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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. IL0189 (Champaign) ) Complaint Regarding ) Cable Programming Services Tier ) Rate Increase ) ORDER Adopted: June 25, 1998 Released: July 1, 1998 By the Acting Chief, Cable Services Bureau: 1. In this Order we consider complaints against the January 1, 1996 and January 1, 1998 rate increases of the above-referenced operator ("Operator") for its cable programming services tier ("CPST") in the community referenced above. On November 30, 1995, we issued an Order approving a Social Contract ("Social Contract") which Operator entered into with the Federal Communications Commission ("Commission"), which resolved all previous complaints filed against Operator's CPST rates. This Order addresses only the reasonableness of Operator's CPST rate increases beginning January 1, 1996. 2. Under the Communications Act, the 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, effective February 8, 1996, 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. Prior to the 1996 Act, the Commission's rules permitted subscribers to file complaints against CPST rates directly with the Commission. 3. Valid subscriber complaints were filed with the Commission on January 27, 1996 and February 7, 1996 against Operator's January 1, 1996 CPST rate increase from $14.30 to $17.61. The LFA for the franchise area referenced above filed a complaint with the Commission on April 20, 1998 against Operator's January 1, 1998 CPST rate increase from $20.13 to $21.53. 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 February 10, 1998. 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. To justify rates for the period beginning May 15, 1994, operators must use the FCC Form 1200 series. Operators are permitted to make changes to their rates on a quarterly basis using FCC Form 1210. 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. On November 30, 1995, we issued an Order approving a Social Contract which Operator entered into with the Commission ("Social Contract"). Subsequently, Operator was given permission by Commission staff to file bifurcated FCC Form 1240s 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 FCC Form 1240 Instructions. 6. 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. In the present case, we will allow Operator to file its bifurcated FCC Form 1240s because we instructed Operator to make such filings. Absent such explicit instructions, we would reject the FCC Form 1240s filed by Operator. Further, our acceptance of Operator's bifurcated FCC Form 1240 methodology still requires that we review Operator's calculations on these FCC Form 1240s. 7. Upon review of Operator's FCC Form 1240s, for the projected period January 1, 1996 through December 31, 1996, we find that Operator has not correctly calculated its maximum permitted rate ("MPR"). On Operator's SCD Form 1240, we accept Operator's filing. On Operator's FCC Form 1240, we adjusted Worksheet 8 (True-Up Rate Charged) Lines 801 through 804 to conform with Operator's actual CPST rate based on Operator's rate card. These adjustments resulted in a total MPR of $17.98 effective January 1, 1996. Because Operator's actual CPST rate of $17.61, effective January 1, 1996, is less than its revised MPR, we find Operator's actual CPST rate of $17.61, effective January 1, 1996, to be reasonable. Upon review of Operator's FCC Form 1240s, for the projected period January 1, 1997 to December 31, 1997, we adjusted Line 801 on both the SCD and FCC Form 1240s to conform with Operator's actual CPST rate based on Operator's rate card. We adjusted both the SCD and FCC Form 1240s to conform to the prior revised FCC Form 1240s. These adjustments resulted in a revised total MPR of $19.89 effective January 1, 1997. Because Operator's actual CPST rate of $20.13 effective January 1, 1997, exceeds its revised MPR, we find Operator's actual CPST rate of $20.13 effective January 1, 1997, to be unreasonable. 8. Upon review of Operator's FCC Form 1240s for the projected period January 1, 1998 to December 31, 1998, we adjusted both the SCD and FCC Form 1240s to conform to the prior revised SCD and FCC Form 1240s. We adjusted Line 801 on Operator's SCD Form 1240 to conform with Operator's actual CPST rate based on Operator's rate card. On Operator's FCC Form 1240, we adjusted Line 804 to conform with Operator's actual CPST rate based on Operator's rate card. We also adjusted the Inflation Factors on Worksheet 1 (True-Up Period Inflation) which adjusted Line C3 (Inflation Factor for True-Up Period 1) to 1.0193. We also revised Line C5 (Current FCC Inflation Factor) to 1.0143. These revisions reduced Operator's total MPR to $21.26 for the projected period January 1, 1998 to December 31, 1998. Because Operator's actual CPST rate of $21.53, effective January 1, 1998, exceeds its revised MPR, we find Operator's actual CPST rate of $21.53, effective January 1, 1998, to be unreasonable. 9. 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 $17.61, charged by Operator in the franchise area referenced above, effective January 1, 1996, IS REASONABLE. 10. 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 $20.13, charged by Operator in the franchise area referenced above, effective January 1, 1997, IS UNREASONABLE. 11. 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 $21.53, charged by Operator in the franchise area referenced above, effective January 1, 1998, IS UNREASONABLE. 12. 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 $21.26 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 $21.26. 13. 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. 14. 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. 15. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the complaints referenced herein against the rates charged by Operator in the community set forth above ARE GRANTED TO THE EXTENT INDICATED HEREIN. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Acting Chief, Cable Services Bureau