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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ************************************************************************* Before the Federal Communications Commission Washington, D.C. 20554 In re: ) ) DJS PRODUCTIONS, ) ) Petitioner,) ) v. ) ) CSR-4577-L MULTIMEDIA CABLEVISION, INC., ) ) Respondent,) ) Petition for Special Relief ) For Commercial Leased Access ) MEMORANDUM OPINION AND ORDER Adopted: August 5, 1996 Released: August 15, 1996 By the Chief, Cable Services Bureau: INTRODUCTION 1. DJS Productions ("DJS") has filed the captioned petition for relief alleging that Multimedia Cablevision, Inc. ("Cablevision") has violated Commission rules which prescribe the method by which the maximum commercial leased access rates that a cable operator may charge an unaffiliated programmer are calculated. Cablevision filed a response. BACKGROUND 2. The statutory framework for commercial leased access was established by the 1984 Cable Act and subsequently amended by the 1992 Cable Act. The Congressional purpose initially underlying the provision of commercial leased access to assure that unaffiliated cable programmers could gain access to the channel capacity of cable systems free from the editorial control of the cable operator. The 1992 Cable Act both broadened the initial statutory purpose to include the "promotion of competition in the delivery of diverse sources of video programming" and provided the Commission with expanded authority to establish: (1) maximum commercial leased access rates; (2) reasonable terms and conditions for leased access; and (3) procedures for expedited complaint resolution. In order to implement Congress' grant of expanded authority, the Commission promulgated regulations applicable to leased access channels in its proceedings in Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992; Rate Regulation, MM Docket 92-266 (the "Rate Order"). Recently, the Commission clarified certain issues with respect to the commercial leased access regulations in its Order on Reconsideration, MM Docket 92-266 (the "Recon. Order). 3. In the Rate Order, the Commission adopted the "highest implicit fee" formula as the method by which maximum commercial leased access rates would be calculated and also adopted standards governing both leased access terms and conditions and dispute resolution. In the Recon. Order, the Commission clarified certain issues with respect to the application of the highest implicit fee methodology. Specifically, the Commission determined that, in calculating the implicit fee; program license fees (if any) should be deducted from the average subscriber revenue; the implicit fee for each must-carry broadcast signal channel and public, educational, and governmental ("PEG") access channel should not be considered for purposes of calculating the highest implicit fee; the highest implicit fee should be calculated on a tier-by-tier basis; any programming revenues received by the operator from an unaffiliated programmer, such as those associated with direct sales or home shopping, should not be included in the calculation of the highest implicit fee; and, for leased access programming on either the basic service tier ("BST") ar the cable programming services tier ("CPST"), the highest per-subscriber implicit fee should be multiplied by the number of current subscribers who actually subscribe to the tier on which the leased access channel will be placed and, for leased access programming on a per-channel or per-event basis, the highest per-subscriber implicit fee should be multiplied by the average number of subscribers that subscribe to the cable operator's premium services. 4. Section 76.970(b) of the Commission's regulations states that the maximum commercial leased access rate that may be charged by a cable operator is the "highest implicit net fee charged any nonaffiliated programmer (excluding leased access programmers) within the same category." Section 76.970(c) provides that the implicit net fee is calculated by determining the price-per-channel each subscriber pays the operator minus the amount-per- subscriber the operator, in turn, pays the programmer. The resulting difference is then multiplied by the number of subscribers able to receive the unaffiliated programmer's service. The Commission has determined that the implicit fee for leased access may not include fees, stated or implied, for services other than the provision of channel capacity. Maximum commercial leased access rates for lease periods shorter that one month can be calculated by prorating the monthly maximum rate. SUMMARY OF PLEADINGS 5. DJS, in its petition, states that it sought to enter into an agreement with Cablevision to lease a 24-hour channel on Cablevision's cable system serving Batavia, Illinois. DJS asserts that Cablevision's Batavia system offers a BST consisting of 44 channels and that, as of July 24, 1995, the cable system had 5,922 subscribers. DJS further asserts that Cablevision's monthly BST rate is $20.99. Based upon that information, DJS calculated an implicit fee of $0.477 per channel and a maximum commercial lease rate of $33,898. DJS complains that Cablevision sought to impose a higher lease rate of $44,061.50, including a $261.50 "set-up" fee, in violation of the maximum commercial leased rate methodology prescribed by the Commission. 6. Cablevision responds that it reviewed the contract with DJS for the lease of a 24- hour channel on its Batavia system and concluded that the rate quoted therein was indeed inaccurate. However Cablevision concluded that the inaccuracy was in DJS' favor. Cablevision recalculated the leased access rate and determined that the original rate quote of $44,061.50 was "too low" and that the correct leased access rate it should have charged DJS was $48,820.92. Cablevision attributed the difference in the leased access rates to an error in calculating the "average home shopping per subscriber compensation." Cablevision states that, initially, it included an average home shopping subscriber compensation of $0.14 when, in actuality, that compensation should have been $0.21. In addition to correcting its average subscriber compensation, Cablevision states that it updated data regarding the number of BST channels and the number of subscribers to reflect 45 channels and 5,960 subscribers, respectively. Cablevision then made the following calculations to determine the maximum commercial leased access rate applicable to DJS: $20.99 (BST rate) ö 45 (BST channels) = $0.466 $0.466 + $0.21 (average home shopping subscriber compensation) = $0.676 $0.676 5,960 (subscribers) = $4,028.96 (monthly lease rate) $4,028.96 12 months = $48,347.52 (annual rate) DISCUSSION 7. The central question to be resolved in this proceeding is whether Cablevision erred when it included revenue derived from the sale of products on home shopping channels in calculating the leased channel "implicit fee" rate. This issue has been addressed and resolved by the Commission, as noted above, in its Recon. Order. In the Recon. Order, the Commission determined that "revenues received by the operator from an unaffiliated programmer, as opposed to programming costs paid by the operator to the unaffiliated programmer, should not be included in the highest implicit fee calculation." Cablevision, in its response, makes it clear that it included such revenues, what it terms "average home shopping per subscriber compensation," in its calculation of the maximum leased access rate applicable to DJS. In light of the foregoing discussion, we find that Cablevision's inclusion of programming revenues is in contravention of the correct application of the highest implicit fee formula. 8. To determine the permissible leased access rate, the per-subscriber implicit fee in this instance should be multiplied by the actual number of subscribers on the tier on which the leased access programming is to be placed. In the instant case, the pleadings do not make clear whether DJS' programming is to be placed on Cablevision's BST or CPST. Moreover, because DJS states that there are 5,922 subscribers in Cablevision's Batavia "system," it is unclear whether the number of subscribers used in calculating the maximum commercial leased access rate includes only subscribers to a single tier of service or represents the total number of subscribers in Cablevision's system serving Batavia. For these reasons, we cannot determine the correct maximum commercial leased access rate applicable to DJS. However, we expect Cablevision to take the distinctions herein noted into consideration when it calculates a new maximum commercial leased access rate. ORDERING CLAUSE 9. Accordingly, IT IS ORDERED that Multimedia Cablevision, Inc. shall, to the extent its current practices in calculating maximum commercial leased access rates are not in compliance with our rulings herein, within 20 days from the effective date of this Order, establish a commercial leased access rate applicable to DJS, in accordance with Section 76.970 of Commission rules, as amended. 10. This action is taken pursuant to authority delegated by Section 0.321 of the Commission's rules, 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau