******************************************************** 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 Nos. RI0013 (Cranston) ) RI0014 (Johnston) Cox Cable Rhode Island, Inc. ) RI0032 (Scituate) ) RI0037 (Glocester) Complaints Regarding ) RI0038 (Burrillville) Cable Programming Services Tier Rates ) ORDER Adopted: August 7, 1998 Released: August 10, 1998 By the Deputy Chief, Cable Services Bureau: 1. In this Order we consider complaints against the rates charged by the above-referenced operator ("Operator") for its cable programming services tier ("CPST") in the community referenced above. We have already issued an order resolving all the complaints filed through June 30, 1995 against Operator's CPST rates ("Resolution"). Accordingly, this Order addresses only the reasonableness of Operator's CPST rate increases subsequent to the Resolution in its rebuild and non-rebuild areas. 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 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. A subscriber complaint was filed with the Commission against Operator's December 28, 1995 CPST rate change from $13.97 for the CPST to $12.47 for the CPST and $2.84 for the newly created Cox Expanded Plus tier. The Cox Expanded Plus tier is a migrated product tier ("MPT"), created pursuant to the terms of the Resolution. As of March 1, 1997, Operator may reclassify the MPT as a New Product Tier ("NPT") under our Going Forward Order. In addition, the LFA for the franchise areas referenced above filed complaints with the Commission on April 27, 1998 against Operator's November 1, 1997 CPST rate increase from $14.68 to $16.13 in its rebuild area, and from $13.70 to $14.16 in its non-rebuild area. 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 December 22, 1997 for the Johnston franchise area and on January 21, 1998 for the other franchise areas referenced above. 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. 4. The LFA also complained about the November 1, 1997 rate increase for certain equipment associated with the Cox Expanded Plus and Cox Select tiers. Upon review, we find that the Cox Expanded Plus tier, as of March 1, 1997, and the Cox Select tiers are NPTs under our Going Forward Order and therefore not subject to regulation. Under Section 76.923(a) of the Commission's rules, all equipment used to receive the basic service tier ("BST") 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 charges are subject to regulation by the LFA. If subscribers use the equipment in question to receive the BST, the LFA has jurisdiction to determine the reasonableness of Operator's equipment charges. The LFA's complaint does not trigger our jurisdiction to regulate the equipment charges. 5. 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 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. 6. The Resolution approved a maximum permitted rate ("MPR") of $13.97 for the CPST in the communities referenced above. Upon review of Operator's FCC Form 1210 covering the period January 1, 1995 through September 30, 1995, which updates Operator's approved MPR of $13.97, we find Operator's calculated MPR of $12.47 for its CPST and $2.84 for its MPT to be reasonable. Because Operator's actual CPST rate of $12.47 and actual MPT rate of $2.84, effective December 28, 1995, do not exceed Operator's MPRs, we find Operator's actual CPST rate of $12.47 and actual MPT rate of $2.84, effective December 28, 1995, to be reasonable. 7. Upon review of Operator's FCC Form 1240s for the projected period October 1, 1996 through September 30, 1997, for its rebuild and non-rebuild areas, we made several adjustments. Because Operator did not create the MPT until December 28, 1995, we corrected Operator's True-Up calculations to reflect the channel movement, in accordance with the FCC Form 1240 Instructions. We also adjusted Operator's Worksheet 8 to reflect the actual rates charged during the True-Up Period. Our adjustments resulted in a revised MPR of $14.79 for the CPST for the rebuild area and $13.45 for the CPST for the non-rebuild area, effective October 1, 1996. Because Operator's actual CPST rate of $13.70 for the rebuild area, effective November 1, 1996, and actual CPST rate of $14.68 for the rebuild area, effective March 1, 1997, do not exceed its revised MPR of $14.79, we find Operator's actual CPST rates of $13.70, effective November 1, 1996 and $14.68, effective March 1, 1997, to be reasonable. We find Operator's actual MPT rate of $3.19 to be reasonable, effective October 1, 1996. 8. Upon review of Operator's FCC Form 1240 for the projected period November 1, 1997 through October 31, 1998 for the rebuild area, we adjusted Operator's Line A1 to coincide with Operator's revised MPR from its previous FCC Form 1240. We also adjusted Operator's Worksheet 2 to reflect the correct addition of channels. We adjusted the Inflation Factors at 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 1.0114. These adjustments resulted in a revised MPR of $15.66 for the projected period. Because Operator's actual CPST rate of $16.13, effective November 1, 1997, exceeds its revised MPR, we find Operator's actual CPST rate of $16.13, effective November 1, 1997, to be unreasonable. 9. Upon review of Operator's FCC Form 1240 for the projected period November 1, 1997 through October 31, 1998 for the non-rebuild area, we adjusted Operator's Line A1 to coincide with Operator's revised MPR from its previous FCC Form 1240. We also adjusted Operator's Worksheet 2 to reflect the correct addition of channels. We adjusted the Inflation Factors at 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 1.0114. These adjustments resulted in a revised MPR of $14.36 for the projected period. Because Operator's actual CPST rate of $14.16, effective November 1, 1997, does not exceed its revised MPR, we find Operator's actual CPST rate of $14.16, effective November 1, 1997, to be reasonable. Operator indicated on its Worksheet 2 for the Projected Period that it was adding four channels to its CPST for the non-rebuild area on November 1, 1997. Based on the information provided by Operator, only one channel was added. Operator claims that this projection will be corrected in the next True-Up Period. However, to the extent that the entire system will be rebuilt as of the next rate justification filing, we will require Operator, in Module H of its next FCC Form 1240 for the communities referenced above, to adjust for any overcharges paid by subscribers in the non-rebuild area as well as the rebuild area. 10. 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 $12.47, charged by Operator in the rebuild area of the franchise areas referenced above, effective December 28, 1995 through October 31, 1996, IS REASONABLE. 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 $13.70, charged by Operator in the rebuild area of the franchise areas referenced above, effective November 1, 1996 through February 28, 1997, IS REASONABLE. 12. 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 $14.68, charged by Operator in the rebuild area of the franchise areas referenced above, effective March 1, 1997 through October 31, 1997, IS REASONABLE. 13. 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 $16.13, charged by Operator in the rebuild area of the franchise areas referenced above, effective November 1, 1997, IS UNREASONABLE. 14. 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 $14.16, charged by Operator in the non-rebuild area of the franchise areas referenced above, effective November 1, 1997, IS REASONABLE. 15. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. 0.321, that the MPT rate of $2.84, charged by Operator in the franchise areas referenced above, effective December 28, 1995 through October 31, 1996, IS REASONABLE. 16. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. 0.321, that the MPT rate of $3.19, charged by Operator in the franchise areas referenced above, effective November 1, 1996 IS REASONABLE. 17. 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 rebuild area of the franchise areas referenced above, that portion of the amount paid in excess of the maximum permitted CPST rate of $15.66 per month (plus franchise fees), plus interest to the date of the refund, for the period November 1, 1997 through the day before Operator implements the maximum permitted CPST rate of $15.66. 18. 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. 19. 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 and, in Module H of its next FCC Form 1240 for the communities referenced above, to adjust for any overcharges paid by subscribers in the non-rebuild area as well as the rebuild area. 20. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the referenced complaints ARE GRANTED TO THE EXTENT INDICATED HEREIN. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Deputy Chief, Cable Services Bureau