Federal Communications Commission DA 99-164 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Bresnan Communications Company ) CUID No. MI0222 (Negaunee) ) Complaints Regarding Cable Programming ) Services Tier Rate Increase ) ORDER Adopted: January 12, 1999 Released: January 15, 1999 By the Acting Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider complaints about the rates charged by the above-referenced operator ("Operator") for its cable programming services tier ("CPST") in the community referenced above. Operator has chosen to attempt to justify its CPST rates through benchmark showings on FCC Form 1200, multiple FCC Form 1210s, multiple FCC Form 1240s and FCC Form 1235. We have already issued an order in which we found that Operator's CPST rates in effect prior to May 15, 1994 were reasonable. 1 Accordingly, this Order addresses only the reasonableness of Operator's CPST rates in effect after May 14, 1994. 2. Under the Communications Act,2 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. If the Commission finds the rate to be unreasonable, it shall determine the correct rate and any refund liability.3 The filing of a complete and timely complaint triggers an obligation upon the cable operator to file a justification of its CPST rates.4 The Operator has the burden of demonstrating that the CPST rates complained about are reasonable.5 3. To justify rates for the period beginning May 15, 1994, operators must use the FCC Form 1200 series.6 Operators are permitted to make changes to their rates on a quarterly basis using FCC Form 1210.7 Operators may adjust their rates on an annual basis using FCC Form 1240.8 Additionally, an 1 See In The Matter of Bresnan Communications Company, 10 FCC Red 3428 (1995). Communications Act, Section 623(c), as amended, 47 U.S.C. §543(c) (1996). See Section 76.957 of the Commission's Rules, 47 C.F.R. §76.957. 4 See Section 76.956 of the Commission's Rules, 47 C.F.R. §76.956. s Id. 6 See Section 76.922 of the Commission's Rules, 47 C.F.R. §76.922. 7 Id. 943 Federal Communications Commission DA 99-164 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 fo 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, FCC Form 1210s and FCC Form 1240s, we find Operator has justified its maximum permitted rates ("MPRs") and actual CPST rates for the period from May 15, 1994 through March 31, 1998. Upon review of Operator's FCC Form 1240 for the projected period April 1, 1998 through March 31, 1999, we find Operator's MPR of $14.61 to be reasonable. 5. Upon review of Operator's FCC Form 1235, we adjusted Operator's net upgrade rate base and expense costs based on post-upgrade channel ratios, which align with the post-upgrade tier charges. We also adjusted Operator's income tax allowances based on a 34 percent Federal tax rate, the maximum applied to United States corporations. Our adjustments resulted in a revised upgrade MPR of $2.54, rather than Operator's MPR of $2.59. Thus Operator's total revised MPR for its CPST is $17.15 ($14.61 plus $2.54) rather than $17.20, effective April 1, 1998. Because Operator's actual CPST rate of $16.72, effective April 1, 1998, does not exceed its revised MPR, we find Operator's actual CPST rate of $16.72, effective April 1, 1998, to be reasonable.9 · 6. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the CPST rates, charged by Operator in the community referenced above, effective May 15, 1994 through March 31, 1998, ARE REASONABLE. 7. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the CPST rate of $16.72, charged by Operator in the community referenced above, effective April 1, 1998, IS REASONABLE. 8 Id 9 These findings are based solely on the representations of Operator. Should information come to our attention that these representations were materially inaccurate, we reserve the right to take appropriate action. This Order is not to be construed as a finding that we have accepted as correct any specific entry, explanation or argument made by any party to this proceeding not specifically addressed herein. Information regarding the specific adjustments made to Operator's FCC Forms can be found in the public file for the above-referenced community, available in the Cable Services Bureau's public reference room, or through the Commission's copy contractor, International Transcription Services (ITS), 1231 20th Street N.W., Washington, DC, 20036, or by calling ITS at (202) 857-3800. 944 Federal Communications Commission DA 99-164 8. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that Operator may charge a maximum permitted upgrade add-on rate of $2.54 for its CPST in the community referenced above. 9. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. § 0.321, that the referenced complaints ARE DENIED. FEDERAL COMMUNICATIONS COMMISSION Margaret M. Egler Acting Chief, Financial Analysis and Compliance Division .Cable Services Bureau 945 .