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File how2ftp (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** $//Jones Spacelink, OH, MO&O, DA 95-2226//$ $/&76.922 for Cable Programming Service tiers/$ $benchmark cable rates/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-2226 In the Matter of ) ) Jones Spacelink, Ltd. ) CUID No. OH0205 (Creston) ) Benchmark Filing to Support ) Cable Programming Service Price ) MEMORANDUM OPINION AND ORDER Adopted: October 24, 1995 Released: November 6, 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 referenced 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 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 complaint in the franchise area which is the subject of this Order was completed and served on Operator on February 23, 1994 and received by the Commission on February 28, 1994. Operator filed FCC Form 393 in response on June 6, 1994. 5. Operator admits that its monthly CPS tier price of $11.73 (plus franchise fee) is not justified by its benchmark filing because its price is higher than the maximum permitted charge of $11.43 per month (plus franchise fee), as calculated in the filing. Thus, Operator has failed to demonstrate that its CPS rate is not unreasonable. Furthermore, upon review of Operator's Form 393 filing, 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 Part II, Worksheet 1, Line 108 and in Part II, Worksheet 2, Line 208 of its Form 393, Operator incorrectly included franchise fees. The franchising authority confirmed that it did not charge Operator franchise fees for the period covered by the Form 393 filing. While the Commission's Rules contemplate recovery of franchise fees as an external cost in addition to the maximum permitted rates calculated on Form 393, an operator is not entitled to recover costs not actually incurred. Accordingly, we removed the franchise fees from Part II, Worksheet 1, Line 108 and Part II, Worksheet II, Line 208 of Operator's Form 393. We also adjusted the $11.58 CPS rate reported in Part I to equal $11.73 as shown in Part II, Worksheet 1, Line 101, Column B, and the rate card. b. In Column D of Schedules A and C of Part III of its FCC Form 393, Operator incorrectly entered deferred tax balances associated with the plant categories listed in Column A. Entities that do not pay income taxes may not include an amount in this column. Operator is a limited partnership, and as such is not a tax-paying entity for the purpose of entering income tax expenses on Form 393. We therefore removed the deferred tax entries made by Operator in Column D of Schedules A and C and recalculated Form 393. c. In Column G of Schedules A and C of Part III of its FCC Form 393, Operator incorrectly accounted for income tax expense. By placing entries in these columns, Operator confirms that it is a tax-paying entity (i.e., a "C" corporation). However, Operator is a limited partnership and therefore not a tax-paying entity for the purpose of Form 393. Accordingly, we reduced the figures that appear in Column G of Schedules A and C to zero and recalculated Form 393. d. Operator did not follow Commission Rules or Instructions to Form 393 regarding the unbundling of equipment charges from programming and other charges. Operator did not record any costs on Part III, Schedule C for remote control devices even though the existence of such devices was admitted by Operator in response to an FCC information request. Operator further stated that the costs for the remote control devices were included with the costs for converters, which are recorded on Part III, Schedule C. Therefore, for the purpose of determining Operator's rates, the remote control devices are accounted for by virtue of their inclusion with converter costs even though they are not properly unbundled. e. Operator's Form 393, Part II, Worksheet 1, Line 104 entry does not represent Operator's current monthly equipment revenue as of the initial date of regulation. Instead, it appears that Operator used the monthly equipment and installation cost figure for the entire system, of which the franchise listed in the caption is a part. According to our instructions for equipment and installation charges for Form 393, Operator must use an equipment and installation figure that is based solely on franchise level data. We therefore adjust Operator's system figure that appears in Part III, Step G, Line 34 with the franchise figure for equipment and installation charges that Operator provided on Part II, Worksheet 3, Line 301 of its Form 393 filing. In addition, we adjust Form 393, Part II, Worksheet 1, Line 104 to agree with the adjusted Line 34 figure. f. Operator calculated the Inflation Adjustment Factor (Form 393, Part II, Worksheet 1, Line 127 and Form 393, Part II, Worksheet 4, Line 401) as of the end of March 1994. However, Operator's use of March 1994 as the date through which it calculated the inflation adjustment is impermissible. The instructions to FCC Form 393, page 11, require that the Inflation Adjustment Factor be calculated using the "number of whole months from September 30, 1992 to the date you will submit this form (emphasis added)." In general, a cable operator must submit a justification of its rates no more than 30 days after service of the earliest valid complaint. Operator was served with the rate complaint on February 23, 1994. Since Operator was required to file a rate justification no later than March 25, 1994, Operator should have used February 1994 as the base date for calculating the Inflation Adjustment Factor. We must therefore recalculate the Inflation Adjustment Factor on the basis of the most accurate data currently available for the correct base date. On July 29, 1994, the 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 126.5 for the fourth quarter of 1993. Using these GNP-PI figures, we calculate 1.039 as the Inflation Adjustment Factor through February 1994, the base date Operator should have 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 period in question. Operator's showing justifies a maximum reasonable CPS tier price of $11.35 per month (plus franchise fee) for the period from February 28, 1994 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 referenced herein against the cable programming service price charged by Operator in the franchise area referenced in the caption 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 the franchise area shown in the caption that portion of the amount paid for cable programming service for the period from February 28, 1994 to May 14, 1994 which exceeded the maximum price of $11.35 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 the franchise area referenced in the caption, 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 permitted price of $11.35 (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