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In Implementation"x,p(p(88"  xjof Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation,  S- xReport and Order and Further Notice of Proposed Rulemaking, MM Docket No. 92266 ("Rate Order"),* yO@-#X\  P6G;P# 8 FCC Rcd 5631 at para. 253, n. 602 (1993).  x{the Commission concluded that cable operators may recover increased costs of programming from  xsubscribers but not to the extent an operator receives revenues from the programmer on account of  xcarriage of programming. The Commission developed rules that required that an operator's increases in  S8- x?programming costs be offset by any revenues received by the operator from programmers.SD8X* {O0- x#X\  P6G;P#э See former Section 76.922(d)(2)(ii) of the Commission's rules, 47 C.F.R. 76.922(d)(2)(vii) (1993); former  xSection 76.922(d)(3)(x) of the Commission's rules, 47 C.F.R. 76.922(d)(3)(x) (1994); and former Section  x76.922(d)(3)(x) of the Commission's rules, 47 C.F.R. 76.922(d)(3)(x) (1995). In Implementation of Sections of the  xCable Television Consumer Protection and Competition Act of 1992: Rate Regulation, MM Docket No. 92266,  xYThirteenth Order on Reconsideration, 11 FCC Rcd 388 (1996), the Commission relocated the revenue offset rule to  {O - xSection 76.922(f)(7) of the Commission's rules, 47 C.F.R. 76.922(f)(7) (1996). See also, Instructions for FCC Form  x1210 at p.9, Line B1a (May 1994), "Programming costs are your actual net cost of programming services. ... Net programming costs are your programming costs less any payments by programmers to you."S The  xCommission, however, did not "require cable companies to report increases in advertising revenues and  S-to offset those increases against any external costs."=d * {O- xԍ  Time Warner Entertainment, Inc. v. Federal Communications Commission, 56 F.3d 151, 172 (D.C. Cir.  x<1995). The U.S. Court of Appeals for the D.C. Circuit also stated that while it found the Commission's decision  xnot to require cable companies to offset reasonable, it did not "rule out the possibility, however, that this decision  xcould become unreasonable over time if evidence comes before the Commission clearly demonstrating that  xadvertising revenues have become a steady and significant source of increased revenue for cable operators, thereby  {O-calling in question the reasonableness of the rates they may charge under the price cap formula." Id. at 172173.=  S- ` $x7.` ` The Cable Services Bureau ("Bureau") has stated that payments from programmers to  xoperators will be offset on a channel by channel basis; any rebates or payments in consideration of  xcarriage from a programmer will be applied to payments from the operator to that programmer but will  S - xnot offset payments to other programmers.3$ * {O- xY#X\  P6G;P#э See Letter dated May 6, 1994 to QVC Network, Inc. from Alexandra M. Wilson, Acting Chief, Cable Services  {Oj- xBureau, 75 Rad. Reg. 2d (P&F) 292 (1994); see also Letter dated May 6, 1994 to The Home Shopping network from  xJAlexandra M. Wilson, Acting Chief, Cable Services Bureau. The application of the revenue offset rule on a channel by channel basis was later codified in 47 C.F.R. 76.922(d)(3)(x) (1995).3 The channel by channel standard for offsetting may also be  xapplied on a programmer specific basis, where the programmers are ultimately controlled by separate and  S - xydistinct entities.# * {O< - x#X\  P6G;P#э See Letter dated December 19, 1994 to Black Entertainment Television, Inc. from Meredith J. Jones, Chief, Cable Services Bureau, 10 FCC Rcd 685 (1995) (DA 941473, released December 21, 1994).# On May 19, 1994, the Bureau stated that an operator need not offset "a programmer's  xMpayments to an operator for advertising time to promote the programmer's offerings, or payments to  xreimburse the operator for reasonable, documented expenses of marketing the program service to  xconsumers," provided "the programmer has routinely and ordinarily reimbursed the cable operator for  S0-promotional expenditures prior to [May 19, 1994]."+0&* {O%- x#X\  P6G;P#э See Letter dated May 19, 1994 to The Disney Channel from Kathleen M.H. Wallman, Acting Chief, Cable Services Bureau, 9 FCC Rcd 7762 (1994) (DA 94520, released May 23, 1994) ("Disney Channel Letter").+ ",p(p(88 "Ԍ S- ` x8.` ` In Implementation of Sections of the Cable Television Consumer Protection and  xlCompetition Act of 1992: Rate Regulation, MM Docket Nos. 92266 and 93215, Sixth Order on  S- xLReconsideration, Fifth Report and Order, and Seventh Notice of Proposed Rulemaking ("Going Forward  S- xOrder"),p* yO-#X\  P6G;P#э 10 FCC Rcd 1226 (1995). p the Commission also required an operator to offset revenues received from programmers against  xits per channel adjustment under the new going forward methodology. Specifically, the Going Forward  S8- xOrder provided that revenues received from programmers must be deducted from programming costs and,  S- x[to the extent revenues remain, from the operator's per channel markup.qX* yO -ԍ #X\  P6G;P# Going Forward Order at para. 74.q In Implementation of Sections  xof the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, MM Docket  S- xNos. 92266 and 93215, Twelfth Order on Reconsideration ("Twelfth Reconsideration Order"),o* yOH -#X\  P6G;P#э 11 FCC Rcd 785 (1996). o the  S- xCommission eliminated the requirement that home shopping service commissions be offset against the per  Sp-channel markup.px* {O-#X\  P6G;P#э See Section 76.922(e)(3)(ii) of the Commission's rules, 47 C.F.R. 76.922(e)(3)(ii) (1996).  S - ` Ax9.` ` In its response to the LFA's Memorandum, Operator cites generally the applicable rules  * yO- xԍ Operator cites the current revenue offset rule, 47 C.F.R. 76.922(f)(7) (1996). The rule states that  xi"[a]djustments to permitted charges on account of increases in costs of programming shall be further adjusted to  xJreflect any revenues received by the operator from the programmer. Such adjustments shall apply on a channelbychannel basis."  xand Bureau letters regarding the offsetting of programming costs with additional revenues received from  S - xthe programmer. The Operator fails to provide a specific explanation concerning the application of those  xrules to the revenues involved in the subject CPST rate justification. The Bureau's statement that  xreimbursements for customary and verifiable promotional costs do not require offsetting "does not permit,  xabsent special circumstances justifying a waiver, programmers to initiate reimbursement of promotional  S0- xexpenses, or significantly expand reimbursements, without the offsetting . . . ."X0 * {O-ԍ See Disney Channel Letter at p. 2.X The Commission's rules  x[seek "to safeguard against programmers initiating or significantly expanding promotional reimbursements  x.and recovering the reimbursements in higher programming charges to operators that could, in turn, result  S- xin higher charges to subscribers . . . ."3 * {O-ԍ Id.3 We have previously stated that we will monitor the application  S- xof the limitation closely.3* {OF"-ԍ Id.3 We order Operator to provide, for each CPST channel for which programming  xcosts are being increased or revenues are being received from programmers, a channel by channel  xyexplanation of the revenues received from programmers, a description of the revenue, as well as a channel  S- xby channel explanation of its programming costs increases, along with documentation explaining why,",p(p(88q"  xpursuant to the Commission's rules, the revenues received from programmers should not offset the  S-increases in Operator's programming costs.* yO@- x<ԍ We reserve the right to modify this Order, if necessary, based on our review of the additional information provided by Operator.  S- ` x10.` ` We have examined the documentation, including FCC Forms, which Operator has  S`- x[submitted to justify its June 1, 1997 CPST rate. To justify rates for the period beginning May 15, 1994  S8- xthrough a benchmark showing, operators must use the FCC Form 1200 series.f8 * yO-ԍ#X\  P6G;P# 47 C.F.R. 76.922.f Operators are permitted  S- x[to make changes to their rates on a quarterly basis using FCC Form 1210.Z* {O` -ԍ#X\  P6G;P#  Id.Z Operators may alternatively  xjustify adjustments to their rates on an annual basis using FCC Form 1240 to reflect reasonably certain  x0and quantifiable changes in external costs, inflation, and the number of regulated channels that are  S- xprojected for the twelve months following the rate change.Z B* {Oz-ԍ#X\  P6G;P#  Id.Z Any incurred cost that is not projected may  Sp-be accrued with interest and added to rates at a later time.!p* {O-ԍ#X\  P6G;P#  Id.#Xj\  P6G;9XP#с x` `  S - ` Cx11.` ` On February 22, 1996, the Commission issued an order granting Operator a waiver  x("Waiver Order") of certain rate adjustment requirements in its initial filing of the Commission's annual  S - x=rate adjustment form (FCC Form 1240)." f * {O- xԍ  See In the Matter of Annual Rate Adjustment System, 11 FCC Rcd 10235 (1996) (DA 96220, released February 22, 1996). Specifically, the Waiver Order allowed Operator, in its initial  xFCC Form 1240 filings, to include estimated changes in costs, inflation, channels and subscriber  xinformation attributable to the period between the last date for which actual cost data was available and  xthe effective date of the new rates. In the Waiver Order, Operator was instructed to include in its initial  x0FCC Form 1240 filing certain calculations, such calculations to be performed on FCC Form 1240  x.(primarily in Module G), or off FCC Form 1240, in an alternative showing done pursuant to the Waiver  S- xOrder's "General Guidelines."D# * yO@-ԍ Waiver Order at Appendix A.D Operator chose to use an alternative showing pursuant to the "General Guidelines" rather than perform its calculations directly on FCC Form 1240.  Sh- ` 2x12.` ` On October 25, 1996, Operator wrote to the Commission requesting review and approval  S@- x\of a modified FCC Form 1240 to justify rates for the projected period from June 1, 1997 to May 31,"@P #,p(p(88"  S- x1998.$* {Oh- xԍ See Letter from Angela Montoya, TCI Communications, Inc., to Alex Byron, Cable Services Bureau, Federal Communications Commission, dated October 25, 1996. On January 9, 1997, we consented to the Operator's use of the form for such period in lieu of  S-filings on the Commission's standard FCC Form 1240.%"* {O- xwԍ See Letter from Meredith Jones, Chief, Cable Services Bureau, Federal Communications Commission to Angela Montoya, TCI Communications, Inc., Dated January 9, 1997.  S- ` x13. ` ` To justify its CPST rate, effective June 1, 1997, Operator submitted two FCC Forms 1240,  x.the first for the projected period June 1, 1996 to May 31, 1997 ("First Form 1240"), and the second for  x=the projected period June 1, 1997 to May 31, 1998 ("Second Form 1240"). Operator's First Form 1240  xused Operator's alternative showing, calculated pursuant to the Waiver Order. Operator's Second Form  x[1240 followed the format set forth in Operator's October 25, 1996 letter. Upon review of the submitted  x[forms, we determined that neither of the submitted forms produced identical results to filings that would have been made on the Commission's standard FCC Form 1240.  SH - ` Ax14. ` ` Accordingly, on December 12, 1997, Operator submitted new standard FCC Forms 1240,  xfor the projected periods June 1, 1996 to May 31, 1997, and June 1, 1997 to May 31, 1998, which  xperformed the Waiver Order's calculations directly on the standard FCC Forms 1240 as well as the  S - xcalculations described in Operator's October 25, 1996 letter.I& |* yO- xYԍ Operator submitted these forms but also stated that it "continues to believe that these additional forms are not  xrequired or necessary as [Operator used] the FCC approved waiver in filing the Form 1240 for this system." Letter  xfrom Angela Bricmont, Director of Regulatory Compliance, TCI Communications, Inc., to Margaret Egler, Assistant  xiChief, Financial Analysis and Compliance Division, Cable Services Bureau, Federal Communications Commission dated December 12, 1997.I Review of both standard FCC Forms 1240  xis necessary to calculate the appropriate maximum permitted rate ("MPR") and the refund amount, if any,  xfor the period beginning June 1, 1997. Operator also submitted a refund plan which calculated the amount  SX- xof refunds owed to subscribers in the community referenced above for the duration of the one year projected period ending May 31, 1998.  S- ` x15.` ` Upon review of Operator's new FCC Form 1240, for the projected period June 1, 1996  xto May 31, 1997, we find that Operator has correctly calculated its MPR of $14.15. Upon review of  xOperator's new FCC Form 1240, for the projected period June 1, 1997 to May 31, 1998, we find that  Sh- xjOperator has correctly calculated its MPR of $12.93.'xh, * yO4- xԍ These findings are based solely on the representations of Operator. Should information come to our attention  xYthat these representations were materially inaccurate, we reserve the right to take appropriate action. This Order is  xnot to be construed as a finding that we have accepted as correct any specific entry, explanation or argument made  xxby any party to this proceeding not specifically addressed herein. Information regarding the specific adjustments  xmade to Operator's filings can be found in the public file for CUID No. MI0125, which is available in the Cable  x,Services Bureau's public reference room, or through the Commission's copy contractor, International Transcription Services (ITS), 1221 20th Street N.W., Washington, DC, 20554, or by calling ITS at (202) 8573800.  However, Operator's actual CPST rate, effective  S@- xJune 1, 1997, is $14.03. Operator has submitted a refund plan which calculates, with interest, the total  S- xamount of overcharges that will be collected from CPST subscribers in the community referenced above"l',p(p(885"  S- xfrom June 16, 1997 (the date of the first subscriber complaint) to May 31, 1998.v(* {Oh-ԍ See Section 76.961 of the Commission's Rules, 47 C.F.R. Section 76.961.v Upon review of  xOperator's refund plan, we find that Operator has correctly calculated, with interest, the amount of  x overcharges that will be received from subscribers during the projected period ending May 31, 1998.  S- xThese calculations result in a total refund amount of $13.67 per CPST subscriber, including interest.  xlWhile we reserve for further review the issue of Operator's revenue and any offsets concerning its  x[programming costs ("revenue/offset" issue), we now order Operator to pay the refund amount of $13.67  S- xto each current CPST subscriber within 60 days of the release of this order.|)Z* {O -ԍ See Section 76.961(c) of the Commission's rules, 47 C.F.R. Section 76.961(c).| We will also order that any  xrate Operator charges on and after June 1, 1998 shall be premised on Operator's use of (1) the standard  x[FCC Form 1240 for rate calculation purposes and (2) $12.93 as Operator's Current Maximum Permitted  xRate as called for on Line A1 of its FCC Form 1240 filing for the projected period beginning June 1,  x1998. Contingent upon Operator's refund payment to its subscribers, we have determined that Operator's  xtotal CPST rate collections in the community referenced above, for the projected period June 1, 1997 to May 31, 1998, will be reasonable, pending our review of the revenue/offset issue.  S - ` `x16.` ` Accordingly, IT IS ORDERED, pursuant to Section 76.961 of the Commission's rules,  x47 C.F.R. Section 76.961, that Operator shall refund to CPST subscribers in the franchise area referenced above the amount of $13.67 within 60 days of the release of this Order.  S0- ` x17.` ` IT IS FURTHER ORDERED, pursuant to Section 76.962 of the Commission's rules, 47  xC.F.R. Section 76.962, that Operator, within 90 days of the release of this Order, shall file with the Chief,  xCable Services Bureau, a certification of its compliance with the refund requirements of this Order, and a certification of its intent to comply with all other aspects of this Order.  Sh- ` x18.` ` IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47  x{C.F.R. Section 0.321, that Operator shall use (1) the standard FCC Form 1240 for rate calculation  xpurposes and (2) $12.93 as Operator's Current Maximum Permitted Rate as called for on Line A1 of its  x0FCC Form 1240 filing for the projected period beginning June 1, 1998, pending our review of the revenue/offset issue.  Sx- ` x19. ` ` IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47  xC.F.R. Section 0.321, that Operator shall file with the Chief, Cable Services Bureau, within 30 days of  xthe release of this Order, a channel by channel explanation of the revenues received from programmers,  x]a description of the revenue, as well as a channel by channel explanation of its programming costs  xincreases, for each CPST channel for which programming costs are being increased or revenues are being  xreceived from programmers, along with documentation explaining why, pursuant to the Commission's  xrules, the revenues received from programmers should not offset the increases in Operator's programming  S`-costs. x  S8-  7$9 "8),p(p(88 "  S- `  7$9 x20.` ` IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47  xC.F.R. Section 0.321, that the complaint referenced herein against the rates charged by Operator in the community set forth above IS GRANTED TO THE EXTENT INDICATED HEREIN. x` `  hh@FEDERAL COMMUNICATIONS COMMISSION x` `  hh@John E. Logan  S-x` `  hh@Deputy Chief, Cable Services Bureauxx  Xp-#Xj\  P6G;9XP#