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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 ) ) TCI Communications, Inc. ) ) CUID No. CA0589 (Oakland) Final Resolution of ) Cable Programming Service ) Rate Complaints ) ) ORDER Adopted: June 18, 1998 Released: July 9, 1998 By the Commission: Chairman Kennard issuing a statement; Commissioner Furchtgott-Roth dissenting and issuing a statement. I. INTRODUCTION 1. The Federal Communications Commission ("Commission") has before it a Proposed Resolution submitted by TCI Communications, Inc. ("TCI") that will resolve three cable programming services tier ("CPST") rate complaints, filed against the cable system in Oakland, California from September 1, 1993 through March 31, 1997, regarding the rates that TCI charged for cable programming services. For the reasons stated below, and based upon our review of the record, we find that the Resolution we adopt today serves the interests of TCI's subscribers by, among other things, bringing finality and stability to its cable programming service tier ("CPST") rates. We also believe that adoption of the Resolution is consistent with the Commission's responsibility under the Cable Television Consumer Protection and Competition Act of 1992 to ensure that consumers' interests are protected in the receipt of cable services and that regulated rates are not unreasonable. II. BACKGROUND 2. The 1992 Cable Act gave the Commission and local franchising authorities jurisdiction over the cable programming and equipment rates of cable systems that do not face effective competition, as defined by the Act. The 1992 Cable Act provides that local franchising authorities may regulate basic service tier ("BST") rates pursuant to guidelines established by the Commission and the Commission may regulate CPST rates upon the filing of a complaint. In enacting the legislation, Congress stated its intent that the 1992 Cable Act be implemented to ensure that "consumer interests are protected in the receipt of cable service." 3. The Commission issued an Order on April 26, 1996 adopting a Final Resolution of CPST rate complaints filed against TCI from September 1, 1993 through September 15, 1995 ("First Resolution"). After receiving numerous inquiries from Bureau staff about its failure to respond to additional CPST rate complaints that were not resolved by the First Resolution but were filed against systems TCI owned prior to the First Resolution, TCI acknowledged that it had no record of the complaints. TCI contacted the Bureau staff expressing an interest in discussing a global resolution of rate complaints that had not been resolved by the First Resolution, as well as complaints against systems acquired by TCI after the First Resolution. Pursuant to 47 C.F.R. 1.1204(a)(10), the Bureau staff met with TCI to discuss the resolution of issues relating to the complaints. The Oakland system was acquired by TCI after the First Resolution. Because the rates charged in Oakland were substantially different from the rates charged in other systems, the Oakland system is being treated separately. The attached Resolution covers the settlement of issues arising from CPST rate complaints filed against the Oakland system; other complaints are being addressed in a separate resolution. 4. On September 11, 1997, the Commission adopted an Order instructing the Bureau staff to serve all complainants and relevant local franchising authorities with the Proposed Resolution. Accordingly, copies of the Proposed Resolution along with the September 11, 1997 Order were mailed to the local franchising authority in Oakland and any party that filed a valid complaint other than the local franchising authority. A 30-day comment period was provided for the local franchising authority and complainants to submit comments on the Proposed Resolution. The Commission received no comments regarding the Proposed Resolution and no substantive changes were made to the Proposed Resolution. III. SUMMARY OF RATE RESOLUTION 5. Under the Oakland Resolution, TCI will provide a $41.88 refund (which includes interest calculated pursuant to the Commission's rules) to each eligible subscriber, payable as cable bill credits of $3.49 per month, for twelve months, beginning no later than December 31, 1997. Currently, there are approximately 61,000 subscribers entitled to this refund, resulting in a total refund amount of approximately $2.5 million. The Resolution provides that if refunds have not begun by December 31, 1997, TCI will adjust the refunds to reflect additional interest for the period from December 31, 1997 to the date on which the refund is paid. TCI will also forgo any rate increases for its CPST in Oakland from the date of the adoption of this settlement until March 31, 1999. 6. The Resolution finds that TCI's current rate in Oakland as of March 31, 1997 is reasonable. Under the Resolution, TCI may avail itself of any applicable modifications of any law or regulation governing the CPST rates, except that TCI shall provide refunds pursuant to the terms of the Resolution. The Resolution provides that TCI does not admit to any violation of, or failure to conform to, any applicable laws, rules or regulations. IV. DISCUSSION 7. As an initial matter, we find that the Commission has authority to approve the Resolution. The Communications Act of 1934 provides the Commission with wide discretion to resolve rate cases. Section 4(i) of the Communications Act authorizes the Commission to "perform any and all acts . . . not inconsistent with [the] Act, as may be necessary in the execution of its functions." Section 4(j) provides that the "Commission may conduct its proceedings in such manner as will best conduce to the proper dispatch of business and to the ends of justice. . . ." Our action in this case is fully consistent with the 1992 Cable Act and with Congress' dual objectives of simplifying cable rate regulation and protecting consumers. We have concluded in other recent proceedings that the Commission has authority to consider such resolutions and to determine, after appropriate review and consideration of comments, that rates set forth in the resolutions are not unreasonable. 8. The courts have long recognized that regulatory agencies have broad discretion to choose among ratemaking methods and procedures in ratemaking determinations, provided that the resulting rates are within a range of reasonableness. The process of adjudicating each of the rate complaints individually and litigating those rulings through the courts, a process likely to take several years, would not benefit subscribers, given that the Resolution provides for reasonable rates and refunds immediately. Administrative agencies are not precluded from modifying their approach to particular issues when circumstances warrant such action. Agencies may depart from prior decisions so long as they have a rational basis for doing so and explain their reasoning. We believe that the refunds required by the Resolution strike an appropriate balance between maximizing the compensation due subscribers for past overcharges and minimizing delay and uncertainty in the payment of refunds. 9. To the extent that adoption of the Resolution requires a waiver of any of our rules, we find that such waiver will ensure the expeditious resolution of rate complaints while protecting consumers' statutory interest in CPST rates that are not unreasonable. We recognize that our rules contemplate an adjudication of each CPST rate complaint pursuant to specific ratemaking standards. Contrary to the view expressed in the dissent, we do not see any indication that section 623(c)(1)(B)'s requirement that the Commission establish rate resolution procedures by regulation was intended by Congress to preclude the Commission from waiving those rate resolution procedures in appropriate circumstances. Indeed, our rules expressly provide for the waiver of any provision of our rules for good cause shown. To the extent that we diverge from these rules by adopting this Resolution, we find good cause to waive these rules pursuant to Section 1.3 of our rules, because strict compliance with our rules would not serve the public interest under the circumstances before us. We find that a waiver furthers the purpose of the rules because the Resolution effectively achieves the objectives of the 1992 Cable Act by ensuring the expeditious resolution of all pending rate complaints regarding the affected systems while protecting consumers from unreasonable CPST rates through refunds. We further observe that the Commission's authority to resolve cases in an analogous manner has been affirmed in other contexts. 10. Because TCI intends to provide the refunds to affected customers as expeditiously as possible, it may not be possible for TCI to provide 30 days' notice of the refund as required. Accordingly, we believe that on a one-time basis, waiver of advance notification requirements, limited strictly to providing for refunds, are appropriate in this case because prompt implementation will serve the public interest and will allow refunds to be issued immediately. Accordingly, we will grant a one-time waiver of the advance notice provisions of Sections 76.309(c)(3)(i)(B) and 76.964 of the Commission's rules, in order to allow TCI to implement the Resolution expeditiously. In addition, we believe that in the limited circumstances presented by this Resolution, state and local notice requirements would frustrate our effort. Thus, to facilitate rapid resolution of the complaints, we will preempt any local franchising agreement or any state or local law or regulation that requires TCI to give 30 days' notice of rates and service changes to subscribers, strictly for the purpose of issuing a credit to subscribers. Our decision in this regard, is provided on a one-time basis and only to the extent that TCI is required to give advance notice for the purpose of issuing credits to subscribers as provided in the Resolution. V. CONCLUSION AND ORDERING CLAUSES 11. For the reasons discussed above, we conclude that it is in the public interest to adopt the Resolution. 12. We further conclude that the actual CPST rate in Oakland as of March 31, 1997 is not unreasonable as of March 31, 1997. 13. ACCORDINGLY, FOR THE REASONS SET FORTH ABOVE, IT IS ORDERED that the Resolution attached to this Order IS ADOPTED. 14. IT IS FURTHER ORDERED that all CPST rate complaints against TCI in the community referenced above ARE GRANTED to the extent indicated herein, and DENIED in all other respects. 15. IT IS FURTHER ORDERED that all proceedings pending review before the Cable Services Bureau and the Commission with respect to rate complaints against the CPST rates of TCI in the community referenced above, and which were filed between September 1993 through March 31, 1997, ARE RESOLVED TO THE EXTENT INDICATED HEREIN. 16. IT IS FURTHER ORDERED that any local franchising agreement or any state or local law or regulation that requires TCI to give more than 30 days' notice of rates and service changes to subscribers, strictly for the purpose of issuing a credit to subscribers in accordance with the Resolution, IS PREEMPTED. 17. IT IS FURTHER ORDERED that waivers of 47 C.F.R. 76.309(c)(3)(i)(B) and 76.964, requiring 30 days' notice of a rate or service change, strictly for the purpose of issuing credits to subscribers, ARE GRANTED. 18. IT IS FURTHER ORDERED that a waiver of 47 C.F.R. 76.922 and 76.950-76.963, to the extent individual adjudication of CPST rate complaints is required thereby, IS GRANTED. 19. IT IS FURTHER ORDERED that the Cable Services Bureau IS DELEGATED authority to oversee implementation of this Resolution. 20. IT IS FURTHER ORDERED that this Order is effective upon adoption. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary TERMS OF RESOLUTION I. Introduction 1. This Resolution finally resolves the cable programming services tier ("CPST") rate complaints pending against TCI Communications, Inc.'s ("TCI") system in Oakland, CA (CUID CA0589) ("Oakland"). II. Background 2. Complaints have been filed with the Federal Communications Commission ("Commission"), pursuant to 47 C.F.R.  76.950, concerning the CPST rate charged by TCI in Oakland. 3. The Commission's Cable Services Bureau ("Bureau"), under delegated authority, has reviewed the rate justification filed in Oakland pursuant to the Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385, 106 Stat. 1460 (1992) ("1992 Cable Act") and the Commission's cable rate regulations. As a result of that review, the Bureau has determined that certain refunds are owed to TCI subscribers in Oakland. 4. TCI and the Commission have agreed to resolve the CPST rate case in Oakland under the terms set forth below. III. Definitions 5. As used herein, the following definitions will apply. When used throughout this document, these definitions are capitalized. (a) "Effective Date" means the date on which the Commission adopts the Resolution Order regarding this Resolution. (b) "Eligible Subscribers" means CPST subscribers of record in Oakland as of the date bills are issued reflecting Refunds. (c) "Publication Date" means the date on which a copy of the Resolution was mailed to the local franchising authority and the CPST complainant in Oakland as specified in paragraph 12(c). (d) "Refund" means a credit on a subscriber's bill. (e) "Resolution Order" means a final order issued by the Commission regarding the terms of this Resolution. IV. Terms 6. TCI accepts the jurisdiction of the Commission over it and the subject matter of this rate resolution for purposes of the Resolution Order. 7. The pending CPST rate complaints filed in Oakland are finally resolved under the terms provided herein. 8. TCI agrees that these terms shall be incorporated by reference in the Resolution Order. Assuming the adoption of these terms in the Resolution Order, TCI and the Commission will each actively defend the Resolution Order against any appeal of, or other legal challenge to, the Resolution Order by any third party. TCI and the Commission will reasonably cooperate in any such defense of these terms. 9. Assuming the adoption of these terms in the Resolution Order, TCI agrees that any violation of the Resolution Order shall constitute a violation of a Commission order, entitling the Commission to exercise any rights and remedies attendant to the enforcement of a Commission order. 10. These terms are for purposes of settlement only and do not constitute an admission by TCI of any violation of, or failure to conform to, the 1992 Cable Act, Commission rules, or any other applicable law, rule, or policy. 11. The Commission will not institute, on its own motion, any proceedings against TCI based upon the information obtained during consideration of this Resolution. In addition, in the absence of additional facts, any allegations and other circumstances involved in consideration of this Resolution will not be used by any party against TCI with respect to any future proceeding. 12. In consideration for the resolution of the CPST rate complaints pending in Oakland, TCI hereby agrees to the following terms, conditions, and procedures, which will facilitate a fair and expeditious resolution of this matter in a manner that serves the public interest: (a) TCI will issue Refunds to Eligible Subscribers over a twelve-month period in equal payments of $3.49. TCI will begin to issue Refunds to Eligible Subscribers no later than December 31, 1997. If Refund payments are not begun by December 31, 1997, TCI will adjust the Refunds to reflect additional interest (calculated at the IRS rate of interest for tax over-payments) for the period after December 31, 1997 through the date on which the Refund payments begin. (b) The Resolution Order will find that the CPST rate in Oakland as of March 31, 1997 is not unreasonable under the 1992 Cable Act and Commission rules. TCI will not implement any CPST rate change in Oakland from the Publication Date through March 31, 1999. (c) A copy of the Proposed Resolution was provided to: (1) the local franchising authority in Oakland; and (2) the party that filed a complaint on FCC Form 329, pursuant to 47 C.F.R.  76.950, in Oakland. Such party was given 30 days to comment on the Proposed Resolution. (d) Except as provided in subparagraph (e) hereof, these terms may not be terminated or modified without the mutual written agreement of TCI and the Commission. The Commission's consent to any such modification or termination shall be demonstrated by an order by the Bureau or, at the Commission's option, by the Commission itself. (e) Notwithstanding the terms hereof, TCI may avail itself of any applicable modification of any law or regulation governing the CPST rates charged in Oakland, including the adoption by the Commission of any regulation governing rates as applied to the cable industry generally. If TCI exercises this election, the terms contained herein shall be superseded upon the effective date of such law or regulation, except that TCI shall provide Refunds to Eligible Subscribers pursuant to the terms of this Resolution, and TCI may not change its CPST rate in Oakland until after March 31, 1999. 13. The Resolution Order shall affirmatively state that any and all waivers of Commission rules necessary to effectuate these terms are deemed to be granted. The Commission will not assert in any proceeding that TCI's compliance with the terms of this Resolution violates any Commission rule or order, and, in any proceeding before the Commission brought by a third party, a showing by TCI that it has complied with these terms shall constitute a defense to any claim that TCI's actions in meeting the terms constitute a violation of any applicable Commission rule or order. Notwithstanding the foregoing, nothing in this Resolution should be construed to preempt the authority of a local franchising authority to regulate the basic service tier and related equipment rates, consistent with the Commission's regulations and orders. This Proposed Resolution will not alter the effect of any future Commission order concerning commercial rate issues. 14. If any provision, clause, or part of this Resolution is invalidated, the remainder of this Resolution shall not be affected thereby and shall remain in effect; provided, however, that if such invalidation is material, TCI and the Commission (or the Bureau) shall attempt in good faith to reconstitute this Resolution in a form that is, to the maximum extent possible, consistent with the original intent of this Resolution. 15. Nothing in this Resolution shall be deemed to affect any TCI rate case other than the CPST rate case resolved by this Resolution in Oakland. Statement of Chairman William E. Kennard In the Matter of TCI Communications, Inc., Final Resolution of Cable Programming Service Rate Complaints (Oakland) The Order we adopt today provides more than 60,000 cable subscribers with refunds for paying cable rates in excess of the maximum permitted rates allowable by the Commission. I believe that this settlement, like those that have preceded it, is a fair way to address many of the over 17,000 complaints the Commission has received since Congress imposed rate regulation on cable operators in 1992. I also believe that the Order we approve today provided a fair process for those involved to participate. Most importantly, it gives tangible, final and prompt relief that otherwise would not likely be possible. The Commission has the responsibility to implement the law in the most efficient and effective way. It must do so pragmatically, recognizing that protracted processes undermine the purpose of the law. The Commission's standards for determining whether cable rates are reasonable have been upheld by the courts. Consumers, local governments, and cable operators have access to the format used by the Commission, as well as information obtained by the Commission, to ascertain a reasonable rate. Because the Commission's standards for determining a reasonable rate are publicly available, along with the information submitted by a cable operator as part of the resolution process, I believe that consumers and local governments had a meaningful ability to evaluate the proposed settlement. As the Commission's opinion explains, the law does not limit the ability of the Commission to calculate rates for a group or class, without lengthy adjudications, and to order refunds. I believe that a group resolution is particularly appropriate where there is one operator, with similar methods of operation across its franchises. Here, the Commission released and sought comment on the proposed settlement, as it has for all other settlements. Moreover, as a general matter, the overwhelming number of comments filed in response to rate resolution settlements support the proposals, and other comments actually have resulted in changes to the proposed settlements. Each of these views has been considered and responded to. The Order provides an immediate and significant remedy to consumers. Dissenting Statement of Commissioner Harold Furchtgott-Roth In the Matter of TCI Communications, Inc., Final Resolution of Cable Programming Service Rate Complaints (Oakland) For the reasons that follow, I must respectfully dissent from the adoption of this "resolution" of cable programming service tier ("CPST") rate complaints. First, I do not believe that the Commission possesses statutory authority to resolve CPST rate complaints by way of this sort of negotiated global settlement. It is true, as the Commission observes, that section 4(i) of the Communications Act states that the Commission may "issue such orders, not inconsistent with this Act, as may be necessary in the execution of its functions," and that section 4(j) authorizes the Commission to "conduct its proceedings in such a manner as will best conduce to the proper dispatch of business and to the ends of justice." 47 U.S.C. sections 154(i)-(j). But the Communications Act includes another provision -- one that, unlike sections 4(i) and (j), speaks directly to the proper processing of CPST complaints. Unfortunately, the Commission fails to follow the dictates of this provision, which mandates that "the Commission shall, by regulation, establish . . . fair and expeditious procedures for the . . . resolution of complaints from any franchising authority . . . alleging that a rate for cable programming" is unreasonable. 47 U.S.C. section 623(c)(1)(B)(emphasis added). The simple fact, however, is that there are no Commission regulations that even arguably provide procedures for a negotiated settlement such as this; the requirements of this section therefore have not been met. Conversely, the regulations that the Commission has adopted to govern procedures for rate complaints, which, like the statute itself, generally contemplate individualized adjudication of complaints, see, e.g., id. section 623(c)(1)(A); 47 CFR section 76.957, have clearly not been observed here. The Commission's noncompliance with these regulations raises its own separate set of potential legal problems. See generally Service v. Dulles, 354 U.S.363, 388 (1957)(administrative agencies must follow their own regulations). In sum, given the existence of section 623, I simply do not understand how the Commission can assert that the use of this mechanism is "consistent with," supra at 3, the Communications Act. Absent conformity with duly promulgated regulations providing for the use of this procedure, this resolution violates section 623. The existence of section 623 also renders inapposite the caselaw cited by the Commission in support of its position. See supra at 4 & n. 12. To be sure, those cases hold that agencies generally possess broad discretion to choose between administrative processes. But none of those cases involve, as here, an agency's failure to conform with statutorily-prescribed limitations on that discretion. Cf. Heckler v. Chaney, 470 U.S. 821, 833 (1985) (presumption against unreviewability of agency non-enforcement decisions rebutted where "the substantive statute has provided guidelines for the agency to follow"). Indeed, the decisions cited by the Commission are expressly premised on the lack of any statutory language precluding the agency's choice of processess. See, e.g., In re Permian Rate Basin Area Rate Cases, 390 U.S. 747, 797 (1968) (stating, in affirming the Federal Power Commission's two-price rate structure for regulation of gas prices, "[w]e find no objection under the Natural Gas Act to this dual arrangment" and that "[n]othing in the purposes or history of the Act forbids the Commission to require different prices for different sales"). I understand the argument from utility for this sort of creative processing mechanism. If the Commission believes that rate "resolutions" are procedurally necessary, however, section 623 requires that we establish them by regulation, with notice and comment. Pragmatic considerations are undeniably important, but they cannot overcome the clear letter of the law. Our paramount duty is to implement the law as written by Congress and enacted by the President -- not based on our own conceptions of the most efficient and effective way to proceed. See Chevron v. Natural Resources Defense Council, 467 U.S. 837, 842-43 (1985) (where statutory language is clear, "that is the end of the matter," for the agency "must give effect to the unambigously expressed intent of Congress"). Second, I do not believe that the Commission has met its obligation under the Administrative Procedure Act to engage in reasoned decisionmaking. Cf. Koch Gateway Pipeline Co. v. FERC, 136 F.3d 810, 814 (D.C. Cir. 1998)("reasoned decisionmaking" requires "a process demonstrating the connection between the facts found and the choice made"). In this item, there is virtually no explanation as to how the Commission arrived at the refund amount that it approves. There is no suggestion that any of the mandatory factors set out in the statute, see 47 USC section 623(c)(2)(A)-(F), or the objective criteria in our regulations, see 47 CFR section 76.922, for measuring the reasonableness of rates were either considered or applied. This lack of explanation as to methodology causes me to suspect that the number at which the Commission and the cable company have arrived has little do with actual rate analysis but more to do with simple horse-trading. And due to this lack of explantion of the methodology or factors employed to calculate the refund, there is no way for complaining parties to know whether they have been given a fair deal or even what the terms of that deal are, much less for a court to review the rationality of the refund determination. Third, I am deeply concerned that the complainants were not party to the negotiations that produced this "resolution." As I have made clear in other contexts, I believe that it is most unseemly, if not illegal, when regulated entities and regulators go behind closed doors to hammer out settlements. See, e.g., Third Order on Reconsideration, Revision of Universal Service Collection Amounts for 1998, FCC No. 97-411 (Dec. 16, 1997). I realize that the complainants and local franchising authorities had a chance to comment on the final agreement reached by the Commission and the cable company, but that participation came at the eleventh hour, after the terms of the resolution had already been finalized as between the company and the Commission. As the Commission has observed in related proceedings, the complainants and local franchise authorities were not deprived of any participation they would have been afforded in a traditional cable rate adjudication. That is not the point: under a traditional proceeding, municipalities or complainants may not have been able to participate beyond the point of submitting their complaint, but neither would the cable operator have been able to participate beyond the point of submitting their response. The problem for complaining parties is not that they did not get additional participation per se but that cable operators were afforded greater participation rights than they were. Whether or not this amounts to a violation of our ex parte rules, a process in which the heart of the negotiations are conducted without the participation of the complainants themselves is just not a fair process. I appreciate that these "resolutions" are efficient in that they dispose of large numbers of complaints in one fell swoop. The Commission saves itself a lot of time-consuming work, and the cable operator saves itself a lot of regulatory headaches and uncertainty. But it is the complainants, who were not a party to the negotiations that produced this resolution and who continue to object to its terms, that seem to be getting the short end of this regulatory stick. However convenient global rate resolutions might be for the Commission and for cable companies, they do not appear to be within the bounds of governing law. I therefore cannot sanction their use. * * * In closing, I observe that the administrative burdens that drove the Commission to employ this creative but legally flawed method of resolving consumer complaints are the sorry and inevitable by-product of rate regulation itself. The better method for avoiding the administrative disaster that would be occasioned by individualized adjuducation of these backlogged complaints is simply to abolish rate regulation. That is, in part, precisely what Congress wisely recognized when it mandated that CPST regulation cease in March of 1999. When that time comes, we will be free of the administrative and regulatory demons that haunt this item.