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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 ) ) Marcus Cable Partners, L.P. ) CUID No. WI0043 (Janesville) ) Complaint Regarding Cable Programming ) Services Tier Rate Increase ) ORDER Adopted: December 14, 1998 Released: December 16, 1998 By the Acting Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider complaints about the rates charged by the above-referenced operator ("Operator") for its cable programming services tier ("CPST") in the community referenced above. We have already issued an order in which we found that Operator's CPST rate in effect prior to May 15, 1994 was unreasonable ("Prior Order"). Operator has attempted to justify its CPST rates through a benchmark justification on FCC Form 1200, updated by multiple FCC Form 1210s and multiple FCC Form 1240s, and FCC Form 1235. This Order addresses the reasonableness of the CPST rates charged by Operator after May 14, 1994, including Operator's June 1, 1998 CPST rate increase in its rebuild and non-rebuild areas. 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 Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act") requires the Commission to review CPST rates upon the filing of a valid complaint by a subscriber or local franchise authority ("LFA"). The Telecommunications Act of 1996 ("1996 Act") and our rules implementing the new legislation ("Interim Rules"), require that, beginning February 8, 1996, complaints against CPST rates be filed with the Commission by an LFA that has received more than one subscriber complaint. 3. Our Prior Order indicates that the findings in that review "do not in any way prejudge the reasonableness of the prices for CPS service after May 14, 1994 under our new rate regulations." We find that Operator was under a continuing obligation to file its rate justification forms with the Commission so long as there was an outstanding complaint. Consequently, the CPST rates beginning May 15, 1994, and subsequent rate increases, are subject to Commission review. 4. The LFA for the franchise area referenced above filed a complaint with the Commission on October 23, 1995 against Operator's October 1, 1995 CPST rate. Operator responded by filing a Motion to Dismiss on November 20, 1995 arguing that there had been no CPST rate increase. The record before us shows that Operator is correct. Consequently, we will dismiss the LFA's October 23, 1995 complaint and grant Operator's Motion to Dismiss. 5. The LFA for the franchise area referenced above also filed a complaint with the Commission on September 21, 1998 against Operator's June 1, 1998 CPST rate increase from $16.22 to $17.97 in the non- rebuild area and Operator's June 1, 1998 CPST rate increase from $16.22 to $22.46 in the rebuild area. 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 June 1, 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. 6. 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 adjust their rates on an annual basis using FCC Form 1240. 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. 7. Upon review of Operator's FCC Form 1200, we find that Operator has justified a maximum permitted rate ("MPR") of $11.14. Operator elected to defer refund liability pursuant to the Commission's Rules. Consequently, Operator's refund liability for charges in excess of its FCC Form 1200 MPR, does not begin until July 14, 1994. The MPR of $11.67 determined in our Prior Order governs the CPST rate during the period from May 15, 1994 to July 14, 1994. Operator's actual CPST rate from May 15, 1994 through June 30, 1994 was $11.88. Because Operator's actual CPST rate of $11.88 exceeds its MPR of $11.67, we find Operator's actual CPST rate of $11.88, effective May 15, 1994 through June 30, 1994, to be unreasonable. 8. Upon review of Operator's FCC Form 1200, and four FCC Form 1210s covering the period April 1, 1994 through March 31, 1995, we find Operator's actual CPST rates, effective July 1, 1994 through June 30, 1995, to be reasonable. Upon review of Operator's FCC Form 1210, covering the period April 1, 1995 through June 30, 1995, we adjusted Operator's Line J5 (Inflation Adjustment Factor) to 1.0 rather than 1.03. Our adjustment resulted in a revised MPR of $11.63, rather than Operator's calculated MPR of $11.86. Because Operator's actual CPST rate of $12.08, effective July 1, 1995 through May 31, 1996, exceeds its revised MPR of $11.86, we find Operator's actual CPST rate of $12.08, effective July 1, 1995 through May 31, 1996, to be unreasonable. 9. Upon review of Operator's FCC Form 1240 for the projected period June 1, 1996 through May 31, 1997, we adjusted Operator's Line A1 (Current Maximum Permitted Rate) to conform to the prior revised FCC Form 1210. We adjusted the Inflation Factors at Worksheet 1 (True-Up Period Inflation) and we allowed Operator to claim an unclaimed inflation adjustment factor of 1.0296, which we denied Operator in its previous FCC Form 1210. Our adjustments changed Line C1 (Inflation Factor for True-Up Period 1) to 1.0452. We also revised Line C3 (Current FCC Inflation Factor) to 1.0222. Our adjustments reduced Operator's MPR to $12.48. Because Operator's actual CPST rate of $12.68, effective June 1, 1996 through May 31, 1997, exceeds its revised MPR of $12.48, we find Operator's actual CPST rate of $12.68, effective June 1, 1996 through May 31, 1997, to be unreasonable. 10. Upon review of Operator's FCC Form 1240 for the projected period June 1, 1997 through May 31, 1998, we adjusted Operator's Line 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 with the prior revised FCC Form 1240. Also, Operator made true- up adjustments through to the effective date of the projected period and those adjustments did not include actual data. Consequently, we reduced Operator's true-up period by one month and adjusted Operator's MPR in accordance with our rules and the FCC Form 1240 instructions. We adjusted the Inflation Factors at Worksheet 1 (True-Up Period Inflation), Line C1 (Inflation Factor for True-Up Period 1), C2 (Inflation Factor for True-Up Period 2) and Line C3 (Current FCC Inflation Factor). These revisions reduced Operator's MPR to $15.86 for the projected period June 1, 1997 through May 31, 1998, rather than Operator's calculated rate of $16.22. Because Operator's actual CPST rate of $16.22, effective June 1, 1997 through May 31, 1998, exceeds its revised MPR, we find Operator's actual CPST rate of $16.22, effective June 1, 1997 through May 31, 1998, to be unreasonable. 11. Upon review of Operator's FCC Form 1240 for the projected period June 1, 1998 through May 31, 1999, we adjusted Operator's Line A1 (Current Maximum Permitted Rate), D6 (Current True-Up Segment), D7 (Current Inflation Segment), and F8 (True-Up Segment For True-Up Period 1) to conform with the prior revised FCC Form 1240. We adjusted the Inflation Factors at Worksheet 1 (True-Up Period Inflation), Line C3 (Inflation Factor for True-Up Period 1), and Line C5 (Current FCC Inflation Factor). These revisions reduced Operator's MPR to $17.52 for the projected period June 1, 1998 through May 31, 1999, rather than Operator's calculated rate of $17.97. Because Operator's actual CPST rate of $17.97 for its non-rebuild area, effective June 1, 1998, exceeds its revised MPR, we find Operator's actual CPST rate of $17.97 for its non-rebuild area, effective June 1, 1997, to be unreasonable. 12. Our review of Operator's FCC Form 1235 reveals that Operator has certified that the upgrade meets the minimum technical requirements of FCC Form 1235 and that the upgrade will be completed by the end of 1998. Operator chose to allocate its Monthly Network Upgrade Add-on (Part III, Lines 4 and 5) to its CPST rates. Such an election is consistent with the FCC Form 1235 instructions. Upon review of Operator's FCC Form 1235, we find Operator has justified a MPR of $4.49 for its Monthly Network Add-on for its CPST. When Operator's Monthly Network Add-on is added to its FCC Form 1240 MPR, Operator has justified an MPR of $22.01 for the CPST in its rebuild area. Because Operator's actual CPST rate of $22.46 for its rebuild area, effective June 1, 1998, exceeds its revised MPR, we find Operator's actual CPST rate of $22.46 for its rebuild area, effective June 1, 1998, to be unreasonable. The Network Upgrade Add-on cannot be charged to subscribers until upgraded cable services become available and are providing benefits to customers. 13. 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 $11.88, charged by Operator in the community referenced above, effective May 15, 1994 through June 30, 1994, IS UNREASONABLE. 14. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rates charged by Operator in the community referenced above, effective July 1, 1994 through June 30, 1995, ARE REASONABLE. 15. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rate of $12.08, charged by Operator in the community referenced above, effective July 1, 1995 through May 31, 1996, IS UNREASONABLE. 16. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rate of $12.68, charged by Operator in the community referenced above, effective June 1, 1996 through May 31, 1997, IS UNREASONABLE. 17. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rate of $16.22, charged by Operator in the community referenced above, effective June 1, 1997 through May 31, 1998, IS UNREASONABLE. 18. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rate of $17.97, charged by Operator in the community referenced above in its non- rebuild area, effective June 1, 1998, IS UNREASONABLE. 19. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rate of $22.46, charged by Operator in the community referenced above in its rebuild area, effective June 1, 1998, IS UNREASONABLE. 20. 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 community referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of $11.67 per month (plus franchise fees), plus interest to the date of the refund, for the period from May 15, 1994 through June 30, 1994. 21. 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 non-rebuild area of the community referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of $17.52 per month (plus franchise fees), plus interest to the date of the refund, for the period from June 1, 1998 through the day before Operator implements the maximum permitted CPST rate of $17.52. 22. 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 rebuild area of the community referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of $22.01 per month (plus franchise fees), plus interest to the date of the refund, for the period from June 1, 1998 through the day before Operator implements the maximum permitted CPST rate of $22.01. 23. 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. 24. 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. 25. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that Operator's Motion to Dismiss IS GRANTED and the local franchising authority's October 23, 1995 complaint IS DISMISSED AS MOOT. 26. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the complaints referenced herein against the CPST rates charged by Operator in the community referenced above ARE GRANTED TO THE EXTENT INDICATED HEREIN. FEDERAL COMMUNICATIONS COMMISSION Margaret M. Egler Acting Chief, Financial Analysis and Compliance Division Cable Services Bureau