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File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** $//TKR Cable Company, NJ, NY, MO&O, DA 96-226//$ $/76.922 Rates for Cable Programming Service tiers/$ $/benchmark cable rates/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 96-226 In the Matter of ) ) TKR Cable Company ) CUID No. NY0449 (Clarkstown) ) ) CUID No. NJ0489 (Montvale) Benchmark Filing to Support ) Cable Programming Service Price ) MEMORANDUM OPINION AND ORDER Adopted: February 22, 1996 Released: March 20, 1996 By the Chief, Cable Services Bureau: 1. Here we consider complaints about the price that TKR Cable Company d/b/a TKR Cable Company of Rockland ("TKR") was charging for its cable programming service ("CPS") tier in the communities referenced above. TKR has chosen to attempt to justify its price through a benchmark showing on FCC Form 393. This Order addresses the reasonableness of TKR'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 complaint in each of the franchise areas which are the subject of this Order were completed and served on TKR and received by the Commission on the dates set forth on Appendix A. TKR filed FCC Form 393 in response. 5. In FCC Form 393, Part I, TKR indicates that its monthly CPS tier price of $11.41 (plus franchise fee) is justified by its benchmark filing because its price is lower than the maximum permitted charge of $11.52 per month (plus franchise fee), as calculated in the filing. 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 TKR's calculations in Form 393: a. TKR's calculations for its rate-regulated package as of the initial date of regulation (Form 393, Part II, Worksheet 1) listed TKR's basic tier rate as $9.94 and its CPS tier rate as $13.81. TKR's rate card as of the initial date of regulation indicates that TKR's actual monthly rate for the basic tier was $11.42 and its actual CPS tier rate was $11.41. These rates are consistent with those shown on the cable bills submitted by the complainants. Accordingly, we change the basic tier rate entered on Form 393, Part I, Worksheet 1, Line 101A from $9.94 to $11.42 and the CPS tier rate entered on Form 393, Part I, Worksheet 1, Line 101B from $13.81 to $11.41. b. TKR's calculations for its rate-regulated package as of the initial date of regulation (Form 393, Part II, Worksheet 1, Line 102 and Form 393, Part I) listed TKR's basic tier channel count as 18 channels and its CPS tier channel count as 26 channels. TKR's channel line-up as of the initial date of regulation indicates 22 channels on the basic tier and 22 channels on the CPS tier; however, channels 50 and 62 on the CPS tier carry identical programming shown at the same time. Because subscribers receive only one programming service over these two CPS tier channels, TKR cannot charge subscribers for these channels as separate units of cable service. We therefore reduce the number of CPS tier channels from 22 to 21 as shown on TKR's channel line-up as of the initial date of regulation. Accordingly, on Form 393, Part II, Worksheet 1, Line 102 and on Form 393, Part I, we record 22 rate-regulated channels on the basic tier and 21 rate-regulated channels on the CPS tier. We also decrease the total number of rate-regulated channels used in calculating TKR's benchmark (Form 393, Part II, Worksheet 1, Line 121) from 44 to 43, and we decrease the number of satellite channels used in calculating the benchmark from 26 to 24. c. Since TKR restructured its rates, including its equipment rates, on September 1, 1993, the current monthly equipment revenue figure it entered on FCC Form 393, Part II, Worksheet 1, Line 104 should have been close or identical to its equipment cost figure on FCC Form 393, Part III, Step G, Line 34. Accordingly, on Line 104 we enter the identical figure listed on Line 34 of Step G of Part III. d. On Form 393, Part III, Schedule C, TKR depreciated its remote 1 and converter box 1 over a useful life of 21.6 years. TKR did not adequately explain why the useful lives of its remote 1 and converter box 1 exceed the industry average of approximately 10 years. By depreciating its equipment over an excessively long useful life, an operator understates its annual depreciation expenses and thereby can increase its CPS price. We therefore recalculate TKR's annual depreciation expenses on remote 1 and converter box 1 (and subsequent steps) using a 10 year useful life. This adjustment increases TKR's annual depreciation expense for remote 1 from $8,449 to $18,257 and for converter box 1 from $247,578 to $534,971. e. TKR calculated the Inflation Adjustment Factor on Form 393, Part II, Worksheet 1 as of the end of October 1993 using data released by the U.S. Department of Commerce on August 31, 1993. However, TKR incorrectly entered on Line 125 that 9 months, rather than 12 months, had passed between the end of the third quarter of 1992 and the third quarter of 1993. TKR's calculation of the Inflation Adjustment Factor is thus incorrect. f. We must therefore recalculate the Inflation Adjustment Factor in Form 393, Part II, Worksheet 1, on the basis of the most accurate data currently available for the date for which TKR filed. On July 29, 1994, the U.S. 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 125.7 for the third quarter of 1993. Using GNP-PI figures, we calculate 1.030 as the Inflation Adjustment Factor through October 1993, the base date TKR used in justifying its rates. 6. Upon review of the record herein, and having incorporated the adjustments discussed above, we conclude that TKR has failed to justify the rate it was charging during the period in question. TKR's showing justifies a maximum reasonable CPS tier price of $10.99 per month (plus franchise fee) for the period from December 7, 1993 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 complaints referred to in Appendix A against the cable programming service price charged by TKR in the franchise areas referenced in the caption, and all other complaints in this franchise area related to the same price, ARE 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 TKR shall refund to subscribers in the franchise areas referenced in the caption that portion of the amount 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 of $10.99 per month (plus franchise fee), plus interest to the date of the refund. 9. IT IS FURTHER ORDERED that TKR 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 TKR shall, within 30 days of the release of this Order, revise its Form 1200 filing with respect to the franchise areas 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 $10.99 (plus franchise fee). 11. IT IS FURTHER ORDERED that TKR 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 Appendix A CUID No. Date First Complaint Date Complaint Served Filed with FCC NY0449 12/07/93 12/29/93 NJ0489 02/28/94 02/25/94