******************************************************** 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. NY1413 (Brooklyn) Cablevision Systems ) NY1414 (Bronx) ) Complaints Regarding ) Cable Programming Services Tier Rates ) ORDER Adopted: September 11, 1998 Released: September 16, 1998 By the Deputy Chief, Cable Services Bureau: 1. In this Order we consider complaints against the February 1, 1998 rate increase of the above- referenced operator ("Operator") for its cable programming services tiers ("CPSTs") in the communities referenced above. All prior complaints against Operator's CPST rate increases have been resolved. Accordingly, this Order addresses only the reasonableness of Operator's February 1, 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 area referenced above filed a complaint with the Commission on June 23, 1998 against Operator's February 1, 1998 CPST rate increases listed in the attached Appendix. 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 February 3, 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. 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 rates ("MPRs"). Operator did not use the most recent Inflation Factors available at the time it prepared its FCC Form 1240. We adjusted the Inflation Factors on Operator's FCC Form 1240, at Worksheet 1 (True-Up Period Inflation) which adjusted Line C3 (Inflation Factor for True-Up Period 1) to 1.0056 and Line C4 (Inflation Factor for True-Up Period 2) to 1.0060. We also revised Line C5 (Current FCC Inflation Factor) to 1.0114. These revisions reduced Operator's MPRs for its CPSTs, for the projected period January 1, 1998 to December 31, 1998, to the rates listed in the attached Appendix. Because Operator's actual CPST rate of $18.32 for its Family Cable tier, effective February 1, 1998, does not exceed its revised MPR, we find Operator's actual CPST rate of $18.32 for its Family Cable tier, effective February 1, 1998, to be reasonable. Because Operator's actual CPST rates listed in the attached Appendix for its other four CPSTs, effective February 1, 1998, exceed its revised MPRs, we find Operator's actual CPST rates for its other four CPSTs, effective February 1, 1998, to be unreasonable. 6. 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 $18.32, charged by Operator in the communities referenced above for its Family Cable tier, effective February 1, 1998, IS REASONABLE. 7. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. 0.321, that the CPST rates listed in the attached Appendix, charged by Operator in the communities referenced above for its Children's & Education, News & Information, Movies & Entertainment, and Arts & Music segment tiers, effective February 1, 1998, ARE 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 rates listed in the attached Appendix for its Children's & Education, News & Information, Movies & Entertainment, and Arts & Music segment tiers, per month (plus franchise fees), plus interest to the date of the refund, for the period beginning February 3, 1998 (the date of the first subscriber complaints), through the day before Operator implements the maximum permitted CPST rates listed in the attached Appendix. 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 TO THE EXTENT INDICATED HEREIN. FEDERAL COMMUNICATIONS COMMISSION William H. Johnson Deputy Chief, Cable Services Bureau APPENDIX REVISED MPR TIER PRIOR RATE 2/1/98 RATE 1/1/98-12/31/98 Family Cable $17.27 $18.32 $20.40 Children's & Education $ 2.27 $ 3.10 $ 3.05 News & Information $ 2.84 $ 3.24 $ 3.19 Movies & Entertainment $ 4.26 $ 5.21 $ 5.13 Arts & Music $ 2.12 $ 2.56 $ 2.52