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 $//Sun Valley Cablevision MO&O, DA 95-879//$ $/76.922 Rates for Cable Programming Service tier/$ $/benchmark cable rates/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-879 In the Matter of ) ) CUID Nos. Sun Valley Cablevision ) ID0055 Ketchum, ID ) ID0076 Hailey, ID Benchmark Filing to Support ) Cable Programming Service Price ) MEMORANDUM OPINION AND ORDER Adopted: April 19, 1995 Released: April 25, 1995 By the Chief, Cable Services Bureau: 1. Here we consider complaints about the price that the above-captioned operator ("Operator") was charging for its cable programming service ("CPS") tier in the communities designated above. 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 date 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. 4. The first valid CPS complaint in CUID No. ID0076 was completed and served on Operator on September 20, 1993; the first valid CPS complaint in CUID No. ID0055 was completed and served on Operator on November 29, 1993. The Commission received the complaints on September 30, 1993 and December 22, 1993, respectively. Operator filed FCC Form 393 submissions on a consolidated basis in response; Operator has also filed amended and supplemental Form 393 filings, most recently on February 7, 1995. 5. Operator asserts that its monthly CPS tier price of $8.82 is justified by its benchmark filing because its price is lower than or equal to the maximum permitted charge as calculated in the filings. Upon review of Operator's Form 393 filing, we have found that it 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 E of Schedule A of Part III of its FCC Form 393, Operator incorrectly entered a negative net book value for the asset "Tools." The accumulated depreciation of $67,748 plus the current provision for depreciation of $8,279 exceeded the gross book value of $72,240 by $3,787. We, therefore, reduced the current provision for depreciation by $3,787. b. In reporting its capital costs of service installation and maintenance of equipment on Part III, Schedule A, Operator over-depreciated its vehicles, exceeding the net book value of the asset. This is in violation of Generally Accepted Accounting Principles. The remaining book value prior to applying the annual depreciation expense of $7,046 was less than the accumulated depreciation of $67,748 plus the current provision for depreciation of $8,279. Therefore, the depreciation expense was decreased to $4,492 in order to match the remaining book value. c. On Form 393, Part III, Step G, line 33, Operator allocated 76.5% of its system customer equipment and installation costs to the areas covered by this Form 393 filing. However, Operator filed Form 393 on a system basis. We have therefore modified Operator's allocation to 100%. d. Operator'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, Operator entered a figure based on its prior equipment rates. We have revised Operator's Line 104 entry to reflect its current monthly equipment revenue. Since Operator 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 on Line 34 of Step G of Part III should be close or identical to its Line 104 entry. Accordingly, on Line 104 we have entered $14,871.77, the same figure that appears on Line 34 as adjusted pursuant to paras. 5a-5e, supra. e. In its most recent Form 393 filing, Operator calculated the Inflation Adjustment Factor (Line 127, Worksheet 1, Part II) as of the end of October 1993. However, the figures Operator used are not consistent with data on which it should have relied in calculating the Inflation Adjustment Factor. Operator 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 calculated the adjustment time period incorrectly in Line 124. We find that the correct inflation adjustment factor is 1.028. Operator's calculation of the Inflation Adjustment Factor is thus incorrect. 6. Because of these errors, we conclude that Operator 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 $8.82 (as Operator calculated) to $8.77. 7. Upon review of the record herein, we conclude that Operator's showing supports a maximum reasonable CPS tier price of $8.77 per month (plus franchise fee) for the periods September 30, 1993 for CUID ID0076, and November 29, 1993 for CUID ID0055 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. 8. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the complaints against the cable programming service prices charged by Operator in the areas referenced in the caption ARE GRANTED to the extent indicated herein. 9. We further conclude that Operator must reflect in its FCC Form 1200 rate filing for the period after May 14, 1994 the fact that Operator's price during the earlier period was unreasonable. We reserve the right to make further adjustments to Operator's price for the period after May 14, 1994 upon completion of our review of Operator'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 30, 1993 and November 29, 1993 complaints against the cable programming service charged by Operator in Hailey, Idaho, CUID ID0076 and Ketchum, Idaho, CUID ID0055, respectively, 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 Operator with respect to Hailey, Idaho, CUID ID0076 and Ketchum, Idaho, CUID ID0055 for the periods of September 30, 1993 and November 29, 1993, respectively, to May 14, 1994 justifies a maximum price of $8.77 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 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 permitted price of $8.77 (plus franchise fee). 13. 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. 14. 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 price in the franchise areas addressed herein for one year following the release of this Order, due to Operator's having submitted in good faith an optional supplemental filing in response to our Public Notice. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau