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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** FOR FCC RECORD ONLY $//SBC Media Ventures, Inc., Arlington, Virginia, MO&O, DA 95-959//$ $76.922 Rates for Cable Programming Service tiers/$ $/benchmark cable rates/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-959 In the Matter of ) ) CUID No. VA0108 (Arlington, VA) SBC Media Ventures, Inc. ) ) Benchmark Filing to Support ) Cable Programming Service Price ) MEMORANDUM OPINION AND ORDER Adopted: April 26, 1995 Released: May 3, 1995 By the Chief, Cable Services Bureau: 1. Here we consider complaints about the price that the above-captioned operator ("SBC Media Ventures") was charging for its cable programming service ("CPS") tier in the community designated above. SBC Media Ventures has chosen to attempt to justify its price through a benchmark showing on FCC Form 393. This Order addresses the reasonableness of SBC Media Ventures' 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 the franchise area which is the subject of this Order was completed and served on SBC Media Ventures and received by the Commission on the dates set forth on Appendix A. SBC Media Ventures filed FCC Form 393 in response; SBC Media Ventures has also filed amended and supplemental Form 393 filings, most recently on March 7, 1995. 5. SBC Media Ventures asserts that its monthly CPS tier price of $13.83 is justified by its benchmark filing because its price is equal to the maximum permitted charge as calculated in the filing. However, SBC Media Ventures' actual monthly CPS tier price, exclusive of franchise fees, was $15.98. Upon review of SBC Media Ventures' 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 SBC Media Ventures' calculations in Form 393: a. In reporting its customer equipment and installation costs on Form 393, Part II, Worksheet 3, Line 301, SBC Media Ventures did not correctly gross-up its tax entries. SBC Media Ventures' Form 1205 filing confirms that it is a tax-paying entity (i.e., a "C" corporation). However, SBC Media Ventures 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 calculating their customer equipment and installation costs. (i.e., calculate the tax as a percentage of return on investment plus tax). By understating its tax entries, an operator reduces its effective rate of return on equipment and installations and thereby could increase its CPS price. We therefore recalculate Line 301 (and Form 393, Part II, Worksheet 1, Line 104) using correctly grossed-up tax entries. b. In Line 101, Columns A and B of Part II, Worksheet 1 of its FCC Form 393, SBC Media Ventures used different rates than those on the rate card that it supplied with its filings. Pursuant to the instructions on Form 393, SBC Media Ventures should have used its actual rates that were in effect on the initial date of regulation. We therefore recalculate line 101, Columns A and B (and subsequent steps) using the prices for the basic and CPS tiers found in the rate card. c. SBC Media Ventures' calculations for its rate-regulated package as of the initial date of regulation (Form 393, Part II, Worksheet 1 and Form 393, Part I) count channel 8 (News Channel 8) as a satellite channel. However, News Channel 8 should not have been counted as a satellite channel because it is not delivered on a communications satellite. We therefore reduce the number of satellite channels used in calculating the benchmark on Form 393, Part II, Worksheet 1, Line 121 from 31 to 30. d. Because of these errors, we must also recalculate the Inflation Adjustment Factor in Form 393, Part II, Worksheet 1. On its Form 393, SBC Media Ventures calculated the Inflation Adjustment Factor using data it relied on when it set its CPS price. If based on this data Form 393 indicated that SBC Media Ventures' price was reasonable, then it would have successfully justified its price under paragraph 94 of the Third Order on Reconsideration. However, SBC Media Ventures has not shown that its price was reasonable, so we must recalculate the Inflation Adjustment Factor on the basis of the most accurate data currently available for the date that it timely filed 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, 125.7 for the third quarter of 1993, and 126.5 for the fourth quarter of 1993. Using these GNP-PI figures, we calculate an Inflation Adjustment Factor of 1.030 through October 1993 for CUID No. VA0108. 6. Upon review of the record herein, and having incorporated the adjustments discussed above, we conclude that SBC Media Ventures has failed to justify the rate it was charging during the period in question. SBC Media Ventures' showing justifies the maximum reasonable CPS tier price shown on Appendix B (plus franchise fee) for the period from the filing of the earliest complaint (as set forth in Appendix A) to May 14, 1994. 7. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the complaint referred to in Appendix A against the cable programming service price charged by SBC Media Ventures, Inc. in the area referenced in the caption and at Appendix A herein, and all other complaints in this franchise area related to the same price, 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 SBC Media Ventures, Inc. shall refund to subscribers in the community shown in Appendix B that portion of the amounts paid for cable programming service for the period from the filing of the first valid complaint (as set forth on Appendix A) to May 14, 1994 which exceeded the maximum price set forth in Appendix B (plus franchise fee) per month, plus interest to the date of the refund. 9. IT IS FURTHER ORDERED that SBC Media Ventures, Inc. shall promptly determine the overcharges to CPS subscribers for the stated 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 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 SBC Media Ventures, Inc. shall, within 30 days of the release of this Order, revise its Form 1200 filing with respect to the community 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 set forth in Appendix B (plus franchise fee). 11. IT IS FURTHER ORDERED that SBC Media Ventures, Inc. shall place into effect, within 30 days after its submission of the revised Form 1200 filing required above, a price that reflects the reduction in the CPS rate determined in this Order. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau Appendix A CUID No. Date First Complaint Date Complaint Filed with FCC Served VA0108 10/25/93 10/22/93 Appendix B CUID No. Actual Rates Maximum Permitted Rates VA0108 $15.98 $13.69