*Pages 1--3 from Microsoft Word - 24493.doc* Federal Communications Commission DA 03- 180 Before the Federal Communications Commission Washington, D. C. 20554 In the matter of Basic Cable Service Equipment Rates of TCI Cablevision of Woodhaven, Inc. City of Lincoln Park, Michigan Appeal of Local Rate Order ) ) ) ) ) ) ) File No. CSB- A- 0285 MEMORANDUM OPINION AND ORDER Adopted: January 17, 2003 Released: January 23, 2003 By the Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION 1. TCI Cablevision of Woodhaven, Inc. (“ TCI”), the franchised cable operator serving the community of Lincoln Park, Michigan, has appealed a local rate order issued by the Lincoln Park City Council (“ Lincoln Park”) on September 25, 1995, requiring TCI to reduce its basic service tier (“ BST”) rate and issue refunds because of the improper unbundling of equipment costs. 1 No opposition was filed. Based upon our review of the record, we grant TCI’s appeal of Lincoln Park’s Rate Order. II. BACKGROUND 2. The Cable Television Consumer Protection and Competition Act of 1992 (“ 1992 Cable Act”) gave the Commission and local franchising authorities jurisdiction over the cable programming and equipment rates of cable systems that did not face effective competition, as defined by the 1992 Cable Act. Specifically, the 1992 Cable Act provided that, with respect to cable systems that are not subject to effective competition, local franchising authorities may regulate the rates for the BST and equipment pursuant to guidelines established by the Commission, and the Commission would regulate the rates for the cable programming service tier (“ CPST”). 2 3. The 1992 Cable Act requires operators to fully “unbundle” equipment and installation costs from programming costs. 3 The Commission’s regulations implement Congress’ directive by requiring operators to establish an “equipment basket." 4 Section 76. 923( c) of the Commission’s regulations specifically provides that equipment basket costs shall include “the direct and indirect material and labor of providing, leasing, installing, repairing, and servicing customer equipment.” In the order adopting this regulation, the Commission further explained it by stating that “[ t] he basket will include an allocation of all those system joint and company costs that service installation, leasing and 1 The Rate Order is identified locally as MI- 0432. 2 47 U. S. C. § 543( a)( 2). The 1996 Act, P. L. 104- 104, 110 Stat. 56 (1996), repealed the Commission’s regulatory authority over CPST rates effective March 31, 1999. 3 47 U. S. C. § 543( b)( 3). 4 47 U. S. C. § 76. 923( b). 1 Federal Communications Commission DA 03- 180 2 equipment repair share with other activities, excluding general system overhead.” 5 When completed correctly, Part III of FCC Form 393 unbundles equipment costs from programming costs. III. STANDARD OF REVIEW 4. Rate orders issued by franchising authorities may be appealed to the Commission pursuant to Commission rules. 6 In ruling on appeals of local rate orders, the Commission will not conduct a de novo review, but instead will sustain the franchising authority's decision as long as a reasonable basis for that decision exists. 7 The Commission will reverse a franchising authority's rate decision only if it determines that the franchising authority acted unreasonably in applying the Commission's rules. If the Commission reverses a franchising authority's decision, it will not substitute its own decision but instead will remand the issue to the franchising authority with instructions to resolve the case consistent with the Commission's decision on appeal. IV. DISCUSSION 5. TCI filed its FCC Form 393 on April 21, 1994 and FCC Forms 1200, 1205, and 1215 on August 24, 1994. On September 25, 1995, Lincoln Park issued a local rate order in which Lincoln Park rejected TCI’s Forms based upon its findings that TCI’s BST rate was unreasonable. Lincoln Park’s findings were based entirely upon our order in TCI Cablevision of Woodhaven, Inc., 8 which involved our review of CPST rates for Lincoln Park and other communities. In TCI Cablevision, we concluded that TCI’s CPST tier rates were unreasonable because TCI did not properly complete Part III of its Form 393 by failing to report any maintenance facility cost for installations and service of customer leased equipment, and on Schedule B it did not report any costs for utilities. 9 We further stated that TCI’s Schedule A and B allocations were inconsistent because TCI stated on Schedule A that it had no maintenance facility, but indicated on Schedule B that TCI employees performed customer equipment installation and maintenance. 10 6. TCI filed its appeal of the Lincoln Park local rate order on October 25, 1995. TCI argues that Lincoln Park’s reliance on TCI Cablevision is misplaced because TCI and the Commission had agreed upon a Proposed Resolution (“ Resolution”) to resolve all outstanding CPST complaints against TCI, and the issue we addressed in TCI Cablevision was one of the issues raised in the CPST complaints 5 Report and Order and Further Notice of Proposed Rulemaking, MM Docket No. 92- 266, FCC 93- 177, 8 FCC Rcd. 5631 at 5815, ¶ 295 (1993) (footnote omitted). See also First Order on Reconsideration, Second Report and Order, and Third Notice of Proposed Rulemaking, MM Docket No. 92- 266, FCC 93- 428, 9 FCC Rcd 1164 at 1190, ¶ 47 (1993). 6 47 U. S. C. § 543( b)( 5)( B); 47 C. F. R. § 76. 944. 7 Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, Report and Order and Further Notice of Proposed Rulemaking, 8 FCC Rcd 5631, 5731- 32 (1993) (" Rate Order"); Third Order on Reconsideration, 9 FCC Rcd 4316, 4346 (1994) (" Third Reconsideration Order"). 8 In the Matter of TCI Cablevision of Woodhaven, Inc., Benchmark Filings to Support Cable Programming Service Prices, DA 95- 856, 10 FCC Rcd 7263 (1995) (“ TCI Cablevision”). TCI filed an Application for Review and a request for stay of the Commission’s order. The Commission granted TCI’s stay request pending disposition of the Application for Review. See In the Matter of Petitions for Stay or Action Pending Resolution of Applications for Review or Petitions for Reconsideration, 10 FCC Rcd 6567 (1995). 9 Operators attempting to justify their prices for the period prior to May 15, 1994 were required to complete FCC Form 393, and after May 15, 1994 were required to complete FCC Form 1200. Id. at ¶ 3. 10 TCI filed an Application for Review on May 18, 1995. 2 Federal Communications Commission DA 03- 180 3 and addressed in the Resolution. 11 TCI also argues that the refund requirement in Lincoln Park’s local rate order is flawed because it ignores the fact that TCI has been undercharging for equipment- related costs. 7. In April 1996, the Commission adopted an Order based upon the Resolution, which resolved 2,000 rate complaints filed against TCI regarding CPST rates from September 1, 1993 through September 15, 1995. 12 The Order states that, with respect to the issues raised in TCI Cablevision, TCI submitted additional information adequately explaining how it implemented the Commission’s unbundling rules. 13 Based upon this additional information, the Commission concluded that there was nothing improper about TCI’s implementation of the unbundling rules and further stated that had the additional information previously been known, TCI’s equipment computations would not have been rejected initially. 14 The Commission also vacated the TCI Cablevision decision. IV. ORDERING CLAUSES 8. Accordingly, IT IS ORDERED that the Appeal of Local Rate Order filed by TCI Cablevision of Woodhaven, Inc. on October 25, 1995 IS GRANTED and the local rate order of the City of Lincoln Park, Michigan IS REMANDED for further consideration consistent with this Memorandum Opinion and Order. 9. This action is taken pursuant to authority delegated by § 0.283 of the Commission’s rules. 15 FEDERAL COMMUNICATIONS COMMISSION John B. Norton Deputy Chief, Policy Division Media Bureau 11 In the Matter of TCI Communications, Inc., Rate Complaints, FCC 95- 442, 10 FCC Rcd. 13, 816 (rel. October 30, 1995). The Resolution was subsequently adopted on April 25, 1996. In the Matter of TCI Communications, Inc., Final Resolution of Cable Programming Service Rate Complaints, 11 FCC Rcd 14, 696 (rel. April 26, 1996). 12 In the Matter of TCI Communications, Inc., Final Resolution of Cable Programming Service Rate Complaints, 11 FCC Rcd. 14, 696 (1996). 13 Id. at ¶ 11. 14 Id. at ¶ 12( g). 15 47 C. F. R. § 0.283. 3