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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Tele-Media Company of Saginaw Bay) CUID No. MI0002 (Tawas City) ) MI0570 (Alabaster Township) ) MI0108 (AuSable CharterTownship) ) MI0283 (Baldwin Township) Small System Filing to Support ) MI0001 (Oscoda CharterTownship) Cable Programming Services ) MI0123 (City of East Tawas) Tier Rates and Basic Service ) Tier Rates ) ORDER Adopted: January 24, 1997 Released: January 30, 1997 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider complaints filed regarding the rate that Tele-Media Company of Saginaw Bay ("Tele-Media") was charging for its cable programming services tier ("CPST") in the franchise areas referenced above. Additionally, a representative of the franchise authority in each of the above franchise areas ("the Cities") petitioned the Federal Communications Commission ("Commission"), requesting assistance in reviewing the Basic Service Tier ("BST") cost of service showings filed for each franchise area by Tele-Media on August 15, 1994. The Commission granted the Cities' petitions and agreed to review Tele-Media's BST cost of service filings. 2. On December 15, 1995, Tele-Media filed FCC Form 1230s, seeking to justify its CPST and BST rates through the simplified small system cost of service procedures under the Sixth Report and Order and Eleventh Order on Reconsideration, MM Docket Nos. 92-266 and 93-215, 10 FCC Rcd 7393 (1995) ("Small System Order"). In this Order we grant Tele-Media's request for small system relief under the Small System Order and, based on our review of Tele-Media's FCC Form 1230 filings, deny the pending CPST complaints and find the CPST and BST rates to be not unreasonable. 3. Under the Communications Act and the Commission's rules, the Commission must review a cable operator's rates for its CPST upon the filing of a valid complaint. The filing of a valid complaint triggers an obligation on behalf of the cable operator to file a justification of its CPST rates. Additionally, once a franchising authority has been certified by the Commission, the cable operator is required to file a justification of its BST rate with the franchising authority. Under the Commission's rules, an operator may attempt to justify its CPST and BST rates through a benchmark showing, a cost of service showing, or a small system cost of service showing. In any case, the operator has the burden of demonstrating that its rates are not unreasonable. 4. Under cost of service regulation, a cable system's rates are reviewed under traditional rate of return analysis. Cost of service regulation imposes heavy burdens upon regulators and the regulated entity because of the significant administrative and compliance costs associated with this regulatory model. The Commission recognized that some local franchising authorities may have resources and personnel sufficient to conduct a review of the rate-setting justification based on the benchmark approach, but not to examine a cost of service showing. The Commission also understood that this concern may have discouraged certification by many local franchising authorities. Therefore, it established procedures under which the Commission, if requested by the local franchising authority in a petition for special relief under Section 76.7 of the Commission's rules, will issue a ruling that makes cost determinations for the BST. 5. The Commission's original rate regulations took effect on September 1, 1993. The Commission subsequently revised its rate regulations effective May 15, 1994. In a further effort to offer small cable companies administrative relief from rate regulation, the Commission amended the definition of small cable companies and small systems and introduced a simplified form of small system rate relief in the Small System Order. Cable systems serving 15,000 or fewer subscribers, and owned by a company having 400,000 or fewer subscribers, may elect to use the small cable system rate mechanism in lieu of other Commission rate processes, provided the Commission has not reached a final resolution on the rate complaints filed against the system. Operators attempting to justify their rates through small system relief must file FCC Form 1230. FCC Form 1230 requires that the Operator Selected Per Subscriber Monthly Programming Rate Per Channel (FCC Form 1230, Line A11) not exceed the Per Subscriber, Per Channel Monthly Programming Costs (FCC Form 1230, Line A6). If the maximum rate established on FCC Form 1230 does not exceed $1.24 per channel, the rate shall be presumed reasonable. 6. On December 15, 1995, Tele-Media filed FCC Form 1230s seeking to justify its CPST and BST rates through the simplified small system cost of service procedures under the Commission's Small System Order. We find that Tele-Media is a company with fewer than 400,000 total subscribers and that the system in question serves fewer than 15,000 subscribers, making them eligible for small system relief. Further, Tele-Media's filing shows that its actual rate per channel for regulated cable service (FCC Form 1230, Line A11) does not exceed its per subscriber, per channel monthly programming costs (FCC Form 1230, Line A6) and the Maximum Permitted Rate (FCC Form 1230, Line A10) does not exceed $1.24. We, therefore, find the rates to be not unreasonable. 7. Accordingly, IT IS ORDERED, pursuant to 47 C.F.R. Section 76.934 of the Commission's rules, that Tele-Media's request for small system relief IS GRANTED. 8. IT IS FURTHER ORDERED that the BST rate charged by Tele-Media during the period under review with respect to each of the above-referenced CUID numbers IS JUSTIFIED. 9. IT IS FURTHER ORDERED, pursuant to 47 C.F.R. Section 76.933(d) of the Commission's Rules, that this decision is binding on each of the captioned local franchising authorities, the Cities of Tawas City and East Tawas, the Townships of Alabaster and Baldwin, and the Charter Townships of AuSable and Oscoda, Michigan and the cable operator, Tele-Media Company of Saginaw Bay. 10. IT IS FURTHER ORDERED that the CPST rates charged by Tele-Media during the period under review for the above-referenced CUID numbers ARE JUSTIFIED. 11. IT IS FURTHER ORDERED that the complaints against the CPST rate charged by Tele-Media during the period under review with respect to the above-referenced CUID numbers ARE DENIED. 12. These actions are taken pursuant to delegated authority under Section 0.321 of the Commission's rules, 47 C.F.R. 0.321. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau