**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the matter of                 | *  | DA 99-1434                   |
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| MOUNTAIN CABLE COMPANY d/b/a     | ** | File No. CSB-A-0628          |
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| ADELPHIA CABLE COMMUNICATIONS    | *  |                              |
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| BETTER TV, INC. OF BENNINGTON    | ** |                              |
| d/b/a                            |    |                              |
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| ADELPHIA CABLE COMMUNICATIONS    | *) |                              |
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| YOUNG'S CABLE TV CORP.           |    |                              |
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| Appeal of Local Rate Order of    | *) |                              |
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| the Public Service Board         |    |                              |
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| State of Vermont                 | *) |                              |
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+----------------------------------+----+------------------------------+

**MEMORANDUM OPINION AND ORDER**

**Adopted: August 20, 2003 Released: August 27, 2003**

By the Commission:

# introduction

1.  Mountain Cable Company d/b/a Adelphia Cable Communications, Better
    TV, Inc. of Bennington d/b/a Adelphia Cable Communications, and
    Young's Cable TV Corp. (collectively "Adelphia"), the franchised
    cable operators in various cable communities in the State of
    Vermont, have filed an application for review of the Cable Services
    Bureau's Memorandum Opinion and Order,\
    DA 99-1434 (released July 22, 1999) ("*Bureau Order*"),[^1] in the
    above captioned proceeding. Adelphia challenges the portion of the
    *Bureau Order* which denied Adelphia's appeal with respect to late
    fees. The Vermont Department of Public Service ("Department") has
    opposed the application and Adelphia\
    has replied.[^2] For the reasons set forth herein, we deny
    Adelphia's application for review.

# background

2.  The Public Service Board of the State of Vermont ("Board") issued a
    rate order on\
    May 3, 1999, that disallowed Adelphia\'s late fee of \$5.00 and
    ordered refunds of fees collected since\
    July 23, 1998, because Adelphia did not show that the costs imposed
    on late-paying customers were not already reflected in its benchmark
    rates. The Board was concerned that authorizing late fees based on
    cost elements already used in establishing benchmark rates would
    permit double recovery of those costs.[^3] While acknowledging that
    late fees generally fall outside the scope of the rate regulation
    provisions of the Communications Act and that a local order
    determining the reasonableness of a particular late fee ordinarily
    will not be subject to Commission review, Adelphia appealed the
    Board's order to the Commission and argued that the Board erred by
    concluding that late payment costs are recoverable through the
    Commission\'s benchmark methodology.[^4] The Board replied that
    while it discussed in its rate order the potential overlap between
    costs recovered by late fees and costs recovered through rates
    regulated under Commission rules, it did not confine itself to these
    matters and did not foreclose future consideration of a showing by
    Adelphia that late fees were appropriate on other grounds.[^5]

3.  The *Bureau Order* stated that

    \[t\]he Commission has declined to adopt regulations governing late
    fees, providing, instead, that late fees are within the purview of
    the franchising authority and are appropriately dealt with through
    local negotiation or the application of state or local consumer
    protection and customer service laws. Local or state authorities may
    regulate the rates of late fees utilizing local or state laws, if
    these laws permit such regulation. Just as we determined in *Falcon
    Cablevision* that we will not rule on the reasonableness of a
    franchising authority\'s decision to require a cost justification
    with respect to late fee charges, we will not rule here on a
    franchising authority\'s decision to require a cable operator to
    show that the costs being recovered through late fees exceed the
    normal billing and collection costs recovered through its tier
    rates.[^6]

4.  Adelphia seeks review of the *Bureau Order* for clarification that
    the "costs uniquely associated with the pursuit of delinquent
    subscriber accounts are not part of the 'normal billing and
    collection costs' that are presumed to be covered by rates
    established pursuant to the federally mandated benchmark
    formula."[^7] Adelphia argues that local franchising authorities may
    regard the Bureau's decision as an invitation to reject late fee
    charges even where the operator is able to substantiate costs that
    are directly connected with the collection of delinquent subscriber
    bills because the Bureau chose not to repudiate the Board's finding
    that the benchmark methodology fully compensates cable operators for
    the costs of pursuing delinquent accounts and that operators
    therefore are barred from imposing a separate late fee charge.[^8]
    Specifically, Adelphia argues that the conclusion in the *Bureau
    Order* may be interpreted as a "declaration by the Bureau that the
    Commission lacks jurisdiction to address the 'double recovery'
    argument."[^9]

5.  Adelphia contends that Commission clarification is necessary for the
    following four reasons. First, Adelphia argues that "common sense
    and common industry practice" support the conclusion that "normal"
    costs of doing business do not include costs to recover delinquent
    subscriber payments.[^10] In support, Adelphia references the
    billing practices of EchoStar and DirecTV, "the cable industry's
    principal competitors," who have established separate late fee
    charges to cover the administrative costs of pursuing delinquent
    accounts.[^11] Second, Adelphia reiterates the arguments it
    proffered in its appeal, namely that the benchmark methodology does
    not account for costs the operator incurs for late payments[^12] and
    that "the Commission's own decisions and statements regarding late
    fee charges confirm the absence of any relationship between the
    benchmark rate formula and the recovery of late fee costs."[^13]
    According to Adelphia, "if the costs associated with late fees were
    included in the benchmark rates, then the Commission's decision to
    allow local franchising authorities to approve late fee charges on
    the basis of late fee-related costs would have been tantamount to a
    decision to allow such local franchising authorities to approve
    evasions of rate regulation."[^14] Third, Adelphia asserts that, if
    the *Bureau Order* is not clarified, the Commission will "find
    itself drawn into a never ending succession of late fee cases"
    regarding the relationship between late fee costs and the benchmark
    rate methodology.[^15] Finally, Adelphia claims that public interest
    considerations warrant clarification because local franchising
    authorities may disallow separate late fee charges altogether,
    invariably resulting in higher rates for\
    all subscribers.[^16]

6.  The Department opposes Adelphia's application for review. First, the
    Department argues that Adelphia's application fails on procedural
    grounds because it does not meet the specific factors that warrant
    Commission review, as outlined in Section 1.115 of the Commission's
    rules.[^17] The Department also asserts that Adelphia is not seeking
    review of the Bureau's action with respect to the Board's denial of
    Adelphia's cost based late fees; rather it is requesting that the
    Commission issue an "advisory opinion."[^18] The Department contends
    that Adelphia's arguments relate to "what the Bureau clearly
    recognized to be a collateral issue" and that its concerns over
    local franchising authority interpretations are "hypothetical" and
    "speculative."[^19] In addition, the Department argues that the
    Board did not foreclose future consideration of a showing by
    Adelphia that the late fees were appropriate, and has acknowledged
    that a late fee may be imposed for reasons other than cost
    recovery.[^20] Finally, the Department contends that the Commission
    correctly declined to rule on the Board's denial of Adelphia's
    proposed late fee and should reject the same arguments raised again,
    because the Board's review of late fees falls outside the
    Commission's statutory jurisdiction in rate regulation.[^21]

# discussion

7.  Section 623 of the Communications Act,[^22] adopted as part of the
    Cable Television Consumer Protection and Competition Act of 1992
    ("1992 Cable Act"),[^23] governs the cable television rate
    regulation process. In its *Consumer Protection and Customer Service
    Order,* the Commission addressed arguments by local governments
    seeking federal limits on late fees by stating that "these types of
    issues are usually dealt with by state or local governments."[^24]
    Consequently, the Commission declined to "add this provision in the
    Federal standards" and recommended "that such concern be dealt with
    through local negotiation or application of local or state consumer
    protection and customer service laws."[^25] In several subsequent
    local cable rate appeal orders, the Commission held that late
    payment fees were not subject to regulation under the 1992 Cable Act
    but that local authorities may regulate late fees pursuant to local
    or state statutes.[^26] The Commission also declined to rule on the
    reasonableness of local franchising authority decisions regulating
    or restricting late fees.[^27] In *Falcon Cablevision,* for example,
    the cable operator argued that a prior Commission decision stood for
    the proposition that while local authorities may regulate the
    customer service aspects of late fees, they may not regulate the
    rates charged for such fees.[^28] The Commission rejected the cable
    operator's contention and declined to rule on the reasonableness of
    a local franchising authority's decision to require a cost
    justification for the cable operator's late fees."[^29] Similarly,
    the Bureau did not rule on the Board's decision to require Adelphia
    to show that the costs being recovered through late fees exceeded
    the normal billing and collection costs recovered through its tier
    rates.[^30] We find that the Bureau correctly denied Adelphia's
    challenge to the Board's rationale for rejecting Adelphia's late
    fees. The Bureau's decision was consistent with applicable precedent
    and we therefore deny Adelphia's application for review.

8.  We also decline to issue the clarification Adelphia seeks -- namely
    that its costs to recover delinquent subscriber payments are not
    "covered" by the benchmark rates. The benchmark rate process was not
    based on a direct accounting for the costs of cable system
    operation, but on a comparison of the rates of competitive and
    noncompetitive systems. The survey from which the benchmark rate
    process was derived did not separately account for late fee charges.
    In these circumstances, we do not find it inappropriate for a state
    or local authority, in attempting to determine an acceptable late
    fee, to demand some level of assurance that the operator is not
    seeking to recover the costs associated with late payments both as a
    component of the tier charge and as a separate late fee.

# Ordering Clauses

9.  Accordingly, pursuant to 47 C.F.R. § 1.115, IT IS ORDERED THAT the
    Application for Review filed by Mountain Cable Company d/b/a
    Adelphia Cable Communications, Better TV, Inc. of Bennington d/b/a
    Adelphia Cable Communications, and Young's Cable TV Corp. on August
    23, 1999\
    IS DENIED.

    FEDERAL COMMUNICATIONS COMMISSION

    Marlene H. Dortch

    Secretary

[^1]: 14 FCC Rcd 11807 (1999).

[^2]: Adelphia Application for Review (filed Aug. 23, 1999) ("Adelphia
    Application"); Department Opposition to Application for Review
    (filed Sept. 7, 1999) ("Department Opposition"); Adelphia Reply
    (filed Sept. 22, 1999) ("Adelphia Reply"); Letter from Seth A.
    Davidson, counsel for Adelphia Cable Communications, to Ms. Magalie
    Roman Salas, Secretary, Federal Communications Commission (filed
    Sept. 29, 1999) ("Adelphia Supp. Response").

[^3]: *Bureau Order* at 11809 ¶¶ 5-7.

[^4]: *Id.*

[^5]: *Id.*

[^6]: *Id.* at 11810-11 ¶ 9.

[^7]: Adelphia Application at 2.

[^8]: *Id.* at 5.

[^9]: Adelphia Reply at 3.

[^10]: Adelphia Application at 5.

[^11]: *Id.* at 6 (referencing DirecTV and EchoStar's billing agreements
    attached as Exh. A to the Adelphia Application).

[^12]: *Id.* at 6-7.

[^13]: *Id.* at 8. Adelphia states that the "Commission has repeatedly
    referred to the common industry practice of imposing late fee
    charges without ever suggesting that the rates produced by the
    benchmark formula covered late fee-related costs." *Id.* Adelphia
    claims that this argument is supported by the Commission's rejection
    of the "cable operator's contention that the local franchising
    authority lacked the authority to require a cost justification for a
    separate late fee" in *Falcon Cablevision*. *Id.*

[^14]: *Id.*

[^15]: *Id.* For support, Adelphia provides copies of several court
    decisions from various jurisdictions. *See* Adelphia Application,
    Exh. B; Adelphia Reply Attachment; *but see* Adelphia Supp. Response
    at 1 (indicating that one of the cited cases had been vacated).

[^16]: Adelphia Application at 9-10.

[^17]: Department Opposition at 4-5.

[^18]: *Id.* at 6.

[^19]: *Id.*

[^20]: *Id.* at 6-7.

[^21]: *Id.* at 7-9.

[^22]: 47 U.S.C. § 543.

[^23]: Pub. L. No. 102-385, 106 Stat. 1460 (1992).

[^24]: Implementation of Section 8 of the Cable Television Consumer
    Protection and Competition Act of 1992: Consumer Protection and
    Customer Service, Report and Order ("*Consumer Protection and
    Customer Service Order*"), 8 FCC Rcd 2892, 2907 ¶ 68 (1993). The
    Commission stated that "\[m\]any local governments complain that
    cable operators charge a flat late fee which can be equal to well
    over standard interest rates." *Id.,* citing Reply Comments of
    Metropolitan Dade County ("Dade County Reply"), MM Docket No.
    92-263, filed Jan. 26, 1993 and Comments of The Northwest Municipal
    Cable Council ("Northwest Comments"), MM Docket No. 92-263, filed
    Jan. 11, 1993. Dade County argued that the Commission should adopt a
    reasonable limit for late fees because several cable operators in
    its "jurisdiction charged a flat rate of \$10, an amount sometimes
    approaching 40% of the past due amount." *See* Dade County Reply at
    7. Northwest proposed that late fees should be limited "from 1% to
    an absolute maximum of 5%" instead of the \$5 flat fee, representing
    "27% for a basic only subscriber, 15.5% for the average subscriber
    with only one pay service," its cable operator charged. *See*
    Northwest Comments at 3-4.

[^25]: *Consumer Protection and Customer Service Order* at 2907 ¶ 68.

[^26]: *See Falcon Cablevision* (Thousand Oaks, CA), 11 FCC Rcd 10511,
    10524-25 ¶ 31 (CSB 1996); *Cablevision Industries Corp*.
    (Bishopville, SC), 10 FCC Rcd 6624, 6625 ¶ 8 (CSB 1995);
    *Cablevision Industries Corp*. (West Columbia, SC), 10 FCC Rcd
    10513, 10516 ¶ 13 (CSB 1995). The Commission, however, can consider
    whether late fees are used to evade the Commission's rate regulation
    rules. This may occur, for example, where a cable operator uses
    billing practices that result in all or most of its customers being
    assessed a late fee, thereby giving the operator a higher effective
    rate than that permitted under the Commission's rules. *See* Public
    Notice, Questions and Answers on Cable Television Rate Regulation, Q
    & A No. 20 (May 6, 1994).

[^27]: *Id.*

[^28]: *Falcon Cablevision* at 10524 ¶ 29.

[^29]: *Id.* at 10524-25 ¶ 31.

[^30]: *Bureau Order* at 11810-11 ¶ 9.