******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. 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 CABLEVISION OF DALLAS, INC. ) File No. CSB-A-0629 ) CUID TX0624 Request for Stay of Local Rate Order ) of the City of Farmers Branch, Texas ) MEMORANDUM OPINION AND ORDER Adopted: June 11, 1999 Released: June 11, 1999 By the Deputy Chief, Cable Services Bureau: 1. TCI Cablevision of Dallas, Inc. ("TCI" or "the operator"), the franchised cable operator serving Farmers Branch, Texas, filed an Emergency Request for Stay of Local Rate Order on May 27, 1999 asking for a stay of Ordinance No. 2474 adopted by the City of Farmers Branch, Texas ("City") on May 17, 1999 ("Order"). The City filed a Response to TCI Cablevision of Dallas, Inc.'s Request for Stay on June 3, 1999 opposing the operator's stay request. 2. The Commission evaluates petitions for stay under well settled principles. To support a stay, a petitioner must demonstrate: (1) that it is likely to prevail on the merits; (2) that it will suffer irreparable harm if a stay is not granted; (3) that other interested parties will not be harmed if the stay is granted; and (4) that the public interest favors granting a stay. The likelihood of success on the merits is an important element in a petitioner's showing. However, the degree to which a probability of success on the merits must be found will vary according to the Commission's assessment of the other factors. When confronted with a case in which other elements strongly favor interim relief, the Commission may exercise its discretion to grant a stay. 3. TCI moved a channel from its cable programming service tier ("CPST") to its basic service tier ("BST") and proposed to adjust its BST rate effective June 1, 1999 by including the residual rate associated with this channel in its BST rate. The City disallowed credit for the residual associated with the shifted channel based on the recommendation of its consultant that TCI had inappropriately requested a change in residual costs during the true-up period for a channel moved subsequent to January 1, 1998. 4. TCI argues that the City's approach is based on an illogical application of the language in section 76.922(g)(8) of the Commission's rules concerning the sunset of section 76.922(g) in its totality. Section 76.922(g) addresses changes in the number of channels on regulated tiers, including changes due to channel shifts between regulated tiers of service. According to TCI, the Commission's Sixth Order on Reconsideration provided temporary pricing options for operators adding CPST channels, including small operators upgrading their headends to add CPST channels, which expired on December 31, 1997. Although the rule provides that it sunset on December 31, 1997, TCI argues that this must be a clerical error because a sunset of all aspects of the rule makes no sense. If the City's interpretation is correct in this case regarding the shifting of the residual with a channel shift from the CPST to the BST, then in TCI's view the residual associated with a channel moved from BST also would not move with the channel. "[A] cable operator could theoretically eliminate most of its BST line-up and still lawfully retain the same rate." TCI also argues that the Commission provided in the Sixth Order on Reconsideration for replacement of the new rule with the then existing rule if the new rule were not reinstated by the Commission at the sunset. TCI views this approach as simple and logically compelling, but not reflected in the sunset language of section 76.922(g)(8). 5. According to TCI, it likely will have suffered irreparable injury by the time its appeal is resolved because it will be unable to recover lost revenue later in the increasingly competitive market cable operators face. It is also concerned about subscriber confusion from billing fluctuations because it has announced and initiated its 1999 rate adjustment. On the other hand, TCI argues, subscribers will be protected by its commitment to issue any refunds with interest if required to do so under the final disposition of the case. 6. The City opposes TCI's request. It believes that the language regarding the sunset of section 76.922(g) is clear and argues that TCI's likelihood of success on the merits is contingent on an amendment or revision of the existing rules regarding rate adjustments for channel changes, not on the present state of the law. The City challenges TCI's argument of irreparable harm as unsupported, and argues that ratepayers are harmed by paying excessive rates because TCI's rates are not consistent with the Commission's rules. 7. We have reviewed the parties' pleadings regarding the pending stay request and will grant TCI's request for stay pending the resolution of the Appeal on the merits. The information before us in the stay request and the operator's appeal suggests that the operator may have first included the disputed residual in its BST rate implemented in 1998, and the 1999 FCC Form 1240 in the record suggests that the operator followed the methodology provided in the form and that we have accepted in CPST cases before the Commission. We expect to address the merits of the operator's appeal quickly. 8. In order to protect the interests of subscribers and ensure that refunds will be paid if the operator does not prevail on the merits, we will grant the operator's request that the local rate order be stayed pending a resolution of this case on the merits on condition that the operator create an escrow account. During the period of this stay, the operator must deposit in an interest-bearing escrow account the total refund amount due under the City's Order as of the date the account is opened and on an ongoing basis must accumulate in the escrow account the difference between the rate ordered by the City and the rate charged customers during the pendency of the underlying appeal of the City's Order. Alternatively, the operator may elect to post a bond for the benefit of the City. The amount of the bond shall be the total refund amount due as of the date the bond is posted plus an estimate of the additional amount that will accumulate on the basis of the difference between the rate ordered by the City and the rate charged customers until the operator's next annual rate adjustment is scheduled to take effect for the City, plus interest. The amount of the bond for estimated additional amounts shall be based on the operator's subscriber count at the time the bond is posted. The bond shall provide that, if the operator is unable to fulfill its refund obligation for any reason, then the surety will fulfill that obligation to the City on behalf of the operator's subscribers. 9. Accordingly, IT IS ORDERED that the Request for Emergency Stay of Local Rate Order filed by TCI Cablevision of Dallas, Inc. IS GRANTED pending the resolution of the operator's appeal on the merits. 10. IT IS FURTHER ORDERED that the operator SHALL PLACE in an interest bearing escrow account the refund amounts due under the City's Order at the time the account is opened and SHALL ACCUMULATE in this account on an ongoing basis the difference between the rate ordered by the City and the rate charged customers during the pendency of the underlying appeal. Alternatively, the operator SHALL SECURE this amount by posting a bond for the benefit of the City for the total refund amount ordered by the City that is due at the time the bond is posted plus an estimate of the additional amount that will accumulate on the basis of the difference between the rate ordered by the City and the rate charged customers until the operator's next annual rate adjustment for the City is scheduled to take effect, plus interest for the period covered by this bond at the prevailing U.S. Internal Revenue Service Rate for tax refunds and additional tax payments. Proof of the operator's compliance with this Order SHALL BE FILED with the Commission within thirty (30) days of the release of this Order. 11. This action is taken pursuant to authority delegated by section 0.321 of the Commission's rules. 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION William H. Johnson Deputy Chief, Cable Services Bureau