******************************************************** 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: ) ) FALCON CABLE MEDIA) CSB-A-0531 ) CUID Nos. NC 0487 & NC0490 Appeal of Rate Order of ) the County of Onslow, NC) MEMORANDUM OPINION AND ORDER Adopted: June 12, 1998 Released: June 17, 1998 By the Acting Chief, Cable Services Bureau: I. INTRODUCTION 1. Falcon Cable Media ("Falcon"), the franchised operator of cable television systems serving the community of Sneads Ferry, North Carolina and the County of Onslow, North Carolina (the "County"), has filed an appeal of a local rate order, issued on March 16, 1998 by the County, which denied Falcon's request to increase its basic service tier ("BST") and equipment rates for the period beginning October 1, 1997. Falcon challenges the local rate order on grounds that the County premised its denial on concerns regarding certain alleged deficiencies in Falcon's service and on the fact that it believes that its citizens cannot afford a rate increase without considering Falcon's rate calculations. The County has not responded to this appeal. II. BACKGROUND 2. Under the Commission's rules, rate orders issued by local franchising authorities ("LFAs") may be appealed to the Commission. In ruling on an appeal of a local rate order, the Commission will not conduct a de novo review, but instead will sustain the franchising authority's decision as long as there is a reasonable basis for that decision. Therefore, the Commission will reverse a franchising authority's decision only if it determines that the franchising authority acted unreasonably in applying the Commission's rules in rendering its local rate order. If the Commission reverses a franchising authority's decision, it will not substitute its own decision but instead will remand the issue to the franchising authority with instructions to resolve the case consistent with the Commission's decision on appeal. 3. FCC Form 1240 is the official form an operator uses to justify annual rate adjustments. These rate adjustments reflect changes in certain external costs, including programming costs, channel additions and deletions and inflation. External costs include the following categories of costs: state and local taxes specifically applicable to the provision of cable television service; franchise fees; costs of complying with franchise requirements; retransmission consent fees and copyright fees incurred for the carriage of broadcast signals; other programming costs; and Commission regulatory fees. FCC Form 1205 is the official form used to update permitted regulated equipment and installation charges based on actual equipment costs. 4. An operator that wants to increase its BST rate has the burden of demonstrating that the increase is in conformance with our rules. In determining whether the operator's proposed increase is in conformance with our rules, a franchising authority may direct the operator to provide relevant supporting information. After reviewing an operator's rate forms, and any other additional information submitted, the franchising authority may either approve the operator's requested rate increase or issue a written decision explaining why the operator's rate is unreasonable. III. SUFFICIENCY OF THE COUNTY'S DECISION A. Falcon's contentions 5. Falcon notes that, although it submitted its FCC Forms 1205 and 1240 on June 16, 1997, the County never addressed its Form 1205, except to say that it had been filed. Falcon adds that, prior to any action by the County, it submitted a revised FCC Form 1240 on February 20, 1998 "to correct certain deficiencies which it and the County's consultant had discovered." In rejecting Falcon's proposed BST rate increase of $0.66 in Onslow and $0.90 in Sneads Ferry, all the County said in its two-page order was that the increased rates had been disapproved. on the basis that the citizens of this County, who subscribe to the basic service tier of service, cannot afford a price increase at this time and same is not justified at this time and that the pace of the equipment modernization and extension of service to the rural areas has been woefully unsatisfactory and that the application of technical standards to provide satisfactory cable television service to the subscriber has been unsuitable. Falcon contends that where there is no dispute concerning the figures or the accuracy of the calculations presented in the cable operator's rate justification forms, the LFA must approve the rate derived from the form, citing the Bureau's prior decisions in Century Cable of Southern California, and TCI of Southeast Mississippi. Falcon adds that the County's statements are insufficient to meet the Commission's requirement that franchising authorities issue written decisions which affirmatively demonstrate why a proposed rate is unreasonable and that LFAs may not consider things such as signal quality when reviewing an operator's BST rate justification. B. Discussion 6. We agree with Falcon. The County must follow the Commission's rate regulations when reviewing an operator's rate filing. If a local franchising authority does not dispute the bases for the figures presented in a cable operator's rate forms and has not discovered any mathematical errors in the forms, the LFA should approve the operator's rates as derived from those forms. If the LFA rejects an operator's proposed rates, it must issue a written decision affirmatively demonstrating why the rates are unreasonable. The LFA may address other, non-rate concerns through our rules on technical standards, our rules on customer service obligations, the LFA's own cable regulations, and the franchise agreement. 7. The LFA may not arbitrarily reduce BST rates below permitted rate levels or deny a justified increase of the permitted rate in an effort to address quality of service issues or because of subjective concerns regarding its citizen's financial affairs. The County must adhere to the Commission's rules in reviewing Falcon's rates. We find that the County acted unreasonably in denying Falcon's requested rate increase. Consequently, we remand this local rate order to the County so that it can reconsider its ruling in a manner consistent with our findings. IV. ORDERING CLAUSE 8. Accordingly, IT IS ORDERED that the appeal filed April 15, 1998 by Falcon Cable Media IS GRANTED and the appeal of the local order IS REMANDED to the County of Onslow, North Carolina for proceedings consistent with the terms of this Order. 9. This action is taken by the Acting Chief, Cable Services Bureau, pursuant to authority delegated by  0.321 of the Commission's Rules. 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Acting Chief, Cable Services Bureau