WPCr 2MBER ZCourierw Roman c-#XR  P7jQ><q*"xxxxWWxxxWWkkxxx#-Reconsideration"), the maximum permitted CPS price determined herein might also apply from May 15, 1994 until the date on which Operator implemented its CPS price under the  Y%-new regulations. See para. 3, infra. Further, to the extent that the price as of March 31, 1994 is found to be excessive, a reduction in Operator's price for the period after May 14, 1994 may be required to reflect the fact that Operator's price during the earlier period, which is used as the starting point to calculate its price for the prospective period, was  Y(-unreasonable. See 47 C.F.R.  76.922(b)(4)(C)."6 0*0*0*"Ԍ X-ԙ  2. Under the Cable Television Consumer Protection and Competition Act of 1992,R Xy-#Xj\  P6G;XP#э Pub. L. No. 102385, 106 Stat. 1460 (1992); Communications Act,  623(c), as  Xd-amended, 47 U.S.C.  543(c) (1993). 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  X-obligation on behalf of the cable operator to file a justification of its CPS prices.gfR X-#Xj\  P6G;XP#э 47 C.F.R.  76.956.g Under our rules, an operator may attempt to justify its prices through either a benchmark showing or a  X-costofservice showing.jR XU -#Xj\  P6G;XP#э 47 C.F.R.  76.956(b).j In either case, the operator has the burden of demonstrating that its  Xv-CPS prices are not unreasonable.ZvR X -#Xj\  P6G;XP#э Id.Z  XH-3. The Commission's original rate regulations took effect on September 1, 1993.H{R Xt-#Xj\  P6G;XP#э Order in MM Docket No. 92266, Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, FCC 93372, 58 Fed. Reg. 41042 (Aug. 2, 1993).  X1-The Commission subsequently revised its rate regulations effective May 15, 1994.j1 R X-#Xj\  P6G;XP#э 47 C.F.R.  76.922(b).j 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  X -revised rules from May 15, 1994 forward. R X5-#Xj\  P6G;XP#э See Second Order on Reconsideration, 9 FCC Rcd at 4190, paras. 150152. Operators attempting to justify their prices for the period prior to May 15, 1994 through a benchmark showing must complete and file FCC  X -Form 393.Z bR X-#Xj\  P6G;XP#э Id.Z Generally, to justify their prices for the period beginning May 15, 1994 through a  X-benchmark showing, operators must use the FCC Form 1200 series. R XV!-#Xj\  P6G;XP#э 47 C.F.R.  76.922(b)(6); see also Second Order on Reconsideration, 9 FCC Rcd at 4189 n.195.  Xb- 4. The complaint in the franchise area which is the subject of this Order was completed and served on Operator on December 13, 1993 and received by the Commission on December 16, 1993. Operator filed FCC Form 393 in response on June 6, 1994. " 0*(("Ԍ X-  5. Operator admits that its monthly CPS tier price is not justified by its benchmark filing because its price is higher than the maximum permitted charge as calculated in its filing. Thus, Operator has failed to demonstrate that its price for the CPS tier was not unreasonable. Furthermore, upon review of Operator's submission, we have found that Operator miscalculated its maximum permitted price, and it is therefore appropriate to make the following adjustments to Operator's calculations in its Form 393: X` ` a. In Column G of Schedules A and C of Part III of its FCC Form 393, the Operator did not correctly account for its income tax expense. By placing entries in these columns, Operator confirms that it is a taxpaying entity (i.e., a "C" corporation). However, Operator incorrectly calculated its income tax by simply applying the corporate tax rate to its return on investment. The Commission has stated that taxpaying business entities must grossup their tax entries in ColumnG of Schedules A  X -and C (i.e., calculate the tax as a percentage of return on investment plus tax). e R XN-#Xj\  P6G;XP#э First Order on Reconsideration, Second Report and Order, and Third Notice of  X9-Proposed Rulemaking, MM Docket No. 92266, FCC 93428, 9FCC Rcd 1164, 1196 n.92  X$-(1993) ("Our provision to grossup the return amount for income taxes applies to all tax paying business entities to the extent that they have a state or federal income tax obligation").  V-See also Cable Television Rate Regulation Questions and Answers Relating To FCC Form  X-393, Question and Answer No.14 (released July 30, 1993) ("The federal tax expense should be calculated based upon a pretax return on investment"). By understating 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 recalculate Column G of Schedules A and C (and subsequent steps) using correctly grossedup tax entries.(# X` ` b. Operator calculated the Inflation Adjustment Factor (Line 127, Worksheet 1, Part II) as of the end of May 1994 using data released by the U.S. Department of Commerce on March 31, 1994. However, Operator's use of May 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  X-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  X-complaint.s R X;"-#Xj\  P6G;XP#э See 47 C.F.R.  76.956(a).s Operator was served with the rate complaint on December 13, 1993. Since Operator was required to file a rate justification no later than January 12, 1994, Operator should have used December 1993 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"9 0*(({"  X-date. R Xy-#Xj\  P6G;XP#э See 47 C.F.R.  76.922(b)(9)(iii) (if a cable operator fails to justify its rates, rates must be adjusted in accordance with the most accurate data available at the time of analysis). On July 29, 1994, the Department of Commerce released corrected inflation data including Gross National Product Price Index ("GNPPI") figures of 122.3 for the third quarter of 1992 and 126.5 for the fourth quarter of 1993. Using these GNPPI figures, we calculate 1.034 as the Inflation Adjustment Factor through December 1993, the base date Operator should have used in justifying its rate.(#  Xv-  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 $15.15 per month (plus franchise fee) for the period from December 16, 1993 to May  X -14, 1994. dR X/-#Xj\  P6G;XP#э This finding is based solely on the representations of Operator and the modifications described herein. Should information come to our attention that these representations were materially inaccurate, we reserve the right to take appropriate action. This Order is not to be construed as a finding that we have accepted as correct any specific entry, explanation or argument made by any party to this proceeding not specifically addressed herein. 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 referenced in the caption that portion of the amounts paid for cable programming service for  X4-the period from December 16, 19934R X-#Xj\  P6G;XP#э Our jurisdiction to order a refund dates from the earliest date a valid complaint is filed with the Commission. 47 C.F.R.  76.961(b). to May 14, 1994 which exceeded the maximum permitted price of $15.15 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.l "NS 0*(("Ԍ10. 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 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 permitted price of $15.15 (plus  X-franchise fee).R X-#Xj\  P6G;XP#э We reserve the right to make further adjustments to Operator's price for the period after May 14, 1994, upon completion of our review of Operator's Form 1200 filing. 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.  ` `  hh,FEDERAL COMMUNICATIONS COMMISSION ` `  hh,Meredith J. Jones ` `  hh,Chief, Cable Services Bureau