******************************************************** 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. CA0750 (Westminster) Time Warner Cable ) CA0751 (Huntington Beach) d/b/a Dickinson Pacific Cable ) CA0752 (Fountain Valley) ) CA0932 (Stanton) Complaint Regarding ) Cable Programming Services Tier ) and ) Petition for Reconsideration ) ORDER ON RECONSIDERATION and RATE ORDER Adopted: June 15, 1998 Released: June 17, 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 communities referenced above. We have already issued a rate order concerning Operator's January 1, 1997 CPST rate increase ("Prior Order"). On August 7, 1997, Operator filed a petition for reconsideration of our Prior Order ("Petition"). Operator subsequently filed an amendment to its petition for reconsideration on January 8, 1998. 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 24, 1998 against Operator's January 1, 1998 CPST rate increase from $19.60 to $22.52. The LFA verified that it received more than one subscriber complaint for each franchise area and that the first valid complaint for each franchise area was received by the LFA on the date listed in Appendix A attached hereto. 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 rates ("MPRs") on its FCC Form 1240 for the projected period January 1, 1997 to December 31, 1997 for its non-rebuild and rebuild areas. 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 $9.79 for its non-rebuild area and $21.74 for its rebuild area rather than Operator's MPRs of $9.92 for its non-rebuild area and $22.34 for its rebuild area. Because Operator was actually charging a CPST rate of $7.75 for its non-rebuild area and $19.60 for its rebuild area, we found Operator's actual CPST rates 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. Further, 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 FCC Form 1240, for the projected period January 1, 1996 through December 31, 1996, we accept Operator's filing and find that Operator has justified its CPST rate of $16.99, effective January 1, 1996. Upon review of Operator's Amended FCC Forms 1240, for the projected period January 1, 1997 through December 31, 1997, we find that Operator did not correctly calculate its MPRs. On Operator's SCD Form 1240, we adjusted Lines 801 to $1.00 to conform with Operator's actual CPST rate based on Operator's rate card. On Operator's other FCC Form 1240, we adjusted Line 801 to conform with Operator's actual CPST rate based on Operator's rate card of $15.99. We also adjusted Operator's Line C5 (Current FCC Inflation Factor) to 1.270. These adjustments resulted in a revised total MPR of $21.71 and we find that Operator has justified its CPST rate of $19.60, effective January 1, 1997. Therefore, we will vacate our Prior Order and grant Operator's Amended Petition to the extent that it concerns Operator's January 1, 1997 rebuild CPST rate. 9. 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 MPRs on its Amended FCC Form 1240s. On Operator's SCD Form 1240, we adjusted Lines 801 through 813 to $2.04 to conform with Operator's actual CPST rate based on Operator's rate card. On Operator's other FCC Form 1240, we adjusted Operator's Line A1 to $19.71 to conform to the revised MPR from its previous filing. We adjusted Line 804 to $17.56 to conform with Operator's actual CPST rate based on Operator's rate card. 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. We adjusted Line D6 (Current True-Up Segment), Line F5 (Inflation Segment for True-Up Period 1), Line F8 (True-Up Segment for True-Up Period 1) and F9 (Max Perm Rate for True-Up Period 1) to conform to the prior revised FCC Form 1240. These revisions reduced Operator's total MPR to $24.07 for the projected period January 1, 1998 to December 31, 1998. Because Operator's actual CPST rate, effective January 1, 1998, is $22.52, we find that Operator's actual CPST rate, effective January 1, 1998, is reasonable. 10. 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. 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 Time Warner Communications, 12 FCC Rcd 23448 (1997), IS VACATED TO THE EXTENT INDICATED HEREIN. 12. 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 $22.52, charged by Operator in the franchise area referenced above, effective January 1, 1998, IS REASONABLE. 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 1240s. 14. 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 communities referenced above, IS DENIED. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Acting Chief, Cable Services Bureau APPENDIX A CUID NO. COMMUNITY DATE FIRST VALID COMPLAINT FILED WITH LFA CA0750 Westminster 1/2/98 CA0751 Huntington Beach 1/2/98 CA0752 Fountain Valley 1/8/98 CA0932 Stanton 1/14/98