**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

+----------------------------------+---+------------------------------+
| In the Matter of                 | * | File No. CSB-A-0711          |
|                                  | * |                              |
| Comcast Cablevision of Dallas,   | ) | File No. CSB-A-0712          |
| Inc.                             | * |                              |
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| Tolling Order Regarding Form     |   |                              |
| 1240                             | * |                              |
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| Farmers Branch TX (TX0624)       | ) |                              |
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| Comcast of                       | * |                              |
| Calif                            |   |                              |
| ornia/Colorado/Illinois/Indiana/ | * |                              |
| Texas, Inc.                      | * |                              |
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| Tolling Order                    | * |                              |
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| McKinney TX (TX0641)             |   |                              |
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+----------------------------------+---+------------------------------+

ORDER

**Adopted: September 20, 2005** **Released: September 21, 2005**

By the Deputy Chief, Policy Division, Media Bureau:

# INTRODUCTION

1.  On April 8, 2004, Comcast Cablevision of Dallas, Inc. ("Comcast of
    Farmers Branch"), filed an appeal of a rate order adopted by the
    City of Farmers Branch, Texas (the "City of Farmers Branch").[^1]
    The City of Farmers Branch filed an opposition on April 27,
    2004,[^2] to which Comcast of Farmers Branch filed no reply. Comcast
    of Farmers Branch's appeal concerns the grounds on which the City
    tolled the Form 1240 that the company had filed in March 2004 to set
    rates for the Basic Service Tier ("BST") of its cable service there.

2.  On April 26, 2004, Comcast of
    California/Colorado/Illinois/Indiana/Texas, Inc. ("Comcast of
    McKinney"),[^3] filed an appeal of a rate order adopted by the City
    of McKinney, Texas (the "City of McKinney").[^4] The City of
    McKinney filed an opposition dated May 10, 2004,[^5] to which
    Comcast of McKinney filed a reply on May 20.[^6] Comcast of
    McKinney's appeal concerns the same asserted grounds for tolling a
    Form 1240 as the appeal of Comcast of Farmers Branch. The McKinney
    appeal also concerns the Form 1205 that Comcast of McKinney filed in
    March 2004 to set rates for regulated equipment and installation
    related to the BST, and the effective date of the rates covered by
    that Form 1205.

3.  In both appeals, the material facts about the Form 1240s are
    virtually identical and the legal issues are identical. Accordingly,
    in the interests of administrative efficiency, we are deciding both
    appeals in this one Order.[^7] In brief, on the merits we conclude
    that each City acted rationally and with a reasonable basis in
    tolling its consideration of the Form 1240s, and that the City of
    McKinney did so in its consideration of Comcast of McKinney's
    Form 1205. We grant Comcast of McKinney's appeal, however, from the
    City of McKinney's statement of the effective date for the rates
    stated in the company's Form 1205.

# BACKGROUND

4.  The Communications Act of 1934, as amended,[^8] provides that, where
    effective competition is absent, rates for the BST and associated
    equipment are subject to regulation by franchising authorities.[^9]
    Rates for the BST 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.[^10] 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.[^11]

5.  Rate orders issued by franchising authorities may be appealed to the
    Commission pursuant to Commission rules.[^12] 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 rational basis for that decision exists.[^13]
    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

## Form 1240

6.  Form 1240 is a form on which a cable operator submits data to its
    franchising authority. Based on that Form, the franchising authority
    sets the rates for the cable operator's BST. Line I9 on Form 1240
    calls for the cable operator to fill in a box marked "Maximum
    Permitted Rate \[MPR\] for Projected Period."[^14] Line I10 calls
    for the cable operator to fill in a box marked "Operator Selected
    Rate \[OSR\] for Projected Period."[^15] Two previous cable rate
    appeals have concerned how cable operators fill in their Form
    1240s.[^16] The cable operators in both those cases filled in Line
    I9, specifying an MPR, but left Line I10 blank, not specifying an
    OSR. Each cable operator, later, wanted to raise its pre-existing
    rate. In our decisions, we ruled that each franchising authority
    could have found the Form 1240 "facially incomplete" because it
    lacked all the information required on it and could have demanded
    that the cable operator fill in Line I10 and specify an OSR.[^17]
    Under our rules, incomplete rate forms toll the review process if
    the franchising authority is unable to proceed with its review.[^18]
    In neither case, however, did the franchising authority do so.
    Instead, each franchising authority took actions that, we decided,
    did not toll the review process and did not prohibit the cable
    operator from later raising its BST.[^19]

7.  Each Comcast Company in the present appeals, on the Form 1240 that
    it submitted to its City in March 2004, filled in Line I9, stating a
    specific sum of money as its MPR, and filled in Line I10, stating
    the same specific sum as its OSR.[^20] In correspondence
    accompanying each Form 1240, however, Comcast disavowed any
    intention of actually charging the sum it filled in and specified as
    its OSR. Specifically, the letter covering each Form 1240 stated
    "\[e\]ven though we have not yet determined the rate we intend to
    charge for the Basic Service Tier effective with our next scheduled
    rate adjustment, we have entered the maximum permitted rate from
    Line I9 on Line I10. Please be advised that it is not our intention
    at this time to charge the maximum permitted rate."[^21]

8.  The Cities issued Tolling Letters, finding the Comcast Companies'
    Form 1240s to be facially incomplete for failing to include OSRs and
    tolling further consideration of them. The Tolling Letters faulted
    each company for "subterfuge" and suggested that the Companies amend
    them by including OSRs.[^22] The Comcast Companies then filed the
    present appeals.

9.  Line I10 of Form 1240 plainly calls for the cable operator to state
    an OSR. Each Comcast Company filled in a sum of money on that Line,
    but its own simultaneous statements declared clearly that the sum
    was not, in truth, the rate it had selected to charge. In any
    realistic sense, the Comcast Companies' Form 1240s did not specify
    an OSR and were facially incomplete. The Cities' Tolling Letters
    followed the advice of our two recent decisions. They acted
    rationally and with a reasonable basis.

10. The Comcast Companies complain that Form 1240 was adopted by the
    Commission approximately nine years ago and that the original
    purpose of an OSR is "far from clear."[^23] That complaint, however,
    is better advanced in a rulemaking or other forum for revising
    Form 1240. The Comcast Companies rely on our decision in *TCI
    Cablevision of Dallas*, but that decision is inapposite. In *TCI
    Cablevision of Dallas*, a franchising authority ruled that a Form
    1240 was facially incomplete and tolled consideration of it. The
    franchising authority did so not because the Form 1240 was missing
    rates or other required data, but because the authority and the
    cable operator disagreed about the specific name of the entity that
    should be filing the Form. In staying the franchising authority's
    ruling, we cautioned that "tolling review when Form 1240 is facially
    incomplete is not intended as a device for halting the review
    process until a cable operator concedes a substantive point."[^24]
    The Cities' treatment of the Comcast Companies' Form 1240s in the
    present case, however, does not exceed the proper reach of our
    tolling procedure. The Cities tolled their review simply to evoke
    the honest, accurate, and complete rate data that the Form
    requires.[^25] We cannot conclude that the Cities' decisions to toll
    the Comcast Companies' Form 1240s lack a rational basis.
    Accordingly, we dismiss the appeals of the Comcast Companies on this
    issue.

##  {#section .unnumbered}

## Form 1205

11. Form 1205 is a form on which a cable operator submits data about its
    equipment and labor costs to its franchising authority. Based on
    Form 1205, the cable operator's equipment and installation rates are
    set for a one-year period. Form 1205 requires the cable operator to
    state "permitted" rates, a concept like the MPRs required by Form
    1240.[^26] Form 1205 also requires the cable operator to state its
    "actual" rates.[^27]

12. Form 1205 was created to deal with both the unbundling of initial
    equipment and installation rates as well as the subsequent revision
    of those rates. At the initial stage of cable rate regulation, Form
    1205 directed cable operators to separate, or "unbundle," the costs
    of equipment and installations in the calculations of initial rates
    for regulated cable services. Once initial rates were established,
    however, the principal purpose of Form 1205 became one of
    calculating the operators' proposed rates for the one-year period
    covered by the Form.[^28] At this later stage of rate regulation,
    the rates that are material in the franchising authority's review of
    an operator's rates are the rates that the operator actually
    proposes to charge during that period. The existing rates that have
    been in effect are not material to that review.

13. Comcast of McKinney, in responding to the requirement in the Summary
    Schedule in Form 1205 that the operator insert its actual rates,
    along with its maximum permitted rates, simply referred the City to
    a recent rate card, a copy of which it attached to its Form
    1205.[^29] In correspondence accompanying the Form 1205, however,
    Comcast of McKinney indicated some uncertainty about what its actual
    rates would be for equipment and installations during the period
    under review. It stated that "\[w\]e will implement specific
    equipment and installation prices that are lower than the maximum
    permitted rates calculated on FCC Form 1205."[^30]

14. The City of McKinney found Comcast of McKinney's Form 1205 to be
    facially incomplete for failing to include the rates that the
    company would actually charge for installation and equipment in the
    period covered by the Form. The City tolled its consideration of the
    Form 1205 and suggested that the Company amend it to include such
    rates.[^31] Comcast of McKinney appeals from that finding.

15. We find a rational basis to support the City's conclusion that
    Comcast of McKinney's Form 1205 was facially incomplete. Comcast of
    McKinney interpreted the Form 1205 to permit insertion of its
    current rates, not the actual rates the operator proposed to charge
    during the one-year period. If Comcast of McKinney planned to charge
    different rates in the period covered by the Form 1205, the rates
    published in a recent rate card were immaterial. The rates that were
    material were those that Comcast of McKinney actually proposed to
    charge for equipment and installation during the review period.[^32]
    As with the Comcast Companies' Form 1240s, the City of McKinney
    tolled its review of Comcast of McKinney's Form 1205 simply to evoke
    honest, accurate, and complete rate data relevant to the review
    period. The City of McKinney acted reasonably in requiring such
    data. Accordingly, we deny the appeal of the Comcast of McKinney on
    this issue.

## Effective Date of Comcast of McKinney's Form 1205

16. Comcast of McKinney's previous Form 1205 was intended to take effect
    on June 1, 2003.[^33] After reviewing it, the City of McKinney
    released a rate order on December 16, 2003.[^34] The rate order
    stated that "\[t\]he effective date for the rates for the 2003-2004
    period is December 1, 2003."[^35] Comcast of McKinney appealed parts
    of that rate order, but not its effective date.[^36]

17. Comcast of McKinney filed its next Form 1205 -- the one involved in
    the present appeal -- with the City of McKinney on March 1, 2004.
    Comcast of McKinney stated that its adjusted rates would become
    effective on June 1, 2004.[^37] In the decision here under review,
    the City of McKinney ruled that the adjusted rates could not go into
    effect until December 1, 2004, at the earliest, because "\[t\]he
    City cannot sanction rate amendments more often than once per each
    twelve-month period."[^38] Comcast of McKinney appeals from this
    ruling.

18. The City of McKinney misapplies our rule, which generally bars cable
    operators, by their own actions, from changing rates more than once
    a year.[^39] Our rule does not authorize a franchising authority to
    delay an operator's rate change by the operation of its review.[^40]
    In this case, Comcast of McKinney filed its Form 1205 with an
    intended effective date of June 1, 2004. Regardless of the length of
    the City's review of that filing, that date continues to serve as
    the one-year anniversary date for Comcast of McKinney's rate changes
    unless it proposes a new date beyond the 12-month anniversary.
    Accordingly, we grant the appeal of Comcast of McKinney on this
    issue.

#  ORDERING CLAUSES

19. Accordingly, **IT IS ORDERED** that the Appeal filed by Comcast
    Cablevision of Dallas, Inc., in CSB‑A‑0711 **IS DENIED** and that
    the Appeal filed by Comcast of California/Colorado/
    Illinois/Indiana/Texas, Inc., in CSB‑A‑0712 **IS GRANTED IN PART**
    and **DENIED IN PART** and **IS REMANDED** for further consideration
    consistent with this Order.

20. 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]: Appeal of Local Rate Order ("Comcast of Farmers Branch Appeal"),
    filed April 8, 2004. The rate order is a letter from Matthew C.G.
    Boyle, Esq., Boyle & Lowry, L.L.P., counsel for the City of Farmers
    Branch, to Mr. Craig A. Schmid, Senior Director of Regulatory
    Affairs for the Atlantic Division, Comcast Cable Communications,
    Inc., dated March 9, 2004 ("Farmers Branch Tolling Letter"). The
    Farmers Branch Tolling Letter is Attachment A to the Comcast of
    Farmers Branch Appeal.

[^2]: City of Farmers Branch's Response to Comcast Cablevision of
    Dallas, Inc.'s Appeal of Local Rate Order, filed April 27, 2004.

[^3]: Both Comcast of Flower Mound and Comcast of McKinney may be
    referred to as "the Comcast Companies."

[^4]: Appeal of Local Rate Order ("Comcast of McKinney Appeal"), filed
    April 26, 2004. The Rate Order is a letter from Mr. Larry Robinson,
    City Manager of McKinney, Texas, to Mr. Craig A. Schmid, Senior
    Director of Regulatory Affairs for the Atlantic Division, Comcast
    Cable Communications, Inc., dated March 25, 2004 ("McKinney Tolling
    Letter"). The McKinney Tolling Letter is Attachment A to the Comcast
    of McKinney Appeal.

    The City of Farmers Branch and the City of McKinney may be referred
    to as "the Cities."

[^5]: City of McKinney's Response to Comcast of
    California/Colorado/Illinois/Indiana/Texas, Inc.'s Appeal of Tolling
    Order ("City of McKinney Response"), dated May 10, 2004.

[^6]: Reply to Opposition to Appeal of Local Rate Order ("Comcast of
    McKinney Reply"), filed May 20, 2004.

[^7]: *Comcast Cablevision of Dallas, Inc*., 19 FCC Rcd 10628, 10630 ¶
    2, *on reconsideration*, 19 FCC Rcd 22687 (2004); *Frontiervision
    Operating Partners*, 18 FCC Rcd 20416, 20417 (2003) ¶ 3,
    *application for review denied*, 19 FCC Rcd 23096 (2004), *appeal
    pending on other grounds sub nom. City of Winchester et al. v. FCC*,
    Case No. 05-3083 (6th Cir., filed Jan. 13, 2005).

[^8]: 47 U.S.C. §§ 151 *et seq.*

[^9]: 47 U.S.C. § 543(a)(2).

[^10]: 47 U.S.C. § 543(b)(1); 47 C.F.R. § 76.922.

[^11]: 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.

[^12]: 47 U.S.C. § 543(b)(5)(B); 47 C.F.R. § 76.944.

[^13]: *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.

[^14]: *See, e.g.*, Comcast of McKinney Appeal, Attachment B (Form 1240
    filed by Comcast of McKinney on March 1, 2004) at 4.

[^15]: *Id.*

[^16]: *Comcast Cable Communications, Inc*., 19 FCC Rcd 6 (2004);
    *Frontiervision Operating Partners*, 18 FCC Rcd 20416 (2003),
    *application for review denied*, 19 FCC Rcd 23096 (2004).

[^17]: *Comcast Cable Communications, Inc*., 19 FCC Rcd at 10-12 ¶¶
    14-18; *Frontiervision Operating Partners*, 18 FCC Rcd at 20421 ¶
    15, *application for review denied*, 19 FCC Rcd at 23097-98 (2004) ¶
    6, citing *TCI Cablevision of Dallas, Inc*., 15 FCC Rcd 7379, 7381
    (2000) ¶ 8 & *Implementation of Sections of the Cable Television
    Consumer Protection & Competition Act of 1992: Rate Regulation*, 11
    FCC Rcd 388, 427 (1995) ¶ 95.

[^18]: 47 C.F.R. § 76.933(g).

[^19]: *Comcast Cable Communications, Inc*., 19 FCC Rcd at 11-12 ¶¶
    15-18; *Frontiervision Operating Partners*, 18 FCC Rcd at 20421-22
    ¶¶ 14-16.

[^20]: These were \$12.80 in Farmers Branch and \$13.07 in McKinney.
    Comcast of Farmers Branch Appeal, Attachment B (Form 1240 filed by
    Comcast of Farmers Branch on March 1, 2004) at 4; Comcast of
    McKinney Appeal, Atachment B (Form 1240 filed by Comcast of McKinney
    on March 1, 2004) at 4.

[^21]: Comcast of Farmers Branch Appeal, Attachment B (Letter from Mr.
    Craig A. Schmid to Ms. Margaret Somereve, Assistant to the City
    Manager, City of Farmers Branch, Texas, dated March 1, 2004);
    Comcast of McKinney Appeal, Attachment B (Letter from Mr. Craig A.
    Schmid to Mr. Larry Robinson, City Manager, City of McKinney, Texas,
    dated March 1, 2004). Each letter goes on to state that "The
    enclosed FCC forms are not intended to serve as notice for any price
    adjustments of the basic service tier, . . . Appropriate notice will
    be sent to you prior to any adjustments in the basic service tier .
    . ."

[^22]: Farmers Branch Tolling Letter, *supra* note 1, at 1 ("a clear
    attempt at subterfuge"); McKinney Tolling Letter*, supra* note 4, at
    1 ("what appears to be an attempt at subterfuge").

[^23]: *See, e.g.*, Comcast of McKinney Appeal at 2-3.

[^24]: *TCI Cablevision of Dallas, Inc.,* 15 FCC Rcd at 7381-82 ¶ 8;
    Comcast of Farmers Branch Appeal at 6 & n.6; Comcast of McKinney
    Appeal at 6-7 & n.9.

[^25]: *See also* *Implementation of Sections of the Cable Television
    Consumer Protection & Competition Act of 1992: Rate Regulation*
    ("*Thirteenth Order on Reconsideration*"), 11 FCC Rcd 388, 427
    (1995) ¶ 95 (adopting annual filing procedures and describing
    facially incomplete filings as \"those filings which do not have all
    the information required by the form.").

[^26]: Comcast of McKinney Appeal, Attachment C (Form 1205 filed by
    Comcast of McKinney on March 1, 2004) at 7, 10.

[^27]: *Id.* at 7, 10.

[^28]: *See, e.g.*, *Cablevision of Boston, Inc.*, 15 FCC Rcd 10334,
    10337 (2000) ¶ 11 ("FCC Form 1205 is used to establish the amount of
    equipment costs to be unbundled in setting initial regulated BST
    rates and periodically thereafter to revise equipment rates based on
    the operator\'s costs."); *Thirteenth Order on Reconsideration,* 11
    FCC Rcd at 403-04 ¶ 35 ("Cable operators must complete and file with
    the franchising authority an FCC Form 1205 for several different
    purposes. First, they must file Form 1205 with the franchising
    authority for the purpose of setting initial rates . . . . Second,
    all operators must file Form 1205 with their franchising authorities
    once every year within 60 days of the end their fiscal year.")
    (footnote omitted).

[^29]: Comcast of McKinney Appeal, Attachment C, *supra* note 26, at 7,
    10.

[^30]: *Id.,* Attachment B, *supra* note 21, at 1.

[^31]: McKinney Tolling Letter, *supra* note 4, at 1-2.

[^32]: The record discloses that Comcast of McKinney's previous owner
    had inserted its proposed rates on its previous Form 1205. City of
    McKinney Response at 3, 6.

[^33]: Comcast of California/Colorado/Illinois/Indiana/Texas, Inc.,
    CSB-A-0700, Appeal of Local Rate Order, Attachment E (Letter from
    Ms. Robbin Pepper, Manager of Rates, Mountain Division, Comcast
    Cable Communications Inc., to Ms. Debra Wallace, Assistant Finance
    Director, City of McKinney, dated Dec. 18, 2003) at 3); *cf.*
    Attachment F (Letter from C2 Consulting Services, Inc., to Ms.
    Wallace & Ms. Shelli Seimer, Assistant to the City Manager, City of
    Allen TX, dated May 5, 2003) at 1.

[^34]: Appeals from this rate order and several others were resolved by
    us in *Comcast Cablevision of Dallas, Inc., supra* note 7.

[^35]: City of McKinney Response, Attachment F (City of McKinney, Texas,
    Ordinance No. 2003‑12‑116), § 2.3 at 2.

[^36]: *See Comcast Cablevision of Dallas, Inc.,* 19 FCC Rcd 10628, *on
    reconsideration*, 19 FCC Rcd 22687 (2004).

[^37]: Comcast of McKinney Appeal, Attachment B, *supra* note 21, at 1.

[^38]: McKinney Tolling Letter, *supra* note 4, at 2.

[^39]: *See, e.g.*, 47 CFR § 76.922 (e)(i) (with certain exceptions, one
    of which is new equipment, "operators that elect the annual rate
    adjustment method may not adjust their rates more than annually to
    reflect \[various factors\]. . . . . An operator may change its
    filing date from year-to-year, but except as described
    \[elsewhere\], at least twelve months must pass before the operator
    can implement its next annual adjustment.").

[^40]: *Comcast Cablevision of Dallas, Inc.,* 19 FCC Rcd at 10642 ¶ 32
    ("The Cities had no authority to prolong the effectiveness of any
    Comcast rate for more than one year. . . . To the extent that the
    Cities\['\] . . . rate orders purported to prolong any Comcast rate
    in effect for more than one year . . . the Cities exceeded their
    authority.").