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3 <br /> SUMMARY <br /> Attached is the review of CV1's FCC-1220 Cost of Service filing. It was accompanied by <br /> FCC-120011205/1215 submittals. The Cost of Service information and attached documents <br /> are substantial and in accordance with the format required by the federal Office of <br /> Management and Budget[OMB]for an FCC-1220 series filing. <br /> The Cost of Service[COS] approach was intended by the FCC for operators to use when they <br /> believed that the maximum permitted rate under the benchmark formula would not enable the <br /> operator to recover costs reasonably incurred in the provision of rate regulated cable services. <br /> CV1's Cost of Service filing for Orane County seeks to justify a basic service rate of$21.62 <br /> and CPS [tier 21 service rate of$32.34 based upon the company's cost of providing cable <br /> television service, <br /> At a December 2, 1994 meeting between CV1's corporate staff and counsel, and the <br /> consultants for Change County, the company argued that it should be allowed to roll prior year <br /> losses into subsequent years. This is not allowed under the FCC benchmark rules but permitter) <br /> under Cost of Service rules. The company asserted it was not the intent of the U.S. Congress <br /> to prohibit the recovery of prior year start up losses nor to ignore continuing capital <br /> investments in its cable television systems. <br /> Based upon the review of CV1's Cost of Service filing, the accompanying supporting <br /> documents, and the information exchanged during conferences with CV1's corporate staff and <br /> counsel, it was observed that: <br /> a. CV1's filing was supported by balance sheets reflecting activities at the franchise <br /> level only; and, <br /> b, a group of investment bankers supports the company's position that it likely <br /> warrants a rate of return greater than 11.25 S. <br /> Additional detailed information about CV1's capital strueturre is not being sought at this time <br /> because the company crated it could meet its financial and business obligations while <br /> preserving its cwrr+eut rates for installation,equipment and basic services. CV1 agreed to <br /> sustain these rates for two years, excluding adjustments for external expenses, such as: <br /> program costs and inflation. The company agreed to maintain installation and equipment costs <br /> at or below the FCC-1205 benchmark rates. <br />