FOR FCC RECORD ONLY $//Vision Cable Company of Rhode Island, Pawtucket, Rhode Island, MO&O, DA 95-658//$ $76.922 Rates for Cable Programming Service tiers/$ $/benchmark cable rates/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. DA 95-658 In the Matter Of ) ) Vision Cable Company of Rhode Island, Inc. ) CUID No. RI0005 (Pawtucket, RI) ) ) Benchmark Filing to Justify Cable ) Programming Service Price ) MEMORANDUM OPINION AND ORDER Adopted: March 30, 1995 Released: April 5, 1995 By the Deputy Chief, Cable Services Bureau: Introduction 1. Here we consider a complaint about the price Vision Cable Company of Rhode Island, Inc. ("Vision Cable") was charging for its cable programming service ("CPS") tier in Pawtucket, Rhode Island, CUID No. RI0005. Vision Cable has chosen to attempt to justify its price through a benchmark showing on FCC Form 393. This Order addresses the reasonableness of Vision Cable'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 complaint was completed and served on Vision Cable on January 14, 1994 and filed with the Commission on February 1, 1994. 5. Vision Cable attempted to justify its CPS price through an FCC Form 393 filed on February 7, 1994 . Vision Cable amended its justification on May 27, 1994 in response to a Cable Services Bureau Order citing common deficiencies observed in benchmark filings generally and on February 7, 1995 in response to a Cable Services Bureau Public Notice offering operators the opportunity to make optional supplemental filings. Discussion 6. Vision Cable asserts that its monthly CPS tier price of $9.62 is justified by its benchmark filing because its price is equal to the maximum permitted charge as calculated in the filing. Upon review of Vision Cable's Form 393 filing, we have found that it has not correctly calculated its maximum permitted price, and it is therefore appropriate to make the following adjustments to Vision Cable's calculations in Form 393: a. In Column D of Schedule A of Part III of its FCC Form 393, Vision Cable incorrectly entered negative deferred taxes. We therefore recalculate Column D of Schedule A (and subsequent steps) using amounts which were adjusted to zero. b. In Column G of Schedules A and C of Part III of its FCC Form 393, Vision Cable did not correctly gross-up its tax entries. By placing entries in these columns, Vision Cable confirms that it is a tax-paying entity (i.e., a "C" corporation). However, Vision Cable 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 adjusted tax entries. c. According to a supplemental schedule attached to its Form 393, Vision Cable's benchmark calculation for its regulated offerings as of September 30, 1992 (Form 393, Part II, Worksheet 2, Line 220) was based upon 44 regulated channels and 24 satellite channels. A review of Vision Cable's channel line-up card, effective September 30, 1992, verified a total of 44 regulated channels and 25 satellite channels. This adjustment increases the benchmark channel rate entered on Line 220 of Worksheet 2. We have recalculated the subsequent worksheets to compute the maximum permitted price. 7. Because of these errors, we conclude that Vision Cable 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 amended Form 393, Vision Cable calculated the Inflation Adjustment Factor using data it relied on when it set its CPS price. If based on this data Form 393 indicated that Vision Cable's prices were reasonable, then Vision Cable would have successfully justified its prices under paragraph 94 of the Third Order on Reconsideration. However, Vision Cable has not shown that its prices were reasonable, so we must recalculate the Inflation Adjustment Factor on the basis of the most accurate data currently available for the date that Vision Cable timely filed Form 393. 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 126.5 for the fourth quarter of 1993. Using these GNP-PI figures, we calculate an Inflation Adjustment Factor of 1.037 through January 1994 for CUID No. RI0005. Conclusions 8. Upon review of the record herein, and having incorporated the adjustments discussed above, we conclude that Vision Cable's showing supports a maximum reasonable CPS tier price of $9.53 per month (plus franchise fee) for the period February 1, 1994 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 Vision Cable must reflect in its FCC Form 1200 rate filing for the period after May 14, 1994 the fact that Vision Cable's price during the earlier period was unreasonable. We reserve the right to make further adjustments to Vision Cable's price for the period after May 14, 1994 upon completion of our review of Vision Cable's FCC Form 1200 rate filing. 10. We further conclude that Vision Cable 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 Vision Cable 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 January 14, 1994 complaint against the cable programming service price charged by Vision Cable Company of Rhode Island, Inc. in Pawtucket, Rhode Island, CUID No. RI0005, IS GRANTED TO THE EXTENT INDICATED HEREIN AND DENIED TO THE EXTENT INDICATED HEREIN. 12. IT IS FURTHER ORDERED that the benchmark filing submitted by Vision Cable Company of Rhode Island, Inc. with respect to Pawtucket, Rhode Island, CUID No. RI0005, for the period of February 1, 1994 to May 14, 1994, justifies a maximum price of $9.53 per month (plus franchise fee) for the cable programming service tier. 13. 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 Vision Cable Company of Rhode Island, Inc. shall, within 30 days of the release of this Order, revise its Form 1200 filing with respect to Pawtucket, Rhode Island, CUID No. RI0005, 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). 14. IT IS FURTHER ORDERED that Vision Cable Company of Rhode Island, Inc. 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. 15. IT IS FURTHER ORDERED, pursuant to Section 76.960 of the Commission's rules, 47 C.F.R.  76.960, that Vision Cable Company of Rhode Island, Inc. shall not be required to obtain advance Commission approval of adjustments to its CPS prices for one year following the release of this Order. FEDERAL COMMUNICATIONS COMMISSION Gregory J. Vogt Deputy Chief, Cable Service Bureau