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Town of Waterloo) Time Warner Communications ) ) Petition for Reconsideration )

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Town of Waterloo) Time Warner Communications ) ) Petition for Reconsideration ) Federal Communications Commission DA 98-2223 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) CUID No. NY0487 (Town of Waterloo) Time Warner Communications ) ) Petition for Reconsideration ) ORDER ON RECONSIDERATION Adopted: October 29, 199S Released: November 3,1998 By the Deputy Chief, Cable Services Bureau: 1. In this Order we consider a petition for reconsideration of a rate order concerning the January 1, 1997 rate increase of the above-referenced operator ("Operator") for its cable programming services tier ("CPST") in the community referenced above. On August 29, 1997, we issued a rate order concerning Operator©s January 1, 1997 CPST rate increase ("Prior Order"). 1 On September 29, 1997, Operator filed a petition for reconsideration of our Prior Order ("Petition"). Operator subsequently filed an amendment to its petition for reconsideration on December 31, 1997. In this Order we will review these documents together as one filing ("Amended Petition").2 2. Under the Communications Act,3 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. The Telecommunications Act of 1996 ("1996 Act")4 and our rules implementing the legislation ("Interim Rules"),5 require that a complaint against the CPST rate be filed with the Commission by a local franchising authority ("LFA") that has received more than one subscriber complaint.6 3. The filing of a complete and timely complaint triggers an obligation upon the cable operator to file a justification of its CPST rates.7 The Operator has the burden of demonstrating that the © See In the Matter of Time Warner Communications, 12 FCC Red 23736 (1997). © Operator attached revised FCC Form 1240s to its Amended Petition. 3 Communications Act, Section 623(c), as amended, 47 U.S.C. §543(c) (1996). " Pub. L. No. 104-104, 110 Stat. 56 (1996). 5 See Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996, 11 FCC Red 5937 (1996). 6 See Communications Act, Section 623(c), as amended, 47 U.S.C. Section 543(c) (1996). 7 See Section 76.956 of the Commission©s Rules, 47 C.F.R. §76.956. 22596 Federal Communications Commission DA 9S-2223 CPST rates complained about are reasonable.8 If the Commission finds a rate to be unreasonable, it shall determine the correct rate and any refund liability.9 4. To justify rates for the period beginning May 15, 1994, operators must use the FCC Form 1200 series. 10 Operators are permitted to make changes to their rates on a quarterly basis using FCC Form 1210." Operators may justify 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.12 Any incurred cost that is not projected may be accrued with interest and added to rates at a later time.13 5. On November 30, 1995, we issued an Order approving a Social Contract which Operator entered into with the Commission ("Social Contract").14 In our Prior Order, we found that Operator had not correctly calculated its maximum permitted rate ("MPR") on its FCC Form 1240 for the projected period January 1, 1997 to December 31, 1997. In particular, we found that Operator had made true-up adjustments through to the effective dale of the rate increase and that those adjustments did not include actual data. 15 Consequently, we reduced Operator©s true-up period by three months and adjusted Operator©s MPR in accordance with our rules and the FCC Form 1240 instructions.16 These adjustments reduced Operator©s MPR to $15.43. Because Operator was actually charging a CPST rate of $16.49, we found Operator©s actual CPST rate to be unreasonable. We also held Operator©s refund liability in abeyance until the release of an order denying Operator©s Petition for Special Relief requesting approval of the uniform ratesetting methodology it was using in its Finger Lakes, New York cable television system.17 6. In its Amended Petition, Operator argues that our elimination of three months of the true- up period conflicts with the Social Contract. Operator states that "[i]n situations where [Operator] did not raise its CPST rate on January 1, 1996 to the maximum permitted rate the Bureau©s exclusion of the last three months of 1996 from the true-up results in [Operator] not getting the full benefit of the $1.00 per s Id. " See Section 76.957 of the Commission©s Rules, 47 C.F.R. §76.957. 10 See Section 76.922 of the Commission©s Rules, 47 C.F.R. §76.922. 11 Id. 12 ©Id. 13 Id. 14 See In the Matter of Social Contract for Time Warner, 11 FCC Red 2788 (1996). 15 Prior Order at f5. 16 Operator©s true-up period, which began January 1, 1996 and originally ended on December 31, 1996, was adjusted to end on September 30, 1996. 17 Waterloo, New York is served by Operator©s Finger Lakes, New York cable television system. 22597 Federal Communications Commission DA 98-2223 year CPST rate increase permitted by the Social Contract."18 Operator requests that it be permitted to use "a full 12-month true-up period on the 1997 Form 1240 for the amount of the $1.00 CPST increase permitted by the Social Contract which it did not take on January 1, 1996."19 Operator discussed possible methods for implementing its request with Bureau staff members. Ultimately, it appears that Operator was given permission by Commission staff to file bifurcated FCC Form 1240s ("Amended FCC Form 1240s") for the projected periods January 1, 1996 through December 31, 1996, January 1, 1997 through December 31, 1997.20 In these bifurcated forms, Operator calculates the $1.00 annual increase permitted by the Social Contract ("Social Contract Dollar") and its true-up on a separate FCC Form 1240 ("SCD Form 1240"). On the SCD Form 1240, Operator calculates its true-up adjustment through to the effective date of the rate increase. On its other FCC Form 1240, Operator calculates the other adjustments to its CPST rate adjusting its true-up period to conform with the Prior Order. 7. Upon review of Operator©s bifurcated FCC Form 1240 methodology, we find Operator©s methodology acceptable. It allows Operator to collect its Social Contract Dollar each year, and to true-up any applicable part of its Social Contract Dollar, within the calendar years covered by the Social Contract.21 Our acceptance of Operator©s Amended FCC Forms 1240, however, is not an invitation to operators to refile FCC Forms after an order has been released concerning their rates. Once an operator has filed FCC Forms with the Commission, each of which requires a signed certification statement that the information on the FCC Form is true and correct, we are entitled to act upon that information. Moreover, once we have released an order concerning those FCC Forms, we cannot ordinarily allow an operator to amend those FCC Forms on appeal with information that should have been submitted in the original certification. In the present case, we will allow Operator to file its Amended FCC Forms 1240 because we instructed Operator to make such filings. Absent such explicit instructions, we would reject the Amended FCC Forms 1240 filed by Operator. Further, our acceptance of Operator©s bifurcated FCC Form 1240 methodology still requires that we review Operator©s calculations on its Amended FCC Forms 1240. 8. Operator also argues that we should modify our findings in the Prior Order to take into consideration its uniform rate structure. On June 25, 1997, Operator filed two Petitions for Special Relief requesting approval of the uniform ratesetting methodology that it was using to set rates in its cable television systems in Rochester, New York and Finger Lakes, New York. On June 24, 1998, the Bureau denied Operator©s Petitions for Special Relief.22 Because the ratesetting methodology used by Operator to set its CPST rates in the community referenced above was not approved by the Bureau, we decline to take its uniform rate structure into consideration in this order. 18 Amended Petition at 1 - 2. 19 Id. at 2. 20 Id. at Attachment A. 21 Social Contract, Section III.F.4. 22 In re Petition of Time Warner Cable, 13 FCC Red 12185 (1998). Operator has since appealed this decision by filing an application for review with the Commission. 22598 Federal Communications Commission DA 9S-2223 9. Upon review of Operator©s Amended FCC Form 1240s, for the projected period January 1, 1996 through December 31, 1996, and January 1, 1997 to December 31, 1997, we adjusted Line 801 of Operator©s 1997 FCC Form 1240 to $12.9089 and Line 801 of Operator©s 1997 SCO Form 1240 to $0.5111, to conform with Operator©s actual CPST rate based on Operator©s rate card. We also adjusted Operator©s Line C5 (Current FCC Inflation Factor), on its 1997 FCC Form 1240, to 1.0270.23 These adjustments resulted in a revised total MPR24 of $15.66 for the projected period January 1, 1997 to December 31, 1997. Because Operator©s actual CPST rate, effective January 1, 1997, is $16.49, we find Operator©s actual CPST rate, effective January 1, 1997 to be unreasonable.25 Therefore, we will vacate our Prior Order and grant Operator©s Amended Petition to the extent that it concerns the amount of refund liability pertaining to Operator©s January 1, 1997 CPST rate.
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