Loading...
HomeMy WebLinkAbout5982 RESOLUTION NO. 5982 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, DISAPPROVING THE RATES CHARGED BY TCI CABLEVISION OF LOS ANGELES COUNTY FOR EQUIPMENT DURING THE PERIOD JUNE I, 1996 TO PRESENT, ORDERING A PRESCRIBED RATE, AND ORDERING A REFUND TO SUBSCRIBERS AND MAKING FINDINGS IN CONNECTION TO A FORM 1205 DATED MARCH I, 1996 WHEREAS, the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") and the regulations adopted pursuant thereto by the Federal Communications Commission (the "FCC regulations") permit the City of Arcadia (the "City") to regulate the cable television subscriber rates charged by TCI Cablevision of Los Angeles County ("TCI") for the basic service tier and associated equipment. The FCC regulations establish the guidelines, rules and regulations under which the City may regulate such rates. Pursuant to these regulations, the City of Arcadia was certified by the FCC to regulate the basic service tier on October 3, 1993. On November 3, 1993, the City duly notified TCI of this certification and the rate regulation authority granted thereby. The City has adopted regulations with respect to the basic service tier and associated equipment that are consistent with the regulations prescribed by the Commission. Furthermore, the City has adopted procedural laws and regulations applicable to rate regulation proceedings which provide a reasonable opportunity for consideration of the views of interested parties. I WHEREAS, TCI filed with the City its FCC Form 1205 dated March 1, 1996 (along with a Form 1240) purportedly showing the manner in which TCI established its rates for . equipment and installation used by subscribers. WHEREAS, on June 1, 1996, pursuant to the Form 1205, TCI raised rates for the remote control and both types of cable television converters accordingly: $0.07 increase in remote from $0.05 to $0.12 (140%) $1.26 increase on addressable converter from $0.75 to $2.01 (168%) $0.39 increase on non-addressable converter from $0.41 to $0.80 (95%) WHEREAS, under the FCC rate rules, the City has a full year from the date of receipt of the Form 1205 to accept the rates as proposed or amended, or make a rate determination to prescribe new rates and order refunds where necessary. WHEREAS, the City retained Communications Support Group ("CSG"), the City's cable television consultant, to review the Form 1205, the additional information submitted by TCI, and TCl's records relevant thereto. WHEREAS, TCI asserted in its filing that certain overhead costs were accounted for as capital costs, identical to the method used in the previous year's filing. The City had previously not allowed this method of accounting and in the previous year, on June 20, 1995, issued an order (Resolution No. 5862) pursuant to Section 76.933(b) of the Rules and Regulations of the Federal Communications Commission determining that TCI had erroneously capitalized these costs, enumerating them in Schedule C, Capital Costs of Leased 2 5982 Customer Equipment of Form 1205. TCl's inclusion of its overhead expenses for converter units in Schedule C was found in the previous year to have increased the operator's equipment rates. WHEREAS, on July 20,1995 TCI appealed this decision to the FCC. On September 12,1996 the Federal Communications Commission released order DA96-1497 pertaining to TCl's appeal regarding the City's rate determination on June 20, 1995 as it pertains to converter costs identified in form 1205 submitted by TCI Cablevision of Los Angeles County on February 28, 1995. Thus, the FCC said TCI should be permitted to recalculate its Form 1205 to include the labor costs of installing and retrieving converters in Schedule B, and the operating costs of managing inventory in Schedule C. Accordingly, the FCC remands this issue to the local franchising authority for further consideration consistent with this Order. WHEREAS, on September II, 1996 the FCC released an order pertaining to Des Moines, Iowa (DA96-1488) and on October 23 released an order addressing Washoe County, City of Reno, Carson City, Nevada City and the City of Sparks, Nevada (DA96-1753). In these cases related to TCl's equipment rates as proposed in Form 1205 dated February 28, 1995: 3 5982 The Cities disallowed TCl's capitalization of converter costs in TCl's Form 1205 stating that the proposed rates would be tantamount to a double recovery of these costs, first in the monthly programming rates and again in the converter charges themselves. In addition to this "double recovery" concern, the costs were disallowed because: (J) the costs are inconsistent with the Commission's definition of "annual purchase costs;" (2) the proposed capital costs for converters are not based on a local system; (3) capitalization of the costs is inconsistent with generally accepted accounting principles ("GAAP"); (4) TCI has not substantiated that the material costs it seeks to capitalize are not already in the converter lease charge as an hourly service charge; and (5) labor or other operating costs assoCiated with converter disconnects and converter inventory management are already incorporated in programming service rates. The Cities excluded the $20 per unit capital cost from Form 1205, thereby reducing TCl's lease rates to the Cities' maximum permitted converter rates in the case of all Cities. WHEREAS, the City directed TCI in letters dated September 26, 1996 and dated January 21, 1997 to resubmit a revised Form 1205 for the year ending December 31, 1995 to identify costs related to Schedule B and Schedule C. City staff and its consultant, Communications Support Group, Inc. studied the information submitted previously, and recently, by TCI to determine whether labor costs of installing and retrieving converters in the 1994 filing were I) reasonable, and 2) had already been included in Schedule B and on 4 5982 the second issue, whether costs related to managing converter inventory were reasonable. WHEREAS, the City has given proper notice of this hearing pursuant to Section 76.935 of the Rules and Regulations of the Federal Communications Commission and has provided a reasonable opportunity for the consideration of the views of interested parties. Moreover, the City has considered the views of interested parties as expressed at this public hearing, as continued from time to time. WHEREAS, based upon the evidence submitted, including but not limited to the attached Report and Recommendation; the February 28, 1995 Form 1205 submitted by TCI, the staff and consultant reports, FCC decisions, and all other written and oral evidence received in connections with this matter, the City Council hereby finds that the rates established by TCI for equipment are unreasonable and do not comply with the FCC regulations accordingly: a. FCC Rules governing the recovery of equipment and installation costs do not provide for the capitalization of the cost of retrieval, re-installation, and re-inventorying of converters. Installation costs are to be recovered as separate installation charges, and therefore such costs may not also be capitalized. b. In addition, the FCC's rules define incidental costs as costs incurred up to the time the converter is provided to the customer, and the converter installation and retrieval costs that TCI seeks to capitalize would be incurred after the converter is provided to the customer. 5 5982 c. TCI does not distinguish clearly the converter costs at issue from the operating expenses and labor costs that are ordinarily included in Form 1205. d. Recent orders by the Federal Communications Commission (DA96-1488 and DA96-1753) gives compelling arguments why TCl's accounting method used to capitalize overhead in the Form 1205 is unreasonable, unjustified, and not consistent with FCC rules. NOW, THEREFORE, TIlE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, DOES HEREBY FINE, DETERMINE AND RESOLVE AS FOLLOWS: SECTION 1. The City Council of the City of Arcadia hereby finds and determines that the proposed rate for the basic equipment charges and rates as identified on the FCC Form 1205 dated March I, 1996 are unreasonable within the meaning of the FCC Form 1205 instructions and in that said rates and charges do not comply with 76.923 of the Rules and Regulations of the Commission for the reasons and grounds as previously set forth herein. SECTION 2. TCI is hereby ordered and directed to implement an addressable converter charge of$1.55; and a non-addressable converter charge of$0.43 by June 1, 1997. SECTION 3. TCI is hereby directed and ordered to provide a Refund Plan ("Refund Plan") to the City within thirty (30) days of the date of this hearing. Said refund plan should 1) identifY the amount of money overcharged by TCI for equipment during the period June 1, 1996 to May 31, 1997; 2) identifY how this overage will be credited to subscribers directly and/or how the overage can be used to lower equipment rates proposed TCI's Form 1205 for year ending December 31, 1996 along with such written evidence and documentation ." 6 5982 demonstrating the reasonableness and appropriateness of said Refund Plan under standards set forth in Section 76.942 of the Rules and Regulations of the Commission. SECTION 4. The City Clerk shall certify to the adoption of this Resolution and is hereby directed to post a copy of this Resolution in such place or places as City Notices are normally posted and to make copies of this written decision available to the public at the office of the City Clerk during normal business hours. SECTION 5. This Resolution shall become effective as of the date of adoption. Passed, approved and adopted this 18th day of February ,1997. ~~~u~ ATTEST: of Arcadia APPROVED AS TO FORM: ~w1-IJ ~ City Attorney 7 5982 STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) CITY OF ARCADIA ) I, June D. Alford, City Clerk of the City of Arcadia, hereby certify that the foregoing Resolution No. 5982 was passed, approved, and adopted by the City Council of the City of Arcadia, signed by the Mayor and attested to by the City Clerk at a regular meeting of said City Council held on the 18th day of February , 1997 and that said Resolution was adopted by the following vote to wit: A)1ES: Councilmember Chang, Harbicht, Kovacic, Young and Kuhn NOES: None ABSENT: None AD 8 5982