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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 ) ) C-TEC Cable Systems ) ) Final Resolution of ) Cable Programming Service ) Rate Complaints ) ORDER Adopted: March 26, 1999 Released: March 31, 1999 By the Commission: Commissioner Furchtgott-Roth dissenting and issuing a statement. I. INTRODUCTION 1. The Federal Communications Commission ("Commission") has before it a Resolution submitted by C-TEC Cable Systems ("C-TEC") that will resolve cable programming services tier ("CPST") rate complaints filed with the Commission between September 1, 1993 and January 31, 1998 against systems owned by C-TEC in New Jersey and New York. It also resolves all of C-TEC's appeals of any Commission decisions, including Bureau orders, which involve C-TEC's cable programming services tiers or C-TEC's requests for small system relief under the Telecommunications Act of 1996 and the Small Systems Order, for every C-TEC system in every State. For the reasons stated below, and based upon our review of the record, we find that the Resolution we adopt today serves the interests of C-TEC's subscribers by, among other things, bringing finality and stability to its cable programming service tier ("CPST") rates. We also believe that adoption of the Resolution is consistent with the Commission's responsibility under the Cable Television Consumer Protection and Competition Act of 1992 to ensure that consumers' interests are protected in the receipt of cable services and that regulated rates are not unreasonable. II. BACKGROUND 2. The 1992 Cable Act gave the Commission and local franchising authorities jurisdiction over the cable programming and equipment rates of cable systems that do not face effective competition, as defined by the Act. The 1992 Cable Act provides that local franchising authorities may regulate basic service tier ("BST") rates pursuant to guidelines established by the Commission and the Commission may regulate CPST rates upon the filing of a complaint. In enacting the legislation, Congress stated its intent that the 1992 Cable Act be implemented to ensure that "consumer interests are protected in the receipt of cable service." 3. In October 1997, C-TEC contacted Cable Services Bureau ("Bureau") staff expressing an interest in discussing a global resolution of rate complaints. Pursuant to 47 C.F.R. 1.1204(a)(10), the Bureau staff met with C-TEC to discuss the resolution of issues relating to complaints regarding the CPST rates charged by C-TEC. On July 15, 1998, the Commission adopted an Order instructing the Bureau staff to serve all complainants and relevant local franchising authorities with the Proposed Resolution. Copies of the Proposed Resolution along with the July 15, 1998 Order were mailed to all local franchising authorities that had filed complaints, all local franchising authorities where valid complaints against C-TEC had been filed, and to any party that filed a valid complaint other than local franchising authorities. A 30-day comment period was provided for the complainants to submit comments on the Proposed Resolution. Two comments were received in response to the Proposed Resolution. III. SUMMARY OF RATE RESOLUTION 4. At issue are 128 complaints filed against C-TEC covering the period September 1, 1993 through January 31, 1998. These complaints involve 34 communities and 80,000 CPST subscribers. The Resolution resolves all of the complaints against the systems owned by C-TEC New Jersey and C-TEC New York, including the appeals of two Bureau decisions in New Jersey (the "New Jersey Orders"). It also resolves all appeals filed by C-TEC including any applications for review, petitions for reconsideration or other appeals or petitions for special relief filed by C-TEC concerning its systems in New York, New Jersey and Michigan. It also resolves any appeals, pleadings or letters before the Commission or Bureau challenging the Bureau's orders denying C-TEC eligibility as a small system operator under the Small Systems Order or the 1996 Telecommunications Act. 5. Under the Resolution, C-TEC will provide a $5.00 refund to each eligible subscriber in the New Jersey communities and a $3.30 refund to each eligible subscriber in the New York communities in the form of a one-time credit on the subscriber's bill. Currently, there are approximately 70,000 subscribers in New Jersey and 10,000 subscribers in New York that would be entitled to this refund, resulting in a total refund amount of approximately $383,000. C-TEC will provide the refunds during the first monthly billing cycle beginning 60 days after the effective date of the Resolution. If refunds are not paid by the last day of that billing cycle, C-TEC will adjust the refunds to reflect additional interest for the period from the last day of the billing cycle to the date on which the refund is paid. 6. The Resolution will find that C-TEC New Jersey and C-TEC New York's current actual and maximum permitted rates for its CPST are reasonable as of January 31, 1998. C-TEC New Jersey and C-TEC New York may increase rates for the CPST after January 31, 1998 in accordance with Commission Rules. The Resolution allows C-TEC New Jersey and C-TEC New York to treat its Family Value Package as a new product tier in accordance with the Commission's Rules. 7. In addition to the refunds, C-TEC will withdraw all applications for review, petitions for reconsideration, petitions for special relief or petitions for stay of any Commission decisions, including Bureau orders or any other appeals, pleadings or letters before the Commission or Bureau challenging rulings by the Bureau concerning CPST rates, including those challenging the Bureau's orders denying C-TEC eligibility for small system relief. C-TEC will not seek treatment as a small system operator so long as it is controlled by its current owners. IV. DISCUSSION 8. As an initial matter, we find that the Commission has authority to approve the Resolution. The Communications Act of 1934 provides the Commission with wide discretion to resolve rate cases. Section 4(i) of the Communications Act authorizes the Commission to "perform any and all acts . . . not inconsistent with [the] Act, as may be necessary in the execution of its functions." Section 4(j) provides that the "Commission may conduct its proceedings in such manner as will best conduce to the proper dispatch of business and to the ends of justice. . . ." Our action in this case is fully consistent with the 1992 Cable Act and with Congress' dual objectives of simplifying cable rate regulation and protecting consumers. We have concluded in other recent proceedings that the Commission has authority to consider such resolutions and to determine, after appropriate review and consideration of comments, that rates set forth in the resolutions are not unreasonable. 9. The Bureau has previously denied C-TEC's requests for small system relief under the 1996 Act and the Small Systems Order. C-TEC argued in its appeals and in a petition for special relief that it was entitled to claim small system status and either be allowed to justify its rates using FCC Form 1230, the simplified cost of service form, or not be regulated at all. If granted small system relief, C-TEC would be entitled to use the FCC Form 1230, which allows a per channel rate of $1.24, a substantially higher rate than C-TEC is currently allowed under the Commission Rules. Because C-TEC agreed to withdraw its C-TEC Michigan appeals along with its C-TEC New Jersey and C-TEC New York appeals, in settlement of its C-TEC New Jersey and C-TEC New York complaints, the Resolution forecloses C-TEC from gaining status as a small system and using the higher rate. 10. In addition to denying C-TEC New Jersey's request for small system relief, the New Jersey Orders found that C-TEC's second CPST, its Family Value Pak ("FVP"), was a regulated tier. In its Going Forward Order the Commission reconsidered its regulatory treatment of a la carte offerings. The Commission determined that such packages are cable programming tiers within the meaning of Section 3(1)(2) of the 1992 Cable Act and therefore are subject to general rate regulation rules. The Commission established criteria for the creation of New Product Tiers ("NPTs"), which cannot include channels taken from regulated tiers. The Commission concluded, however, that cable operators may treat existing packages as NPTs, so long as such packages involve only a small number of migrated channels. When C-TEC created the a la carte tier on the eve of regulation, it moved seven channels from regulated tiers. Although C-TEC initially moved seven channels, two of those channels were removed from the FVP by April 1, 1994 at the request of the programmers. The Commission has found generally that the movement of six channels or less to an a la carte tier constitutes a small number of channels. It is just and fair to allow C-TEC New Jersey to treat its FVP as a new product tier beginning April 1, 1994. The Resolution will allow C-TEC New Jersey to treat its FVP as an NPT under the Going Forward Order. 11. The New Jersey Orders also found that C-TEC New Jersey was not entitled to offset its CPST overcharges against its basic service tier ("BST") undercharges. The Commission's jurisdiction to regulate cable rates is generally limited to the review of CPST rates. The Commission addressed this issue in Cencom Cable Income Partners ("Cencom"). In Cencom, the Commission determined that such inter-tier offsets are "inconsistent with the Commission's conclusion in the [Implementation of Sections of the Consumer Protection and Competition Act of 1992, Rate Regulation, MM Docket 92-266, Report and Order and Further Notice of Proposed Rulemaking] that cable operators should not balance low BST rates with CPST rates that exceed the maximum permitted rate for the tier." Although the Commission disallowed offsets across tiers in Cencom, it distinguished offsets in rate resolutions from offsets in individual rate proceedings. Unlike in this instance, in individual proceedings there are no procedures for soliciting local franchising authority comment on proposed offsets and the resulting rates. In the limited context of this Resolution, we are allowing inter-tier offsets. 12. Upon review of C-TEC's rate justifications, the Bureau found that C-TEC's maximum permitted rates for both its BST and CPST were reasonable. C-TEC demonstrated that the BST rates it charged in its New Jersey systems were, at times, lower than the maximum rates permitted under the Commission's regulations. In the Resolution, C-TEC's CPST overcharges (the potential refund amount) are reduced by the BST undercharges. Offsets have been computed on a system basis and only within the period covered by each rate filing and have not been allowed across time periods. These offsets reduce C-TEC's refund liability. 13. The Bureau has not previously issued any orders resolving the outstanding complaints in the three C-TEC New York communities. The three communities are part of the same system and the C-TEC New York methodology was similar to that used by C-TEC New Jersey. The Resolution will also allow C-TEC New York to treat its FVP as an NPT under the Going Forward Order. As with C-TEC New Jersey, upon review of C-TEC's rate justifications, the Bureau found that C-TEC's maximum permitted rates for both its BST and CPST were reasonable. However, the Bureau also found that C-TEC New York was overcharging for its CPST while undercharging for its BST. The Bureau computed C-TEC's refund liability with only a single regulated CPST and offset that liability with the BST undercharges. 14. Two written comments were received by the Commission, one from a local franchising authority and one from a subscriber. C-TEC filed Reply Comments on September 8, 1998. The State of New Jersey Board of Public Utilities' Office of Cable Television ("New Jersey") generally supported the Resolution but requested an explanation of how C-TEC's current rates could be found to be reasonable even though C- TEC was required to pay a refund of $5.00. In its Reply Comments, C-TEC responded that the refund liability was the result of an adjustment made by C-TEC to a rate justification filing which supported its 1995 basic service tier ("BST") rates, and which were reviewed by New Jersey. The nature of our CPST rate review process requires that we review CPST rates in segments, comparing the actual CPST rate charged during a particular period of time against the maximum rate permitted by the Commission's Rules which corresponds to that time period. In this instance, as in many other rate review cases, the CPST rate for a later period was justified by the operator's filings, whereas an earlier rate was not. C-TEC's adjustment reduced the BST undercharges which could be used to offset its CPST overcharges for that time period. 15. The other comment was received from Anand Shah, a subscriber who complains that the settlement amount of $5.00 is not adequate and would like an explanation of how we arrived at that figure. Upon review of C-TEC's rate justifications in accordance with the Commission's Rules, the Bureau found that C-TEC's maximum permitted rates for both its BST and CPST were reasonable. For a period of time, C-TEC was charging in excess of its maximum permitted rates for its CPST, but C-TEC was able to demonstrate that the BST rates it charged in its New Jersey systems were, at times, lower than the maximum rates permitted under the Commission's regulations. In the Resolution, C-TEC's CPST overcharges (the potential refund amount) are reduced by the BST undercharges. 16. The courts have long recognized that regulatory agencies have broad discretion to choose among ratemaking methods and procedures in ratemaking determinations, provided that the resulting rates are within a range of reasonableness. The process of adjudicating each of the rate complaints individually and litigating those rulings through the courts, a process likely to take several years, would not benefit subscribers, given that the Resolution provides for reasonable rates and refunds immediately. Administrative agencies are not precluded from modifying their approach to particular issues when circumstances warrant such action. Agencies may depart from prior decisions so long as they have a rational basis for doing so and explain their reasoning. We believe that the refunds required by the Resolution strike an appropriate balance between maximizing the compensation due subscribers for past overcharges and minimizing delay and uncertainty in the payment of refunds. 17. To the extent that adoption of the Resolution requires a waiver of any of our rules, we find that such waiver will ensure the expeditious resolution of rate complaints while protecting consumers' statutory interest in CPST rates that are not unreasonable. We recognize that our rules contemplate an adjudication of each CPST rate complaint pursuant to specific ratemaking standards. We do not see any indication that Section 623(c)(1)(B)'s requirement that the Commission establish rate resolution procedures by regulation was intended by Congress to preclude the Commission from waiving those rate resolution procedures in appropriate circumstances. Indeed, our rules expressly provide for the waiver of any provision of our rules for good cause shown. To the extent that we diverge from these rules by adopting this Resolution, we find good cause to waive these rules pursuant to Section 1.3 of our rules, because strict compliance with our rules would not serve the public interest under the circumstances before us. We find that a waiver furthers the purpose of the rules because the Resolution effectively achieves the objectives of the 1992 Cable Act by ensuring the expeditious resolution of all pending rate complaints regarding the affected systems while protecting consumers from unreasonable CPST rates through refunds. We further observe that the Commission's authority to resolve cases in an analogous manner has been affirmed in other contexts. 18. Because C-TEC intends to provide the refunds to affected customers as expeditiously as possible, it may not be possible for C-TEC to provide 30 days' notice of the refund as required. Accordingly, we believe that on a one-time basis, waiver of advance notification requirements, limited strictly to providing for refunds, are appropriate in this case because prompt implementation will serve the public interest and will allow refunds to be issued immediately. Accordingly, we will grant a one-time waiver of the advance notice provisions of Sections 76.309(c)(3)(i)(B) and 76.964 of the Commission's Rules, in order to allow C-TEC to implement the Resolution expeditiously. In addition, we believe that in the limited circumstances presented by this Resolution, state and local notice requirements would frustrate our effort. Thus, to facilitate rapid resolution of the complaints, we will preempt any local franchising agreement or any state or local law or regulation that requires C-TEC to give 30 days' notice of rates and service changes to subscribers, strictly for the purpose of issuing a credit to subscribers. Our decision in this regard, is provided on a one-time basis and only to the extent that C-TEC is required to give advance notice for the purpose of issuing credits to subscribers as provided in the Resolution. V. CONCLUSION AND ORDERING CLAUSES 19. For the reasons discussed above, we conclude that it is in the public interest to adopt the Resolution. 20. We further conclude that the actual CPST rates in the communities listed in Exhibits 1 and 2 as of January 31, 1998 are not unreasonable as of January 31, 1998. 21. ACCORDINGLY, FOR THE REASONS SET FORTH ABOVE, IT IS ORDERED that the Resolution attached to this Order IS ADOPTED. 22. IT IS FURTHER ORDERED that all CPST rate complaints against C-TEC in the communities listed in Exhibits 1 and 2 ARE GRANTED to the extent indicated herein, and DENIED in all other respects. 23. IT IS FURTHER ORDERED that all proceedings pending review before the Cable Services Bureau and the Commission with respect to rate complaints against the CPST rates of C-TEC as referenced herein, ARE RESOLVED TO THE EXTENT INDICATED HEREIN. 24. IT IS FURTHER ORDERED that any local franchising agreement or any state or local law or regulation that requires C-TEC to give more than 30 days' notice of rates and service changes to subscribers, strictly for the purpose of issuing a credit to subscribers in accordance with the Resolution, IS PREEMPTED. 25. IT IS FURTHER ORDERED that waivers of 47 C.F.R. 76.309(c)(3)(i)(B) and 76.964, requiring 30 days' notice of a rate or service change, strictly for the purpose of issuing credits to subscribers, ARE GRANTED. 26. IT IS FURTHER ORDERED that a waiver of 47 C.F.R. 76.922 and 76.950-76.963, to the extent individual adjudication of CPST rate complaints is required thereby, IS GRANTED. 27. IT IS FURTHER ORDERED that the Cable Services Bureau IS DELEGATED authority to oversee implementation of this Resolution. 28. IT IS FURTHER ORDERED that this Order is effective upon adoption. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary I. TERMS OF RESOLUTION I. Introduction 1. This Resolution finally resolves all cable programming services tier ("CPST") rate complaints pending as of January 31, 1998, against ComVideo Systems, Inc. and Home Link Communications of Princeton, L.P. (together, "C-TEC New Jersey"), C-TEC Cable Systems of New York, Inc. ("C-TEC New York") and all appeals filed by C-TEC of CPST rate complaints pending as of January 31, 1998 against C-TEC New Jersey, C-TEC New York and C-TEC Cable Systems of Michigan, Inc., Mercom, Inc., Allegan County Cablevision, River Raisin Cablevision, and Coldwater Cablevision (collectively, "C-TEC Michigan," and collectively with C-TEC New Jersey and C-TEC New York, "C-TEC"). II. Background 2. Complaints have been filed with the Federal Communications Commission ("Commission") pursuant to 47 C.F.R.  76.950, concerning the CPST rates charged by C-TEC in the franchise areas listed in Exhibits 1 and 2. Rate justifications were filed in response to such complaints. 3. The Commission's Cable Services Bureau ("Bureau"), under delegated authority, has reviewed C- TEC's rate justifications pursuant to the Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385, 106 Stat. 1460 (1992) ("1992 Cable Act"), and the Commission's cable rate regulations. As a result of that review, the Bureau has determined that certain refunds are owed to subscribers. 4. C-TEC and the Commission hereby resolve all of C-TEC's CPST rate cases for the franchise areas listed in Exhibits 1 and 2, that were pending as of January 31, 1998, and filed under FCC Forms 393, 1200, 1210 and 1240, under the terms set forth below. III. Definitions 5. As used herein, the following definitions will apply. When used throughout this document, these definitions are capitalized. (a) "Billing Cycle" means the time period during which monthly bills are sent to subscribers, but in no event longer than 31 days. (b) "Buyer" means a company not affiliated with C-TEC Cable Systems of Michigan, Inc., Mercom, Inc., River Raisin Cablevision, Allegan County Cablevision, Coldwater Cablevision, C-TEC Cable Systems of New York, Inc., Home Link Communications of Princeton, L.P. or ComVideo Systems, Inc., under the affiliation standard set forth in Section 76.501 of the Commission Rules. (c) "Commission Rules" means all Commission rules currently in effect as of January 31, 1998, as well as all subsequent clarifications, amendments, and additions thereto, including, but not limited to, changes initiated by the Commission or changes required by or made pursuant to changes in federal law. (d) "Current Rates" means the C-TEC New Jersey and C-TEC New York CPST rates in effect as of January 31, 1998. (e) "Effective Date" means the date on which the Commission adopts the Resolution Order approving this Resolution. (f) "Eligible Subscribers" means CPST subscribers of record to C-TEC's New Jersey or New York cable franchises listed in Exhibits 1 and 2 as of the date bills are issued reflecting Refunds. (g) "Interest" means the Internal Revenue Service rate of interest for tax underpayments. (h) "LFA" means the local franchising authority entitled to regulate CPST rates. (i) "Maximum Permitted Rates" means the maximum rates that may be charged for the CPST under the Commission Rules. (j) "Refund" means a credit on a subscriber's bill. (k) "Resolution Order" means a final order issued by the Commission regarding the terms of this Resolution. IV. Terms 6. C-TEC accepts the jurisdiction of the Commission over it and the subject matter of these rate resolutions for purposes of the Resolution Order approving these terms. 7. C-TEC's pending CPST rate cases for the franchise areas listed in Exhibits 1 and 2 filed under FCC Forms 393, 1200, 1210 and 1240 for the period through January 31, 1998, are finally resolved under the terms provided herein, including any Applications for Review, Petitions for Reconsideration, Petitions for Stay or other appeals. 8. C-TEC agrees that the terms contained in this Resolution are incorporated by reference in the Resolution Order. C-TEC and the Commission will each actively defend the Resolution Order against any appeal of, or other legal challenge to, the Resolution Order by any third party. C-TEC and the Commission will reasonably cooperate in any such defense of these terms. 9. C-TEC agrees that any violation of the Resolution Order approving these terms shall constitute a violation of a Commission order, entitling the Commission to exercise any rights and remedies attendant to the enforcement of a Commission order. 10. These terms are for purposes of settlement only, and do not constitute an admission by C-TEC of any violation of, or failure to conform to, the 1992 Cable Act, the Commission Rules, or any other applicable law, rule, or policy. C-TEC maintains that it has followed the letter and spirit of the Commission's cable rate regulations and the 1992 Cable Act in the rate justification filings, and that its CPST rates generally are within the maximum permitted levels. 11. The Commission will not institute, on its own motion, any proceedings against C-TEC based on the information obtained during consideration of the Resolution. In addition, in the absence of additional facts, any allegations and other circumstances involved in consideration of this Resolution will not be used against C-TEC with respect to any future proceeding. 12. In consideration for the resolution of C-TEC's CPST rate cases for the franchise areas listed in Exhibits 1 and 2, pending as of January 31, 1998, C-TEC hereby agrees to the following terms, conditions and procedures which will facilitate a fair and expeditious resolution of those matters in a manner that serves the public interest: (a) C-TEC will issue Refunds to Eligible Subscribers in the amount of $5.00 per Eligible Subscriber for the New Jersey communities listed in Exhibit 1 and $3.30 per Eligible Subscriber for the New York communities listed in Exhibit 2. Refunds will be reflected as a one-time credit on Eligible Subscribers' bills. (b) C-TEC will provide Refunds to Eligible Subscribers during the first monthly Billing Cycle beginning 60 days after the Effective Date (the last day of which Billing Cycle shall be called the "Refund Date"). If Refunds are not issued by the Refund Date, C-TEC will adjust the Refunds to reflect Interest from the Refund Date to the day before the date on which the issuance of Refunds begins. (c) The Current Rates and Maximum Permitted Rates for the communities listed in Exhibits 1 and 2 are deemed reasonable as of January 31, 1998. C-TEC New Jersey and C-TEC New York's Family Value Package will be treated as a new product tier as defined by the Commission Rules. (d) C-TEC New Jersey and C-TEC New York may adjust rates for the CPST after January 31, 1998 in accordance with the Commission Rules. (e) C-TEC withdraws all Petitions for Reconsideration, Applications for Review, Petitions for Special Relief, or Petitions for Stay of any Bureau orders regarding the communities listed in Exhibits 1 and 2 and the C-TEC Michigan communities, and any other appeals, pleadings or letters before the Commission or the Bureau challenging rulings by the Bureau concerning CPST rates or challenging the Bureau's orders denying C-TEC eligibility as a small system operator under the Commission Rules and the 1996 Telecommunications Act. (f) As of the Effective Date, any Bureau orders which concern C-TEC New Jersey's CPST rates through January 31, 1998, are vacated. This Resolution supersedes any such Bureau orders. Any Bureau orders which concern C-TEC Michigan's CPST rates are not vacated by this Resolution. (g) The terms of this Resolution will continue to apply to cable systems divested by C-TEC through a system sale or trade, except to the extent that the Buyer of a C-TEC system qualifies for small operator treatment under the Commission's Rules or the Telecommunications Act of 1996. During the time that the C-TEC Michigan communities are controlled by current owners, C-TEC shall not seek to qualify for treatment as a small system operator under current Commission Rules or the 1996 Telecommunications Act. (h) Except as provided in paragraph (j) hereof, these terms may not be terminated or modified without the mutual written agreement of C-TEC and the Commission. The Commission's consent to any such termination or modification shall be demonstrated by an order issued by the Bureau or, at the Commission's option, by the Commission itself. (i) Notwithstanding the terms hereof, C-TEC may avail itself of any applicable modifications of any law or regulation governing the CPST rates charged in any C-TEC franchise listed in Exhibits 1 and 2, including the adoption by the Commission of any regulation governing rates as applied to the cable industry generally. If C-TEC exercises this election, the terms contained herein shall be superseded upon the effective date of such law or regulation, except that C-TEC shall provide Refunds to Eligible Subscribers pursuant to the terms of this Resolution. Nothing herein shall restrict the ability of any C-TEC system to adjust its rates in the event such rates are not regulated for any reason, including changes to the Communications Act of 1934, as amended, or the Commission Rules. 13. The Resolution Order affirmatively states that any and all waivers of Commission Rules necessary to effectuate these terms are deemed to be granted. The Commission will not assert in any proceeding that C- TEC's compliance with the terms of the Resolution violates any Commission Rule or order, and, in any proceeding before the Commission brought by a third party, a showing by C-TEC that it has complied with these terms shall constitute a defense to any claim that C-TEC's actions in meeting the terms constitute a violation of any applicable Commission Rule or order. Notwithstanding the foregoing, nothing in this Resolution should be construed to preempt the authority of a local franchising authority to regulate the basic service tier and related equipment rates, consistent with the Commission's regulations and orders. This Resolution will not alter the effect of any future Commission order concerning commercial rate issues. 14. If any provision, clause, or part of this Resolution is invalidated, the remainder of this Resolution shall not be affected thereby and shall remain in effect; provided, however, that if such invalidation is material to this Resolution, C-TEC and the Commission (or the Bureau) shall attempt in good faith to reconstitute the Resolution in a form that is, to the maximum extent possible, consistent with the original intent of the Resolution. 15. Nothing in this Resolution shall be deemed to affect any C-TEC rate case other than the CPST rate cases resolved by this Resolution in the franchise areas referenced in Exhibits 1 and 2 and the appeals of C- TEC Michigan rate cases. EXHIBIT 1 C-TEC NEW JERSEY FRANCHISE NAME Community Unit ID # MPR 1/31/98 CPST Rate 1/31/98 PRINCETON BOROUGH NJ0481 $8.18 $7.95 PRINCETON TWP NJ0482 $8.18 $7.95 HILLSBOROUGH NJ0463 $10.95 $10.93 LEBANON NJ0491 $10.95 $10.93 CLINTON TWP NJ0492 $10.95 $10.93 READINGTON NJ0493 $10.95 $10.93 CLINTON TWP NJ0494 $10.95 $10.93 LONG HILL TWP (Passaic) NJ0495 $10.95 $10.93 BRANCHBURG NJ0504 $10.95 $10.93 BERNARDSVILLE NJ0505 $10.95 $10.93 FLEMINGTON NJ0506 $10.95 $10.93 RARITAN NJ0507 $10.95 $10.93 CHATHAM NJ0509 $10.95 $10.93 FRANKLIN NJ0510 $10.95 $10.93 MENDHAM BOROUGH NJ0546 $10.95 $10.93 PEAPACK-GLADSTONE NJ0547 $10.95 $10.93 MENDHAM TWP NJ0565 $10.95 $10.93 BEDMINSTER NJ0572 $10.95 $10.93 CHESTER BOROUGH NJ0573 $10.95 $10.93 CHESTER TWP NJ0574 $10.95 $10.93 TEWKSBURY NJ0575 $10.95 $10.93 MONTGOMERY NJ0576 $10.95 $10.93 ROCKY HILL NJ0577 $10.95 $10.93 HARDING NJ0583 $10.95 $10.93 EAST AMWELL NJ0586 $10.95 $10.93 FRANKLIN NJ0591 $10.95 $10.93 UNION TWP NJ0597 $10.95 $10.93 MILLSTONE NJ0601 $10.95 $10.93 BETHLEHEM TWP NJ0602 $10.95 $10.93 DELAWARE NJ0611 $10.95 $10.93 FAR HILLS NJ0616 $10.95 $10.93 EXHIBIT 2 C-TEC NEW YORK FRANCHISE NAME Community Unit ID # MPR 1/31/98 CPST Rate 1/31/98 TOWN OF PAWLING NY 1054 $12.66 $12.65 TOWN OF CARMEL (Mahopac) NY 1099 $12.66 $12.65 TOWN OF BEEKMAN NY 1454 $12.66 $12.65 Dissenting Statement of Commissioner Harold Furchtgott-Roth In the Matter of C-TEC Corporation, Final Resolution of Cable Programming Service Rate Complaints For the reasons that follow, I must respectfully dissent from this Order adopting a "resolution" of cable programming service tier ("CPST") rate complaints against C-TEC Corporation. First, I do not believe that the Commission possesses statutory authority to resolve CPST rate complaints by way of this sort of negotiated global settlement. It is true, as the Commission has observed in similar items, that section 4(i) of the Communications Act states that the Commission may "issue such orders, not inconsistent with this Act, as may be necessary in the execution of its functions," and that section 4(j) authorizes the Commission to "conduct its proceedings in such a manner as will best conduce to the proper dispatch of business and to the ends of justice." 47 U.S.C. sections 154(i)-(j). But the Communications Act includes another provision -- one that, unlike sections 4(i) and (j), speaks directly to the proper processing of CPST complaints. Unfortunately, the Commission fails to follow the dictates of this provision, which mandates that "the Commission shall, by regulation, establish . . . fair and expeditious procedures for the . . . resolution of complaints from any franchising authority . . . alleging that a rate for cable programming" is unreasonable. 47 U.S.C. section 623(c)(1)(B)(emphasis added). The simple fact, however, is that there are no Commission regulations that even arguably provide procedures for a negotiated settlement such as this; the requirements of this section therefore have not been met. Conversely, the regulations that the Commission has adopted to govern procedures for rate complaints, which, like the statute itself, generally contemplate individualized adjudication of complaints, see, e.g., id. section 623(c)(1)(A); 47 CFR section 76.957, have clearly not been observed here. The Commission's noncompliance with these regulations raises its own separate set of potential legal problems. See generally Service v. Dulles, 354 U.S.363, 388 (1957) (administrative agencies must follow their own regulations). In sum, given the existence of section 623, I simply do not understand how the use of this mechanism could comport with the Communications Act. Absent conformity with duly promulgated regulations providing for the use of this procedure, this resolution violates section 623. The existence of section 623 also renders inapposite the caselaw often cited by the Commission in support of its position that these global settlements are proper. To be sure, courts have held that agencies generally possess broad discretion to choose between administrative processes. But none of those cases involve, as here, an agency's failure to conform with statutorily-prescribed limitations on that discretion. Cf. Heckler v. Chaney, 470 U.S. 821, 833 (1985) (presumption against unreviewability of agency non-enforcement decisions rebutted where "the substantive statute has provided guidelines for the agency to follow"). Indeed, the decisions typically cited by the Commission are expressly premised on the lack of any statutory language precluding the agency's choice of processes. See, e.g., In re Permian Rate Basin Area Rate Cases, 390 U.S. 747, 797 (1968) (stating, in affirming the Federal Power Commission's two-price rate structure for regulation of gas prices, that "[w]e find no objection under the Natural Gas Act to this dual arrangement" and that "[n]othing in the purposes or history of the Act forbids the Commission to require different prices for different sales"). I understand the argument from utility for this sort of creative processing mechanism. If the Commission believes that rate "resolutions" are procedurally necessary, however, section 623 requires that we establish them by regulation, with notice and comment. Pragmatic considerations are undeniably important, but they cannot overcome the clear letter of the law. Our paramount duty is to implement the law as written by Congress and enacted by the President -- not based on our own conceptions of the most efficient and effective way to proceed. See Chevron v. Natural Resources Defense Council, 467 U.S. 837, 842-43 (1985) (where statutory language is clear, "that is the end of the matter," for the agency "must give effect to the unambiguously expressed intent of Congress"). Second, I do not believe that this Order satisfies the Commission's obligation under the Administrative Procedure Act to engage in reasoned decisionmaking. Cf. Koch Gateway Pipeline Co. v. FERC, 136 F.3d 810, 814 (D.C. Cir. 1998)("reasoned decisionmaking" requires "a process demonstrating the connection between the facts found and the choice made"). In this Order, there is no explanation as to how the Commission arrived at the refund amounts that it today mandates. There is no suggestion that any of the mandatory factors set out in the statute, see 47 USC section 623(c)(2)(A)-(F), or the objective criteria in our regulations, see 47 CFR section 76.922, for measuring the reasonableness of rates were either considered or applied. Why do New York subscribers receive a refund of $3.30, whereas New Jersey subscribers receive $5.00? Why do subscribers within a State, but in different franchise areas, receive an identical refund? Nothing in the Order accounts for the choice of the relevant dollar figures. Rather, the Order simply asserts that certain rates were in excess of maximum permitted rates but that the overcharges were offset by other, lower rates. This is not an explanation, just a conclusory statement. The Order provides no explanation of the findings upon which the conclusion is supposedly based:why the maximum permitted rates were reasonable under the Commission's rules; the amount of the overcharges (i.e., the "potential refund amount"); the period of time during which the overcharges occurred; the amount of the basic service tier undercharges; the period of time during which the undercharges occurred; or the difference between the over and undercharges. The Order also states that offsets were computed on a system basis. But there is no discussion of what the offsets for each system are and why, notwithstanding the asserted system-by-system computation, the refunds are uniform throughout States. In short, this Order does not provide a sufficiently reasoned or detailed explanation of the rate methodology employed by the Commission. This lack of explanation as to methodology, as well as the uniformity of the refunds across franchise areas, causes me to suspect that the number at which the Commission and the cable operator have arrived has little do with actual rate analysis but more to do with simple horse-trading. And due to this lack of explanation of the methodology or factors employed to calculate the refund, there is no way for the local franchise authority or the subscriber who requested an explanation of the basis for the refunds to know whether they have been given a fair deal or even what the terms of that deal are, much less for a court to review the rationality of the refund determination. Third, I am deeply concerned that the actual complainants were not party to the negotiations that produced this "resolution." As I have made clear in other contexts, I believe that it is most unseemly, if not illegal, when regulated entities and regulators go behind closed doors to hammer out settlements. See, e.g., Third Order on Reconsideration, Revision of Universal Service Collection Amounts for 1998, FCC No. 97- 411 (Dec. 16, 1997). I realize that the complainants are now being given a chance to comment on the final agreement reached by the Commission and the cable company, but this participation comes at the eleventh hour, after the essential terms of the resolution have already been finalized as between the company and the Commission. It is true that the local franchising authorities and other complainants were not deprived of any participation they would have been afforded in a traditional cable rate adjudication. But that is not the point: under a traditional proceeding, municipalities may not have been able to participate beyond the point of submitting their complaint, but neither would the cable operator have been able to participate beyond the point of submitting their response. The problem is not that the complainants did not get additional participation per se but that the cable operator was afforded greater participation rights than they were. Whether or not this amounts to a violation of our ex parte rules, a process in which the heart of the negotiations are conducted without the participation of the complainants themselves is just not a fair process. Finally, in the context of these rate resolutions, the Commission has often purported to bind even those complaining parties who vigorously object to the terms of the resolution. It is a fundamental, however, that settlements require the consent, whether on an opt-in or opt-out basis, of all the parties in interest. If, in response to this order, franchising authorities or other complainants object to its terms and conditions, I have difficulty seeing how, as a matter of black letter settlement law, they could be bound by this "resolution." I appreciate that these "resolutions" are efficient in that they dispose of large numbers of complaints in one fell swoop. The Commission saves itself a lot of time-consuming work, and the cable operator saves itself a lot of regulatory headaches and uncertainty. But it is the municipalities and the ratepayers they represent, who were not a party to the negotiations that produced this resolution, that seem to be getting the short end of this regulatory stick. However convenient global rate resolutions might be for the Commission and for cable companies, they do not appear to be within the bounds of governing law. The policies of "finality" and "stability" cannot overcome the provisions of the Communications Act, black-letter contract law, or the "reasoned decisionmaking" requirement of the Administrative Procedure Act. I therefore cannot sanction the use of this procedure or the resultant Order. * * * In closing, I observe that the administrative burdens that drove the Commission to employ this creative but unlawful method of resolving consumer complaints are the sorry and inevitable by-product of rate regulation itself. The better method for avoiding the administrative disaster that would be occasioned by individualized adjudication of these backlogged complaints is simply to abolish rate regulation. That is, in part, precisely what Congress wisely recognized when it mandated that CPST regulation cease after March 31, 1999. Fortunately, that time has now come.