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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: ) ) CONTINENTAL CABLEVISION ) OF OHIO, INC. ) ) Reconsideration of Appeal ) of Local Rate Order of the ) City of Mentor, Ohio ) MEMORANDUM OPINION AND ORDER Adopted: April 14, 1997 Released: April 16, 1997 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. Continental Cablevision of Ohio ("Continental"), the franchised cable system serving the City of Mentor, Ohio (the "City"), has filed a petition for reconsideration of the Cable Services Bureau's (the "Bureau") decision in Continental Cablevision of Ohio, Inc. In that decision, the Bureau denied Continental's appeal of a refund order issued by the City on the ground that Continental had not timely met the June 14, 1994 notice provision regarding Continental's refund deferral election. On appeal, Continental contended that while it had given notice to the City of its intention to elect the refund deferral option, it was unable to locate an actual copy of that notice. There being no evidence of notice, the Bureau denied Continental's appeal. On reconsideration, Continental now submits a copy of the notice sent to the City, dated June 10, 1994, along with a receipt for certified mail showing delivery to the City on June 13, 1994. The City has filed an opposition to the request for reconsideration and Cablevision has filed a reply. II. STANDARD OF REVIEW 2. Under our rules, rate orders made by local franchising authorities may be appealed to the Commission. In ruling on appeals of local rate orders, the Commission will not conduct a de novo review, but instead will sustain the franchising authority's decision as long as there is a reasonable basis for that decision. The Commission will reverse a franchising authority's decision only if it is determined that in rendering its local rate order the franchising authority acted unreasonably in applying the Commission's rules. 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. III. THE BUREAU'S ORDER 3. On April 19, 1995, Continental filed an appeal of a cable rate order, Ordinance No. 95-0-46, adopted by the City on March 21, 1995. The City's rate order approved both the Form 393 rates and the Form 1200 rates proposed by Continental. However, the City also held that Continental must refund approximately $30,000 to its subscribers for the period from May 15, 1994 through March 21, 1995, because Continental did not meet two prerequisites necessary to take advantage of the refund deferral period from May 15, 1994 to July 14, 1994, provided for under Sections 76.922(b)(6) and 76.964 of the Commission's rules. The City found that Continental had failed both to submit its FCC Form 1200 for the relevant city, Mentor, Ohio, to the City by the August 15, 1994 deadline and to demonstrate that it had notified the City of its decision to take advantage of the refund deferral period by June 14, 1994, as required under the Second Recon. Order. On appeal, the Bureau held that Continental did not qualify for the refund deferral period because it had failed to notify the City before the June 14, 1994 deadline that it was electing the deferral option. The Bureau further stated that given this finding it did not need to consider whether Continental's untimely FCC Form 1200 also would prevent Continental from qualifying for the refund deferral option. IV. BACKGROUND 4. Under the Cable Act of 1992, the Commission's initial rate regulations required regulated cable systems to apply a benchmark formula to determine their maximum permitted rates. Those systems whose rates were above the benchmark on September 30, 1992 were required to reduce their September 30, 1992 rates by the lesser of either 10 percent or the benchmark rate. This 10 percent reduction stemmed from the Commission's initial finding that on average there was a 10 percent difference (the so-called "competitive differential") between the rates charged by competitive and noncompetitive cable systems. Under the Commission's revised benchmark regulations adopted on February 22, 1994, regulated cable systems were required to set their rates at a level equal to their September 30, 1992 rates minus a revised competitive differential of 17 percent. In order to comply with the new rules, cable operators were required to collect necessary rate-setting information, complete FCC Form 1200 to determine their new permitted rates, and provide 30 days notice of any rate changes to their subscribers and to franchising authorities. Systems that were not in compliance with the new rules by May 15, 1994 were subject to refund liability for the period May 15, 1994 through July 14, 1994. 5. The Commission recognized that many systems would have difficulty complying with the new regulatory scheme by May 15, 1994 and, therefore, provided operators with the option of deferring refund liability for an additional 60 days after May 15, 1994, or until July 14, 1994. Pursuant to Sections 76.922 (b)(6)(ii) and 76.964, operators wishing to take advantage of this refund liability deferral were required to meet the following conditions: (1) the cable operator could not change its rates for any regulated service or equipment or restructure any regulated service or equipment offering between March 30, 1994 and July 14, 1994; (2) the operator had to provide subscribers at least 30 days' notice of any rate or service change made pursuant to the new rules; and (3) all rate and service restructuring must be completed by July 14, 1994. 6. In addition, pursuant to the Second Recon. Order, operators, such as Continental, "involved in proceedings concerning basic cable rates" at the time of the release of the Second Recon. Order, had to meet two additional conditions to qualify for refund deferral. The SecondRecon. Order required that an operator which "elects to take advantage of the refund deferral period," had to notify the local franchising authority by June 14, 1994 that it intended to do so. In addition, the Second Recon. Order required the operator to submit the relevant FCC rate justification forms to the local franchising authority no later than August 15, 1994. Thus, Continental was required to notify the City by June 14, 1994 that it was electing the refund deferral option and was required to submit the relevant rate justification forms to the City by August 15, 1994. As to the first requirement, Continental contended all along that it provided the required notice, but was unable to locate a copy until prior to its filing of this reconsideration petition. As to the second requirement, Continental mistakenly provided the City on June 20, 1994 with a FCC Form 1200 for the wrong franchise area. Continental was notified of its mistake on August 22, 1994 and, thereafter, provided the City with the correct FCC Form 1200 for Mentor. V. ISSUES A. Contentions of the parties 7. The Bureau previously found, and it is undisputed by the parties, that Continental complied with the following prerequisites to be eligible for refund deferral: (1) maintaining stability of rates prior to July 15, 1994; (2) providing 30 days notice to subscribers; and (3) completing rate restructuring by July 14, 1994. However, the parties disagree as to whether Continental was required to, and did in fact, fulfill the two additional conditions to qualify for refund deferral set forth in the Second Recon. Order. Continental argues that the Bureau's decision that there are five requirements a cable system must meet in order to become eligible for refund deferral is contrary to  76.922(b)(6)(ii) of the Commission rules, which only specifies three requirements. In any event, Continental contends that even if the Bureau does not change its decision to apply five criteria for refund deferral, rather than the three prerequisites specified in the rules, Continental effectively has met all five criteria. As to its notification to the City of its election of the refund deferral plan, Continental contends that, despite a thorough search both of Continental's corporate files and of its attorneys' office files, it only was able to locate a copy of the notice one week prior to filing its reconsideration petition. Continental now submitted a copy of the actual notice to the City dated June 10, 1994, along with a receipt for certified mail, indicating delivery to the City on June 13, 1994. Continental contends that the Bureau must reverse its prior decision, because that decision solely was premised on the fact that this notice was missing. 8. As to the timeliness of its rate justification forms, Continental claims that when the City received the wrong FCC Form 1200 from Continental on June 20, 1994, the City immediately should have notified Continental of the mistake and not waited until August 22, 1994. Continental contends that once it was notified of the mistake, it delivered the correct copy of FCC Form 1200 to the City by telecopier the next day and delivered the forms to the City by Federal Express on August 24, 1994. Continental notes that on March 21, 1995, the City approved all of Continental's rates, including its previously filed FCC Form 393, and the lower revised rates were timely implemented in July. Continental maintains that the City should bear responsibility for the delay in the filing of the correct FCC Form 1200 and further contends that neither the City nor any subscriber suffered prejudice as a result of the filing error. 9. In opposition, the City argues that pursuant to Section 1.106(c) of the Commission's rules, Continental should not now be allowed to introduce the notice because it is not new evidence; Continental has not shown that it could not have located the documents sooner through the exercise of ordinary diligence; and Continental does not make a public interest showing that its request should be considered. The City further argues that, although Continental was required to submit FCC Form 1200 to the City by August 15, 1994, the City did not receive it until August 24, 1994. The City claims that if it did not contact Continental on August 22, 1994, because it had received the wrong FCC Form 1200, it might not ever have received the correct filing. Finally, the City cites the Second Recon. Order, contending that Continental must meet all five of the Commission's prerequisites to be eligible to receive refund deferral. The City argues that since Continental failed to meet all of these conditions, its subscribers are entitled to the rate reduction that they would have received absent a refund deferral. Finally, the City requests that the Commission issue sanctions against Continental for "needlessly expending the scarce resources" of the Bureau and of the City on its initial rate appeal and on its present reconsideration petition. 10. In its Reply, Continental contends that, contrary to the City's claim, it is understandable how it might have failed to find the notice in view of the thousands of pages of rate regulation materials in its offices. Continental further states that the City has not explained its own misstatement concerning its receipt of this notice. Continental notes that the Commission has a policy of encouraging a level of cooperation between franchising authorities and cable operators on rate regulation matters and that the parties owe each other a duty of fair dealing and good faith. In addition, Continental contends that the public interest is served here by "reviewing and correcting decisions based on misstatements of fact," as well as by applying the rate regulations and "arriving at a reasonable result based on the actual facts as they occurred." Continental further states that the City's request for sanctions in this case is "inappropriate and frivolous." VI. DISCUSSION 11. We hold that Continental was required to comply with five prerequisites in order to take advantage of the refund deferral option. Section 76.922 of the Commission's rules provides that in general cable systems will not incur refund liability if they establish a permitted rate by July 14, 1994, and if they do not change the rate for, or restructure, any equipment service or program offering subject to regulation between March 31, 1994 and July 14, 1994. In addition, footnote 190 to the Second Recon. Order specifies that in those rate cases that are still pending when the Order is adopted, an operator who elects refund deferral, such as Continental, must submit its FCC forms to the franchising authority by August 15, 1994, and is required to notify the local franchising authority of its refund deferral election "by the date on which its rate justification on an FCC Form is due." These requirements govern different categories of cases and there is no inherent conflict between them. It is the operator's responsibility to ensure that forms are timely filed. 12. Adherence to the procedures established for processing and reviewing rate complaints is an important element to an orderly and fair adjudication of complaints. Departures undermine the entire system to the detriment of all involved. In this case, there was a diligent effort to comply with the procedures. Continental has demonstrated that it filed the notice to obtain a refund deferral. With regard to the responsibility to justify its rates, Continental filed FCC Form 1200, due on August 15, 1994, on June 20, 1994. When notified by the City that the document related to another franchise area, Continental promptly submitted a corrected version. The City does not claim that it was disadvantaged by this error. 13. Our procedural requirements are not so inflexible to override the substantive issues involved in a particular proceeding. In this case, the record indicates that Continental complied with all the filing deadlines to obtain a refund deferral. An error made on one document was corrected promptly and predjudiced neither the City nor the subscribers. We do not think the public interest is served by denying Continental the refund deferral it was entitled to under our rules. VII. CONCLUSION 14. For the above reasons, we will grant Continental's request for reconsideration of the Bureau's initial Order, and we remand this case for further proceedings not inconsistent with this decision. VIII. ORDERING CLAUSES 15. Accordingly, in view of the foregoing, IT IS ORDERED that the petition for reconsideration filed by Continental Cablevision of Ohio, Inc. IS GRANTED. 16. IT IS FURTHER ORDERED that Ordinance No. 95-0-46 IS REMANDED to the City of Mentor, Ohio for proceedings not inconsistent with the terms of this Order. 17. This action is taken by the Chief, Cable Services Bureau, pursuant to authority delegated by  0.321 of the Commission's Rules. 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau