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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 ) ) Citizens Century Cable TV Venture ) CUID No. CA0960 (Rowland Heights) ) Complaint Regarding Cable Programming ) Services Tier Rate Increase ) ORDER Adopted: November 19, 1998 Released: November 20, 1998 By the Acting Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider a complaint against the May 1, 1998 rate increase of the above- referenced operator ("Operator") for its cable programming services tier ("CPST") in the community referenced above. Operator has attempted to justify its CPST rate through a benchmark justification on FCC Form 1200, updated by multiple FCC Form 1210s and multiple FCC Form 1240s. This Order addresses only the reasonableness of Operator's May 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. If the Commission finds a rate to be 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 CPST rates 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 August 25, 1998 against Operator's May 1, 1998 CPST rate increase from $13.33 to $14.42. The LFA verified that it received more than one subscriber complaint for the franchise area and that the first valid complaint was received by the LFA on May 26, 1998. The filing of a complete and timely LFA 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. 4. To justify rates for the period beginning May 15, 1994 through a benchmark or cost of service showing, operators must use the FCC Form 1200 series. Cable operators may file an FCC Form 1210 to justify rate increases based on the addition and deletion of channels, changes in certain external costs and inflation. In addition, Operators must file an FCC Form 1210 at least 30 days before new rates are scheduled to go into effect, where there is a pending complaint against the CPST rate. Operators may alternatively justify adjustments to 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. Under Section 76.923(a) of the Commission's rules, all equipment used to receive the basic service tier ("BST") is subject to rate regulation, regardless of whether such equipment is used to receive other tiers of regulated programming and/or unregulated service. Such equipment related charges are subject to regulation by the LFA. In a separate letter which accompanied its FCC Form 329 complaint against Operator's May 1, 1998 CPST rate increase, the LFA states that Operator filed an annual FCC Form 1205 dated July 31, 1995 to reflect its current equipment rates. Section 76.923(n)(3) of the Commission's rules requires an operator, which has chosen to adjust its rates under the annual adjustment system (FCC Form 1240), to file an accurate FCC Form 1205 "[o]n the same date it files its FCC Form 1240." FCC Form 1205 must be filed "on an annual basis." Because Operator has failed to do this, we will order Operator to file an FCC Form 1205, that justifies its current 1998 equipment rates, with the LFA within 30 days of the release of this Order so that the LFA may determine the reasonableness of Operator's equipment rates. 6. Upon review of Operator's FCC Form 1200, we find that Operator has justified a maximum permitted rate ("MPR") of $10.93. Upon review of Operator's FCC Form 1210, covering the period April 1, 1994 through December 31, 1994, we adjusted Line B13 (Previous Ext. Costs per Tier per Sub.) to $5.5691 from $5.5396 to coincide with the external costs from Operator's FCC Form 1200, in accordance with the FCC Form 1210 Instructions. Our adjustment reduced Operator's MPR to $11.58. Upon review of Operator's FCC Form 1210, covering the period January 1, 1995 through December 31, 1995, we adjusted Operator's Line A2 (Permitted Charge) to $11.5751 to conform to the prior revised FCC Form 1210. Our adjustment reduced Operator's MPR to $12.39. 7. Upon review of Operator's FCC Form 1240 for the projected period January 1, 1997 through December 31, 1997, we adjusted Operator's Line A1 (Current Maximum Permitted Rate) to $12.39 to conform to the prior revised FCC Form 1210. We adjusted the Inflation Factors at Worksheet 1 (True-Up Period Inflation) which adjusted Line C3 (Inflation Factor for True-Up Period 1) to 1.0246. We also revised Line C5 (Current FCC Inflation Factor) to 1.0270. Our adjustment reduced Operator's MPR to $13.35. Upon review of Operator's FCC Form 1240 for the projected period May 1, 1998 through April 30, 1999, we adjusted Operator's Lines A1 (Current Maximum Permitted Rate), D6 (Current True-Up Segment), D7 (Current Inflation Segment), F8 (True-Up Segment For True-Up Period 1) and G8 (True-Up Segment For True-Up Period 2) to conform to the prior revised FCC Form 1240. We adjusted the Inflation Factors at Worksheet 1 (True-Up Period Inflation) which adjusted Line C3 (Inflation Factor for True-Up Period 1) and C4 (Inflation Factor for True-Up Period 2). We also revised Line C5 (Current FCC Inflation Factor) to 1.0082. We adjusted Operator's Line I2 to $0.00 rather than $0.01. Operator is not entitled to claim an adjustment under the "markup method" for channels added in 1998. These revisions reduced Operator's MPR to $14.23 for the projected period May 1, 1998 through April 30, 1999, rather than Operator's calculated rate of $14.42. Because Operator's actual CPST rate of $14.42, effective May 1, 1998, exceeds its revised MPR, we find Operator's actual CPST rate of $14.42, effective May 1, 1998, to be unreasonable. 8. 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 $14.42, effective May 1, 1998, IS UNREASONABLE. 9. 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 area referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of $14.23 per month (plus franchise fees), plus interest to the date of the refund, for the period, beginning May 26, 1998 (the date of the first subscriber complaint), through the day before Operator implements the maximum permitted CPST rate of $14.23. 10. 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. 11. IT IS FURTHER ORDERED that Operator shall file a current and accurate FCC Form 1205, that justifies its current 1998 equipment rates, with the LFA within 30 days of the release of this Order. 12. 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. 13. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the complaint referenced herein against the CPST rate charged by Operator in the community referenced above IS GRANTED. FEDERAL COMMUNICATIONS COMMISSION Margaret M. Egler Acting Chief, Financial Analysis and Compliance Division Cable Services Bureau