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 how2ftp (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** FOR FCC RECORD ONLY $//Bresnan Communications Co., Michigan, MO&O, DA 95-1380//$ $/76.922 Rates for Cable Programming Service tiers/$ $/benchmark cable rates/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-1380 In the Matter of ) ) CUID Nos. MI0101 (Bay City) Bresnan Communications Company ) MI0102 (Essexville) ) MI0118 (Hampton) Benchmark Filings To Support ) MI0122 (Midland) Cable Programming Service Prices ) ) MEMORANDUM OPINION AND ORDER Adopted: June 19, 1995 Released: June 28, 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 referenced 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 attempted to justify its CPS prices through substantially identical FCC Forms 393 filed on November 15, 1993 for CUID Nos. MI0101, MI0102, and MI0122 and on January 6, 1995 for CUID No. MI0118. For CUID Nos. MI0101, MI0102, and MI0122, Operator amended its justifications on February 7, 1995, in response to a Cable Services Bureau Public Notice offering operators the opportunity to make optional supplemental filings. For CUID No. MI0118, Operator filed additional information on February 24, 1995, in response to an inquiry by Commission staff. 5. On April 29, 1994, the local franchise authority and sole complainant for the community of Midland, CUID No. MI0122, filed with the Commission a Motion to Accept information regarding the CPS rates of Operator. In its motion, the complainant states that two of the channels on Operator's CPS tier duplicated the programming offered on two other channels and argued that Operator should not be permitted to count the duplicate channels twice under the benchmark formula. On May 31, 1994, Operator filed with the Commission a Supplement to its Rate Complaint Response for the community of Midland. In its Supplement, Operator defends its inclusion of the duplicate channels by stating, among other things, that it offered the duplicate channels with the local franchise authority's assent in order to accommodate customer equipment constraints and local programming interests. By letter dated April 20, 1995, the Commission requested further information from Operator concerning its duplicate channel counting for CUID Nos. MI0101, MI0102, MI0118, and MI0122. In response, Operator filed a letter with the Commission on April 26, 1995 stating that it currently did not have much of the information requested by the Commission and defending its practice of counting duplicate channels. In response, the complainant, the local franchise authority, filed a letter with the Commission on May 9, 1995 repeating its request that the Commission disallow Operator's duplicate channel counting and refuting many of Operator's claims. 6. In its filings of May 31, 1994 and April 26, 1995, Operator argues that, assuming duplicate channels may not ordinarily be counted twice in calculating the benchmark, it should nonetheless be allowed to count its duplicate channels under the special circumstances of this case. Specifically, Operator states that it offered duplicate programming on Channels 19 and 21 in order to accommodate subscribers whose television sets could not receive Channels 40 through 42 without a converter box. Operator states that Channels 19 and 21 were not normally used due to potential interference problems, but their use was deemed suitable for this purpose. Operator further states that the local franchise authority in the community of Midland approved this resolution of the problem. We are not persuaded by Operator's argument. Operator does not assert that it was required by any federal, state, or local authority to offer any of the duplicate channels, and no subscriber receives any separate benefit from Operator's offering both Channels 19 and 21 and Channels 40 to 42. Nor does Operator assert that the number of subscribers required to obtain converter boxes in order to receive Channels 40 through 42 will be material. We therefore will not include duplicate channels in the total number of either rate-regulated or satellite channels. 7. Operator asserts that its monthly CPS tier prices are justified by its benchmark filings because its prices are lower 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 therefore it is appropriate to make the following adjustments to Operator's calculations in Form 393: a. In Columns A, B and C of Worksheet 1 of Part II of its FCC Forms 393, Operator completed information for three separate tiers although its rate cards showed only two tier offerings consisting of basic and CPS programming with related charges. Accordingly, Worksheet 1 was adjusted to reflect only the two tiers and to include tier channels and tier charge information consistent with the rate cards. b. Operator's Form 393, Worksheet 1, Line 104 entries do not represent its monthly equipment revenue current as of the initial date of regulation. 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 figures it entered on Line 34 of Step G of Part III should have been close or identical to its Line 104 entries. However, Operator's entries on Line 104 differed substantially from its entries on Line 34. We therefore adjusted Line 104 to equal the amounts entered on Line 34. c. Operator's calculations for its rate-regulated package as of the initial date of regulation (Form 393, Part I, and Form 393, Part II, Worksheet 1) count channels 19 and 21 as rate-regulated channels on the CPS tier. Both channel 19 and channel 42, however, carry identical programming shown at the same time. Because subscribers receive only one programming service over channels 19 and 42, Operator cannot charge subscribers for these channels as separate units of cable service. Similarly, Operator counted channel 21 as a rate-regulated channel on the CPS tier even though channel 21 carries programming already shown on channels 40 and 41. We therefore reduced the number of CPS channels from 24 to 22 on Form 393, Part I and on Part II, Worksheet 1, Line 102. We also reduced the number of rate- regulated channels used in calculating Operator's benchmark (Form 393, Part II, Worksheet 1, Line 121) from 44 to 42, and we reduced the number of satellite channels used in calculating the benchmark from 24 to 22. 8. 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 showings justify 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. 9. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's Rules, 47 C.F.R.  0.321, that the complaints referred to in Appendix A against the cable programming service prices charged by Operator in the franchise areas referenced in the caption and at Appendix A herein ARE GRANTED TO THE EXTENT INDICATED HEREIN. 10. 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 franchise areas 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 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. 11. 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. 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 franchise 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 franchise area set forth in Appendix B (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 prices for CUID Nos. MI0101, MI0102, and MI0122 for one year following the release of this Order, due to Operator's having submitted in good faith optional supplemental filings in response to our Public Notice. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau Appendix A CUID No. Date First Complaint Date Complaint Filed with FCC Served MI0101 10/13/93 10/10/93 MI0102 10/8/93 10/4/93 MI0118 1/10/94 1/10/94 MI0122 10/12/93 10/10/93 Appendix B CUID No. Actual Rates Maximum Permitted Rates MI0101 $11.49 $11.01 MI0102 $11.44 $10.96 MI0118 $11.44 $10.96 MI0122 $11.47 $10.98