HomeMy WebLinkAboutAgenda - 08-03-1995 - V-A i 1
ORANGE COUNTY
BOARD OF COMMISSIONERS
Action Agenda
Item No. V-A
ACTION AGENDA ITEM ABSTRACT
Meeting Date: August 3, 1995
SUBJECT: Resolution Adjusting Basic Service Rates Based on External
Cable TV Costs
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DEPARTMENT: County Manager PUBLIC HEARING YES: NO: X
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ATTACHMENT(S) : INFORMATION CONTACT: Albert Kittrell
Ext. 2300
Report TELEPHONE NUMBER-
Hillsborough -732-8181
Chapel Hill -968-4501
Mebane -227-2031
Durham -688-7331
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PURPOSE: To adopt resolution/order approving adjustments in basic
service rates based on external costs.
BACKGROUND: In accordance with Federal Communication Commsission
regulations, cable operators are allowed to update rates
for basic service based on external costs, such as
copyright licenses, programming costs, inflation and
retransmission fees.
On May 17, 1995 Cablevision Industries (CVI) submitted
appropriate FCC forms requesting an adjustments to basic
rates based on inflationary costs. CVI used the Gross
National Product Price Index as the basis for the
inflationary adjustments.
Triangle J Council of Governments Consultants have
reviewed CVI ' s documentation. The consultants findings
are included in the attached report and Resolution/Order
Approving Adjustments in Basic Rates.
The consultants recommend that the Board approve an $. 18
increase in basic tier rates for the 760 CVI customers
in the unincorporated areas of the County.
RECOMMENDATION(S) : The Manager recommends adoption of Resolution/
Order Approving Adjustments in Basic Service
Rates Based on External Costs.
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City Of 6Ralei h
.North Carolina
CABLEVISION INDUSTRIES
ORANGE COUNTY, NC-0256
FCC-1210 REVIEW
June 20, 1995
REPORT
TO: Albert Kittrell, Assistant County Manager "
FROM: Robert Sepe, Information Access Manager
RE: Review of Updating Maximum Permitted Rates filing [FCC-1210] by Cablevision
Industries, CVI.
The consultants have reviewed Cablevision Industries' FCC-1210 filing, and supporting
documentation furnished by the company. The values stated in the filing are the responsibility
of the company's management.
Supplied data were reviewed to determine whether the company calculated "updated" rates
consistent with the procedures prescribed by the Federal Communications Commission.
Original computations were performed by the consultants and compared against those filed by
Cablevision Industries. We believe that the data submitted by the company is free of material
misstatements and that the accompanying report provides a reasonable basis for our
recommendation.
OFFICES•110 SOUTH McDOWELL STREET•POST OFFICE BOX 590•RALEIGH,NORTH CAROLINA 27602
Recycled Paper
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REPORT
Following is the report and recommendation on the Updating Maximum Permitted Rates filing
[FCC-1210] submitted by Cablevision Industries on May 17, 1995.
Cable operators are allowed to update maximum permitted rates for the basic tier of service,
based on external costs, such as copyright licenses, programming costs, inflation and
retransmission fees no more frequently than on a quarterly basis.
FCC-1210 Inflationary Adjustments
Cablevision Industries is seeking to recover inflationary costs incurred during the nine-month
period of October 1, 1993 through June 30, 1994. FCC rules allow cable operators to recover
these costs during the period of October 1, 1994 through August 8, 1995.
CVI is seeking an$.18 [cent] increase in basic rates, attributable to external costs - inflation.
Though CVI states that it experienced less than$.01 [cent] decrease in programming costs for the
basic tier, almost all of the increase in basic rates is due to the inflationary adjustment.
CVI will be allowed to file another FCC-1210 and adjust its basic rates again(on a quarterly
basis) after October 1, 1995, reflecting inflationary costs realized during July 1, 1994 through
June 30, 1995. Inflationary adjustment figures are based on the GNP-PI, Gross National Product
Price Index. CVI used an inflationary adjustment figure of 1.0215.
History
Inflationary costs prior to this FCC-1210 adjustment were factored into the cable operators' initial
rate calculations contained within the FCC-1200, and/or the FCC-1220, filed by CVI in August
1994. However, the subsequent FCC-1220 Cost of Service superseded the FCC-1200 and sought
to justify a higher rate; it also included inflationary elements built into the reported costs.
Cost of Service and FCC-1210 Overlap
The first three months of the of the period (October-December 1993)the cable operator is
claiming inflationary costs are assigned to the last quarter of 1993; this is the same period on
which the 1994 Cost of Service rates were partially based.
Inflationary costs for the last quarter of 1993 may already be reflected in the current rates, which
were set by the FCC-1220 Cost of Service filing. The COS rates were based on various costs of
doing business in 1993; these costs did not exclude inflation.
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However, since CVI and the franchise authority agreed upon a basic rate substantially lower than
that sought under the COS filing, rate adjustments attributable to inflationary expenses during the
last quarter of 1993 would be cost prohibitive and onerous to determine, in the consultants'
opinion. See Table A for a schedule of inflation rates and recovery periods.
Table A
Inflationary Periods
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:::::.: :::.::: .:::::.;:::.:::::::.:::: ......::.::.::.::.:;.::.::? .::::::::.:::....:::.:::::.:::..::: ::::::.:::::::.::::::::::.::::.::::..:.:::.:.:...::::...:
............................................................. ........... .
3.00 9/30/92 - 9/30/93 Date of initial FCC-
1200/1220 filing
2.15 10/1/93 - 6/30/94 10/1/94 - 8/31/95 FCC-
1210
TBA 7/1/94 - 6/30/95 10/1/95 - 8/31/96
FCC-1210
Though it falls outside its jurisdiction, it is recommended that the County acknowledge the
proposed increases to the expanded tier service rates. Regulation of second tier rates is
accomplished through a complaint-driven process with the FCC. See Table B below for a
comparison of current and proposed rates for the County.
Table B
Comparison of Rates
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::::::::.......::::.......................... ......................................... ...................... . ... ................................................................::...::::::::::.............
XX
X.Basic $8.58 $8.76 $0.18
Expanded $12.27 $12.92 $0.65
Cost of Programming
The operator reported previous programming costs for March 1994 as$82 for basic and $1852
for expanded tiers of service. These figures compare to current programming costs of$98 and
$2545 for basic and expanded, respectively.
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Franchise Related Costs
The operator reported no franchise related costs. Such costs typically include Public, Education
and Government access programming expenses.
Subscribers
The operator reported 760 and 747 subscribers on the basic and expanded tiers, respectively, as of
May 1995. These figures contrast with 629 basic and 621 expanded-tier subscribers for the
previous year.
U.S. Congress
Telecommunications Reform
This month the U.S. Senate approved passage of the Pressler telecommunications bill, S.652,
which would allow cable and telephone companies to compete with one another. The bill also
promises to dismantle cable rate regulation for the upper tiers of cable service and remove
regulations for small cable systems - among other measures. But local government
regulation of basic cable rates and services is maintained.
The House of Representatives' counterpart telecommunications bill, H.R. 1555, also proposes to
deregulate upper tiers of cable service. However, it would keep intact basic cable rate and service
regulation by local governments. If H.R. 1555 is passed by the House in July, it will go to a
conference committee, where it will be combined with the Pressler Bill. Some changes in both
bills are expected to take place in this committee before a final bill emerges and is sent onward to
the White House for signature. But The President has threatened to veto any telecommunications
bill that does not adequately protect cable subscribers. Currently, local regulation of basic
rates and services by communities is not threatened by either the Pressler Bill or
H.R. 1555.
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RECOMMENDATION
The consultants recommend that the County approve the basic service rate adjustments based on
external costs proposed by Cablevision Industries.
PROCEEDING
The FCC regulatory rules require the franchise authority to issue an order, based upon a
finding of fact, regarding the approval or denial of the cable operator's FCC-1210 submittal.
The rules require that the franchise authority adopt this report and the public be granted an
opportunity to comment. It is suggested that the public comment period coincide with a
regular public meeting.
CHRONOLOGY
1) Public Notice: The County will advertise, in local media, the date, time, and location of the
public comment period on Cablevision Industries' rate adjustment filing.
2) Written Report: The report must be submitted to the County during a regularly scheduled
county commissioners meeting.
3) Public Comment: The County Commissioners must allow the public an opportunity to
comment after the report has been presented by staff.
4) Consider & Adopt Report: The County will be asked to consider and adopt the consultant's
report as its own, as stated in FCC rules.
5) Execute Order: After adopting the report, the County should issue an order in three original
copies, approving or denying, based upon a finding of fact, CVI's FCC-1210 rate filing
request.
6) Distribute Order: Provide original executed copies to CVI (via Certified U.S. Mail), the
consultants, and place an original in the County's permanent file.
Though the public comment period is intended to allow interested parties the opportunity to
comment on the cable operator's rate filing, it is not constrained by formal advertising rules
which are often associated with municipal zoning issues.
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STATE OF NORTH CAROLINA
ORANGE COUNTY
BEFORE ORANGE COUNTY
IN THE MATTER OF: ) ORDER APPROVING
Review of Basic Cable Service Rates ) ADJUSTMENTS IN BASIC
FCC-1210 Updating Maximum Permitted ) SERVICE RATES BASED
Rates filed by Cablevision Industries, ) ON EXTERNAL COSTS
CVI, for Orange County ) FCC-1210
NC-0256 )
BY ORANGE COUNTY:
b
WHEREAS, on May 17, 1995, Cablevision Industries, d/b/a CVI, filed an FCC-1210 Updating
Maximum Permitted Rates form for Regulated Cable Services with Orange County. CVI's filing covers
the period of April 1, 1994 through December 31, 1994;
WHEREAS, cable operators are allowed to recover inflationary costs anytime between October
1, 1994 through August 31, 1995, based on inflationary costs incurred during October 1, 1993 through
June 30, 1994;
WHEREAS, on June 20, 1995, the County received a report from its consultants indicating that
CVI's said filing was in compliance with Federal Communications Commission procedures, allowing for
the adjustment of basic cable service rates based on external cost factors; and,
WHEREAS, the Orange County has authority to regulate basic service rates charged by CVI
serving franchise NC-0256, Orange County.
IT IS A FINDING:
That Cablevision Industries has justified the adjustment of its basic tier service rates based on
external cost factors -inflation.
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IT IS THEREFORE ORDERED:
That basic rates assessed subscribers within Orange County by Cablevision Industries are
approved as follows:
Basic Service $8.76
ISSUED BY ORDER OF ORANGE COUNTY
This the day of , 1995.
ATTEST: CHAIRMAN:
Clerk
seal
Deliver via Certified U.S. Mail to: Cablevision Industries
Extra copy to: City of Raleigh