STATEMENT OF ISSUE
On October 1, 2008, Comcast Cable Communications Inc. submitted to the City the Federal Communications Commission (FCC) 1240 and 1205 filings for 2009. These filings serve as notice of Comcast’s intent to change rates in the basic tier of cable services and charges for rates for cable equipment installations and rentals applicable during calendar year 2009. The City, as the local franchising authority, reviews those filings to determine if proposed rates are within the maximum permitted rates under the Federal Communications Commission rules and regulations. Based upon the analysis by Rice, Williams Associates, the City’s cable television consultant, Comcast Cable Communications Inc. has chosen to continue to charge the basic service tier rate unchanged at $9.85 per month as of January 1, 2009, which was placed into effect on July 1, 2004. Staff is recommending the City Commission adopt Resolution No. 09-R-02 to approve Comcast’s proposed rate schedule.
RECOMMENDED ACTION
Option 1. Adopt Resolution No. 09-R-02 approving Comcast Cablevision’s maximum permitted rates for basic tier service, installation service and rental fees for 2009.
FISCAL IMPACT
Option 1. No direct financial impact to the City.
Reese Goad, Director, Utility Business & Customer Service
Anita Favors Thompson, City Manager
For information, please contact: Patricia B. Jimenez, Utility Business & Customer Services, ext. 6180
SUPPLEMENTAL MATERIAL/ISSUE ANALYSIS
HISTORY/FACTS & ISSUES
The Federal Communications Commission’s (FCC) rules allow the City one year after receiving Comcast’s October rate filing (FCC Form 1240 and Form 1205) to issue a decision regarding the proposed rates from the filing date. If the City wishes to reserve all of its rights and protect subscriber’s rights, it must issue an order.
The FCC Form 1240 annual filing system examines historical costs that have occurred over a period of time that relates this to the revenues actually collected during the same period and computes a monthly adjustment to apply to a future rate. The rate to be charged in a future period is developed based on a projected 12 months of costs and the unit rate adjustment, or true-up. The true-up from the historical period is added to the projected period maximum permitted rate to determine the total maximum permitted rate to be charged for the future (12) month period. Each subsequent annual FCC Form 1240 filing will evaluate a historical, or “true-up period,” and a future, or “projected period,” as part of the process of establishing a new maximum permitted rate for a future 12 months period.
A maximum permitted rate is determined by separate calculations for both of these periods. Under the FCC Form 1240, the true-up period maximum permitted rate is the sum of (1) the prior rate net of prior external costs; (2) an inflation segment; and, (3) the actual external costs experienced in the true-up period. This rate is utilized to determine the level of revenue that the cable system was entitled to collect in the true-up period, and this amount is compared to the actual amounts collected which are determined by multiplying the average rate charged by the average number of subscribers and by the months in the true-up period. The difference is an amount that the cable system is permitted to collect (or refund), with interest, uniformly over the projected period.
The FCC Form 1240 filing reviewed in this report was provided to support Comcast’s proposed calendar year 2009 rate for basic tier cable services (BST) cable programming services. Comcast has chosen to establish rates for a “Projected Period” of January 1, 2009, through December 31, 2009. The “True-up Period” chosen by Comcast is from September 1, 2007, through August 31, 2008. As the first step in the review and analysis of Comcast’s filings, the initial information provided by Comcast was incorporated into an FCC approved analytical model. The results replicated Comcast’s calculations.
The FCC Form 1205 is used to update rates and charges for renting regulated equipment (i.e., remotes and converters), equipment installations (i.e., house wiring, service drops, extra outlets, service tier changes) and the Hourly Service Charge (HSC) for service calls. Rice, Williams Associates, the City’s cable television consultant, incorporated the information provided by Comcast into an official FCC analytical model which provides the formulas and format for all the calculations required for preparation and completion of the FCC Form 1205. The result of the analyses is a finding that Comcast has correctly determined the maximum permitted rates for cable equipment rental and service installations.
Historically, Comcast changed cable rates in July rather than as of January 1, the beginning of the 12-month Projected Period. This is permitted by FCC regulations so long as the July 1 increase does not exceed the MPR for that calendar year. Under the FCC Form 1240 rate making methodology, rates are to be adjusted only once every 12 months. Accordingly, the rate level set in July must not exceed the MPR determined for the next year’s Projected Period, which would become effective on January 1. Since the rate set effective July 1, 2008 of $9.85 per subscriber per month does not exceed either the 2008 MPR of $9.9761 nor the 2009 MPR of $10.9011 it is reasonable and may continue to be charged after January 1, 2009.
The conclusion of the review by Rice, Williams Associates with respect to FCC 1240 rate filing for basic service tier cable programming services is that the 2009 MPR of $10.9011 per subscriber determined by Comcast is correct and complies with prescribed FCC methodology. However, Comcast has chosen to continue to charge the basic service tier rate unchanged at $9.85 per month as of January 1, 2009, which was placed into effect on July 1, 2004. With respect to the charges and rates for equipment installations and rentals applicable in 2009, this review finds Comcast appears to have correctly determined the maximum permitted rates pursuant to the FCC Form 1205 methodology. The FCC Form 1240 and 1205 filings are reasonable and should be authorized by the Commission. The Resolution accompanying this item will serve to codify a 2009 maximum permitted rate $10.9011 that shall be used by Comcast in its 2010 form 1240 calculation.
OPTIONS
Option 1. Adopt Resolution No. 09-R-02 approving Comcast Cablevision’s maximum permitted rates for basic tier service, installation service and rental fees for 2009.
ATTACHMENTS/REFERENCES
A. Summary Report from Rice, Williams Associates
B. Resolution No. 09-R-02