FOR FCC RECORD ONLY $//Viacom Cable, Sonoma, CA, MO&O, DA 95-273//$ $/76.922 Rates for cable programming service tiers/$ $/benchmark cable rates/$ Before the Federal Communications Commission Washington, D.C. DA 95-273 In the Matter of ) ) CUID Nos. CA0110, CA0111, CA0112, Viacom Cable ) CA1513 Sonoma, California, System ) ) Benchmark Filings to Support ) Cable Programming Service Prices ) Memorandum Opinion and Order Adopted: February 17, 1995 Released: February 21, 1995 By the Chief, Cable Services Bureau: Introduction 1. Here we consider complaints about the prices Viacom Cable ("Viacom") was charging for its cable programming service ("CPS") tier in the communities designated by the CUID numbers referenced above which are served by Viacom's Sonoma, California System. Viacom has chosen to attempt to justify its prices through benchmark showings on FCC Form 393. This Order addresses the reasonableness of Viacom's prices only through May 14, 1994. At a later date we will issue a separate order addressing the reasonableness of the prices 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. Procedural Matters 4. The first valid CPS complaints in the franchise areas which are the subject of this Order were completed and served on Viacom and received by the Commission on the dates set forth on Appendix A. 5. Viacom filed its first FCC Form 393 filings for the franchise areas which are the subject of this Order on December 13, 1993. Viacom filed amended FCC Form 393 filings for Windsor, California, CUID No. CA1513, on February 22, 1994, to reflect the assignment of CUID No. CA1513 to Windsor; and on April 18, 1994, to respond to a Notice from the Town of Windsor. Viacom filed amended FCC Form 393 filings on June 27, 1994, for Cloverdale, California, CUID No. CA0110, and Sonoma County, California-H-C-G Cablevision Inc., CUID No. CA0112; on June 28, 1994, for Windsor, California, CUID No. CA1513; on June 27, 1994 and September 6, 1994, for Healdsburg, California, CUID No. CA0111, in response to a Cable Services Bureau Order citing common deficiencies observed in benchmark filings generally; and on February 8, 1995 for all areas in response to a Cable Services Bureau Public Notice offering operators the opportunity to make optional supplemental filings. Discussion 6. Viacom asserts that its monthly CPS tier prices are justified by its benchmark filings because its prices are lower than the maximum permitted charges as calculated in the filings. However, upon review we have determined that Viacom has not correctly calculated its maximum permitted prices, and it is therefore appropriate to make the following adjustment to Viacom's calculations in its Form 393 filings prior to February 8, 1995: a. In its amended filings, Viacom states that it calculated the Inflation Adjustment Factor (Form 393, Part II, Worksheet 1, Line 127, and Form 393, Part II, Worksheet 4, Line 401) using data it relied on when it set its CPS prices. If Viacom had done so correctly (i.e., if it had completed Form 393 with accurate data, including the most recent inflation data available as of the time it set its prices), and if based on this data Form 393 indicated that its prices were reasonable, then Viacom would have successfully justified its prices under paragraph 94 of the Third Order on Reconsideration. However, the figures Viacom used are not consistent with data on which it should have relied in setting its CPS prices. Specifically, Viacom used data released by the U.S. Department of Commerce on August 31, 1993, to complete Lines 122 and 125, but used earlier data to calculate the Inflation Factor on Line 123. Furthermore, Viacom claimed Adjustment Time Periods extending through November 1993, March 1994 and August 1994 (Line 124), which are inconsistent with an attempt to justify rates based on August 1993 data. Viacom's calculation of the Inflation Adjustment Factors are thus incorrect. b. We must therefore recalculate the Inflation Adjustment Factor on the basis of the most accurate data currently available for the date on which Viacom initially filed. On its amended Form 393 filings for CUID Nos. CA0110 and CA0112, Viacom entered 14 months on line 124, indicating that these filings were as of the end of November 1993. On its Form 393 filings for CUID Nos. CA0111 and CA1513, Viacom entered 18 months and 23 months, respectively, indicating that these filings were as of the end of March 1994 and August 1994. However, Viacom's use of the 18 months and the 23 months entries is impermissible. Viacom was required to file a justification of its CPS prices for all of these CUIDs no later than December 13, 1994. Since Viacom filed its initial FCC Form 393s by that date, the instructions to Form 393 required it to calculate the inflation adjustments only through November 1993. Viacom cannot be permitted to claim an additional inflation adjustment simply because it filed amended Form 393s at later dates. On July 29, 1994, the 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 these GNP-PI figures, we calculate an Inflation Adjustment Factor through November 1993, the base date Viacom should have used in justifying its rates, of 1.032. This adjustment is consistent with the Inflation Adjustment Factor that Viacom used in its optional filing of February 8, 1995. c. In its February 8, 1995 optional filing, Viacom reduced the number of satellite channels as of the initial date of regulation that it used to calculate the benchmark on Form 393, Part II, Worksheet 1, Line 121 from 22 to 21 and also reduced the number of satellite channels as of September 30, 1992 that Viacom used to calculate the benchmark on Form 393, Part II, Worksheet 2, Line 220 from 21 to 20. We rely on these revisions to recompute Viacom's maximum permitted rate. 7. Because of these errors, we conclude that Viacom has failed to demonstrate that its prices for the CPS tier were not unreasonable. We will therefore set prices for this tier, incorporating the adjustments discussed above. These adjustments have the effect of reducing the maximum permitted monthly CPS tier price for each franchise area to the levels set forth in Appendix B. Conclusions 8. Upon review of the record herein, we conclude that Viacom's showing supports the maximum reasonable CPS tier price for each franchise area set forth in Appendix A (plus franchise fee) for the period from the filing of the earliest complaint in each franchise area (as set forth in Appendix A) to May 14, 1994. With respect to Healdsburg, California, CUID No. CA0111, we determine that the refund at issue is such a de minimis amount that it would not serve the public interest to order a refund. With respect to the other franchise areas addressed herein, we will order appropriate refunds pursuant to Section 76.957 of the Commission's Rules, 47 C.F.R.  76.957, in order to reimburse subscribers for the amount they paid in excess of a reasonable price. 9. We further conclude that Viacom must reflect in its FCC Form 1200 rate filings for the period after May 14, 1994 the fact that Viacom's prices during the earlier period were unreasonable. We reserve the right to make further adjustments to Viacom's prices for the period after May 14, 1994, upon completion of our review of Viacom's FCC Form 1200 rate filings. 10. We further conclude that Viacom has submitted in good faith an optional supplemental filing in response to our December 29, 1994 Public Notice. As provided in the Public Notice, we will relieve Viacom of its obligation to obtain advance Commission approval of adjustments to its CPS prices for one year following the release of this Order. 11. 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 prices charged by Viacom Cable in Cloverdale, California, CUID No. CA0110; Healdsburg, California, CUID No. CA0111; Sonoma County, California-H-C-G Cablevision Inc., CUID No. CA0112; and Windsor, California, CUID No. CA1513, and all other complaints in these franchise areas related to the same prices, ARE GRANTED TO THE EXTENT INDICATED HEREIN. 12. IT IS FURTHER ORDERED that the benchmark filings submitted by Viacom Cable with respect to Cloverdale, California, CUID No. CA0110; Healdsburg, California, CUID No. CA0111; Sonoma County, California-H-C-G Cablevision Inc., CUID No. CA0112; and Windsor, California, CUID No. CA1513, for the period beginning with the filing of the first valid complaint in each franchise area and ending on May 14, 1994, as set forth on Appendix A, justify the maximum price in each franchise area set forth in Appendix B (plus franchise fee) for Viacom Cable's cable programming service tier. 13. IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's Rules, 47 C.F.R.  76.961, that Viacom Cable shall refund to subscribers in Cloverdale, California, CUID No. CA0110; Sonoma County, California-H-C-G Cablevision Inc., CUID No. CA0112; and Windsor, California, CUID No. CA1513 that portion of the amounts 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 for each franchise area set forth in Appendix B (plus franchise fee) per month and was thus unreasonable, plus interest to the date of the refund. 14. IT IS FURTHER ORDERED that Viacom Cable shall promptly determine the overcharges to CPS subscribers for the stated periods, 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 thereof. 15. 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 Viacom Cable shall, within 30 days of the release of this Order, revise its Form 1200 filings with respect to Cloverdale, California, CUID No. CA0110; Healdsburg, California, CUID No. CA0111; Sonoma County, California-H-C-G Cablevision Inc., CUID No. CA0112; and Windsor, California, CUID No. CA1513, 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 price in each franchise area set forth in Appendix B (plus franchise fee). 16. IT IS FURTHER ORDERED that Viacom Cable shall place into effect, within 30 days after its submission of the revised Form 1200 filings required above, prices that reflect the reductions in the CPS rates determined in this Order. 17. IT IS FURTHER ORDERED, pursuant to Section 76.960 of the Commission's rules, 47 C.F.R.  76.960, that Viacom Cable shall not be required to obtain advance Commission approval of adjustments to its CPS prices for one year following the release of this Order. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau Appendix A CUID No. Date First Complaint Date Complaint Filed with FCC Served 0110 11/15/93 11/13/93 0111 11/15/93 11/13/93 0112 11/15/93 11/13/93 1513 11/16/93 11/11/93 Appendix B CUID No. Actual Rates Maximum Reasonable Rates 0110 $11.02 $10.85 0111 $11.08 $11.05 0112 $11.14 $10.91 1513 $11.14 $10.89