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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 CABLE SYSTEMS ) ) File No. CSB-A-0369 Appeal of a Local Rate Order ) CUID OR0052 of the Regional Cable Commission ) (acting on behalf of Drain, Oregon) ) MEMORANDUM OPINION AND ORDER Adopted: June 26, 1998 Released: June 30, 1998 By the Acting Chief, Cable Services Bureau: I. Introduction 1. Petitioner, Falcon Cable Systems ("Falcon"), requests that we review and stay the enforcement of a rate order adopted by the Regional Cable Commission ("RCC") ("November 1996 Rate Order") on behalf of the City of Drain, Oregon. In the November 1996 Rate Order, the RCC denied Falcon's request to increase charges for its Basic Service Tier ("BST") of cable programming and rejected Falcon's proposed increases to certain charges for equipment and installation. The RCC did not file a response to the Petition. For the reasons discussed below, we remand this matter to the RCC for further proceedings consistent with this decision. II. Procedure and Standard of Review 2. After its initial rates have been set, a cable operator electing to use the quarterly rate adjustment system pursuant to Section 76.922(d) of the Commission's rules may file proposed rate changes as often as quarterly for the BST and annually for equipment and installation rates. The operator uses FCC Form 1210 for its BST rate adjustments and Form 1205 to establish its actual equipment and installation costs. Thirty days after a cable operator has submitted its proposed rates for review by the franchising authority, the proposed rates will become effective unless the franchising authority tolls the deadline by issuing a brief written tolling order within the 30-day period. The franchising authority then has an additional 90 days in cases not involving cost-of-service showings in which to request or consider additional information from the cable operator or comments from interested parties. Before the end of this additional review period, the franchising authority may extend the deadline still further and may preserve its authority to order refunds by issuing an accounting order directing the operator to keep an accurate account of its financial records. If the franchising authority has not issued a rate decision or an accounting order by the end of the additional review period, the operator's proposed rates will go into effect without being subject to retroactive refunds. If a franchising authority subsequently issues a rate order, the franchising authority may not require subscriber refunds as part of its rate order. A franchising authority that has not, however, rendered a rate decision or issued an accounting order before the expiration of the 120-day review period may still prescribe rates and order a prospective rate reduction when it issues its rate order. 3. In rate regulation proceedings, the cable operator bears the burden of proving the reasonableness of its existing or proposed rates for the BST and associated equipment. The local franchising authority must provide the cable operator with an opportunity to participate in the rate review process and to provide documentation supporting its proposed rates. In addition, the local franchising authority must provide a reasonable opportunity for consideration of the views of interested parties. If the local franchising authority determines that the cable operator's proposed rates exceed the maximum levels set forth in the Commission's rate standards, it may prescribe rates different from those proposed, provided that it affirmatively demonstrates, in a written decision that is available to the public, why the cable operator's rates are unreasonable and why its prescribed rates are reasonable. 4. Rate orders entered by local franchising authorities may be appealed directly to the Commission. The Commission will not conduct a de novo review of the challenged rate order, but will examine the decision to determine whether the local franchising authority has provided a reasonable basis for its decision. If the Commission determines that no reasonable basis exists in the record to sustain the local franchising authority's challenged rate order, the Commission will remand the rate order to the local franchising authority for resolution of the matter in a manner consistent with the Commission's decision and appropriate authority. III. Discussion 5. The RCC was created by intergovernmental compact to further communications policy among its members and to carry out and administer cable regulation on their behalf. It issued the November 1996 Rate Order on November 20, 1996. It found that Falcon's proposed BST rate of $15.84 exceeded the maximum permitted rate of $14.25. Consequently, the RCC ordered Falcon to reduced its BST rate to $14.25. It also ordered Falcon to reduce certain equipment charges to amounts that the RCC deemed appropriate. In the rate order, the RCC stated that Falcon transmitted to it copies of FCC Forms 1205 and 1210 on February 27, 1996. On March 27, 1996, the RCC issued a tolling order, which it followed on July 1, 1996 with an accounting order. The RCC ordered Falcon to refund "all fees collected in excess of the appropriate rate levels specified herein." 6. Falcon disputes the RCC's chronology of events, contending that it submitted an FCC Form 1210 to the RCC on June 12, 1995, in which it justified a $0.46 increase to its BST rate, and an FCC Form 1205, in which it justified increases to certain equipment charges. Falcon alleges that it did not increase its BST rate in 1996 and did not file an FCC Form 1210 with the RCC in 1996. Thus, Falcon argues, the RCC did not initiate its review nor issue tolling or accounting orders within the periods set forth in the Commission's regulations and, consequently, cannot order Falcon to refund to subscribers amounts derived from its FCC Form 1210 filing of June 12, 1995. Assuming that Falcon filed when the RCC states that it did, Falcon argues that the accounting order was several days too late. Additionally, Falcon contends that the RCC failed to provide a reasonable basis for its rejection of either the proposed BST rate increase or the equipment charges in that it did not explain why Falcon's charges were unreasonable and why its prescribed charges were reasonable. 7. The November 1996 Rate Order states that the RCC gathered information with respect to Falcon's charges and evaluated the same, but offers only the conclusion that Falcon's proposed rates exceeded the permitted rates set forth in the November 1996 Rate Order. It provides no explanation as to why Falcon's charges were unreasonable and why the RCC's prescribed charges were reasonable and, therefore, fails to provide a reasonable basis for the RCC's decision. A written order protects the due process rights of the cable operator by explaining why the rate was disapproved and providing a basis to refile the rates or appeal the decision to the Commission. Accordingly, we remand this case to the RCC for further proceedings consistent with this Memorandum Opinion and Order. 8. On remand the RCC may issue a written decision prospectively disapproving any portion of Falcon's rates if the decision explains why the amount disapproved is unreasonable. The RCC may not order retroactive refunds, however, unless it timely issued both tolling and accounting orders pursuant to the Commission's rules governing the quarterly rate adjustment system elected by Falcon in this case. As part of the remand process, the RCC should resolve the factual question as to when Falcon submitted the rate forms at issue here and explain what the RCC relied on to make that determination. If Falcon submitted its proposed rates for franchising authority review on February 27, 1996, as the RCC's rate order states, or earlier as Falcon contends, an accounting order adopted on July 1, 1996 would be more than 120 days after Falcon's submission and, therefore, would be too late to establish the RCC's right to order refunds under the Commission's rules. IV. Ordering Clauses 9. Accordingly, IT IS ORDERED that Falcon Cable Systems Petition for Review of Rate Order IS GRANTED to the extent noted herein and otherwise IS DENIED. 10. IT IS FURTHER ORDERED that this matter IS REMANDED to the Regional Cable Commission, acting on behalf of the City of Drain, Oregon, to conduct proceedings consistent with this Memorandum Opinion and Order and appropriate authority. 11. IT IS FURTHER ORDERED that Falcon Cable Systems Emergency Petition for a Stay of Enforcement Pending Review of the Regional Cable Commission's November 1996 Rate Order IS DISMISSED as moot. 12. This action is undertaken by the Acting Chief, Cable Services Bureau, pursuant to authority delegated under 47 C.F.R.  0.321(a)(3). FEDERAL COMMUNICATIONS COMMISSION John E. Logan Acting Chief, Cable Services Bureau