******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Comcast Cablevision of Indianapolis, Inc.) CUID No. IN0556 (Marion County) ) Complaints Regarding ) Cable Programming Services Tier ) Rate Increases ) ORDER Adopted: March 5, 1997 Released: March 7, 1997 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider complaints against the November 1, 1996 rate increase that the above-captioned operator ("Operator") implemented for its cable programming services tier ("CPST") in the re-build and existing systems in the community set forth above. This Order addresses only the reasonableness of Operator's rate increases of November 1, 1996. We conclude, for the reasons discussed below, that the CPST rate increases of $2.16 for the existing system and $2.04 for the re-build system charged by Operator from November 1, 1996 to the present are unreasonable. 2. The Communications Act authorizes the Federal Communications Commission ("Commission") to review the CPST rates of cable systems not subject to effective competition to ensure that rates charged are not unreasonable. If the Commission finds the rate unreasonable, it shall determine the correct rate and any refund liability. The Telecommunications Act of 1996 ("the 1996 Act") and our rules implementing the new legislation, require that complaints against the CPST rates be filed with the Commission by a franchising authority that has received subscriber complaints. A franchising authority may not file a CPST rate complaint unless it receives more than one subscriber complaint within 90 days after such increase becomes effective. 3. To justify rates for the period beginning May 15, 1994 through a benchmark or cost of service showing, operators must use the FCC Form 1200 series. Operators may justify adjustments to their rates on an annual basis using FCC Form 1240 to reflect reasonably certain and quantifiable changes in external costs, inflation, and the number of regulated channels that are projected for the twelve months following the rate change. Any incurred cost that is not projected may be accrued with interest and added to rates at a later time. If actual and projected costs are different during the rate year a "true-up" mechanism is available to correct estimated costs with actual cost changes. The "true-up" requires operators to decrease their rates or alternatively permits them to increase their rates to make an adjustment for over or under estimations of these cost changes. 4. On December 9, 1996, the local franchising authority ("LFA"), filed complaints against the Operator's November 1, 1996 CPST rate increases in the existing and the re-build systems. The LFA has certified that it has complied with the Interim Rules. Operator submitted FCC Forms 1240 for the community set forth above to justify the rate increases in the existing and re-build systems that went into effect on November 1, 1996. 5. FCC Form 1240 Filings: On January 24, 1997, Operator filed its amended FCC Forms 1240 to justify CPST rate increases that began November 1, 1996, in the existing and re-build systems in the community set forth above. After evaluation of the Operator's amended Form 1240, we made the following adjustments to Operator's calculations. First, Operator is incorrectly taking a $0.20 per channel adjustment for both the existing and re-build systems in its separate Projected Periods, as of January 1997. Under our rules, Operator is not permitted to take a $0.20 adjustment in 1997 unless the channel was added during 1997. The channel in question was added as of October 1, 1996 and the $0.20 is reflected in Worksheet 2 for the Projected Period and the projected maximum permitted rate was implemented November 1, 1996. We have disallowed the $0.20 per channel adjustment for the existing and re-build systems for January 1997 at Worksheet 2, Line 204 and Module I, Line I1 on FCC Forms 1240. 6. Second, we corrected the inflation for the two True-Up Periods on Module C, Lines C1 and C2 to the latest rate of inflation that was available to Operator when it filed its amended FCC Form 1240. The rate of inflation for all months of the True-Up Period for the existing system is 2.22% and is reflected on Worksheet 1, Line 101. The rate of inflation for the re-build system is 2.39% for the first quarter of 1996 and is reflected on Worksheet 1, Lines 101-103, and 2.22% for all other months of the True-Up Period, and is reflected on Worksheet 1, Lines 104-107 and Lines 114-116. The inflation factor has also been adjusted on Module C, Line C1 to include unclaimed inflation for the period July 1995 through June 1996 for the existing system, and July 1995 through December 1995 for the re-build system. 7. Third, we adjusted the interest calculated for True-up Period 1 on Module H, Line H4. Fourth, we corrected Module H, Lines H14, H15, and Module I, Line I8 to reflect the correct True- up Adjustment included in the projected rate calculation. In the aggregate, our adjustments reduced Operator's maximum permitted rate for the existing system from $13.38 as calculated by Operator to $13.23, and Operator's maximum permitted rate for the re-build system from $13.93 as calculated by Operator to $13.75. 8. Upon review of the record before us, we find that Operator has failed to demonstrate that its CPST rate increases of $2.16 in the existing system and $2.04 in the re-build system were reasonable. Based upon the record before us, we find that Operator has provided sufficient evidence to support a CPST rate increase of $2.01 in the existing system. This represents an overcharge of $0.15 per month per subscriber in the existing system beginning November 1, 1996. Operator has provided sufficient evidence to support a CPST rate increase of $1.86 in the re-build system. This represents an overcharge of $0.18 per month per subscriber in the re-build system beginning November 1, 1996. We conclude, therefore, that Operator's CPST rate increases which went into effect on November 1, 1996, are not justified. 9. Consistent with Commission's rules, we order Operator to make a true-up adjustment in its next FCC Form 1240 filing consistent with the findings of this Order. The Commission's rules require adjustments for over estimation of costs resulting in an overcharge to be made within twelve months of the date the rates based on the projections were implemented. Accordingly, Operator must true-up and adjust its rates by October 31, 1997 if the net projections through the period November 1, 1996 through October 31, 1997 were over-estimated resulting in an overcharge. 10. Accordingly, IT IS ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321 that the monthly CPST rate increase of $2.16 from $11.22 to $13.38 charged by Operator in the existing system in the community set forth above from November 1, 1996 to the present, IS UNREASONABLE. 11. Accordingly, IT IS ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321 that the monthly CPST rate increase of $2.04 from $11.89 to $13.93 charged by Operator in the re-build system in the community set forth above from November 1, 1996 to the present, IS UNREASONABLE. 12. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321, that the complaints referenced herein against the rate increases charged by Operator in the existing and re-build system in the community set forth above ARE GRANTED. 13. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. Section 0.321, that Operator take into account our adjustments in its true-up calculation in the next FCC Form 1240 that it files with the Commission prior to November 1, 1997. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau