Federal Communications Commission DA 02-1050 in the Matter Of
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Federal Communications Commission DA 02-1050 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) File No. EB-02-TC-037 Time Warner Entertainment Company, LP ) ) CUID No.WI0265 (West Allis) Complaint Regarding ) Cable Programming Services Tier ) ORDER Adopted: May 6, 2002 Released: May 8, 2002 By the Chief, Enforcement Bureau:1 1. In this Order we consider a complaint2 against the rates charged by the above-referenced operator ("Operator")3 for its cable programming services tier ("CPST") in the community referenced above.4 The Cable Services Bureau has already issued an order in which it found Operator’s CPST rates in effect through May 14, 1994 to be unreasonable ("Prior Order").5 In the Prior Order, the Cable Services Bureau stated that its findings "do not in any way prejudge the reasonableness of the prices for CPS service after May 14, 1994 under our new rate regulations."6 This Order addresses only the reasonableness of Operator’s CPST rates in effect beginning May 15, 1994. 2. Under the provisions of the Communications Act7 that were in effect at the time the referenced complaints were filed, the Federal Communications Commission ("Commission") was authorized to review the CPST rates of cable systems not subject to effective competition to ensure that rates charged are not unreasonable. The Cable Television Consumer Protection and Competition Act of 19928 ("1992 Cable Act") required the Commission to review CPST rates upon the filing of a valid complaint by a subscriber or local franchising authority ("LFA"). The filing of a complete and timely complaint triggers an 1 Effective March 25, 2002, the Commission transferred responsibility for resolving cable programming services tier rate complaints from the former Cable Services Bureau to the Enforcement Bureau. See Establishment of the Media Bureau, the Wireline Competition Bureau and the Consumer and Governmental Affairs Bureau, Reorganization of the International Bureau and Other Organizational Changes, FCC 02-10, 17 FCC Rcd 4672 (2002). 2 The first valid complaint against Operator’s CPST rate in the community referenced above was filed on February 28, 1994. There are no subsequent complaints on file. 3 The term "Operator" includes Operator's predecessors and successors in interest. 4 On December 3, 1997, the Federal Communications Commission received notification, pursuant to 47 C.F.R. § 76.400, of a change of ownership from Marcus Cable Partners, LP to Time Warner Entertainment Company, LP. 5 See In the Matter of Crown Cable Wisconsin, Inc., DA 95-680, 10 FCC Rcd 7923 (CSB 1995); refund plan denied, In the Matter of Marcus Cable Partners, LP, DA 98-2442, 13 FCC Rcd 23411 (CSB 1998). 6 Prior Order at n. 2. 7 Communications Act, Section 623(c), as amended, 47 U.S.C. §543(c) (1996). 8 Pub. L. No. 102-385, 106 Stat. 1460 (1992). Federal Communications Commission DA 02-1050 obligation upon the cable operator to file a justification of its CPST rates.9 The Operator has the burden of demonstrating that the CPST rates complained about are reasonable.10 If the Commission finds a rate to be unreasonable, it shall determine the correct rate and any refund liability.11 3. Operators must use the FCC Form 1200 series to justify rates for the period beginning May 15, 1994.12 Operators may file an FCC Form 1210 to justify quarterly rate increases based on the addition and deletion of channels, changes in certain external costs and inflation.13 Operators may justify their rates on an annual basis using an 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.14 Any incurred cost that is not projected may be accrued with interest and added to rates at a later time.15 Additionally, an Operator may file an FCC Form 1235 (Abbreviated Cost of Service Filing for Cable Network Upgrades). The FCC Form 1235 allows cable operators to justify rate increases related to significant capital expenditures used to improve rate-regulated services. This option is extended only in cases of significant upgrades requiring added capital investment, such as bandwidth capacity and conversion to fiber optics, and for system rebuilds. Normal improvements and expansions of service remain subject to the usual rate adjustments allowed by filing FCC Form 1210s, 1220s and 1240s. Cable operators that incur increases in operating costs associated with a significant network upgrade will be permitted to charge additional rates as justified by their FCC Form 1235 filing. 4. Upon review of Operator’s FCC Form 1200, we adjusted Line A6 (Monthly Charge per Tier as of 3/31/94) to $10.01 to conform to the maximum permitted rate ("MPR") from Operator's revised FCC Form 393 as adjusted in our Prior Order. Line A1 (Channels per Tier as of 3/31/94) and Line C1 (Channels per Tier as of 3/31/94) were adjusted to 23 channels for the CPST to reflect Operator’s actual channel line-up, in accordance with the channel line-up card provided by Operator. We also adjusted Line C2 (Number of Regulated Non-Broadcast Channels per Tier) to 23 for the CPST for the same reason. Our adjustments reduced Operator’s MPR from $10.55 to $9.36. The Commission’s rules provide for a refund liability deferral period, if timely requested by Operator, beginning May 15, 1994 and ending July 14, 1994, for any overcharges resulting from Operator’s calculation of a new MPR on the FCC Form 1200.16 Operator elected to defer refund liability for overcharges associated with its FCC Form 1200 pursuant to the Commission’s rules.17 However, Operator will incur refund liability from May 15, 1994 through July 14, 1994 for any CPST rates charged above the FCC Form 393 MPR approved by the Commission.18 In the 9 See Section 76.956 of the Commission’s rules, 47 C.F.R. § 76.956. 10 Id. 11 See Section 76.957 of the Commission’s rules, 47 C.F.R. § 76.957. 12 See Section 76.922 of the Commission's rules, 47 C.F.R. §76.922. 13 Id. 14 Id. 15 Id. 16 See Section 76.922(b)(6)(ii) of the Commission's rules, 47 C.F.R. Section 76.922(b)(6)(ii). 17 See Letter dated August 12, 1994 to the Federal Communications Commission from Trudi McCollum Foushee, Vice President, Crown Cable Law and Regulatory Affairs. 18 See Section 76.922(b)(6)(ii) of the Commission's rules, 47 C.F.R. § 76.922 (b)(6)(ii). 2 Federal Communications Commission DA 02-1050 Prior Order, the Cable Services Bureau found that Operator justified an FCC Form 393 MPR of $10.01. Because Operator’s actual CPST rate of $10.27, effective May 15, 1994 through July 14, 1994, exceeds its FCC Form 393 MPR of $10.01, we find Operator’s actual CPST rate of $10.27, effective May 15, 1994 through July 14, 1994, to be unreasonable. 5. Upon review of Operator’s FCC Form 1210 covering the period April 1, 1994 through June 30, 1994, we adjusted Line A2 (Full Reduction Rate per Tier) to reflect Operator’s revised FCC Form 1200 Line K1 (Maximum Permitted Rate) of $9.36. Line C1 (Previous Number of Regulated Channels per Tier) and Line C2 (Current Number of Regulated Channels per Tier) were adjusted to 23 channels for the CPST as noted above. These adjustments reduced Operator’s MPR from $11.15 to $9.96, effective July 1, 1994. Because Operator’s actual CPST rate of $10.27, effective July 15, 1994 through July 31, 1994, exceeds its revised MPR of $9.96, we find Operator’s actual CPST rate of $10.27, effective July 15, 1994 through July 31, 1994, to be unreasonable. Because Operator’s actual CPST rate of $10.55, effective August 1, 1994 through September 30, 1994, exceeds its revised MPR of $9.96, we find Operator’s actual CPST rate of $10.55, effective August 1, 1994 through September 30, 1994, to be unreasonable. 6. Upon review of Operator’s FCC Form 1210 covering the period July 1, 1994 though September 30, 1994, we adjusted Line A2 to reflect Operator’s prior FCC Form 1210 MPR of $9.96. Line C1 and Line C2 were adjusted to 23 channels for the CPST. These adjustments reduced Operator’s MPR from $11.35 to $10.14, effective October 1, 1994. Because Operator’s actual CPST rate of $10.55, effective October 1, 1994 through October 31, 1994, exceeds its revised MPR of $9.96, we find Operator’s actual CPST rate of $10.55, effective October 1, 1994 through October 31, 1994, to be unreasonable. Because Operator’s actual CPST rate of $11.35, effective November 1, 1994 through December 31, 1994, exceeds its revised MPR of $10.14, we find Operator’s actual CPST rate of $11.35, effective November 1, 1994 through December 31, 1994, to be unreasonable. 7. Upon review of Operator's FCC Form 1210 covering the period October 1, 1994 through December 31, 1994, we adjusted Operator's Line A2 to reflect Operator’s prior FCC Form 1210 MPR of $10.14. Line C1 and Line C2 were adjusted to 23 channels for the CPST. These adjustments reduced Operator’s MPR from $11.56 to $10.34, effective January 1, 1995. Because Operator’s actual CPST rate of $11.35, effective January 1, 1995 through March 31, 1995, exceeds its revised MPR $10.34, we find Operator’s actual CPST rate of $11.35, effective January 1, 1995 through March 31, 1995, to be unreasonable.