******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. 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 ) ) MediaOne Inc., d/b/a ) CUID Nos. MN0392 (Stillwater) King Videocable Company - Minnesota ) MN0393 (Bayport) ) MN0394 (Oak Park Heights) Complaints Regarding ) Cable Programming Services Tier Rates ) ORDER Adopted: May 7, 1998 Released: May 11, 1998 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider complaints against the November 1, 1997 rate increase of the above-referenced operator ("Operator") for its cable programming services tier ("CPST") in the communities referenced above. We have already issued orders which resolved complaints filed against Operator from September 1, 1993 through April 3, 1995. On August 1, 1995, the Federal Communications Commission ("Commission") adopted an order approving a Social Contract entered into between Operator and the Commission ("Social Contract"). On August 21, 1996, the Commission adopted an order approving an Amended Social Contract entered into between Operator and the Commission ("Amended Social Contract"), which incorporated the communities referenced above. This Order addresses only the reasonableness of Operator's November 1, 1997 CPST rate increase, consistent with the terms of the Amended Social Contract. 2. Under the Communications Act, the Commission is authorized to review the CPST rates of cable systems not subject to effective competition to ensure that rates charged are not unreasonable. If the Commission finds a rate to be unreasonable, it shall determine the correct rate and any refund liability. The Telecommunications Act of 1996 ("1996 Act") and our rules implementing the new legislation ("Interim Rules"), require that complaints against the CPST rates be filed with the Commission by a local franchising authority ("LFA") that has received more than one subscriber complaint. 3. The LFA for the franchise area referenced above filed a complaint with the Commission on February 25, 1998, against Operator's November 1, 1997 CPST rate increase from $16.40 to $18.90 (exclusive of franchise fees). The LFA verified that it received more than one subscriber complaint and that the first complaint was received by the LFA on October 15, 1997. The filing of a complete and timely LFA complaint triggers an obligation upon the cable operator to file a justification of its CPST rates. The Operator has the burden of demonstrating that the CPST rates complained about are reasonable. 4. To justify rates for the period beginning May 15, 1994 through a benchmark or cost of service showing, operators must use the FCC Form 1200 series. Cable operators may file an FCC Form 1210 to justify rate increases based on the addition and deletion of channels, changes in certain external costs, and inflation. In addition, Operators must file FCC Form 1210 with the Commission within thirty days of the date of service of the complaint regarding the new rate. 5. Under the terms of the Amended Social Contract, Operator is required to invest $1.35 billion to upgrade its cable systems. By January 1, 1997, Operator must create, on systems serving at least 80% of its total subscribers, a lifeline basic service tier by reducing rates on the basic service tier by 15% to 20% and offset this reduction in a revenue neutral manner by adjusting the rates on the CPST. Operator may migrate up to four existing services from its CPST to a migrated product tier ("MPT") and Operator may add an unlimited number of channels to an MPT at $0.20 per added channel plus license fees. 6. There are no official forms available for use to implement the one-time changes in rates as required by the Social Contract. The Commission, seeking to simplify the implementation of the Social Contract, found that the Rate Form proposed by Continental to implement the rate restructuring under the Social Contract, was consistent with the methodologies of the Commission's Forms 1200 and 1210 and greatly simplified the review of the restructured rates under the Social Contract. Therefore, pursuant to the terms of the Social Contract, the Commission permitted Continental to file a Rate Form to establish its CPS tier rates. 7. Upon review of Operator's Rate Form, setting an initial maximum permitted rate ("MPR") in accordance with the Amended Social Contract, and Operator's FCC Form 1210, covering the period from the Rate Form through September 30, 1997, we find Operator's actual CPST rate of $18.90 (exclusive of franchise fees), effective November 1, 1997, to be reasonable. 8. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the CPST rate of $18.90 (exclusive of franchise fees) charged by Operator in the communities referenced above, effective November 1, 1997, IS REASONABLE. 9. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the complaints against Operator's November 1, 1997 CPST rate increase, in the communities referenced above, ARE DENIED. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau