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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: ) ) ENSTAR COMMUNICATION ) ) Consolidated Appeal of the Local Rate) Orders for Pitt County and the Town of ) Grifton, North Carolina ) MEMORANDUM OPINION AND ORDER Adopted: August 13, 1996 Released: August 22, 1996 By the Chief, Cable Services Bureau: INTRODUCTION 1. On August 10, 1995, Enstar Communications Corporations ("Enstar") filed with the Commission two appeals of local rate orders adopted by the franchising authorities of Pitt County, North Carolina ("County"), and the Town of Grifton, North Carolina ("Town"). Both rate orders were adopted on July 11, 1995. On September 5, 1995, the franchising authorities filed with the Commission oppositions to Enstar's appeals. On September 12, 1995 Enstar filed replies to both oppositions. Enstar's two appeals both raise the sole issue of whether the local governments' substantially similar orders are too vague to satisfy due process requirements. In the interest of administrative efficiency, we consolidate the two appeals into one proceeding and rule on the merits of each appeal. In deciding the appeals, the Bureau has reviewed all of the pleadings filed in each of the separate proceedings. 2. In its appeal of the County's order, Enstar states that the County's opinion is a brief two page document that provides no explanation or reason for its denial of the proposed rate increase. According to Enstar, the County's order merely states that it has "remaining questions" regarding unspecified calculations on Enstar's Form 1210, having found "discrepancies between the information filed by Enstar and actual subscriber charges," and that "the 90 day extended review period will expire before these questions can be answered." Enstar maintains that the 120-day period provided by the Commission for review of a rate submission is ample, and that Enstar responded to all of the County's questions in a timely manner. Moreover, Enstar asserts that the County's order is also deficient in that it states that the proposed rate increase "would raise basic cable rates to an unreasonable level for subscribers in this area," without providing any details as to how the County made this determination. It concludes that the rate order is too vague to withstand due process scrutiny. 3. In its opposition, the County argues that although 120 days would normally be sufficient time to issue a rate order, it did not have adequate time to evaluate fully Enstar's rate request here as a result of Enstar's own actions and submission of conflicting information. Specifically, it asserts that Enstar submitted two alternative versions of Form 1210 on March 10, 1995 on outdated forms and that, after months of correspondence between the parties, it was not until June 21, 1995 that Enstar finally submitted a single version of its filing on a current form, thus affording the County only 20 days to complete its evaluation. In addition, the County states that the rates shown on Enstar's June 21 rate submission request, and on its rate card in effect during the first six months of 1995, are not consistent with the rates shown on a subscriber statement ledger for services billed by Enstar during this period. Because the figures supplied by Enstar were not reliable, the County states, it had insufficient time to sort out the discrepancies and determine the "true rate" for Enstar subscribers. Finally, the County asserts, it denied Enstar's proposed rates as unreasonable because, at a subscriber cost of $22.04, for a per channel cost of $.92, they are higher per channel than all other cable operators in Pitt County with the exception of one. 4. Similar to its appeal of the County's order, Enstar attacks the Town's one page written opinion as being devoid of any reason or explanation for its denial of the proposed rate increase. Enstar notes that the Town's order states only that it has "remaining questions" regarding Enstar's Form 1210 submission and that "the FCC form 1210 is based on FCC 1200 and 1220 Cost of Service forms which are still under review and have not yet been approved by the FCC." These factors are not relevant, Enstar maintains. First, it argues that the Town could have extended its review by issuing an accounting order to Enstar and thereby preserved its right to later order refunds, but it could not use the expiration of the 120-day period as an excuse to flatly deny the proposed rate increase, as it appears to have done here. Furthermore, Enstar asserts, the Commission's continuing review of its other submissions is no basis to deny its proposed rate increase because its FCC Form 1210 is based on rates previously approved by the Town and not on its cost of service showings. Finally, Enstar contends that the Town stated in its order that it "was not interested in receiving further requests until such time as the FCC has ruled on Enstar's Cost of Service filings" and that such statement is inconsistent with Enstar's right to request changes in its basic rates as often as quarterly, regardless of the pendency of any review of previous cost of service submissions. 5. In its opposition, the Town makes the identical argument made by the County, that it was Enstar's actions in failing to submit a single rate justification on an appropriate form and in timely fashion that resulted in inordinate delay and inadequate opportunity to review its submission. Also, like the County, the Town states that Enstar's subscriber rate of $21.94, or $.91 per channel, is unreasonable for the number of channels offered and the quality of service provided, and was denied for this reason. Finally, the Town maintains that because Enstar's 1200 request is still pending before the Commission, it would be improper to grant its 1210 request for a rate increase above an amount which has not been approved. 6. Under our rules, rate orders made by local franchising authorities may be appealed to 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 7. The Commission's Rate Order requires that if a franchising authority disapproves a request for a rate increase, as it did here, it must issue a written opinion. The Commission has stated: Such a publicly available decision is necessary to protect the due process rights of the cable operator, so that it can know why the rate was disapproved and can appeal the decision to the Commission if it believes the decision is unfair or contrary to the 1992 Cable Act. Furthermore, the franchising authority's written decision must affirmatively demonstrate why the proposed rate is unreasonable. 8. The Bureau agrees with Enstar that the County and the Town failed to demonstrate affirmatively in their written rate orders why the cable operator's proposed rates were unreasonable. While a franchising authority may question the reasonableness of an operator s calculations, upon receiving answers to its questions, the franchising authority should recalculate the questioned figures based upon the operator s responses. If the operator fails to comply with the request, the franchising authority may recalculate the figure based upon the best available evidence at the time it issues the order, as long as it explains why the operator's proposed rate is unreasonable and its own prescribed rate is reasonable. Due to Enstar's submission of conflicting information, the County and the Town could have calculated its own rates based on the best information available at the time the order was issued. The County and the Town concluded the proposed rates were unreasonable, yet did not prescribe their own rates with an explanation as to why such rates would be reasonable. The orders at issue in this appeal are brief and conclusory and fail to explain the substantive reasons for the rulings. A decision must enumerate factors that reveal how the rate is determined. The County and the Town, in their respective responses to Enstar's instant petitions, offer similarly broad explanations for their actions, e.g., the rates were unreasonably high in comparison to other area cable operators and, in the case of the County, there were unexplained conflicts between the proposed rates and those shown on rate card and subscriber statements. These explanations were not adequate under the Commission's rules. Accordingly, we will remand this case so that the County and the Town can reconsider their respective rulings in a manner consistent with this opinion. 9. It is apparent from a review of the materials submitted by the parties that the deficiencies in the orders of the County and the Town were a direct result of their inability to evaluate fully the rate proposals before the expiration of 120 days. Although both authorities extended the permissible review period, it was not until June 21, some 20 days prior to the extended deadline, that they received from Enstar the information they deemed necessary to complete the rate evaluation process. Enstar's intention in initially submitting alternative versions of its Form 1210 may have been to assist the process but, in fact, created confusion and led to an exchange of communications between the parties culminating in a single rate filing on an updated form that was finally acceptable to the franchising authorities more than three months after Enstar's first submission. The Commission's rules attempt to balance the need of cable operators to implement their proposed rates with as little delay as possible against the need for franchising authorities to have adequate time to scrutinize carefully and evaluate an operator's rate filing. Nonetheless, the cable operator, not the franchising authority, bears the burden of proving the reasonableness of its proposed regulated rates. To this end, we admonish Enstar that, in its future rate filings, it must cooperate fully and expeditiously with the reasonable requests of the County and the Town. ORDERING CLAUSES 10. Accordingly, IT IS ORDERED that the petitions for review of the local rate orders adopted by the Town of Grifton, North Carolina and Pitt County, North Carolina, ARE REMANDED to the local franchising authorities for further proceedings consistent with this opinion. 11. 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