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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 ) CUID No. CA0255 (Santa Rosa) ) Cable One ) ) Complaint Regarding Cable Programming ) Services Tier Rates ) and ) Petition for Reconsideration ) ORDER ON RECONSIDERATION AND RATE ORDER Adopted: February 25, 1999 Released: March 3, 1999 By the Deputy Chief, Cable Services Bureau: 1. In this Order we consider a complaint against the July 1, 1998 rate increase of the above- referenced operator ("Operator") for its cable programming services tier ("CPST") in the community referenced above. We have already issued a separate order in which we found Operator's rates in effect before May 15, 1994 to be unreasonable ("Prior Order"). On May 28, 1996, Operator filed a Partial Petition for Reconsideration of our Prior Order ("Petition") along with a refund plan ("Refund Plan"). In our Prior Order, we stated that our findings "do not in any way prejudge the reasonableness of the price for CPS service after May 14, 1994." This Order addresses Operator's Petition, Refund Plan, the reasonableness of Operator's CPST rates in effect after May 14, 1994, and the reasonableness of Operator's July 1, 1998 rate increase. 2. Under the Communications Act, the Federal Communications Commission ("Commission") is authorized to review the CPST rates of cable systems not subject to effective competition to ensure that rates charged are not unreasonable. If the Commission finds a rate to be unreasonable, it shall determine the correct rate and any refund liability. The Telecommunications Act of 1996 ("1996 Act") and our rules implementing the new legislation ("Interim Rules"), require that complaints against the CPST rates be filed with the Commission by a local franchising authority ("LFA") that has received more than one subscriber complaint. 3. The LFA for the franchise area referenced above filed a complaint with the Commission on December 28, 1998, against Operator's July 1, 1998 CPST rate increase from $13.15 to $14.00. The LFA verified that it received more than one subscriber complaint and that the first valid complaint was received by the LFA on July 7, 1998. The filing of a complete and timely LFA complaint triggers an obligation upon the cable operator to file a justification of its CPST rates. The Operator has the burden of demonstrating that the CPST rates complained about are reasonable. 4. In its Petition, Operator argues that the Cable Services Bureau erred in unbundling the costs for wire maintenance from Operator's programming service rates. Operator states that ownership of inside wiring was ceded to subscribers prior to September 1, 1993 and that Operator offers subscribers a choice of a maintenance plan or service at the regulated hourly service charge. Operator analogizes that its home wiring circumstances are no different than the circumstances surrounding the sale of equipment. Therefore, Operator argues, the wire maintenance plan should be unregulated and it is wrong to unbundle the cost on FCC Form 393. 5. We have addressed this issue in a previous order. The Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act") provides that where competition is absent, cable rates are to be regulated to protect subscribers. The 1992 Act and the Commission's rules require that regulated equipment and installation services, including inside wiring, be offered to subscribers at rate levels that reflect operators' actual costs. Operators initially were required to unbundle their charges for equipment and installation from their rates for programming services to ensure that their equipment and installation rates reflect actual costs. Charges that were bundled with programming rates prior to regulation should now appear as separately calculated and itemized charges. 6. The Commission has held that the regulatory treatment of inside wiring and the costs associated with its maintenance depends on who owns the wiring. If an operator installs inside wiring and retains ownership of it, the operator must establish a rate for the lease of the wiring. As computed on FCC Form 393, the lease rate includes a component for maintenance and repair, and the operator therefore is not permitted to charge a separate wire maintenance fee or other service charge to subscribers who pay the lease rate. If the operator sells the equipment to a subscriber, then no lease rate would apply, but the operator may offer a service contract for the repair and maintenance of such equipment. Section 76.923(i) of our rules states that the cost for such a service contract shall equal "the HSC [hourly service charge] times the estimated average number of hours for maintenance and repair over the life of the equipment." If subscribers own their inside wiring, an operator may also charge a rate based on the operator's HSC for installation-related activities, provided that the HSC was properly unbundled from its programming rates. The operator may charge that hourly rate for each visit the operator makes to a subscriber's premises. 7. We affirm that the rates for inside wiring maintenance plans for subscriber-owned wiring is subject to Commission regulation. We also affirm that the costs of providing maintenance of the inside wiring should be unbundled from the programming service rates on the FCC Form 393. Therefore, we deny Operator's Petition and affirm our Prior Order. Because Operator's Refund Plan was calculated excluding the refund liability associated with this issue, we do not accept Operator's Refund Plan. 8. To justify rates for the period beginning May 15, 1994, operators must use the FCC Form 1200 series. Operators are permitted to make changes to their rates on a quarterly basis using FCC Form 1210. Operators may adjust their rates on an annual basis using FCC Form 1240. Operator has attempted to justify its CPST rates through benchmark justifications on FCC Form 1200, multiple FCC Form 1210s and multiple FCC Form 1240s. 9. Upon review of Operator's FCC Form 1200, we find Operator's calculated maximum permitted rate ("MPR") of $7.50 to be reasonable. However, Operator's actual CPST rate in effect from May 15, 1994 through July 13, 1994 was $7.89. The Commission's rules provide for a refund liability deferral period, if timely requested by Operator, beginning May 15, 1994 and ending July 14, 1994, for any overcharges resulting from Operator's calculation of a new MPR on the FCC Form 1200. Operator elected to defer refund liability pursuant to the Commission's Rules. However, Operator will incur refund liability between May 15, 1994 and July 14, 1994 for any CPST rates charged above the FCC Form 393 MPR approved by the Commission. In our Prior Order, we approved an MPR of $7.81. Because Operator's actual CPST rate of $7.89 exceeds its revised FCC Form 393 MPR, we find Operator's actual CPST rate of $7.89, effective May 15, 1994 through July 13, 1994, to be unreasonable. 10. Upon review of Operator's multiple FCC Form 1210s covering the period from April 1, 1994 through September 30, 1995 and FCC Form 1240s for the projected periods July 1, 1996 through June 30, 1997, and July 1, 1997 through June 30, 1998, we find Operator's actual CPST rates, effective July 14, 1994 through June 30, 1998, to be reasonable. Upon review of Operator's FCC Form 1240 for the projected period July 1, 1998 through June 30, 1999, we adjusted Operator's Worksheet 8 (True-Up Rate Charged) to reflect the actual rate charged during the True-Up Period in accordance with the FCC Form 1240 Instructions. We adjusted the Inflation Factors at Worksheet 1 (True-Up Period Inflation) which adjusted Line C3 (Inflation Factor for True-Up Period 1) to 1.0138. We also revised Line C5 (Current FCC Inflation Factor) to 1.0100. These adjustments resulted in a revised MPR of $14.02 rather than Operator's MPR of $14.14. Because Operator's actual CPST rate of $14.00, effective July 1, 1998, does not exceed its revised MPR, we find Operator's actual CPST rate of $14.00, effective July 1, 1998, to be reasonable. 11. Accordingly, IT IS ORDERED, pursuant to Section 1.106 of the Commission's rules, 47 C.F.R. 1.106, that Operator's Petition for Reconsideration IS DENIED. 12. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. 0.321, that In the Matter of Post-Newsweek Cable, Inc., DA 96-591, 11 FCC Rcd 4853 (1996), IS AFFIRMED. 13. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. 0.321, that Operator's Refund Plan is NOT ACCEPTED. 14. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rate of $7.89, charged by Operator in the franchise area referenced above, effective October 22, 1993 (the date of the first valid subscriber complaint) through July 13, 1994, IS UNREASONABLE. 15. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rates, charged by Operator in the franchise area referenced above, effective July 14, 1994 through June 30, 1998, ARE REASONABLE. 16. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rate of $14.00, charged by Operator in the franchise area referenced above, effective July 1, 1998, IS REASONABLE. 17. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the community referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of $7.81 per month (plus franchise fees), plus interest to the date of the refund, for the period October 22, 1993 through July 13, 1994. 18. IT IS FURTHER ORDERED that Operator shall promptly determine the overcharges to CPST subscribers for the stated periods, and shall within 30 days of the release of this Order, file a report with the Chief, Cable Services Bureau, stating the cumulative refund amount so determined (including franchise fees and interest), describing the calculation thereof, and describing its plan to implement the refund within 60 days of Commission approval of the plan. 19. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that Operator take into account our FCC Form 1240 adjustments when calculating its maximum permitted rate and performing the true-up calculation on its next FCC Form 1240. 20. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the October 22, 1993 complaint IS GRANTED TO THE EXTENT INDICATED HEREIN and the complaint against Operator's July 1, 1998 CPST rate increase is DENIED. FEDERAL COMMUNICATIONS COMMISSION William H. Johnson Deputy Chief, Cable Services Bureau