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hh@)hpp  S-TPx` `  hh@)hpp  SX-Petition for Reconsiderationhh@)   x  S -P ORDER ON RECONSIDERATION  S -AND RATE ORDER TP  Sh -X` hp x (#%'0*,.8135@8: - xRate Regulation, MM Docket No. 93-215, Report and Order and Further Notice of Proposed Rulemaking, 9 FCC Rcd 4527 (1994).?  S- ` `x6. ` ` Subsequently, on December 15, 1995, the Commission adopted the Second Report and  Sr- xOrder, First Order on Reconsideration, and Further Notice of Proposed Rulemaking, MM Docket No.  SL - x/93-215 and CS Docket No. 94-28 ("Final Cost Order")W L ) {O-ԍ See FCC 95-502, 11 FCC Rcd 2220 (1996).W setting forth its final rules to govern cost of  xservice filings. In the Final Cost Order, the Commission refined the approach it had adopted in the Notice  x]and Cost Order and reaffirmed the use of the cost of service approach for operators for which the  S - xbenchmark approach might not produce fully compensatory rates in all cases.Q ) {O-ԍ See Final Cost Order at  191.Q The Commission also  xdetermined that cost of service filings still pending before the Commission could be reviewed in  xaccordance with the Final Cost Order, unless the operator notified the Commission by April 8, 1996, that  S\-it wished its filing to be reviewed under the Interim Rules of the Cost Order.3\4 ) {O0-ԍ Id.3  S - ` ~x7. ` ` In response to the February 25, 1994 complaint leading to our CPST Order,  ) yOr- xiԍ The Commission received a total of five valid complaints leading to the CPST Order, the earliest of which  {O:-was filed on February 25, 1994. CPST Order at n.1. Operator  xMfiled an August 15, 1994 cost of service justification on FCC Form 1220, seeking to establish that its  xCPST rate of $12.04 per month for the period September 1, 1993 through March 31, 1994 was reasonable.  x[Operator also filed with the Commission an initial and two amended FCC Forms 1210. The most recent  xamended FCC Form 1210, filed November 29, 1995, attempted to justify a CPST rate increase to $13.89,  xLbeginning January 15, 1995, based upon changes in channels, external costs, and inflation incurred during  xthe period April 1, 1994 through December 31, 1994. Operator did not elect to have the Interim Rules  S- xLapplied to its FCC Form 1220.E ) {O%-ԍ CPST Order at  8.E Accordingly, we analyzed Operator's FCC Form 1220 pursuant to the  x Final Cost Order. We also reviewed all of Operator's CPST rate justifications pursuant to the Cable",p(p(883"  S- xTelevision Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"),) yOh- xԍ Cable Television Consumer Protection and Competition Act, Pub. L. No. 102- 385, 106 Stat. 1460 (1992) amended by Telecommunications Act of 1996, Pub. L. 104-104, 110 Stat. 56 (1996). and the  xCommission's implementing regulations, to determine whether the rates charged were unreasonable and  S-to determine, if necessary, any associated refund liability.k ) {Op- xԍ See Communications Act of 1934, as amended by the Cable Television Consumer Protection and Competition  xwAct of 1992, Pub. L. No. 102-385, 106 Stat. 1460 (1992), at Section 623(c)(1)(C). The 1992 Cable Act authorizes  xwthe Commission to order that the operator refund to subscribers that portion of rates that subscribers have paid after  {O- xthe filing of a valid complaint, that are then found to be unreasonable. See Communications Act, Section 623(c)(3), 47 U.S.C. Section 543(c)(3).k  S`- ` x8. ` ` In analyzing Operator's FCC Form 1220, we evaluated rate base and expense items to  xkdetermine whether Operator should be permitted to recover those items. Where a certain rate base or  xyexpense element was not supported, was excessive, or was unrelated to providing regulated cable service,  S- xwe disallowed such cost in whole or in part.) yO\- xxԍ The Commission made clear that the fact that an operator has incurred costs does not necessarily establish  {O$-its right to recover those costs from subscribers. See Rate Order at n.619. In some cases, we found costs that were not allowable, and  xwe made appropriate adjustments. With our adjustments and disallowances, we reduced Operator's MPR  S- xon its FCC Form 1220 to $11.88.{. ) {Of-ԍ The CPST Order incorrectly states in paragraph 18 that this rate is $11.68.{ Consequently, we found that Operator's monthly CPST rate of  Sp- x$12.04,zp ) {O-ԍ The CPST Order incorrectly states in paragraph 8 that this rate is $14.50.z effective September 1, 1993 through January 14, 1995, was unreasonable. We ordered Operator  xto refund its overcharges for the period February 25, 1994, the date of the first valid complaint, through January 14, 1995.  S - ` x9. ` ` When we reviewed Operator's most recently amended FCC Form 1210, we found no  x0apparent errors in Operator's methodology. Nevertheless, we found it necessary to make certain  x=adjustments to the rate that Operator was required to carry over from its previous rate filing. Instead of  xreporting its maximum permitted cost of service rate, Operator had reported its benchmark rate in Module  xA for purposes of updating its CPST rate. We corrected this error and revised Module A to state the cost  xof service rate of $11.88 for purposes of updating Operator's CPST rate. After making the appropriate  xadjustments, we concluded that Operator had failed to justify the CPST rate of $13.89 that it was charging  xpursuant to its FCC Form 1210 filings. Instead, we found that Operator's most recently amended FCC  xForm 1210 justified an MPR of $13.64. We ordered Operator to refund CPST overcharges above that amount for the period beginning January 15, 1995.  S- xC.` ` Discussion  S-x` ` 1. Operator's Pleadings  Sx- ` `x 10. ` ` Operator makes three major arguments in its Reconsideration Petition. First, Operator  xclaims that in analyzing Operator's cost of service filing, the Bureau adjusted various ratebase and expense  xelements, particularly accumulated depreciation and accumulated amortization, in a manner inconsistent"(R ,p(p(88"  xwith Commission rules and policies. These adjustments carried forward to Operator's FCC Form 1210  xfiling, resulting, according to Operator, in substantially lower rates than Operator had justified. Second,  xOperator maintains that in reliance upon its belief that it had successfully justified its CPST rates in its  xcost of service filing, it subsequently failed to file justifications for, and failed to implement, allowable  xadjustments for external costs and inflation. Operator argues that these adjustments alone, if permitted  x now, would be sufficient to offset the reductions and refund liability established in the CPST Order.  xThird, Operator asserts that the Bureau could have and should have held the CPST Order in abeyance  xlwhile it was ruling on Operator's appeal of the LFA order in the abovereferenced community. In  xOperator's view, the liability established in the CPST Order would be fully offset if the Bureau were to reduce that liability by the amount of Operator's undercharges to its BST subscribers.  SH -x` `  a.Ratebase and expense element adjustments  S - ` ~x 11. ` ` Operator breaks its first argument down into three subarguments. The first of these is  x]that the Bureau erred in its restatements of Operator's accumulated depreciation and amortization  S - x?accounts.J ) yO-ԍ Reconsideration Petition at 57.J Following this claim is Operator's assertion that we improperly applied a 34 percent  S - x\adjustment for monopoly profits.; X) {Ox-ԍ Id. at 78.; Finally, Operator argues that the Bureau should not assume that  SX- x{Operator, a partnership, benefits from deferred tax liability.:X) {O-ԍ Id. at 8.: Because the issue of the 34 percent  xadjustment has bearing upon the Bureau's treatment of Operator's accumulated depreciation and amortization accounts, we shall address this issue first.  S- ` 2x 12. ` ` Thirtyfour percent adjustment. Operator disagrees with the way we applied a 34 percent  xreduction to Operator's ratebase assets. The Final Cost Rules presume, rebuttably, that 34 percent of the  x purchase price associated with the regulated services of a cable system purchased prior to regulation  SB- xrepresents monopoly expectations and must therefore be removed from the regulated ratebase.LB|) {O^-ԍ Final Cost Order at  58.L  x=Accordingly, our rules require that we apply a 34 percent reduction to the purchase price allocable to all  x[assets, both tangible and intangible, associated with regulated services in order to remove all expectations  S- x-of monopoly profits.j) {Ox-ԍ Id.; see also 47 C.F.R.  76.922(i)(6)(i) (1997).j Operator does not object to the reduction per se. Rather, Operator objects that the  xBureau applied the entire amount of the reduction to Operator's intangible assets and the associated  xaccumulated amortization of those assets. According to Operator, the Final Cost Rules require that the 34 percent adjustment be applied to both tangible and intangible assets. ",,p(p(88"Ԍ S- ` x 13. ` ` Operator is mistaken. While the Final Cost Order states that the 34 percent adjustment  S- xmust be based upon the entire purchase price of the cable system,z) {O@-ԍ Final Cost Order at  58:  XxThe 34% adjustment must be applied to the entire purchase price associated with regulated services,  "not just the portion of the price allocable to intangibles, because cable operators derive revenues,  including monopoly revenues, from the employment of both tangible and intangible assets.  Applying the 34% adjustment to all assets associated with regulated services, rather than only to the associated intangibles, should remove all expectations of monopoly profits. ƃ it does not require an apportionment  xof the adjustment between both tangible and intangible assets. Rather, the Final Cost Order suggests that  S- xin most cases the entire amount of the adjustment should be applied only against intangible assets.J ) {O4 -ԍ See id. at  6061.J The rationale for this practice is provided in the Final Cost Order:  Xx[T]he absence of rate regulation presumably would have increased the overall value of  4any particular cable system, but would have had no effect on the book value of the  S- tangible asset. Thus, the increased value attributable to a lack of regulation would have  S-to be allocated to intangible assets.?) {O-ԍ Id. at  40.? [emphasis added]   SN - ` x 14. ` ` As a practical consideration, FCC Form 1220 does not usually permit tangible assets  x.acquired with the purchase of a cable system to be distinguished from tangible assets placed into service  xafter an acquisition. While the valuations of tangible assets acquired with a system purchase may include  xacquisition premiums, tangible assets placed into service after a system acquisition usually reflect historical  xcosts. Intangible assets, on the other hand, arise exclusively from system acquisitions. If the Bureau were  xto apply the 34 percent adjustment to tangible assets, it would risk adjusting the value of assets already  x[priced at historical cost. The Bureau is able to minimize that risk, however, by allocating the adjustment  xsolely to intangible assets. For these reasons, the Bureau customarily applies the entire amount of the  S- xadjustment against intangible assets.^. ) {O- xԍ See, e.g., U.S. Cable Television Group, L.P., DA 972127 at  6 (released October 7, 1997); U.S. Cable  {O- xTelevision Group, L.P., DA 972124 at  6 (released October 7, 1997); U.S. Cable Television Group, L.P., DA 97 {Op-1899 at  6 (released September 4, 1997), erratum on other grounds, DA 972125 (released October 7, 1997). This is a reasonable determination and we reject Operator's argument.  S- ` nx15. ` ` Accumulated amortization and depreciation adjustments. Operator asserts that the Bureau  xerred in adjusting Operator's ratebase and expense items. Operator's precise objection, however, is  xLdifficult to interpret. Operator points out that "[i]n determining allowed operating expenses, the Bureau  xrecalculated permitted amortization expense to reflect the annual amount required to amortize the allowed  xjgross cost of the intangible assets over a 15 year period on a straight line basis." Operator "requests that  xthe Bureau reconsider this calculation to restate the accumulated amortization and accumulated  S- xdepreciation to reflect the balances that would have been recorded had [Operator] adopted the straight line  xdepreciation method applied by the Bureau for tangible assets, and apply the 15year useful life prescribed"T ,p(p(88"  S- xkby the Commission [in the Cost Rules] for [Operator's] intangible assets."^) yOh-ԍ Reconsideration Petition at 5, emphasis in original.^ As detailed in the CPST  xMOrder, the Bureau's original analysis of Operator's FCC Form 1220 applied the depreciation method, amortization method, and useful lives that Operator now requests in its Reconsideration Petition.  S`- ` 2x16. ` ` Operator's actual objection may be to the Bureau's application of the 34 percent purchase  xZprice adjustment exclusively to intangible assets with a proportionate adjustment to Operator's accumulated  S- xamortization and amortization expense accounts.n ZX) yO - xԍ This possibility is suggested by the proximity of this issue in the Reconsideration Petition to Operator's  xrequest that the Bureau apply the 34 percent purchase price adjustment to both Operator's tangible and intangible  {O -assets. See Reconsideration Petition at 58.n We have already explained the reasons for our general  x>practice of allocating the 34 percent adjustment against only intangible assets. Whatever the specific  xunderpinnings of this issue, numerous defects and inconsistencies in Operator's data, listed below, prevent  x>our relying upon these data as a basis for reconsideration of our treatment of Operator's ratebase and expense items.  S - ` x17. ` ` First, in the table listing tangible and intangible asset values accompanying Operator's  S - xReconsideration Petition,! z) yO- xwԍ Reconsideration Petition at Ex. 3 (Ex. 1.1(b)). The table was part of information originally filed by Operator on October 30, 1995, pursuant to a Bureau request. Operator reported accumulated depreciation as $1,250,457 in the column titled  x"Gross Book Value at Acquisition." Presumably, this valuation reflected doubledeclining depreciation  xapplied through the filing date. Yet, in the next column, titled "Estimated Historical Cost," Operator listed  xaccumulated depreciation as $404,591, or less than onethird of the prior value. If the restatement from  xGross Book Value at Acquisition to Estimated Historical Cost had resulted from a conversion from  xdoubledeclining to straightline depreciation, then the valuation of accumulated depreciation in the  xEstimated Historical Cost column would have been about half of the valuation listed in the Gross Book Value at Acquisition column.  S- ` #x18. ` ` Second, in the Reconsideration Petition, Operator claims that if the Bureau had "properly  x.applied the Commission's cost Rules and policies, it would have reduced accumulated depreciation from  S@- x($1,250,457) (Worksheet A, Line 10) to (  $450,239)[.]"H"@) yO-ԍ Reconsideration Petition at 6.H Here Operator cites a figure for accumulated  xdepreciation far different from the one in the table listing tangible and intangible asset values  x-accompanying Operator's Reconsideration Petition. Third, in the Reconsideration Petition, Operator states  xthat it "reported a total depreciation expense of $363,878 in its Form 1220 filing . . . ." However, in its  S- x?FCC Form 1220, Operator shows a total depreciation expense of $416,032,#"b ) yO"- xJԍ Derived from information on Worksheet A of Operator's FCC Form 1220, this figure is the sum of $372,046  x(Line 23Cable Plant Depreciation Expense); $23,212 (Line 26Plant Support Depreciation Expense); $8,815 (Line  x30Programming Activities Depreciation Expense); and $11,959 (Line 36Selling, Gen. & Admin. Depreciation  {O$-Expense). See Reconsideration Petition at Ex. 2. another example of inconsistency. "RL #,p(p(88"Ԍ S- ` x19. ` ` Fourth, it appears that Operator adjusted accumulated depreciation to account for both a  x>restatement from doubledeclining to straightline depreciation and a 34 percent adjustment. Such an  xadjustment would have resulted in a restated accumulated depreciation value of $412,651 or slightly more  xthan the $404,591 reported as accumulated depreciation based on Operator's "Estimated Historical Cost"  S`- xjmethodology.$`) yO- xԍ We arrive at this figure by dividing Operator's reported accumulated depreciation of $1,250,457 by two and then reducing the quotient by 34 percent. However, Operator adjusted corresponding tangible assets from a "Gross Book Value at  S8- xAcquisition" value of $5,823,398k%8 ) {O-ԍ See Reconsideration Petition at Ex. 3 (Ex. 1.1(b), Col. C).k to an "Estimated Historical Cost" of $4,484,308,k&8) {O -ԍ See Reconsideration Petition at Ex. 3 (Ex. 1.1(b), Col. D).k a reduction of only 23 percent. These inconsistent reductions, if accepted, would lead to an overstated ratebase.  S- ` `x20. ` ` Fifth, in its Addendum, Operator modifies the table listing tangible and intangible asset  xkvalues, explaining that the original table reflected accumulated depreciation for the wrong time period.  x0Operator reports that it should have shown the Gross Book Value at Acquisition of accumulated  SH - x[depreciation as $479,124 instead of $1,250,457, as listed in the original table.'H D) yO,- x;ԍ Operator states that its FCC Form 1220 properly stated the accumulated depreciation balance as $482,001 at the time of filing. Addendum at 2. As a preliminary matter,  xywe note that at the time of our original CPST review, we could not have anticipated Operator's error; and  x/we conducted our assessment based upon the best evidence available. Moreover, a Commission rule  xjanticipates this situation by preventing us from granting a petition for reconsideration that relies on facts  xnot previously presented to us unless these facts relate to events which have occurred or circumstances  xwhich have changed since a petitioner's last opportunity to present the facts to us or unless these facts  SX- xwere unknown to petitioner until after its last opportunity to present them to us.E(X) yO-ԍ 47 C.F.R.  1.106(c)(1).E Even if we were able  x_to consider Operator's altered figure for accumulated depreciation, we still would not grant  x=reconsideration. The corrected figure approximates straightline depreciation of tangible assets valued at  S- xL$5,823,398S), ) {O-ԍ See Addendum at Ex. 1.1(b), Col. C.S and not the doubledeclining depreciation Operator claims to have applied. The correction,  xjconsequently, renders Operator's request for us to permit a conversion from doubledeclining to straightline depreciation unnecessary.  S@- ` Qx21. ` ` Sixth, Operator failed to follow Commission rules requiring the 34 percent adjustment.  xIn Operator's original table listing tangible and intangible asset values, Operator shows an adjustment of  S- xthe sum of gross tangible and intangible assets from $23,467,953* ) {ON#- xԍ See Reconsideration Petition at Ex. 3 (Ex. 1.1(b). This figure is the sum of $5,823,398 and $17,644,555, both in Column C. to $16,919,871,+) {O%-ԍ See id. This figure is the sum of $4,484,308 and $12,435,563, both in Column D. or a reduction of only  x27.9 percent. The adjustment is 6.1 percent less than the 34 percent reduction prescribed under our rules,  xand it results in an overstated ratebase. This results because Operator disagreed with Commission"+,p(p(88"  x-conclusions regarding the difference in profitability between competitive and noncompetitive cable systems and therefore had substituted its own figure for the Commissionprescribed competitive differential:  ~XxThe Commission's exclusion of all but a small portion of intangible value is based on its  contention that prices paid for cable systems following the 1984 Cable Act reflected  expectations of supra normal returns on monopoly rates. The Commission has also  %quantified the monopoly premium as equal to 17% of the September 1992 rates of  systems without competition. Without conceding to the veracity of the socalled  S- P"competitive differential" proposed by the Commission, and in fact, InterMedia disagrees  S- #with the Commission's conclusions on the competitive differential, Intermedia has revalued  St- its intangibles using a reduced differential of 13 % to exclude any monopoly value....,t) yO - xԍ Reconsideration Petition at Ex. 2 ("Argument in Support of InterMedia's Inclusion of a Portion of the Value of Acquired Intangible Assets in the Rate Base," dated August 12, 1994). [emphasis added]   x<Despite Operator's disagreement with our rules, Operator has failed to provide any substantive reason why  xthe "competitive differential" proposed by the Commission is incorrect or why we should waive the 34  xpercent reduction prescribed under our rules. Therefore, Operator's application of a percentage other than  xthe percentage prescribed by Commission rules precludes the use of Operator's ratebase asset and related expense information as a basis for adjustment.  S- ` x22. ` ` Seventh, if the Bureau applied the 34 percent adjustment to both tangible and intangible  xassets, Operator's test year depreciation expenses on FCC Form 1220 would exceed the restated  xaccumulated depreciation balance reported by Operator. This outcome fails to account for any  xdepreciation prior to the test year. Eighth, Operator reported that it had purchased the Murfreesboro  x<system in May 1993, or eight months prior to the end of the test year. Yet, both the depreciation expenses  xand the amortization expenses reported on Operator's FCC Form 1220 appear to have been based on a  x[full 12month year. These errors also cause overstated maximum permitted rates. For these reasons, we reject Operator's request that we adjust its ratebase and expense items.  S- ` Bx23. ` ` Tax liability. Operator cautions that the Bureau should not assume that Operator, as a  S- xpartnership, benefits from deferred tax liability.J- ) yO@-ԍ Reconsideration Petition at 58.J Operator's concern is unnecessary. Operator did not  x?provide any deferred tax data in its original FCC Form 1220 submission, and the Bureau made no  xadjustments for deferred tax balances during its review. We note, however, that if Operator had applied  xjaccelerated depreciation and amortization methods to its ratebase assets after the system was purchased,  xthen Operator would have been required to provide deferred tax data regardless of its organizational  S-structure.`.Z) yO#- xwԍ We note that Operator neglected to account for distributions by, or contributions from, its partners during the  {O#- xtest year while availing itself fully of statutory capital structures and income tax rates. See Operator's FCC Form 1220 at Part I, Lines 3(e)(f).` " .,p(p(88"Ԍ S-8x ` `  b.FCC Form 1210 Adjustments  S- ` x24. ` ` In the Reconsideration Petition, Operator explains that because it believed its cost of  xservice filing justified its applicable rate, it later refrained from filing justifications for rate increases that  x8would have been permitted based on adjustments for the periods January 1, 1995 through March 31, 1995  xand April 1, 1995 through June 30, 1995, as well as additional adjustments for external costs and inflation  xLthrough the present. These adjustments, Operator claims, "would more than offset all prescribed refund  x{liability." Operator has included with the Reconsideration Petition draft FCC Forms 1210 for the  xapplicable periods that ostensibly justify higher MPRs. Operator urges that we modify the CPST Order  S-to allow Operator the offsetting increases.K/) yO -ԍ Reconsideration Petition at 911.K  SH - ` x25. ` ` Our rules reflect a need for timeliness and certainty in the rate setting process. They provide operators using the quarterly rate adjustment method with a "use it or lose it" choice:  XxPermitted charges for a tier may be adjusted up to quarterly to reflect changes in external  ocosts experienced by the cable system . . . . In all events, a system must adjust its rates  _annually to reflect any decreases in external costs that have not previously been accounted  for in the system's rates. A system must also adjust its rates annually to reflect any  changes in external costs, inflation and the number of channels on regulated tiers that  occurred during the year if the system wishes to have such changes reflected in its  S- ~regulated rates. A system that does not adjust its permitted rates annually to account for  those changes will not be permitted to increase its rates subsequently to reflect the  S-changes.a0X) yO-ԍ 47 C.F.R.  76.922(d)(3)(i) (1966), emphasis added.a   SD- xSimilarly, the rules stipulate that inflation adjustments "may be made after September 30, but no later than  S-August 31, of the next calendar year."1) {O-ԍ 47 C.F.R.  76.922(d)(2) (1966), emphasis added; see also 47 C.F.R.  76.922(d)(3)(iii), (g) (1966)  S- ` Ax26. ` ` The rules are unequivocal regarding the timing of rate adjustments, and they do not permit  x[the relief that Operator seeks. The rules serve to ensure fundamental precepts of certainty, stability and  xfairness. Nevertheless, Operator asks for a waiver of the rules, to the extent that one is necessary.  xOperator has provided us with no reason why such extraordinary relief should be granted, other than that  xit believed its FCC Form 1220 filing to be justified. To grant Operator's waiver request would be to set  xa precedent for operators to seek to reform later filed rate justifications whenever we find an earlier rate  xincrease to be unreasonable. We believe that such a precedent would lead to an administratively untenable situation and would be unfair to operators who adhered to the rules. We deny Operator's request.  Sf-x ` `  c.Intertier offset  S - ` 2x27. ` ` Finally, Operator asserts that its BST rate is below the permitted level by an amount that  xmore than offsets the ordered reductions in its CPST rate. Operator points out the similarities and  xinterrelationship between the BST and CPST rate reviews in cost of service cases and claims that, in order"! z1,p(p(88U#"  xto evaluate CPST rates, the Bureau had to make a determination regarding the reasonableness of  xOperator's BST rates. Operator explains that the Bureau has before it Operator's appeal of an LFA order  xregarding BST rates, which was the case at the time Operator filed the Reconsideration Petition. Operator  xmaintains that its BST and CPST subscriberships are nearly identical and that the Bureau has sufficient  x[information to verify the BST shortfall. Operator argues that it had established its regulated rates before  xwe issued our Final Cost Rules, when there was great uncertainty among operators regarding the  xapplication of cost of service rules and policies. For these reasons, Operator asks that we grant reconsideration of our CPST Order to allow an offset between the two tiers.  S- ` #x28. ` ` The issue of intertier offsets was raised by Cencom Cable Income Partners II, L.P. in the  Sp- x0Commission's decision in Cencom Cable Income Partners II, L.P. ("Cencom").2p) {O -ԍ FCC 97205, 12 FCC Rcd 7948 (1997), reconsideration denied, FCC 97374 (released October 14, 1997). In Cencom, the Commission explained why it does not allow such offsets:  ` pXx` ` If both basic and CPST rates were within the Commission's jurisdiction, we might  Aconsider intertier offsets when ordering refunds for overcharges on CPST where less than  the maximum permitted rate has been charged on the BST. However, the  3Communications Act sets up a dual regulatory structure for cable services, giving local  `franchising authorities jurisdiction to regulate BST and associated equipment rates, and  Cgiving the Commission jurisdiction to regulate CPST rates upon the filing of a valid  S - _complaint.3 Z) yO- xԍ Communications Act  623, 47 U.S.C.  543. Rates for equipment used exclusively for CPST are also within  {O-the Commission's jurisdiction. See 47 C.F.R.  76.950. While the Commission has prescribed standards and procedures for local rate  S- _regulation4) yO6-ԍ Communications Act  623(b)(1), (3), 47 U.S.C.  543(b)(1), (3); 47 C.F.R.  76.922, 76.923. and is authorized to consider appeals from local rate orders,5D) yO-ԍ Communications Act  623(b)(5)(B), 47 U.S.C.  543(b)(5)(B); 47 C.F.R.  76.944. the Commission  S- generally is not otherwise involved in local rate regulationB6) yO.- xԍ Only if the franchising authority's certification is denied or revoked or if a franchising authority asks the  xYCommission to assume jurisdiction because it can not meet Commission certification standards, can the Commission  xdirectly regulate basic service and associated equipment rates until the franchising authority becomes qualified. 47  xC.F.R.  76.913. The Commission has not assumed such jurisdiction to date. The Commission's files reflect that  xthe Commission has received 123 requests from local franchising authorities representing 203 communities for  {O-assistance in reviewing cost of service filings. See Third Order on Reconsideration, 9 FCC Rcd at 433839.B and is not in a position to  evaluate offsets between tiers as a matter of routine. Absent an appeal, it may be  uninformed about local matters potentially affecting BST rates. Its processes are not  `coordinated with local rate review processes. In short, allowing intertier offsets under  the current statutory scheme would create practical problems in determining the correct  _BST rates for offset purposes, further burdening the administrative processes of cable rate  Sregulation, and would be discordant with the dual regulatory structure Congress envisioned.   ` p(Xx` ` In the limited context of global resolutions of rate complaints for all or a  substantial number of a company's cable systems, the Commission has allowed intertier"* N 6,p(p(88{"  offsets when determining refund liability. But, it has done so only after reviewing rates  for BSTs, and where both individual complainants and local franchising authorities were  able to participate in the rate resolution through comments on the proposal. We have  $learned from this process that there often are considerations affecting rates at the local  level that are not apparent from the face of the rate form filed to justify CPST rates and  to which the Commission is not normally privy. The special circumstances applicable to the rate resolutions are not present here.   ` pXx` ` . . . None of the authorities cited by Cencom provides for aggregating revenues  for services and equipment costs that are subject to review by different regulatory  jurisdictions. Indeed, Cencom's refund offset request is inconsistent with the  SH - Commission's conclusion in the Rate Order that cable operators should not balance low  S" - BST rates with CPST rates that exceed the maximum permitted rate for the tier.7 " ) {O - xԍ Rate Order at 5759-60 (1993). The Commission's concern was twofold: (1) that programming might be  xJmoved from the BST to tiers where the cable operator could receive relatively higher prices; and (2) that mandated  xseparate rate levels would increase both the burdens on cable operators and regulators and the complexity of their decision making. See 47 C.F.R.  76.922(a) (tier neutral pricing structure required).   xMore recently, the Commission proposed to allow some flexibility in pricing cable service tiers by allowing  xxany operator who had set initial or adjusted rates in accordance with existing regulations to decrease its BST rate  x<and offset the lost revenue with a corresponding increase in CPST rates. To facilitate review of the offsets and  xunderlying BST rates by local franchising authorities or CPST rates by the Commission, operators would maintain  xrecords of what their maximum permitted rates would be if computed without the offsets. BST rates would be  x,capped at the offset amount, and operators justifying CPST rates would be required to show the offset amounts and  {O$- x-demonstrate that the offsets would be revenue neutral. See Implementation of Sections of the Cable Television  xConsumer Protection and Competition Act of 1992: Rate Regulation, MM Docket No. 92-266, and Cable Pricing  xJFlexibility, CS Docket No. 96-157, Memorandum Opinion and Order and Notice of Proposed Rulemaking, 11 FCC Rcd 9517, 9523-27 (1996).  Q - ACencom is seeking to accomplish through refunds what it was prohibited from doing when  setting its rates, without demonstrating any special circumstances that would justify such  S -treatment in this case. We deny Cencom's request.G8 L ) {O-ԍ Cencom at para. 20 21.G  [footnotes in original, emphasis added]  S - ` `x29. ` ` We see no reason to deviate from our general rule of prohibiting intertier offsets.9 ) {O - xԍ We recently followed Cencom in denying an intertier offset. See Bresnan Communications Company, DA 972033 (released September 22, 1997). As  xexplained earlier, we found much of the information in Operator's CPST cost of service filing unreliable.  xAs a consequence, the argument that the cost of service showings for the two tiers are interrelated does  xnot persuade us to rely upon the information we had before us regarding Operator's BST rates. Moreover,  xwe evaluated Operator's BST filing in the context of an appeal from a local rate order. As we stated in  x/our Remand Order, our review in such situations is limited to deciding whether or not the LFA acted"D 89,p(p(88E"  S- xunreasonably in applying the Commissions rules in rendering its local rate order.G:) {Oh-ԍ Remand Order at  5.G In addition, our  S- xremand decision was based on purely procedural grounds.J;Z) {O-ԍ See id. at  1820.J We do not find Operator's description of the  xuncertainty under which it prepared its cost of service filing to be relevant to the issue of intertier offsets.  xNevertheless, we must point out that Operator relinquished an opportunity for increased certainty by  S`- xfailing to choose to have its filing reviewed under the Interim Rules of the Cost Order.O<`) {O-ԍ See n.14 and accompanying text.O Consequently,  xwe reject Operator's request for an intertier offset and we deny Operator's Reconsideration Petition as well as its Refund Plan.  S-x` ` 2. LFA Pleading  Sp- ` x30. ` ` We next turn to the LFA Pleading filed on August 19, 1996 and entitled "Objection to  x[June 15, 1996, FCC Order, and Intermedia Petition for Stay, and Petition for Reconsideration." Because  xthe Commission issued no order concerning the abovereferenced community on or around June 15, 1996,  S - xother than the CPST Order, which was adopted on June 19, 1996 and released on June 20, 1996,M= ~) yO-ԍ DA 96992, 11 FCC Rcd 12570 (1996).M we  xbelieve it is the CPST Order that the LFA refers in the title of its pleading. In substance, however, the  S - x=LFA Pleading is primarily a petition for reconsideration of the Final Cost Order.> ) {OV- xԍ See LFA Pleading at 1: "Formal objection is made to the June 15, 1996 Order entered by the FCC in this  xcase, as it incorporates the December 15, 1995 Order MM Docket No. 93215, CS Docket No. 9428, dealing with  {O- xthe Adoption of a Uniform Accounting System for Provision of Regulated Cable Service." See also LFA Pleading  xat 4: "The FCC is respectfully requested to reconsider its actions in adopting the Uniform Accounting System for  xProvision of Regulated Cable Service on December 15, 1995, as it deals with intangibles in the rate base and the incorporation of said Order into the Murfreesboro Order dated June 15, 1996." The LFA claims that  xthe Final Cost Rules as applied in the CPST Order had the effect of increasing CPST rates in the  xcommunity. Essentially, the LFA Pleading is a petition for reconsideration of either the Final Cost Order  xor the CPST Order or both. To the extent it is a petition for reconsideration of either the Final Cost Order  S- xzor the CPST Order or both, we deny it as having been untimely filed.S? ) {O2-ԍ See 47 C.F.R.  1.106(f) (1996).S The title of the LFA Pleading  x/also suggests that it is an opposition to the Stay Petition. If so, we must deny it as also having been  S- xuntimely filed.]@) {Ot!-ԍ See 47 C.F.R.  1.43, 1.45(d) (1996).] To the extent that the LFA Pleading is an opposition to the Reconsideration Petition, as  x[the pleading's title also suggests, we deny it as having been filed after the time permitted by Commission  Sh-rules.TAh) {O$-ԍ See 47 C.F.R.  1.106(g) (1996).T " @A,p(p(88q"Ԍ S- 8III.xCPST RATE COMPLAINT  S- ` `x31. ` ` As stated, we also consider herein a complaint against Operator's May 15, 1997 CPST  xrate increase in the abovereferenced community. Operator increased its CPST rate from $14.09 to $19.61  x8in a part of the system that had been rebuilt ("rebuild") and from $14.09 to $15.29 in a part of the system that had not been rebuilt ("nonrebuild").  S- ` _x32. ` ` The Communications Act,}B) {OP-ԍ Communications Act, Section 623(c), as amended, 47 U.S.C.  543(c) (1996).} authorizes the Commission to review the CPST rates of cable  S- xsystems not subject to effective competition to ensure that rates charged are not unreasonable. The  S- xCommission's original rate regulations took effect on September 1, 1993.CZ) {O - x.ԍ Order in MM Docket No. 92266, Implementation of Sections of the Cable Consumer Protection and  {O\ -Competition Act of 1992: Rate Regulation, FCC 93372, 58 Fed. Reg. 41042 (Aug. 2, 1993). The Commission subsequently  Sp- xrevised its rate regulations effective May 15, 1994.eD^p) {O- xԍ 47 C.F.R.  76.922(b) (1996); see also Second Order on Reconsideration, Fourth Report and Order, and Fifth  {O- xxNotice of Proposed Rulemaking, MM Docket No. 92266, FCC 9438, 9 FCC Rcd. 4119, 4190 (1994) ("Second  {OZ-Order on Reconsideration").e Cable operators must use the FCC Form 1200 series  SH - x]to justify their rates through a benchmark showing for the period beginning May 15, 1994.gE\H ) {O- xԍ 47 C.F.R.  76.922(b)(6) (1996); see Second Order on Reconsideration, supra at 4183, paras. 135138, and  {O- xat 4190, n.136; see also Public Notice "Questions and Answers on Cable Television Rate Regulation" (April 26, 1994).g The  S - xTelecommunications Act of 1996 ("1996 Act")F ) {O-ԍ Pub. L. 104104, 110 Stat. 56 (Feb. 8, 1996), codified at 47 U.S.C.  151 et seq. and our rules implementing the new legislation ("Interim  S - xRules"),G ) {O*- xԍ Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996, 11 FCC Rcd. 5937 (1996). require that complaints against CPST rates be filed with the Commission by an LFA that has  xreceived subscriber complaints. An LFA may not file a CPST rate complaint unless it receives more than  S - xone subscriber complaint within 90 days after such increase becomes effective.HH ) yO4-ԍ 47 C.F.R.  76.1402 (1966).H If the Commission finds  S -the rate unreasonable, it shall determine the correct rate and any refund liability.SI |) {O-ԍ  47 C.F.R.  76.957 (1996).S  S0- ` px 33. ` ` The LFA in the abovereferenced community certified that it has complied with the  S- x[Interim Rules and that it has received more than one valid subscriber complaint.RJ) {O#-ԍ See 47 C.F.R.  76.1402 (1996).R The LFA verified that  xit received its first valid subscriber complaint on June 6, 1997. Along with its complaint, the LFA filed  xFCC Forms 1210 and 1240 that had been submitted by the Operator. The filing of a complete and timely"J,p(p(88"  S- xLFA complaint triggers an obligation upon Operator to file a justification of its CPST rates.GK) yOh-ԍ 47 C.F.R.  76.956 (1996).G The  S-Operator has the burden of demonstrating that the CPST rates at issue are reasonable.3LX) {O-ԍ  Id.3  S- ` x!34. ` ` Operator filed four FCC Forms 1210 with the LFA, two for the rebuild and two for the  x]nonrebuild. For the rebuild, Operator filed an FCC Form 1210 for the period January 1, 1995 to  x March31, 1995, attempt to justify an MPR of $14.01, and a second FCC Form 1210 for the period  x=April1, 1995 to June 30, 1995, attempting to justify an MPR of $14.32. For the nonrebuild, Operator  xfiled an FCC Form 1210 for the period January 1, 1995 to March 31, 1995, attempting to justify an MPR  xzof $14.01, and a second FCC Form 1210 for the period April 1, 1995 to June 30, 1995, attempting to  xjjustify an MPR of $14.32. Upon review of these FCC Forms 1210, we find that they are the same FCC  Sp- xForms 1210 we discussed earlier in the context of Operator's Reconsideration Petition.IMp) {O -ԍ See supra  2426.I As we explained,  xOperator's failure to file these FCC Forms 1210 in a timely fashion, as required by our rules, prevents our being able to consider them as justification for Operator's CPST rate increase.  S - ` Ax"35. ` ` Operator also filed two FCC Forms 1240 with the LFA, one each for the rebuild and non xrebuild, and both for the projected period September 1, 1996 to August 31, 1997. Upon review of  xjOperator's FCC Forms 1240, we reduced on both forms the figures on both Line A1 (Current MPR) and  xjLine 401 (Average Permitted Charge on Worksheet 4 (Residual Projected Period)) from $14.32 to $13.64  S0- xto take into account the reduction to Operator's MPR established in our CPST Order.GN0|) {OL-ԍ See supra  79.G For the same  xreason, we reduced Line D2 (Current External Costs Segment) on both FCC Forms 1240 from $3.4056  xto $3.0337. We also reduced Line H14 (Amount of TrueUp Claimed for This Projected Period) on the  xFCC Form 1240 for the rebuild from $54,531.0716 to $44,450.4098 and on the FCC Form 1240 for the  S-nonrebuild from $328,248.1748 to $267,567.6700.lOX) yO>- xԍ We note that with the total of the two adjusted Lines H14, $312,018.0798, Operator has recovered its total  xremaining trueup adjustment from Line H15, and we instruct Operator not to include these amounts on Line H12 (Previous Remaining TrueUp Adjustment) on its next FCC Form 1240 filing.l  S@- ` 3x#36. ` ` These changes to Operator's FCC Form 1240 for the rebuild reduced Operator's MPR  xfrom $19.65 to $18.98. Because Operator's actual CPST rate in the rebuild portion of the community  xreferenced above, for the period beginning May 15, 1997, of $19.61 exceeds Operator's MPR, we find  xthat Operator's rebuild CPST rate is unreasonable. The changes to Operator's FCC Form 1240 for the  xnonrebuild reduced Operator's MPR from $18.58 to $17.91. Because Operator's actual CPST rate in the  xnonrebuild portion of the community referenced above, for the period beginning May 15, 1997, of $15.29  SP-does not exceed Operator's MPR, we find that Operator's nonrebuild CPST rate is not unreasonable.P XP. ) yO%- x-ԍ #X\  P6G;P#The findings herein are based solely on the representations of Operator. Should information come to our  xattention that these representations were materially inaccurate, we reserve the right to take appropriate action. This  x=Order is not to be construed as a finding that we have accepted as correct any specific entry, explanation, or  xhargument made by any party to this proceeding not specifically addressed herein. Information regarding the specific"v'O,p(p('"  xadjustments made to Operator's filings can be found in the public file for CUID No. TN0082, which is available in  xthe Cable Services Bureau's public reference room, or through the Commission's copy contractor, International Transcription Services (ITS), 1231 20th Street N.W., Washington, DC, 20036, or by calling ITS at (202) 8573800."PP,p(p(88"Ԍ S-ԙ IV.xORDERING CLAUSES  S- ` x$37. ` ` Accordingly, IT IS ORDERED, pursuant to Section 1.106 of the Commission's rules, 47 C.F.R.  1.106, that the Reconsideration Petition filed by Operator is DENIED.  S8- ` x%38. ` ` IT IS FURTHER ORDERED, pursuant to Sections 0.321 and 1.43 of the Commission's rules, 47 C.F.R.  0.321 and 1.43, that the Stay Petition filed by Operator is DENIED.  S- ` x&39. ` ` IT IS FURTHER ORDERED, pursuant to Sections 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the Refund Plan filed by Operator is DENIED.  SH - ` x'40. ` ` IT IS FURTHER ORDERED, pursuant to Sections 1.43, 1.45, and 1.106 of the  xCommission's rules, 47 C.F.R.  1.43, 1.45, and 1.106, that the "Objection to June 15, 1996, FCC Order,  xand Intermedia Petition for Stay, and Petition for Reconsideration" filed by the LFA on August 19, 1996, is DENIED.  S - ` x(41. ` ` IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47  xC.F.R.  0.321, that Operator shall promptly revise its Refund Plan in accordance with this Order and  xzshall, within 30 days of the release of this Order, refile such revised refund plan with the Chief, Cable  xServices Bureau, stating the updated cumulative refund amounts so determined (including franchise fees  xand interest), describing the calculation thereof, and describing its plan to implement the refund within 60 days of the Commission approval of the updated plan.  Sh- ` x)42. ` ` IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47  xC.F.R.  0.321, that the complaint referenced herein against the CPST rate charged, beginning May 15,  x>1997, by Operator in the franchise area referenced in the caption IS GRANTED TO THE EXTENT INDICATED HEREIN.  S- ` x*43. ` ` IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47  xC.F.R.  0.321, that Operator's CPST rate, in the nonrebuild portion of its system, for the period beginning May 15, 1997 in the community referenced above, IS NOT UNREASONABLE.  S- ` x+44. ` ` IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47  xC.F.R.  0.321, that Operator's CPST rate, in the rebuild portion of its system, for the period beginning May 15, 1997 in the community referenced above, IS UNREASONABLE.  S`- ` x,45. ` ` IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47  xzC.F.R.  76.961, that Operator shall refund to its subscribers in the rebuild portion of the community  xreferenced above that portion of the amount paid in excess of the maximum permitted CPST rate of  x-$18.98 per month (plus franchise fees), plus interest to the date of the refund, for the period May 15, 1997 through the day before Operator implements the maximum permitted CPST rate of $18.98. ""P,p(p(88 $"Ԍ S- ` x-46. ` ` IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47  x-C.F.R.  0.321, that Operator shall promptly determine the overcharges to CPST subscribers for the period  xMay 15, 1997 through the day before Operator implements the maximum permitted CPST rate of $18.98  xin the rebuild portion of the community referenced above, and shall file, within 30 days of the release of  x this Order, a report with the Chief, Cable Services Bureau, stating the cumulative refund amounts so  xzdetermined (including franchise fees and interest), describing the calculation thereof, and describing its plan to implement the refund within 60 days of the Commission approval of the plan.  S- ` x.47.` ` IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47  xC.F.R.  0.321, that Operator shall revise its FCC Forms 1240 for the projected period September 1, 1996  xto August 31, 1997 incorporating the changes detailed in this order and shall file such amended FCC Forms 1240 with the Chief, Cable Services Bureau within 30 days of the release of this Order. x` `  hh@FEDERAL COMMUNICATIONS COMMISSION x` `  hh@John E. Logan x` `  hh@Deputy Chief, Cable Services Bureau