******************************************************** 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 ) ) Cablevision Systems ) CUID Nos. NY0392 (Huntington) ) NY0453 (North Hempstead) Complaint Regarding Cable Programming) NY0454 (Hempstead) Services Tier Rate Increase ) ORDER Adopted: September 21, 1998 Released: September 23, 1998 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider complaints against the January 1, 1998 rate change of the above- referenced operator ("Operator") for its cable programming services tier ("CPST") in the communities referenced above. We have already issued orders which resolved prior complaints filed against Operator in the communities referenced above. Operator has attempted to justify its CPST rate change through a benchmark showing on FCC Form 1240 and FCC Form 1235. Accordingly, this Order addresses the reasonableness of Operator's CPST rate, effective January 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 a rate 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 30, 1998, the LFA for the communities referenced above filed complaints regarding the January 1, 1998 change in Operator's CPST rate in the communities referenced above from $20.42 to $19.58. In its complaints, the LFA asserts that it has received more than one subscriber complaint against Operator's CPST rate change and verified that the first complaint was received on January 29, 1998 for CUID NY0392, January 20, 1998 for CUID NY0453 and January 13, 1998 for CUID NY0454, thereby triggering the Commission's jurisdiction to review the complaints. The valid complaints 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 change in its CPST rate which is the subject of the LFA's complaints. 6. Operator's January 1, 1998 rate change reflects not only the rate change, 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 March 28, 1997 and selected the pre-approval option. On January 7, 1998, 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 prepared 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 MPR to $18.82 for the projected period January 1, 1998 to December 31, 1998. Upon review of Operator's revised FCC Form 1235, we approve a CPST MPR of $4.08. This results in a revised combined CPST MPR of $22.90 rather than Operator's combined CPST MPR of $23.22. Because Operator's actual CPST rate, effective January 1, 1998, is $19.58, we find Operator's actual CPST rate, effective January 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 $19.58 effective January 1, 1998 in the communities 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 complaints referenced herein ARE DENIED. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau