DA 95-2275 Federal Communications Commission Record 10 FCC Red No. 23
Before the
Federal Communications Commission 
Washington, D.C. 20554
In the Matter of
TCI CABLEVISION OF THE 
METROPLEX, INC.
Appeal of Local Rate Order of 
Garland, Texas TX0554
MEMORANDUM OPINION AND ORDER
Adopted: October 30,1995; Released: November 9,1995
By the Chief, Cable Services Bureau:
I. INTRODUCTION
1. On February 23, 1995, TCI Cablevision of the 
Metroplex, Inc. ("TCI"), filed an appeal of a local rate 
order of the City of Garland, Texas (the "City"), dated 
January 24, 1995. The City filed an opposition to 
Cablevision's appeal on March 9, 1995. Cablevision filed a 
reply to the City's opposition on March 20, 1995. In the 
local rate order, the City denied a proposed rate increase 
for basic cable service. 1
2. The City rejected the proposed rate increase because 
TCI failed to provide any supporting documentation for 
the increase which was based on claimed increased pro 
gramming costs. In its appeal, TCI contends that a franchis 
ing authority is only entitled to request information that is 
reasonably necessary for it to review an operator's rates and 
to prepare a local rate order, and that the City's request for 
supporting documentation is neither reasonable nor neces 
sary. TCI states that the supporting documentation request 
ed by the City is in its programming contracts. TCI 
contends that the City's request for the information in the 
programming contracts is not reasonable because the re 
quested information is confidential, and that making the 
information available to individual franchising authorities
1 Under the Cable Television Consumer Protection and Com 
petition Act of 1992, and the Commission's implementing regu 
lations, local franchising authorities may regulate rates for basic 
cable service, associated equipment, and installations. See Cable 
Television Consumer Protection and Competition Act, Pub. L. 
No. 102-385, 106 Stat. 1460 (1992); Communications Act, § 
623(b), 47 U.S.C. § 543(b).
2 TCI also indicates a willingness to have the Commission 
review the contracts in camera if the City is dissatisfied with an 
independent accountant's review, arguing that: (1) the likeli 
hood of leaks of confidential information would be reduced if 
only one federal agency reviews the contracts, rather than a 
number of franchising authorities; (2) since most programming 
is MSO-wide, the Commission's review of one contract could 
apply to potentially thousands of franchises; (3) the Commission 
could review the same material in the context of CPS rate 
reviews, reducing duplication of local and federal efforts; (4) the 
Commission is better equipped to deal with the complexities of 
the pricing structures involved; (5) franchising authorities 
would save money on consultants' fees; (6) knowing that Corn-
will ensure that the information will become public at 
some point. TCI also argues that review of programming 
costs by local franchising authorities is not necessary to 
ensure the validity of TCI's cost increases because an in 
dependent accounting firm retained by TCI could review 
the contracts and verify the cost increases.2
3. In its opposition, the City argues that in order to 
review the merits of a rate increase filing, the City must 
have documentation supporting the basis for the rate in 
crease. The City states that it told TCI that if the only 
source of the supporting documentation is TCI's program 
ming contracts, TCI need not identity its programmers to 
the City. In addition, the City has expressed its intent .to 
maintain the confidentiality of TCI's programming con 
tracts.3 However, the City contends that TCI cannot simply 
refuse to provide any documentation for its rate increase 
on grounds that an employee of the City might disclose the 
information. Finally, the City observes that TCI's argument 
is focused on to whom TCI should be required to submit 
its contracts for review and not on whether review of the 
programming contracts is reasonably necessary to deter 
mine the merits of the rate justification. The City argues 
that the Commission has already identified the franchising 
authority as the proper reviewing body.
4. In its reply, TCI concedes that the City is correct in 
asserting that TCI wants a party other than the City to 
review programming contracts, but that the City fails to 
identify any compelling reason why it should be the re 
viewing party.
5. Under the Commission's rules, appeals of franchising 
authorities' local rate orders are reviewed by the Commis 
sion.4 In ruling on an appeal of a local rate order, the 
Commission will not conduct a de novo review, but instead 
will sustain the franchising authority's decision as long as 
there is a reasonable basis for that decision.5 The Commis 
sion will reverse a franchising authority's decision only if it 
determines that the franchising authority acted unreason 
ably in applying the Commission's rules in rendering a 
local rate order. 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 author 
ity with instructions to resolve the case consistent with the 
Commission's decision on appeal.7
mission review was available, franchising authorities would rec 
ognize that operators would have no incentive to misrepresent 
their programming costs; and (7) the Commission's authority to 
impose refunds and sanctions on a national basis for inaccurate 
rate justifications would ensure that such inaccuracies would 
not occur.
3 City's Opposition at 5-6. See also, Exhibit C of the City's 
Opposition which contains the City's rules for maintaining 
confidentiality of proprietary information.
4 47 C.F.R. §76.944.
5 See Report and Order and Further Notice of Proposed 
Rulemaking in MM Docket 92-266, 8 FCC Red 5631, 5731(1993) 
("Report and Order"); Third Order on Reconsideration in MM 
Docket 92-266, 9 FCC Red 4316, 4346 (1994) ("Third Recon. 
Order").
6 Id.7 Id.
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10 FCC Red No. 23 Federal Communications Commission Record DA 95-2275
II. DISCUSSION
6. FCC Form 1200 is the official form used to determine 
whether an operator's initial regulated programming rates 
are reasonable under the revised benchmark rules which 
apply to 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 our rules. 8 In 
the Form 1200, an operator calculates its provisional rates 
and its full reduction rates. An operator uses FCC Form 
1210 to justify adjustments to the initial rates it computed 
on its FCC Form 1200.9 An operator may adjust its rates to 
reflect changes in certain external costs, including pro 
gramming costs, channel additions anddeletions, and infla 
tion.
7. TCI filed a Form 1210 to reflect an increase in 
programming costs it alleged it incurred between April 1, 
1994 and June 30, 1994. The City requested that TCI 
supply documentation supporting the increase in program 
ming costs. The City rejected the rate increase because TCI 
failed to provide any supporting documentation for the 
claimed increase in programming costs.
8. A cable operator that wishes to increase its basic 
service tier rate has the burden of demonstrating that the 
increase is in conformance with our rules. 10 In determining 
whether the operator's increase is in conformance with our 
rules, a franchising authority has the right to collect addi 
tional information from the operator." Where appropriate, 
the franchising authority, in reviewing a rate justification, 
may require that the operator provide proprietary informa 
tion. 12 In so doing, the franchising authority should state 
the justification for each item of information requested, 
and should state the section of the form to which the 
request relates. 13
9. In response to a request for clarification we received,14 
we recently addressed the issue of whether operators are 
required to provide franchising authorities with copies of 
programming contracts, which the operators maintain are 
confidential, to support rate increases based on increases in 
programming costs. We stated that our rules require that 
upon proper request by the franchising authority, an oper 
ator must disclose to the franchising authority material, 
even proprietary information, determined by the franchis 
ing authority to be reasonably necessary in making a deter 
mination regarding the operator's maximum permitted 
rates.16 At that time, we declined to address the merits of 
an alternative proposal contained in the request which is
the same as the request presented by TCI in the present 
appeal.17 We concluded that we could not change those 
rules in the absence of a rulemaking proceeding.18
10. In the instant case, we believe it reasonable to con 
clude that programming contracts, which TCI maintains 
are confidential, may be "reasonably necessary" for the 
review of a rate increase based on increases in program 
ming costs reflected in those contracts. Indeed, in its reply, 
TCI does not contest that review of supporting documenta 
tion from its programming contracts is necessary.19 Its ob 
jection lies with whether a franchising authority is the 
proper party to review such programming contracts. As 
stated in our recent letter discussed above, we have con 
cluded that a franchising authority is, in fact, an appro 
priate party to review those contracts.20 We again 
emphasize, however, that franchising authorities should "be 
judicious in their requests for programming contracts, to 
make sure that the information is needed, and to narrow 
their requests, if appropriate, to permit cable operators to 
submit only the specific information requested."21 In this 
case, the City intends to maintain the confidentiality of 
TCI's programming contracts and has advised TCI that it 
need not identify the programmers in those contracts sub 
ject to the City's review. Accordingly, we conclude that 
the City acted reasonably in its request.
11. For the above-stated reasons, we also find that the 
City acted reasonably in denying the rate increase. How 
ever, TCI may resubmit to the City the underlying data in 
support of its proposed rate increase as long as it has not 
already made an adjustment in its rates for this or any 
subsequent period. Our rules state that a proposed rate 
increase that is due to changes in external costs, must fully 
reflect all changes in external costs, inflation and the num 
ber of channels that occurred "from the end of the last 
quarter for which an adjustment was previously made" 
through the end of the quarter that has most recently 
closed.23 Accordingly, if TCI has made no further adjust 
ments to its rates following the City's denial of its proposed 
rate increase, our rules permit TCI to incorporate the cost 
increases that were the basis of the proposed increase that 
was denied by the City into a subsequent rate increase 
proposal. Little may come of a decision by an operator to 
resubmit a proposed increase to a local franchising author 
ity that had been denied on the merits, but where, as here, 
the increase was denied because of the refusal of TCI to 
supply necessary supporting data, and TCI subsequently
8 See Second Order on Reconsideration, Fourth Report and 
Order, Fifth Notice of Proposed Rulemaking in MM Docket 
92-266, 9 FCC Red 4119 (1994) ("Second Recon. Order").
9 See Second Order on Reconsideration, Fourth Report and 
Order, and Fifth Notice of Proposed Rulemaking in MM Docket 
No. 92-266, FCC 94-38, 9 FCC Red 4119 (1994) ("Second Re 
consideration Order").
10 47 C.F.R. § 76.937(a).
11 Rate Order, 8 FCC Red at 5718-19.'
12 Id.; Third Recon. Order, 9 FCC Red at 4343-45; 47 C.F.R. § 
76.938.
13 47 C.F.R. § 76.938.
14 Letters from Wesley R. Heppler, Esq. and Paul Glist, Esq., 
Cole, Raywid & Braverman, to Meredith Jones, Chief, Cable 
Services Bureau (Aug. 8, Sept. 19, and Oct. 28, 1994).
15 See Letter from Meredith Jones, Chief, Cable Services Bu 
reau, to Wesley R. Heppler, Esq. and Paul Glist, Esq., DA 
95-1175 (May 26, 1995) ("Letter").
16 The franchising authority must state clearly the reason for 
the request, and to which portion on the FCC form the re 
quested information specifically relates. Letter at 4; Third 
Recon. Order, 9 FCC Red at 4344. Here, TCI does not challenge 
whether the City properly submitted its request.
17 Id. at 4. As set forth in paragraph 2 and footnote 2, supra, 
the proposal involves review of the relevant confidential pro 
gramming contracts by an independent accounting firm re 
tained by the operator. In the event that the franchising 
authority is dissatisfied with such a review, it could request that 
the Commission review the contracts in camera.
18 Letter at 4-5.
19 Reply at 2.
20 Letter at 4.
21 Id. at 5.
22 TCI has made no argument that the City does not have the 
legal authority to keep the contracts confidential.
23 47 C.F.R. § 76.922(d)(3)(iii).
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DA 95-2275 Federal Communications Commission Record 10 FCC Red NO. 23
supplies that data, the City could approve the previously 
denied increase as part of a rate increase proposal submit 
ted subsequently.
III. ORDERING CLAUSE
12. Accordingly, IT IS ORDERED that the appeal by 
TCI Cablevision of the City of Garland's local rate order, 
regarding the City's requirement that TCI make its pro 
gramming contracts available as part of the rate review 
process, is DENIED.
13. This action is taken by the Chief, Cable Services 
Bureau, pursuant to authority delegated by Section 0.321 of 
the Commission's rules. 47 C.F.R. §0.321.
FEDERAL COMMUNICATIONS COMMISSION
Meredith J. Jones
Chief, Cable Services Bureau
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