FOR FCC RECORD ONLY
$//New Channels Corporation, Carthage, New York, MO&O, DA 95-407//$
$/ 76.922 Rates for the basic service tier and cable programming services tier/$
$/benchmark cable rates/$

                                Before the
                     Federal Communications Commission
                             Washington, D.C.

                                                                  DA 95-407


In the matter of              ) CUID Nos. NY1344, NY1345, NY1346, 
                         )    NY1348, NY1349, NY1418, 
                         )    NY1419, NY1420, NY1421 
                         )    and NY1495
                         )
NewChannels Corporation       )
Carthage, New York System     )
                         )
Benchmark Filing To Support   )
Cable Programming Service Price         )


                       Memorandum Opinion and Order

      Adopted:  March 2, 1995                Released:  March 3, 1995

By the Deputy Chief, Cable Services Bureau:


Introduction

     1.  Here we consider complaints about the price NewChannels Corporation
("NewChannels") was charging for its cable programming service ("CPS") tier in its
Carthage, New York System, CUID Nos. NY1344, NY1345, NY1346, NY1348, NY1349,
NY1418, NY1419, NY1420, NY1421 and NY1495.  NewChannels has attempted to justify
its price through a benchmark showing on FCC Form 393.  This Order addresses the
reasonableness of NewChannels' 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 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 each franchise area was completed and served on
NewChannels and received by the Commission on the dates set forth in Appendix A.  

     5.  NewChannels attempted to justify its CPS price through an FCC Form 393 filed
on February 14, 1994 for CUID Nos. NY1345, NY1346, NY1348, NY1418, NY1419 and
NY1420; on February 15, 1994 for CUID Nos. NY1344, NY1349 and NY1495; and on
February 16, 1994 for CUID No. NYl421.  NewChannels amended its justification on July
5, 1994 in response to a Cable Services Bureau Order citing common deficiencies observed
in benchmark filings generally. 

Discussion

     6.  NewChannels asserts that its monthly CPS tier price of $12.99 per subscriber is
justified by its benchmark filing because its price is equal to the maximum permitted charge
of $12.99 as calculated in its most recent amended filing, dated July 5, 1994.  Upon review,
however, we have determined that NewChannels has not correctly calculated its maximum
permitted price, and it is therefore appropriate to make the following adjustments to New
Channels' calculations in Form 393:

          a.  In Column G of Schedules A and C of Part III of its FCC Form 393,                          
     NewChannels did not correctly account for its income tax expense.  By placing entries
     in these columns, NewChannels confirms that it is a tax-paying entity (i.e., a "C"             
     corporation).  However, NewChannels 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.

          b.  NewChannels calculated the Inflation Adjustment Factor on Form 393, Part
     II, Worksheet 1 as of the end of September 1993 using data released by the U.S.
     Department of Commerce on December 1, 1993.  However, NewChannels incorrectly
     entered on Line 125 that 9 months, rather than l2 months, had passed between the     end
     of the third quarter of 1992 and the third quarter of 1993. New Channels'  calculation
     of the Inflation Adjustment Factor is thus incorrect.

          c.   We must therefore recalculate the Inflation Adjustment Factor in Form                                    
          393, Part II, Worksheet 1, on the basis of the most accurate data currently available                                              
     for the date for which NewChannels filed.   On July 29,                    1994, the U.S.                               
     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                                          
     1.028 as the Inflation Adjustment Factor through September 1993, the                 base                                  
     date NewChannels used in justifying its rates.
      
     7.  The cumulative effect of these adjustments is to reduce the maximum permitted
monthly price for the CPS tier from $l2.99 to $l2.88.

Conclusions

     8.  Upon review of the record herein, we conclude that NewChannels' showing
supports a maximum reasonable CPS tier price of $12.88 per month (plus franchise fee) 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.  However, we further determine that the refund at issue is
such a de minimis amount that it would not serve the public interest to order a refund.  

     9.  We further conclude that NewChannels must reflect in its FCC Form 1200 rate
filing for the period after May 14, 1994 the fact that NewChannels' price during the earlier
period was unreasonable.  We reserve the right to make further adjustments to
NewChannels' price for the period after May 14, 1994 upon completion of our review of
NewChannels' 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 complaints referenced in Appendix A against the cable
programming service price charged by NewChannels Corporation in its Carthage, New York
System, CUID Nos. NY1344, NY1345, NY1346, NY1348, NY1349, NY1418, NY1419,
NY1420, NY1421 and NY1495, ARE GRANTED TO THE EXTENT INDICATED
HEREIN AND DENIED TO THE EXTENT INDICATED HEREIN.

     11.  IT IS FURTHER ORDERED that the benchmark filing submitted by
NewChannels Corporation with respect to its Carthage, New York System, CUID Nos.
NY1344, NY1345, NY1346, NY1348, NY1349, NY1418, NY1419,                          NY1420,       NY1421     and
NY1495, for the period from the first filing of the first valid complaint in each franchise area
(as set forth on Appendix A) to May 14, 1994, justifies a maximum price of $12.88 per
month (plus franchise fee) for the cable programming service tier.

     12.  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 NewChannels Corporation shall,
within 30 days of the release of this Order, revise its Form 1200 filing with respect to
Carthage, New York System, CUID Nos. NY1344, NY1345, NY1346, NY1348, NY1349,
NY1418, NY1419, NY1420, NY1421 and NY1495, 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 permitted rate (plus franchise fee).

     13.  IT IS FURTHER ORDERED that NewChannels Corporation shall place into
effect, within 30 days after its submission of the revised Form 1200 filing required above, a
CPS tier price that reflects the reduction in the CPS rate determined in this Order.  

     

                         FEDERAL COMMUNICATIONS COMMISSION




                         Gregory J. Vogt
                         Deputy Chief, Cable Services Bureau