************************************************************************** NOTICE ********************************* *********************** This document was converted from WordPerfect or Word 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 or Word version or Adobe Acrobat version, if available. Before the Federal Communications Commission Washington, D. C. 20554 In the Matter of: ) ) Falcon Community Ventures I ) ) v. ) CSB-A-0365 ) The City of Roseburg, Oregon (CUID OR0124 ) Local Rate Order Appeal ) MEMORANDUM OPINION AND ORDER Adopted: November 30, 1999 Released: December 2, 1999 By the Deputy Chief, Cable Services Bureau: I. introduction 1. Falcon Community Ventures I ("Falcon"), operator of a cable system serving the City of Roseburg, Oregon, filed an appeal of the local rate order adopted by the City of Roseburg, Oregon, ("the City") on October 28, 1996. No response to the appeal has been received from the City. II. background 3. 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 will remand the issue to the franchising authority with instructions to resolve the case consistent with the Commission decision on appeal. 4. 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. 5. Cable operators may justify adjustments to 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. If actual and projected costs are different during the rate year, a "true-up" mechanism is available to correct estimated costs with actual cost changes. VI. discussion and analysis 7. Falcon submitted an FCC Form 1240 to the City on August 28, 1996 to establish a maximum permitted basic service tier ("BST") rate of $23.40, an increase of $2.35 from the existing rate of $21.05. Falcon complains that the City's rate order contains no explanation, other than a finding that Falcon used a wrong inflation rate, for its refusal to allow any increase in the BST rate. Falcon asserts that the City refused to permit any increase in Falcon's BST rate. Falcon notes that the City's consultant recommended a BST rate of $22.43, an increase of $1.38, based on a recommended adjustment to an inflation factor used by Falcon in the Form 1240. Falcon contends the failure of the City's order to provide an explanation of the refusal to allow any rate increase makes the order invalid. 8. The City's order describes the history of the proceeding, lists the filings submitted by Falcon, summarizes the procedural steps taken and information requests made in response to those filings, and describes the proposed changes in rates proposed by Falcon. Further, the order finds that "Falcon calculated its proposed rate increase using an excessively high inflation rate instead of the appropriate inflation rate of 2.39 percent, resulting in a proposed rate and a maximum permitted rate in excess of rates that would have been correct." Without further explanation, the City's order states, "Falcon Community Ventures I is ordered to not implement any change in Falcon's previously approved monthly rate for basic cable services of $21.05 per month . " 9. We find that the City's rate order provides no explanation why Falcon's proposed BST rate of $23.40 is based on an excessive inflation rate or why denying any adjustment to the previously approved BST rate of $21.05 is reasonable. The City's rate order is therefore inconsistent with our requirements that a local rate authority must provide a written decision affirmatively demonstrating why the cable operator's proposed rates are unreasonable and why permitted rates are reasonable. In the Rate Order, the Commission stated: "[w]e will thus require that a franchising authority issue a written decision to the public and give public notice of such decision whenever it disapproves, in whole or in part, either initial rates for the basic service tier and accompanying equipment, or a request for an increase in those rates, or approves a proposed rate over the objections of interested parties." In several subsequent decisions, the Bureau held that Commission rules require local franchising authorities to issue written decisions, and that those decisions must affirmatively demonstrate why an operator's proposed rates are unreasonable. Since it appears from the record below that the City's rate order does not comport with our rules in providing the required explanations of its rate determinations, this rate order is remanded for further proceedings consistent with this order. X. ordering clauses 11. 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 Roseburg, Oregon, (CSB-A-0365), filed by Falcon Community Ventures I on November 27, 1996, IS GRANTED and Resolution 96-18 adopted by the City of Roseburg, Oregon on October 28, 1996 IS REMANDED for further consideration consistent with this Memorandum Opinion and Order. 12. IT IS FURTHER ORDERED that the City of Roseburg, Oregon shall not enforce Resolution 96-18 pending further action by the City on these matters. FEDERAL COMMUNICATIONS COMMISSION William H. Johnson Deputy Chief, Cable Services Bureau