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Home My WebLink AboutOrdinance No. 95-22 �' ORDINANCE NO. 9 5-2 2 AN ORDINANCE ESTABLISHING THE MAXIMUM HOURLY SERVICE CHARGE TO BE USED TO DEVELOP THE EQUIPMENT AND INSTALLATION RATES OF TCI TKR OF HOUSTON, INC., D/B/A TCI CABLEVISION OF HOUSTON; ESTABLISHING THE MAXIMUM PERMITTED RATES FOR EQUIPMENT AND INSTALLATION CHARGES COMMENCING ON JULY 1, 1995; ESTABLISHING THE MAXIMUM PERMITTED RATE FOR TCI'S INSIDE WIRE MAINTENANCE PROGRAM COMMENCING ON JULY 1, 1995; ORDERING A REFUND OF THE DIFFERENCE BETWEEN THE MAXIMUM PERMITTED RATES FOR EQUIPMENT, INSTALLATION AND INSIDE WIRE MAINTENANCE AND THE ACTUAL CHARGES THERE FOR; DECLARING THE REGULATED STATUS OF THE INSIDE WIRE MAINTENANCE PROGRAM FOR PURPOSES OF ORDINANCE NO. 94-10; AND SETTING FORTH OTHER PROVISIONS RELATED THERETO. * * � * * * * * � * * WHEREAS, the City of Friendswood, Texas, (the "City") is certified to regulate basic cable service rates pursuant to the 1992 Cable Act (the "Act") and Federal Communication Commission ("FCC") rules; and WHEREAS, by Resolution No. 93-40 (the "Resolution") the City adopted procedures for rate regulation consistent with the Act and FCC rules, and is regulating basic cable rates; and WHEREAS, on or about March 2, 1995, TCI TKR of Houston, Inc. d/b/a TCI Cablevision of Houston ("TCI") submitted to the City an FCC Form 1205 with a proposed schedule of equipment and installation rates (hereafter "Form 1205"); and WHEREAS, by Resolution No. R95-12 the City extended the review period for Form 1205 for an additional ninety (90) days beyond the initial thirty (30) days; and WHEREAS, by Resolution No. R95-21 the City adopted its accounting order authorizing TCI to charge its proposed schedule of equipment and installation rates subject to refund and prospective reduction upon a later written order or decision by the Council disapproving any portion of such rates; and WHEREAS, at the City's request, Reed-Stowe & Co., Inc., has reviewed TCPs proposed schedule of equipment and installation rates and determined that the methodology used by TCI to develop such rates did not comply with FCC rules, regulations, instructions, directives and recent decisions rendered by the FCC; and WHEREAS, Reed-Stowe & Co., Inc., has submitted an alternative schedule of equipment and installation rates attached as Exhibit `A"and has submitted its report explaining its analysis, findings, and conclusions attached as Exhibit "B" and Exhibit"C"; and Friendswood\1205.Ord. . . � � • . . + WHEREAS, a public hearing was held to hear public comments on the proposed schedule of equipment and installation rates of TCI; and WHEREAS, the City Council has now concluded its review of TCI's proposed schedule of equipment and installation rates and made certain determinations; NOW THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FRIENDSWOOD, STATE OF TEXAS: Section 1: That the City Council hereby adopts and affirms the fmdings and recitals set forth in the preamble to this Ordinance. Section 2: That TCI's Hourly Service Charge for installation, maintenance and repair of equipment shall not exceed $23.63 per hour commencing on July 1, 1995. This Hourly Service Charge rate was derived by using FCC rules, regulations and instructions for calculating the Hourly Service Charge as further explained in the report from Reed-Stowe & Co., Inc., attached hereto as "E�ibit B" and incorporated herein by reference. Based on this Hourly Service Charge, equipment and installation rates shall not exceed the maximum permitted rates set forth in the attached "Exhibit A" which is incorporated herein by reference. TCI is hereby ordered to refund to subscribers, within forty-five (45) days of the adoption of this Ordinance, the difference between the permitted rates and the actual charges to the extent that actual charges have exceeded the permitted rates. Section 3: That the maximum permitted rate for TCI's inside wire maintenance program shall not exceed $0.02 per month commencing on July 1, 1995. This rate was calculated in accordance with the FCC directive from the Report and Order issued May 3, 1993, as further explained in the report from Reed-Stowe & Co., Inc., attached hereto as "Exhibit B" and the FCC order adopted June 15, 1995, (DA 95-1352), as further explained in the supplemental report from Reed-Stowe & Co., Inc., attached hereto as "E�ibit C" which is incorporated herein by reference. TCI is hereby ordered to refund to subscribers the difference between the current charge of $0.49 per month and the $0.02 permitted rate per month established by this Section computed from July 1, 1995, until TCI physically changes the inside wire maintenance program rate, including interest calculated pursuant to FCC rules and regulations. The refund required by this Section shall be made by TCI within forty-five (45) days of the adoption of this Ordinance. Section 4: That the City Council hereby declares and affirms that the FCC has now determined by FCC order DA 95-1352, adopted June 15, 1995, that an inside wire maintenance program is a regulated service and, therefore, the maximum permitted rate for TCI's inside wire maintenance program established in Section 5 of Ordinance 94-10 is effective from the inception of the inside wire maintenance program, April 1994, until June 30, 1995, and the procedural and refund requirements established in Section 5 of Ordinance 94-10 are now operative. The refund required by Section 5 of Ordinance 94-10 shall include interest, shall be calculated in accordance with FCC rules and regulations, and shall be made by TCI within forty-five (45) days of the adoption of this Ordinance. Friendswood\1205.Ord. -2 - i; . ,� � � • . �• . , + Section 5: In adopting this Ordinance the City Council of the City is not approving or acquiescing in any way whatsoever to cost data and/or methodologies not specifically addressed in this Ordinance. Furthermore, the City Council is not waiving any rights to which it is entitled. Section 6: All ordinances in force when this Ordinance becomes effective and which are inconsistent or in conflict with this Ordinance are hereby repealed insofar as such ordinances are inconsistent or in conflict with this Ordinance. Section 7: The City Council of the City of Friendswood, Texas, does hereby declare that if any section, subsection, paragraph, sentence, clause, phrase, word or portion of this Ordinance is declared invalid or unconstitutional by a court of competent jurisdiction then, in such event, it would have passed and ordained any and all remaining portions of this Ordinance without the inclusion of that portion or portions which may be so found to be unconstitutional or invalid, and declares that its intent is to make no portion of this Ordinance dependent upon the validity of any other portion thereof, and all said remaining portions shall continue in full force and effect. Section 8: That the City Secretary is hereby authorized and directed to mail a copy of this Ordinance by first class mail to TCI. PASSED AND APPROVED on first reading this 24t�day of July , 1995. PASSED, APPROVED, AND ADOPTED on second and final reading this 7th day of August , 1995. CITY OF FRIENDSWOOD, TEXAS By: /� Evelyn . Newma Mayor ATTEST: � By: Deloris McKenzie, T C City Secretary . Friendswood\1205.Ord. - 3 - - - _ , • � � • . ; , � ,• : � EXHIBIT A INSTALLATION RATES Installation of Unwired Homes $35.44 Installation of Prewired Homes $1�•�2 Installation of Additional Connects Initial $11.81 Installation of Additional Connects Separate $17.72 Relocate Outlet �1�•�2 Upgrade/Downgrade Non-Addressable $11.81 Upgrade/Downgrade Addressable $2.00 Connect VCR Initial $5.91 Connect VCR Separate $11.81 LEASE RATES Remotes $0.20 Converter-Standard $1.01 Converter-Addressable $2.02 INSIDE WIRE MAINTENANCE PROGRAM $0.02 . r" � � ' , ` ' . � EXHIBIT A SUNIMARY OF FORM 1205 RATES TCI'S CURRENT PROPOSED RECOMMENDED RATES RATES RATES INSTALLATION RATES INSTALLATION OF UNWIRED HOMES $35.78 $35.83 $35.44 INSTALLATION OF PREWIRED HOMES $17.89 $17.91 $17.72 INSTALLATION OF ADDITIONAL CONNECTS INITIAL $5.96 $11.94 $11.81 INSTALLATION OF ADDITIONAL CONNECTS SEPARATE $17.89 $17.91 $17.72 RELOCATE OUTLET $17.89 $17.91 $17.72 UPGRADE/DO WNGRADE NON-ADDRESSABLE $11.93 $11.94 $11.81 UPGRADE/DOWNGRADE ADDRESSABLE $2.00 $2.00 $2.00 CONNECT VCR INITIAL $5.74 $5.97 $5.91 CONNECT VCR SEPARATE $11.49 $11.94 $11.81 LEASE RATES REMOTES $0.17 $0.20 $0.20 CONVERTER-STANDARD $0.99 $1.38 $1.01 CONVERTER-ADDRESSABLE $2.23 $2.38 $2.02 INSIDE WIRE MAINTENANCE PROGRAM N/A N/A $0.02 Pedaal Canmu�intiaa Com�tission + Ap�xovcdby:OMB 3060-0592 Wishitgton,IY:C.20554 Fxpircs:4/30/97 SCHEDULE A:CAPITAL COSTS OF SERVICE INSTALLATION AND MAINTENANCE OF EQUIPMENT AND PLANT � M�Inlenana Olher l. Olher i A i rnt ud Piut Vehkies Tools F�cWtks (S below) (S below) B GrossBoakValue S1A53,454.36 51,316,183J5 C Acartulated eciuion SI,O17,43429 3775,595.08 D DefaredTaza S40,S63.97 5188,375.60 E NU Book Vdue {C+D) 5394,456.10 . '� 3557,113.03 '�. 50.00 �' � �� 50.00 � SD.00� F Rrie of RcWm o 1125 �� G Cdnl�ion o Grosi- Rafe GI Fedaal Uitane Tex Rate 0 35 G2 Sute Incwnc Tax Rue 0 G3 Na Toul Incomc Tax Ratc[(Gl+G2}(G]x G2)] 0 35 Crl Ad'usUne�rt to Reflc�t Maest DeA�ctibilit rc G4a Ac[ual L6acst Mwur4 569.880.94I 18 G4b Toial Nd AsseLS 51,173,14I,995 71 G4c Besc Rc4un on InvcslmM Amou�¢[G4b:F � 5131.978.474 5174 G4d Increst Dchictibilit Faaor(G4s/G4c , 0 4g5 GS Effcclive Taz Ratc[G3 x(1•G4� [CLo s ski to G7 . 0 I647 G6 Ad'uslmttu for Non-C Co 'ons �_ . :�. :: `? ` ; G6a Bue RGUm on ImcstmM Artwum G4c] ��. 5131.978.474 5174 G66 Distnlwtio� SO 00 G6c Cadrid:lions(ma nM excecd G6b) SO 00 G6d Rdums Sub'ecl lo Lrcome Tax[G6a-G6b+G6c] � %131.Y'SA74 ]74 . G6e Retu�Pacc e Sub'cct ro Income Tax[G6NG6a] I . c� cro�-u x�e�cc s:v�i-cs)ou�«v�i-ccs%c�)N i iv�� H Grossed-U Rate of Rshun F x G7] '�.0 1347 . I ReWm on NvesUnen 6rosseGU for Tnxa[E x H 553,124 8858 -�574�.371 4R99 . 3aG0 � 30 0o SO.Op J pirtadProvisionforD cia[ion 5190.097.�0 5144,407.44 x arnuai csp�w cosu�[+� asa3.z2z sass sz�s,»s.sa4s so.00 so.00 so.00 L GRAIVD TOTAL[sum of Une K mWesJ 5462,OBI.GJ58 Boa 1. Specify:01ha l. Spccify:Othm 2. SCHEDULE B:ANNUAL OPERATINC EXPENSES FOR SERV[CE INSTALLATION AND MAINTENpNCF OF EQIJiPMENT Salaria Othtt 1. Othu 2. &Benefies Su Iies U[ili6os qha Taxes (S ec' below) ( ci below) A Nwnl Op.Exparses fa Svt.Im7a11.and Maird.of Fquip. 52,057,1;2,q9 555,536.69 50.00 S189,446.27 5474,732.62 5149,950.62 B CRAND 70TAL�wm of Line A entrles� 52,926,788.69� Bo:i Specify:Other 1.CONTRACf LABOR/CONVIItTIIt MAQJTENpNCE Specify:Orher 2.VF7�CLF/OTf�7t Q�ENSFS FCC Fam 1205 �� Fxce14.0 Wiq Vasion 2.0 l,qyy Iggq Fedcnl Comnuticuias Cmmissim ' . Approvcd 4y:OMB 3060•0592 Wedtington,D.6.20554 Fv�ircs:4/30/97 SCHEDULE C:CAPITAL COSTS OF LEASED NSTOMER E UIPMFNf p i Rrnwle I Rmw[e 2 Rertwte 3 Comata 1 ComMC 2 Co�rvena 3 Other i. B Total Ma'vtenence5micc Haws(NLCh lanation) 69.866 0. 0. 411.594I 915.8598 0. 0. C Total N of Units in Servict 12074. 0. 0. 7888. 17553. 0. 0. D (3rouBookValue 5193,207.43 50.00 50.00 5863,730.66 31,796.267.50 50.00 50.00 E Atcurtul�ted iuion 5108,873J7 50.00 50.00 S7Z9,244.35 E278,792.68 50.00 30.00 F DefaredTuca 51,888.62 50.00 50.00 SS'60.05 S?7,54LS8 50.00 50.00 G Nct Book Vilue[D-(E+�] ��582,445.04 50.00 � 50.00 �� Si 28,?1626 51.489,933.24 � � 50.00 � 50.00 ��. � ..:.::. .............. .___... ...._... ......_. ___....__......_......................__......... ....._.. . . . .. . . ................_..... ..._...._ ____. _._._. _...._....... .............._................._.................. .. .. . ...........__....... ..__...... .....___. ..__.__. ............. ............. .. ......... ...............__...... .. . .. . . ..................._........._..... .._.__ ___...... _............. .........._.............. ._.................... . _ ..... . ................ ...._.........._.. ............. .......... ._.......... ............. ............. ............. ......... . . . . . ... . _..................... ..._....._._.............. __........ __._................. ....................._.............._.. H Grossed- Rue of Rchun rom Sched.A,Line H] ��0 1347 :. 1 Rcmm on Imcslmrnl Grossed- for Taxes[G x H � � SI 1,103.6015 � 30.00 � �50.00 � $1'.335.35 t? 320D,662,4646 � � E0.00 50.00 1 CLrtariProvisionforD ciation 316,770.50 50.00 50.00 568.SS6.68 S?02,526.?1 50.00 E0.00 K AroualCapiWCosls[I+7] � `� 527,8)41015 � 50.60 !�. 50.00 �� 586,192.0332 - 3403,189.1948 � � 50.00 50:00 L GRAND TOTAL�sum of Une K entrks� 5517,255.3116 Box 3. SCHEDULED:AVERAGE HOURSPERINSTALLATION A Av e Haus a Unwircd Hane LW�llation(enach an lanation) 1.5 B. Av e Hours Prc-W'ved Home GWalla[ion(nuach an lanetion) 0.75 C. Av Hours tt Addilional Comcclion IfWallntion at Tvne of Initial LMallalion(atlach an c lanation) 0.5 D. Ave e Haus Additlon¢I Comcction Wtallation Re iri Sc arate Iretallation(anach an c Iarution) 0.75 E. Othtt Lsstellation(b Rem ): llan 1.(S eci J Av c Hours a L�stallaiion(atlach an c lanation) 0.95 llem 2.( ec' :) Av e Hours er Installation(att�ch an e Ianation) 0.5 Item 3.( eci :) Avc c Hours cr Wtallalion(wach an c lanalion) FCC Fortn I I05 Page 3 Ezcc14.0 Wiq Vasion 2A May 1994 Fedrnl ComnmicWia�s Cortmission � , � Approvcdby:OMB 3060•0592 Wuh'ut�oq AC.30554 E+�ires:4/30/97 WORKSF�ET FOR CALCULATING PERMIiTED EQUIPMENT M'D INSTALLATION CI�IARGES S7EP A Ho Servla Ch e 1. Total C iml Costs of Iratallalion and Maintensnce Schc�le A,Box I -��3452,OOI.A358 2. ToW Aroual es for Imtalluim vd MaiKensnce Sche�le B,Box 2 .SZ926,')88.69 3. Tdal C ilsl Cosl�snd a for LtCSllalion and Mou4envrct Rinc 1+�2], -:-: 53,368,790.1158 4. (�AOma i ud In.aallalion Pac (�nsch an luWion). 0.275 5. Amwal CLAOma i Maimrnance snd L�slallalim Costs,Fxclud' Cosu of Leued i tt¢[Line 3 x Linc 4] ��.��5931,917.2846 6. Totil labor Hours for MsirlarerKC snd LWalletion of CLslomer i mcr[ond Saviccs(a0ach e lanation) 39440.52 7. Havl Suvice (HSC)p.irie S/L'u�c� �- 523.6184�� hfE7NOD OF BILLWG FOR INSTAI.I.ATIONS(pl�ez m"a"In the�pproprf�te bo:) LssW letior�s billed by Uw hour bosed on ihe}iSC calculated in Line 7. X Incsllations billed as a star�dard charge. STEP B.inslallatlon CTaree s. Unifortn FLSC for all'umallatia�s(From Step A line� ��.��.Na OR 9. Avi c e fw Lwalluion s a.Umvircd Homc L�aallation . ..,.._................. eI.HSC Line 7 �.�>�523 6284 �� ;::�:� .�:: .�.��: a2.Avuage Hours pv Umvired Home Irntalltlion(ScheAile D,Line A) 1 5:..:.;...........: �:�.:� a3.l.l�argc pc Umvired Home L�sullelion[sl x a2] ��535�.4426 b.Pre-wircd Homc Inttallation ... ........_........._.... bl.FLSC[Line 71 ;:'�523.61& 62.Avuage Hours pa Re-wircd Home Lnvlla�ion(Sche�le D,Line B) � � 0 7S:.:.!�.....�.....:....i�.:��i 63.Clierge pc Pro-w'ved Home Lmalla�ion @l x b2J ��Si'7�,721:3�. c.Additional Connoction Insfailation at Timc of Initial Imtallazion . . ..... ........................ cl.HSC�Line 7] _�>.I23.6284 � c2.Avcrege Hours pa Additional Camection 6Wallation az Yime of Inil LntalL[ScheA�le D,Line C] D 5.� c3.Cfiarge pa Additional Cornection I(etsllalion u Time of Initisl Listallelion(cl x c2] St 1.8142 d.Additional Comection LWalialion Re �� S antc Lmallation dI.HSC[Line 7] :I'..123�6284 � .� .. .. d2.Avg.Hours pa Addiuonal Comection Ltstallation Req.Sep.LtstalL[Sche�le D,Line D) 0 75�: d7.Ctiarge pa Additional Corncttion L�stallation Requ'ving Separatc�lation[dl x d2] �� SI Z7?l3� a Other installatior�s(As cified in ScheA�le D.Linc�: . . . .... . ................._...... N.HSC[LiM 7] �."523 628d -�. ; 4.Avciagc Hours per Listallation of Itcm 1 [Schedule D,LiM E,Item 1] 0 75 „<. ��' e3.Charge pa Lutnllelion of Itcm 1[cl x c21 .. 31�7.7213� ... . . ... . ..........._.....__... W.HSC[Gne 7 is�ST3:628d� �': `:;�%%:�: e5.Avuage Hours per LWallalion of IIan 2[Schcdule D.Line E.Item 2] :� .� `��: .:--:0.5_:..�.::.�:::::::::;:�::� e6.C7iarge pa L�slallalion of IIan 1[c4 x e5] .............311.8142 d.HSC[Line 7] I Y23 62&1 e8.Avvage Hours per LWalislion of IIan 3(ScheBile D.Line E,Item 3J 0 e9.Charge per LWalialion of llan 3[el z e8] .. .....Sid.(��0 FCC Form 1305 P�4 Ezccl 4.0 Win,Version 2.0 �,.�y 1g9q , ' � � � ^ . � � �Fcderal Cm�muniwliaa Cottenission . Wash'vigttai,T�C.20554 ' > ApprovcE by:OMB 3060-0592 E�irzs:4/30/97 STEP C.ChrtEa for kaaed Rsmdn o p � (Cdculik x u� fw ead� Ilc�n dlRerenl ) Remo[c 1 Rcrtwtc 2 Ranott 3 10. Tdal MairtanncdSdvicc Haus Care ' colwm&an ScheAile C.L'mc B ��69.866 � 0. � :. �0. i l. EiSC 'e 7 � ��323.6264 . � ��523.6284 �-. S23.b284� 12. ToW Mairlenence/Savice CoA ' 10 x[.ine 1 I j ��I�.31,650.823a �� 50.00 � � f0.00� 13. Mud C ihl CosLS C ' colurtn Bdn ScheA�le C,IJne K 5:7,874.10iS � � 50.00 f0.00 14. Taal Cost otRunotc[Linc I2+line l3 - S?9,52�.9249 � 50.00 � . 50.00 1 S. Numba of Units in Smice ' colurtn from Schchilc C.line C �..1207a. .. 0. ��.��0. 16. Uttil Cost[I.ine 14/l�ne]5] � S2:b453 � 50.00 � � 50.00 ll. Rue per Math(Line 1 N(12)J . 50.2038 50.00 � �� 50.00 STEP D. Q�upes for kased ConvMer Boxa fl b � (CdcW�le x�n for e�ch c�n dllfttent ) ConvMU 1 Commtt 2 Corrvcrter 3 ]8. ToUI Mai1tc`u+rcd5ervite Houtt Corte an' colurtn from Sche�le C.l,in�B "; 411.5917 �. 9158598 �-�0. 19. HSC Line 1 '��S?3.6284 .. .. 323b28G .��5:3.5264 20. Total Mainrnante�SUVice Cost[Line 18 x 19j E9,725.3218 �. �. 521,640.3226 � - �50.00 21. Meid C iW Cosu Cart di column from Schc�lc C,Line K] 586,192.0352� � - 3403,IS9.1748 50.00 22. Total Co�of Carvata(Li�rc 20�Linc 21 . 595,917357 �S4?q829.4995 50.00 23. Numbu of Units in Savice Cwr on� colwm Gom Sche�le C.Linc C] �� 7888. �. . � 17552 �,a�0. 24. Unit CoA[Line 27./Line 23] � ��SI2t599 � S?42001 . .. 50.00�. zs. x,�opaMorth�lineza�pz>] � s�.oisa � � ss.o�� . so.00 STEP E.Ch es for Othtt Leaxd W ment ]6. Total Ma'v�tcnencc/Savice Hours(Corte on' colwtm from Schedile C,Line B) . .�.:p,- I7. HSC�Unc 7] .. :�523.6284�. 28. Total MaiNU�ancdSavice CoA Linc 26 x Line 27 gp,pp 29. Arowd C ital Costs[Care n' colurm Bom Sche�le C,linc Kj �.I��50.00 30. To�al Cost of i [Line 28+Linc 29] �� .50.00 31. Numba of Units in Servicc[Care on' colurtm from Sche�le C,Linc C] � p. 33. Unit Cos[[line 30/Line 31] �50.00 33. Ratc per Month[Line 3i/(12)) .'-�.'-.50.00 METHOD OF BILLING FOR CFIANCWC SERVICE TIERS OR EQUIPMEhT�platt an":"In We�pproprlats bo:� u e Nom'unl Clurge(Fina ihe�romirwl charge in IaM 34) �s a Unifam Howly Smice Chargc X u an Avcragc(,'trerge(EYa the qverege Hours for CTiaqgirig Smitt Tias in L'u�e 366.) STEP F.Ch es for CA Service Tfers or ul menl 34. Nom'viel c for ' Smice Tias If ou use an escalat scale of c es, Iece en"x"in the box a!�he ri OR 35. UnifortnHourl SmiceChar e -,'��8 OR 36. Av c c for Scrvice Tias 36a.HSC Une 7 . . .. .�.;., �: ...�-�-523:6284 .. ;: 366.Avuagc Hours lo(.'hu�ge Scrvicc Ticrs 0.5';i�;i�i�;ii:i:i;:i:j:iii�i>::?;�;:i: 36c.Average Chargc fw Cl�anging Smice Tiers(L'vic 36a x line 36bJ ....�S 11.8142 FCC Fortn 1205 P°�5 Fxce14.0 Wiq Vpsion 2.0 May 1994 . ' • --• .^-., � . Fedaal Cw�cfwiialiora Cortsnission �� Approvcd by:OM8 3060•059I WysFw�gtat D'.C..2055C Fxpves:4/30/97 WORKSHEET FOR CALCULATING TOTAL E UIPMENT AND INSTALLATION COSTS 1. ToW C ilal Costs of LWalluion and Maintcnance[SthcBile A,Box 1 . 3462,001.D3S8 2. TWaI Mual rnscs fw U�sUilation and MaiKrnu�ce[Schc�le B.8ox 7 �.-12,926,i88.69 3a Totzl Arruel C ital Costs of Inaalluion end Maituerencc I+Linc 2) �.��.��53.388.790.1256 4. �stomer i M end LWallation Pcrce e(ettach lamtion). 5. hmwa!(.LAOmtt i `G Mai�¢enarite and It�slsllation Cosu,Exclu' Costs of Lcased i M � � � .. 50.00 3 x Line 4 6. Totd C ilal Costs of I.wscd CLAOma i [Sche�Ie C,Box 3] ��.5517,255.3116 7. Mtmal CLrioma M end LWxiletion Costs�Line 5+Linc 6] �5517�553ll6 8. Pcrc Allaalion to Fnnchise Ara(see inwuctions) 9. AllaWCd Amual i mcm and ImWlation Coa(Linc 7 x Linc 8j � �50.00��. �o. Mo�.t� ��e,�a�u�;o�con[�0 9 i�izN so.oti I1. Numba of Basic Subscribus in Franchise 12. More1J i erc and LWallation CoA v Subsaiba�line 10/Une I I) I'I�'}�ylp! 13. Itdlation Ad'ustmrnt Facla See Lahuctiwts) 14. Ad'ustcd Marthi i ad end L�s[elletion Cori a Subsctiber[Line 12 x linc 13] �� pp{y�pi � FCC Fam]205 Page 6 Ezcel 4.0 Wir�Version 2.0 1„fay iqyq Fedual Comreutitetiaa Compission � Approved by:OMB 3060-0592 Wcslun�oM1 D.'.,'. 20554 Fxpires:4/30/97 SUNA4ARYSCF�DULE Clurenl uf inent�nd Installatlon Rates Pmniried Actual 1. es fw Cablc Savice Irmallatiors a.Hourl Ratc[St A.Line 7] � �... � b.Av IrWallelion u: 1.IrnYallni�on of Umv'vcd Homes[St B,Linc 9z7] � ��535.44 f35.78 2.U�sWlction of Rcwircd Homa[Sl B.Linc 9b3] ��.517.72 517.69 3.LWall�tion of AddiUOnel Corneqions u Time of Ltitiil LnYallelion[St B,Line 9c3] ��511.81 55.96 4.L�stallWion of Addilioml Comectio�Re iri S arate hutall[St B,I�ne 9d3 � 317.72 517.89 S. Ot}xr LWalluiorts( c� ) St B,Lincs 9c3,9e6,9e9] ■.xoiocueaua s�2n 517.89 b.U dW de Non-Adtrcssabic � ��SI 1.81 511.93 c. < 50.00 2. Mwthl e for Le�se of Ranotc CoKrols[St C,line 17,colurtms a-c) Ronwlc Cordrol c l: � .��50.30 50.17 Rcrtwtc Catrol c 2: � Sp.pp Rcmotc CaYrol T 3: � ;p.pp 3. Mwphl c tor Lease of Corrvcrta Boxes[St D,Line 25,colwma a-c Comcrta Box T c L � ��51.01� 50.99 Comcna Boz e 2: 32.02 SI.23 ComMa Box e 3: - Sa.pp 4. Morthl fa Lease of OUia i em St E,Linc 33] Olhcr i mau(S ec' ) '�.'50.90 5. Ch c for ' Tias(if m)[Stc F,Linc 34,35 or 36t -311.8L 511.93 LABOR COST AND POLICY CILINGES Iridicate your anma to thc following tivee qucstions by placing an"z"in�hc appropriate box 1.Fiave you includcd thc labor cosu associated with subscnbu cabic drops in your charges fw wtial installation7 8� NO 2.Have you capitalizcd thc labor costs associazcd with svbscribcr cablc�ops? YES X NO 3.If you have filed ihis fam before,have you charged eny policy,e.g.,cosl accounting or cost allocation that causes an inercaso in Ne coses 'vrciuded in ihe cortqwntion of equipmere and iiutallatiora charges? B1'ES(l ou must anach a full w�lanation) NO CERTIFICATIONSTATEMENT WIlIFUL FALSE STATE7vfENTS MqDE ON TFQS FORM ARE PUNLSHABIE By FWE AND/OR Q.�RLSONMENT (U.S.CODE TI77B I8,SECT[ON 1001),AND/OR FORFEITURE(U.S.CODE,771'LE 47,SEC770N 503). I certify Ihat tM statempts mede in this f«m are Uue and cmren to ihe best of rtry knowledgc and bclief.and ve made in good faith. Name of ihc Cable Opmta Si�aWre Due Tille FCC Fortn 1205 PT�� &ccel 4.0 Wiq Version 2.0 �y Iqqq . . � �.�HIP B � . � ' , , � ��►1 ��i�i��►1��,��„��i ��c ��11. g9 ?OIIIZ ,�� 3J I N C � R P O R A T E D <_ ' 9J /-. J .:�. �/ c� �'-' � .�.�/ � ,� $- rp;�, ✓,qo �.� � �'�` �f� ---� ' June 12, 1995 }�'��': �{�� ' ��,� ,�;; , . ,.,�3 . V Ms Eugenia Cano Mr. David Stail � ::%��"� City Attorney City Manager � City of Alvin City of Nassau Bay 216 W. Sealy Street 1800 Nasa Road One Alvin, Texas 77511 Nassau Bay, Texas 77058 The Honorable Roger Nylin Mr. Ron Wicker Mayor City Manager City of EI Lago City of Seabrook 98 Lakeshore Drive 1700 First Street EI Lago, Texas 77586-6398 Seabrook, Texas 77586 Mr. Ron Cox Mr. James McFellin City Manager City Manager City of Friendswood City of Webster 109 Willowick Avenue 311 Pennsylvania Friendswood, Texas 77546-3898 Webster, Texas 77598 Mr. Mark Sokolow The Honorable James Cumming City Attorney Mayor City of League City City of Taylor Lake Village 300 West Walker 500 Kirby League City, Texas 77573 Taylor Lake Village, Texas 77586-5298 Ms. Cheryl Wilson Mr. Nicholas Finan Attorney City Manager Olson & Olson City of La Marque 3485 Three Allen Center 1111 Bayou 333 Clay Street La Marque, Texas 77568 Houston, Texas 77002 Dear City Representatives: Reed-Stowe & Co., Inc. has completed the review of the Form 1205 submitted to the Cities by TCI Cablevision of Houston, Inc. (TCI) on or about March 2, 1995. The Form 1205 has been filed with the intent of establishing revised equipment lease and installation services (equipment basket) charges based on TCI's cost for such services during the calendar year 1994. 1 2770 COIT ROAD AT LBJ FWY.,SUiTE i 107 'I O'I W. SIXTH STREET, SUITE 225 DALLAS,TEXAS 75251 AUSTIN, TEXAS 7870'I (214]458-9388 [5'12] 479-099'I FAX(214]458-0205 FAX [512]479-8992 � • • ' ' , • � � : • : . . , - City Representatives June 12, 1995 Page 2 As you are aware, the FCC rules and regulations authorize cable operators to file the Form 1205 annually to propose changes in the equipment basket rates. The test year on which the proposed rates are to be based is the most recent calendar year prior to the filing. As with the other FCC rate application forms, the Cities had the opportunity to extend the review period of the Form 1205 filing to 120 days from the date of the filing for adequate analyses and rate determination. Based on the early March 1995 date of receipt, the Cities must take action in June, contingent upon the official date each City received TCI's Form 1205 filing. The following discussion provides a brief explanation of the analyses Reed-Stowe performed, our findings and conclusions and a listing of the recommended actions that we believe the Cities should take in order to establish the appropriate equipment basket rates for the cable subscribers within the Cities' cable franchise areas. SUMMARY OF ANALYSES The four major components included in the development of the equipment basket rates for installation activities and equipment lease are: 1. The development of the actual capital costs and associated labor costs of providing various installation and equipment maintenance activities; 2. The development of the annual number of hours spent to provide the installation and maintenance services and for which the cable operator incurred the costs identified in Item 1 above. By dividing the costs from Item 1 by the total annual hours, the Hourly Service Charge (HSC) is determined; 3. The development of the average time spent by type of installation and equipment maintenance service. By multiplying these time estimates by the HSC, the rate for each particular service is established; and 4. The development of the actual capital costs associated with the equipment that can be leased from the cable operator for particular cable services (i.e., converter and remotes). These costs, along with any actual hourly costs are used to developed a rate per month for the lease of this equipment. Our analyses focused on TCI's development of these factors in order to determine the appropriateness of the resulting rates that are being proposed by the Company. • • • ' . , • � � . : . '' . , . City Representatives June 12, 1995 Page 3 During the course of our evaluation, we noted discrepancies in two of the components listed above. First, the Company's computation of the total number of annual hours spent to perform the services was not based on the actual hours spent for these activities. Second, TCI did not comply with the FCC regulations in its determination of the actual capital costs associated with the equipment that is available for lease by the subscriber. INSTALLATION AND EQUIPMENT MAINTENANCE HOURS In determining the annual operating expenses incurred as a result of providing the various installation and equipment maintenance services, TCI developed an allocation of the total operating costs to the equipment basket based on the total number of actual hours devoted to such activities. However, TCI used an estimate for the numk�er of hours to perform the activities in determining the hourly cost to provide the services. A key component in the development of the appropriate Hourly Service Charge is the total annual hours devoted to equipment basket activities. TCI has estimated the total number of hours by using a full time equivalent employee count times 1,863 hours per employee. This per employee estimate is derived by the following formula: Total working hours in one year 2,080 Less: Vacation hours 80 Sick time 57 Paid holiday 80 Total labor hours for equipment basket 1.863 Clearly, this is an estimate of the hours and not the actual hours spent on the regulated activities. In our opinion, it is inconsistent to use the actual hours to compute the allocation factors for the costs and an estimate of the hours to determine the hourly cost to provide the services. In addition, the methodology used by TCI is in direct conflict with the FCC instructions for computing the HSC. The instructions for calculating the Hourly Service Charge include: ' � ' , ,.'� ^ ' ' ' • . � , . ' � City Representatives June 12, 1995 . Page 4 ". . . To calculate the HSC, you will compute your annual capital costs plus expenses for the maintenance of customer equipment and the installation of basic service tier. You will divide the total costs and expenses by the total number of person-hours spent on those activities over the past year." We have used the actual hours as presented by TCI of 39,440.52 as compared to the 39,017.11 hours proposed by the Company. This recommended adjustment results in an HSC of $23.63. The Company's methodology which estimates hours results in a HSC of $23.89. In our opinion, the use of actual hours when available and the total annual costs is consistent with the FCC instructions and should be used to develop the appropriate HSC on which equipment basket rates are based. CAPITAL COSTS FOR LEASED CONVERTERS TCI has adjusted the actual capital costs for the converters that are available for lease to include a "direct overhead" component of $20.00 per converter. The Company states that these costs are for additional materials, installation and retrieval labor and the management of the converter population. These additional costs are not recorded on the books and records of TCI, but are only being considered for ratemaking purposes. In our opinion, these costs should not be allowed for the following reasons: 1. TCI did not "unbundle" these costs in its initial Form 1205 submitted in conjunction with the Form 1200 rate computation. If these costs had been "unbundled" at that time, the resulting monthly service charge would have been lower than that authorized by the Cities. To allow the Company to include this "direct overhead" in this Form 1205 computation results in a "double recovery" of these costs; once from the monthly service charge, and again from the converter lease rates. 2. The "direct overhead" costs being proposed are inconsistent with the FCC's definition of °annual purchase costs" that are appropriately included in the capital costs of leased equipment. 3. These costs are not capitalized on the books and records of the Company. The FCC instructions are to include data that comes from the cable operator's general ledger and subsidiary records maintained in accordance with GAAP. . . ' � �„�, , � . � _ . - , . City Representatives June 12, 1995 Page 5 4. The Company has provided no basis of support for the $20.00 per converter for the Cities' franchise areas. In addition, TCI provided no supporting documentation for the amount for any specific franchise area. It appears that the "direct overhead" is determined on a national level and used in the Form 1205 filings regardless of the franchise area under consideration. For these reasons, we are recommending that the Cities disallow the $20.00 per converter of "direct overhead." The result of removing these costs along with our recommended adjustment to the HSC reduces the proposed monthly rate of $1.38 to $1.01 for standard converters and reduces the proposed monthly rate of $2.38 to $2.02 for addressable converters. INSIDE WIRE MAINTENANCE PROGRAM The final issue we reviewed was the "inside wire maintenance program" offered by TCI. By subscribing to the program, a subscriber can pay a monthly rate of$0.49 in order to have any repair and maintenance performed on inside wiring should it be required. As was discussed in our report on the Form 1200 rates, TCI maintains that this service is not regulated by the Cities and therefore, the rate can be determined by the Company. It is our opinion that the "inside wire maintenance program" is a regulated service and the Cities have the authority to determine the rate based on the actual cost of providing the service. Many other communities have taken this position and have requested that the FCC make a determination as to its regulated status. To date, the FCC has not rendered an opinion, but the Cities should determine an appropriate rate in order to have an ability to institute such a rate should the FCC determine that it is a regulated service. We have calculated a rate for the "inside wire maintenance program" based on the FCC directive from the Report and Order, issued May 3, 1993 which provided that service contracts could be entered into with subscribers, provided that: ". . . The price of these contracts shall be based on the HSC times the estimated average number of hours for maintenance and repair. . ." By using the recommended HSC of$23.63 times the number of hours in 1994 spent on inside wire maintenance of 462.30, the total annual cost is $10,924. To determine the monthly rate, we divided the total cost by the December 1994 subscriber count of 52,821. This results in an annual rate of$0.21, or $0.02 per month. . . ,,�"� '"'� ., �. fl ' City Representatives June 12, 1995 Page 6 SUMMARY OF RECOMMENDATIONS Based on the above findings and conclusions, we recommend that the Cities take the following actions: 1. Establish an Hourly Service Charge of $23.63 to be used to develop the installation and equipment rates. 2. Adopt installation and equipment rates shown on Exhibit A. 3. Adopt an "inside wire maintenance program" rate of$0.02 per month. 4. Adopt an Accounting Order only as it relates to the °inside wire maintenance program" in order to allow the continuation of the $0.49 per month until such time that the FCC makes a final ruling on the regulated/non-regulated status of this service. By having the Accounting Order in place and an approved rate, the Cities can order a refund on this service should the FCC determine that it is a regulated service. Reed-Stowe & Co., Inc. appreciates the opportunity to provide assistance to each of the respective Cities. If you have any questions regarding this report, the project activities or any of the recommendations presented, please feel free to contact Ms. Connie Cannady at (214) 458-9388. Very truly yours, ��a� �� `"�-�. Reed-Stowe & Co. Inc. . , ° . � �-vxr,>T�, c � �Z o� . , • � 1« ` 1�1:1:11-5'1'11�1�1: .� 1:��. �g-�,o�»► �`3�so> � INGORPQRATED ti ��ji�l � .� N � } � e � .t� • N �'v� ,. C`-� I��' �v y � �` July 3, 1995 �� ;� `r �� '� �� ; G�.::,; , �� u� L�J,.: Ms. Eugenia Cano Mr. David Stail City Attorney City Manager ��? City of Alvin City of Nassau Bay 216 W. Sealy Street 1800 Nasa Road One Alvin, Texas 77511 Nassau Bay, Texas 77058 The Honorable Roger Nylin Mr. Ron Wicker Mayor City Manaaer City of EI Lago City of Seabrook 98 Lakeshore Drive 1700 First Street EI Lago, Texas 77586-6398 Seabrook, Texas 77586 Mr. Ron Cox Mr. James McFellin City Manager City Manager City of Friendswood City of Webster 109 Willowick Avenue 311 Pennsylvania Friendswood, Texas 77546-3898 Webster, Texas 77598 Mr. Mark Sokolow The Honorable James Cumming City Attorney Mayor City of League City City of Taylor Lake Village 300 West Walker 500 Kirby League City, Texas 77573 Taylor Lake Village, Texas 77586 Ms. Cheryl Wilson Mr. Nicholas Finan Attorney City Manager Olson & Olson City of La Marque 34ts� Tnree F�lien Cer�ter 11 i 1 bayc,u 333 Clay Street La Marque, Texas 77568 Houston, Texas 77002 Dear City Representatives: Reed-Stowe & Co., Inc. submits the following as a supplemental report to the June 12, 1995 report regarding our evaluation of the FCC Form 1205 received by the Cities from TCI. In the June 12th issuance, Reed-Stowe recommended that the Cities allow TCI to continue to charge $0.49 per month for the inside wire maintenance program until such time that the FCC issued a ruling regarding the regulated status of this particular service. In addition, we recommended that 1 2;�;O GOIT r�O�D AT LBJ FWY.,:�Ji�'�c i i G7 �1 O i W'. SIX'H `o i r��E�, SiJI�i i- �2S DALLAS,TEXAS 75251 AUSTIN, TEXAS 7870'I [214)458-9388 [5'12]479-095'I FAX[214)458-�205 FAX [512j 479-B592 '. �. � • ' - . � ._ ,�.. . . 'City Representatives July 3, 1995 Page 2 ' the Cities established a regulated rate of$0.02 per month in the event that at a future time the FCC determined that the fee for the inside wire maintenance . program was to be regulated by the franchising authority. It is our opinion that the FCC has made such a ruling. In an order adopted June 15, 1995 (DA 95-1352) involving Multivision Cable N, the FCC addressed the issue of whether an operator could charge a separate maintenance fee for the repair and maintenance of inside wiring within the customer's premises. In the ruling, the FCC clarified that if the operator owns the inside wiring, then the operator must justify the rate for the maintenance of such wiring through the development of a lease rate in the equipment basket rate computations. Further, under these circumstances, the: ". . . subscribers can not also be charged a separate wire maintenance fee." If the customer owns the inside wiring, (the position that has been presented by TCI), : °. . . no lease rate would apply, obviously, but Multivision's costs of providing any maintenance and repair of that wiring may be recovered through a service contract. Our rules provide that charges for such service contracts must be based on the operator's HSC multiplied by either the estimated average number or the actual number of hours for maintenance and repair." As discussed in our report of June 12th, the recommended rate of$0.02 per month for the inside wire maintenance program was computed based on the HSC times the number of hours devoted to this service as supplied by TCI in its response to requests for information. Given this recent rulina by the FCC and that the recommended rate of$0.02 was developed in compliance with the FCC rules, it is our opinion that the Cities can order this rate for the inside wire maintenance program. Further, because many of the Cities already have an accounting order in place as it relates to the inside wire maintenance program (FCC Form 1200 rate ordinances), the Cities can order a refund of the difference between the previously determined rate of $0.018 (rounded to $0.02) and TCI's charge of$0.49 from the period July 14, 1994 until such time that TCI reduces the rate in compliance with the Cities' rate orders. For those Cities that did not establish an inside wire maintenance rate during the Form 1200 process, a refund can still be ordered from the effective date of the rate order on the Form 1205 to the time that TCI changes the rate. As with all i ,� , , • � � 'City Representatives July 3, 1995 Page 3 other refunds, TCI is required to remit the interest that has accumulated on the refund amounts. If you have any questions regarding this supplemental report, or need further clarification of the issue presented, please feel free to call Ms. Connie Cannady at (214) 458-9388. Very truly yours, , �- 5�� , �� . Reed-Stowe & Co., Inc.