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 $//Kansas City Cable Partners, MO&O, DA 95-785 //$ $/76.922 Rates for Cable Programming Service tier/$ $/benchmark cable rates/$ Before the Federal Communications Commission Washington, D.C. DA 95-785 In the matter of) ) Kansas City Cable Partners dba ) American Cablevision ) CUID N0. MO0072 Lee's Summit, Missouri) ) Benchmark Filing To Support ) Cable Programming Service Price ) Memorandum Opinion and Order Adopted: April 10, 1995 Released: April 14, 1995 By the Deputy Chief, Cable Services Bureau: Introduction 1. Here we consider complaints about the price Kansas City Cable Partners dba American Cablevision ("Cablevision") was charging for its cable programming service ("CPS") tier in Lee's Summit, Missouri, CUID No. MO0072. Cablevision has attempted 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 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 on Cablevision on October 9, 1993. The Commission received the complaint on October 15, 1993. 5. Cablevision attempted to justify its CPS price through an FCC Form 393 filed on November 12, 1993. Discussion 6. Cablevision claims that its monthly CPS tier price of $13.09 per subscriber is justified by its benchmark filing, which shows a maximum permitted charge of $13.10. However, upon review we have determined that Cablevision has not correctly calculated its maximum permitted price, and it is appropriate to make the following adjustments to Cablevision's calculations in the Form 393: a. In reporting its capital costs of leased customer equipment on Part III, Schedule C, Cablevision overdepreciated its set top converters and remotes, exceeding the gross book value of each asset. This is in violation of Generally Accepted Accounting Principles. The remaining book value of each asset prior to applying the annual depreciation expense was less than the annual depreciation expense claimed by Cablevision. Therefore, we reduced the depreciation expense for each asset to equal the remaining book value. b. On its Form 393 filing, Cablevision calculated the Inflation Adjustment Factor (line 127, Worksheet 1, Part II) as of the end of November 1993. However, Cablevision cannot permissibly calculate inflation through the end of November 1993. Based on the service date of the earliest valid complaint, Cablevision was required to file a rate justification no later than November 15, 1993. Since Cablevision filed its initial FCC Form 393 by that date, the instructions to Form 393 required it to calculate the inflation adjustment only through October 1993. We therefore must recalculate the Inflation Adjustment Factor on the basis of the most accurate data currently available for the date that Cablevision timely filed its 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 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 Cablevision should have used in justifying its rates. 7. Because of these errors, we conclude that Cablevision 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 $13.10 (as Cablevision calculated) to $13.08. Conclusions 8. Upon review of the record herein, we conclude that Cablevision's showing supports a maximum reasonable CPS tier price of $13.08 per month (plus franchise fee) for the period October 15, 1993 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 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. 10. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's Rules, 47 C.F.R.  0.321, that the October 9, 1993 complaint against the cable programming service price charged by Kansas City Cable Partners dba American Cablevision, in Lee's Summit, Missouri, CUID No. MO0072, and all other complaints in this franchise area related to the same price, ARE GRANTED TO THE EXTENT INDICATED HEREIN AND DENIED TO THE EXTENT INDICATED HEREIN. 11. IT IS FURTHER ORDERED that the benchmark filing submitted by Kansas City Cable Partners dba American Cablevision with respect to Lee's Summit, Missouri, CUID No. MO0072, for the period of October 15, 1993 to May 14, 1994, justifies a maximum price of $13.08 per month (plus franchise fee) for the cable programming service tier. 12. 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 American Cablevision shall, within 30 days of the release of this Order, revise its Form 1200 filing with respect to Lee's Summit, Missouri, CUID No. MO0072, 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). 13. IT IS FURTHER ORDERED that American Cablevision 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. FEDERAL COMMUNICATIONS COMMISSION Gregory J. Vogt Deputy Chief, Cable Services Bureau