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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 ) ) CUID No. HI0002 (Lahaina) Time Warner Cable ) ) Complaint Regarding ) Cable Programming Services Tier ) and ) Petition for Reconsideration ) ORDER ON RECONSIDERATION and RATE ORDER Adopted: June 15, 1998 Released: June 18, 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 rate order concerning Operator's January 1, 1997 CPST rate increase ("Prior Order"). On July 14, 1997, Operator filed a petition for reconsideration of our Prior Order ("Petition"). Operator subsequently filed an amendment to its petition for reconsideration on December 31, 1997. We will review these documents together as one filing ("Amended Petition"). In this Order we will consider Operator's Amended Petition as well as the above-referenced complaint. 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 March 31, 1998 against Operator's January 1, 1998 CPST rate increase from $16.46 to $20.25. The LFA verified that it received more than one subscriber complaint and that the first valid complaint was received by the LFA on January 5, 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"). In our Prior Order, we found that Operator had not correctly calculated its maximum permitted rate ("MPR") on its FCC Form 1240 for the projected period January 1, 1997 to December 31, 1997. In particular, we found that Operator had made true-up adjustments through to the effective date of the rate increase and that those adjustments did not include actual data. Consequently, we reduced Operator's true-up period by three months and adjusted Operator's MPR in accordance with our rules and the FCC Form 1240 instructions. These adjustments reduced Operator's MPR to $19.44. Because Operator was actually charging a CPST rate of $16.46, we found Operator's actual CPST rate to be reasonable. 6. In its Amended Petition, Operator argues that our elimination of three months of the true-up period conflicts with the Social Contract. Operator states that "[i]n situations where [Operator] did not raise its CPST rate on January 1, 1996 to the maximum permitted rate the Bureau's exclusion of the last three months of 1996 from the true-up results in [Operator] not getting the full benefit of the $1.00 per year CPST rate increase permitted by the Social Contract." Operator requests that it be permitted to use "a full 12-month true-up period on the 1997 Form 1240 for the amount of the $1.00 CPST increase permitted by the Social Contract which it did not take on January 1, 1996." Operator discussed possible methods for implementing its request with Bureau staff members. Ultimately, it appears that Operator was given permission by Commission staff to file bifurcated FCC Form 1240s ("Amended 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 the Prior Order. 7. 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. Our acceptance of Operator's Amended FCC Forms 1240, however, is not an invitation to operators to refile FCC Forms after an order has been released concerning their rates. Once an operator has filed FCC Forms with the Commission, each of which requires a signed certification statement that the information on the FCC Form is true and correct, we are entitled to act upon that information. Moreover, once we have released an order concerning those FCC Forms, we cannot ordinarily allow an operator to amend those FCC Forms on appeal with information that should have been submitted in the original certification. In the present case, we will allow Operator to file its Amended FCC Forms 1240 because we instructed Operator to make such filings. Absent such explicit instructions, we would reject the Amended FCC Forms 1240 filed by Operator. Therefore, we will vacate our Prior Order and grant Operator's Amended Petition to the extent indicated below. However, our acceptance of Operator's bifurcated FCC Form 1240 methodology still requires that we review Operator's calculations on its Amended FCC Forms 1240. 8. Upon review of Operator's Amended FCC Form 1240s, for the projected period January 1, 1996 through December 31, 1996, and January 1, 1997 to December 31, 1997, we accept Operator's filings and find that Operator has correctly calculated its maximum permitted rates ("MPRs"). Operator's total MPR, effective January 1, 1997, is $19.31. Therefore, we find that Operator's actual CPST rate of $16.46, effective January 1, 1997, is reasonable. As part of its Amended Petition, and in response to the above- referenced LFA complaint, Operator filed Amended FCC Form 1240s for the projected period January 1, 1998 to December 31, 1998. Upon review of these forms, we find that Operator did not correctly calculate the MPR on its FCC Form 1240. We find that Operator has failed to use the most current FCC Inflation Factors available at the time Operator signed its FCC Form 1240. We revised Worksheet 1 (True-Up Period Inflation) which adjusted Line C3 (Inflation Factor for True-Up Period 1) to 1.0193. We also revised Line C5 (Current FCC Inflation Factor) to 1.0143. These revisions reduced Operator's total MPR to $21.53 for the projected period January 1, 1998 to December 31, 1998. Because Operator's actual CPST rate, effective January 1, 1998, is $20.25 we find Operator's actual CPST rate, effective January 1, 1998, to be reasonable. 9. Accordingly, IT IS ORDERED, pursuant to Section 1.106 of the Commission's rules, 47 C.F.R. 1.106, that Operator's Amended Petition for Reconsideration IS GRANTED TO THE EXTENT INDICATED HEREIN. 10. 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 Time Warner Entertainment Co., L.P. d/b/a Hawaiian Cablevision, DA 97-1279, 12 FCC Rcd 23422 (1997), IS VACATED. 11. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. 0.321, that the CPST rate of $20.25, charged by Operator in the franchise area referenced above, effective January 1, 1998, IS REASONABLE. 12. 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 1240s. 13. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. 0.321, that the complaint referenced herein, against the CPST rate charged by Operator in the community referenced above, IS DENIED. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Acting Chief, Cable Services Bureau