*Pages 1--3 from Microsoft Word - 7677.doc* Federal Communications Commission DA 01- 718 Before the Federal Communications Commission Washington, D. C. 20554 In the Matter of TIMES MIRROR CABLE TELEVISION OF ORANGE COUNTY, INC. d/ b/ a DIMENSION CABLE SERVICES Appeals of Local Rate Orders of the Following Cities: Dana Point, California Laguna Niguel, California Lake Forest, California Mission Viejo, California ) ) ) ) ) ) ) ) ) ) ) ) ) ) File No. CSB- A- 0015 CUID Nos. CA0549 and CA0652 CUID No. CA0316 CUID No. CA1070 CUID Nos. CA0192 and CA0135 MEMORANDUM OPINION AND ORDER ON RECONSIDERATION Adopted: March 19, 2001 Released: March 21, 2001 By the Deputy Chief, Cable Services Bureau: I. INTRODUCTION 1. Cox Cable Orange County, Inc., formerly Times Mirror Cable Television of Orange County, Inc. d/ b/ a Dimension Cable Services (“ Dimension” or “operator”) 1 filed a petition for reconsideration 2 of a Consolidated Order issued by the Chief, Cable Services Bureau, on June 1, 1995 (“ Bureau Order”). 3 The Order denied, in part, and dismissed, 4 in part, the operator’s appeals of four separate rate orders issued by the above cities that disallowed Dimension’s inclusion of franchise fees as a portion of equipment revenue on FCC Form 393. 5 The City of Laguna Niguel (“ City”) filed an opposition 1 Dimension’s parent company, Times Mirror Cable Television, Inc., was merged with Cox Communications, Inc. on January 31, 1995. 2 See 47 C. F. R. § 1.106. 3 In the Matter of Times Mirror Cable Television of Orange County, Inc. d/ b/ a Dimension Cable Services, DA 95-1177, released June 1, 1995 (Cab. Serv. Bur. 1995). 4 The Bureau Order dismissed an issue regarding whether the Cities exceeded their authority by reserving the right to order additional rate reductions and refunds based on any future Commission action. That issue was not appealed. 5 FCC Form 393 is the official form used by the Commission to determine whether an operator’s regulated rates for programming, equipment and installations were reasonable during the time period from September 1, 1993 until May 14, 1994. 1 Federal Communications Commission DA 01- 718 2 to the petition for reconsideration and Dimension filed a reply. II. ANALYSIS AND DECISION 2. Dimension contends that the Cities improperly excluded a portion of its franchise fees from Dimension’s cable rate justification calculations. The operator included $33,703 of franchise fees as part of its equipment revenue on Line 204 of Worksheet 2, in Part II of its Forms 393. Including franchise fees or portions thereof in Line 204 has the effect of increasing the operator’s base rate per channel as of September 30, 1992, which may result in a higher maximum rate. The Commission’s rules contemplate recovery of franchise fees as an external cost in addition to the maximum permitted rates calculated on Form 393. 6 The Bureau Order upheld the positions of the Cities and found that if franchise fees are included in both the base from which maximum rates are calculated and permitted as an addition to maximum permitted rates as a pass- through, the operator would recover those costs twice. Dimension asserts that the Commission structured its benchmark rates to exclude the franchise fee expense on programming service revenues, but not the franchise fee expense on equipment revenues. The operator contends that the Cities’ exclusion of franchise fees from its equipment revenue resulted in a substantial understatement of its base rate per channel. The operator further argues that nowhere in the Form 393 is an operator required to reduce the monthy equipment revenue calculation by the amount of revenue allocable to franchise fees; that while Form 393 instructions direct operators to “back out” the portion of service revenues allocable to franchise fees, there is no similar instruction with respect to equipment revenues; that it appears that the Commission later corrected this anomaly in its Form 1200; 7 and that the Commission has not addressed the merits of its appeal of the Cities’ treatment of its franchise fee calculation methodology. 3. We affirm our earlier conclusion in the Bureau Order and agree with the Cities that allowing Dimension to include within line 204 of Form 393 equipment revenue allocable to franchise fees would yield a double recovery for the operator, once for the amount that effectively became imbedded in Line 204 as the base and again as franchise fees are added as a pass through to the maximum permitted rate. Moreover, we note that the instructions for Line 104 of Worksheet 1 and Line 204 of Worksheet 2, Form 393, expressly provide that the monthly average equipment revenue as of September 30, 1992 is calculated by taking the total revenues earned over the preceding fiscal year for the community unit for the following categories of equipment and installation services: (1) converter box rental; (2) remote control rental; (3) additional outlet fees; (4) installation fees; (5) disconnect fees; reconnect fees; and (7) tier changing fees, and that the total revenues are then divided by 12 to compute the equipment revenue per month. Thus, the instructions do not allow the inclusion of franchise fees or other items. Additionally, a Commission Public Notice: “Cable Television Rate Regulation, Questions and Answers Relating to FCC Form 393” (released July 30, 1993), at Question and Answer 8 addresses whether or not the seven categories of equipment and installation services listed in the instructions are intended to be exhaustive. The answer specifically states that the categories of equipment and installation described in the instructions to Line 104 are exhaustive; that no other items should be included; that these were the categories the Commission included in the cable rate survey which was used to develop the benchmarks against which current rates will be compared; and that in order to ensure a proper comparison, the same categories must be used in Line 104. 6 47 C. F. R. § 76.923( k). 7 FCC Form 1200 is the official form used to determine whether initial regulated rates for programming are reasonable under the revised benchmark rules which apply to cable operators beginning May 15, 1994, or upon the expiration of the deferral period provided under our rules for operators to comply with the revisions to the rules. 2 Federal Communications Commission DA 01- 718 3 IV. ORDERING CLAUSES 4. For the foregoing reasons, IT IS ORDERED, that the Petition for Reconsideration filed by Cox Cable Orange County, Inc., formerly Times Mirror Cable Television of Orange County, Inc., d/ b/ a Dimension Cable Services, IS DENIED. 5. This action is taken pursuant to authority delegated under Section 0.321 of the Commission’s rules, 47 C. F. R. § 0.321. FEDERAL COMMUNICATIONS COMMISSION William H. Johnson Deputy Chief Cable Services Bureau 3