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MI1723, MI0703, MI0702, MI0704, MI1004, MI1003, MI1572, MI1570, MI1157, and  S-  MI1569) in accordance with the small system costofservice methodology adopted in the Sixth Report  Sr-  <and Order and Eleventh Order on Reconsideration in MM Docket Nos. 92266 and 93215 ("Small System  SL-Order").XLs yO- =ԍFCC 95196, 10 FCC Rcd 7393 (1995). MultiCablevision also filed a petition seeking a waiver of the $910   filing fee that it was required to submit under 47 C.F.R.  1.1106. Because this issue falls within the purview of the Commission's Office of the Managing Director, we have forwarded this request to that office for resolution. No oppositions were filed in this proceeding.XLs yO- ԍMultiCablevision submitted a Petition for Special Relief and a Petition for Waiver of the Filing Fee on   hSeptember 23, 1997, and served the appropriate townships and villages served by its system. Public notice of MultiCablevision's petitions occurred on October 3, 1997. Oppositions or comments were due by October 23, 1997.  S-  22.` ` Section 623(i) of the Communications Act of 1934, as amended ("Communications Act"),   requires that the Commission design rate regulations that reduce the administrative burdens and the cost  S-  of compliance for cable systems with 1,000 or fewer subscribers.Gs yOV$-ԍ47 U.S.C.  543(i).G Accordingly, in the course of  S-  establishing the standard benchmark and costofservice ratemaking methodologies generally available to   cable operators, the Commission adopted various measures aimed specifically at easing regulatory burdens"^,**88"  S-  for these smaller systems.R {Oh- ԍSee, e.g., Report and Order and Further Notice of Proposed Rulemaking in MM Docket No. 92266, FCC  {O2-  93177, 8 FCC Rcd 5631 (1993); Second Order on Reconsideration, Fourth Report and Order, and Fifth Notice of  {O-  Proposed Rulemaking in MM Docket No. 92266, FCC 9438, 9 FCC Rcd 4119 (1994); Fifth Order on  {O-  Reconsideration and Further Notice of Proposed Rulemaking in MM Docket Nos. 93215 & 93266, 9 FCC Rcd  {O-  5327 (1994); Eighth Order on Reconsideration in MM Docket Nos. 92266 & 93215, FCC 9542, 10 FCC Rcd 5179 (1995). In the Small System Order, the Commission further extended small system rate  S-  jrelief to certain systems that exceed the 1,000subscriber standard.^JR {O-ԍSmall System Order, 10 FCC Rcd at 7406.^ These systems were deemed eligible   nfor small system rate relief because they were found to face higher costs and other burdens  S-disproportionate to their size. R {O - >ԍId. at 7407. More recently, Congress amended Section 623 of the Communications Act to allow greater   ideregulation for "small cable operators," defined as operators that "directly or through an affiliate, [serve] in the   aggregate fewer than 1 percent of all subscribers in the United States and [are] not affiliated with any entity or   Kentities whose gross annual revenues in the aggregate exceed $250,000,000." Telecommunications Act of 1996   -("1996 Act"), Pub. L. No. 104104,  301(c), 110 Stat. 56, approved February 8, 1996; Communications Act    623(m), 47 U.S.C.  543(m). Pursuant to this amendment, the rate regulation requirements of Sections 623(a), (b)   and (c) do not apply to a small cable operator with respect to "(A) cable programming services, or (B) a basic service   htier that was the only service tier subject to regulation as of December 31, 1994," in areas where the operator serves  {OH-50,000 or fewer subscribers. Id.   S:-  }3.` ` The Small System Order defines a small system as any system that serves 15,000 or fewer  S-  subscribers.^R {Od-ԍSmall System Order, 10 FCC Rcd at 7406.^ The Commission recognized that systems with no more than 15,000 subscribers were   /qualitatively different from larger systems with respect to a number of characteristics, including: (1)  S-  kaverage monthly regulated revenues per channel per subscriber; (2) average number of subscribers per  S-  mile; and (3) average annual premium revenues per subscriber.KBR {O~-ԍXId. at 7408.(#K The magnitude of the differences between   .the two classes of systems as to these characteristics indicated that the 15,000 subscriber threshold was   the appropriate point of demarcation for purposes of providing for substantive and procedural regulatory  S$ -relief.; $ R {O-ԍId. ;  S -  4.` ` Rate relief provided under the Small System Order and the Commission's rules is also  S -  available only to those small systems that are affiliated with a small cable company, which is defined as  S -  !a cable operator that serves a total of 400,000 or fewer subscribers over all of its systems. ^ fR {O#- [ԍId. A small system is deemed affiliated with a cable company if the company "holds more than a 20 percent  {OV$-  equity USESESUSinterest (active or passive) in the system or exercises de jure control (such as through a general partnership  {O %-or majority voting shareholder interest)." Id. at 741213, n.88. The   Commission adopted this threshold because it roughly corresponds to $100 million in annual regulated   revenues, a standard the Commission has used in other contexts to identify smaller entities deserving of"6 ,`(`(88;"  S-  >relaxed regulatory treatment.F R {Oh-ԍId. at 740911.F The Commission found that cable companies exceeding this threshold  S-  [would find it easier than smaller companies to attract the financing and investment necessary to maintain  S-  and improve service.C ZR {O-ԍId. at 7411.C In addition, the Commission determined that cable companies that exceeded the   small company definition "are better able to absorb the costs and burdens of regulation due to their  S`-expanded administrative and technical resources."C `R {O-ԍId. at 7409.C ` `  S-  o5.` ` In addition to adopting the new categories of small systems and small cable companies,  S-  the Small System Order introduced a form of rate regulation known as the small system costofservice  S-  methodology.F~R {O -ԍId. at 741828.F This approach, which is available only to small systems owned by small cable companies,   [is more streamlined than the standard costofservice methodology available to cable operators generally.   yIn addition, the small system rules include substantive differences from the standard costofservice rules   [to take account of the proportionately higher costs of providing service faced by small systems. Eligible   [systems establish their rates under this methodology by completing and filing FCC Form 1230. In order   jto qualify for the small system costofservice methodology, systems and companies must meet the new  S -  size standards as of either the effective date of the Small System Order, or on the date thereafter when  S -they file the documents necessary to elect the relief they seek. R {O\-ԍId. at 7413. The effective date of the Small System Order was August 21, 1995.  S\-  6.` ` Cable systems that fail to meet the numerical definition of a small system, or whose   joperators do not qualify as small cable companies, may submit petitions for special relief requesting that   the Commission grant a waiver of its rules to enable the petitioning systems to utilize the various forms  S-  .of rate relief available to small systems owned by small cable companies.FR {O&-ԍId. at 741213.F The Commission stated that  S-  petitioners should demonstrate that they "share relevant characteristics with qualifying systems.":4 R {O-ԍId.: Other   lpotentially pertinent factors include the degree by which the system fails to satisfy either or both   definitions and evidence of increased costs (e.g., lack of programming or equipment discounts) faced by  SD-  the operator.:D R {O!-ԍId.: If the system fails to qualify for relief based on its affiliation with a larger cable company,   the Commission will consider "the degree to which that affiliation exceeds our affiliation standards, and   whether other attributes of the system warrant that it be treated as a small system notwithstanding the  S-  percentage ownership of the affiliate.";X R {O%-ԍId. ; The Commission also stated that "a qualifying system that seeks  S-  jto obtain programming from a neighboring system by way of a fiber optic link, but that is concerned that   interconnection of the two systems will jeopardize its status as a standalone small system, may file a"|,`(`(88"  S-  petition for special relief to ask the Commission to find that it is eligible for small system relief."CR {Oh-ԍId. at 7413.C The   =Commission specifically stated that this list of relevant factors was not exclusive and invited petitioners  S-to support their petitions with any other information and arguments they deemed relevant.:ZR {O-ԍId.:  S`- II.THE PETITION  S-  #7.` ` In its Petition, MultiCablevision seeks authority to establish regulated rates for its single   cable system in accordance with the small system costofservice methodology. As noted, that form of   /rate regulation is only available to small systems owned by small cable companies. According to the   LPetition, MultiCablevision serves a total of 15,183 subscribers in ten small rural communities located in  Sp-  midMichigan.ApR yO -ԍPetition at 12.A MultiCablevision also states that no larger cable company exercises de jure control over  SJ -  jits system, and that it therefore qualifies as a small cable company.@J |R {Of-ԍId. at 5.@ Nevertheless, MultiCablevision is   =in need of special relief because its single system serves 15,183 subscribers, and thus exceeds the 15,000  S -subscriber limit for small systems.B R {O-ԍId. at 13.B  S -  8.` ` In support of its Petition, MultiCablevision argues that it easily qualifies as a small   operator, and that its single system fails to meet the numerical definition of a small system by only a small  SZ-  degree.GZR {O-ԍId. at 45, 78.G In addition, MultiCablevision argues that its cable system shares several relevant characteristics   with qualifying small systems even though its system does not meet the numerical definition of a small  S -  system.B 2 R {O-ԍId. at 58.B According to the Petition, MultiCablevision's system serves approximately 18 subscribers per   [mile, which is almost half the average number of 35.3 subscribers per mile served by systems with fewer   than 15,000 subscribers, and far below the average number of 68.7 subscribers per mile served by systems  S-  =with more than 15,000 subscribers.B R {O-ԍId. at 67.B MultiCablevision's system also has an average monthly regulated   revenue per channel per subscriber of approximately $0.52, as compared to the $0.86 average monthly  SB-  regulated revenue per channel per subscriber for systems serving fewer than 15,000 subscribers.BBV R {O8#-ԍId. at 56.B Finally,  S-  {the Petition indicates that MultiCablevision's system has an average annual premium revenue per",`(`(88"  S-  jsubscriber of $50.76.@R {Oh-ԍId. at 6.@ This figure is closer to the average of $41.00 for systems with fewer than 15,000  S-subscribers than it is to the average of $73.13 for systems with more than 15,000 subscribers.ZR {O-ԍSmall System Order, 10 FCC Rcd at 7408. See also Petition at 6.  S-  9.` ` In further support of the Petition, MultiCablevision argues that it continues to pay "small   system" prices for its programming, and does not benefit from the programming discounts enjoyed by  S8-  larger MSOs.?8R yO -ԍPetition at 7.? MultiCablevision also argues that a grant of special relief for its Michigan system would  S-  be in the public interest.@ |R {O, -ԍId. at 9.@ Specifically, the Petition states that the public interest would be served because   the Commission has determined that providing relief for small systems in need of such relief serves the   public interest, and MultiCablevision is one such system that would need small system relief to establish  S-  .reasonable rates for its regulated tiers.:!R {OF-ԍId.: The Petition also notes that small LFAs that choose to regulate   jMultiCablevision's basic cable rates will also benefit from the reduced administrative burdens associated  SH -with the Form 1230 rate regulation process.:"H R {O-ԍId.:  S - III.DISCUSSION  S -  S -   10.` ` In the Small System Order, the Commission defined a small cable company as a cable  S -  jcompany "serving 400,000 or fewer subscribers over all of its systems."^# 2 R {OT-ԍSmall System Order, 10 FCC Rcd at 7406.^ The Commission also defined  SZ-  a small cable system as a system that "serves 15,000 or fewer subscribers."^$Z R {O-ԍSmall System Order, 10 FCC Rcd at 7406.^ MultiCablevision serves   a total of 15,183 subscribers on a single system that covers ten small rural communities. It also is not  S -  affiliated with any larger cable company exercising de jure control over its system. MultiCablevision   ytherefore easily qualifies as a small cable company. However, its single system exceeds the small system   definition by 183 subscribers and does not, therefore, qualify for small system rate relief absent a grant of special relief.  SD-  n 11.` ` We believe that MultiCablevision is entitled to special relief. We previously have granted   small system status to systems that exceed the 15,000 subscriber limit by only a small amount where it   has been shown that the system in question shares relevant characteristics with systems serving fewer than  S-  15,000 subscribers.L%\\V R {O%- {ԍSee In the Matter of Insight Communications Company, L.P., DA 952334, 11 FCC Rcd 1270 (1995)  {O&-  Z("Insight"); see also In the Matter of Rifkin & Associates d/b/a Columbia Cablevision, DA 962026, 11 FCC Rcd"T'$,`(`(&"  {OX-  x21124 (1996) ("Rifkin") and In the Matter of Lake Cablevision, Inc. and Lake Cablevision (Winder), Inc., DA 97 {O"-1616 (released August 1, 1997) ("Lake").L In Insight, we granted special relief so that the cable operator could use the small"%,`(`(883"  S-  system rate rules for its systems serving 16,348, 16,328 and 17,798 subscribers, respectively.S&R {O-ԍInsight, 11 FCC Rcd at 1274.S We found   jthat "even the largest of the three systems exceed[ed] the 15,000 subscriber standard by only a relatively  S-  small amount.":'~R {O-ԍId.: With only 15,183 subscribers, MultiCablevision's system is smaller than any of the  S-  =above mentioned Insight systems, and exceeds the 15,000 subscriber limit by only 183 subscribers.I(R {O8 -ԍSee Petition at 2.I In  Sb-  addition, as in Insight, we find no evidence that the system in question is "experiencing, or anticipates  S<-  Mexperiencing, a high rate of subscriber growth."u)<R {O~-ԍSee Insight, 11 FCC Rcd at 1274; see also Petition at 7.u MultiCablevision claims that its system faces stiff   competition in its region due to the penetration of direct broadcast satellite services, and that significant  S-  nearterm subscriber growth on its system is not anticipated.?*4 R yO-ԍPetition at 7.? We did not receive any oppositions to the Petition that dispute this claim.   St-   12.` ` MultiCablevision's system also shares several relevant characteristics with systems serving  SL -  Lfewer than 15,000 subscribers. In the Small System Order, the Commission observed that systems with   .fewer than 15,000 subscribers differed from systems with more than 15,000 subscribers with respect to  S -  three main characteristics, including average number of subscribers per mile, regulated revenues, and  S -  =non-regulated (or premium) revenues.^+ R {O:-ԍSmall System Order, 10 FCC Rcd at 7408.^ With respect to subscriber density, MultiCablevision's system   serves an average of only 18 subscribers per mile, which is almost half the small system average of 35.3  S -  Lsubscribers per mile and substantially less than the 68.7 subscriber per mile average for larger systems., V R {O|-ԍPetition at 67. See also Small System Order, 10 FCC Rcd at 7408.   .Low subscriber density was specifically relied on by the Commission to establish the 15,000 subscriber  S6-  threshold for small systems.^-6R {O-ԍSmall System Order, 10 FCC Rcd at 7408.^ The Commission noted in the Small System Order that commenters had   zobserved that "a smaller system serving a large rural area faces increased construction costs due to the  S-  Mincreased amount of cable that must be installed to reach the entire area and increased operating costs  S-given the greater amount of facilities that must be maintained."C.zR {O#-ԍId. at 7402.C  S-" .,`(`(88"Ԍ S-   13.` ` The Commission also found that the average monthly regulated revenue per channel per  S-  <subscriber is $0.86 for systems with fewer than 15,000 subscribers.C/R {O@-ԍId. at 7408.C MultiCablevision's average monthly  S-  >regulated revenue per channel per subscriber of $0.52 falls between the standards for small and larger  S-systems.A0ZR yO-ԍPetition at 56.A  S8-   14.` ` MultiCablevision's system furthermore reports an average annual premium revenue per  S-  subscriber of only $50.76, which is closer to the $41 average for small systems than it is to the $73.13  S-  average for larger systems.x1R {Or -ԍId. at 6. See also Small System Order, 10 FCC Rcd at 7408.x This disparity with respect to unregulated or premium revenues was another  S-  factor specifically recognized in the Small System Order as a justification for the small system definition.^2|R {O -ԍSmall System Order, 10 FCC Rcd at 7408.^  Sr-  15.` ` In the Small System Order, the Commission stated that it would also consider "evidence  SL -  of increased costs (e.g., lack of programming or equipment discounts) faced by the operator."D3L R {O-ԍId. at 7412. D As we  S$ -  have previously noted, small systems with a low subscriber density are often faced with increased costs.b4$ R {Od-ԍId. at 7402. See supra at para. 12. b   MultiCablevision's petition indicates that the subscriber density for its system compares very favorably  S -  with the average subscriber density for small systems.M5 2 R {O-ԍSee supra at para. 12.M MultiCablevision also states that it "does not  S -benefit from programming discounts enjoyed by larger MSOs."?6 R yO-ԍPetition at 7.?  S\-  16.` ` We believe that MultiCablevision should be allowed to use the small system costof S4-  |service methodology to justify rates for its regulated channels. In the Small System Order, the   kCommission adjusted its definition of small systems in order to further Congress' goal of reducing the  S-  .regulatory burdens and cost of compliance for smaller cable concerns.d7T R {O-ԍSmall System Order, 10 FCC Rcd at 7395, 7406.d The Commission noted that the   goals expressed by Congress in the 1992 Cable Act Statement of Policy would also be furthered if it  S-  expanded the category of small systems entitled to reduced regulatory burdens.8R {O#-ԍId. at 740607, citing 1992 Cable Act, Pub. L. No. 102385, 106 Stat. 1460 (1992),  2(b)(1)(3). The Small System Order   kallows for the filing of petitions for special relief so that systems that fail to meet the numerical small   system definition may still show that they are similar to systems that meet the definition, and are therefore  S -  Lentitled to relief.I9 xR {O8'-ԍId. at 7412.I MultiCablevision's system exceeds the small system definition by only a very small"  9,`(`(88"   amount. MultiCablevision has also shown that its system has characteristics that compare favorably with   the various characteristics that the Commission used to determine the category of systems deserving of  S-  Nregulatory relief. For these reasons, we believe that granting the Petition will further the intent of Congress and will therefore serve the public interest.  S8- IV.SCOPE OF THE WAIVER  S-  17.` ` As a result of our grant of the Petition, MultiCablevision's system shall be deemed a   small system for purposes of rate regulation. Accordingly, to the extent MultiCablevision's basic service  S-  tier and/or cable programming service tier offerings are subject to rate regulation,:R yO - !ԍAs of the 1996 Act's enactment on February 8, 1996, rate regulation does not apply to a small cable   operator with respect to CPSTs or to a BST that was the only service tier subject to regulation as of December 31,   1994. For purposes of this provision, a "small cable operator" is defined as one that, directly or through an affiliate,   serves in the aggregate fewer than 617,000 subscribers and is not affiliated with any entity whose gross annual  {O -  revenues exceed $250,000,000. 47 U.S.C.  543(m); 47 CFR  76.1403(b); Order and Notice of Proposed  {O -  Rulemaking in CS Docket No. 9685, 11 FCC Rcd 5937, 5947 (1996). As discussed above, small system relief under   our rules is available only to systems that serve fewer than 15,000 subscribers and are not affiliated with a cable  {O|-  operator that serves more than 400,000 subscribers, absent a waiver. See supra paras. 34. Accordingly, a rate   ,complaint that is filed concerning a cable system that is deemed a small system under our rules may not invoke rate   .regulation of the system's CPST or of its BST if the BST was the only service tier subject to regulation as of December 31, 1994. it may now set rates prospectively in accordance with the small system costofservice methodology.  S -  18.` ` We next must determine the duration of the waiver. In the Small System Order, after establishing the new small system and small cable company definitions, the Commission stated:    ` XX` ` To qualify for any existing form of [small system] relief, systems and  S -  companies must meet the new size standards as of either the effective   date of this order or on the date thereafter when they file whatever   documentation is necessary to elect the relief they seek, at their   (election... $C Ԡ $C Ԡ. A system that is eligible for small system relief on either   of the dates described above shall remain eligible for so long as the   Gsystem has 15,000 or fewer subscribers, regardless of a change in the   sstatus of the company that owns the system. Thus, a qualifying system   8will remain eligible for relief even if the company owning the system   subsequently exceeds the 400,000 subscriber cap. Likewise, a system that   Fqualifies $C   $C shall remain eligible for relief even if it is subsequently acquired  S-by a company that serves a total of more than 400,000 subscribers.;\.  {O!- ԍId. at 7413. The quoted text was discussing a system's initial and continuing eligibility for "any existing   form of relief," which did not include the small system costofservice methodology. However, later in the order  {OR#-the Commission applied the same eligibility standards to that methodology as well. Id. at 742728.x`  `    S-  219.` ` The Commission adopted this grandfathering treatment for qualifying systems to enhance  Sz-  their value "in the eyes of operators and, more importantly, lenders and investors."C<zR R {Ol'-ԍId. at 7413.C As the Commission"z<,`(`(88"   stated: "The enhanced value of the system thus will strengthen its viability and actually increase its ability  S-to remain independent if it so chooses.":=R {O@-ԍId.: ` `  S-  #20.` ` Upon exceeding the 15,000 subscriber threshold, a system that has established its rates in accordance with the small system costofservice methodology:   XX` ` . . . may maintain its then existing rates. However, any further   adjustments shall not reflect increases in external costs, inflation or   channel additions until the system has reestablished initial permitted rates  S-in accordance with our benchmark or costofservice rules.H>ZR {O -ԍId. at 742728. Hx`  SH -  $21.` ` Since MultiCablevision's system has already exceeded 15,000 subscribers, there is no   obvious numerical limit to serve as a cutoff for its continued eligibility for small system treatment.  S -  Although MultiCablevision does not anticipate "significant nearterm subscriber growth on its system,"?? R yO-ԍPetition at 7.?   [we believe it is reasonable to presume that the system will continue to grow. Thus, we must place some   duration on the waiver, since the alternative would be to grant small system status indefinitely, regardless   of the eventual size of the system. This latter alternative is clearly inconsistent with the Commission's decision to limit small system relief to systems who are in need of it due to their relatively small size.  S-  22.` ` Therefore, as we have ordered in the context of a similar waiver situation, the Multi  Cablevision waiver will terminate two years from the date of this order, subject to the conditions set forth  S-  below.{@|R {O-ԍSee Insight, 11 FCC Rcd at 1276; Lake at para. 24.{ During the waiver period, MultiCablevision may file only one Form 1230 for each franchise   area it serves. This should give MultiCablevision adequate regulatory certainty for the foreseeable future,   .while still ensuring that the system is not permitted to charge rates indefinitely under a scheme designed   for smaller systems. Of course, MultiCablevision may seek continued eligibility for small system treatment by filing a petition for special relief at the end of the waiver period.  S-  23.` ` Limiting the waiver period to two years means that any Form 1230 to be filed by Multi  Cablevision must be submitted with the appropriate regulatory authorities within two years of the date of   this order. In any franchise area where the system is currently subject to regulation, MultiCablevision  SP-  zmay reestablish its maximum permitted rates by filing Form 1230 at any time in the next two years.APR yO!- ԍThe Petition indicates that, at the time of filing, none of the local franchising authorities in the communities served by MultiCablevision's system regulated basic rates. Petition at 2.   jWhere the system is not currently subject to regulation but becomes subject to regulation within the next   two years, MultiCablevision may then file Form 1230 within the normal response time. Where the   system is not now subject to regulation, and does not become subject to regulation until more than two years from now, MultiCablevision will not be eligible for small system treatment under this waiver.  S-" f A,`(`(88"Ԍ S-  Q24.` ` After filing its initial Form 1230 and giving the required notice, MultiCablevision may   [set its actual rates in the franchise area at any level that does not exceed the maximum rate, subject to the   standard rate review process. Subsequent increases, not to exceed the maximum rate established by the  S-  Form 1230, shall be permitted, subject to the 30 days' notice requirement of the Commission's rules.B\R {O- ԍSmall System Order, 10 FCC Rcd at 7426. Under the small system rules, rate increases taken after the   initial Form 1230 has been approved are not subject to further regulatory review, as long as the rate is no higher than  {O-that permitted by the previouslyfiled form. Id.   >As noted, the maximum rate established by the initial Form 1230 shall be a cap on the system's rates  S8-  during the waiver period. If the system reaches that cap and subsequently wishes to raise rates further,   it will have to justify the rate increase in accordance with our standard benchmark or costofservice rules.   Alternatively, the system can file another petition for special relief and seek continued treatment as a small   =system. Limiting MultiCablevision to a single Form 1230 filing for each franchise area provides further   assurance that the system will not have grown too large to be establishing rates under the small system costofservice methodology.  S - V.ORDERING CLAUSES  S -  25.` ` Accordingly, IT IS ORDERED that the Petition for Special Relief filed by Multi S -Cablevision Co. of Livingston/Washtenaw IS GRANTED.  SX-  26.` ` This action is taken pursuant to delegated authority under Section 0.321 of the  S0-Commission's rules.FC0R yO-ԍ47 C.F.R.  0.321.F  $C   $C ` `  hh,FEDERAL COMMUNICATIONS COMMISSION ` `  hh,John E. Logan ` `  hh,Acting Chief, Cable Services Bureau