******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. 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 ) ) Robinson/Plum Cablevision, L.P. ) CUID No. PA1391 (Plum) d/b/a Adelphia Cable Communications) ) Complaints Regarding ) Cable Programming Services Tier ) Rate Increases ) ORDER Adopted: April 8, 1997 Released: April 11, 1997 By the Chief, Cable Services Bureau: 1. In this Order we consider a complaint against the August 1, 1996 rate increase that the above-captioned operator ("Operator") implemented for its cable programming services tier ("CPST") in the community set forth above. This Order addresses only the reasonableness of the Operator's rate increase of August 1, 1996. We have already issued a separate order on May 9, 1995, which found that the Operator's rates in effect before May 15, 1994 were not unreasonable. We also issued an order on January 17, 1996, granting the previous owner of the system, Plum Cable TV, small system relief while finding that its rates in effect from May 15, 1994, to January 17, 1996, as justified on FCC Form 1230 ("Form 1230 Order"), were not unreasonable. Accordingly, this Order addresses the reasonableness of the Operator's CPST rate increase of $3.95 from $14.86 to $18.81 effective August 1, 1996. 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. If the Commission finds the rate unreasonable, it shall determine the correct rate and any refund liability. The Telecommunications Act of 1996 ("1996 Act") and our rules implementing the new legislation ("Interim Rules"), require that complaints against the CPST rates be filed with the Commission by a franchising authority that has received subscriber complaints. A franchising authority may not file a CPST rate complaint unless it receives more than one subscriber complaint within 90 days after such increase becomes effective. 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 January 23, 1997, the local franchising authority ("LFA"), filed a complaint against the Operator's August 1, 1996 CPST rate increase. The LFA has certified that it has complied with the Interim Rules. Operator submitted FCC Form 1240 for the community set forth above to justify the rate increase that went into effect on August 1, 1996. Along with the complaint the LFA submitted a Supplement ("Supplement 1") which included the Operator's Response ("Response") which Operator had filed with the LFA on November 13, 1996. On February 24, 1997, the LFA submitted a Second Supplement ("Supplement 2") to its FCC Form 329 Cable Complaint. Both Supplement 1 and Supplement 2 raise several issues contending that the Operator has not met its burden of justifying its CPST rate. 5. First, the LFA argues that the Operator used an incorrect interpretation of the Commission's rules in calculating the rates for the addition of channels. The LFA states that Operator violated the Commission's rules by increasing its rates in excess of the $1.70 that is permitted pursuant to Section 76.922(g)(3) of the Commission's rules ("Caps Method"). We conclude that the LFA has misinterpreted the Commission's rules and that the Operator correctly raised its rates under the Caps Method. Using the Caps Method, an Operator may increase its rates between January 1, 1995, and December 31, 1997, by a per channel adjustment of up to $0.20 per channel, exclusive of programming costs, for new channels added to CPSTs on or after May 15, 1994. The Operator may not make rate adjustments totalling more than $1.20 per month per subscriber through December 31, 1996, or by more than $1.40 per month per subscriber through December 31, 1997 (the "Operator's Cap"). The Commission's rules also allow for a license fee reserve when adding new channels. Operators that make channel additions on or after May 15, 1994, may increase their rates by a total of $0.30 per month, per subscriber between January 1, 1995, and December 31, 1996, for license fees associated with such channels. The $0.30 limit no longer applies after December 31, 1996. We find that Operator has correctly calculated its channel additions using the Caps Method. 6. Second, the LFA argues that the Operator was not entitled to take advantage of the true-up method. The LFA states that on January 9, 1996, the Operator acquired Plum Cable TV from Eastern Telecom Corporation and therefore Operator did not incur any actual costs to include in a true-up for the period October 1, 1995 to April 30, 1996 on Operator's FCC Form 1240. Operator argues in its Response that upon purchase, the previous owner's rate filings transfer to the purchaser. Operator asserts that it correctly followed the instructions for FCC Form 1240. Additionally, Operator contends that the LFA offers no basis in fact or law for its argument that Operator may not take advantage of the true-up. 7. The LFA has failed to cite to any of the Commission's rules, or its prior orders, which support the LFA's contention. In the past, the Commission has permitted, and the FCC Form 1240 by design allows, the new owner of a cable system to begin a true-up period with the prior system owners's maximum permitted rate, adjust that rate for past external costs and inflation, and then bring forward the resulting true-up adjustment when calculating the maximum permitted rate for the new system owner's projected period. Consequently we find Operator's use of the true-up modules on its FCC Form 1240 not unreasonable. 8. Third, the LFA argues that the Operator took an additional $0.20 for a channel it did not add in 1997. We disagree. Operator's Worksheet 2 - Caps Method (Projected Period) in its FCC Form 1240 indicates on Line 207 an additional $0.20. The column in which the $0.20 is placed is "License Fee Reserve Used." Therefore, we find that the additional $0.20 is for a license fee and not an additional channel. 9. Operator argues that the LFA's complaint is invalid because it is based on FCC Form 1240s that the Operator filed with the LFA in April 1996, and September 1996. The Operator subsequently withdrew those FCC Form 1240s and filed an amended FCC Form 1240 in December, 1996. We disagree with the Operator and find the LFA's complaint valid. Under the Commission's rules, a franchising authority may file a complaint challenging the reasonableness of its cable operator's CPST rate. In the present case, the LFA's timely filed complaint is challenging the reasonableness of a CPST rate increase implemented by the Operator on August 1, 1996, not an FCC Form 1240. Therefore, we reject Operator's argument that the complaint is invalid. 10. Operator also alleges that the LFA's FCC Form 329 states an incorrect rate. The LFA states that it entered a CPST rate of $18.11 on its FCC Form 329 because it believed, incorrectly, that Operator's current CPST rate of $18.81 included franchise fees. Consequently, the LFA subtracted the franchise fees and entered the rate of $18.11 on its FCC Form 329. Operator, however, did not include franchise fees in its current rate. Therefore, the correct rate on the FCC Form 329 should have been $18.81. This confusion regarding the franchise fees was corrected in the review process at the Commission. In general, we will find valid any complaint that states a claim on which relief can be granted and provides adequate information to allow us to process the complaint, despite minor flaws or inaccuracies. We believe this approach best implements the mandate of the 1992 and 1996 Cable Act. Because the LFA's complaint states a claim on which relief can be granted, and because the actual rate complained about was easily ascertained, we conclude that the LFA's complaint is valid. 11. Having dealt with the parties' issues, we shall review the Operator's rate justification forms. Upon review of the March 29, 1995, FCC Form 1210 for the period January 1, 1995, through March 31, 1995, we made the following adjustments. Operator incorrectly took both a Price Caps Method Adjustment and Markup Method Adjustment in its calculation. Operator is not permitted to use both methods for the same channels, as appears to be the case in this instance. We allowed the Operator the Price Caps Method because the Operator had elected to use it pursuant to Question 8 on the FCC Form 1210. This adjustment reduced the maximum permitted rate ("MPR") by $0.02 from $14.86 to $14.84. 12. On February 24, 1997, the Operator filed its amended FCC Form 1240 to justify the CPST rate increase that began August 1, 1996, in the community set forth above. After evaluation of the Operator's amended Form 1240, we made the following adjustments to the Operator's calculations. First, as a result of our adjustment to the Operator's FCC Form 1210, discussed above, we adjusted Part I, Module A, Line A1 of the Operator's FCC Form 1240 to reflect the corrected MPR of $14.84 calculated on the FCC Form 1210. Second, per instructions for FCC Form 1240, Line D2, we adjusted the current external costs of $5.7921 reported by the Operator to $6.84 on Part I, Module D, Line D2, to conform with the latest external cost figure reported on the Operator's FCC Form 1210. In the aggregate, our adjustments reduced the Operator's MPR from $18.31 to $16.42. 13. Upon review of the record before us, we find that the Operator has failed to demonstrate that its MPR of $18.31 is reasonable. According to Operator's submissions, it raised its CPST rate to $18.81, effective August 1, 1996; lowered its CPST rate to $17.85, effective October 1, 1996; and then raised the CPST rate to $18.31, effective February 1, 1997. Based upon the record before us, we find that the Operator has only provided sufficient evidence to support a CPST rate of $16.42. We conclude, therefore, that Operator's CPST rate increase of $3.95 from $14.86 to $18.81, which went into effect on August 1, 1996, and its subsequent adjustments, are not justified. 14. 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 $3.95 from $14.86 to $18.81 charged by the Operator in the community set forth above from August 1, 1996, to the present, IS UNREASONABLE. 15. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321, that the complaint referenced herein against the rate increases charged by Operator in the community set forth above IS GRANTED. 16. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R. Section 76.961, that the Operator shall refund to subscribers in the community referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of $16.42 per month (plus franchise fees), plus interest to the date of the refund, for the period of August 8, 1996 to the day before the Operator implements the maximum permitted CPST rate of $16.42 17. IT IS FURTHERED 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. 18. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321, that the Operator take into account our adjustments in its true-up calculation in the next FCC Form 1240 that it files with the Commission. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau