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                                Before the
                     Federal Communications Commission
                          Washington, D.C. 20554
                                     
In the Matter of  )     
                  )     
InterMedia Partners     )     CUID No. TN0082 (City of Murfreesboro)      
                  )     
                  )     
Petition for Reconsideration  )

       
ORDER ON RECONSIDERATION
                             AND RATE ORDER

        Adopted:  January 8, 1998                  Released:  January 12, 1998  

By the Deputy Chief, Cable Services Bureau:


I.      INTRODUCTION

  1.    In this Order, we consider a petition for reconsideration ("Reconsideration Petition") filed
with the Federal Communications Commission ("Commission") by the above-referenced operator
("Operator") of a June 20, 1996 order ("CPST Order") by the Cable Services Bureau ("Bureau")
granting complaints alleging that Operator's rates were excessive for its cable programming services tier
("CPST") in the community referenced above.  We also consider a complaint against Operator's May
15, 1997 CPST rate increase in the above-referenced community.


II.     RECONSIDERATION PETITION

  A.    Procedural History

  2.    In the CPST Order, we found that Operator's CPST rates for the period September 1,
1993 through June 30, 1996 had not been justified by Operator's cost of service filing.  We ordered
Operator to reduce its CPST rate and to refund to CPST subscribers payments made in excess of
Operator's maximum permitted rates ("MPRs").  On July 22, 1996, Operator timely filed its
Reconsideration Petition.  On August 1, 1996, Operator filed a petition for stay ("Stay Petition") of the
CPST Order.  On August 6, 1996, Operator filed an addendum to the Reconsideration Petition
("Addendum"), revising and supplementing certain cost of service figures which originally had been filed
on October 30, 1995, pursuant to a Bureau request.  On August 16, 1996, Operator filed a refund plan
("Refund Plan") as required by the CPST Order.  On August 19, 1996, the local franchising authority
("LFA") filed a pleading entitled "Objection to June 15, 1996, FCC Order, and Intermedia Petition for
Stay, and Petition for Reconsideration" ("LFA Pleading").

  3.    In addition to the CPST Order, we have issued two other orders concerning the above-
referenced community.  The first of these, released May 22, 1995, granted Operator's request for a stay
of a rate order by the LFA requiring Operator to reduce its basic service tier ("BST") rates and refund
past overcharges to BST subscribers.  The second order ("Remand Order"), released August 13, 1996,
addressed an appeal petition by Operator of the same LFA rate order.  On procedural grounds, we
remanded Operator's appeal petition to the LFA for further consideration.

  B.    Background

  4.    On May 3, 1993, the Commission released its Implementation of Sections of the Cable
Television Consumer Protection and Competition Act of 1992:  Rate Regulation, MM Docket No. 92-266,
Report and Order and Further Notice of Proposed Rulemaking ("Rate Order") establishing rules to
implement the cable television rate regulation provisions of the 1992 Cable Act.  In the Rate Order, the
Commission determined that a benchmark and price cap approach should serve as the primary method
for regulating BST and CPST rates.  The Commission also concluded that because the benchmark
methodology might not produce fully compensatory rates in all cases, it was appropriate to permit
operators, as an alternative, to justify rates based on costs, using individual cost of service showings. 
The cost of service approach was intended to be used only if an operator believed 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.  Under traditional cost of service regulation, rates are
set at a level to provide a company with recovery of its costs and a reasonable opportunity to earn a fair
return on its invested capital.

  5.    The Commission found, however, that the record before it at the time of  the adoption
of the Rate Order did not provide sufficient information on which to develop detailed cost of service rules
for the cable industry.  Therefore, on July 16, 1993, the Commission issued a Notice of Proposed
Rulemaking which proposed requirements to govern cost of service showings submitted by cable
operators seeking to justify rates higher than those determined under the benchmark approach.  The
Commission indicated in the Notice, as it did in the Rate Order, that general cost of service principles
would apply to cost of service filings submitted prior to the  adoption of specific rules.  Operator's cost
of service filing under  review in this proceeding was submitted during that pre-adoption time period. 
In February 1994, the Commission adopted an order (the "Cost Order") setting forth specific regulatory
requirements to govern cost of service filings to justify rates above levels determined under its benchmark
requirements.  Those rules took effect May 15, 1994.  The guidance of the Cost Order became known
as the "Interim Rules."

  6.    Subsequently, 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 No. 94-28 ("Final Cost Order") setting forth its final rules to govern cost of
service filings.  In the Final Cost Order, the Commission refined the approach it had adopted in the
Notice and Cost Order and reaffirmed the use of the cost of service approach for operators for which the
benchmark approach might not produce fully compensatory rates in all cases.  The Commission also
determined that cost of service filings still pending before the Commission could be reviewed in
accordance with the Final Cost Order, unless the operator notified the Commission by April 8, 1996, that
it wished its filing to be reviewed under the Interim Rules of the Cost Order.

  7.    In response to the February 25, 1994 complaint leading to our CPST Order, Operator
filed an August 15, 1994 cost of service justification on FCC Form 1220, seeking to establish that its
CPST rate of $12.04 per month for the period September 1, 1993 through March 31, 1994 was
reasonable.  Operator also filed with the Commission an initial and two amended FCC Forms 1210.  The
most recent amended FCC Form 1210, filed November 29, 1995, attempted to justify a CPST rate
increase to $13.89, beginning January 15, 1995, based upon changes in channels, external costs, and
inflation incurred during the period April 1, 1994 through December 31, 1994.  Operator did not elect
to have the Interim Rules applied to its FCC Form 1220.  Accordingly, we analyzed Operator's FCC
Form 1220 pursuant to the Final Cost Order.  We also reviewed all of Operator's CPST rate justifications
pursuant to the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act"), and the Commission's implementing regulations, to determine whether the rates charged were
unreasonable and to determine, if necessary, any associated refund liability.  

  8.    In analyzing Operator's FCC Form 1220, we evaluated rate base and expense items 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,
we disallowed such cost in whole or in part.  In some cases, we found costs that were not allowable,
and we made appropriate adjustments.  With our adjustments and disallowances, we reduced Operator's
MPR on its FCC Form 1220 to $11.88.  Consequently, we found that Operator's monthly CPST rate
of  $12.04, effective September 1, 1993 through January 14, 1995, was unreasonable.  We ordered
Operator to refund its overcharges for the period February 25, 1994, the date of the first valid complaint,
through January 14, 1995.

  9.    When we reviewed Operator's most recently amended FCC Form 1210, we found no
apparent errors in Operator's methodology.  Nevertheless, we found it necessary to make certain
adjustments to the rate that Operator was required to carry over from its previous rate filing.  Instead of
reporting its maximum permitted cost of service rate, Operator had reported its benchmark rate in Module
A for purposes of updating its CPST rate.  We corrected this error and revised Module A to state the cost
of service rate of $11.88 for purposes of updating Operator's CPST rate.  After making the appropriate
adjustments, we concluded that Operator had failed to justify the CPST rate of $13.89 that it was
charging pursuant to its FCC Form 1210 filings.  Instead, we found that Operator's most recently
amended FCC Form 1210 justified an MPR of $13.64.  We ordered Operator to refund CPST
overcharges above that amount for the period beginning January 15, 1995.

  C.    Discussion

        1.    Operator's Pleadings

  10.   Operator makes three major arguments in its Reconsideration Petition.  First, Operator
claims that in analyzing Operator's cost of service filing, the Bureau adjusted various ratebase and
expense elements, particularly accumulated depreciation and accumulated amortization, in a manner
inconsistent with Commission rules and policies.  These adjustments carried forward to Operator's FCC
Form 1210 filing, resulting, according to Operator, in substantially lower rates than Operator had
justified.  Second, Operator maintains that in reliance upon its belief that it had successfully justified its
CPST rates in its cost of service filing, it subsequently failed to file justifications for, and failed to
implement, allowable adjustments for external costs and inflation.  Operator argues that these adjustments
alone, if permitted now, would be sufficient to offset the reductions and refund liability established in the
CPST Order.  Third, Operator asserts that the Bureau could have and should have held the CPST Order
in abeyance while it was ruling on Operator's appeal of the LFA order in the above-referenced
community.  In Operator's view, the liability established in the CPST Order would be fully offset if the
Bureau were to reduce that liability by the amount of Operator's undercharges to its BST subscribers.

        a.    Ratebase and expense element adjustments

  11.   Operator breaks its first argument down into three sub-arguments.  The first of these is
that the Bureau erred in its restatements of Operator's accumulated depreciation and amortization
accounts.  Following this claim is Operator's assertion that we improperly applied a 34 percent
adjustment for monopoly profits.  Finally, Operator argues that the Bureau should not assume that
Operator, a partnership, benefits from deferred tax liability.  Because the issue of the 34 percent
adjustment has bearing upon the Bureau's treatment of Operator's accumulated depreciation and
amortization accounts, we shall address this issue first.

  12.   Thirty-four percent adjustment.  Operator disagrees with the way we applied a 34 percent
reduction to Operator's ratebase assets.  The Final Cost Rules presume, rebuttably, that 34 percent of the
purchase price associated with the regulated services of a cable system purchased prior to regulation
represents monopoly expectations and must therefore be removed from the regulated ratebase. 
Accordingly, our rules require that we apply a 34 percent reduction to the purchase price allocable to all
assets, both tangible and intangible, associated with regulated services in order to remove all expectations
of monopoly profits.  Operator does not object to the reduction per se.  Rather, Operator objects that
the Bureau applied the entire amount of the reduction to Operator's intangible assets and the associated
accumulated amortization of those assets.  According to Operator, the Final Cost Rules require that the
34 percent adjustment be applied to both tangible and intangible assets.

  13.   Operator is mistaken.  While the Final Cost Order states that the 34 percent adjustment
must be based upon the entire purchase price of the cable system, it does not require an apportionment
of the adjustment between both tangible and intangible assets.  Rather, the Final Cost Order suggests that
in most cases the entire amount of the adjustment should be applied only against intangible assets.  The
rationale for this practice is provided in the Final Cost Order:

  [T]he absence of rate regulation presumably would have increased the overall value of
  any particular cable system, but would have had no effect on the book value of the
  tangible asset.  Thus, the increased value attributable to a lack of regulation would have
  to be allocated to intangible assets.  [emphasis added]

  14.   As a practical consideration, FCC Form 1220 does not usually permit tangible assets
acquired with the purchase of a cable system to be distinguished from tangible assets placed into service
after an acquisition.  While the valuations of tangible assets acquired with a system purchase may include
acquisition premiums, tangible assets placed into service after a system acquisition usually reflect
historical costs.  Intangible assets, on the other hand, arise exclusively from system acquisitions.  If the
Bureau were to apply the 34 percent adjustment to tangible assets, it would risk adjusting the value of
assets already priced at historical cost.  The Bureau is able to minimize that risk, however, by allocating
the adjustment solely to intangible assets.  For these reasons, the Bureau customarily applies the entire
amount of the adjustment against intangible assets.  This is a reasonable determination and we reject
Operator's argument.

  15.   Accumulated amortization and depreciation adjustments.  Operator asserts that the Bureau
erred in adjusting Operator's ratebase and expense items.  Operator's precise objection, however, is
difficult to interpret.  Operator points out that "[i]n determining allowed operating expenses, the Bureau
recalculated permitted amortization expense to reflect the annual amount required to amortize the allowed
gross cost of the intangible assets over a 15 year period on a straight line basis."  Operator "requests that
the Bureau reconsider this calculation to restate the accumulated amortization and accumulated
depreciation to reflect the balances that would have been recorded had [Operator] adopted the straight line
depreciation method applied by the Bureau for tangible assets, and apply the 15-year useful life prescribed
by the Commission [in the Cost Rules] for [Operator's] intangible assets."  As detailed in the CPST
Order, the Bureau's original analysis of Operator's FCC Form 1220 applied the depreciation method,
amortization method, and useful lives that Operator now requests in its Reconsideration Petition.

  16.   Operator's actual objection may be to the Bureau's application of the 34 percent purchase
price adjustment exclusively to intangible assets with a proportionate adjustment to Operator's
accumulated amortization and amortization expense accounts.  We have already explained the reasons
for our general practice of allocating the 34 percent adjustment against only intangible assets.  Whatever
the specific underpinnings of this issue, numerous defects and inconsistencies in Operator's data, listed
below, prevent our relying upon these data as a basis for reconsideration of our treatment of Operator's
ratebase and expense items.  

  17.   First, in the table listing tangible and intangible asset values accompanying Operator's
Reconsideration Petition, Operator reported accumulated depreciation as $1,250,457 in the column titled
"Gross Book Value at Acquisition."  Presumably, this valuation reflected double-declining depreciation
applied through the filing date.  Yet, in the next column, titled "Estimated Historical Cost," Operator
listed accumulated depreciation as $404,591, or less than one-third of the prior value.  If the restatement
from Gross Book Value at Acquisition to Estimated Historical Cost had resulted from a conversion from
double-declining to straight-line depreciation, then the valuation of accumulated depreciation in the
Estimated Historical Cost column would have been about half of the valuation listed in the Gross Book
Value at Acquisition column.

  18.   Second, in the Reconsideration Petition, Operator claims that if the Bureau had "properly
applied the Commission's cost Rules and policies, it would have reduced accumulated depreciation from
($1,250,457) (Worksheet A, Line 10) to ($450,239)[.]"  Here Operator cites a figure for accumulated
depreciation far different from the one in the table listing tangible and intangible asset values
accompanying Operator's Reconsideration Petition.  Third, in the Reconsideration Petition, Operator
states that it "reported a total depreciation expense of $363,878 in its Form 1220 filing . . . ."  However,
in its FCC Form 1220, Operator shows a total depreciation expense of $416,032, another example of
inconsistency.

  19.   Fourth, it appears that Operator adjusted accumulated depreciation to account for both
a restatement from double-declining to straight-line depreciation and a 34 percent adjustment.  Such an
adjustment would have resulted in a restated accumulated depreciation value of $412,651 or slightly more
than the $404,591 reported as accumulated depreciation based on Operator's "Estimated Historical Cost"
methodology.  However, Operator adjusted corresponding tangible assets from a "Gross Book Value
at Acquisition" value of $5,823,398 to an "Estimated Historical Cost" of $4,484,308, a reduction of
only 23 percent.  These inconsistent reductions, if accepted, would lead to an overstated ratebase.

  20.   Fifth, in its Addendum, Operator modifies the table listing tangible and intangible asset
values, explaining that the original table reflected accumulated depreciation for the wrong time period. 
Operator reports that it should have shown the Gross Book Value at Acquisition of accumulated
depreciation as $479,124 instead of $1,250,457, as listed in the original table.  As a preliminary matter,
we note that at the time of our original CPST review, we could not have anticipated Operator's error;
and we conducted our assessment based upon the best evidence available.  Moreover, a Commission rule
anticipates this situation by preventing us from granting a petition for reconsideration that relies on facts
not previously presented to us unless these facts relate to events which have occurred or circumstances
which have changed since a petitioner's last opportunity to present the facts to us or unless these facts
were unknown to petitioner until after its last opportunity to present them to us.  Even if we were able
to consider Operator's altered figure for accumulated depreciation, we still would not grant
reconsideration.  The corrected figure approximates straight-line depreciation of tangible assets valued
at $5,823,398 and not the double-declining depreciation Operator claims to have applied.  The
correction, consequently, renders Operator's request for us to permit a conversion from double-declining
to straight-line depreciation unnecessary.

  21.   Sixth, Operator failed to follow Commission rules requiring the 34 percent adjustment. 
In Operator's original table listing tangible and intangible asset values, Operator shows an adjustment of
the sum of gross tangible and intangible assets from $23,467,953 to $16,919,871, or a reduction of
only 27.9 percent.  The adjustment is 6.1 percent less than the 34 percent reduction prescribed under our
rules, and it results in an overstated ratebase.  This results because Operator disagreed with Commission
conclusions regarding the difference in profitability between competitive and noncompetitive cable systems
and therefore had substituted its own figure for the Commission-prescribed competitive differential:

  The Commission's exclusion of all but a small portion of intangible value is based on its
  contention that prices paid for cable systems following the 1984 Cable Act reflected
  expectations of supra normal returns on monopoly rates.  The Commission has also
  quantified the monopoly premium as equal to 17% of the September 1992 rates of
  systems without competition.  Without conceding to the veracity of the so-called
  "competitive differential" proposed by the Commission, and in fact, InterMedia disagrees
  with the Commission's conclusions on the competitive differential, Intermedia has
  revalued its intangibles using a reduced differential of 13 % to exclude any monopoly
  value . . . .  [emphasis added]

Despite Operator's disagreement with our rules, Operator has failed to provide any substantive reason
why the "competitive differential" proposed by the Commission is incorrect or why we should waive the
34 percent reduction prescribed under our rules.  Therefore, Operator's application of a percentage other
than the percentage prescribed by Commission rules precludes the use of Operator's ratebase asset and
related expense information as a basis for adjustment.

  22.   Seventh, if the Bureau applied the 34 percent adjustment to both tangible and intangible
assets, Operator's test year depreciation expenses on FCC Form 1220 would exceed the restated
accumulated depreciation balance reported by Operator.  This outcome fails to account for any
depreciation prior to the test year.  Eighth, Operator reported that it had purchased the Murfreesboro
system in May 1993, or eight months prior to the end of the test year.  Yet, both the depreciation
expenses and the amortization expenses reported on Operator's FCC Form 1220 appear to have been
based on a full 12-month year.  These errors also cause overstated maximum permitted rates.  For these
reasons, we reject Operator's request that we adjust its ratebase and expense items.

  23.   Tax liability.  Operator cautions that the Bureau should not assume that Operator, as a
partnership, benefits from deferred tax liability.  Operator's concern is unnecessary.  Operator did not
provide any deferred tax data in its original FCC Form 1220 submission, and the Bureau made no
adjustments for deferred tax balances during its review.  We note, however, that if Operator had applied
accelerated depreciation and amortization methods to its ratebase assets after the system was purchased,
then Operator would have been required to provide deferred tax data regardless of its organizational
structure.

        b.    FCC Form 1210 Adjustments

  24.   In the Reconsideration Petition, Operator explains that because it believed its cost of
service filing justified its applicable rate, it later refrained from filing justifications for rate increases that
would have been permitted based on adjustments for the periods January 1, 1995 through March 31, 1995
and April 1, 1995 through June 30, 1995, as well as additional adjustments for external costs and
inflation through the present.  These adjustments, Operator claims, "would more than offset all prescribed
refund liability."  Operator has included with the Reconsideration Petition draft FCC Forms 1210 for the
applicable periods that ostensibly justify higher MPRs.  Operator urges that we modify the CPST Order
to allow Operator the offsetting increases.

  25.   Our rules reflect a need for timeliness and certainty in the rate setting process.  They
provide operators using the quarterly rate adjustment method with a "use it or lose it" choice:

  Permitted charges for a tier may be adjusted up to quarterly to reflect changes in external
  costs experienced by the cable system . . . . In all events, a system must adjust its rates
  annually to reflect any decreases in external costs that have not previously been accounted
  for in the system's rates.  A system must also adjust its rates annually to reflect any
  changes in external costs, inflation and the number of channels on regulated tiers that
  occurred during the year if the system wishes to have such changes reflected in its
  regulated rates.  A system that does not adjust its permitted rates annually to account for
  those changes will not be permitted to increase its rates subsequently to reflect the
  changes.

Similarly, the rules stipulate that inflation adjustments "may be made after September 30, but no later
than August 31, of the next calendar year."

  26.   The rules are unequivocal regarding the timing of rate adjustments, and they do not
permit the relief that Operator seeks.  The rules serve to ensure fundamental precepts of certainty,
stability and fairness.  Nevertheless, Operator asks for a waiver of the rules, to the extent that one is
necessary.  Operator has provided us with no reason why such extraordinary relief should be granted,
other than that it believed its FCC Form 1220 filing to be justified.  To grant Operator's waiver request
would be to set a precedent for operators to seek to reform later filed rate justifications whenever we find
an earlier rate increase to be unreasonable.  We believe that such a precedent would lead to an
administratively untenable situation and would be unfair to operators who adhered to the rules.   We deny
Operator's request.

        c.    Inter-tier offset

  27.   Finally, Operator asserts that its BST rate is below the permitted level by an amount that
more than offsets the ordered reductions in its CPST rate.  Operator points out the similarities and
interrelationship between the BST and CPST rate reviews in cost of service cases and claims that, in
order to evaluate CPST rates, the Bureau had to make a determination regarding the reasonableness of
Operator's BST rates.  Operator explains that the Bureau has before it Operator's appeal of an LFA order
regarding BST rates, which was the case at the time Operator filed the Reconsideration Petition. 
Operator maintains that its BST and CPST subscriberships are nearly identical and that the Bureau has
sufficient information to verify the BST shortfall.  Operator argues that it had established its regulated
rates before we issued our Final Cost Rules, when there was great uncertainty among operators regarding
the application of cost of service rules and policies.  For these reasons, Operator asks that we grant
reconsideration of our CPST Order to allow an offset between the two tiers.

  28.   The issue of inter-tier offsets was raised by Cencom Cable Income Partners II, L.P. in
the Commission's decision in Cencom Cable Income Partners II, L.P. ("Cencom").  In Cencom, the
Commission explained why it does not allow such offsets:

        If both basic and CPST rates were within the Commission's jurisdiction, we
  might consider inter-tier offsets when ordering refunds for overcharges on CPST where
  less than the maximum permitted rate has been charged on the BST.  However, the
  Communications Act sets up a dual regulatory structure for cable services, giving local
  franchising authorities jurisdiction to regulate BST and associated equipment rates, and
  giving the Commission jurisdiction to regulate CPST rates upon the filing of a valid
  complaint.  While the Commission has prescribed standards and procedures for local
  rate regulation and is authorized to consider appeals from local rate orders, the
  Commission generally is not otherwise involved in local rate regulation and is not in a
  position to evaluate offsets between tiers as a matter of routine.  Absent an appeal, it may
  be uninformed about local matters potentially affecting BST rates.  Its processes are not
  coordinated with local rate review processes.  In short, allowing inter-tier offsets under
  the current statutory scheme would create practical problems in determining the correct
  BST rates for offset purposes, further burdening the administrative processes of cable rate
  regulation, and would be discordant with the dual regulatory structure Congress
  envisioned.

        In the limited context of global resolutions of rate complaints for all or a
  substantial number of a company's cable systems, the Commission has allowed inter-tier
  offsets when determining refund liability.  But, it has done so only after reviewing rates
  for BSTs, and where both individual complainants and local franchising authorities were
  able to participate in the rate resolution through comments on the proposal.  We have
  learned from this process that there often are considerations affecting rates at the local
  level that are not apparent from the face of the rate form filed to justify CPST rates and
  to which the Commission is not normally privy.  The special circumstances applicable
  to the rate resolutions are not present here.

        . . . None of the authorities cited by Cencom provides for aggregating revenues
  for services and equipment costs that are subject to review by different regulatory
  jurisdictions.  Indeed, Cencom's refund offset request is inconsistent with the
  Commission's conclusion in the Rate Order that cable operators should not balance low
  BST rates with CPST rates that exceed the maximum permitted rate for the tier. 
  Cencom is seeking to accomplish through refunds what it was prohibited from doing when
  setting its rates, without demonstrating any special circumstances that would  justify such
  treatment in this case.  We deny Cencom's request.

[footnotes in original, emphasis added]

  29.   We see no reason to deviate from our general rule of prohibiting inter-tier offsets.  As
explained earlier, we found much of the information in Operator's CPST cost of service filing unreliable. 
As a consequence, the argument that the cost of service showings for the two tiers are interrelated does
not persuade us to rely upon the information we had before us regarding Operator's BST rates. 
Moreover, we evaluated Operator's BST filing in the context of an appeal from a local rate order.  As
we stated in our Remand Order, our review in such situations is limited to deciding whether or not the
LFA acted unreasonably in applying the Commissions rules in rendering its local rate order.  In
addition, our remand decision was based on purely procedural grounds.  We do not find Operator's
description of the uncertainty under which it prepared its cost of service filing to be relevant to the issue
of inter-tier offsets.  Nevertheless, we must point out that Operator relinquished an opportunity for
increased certainty by failing to choose to have its filing reviewed under the Interim Rules of the Cost
Order.  Consequently, we reject Operator's request for an inter-tier offset and we deny Operator's
Reconsideration Petition as well as its Refund Plan.

        2.    LFA Pleading

  30.   We next turn to the LFA Pleading filed on August 19, 1996 and entitled "Objection to
June 15, 1996, FCC Order, and Intermedia Petition for Stay, and Petition for Reconsideration."  Because
the Commission issued no order concerning the above-referenced community on or around June 15, 1996,
other than the CPST Order, which was adopted on June 19, 1996 and released on June 20, 1996, we
believe it is the CPST Order that the LFA refers in the title of its pleading.  In substance, however, the
LFA Pleading is primarily a petition for reconsideration of the Final Cost Order.  The LFA claims that
the Final Cost Rules as applied in the CPST Order had the effect of increasing CPST rates in the
community.  Essentially, the LFA Pleading is a petition for reconsideration of either the Final Cost Order
or the CPST Order or both.  To the extent it is a petition for reconsideration of either the Final Cost
Order or the CPST Order or both, we deny it as having been untimely filed.  The title of the LFA
Pleading also suggests that it is an opposition to the Stay Petition.  If so, we must deny it as also having
been untimely filed.  To the extent that the LFA Pleading is an opposition to the Reconsideration
Petition, as the pleading's title also suggests, we deny it as having been filed after the time permitted by
Commission rules.


III.    CPST RATE COMPLAINT

  31.   As stated, we also consider herein a complaint against Operator's May 15, 1997 CPST
rate increase in the above-referenced community.  Operator increased its CPST rate from $14.09 to
$19.61 in a part of the system that had been rebuilt ("rebuild") and from $14.09 to $15.29 in a part of
the system that had not been rebuilt ("non-rebuild").

  32.   The Communications Act, authorizes the Commission to review the CPST rates of cable
systems not subject to effective competition to ensure that rates charged are not unreasonable.  The
Commission's original rate regulations took effect on September 1, 1993.  The Commission
subsequently revised its rate regulations effective May 15, 1994.  Cable operators must use the FCC
Form 1200 series to justify their rates through a benchmark showing for the period beginning May 15,
1994.  The Telecommunications Act of 1996 ("1996 Act") and our rules implementing the new
legislation ("Interim Rules"), require that complaints against CPST rates be filed with the Commission
by an LFA that has received subscriber complaints.  An LFA may not file a CPST rate complaint unless
it receives more than one subscriber complaint within 90 days after such increase becomes effective. 
If the Commission finds the rate unreasonable, it shall determine the correct rate and any refund
liability.

  33.   The LFA in the above-referenced community certified that it has complied with the
Interim Rules and that it has received more than one valid subscriber complaint.  The LFA verified that
it received its first valid subscriber complaint on June 6, 1997.  Along with its complaint, the LFA filed
FCC Forms 1210 and 1240 that had been submitted by the Operator.  The filing of a complete and timely
LFA complaint triggers an obligation upon Operator to file a justification of its CPST rates.  The
Operator has the burden of demonstrating that the CPST rates at issue are reasonable.

  34.   Operator filed four FCC Forms 1210 with the LFA, two for the rebuild and two for the
non-rebuild.  For the rebuild, Operator filed an FCC Form 1210 for the period January 1, 1995 to
March 31, 1995, attempt to justify an MPR of $14.01, and a second FCC Form 1210 for the period
April 1, 1995 to June 30, 1995, attempting to justify an MPR of $14.32.  For the non-rebuild, Operator
filed an FCC Form 1210 for the period January 1, 1995 to March 31, 1995, attempting to justify an MPR
of $14.01, and a second FCC Form 1210 for the period April 1, 1995 to June 30, 1995, attempting to
justify an MPR of $14.32.  Upon review of these FCC Forms 1210, we find that they are the same FCC
Forms 1210 we discussed earlier in the context of Operator's Reconsideration Petition.  As we
explained, Operator's failure to file these FCC Forms 1210 in a timely fashion, as required by our rules,
prevents our being able to consider them as justification for Operator's CPST rate increase.

  35.   Operator also filed two FCC Forms 1240 with the LFA, one each for the rebuild and non-
rebuild, and both for the projected period September 1, 1996 to August 31, 1997.  Upon review of
Operator's FCC Forms 1240, we reduced on both forms the figures on both Line A1 (Current MPR) and
Line 401 (Average Permitted Charge on Worksheet 4 (Residual Projected Period)) from $14.32 to $13.64
to take into account the reduction to Operator's MPR established in our CPST Order.  For the same
reason, we reduced Line D2 (Current External Costs Segment) on both FCC Forms 1240 from $3.4056
to $3.0337.  We also reduced Line H14 (Amount of True-Up Claimed for This Projected Period) on the
FCC Form 1240 for the rebuild from $54,531.0716 to $44,450.4098 and on the FCC Form 1240 for the
non-rebuild from $328,248.1748 to $267,567.6700.

  36.   These changes to Operator's FCC Form 1240 for the rebuild reduced Operator's MPR
from $19.65 to $18.98.  Because Operator's actual CPST rate in the rebuild portion of the community
referenced above, for the period beginning May 15, 1997, of $19.61 exceeds Operator's MPR, we find
that Operator's rebuild CPST rate is unreasonable.  The changes to Operator's FCC Form 1240 for the
non-rebuild reduced Operator's MPR from $18.58 to $17.91.  Because Operator's actual CPST rate in
the non-rebuild portion of the community referenced above, for the period beginning May 15, 1997, of
$15.29 does not exceed Operator's MPR, we find that Operator's non-rebuild CPST rate is not
unreasonable.

IV.      ORDERING CLAUSES

  37.    Accordingly, IT IS ORDERED, pursuant to Section 1.106 of the Commission's rules,
47 C.F.R.  1.106, that the Reconsideration Petition filed by Operator is DENIED.

  38.    IT IS FURTHER ORDERED, pursuant to Sections 0.321 and 1.43 of the Commission's
rules, 47 C.F.R.  0.321 and 1.43, that the Stay Petition filed by Operator is DENIED.

  39.    IT IS FURTHER ORDERED, pursuant to Sections 0.321 of the Commission's rules, 47
C.F.R.  0.321, that the Refund Plan filed by Operator is DENIED.

  40.    IT IS FURTHER ORDERED, pursuant to Sections 1.43, 1.45, and 1.106 of the
Commission's rules, 47 C.F.R.  1.43, 1.45, and 1.106, that the "Objection to June 15, 1996, FCC
Order, and Intermedia Petition for Stay, and Petition for Reconsideration" filed by the LFA on August
19, 1996, is DENIED.

  41.    IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47
C.F.R.  0.321, that Operator shall promptly revise its Refund Plan in accordance with this Order and
shall, within 30 days of the release of this Order, refile such revised refund plan with the Chief, Cable
Services Bureau, stating the updated cumulative refund amounts so determined (including franchise fees
and interest), describing the calculation thereof, and describing its plan to implement the refund within
60 days of the Commission approval of the updated plan.

  42.    IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47
C.F.R.  0.321, that the complaint referenced herein against the CPST rate charged, beginning May 15,
1997, by Operator in the franchise area referenced in the caption IS GRANTED TO THE EXTENT
INDICATED HEREIN.

  43.    IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47
C.F.R.  0.321, that Operator's CPST rate, in the non-rebuild portion of its system, for the period
beginning May 15, 1997 in the community referenced above, IS NOT UNREASONABLE.

  44.    IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47
C.F.R.  0.321, that Operator's CPST rate, in the rebuild portion of its system, for the period beginning
May 15, 1997 in the community referenced above, IS UNREASONABLE.

  45.    IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47
C.F.R.  76.961, that Operator shall refund to its subscribers in the rebuild portion of the community
referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of
$18.98 per month (plus franchise fees), plus interest to the date of the refund, for the period May 15,
1997 through the day before Operator implements the maximum permitted CPST rate of $18.98.

  46.    IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47
C.F.R.  0.321, that Operator shall promptly determine the overcharges to CPST subscribers for the
period May 15, 1997 through the day before Operator implements the maximum permitted CPST rate
of $18.98 in the rebuild portion of the community referenced above, and shall file, within 30 days of the
release of this Order, a report with the Chief, Cable Services Bureau, stating the cumulative refund
amounts so determined (including franchise fees and interest), describing the calculation thereof, and
describing its plan to implement the refund within 60 days of the Commission approval of the plan.

  47.    IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47
C.F.R.  0.321, that Operator shall revise its FCC Forms 1240 for the projected period September 1,
1996 to August 31, 1997 incorporating the changes detailed in this order and shall file such amended
FCC Forms 1240 with the Chief, Cable Services Bureau within 30 days of the release of this Order.

  FEDERAL COMMUNICATIONS COMMISSION 



  John E. Logan
  Deputy Chief, Cable Services Bureau