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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Cablevision of Monmouth, Inc. ) CUID No. NJ0346 (Jackson) ) ) Complaint Regarding ) Cable Programming Services Tier Rates ) ORDER Adopted: August 26, 1998 Released: August 28, 1998 By the Chief, Financial Analysis and Compliance Division, 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 set forth above. On August 11, 1998, 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 from September 1, 1993 through August 1, 1997. Operator has attempted to justify its CPST rate increase through a benchmark showing on FCC Forms 1240 and 1235. Accordingly, this Order addresses the reasonableness of Operator's CPST rate increase, effective February 1, 1998. 2. The Communications Act authorizes the Commission 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 the rate 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 subscriber complaints. An LFA may not file a CPST rate complaint unless, within 90 days after such increase becomes effective, it receives more than one subscriber complaint. 3. 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. 4. FCC Form 1235 is an abbreviated cost of service filing used in cases of network upgrades. It 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 will remain subject to the usual rate adjustments allowed by filings of FCC Forms 1210, 1220 and 1240. 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. On June 16, 1998, the LFA filed a complaint regarding the February 1, 1998 increase in Operator's CPST rate from $14.34 to $17.99, in the community referenced above. In its complaint, the LFA asserts that it has received more than one subscriber complaint against Operator's CPST rate increase and verified that the first complaint was received on February 15, 1998, thereby triggering the Commission's jurisdiction to review the complaint. The valid complaint from the LFA triggers an obligation by the cable operator to file a justification of its CPST rates with the LFA. Thus, in this case, Operator is required to justify the increase in its CPST rate which is the subject of the LFA's complaint. 6. Operator's February 1, 1998 rate increase reflects not only the increase as reported on FCC Form 1240, but also recovery of costs for its network upgrade as reflected on FCC Form 1235. Operator initially filed its FCC Form 1235 on April 11, 1997 and selected the pre-approval option. On December 24, 1997, Operator submitted a revised FCC Form 1235. Operator also chose to allocate its Monthly Network Upgrade Add-on (Section III, Lines 4 and 5) to both its basic service tier ("BST") and its CPST rates. Such an election is consistent with the FCC Form 1235 instructions. 7. Upon review of Operator's FCC Form 1240 for the projected period January 1, 1998 to December 31, 1998, we find that Operator did not correctly calculate its maximum permitted rate ("MPR"). We find that Operator has failed to use the most current FCC Inflation Factors available at the time Operator dated its FCC Form 1240. Therefore, we revised Worksheet 1 (True-Up Period Inflation) which adjusted Line C3 (Inflation Factor for True-Up Period 1) to 1.0056. We also revised Line C4 (Inflation Factor for True-Up Period 2) to 1.0060 and Line C5 (Current FCC Inflation Factor) to 1.0114. These revisions reduced Operator's total MPR to $15.78 from Operator's MPR of $16.07, for the projected period January 1, 1998 to December 31, 1998. Upon review of Operator's revised FCC Form 1235, we corrected a mistake in Operator's advertising revenue offset calculation. This correction reduced Operator's FCC Form 1235 MPR allowed increase to $4.79. These revisions have resulted in a revised combined CPST MPR of $20.57. Because Operator's actual CPST rate, effective February 1, 1998, is $17.99, we find Operator's actual CPST rate, effective February 1, 1998, 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 Operator's CPST rate of $17.99 effective February 1, 1998, in the community set forth above, IS REASONABLE. 9. 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. 10. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the complaint referenced herein IS DENIED. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau