Loading...
HomeMy WebLinkAbout2003-08-04 Resolution RESOLUTION NO. 03-239 RESOLUTION TO ISSUE DANCING PERMIT BE IT RESOLVED BY THE CITY COUNCIL OF IOWA CITY, IOWA, that a Dancing Permit as provided by law is hereby granted to the following named person and at the following described locations upon his filing an application, having endorsed thereon the certificates of the proper city officials as to having complied with all regulations and ordinances, and having a valid beer, liquor, or wine license/permit, to wit: Third Base Sports Bars, The Field House - 111 E. College Street It was moved by Vanderhoef and seconded by 0'0onnel 1 that the Resolution as read be adopted, and upon roll call there were: AYES: NAYS: ABSENT: X Champion X Kanner X Lehman X O'Donnell X __ Pfab X __ Vanderhoef X Wilburn Passed and approved this 4th day of Auqust ,20 03 . h~AYOR ~r, oved by (~IT~4-CLERK City Attorney's Office clerk\res\danceprrn,doc Prepared by Marian K. Karr, City Clerk, 410 E. Washington St,, Iowa City, IA 52240 1319) 356-5041 RESOLUTION NO. 03-240 RESOLUTION TO ISSUE ClGARETI'E PERMITS WHEREAS, the following firms and persons have made application and paid the mulct tax required by law for the sale of cigarettes, therefore BE IT RESOLVED BY THE CITY COUNCIL OF IOWA CITY, IOWA, that the applications be granted and the City Clerk is hereby directed to issue a permit to the following named persons and firms to sell cigarettes: Third Base Spo~ts Bars, The Field House 111 E. College Street Passed and approved this 4th day of August .20 03 · MAYOR Approved by CI'~Y CLERK ' - City Attorney's Office It was moved by Vand~rhnef and seconded by (l' Dnnn~l 1 the Resolution be adopted, and upon roll call there were: AYES: NAYS: ABSENT: X Champion X Kanner x Lehman X O'Donnell X P fab X Vanderhoef X Wilbum Prepared by: Gary Cohn, ITS Coordinator, 410 E. Washington St., Iowa City, IA 52240 (319) 356-5430 RESOLUTION NO, 03-241 RESOLUTION ACCEPTING THE WORK FOR THE VOICE COMMUNICATIONS UPGRADE - PHASE 2 OUTSIDE PLANT PROJECT WHEREAS, the ITS Division has recommended that the work for construction of the outside copper and fiber optic cable plant, as included in a contract between the City of Iowa City and Gabes Construction Company, Inc. of Sheboygan, WI, dated August 26, 2002, be accepted; and WHEREAS, the performance and payment bond has been filed in the City Clerk's office; and WHEREAS, the final contract price is $ 718,729.00. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CiTY OF IOWA CITY, IOWA, THAT said improvements are hereby accepted by the City of Iowa City, Iowa. Passed and approved this 4th dayof August ,20 03 . Approved by (~1~I'~--C LERK ' City Attorney's~O~fice It was moved by Vanderhoef and seconded by 0'Donne'l 1 the Resolution be adopted, and upon roll call there were: AYES: NAYS: ABSENT: × Champion X Kanner X Lehman × O'Donnell × Pfab X Vanderhoef X Wilbum Prepared by: Dale Helling, Asst. City Mgr., 410 E. Washington St., Iowa City, IA 52240; 319-356-5013 RESOLUTION NO. 03-242 RESOLUTION CONCERNING MEDIACOM COMMUNICATIONS CORPORATION'S REQUESTED RATE INCREASE AND ESTABLISHING MAXIMUM PERMI'rrED RATES FOR BASIC CABLE SERVICE WHEREAS, pursuant to the public law and the regulations of the Federal Communications Commission (FCC), the City of Iowa City, Iowa (City) retains regulatory authority over basic cable television services provided by Mediacom Communications Corporation [d/b/a MCC Iowa, LLC] (Mediacom) in the authorized franchise area encompassing the City; and WHEREAS, Mediacom filed an FCC Form 1240 dated Apdl 29, 2003, for the purpose of requesting and justifying an adjustment to its rates for basic cable services to a level of $14.00 per subscriber per month [inclusive of FCC regulatory fees] to be effective on or about August 1,2003; and, WHEREAS, Mediacom filed FCC Form 1205 dated Apdl 28, 2003, for the purpose of requesting and justifying adjustments to rates charged for cable service equipment installation and rental to be effective on or about August 1,2003; and, WHEREAS, in the exercise of its regulatory authority, the City has reviewed these filings and has determined that Mediacom's FCC Form 1240 calculated maximum permitted rate was not correctly established; that Mediacom's requested rate for basic cable services is unreasonable; that Mediacom's FCC Form 1205 calculated maximum permitted rates were correctly established; and, that the requested rates for equipment installations and rental are reasonable; and, WHEREAS, the findings from the City's review of these filings are presented in a report prepared by the City's consultant, Rice Williams Associates, which is attached to and incorporated by reference in this Resolution. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF IOWA CITY, IOWA, THAT: 1. Mediacom's requested rate of $14.00 per subscriber per month [inclusive of FCC regulatory charges] is denied. 2. Mediacom's rate for basic service tier cable programming services shall not exceed the level of $11.83 per subscriber per month [inclusive of FCC regulatory charges] for bills rendered after August I, 2003. 3. Mediacom shall take into account the City's adjustments to the FCC Form 1240 and associated attachments and utilize the City's Maximum Permitted Rate of $11.8313 per subscriber per month and its associated components when calculating its Maximum Permitted Rate and performing the true-up calculation on its next FCC Form 1240. 4. Mediacom's proposed rates for equipment installation and rental as determined by the FCC Form 1205 filing are approved to become effective on bills rendered after August 1, 2003. Resolution No. 03-242 Page 2 5. Mediacom is directed to review the official FCC Form 1240 and FCC Form 1205 filing instructions and to insure that its future FCC Form 1240 and 1205 filings provide the full level of detail and supporting information required by these filing instructions. Passed and approved this 4th day of Aug,~t ,2003. ATTEST: CR,~...CLERK - ca bletv',res~mediacom ratesd oc Attorney% Office Resolution No. 03-242 Page. 3 It was moved by Vanderhoef and seconded by 0'Donne11 the Resolution be adopted, and upon roll call there were: AYES: NAYS: ABSENT: X Champion X Kanner X Lehman X O'Donnell X Pfab X Vanderhoef X Wilbum REPORT ON REVIEW & ANALYSIS OF FCC FORM 1240 & 1205 [2003] FILED BY MCC IOWA, LLC FOR IOWA CITY, IOWA JULY 29, 2003 SUMMARY This is a review of Federal Communications Commission ["FCC"] Form 1240 dated April 29, 2003, and Form 1205 dated April 28, 2003, filed by MCC Iowa, LLC ["Mediacom"] relating to the updating of permitted rates for basic tier cable programming service ["BST"] and equipment installation and rental services which are regulated by the City of Iowa City, Iowa ["City"]. These filings were transmitted by Mediacom cover letter dated April 30, 2003, which indicates that price adjustments would take effect on or about August 1, 2003. The conclusion of this review is that Mediaeom's proposed rate for BST programming services [FCC Form 1240] exceeds the adjusted maximum permitted rate, and therefore is unreasonable. The rates proposed for equipment installation and rental services [FCC Form 1205] do not exceed the adjusted maximum permitted rates determined pursuant to FCC regulations, and therefore are reasonable. Mediacom's calculations determine a Maximum Permitted Rate ["MPR"] for the BST of $14.5213 per subscriber per month [inclusive of FCC regulatory fees] for basic cable services. Mediacom has proposed implementing a rate of $14.00 per subscriber per month [inclusive of the FCC regulatory fee]. Rice Williams has determined that the FCC Form 1240 MPR should be lower at a level ors11.8313 per subscriber per month. Accordingly, the rate that Mediacom proposes to put into effect of $14.00 per subscriber per month is unreasonable and should be denied. Pursuant to Rice Williams' analyses as more fully described hereinafter, the maximum rate that now should be allowed for BST cable programming services is $11.83 per subscriber per month. ANALYSES The following analyses of Mediacom 's filings assume the accuracy of the information supplied by Mediacom in its filings with respect to Mediacom 's particular costs of providing cable services. No audit of Mediacom 's books and records has been done and none of its system cost assumptions has been checked against any independent City of Iowa City, Iowa MCC Iowa, LLC Review of FCC Form 1240 & 1205 July 8, 2003 Page 2 of 10 sources. In order to clarify some of the costs and calculations made by Mediacom, a request for additional information was prepared and submitted. Accordingly, the following analyses also are based upon, and rely upon, the accuracy of the Mediacom responses. FCC FORM 1240 Pursuant to FCC regulations, cable system operators are permitted to adjust their rates periodically for increases and decreases in costs relating to retransmission consent fees, copyright fees, programming costs, certain cable specific taxes, franchise-related costs, and FCC regulatory fees. On September 15, 1995, the FCC adopted new rules giving regulated cable operators the option of filing for rate adjustments on an annual basis instead of the existing quarterly system embodied in the FCC Form 1210. Subsequently, the FCC issued its instructions and analytical model for the FCC Form 1240 which implements the latest filing rules. Mediacom's predecessor elected this option in 1996. The FCC Form 1240 annual filing system examines a stream of historical costs that have occurred over a period of time, relates this to the revenues actually collected during the same period and computes a monthly adjustment to apply to a future rote. The rate to be charged in a future period is developed based on a projected 12 months of costs and the unit rate adjustment, or "true-up," from the historical period is added to this projected period maximum permitted rate to determine the total maximum permitted rate to be charged for the future 12 months period. Each subsequent annual FCC Form 1240 filing will evaluate a historical, or "True-Up Period," and a future, or "Projected Period," as part of the process of establishing a new maximum permitted rate for a future 12 months period. For its year 2002 FCC Form 1240 filing, Mediacom has chosen to establish rates for the "Projected Period" of August 1, 2003, through July 31, 2004. The "True-Up Period" chosen by Mediacom is from February 1, 2002, through March 31, 2003. This is a 14 month true-up period and pursuant to the FCC Form 1240 format requires that the True-Up Period be split into a 12 month "True-up Period 1" and a 2 month "True-up Period 2." A Maximum Permitted Rate was determined by separate calculations for each of these three periods. Under the FCC Form 1240, the True-Up Period Maximum Permitted Rate is the sum of (1) the prior rate net of prior external costs; (2) an inflation segment; and, (3) the "actual" external costs experienced in the True-Up Period. This rate is utilized to determine the level of revenue that the cable system was entitled to collect in the True-Up Period, and this amount is compared to the "actual" amounts City of Iowa City, Iowa MCC Iowa, LLC Review of FCC Form 1240 & 1205 July 8, 2003 Page 3 of 10 collected which are determined by multiplying the average rate charged by the average number of subscribers and by the months in the True-Up Period. The difference is an amount that the cable system is permitted to collect [or refund], with interest, uniformly over the Projected Period. As the first step in the review and analysis of Mediacom's filing, the information provided by Mediacom was incorporated into the official FCC Form 1240 analytical model. It appears that Mediacom has followed the FCC's analytical format and the results shown on the FCC Form 1240 filing made by Mediacom match the results obtained from the official FCC analytical model reconstructed with Mediacom supplied cost data for the purpose of this review. This demonstrates that Mediacom has not improperly manipulated the FCC analytical model. However, Mediacom failed to utilize the prior City approved FCC Form 1240 for the starting point of the current FCC Form 1240 as is required by FCC regulations and the City's last rate order. In addition, Mediacom made an input error on Line G8 of its FCC Form 1240 and failed to conform to the City's rate order in its determination of "Franchise Related Costs" as shown on the attachment to the filing, the results of which are included into Worksheet 7, "External Costs," of the FCC Form 1240. In accordance with FCC practice, Mediacom's filing also has been adjusted to reflect the latest FCC inflation figures as released by the FCC on July 7, 2003. It is presumed that Mediacom did not utilize the prior City approved FCC Form 1240 as the starting point for the current filing and did not otherwise conform the current filing to the City's last rate order because Mediacom has appealed to the FCC to reverse certain aspects of the City's findings and rate order.~ Rice Williams has analyzed Mediacom's objections as filed with the FCC and continues to believe that the City's findings and rate order disposing of Mediacom's prior FCC Form 1240 filing remain correct and valid and applicable to the current filing, as is discussed hereafter. Mediacom's first argument [Paragraph I.] alleges that the City reduced "Mediacom's actual BST rate to below the maximum permitted level" and that the City compelled Mediacom to charge at this lower level. This is an inaccurate, twisted characterization. Basically, Mediacom is complaining that the City was wrong to simply accept the FCC Form 1240 portion of the "operator selected rate" that actually was established and requested by Mediacom. In fact, the City did no analysis to arrive at the particular level of $13.91; this level presumably was determined by some analysis internal to Mediacom that certainly was not shared with the City. ~ "Appeal of Local Rate Order" by MCC Iowa, LLC dba Mediacom, filed with the Federal Communications Commission dated October 23, 2002. ["Appeal"] City of Iowa City, Iowa MCC Iowa, LLC Review of FCC Form 1240 & 1205 July 8, 2003 Page 4 of 10 As Medicom readily admits, it was improper for Mediacom to request approval of an "operator selected rate" that was based in part on an upgrade surcharge charge that never was approved by the City. Mediacom's claimed ignorance on this point is extraordinary considering the fact that the controversy over the upgrade surcharge has been a prominent issue in at least the two prior FCC Form 1240 filings submitted to the City; in particular, in the last filing that Mediacom would have been required to review in preparation for the filing that is the source of this Appeal. It was reasonable for the City to assume that Mediacom was fully aware of the history of the City's denials of the upgrade surcharge, but it is not reasonable to expect the City to understand, or to try to figure out, why Mediacom would chose to reintroduce this issue by creating a bifurcation of its proposed "operator selected rate." It is Mediacom, not the City, that has the full burden of proposing and supporting a particular rate level. As noted in the Rice Williams report prepared last year ["RW Report"], none of Mediacom's predecessors have included any such upgrade surcharge in their BST rates. Moreover, in the two rate adjustment filings preceding the 2002 filing Mediacom's predecessors requested BST rates that were below the MPR's determined by the filings. The outcome of these proceedings did not result in a demand from the operators that the City should have increased the requested rates to the level of the full MPR. It also was reasonable for the City to assume that Mediacom would first utilize all of its FCC Form 1240 MPR before claiming any FCC Form 1235 costs, which is required by ample Commission precedent as was acknowledged by Mediacom in its Appeal, if Mediacom truly intended to seek the higher rate claimed in the Appeal. Mediacom did not attempt to distinguish any differences in its rate proposals from those of its predecessors or otherwise explain its logic for the proposed "operator selected rate." Thus, it was not unreasonable for the City to assume that Mediacom's request for an FCC Form 1240 "operator selected rate" of $13.91 was, in fact, what Mediacom desired. As was the case with Mediacom's predecessors, cable operators often do not propose B ST rates as high as the MPR that is justified by the FCC Form 1240 rate making process. While the operator is prohibited from charging a rate that is above the correctly determined MPR, the operator may choose to defer recovery of the full amount by charging an actual rate that is less than the MPR. By virtue of the FCC Form 1240 methodology, this under recovery is carried forward and factored into the future year's true-up period at which time the operator can again decide to include all, a portion, or none of it in the new "Projected Period" rate. Accordingly, any under recovery that Mediacom believes is represented by the FCC Form 1240 rate that it requested and the City approved will remain available for Mediacom to claim during a subsequent FCC Form 1240 rate making process. It was reasonable for the City to assume that Mediacom City of Iowa City, Iowa MCC Iowa, LLC Review of FCC Form 1240 & 1205 July 8, 2003 Page 5 of 10 understood this process and what it was doing when it sought approval for only a portion of the FCC Form 1240 MPR as had been done by its predecessors. It was not necessary, or required by any FCC rule or regulation, for the City to speculate about Mediacom's pricing intentions. The City compared Mediacom's requested "operator selected rate" after it was stripped of the improper upgrade surcharge component to the City's adjusted FCC Form 1240 MPR and found that Mediacom's requested level of $13.91 was reasonable because it did not exceed that redetermined MPR. The valid portion of Mediacom's request was approved on that basis. Nonetheless, Mediacom contends that the City, on its own initiative, should have gratuitously increased the valid portion of Mediacom's proposed "operator selected rate" and supports this position by offering a Commission precedent contained in the "recently released Media Bureau order, Adelphia Communications (Orchard Park)." A review of this order reveals that it deals with adjustments made by the FCC's Cable Services Bureau to an operator's filing that sought to justify rates for its cable programming tier. Clearly the FCC previously retained the authority for direct regulation of the rates for the cable programming tier, and currently retains the authority to exercise appellate review of a franchise authority's regulatory actions over a cable operator. However, it is well established that decisions by the FCC with respect to a cable operator's CPT rates are not directly binding upon the franchise authority in the exercise of its right to regulate the BST rates, and the FCC's appellate review authority cannot be used to change decisions of the franchising authority where those decisions are reasonable and consistent with federal laws and regulations. Mediacom has not cited any specific federal law or regulation which was violated by the City's reasonable exercise of its powers as franchise authority when it approved the FCC 1240 portion of the "operator selected rate" requested by Mediacom, or when it disapproved the FCC Form 1235 portion of the "operator selected rate" requested by Mediacom. Mediacom's second argument in its Appeal [Paragraph II.] asserts that "Iowa City cannot require amortization of annual PEG operating cost payments." However, does not cite any specific federal law or regulation that proscribes the method of treatment of franchise costs utilized by the City. The fact that "no precedent exists" for the City's treatment of fi'anchise costs does not bar the City's method for treatment of fi'anehise costs. Mediacom ignores the fact that it was not party to the original franchise agreement and had no knowledge of the intention of the original parties with respect to the treatment of these costs. Indeed, each of Mediacom's three predecessor's, including the operator that negotiated the subject Franchise Agreement, have amortized the subject franchise costs. The City believes that this treatment was utilized and continued by Mediacom's City of Iowa City, Iowa MCC Iowa, LLC Review of FCC Form 1240 & 1205 July 8, 2003 Page 6 of 10 predecessors because it best reflected mutual understandings of the the makers of the original franchise. Accordingly, for some years now the City has approved as reasonable rates based on amortized franchise costs. It should have come as no surprise to Mediacom that the City would want to continue this treatment methodology. This second argument also suggests concern by Mediacom over "rate shock in future years" if application of the historical method of treating these franchise costs is continued, and asserts that Mediacom's approach results in "far more stable rates." Certainly the issue of rate shock was of significant concern to the City as it considered Mediacom's rate change application, but not apparently of concern to Mediacom when it prepared its application. The history of rates paid by the City's BST subscribers was one of stability until this first FCC Form 1240 filing [for year 2002] was submitted by Mediacom. For example, BST rates utilized by Mediacom's predecessors over recent history were $12.44, $13.06 and $13.39. Then Mediacom proposed to charge of $14.99. Thus annual increases were as follows: 4.98% and 2.52%, and then Mediacom's proposal which resulted in a one year increase of almost 12%. In contrast, the FCC Form 1240 rate selected by Mediacom and approved by the City of $13.91 results in an increase over the prior year's rate of 3.88%, which is consistent with the City's past rate history as well as reflective of the lower levels of inflation currently being experienced within the economy. If Mediacom truly has concerns over subscriber rate shock and serving the Commission's goals on this point, it should not have objected to the City's approval of a BST rate of $13.91. The last argument of Mediacom's Appeal [Paragraph III.] asserts that the City has allocated franchise costs to subscribers outside of the franchise area and that this will cause practical problems because Mediacom can not recover these costs from another jurisdiction. Again, Mediacom has not asserted any particular federal law or regulation that proscribes the City's actions; rather Mediacom simply claims that "Neither the RW Report nor the Order cite any authority ..." AS evidenced in the RW Report, the City holds that an underlying concept of cost allocation is that users are to be allocated only costs related to the benefits that they receive. It was the City's intent to provide a service and achieve a benefit for the City's cable subscribers through the creation and operation of the PEG facilities supported by the payments made by Mediacom and its predecessors. However, Mediacom's predecessors, not the City, designed a system that operates beyond the franchise limits of the City and in doing so provides to these external subscribers the benefits of the City's PEG facilities and programming. City of Iowa City, Iowa MCC Iowa, LLC Review of FCC Form 1240 & 1205 July 8, 2003 Page 7 of 10 This situation was recognized by Mediacom's predecessors in their rote making proposals when they used this expanded subscriber base in the calculations for determining external costs, including the subject franchise costs. As a result, Mediacom predecessors properly excluded from rates to the City's subscribers the appropriate, proportionate amount of costs that were attributable to the benefits received by the subscribers external to the City's franchise area. So, while the City is not able to control how Mediacom operates its system in this respect, it does have the authority and responsibility to regulate how Mediacom passes through costs to the BST subscribers. Accordingly, for a number of years the City has found reasonable and has approved rates incorporating the same methodology that underlies the City's Order. Mediacom's complaint that it might be problematic to recover certain costs in another regulatory jurisdiction is not a valid basis for now forcing such costs onto the City's BST cable subscribers. Such inter-jurisdictional issues often are encountered when performing cost allocations in a regulated environment when, as is the case here, the regulated entity operates in more than one jurisdiction. The City has not attempted to use its authority to impose costs on another jurisdiction; rather it has acted to eliminate improperly imposed costs from being included in its own jurisdictional subscriber rates. The City notes that apparently Mediacom predecessors were not concerned about this situation or, possibly, felt that the rate levels obtained in the other jurisdictions were appropriately compensatory, as may also be the case with Mediacom. To resolve its concerns, the City suggests that Mediacom consider translating the costs that it improperly seeks to obtain from the City's BST subscribers into a programming expense that then could be recovered in other jurisdictions pursuant to FCC rules governing external costs. In any event, the City's subscribers should not be charged for the cost of services that Mediacom chooses to give away to its non-jurisdictional customers. Finally, Medicom's arguments conclude with a generalized bald assertion that the City's actions embodied in the Order "are unsupported by (and are in direct conflict with) the relevant Commission authority." As noted several times in the foregoing discussion, Mediacom's Appeal has failed to cite any appropriate federal law or regulation that was violated by the City's Order. In its role as a court of appeal, the FCC owes deference to the franchise authority's findings and actions on subjective matters and questions of administrative expertise. In view of the fact that the City has not violated any specific and applicable Commission rules that may have a bearing on the subject issues, and that its actions were reasonable and supported by its written decision and the public record, it is expected by the City that its findings and rate order will be upheld by the Commission. In any event, Mediacom did not request the FCC to order a stay of the City's rate order. Accordingly, this rate order governs Mediacom's ratemaking activities. City of Iowa City, Iowa MCC Iowa, LLC Review of FCC Form 1240 & 1205 July 8, 2003 Page 8 of 10 Mediacom's FCC Form 1240 for year 2003 should have used the adjusted MPR and its components from the year 2002 FCC Form 1240 that was approved by the City last year as the starting point for this filing. Instead, Mediacom used the MPR and its components that were contained in its original year 2002 FCC Form 1240 filing and ignored the adjusted FCC Form 1240 approved by the City's last rate order. Until such time as the FCC acts upon Mediacom's Appeal, Mediacom must conform to the City's prior rate order for the purposes of this current filing and subsequent filings. Accordingly, Mediacom's current filing has been adjusted to reflect this correct starting point. As discussed above with respect to Mediacom's Appeal, Mediacom makes annual payments to the City to support the community facilities for "public, education and government" programming [PEG] and includes these "Franchise Related Costs" in its BST rate determination. The three "Franchise Related Costs" components shown on Worksheet 7 for each rate period of the current FCC Form 1240 filing were developed by Mediacom on an attachment titled "Franchise Related Costs." Again, Mediacom's analysis and development of Franchise Related Costs differs from its predecessor's analyses and from the conclusions and directions incorporated by reference in the City's last rate order. However, as noted before, Mediacom did not seek or obtain a stay of the City's rate order and must conform to that rate order until such time as its Appeal reaches a final conclusion.. Accordingly, Mediacom's "Franchise Related Costs" attachment also has been modified to be consistent with the City's prior findings and rate order as is discussed above in the analysis of Mediacom's Appeal. The detail of these modifications can be found in last year's RW Report. An additional adjustment made to Medicom's Franchise Related Costs analysis was to utilize a rate of return component of 14.63% for the calculations vs. the figure of 15.56% used by Mediacom. Mediacom did not indicate the origins of the 15.56% figure. On the other hand, Mediacom's annual FCC Form 1205 filing determines the latest rate of return figure, and this amount was shown to be 14.63% in the 2003 filing. In addition to the above adjustments and modifications, a correction to Mediacom's Module G presentation was necessary. In Module G at Line G8, Mediacom is required to calculate the "True-Up Segment For True-Up Period 2" utilizing the amount on Line H14 from the prior, approved FCC Form 1240 divided by the number of subscribers in True-Up Period 2 and the number of months in the total tree-up period, which in this case is 14 months. It appears that Mediacom erroneously used the same factor that it calculated for Line F8. This error has been corrected in the Rice Williams presentation. City of Iowa City, Iowa MCC Iowa, LLC Review of FCC Form 1240 & 1205 July 8, 2003 Page 9 of 10 The combination of all these adjustments produces an MPR of $11.8313 per subscriber per month, inclusive of FCC regulatory charges. This contrasts to Mediacom's determination of an FCC Form 1240 M PR of $14.5213 and its request for a rate of $14.00 per subscriber per month [inclusive of the FCC regulatory charge]. Mediacom's MPR determination and its requested BST rate are unreasonable. The rate for basic tier programming charges cannot exceed $11.83 per subscriber per month, inclusive of the FCC regulatory charge. FCC Form 1205 The FCC Form 1205 is used to update charges for renting regulated equipment [eg., remotes and converters], equipment installations [eg., house wiring, service drops, extra outlets, service tier changes] and the Hourly Service Charge ["HSC"] for service calls. Charges established pursuant to this form are based strictly upon the actual cost of regulated equipment and installations plus a reasonable profit. The f'mancial information utilized in this form is to be derived directly from the operator's general ledger and subsidiary records that are to be maintained in accordance with generally accepted accounting principles. This form is required to be prepared and submitted on an annual basis. As with the Mediacom's FCC Form 1240, this review of Mediacom's FCC Form 1205 filing assumes the accuracy of the information supplied by Mediacom from its financial books and records and related soumes. No audit of Mediacom's books and records has been done and none of its system cost assumptions has been checked against any independent sources. The information supplied by Mediacom has been incorporated into an official FCC analytical model which provides the formulas and format for all the calculations required for preparation and completion of the FCC Form 1205. It appears that Mediacom has followed the FCC's analytical format and the results shown on the FCC Form 1205 filing made by Mediacom match the results obtained from the official FCC analytical model reconstructed with Mediacom supplied cost data for the purpose of this review. It was noted that the amounts recorded for the various categories reported on the FCC Form 1205 differed considerably, in some cases dramatically, from the amounts reported in last year's filing. This was true for most values except for one in particular. The Schedule B [Annual Operating Expenses] amount shown for "Other 1" [Contract Labor and Converter Maintenance of $5,684,873.00] was exactly the same as last year. This seems unusual and suspicious given the changes in the number of remotes and converters and the changes in remote and converter labor hours. Outside of this curious City of Iowa City, Iowa MCC Iowa, LLC Review of FCC Form 1240 & 1205 July 8, 2003 Page 10 of 10 coincidence, Mediacom's determination of the maximum permitted charges for equipment rentals and installations appears to be correct. Actually, Mediacom has proposed changing only two of the equipment rental and installation rate levels: the charge for digital converters went up slightly, and the charge for reconnection went down slightly. Since the other existing rates and these two proposed changed rates do not exceed the maximum levels determined by the FCC Form 1205 analyses, Mediacom has demonstrated pursuant to FCC rules and regulations that these rates are reasonable. Thus, these rates may be approved and allowed to go into effect. CONCLUSION Mediacom's "Operator Selected Rate" of $14.00 per subscriber per month [inclusive of FCC regulatory charges] is unreasonable because it exceeds the properly determined MPR of $11.8313. Mediacom may not be authorized to charge a BST rate exceeding $11.83 per subscriber per month beyond August 1, 2003 [inclusive of the FCC regulatory charge]. In addition, the City should order Mediacom to utilize the MPR and its components determined by the current filing as adjusted by these analyses as the starting point for the next FCC Form 1240. The rates and charges shown in Mediacom's FCC Form 1205 have been shown to be reasonable and these adjusted levels may be put into effect on or about August 1, 2003, as requested. It also should be noted that Mediacom's FCC Form 1240 and 1205 filings do not include all the information required by the FCC's filing instructions. For instance, among other things, actual external costs and rates at the beginning and end of the Tree-up and Projected periods and at the time of channel changes are not shown, and there was no backup at all provided, as required, for various inputs to the FCC Form 1205. While the scope of the investigations and analyses described by this report did not prevent reaching the particular findings and conclusions contained herein in the absence of this FCC required information, Mediacom should be directed to review these filing requirements and insure that future filings are in full compliance therewith.