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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. CA1406 (Hidden Hills) ) Falcon Cable Systems Company ) ) Complaint Regarding ) Cable Programming Services Tier Rates ) and ) Petition for Reconsideration ) ORDER ON RECONSIDERATION and RATE ORDER Adopted: May 4, 1999 Released: May 6, 1999 By the Deputy Chief, Cable Services Bureau: 1. In this Order we consider a complaint against the October 31, 1998 rate increase by the above- referenced operator ("Operator") for its cable programming services tier ("CPST") in the community referenced above. We have previously resolved all prior complaints filed against Operator's CPST rates in the above- referenced community ("Prior Order"). On July 21, 1997, the local franchising authority ("LFA") filed a petition for reconsideration of our Prior Order ("Petition"). On August 4, 1998, Operator filed a motion for extension of time ("Motion") which was unopposed. On August 11, 1998, Operator filed an opposition to the Petition ("Opposition"). On August 21, 1998, the LFA filed a reply to the Opposition ("Reply"). In this Order we grant Operator's Motion and consider the LFA's Petition as well as the above-referenced complaint. 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 an 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 February 16, 1999, against Operator's October 31, 1998 CPST rate increase from $8.41 to $10.44. The LFA verified that it received more than one subscriber complaint and that the first valid complaint was received by the LFA on November 2, 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. To justify rates for the period beginning May 15, 1994 through a benchmark showing, 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 justify adjustments to their rates on an annual basis using FCC Form 1240 to reflect reasonably certain and quantifiable changes in external costs, inflation, and the number of regulated channels that are projected for the twelve months following the rate change. Any incurred cost that is not projected may be accrued with interest and added to rates at a later time. 5. In our Prior Order, we treated Operator's SatPac tiers as new product tiers ("NPTs") pursuant to Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, MM Docket Nos. 92-266 and 93-215, Sixth Order on Reconsideration, Fifth Report and Order, and Seventh Notice of Proposed Rulemaking ("Going Forward Order"). In the Going Forward Order, the Commission established criteria for the creation of NPTs, which cannot include channels taken from regulated tiers. The Commission concluded, however, that cable operators would be permitted to treat certain packages, in existence as of the Going Forward Order, as NPTs, so long as such packages involve only a small number of migrated channels. Upon review, we found that Operator's SatPac tiers are NPTs under our Going Forward Order and therefore not subject to regulation. 6. In its Petition, the LFA argues that the facts surrounding the creation of the SatPac tiers in the above-referenced community do not support our finding. However, Operator eliminated the headend serving the above-referenced community and merged it with a different headend, serving the community of Calabasas, CA. The LFA does not dispute that the headend was eliminated. We determine that it is reasonable for Operator to treat its SatPac tiers in the above-referenced community in the same manner as in its Calabasas community. In the Calabasas community, we found that the SatPac tiers qualified for treatment as NPTs. Therefore, we deny the LFA's Petition. 7. Upon review of Operator's FCC Form 1240 for the projected period October 1, 1998 through September 30, 1999, we made adjustments to conform Operator's filing with the revised FCC Form 1240 from our Prior Order. We reduced Operator's True-Up Period from July 1, 1997 through June 30, 1998 to October 1, 1997 through June 30, 1998. In our Prior Order, Operator was treated as an unregulated operator in accordance with Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, Thirteenth Order on Reconsideration, MM Docket No. 92-266 ("Thirteenth Reconsideration Order") and the FCC Form 1240 Instructions. Operator's True-Up Period in its current FCC Form 1240 cannot begin earlier than the beginning of Operator's projected period from the revised FCC From 1240 from our Prior Order. 8. We adjusted the Inflation Factors at Worksheet 1 (True-Up Period Inflation) which adjusted Line C3 (Inflation Factor for True-Up Period 1) to 1.0085. We also revised Line C5 (Current FCC Inflation Factor) to 1.0078. Our adjustments resulted in a revised maximum permitted rate ("MPR") of $10.25, for the projected period October 1, 1998 through September 30, 1999. Because Operator's actual CPST rate of $10.44, effective October 31, 1998, exceeds its revised MPR, we find Operator's actual CPST rate to be unreasonable. 9. Accordingly, IT IS ORDERED, pursuant to Section 1.106 of the Commission's rules, 47 C.F.R. 1.106, that Operator's Motion for Extension of Time is GRANTED. 10. IT IS FURTHERED ORDERED, pursuant to Section 1.106 of the Commission's rules, 47 C.F.R. 1.106, that the LFA's Petition for Reconsideration IS DENIED. 11. IT IS FURTHERED ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. 0.321, that In the Matter of Falcon Cablevision d/b/a Falcon First, Inc., DA 98-1199, 13 FCC Rcd 16814 (1998), IS AFFIRMED. 12. 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 $10.44, charged by Operator in the rebuild area of the community referenced above, effective October 31, 1998, IS UNREASONABLE. 13. 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 franchise area referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of $10.25, per month (plus franchise fees), plus interest to the date of the refund, for the period beginning November 2, 1998 (the date of the first subscriber complaint) through the day before Operator implements the maximum permitted CPST rate of $10.25. 14. 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. 15. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. 0.321, that the complaint referenced herein against the CPST rate charged by Operator in the community referenced above IS GRANTED. FEDERAL COMMUNICATIONS COMMISSION William H. Johnson Deputy Chief, Cable Services Bureau