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Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
) File No. EB-02-TC-037
Time Warner Entertainment Company, LP )
) CUID No.WI0265 (West Allis)
Complaint Regarding )
Cable Programming Services Tier )
ORDER
Adopted: May 6, 2002 Released: May 8, 2002
By the Chief, Enforcement Bureau:1
1. In this Order we consider a
complaint2 against the rates charged by the above-referenced
operator ("Operator")3 for its cable programming services tier
("CPST") in the community referenced above.4 The Cable Services
Bureau has already issued an order in which it found Operator's
CPST rates in effect through May 14, 1994 to be unreasonable
("Prior Order").5 In the Prior Order, the Cable Services Bureau
stated that its findings "do not in any way prejudge the
reasonableness of the prices for CPS service after May 14, 1994
under our new rate regulations."6 This Order addresses only the
reasonableness of Operator's CPST rates in effect beginning May
15, 1994.
2. Under the provisions of the Communications Act7 that
were in effect at the time the referenced complaints were filed,
the Federal Communications Commission ("Commission") was
authorized to review the CPST rates of cable systems not subject
to effective competition to ensure that rates charged are not
unreasonable. The Cable Television Consumer Protection and
Competition Act of 19928 ("1992 Cable Act") required the
Commission to review CPST rates upon the filing of a valid
complaint by a subscriber or local franchising authority ("LFA").
The filing of a complete and timely complaint triggers an
obligation upon the cable operator to file a justification of its
CPST rates.9 The Operator has the burden of demonstrating that
the CPST rates complained about are reasonable.10 If the
Commission finds a rate to be unreasonable, it shall determine
the correct rate and any refund liability.11
3. Operators must use the FCC Form 1200 series to justify
rates for the period beginning May 15, 1994.12 Operators may
file an FCC Form 1210 to justify quarterly rate increases based
on the addition and deletion of channels, changes in certain
external costs and inflation.13 Operators may justify their
rates on an annual basis using an FCC Form 1240 to reflect
reasonably certain and quantifiable changes in external costs,
inflation, and the number of regulated channels that are
projected for the twelve months following the rate change.14 Any
incurred cost that is not projected may be accrued with interest
and added to rates at a later time.15 Additionally, an 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 to 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, we adjusted
Line A6 (Monthly Charge per Tier as of 3/31/94) to $10.01 to
conform to the maximum permitted rate ("MPR") from Operator's
revised FCC Form 393 as adjusted in our Prior Order. Line A1
(Channels per Tier as of 3/31/94) and Line C1 (Channels per Tier
as of 3/31/94) were adjusted to 23 channels for the CPST to
reflect Operator's actual channel line-up, in accordance with the
channel line-up card provided by Operator. We also adjusted Line
C2 (Number of Regulated Non-Broadcast Channels per Tier) to 23
for the CPST for the same reason. Our adjustments reduced
Operator's MPR from $10.55 to $9.36. The Commission's rules
provide for a refund liability deferral period, if timely
requested by Operator, beginning May 15, 1994 and ending July 14,
1994, for any overcharges resulting from Operator's calculation
of a new MPR on the FCC Form 1200.16 Operator elected to defer
refund liability for overcharges associated with its FCC Form
1200 pursuant to the Commission's rules.17 However, Operator
will incur refund liability from May 15, 1994 through July 14,
1994 for any CPST rates charged above the FCC Form 393 MPR
approved by the Commission.18 In the Prior Order, the Cable
Services Bureau found that Operator justified an FCC Form 393 MPR
of $10.01. Because Operator's actual CPST rate of $10.27,
effective May 15, 1994 through July 14, 1994, exceeds its FCC
Form 393 MPR of $10.01, we find Operator's actual CPST rate of
$10.27, effective May 15, 1994 through July 14, 1994, to be
unreasonable.
5. Upon review of Operator's FCC Form 1210 covering the
period April 1, 1994 through June 30, 1994, we adjusted Line A2
(Full Reduction Rate per Tier) to reflect Operator's revised FCC
Form 1200 Line K1 (Maximum Permitted Rate) of $9.36. Line C1
(Previous Number of Regulated Channels per Tier) and Line C2
(Current Number of Regulated Channels per Tier) were adjusted to
23 channels for the CPST as noted above. These adjustments
reduced Operator's MPR from $11.15 to $9.96, effective July 1,
1994. Because Operator's actual CPST rate of $10.27, effective
July 15, 1994 through July 31, 1994, exceeds its revised MPR of
$9.96, we find Operator's actual CPST rate of $10.27, effective
July 15, 1994 through July 31, 1994, to be unreasonable. Because
Operator's actual CPST rate of $10.55, effective August 1, 1994
through September 30, 1994, exceeds its revised MPR of $9.96, we
find Operator's actual CPST rate of $10.55, effective August 1,
1994 through September 30, 1994, to be unreasonable.
6. Upon review of Operator's FCC Form 1210 covering the
period July 1, 1994 though September 30, 1994, we adjusted Line
A2 to reflect Operator's prior FCC Form 1210 MPR of $9.96. Line
C1 and Line C2 were adjusted to 23 channels for the CPST. These
adjustments reduced Operator's MPR from $11.35 to $10.14,
effective October 1, 1994. Because Operator's actual CPST rate
of $10.55, effective October 1, 1994 through October 31, 1994,
exceeds its revised MPR of $9.96, we find Operator's actual CPST
rate of $10.55, effective October 1, 1994 through October 31,
1994, to be unreasonable. Because Operator's actual CPST rate of
$11.35, effective November 1, 1994 through December 31, 1994,
exceeds its revised MPR of $10.14, we find Operator's actual CPST
rate of $11.35, effective November 1, 1994 through December 31,
1994, to be unreasonable.
7. Upon review of Operator's FCC Form 1210 covering the
period October 1, 1994 through December 31, 1994, we adjusted
Operator's Line A2 to reflect Operator's prior FCC Form 1210 MPR
of $10.14. Line C1 and Line C2 were adjusted to 23 channels for
the CPST. These adjustments reduced Operator's MPR from $11.56
to $10.34, effective January 1, 1995. Because Operator's actual
CPST rate of $11.35, effective January 1, 1995 through March 31,
1995, exceeds its revised MPR $10.34, we find Operator's actual
CPST rate of $11.35, effective January 1, 1995 through March 31,
1995, to be unreasonable.
8. Upon review of Operator's FCC Form 1210 covering the
period January 1, 1995 through March 31, 1995, we adjusted
Operator's Line A2 to reflect Operator's prior FCC Form 1210 MPR
of $10.34. Line C1 and Line C2 were adjusted to 23 channels for
the CPST. These adjustments reduced Operator's MPR from $11.48
to $10.27, effective April 1, 1995. Because Operator's actual
CPST rate of $11.35, effective April 1, 1995 through May 31,
1995, exceeds its revised MPR of $10.27, we find Operator's
actual CPST rate of $11.35, effective April 1, 1995 through May
31, 1995, to be unreasonable. Because Operator's actual CPST rate
of $11.48, effective June 1, 1995 through May 31, 1996, exceeds
its revised MPR of $10.27, we find Operator's actual CPST rate of
$11.48, effective June 1, 1995 through May 31, 1996, to be
unreasonable.19
9. Upon review of Operator's FCC Form 1240 for the
projected period June 1, 1996 through May 31, 1997, we adjusted
Operator's Line A1 (Current Maximum Permitted Rate) and D2
(Current External Costs Segment) to conform with Operator's
previous revised FCC Form 1210. We revised Worksheet 1 (True-Up
Period Inflation) which adjusted Line C3 (Inflation Factor for
the True-Up Period 1) to 1.0151 and Line C5 (Current FCC
Inflation Factor) was adjusted to 1.0222.20 These adjustments
resulted in a revised MPR of $9.33 rather than Operator's
calculated MPR of $11.88. Because Operator's actual CPST rate of
$11.88, effective June 1, 1996 through May 31, 1997, exceeds its
revised MPR of $9.33, we find Operator's actual CPST rate of
$11.88, effective June 1, 1996 through May 31, 1997, to be
unreasonable.
10. Upon review of Operator's FCC Form 1240 for the
projected period June 1, 1997 through May 31, 1998, we adjusted
Operator's Line A1 to reflect the MPR of $9.33 from its previous
revised FCC Form 1240. We revised Worksheet 1, which adjusted
Line C3 to 1.0221 and we adjusted Line C5 to 1.0177.21 We
adjusted Line D6 (Current True-Up Segment), Line D7 (Current
Inflation Segment) and Line F8 (True-Up Segment for True-Up
Period 1) to conform to Operator's previous revised FCC Form
1240. Also, Operator made true-up adjustments through to the
effective date of the projected period and those adjustments did
not include actual data.22 Consequently, we reduced Operator's
true-up period by one month and adjusted Operator's MPR in
accordance with our rules and the FCC Form 1240 instructions.23
This resulted in an adjustment to Line E2 (Number of Months in
the True-up Period 1) to 12 months and Line E4 (Number of Months
in True-Up Period 2 Eligible for Interest) to 2 months. Line G5
(Inflation Segment for True-Up Period 2) was adjusted to $0.0254
and Line G8 (True-Up Segment Period 2) was adjusted to $0.8739.
These adjustments resulted in a revised MPR of $9.79 rather than
Operator's calculated MPR $14.31.24 Because Operator's actual
CPST rate of $14.31, effective June 1, 1997 through September 30,
1997, exceeds its revised MPR of $9.79, we find Operator's actual
CPST rate of $14.31, effective June 1, 1997 through September 30,
1997, to be unreasonable.
11. Operator filed an FCC Form 1235 to justify its October
1, 1997 CPST rate increase to $16.58. Operator subsequently
reduced its CPST rate on December 1, 1997 to $16.30 and gave a
credit to its subscribers for $0.28 for the months of October and
November.25 Upon review of Operator's FCC Form 1235, we accept
Operator's calculated MPR of $1.99. This results in a combined
CPST MPR of $11.78, effective October 1, 1997. Because
Operator's actual CPST rate of $16.30,26 effective October 1,
1997 through December 31, 1998, exceeds its revised MPR of
$11.78, we find Operator's actual CPST rate of $16.30, effective
October 1, 1997 through December 31, 1998, to be unreasonable.
12. On November 30, 1995, the Commission issued an Order
approving a Social Contract that Operator entered into with the
Commission ("Social Contract").27 Among its terms was a
provision by which Time Warner would be permitted to increase the
monthly CPST rate by one dollar during each year of the contract,
but would waive the right to make any other increase in rates.28
Operator was given permission by Commission staff to file
bifurcated FCC Form 1240s. In these bifurcated forms, Operator
calculates the $1.00 annual increase permitted by the Social
Contract and its true-up on a separate FCC Form 1240 ("SCD Form
1240"). On the SCD Form 1240, Operator calculates its true-up
adjustment through to the effective date of the rate increase.
On its other FCC Form 1240, Operator calculates the other
adjustments to its CPST rate in conformance with FCC Form 1240
Instructions for the true-up period.29 As noted above, Time
Warner Cable purchased this system in December 1997. Upon filing
its first FCC Form 1240 for this cable system, which we review
below, Time Warner Cable elected to include the system in its
Social Contract, thus taking the annual Social Contract Dollar
for its upgrade and rejecting the FCC Form 1235 upgrade add-on
amount.
13. Upon review of Operator's non-SCD FCC Form 1240 for the
projected period January 1, 1999 through December 31, 1999, we
adjusted Operator's Line A1, Line D6, Line D7, Line F8, and G8 to
conform to Operator's previous revised FCC Form 1240. We also
added back the month that we removed from the true-up period of
the previous FCC Form 1240. Consequently, Line E2 was adjusted
to 12 months and Line E4 was adjusted to 7 months. Our
adjustments reduced Operator's MPR from $15.50 to $8.18. Upon
review of Operator's SCD Form 1240 for the projected period
January 1, 1999 through December 31, 1999, we accept Operator's
calculated MPR of $3.14 for a total MPR of $11.32, effective
January 1, 1999. Because Operator's actual CPST rate of $18.28,
effective January 1, 1999 through March 31, 1999, exceeds its
revised MPR of $11.32, we find Operator's actual CPST rate of
$18.28, effective January 1, 1999 through March 31, 1999, to be
unreasonable.30
14. Accordingly, IT IS ORDERED, pursuant to Sections 0.111
and 0.311 of the Commission's rules, 47 C.F.R. §§ 0.111 and
0.311, that the CPST rates, charged by Operator in the community
referenced above, effective May 15, 1994 through March 31, 1999,
ARE UNREASONABLE.
15. IT IS FURTHER ORDERED, pursuant to Section 76.961 of
the Commission's rules, 47 C.F.R. § 76.961, that Operator shall
refund to subscribers that portion of the amount paid in excess
of the maximum permitted CPST rate of $10.01 per month (plus
franchise fees), plus interest to the date of the refund, for the
period May 15, 1994 through July 14, 1994.
16. IT IS FURTHER ORDERED, pursuant to Section 76.961 of
the Commission's rules, 47 C.F.R. § 76.961, that Operator shall
refund to subscribers that portion of the amount paid in excess
of the maximum permitted CPST rate of $9.96 per month (plus
franchise fees), plus interest to the date of the refund, for the
period July 15, 1994 through September 30, 1994.
17. IT IS FURTHER ORDERED, pursuant to Section 76.961 of
the Commission's rules, 47 C.F.R. § 76.961, that Operator shall
refund to subscribers that portion of the amount paid in excess
of the maximum permitted CPST rate of $10.14 per month (plus
franchise fees), plus interest to the date of the refund, for the
period October 1, 1994 through December 31, 1994.
18. IT IS FURTHER ORDERED, pursuant to Section 76.961 of
the Commission's rules, 47 C.F.R. § 76.961, that Operator shall
refund to subscribers that portion of the amount paid in excess
of the maximum permitted CPST rate of $10.34 per month (plus
franchise fees), plus interest to the date of the refund, for the
period January 1, 1995 through March 31, 1995.
19. IT IS FURTHER ORDERED, pursuant to Section 76.961 of
the Commission's rules, 47 C.F.R. §76.961, that Operator shall
refund to subscribers that portion of the amount paid in excess
of the maximum permitted CPST rate of $10.27 per month (plus
franchise fees), plus interest to the date of the refund, for the
period April 1, 1995 through June 30, 1995.
20. IT IS FURTHER ORDERED, pursuant to Section 76.961 of
the Commission's rules, 47 C.F.R. §76.961, that Operator shall
refund to subscribers that portion of the amount paid in excess
of the maximum permitted CPST rate of $11.78 per month (plus
franchise fees), plus interest to the date of the refund, for the
period from December 1, 1998 through December 31, 1998.
21. IT IS FURTHER ORDERED, pursuant to Section 76.961 of
the Commission's rules, 47 C.F.R. §76.961, that Operator shall
refund to subscribers that portion of the amount paid in excess
of the maximum permitted CPST rate of $11.32 per month (plus
franchise fees), plus interest to the date of the refund, for the
period from January 1, 1999 through March 31, 1999.
22. IT IS FURTHER ORDERED that Operator shall promptly
determine the overcharges to CPST subscribers for the stated
periods, and shall within 30 days of the release of this Order,
file a report with the Chief, Enforcement Bureau, stating the
cumulative refund amount so determined (including franchise fees
and interest), describing the calculation thereof, and describing
its plan to implement the refund within 60 days of Commission
approval of the plan.
23. IT IS FURTHER ORDERED, pursuant to Sections 0.111 and
0.311 of the Commission's rules, 47 C.F.R. §§ 0.111 and 0.311,
that the complaint referenced herein against the rates charged by
Operator in the community referenced above IS GRANTED.
FEDERAL COMMUNICATIONS COMMISSION
David H. Solomon
Chief, Enforcement Bureau
_________________________
1 Effective March 25, 2002, the Commission transferred
responsibility for resolving cable programming services tier rate
complaints from the former Cable Services Bureau to the
Enforcement Bureau. See Establishment of the Media Bureau, the
Wireline Competition Bureau and the Consumer and Governmental
Affairs Bureau, Reorganization of the International Bureau and
Other Organizational Changes, FCC 02-10, 17 FCC Rcd 4672 (2002).
2 The first valid complaint against Operator's CPST rate in the
community referenced above was filed on February 28, 1994. There
are no subsequent complaints on file.
3 The term "Operator" includes Operator's predecessors and
successors in interest.
4 On December 3, 1997, the Federal Communications Commission
received notification, pursuant to 47 C.F.R. § 76.400, of a
change of ownership from Marcus Cable Partners, LP to Time Warner
Entertainment Company, LP.
5 See In the Matter of Crown Cable Wisconsin, Inc., DA 95-680, 10
FCC Rcd 7923 (CSB 1995); refund plan denied, In the Matter of
Marcus Cable Partners, LP, DA 98-2442, 13 FCC Rcd 23411 (CSB
1998).
6 Prior Order at n. 2.
7 Communications Act, Section 623(c), as amended, 47 U.S.C.
§543(c) (1996).
8 Pub. L. No. 102-385, 106 Stat. 1460 (1992).
9 See Section 76.956 of the Commission's rules, 47 C.F.R. §
76.956.
10 Id.
11 See Section 76.957 of the Commission's rules, 47 C.F.R. §
76.957.
12 See Section 76.922 of the Commission's rules, 47 C.F.R.
§76.922.
13 Id.
14 Id.
15 Id.
16 See Section 76.922(b)(6)(ii) of the Commission's rules, 47
C.F.R. Section 76.922(b)(6)(ii).
17 See Letter dated August 12, 1994 to the Federal Communications
Commission from Trudi McCollum Foushee, Vice President, Crown
Cable Law and Regulatory Affairs.
18 See Section 76.922(b)(6)(ii) of the Commission's rules, 47
C.F.R. § 76.922 (b)(6)(ii).
19 Because Operator's refund liability for the period July 1,
1995 through November 30, 1998, was trued up in subsequent FCC
Form 1240s, which we review herein, Operator is not required to
separately calculate that refund liability and submit a refund
plan for those time periods.
20 In accordance with the FCC Form 1240 Instructions, we used the
most recent Inflation Adjustment Factors released by the Cable
Services Bureau for the relevant time periods. See Public
Notice, DA 02?791 (CSB released April 9, 2002).
21 Id.
22 Operator signed its FCC Form 1240 on April 30, 1997, one month
prior to the ending date of its true-up period.
23 Operator's true-up period, which began March 1, 1996 and
originally ended on May 31, 1997, was adjusted to end on April
30, 1997. The annual adjustment afforded by FCC Form 1240 allows
operators to project changes in external cost, inflation, and the
number of regulated channels. This structure avoids the delay
some operators experienced in recouping costs through multiple
rate adjustments throughout the year. Because projections will
not reflect the costs that actually occur, the Commission
provided, as part of the annual adjustment, a "true-up" mechanism
to correct projected cost changes with the actual cost changes.
However, the Commission has noted that, as FCC Form 1240 must be
filed 90 days before an increase is to take effect, the period
for the true-up will not coincide with the previous year's
projections. See In the Matter of Implementation of Sections of
the Cable Television Consumer Protection and Competition Act of
1992: Rate Regulation, MM Docket No. 92-266, Thirteenth Order on
Reconsideration ("Thirteenth Reconsideration Order"), 11 FCC Rcd
388, 420 at n.151 (1995). The true-up data is intended to
indicate real, not projected data. Id. This policy is reflected
in the instructions accompanying FCC Form 1240. See FCC Form
1240 Instructions, "Timing" at pp. 3-4.
24 We allowed Operator to claim $0.14 for increases in external
costs between September 30, 1992 and the earlier of the initial
date of regulation or February 28, 1994.
25 See Letter dated November 30, 1997, with attached bill, to the
Honorable Jeanette Bell, Mayor, City of West Allis, WI from Marty
Robinson, District Manager, Marcus Cable.
26 The actual CPST rate of $16.30 reflects Operator's rate
reduction and refund for October and November.
27 See In the Matter of Social Contract for Time Warner, 11 FCC
Rcd 2788 (1996).
28 Id. at 2798.
29 The true-up data is intended to indicate real, not projected
data. See In the Matter of Implementation of Sections of the
Cable Television Consumer Protection and Competition Act of 1992:
Rate Regulation, MM Docket No. 92-266, Thirteenth Order on
Reconsideration ("Thirteenth Reconsideration Order"), 11 FCC Rcd
388, 420 at n.151 (1996). The period for the true-up will not
coincide with the previous year's projections. Id. This policy
is reflected in the instructions accompanying FCC Form 1240. See
FCC Form 1240 Instructions, "Timing" at pp. 3-4.
30 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 files for the above-referenced community which are
available in the FCC Reference Information Center, Portals II,
445 12th Street, SW, Room CY-A257, Washington, DC, 20554. This
document may also be purchased from the Commission's duplicating
contractor, Qualex International, Portals II, 445 12th Street,
SW, Room CY-B402, Washington, DC, 20554, telephone 202-863-2893,
facsimile 202-863-2898, or via e-mail qualexint@aol.com.