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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 ) ) Time Warner Cable ) CUID No. FL0569 (Orange County) ) Complaint Regarding Cable Programming) Services Tier Rate Increase ) ORDER Adopted: May 18, 1998 Released: May 20, 1998 By the Acting Chief, Cable Services Bureau: 1. In this Order we consider a complaint against the January 1, 1998 rate increase of the above-referenced operator ("Operator") for its cable programming services tier ("CPST") in the community referenced above. We have already issued a separate order in which we resolved all prior complaints against Operator's CPST rate increases. Accordingly, this Order addresses only the reasonableness of Operator's January 1, 1998 CPST rate increase. 2. Under the Communications Act, the Federal Communications Commission ("Commission") is authorized to review the CPST rates of cable systems not subject to effective competition to ensure that rates charged are not unreasonable. The Telecommunications Act of 1996 ("1996 Act") and our rules implementing the legislation ("Interim Rules"), require that a complaint against the CPST rate 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 January 1, 1998 CPST rate increase from $18.50 to $20.15. The LFA verified that it received more than one subscriber complaint for the franchise area and that the first valid complaint was received by the LFA on January 15, 1998. The filing of a complete and timely 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. If the Commission finds a rate to be unreasonable, it shall determine the correct rate and any refund liability. 4. To justify rates for the period beginning May 15, 1994, operators must use the FCC Form 1200 series. Operators are permitted to make changes to their rates on a quarterly basis using FCC Form 1210. Operators may justify their rates on an annual basis using FCC Form 1240 to reflect reasonably certain and quantifiable changes in external costs, inflation, and the number of regulated channels that are projected for the twelve months following the rate change. Any incurred cost that is not projected may be accrued with interest and added to rates at a later time. 5. On November 30, 1995, we issued an Order approving a Social Contract which Operator entered into with the Commission ("Social Contract"). Subsequently, Operator was given permission by Commission staff to file bifurcated FCC Form 1240s for the projected periods January 1, 1996 through December 31, 1996, January 1, 1997 through December 31, 1997, and January 1, 1998 through December 31, 1998. In these bifurcated forms, Operator calculates the $1.00 annual increase permitted by the Social Contract ("Social Contract Dollar") and its true-up on a separate FCC Form 1240 ("SCD Form 1240"). On the SCD Form 1240, Operator calculates its true-up adjustment through to the effective date of the rate increase. On its other FCC Form 1240, Operator calculates the other adjustments to its CPST rate adjusting its true-up period to conform with FCC Form 1240 Instructions. 6. Upon review of Operator's bifurcated FCC Form 1240 methodology, we find Operator's methodology acceptable. It allows Operator to collect its Social Contract Dollar each year, and to true- up any applicable part of its Social Contract Dollar, within the calendar years covered by the Social Contract. In the present case, we will allow Operator to file its bifurcated FCC Form 1240s because we instructed Operator to make such filings. Absent such explicit instructions, we would reject the FCC Form 1240s filed by Operator. Further, our acceptance of Operator's bifurcated FCC Form 1240 methodology still requires that we review Operator's calculations on these FCC Form 1240s. 7. Upon review of Operator's FCC Form 1240s, for the projected period January 1, 1996 through December 31, 1996, we accept Operator's filings. Upon review of Operator's FCC Form 1240s, for the projected period January 1, 1997 to December 31, 1997, we adjusted Line 801 on the SCD Form 1240 and all of Worksheet 8 on the FCC Form 1240 to conform with Operator's actual CPST rate, based on Operator's rate card. These adjustments resulted in a revised maximum permitted rate ("MPR") of $18.41, effective January 1, 1997. Upon review of Operator's FCC Form 1240s for the projected period January 1, 1998 to December 31, 1998, we adjusted Lines A1 (Current Maximum Permitted Rate), D6 (Current True-Up Segment), and F8 (True-Up Segment For True-Up Period 1) on both the SCD Form 1240 and the FCC Form 1240 to conform to the prior revised FCC Form 1240s. We also adjusted Operator's Line 801 on the SCD Form 1240 and Lines 801 through 804 on the FCC Form 1240 to conform with Operator's actual CPST rate, based on Operator's rate card. We adjusted the Inflation Factors on Operator's regular FCC Form 1240, at Worksheet 1 (True-Up Period Inflation) which adjusted Line C3 (Inflation Factor for True-Up Period 1) to 1.0193. These revisions resulted in an adjustment of Line F5 (Inflation Segment for True-Up Period 1). We also revised Line C5 (Current FCC Inflation Factor) to 1.0143. These revisions reduced Operator's total MPR to $19.68 for the projected period January 1, 1998 to December 31, 1998. Because Operator's actual CPST rate of $20.15, effective January 1, 1998, exceeds its revised MPR, we find Operator's actual CPST rate of $20.15, effective January 1, 1998, to be unreasonable. 8. On August 29, 1997, Operator filed a petition for special relief ("Petition"). In its Petition, Operator claims that its rates are not subject to regulation because the Operator is subject to effective competition in the community set forth above. We find that it would serve the public interest to hold the refund liability of Operator in abeyance pending a decision on Operator's Petition. There is an administrative burden on Operator to implement a refund plan, which we seek to avoid, if we subsequently grant Operator's Petition. The interests of subscribers will be safeguarded if Operator's Petition is denied because this Order imposes refund liability on Operator for its overcharges on the CPST, beginning January 1, 1998. Therefore, we will hold in abeyance Operator's obligation to issue refunds for 30 days after the release of an order denying Operator's Petition. 9. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rate of $20.15, charged by Operator in the franchise area referenced above, effective January 1, 1998, IS UNREASONABLE. 10. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the franchise area referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of $19.68 per month (plus franchise fees), plus interest to the date of the refund, for the period January 15, 1998, the date of the first subscriber complaint, through the day before Operator implements the maximum permitted CPST rate of $19.68. 11. IT IS FURTHER ORDERED that Operator shall promptly determine the overcharges to CPST subscribers for the stated periods, and shall within 30 days of the release of this Order, file a report with the Chief, Cable Services Bureau, stating the cumulative refund amount so determined (including franchise fees and interest), describing the calculation thereof, and describing its plan to implement the refund within 60 days of Commission approval of the plan or within 30 days after the release of an order denying Operator's Petition for Special Relief, CSR-5098-E, whichever is later. 12. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that Operator's refund liability for the overcharge on the CPST, effective January 1, 1998, is held in abeyance, TO THE EXTENT INDICATED HEREIN. 13. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that Operator take into account our FCC Form 1240 adjustments when calculating its maximum permitted rate and performing the true-up calculation on its next FCC Form 1240. 14. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the complaint filed against Operator's January 1, 1998 CPST rate increase in the community set forth above IS GRANTED TO THE EXTENT INDICATED HEREIN. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Acting Chief, Cable Services Bureau