HomeMy WebLinkAboutItem 12 - Paragon Cable Rate ReviewITEM # 11
MEMO TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: ROGER NELSON, CITY MANAGER
MEETING DATE: MARCH 7, 2000
SUBJECT: PARAGON CABLE RATE REVIEW
RECOMMENDATION:
City Council consider the approval of two rate order ordinances to reject the Paragon
Cable rates established by FCC Form 1240 and FCC Form 1205, accept the withdrawal
for FCC Form 1235 and to order new maximum permitted rates.
FUNDING SOURCE:
The rate order does not have a financial impact. The city will continue to collect revenue
according to our franchise agreement of 5% of gross receipts.
BACKGROUND:
The City of Grapevine received notice of Paragon Cable's FCC rate filing in September
1999. Since this is the first year that Paragon Cable has filed a rate increase outside the
auspice of the "Social Contract" agreement, staff felt a review of their proposal was
appropriate. The Social Contract was an agreement the FCC and Time Warner entered
into in 1995; the agreement allowed Time Warner to recover the costs associated with
their nation-wide system upgrade.
The charge for the basic service tier in 1999 was $9.06 that includes channels 0-22. In
their recent filing, Paragon proposed a rate increase under FCC Form 1240 of .40¢, and
proposed a rate increase under FCC Form 1235 of $1.45. Those proposed increases
have brought the basic service tier cost up to $10.91, an increase of $1.85. The FCC
Form 1205 indicated reductions in most areas of monthly lease or installation services
except for the addressable converters. That rate increased from $2.76 to $3.44, a .68¢
increase. The rate increases were implemented on January 1' in accordance with FCC
rules. However, these increases are not justified according to our consultant.
Connie Canady, C2 Consulting, Inc., was hired to provide an analysis of FCC Forms
1205, 1235 and 1240 related to Paragon's rates for the year 2000. The consultant's
March 2, 2000 (1:14PM)
reports are included for your review. The Staff recommends the following course of
action based on the reports:
a) The City Council deny Paragon Cable the rate increases filed in the 1205 and
1240.
(Paragon requested a .40¢ increase for total basic tier charge of 9.46; and
requested a .68¢ increase in addressable converters for charge of $3.44)
b) The City Council accept Paragon Cable's offer to withdraw the FCC Form
1235 filing.l
(Paragon requested an additional $1.45 increase that would bring the
basic tier charge to $10.91)
c) Order a maximum permitted rate of for basic service tier of $9.36, order a
maximum permitted rate of $3.39 for addressable converters (and .62¢ for
non -addressable converters) as outlined in the attached ordinances.
The City of Grapevine retains regulatory authority only on these specific services.
Paragon Cable, with City Council approval of this rate order, must adjust the basic
service tier rates and monthly lease rates immediately and issue credits to customers.
It should be noted that while working with C2 Consulting Services, Inc., Staff also
contacted the other communities who are serviced by Paragon Cable. C2 Consulting
Services, Inc. reviewed the FCC forms filed in Irving and Coppell. Staff representatives
from these cities will be forwarding similar recommendations to their respective boards
and councils based on the C2 Consulting Services, Inc.'s reports.
Staff recommends approval of both of the rate order ordinances. The Utilities
Committee and the City Attorney have been briefed on the rate order and support the
approval of the ordinances.
1 Representatives from the Cities of Coppell, Grapevine, Irving and Lewisville asked Paragon Cable to
withdraw their filing of FCC Form 1235. The cities' argument is based on the fact that Time Warner has
already recovered the capital costs associated with the system wide upgrade under the Social Contract
provisions. Paragon Cable agreed to withdraw the Form; however will be applying the increase to the
unregulated standard service tier.
March 2, 2000 (1:14PM)
f
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF GRAPEVINE, TEXAS ESTABLISHING THE MAXIMUM
PERMITTED BASIC SERVICE TIER RATES CHARGED BY
PARAGON CABLE, DECLARING AN EMERGENCY AND
PROVIDING AN EFFECTIVE DATE
WHEREAS, the City of Grapevine, Texas franchises cable television service for
the benefit of its citizens, and
WHEREAS, the City is the Grantor of a franchise ordinance by and between the
City of Grapevine and Paragon Cable ("Paragon"); and
WHEREAS, in accordance with applicable provisions of the Telecommunications
Act of 1996 (herein the "Telecom Act") and rules adopted by the Federal
Communications Commission ("FCC") and all other applicable federal and state law and
regulations, the City has undertaken all appropriate procedural steps to regulate the
equipment and installation rates; and
WHEREAS, in accordance with applicable FCC- regulations the City adopted an
ordinance providing for the regulation of rates charged by cable television operators
within the City for the equipment and installation rates and related equipment and
installation charges and providing for a reasonable opportunity for interested parties to
express their views concerning basic cable regulations.
NOW, THEREFORE IT BE ORDAINED BY THE CITY COUNCIL OF THE CITY
OF GRAPEVINE, TEXAS:
Section 1. Findings:
1. That on or about October 1, 1999, the City of Grapevine received
Paragon's FCC form 1240 filing.
2. That the City engaged the services of C2 Consulting Services, Inc.
to provide assistance in the review of Paragon's FCC form 1240 to
determine the reasonableness of the proposed basic service tier
rates, attached hereto as Exhibit "A".
3. That based upon the information received from Paragon and
recommendations from C2 Consulting Services, Inc., the City
concludes that the rate proposed by Paragon for maximum
permitted service rate is not reasonable.
Section 2. Conclusions:
The City has an obligation to timely act upon the pending rate application
consistent with current FCC rules and regulations. Paragon's submittal of the FCC form
1240 received on or about October 1, 1999, is hereby rejected, for the reason that the
proposed rate is not reasonable.
Section 3, Orders for Action:
Based on the foregoing Findings and Conclusions, the City hereby enters the
following orders:
1. Paragon's request for maximum permitted basic service rate of $9.46
included in its Form 1240 filing is hereby denied.
2. Based on the information received from Paragon and recommendations
from C2 Consulting Services, Inc. which is attached hereto as Exhibit "A"
and included herein for all purposes, the maximum permitted rate for the
basic service tier is established at $9.36 effective March 7, 2000.
Section 4. The fact that the present ordinances and regulations of the City of
Grapevine, Texas, are inadequate to properly safeguard the health, safety, morals,
peace and general welfare of the public creates an emergency which requires that this
ordinance become effective from and after the date of its passage, and it is accordingly
so ordained.
PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS on this the 7th day of March, 2000.
ORD. NO. 2
ATTEST:
;,
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1 K MW man ONSLULTING SERVICES, INC.
16 i III
7801 Pennoss
DaHas, Texas 75248
Jmumy 28. 2000
W, Nlehsa Leal
Assistant to the City Mana,_n-
Uity of Grapevine
PC) Box 95 104
Grapevine. Texas 76091)
Dear NIs. Leal:
(972) 729-721 S
(972) 729-0212 (fax)
Consulting Ser%ice& Inc. (-C'21 has completed its rmo,of the FCC' Forni 1240 and the
FCC' Form 1235 submitted to the CIO of Grapevine. Texas (the "City-') bti Pua,;on Cable
'Paragon ot - the -Compmq-) on or about Sepr.inbier �(). !QQQ. Paragon is proposing to
wornbWe We I_eSUItS OfthCn ratio filings 10 jLlStify its proposed basic service rates. -Flic follovving
report provides a brief discussion of the issues noted during the ro0em and C2's
regarding porential CIO, Council onions in response to Paragon's proposed
baw sonice rates.
This studti does net COIIStitUte an exLu71inLtion oFthe financial condhion of Paragon or its parent
company. Therefore, C2 cannot and does not express any position vith regard to the accuracy or
2liditv of the finaticial infornikon pr vAed by Paragon during the course of the analyses.
0 VE R V1 EW 0 F T1 -1E F 11,
to thv infor-n-tation pro,, id2d by Patagon, the hasic scmce tier includes vvenqvw o (22)
Wannels Prior to the Janumo 3 � implemetnation of to tiled into, ' hmqun "as chic on 59.06fur basic service progruirunitig based cm is Fcarn 1240 cornpurtarion for the I R99 rate 3wau.
Howevet this yem, We Compwq has tiled a FCC For-ni 1235 in an Wni to collect costs related
K, the cable symeni upgrade. Pursuant to FCC regulakv die result of a Fomin 1235 computation
can be added to the Forrn 1240 computation to develop the total We setwice chmg, Band on
Paragon's proposed Form 1240 filing of 59.46 and proposed Form 1235 filing of SIAM the
Company has increased the basic servne rate by S 115 to a proposed rate of S! ().() I - The rate
1 war is January 1, 2000 thrOUg"h December 31. 2000
line an three Qor tactors that exploun Paragon's proposed increase in the Ric svn4ce rate:
3wed on par;agraph 92 of Me il"nn& W,, FCC 95-3J 7, r,-!t�as�.:d 22.
QN, a cable operator may implement a proposed roe nWYjATQ dqn atter A has BQd for to rate change
Obthe WwWArigauthoHm Ho`. var, the fraw&& ng awhorhy has one " �,ar C-orn the ,iaze of the filing
;v"hichtorender afinal decision_ Such decision is retroa ire to the bei>innin<> date on "hkhhe
pwposed roe mas charged Because Me Form 1235 rats is added as a component to the henciiniarkForrn
i 240 rate, the City has he same period of resiev for be Forrad 235 as a does be Form 1240 For either
torm- a decision is retroactive to the date otrate, implementation
\Is. Melisa Leal
January 28, 2000
Page
1. Paragon proposes to use a hid, her inflation factor in its current Foran 1240 true -up
period than vti hat v�as estimated in the projected penod for the pnorl9()8 filing_
2. Paragon proposes an additional projected year of inflation in itscuuer,t Form 1240
that xvill be trued -up next year pursuant to FCC regulations: and
3. As stated aboN e_ Paragon proposes to add in additional S 145 based on Hs FCC Form
1235 computation
A'.'N"ALYSES OF THE FHAN US
Project ObjectiNes and Actir ities
Th, prtl ect of jectives are thrc,24old:
1. Assessment of the Completeness of the Alinas R Ali regard to the Infori 1ation and
documentation that roust he tiled %%ith the ('ite.
=. .assessment of the reasonableness of the proposed computations In light of FCC
regulations. and FCC rulings.
Usessment of the reasonableness of the proposed computations Iii 1'.g}'t of the
ColiipanL s ei.'Ctlon to opt out of Certain provions 1I1 the Social Contract.
-
k Ghen these objeakes, C2 conducted the prgject activities:
1. Review of the filings to assess the completeness based on the FCC Forin instructions.
_'. netiit" of the tilings t,-, id-.miA6am issues vtith respect to the data and`or
methodologies emplotied h% Paragon.
_. Subirission of . "i w- it M mquests and sll?seclLien t revicx5 t` aira_Ton's
responses.
rt. Reviev4 of FCC d:',CisionIt that, cleai'i�. ha%c Lit-, impact on Piragon s proposed
methodologies.
De olopment of potential akemakes mailable to the Citi- in establishing maximum
puniltted basic ser A ice rates. -
ilci�tl t nnlru t.for TimMarner Cable MAN Contract'), as approved by the FCC in <<-cru% I `<wiuytct
/w' "inlet riUrner, :I%,'17v1'Utle�t/Nt Of)lillon cam/ (AW FCC 05-478, rdeasedNovenlber it 1095 ,-Sochi
Contract Order")
\1s. Alelisa Leal
January 28, 2000
Page 3
Summary- of Findings
Form 1240:
C2 identified two Alain issues WHI respect to Paragons proposed Form 125 compuruuni_ Kiese
issues are:
1. Pymgon inappropriately included estimate(,' Costs (Il its trUe-up pc1T,'ii
_. In cotijuncdon with coaccilin'u the true -up period, file A&Wort taaoN to he applied
during both t11e true -up period and the projected period need to retiect the most recent
information available.
Form 1_35:
the overriding issue related to the For in 1 ?3
L Paragons proposal to recover the upgrade costs that were the primary bads for CPST
increases under application of Social Contract provisions in the last fOLIF years should
not be considered no" in the dev elopm nt of rate year 2000 basic serN ice rates.'
Discussion —t=oast 1240
1.
1 --se of Actual Costs Only, For True-t'p Period
Th;: Form 1240 methodology incorporates a series of ealculat>-ons that in-ol%c an accounting of
the actual costs previously- pro�iected for the prior rate bear and an allowance for pro?jecting
.;e17ain cost increase&decreases fog" the upcondrig rate bear, In each annual Froin 1240 film, the
protections from tlhe prior computation an to be - mied-up to actual costs. nn.d i!nl- ober Linder -
collections are taken into account in the do eOpment of the new rates.
In (!ri�_'r'r),'the FCC' !hotel,:
Because the true -Up Neill examine "Tat cods Dere actLiall,incurred, it can ON> examine
costs as of the date the Form 12419 is tiled. As a result. and because rile %in 1240 must
be tiled at least 90 days before the proposed increase is scheduled to take effect, .. and
the projections are made for the year beginning "ith the proposed inlplenorimtion date.
the period applicable for the true up will not exactly coincide with the previous years
projections. For eyampie, if an operator files annually on October I for rates to take
ut'fect on Januar-% 1, the true -up N011 Cover the period from the previous (),:tober through
September. but the projections WI apple to the period Januarl- to [december.
Paragons filing ��as subtllitted on September 30, 1�,QQ, for a rate year beginnhy Januar 1. 2000
WAR example aboxvi However. Paragon's proposed true -up period is from Januarti. 1. 1999.
throw=h December ; 1. 1999. even though the information available to Paragon at the time of the
tiling "as onV through September 30, 1Q99. Thererlore, the last three mond s AMC true -up
See Social Contract at IILF.-_
'See paragraph 79, footnote 15 L FCC 95-397, reieased September 22. 1995
Vs. Velisa Leal
Jarnary 2S. 2000
Page 4
period as calculated by Paragon i� based on estimated data anti not on the actual data that
must be used.
'lice FCC has issued a number of decisions concerning this issue, mane of %�hich ha, -e been
related to Flunks submitted by Paragon in other jurisdictions. For example:
Upon reg, ieu of the Operators FCC Foran 1240. . . "e find that Operator has not
coizectly calculated its NIPR. In particular, npdramr nude true -up adjustm_-nt; throuvh
to the effectiN e dote of the tate increase. This is incorrect. , . The trUe-up data is Intended
to indicate real. not projected data This police is reflected in instructions aceompanong
FCC Finn 12415
In C_'s opinion and based on these FCC decisions. Paracon should not be authorized to include
Wober 1990 throug=h Deceinher 11)90 in its Forni 1240 nue-up period. The true -up period
should be only for the Eine months ended September 1 QQ " .-actual data for the Wober through
December 1999 period should be trued -up in Paragons next rate tiling.
The impact of allowing only a nine month tl-ue-Up period is to reduce the rate N ear 2000 Form
1240 proposed basic service calculation by :gTrWmate4 SO 1.
2. Aijustment to Inflation Rates
The Form 11240 mithodol0_, allowks tvr an inflation aiijustmtnt to be projected for each rats year.
Such projection becomes part of the truoup computation in the next rate filing,. Based on FCC
reguiadons, a cable operator is to use the most recent information published by the FCC
concerrung, quanerly inflation actors to be applied. At, the time of Paragon'SCUITent Form 1240
filing__ the latest published inflation tactor for amv of the true-ur) period in question was for the
first quarter of 1999. Paragon used this Rwtor of I.Gj)10 not only to true -up the entire true -up
period. but also to project for the t vd% e months ended December 2000.
On �� Cil7C; « dionly i Pa �� 1 tS For n 1_2'T�%. the FCC
October -1, 1 which it i� icirt�'� Fitter ra'_�.ii ilei I:� CUrTel;i
;published the second quarter i:nflaiion factor at 1.35"n. hi [0-omber 1999. the FCC published the
third quarter inflation tactor at
Typicalk, if the inflation tactor used is the onb issue Bund in a franchise y authodry's Wew of
a Fonn 1240 filing. the FCC' has found in; favor of the cable operator using �i hat %v as the most
recent data a�-ailable at the time the filing "as made. This policy ,vas detailed b� the FCC in the
BAY t )r IM M Kc Cot ze ia,'r� tui oii as folloAv s:
We share National Cable Tele%-ision .Association's concern that rates adoptee in an effort
to comply ti.ith our rules as quickly as possible mai become unreasonable soler as a
See ( )rcier. DA 1 S52. rdeased Augun 1097,para ni h c; ( Para ni Cable operations Ai Portland,
Oregon). Order, DA 97- (� released September A 1997, paragraph 9 f Parayon Cable operation; In
Multnomah Co!unn i; and DA 07.1 P30. released Secwmber " 1 Cable
`907 paragraph i Parar��
operations in Gresham e.. al-,)
Typically, a true -up period t,,ould be months. In this case. Parnuon already trued --p October
1993 through December 199S. albeit inappropriate(,, in its prior -rate Win-
FCC Form 1240 Instructions. Part I. Module C [Re% -iced Juk, I9> 'b]
\Is. Melisa Leal
January 28, 2000
Page
result of using later data to refresh the calculation;. Operators should not he penalized
for making good NO attempts to comply "it ou rules in a timeiy manna -
Then current rates are accurately justified by almlysis using the old data wild that data
ryas accurate at the tima cable operators will not be required to char,*e tncir rates.. .
11 hen current rates are not justified by analysis using the old data i <o that a rate
adjusuriern "ruld be m:cessaiA in an%- event), cable operators "AH be req._Iircd to correct
their rates pursuant to current delta. In these circumstances. the resulting rates must be
based on current data.' [cI 1phasis added]
C learly% if the franchising authonry finds adjustments need to be Imide other than those
Attributable to the inflation factors. the FCC has found that the inflation factors can be adjusted
"Ah data that became available subsequent to the date of the filing. The FCC's position on this
We is evAlenced in the above cited Ponland Order (DA 97-Ifs52). In that decision. the FCC
found error %\ all Paragons use of estirimted data in its true -up computation for CPSF rates and
Aso made an adjustment to reflect cunrnt inflation factor data:
This adjustment required that vye refresh Operators inflation factors
Fli,refore. because Paragon's use year 2000 Form 1-2,41) true -up petiod should be reduced from
tvvelti-e months to nine montrls to reflect actual data_ the inflation factors for both the true -up
period and the projected period road to he adjusted to inJude those published in,iation factors
thrOUgh the 7n0st current QQta awdaWc Kad quirtor 1909!. the impact Cil making such
adlustinent Is to reduce the cwrwt Fonn 124 proposed basic service rate calculation by
a;pproynriately S.09,
Discussion — Form 1235
The FCC developed the Form 12 2 5 in order to alio" cable operators an opportunky to justify rate
Increases for recover% of un cstillem ill cable s" stern up_Trades. it v`, as intended io provide an
abbreviated 1neaI13 Of fllln'T a 1, Sh0 tilll1l, but on,L" vSlth I"�Sp_Ct tO costs 0, Irpgrade
and nor genual opemrions of the s1stcm. I'oI- gc,nc:ral OperatiOns. a cable Operat,.-r could continue
to use the Jewhm ark approach to dcveloplilL rates reflected in the F'onn 124, 1lo"ever, the
icvdts of a Fond I235 anal, ds coukI be added u) the doe5opmair of rams under We benchmark
mahod Or a total her rate.
in C_''s opinion_ the Form !2 should not be assailable to Paragon under the Social Contract.
Re major comlponznB of the Sowal Conna Ct That apply lticlllO
1. -*PST rites can W increased j-=_, SITO is each rate wr over a tip.e year period to
ftnld an investment of S4 billion dollars to upgrade all Time Av, anler's systems
( Social Contract, Section I I IE . )
�.
Basic service rates only' shall be increased for changes III evt rnal p1'i_r<<i'anllning Costs
and inflation (Social Contract. Section 111.,;.2.
� n the Form 1235. Paragon proposes to recover its W estmem III the CW ['. s upgrade oven though
it .pll _.11`. has llwed Owl sU .crs during the °1'IOd l C)c;U tilroulh ' U - Wswi kv the
See 11111"61 01.64!1- oil I�i (.TlRS1Cl��rC111�J/l, FCC 0-'-4), released Manch ? 1994para-rraDO, ant ] 04.
,
See Order, DA 97-1852. released August _Q, 1 M. pariginiph 10
Ms. Meiisa Leal
Januar% 28, 2000
Page b
provision of the Social Contract as outlined in =1 above. Hovever. Paragon ciearl.� already has
teen compensated for this upgrade. By proposing, no" to spread the recovery Nt"een basic
service and CPST rate tiers. Paragons proposal. in C2's opinion, is not onl% a '-duubl;: dip` into
the pockets of subscribers, Na also is in direct violation of the Social Contract to ntihich Time
Wni-ner agI'eed. The imam of be Social C i)ntnwt is uneglli%ocally Stated in the WE" ing:
At the core of the ,,ocial contract is the upgrade incentive plan Mierel),, Tithe Warner
«ill rebuild and ungrade Al of its domestic cabb-, snstems and in tube X011 k-allovned to
r::cover the cost-, of Ile tipgrade Oner time lin' adding a charge to the il1'g;?iii ,penetrated
CPST during the years of the Social Contract.
Clearly. the S1.00 per year increase to the CPST tier was intended to corer all the upgrade costs
to both the basic service and other rogul .ted tiers.' Ile Social Contract prop ided that Time
Warner would not seek- to pass capital costs, in addition to the alra dy ruck,d S 1 Ma inual
increase to subscribers.' Paragon should be prohibited from recovering, costs tdr:adn recovered
and from proposing. to place some of that burden on the basic ser%ice subscriber.
ParagoI1 takes a different position arguing that (I is no ItNiger bound bn the ,prov i;!ons of the
St.>cial Contract as it opted out pursuant to Section 111.1. 1.c:
In the event of anV chaIhges to the .-pct or ann material changes tc, tie FCC rules
hereunder relating to rat.sAS (.0 P`, i or eglilpmerm) that are ta%(_-,ra1,)I to T'WC , any
MU, s%stem ina eiect ii) he lclaeled from tic; relevant rare provisions 1Seciions 111. .2.,
ill_W. 111.8._ 111.D.. IILFA., and III.G.) of &A Contract Mit Miall remain
bound by all other provisions of this Contract.
Ile Compw y further states On an a result of exerciAng this Option. It is no loiig'er subject to the
10')o reduction to the basic service rate. the prohibition against adding, satellite channels to the
basic sen'ice rate, FCC regulation Of egttlpihhelht rates, and the prohibKon agruhSt tiHng comwf-
_ervice sho"NIngs for the basic seitiice tier.
;h an .'ugu-,i IW letter to be W, Muon indicates fi'.at tnc_ c`,ait ti; .�ti(bmes Its
eclsion to opt out c) ilio ll?cl i; (,nuact rate pr N isioIls vas ti-, ?'aSSa=e of the
Tel ecoinlLill Icatioits :Act of I 1,Q6 and the total dercguiation of the CPST tier W swNice. It
zippears that Paragon desire-, tic frecdoin th Ill,aease its CPST ran be")nd th, hnhits-):o'.ided for
in the Social Contract. Indeed, it is interestinu to note that the provisions of the
Tel ecommtill ications Act related to the l9QO deregulation of the CPST tier have been known
-,ince 1496. but Paragon continued to collect the SI TO per near increase on CPST until such time
that this tier no longer was regulated hn tile I (-'C'.
In C21s opnion.under the Social Contract there ai-e only ttivo circumstances tinder nnhish Paragon
should be able to charge additional amounts for upgrade costs outside of v fiat it has already
Mew&
SeeSoiial Contract Order- FCC 05-17,. paragraph K
SeeSoeial Coniract Order. FCC95-�7S- c�.rat=�<ieh __ -_..
Subject to the prodMons discussed beio" concernih, Rawhishy uuthondes' re,ivawmans Q upgrades
that exceed the requirements of the Social Contract.
F Parrigon s resporibe to Third Reyes AN Ithtorn mAn Or Ke C -a\ of Ii�,n _ :ed Jawary
Vs. V,c Iiia Leal
Januar' 28, 2000
Page i
I. In the event that the Cit,, had negotiated an upgrade that exceeded the scope of the
upgrade in the Social Contract ( Section 1ll.l=.2.)_and, or
I implementation of the favorable regulatory treatment on which the Company based
its decision pro%ides for a incremental increase in the amounts ahead> recovered
under the Social Contract ( Section
Based on C?'s understanding. the Circ did not request any additional up;_=rade requirements. With
respect to an allowance for the incremental increase in arllounts to he reco%ered frons the
tawraWe regulatory pro%isions No the deregulation of CPST under the Telecommunications
Ant Paragon has every right to inawse the CPST more than the St.00 that "ould have bun
ridded in 2000 under the final yem of the Socia] Contract.
> t: pinion, Paragon has no bads to riotic Sec; total reel vel' OT it upgrade costs pursuant to
Me Form 1235 inethodolo ,,y. The Telc'.collllllutlications _pct did not establish this methodology,
Igor did it provide for any upgrade increment not already available to cable operators. It
ineret, provided for the deregulation of the CPST tier ratev through which Paragon could
XisritiaWy recover the incremental amount that results under such favorable
regulatory provisions on this tier of service.
SUI,'�LARY OF RECO.NINIE\DATIONS
on rhe ab,we Anding. U2 recoilimends the following dd1jusunents be considered by the
ill dete1-1-niIlrnL thl_ IIlaNlInt tll uetanttteo monthly basi`_- seal ice rate:
K The True -up Period should oAv ret'lect the nine months ended September 30, 1999.
The inflation factors should be adjusted to reflect the published ftcti,�rs for the first
through the third quarters of 1999
The Ci should consider ordain.-, a nlrtMimum penllirted rate t )r the Poem 1240
computation o S`?.R rather than the 59.40 proposed Paragon.
The 01 , should consider cornpietel,Parag,01) s rror?o_-C1 F-onn 1235
basic s ice rate increase of S 1.45.
The Cite should order Paragon to issue refunds to subscribers NN ithin rlinery (90) days
of a rate order based on the difference between the ordered rate and be January ;,
000, iillpleTllented rate. Interest oil the rerand amount should accrue 0 The time the
refund is Issued.
C2 gread) appreciates hav-ing this opporttrlliry- to vpith the Cir< of Grapevine. If you have
an', questions regarding this report. the project acK hies_ or any of the recommendations, please
contact N.Is, Connie Cannady at 720 16,
• c'.ti-Li" otlrs_
\J
C2 Consulting Services. Inc.
S. Status of Previous Filing of FCC Form IM (enter in -x" in the appropriate box)
Cti 0
art FCC Form 1210 been previously filed with die FCC'?
enter die data of tll filing:
P:E im FCC Forrit 1210 been previously Med with the Franch-'sing Audlor;tt?
1f; es. enrerdie duce of die
9. Status of FCC Form 1200 Filing (enter an 'Y' in the appropriate box)
iH:x; an F'-� F -,nn 1200 been previoTzly Ned with die FCC
if yes. enr,-r the (,Mte filed: -nm
1; Lu: F"...- [-'00 been previcitzk file. widi the Fnchi_-ing A:;,M'Orn
U n. encer die date (ileal: _j 'intri
10, Cable Programming Services Complaint Status (enter in -x" in the appropriate box'l
0
_C Form 3-'*? ccr , a t.
L the f`M' beteg filein response to -all R rn;:[a
1f s. enter d:C date CI dl'.'coluplaint:
ti it
i L Is FCC Form 1205 Being Included With This Filing
t=. Selection of -Going Forward- Channel Addition Methodology (-enter an in the appropriate box)
here if -,-on are tying the original miles [MARKUf'N1ETH(_,Dj,
lick here if,. citi are izing he new. akernative ride, [CAPS SIE Tii:)[)
----------
1: the CAPS Mt THOD. have you elected to revii;e recovere . for ti V
durin- rhe period May 15. 11"94 to Dec. 31. 1994?
1.33. Ficadend Upgrade Methodology
V. w
hck here if y ,-it iri > qualifying wmaifl n2ing, the _,ireanill ui,2d headend upgrade meT'K1tjQIOg,%'.
Part 1: Preliminary Information
Module A: Maximum Permitted Rate From Previous Filing
0\[9
a b t: d
'_ine Line Description 11.5w Ti— 2 'I ret 3 Fier 4 Tier
Rj:�
Module B: Subscribership
a n Z d
"Deer 3 1 icr 4 Ti— 5
J
Module C: Inflation Information
Line Description
Module D: Calculating the Base Rate
b C d
Line DescriDtiou nasic Tier 2 Tier 3 l'ier 4 Tier 5
r(t;
1.2rilolll
.'Zm \1: alio N["hoo 1e.me"f
'I'l, 2alell alid Delel,';l sn' t' :1 it I
1:,n-,11 1; 11 '-'111111L j SO. I
KC Form
JUIY
.. . .....
d c
Pier 4 'rier 5
n "ne il, I rtx f P-': !t'd 4 ;._t.4
j.1, n'! Q' -'rade S'2aw"t 1 -r lrjc-t p Peri !
I or I roc -l pY^_r.,:c ,4.-i 'S: -_4-
i i
Permitted trate For True -Up Period 2
d
Line Description Basic tier 2 1
t ter 4 Cier
N1,111"'i or k—1 p P. od 2 2;
for ',z -t p P'n""! 2 j
M'm"l Dt,1e111 N--mcnt I or huc, P2,1"'i [1A
.,:,I 2 k i, I or 3rL mi ':),-15-(,, -1
41
r,—t 1,
1 -CC
$88829
Part 11: True -Up Period
Module E: Timing Information
Line Description
"Al"! ip, oi o 1, B,m•_ Pcrfovfne'I.' 'An"Ier
Jor ., J—fitilion p,—
If -I-. go to Module 1. If '2". answer G2 and 1:3. If '3'. answer
F2. E3, 1:4. and FiS.
rubor N MonCi, it tiw I rtic-I I) 'mod
of het"un III, "Id oI I p Pt "'d
P: ri"'!
oi \I-im, m il I'-.-rwd -1 Hinblc !,,r hvr,
no,' A "I, :Itil , I it, '2rwdl 2 Iilctmb�e for i:1111
Module F:
Nlaximum Permitted Rate For Truc-Up Period I
1 me
Line Description
1, c
Basic Vier 2 Wier 3
\I, and F(,r 1 i,ie-1 t, llm,d jV,-k, 2!
t 'p \(,-h,,d "c•�mcm I ,r 1 r --t v Pmool I AAAI,,
NI—im Iklem ',, nical 1 or I Nri-j 4
--t it t', -'d Pa1' kor l.^.t!'Iion I!),-[
d c
Pier 4 'rier 5
n "ne il, I rtx f P-': !t'd 4 ;._t.4
j.1, n'! Q' -'rade S'2aw"t 1 -r lrjc-t p Peri !
I or I roc -l pY^_r.,:c ,4.-i 'S: -_4-
i i
Permitted trate For True -Up Period 2
d
Line Description Basic tier 2 1
t ter 4 Cier
N1,111"'i or k—1 p P. od 2 2;
for ',z -t p P'n""! 2 j
M'm"l Dt,1e111 N--mcnt I or huc, P2,1"'i [1A
.,:,I 2 k i, I or 3rL mi ':),-15-(,, -1
41
r,—t 1,
1 -CC
Module 11: True -Up Adjustment Calculation
1) e d
,"meat For true -Up Period I
:;2 1 r)M \1&j PCFM11[Cd RAte for PertCtf
p 1,2nod * \Jjuslmenf 1112-11: 1
—J
:4 �n'ereq or PmcxI I Athustment I
S: i4
Adjustment For Fru -Up Period 2
"Cmje i r:,vl Nla:. Perm Rate for PCF100 Eh,ib'C 7- r ill',[c'O
\j,"mcni 1-,,r ini"re'A
k,flustmeni .See instrictions f,,r
From Per -1 2 lnabgibfe for
From \(a, Perm Rate for Pert,; 2 lnetwibie f,,t
Pen, --.11 to—t ; ehp;,1e E ,, I ta,re,l f f i ! t � I 1", 1
I:iI
1' j Fru -Up Adjustment
p Adjtvstme.,
me -i \Jjk,,Irnent j i i3-1 i -t- I F -I i I ! i
si. ;1)
o Claimed Eur 1 h:s ", ot- tej i'�r:,,i
i A,jiu,tatent JIL 3-H:4
Fart III: Projected Period
�Module 1: New Maximum Permitted Rate
b C d
Une Descri?tian Basic Fier 2 pier 3'tier 4 Tier 3)
!—,,d Se,•,Ma f or roj'.'!Lj .'erg c 21
Mrnal Del.!n ,.,rrtcnl For pt"'Icood Pr I%% },;.y
17
f,,r lnflancn!
Seg.=at wr Projected Pert -d [14'CS--141
H,,,—no I 1,rProjecled Renoi! ICS;., of
Po,Qvied Pcn,xi I 1.2422
u— " p >e -mem Far Protected Penod I Sf): a-
'4"', P'nna��u R,1� [,�r Protected Nno'l S,�,,3 3
i I " r >2 1 R s', r or Pr c, LJ P 2 r: IX!
"-�-,jficat:�oa Statement
:i L FC1 F \L3E STATEMENTS MADE ON 'l -HIS P )RN1 .AF -E F't-.',1SHA1�',E B"'FINE AMD/OR [',IPRISONME.",
:t)[)E TITLE 1S.SECTIC N F(�PFEITI- PE S. CUDE. FITLE 47..SECT!().\ 510',:,
mine in this f, -)m are rri� :)T,d r, ih hi -r of m knowled—;wd uAipf and ,re rr:ide in
CC 1"
Federal Communications Commission
%V-ishuigton. DC 20554
',Pprcved By OMB 3060-0h',4
Worksheet I - True -Up Period Inflation
For ll,;Mczlorl<. sCQ Arpcfldl'� A ;,i 1-1,1;llcllon, For 1 c(- i or-i'll I an
Line Pe ri,,d
Erillition Factor
1�0 Month I
%!ofid)
!i,l V-1th
M "fl[h 4
t 11
M"lith
Month I
1 lo!wl 1 1
12 Month I
FuQ,,or
11 Month 13
M,nti, I
Vollih 17
2 1. lown 1
Pz-:,lj 2
FCC Form 12-'
r i- 4 jW5,
m 7 - II !c ,I, (- o m nIj 11, 1011
Work -sheet 7 - External Costs
True -Up Period
Tp -d,, of Jjm:t,,,n, forj.,V I ,,11 1 '4,+
j:,Ixz
11u 61 m t- j, t 2,n,-. ch
mowi- to, ,irt,i, rate. ii, n,—v -,t x,111,
Fier? 2 i- 3
Period I
d �zt�j
!lar 4
External Costs Elizible for .Markup
of Pr, rairmim,-, Por , 'Im,ind, Addcd Pr,o, Lo
M,rkur \Lthod I or Pc --J.
1� 94 or
rt,m 1 . ,'i N -)d
i o(I
Bari: ht For P: ri.d
Co -I, L-1,2ihla For T_`—Mrki;r
For 1 71"5 1"
Up E:�"ai (-o,L,
!,A�J 7 r, Fx,—mil 1 361
E�rurmd Costs ,Not Elittible for "tfarkup
-r,mch e Raaud [i I or Pc,—d
N—Iaton i o " Pa m " d
- - -
1 "A 1, xnji "."t, For Po ,,d
1"r— "rr 01 i, I
Perind I
anal Costs Eheible for Markup
1� 94 or
1-1-'
P.otrmi,riui,wn Fes For P::nou
Bari: ht For P: ri.d
Co -I, L-1,2ihla For T_`—Mrki;r
Up E:�"ai (-o,L,
IT-Jernal Costs Not Efi2iblc for Mark-up
1 "A 1, xnji "."t, For Po ,,d
"'nm. im, A ons
on. L i- _': , _- -' 4
Worksheet 7 - External Costs
Projeaed Period
% �Mmd Sc OMB I a P —,
1, V 1 -nI 1 -'1,
r r—od cut [,I,, j:
�,m— 2 1 V, 1"; , 0, ur,t in rnonih,- ;:.,r ru- ar <i —(h 1hi, %—r«,i .ct 12
fw" I —;, On
7F 0
be IWAptia" M, ii,, 3 im
I Externa! Coos EHWhk For NbrAp
—m 4 %W-mng Fix I Umnck Ad&d Awr w 5 15 ll.. lii 31
V:r 5 1 -n-n, N farkuT,, McOwd h^r Pario��.
I— FX 1Arm.i
IaMuj t'_I, j,jjjjj
V,irtzj
�24.930-"49
E�tcrnai Costs Not Ehaible for Markup
wd --u on IWO
owl
1 1 1 snji � '1' 1 c' f1c,"I
01 42:
fcc Pont 'A
At : —
dtmi Commmications Commission
)C' 29554
ov -d - MB 3060 R,; -0635
m
Microsoft Ex -e! 4.0 Vtsiun
FCC Form 124:;'
Jtdy 199,
Worksheet 8 -True-Up
Rate Charged
I I ,I) 1 1 i'm 1 1, [11,• l I, Period Iod i,.!,J I [h
E—
T 2 1 lm„ lom-, i; the 'I ruc-i!P Period 2. m III,,( I I i I,,
b
Line Line Description
Basic
Tier 2 Tier 3 Tier 4 Tier 5
Month 1
34.0600
54.0600
0600
Month 2
320600
30
59-0600
01 Nk'tldi 4
59.0600
59.0600
%I nth 6
'03 Mondi S
59,0600
S).0600
�.Iolldl 9
t
I o th 11
13", Month 1,
39.0600
Period I Avemge Rate
m
Microsoft Ex -e! 4.0 Vtsiun
FCC Form 124:;'
Jtdy 199,
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF GRAPEVINE, TEXAS ESTABLISHING THE MAXIMUM
PERMITTED MONTHLY LEASE RATES CHARGED BY
PARAGON CABLE, DECLARING AN EMERGENCY AND
PROVIDING AN EFFECTIVE DATE
WHEREAS, the City of Grapevine, Texas franchises cable television service for
the benefit of its citizens; and
WHEREAS, the City is the Grantor of a franchise ordinance by and between the
City of Grapevine and Paragon Cable ("Paragon"); and
WHEREAS, in accordance with applicable provisions of the Telecommunications
Act of 1996 (herein the "Telecom Act") and rules adopted by the Federal
Communications Commission ("FCC") and all other applicable federal and state laws
and regulations, the City has undertaken all appropriate procedural steps to regulate the
equipment and installation rates; and
WHEREAS, in accordance with applicable FCC regulations the City adopted an
ordinance providing for the regulation of rates charged by cable television operators
within the City for the equipment and installation rates and related equipment and
installation charges and providing for a reasonable opportunity for interested parties to
express their views concerning basic cable regulations.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
OF GRAPEVINE, TEXAS:
Section 1. Findings:
1. That on or about October 1, 1999, the City of Grapevine received
Paragon's FCC form 1205 filing.
2. That the City engaged the services of C2 Consulting Services, Inc.
to provide assistance in the review of Paragon's FCC form 1205 to
determine the reasonableness of the proposed monthly equipment
lease, installation and maintenance rates attached hereto as Exhibit
"A"
3. That based upon the information received from Paragon and
recommendations from C2 .Consulting Services, Inc., the City
concludes that the rates proposed by Paragon for maximum
permitted monthly lease rates are not reasonable.
Section 2. Conclusions:
The City has an obligation to timely act upon the pending rate application
consistent with current FCC rules and regulations. Paragon's submittal of the FCC form
1205 received on or about October 1, 1999, is hereby rejected, for the reason that the
proposed rate is not reasonable.
Section 3. Orders for Action:
Based on the foregoing Findings and Conclusions, the City hereby enters the
following orders:
1. Paragon's request for maximum permitted monthly lease rates of $3.44 for
addressable converters and $.64 for non -addressable converters included
in its Form 1205 filing is hereby denied.
2. Based on the information received from Paragon and recommendations
from C2 Consulting Services, Inc. which is attached hereto as Exhibit A
and included herein for all purposes, the maximum permitted rate for the
monthly lease rate for addressable and non addressable converters is
established at $3.39 and $.62 respective !y effective March 7, 2000.
Section 4. The fact that the present ordinances and regulations of the City of
Grapevine, Texas, are inadequate to properly safeguard the health, safety, morals,
peace and general welfare of the public creates an emergency which required that this
ordinance become effective from and after the date of its passage, and it is accordingly
so ordained.
PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS on this the 7th day of March, 2000.
2
ATTEST:
MONSULTING
SERVICES,
7801 Pencross
Dallas_ Texas 75248
January 28. 2000
Is.:Melisa Leal
.-\ssistant to the City Manai_,er
City of Grape -vine
PO Bos 9� 104
Grapevine. Texas 76099
Dear Ms. Leal:
(972) 726-7216
(972) 726-0212 (fax)
C2 Consulting Services. Inc. (''C_'") has completed the evaluation of the FCC' Form 1 _05 tiled by
Paragon Cable ("Paragon'� or the "Company") ��ith the Circ of Grape%ine= Teras ( Cin j on or
about September 30. 1999. This is Paragon's first year to file a >=omi 1205 for Citi review of
reg*arding, its proposed changes in equipment monthly lease rates and installation and ninintenance
Charges since implementation of the Social Contract provisions in 1996.' In August 1999,
Parauon opted out of the Social Contract provision that established regulation of such installation
and equipment maintenance costs by the FCC.- Therefore, Paragon has tiled for re%ie,v of these
proposed rates by each of the franchising authorities' V,ith jurisdiction over such rates.
This stud: does not constitute an examination of the financial condition of Paragon or its parent
ct�mpany. .As such. C2 cannot and does not express any position v�ith reward to tlr_- accuracy or
ofthe tlnancial lnrOrnmtlon pro-, ded byParagon duIthe C0t.rsZ of t!Ie Ltii<<:'• �e5.
BACIIGROUND
In its 1999 Fonn I205 filing for the 2000 rate vear, Paragon proposes to decrease ail its 1999
rates �� ith the exception of the monthly change for addressable converters. This 1-11,;:- is being
wcrCasC-d form 52.76 to S3.4I per month per Converter --a twentl five percent (25°u) Increase.
['he #oIIowiiiu table pro ides a comparison of Paragon's 1999 rates and Paragon's hr Dposed 2000
Fomi 1205 rates:
Sucia,�i'ururac�t fc�r 7i�r,�° 16i�r�ter` t'cin; J"'YoL CII ('onnacr Vii. as approved by'the FCC i.. nr�trcrc'�
for l imc Id CIrtler, .tlemoramhon opimott cntcl Greer, FCC 95-4 S. released November
Contract Order').
See Social Contract. III.B.
Ms. Alelisa Leal
Januar, 28. 2000
Page ?
COMPARISON OF EQUIPMENT AND INSTALLATION RATES
Paragon
Paragon
Proposed
1999 MPR`
2000 MPR"
Difference
Hourly Service Charge
529.84
529.73
5(0.033)
i
Service
I nstall - Unwired home
529.34
529.78
S(0.06)
nstall -Prewired home
517.31
51 1 .27
S(0.04)
Install - Additional connect initial
513.40
',3113.40
0
Install - Additional connect separate
527.46
S27.40
5(0.06)
ruck Trip
S17 31
S 17 27
S{0.04}
Chane of service tier
529.54
529.78
St0.06)
Monthly Lease Rates
Remotes
S 31
50.29
S'0.02)
idon addressable converters
50.64
S(0.20)
Addressable converters
_.
53.4"
SO.63
,Maximum Permitted Rate
Paragon's proposed 2000 rates are based on a siml le Forin 1205 calculation that vas provided to
each of the franchising authoriti s impacted. However, each of the components of the aggregated
fihn-is a sum of that same component on Folin 1205 filings developed for the following five
Time Warner divisions operating in Texas: —
0 Austin DI`,"Islon
Houston Division ( East and \Ncstt ~i, ith E,,st beim, prey iOLISIV operated b% TCI)
a Sall Antonio DMslon
1i Southwest DI%-Ision
9 Waco DIti Islon
Tlic:' tl)re, elth II1d1l IdUal i'i)I'In 1 1�)` I21lltit b�0 i'cV1011?d for aC'
CLIraC and Til approp'latellesS Of
ltil�,� COInpIICat1Q[1S.
ANALYSES OF THE FILINGS
Project Objectives and Activities
The pr( ect ot,?jectives are three fold:
i. -assessment of the completeness of the hhnrrs with I,cuard to the info rmatlon and
documentation that must be tied lith the Cin.
2. assessment of the reasonableness of the proposed computations in Baht of FCC
regulation, recent FCC rulinus and prior oti�nership and operations of the system
included in the calculations.
-Assessment of the reasonableness of the proposed computations in light o Paragon's
proposed method of augre-ation.
V& Alelisa Leal
janwit, 28. 20W)
Page
Gven these obiecrixes. C2 conducted the 1110"&g protect acti` hies:
s
RevieVv of the flings to 3>jesS t}1? completeness based t?n t,l;' f' (T f' Orli3 1205
instructions.
s Rev"ievv of the filings to idea it ' :111%issues AA ith respect t_� tli-� J,iia ;trid or
methodologies employed h,Paragon.
• Submissicn of data requests and sub,equent revic4 Paragon's
responses.
• Revievv of recent FCC decisions that im in impact on Parig)'s proposed
methodologies or the City"s altemadve actions.
• Development of potential alternatives available to the City in esrablishin,_� maximum
permitted equipment and installation saes_
�,unimary of Findings
(: t\�o main issues %%An rospen to Pwa'_'on s proposed corill%utations cl 11ILI Inurn
r-�,rnutted equipment and installation rates. The issues are:
1 the computation vt the HouriS Ory We Charge ( 11SC..) and the mortnlV le lse rates
inappropriately, i;i l!ide lrodi t ;e costs and hours relcaed to converter retrieval in the
previously owned TCI svgaiis.
it does not appear that Time'A'arner has instituted adequate quality control measures
to assure that the 0% e Texas dh isions follow standard methods by o hip, , the data are
dab ed. accumulated and'or allocated to the Fonn l205 computations.
i. C converter Retrieval Costs/Hours in HSC and Converter Lease Mires
the Houston Division are a number of prolously o"ned and operated TO systems that
%%ore transferred to the control of Time AVurner in \ovember 1098. Prior in that unw, TO had
Sad aggregated Form 114s that included A its =wd and. or mmia._Ted s anis on a national
h ,
�.2 rc' w"ad the Tl I Foran I "Ids Q these s_Vjtcnls for the pato,,! 1096 through `i1e 1,990. In
-1 imc Warner prcz—w ite l the 1'oiin 1205 Ahnu based on imbri-imnon that A\as =roA04d by
it L' In the lQ96-1994 filings. C2 determined costs and hours concerning ,:onverTtr retrieval
had inappropiiately been included in the development of the HSC and the monthl-_; equipment
lease rates. C2's arguinem "as premised on ( H these costs (and hours) were not: related to "neve
awbdtiek- but in fact were related to activities conducted during the period K—m bundling.. in
the Foran 12001205 process: and (?) TO had not unbundled the costs related to these activities
Ow the equipment basket Screbv continuing to recover than from the monthl',,pro,,<rarnmingg
serviaes rates). C_' concluded that allowance of these costs in the equipment b..isket would
provide for i double recov i2rtir from the subscriber: served b-,;' these s,, stem;.
n tl:e 1099 Thile wVarner Form 1205 thine related to the sv,stems that had been ,ed from
7(,i. IT, i provided Time V,,ariier vyitli computations Wat did not include come1ncr retrieval CO3ts
hour;. These 19P9 glad raw s are the rates that were adopted by the fran,_�hisin ;i.itii,2riti-s.
T ii1� 'A arneC s (999 Fora, i205 tilirlg in the htousCon East wswirs was based On a SO '. Coir" end
Deumber 3 I. 1993
Vs. llelisa Leal
January 28. 2000
Page 4
Noweven in the instant filing. Paragon has included comoner retrieval costs and Wars again for
these prior TCI systems. Not My is the Company collectin,; from the basic serviwc rates in the
Houton systems. but it is also attempting. to collect these same costs from all other subscribers
through equipment and installation rates.
Tire FCC recew1v ruled on this issue in DA 00-2?27:
NLACC disallowed IrK recovery of costs associated with disconnects and convener
retrievals based on the consultants finding that these costs were not unbundied from the
operators prouranming chary=e. 1 -Cl appealed this action but does not dispute the
unbundling finding. Because an operator cannot include in the equipment basket costs
Out wen Left in the base programminu service rates. . . TCA appeal on this point is
denied
Therefore. the Incltlsion of be .:On`.vas romeval cogs and hours by Parauon in th2 pne iously
luanaged TCI systems should he disci':o«ed in determining the combined divisions' HSC. In
additiont the labor costs assigned to the repair and maintenance of convermB should not include
the hours related to the retrieval of conveners from the subscribers' premises for these sti stems.
Based on the information proti ided. the impact of deducting the converter retricv al costs and
associated hours from the Houston Di,, inion East's Form 1201 and thereby wducing the
combined Form 1205 computation& results in no chame to the HSC, but reduces We monthly
squtipment lease rates as follo«s:
Non addressable colt%ertrs - 50.6 to S0.6-2 —
addressable converters - to S ;q
2. -apparent Lack of Standard Quality Controls
Any die revie" of the five l xas divisions Form 1205 computations. ( ' ro,,cd that the
('JplTlent of certOn data and. for I-nediodologies , aried am.onu divisions, For c:Aarlple. some
t smms used the actual contract labor costs and others developed an average anim!ai cosi based on
average annual Jobs thnes av:'mp cons per job. I he Supporting documentation pro4 ided by each
Adsion also varied siuniticand%
For purposes of the instant Ming. it does not appear that the lack of standardization has resulted in
any significant impact to rates (outside of the above issue. and in light of the fact that most of the
rates have been reduced for the -'(_)0(.) rate year). HoNyever. for future filings. Pltra;1011 should be
required to demonstrate that a standard methodolon- is beim= used. that the dr inions are
AM% such sm.ndards_ and that the Company has instituted quality- control m--asure to test the
reliability of each divisions computations.
St'' I:IAA) OF RECO MI EN DA-FIONS
Based on the above trifling s and conclusions, the DO should coIlsider taking On Vkming
actions'
11li;lUl'cfJll�t7i77 i)�7/illrNT Ut'U (lY<<� J', DA released (Vto'ber _2 j. 191)1). pca-a uraph i `s
Vs. Velisa Leal
Jantiary 23.2000
Page
1. The City should consider disaIloNving, the converter retrieval costs and hours used in the
development of the Houston Division's East Fonnn 1205.
_. The City should consider adopting a maximum permitted non addressable rate
ofS0.62 per month.
_ . The City should consider adopting a maximum pennitted addressable com cl ger rate of
S',.-,9 per month.
Ilse C'ity should order Ptu-aami to issue rehmds to subscribers Nvithin nincry (,)m da s of a
rats order based on the difference bet -ween the ordered rate and the Janual-V ;. 2iWl)
implemented rate. Interest on the refund amount should accrue to the time the ret;tnd is
1 SSued.
Tlie Company should be required to institute quality_ controls for cornsktencv- in the
reporting of data by Time Wamer divisions should the Company continue to employ this
aggregated methodoion .
appreciates haying this opportumn, to «ork Nwh the Cite of Grapevine in reg ic,v of the Fonn
1-20 5 rates. If you have am, questions regarding this report or need clarifications as To the
recommendations. please contact vis. Connie Cannady at (972) 726-7216.
Velti trul\ yours.
{'� Corisuitliig Services. Inc.
U APFr U. COSTS OF SFRIICF fN S r,Xf, I \T -TON ASP IfA 1\ rFN I I( OF Fprif,Nwvr k,i) pi, \,-r
Oth" 2,
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ORDINANCE NO.
AN ORDINANCE OF THE CITY COUNCIL OF THE
CITY OF GRAPEVINE REJECTING FCC FORM
1235 FILED BY PARAGON CABLE AND
ACCEPTING ITS WITHDRAWAL; DECLARING AN
EMERGENCY AND PROVIDING AN EFFECTIVE
DATE
WHEREAS, the City of Grapevine, Texas (the "City") franchises cable television
service for the benefits of its citizens; and
WHEREAS, the City is the Grantor of a Franchise Ordinance by and between
the City and Paragon Cable ("Paragon"); and
WHEREAS, in accordance with applicable provisions of the
Telecommunications Act of 1996 (herein the "Telecom Act") and rules adopted by the
Federal Communications Commission ("FCC") and all other applicable federal and state
law and regulations, the City has undertaken all appropriate procedural steps to
regulate the equipment and installation rates; and
WHEREAS, in accordance with applicable FCC regulations the City adopted an
Ordinance providing for the regulation of rates charged by cable television operators
within the City for the equipment and installation rates and related equipment and
installation charges and providing for a reasonable opportunity for interested parties to
express their views concerning basic cable regulations; and
WHEREAS, Paragon has filed FCC Form 1235 regarding basic service rates;
�l
WHEREAS, the City has requested, and Paragon has agreed to, the withdrawal
of Form 1235, based on the City's belief that the rate increase proposed on Form 1235
included inappropriate charges Paragon had previously recovered under the Social
Contract.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
OF GRAPEVINE, TEXAS:
Section 1. Findings:
1. That all matters stated in the preamble are found to be true and
correct and are incorporated herein as if copied in their entirety.
2. That on or about October 1, 1999, the City received Paragon's FCC
Form 1235 filing.
3. That on March 7, 2000, Paragon issued a letter to the City
committing to withdraw FCC Form 1235.
Section 2. Conclusions and Order for Action:
The City has an obligation to timely act upon the pending rate application
consistent with current FCC rules and regulations. The City rejects Form
1235. Therefore, Paragon's withdrawal of the FCC Form 1235 received on
or about October 1, 1999, is hereby accepted, based on the reason that
the proposed rate is not reasonable.
Section 3. The fact that the present ordinances and regulations of the City of
Grapevine, Texas, are inadequate to properly safeguard the health, safety, morals,
peace and general welfare of the public creates an emergency which required that this
ordinance become effective from and after the date of its passage, and it is accordingly
so ordained.
PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS on this the 7th day of March, 2000.
ATTEST:
N
APPROVED AS TO FORM:
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF GRAPEVINE, TEXAS ESTABLISHING THE MAXIMUM
PERMITTED MONTHLY LEASE RATES CHARGED BY
PARAGON CABLE, DECLARING AN EMERGENCY AND
PROVIDING AN EFFECTIVE DATE
WHEREAS, the City of Grapevine, Texas franchises cable television service for
the benefit of its citizens; and
WHEREAS, the City is the Grantor of a franchise ordinance by and between the
City of Grapevine and Paragon Cable ("Paragon"); and
WHEREAS, in accordance with applicable provisions of the Telecommunications
Act of 1996 (herein the "Telecom Act") and rules adopted by the Federal
Communications Commission ("FCC") and all other applicable federal and state laws
and regulations, the City has undertaken all appropriate procedural steps to regulate the
equipment and installation rates; and
WHEREAS, in accordance with applicable FCC regulations the City adopted an
ordinance providing for the regulation of rates charged by cable television operators
within the City for the equipment and installation rates and related equipment and
installation charges and providing for a reasonable opportunity for interested parties to
express their views concerning basic cable regulations.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
OF GRAPEVINE, TEXAS:
Section 1. Findings:
That on or about October 1, 1999, the City of Grapevine received
Paragon's FCC form 1205 filing.
2. That the City engaged the services of C2 Consulting Services, Inc.
to provide assistance in the review of Paragon's FCC form 1205 to
determine the reasonableness of the proposed monthly equipment
lease, installation and maintenance rates attached hereto as Exhibit
"A"
3. That based upon the information received from Paragon and
recommendations from C2 Consulting Services, Inc., the City
concludes that the rates proposed by Paragon for maximum
permitted monthly lease rates are not reasonable.
Section 2. Conclusions:
The City has an obligation to timely act upon the pending rate application
consistent with current FCC rules and regulations. Paragon's submittal of the FCC form
1205 received on or about October 1, 1999, is hereby rejected, for the reason that the
proposed rate is not reasonable.
Section 3. Orders for Action:
Based on the foregoing Findings and Conclusions, the City hereby enters the
following orders:
Paragon's request for maximum permitted monthly lease rates of $3.44 for
addressable converters and $.64 for non -addressable converters included
in its Form 1205 filing is hereby denied.
2. Based on the information received from Paragon and recommendations
from C2 Consulting Services, Inc. which is attached hereto as Exhibit A
and included herein for all purposes, the maximum permitted rate for the
monthly lease rate for addressable and non addressable converters is
established at $3.39 and $.62 respectively effective March 7, 2000.
Section 4. The fact that the present ordinances and regulations of the City of
Grapevine, Texas, are inadequate to properly safeguard the health, safety, morals,
peace and general welfare of the public creates an emergency which required that this
ordinance become effective from and after the date of its passage, and it is accordingly
so ordained.
PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS on this the 7th day of March, 2000.
ATTEST:
FWAI w W
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF GRAPEVINE, TEXAS ESTABLISHING THE MAXIMUM
PERMITTED BASIC SERVICE TIER RATES CHARGED BY
PARAGON CABLE, DECLARING AN EMERGENCY AND
PROVIDING AN EFFECTIVE DATE
WHEREAS, the City of Grapevine, Texas franchises cable television service for
the benefit of its citizens; and
WHEREAS, the City is the Grantor of a franchise ordinance by and between the
City of Grapevine and Paragon Cable ("Paragon"); and
WHEREAS, in accordance with applicable provisions of the Telecommunications
Act of 1996 (herein the "Telecom Act") and rules adopted by the Federal
Communications Commission ("FCC") and all other applicable federal and state law and
regulations, the City has undertaken all appropriate procedural steps to regulate the
equipment and installation rates; and
WHEREAS, in accordance with applicable FCC regulations the City adopted an
ordinance providing for the regulation of rates charged by cable television operators
within the City for the equipment and installation rates and related equipment and
installation charges and providing for a reasonable opportunity for interested parties to
express their views concerning basic cable regulations.
NOW, THEREFORE IT BE ORDAINED BY THE CITY COUNCIL OF THE CITY
OF GRAPEVINE, TEXAS:
Section 1. Findings:
That on or about October 1, 1999, the City of Grapevine received
Paragon's FCC form 1240 filing.
2. That the City engaged the services of C2 Consulting Services, Inc.
to provide assistance in the review of Paragon's FCC form 1240 to
determine the reasonableness of the proposed basic service tier
rates, attached hereto as Exhibit "A".
3. That based upon the information received from Paragon and
recommendations from C2 Consulting Services, Inc., the City
concludes that the rate proposed by Paragon for maximum
permitted service rate is not reasonable.
Section 2. Conclusions:
The City has an obligation to timely act upon the pending rate application
consistent with current FCC rules and regulations. Paragon's submittal of the FCC form
1240 received on or about October 1, 1999, is hereby rejected, for the reason that the
proposed rate is not reasonable.
Section 3. Orders for Action:
Based on the foregoing Findings and Conclusions, the City hereby enters the
following orders:
1 Paragon's request for maximum permitted basic service rate of $9.46
included in its Form 1240 filing is hereby denied.
2. Based on the information received from Paragon and recommendations
from C2 Consulting Services, Inc. which is attached hereto as Exhibit "A"
and included herein for all purposes, the maximum permitted rate for the
basic service tier is established at $9.36 effective March 7, 2000.
Section 4. The fact that the present ordinances and regulations of the City of
Grapevine, Texas, are inadequate to properly safeguard the health, safety, morals,
peace and general welfare of the public creates an emergency which requires that this
ordinance become effective from and after the date of its passage, and it is accordingly
so ordained.
PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS on this the 7th day of March, 2000.
ORD. NO. 2
ATTEST: