Before the

Federal Communications Commission

Washington, D.C. 20554

+----------------------------------+---+------------------------------+
| In the Matter of                 | * | File No. CSB-A-0015          |
|                                  | * |                              |
| TIMES MIRROR CABLE               | ) | CUID Nos. CA0549 and CA0652  |
|                                  | * |                              |
| TELEVISION OF ORANGE             | * | CUID No. CA0316              |
|                                  |   |                              |
| COUNTY, INC. d/b/a               | * | CUID No. CA1070              |
|                                  | * |                              |
| DIMENSION CABLE SERVICES         | ) | CUID Nos. CA0192 and CA0135  |
|                                  | * |                              |
| Appeals of Local Rate Orders     | * |                              |
|                                  |   |                              |
| of the Following Cities:         | * |                              |
|                                  | * |                              |
| Dana Point, California           | ) |                              |
|                                  | * |                              |
| Laguna Niguel, California        | * |                              |
|                                  |   |                              |
| Lake Forest, California          | * |                              |
|                                  | * |                              |
| Mission Viejo, California        | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
+----------------------------------+---+------------------------------+

MEMORANDUM OPINION AND ORDER ON RECONSIDERATION

**Adopted: March 19, 2001** **Released: March 21, 2001**

By the Deputy Chief, Cable Services Bureau:

# introduction

1.  Cox Cable Orange County, Inc., formerly Times Mirror Cable
    Television of Orange County, Inc. d/b/a Dimension Cable Services
    ("Dimension" or "operator")[^1] filed a petition for
    reconsideration[^2] of a Consolidated Order issued by the Chief,
    Cable Services Bureau, on June 1, 1995 ("*Bureau Order*").[^3] The
    Order denied, in part, and dismissed,[^4] in part, the operator's
    appeals of four separate rate orders issued by the above cities that
    disallowed Dimension's inclusion of franchise fees as a portion of
    equipment revenue on FCC Form 393.[^5] The City of Laguna Niguel
    ("City") filed an opposition to the petition for reconsideration and
    Dimension filed a reply.

    **II. ANALYSIS AND DECISION**

2.  Dimension contends that the Cities improperly excluded a portion of
    its franchise fees from Dimension's cable rate justification
    calculations. The operator included \$33,703 of franchise fees as
    part of its equipment revenue on Line 204 of Worksheet 2, in Part II
    of its Forms 393. Including franchise fees or portions thereof in
    Line 204 has the effect of increasing the operator's base rate per
    channel as of September 30, 1992, which may result in a higher
    maximum rate. The Commission's rules contemplate recovery of
    franchise fees as an external cost in addition to the maximum
    permitted rates calculated on Form 393.[^6] The *Bureau Order*
    upheld the positions of the Cities and found that if franchise fees
    are included in both the base from which maximum rates are
    calculated and permitted as an addition to maximum permitted rates
    as a pass-through, the operator would recover those costs twice.
    Dimension asserts that the Commission structured its benchmark rates
    to exclude the franchise fee expense on programming service
    revenues, but not the franchise fee expense on equipment revenues.
    The operator contends that the Cities' exclusion of franchise fees
    from its equipment revenue resulted in a substantial understatement
    of its base rate per channel. The operator further argues that
    nowhere in the Form 393 is an operator required to reduce the monthy
    equipment revenue calculation by the amount of revenue allocable to
    franchise fees; that while Form 393 instructions direct operators to
    "back out" the portion of service revenues allocable to franchise
    fees, there is no similar instruction with respect to equipment
    revenues; that it appears that the Commission later corrected this
    anomaly in its Form 1200;[^7] and that the Commission has not
    addressed the merits of its appeal of the Cities' treatment of its
    franchise fee calculation methodology.

3.  We affirm our earlier conclusion in the Bureau Order and agree with
    the Cities that allowing Dimension to include within line 204 of
    Form 393 equipment revenue allocable to franchise fees would yield a
    double recovery for the operator, once for the amount that
    effectively became imbedded in Line 204 as the base and again as
    franchise fees are added as a pass through to the maximum permitted
    rate. Moreover, we note that the instructions for Line 104 of
    Worksheet 1 and Line 204 of Worksheet 2, Form 393, expressly provide
    that the monthly average equipment revenue as of September 30, 1992
    is calculated by taking the total revenues earned over the preceding
    fiscal year for the community unit for the following categories of
    equipment and installation services: (1) converter box rental; (2)
    remote control rental; (3) additional outlet fees; (4) installation
    fees; (5) disconnect fees; reconnect fees; and (7) tier changing
    fees, and that the total revenues are then divided by 12 to compute
    the equipment revenue per month. Thus, the instructions do not allow
    the inclusion of franchise fees or other items. Additionally, a
    Commission Public Notice: "Cable Television Rate Regulation,
    Questions and Answers Relating to FCC Form 393" (released July 30,
    1993), at Question and Answer 8 addresses whether or not the seven
    categories of equipment and installation services listed in the
    instructions are intended to be exhaustive. The answer specifically
    states that the categories of equipment and installation described
    in the instructions to Line 104 are exhaustive; that no other items
    should be included; that these were the categories the Commission
    included in the cable rate survey which was used to develop the
    benchmarks against which current rates will be compared; and that in
    order to ensure a proper comparison, the same categories must be
    used in Line 104.

    **IV. ORDERING CLAUSES**

4.  For the foregoing reasons, **IT IS ORDERED,** that the Petition for
    Reconsideration filed by Cox Cable Orange County, Inc., formerly
    Times Mirror Cable Television of Orange County, Inc., d/b/a
    Dimension Cable Services, **IS DENIED**.

5.  This action is taken pursuant to authority delegated under 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]: Dimension's parent company, Times Mirror Cable Television, Inc.,
    was merged with Cox Communications, Inc. on January 31, 1995.

[^2]: *See* 47 C.F.R. § 1.106.

[^3]: *In the Matter of Times Mirror Cable Television of Orange County,
    Inc. d/b/a Dimension Cable Services*, DA 95-1177, released June 1,
    1995 (Cab. Serv. Bur. 1995).

[^4]: The *Bureau Order* dismissed an issue regarding whether the Cities
    exceeded their authority by reserving the right to order additional
    rate reductions and refunds based on any future Commission action.
    That issue was not appealed.

[^5]: FCC Form 393 is the official form used by the Commission to
    determine whether an operator's regulated rates for programming,
    equipment and installations were reasonable during the time period
    from September 1, 1993 until May 14, 1994.

[^6]: 47 C.F.R. § 76.923(k).

[^7]: FCC Form 1200 is the official form used to determine whether
    initial regulated rates for programming are reasonable under the
    revised benchmark rules which apply to cable operators beginning May
    15, 1994, or upon the expiration of the deferral period provided
    under our rules for operators to comply with the revisions to the
    rules.