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 $//TCI of Central Florida, MO&O, DA95-815//$ $/76.922 Rates for Cable Programming Service Tiers/$ $/benchmark cable rates$ Before the Federal Communications Commission Washington, D.C. DA 95-815 In the matter of: ) ) TCI of Central Florida ) CUID Nos. FL0462 and FL0495 Altamonte Springs, Florida ) Seminole County, Florida ) ) 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 complaints about the price TCI of Central Florida ("TCI") was charging for its cable programming service ("CPS") tier in Altamonte Springs, Florida, CUID No. FL0462 and in Seminole County, Florida, CUID No. FL0495. TCI has chosen to attempt to justify its price through a benchmark showing on FCC Forms 393. This Order addresses the reasonableness of TCI'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 rates 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 complaints were completed and served on TCI on September 7, 1993 for CUID No. FL0462 and on September 13, 1993 for CUID No. FL0495. The Commission received the complaints on September 13, 1993 for CUID No. FL0462 and on October 13, 1993 for CUID No. FL0495. 5. TCI attempted to justify its CPS price by filing identical FCC Form 393s for both franchise areas on November 30, 1993. TCI amended its justifications on May 31, 1994 in response to a Cable Services Bureau Order citing common deficiencies observed in benchmark filings generally. Discussion 6. In its amended benchmark filing of May 31, 1994, TCI calculated a maximum permitted price for the CPS tier of $10.82 per month. However, TCI's actual price for the CPS tier in each franchise area was $11.09 per month. Thus, TCI has failed to demonstrate that its price for the CPS tier in each franchise area was not unreasonable. Furthermore, upon review of TCI's submission we have found that it has not correctly calculated its maximum permitted price and it is therefore appropriate to make the following adjustments to TCI's calculations in Form 393: a. In Column G of Schedules A and C of Part III of its FCC Form 393, TCI did not correctly account for its income tax expense. By placing entries in these columns, TCI confirms that it is a tax-paying entity (i.e., a "C" corporation). However, TCI 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. Because TCI has failed to demonstrate that its price for the CPS tier was not unreasonable, we will set a maximum permitted price for this tier, incorporating the adjustment 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 TCI filed. On its amended Form 393, TCI 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 ("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, the base date TCI used in justifying its rates, of 1.030. 7. These adjustments have the cumulative effect of reducing the maximum permitted monthly CPS tier price from $10.82 (as TCI calculated) to $10.78. Conclusions 8. Upon review of the record herein, we conclude that TCI's showing supports a maximum reasonable CPS tier price of $10.78 per month (plus franchise fee) for the period September 13, 1993 to May 14, 1994 in CUID No. FL0462 and for the period October 13, 1993 to May 14, 1994 in CUID No. FL0495. We further determine that we will order an appropriate refund 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 for the period after May 14, 1994, TCI must reflect in its Form 1200 rate filing for the franchise areas addressed in this Order the fact that TCI's price during the earlier period was unreasonable. We reserve the right to make further adjustments to TCI's price for the period after May 14, 1994, upon completion of our review of TCI'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 September 7, 1993 complaint for CUID No. FL0462 and the September 13, 1993 complaint for CUID No. FL0495 against the cable programming service price charged by TCI of Central Florida in Altamonte Springs and Seminole County, Florida, CUID Nos. FL0462 and FL0495, and all other complaints in these franchise areas relating to the same price, ARE GRANTED TO THE EXTENT INDICATED HEREIN. 11. IT IS FURTHER ORDERED that the benchmark filings submitted by TCI of Central Florida with respect to Altamonte Springs, Florida, CUID No. FL0462, for the period of September 13, 1993 to May 14, 1994 and Seminole County, Florida, CUID No. FL0495, for the period of October 13, 1993 to May 14, 1994, justify a maximum price of $10.78 per month (plus franchise fee) for TCI of Central Florida'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 TCI of Central Florida shall refund to subscribers that portion of the amounts paid for cable programming service from September 13, 1993 to May 14, 1994, for CUID No. FL0462 and from October 13, 1993 to May 14, 1994, for CUID No. FL0495, that exceeded $10.78 (plus franchise fee) per month and was thus unreasonable, plus interest to the date of the refund. 13. IT IS FURTHER ORDERED that TCI of Central Florida 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 30 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 TCI of Central Florida shall, within 30 days of the release of this Order, revise its Form 1200 filing with respect to Altamonte Springs and Seminole County, Florida, CUID Nos. FL0462 and FL0495, 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 price (plus franchise fee). 15. IT IS FURTHER ORDERED that TCI of Central Florida shall place into effect, within 30 days after its submission of the revised Form 1200 filing required above, a CPS tier price for its Altamonte Springs and Seminole County, Florida franchise areas, CUID Nos. FL0462 and FL0495, that reflects the reduction in the CPS rate determined in this Order. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau