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In the Matter of Federal Communications Commission DA 96-1339

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In the Matter of Federal Communications Commission DA 96-1339 Federal Communications Commission DA 96-1339 Before the Federal Communications Commission Washington, D.C. 20554 ) In the Matter of ) ) InterMedia Partners ) CUID No. GA0289 (City of Hogansville) ) Cost of Service Showing and ) FCC Form 1210 Filings to Support ) Basic Service Tier Rate and ) Cable Programming Services Rates ) ORDER Adopted: August 19, 1996 Released: August 19, 1996 By the Deputy Chief, Cable Services Bureau: INTRODUCTION 1. On August 12, 1994, Robin Media Group, Inc. d/b/a InterMedia Partners ("InterMedia"), serving CUID Number GA0289, filed a cost of service showing with its franchising authority, the City of Hogansville, Georgia ("City"), seeking to justify its Basic Service Tier ("BST") rate. 1 Thereafter, on September 13, 1994, the City petitioned the Federal Communications Commission ("Commission") to review the BST cost of service showing.2 On March 15, 1995, the Commission granted the City's request and agreed to review InterMedia's cost of service showing for the BST rate.3 1 In accordance with 47 C.F.R. § 76.910, on October 15, 1993 the City filed FCC Fonn 328 with the Commission requesting certification to regulate the BST rate. The City also served a copy of FCC Form 328 on InterMedia which served as notification to InterMedia of the City's intention to regulate the BST rate. On September 20, 1993 the City ( 1) authorized the filing of FCC Fonn 328 with the Commission and (2) adopted regulations with respect to the rates for the BST that were consistent with the regulations prescribed by the Com.mission for regulation of the BST. 2 See Third Order on Reconsideration in MM Docket Nos. 92-266 and 92-262 (Third Recon. Order), 9 FCC Red 4316, 4338-39 (1994). The Commission recognized that some local franchising authorities may have resources and personnel sufficiept to conduct a review of the rate-setting justification based on the benchmark approach but not to examine and review a cost of service showing. The Commission also understood that this concern may have discouraged certification by many local franchising authorities. Therefore, it established procedures under which the Commission, if requested by the local franchising authority in a petition for special relief under Section 7 6. 7 of the Commission's rules, will issue a ruling that makes cost of service detenninations for the BST. 47 C.F.R. § 76.933(d). ; The City asserted that it lacked the municipal resources and adequately trained personnel necessary to conduct the cost of service review. See Petition of City September 13, 1994; see also Affidavit of Constance G. Ellis, City Clerk, City of Hogansville (September 7, 1994). The Commission granted the City's request on March 15, 1995 and 9949 Federal Communications Commission DA 96-1339 2. On April 11, 1995, InterMedia also filed a cost of service submission with the Commission in response to complaints which allege that InterMedia' s cable programming services tier ("CPST") rate is unreasonable.4 On May 31, 1996, InterMedia supplemented and amended this filing. 3. According to infonnation provided by InterMedia in its cost of service showings, the franchise area comprised approximately 676 BST subscribers and 288 CPST subscribers at the time of the August 12, 1994 filing, and approximately 680 BST subscribers and 302 CPST subscribers at the time of the April 11, 1995 filing. InterMedia provided 12 BST channels and 7 CPST channels at the time of both filings. In this review process, pursuant to the Cable Television Consumer Protection and Competition Act of 1992 (" 1992 Cable Act"), 5 we analyze InterMedia's BST and CPST cost of service showings to ensure that the rates charged were not unreasonable and to determine any associated refund liability.6 4. In this review, we are analyzing BST rates charged from May 15, 1994 to the present.7 InterMedia's cost of service filings seek to esta~lish that its BST rate of $17.54 per month for this period is justified based on its cost of providing service on its BST. Our analysis indicates agreed to review InterMedia's cost of service showing regarding its BST rates for the City. See Letter dated March 15, 1995, from Jacqueline Spindler, Deputy Division Chief, Financial Analysis and-Compliance Division, to the Honorable Calvin Turbyfield, Mayor, City of Hogansville, Georgia. 4 The earliest valid complaint filed and accepted by the Commission for the CPST rate charged in the above franchise area served by InterMedia was received on February 23, 1995. On April 4, 1995, InterMedia filed a request for extension oftime (until April IO, 1995) in which to file its cost of service rate justification. The request for extension of time is moot, because lnterMedia filed its cost of service rate justification on April 11, 1995. 5 See Communications Act of 1934, as amended by the Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385, 106 Stat. 1460 (1992) ("1992 Cable Act") at § 623{c)(l){C), 47 U.S.C. § 543(c)(l)(C). The Communicatfons Act authorizes the Commission to order that an operator refund to subscribers that ponion of rates that subscribers have paid that are, upon review, found to be unreasonable. 6 See Communications Act, §§ 623(b)(l) and 623(c){l)(C). 7 InterMedia submitted a letter on November 23, 1993 to the City advising that InterMedia qualified as a small system and that, accordingly, the Commission's stay of rate regulation, for systems with 1,000 or fewer subscribers, applied to InterMedia's Hogansville system. See Letter from Bruce J. Stewart, Counsel, InterMedia Partners, to A. Quillian Baldwin, Jr., City Attorney, City of Hogansville, Georgia (November 23, 1993). See also Implementation of Sections of the Cable Television Consumer Protection Act of 1992: Rate Regulation, :MM Docket No. 92-266, Memorandum Opinion and Order and Further Notice of Proposed Rulemaking, 8 FCC Red 5585 (1993). On May 16, 1994, the City issued a letter to InterMedia advising lnterMedia that the stay for small systems terminated on May 15, 1994 and that the City was authorized to regulate InterMedia's BST rate as of May 15, 1994. See Letter from The Honorable Calvin J. Turbyfield, Mayor, City of Hogansville, to Anthony (Sonny) Seneker, Jr., General Manager, Peachstate Cablevision (May 16, 1994). See also Implementation of Sections of the Cable Television Consumer Protection Act of 1992: Rate Regulation, MM Docket No. 92-266, Second Order on Reconsideration, Fourth Repon and Order, and Fifth Notice of Proposed Rulemaking, 9 FCC Red 4119 (1994). 9950 Federal Communications Commission DA 96-1339 that the rate charged by InterMedia during the period under review should instead have been $13 .41 per month. 8 5. We are also analyzing CPST rates charged beginning February 23, 1995, the date of the first valid complaint regarding the CPST rate in GA0289.9 InterMedia's April 11, 1995 cost of service filing, on FCC Form 1220, and subsequent FCC Form 1210 filing seek to establish that its CPST rate of $11.94 per month beginning February 23, 1995 is justified based on its cost of providing service. Our review indicates that InterMedia' s CPST rate, as substantiated on its FCC Form 1220 and FCC Form 1210 filing, is justified under the Commission's rules. BACKGROUND 6. On May 3, 1993, the Commission released an Order establishing rules to implement the cable television rate regulation provisions of the 1992 Cable Act. 10 In the Rate Order, the Commission determined that a benchmark and price cap approach should serve as the primary method for regulating BST and CPST rates. The Commission also concluded that because the benchmark methodology might not produce fully compensatory rates in all cases, it was appropriate to permit operators, as an alternative, to justify rates using cost of service showings.11 The cost of service approach was intended to be used only if an operator believed that the maximum rate permitted under the benchmark formula would no~ enable the operator to recover costs reasonably incurred in providing rate regulated cable services. Under traditional cost of service regulation, rates are set at a level to provide a company with recovery of its costs and a reasonable opportunity to earn a fair return on its capital investment. 12 8 On January 23, 1995, the City issued an accounting order pursuant to 47 C.F.R. § 76.933(c), thereby preserving its ability to order refunds. As a result, applying 47 C.F.R. § 76.942(c)(2), the total refund period shall be for a period not to exceed one year back in time from the date of the accounting order. The actual refund liability time period is from May 15, 1994 (the date the stay ended), to January 23, 1995 (the date of the City's accounting order). 9 See Communications Act, § 623(c)(l)(C). 10 Implementation ~fSections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, MM Docket No. 92-266, Report and Order and Further Notice of Proposed Rulemaking (''Rate Order''), 8 FCC Red 5631, 5637 (1993). 11 Rate Order, 8 FCC Red at 5794-95; see also 47 C.F.R. § 76.922. 12 Under the traditional cost of service formulation, a company's revenue requirement is equal to the reasonable expenses of providing service and a fair return on investment: R = E + (V - d) r, where R is the revenue requirement; E is expenses, including operating expenses, maintenance expenses, depreciation and taxes; V is the value of the rate base, including plant in service and working capital; d is accumulated depreciation; and r is the authorized rate of return, consisting of a weighted average of long term debt, preferred stock, and common stock.
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