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(1) (a) (i) 1) a)D )DDDFrfQq y.X80,QwX\  P6G;P 2a=5,r&a\  P6G;&P 2e=5,d[&e4  pG;& P:% ,J:\  P6G;JP H5!,x,5\  P6G;,P 0_=5,%]&_*f9 xr G;&X {,W80,%~UW*f9 xr G;XdddH=dYHHHHHHHHHH!d2H282YdHdC2!2H,29HNAddHHHHHHHHHHddddd.dHHHHdddddddddddddddddddHHddddddSC=NdHddd+;HHHHddddddHHH2HHdHHdddHHH,HHHH,HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!HHH!HHH!HHH!HHHHHHHHHHHHHH=?8=8C,?'A,J2H,!F,C8[8J,C2H,H=92=22?,H,C=H8N===H?J!2HHH=,====I!!2222HJ222HHH=!92,!ddhrZz.lZrrvvnFFZ8late fee charge ordinarily will not be subject to Commission review,= X  yO(ԍAdelphia Appeal at 2.= Adelphia argues that the Board  xcommitted reversible error cognizable by the Commission in this case when it concluded that late payment  S( xcosts are recovered pursuant to the Commission's benchmarks.? yOD(ԍAdelphia Appeal at 46.? According to Adelphia, benchmark rates  xare not cost based, but are determined by comparing the revenues of a cable system subject to rate  xregulation with the revenues of a competitive cable operator with similar characteristics, such as subscriber  xsize and channel capacity. In addition, the Commission's recognition that late fees are treated like other  x$ancillary charges that were subject to state or local consumer protection laws confirms the Board's error  xLin concluding that benchmark rates recover the costs of late payments. Adelphia argues that the Board's  xerror permeated the Board's review so that, even when the Board considered Adelphia's cost showing,  xthe issue was framed in terms of whether Adelphia had provided proof that it incurred costs not already  xreflected in the benchmark rates. Thus, Adelphia asks that the Commission reverse the Board's order  xinsofar as it bars Adelphia from establishing any late fee charge and requires refunds of previously collected late fees. Adelphia does not ask for review of the reasonableness of a particular late fee charge.  S(( ` N7. ` ` The Department opposes Adelphia's appeal. It disagrees with Adelphia that the  xCommission can provide a remedy in this case, arguing that the Board's review of Adelphia's late fees", 0*&&88"  xBlies outside the Commission's statutory jurisdiction and field of special expertise in regulating service and  S( xequipment rates pursuant to federal law.E yO@(ԍDepartment Opposition at 56.E According to the Department, the Board's action striking down  xHthe late fees traces from Vermont law and is independent of any basis in FCC regulations. While the  xBoard discusses the potential overlap between costs recovered by late fees and costs recovered through  x$rates regulated under Commission rules, the Department argues that the Board does not confine itself to  xthese matters and does not foreclose future consideration of a showing by Adelphia that late fees were  xappropriate on the basis of issues having nothing to do with those costs that might also be related to  xCommissionregulated rates. The Department argues that the Commission lacks any statutory mandate  xlto interfere in statelevel determinations with respect to charges that are not subject to federal rate  xregulation, even if the Commission disagrees with the Board's approach to late fees, as long as the state  Sp(government does not miscalculate the rates that are regulated under the Commission's methodology.EpX yOh (ԍDepartment Opposition at 67.E  S ( ` 8. ` ` The Department also disagrees with Adelphia's analysis of the benchmark method. It  x*argues that the benchmark "method, which was based on existing rates rather than on a detailed cost  xanalysis, was nonetheless intended to `permit a full recovery of the average costs incurred' by cable  S ( xoperators."  {O0( xԍDepartment Opposition at 9, quoting from Suburban Cable TV, Inc., 12 FCC Rcd 23862, 23864 (Cab. Serv.  {O(Bur. 1997) ("Suburban Cable"). "Thus, the benchmark rates `are expected to provide adequate recovery of an operator's total  xrevenue requirement needed to cover all capital and operating costs,'" including the costs of billing and  SX( x~collection recognized in the Board Order.{XD {O<(ԍDepartment Opposition at 9, quoting from Suburban Cable, 12 FCC Rcd at 23865.{ The Department argues that the Board could reasonably find  x:that Adelphia failed to show it incurred any costs due to late payments over and above its normal  x2operating costs recovered through the benchmark rate, and the Board has acknowledged that a late fee may  xbe imposed for reasons other than cost recovery. Finally, the Department argues that the Commission has  x*no grounds for reversing or staying the Board's order, even if it chooses to issue an advisory opinion  x~about the relationship between a cable operator's costs of late payment collection and its benchmark rate,  xRbecause the Board's Order included reasons for rejecting Adelphia's late fee claim independent of the Commission's ratemaking methods.  S( ` 9. ` ` Section 623(b) of the Communications Act directs the Commission to design regulations  S( x for BST rates.> yO> (ԍ47 U.S.C.  543(b).> The Commission has declined to adopt regulations governing late fees, providing, instead,  x8that late fees are within the purview of the franchising authority and are appropriately dealt with through  Sx( xHlocal negotiation or the application of state or local consumer protection and customer service laws.\xf  yO~#( x.ԍImplementation of Section 8 of the Cable Television Consumer Protection and Competition Act of 1992:  {OF$( xConsumer Protection and Customer Service, Report and Order, 8 FCC Rcd 2892, 2907 para. 68 (1993); Falcon  {O%( xCablevision (Thousand Oaks, CA), 11 FCC Rcd 10511, 1052425 para. 31 (Cab. Serv. Bur. 1996); Cablevision"%0*&&%"  {O( x6Industries Corp. (Bishopville, SC), 10 FCC Rcd 6624, 6625 para. 8 (Cab. Serv. Bur. 1995); Public Notice, Questions and Answers on Cable Television Rate Regulation, Q & A No. 20 (May 6, 1994). "x"0*&&88>"  xLocal or state authorities may regulate the rates of late fees utilizing local or state laws, if these laws  S( xpermit such regulation. Just as we determined in Falcon Cablevision that we will not rule on the  xreasonableness of a franchising authority's decision to require a cost justification with respect to late fee  S( xcharges,b" {OL(ԍFalcon Cablevision, 11 FCC Rcd at 1052425 para. 31.b we will not rule here on a franchising authority's decision to require a cable operator to show  xthat the costs being recovered through late fees exceed the normal billing and collection costs recovered through its tier rates.  S( B.Form 1235 Network Upgrade Adjustment  S( 1.` ` Background  SJ ( ` R 10. ` ` Section 76.922(j) of the Commission's rules allow operators undertaking significant  xnetwork upgrades to recover the net increase in cost attributable to the upgrade by adding the upgrade  S ( xcosts to the rates permitted under the benchmark and price cap rate methodologies.~  yON( xԍ47 C.F.R.  76.922(j). When adopting rate regulations, the Commission determined that the costs of system  x improvements should not be recovered as external costs. It anticipated that operators increasing channel capacity  xdwould see an increase in total per subscriber revenues under the benchmark approach, which also included periodic  {O( xadjustments for inflation changes, or could recover costs through costofservice showings. See Rate Order, 8 FCC  xRcd at 5791 n.608. The Commission revised its treatment of upgrade costs to allow an abbreviated costofservice  {O8( x.showing in support of an upgrade addon rate. See Cost Order, 9 FCC Rcd at 467476. Normal improvements  {O(continue to be subject to the usual rate review process. Id. at 4674. Operators calculate  xVtheir upgrade addon by making an abbreviated costofservice filing on FCC Form 1235 and certify that  S ( xfthey meet the minimum technical requirements specified in the form.  yOD( xԍThe instructions to Form 1235 specify that, at a minimum, a significant upgrade for systems not classified as  xLsmall systems under the Commission's rules must involve an increase in usable bandwidth to at least 550 MHZ  xcapacity with upgrade capability to 750 MHZ, fiber to the node or beyond, and no more than 1,500 homes per node.  xAn upgrade not meeting these minimum criteria must be justified by a brief description of the upgrade and its  xsignificance and benefit to subscribers of rateregulated service. FCC Form 1235, Instructions for Part I, Qualification for Upgrade Adjustment, Section A, at 5. In order to assist operators in  xzprojecting cash flows and obtaining capital for the construction of upgraded systems, the Commission  xallows operators to file FCC Form 1235 for preapproval using projected upgrade costs at any time before  S2( xmaking the upgrade services available to subscribers.j2r yOD!(ԍFCC Form 1235, Instructions, Purpose and Filing Instructions at 2.j The operator may begin charging the rates  xdetermined in the preapproval form in subsections of the system where the rebuild is complete and  S( xservice is provided to subscribers.> yO$(ԍFCC Form 1235 at 2, 5.> When the upgrade is complete, operators using this phasedin"0*&&88"  xapproach must refile the form using the actual costs where possible and substituting actual costs for the  xprojected costs in the preapproval filing. Operators filing Form 1235 have the option of recouping all  xof their upgrade costs from services other than the BST or may collect costs allocated to the BST from  S(BST subscribers.@X yO( xԍFCC Form 1235 is used to compute the revenue requirement allocated to the BST and in Part III requires the  xoperator to select whether the method of recovery includes recovery from the BST and CPSTs or whether all of the recovery is from the CPSTs.@  S8( ` . 11. ` ` Adelphia is upgrading its systems in phases and sought State preapproval of BST rate  xincreases based on the expected future capital investment and technical improvements. The Board denied  xBall of Adelphia's monthly network upgrade adjustment without prejudice to Adelphia's right to renew the  S( xissue if it files completed versions of FCC Form 1235 at some future date.: yOH (ԍBoard Order at 63.: The Board required refunds  xof any upgrade addons collected from subscribers after August 1, 1998. The Hearing Officer, whose  Sp(findings and conclusions were adopted except as modified by the Board, found:Fpx yO(ԍBoard Order at 2122 para. 78.F  ` ~XX` ` Adelphia did not include any offsetting revenue other than advertising  ` revenue in its calculation. The Company did not identify any property,  ` xplant, or equipment which may be disposed of as a result of the upgrade,  ` the revenues from which could also be used to reduce the costs recovered  ` Zfrom ratepayers. Estimates of projected incremental operating costs and  ` operating or support savings are absent from the filings. The post ` <upgrade channel lineups have not yet been developed. There is no rate  ` base adjustment for excess capacity in the upgraded systems. The  ` Company indicated that it did not include any projected operating cost  ` changes or changes in plantrelated support expenses "for simplicity in  ` (the preapproval calculation" notwithstanding the clear FCC instructions  ` to do so and the Department's testimony challenging the company's filing as deficient.x`  xIn reviewing Adelphia's exceptions to the Hearing Officer's findings and conclusions, the Board found  x>that Adelphia's "preapproval filing was incomplete on its face since it included only projected capital  xcosts (including associated depreciation and financing costs) but did not include offsetting factors explicitly  xrequired by Form 1235. Specifically, the Company did not include projections of changes in revenues  SP( x:or operating costs . . . .":P yO!(ԍBoard Order at 52.: The Board added that Adelphia's "preapproval filings omitted several  S((categories of costs and revenues" from its Form 1235.:( yO`$(ԍBoard Order at 52.: "( 0*&&88"Ԍ S( `  12. ` ` Adelphia disagrees with the Board's criticisms of its Form 1235 filings and asserts that  xits preapproval upgrade adjustment should have been accepted as submitted. Adelphia argues the Board  xerred when it faulted Adelphia for not projecting any offsetting revenue adjustments in calculating its BST  xupgrade addon because its Form 1235 clearly indicated that no new channels are going to be added to  x*the BSTs as a result of the upgrade. It also argues the Board erred in concluding its Form 1235 was  xdefective because it projected that it would incur no net change in its operating or support costs as a result  S( xof the upgrade. Finally, assuming arguendo that the Board could reasonably disagree with its revenue and  xloperating cost projections, Adelphia argues the decision to reject all of its upgrade addon was not  xreasonable or consistent with Commission precedent holding that a franchising authority cannot reject a rate in its entirety because of a disagreement about specific elements of a rate calculation.  SJ ( ` F 13. ` ` The Department opposes Adelphia's appeal. In its view, whether an upgrade is significant  xis a local question, and Adelphia failed to demonstrate any need for an upgrade addon to the BST. It  xargues that Adelphia has failed to show a net increase in costs, taking into account the cost of the upgrade,  xthe operator's gain on the disposition of retired assets, additional revenues due to the implementation of  xthe upgrade, such as anticipated home shopping revenues, and savings in operating costs due to increased  xefficiencies and improved technology, such as the reduction of amplifier cascaded due to increased use  xof fiber. It disagrees with Adelphia's position that the Board should have recalculated the rate using the  xbest information available, because so much essential information was missing and the Board is limited  S ( x\to the hearing record when making rate decisions.G  yOr(ԍDepartment Opposition at 1119.G The Department also argues that Adelphia is not  S( xentitled to any upgrade addon because it will place no new channels on the basic tier,I X yO(ԍDepartment Opposition at 18 n.30.I and it disagrees  S(with Adelphia's argument that offsetting factors not directly linked to the basic tier should be ignored.D! yOB(ԍDepartment Opposition at 19.D  Sj( `  14. ` ` In response to the Department's opposition, Adelphia addressed offsetting gains from the  x.disposition of plant. Adelphia argues that it did not project offsetting gains because the prospect of such  xgains was too speculative at the time the preapproval filing was submitted. It states its intention to reflect  S(any gains that do occur in the final Form 1235 filings.?"x yO (ԍAdelphia Reply at 511.?  S(` 2.` ` Discussion  SR( ` 15. ` ` In the case before us, the Board accepted Adelphia's certification that its planned  xLnetwork upgrades meet the minimum technical requirements for an abbreviated costofservice showing,`  S( xand it did not dispute Adelphia's total capital costs estimated in its preapproval filings on Forms 1235./#X yO#( x(ԍBoard Order at 51. The Hearing Officer found that the Department did not undertake a comprehensive review  x$of Adelphia's capital cost estimates because these costs will be updated with actual results. Board Order at 20 finding 71./ "( #0*&&88x"  xBThe dispute is whether the Board erred in disallowing the addon in its entirety because Adelphia did not  x>show gains from the disposition of property to be replaced in the upgrade and did not show expected  xrevenues and operating cost adjustments. We conclude that the Board did not err in expecting the operator  xVto consider operating cost adjustments and gains in its ratemaking but did err in its treatment of revenues  xassociated with nonBST channels. Because the Board's Order did not allow the operator to recover any  xupgrade costs as it phased in the upgrade and because the decision to disallow the upgrade addons in their  xentirety was based in part on its conclusion that Adelphia failed to bear its evidentiary burden by failing  xto include revenues not attributable to the BST, we are remanding the Order for further consideration and are directing Adelphia to file information on estimated gains and operating costs with the Board.  Sp( ` 16. ` ` A cable operator seeking to recover the costs of a significant upgrade should allocate  xupgrade costs to the BST and other services in conformance with the Commission's cost allocations rules  S ( xfor costofservice showings.D$~  {O (ԍ47 C.F.R.  76.922(j)(4); Cost Order, 9 FCC Rcd at 4676.    :Contrary to the Department's position, recovery of upgrade costs from the BST does not depend on the  {O( xaddition of new channels to the BST. See Cox Communications San Diego, Inc. (Chula Vista, CA), 13 FCC Rcd  x17653, 1765859 (Cab. Serv. Bur. 1998). "The cost of physical plant is directly related to the provision of cable  {O( x8channels and the amount of channel capacity a particular system has." Final Cost Order, 11 FCC Rcd at 2237.  yOv( xThus, a straight channel ratio would be a reasonable measure of the current usage of the tangible plant in many cases. D The cost assignments and allocations made on the worksheets for FCC  xForm 1235 are to be made in accordance with section 76.924(f) of the Commission's rules specifying cost  S ( xallocation requirements.H%  yO~(ԍFCC Form 1235 Instructions at 9.H Section 76.924(f)(2) specifies that costs of programming shall be directly  xassigned or allocated only to the service cost category in which the programming is offered. Section  x$76.924(f)(6) provides for direct allocation of costs incurred exclusively to support a specific service cost  x.category or the equipment basket wherever possible. Section 76.924(f)(7) allows the operator flexibility  xin determining specific allocators and allocation schemes that achieve reasonable results when direct  S( x.allocation is not possible.& {OF(ԍSee Cost Order, 9 FCC Rcd at 465354; Final Cost Order, 11 FCC Rcd at 2268 . Wherever possible, common costs for which no allocator has been specified  xby the Commission are to be allocated based on direct analysis of the origin of the costs. Where this is  xnot possible, common costs shall, if possible, be allocated based on indirect costcausative linkage to other  xcosts directly assigned or allocated to the service cost categories and equipment basket. Where neither  x4direct nor indirect measures of cost causation can be found, common costs shall be allocated to each  x~service cost category based on the ratio of all other costs directly assigned and attributed to a service cost category over total costs directly or indirectly assigned and directly or indirectly attributable.  S( ` 17. ` ` These cost allocations are reflected in Form 1235, Worksheet A, which is used to  xcompute: the net upgrade rate base; the projected net impact of the upgrade on operating expenses,  xjincluding plant related operating expenses and plant related support expenses; the interest expense related  xto the upgrade; and the net revenue and income adjustments related to the upgrade, including cable  x~revenue and other adjustments. Worksheet A shows by service category directly assigned cost elements,  xallocated cost elements, and the total of directly assigned and allocated cost elements. Costs and revenues"0 &0*&&88Z"  xRassigned or allocated to the BST through this process would be reflected as BST costs and revenues.  x`Costs and revenues for other services or the equipment basket would be reflected as CPST or as "other"  S( xcosts and revenues.?'X yO( x ԍAt the time Adelphia filed its forms 1235 with the State, CPST rates were subject to regulation by the  xCommission. 47 U.S.C.  543(c)(4) provides that rate regulation shall not apply to cable programming services provided after March 31, 1999.? The totals by service cost category from Worksheet A are used in Part II of the  xjform to compute the total upgrade revenue requirement which can be recovered from subscribers for the  xBST and for any CPSTs. The revenue requirement is computed by adjusting the net upgrade rate base  xNfor taxes, net operating expenses, and net revenue and income adjustments. No upgrade revenue requirement is computed on Form 1235 for equipment or premium services.  S( ` `18. ` ` The instructions to Form 1235 also provide that any gains realized from the disposition  xof property, plant, and equipment used to provide network services are to offset the cost of the capital  Sp( xzimprovement in the ratemaking process.H(p yO (ԍFCC Form 1235 Instructions at 1.H This offset would be reflected in the net upgrade rate base  xcomputed in Worksheet A and carried over to Part II of the form. In opposing Adelphia's appeal, the  xDepartment repeats the Hearing Officer's finding that Adelphia "`did not identify property, plant, or  xequipment that could be disposed of as a result of the upgrade, the revenues from which could also be  S ( x$used to reduce the costs recovered from the ratepayers.'"d) x yO(ԍDepartment Opposition at 17, quoting from Board Order at 22.d Adelphia responds only that the prospect of  S ( xLgains from the disposition of plant was too speculative when it submitted its preapproval filing.>*  yOP(ԍAdelphia Reply at 89.> It said  xtin its Supplemental Comments to the Board that upgrades for four of the six systems at issue will involve  xHincremental plant only, with existing plant continuing to be used and useful, so anticipated gains from  S0( xthose upgrades will be minimal.n+0 yOh(ԍAdelphia Supplemental Comments at 17, found at Adelphia Reply, Exh. A.n For the other two systems at issue, it stated its intention to wait until  S(the rebuilds/upgrades are complete before reflecting any gain from replaced plant in the those rates.1,(  {O(ԍId.1  S( ` 19. ` ` Adelphia's position, that it need not address anticipated gains in the preapproval process,  xis not supported by the rate form or any Commission rule. In developing its rate regulations, the  xCommission intended that an operator's initial rates, whether set through the benchmark or cost of service  xBmethodologies, should be sufficient to compensate the operator for its investment in property, plant, and  xLequipment used for cable service. When property, plant, or equipment is pulled out of service as part of  xBa major upgrade, subscribers paying for the cost of the upgrade through an upgrade addon to their rates  S( xshould not also be expected to continue paying for what is no longer used and useful.-  {O"$( xԍSee Falcon Cable Systems Co. (Los Osos, CA), 14 FCC Rcd 2105 at para. 7 (Cab. Serv. Bur. 1999); Falcon  {O$(Cable Systems Co. (Los Osos, CA), 13 FCC Rcd 25032, 25035 para. 9 (Cab. Serv. Bur. 1998). For this reason," -0*&&88"  xoperators are expected to reduce the costs of the capital improvement by gains realized from the  xVdisposition of property, plant, and equipment used before the upgrade. This expectation applies whether  x$the rates to be charged are preapproval or final rates. Adelphia is concerned that the actual gains from  xdisposing of old plant were not known when it prepared its preapproval Forms 1235, but neither were  xthe actual capital costs of the upgrade. Where gains are likely because, for example, the operator is  xreplacing old plant, the operator is expected to make a good faith effort to estimate gains that would affect  xits net costs when developing the preapproval rates it proposes to charge subscribers, and it can adjust these estimates in its final form.  S( ` F20. ` ` Adelphia argues the Board erred in concluding that its Form 1235 was defective for failing  x\to include projected net changes in operating or support costs. It states it pointed out during the local  SH ( xreview process that increases in these expense categories were at least as likely as decreases,=.H  yO (ԍAdelphia Appeal at 7.= but nothing  xin the record shows that Adelphia gave the franchising authority any estimates or projections to support  xthis view. In an exhibit in the Board proceeding, Adelphia stated it omitted operating and support costs  S ( x"[f]or simplicity in the preapproval calculation,"F/ X yO(ԍDepartment Opposition, Exh. 1.F and its Supplemental Comments to the Board state it  S ( xdid not include projections.M0  yO0(ԍAdelphia Supplemental Comments at 16.M Adelphia explains this omission by arguing that Form 1235 preapproval  xfilings justifying CPST rates before the Commission frequently show either no change or a net increase  xin operating and/or support expenses. These filings are not based on data relevant to Adelphia's filings,  xhowever, and the Board was not unreasonable in expecting Adelphia to provide its own projections to  xsupport its requested BST rates. Whether Adelphia's operating costs will change at all, increase, or  xdecrease will depend on the circumstances of each of the systems at issue and will be affected by matters  xsuch as changes in pole attachment costs, real estate taxes, and utility charges as well as by the service and repair costs noted by the Department and other changes in personnel needs resulting from the upgrade.  S@( ` V21. ` ` Adelphia also argues that the Board erred in accepting the Hearing Officer's conclusion  xRthat Adelphia had violated the Commission's rules by failing to include projected changes in revenues  xother than CPST advertising revenues in the Form 1235 calculations. The Hearing Officer found that  xBAdelphia had acknowledged in discovery it expected ancillary revenues from the upgrade but had shown  xonly advertising revenue on the CPST in its filings and had not shown offsetting revenues for payper  Sx( x~view or home shopping commissions.T1xx yO(ԍBoard Order at 20 finding 72, 21 finding 24.T Incorporating the Hearing Officer's findings and conclusions, the  SP( xtBoard found that the Company did not include projected revenues changes.:2P yO!(ԍBoard Order at 52.: Adelphia argues that cable  xoperators are required to project ancillary revenues only to the extent those revenues are specifically  x attributable to channels added as a result of the upgrade, and states that its Form 1235 filings clearly" 20*&&88"  S( xpindicated no new channels would be added to the BST as a result of the upgrade.=3 yOh(ԍAdelphia Appeal at 7.= Thus, it does not  xexpect offsetting advertising or home shopping commissions relevant to the BST. The Department  xdisagrees that offsetting factors not associated with the basic tier should be ignored, arguing that all new  S(revenues from the upgrade must be offset against the upgrade costs.H4X yO(ԍDepartment Opposition at 16, 19.H  S8( ` 22. ` ` Section 76.924(f)(2) of the Commission's rules specifically provides that programming  xcosts are directly assigned or allocated only to the service cost category in which the programming at issue  x$is offered. Costs of any programming added to the BST as a result of the upgrade are directly allocated  xto the BST, and the only upgrade related programming revenues allocated to the BST are revenues derived  xfrom channels added to the BST as a result of the upgrade. Costs and revenues attributable to  xprogramming on other service tiers would be allocated to the tier on which the particular programming  xis added. While Form 1235 asks for information about projected CPST and other revenues, revenues  xdirectly allocated to those categories would not affect the BST rates subject to the Board's jurisdiction and  xare not subject to the Board's review. Because determining the revenue requirement for the BST does  xVnot depend on information about revenues from advertising or home shopping commissions for channels  xLadded to the CPST or carried on a premium basis, denying a BST network upgrade addon for failing to show revenues directly generated by nonBST channels is not reasonable.  S0( ` B23. ` ` Finally, Adelphia challenges the Board's decision to disallow all of the upgrade addon,  xarguing that, if the Board reasonably disagreed with its revenue and operating cost projections, it should  xhave requested additional information or substituted its judgment for the operator's estimate, using the best  S( x information available from public sources.?5 yO@(ԍAdelphia Appeal at 89.? The Department disagrees.G6x yO(ԍDepartment Opposition at 2023.G It states that the Board is  xRlimited in its decisionmaking to evidence on the record presented during hearings and argues that the  xhBoard's decision was reasonable in light of the amount of information missing from Adelphia's  xLsubmission. While agreeing that local regulators may use the best information available when faced with  xja gap in a cable operator's calculations, it argues that the Board should not be required to bear Adelphia's  xevidentiary burden in this case when most of the required information is missing. It also argues the offsets  xcould be significant enough to completely offset the estimated capital costs. It posits that the operator  S( x>should realize operating cost savings due to increased efficiencies and improved technology, e.g., the  xreduction of amplifier cascades due to increased use of fiber and the assumed reduction in required service  SR(and repair, and can recover the upgrade costs through additional services and revenues.7R yO!( xnԍAs discussed above, however, revenues from additional services not offered on the BST would not offset costs allocated to the BST.  S( ` j24. ` ` If a cable operator files a facially incomplete rate justification in that it fails to complete  xzthe rate form or fails to include supporting information required by the form, the franchising authority" ` 70*&&88@"  S( xshould give the operator an opportunity to cure the defect.i8 {Oh(ԍThird Order on Reconsideration, 9 FCC Rcd at 434748.i The franchising authority may also order the  S( xcable operator to file supplemental information.h9Z {O(ԍId. at 434344, 4348; Rate Order, 8 FCC Rcd at 5718.h If the operator fails to provide the requested information  xwithin the required time or fails to provide complete information in good faith, the franchising authority  xmay hold the operator in default and mandate appropriate sanctions as if the operator had failed to submit  xa response at all. In that case, the franchising authority could enter an order finding the operator's rates  x8unreasonable and mandating appropriate relief, which could include, for example, ordering a prospective  S( x$rate reduction and a refund based on the best information available at the time.h: {O (ԍThird Order on Reconsideration, 9 FCC Rcd at 4347 para 84.h Disapproving a rate in  xits entirety, or reducing it to zero, because some but not all cost elements are unproven generally is not  S( xreasonable,C;\~ {O ( xԍSee id. at 434748; see also Falcon Community Ventures I (Roseburg, OR), 13 FCC Rcd 12503, 12505 (Cab.  {O( x Serv. Bur. 1998); Novato Cable Co. d/b/a Chambers Cable of Novato, 10 FCC Rcd 5158, 5159 (Cab. Serv. Bur. 1995).C although as the cases cited by the Department point out, disallowing unproven cost elements  S(may be reasonable.< {O( xPԍSeeTeleScripps Cable Co. (Hardin County, KY), 11 FCC Rcd 14518, 14522 para. 11 (Cab. Serv. Bur.) (CPST  x.costs not based on calendar year quarters were disallowed, although other rate adjustments were corrected and  {Ol( xapproved); Times Mirror Cable Television of Orange County, Inc., d/b/a Dimension Cable Services (Dana Point, CA),  x10 FCC Rcd 817, 82324 & n.31 (Cab. Serv. Bur. 1994) (additional outlet charge for CPST services disallowed  {O( xbecause operator failed to show any costs associated with additional outlets for CPST), vacated Cox Communications,  {O( xInc. and Times Mirror Cable Television, Inc., 11 FCC Rcd 1972, 1977 n.20, 1988 para. 49 (1995) (vacated in order  xaccepting rate resolution); Cable Operators' Rate Justification Filings, Sections 76.945, 76.956 of the Commission's  xRules, 9 FCC Rcd 7752, 7756 paras. 78 (Cab. Serv. Bur. 1994) (showing that fails to provide adequate detail of, for example, intangible costs, may result in disallowance of unsupported costs).   SH ( ` `25. ` ` We find that the Board's denial of all of Adelphia's upgrade addon is not supported by  xjthe operator's failure to provide revenues from nonBST channels, operating cost savings and gains from  xthe disposition of plant. As discussed above, revenues from nonBST channels would not affect the BST  xrevenue requirement. Although the Department speculates that the savings in operating costs from use  x\of fiber could be significant, it is highly unlikely that operating cost savings, if any, and any gain from  xdisposing of old plant could negate all of the costs of an upgrade meeting the minimum technical  xstandards specified in Form 1235 for a significant upgrade. According to Adelphia's Supplemental  xtComments to the Board, only two of the systems will be upgraded by replacing rather than incrementally  S( xincreasing plant.M=z yO""(ԍAdelphia Supplemental Comments at 17.M On the other hand, we recognize the Board's dilemma under Vermont law in  xconsidering adjustments based on the best information available if it had sought but not received the" =0*&&88T"  S( xmissing information from Adelphia.g> {Oh(ԍSee Third Order on Reconsideration, 9 FCC Rcd at 434748.g According to the Department, Vermont law requires the Board to  S( xact only on the record before it, and the record lacked sufficient information for determining adjustments.D?Z yO(ԍDepartment Opposition at 22.D  xAlthough Adelphia argues that some operators filing with the Commission showed no net change in  xoperating costs or a net increase in operating costs, this does not require a finding that Adelphia's upgrades involve similar designs or costs.  S( ` 226. ` ` We are remanding the Board Order for further consideration of the network upgrade add xon consistent with this Memorandum Opinion and Order. To facilitate the Board's review, Adelphia is  xdirected to file its estimates of projected changes in plant related operating and support expenses and its  xestimates of the gains to be realized from the disposition of property, plant and equipment used prior to  xthe upgrades. This information is to be filed with the Board within 20 days of the release of this Memorandum Opinion and Order.  S ( ` 27. ` ` Accordingly, IT IS ORDERED that the Emergency Petition for Stay of Enforcement Pending Appeal of Rate Order filed by Adelphia on May 20, 1999 IS DISMISSED.  S ( ` 28. ` ` IT IS FURTHER ORDERED that the Emergency Petition to Dismiss, or Alternatively, to Stay Appeal of Rate Order filed by the Department on June 3, 1999 IS DISMISSED.  S( ` x29. ` ` IT IS FURTHER ORDERED that the Appeal of Rate Order filed by Adelphia on May25,  xj1999 IS GRANTED in part and DENIED in part and the matter IS REMANDED to the Vermont Public Service Board for further action consistent with this Memorandum Opinion and Order.  Sh( ` 30.` ` IT IS FURTHER ORDERED that, within twenty (20) days of the release of this order,  xAdelphia MUST SUBMIT to the Vermont Public Service Board its estimates of projected changes in plant  xrelated operating and support expenses and its estimates of any gains to be realized from the disposition of property, plant and equipment used prior to the upgrades.  S( ` 231. ` ` This action is taken pursuant to authority delegated by  0.321 of the Commission's rules. 47 C.F.R.  0.321. ` `  ,hhhFEDERAL COMMUNICATIONS COMMISSION ` `  ,hhhWilliam H. Johnson ` `  ,hhhDeputy Chief, Cable Services Bureau