******************************************************** 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 ) CUID Nos. MI0035 (Coldwater Twp.) ) MI0052 (Sturgis City) C-TEC Cable Systems of Michigan, Inc. ) MI0103 (Quincy Village) ) MI0277 (Village of Pentwater) and ) MI0319 (Township of Fruitland) ) MI0345 (Township of Park) C-TEC Cable Systems of Michigan, Inc. ) MI0371 (City of Grand Haven) d/b/a Mercom, Inc.) MI0486 (City of Coopersville) ) MI0673 (City of Rockford) ) MI0675 (Algoma Twp) Complaints Regarding ) MI0693 (City of Evart) Cable Programming Service Rates ) MI0746 (City of Gladwin) and ) MI0960 (Township of Pentwater) Petitions for Reconsideration ) MI1610 (Township of Robinson) ORDER ON RECONSIDERATION AND RATE ORDER Adopted: June 4, 1998 Released: June 8, 1998 By the Acting Chief, Cable Services Bureau: 1. In this Order we consider complaints about the rates the above-captioned operator ("Operator") was charging for its two cable programming service tiers ("CPSTs") in the communities referenced above. We also consider several petitions for reconsideration filed by Operator. Operator has chosen to attempt to justify its CPST rates through cost of service showings on FCC Form 1220s, updated by FCC Form 1210s and/or FCC Form 1240s. We have already issued orders in which we denied Operator's request for small system relief under the Telecommunications Act of 1996 ("1996 Act") and the Small Systems Order, and found that Operator's CPST rates in some of the communities above were unreasonable ("Prior Orders"). Operator filed timely Petitions for Reconsideration of our Prior Orders and we have consolidated our review of those Petitions because they involve the same issues. Operator also filed several Petitions for Stay of our Prior Orders. Because we are reviewing Operator's Petitions for Reconsideration, we will dismiss Operator's Petitions for Stay as moot. Operator filed alternate FCC Forms to justify its CPST rates in the event that its request for small system relief was denied. On March 4, 1998, Operator clarified that it wished to rely on its FCC Form 1220 (Cost of Service) filings as an alternative to its request for small system relief and other relief requested in its Petitions for Reconsideration. Several of Operator's Petitions for Reconsideration and Petitions for Stay were opposed by the local franchising authorities ("LFAs"). In this Order, we address Operator's Petitions for Reconsideration of our Prior Orders and any Opposition and the reasonableness of Operator's CPST rates in the communities referenced above. This Order resolves all outstanding complaints against Operator's CPST rates in the above communities through January 31, 1998. 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. If the Commission finds a rate to be unreasonable, it shall determine the correct rate and any refund liability. The 1996 Act and our rules implementing the legislation ("Interim Rules"), require that a complaint against the CPST rate be filed with the Commission by an LFA that has received more than one subscriber complaint. Under Section 76.923(a) of the Commission's Rules, equipment used to receive the basic service tier ("BST") is subject to rate regulation, regardless of whether such equipment is used to receive other tiers of regulated programming and/or unregulated service. Such equipment related charges are subject to regulation by the LFA. 3. Valid complaints were filed with the Commission between September 1993 and July 1997 against the CPST rates Operator was charging in the communities referenced above. In its Petitions for Reconsideration, Operator moves for dismissal of the LFA complaints due to failure of each LFA to provide further documentation to Operator of the underlying subscriber complaints. We disagree with Operator that our rules require more complete documentation than that supplied by the LFAs in response to our request. Our rules provide that the "records maintained by an LFA in accordance with its regular business practice" are sufficient to establish that the LFA received the requisite subscriber complaints. We also disagree with Operator that an employee of an LFA is precluded from filing a complaint against the employee's CPST provider simply because the employee is affiliated with an LFA. We will deny Operator's motions to dismiss. 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 its CPST rates are reasonable. 4. Operators with complete and timely CPST complaints filed against them prior to May 15, 1994 must demonstrate that their CPST rates were in compliance with the Commission's initial rules from the time the complaint was filed through May 14, 1994, and that the CPST rates were in compliance with the revised rules from May 15, 1994 forward. Operators attempting to justify CPST rates for the period prior to May 15, 1994 through a benchmark showing must complete and file FCC Form 393. To justify rates for the period beginning May 15, 1994 through a benchmark showing, operators must use the FCC Form 1200 series. Cable operators attempting to justify their rates for either period through a cost of service showing must complete and file FCC Form 1220. 5. Operators are permitted to make changes to their rates on a quarterly basis using FCC Form 1210 to account for the addition and deletion of channels, changes in certain external costs and inflation. In addition, Operators must file FCC Form 1210 at least 30 days before new rates are scheduled to go into effect, where there is a pending complaint against the CPST rate. Operators may justify adjustments to 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. If actual and projected costs are different during the rate year a "true-up" mechanism is available to correct estimated costs with actual cost changes. The "true-up" requires operators to decrease their rates or alternatively permits them to increase their rates to make an adjustment for over or under estimations of these cost changes. 6. Operator requested small system relief and attempted to justify its CPST rates using the FCC Form 1230 (Establishing Maximum Permitted Rates for Regulated Cable Services on Small Cable Systems). Several of the LFAs for the communities referenced above complained that operator did not qualify for small system relief and could not file the FCC Form 1230 for that and other reasons. In our Prior Orders, we determined that Operator is not entitled to small system relief and accepted Operator's FCC Form 1240 (Annual Update Form) filings in lieu of its FCC Form 1230 filings. In its Petitions for Reconsideration, Operator has not provided any new information or arguments that persuade us that Operator is entitled to small system relief. Therefore, we deny Operator's Petitions for Reconsideration in part. 7. In the alternative, Operator requests that it be permitted to support its CPST rates with other FCC Form 1200 series filings, along with its FCC Form 1240s. In its initial response to the CPST complaints referenced herein, Operator filed FCC Form 1220s to justify its CPST rates in the communities referenced above. We will allow Operator to rely on any appropriate FCC Forms in order to justify its CPST rates, which were filed prior to our rejection of the FCC Form 1230s, including its FCC Form 1220s. We also accept Operator's FCC Forms which were filed in response to our request for additional information regarding Operator's FCC Form 1220 filings and regarding its second CPST. We do not accept the LFAs' argument that Operator is not allowed to file approved FCC Forms to justify its CPST rates, including the FCC Form 1240s, simply because Operator relied, at one point, on a method which we rejected. Therefore, we grant Operator's Petitions for Reconsideration in part. 8. Upon review of Operator's FCC Form 1220, FCC Form 1210 and FCC Form 1240 filings, we find Operator's actual CPST rates, for both its CPSTs, effective September 1, 1993 through January 31, 1998, to be reasonable. The CPST rates approved through January 31, 1998 are listed in the Appendix attached hereto. Our findings are based in part on allowing Operator to offset its CPST undercharges against its CPST overcharges within the same time period. Unlike inter-tier offsets between the CPST and BST, which we have rejected, intra-tier offsets between two CPSTs do not require the Commission to review or monitor the BST. 9. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rates, charged by Operator in the communities referenced above, effective September 1, 1993 through January 31, 1998, ARE REASONABLE. 10. IT IS FURTHER ORDERED, pursuant to Section 1.106 of the Commission's rules, 47 C.F.R. 1.106, that Operator's Petitions for Reconsideration ARE DENIED IN PART AND GRANTED IN PART TO THE EXTENT INDICATED HEREIN. 11. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. 0.321, that In The Matter of C-TEC Cable Systems of Michigan, Inc., 13 FCC Rcd 2052 (1998); In The Matter of C-TEC Cable Systems of Michigan, Inc., 12 FCC Rcd 23508 (1997); In The Matter of C-TEC Cable Systems of Michigan, Inc., 12 FCC Rcd 23350 (1997); In The Matter of Mercom, Inc., 11 FCC Rcd 7685 (1996); In The Matter of C-TEC Cable Systems of Michigan, Inc., 11 FCC Rcd 6189 (1997); and In The Matter of C-TEC Cable Systems of Michigan, Inc., 11 FCC Rcd 6078 (1996), ARE AFFIRMED IN PART AND VACATED IN PART TO THE EXTENT INDICATED HEREIN. 12. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that Operator's motions to dismiss the local franchising authority complaints ARE DENIED. 13. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321, that Operator's Petitions for Stay, ARE DISMISSED AS MOOT. 14. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the complaints against the CPST rates charged by Operator in the communities referenced above, ARE DENIED. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Acting Chief, Cable Services Bureau APPENDIX CUID NO./COMMUNITY DATE FIRST COMPLAINT RATE APPROVED THROUGH 1/31/98 FILED WITH FCC* CPST #1 CPST#2 MI0035/Coldwater Twp. 11/18/93 $12.84 $5.95 MI0052/Sturgis City 11/18/93 $12.84 $5.95 MI0103/Quincy Village 11/18/93 $12.84 $5.95 MI0277/Village of Pentwater 3/18/94 $8.00 $4.75 MI0319/Township of Fruitland 3/16/94 $10.90 $5.74 MI0345/Township of Park 11/19/93 $11.00 $4.45 MI0371/City of Grand Haven 11/18/93 $11.00 $6.15 MI0486/City of Coopersville 11/16/93 $10.90 $5.50 MI0673/City of Rockford 11/12/93 $12.00 $5.60 MI0675/Algoma Twp. 12/9/93 $12.00 $5.60 MI0693/City of Evart 11/16/93 $7.16 $5.69 MI0746/City of Gladwin 11/12/93 $9.50 $3.85 MI0960/Pentwater Twp. 2/25/94 $8.00 $4.75 MI1610/Robinson Twp. 11/18/93 $11.00 $6.15 *Initial complaints were withdrawn, see fn 15 above.