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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** FOR FCC RECORD ONLY $//Post-Newsweek, MO&O, DA 95-1071//$ $76.922 Rates for Cable Programming Service tiers/$ $/benchmark cable rates/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-1071 In the Matter of ) ) CUID No. CA0019 (Modesto, CA) Post-Newsweek Cable, Inc. ) CA0670 (Stanislaus, CA) ) CA0925 (Burlingame, CA) ) IN0189 (Greenwood, IN) ) IN0191 (New Whiteland, IN) ) TX0024 (Port Lavaca, TX) ) TX0095 (Livingston, TX) Benchmark Filings to Support ) Cable Programming Service Prices ) MEMORANDUM OPINION AND ORDER Adopted: May 11, 1995 Released: May 18, 1995 By the Chief, Cable Services Bureau: 1. Here we consider complaints about the prices 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 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. 5. On November 10, 1993, Operator moved by letter to dismiss the October 13, 1993 complaint in CUID No. CA0670 and the November 1, 1993 complaint in CUID No. CA0019. Operator argues that the complaint in CUID No. CA0019 should be dismissed because the complainant (1) included charges for the basic tier, premium channels, and equipment as well as the CPS tier in response to question 8 of FCC Form 329 as it then existed; (2) included channels on the basic tier as well as the CP tier in response to question 9 on FCC form 329; and (3) incorrectly indicated in response to question 6 that he was complaining about a rate increase after September 1, 1993, rather than the rates in effect on September 1, 1993. Operator argues that the complaint in CUID No. CA0670 should be dismissed for the same reasons and also because the complainant (4) did not include a copy of his bill with the complaint that he sent to Operator; (5) did not indicate the date that he served Operator with a copy of the complaint in response to question 12; and (6) did not state in response to question 13 that he believed the CPS rate was unreasonable. Operator's assertions do not persuade us that the complaints are invalid or should be dismissed. In general, we will find valid any complaint that states a claim on which relief can be granted and provides adequate information to allow us to process the complaint, despite minor flaws or inaccuracies. We believe this approach best implements the mandate of the 1992 Cable Act. Because the complainants' responses to question number 9 include channels contained on the CPS tier and because the rates listed in answer number 8 and on the attached bills indicate that the complainants received the CPS tier, we find it reasonable to conclude that the complainants objected to the CPS rates in effect on September 1, 1993 and that they believed those rates were unreasonable. Furthermore, there is no evidence that Operator was hindered in responding to the complaint in CUID No. CA0670 by complainant's failure to include a copy of his bill or to indicate the service date. We therefore find the complaints valid and deny Operator's motions to dismiss the complaints. 6. On January 24, 1994, each of the complainants in CUID No. CA0925 filed a Motion to Strike Post-Newsweek's rate justification for that franchise area on the ground that it was willfully false and deceptive. The complainants noted that in a cover sheet attached to its rate justification, Post-Newsweek stated that for the period prior to September 1, 1993, it had 23 channels on its CPS tier, whereas on Form 393, Part II, Page 2, Line 202, Post- Newsweek claimed 24 channels. The complainants further state that Post-Newsweek should not have counted SportsChannel as a full CPS channel because it is used part of the time to provide pay-per-view services, and therefore that Post-Newsweek should have counted no more than 22.5 CPS channels as of September 30, 1992. For the period since September 1, 1993, the complainants argue that SportsChannel and three other channels should not be counted as full channels on the CPS tier because thay are used part of the time to provide pay-per-view or pay-per-channel services. Therefore, they state that Post-Newsweek should haved counted fewer than 26 channels on the CPS tier on Form 393, Part II, Worksheet 1, Line 102. 7. Post-Newsweek filed an Opposition to Motions to Strike on February 8, 1994. In its opposition, Post-Newsweek explained the discrepancy between its cover sheet and its entry on Line 202 by stating that its cover sheet reported 23 channels immediately prior to September 1, 1993, whereas its Line 202 entry represented 24 CPS channels offered as of September 30, 1992. Post-Newsweek also defended its counting of each of the channels that was used to provide both CPS and premium services as a rate-regulated satellite channel. Post-Newsweek stated that SportsChannel provided rate-regulated services approximately 90 percent of the time that it was in use, and that each of the other channels provided CPS for 12 hours per day and premium services for 12 hours per day. 8. Upon review of the Motions to Strike and Post-Newsweek's opposition, we find that Post-Newsweek has sufficiently explained the apparent discrepancy between its cover memo and its entry on Line 202. We note that Post-Newsweek's claim of 24 CPS channels as of September 30, 1992 is consistent with its channel line-up for that period. Our treatment of Post-Newsweek's split channels is discussed at paragraphs 9d, 9e, and 9f below. Finally, we do not find that Post-Newsweek's statements in its rate justification were willfully false and deceptive. Accordingly, we grant in part and deny in part the Motions to Strike. 9. Operator asserts that its monthly CPS tier prices are justified by its benchmark filings because its prices are equal to or less than 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 its FCC Form 393, Operator did not correctly gross-up its tax entries. By placing entries in these columns, Operator confirms that it is a tax-paying entity (i.e., a "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 adjusted tax entries. b. Operator's Form 393, Worksheet 1, Line 104 entries do not represent its current monthly equipment revenue as of the initial date of regulation. Since Operator restructured its rates, including its equipment rates, on September 1, 1993, the monthly equipment revenue figure it entered on Part II, Worksheet 1, Line 104 should have been close or identical to its equipment cost figure on Line 34 of Step G of Part III. However, Operator's entries on these two lines varied substantially . Accordingly, we have changed Line 104 to equal the figure entered on Line 34 in each franchise area, as adjusted pursuant to paragraph 5a, supra. c. In Line 101, Columns A and B of Part II, Worksheet 1 of its FCC Forms 393, Operator used different rates than what appear on the rate cards that operator supplied with its filings. Pursuant to the instructions on Form 393, Operator 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 cards. d. In CUID No. CA0925, Operator's calculations for its rate-regulated package as of September 1, 1993 (Form 393, Part II Worksheet 1) count channels 40, 41, and 42 as rate-regulated satellite channels on the CPS tier. In addition, Operator counts channel 52 (SportsChannel) as a satellite channel on the CPS tier both on Worksheet 1 and in its calculations as of September 30, 1992 on Worksheet 2. According to Operator as of September 1, 1993, channels 40, 41, and 42 each carried a rate-regulated satellite service (CSpan II, ValueVision, and MOR Music, respectively) 12 hours per day and a pay-per-channel service that is not subject to rate regulation (Request 1, Request 2, and Viewer's Choice, respectively) 12 hours per day. Operator further states that as of both time periods SportsChannel carried rate-regulated programming approximately 90 percent of the time and pay-per-view programming approximately 10 percent of the time. e. Our policy on "split" channels is to categorize them according to their preponderance of use. This policy is based on the fact that the 1992 price survey underlying the benchmark system was analyzed based on whole, not fractional, channel counts. Under the benchmark system in effect prior to May 15, 1994, all channels must be characterized as either rate-regulated or not subject to rate regulation and as either satellite or non-satellite. A "channel" is defined as a "unit of cable service identified and selected by a channel number or similar designation." FCC Form 393, p. 10. The preponderance-of-use test is the only one consistent with this conceptual framework. f. According to the information provided by Operator, channels 40, 41 and 42 did not provide rate-regulated programming during the majority of programming hours. These channels therefore should not be counted as rate-regulated or as satellite channels on Worksheet 1. Channel 52 (SportsChannel), however, did provide rate-regulated satellite programming during the majority of the programming hours, and it was therefore properly counted. Accordingly, in CUID No. CA0925, we reduce the number of channels on the CPS tier on Form 393, Part I and Form 393, Part II, Worksheet 1, Line 102 from 26 to 23. We also reduce the number of rate-regulated channels used in calculating the benchmark on Form 393, Part II, Worksheet 1, Line 121 from 44 to 41, and we reduce the number of satellite channels in the same calculation from 28 to 25. We do not make any adjustments on Form 393, Part I, Worksheet 2. g. Because of these errors, we must also recalculate the Inflation Adjustment Factor in each franchise area on Form 393, Part II, Worksheet 1. On its amended Forms 393, Operator 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 currently available for the date that Operator should have filed Form 393 in each franchise area. 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 the Inflation Adjustment Factors set forth in Appendix A. 10. 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. We further conclude that in CUID No. IN0191 the total overcharge per subscriber is de minimis, and therefore it would not serve the public interest to order a refund. 11. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that Operator's Motion to Dismiss the November 1, 1993 complaint in CUID No. CA0019 and the October 13, 1993 complaint in CUID No. CA0670 ARE DENIED. 12. IT IS FURTHER ORDERED that the Motions to Strike Operator's Response in CUID No. CA0925 ARE GRANTED IN PART AND DENIED IN PART AS INDICATED HEREIN. 13. IT IS FURTHER ORDERED 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. 14. 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 the communities shown in Appendix B except for CUID No. IN0191 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. 15. IT IS FURTHER ORDERED that Operator 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 60 days of Commission approval of the plan. 16. 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). 17. 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. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau Appendix A CUID No. Date First Complaint Date Complaint Inflation Adj. Filed with FCC Served Factor CA0019 11/01/93 11/01/93 1.032 CA0670 10/19/93 10/13/93 1.030 CA0925 12/14/93 12/07/93 1.034 IN0189 11/02/93 10/29/93 1.030 IN0191 02/25/94 02/25/94 1.039 TX0024 10/08/93 10/05/93 1.030 TX0095 11/16/93 11/11/93 1.032 Appendix B CUID No. Actual Rates Maximum Permitted Rates CA0019 $ 9.02 $ 8.92 CA0670 $ 9.02 $ 8.90 CA0925 $13.05 $12.12 IN0189 $ 5.77 $ 5.66 IN0191 $ 5.77 $ 5.71 TX0024 $ 9.21 $ 9.07 TX0095 $10.66 $10.54