R-8781
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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
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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.
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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
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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