SR-501-002-02 (5)
City Council Meeting: April 22, 2003 Santa Monica, CA
To: Mayor and City Council
From: City Staff
Subject: Public Hearing and a Resolution of the City Council of the City of Santa
Monica Adopting a Rate Order Regarding the Basic Cable Service Tier
and The Equipment and Installation Rates for Century-TCI California, L.P.
(D/B/A Adelphia Communications Corporation)
Introduction
This report recommends that the City Council hold a public hearing and adopt a resolution
issuing a rate order to Century-TCI California, L.P., d/b/a Adelphia Communications
Corporation (?Cable Company?). The rate order establishes basic cable service,
equipment and installation rates and orders the Cable Company to issue refunds as
appropriate.
Background
The City has been certified by the Federal Communications Commission (FCC) to regulate
basic cable television rates (which includes the "basic cable" tier and rates for associated
equipment, installation and services). Pursuant to FCC regulations, a cable company must
justify the rates it charges as reasonable in accordance with federally devised formulas.
The City serves as the implementing agency for determining the Cable Company?s
compliance with the federal regulations.
The FCC sets forth specific procedures for franchising authorities and cable companies to
follow in establishing rates. The City has followed these procedures.
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The Cable Company submitted its rate justification to the City on May 6, 2002. The City
reviewed the rate filings to: (1) uncover deficiencies in the Cable Company?s completion of
the rate filings; and (2) verify the information the Cable Company submitted. A
supplemental request for information was sent to the Cable Company on December19,
2002. The Company responded on January 22, 2003.
Public comments were solicited and notification of the upcoming hearing was provided.
Based on the financial consultant?s report and the FCC?s rate regulations, the
recommended maximum permitted rates are set forth below. For comparison purposes
only, the rates published on the Cable Company?s rate card are also set forth below.
RECOMMENDED RATES
Adelphia Rate FCC Maximum
Card Rates Permitted Rates
BASIC SERVICE TIER $26.24 $34.19
EQUIPMENT & INSTALLATION:
Hourly Service Charge N/A $47.20
Unwired Homes $44.00 47.20
Prewired Homes 33.00 35.40
Underground Burial 75.00 82.60
Relocate Service 33.00 35.40
Trip Charge 29.00 31.62
Downgrade to Basic (Nonaddressable) 29.00 31.62
Additional Connection (initial trip) 22.00 23.60
Additional Connection (separate trip) 33.00 35.40
Changing Tier (addressable) 2.00 2.00
Transfer 33.00 33.00
Non-Pay Reconnect 28.00 28.00
Remote Control Device (Addressable) .25 .28
Remote Control Device (Universal) .25 .28
Remote Control Device (Digital) .25 .28
Converter Box (Addressable) 3.25 3.82
Converter Box (Non-Addressable) .95 .00
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Converter Box (Digital) 3.25 3.82
Lease of Additional Outlets N/A .00
The City?s review identified five issues. They are: rate for ?downgrade to basic?; charges
for ?transfer? and ?non-pay reconnect?; charges for ?non-addressable converters? and
?additional outlets?; and the rate for ?universal remote control device.?
The Company proposes a maximum permitted rate of $47.20 for downgrade to basic;
however, the Company has failed to meet its burden of demonstrating why it is reasonable
to assume that it takes the same amount of time to downgrade basic service as it does to
do the initial install of cable in an unwired home. The FCC rate regulations state that
?downgrade charges that are the same as or lower than upgrade changes are evidence of
the reasonableness of such downgrade charges.? Adelphia does not have a specific
charge for upgrade but stated in the prior filing that it charges a ?trip charge? for among
other things, converter installation and removal of pay service traps. The maximum
permitted rate for a ?trip charge? is $31.62. Based on the best information available, it
would be reasonable for the City to set $31.62 as a reasonable maximum rate for
downgrade to basic that requires a trip. The rate card states that it charges subscribers
$29.00 for both the trip charge and downgrade to basic.
Adelphia?s rate card accompanying this filing listed two installation rates that were not
computed on the Form 1205: charges for ?Transfer? of $33.00 and ?Non-Pay Reconnect? of
$28.00. The FCC rules require that all rates for installations charged to basic subscribers
be computed on the Form 1205. Adelphia did not provide time studies or other
documentation demonstrating the actual average time it takes to complete such
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installations with its Form 1205. However, Adelphia stated in the prior year filing that both
services took .75 hours. If we accept .75 hour for these services, the maximum permitted
rate for both services would be $35.40. Therefore, a rate of $33.00 for ?Transfer? and
$28.00 for ?Non-Pay Reconnect? does not appear to be unreasonable.
The Company has informed the City that the rate card was in error and that it no longer
charges subscribers for non-addressable converters. Although it calculated a rate of $0.92
on its Form 1205 for the lease of additional outlets. Adelphia also informed the City it does
not charge for additional outlets in Santa Monica.
The rate card establishes a rate of $0.25 for a universal remote control device, but such
rate is not calculated on the Form 1205. The Company chose to consolidate its rates for
remote control devices as permitted by the FCC rules, and calculated a maximum
permitted rate of $0.28 for all other remote control devices. The City concludes that $0.28
should also be the maximum permitted rate for the universal remote control device.
The basic service tier, equipment and installation rates recommended by the City as the
franchising authority will remain in effect until the date in 2003 that the Cable Company is
permitted by the FCC rate regulations to again adjust its rates in the prescribed Forms.
The City Council reserves the right to modify the Rate Order if, at any time, it determines
that information the Company provided to the City is incorrect in any material manner.
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Budget Impact
No City budgetary impact results from the issuance of this rate order.
Recommendation
Staff recommends that City Council hold a public hearing and adopt the attached
resolution issuing a rate order to establish the maximum permitted rates for basic cable
service, equipment and installation charges during the period under review.
Prepared by: Kathryn Vernez, Assistant to City Manager for Government Relations
Joseph Lawrence, Assistant City Attorney
Robin Gee, Cable Manager
Attachments: Attachment A: Resolution
Attachment B: Financial Report
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