FOR FCC RECORD ONLY $// Viacom Cable, East Bay, CA System, MO&O, DA 95-137 $/76.922 Rates for Cable Programming Service tiers/$ $/benchmark cable rates/$ Before the Federal Communications Commission Washington, D.C. DA 95-137 In the Matter of ) ) Viacom Cable ) CUID Nos. CA0353, CA0356, CA0360 East Bay, California, System and ) CA0364, CA1115 City of Dublin, California ) ) Benchmark Filings To Support ) Cable Programming Service Prices ) Memorandum Opinion and Order Adopted: January 31, 1995 Released: February 1, 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 East Bay, California, system and in Dublin, California. 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 complete and timely CPS complaints in the franchise areas addressed in this Order were completed and served on Viacom and received by the Commission on the dates set forth in Appendix A. 5. Viacom filed its first FCC Form 393 for the City of Livermore, California, CUID No. CA0356; the City of Pleasanton, California, CUID No. CA0360; and the City of San Ramon, California, CUID No. CA1115, on November 26, 1993. Viacom filed its first FCC Form 393 for the City of Dublin, California, CUID No. CA0353, on December 13, 1993. Viacom filed its first FCC Form 393 for Alameda County, California-Sunol, CUID No. CA0364, on March 28, 1994. Viacom filed amended FCC Forms 393 for each franchise area on June 14 and June 27, 1994, in response to a Cable Services Bureau Order citing common deficiencies observed in benchmark filings generally. Discussion 6. Viacom asserts that its monthly CPS tier prices are justified by its benchmark filings because its prices are lower than the maximum permitted charge 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 Form 393 filings, Viacom's calculations for its rate-regulated package as of the initial date of regulation (Form 393, Part II, Worksheet 1 and Form 393, Part I) count Channels 0 and 27 as satellite channels on the basic tier. However, according to the September 1, 1993 channel line-ups presented in Viacom's June 27, 1994 amendments, Channel 0 carried Playboy TV, which is a premium service, for 10 hours a day and carried the California Channel, which is a rate- regulated service, for only 5 hours a day; and Channel 27 carried Viewer's Choice, which is a pay-per-view service, for 17 hours a day and carried C-Span 2, which is a rate-regulated satellite service, for only 7 hours a day. Further, Viacom's calculations for its rate-regulated package as of September 30, 1992 (Form 393, Part II, Worksheet 2) count Channel 0 as a satellite channel on the basic tier and Channel 22 as a satellite channel on the CPS tier. However, according to the November 1992 channel line-ups presented in Viacom's June 27, 1994 amendments, Channel 0 carried the Playboy Channel for 10 hours a day and it appears that it carried CNBC, which is a rate-regulated satellite service, for only 5 hours a day; and Channel 22 carried Sports Channel Pacific, which was a premium channel. b. Our policy on "split" channels is to categorize them according to their preponderance of use. This policy is based on the fact that the 1992 price survey underlying the benchmark system was analyzed based on whole, not fractional, channel counts. Under the benchmark system in effect prior to May 15, 1994, all channels must be characterized as either rate-regulated or not subject to rate regulation and as either satellite or non-satellite. A "channel" is defined as a "unit of cable service identified and selected by a channel number or similar designation." FCC Form 393, p. 10. The preponderance-of-use test is the only one consistent with this conceptual framework. c. Under our rules, pay-per-view channels or premium channels offered on a per channel basis may not be counted as regulated channels or as satellite channels. We therefore reduce the number of satellite channels used in calculating the benchmark on Form 393, Part II, Worksheet 1, Line 121 from 18 to 16. We reduce the number of total regulated channels on Form 393, Part II, Worksheet 1 from 34 to 32. We also reduce the number of satellite channels used in calculating the benchmark on Form 393, Part II, Worksheet 2, Line 220 from 18 to 16 and the number of total regulated channels on Worksheet 2 from 32 to 30. These adjustments have the net effect of increasing the benchmark channel rates entered on Line 121 of Worksheet 1 and Line 220 of Worksheet 2. d. In its amended filings, 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 price), and if based on this data Form 393 indicated that its price was reasonable, then Viacom would have successfully justified its price 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 price. 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 October 1993, November 1993 and February 1994 (Line 124), which are inconsistent with an attempt to justify rates based on August 1993 data. Viacom's calculations of the Inflation Adjustment Factors are thus incorrect. e. We must therefore recalculate the Inflation Adjustment Factors on the basis of the most accurate data currently available for the dates as of which Viacom filed. On its amended Form 393s for CUID Nos. CA0356, CA0360 and CA1115, Viacom entered 13 months on Line 124, indicating that these filings were as of the end of October 1993. On its amended Form 393s for CUIDs CA0353 and CUID0364, Viacom entered 14 months and 17 months, respectively, indicating that these filings were as of the end of November 1993 and February 1994. On July 29, 1994, the Department of Commerce released corrected inflation data including Gross National Product Price Index (GNP-PI) figures of 122.3 for the third quarter of 1992, 125.7 for the third quarter of 1993, and 126.5 for the fourth quarter of 1993. Using these GNP-PI figures, we calculate Inflation Adjustment Factors through October 1993, November 1993, and February 1994, the base dates Viacom used in justifying its rates, of 1.030, 1.032, and 1.039, respectively. 7. Correction of Viacom's errors does not result in a reduction in Viacom's maximum permitted CPS tier prices. We therefore conclude that Viacom has demonstrated that its prices for the CPS tier were not unreasonable. Conclusions 8. Upon review of the record herein, we conclude that Viacom has demonstrated that its monthly price for each franchise area set forth in Appendix B (plus franchise fee) was just and reasonable for the period from the filing of the earliest complaint in each franchise area (as set forth in Appendix A) to May 14, 1994. 9. 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 price charged by Viacom Cable in the City of Dublin, California, CUID No. CA0353; the City of Livermore, California, CUID No. CA0356; the City of Pleasanton, California, CUID No. CA0360; Alameda County, California-Sunol, CUID No. CA0364; and the City of San Ramon, California, CUID No. CA1115, and all other complaints relating to the same prices, ARE DENIED TO THE EXTENT INDICATED HEREIN. 10. IT IS FURTHER ORDERED, that the benchmark filings submitted by Viacom Cable with respect to the City of Dublin, California, CUID No. CA0353; the City of Livermore, California, CUID No. CA0356; the City of Pleasanton, California, CUID No. CA0360; Alameda County, California, CUID No. CA0364; and the City of San Ramon, California, CUID No. CA1115, justify the monthly price for each franchise area set forth in Appendix B (plus franchise fee) for Viacom Cable's cable programming service tier. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau Appendix A CUID No. Date First Complaint Date Complaint Filed with FCC Served 0353 11/23/93 11/11/93 0356 11/16/93 10/27/93 0360 11/16/93 10/27/93 0364 2/24/942/25/94 1115 11/16/93 10/27/93 Appendix B CUID No. CPS Tier Price 0353 $10.23 0356 $10.23 0360 $10.23 0364 $10.23 1115 $10.14