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 $//Cox Cable of Greater Hartford, Inc., MO&O, DA 95-810//$ $/76.922 Rates for Cable Programming Service tier/$ $/benchmark cable rates/$ Before the Federal Communications Commission Washington, D.C. DA 95-810 In the Matter of ) ) Cox Cable of Greater Hartford, Inc. ) CUID Nos. ) CT0034 (Rocky Hill) ) CT0035 (Wethersfield) ) Benchmark Filing To Support ) Cable Programming Service Price ) Memorandum Opinion and Order Adopted: April 12, 1995 Released: April 17, 1995 By the Chief, Cable Services Bureau: Introduction 1. Here we consider a complaint about the price Cox Cable of Greater Hartford, Inc. ("Operator") was charging for its cable programming service ("CPS") tier in its Rocky Hill and Wethersfield, Connecticut franchise areas, CUID Nos. CT0034 and CT0035. Operator has chosen to attempt to justify its price through a benchmark showing on FCC Form 393. This Order addresses the reasonableness of Operator'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. A complete and timely CPS complaint for CUID Nos. CT0034 and CT0035 was completed and served on Operator by the Connecticut State Attorney General on September 1, 1993. It was received by the Commission on September 3, 1993. 5. Operator filed a single Form 393 with the Commission for both franchise areas covered by this Order on November 15, 1993. Discussion 6. Operator asserts that its monthly CPS price of $10.28 is equal to its maximum permitted per channel price of $10.28 as calculated in its filing. However, upon review we have determined that Operator has not correctly calculated its maximum permitted price, and it is therefore appropriate to make the following adjustments to Operator's calculations in Form 393: a. In Column G of Schedules A and C of Part III of its FCC Form 393, Operator did not correctly account for its income tax expense. By placing entries in these columns, Operator confirms that it is a tax-paying entity (i.e., a subchapter "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 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 grossed-up tax entries. b. In Line 101, Columns A and B of Part II, Worksheet 1 of its FCC Form 393, Operator used different rates than those on the rate card for September 1, 1993 which Operator filed along with the Form 393. Pursuant to the instructions on Form 393, Operator should have used rates that were in effect on September 1, 1993. Similarly, Operator's entries in Part II, Worksheet 2, Line 201, Columns A and B did not match the rates on its September 30, 1992 rate card. We therefore recalculate Lines 101 and 201, Columns A and B (and subsequent steps) using the prices for the basic and CPS tiers found in Operator's rate cards. c. Since Operator restructured its rates, including its equipment rates, on September 1, 1993, the current monthly equipment revenue figure it entered in Part II, Worksheet 1, Line 104 should have been close or identical to its equipment cost figure on Part II, Step G, Line 34. However, Operator's entries on these two lines varied substantially. Accordingly, on Line 104 we enter the same figure that appears on Line 34, as adjusted pursuant to paragraph 6a, supra. d. Because of these errors, we must also recalculate the Inflation Adjustment Factor in Form 393, Part II, Worksheet 1. On its amended Form 393, Operator apparently calculated the Inflation Adjustment Factor using data it relied upon when it set its $10.28 CPS price. If based on this data Form 393 indicated that Operator's prices were reasonable, then Operator would have successfully justified its prices under paragraph 94 of the Third Order on Reconsideration. However, Operator 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 Operator timely filed FCC 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 an Inflation Adjustment Factor through October 1993 of 1.030. Conclusions 7. Upon review of the record herein, and having incorporated the adjustments discussed above, we conclude that Operator has failed to justify the rate it was charging during the period in question. We further conclude that Operator's showing justifies a maximum reasonable CPS tier price of $10.20 per month (plus franchise fee) for the period September 3, 1993 to May 14, 1994. 8. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's Rules, 47 C.F.R.  0.321, that the September 1, 1993 complaint against the cable programming service price charged by Cox Cable Greater Hartford, Inc., in Rocky Hill and Wethersfield, Connecticut, CUID Nos. CT0034 and CT0035, IS GRANTED TO THE EXTENT INDICATED HEREIN. 9. IT IS FURTHER ORDERED that the benchmark filing submitted by Cox Cable Greater Hartford, Inc., with respect to Rocky Hill and Wethersfield, Connecticut, CUID Nos. CT0034 and CT0035, for the period beginning on September 3, 1993 and ending on May 14, 1994, justifies a maximum price of $10.20 per month (plus franchise fee) for Operator's cable programming service tier. 10. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's Rules, 47 C.F.R.  76.961, that Cox Cable Greater Hartford, Inc. shall refund to subscribers in the franchise areas designated by CUID Nos. CT0034 and CT0035 that portion of the amount paid for cable programming service from September 3, 1993 to May 14, 1994, that exceeded $10.20 per month (plus franchise fee) and was thus unreasonable, plus interest to the date of the refund. 11. IT IS FURTHER ORDERED that Cox Cable Greater Hartford, Inc. shall promptly determine the overcharges to CPS subscribers in CUID Nos. CT0034 and CT0035 for the same 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 refund within 60 days of Commission approval thereof. 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 Cox Cable Greater Hartford, Inc. shall, within 30 days of the release of this Order, revise its Form 1200 filing for CUID Nos. CT0034 and CT0035 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). 13. IT IS FURTHER ORDERED that Cox Cable Greater Hartford, Inc. shall place into effect, within 30 days after submission of the revised Form 1200 filing required above, a CPS tier price for CUID Nos. CT0034 and CT0035 that reflects the reduction in the CPS rate determined in this Order. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Service Bureau