**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of ) CUID Nos. NJ0463 (Hillsborough)

) NJ0491 (Lebanon)

) NJ0492 (Clinton)

RCN Cable of New Jersey, Inc ) NJ0493 (Readington)

) NJ0494 (Clinton Township)

) NJ0495 (Passaic/Longhill Township)

) NJ0504 (Branchburg)

) NJ0505 (Bernardsville)

) NJ0506 (Flemington)

) NJ0507 (Raritan)

) NJ0509 (Chatham)

) NJ0510 (Franklin)

) NJ0565 (Mendham Township)

) NJ0576 (Montgomery)

) NJ0586 (West Amwell)

Application for Review ) NJ0591 (Franklin)

**ORDER**

**Adopted: February 22, 2000 Released: February 25, 2000**

By the Commission:

**I. INTRODUCTION**

1\. Before the Commission is an application for review (\"Application\")
filed October 4, 1999, by RCN of New Jersey, Inc. (\"RCN\") of an Order,
DA 99-1745 ("Reconsideration Order"), [^1] released by the Cable
Services Bureau ("Bureau"), denying RCN's petition for reconsideration
of a prior Bureau Order, DA 98-2130 ("Bureau Order").[^2] In the
Reconsideration Order, the Bureau determined that RCN could not modify
its 1997 FCC Form 1240 filing in order to support a modification of its
1998 FCC Form 1240 filing, which was the subject of the Bureau Order.
Having considered RCN\'s application for review, we conclude that the
Reconsideration Order should be affirmed. RCN also filed a petition for
stay of the Reconsideration Order pending resolution of its Application.
Because we resolve RCN\'s Application herein, we will dismiss RCN\'s
petition for stay as moot.

**II. BACKGROUND**

2\. Under the Communications Act, cable operators that do not face
effective competition are subject to regulation of their cable
programming services tier (\"CPST\") rates in effect prior to March 31,

1999.[^3] Operators may establish their regulated rates using either the
benchmark methodology or the cost of service methodology, both of which
set a maximum permitted rate (\"MPR\") that an operator may charge in a
local franchise area.[^4] During the relevant time period, the
Telecommunications Act of 1996 (\"1996 Act\")[^5] and our rules
implementing the legislation,[^6] required that a complaint against the
CPST rate be filed with the Commission only by a local franchising
authority (\"LFA\") that received more than one subscriber
complaint.[^7] The filing of a complete and timely complaint triggered
an obligation upon the cable operator to file a justification of its
CPST rates.[^8] To justify rates for the period beginning May 15, 1994,
operators must use the FCC Form 1200 series.[^9] Operators are permitted
to make changes to their rates on a quarterly basis using FCC Form
1210.[^10] Operators may justify their rates on an annual basis using
FCC Form 1240.[^11]

3\. In the Thirteenth Reconsideration Order,[^12] the Commission adopted
an optional rate adjustment methodology that encouraged cable operators
to make only annual rate changes to their basic service tiers (\"BSTs\")
and CPSTs. Operators that elect to use the annual methodology adjust
their rates once a year to reflect changes in external costs, inflation,
and the number of regulated channels that they expect to occur during
the 12 months following the rate change.[^13] If actual and projected
costs are different during the rate year, a true-up mechanism is
available to correct estimated costs with actual cost changes. At the
end of the rate year, operators true up their projected changes to
correct for differences between actual and projected costs during the
rate year.[^14] The true-up requires operators to decrease their rates
or alternatively, permits them to increase their rates to make
adjustments for over or under estimations of these cost changes.

**III. BUREAU ACTION**

4\. Prior to the release of the Bureau Order, the Commission released
for comment an Order, FCC 98-132 ("Proposed Resolution Order"),[^15]
resolving complaints filed against RCN which were pending as of January
31, 1998. The Proposed Resolution Order included a review of RCN's FCC
Form 1240 for the Projected Period February 1, 1997 through January 31,
1998 ("1997 1240") and, based on that review, found that RCN had
justified a maximum permitted rate ("MPR") of \$10.95 and an actual CPST
rate of \$10.93 through January 31, 1998. On the 1997 1240, RCN claimed
a True-Up Period from April 1, 1996 through August 31, 1996. This means
that the projected costs and actual costs, including any allowances for
external cost increases and inflation increases were compared for the
period that included the months of July and August 1996, on the 1997
1240. Subsequently, on March 31, 1999, the Commission issued an Order,
FCC 99-63 ("Final Resolution Order"),[^16] which finally adopted the
proposed resolution previously released for comment, and resolved
complaints against RCN which were pending as of January 31, 1998.

5\. Meanwhile, on October 26, 1998, the Bureau Order was released
resolving complaints filed against RCN's April 26, 1998 CPST rate
increase from \$10.93 to \$11.90. The Bureau Order included a review of
RCN's FCC Form 1240 for the Projected Period February 1, 1998 through
January 31, 1999 ("1998 1240"), which updated the 1997 1240. On the 1998
1240, RCN claimed a True-Up Period from September 1, 1996 through July
31, 1997. RCN also claimed additional inflation on Line C1 (Unclaimed
Inflation: Operator Switching From 1210 to 1240) of the 1998 1240. The
Instructions for Line C1 state that "\[I\]f this is **not** your first
Form 1240, enter a "1" here and in Line C2 and skip to Line C3."[^17]
Because RCN was not a first time FCC Form 1240 filer, the Bureau
adjusted Line C1 to 1.00 rather than the 1.0037 claimed by RCN.

6\. On November 25, 1998, RCN filed a petition for reconsideration
("Petition"), as well as a request for stay of the Bureau Order. In its
Petition, RCN argued that it should have been allowed to recover
unclaimed inflation for the months of July and August 1996 in its 1998
1240. RCN argued that it had incorrectly included its claim on Line C1
of its 1998 1240 but that it was nevertheless entitled to claim
inflation for July and August 1996. In the Reconsideration Order, the
Bureau denied RCN's Petition because RCN had already recovered inflation
for July and August 1996 in the 1997 1240. The Bureau stated that
Operator's claim to inflation for the months of July and August 1996
should have been included in the 1997 1240 because Operator's 1997 1240
True-Up Period included those two months.[^18] The Bureau further noted
that the Commission's approval of RCN\'s MPR and actual rate in both the
Proposed and Final Resolution Orders was based on a review of RCN\'s
1997 1240, including inflation for the months of July and August 1996.
The Bureau did not accept RCN's claim that it did not intend, contrary
to the FCC Form 1240 Instructions, to include the inflation adjustment
for that period of time in its 1997 1240.[^19] The Bureau stated, "We
cannot now go back and review a filing which has been resolved to
determine if operator \[RCN\] could have claimed additional inflation in
that filing."[^20] The Bureau also stated that it could not ordinarily
allow an operator to amend its FCC Form filings on appeal with
information that should have been submitted in the original
certification.

**IV. APPLICATION FOR REVIEW**

7\. In its Application, RCN argues that it is entitled to recover
inflation for the months of July and August 1996 because it did not
previously recover inflation for that period of time. RCN claims that in
its 1997 FCC Form 1240, it claimed external costs increases for the
period April 1, 1996 through August 31, 1996 and inflation increases for
the period July 1, 1995 through June 30, 1996. RCN also claims that its
request for this recovery was simply mischaracterized in its 1998 1240
and should be converted to a different line, allowing RCN to recover
this inflation. RCN also argues that the Bureau has treated it unfairly
by not accepting its amended 1998 1240 because the Bureau has accepted
amended filings on appeal on other occasions.[^21] We reject RCN's
request for the reasons set forth below.

8\. RCN indicated on its 1997 1240 that its True-Up period covered April
1, 1996 through August 31, 1996. By designating this period of time as
its True-Up Period, RCN represented that it was claiming any external
costs and inflation adjustments for that period in the 1997 1240. In its
Application, RCN now says that was incorrect and it meant to claim
something different. However, in determining that RCN's proposed MPR of
\$10.95 and actual CPST rate of \$10.93 were reasonable through January
31, 1998, the Bureau relied on RCN's designation of its True-Up Period
in its 1997 1240 as including July and August 1996. Thus, the
Commission's final approval of RCN's MPR was based on a review of RCN's
1997 1240 as submitted. Moreover, the Commission resolved the complaints
filed against RCN which were pending as of January 31, 1998, based on
the MPR as approved. Thus, contrary to RCN's characterization that its
request is merely for a correction of a minor error on its 1998 1240,
RCN is actually seeking to correct its 1997 1240, then carry that
correction through to its 1998 1240. Contrary to RCN's claim that the
Bureau acted arbitrarily in rejecting RCN's amended 1998 1240, the
Bureau rejected RCN's amended 1998 1240 because it included inflation
that was already claimed in the 1997 1240.[^22]

9\. Because RCN's claim to an inflation adjustment for the months of
July and August 1996 was included in the True-Up Period of its 1997
1240, RCN is not entitled to claim an inflation adjustment for that same
period in its 1998 1240. In order to determine whether RCN made a
mistake in its 1997 1240, the Commission would have to reopen and
reevaluate its determination regarding the MPR which formed the basis of
the Proposed and Final Resolution Orders. The period of time for appeal
of those orders has long passed and the parties to the resolution are
entitled to rely on the finality of those orders.[^23] Moreover, to
allow RCN to recover inflation for July and August 1996 without
reviewing the 1997 1240 could amount to allowing RCN a double recovery
for those months.

**V. CONCLUSION AND ORDERING CLAUSE**

10\. For the reasons discussed above, we conclude that RCN\'s
application for review should be denied.

11\. Accordingly, IT IS ORDERED, pursuant to Section 1.115 of the
Commission\'s Rules, 47 C.F.R. § 1.115, that the Application for Review
of RCN of New Jersey, Inc. seeking reversal of In the Matter of RCN
Cable of New Jersey, Inc., DA 99-1745 (released September 2, 1999), IS
DENIED and the referenced Petition for Stay IS DISMISSED AS MOOT.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

[^1]: In the Matter of RCN Cable of New Jersey, Inc., Order on
    Reconsideration (released September 2, 1999).

[^2]: In the Matter of RCN Cable Of New Jersey, Inc, 13 FCC Rcd 21788
    (1998).

[^3]: Communications Act, Section 623(c), *as amended*, 47 U.S.C. §
    543(c) (1996). 47 U.S.C. § 543(c), which establishes the criteria
    for Commission regulation of the cable programming service tier,
    does not apply to cable programming services provided after March
    31, 1999. *See* 47 U.S.C. § 543(c)(4) (1996).

[^4]: *See* 47 C.F.R. § 76.922 (1997).

[^5]: Pub. L. No. 104-104, 110 Stat. 56 (1996).

[^6]: *See* Implementation of Cable Act Reform Provisions of the
    Telecommunications Act of 1996, 11 FCC Rcd 5937 (1996).

[^7]: *See* Communications Act, Section 623(c), as amended, 47 U.S.C.
    Section 543(c) (1996).

[^8]: *See* Section 76.956 of the Commission\'s Rules, 47 C.F.R.
    §76.956.

[^9]: *See* Section 76.922 of the Commission\'s Rules, 47 C.F.R.
    §76.922.

[^10]: Id.

[^11]: Id.

[^12]: Implementation of Sections of the Cable Television Consumer
    Protection and Competition Act of 1992: Rate Regulation FCC 95-397,
    11 FCC Rcd 388 (1996).

[^13]: This 12 month period is called the Projected Period.

[^14]: The period of time for which estimated costs are compared with
    actual costs is called the True-Up Period.

[^15]: In the Matter of C-TEC Corporation, FCC 98-132, 13 FCC Rcd 13673
    (1998). C-TEC is the predecessor in interest to RCN.

[^16]: In the Matter of C-TEC Cable Systems, FCC 99-63, 14 FCC Rcd 5437
    (1999).

[^17]: FCC Form 1240 Instructions at p.13.

[^18]: Reconsideration Order at ¶ 4.

[^19]: *Id*. at ¶ 5.

[^20]: *Id*. at ¶ 4.

[^21]: Application at p. 5. In support of its proposition, RCN cites In
    the Matter of Comcast Cablevision of Paducah, Inc., DA 97-2144, 13
    FCC Rcd 7891 (1997) (\"*Comcast*\"), in which the Bureau stated \"We
    accept Operator's FCC Form 1240 in lieu of its previous filings and
    make the following adjustments."

[^22]: The *Comcast* decision cited by RCN is distinguishable from the
    instant matter because, in *Comcast*, the Bureau allowed the
    operator to file an amended FCC Form 1240 in order to claim
    adjustments to its CPST rate that the operator was entitled to claim
    whereas RCN is asking the Bureau to allow RCN to file an amended FCC
    Form 1240 in order to claim an adjustment RCN is not entitled to
    claim.

[^23]: *See* 47 C.F.R. §1.106(f), which allows 30 days to file a
    petition for reconsideration. The Proposed Resolution Order was
    released on July 15, 1998 and the Final Resolution Order was
    released on March 31, 1999.