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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 ) ) TCI Cablevision of California, Inc. ) ) CUID No. CA0376 (Hemet) ) ) ) Cost of Service Showing to Support ) Cable Programming Services Tier ) Rate ) ORDER Adopted: March 20, 1997 Released: March 26, 1997 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider complaints about the rates of the above-referenced operator ("Operator") for its cable programming services tier ("CPST") in the community referenced above. Operator has attempted to justify its CPST rates through a cost of service showing on FCC Form 1220. We have already issued a separate order in which we found that Operator's rates in effect before May 15, 1994 were unreasonable. Accordingly, this Order addresses the reasonableness of Operator's CPST rates in effect from May 15, 1994. 2. The Communications Act authorizes the Federal Communications Commission ("Commission") to review the CPST rates of cable systems not subject to effective competition to ensure that rates charged are not unreasonable. The Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act") requires the Commission to review CPST rates upon the filing of a valid complaint by a subscriber or local franchise authority ("LFA"). If the Commission finds the rate to be unreasonable, it shall determine the correct rate and any refund liability. 3. The Commission's original rate regulations took effect on September 1, 1993. The Commission revised its rate regulations effective May 15, 1994. Cable operators that have valid CPST complaints filed against them prior to May 15, 1994 must demonstrate that their CPST rates were in compliance with the Commission's initial rules from the time the complaint was filed through May 14, 1994. Cable operators must also demonstrate that their rates were in compliance with the revised rules from May 15, 1994 forward. 4. The Commission has determined that a benchmark and price cap approach should serve as the primary method for regulating the basic service tier ("BST") and CPST rates. Because the benchmark methodology might not produce fully compensatory rates in all cases, the Commission permits operators, as an alternative, to justify rates using cost of service showings. The cost of service approach is intended to be used only if an operator believes that the maximum rate permitted under the benchmark formula would not enable the operator to recover costs reasonably incurred in providing rate regulated cable services. On December 15, 1995, the Commission adopted the Second Report and Order, First Order on Reconsideration, and Further Notice of Proposed Rulemaking, MM Docket No. 93-215 and CS Docket 94-28 ("Final Cost Order") setting forth its final rules to govern cost of service filings. 5. Our Memorandum Opinion and Order addressing the first valid complaint for the community referenced above indicates that the findings in that review "do not in any way prejudge the reasonableness of the prices for CPS service after May 14, 1994." Consequently, the rates beginning May 15, 1994, and subsequent rate increase on October 1, 1994, are subject to Commission review and are addressed in this Order. 6. Operator's FCC Form 1220 filing seeks to establish that its CPST rate, including a subsequent increase on October 1, 1994, is below the maximum permitted rate ("MPR") and is justified based on its cost of providing regulated cable service. According to information provided by Operator in its cost of service showing, the franchise area comprised approximately 13,303 CPST subscribers and Operator provided 22 CPST channels at the time of its filing. In this review process, we analyzed Operator's CPST cost of service showing to ensure that its CPST rate, and subsequent rate increase, were not unreasonable and to determine any associated refund liability. 7. In reviewing the cost of service showing on FCC Form 1220, we evaluated Operator's Asset Valuation, Capitalized Losses and Accumulated Amortization, Assignments, Cost Allocations, and Rate of Return to determine whether Operator should be permitted to recover those items. Where a certain rate base or expense element was not supported, was excessive, or was unrelated to providing regulated cable service, such cost was disallowed in whole or in part. Where reported costs were disallowed, we have made appropriate adjustments. Even with our adjustments and disallowances, however, we find that Operator's monthly CPST rates have been justified. 8. Based on our review of Operator's cost of service filing, applying the Commission's most current rules, we find that Operator has justified the monthly CPST rate of $10.80 charged from May 15, 1994 through September 30, 1994, and the monthly CPST rate of $12.30 effective October 1, 1994. 9. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the monthly CPST rate of $10.80 charged from May 15, 1994 to September 30, 1994 and the monthly CPST rate of $12.30 effective October 1, 1994, ARE NOT UNREASONABLE. 10. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the complaints referenced above ARE DENIED TO THE EXTENT INDICATED HEREIN. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau