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R-8781 - - e e RESOLUTION NO. 8781 (City Council Ser~es) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA ADOPTING A RATE ORDER REGARDING BASIC SERVICE RATES AND ASSOCIATED CHARGES OF CENTURY SOUTHWEST CABLE TELEVISION, INC. AND REQUESTING FURTHER INFORMATION REGARDING DELINQUENT ACCOUNT CHARGES THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES RESOLVE AS FOLLOWS: WHEREAS, the C~ ty of Santa Monica (the IICity") became certified to regulate basic cable serVlce rates and associated charges as of October 7, 1993, and has followed regulations prescrlbed by the Federal Communications Commission ( II FCC II ) for the regulation of the basic service tier and associated equipment, installation, and service charges (the rtFCC Rules"), and WHEREAS, on January 24, 1994, the City notified Century Southwest Cable Telev~s~on, Inc. (the rtCompany" ) that the Company's basic serv~ce tler and assoc~ated charges for equipment and installation were subJect to regulat~on by the C~ty ("initlal date of regulationrt) i and WHEREAS, the Company submitted a FCC Form 393 to the City on February 22, 1994, submitted supplemental rate informatlon on March 31, May 11, and June 1, 1994, and submitted a revised FCC Form 393 on June 29, 1994, WhlCh ~ncorporated adjustments 1 e e recommended by the City's financial consultant (collectlvely, the "Rate Fllings"), and WHEREAS, the C1ty issued a public notice seeking written comments from interested parties on the Company's proposed rates, and the Rate Fillngs, except for the June 29, 1994 FCC Form 393, were made available for public inspectlon ln order to obtain comment from any lnterested party on the Company's proposed rates; and WHEREAS, City staff has made a recommendation to the Clty Councl1 (the "Councill!) regarding the Company's rates based on. ( a) information contalned ln the Rate Filings submltted by the Company; (b) the assumed accuracy of that informationi (c) information in the draft rate report prepared by the City's financial consultant, (lIDraft Report 11) and supplements to the Draft Reporti (d) comments by the Company on the Draft Reporti (e) the flnancial consultant's final report (" Flnal Reportl!) i and (f) comments received from the public, and WHEREAS, the Councll has considered staff's recommendations and the reasons therefore, and has rece~ved and considered comments from the publici and has reviewed and hereby adopts (and by this reference incorporates herein), to the extent not ~ncons~stent w~th th~s Order, the f~nd~ngs, assumptions and other lnformatlon set forth In the flnanclal consultant's Flnal Report, and 2 - e WHEREAS, the Company gave the City notice that effective as of July 15, 1994, the Company would restructure ~ts rates to comply with revlsed rate regulation rules adopted by the FCC that became effective on May 15, 1994 (the T1Amended RulesTl) , and WHEREAS, the Company has the burden of provlng by a preponderance of the eVldence that the Company's eXlstlng rates as of the inltial date of regulation are reasonable under the FCC Rules, 47 C.F.R. ~ 76.937{a) , and WHEREAS, the FCC has granted franchising authorities the right "to make inltial determlnatlons as to whether a collective offering of "a la carte II channels should be considered a regulated tier", 1n order lito properly determ1ne the total number of regulated channels offered by the operator in order to properly set rates for the basic service tier, II see In Re Implementation of Sections of the Cable Televlsion Consumer Protection and Competltion Act of 1992' Rate Regulation, Second Order on Reconsideration (MM Dkt. No. 92-266), FCC 94-38 at , 197 (released Mar. 30, 1994) ("Second Order on Reconsideratlonll), and WHEREAS, the FCC has stated that franchislng authorlties may apply the FCC's "a la carte" rules 1n any rate proceeding pending on May 15, 1994, see FCC Public Notlce: Questlons and 3 e e Answers on Cable Telev~sion Rate Requlation at Question 24 (dated May 6, 1994) ("FCC Public Notice"); and WHEREAS, the FCC has set forth factors a franchis~ng author~ty should consider in determ1ning whether or not a collect1 ve package of "a la carte" offerings should be counted ln order to properly set rates for the basic serVlce tier, see Second Order on Reconsiderat~on at ~ 196; and WHEREAS, the Company d1d not offer Century Select prlor to September 1, 1993, the effectlve date of the FCC Rules, and WHEREAS, the Company's August 25, 1993 notice to subscribers regarding its new September I, 1993 rates, and the Company's September 1, 1993 rate card, did not inform subscribers that they would need to lease a converter box in order to receive less than all 12 Century Select channels; and WHEREAS, the Company states that "specl.fic marketing surveys were not conducted prior to introducing the ~ la carte service option" in order to determine consumer interest in such an offerlng, see Letter from Robert J. Larson, Assistant Vlce presldent & Controller, Century Communications Corporation to John Jall.ll, City Manager, Clty of Santa Moul.ca, at Response to Previous Question 8 (May 11, 1994) (Company's response to Ma y 5 I 1994 request for supplemental rate information); and 4 e e WHEREAS, the programming services offered as part of Century Select trad~t~onally have not been marketed as lIa la carte" services, and WHEREAS, 11 of the 12 programming services on Century Select on the initlal date of regulation previously were offered as part of either the basic tier or the Company/s former Satellite Tier, and thus a signif1cant percentage or number of channels in the package were removed by the Company from regulated t~ers; and WHEREAS, as of September 1, 1993, Santa Monica subscr~bers, depend~ng on the level of serVlce they received prior to September 1/ 1993/ autornatlcally were SUbscTlbed to the 12-channel Century Select serv~ce through a negat~ve option billing method; and WHEREAS, as of September 1, 1993, the Company dlsmantled the Satellite Tier (a cable programmlng service tier) by moving nine (9 ) of the fourteen (14) channels on the Satell~te Tier to Century Select, and by mov~ng the remaining f~ve (5) channels to the basic service tier, thus entirely eliminating what would have been a regulated tleri and WHEREAS, a Santa Monica subscriber may receive all 12 Century Select programming serV1ces for $6.12 (or only $0.52 per channel) , but must pay almost 50 percent more ($0.77) per channel ~n order to purchase the channels indivldually, and 5 e e thus the package prlce is deeply discounted when compared to the prlce of an indivldual channel; and WHEREAS, a Santa Monlca subscriber must lease a converter box, at a monthly rate of elther $0.45 (exclus1ve of franchise fee) for most converters currently in use, 1n order to receive any service other than baslc cable serVlce plus all 12 Century Select channels, thus requiring a Santa Monica subscriber to pay a signiflcant equipment charge to receive fewer than all 12 Century Select channelsi and WHEREAS, the Company stated that the Arts & Entertalnment programming service objected to belng restructured to Century Select, see Memorandum from Kathryn Vernez, Senlor Management Analyst, City of Santa Monica, to Robert Larson, Assistant Vlce PresldentjController, Century Communications Corp. at 3 (May 27, 1994) ; and WHEREAS, by creating the Century Select service, the Company claims that the channels on Century Select should not be taken into account in calculatlng the basic service tler rate, which, lf the Company were correct, would permit the Company to avold rate reductions that otherwise would have been required under the Commission's rules, see Second Order on Reconsideration at , 196; and WHEREAS, the Clty Council has determlned, by applicatlon of the FCC Rules, that the creation of Century Select serVlce 6 e e represented an attempt by the Company to avoid regulation of the rates for the former Satelllte Tier; and WHEREAS, the Company's September I, 1993 rate card includes rates for (a) late charges, (b) returned checks, and (c) collectlon charges (collectively, "Delinquent Account Charges") ; WHEREAS, the Commission has stated that the reasonableness of late fees are 11 appropriately dealt with through local negotiatlon or the appllcatlon of local or state consumer protection and customer service laws, 11 see FCC Public Notice at Question 20; and WHEREAS, the City has authorlty to request the Company to ]ustlfy the dellnquent account charges as reasonably necessary for the conduct of the Company's business (Santa Monica Municipal Code Sections 6 108.14.050 and 6.108.22.050); WHEREAS, the net impact of the Company's service changes on April 1 (lncludlng restructuring A & E and VH-l into a 2 channel cable programming service tler and addlng a broadcast channel to the basic service tler) would be to increase the number of channels on the cable system on serVlce tiers subject to regulation by three (3), or from 43 to 46 channels; WHEREAS, FCC Rules do not appear to permit the Clty to take into account the serVlce changes made by the Company on April 1, 1994; and 7 e e WHEREAS, subscrlbers to the baslc serviced tler during the perlod from April 1, 1994 to July 14, 1994 would be entitled to a larger refund for that time period if the Clty could take into account the Company's Aprll 1 service changes ln calculating refundsj and NOW, THEREFORE, IT IS ORDERED THAT: 1 For the period commencing on September I, 1993 and ending on July 14, 1994, whlch is the day prlar to the date the Company restructured its rates to comply with the Amended Rules (July 15, 1994) , the lnltial permltted rates, excluslve of franchise fees, for the basic serVlce tier and certaln installations shall be as follows. Initial Permitted Rate Basic Servlce: - - Per-channel rate $ 0.587 - - Basic Tler Monthly Rate $18.20 (31-channel basic service) Installatlon: - - Unwired Homes $30.83 - - prewired Homes {reconnection} $18.18 - - Add'l Outlets (initial install) $10.87 - - Add'l Outlets (separate install) $17.39 The Company shall refund that portion of rates paid by a subscriber for the basic serVlce tler and the installatlons 8 e e descrlbed in thlS Paragraph 1 to the extent such rates exceed the lnitial permitted rates approved in this Paragraph I, plus interest, offset by' (a} undercharges for type 1 converter boxes; (b) undercharges for the hourly service charge; and (c) undercharges for a change of service requiring a vis~t to a subscrlber's home. Undercharges for type 1 converter boxes shall mean the difference between the $.68 per month the Company could have charged for the box and the $.45 per month the Company actually charged. Undercharges for the hourly service charge shall mean the difference between the $23.48 per hour rate that the Company could have charged for the hourly service charge and the $19.76 per hour rate the Company actually charged. Undercharges for a change of service requiring a service call to a subscriber's home shall mean the difference between the $13.04 the Company could have charged and the $6.72 the Company actually charged for such a service call. The refund perlod shall run from September 1, 1993 through July 14, 1994, which ~s the day prior to the date the Company restructured its rates to comply with the Amended Rules (July 15, 1994) . with respect to each affected subscr1ber entitled to a refund, the Company shall implement the rate refunds ordered ln this Paragraph 1 w1thin 40 days after the effectlve date of this Rate Order. 9 ~ e 2. For the perlod commenclng on September 1, 1993 and endlng on July 14, 1994, which is the day prlor to the date the Company restructured its rate to comply with the Amended Rules (July 15, 1994) , the lnltlal permltted rates for the equlpment and services listed below shall be the actual rates charged by the Company as of the initial date of regulation: Inltlal Pernutted Rate Equipment. - - Lease of Type 1 Converter Box $0.45 (exclusive of franchlse fee) -- Lease of Type 2 Converter Box $1.39 (inclusive of franchise fee) -- Lease of Remote Control $0.00 Chanqinq Tiers: -- Charge for changing tier $6.72 (Requlrlng a service call to subscrlber's home) (incluslve of franchise fee) -- Charge for changing tier $2.00 (Addressable) (excluslve of franchise fee) Other -- Hourly Service Charge $19.76/hr. 3. The Company may not lncrease the rates for any of the items 11sted in Paragraphs 1 or 2, nor may it instltute new charges for new remote controls or any other types of serVlce, equlpment or installation assoclated with the baslc service tler whlch are not listed ln sald Paragraphs wlthout 10 e e first complying wlth appllcable law and regulatlon, lncluding the Amended Rules. 4. Withln ten (10 ) days after the effective date of thlS Rate Order, the Company shall submit a written plan to the City Manager for reVlew and approval which, at a minlmum, shall set forth the Company's method of providlng refunds to subscribers (plus lnterest) as ordered in Paragraph Ii shall identify the basis for the calculation of the amount of refundsi shall identify the applicable interes~ rate and explaln how it was calculatedi and shall explain how the rate refunds ordered herein shall be lmplemented. The Company's obllgatlon to submlt such plan shall not affect the Company's obligation to implement rate refunds, as set forth in Paragraph 1. 5. Within ten (10) days after the effective date of thlS Rate Order, the Company is requested to submit a written ]ustlf1cation for its schedule of rates for Delinquent Account Charges. The City Manager will review the justification and then make a recommendation to the City Councll regardlng the reasonableness of the rates under the local ordlnance and state law 6. The Clty Councll reserves the right to order addltlonal refunds for the perl ad from April I, 1994 to July 11 . e e 14, 1994 to account for service changes made by the Company on April 1, 1994, in the event the FCC clar1.f1.es that the City council has the r1.ght to take into account such serV1.ce changes in establishing the maX1.mum permitted basic rate for that time period. 7 The Council reserves the r1.ght to modify this Order if, at any time, it determlnes that information the Company provided to the City is incorrect ln any material manner. S . Nothing in th1.s Rate Order shall be construed as a waiver of the City's rlght to determine whether the Company correctly computed and itemized franch1.se fees on past bllls to subscr1.bers 9. The City Manager shall mail a copy of this Rate Order to the Company, provide appropriate publ1.c not1.ce of th1.s Rate Order, and make a copy of th1.s Rate Order available to any person upon request. 12 ~ . . r e e 10. The City Clerk shall certlfy to the adoption of this Resolution, and thenceforth and thereafter the same shall be In full force and effect. APPROVED AS TO FORM: dY'L4J ~ Ld<j7u_~Jx~ Marsha Jo~e$ Moutrie City Attortr'ey 13 -- - - . . . e e Adopted and approved this 19th of July, 1994 Q iJA IV Mayor I hereby certify that the foregoing Resolution 8781 (CCS) was duly adopted at a meeting of the City Council held on the 19th of July, 1994 by the followmg vote. Ayes: Councilmembers: Abdo, Genser, Greenberg, Holbrook, Olsen, Rosenstein, Vazquez Noes Councilmembers: None Abstain. Councilmembers: None Absent: Councilmembers: None ATTEST /~~ M~ --- City Clerk