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                            Before the
                Federal Communications Commission
                      Washington, D.C. 20554

In the Matter of:               )
                                )
FALCON CABLEVISION              )  File No. CSB-A-0584
                                )
Appeal of Local Rate Order      )
of the City of Malibu, California)
(CUID No. CA0249)               )


                   MEMORANDUM OPINION AND ORDER


   Adopted:  September 14, 1999         Released:  September 17, 1999

By the Deputy Chief, Cable Services Bureau:

I.   INTRODUCTION

     1.   Falcon Cablevision ("Falcon"), the operator of the cable television system in Malibu,
California, filed a Petition for Review of the local rate order of the City of Malibu, California, adopted on July
13, 1998.  The City filed an opposition to the petition, and Falcon filed a reply.  With this order, we deny
Falcon's petition.

II.  BACKGROUND

     2.   Under the Commission's rules, rate orders issued by local franchising authorities may be
appealed to the Commission.  In ruling on an appeal of a local rate order, the Commission will sustain the
franchising authority's decision provided there is a reasonable basis for that decision, and will reverse a
franchising authority's decision only if the franchising authority unreasonably applied the Commission's rules
in its local rate order.  If the Commission reverses a franchising authority's decision, it will not substitute its
own decision but instead will remand the issue to the franchising authority with instructions to resolve the case
consistent with the Commission's decision on appeal.

     3.    An operator proposing an increase in basic service tier ("BST"), equipment or installation
rates bears the burden of demonstrating that the proposed increase conforms with our rules.  In determining
whether the operator's proposed increase conforms with our rules, a franchising authority may direct the
operator to provide supporting information.  After reviewing an operator's rate forms, and any other additional
information submitted, the franchising authority may approve the operator's requested rate increase or issue
a written decision explaining why the operator's rate is not reasonable.  If the franchising authority determines
that the operator's proposed rate exceeds the maximum permitted rate as determined by the Commission's rules,
it may prescribe a rate different from the proposed rate provided that it explains why the operator's rate is
unreasonable and the prescribed rate is reasonable.

III. DISCUSSION AND ANALYSIS

     4.   The sole issue for consideration in this local rate order appeal concerns the City's disallowance
of certain costs claimed as franchise related costs on FCC Form 1240 submitted in support of basic service
("BST"), equipment, and installation rates on October 1, 1997.  The disputed costs relate to certain
programming presented on Falcon's public, educational and government access ("PEG") channels.  Falcon
contends that the disallowed costs are eligible for external treatment and pass-through as franchise related
costs.  Falcon states that it has been asked to produce and air many programs on the PEG channels by schools
in the city and by public persons and groups.  The City disagrees, stating that Falcon has been permitted to
claim costs related to providing PEG channels required by the franchise but should not be permitted to claim
and pass-through to subscribes the cost of programming appearing on Falcon's PEG channel as franchise
related costs, unless the City requested Falcon to provide such programming.  The City asserts that the
franchise does not require carriage of any programming Falcon chooses or anyone requests.  We interpret the
City as arguing that the franchise does not require Falcon to produce or underwrite programming.  The City
further asserts that the disallowed programming costs relate to programming that was not requested by the City.

     5.   In the First Reconsideration Order, the Commission stated that the scope of costs eligible for
external treatment and pass-through as franchise related costs "include the costs of satisfying franchise
requirements to support [PEG] channels or the use of such channels or any other services required under the
franchise, and the cost of any [PEG] access programming required by the franchise authority."  The issue is
whether Falcon's disallowed costs meet these eligibility requirements.  Section 7.B.1. of Falcon's Malibu
franchise requires Falcon to set aside a minimum of "one public access channel and one educational channel"
and to submit a "written 5-year plan to the County outlining access utilization of the System."  The plan must
describe "the availability of studio facilities and equipment for use by the public schools, community groups
and residents within the service area, training in the use of the equipment and support, if any, for community
access and participation."

     6.   We find the City's interpretation of the provisions of Falcon's franchise regarding requirements
for PEG programming to be reasonable.  The franchise requires Falcon to provide a minimum of one channel
each for public access and educational use, and to submit a plan for utilization of those channels, i.e. for
making the channels available and accessible to users.  Significantly, the franchise is silent on the matter of
programming or Falcon's role in program production or program funding.  Nothing on the face of the franchise
appears to obligate Falcon to produce programming or provide program funding or to include program
production or funding in its plan.  Furthermore, the City has not disallowed other costs Falcon incurred for the
PEG channels it provides. We do not find the City's interpretation of its franchise or its adjustment of Falcon's
franchise related PEG costs to be unreasonable.

     7.   Falcon contends that the programming relating to the disallowed costs should have been treated
as PEG programming requested by the City.  To support this contention, Falcon presented copies of several
programming requests as examples of programming that should be treated as franchise related programming
eligible for cost pass through.  However, it is not apparent from the face of the example requests that any of
these programming requests originated with the City.  Accordingly, we find reasonable the City's conclusion
that Falcon's programming costs at issue should be disallowed because Falcon has not shown such costs to be
related to programming required by Falcon's franchise.

     8.   Falcon asserts that although a utilization plan was submitted to the City in 1994, the City has
not approved it.  Falcon argues that in view of such inaction, the City's refusal to allow costs for programming
not specifically requested is supported by a self-serving rationale.  Falcon also argues that the City's
disallowance of programming costs in this instance amounts to editorial control prohibited to both Falcon and
the City by the franchise.  Falcon further contends the City's position undermines support for programming of
organizations or individuals that cannot otherwise afford programming or for programming Falcon is unwilling
to fund absent an opportunity to pass their costs through to subscribers.  Otherwise, Falcon suggests that only
programming requested by the City would be available to the public.  We reject these arguments as grounds
for reversal of the City's disallowance of these costs and decline to intervene in the City's determination of what
"satisf[ies] the franchise requirements to support" PEG channels or what access programming "is required by
the franchise authority."

IV.  ORDERING CLAUSES

     9.   For the foregoing reasons, IT IS HEREBY ORDERED, pursuant to authority delegated by
Section 0.321 of the Commission's rules, that the Petition for Review of the Local Rate Order of the City of
Malibu, California (CSB-A-0249), filed by Falcon Cablevision on August 12, 1998, IS DENIED.


                              FEDERAL COMMUNICATIONS COMMISSION



                              William H. Johnson
                              Deputy Chief, Cable Services Bureau