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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 ) ) Time Warner Cable ) CUID No. NC0052 (City of High Point) ) Petition for Reconsideration ) ) ORDER ON RECONSIDERATION Adopted: September 14, 1999 Released: September 16, 1999 By the Deputy Chief, Cable Services Bureau: 1. In this Order we consider a petition for reconsideration of a rate order concerning the January 1, 1998 rate increase of the above-referenced operator ("Operator") for its cable programming services tier ("CPST") in the community referenced above. On June 18, 1998, we issued a rate order concerning Operator's January 1, 1998 CPST rate increase ("Prior Order"). On July 20, 1998, Operator filed a petition for reconsideration of our Prior Order ("Petition"). This Order addresses Operator's Petition. 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. The Telecommunications Act of 1996 ("1996 Act") and our rules implementing the legislation ("Interim Rules"), require that a complaint against the CPST rate be filed with the Commission by a local franchising authority ("LFA") that has received more than one subscriber complaint. 3. The filing of a complete and timely 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. If the Commission finds a rate to be unreasonable, it shall determine the correct rate and any refund liability. 4. 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 justify 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 found that Operator had not correctly calculated its maximum permitted rate ("MPR") on its FCC Form 1240 for the projected period January 1, 1998 to December 31, 1998. In particular, we adjusted Lines 808 and 809 of Worksheet 8 (True-Up Rate Charged) to reflect Operator's actual rate charged during its True-Up Period. We also found that Operator had failed to use the most current FCC Inflation Factors available at the time Operator signed its FCC Form 1240. Therefore, we revised Worksheet 1 (True-Up Period Inflation) which adjusted Line C3 (Inflation Factor for True-Up Period 1) to 1.0193. We also revised Line C5 (Current FCC Inflation Factor) to 1.0143. These revisions reduced Operator's MPR to $21.56 for the projected period January 1, 1998 to December 31, 1998. Because Operator was actually charging a CPST rate of $21.92, we found Operator's actual CPST rate to be unreasonable, effective January 1, 1998. 6. In its Petition, Operator argues that Operator's failure to use the most currently published inflation figures available at the time it prepared its filing is not a defect and the inflation factors should not have been refreshed. However, because Operator was filing revised forms, Operator was required to use the most currently available information. This issue was addressed by the Commission in Cencom Cable Income Partners II, L.P. ("Cencom"). In Cencom, the Commission explained its policy regarding refreshing inflation: The Commission is charged with protecting subscribers from paying unreasonable CPST rates, while also providing system operators with a fair return. Accurate information, including accurate inflation information, is central to setting an initial regulated rate that meets the standard. Thus, the Commission requires that data used in setting a rate be refreshed with the most current data available when an operator's rates become regulated and are justified. Because final inflation data for the period addressed in rate justifications may not be available when a justification is filed, the Commission directs operators to estimate inflation by using the most recently available inflation data published on an interim basis in the Commerce "Survey of Current Business" at Table 7.3, Line 5. The Bureau practice when reviewing rate justifications is to verify that the operator has used this inflation data. The Bureau also determines whether the other information in the rate justification is correct, and on the basis of the inflation and other information in the form, including any corrections, whether the operator's rate meets the statutory requirement that the rate not be unreasonable. The Bureau does not find a rate unreasonable solely because more accurate inflation data has become available by the time it makes its review. This would churn rates, causing significant administrative expenses to operators and confusion to subscribers. However, if a rate is unreasonable on its face or has to be adjusted for reasons other than the availability of a more accurate inflation figure, e.g., because the operator failed to provide correct information in its rate justification or failed to complete its rate justification form correctly, the Bureau recalculates the maximum permitted rate using the most accurate inflation information available, rather than earlier estimates. This practice is consistent with 47 C.F.R.  76.922(b)(9)(iii), which provides: [I]f the rates charged by a cable operator are not justified by an analysis based on the data available at the time it initially adjusted its rates, the cable operator must adjust its rates in accordance with the most accurate data available at the time of the analysis. [footnotes in original] Because we find that our action in our Prior Order is consistent with the Commission's holding in Cencom, we reject Operator's argument and deny Operator's Petition in part. 7. Operator also argues that it did not implement its 1997 CPST rate increase until July 1, 1997 and that its original entries on Worksheet 8 were accurate. In support of its argument, Operator provided a customer notification letter indicating that the CPST rate would increase on July 1, 1997, rather than May 1, 1997. Once an operator has filed FCC Forms and supporting documentation with the Commission, we are entitled to act upon that information. Moreover, once we have released an order concerning those FCC Forms, we cannot ordinarily allow an operator to amend those FCC Forms on appeal with information that should have been submitted in the original certification. In the present case, we relied on information that Operator provided, specifically, a dated rate card which indicated that Operator increased its CPST rate as of May 1, 1997. However, upon our request, Operator supplemented its Petition with customer ledger details which showed that subscribers were not charged the CPST rate increase until July 1, 1997. We find this information to be reliable and we will grant Operator's Petition in part and adjust Worksheet 8 to reflect the actual rate charged. Upon review of Operator's FCC Form 1240s for the projected period January 1, 1998 through December 31, 1998, we find that Operator has justified an MPR of $21.77 for the projected period January 1, 1998 to December 31, 1998. Because Operator's actual CPST rate, effective January 1, 1998, is $21.92, we find Operator's actual CPST rate, effective January 1, 1998, to be unreasonable. 8. 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 GRANTED IN PART TO THE EXTENT INDICATED HEREIN. 9. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. 0.321, that In the Matter of Time Warner Cable, DA 98-1150, 13 FCC Rcd 16672 (1998), IS VACATED IN PART TO THE EXTENT INDICATED HEREIN. 10. 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 $21.92, charged by Operator in the franchise area referenced above, effective January 1, 1998, IS UNREASONABLE. 11. 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 $21.77 per month (plus franchise fees), plus interest to the date of the refund, for the period January 6, 1998, the date of the first subscriber complaint, through the day before Operator implements the maximum permitted CPST rate of $21.77 or March 31, 1999, whichever is sooner. 12. 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. FEDERAL COMMUNICATIONS COMMISSION William H. Johnson Deputy Chief, Cable Services Bureau