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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. CA1059 (West Covina) Charter Communications ) ) Complaint Regarding ) Cable Programming Services Tier Rates ) ORDER Adopted: August 7, 1998 Released: August 12, 1998 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider a complaint against the March 1, 1998 rate increase of the above-referenced operator ("Operator") for its cable programming services tier ("CPST") in the community referenced above. This Order addresses only the reasonableness of Operator's March 1, 1998 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 the 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 community referenced above filed a complaint with the Commission on June 1, 1998, against Operator's March 1, 1998 CPST rate increase from $15.25 to $17.20. The LFA verified that it received more than one subscriber complaint and that the first valid complaint was received by the LFA on March 4, 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. 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 adjust their rates on an annual basis using FCC Form 1240. Additionally, an Operator may file an FCC Form 1235 (Abbreviated Cost of Service Filing for Cable Network Upgrades). The FCC Form 1235 allows cable operators to justify rate increases related to significant capital expenditures used to improve rate-regulated services. This option is extended only in cases of significant upgrades requiring added capital investment, such as bandwidth capacity and conversion to fiber optics, and for system rebuilds. Normal improvements and expansions of service remain subject to the usual rate adjustments allowed by filing FCC Form 1210s, 1220s and 1240s. Cable operators that incur increases in operating costs associated with a significant network upgrade will be permitted to charge additional rates as justified by their FCC Form 1235 filing. 5. In response to the LFA's complaint, Operator filed an FCC Form 1210 and an FCC Form 1235. Upon review of Operator's FCC Form 1210, covering the period October 1, 1997 through December 31, 1997, we find Operator has justified its calculated maximum permitted rate ("MPR") of $15.96. Because Operator filed its FCC Form 1210 with the Commission in response to a complaint, and Operator was not subject to regulation by the Commission at the time the complaint was filed, we allow Operator to update its actual CPST rate in effect prior to the rate increase complained about by filing an initial FCC Form 1210 without FCC Form 1200. 6. Our review of Operator's FCC Form 1235 reveals that Operator has certified that the upgrade meets the minimum technical requirements of FCC Form 1235 and that the upgrade was completed in January 1998. Operator chose to allocate its Monthly Network Upgrade Add-on (Part III, Lines 4 and 5) to both its BST and its CPST rates. Such an election is consistent with the FCC Form 1235 instructions. Upon review of Operator's FCC Form 1235, we adjusted Operator's interest expenses reported on Worksheet A (Cost Assignments and Allocations), Line 9 (Interest Expense Related to Upgrade), in accordance with the FCC Form 1235 Instructions, which require actual interest data. Our adjustment of Operator's interest calculation, based on its actual cost of debt, affected Operator's income tax allowance calculation (Section II, Line 3h). Our adjustments resulted in a revised MPR of $4.81 for Operator's Monthly Network Add-on for its CPST, rather than Operator's calculated MPR of $5.25. Therefore, Operator's total revised MPR for its CPST, effective March 1, 1998, is $20.77, $15.96 plus $4.81. Because Operator's actual CPST rate of $17.20, effective March 1, 1998, does not exceed its revised MPR, we find Operator's actual CPST rate of $17.20, effective March 1, 1998, to be reasonable. 7. 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 $17.20, charged by Operator in the community referenced above, effective March 1, 1998, IS REASONABLE. 8. 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