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 how2ftp. File how2ftp (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** $//US Cable of Lake County, IL, MO&O, DA 95-2070//$ $/76.922 for Cable Programming Service tiers/$ $benchmark cable rates/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-2070 In the Matter of ) ) US Cable of Lake County ) CUID Nos. IL0001 (Waukegan) ) IL0468 (North Chicago) ) IL0679 (Gurnee) Benchmark Filings to Support ) Cable Programming Service Prices ) MEMORANDUM OPINION AND ORDER Adopted: September 29, 1995 Released: October 11, 1995 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. Here we consider complaints about the price 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 price through benchmark showings 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 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 in the Appendix. Operator filed FCC Forms 393 in response; Operator has also filed amended and supplemental Form 393 filings, most recently on January 17, 1995. 5. Operator asserts that its monthly CPS tier price of $11.82 (plus franchise fee) is justified by its benchmark filings because its price is equal to or lower than the maximum permitted charge of $11.98 for CUID No. IL0001 and $11.86 for CUID Nos. IL0679 and IL0468, 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 price, and it is therefore appropriate to make the following adjustments to Operator's calculations in Form 393: a. Operator's Form 393, Part II, Worksheet 1, Line 104 entry does 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 current monthly equipment revenue figure it entered on Line 104 should have been close or identical to its equipment cost figure on Part III, Step G, Line 34. However, Operator's entries on these two lines differed substantially. We therefore adjusted Line 104 to equal the amount entered on Line 34. b. In its most recent amended Form 393 filings, Operator incorrectly calculated the Inflation Adjustment Factor (Form 393, Part II, Worksheet 1, Line 127, and Form 393, Part II, Worksheet 4, Line 401). Lines 122 and 125 of Form 393 require the operator to enter Gross National Product Price Index ("GNP-PI") data for the latest quarter for which data is available that ended before the date through which the Inflation Adjustment Factor is calculated. On its most recent Forms 393, Operator calculated the Inflation Adjustment Factor through January 1994. However, Operator completed Lines 122 and 125 using GNP-PI data for the second quarter of 1993 (released August 31, 1993) when updated data was available at least through the third quarter of 1993 (released December 1, 1993). Operator's calculation of the Inflation Adjustment Factor is therefore incorrect. c. We must therefore recalculate the Inflation Adjustment Factor on the basis of the most accurate data currently available in accordance with the Form 393 Instructions. On July 29, 1994, the Department of Commerce released corrected inflation data including GNP-PI figures of 122.3 for the third quarter of 1992 and 126.5 for the fourth quarter of 1993. Using these GNP-PI figures, we calculate an Inflation Adjustment Factor of 1.037 through January 1994, the base dates Operator used in justifying its rate. 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 periods in question. Operator's showings justify the maximum reasonable CPS tier price of $11.77 (plus franchise fee) for the period from the filing of the earliest complaint in each franchise area (as set forth in the Appendix) to May 14, 1994. However, we further determine that the total overcharge per subscriber is de minimis. Therefore, it would not serve the public interest to order a refund. 7. 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 the Appendix against the cable programming service price charged by Operator in the franchise areas referenced in the caption and the Appendix herein, and all other complaints in these franchise areas related to the same price, ARE GRANTED TO THE EXTENT INDICATED HEREIN. 8. 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 of $11.77 per month (plus franchise fee). 9. IT IS FURTHER ORDERED that Operator shall place into effect, within 30 days after its submission of the revised Form 1200 filings required above, a price that reflects the reduction in the CPS rate determined in this Order. 10. 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 price in the franchise areas addressed herein 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 JoAnn Lucanik Chief, Financial Analysis and Compliance Division Cable Services Bureau Appendix CUID No. Date First Complaint Date Complaint Filed with FCC Served IL0001 01/07/94 01/05/94 IL0468 02/25/94 02/25/94 IL0679 02/04/94 02/04/94