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S- d(#kfor that decision.p {Oh-   ԍSee Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate  {O2-  ,Regulation, Report and Order, MM Docket 92266, 8 FCC Rcd 5631, 5731 ("Rate Order"); and Implementation of   Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, BuyThrough  {O-  Prohibition, Third Order on Reconsideration, MM Docket 92266, 9 FCC Rcd 4316, 4346 (1994) ("Third  {O-Reconsideration Order").p Therefore, the Commission will reverse a franchising authority's decision only if it  d(#determines that the franchising authority acted unreasonably in applying the Commission's rules in  S- d(#rendering its local rate order.1 {O-ԍId.1 If the Commission reverses a franchising authority's decision, it will not  d(#substitute its own decision but instead will remand the issue to the franchising authority with instructions  S`-to resolve the case consistent with the Commission's decision on appeal.` {O -ԍRate Order, 8 FCC Rcd at 5732; Third Reconsideration Order, 9 FCC Rcd at 4346.  S- III.DISCUSSION  S- A.` ` Written Decision.  Sp-  Q4.` ` TCI contends that the City's rate order should be remanded because the order does not  d(#Lcontain an explanation for the City's recalculation of TCI's basic programming service tier ("BST") rates.  d(#LThe City's rate order merely stated that TCI's BST rate of $9.53 was unreasonable because it was higher  S -than the maximum permitted of $9.50 that the City had recalculated, under the FCC's regulations.   yO<- xԍAppeal, Attachment A, Local Rate Order. Using Form 393, TCI calculated a maximum permitted BST rate of  x$9.58. The City recalculated TCI's Form 393 and determined TCI's maximum permitted BST rate to be $9.50. The  xCity found that TCI's rates for equipment leasing and installation were reasonable because they were less than the maximum permitted rates.   S - 5.` ` In rate regulation proceedings, the cable operator bears the burden of proving the  S - d(#-reasonableness of its proposed rates.  {O- xԍSee 47 C.F.R.  76.937. See also, Sammons Communications, Inc., (Cities of Burbank and Glendale, CA), 10 FCC Rcd 5089 (Cab. Serv. Bur. 1995) at  14. The local franchising authority must provide the cable operator with  d(#[an opportunity to participate in the rate review proceeding and to provide documentation supporting its  S0- d(#proposed rates.S0 {O-ԍSee Rate Order, 8 FCC Rcd at 572324.S Thereafter, if the local franchising authority determines that the operator's proposed rate  d(#exceeds the maximum permitted level as defined by the Commission's rate standards, it may prescribe a  d(#rate different from the proposed rate provided that the local franchising authority affirmatively  d(#Ldemonstrates in a written decision why the operator's rate is unreasonable and why its prescribed rate is  S- d(#yreasonable.1 x {O$-ԍId.1 While there is no requirement that the franchising authority embody its rate order in a single  Sh- d(#document,w h  yO'-ԍWarner Communications (Cincinnati, OH), 10 FCC Rcd 6015 (Cab. Serv. Bur. 1995).w our rules do require that the franchising authority's decision be publicly available and provide"h ,-(-(ZZ"  d(#a sufficient basis for its decision to allow an operator and other interested parties to know why the rate  d(#was disapproved so that the operator may appeal the local authority's decision. Here, the local authority's  d(#written decision contains no explanation for its recalculation of TCI's maximum permitted rate, and no  d(#explanation of why TCI's rates were unreasonable. Accordingly, it appears that the City's local rate order  S`- d(#kdid not comport with our rules., Z` {O- xMԍSee AR Cable ServicesME, Inc., Lisbon, ME, 10 FCC Rcd 1783 (Cab. Serv. Bur. 1995); Chillicothe  xCablevision, Inc. d/b/a/ Dimension Cable Services, Washington Court House, OH, 10 FCC Rcd 6055, 6057 (Cab. Serv. Bur. 1995). , Therefore, we remand this issue to the City for further proceedings consistent with this decision.  S- B.` ` Inflation Adjustment .hhC  S-  6.` ` FCC Form 393 is the official form used by regulators to determine whether an operator's  d(#regulated rates for programming, equipment and installations were reasonable during the time period from  SH - d(#[September 1, 1993 until May 14, 1994.n H  yO-  ԍTo the extent that an operator has sought to take advantage of the refund deferral period available under the  yO-  Second Order on Reconsideration, Fourth Report an Order, and Fifth Notice of Proposed Rulemaking in MM Docket  {Ob-  92266, 9 FCC Rcd 4119, 41834185 (1994) ("Second Recon. Order"), the maximum permitted rates determined   under Form 393 may also apply from May 15, 1994 until the date that the operator implemented its new rates, as determined under the Form 1200 series.n Form 393 is divided into three separate, but interrelated parts.  d(#In Part II, the operator calculates its maximum permitted programming rates, while in Part III, the operator  d(#calculates its maximum permitted equipment and installation rates. Part I is a cover sheet that lists the  d(#various programming, equipment and installation rates that have been calculated in Parts II and III and compares them to the rates the operator has actually charged during the period of review.  SX-  7.` ` The operator's maximum permitted rates are derived by completing Parts II and III of the  d(#Form 393, pursuant to which the operator calculates the actual aggregate revenues collected by the  d(#Noperator for regulated programming, equipment and installation, as of the initial date of regulation  S- d(#("current rate") or as of September 30, 1992.S X yO- xԍAn operator must calculate its rate in effect on September 30, 1992, only if its current rate level is above the  xKbenchmark rate. If an operator's current rate is at or below the benchmark rate, it is not required to calculate its September 30, 1992 perchannel rate.S After calculating actual aggregate revenues, the operator  d(#converts those revenues to a perchannel rate, and then compares the perchannel figures to the applicable  d(#benchmark rate. If an operator's current perchannel rate level is below the applicable benchmark rate,  d(#then the operator's rate level is deemed reasonable, but it must remain at its current level. If its current  d(#perchannel rate exceeds the benchmark rate, the operator must then compare its September 30, 1992 per d(#channel rate level to the applicable benchmark rate. If its September 30, 1992 perchannel rate level is  d(#jabove the benchmark rate, it must reduce this rate to the benchmark rate or by 10%, whichever reduction  d(#!is less. Maximum permitted rates for equipment and installation are based on actual cost and are calculated in Part III of the Form 393.  SP-  8.` ` TCI explains that it presumes that the City's recalculation of the BST rate was based on  d(#the City's adjustment to TCI's inflation factor. TCI explains that it bases this presumption on local  d(#communications it had with the City prior to the adoption of the rate order and similar results in a" ,-(-(ZZM"  S-neighboring community where the rate reduction was based on an adjustment of the inflation factor. yOh- xԍAppeal at n.2. TCI does not indicate whether the adjustment to the inflation factor was the only adjustment made, or discussed, by the City.  S-  `9.` ` Because the City did not articulate its reasons for reducing TCI's BST rates, we cannot  S- d(#Mdetermine whether it reduced the rates due to an adjustment of TCI's inflation factor.  yOH- xԍTCI completed its Form 393 inflation factor section using the revised Third Quarter GNPPI of 122.5. TCI states that it presumes that the City revised its inflation factor by using the original Third Quarter GNPPI of 121.8. Generally, an  d(#operator should use the most recent, publicly available data applicable to the period on which the operator  S8- d(#bases its Form 393 calculations.$8x {OP - xԍSee Third Recon. Order, 9 FCC Rcd at 434950; 47 C.F.R.  76.922(b)(9); Public Notice, Cable Television  {O - xwRate Regulation: Questions and Answers Relating to FCC Form 393, Question No. 10 (July 30, 1993); Public Notice,  xQuestions and Answers on Completion of FCC Form 393 and Associated Filing Requirements, Question No. 9 (November 10, 1993). TCI should be allowed to justify its rates using the most recent publicly  S- d(#available data, the revised Third Quarter GNPPI of 122.5.d  yO-  ԍThe Department of Commerce first issued a GNPPI for the Third Quarter of 121.8 and then subsequently   Jissued a revised GNPPI for the Third Quarter of 122.5. Many operators, in anticipation of rate regulation used the  {O-  Yoriginal Third Quarter 1992 GNPPI of 121.8. In a Public Notice released on November 10, 1993, the Commission   announced that the correct figure to be used in the Line 123 calculation for the Third Quarter 1992 GNPPI figure  {O6-  was 122.5, not 121.8. Subsequently, in the Third Recon. Order, the Commission made an exception to the general   Mrule that operators must use the most recent publicly available date in completing a FCC Form 393. The   Commission provided that operators whose rate calculations were otherwise accurate were not required to adjust their   rates simply because of its use of initial data. Since TCI did not complete its Form 393 using the original Third   Quarter GNPPI of 121.8 and instead used the revised GNPPI for the Third Quarter of 122.5, this exception does not apply. We remand this issue to the local franchising  S-authority for resolution in accordance with the terms of this Order.   S- C.` ` Calculation of Refund Liability.  SH -  10.` ` TCI contends that the City's rate order ignores the Commission's instructions for the  d(#calculation of refunds, which it asserts require that TCI's overcharges for the basic programming service tier rates be offset by its undercharges for equipment and installation.  S - o11.` ` Commission rules provide that, if a franchising authority does not dispute the basis for  d(#Lthe figures presented in the cable operator's filings and has not discovered any mathematical errors in the  d(#forms, the franchising authority should approve the operator's maximum permitted rates as derived by the  S0- d(#yforms.I0 {O"-ԍSee 47 C.F.R.  76.942. I After setting the various regulated rates that an operator is permitted to charge on a prospective  d(#basis, a franchising authority should then determine if the operator is liable for any subscriber refunds.  S- d(#>Although maximum permitted rates are always determined on an unbundled basis, i.e., separately for  d(#program service and equipment, refund liability may stem from bundled rates. Refund liability should  d(#be calculated based on the difference between old bundled rates and the sum of the new unbundled  d(#yprogram service charges. The intent of the refund mechanism is to place subscribers in the same position"j,-(-(ZZ"  S- d(#ythey would be had they been subject to reasonable rates.d {Oh-ԍSee Third Recon. Order, 9 FCC Rcd at 4353.d In calculating an operator's refund liability for  d(#purposes of the Forms 393 and 1200, offsets between programming and equipment overcharges and  S- d(#Mundercharges on the same tier may be allowed.Z yO- xԍForm 1200 is used to explain an operator's maximum permitted rates after May 15, 1994 or after the deferral  {Or-period authorized by the Second Recon. Order. See Second Recon. Order at 9 FCC Rcd 418385. Offsets are allowed in this context of Form 393 and  d(#Form 1200 because the formulas for these two forms establish a direct relationship between equipment  d(#.rates and programming rates. Higher equipment costs and correspondingly higher equipment rates result  d(#in lower programming costs and correspondingly lower programming rates. Similarly, lower equipment  d(#costs and correspondingly lower equipment rates result in higher programming costs and correspondingly  S- d(#higher programming rates.   yO< - xԍWith the 1210 Forms, however, these issues are not present. Operators filing a Form 1210 should be familiar  xYwith our rules since the Form 1210 is not a first time filing, but is used to adjust maximum permitted rates in a Form  xJ1200 or in a previously filed Form 1210. Therefore, the reasons for permitting offsets in the context of Form 393 or Form 1200 are not present in a Form 1210 proceeding and offsets will not be allowed.  In this proceeding, any refunds to be paid by TCI should be calculated based on this method.  Sp- 12.` ` While the Commission will sustain the decisions of franchising authorities if there is a  d(#reasonable basis for doing so, franchising authorities should adhere to the principles underlying the  S - d(#benchmark methodology, particularly when calculating an operator's refund liability.  {O\-ԍSee Rate Order, 8 FCC Rcd at 5731; Third Recon. Order, 9 FCC Rcd at 4346. In this case, the  d(#City should offset or reduce any refunds it may order by the difference between the actual BST and  d(#Lequipment rates that TCI charged and the maximum permitted rates that it could have charged during the  S - d(#applicable period of review. .  {Ov-  KԍSee Third Recon. Order, 9 FCC Rcd at 4353. While a franchising authority may not require an operator to   set its rates below its maximum permitted rates, an operator may not set programming service rates at higher than   permitted maximum rates to recover lost equipment revenues when they voluntarily price equipment rates below their  {O-  -maximum permitted levels. See Rate Order, 8 FCC Rcd at 582021; United Cable Television of California, Inc.   (Davis, California), 11 FCC Rcd 4465 (Cab. Serv. Bur. 1995). To permit operators to do so would undermine  {Ob-  Congress's intention to create a competitive market of cable equipment providers. See Communications Act,   {O,-624A(c)(2)(C), 47 U.S.C.  544A(c)(2)(C); Equipment Compatibility Order, 9 FCC Rcd at 1982. We remand this issue to the City so that it can reconsider its ruling in a  S -manner consistent with our findings. v {O- xԍSee TCI Cablevision of North Central Kentucky, Inc. (Mount Washington, KY), 10 FCC Rcd 926 (Cab. Serv. Bur. 1994). " ,-(-(ZZ["Ԍ S- IV. ORDERING CLAUSE S  S-  13.` ` Accordingly, IT IS ORDERED that TCI of Ohio, Inc.'s appeal of the City of Courtland's  S- d(#=local rate order, is GRANTED and the appeal IS REMANDED to the local franchising authority for resolution in accordance with the terms of this Order.  S- 14.` ` This action is taken by the Deputy Chief, Cable Services Bureau, pursuant to authority delegated by Section 0.321 of the Commission's rules. 47 C.F.R. 0.321 (1993). ` `  hhCFEDERAL COMMUNICATIONS COMMISSION  ` `  hhCJohn E. Logan ` `  hhCDeputy Chief, Cable Services Bureau