******************************************************** 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 ) ) Cox Communications, Inc. ) CUID Nos. RI0003 (Providence) ) RI0004 (North Providence) ) RI0006 (Coventry) ) RI0007 (East Greenwich) Complaint Regarding ) RI0008 (Warwick) Cable Programming Services Tier Rates ) RI0009 (West Warwick) ORDER Adopted: July 20, 1998 Released: July 23, 1998 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider a complaint against the November 1, 1997 rate increase of the above-referenced operator ("Operator") for its cable programming services tier ("CPST") in the communities referenced above. On December 1, 1995, we issued an Order approving a resolution ("Resolution") which Operator entered into with the Federal Communications Commission ("Commission"), which resolved all previous complaints filed against Operator's CPST rates in the communities referenced above. This Order addresses only the reasonableness of Operator's November 1, 1997 CPST 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. If the Commission finds a rate to be unreasonable, it shall determine the correct rate and any refund liability. The Telecommunications Act of 1996 ("1996 Act") and our rules implementing the new legislation ("Interim Rules"), require that complaints against CPST rates 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 areas referenced above filed a complaint with the Commission on April 27, 1998 against Operator's November 1, 1997 CPST rate increase from $15.63 to $17.51 The LFA verified that it received more than one subscriber complaint for each franchise area and that the first valid complaint was received by the LFA on November 26, 1997. The filing of a complete and timely LFA 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. 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 Cox Select, a new product tier ("NPT") and Cox Expanded Plus, a migrated product tier ("MPT"). 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 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 Cox Select tier is an NPT under our Going Forward Order and therefore not subject to regulation. 6. Under the terms of the Resolution, Operator may migrate up to four existing services from its CPST to an MPT and Operator may add an unlimited number of channels to an MPT at $0.20 per added channel plus license fees. We find Operator's Cox Expanded Plus MPT rate, effective November 1, 1997, to be in compliance with the Resolution. The LFA also complains about rate increases for the addressable converter and remote control to receive CPST. Under Section 76.923(a) of the Commission's rules, all equipment used to receive the basic service tier 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. Therefore, the LFA's complaint does not trigger our jurisdiction to regulate the addressable converter and remote control rates. 7. Upon review of Operator's FCC Form 1240 for the projected period November 1, 1997 through November 30, 1998, we find that Operator has not correctly calculated its maximum permitted rate ("MPR"). On Operator's FCC Form 1240, we adjusted Line F8 (True-Up Segment for True-Up Period 1) to $0.5716. This required us to revise Worksheet 1 (True-Up Period Inflation) which adjusted Line C3 (Inflation Factor for True-Up Period 1) to 1.0213. We also revised Line C5 (Current FCC Inflation Factor) to 1.0143. Our adjustments resulted in a revised MPR of $18.65 for the projected period rather than Operator's calculated MPR of $18.92 for the projected period. Because Operator's actual CPST rate of $17.51, effective November 1, 1997, is less than its revised MPR of $18.65, we find Operator's actual CPST rate of $17.51 to be reasonable. 8. 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 $17.51, charged by Operator in the communities referenced above, effective November 1, 1997, IS REASONABLE. 9. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the Cox Expanded Plus rate of $3.19 charged by Operator in the communities referenced above, effective November 1, 1997, IS REASONABLE. 10. 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. 11. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the referenced complaint IS DENIED. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau