SR-501-002-02 (6)
City Council Meeting: October 12, 2004 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.
dba Adelphia Communications Corporation (?Adelphia?)
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.
1
The City notified Adelphia on November 13, 2003 that it had determined that the city
could not rely on rate forms filed prior to 2002 based upon allegations that the ?massive
fraud? allegedly perpetrated by Adelphia and/or its prior officials, significantly preceded
its 2002 rate filings and potentially occurred as early as Adelphia?s acquisition of the
City?s franchise and franchisee.
The Cable Company submitted its rate justification to the City on November 26, 2003
(dated November 24, 2003). 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. On January 5, 2004 the City received
revised Forms 1240 and 1205 along with a commitment not to raise Basic Service Tier
rates until at the earliest November 2004. Supplemental requests for information were
sent to the Cable Company on May 12, 2004 and May 25, 2004. The Company
responded on May 19, 2004, May 28, 2004, June 4, 2004 and June 11, 2004
respectively. The City sent the Financial Consultant?s Report on August 19, 2004.
Adelphia responded that the financial report holds the company to an unreasonable
standard.
Public comments were solicited and notification of the upcoming hearing was provided.
The Consultant?s Report concluded that the Maximum Permitted Rates set forth in the
FCC Forms should be disapproved and the changes denied as unreasonable due to the
inherent unreliability of the financial information used by Adelphia in determining the
Maximum Permitted Rates for the BST and related equipment and installation fees.
2
The Consultant?s Report recommended that the current rates remain in effect, without
validation, until such time as Adelphia can provide the necessary supporting
documentation and the City has the opportunity to review all of the revised filings
submitted.
For comparison purposes only, restated rates in the filings and the rates published on
the Cable Company?s rate card are set forth below.
RATES
Original Restated Difference
Form 1240
2001 Filing
BST MPR $29.02 $24.00 -$5.02
2002 Filing
BST MPR $34.19 $26.70 -$7.49
2003 Filing
BST MPR $34.18 $31.07 -$3.09
Form 1205
1
2001 Filing
HSC $44.66 Not Restated Not Applicable
Converter $4.65 Not Restated Not Applicable
2002 Filing
HSC $47.20 $45.73 -$1.47
Converter $3.82 $4.89 $1.07
2003 Filing
HSC $44.79 Not Applicable Not Applicable
Converter $7.22 Not Applicable Not Applicable
Based on this Rate Order, Adelphia shall not charge any rate for the BST, equipment,
installations, or any other products or services subject to regulation by the City higher
3
than the rates actually charged on November 23, 2003, nor increase those rates, nor
impose on subscribers any other charge for BST, equipment, installations, or other
regulated rates beyond those rates in effect on November 23, 2003, including but not
limited to, bulk and commercial rates (to the extent such limitation is permitted by
applicable law), unless and until an appropriate form relating to said rates or charge is
first filed with and approved by the City, in accordance with applicable law and
regulations.
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.
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
Attachment: Resolution
See adopted Resolution No. 9986 (CCS)
4