FOR FCC RECORD ONLY $//Viacom Cable, Red Bluff, CA, MO&O, DA 95-272//$ $/76.922 Rates for cable programming service tiers/$ $/benchmark cable rates/$ Before the Federal Communications Commission Washington, D.C. DA 95-272 In the Matter of ) ) CUID Nos. CA0093, CA0094 Viacom Cable ) Red Bluff, California ) ) Benchmark Filings to Support ) Cable Programming Service Price ) Memorandum Opinion and Order Adopted: February 17, 1995 Released: February 21, 1995 By the Chief, Cable Services Bureau: Introduction 1. Here we consider complaints about the price Viacom Cable ("Viacom") was charging for its cable programming service ("CPS") tier in the City of Red Bluff, California, CUID No. CA0093, and Tehama County-Red Bluff, California, CUID No. CA0094. Viacom has chosen to attempt to justify its price through benchmark showings on FCC Form 393. This Order addresses the reasonableness of Viacom's price only through May 14, 1994. At a later date we will issue a separate order addressing the reasonableness of the price 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 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 filings in the franchise areas addressed in this Order on December 21, 1993. Viacom filed amended FCC Form 393 filings for both franchise areas on June 27, 1994 in response to a Cable Services Bureau Order citing common deficiencies observed in benchmark filings generally and 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 price of $11.84 per subscriber is justified by its benchmark filings because its price is approximately equal to the maximum permitted charges as calculated in the filings. However, upon review we have determined that Viacom has not correctly calculated its maximum permitted price, and it is therefore appropriate to make the following adjustment to Viacom's calculations in Form 393: a. 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 price. 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 an Adjustment Time Period extending through November 1993 (Line 124), 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. b. We must therefore recalculate the Inflation Adjustment Factor on the basis of the most accurate data currently available for the date on of which Viacom filed. On its amended Forms 393, Viacom entered 14 months on Line 124, indicating that these filings were as of the end of November 1993. 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 and 125.7 for the third quarter of 1993. Using these GNP-PI figures, we calculate an Inflation Adjustment Factor through November 1993, the base date Viacom used in justifying its rates, of 1.032. This adjustment is consistent with the Inflation Adjustment Factor that Viacom used in its optional filing of February 8, 1995. c. In its February 8, 1995 optional filing, Viacom reduced the number of satellite channels as of the initial date of regulation that it used to calculate the benchmark on Form 393, Part II, Worksheet 1, Line 121 from 24 to 23 and also reduced the number of satellite channels as of September 30, 1992 that Viacom used to calculate the benchmark on Form 393, Part II, Worksheet 2, Line 220 from 20 to 19. We rely on these revisions to recompute Viacom's maximum permitted rate. 7. Because of these errors, we conclude that Viacom has failed to demonstrate that its price for the CPS tier was not unreasonable. We will therefore set prices for this tier, 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 8. Upon review of the record herein, we conclude that Viacom's showing supports the maximum reasonable CPS tier price for each franchise area set forth in Appendix B (plus franchise fee) for the period from the filing of the earliest complaint in each franchise area (as set forth on Appendix A) to May 14, 1994. We further determine that 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. 9. We further conclude that Viacom must reflect in its FCC Form 1200 rate filings for the period after May 14, 1994 the fact that Viacom's price during the earlier period was 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 rate filings. 10. We further conclude that Viacom has submitted in good faith an optional supplemental filing in response to our December 29, 1994 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. 11. 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 Red Bluff, California, CUID No. CA0093, and Tehama County-Red Bluff, California, CUID No. CA0094, and all other complaints in these franchise areas related to the same price, ARE GRANTED TO THE EXTENT INDICATED HEREIN. 12. IT IS FURTHER ORDERED that the benchmark filings submitted by Viacom Cable with respect to Red Bluff, California, CUID No. CA0093, and Tehama County-Red Bluff, California, CUID No. CA0094, for the period beginning with the filing of the first valid complaint in each franchise area and ending on May 14, 1994, as set forth on Appendix A, justify the maximum price in each franchise area set forth in Appendix B (plus franchise fee) for Viacom Cable's cable programming service tier. 13. 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 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. 14. 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. 15. 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 Red Bluff, California, CUID No. CA0093, and Tehama County-Red Bluff, California, CUID No. CA0094, 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). 16. 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. 17. 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 Commission approval of adjustments to its CPS prices 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 0093 11/22/93 11/18/93 0094 11/24/93 11/18/93 Appendix B CUID No. Actual Rates Maximum Reasonable Rates 0093 $11.84 $11.65 0094 $11.84 $11.74