******************************************************** 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: ) ) CUID No. OH 0250 TCI CABLEVISION OF OHIO, INC. ) ) ) Appeal of Local Rate Order of the ) City of Fairfield, Ohio ) MEMORANDUM OPINION AND ORDER Adopted: June 25, 1998 Released: July 1, 1998 By the Acting Chief, Cable Services Bureau: I. INTRODUCTION 1. On July 12, 1995, TCI Cablevision of Ohio, Inc. ("TCI-O") filed with the Commission an appeal of a rate order adopted on June 12, 1995 by the City of Fairfield, Ohio (the "City"). In the local rate order, the City established a regulated rate for TCI-O's basic service tier and ordered TCI-O to issue refunds for the period January 1, 1995 through March 31, 1995. The City filed an opposition to the appeal. II. SUMMARY OF PLEADINGS 2. In its review of TCI-O's Forms 1200 and 1210, respectively, the City approved TCI-O's permitted rate for its basic service tier as justified on Form 1200 but found that TCI-O could not implement that rate because TCI-O's Form 1210 indicated a decrease in its maximum permitted rate for basic service. Because TCI-O had not decreased its rate on its own after preparing Form 1210, the City ordered a refund of the amount of the difference between the amount justified on TCI-O's Form 1200, $9.75, and the maximum permitted rate established on Form 1210, $9.70. 3. TCI-O asserts that the City's refund order violates the Commission's rules governing rate regulation because the City retroactively imposed a rate reduction in the maximum permitted rate for TCI- O's basic service tier. TCI-O argues that a cable operator can implement a rate adjustment pursuant to Form 1210 only after the proposed adjustment has been approved by the local franchising authority. TCI- O further asserts that the City's refund order, which was issued in June, 1995, improperly requires TCI-O to issue subscriber refunds in its July, 1995 billing. TCI-O maintains that Commission rules provide that operators should receive at least 60 days to comply with a local rate order. 4. In opposition, the City asserts that the Commission's rules require a cable operator to automatically decrease programming rates if, after the required annual review of external costs, the operator finds that it has experienced a decrease in those costs. With regard to the City's order to issue subscriber refunds in TCI-O's July bills, the City asserts that 30 days is sufficient time within which to comply with its refund order. Further, the City states that it would have given TCI-O more time to implement the refund order if TCI-O would have made known its concerns regarding the time necessary for compliance prior to adoption of the final rate order. III. BACKGROUND 5. Under our rules, rate orders made by local franchising authorities 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 a reasonable basis for that decision exists. The Commission will reverse a franchising authority's rate decision only if it determines that the franchising authority acted unreasonably in applying the Commission's rules. 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. 6. A cable operator uses FCC Form 1210 to justify adjustments in the rates the operator previously computed on FCC Form 1200 or on a previously filed Form 1210. A cable operator calculates its initial maximum permitted rates on Form 1200, which are the higher of the operator's provisional rates and its full reduction rates. An operator may file a Form 1210 to adjust its rates to reflect changes in external costs, channel additions and deletions, and inflation. External costs include the following categories: 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. An operator may file for changes in external costs for the period beginning at the end of the last quarter for which an adjustment was previously made through the end of the quarter that has most recently closed preceding the filing of the Form 1210. An operator may file a Form 1210 as often as quarterly, but must file in the quarter following a decrease in costs due to channel deletions and within a year following a decrease in other costs. An operator must file for a rate increase within a year of any changes in external costs or inflation in order to recover those costs in its rates. IV. DISCUSSION A. Rate Decrease Under Form 1210 7. TCI-O argues that Section 76.933(a) of our rules requires a local franchising authority to approve all programming and equipment rate adjustments prior to their implementation by a cable operator. TCI-O further argues that the Commission's rules regarding franchising authority approval of rate adjustments do not differentiate between rate increases and rate decreases. Each adjustment must receive prior approval before subscribers may be charged the adjusted rate. Thus, TCI-O asserts that the City cannot order refunds on a retroactive basis because that would have the effect of permitting automatic rate adjustments without the benefit of the City's prior approval. 8. The City asserts that, contrary to TCI-O's arguments, the Commission's rules are quite specific regarding automatic adjustment of service rates to reflect a rate decrease. The City makes reference to Section 76.922(d)(3)(i) of our rules governing rate adjustments pursuant to Form 1210. In that rule section, we state that "a system must adjust its rates annually to reflect any decreases in external costs that have not previously been accounted for in the system's rates." The City states that TCI-O submitted its Form 1210 on January 25, 1995 and an amended Form 1210 on February 9, 1995 which showed that TCI-O's external costs had decreased for the annual period ending December 31, 1994. The City further states that on February 28, 1995, TCI-O filed a request for a rate increase which the City continued to review. The City argues that, although it approved TCI-O's basic service rate of $9.75 as established on Form 1200, the City was justified in ordering refunds based upon the adjusted rate of $9.70 that was established in TCI-O's year-end filing on Form 1210. Further, the City argues that, in light of TCI-O's request for a rate increase, the City was reasonable in limiting its refund order to the first quarter of 1995 rather than delaying the decision until such time as it rules on TCI-O's request for a rate increase. 9. We agree with the City. Neither the Communications Act nor the Commission's rules require advance franchising authority approval of rate decreases for systems using the quarterly rate adjustment method. Section 623(b)(7) of the Communications Act requires advance notice to a franchising authority only of any increase in the proposed price for the BST. Section 76.933(a) of the Commission's rules, which governs franchising authority review of BST rates under the quarterly rate adjustment method used by TCI-O, provides an opportunity for advance franchising authority review of rate increases but does require the same procedures for rate decreases. The Commission's rules do provide that a system using the quarterly rate adjustment method "must adjust its rates annually to reflect any decreases in external costs that have not previously been accounted for in the system's rates." The instructions for FCC Form 1210, which is used to compute external cost changes, instruct the operator that, "if you experience a decrease in external cost that is not later reflected in another rate filing, you must submit this Form and reduce your rate no later than one year after the decrease occurred." When TCI-O computed its rates on the basis of the decrease in its external costs, it should have decreased its rates accordingly, without waiting for advance approval of the decrease from the franchising authority. The City was not unreasonable in ordering refunds for the quarter between TCI-O's recomputation of its external costs on Form 1210 and TCI-O's subsequently-filed Form 1210 proposing a future rate increase. Accordingly, we deny TCI-O's appeal on this issue. B. Refund Timetable 10. TCI-O insists that the City should have given it at least 60 days to issue subscriber refunds under the terms of the local order. In support of its position, TCI-O makes reference to Times Mirror in which we stated that a local franchising authority should give a cable operator sufficient time within which to comply with a rate order. The City responds that 30 days is sufficient to comply with its order. 11. Our rules do not explicitly require franchising authorities to provide cable operators with 60 days to comply with local rate orders. In Times Mirror, we note that, regarding rate orders issued by the Commission, we would allow 60 days for compliance. With regard to the timing of compliance with local rate orders, we have stated that cable systems must give 30 days written notice to subscribers and to local franchising authorities before implementing any rate or service change. We have further stated in a Public Notice that in specifying an effective date [for its local order], a franchising authority should take into consideration the amount of time necessary to prepare and send out notices and bills reflecting a rate change, giving due regard to the impact of cycle billing, if applicable. The clarifying information contained in the Public Notice was based upon the same rationale we used in concluding that cable operators should have 60 days to implement a Cable Services Bureau order requiring refunds with regard to rates charged for the cable programming service tier. In the Rate Order, the Commission explained that a 60-day time period to implement remedial measures will better accommodate standard billing cycles than the 30-day period we proposed in the Notice, thus preventing undue burdens on operators --- without adversely affecting subscribers. Thus, we find that, while a franchising authority has discretion to specify a reasonable time period for compliance with its rate order, the time specified must be sufficient to allow preparation and distribution of notices and bills and must accommodate the time demands of cycle billing, if any. The Commission found in the Rate Order that a reasonable time period was at least 60 days. We have no reason to believe that implementation of a local order should be any less time-consuming than the implementation of a Commission order. Accordingly, we grant TCI-O's appeal regarding the time needed for compliance with a local rate order. V. ORDERING CLAUSES 12. Accordingly, IT IS ORDERED that the appeal of the local order, with regard to TCI-O's refund liability for decreases in external costs, IS DENIED. 13. IT IS FURTHER ORDERED that the appeal of the local order, with regard to the timing of compliance with the City's refund order, IS GRANTED. 14. This action is taken by the Acting Chief, Cable Services Bureau, pursuant to authority delegated by Section 0.321 of the Commission's rules, 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Acting Chief, Cable Services Bureau