DA 96-226

Federal Communications Commission Record

11 FCC Red No.7

Before theFederal Communications Commission

Washington, D.C. 20554

In the Matter of

TKR Cable Company CUID No. NY0449 (Clarkstown)

CUID No. NJ0489 (Montvale)

Benchmark Filing to SupportCable 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 TKRCable Company d/b/a TKR Cable Company of Rockland("TKR") was charging for its cable programming service("CPS") tier in the communities referenced above. TKRhas chosen to attempt to justify its price through a bench-mark showing on FCC Form 393. This Order addresses thereasonableness of TKR's price only through May 14, 1994.At a later date we will issue a separate order addressing thereasonableness of the price after that date.'

2. Under the Cable Television Consumer ProtectionandCompetition Act of 1992,2 and our rules implementingit, 47 C.F.R. Part 76, Subpart N, the Commission mustreview CPS prices upon the filing of a valid complaint.The filing of a valid complaint triggers an obligation onbehalf of the cable operator to file a justification of its CPSprices.3 Under our rules, an operator may attempt to justifyits prices through either a benchmark showing or a cost-of-service showing.4 In either case, the operator has theburden of demonstrating that its CPS prices are not un-reasonable.5

3. The Commission's original rate regulations took effecton September 1, 1993.6 The Commission subsequently re-vised its rate regulations effective May 15. 1994. Operatorswith valid CPS complaints filed against them prior to May15, 1994 roust demonstrate that their CPS prices were in

The Findings in this Order do not in any way prejudge thereasonableness of the price for CPS service after May 14, 1994under our new rate regulations. However, to the extent Oper-ator has sought to take advantage of the refund deferral periodunder the Second Order on Reconsideration. Fourth Reportand Order, and Fifth Notice of Proposed Rulemaking, MMDocket No. 92-266, FCC 94-38, 9 FCC Rcd 4119 (1994) ("SecondOrder on Reconsideration",), the maximum permitted CPS pricedetermined herein might also apply from May 15, 1994 until thedate on which Operator implemented its CPS price under thenew regulations. See para. 3, infra. Further, to the extent thatthe price as of March 31, 1994 is found to be excessive, areduction in Operator's price for the period after May 14, 1994may be required to reflect the fact that Operator's price duringthe earlier period, which is used as the starting point to cal-culate its price for the prospective period, was unreasonable. See

compliance with the Commission's initial rules from thetime the complaint was filed through May 14, 1994, andthat their prices were in compliance with the revised rulesfrom May 15, 1994 forward.8 Operators attempting to jus-tify their prices for the period prior to May 15, 1994through a benchmark showing must complete and file FCCForm 3939 Generally, to justify their prices for the periodbeginning May 15, 1994 through a benchmark showing,operators must use the FCC Form 1200 series.'0

4. The first valid CPS complaint in each of the franchiseareas which are the subject of this Order were completedand served on TKR and received by the Commission onthe dates set forth on Appendix A. TKR filed FCC Form393 in response.

5. In FCC Form 393, Part I, TKR indicates that itsmonthly CPS tier price of $11.41 (plus franchise fee) isjustified by its benchmark filing because its price is lowerthan the maximum permitted charge of $11.52 per month(plus franchise fee), as calculated in the filing. Upon re-view of Operator's Form 393 filing, we have found that ithas not correctly calculated its maximum permitted price,and it is therefore appropriate to make the following ad-justments to TKR's calculations in Form 393:

a. TKR's calculations for its rate-regulated package asof the initial date of regulation (Form 393, Part II,Worksheet 1) listed TKR's basic tier rate as $9.94 andits CPS tier rate as $13.81. TKR's rate card as of theinitial date of regulation indicates that TKR's actualmonthly rate for the basic tier was $11.42 and itsactual CPS tier rate was $11.41. These rates are con-sistent with those shown on the cable bills submittedby the complainants. Accordingly, we change thebasic tier rate entered on Form 393, Part I,Worksheet 1, Line lOlA from $9.94 to $11.42 andthe CPS tier rate entered on Form 393, Part I,Worksheet 1, Line 1O1B from $13.81 to $11.41.

b. TKR's calculations for its rate-regulated package asof the initial date of regulation (Form 393. Part II.Worksheet 1. Line 102 and Form 393. Part I) listedTKR's basic tier channel count as 18 channels and itsCPS tier channel count as 26 channels. TKR's chan-nel line-up as of the initial date of regulation in-dicates 22 channels on the basic tier and 22 channelson the CPS tier: however, channels 50 and 62 on theCPS tier carry identical programming shown at thesame time. Because subscribers receive only one pro-

47 C.F.R. § '76.922(b)(4)(C).2 Pub. L. No. 102-385, 106 Stat. 1460 (1992): CommunicationsAct, § 623(c), as amended, 47 U.S.C. § 543(c) (1993).

47 C.F.R. § 76.956.47 C.F.R. § 76.956(b).Id.

6 Order in MM Docket No. 92-266, Implementation of Sectionsof the Cable Television Consumer Protection and CompetitionAct of 1992: Rate Regulation, FCC 93-372, 58 Fed. Reg. 41042çAug. 2, 1993).

47 C.F.R. § 76.922(b).s See Second Order on Reconsideration, 9 FCC Rcd at 4 19(1,paras. 150-152." Id.'° 47 C.F.R. § 76.922(b)(6); see also Second Order on Reconsi-deration, 9 FCC Rcd at 4189 n.195.

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Federal Communications Commission Record DA 96-226

gramming service over these two CPS tier channels,TKR cannot charge subscribers for these channels asseparate units of cable service." We therefore reducethe number of CPS tier channels from 22 to 21 asshown on TKR's channel line-up as of the initial dateof regulation. Accordingly, on Form 393, Part II,Worksheet 1, Line 102 and on Form 393, Part I, werecord 22 rate-regulated channels on the basic tierand 21 rate-regulated channels on the CPS tier. Wealso decrease the total number of rate-regulated chan-nels used in calculating TKR's benchmark (Form393, Part II, Worksheet 1, Line 121) from 44 to 43,and we decrease the number of satellite channelsused in calculating the benchmark from 26 to 24.

c. Since TKR restructured its rates, including itsequipment rates, on September 1, 1993, the currentmonthly equipment revenue figure it entered onFCC Form 393, Part II, Worksheet 1, Line 104should have been close or identical to its equipmentcost figure on FCC Form 393, Part III, Step 0, Line3412 Accordingly, on Line 104 we enter the identicalfigure listed on Line 34 of Step G of Part III.

d. On Form 393, Part III, Schedule C, TKR depre-ciated its remote 1 and converter box 1 over a usefullife of 21.6 years. TKR did not adequately explainwhy the useful lives of its remote I and converterbox 1 exceed the industry average of approximately10 years. By depreciating its equipment over an ex-cessively long useful life, an operator understates itsannual depreciation expenses and thereby can in-crease its CPS price. We therefore recalculate TKR'sannual depreciation expenses on remote I and con-verter box 1 (and subsequent steps) using a 10 yearuseful life.'3 This adjustment increases TKR's annualdepreciation expense for remote I from $8,449 to$18,257 and for converter box 1 from $247,578 to$534,971.

e. TKR calculated the Inflation Adjustment Factor onForm 393, Part II. Worksheet I as of the end ofOctober 1993 using data released by the U.S. Depart-ment of Commerce on August 31. 1993. However,TKR incorrectly entered on Line 125 that 9 months,rather than 12 months, had passed between the endof the third quarter of 1992 and the third quarter of1993. TKR's calculation of the Inflation AdjustmentFactor isthus incorrect.

f. We must therefore recalculate the Inflation Adjust-ment Factor in Form 393, Part II. Worksheet 1. onthe basis of the most accurate data currently availablefor the date for which TKR filed.'4 On July 29, 1994,the U.S. Department of Commerce released corrected

We note that in all likelihood TKP. receives this service overone signal. It is a relatively simple and inexpensive matter for acable operator such as TKR to show a single signal to subscrib-ers over multiple channels.12 See Questions and Answers on Completion of FCC Form393 and Associated Filing Requirements, Question and AnswerNo. 7 (released Nov. 10, 1993) ("Where operators haverestructured equipment rates as of September I, 1993 in accor-dance with our regulations... operators will enter on Line 104the same, or nearly the same number as on Line 301.").'' Cf. United Video Cablevision Inc., CUID Nos. MA0333 andMA0334, DA 94-1144, para. lOb (Cab. Serv. Bur., released Nov.9, 1994).

inflation data including Gross National Product PriceIndex ("GNP-Pl") figures of 122.3 for the third quar-ter of 1992 and 125.7 for the third quarter of 1993.Using GNP-PI figures, we calculate 1.030 as the Infla-tion Adjustment Factor through October 1993, thebase date TKR used in justifying its rates.

' See 47 C.F.R. § 76.922(b)(9)(iii) (if a cable operator fails tojustify its rates, rates must be adjusted in accordance with themost accurate data available at the time of analysis).

This finding is based solely on the representations of Oper-ator and the modifications described herein. Should informationcome to our attention that these representations were materiallyinaccurate, we reserve the right to take appropriate action. ThisOrder is not to be construed as a finding that we have acceptedas correct any specific entry, explanation or argument made byany party to this proceeding not specifically addressed herein.

Our jurisdiction to order a refund dates from the earliestdate a valid complaint is filed with the Commission. 47 C.F.R. §76.961(b).

6. Upon review of the record herein, and having incor-porated the adjustments discussed above, we conclude thatTKR has failed to justify the rate it was charging during theperiod in question. TKR's showing justifies a maximumreasonable CPS tier price of $10.99 per month (plus fran-chise fee) for the period from December 7, 1993 to May14, 1994.'

7. Accordingly, IT IS ORDERED, pursuant to Section0.321 of the Commission's Rules, 47 C.F.R. § 0.321, thatthe complaints referred to in Appendix A against the cableprogramming service price charged by TKR in the fran-chise areas referenced in the caption, and all other com-plaints in this franchise area related to the same price,ARE GRANTED TO THE EXTENT INDICATED HERE-IN.

8. IT IS FURTHER ORDERED, pursuant to Section76.961 of the Commission's Rules, 47 C.F.R. § 76.961, thatTKR shall refund to subscribers in the franchise areasreferenced in the caption that portion of the amount paidfor cable programming service for the period from thefiling of the first valid comlaint in each franchise area (asset forth on Appendix A) to May 14, 1994 which ex-ceeded the maximum price of $10.99 per month (plusfranchise fee), plus interest to the date of the refund.

9. IT IS FURTHER ORDERED that TKR shallpromptly determine the overcharges to CPS subscribers forthe stated period, and shall within 30 days of the release ofthis Order file a report with the Chief, Cable ServicesBureau, stating the cumulative refund amount so deter-mined (including franchise fees and interest), describingthe calculation thereof, and describing its plan to imple-ment the refund within 60 days of Commission approval ofthe plan.

10. IT IS FURTHER ORDERED, pursuant to Section76.922(b)(4)(C) of the Commission's Rules, 47 C.F.R. §76.922(b)(4)(C), that TKR shall, within 30 da,is of therelease of this Order, revise its Form 1200 filing withrespect to the franchise areas referenced in the caption, forthe period beginning May 15, 1994, to reduce the monthly

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11 FCC Red No.7

charge per tier as of March 31, 1994 for Tier 2 (Line A6b)to equal the maximum permitted price of $10.99 (plusfranchise fee).17

11. IT IS FURTHER ORDERED that TKR shall placeinto effect, within 30 days after its submission of the re-vised Form 1200 filing required above, a price that reflectsthe reduction in the CPS rate determined in this Order.

FEDERAL COMMUNICATIONS COMMISSION

Meredith J. JonesChief, Cable Services Bureau

Appendix A

CUID No.

Date First Complaint

Date Complaint ServedFiled with FCC

NY0449

12/07/93

12/29/93NJ0489

02/28/94

02/25/94

17 We reserve the right to make further adjustments to Oper-ator's price for the period after May 14, 1994, upon completionof our review of Operator's Form 1200 filing.

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