FOR FCC RECORD ONLY $//V Cable, Inc., Euclid and Cleveland Heights, OH, MO&O, DA 95-484//$ $/76.922 Rates for Cable Programming Service tiers/$ $/benchmark cable rates/$ Before the Federal Communications Commission Washington, D.C. 20554 DA 95-484 In the Matter of ) ) V Cable, Inc. ) CUID Nos. OH0109 and OH0695 Euclid and Cleveland Heights, Ohio ) ) Benchmark Filings To Support ) Cable Programming Service Prices ) Memorandum Opinion and Order Adopted: March 14, 1995 Released: March 15, 1995 By the Chief, Cable Services Bureau: Introduction 1. Here we consider complaints about the prices V Cable, Inc. d/b/a Cablevision ("Cablevision") was charging for its cable programming service ("CPS") tier in Euclid, Ohio, CUID No. OH0109, and Cleveland Heights, Ohio, CUID No. OH0695. Cablevision has chosen to attempt to justify its prices through benchmark showings on FCC Form 393. This Order addresses the reasonableness of Cablevision'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 complaint in Euclid, Ohio, CUID No. OH0109, was completed and served on Cablevision on December 14, 1993 and received by the Commission on December 20, 1993. The first complete and timely CPS complaint in Cleveland Heights, Ohio, CUID No. OH0695, was completed and served on Cablevision on October 13, 1993 and received by the Commission on October 18, 1993. 5. Cablevision filed its FCC Form 393 for Euclid, Ohio, CUID No. OH0109, on January 14, 1994, and filed its Form 393 for Cleveland Heights, Ohio, CUID No. OH0695, on November 30, 1993. Cablevision amended its justification for CUID No. OH0109 on June 24, 1994 in response to a Cable Services Bureau Order citing common deficiencies observed in benchmark filings generally. Cablevision further amended its justification in CUID No. OH0109 on February 17, 1995, in response to a Commission letter which requested further clarification of Cablevision's amended showing. Background 6. Cablevision restructured its rates in an effort to comply with the Commission's Rules on September 1, 1993. In October 1993, Cablevision changed its channel line-up on Channel 37 by deleting HSN II, a satellite channel on the CPS tier, and adding WQHS, a non-satellite channel on the basic tier. On January 1, 1994, Cablevision again changed its channel line-up by moving Channel 17, a satellite channel on the CPS tier, to the basic tier. These changes in Cablevision's channel line-up were unaccompanied by any change in Cablevision's prices for its basic and CPS tiers. Cablevision completed Part II of Form 393 using its channel line-up as of October 1993. In Part I of Form 393, Cablevision performed alternative calculations using its number of channels as of September 1, 1993, and as of October 1993. Discussion 7. Cablevision acknowledges that its CPS prices are higher than the maximum permitted price if Form 393 is calculated using the number of channels Cablevision offered as of October 1993. Thus, Cablevision has failed to demonstrate that its prices for the CPS tier were not unreasonable. Furthermore, upon review of Cablevision's Form 393 filings, we have found that Cablevision has not correctly calculated its maximum permitted price as of the initial date of regulation, and it is therefore appropriate to make the following adjustments to Cablevision's calculations in Form 393: a. In its Form 393 filings, Cablevision'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) do not count Channel 30 as a regulated satellite channel. Similarly, Cablevision's calculations for its rate-regulated tiers as of September 30, 1992 (Form 393, Part II, Worksheet 2) do not count Channel 29 as a regulated satellite channel. However, according to the channel line-ups included with Cablevision's responses to complaints and the February 17, 1995 letter provided by Cablevision, as of the initial date of regulation Channel 30 carried Bravo, which is a non-rate-regulated pay-per-channel service, for 76 hours per week and carried C-Span II, which is a rate-regulated satellite service offered on the CPS tier, for 92 hours per week. The same programming in the same proportion was carried on Channel 29 as of September 30, 1992. 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 channels may not be counted as regulated channels or as satellite channels. However, under the preponderance-of-use test, the channel that was split between Bravo and C-Span II is not a pay channel because it was used for a rate-regulated service the majority of the programming week. We therefore increase the number of satellite channels used in calculating the benchmark on Form 393, Part II, Worksheet 2, Line 220 from 22 to 23 and increase the number of total regulated channels in the same calculation from 32 to 33. We also increase the number of channels on Form 393, Part II, Worksheet 2, Line 202 from 32 to 33. On Form 393, Part II, Worksheet 1, Line 121, we increase the numbers of satellite and regulated channels used to calculate the benchmark from 21 to 22 and from 31 to 32, respectively. Finally, we increase the number of channels in the CPS tier on Form 393, Part I and on Form 393, Part II, Worksheet 1, Line 102, from 21 to 22. These adjustments have the net effect of reducing the benchmark channel rates entered on Line 121 of Worksheet 1 and Line 220 of Worksheet 2, reducing the base rate per channel on Worksheet 1, Line 110 and Worksheet 2, Line 210, and increasing the number of channels used to calculate the maximum permitted CPS rate in Part I. 8. Because Cablevision has failed to demonstrate that its prices for the CPS tier were not unreasonable, we will set prices for this tier, incorporating the adjustments discussed above. In doing so, we must also recalculate the Inflation Adjustment Factor on the basis of the most accurate data currently available for the dates for which Cablevision filed Form 393 in each franchise area. 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 126.2 for the fourth quarter of 1993. Using these GNP-PI figures, we calculate 1.034 as the Inflation Adjustment Factor through December 1993, the base date Cablevision used in justifying its rate for CUID No. OH0109, and 1.028 as the Inflation Adjustment Factor through September 1993, the base date Cablevision used in justifying its rate for CUID No. OH0695. 9. These adjustments have the cumulative effect of yielding the maximum permitted monthly CPS tier price for each franchise area as of the initial date of regulation set forth in Appendix A. 10. As described in paragraph 6, supra, on January 1, 1994, Cablevision moved Channel 17 from the CPS tier to the basic tier. Cablevision thus increased the rate charged for its service by reducing the number of channels available on the CPS tier without a consequent reduction in price. Cablevision failed to notify the Commission of the rate change and submit a revised rate justification as required by the instructions to Form 393. To determine Cablevision's subsequent permitted per channel charge as of January 1, 1994, and thus Cablevision's maximum permitted price, we rely on the Commission's rules then in effect and therefore reduce the number of channels on the CPS tier on Form 393, Part I effective January 1, 1994 from 22 to 21. This adjustment has been reflected in Appendix A for the period after December 31, 1993. Conclusions 11. Upon review of the record herein, we conclude that Cablevision's showing supports the maximum CPS tier prices for each franchise area set forth in Appendix A (plus franchise fee) for the periods set forth in Appendix A. 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. 12. We further conclude that Cablevision must reflect in its FCC Form 1200 rate filings for the period after May 14, 1994 the fact that Cablevision's prices as of March 31, 1994 were unreasonable. We reserve the right to make further adjustments to Cablevision's prices for the period after May 14, 1994, upon completion of our review of Cablevision's FCC Form 1200 rate filings. 13. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's Rules, 47 C.F.R.  0.321, that the complaint filed on December 14, 1993 against the cable programming service prices charged by V Cable, Inc. d/b/a Cablevision in the City of Euclid, Ohio, CUID No. OH0109 and the complaint filed October 13, 1993 against the cable programming service prices charged by V Cable, Inc. d/b/a Cablevision in the City of Cleveland Heights, Ohio, CUID No. OH0695, and all other complaints in these franchise areas related to the same prices, ARE GRANTED TO THE EXTENT INDICATED HEREIN. 14. IT IS FURTHER ORDERED that the benchmark filings submitted by V Cable, Inc. d/b/a Cablevision with respect to the City of Euclid, Ohio, CUID No. OH0109 and the City of Cleveland Heights, Ohio, CUID No. OH0695, for the periods set forth in Appendix A justify the maximum prices in each franchise area set forth in Appendix A (plus franchise fee) for V Cable, Inc. d/b/a Cablevision's cable programming service tier. 15. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's Rules, 47 C.F.R.  76.961, that V Cable, Inc. d/b/a Cablevision shall refund to subscribers that portion of the amounts paid for cable programming service for the periods set forth in Appendix A to May 14, 1994 which exceeded the maximum prices for each franchise area set forth in Appendix A (plus franchise fee) per month and was thus unreasonable, plus interest to the date of the refund. 16. IT IS FURTHER ORDERED that V Cable, Inc. d/b/a Cablevision 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. 17. 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 V Cable Inc. d/b/a Cablevision shall, within 30 days of the release of this Order, revise its Form 1200 filings with respect to the City of Euclid, Ohio, CUID No. OH0109 and the City of Cleveland Heights, Ohio, CUID No. OH0695, 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 A (plus franchise fee). 18. IT IS FURTHER ORDERED that V Cable, Inc. d/b/a Cablevision 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. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau Appendix A CUID No. OH0109 CUID No. OH0695 Actual Rate $14.34 $14.52 First Period Maximum Rate $14.04 for 12/20/93- $13.97 for 10/18/93- 12/31/93 12/31/93 Second Period Maximum Rate $13.40 for 1/1/94- $13.34 for 1/1/94- 5/14/94 5/14/94