Santa Monica, California
City Council: Jan. 9, 1996
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Recommendation to Adopt Resolution Regarding A Rate
Order for "SmartBox" Converter and "Universal" Remote
Control Device Rates for Century Southwest Cable
Television, Inc.
INTRODUCTION
This report recommends that the City Council issue by resolution
a rate order to Century Southwest Cable Television, Inc.
("Century") which establishes rates for the "SmartBox" converter
and "Universal" remote control device, and orders Century to
issue refunds, if any.
BACKGROUND
The City has been certified by the Federal Communications
Commission (FCC) to regulate basic cable television rates (which
includes the "basic cable" tier and rates for associated
equipment, installation and services). Pursuant to FCC
regulations, a cable company must justify the rates it charges as
reasonable in accordance with federally-devised formulas. The
City serves as the implementing agency for determining Century's
compliance with the federal regulations.
The FCC has set forth specific procedures for franchising
authorities and cable companies to follow in establishing rates
for the period commencing after July 14, 1994. Under those
procedures, Century must justify its rates, and any increases in
its rates, by filing the appropriate FCC Form 1200 Series rate
filing. The City and Century have been proceeding in accordance
with these procedures.
Because threshold issues regarding Century Select rates are
already on appeal before the FCC, the City and Century entered
into an agreement to defer further review of certain of Century's
FCC Form 1200 series rate filings pending completion of current
appeals before the FCC, and judicial review if any, and to extend
Century's refund liability period. This agreement preserves the
City's right to order refunds if rates set forth in the 1200
series rate filings are found unreasonable under the FCC rules,
but minimizes further litigation costs to the City in the
interim. However, the deferral affected by the agreement does
not apply to Century's rate filings for the "SmartBox" converter
and associated remote control device and the "Universal" remote
control device.
Century submitted an FCC Form 1205 rate filing to the City on
February 14, 1995 for the "SmartBox" converter and its associated
remote control device. On May 19, 1995, Century submitted an FCC
Form 1205 rate filing for the "Universal" remote control device.
Century has confirmed that the "Universal" remote control device
is the same piece of equipment as the remote control device
associated with the "SmartBox". Both devices are referred to
below as the "Universal" remote control device. The City
reviewed the rate filings submitted by Century and supplemental
information requested by the City.
The chart below sets forth: (a) the maximum permitted rates
recommended by the City's financial consultant for the "SmartBox"
converter and the "Universal" remote control device; and (b)
Century's proposed rates for the converter and "Universal" remote
control device:
Recommended Rate Century's Proposed Maximum Permitted Rate
"Universal" Remote
Control Device $ .71 $1.56
"SmartBox" Converter $2.29 $3.20
Century stated that it would offer subscribers -- other than
"basic-only" subscribers (i.e., those subscribers receiving basic
cable service, but not Century Select and other premium services)
-- the equipment at a special discounted rate of $0.99 per month
for the "SmartBox converter and $0.00 for the "Universal" remote
control device. Century recently informed City staff that it did
not intend to discontinue such discounts prior to January 31,
1996.
Century states that it provides a converter box, including the
"SmartBox" converter box, to "basic-only" customers at no charge
(i.e., no installation fee or monthly rental fee). Century
requires that "basic-only" subscribers use a converter box to
receive basic cable service. The converter box is used to block
the "Century Select" tier signal, which "basic-only" subscribers
might otherwise receive over their cable-ready televisions.
The rates established by the attached Rate Order would be in
effect until Century is permitted by FCC regulation to adjust the
rates pursuant to the Company's November 6, 1995 FCC Form 1205,
subject to City review of such rates.
City staff believes that the City should issue a rate order to
establish the maximum permitted rates recommended by the
financial consultant for the "SmartBox" converter and "Universal"
remote control device during the period covered by the February
14, 1995 and May 19, 1995 Form 1205 rate filings, and to order
refunds of overpayment, if any, for the "SmartBox" converter and
"Universal" remote control devices during such period.
BUDGET IMPACT
There is no City budgetary impact resulting from the issuance of
this rate order.
RECOMMENDATION
City Staff recommends that City Council adopt the attached rate
order to establish the rates for the "SmartBox" converter and for
the "Universal" remote control device during the period under
review, and to order refunds, if any, of overpayment for such
equipment during such period.
Prepared by: Kathryn Vernez, Senior Management Analyst
Linda A. Mills-Coyne, Deputy City Attorney
Robin Gee, Cable Manager
Attachments: Resolution
Kaiser Scherer & Schlegel Final Financial Report