FOR FCC RECORD ONLY $//Viacom Cable, Puget North/Central, WA, Salem, OR, MO&O, DA 95-325//$ $/76.922 Rates for Cable Programming Service tiers/$ $/benchmark cable rates/$ Before the Federal Communications Commission Washington, D.C. DA 95-325 In the matter of ) CUID Nos. ) WA0013, WA0026, WA0076, ) WA0091, WA0149, WA0151, Viacom Cable ) WA0191, WA0223, WA0243, Puget North/Central, Washington ) WA0245, WA0255, WA0264, Salem, Oregon ) WA0310, WA0325, WA0330, Systems ) WA0396, WA0549, OR0057, ) OR0194, OR0195, OR0227, Benchmark Filings to Support OR0423 Cable Programming Service Prices Memorandum Opinion and Order Adopted: February 24, 1995 Released: February 24, 1995 By the Chief, Cable Services Bureau: Introduction 1. Here we consider complaints about the prices Viacom Cable was charging for its cable programming service ("CPS") tier in the communities designated by the CUID numbers referenced above on its Puget North/Central, Washington and Salem, Oregon Systems. Viacom has chosen to attempt to justify its prices through benchmark showings on FCC Form 393. This Order addresses the reasonableness of Viacom's prices only through May 14, 1994. At a later date we will issue a separate order addressing the reasonableness of the prices after that date. 2. Under the Cable Television Consumer Protection and Competition Act of 1992, and our rules implementing it, 47 C.F.R. Part 76, Subpart N, the Commission must review CPS prices upon the filing of a valid complaint. The filing of a valid complaint triggers an obligation on behalf of the cable operator to file a justification of its CPS prices. Under our rules, an operator may attempt to justify its prices through either a benchmark showing or a cost-of-service showing. In either case, the operator has the burden of demonstrating that its CPS prices are not unreasonable. 3. The Commission's original rate regulations took effect on September 1, 1993. The Commission subsequently revised its rate regulations effective May 15, 1994. Operators with valid CPS complaints filed against them prior to May 15, 1994 must demonstrate that their CPS prices were in compliance with the Commission's initial rules from the time the complaint was filed through May 14, 1994, and that their prices were in compliance with the revised rules from May 15, 1994 forward. Operators attempting to justify their prices for the period prior to May 15, 1994 through a benchmark showing must complete and file FCC Form 393. Generally, to justify their prices for the period beginning May 15, 1994 through a benchmark showing, operators must use the FCC Form 1200 series. Procedural Matters 4. The first valid CPS complaints in the franchise areas which are the subject of this Order were completed and served on Viacom and received by the Commission on the dates set forth on Appendix A. 5. Viacom filed its first FCC Form 393 for each of the franchise areas addressed in this Order prior to June 27, 1994. On June 27, 1994, Viacom filed amended FCC Forms 393 for all areas, in response to a Cable Services Bureau Order citing common deficiencies observed in benchmark filings generally. Viacom subsequently filed further amended Forms 393 on August 15, 1994 for Redmond, Washington, CUID No. WA0151 and Kirkland, Washington, CUID No. WA0310; and on October 20, 1994 for Bellevue, Washington, CUID No. WA0076 and Bellevue-All Points, Washington, CUID No. WA0330. Finally, Viacom submitted additional information for all areas on February 8, 1995 in response to a Cable Services Bureau Public Notice offering operators the opportunity to make optional supplemental filings. Discussion 6. Viacom asserts that its monthly CPS tier prices are justified by its benchmark filings because its prices are lower than or equal to the maximum permitted charges as calculated in the filings. Upon review of Viacom's Form 393 filings, we have found that Viacom has not correctly calculated its maximum permitted prices, and it is therefore appropriate to make the following adjustments to Viacom's calculations in Form 393: a. In its February 8, 1995 optional filings, Viacom set forth the total number of regulated channels and the total number of satellite channels based on the standards set forth in the Public Notice. Under those standards, a channel must be counted as a regulated channel if, but only if, more than 50% of the time the channel was in operation it was used to provide a service subject to rate regulation. Similarly, in order to count as a satellite channel, a channel must be used for regulated satellite programming more than 50% of the time it is in operation. We have adjusted Viacom's FCC Form 393 filings to reflect the counts of total regulated and satellite channels reported on Viacom's optional filings. b. In its amended filings of June 27, 1994, Viacom states that it calculated the Inflation Adjustment Factor (Form 393, Part II, Worksheet 1, Line 127, and Form 393, Part II, Worksheet 4, Line 401) using data it relied on when it set its CPS prices. If Viacom had done so correctly (i.e., if it had completed Form 393 with accurate data, including the most recent inflation data available as of the time it set its prices), and if based on this data Form 393 indicated that its prices were reasonable, then Viacom would have successfully justified its prices under paragraph 94 of the Third Order on Reconsideration. However, the figures Viacom used are not consistent with data on which it should have relied in setting its CPS prices. Specifically, Viacom used data released by the U.S. Department of Commerce on August 31, 1993, to complete Lines 122 and 125, but used earlier data to calculate the Inflation Factor on Line 123. Furthermore, Viacom claimed Adjustment Time Periods extending through various periods in the last quarter of 1993 and the first quarter of 1994 (depending on the filing date of the complaint), which is inconsistent with an attempt to justify rates based on August 1993 data. Viacom's calculation of the Inflation Adjustment Factor is thus incorrect. c. We must therefore recalculate the Inflation Adjustment Factor on the basis of the most accurate data currently available for the latest date contemplated by the Form 393 instructions. On its February 8, 1995 filings in response to the Public Notice, Viacom supplied corrected Inflation Adjustment Factors based on the last legal filing date as defined in the Public Notice. We have used these Inflation Adjustment Factors to calculate Viacom's maximum permitted rates. 7. Correction of Viacom's errors does not result in a reduction in Viacom's maximum permitted CPS tier prices in CUID Nos. WA0026, WA0091, WA0149, WA0151, WA0243, WA0245, WA0325, WA0396, OR0057, OR0194, OR0195, OR0227, and OR0423. We therefore conclude that Viacom has demonstrated that its prices for the CPS tier in these areas were not unreasonable. 8. We conclude that Viacom has failed to demonstrate that its prices for the CPS tier were not unreasonable in CUID Nos. WA0013, WA0076, WA0191, WA0223, WA0255, WA0264, WA0310, WA0330 and WA0549. We will therefore set prices for this tier in these communities, incorporating the adjustments discussed above. These adjustments have the effect of reducing the maximum permitted monthly CPS tier price for each franchise area to the levels set forth in Appendix B. Conclusions 9. Upon review of the record herein, we conclude that Viacom's showing supports the maximum reasonable CPS tier prices shown on Appendix B (plus franchise fee) for the period from the filing of the earliest complaint in each franchise area (as set forth in Appendix A) to May 14, 1994. With respect to CUID Nos. WA0013, WA0076, WA0223, WA0255, WA0310, WA0330, and WA0549, we determine that the refund at issue is such a de minimis amount that it would not serve the public interest to order a refund. With respect to CUID Nos. WA0191 and WA0264, we will order appropriate refunds pursuant to Section 76.957 of the Commission's Rules, 47 C.F.R.  76.957, in order to reimburse subscribers for the amount they paid in excess of a reasonable price. 10. We further conclude that Viacom must reflect in its FCC Form 1200 rate filings for CUID Nos. WA0013, WA0076, WA0191, WA0223, WA0255, WA0264, WA0310, WA0330 and WA0549 for the period after May 14, 1994 the fact that Viacom's prices during the earlier period were unreasonable. We reserve the right to make further adjustments to Viacom's prices for the period after May 14, 1994, upon completion of our review of Viacom's FCC Form 1200 rates. 11. We further conclude that Viacom has submitted in good faith optional supplemental filings in response to our Public Notice. As provided in the Public Notice, we will relieve Viacom of its obligation to obtain advance Commission approval of adjustments to its CPS prices for one year following the release of this Order. 12. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's Rules, 47 C.F.R.  0.321, that the complaints referred to in Appendix A against the cable programming service prices charged by Viacom Cable in the City of Lake Stevens, Washington, CUID No. WA0026; the City of Everett, Washington, CUID No. WA0091; the City of Bothell, Washington, CUID No. WA0149; the City of Redmond, Washington, CUID No. WA0151; Snohomish County, Washington, CUID No. WA0243; the Town of Steilacoom, Washington, CUID No. WA0245; the City of Brier, Washington, CUID No. WA0325; the City of Mill Creek, Washington, CUID No. WA0396; the City of Salem, Oregon, CUID No. OR0057; Polk County, Oregon, CUID No. OR0194; Marion County, Oregon, CUID No. OR0195; the City of Keyzer, Oregon, CUID No. OR0227; and the City of Amity, Oregon, CUID No. OR0423, and all other complaints in these franchise areas relating to the same prices, ARE DENIED TO THE EXTENT INDICATED HEREIN. 13. IT IS FURTHER ORDERED that the complaints referred to in Appendix A against the cable programming service prices charged by Viacom Cable in the City of Oak Harbor, Washington, CUID No. WA0191 and Island County, Washington, CUID No. WA0264, and all other complaints in these franchise areas related to the same prices, ARE GRANTED TO THE EXTENT INDICATED HEREIN. 14. IT IS FURTHER ORDERED that the complaints referred to in Appendix A against the cable programming service prices charged by Viacom Cable in the City of Mukilteo, Washington, CUID No. WA0013; the City of Bellevue, Washington, CUID No. WA0076; Snohomish County-Everett, Washington, CUID No. WA0223; Snohomish County- Lynnwood, Washington, CUID No. WA0255; the City of Kirkland, Washington, CUID No. WA0310; the City of Bellevue-All Points, Washington, CUID No. WA0330; and the City of Woodenville, Washington, CUID No. WA0549, and all other complaints in these franchise areas related to the same prices, ARE GRANTED TO THE EXTENT INDICATED HEREIN AND DENIED TO THE EXTENT INDICATED HEREIN. 15. IT IS FURTHER ORDERED that the benchmark filings submitted by Viacom Cable justify the maximum reasonable price in each franchise area set forth in Appendix B (plus franchise fee) for Viacom Cable's cable programming service tier. 16. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's Rules, 47 C.F.R.  76.961, that Viacom Cable shall refund to subscribers in the City of Oak Harbor, Washington, CUID No. WA0191, and Island County, Washington, CUID No. WA0264 that portion of the amounts paid for cable programming service for the period from the filing of the first valid complaint in each franchise area (as set forth on Appendix A) to May 14, 1994 which exceeded the maximum price for each franchise area set forth in Appendix B (plus franchise fee) per month and was thus unreasonable, plus interest to the date of the refund. 17. IT IS FURTHER ORDERED that Viacom Cable shall promptly determine the overcharges to CPS subscribers for the stated periods, and shall within 30 days of the release of this Order file a report with the Chief, Cable Services Bureau, stating the cumulative refund amount so determined (including franchise fees and interest), describing the calculation thereof, and describing its plan to implement the refund within 60 days of Commission approval thereof. 18. IT IS FURTHER ORDERED, pursuant to Section 76.922(b)(4)(C) of the Commission's rules, 47 C.F.R.  76.922(b)(4)(C), that Viacom Cable shall, within 30 days of the release of this Order, revise its Form 1200 filings with respect to the City of Mukilteo, Washington, CUID No. WA0013; the City of Bellevue, Washington, CUID No. WA0076; the City of Oak Harbor, Washington, CUID No. WA0191; Snohomish County- Everett, Washington, CUID No. WA0223; Snohomish County-Lynnwood, Washington, CUID No. WA0255; Island County, Washington, CUID No. WA0264; the City of Kirkland, Washington, CUID No. WA0310; the City of Bellevue-All Points, Washington, CUID No. WA0330; and the City of Woodenville, Washington, CUID No. WA0549 for the period beginning May 15, 1994, to reduce the monthly charge per tier as of March 31, 1994 for Tier 2 (Line A6b) to equal the maximum price in each franchise area set forth in Appendix B (plus franchise fee). 19. IT IS FURTHER ORDERED that Viacom Cable shall place into effect, within 30 days after its submission of the revised Form 1200 filings required above, prices that reflect the reductions in the CPS rates determined in this Order. 20. IT IS FURTHER ORDERED, pursuant to Section 76.960 of the Commission's rules, 47 C.F.R.  76.960, that Viacom Cable shall not be required to obtain advance approval of adjustments to its CPS prices in the franchise areas addressed herein for one year following the release of this Order. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau Appendix A CUID No. Date First Complaint Date Complaint Filed with FCC Served WA0013 11/2/93 10/26/93 WA0026 12/3/93 11/17/93 WA0076 12/6/93 11/30/93 WA0091 12/30/93 12/23/93 WA0149 12/29/93 12/22/93 WA0151 2/28/94 2/24/94 WA0191 11/17/93 10/27/93 WA0223 11/29/93 11/19/93 WA0243 12/28/93 12/23/93 WA0245 11/8/93 11/5/93 WA0255 11/29/93 11/23/93 WA0264 11/23/93 10/27/93 WA0310 10/12/93 10/6/93 WA0325 11/29/93 11/22/93 WA0330 12/9/93 12/8/93 WA0396 1/4/94 12/28/93 WA0549 11/15/93 10/31/93 OR0057 11/9/93 11/9/93 OR0194 11/22/93 11/9/93 OR0195 11/22/93 11/9/93 OR0227 11/22/93 11/9/93 OR0423 11/22/93 11/9/93 Appendix B CUID No. Actual Rates Maximum Permitted Rates WA0013 $10.80 $10.74 WA0026 $10.80 $10.80 WA0076 $10.69 $10.67 WA0091 $10.57 $10.57 WA0149 $10.80 $10.80 WA0151 $10.57 $10.57 WA0191 $13.11 $13.00 WA0223 $10.80 $10.75 WA0243 $10.80 $10.80 WA0245 $12.04 $12.04 WA0255 $10.80 $10.75 WA0264 $12.97 $12.86 WA0310 $10.09 $10.04 WA0325 $10.80 $10.80 WAO330 $10.69 $10.67 WA0396 $10.80 $10.80 WA0549 $10.57 $10.54 OR0057 $11.36 $11.36 OR0194 $11.36 $11.36 0R0195 $11.36 $11.36 OR0227 $11.36 $11.36 OR0423 $11.36 $11.36