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Federal Communications Commission

FCC 97-374

Before theFederal Communications Commission

Washington, D.C. 20554

In the Matter of

Cencom Cable IncomePartners II, LY.

Benchmark Filing to SupportCable Pmgiamming Service Price

CUID No. TXOO61 (Jasper, TX)

MEMORANDUM OPINION AND ORDER

Adopted: October 9, 1997

Released: October 14, 1997

By the Commission: Commissioner Quello Concurring in the Result.

1. Before the Commission is a petition for reconsideration of the Commission's Ortler inCencom Cable Income Partners II, LP. ("Cencom Order")' filed by Cencom Cable Income Partners II,L.P. ("Cencom").2 In the Cencom Order, the Commission substantially afflimed the action by the CableServices Bureau in Cencom Cable Income Partners U, LP., Memorandum Opinion and Oitler ("Bureau

Order")3 and ottlered that Cencom refund overcharges collected fmm subscribers to its cable prngrammingservices tier ("CPST") fmm November 16, 1993 thmugh May 14, 1994. We are denying Cencom'spetition for reconsideration of the Cencom Order.

2. Section 1.106 of the Commission's mies governs petitions for reconsideration.4 Sectionl.106(b)(2) pmvides that, where the Commission has previously denied an application for review, theCommission will entertain a petition for reconsideration only if: (1) the petixipn relies on facts whichrelate to events that have occurred or circumstances that have changed since the petitioner's lastopportunity to present such matters; or (2) the petition relies on facts unknown to the petitioner until afterhis last opportunity to present such matters which could not, through onlinary diligence, have been learnedprior to such opportunity.

3. Cencom previously applied for review of the Bureau Order in which the Bureau foundthat Cencom had not justified its CPST rate. The Bureau recalculated Cencom's maximum peimittedCPST rate and oniered refunds of the overcharge amount. In recalculating Cencom's maximum pemiittedrate, the Bureau corrected enors in the inflation information Cencom used in its inflation calculation in

FCC 97-205, 12 FCC Rcd 7948 (1997).

2 Cencom advises that the Jasper system was sold to Etan Industries, Inc. on March 31, 1997. Petition at 10n.4. Any reference to Cencom herein includes its successors in interest as well. Cencom had previously beenpurchased by Charter Communications, Inc. See Cencom Order, 12 FCC Rcd at 7948 n. 1.

DA 95-681, 10 FCC Rcd 10038 (1995).

47 C.F.R. § 1.106.22295

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Fonn 393, the form for calculating initial regulated rates with the benchmark methodology, and theBureau 'refreshed" the inflation figure with the most accurate data from the U.S. Department ofCommerce Gross National Product Price Index ("GNP-PI"). Cencom argued in its application for reviewthat the Commission should not refresh inflation data and also argued that it should allow the operatorto offset alleged undercharges for its basic service tier against the CPST refunds it owed. Cencom alsoargued that it should be allowed to take advantage of the inflation adjustment allowed by the Commissionfor a longer period of time than it had claimed in its rate form.

4. In the Cencom Order, the Commission agreed that, although Cencom had not claimed thelonger period for the inflation adjustment, it could have done so. The Commission recalculated Cencom'srate with this adjustment. The Commission rejected Cencom's arguments against Bureau use of refreshedinflation data. The Commission explained that determining an operator's initial regulated rate asaccurately as possible when an operator's actual rate is not justified by the operator's calculation is neitherunlawful nor contrary to Commission policy, is not inconsistent with instructions given operators on rateforms, and is not inconsistent with the Commission's stated intention not to penalize operators for goodfaith efforts to restructure rates when rate regulation became effective. Cencom's arguments in its petitionfor reconsideration repeat its earlier arguments without alleging new or newly discovered facts or changedcircumstances that would warrant further review.

5. In the Cencom Order, the Commission also rejected Cencom's argument that it should beallowed to take offsets in onier to reduce its CPST refund liability. Cencom had charged CPSTsubscribers for one more channel than it delivered to them and used the higher channel count in its ratecalculation. tecause the total number of channels delivered by a cable system is one of the variablesaffecting the pe. channel maximum permitted rate determined by the benchmark methodology, the higherchannel count Cencom used in its rate calculation resulted in a slightly lower permitted rate on a perchannel basis than Cencom could have used in setting its rates. Cencom claimed that it could havecharged basic service tier ("BST") subscribers a higher per channel rate, and therefore a higher tier rate,if it had used the correct channel count in the first instance. It sought to use this BST "undercharge" tooffset its CPST overcharge. The Commission explained that the Communications Act sets up a dualregulatory structure for cable services, giving local franchising authorities jurisdiction to regulate B ST andassociated equipment rates and the Commission jurisdiction to regulate CPST upon the filing of'a validcomplaint. The Commission also explained that allowing inter-tier offsets would create practical problemsin determining the correct CPST rates for offset purposes and would be discordant with the dual regulatorystructure established by Congress. The Commission stated that the precedents cited by Cencom addressedoffsets within the BST but did not support offsets between tiers that are subject to review by differentregulatory authorities.5

Cencom cites additional cases in its Petition for Reconsideration at 6 n.3. These, too, deal only with offsetswithin the BST. Cencom argues that the Bureau "strongly suggested' that inter-tier offsets should be allowed inCablevision of New England, Inc., Kittery, ME, 10 FCC Rcd 7569 (Cab. Serv. Bur. 1995). Petition at 7. InCablevision, the cable operator sought offsets across tiers when the local franchising authority would not allow theoperator to correct an error in its rate justification form. The Bureau held that the local franchising authority shouldhave accepted the correction, which the operator had timely called to the franchising authority's attention. With thecorrection, the offset issue was moot. The case does not suggest that inter-tier offsets would have been appropriate.Cencom cites the global rate resolution in Viacom Cable, Inc., FCC 97-32 (Feb. 7, 1997). The Commissiondistinguished global rate resolutions in the Cencom Order, 12 FCC Rcd at 7959.

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6. In its petition for reconsideration, Cencom takes issue with the Commission's reasoning.Accoithng to Cencom, the Commission has jurisdiction over B ST rates. Also acconi.ing to Cencom, themis no administrative impediment to calculating net refunds because offsets do not require a review of BSTrates, only a review of the data on the Form 393 flied with the Commission in response to a CPST ratecomplaint. Cencom's arguments do not allege new or newly discovered facts or changed circumstancesas required by § 1 .106(b)(2). In addition, Cencom's arguments substantively are without merit. The CableTelevision Consumer Protection and Competition Act of 1992 established a regulatoly structure based onfederal guidelines, but it placed jurisdiction to determine BST rates and associated equipment basketcharges with the local franchising authority.6 The Commission sets guidelines for BST regulation andhears appeals of local rate orders involving interpretation of these guidelines, but it does not set or reviewBST rates in the first instance unless a franchising authority's certification has been denied or revoked orthe franchising authority asks the Commission to assume jurisdiction until it becomes certified.7 If theCommission reverses a local franchising authority's decision, it will not substitute its own decision, butwill remand the matter to the franchising authority.8

7. Cencom argues that the Commission need not set or review BST rates when allowingoffsets because the Form 393 filed with the Commission includes sufficient information for calculatinga permitted BST rate. However, if a local franchising authority assumes jurisdiction over an operator'sBST rate at a different point in time, the permitted BST rate it detennines may differ somewhat from thatwhich might be calculated at the time of the CPST rate justification because of intervening changes ininflation or other costs. Offsets may have been used at the local level pursuant to § 76.942 of theCommission's rules9 in determining net refunds for BST and equipment and installation costs. Local ratesmay have changed during the period under consideration. Local review may be in a different status than

e Commission's review. None of this information is required in the CPST rate justification filed withthe Commission, but it is relevant to determining refund offsets across tiers. Cencom argues that localfranchising authorities see the CPST rate justifications filed with the Commission, but nothing in theCommission's rules or procedures would alert a franchising authority that BST rate issues are relevant tothe Commission's CPST review. An inter-tier offset without either a determination of the BST rates usedin computing the offset or an opportunity for local franchising authorities to address the offset issue wouldnot assure subscribers of accurate offset amounts and reasonable refunds.

8. Cencom also argues that consideration of administrative burden was rejected in TimeWarner Entertainment Co., L.P. v. FCC.'° The court reviewed the Commission's decision not to allowcable operators to adjust their September 30, 1992 rates for external costs incurred between September

6 Public Law 102-385, § 3, 106 Stat 1460, 1464-68 (1992), 47 U.S.C. § 543(a), (b).

47 C.F.R. § 76.913. Franchising authorities can also ask for assistance in reviewing cost of service filings.See

8 Implementation of Sections of the cable Television consumer Protection and Competition Act of 1992: RateRegulation, MM Docket 92-266, Report and Order and Further Notice of Proposed Rulemaking, 8 FCC Rcd 5631,573 1-32 ¶ 149 (1993).

47 c.F.R. § 76.942.

10 56 F.3d 151, 173 (D.C. Cir. 1995).

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FCC 97-374

30, 1992 and the date rates became subject to regulation at the federal or local level, the "gap period."The court rejected the Commission's argument that the builen of dealing with gap period external costsjustified its decision. In that case, the Commission hal acknowledged that allowing these costs wouldmake rates more accurate, and the documentation needed would not differ from the documentation usedto review external costs after the gap period. The offsets requested in the instant case do not affect theaccuracy of the CPST rates. The Commission has no mechanism for collecting infonnation about localrate proceedings outside of the process for hearing appeals of local rate orders, and it has no need for suchinfonnation.

9. Cencom argues in its Petition for Reconsideration that the staff worksheet used torecompute the maximum permitted CPST rate for the Cencom Order was not placed in the public filebefore the deadline for filing its petition. Although Cencom is correct about the delay, the Cencom Orderthoroughly discussed the adjustments made in calculating Cencom's maximum permitted CPST rate anddid not rely on the staff worksheet to explain its action. No rule requires that staff worksheets be placedin the public file. However, to avoid any prejudice to Cencom, Cencom was offered the opportunity tosupplement its petition in light of the staff worksheet.'1 It did not do so. No further Commissionresponse is warranted.

10. ACCORDINGLY, IT IS ORDERED, pursuant to section 1.106 of the Commission's rules,47 C.F.R. § 1.106, that the Petition for Reconsideration of the Commission's Order in Cencom CableIncome Partners II, LP., FCC 97-205, 12 FCC Rcd 7948 (1997), filed by Cencom Cable Income PartnersII, L.P. IS DENIED.

FEDERAL COMMUNICATIONS COMMISSION

William F. CatonActing Secretary

' Letter from M.J. Jones to P. Gust (8/27/97) enclosing staff worksheet.

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