;D.DD3O7O7O7O7O7O7gOO;D0D0D0O7D%O7>*D%O7E77%%WMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN(BB(37%07777j7#TT7!#TT7T!%%007n&&Bn77lCTn(nBB(A\\>>n%07\n!"IIIITTenn7TnB@;7>lBBn7"i~'^"(22TN"""28"2222222222888,\HBBH>8HH"&H>XHH8HB8>HH^HH>"".2",2,2,"222N2222"&22H22,006"6."""""""""""2H,H,H,H,H,XAB,>,>,>,>,""""H2H2H2H2H2H2H2H2H2H2H,H2H1H2H2H282H,H,H,B,B,B6B,H?>,>,>,>,H2H2H2H6H2H6H2""2"""2F866H2>>(>">">H2;H2H2H2H2XHB"B"B"8&8&8&86>*>>.H2H2H2H2H2H2^HH6>,>,>,H2>"H28&>"H2?22!!WFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN$<<$.2",2222`2 LL2 LL2L"",,2d""M\\>>>\}0>03\\\\\\\\\\>>}}}\rryrr>Qygyrr\grrggF3FM\>\\Q\Q3\\33Q3\\\\FF3\QyQQFI3Ic>0cM>>>0>>>>>>\>\3r\r\r\r\r\yyQrQrQrQrQ>3>3>3>3y\\\\\\\\\gQr\\\\gQ\r\r\r\r\yQyQycyQnrQrQrQrQ\\\c\c\>3>\>>>\\ccyQg3gBg>g;g3y\jy\y\\\yrFrFrF\F\F\FccgBg3gM\\\\\\ygcgFgFgF\g>y\\Fg>g\n0\\=(=WddddddddddddddddddddddddddddddddddddddddNBnnB_\F\\\\\\3;\7;\7>>gg\??n\\pBnnBb\\>g\7"yyyy\njc\}nn\2KK K Ke"i~'^09]SS999S]+9+/SSSSSSSSSS99]]]Sxnxxng?Snxgx]nxxxxn9/9aS9S]I]I9S]/9]/]S]]I?9]SxSSIC%CW9+Wa999+999999S9]/xSxSxSxSxSxxInInInInI>/>/>/>/x]SSSSx]x]x]x]xSxSx]SSxSxSf]xSxSxSxIxIxWxIx{nInInInISSSWS]a?/?]?9?]]WW]n/nKn9nCn/x]xx]x]SSxxIxIxI]?]?]?]WnUn9nax]x]x]x]x]x]xxWnInInIx]n9x]]?n9xSz+SS8-8WuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNd Y yO"-ԍ47 C.F.R.  76.944.> In ruling on appeals of local rate orders, the Commission will not conduct a de novo  xreview, but instead will sustain the franchising authority's decision as long as there is a reasonable basis  S- xfor that decision.^ Y {O&- xԍSee Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate  {O&- xRegulation, MM Docket 92266 ("Rate Regulation"), Report and Order and Further Notice of Proposed Rulemaking,  {O'-8 FCC Rcd. 5631, 5731 (1993); Rate Regulation, Third Order on Reconsideration, 9 FCC Rcd. 4316, 4346 (1994). The Commission will reverse a franchising authority's decision only if it determines  xthat the franchising authority acted unreasonably in applying the Commission's rules in rendering its local"N, * *,,"  S- xrate order.1S {Oh-ԍId.1 If the Commission reverses a franchising authority's decision, it will not substitute its own  xdecision but instead will remand the issue to the franchising authority with instructions to resolve the case  S-consistent with the Commission's decision on appeal.3ZS {O-ԍId. 3  S4- III.xDISCUSSION  S- ` x3.` ` In its rate order, the City required TCI to reduce its BST rate from $12.20 per month to  x$11.64 per month, and it ordered TCI to credit subscribers the difference between the rate actually charged  x/and the approved rate. TCI asserts that the City incorrectly reduced the franchiserelated costs TCI  xkincluded on line B7 of its Form 1210 by (i) rejecting TCI's twoyear depreciation schedule in favor of  x/a sevenyear depreciation schedule; and (ii) failing to include an 11.25% rate of return on the costs at  xissue. The dispute concerns TCI's recovery in its rates of $287,682, which was used to purchase video  xequipment necessary for TCI to broadcast City Council meetings to cable subscribers. The City maintains  xthat its sevenyear depreciation schedule is supported by the Commission's rules. The City also claims  x.that it was not required to include a rate of return amount when it recalculated the costs at issue because TCI did not include any return amount when it itemized the costs on the Form 1210.  S -  x A.` ` Depreciation Schedule  S7- ` Qx4.` ` TCI contends that the depreciation schedule for the costs at issue should be tied to the  S- x\term of the franchise, which had approximately two years remaining when TCI filed the Form 1210.4S yO-ԍAppeal at 2.4  S- xAcknowledging that the Commission adopted a different methodology in its final costofservice rules,z|S {O- x,ԍId. at 3 n.2. The final costofservice rules were adopted in Implementation of Sections of the Cable Television  {O- xConsumer Protection and Competition Act of 1992: Rate Regulation, MM Docket No. 93215, and Adoption of a  {O- xiUniform Accounting System for Provision of Regulated Cable Service, CS Docket No. 9428, Second Report and  xOrder, First Order on Reconsideration, and Further Notice of Proposed Rulemaking, 11 FCC Rcd. 2220 (1996)  {O-("Final Cost Order").z  S- x>TCI argues that its approach is justified under the circumstances. 4 S {Or- xԍId. at 23. In addition, TCI objects generally to the depreciation of franchiserelated costs over a period that  {O<-is greater than the remaining life of the franchise. Id. According to TCI, the costs were  xincurred in connection with City approval of a corporate reorganization and a twoyear extension of the  xfranchise, when TCI agreed to pay the City a lump sum of $272,682 for the purchase of production  S- xequipment and three annual payments of $15,000 for operating support.  S {O5"- xԍId. at 2 & Exh. 2 (Letter dated May 19, 1995, from Tamara S. Gates, Administrative Assistant, City of Arcadia, to Juan Herrera, General Manager, TCI/Cablevision). The production equipment was  S- xinstalled in the City Council chambers to broadcast City Council meetings to cable subscribers.7 S {O\%-ԍId. at 2.7 TCI"| ,l(l(,,4"  xyadmits that the useful life of the equipment could exceed two years but states that its franchise might not  S-be renewed and that a successor franchisee might not be willing to purchase the equipment.9 S {O5-ԍId. at 23.9  Sg- ` x5.` ` In response, the City argues that its order comports with the Commission's rule that  xfranchiserelated capital costs should be depreciated over the useful life of the facilities or equipment in  S- xquestion. ZS {O- xԍReply at 34 (citing Rate Regulation, Thirteenth Order on Reconsideration, 11 FCC Rcd 388, 442 (1995)  {O-(Thirteenth Order on Reconsideration")). The City states that its sevenyear depreciation period for the production facilities was based  xon the estimated useful life of the equipment, which the City derived from a survey of local production  S- xstudios.7S {O -ԍId. at 4.7 The City asserts that TCI has not shown that renewal of its franchise is unlikely and points out  Sh- xthat the federal statutory scheme favors the incumbent operator, which is TCI.9hHS {OP-ԍId. at 45.9 The City disputes TCI's  xZcharacterization of the lump sum payment, arguing that the payment was not tied to the twoyear extension  xof TCI's franchise but instead was intended to remedy TCI's noncompliance with the public access  S-provisions of its original franchise.7S {OI-ԍId. at 3.7  Si - ` }x6.` ` The City's selected depreciation schedule for the franchiserelated costs is reasonable. The  xdepreciation schedule is based on a goodfaith estimate of the useful life of the equipment, which is the  S - xmethod the Commission has prescribed for franchiserelated costs.e l S {O-ԍThirteenth Order on Reconsideration, 11 FCC Rcd at 442.e We reject TCI's argument that the  xdepreciation schedule should be tied to the remaining term of the franchise. Depreciation schedules should  xnot be tied to the term of the franchise unless the operator can show that renewal is not likely and that  Sj- xin the event of nonrenewal the operator would not be able to recover the value of the assets.Sj S {O-ԍFinal Cost Order, 11 FCC Rcd at 2261.S TCI has  xnot demonstrated, beyond its mere assertion, that renewal of its franchise is unlikely or that it would be unable to sell the equipment to a successor franchisee or otherwise recover the value of the equipment.  S-x B.` ` Rate of Return  S8- ` x7.` ` TCI states that the Commission's rules allow operators to earn an 11.25% rate of return  S- xon their franchiserelated capital investments, which are reported on Line B7 of the Form 1210.;Z S {O5"- xԍAppeal at 4 (citing Thirteenth Order on Reconsideration, 11 FCC Rcd at 442). The Form 1210 does not have  xseparate entries where the return amount is reported. Rather, costs that include a return amount are reported as a lump sum.; TCI  xclaims that the City's order is unreasonable because the allowed franchiserelated costs do not include a return amount. "l,l(l(,,"Ԍ S- ` }x8.` ` The City agrees that the Commission allows operators to earn a return on certain costs but  x[argues that TCI is not entitled to a return on its franchiserelated costs because it did not include a return  S- xamount in the total costs reported on line B7 of its Form 1210.3S yO-ԍReply at 5.3 As evidence, the City points to TCI's  xresponse to the City's request for a breakdown of the costs at issue. In a letter dated August 18, 1995,  S4-TCI stated:4XS yO,- xԍReply, Attachment C (Letter dated Aug. 18, 1995, from Debra Boten Keith, Rate Compliance Manager, TCI West, Inc., to William R. Kelly, City Manager, City of Arcadia).  S-#&a\  P6G;0&P#XxThe costs on Line B7 were paid to the City of Arcadia in June 1994:   Sh-X` hp x (#%'0*,.8135@8:TCI did not include a return component in the franchiserelated costs it reported on its Form 1210.XX  yO - xԍThe monthly amount of $11,361.75 represents a twoyear amortization of $272,682, which is the amount TCI  xpaid for the production equipment. The monthly amount of $1,250.00 is a oneyear amortization of $15,000, which equals TCI's first annual operational support payment.X  x[Rather, TCI simply divided the total costs at issue by the number of months in the selected depreciation  xperiod. The City's replication of and reliance on this methodology was reasonable. The City was not required to remedy TCI's omission of a return component.  S- IV.xORDERING CLAUSES  Sk- ` x 10.` ` Accordingly, IT IS ORDERED that the appeal by TCI Cablevision of Arcadia/Sierra  S8-Madre of the local rate order of the City of Arcadia, California, IS DENIED .  S- ` x 11.` ` This action is taken by the Deputy Chief, Cable Services Bureau, pursuant to authority  S-delegated by Section 0.321 of the Commission's rules.= yO-ԍ47 C.F.R.  0.321.= x` `   FEDERAL COMMUNICATIONS COMMISSION x` `   John E. Logan x` `   Deputy Chief, Cable Services Bureau