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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) MediaOne of Metropolitan ) CUID No. MI0525 (Southfield) Detroit, Inc. ) ) Complaint Regarding ) Cable Programming Services Tier Rates ) ORDER Adopted: July 21, 1998 Released: July 24, 1998 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider a complaint against the April 1, 1998 rate increase of the above- referenced operator ("Operator") for its cable programming services tier ("CPST") in the community referenced above. We have already issued orders which resolved complaints filed against Operator from September 1, 1993 through April 3, 1995, and Operator's November 1, 1997 rate increase. On August 1, 1995, the Federal Communications Commission ("Commission") adopted an order approving a Social Contract entered into between Operator and the Commission ("Social Contract"). On August 21, 1996, the Commission adopted an order approving an Amended Social Contract entered into between Operator and the Commission ("Amended Social Contract"), which incorporated the community referenced above. This Order addresses only the reasonableness of Operator's April 1, 1998 CPST rate increase, consistent with the terms of the Amended Social Contract. 2. Under the Communications Act, the 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 a rate to be unreasonable, it shall determine the correct rate and any refund liability. The Telecommunications Act of 1996 ("1996 Act") and our rules implementing the new legislation ("Interim Rules"), require that complaints against the CPST rates be filed with the Commission by a local franchising authority ("LFA") that has received more than one subscriber complaint. 3. The LFA for the franchise area referenced above filed a complaint with the Commission on May 19, 1998, against Operator's April 1, 1998 CPST increase from $14.40 to $16.51. The LFA verified that it received more than one subscriber complaint and that the first complaint was received by the LFA on April 9, 1998. The filing of a complete and timely LFA complaint triggers an obligation upon the cable operator to file a justification of its CPST rates. The Operator has the burden of demonstrating that the CPST rates complained about are reasonable. 4. To justify rates for the period beginning May 15, 1994 through a benchmark showing, operators must use the FCC Form 1200 series. Operators are permitted to make changes to their rates on a quarterly basis using FCC Form 1210. Operators may alternatively justify adjustments to their rates on an annual basis using 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. Any incurred cost that is not projected may be accrued with interest and added to rates at a later time. Operator's response to the complaint included rate justifications filed on a "Social Contract 2 Rate Form" ("Rate Form") and FCC Form 1210. 5. Under the terms of the Amended Social Contract, Operator is required to invest $1.35 billion to rebuild and upgrade all of its domestic cable systems from 1995 through 2000. By January 1, 1996, Operator must create, on systems serving at least 80% of its total subscribers, a lifeline basic service tier by reducing rates on the basic service tier by 15% to 20% and offset this reduction in a revenue neutral manner by adjusting the rates on the CPST. Operator may migrate up to four existing services from its CPST to a migrated product tier ("MPT") and Operator may add an unlimited number of channels to an MPT at $0.20 per added channel plus license fees. 6. Upon review of Operator's Rate Form, setting an initial maximum permitted rate in accordance with the Amended Social Contract, and Operator's FCC Form 1210 covering the period from April 1, 1997 through December 31, 1997, we find Operator's actual CPST rate of $16.51, effective April 1, 1998, to be reasonable. 7. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the CPST rate of $16.51 charged by Operator in the community referenced above, effective April 1, 1998, IS REASONABLE. 8. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the complaint against Operator's April 1, 1998 CPST rate increase, in the community referenced above, IS DENIED. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau