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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. OH0663 (Lyndhurst) Cablevision ) ) Complaint Regarding ) Cable Programming Services Tier Rates ) ORDER Adopted: September 10, 1998 Released: September 11, 1998 By the Acting Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider a complaint against the January 1, 1998 rate increase of the above- referenced operator ("Operator") for its cable programming services tier ("CPST") in the rebuild area of the community referenced above. We have previously issued an Order in which we resolved a complaint against Operator's 1997 CPST rate increase for its network upgrade ("Prior Order"). Accordingly, this Order addresses only the reasonableness of Operator's January 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. 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 area referenced above filed a complaint with the Commission on June 30, 1998 against Operator's January 1, 1998 CPST rate increase from $17.18 to $18.23 in the rebuild area of the community referenced above. The LFA verified that it received more than one subscriber complaint and that the first valid complaint was received by the LFA on January 16, 1998. 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. 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. Upon review of Operator's FCC Form 1240 for the projected period January 1, 1998 through December 31, 1998, we find that Operator has not correctly calculated its maximum permitted rate ("MPR"). Operator did not use its actual CPST rate of $14.18 as the starting rate on Line A1 of its FCC Form 1240. Operator included true-up adjustments for the period April 1, 1997 through December 31, 1997. However, because Operator filed its FCC Form 1240 with the Commission in response to a CPST complaint, and Operator was not subject to regulation by the Commission at the time the complaint was filed, Operator is not entitled to any true-up adjustment. We recalculated Operator's FCC Form 1240 with Operator's actual CPST rate as the starting rate on Line A1 of its FCC Form 1240 and without the true-up adjustment in Module I, Line I8. We adjusted Operator's Module D (Calculating the Base Rate), Line I1 (CAPS Method Segment for Projected Period) and Line 201 (Total CAPS Adjustment) of Worksheet 2 (CAPS Method Projected Period) in accordance with the FCC Form 1240 Instructions for operators not subject to regulation. We also revised Line C5 (Current FCC Inflation Factor) to 1.0114. Our adjustments resulted in a revised regular MPR of $16.74, rather than Operator's calculated MPR of $17.31. 6. In our Prior Order, we reviewed Operator's FCC Form 1235 and found that Operator had justified a network upgrade MPR of $4.14. Thus Operator's total revised MPR for its CPST is $20.88 ($16.74 plus $4.14), effective January 1, 1998, rather than Operator's calculated total MPR of $21.45. Because Operator's actual CPST rate of $18.23, effective January 1, 1998, does not exceed its revised MPR, we find Operator's actual CPST rate of $18.23, effective January 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 $18.23 charged by Operator in the community referenced above, effective January 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 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. 9. 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 Margaret M. Egler Acting Chief, Financial Analysis and Compliance Division Cable Services Bureau