FOR FCC RECORD ONLY $//Harron Communications Corp., Rockland, MA, MO&O, DA 95-558//$ $/76.922 Rates for Cable Programming Service tiers/$ $/benchmark cable rates/$ Before the Federal Communications Commission Washington, D.C. DA 95-558 In the Matter of ) ) Harron Communications Corp. ) CUID No. MA0224 Town of Rockland, Massachusetts ) ) Benchmark Filing To Support ) Cable Programming Service Price ) Memorandum Opinion and Order Adopted: March 20, 1995 Released: March 22, 1995 By the Deputy Chief, Cable Services Bureau: Introduction 1. Here we consider a complaint about the price Harron Communications Corp. ("Operator") was charging for its cable programming service ("CPS") tier in Rockland, Massachusetts, CUID No. MA0224. Operator has attempted 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 time 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. Procedural Matters 4. The first valid CPS complaint was completed and served on Operator on February 25, 1994. The Commission received the complaint on February 28, 1994. 5. Operator filed an FCC Form 393 in response to the rate complaint; Operator also filed an amended Form 393 on February 7, 1995. Discussion 6. In its amended benchmark filing of February 7, 1995, Operator calculated a maximum permitted price for the CPS tier of $10.10 per month. However, Operator's actual price for the CPS tier was $10.12 per month. Thus, Operator has failed to demonstrate that its price for the CPS tier was not unreasonable. Furthermore, upon review of Operator's FCC Form 393, as amended, we have found the following error that impacts the maximum permitted price: a. In Column G of Schedules A and C of Part III of its FCC Form 393, Operator did not report any income tax expense. Operator is a Subchapter C corporation and is therefore required to pay corporate income tax. By omitting its tax entries in Column G, an operator reduces its effective rate of return on equipment and installations and thereby could increase its CPS price. We therefore calculate Operator's federal income tax allowance on Column G of Schedules A and C on the basis of a 34% corporate tax rate. Furthermore, the Commission has stated that tax-paying business entities must gross-up their tax entries in Column G of Schedules A and C (i.e., calculate the tax as a percentage of return on investment plus tax). In accordance with this principle, we recalculate Column G of Schedules A and C (and subsequent steps) using a grossed-up federal income tax rate of 51.515% of Operator's return on investment. Conclusions 7. Upon review of the record herein, and having incorporated the adjustment discussed above, we conclude that Operator's showing supports a maximum reasonable CPS tier price of $9.94 per month (plus franchise fee) for the period February 28, 1994 to May 14, 1994. However, we further determine that the refund at issue is such a de minimis amount that it would not serve the public interest to order a refund. 8. We further conclude that Operator must reflect in its FCC Form 1200 rate filing for the period after May 14, 1994 the fact that Operator's price during the earlier period was unreasonable. We reserve the right to make further adjustments to Operator's price for the period after May 14, 1994 upon completion of our review of Operator's FCC Form 1200 rate filing. 9. We further conclude that Operator has submitted in good faith a timely optional supplemental filing in response to our Public Notice. As provided in the Public Notice, we will relieve Operator of its obligation to obtain advance Commission approval of adjustments to its CPS prices for one year following the release of this Order. 10. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's Rules, 47 C.F.R.  0.321, that the February 25, 1994 complaint against the cable programming service price charged by Harron Communications Corp. in Rockland, Massachusetts, CUID No. MA0224, IS GRANTED TO THE EXTENT INDICATED HEREIN AND DENIED TO THE EXTENT INDICATED HEREIN. 11. IT IS FURTHER ORDERED that the benchmark filing submitted by Harron Communications Corp. with respect to Rockland, Massachusetts, CUID No. MA0224, for the period of February 28, 1994 to May 14, 1994, justifies a maximum price of $9.94 per month (plus franchise fee) for the cable programming service tier. 12. 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 Harron Communications Corp. shall, within 30 days of the release of this Order, revise its Form 1200 filing with respect to Rockland, Massachusetts, CUID No. MA0224, 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 rate (plus franchise fee). 13. IT IS FURTHER ORDERED that Harron Communications Corp. shall place into effect, within 30 days after its submission of the revised Form 1200 filing required above, a CPS tier price that reflects the reduction in the CPS rate determined in this Order. 14. IT IS FURTHER ORDERED, pursuant to Section 76.960 of the Commission's rules, 47 C.F.R.  76.960, that Harron Communications Corp. shall not be required to obtain advance approval of adjustments to its CPS price in Rockland, Massachusetts, CUID No. MA0224, for one year following the release of this Order. FEDERAL COMMUNICATIONS COMMISSION Gregory J. Vogt Deputy Chief, Cable Services Bureau