************************************************************************** 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 Telecable ) ) v. ) CSB-A-0358 ) The City of Lincoln City, Oregon (CUID OR0359) ) 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 Telecable ("Falcon"), operator of a cable system serving the City of Lincoln City, Oregon, filed an appeal of the local rate order adopted by the City of Lincoln City, Oregon, ("the City") on September 9, 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 July 1, 1996 to establish a maximum permitted basic service tier ("BST") rate for the year commencing October 1, 1996, of $17.53, an increase of $0.77 from the existing rate of $16.76. Falcon complains that the City's rate order erred in two respects in its determination that the proposed $0.77 increase should be only $0.26, resulting in a $17.02 permitted rate. First, Falcon contends the City erred in correcting the inflation factor to be entered on Line C1 of the Form 1240 from 1.0296 to 1.006, which the City derived from the use of 2.39% as the inflation rate applicable to the three month (4/1/96 6/30/96) true-up period involved. Falcon conceeds that this is a proper correction for that true-up period, but fails to take into account unclaimed inflation for the nine month period July 1, 1995 through April 30, 1996. 8. Using the Commission's published inflation updates, Falcon calculated the proper inflation factor for the nine month unclaimed period as being 1.7075, which it then multiplied by the 1.006 true-up period (4/1/30 to 6/30/96) factor calculated on Worksheet 1 of Form 1240, and obtained 1.02318 as the correct inflation factor to be entered on Line C1 of the Form 1240. We find these calculations by Falcon to be consistent with the Instructions for Form 1240 associated with Line C1 and Worksheet 1 of that form. Falcon's petition contains no representation that the matter of unclaimed inflation on prior filed Forms 1210 was ever brought to the City's attention. Nor does the record before us establish that Falcon's prior Forms 1210 did not claim inflation for the period in question. However, we have previously visited this matter and determined that cable operators may include previously unclaimed inflation for the period after June 30, 1994 in the true-up adjustment performed on Form 1240, when such inflation has not been claimed on prior filed Forms 1210. Moreover, the City filed no opposition to Falcon's appeal. Therefore, we grant Falcon's petition with respect to this issue and remand this matter to the City with directions to allow Falcon to include any inflation unclaimed on prior Forms 1210 for the period July 1, 1995 to June 30, 1996. 9. Secondly, Falcon contends the City erred in correcting the inflation factor on Line C3 of the Form 1240 by substituting 1.0321 for the figure 1.0239. Falcon asserts that the 1.0239 figure is correct. Line C3, the inflation factor for the true-up period, here April 1, 1996 to June 30, 1996, calls for use of the published First Quarter Inflation Figure (2.39%) on Line 101 through Line 103 of Worksheet 1, which entries are summed and divided by twelve, to produce an average inflation factor of 1.006. This figure is then multiplied by the entry on Line C1 (1.02318), to produce 1.0293, which is entered on Line C3. Accordingly, we remand this issue to the City for further consideration consistent with this Memorandum Opinion and Order. X. Ordering clauses 11. For the foregoing reasons, IT IS HEREBY ORDERED, pursuant to authority delegated under Section 0.321 of the Commission's rules, that the captioned Petitions for Review of the September 9, 1996 local rate order of the City of Lincoln City, Oregon (CSB-A-0358) IS GRANTED AND REMANDED to the City for further consideration consistent with this Memorandum Opinion and Order. 12. IT IS FURTHER ORDERED that the City shall not enforce matters remanded for further consideration herein pending further action by the City on these matters. FEDERAL COMMUNICATIONS COMMISSSION William H. Johnson Deputy Chief, Cable Services Bureau