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MOSS & BARNETT .A PPOFES ZONAL AS [ATON Mr. Clyde Gouldman • Page 5 September 23, 1994 The FCC identified one exception to the general rule of deference as it relates to FCC review of local franchising authorities decisions as to whether an "a la carte" package is subject to rate regulation as a cable programming services tier. In this situation the FCC will defer to the local authorities findings of fact if there is a reasonable basis for those findings. The FCC, however, will apply its own analysis of FCC rules and precedent to those facts to determine the appropriate regulatory status of the tier in question. MOSS S BARNETT'S ANALYSIS In analyzing Adelphia's Form 1215 submission, we will review each of the factors the FCC has identified to assist local franchising authorities in considering whether a collective offering of "a la carte" channels should be considered a regulated tier. First, we will analyze the five (5) factors the FCC has identified which, if present, would suggest that the rates for the offering should not be regulated. 1. The operator had offered (or begun to explore offering) "a la carte" packages consisting of non -premium channels prior to rate regulation. In March of 1993. Adelphia sent to all of its customers a notice of rate • change wherein Adelphia increased many of its charges for what were then known as satellite service, economy service and standard service and decreased the charge for expanded satellite service and certain equipment charges. Adelphia did not offer any non -premium channels on an "a la carte" basis at that time. A copy of Adelphia's March, 1993 customer notice has been attached hereto as Exhibit 4. The FCC's rate regulations were adopted on April 1, 1993. These rate regulations were originally to take effect June 21, 1993, however the FCC delayed the effective date until September 1, 1993. Based on the foregoing, no "a la carte" packages consisting of non -premium channels were offered prior to April 1, 1993, the date specified within the FCC's regulations as the beginning of rate regulation. (See 47 C.F.R. § 76.986.) 2. The operator has conducted market research that suggest introducing an "a la carte" package would be profitable, other than as a means of evading rate regulation. Adelphia has submitted no market research or other information as part of its Form 1215 submission to the City suggesting that "a la carte" packages would be profitable. Further, the City has received no other information from Adelphia which includes market research or otherwise statistically supports creation of "a la carte" packages other than as a means of evading rate regulation. 3. A subscriber is free to select which channels will be included in the package. •