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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 ) ) Cencom Cable Income ) Partners II, L.P. ) CUID No. TX0061 (Jasper, TX) ) Benchmark Filing to Support ) Cable Programming Service Price ) MEMORANDUM OPINION AND ORDER Adopted: October 8, 1997 Released: October 14, 1997 By the Commission: Commissioner Quello Concurring in the Result. 1. Before the Commission is a petition for reconsideration of the Commission's Order in Cencom Cable Income Partners II, L.P. ("Cencom Order") filed by Cencom Cable Income Partners II, L.P. ("Cencom"). In the Cencom Order, the Commission substantially affirmed the action by the Cable Services Bureau in Cencom Cable Income Partners II, L.P., Memorandum Opinion and Order ("Bureau Order") and ordered that Cencom refund overcharges collected from subscribers to its cable programming services tier ("CPST") from November 16, 1993 through May 14, 1994. We are denying Cencom's petition for reconsideration of the Cencom Order. 2. Section 1.106 of the Commission's rules governs petitions for reconsideration. Section 1.106(b)(2) provides that, where the Commission has previously denied an application for review, the Commission will entertain a petition for reconsideration only if: (1) the petition relies on facts which relate to events that have occurred or circumstances that have changed since the petitioner's last opportunity to present such matters; or (2) the petition relies on facts unknown to the petitioner until after his last opportunity to present such matters which could not, through ordinary diligence, have been learned prior to such opportunity. 3. Cencom previously applied for review of the Bureau Order in which the Bureau found that Cencom had not justified its CPST rate. The Bureau recalculated Cencom's maximum permitted CPST rate and ordered refunds of the overcharge amount. In recalculating Cencom's maximum permitted rate, the Bureau corrected errors in the inflation information Cencom used in its inflation calculation in Form 393, the form for calculating initial regulated rates with the benchmark methodology, and the Bureau "refreshed" the inflation figure with the most accurate data from the U.S. Department of Commerce Gross National Product Price Index ("GNP-PI"). Cencom argued in its application for review that the Commission should not refresh inflation data and also argued that it should allow the operator to offset alleged undercharges for its basic service tier against the CPST refunds it owed. Cencom also argued that it should be allowed to take advantage of the inflation adjustment allowed by the Commission for a longer period of time than it had claimed in its rate form. 4. In the Cencom Order, the Commission agreed that, although Cencom had not claimed the longer period for the inflation adjustment, it could have done so. The Commission recalculated Cencom's rate with this adjustment. The Commission rejected Cencom's arguments against Bureau use of refreshed inflation data. The Commission explained that determining an operator's initial regulated rate as accurately as possible when an operator's actual rate is not justified by the operator's calculation is neither unlawful nor contrary to Commission policy, is not inconsistent with instructions given operators on rate forms, and is not inconsistent with the Commission's stated intention not to penalize operators for good faith efforts to restructure rates when rate regulation became effective. Cencom's arguments in its petition for reconsideration repeat its earlier arguments without alleging new or newly discovered facts or changed circumstances that would warrant further review. 5. In the Cencom Order, the Commission also rejected Cencom's argument that it should be allowed to take offsets in order to reduce its CPST refund liability. Cencom had charged CPST subscribers for one more channel than it delivered to them and used the higher channel count in its rate calculation. Because the total number of channels delivered by a cable system is one of the variables affecting the per channel maximum permitted rate determined by the benchmark methodology, the higher channel count Cencom used in its rate calculation resulted in a slightly lower permitted rate on a per channel basis than Cencom could have used in setting its rates. Cencom claimed that it could have charged basic service tier ("BST") subscribers a higher per channel rate, and therefore a higher tier rate, if it had used the correct channel count in the first instance. It sought to use this BST "undercharge" to offset its CPST overcharge. The Commission explained that the Communications Act sets up a dual regulatory structure for cable services, giving local franchising authorities jurisdiction to regulate BST and associated equipment rates and the Commission jurisdiction to regulate CPST upon the filing of a valid complaint. The Commission also explained that allowing inter-tier offsets would create practical problems in determining the correct CPST rates for offset purposes and would be discordant with the dual regulatory structure established by Congress. The Commission stated that the precedents cited by Cencom addressed offsets within the BST but did not support offsets between tiers that are subject to review by different regulatory authorities. 6. In its petition for reconsideration, Cencom takes issue with the Commission's reasoning. According to Cencom, the Commission has jurisdiction over BST rates. Also according to Cencom, there is no administrative impediment to calculating net refunds because offsets do not require a review of BST rates, only a review of the data on the Form 393 filed with the Commission in response to a CPST rate complaint. Cencom's arguments do not allege new or newly discovered facts or changed circumstances as required by  1.106(b)(2). In addition, Cencom's arguments substantively are without merit. The Cable Television Consumer Protection and Competition Act of 1992 established a regulatory structure based on federal guidelines, but it placed jurisdiction to determine BST rates and associated equipment basket charges with the local franchising authority. The Commission sets guidelines for BST regulation and hears appeals of local rate orders involving interpretation of these guidelines, but it does not set or review BST rates in the first instance unless a franchising authority's certification has been denied or revoked or the franchising authority asks the Commission to assume jurisdiction until it becomes certified. If the Commission reverses a local franchising authority's decision, it will not substitute its own decision, but will remand the matter to the franchising authority. 7. Cencom argues that the Commission need not set or review BST rates when allowing offsets because the Form 393 filed with the Commission includes sufficient information for calculating a permitted BST rate. However, if a local franchising authority assumes jurisdiction over an operator's BST rate at a different point in time, the permitted BST rate it determines may differ somewhat from that which might be calculated at the time of the CPST rate justification because of intervening changes in inflation or other costs. Offsets may have been used at the local level pursuant to  76.942 of the Commission's rules in determining net refunds for BST and equipment and installation costs. Local rates may have changed during the period under consideration. Local review may be in a different status than the Commission's review. None of this information is required in the CPST rate justification filed with the Commission, but it is relevant to determining refund offsets across tiers. Cencom argues that local franchising authorities see the CPST rate justifications filed with the Commission, but nothing in the Commission's rules or procedures would alert a franchising authority that BST rate issues are relevant to the Commission's CPST review. An inter-tier offset without either a determination of the BST rates used in computing the offset or an opportunity for local franchising authorities to address the offset issue would not assure subscribers of accurate offset amounts and reasonable refunds. 8. Cencom also argues that consideration of administrative burden was rejected in Time Warner Entertainment Co., L.P. v. FCC. The court reviewed the Commission's decision not to allow cable operators to adjust their September 30, 1992 rates for external costs incurred between September 30, 1992 and the date rates became subject to regulation at the federal or local level, the "gap period." The court rejected the Commission's argument that the burden of dealing with gap period external costs justified its decision. In that case, the Commission had acknowledged that allowing these costs would make rates more accurate, and the documentation needed would not differ from the documentation used to review external costs after the gap period. The offsets requested in the instant case do not affect the accuracy of the CPST rates. The Commission has no mechanism for collecting information about local rate proceedings outside of the process for hearing appeals of local rate orders, and it has no need for such information. 9. Cencom argues in its Petition for Reconsideration that the staff worksheet used to recompute the maximum permitted CPST rate for the Cencom Order was not placed in the public file before the deadline for filing its petition. Although Cencom is correct about the delay, the Cencom Order thoroughly discussed the adjustments made in calculating Cencom's maximum permitted CPST rate and did not rely on the staff worksheet to explain its action. No rule requires that staff worksheets be placed in the public file. However, to avoid any prejudice to Cencom, Cencom was offered the opportunity to supplement its petition in light of the staff worksheet. It did not do so. No further Commission response is warranted. 10. ACCORDINGLY, IT IS ORDERED, pursuant to section 1.106 of the Commission's rules, 47 C.F.R.  1.106, that the Petition for Reconsideration of the Commission's Order in Cencom Cable Income Partners II, L.P., FCC 97-205, 12 FCC Rcd 7948 (1997), filed by Cencom Cable Income Partners II, L.P. IS DENIED. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary