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A. 1. a.(1)(a) i) a)T,0*ÍÍ,*Í ., US!!!! ! #:}D4P XP##u\4 PXP#     X` hp x (#%'0*,.8135@8:<     #:}D4P XP# ,0*ÍÍ,*Í ., US!!!! ! #:}D4P XP##:}D4PXP#2 i para numnumbered indented paragraphs' Y- 1.(i) 1) 1.#Xw P7[hXP# 1. 1.ҲStyle 14Swiss 8 Pt Without Margins$$D Co> PfQ  )a [ PfQO Style 12Dutch Italics 11.5$$F )^ `> XifQ  )a [ PfQO Style 11Initial Codes for Advanced IIJ )a [ PfQK  dddn  #  [ X` hp x (#%'b, 2*l"|Style 3oDutch Roman 11.5 with Margins/Tabs )a [ PfQO  ddn  # c0*b, oT9 !Style 4 PSwiss 8 Point with MarginsDq Co> PfQ  dddd  #  Style 1.5Dutch Roman 11.5 Font4h )a [ PfQO  dddn Style 2Dutch Italic 11.5$ )^ `> XifQ 2C\<Style 5Dutch Bold 18 Point$RH$L T~> pfQ_  )a [ PfQO Style 7Swiss 11.5$$V )ao> PfQ ]  )a [ PfQO Style 6Dutch Roman 14 Point$$N w [ PfQ   )a [ PfQO Style 10oInitial Codes for Advanced U )a [ PfQK  dddn  ##  [[ b, oT9 !b, oT9 !n )^ `> XifQ ` Advanced Legal WordPerfect Learning Guide   f )^ `> XifQ Advanced Legal WordPerfect Learning Guide   Q" )^ `> XifQ    Copyright  Portola Systems, Inc. 1987, 1988`6 >Page  QN~ )^ `> XifQ    Page ` Copyright  Portola Systems, Inc. 1987, 1988 2(/u|$K)\+Style 8PfInitial Codes for Beginninggi )a [ PfQK  dddn  # X` hp x (#%'b, oT9  [ &e )^ `> XifQ ` Beginning Legal WordPerfect Learning Guide   d )^ `> XifQ Beginning Legal WordPerfect Learning Guide   jH )^ `> XifQ    Copyright  Portola Systems, Inc. 1987, 1988`6 >Page  j )^ `> XifQ    Page ` Copyright  Portola Systems, Inc. 1987, 1988 Style 9Initial Codes for Intermediate )a [ PfQK  dddn  # X` hp x (#%'b, oT9 Њ [ e )^ `> XifQ ` Intermediate Legal WordPerfect Learning Guide  "i~'^:DpddȨDDDdp4D48ddddddddddDDpppd|Ld|pȐD8DtdDdpXpXDdp8Dp8pdppXLDpdddXP,PhD4htDDD4DDDDDDdDp8dddddȐXXXXXJ8J8J8J8pddddppppddpddddzpdddXXhXXXXXdddhdptL8LpLDLpphhp8ZDP8pppddƐXXXpLpLpLphfDtppppppȐhXXXpDppLDd4ddC6CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxHjdDddddddand the number of regulated channels that it expects to occur during the 12 months following the rate   change. In addition to calculating a prospective rate, an operator adjusts, or "trues up," the previous year's  S- xrate to correct for differences between actual and projected costs.z` yO,"- x,#X\  P6G;ɒP##X\  P6G;ɒP#эImplementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate  {O"-Regulation, Thirteenth Order on Reconsideration, 11 FCC Rcd 388, 420422 (1995) ("Thirteenth Reconsideration").z Pursuant to these trueup calculations,  x[an operator must decrease its projected rates for overestimations and may increase its projected rates for underestimations.  S@- ` x8.` ` When an operator files a Form 1240, it must also file a Form 1205. Pursuant to the 1992   Cable Act, the Commission has established standards for setting, based on actual costs, the rates for",8)8)``b"  S- xinstallation and lease of equipment used by subscribers to receive the basic service tier.` yOh- x#X\  P6G;ɒP#эCommunications Act of 1934, as amended,  623(b)(3), 47 U.S.C.  543 (b)(3) ("Communications Act of 1934"). Equipment rates  xLare derived from total capital and maintenance costs per unit of equipment. Installation rates are derived  xfrom a calculation of an hourly service charge and an application of that charge to different types of  S- xinstallations. ` yOH- x#X\  P6G;ɒP#эTo calculate the hourly service charge ("HSC"), an operator adds its expenses for equipment necessary for the  xmaintenance of customer equipment and for the installation of basic tier service to its annual capital costs, excluding  xthe capital costs of customer equipment. The operator then divides the total by the total number of personhours  xspent in those activities over the past year. The HSC is used as a factor in developing charges for installation and  {Oh -monthly lease of individual pieces of equipment. See Form 1205 at 14. Regulated equipment is the equipment located in a subscriber's home, provided and  S`- xmaintained by the operator, that is used to receive the basic service tier.h`` yO -#X\  P6G;ɒP#э47 C.F.R.  76.923(a).h It includes converter boxes,   remote control units, and inside wiring. As the use of one form for cable service and another for  xequipment suggests, a cable operator must unbundle charges for equipment, installation, and additional  S- x1outlets from each other and from charges for the BST.hb ` yO-#X\  P6G;ɒP#э47 C.F.R.  76.923(b).h An operator also must use a specific  S- xmethodology for determining the actual cost of each piece of equipment and installation.z ` {OR-#X\  P6G;ɒP#эSee 47 C.F.R.  76.923(d)-(m).z Under this  xmethodology, an operator establishes an equipment basket that includes all direct and indirect material and  Sp- xlabor costs of providing, leasing, installing, repairing, and servicing customer equipment.hp ` yO-#X\  P6G;ɒP#э47 C.F.R.  76.923(c).h The equipment   zbasket does not include general overhead, such as marketing expenses, but it does include a reasonable profit.  S -  S - ` x9.` ` The Commission has expressed its intention that an operator recover the full, actual cost  S - xZof equipment. ` {O\-#X\  P6G;ɒP#эThirteenth Reconsideration, 11 FCC Rcd at 425; Third Reconsideration, 9 FCC Rcd at 4372. An operator, therefore, must base its proposed annual customer equipment and installation  xrate adjustments on past costs, because it is more difficult to project reasonably certain and reasonably  SX-  quantifiable changes in equipment and installation costs.X` {O-#X\  P6G;ɒP#эThirteenth Reconsideration, 11 FCC Rcd at 393394, 424. The use of actual, past costs in Form 1205 contrasts with the use of estimated costs in Form 1240.  S- %C  III.XxDISCUSSION(#  S-  S- XX(P XxA.X` ` FORM 1205 EQUIPMENT AND INSTALLATION RATES (#`  S@-XxX` ` 1.X Capitalization of Converter Costs (#  S- ` x 10.` ` Two parts of Form 1205, Schedules B and C, are particularly relevant to TCI's appeals.  x[Schedule B reflects the annual operating expenses for service, installation, and maintenance of equipment"8,8)8)``3"  x[and plant. Schedule C reflects the annual capital costs of equipment leased to customers. In its 199697   KRate Order, the City rejected TCI's capitalization of certain "overhead" costs associated with its converters.  xjSpecifically, the City argued that TCI improperly included $20 on Schedule C of its Form 1205 for three  xitems: the labor costs of installing and retrieving converters, the costs of managing converter inventory,  xzand the material costs of converters. The City contends that there is no regulatory support for adding  x\"overhead" to converter costs, and, in any case, it appeared that TCI had already taken the costs into  S- xaccount on Schedule B. TCI responds that it has not previously included the $20 on Schedule B, and that   LCommission rules allow it to recover "incidental" costs. TCI states that if it can not include the $20, the  xconverter charge will not reflect actual costs. TCI acknowledges that an operator may not recover general  S-overhead, but insists that it may collect "indirect" equipmentrelated costs.  SH - ` nx 11.` ` The Commission's rule defining the "equipment basket" states that the basket shall include  xzall "direct and indirect material and labor costs of providing, leasing, installing, repairing, and servicing  S -  0customer equipment."o ` {O` -#X\  P6G;ɒP#эSee 47 C.F.R.  76.923.o Pursuant to the 1992 Cable Act, material and labor costs included in the  S - xequipment basket must be recoverable by the operator.^ Z` {O- x#X\  P6G;ɒP#эSee Communications Act of 1934, as amended,  623(b), 47 U.S.C.  543(b). Section 623(b)(3) of the  {O- xCommunications Act requires that rates for equipment and installation reflect their actual costs. See also First  {O^-Reconsideration, 9 FCC Rcd at 11901201. The labor costs of installing and retrieving  xyconverters, the costs of managing the converter inventory, and the material costs of converters are clearly  S - xrelated to providing and installing equipment, and are properly classified as part of the equipment basket.O ` {O- x#X\  P6G;ɒP#эTCI of Seattle, Inc., 13 FCC Rcd 5103, 5106 (Cab. Serv. Bur. 1998) ("Seattle"); Heritage Cablevision, Inc.  {Oj-d/b/a TCI of Central Iowa, 11 FCC Rcd 10542, 10545 (Cab. Serv. Bur. 1996) ("Heritage").O Under the circumstances indicated by the record in this case, however, TCI may not recover these costs.  S-   12.` ` First, TCI does not adequately justify treating the labor costs of installing and retrieving  xconverters as capital costs, rather than expenses, and including them on Schedule C. Including these costs  xon Schedule C, which is used only to "compute the annual capital costs of equipment leased to customers,"  S- xis inconsistent with the Commission's rules.` {O -#X\  P6G;ɒP##X\  P6G;ɒP#эSee FCC Form 1205 at 12.#X\  P6G;ɒP#ѻ TCI does not clearly distinguish these labor costs from the  xoperating expenses and labor costs that are ordinarily included on Schedule B. Instead, TCI argues that  xit should include these costs on Schedule C because it has not listed them elsewhere in Form 1205. The   Form 1205 instructions specifically provide that operators include "all annual operating expenses ... for  S- xinstallation and maintenance of all cable facilities" on Schedule B.n ` yO -#X\  P6G;ɒP##X\  P6G;ɒP#эForm 1205 at 11. Moreover, the instructions for  xcompleting Schedule B expressly refer to operating expenses incurred to maintain and install customer  S- xequipment.  ` {O>$-#X\  P6G;ɒP##X\  P6G;ɒP#эId#X\  P6G;ɒP#; see also Seattle, 13 FCC Rcd at 5106. The Form 1205 instructions indicate that TCI should include the labor costs of installing  xyand retrieving converters on Schedule B rather than on Schedule C. Such costs are included in installation charges or in the maintenance element of the equipment lease charges.  %C " ,8)8)``z"Ԍ S- ` ~x 13.1%C` `  14.1` ` Second, TCI has not refuted the City's claim that the inventory management costs have  x already been accounted for in Schedule B. An operator may capitalize and include on Schedule C its  x.inventory costs that are incidental to equipment purchase costs and that it incurred before providing the  xequipment to subscribers. It may not account for them twice, however. Pursuant to Sections 76.923(f)   and (g) of the Commission's rules, capitalized equipment charges include the "acquisition price and  xincidental costs such as sales tax, financing, and storage up to the time [the converter] is provided to the  S- xjcustomer.{!` {Ox-#X\  P6G;ɒP#эSee 47 C.F.R.  76.923(f), (g).{ This list is not exhaustive.v"Z` {O -#X\  P6G;ɒP#эSeattle, 13 FCC Rcd at 51065107.v The capitalization allowance conforms with generally accepted  xaccounting principles ("GAAP"), which state that it is proper to capitalize costs incurred in storing or  S- xLhandling goods before they are sold.s#(` {OL - x-#X\  P6G;ɒP##X\  P6G;ɒP#эSee Heritage, 11 FCC Rcd at 10546; TCI Cablevision of Arcadia/Sierra Madre, 11 FCC Rcd 10557, 10561 {O - x10562 (Cab. Serv. Bur. 1996) ("Arcadia"). Operators must adhere to GAAP. See FCC Form 1205 at 3. It is not  {O - xJproper to capitalize the costs of reinventorying converters after retrieving them from subscribers. Seattle, 13 FCC  {O-Rcd at 51065107; Arcadia, 11 FCC Rcd at 10561. s Yet TCI has not taken this position. Significantly, TCI has failed  x]to refute the City's claim that the inventory management costs have already been accounted for in Schedule B.  S - ` Rx 14.` ` Third, TCI has not supported capitalizing certain material costs associated with its  S - xconverters (i.e., cable jumpers, fittings, etc.). Materials and supplies associated with equipment  S - x installations may be capitalized, but an operator must establish a separate charge for them,$ ` {ON-#X\  P6G;ɒP#эForm 1240 Instructions at 12 (Instructions for Schedule C); Arcadia, 11 FCC Rcd at 10557. and the  S - xmaterials cannot be part of the operator's network equipment .% n ` {O- x#X\  P6G;ɒP#эArcadia, 11 FCC Rcd at 10561. Network equipment includes equipment and materials not utilized inside a subscriber's home. When an operator has capitalized material   and supplies as part of the converter cost, it is proper to include the costs on Schedule C and recover them  xLin the converter lease charge. Alternatively, when an operator expenses incidental material and supplies,  x/it may include the costs on Schedule B and recover them in installation charges or in the maintenance  xelement of the appropriate lease charge. The accounting treatment, under GAAP, would determine which  S- xjschedule an operator uses.& ` {OJ-#X\  P6G;ɒP#эSee Seattle, 13 FCC Rcd at 5107. If Schedule C is appropriate, the accounting rules determine the asset group  S- xin which it is included.l'Z ` {O -#X\  P6G;ɒP#эSee FCC Form 1205 at 3.l If an operator capitalizes certain converter installation materials and supplies   in the converter account, it would be proper to report the costs on Schedule C for converters. It is unclear  xkfrom the record in this case, however, where TCI has recorded the materials and supplies in question.  xIt appears that the costs involved either are not capitalized or have been capitalized in accounts for  xLequipment for which TCI has not established a separate regulated charge. In either case, we find nothing  xin the record to demonstrate that they may be included with the converter costs on Schedule C and,"',8)8)``4"  S- xtherefore, find that the City did not act unreasonably in denying capitalization.(` {Oh- x#X\  P6G;ɒP#эIn Arcadia, which TCI cites, the local operator claimed that it could capitalize labor, inventory, and material  xcosts that were very similar to the costs at issue here. The Cable Services Bureau remanded the case for further  {O- xconsideration of the City's ruling on the inventory and material costs issues. The LFA in Arcadia had not questioned  xTCI's calculations, but rejected them for erroneous reasons. In this case, as noted, TCI has not adequately demonstrated why the $20 should be included on Schedule C. TCI's appeal on this issue is denied.  S- Xx X` ` 2.X Unfunded Deferred Taxes (#  S8- ` Px15.` ` Form 1205 requires an operator to reduce its ratebase by the amount of any deferred taxes  S- xit accrues from the accelerated depreciation of equipment.)|` {O, - x#X\  P6G;ɒP#эSee Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992:  xRate Regulation and Adoption of a Uniform Accounting System for Provision of Regulated Cable Service, Second  xReport and Order, First Order on Reconsideration, and Further Notice of Proposed Rulemaking, 11 FCC Rcd 2220,  {O- xh2248 (1996) ("COS Order"); FCC Form 1205 Instructions for Determining Costs of Regulated Cable Equipment and Installation, p.7, Line D (June 1996) ("Form 1205 Instructions"). Deferred income taxes represent the tax   benefit enjoyed by regulated entities that depreciate rate base assets on an accelerated basis for tax  xpurposes, but that establish rates based on the regulatory presumption that rate base assets are depreciated  xon a straightline basis. Straightline depreciation results in a longer depreciation schedule than does an  xaccelerated depreciation method. Initially, when rates are calculated using straightline depreciation, the  x]presumed tax liability for regulatory purposes exceeds the actual tax liability that results from the  S - xoperator's use of accelerated depreciation for tax purposes.* 0 ` yO- xY#X\  P6G;ɒP#эAccelerated depreciation, as compared to the straightline method, produces a higher expense amount to offset against revenues, which reduces the operator's tax liability.  Eventually, the operator's use of a shorter   kdepreciation schedule for tax purposes than for regulatory purposes will have the reverse effect. The  x>initial "savings" that results from the use of a shorter depreciation schedule for tax purposes than for  S -regulatory purposes is referred to as deferred taxes, because the tax liability is deferred to a later date.}+ ` {O-#X\  P6G;ɒP#эSee COS Order, 11 FCC Rcd at 2248.}  SX- ` x16.` ` Cable rates are calculated as if the operator were subject to the tax liability that would  S0- x=result from the use of a straightline depreciation schedule.X,0` S-ԍ#X\  P6G;ɒP#Id.X As a result, the operator using straightline   asset depreciation for regulatory purposes and accelerated depreciation for tax purposes receives revenues  xfrom subscribers today for an income tax liability that it will not incur until a later date. In the early  xyears, this difference in depreciation methodologies will result in an overcollection of revenues that the  xoperator needs to pay its current tax liability. These excess revenues are viewed as subscriberprovided  Sh- xfunds, which are available to the operator at no cost to fund the future payment of its deferred taxes.- h` yO$- x;#X\  P6G;ɒP#эThe operator does not pay interest to subscribers to obtain and use the funds. In later years, when the deferred  xtax effect has been reversed and actual tax liability exceeds regulatory tax liability, rates calculated using the  xregulatory depreciation schedule will not be sufficient to fund the tax liability that results from a shorter depreciation schedule for tax purposes.   S@- xThe Form 1205 addresses the overrecovery of revenues by requiring operators to deduct deferred tax"@-,8)8)``r"  S-  /balances from the equipment rate base.w.` {Oh-#X\  P6G;ɒP#эSee COS Order, 11 FCC Rcd at 2248.w Consequently, rates are reduced by an amount equal to the  S- xdeferred taxes multiplied by the rate of return on the rate base. The requirement to reduce the rate base  xLby the deferred tax balance is premised on the assumption that the operator has included the tax expense  S- x.in its rates even though the amount was not payable to taxing authorities./(Z` {O- x[#X\  P6G;ɒP##X\  P6G;ɒP#эTCI TKR of Houston, Inc., 11 FCC Rcd 20929, 20932 (Cab. Serv. Bur. 1996) ("TCI TKR of Houston"),  {OL- xKpetition for reconsideration denied TCI TKR of Houston, Inc., 1998 WL 274803, DA 981021 (Cab. Serv. Bur.  {O- xh1998), application for review filed July 1, 1998; TCI Cablevision of St. Louis, Inc., 12 FCC Rcd 15287, 15295 (Cab.  {O-Serv. Bur. 1997), petition for reconsideration pending ("TCI of St. Louis"). In these instances, since the  x-operator has use of these "no cost funds" provided by the ratepayer, an adjustment is made to the rate base  S8-for an appropriate reduction to the revenue requirement.X08J` {O" -#X\  P6G;ɒP#эId.X  S- ` Qx17.` ` In its 199697 Appeal, TCI states that it complied with the Form 1205 requirement to  S- xreduce its initial equipment rate by its existing deferred taxes.e1` yO<-#X\  P6G;ɒP#э199697 Appeal at 38.e According to TCI, the dispute in this case  xconcerns allegedly "unfunded" deferred taxes that it accrued before cable rate regulation began in 1993.  x>TCI claims that its existing deferred tax balance is unfunded because, before rate regulation, it did not  xcollect any excess revenue from subscribers to fund the future payment of deferred taxes. Instead, TCI   states that it collected only the money needed to pay its actual tax liability at the time. TCI's socalled  x0unfunded deferred tax balance represents the difference between TCI's actual tax liability prior to  xregulation, which it recovered from subscribers, and the operator's hypothetical regulatory tax liability during the same period, which purportedly it did not seek to recover from subscribers.  SX- ` x18.` ` TCI argues that, until recently, the Commission did not allow operators to recover their   junfunded, preregulatory deferred taxes. Because the Commission provided no guidance, TCI states that  S- x[it has treated the unfunded balance as an asset and amortized it.`2l ` {O-#X\  P6G;ɒP#эId. at 56.` This amortization is reflected in TCI's  xpast and present Form 1205 equipment filings. In its Rate Order, the City rejected this accounting method  xas unauthorized under Commission rules, and, in its 199697 Opposition, asserts that TCI may not apply  S- xits own ratesetting theories if they conflict with the Commission's methods.3 ` {O.-#X\  P6G;ɒP##X\  P6G;ɒP#э199697 Opposition at 610; 199697 Rate Order at 2, citing TCI TKR#X\  P6G;ɒP# of Houston, 11 FCC Rcd at 20929. TCI contends that requiring  xit to restate its initial rate base would be administratively difficult, particularly after several years of   Mamortizing its unfunded deferred tax balance, and could leave it with unrecoverable lost revenue and a  S-sizeable refund exposure.k4 ` yOH#-#X\  P6G;ɒP#э199697 Appeal at 67.k  S- `  x19.` ` Initially, the Commission required operators to reduce the regulated rate base by the total  xdeferred taxes associated with the rate base investment. Subsequently, it modified that rule to require the  xreduction of the rate base by deferred taxes accrued only since the date the operator became subject to rate"x 4,8)8)``"  S-  regulation.z5` {Oh-#X\  P6G;ɒP#эSee COS Order, 11 FCC Rcd at 224748.z Stating that the deduction it first required was "premised on the regulatory presumption that  xrates reflect the operator's use of straightline depreciation," the Commission concluded that the  S- xpresumption could not have existed in the absence of rate regulation.a6Z` {O-#X\  P6G;ɒP#эId. at 2248.a Accordingly, it modified the  xapproach to require operators to deduct deferred taxes from rate base only to the extent the deferred taxes  x0were accrued and became payable after the operator became subject to rate regulation. Under the  S8- xLmodified approach, we have permitted operators to deduct their preregulation deferred tax balance from  S-  their current deferred tax balance before they deduct deferred taxes from the rate base.7` {O -#X\  P6G;ɒP#эSee TCI TKR of Houston, 11 FCC Rcd at 20932; TCI of St. Louis, 12 FCC Rcd at 1529596. This results in  xa smaller deduction to the rate base and, correspondingly, larger revenues. As noted, because the operator  xymay earn a return on those revenues until it actually incurs the tax liability, the Commission requires that  S-this amount, the deferred tax liability, be deducted from the ratebase to preclude a double recovery.u8~` {O-#X\  P6G;ɒP#эCOS Order, 11 FCC Rcd at 2248. u  SH - ` x20.` ` An operator may apply this modified approach only in rate filings subsequent to the   keffective date of the modification in 1996. Furthermore, an operator may not be compensated for the  xdifference between its actual costs recoveries and those it would have derived if the modified methodology  xapplied from the beginning of the current regulatory regime. Although superficially appealing, such an  xapproach overlooks a crucial factor. As a consequence of the unbundling methodologies reflected in  xForms 393 and 1200, used to establish benchmark rates, any perceived shortfalls in an operator's recovery  xof its equipment costs were equally offset by overages derived from its regulated services tier revenues.   An operator has already been made whole for any of the previous costs and may not recover them a  S- x\second time. An operator's regulated revenue in the aggregate would have been identical under either  xapplication of the deferred tax formulae. The Commission's initial treatment of deferred taxes was  xconsistent with generally accepted accounting principles, particularly with FASB Number 96, and was not,  xtherefore, in error. The Commission's subsequent decision to modify its treatment of deferred taxes  x[without revisiting the initial unbundling was of economic benefit to cable operators, but such action does not confer any right to benefit from this decision retroactively or after the onset of regulation.  S- `  %C Ԋ %C x21.` ` The City applied our rules correctly and, therefore, ruled reasonably when it rejected TCI's  S- xattempt to recover deferred taxes as an amortized expense.9 {Oz-#X\  P6G;ɒP#ЍSee COS Order, 11 FCC Rcd at 2248; TCI TKR of Houston, 11 FCC Rcd at 20930; see also 47 C.F.R.  76.922(i)(7). Our rules do not provide the remedy TCI  xseeks. The local rate appeal process is not the forum for TCI to seek modification of our rules. In  xaddition, TCI's depreciation practices and rate design methods prior to rate regulation were matters within   LTCI's control and discretion. It allocated its costs and determined what to collect from subscribers. The  xtreatment TCI seeks for the allegedly unfunded deferred tax liability would allow it to recover for future  x\tax liability without adjusting its rate base. On this record, we find that TCI has neither sustained its  S- x<burden of demonstrating the reasonableness of its rates on this pointh:j  yO&-#X\  P6G;ɒP#э47 C.F.R.  76.937(a).h nor demonstrated that the City acted" :,8)8)``L"  S- xinconsistently with the Commission's rules.; yOh-#X\  P6G;ɒP##X\  P6G;ɒP#э47 C.F.R.  76.944(a). TCI's appeal on this issue is denied.  S- XxX` ` 3.X Aggregation of Equipment and Installation Costs (#  S8- ` }x22.` ` The Commission's rules before the Telecommunications Act of 1996 ("1996 Act") allowed  xLcable operators to aggregate costs on a franchise, system, regional, or company level, consistent with the  S- xoperator's accounting practices in effect when the Commission adopted its rate regulations in April 1993.<\X yO - x#X\  P6G;ɒP#эTelecommunications Act of 1996, Pub. L. No. 104104, 100 Stat. 56,  301(j), codified at 47 U.S.C.   {O - x0543(a)(7); see also 47 C.F.R.  76.923(c); In the Matter of Implementation of Section 301(j) of the  {Or -Telecommunications Act of 1996, 11 FCC Rcd 6778, 6786 (1996) ("Equipment Aggregation Order").   /The 1996 Act eliminated the restriction on changes in an operator's accounting practices, allowing an  xoperator to change the level at which it aggregates its costs. The 1996 Act also allows operators to  xaggregate costs into broad categories, such as converter boxes, regardless of the varying levels of  SH - xfunctionality of equipment within each category.=H | yOd- x#X\  P6G;ɒP#эCongress intended to promote the development of a broadband, twoway telecommunications infrastructure,  {O,- xhreduce the cost of advance technology for consumers, and stimulate the deployment of digital technology. See H.R.  {O-Rep. 204, 104th Cong., 1st Sess. at 107; see also Conf. Rep. 104230, 104th cong. 2d Sess. at 167.   xIn 47 C.F.R.  76.923(a), the Commission recognizes three broad categories of equipment: converter boxes, remote control units, and inside wiring. The operator can include additional categories at its option. The costs of customer equipment used by subscribers  xtaking only the basic service tier may not be included in the aggregation. The 1996 Act did not change the requirement that the cable operator's rates must be based on actual cost.  S - ` x23.` ` A cable operator submitting aggregated equipment costs "must provide a general  xdescription of the averaging methodology employed and a justification that its averaging methodology  SX- x[produces reasonable equipment rates."k>X0  yO(-#X\  P6G;ɒP#э47 C.F.R.  76.923(c)(1).k The operator must aggregate installation costs at the same level  x\it aggregates equipment costs, and also make a showing of its methodology and that the methodology  S- x[produces reasonable rates when submitting installation costs based on average charges.?  {Oh-#X\  P6G;ɒP#эEquipment Aggregation Order, 11 FCC Rcd at 6786; 47 C.F.R.  76.923(c)(3). Equipment and  S-installation rates must be set at the same organizational level at which an operator aggregates its costs.@R  yO-#X\  P6G;ɒP##X\  P6G;ɒP#э47 C.F.R.  76.923(c)(1), (3).  S- ` x24.` ` In both 1997 and 1998, TCI sought to determine companywide equipment and installation  xcosts by sampling 40 of its more than 430 cable systems, and it developed companywide rates from these  S@- x.sampled costs.OA@ {O$- x#X\  P6G;ɒP#э199899 Rate Order at 2; 199798 Rate Order at 2; see also 199899 Appeal at 26; 199899 Opposition at 12 yO%-18; 199899 Reply at 59; 199798 Appeal at 69; 199798 Opposition at 1015; 199798 Reply at 23.O The City rejected TCI's rates and, in its 199798 and 199899 Rate Orders, prescribed  xthe rates earlier prescribed in its 199697 Rate Order. The City does not argue with the concept of rate   .aggregation, but contends that TCI has failed to sufficiently demonstrate how its sampling methodology  xworked, whether it was used properly, and if the "costs" produced under this approach justified the rates" <A,8)8)``$"  xLproposed for Richardson. According to the City, TCI persisted in hiding probative information, despite  xseveral requests for further explanation. The City claims it could not make an independent determination  xjof whether TCI's rates were reasonable and, therefore, could only turn to TCI's 199697 equipment rates  x/for guidance. The City was also concerned about the magnitude of the HSC rate increases each year.   LIn Executive Summaries, the City's staff characterizes these increases as 64% the first year and a total of  S8-95% over two years.B8 yO-#X\  P6G;ɒP#э199788 Appeal, Attach. C at 3; 199899 Appeal, Attach. B at 3.  S- ` x25.` ` TCI asks that we reject these rate orders. In its Appeals, the operator argues that it  xprovided prompt and detailed responses to the City's requests for additional information, and specifically  S- xZnotes a professionallyprepared explanation of its sampling methodology.C"X {O - x#X\  P6G;ɒP#эSee Statistical Analysis Report, Sampling Plan and Estimates for FCC Form 1205, prepared by Robert C.  xYHannum, Ph.D (February 20, 1998) (Attachment D of 199899 Appeal); Statistical Analysis Report, Sampling Plan  xiand Estimates for FCC Form 1205, prepared by Robert C. Hannum, Ph.D (February 21, 1997) (Attachment F of  yO -199798 Appeal). TCI argues that the City's Rate   Order lacks a rational basis, because the City cannot simply discard TCI's national rates in favor of earlier  xklocal rates computed from local data. TCI also states that the City may not reject the proposed rates  xsimply because they are significantly higher than previous rates. Ultimately, TCI charges, the City failed  xto identify specifically what proof was lacking, and has established a burden of proof so high that TCI can never prove that its cost aggregation and resulting rates are reasonable.  S -  B26.` ` The Commission's rules allows a cable operator to collect or gather cost information at  xthe level of its choosing, and requires that the operator set prices at the same level at which it aggregates  S0- xits costs.D0B yO-#X\  P6G;ɒP##X\  P6G;ɒP#э47 C.F.R.  76.923(c). TCI seeks to set prices at the company level, but it has not shown that it collects or gathers  xcost data at that level. Indeed, its reliance on a statistical sample rather than actual cost information  xzsuggests that it does not aggregate cost data at the company level. TCI has invited the City to review  xcosts for the sampled systems, but this is not a substitute for aggregating costs under Sections 76.923(c)(1) and (3), and making that aggregated cost information available for meaningful review.  S@- ` x27.` ` An operator must demonstrate, as part of its justification, a reasonable premise of how it  xhas aggregated costs at the level it has chosen. An operator must make this demonstration whether it uses  xLa sampling approach or actual data. In the record before us, TCI has not provided sufficient information  xfor determining whether its national sampling is accurate. It has not demonstrated that its proposed   aggregation average accurately reflects actual cost data. Nor has TCI identified what costs it aggregated so that the City can better understand how TCI computed the averages used to determine rates.  S(- ` x28.` ` Although TCI offered to make the costs of some sampled systems available to the City,  xasking the City to select a system or systems to review, it has not submitted sufficient information to  S- xassure the City that the cost experience or costing methodology it used represents a fair determination   across its systems. Commission rules do not place the burden of determining the costs for the sampled  xsystems on the City. The City has no way of ascertaining the kinds of costs that went into the TCI's  xsampling average. If the City reviews only one sampled system, as it did for TCI's Baton Rouge system,  xit can not be confident that it has identified the kinds of costs TCI is recovering in its rates. For example,  x<the Baton Rouge costs included a new dispatch system not used in Richardson. An operator must not only" D,8)8)``!"  xkprovide support for the methodology used, but must demonstrate that the methodology is capable of accurately reflecting proper cost aggregation.  S- ` 3x29.` ` TCI also has not met its burden of justifying how its averaging methodology produces  xreasonable equipment and installation rates. Although, as TCI argues, increases over past rates do not  xmake rates unreasonable, increases of the magnitude of the Richardson installation rate increases raise a  xquestion. In its notice soliciting comments on equipment cost aggregation, the Commission tentatively   concluded that equipment charges would not vary significantly between systems, although installation  xcharges would vary because of local labor cost variations. In its 1996 comments advocating the  xaggregation of installation costs, TCI assured the Commission that using its then highest hourly service  xcharge ("HSC") of $34 and lowest HSC of $16 to calculate a uniform HSC at the company level would  xonly change converter prices an average of plus or minus $0.10 and increase the rate of an initial  S -installation by approximately $4.50, at most.E  {O -#X\  P6G;ɒP#эSee Equipment Aggregation Order, 11 FCC Rcd at 67876788.  S - ` Qx30.` ` TCI's sampling methodology has produced very different results in Richardson. TCI's  xjRichardson HSC has gone from $19.30 in its 199697 rates (before the downward adjustment ordered by  S - xthe City) to $30.18 in its 199798 rates to $35.90 in its 199899 rates.F Z yOz-#X\  P6G;ɒP#э199697 Appeal, Attach. A at 2; 199798 Appeal, Attach. A at 2; 199899 Appeal, Attach. A at 3. Its charge for installation in an  xunwired home has increased from $28.96 (before the downward adjustment ordered by the City) to $47.30  x{to $53.16. Before a cable operator can meet the reasonableness requirement, it must show that its  S-  averaging methodology produces rates that are revenue neutral to the operatorG {O-#X\  P6G;ɒP#эSee Equipment Aggregation Order, 11 FCC Rcd at 67876788. and accounts for any large  x?variances in cost characteristics among its systems. It also must show that the included costs are  x>permissible and properly treated in Form 1205. TCI has not done so in this case and has not met its  xburden of justifying its equipment and installation rates. The City did not act unreasonably when rejecting  xTCI's equipment and installation rates and prescribing rates based on the best available information. TCI's appeals on this issue are denied.  S-  S-xB. ` ` FORM 1240 BASIC SERVICE RATES  S-XxX` ` 1.X External Cost Treatment of Franchise Requirements (#  SP- ` x31.` ` Under Commission rules, cable operators may pass through the costs of some franchise  S(-  jrequirements to their subscribers as external costs.H(| yOD!-#X\  P6G;ɒP##X\  P6G;ɒP#э47 C.F.R.  76.922(f), 76.925. When determining which franchise requirements are  xrecoverable as external costs, the Commission asks whether they are specifically enumerated in the  S- xjfranchise agreement,IZ  yO$- x#X\  P6G;ɒP#эIn the Matter of Implementation of Sections of the Cable Television Consumer Protection and Competition  xyAct of 1992: Rate Regulation, First Order on Reconsideration, Second Report and Order, and Third Notice of  {O&-Proposed Rulemaking, 9 FCC Rcd 1164, 1168 (1993) ("First Reconsideration"). and whether they produce costs that an operator would not have incurred without" . I,8)8)``="  S- xLa franchise requirement.J {Oh-#X\  P6G;ɒP#эThirteenth Reconsideration, 11 FCC Rcd at 441; First Reconsideration, 9 FCC Rcd at 1217. The Commission has declined to extend external cost treatment to all possible  S- xcircumstances.KZ {O-#X\  P6G;ɒP#эSee First Reconsideration, 9 FCC Rcd at 1211. For example, the mere presence of a franchise requirement does not automatically result  S- xin a right to recover its cost as an external cost.L^ {O<- xi#X\  P6G;ɒP#эThirteenth Reconsideration, 11 FCC Rcd at 442; First Reconsideration, 9 FCC Rcd at 1168. Paragraph 4 of  {O- xthe First Reconsideration reads, in relevant part: "only costs of meeting franchise requirements specifically  {O-enumerated in the franchise agreements will be eligible for external cost treatment" (emphasis added). Also, a cable operator's control over the cost of a  S-  franchise requirement is not an exclusive criterion for granting external cost treatment.M {O: -#X\  P6G;ɒP#эFirst Reconsideration, 9 FCC Rcd at 1211. The Commission  xjhas outlined some specific situations where franchise requirements are and are not recoverable as external  S8- xcosts. For example, upgrades and rebuilds, even if mandatory, are not recoverable as franchise costs.cN8 {O|- x#X\  P6G;ɒP#эThirteenth Reconsideration, 11 FCC Rcd at 442; Second Reconsideration, 9 FCC Rcd at 424041, n.340; First  {OF-Reconsideration, 9 FCC Rcd at 1216; Rate Order, 8 FCC Rcd at 57915792, n.608.c  xIn contrast, consistent with the Commission's rules governing external costs, an operator may pass through  xincreases in the costs of meeting technical and customer service standards, to the extent they exceed  xfederal standards; removing aerial facilities from poles and placing them underground; providing video,   voice, and data transmission to or from governmental and educational institutions; and providing PEG  Sp-access channels and programming.Op  yO-#X\  P6G;ɒP##X\  P6G;ɒP#э47 C.F.R.  76.925(a).  S - ` x32.` ` In its three Form 1240 rate filings, TCI included in its rates an incremental increase in  xypayments to the City's community access fund that occurred after TCI became subject to rate regulation.  xyTCI contributes to the community access fund under a franchise agreement that predates rate regulation.   /In the fifth year of the franchise, TCI's annual obligation rose from $100,000 to $125,000, and in the  S - xtwelfth year it will rise to $150,000.xP  {O-#X\  P6G;ɒP#эSee 199697 Appeal at Attachment C.x TCI has sought to recover the additional $25,000. TCI argues that  SX- xit may recover the cost increase under the Commission's Thirteenth Reconsideration, which states that  xincreased franchise costs eligible for "pass through" to subscribers "include both new requirements that  S - xthe franchising authority imposes and increases in the costs of complying with existing requirements."Q " {O-#X\  P6G;ɒP#э199798 Appeal at 4, citing Thirteenth Reconsideration, 11 FCC Rcd at 388.  x=The City counters that the increases in costs are part of the original franchise agreement and are not new  S-  Lto TCI.R yO#-#X\  P6G;ɒP#э199697 Rate Order, consultant's report at 3; 199798 Rate Order, consultant's report at 3. The City cites the Cable Services Bureau's decision in Falcon Cablevision, where the operator  S- xsought to pass through the costs of a prerate regulation franchise requirement to its subscribers.SD {Ox%-#X\  P6G;ɒP#эFalcon Cablevision, 11 FCC Rcd 9840 (Cab. Serv. Bur. 1996) ("Falcon Cablevision"). In that  Sl- xdecision, the Bureau upheld the LFA's decision to deny recovery, stating that "costs associated with an"l S,8)8)``"  S- xjobligation incurred prior to [rate regulation] should not be accorded passthrough treatment."aT {Oh-#X\  P6G;ɒP#эId. at 9847.a The City  xcontends that TCI should have included the entire costs of the community access payment in its  xbenchmark rate both the original $100,000 and the $25,000 incremental increase and asserts that TCI  S-  has failed to prove that the costs were not included.fUZ yO-#X\  P6G;ɒP#э19978 Opposition at 5.f TCI acknowledges that it agreed to the access  xsupport obligation before rate regulation, but insists that it had not incurred the incremental increases when  S8-regulation began and did not include them in the original rate base.{V8 yO -#X\  P6G;ɒP#э199697 Appeal at 23; 199899 Reply at 35.{  S- ` x 33.` ` TCI may recover the incremental increases in its community access fund obligation. The  S-Thirteenth Reconsideration is controlling:  ` *XxX` ` [O]perators should be permitted to include increases in franchise  ` requirement costs that the operator would not have incurred in the  S" - ` absence of the franchise requirement. Such increases include both new  ` requirements that the franchise authority imposes and increases in the  S -costs of complying with existing requirements.W z {O-#X\  P6G;ɒP#эThirteenth Reconsideration, 11 FCC Rcd at 441.x`  x=The City argues that an operator may not recover the costs of franchise requirements that existed before  SZ- xrate regulation began., and cites Falcon Cablevision and the Commission's Rate Order for support. The  S4- xRate Order prohibits external cost treatment of preregulation changes in costs, but it does not address  S- xchanges in those costs after rate regulation begins. Falcon Cablevision offers no additional support to the  xjCity's arguments. In that case, the operator sought to pass through the total amortized cost of a prerate  S-  regulation requirement, not merely an increase in costs, in order to avoid existing rate caps.|X  {Ol-#X\  P6G;ɒP#эFalcon Cablevision, 11 FCC Rcd at 9847.| In this case,  xTCI is not seeking to pass through, for the first time, any of the "base" community access payment of  x$100,000. Instead, it is seeking to recover only the recent incremental increase of $25,000 in its annual  x\payment. In an analogous situation, the Commission has stated that increases in state and local taxes  S -applicable to cable service are external costs that an operator may pass through to subscribers.Y  S^- x-ԍ#X\  P6G;ɒP#Implementation of Sections of Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, 9 FCC Rcd 1164, 1211 (1993).  S-  !34.` ` The benchmarks used to set operators' initial rates when rate regulation began were based  xon the results of the Commission's 1992 price survey. The survey collected information about prior actual  S- x\franchise costs, but did not collect information about anticipated future increases in franchise costs.ZZ  {O&%- x.#X\  P6G;ɒP#эSee Implementation of the Cable Television Consumer Protection and Competition Act of 1992: Rate  xRegulation, Order, 8 FCC Rcd 226, 237, 260 (1992) (price survey used for establishing benchmarks required operators to specify taxes, fees, or charges "paid" for the franchise in the latest completed fiscal year).  xFuture increases in costs, including community access costs, were not built into the benchmarks. The  xCommission addressed increases in external costs through its price cap mechanism, reflected in FCC"0(Z,8)8)``"  xjForms 1210 and 1240. Although the City argues that TCI has not demonstrated that the postregulation   incremental increase was excluded from its rate base, TCI correctly responds that the Commission's  xbenchmark system for setting rates does not contemplate any retroactive justification of preregulation  xrates. TCI is entitled to use the Commission's price cap mechanism governing external cost increases to  x>recover the increases in its franchiserequired community access payments, regardless of the date the  xfranchise took effect. The City's determination that these costs are not recoverable is, therefore, an unreasonable application of Commission rules. We grant TCI's appeals on this issue.  S-Xx X` ` 2.X Gap Period (#  Sp-XxX` ` X a.XBackground (#  S - ` x"35.` ` A cable operator using FCC Form 1240 sets rates by projecting expected changes in   external costs, inflation, and channels and by correcting for differences between past projections and actual  S - xcosts. The projected rates are adjusted to account for overestimations or underestimations in past rates.  xA cable operator using the quarterly rate adjustment system bases rate changes on past costs, so it does  xnot include cost projections in its rates. A cable operator that switches from the quarterly rate adjustment  xmethod to the annual rate adjustment method may not have actual cost data for costs incurred up to the  xfirst annual adjustment and, therefore, could experience a delay in recovering those costs until it   /implements rates after its second annual Form 1240 filing. Because of concern that this delay would  xcreate a disincentive for operators to begin using the annual rate adjustment methodology, the Cable  xyServices Bureau granted TCI a onetime waiver that allowed it to estimate costs for the period before and  S- xafter its new annual rates were to become effective.7[( {O- xY#X\  P6G;ɒP#эSee Thirteenth Reconsideration, 11 FCC Rcd at 420422; Annual Rate Adjustment System, Request for Waiver,  {O- xy11 FCC Rcd 16297, 1630016301 (Cab. Serv. Bur. 1996); see also Annual Rate Adjustment System for Cable  {O- xService Rates, Request for Waiver of Requirements Contained in the Thirteenth Order on Reconsideration, 11 FCC  {OV-Rcd 10235 (Cab. Serv. Bur. 1996) ("TCI Waiver").7 Importantly, this waiver only applied to TCI's first  xForm 1240 filing. Specifically, an operator's initial Form 1240 filing may include projected changes in  xcosts, inflation, channels, and subscriber information attributable to the period between the last full month   for which cost data is available and the effective date of the new rates. An operator must include with  xLits projections a separate calculation and explanation of the basis for these projected costs. Because this  x["gap period" waiver resulted in two projected periods in TCI's first Form 1240 filings, TCI was required  x[to true up the gap period as well as the standard projected period when making its second filing on Form 1240. x  S(- XX` ` X b.XDiscussion (#  S- ` x#36.` ` In its 199798 Rate Order, the City stated that TCI failed to account for some "gap" period  S- xadjustments, originating in its first Form 1240 filing, when it made its second Form 1240 filing.\ {O#-#X\  P6G;ɒP#э199798 Appeal at 23 and Attachment B; 199798 Opposition at 79; see also 199899 Appeal at 78. The  xadjustments relate to the calculation of the base rate in Module D of Form 1240. A proper calculation  xkof the base rate is especially important because an operator uses the base rate to build its trueup and   =projected period MPRs. TCI defends its calculation by citing a January 9, 1997 letter from the Chief of  S - xkthe Cable Services Bureau that expressly approved TCI's methodology.c] J yO'-#X\  P6G;ɒP#э199798 Appeal at 2.c The City agrees that TCI's" ],8)8)``!"  xcalculations are consistent with the letter, but states that TCI's gap adjustments were simply incomplete,  S- xbecause TCI did not carry the adjustments throughout the rate form.g^ yO@-#X\  P6G;ɒP#э199798 Opposition at 8.g Specifically, the City states that  xwhen TCI calculated its base rate, it did not correctly calculate the base rate in Module D, which determines TCI's current trueup segment, and it miscalculated an inflation adjustment.  S8- ` x$37.` ` In most situations, an operator performs a trueup only for its previous rate period. It uses  xthe resulting trueup figure, recorded on Line I8 of Form 1240, to calculate its MPR for the projected rate  S- xNperiod. In its next rate filing, an operator will enter the same Line I8 trueup figure on Line D6 to  S- xcalculate the base rate.o_X yO -#X\  P6G;ɒP#эForm 1240 Instructions at 1415.o However, when an operator calculates a trueup figure for both the gap period  xand the projected period, as described above, Line I8 is not sufficient to calculate the base rate by itself.  Sp-  An operator must also use the gap period figure from its gap period calculation.`\p yO - xi#X\  P6G;ɒP#эThe Commission has required TCI to make this adjustment for its cable programming service tier ("CPST")  {O- xrates. See Margate Video Systems, Inc. d/b/a TCI of North Broward, Inc., 12 FCC Rcd 23683, 2368423685 (Cab.  {O-Serv. Bur. 1997) ("Margate"). The City found that  xLTCI did not include the gap period figure in Module D of Form 1240, which is used to calculate the base  S - xrate.a  yO-#X\  P6G;ɒP#э199798 Appeal, consultant's report at 34; 199798 Opposition at 78. This omission results in an overstatement of TCI's base rate. The City also found that TCI  ximproperly deducted inflation adjustments,which were not included in the previous MPR, from the gap  xperiod. According to the City, the total effect of adjustments to the gap period calculations results in a $.28 reduction in TCI's requested 19971998 MPR.  SX- ` Px%38.` ` TCI argues that it relied on a letter from the Bureau approving its methodology. The City  xdid not act inconsistently with that letter when it carried the approved adjustments through the form. The  S- xCity acted consistently with Bureau adjudications involving CPST rate complaints that considered the  S- xJanuary 9, 1997 letter.b\ {O- x#X\  P6G;ɒP#эSee TCI Cablevision of Arlington, Inc., Plano, 13 FCC Rcd 2889 (Cab. Serv. Bur. 1998); TCI of Plano, Inc.,  {O- x12 FCC Rcd 20411 (Cab. Serv. Bur. 1997); Margate, 12 FCC Rcd at 23683. TCI argues that the City goes beyond the Bureau's orders in the gap period issue, but does not explain how. Operators have an obligation to complete their rate forms so that accurate and  xreasonable rates result. We agree with the City that TCI's rate filing did not properly carry the adjustment   through the form, and conclude that the City did not act unreasonably in adjusting TCI gap period  Sh-calculations. We uphold the City's decision and deny this aspect of TCI's appeal.ch  {O -#X\  P6G;ɒP#э47 C.F.R.  76.937(a), 76.944(a); see Margate, 12 FCC Rcd at 2368423685.  S-Xx X` ` 3.X Starting Rate for TCI's 199798 and 199899 Forms 1240 (#  S- ` x&39.` ` The starting point for computing a cable operator's annual rate adjustment on Form 1240   is the operator's current maximum permitted rate, which it enters on line A1 of Form 1240. The cable  xioperator then adjusts its current MPR to true up past projections with actual cost data and reflect projected  xcosts for the next year. New permitted cable rates are therefore computed from past permitted rates. The higher the starting MPR used in the computation, the higher the new maximum permitted rate will be. "R c,8)8)``z"Ԍ S- ` x'40.` ` In this case, where past rates are unresolved, TCI argues that it should be able to   implement rate adjustments on the basis of its proposed rates, rather than the City's prescribed rates while  xits appeals of the City's rate orders are pending. In its 199697 Rate Order, the City rejected TCI's  S- xproposed 199697 MPR.6d {O- x #X\  P6G;ɒP#эSee 199798 Rate Order at 2, consultant's report at 34; 199798 Appeal at 56; 199798 Opposition at 5, n.13; 199899 Rate Order at 2, consultant's report at 23; 199899 Appeal at 67; 199899 Opposition at 38.6 TCI's appeal of that rate order remained unresolved when TCI made its 1997 x98 rate filing. Because of this, the 199697 MPR that TCI needed to use as a starting rate for its 199798  S8- xForm 1240 was in dispute when TCI filed that form. Likewise, in its 199798 Rate Order, the City  xrejected TCI's proposed 199798 MPR. TCI appealed that rate order, which also remained unresolved   and resulted in a dispute over which starting rate to use in TCI's 199899 rate filing. The City argues that  x-TCI may not use a starting rate for 199798 that is based on the 199697 MPR, because the City has found  S- xthe 199697 MPR to be unreasonable.e" yOZ -#X\  P6G;ɒP##X\  P6G;ɒP#э199798 Opposition at 5, n.13. Similarly, the City argues that TCI may not use a starting rate  x for 199899 that is based on the 199798 MPR, because the City has found the 199798 MPR to be  xLunreasonable. TCI responds that, as long as its appeals are pending before the Commission, TCI should  xbe allowed to use its calculation of the 199697 MPR as the 199798 starting rate and the calculation of  S -  [the 199798 MPR as the 199899 starting rate.f  yOJ-#X\  P6G;ɒP##X\  P6G;ɒP#э199798 Appeal at 56. TCI notes that if it loses its appeals and has to reduce  xits MPRs, subscribers will be protected because they will receive prospective rate reductions and refunds  xLof the overcharges. In contrast, TCI argues that if it had not increased its rates and it prevails on appeal,  xthen it will not realistically be able to recover the lost revenue, even though it has a right to recover that revenue under Commission rules.  S-  o(41.` ` TCI improperly ignored the City's three rate orders. When the Commission developed  S- xthe annual rate adjustment methodology in the Thirteenth Reconsideration, it established several definitive  xdeadlines for the rate filing and approval process by the LFA. These deadlines determine the appropriate  xstarting rate for later filings and the operator's authority to implement new rates. An operator that wishes  xto make rate adjustments must file the appropriate forms at least 90 days before it plans to implement its  SB- xjproposed rates.gBB {O$-#X\  P6G;ɒP##X\  P6G;ɒP#эThirteenth Reconsideration, 11 FCC Rcd at 425428. When it makes a rate filing, an operator is not informing the franchising authority that  S-  it will increase rates, but is asking the franchising authority's permission to raise rates.`h {O- x<#X\  P6G;ɒP##X\  P6G;ɒP#эSee 47 C.F.R.  76.922, 76.923, and 76.937(a); Thirteenth Reconsideration, 11 FCC Rcd at 398 ("a cable operator ... may not increase its BST rates without approval from the franchising authority").` An LFA does  xLnot have an unlimited time, however. If an LFA has taken no action within 90 days of an operator's rate  S- xfiling, then Commission rules permit the operator to implement its rates as proposed.i.  {O"-#X\  P6G;ɒP#э#X\  P6G;ɒP#47 C.F.R.  76.933(g)(2); Thirteenth Reconsideration, 11 FCC Rcd at 426. The LFA may  xsubsequently issue a rate order rejecting the proposed rates and, if the order was adopted within twelve  xmonths of the rate filing, may require a prospective rate reduction and refund. If the LFA waits longer  xthan twelve months, however, it loses its right to order a reduction or refund. In any case, an operator   =is not free to ignore an LFA's rate order, whether that order is issued within the 90day review period or  S- x\after it. An operator's appeal of an LFA's rate order does not stay that order. The Commission may" i,8)8)``z"   \grant a stay request or the LFA may consent to a stay. Neither happened here, and TCI should have  S-complied with the City's rate orders when issued and when computing subsequent rate adjustments.j {O@- x#X\  P6G;ɒP#эSee Falcon Cablevision, 12 FCC Rcd 8229, 8233 (Cab. Serv. Bur. 1997); see also TCI Cablevision of Oregon, Inc., 12 FCC Rcd 8216, 822021 (Cab. Serv. Bur. 1997).  S-  )42.` ` TCI should have recalculated and resubmitted its Forms 1205 and Forms 1240 after the   City issued its 199697 and 199798 Rate Orders. TCI should have implemented the revised rates, subject   jto the City's right to review them, without waiting for the resolution of its appeals. Further, TCI should   not have implemented its 199899 rates, because the City issued its 199899 Rate Order before the 90day  S-  review period expired.k" {O -#X\  P6G;ɒP#эThirteenth Reconsideration, 11 FCC Rcd at 392 (emphasis added). The Commission's rules are unequivocal: "Operators may implement rate  S-  changes proposed in their filings 90 days after they file unless the franchising authority rejects the  S-  !proposed rate."Xl {O -#X\  P6G;ɒP#эId.X In this case, because we have granted part of TCI's appeals, its MPRs will be   Nrecalculated and it may add any lost revenue back into the rates at that time. Accordingly, we are   ordering TCI to revise and refile its rate forms with the City and, subject to the City's right to review   the rate filings, require TCI to implement revised rates to reflect the rulings discussed herein within 60 days of the effective date of this Order.  S - IV. ORDERING CLAUSES  SZ-  U*43.` ` Accordingly, IT IS ORDERED that the appeals by TCI of Richardson, Inc., ARE  S2- GRANTED with respect to the community access charge and otherwise DENIED .  S-  0+44. ` ` IT IS FURTHER ORDERED that this case IS REMANDED to the City for proceedings consistent with this Memorandum Opinion and Order.  Sj-  ,45.` ` IT IS FURTHER ORDERED that within 60 days of the effective date of this Order, TCI  SB-   IS DIRECTED to revise and refile its basic service tier rate forms with the City and, subject to the City's right to review the rate filings, implement revised rates to reflect the rulings discussed herein.  S-  -46.` ` IT IS FURTHER ORDERED that the City's Motion for Extension of Time to file its  S-199697 Opposition IS GRANTED .  SR-  .47.` ` This action is taken by the Deputy Chief, Cable Services Bureau, pursuant to authority  S*-delegated by  0.321 of the Commission's rules.dm*F S"-ԍ#X\  P6G;ɒP#47 C.F.R.  0.321.d  ` `  hh,FEDERAL COMMUNICATIONS COMMISSION ` `  hh,John E. Logan  S:-` `  hh,Acting %CDeputy Chief, Cable Services Bureau#Xj\  P6G;ynXP#ѐ S - #&a\  P6G;u&P#