DA 95-1918 Federal Communications Commission Record 10 FCC Red No. 19
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
Telerama, Inc. CUID No. OH0804
(Chagrin Falls)
Benchmark Filing to Support
Cable Programming Service Price
MEMORANDUM OPINION AND ORDER
Adopted: September 6, 1995; Released: September 12, 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. 1
2. Under the Cable Television Consumer Protection and
Competition Act of 1992,2 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.3 Un
der our rules, an operator may attempt to justify its prices
through either a benchmark showing or a cost-of-service
showing.4 In either case, the operator has the burden of
demonstrating that its CPS prices are not unreasonable.5
3. The Commission's original rate regulations took effect
on September I, 1993.6 The Commission subsequently re
vised 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.8 Operators attempting to jus
tify their prices for the period prior to May 15, 1994
through a benchmark showing must complete and file FCC
Form 393.9 Generally, to justify their prices for the period
beginning May 15, 1994 through a benchmark showing,
operators must use the FCC Form 1200 series. 10
4. The complaint in the franchise area which is the
subject of this Order was served on Operator and received
by the Commission on February 25, 1994. Operator filed
FCC Form 393 in response; Operator amended its justifica
tion on February 17, 1995, April 13, 1995, and May 26,
1995 in response to Commission letters which requested
further clarification of Operator's showing. 11
5. Operator restructured its rates on September 1, 1993
in an effort to comply with the Commission's rules. On
October 1, 1993, Operator changed its service offerings by
deleting HSN II from the CPS tier and adding WQHS to
the basic tier. On January 1, 1994, Operator again changed
its offerings by moving WTBS from the CPS tier to the
basic tier. Despite these changes in Operator's channel
line-up, Operator did not adjust its price for either its basic
tier or its CPS tier.
6. Operator calculated a maximum permitted rate for its
CPS tier of $13.69 per month (plus franchise fee). How
ever, Operator's actual monthly charge was $14.34 (plus
franchise fee). Thus Operator has failed to demonstrate that
its price for the CPS tier was not unreasonable. 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 ad
justments to Operator's calculations on Form 393:
a. In its Form 393 filings, Operator's calculations for
its rate-regulated package as of the initial date of
regulation (Form 393. Part II, Worksheet 1 and Form
393, Part I) do not count Channel 30 as a regulated
satellite channel. Similarly, Operator's calculations
for its rate-regulated tiers as of September 30, 1992
(Form 393, Part II, Worksheet 2) do not count Chan
nel 29 as a regulated satellite channel. However, ac
cording to the channel line-ups provided by
Operator, as of the initial date of regulation, Channel
30 carried both Bravo, a non-regulated pay-per-chan-
1 The findings in this Order do not in any way prejudge the
reasonableness of the price for CPS service after May 14, 1994
under our new rate regulations. However, to the extent Oper
ator has sought to take advantage of the refund deferral period
under the Second Order on Reconsideration, Fourth Report
and Order, and Fifth Notice of Proposed Rulemaking, MM
Docket No. 92-266, FCC 94-38, 9 FCC Red 4119 (1994) ("Second
Order on 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
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 cal
culate its price for the prospective period, was unreasonable. See
47 C.F.R. § 76.922(b)(4)(C).
2 Pub. L. No. 102-385, 106 Stat. 1460 (1992); Communications
Act, § 623(c), 05 amended, 47 U.S.C. § 543(c) (1993).
3 47 C.F.R. § 76.956.
4 47 C.F.R. § 76.956(b).
5 Id.
6 Order in MM Docket No. 92-266, Implementation of Sections
of the Cable Television Consumer Protection and Competition
Act of 1992: Rate Regulation, FCC 93-372, 58 Fed. Reg. 41042
(Aug. 2, 1993).
? 47 C.F.R. § 76.922(b).
8 See Second Order on Reconsideration, 9 FCC Red at 4190,
paras. 150-152.
* Id.
10 47 C.F.R. § 76.922(b)(6); see also Second Order on Reconsi
deration, 9 FCC Red at 4189 n.195.
" Letter from Peter G. Wolfe, FCC, to Chad G. Hume,
Cablevision (Feb. 13, 1995); letter from Peter G. Wolfe, FCC, to
Chad G. Hume, Cablevision (Mar. 7, 1995); letter from Peter G.
Wolfe, FCC, to Chad G. Hume, Cablevision (May 3, 1995).
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10 FCC Red No. 19 Federal Communications Commission Record DA 95-1918
nel service, for 76 hours per week and C-Span II, a
regulated satellite service, for 92 hours per week. The
same programming in the same proportion was car
ried on Channel 29 on September 30, 1992.
b. Our policy on "split" channels is to categorize
them according to their preponderance of use. This
policy is based on the fact that the 1992 price survey
underlying the benchmark system was analyzed based
on whole, not fractional, channel counts. Under the
benchmark system in effect prior to May 15, 1994, all
channels must be characterized as either rate-regu
lated or not subject to rate regulation and as either
satellite or non-satellite. A "channel" is defined as a
"unit of cable service identified and selected by a
channel number or similar designation." FCC Form
393, p. 10. The preponderance of use test is the only
method of classifying channels that is consistent with
this conceptual framework.12
c. Under the preponderance of use test, the channels
carrying both Bravo and C-Span II should have been
classified as regulated satellite channels because C-
Span II was shown the majority of the programming.
Operator therefore should have counted Channel 30
as a regulated satellite channel on the CPS tier (Form
393, Part II, Worksheet 1 and Part 1) and Channel 29
as a regulated satellite channel on the basic tier
(Form 393, Part II, Worksheet 2) u
d. Operator's calculations for its rate-regulated tiers
as of the initial date of regulation (Form 393, Part II,
Worksheet 1 and Form 393, Part I) count WTBS as a
regulated satellite channel on the CPS tier. However,
according to the channel line-ups submitted by Oper
ator, WTBS was moved from the CPS tier to the
basic tier before the filing of the first valid complaint
in this franchise area. The channels used in complet
ing Form 393 must be those channels offered on the
initial date of regulation for each franchise area. 14
Since the change in the placement of WTBS oc
curred before any complaints were filed pertaining to
this franchise area, that change must be reflected in
the channel counts.
e. In order to correct the channel-counting errors
discussed above, we increased the number of satellite
channels used in calculating the benchmark on Form
393, Part II, Worksheet 2, Line 220 from 21 to 22,
and we increased the number of regulated channels
from 31 to 32. We also increased the number of
channels on Form 393, Part II, Worksheet 2, Line
202A from 31 to 32. On Form 393, Part II,
Worksheet 1, we increased the number of regulated
channels and satellite channels used to calculate the
benchmark on Line 121 from 31 to 32 and from 21
to 22, respectively. We also increased the number of
channels on the basic tier on Line 102A from 10 to
11. These adjustments have the net effect of reducing
the benchmark channel rates entered on Line 121 of
Worksheet 1 and Line 220 of Worksheet 2 and de
creasing the base rates per channel on Part II,
Worksheet 1, Line 110 and Part II, Worksheet 2,
Line 210.
f. In its Form 393 filing, 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 adjust
ment is impermissible. Our rules require a cable
operator to respond to a complaint that is not re
turned by the Commission within 30 days after the
complaint is served. 15 Operator was, therefore, re
quired to file a justification of its CPS price no later
than March 28, 1994. If Operator had filed its jus
tification in a timely fashion, the instructions to
Form 393 would have required it to calculate the
inflation adjustment only through February 1994.
Operator cannot be permitted to claim an additional
inflation adjustment simply because it filed Form 393
late. We must therefore recalculate the Inflation Ad
justment Factor on the basis of the most accurate
data currently available for the date on which Oper
ator should have filed.16 On July 29, 1994, the De
partment 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 Infla
tion Adjustment Factor through February 1994, the
base date Operator should have used in justifying its
rate.
7. Upon review of the record herein, and having incor
porated 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 $13.55 per month
(plus franchise fee) for the period from February 25, 1994
to May 14, 1994. 17
8. 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 program
ming service price charged by Operator in the franchise
area referenced in the caption IS GRANTED TO THE
EXTENT INDICATED HEREIN.
9. 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 amount paid
for cable programming service for the period from Feb-
12 See Viacom Cable, Nashville. Tennessee. CUID No. TN0148,
DA 94-1151, at para. 6a-6c (Cab. Serv. Bur., released Nov. 9,
1994).
13 Operator offered only a single tier of programming on this
system on September 30, 1992. Channel 29 was part of this tier.
See Viacom Cable, Nashville, Tennessee, supra.
15 See 47 C.F.R § 76.956(a).
16 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).
17 This finding is based solely on the representations of Oper
ator 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
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DA 95-1918 Federal Communications Commission Record 10 FCC Red No. 19
ruary 25, 199418 to May 14, 1994 which exceeded the
maximum price of $13.55 per month (plus franchise fee),
plus interest to the date of the refund.
10. 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 deter
mined (including franchise fees and interest), describing
the calculation thereof, and describing its plan to imple
ment the refund within 60 days of Commission approval of
the plan.
11. 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 $13.55 (plus
franchise fee). 19
12. 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 re
flects the reduction in the CPS rate determined in this
Order.
FEDERAL COMMUNICATIONS COMMISSION
Meredith J. Jones
Chief, Cable Services Bureau
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.
18 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).
19 We reserve the right to make further adjustments to Oper
ator's price for the period after May 14, 1994, upon completion
of our review of Operator's Form 1200 filing.
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