FOR FCC RECORD ONLY $//CVI, Liberty, New York, MO&O, DA-95-330//$ $/76.922 Rates for Cable Programming Service tiers/$ $/benchmark cable rates/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. DA 95-330 In the Matter of ) ) CUID No. CA0161 ) Cablevision Industries ) Long Beach, California ) ) Benchmark Filings to Support ) Cable Programming Service Prices ) Memorandum Opinion and Order Adopted: February 21, 1995 Released: February 23, 1995 By the Chief, Cable Services Bureau: Introduction 1. Here we consider complaints about the price Cablevision Industries ("CVI") was charging for its cable programming service ("CPS") tier in Long Beach, California, CUID No. CA0161. CVI has chosen to attempt to justify its price through a benchmark showing on FCC Form 393. This Order addresses the reasonableness of CVI's price 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 a cable operator's prices for its cable programming service ("CPS") tier 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 complaint in the franchise area addressed by this Order was completed and served on CVI on September 3, 1993 and received by the Commission on September 9, 1993. 5. CVI filed its first FCC Form 393 on November 18, 1993. CVI subsequently amended its Form 393 filing on June 27, 1994. Discussion 6. CVI asserts that its monthly CPS tier price per subscriber of $7.65 is justified by its benchmark filing because its price is within the maximum permitted rate as calculated in the filing. Upon review of CVI's FCC Form 393, we have found the following errors that require a recalculation of CVI's maximum permitted CPS price: a. On September 1, 1993, CVI restructured its rates. As part of this restructuring, CVI reduced its CPS price from $14.00 to $7.65 and increased its basic programming tier price from $12.95 to $13.95. This change, however, is not reflected on Line 101 of Worksheet 1 of Part II of CVI's FCC Form 393. Instead of entering its currently effective tier prices, as required by the directions for Line 101, CVI entered its previously effective tier prices. On Line 101, CVI should have entered $13.95 instead of $12.95 as its basic service tier price and $7.65 instead of $14.00 as its CPS tier price. b. Since CVI restructured its rates, including its equipment rates, on September 1, 1993, the current monthly equipment revenue figure it entered on Part II, Worksheet 1, Line 104 should have been close or identical to its equipment cost figure on Part III, Step G, Line 34. However, CVI's entries on these two lines varied substantially. Accordingly, on Line 104 we enter $242,559.83, which is the identical figure that is on Part III, Step G, Line 34. 7. Because of these errors, we conclude that CVI has failed to demonstrate that its price for the CPS tier was not unreasonable. We will therefore set a price for this tier, incorporating the adjustments discussed above. In doing so we must also recalculate the Inflation Adjustment Factor in Form 393, Part II, Worksheet 1. On its Form 393, CVI apparently calculated the Inflation Adjustment Factor using the data it relied on when it set its CPS price. If based on this data, Form 393 indicated that CVI's price was reasonable, then CVI would have successfully justified its price under paragraph 94 of the Third Order on Reconsideration. However, CVI has not shown that its price was reasonable, so we must 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 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, 126.5 for the fourth quarter of 1993, and 127.5 for the first quarter of 1994. Using these GNP-PI figures, we calculate an Inflation Adjustment Factor of 1.028 through September 1993. 8. These adjustments have the cumulative effect of reducing the maximum permitted monthly CPS tier price from $7.63 (as CVI calculated) to $7.56. Conclusions 9. Upon review of the record herein, we conclude that CVI's showing supports a maximum reasonable CPS tier price for this franchise area of $7.56 (plus franchise fee) for the period from September 9, 1993 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. 10. We further conclude that CVI must reflect in its FCC Form 1200 rate filing for the period after May 14, 1994 the fact that CVI's price during the earlier period was unreasonable. We reserve the right to make further adjustments to CVI's price for the period after May 14, 1994, upon completion of our review of CVI's FCC Form 1200 rate filing. 10. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's Rules, 47 C.F.R.  0.321, that the September 3, 1993 complaints against the cable programming service tier price charged by Cablevision Industries in Long Beach, California, CUID No. CA0161 and all other complaints in this franchise area related to the same price, ARE GRANTED TO THE EXTENT INDICATED HEREIN. 11. IT IS FURTHER ORDERED that the benchmark filing submitted by Cablevision Industries with respect to Long Beach, California, CUID No. CA0161, for the period from September 9, 1993 to May 14, 1994, justifies a maximum price of $7.56 (plus franchise fee) for Cablevision Industries' cable programming service tier. 12. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's Rules, 47 C.F.R.  76.961, that Cablevision Industries shall refund to subscribers that portion of the amounts paid for cable programming service for the period September 9, 1993 to May 14, 1994 which exceeded $7.56 (plus franchise fee) per month and was thus unreasonable, plus interest to the date of the refund. 13. IT IS FURTHER ORDERED that Cablevision Industries shall promptly determine the overcharges to CPS subscribers for the stated period, 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. 14. 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 Cablevision Industries shall, within 30 days of the release of this Order, revise its Form 1200 filing with respect to Long Beach, California for the period beginning May 15, 1994, to reduce the monthly charge for Tier 2 (Line A6b) to equal the maximum permitted price in this franchise area (plus franchise fee). 15. IT IS FURTHER ORDERED that Cablevision Industries shall place into effect, within 30 days after its submission of the revised Form 1200 filing required above, a price for the cable programming service tier that reflects the reduction in the CPS rate determined in this Order. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau