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3 <br /> REPORT <br /> Following is the report and recommendation on the Updating Maximum Permitted Rates filing <br /> [FCC-1210] submitted by Cablevision Industries on May 17, 1995. <br /> Cable operators are allowed to update maximum permitted rates for the basic tier of service, <br /> based on external costs, such as copyright licenses, programming costs, inflation and <br /> retransmission fees no more frequently than on a quarterly basis. <br /> FCC-1210 Inflationary Adjustments <br /> Cablevision Industries is seeking to recover inflationary costs incurred during the nine-month <br /> period of October 1, 1993 through June 30, 1994. FCC rules allow cable operators to recover <br /> these costs during the period of October 1, 1994 through August 8, 1995. <br /> CVI is seeking an$.18 [cent] increase in basic rates, attributable to external costs - inflation. <br /> Though CVI states that it experienced less than$.01 [cent] decrease in programming costs for the <br /> basic tier, almost all of the increase in basic rates is due to the inflationary adjustment. <br /> CVI will be allowed to file another FCC-1210 and adjust its basic rates again(on a quarterly <br /> basis) after October 1, 1995, reflecting inflationary costs realized during July 1, 1994 through <br /> June 30, 1995. Inflationary adjustment figures are based on the GNP-PI, Gross National Product <br /> Price Index. CVI used an inflationary adjustment figure of 1.0215. <br /> History <br /> Inflationary costs prior to this FCC-1210 adjustment were factored into the cable operators' initial <br /> rate calculations contained within the FCC-1200, and/or the FCC-1220, filed by CVI in August <br /> 1994. However, the subsequent FCC-1220 Cost of Service superseded the FCC-1200 and sought <br /> to justify a higher rate; it also included inflationary elements built into the reported costs. <br /> Cost of Service and FCC-1210 Overlap <br /> The first three months of the of the period (October-December 1993)the cable operator is <br /> claiming inflationary costs are assigned to the last quarter of 1993; this is the same period on <br /> which the 1994 Cost of Service rates were partially based. <br /> Inflationary costs for the last quarter of 1993 may already be reflected in the current rates, which <br /> were set by the FCC-1220 Cost of Service filing. The COS rates were based on various costs of <br /> doing business in 1993; these costs did not exclude inflation. <br /> 1 <br />