FOR FCC RECORD ONLY $//King Videocable Company, MN, MO&O, DA 95-404//$ $/76.922 Rates for Cable Programming Service tiers/$ $/benchmark cable rates/$ Before the Federal Communications Commission Washington, D.C. DA 95-404 In the Matter of ) ) King Videocable Company ) CUID Nos. MN0271, MN0279, MN0280, ) MN0291, MN0292, MN0293, MN0294, ) MN0307, MN0311 ) Benchmark Filing To Support ) Cable Programming Service Price ) Memorandum Opinion and Order Adopted: March 2, 1995 Released: March 3, 1995 By the Chief, Cable Services Bureau: Introduction 1. Here we consider complaints about the price King Videocable Company ("King") was charging for its cable programming service ("CPS") tier in Brooklyn Center, Minnesota, CUID No. MN0279; Brooklyn Park, Minnesota, CUID No. MN0271; Crystal, Minnesota, CUID No. MN0292; Golden Valley, Minnesota, CUID No. MN0294; Maple Grove, Minnesota, CUID No. MN0311; New Hope, Minnesota, CUID No. MN0291; Plymouth, Minnesota, CUID No. MN0307; Robbinsdale, Minnesota, CUID No. MN0293; and Osseo, Minnesota, CUID No. MN0280. King has chosen to attempt to justify its price through a benchmark showing on one FCC Form 393. This Order addresses the reasonableness of King's price only through May 14, 1994. At a later time 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 complete and timely complaint. The filing of a complete and timely 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 complete and timely 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 Brooklyn Center, Minnesota, CUID No. MN0279; Brooklyn Park, Minnesota, CUID No. MN0271; Crystal, Minnesota, CUID No. MN0292; Golden Valley, Minnesota, CUID No. MN0294; Maple Grove, Minnesota, CUID No. MN0311; New Hope, Minnesota, CUID No. MN0291; Plymouth, Minnesota, CUID No. MN0307; Robbinsdale, Minnesota, CUID No. MN0293; and Osseo, Minnesota, CUID No. MN0280 were completed and served on King and received by the Commission on December 27, 1993. 5. King attempted to justify its CPS price through an FCC Form 393 filed on November 15, 1993 in response to the franchising authority's initial complaints. King amended its justification on June 24, 1994 in response to a Cable Services Bureau Order citing common deficiencies observed in benchmark filings generally, on January 24, 1995, in response to a Cable Services Bureau Public Notice offering operators the opportunity to make optional supplemental filings, and on February 1 and 14, 1995, in response to inquiries by Commission staff. Discussion 6. In its amended benchmark filings of January 24, 1995, King calculated a maximum permitted price for the CPS tier of $10.79 per month. However, King's actual price for the CPS tier was $10.95 per month. Thus, King has failed to demonstrate that its price for the CPS tier was not unreasonable. Furthermore, upon review of King's FCC Form 393, we have found the following error that requires a recalculation of King's maximum permitted CPS price: a. In Column G of Schedules A and C of Part III of its FCC Form 393, King did not correctly account for its income tax expense. By placing entries in these columns, King confirms that it is a tax-paying entity (i.e., a "C" corporation). However, King incorrectly calculated its income tax by simply applying the corporate tax rate to its return on investment. The Commission has stated that tax-paying business entities must gross-up their tax entries in Column G of Schedules A and C (i.e., calculate the tax as a percentage of return on investment plus tax). By understating its tax entries in Column G, an operator reduces its effective rate of return on equipment and installations and thereby could increase its CPS price. We therefore recalculate Column G of Schedules A and C (and subsequent steps) using correctly grossed-up tax entries. 7. This adjustment has the effect of reducing the maximum permitted monthly CPS tier price from $10.79 (as King calculated) to $10.77. Conclusions 8. Upon review of the record herein, we conclude that King's showing supports a maximum reasonable CPS tier price of $10.77 per month (plus franchise fee) for the period December 27, 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. 9. We further conclude that King must reflect in its Form 1200 rate filing for the period after May 14, 1994 the fact that King's price during the earlier period was unreasonable. We reserve the right to make further adjustments to King's price for the period after May 14, 1994, upon completion of our review of King's FCC Form 1200 rate filing. 10. We further conclude that King has submitted in good faith a timely optional supplemental filing in response to our December 29, 1994 Public Notice. As provided in the Public Notice, we will relieve King of its obligation to obtain advance Commission approval of adjustments to its CPS price 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 December 27, 1993 complaints against the cable programming service price charged by King Videocable Company in Brooklyn Center, Minnesota, CUID No. MN0279; Brooklyn Park, Minnesota, CUID No. MN0271; Crystal, Minnesota, CUID No. MN0292; Golden Valley, Minnesota, CUID No. MN0294; Maple Grove, Minnesota, CUID No. MN0311; New Hope, Minnesota, CUID No. MN0291; Plymouth, Minnesota, CUID No. MN0307; Robbinsdale, Minnesota, CUID No. MN0293; and Osseo, Minnesota, CUID No. MN0280 ARE GRANTED TO THE EXTENT INDICATED HEREIN. 12. IT IS FURTHER ORDERED that the benchmark filing submitted by King Videocable Company with respect to Brooklyn Center, Minnesota, CUID No. MN0279; Brooklyn Park, Minnesota, CUID No. MN0271; Crystal, Minnesota, CUID No. MN0292; Golden Valley, Minnesota, CUID No. MN0294; Maple Grove, Minnesota, CUID No. MN0311; New Hope, Minnesota, CUID No. MN0291; Plymouth, Minnesota, CUID No. MN0307; Robbinsdale, Minnesota, CUID No. MN0293; and Osseo, Minnesota, CUID No. MN0280, for the period of December 27, 1993 to May 14, 1994, justifies a maximum price of $10.77 per month (plus franchise fee) for the 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 King Videocable Company shall refund to subscribers that portion of the amounts paid for cable programming service in each franchise area from December 27, 1993 to May 14, 1994, that exceeded $10.77 (plus franchise fee) per month and was thus unreasonable, plus interest to the date of the refund. 14. IT IS FURTHER ORDERED that King Videocable Company shall promptly determine the overcharges to CPS subscribers for the same 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. 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 King Videocable Company shall, within 30 days of the release of this Order, revise its Form 1200 filing for CUID Nos. MN0271, MN0279, MN0280, MN0291, MN0292, MN0293, MN0294, MN0307 and MN0311 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 (plus franchise fee). 16. IT IS FURTHER ORDERED that King Videocable Company shall place into effect, within 30 days after submission of the revised Form 1200 filing required above, a CPS tier price for CUID Nos. MN0271, MN0279, MN0280, MN0291, MN0292, MN0293, MN0294, MN0307 and MN0311 that reflects the reduction in the CPS rate 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 King Videocable Company shall not be required to obtain advance Commission approval of adjustments to its CPS price for one year following the release of this Order. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Service Bureau