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Matter of: hh@)hpp   x` `  hh@)  S-JONES INTERCABLE, INC.hh@)hCUID No. IL0666  Sp-xWestern Springs, Illinoishh@)h  SH-JONES INTERCABLE OF hh@)hCUID No. VA0220  S -xALEXANDRIA, INC.hh@)  S-xAlexandria, Virginiahh@)h x` `  hh@)  S -Application for Review hh@)hpp  S -of CPST Orders  hh@) x` `  x` `  hh@  S-  MEMORANDUM OPINION AND ORDER TP  S-X` hp x (#%'0*,.8135@8:  ) yOd-ԍ47 C.F.R.  76.956.>  S- ` x4.` ` An operator may attempt to justify its prices either through a benchmark showing or  x.through a costofservice showing. The Commission's benchmark methodology uses a formula to derive  Sj- xa benchmark rate against which the reasonableness of an operator's rate can be measured. ZjJ ) yOT"- xԍ Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate  xRegulation, Report and Order, MM Docket No. 92266, 8 FCC Rcd 5631, 576869, 577074, 577778, 588183  {O#-(1993) ("Rate Order"), recon. denied on this point, 9 FCC Rcd 1164, 117179 (1993). The  xNmethodology is based on the Commission's analysis of systems' rates that are subject to effective  xcompetition and is used to determine, on an individual cable system basis, whether rates exceed the  xcompetitive rate level, and if so by what amount. Comparing a system's rate with the rate computed from  xa benchmark formula enables the Commission to determine an initial reasonable regulated rate for each"l ,p(p(883"  xcable system. The Commission has established forms, in this case, Form 393, to implement the  S- xbenchmark methodology. This method of determining rates was upheld in Time Warner.8 ) yO@-ԍ56 F. 3d at 178.8 In addition,  S- xthe Commission adopted an alternative costofservice methodology which is available to ensure that cable  S- x^operators can fully recover costs. ~X) {O- xԍ47 C.F.R.  76.956 (b). Since the benchmark methodology is based in part on industrywide data, it does not  xnecessarily reflect individual systems' costs of providing cable service. The Commission concluded that the  xbenchmark methodology may not permit all cable operators to fully recover the costs of providing service and to  x;continue to attract capital. Consequently, the Commission decided to allow cable operators to exceed the rate level  x/permitted under the benchmark methodology, provided that they could make the requisite cost showings  {Ol - xdemonstrating that the rate in question was reasonable even though it exceeded the permitted benchmark level. Rate  {O6 -Order, 8 FCC Rcd at 5794. Under either methodology, the operator has the burden of  xdemonstrating that its CPST rates are not unreasonable. The law requires that if the Commission finds  S:-the rates to be unreasonable, it shall determine the correct rates and any refund liability.= :) yOx-ԍ47 C.F.R.  76.957=  S- ` x5.` ` The Commission's original rate regulations took effect on September 1, 1993.. ) yO- xԍOrder in MM Docket No. 92266, Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, FCC 93372, 58 Fed. Reg. 41042 (August 2, 1993). The  S- xCommission subsequently revised its rate regulations effective May 15, 1994.A ) yO-ԍ47 C.F.R.  76.922(b).A Operators with valid  xCPST complaints filed against them prior to May 15, 1994 were required to demonstrate that their CPST  xprices were in compliance with the Commission's initial rules from the time the complaint was filed  xthrough May 14, 1994, and that their prices were in compliance with the revised rules from May 15, 1994  S" - xforward." ) {O- xԍSee Second Order on Reconsideration, Fourth Report and Order and Fifth Notice of Proposed Rulemaking in  {O-MM Docket No. 92266, 9 FCC Rcd 4119, 4190 (1994) ("Second Order on Reconsideration"). Operators attempting to justify their prices for the period prior to May 15, 1994 did so by filing FCC Form 393. These cases involve the Bureau's interpretation of Form 393.  S - ` x6.` ` FCC Form 393 is the official form used by regulators to determine whether an operator's  S - xkregulated rates  r) yO- x<ԍThe Communications Act establishes a dual regulatory structure for cable services, delegating jurisdiction to  xlocal franchising authorities for the regulation of the basic service tier ("BST") and associated equipment rates, and  xdelegating jurisdiction to the Commission for the regulation of CPST rates upon the filing of a valid complaint. Communications Act  623, 47 U.S.C.  543. for programming, equipment and installations were reasonable during the time period  SZ- xfrom September 1, 1993 until May 14, 1994.ZZ) yOT$- xԍ#Xw PE37 XP## X\  P6G;P#To the extent that an operator has sought to take advantage of the refund deferral period available under the  yO%- xSecond Order on Reconsideration, Fourth Report and Order, and Fifth Notice of Proposed Rulemaking in MM  {O%- xDocket 92266, 9 FCC Rcd 4119, 41834185 (1994) ("Second Recon. Order"), the maximum permitted rates  xdetermined under Form 393 may also apply from May 15, 1994 until the date that the operator implemented its new rates, as determined under the Form 1200 series. Through a series of calculations, Form 393 compares what"Z ,p(p(88Z"  xythe operator is charging subscribers on a per channel basis to what the Commission's analysis determined  xa similarly situated operator would charge if it faced competition from other providers. To make these calculations, the operator's revenue, number of channels, and number of subscribers are analyzed.  S`- ` x7.` ` Form 393 is divided into three separate, but interrelated parts which culminate in  xdetermining whether the operator's current rate is not unreasonable and whether the rate charged for  xyequipment and installation is consistent with the law's standard. It also determines what the appropriate  xrate is. In Part II, the operator calculates its maximum permitted programming rates through several  xyworksheets, while in Part III, the operator calculates its monthly equipment and installation costs and its  xmaximum permitted equipment and installation rates. Part I is a summary of the various programming,  xyequipment and installation rates that have been calculated in Parts II and III and provides the comparison to the rates the operator has actually charged during the period of review.  S - ` x8.` ` Worksheet 1 of Part II calculates the operator's Charge Per Channel, as of its initial date  x]of regulation. An operator's initial date of regulation is the date the Commission received the first  S - xcomplaint against the operator for its cable programming services rate in a community., ) yO- x#X\  P6G;P##Xj\  P6G;9XP##X\  P6G;P#э In both of the communities referenced above, Jones' initial date of regulation is February 28, 1994. 47 C.F.R.  76.922(b)(7)., To determine  xkthe charge per channel, an operator begins Worksheet 1 by entering the current monthly charge for its  xbasic service tier and for each of its cable programming services tiers (Line 101). The operator then  xenters the number of channels on each tier (Line 102) and the number of subscribers for each tier (Line  S- xy103). On Line 104, the operator calculates its monthly equipment revenue and enters it.}  ) yO- x#Xj\  P6G;9XP##X\  P6G;P#э To do this, the operator calculates the total revenues earned over the last fiscal year for the following  x,categories of equipment and installation services: (1) converter box rental; (2) remote control rental; (3) additional  xoutlet fees; (4) installation fees; (5) disconnect fees; (6) reconnect fees; and (7) tier changing fees. The operator is then instructed to divide that total by 12 to calculate its equipment revenue per month. FCC Form 393 at 10.} The operator  xthen determines the Charge Factor (Line 105), by multiplying the current charge for the tier (Line 101)  xby the number of subscribers (Line 103), and obtains the total revenue received from the tier. The  xjmonthly equipment revenue is then added. The operator then determines the Channel Factor (Line 106),  xjby multiplying the number of channels (Line 102) by the number of subscribers (Line 103). The channel  xfactor is used to determine the Charge Per Channel (Line 107), by dividing the Charge Factor by the  xLChannel Factor. The operator's Charge Per Channel less the Franchise Fee allocated to the channel (Line 109) is the operator's Base Rate Per Channel and is reflected on Line 110. x  S- ` x9.` ` If the Operator's Base Rate is less than or equal to the Benchmark, it is accepted.) yOH -#Xj\  P6G;9XP##X\  P6G;P#э This benchmark "is based on rates as of September 30, 1992." FCC Form 393 at p.2. If the  xBase Rate exceeds the Benchmark, the operator completes Worksheet 2 Calculation of Rates in Effect  xon September 30, 1992 and Benchmark Comparison. This worksheet determines how much the operator  xmust reduce its rates. The calculations require the operator to reduce its rate per channel to the  xBenchmark or 90% of its rate per channel in effect on September 30, 1992. The greater of these two rates  S-then would become the operator's Base Rate and be placed on Worksheet 3.H) yO&-ԍ Cite appropriate para of 93177H   "( ,p(p(88"Ԍ S- ` x10.` ` Prior to the 1992 Cable Act, cable operators typically included the costs of some  S- xequipment, such as converters, in their tier rates and established separate charges for other equipment, such  xas remote controls and additional outlets. The 1992 Cable Act required that the charges for equipment  xand installations be assessed to the subscriber on a cost basis. As a result, the Benchmark methodology  xzwas not used to establish equipment charges. The Commission required cable operators to remove or  x"unbundle" equipment and installation rates from rates for cable programming services to calculate  S- xmaximum rates in accordance with the 1992 Act.) {Ox-#Xj\  P6G;9XP##X\  P6G;P#эRate Order, 8 FCC Rcd at 5889. This was necessary to ensure the "ability to assess the  S- xreasonableness of any charges for equipment provided as part of cable programming services."Z) {O -#Xj\  P6G;9XP##X\  P6G;P#э Id.Ā  xUnbundling equipment rates is performed on Worksheet 3 of FCC Form 393 ("Removal of Equipment  xand Installation Costs"). The number on Line 301 of Worksheet 3 is taken from Line 34 of Part III,  xMwhich is the worksheet used to calculate equipment and installation charges. The operator enters the  xfigure for monthly equipment and installation costs from Line 34 on Line 301 of Worksheet 3, which is  x\then subtracted from the operator's Base Rate to remove equipment costs from the programming rate calculation.  S - ` _x11.` ` In a Public Notice, released November 10, 1993 ("Public Notice"), the Commission stated  x>that where an operator had restructured its rates to ensure that equipment and installment rates were  xlimited to costs, as of September 1, 1993, it anticipated that the number placed on Lines 104 and 301 of  S0- xFCC Form 393 would be "the same, or nearly the same . . . ."R0) {O- x[#Xj\  P6G;9XP##X\  P6G;P#эSee FCC Public Notice, "Questions and Answers on Completion of FCC Form 393 and Associated Filing  yO-Requirements," Question and Answer No. 7 (released November 10, 1993). R This is because Line 104 is the operator's  xmonthly equipment revenue, including installation fees, and Line 301 is the operator's monthly equipment  xand installation costs calculated in accordance with the Commission's rules. If the operator had already  xrestructured its rates pursuant to the law and the Commission's rules that equipment and installation rates  xbe limited to costs, the revenues collected (Line 104) would not be significantly different than the amount calculated as the operator's costs (Line 301).  S- II. THE BUREAU'S ORDERS  S- ` x12.` ` The Bureau orders, based on the review of Jones' FCC Form 393s, established CPST  x>maximum permitted rates lower than its actual rates. The Bureau substituted Jones' data in Line 104  x[(monthly equipment revenue) with Jones' data from Line 34 (monthly equipment and installation costs),  xan amount substantially less than the Jones data, which resulted in a reduction of the CPST rates for both  xJones' systems. The Jones data represented monthly equipment revenue prior to the effective date of rate  xregulation. As noted, an operator's maximum permitted rates are derived from its aggregate revenues for  xMregulated programming, equipment and installation. The Bureau's substitution deleted the additional  x.outlet revenues Jones had collected prior to rate regulation. Jones' maximum permitted rates were lower  xthan they would have been had the revenues from the additional outlets not been deleted. It is the deletion of the additional outlet revenue that Jones contests.  S8- "8F,p(p(88 "Ԍ S-  III. ADDITIONAL OUTLET REVENUES  S-xA. Petitioner's contentions  S`- ` x13.` ` Jones contends that the Bureau impermissibly lowered the systems' per channel benchmark  S8- xrates when it placed the same number on Line 104 in Part II of Worksheet 1,8) yO-ԍThis amount reflects average monthly equipment and installation revenue earned over the last fiscal year. and Line 34 in Step G of  xPart III. Jones believes the Bureau failed to consider all of the equipment revenue, including additional  x outlet revenue, that Jones had collected prior to the onset of rate regulation, and that if it had, Jones'  xmaximum permitted rates would be higher as a result. Jones acknowledges that, while it did charge  xzsubscribers additional outlet fees prior to rate regulation, it was no longer permitted to do so as of the  Sp- x\initial date of rate regulation. Jones contends that, consistent with the Commission's Third Order on  SJ - xReconsideration in MM Dockets No. 92266 and 92262,J X) {OB - xZԍThird Order on Reconsideration in MM Docket No. 92266, 9 FCC Rcd 4316, 4349 (1994) ("Third Recon.  {O -Order"). it should be permitted to calculate its rates  xusing preregulatory revenues, including revenues for additional outlets, provided that, at the time Jones restructured its rates, the data were accurate.  S - ` x14.` ` Jones states that the instructions for Line 104 of Form 393 direct cable operators to  S - xjcalculate their average monthly equipment revenues by dividing the last fiscal year's total revenues by 12  xfor the following categories of equipment and installation services: converter box rental; remote control  xrental; additional outlet fees; installation fees; disconnect fees; reconnect fees; and tier changing fees.  S - x=When cable operators calculate Line 34 in Part II, they add the capital costs of leased equipment and the  xannual cost of maintenance and installation of cable facilities and services to obtain the total annual  S- xconsumer equipment and installation costs for the system. This amount is then adjusted (as necessary)  xto apply it to the franchise area, and the remainder is divided by 12 to obtain the monthly equipment and  xinstallation costs. Since the latter calculation does not allow for any costs attributable to providing  xadditional outlets, Jones argues that Line 104 will always vary from Line 34. Citing the Bureau's decision  S- x0in Staten Island Cable of New York City,?) yOp-ԍ10 FCC Rcd 6620 (1995).? Jones contends that this situation constitutes a special  xcircumstance, for which operators should be permitted to utilize old data, which were accurate at the time of rate restructuring, when calculating Line 104.  S~- ` 3x15.` ` Jones adds that the Bureau should modify its Public Notice because it differs from the  SV- xThird Recon. Order, where the Commission held that cable operators are not required to change their rates  xLwhen different rates are dictated by data, such as inflation adjustments and the number of channels used,  xwhich were used in initial rate setting, as opposed to data which were current when the operators filed  xtheir FCC Forms 393 either with the Commission or with their local franchising authorities. Although  S- xthe Third Recon. Order also required that operators use current data when making any subsequent rate  S- x>changes,=D) yOv%-ԍ9 FCC Rcd at 434950.= Jones contends that since its additional outlet revenue data do not change, it should not be  Sj-precluded from including it when calculating Line 104.  SB- "B,p(p(88 "Ԍ S- ` 3x16.` `  Citing instructions in FCC Form 393 relative to Line 104, as well as the Commission's  S- xThird Recon. Order, Jones asserts that it was entitled to use preregulatory data in Line 104. Jones claims  x[that the Commission permits operators to use data to justify their rates as long as that data was accurate  xat the time of rate restructuring. Jones contends that its data was accurate at the time and that it should  Sb- xbe allowed to use that data.6 b) yO- xԍUnder the Commission's rules, cable operators should base rates for installation of additional outlets on costs  xin the same manner as other installations. If the operator retains ownership of the equipment associated with such  xinstallations (e.g., the outlet), the cost of that equipment may be recouped in a monthly lease rate that must be cost yO"-justified. Those installation and equipment costs are factored into the Line 301 amount. 6 It is Jones' position that, because it received revenues from additional outlet  xfees prior to rate regulation, and such revenue was included in its entry on Line 104, its entries on Lines  x104 and 34 should differ by approximately the amount of the revenues received from additional outlets.  xFurthermore, Jones alleges that, simultaneous with Commission pronouncements that Lines 104 and 34  xshould be the same, or nearly the same, for operators who restructured their rates as of September 1, 1993,  xkthe Commission has acknowledged that special circumstances may exist which produce discrepancies  Sr- xbetween lines 104 and 34.ir) yO-ԍNovember 10, 1993 Public Notice, Question and Answer No. 7.i Jones contends that the differing treatment of additional outlet revenues prior  xto and subsequent to the advent of rate regulation is a special circumstance that would not only permit,  S" -but would require a discrepancy between Lines 104 and 34.D " @) yO- xԍJones notes that the Commission released its Public Notice ten weeks after Jones restructured its rates on  {O- xiSeptember 1, 1993. Significantly, Jones was not served with the complaint in Western Springs until February 26,  {O- x1994, and it was not until February 28, 1994 was it served with the complaint in Alexandria. Therefore, Jones knew  xor should have known of the Commission's Public Notice of November 10, 1993 well before it filed its FCC Form  {O&- xi393s in response to the complaint in Western Springs on May 24, 1994 (which was followed by an amended FCC  {O-Form 393 on August 14, 1995), and in Alexandria on May 19, 1994. D  S -x B. Discussion  S - ` }x17.` ` The purpose of Form 393 is to compare an operator's rates to a similarly situated operator  xfacing effective competition. The Benchmark and implementing methodology is premised on Congress'  xdirection that rates approach that which would be reflected in a competitive environment. The  xCommission's policies, including the Benchmark and Form 393, also encompass the law's requirement  S- x\that fees for equipment, installation, and additional outlets be provided to subscribers at cost.U! ) {OB-ԍRate Order, 8 FCC Rcd at 5810, 581516.U Any  xregulated revenues, therefore, derived from equipment and installation should approximate the costs of  xproviding such installation and equipment. Conversely, any regulated revenues relating to installation and  xequipment that significantly exceed the cost of providing them is inconsistent with the premise of the law and will distort any calculation seeking to implement it.  S- ` x18.` ` The instructions pertaining to Line 104 in FCC Form 393 state that revenue earned over  xthe last fiscal year, including revenue from additional outlet fees, should be used to determine an  S- xoperator's monthly equipment revenue entry on Line 104.E"R ) {O&-ԍSee FCC Form 393 at 10.E In the  Public Notice, we provided clarifying"",p(p(88"  x[instructions and specifically discussed the issue of the relationship between Lines 104 and 301 (which is carried over from Line 34) on FCC Form 393: x    The instructions for completing Worksheet I Line 104 of FCC Form 393 specify that  Sequipment revenues for the year preceding [September 1, 1993] shall be used in  computations of the current rate per channel which is to be compared to the benchmark.  }Revenues for the previous years may not be sufficiently representative where the operator  has already unbundled and instituted costbased pricing in accordance with our  S- prequirements. This answer clarifies that in completing Line 104 operators must use  equipment revenues that will be representative of the equipment rates that were in effect  Cas of the initial date of regulation. Where available, actual revenues should be used.  PWhere operators have restructured equipment rates as of September 1, 1993 in accordance  nwith our regulations, we would anticipate that in most cases, absent special circumstances,  operators will enter on Line 104 the same, or nearly the same, number as on Line 301.  Line 301 is the anticipated revenues based on equipment rates derived in accordance with  S -FCC rate regulations.u#  {O-ԍSee November 10, 1993 Public Notice (emphasis added).u     x Jones restructured its rates on September 1, 1993 to comply with the law. It was reasonable for the  xBureau to presume that Jones' entries for Lines 104 and 34 (which is the same as Line 301) on its FCC  xForm 393s should be the same, or nearly the same. The difference of over 9% between Line 104  x($158,808) and Line 301($143,431) in Alexandria, and the difference of approximately 63% between Line  x.104 ($13,705) and Line 301 ($5,054) in Western Springs cannot be characterized as "the same, or nearly  xthe same." We note that the complaint was filed on February 28, 1994, subsequent to release of the  xBureau interpretation in the Public Notice (November 10, 1993), and that Jones had an opportunity to prepare its submission in a manner consistent with the Public Notice.  S- ` Rx19.` ` Jones' asserts that its additional outlet revenue constitutes a "special circumstance"  S- xpermitting a discrepancy between Jones' entries on Lines 104 and 34._$Z) {O- x,ԍIn Alexandria, the Bureau also changed Jones' entry of negative deferred taxes to zero, and it substituted Jones'  xCPST and BST rates from its rate cards for the rates reported by Jones on Line 101, Part II, Worksheet 1 of Jones'  {OT- xFCC Form 393. In Western Springs, the Bureau substituted Jones' entry in Line 301 for its entry in Line 34, which  xhad incorrectly reported equipment and installation costs on a system level, rather than on as franchise level, as in Line 301._ It is not. The reference to special  xjcircumstances in the Public Notice encompasses situations where restructured rates may not equal costs.  Sx- xyT he Public Notice sought to ensure that operators did not include prerestructuring revenues in Line 104.  xIn completing Line 104, Jones must use equipment revenues that are representative of equipment rates in  xeffect on the initial date of regulation. Additional outlet revenues generated from noncostbased rates  S- x[established prior to the initial date of regulation are not representative of rates in effect on the initial date  S- xof regulation and distort the Benchmark methodology used to determine whether a rate is reasonable.h%) {O$-ԍSee Kauai Cablevision, L.P., 10 FCC Rcd 8722, 8724 (1995).h  xjThe Public Notice correctly presumed that operators who had restructured their rates as of September 1,  S- x[1993 had done so in accordance with Commission regulations. Pursuant to Commission regulations then"%,p(p(88"  xin effect, rates for equipment, including additional outlets, were to be calculated based on actual cost  S-methodology.H&) {O@-ԍSee 47 C.F.R.  76.923.H  S- ` x 20.` ` Jones' reliance upon the exception in the Third Recon. Order permitting operators to rely  xupon "old" data if its current rates are accurately justified using the old data and that data was accurate  S:- x=at the time[':Z) {O4-ԍSee Third Recon. Order, 9 FCC Rcd at 434950.[ is misplaced. The Commission reasoned that operators should not be penalized for making  S- xgood faith attempts to comply with Commission rules.T() {O -ԍThird Recon. Order, 9 FCC Rcd at 4349.T The Public Notice stated that, pursuant to   x76.922(b) of the Commission's Rules, operators should refresh cost or other financial information as of  xkthe initial date of regulation, based on the most recent information available. Operators who added or  xdeleted channels on September 1, 1993, in anticipation of rate regulation, were also instructed to use the  Sr- x\number of channels as of the initial date of regulation.)Xr~) yO- xԍ#C\  P6QP#The initial date of regulation for the BST is the date on which the franchising authority provides notice to the  xoperator that provision of the BST is subject to regulation. The initial date of regulation for the CPST is the date  yO -on which a complaint is filed with the Commission. 47 C.F.R.  76.922(b)(7).  Information, such as inflation data, is subject  x.to revision. The Commission's intention was to protect an operator who made good faith attempts and used the best available data at the time it recalculated rates.  S - ` x21.` ` In Jones' case, however, the facts (i.e. data) have not changed during the intervening time  xkbetween the rate restructuring on September 1, 1993 and the initial date of regulation on February 28,  S - x1994. Unlike the situations contemplated by the exception carved out in the Third Recon.Order, this case  xsimply does not involve data that subsequently became available. The revenue figures that Jones is  S6- x[attempting to use in Line 104 have remained the same.l*6) {Ot-ԍSee footnote 21 of Jones' consolidated application for review.l Postrestructuring revenue from equipment and  xinstallation in excess of cost, which Jones is attempting to use, is inconsistent with the law and  S-inappropriate.+0 ) {O-ԍ47 C.F.R.  76.923(h) & 76.937; see also Rate Order, 8 FCC Rcd at 60436050.  S- ` x22.` ` Jones' reliance on Staten Island Cable is also incorrect. Staten Island Cable  involved  xan operator that changed its channel configuration on October 1, 1993, after it had restructured its rates  xon September 1, 1993. The Bureau stated that "[o]ur rules do not require an operator to set its initial rates  S - xbased on anticipated adjustments to its channel lineup.":,  ) yO"-ԍ10 FCC Rcd at 6622: Staten Island Cable involved the limited  x[exception where the restructured rate did not have to reflect the addition of a new channel occurring after  S- xthe operator initially restructured its rates but prior to the rate review. Jones, in contrast, is attempting  S- xto use flawed data (i.e. preregulatory revenues) which distorts the analysis needed to determine the  S-permitted rate.  S\-"\ R ,,p(p(88"Ԍ S- I V. EXTERNAL COSTS INCURRED DURING THE GAP PERIOD  S-x A. Petitioner's contentions  S-  S`- ` x 23.` ` Jones states that neither of the Bureau orders accounts for any external costs incurred  S8- xduring the "gap period" which is the period from the effective date of the 1992 Cable Act to the initial  S- xdate of regulation in each franchise area. Jones cites the Court of Appeals' decision in Time Warner and  xargues that it must be allowed to adjust its rates prospectively for each of the systems in order to account for the gap costs that should be included in computing the Form 1200 series rates.  S-  Sr-x B. Discussion  S" - ` _x24.` ` The socalled "gap period" refers to that period after enactment of the 1992 Cable Act and  xkprior to the date of initial regulation where cable operators may have experienced increases in external  xcosts. These costs were not reflected in the rate survey used by the Commission as the basis for its  S - x_Benchmark methodology. The Commission's rate rules, as revised in the Second Order on  S - xReconsideration, implemented the Benchmark system premised on a survey demonstrating a 17% average  xdifference in rates between cable systems operating in competitive and in noncompetitive situations on  xSeptember 30, 1992. Cable operators subject to full reduction were required to reduce their rates by 17%  xof their September 30, 1992 regulated revenues and were permitted to adjust their rates upward to account  xjfor inflation between the September 30, 1992 survey date and the actual date when the reasonableness of  xtheir rates were being judged. Rate adjustments after the start of regulation were premised on inflation  xand on actual changes in external costs. Increases in external costs that took place between September %C Ԡ %C 30,  xy1992 and the actual date regulation commenced were not permitted. The Commission believed that to do  xso would entail a considerable administrative burden both on cable operators and on the Commission since  x\it would be necessary to apply Commission cost accounting and cost allocation requirements back to  xlSeptember 30, 1992. The Commission held that any greater rate accuracy was outweighed by the  xadministrative difficulties to both cable operators and the Commission in establishing September 30, 1992  S-as the starting date for external cost treatment.-) {O- xԍFirst Order on Reconsideration, Second Report and Order, and Third Notice of Proposed Rulemaking in MM Docket No. 92266, 9 FCC Rcd 1164, 1233 (1993).  SV- ` ax25.` ` In Time Warner, the Court overturned the Commission's decision of not permitting  xoperators to make adjustments in their Benchmark calculations for external costs during the gap period.  xThe Court stated that cable operators would only make such adjustments in cases where the revenue to  x^be gained from the adjustment exceeds the cost of its recovery. The Court also stated that the  xadministrative burden imposed on the Commission will be substantially unchanged, because the  xdocumentation to be reviewed during the administrative process would be the same as the externalcost  Sh-documentation that would have to be reviewed for all postgap periods.O.h") {O*#-ԍSee Time Warner, 56 F.3rd at 173.O  S@-"@ .,p(p(88 "Ԍ S- ` Qx26.` ` In response to the decision in Time Warner, the Commission adopted  76.922(f)(4),/^) {Oh- xJԍMemorandum Opinion and Order in MM Docket No. 92266, 11 FCC Rcd 20206, 20216 (1996), reversed, in  {O2- x,part, on appeal, Time Warner Entertainment Company, L.P. v. FCC, 144 F.3d 75 (D.C. Cir. 1998).  A petition for   {O-en banc reconsideration is pending.  xallowing cable operators to adjust their current Benchmark rates to reflect external costs occurring between  xSeptember 30, 1992 and their initial date of regulation, reduced by any inflation increases already received  xwith respect to those costs. Operators were directed to report these adjustments in their FCC Form 1210s  Sb- xor 1240s that they are required to file to justify their rates.P0b) {O-ԍSee Appendix B, supra.P These forms permit the operator to calculate  S:-and justify their rates on a quarterly or annual basis for the period subsequent to May 14, 1994.  S- ` x27.` ` Jones, however, has already recovered its "gap period" external costs through its costof xyservice filings in Western Springs and in Alexandria. As we have stated, the costofservice methodology  xis an alternative to the Benchmark methodology which a cable operator can invoke if it believes its  Sr- xmaximum permitted rate under the Benchmark methodology will not enable the operator to recover its  SJ - xjcosts.L1J ) {Oj-ԍRate Order, 8 FCC Rcd at 5794.L Because Jones submitted costofservice filings on August 15, 1994 for Western Springs and for  xjAlexandria, it may not now attempt to justify its rates through benchmark adjustments for external costs  xincurred during the gap period. Jones may recover "gap period" external costs through either the  xbenchmark adjustments or the costofservice methodology, but it may not double recover these costs.  S - V. ORDERING CLAUSES  SZ-  S2- ` P x28.` ` Accordingly, in view of the foregoing, IT IS ORDERED that the motion to consolidate  S - xreview IS GRANTED with respect to Jones Intercable, Inc. and Jones Intercable of Alexandria, Inc . and  S- IS DENIED with respect to Jones Spacelink, Ltd.  S- ` x29.` ` IT IS FURTHER ORDERED that the consolidated application for review filed  Sj- xNovember 24, 1995 on behalf of Jones Intercable, Inc. and Jones Intercable of Alexandria, Inc.  IS  SB-DENIED . x` `  hh@FEDERAL COMMUNICATIONS COMMISSION x` `  hh@Magalie Roman Salas x` `  hh@Secretary x` `