******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. 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 ) ) Marcus Cable Associates, L.P. ) CUID No. IN0001 (Columbus) ) ) ) Petition for Reconsideration ) ORDER ON RECONSIDERATION Adopted: August 31, 1998 Released: September 2, 1998 By the Deputy Chief, Cable Services Bureau: 1. In this Order we consider a Petition for Reconsideration ("Petition") filed by the operator ("Operator") for the community set forth above. We have issued an order ("Prior Order") which granted complaints filed against the rates charged by Operator for its cable programming services tier ("CPST") in the community referenced above and found that a refund plan ("1994 Refund Plan") filed by Operator in response to another order ("1994 Order") was unacceptable. Operator filed its Petition against our Prior Order on March 25, 1998 along with a revised refund plan ("1998 Refund Plan"). The Commission has received no opposition to the Petition. 2. The Communications Act authorizes the Federal Communications Commission ("Commission") 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 1992 ("1992 Cable Act") required the Commission to review CPST rates upon the filing of a valid complaint by a subscriber or LFA. If the Commission finds the rate to be unreasonable, it shall determine the correct rate and any refund liability. Operators must use the FCC Form 1200 series to justify their rates for the period beginning May 15, 1994 using a benchmark showing. Cable operators may also justify rate increases based on the addition and deletion of channels, changes in certain external costs, and inflation, by filing FCC Form 1210. FCC Form 1210 must be filed at least 30 days before new rates are scheduled to go into effect where the Commission has found the cable programming service rate to be unreasonable less than one year prior to the filing, or where there is a pending complaint against the CPST rate. 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. 3. In the Prior Order, we found that Operator's 1994 Refund Plan did not comply with the requirements of our 1994 Order and we ordered Operator to refile its 1994 Refund Plan. We also reviewed Operator's CPST rates effective May 15, 1994. Upon review of Operator's FCC Form 1200, filed to justify its CPST rates beginning May 15, 1994, we adjusted Line A6 to $10.13 to correspond to the maximum permitted rate ("MPR") determined in our 1994 Order. We found Operator's CPST MPR of $9.12 to be reasonable. Because Operator's actual CPST rate was $10.47, however, we found Operator's CPST rate to be unreasonable for the period May 15, 1994 through June 30, 1994. However, Operator elected to take advantage of the refund liability deferral period in accordance with the Commission's Rules. Accordingly, Operator did not incur refund liability for charging in excess of the MPR calculated on its FCC Form 1200 for the period May 15, 1994 through June 30, 1994. However, Operator did incur refund liability for charging a CPST rate of $10.47, for the period May 15, 1994 through June 30, 1994, which is above the MPR of $10.13 approved by the Commission on Operator's FCC Form 393. In addition, because Operator's actual CPST rate of $11.29, in effect from July 1, 1994 through October 31, 1995, exceeded its FCC Form 1200 MPR, we found Operator's actual CPST rate of $11.29 to be unreasonable effective July 1, 1994 through June 30, 1995. 4. Upon review of Operator's FCC Form 1210 covering the period March 31, 1994 to June 30, 1995, we found that Operator claimed an excessive inflation factor. Accordingly, we adjusted Operator's inflation factor on Lines I5 (Inflation Adjustment Factor) and J5 (Inflation Adjustment Factor) each from 1.0521 to 1.0215. These adjustments to Operator's FCC Form 1210 reduced Operator's MPR from $9.80 to $9.63. Because Operator's actual CPST rate continued to be $11.29, we found that Operator's CPST rate, effective July 1, 1995 through October 31, 1995, was unreasonable. On November 1, 1995, Operator implemented a CPST rate of $9.80 to conform with its FCC Form 1210 filing. Because Operator's actual CPST rate of $9.80 exceeded its reduced MPR of $9.63, we found Operator's actual CPST rate of $9.80, effective November 1, 1995 through May 31, 1996, to be unreasonable. However, because Operator's rates had been adjusted to remove excess inflation, pursuant to our "Public Notice: Cable Rates for Inflation Applied to Transition Rates," Operator did not incur refund liability because of its excess inflation until April 1, 1996. 5. Upon review of Operator's first FCC Form 1240 for the period June 1, 1996 through May 31, 1997, we adjusted Module A, Line A1 to reflect Operator's previous MPR of $9.63. The adjustment to Line A1 required that we correct the inflation factor in Module C, Line C1 to 1.0208. These adjustments reduced Operator's MPR from $11.65 to $11.32. Because Operator's actual CPST rate of $11.65 exceeded its reduced MPR of $11.32, we found Operator's actual CPST rate of $11.65, effective June 1, 1996 through May 31, 1997 to be unreasonable. 6. Upon review of Operator's second FCC Form 1240 for the period June 1, 1997 through May 31, 1998, we adjusted Module A, Line A1 to reflect Operator's previous MPR of $11.32. On Operator's second FCC Form 1240, we found that the time period selected for performing true-up adjustments incorrectly overlapped the time-period selected for true-up adjustments from Operator's first FCC Form 1240. In addition, Operator incorrectly made true-up adjustments through to the effective date of the increase. Therefore, we adjusted the true-up period in Operator's second FCC Form 1240 from 15 months to 11 months. This adjustment reduced the number of months on Worksheet 1, True Up Period 1, from 12 months to 11 months and eliminated the three months that Operator had listed for True Up Period 2. Our adjustments to Worksheet 1 required that we revise Operator's inflation factors. As a result, the inflation factor in Module C, Line C1 for the 11 month true-up period was corrected to 1.0202 and the current inflation factor in Module C, Line C3 was corrected to 1.0177. 7. The reduction in the length of the true-up period resulted in a reduction to Line H2 (Revenue From MPR for Period 1), and in a corresponding reduction to Line I8 (True-Up Segment for the Projected Period). In total, our adjustments to Operator's FCC Form 1240 resulted in a reduction of the MPR for the Projected Period to $12.11 (Line I9). Therefore, we found that Operator failed to demonstrate that its June 1, 1997 rate of $13.36 for its CPST was not unreasonable. We also ordered Operator to file with us an accounting of its external costs in its revised true-up period, so that we could compare the actual external costs for the permitted 11 month true-up period with the recovery of external costs afforded by the external cost segment for that period as calculated on Worksheet 7. 8. The first issue raised by Operator its Petition concerns Operator's 1994 Refund Plan. Operator argues that it should be permitted to offset its past CPST overcharges with its past basic service tier ("BST") undercharges. This is essentially the same argument advanced by Operator in its 1994 Refund Plan. We rejected this argument in the Prior Order and we reject it again now. The Commission has addressed the issue of inter-tier offsets in Cencom Cable Income Partners ("Cencom"). In Cencom, the Commission determined that such inter-tier offsets are "inconsistent with the Commission's conclusion in the [Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992, Rate Regulation, MM Docket 92-266, Report and Order and Further Notice of Proposed Rulemaking] that cable operators should not balance low BST rates with CPST rates that exceed the maximum permitted rate for the tier." More recently, the Commission has affirmed its decision in Cencom by rejecting a cable operator's request to offset its overcharges on its BST with its undercharges on its CPST. Therefore, we will not allow Operator to offset its CPST overcharges with its BST undercharges. Also, because Operator has had two opportunities to file a refund plan that complies with our 1994 Order and has failed to do so, we will calculate the amount of refund due and order Operator to make refunds to its subscribers within 60 days of the release of this order. 9. The second issue raised by Operator concerns the starting date of its CPST rate, as calculated on its FCC Form 1200. We found Operator's CPST MPR of $9.12 to be reasonable. Operator states that it did not implement its FCC Form 1200 until July 15, 1994 and not July 1, 1994, as stated in the Prior Order. We accept Operator's contention in this issue and we will vacate this portion of the Prior Order. Because Operator's actual CPST rate for the period May 15, 1994 through July 14, 1994 was $10.47, which was greater than the MPR of $10.13 approved in our Prior Order, Operator is still liable for the amount charged subscribers above $10.13 for the period May 15, 1994 through July 14, 1994. In addition, because Operator's actual CPST rate of $11.29, in effect from July 15, 1994 through October 31, 1995, exceeded its FCC Form 1200 MPR, we find Operator's actual CPST rate of $11.29 to be unreasonable effective July 15, 1994 through October 31, 1995. 10. The third issue raised by Operator relates to our requirement, in the Prior Order, that Operator recalculate its external cost segment as found on Worksheet 7 in its FCC Form 1240, for the projected period June 1, 1997 through May 31, 1998, ("1997 Form 1240") and to file with us an accounting of its external costs in its revised true-up period, so that we could compare the actual external costs for the permitted 11 month true-up period with the recovery of external costs afforded by the external cost segment for that period as calculated on Worksheet 7. Operator has revised its 1997 Form 1240 to comply with the adjustment required on Worksheet 7, and has filed with us the required accounting. Upon review of Operator's revised 1997 Form 1240, we accept Operator's entry of $4.924 on Line I7 (External Costs Segment for Projected Period - Worksheet 7). However, Operator did not correctly calculate its Line F8 (True-Up Segment For True-Up Period 1) to take into account the other revisions from our Prior Order. Therefore, we adjusted Line F8 to ($0.4898) in accordance with the FCC Form 1240 instructions. This adjustment reduced Operator's MPR, effective June 1, 1997, to $12.24. Because Operator was charging a CPST rate of $13.36, effective June 1, 1997, we find that Operator's CPST rate, effective June 1, 1997, was unreasonable. 11. The final issue raised by Operator concerns its calculation of its 1998 Refund Plan, filed to account for overcharges after July 15, 1994. Specifically, Operator contends that it should be permitted to engage in inter-tier offsetting when calculating this refund plan as well. We have already dealt with this issue above; therefore, we deny Operator's request to engage inter-tier offsetting in its 1998 Refund Plan. Operator also contends that it should be permitted to account for its overcharges for the period beginning June 1, 1997 in its true-up calculations on its FCC Form 1240 for the projected period June 1, 1998 to May 31, 1999. The Prior Order requires Operator to "refund to subscribers in the franchise area referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of $12.11 per month (plus franchise fees), plus interest to the date of refund, for the period June 1, 1997 to the day before it reduces its rate to $12.11." Operator argues that it should not be required to refund all past overcharges through a single, one-time payment. Instead, Operator contends that we should accept its "hybrid" refund plan which allows for some payment of refunds to subscribers, for the period prior to June 1, 1997, while accounting for overcharges after June 1, 1997 in its true-up calculations on its next FCC Form 1240 filing. Section 76.961 of the Commission's rules requires operators to make refunds by either "returning overcharges to those subscribers who actually paid the overcharges, either through direct payment or as a specifically identified one-time credit to those subscribers' bills," or by "means of a prospective percentage reduction in the unreasonable cable programming service tier rate . . . to cover the overcharge. This shall be reflected as a specifically identified, one-time credit on prospective bills to the class of subscribers that currently subscribe to the cable programming service . . . at issue." Once an order has been released requiring an operator to make such a refund, we will not allow an operator to avoid making the refund, using one of the two methods required by the Commission's rules, by attempting to true-up its overcharges in its next FCC Form 1240. Therefore, we reject Operator's argument and find its 1998 Refund Plan to be unacceptable. 12. Because Operator has been ordered to file refund plans to account for CPST overcharges calculated in both the Prior Order and the 1994 Order, and has failed to do so, we have calculated the total refund amount due from Operator to the CPST subscribers in the community referenced above. Our calculations take into account Operator's overcharges to subscribers for the period February 28, 1994 through June 30, 1995 and June 1, 1997 through May 31, 1998, including principal and interest, through to the date of refund. The total due from Operator to its CPST subscribers is $576,362.73. We order Operator to refund this amount to its CPST subscribers within 60 days of the release of this order. 13. Accordingly, IT IS ORDERED, pursuant to Section 1.106 of the Commission's rules, 47 C.F.R. Section 1.106, that Operator's Petition for Reconsideration of In the Matter of Marcus Cable Associates, L.P., 13 FCC Rcd 10460 (1998), IS DENIED TO THE EXTENT INDICATED HEREIN. 14. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that In the Matter of Marcus Cable Associates, L.P., 13 FCC Rcd 10460 (1998), IS AFFIRMED TO THE EXTENT INDICATED HEREIN. 15. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321 that Operator's CPST rate of $10.47, effective May 15, 1994 through July 14, 1994, in the community set forth above, IS UNREASONABLE. 16. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321 that Operator's CPST rate of $11.29, effective July 15, 1994 through October 31, 1995, in the community set forth above, IS UNREASONABLE. 17. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R. Section 76.961, that Operator shall refund to subscribers in the franchise area referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of $10.13 per month (plus franchise fees), plus interest to the date of the refund, for the period May 15, 1994 through July 14, 1994. 18. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R. Section 76.961, that Operator shall refund to subscribers in the franchise area referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of $9.12 per month (plus franchise fees), plus interest to the date of the refund, for the period July 15, 1994 through June 30, 1995. 19. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R. Section 76.961, that Operator shall refund to subscribers in the franchise area referenced above that portion of the amount paid in excess of the maximum permitted CPST rate of $12.24 per month (plus franchise fees), plus interest to the date of the refund, for the period June 1, 1997 through May 31, 1998. 20. IT IS FURTHER ORDERED, pursuant to Section 76.962 of the Commission's rules, 47 C.F.R. Section 76.962, that Operator's Refund Plans ARE NOT ACCEPTED. 21. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R. Section 76.961, that Operator shall refund to subscribers in the franchise area referenced above the total amount of $576,362.73 within 60 days of the release of this Order. 22. IT IS FURTHER ORDERED, pursuant to Section 76.962 of the Commission's rules, 47 C.F.R. Section 76.962, that Operator file a certificate of compliance with the Chief, Cable Services Bureau, within 90 days of the release of this Order certifying its compliance with this Order. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Deputy Chief, Cable Services Bureau