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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ************************************************************************* FOR FCC RECORD ONLY $//Cox Cable Pensacola, Inc., Pensacola, Florida, MO&O, DA95-811//$ $/76.922 Rates for Cable Programming Service tier/$ $/Benchmark cable rates/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-811 CORRECTED In the Matter of ) ) Cox Cable Pensacola, Inc. ) CUID Nos. FL0001 (City of Pensacola) Emerald Coast Cable Television ) FL0002 (Escambia County) ) FL0143 (Okaloosa County) Benchmark Filings to Support ) Cable Programming Service Prices ) MEMORANDUM OPINION AND ORDER Adopted: April 12, 1995 Released: April 21, 1995 By the Chief, Cable Services Bureau: 1. Here we consider complaints about the prices that the above-captioned operators (together, "Operator") were charging for their 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 reasonableness of the prices 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. 4. The first valid CPS complaints in each of 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 393 in response; Operator has also filed amended and supplemental Form 393 filings, most recently on January 23, 1995. 5. Operator asserts that its monthly CPS tier prices are justified by its benchmark filings because its prices are lower than or equal to the maximum permitted charges as calculated in the filings. Upon review of Operator's Form 393 filings, 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: a. In Column G of Schedules A and C of Part III of the Operator's FCC Forms 393 filed for CUID Nos. FL0001 and FL0002, Operator did not correctly account for its income tax expense. By placing entries in these columns, the 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 entries. b. For CUID No. FL0001, Operator's calculations for its rate-regulated package as of the initial date of regulation (Form 393, Part I, and Form 393, Part II, Worksheet 1) in its most recent filing reflect 15 basic tier channels and 22 CPS tier channels. Based upon channel line-ups that accompanied Operator's Form 393 filings, we count 16 basic tier channels and 22 CPS tier channels. We will therefore increase the number of basic tier channels on Form 393, Part II, Worksheet 1, Line 102 from 15 to 16 (which will increase the number of regulated channels used to calculate the Benchmark Channel Rate on Line 121 from 37 to 38). c. For CUID No. FL0143, Operator's calculations for its rate-regulated package as of the initial date of regulation in its most recent filing reflect 42 regulated channels and 30 satellite channels. Based upon channel line-ups that accompanied Operator's Form 393 filings, we count 17 basic tier channels, 26 CPS tier channels and 31 satellite channels. We will therefore increase the number of CPS tier channels on Form 393 Part II, Worksheet 1, Line 102 from 25 to 26 (which will increase the number of regulated channels used to calculate the Benchmark Channel Rate on Line 121 from 42 to 43), and increase the number of satellite channels from 30 to 31. d. 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 I, Line 104 should have been close or identical to its equipment cost figure on Part III, Step G, Line 34. However, Operator's entries on these two lines varied substantially. Accordingly, we changed Line 104 to equal Part III, Line 34 for all of the franchise areas covered by this Order. e. Because of these errors, we must also recalculate the Inflation Adjustment Factor in Form 393, Part II, Worksheet 1. On its amended Forms 393, Operator apparently calculated the Inflation Adjustment Factor using data it relied on when it set its CPS prices. 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 available for the date that Operator was required to file Form 393 for each franchise area. 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, 125.7 for the third quarter of 1993, and 126.5 for the fourth quarter of 1993. Using these GNP-PI figures, we calculate Inflation Adjustment Factors of 1.037 through January 1994 for CUID No. FL0001; and 1.030 through October 1993 for CUID Nos. FL0002 and FL0143. 6. 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 periods 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 earliest complaint in each franchise area (as set forth in Appendix A) to May 14, 1994. However, we further determine that for CUID No. FL0143, the total overcharge per subscriber is such a de minimis amount that it would not serve the public interest to order a refund. 7. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, 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. 8. 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 CUID Nos. FL0001 and FL0002 that portion of the amounts paid for cable programming service for the period from the filing of the first valid complaint in each franchise area (as set forth on Appendix A) 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. 9. IT IS FURTHER ORDERED that Operator shall promptly determine the overcharges to CPS subscribers in CUID Nos. FL0001 and FL0002 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. 10. 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 forth in Appendix B (plus franchise fee). 11. 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. At the option of the Operator, it may reduce its rates for CUID No. FL0143 pursuant to this paragraph in its next filing adjusting its rates for other reasons, if the total rate reduction required by this Order is less than twenty-five cents per subscriber per month. 12. IT IS FURTHER ORDERED, pursuant to Section 76.960 of the Commission's rules, 47 C.F.R.  76.960, that Operator shall not be required to obtain advance approval of adjustments to its CPS prices in the franchise areas addressed herein for one year following the release of this Order, due to Operator's having submitted in good faith optional supplemental filings in response to our Public Notice. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau Appendix A CUID No. Date First Complaint Date Complaint Filed with FCC Served FL0001 01/26/94 01/20/94 FL0002 09/28/93 09/22/93 FL0143 11/08/93 10/27/93 Appendix B CUID No. Actual Rates Maximum Permitted Rates FL0001 $12.30 $11.98 FL0002 $13.35 $13.10 FL0143 $12.65 $12.64