NOTICE ************************************************************************* NOTICE ************************************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file pnmc5021. File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ************************************************************************* FOR FCC RECORD ONLY $//Warner Cable of Williamsburg, MO&O, DA 95-782 //$ $/76.922 Rates for Cable Programming Service tier/$ $/benchmark cable rates/$ Before the Federal Communications Commission Washington, D.C. DA 95-782 In the matter of ) ) Warner Cable of Williamsburg ) Williamsburg, Virginia ) CUID No. VA0074 ) ) Benchmark Filing To Support ) Cable Programming Service Price ) Memorandum Opinion and Order Adopted: April 6, 1995 Released: April 14, 1995 By the Chief, Cable Services Bureau: Introduction 1. Here we consider a complaint about the price Warner Cable of Williamsburg ("Warner Cable") was charging for its cable programming service ("CPS") tier in Williamsburg, Virginia, CUID No. VA0074. Warner Cable has attempted to justify its price through a benchmark showing on FCC Form 393. This Order addresses the reasonableness of Warner 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 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 was completed and served by the City of Williamsburg, Virginia, on Warner Cable on September 30, 1993. The Commission received the complaint on October 4, 1993. 5. Warner Cable attempted to justify its CPS price through an FCC Form 393 filed on November 15, 1993. Warner Cable refiled its justification on the prescribed form on May 23, 1994 in response to a Cable Services Bureau Order citing common deficiences observed in benchmark filings generally. Discussion 6. Warner Cable claims that its monthly CPS tier price of $12.57 per subscriber is justified by its benchmark filing, which shows a maximum permitted charge of $12.58. However, upon review we have determined that Warner Cable has not correctly calculated its maximum permitted price, and it is appropriate to make the following adjustments to Warner Cable's calculations in the Form 393: a. Warner Cable's Form 393, Worksheet 1, Line 104 entry does not represent its current monthly equipment revenue as of the initial date of regulation. Instead of entering its current monthly equipment revenue, Warner Cable entered a figure based on its prior equipment rates. This observation is confirmed by the fact that Warner's Worksheet 2, Line 204 entry is the same as its Worksheet 1, Line 104 entry. As a result, Warner Cable's Line 104 entry must be revised to reflect its current monthly equipment revenue. Since Warner Cable restructured its rates, including its equipment rates, on September 1, 1993, in an attempt to comply with the Commission's regulations, the monthly equipment cost figure it entered on Line 34 of Step G of Part III should have been close or identical to its Line 104 entry. Accordingly, on Line 104 we enter $1,840.00 instead of $8,870.00. b. In its Form 393 filing, Warner Cable calculated the Inflation Adjustment Factor (Line 127, Worksheet 1, Part II) as of the end of October 1993. However, the figures Warner Cable used are not consistent with data on which it should have relied in calculating the Inflation Adjustment Factor. Warner Cable used the Gross National Product Price Index ("GNP-PI") data released by the U.S. Department of Commerce on August 31, 1993 to complete Lines 122 and 125, but used an outdated GNP-PI of 121.8 for the third quarter of 1992 in calculating Line 123. The GNP-PI figure for the third quarter of 1992 released on August 31, 1993 was 122.5. Warner Cable's calculation of the Inflation Adjustment Factor is thus incorrect. c. We must therefore recalculate the Inflation Adjustment Factor on the basis of the most accurate data currently available for the date for which Warner Cable filed. On July 29, 1994, the U.S. Department of Commerce released corrected inflation data including 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 1.030 as the Inflation Adjustment Factor through October 1993, the base date Warner Cable used in justifying its rates. 7. Because of these errors, we conclude that Warner 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. These adjustments have the cumulative effect of reducing the maximum permitted monthly price for the CPS tier from $12.58 (as Warner Cable calculated) to $12.18. Conclusions 8. Upon review of the record herein, we conclude that Warner Cable's showing supports a maximum reasonable CPS tier price of $12.18 per month (plus franchise fee) for the period of October 4, 1993 to May 14, 1994 for CUID No. VA0074. 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. 9. We further conclude that Warner Cable must reflect in its Form 1200 rate filing for the period after May 14, 1994 the fact that Warner Cable's prices during the earlier period was unreasonable. We reserve the right to make further adjustments to Warner Cable's price for the period after May 14, 1994, upon completion of our review of Warner Cable's 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 October 4, 1993 complaint against the cable programming service price charged by Warner Cable of Williamsburg in Williamsburg, Virginia, CUID No. VA0074, IS GRANTED TO THE EXTENT INDICATED HEREIN. 11. IT IS FURTHER ORDERED that the benchmark filing submitted by Warner Cable of Williamsburg with respect to Williamsburg,Virginia, CUID No. VA0074, for the period of October 4, 1993 to May 14, 1994, justifies a maximum price of $12.18 per month (plus franchise fee) for Warner Cable's cable programming service tier. 12. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's Rules, 47 C.F.R.  76.961, that Warner Cable of Williamsburg shall refund to subscribers that portion of the amounts paid for cable programming service from October 4, 1993 to May 14, 1994 in Williamsburg, Virginia, CUID No. VA0074, that exceeded $12.18 per month (plus franchise fee), and was thus unreasonable, plus interest to the date of the refund. 13. IT IS FURTHER ORDERED that Warner Cable of Williamsburg shall promptly determine the overcharges to CPS subscribers for the stated period, 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 refunds within 60 days of Commission approval thereof. 14. 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 Warner Cable of Williamsburg shall, within 30 days of the release of this Order, revise its Form 1200 filing with respect to Williamsburg,Virginia, CUID No. VA0074 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 for those franchise areas (plus franchise fee). 15. IT IS FURTHER ORDERED that Warner Cable of Williamsburg shall place into effect, within 30 days after its submission of the revised Form 1200 filing required above, a CPS tier price for Williamsburg, Virginia, CUID No. VA0074, that reflects the reduction in the CPS rate determined in this Order. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau