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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 ) ) Global Acquisition Partners, Ltd.) d/b/a Adelphia Cable Communications) CUID No. NY0874 (Orchard Park) ) NY1225 (Elma) Complaint Regarding ) Cable Programming Services Tier ) Rate Increase ) ORDER Adopted: January 31, 1997 Released: February 3, 1997 By the Chief, Cable Services Bureau: 1. In this Order we consider complaints against the August 1, 1996 rate increase of $3.86 by the above captioned operator ("Operator") for its cable programming services tier ("CPST") in the communities set forth above. This Order addresses the reasonableness of Operator's rate increase of August 1, 1996. Operator has attempted to justify its CPST rates through a cost of service showing on FCC Form 1220, a benchmark showing on Form 1210 and FCC Form 1240. We conclude, for the reasons discussed below, that the CPST rate increase implemented by Operator is unreasonable. 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") required the Commission to review CPST rates upon the filing of a valid complaint by a subscriber or local franchising authority ("LFA"). The Telecommunications Act of 1996 ("the 1996 Act") and our rules implementing the new legislation, require that complaints against the CPST rates be filed with the Commission only 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. 3. To justify rates for the period beginning May 15, 1994 through a benchmark or cost of service showing, operators must use the FCC Form 1200 series. Operators may justify adjustments to their rates on an annual basis using FCC Form 1240 to reflect reasonably certain and quantifiable changes in external costs, inflation, and the number of regulated channels that are projected for the twelve months following the rate change. Any incurred cost that is not projected may be accrued with interest and added to rates at a later time. If actual and projected costs are different during the rate year, a "true-up" mechanism is available to correct estimated costs with actual cost changes. The "true-up" requires operators to decrease their rates or alternatively permits them to increase their rates to make an adjustment for over or under estimations of these cost changes. 4. On November 5, 1996 and December 9, 1996, the LFA filed complaints regarding the August 1, 1996 increase in Operator's CPST rate in each of the communities set forth above. The LFA has certified that it has complied with the Interim Rules. On October 18, 1996, Operator submitted FCC Form 1240 to justify the rate increase that went into effect August 1, 1996. Upon review of Operator's FCC Form 1240, we find that Operator charged in excess of its calculated maximum permitted rate, as discussed in the paragraphs below. 5. On its FCC Form 1240 filing, Operator attempted to justify its current rate increase by adjusting a maximum permitted rate ("MPR") that was higher than the rate it previously charged to subscribers. To verify the MPR included on Line A1 of Operator's FCC Form 1240 rate justification, we reviewed FCC Forms 1210 and 1220 previously filed for Operator's Lancaster system, of which the communities set forth above are a part. 6. MPR Review - FCC Forms 1220 and 1210: We made three adjustments to Operator's cost of service calculations on its FCC Form 1220 that affected the MPR. First, Operator allocated all rate base and operating costs not directly assigned on a weighted channel basis, i.e. the number of channels per tier times the number of tier subscribers. In accordance with the Final Cost Rules, we revised these allocations on a channel ratio basis. This reduced the percentage of common costs allocated to the CPST from 60% to 55%. 7. Second, Operator did not allocate depreciation expenses assignable to the equipment basket on Lines 23, 26, 30 and 36 of FCC Form 1220. We revised Operator's calculations consistent with the general ledger detail data that accompanied the FCC Form 1220. 8. Third, Operator did not include the Home Shopping channel revenues and late fee revenues as offsets to its revenue requirement. Moreover, the advertising revenues assigned to Other Programming Service Activities should instead have been assigned to the CPST, as should the corresponding advertising expenses. Again, we made adjustments as appropriate, consistent with general ledger detail data that accompanied the FCC Form 1220. The effect of our FCC Form 1220 adjustments reduced the CPST MPR on that form from $19.99, as calculated by Operator, to $16.98, excluding franchise fees. 9. Upon review of the FCC Form 1210, we adjusted Line A2 of that form to $16.98 to reflect our correction to the CPST MPR on the previous FCC Form 1220. As a result of our adjustment, the MPR calculated on Operator's FCC Form 1210 for CPST has been corrected to $16.18. 10. Current Charge Review - FCC Form 1240: On its FCC Form 1240, Operator calculated a CPST Maximum Permitted Rate For Projected Period of $19.99, excluding franchise fees, to justify a $3.86 increase in its actual rates from $l5.70 to $19.56. As a result of our adjustments to the FCC Forms 1210 and 1220, discussed above, we adjusted Line A1 of Operator's FCC Form 1240 to reflect the corrected MPR of $16.18 calculated on the FCC Form 1210. As a result of our adjustment, the CPST Maximum Permitted Rate For Projected Period calculated by Operator on its FCC Form 1240 has been corrected to $18.75. 11. Upon review of the record before us, we find that Operator has provided sufficient evidence to support a CPST rate increase of only $3.05. Thus, Operator failed to demonstrate that its August 1, 1996 rate increase of $3.86 was not unreasonable. 12. Accordingly, IT IS ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321 that the monthly CPST rate increase of $3.86 charged by Operator in the communities set forth above beginning August 1, 1996, IS UNREASONABLE. 13. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321, that the complaints referenced herein against the August 1, 1996 CPST rate increase charged by Operator in the communities set forth above, ARE GRANTED. 14. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund subscribers in the communities set forth above that portion of the amount of the CPST rate increase paid by subscribers that exceeded the maximum permitted CPST rate of $18.75 per month (plus franchise fee), plus interest to the date of the refund, for the period from August 1, 1996 to the day before Operator implements the maximum permitted CPST rate of $18.75. 15. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that Operator in the communities set forth above, revise its calculation of its maximum permitted CPST rate in its next FCC Form 1240 filing. 16. IT IS FURTHER ORDERED that Operator shall promptly determine the overcharges to CPST subscribers for the stated periods, and shall within 30 days of the release of this Order, file a report with the Chief, Cable Services Bureau, stating the cumulative refund amount so determined (including franchise fees and interest), describing the calculation thereof, and describing its plan to implement the refund within 60 days of Commission approval of the plan. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Service Bureau