**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | CSR-6165-R                   |
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| Comcast Cable Communications,    | ) | CUID No. PA0357              |
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| Petition for Declaratory Ruling  |   |                              |
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| Petition for Revocation of       | * |                              |
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DECLARATORY RULING

**Adopted: December 29, 2003** **Released: January 6, 2004**

By the Deputy Chief, Policy Division, Media Bureau:

# INTRODUCTION

1.  On April 25, 2003, Comcast Cable Communications, Inc. ("Comcast"),
    filed a Petition for Declaratory Ruling and Petition for Revocation
    of Certification (the "Petition"), directed at Middletown Township,
    Pennsylvania (the "Township"). Simultaneously, Comcast filed a
    Request for Expedited Consideration of Petition for Declaratory
    Ruling and Petition for Revocation of Certification. On June 4,
    2003, the Township filed Comments of Middletown Township (the
    "Comments"), to which Comcast filed a Reply to Comments of
    Middletown Township (the "Reply") on June 18. On July 2, 2003,
    Comcast filed a Supplement to Petition for Declaratory Ruling (the
    "Supplement").[^1]

2.  By issuing this Declaratory Ruling promptly after the close of the
    pleading cycle, we grant Comcast's Request for Expedited
    Consideration. For the reasons stated below, we grant the Petition
    for Declaratory Ruling and we deny the Petition for Revocation of
    Certification. Also, we deny the Township's First and Second Motions
    to Strike.

# BACKGROUND

3.  Strictly speaking, this case is a request for a declaratory ruling
    and not an appeal of a rate order by a franchising authority.
    Nevertheless, it concerns two such orders, and therefore a statement
    of general principles is in order. The Communications Act provides
    that, where effective competition is absent, rates for basic cable
    service and associated equipment are subject to regulation by
    franchising authorities.[^2] Rates for service and equipment should
    not exceed rates that would be charged by systems facing effective
    competition, as determined in accordance with Commission regulations
    for setting rates.[^3] If the cable operator fails to meet its
    burden of proof, has improperly calculated its rates, or is
    unresponsive to requests for relevant information, the franchising
    authority may use the "best information available" to review the
    operator's proposed rates and, if appropriate, adjust them and order
    refunds.[^4]

4.  Rate orders issued by franchising authorities may be appealed to the
    Commission pursuant to Commission rules.[^5] In ruling on appeals of
    local rate orders, the Commission will not conduct a *de novo*
    review, but instead will sustain the franchising authority\'s
    decision as long as a reasonable basis for that decision exists.[^6]
    The Commission will reverse a franchising authority\'s rate decision
    only if it determines that the franchising authority acted
    unreasonably in applying the Commission\'s rules. If the Commission
    reverses a franchising authority\'s decision, it will not substitute
    its own decision but instead will remand the issue to the
    franchising authority with instructions to resolve the case
    consistent with the Commission\'s decision on appeal.

# DISCUSSION

## Facts

5.  The present dispute concerns two rate orders that the Township
    adopted, in 2002 and 2003, regarding the rates for the Basic Service
    Tier ("BST") of Comcast's cable service in Middletown. Before the
    first of those decisions, the rate that Comcast and its predecessor
    had actually charged its BST subscribers (the "actual rate") had not
    changed since January 2000.[^7] That actual rate was \$11.66.[^8]

6.  On March 1, 2002, Comcast filed a Form 1240 (the "2002 Form 1240")
    to establish BST rates for the 12-month period beginning June 1,
    2002.[^9] The 2002 Form 1240 stated a Maximum Permitted Rate ("MPR")
    of \$13.10, but left blank Line I10 on the Form, which was for
    "Operator Selected Rate \["OSR"\] For Projected Period."[^10]
    Comcast's cover letter to its 2002 Form 1240 stated:

    "Currently, Comcast does not plan to implement any changes in its
    regulated basic . . . rates when these filings become effective on
    June 1, 2002. Although these may not be our actual rate change
    plans, we want to preserve our rights for the coming year under the
    current rules."[^11]

7.  On May 14, 2002, the Township adopted an Opinion and Order
    concerning the 2002 Form 1240 (the "May 2002 Order").[^12] The
    Township's May 2002 Order disapproved of Comcast's treatment of
    inflation and lowered the MPR to \$12.77.[^13] We later overturned
    the Township's May 2002 Order in this respect,[^14] and Comcast's
    MPR was re-established at \$13.10.[^15] More important to the
    present dispute, however, the Township's May 2002 Order addressed
    the BST rate that Comcast could charge in the future. The May 2002
    Order stated that Comcast "has indicated to the Township that it
    will continue to charge subscribers \$11.70 for Basic service,"
    perhaps overlooking that Comcast's actual rate was \$11.66.[^16] The
    Township "ordered . . . that an operator selected \[rate\] of
    \$11.70 is approved for the projected period from June 1, 2002
    through May 31, 2003."[^17]

8.  On or about January 27, 2003, Comcast notified the Township and its
    subscribers that it would increase its actual rate to \$12.65 on
    March 1 of that year.[^18] Comcast effected that increase. Also on
    or about March 1, 2003, Comcast filed a Form 1240 (the "2003 Form
    1240") to establish BST rates for the 12-month period beginning June
    1, 2003.[^19] The 2003 Form 1240 stated an MPR of \$13.95.[^20]
    Comcast's cover letter to its 2003 Form 1240 contained almost the
    same tentative and cautionary words as the previous year's,[^21] and
    again Comcast's Form 1240 left blank the line for the OSR.[^22]

9.  On March 6, 2003, the Township advised Comcast that it could not
    lawfully raise its actual rate until after June 1, 2003 -- the end
    of the 90-day review period for its 2003 Form 1240.[^23] Over the
    next several weeks, Comcast and the Township corresponded.[^24]
    Comcast proposed that they consult with the Commission's Media
    Bureau for an informal resolution of their disagreement.[^25] The
    Township demanded refunds and mentioned the possibility of fines and
    imprisonment if Comcast persisted with the \$12.65 actual rate for
    Basic Service.[^26] Later, on or about April 11, 2003, the Township
    served information requests on Comcast, one of which stated: "The
    Operator's Selected Rate for the Projected Period was not set forth
    in line item I10. Please provide this Rate."[^27] Comcast responded
    on May 1, 2003, that

    "The information requested is not relevant to the FCC Form 1240
    preparation or the information contained in the form used to
    determine the Maximum Permitted Rate because currently Comcast does
    not plan to implement changes in its regulated basic rates when this
    filing becomes effective on June 1, 2003.

    . . . .

    "Thus the FCC Form 1240 submitted on March 1, 2003 was not intended
    to serve as notice for any price adjustments for the basic service
    tier."[^28]

10. On June 3, 2003, the Township adopted an Opinion and Order (the
    "June 2003 Order") regarding Comcast's 2003 Form 1240. The June 2003
    Order approved Comcast's MPR of \$13.95.[^29] The June 2003 Order
    also noted that Comcast

    "has not indicated in its Application to the Township what rate it
    will charge subscribers for Basic service.

    . . . .

    "The Operator failed to include an Operator Selected Rate in its FCC
    Form 1240. The best available information concerning the actual rate
    which the Operator intends to charge for Basic Service is the rate
    of \$12.65 as described in a special notice sent by the operator to
    its subscribers in January, 2003."[^30]

    Accordingly, the June 2003 Order set Comcast's OSR at \$12.65 for
    the period from June 1, 2003, through May 31, 2004.[^31] This would
    keep Comcast's actual rate at \$12.65 until 15 months after Comcast
    first began charging it.

## Analysis

11. [Appropriateness of a Declaratory Ruling.]{.underline} The Bureau
    may issue a declaratory ruling at any time to terminate a
    controversy or remove uncertainty.[^32] The Bureau has wide
    discretion to determine whether a declaratory ruling is
    appropriate.[^33] Here, we find that it is. Comcast and the Township
    have a dispute that is real, well defined, and ripe for resolution.
    The dispute concerns a course of conduct \-- cable operators not
    specifying OSRs on their Forms 1240 and franchising authorities
    reacting differently \-- that is occurring elsewhere in the
    industry.[^34] By issuing this ruling to resolve this dispute
    between Comcast and the Township, we may give useful guidance to
    other cable operators and franchising authorities about how to
    jointly set BST rates with a minimum of time, cost, and
    misunderstanding.

12. The Township argues that this proceeding, although styled by Comcast
    as a request for a declaratory ruling, is really an untimely appeal
    of the Township's May 2002 Order.[^35] The Township notes that
    Comcast previously brought the May 2002 Order before us in an
    earlier appeal[^36] without challenging the Township's specification
    of an OSR that was plain on the face of the May 2002 Order.[^37] The
    present dispute between Comcast and the Township, however, did not
    arise until Comcast first announced that it intended to raise its
    actual rate above the OSR that the Township had set in its May 2002
    Order. Comcast made that announcement on January 27, 2003, by which
    time the pleading cycle on its appeal had been over for months.[^38]
    Comcast might have attempted to re-open the record in its appeal and
    add the present dispute to it, but it was not unreasonable for
    Comcast to have begun this separate, later proceeding. Therefore,
    the Petition is not an untimely rate appeal and we find that the
    Petition is procedurally proper.

13. Nor do we find it a fatal flaw that Comcast, by its Supplement,
    added its 2003 Form 1240 to a case that originally concerned only
    its 2002 Form 1240. Although two Form 1240s and the Township's
    reaction to each are somewhat different, they have enough in common
    to make evaluating them in one proceeding efficient and prudent.
    Accordingly, the Township's first Motion to Strike is denied.

14. [The Merits.]{.underline} The recent case of *Frontiervision
    Operating Partners*[^39] concerned cable operators who, like Comcast
    here, left blank Line I10 for their OSRs on their Form 1240s,
    justified MPRs higher than their actual rates, and later sought to
    raise their actual rates up to their MPRs.[^40] We ruled that each
    Form 1240 in *Frontiervision*, lacking all the information required
    on it, could be treated as "facially incomplete"[^41] and that each
    franchising authority was entitled to demand that the cable operator
    fill in Line I10 and declare an OSR. Under our Rules, incomplete
    rate forms toll the review process if the franchising authority is
    unable to proceed with its review.[^42] Neither authority involved
    in *Frontiervision*, however, declared the filed Form 1240 facially
    incomplete, directed that the cable operator complete it by filling
    in Line I10, or tolled review of the Form pending its completion.
    Nor did either authority in *Frontiervision* take any formal action
    on the Form 1240 that had been filed with it.[^43] We ruled that, on
    the facts of that case, the cable operator was permitted to raise
    its actual BST rate after the end of the standard 90-day review
    period, so long as that rate did not exceed the MPR and was the
    first change in that actual rate in a year or longer.

15. In this case, the franchising authority (the Township) did more than
    the authorities in *Frontiervision*. It took formal action on both
    Forms 1240 filed with it and prescribed an OSR in each one. When the
    facially incomplete 2003 Form 1240 was filed with it, the Township
    formally inquired of Comcast what its OSR would be. The Township did
    not, however, declare either of Comcast's Forms 1240 facially
    incomplete, direct Comcast to complete them by filling in Line I10
    and declaring an OSR, or toll review of the Form pending its
    completion. When it instead served information requests on Comcast,
    the Township permitted Comcast to merely repeat the kind of
    tentative and cautionary words it had given the Township earlier.
    The Township's conduct, while undoubtedly in good faith, failed to
    extract any commitment to an OSR from Comcast. The Township erred by
    then prescribing an actual rate when it could have, by requiring
    that Line I10 be filled in, forced Comcast to commit to an OSR and
    prescribed that rate. (It is contradictory for the Township to label
    a rate that it selected an "Operator Selected" rate.)

16. The analysis in *Frontiervision* addresses and answers the claims
    made by the Township about our Rules.[^44] In that case, the
    franchising authorities argued that several of our Rules allow
    actual rates to change only at the end of the 90-day review period
    \-- with a few exceptions, none of which applied to the facts of
    that case.[^45] We disagreed, stating that "\[n\]one of those rules
    states explicitly what the \[franchising authorities\] read into
    them, that actual rate changes may occur only at the end of the
    90-day review period. None of them explicitly forbids actual rate
    changes at other times."[^46] Additionally, in this case, the
    Township cites another exception, to the same alleged effect as the
    franchising authority in *Frontiervision* argued.[^47] We find our
    *Frontiervision* analysis applicable here, too, and find nothing in
    the Township's arguments to change that analysis.

17. Here, as in *Frontiervision,* the equities favor the cable operator.
    The Township cannot, any more than the franchise authorities in
    *Frontiervision*, claim that its cable operator violated the
    legitimate expectations of BST subscribers for stable and reasonable
    rates. Comcast's present actual rate is below its present MPR, and
    even below the MPR that it justified in 2002. Our rules generally
    protect subscribers from rate increases more than once a year,[^48]
    and Comcast's rate increase of March 1, 2003, was its first in more
    than three years. And, to paraphrase *Frontiervision,* for us to
    uphold the Township's May 2002 and 2003 Orders would allow
    franchising authorities, when a cable operator does not specify an
    OSR, to freeze BST rates for a year. Cable operators, if they faced
    that risk, might specify an OSR higher than they would otherwise
    charge. We do not wish to encourage such increases. Rather, we want
    to give free rein to any operator's inclination to restrain a rate
    increase that our rules allow.[^49]

18. The Township attempts to distinguish our decision in
    *Frontiervision* on grounds already noted \-- that it, unlike the
    franchising authorities in *Frontiervision*, issued timely rate
    orders and set an OSR in each one.[^50] These differences, however,
    are not significant to the analysis set forth above and do not
    overcome the Township's failure to find the 2002 and 2003 Forms 1240
    facially incomplete, to demand that Comcast fill in Line I10 and
    declare an OSR, and to toll its review process until Comcast did so.
    Generally, we favor the expeditious and simple setting of BST
    rates,[^51] which can best be accomplished by both cable operators
    and franchising authorities adhering to the Form 1240 requirements.

19. Accordingly, we grant the Petition to the extent of ruling that,
    under the Communications Act and the Commission's Rules, (1) the
    Township's May 2002 Order and its June 2003 Order were erroneous to
    the extent that they prescribed OSRs for Comcast, (2) Comcast's
    increase of its actual rate for the BST to \$12.65, effected March
    1, 2003, was lawful, and (3) no contrary or punitive action by the
    Township, including fines and imprisonment, would be lawful.

20. [Continued Certification of the Township.]{.underline} Comcast
    characterizes the Township's conduct as "totally unsupported by even
    the most generous interpretation of its position"[^52] and requests
    that we revoke the Township's certification to set its BST
    rates.[^53] Section 76.914(a)(1) of our Rules provides for such
    relief, "\[a\]fter the franchising authority has been given a
    reasonable opportunity to comment and cure any minor nonconformance,
    it is determined that state and local laws and regulations are in
    substantial and material conflict with the Commission\'s regulations
    governing cable rates."[^54] The Township's actions do not begin to
    rise to the level of "substantial and material conflict" with our
    applicable rules. It is Comcast that filed the incomplete
    Forms 1240. The Township merely attempted to address Comcast's
    omissions. We have upheld Comcast's claims against the Township's
    May 2002 and June 2003 Orders, and we expect the Township to correct
    the Orders on which Comcast bases its revocation claims in this
    proceeding.[^55] Accordingly, we deny Comcast's Petition insofar as
    it asks that we revoke the Township's certification to regulate
    rates.

21. [Procedural Matters.]{.underline} The Township points to several
    alleged procedural missteps by Comcast. Specifically, it claims that
    Comcast's Supplement contained new matters and did not explicitly
    show extraordinary circumstances,[^56] and that Comcast's Opposition
    to the Township's first Motion to Strike was filed late.[^57]
    Comcast disputes the Township's claims and alleges procedural
    missteps (lateness and lack of verification) in the Township's first
    Motion to Strike.[^58] We find that, whatever the possible
    procedural flaws in these filings, they have added substance to the
    record in this case and enable us to make a more informed
    declaratory ruling that will better guide cable operators and
    franchising authorities in preparing and reviewing Forms 1240.
    Accordingly, based on the particular circumstances of this case, we
    deny Comcast's Motions to Strike.

#  {#section .unnumbered}

#  ORDERING CLAUSES

22. Accordingly, **IT IS ORDERED** that the Request for Expedited
    Consideration filed by Comcast Cable Communications, Inc., in
    CSR-6165R, **IS GRANTED.**

23. **IT IS FURTHER ORDERED** that the Request for Declaratory Ruling
    filed by Comcast Cable Communications, Inc., in CSR-6165R, **IS
    GRANTED**.

24. **IT IS FURTHER ORDERED** that the Petition for Revocation of
    Certification filed by Comcast Cable Communications, Inc., in
    CSR-6165R, **IS DENIED**.

25. **IT IS FURTHER ORDERED** that the Motion to Strike filed by
    Middletown Township, Pennsylvania and directed at the Supplement to
    Petition for Declaratory Ruling filed by Comcast Cable
    Communications, Inc., **IS DENIED**.

26. **IT IS FURTHER ORDERED** that the Motion to Strike Comcast
    Opposition filed by Middletown Township, Pennsylvania and directed
    at the Opposition filed by Comcast Cable Communications, Inc., on
    November 13, 2003, **IS DENIED**.

27. This action is taken pursuant to authority delegated by Section
    0.283 of the Commission\'s rules. 47 C.F.R. § 0.283.

FEDERAL COMMUNICATIONS COMMISSION

John B. Norton

Deputy Chief, Policy Division, Media Bureau

[^1]: On October 28, 2003, the Township filed a Motion to Strike
    directed at Comcast's Supplement. On November 13, 2003, Comcast
    filed an Opposition to Motion to Strike, to which the Township filed
    a Reply to Opposition and a second Motion to Strike on November 19,
    2003. The latter filing drew an Opposition, filed by Comcast on
    December 3, 2003.

[^2]: 47 U.S.C. § 543(a)(2).

[^3]: 47 U.S.C. § 543(b)(1); 47 C.F.R. § 76.922.

[^4]: 47 C.F.R. § 76.937(d); *Falcon Classic Cable*, 15 FCC Rcd 5717,
    5720 (2000) ¶ 10; *Western Reserve Cablevision, Inc.*, 14 FCC Rcd
    13391, 13398 (1999) ¶ 12.

[^5]: 47 U.S.C. § 543(b)(5)(B); 47 C.F.R. § 76.944.

[^6]: *Harron Commun. Corp*., 15 FCC Rcd 7901 (2000) ¶ 2;
    *Implementation of Sections of the Cable Television Consumer
    Protection & Competition Act*, 8 FCC Rcd 5631 (1993), 9 FCC Rcd
    4316, 4346 (1994) ¶ 81.

[^7]: Township's first Motion to Strike, Exh. 2 (2002 Form 1240 Cover
    Letter); Reply at 3 n.3.

[^8]: Petition at 2, n.1 & text accompanying n.3.

[^9]: *Appeal of Comcast Cable Commun., Inc., From a Rate Order of the
    Township of Middletown, Pennsylvania Board of Supervisors*, CUID
    PA0357, Exh. 2 (filed June 13, 2002), *decided*, *Comcast Cable
    Commun., Inc.,* 18 FCC Rcd 4540 (2003).

[^10]: *Id.* at 4.

[^11]: Township's first Motion to Strike, Exh. 2 (2002 Form 1240 Cover
    Letter).

[^12]: Comments*,* Exh. 1.

[^13]: *Id.,* ¶ 7 at 2.

[^14]: *Comcast Cable Commun., Inc.,* 18 FCC Rcd 4540 (2003).

[^15]: Supplement, Exhibit 1 (June 2003 Order) at ¶¶ 3, 9.

[^16]: May 2002 Order, *supra* note 12, at ¶ 3.

[^17]: *Id.* at ¶ 7 (capitalization omitted).

[^18]: Comments at 4 & Exh. 2.

[^19]: Township's first Motion to Strike, Exh. 3 (Comcast's March 2003
    Form 1240 and cover letter).

[^20]: *Id.*, 2003 Form 1240 at 4.

[^21]: *Id.,* Cover Letter at 1.

[^22]: *Id.,* 2003 Form 1240 at 4.

[^23]: Petition, Exh. 2 at 1.

[^24]: Petition, Exhs. 3-5. The Township may have believed that the
    increase in Comcast's actual rate was related to the 2003 Form 1240.

[^25]: Petition, Exhibit 5.

[^26]: Petition, Exh. 4 at 2-3.

[^27]: Township's first Motion to Strike, Exh. 5 at 1.

[^28]: *Id.* at 1 (quotations from and citations to Commission decisions
    omitted).

[^29]: June 2003 Order, *supra* note15, at ¶¶ 6, 9.

[^30]: *Id.* at ¶¶ 4, 7.

[^31]: *Id.* at ¶ 9.

[^32]: 47 C.F.R. §§ 1.2, 76.7; 5 U.S.C. § 554(e). See also 47 USC §
    154(i), (j).

[^33]: *Yale Broadcasting Co. v. FCC*, 478 F.2d 594, 602 (D.C.Cir.),
    *cert denied*, 414 U.S. 914 (1973).

[^34]: *Frontiervision Operating Partners*, Order DA 03-3127, rel. Oct.
    10, 2003, available at 2003 WL 22318718.

[^35]: Township's first Motion to Strike at 3-4, 6.

[^36]: *See supra* note 34.

[^37]: Township's first Motion to Strike at 4.

[^38]: *See supra* note 9.

[^39]: *See supra* note 34.

[^40]: *Frontiervision Operating Partners, supra* note 34, at ¶¶ 6-9.

[^41]: *Frontiervision Operating Partners, supra* note 34, at ¶ 15,
    *citing* *TCI Cablevision of Dallas, Inc.*, 15 FCC Rcd 7379, 7381
    (2000) ¶ 8 *and* *Implementation of Sections of the Cable Television
    Consumer Protection & Competition Act of 1992: Rate Regulation*, 11
    FCC Rcd 388, 427 (1995) ¶ 95.

[^42]: 47 C.F.R. § 76.933(g).

[^43]: *Frontiervision Operating Partners, supra* note 34, at ¶¶ 14-15.

[^44]: *Compare* *Frontiervision Operating Partners*, *supra* note 34,
    at ¶¶ 10-13, *with* Comments at 7-10.

[^45]: 47 C.F.R. §§ 76.922(e)(1), (2)(i), (ii)(A), (iii)(A-C), o.

[^46]: *Frontiervision Operating Partners*, *supra* note 34, at ¶ 11.

[^47]: Comments at 7-8, *citing* 47 C.F.R. § 76.933(g)(5).

[^48]: *See Frontiervision Operating Partners*, *supra* note 34, at ¶¶
    11-12. *See also* 47 C.F.R. § 76.922(e).

[^49]: *Frontiervision Operating Partners*, *supra* note 34, at ¶ 16.

[^50]: Township's first Motion to Strike at 6 n.2; Reply to the
    Opposition to the Township's first Motion to Strike at 4.

[^51]: 47 U.S.C. § 543(b)(2)(A) (In prescribing regulations for BST
    rate-setting, the Commission "shall seek to reduce the
    administrative burdens on subscribers, cable operators, franchising
    authorities, and the Commission"), (5)(B) (such regulations shall
    include "procedures for the expeditious resolution of disputes
    between cable operators and franchising authorities concerning the
    administration of such regulations"); *Adelphia Commun. Corp*., 18
    FCC Rcd 14622, 14625 (2003) ¶14 ("We favor expeditious resolution of
    disputes about rates"); *C-Tec Cable Systems*, 14 FCC Rcd 5437, 5443
    (1999) ¶17 ("the Resolution effectively achieves the objectives of
    the 1992 Cable Act by ensuring the expeditious resolution of all
    pending rate complaints").

[^52]: Petition at 13.

[^53]: *Id.* at 12-14.

[^54]: 47 C.F.R. § 76.914(a)(1).

[^55]: 47 C.F.R. § 76.914(a)(2). *See generally* *Joppa Associates,
    L.P*., 10 FCC Rcd 13103 (1995).

[^56]: Township's first Motion to Strike at 2-3, *citing* 47 C.F.R. §
    76.7(c)(1), (d).

[^57]: Township's second Motion to Strike *passim*.

[^58]: Opposition to the Township's first Motion to Strike *passim.*