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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: ) ) HERITAGE CABLEVISION, INC. ) File No. CSB-A-0434 d/b/a TCI of Southern Iowa ) CUID No. IA0104 ) Appeal of Local Rate Order ) of the City of Newton, Iowa ) MEMORANDUM OPINION AND ORDER Adopted: June 15, 1998 Released: June 18, 1998 By the Acting Chief, Cable Services Bureau: I. INTRODUCTION 1. Heritage Cablevision, Inc. d/b/a TCI of Southern Iowa ("TCI"), the franchised operator of a cable television system serving the City of Newton, Iowa (the "City"), has filed an appeal of the City's local rate order, Resolution No. 97-68, adopted May 27, 1997. The local rate order denied increases in TCI's installation charges and leased equipment rates proposed on FCC Form 1205 and submitted to the City on or about March 1, 1997. TCI challenges the local rate order on the grounds that the City failed to provide any specific basis for rejecting the system's proposed rate increases. The City has not filed an opposition. II. BACKGROUND 2. Under the Commission's rules, rate orders made by local franchising authorities ("LFAs") may be appealed to the Commission. In ruling on appeals of local rate orders, 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 the LFA's decision only if it determines that the LFA acted unreasonably in applying the Commission's rules in rendering its local rate order. If the Commission reverses the LFA's decision, it will not substitute its own decision but instead will remand the issue to the LFA with instructions to resolve the case consistent with the Commission's decision on appeal. 3. FCC Form 1200 is the official form used to determine whether an operator's initial regulated programming rates are reasonable under the revised benchmark rules which apply to operators beginning May 15, 1994, or upon expiration of the deferral period provided under our rules for operators to comply with the revisions to our rules. In Form 1200, an operator calculates its provisional rates and its full reduction rates. An operator uses FCC Forms 1210 or 1240 to justify adjustments to the initial rates it computed on its FCC Form 1200. Form 1210 can be filed as often as quarterly. Form 1240 is filed annually. 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 used to justify equipment and installation costs. Operators filing Form 1240 to justify tier costs file Form 1205 at the same time. 4. The Commission's annual rate adjustment methodology using FCC Form 1240 provides for a ninety day review process, at the end of which the operator can put its rates into effect, unless the rate changes are rejected as unreasonable. A local franchising authority may disapprove a rate increase only after completing its review of the requested rate increase and determining that the rates are unreasonable, pursuant to Commission rules governing local rates. During its review, a franchising authority may request information that is related to the rate determination. If the franchising authority does not issue a rate decision and the operator makes a rate adjustment after the ninety-day period expires, the franchising authority has twelve months from the date the operator filed for the rate adjustment to issue a rate order requiring a prospective rate reduction and refunds, where appropriate. A rate decision disapproving any part of a rate increase must explain the bases for the franchising authority's action so that the cable operator can know why the rate was disapproved and can appeal the decision to the Commission if it believes the decision is unfair. When Form 1205 is filed with Form 1240, it is subject to the same procedures as the Form 1240. III. SUFFICIENCY OF THE CITY'S DECISION A. TCI's contentions 5. The City's rate order states that additional information is needed from TCI and denies TCI's proposed rate increase "in the best interests of the citizens of Newton." TCI states that, subsequent to the adoption of this rate order, the City's consultant served it with an additional information request, making clear that the City had not finished its review. TCI asks that the rate order be vacated because it is premature and fails to state why TCI's rates are unreasonable. TCI also asks that the City be instructed to forbear from issuing any further rate order until its regulatory review is complete. B. Discussion 6. We have previously addressed the need for LFAs to explain the bases of their decisions. In the Rate Order, the Commission stated: "[w]e will thus require that a franchising authority issue a written decision to the public and give public notice of such decision whenever it disapproves, in whole or in part, either initial rates for the basic service tier and accompanying equipment, or a request for an increase in those rates, or approves a proposed rate over the objections of interested parties." In several subsequent decisions, including Chillicothe Cablevision, Inc., the Bureau held that Commission rules require LFAs to issue written decisions, and that those decisions must affirmatively demonstrate why an operator's proposed rates are unreasonable. No such explanation can be comprehensive, however, until the LFA has finished its review of the cable operator's proposed rates, which is why LFAs are expected to issue their rate orders following completion of their review and not prior to that time. The City's resolution does not comport with these requirements. It does not affirmatively demonstrate why TCI's proposed rate is unreasonable but merely states that additional information is necessary and that denial is in the best interest of the local citizens. We remand this case for further proceedings consistent with this decision. IV. ORDERING CLAUSES 7. Accordingly, IT IS ORDERED that the appeal filed June 26, 1997, by Heritage Cablevision, Inc. d/b/a TCI of Southern Iowa IS GRANTED and Resolution No. 97-68 dated May 27, 1997 IS REMANDED to the City of Newton, Iowa for proceedings consistent with the terms of this Order. 8. IT IS FURTHER ORDERED that the Request For Emergency Stay Of Local Rate Order filed July 1, 1997 by Heritage Cablevision, Inc. d/b/a TCI of Southern Iowa IS DISMISSED. 9. This action is taken by the 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