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INTRODUCTION ă  1. 1. 1. a.(1)(a) i) a) I. 1. 1. a.(1)(a) i) a)  S' ( 1. ` ` Before the Commission is an application for review ("Application") filed July 24, 1998,  S`' !Zby Time Warner Cable ("TWC") of the action by the Cable Services Bureau ("Bureau"), In Re Petition  S:' !of Time Warner Cable, Memorandum Opinion and Order ("Bureau Order"),B:Y yO'ԍ 13 FCC Rcd 12185 (1998).B denying two petitions for  S' !special relief ("Petitions") requesting approval of its uniform ratesetting methodology already in place in  S' !its cable television systems in Rochester, New YorkgXY yO'ԍ Petition for Special Relief, CSR5051R, filed June 25, 1997.g and Finger Lakes, New York.gY yOt'ԍ Petition for Special Relief, CSR5052R, filed June 25, 1997.g In the Bureau Order,  !the Bureau determined that TWC was not authorized to implement uniform rates before the adoption by  S' !Dthe Commission of an order allowing the setting of uniform rates, specifically Implementation of Sections  !of the Cable Television Consumer Protection and Competition Act of 1992, Rate Regulation: Uniform  SP' !RateSetting Methodology ("Uniform Rate Order"),APxY yOh'ԍ 12 FCC Rcd 3425 (1997).A and before TWC obtained Commission approval of  !its proposed methodology. The Bureau also determined that TWC had not submitted information, required  S' !7pursuant to Section 76.922(n) of the Commission's rules,JY yO"'ԍ 47 C.F.R.  76.922(n) (1997).J that demonstrated that TWC's current rates or  !proposed uniform rates were calculated in accordance with the Commission's rate regulations and were  !greasonable, a critical element of any uniform rates proposal. Having considered TWC's application for  S' !review, we conclude that the Bureau Order should be affirmed. TWC also filed a petition for stay of the  Sd' !Bureau Order pending resolution of its Application. Because we resolve TWC's Application herein, we will dismiss TWC's petition for stay as moot. ",**88"  S'c II. BACKGROUND Đc  S' ( 2.` ` Under the Communications Act, cable operators that do not face effective competition are  !subject to regulation of their basic services tier ("BST"), cable programming services tier ("CPST"),  S`' !xequipment and installation rates.\` {O' !/ ԍ Communications Act, Section 623(a)(2), as amended, 47 U.S.C.  543(a)(2) (1996). 47 U.S.C.  543(c),  !D which establishes the criteria for Commission regulation of the cable programming service tier, does not apply to  {OZ'cable programming services provided after March 31, 1999. See 47 U.S.C.  543(c)(4) (1996). Operators may establish their regulated rates using either the benchmark  !methodology, or the cost of service methodology, both of which set a maximum permitted rate ("MPR")  S' !that an operator may charge in a local franchise area.Q {O 'ԍ See 47 C.F.R.  76.922 (1997).Q In the Uniform Rate Order, the Commission  !created a variation on these ratesetting methodologies by allowing cable operators to establish uniform  !rates for multiple franchise areas. The Commission determined that uniform rates, when set using a  !3methodology approved by the Commission, benefit both cable operators and subscribers by providing  !Qoperators with competitive pricing options, providing subscribers with less confusing rate structures, and  SJ ' !cproviding local franchising authorities ("LFAs") with enhanced incentives to pool their resources to  S" ' !administer rate regulation across a wider region. The Commission permits the establishment of uniform  !rates on a case-by-case basis after an operator submits a proposal and supporting justification demonstrating that the rate structure proposed will be reasonable.  S 'W" III. BUREAU ACTION Đc  S2' ( d3.` ` In September, 1996, TWC filed petitions with the Commission seeking a declaration that  !fifty communities that it served in the Finger Lakes, New York area and twentyeight communities that  !it served in the Rochester, New York area were subject to effective competition ("Effective Competition  S' !Petitions").NX~ yO' ! ԍ Petition of Time Warner Cable for Declaration of Effective Competition, CSR4829E, filed September 12,  ! 1996 (Rochester System); Petition of Time Warner Cable for Declaration of Effective Competition, CSR4833E, filed September 18, 1996 (Finger Lakes System).N The Commission rejected TWC's Effective Competition Petitions on June 5, 1997.w  {O'ԍ Cox Communications Hampton Roads, Inc., et al., 12 FCC Rcd 7673 (1997).w TWC  !did not appeal the determination that it was not subject to effective competition in the Finger Lakes and  !*Rochester areas. While the Effective Competition Petitions were pending, TWC implemented its uniform  !rate structures in response to what it characterized as the "aggressive competition" that it faced in its  S' !^Rochester and Finger Lakes systems. 0  yO ' ! ԍ Petitions at 3. TWC stated that the competition came from Rochester Choice Television as well as nationally marketed satellite services. The uniform rates took effect on January 1, 1997, three and one S' !half months before the Commission adopted the Uniform Rate Order and without prior Commission  S' !lapproval.3   {O$'ԍ Id.3 At the time the Petitions were filed, the rates were the subject of several unresolved complaints. "| ,p(p(88"Ԍ S' ( 4.` ` In its Petitions, filed in June 1997, TWC requested prospective approval of its uniform  !ratesetting methodology, in both its Rochester and Finger Lakes systems, because the methodology is not  !unreasonable and because the uniform BST rate does not exceed the MPR that would otherwise apply in  S' !gany of the affected communities. Z yO' !t ԍ Petitions at 8. Under any proposed uniform rate structure, the uniform rates for regulated BSTs may not  ! exceed the BST rates that would be established under existing regulations; therefore, BST rates will either decrease  {O'or remain the same under a uniform rate mechanism. Uniform Rate Order at  1. TWC stated that its methodology is revenueneutral and has only a  S`' !de minimis impact on CPST customers, while raising no additional complicating factors.A ` {O'ԍ Petitions at 89.A TWC also  !requested retroactive approval of its uniform ratesetting methodology back to January 1, 1997, even  S' !/though it was implemented prior to the release of the Uniform Rate Order.e| yO. 'ԍ Finger Lakes Petition at 1011; Rochester Petition at 911.e TWC argued for this  S' !ctreatment because it implemented the uniform rates in "good faith reliance" on its pending Effective  S' !tCompetition Petitions.:  yOp'ԍ Petitions at 10.: TWC acknowledged that rate complaints had been filed against the January 1,  S' !1997 CPST rate adjustments, but asked for a stay of enforcement pending resolution of the Petitions.i yO'ԍ Finger Lakes Petition at 1011; Rochester Petition at 11.i  St' !@The Petitions were placed on Public Notice on August 1, 1997.t,  yO@' ! ԍ  Public Notice: Cable Services Action Time Warner Seeks Commission Approval for the Implementation of Uniform Rate Structures for its Rochester and Finger Lake, New York Systems, 12 FCC Rcd 11467 (1997). No other party filed comments. On  SL 'June 24, 1998, the Bureau denied the Petitions in the Bureau Order.  S '.7  IV. APPLICATION FOR REVIEW Đc  S ' ( ~5.` ` In its Application, TWC argues that the public interest benefits of its uniform ratesetting  S ' !Zplan outweigh the concerns that the Bureau raised in the Bureau Order. TWC also argues that its plan  S`' !is in compliance with the substantive requirements of the Uniform Rate Order: (i) the uniform BST rate  !does not exceed the MPR for the BST for any individual community, (ii) the plan is revenueneutral and  S' !has only a de minimis impact on CPST rates, and (iii) because of the uniformity among the communities  S' !*served by the Rochester and Finger lakes systems, the plan would provide all of the benefits the Uniform  S' !Rate Order was promoting. Finally, TWC argues that the Bureau's concern about the reasonableness of  !gthe specific rate calculations is misplaced because no uniform rate structure could ever be approved in advance if approval depended on a review of the specific rate calculations.  S(' (  6.` ` An operator is required to obtain the Commission's approval before implementing uniform  S' !rates.Y  {O$$'ԍ Uniform Rate Order at  1, 13, 18.Y The Commission has stated that "a cable operator wishing to establish uniform rates will be  !Drequired to submit a proposal with supporting justification that states fully and precisely all pertinent facts",p(p(88X"  S' !and considerations relied on to demonstrate that the proposed rates will not be unreasonable."Z {Oh' ! ԍ Id. at  13; see also Id. at  1 ("[W]e hereby permit the establishment of uniform rates . . . upon the  ! Commission's finding that the cable operator's submission of a proposed uniform rate proposal and supporting justification demonstrates that the proposed rates structure will be reasonable.")  Pre !approval ensures fairness for all interested parties because it provides an opportunity for comment, protects  !&an LFA's jurisdiction over rates for the BST and associated equipment, and allows the Commission to  S' !examine a proposal's impact on subscribers before implementation.K {O'ԍ Id. at  15, 18, 22.K TWC filed its Petitions, seeking  S`'approval of its uniform rates, six months after implementing the uniform rates.C`| {O| 'ԍ See Petitions at 3.C  S' ( =7.` ` In its Application, TWC admits that it implemented its uniform rates on January 1, 1997  !because it believed that it was subject to effective competition. It wasn't until after the Effective  !gCompetition Petitions were denied that TWC attempted to justify its rates by filing the Petitions. TWC  S' !was not authorized to implement uniform rates before the adoption of the Uniform Rate Order because,  !gat that time, Commission rules required that rates be established on a franchise area basis and made no  !"provision for setting a uniform rate across multiple franchise areas. Following the adoption of the  S" ' !ZUniform Rate Order, TWC was required to obtain the Commission's approval of its proposed uniform  S ' !rates methodology before implementation. The Uniform Rate Order established specific parameters which  S ' !contemplate prior approval before any methodology is implemented by a cable operator."  yO' !/ ԍ "The fair implementation of a uniform rate approach is facilitated if the Commission can examine the  ! methodology to be employed and the impact of that methodology on subscribers in advance of its implementation.  ! Our approach will provide the Commission with the ability to render an informed and accurate decision on whether  {O'an operator's proposed uniform rates are not unreasonable." Uniform Rate Order at  18. TWC's  !argument that it expected the Commission to find its Rochester and Finger Lakes systems subject to effective competition, thereby freeing them from regulation, is not a satisfactory justification.  S6' ( J8.` ` The Commission has stated that a cable operator's "supporting justification must include  !@a specific, detailed description of all relevant financial and economic data, and other factors (including  !particularly local factors) that demonstrate the impact of the proposal on subscriber rates and that justify  S' !/the uniform rates as not unreasonable."N  {OV'ԍ Uniform Rate Order at  18.N According to its Petitions, TWC created its uniform rate  ! methodology by first calculating its MPRs for both the BST and CPST on FCC Forms 1240 for each  Sn' !community listed in the Petitions.=n  yO!'ԍ Petitions at 3 4.= TWC then chose the lowest calculated BST rate as the uniform BST  SF' !/rate for all the communities in each Petition.F yO$' ! ԍ In the Rochester system, TWC chose $7.24 as the uniform BST rate. Rochester Petition at 4. In the Finger Lakes system, TWC chose $9.09 as the uniform BST rate. Finger Lakes Petition at 4. The next step in TWC's methodology was "shifting  !foregone BST revenue for each community to that community's CPST and calculating a uniform weighted"r,p(p(88"  S' !average across all communities."j yOh'ԍ Rochester Petition at 8, n.12; Finger Lakes Petition at 8, n.13.j Although TWC states that its uniform ratesetting methodology in both  S' !Dsystems is revenueneutral and has only a "de minimis" impact on CPST subscribers, the Bureau's review  !krevealed that TWC's uniform ratesetting methodology produced an increase in CPST rates in twentytwo  !&of the twentyeight franchises in its Rochester system with amounts ranging from $0.18 to $1.11 per  !Mmonth. In its Finger Lakes system, TWC's uniform ratesetting methodology produced an increase in  !CPST rates in thirtyone of the fifty franchises with amounts ranging from $0.01 to $1.00 per month  !@(twentyfour of the franchises experienced an increase ranging from $0.17 to $1.00 per month). The  !Commission has stated that it "will be disinclined to approve any proposal that results in a more than  S' !minimal increase in CPST rates for a significant proportion of affected subscribers."OX {O 'ԍ Uniform Rate Order at  30.O The Commission  !Ihas also stated that it will "be disinclined to approve any rate approach that increases the combined  Sr' !x[BST/CPST] tier rate for subscribers by a more than minimal amount."@r {O 'ԍ  Id. at  31. @ The Bureau review revealed that  !TWC's uniform ratesetting methodology produced an increase in the combined BST/CPST rate in thirteen  !Qof the twentyeight franchises in its Rochester system in amounts ranging from $0.02 to $0.96 (eleven of  !the franchises experience a combined BST/CPST rate increase ranging from $0.19 to $0.96). In its Finger  !Lakes system, sixteen of the fifty franchises experience a combined BST/CPST rate increase ranging from  S ' !$0.06 to $0.84.w | yO' !! ԍ As exhibits to its Rochester Petition, TWC attached a copy of its channel lineup for its Rochester system and  ! a list of calculated BST MPRs for all of the communities in the Rochester system. Rochester Petition at Exhibits  ! A and B. As exhibits to its Finger Lakes Petition, TWC attached a copy of its channel lineup for its Finger Lakes  ! system, a list of calculated BST MPRs for all of its Finger Lakes communities, and the number of subscribers on  ! the eight headends of its Finger Lakes system. Finger Lakes Petition at Exhibits A, B and C. TWC later  ! supplemented its Petitions by filing a list, by community, of the calculated BST and CPST rates in each system,  !o along with the percentage and net difference between the calculated total BST/CPST rate and the uniform BST/CPST  !D rate in each community. Letter to William F. Caton, Acting Secretary, Federal Communications Commission from  ! Seth A. Davidson, Counsel for Time Warner Cable, dated July 11, 1997 (Rochester Petition); Letter to William F.  !^ Caton, Acting Secretary, Federal Communications Commission from Seth A. Davidson, Counsel for Time Warner Cable, dated July 11, 1997 (Finger Lakes Petition). w Therefore, the Bureau found that TWC's uniform rate structure was inconsistent with the Commission's rules.   S2' ( 9.` ` In addition, Section 76.922(n) of the Commission's rules states that "a cable operator that  !@has established rates in accordance with [the Commission's rate regulations] may then be permitted to  S' !establish a uniform rate for uniform services in multiple franchise areas."C yO^!'ԍ 47 C.F.R.  76.922(n).C Complaints against the CPST  S' !rates charged by TWC, effective January 1, 1997, the rates resulting from its uniform rate structure, were  !^filed by LFAs for communities in both the Rochester and the Finger Lakes systems. In every community  !where a complaint was filed, the Bureau released orders finding that TWC had incorrectly calculated its  !QMPRs on its FCC Forms 1240 and ordered TWC to reduce its MPRs. Subsequent to the release of those  !torders, and in response to petitions for reconsideration filed by TWC, the Bureau staff permitted TWC  !to recalculate and refile its FCC Forms 1240 for its CPST rates effective January 1, 1997 and January 1,"l,p(p(88a"  S' !1998.j {Oh'ԍ See Time Warner Cable, DA 98714, released April 16, 1998.j TWC, however, did not amend its Petitions to show the correct recalculation of its MPRs in its  S' !Rochester or Finger Lakes systems.A Z yO' ! ԍ The correct use of the FCC Form 1240 is particularly important because the Commission has determined that  {O' !D annual rate adjustments made to uniform rates must be performed pursuant to the FCC Form 1240. Uniform Rate  {Od' ! Order at  19. The Bureau has already determined, in at least one franchise in TWC's Rochester system, that even  {O.' !g the refiled FCC Forms 1240 do not completely comply with the FCC Form 1240 instructions. See Time Warner  !@ Cable: CUID NY0416 (Greece), DA 981155, released June 18, 1998 (TWC's calculated MPR, effective January 1, 1998, was lowered because, among other errors, TWC failed to use the most current FCC Inflation Factor).A The Uniform Rate Order requires a finding that the uniform rates  !tcharged by TWC in its Rochester and Finger Lakes systems, effective January1, 1997 and January 1,  !Q1998, were reasonable. Therefore, the Bureau was unable to determine that the uniform rates charged by TWC in its Rochester and Finger Lakes systems were reasonable.  S' ( 10.` ` TWC argues that the Bureau's rationale in denying its Petitions is faulty because the  !rationale would preclude any preapproval of uniform rates. TWC did not submit Petitions which  S' !Zpurported to propose a methodology, consistent with the Uniform Rate Order, which, if implemented,  !would allow TWC to provide a uniform rate structure in the Rochester and Finger Lakes systems. What  !3TWC proposed was a justification of actual rates that had already been implemented. To suggest that  !somehow the Bureau should be able to separate TWC's theoretical proposals from its already established  !Maction is inconsistent with the Petitions which requested approval of TWC's existing uniform rates. It  !/would be unrealistic to expect that the Bureau could approve uniform rates which are premised on  !Mincorrect MPRs. TWC's argument in support of its methodology consistently refers to the reliance of  !TWC on its underlying benchmark rate calculations as justification for its uniform rate methodology.  !Therefore, TWC has not submitted information that demonstrates that its current or proposed uniform rates have been calculated in accordance with the Commission's rate regulations.  S ' (   11.` ` We believe that TWC overstates the negative effect the Bureau Order has on the public  !interest. Admittedly, in theory, the adoption of uniform rates may be exceedingly beneficial in a number  S' !of areas. If TWC had filed its Petitions after the issuance of the Uniform Rate Order and prior to  !implementing its uniform rates, there may have been some public benefit in implementing a uniform rate  Sp' !structure in compliance with the Uniform Rate Order. There cannot be any public benefit to approving  !@a uniform rate structure which has been calculated using benchmark rates as the foundation when the benchmark rates are not reasonable under the Commission's rules. " ,p(p(88:"  S'_   V. CONCLUSION AND ORDERING CLAUSE ă  S' ( q12.` ` For the reasons discussed above, we conclude that TWC's application for review should be denied.  S8' ( 13. ` ` Accordingly, IT IS ORDERED, pursuant to Section 1.115 of the Commission's Rules, 47  !C.F.R.  1.115, that the Application for Review of Time Warner Cable seeking reversal of In Re Petition  !7of Time Warner Cable, Memorandum Opinion and Order, 13 FCC Rcd 12185 (Cab. Serv. Bur. 1998), IS DENIED and the referenced Petition for Stay IS DISMISSED AS MOOT. ` `  ,hh]FEDERAL COMMUNICATIONS COMMISSION ` `  ,hh]Magalie Roman Salas ` `  ,hh]Secretary