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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** FOR FCC RECORD ONLY $//Cablevision of Lake Travis, MO&O, DA 95-1100//$ $/ 76.922 Rates for the basic service tier and cable programming services tier/$ $/benchmark cable rates/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-1100 In the Matter of ) ) CUID No. TX0323 (Austin) Cablevision of Lake Travis ) ) Benchmark Filing to Support ) Cable Programming Service Price ) MEMORANDUM OPINION AND ORDER Adopted: May 16, 1995 Released: May 19, 1995 By the Chief, Cable Services Bureau: 1. Here we consider a complaint about the price that the above-captioned operator ("Operator") was charging for its cable programming service ("CPS") tier in the community 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 price 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 price. Under our rules, an operator may attempt to justify its price through either a benchmark showing or a cost-of-service showing. In either case, the operator has the burden of demonstrating that its CPS price 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 price were in compliance with the Commission's initial rules from the time the complaint was filed through May 14, 1994, and that their price were in compliance with the revised rules from May 15, 1994 forward. Operators attempting to justify their price for the period prior to May 15, 1994 through a benchmark showing must complete and file FCC Form 393. Generally, to justify their price for the period beginning May 15, 1994 through a benchmark showing, operators must use the FCC Form 1200 series. 4. The complaint in the franchise area of Austin, Texas was completed and served on Operator on October 8, 1993 and received by the Commission on October 12, 1993. Operator filed FCC Form 393 in response on November 15, 1993. 5. In its benchmark filing of November 15, 1993, Operator calculated a maximum permitted price for the CPS tier of $15.29 per month (plus franchise fee). However, Operator's actual price for the CPS tier was $l6.30 per month (plus franchise fee). Thus, Operator has failed to demonstate that its price for the CPS tier was not unreasonable. Furthermore, upon review of Operator'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 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 account for its income tax expense. Operator is a Subchapter C corporation and is therefore required to pay corporate income tax. By omitting 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 recalculated Operator's Federal income tax allowance on Column G of Schedules A and C on the basis of a 34% corporate tax rate. Furthermore, 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). In accordance with this principle, we recalculated Column G of Schedules A and C (and subsequent steps) using a grossed-up federal income tax rate of 51.51% of Operator's return on investment. b. Since Operator has failed to demonstrate that its price for the CPS tier was not unreasonable, we must recalculate the Inflation Adjustment Factor on Form 393, Part II, Worksheet 1 on the basis of the most accurate data currently available for the date for which Operator filed. On its FCC Form 393, Operator calculated its Inflation Adjustment Factor as of the end of October 1993 using data released on August 31, 1993. On July 29, 1994, the United States 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 operator used in justifying its rate, of l.030. c. In its filing, Operator entered $7.95 for the CPS tier as its monthly rate as of September 30, 1992 on Form 393, Part II, Worksheet 2, Line 201(B). However, Operator's rate card from that time period indicates that its actual monthly rate, exclusive of franchise fees, was $9.50 for the CPS tier. The instructions to Form 393 require the operator to enter on Line 201 its actual monthly charge for the basic service tier and for each tier of cable programming service that was offered to subscribers in the franchise area as of September 30, 1992. We have therefore corrected Line 201 to match the figure on Operator's rate card. 6. Upon review of the record herein, and having incorporated the adjustments discussed above, we conclude that Operator has failed to justify the rate it was charging during the period in question. Operator's showing justifies the maximum reasonable CPS tier price of $15.92 per month (plus franchise fee) for the period from October 12, 1993 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 against the cable programming service price charged by Operator in Austin, Texas IS 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 Austin, Texas that portion of the amounts paid for cable programming service for the period from October 12, 1993 to May 14, 1994 which exceeded the maximum price of $15.92 per month (plus franchise fee), plus interest to the date of the refund. 9. IT IS FURTHER ORDERED that Operator 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 Operator shall, within 30 days of the release of this Order, revise its Form 1200 filing with respect to Austin, Texas, for the period beginning May 15, 1994, to reduce the monthly charge as of March 31, 1994 for Tier 2, (line A6b) to equal $l5.92 (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 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