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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. ) ) 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 approximately 325 rate complaints filed against TCI regarding the rates that TCI charged for cable programming services from September 1, 1993 through March 31, 1997. Together, these cases affect approximately 1,053,000 cable programming services subscribers. For the reasons stated below, and based upon our review of the record, we find that the Resolution we adopt today, including certain modifications as discussed herein, 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 inquiries from the Cable Services Bureau ("Bureau") 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. The complaints are similar to those resolved by the First Resolution. Included are several complaints that the Bureau issued orders finding that TCI failed to justify its CPST rates. TCI filed appeals in those cases and the appeals are now pending. The process of adjudicating each of these rate complaints individually and litigating those rulings through the courts would require considerable resources and time by all parties. 4. TCI communicated with the Bureau staff expressing an interest in discussing a global resolution of rate complaints that had not been resolved by the First Resolution. Pursuant to Section 1.1204(a)(10) of the Commission's rules, the Bureau staff met with TCI to discuss the resolution of issues relating to these complaints. At issue are CPST complaints filed against TCI covering the period September 1, 1993 through March 31, 1997. The Resolution settles CPST rate complaints against systems owned by TCI as of September 15, 1995, but which were omitted from the First Resolution ("Owned Systems") and CPST rate complaints against systems acquired by TCI after the First Resolution ("Acquired Systems"). 5. On September 10, 1997, the Commission adopted an Order instructing the Bureau staff to serve all complainants and relevant local franchising authorities with the Proposed Resolution. Copies of the Proposed Resolution along with the September 10, 1997 Order were mailed to all local franchising authorities that had filed complaints, all local franchising authorities where valid complaints against TCI had been filed, and to any party that filed a valid complaint other than local franchising authorities. A 30-day comment period was provided for the complainants to submit comments on the Proposed Resolution. III. SUMMARY OF RATE RESOLUTION 6. Under the Resolution, TCI will provide a $2.18 refund to each of TCI's CPST subscribers in the communities listed in Exhibits 1 and 2 to the Resolution in the form of a one-time credit on the eligible subscriber's bill. Currently, there are approximately 1,053,000 subscribers that are entitled to this refund, resulting in a total refund amount of approximately $2,300,000. Because the $2.18 refund calculation presumes that TCI will provide the refunds no later than 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. The Resolution will resolve approximately 325 pending CPST rate complaints. 7. In addition to the refunds, TCI will withdraw all Applications for Review, Petitions for Reconsideration, and Petitions for Stay of Bureau orders relating to the included franchise areas. The Resolution will find that TCI's March 31, 1997 rates or maximum permitted rates filed with the Bureau, effective March 31, 1997, if not yet implemented, are 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 8. Four written comments were received by the Commission reflecting the views of 6 local franchising authorities. Three comments were received from parties other than local franchising authorities. TCI filed Reply Comments on November 6, 1997. The comments raised various concerns, including the Commission's authority to enter into the Resolution, the procedures followed to effectuate the Resolution, and the effect of the Resolution on rates. We address the various comments below and set forth certain modifications to the Proposed Resolution where appropriate. 9. The City of DeWitt, Iowa, expressed satisfaction with the Proposed Resolution. 10. The City of Davis, California, expressed acceptance of the Proposed Resolution, so long as the CPST rates effective June 1, 1997 are still subject to review. The Resolution is intended to cover complaints concerning CPST rates in effect through March 31, 1997. Therefore, any June 1, 1997 CPST rate increase is subject to the regular complaint review process. In its Reply Comments, TCI proposed additional language to clarify the terms of the Resolution. With slight modification, we accept TCI's suggestion and include the following sentence at the end of Paragraph 1 of the Resolution: Nothing in this Resolution will affect the CPST rates implemented by TCI after March 31, 1997, or any rate complaints which have been or which may be filed with respect to such CPST rates. 11. The City of Ravenna, Ohio requested clarification of Item 12(c) under Part IV (Terms) of the Resolution. Item 12(c) allows TCI to adjust its CPST rates without prior approval from the Commission. However, those CPST rate adjustments are still subject to the Commission's CPST rate review process. In its Reply Comments, TCI proposes to delete the second sentence of Item 12(c) and substitute the following language: TCI may adjust CPST rates in such Benchmark Franchises and Cost-of- Service Franchises after the Effective Date pursuant to the Commission's rules governing such rate adjustments. We agree that this language responds to the City of Ravenna, Ohio's request for clarification and therefore amend the Resolution accordingly. 12. The Cities of Berkeley and Richmond, California and the County of Contra Costa, California (the "Cities") raise three issues. First, the Cities argue that the Commission is without authority to approve the Resolution; second, that the negotiation of the Resolution violates the Commission's ex parte rules; and third, that there is no evidence justifying the reasonableness of the CPST rates approved by the Resolution. 13. As we have stated before, 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 consistent with the 1992 Cable Act and with Congress' dual objectives of simplifying cable rate regulation and protecting consumers. As noted above, we have concluded in other recent proceedings that the Commission has authority to consider the Proposed Resolution and to determine, after review and consideration of comments, that the rates set forth in the Resolution are not unreasonable. 14. 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. 15. There is nothing in our rules or regulations that precludes us from vacating Bureau Orders in the context of a Resolution which establishes rates that are not unreasonable. We find that modifying the Bureau's rate decisions involved in this Resolution is in the public interest because we find the rates provided for in the Resolution are not unreasonable under our rules. To the extent that adoption of the Resolution does require a waiver of any of our rules, we find that such waiver will ensure the expeditious resolution of a large number 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 benchmark rate complaints regarding the affected systems while protecting consumers from unreasonable CPST rates through rate reductions and refunds. We further observe that the Commission's authority to resolve cases in an analogous manner has been affirmed in other contexts. 16. Because the Resolution anticipates an expeditious payment of refunds, it may not be possible for TCI to provide 30 days' notice of the refund as required. 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. 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 a credit to subscribers as provided in the Resolution. 17. Secondly, the negotiation of the Resolution does not violate the Commission's ex parte rules. On June 2, 1997, amendments to the Commission's ex parte rules became effective, classifying proceedings involving cable rate complaints filed on FCC Form 329 as permit-but-disclose proceedings for ex parte purposes. In the instant proceeding, TCI contacted the Bureau staff expressing an interest in discussing a global resolution of the rate complaints. Pursuant to Section 1.1204(a)(10) of the Commission's rules, the Bureau staff met with TCI to discuss the resolution of issues relating to complaints regarding the rates charged for CPST offerings by TCI. Section 1.1204(a)(10)(v) of the Commission's rules provides that ...in situations where new information regarding the merits is disclosed during settlement discussions, and the Commission or staff intends that the product of the settlement discussions will be disclosed to the other parties or the public for comment before any action is taken, the Commission or staff in its discretion may defer disclosure of such new information until comment is sought on the settlement proposal or the settlement discussions are terminated. Disclosure of new material must be made in accordance with the requirements of Section 1.1206(b) of the Commission's rules which provides that a person who makes a written ex parte presentation ... shall ... submit two copies of the presentation to the Commission's secretary ... for inclusion in the public record. The presentation ... must be labelled as an ex parte presentation. A notice requirement is found in Section 1.1206(b)(4) of the Commission's rules which states that the ... relevant Bureau ... shall place in the public file or record of the proceeding written ex parte presentations and memoranda reflecting oral ex parte presentations. The Secretary shall issue a public notice listing any written ex parte presentation or written summaries of oral ex parte presentations received by his or her office relating to any permit-but-disclose proceeding. 18. In the context of discussions with the Commission regarding the resolution of the issues raised by the complaints, TCI provided the Commission with new written information. On September 11, 1997, TCI provided copies of all new material to the Secretary of the Commission and the material was placed in the public file. Although there are no additional service or public notice requirements associated with permit-but- disclose proceedings, all complainants including local franchising authorities were served with the Proposed Resolution for the purpose of soliciting comment. Local franchising authorities that were not complainants, and therefore not parties to the proceedings, were also served. In addition, a public notice was issued by the Bureau notifying the public that new information in the record was available for public inspection. The Commission provided 30 days for comment on the Proposed Resolution. The process followed here balances the need to present a reasonable resolution of a myriad of contested rate complaints with a real opportunity for those interested to present their views. Although our standard procedures for the review of CPST rates do not include an opportunity for local franchising authorities, complainants, or others to participate in our decisionmaking process prior to the issuance of an initial order resolving the complaint that triggered our review, local franchising authorities and other interested parties were given a full and fair opportunity to participate in our deliberative process by submitting comments on the Proposed Resolution, which, by its terms, was not binding on any party prior to our adoption of it in this Order as a final Resolution. We conclude that the Bureau correctly followed the ex parte rules and all interested parties were given fair participation rights. 19. There is ample evidence justifying the reasonableness of the CPST rates approved by the Resolution. TCI submitted rate justifications for all of the systems included in the Resolution and these filings are available in the public file room. The Bureau determined that TCI's liability for systems covered by the Resolution is substantially the same as it was for systems covered by the First Resolution. The difference in the refund amount, $2.18 in the Proposed Resolution and $1.93 in the First Resolution, is due to accumulated interest between the time refunds were paid under the First Resolution and December 1, 1997 (the date refunds are assumed payable under the Proposed Resolution). 20. As noted, the Resolution covers CPST rate complaints against systems owned by TCI as of September 15, 1995, but which were omitted from the First Resolution ("Owned Systems") and CPST rate complaints against systems acquired by TCI after the First Resolution ("Acquired Systems"). TCI was able to provide information and reasonable assurances regarding its rate-setting methodologies in its Owned Systems. The Bureau reviewed uncertified benchmark rate justifications submitted by TCI to ensure that the terms of the First Resolution were applicable to the Owned Systems. Because of the consistency in the general policies governing TCI's rate-setting in TCI's Owned Systems and based on the review conducted by the Bureau of FCC Forms submitted by TCI, the Bureau concluded that the settlement amount used in the First Resolution, with interest to cover the passage of time, is applicable to the Owned Systems. The Bureau also reviewed both benchmark and cost of service rate justifications to ensure that the terms of the First Resolution were applicable to the Acquired Systems. The Bureau reviewed the FCC Form 1220 filing for the Berkeley/Richmond system based on the Commission's Final Cost Rules. Upon review, the Bureau determined that the original settlement refund amount, as adjusted for interest, was a reasonable and just settlement for the Acquired Systems. 21. Edward J. Hoffman and Thomas Heard, in addition to being disappointed in the refund amount, express the desire to be able to refuse the addition of unwanted channels. We have already addressed the reasonableness of the settlement amount. The issue of subscriber prerogatives in programming selection is beyond the scope of this proceeding. 22. B. Sachau, a former subscriber, objects to TCI's plan to make refunds only to current subscribers. The Commission's rules allow an operator, at its discretion, to implement a refund in one of two ways, either through identification of actual subscribers or through a prospective percentage reduction of the rates to the class of subscribers that currently subscribe to the service. Operators face constant changes to their subscriber base making it difficult, if not impossible, to identify all such former subscribers, maintain current address lists for them, and determine what portion of the refund amount should be remitted to any former subscriber for the period of that subscriber's subscription. We are convinced that the expense associated with giving refunds to all former subscribers would be large and that making such refunds would be unduly burdensome to TCI. We conclude that the payment method proposed for the refunds, as credits to current subscribers, is consistent with our rules and is a reasonable alternative to meet the purposes of the law. V. CONCLUSION AND ORDERING CLAUSES 23. For the reasons discussed above, we conclude that it is in the public interest to adopt the Resolution with the modifications set forth in Paragraphs 10 and 11 above. 24. We further conclude that the maximum permitted rates as reflected by TCI's Form 1200 Series filings for the communities listed in Exhibits 1 and 2 to the Resolution, are justified and are therefore not unreasonable as of March 31, 1997. 25. ACCORDINGLY, FOR THE REASONS SET FORTH ABOVE, IT IS ORDERED that the Resolution attached to this Order, including the modifications noted in this Order, IS ADOPTED. 26. IT IS FURTHER ORDERED that all CPST rate complaints against TCI in the communities referenced in Exhibits 1 and 2 ARE GRANTED to the extent indicated herein, and DENIED in all other respects. 27. 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 communities referenced in Exhibits 1 and 2, ARE RESOLVED TO THE EXTENT INDICATED HEREIN. 28. IT IS FURTHER ORDERED that the orders issued by the Cable Services Bureau with respect to CPST rate complaints filed between September 1993 through March 31, 1997 against TCI in the communities referenced in Exhibits 1 and 2, ARE VACATED and ARE SUPERSEDED by this Resolution. 29. 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. 30. 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 a credit to subscribers, ARE GRANTED. 31. 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. 32. IT IS FURTHER ORDERED that the Cable Services Bureau IS DELEGATED authority to oversee implementation of this Resolution. 33. 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 Proposed Resolution finally resolves cable programming services tier ("CPST") complaints pending as of March 31, 1997 against TCI Communications, Inc. and its subsidiaries as of the same date ("TCI"). Nothing in this Resolution will affect the CPST rates implemented by TCI after March 31, 1997, or any rate complaints which have been or which may be filed with respect to such CPST rates. II. Background 2. Complaints have been filed with the Federal Communications Commission ("Commission"), pursuant to 47 C.F.R.  76.950, concerning the CPST rates charged by TCI in the communities listed in Exhibit 1 and Exhibit 2. 3. The Commission's Cable Services Bureau ("Bureau"), under delegated authority, has reviewed TCI's pending CPST benchmark and cost-of-service rate justifications 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. 4. TCI and the Commission have agreed to resolve TCI's pending CPST rate cases filed under FCC Forms 393, 1200, 1210, 1240, and/or 1220 in communities listed in Exhibits 1 and 2 that were pending as of March 31, 1997, 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) "Benchmark Franchises" means those cable franchises in which benchmark rate justifications were filed to justify CPST rates, as listed in Exhibit 1. (b) "Commission Rules" means all Commission rules currently in effect as of March 31, 1997, as well as all subsequent clarifications, amendments, and additions thereto, including, but not limited to, changes initiated by the Commission or changes required by or made pursuant to changes in federal law. (c) "Cost-of-Service Franchises" means those cable franchises in which a cost-of service rate justification was filed at any time to justify CPST rates, as listed in Exhibit 2. (d) "Current Rate" means the CPST rate in effect in a TCI franchise as of March 31, 1997, or the maximum permitted CPST rate included in FCC Form 1200, 1210, 1220, or 1240 and filed with the Commission if such rate had not been implemented as of March 31, 1997. (e) "Effective Date" means the date on which the Commission adopts the Resolution Order regarding this Resolution. (f) "Eligible Subscribers" means CPST subscribers of record in all Benchmark Franchises and Cost-of-Service Franchises as of the date bills are issued reflecting Refunds. (g) "Refund" means a credit on a subscriber's bill. (h) "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 these rate resolutions for purposes of the Resolution Order. 7. TCI's pending CPST rate cases filed under FCC Forms 393, 1200, 1210, 1240, and/or 1220 in the Benchmark Franchises and the Cost-of-Service Franchises for the period through March 31, 1997 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 all TCI CPST rate complaints pending before the Commission as of March 31, 1997, TCI hereby agrees to the following terms, conditions, and procedures, which will facilitate a fair and expeditious resolution of those matters in a manner that serves the public interest: (a) In settlement of all of TCI's pending CPST rate cases in Benchmark Franchises and Cost- of-Service Franchises, TCI will issue a $2.18 Refund to Eligible Subscribers. These Refunds include applicable interest through December 1, 1997. Refunds will be reflected as a one-time credit on the bills of Eligible Subscribers. (b) TCI will issue Refunds to Eligible Subscribers no later than December 31, 1997. If Refunds are not issued by December 31, 1997, TCI will adjust the Refunds to reflect additional interest for the period after December 31, 1997 through the date on which the refund payments begin. (c) The Resolution Order will find that in each of the Benchmark Franchises and Cost-of- Service Franchises, the Current Rate is deemed not unreasonable under the 1992 Cable Act and Commission Rules. TCI may adjust CPST rates in such Benchmark Franchises and Cost-of-Service Franchises after the Effective Date pursuant to the Commission's rules governing such rate adjustments. (d) As of the Effective Date, any Bureau orders which concern TCI's CPST rates charged in the franchises listed in Exhibits 1 and 2 are vacated. The Resolution Order shall supersede any such vacated Bureau orders. (e) As of the Effective Date, TCI will withdraw the Applications for Review, Petitions for Reconsideration, and Petitions for Stay of any Bureau orders relating to CPST cases filed with the Commission for the franchises listed in Exhibits 1 and 2. (f) A copy of the Proposed Resolution was provided to: (1) all local franchising authorities ("LFAs") in Benchmark Franchises and Cost-of-Service Franchises; and (2) each party that filed a complaint on FCC Form 329, pursuant to 47 C.F.R.  76.950, in the franchises listed in Exhibits 1 and 2. Parties that filed a complaint were given 30 days to comment on the Proposed Resolution. (g) Except as provided in subparagraph (h) 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. (h) Notwithstanding the terms hereof, TCI may avail itself of any applicable modification of any law or regulation governing the CPST rates charged in any TCI franchises listed in Exhibits 1 and 2, 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. Nothing herein shall restrict the ability of any TCI system to adjust its rates in the event such rates are not regulated for any reason, including changes to the Communications Act of 1934, as amended, or to Commission Rules. 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 the 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 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 to this Resolution, TCI and the Commission (or the Bureau) shall attempt in good faith to reconstitute the Resolution in a form that is, to the maximum extent possible, consistent with the original intent of the Resolution. 15. Nothing in this Resolution shall be deemed to affect any TCI rate case other than the CPST rate cases resolved by this Resolution in the franchises referenced in Exhibit 1 or Exhibit 2. EXHIBIT 1 BENCHMARK COMMUNITIES CUID# FRANCHISE NAME AL0010 PLEASANT GROVE AL0062 HOOVER AL0082 JEFFERSON COUNTY AZ0018 SIERRA VISTA AZ0281 PIMA COUNTY CA0036 PACIFIC GROVE CA0062 CONCORD CA0239 LAFAYETTE CA024 3 CONTRA COSTA CA0303 THOUSAND OAKS CA0347 MERCED CA0376 HEMET CA0388 VALLEJO CA0492 CUPERTINO CA0575 BROADMOOR CA0743 IDYLLWILD CA1058 DAVIS CA1228 LOS ALTOS CA1233 BRENTWOOD CA1507 CLYDE CO0037 MESA DE0010 ELSEMERE FL0133 PASCO COUNTY FL0231 INDIAN RIVER SHORES FL0418 MIRAMAR FL0846 SPRUCE CREEK GA0008 MILLEDGEVILLE GA0022 FITZGERALD GA0023 HAZELHURST GA0035 MOULTRIE GA0705 TY TY HI0073 KAUNAKAKAI HI0074 LANAI CITY IA0033 CLINTON IA0040 STORM LAKE IA0062 CAMANCHE IA0072 WEBSTER CITY IA0101 DEWITT IA0853 JEFFERSON (UO FAIRFIELD) ID0059 GARDEN CITY IL0109 PEORIA IL0161 ROCK ISLAND IL0172 EAST ALTON IL0178 MCHENRY [CARPENTERSVILLE] IL0417 DEPUE IN0007 BEDFORD IN0026 HARTFORD CITY IN0061 MARTINSVILLE IN0082 LEBANON IN0104 EAST CHICAGO LA0036 LAKE CHARLES LA0055 BATON ROUGE (REBUILD) LA0064 SULPHUR LA0195 WALKER LA0444 CHALMETTE LA0475 SULPHUR MA0058 ZZ CHATHAM MA0172 ANDOVER MD0059 ANNE ARUNDEL COUNTY ME0157 WELLS MI0315 KENTWOOD MI0389 BYRON MI0392 ALPINE MI0829 FERNDALE MI0830 HUNTINGTON WOODS MI0900 WHITE LAKE MI1166 BRIDGEPORT MN0010 WINONA MO0156 BOONE MO0160 SPRINGFIELD MS0152 NETTLETON MT0053 YELLOWSTONE COUNTY NE0064 BELLEVUE NE0080 SARPY NJ0120 PARSIPPANY NJ0135 ROCKAWAY NJ0151 FLORHAM PARK NJ0159 DENVILLE TOWNSHIP NJ0166 BROOKLAWN NJ0168 MOUNT EPHRAIM NJ0242 BOONTON NJ0270 RANDOLPH NJ0319 MAPLE SHADE NJ0421 MAHWAH NJ0459 HAMILTON NJ0561 ALLENTOWN NJ0566 PATERSON NJ0588 WASHINGTON, NJ NM0021 FARMINGTON NM0141 GAMERCO NV0020 WASHOE NV0084 DAYTON NY0165 ESOPUS NY0168 KINGSTON NY0222 POUGHKEEPSIE NY0235 LOWVILLE NY0363 PATCHOGUE NY0451 LAKE GROVE NY0746 PERTH NY0905 SLOATSBURG NY0906 TUXEDO NY1464 NEW HEMPSTEAD OH0251 HAMILTON OH0292 JEFFERSON OH0327 RAVENA OH0413 NEWTON FALLS OH0576 RAVENNA OH0615 TRENTON OH0931 PAULDING OH2195 BOWERSTON OH2395 SUPERIOR OK0059 STILLWATER OK0202 BIXBY OK0202 BIXBY (REBUILD) OR0043 CLASKANIE OR0047 CORVALLIS OR0157 CLACKAMAS PA0147 FERGUSON PA0162 PENN HILLS PA0528 MCKEES ROCKS PA0714 ROSS RI0025 TIVERTON TN0050 MANCHESTER TN0085 SHELBYVILLE TN0452 BELL BUCKLE TX0002 MINERAL WELLS TX0074 KERRVILLE TX0164 UVALDE TX0251 BEAUMONT TX0284 GONZALES TX0514 LA MARQUE TX0640 WYLIE TX0649 EULESS TX1276 DOUBLE OAK UT0006 SALT LAKE CITY (REBUILD) UT0006 SALT LAKE CITY UT0007 MURRAY UT0007 MURRAY (REBUILD) UT0161 SALT LAKE (W) [WEST VAL] WA0008 OLYMPIA WA0097 ARLINGTON WV0115 VIENNA WV0751 NORTH HILLS WY0002 RIVERTON WY0003 THERMOPOLIS EXHIBIT 2 COST OF SERVICE COMMUNITIES CUID# FRANCHISE NAME CA0006 BERKELEY CA0487 RICHMOND OR0362 MULTNOMAH (HAYDEN ISLAND) OR0363 HAYDEN ISLAND WA0347 VANCOUVER WA0348 CLARK Statement of Chairman William E. Kennard In the Matter of TCI Communications, Inc., Final Resolution of Cable Programming Service Rate Complaints The Order we adopt today provides more than 1 million cable subscribers in 151 communities with refunds for paying cable rates in excess of the maximum permitted rates allowable by the Commission. The Commission already has provided similar relief to over 4 million subscribers. 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 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 5, 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 page 5 & n. 16. 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 processes. 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 arrangement" 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. Indeed, the fact that in this resolution all subscribers receive an identical refund, regardless of the franchise area in which they live, makes it appear unlikely that these factors, which look to the historical rates of the particular cable system in question, were in fact employed. This lack of explanation as to methodology and the uniformity of the refunds 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 explanation of the methodology or factors employed to calculate the refund, there is no way for the complaining municipalities 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 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. And, of course, the Commission today rejects in toto the arguments of the municipalities who object to the resolution. As the Commission observes, the municipalities were not deprived of any participation they would have been afforded in a traditional cable rate adjudication. See supra at 8 & n.32. That is not the point: under a traditional proceeding, municipalities 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. What the municipalities complain of is not that they did not get additional participation per se but that cable operators were afforded greater participation rights than were the municipalities. 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. Finally, in the context of these rate resolutions, the Commission purports to bind even those complaining parties who vigorously object to the terms of the resolution. It is a fundamental, however, that settlements require the consent, whether on an opt-in or opt-out basis, of all the parties in interest. 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 municipalities and the ratepayers they represent, 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 adjudication 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.