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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 ) ) CUID No. MD0172 (Prince George's County) Jones Communications ) of Maryland, Inc. ) ) Complaint Regarding ) Cable Programming Services Tier Rates ) and ) Petition for Reconsideration ) ORDER ON RECONSIDERATION and RATE ORDER Adopted: August 4, 1998 Released: August 7, 1998 By the Deputy Chief, Cable Services Bureau: 1. In this Order we consider a complaint against the February 1, 1998 rate increase that the above-captioned operator ("Operator") implemented for its cable programming services tier ("CPST") in the community referenced above. Operator has attempted to justify its CPST rate increase through a benchmark showing on FCC Forms 1240. We have already issued orders that resolved previous complaints against Operator's rates from September 1, 1993 through May 14, 1994. This Order addresses only the reasonableness of Operator's February 1, 1998 CPST rate increase. We have also released a rate order ("Prior Order") concerning Operator's CPST rates after May 15, 1994 through December 9, 1996. On December 31, 1996, Operator filed a petition for reconsideration ("Petition") of the Prior Order. Operator also filed a Petition for Stay on January 7, 1997. In this Order we will consider Operator's Petition as well as the above- referenced complaint. Because we are reviewing Operator's Petition we will dismiss Operator's Petition for Stay as moot. 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 the CPST rates be filed with the Commission by a local franchising authority ("LFA") that has received more than one subscriber complaint. 3. To justify rates for the period beginning May 15, 1994 through a benchmark showing, operators must use the FCC Form 1200 series. Cable operators may also justify rate increases based on the addition and deletion of channels, changes in certain external costs, and inflation, by filing FCC Form 1210. Operators are permitted to make changes to their rates on a quarterly basis using FCC Form 1210. FCC Form 1210 must be filed at least 30 days before new rates are scheduled to go into effect where the Commission has found the cable programming service rate to be unreasonable less than one year prior to the filing, or where there is a pending complaint against the CPST rate. Operators may alternatively justify adjustments to 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. 4. The LFA for the franchise area referenced above filed a complaint with the Commission on May 13, 1998, against Operator's February 1, 1998 CPST rate increase from $11.11 to $11.66. The LFA verified that it received more than one subscriber complaint for the franchise area and that the first complaint was received by the LFA on February 2, 1998. 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. 5. In the Prior Order, we found that Operator had justified its maximum permitted rate ("MPR") of $9.01 on its FCC Form 1200, but was actually charging a CPST rate of $9.04, effective May 15, 1994. Therefore we found that Operator's actual CPST rate, effective May 15, 1994 through September 30, 1994 was unreasonable. We also found that Operator had justified its CPST rates, effective October 1, 1994 through April 30, 1995. We further found that Operator filed an FCC Form 1210 to justify a CPST rate increase of $0.26 effective May 1, 1995. We found that Operator did not correctly calculate its MPR on this filing. Operator claimed a previous permitted charge of $9.37 for the CPST on Line A2 of its FCC Form 1210 filing. The correct MPR from its previous FCC Form 1210 was $9.26. We adjusted Line A2 to reflect the corrected previous permitted rate to $9.26 for CPST. In addition, Operator did not bring forward the correct previous external cost amounts as filed on Line B10 of its previous FCC Form 1210. In accordance with FCC Form 1210 instructions, we corrected Line B13 on the May 1, 1995 FCC Form 1210 filing to reflect the external costs recorded on Line B10 of the previous FCC Form 1210 filing. Our correction reduced the MPR for the CPST from $9.45 to $9.33. Thus, Operator failed to demonstrate that its May 1, 1995 rate of $9.48 for its CPST was not unreasonable. On October 17, 1995, Operator filed its FCC Form 1210 to justify a CPST rate increase of $0.29 effective October 1, 1995. Upon review of the FCC 1210, we adjusted Module A, Line A2 to reflect our corrections to the MPR on the previous FCC Form 1210. Finally, we adjusted Operator's inflation to conform with the FCC published rate for the 12 months ending June 30, 1995. These adjustments resulted in a reduction of the MPR for the CPST to $9.61 from the rate of $9.74 filed by Operator. Thus, Operator failed to demonstrate that its October 1, 1995 rate of $9.77 for its CPST was not unreasonable. 6. Additionally, in the Prior Order, Operator filed FCC Form 1240. We adjusted Module A, Line A1 of that Form to reflect the corrected MPR of $9.61 brought forward from the prior FCC Form 1210. In addition, we again adjusted Operator's inflation to conform with the FCC published rate. We also corrected Worksheet 8 and Line H1 to reflect the MPR corrections we made on FCC Forms 1210 for prior months included in the true-up period. As a result of our adjustments, the MPR of $11.11 calculated by Operator on its FCC Form 1240 for CPST was corrected to $10.78. Thus, Operator failed to demonstrate that its June 1, 1996 rate of $11.13 for its CPST was not unreasonable. 7. In its Petition, Operator argues that it deferred implementing a permitted quarterly increase to its CPST rate in the first quarter of 1995. Because the system's rate had been increased on October 1, 1994 to recover external costs the Operator incurred through the second quarter of 1994, the Operator deferred a rate increase for costs incurred in the third quarter of 1995 and for inflation incurred in the September 1, 1993 through June 30, 1994 period. Instead, Operator prepared FCC Form 1210 but did not file it. Operator entered on its next submitted Form 1210 the previous maximum permitted rate and external costs (including inflation) that were derived from the From 1210 which had been prepared but was not filed, rather than from its previously filed Form 1210. Operator argues that the Commission, which did not have the additional third quarter costs before it, therefore recalculated Operator's Form 1210 filed February 27, 1995 and all other FCC Forms 1210 and 1240 filed subsequent to it. Operator argues that Commission should now consider the FCC Form 1210 that was prepared but not filed to show that Operator incurred permitted external costs during the third quarter of 1995. Operator amended its FCC Forms 1210, filed February 27, 1995 and October 17, 1995, on December 20, 1996. Operator contends that the Bureau should reconsider its Prior Order and permit Operator to recover externals costs and inflation as reflected on Operator's amended FCC Forms 1210. 8. We have previously found that once "an operator has filed FCC Forms with the Commission, each of which requires a signed certification statement that the information on the FCC Form is true and correct, we are entitled to act upon that information. Moreover, once we have released an order concerning those FCC Forms, we cannot ordinarily allow an operator to amend those FCC Forms on appeal with information that should have been submitted in the original certification." Operators that fail to timely file their FCC Forms do so at their own peril. 9. Additionally, our rules concerning the filing of FCC Form 1210 reflect a need for timeliness and certainty in the rate setting process. They provide operators using the quarterly rate adjustment method with a "use it or lose it" choice: Permitted charges for a tier may be adjusted up to quarterly to reflect changes in external costs experienced by the cable system .... In all events, 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. A system must also adjust its rates annually to reflect any changes in external costs, inflation and the number of channels on regulated tiers that occurred during the year if the system wishes to have such changes reflected in its regulated rates. A system that does not adjust its permitted rates annually to account for those changes will not be permitted to increase its rates subsequently to reflect the changes. Similarly, the rules stipulate that inflation adjustments "may be made after September 30, but no later than August 31, of the next calendar year." 10. The rules are unequivocal regarding the timing of rate adjustments, and they do not permit the relief that Operator seeks. The rules serve to ensure fundamental precepts of certainty, stability and fairness. Essentially, Operator is asking for a waiver of our rules. However, Operator has provided us with no reason why such extraordinary relief should be granted, other than that it believed its FCC Form 1210 filings to be justified. To grant Operator's request would be to set a precedent for operators to seek to reform later filed rate justifications whenever we find an earlier rate increase to be unreasonable. We believe that such a precedent would lead to an administratively untenable situation and would be unfair to operators who adhered to the rules. For these reasons, we deny Operator's Petition in this respect. 11. Operator also asks that we reconsider our finding that its CPST rate, effective May 15, 1994 through September 30, 1994, was unreasonable. Operator states that its actual CPST rate was $9.01, not $9.04, as indicated in the Prior Order, and therefore did not exceed its approved MPR of $9.01. Operator demonstrates that its actual rate was $9.49 (including franchise fees) and $9.01 (excluding franchise fees). We accept Operator's showing and will vacate the Prior Order in this respect. 12. We now consider the complaint filed by the LFA against Operator's February 1, 1998 CPST rate increase. Operator filed FCC Form 1240, for the projected period January 1, 1998 through December 31, 1998, to justify its CPST rate beginning February 1, 1998. Upon review, we find that Operator did not correctly calculate its maximum permitted rate ("MPR"). We adjusted Line A1 (Current Maximum Permitted Rate) to $10.78 to conform with the previous revised FCC 1240. Therefore, we revised Worksheet 1 (True-Up Period Inflation) which adjusted Line C3 (Inflation Factor for True-Up Period 1) to 1.0221. We also revised Line C5 (Current FCC Inflation Factor) to 1.0114. We also revised Line D6 (Current True-Up Segment) to $0.2074 and Line D7 (Current Inflation Segment) to $0.1506. We revised Line I1 (Caps Method Segment for Projected Period) to $0.47 because Operator incorrectly took a $0.20 per channel adjustment for a channel added to the CPST rate in January 1998. We also revised Modules F, G, H and I to conform with the above adjustments. These revisions reduced Operator's MPR, for the projected period January 1, 1998 to December 31, 1998, to $11.36. Because Operator's actual CPST rate, effective February 1, 1998, is $11.66, we find Operator's actual CPST rate, effective February 1, 1998, to be unreasonable. 13. Accordingly, IT IS ORDERED, pursuant to Section 1.106 of the Commission's rules, 47 C.F.R. Section 1.106, that Petition for Reconsideration of In the Matter of Maryland Cable Partners, L.P., 11 FCC Rcd 20890 (1996), IS DENIED IN PART AND GRANTED IN PART. 14. IT IS FURTHER ORDERED, pursuant to Section 0.321 and 1.43 of the Commission's rules, 47 C.F.R.  0.321 and 1.43, that the Petition for Stay of In the Matter of Maryland Cable Partners, L.P., 11 FCC Rcd 20890 (1996), IS DISMISSED AS MOOT. 15. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that In the Matter of Maryland Cable Partners, L.P., 11 FCC Rcd 20890 (1996), IS VACATED IN PART AND AFFIRMED IN PART. 16. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the CPST rates of charged by Operator in the community referenced above, effective May 15, 1994 to April 30, 1995, ARE REASONABLE. 17. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the CPST rates charged by Operator in the community referenced above, effective May 1, 1995 through January 31, 1998, ARE UNREASONABLE. 18. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the CPST rate of $11.66 charged by Operator in the community referenced above, effective February 1, 1998, IS UNREASONABLE. 19. 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 $9.33 per month (plus franchise fees), plus interest to the date of the refund, for the period May 1, 1995 through June 30, 1995. 20. 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 $11.36 per month (plus franchise fees), plus interest to the date of the refund, for the period February 1, 1998 through the day before Operator implements the maximum permitted CPST rate of $11.36. 21. 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. 22. 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. 23. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the LFA complaint referenced herein against the rates charged by Operator in the community set forth above IS GRANTED. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Deputy Chief, Cable Services Bureau