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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** FOR FCC RECORD ONLY $//CCA Acquisition Corp., Western CT, MO&O, DA 95-1231//$ $/76.922 Rates for Cable Programming Service tiers/$ $/benchmark cable rates/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-1231 In the Matter of ) CUID Nos.: CT0037 (New Milford) ) CT0038 (Bridgewater) CCA Acquisition Corporation ) CT0101 (Trumbull) ) CT0102 (Monroe) ) CT0103 (Newton) ) CT0104 (Brookfield) ) CT0105 (New Fairfield) ) CT0106 (Sherman) ) CT0169 (Bethlehem) ) CT0170 (Southbury) ) CT0171 (Woodbury) ) CT0176 (Kent) ) CT0177 (Washington) Benchmark Filings to Support ) CT0178 (Roxbury) Cable Programming Service Prices ) CT0180 (Warren) MEMORANDUM OPINION AND ORDER Adopted: June 5, 1995 Released: June 12, 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") tiers in the communities designated above. Operator has chosen to attempt to justify its prices through a benchmark showing 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 its CPS prices were in compliance with the Commission's initial rules from the time the complaint was filed through May 14, 1994, and that its 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. For each of the communities referenced in the caption, the first complete and timely complaint was served on Operator on September 7, 1993. The Commission received all of these complaints on September 3, 1993. In response to all of the complaints, Operator filed one FCC Form 393 on November 15, 1993. Operator also filed amended and supplemental Form 393 filings, most recently on May 16, 1995. 5. Operator filed motions to dismiss complaints filed after September 3, 1993 for several of the communities referenced in this Order. Because we have accepted the complaints filed with the Commission on September 3, 1993 for all of the communities referenced in this Order, we find it unnecessary to rule on Operator's objections to all other later filed complaints for all of the communities referenced in this Order. On December 1, 1993, a complainant filed a reply to the Operator's motion to dismiss the complaints he filed for all of the communities referenced in this Order. However, the records of the Commission and of the Operator do not show that Operator ever filed such a motion. Accordingly, we have no basis to rule on the complainant's reply. 6. Operator asserts that its monthly CPS tier prices are justified by its benchmark filing because its prices are less than the maximum permitted charges as calculated in the filing. Upon review of Operator's Form 393 filing, we have found that Operator has not correctly calculated its maximum permitted prices, and it is therefore appropriate to make the following adjustments to Operator's calculations in its Form 393: a. In a single FCC Form 393 filing, Operator improperly combined data for three separate areas in which it offered subscribers different CPS rates and different numbers of rate-regulated and satellite channels. According to information supplied by Operator, subscribers in CUID Nos. CT0169, CT0170, CT0171 and CT0178 received a different CPS rate and channel line- up from subscribers in CUID Nos. CT0101, CT0102, and CT0103, and from subscribers in CUID Nos. CT0037, CT0038, CT0104, CT0105, CT0106, CT0177, CT0180, and CT0176. The instructions to Form 393 clearly state that separate community units may be combined in a single filing only if "all relevant factors (including program service and equipment rates, channel line- ups and franchise fees) are identical." Operator therefore should have completed and filed separate Forms 393 for each of these three areas. In its amended FCC Form 393 filing of May 16, 1995, Operator provided the necessary data to calculate separately the maximum permitted price for each of the three areas covered by this Order. b. In Lines 101 and 102, Worksheet 1, Part II of its FCC Form 393, Operator did not correctly enter its monthly tier charges and number of CPS channels as of the initial date of regulation. Although Operator submitted a list of channels for each of the three areas, these lists did not correspond with the number of channels listed for each area on its September 1, 1993 rate card. Accordingly, we adjusted Worksheet 1 to reflect the tier charges and channel information shown on the September 1, 1993 rate card as submitted by Operator. c. In Column G of Schedules A and C of Part III of its FCC Form 393, Operator did not report any income tax expense due to a net operating loss. Operator is a Chapter C corporation and is therefore required to pay corporate income tax. Therefore, Operator must complete Column G on the basis of its statutory tax rate, regardless of the rate it actually paid in any given year. 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 calculated 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. d. In Line 103, Worksheet 1, Part II of its FCC Form 393, Operator did not correctly enter its number of CPS subscribers. Accordingly, we adjusted Worksheet 1 to reflect Operator's CPS subscriber information for each of the three areas as submitted by Operator on Exhibit E, page 1 of its amended FCC Form 393 filing. e. In Line 103, Worksheet 1, Part II of its FCC Form 393, Operator did not correctly enter its number of basic subscribers. Accordingly, we adjusted Worksheet 1 to reflect Operator's basic subscriber information for each of the three areas as submitted by Operator on page 4 of its April 27, 1995 letter. f. In Line 33, Step G, Part III of its FCC Form 393, Operator did not adjust its annual customer equipment and installation costs to reflect the three separate areas. Accordingly, we adjusted Line 33 (and subsequent steps) in accordance with each area's percentage of subscribers as submitted by Operator on Exhibit E, page 1 of its amended FCC Form 393 filing. 7. 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 period in question. Operator's showing justifies the maximum reasonable CPS tier prices shown on Appendix A (plus franchise fee) for the period from September 3, 1993 to May 14, 1994. 8. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's Rules, 47 C.F.R.  0.321, that the complaints referenced herein against the cable programming service prices charged by Operator in the areas referenced in the caption and at Appendix A, and all other complaints in these areas related to the same prices, ARE GRANTED TO THE EXTENT INDICATED HEREIN. 9. 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 addressed herein that portion of the amounts paid for cable programming service for the period from September 3, 1993 to May 14, 1994 which exceeded the maximum price for each area set forth in Appendix A (plus franchise fee) per month, plus interest to the date of the refund. 10. IT IS FURTHER ORDERED that Operator shall promptly determine the overcharges to its CPS subscribers for the stated period, and shall within 30 days of the release of this Order file reports with the Chief, Cable Services Bureau, stating the cumulative refund amounts so determined (including franchise fees and interest), describing the calculation thereof, and describing its plans to implement the refunds within 60 days of Commission approval of those plans. 11. 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 areas 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 area set forth in Appendix A (plus franchise fee). 12. 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. Actual Rates Maximum Permitted Rates for CPS Tier for CPS Tier CT0037 $12.22 $11.24 CT0038 $12.22 $11.24 CT0101 $8.36 $8.76 CT0102 $8.36 $8.76 CT0103 $8.36 $8.76 CT0104 $12.22 $11.24 CT0105 $12.22 $11.24 CT0106 $12.22 $11.24 CT0169 $15.44 $10.57 CT0170 $15.44 $10.57 CT0171 $15.44 $10.57 CT0176 $12.22 $11.24 CT0177 $12.22 $11.24 CT0178 $15.44 $10.57 CT0180 $12.22 $11.24