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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 ) ) TCI Cablevision of Houston, Inc. ) CUID No. TX0424 (Texas City) ) ) Complaint Regarding ) Cable Programming Services Tier ) Rate Increase ) ORDER Adopted: January 12, 1998 Released: January 14, 1998 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider a complaint against the June 1, 1997 rate increase that the above-captioned operator ("Operator") implemented for its cable programming services tier ("CPST") in the community referenced above. Operator has attempted to justify its CPST rate increase through a benchmark showing on FCC Forms 1240. We have already issued an order in which we found that Operator's rates in effect prior to May 15, 1994 were unreasonable ("First Order"). Subsequently, we issued an order vacating and superseding our First Order and resolving all the complaints filed from September 1, 1993 through September 15, 1995 against Operator's CPST rates ("Second Order"). This Order addresses Operator's CPST rate effective June 1, 1997. 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, 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, within 90 days after such increase becomes effective, it receives more than one subscriber complaint. 3. Cable operators attempting to justify their rates for the period beginning May 15, 1994 using a benchmark showing must complete and file the FCC Form 1200 series. Cable operators may also justify rate increases based on the addition and deletion of channels, changes in certain external costs, and inflation, by filing FCC Form 1210. FCC Form 1210 must be filed at least 30 days before new rates are scheduled to go into effect where the Commission has found the cable programming service rate to be unreasonable less than one year prior to the filing, or where there is a pending complaint against the CPST rate. Cable 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. 4. On October 17, 1997, the local franchising authority ("LFA") filed its complaint against Operator's June 1, 1997 CPST rate increase. In its complaint, the LFA asserts that it has received more than one subscriber complaint against Operator's CPST rate increase, thereby triggering the Commission's jurisdiction to review this complaint. The valid complaint from the LFA triggers an obligation on behalf of the cable operator to file a justification of its CPST rates with the LFA. Thus, in this case, Operator is required to justify the increase in its CPST rate which is the subject of the LFA's complaint. Operator filed FCC Forms 1240 with the LFA as justification for this rate increase. 5. On February 22, 1996, the Commission issued an order granting Operator a waiver (the "Waiver Order") of certain rate adjustment requirements in its initial filing of the Commission's annual rate adjustment form (FCC Form 1240). Specifically, the Waiver Order allowed Operator, in its initial FCC Form 1240 filings, to include estimated changes in costs, inflation, channels and subscriber information attributable to the period between the last date for which actual cost data was available and the effective date of the new rates. In the Waiver Order, Operator was instructed to include in its initial FCC Form 1240 filing certain calculations, such calculations to be performed on FCC Form 1240 (primarily in Module G), or off FCC Form 1240, in an alternative showing done pursuant to the Waiver Order's "General Guidelines." Operator chose to use an alternative showing pursuant to the "General Guidelines" rather than perform its calculations directly on FCC Form 1240. 6. On October 25, 1996, Operator wrote to the Commission requesting review and approval of a modified FCC Form 1240 to justify rates for the projected period from June 1, 1997 to May 31, 1998. On January 9, 1997, we consented to the Operator's use of the form for such period in lieu of filings on the Commission's standard FCC Form 1240. 7. To justify its CPST rate, effective June 1, 1997, Operator submitted two FCC Forms 1240, the first for the projected period June 1, 1996 to May 31, 1997 ("First Form 1240"), and the second for the projected period June 1, 1997 to May 31, 1998 ("Second Form 1240"). Operator's First Form 1240 used Operator's alternative showing, calculated pursuant to the Waiver Order. Operator's Second Form 1240 followed the format set forth in Operator's October 25, 1996 letter. On reviewing the submitted forms, we determined that neither of the submitted forms produced identical results to filings that would have been made on the Commission's standard FCC Form 1240. 8. Accordingly, on December 12, 1997, Operator submitted new standard FCC Forms 1240, for the projected periods June 1, 1996 to May 31, 1997, and June 1, 1997 to May 31, 1998, which performed the Waiver Order's calculations directly on the standard FCC Forms 1240 as well as the calculations described in Operator's October 25, 1996 letter. Review of both standard FCC Forms 1240 is necessary to calculate the appropriate maximum permitted rate ("MPR") and the refund amount, if any, for the period beginning June 1, 1997. 9. Upon review of Operator's new FCC Form 1240, for the projected period June 1, 1996 to May 31, 1997, we find that Operator has correctly calculated its MPR of $15.16. Upon review of Operator's new FCC Form 1240, for the projected period June 1, 1997 to May 31, 1998, we find Operator's actual CPST rate of $16.70 to be reasonable. We will order that any rates Operator charges on and after June 1, 1998 shall be premised on Operator's use of the standard FCC Form 1240 for rate calculation purposes. 10. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the CPST rate of $16.70 charged by Operator in the franchise areas referenced above, effective June 1, 1997, IS REASONABLE. 11. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that Operator shall use the standard FCC Form 1240 for rate calculation purposes for any rate Operator charges on or after June 1, 1998. 12. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the referenced complaint IS DENIED. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau