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NY0468 (Elmsford), NY0700  # #  Y-TCI Cable of Westchesterhh@)h(New Rochelle), NY0701 (Scarsdale),  Y-x` `  hh@)hNY0739 (Eastchester), NY0743  Y -x` `  hh@)h(Tuckahoe), NY0750 (Bronxville),  Y{ -x` `  hh@)hNY0792 (Dobbs Ferry), NY0793  Yd -x` `  hh@)h(Ardsley), NY0803 (Pelham), NY0804  YM -x` `  hh@)h(Pelham Manor), NY0805 (White Plains),  Y6 -x` `  hh@)hNY0814 (Rye), NY0815 (Greenburgh),  Y-x` `  hh@)hNY0851 (Irvington), NY0868 (Hastings Y-x` `  hh@)honHudson), NY0900 (Town of  Y-x` `  hh@)hMammaroneck), NY0901 (Village of  Y-x` `  hh@)hMammaroneck), NY0902 (Larchmont), (#(#X Y-x` `  hh@)hNY0982 (Rye Brook) and NY1277 (North  Y-x` `  hh@)hCastle)  Y-Benchmark Filings to Supporthh@)  Y~-Cable Programming Service Priceshh@)  YP-}  MEMORANDUM OPINION AND ORDER ă  Y#-x` ` Adopted: April 7, 1995 @Released: April 11, 1995 By the Chief, Cable Services Bureau:  Y- I. A. 1. a.(1)(a) i) a) I. 1. 1. a.(1)(a) i) a)  x1. Here we consider complaints about the prices that the abovecaptioned operator ("Operator") was charging for its cable programming service ("CPS") tier in the communities designated above. Operator has chosen to attempt to justify its prices through benchmark showings on FCC Form 393. This Order addresses the reasonableness of Operator's prices only through May 14, 1994. At a later date we will issue a separate order addressing the  YT -reasonableness of the prices after that date.NT  Y"-#Xw PE37XP#э The findings in this Order do not in any way prejudge the reasonableness of the prices for CPS service after May 14, 1994 under our new rate regulations. However, to the extent Operator has sought to take advantage of the refund deferral period under the Second Order on Reconsideration, Fourth Report and Order, and Fifth Notice of Proposed Rulemaking,  Yq&-MM Docket No. 92266, FCC 9438, 9 FCC Rcd 4119 (1994) ("Second Order on  Y\'-Reconsideration"), the maximum permitted CPS prices determined herein might also apply from May 15, 1994 until the date on which Operator implemented its CPS prices under the  Y0)-new regulations. See para. 3, infra. Further, to the extent that the prices as of March 31,"0)0*0*0*l)" 1994 are found to be excessive, reductions in Operator's prices for the period after May 14, 1994 may be required to reflect the fact that Operator's prices during the earlier period, which are used as the starting point to calculate its prices for the prospective period, were  YK-unreasonable. See 47 C.F.R.  76.922(b)(4)(C)."T 60*0*0*W!"Ԍ  x2. Under the Cable Television Consumer Protection and Competition Act of 1992  Y-("Cable Act"),6x4 Y-#Xw PE37}XP#э Pub. L. No. 102385, 106 Stat. 1460 (1992); Communications Act,  623(c), as  Y-amended, 47 U.S.C.  543(c) (1993). 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  Y-its CPS prices.gx4 Y) -#Xw PE37}XP#э 47 C.F.R.  76.956.g Under our rules, an operator may attempt to justify its prices through either  Y-a benchmark showing or a costofservice showing.j x4 Y-#Xw PE37}XP#э 47 C.F.R.  76.956(b).j In either case, the operator has the  Yv-burden of demonstrating that its CPS prices are not unreasonable.Zv6 x4 Y]-#Xw PE37}XP#э  Id.Z  YH-x3. The Commission's original rate regulations took effect on September 1, 1993.H x4 Y-#Xw PE37}XP#э Order in MM Docket No. 92266, Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, FCC 93372, 58 Fed. Reg. 41042 (Aug. 2, 1993).  Y1-The Commission subsequently revised its rate regulations effective May 15, 1994.j1lx4 YN-#Xw PE37}XP#э 47 C.F.R.  76.922(b).j 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  Y -compliance with the revised rules from May 15, 1994 forward. x4 Y-#Xw PE37}XP#э See Second Order on Reconsideration, 9 FCC Rcd at 4190, paras. 150152. Operators attempting to justify their prices for the period prior to May 15, 1994 through a benchmark showing must  Y -complete and file FCC Form 393.Z x4 Y(#-#Xw PE37}XP#э Id.Z Generally, to justify their prices for the period beginning May 15, 1994 through a benchmark showing, operators must use the FCC Form 1200" 0*((x"  Y-series. x4 Yy-#Xw PE37}XP# 47 C.F.R.  76.922(b)(6); see also Second Order on Reconsideration, 9 FCC Rcd at 4189 n.195. x  Y- x4. The first valid CPS complaints in the franchise areas which are the subject of this Order were completed and served on Operator and received by the Commission on the dates set forth on Appendix A. Operator filed FCC Form 393s in response; Operator has also  Y_-filed amended and supplemental Form 393 filings, most recently on June 23, 1994.< _x4 Y' -#Xw PE37}XP#э Operator filed amended FCC Forms 393 in response to a Cable Services Bureau Order citing common deficiencies observed in benchmark filings generally. Cable Operators' Rate Justification Filings, 9 FCC Rcd 7752 (Cable Serv. Bur. 1994).< x5. Operator has moved to dismiss complaints filed by Assemblyman Richard L. Brodsky, who represents the 86th District in the State of New York Assembly. Assemblyman Brodsky filed a CPS tier rate complaint for each franchise area being considered in this Order. In seven of these franchise areas Assemblyman Brodsky's  Y -complaint was preceded by an earlier valid complaint.  x4 Y -#Xw PE37}XP#э These seven franchise areas are identified by the following CUID Nos.: NY0743, NY0792, NY0814, NY0815, NY0900, NY0901 and NY0902. For these seven franchise areas, therefore, it is not necessary to rule on Operator's motion. x6. For the other 13 franchise areas, however, it is necessary to consider Operator's motion. The Cable Act provides that a CPS tier rate complaint may be filed by "any  Yb-subscriber, franchise authority, or other relevant State or local government entity . . . ."m b4 x4 YG-#Xw PE37}XP#э 47 U.S.C.  543(c)(1)(B).m Operator argues that Assemblyman Brodsky does not meet any of these descriptions. The legislative history to the Cable Act, however, clarifies that "[n]othing in this legislation shall  Y-be interpreted as restricting subscribers, franchising authorities, or state officials from the  Y-submission of a complaint." x4 Y"-#Xw PE37}XP#э See S. Rep. No. 10292, 1992 U.S.C.C.A.N. 1133, 1208 (emphasis added). We conclude that a state assemblyman is a state official, and we therefore find that a state assemblyman may file a CPS tier rate complaint. Accordingly, we deny Operator's motions to dismiss Assemblyman Brodsky's rate complaints in the remaining 13 franchise areas.  Y-  x7. In its amended benchmark filings of June 23, 1994, Operator calculated a"0*((" maximum permitted price for its CPS tier of $11.87 per month in all of the franchise areas being considered in this Order except those designated by CUID Nos. NY0739, NY0743 and NY0750. For CUID Nos. NY0739, NY0743 and NY0750, Operator calculated a maximum permitted price for its CPS tier of $11.39 per month. However, Operator's actual price for the CPS tier in the first set of franchise areas was $12.65 per month and for the second set of franchise areas it was $12.22 per month. Thus, Operator has failed to demonstrate that its prices for the CPS tier were not unreasonable. Furthermore, upon review of Operator's submissions we have found that it has not correctly calculated its maximum permitted prices, and it is therefore appropriate to make the following adjustments to Operator's calculations in Form 393: Xx` ` a. In Column G of Schedules A and C of Part III of its FCC Form393, Operator did not correctly account for its income tax expense. By placing entries in these columns, Operator confirms that it is a taxpaying entity (i.e., a "C" corporation). However, Operator incorrectly calculated its income tax by simply applying the corporate tax rate to its return on investment. The Commission has stated that taxpaying business entities must grossup their tax entries in ColumnG of Schedules A and C (i.e., calculate  Yb-the tax as a percentage of return on investment plus tax)._bx4 Y-#Xw PE37}XP#э First Order on Reconsideration, Second Report and Order, and Third Notice of Proposed Rulemaking, MM Docket No. 92266, FCC 93428, 9FCC Rcd 1164, 1196 n.92 (1993) ("Our provision to grossup the return amount for income taxes applies to all tax paying business entities to the extent that they have a state or federal income tax obligation"). See also Cable Television Rate Regulation Questions and Answers Relating To FCC Form 393, Question and Answer No.14 (released July 30, 1993) ("The federal tax expense should be calculated based upon a pretax return on investment"). 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 grossedup tax entries.  Xx` ` b. On Part II, Worksheet 2, Line 201 of both Form 393s, Operator entered $13.54 for the basic tier and $5.83 for the CPS tier as its monthly prices for rateregulated service as of September 30, 1992. However, Operator's September 1992 rate card indicates that its actual prices, including franchise fees, were $13.95 for the basic tier and $6.00 for the CPS tier. On Line 208 of Form 393, Part II, Worksheet 2, Operator entered a monthly franchise fee expense for each group of franchise  YN-areas.Nx4 Y$-#Xw PE37}XP#э For CUID Nos. NY0739, NY0743 and NY0750, the monthly franchise fee expense was $6,134.96 and for the rest of the franchise areas it was $52,588.66. The instructions to Form 393 provide that franchise fees are to be deducted on Line208 only if they are included in the charges listed on Form 393, Part II,"7 0*((." Worksheet 2, Line 201. Accordingly, we have revised Operator's Line 201 entries by entering $13.95 for the basic tier price and $6.00 for the CPS tier price. (# Xx` ` c. Because Operator has failed to demonstrate that its prices for the CPS tier were not unreasonable, we will set maximum permitted prices for this tier, incorporating the adjustments discussed above. In doing so, we must also recalculate the Inflation Adjustment Factor in Form 393, Part II, Worksheets 1 and 4, on the basis of the most accurate data currently available for the date for which Operator  YH-filed.Hx4 Y -#Xw PE37}XP#э  See 47 C.F.R.  76.922(b)(9)(iii) (if a cable operator fails to justify its rates, rates must be adjusted in accordance with the most accurate data available at the time of analysis).  On its amended Form 393s, Operator calculated the Inflation Adjustment Factor as of the end of October 1993 using data released on August 31, 1993. On July 29, 1994, the U.S. Department of Commerce released corrected inflation data including Gross National Product Price Index ("GNPPI") figures of 122.3 for the third quarter of 1992 and 125.7 for the third quarter of 1993. Using these GNPPI figures, we calculate an Inflation Adjustment Factor through October 1993, the base date Operator used in justifying its rates, of 1.030.(#  Y-  x8. Upon review of the record herein, and having incorporated the adjustments discussed above, we conclude that Operator has failed to justify the rates it was charging during the period in question. Operator's showing justifies the maximum reasonable CPS tier prices shown on Appendix B (plus franchise fee) for the period from the filing of the  Y4-earliest complaint in each franchise area (as set forth in Appendix A) to May 14, 1994.4dx4 YI-#Xw PE37}XP#э This finding is based solely on the representations of Operator and the modifications described herein. Should information come to our attention that these representations were materially inaccurate, we reserve the right to take appropriate action. This Order is not to be construed as a finding that we have accepted as correct any specific entry, explanation or argument made by any party to this proceeding not specifically addressed herein. x9. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that Operator's motions to dismiss Assemblyman Brodsky's rate complaints in the 13 franchise areas where his complaint was the first filed ARE DENIED. x10. IT IS FURTHER ORDERED that the complaints referred to in Appendix A against the cable programming service prices charged by Operator in the areas referenced in the caption and at Appendix A herein, and all other complaints in these franchise areas related to the same prices, ARE GRANTED TO THE EXTENT INDICATED HEREIN. x11. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47 C.F.R.  76.961, that Operator shall refund to subscribers in the communities shown in Appendix B that portion of the amounts paid for cable programming service for" 0*((" the period from the filing of the first valid complaint in each franchise area (as set forth on  Y-Appendix A)x4 Yb-#Xw PE37}XP#э Our jurisdiction to order a refund dates from the earliest date a valid complaint is filed with the Commission. 47 C.F.R.  76.961(b). to May 14, 1994 which exceeded the maximum price for each franchise area set forth in Appendix B (plus franchise fee) per month, plus interest to the date of the refund. x12. IT IS FURTHER ORDERED that Operator 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 of the plan.T x13. 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 Operator shall, within 30 days of the release of this Order, revise its Form 1200 filings with respect to the communities listed herein, 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  Yy-forth in Appendix B (plus franchise fee).ybx4 Y-#Xw PE37}XP#э We reserve the right to make further adjustments to Operator's prices for the period after May 14, 1994, upon completion of our review of the Operator's Form 1200 filings. x14. IT IS FURTHER ORDERED that Operator 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. x` `  hhFEDERAL COMMUNICATIONS COMMISSION x` `  hhMeredith J. Jones x` `  hhChief, Cable Services Bureau "N0*((>"   Y-, Appendix A ă  Y-CUID No.` `  Date First ComplainthppDate Complaint xx  Y-x` `  Filed with FCC@hppServed  xx  Y`-NY0468` `  2/28/94hh@hpp2/25/94  Y2-NY0700` `  2/28/94hh@hpp2/25/94  Y -NY0701` `  2/28/94hh@hpp2/25/94  Y -NY0739` `  2/28/94hh@hpp2/25/94  Y -NY0743` `  1/5/94hh@hpp12/28/93  Yz-NY0750` `  2/28/94hh@hpp2/25/94  YL-NY0792` `  1/24/94hh@hpp1/20/94  Y-NY0793` `  2/28/94hh@hpp2/25/94  Y-NY0803` `  2/28/94hh@hpp2/25/94  Y-NY0804` `  2/28/94hh@hpp2/25/94  Y-NY0805` `  2/28/94hh@hpp2/25/94  Yf-NY0814` `  12/20/93hh@hpp12/16/93  Y8-NY0815` `  10/28/93hh@hpp10/26/93  Y -NY0851` `  2/28/94hh@hpp2/25/94  Y-NY0868` `  2/28/94Thpp2/25/94  Y!-NY0900` `  11/15/93hh@hpp11/8/93  Y#-NY0901` `  11/19/93hh@hpp11/17/93  YR%-NY0902` `  10/20/93hh@hpp10/3/93  Y$'-NY0982` `  2/28/94hh@hpp2/25/94  Y(-NY1277` `  2/28/94hh@hpp2/25/94"(0*0*0*0*"Ԍ X-ԙ- Appendix B ĐTP  Y-CUID No.` `  Actual Rates@hMaximum Permitted Rates  Y-NY0468` `  $12.65@hpp$12.06  xx 0  Yv-NY0700` `  $12.65@hpp$12.06  YH-NY0701` `  $12.65@hpp$12.06  Y -NY0739` `  $12.22@hpp$11.35  Y -NY0743` `  $12.22@hpp$11.35  Y -NY0750` `  $12.22@hpp$11.35  Y-NY0792` `  $12.65@hpp$12.06  Yb-NY0793` `  $12.65@hpp$12.06  Y4-NY0803` `  $12.65@hpp$12.06  Y-NY0804` `  $12.65@hpp$12.06  Y-NY0805` `  $12.65@hpp$12.06  Y-NY0814` `  $12.65@hpp$12.06  Y|-NY0815` `  $12.65@hpp$12.06  YN-NY0851` `  $12.65@hpp$12.06  Y -NY0868` `  $12.65@hpp$12.06T  Y-NY0900` `  $12.65@hpp$12.06  Y -NY0901` `  $12.65@hpp$12.06  Y"-NY0902` `  $12.65@hpp$12.06  Yh$-NY0982` `  $12.65@hpp$12.06  Y:&-NY1277` `  $12.65@hpp$12.06