FOR FCC RECORD ONLY $//V Cable, Inc., Willowick, OH, MO&O, DA 95-501$// $/76.922 Rates for Cable Programming Service tiers/$ $/benchmark cable rates/$ Before the Federal Communications Commission Washington, D.C. DA 95-501 In the Matter of ) ) V Cable, Inc. ) CUID No. OH0776 Willowick, Ohio ) ) Benchmark Filing To Support ) Cable Programming Service Price ) Memorandum Opinion and Order Adopted: March 15, 1995 Released: March 16, 1995 By the Chief, Cable Services Bureau: Introduction 1. Here we consider complaints about the price V Cable, Inc. d/b/a Cablevision ("Cablevision") was charging for its cable programming service ("CPS") tier in Willowick, Ohio, CUID No. OH0776. Cablevision has chosen to attempt to justify its price through a benchmark showing on FCC Form 393. This Order addresses the reasonableness of Cablevision'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 complete and timely CPS complaint in Willowick, Ohio, CUID No. OH0776, was completed and served on Cablevision on February 11, 1994, and received by the Commission on February 15, 1994. 5. Cablevision filed its FCC Form 393 for Willowick, Ohio, on March 11, 1994. Cablevision amended its justification 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 price of $14.34 is 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 price for the CPS tier was not unreasonable. Furthermore, upon review of Cablevision's Form 393 filing, 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 filing, 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, 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. Cablevision therefore should have counted Channel 30 as a satellite channel on the CPS tier on Form 393, Part II, Worksheet 1 and Part I, and it should have counted Channel 29 as a satellite channel on the basic tier on Form 393, Part II, Worksheet 2. d. Cablevision's calculations for its rate-regulated channels as of the initial date of regulation (Form 393, Part II, Worksheet 1 and Form 393, Part I) count Channel 17 as a regulated satellite channel on the CPS tier. However, according to the channel line-ups submitted by Cablevision, Channel 17 was moved from the CPS tier to the basic tier before the filing of the first valid complaint. The channels used in completing Form 393 should be those channels offered on the initial date of regulation for each franchise area. Since the change in the use of Channel 17 occurred before any complaint was filed pertaining to Willowick, that change must be reflected in the channel counts. e. In order to correct for the net effect of the channel-counting errors discussed above, we 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, we increase the number of total regulated channels and satellite channels used to calculate the benchmark on Line 121 from 31 to 32 and from 21 to 22, respectively. We also increase the number of channels in the basic tier on Line 102 from 10 to 11. 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 and decreasing the base rates per channel on Part II, Worksheet 1, Line 110 and Part II, Worksheet 2, Line 210. 8. Because Cablevision has failed to demonstrate that its price for the CPS tier was not unreasonable, we will set a price 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 date that Cablevision timely filed Form 393. 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 126.5 for the fourth quarter of 1993. Using these GNP-PI figures, we calculate 1.039 as the Inflation Adjustment Factor through February 1994, the base date Cablevision should have used in justifying its rate for Willowick, Ohio. 9. These adjustments have the cumulative effect of changing the maximum permitted monthly CPS tier price from $13.69 (as Cablevision calculated) to $13.61. Conclusions 10. Upon review of the record herein, we conclude that Cablevision's showing supports a maximum reasonable CPS tier price for Willowick, Ohio, CUID No. OH0776 of $13.61 (plus franchise fee) for the period from February 15, 1994 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. 11. We further conclude that Cablevision must reflect in its FCC Form 1200 rate filing for the period after May 14, 1994 the fact that Cablevision's price during the earlier period was unreasonable. We reserve the right to make further adjustments to Cablevision's price for the period after May 14, 1994, upon completion of our review of Cablevision's FCC Form 1200 rate filing. 12. 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 February 15, 1994 against the cable programming service price charged by V Cable, Inc. d/b/a Cablevision in Willowick, Ohio, CUID No. OH0776, and all other complaints in the same franchise area related to the same price, ARE GRANTED TO THE EXTENT INDICATED HEREIN. 13. IT IS FURTHER ORDERED that the benchmark filing submitted by V Cable, Inc. d/b/a Cablevision with respect to Willowick, Ohio, CUID No. OH0776, for the period beginning on February 15, 1994 and ending on May 14, 1994 justifies the maximum price of $13.61 (plus franchise fee) for V Cable, Inc. d/b/a Cablevision's cable programming service tier. 14. 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 period from February 15, 1994 to May 14, 1994 which exceeded $13.61 (plus franchise fee) per month and was thus unreasonable, plus interest to the date of the refund. 15. 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. 16. 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 filing with respect to Willowick, Ohio, CUID No. OH0776, 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). 17. 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 filing required above, a price that reflects the reduction in the CPS rate determined in this Order. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau