Before the

Federal Communications Commission

Washington, D.C. 20554

+----------------------------------+---+------------------------------+
| In the Matter of                 | * | File No. CSB-A-0640          |
|                                  | * |                              |
| PRIME COMMUNICATIONS-POTOMAC,    | ) |                              |
| LLC                              | * |                              |
|                                  | * |                              |
| d/b/a CABLE TV ARLINGTON         |   |                              |
|                                  | * |                              |
| Appeal of Local Rate Order of    | * |                              |
|                                  | ) |                              |
| the County of Arlington,         | * |                              |
| Virginia                         | * |                              |
|                                  |   |                              |
| CUID VA0108                      | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
+----------------------------------+---+------------------------------+

MEMORANDUM OPINION AND ORDER

**Adopted: June 22, 2000** **Released: June 26, 2000**

By the Deputy Chief, Cable Services Bureau:

# introduction

1.  Prime Communications-Potomac, LLC d/b/a Cable TV Arlington ("CTA")
    the cable operator serving Arlington County, Virginia,[^1] has filed
    an appeal of the local rate order issued by the County of Arlington,
    Virginia ("County") on August 17, 1999. The County filed an
    opposition to which CTA replied. The rate order at issue reduces
    equipment rates proposed on FCC Form 1205. This order grants CTA's
    appeal in part and remands the rate order to the County for further
    consideration.

# background

2.  Under the Commission's rules, rate orders issued by local
    franchising authorities may be appealed to the Commission.[^2] In
    ruling on an appeal of a local rate order, the Commission will not
    conduct a *de novo* review, but will sustain the franchising
    authority's decision provided there is a reasonable basis for that
    decision, and will reverse a franchising authority's decision only
    if the franchising authority unreasonably applied the Commission's
    rules in its local rate order.[^3] If the Commission reverses a
    franchising authority's decision, it will not substitute its own
    decision but will remand the issue to the franchising authority with
    instructions to resolve the case consistent with the Commission
    decision on appeal.[^4]

3.  An operator seeking to justify its existing or proposed rates for
    the basic service tier, equipment, or installation bears the burden
    of demonstrating that the rates conform with our rules.[^5] In
    determining this, a franchising authority may direct the operator to
    provide supporting information.[^6] After reviewing an operator's
    rate forms and any other additional information submitted, the
    franchising authority may approve the operator's rates or issue a
    written decision explaining why the operator's rates are not
    reasonable.[^7] If the franchising authority determines that the
    operator's rates exceed the maximum permitted rate as determined by
    the Commission's rules, it may prescribe a rate different from the
    proposed rate or order refunds, provided that it explains why the
    operator's rate or rates are unreasonable and any prescribed rate is
    reasonable.

4.  Section 76.923 of the Commission's rules and FCC Forms 393, Part III
    and 1205 establish standards for the regulation of equipment and
    installation charges based on actual cost for systems not subject to
    effective competition.[^8] Operators are required to establish an
    equipment basket to which they assign the direct and appropriately
    allocated indirect costs of service installation, additional
    outlets, and leasing and repairing equipment, plus a reasonable
    profit.[^9] The rate for each type of leased equipment is intended
    to recover maintenance and capital costs for the equipment. The
    capital costs entered in the formula are the return on investment
    grossed up for taxes plus the current rate for depreciation.[^10]
    The investment in the formula on both forms is the gross book value
    for the particular type of equipment as of the date the operator
    closed its books for the time period covered by the form minus
    accumulated depreciation and deferred taxes. The Commission assumes
    that operators recover investment through depreciation, and the rate
    rules should not provide for recovery beyond the cost of the
    plant.[^11] The rate form instructions generally require inclusion
    of historical costs rather than historically-based projected costs.
    Thus, rates for the upcoming rate year are based on the annual
    actual cost data for the operator's previous fiscal or test year
    instead of projected costs.[^12]

# discussion

5.  CTA filed FCC Form 393 in November 1993 to set unbundled programming
    and equipment rates and filed FCC Form 1205 in August 1994 and an
    amended Form 1205 in December 1994.[^13] In its 1993 and 1994
    filings, CTA used cost information based on the fiscal year ended
    December 31, 1992.[^14] Starting in 1995, CTA annually filed Form
    1205 to amend its equipment rates based on costs as of December 31
    of the preceding year.

6.  CTA filed its 1999 Form 1205 with the County to justify its
    equipment and installation rates to be in effect starting July 1,
    1999, based on its costs as of December 31, 1998,[^15] the end of
    its most recent fiscal year. The County adopted a rate order setting
    lower maximum permitted rates for addressable and non-addressable
    converters and remotes than CTA had proposed.[^16] This followed
    from the recommendations of its consultant and staff, who had
    questioned CTA's bases for the net book values and depreciation
    expenses for this equipment.[^17] The County consultant's Consulting
    Report stated that addressable converters, non-addressable
    converters, and remotes carried on the operator's books on December
    31, 1992 and added in 1993 had been fully depreciated before the
    1998 fiscal year.[^18] The Report therefore concluded that the book
    value of these assets on December 31, 1998 was \$0 and no
    depreciation expenses for this equipment could be recovered in the
    1999 rates.[^19]

7.  CTA objects to the County's treatment of its depreciation expenses,
    arguing that the County has misunderstood how CTA accounted for its
    depreciation and has impermissibly revisited past rates. Believing
    it still had depreciation to recover in its 1999 rates for the 1998
    fiscal year, CTA argues that the County must have deviated from the
    standard "test year" protocol by disallowing the last year of its
    five year depreciation on equipment acquired in 1994.[^20] CTA
    illustrates this by pointing to new remotes acquired in 1994. The
    County disagrees, arguing it may review past rate forms for
    consistency with the current filing, and its review showed that CTA
    has over-recovered for depreciation expenses claimed before 1994 and
    claimed again in succeeding years. Referring to non-addressable
    converters, the example developed in the Consulting Report at 4-5,
    the County argues that the operator's past rate forms and its
    supplemental information show depreciation for 1993 to be taken in
    CTA's rates that was not reflected in CTA's rate calculation and not
    explained.[^21] According to the County, CTA's net book value for
    non-addressable converters transferred as of December 31, 1992
    should be adjusted for depreciation taken in 1993. It uses the 1992
    depreciation expense as the 1993 expense. The County states that
    this problem also exists with respect to remotes and addressable
    converters.[^22] CTA replies that the County must have misunderstood
    that the system was transferred in early 1994, which started a new
    five-year depreciation period based on the December 31, 1993 book
    value of equipment and continuing through the 1998 fiscal year.[^23]
    CTA argues that, even if the County is correct with respect to the
    historical treatment of depreciation expenses associated with
    non-addressable converters, the County cannot use this to justify
    disallowing depreciation expenses with addressable converters and
    remotes.

## Depreciation Expense

8.  In preparing its 1999 Form 1205, CTA relied on the depreciation
    information it used and filed with the County each year starting
    with its 1995 filing.[^24] The information shows that CTA took a
    depreciation expense for fiscal year 1993 for remotes and
    addressable converters transferred as of December 31, 1992, and
    deducted this expense from its 1992 net book values to determine net
    book values for 1993. The 1992 net book values are those shown on
    its Form 393, Schedule C, Column E.[^25] For equipment added in
    1993, the information shows that CTA took a depreciation expense in
    1993 using the half year convention and reflected this expense in
    the 1993 net book value. The system and assets were transferred on
    January 6, 1994, and CTA sought to recover the fiscal year 1993
    combined net book value in even amounts in its rates over five
    years, from fiscal year 1994 through fiscal year 1998. The
    corresponding rate forms would be those filed in calendar years 1995
    through 1999. The total projected depreciation recovery in rates
    equaled the combined net book value shown in CTA's depreciation
    information. The depreciation information shows that CTA treated the
    non-addressable converters transferred as of December 31, 1992 and
    added in 1993 in the same way, except that CTA's information does
    not show any depreciation expense, accumulation of depreciation or
    adjustment to net book value in 1993. Until ruling on CTA's 1999
    rate filing, the County had accepted this approach.[^26]

9.  The Consulting Report on CTA's 1999 rate filing calculated
    depreciation expense in a table attached as Appendix E.[^27]
    Appendix E assumes that the remotes and addressable converters
    transferred as of December 31, 1992 and added in 1993 were
    depreciated over five years starting in fiscal year 1993, and
    overlooks the adjustment to CTA's recovery period starting with
    fiscal year 1994 upon which previously approved rates were premised.
    Thus, Appendix E shows the remotes and addressable converters in
    these categories were fully depreciated as of December 31, 1997, and
    no depreciation remained to be recovered in fiscal year 1998.
    Appendix E treated non-addressable converters transferred in 1992
    and added in 1993 the same way. According to the Consulting Report
    at 5, the consultant's recommendations were based on the
    depreciation expense shown in Appendix E. As a result, the amount of
    depreciation CTA claimed for fiscal year 1998 on transferred assets
    and assets added in 1993 was eliminated from the consultant's
    recalculation of Form 1205.

10. We find that the treatment of CTA's adjusted recovery period was not
    reasonable. When approving previous rate proposals, the County did
    not object to CTA's adjusted recovery periods for remotes and
    converters transferred in 1992 and added in 1993.[^28] This
    adjustment had the effect of reducing the annual depreciation
    expense to be recovered in rates and resulted in lower annual
    permitted rates to subscribers than rates based on a shorter
    recovery period, while allowing CTA to fully recover the same total
    investment over a longer time. Appendix E's reliance on an
    unadjusted recovery period denied CTA the opportunity to fully
    recover its investment. Neither the Consulting Report nor the rate
    order explains why this change was made.[^29] The Commission
    intended when establishing rules for equipment pricing that the
    pricing would effectively allow recovery of the full cost of the
    equipment over the equipment life.[^30]

11. We also find that the treatment of remotes and converters acquired
    in 1994 was not reasonable. For this equipment, the net plant and
    annualized depreciation expense in Appendix E does not follow from
    the amount of new investment and depreciable life shown in the
    Appendix, whether or not the half year convention is used. CTA's
    depreciation information shows \$25,117 in new remotes added in
    Accounting Year 1994. Appendix E at 2 line 80 shows the same amount
    for remotes added in 1994 with a depreciable life of five years. One
    would expect from this table that the annualized depreciation
    expense would be \$5023. Line 80 shows only \$2512 in net plant as
    of December 31, 1997, the end of the fourth year, and allows only
    \$2512 in the "Annualized Depreciation Expense" column for fiscal
    year 1998, the fifth year, rather than the expected \$5023 that was
    claimed by CTA.[^31] The anomaly may be due to the "Accumulated
    Depreciation" as of December 31, 1997, which is recorded on line 80
    as \$22,605, the amount of accumulated depreciation shown on CTA's
    depreciation information for the end of fiscal year 1998.[^32] The
    same problem appears at lines 87 and 94 with respect to addressable
    and non-addressable converters added in 1994.

12. While the recommendations in the Consulting Report are based on
    Appendix E, the Consulting Report also attempts to demonstrate that
    CTA has over-recovered for depreciation on the remotes and
    converters transferred as of December 31, 1992. According to the
    Consulting Report at 4-5, the consultant assumed that CTA incurred
    the depreciation it claimed in its rates, so the consultant
    subtracted the amount of depreciation CTA recovered in 1993 rates
    from the 1992 net book value shown on CTA's Form 393 to determine
    the 1993 net book value. The consultant again assumed that CTA
    incurred depreciation expense at the rate amount during 1994 and
    deducted the 1992 depreciation expense a second time to arrive at
    the 1994 net book value.[^33] Using this analysis, which is based on
    Appendix K at 1, 2, it determined that CTA had over-recovered for
    depreciation on these transferred assets. However, equipment rates
    proposed in a rate form are set to recover actual costs from the
    previous fiscal or accounting year, and do not include cost
    projections.[^34] The depreciation expense experienced in one fiscal
    year is taken on the books in the same year but recovered the
    following year in rates. CTA's 1992 depreciation expense is
    reflected in the 1992 net book value shown on CTA's Form 393, and is
    recovered in rates in the next rate year, but is not necessarily the
    actual depreciation expense experienced in fiscal year 1993. The
    actual expense experienced in fiscal year 1993 should be used to
    determine the net book value at the end of 1993. The actual expense
    experienced in fiscal year 1994 should be used to determine the net
    book value at the end of 1994.

13. Confusion in determining depreciation expense may be due to CTA's
    use of the same 1992 data in both its Form 393 and its first
    Form 1205. To facilitate the transition to programming service rates
    using the revised benchmark methodology, the Commission required
    operators to unbundle equipment costs from program revenues by
    filing Forms 1205 and 1200 together, even if they had computed
    unbundled rates on Form 393. Operators like CTA that had previously
    unbundled equipment costs using Form 393 could use the same fiscal
    year when redoing the calculation rather than data from the most
    recent fiscal year. In addition, the timing of the recalculation
    need not have coincided with the Form 1205 instructions that
    equipment rates be changed no more than annually and should be filed
    within 60 days of the end of a fiscal year and before
    implementation.[^35] Because of these timing requirements and to
    limit administrative expenses for the operator and confusion for the
    subscriber from frequent rate changes, an operator could keep its
    initial equipment rates in effect until after the close of its next
    fiscal year. [^36] In CTA's case, this meant that its Form 1205
    filed in 1994 used fiscal year 1992 data, not data from its 1993
    fiscal year, and its rates computed from Form 393 continued in
    effect until it changed rates pursuant to the Form 1205 filed in
    1995, using data as of the end of fiscal year 1994, even though its
    costs may have changed in the intervening time. Thus, its rates may
    not have been adjusted until its 1995 rate change for any fiscal
    year 1993 change in the depreciation for the equipment transferred
    in 1992. But, the rates during the same period also would not
    reflect additional depreciation for equipment added in 1993, the
    higher return on investment to which CTA may have been entitled
    because of the grossed up tax treatment permitted with Form 1205, or
    any other cost changes CTA might have experienced during fiscal year
    1993.[^37]

14. The Commission's rules and instructions to Form 1205 do not provide
    a mechanism for truing up depreciation where regulated equipment
    rates continued in effect for more than a year to facilitate this
    transition.[^38] The Consulting Report appears to have tried to
    address this by using the 1992 depreciation expense on CTA's Form
    393 and first Form 1205 as the expense for 1993 and even 1994. Rate
    forms and company financial records for the same fiscal year
    normally should be consistent, and franchising authorities should be
    able to rely on an operator's rate forms when reviewing depreciation
    costs. However, when a fiscal year is not covered by a rate form,
    depreciation expenses attributed to that fiscal year should be based
    on financial information from company records,[^39] if the
    information is available and not otherwise disputed. The information
    on CTA's Form 393 and its first Form 1205 does not establish the
    unreasonableness of CTA's claimed depreciation expenses after fiscal
    year 1992.[^40] The Consulting Report's reliance on those forms to
    establish depreciation expense for years not covered by the data in
    the forms is not reasonable in this case, and the analysis based on
    Appendix K does not support the rate recommendations accepted by the
    County.

15. With respect to non-addressable converters, the County argues that
    depreciation information attached to CTA's Form 1205 (presumably the
    form filed in 1999) shows that CTA claimed \$108,249 in depreciation
    in 1993, the figure also appearing on its Form 393, but failed to
    reflect this in its rates, so that CTA's proposed rates in its 1999
    Form 1205 would result in an over-recovery of \$108,249.[^41] CTA
    states that this \$108,249 depreciation expense was recognized in
    the calculation of the year-end 1993 net book value.[^42] We find
    that CTA's depreciation information does not support the
    depreciation expense claimed on its 1999 Form 1205 for
    non-addressable converters transferred as of December 31, 1992 or
    added in 1993. CTA's depreciation information for these converters
    does not show any fiscal year 1993 depreciation for assets
    transferred as of December 31, 1992 or added in 1993, even though
    CTA was charging regulated rates during and after this period and
    the lack of a filing using fiscal year 1993 data does not toll the
    accumulation of depreciation. CTA showed depreciation expense for
    other equipment for this period and should have treated all of the
    equipment consistently under generally accepted accounting
    principles. CTA argues that the appropriate net book value is that
    shown for 1993,[^43] but the value for the transferred assets in
    1993 is the same as the net book value for 1992 shown on its
    depreciation information and its Form 393, and no depreciation
    expense is shown or accumulated in 1993. The net book value carried
    for assets added in 1993 is unchanged from the value of the assets
    when added, and no depreciation expense is shown or accumulated in
    1993, even though under generally acceptable accounting principles
    depreciation usually starts when the assets are added and CTA
    depreciated other assets added in 1993. CTA took the combined values
    it showed as 1993 net book values and depreciated this amount over
    five years, from fiscal year 1994 through fiscal year 1998.[^44]
    While it is possible that no depreciation remains to be recovered
    because of this error, the analysis upon which the County relied
    does not establish this and must be revisited.

## Review of Past Rate Filings

16. CTA also argues that the County Rate Order is inconsistent with the
    intent of the *Thirteenth Order on Reconsideration* and with
    achieving finality to equipment rate rulings.[^45] The *Thirteenth
    Order* added section 76.933(g)(2) to the Commission's rules when the
    annual rate adjustment methodology was adopted.[^46] This gives
    franchising authorities a limited period in which to act on a rate
    filing made pursuant to the annual adjustment method. If the
    franchising authority has not acted within 12 months from the date
    the operator files a rate form, it may not later order a refund or a
    prospective rate reduction with respect to the rate filing. The
    Commission explained in the *Thirteenth Order* that this time
    constraint should provide ample time for review, while giving
    operators certainty with respect to their liability for refunds and
    whether their rates will be permitted to remain in effect. The
    County disagrees with CTA, explaining it did not engage in
    retroactive ratemaking by ordering CTA to revise past rates or issue
    refunds.[^47] It argues that it addressed an unexplained
    inconsistency in the current filing and compared past and present
    filings. CTA sees the County's review as a recalculation of the
    depreciation expenses taken prior to 1994 and argues the County
    cannot revisit components of previously established rates, nor
    prohibit the establishment of current rates based on those
    previously established rates.[^48]

17. A franchising authority may review the bases for the figures
    presented in an operator's rate forms and may seek substantiation of
    the figures.[^49] In this case, the County reviewed the depreciation
    expense claimed in CTA's 1999 Form 1205 and supporting data and
    looked at CTA's treatment of depreciation expense in earlier filings
    to resolve what it believed to be an unexplained discrepency. The
    County did not recalculate earlier rates, order any adjustment to
    earlier rates, or require refunds based on what it perceived to be
    past over-recovery of depreciation expense. Based on its view that
    CTA had fully depreciated some equipment, the County disallowed
    further recovery in the new rates. While we find that the analysis
    underlying the County rate order is not reasonable, we find nothing
    in Section 76.933(g)(2) or the *Thirteenth Order on Reconsideration*
    insulating an operator's current rate form from scrutiny on the
    basis of that operator's past rate filings or the supporting data
    submitted with the current filing. Nor does the cited precedent
    prevent a franchising authority from addressing a discrepancy in an
    operator's current rate filing or correcting for mistakes in the
    operator's substantiating information that affect the proposed rates
    and result in proposed equipment charges in excess of actual costs,
    even if the mistakes were also made in or derive from earlier rate
    filings.[^50]

# conclusion

18. For the reasons discussed above, the analysis of CTA's depreciation
    expenses relied on by the County does not support the conclusion
    underlying the rate order that CTA had fully recovered the
    depreciation for remotes and converters transferred as of December
    31, 1992 or added in 1993. Nor does it support the treatment of
    equipment added in 1994. Appendix E to the Consulting Report, said
    to be the basis for the Consulting Report recommendations adopted by
    the County, does not take into account the depreciation recovery
    period used by CTA and accepted in previous County rate reviews for
    equipment transferred as of December 31, 1992 and added in 1993. It
    does not explain why this period is no longer reasonable and why the
    shorter period is reasonable. Appendix E also appears to have
    miscalculated the depreciation on equipment added in 1994. The
    analysis based on Appendix K reflects confusion about what
    depreciation expenses were recovered in CTA's 1993 rates and what
    expenses should be attributed to fiscal years 1993 and 1994 and
    fails to explain why the depreciation CTA claimed for remotes and
    addressable converters in 1993 is not reasonable. Therefore, that
    analysis does not independently support the rate order. The County
    rate order is not reasonable and is being remanded for further
    review of CTA's depreciation expenses for remotes and converters
    consistent with this Memorandum Opinion and Order.

# ordering clauses

19. ACCORDINGLY, IT IS ORDERED that the Appeal of Local Rate Order filed
    by Prime Communications-Potomac, LLC d/b/a Cable TV Arlington on
    September 13, 1999 IS GRANTED to the extent indicated herein and the
    local rate order issued by Arlington County, Virginia on August 17,
    1999 IS REMANDED for further consideration consistent with this
    Memorandum Opinion and Order.

20. IT IS FURTHER ORDERED that Arlington County, Virginia shall not
    enforce matters remanded for further consideration pending further
    action by the County on those matters.

21. This action is taken pursuant to authority delegated by Section
    0.321 of the Commission's rules. 47 C.F.R. § 0.321.

FEDERAL COMMUNICATIONS COMMISSION

William H. Johnson

Deputy Chief, Cable Services Bureau

[^1]: CTA's assets were transferred as of December 31, 1992. Public
    Resources Management Group, Inc., Review of Prime Communications
    Potomac, L.L.C. dba CATV Arlington's 1999 FCC Forms 1240 and 1205
    Filed With Arlington County April 1, 1999 ("Consulting Report"),
    page 4, *found at* CTA Appeal of Local Rate Order ("CTA Appeal"),
    Attachment C. Assets were transferred from Arlington Cable Partners,
    L.P. to SBC Media Ventures, Inc., its sole remaining partner, on
    January 6, 1994. CTA Reply to Opposition to Appeal of Local Rate
    Order ("CTA Reply"), Attachment B (Assignment and Assumption of
    Franchise). The County approved the transfer to Prime
    Communications-Potomac, LLC, which filed the instant appeal, on June
    20, 1998. Opposition of Arlington County, Virginia, to Prime
    Communications-Potomac's Appeal of Local Rate Order ("County
    Opposition"), Declaration of Gail M. Lucas in Support of Opposition
    of Arlington County, Virginia, to Appeal of Local Rate Order ("Lucas
    Declaration"), Attachment C at 1.

[^2]: 47 C.F.R. § 76.944.

[^3]: *See Implementation of Sections of the Cable Television Consumer
    Protection and Competition Act of 1992, Rate Regulation*, 8 FCC Rcd
    5631, 5731 (1993) (*\"Rate Order\"*); *See also Implementation of
    Sections of the Cable Television Consumer Protection and Competition
    Act of 1992, Rate Regulation, Third Order on Reconsideration*, 9 FCC
    Rcd 4316, 4346 (1994) ("*Third Order on Reconsideration*").

[^4]: *Rate Order*, 8 FCC Rcd at 5732.

[^5]: 47 C.F.R. § 76.937(a).

[^6]: *See Rate Order* at 5718-19; *Third Order on Reconsideration*, 9
    FCC Rcd at 4348.

[^7]: 47 C.F.R. § 76.936; *see Ultracom of Marple, Inc.*, 10 FCC Rcd
    6640, 6641-42 (Cab.Serv.Bur. 1995).

[^8]: FCC Form 393 was used to compute equipment and installation
    charges when rate regulation first began but was replaced with Form
    1205 in 1994 when the Commission revised the benchmark formula and
    required operators to recompute their initial regulated rates for
    programming services, including the amount of equipment costs to be
    unbundled from programming service rates. With FCC Form 1205, the
    Commission extended the application of grossed up taxes to
    Subchapter S corporations, partnerships and sole proprietorships.
    FCC Form 1205 Instructions for Determining Costs of Regulated Cable
    Equipment and Installation, page 8 (June 1996) ("Form 1205
    Instructions); *Implementation of Sections of the Cable Television
    Consumer Protection and Competition Act of 1992: Rate Regulation,
    Report and Order and Further Notice of Proposed Rulemaking*, 9 FCC
    Rcd 4527, 4607-08 (1994) ("*Cost Order*"). Operators who had
    unbundled equipment rates using Form 393 could use the same fiscal
    or test year data when redoing the unbundling calculation using FCC
    Forms 1200 and 1205 after May 14, 1994. FCC Form 1200 Setting
    Maximum Initial Permitted Rates for Regulated Cable Services
    Pursuant to Rules Adopted February 22, 1994, page 9 (May 1994)
    ("Form 1200 Instructions"). These operators were not required to
    revise equipment and installation rates at that time if their
    regulated equipment and installation rates computed on Form 393 had
    been in effect for less than a year. Form 1205 Instructions at 2.

[^9]: 47 C.F.R. § 76.923(c); *see Implementation of Sections of the
    Cable Television Consumer Protection and Competition Act of 1992:
    Rate Regulation*, *First Order on Reconsideration, Second Report and
    Order, and Third Notice of Proposed Rulemaking*, 9 FCC Rcd 1164,
    1190 (1993) ("*First Order on Reconsideration*"); *Rate Order*, 8
    FCC Rcd at 5810 para. 288.

[^10]: FCC Form 1205, Schedule C; Form 1205 Instructions at 13; FCC Form
    393 at 27, 31(Schedule C), 33-34.

[^11]: *First Order on Reconsideration*, 9 FCC Rcd at 1198.

[^12]: *Third Order on Reconsideration*, 9 FCC Rcd at 4372 para. 157;
    *First Order on Reconsideration*, 9 FCC Rcd at 1200 para. 67. Under
    some circumstances, an operator may calculate its rates using a
    representative month.

[^13]: Consulting Report at 4.

[^14]: *Id*.

[^15]: *Id.* at 2, Appendix D at 1.

[^16]: CTA Appeal, Attachment A.

[^17]: *See* Consulting Report; CTA Appeal, Attachment B (Staff Report).

[^18]: Consulting Report at 4-5; *see id.*, Appendices K at 1, 2 and E
    at 2-3.

[^19]: Consulting Report at 5, Appendix E at 2-3 lines 78-79, 85-86,
    92-93.

[^20]: CTA Appeal at 2-3.

[^21]: County Opposition at 8-9.

[^22]: County Opposition at 9-10, citing Consulting Report at 4.

[^23]: CTA Reply at 2-3. CTA does not contend that the gross book value
    of these assets changed as a result of transfers, only the period
    for depreciating the assets. *See generally Cablevision of Boston,
    Inc.*, DA 00-950 para. 11, 2000 WL 502317 (F.C.C.) (Cab. Serv. Bur.
    released Apr. 28, 2000).

[^24]: CTA Reply at 4. CTA's depreciation information prepared on
    3/30/99 was attached to CTA's 1999 Form 1205 as Schedule C support
    and also to the Consulting Report, Appendix K, pages 3-5. CTA's 1999
    Form 1205 can be found at County Opposition, Lucas Declaration,
    Attachment A. CTA filed amended depreciation information dated
    8/14/99, which can be found at CTA Reply, Attachment A.

[^25]: Form 393 is found at County Opposition, Lucas Declaration,
    Attachment B. The 1992 net book value shown on Form 393 for
    addressable converters is \$632,565. The value shown on CTA's
    depreciation information is \$632,567, a *de minimis* difference.

[^26]: *See* CTA Reply at 4-5; Consulting Report, Appendix K at 2 n.8.

[^27]: Consulting Report, Appendix E at 2, Analysis of Plant &
    Depreciation of the 1999 FCC Form 1205.

[^28]: *See* CTA Reply at 4-5; Consulting Report, Appendix K at 2 n.8.

[^29]: *See Chillicothe Cablevision, Inc.*, 10 FCC Rcd 6055, 6057 para.
    9 (Cab. Serv. Bur. 1995) ("written decision must demonstrate why the
    proposed rate is unreasonable and why the prescribed rate is
    reasonable"), citing *Rate Order*, 8 FCC Rcd at 5723.

    The County argues in its Opposition at 9-10 that CTA's rate filings
    indicated that it originally transferred the assets as of December
    31, 1992 but that filings for remotes and addressable converters
    claim that depreciation did not start until 1994. It appears from
    the record that CTA was transferred twice, once at the end of 1992
    and again at the start of 1994. *See* Consulting Report at 4; CTA
    Reply, Attach. B. CTA's depreciation information for remotes and
    addressable converters shows that CTA took depreciation experienced
    in fiscal year 1993 into account in determining the fiscal year 1993
    net book value to be further depreciated over five years, starting
    in fiscal year 1994. The amount of depreciation expense claimed for
    fiscal year 1993 was less than the amount claimed for the same
    equipment for fiscal year 1992; the annual expense claimed for
    fiscal year 1994 and later was less than the expense claimed for
    fiscal year 1993. This suggests that the recovery period was
    adjusted twice, as CTA claims in its Reply at 3. CTA's total
    depreciation recovery shown on its depreciation information for
    remotes and addressable converters equals the book values shown on
    the information.

[^30]: *First Order on Reconsideration*, 9 FCC Rcd at 1198-99.

[^31]: If the half-year convention had been used, one-half of the annual
    depreciation would have been taken in the first year, leaving
    one-half to be recovered in the sixth year.

[^32]: CTA's number reflects use of the half-year convention. The
    Consulting Report at 5 states that the consultant annualizes
    depreciation, including a full year of depreciation for new
    equipment in the year added.

[^33]: The County Opposition at 8 argues that the 1992 depreciation
    expense is also the 1993 depreciation expense, based on CTA's Form
    393 and attachments to its Form 1205. It does not argue that this
    amount is also the 1994 expense.

[^34]: *Third Order on Reconsideration*, 9 FCC Rcd at 4372 para. 157;
    *First Order on Reconsideration*, 9 FCC Rcd at 1200 para. 67.

[^35]: FCC Form 1200 Instructions at 2; FCC Form 1205 Instructions at
    1-2. When providing operators with the option to seek program
    service rate adjustments using the annual adjustment method, the
    Commission required that operators using this method file Form 1205
    on the same date they file for program service rate adjustments
    using Form 1240. Operators using the quarterly rate adjustment
    method must continue to File Form 1205 within 60 days of the end of
    the fiscal year. 47 C.F.R. §§ 76.922(e)(1), 76.923(n).

[^36]: *Century New Mexico Cable Corp.*, 11 FCC Rcd 17335, 17350-51
    (Cab. Serv. Bur. 1996); *TCI Cablevision of Oregon, Inc.*, DA
    95-2269 paras. 15-19, 1995 WL 683989 (F.C.C.) (Cab. Serv. Bur.
    released Nov. 11, 1995) (Multnomah & Portland, OR). Indeed, the Form
    1205 Instructions at 3, 14 provide that an operator need not
    complete the worksheet for computing rates or the information about
    average installation hours when submitting Form 1205 solely for
    establishing initial maximum permitted rates for programming
    services. *TCI Cablevision* at para. 18.

[^37]: *See id*. at n.36 ("We realize that this finding will enable
    operators who are charging more for equipment than is justified by
    their Form 1205 costs, to receive in excess of their maximum
    permitted revenues for some period of time. However, the Form 1205
    instructions and this ruling apply to "changes" in equipment rates
    and therefore other operators who are charging less than their
    permitted rates under their initial Form 1205 filing will earn less
    than their maximum permitted revenues for a similar period of
    time"); *Falcon Cablevision*, 11 FCC Rcd 10511, 10522 n.47 (Cab.
    Serv. Bur. 1996) (Thousand Oaks, CA) (same).

[^38]: Because an operator is required to file Form 1205 within 60 days
    after the end of its fiscal year if using the quarterly method for
    adjusting programming service rates, when filing its Form 1240 if
    using the annual adjustment method, or on the anniversary date of
    its last Form 1205 filing if it elects not to file a Form 1240, this
    should not be a recurring problem, although a Form 1205 filing could
    be delayed if an operator changes rate adjustment methods. *See* 47
    C.F.R. § 76.923(n).

[^39]: *See* Form 1205 Instructions at 3. The General Instructions
    provide that the form should be completed "using financial data from
    the company's general ledger and subsidiary records maintained in
    accordance with generally accepted accounting principles.\"

[^40]: *See Chillicothe Cablevision,*10 FCC Rcd at 6057 para. 9; *Rate
    Order*, 8 FCC Rcd at 5723.

[^41]: County Opposition at 8-9.

[^42]: CTA Reply at 2.

[^43]: *Id*.

[^44]: The treatment of depreciation in CTA's rates is the same in both
    sets of depreciation information CTA provided to the County, even
    though the entry of \$108,249 as "Depreciation Taken for Rates" for
    the transferred assets is placed in the "Accounting Year" 1993
    column in the 3/30/99 information but moved to the "Test Year" 1992
    column in the 8/14/99 information. We understand the terms "Test"
    and "Accounting" year to have the same meaning. The County appears
    to rely on CTA's earlier information in arguing that CTA claimed
    \$108,249 in depreciation expense in 1993. *See* County Opposition
    at 8. We note that the 8/14/99 information bears the same date as
    the County Board meeting approving the rate order.

[^45]: CTA Appeal at 3-4, citing *Implementation of Sections of the
    Cable Television Consumer Protection and Competition Act of 1992:
    Rate Regulation, Thirteenth Order on Reconsideration*, 11 FCC Rcd
    388, 426 para. 92 (1995).

[^46]: 47 C.F.R. § 76.933(g)(2).

[^47]: County Opposition at 11-12.

[^48]: CTA Reply at 4-5.

[^49]: *See Marcus Cable Partners, LLC*, 14 FCC Rcd 11,663, 11,664 para.
    4 (Cab. Serv. Bur. 1999) and cases cited therein at n.15.

[^50]: *See* 47 U.S.C. § 543(b)(3); 47 C.F.R. § 76.923(a)(2)
    ("Subscriber charges for such equipment shall not exceed charges
    based on actual costs . . . ."). *See generally Western Reserve
    Cablevision, Inc.*, 14 FCC Rcd 13,391, 13,397 para. 11 (Cab. Serv.
    Bur. 1999).