******************************************************** 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. CA0622 (Oak Hills) ) CA0890 (Prunedale) Falcon Cable Systems ) CA1013 (Las Lomas/Pajaro) ) CA1048 (Carmel Highlands) ) CA1118 (Aromas) Complaints Regarding ) CA1189 (Monterey North) Cable Programming Services Tier Rates ) CA1190 (Castroville) ORDER Adopted: September 1, 1998 Released: September 4, 1998 By the Deputy Chief, Cable Services Bureau: 1. In this Order we consider complaints against the January 13, 1998 rate increase of the above- referenced operator ("Operator") for its cable programming services tier ("CPST") in the communities referenced above. Prior complaints against Operator's CPST rate increases were dismissed. Accordingly, this Order addresses only the reasonableness of Operator's January 13, 1998 CPST rate increases. 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. The Telecommunications Act of 1996 ("1996 Act") and our rules implementing the legislation ("Interim Rules"), require that 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. 3. The LFA for the franchise areas referenced above filed complaints with the Commission on June 30, 1998 against Operator's January 13, 1998 CPST rate increase from $4.74 to $5.13. The LFA verified that it received more than one subscriber complaint for each franchise area and that the first valid complaint for each franchise area was received by the LFA on the date listed in the attached Appendix. 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. If the Commission finds a rate to be unreasonable, it shall determine the correct rate and any refund liability. 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. Upon review of Operator's FCC Form 1240, for the projected period December 1, 1997 through November 30, 1998, we find that Operator has not correctly calculated its maximum permitted rate ("MPR"). Operator claimed an adjustment of $0.0268 to its MPR, calculated pursuant to Section 76.922(f)(4) of the Commission's Rules. Section 76.922(f)(4) allows certain cable operators, who initially calculated their CPST rates on FCC Form 1200, to make an "adjustment for changes in external costs for the period September 30, 1992, and the initial date of regulation or February 28, 1994, whichever is applicable . . . ." The Commission released a methodology for the calculation of this adjustment on December 31, 1996. 6. Operator filed only one FCC Form 1240 in response to the LFA complaint and on its FCC Form 1240, Operator certified that it had never filed an FCC Form 1200 with the Commission. Because Operator was not previously subject to CPST rate regulation, and because it has never used an FCC Form 1200 to calculate its CPST rates, Operator is not entitled to an adjustment under Section 76.922(f)(4). Therefore, we will remove Operator's adjustment of $0.0268 from its proposed MPR. Our adjustment resulted in a revised MPR of $4.97, for the projected period December 1, 1997 through November 30, 1998. We also adjusted Operator's Line I10 (Operator Selected Rate For Projected Period) to $5.13 to reflect the actual rate selected by Operator, which conforms with Operator's rate card. Because Operator's actual CPST rate of $5.13, effective January 13, 1998, exceeds its revised MPR, we find Operator's actual CPST rate of $5.13, effective January 13, 1998, to be unreasonable. 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 $5.13, charged by Operator in the communities referenced above, effective January 13, 1998, IS UNREASONABLE. 8. 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 areas referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of $4.97, per month (plus franchise fees), plus interest to the date of the refund, for the period from the filing of the earliest complaint in each franchise area (as set forth in the attached Appendix) through the day before Operator implements the maximum permitted CPST rate of $4.97. 9. 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. 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 complaints referenced herein against the CPST rates charged by Operator in the communities referenced above ARE GRANTED. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Deputy Chief, Cable Services Bureau APPENDIX DATE OF FIRST CUID NO. COMMUNITY VALID COMPLAINT CA0622 Oak Hills 1/23/98 CA0890 Prunedale 1/29/98 CA1013 Las Lomas/Pajaro 1/23/98 CA1048 Carmel Highlands 2/10/98 CA1118 Aromas 1/29/98 CA1189 Monterey North 2/10/98 CA1190 Castroville 1/13/98