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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 ) ) Falcon Cablevision ) CUID No. CA1406 (Hidden Hills) d/b/a Falcon First, Inc.) ) Complaint Regarding ) Cable Programming Services Tier Rates ) ORDER Adopted: June 19, 1998 Released: June 24, 1998 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider a complaint against the rate the above-referenced operator ("Operator") was charging for its cable programming services tier ("CPST") in the community referenced above. This Order addresses only Operator's October 1, 1997 rate increase. 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 October 1, 1997 CPST rate increase from $7.34 to $8.41. The LFA verified that it received more than one subscriber complaint for the franchise area and that the first valid complaint was received by the LFA on October 15, 1997. 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. 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. In its complaint, the LFA also questions rate increases for other cable services provided by Operator, specifically Operator's SatPac1 and SatPac2 tiers and a new interactive service called Starsight. In Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, MM Docket Nos. 92-266 and 93-215, Sixth Order on Reconsideration, Fifth Report and Order, and Seventh Notice of Proposed Rulemaking ("Going Forward Order"), the Commission established criteria for the creation of New Product Tiers ("NPTs"), which cannot include channels taken from regulated tiers. The Commission concluded, however, that cable operators would be permitted to treat certain packages, in existence as of the Going Forward Order, as NPTs, so long as such packages involve only a small number of migrated channels. Upon review, we find that Operator's SatPac1 and SatPac2 tiers are NPTs under our Going Forward Order and therefore not subject to regulation. The LFA also complains about Operator's increases for the SatPac and Starsight additional outlet charges. Under Section 76.923(a) of the Commission's rules, all equipment used to receive the basic service tier ("BST") is subject to rate regulation, regardless of whether such equipment is used to receive other tiers of regulated programming and/or unregulated service. Such equipment-related charges are subject to regulation by the LFA. If subscribers obtain both the BST and unregulated programming on the outlet for which Operator imposes an additional outlet charge, the LFA has jurisdiction to determine the reasonableness of Operator's additional outlet charges. In either case, the LFA's complaint does not trigger our jurisdiction to regulate the additional outlet charges. 6. Upon review of Operator's FCC Form 1240 for the projected period October 1, 1997 through September 30, 1998, we find that Operator has not correctly calculated its maximum permitted rate ("MPR"). Operator used a rate higher than its actual CPST rate as the starting rate on Line A1 of its FCC Form 1240. Operator also included true-up adjustments for the period July 1, 1996, through June 30, 1997. However, because Operator filed its FCC Form 1240 with the Commission in response to a complaint, and Operator was not subject to regulation by the Commission at the time the complaint was filed, Operator is not entitled to any true-up adjustment. Therefore, we substituted Operator's actual CPST rate as the starting rate on Line A1 of its FCC Form 1240 and recalculated Operator's FCC Form 1240 without the true-up adjustment in Module I, Line I8. We also adjusted Operator's Line I1 and Worksheet 2 (CAPS Method Segment for Projected Period) in accordance with the FCC Form 1240 Instructions for operators not subject to regulation. These adjustments required that we adjust Operator's inflation factor at Operator's Line C5 (Current FCC Inflation Factor) to 1.0143. Our adjustments resulted in a revised MPR of $8.96 for the projected period. Because Operator's actual CPST rate of $8.41, effective October 1, 1997, is less than its revised MPR of $8.96, we find Operator's actual CPST rate of $8.41 to be reasonable. 7. 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 $8.41 (exclusive of franchise fees), charged by Operator in the franchise area referenced above, effective October 1, 1997 through the present, IS REASONABLE. 8. 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. 9. 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 DENIED. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau