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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 ) ) Time Warner Cable ) CUID No. NC0028 (Raleigh) d/b/a Cablevision of Raleigh ) ) Complaint Regarding ) Cable Programming Services Tier ) and ) Petition for Reconsideration ) ORDER ON RECONSIDERATION and RATE ORDER Adopted: June 18, 1998 Released: June 22, 1998 By the Acting Chief, Cable Services Bureau: 1. In this Order we consider a complaint against the January 1, 1998 rate increase that the above-captioned operator ("Operator") implemented for its cable programming services tier ("CPST") in the community referenced above. Operator has attempted to justify its CPST rate increase through a benchmark showing on FCC Forms 1240. We have already released a rate order ("Prior Order") concerning Operator's CPST rates beginning January 15, 1996 and a rate order concerning Operator's rates in effect September 1, 1993 through November 30, 1995. On August 26, 1997, Operator filed a petition for reconsideration of the Prior Order. Operator subsequently filed an amendment to its petition for reconsideration on January 2, 1998. We will review these documents together as one filing ("Amended Petition"). Operator also filed a Petition for Stay on August 26, 1997. In this Order we will consider Operator's Amended Petition as well as the above-referenced complaint. Because we are reviewing Operator's Amended Petition we will dismiss Operator's Petition for Stay as moot. 2. The Communications Act authorizes the Federal Communications Commission ("Commission") 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 the rate unreasonable, it shall determine the correct rate and any refund liability. The Telecommunications Act of 1996 ("1996 Act"), and our rules, require that complaints against CPST rates be filed with the Commission by a franchising authority that has received subscriber complaints. A franchising authority may not file a CPST rate complaint unless, within 90 days after such increase becomes effective, it receives more than one subscriber complaint. 3. Cable operators attempting to justify their rates for the period beginning May 15, 1994 using a benchmark showing must complete and file the FCC Form 1200 series. Cable operators may also justify rate increases based on the addition and deletion of channels, changes in certain external costs, and inflation, by filing FCC Form 1210. FCC Form 1210 must be filed at least 30 days before new rates are scheduled to go into effect where the Commission has found the cable programming service rate to be unreasonable less than one year prior to the filing, or where there is a pending complaint against the CPST rate. Cable 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. 4. On March 31, 1998, the local franchising authority ("LFA") for the community referenced above filed its complaint against Operator's January 1, 1998 CPST rate increase. In its complaint, the LFA asserts that it has received more than one subscriber complaint against Operator's rate increase, thereby triggering the Commission's jurisdiction to review the complaints. The valid complaint against Operator's CPST rates from the LFA triggers an obligation on behalf of the cable operator to file a justification of its CPST rate with the LFA. Thus, in this case, Operator is required to justify the increase in its CPST rate which is the subject of the LFA's complaint. Operator filed FCC Form 1240 with the LFA as justification for this rate increase. 5. In the 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 $19.79. Because Operator was actually charging a CPST rate of $19.85, we ordered Operator to make refunds to its CPST subscribers. 6. In its Amended Petition, Operator argues that our elimination of three months of the true- up period conflicts with the Social Contract for Time Warner ("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 Forms 1240 ("Amended FCC Forms 1240") 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 FCC Amended Forms 1240, for the projected period January 1, 1996 through December 31, 1996, we accept Operator's filings and find that Operator has justified its CPST rate of $15.70, 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 accept Operator's filing. On Operator's other FCC Form 1240, we adjusted Line I3 (Channel Movement and Deletion Segment for Projected Period), in accordance with FCC Form 1240 instructions, to $1.12 from $1.59 because Operator moved four channels to Tier 2 from Tier 3. This revision reduced Operator's total MPR to $19.45 for the projected period January 1, 1997 to December 31, 1997. Because Operator's actual CPST rate, effective January 1, 1997, is $19.85 we find that Operator's actual CPST rate, effective January 1, 1997 is unreasonable. 9. As part of its Amended Petition, and in response to the above-referenced LFA complaint, Operator filed Amended FCC Forms 1240 for the projected period January 1, 1998 to December 31, 1998. Upon review of these forms, we find that Operator did not correctly calculate its MPRs. On Operator's SCD Form 1240, we accept Operator's filing. Specifically, we find that Operator failed to use the most current FCC Inflation Factors available at the time Operator signed its FCC Form 1240. We adjusted Line A1 (Current Maximum Permitted Rate), Line D6 (Current True-Up Segment), Line D7 (Current Inflation Segment), Line D8 (Base Rate) and Line F4 (True-Up Period 1 Rate Eligible for Inflation), Line F5 (Inflation Segment for True-Up Period 1), Line F8 (True-Up Segment for True-Up Period 1) and Line F9 (Max Perm Rate for True-Up Period 1) to conform to our changes to Operator's prior FCC Form 1240. These revisions reduced Operator's total MPR to $20.55 for the projected period January 1, 1998 to December 31, 1998. Because Operator's actual CPST rate, effective January 1, 1998, is $22.17, we find that Operator's actual CPST rate, effective January 1, 1998 is unreasonable. 10. Accordingly, IT IS ORDERED, pursuant to Section 1.106 of the Commission's rules, 47 C.F.R. Section 1.106, that Amended Petition for Reconsideration of In the Matter of Time Warner Cable, d/b/a Cablevision of Raleigh, 12 FCC Rcd 23530 (1997). 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. Section 0.321, that In the Matter of Time Warner Cable, d/b/a Cablevision of Raleigh, 12 FCC Rcd 23530 (1997), IS VACATED. 12. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321, that the Petition for Stay of In the Matter of Time Warner Cable, d/b/a Cablevision of Raleigh, 12 FCC Rcd 23530 (1997), IS DISMISSED AS MOOT. 13. 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 $19.85, (exclusive of franchise fees), charged by Operator in the franchise area referenced above, effective January 1, 1997 through December 31, 1997, IS UNREASONABLE. 14. 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 $22.17, (exclusive of franchise fees), charged by Operator in the franchise area referenced above, effective January 1, 1998 through the present, IS UNREASONABLE. 15. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the franchise area referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of $20.55 per month (plus franchise fees), plus interest to the date of the refund, for the period January 1, 1998 through the day before Operator implements the maximum permitted CPST rate of $20.55. 16. IT IS FURTHER ORDERED that Operator shall promptly determine the overcharges to CPST subscribers for the stated periods, and shall within 30 days of the release of this Order, file a report with the Chief, Cable Services Bureau, stating the cumulative refund amount so determined (including franchise fees and interest), describing the calculation thereof, and describing its plan to implement the refund within 60 days of Commission approval of the plan. 17. 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 1240. 18. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the complaint referenced herein against the rates charged by Operator in the community set forth above IS GRANTED. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Acting Chief, Cable Services Bureau