******************************************************** 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 ) ) C-TEC Cable Systems ) CUID Nos. NJ0481 (Borough of Princeton) d/b/a Home Link Communications of ) NJ0482 (Township of Princeton) Princeton, Ltd. ) ) Complaints Regarding ) Cable Programming Services Tier Rates) ) ORDER Adopted: September 4, 1997 Released: September 8, 1997 By the Chief, Cable Services Bureau: 1. In this Order we consider complaints about the rates charged by the above-referenced operator ("Operator") for its cable programming services tiers ("CPSTs") in the communities referenced above. Operator has attempted to justify its CPST rates through benchmark justifications on FCC Form 393, FCC Form 1200, and multiple FCC Form 1210s. 2. Under the Communications Act, the Federal Communications Commission ("Commission") is authorized 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 a rate to be 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 local franchising authority ("LFA") that has received more than one subscriber complaint. 3. The first valid complaints for each of the above-referenced communities were filed with the Commission on February 28, 1994 against the CPST rates Operator was charging on September 1, 1993 in the above referenced communities. The filing of a complete and timely complaint triggers an obligation upon the cable operator to file a justification of its CPST rates. The Operator has the burden of demonstrating that its CPST rates are reasonable. 4. Operator filed several motions to dismiss the various complaints filed against the CPST rates in the above-referenced communities. Because we find that the Commission's jurisdiction to review the CPST rates in each of the referenced communities has been invoked by the filing of at least one valid complaint in each of the referenced communities on February 28, 1994, we decline to address each individual Motion to Dismiss the additional complaints. We do, however, address Operator's arguments that affect the validity of all of the complaints. Operator takes the position that the complaints are invalid for three reasons. First, Operator argues that it is a small systems operator and is thus not subject to rate regulation. We have previously addressed and rejected this argument in C-TEC Cable System of Michigan and we rely on that decision and reject Operator's request without further comment. 5. Secondly, Operator requests that it be allowed to offset its overcharges on the CPST against its alleged undercharges for its basic services tier ("BST"). The Commission's jurisdiction to regulate cable rates has been limited to the review of CPST rates. In order to accomplish this review, the Commission has promulgated rules which allow the Commission to fairly review and establish reasonable CPST rates. The Commission has already addressed this issue in Cencom Cable Income Partners ("Cencom"). In Cencom, the Commission determined that such inter-tier offsets are "inconsistent with the Commission's conclusion in the [Implementation of Sections of the Consumer Protection and Competition Act of 1992, Rate Regulation, MM Docket 92-266, Report and Order and Further Notice of Proposed Rulemaking] that cable operators should not balance low BST rates with CPST rates that exceed the maximum permitted rate for the tier." Based on the Commission's holding in Cencom we reject Operator's request without further comment. 6. Finally, Operator argues that its Family Value Package ("FVP") is an a la carte tier and therefore not regulated. In order to determine whether or not a subject tier is regulated, the Commission reviews the rules that were in effect September 1, 1993 and subsequent orders. We held in Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, MM Docket 92-266, Report and Order and Further Notice of Proposed Rulemaking ("Rate Order") that collective a la carte offerings will not be regulated so long as two essential conditions are met. We determined that a la carte packages would be exempt from rate regulation if: 1) the price for the combined package does not exceed the sum of the individual charges for each component service and 2) the cable operator continues to provide the component part of the package to subscribers separately in addition to the package. We said that the second condition would be satisfied only when "the per channel offering provides consumers with a realistic service choice." In Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, MM Docket No. 92-266, Second Order on Reconsideration, Fourth Report and Order, and Fifth Notice of Proposed Rulemaking ("Second Order on Reconsideration"), we identified several factors that local franchising authorities and the Commission should consider in assessing whether an a la carte package enhances consumer choice and therefore does not constitute an evasion of rate regulation. Finally, in Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, MM Docket Nos. 92-266 and 93-215, Sixth Order on Reconsideration, Fifth Report and Order, and Seventh Notice of Proposed Rulemaking ("Going Forward Order"), the Commission reconsidered its regulatory treatment of a la carte offerings. Specifically, we determined that such packages are cable programming tiers within the meaning of Section 3(1)(2) of the 1992 Cable Act and therefore will be subject to our general rate regulation rules. We established criteria for the creation of New Product Tiers ("NPTs"), which cannot include channels taken from regulated tiers. We concluded, however, that cable operators may treat existing packages as NPTs, so long as such packages involve only a small number of migrated channels. 7. In Falcon Cable TV, the Commission concluded that the a la carte tier, which started with seven channels and was enlarged to include ten channels, was a regulated tier. In the instant case, Operator moved seven channels from regulated tiers to create its FVP. Therefore, we find that Operator's FVP is a regulated tier. Thus, we review both Operator's Expanded Basic Tier ("CPST-1") and its FVP ("CPST-2"). 8. Operators with complete and timely CPST complaints filed against them prior to May 15, 1994 must demonstrate that their CPST rates were in compliance with the Commission's initial rules from the time the complaint was filed through May 14, 1994, and that the CPST rates were in compliance with the revised rules from May 15, 1994 forward. Operators attempting to justify CPST rates for the period prior to May 15, 1994 through a benchmark showing must complete and file FCC Form 393. To justify rates for the period beginning May 15, 1994 through a benchmark showing, operators must use the FCC Form 1200 series. Operators are permitted to make changes to their rates on a quarterly basis using FCC Form 1210 to account for the addition and deletion of channels, changes in certain external costs and inflation. In addition, Operators must file FCC Form 1210 at least 30 days before new rates are scheduled to go into effect, where there is a pending complaint against the CPST rate. 9. Upon review of Operator's FCC Form 393, we find that Operator has not correctly calculated its maximum permitted rate ("MPR") for its CPSTs. We corrected Operator's Inflation Adjustment Factor in Form 393, Part II, Worksheet 1, on the basis of the most accurate data available at the time Operator filed. Operator filed its FCC Form 393 on March 21, 1997. On July 29, 1994, the U.S. Department of Commerce released corrected inflation data including Gross National Product Price Index ("GNP-PI") figures of 122.3 for the third quarter of 1992 and 126.5 for the fourth quarter of 1993. We also corrected Operator's entry on Line 125 (GNP-PI Time Period) of Worksheet 1 from 9 to 15 months. These adjustments resulted in a revised MPR for Operator's CPST-1 of $5.64, effective September 1, 1993 rather than Operator's MPR of $5.78, and a revised MPR of $4.84 for CPST-2, effective September 1, 1993, rather than Operator's MPR of $4.95. Because Operator was charging in excess of its revised MPR for CPST-1, we find Operator's actual rate of $7.50, effective September 1, 1993, to be unreasonable for the period beginning February 28, 1994 through May 14, 1994. Because Operator's actual CPST-2 rate of $5.95 exceeds its revised MPR, we find Operator's actual CPST-2 rate of $5.95, effective September 1, 1993, to be unreasonable for the period beginning February 28, 1994 through May 14, 1994. 10. Upon review of Operator's FCC Form 1200, we find Operator's MPRs of $5.42 for its CPST-1 and $4.15 for its CPST-2 to be reasonable. Because Operator's actual CPST-1 rate of $7.50 exceeds its MPR, we find Operator's actual CPST-1 rate of $7.50, effective May 15, 1994 through October 31, 1994, to be unreasonable. Because Operator's actual CPST-2 rate of $5.95 exceeds its MPR, we find Operator's actual CPST-2 rate of $5.95, effective May 15, 1994 through October 31, 1994 to be unreasonable. 11. Upon review of Operator's FCC Form 1210 covering the period April 1, 1994 through December 31, 1994, we find Operator's MPRs of $5.50 for its CPST-1 and $4.17 for its CPST-2 to be reasonable. Because Operator's actual CPST-1 rate of $7.71, effective November 1, 1994, exceeds its MPR for both this FCC Form 1210 and Operator's FCC Form 1200, we find Operator's actual CPST-1 rate of $7.71, effective November 1, 1994 through March 31, 1995, to be unreasonable. Because Operator's actual CPST-2 rate of $5.95 exceeds its MPR, we find Operator's actual CPST-2 rate of $5.95, effective November 1, 1994 through March 31, 1995 to be unreasonable. 12. Upon review of Operator's FCC Form 1210 covering the period January 1, 1995 through March 31, 1995, we find Operator's MPRs of $6.44 for its CPST-1 and $5.63 for its CPST-2 to be reasonable. Because Operator's actual CPST-1 rate of $9.56 exceeds its MPR, we find Operator's actual CPST-1 rate of $9.56, effective April 1, 1995 through December 31, 1995, to be unreasonable. Because Operator's actual CPST-2 rate of $7.45 exceeds its MPR, we find Operator's actual CPST-2 rate of $7.45, effective April 1, 1995 through December 31, 1995, to be unreasonable. 13. Upon review of Operator's FCC Form 1210 covering the period April 1, 1995 through December 31, 1995, we find Operator's MPRs of $6.99 for its CPST-1 and $5.81 for its CPST-2 to be reasonable. Because Operator's actual CPST-1 rate of $7.50 exceeds its MPR, we find Operator's actual CPST-1 rate of $7.50, effective January 1, 1996 through December 31, 1996, to be unreasonable. Because Operator's actual CPST-2 rate of $8.95 exceeds its MPR, we find Operator's actual CPST-2 rate of $8.95, effective January 1, 1996 through December 31, 1996, to be unreasonable. 14. Upon review of Operator's FCC Form 1210 covering the period January 1, 1996 through December 31, 1996, we find Operator's MPRs of $7.33 for its CPST-1 and $6.79 for its CPST-2 to be reasonable. Because Operator's actual CPST-1 rate of $7.95 exceeds its MPR, we find Operator's actual CPST-1 rate of $7.95, effective January 1, 1997 through the present, to be unreasonable. Because Operator's actual CPST-2 rate of $9.45 exceeds its MPR, we find Operator's actual CPST-2 rate of $9.45, effective January 1, 1997 through the present, to be unreasonable. 15. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST-1 rate of $7.50, charged by Operator in the franchise areas referenced above, effective September 1, 1993 through October 31, 1994, IS UNREASONABLE. 16. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST-1 rate of $7.71, charged by Operator in the franchise areas referenced above, effective November 1, 1994 through March 31, 1995, IS UNREASONABLE. 17. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST-1 rate of $9.56, charged by Operator in the franchise areas referenced above, effective April 1, 1995 through December 31, 1995, IS UNREASONABLE. 18. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST-1 rate of $7.50, charged by Operator in the franchise areas referenced above, effective January 1, 1996 through December 31, 1996, IS UNREASONABLE. 19. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST-1 rate of $7.95, charged by Operator in the franchise areas referenced above, effective January 1, 1997 through the present, 1996, IS UNREASONABLE. 20. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST-2 rate of $5.95, charged by Operator in the franchise areas referenced above, effective September 1, 1993 through March 31, 1995, IS UNREASONABLE. 21. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST-2 rate of $7.45, charged by Operator in the franchise areas referenced above, effective April 1, 1995 through December 31, 1995, IS UNREASONABLE. 22. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST-2 rate of $8.95, charged by Operator in the franchise areas referenced above, effective January 1, 1996 through December 31, 1996, IS UNREASONABLE. 23. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST-2 rate of $9.45, charged by Operator in the franchise areas referenced above, effective January 1, 1997 through the present, IS UNREASONABLE. 24. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the community referenced above that portion of the amount paid in excess of the maximum permitted CPST-1 rate of $5.64 per month (plus franchise fees), plus interest to the date of the refund, for the period beginning February 28, 1994 through May 14, 1994. 25. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the community referenced above that portion of the amount paid in excess of the maximum permitted CPST-1 rate of $5.42 per month (plus franchise fees), plus interest to the date of the refund, for the period May 15, 1994 through December 31, 1994. 26. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the community referenced above that portion of the amount paid in excess of the maximum permitted CPST-1 rate of $5.50 per month (plus franchise fees), plus interest to the date of the refund, for the period January 1, 1995 through March 31, 1995. 27. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the community referenced above that portion of the amount paid in excess of the maximum permitted CPST-1 rate of $6.44 per month (plus franchise fees), plus interest to the date of the refund, for the period April 1, 1995 through December 31, 1995. 28. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the community referenced above that portion of the amount paid in excess of the maximum permitted CPST-1 rate of $6.99 per month (plus franchise fees), plus interest to the date of the refund, for the period January 1, 1996 through December 31, 1996. 29. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the community referenced above that portion of the amount paid in excess of the maximum permitted CPST-1 rate of $7.33 per month (plus franchise fees), plus interest to the date of the refund, for the period January 1, 1997 through the day before Operator implements the maximum permitted CPST rate of $7.33. 30. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the community referenced above that portion of the amount paid in excess of the maximum permitted CPST-2 rate of $4.84 per month (plus franchise fees), plus interest to the date of the refund, for the period February 28, 1994 through May 14, 1994. 31. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the community referenced above that portion of the amount paid in excess of the maximum permitted CPST-2 rate of $4.15 per month (plus franchise fees), plus interest to the date of the refund, for the period May 15, 1994 through December 31, 1994. 32. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the community referenced above that portion of the amount paid in excess of the maximum permitted CPST-2 rate of $4.17 per month (plus franchise fees), plus interest to the date of the refund, for the period January 1, 1995 through March 31, 1995. 33. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the community referenced above that portion of the amount paid in excess of the maximum permitted CPST-2 rate of $5.63 per month (plus franchise fees), plus interest to the date of the refund, for the period for the period April 1, 1995 through December 31, 1995. 34. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the community referenced above that portion of the amount paid in excess of the maximum permitted CPST-2 rate of $5.81 per month (plus franchise fees), plus interest to the date of the refund, for the period January 1, 1996 through December 31, 1996. 35. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the community referenced above that portion of the amount paid in excess of the maximum permitted CPST-2 rate of $6.79 per month (plus franchise fees), plus interest to the date of the refund, for the period January 1, 1997 through the day before Operator implements the maximum permitted CPST-2 rate of $6.79. 36. 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. 37. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that Operator's Motions to Dismiss are DENIED TO THE EXTENT INDICATED HEREIN and the referenced complaints ARE GRANTED. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau