******************************************************** 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: ) CSR-4735-L Petition for Relief of ) ) Engle Broadcasting ) Petitioner, ) v. ) ) Jones Intercable ) Turnersville, New Jersey ) Respondent, ) ) For Commercial Leased Access ) ) MEMORANDUM OPINION AND ORDER Adopted: May 22, 1997 Released: May 29, 1997 By the Chief, Cable Services Bureau: INTRODUCTION 1. Engle Broadcasting ("Engle"), licensee of low power television station W08CC, Winslow, New Jersey, has filed this petition for relief alleging that Jones Intercable, Turnersville, New Jersey ("Intercable") has violated the Commission's rules prescribing the method by which maximum commercial leased access rates for independent programmers are calculated. Intercable did not respond. Specifically, Engle alleges that Intercable's method of calculation required Engle to pay commercial leased access rates which were in excess of the maximum reasonable rates for commercial leased access under the Commission's rules. BACKGROUND 2. In 1984, Congress amended the Communications Act of 1934 by adding, among other things, a commercial leased access requirement, pursuant to which cable operators with 36 or more activated channels must set aside part of their channel capacity for use by video programmers that are not affiliated with them. The Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") revisited the leased access requirement and directed the Commission to establish rules for determining maximum reasonable rates for, and reasonable terms and conditions for the use of, commercial leased access channels. Pursuant to that Congressional directive, the Commission established regulations applicable to leased access channels in its proceedings in Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992; Rate Regulation (the "Rate Order"), and clarified certain issues in Order on Reconsideration of the First Order and Further Notice of Proposed Rulemaking (the "Recon. Order"). The Commission revised, among other things, the formula used to calculate permissible commercial leased access rates in Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992, Leased Commercial Access, Second Report and Order and Second Order on Reconsideration of the First Report and Order (the "Second Report"). In the Rate Order and the regulations promulgated thereunder, which were in effect at the time of this complaint, the Commission adopted the "highest implicit net fee" as the formula for determining the maximum reasonable rates for commercial leased access. SUMMARY OF PLEADINGS 3. In its petition, Engle states that, on August 7, 1995, it entered into a commercial leased access agreement with Intercable's system serving Turnersville, NJ. Engle further states that, on March 27, 1996, it notified Intercable of its belief that the leased access rate established by Intercable resulted in a monthly fee that was significantly higher than the highest implicit net fee as calculated under Section 76.970 of the Commission's rules. In response, Intercable calculated a second leased access rate which became effective on April 10, 1996. Engle next asserts that the second leased rate charged by Intercable was also higher than permissible under Section 76.970. Engle states that, according to Intercable, its leased access fee calculations were based on the "formula used in setting [its] fixed position advertising commercial rates." Engle argues that Intercable's stated methodology is impermissible and in violation of the Commission's rules. In addition, Engle argues that Intercable utilized an incorrect subscriber count in its calculations of the monthly fee. Engle asserts that the New Jersey Board of Public Utilities lists Intercable as having 33,960 subscribers in 1995 and Intercable used a subscriber base of 36,000 in its calculations. Engle argues that the Commission has required cable operators to calculate commercial leased access rates annually based upon the number of subscriber contracts in effect the previous year. Engle requests that Intercable be directed to: (1) correct its commercial leased access rates in accordance with Commission rules; (2) provide Engle with the anniversary date of its rate calculations; and (3) adjust all billing accrued to Engle from the effective date of the leased access agreement until the present time. DISCUSSION 4. The principal issue is whether the leased access rates calculated by Intercable were based upon the highest implicit net fee methodology, the methodology then in effect, to determine the maximum reasonable rates for leased access channel capacity. In the instant case, two calculations of leased access rates are relevant. The first calculation would have applied to the initial leased access rate contained in the leased access agreement which was entered into by Engle on August 7, 1995 and which was in effect through April 10, 1996. The second calculation stems from the second leased access rate charged by Intercable, which became effective on April 10, 1996. 5. With regard to the initial leased access rate, Engle's complaint is procedurally defective. Under Section 76.975(d) of the Commission's rules, "a petition must be filed within 60 days of an alleged violation." Engle's complaint was filed on April 26, 1996, approximately eight months after it entered into the leased access agreement with Intercable. We find that Engle's complaint regarding the initial leased access rate is only valid for the period 60 days prior to the filing of its complaint and does not extend back to the effective date of the leased access agreement. With regard to the calculation of the second leased access rate which became effective on April 10, 1996 and for the time period forward from that date, Engle's complaint is timely. Accordingly, we will dismiss that portion of Engle's complaint which pertains to the initial leased access rate in effect from August 7, 1995 through February 26, 1996. 6. Engle's complaint regarding the reasonableness of the initial leased access rate applied during the 60-day period prior to the filing of its complaint, and of the second leased access rate is governed by the requirements of the Rate Order and Section 76.970 et seq. of the Commission's rules promulgated thereunder. As noted above, in the Rate Order, the Commission adopted a "highest implicit net fee" formula as the method by which commercial leased access rates would be calculated and also adopted standards governing both leased access terms and conditions and dispute resolution. 7. The provisions of Section 76.970 of the Commission's regulations, which were in effect at the time relevant to Engle's complaint, provide that the maximum commercial leased access rate that may be charged by a cable operator is the "highest implicit net fee charged any nonaffiliated programmer (excluding leased access programmers) within the same category." Further, Section 76.970(c) provides that the highest implicit net fee is calculated by determining the price-per-channel each subscriber pays the operator minus the amount-per-subscriber the operator, in turn, pays the programmer. The resulting difference is then multiplied by the number of subscribers able to receive the unaffiliated programmer's service. The Commission determined that the highest implicit net fee for leased access may not include fees, stated or implied, for services other than the provision of channel capacity. Maximum commercial leased access rates for lease periods shorter than one month can be calculated by prorating the monthly maximum rate. 8. We cannot determine from the record the method employed by Intercable to calculate the initial leased access rate charged to Engle. The record shows that Intercable calculated the second leased access rate, which it began charging Engle on April 10, 1996, as follows: "Limited basic retail rate (as of 6/1/96) - $8.92/ 23 channels= Per channel rate of 0.38726 x 36,000 customers = $13,961.94." The record further shows that Intercable calculated the second leased access rate by considering "the formula used in setting [its] fixed position advertising commercial rates." We note that this information is taken from correspondence between Engle and Intercable and that the cable operator did not file a response to Engle's petition as required by Section 76.975 of our rules. We cannot make a determination, based upon the information in the record, whether Intercable's calculation of either the initial leased access rate or the second leased access rate complied with the requirements of the Commission's leased access rules then in effect. As an example, the record should indicate on which tier Engle's services were placed and whether the number of cable subscribers used in Intercable's calculations included only subscribers to a single tier of service or represented the total number of subscribers to Intercable's cable system. Neither does the record show the actual amounts paid or the leased access channel services provided by Engle to Intercable. 9. In light of the foregoing, we direct Intercable to recalculate the commercial leased access rate charged to Engle in accordance with the Commission's highest implicit net fee formula and to provide an accounting to Engle and to the Commission of all payments received from Engle and of all leased access channel services provided by Engle from the period February 26, 1996 until such accounting is completed. Specifically, the accounting should indicate: (1) the amounts properly billable for the services provided and the calculations made to derive those amounts consistent with Section 76.970; (2) the amounts collected from Engle under the leased access agreement for the period February 26, 1996 through April 10, 1996; (3) the amounts collected from Engle from April 10, 1996 until such time as the accounting is completed; (4) the number of subscribers to the tier on which Engle's programming was placed and the method used to determine the number of subscribers; (5) any other relevant data, information and supporting calculations required by our rules in determining the maximum reasonable leased access rate; and (6) the amount of any refund due Engle as a result of monthly fees paid by Engle which were in excess of the amounts properly billable as calculated under the Commission's rules for the relevant period of time. ORDERING CLAUSES 10. Accordingly, IT IS ORDERED that the petition filed by Engle Broadcasting (CSR- 4735-L) pursuant to Sections 76.970 et seq. of the Commission's rules, 47 C.F.R. 76.970 et seq., IS GRANTED to the extent indicated above and, in all other respects, IS DISMISSED. 11. IT IS FURTHER ORDERED that, pursuant to Section 76.975(e) and 76.975(f) of the Commission's rules, 47 C.F.R.  76.975(e),(f), Jones Intercable shall, within thirty (30) days of the release date of this Order, provide to Engle Broadcasting the accounting described in paragraph nine of this Order. 12. IT IS FURTHER ORDERED that Engle Broadcasting will have fifteen (15) days from the receipt of Jones Intercable's accounting to dispute its findings to which Jones Intercable may reply within ten (10) days of its receipt of Engle Broadcasting's response. 13. This action is taken pursuant to authority delegated by Section 0.321 of the Commission's rules, 47 C.F.R. 0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau