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City Council Sanuary 27, 1998
Santa Monica, Cahforn~a
.~ ~~1 Z 7 ~~
T~ Mayor and City Counc~l
FROM City S~afF
SUBJECT Recommendation ta Adopt Resolution Regar~img A Rate Order far
Equ~pment and lnstallatkon Rates for Century Southwest Cable Tele~ision,
Inc
INTRODUCTION
This report recammends that the City Council adopt a resalution issumg a rate order to
Century Southwest Cable Tele~iston, Inc ("Century") w~cc~r establ~shes equipment ar~d
mstallat~on rates and arders Century to issue refunds as apprapria#e
BACKGRDUND
The C~ty has been cert~fied by the Federal Commun~cat~ons Commission (FCC} to regulate
basic cabfe felevision ra#es (which ~ncludes tE~e "~as~c cabfe" tier and rafes for associated
equ~pment, ~nstalfat~an and services} Pursuant to FGC regulations, a cable campany must
~ustify the rates ~t charges as reasonable in accardance w~th federally-de~~sed formulas
Ti~e Cr#y sanres as the rmplement~ng agency fiar determ~ning Century`s campl~ance wrth the
federal regulat~ons
'~~e FCC sets €orth specifc procedures for franc~is~r~g a~thor~ties and ~able corr~pan~es to
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follow in estabiish~ng rates The City and Century have foilowed fhese procedures The
recent settlement of issues regard~ng Century Select and basic rates daes not apply to
Century's annual equipment and installation rate fdings which is the sub~ect of this repart
Century subm~tted its rate ~ust~ficat~on to the City on .lanuary 3D, 1997, and on May 30,
1997 subm~tted a supplemsntal ~us#~fication far d~gital equipment an~i d~g~tal ans#allation
rates The Crty rev~ewed the rate flmgs (1) to co~er defcrenc~es rn Century's completron
af #he ra#e filmgs, (2) to ~er~fy the mformat~on the Company submitted, and (3) to complete
review by the City af the Company's rate ~ling A supplemental request for information
was filed w~th Century on Qctober 7, 1997 They responded on October 20, ~ 997
Cen#Lry was pro~ided additional informat~on an the City's concerns on December 9, 1997
with a second request for add~tional informat~on Century subm~tted a respanse on
December ~ 8, 1997
The City has adv~sed Century of the following problems with their rate ~ustification
• Century cla~ms that the hourly contract labor rate for ~nstallation is $60 90 although
Century d~d not pro~ide tnvoices or other documentation to support such rate This
rate is impor~ant in establishing the installation rates set forth belos-v The City
contends an ~ourly contract labor rate ot $39 58 is reasonab~e based on the ~est
a~ailable inforrnation
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• The Company establ~shed one year as the useful l~fe ~ar ats un~versa! remate control
devfce taut prodided ~o support~ng documentat~on The Cor~su~tant, based on
Century's past use artd experience wit~ ot~er o~erators, foune! a three year useful
life to be r~asanable based an the best a~arlabie rnfarmation
• Century stated that it had nat as yet intraduced the digital package, and prov~ded
no support far a rate of $ 76 for a digita! remote Based on the besi available
informat~on, this staff report concludes that a$0 26 rate is appropriate
• Century included a license fee of $15 in calculatir~g its d~gital converter rate, but
provided no suppart for such fee This staff report recommends that such fee be
d~sallowed in calculating the digital converter rate
• Century also requested a digital ~nstallation rate of $114 98, based on its
assumption that it will take 4 hours to compiete such ~nstallation However, Century
did not subm~t tjme s#ud~es or other da#a m support of the four hour estimate 1n the
absence af such data, #his repo~ concluded that Century shauld charge the Hourly
Ser~ice Charge ra#e ($28.461hour) for such ~nstallations.
Based or~ the adj~astmerrts suggestec! above ar~d the tmancial coRSUltants repQrt, the
recommended max~mum permitted rates are set fc~rth belaw
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SUMMARY OF RATES
Century proposed rates
per Forms f 205
January 30, 1997lMay 30, 1997
Equipment and irstallation Rates
Hourly Servrce Charge $ 2$ 7~
Unw~red Homes 4~ 84
Prew~red H~mes 2G 45
Additional Connections ~~nitial) 15 81
Addit~onal Connect~ons (separa#e) 2~ 30
Charge for Changing Tkers 1 99
Digifal {nsta{fation ~ 14 98
Lease of Remo#e Con#rols
Remote Cantrol Ty~e I 26
Un~~ersal Remo#e (Note 8} 85
Remote Cantrol -- Digital (Nate A) 76
Lease of Con~erter Boxes
Drak Ad~usted
Rates
$2$ 46
44 40
2618
15 65
25 04
1 99
HSC
26
70
26
Addressable (iVate B) 2 20 2 20
Norr-Addressable 4~ 44
Dig~tal Converter Box (Note A) , 1 D 42 7D 93
Note A
Century has computed these proposed rates for their new digital service ~n a Supplernental
Form 1205 filed May 30, 1997 As of October 20, 1997, Century had not dec~d~d on the
date they would rolf aut the d~gital package
Note B
Century's rate card dated May 9, 1997 s#ated tf~at the introductory charge for the
Addressable Conver#er was $1 95 and the charge for the Un~versal Remote was $ 67
Century stated that they reserved the right to charge the max+mum perm~tted rates upori
gi~ing the appropriate nat~ce
The equipmen# and ~nstallat~on rates recommended by the G~iy as franch~sir~g authortt;+ w~ll
remam ~n effect un#il the date in 1998 that Century ~s permitt~d by the FCC Rules ta again
adaust their rates m the prescr~bed Form
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Nathmg ~n the recommended Rate Order prohib~ts the Company frorn subm~tting a
suppiementai rate friing far revrew by the Gity far a dig~tal remote cantrol device that
includes invaices and other documentation af the Company's actual costs f4r such device,
ar from subrnittmg a supplemental rate filing far d~gital mstallations far re~iew by the C~ry
that es#ablishes a rate for such fr~stallatror~s based oR t+me st~d+es or other approprrate
doeumentat~on estabi~shmg the actuaf average time it takes the Company ta complete a
digitai instal{ation The Council reserves the right ta modify th~s Rate Order ~f, at any time,
~t determ~r~es #hat ~nformation the Compar~y prov~ded to t1~e G~ty ~s mcorrect ~n any rnater~al
manner
BUDGET IMPACT
No C~ty budgetary ~mpact results from the issuance af this rate order
RECOMMENDATION
Staff recommends that City Caunc~l adopt the attached resolutian issu~ng a rate order to
estak~list~ the max~murn permitted rates for equipmer~t anc! ~r~stallat~on c~arges dur~r~g the
per~od under review, and to order re#unds, Ef any, of o~erpayment for such charges during
such period
Preparec~ by Kathryn Vernez, Senior Management Analyst
Martin Tachik~, Deputy City At#orney
Robin Gee, Cabie Manager
Attachments Resolution
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ACMO ~C1/ SG F IGMGRiSTFRPRTStRATEORDR VIIPD
Jan~ary 27, ~ 998 Santa Mon~ca. CA
RESOLUTION NO 423~ (ccs}
(Ctty Counc~l Series)
A RESOLUTlQN OF THE CITY CQUNCIL
OF THE CITY OF SANTA MdNICA
ADOPTING A RAT~ ORDER REGARDING
THE EQUIPMENT AND 1NSTA~LATION RATES
FOR CENTURY SOUTHWEST CABLE TELEVISION, INC
THE CITY CQUNCIL ~F THE CITY 4~ SANTA M4NICA DOES RESOLVE AS
F4LLOWS
WHEREAS, the City af Santa Monica (the "C~ty"} became cert~fed to regula#e basic
cable service rates and associated charges as of ~ctober 7, 1993, and has fallowed
regulations prescribed by the Federal Communicatians Comm~ssion ~"~CC") for th~
regulation of the basic serv~ce t~er and assocEated equipmer~t, ~ns#allatian, serv~ces and
charges {the "FCC Rules"), and
WHEREAS, Century Sauthwest Gable Televis~on, Inc (tf~e "Company") subm~tted
an FCC Form 12Q5 to the Ciry on February 3, ~997 (t~e "Rate F~ling") for equipment and
ms#allation, and
WHEREAS, the Company was permitted under the FCC Rules to ~mplement its
equipment and installat~on rates m accordance wifh the February 3, 1997 FCG ~orm 1205
on May 4, 'f 997, sub;ect to the C~ty's right to adopt a rate order and order rate refunds, and
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WHEREAS, the City ~ssued a public not~ce seeiung writt~n camments from
mterested partFes on the Cornpany's proposed ra~es, and the Rate Fi~~ng was made
ava~la~le #or publ~c {nspect+or~ ~n osde~ #o obta~n commen# from any mte~ested party, and
WHEREAS, the City staff has macle a recommentfatEOn to #he City Council
("Council"} regardrng the Company's rates based on {a} rnfiormation cor~ta~ned in the Rate
F~4~r~g, (b) the assumed accuracy of that ~nformat~on, ~c) comme~ts, ev~dence and
informafion from interested parties, (d) the draft rate report prepared by the City's financra!
consultant, (e} the Company's comments on the draft rate report. (~} the financral
cansu~ta~t's fina! rate ~eport {"F~nal Repo~k"), ar~d
WHEREAS, #he Campany has the burden of provrng by a prepanderance af
evidence that ~ts rates fior eqwpment and instailations are reasonable under the FCC
Rules, 47 C F R§ 76 937(a}, ar~d
WHEREAS, FCC Rules permi~ a franchising authorrty #a establish maximum
perm~tted rates fior equipmen# and instal~ations based on the "best infiormatran a~aElabie"
where a cabfe operator fails ta meet its burden 4f prQV~r~g that its prQposed rates are
reasonable, 47 C F R§ 76 937(c), and
WHEREAS, the Company daims that the hourly contract la~or rat~ for ~nstallations
is $80 90, and
WHEREAS, the Company farled to provide ~nvoices or other appropriate
dacumentat~on to suppar# such rate, and
WHEREAS, th~ fiinancial consultant, using the best ava~lable ~nfarmatian, c~mpu#ed
a contract labor rate of $39 58, and
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WHEREAS, the City finds $39 58 to be a reasonable cantract labor hour rate for
installations, based on tt~e best available Enformatior~, and
WHEREAS, the Company estabf~shed one year as the useful life far the universal
remate, but pro~ided no suppo~t for such ~igure, and
WHEREAS, the Company notes that existing universal remote control devices have
been m service for 2 years, which suc~ periQd exceeds a one year useful li#e, and
WHEREAS, the Campany uses a tE~ree year useful f~fe forthe bas~c remote cantrol
de~,ces, and
WHEREAS, the ftnancta( consultant, based on pas# expenence in revrewing the rate
filings af ~ther cab~e opera#ors, nates that the useful life for remote control devECes is
generally from 3 to 5 years, and
WHEREAS, the Ci#y finds a three year useful life for ur~iversal remote control
devices to be reasonable, based on the best ava~lable information, and
WHEREAS, the Counc~l has considered the City staff s recommendations and the
reasons therefore, has received and considered comments from the public, has re~iewed
and hereby adopts (and by this reference incorporates herein}, as appropr~ate and to the
extent not ~~consis#ent with this Rate Qrder, the findings, assumpt~ons and ot#~er
information set forth in the financial consultant's Fina! Report,
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NaW, THEREFORE, IT IS ORDERED THAT
1 The maximum permrtted rates for equ~pment and installation charges
from May 4, 1997 forward are set forth below
Maximum PermEtted Rate'
Equ~pmen# & Installatian
Hourly Servrce Charge
Unw~red Homes
Prewired Nomes
Additional Outlet (mitial #rip}
Add~t~onal Outlet (separate trip)
Gha~ging T~er (Addressable)
Remote Controi Device (Basic)
Remote Contr~l Device {Universal}
Converter Box (Non-Addressable}
Converter Box (Addressabfe)
$28 461per hour
44 40
26 18
15 65
25 04
1 99
2fi
~7Q
44
2 20
The equipmertt anc~ installation ra~es set farth rn thGS Paragraph shal! rema~n rn effec# untEl
the date in 1998 the Company is perm~tted by the FCC Rules to ad~ust such rates pursuant
to ~ts next FCC Form 1205 filing
2 The C~mpa~y shall refund that port~o~ af the rates (pius t~terest) pa~d by
subscr~bers forthe equ~pment and ~nstallations descnbed in Paragraph 1 to the extent sucl~
rates exceed the rates approved in Paragraph 1 The Company shall not offset refunds
by the amount of any discounts provided to subscribers on the eqwpment and installation
ra~es sub~ect to this Rate Order The refund perrad shall run from the date the Campany
implements the refunds ret~u~red by this Or~er back to May 3, 1997 Wi#h respect to each
~ffected subscriber entitled to a refund, the Campany shall implement the r~funds withm
' All rates listed ~n the column entitled "Maximum Permitted Rate" exclude only
frar~chise fees
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sixty {60} days after the date of thES Order
3 Withi~ fi~e (~} days after ths date of this Rate Order, the Company shall submEt
a written plan to the City Manager which, at a minEmum, shall s~t forth the Company's
me#hod of provEding refunds to subscribers (plus interest) pursuant to Paragraphs 1 and
2, identifies the basis for the caiculat~an of the amount of ~efunds, ident~fies the amflunt of
the refund, identifies the applicable mterest rate and explams how it was calculated,
proWides the actual rates charged subscribers far e~uipment and mstalla#ions each month
dunng the refund period, and expEa~ns how the rate refunds ordered herein shali be
imp4emertted Such pian ~s subject to the C~ty Manager's re~kew and approval T~e
Company's obligation to s~bmit such plan shall not affect the Company's abligatian to
Emplement rate refunds, as set forth m Paragraphs 1 and 2
4 T~e Company shall ad~ust its current rates for equipmen# and ~nstallation to the
levels set fo~th ~n Paragraph 1 wftf~in 60 days after the date of this Order
5 The Company may not increase the rates for any of the items listed in Paragraph
1, nor may the Company institute new charges for other types of service, equipment or
instal~at~ons associated with the basic serv~ce tier which are not listed ~n said Paragraph,
without first complying with appf~cabfe law ar regulation, mcluding tf~e FCC Rules
6 The Council reserves the right to modify th~s Rate Order if, at any time, it
determines that information the Cflmpany provided to the City is mcorrect in any materiak
manner
7 The City Manager is ordered to rnaik a copy of thES Rate Order to the Company,
provide appropr~ate public notice of #his Ra#e Order, and make a c~py of this Rate Qrder
available to any person ~pon r~qu~st
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8 The City Clerk shall certify ta the adoption of this Resal~tian, and thenceforth and
thereafter the same shall be in fuil force and effect
APPROVED AS TO FaRM
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! ~(.~%i.~~ .F,c~..~ i1~f.~.a~`f'~C
Marsha Jorfes Moutrie
L
City Attorney
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Adopted and appraved th~s 27tF~ of January, 1998
> ~ ~~1
Robert Holbrook, Mayor
!, Mari~ M Stewart, City Clerk of the City of Santa Monica, cfo hereby certtfy that
the foregoing Resolut~on 923~ (CCS) was duly ado~ted at a meeting of the City CouncE~
hefd on the 27th of January, 1998 by the foElowmg ~ote
Ayes Counalmembers Ebner, Feinstein, Genser, Greenberg, Holbrook,
O'Connor, Rosenstein
Noes CouncElmemt~ers None
Abstam Counc~lmembers None
Abse~t Councilmembers None
ATTEST
~//,~'J~i~~ ~ ~/LT ~/.t./~~i ~ ~I.f?i",
,~ . . , .r _ _ .
Maria M Stewart, City Clerk