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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 ) ) Comcast Cablevision of Paducah, Inc. ) CUID No. IL0470 (City of Metropolis) ) ) Complaint Regarding ) Cable Programming Services Tier ) Rate Increase ) ORDER Adopted: March 4, 1998 Released: March 9, 1998 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider a complaint against the July 1, 1997 rate increase that the above-captioned operator ("Operator") implemented for its cable programming services tier ("CPST") in the community referenced above. We also consider a complaint against Operator's "Value Pak Tier" rate increase, effective July 1, 1997. Operator has attempted to justify its CPST rate increase through a benchmark showing on FCC Form 1240. This is the first complaint ever filed against Operator's CPST rates in the community referenced above. Consequently, this Order addresses only the reasonableness of Operator's July 1, 1997 CPST rate increase. 2. The Communications Act authorizes the Federal Communications Commission ("Commission") to review the CPST rates of cable systems not subject to effective competition to ensure that rates charged are not unreasonable. If the Commission finds the rate unreasonable, it shall determine the correct rate and any refund liability. The Telecommunications Act of 1996 ("1996 Act"), and our rules, require that complaints against CPST rates be filed with the Commission by a franchising authority that has received subscriber complaints. A franchising authority may not file a CPST rate complaint unless, within 90 days after such increase becomes effective, it receives more than one subscriber complaint. 3. Cable operators attempting to justify their rates for the period beginning May 15, 1994 using a benchmark showing must complete and file the FCC Form 1200 series. Cable operators may also justify rate increases based on the addition and deletion of channels, changes in certain external costs, and inflation, by filing FCC Form 1210. FCC Form 1210 must be filed at least 30 days before new rates are scheduled to go into effect where the Commission has found the cable programming service rate to be unreasonable less than one year prior to the filing, or where there is a pending complaint against the CPST rate. 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. 4. On December 16, 1997, the local franchising authority ("LFA") filed its complaints against Operator's July 1, 1997 CPST and Value Pak Tier rate increases. In its complaints, the LFA asserts that it has received more than one subscriber complaint against Operator's rate increases, thereby triggering the Commission's jurisdiction to review the complaints. We have already determined that Operator's Value Pak Tier is to be treated as a new product tier ("NPT") and is therefore not currently subject to CPST rate regulation. Therefore, we will dismiss the LFA's complaint against Operator's Value Pak Tier rate increase. However, the valid complaint against Operator's CPST rates from the LFA triggers an obligation on behalf of the cable operator to file a justification of its CPST rates with the LFA. Thus, in this case, Operator is required to justify the increase in its CPST rate which is the subject of the LFA's complaint. Operator filed FCC Form 1240 with the LFA as justification for this rate increase. 5. Upon review of Operator's FCC Form 1240, for the projected period July 1, 1997 to June 30, 1998, we find that Operator has incorrectly calculated its unclaimed inflation on Module C, Line C2. The FCC Form 1240 instructions for Line C2 (Unclaimed Inflation: Unregulated Operator Responding to Rate Complaint) instruct Operator to "enter an inflation factor appropriate for the amount of inflation experienced by your system's non-external costs for which you have not already made rate increases but wish to include in the rate." The instructions direct Operator to use "the examples from the instructions for Line C1 as guidelines to assist in calculating this number." The instructions for Line C1 instruct Operator to "use the methodology described in Worksheet 1 and apply it to your period of unclaimed inflation." The Worksheet 1 instructions require Operator to "[a]dd up all of the figures [for the time period being claimed] and divide them by 12." Operator has not followed these instructions in calculating its inflation factor. Rather, on its Supplement to Form 1240, Operator added together the inflation figures for eight months of unclaimed inflation, from November 1, 1996 through June 30, 1997, and then divided the sum of those figures by nine. Therefore, we revised Operator's calculations by dividing the sum of the inflation figures by twelve. This revision adjusted Line C2 to 1.0142. In addition, we revised Line C5 (Current FCC Inflation Factor). In total, our adjustments to Operator's FCC Form 1240 result in a reduction of the maximum permitted rate ("MPR") for the Projected Period to $18.95. Despite our adjustments, we find that Operator has justified a CPST rate of $18.58, effective July 1, 1997. 6. Accordingly, IT IS ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321 that Operator's CPST rate of $18.58, effective July 1, 1997, in the community set forth above, IS REASONABLE. 7. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321, that the complaint referenced herein against the CPST rate charged by Operator in the community set forth above IS DENIED. 8. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321, that the complaint referenced herein against the Value Pak Tier rate charged by Operator in the community set forth above IS DISMISSED. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau