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Comcast Appeal Of Local Rate Orders In Minnesota Communities

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Released: March 19, 2014

Federal Communications Commission

DA 14-364

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of
)
File No. CSB-0749-A
)
North Metro Telecommunications
Comcast Cable Communications, LLC
)
Commission;
)
North Suburban Communications
Orders Setting Basic Equipment Rates
)
Commission;
)
Ramsey/Washington Counties Suburban
Appeal of Local Rate Orders and
)
Cable Commission;
)
South Washington County
Petition for Emergency Stay
)
Telecommunications Commission

ORDER

Adopted: March 18, 2014

Released: March 19, 2014

By the Deputy Chief, Policy Division, Media Bureau:

I.

INTRODUCTION

1. We dismiss Comcast’s appeal of several local cable rate orders with respect to pay-by-phone
convenience fees, grant the appeal with regard to charging different rates for different models of converter
boxes when equipment costs have been aggregated to calculate a single maximum rate, and deny the
appeal with respect to the unbundling of equipment and service rates. On May 14, 2013, Comcast Cable
Communications, LLC ("Comcast") filed a consolidated appeal of local cable rate orders issued by four
local franchising authorities in Minnesota (“LFAs”). These LFAs are North Metro Telecommunications
Commission (“NMTC”), North Suburban Communications Commission (“NSCC”), Ramsey/Washington
Counties Suburban Cable Commission (“RWCSCC”), and South Washington County
Telecommunications Commission (“SWCTC”).1 Subsequently, Comcast filed a second appeal with
regard to a fifth local cable rate order, also issued by NSCC.2 The appeals were consolidated
(“Consolidated Appeal”) procedurally at the request of the parties.3 The local rate orders (together, the
“Local Orders”) affect several communities in Minnesota and are the result of the LFAs’ review of
Comcast’s 2012 and 2013 FCC Form 1205s ("Comcast 1205s"), which set the maximum permitted rates
that Comcast may charge for equipment used to receive the basic service tier ("BST"). Comcast also filed

1 Appeal of Local Rate Orders by Comcast Cable Communications, LLC, filed May 14, 2013 (“First Appeal”).
2 Comcast Cable Communications, LLC Appeal of the North Suburban Cable Communications Commission Rate
Order
, filed June 3, 2013 (“Second Appeal”).
3 See Letter dated March 28, 2013 to John B. Norton, Deputy Chief, Policy Division, Media Bureau from Steven J.
Horvitz, Attorney for Comcast and Steven J. Guzzetta, attorney for the LFAs.

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DA 14-364

requests to stay the Local Orders (“Stay Petitions”).4 In this Order, we dismiss one issue in the
Consolidated Appeal for lack of jurisdiction, deny the Consolidated Appeal in part and grant it in part,
remand the Local Orders for further action consistent with this Order, and dismiss the Stay Petitions as
moot pursuant to the Cable Act and our rules.5

II.

BACKGROUND

2. Local Rate Appeals. The Communications Act of 1934, as amended, provides that, where
effective competition is absent, rates for the BST and associated equipment are subject to regulation by
LFAs.6 Rates for the BST and equipment should not exceed rates that would be charged by systems
facing effective competition, as determined in accordance with Commission regulations for setting rates.7
If the cable operator fails to meet its burden of proof, has improperly calculated its rates, or is
unresponsive to requests for relevant information, the franchising authority may use the “best information
available” to review the operator's proposed rates and, if appropriate, adjust them and order refunds.8
3. Rate orders issued by LFAs may be appealed to the Commission.9 In resolving an appeal of a
local rate order, the Commission will not conduct a de novo review of the rate filings. The Commission
will sustain the LFA's decision if it determines that the LFA acted reasonably in applying the
Commission's rules.10
4. FCC Form 1205. LFAs have jurisdiction to regulate the cable operator's rates for the
installation and lease of equipment used by subscribers to receive the BST.11 All equipment in the
customer’s home used to receive the BST is subject to rate regulation, regardless of whether such
equipment is also used to receive other tiers of regulated or unregulated programming services.12 The

4 Emergency Petition of Comcast Cable Communications, LLC for Immediate Stay of Local Rate Orders, filed May
14, 2013; and Comcast Cable Communications, LLC Emergency Petition for Immediate Stay of the North Suburban
Cable Communications Commission Rate Order
, filed June 3, 2013. The LFAs filed oppositions to the Stay
Petitions on May 21, 2013 and June 7, 2013, and a consolidated opposition (“Consolidated Opposition”) to the
Consolidated Appeal on June 18, 2013. Comcast replied to the stay oppositions and also to the Consolidated
Opposition (“Consolidated Reply”).
5 See 47 U.S.C. § 543 (b) (5) (B) and 47 C.F.R. § 76.944.
6 See 47 U.S.C. §§ 151 et seq.; 47 U.S.C. § 543 (a) (2).
7 47 U.S.C. § 543 (b); 47 C.F.R. § 76.922, et seq.
8 47 C.F.R. § 76.937(d); Falcon Classic Cable, 15 FCC Rcd 5717, 5720 (2000) ¶ 10; Western Reserve Cablevision,
Inc
., 14 FCC Rcd 13391, 13398 (1999).
9 47 U.S.C. § 543 (b) (5) (B); 47 C.F.R. § 76.944 (b).
10 Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate
Regulation
, 8 FCC Rcd 5631, 5731 (1993) (“Rate Order”); 9 FCC Rcd 4316, 4346 (1994) (“Third
Reconsideration
”). 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. Id. at 5732.
11 47 U.S.C. § 543 (a) (2) (A), (b) (1), (b) (3) (A).
12 47 C.F.R. §76.923 (a). The BST is defined by statute as “any service tier which includes the retransmission of
local television broadcast signals.” See 47 U.S.C. §522 (3). The BST includes, at a minimum, the broadcast signals
(except superstations) distributed by the cable operator, along with any public, educational, or government access
(continued.…)
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DA 14-364

covered equipment includes converter boxes, remote control units, and inside wiring. Regulated cable
operators that have not been found by the Commission to be subject to effective competition compute
cost-based equipment and installation rates annually using FCC Form 1205.13 The FCC Form 1205s are
filed with and are subject to review by the LFAs.
5. The Consolidated Appeal. In its Consolidated Appeal, Comcast seeks relief from the Local
Orders to the extent they (1) disallow a pay-by-phone convenience fee charged by Comcast to customers
who wish to pay their bill over the telephone; (2) require Comcast to have a single rate for different
models of converters when the costs for the converters have been aggregated under our rules; and (3)
require Comcast to separately calculate and list all rates that are for equipment costs that are included in
package rates.

III.

DISCUSSION

A.

PAY-BY-PHONE FEE

6. We decline to review the reasonableness of the Local Orders with respect to the pay-by-
phone convenience fee. In the Local Orders, the LFAs disallow a convenience fee of $5.99 charged by
Comcast to customers who wish to pay their bill over the phone. The LFAs postulate that this fee would
have been included in the service rate at the time the cable systems became subject to rate regulation in
1993.14 The LFAs claim that there is no evidence that the fee was removed or unbundled from the service
rate at that time and conclude that charging the fee now would amount to a double recovery of service
costs. In its Consolidated Appeal, Comcast argues that the LFAs have exceeded their authority and
misapplied the Commission’s rate rules by disallowing Comcast’s $5.99 pay-bill-by-telephone
convenience fee.15 Comcast argues that the pay-by-phone option was not available in the relevant
systems in 1993 and therefore no costs associated with that option would have been included in the initial
rate for cable services.16 Comcast asks the Commission to reverse that part of the Local Orders that finds
that Comcast cannot charge a convenience fee of $5.99 to subscribers who pay their bill over the telephone.
7. We address this issue first because it involves a question of jurisdiction. Based on our own
precedent, and without comment on the merits of either party’s arguments, we decline to rule on the
reasonableness of the Local Orders with regard to this issue. Instead, we dismiss this part of the
Consolidated Appeal because we have determined in previous decisions that these types of fees, such as

(…continued from previous page)
channels required by the local franchising authority, as well as any additional video programming signals or services
added to the basic tier by the cable operator. See 47 U.S.C. § 543 (b) (7); 47 C.F.R. § 76.901 (a).
13 See FCC Form 1205, Determining Regulated Equipment and Installation Costs (June 1996). See also 47 U.S.C. §
623 (a) (2) (cable systems subject to effective competition are not subject to rate regulation).
14 Consolidated Opposition at 29. When establishing initial regulated rates, cable operators computed their total
regulated revenue per subscriber from programming tiers and equipment installations and leases and then adjusted
this revenue based on benchmarks that reflected competitive rates or by reducing the revenue by the differential
between competitive and non-competitive cable systems. Cable operators then removed subscriber equipment and
installation costs and allocated the remaining regulated revenue among then-regulated programming tiers to
establish programming tier rates. Equipment prices were established using a cost-based methodology. From that
point on, service and equipment rate increases were calculated separately. See Rate Order, 8 FCC Rcd 5631 (1993).
15 First Appeal at 2.
16 Id. at 6.
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DA 14-364

late fees, returned check fees, and other similar miscellaneous subscriber charges, are within the purview
of local franchising authorities and not part of our regulatory scheme.17 A convenience fee charged for a
particular payment method chosen by the subscriber falls into this category of miscellaneous fees.18 Local
authorities may regulate such fees if they are permitted to under State or local consumer protection or
other law. Therefore, resolution of this issue would be more appropriately addressed through negotiations
with or appeal to the LFAs, or appeal to a State or local court.
8. Thus, we dismiss this part of the Consolidated Appeal and decline to rule on the reasonableness
of the Local Orders on this issue.

B.

CONVERTER CHARGES

9. We find the Local Orders to be unreasonable with respect to the restriction on separate
pricing of aggregated basic-only converters. Our aggregation rules permit an operator to aggregate the
costs of basic-only subscribers' equipment.19 However, the costs of equipment used by basic-only
subscribers may not be aggregated with costs of equipment used by non-basic-only subscribers.20 In its
FCC Form 1205, Comcast aggregated its basic-only converters, including both high definition (“HD”)
and standard definition (“SD”) converters. Comcast then set two different rates for its converters, both
less than the maximum permitted rate (“MPR”) calculated on the FCC Form 1205.
10. In the Local Orders, the LFAs require Comcast to file revised FCC Form 1205s to separately
justify Comcast’s selected rates for HD and SD converters used by subscribers to the basic tier (“basic-
only converters”). The LFAs argue that because Comcast aggregated the costs of its HD and SD basic-
only converters in its FCC Form 1205 and calculated a single MPR for basic-only converters, it cannot
charge separate rates for its HD and SD basic-only converters.21 In the Local Orders, the LFAs do not
challenge Comcast’s aggregation of its basic-only converters but challenge Comcast’s ability to charge
different prices for the converters once a single MPR has been calculated.22 Comcast claims that its
equipment aggregating and discounting practices are fully consistent with Commission rules and
precedent.23
11. We have previously addressed the issue of separate pricing of aggregated equipment in the
context of non-basic-only equipment. Significantly, we stated that once equipment has been aggregated,

17 See, e.g., Falcon Cablevision, 11 FCC Rcd 10511 (CSB 1996); Charter Communications, 20 FCC Rcd 3503 (MB
2005).
18 If there were no choice of payment methods, then such a fee might be considered part of the regulated cable
service charge because all customers would be required to pay the fee as part of their cable bill.
19 See Implementation of Section 301(j) of the Telecommunications Act of 1996, Aggregation of Equipment Costs by
Cable Operators
, Report and Order, 11 FCC Rcd 6778, 6789 (1996); 47 C.F.R. § 76.923 (c) (2). See also 47 C.F.R.
§ 76.923 (c) (1) (“Costs of customer equipment . . . may be aggregated . . . into broad categories . . . of the same type
. . . regardless of the levels of functionality . . . ”)
20 Id.
21 Consolidated Opposition at 11.
22 In the Consolidated Opposition the LFAs question Comcast’s ability to aggregate the basic-only converters in the
first place. However, the LFAs did not challenge the aggregation of the basic-only converters in the Local Orders
and we do not address that issue in this Order.
23 Consolidated Reply at 2.
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a cable operator “is under no specific obligation to charge the same price for each item of equipment that,
on its Form 1205, is aggregated.”24 Subsequently, we re-affirmed that holding and found that a cable
operator is “not obliged to establish a particular relationship between the rates for its different kinds of
aggregated converters.”25 In other words, once several pieces of equipment of a single type (e.g.,
converter box) have been grouped together and averaged to determine a single MPR, there is no
requirement that a single rate be charged for the equipment or that different rates charged remain in the
same proportion to each other as the costs of the equipment. As long as all charges per unit are under or
equal to the MPR, and the pricing scheme is not discriminatory,26 our rules do not prohibit different
charges for separate classes of converters. Although the equipment at issue in our prior orders was non-
basic-only equipment, the same rationale applies to the basic-only equipment here. The establishment of
different prices for aggregated equipment is not prohibited under our rules. The only relevant requirement
is that all of the separate prices must be equal to or less than the calculated MPR.
12. In the Local Orders, the LFAs also require Comcast to file revised FCC Form 1205s to
separately justify Comcast’s charges for specific models of converters used by subscribers to non-basic
tiers of service (“non-basic-only converters”). Comcast denies that it is charging different prices for
different models of non-basic-only converters.27 We need not resolve the factual dispute as to whether
Comcast charges different prices for different models of converter boxes in the communities because, as
we previously stated in the orders cited above, our rules do not restrict the separate pricing of aggregated
converters as long as all rates are less than or equal to the calculated MPR. For this reason, we find the
Local Orders to be inconsistent with our precedent and therefore unreasonable with respect to this issue.

C.

EQUIPMENT UNBUNDLING

13. We find the Local Orders to be reasonable with respect to the unbundling of equipment and
service prices. In the Local Orders, the LFAs require Comcast to remove all costs for regulated
equipment from charges Comcast identifies as the HD Technology Fee, HD DVR Service Fee, and
Digital Adapter Additional Outlet Service Fee. In its Consolidated Reply, Comcast offers to separately
identify any equipment fees that are included in its service bundles and claims that some of its services do
not have an “equipment component.”28 Comcast also argues that, because the service packages are
unregulated, the equipment component need not be separately stated.29 The LFAs respond that each of
the service fees has at some point included equipment as part of its package even if the name of the fee
doesn’t reflect the inclusion of equipment.30
14. Section 76.923(b) of the Commission’s rules requires cable operators to establish separate
equipment and programming rates when setting initial regulated rates, by first unbundling (or separating)

24 See Comcast Cablevision of Dallas, Inc., et al., 19 FCC Rcd 10628, 10636 (MB 2004) (approving separate rates
for aggregated non-basic equipment).
25 See Comcast Cable of Dallas, Inc., 19 FCC Rcd 17421, 17424 (MB 2004).
26 See 47 U.S.C § 543(e).
27 First Appeal at 6.
28 Consolidated Reply at 17-18
29 Id. at 23-25.
30 Consolidated Opposition at 22.
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equipment costs from total regulated revenues.31 As noted above, regulated cable operators computed
their total regulated revenue per subscriber, adjusted this revenue to reflect competitive rates, and then
removed equipment and installation costs from the reduced revenue. This unbundling of equipment from
service allowed equipment rates to be determined using a cost-based methodology, as required by the Cable
Act. The statutory scheme of cost-based equipment prices and competitive service rates has not changed;
thus the unbundling requirement remains in effect today.32 Further, Section 629(a) of the Cable Act allows
multichannel video programming distributors, including cable operators, to offer subscriber premises
equipment for accessing multichannel video programming and other services offered over the system "if
the system operator’s charges to consumers for such devices and equipment are separately stated and not
subsidized by charges for any such service."33
15. Although Congress sunset regulation of the cable programming services tier (“CPST”) for
services provided after March 31, 1999, LFAs were allowed to continue to regulate the BST in systems not
found to be subject to effective competition.34 For regulated cable systems not found to be subject to
effective competition, all customer premises equipment used to receive the BST remained regulated, but
service charges for the CPSTs became unregulated. As a result, the Commission issued several decisions
clarifying that certain non-BST services were now unregulated services.35 However, the equipment
regulations still apply to all the equipment in a subscriber’s home that is provided and maintained by the
cable operator and that is used to receive the BST, even if it is also used to receive additional tiers of
unregulated services.36 So, even as pricing schemes become more complex with the de-regulation of the
CPSTs, the digital transition, and the development of advanced technologies, regulated equipment rates
must still be separately calculated and separately listed on rate cards.
16. In light of our equipment unbundling and rate regulation rules, we find the LFAs’ requirement
that Comcast remove all costs for regulated equipment from Comcast’s HD Technology Fee, HD DVR
Service Fee, and Digital Adapter Additional Outlet Service Fee as stated in the Local Orders to be
reasonable.

IV.

STAY PETITIONS

17. Because we decide herein the Consolidated Appeal on its merits, we decline to rule on the
Stay Petitions and dismiss them as moot.

31 47 C.F.R. § 76.923 (b). See FCC Form 1200, Setting Initial Maximum Permitted Rates for Regulated Cable
Services Pursuant to Rules Adopted February 22, 1994
, “First-Time Filers Form” (May 1994).
32 We disagree with Comcast’s argument that the Commission’s CableCARD rule, 47 C.F.R. 76.1205 (b)
(5)(ii)(B)(2), supports their claim that the unbundling rules no longer apply. That section reiterates that a cable
operator must separately disclose to consumers in a conspicuous manner, with written information, any fees for the
rental of CableCARDS and operator-supplied navigation devices. See 47 C.F.R. 76.1205 (b)(5)(i). See also, 47
C.F.R § 76.1206.
33 47 U.S.C. § 549 (a).
34 47 U.S.C. § 543 (e) (4).
35 See Comcast Cablevision of Dallas, Inc., 19 FCC Rcd 10628 (MB 2004); Comcast Cable of
Indiana/Michigan/Texas, Inc.
, 19 FCC Rcd 16344 (MB 2004); Comcast Cablevision of Dallas, Inc., 19 FCC Rcd
22687 (MB 2004)
36 See 47 C.F.R. § 76.923 (a); see also 47 U.S.C. § 543 (b) (3).
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V.

ORDERING CLAUSES

18. Accordingly, IT IS ORDERED that the Petitions for Emergency Stay ARE DISMISSED AS
MOOT.
19. IT IS FURTHER ORDERED that the issue of the $5.99 convenience fee is dismissed, and, to
that extent, the Consolidated Appeal IS DISMISSED IN PART.
20. IT IS FURTHER ORDERED that the Consolidated Appeal IS GRANTED IN PART AND
DENIED IN PART, as discussed above, and the Local Orders ARE REMANDED to the local franchising
authorities for further action consistent with this Order.
21. This action is taken pursuant to authority delegated by section 0.283 of the Commission's
rules, 47 C.F.R. § 0.283.
FEDERAL COMMUNICATIONS COMMISSION
John B. Norton,
Deputy Chief, Policy Division
Media Bureau
7

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