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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: ) ) Century Communications Corp. ) CUID No. CA0813 ) File No. CSB-A-0347 Appeal of Local Rate Order ) of the City of Anaheim, CA ) MEMORANDUM OPINION AND ORDER Adopted: November 16, 1999 Released: November 17, 1999 By the Associate Chief, Cable Services Bureau: 1. Century Communications Corp. ("Century"), the franchised operator of a cable system serving the City of Anaheim, California ("City") has filed an appeal of the rejection of ML Media Partners L.P. ("Multivision") small cable operator certification in a Resolution ("Resolution") adopted by the City on July 23, 1996. The City filed an opposition on September 10, 1996. Century filed a reply on October 4, 1996. Century in its reply argues that the City did not file its opposition within the time frame specified in Section 76.944(b) of the Commission's rules. The City requested acceptance of the late-filed opposition, and Century responded. For good cause shown, we accept the City's opposition. 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 not conduct a de novo review, but instead will sustain the franchising authority's decision as long as there is a reasonable basis for that decision.. Therefore, the Commission will reverse a franchising authority's decision only if it determines that the franchising authority acted unreasonably in applying the Commission's rules in rendering 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. Section 623(m) of the Communications Act and Section 76.1403 of the Commission's rules provides that effective February 8, 1996 a small cable operator is exempt from rate regulation on its basic service tier if that tier was the only service tier subject to regulation as of December 31, 1994. A cable operator is small cable operator if it serves 50,000 or fewer subscribers in the franchise area and directly or through an affiliate, serves in the aggregate fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceeds $250,000,000. 4. On November 28, 1994, Multivision and Century entered into an Asset Purchase Agreement ("APA") and a franchise transfer agreement. On or about February 23, 1995, Multivision and Century requested approval by the City of Century's acquisition of Multivision franchise and system. On February 27, 1996, the City approved the franchise transfer agreement from Multivision to Century, and the approval became effective on or about April 5, 1996. On or about May 2, 1996, Multivision filed a small cable operator certification. On May 31, 1996, the parties consummated the APA transaction. On July 23, 1996, the City issue a Resolution rejecting the small cable operator certification on the grounds that: (1) Multivision as of the certification date was affiliated with and controlled by Century; (2) Multivision was obligated to sell to Century and Century controlled Multivision through the assets purchase agreement; and (3) Century manipulated the certification date and the closing date so that Multivision could seek certification of small cable operator relief. Therefore, the City concluded that Century was the actual beneficiary of the certification and did not, and does not, qualify as a small cable operator within the meaning of the Communications Act. 5. In its appeal Century argues that Multivision met the small cable requirements as of February 8, 1996, the effective date of the small cable amendment to the Communications Act, and disagrees that it had a cognizable ownership interest in the system prior to the closing on the APA on May 31, 1996. Century also states that the City erred in basing its decision on events occurring after February 8, 1996, because in its Resolution the City acknowledged that the transfer of Multivision's franchise to Century was not approved until February 27, 1996 and closing did not occur until May 31, 1996. 6. We are granting Century's appeal. Pending completion of the rulemaking in CS Docket 96- 85, an entity was deemed an affiliate of a small cable operator "if that entity has a 20% or greater equity interest in the operator (active or passive) or holds de jure or de facto control over the operator." Although the asset purchase agreement signed in 1994 gave Century the right to purchase the assets managed by Multivision, section 6.2(a) of the agreement clearly provides: "From the date of this agreement through the applicable Closing Date: (a) the Seller may terminate the services of Multivision as the manager of the System but the Seller shall continue to operate the business of the Systems in the ordinary course ....." Section 6.7 of the agreement further provides: "Between the dates of this agreement and the Closing, the Buyer shall not, directly or indirectly, control, supervise or direct, or attempt to control, supervise or direct, the operation of any of the Systems, but such operation shall be solely the responsibility of the Seller and, subject to the provisions of section 6.2, shall be in its complete discretion." Contrary to the City's finding in its Resolution, section 6.2(a) does not show that Century acquired control over Multivision before the closing. Nothing in the record contradicts Century's assertion that Multivision was in control of the cable system serving Anaheim until closing on the asset transfer and otherwise qualified for the small cable exemption. Therefore, Multivision was entitled to small cable treatment under section 623(m) of the Communications Act as of February 8, 1996, the date the exemption became effective. Unless Century also qualified for the exemption after it acquired the system assets, however, it could not keep Multivision's exemption. The Commission concluded in CS Docket No. 96-85 that the language of the Telecommunications Act of 1996 adopting the small cable exemption requires regulation to commence once an operator no longer qualifies for small cable treatment under the statutory criteria. The Commission provided for a transition to rate regulation once an operator lost eligibility for small cable treatment. We are remanding this matter to the City for further consideration consistent with this Memorandum Opinion and Order. 7. Accordingly, IT IS ORDERED that Century Communications Corp. Appeal of the City of Anaheim, California Resolution IS GRANTED and the case IS REMANDED to the City for further consideration consistent with the terms of this Memorandum Opinion and Order. 8. IT IS FURTHER ORDERED that the City's Request to Accept Late Filed Opposition IS GRANTED. 9. 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 Marjorie Reed Greene Associate Chief, Cable Services Bureau