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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ************************************************************************* Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of: ) ) CENTURY COMMUNICATIONS ) CORPORATION, D/B/A YUMA ) CABLEVISION ) ) ) Appeal of Local Rate Order of ) the City of Yuma, Arizona ) MEMORANDUM OPINION AND ORDER Adopted: August 6, 1996 Released: August 19, 1996 By the Chief, Cable Services Bureau: INTRODUCTION 1. On March 3, 1995, Century Communications Corporation d/b/a Yuma Cablevision ("Century") filed with the Commission an appeal of a local rate order adopted on February 1, 1995 by its local franchising authority, the City of Yuma, Arizona ("the City"). In its rate order, based on the FCC Forms 1200, 1205 and 1210 filed by Century, the City established rates for basic tier service and associated equipment and installations and required Century to refund overcharges to subscribers. On March 20, 1995, the City filed an opposition to Century's appeal, and on April 3, 1995, Century filed a reply to the City's opposition. 2. Century raises four issues on appeal claiming the following: (1) the City failed to adopt a tolling order before the end of the initial 30-day review period; (2) the City improperly treated Century's "Century Select" a la carte package offerings as a regulated service; (3) the City did not make internally consistent adjustments to its rate filing; and (4) the City improperly ordered Century to issue immediately a partial refund to subscribers based on the undisputed portions of the local rate order. We consider each issue in turn. STANDARD OF REVIEW 3. Under the Commission's rules, appeals of franchising authorities' local rate orders are reviewed by the Commission. In ruling on appeals of local rate orders, the Commission will not conduct a de novo review, but instead will sustain the franchising authority's decision as long as there is a reasonable basis for that decision. The Commission will reverse a franchising authority's decision only if it determines that the franchising authority acted unreasonably in applying the Commission's rules in rendering its local rate order. If the Commission reverses a franchising authority's decision, it will not substitute its own decision but instead will remand the issue to the franchising authority with instructions to resolve the case consistent with the Commission's decision on appeal. DISCUSSION A. EFFECT OF THE CITY'S FAILURE TO ISSUE A TOLLING ORDER 1. Positions of the Parties 4. Century argues that its rates must be deemed approved because the City failed to issue a written rate order within 30 days of the date it filed its Forms 1200, 1205 and 1210 or to issue an order tolling the deadline for 90 more days, as required under the Commission's rules. Century contends that, as a result, the City ceded its authority to prescribe rates, to order rate reductions, and to issue refunds with regard to this particular rate filing. Century asserts that the City's inaction must be interpreted as an implicit approval of the rates justified by Century's filing. Century contends that the City's failure to issue a tolling order before the conclusion of its initial 30-day review period resulted in the tacit approval of those rates and that the City was constrained from issuing thereafter a rate order setting rates, requiring rate reductions, or mandating subscriber refunds. 5. In response, the City disputes Century's contention that its rate filing was filed on August 11, 1995 because the filing was not made in accordance with the Commission's rules or the City's own procedural rules. Specifically, the City claims that Century's August filing was facially incomplete because the operator failed to fill out Lines 1-4 of Step A of the Worksheet for Calculating Permitted Equipment and Installation Charges and Lines 1-4 of the Worksheet for Calculating Total Equipment and Installation Costs. The City also alleges that Century's August 11, 1995 submission was not filed in compliance with the City's local procedural regulations because the nature of the submission was not correctly described in the cover letter, the appropriate number of copies of the filing were not included, and the forms were not properly completed. DISCUSSION 6. The record shows that Century filed its Forms 1200, 1205 and 1210 with the City on August 11, 1994. On September 16, 1994, the City requested further information from Century in order to review Century's filing. However, the City did not issue a rate order or a tolling order within 30 days of the date that Century submitted its forms. On October 6, 1994, Century declined to provide the City with further information on the grounds that because the City had not entered a tolling order within 30 days of its August 11th filing, its rates therefore had been approved. The City responded by stating that the City did not consider Century's August submission to be a proper filing. On October 26, 1994, Century submitted an original and seven copies of its amended Form 1200 to the City, but maintained its position that the rates already had been approved due to the City's prior inaction. On November 2, 1994, the City issued an order tolling the review period for 90 days. On February 1, 1995, the City issued its local rate order, setting Century's rates at a level below that proposed by Century in its original Form 1200 and requiring corresponding refunds. 7. When a cable operator files either a benchmark or a cost-of-service rate justification, the Commission's rules provide a franchising authority with 30 days in which to take certain action with respect to the rate filing. At the end of the 30-day deadline if the franchising authority has taken no action, an operator's proposed rates become effective immediately (or its existing rates remain in effect). In benchmark proceedings (i.e., filings based on either FCC Form 393 or FCC Forms 1200, 1205 and 1210), such as the proceeding below, a franchising authority may issue an order tolling the 30-day deadline for an additional 90 days if it requires more time to review the filing, giving the franchising authority a total of 120 days to issue a rate order. Prior to the expiration of the 120-day review period, the franchising authority may extend the deadline still further and may preserve its authority to order refunds by issuing an accounting order by which the operator is directed to keep an accurate account of its financial records. If the franchising authority has not issued a rate decision or an accounting order by the end of the 120-day review period, the operator's proposed rates will go into effect and its existing rates will remain in effect without being subject to retroactive refunds. If the franchising authority subsequently issues a rate order, the franchising authority may not require subscriber refunds as part of its rate order. However, the franchising authority may still prescribe rates and order a prospective rate reduction when it issues its rate order. 8. If a cable operator files a facially incomplete rate justification, the local franchising authority may order the cable operator to file supplemental information. While the local franchising authority is waiting to receive this information from the cable operator, the deadlines for the franchising authority to rule on the reasonableness of the proposed rates are automatically tolled as long as it seeks the supplemental information within the initial 30-day review period. The City argues that Century's August 11 submission was facially incomplete and thus did not trigger the time limits of 47 C.F.R.  76.933. However, the City did not notify Century until October 16, 1994, well past its 30-day deadline, that it required supplemental information, and thus the review deadlines were not automatically tolled. 9. We do not agree with Century that the City, by failing to issue a tolling order during the initial 30-day review period, ceded its general authority to issue a rate order with respect to the subject rates. To retain the full complement of its rate regulatory powers (i.e., to order rate prescriptions, require rate reductions, and mandate subscriber refunds), a franchising authority must follow each of our procedural requirements throughout the entire rate review process. However, a franchising authority's failure to issue a tolling order or an accounting order does not result in a loss of its general authority to regulate rates or in the loss of all of its regulatory powers. We have previously held that a failure to issue an accounting order before the conclusion of the 120-day review period results in the franchising authority's loss of its refund power, whether it involves the justification of existing rates or proposed rates. Similarly, if a local franchising authority takes no action within the initial 30-day period of review and does not issue a tolling order, it also loses its power to subsequently order refunds. However, the rates remain subject to prospective regulation by the local franchising authority. A franchising authority cedes its general authority to regulate rates only if it withdraws its certification to regulate rates or if its certification is denied or revoked by the Commission or if it requests that the Commission regulate on its behalf. In this case, the City failed to take any action or issue a tolling order at the conclusion of its initial 30-day review period. As a result, the City lost its authority to require subscriber refunds with respect to these rates as part of its rate order. Because it did not issue a tolling order within the initial 30-day review period, the accounting order that it issued before the conclusion of its 120-day review period could not be used to retain its authority to order subscriber refunds upon the issuance of its rate order. The City did not lose its authority to set rates on a prospective basis for this particular rate filing. We remand this issue to the City for resolution in accordance with the terms of this Order. B. A LA CARTE PACKAGE 1. Positions of the Parties 10. As part of its decision setting Century's basic tier rates, the City found Century's package offering of three individually available channels (TNT, CNN, and the Family Channel), known as the Century Select package, to be a regulated tier of service. This a la carte package was first offered to Century's subscribers on September 1, 1993, when Century restructured its service offerings to comply with the Commission's rules. 11. Century argues that the City's decision to treat its a la carte package as a regulated tier of service is contrary to the objectives of the 1992 Cable Act and the Commission's a la carte rules. Century further argues that its Century Select package complies with the Commission's a la carte rules in effect at the time the package was created. In response, the City asserts that it properly applied the Commission's guidelines on a la carte packages in treating Century's package as a regulated tier and, therefore, its decision is reasonable and should be sustained. 2. Discussion 12. The record shows that the a la carte package at issue was first offered to Century's subscribers on September 1, 1993, the effective date of our regulations. As a result of Century's tier restructuring, Century began offering the three channels at issue on an individual basis and also as a package that Century alleges is not subject to regulation. 13. We examined this precise issue in our decision resolving Century's appeal of the City's FCC Form 393 ratemaking decision. In that decision, we found that the City's determination that Century's Century Select package was a regulated tier was inconsistent with the action taken in Century Cable TV of Yuma. We further found that, in accordance with the Century Cable TV of Yuma decision, Century's a la carte package should not have been treated as a rate regulated tier of service. Accordingly, we are remanding City's treatment of the Century Select package for FCC Form 1200 purposes to the local authority so that it can enter a revised order consistent with our findings in Century I and Century Cable TV of Yuma. C. COMPUTATION OF EXTERNAL COST 1. Position of the Parties 14. Century contends that the City erred in computing its external costs. According to Century, the City recomputed Century's rates by adding 862 subscribers to Line B12 of Form 1200 but did not make a corresponding adjustment to Century's programming costs listed in Line B8. Century contends that it notified the City, albeit two hours past the City's deadline for comments, that the programming cost amount on Line B8 should have been increased to $50,212.30. The City ignored Century's comments and did not make the adjustment to the programming costs. In response, the City contends that it reasonably rejected Century's comments because they were submitted after the January 30, 1995 12:00 p.m. deadline which was just two days prior to expected Council action on Century's rates. The City argues that it gave Century three opportunities to comment on the proposed recalculations and that the City is entitled to finality in its ratemaking process. 2. Discussion 15. FCC Form 1200 is the official form used to determine whether regulated rates for programming, equipment and installations are reasonable under the revised benchmark rules which apply to operators beginning May 15, 1994 or upon the expiration of the deferral period provided under our rules for operators to comply with the revisions to our rules. Through the use of Form 1200, an operator calculates three sets of figures: (1) the operator's actual March 31, 1994 rate level; (2) the operator's March 31, 1994 benchmark rate level; and (3) the operator's "full reduction" rate level. These figures are used to derive an operator's maximum permitted rates. 16. The operator first completes Module A of the Form 1200 to calculate its March 31, 1994 per subscriber monthly regulated revenue. Next, the operator completes Module B to calculate changes in external costs which the operator is entitled to reflect in its rates but have not yet been passed through to its subscribers. In Module C the operator enters its data with respect to a number of variables to calculate its March 31, 1994 benchmark rate level on a per subscriber, per month basis. The operator's March 31, 1994 actual rate level (Module A plus external costs calculated in Module B) is then compared to the benchmark rate level derived in Module C, with the operator carrying forward the smaller of the two. If the March 31, 1994 actual rate level is smaller, the operator completes Module D, subtracting the monthly per subscriber equipment cost calculated in Form 1205 and adding external costs calculated from Module B. If the benchmark rate level is smaller, the operator completes Module E, subtracting the monthly per subscriber equipment cost taken from Form 1205. Depending on which is used, either Module D or E establishes per-tier rates, which the operator carries forward into Module F, as its so-called provisional rates. 17. In the second part of Form 1200, the operator derives its full reduction rate based on its September 30, 1992 rates. To compute this rate, in Module G, the operator calculates its September 30, 1992 total monthly regulated revenues per subscriber, reduces that amount by 17%, and adjusts upward by 3% to reflect the inflation from September 30, 1992 until September 30, 1993. In Module H, the operator then adjusts the results from Module G for changes since September 30, 1992 with respect to subscribers, regulated channels, and satellite channels. In Module I, the operator subtracts a monthly per subscriber equipment cost amount from Form 1205, establishes per-tier rates, and adjusts for changes in external costs. In Module J, the operator compares its aggregate provisional rate with its aggregate full reduction rate. The maximum permitted rates an operator is actually allowed to charge are either the provisional rates (Module F) or the full reduction rates (Module I), depending on whether the aggregate provisional rate is greater or less than the aggregate full reduction rate, and are entered into Module K. In addition to Form 1200, an operator may file Form 1210, up to quarterly, to claim changes in external costs and inflation that justify rate increases. 18. The record shows that on January 19, 1995, the City notified Century that it had finalized its recommendations for Century's rates based on its FCC Form 1200 series filing and that Century would have until January 30, 1995, at 12:00 p.m. to forward any comments to the City Council. On January 30, 1995 at approximately 1:55 p.m, Century submitted comments to the City Council by facsimile indicating that the programming cost amount on Line B8 should have been increased to $50,212.30. Module B is used to calculate changes in external costs which the operator is entitled to reflect in its rates but have not yet been passed through to its subscribers. In its initial filing, Century stated that its subscriber base was 14,308 and that programming costs attributable to its subscriber base were $47,359.48. In its January 30, 1995 submission, Century increased its programming costs to $50,212.30 to take into account the City's addition of 862 subscribers to the operator's subscriber count, for a total subscriber base of 15,170. 19. We have stated in the context of a franchising authority's remedial powers that franchising authorities should act reasonably and not act inflexibly against de minimis violations. We believe this to be the situation. The City rejected Century's comments because the City's comment period had expired. The City's notice requested comments on its proposed revisions by January 30, 1995 at 12:00 p.m. Century submitted its comments on January 30, 1995 at 1:55 p.m, less than two hours past the deadline imposed by the City. Moreover, this issue involves a mechanical adjustment to Form 1200 that readily could be made before the City Council's February 1, 1995 meeting. The City was obligated to process Form 1200 according to the rules and directions. There is no persuasive argument for permitting the City to use the wrong number and calculate an incorrect result. Accordingly, we remand this issue to the local franchising authority for further consideration. D. UNSPECIFIED PARTIAL REFUNDS 1. Positions of the Parties 20. Century contends that the City erred by ordering the operator to provide unspecified "partial refunds." Specifically, the City ordered Century to provide refunds to subscribers for overcharges resulting from the City's adjustments discussed in paragraphs three and four of its order and exempted any overcharges based on Century's a la carte treatment of the Century Select tier in the subscriber refund order. Instead, the local authority stated that it retained its right to issue a future order directing Century to refund any a la carte package overcharges. Century alleges that the City failed to indicate the amount that should be refunded pursuant to the local order or to describe the calculations from which the amount to be refunded could be determined rendering the order too vague for Century to comply with it. The City contends that its refund order is not vague, but instead that Century can easily compute the necessary refund by recomputing its FCC Form 393 rate using the City's revised figures and then using that recomputed Form 393 rate to set a new Form 1200 rate. 2. Discussion 21. In this matter, the City failed to take any action or issue a tolling order at the conclusion of its initial 30-day review period and accordingly lost its authority to require subscriber refunds. Century's complaint regarding the City's February 1, 1994 order directing Century to perform unspecified partial refunds is therefore moot. ORDERING CLAUSES 22. Accordingly, IT IS ORDERED that Century Communications Corporation's appeal of the City of Yuma's local order, regarding the City of Yuma's failure to adopt a tolling order before the end of the initial 30-day review period is REMANDED to the City so that it may enter an order in accordance with the terms of this memorandum opinion and order. 23. IT IS FURTHER ORDERED that Century's appeal of the City of Yuma's treatment of Century's Century Select package is REMANDED to the City so that it may enter an order consistent with our findings in Century Cable TV of Yuma. 24. IT IS FURTHER ORDERED that Century's appeal of the City of Yuma's failure to make internally consistent adjustments to its rate filing is REMANDED to the City so that it may enter an order in accordance with the terms of this memorandum opinion and order. 25. IT IS FURTHER ORDERED that Century's appeal of the City of Yuma's order that Century immediately issue a partial refund to subscribers based on the undisputed portions of the local rate order is DISMISSED as moot. 26. IT IS FURTHER ORDERED that, in light of the resolution of its appeal herein, the request for stay filed by Century is DISMISSED as moot. 27. This action is taken by the Chief, Cable Services Bureau, pursuant to authority delegated by section 0.321 of the Commission's rules. 47 C.F.R.  0.321 (1995). FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau