HomeMy WebLinkAboutResolution 94-10RESOLUTION NO. 94- 10
RESOLUTION REGARDING REGULATION OF RATES
CHARGED FOR BASIC CABLE SERVICE
AND RELATED EQUIPM'ENT
WHEREAS, the City of Columbia Heights ("City") is a certified rate regulatory authority
for Columbia Heights, Minnesota, and by delegation, the City of Hilltop, Minnesota.
NOW, THEREFORE, at a regular public meeting of the City dated Feb. 28
the following is resolved:
, 1994,
FINDINGS
1. The Cities of Columbia Heights and Hilltop are Grantors of Cable
Communications Franchise Ordinances ("Ordinances") originally executed by and between
Teleprompter of Columbia Heights and each of the Cities. The Ordinances were renewed on
or about June 25, 1990.
2. On or about September 1, 1992, Meredith/New Heritage Strategic Partners, L.P.,
an Iowa limited partnership (hereinafter "Grantee"), became Grantee of the Ordinance.
3. In accordance with applicable provisions of the Cable Consumer Protection and
Competition Act of 1992 (hereinafter the "Cable Act") and rules adopted by the Federal
Communications Commission ("FCC"), the City has undertaken all appropriate procedural steps
to regulate the basic cable service tier and related equipment.
4. In accordance with applicable FCC regulations, on or about September 10, 1993,
the City filed FCC Form 328 -- Certification of Franchising Authority to Regulate Basic Cable
Service Rates and Initial Finding of Lack of Effective Competition -- with the FCC.
5. In accordance with applicable FCC regulations, on or about September 30, 1993,
the City passed and adopted a Rate Regulation Resolution regarding Policies and Procedures for
Rate Regulation.
6. On or about October 13, 1993, the City notified Grantee in writing that Grantee
was subject to the rate regulatory authority of the City and requested Grantee's FCC Form 393
and associated documentation.
7. On or about November 15, 1993, the City received Grantee's FCC Form 393
which is attached and made a part of this Resolution as Exhibit A.
8. The City's special legal counsel for telecommunication issues, Bernick and Lifson,
P.A., was asked to provide assistance to the City for review of Grantee's FCC Form 393.
9. Bernick and Lifson, P.A. retained the services of the accounting farm of
Muellerleile & Harrington, Ltd. to assist in the analysis of rate information.
10. Pursuant to FCC regulations, on or about December 20, 1993, the City sent a
letter notifying Grantee that the time period for the City's review of FCC Form 393 would be
extended for an additional ninety (90) day period.
11. Muellerleile & Harrington, Ltd. issued a preliminary report dated December 1,
1993, identifying certain issues requiring Grantee's response before a final report could be
prepared, which report is attached and made a part of this Resolution as Exhibit B.
12. On or about December 16, 1993, Grantee responded to Muellerleile &
Harrington, Ltd. and the City, which response is attached and made a part of this Resolution as
Exhibit C.
13. On or about January 19, 1994, a final report was prepared for the City by
Muellerleile & Harrington, Ltd. which report is attached hereto and made a part of this
Resolution as Exhibit D.
14. The City conducted a meeting open to the public on February 28, 1994, to ensure
that all interested parties had ample opportunity to present information to the City.
15. Based upon the information received from Grantee, information received at the
public meetings of the City, and all reports and advice from Muellerleile & Harrington, Ltd. and
Bernick and Lifson, P.A., the City makes the below additional Findings:
Grantee has not made changes to account for an FCC misprint of inflation factor
on Form 393.
Grantee's allocation percentage for Vehicle R&M and Vehicle Oil & Gas is
inconsistent with Vehicle percentage determined on Schedule A of Form 393 and
Vehicle lease expense.
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Grantee has created information on lines 109B, 109C, 209B, and 209C on Form
393 and included information on these lines, which is inconsistent with Federal
law, FCC rules and approved Form 393.
Grantee has used quarterly averages of equipment revenue for Worksheet 2 rather
than annual averages as required by the instructions to Form 393.
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With total system subscribers in excess of 100,000 subscribers, Grantee
incorrectly used the Benchmark Rate table for 1,500 subscribers when it should
have used the Benchmark Rate table for 10,000 subscribers.
f. Grantee .did not include a factor for Maintenance Facility Cost.
g. Grantee did not include disconnect activity as a "tier change" task for
determination of installation cost allocation to equipment costs.
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Grantee should have used allocations of installation/service vehicle costs based on
unit count of vehicles in place of "estimated replacement cost" information.
Grantee used a tool allocation percentage significantly different than manpower
on vehicle allocation percentages.
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Grantee has since September 1, 1993 calculated and billed franchise fee costs
inconsistent with the City's understanding of the FCC's rate freeze and other
requirements, said practices are the subject of a written request for a ruling to the
FCC issued by the Quad Cities Cable Communications Commission, Anoka,
Minnesota (said request for a ruling attached hereto as Exhibit E and made a part
hereof). NOTE: This finding is contingent upon the final ruling of the FCC on
this issue and any appeals thereof.
Grantee has, since September 1, 1993, been treating as external costs, expenses
associated with franchise imposed obligations which existed prior to September
1, 1993, including, but not limited to, costs associated with provision of required
public, educational and governmental access channels, scholarship grants and
local origination costs.
Grantee has, since September 1, 1993, been passing through to each subscriber
an amount of $1.88 per month as a "PEG" fee to recoup expenses associated with
franchise obligations which existed prior to September 1, 1993, said pass through
charges are the subject of a written opinion issued by Bernick and Lifson, P.A.,
as the City's legal counsel, and said opinion, attached hereto as Exhibit F and
made a part hereof, is hereby adopted by the City.
16. The FCC has announced that it intends to make certain modifications in their rate
rules and regulations which may affect the review of rates currently being conducted by the City.
17. The City must act upon the pending rate request consistent with current FCC rate
rules and regulations.
18. The City desires and intends to take advantage of any further reductions in the
FCC benchmark calculations.
CONCLUSIONS
The City concludes that:
1. Grantee's request for cable rate approval for the maximum permitted rate for basic
service tier (exclusive of any franchise fee) of $8.50 is denied.
2. Grantee's request for cable rate approval for the maximum permitted charge for
hourly service (exclusive of any franchise fee) of $16.49 is denied.
3. The maximum permitted rate for the basic service tier (exclusive of any franchise
fee) shall be $8.40.
4. The maximum permitted charges for hourly service shall be $15.25.
5. Grantee shall only be allowed to include as external costs increases in franchise
imposed obligations, including public, educational and governmental costs, which occur after
October 13, 1993, the date on which Grantee's system became subject to rate regulation.
6. Grantee has violated FCC rules and regulations and federal statutes by Grantee's
practice since September 1, 1993, of passing through to and collecting from each subscriber an
amount of $1.88 per month as a "PEG Fee" for the purpose of recouping expenses for franchise
obligations which existed prior to September 1, 1993.
7. Grantee and City will be bound by any ruling issued by the FCC regarding the
billing of franchise fees by Grantee.
8. The City has an obligation to timely act upon the pending'rate application
consistent with now current FCC rules and regulations. However, if the FCC alters the
benchmark calculations resulting in a lower reasonable rate for Columbia Heights/Hilltop
subscribers, the City has an obligation to area subscribers to reconsider the pending analysis
consistent with such changes the FCC may make in its regulations.
9. The City hereby adopts and makes a part of this Resolution all attachments
referenced above.
ORDERS FOR ACTION
Based on the foregoing Findings and Conclusions, the City hereby enters the following
orders:
1. Pursuant to current FCC regulations, from the date of the order and until further
order of the City, Grantee shall be permitted to charge an initial rate for the basic service tier
of $8.40.
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2. Pursuant to current FCC regulations, from the date of the order and until further
order of the City, Grantee shall be permitted to charge $15.25 as its hourly service charge.
3. Pursuant to current FCC regulations, from the date of the order and until further
order of the City, Grantee shall cease charging any and all PEG access fees of any amount
except that which reflects increases in franchise imposed obligations in excess of GNP-PI, which
occur after October 13, 1993, the date on which Grantee's system became subject to rate
regulation.
4. Grantee shall immediately undertake all necessary steps, in accordance with
applicable FCC regulations, to refund to all subscribers $0.10 per month, and any franchise fee
assessed thereon, plus interest, computed at the applicable published rates for tax refunds and
additional tax payments, which has been overcharged since September 1, 1993 as a result of the
difference between Grantee's requested basic service rate of $8.50 and the approved basic
service rate of $8.40.
5. Grantee shall immediately undertake all necessary steps, in accordance with
applicable FCC regulations, to refund to all subscribers who have been overcharged for hourly
service, $1.24 per hour for each hour of hourly service charged each subscriber, since
September 1, 1993, and any franchise fee assessed thereon, plus interest, computed at the
applicable published rates for tax refunds and additional tax payments. The refund is based upon
the difference between the $16.49 hourly service charge (actual rate since September 1, 1993)
and $15.25 (the permitted and approved hourly service charge).
6. Grantee shall immediately undertake all necessary steps, in accordance with
applicable FCC regulations, to refund to all subscribers the PEG Fee in the amount of $1.88,
and any franchise fee assessed thereon, plus interest, computed at the applicable published rates
for tax refunds and additional tax payments, which has been overcharged since September 1,
1993, as a result of the treatment as external costs, expenses associated with franchise imposed
obligations which existed prior to September 1, 1993, including, but not limited to, costs
associated with provision of required public, educational, and governmental access channels,
scholarship grants, and local origination costs..
7. Grantee shall provide the City evidence that Orders 1, 2, 3, 4, 5 and 6 have been
complied with and that all refunds have been properly made in accordance with the Cable Act
and applicable FCC regulations.
8. Grantee shall comply with any future ruling of the FCC regarding the billing of
franchise fees.
9. The City reserves the right to reconsider this resolution within sixty (60) days of
its adoption for the sole purpose of further reducing rates, should the future modifications to
FCC rules and regulations so provide and permit.
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10. This resolution shall not be reconsidered should any further analysis pursuant to
furore FCC rules and regulations result in higher rates to subscribers, unless such future FCC
rules and regulations mandate that this City order such an upward adjustment.
Passed this28thday of February
, 1994.
Offered By: Nawrock i
Seconded By: Ruett imann
Roll Call:
All ayes
{~seph S~rc~evant, Mayor '
~/J/0-Anne Student, Council Secretary
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