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05-243�� J l,i-� � �la 3 I W COUilcil File #�J' Z�3 Green Sheet # 3025764 RESOLUTION CITY OF SAINT PAUL, MINNESOTA Presented By Referred To ' Committee: Date: l9 RESOLTJTION OF THE CITY COUNCIL OF ST. PAUL, MINNESOTA, SETTING CABLE TELEVISION RATES FOR EQUIPMENT AND INSTALLATION WHEREAS, under Section 623 of the Cable Communications Policy Act of 1984, 47 U.S.C. § 543, as amended ("Cable AcY') the City of Saint Paul, Minnesota ("Cit}�'), is permitted to regulate rates for basic cable service and equipment (including installations); and WHEREAS, the Comcast of St. Paul, Inc., ("ComcasY') submitted a filing on or about February 27, 2004 purporting to justify its equipment and installation rate for the period Junel, 2004 through May 31, 2005 (the 2004 Form 1205 Filing); and submitted a filing on ar about the same date purporting to support basic service rates for the same period (the 2004 Form 1240 Filing); and WHEREAS, the City has one year from the filing date to issue a final order with respect to those filings, except as the deadline for action has been extended to April 1, 2005 for action on the 2004 Form 1205 Filing; and WHEREAS, the City has worked with the firm of Ashpaugh & Sculco, CPAs, PLC to review the 2004 Form 1205 Filing, and has received from that firm a letter Final Report (January, 2005), an Addendum to Final Report (January 18, 2005), and an Enata to Final Report, regarding that review; has received ComcasYs written comments (February 11, 2005) regazding the reports; has received a responding Supplemental Report from Ashpaugh & Sculco (February, 2005) pertaining to ComcasYs comments; and has considered those and other comments received during the course of the review of the Comcast filing; THEREFORE, BE IT RESOLVED, The attached, "ORDER SETTiNG CABLE TELEVISION RATES FOR EQUII'MENT AND INSTALLATION PURSUANT TO FCC FORM 1205 FILED ON OR ABOUT MARCH 1, 2004," is hereby adopted as if fully set forth herein, and shall govern the equipment and installation rates charged within the City of St. Paul by Comcast. 2. This Resolution, including the Order incorporated by reference herein, shall be effective immediately upon passage. 3. This Resolution and the Order incorporated herein are based on information provided to the City by Comcast. If the information provided Comcast proves to have been false, misleading or incomplete, the City reserves the right to make such further adjushnents to rates as it may find appropriate. Yeas �'ays Absent Benanav � Bostrom � Harris �/ Helgen � I.anhy Montgomen Thune Adopted by C Adoprion Cer B Approved by By: 05-a�3 Requested by Office of Technology: BJ'� � ��h' I�LLii�c�� Form Approved by City Attorney �\ � Refened To Committee: Date: SETTING WHEREAS, under Section ("Cable AcY') the City of S and equipment (including i: 7TION OF THE CITY COUNCIL OF ST. PAUL, MINNESOTA, TELBVISION RATES FOR BASIC CABLE SERVICB AND EQUIPMENT of the Cable Communications Policy Act of 1984, 47 U.S.C. § 543, as amended ?aul, Minnesota ("Cit}�'), is pernutted to regulate rates for basic cable service `�tions); and WHEREAS, the Comcast of St. Pau Inc., ("Comcast") submitted a filing on or about February 27, 2004 purporting to justify its equipment an 'nstallation rate for the period Junel, 2004 through May 31, 2005 (the 2004 Form 1205 Filing); and submitted filmg on or about the same date purporting to support basic service rates far the same period (the 2004 Form 1 40 Filing); and WHEREAS, the City has one year from the fili�g date to issue a final order with respect to those filings, except as the deadline far action has been extended to April 1, 2005 for action on the 200A Form 1205 Filing; and WHEREAS, the City has worked with the firm of Ash�ati 1205 Filing, and has received from that firm a letter Fin`al (7anuary 1&, 2005), and an Errata to Final Report, regardi comments (February 11, 2005) regarding the reports; has AsHpaugh & Sculco (February, 2005) pertaining to Comc comments received during the course of the review of the THEREFORE, BE IT RESOLVED, Council File # �' �� 3 Green Sheet # _3025764 RESOLUTION OF SAINT PAUL, MINNESOTA � gh & Sculco, CPAs, PLC to review the 2004 Form Report (7anuary, 2005), an Addendum to Final Report ag that review; has received ComcasYs written re�eived a responding Supplemental Report from asY� comments; and has considered those and other Com�ast filing; The attached, "ORDER SETTING CABLE TELEVISIf INSTALLATION PURSUANT TO FCC FORM 1205 I 2004," is hereby adopted as if fully set forth herein, and installation rates charged within the City of St. Paul by i RATES FOR EQLJIPMENT r1ND ED ON OR ABOUT MARCH 1, the equipment and 2. This Resolution, including the Order incorporated by reference hei in, shall be effective immediately upon passage. `� � 3. This Resolution and the Order incorporated herein are based on informatibn provided to the City by Comcast. If the informarion provided Comcast proves to have been false�misleading or incomplete, the City reserves the right to make such further adjustments to rat� as it may find appropriate. � Benanav , Bos�om Harris Aelgen L��, Mantgomery Thune Yeas �� Nays AdoptedbyCouncil: Date Adoprion Certified by Council Secretary � Appcoved by By: 65- 2�,3 Requested by Office of Technology: Absent BY: �l�-F.rii� �;�� Forsn Approved by City Attomey By: Approved b} � �'�� l• 7�� t75-�y3 Executive Summary 1205 Rate Order for Setting Equipment & Installarion Rates Background In late February, 2004, Comcast filed with the City FCC Form 1205, "Determining Regulated Equipment and Installation Costs," (1205) that sought the City's approval of a change in the company's equipment rates; i.e., converters, remotes, etc., and installation rates. This same 1205 filing was submitted to all Comcast communities nationwide, using the same data for setting the same rates for all communities. The City of St. Paul joined 19 other local governments entities, which represent over 1'h million Comcast subscribers nationwide, and retained financial consultants (Consultants) to review the 1205 rate filing. The 20 local government entities represent almost 100 cities, townships and counties, including Los Angeles, Denver, the District of Columbia, and eiu�t cable commissions, including six commissions in the Twin Cities metro area. After a lengthy review of support materials submitted by Comcast, including detailed discussions and analysis of the issues raised by Comcast, the Consultants developed recommendations and conclusions as to the recalcularions of ComcasYs equipment and installation rates, and which are contained in their voluminous Final Report, addendums to the report and attachments (Consultant Report). Rate Order Findings and Action Based on the findings from the Consultant Report, the Consultants determined "that Comcast's filed rates for equipment and installation are unreasor�able and do not comply with the FCC rules and applicable law." The Consultant Report further found the rates should be lowered as listed on Page 3 of the attached Rate Order, based "upon the best information made available to them." The Consultant Report and subsequent Rate Order were issued nationally to the joint rate review government entities. The Rate Order requires that Comcast within 60 days from the effective date of the Order, "make all rate reductions and refunds that are necessary based on the rates" as listed on Page 3 of the Rate Order. Furthermare, Comcast shall refund all amounts charged to subscribers fbr equipment and installations that exceed the rates as listed by the Consultants. FCC Involvement Comcast has the legal right to appeal the City's Rate Order by appealing it to the FCC within 30 days of the Rate Order adoption. In the likely event that Comcast does appeal, the City has 15 days to submit their comments to the FCC. As this 1205 rate review process and Rate Order has been conducted by the City's Consultants on a natianallevel, any appeal by the City will be submitted jointly with the other rate review partners. Depending on how the FCC elects to review the Rate Order, appeals and reply, the Rate Order may be allowed to take effect within the 60 days, or stayed pending fin review by the FCC. �-a�t3 ORDER 3ETT]NG CABLE TELEVISION RATES FOR EQUIPMENT AND INSTALLATION PURSUANT TO FCC FORM 1205 FILED ON OR ABOUT MARCH 1, 2004 March 23, 2005 p5-�u3 Table of Contents I. BACKGROUND .................................................................................................................... 1 A. The City's Review of ComcasYs National Form 1205 ....................................................... 1 II. FINDINGS AND CONCLUSIONS ....................................................................................... 3 A. Bonuses and Coxnmissions ................................................................................................. 4 B. Maintenance and Repair — Plant and Equipment ................................................................ 6 C. Payroll Tases ...................................................................................................................... 7 D. Property Tases and Insurance ............................................................................................. � E. Miscellaneous Regulated Hours ......................................................................................... 8 1 . Warehouse Personnel ...................................................................................................... 8 2. Office Personnel .............................................................................................................. 8 F. Installation Activity Hours .................................................................................................. 9 G. Annual Employee Labor Hours ........................................................................................ 11 A. Inside Wiring .................................................................................................................... 12 I. Weighted Installation Times ............................................................................................. 13 J . VCR Connections ............................................................................................................. 14 K. Customer Trouble Calls .................................................................................................... 15 L. DVR Converters ................................................................................................................ 16 M. Unreturned Equipment Charge .......................................................................................... 17 III. ADDITIONAL RECOMMENAATIONS OF CONSULTANTS .................................... 18 A . Contract Labor .................................................................................................................. 18 B. Sampling Issues ................................................................................................................ 19 C. Responses to Data Requests ..................................................:........................................... 20 IV. ORDERING CLAUSES ................................................................................................... 21 ATTACHMENT 1: FINAL REPORT BY ASHPACTGH & SCULCO, CPAs, PLC AND FRONT RANGE CONSULTING, INC., TO THE PARTICIPATING LOCAL FRANCHISING AUTHORITIES REGARAING THE NATTONAL FCC FORM 1205 FILED BY COMCAST CABLE COMMIJNICATIONS, INC., IN 2004 (WITH APPENDICES) ATTACI�NT 2: ADDENDUM TO FINAL REPORT BY ASHPAUGH & SCULCO, CPAs, PLC AND FRONT RANGE CONSULTING, INC., TO THE PARTICIPATING LOCAL FRANGHISING AUTHORTTIES REGARDING THE NATIONAL FCC FORM 1205 FILED BY COMCAST CABLE COMNIUNICATIONS, INC., IN 2004 (January 18, 2005) ATTACHMENT 3: ERRATA TO FINAL REPORT ON THE COMCAST NATIONAL FORM 1205 ATTACHMENT 4: COMCAST CONIMENTS ON CONSULTANTS' REPORT ATTACHMENT 5: SUPPLEMENTAL REPORT OF ASHPAUGH & SCULCO, CPAs, PLC AND FRONT RANGE CONSLJLTING, INC., TO TI�E FEBRUARY 11, 2005 CONLNIENTS OF COMCAST CABLE COMMI.INICATIONS, LLC ON THE FINAL REPORT AND ADDENDUM REGARDING THE NATIONAL FCC FOKM 12Q5 (February 2005) b5-a�3 ORDER SETTING CABLE TELEVISION RATES FOR EQI7IPMENT AND INSTALLATION PURSU.ANT TO FCC FORM 1205 FILEA ON OR ABOUT MARCH l, 2004 I. SACKGROI7ND A. The CitV's Review of Comcast's National Form 1205 1. The City of Saint Paul ["Cit}�'} has limited authority to regulate cable operator equipment and installation rates under applicable law and Federal Communicarions Convnission ("FCC") regulations. The FCC has developed forms that an operator subject to regulation must file to justi£y equipment rates. 2. Comcast Cable Communications, Ina ("ComcasP'), filed with the City FCC Form 1205, "Determining Regulated Equipment and Installation Costs, `Equipment Form"' ("2004 Form 1205"), on ar about February 27, 2004, seeking the City's approval of a change in the maximum permitted rates for equipment and installation. 3. The filing Comcast made in the City was also submitted to other communifies nationwide. Comcast relied on the same data in setting equipment and installation rates for all the coinmuniries that received the national filing. The City joined with other communities to hire financial consultants Ashpaugh & Sculco, CPAs, PLC, and Front Range Consulting, Tnc. ("Consultants"), to review the national Rorm 1205 filing. 4. After review of the materials submitted by Comcast, and detailed discussions and analysis of the issues raised, and using best auailabie information when necessary, the Consultants developed recommendations and conclusions as to the recalculation of ComcasYs equipment and installation rates, which are contained in (a) the Final Report by Ashpaugh & 1 b5-�y3 Sculco, CPAs, PLC And Front Range Consulting, Inc., to the Participating Local Franchising Authoriries Regazding The National FCC Form 1205 Filed by Comcast Cable Communications, Inc., in 2004 (January 2005), appended to this Order as Attachment 1("Final Report"); (b) Addendum to Final Report by Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting, Inc., to the Participating Local Franchising Authorities Regazding the National FCC Form 1205 Filed by Comcast Cable Comxnunications, Inc., in 2004 (January 18, 2Q05), appended to this Order as Attachment 2("Addendum"); and (c) Errata to Finai Report on the Comcast National Form 1205, appended to this Order as Attachment 3. 5. Comcast submitted comments on these documents on Pebruary ll, 2005 ("Comcast Comments"). The Comcast Comments are appended to tlus Order as Attachment 4. The Consultants submitted a response to these comments in February 2005 ("Supplemental Report"). That response is appended to this Order as Attachment 5. The four Consuitant documents are refened to collectively herein as the "Consultant Reports." 6. FCC rules place the burden on the cable operator to prove that its existing rates for basic service and equipment are reasonable under applicable federal law and regularions. 47 C.F.R. § 76.937(a). The City has provided Comcast with ample opporhuury to provide the necessary support for its rates.. To the extent Comcast has failed to carry its burden of proof, the City may re}ect Comcast's rates, set rates itself based on the best available information, and order refunds. See, e.g., Comcast Cablevision of Tallahassee, Inc.: Appeal ofLocal Rate Order of City of Tallahassee, Fla., DA 95-1561, 10 FCC Rcd 7686 at ¶¶ 28-29, 37, 48-49, and 54 (1995) ("Tallahassee") 7. Aaving considered the record before it, the Consultant Reports, comments made by Comcast, and any comments made by the public, the City finds, based on the best 2 a5-ay3 informarion available to it, and for reasons set forth below and in the Consultant Reports, that ComcasYs filed rates for equipment and installation are unreasonable and do not comply with FCC rules and applicable law. It further finds, for reasons set forth below and in the Consultant Reports, that the rates should be no higher than the rates in Column B, below. The rates in Column A are those proposed by Comcast. A B I Comcast Rates as i Filed Rates Ado ted E ui ment Rates Remote Control $ 033 $ 0.29 Basic-Only Converter (Converter 1) $ 130 $ 0.�9 ; ; Addressable or Digital Converter or DVR $ 4.83 $ 4.10 , {Converter 2) I FIDTV Converter (Converter 3) $ 833 $ 6.06 ' f Installation Rates ' Hourly Service Charge $ 35.17 $ 30.10 Unwired Installarion $ 52.23 $ 37.88 j Prewired Installation $ 31.40 $ 19.83 { � Addifional Outlet (Same Tri ) $ 17.15 $ 1228 ; Additional Outlet S azate Tri ) $ 25.31 $ 14.72 ' Move Outlet $ 23.60 $ 14.14 II ade on-addressable) $ 1712 $ 12.61 f Downgrade (Non-addressable) $ 15.55 $ 12.58 U gradeiDowngrade, Addressable $ 1.99 $ 1.99 , VCR Connect (Same Trip) $ 8.79 - VCR Connect (Se azate Tri ) $ 1610 $ 13.78 { ( Customer Trouble Calls $ 23.27 $ 4.45 { II. FINDINGS AND CONCLUSIONS 8. As shown in the Supplemental Report, the Consultants identified a number of errors in the Form 1205 that Comcast neither disputes ttor cozrects. Supplemental Report, Part III. City adopts the undisputed adjushnents made by Consultants, for reasons set forth in the 3 � Green Sheef Green Sheet Green Sheet Green Sheet Green Sheet Green Sheet � DeuartmenUnfficn/enune�l� ' . n�wlnw:new. V✓ -�a3 -� �r��o��a��« Co�act Type: Confact Person & Phone: Karen .lotmson 6-&910 RE-RESOLUTION (Date): ,�-0s � ' Assign Number For Routim,� Ui�lM Green Sheet NO: 3025764 Department SeMToPerson InitiaUDate 0 ec ol d Ma a e ent S � _�� 1 Techno]oQe aod AfaeaPemeet S Deuarhnent D'vector 2 ,CtihAttomev Lisa Vei[h 3 0's Offic or istant a onsoa 5 " Qerk i C7erk Toql # of Signature Pages _(Clip All Locations for S ign a ture) Action Requested: Resolurion Setting Cable Television Rates for equipment and installa6on by Comcast of St. Paul, Inc. Pursuant to FCC form 1205 filled Febmaiy 2004 PlanM� Commission CIB Committee CiHI Senrice Cqmmission 1. Has this person/firm e�er worketl under a coMract for this department? Yes No 2. Nas this persoNfittn e�er been a city employee? Yes No 3. Does this personlfirtn possess a skill fwt normally possessed by any cunent ciry employee? Yes No Enplain all yes answers on separate sheet antl attach to green sheet InRiating Probiem, lssues, Opportunity (Who, What, When, Where, Why): AdvantaSies liApuroved: Disadvanta9es If NotApproved: iotal Amount of Transaction; Funding Source: Fina�cial Information: (F�cplain) CostlRevenue Budgeted: Act'rvity Mumber: March 15, 2005 11:41 AM Page 1 OS- a� The complete Comcast document is available for review in the City Council Offices, Room 310. �•aa3 Final Report. These errors alone justify a finding that the Comcast proposed rates are unjust and unreasonable. 9. The Consultants proceeded to recommend rates based upon the best information available to them. The specific adjustments proposed (and resulting recommended rates) are reasonable in lig�t of the information available. More specifically, Consultants made the following adjustments that Comcast disputed. A. Bonuses and Commissions 10. Comcast included as costs in its Form 1205 bonuses and commissions paid to its employees. Final Report at 15-16. The Consultants eliminated these costs because Comcast failed to provide to provide proof that the bonus and commission payments were in fact related to Form 1205 regulated activities, despite requests that it provide such support. Final Report at 15-16. ll. Comcast azgued in response that a general "Step A" factor based on salaries and wages was sufficient to properly allocate bonuses and commissions between regulated and unregulated equipment. Comcast Comments at 15. But there is no reason to suppose that any of the bonuses and commissions are actually paid for acrivities properly recognized in the Form 1205, a predicate far allocation of any costs to the equipment basket. The company withheld information the Consultants requested in order to determine under what circumstances bonuses and commissions were paid. Even if one assumed that some bonuses ar commissions relate to equipment, there is no reason to suppose that the proportion in which bonuses or commissions are paid on regulated equipment is related to the proportion in which overall salaries and wages relate to regulated equipment. The Comcast Comments do not justify ComcasYs allocation methodology, or justify rej ection of the Consultants' recommendations. � (�•�y3 12. The Consultants also eliuunated the bonuses and commission in light of unbundling concerns. As the Consultants' Supplemental Report explains at 3-4, a series of FCC decisions has made clear that costs can be claimed in the operator's equipment basket "only if they we:e unbundled from the regulated programming service rates ar are new costs incurred since the operator unbundled its equipment costs." See, e.g., TCI Cablevision of Oregon, Inc. dlb/a TCI of Tualatin YttlZey, Inc., DA 99-2227, 14 FCC Rcd. 17685 at ¶ 6(Cab. Serv. Bur. 1449); .Iones Communications of Georgia/South Carolina Inc. d!b/a Jones Communications, DA 04-2448 at ¶ 4(Aug. 4, 2004). 13. The Consultants' review of a number of 1994 Form 1205s indicated bonuses and commissions were not included in Form 1205s by a substantial number of systems covered by ComcasYs narional filing. Final Report at 15 14. The Comcast Comments do not dispute the fact that FCC rules prohibit Comcast from importing into the equipment basket any costs that were not initially unbundled from the Basic Service Tier (`BST") rate without making a conesponding adjustment to the BST rate to prevent double recovery. Rather, Comcast azgues that due to "changing business practices," the FCC's unbundling rules should not be applied. Comcast Comments at 8. Similar ao-uments were raised and rejected in the Tualafin proceeding, and we conclude that they should be rejected here as well, for reasons indicated in the Tualatin decision and in the Consultants' Reports. 15. Comcast also suggests that "it is possible" that these costs are new costs not incutted at the time of the 1994 unbundling, and that it is possible that the costs were unbundied as part of some other adjushnent, and not separately accounted for. Comcast Comments at 8. Comcast, however, provides no evidence to support either supposition, and hence fails to satisfy 5 05��3 its burden of proof, particulazly in light of its failure to provide information regazding past system unbundling. See Final Report at 15; Supplemental Report at 4-5. 16. The problems identified by Consultants, considered separately ar together justified elimination of the bonuses and commissions from rates. B. Maintenance and Repair — Plant and Equipment 17. The Consultants' review of prior 1205s for systems covered by ComcasYs filing indicates that many of the systems had not included Maintenance and Repair — Plant and Equipment ("ivI&R-Plant") costs in the equipment basket, as would have occurred had the cost been unbundled from service rates. Comcast did not claim or show that M&R-Plant costs had been unbundled from service rates for all ar even most of the systems covered by its filing; some of its responses to data requests indicated unbundling had not occurred uniformly. Comcast opposes the Consultants' unbundling adjustrnent concerning M&R-Plant primarily on policy grounds. Its arguments aze rejected, for reasons stated in Section II.A above and in the Consultants Reports. 18. Setting aside the unbundling problem, the M&R Plant costs Comcast included in rates were not supported. As explained in the Final Report, Secrion VIII.C, M&R-Plant costs are associated with both regulated and unregulated acrivities. Comcast developed an allocation methodology for dividing costs among activities, and argues that its methodology was appropriate. Comcast Comments at 13-15. The Consultants argue, however, that the methodology in fact over-allocates costs to regulated equipment. Supplemental Report at 9-10. 'The City concludes ComcasYs methodology was not supported, and over allocates costs to the equipment basket, for reasons set out in the Consultants Reports. The unbundling problem � 05 a�3 identified by Consultants, considered separately or together with the allocation problem, justified elimination of the M&R-Plant costs from rates. C. Pavroll Taxes 19. Since it was necessary to remove bonuses and commissions from ComcasYs costs, the Consultants also eliminated a pro-rata shaze of payroll tases corresponding to the bonus and commission payments. Final Report at 17. The Comcast Comments do not appear to address this issue. D. Pronerty Taxes and Insurance. 20. The Consultants disallowed certain property taYes and insurance costs based on unbundling concems similar to those discussed above, and Comcast opposed the unbundling adjustment for sunilaz reasons. ComcasYs arguments aze rejected, for reasons stated in Section II.A and B above and in the Consultants Reports. 21. In addition, the Cottsultants' review showed that Comcast had over-allocated property taac and insurance costs to regulated services. The issues (and ComcasYs comments) are identical to those discussed in connection with the M&R-Plant. For reasons suggested above, and in the Consultant Reports, see particularly Supplemental Report at 9-10, City finds Comcast's allocations were unreasonable, even setting aside unbundling concerns. The unbundling probiem identified by Consultants, considered separately or together with the allocation problem, justified el'unination of the property tax and insurance costs. 7 os a�3 E. Miscellaneous Re2ulafed Hours 1. Warehouse Personnel 22. The Consultants disallowed wazehouse personnel costs based on unbundling concems similaz to those discussed above. Comcast provides no reasonable ground for including costs it faiied to unbundle, see Secfion II.A and B above and the Consultants Reports. 23. In addition, the Consultants nutially concluded that the personnel costs had been included twice, once in Schedule B(recovering it in the Hourly Service Charge ("HSC")) and once in Schedule C(as a capitalized cost). The Comcast Comments state that Comcast did not in fact include any warehousing costs in Schedule C, but only on Schedule B. Comcast Comments at 16-17. The Consultants do not disagree. However, Consultants also state that the warehouse personnel cost esYimate is not adequately supported. The City agrees, for xeasons indicated in the Supplemental Report at 13-14. 24. Elimination of the costs was appropriate given the unbundling problems, aonsidered separately or together with the failure to adequately support the costs. 2. Of�ce Personnel 25. The Consultants idenfified a sisnilar unbundling concem with respect to office personnel costs. Fanal Report at 19. Comcast provides no reasonable ground for including costs it failed to unbundle, see Section II.A and B above and the Consultants Reports. 26. The Consultants also noted that Comcast had failed to adequately support the time estimates used to arrive at the office personnel costs. Comcast was asked to provide support far these estunates, including any studies performed, and to identify the individuals making the estimates. The Consultants noted that Comcast did not provide any of the requested information, but merely stated that the company had used "past experience" — in effect, 0 a�d�3 demandina that the City take ComcasYs estimates on faith. Final Report at 19. 'I`hus, even assnmina that office personnel costs had not been disqualified by the unbundling issue, Comcast failed to carry its burden of proof with respect to those costs. 27. Comcast aza ed that it had pxovided documents related to the office personnel costs in question. Comcast Comments at 17. The Consultants noted that Comcast broke down its office converter maintenance hours into three components, but failed to provide any supporting studies or detailed explanarions, and failed to identify an individual responsible for ComcasYs brief estimate. The Consultants specifically asked Comcast to explain the high nuxnber of hours associated with this personnel category, but Comcast did not provide any support. Supplemental Report at 14-15. 28. Elimination of the costs was appropriate given the unbundling problems, and the failure of proof, considered separately or together. F. Installation Activitv Hours 29. The Consultants' analysis of the 2004 Form 1205 revealed two problems with respect to the employee time required for installafion activities: (1) a general lack of consistent support for ComcasYs employee rime estimates; and (2) failure to distinguish between time related to installation of subscriber premises equipment (inside the demarcation point), which is relevant to Form 1205 rates, and time related to activiries outside the demarcation point such as installation of subscriber drops, which is not. The second problem resulted in an adjusiment both to employee rime and to contractor time reported by Comcast, and is discussed below in Section II.I. 30. With respect to the lack of support for employee installation tunes: fhe Consultants' Requests far Information ("RFIs") requested Comcast to provide support for the � c o�-a � 3 employee installarion times used by each of the sample systems. Final Report at 19-20. For most of the sample systexns, Comcast provided a table of work tasks that used a point system. Comcast's sample systems clauned tt�at the work task tables were used by its technical personnel to develop the esrimated times. Final Report at 20. In addition, Comcast supplied each sample system with a sheet showing the approximate installation times used by Comcast in the previous year's rate filing, which was only for the former AT&T Broadband systems. It asked personnel to provide their own estimates of install time (although in more than half the cases, the guidance from corporate was accepted). Comcast also had data regarding contractor install times, which should have served as a check on the employee data. 3 L This data pointed in varying directions. The Comcast Comments note that install times are stable from year to year, yet ComcasYs install rime estimates in some cases varied significantly from historical data. The times resulting from use of point system data varied from local fieid estimates, even though the point system is used to schedule field wark. Consultants sought information to explain the variance, and it was not provided. In short, as explained in the Final Report at 23-24 and the Supplemental Report at 5-8, given the significant problems with the data, ComcasYs failure to explain the variations from estimate to estimate, and the failure to separate out tasks properly included in the Form 1205 from those that aze not properly included in the Form 1205, Comcast's install estimates could not be used without adjustment. 32. The adjustments made to the install time were reasonable in light of the data availabie, and particularly in light of the company's failure to adequately explaan its own data. Where point system data was sufficiently detailed, the Consultants used that data to adjust the time for employee installations. The Consultants explained why that data appeared most reliable, Supplemental Report at 7, and that explanarion appears reasonable. ComcasYs 10 o5-a�3 objections to use of the data are not convincing; it claims that point system data was not sufficiently detailed for some systems, but the Consultants make it cleaz that only point system data that was detailed was used in making the adjustment. Comcast clairned its point system typically excluded drive rime, but there is evidence to the contrary. Supplemental Report at 7. FinaIly, Comcast complains that the point system was not designed for rate regulation, but fails to explain why this makes it less reliable. Even assuming that there are problems with the point system data, it appears to be the best data available for developing more reasonable installation time estimates, and City therefore adopts the adjusrinents recommended by the Consultants. G. Annual Emnloyee Labor Hours 33. Comcast xeduced annual employee labor hours in the sample systems by 373 hours to reflect non-productive hours, such as sick leave, holidays, safety meetings, and general paperwork. Addendum at 1. The Consultants found that the support provided by Comcast for this component was out of date and was based on another operator's labor policies. Comcast admit as much. Addendum at 1-2, Comcast Comments at 12. 34. The Consultants included 224 non-productive hours, based on historical data from Comcast systems. Addendum at 1-2. Comcast argues this is unreasonable because under its policies employees may take between 224-304 paid hours off, depending on seniority. But as the Consultants explain, historical experience indicates less than half this time is typically taken. Comcast also seems to complain that the Consukants estimate does not adequately account for administrativeltraining time, but the problem for Comcast is that it has not supported any tnne for those activities. The Consultants' historical data actually includes more time for tra'vung and admiuistrative activities than did the TCI estimates on which the filing was based. The City finds that Comcast has failed to cany its burden of proof with respect to its claimed non- 11 05-��3 productive hours, and that the Consultants' adjustment to ttus figure is based on the best available information. H. Inside Wirin2 35. Comcast included in its 2004 Form 1205 calculation tirue spent on trouble calls related to inside wiring maintenance. But Comcast provides wire maintenance services in two ways: on an individual call basis, and pursuant to a wire maintenance plan program. The Consultants point out that under wire maintenance plans, Comcast does not simply maintaan cable lmes. It also maintains telephone and home network computer wiring. As far as the record shows, Comcast has made no effort to distinguish between calls related to its cable television plant and other inside wiring — it has included all wire maintenance trouble calls in the Form 1205 calculation. Comcast bills subscribers monthly for this service but has made no adjustrnent to reduce inside wire costs by the revenue collected, even though Comcast has included the costs of services provided under the wire maintenance plans. 36. The record suggests that a substantial portion of ComcasYs subscribers may be talciug the wire maintenance plans, and calling on Comcast to maintain non-cable wuing. Comcast does not claim that its trouble ca11 reports included only cable-related ca11s. ComcasYs inclusion of non-cable related calls was error. The Consultants were therefore required to adjust Comcast's estimates in order to ensure that Comcast did not include wire maintenance costs unrelated to regulated cable equipment. The Consultants eliminated fifty per cent (50%) of the trouble calls from the Comcast data Comcast does not propose an aiternative, ar suggest that there is a more rational correction that could be made in light of the a�ailable data. Supplemental Report at 16. 12 o5-a y � 37. Accardingly, the City finds that Comcast failed to support its estimates, and that the Consultants' adjustrnent to those estimates was proper. I. WeiEhted Installation Times 38. In detern�ning the average installarion times used in the Form 1205, Comcast used the installarion time estimates only for Comcast in-house technical personnel, omiriing the time estimates relating to ComcasYs contractors, even though ComcasYs information reveals that contractors perform approximately 54°Jo of all of the installation activities for ihe twenty sample systems. Final Report at 29. The Consultants proposed to adjust installation times to reflect_ a weighted average of time spent on installs by employees and time spent on installs by contractoxs. They concluded this adjustment was necessary because contractor install tunes were substanfially shorter than employee install times in most cases, Final Report at 29, so that a failure to average would overstate the normal time required to complete an installation, and over-recover costs. Final Report at 30 39. Comcast objects to inclusion of contractor installation time because (it claims) contractor reported times do not include drive time. However, as the Supplemental Report points out, (a) the difference in times canuot be explained by drive time alone; and (b) elsewhere in the Form 1205, Comcast has treated its reported contractar install times as if those included drive time. For that reason alone, an adjushnent appears to be appropriate, and gven the treatment of the contractor hours elsewhere in the Form 1205, the Consultants' approach appears reasonable given the information available. 40. The Consultants made another adjustment to contractor-related install costs (and employee-related install costs) to which Comcast objects. Under FCC regulafions, regulated equipment — customer premises equipment — includes equipment inside a"demazcarion poinP' 13 05-a�3 twelve inches outside the connection to the home. Installation and other equipment costs outside that demazcation point belong to the network and cannot be charged to the subscriber as an equipment rate; rather, such costs are recovered by Comcast through its rates for services. Final Report at 20-21. ComcasYs data responses indicate that its installafion calculations included cost related to acfivities outside the demazcation point. Final Report at 25. 41. In order to remove these costs (and associated hours), the Consultants used the ratio of drop-related costs to total contractor labar costs from the review of ComcasYs 2003 Form 1205 filed with Montgomery County, Maryland. The Consultants modified the contractor labor costs in the 2004 Form 1205 based upon this eazlier Comcast data. Final Report at 27. 42. In its comments, Comcast appears to argue that drop-related labar costs outside the demarcation point can be included in the Form 1205 under Comcast Cablevision of Tallahassee, Inc., 10 FGG Rcd. 7686 (1995). Comcast Comments at 16. However, that decision at best pemuts an operator to choose between capitalizing drop labor costs in service rates, or recovering them through the Forxn 1205. Tullahassee at ¶¶ 34-37. As the Supplemental Report shows, Comcast has chosen the former approach, and cannot now seek to recover the costs through the Form 1205. See Supplemental Report at 11-13. Thus, under the Tallahassee rule, exclusion of drop labor costs was appropriate, and the Consultants' adjustment appears reasonable based on the information available.. J. VCR Connections 43. Comcast included in its 2004 Form 1205 time estimates for making VCR conne�tions for the subscriber, both at the same time as an installation and as a sepazate trip. Final Report at 31. 14 05 a�3 44. The Consultants found that Comcast appeared to have included the activity of making VCR connections as part of its normal installation process, and thus no separate chazge is warranted. Comcast also failed to provide sufficient support for its claimed charge for a V CR connecfion as a sepazate installarion. On that basis, the Consultants inirially recommended that Comcast not be permitted to make a separate chazge for VCR connections. Final Report at 31. 45. The Comcast Comments argued that the company had in fact provided some lunited inforxnation about VCR connection costs and tune estimates, and hence that the City should not eluninate any chazge far VCR connections. Comcast Comments at 18-19. 46. The Consultants' Supplemental Report did not disagree that in principle subscribers could be charged for VCR connection, but noted that Comcast had not addressed the factual issue as to the inclusion of VCR connection costs in the normal installation rates charged to subscribers and hence the potential for double recovery. However, the Consultants noted that installers would be likely to incur some costs not otherwise recovered when they made separate trips for VCR connections. Thus, the Supplemental Report recommended a maYUnum permitted rate of $13.78 for VCR connections requiring a sepazate trip, but disallowed an additional charge as part of the normal installation process. Supplemental Report at 17. 47. The City finds that Consultants' revised recommendafions aze reasonable in light of the recard and ComcasYs failure to show that an additional charge is warranted at the tune of installation. However, Comcast may charge far VCR connection on a separate trip at the rate stated in the Supplemental Report. K Customer Trouble Cails 48. ComcasYs 2004 Form 1205 included a separate charge for service calls where customer-owned equipment is at fault. Comcast estnnated that such a service call averages 40 15 05 a�3 minutes to compiete. The Consultants, however, concluded that Comcast had provided no support for this acrivity either in its "poinY' system data or by specifically identifying time for the activity. Final Report at 31. 49. Absent some supporting information, the Consultants concluded it was only possible to include an amount that included drive tune and a short time for customer interacfion. Accordingly, the Consultants reduced Comcast's estirnate by half. Finai Report at 31. 50, The Consultants also identified a fm problem with Comcast's "trouble call" charge. Based on their review of the original 1994 filed Form 1205s, the Consultants do not believe that these costs were originally unbundled by Comcast. If they were not, Comcast is already recovering the costs associated with these trouble calls in its BST rates. However, as a conservative approach, given the absence of further information, the Consultants decfined to eliminate this category entirely. Fina1 Report at 32. � 1. In response, Comcast suggested that a likely scenario for a trouble call of this type would involve more than hventy minutes' fime. Comcast also stated that its technicians sometimes resolve problems for subscribers even when Comcast equipment is not involved. Comcast Comments at 18. The problem is that ComcasYs hypothericals simply do not provide any substantive support for its result. Given the company's failure to provide any reasonable support for its estimate, and the unbundling issue, the choice is really between allowing no time for this activity, or a short time. The Consultants' choice of twenty minutes is reasonable under these circumstances. Supplemental Report at 16. L. DVR Converters 52. In several of the communities participating in the joint review of the national Form 1205, Comcast included a charge on its rate card for converters incorporating digital 16 o�-au3 video recorders ("DVR"�. However, Comcast did not provide support in its 2004 Form 1205 for such a charge. The Consultants found that the costs of DVR converters were not included in the 2004 Form 1205 filing. Final Report at 32. 53. In its comments, Comcast claimed that the DVR chazge should actually have been classified as a service chazge. Comcast Comments at 19. However, DVRs aze equipment, and are used to receive basic service. The ctiarge for the DVR is therefore appropriately regulated pursuant to the Form 1205. (Comcast has not shown that in fact it provides any service over and above the equipment in connection with DVIt usage by subscribers. As the Consultants suggest, if there is a separate service, Comcast may be able to charge for it, but it cannot bundle service and equipment charges.) See Final Report at 32; Supplemental Report at 17. In light of the absence of any support for a DVR charge, the Consultants recommend allowing Comcast to charge subscribers the same amount it chazges for addressable converters. As this is the equipment closest in kind to a DVR, that approach appeazs reasonable. 54. The City fmds that Comcast has not supported an equipment charge for a DVR converter, and finds that Consultants have reasonably permitted Comcast to charge the same price it chazges for addressable converters. Of course, nothing in this Order prevents Comcast from supporting a different charge for a DVR in its next fi&ng. M. Unreturned Epuipment Charee 55. The Consultants noted that Comcast had introduced, but not supported, a charge of $250 to subscribers for failure to retum a CableCard. Final Report at 34. In its comments, Comcast aro ed that charges for unretumed equipment should not be calculated on Form 1205. Comcast Comments at 19. 17 os a�3 56. The FCC has recently ruled that a cable operator's fees for unreturned equipment are not regulated pursuant to Form 1205, although they are subject to regularion pursuant to local or state laws. Basic Cable Service and Equipment Rates of Charter Communications Entertaznment I, LLC, St. Louis, MO (CUZD No. MOO.i45): Appeal of Loca1 Rate Order, File No. CSB-A-0720, Order, DA OS-392 at ¶¶ 4-5 (Nledia Bureau Feb. 14, 2005). Accordingly, this Order will not establish an amount for or otherwise regulate ComcasYs unretumed equipmznt charges. See Supplemental Report at 18. However, the City is not endorsing Comcast's charge through this Order, and reserves all its rights to address such charges pursuant to state or local law. III. ADDTTIONAL RECOMMENDATIONS OF CONSULTANTS 57. The Consultants' investigarion of the 2004 Form 1205 revealed a number of apparent enors and improprieties'in Comcast's �ling for which specific adjushnents could not be made. While these findings do not directly affect the rates set herein, they are noted below insofaz as they may affect future filings. A. Contract Labor 58. Along with equipment-related costs incurred by its own employees, Comcast may recover on Form 1205 costs for contract labor. The Consultants found that Comcast did not use actual invoices to calculate its contract labor costs. Instead, Comcast merely estunated the contract labor costs based on the number of installations contained in certain Comcast reports. It was uncleaz, however, whether all the activities in this estimate were a�tually billed to Comcast Final Report at 16. LF:3 o5-a�3 59. Comcast refused to provide acfuai invoices for the Consultants' review. The fact that the Consultants were not given any zeal data to review raises questions as to the accuracy of ComcasYs estimates. The Consultanfs recommend that Comcast be required to use actual invoices from the contractor and allocate those invoices to regulated and unregulated activities. Regulators would then be able to distinguish between `keal" costs and hypothetical costs based upon unverified data. Final Report at 16. The City concludes this recommendarion is reasouable, particularly in light ofproblems in Comcast data that were identified. B. SamalinE Issues 60. Under the pertinent statute and FCC rules, operatars may make a single, national filing that sets charges for equipment and installation. But, rather than collect data from all its systems and use that data to set rates, Comcast examines data from a sample of systems. The accuracy of the sampling,methodology is thus crirical to the reasonableness of the rates. 61. In its original 20Q4 Form 1205, Comcast did not provide the general description of inethodology and justification of reasonableness required by 47 C.F.R. § 76.923(c)(1). The Consultants asked Comcast to provide the required information. ComcasYs only response was to claim that its averaging methodology had already been approved by the FCC in TCI of Richurdson, Inc.: Petition for Reconsideration of Bureau Order Resolving Locat Rate Appeals (CUID TX1228), Memorandum Opinion and OrdeY on ReconsideYation, 14 FCC Rcd. 11700 (1999) ("Richardson"). Final Report at 35. 62. Richardson, however, did not approve the specific methodology used by Comcast in the 2004 Form 1205. Richardson established that a sampling methodology could be acceptable. But the sampling methodology used in Rickardson is different from that used in the 2004 Form 1205. The mere fact that a sample can be used, and the FCC's willingness to accept 19 b5-a � 3 the particular sampling used in Richardson, does not by itself establish whether Comcast's sample here was statistically valid. Pinal Report at 35-39. 63. The Consultants identified a number of potenrial problems with ComcasYs sampling methodology. Among other things, the Consultants compared the equipment and mstallation rates in the 2004 Form 1205 with Comcast's equipment and installarion rates in other jurisdictions where Comcast did not use the national Form 1205, but rather used special local Forms 1205 instead. The differences found b� the Consultants raise serious concerns that Comcast may be over-recovering its costs in converter rates and installation charges and cast serious doubt on the revenue-neutrality of ComcasYs overall Form 1205 methodology. Final Report at 36, 40-41. Comcast responded to The potenrial problem regarding the number of sample systems used, but then refused to produce documents that the Consultants requested in arder to evaluate Comcast's claims. 64. Due to the difficulty of obtaining tunely and complete inforniation from Comcast, as noted above, it does not seem to be practical to address the validity of the sampling methodology in the 2004 Form 1205 at this tune. Thus, no adjushnents are made to ComcasYs rates in this Order based on the concems described in this Section III.B. The City does, conclude that there is good reason to examine this methodology if its is used 'm future filings, and to decide based on that exaniination whether to reject it or make any necessary corrections that may be permitted under FCC regulations. C. Resnonses to Data Repnests 65. A significant portion of the Final Report, Supplemental Report and Comcast's Commettts is devoted to ComcasYs responses — or failure to respond — to the Consultants' data requests. What is clear is that there were many cases in which Comcast failed to produce data, 20 �5-a�3 even where it had produced comparable data in response to Form 1205s for other communifies in the past (and for the current year}. For example, even setting aside disputes with respect to the form in which certain invoices were produced, Comcast appears to have failed to produce even documents it said it would produce. See, e.g., Supplemental Report at 21. It is also cleaz that the requests were not unreasonable given apparent problems with Comcast's other baoks, records and representations, as suggested by the Consultants' discussion of cable modem costs. 66. We recognize that this is Comcast's fust national filnag. However, the City concludes that ComcasYs responses are fairly taken into account in deciding whether the recommendations of the Consuitants are reasonabte based on the best information available. Further, the City puts Comcast on norice that it should respond promptly and fu11y to requests for information in connection with fuhue filings, in a way designed to pernut the City to conduct a review of documents. It should take steps to ensure that it can perform consistent with this paragraph. Tf it fails to do so, it may be subject to any remedies permitted under the City's franchise or applicable law. TV. ORDERING CLAUSES IT IS THEREFORE ORDERED THAT: 67. ComcasYs maYYimum permitted rates for equipment and installarion are hereby set in accordance with the rates caiculated in the Consultants' Report and (with zespect to VCR Connect (Separate Trip)) the Supplemental Report, as set forth in the table at pazagraph 7, above. The rates set herein .will govem Comcast's equipment and installation rates unfil Comcast lawfully unplements a further rate change pursuant to applicable law. 68. Except as otherwise noted herein, the City adopts the recommendations and the rafionale for the recommendations made by Consukants. 21 d5-d �d 3 69. It is unclear whether Comcast has implemented the basio-only converter rate for which it filed in the 2QQ4 Form 1205. To the extent it has not done so, the greater refund due to such failure to implement the filed rate shall be included in the requirements for reductions and refunds established herein. In addition, Comcast shall, along with the certification required by ¶ 72, file a complete explanarion of its failure to implement the basio-only converter rate. 70. As soon as possible, but in any event within sixty (60) days from the effective date of this Order, Comcast shall make all rate reducfions and refunds that are necessary based on the rates shown above. Comcast shall refund all amounts charged to subscribers for equipment ar installations that exceed the maxnnum permitted amounts specified herein in accordance with 47 C.F.R. § 76.942(d), and shall include interest computed at applicable rates published by the Intemal Revenue Service far taY refunds and addifional tas payments, pursuant to 47 C.F.R. § 76.942(e). 71. Any charges for equipment, installation, or other services based on an hourly rate shall reflect an HSC no greater than the maxunum pernussible HSC shown above. 72. Comcast sha11 file d✓ith the City within ninety days from the date of this Order a certification, signed by an authorized representative of Comcast, statuag whether Comcast has complied fully with all provisions of this Order, describing in detail the precise measures taken to implement this Order. 73. Comcast may chazge rates less than the maacunum rates indicated above for equipment and installation, as long as such rates are consistent with applicable law and aze applied in a uniform and nondiscriminatory way, pursuant to applicable federal, state, and local laws and regulations, 22 o5-d�3 74. The rates set herein are subject to fiuther reduction and refund to the extent permitted under applicable law and regulations, as the same may be amended from time to time. 75. The findings herein are based on the representations of Comcast. Should information come to the City's attention that these representations were inaccurate in any material way, the City reserves the right to take appropriate action. This Order is not to be construed as a finding that the Caty has accepted as correct any specific entry, calculation, explanarion ar argtunent made by Comcast not specifically addressed herein. 76. The City reserves all of its rights with respect to rate regulation, including, but not limited to, any right it may have to reopen this rate proceeding based on new information or rulings by any goveming authority, if it appears that such new in£ormation or rulings could alter the zeasonable rates prescribed by FCC regulations, and any right it may have to "true up" overcharges or underchazges in connection with future rate filings pursuant to 47 C.F.R. § 76922(e)(3). 77. This Order constitutes the written decision required by 47 C.F,R. § 76.436(a). 78. This Order shall be effective March 23, 2005. 74. T1us Order shall be released to the public and to Comcast, and a public notice shall be published stating that this Order has been issued and is available for review, pursuant to 47 C.F.R. § 76.936(b). Date > l 28`.Q 1,OOICs%495.DdC 23 05-d�3 ATTACI�NT 1: FINAL REPORT BY ASHPAUGH & SCULCO, CPAs, PLC AND FRONT RANC'iE CONSULTING, INC., TO TF� PARTTCIl'ATING LOCAL FRANCHISING Ai3THORITIES REGARDING THE NATIONAL FCC FORM 1205 FII,ED BY COMCAST CABLE COMMUNICATIONS, INC., IN 2004 (WPI'H APPENDICES) ��=d�3 Final Report � Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting, Inc. To The Participating Local Franchising Authorities Regarding the National FCC Form 1205 filed by Comcast Cable Communicafions, Inc. In 2004 05 �� 3 `�� ASHPAUGH & SCULCO, CPAs, PLC CertlLcd Pubh: Acmuncx*re m8 Gmsu::ar,vs Front Range Consulting, Inc. TABLE OF CONTENTS I . INTRODUCTION .............................................................................................................. 3 II. Ea�cvT� SuNm�RY ................................................................................................... 3 IILRECO�rmEDRnTES ..................................................................................................5 N. SUMMARY OF ISSUES IDEN"TIFIED .................................................................................. S V. COMCASTNATIONAL FORM 1205 METHODOLOGY ........................................................ 6 VI. CONSULTANTS' REVIEW PROCESS ................................................................................. 7 VII. UNBUNDLING ISSUES ................................................................................................... 13 VIIL DISCUSSIONS OF LSSUES IAENTIFIED ..._ ....................................................................... 15 A. BONUSES / COMMISSIONS ....................................................................................... 15 B. CONTRACT LABOR ................................................................................................. 16 C. MAINTENANCEANDREPATR—PLANTANDEQUIPMENT .........................................16 D. PAYROLL'TAXES ....................................................................................................17 E. PILOPERTY TAXES ................................................................................................. 17 F . LNSURANCE ..................................:.........................................................................18 G. MISCELLANEOUS REGULATED HOURS ................................................................... 19 1. WAREHOUSE PERSOIVIVEL ................................................................................ 19 2 . OFFICE PERSONNEL ......................................................................................... 19 H. INSTALLATION ACTIVITY HOURS ..................................................: ........................ 19 1 . SuPPORT ..........................................................................................................20 2. CONTRACT LABOR ESTIMATES ........................................................................ 25 I. CONVERTERMAINTENANCEATT7MEOFINSTALL .................................................27 J . IrrSIDE WIItt1vG ...................................................................................................... 27 K. WETGHTED INSTALLATION TIMES ........................................................................... 29 L. VCRCONNECTIONS ...............................................................................................31 M. CUSTOMER TY20UBLE CALLS ................................................................................. 31 N. DVRCONVERTERS ................................................................................................32 Page 1 of 42 January, 2005 � Ashpau�h & Sculco, CPAs, pLC aud Front Range Consulting, Inc. All rights reserved Cannot be used without expressed wrmrn pemussion from both organizations. v5 a�F3 0 ASHPAU6H & SCVLCO, GPAs, PLC 4r.�fied Patfic Accountznaz xrzd tan_,i:x,r.s IX. X. XI. �� 1 Front Range Consulting, Inc. O. OTHER CONVERTER COSTS ................................................................. 1. CONVERTERREPAII2S .................................................................... 2. BASIC-ONLY ASSET COSTS ........................................................... 3. FIDTV ASSET CoSTS .................................................................... P. CABLE CARDS .................................................................................. Q. HDTV INSTALLATIONS ...................................................................... R. UNRETURNED EQUIPMENT CHARGES .................................................. SAMPLING CONCERNS AND ISSUES ........................................................... REFTJND REQUIREMENTS .......................................................................... CONCLUSION ................................................................_.......................... .......... 32 .......... 32 .......... 33 .......... 33 .......... 34 .......... 34 ......... 35 ......... 35 ......... 41 ......... 42 Page 2 of 42 January, 2005 � Ashpaugh & Sculcq CPAS, YLC and Front Range Consulnng, Inc. All righis reserved. Cannot be used untk�out expressed written persnission from boih organizations. 05��3 � � ASNPAUGH & SCULtQ, CPAs, PLG Gertifiec Pubii: Accawxaois acd CoczuHac.z I. INTitODLICTION � Front Range Consulting, Inc. Ashpaugh & Sculco, CPAs, PLC {"A&5") and Front Range Consulring, Inc. ("FRC") (collecfively "Consultants") aze pleased to provide the participating Local Franchising Authorities ("participating LFAs") this final analysis of Comcast Cable Communications, Inc.'s ("Comcast") nationa12004 FCC Porm 1205 (the "Filing"). Each participating LFA has contracted with the Consultants to share in the costs of the Consultants' analysis and review of the Comcast Porm 12Q5 filing, and each participating LFA has been specifically granted the right by the Consultants to use this final report as part of and support for its individual rate order. II. EXECLITIVE SLI.114MARY The Consultants have identified numerous issues and concerns with the Filing that are explained in detail below. Briefly, Comcast has included in the Filing costs that were not originally unbundled from service rates in 1994; has included contract labor costs for activities outside of twelve inches from the subscriber's residence; has generally not met its burden of proof with regard to the estimated times associated with installarion activifies; has improperly eliminated contractor installation rimes from the esrimated installation times; and has improperly included costs associated with digital converters in the basic-only converter category. The Consultants do not believe that the Form 1205 as filed by Comcast can serve as a reliable basis far setting equipment and installarion rates for the participating LFAs. Comcast has also ignared Federal Communicarions Commission ("FCC") precedents and Form 1205 instrucrions? The Consultants have had to conect these significant ezrors and omissions in the Comcast filing by using data supplied by Comcast, together with data developed from other reliable sources where Comcast has failed to provide detailed support. The Consultants have spent considerable time and effort in reviewing the Filing by propounding numerous data requests, responding to correspondences from Comcast, reviewing individual invoices supporting the Schedule B operating costs, developing electronic spreadsheets minoring the Comcast sample system methodology, and responding to ComcasYs Petition for Declaratory Ruling at the FCC. The Consultants have spent nearly i man-hours on this review. In large part, this has been due to the need to repeatediy request the same informarion because of ComcasYs failure to respond to the Consultants' attempts to get some form of supporting documentarion for the costs, esfimates and procedures used by Comcast in the Filing. As will be discussed beiow, in many cases Comcast srill has not provided the necessary support. ' A complete listing of all of the LFAs participating in this review project is contained an Attachment A to this report. 2 For example, Comcast has inciuded subscnber drop costs in the contract labar costs, which is prohibited by the Form 1205 instructions. See FCC instruchons for the Form 1205 Schedule C`hote." Page 3 of 42 January, 2005 � Ashpaugh & Sculco, CPAs, PI,C and Front Range ConsWnng, Inc Ali nghts reserved. Cannot be used witt�out expressed written pemussmn from both organ�zations. 05 -� �k 3 A �� ASFiPAUGH & SNLCO, CPAs, PLC Cnt:d�etl ?vElic P.ccauaaa3s aa6 Consui;zms Front Range Consulting, Inc. The Consultants believe that they have spent more tune and effort on reviewing the Comcast Filing than would have been necessary if Comcast had: (1) spent the time and effort to review the individual cost components prior to filing; (2) been willing to provide all documentarion necessary to support the Filing; and (3) been willing to work in a cooperative spirit with the participating LFAs and tbe Consultants in completing this review. Each of these failures by Comcast has required the Consultants to attempt to verify data that shouid have been done by Comcast prior the Filing and search for documentafion and support from other souzces. In particulaz, the Consultants have had to make extra efforts in attempting to retrieve FCC Form 1205s filed by cable operators in 1994 in order to assess the impact of those costs not originally unbundled by the operator in the determinarion of service rates in 1994 — costs that Comcast refused to identify. The rates shown in Appendix B to this report were developed by the Consultants using the same methodology employed by Comcast, namely the use of data for the twenty sampte systexns selected by Comcast and the sample methodology of used Comcast consultant Dr. Hannum in the determination of the Consultants' revised FCC Form 1205. The Consultants srill believe that the sampling methodology used by Comcast is itself suspect and may contain statistically invalid results. However, given Comcast's efforts to withhold much of information necessary to determine if the sample were valid, the Consultants were not able to reach a final conclusion on that point or to use an alternarive methodology. The Consultants anricipate that Comcast will be afforded an opportunity to comment on this Report. Such comments may succeed in clarifying some of ComcasYs responses to data requests. But Comcast should not be allowed to provide missing supporting documentation in such a comment period. Comcast has already been provided ample opportunity to provide supporting documentation in response to the Consultants' requests. The company chose not to provide it. Comcast should not be allowed to abuse the rate review process by submitting data during a comment period that it withheld during the Consultants' review. Any additional inforenation offered by Comcast in response to this report should be rejected if it represents merely an attempt to "pad" the record and make the review process longer and more costly. The Consultants appreciate the openness of our participaring LFAs in joining and sharing in the cost of this review of the Filing. The Consultants believe that this type of cost sharing will benefit subscribers by ensuring a thorough review of the national Porm 1205 and wiIl streamline the regulatory review process. The Consultants hope that Comcast will be more forthcoming in future reviews by preparing necessary supporting detail and providing timely responses to data requests. Page 4 of 42 3anuary, 2005 � Ashpau� & Sculco, CPAS, PLC and Front Range Consulting, Inc. All rights reserved. Cannot be used without expresud writtea peanission from both ocganizaAOns. 05-��3 11 t� ASHPAUGH & SCULCO, CPhs, PLC Cer:1i�� Puhlic Accaon+xnxs ar.3 Ccamiacu RA'T£S Front Range Consulting, Inc. In summary, the Consultants aze recommending the following converter and installation rates: Table 1 IV. SL[MMARY OF ISSI.IES IDENTIFIEI? The Consultants have identified two general issues and fourteen specific issues with respect to the Comcast Filing. The two general issues are: • Comcast has ignored the FCC's precedent on the unbundling of existing costs in the Form 1205 that are currently part of the basic service fier rates; and • Comcast has not provided necessary support and documentation for the many of the costs and esrimates used in the Filing and thus has failed to meet its burden of proof. The fourteen specific issues are related to: • Bonuses and Commissions; • Contract Labor; • Maintenance & Repair — Plant and Equipment; • Payroll TaYes; • Property Tases; Page 5 of 42 January, 20Q5 � Ashpaugh & Sculco, CPAs, PLC and Front Range Consuldng, Inc. All rights reserved. Cazmot be used witf�out expressed written prnnissio� finm both organizapons. Attached as Appendix B to this Report is a complete listing of all of the individual installarion rates recommended. Appendix C is a revised FCC Form 1205 and Appendix D is the revised staristical suminary for each of the sample systems. Appendices C and D contain essentially the same numerical information provided by Comcast in the original Form 1205 filing. �5-a y 3 j �� ASHPAUGH & SCULGQ, CPAs, P�C Cer.iicd iu�Lc Accaun�znx� and Caas.i�rt:s Front Range Consulting, Inc. • Insurance; • Miscellaneous Regulated Hours; • Installarion Activity Hours; • Converter Maintenance; • Inside Wiring; • Contractor Drop Costs; • Weighted Installation Times; • VCR Connections; and • Other Converter Asset Costs. The Consultants also idenfified three other issues pertainang to rate notices and rate cards. Those issues were related to: • CableCARDS; • HDTV Installations; and • Unreturned Equipment Charges. Each of these issues will be discussed in detail below. V. COMCAST NATIONAL FORM 1205 METHODOLOGY The Form 12Q5 Filing was made with some local franchising authorities on or about March 1, 2004, and with most of the others on or about April l, 2004. The participating LFAs include some that received filings on each date. Comcast prepared its Filing using the FCC's Equipment Averaging Methodology. This is the first rime Comcast has used the FCC Equipment Averaging Methodology for its costs associated with equipment and installarion activities from the en6re company. In last year's Form 1205 filings, Comcast used both an aggregated filing for the former AT&T Broadband systems and regaonal/local filings for the old Comcast systems. It should be noted, however, that while Comcast has included costs of its entire company in the Filing, some individual Fozm 1205s using local or regional data were still filed by Comcast in 2004. Moreover, in New 7ezsey, no Form 1205 filing was made, since in that state Comcast is under the terms of a rate settlement — terms that Comcast has refused to 3 The City of Murfreesboro, TN received rts filing based on regional data on June 1, 2004. ° See 47 U.S.C. § 543(a)(7); 47 C.F.R. § 76.923(c); and Implementation of Secrion 301(j) of the Telecommunicarions Act of 1996, Aggegation of Equipment Costs by Cable Operators, Report and Order, 11 FCC Rcd 6778 (1996) (the "Aggregarion Orde�"). S For example, in 2004 Comcast filed a loca] 1205 in Detrott, Michagan, Muncie and Huntington, Indiana and a regional 1205 in Mur&eesboro, Tennessee. Page 6 of 42 January, 2005 � Ashpaugh & Sculco, CPAs, PLC and Front Range Consultmg, Snc. All rights ruerved. Cannot be used without expressed wntten pem�ission from both organizations. d5-�'�3 � �� ASHPAUGH & SCULCO, CPAs, PLC c_rn iec vam�a accacaaaon aaa caomiaacx Front Range Consuiting, Inc. share with the Consultants even though two of the sample systems ue in New Jersey. The Consultants conrinue to be concemed that the terms of the settlement in New Sersey may be inconsistent with the Filing and that the national filing may be subsidizing the equipment and installation rates in New Jersey. The Consultants believe that Comcast cannot prepare both a regional and narional Form 1205 filing for the same test year. This would allow Comcast to potentially over-recover its costs for the equipment and installafion rates. In the 2004 Filing, Comcast prepared a national Form 1205 calculation utilizing data from across Comcast's entire company. For some of the participating LFAs, this is the first time Comcast has used a national filing. For others, such as the former AT&T Broadband systems, this is the eighth such national filing. National filings are much harder to review and analyze than local filings, as each LFA is not just reviewing its own individual Comcast system but rather must consider the combinarion of systems comprising over twenty million subscribers. Comcast prepared this filing by selecting a sample of its systems and using a staristical methodology, developed estimates for the entire company. The statistical methodology chose twenty sample systems based upon the size of the systems, not on their geographical locations. For these twenty sample systems, Comcast then invesrigated the percentage of fime the technical personnel were assigned to regulated acfivities such as installations, the costs associated with those activiries, and the average installarion times. From these individual sample system reviews, Comcast develops average times for each of the installafion acriviries and a dollar amount of regulated costs. The latter amount is called an "end amount" in the Comcast methodology. Tn developing the "end amounY' Comcast looks at the assignment of all of the sample system costs and assumes that these costs are consistent across all systems contained in the individual subscriber size categozies. While this sampling methodology has been used previously by Comcast for the former AT&T Broadband systems, the sampling methodology has never been challenged as to its reasonableness by an LFA, nor has the FCC approved the methodology. The FCC has stated that a cable operator can use a sampling methodology, but has not endorsed the Comcast methodology. The Comcast methodology is significantly different from the former AT&T Broadband methodology with respect to the treatment of contract labor, and also with respect to the items included on Schedule B(Operating Expenses) included in the Form 1205 filing. Therefore, while ComcasYs methodology is similar to the former AT&T Broadband methodology, it is not the same. VI. CONSLII.TANTS' REVIEW PROCESS The Consultants approached a number of local franchising authoriries in early 2Q04 in prepazafion for the Filing to determine their interest in a joint review. Once several LFAs had committed to the project, ComcasYs legal counsel was advised of this project, and the Consultants were directed by Comcast to send their information requests to ComcasY s preparer of the national Form 1205 in Pluladelphia. Page 7 of 42 January, 2005 m Ashpau�h & Sculcq CPAs, PLC and Fmnt Range Consulring, Inc. All ri�ts reserved. Cannot be used without expressed wntten pemtission from both organivztions. asa�3 ASHPAUGH & SCULCO, CPAs, PLC Rr<i ecd Public A¢aun.aer:s ar.E Conzvlar�s r Front Range Consulting, Inc. The Consuliants began the Request for Information ("RFP') process shortiy a$er the uurial group of participating LFAs was organized. The inirial data request, which was transmitted to Comcast on May 21, 2004, was limited to 22 individual questions basically asking for fundamental supporting data not contained in ComcasYs inirial rate filing. As is common in a rate review, the initial RFI was designed to gather some of the supporting data used by Comcast to arrive at the numbers included in the narional Form 1205. Once the suppor[ing data had been reviewed, it would be possible to submit more detailed follow-up questions addressing the specific responses to the initial RFI. Comcast responded to the inirial request on June 21, but did not provide the requested informarion or support in most of its responses. As a rule, Comcast simply stated that the requested informafion was not relevant and refused to provide it. In the Consultants' view, Comcast abused rate regulation procedures by not responding to reasonable and necessary data requests issued by the participating LFAs as part of their review of the Filing. In effect Comcast claimed a right to decide unilaterally what informarion requests were `Yeasonably necessazy" and/or relevant. In subsequent requests, Comcast was reminded that by not providing the requested informarion and supporting documents, Comcast was waiving any right it might have to challenge the "best available" information used by the participating LFAs to evaluate the Filing and to establish rates. In implementing the rate regulation provisions of the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 AcY'), the FCC issued an order specifying how local franchising authoriries may seek addirional and supplemental informarion $om the cable operators in the course of their review of a rate filing. The Third Order on Reconsideration� specifies that: Franchising authorities are enfitled to request information, including proprietary informarion, that is reasonably necessary to make a rate determination ... Each request should state cleazly the zeasons the in£ormation is needed, and where related to and FCC Form 393 (and/or FCC Form 1200/1205), indicate the question or section of the form to which the request specifically relates. This specificity will enable franchising authorities to ensure the validity of the information provided in order to arrive at a detemrination of the reasonableness of the rates proposed, while at the same rime ensuring that the cable operators are not required to provide additional data that is not germane to the rate-setting process. Third Order on Reconszderation at �{ 77. The Consultants have met this standard in their requests for infounation. The RFIs detailed the reasons for the requests and the sec6ons of the national Form 1205 to which they related. Where 6 See 47 CFR §§ 76.937, 938 and 939. ' Imptementation of Sec$ons of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regutation By-Through Prohibifron, Third Order on Reconsidera8on, PCC 94-40, 9 FCC Rcd 4316 (March 3Q 1994) (referred to herem as the "Third Order on Reconsideration'�. Page 8 of 42 January, 2005 � Ashpaugh & Sculco, CPAs, PLC and Front Range ConsWting, Inc. AII righu reserved. Caunot be used without expressed written peraussion from boeh oxganizations. o5a�3 � �� ASHPAUGH & SCULCO, CPks, PLC Ccr.�,icc Pc3lic Aaoua:aa*s aad Ccns�2azcz Front Range Consulting, Inc. necessary, the Consultants identified the hypothesis they were trying to prove or disprove by the requests. Nonetheless, Comcast refused to provide the requested informarion and support. Instead, the company filed a petirion with the FCC asidng to be excused from answering these legitimate requests. Aistorically, disputes with regazds to requests for information have been addressed in the appeal process, and not in an interlocutory plea to the FCC. ComcasYs filing of a Peririon for Declaratory Ruling sought to short-circuit the nomial process by asking the FCC to become involved before any of the resulring analyses and conclusions could be addressed by the participaring LFAs. Comcast's FCC filing was the culminarion of a process in which the Comcast failed to show the land of "full cooperation" that the FCC has said is required from a cable operator. For instance, in Century Southwest Cable Television Corp., 9 FCC Rcd 2423 (City of West Hollywood, CA), DA 94489 at (Cab. Serv. Bur. 1994) the FCC stated: We recognize that Century's own conduct contributed to West Hollywood's ultimate decSsion to set Cenhuy's installadon rates at zero. We emphasize that the Commission expects cable operators to do theiz best to facilitate the efficient and effecrive review ofproposed rates by local franchising authorifies. Tlus effort should include full cooperation with reasonable requests by local authorities for data in support of asserted costs and rates. Our rate regulations are clear in placing the burden on operators to jusrify their regulated rates for l�asic fier service and associated equipment and installafions. Therefore, uncooperative and recalcitrant conduct will not be tolerated by the Commission and need not he tolerated by local franchising authorities. The FCC was confronted with a similar to that in Century Southwest Cable Television Corp. dispute in a 1995 order regarding Century New Mexico. There, the Commission stated: Franchising authoriries are given a certain amount of discrerion in conducting their regulatory review. Cable operators have the burden of establishing the reasonableness of their rates that aze subject to regulation. If a franchising authoriry determines that an operator has not rriet that burden, it may set an operator's rates based on the best 9nformarion available. In reviewing a rate filing, a franchising authority may require an operator to provide a reasonable explanation for the figures contained in its rate filing and may also ask for supporting documentation to substantiate the figures. Operators ue required to respond to reasonable requests from franchising authoriries in a timely fashion. If a franchising authority does not receive a satisfactory response or receives no response at all, it may rely on the best informarion available, We must affirm the $ CSR-6388-R, filed September 3, 2004. 9 As of the date of this report, the FCC has not yet acted on ComcasYs Pefihon. � Southwest Cable TeZevision Corp., 9 FCC Rcd 2423 (City of West Hollywood, CA), DA 94-489 at ¶ 9 (Cab. Serv. Bur. 1444) (emphasis added). Page 9 of 42 January, Z005 � Ashpaugt� & Swlco, CPAs, PLC and Front Range Consultmg Ina A71 rights reserved. Cannot be used without expressed written pemilss�on from both organizsrions. 05-a,�3 `�� ASHPAUGN-& SGUlCO, CPAs, PLC 4Ci icL ?ubi¢ p«oun�nsz xr.d Gonmicancs C Frant Range Consulting, Inc. Town's decision if we find it was reasonable. To determine if the Town's decision was reasonable, we must analyze the decision in its proper context. In making the rivo changes to Century's rate filing that are challenged in this appeal, the Town detemuned that Cenhuy had not provided an adequate explanation or an appropriate justification for its own equipment-related figuzes.l t In that case the FCC had before it the entire record and thus was able to address how the disputed informarion fit into the LFA's rate deterniination. Comcast has abused the data collection process by being less than forthcoming with respect to its responses to the R�'Is, and by ignoring clear and longstanding FCC rules and orders. For example, rather than providing requested explanarions or materials, Comcast has frequenfly submitted nothing more than a terse, uninformative cross-reference. The following exchange between the Consultants and Comcast is a case in point (but by no means an isolated incident). In the Consultants' August 24, 2004 request regazding the Trenton sample system, question 8 asked: Please explain in detail the `Bonus" amounts shown on "FCC Form 12o5 Schedule B Details For Year Ended December 31, 2003" worksheet. Include with the description ComcasYs Bonus plan and employee eligibility requirements. Comcast responded on September 13, 2004 with: Please see the attached Exhibit 1205 8 082404, the General Ledger for accounts 41130 and 41140, Bonus and Contra Payroll Bonus, respectively. That response by Comcast to this request, along with similar responses to questions 4, 10 and 11 for each of the 20 sample systems (a total of 80 respanses), is typical of the selective, vague and uninformative responses submitted by Comcast. The RFI asked Comcast to "explain in detail"; no such explanation was provided. The information provided on E�ibit 1205_8_082404 was notlung more than a monthly listing of the amounts charged to the bonus account contained in the general ledger. At best, it shows the monthly charges each month for 2003 comprising the amount shown on the sample system 5chedule B worksheet. The Consultants were concerned at the time of the request that either the technical personnel involved were not eligible for bonuses, or that the requirements for gaining a bonus had nothing to do with equipment or installation activities. Because of Comcast's failure to cooperate and to provide a clear answer, the Consultants are still without any information as to the bonus eligibility requirements and the " Century New Mexico Cable Corpmation, Town of Silver City, 10 FCC Rcd 9403 at ¶ 9(Cab. Sero. Buv 1995) (foomotes omitted). �� See also Wesley R. Heppler, Esq., Leifer, 10 FCC Rcd. 9433, DA 95-1175 (Cab. Serv. Bur. 1995); In re: Century New Mexico Cable Corporation, Memorandum Opinion and Order, �1Q FCC Rcd. 9403, DA 95-ll 34 (Cab. Serv. Bur. 1995); In re: Heritage Cable vision ofTennessee, Inc. Order, 10 FCC Rcd. 13147, DA 95-2405 (Cab. Serv. Bur. 1995). • Page 10 of 42 January, 2005 m Ashpaugh & Scuico, CPAS, PLC and Front Range Consulting, Inc. A11 rights reserved. Cannot be used wiihout expressed written permission from both organizations. os d�3 ASHPAUGH & SCULC6, CPAs, PLC C:r.iveL 9vtr�ic P¢coun:znis ar.d Cansu:nzncs Front Range Consulting, Inc. Comcast bonus plan with respect to these specific costs, which are included in the national Form 1205. Notwithstanding Comcast's uncooperative behavior, the Consultants took an extraordinary step in an attempt to resolve ComcasYs objecAons to the inirial and supplemental RFIs submitted to Comcast on May 21, 2004, 7uly 4, 2004, and 7uly 22, 2004. On August 4, 2004, the Consultants provided Comcast with a letter responding to ComcasYs objecrions raised as of that time. The letter stated: "In order to give Comcast a final attempt at responding to these valid RFIs, we have grouped all of our questions to which you have objected into broad categories and have gone to the extraordinary effort of again providing not only the `reason for the requesY and the `section of the form' it relates to, but also a detailed explanation of the hypotheses we are hying to prove or disprove by these requests." ComcasYs response to this effort by the Consultants was a letter dated August 18, 2004, in which Comcast largely reiterated its previous posafions and provided no new informarion. l�lSailU�T 1► Question 2. (from the May 21, 2004 Request for Additional Informafion) ComcasYs Narional 1205 includes the following costs in Schedule B: Salaries — Regulaz, Salaries — Overtime, Salaries — Bonuses, Salaries — Coxnmissions, Utilities, Contract Labor, Building Maintenance, M&R — Converter, Rentals/T,ease Expense, Vehicles — Gas & Oil, Vehicles — Gas & Oil, Vehicles — Repairs & Maintenance, Employee Benefits, Payroll Taxes, M&R— Equipment, Parts Supplies Small Tools, Property Taxes and Insurance. Please provide a signed letter from an officer of Comcast certifying that ALL of these cost categories were unbundled in 5chedule B in each and every original 1205 filed on or about August 12, 1994 by Comcast and its predecessor's in interest with each of the LFAs where this Nafional 1205 was filed. Response: Comcast has addressed this informarion request in numerous responses. Most recently, in our response dated 7u1y 28, 2404, we went to great length to expiain why it is virtually impossible to comply with this request. Addifionally, we expressed our belief that a"signed letter from an o�cer of Comcast certifying that ALL of these cost categories were unbundled in Schedule B in each and every original 1205 51ed on or about August 12, 1944 by Comcast and its predecessor's in interesY' is NOT required by existing FCC rules and regularions. We went on to provide a list of Schedule B costs that were unbundled by predecessors in anterest TCUAT&T Broadband and a list of the 5chedule B costs that were unbundled by the "classid' Comcast systems i.e, systems that have been owned and operated by Comcast since the inceprion of cable regulation. We added that the Schedule B unbundled costs lists provided for predecessor iri 13 The Consuitants' recommendarion on ttus point is provided in Secrion VITI, A be]ow. Page 11 of 42 January, 2005 � Ashpaugti & Sculcq CPAs, PLC and Front Range Consulting, Sna Al7 nghts reserved. Cannot be used without expressed written pemtission fromboth organizarions. o5-a �P3 ASHPAUGH & SCULCO, CPAs, PLC Ge; ti ied ?ub;ic Accono-av:z aad Caosuianes � Front Range Consultiug, Inc. interest TCUAT&T Broadband and the "classic" Comcast systems does not account for systems that were not owned by Comcast or AT&T in 1994. This response is indicafive of ComcasYs belief that it may unilaterally decide what information it will provide to the participating LFAs, even though the relevancy and need for the informafion has been clearly explained. Such a posirion would effecfively render the regulation of basic service, equipment and installation rates meaningless, because cable operators will feel free to withhold the infor[nation required to gauge whether filed rates comport with the FCC's rules, orders and decisions. It should also be noted that Comcast also attempted to thwart the participaring LFAs' review of the narional Form 1205 by making the RFI process an unnecessarily rime-consuming and burdensome "paper waz." The Consultants expressed a desire to meet and discuss the inifial RFI requests with ComcasY, so that the company could pxavide informarion responsive to the requests and address any confusion or discrepancies before assembling the necessary informarion. Comcast refused to have this meeting and instead prepazed its responses without the benefit of such informal discussions. Comcast's preference for confrontational paper battles over a straightFonvard attempt to resolve any issues reached its lowest point on one occasion where Comcast asked that the Consultants not f� or e-mail data requests, but rather transmit them by United States mai1, for no apparent reason but with the effect of delaying the receipt and fulfillment of requests. ComcasYs recalcitrant approach to RFIs thus impeded the review process and effectively shortened the rime available for the Consultants to review materials submitted by Comcast. The specific quesrions objected to by Comcast regazding the Filing were the second and third attempts to get necessary information from Comcast. Thus, the delay Comcast created by the filing at the FCC compounded the delay Comcast had already created by failing to answer the quesrions the first time. The Consultants specifically requested Comcast to provide all invoices supporting the amounts , claimed in Schedule B for each of the 20 sample systems. For example, regarding the Fresno system, these requests were numbers 12, 13, 14, 16, 17, 18, 19, 20 and 21. Comcast responded with the following statement in regard to each question —"Comcast wil] provide the requested documents after we have retrieved the documents from our data storage systems and copied them for transmittal" This is not what Comcast did. Comcast never actually provided the copies. It should be noted that several of the above requests had addarional components to which Comcast never responded. For Fresno, requests 19 and 21 were as follows: 19. Please provide detailed invoices and specific facilifies covered by the insuranca policies totaling $522,843.99 of insurance expense shown on "FCC Form 1205 Schedule B Details For the Yeaz Ended December 31, 2003." 21. Please provide detailed invoices and a full description of the items and the tax assessment by item for the foliowing amounts shown on "FCC Form 1205 Schedule B Details For the Year Ended December 31, 2003." Page 12 of 42 7anuary, 2005 � Ashpau� & Sculco, CPAs, PLC and Front Range ConsulLng, Inc. All rightr reserved. Cannot be used wlthout expressed writteu pemvssion fmm both organizations. 05-��3 ASHPAUGH & SCULCO, CPAs. PLC cettiiea ?u"v�rc Aacvacan*.s ana cancuRanc: Ka � Front Range Consulting, Inc. Personal properiy tases of $4,263,600.82: and, Real property tases of -$981.38. The only response from Comcast was the statement quoted above plus copies of the Genezal Ledger pages showing each of the individual accounts. Comcast has never provided copies of the invoices or specific supporting details for these two requests. As described below, the Consultants never envisioned and Comcast never disclosed the cumbersome process for reviewing the invoices. Comcast had to idenrify, and probably copy, the invoices in ozder to set up the system that was used. Comcast could have easily made a copy of the documents for the Consultants, but chose a more difficult and unwieldy system. ComcasYs process for reviewing the invoices did not work well and was very cumbersome. No instructions on how to use the system were provided other than a simple email. The "search" and "documents located" functions for the individual invoice searches had oprions that were not explained and had to be "found" by the Consultants. There were significant delays waiting for downloads of the requested information through ComcasYs network. The Consultants had tp specifically know what they were looking for, by system and account number. The system did not pemrit them to go through and see what documents were available, then choose what they wanted to see. The Consultants had to enter the information manually for each account of each sample system (the invoices totaled several thousand for each sample system), then wait for the search, which always took 15 seconds or more. When the result appeared, the Consultants could only see one page at a fime and had to wait for the computer to load each page. Even this procedure only produced a list of documents. The Consultants next had to select a specific invoice from the list and wait another 15 seconds or more for the "pdf' document to download. Again, only the first page was displayed; the Consultants had to manually request the software to provide "all" pages. If the Consultants wanted a copy, the Consultants had to go to "prinY' and wait another 15 seconds or more for the print function to complete before the computer could be freed up to move to the next item. In order to move to the next item, the Consultant had to go back to the list and start again. There seemed to be an option to choose multiple docuxnents, but it was impossible to figure out how this worked since instrucrions were not provided. In the two days spent on this review at ComcasYs office in Leesburg, Florida, the Consultants were only able to sample the data of the available systems. Reviewing all of the thousands of pages of invoices for each sample system using Comcast's procedures would have taken many months. The Consultants were unable to access any data for the following eight sample systems: E332 Wildwood, E840 Trenton, A54 Chesapeake Bay, EK32 New England East, E858 Montgomery County, E346 Connecticut, E868 Vineland and B56 Ann Arbor. While Comcast was informed of this problem, Comcast has srill never made the missing informarion available. VII. LINBLINDLING ISSLiES When the FCC established the rate regulatory process, it required the cable operators to "unbundle" costs associated with equipment and installation chazges. In essence, the unbundling process looked at the total amount recovered in rates from the subscraber, then subtracted out the Page 13 of 42 January, 2005 � Ashpangl7 & Sculcq CPAS, PLC and Pront Range Consulting, Ina All righes resarved. Caanot be used without expressed writtrn pemvssion fromboih organizations. 05 a�3 � �`_� r ASHPAUGH & SCULCO, LPAs, PLC C<.iiutl lu9iic A«ovn:ancz zr.d Conwi:art.s Front Range Consulting, Inc. amount recovered from equipment rates and installarion charges to arrive at the amount that needed to be recovered from prograinmiug rates. Tlus established a relationship between costs recovered through progra� and those recovered through the equipment basket (equipment rates and installarion charges). The FCC has been clear in orders since then that any costs included in service rates moved into the equipment basket must be unbundled, requiring a corresponding adjustrnent to service rates. In fact, during the Consultants' review, the FCC released a decision confirviing the validity of the unbundling issue and the authority of local franchising authoriries to invesfigate unbundling calculafions. This decision confirmed the FCC's earlier deternunarion in TCI of Tualatin (�alZey.' Notwithstanding cleaz FCC pLecedent on unbundling, ComcasYs responses to the Consultants' quesrions maintained that investigation of unbundling was unnecessary. (See the request and response provided above on page 12 under VI, Consultants' Review Process.) On the contrary, the FCC's recent decision in .7ones of Georgia/South Carolina makes clear that such informarion is relevant and necessary and must be provided to a local franchising authority upon request. The Consuitants need to have the same abiliry to evaluate unbundled costs in the instant national Form 1205 review as the rate regulatory authority did in the Jones of Georgia/South Carolina proceeding in order to prepaze its recommendarion to the participating LFAs. For this reason, the Consultants had hoped that Comcast would modify its claims as to the reasonableness of the data request on the unbundling issue as a result of the Tones of Georgia/South Carolina decision. Comcast, however, has conrinued to ignore the FCC's rulings on this issue. Since Comcast refused to provide the requested in£ormarion, the Consultants asked each of the participating LFAs to provide copies of the original Forms 1200 and 1205 from August 1994 that iden6fied the unbundling. In some cases, the participaring LFAs could not locate the forms and asked Comcast to provide copies. However, ComcasYs local of6ces informed these participating LFAs that they had instructions to refer these quesrions to ComcasYs regulatory personnel in Philadelphia. Comcast did not provide the copies. Comcast was also requested to provide copies of the original 1205s of each of the sample systems. Comcast provided copies from a few of the samples. The Consultants' review of all of the original Form 1205s gathered showed a lazge variety of costs unbundled. In some 1994 1205s, only unbundled small amounts of salaries and benefits 14 See.7ones Communications of Georgia/South Carolinq Inc. d/b/a Jones Communications (Savannah and Chatham County, Georgia), DA 04-2448 (Aub st 4, 2004). ' See TCI Cablwision ofOregon, Irzc. d/b/a TCI ofTualatin Valley, Inc., DA 94-2227 (Cab. Serv. Bur. 1949). 16 The Commission's Order stated: "Therefore, even 3f the costs at issue are bona fide, they can be c]aimed in the equipment basket only if they aze unbundled from the regulated programming service rates or aze new costs incurred smce the operator unbundled its equipment costs. If an operator shifts existing costs from the BST to the equipment basket after the initial unbundiing but without adjusring the BST rate, the operator may be recovering the cost twice, once duough the BST rate and again Through the equipment basket" Jones Communications of Georgia/South Carolinq Inc. at ¶ 4(foohiote omitted). Page 14 of 42 January, 2005 � Ashpaugh R. Sculco, CPAs, PLC and Front Range Consuking Inc. All rights reserved. Cannot be used without expressed written permission from both organizations. C�5--�43 ASHPAUGH & SCULCO, CPAs, PLC Cvti:ird Pubiic Accavn'v�ss an2 Ccazue;ar,s Front Range Consulting, Inc. were included, wlule in other 1994 1205s the unbundling included salaries, benefits, contract labor, supplies and vehicle costs. The former AT&T BroadbandPTCI systems consistently did not unbundle commissions, bonuses, maintenance and repair costs of plant and equipment other than converters, properry taxes and insurance. Obviously, these were costs in 1993 and 1994 and are not new costs. Thus, eluxrinat3ng these costs from the national Form 1205 Filing, since they were not unbundled originally, is consistent with the FCC decisions in TCI of Tualatin Valley and ,Tones of Georgia/South Carolina. � II OF LSSLIES IDENTIFIED As discussed above, the Consultants analysis identified a number of specific problems with the Filing. The following sections discuss each of the idenfified concerns and, where necessary, explain the adjustments to the Filing that were needed to arrive at a proper determination of equipment rates and installarion charges and is conrinuing to do so. Thus, including them in the national Fozm 1205 Filing would result in a double recovery. A. BQNLISES l COMMISSIONS Comcasthas included bonuses and cormnissions in the 1205 costs. First, these are costs that were not unbundled by a majority of the systems, including the former AT&T BroadbandlTCI systems and the TKR systems. The Consultants reviewed a number of 1994 Foxm 1245s and concluded that these items, bonus and commissions, do not appear to be part of the Schedule B amounts shown. As a result, Comcast was able to recover these bonuses and commissions from subscribers in service rates. In addition, Comcast has not shown that the bonuses and coznxnissions are actually related to regulated activiries. Comcast was requested to provide the following for each of the lwenty sample systems: Please explain in detail the "Bonus" amounts shown on the "FCC Form 1205 Schedule B Details For the Year Ended December 31, 2003" worksheet. Include with the descriprion the Comcast's bonus plan and employee eligibility requirements. Please describe and provide detail accounting records showing the payment basis for the "Commissions" shown on "FCC Form 1205 Schedule B Details For the Year Ended December 31, 2003". Comcast responded with the following, respecrively: Please see the attached Eachibit 1205_a ��, the General Ledger for account 41130, Bonus, `� See Appendix E for exaznples of these 1994 filmgs. ts Id. Page 15 of 42 January, 2005 � Ashpaugh & Sculco, CPAs, PLC and Front Range Consultiug, Jna Al] rightc reserved. Cannot be used withouk expressed writCen permission from both orgymzatioas. �-��t3 �� _ ASHPAUGH & SCU�Cd, GPA:, PLC �n.iSaC Tubiic Accocncanu ar.b tonru� nr.0 � Front Range Consulting, Inc. Please see the attached E�ibit_1205_a_�x�, the General Ledger for account number 41150, Commissions. [Here "a" indicates the number of the request and "xxxacxx" the date of the request.] Other than these terse and uninformarive cross-references, Comcast did not respond to the zequest. It did not provide the explanarions, the description, the payment basis or the employee eligibility requirements requested by the Consultants. Comcast has the burden of showing that these amounts relate to Form 1205 activiries and has not met that burden of proof. Comcast did not provide any "descriprion of the bonus or commission plan" as requested. The Consultants believe that such bonus and commission plans are not ried directly to acrivities such as installarions and are therefore not includable in the Form 1205. As Comcast has not met its burden of proof with regazd to these two items, the Consultants have eliminated all of these costs. B. CONTRACT LABOR Contract labor costs account for the second largest cost element after salaries and benefits included in the Schedule B items. Yet Comcast has not used any actual invoices for this significant cost element, but rather has estimated the costs based on the number of installations contained 'an the "Field Data Reports" and the cost for each activity. The Consultants were unabie to review actual invoices for contract labor to verify whether a11 of the acfivifies contained in the "Field Data Reports" were actuaily billed to Comcast, because Comcast refused to pTOVide them. The Consultants therefore were not given any real data to review and analyze with respect to the contract labor costs. This raises problems as to the accuracy of ComcasYs estimates. If, for example, a contractoz did not complete an installarion correctly, would Comcast have paid for that activity? Such corrections and audit-type adjustments that would normally occur in the review of actual bills from the contractor were not considered in ComcasYs estimation methodology, To the extent Comcast wants to include contract labor in future Form 1205 filings, the Consultants recommend that Comcast must use actual invoices from the contractor and allocate those invoices to regulated and un-regulated activities. In this way, the participating LFAs can be assured that the costs included in the Form 1205 are "reaP' costs and not just hypotherical costs based upon the unverified "Field Data Report." The Consultants have made other recommendarions conceming contract labor costs and hours, as described in §§ A(2) and K below. C. MAINTENANCE AND REPAIR — PLANT AND EQLIIPMENT The Consultants' review of the prior Form 1205s filed by systems now part of Comcast has revealed that in many of these systems, the cable operator did not include maintenance and repair — plant and equipment ("M&R — P1anY') as part of the Schedule B costs. For this reason, as 19 The Consultazats belSeve that this methodology is different from the methodology used earlier by AT&T Broadband, but based on ComcasYs RFI responses the Consultants cannot conclude this definirively. Page 16 of 42 January, 2005 � Ashpaugl� & Sculcq CPAS, PLC and Fiom Range Consulring, Inc. All righu reserved. Cannot be used withoui expressed written permission from both organizations. 05 a�3 a �� ASHPAUGH & SGUlCO, CPAs, PLC i Cer.i,�_d Pubfic Ac<ounuc;s and Coosuiva.:s Front Range Consulting, Inc. illustrated in TCI of TuaZatin Yalley and Jones of Georgia/South Carolina, leaving in the M&R — Plant crosts in the Filing would allow Comcast to "double recover" these costs — once in the service rates and again in the equipment and installation rates — since such costs were never unbundled. The Consultants have therefore eliminated M&R — Plant in order to be consistent with the FCC's precedents and to prevent double recovery of these costs. In addition to the unbundling concerns, ComcasYs treatment of M&R— Plant costs suffers from the same allocarion problem as discussed in § E below concerning groperty taxes. The Consultants' review of supporting documents shows that M&R - Plant costs across the sample systems and is not specific to the Technical Department or regulated equipment. Comcast uses an allocafion factor based on salaries and wages by detern�ining the regulated portion and comparing it to total Technical salaries plus salaries for a group called "Other". This does not include ai1 salaries and wages within the system and, as such, over-allocates costs to regulated services. Thus, even if M&R - Plant costs that are currently recovered in the service rier rates could properly be included in the Form 1205, the allocation factor would still need to be reduced. Since the Consultants do not have specific informarion from Comcast to support an alternative calcularion, �ve have estimated that the factor would be reduced by two-thirds. D. PAYROLL TAXES The Consultants have eliminated a pro-rata share of payroll taxes based on the elunination of the Bonuses and Commissions as described in § A above. This equates the appropriate inclusion of payroli tases to the reduced level of salary related costs. The calculation was made by using the ratio of bonuses and commissions to the total of salaries and wages plus bonuses and commissions and mulfiiplying the resulting factor times payroll taYes. E. PROPERTY TAXES The Consultants' review of the prior Form 1205s filed by systems now part of Comcast has revealed that in many of these systems, the cable operator did not include property tases as part of the Schedule B costs. As the FCC pointed out in TCl of Tualatin Valley and Jones of GeorgiafSouth Carolina, ComcasYs inclusion of such properiy t�es in the Filing would allow Comcast to "double recover" these costs — once in the service rates and again in the equipment and installation rates — since such costs were never unbundled. The Consultants have therefore eliminated these property taxes in order to be consistent with the FCC's precedents2 In addirion to the unbundling concertis, fihe Consultants' review of supporting documents show that property taxes include costs across all departments in the sample systems and are not specific to the Techrucal Department or regulated equipment. As these property taYes include tases far �ecurive system office, call center and other facilities not part of the regulated 20 As indicated m n.21 above, Comcast appeazs to have ignored these pzecedents. Z ' The Consultants aze concemed that Comcast appears to have ignored the relevant FCC rulings, even though it was clearly awaze of the precedents in TCI of Tualarin Yalley and (during the xeview of this Filing) Jones of Georgia/South Carolina. Such a course of conduct does not appeaz to be consistent with the certificafion attached by Comcast to the Fihng. Page 17 of 42 January, 2005 � Ashpaugh & Sculco, CPAS, PLC and Fmne Range Consulting, Ina A71 nghts reserved. Cannot be u.ed without erpres�ci written petmission from both ozganizarions. o5 �3 .� J ASHPAIlGH & SCULCO, CPAs, PLC C_rtii_c ]uStic Accocncanxz znd Coasui:.ncs Front Range Consulting, Inc. activities, Comcast should have made an adjustment to assign property tases to these locations before further allocating the remaining amount within the Technical Deparhnent. Comcast, however, uses only an allocarion factor based on salaries and wages by determining the regulated portion of Technical salaries and comparing it to total Technical salaries plus salaries for a group calied "Other." This does not include all salaries and wages within the system and, as such, over-allocates costs to regulated services. It should be noted that the Consultants are awaze that in a prior year's Form 1205 filing by Comcast, property tases could not be shown to be related to or based on converters. Thus, even if property taYes that aze currently recovered in the service tier rates could properly be included in the Form 1205, the allocation factor would srill need to be reduced. Comcast did not provide the requested informarion with regard to the facilities covered by the property taxes far each system. Comcast has therefore not met its burden of proo£ The Consultants have used the best available information from prior reviews of Comcast systems and have reduced the technical salary allocarion factor by two-thirds to reflect an assignment of the property tases to non-regulated facilities and assets. Based on the Consultants' analysis discussed above, this reduction is reasonable. F. INSLIRANCE The Consultants' review of the prior Form 1205s filed by systems now part of Comcast has revealed that in many of these systems, the cable operator did not include insurance as part of the Schedule B costs. For this reason, as illustrated in TCI ofTualatin YaZley and Jones of Georgia/South Carolina, leaving in the insurance costs in the Filing would allow Comcast to "doubie recovex" these costs — once in the service rates and again in the equipment and installation rates — since such costs were.never unbundled. The Consultants have therefore elirninated insurance in order to be consistent with the FCC's precedents. In addirion to the unbundling concems, ComcasYs treatment of insurance costs suffers from the same allocation problem as discussed in § D above. The Consultants' review of supporting documents shows that insurance includes costs across the sample systems and is not specific to the Technical Deparhnent or regulated equipment. Comcast uses an allocation factor based on salaries and wages by deternuning the regulated portion and comparing it to total Technical salaries plus a grotrp called "Other." This does not include all salaries and wages within the system and, as such, over-allocates costs to regulated services. Thus, even if insurance costs that aze currently recovered in the service tier rates could properly be included in the Form 12�5, the allocafion factor would still need to be reduced. Since the Consultants do not have specific informafion from Comcast to support an alternarive calcularion, we have estimated that the factor would be reduced by two-thirds. ' As indicated in n21 above, Comcast appears to have ignored these precedents. Page 18 of 42 January, 2005 � Ashpaugh & Sculco, CPP.s, PLC and Front Range Consulting, Inc. All rights xeserved. Cannrn be used witt�out expressed written pemtission from botk� organizarions. 05 a�3 `k� ASHPAUGH & SGUlGO, CPAs, PLC CaruSetl Puhtic Accouocxn�s �nd Ccnivlaa.z � Front Range Consuiting, Inc. G. 1�IISCII,LANEOLTS REGLII,ATED HOLIRS This component was used by Comcast to add hours associated with dispatch, warehouse and office personnel. The Consultants haue eliminated warehouse hours and office personnel hours. 1. WAREEIOIISE PERSONNEI. The Consultants' analysis eliminates wazehouse personnel costs and labor hours from Schedule B ofthe 1205 and the Hourly 5ervice Charge ("HSC"). Comcast has included the cost of warehousing in the Filing twice. Comcast includes the rime associated with wazehouse personnel acfivity in Schedule B and, as a result, in the HSC Comcast also capitalizes the time associated with this acfivity and includes that capitalized costs in Schedule C. The Consultants' analysis corrects this and only includes the cost in Schedule C. In addirion, it is not apparent that these costs were unbundled in the original Fozm 1205s. As pzeviously discussed in the unbundling section above, the Consultants' review of the 1994 Form 1205s showed that the cable operators did not include warehouse personnel in the deternunation of equipment rates and installation charges. Consultants recommend that based on these two flaws, warehouse personnei should be eliminated from the 12Q5. 2. OFFICE PERSONNEL This issue is also an unbundling issue. As with othar issues discussed above, the Consultants' review of the 1994 Form 1205s showed that prior filings did not include office personnel costs in the determination of equipment rates and installation charges, and hence those costs remain in the basic service tier rates. The Consultants' analysis therefore has eliminated this component. In addifion to the appropriate exclusion based on the "unbundling" issue, Comcast has not met its burden of proof in supporting these time esrimates. Comcast was specifically requested to provide "support (that) must include all studies, documents or other material used by the (sample system) personnel used to support such amounts. To the extent the individual responsible for preparing such amounts did not use any supporting informarion, please state such and provide a detailed explanarion for the source of the amount shown_ Pleasa provide the name and riUe of the individual supporting the hours shown on this schedule." ComcasYs only response was "Comcast has used the past experience of its office personnel to make their best esfimate of the avezage hours spent per week on converter maintenance." Comcast did not provide the requested infoanation for any of the sample systems. Therefore, exclusion of these costs is also warranted based on Comcast's failure to provide adequate support. H. INSTALLATION ACTIVTTY HOLIl2S Comcast was requested to (1) provide support for the installation times used by each of the sample systems; (2) identify components more than 12 inches outside the subscriber's residence; and, (3) provide any scheduling ar routing programs used to assign in-house and contractor personnel to installarion acfivifies and the reports and other supporting details for those programs Page 19 of 42 January, 2005 m Ashpaugh & Sculcq CPAS, PLC and Front Range Consulting, Inc. Al] rights reserved. Cazmot be used withoux expxesaed writtrn permission &om both organizarions. 05-d �13 ASHPAUGH & SGUlCO. CPhs, PLC 4r:ifcc Pvbiic Accoontanu a^A Coasui.xms Front Range Consulting, Inc. for each month of the review period. For most of the sample systems, Comcast provided "the work tasks table containing the points assigned to each task for the (sample system)" and went on to e�cplain that "this infozmation was used to develop the estimated times in the Schedule D Support" in the sample data. Comcast also explained in its response that "Comcast has used the past e�erience of its technical personnel to make their best estimate of average hours spent per installarion activity. The technical personnel rely upon the work task table and pomts assigned to help them detemune the best estimate of average hours spent per installation acrivity." However, ComcasYs packet of informarion supplied to each sample system for prepararion of the sample data included a sheet showing the installation rimes used by Comcast in the prior yeaz. The sample systems then could use these estimates rather than actual data relative to their specific operations. 1. SLIPPORT Comcast failed to support the installarion times. First, while Comcast's response refened to the work task table, the tasks listed did not match the Fornl 1205 regulated activity. For example, the work task table provided by Comcast for the Portland Willamette Va11ey sample system did not contain any work tasks for: un-wired installation; pre-wired installafion; upgrade; downgzade; A/O separate trip and VCR connecrion — same trip. Comcast also failed to allocate the tasks to activities within 12 inches of the residence. The Consultants compazed the rimes on the work task table to the times on the Schedule D Support and found that the times did not match. Consistently, the times on the Schedule D Support exceeded the times on the work task table. No explanafion was provided for this difference, even though the RFI specifically asked Comcast for "detailed explanations and support for each amount shown on `Schedule D Support' page 220" of each sample system support. For example, in the Wildwood sample system data request, the Consultants asked Comcast in Quesfion 29 to: Please identify the components of each amount provided in #28 above that are outside of 12 inches of the subscriber's home or residence. (Question 28 requested infoxmation with regards to the installation times for such activities as un-wired and pre-wired installations) Comcast responded: The only installation acrivity outside of 12 inches of the subscribez's home or residence is the drop required for an un-wired installation. It appears from this response that Comcast does not understand the definitions of pre-wired and un- wired installarions. T'he difference between an un-wired installation and a pre-wired installation has to do only with ffie status of wning inside the demarcation point on the home (12 inches �' While CamcasYs responses for each of the sample systems referenced use of the work task table and indicated that copies were ec�closed, the support for Mobile, Chesapeake, New England East and Montgomery County, PA did not in fact include this informarion. . "' Exlubit 1205_32_082704 attached to Comcast response date September 23, 2004. Page 20 of 42 January, 2005 � Ashpaugh & Sculco, CPAs, PLC and Front Range Consulung Inc. A71 rights reserved. Cannot be used without erpressed written peanission from both organizations. a5-a�3 .� _ � ASHPAUGH & SCUICQ, CPAs, PLC CeruSC& 2_7ii� 6<coun�rtis ar.d Gar.ruEtartaz Front Ran;e Cansulting, Iuc. outside of the connection to the home). Thus, a drop may also be needed for a pre-wired installarion: a pre-wired home that has never had service, or an un-wired home that also has never had service, would each require Comcast to nxn a drop to the outside of the home. Comcast therefore appeazs to be incosect that oniy homes that aze un-wired would require a drop or maybe Comcast is incorrectly applying the installarion prices to a new connection customer. Similarly, Comcast did not answer the Consultants' question as to whether the average times shown on page 220 of the sample system workpapers included time for Comcast to run a drop to the subscriber's residence. Comcast has failed to meet its required burden of proof. The Consultants' asked Comcast to support its installation times for each of the sample systems. For example, for the Flint MI sample system, Quesrions 30 and 32 asked: Question 30. Please provide detailed explanations and support far each amount shown on "Schedule D Support" page 220. To the extent the individuat responsibie for preparing such amounts did not use any supporting information, please state such and provide a detailed explanarion for the source of the amounts shown. Quesrion 32. Does Comcast of Flint use any scheduling or routing programs (either automated ox manual) to assign both in-house and eontractar personnel to installation acrivities? Lf so, please provide such programs, reports and other supporting details for those programs for each month of the review period (the purpose of this request is to verify the amounts shown on "Schedule D 5upport," to the �tent Comcast refuses to provide flus altemative supporting informafion, Comcast should expect that the Consultants may rej ect the amounts shown on "Schedule D Support" and use the best available informafion). Comcast responded: Question 30. Please refer to our response to your question 32 m this request. Question 32. Enclosed is a copy of the work task table, Ea�hibit 1205_32_082704, containing the points assigned to each task for the F1intlBad Axe system. This information was used to develop the estimated times in the Schedule D Support. The FCC has stated, "We anricapate that cable operators will use their past experience and historical data to make the best esrimate of the number of service repair hours for remotes. Chuges for leasing of converter boxes and all other equipment wili be calculated in the same manner as for remotes_ For installarion chazges, the cable operator must elect a uniform installation charge that is calculated based on either: (1) the HSC rimes the person hours of the visit; or (2) the HSC times the average hours spent per installarion visit." (See FCC Report and Order, FCC 93-177, released May 3, 1943, Paragraph 29b.) Comcast has used the past experience of its technical personnel to make their best esfimate of the average hours spent per utstallation activity. The technical personnel rely upon the wark task table and point assigned to help them determine the best estimate of the a�erage hours spent per installation acrivity. Page 21 of 42 January, 2005 � Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting, Inc. All righu reserved. Cannoi be used without expressed written pemilssion from bofli organizanws. 05-��3 � �� ASHP.4UGH & SCUlCO, CPAs, PLC Ceati-icd Tvhti: Atcann:snts ar.d Cons�si.acu Front Range Consultmg, Inc. Comcast attached EJChibit 1205 32 082704, which detailed some "points" for some of the installarion acrivities. Comcast also included an emaii from Ms. Shazon Wiozek to Ms. Marcia Anderson, where Ms. Wiorek stated: You may have noticed that Flint does not have any points for any installations tasks on fhe Cable Data report I sent you. ThaYs because they work on a 1 point per job basis. Doesn't matter on the complexity or length of the task, every job is assigned 1 point. Thus, in F1inYs case, Comcast was incorrect in its response to Quesrion 32 that the "technical personnel zely upon the work tasks table and points assigned to help them determine the average hours °' Comcast has completely failed to support any of these time estimates for the Flint sample sqstem. The Consultants also asked about any changes in the time estimates from last yeaz's Form 1205 filing. For example in the Flint system, the request was: Question 33. Has any of the amounts shown on "Schedule D Support" changed from the amounts used on the last Form 1205 filed by Comcast (or its predecessor in interest) for the Flint system? If so, please identify and explain in detail all changes including a copy of the filing made by Comcast (or its predecessor in interest) (the purpose of this request is to verify if Comcast is in compliance with the precedent set by the FCC in DA 04-2A48). Comcast responded: Question 33. Yes. The Schedule D times on the last Form 1205 filed by Comcast for the Flint system were as follows: Unwued — 1.S Hours; Pze-wired — 1 Hour; Additional Ouflet Same Trip — 0.5 Hours; and Addirional Outlet Separate Trip — i Hour. These are the hours listed on Schedule D of the last Michigan Form 1205 filing. Comcast is not awaze of any precedent set by DA 04-2448. Notwithstanding the unbundling concerns with respect to rime associated with Relocate Outlets, Upgrades, Downgrades, Connect VCR Same Trip, Connect VCR Separate Trip, Converter Service Call, Inside Wiring Service Call, Customer Owned Equipment, Customer Education and Non Productive Trouble Calls listed on Schedule D Support (Page 220), Comcast has not provided any explanation of the changes made, nor has Comcast provided a copy of the previous Form 1205 filing. Again, Comcast has not met its burden of proof. A comparison of ComcasYs current estimates and its prior year esrimates for the Flint MI sample system raises many questions that the Consultants cannot investigate because of ComcasYs unwillingness to make a through and complete response. Page 22 of 42 January, 2005 � Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting, Inc. N1 rights reserved. Caunot be used w�thout expressed written pemtission finm both organizanons. bs-a�3 ' t� ASHPAUGH & SCUtGO, tPA:, PLC Cer.i iec te�iia hacou-vanxs ar.d Cen:eitan:s Front Range Consulting, Inc. Table 2 i � � ' • � � � � •� Install Unwired Home 72 minutes 90 minutes (20%) Install Pre-Wired Home 42 minutes 60 minutes (30%) Additional Outlet — Same Tri 24 minutes 30 minutes (20% Additional Outlet — Se azate Tri 42 minutes 60 minutes (30%) Relocate Outlet 30 minutes Not Pzovided N/A Upgrade — Requiring a Truck 24 minutes Not Provided N/A Roll Downgrade — Requiring a Truck 24 minutes Not Provided N1A Roll Connect VCR — Same Tri 18 minutes Not Provided N/A Connect VCR — Se uate Tri 24 minutes Not Provided N!A Converter Service Call 30 minutes Not Provided N(A Inside Wirin Service Call 42 minutes Not Provided N/A Customer Owned E uipment 30 minutes Not Provided N1A Customer Education 24 minutes Not Provided N!A Non Productive Trouble Calls 12 minutes Not Provided NfA As sho`m in the following table (Table 3), one could conclude that Comcast did not simply allow its local technical personnel to make case-by-case deternunarions of the required times. With its request to each sample system, Comcast provided guidance as to the 2002 Test Year average times. A comparison of the "suggested" times for the most common installations to the actual reported times ue: Page 23 of 42 January, 2005 � Ashpaugii & Sculcq CP.Ss, PLC and FrorA R�ge CansuNing, Inc. Al] rights reserved. Cannot be used witt�out expressed written pemussion from both organizarions. os-a�13 �� , ASHPAUGH & SCULCO, CPAs, PLG Cu:i,^ied Puifia Accouvv�u::d Cccni:anss Front Range Consulting, Inc. Table 3 Thus, in most cases over half of the twenty sample systems appear to have followed the "guidance" received from ComcasYs corporate level. However, Comcast has not provided any information to the Consultants that would enable them to understand the basis Comcast used to provide esrimated times in this corporate "guidance." In sum, Comcast has not meet its burden of proof with regazds to the esrimated times per installation acrivity. Based on the informafion described above, the Consultants analyzed the "poinY' system estimates provided in the individual sample system responses as the best auailable information. The analysis showed that based on ComcasYs "poinY' system, the estimated times by installation acfivity in the Piling are overstated as follows: Table 4 Each of the estimated times by sample system provided by Comcast has been adjusted by these percentages. The Consultants did not adjust the rimes for other activities, as it appeared tttat the Page 24 of 42 3anuary, 2005 � Ashpaugh & ScWco, CPAs, PLC and Front Range Consulfing, Inc. Atl rie,Jrts reserved. Cannot be used without expresud written pemvssion from both organizations. o5-a�3 i� ASHPRUGH & SCULCO, CPAs, PLC C� Le: u{yt pyhlic Actoun:ancz and Can>ui:an:s Front Range Consulting, Inc. "poinE' system data analyzed did not have enough samples to provide a reasonable estimate. Z ' Therefore, these times were accepted, even though they lacked supporting documentation from Comcast. 2. CONTRACT LABOR ESTLMATES Comcast was also asked to provide detailed support for the amount of contract labor associated with "indoo�' activities (i.e., activiries occurring no more than 12 inches outside of the connection to the home} and the hours for each task. This request was part of the &rst RFI, dated May 21, 20Q4, Question 4. Comcast responded: The 2003 indoor °lo for each contractor acrivity is not available because our contract labor vendors do not provide such detail. The 2003 hours per task for each contractor acrivity axe included on the individual sample system contract labor installation activiries workpaper. The Consultants were provided copies of the individual contract price sheets (marked "Confidenrial Not For Public Disclosure") for each sample system. For example, in the material provided for the Trenton sample system, the installation activities included in the prices used by Comcast for the costs of an "Aerial Installation" include the £ollowing: • Installation of cable from the tap to the television; • Includes mid-span and sub pole(s) as necessary; • Tagging and identifying drops; • Ground drop per NEC and document type ground; • Converter installahon; • Installing trap(s); • Installation of VCR, A{B switch, game switch as required; • Customer education (installation package), complefing paperwork and collection of any payment due; and • Compliance with applicable Comcast specifications. 25 For example, see the discussion about the email for the Flint system described above. For the DC samp3e system, each activity had the same point value — 15 minutes. Comcast did not provide any "poinP' information foz 4 of the sample systems. Page 25 of 42 January, 2005 (9 Ashpaugh & ScWco, CPAs, PLC and Front Ranye Consulting, Inc. All rinMs reserved. Cannot be used anthout expressed written permission from both o�anizations. o� a�3 ASH4AUGH 8� SGULCQ, CPhs, PLC CcrnfrcL 9utfc Rccounun:s =ntl Gcnsciteu Front Range Consulting, 7nc. Of these listed activities, the first four acrivities involve work by the contractor on efforts related to the installaLion of a customer drop. But drop activities are not part of the Form 1205 regulated activifies, and their cost should not be included in the prices for installarion acrivities. Comcast has therefore overstated the costs for contract installarions in its Form 1205. Comcast has failed to meet its required burden of proof by not determining or providing the Consultants with any supporting data related to the amount of costs or percentage of time associated with installarion of drops by the contractors. Comcast has failed to meet its burden of proof with regard to the average installation times used by Comcast in its worksheet 270 (Contractor installarion times) completed for each sample system. Comcast has provided no informarion as to where the average instaIlarion times for contractors were developed. For example, in the Wildwood sample system, Comcast provided the following information: Table 5 Based on the foregoing discussion, Comcast has failed to meet its burden of proof and has included costs that cannot be included in the Form 1205. The Consuitants haue had to use the best available information in order to modify the coniract labor costs to exclude the costs associated with zunning a drop to a subscriber's residence. The Consuitants have utilized the rario of drop-related costs to the total costs for contractor labor from the review of ComcasYs Page 26 of 42 7anuary, 2005 � Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting, Inc. All rights reserved. Cannot be used wnhout expressed written pernnssion from borh organizations. D5 -� �F3 ASHPAUGH & SC4ILCQ, tFAs, PLC Cer.i:iu ?nbiic Accounnr,u and Co.^.ni[xofs �� Front Range Consulting, Inc. 2003 Form 1205 filed with Montgomery County, Maryland. In that study, the Consultants found that approxirciately fifteen percent of the contract labor costs for an un-wired installarion were related to drop costs and approximately eighteen percent of the contract labor costs of a pre- wired installarion were zelated to drop costs. The Consuitants have therefore modified a11 of the unwired and pre-wired contract labor costs to exclude the costs associated with the drop, based on this best available inforn�ation, in each of the twenty sample systems. Because no other informarion was available, the Consultants did not revise the average hours per installarion for the contract labor activities even though Comcast did not provide any supporting informarion, since no other informarion was available. The Consultants recommend that each particapafing LFA in its individual rate order require Comcast to provide such information with the next Form 1205 filed by Comcast. T. CONVERTER MAINTENANCE AT T`IME OF INSTALL These costs are made up of the time warehouse personnel and converter repair personnel spend to test and set up the converter before placing it in the subscriber's residence and putting the converter in service. The Consultants' analysis has eliminated this component from the converter charge. Comcast capitalizes this cost and includes it in the cost of converters in Schedule C. To include the cost in the converter charge and then also include the maintenance charges (maintenance hours times H5C) in Schedule C would a11ow Comcast to recover the cost twice. The Consuitants' analysis includes the capitalized costs in Schedule C. J. INSIDE WIIZING Comcast has included on page 235 of its individual sample system studies an entry for the amount of time and the number of troubie calls related to inside wiring activiries. For the Ann Arbar sample system, Comcast has estimated that it will average 2,164 trouble calls related to inside wiring activities. Comcast has also estimated that each of these trouble calls will average 30 minutes to complete the repair. Comcast has not supported the 30 minute estimate with any data. Comcast has also admitted that over 47,000 subscribers of the approximately 135,000 subscribers in the Ann Arbor sample system subscribe to an optional inside wiring plan, which would mean that they aze already paying for the costs of these trouble calls through the plan and should not 6e chazged for those costs again. Comcast has not met its burden of proof with regards to the inclusion of the hours associated with the inside wiring trouble calls, nor has Comcast provided any adjustment for the inside wiring trouble ca11s related to customers with the optional inside wire maintenance plan. Specifically, on August 27, 2004, the Consultants asked the following questions for the Ann Arbor sample system: Question 23. Does Comcast of Ann Arbor system have an oprional inside wire maintenance plan? If so, please pzovide the plan and the number of customers currently subscribed to the plan. Question 27. Please provide detailed explanarions and support for each amount shown on "Schedule D Support" page 220. To the extent the individual responsible for preparing Page 27 of 42 January, 2005 m Ashpaugh & Sculco, CPAs, PLC and Fzont Range Consuthng, Inc. Ali righu reserved. Cannot be used without expressed written permission from botE orgaz�iaations. 65 a�3 � �� ASHPAUGH 8� SCUlGO, CPAs, PLG Ccs.iisd 9ubiic O.caossncants ar.E Coe,s�Ra:.s Front Range Consulting, Inc. such amounts did not use any supporting informarion, please state such and provide a detailed explanation for the source of the amounts shown. Question 29. Does Comcast of Ann Arbor use any scheduling or routing programs (either automated of manual) to assign both in-house and contractor personnel to installation activities? If so, please provide such pmgzams, zeports and other supporting details for those programs for each month of the review period. jParenthetical item omitted] Comcast responded to these requests on September 9, 2004, stating: Question 23. Yes. As of May 31, 2004, forty seven thousand two hundred and fifty (47,250) custAmers subscribe to the plan Z6 Quesrion 27. Please refer to our response to your question number 29 in this request for additional informarion. Question 24. Enclosed is a copy of the work task table, Er,hibit 1205_29 082704, containing the points assigned to each task for the Ann Arbor system. This inforxnation was used to develop the estimated times in the Schedule D Support. The FCC has stated, "We anticipate that cable operators will use their past experience and historical data to make the best esrimate of the number of service repair hours for remotes. Charges for leasing of converter boxes and all other equipment will be calculated in the same manner as for remotes. Far installarion charges, the cable operator must elect a uniform installation charge that is calculated based on either: (1) the HSC times tha person hours of the visit; or (2) the HSC rimes the average hours spent per installation visit." (See FCC Report and Order, FCC 93-177, released May 3, 1993, Paragraph 296.) Comcast has used the past experience of its technical personnel to make their best estimate of the average hours spent per installarion activity. The technical personnel rely upon the work task table and point assigned to help them determine the best estimate of the average hours spent per installation activity. Comcast also provided a copy of the "Technical Operations Database - Field Data Report" which idenrifies the number of installation activities. Based on this limited data provided, the Consultants conclude that Comcast has failed to support its claim of 30 minutes of average time for an inside wiring call. The task and point system refened to in its response to Quesrion 29 does not contain any individual item related to inside wiring trouble cails; therefore, Comcast has not met its required burden of proof with regards to this 30 minute estimate. Further, ComcasYs "Field Data Report" does not segregate inside 26 Comcast complete]y igiored the portion of the request asking for the "p1an" itself. This chazacterisric behavior by Comcast once agaln undernvnes the Consultants' abi]iTy to thoroughly xeview ComcasYs submission and thus undeccuts the FCC's rate regulafion process. Page 28 of 42 January, 2005 � Ashpaugh & Sculco, CPAs, PLC and Front Range Consulnng, Inc. All nghts reserved. Cannot be used without expressed written pemilssion from borh or�nizarions. b5-a�3 i � ASHPAUGH & SCUlCO, CPAs, PLC Cr.:i.`rcd lubiic Ps<ounranc zr.d Cansuiaov � � _% . Front Range Consulting, Inc. wiring trouble calls between those performed as part of the optional inside wiiing maintenance plan and those performed for non-inside wiring maintenance plan customers. Therefore, Comcast is including activities and hours associated with un-regulated services in its equipment and installation activities n The Consultants have eliminated 50% of the numbet of inside wire trouble calls as a conservative estimate from each sample system in order to account for un-regulated acriviries. The Consultants also recommend that Comcast be required to provide better documented support for the average times to complete insade wiring trouble calls in its next Form 1205 filing, so that the participaring LFAs can meaningfully review these estimates. K. WEIGH"I'ED IN5TALLATION TIIVIES Comcast has improperly used the installation rime estimates of only Comcast in-house technical personnel in determining the average installation times used in the Fozm 1205. The Average Installation Times, Installation Acrivities and Installation Hours provided as input to the statisrical sampling report do not consider the average times, installation activities and 3nstallation hours of any of ComcasYs contractors. Yet based on the data provided by Comcast, contractars perform approximately 54% of all of the installarion activities for the 20 sample systems. The Consultants obtained data for contractors and in-house personnel in response to RFIs. In the vast majority of the sample systems, the contractor time estimates shown on Worksheet 270 to complete an installation were at or below the estimates prepared supposedly by ComcasYs in- house technical personnel. This enor would allow Comcast to over-recover its costs of an installafion where such installation is performed by a contractor. For example, in the Wildwood system, Comcast provided the following data: Table 6 �� Comcast has not included wire maintenance plans in the 1205 and is ffeating these as unregulated. Page 29 of 42 January, 2005 � Ashpau� & Scuicq CPAS, PLC and Front Range Consul[ing, Inc. Al] righu reserved. Cannot be used without eapressed written permission from both organizarions. b�-a�3 � �� ASHPAllGH & SCUlGO, CPAs, PLC � 4r.iFeG ?vSiic Accoun;tn[s anL Consukacss Front Range Consulting, Inc. Comcast used the time estimates from the "in-house" category for each of the sample system in order to arrive at its average rime per installation, but then applied that average time to both in- house and contractor installations. On average, the time esrimated by the statistical sampling methodology for an un-wired installation was 1.4849 hours. Using the Comcast estimated HSC of $35.17, an un-wired installarion wouid be priced to the subscriber at $52.23. Assuming the contractor only chazges Comcast $32.36 for this installation, Comcast has over collected for this installarion by approximately $20.00. To conrect this problem, the Consultants have included a11 of the installation times for both the contractors and the in-house personnel in computing the average installarion times for each sample system. Comcast appears to have modified the results of the starisrical report issued by Dr. Hannum. Comcast based its installarion rimes on the statisticai analysis and study performed by Dr. Hannum. In his report attached to the Filing, Dr. Hannum's report states: For Installation Time variables 4 through 10, estimates of the popularion total hours spent on installation and the popuiation nusnber of installarions (activity levels) aze used to acquire an estimate of the mean tinte per installation. This latter estimate incorporates both the average rime pez install for each sampled azea and the installarion activity level for each area. [Emphasis added] Comcast did not, however, use Dr. Hannum's figures in computing the average cost of each type of instailation. Instead, Comcast used the "average install time" computarion, which does not consider the "activity level" (the number of installarions) for each sampled area. The differences aze: Table 7 Zg That is, 0.92 hours fimes $35.17. The actual chazge for the installation is less than $30.00 based on the material provided by Comcast. Comcast has requested that the actual price for the instailation be kept confidential and it is therefore not included in this report. Page 30 of 42 7anuary, 2005 � AsLpaugh & Sculco, CPAs, PLC and From Range Consulting, Inc. All rigLts reserved. Cannot be used wlthout expressed wa9tten pertnission from both organizations. o�-a�G3 ° i�� ASHPAUGH & SLULCO, CPAs, PLt Cer:ificL Poblic Accneman'.s aad Cw:sniwr,:s Front Range Consulting, Inc. Using these higher amounts has allowed Comcast to azrificially inflate its installation chazges. The Consultants have modified the time to use the "estimated mean rime" as recommended in I7r. Hannum's report. L. VCR CONNECTIONS Comcast has included time estimates for VCR connections both at the same time as an installation and as a separate trip. Comcast provided no support for its estimated VCR connecfion times in its responses to the data requests for each individual sample system (see response to question 29 in §�. While Comcast did provide its "poinY' system for some of the sample systems, VCR connections were listed in less than twenty-five percent of the sample systems 2 ComcasYs "Field Data Reports" did not list any acfivifies for VCR connection either at the time of installafion or as a sepazate trip. ComcasYs contractors have included the connection of a VCR as part of their noimal installation activiries. These facts suggest that the cost of making VCR connections is in fact recovered as part of the normal installation process. The Consultants do not believe that Comcast has met its burden of proof with regazd to times associated with a VCR connection. Further, it appears that to the extent a contractor provides the installation, the VCR efforts are already included in the contract labor costs. Based on these finding, the Consultants recommend that Comcast should not be allowed to charge customers for VCR connecrions, because any associated aosts are already recovezed in other installation rates 30 M. CLISTOMER TROLLBLE CALLS Comcast has included time esrimates for customer-owned equipment service calls. Comcast has estimated that such a customer owned equapment service call averages 40 minutes to complete. As a matter of common sense this time appeazs to be excessive, as it should not take 40 minutes to check the Comcast-owned equipment and conclude that the service problem relates to customer-owned equipment, which is not repaired by Comcast. Comcast did not provide any support £or this activity either by specific idenrification or in the "point" system data supplied. Comcast has therefore again not met its burden of proof with regard to the rime estimates for this activity. The Consultants understand that Comcast does in fact incur some costs for these trouble calls. However, without any support for the individual sample system amounts included in the Filing, the Consultants cannot confirm ComcasYs inherently impiausible claim that the overall average rime is approximately 40 minutes. Accordingly, the Consultants have reduced the sample system estimates by fifty percent. '" The limited data provided by Comcast suggested that the VCR — Same Trip rime was overstated by 11 % and the VCR — Separate Trip time overstated by 27 3o To the extent Comcast can identify in a subsequent Form 1205 filing that VCR conneci9ons tequiring a separate hip aze actually performed and the hme associated with that instailation, such an installation chazge for VCR — separate hip may be jusrified. Page 31 of 42 January, 20Q5 � Ashpaugh & Sculca, CPAs, PLC and Front Range Consutting, Inc. All righu reserved. Cannot be used witLout expressed written pemvssion from both o aQaniutions. �5-�`�3 � �� ASHPAUGN & SCUlCO, CPAs, PlC Cr. *i1ieC 7ubiic Avwnmcsx avC Cwsv(:ancs � Front Range Consuiting, Inc. Additionally, based on our review of the original filed 12QSs, the Consultants do not believe that these costs weze unbundled originally by Comcast. If that is correct, then Comcast is already recovering its costs associated with these trouble calls in its service rates. The Consultants have not eliminated this category entirely at this time as a conservafive approach, but the Consultants may eliminate tlris category in future Comcast filings. N. DVR CONVERTERS 7n several of the participating LPAs, Comcast included a chazge on its rate cazd for Digital Video Recorders ("DVR"). This charge was listed as an"equipmenP' charge on the rate cazd, but Comcast has now claimed that tkris charge should have been included as a"service" charge (as a programming alternarive). The Form 1205 filed by Comcast does not include any costs in Schedule C for DVRs. Therefore Comcast cannot charge a customer a monthly lease price for a DVR based on the current filing. To impose such a charge, Comcast would have to file a new Form 12�5 including this new piece of equipment, or wait unril the next annual filing to include these DVR costs in one of the converter categories, To the extent subscribers are currently being charged for these DVRs, Comcast should be ordered to refund these monies and cease billing subscribers. A DVR converter works in a similar fashion to a regular converter in that it allows the subscriber to view any and all of the channels currentiy subscribed to by the subscriber. O. OTIIQi CONVERTER COSTS 1. CONVERTER REPt1IR5 The Consultants' review of invoices supporiing converter repair costs included m the sample systems showed that Comcast has inciuded cable modem costs in this item. Comcast provided access to picture images of the invoices via an internal Comcast Web-based computer access. Comcast did not provide this access, however, unril November 4, 2004, several months after the original data request soliciting this data was issued. The Consultants were forced to travei to a specified Comcast of6ce an order to gain access to this informarion. Comcast did not allow the Consultants to use a search engine, but required the Consultants to pick specific invoices one at a time from a list of several thousand invoices for each system. The process was very tima- consuming; the Consultants spent almost tcventy hours woridng through ComcasYs cumbersome data retrieval process. The Consultants also informed Comcast that the company's system was unable to provide access to several of the sample system invoices they sought to review. Aowever, Comcast made no effort to provide access to these systems or anange for alternarive review methods. Since the Consultants were unable to access the invoices associated with eight of the sample systems - E332 Wildwood, E840 Trenton, A54 Chesapeake Bay, EK32 New England East, E858 Montgomery County, E346 Conriecticut, E868 Vineland and B56 Ann Arbor- and it was impossible given ComcasYs cumbersome system to examine and analyze every invoice, the Consultants have not been able to determine the e�ct amount of the cable modem costs improperly included by Comcast in the Filing. Review of the invoices the Consultants were able to access indicated that at a conservative estimate, 10% of the converter repair costs claimed by Page 32 of42 January, 2005 � Ashpaugh & Sculco, CPAS, PLC and Front Range Consulting, Jnc. All rights reserved. Cannot be used vnthout expressed wcittrn pemvss�on from both organizations. b5-�4� �,� � _ ASHPAUGH & SCULCQ CFA:, PLC Cer.i"ma fubik Accouncan-z and Cocsuftants Front Range Consulting, Inc. Comcast actually represented cable modem costs. Accordingly, the Consultants have reduced the filed costs by 10% tp cosect ComcasYs improper inclusion of cable modem costs. It should be noted that Comcast was specificaily asked in the May 21 request to "provide a signed letter from an officer of Comcast certifying that the Narional 1205 does not include any cable modem costs in Schedules B or C" Comcast's June 21 response to this request stated: `ho cable modem costs were included in Schedules B or C." This was the only response received; Comcast did not provide the requested signed letter. The Consultants' review showed that the 7une 21 Comcast response was factually inaccurate. The Consultants' analysis of invoices also showed that converter dasposal costs were included in the costs claimed by Comcast in Schedule B. While the Consultants have not made a separata adjustment to eliminate these costs, it is not appropriate to include them in Schedule B. Cost of removal should be recovered in depreciation and/or the asset base cost. In subsequent reviews, this issue needs to be addressed. The Consultants' analysis also idenfified some of the alleged converter costs as repairs to remotes and costs of guides far use of remotes. It is not apparent that these costs were ever unbunrlled in the original Form 1205. Again, this is an issue that needs to be addressed in subsequent raviews. 2. $A5IC-ONLY CONYERTER ASSET COSTS The Consultants are awaze that Comcast has admitted to some local franchising authoriries that the company included wsts in the Basic-only Converter Asset wsts that aze not related to these Basic-only Converters. T'he Consultants' review found that Comcast inciuded in this Basic-only category over $32 million of asset costs not zelated to Basic-only converters out of a total gross book cost of over $59 million. This mistake has significantly increased the net book value of these converters. The Consultants understand from other LFAs and their consultants that Comcast is not contending this isue and has essentially agreed with the removal of this sum of over $32 million from the gross book costs of the Basic-only converters. The Consultants have included this adjustment in their revised Form 1205. 3. HDTV CONVERTER ASSET COSTS The Consultants have also identified a discrepancy regarding the asset costs for the HDTV converters. On the detailed workpapers submitted by Comcast, the gross book cost for the HDTV converters was shown as $101 million (per its response to Question 1 dated Tune 21, 2004). However, the details submitted with the Filing by Comcast showed a gross book cost of $134 miliion. As the request in Question 1 was for the support for the gzoss book value of the Schedule C amounts, the Consultants have used the lower gross book value contained in ComcasYs response as the cozrect amount to be used on Schedule C of the revised Form 1205. Page 33 of 42 January, 2005 � Ashpaugh & Sculco, CPAs, PLC and Fmnt Range Consulting, Inc. Ali nghts reserved. Cannot be used wvhout expressed written pemussion finm both organizations. 05-�a �/3 ASHPAUGH R SCULCO, CPAs, PLC Cer•vficL 7¢h�l< Raaca_„nts asd Ca�cutezaa P. CABLE CARDS Rront Range Consulting, Tnc. 1. MON7'FII,Y LEASE RATE During the Consultants' review of the Comcast �orm 1205 Filing, Comcast announced in certain communities' rate changes effective January 2005. A Cab1eCARD is a new piece of equipment owned by Comcast that allows a subscriber to purchase a separate digital box or a TV containing the teceiving and decoding equipment foz a digital signal. The Cab1eCAI2D decodes or descrambles the signal and thus allows Comcast to maintain coni�oi of the authorized services that are passed through this customer-owned digital box. Comcast has not included a price in its Form 1205 filing for this Cab1eCAItD. The Consultants believe that because the Cab1eCARD is used to receive Basic Service (such as broadcast channels received in digital forxn), it is a regulated piece of equipment. Unfil such rime as Comcast files a rate for this Cab1eCARD, Comcast cannot charge a monthly rate for the leasing of this new piece of equipment. Each participating LFA should ensure that Comcast is currently not charging for this CableCARD and also prohibit Comcast from charging for the CableCARD until Comcast files the appropriate PCC Rorm 1205. 2. LINRETCTRNED CI�t1RGE One of the other changes Comcast sought was to establish the price for an unreturned Cab1eCARD. This unreturned equipment charge was set at $250.00 3 Until such rime as Comcast files a FCC Form 1205 supporting this chazge, each participating LFA should inform Comcast that it cannot implement the unreturned charge. Q. HDTV INSTALLATIONS During the Consultants' rev3ew of the Comcast Form 1205, Comcast also announced in certain communities a rate change to implement a HDTV installation charge of $30.00. However, Comcast did not jusrify a separate installation charge for a HI�TV installation as part of its Filing, and therefore Comcast cannot implement such a charge. A HDTV installafion is either an upgrade charge or a new installarion charge. The Consultants believe that a current subscriber would be the most likely subscriber to purchase HDT`V services and therefore the charge to upa ade to HDTV services would be limited to the MPR for an "upgrade." Comcast's filing indicated that the MPR for an upgrade would be $17.12. Thus, Consuitants recommend that under its current Filing Comcast can be pemutted to impose an upgrade charge of up to $17.12 for HIITV installation for an existing subscriber. To the extent a new subscriber wants HDTV services in addition to purchasing at least the Basic Service tier; however, the un-wired(pre-wired installation charges would cover the HDTV installafion. Ln some of our participafing communities, Comcast has a-greed to lower tlus installation charge to the noriced "upgrade" 31 In some communihes, Comcast has reduced this charge to $75.00. See § R below. 32 These two charges cover "standard" installations. Comcast can chazge for non-standard installations, for example, Home Theater hook-ups. Page 34 of 42 January, 2005 � Ashpaugh & Sculco, CPAs, PLC a�d Front Range Consulting Ina All nghts reserved. Cannot 6e used without expressed writ[en pecmission from both organizacions. o5-a43 �� - ASHPqUGH & SCULCO, CPAs, PLC c.a,;u�a a�e:�� n�.a�� a�a c��:e��.s �'� Front Range Consulting, Inc. chatge. Each participaring LFA should ensure that Comcast is not currently charging this higher �IDTV installation chazge. R. LINRETCiFiNED EQLIIPMENT CHARGES During the Consultants' review of the Comcast Form 1205 Filing, Comcast announced in certain communities' rate changes effective January 1, 2005. T'he Consultants believe that all unretumed equipment chazges are rate regulated chazges and must be based on the costs of such unreturned equipment. The Consultants thus recommend that each participating LFA review the unrehuned equipment charges and consider reducing these charges to reasonable levels. For example, in some of our participating communities, Comcast has agreed to lower this unreturned equipment chazge for the Cab1eCARD to $75.00. Each participating LPA should review this issue for all equipment, and consider lowering the charge to $75.00 for unretumed CableCARDs. �. SAMPLING CONCERNS AND ISS[iES The Consultants' analysis identi&ed several concerns with ComcasYs sample. This is the first national Form I205 filed by Comcast for all of the cable television systems it currently owns. Prior aggregated 1205s only included data from former TCUAT&T Broadband systems. Going to this narionally aggregated filing has had a major impact on rates in some "classic" Comcast systems. It is thus highly significant to determine whether the aggregarion in practice is revenue- neutral, as the Commiss3on intended, or whether it results in an aggregate increase in subscriber rates. In this respect, the LFAs requested that Comcast provide the information requized by the Commission's rules. Section 76.923(c)(1) of the Commission's rules states: When submitting its equipment costs based on average charges, the cable operator must provide a general descripfion of the averaging methodology employed and a jusrificafion that its averaging methodology produces reasonable equipment rates. Equipment rates should be set at the same organizational level at which an operator aggregates its costs. Question 7 of the Initial Request for Informafion ("Inifial RFI") issued on May 21, 2004 repeated the FCC's rule and asked Comcast to provide the required descriprions. Comcast's only response to date on its averaging methodology has been to claim that its averaging methodology was approved by the FGC in TCI ofRichardson, Inc. However, TCI ofRichardson did not approve the sampling methodology used by Comcast in this filing, nor did it approve sampling in general. The FCC does not perform a de novo review in a rate appeal and therefore did not rule on issues not part of the rate appeal in TCI ofRichardson. The validity of the methodology used here was not brought before the Commission in that case. ComcasYs response is thus irrelevant. The Consultants' review does not question the use of a sample, but rather quesrions specifically whether ComcasYs sample is statistically valid. 33 TCI ofRichardron, Inc.: Pelifion for Reconsideratton ofBureau Order Resolving Local Rate Appeals (CUID TXI228), Memorandum Opiniox and Order on Reconsideration, 14 FCC Rcd 11700 (1999). Page 35 of42 January, 2005 � Ashpaugh & Sculco, CPAS, PLC and Front Range Consulting, Inc. Ali rights reserved. Cannot be used withoue expressed w�itten permission from both organizations. 05 -a�3 `�� ASHPAllGH & SCLiLCO, CPAs, PLL Cer!i{� iublic Acsacn:zccs zod ConsW.aa:s Front Range Consulting, Inc. The "methodology" in T'CI of Richardson used a sample of 40 systems out of 422 systems serving approximately 15 million subscribers, as compazed Yo the cuaent sample of 20 out of 114 "management azeas" serving approximately 22 million subscribers. For the 2000 Form 1205 filing, the TCUAT&T Broadband sample used a populafion of "381 systems representing appro�mately 16 million subscribersi that were strafified as follows: Table 8 By contrast, the current Comcast stratification contains: Table 9 Comcast has mare than doubled the number of subscribers and aggregated them into smaller "systems", that Comcast calls "management areas", while decreasing the size of the sample. This is counter-intuitive. Plus, as discussed below, the management areas and strata do not seem to be homogenous groups. ComcasYs sample s�atifies the systems based on the number of subscribers and uses that number as the only criterion. This grouping thus includes in one stratum tl�e management azeas of Washington, DC (2 CUIDs) and Mobile, Alabama (6 CLJIDs) with Flint, Michigan (78 CUIDs) and Ann Arbor, Michigan (52 CIIIDs). These differences raise significant quesfions about the potentiai differences in the cost structures of these systems. It is our understanding, for example, that the Waslungton, DC azea is served primarily out of one headend and one maintenance facility, but that F1int has mulriple headends and maintenance faciliries covering a]azge geographic area. 3a See ComcasYs August 16, 2004 response to Quesrion 13a. Page 36 of 42 January, 2005 � Ashpaugh & Sculcq CPAs, PLC arid Front Range Consuiting, Inc. All rights reserved. Cannot be used w�thout expressed written peaxtission from boffi organizations. DS-��3 ASNPAUGH & SCULCO, CFAs, PI.0 Ce:4i4e£ Pub:s A¢onnare:z znd Coqsu{�mcs Front Range Consulting, Inc. The participating LFAs are within their rights to seek to evaluate the accuracy of the cost data and the reasonableness of the rates in Comcast's Filing. As the FCC has stated: A franchising authoriry that "reasonably feels it requires clarifying oz substanriating informarion ... has the right to request and receive clarifying or substantiating informarion." If the cable ouerator fails to nrovide the requested information or faiis to nrovide comulete information in eood faith the franchisins onerator could hold the cable ouerator in default and mandate auprouriate sanctions, which could include enterine an arder findin� the oaerator's rate unreasonable and mandatins apnrouriate relief based on the best information available at the time relevant to the rectuested information. One of the key points in the FCC's order in TCI of Richardson was based on the fact that TCI's Form 1205 used actual data. In clarifying how it used the sampling, TCI states that it did not use sampling to develop costs across the boazd. It relied extensively on aggregate books and records and relied on sampling to facilitate its rate calculations in only three areas: (1) the average hours spent on different installation activities that must be reported on Schedule D, which it derived from fieid experience for the 40 sampled systems; (2) allocaring certain accounting entries between customer premise acriviry and network activiry; and (3) deternuning the percentage of "security devices" on either side of the customer demarcation point. According to TCI-R, looking beyond its books and records would be necessary in each of these circumstances, regardless ofwhether it developed aggregated or franchise specific rates. Had the Bureau understood the limited role sampling played in the derivation of TCI-R's Form 1205 rates, TCI-R argues, the Bureau would have placed more limited demands on TCI-R's evidentiary support. The City does not dispute that the data on Schedules A, B, and C of Form 1205 are actual data. That is not the case with Comcast's 2004 national Form 1205, even though Comcast inconectly claimed that "...both TCI and AT&T Broadband (both predecessors in interest to Comcast) had ufilized the exact same methodology for the last eight years.s Comcast further stated: Our use of the verbiage "essentially the same" was imprecise. The sampling methodology is the same methodology urilized by TCI and AT&T Broadband. There are no differences in the components, methodology or use of the sample from the components, methodology or use of the sample utilized by TCI and ' TCI ofRickardson DA99-1408 at ¶ 23.(emphasis added). 36 TCI ofRichardron DA99-1408 at ¶ I5. 3i See Comcast's August 18, 2004 response to Quesfion 7. Page 37 of 42 7anuary, 2005 � Ashpaugh & Sculw, CPAs, PLC and Front Range Consulting, Inc. 911 ri�hts reserved. Cannot be used without ezpressed wntten pemilssion from both organizations. r�5 a �.� ° �� ASHPAUGH & SCULCO, CPAs, PLC Cetti'ictl Pu:fic Accocnxxn.z aad Caora�SZna � Front Range Consulting, Inc. AT&T Broadband (other than the actual sample systems selected - these vary from yeaz to year) 3 That turns out not to be the case. For example, in response to Question 8 in the same August 18, 20041etter, Comcast states that "(t)he Schedule B costs, with the e%ception of the amount for contract labor, were all company aggregate costs." (Emphasis added) Comcast used the sample to derive the amount for contract labor in Schedule B. The prior Form 12Q5 filings of TCI and AT&T Broadband, however, did not use the sample to determine the amount of contract Iabor in Schedule B. Thus, the Filing deviates in at least one significant respect from the methodology of the prior samples 39 Addirionally, while Comcast has stated to the FCC that "it used actual company-wide aggregated costs as reflected in its books and records on December 31, 2003,i the above details make clear that this is not the case. The amount used foz ccntract labor in Schedule B is not the actual per book amount, but is derived from the sample systems. Also, the number of `Basic Only" converters in Schedule C is not an actual amount. The Consuttants' July 9, 2004 RFI asked the following as Quesrion 11: For each of the systems included in the Narional 1205 that were Comcast properties pr�or to the merger of Comcast and AT"1' Broadband where this is the inifial nafionally aggregated FCC Form 1205 filing, please provide: a. Cabledata or Cabledata-like reports for each month of 20Q3 identifying the number of convezters associated with "Basic Only" subscribers, as the term "Basic Only" is used in the 2004 National FCC Form 1205 filed by Comcast; and, b. A detailed explanation of Comcast's methodology for idenrifying the number of 'Basic Only" subscribers leasing equipment, specifically converters, for the period of January i, 2Q03 through December 31, 2003 in all systems that were Comcast properiies prior to the merger of Comcast and ATT Broadband and where this is the initial narionally aggregated FCC Form 1205 filing. Comcast responded to (a) that "billing reports were not utilized to idenfify the number of converters associated with 'Basic Only' converters. Therefore, Cabledata or Cabledata-like reports for each month of 2003 for each system where this is the inilial aga egated FCC Form 1205 filing would be of no use in the review of the Form 1205."4 Comcast responded to part (b) that it had deternuned the number of "Basic Only" subscribers leasing equipment by "polling" ' See ComcasPs 7uly 28, 2Q04 response to Follow-up Question 1. 39 Comcast's July 28 response is thus a clear failure to provide "complete" lnformation in good faith, as referenced in TCI ofRickardson. ' CSR-6388-R, filed September 3, 2004. p. 21. 41 See Comcast's July 22, 2004 response to Question l la. Page 38 of 42 January, 2005 � Ashpaugh & Sculco, CPAS, PLC and Front Range Consulting, Inc. All righks reserved. Cannot be used without expressed written pemilssion from both organizations. o5-a�� A3HPAUGH & SCUlCO, CPAs, PLC tcr.iGw' Pubiic Accoun:z.r.x ar.d Cmm:ta�u Front Range Consulting, Inc. the sam�le systems and extrapolating the results to ComcasPs entire system covered by the Filing. Thus, here again Comcast did not use actual company-wide aggregated costs. Comcast's use of sampiing for the Basic-only converter data is problematic. The company's September 15, 2004, response to Question lb states that "(m)onthly billing reports for 2003 do not show the number of subscribers being chazged a Basic-only converter rate." Comcast responded with additional information on October 7, 2004, including additional information on its polling methodology. However, it is unclear why Comcast used a polling methodology at all. Prior TCl/AT&T Broadband nariona151ings did provide billing reports supporting Basic Only subscribers. Thus, it seems unlikely that the same sort of billing reports could not be provided by Comcast. Obviously, this is a matter of legirimate concem. Tf Comcast cannot idenrify Basic-only converter subscribers, then (1) how can the regulator be assured that the resulting rate structure is appropriate, and (2) how can Comcast accurately implement a Basic-only converter rate to subscribers? In seeking to address the reasonableness of the aggegated rates, our analysis has followed the FCCs own mandate. In TCI ofRichardson the FCC stated: TCT's sampling methodology has produced very different results in Richardson. TCI's Richardson HSC has gone from $193Q in its 1996-97 rates (before the downward adjustment ardered by the Ciry) to $3018 in its 1997-98 rates to $35.90 in its 1998-99 rates. Its chazge for installation in an unwired home has increased from $28.46 (before the downward adjustment ozdered by the City} to $47.30 to $53.16. Before a cahle oaerator can meet the reasonabieness repuirement it must show that its averasin� methodoloev produces rates that are revenue neutral to the onerator and accounts for anv laree variances in cost characteristics amona its svstems. It also must show that the included costs are uermissible and nroperlv treated in Form 1205. TCI has not done so in this case and has not met its burden of iustifvine its eauipment and installation rates. The City did not act unreasonably when rejecting TCI's equipment and installarion rates and prescribing rates based on the best available infozmation. TCI's appeals on this issue aze denied. Thus, as part of its burden of proof, Comcast must show that its methodology yields revenue- neutral results. The following table shows a comparison of the equipment and installafion rates in the Filing with those in other LFAs where Comcast did not use the narional 1205. ' See ComcasPs July 22, 2004 response to Question 1 Ib. °' TCI ofRichardson DA98-1642 at ¶ 30. (emphasis added) Page 39 of 42 January, 2005 � Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting Inc. AI( rigpTS resetved_ Cannot be used withouc expressed amtten pemvssion from both organizanons. 05�-u 3 ASHPAUGH & SCUCCO, CPAs, PLC Cc:fiSeE 7uhiic Aaacnians ar.0 Gonmi:xr.s Table 10 Front Range Consulting, Inc. The difference in rates idenrified above raises serious concerns of over-recovery in converter rates and insTallation charges. Detroit has subscribers that are "Basic Only." These subscribers would be paying $4.83 even though their "costs" would be included in the national 1205 so as to result in a rate of $1.30 or less. Similarly, Murfreesbords converter and installation rates exceed the narional 1205 amounts � These discrepancies cast serious doubt on the revenue-neutrality of ComcasYs overall Form 12Q5 methodology. The Forni 12Q5 filed in Mur&eesboro is a regional filing for the Nashville azea. Nashville is one of the sample systems used in the national 1205. The following compares the inputs for the Nashville sample system to the amounts shown on the Mur&eesboro 1205. "The Murfreesboro filed 1205 idenrifies "Converter 1" as addressable converters, °Converter 2" as non-addressable converters, and "Converter 3" as I�TV converters. Page 40 of 42 January, 2005 � Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting, 7ne. All rights reserved. Cannot be used without expressed wntten pemussion from both organizahons. 05 -� �f 3 ASHPAllGH & SCULCQ CPAs, PLC Cer:Tet ?uhG< Accaumavr.s x¢d Cansu�:ancs Table 11 Front Range Consulting, Inc. While both sets of information claim to be costs and data for the year ended December 31, 2003, attd both were supposedly prepared by the same person in Nashviile, there aze major discrepancies between them that thus far aze unexplained. Comcast was requested to provide the support for the costs and data of the sample systems, but only provided the data sheets "used" by Comcast's Philadelphia office in preparing the national 1205. Comcast claims that the LFAs do not have the ability to request support beyond what was "used" by Comcast's Philadelphia office. But if other materials from Comcast bearing on the same facts contain contrary infonnation, further invesrigarion is certainly relevant to evaluaring the validiry of Comcast's claimed rates. Comcast's refusal to respond necessitated the round of requests from the LFAs specific to each sample, as described above. The above comparisons show the necessity of having access to this type of data. X. REFLIND REQLIII2EMENTS The Consultants believe that these revised rates will require Comcast to refund equipment and installation charges during the rate period of these Form 12Q5 rates (typically the period starCing 90 days after filing date). For those participating LFAs zeceiving their filings on March 1, 2004, 45 The hourly service chazge for the Nashville sample was calculated by dividing the amount for Annual C1�stomer Equipment Maintenance & InstaIla6on Costs, Step A, Line 5 by amount of Total Labor Houzs, Step A, Lme 6. ' Page 41 of 42 January,2Q05 � Ashpaugh & Sculcq GPAs, PI.0 and Front Range Consulting, 7nc. All rights r¢served. Cannot be used wiffiout expressed written peanission from both organizations. o5-a43 ` i� r ASHPAtiGH & SCULLO, LFAs, PLG �i � Cer:iGed Pue!ic Accocn:antz ar.d Lor.s_icxms Front Range Consulting, Inc. the rate period starts June 1, 2004. For those participating LFAs receiving their filings on April 1, 2004, the rate period starts July 1, 2004. Each participaring LFA should include a refund section in the individual rate orders requiring Comcast to prepaze a refund plan from the beginuing of the appropriate rate period unril Comcast reduces its rates in accordance with the order of the LFA. T`he Consultants recommend that these refund plans should be submitted to the parkicipating LFAs within sixty days of the release of the individual rate orders and require Comcast to refund the over-collecrions after approval of the refund p1an by the participaring LFA. In this way, Comcast will be able to retum these over-collecrions to essentially the same subscribers that paid these over-chazges by avoiding undue deiays. XI. CONCLUSION The Consultants recommend that the participaring LFAs appxove the rates determined in the analysis as shown in Appendix B, with the caveat that if any informafion should become known in the future which would lower these rates further, the participating LFAs reserve their rights to revisit this new information. The participating LFAs should state that these are the maacimusn rates allowed foz each component of equipment and installarions under the FCC's rules. Page 42 of 42 January, 2005 6 Ashpaugh & ScWco, CPAs, PLC and Front Range Consulting Inc. All righu reserved. Cannot be used wifhout expressed written pexmission frmn both rngani�ahons. 05 -a� 3 AppendiY A os-a �3 Appendix A Comcast 2��4 FCC Form 12�5 List of Participating Local Franchise Authoriries City of Albuquerque, New Me�co Arlington County, Virginia City of Coon Rapids, Minnesota Dastrict of Columhia Village of Downers Grove, Illinois Greater Metro Telecommunications Consoriium (which is comprised of Adams County, Arapahoe Counry, Arvada, Aurora, Brighton, Broomfield, Castle Rock, Centennial, Cheiry Hills Village, Columbine Va11ey, Commerce City, Denver, Douglas County, Edgewater, Englewood, Erie, Federal Heights, Glendale, Greenwood Village, Jefferson County, Lafayette, Lakewood, Littleton, Lone Tree, Northglenn, Parker, Sheridan, Thornton, Westminster, and Wheat Ridge, Colorado) City of Los Angeles, California City of Mentor, Ohao Metropolitan Area Communications Commission, the (which is comprised of the Ciries of Banks, Beaverton, Cornelius, Durham, Forest Grove, Gaston, Hillsboro, King Ciry, Lake Oswego, North Plains, Rivergrove, Tigazd and Tualatin and Washington County, Oregon) Montgomery County, Maryland City of Murfreesboro, Tennessee North Metro Telecommunicarions Communications Commission (which is comprised of the Ciries of Blaine, Centerville, Circle Pines, Ham Lake, Lexington, Lino Lakes, and Spring Lake Park, Minnesota) North Suburban Communications Commission (which is comprised of the Ciries of Arden Hills, Falcon Heights, Lauderdale, Little Canada, Mounds View, New Brighton, North Oaks, Roseville, St. Anthony and Shoreview, Minnesota) Quad Cities Cable Communications Commission (which is comprised of the Cities of Andover, Anoka, Champlin and Ramsey, Minnesota) Ramsey/Washington Counties Suburban Cable Communications Commission (which is comprised of the Cities of Lake Elmo, Maplewood, North St. Paul, Birchwood Village, Dellwood, Mahtomedi, Vadnais Heights, 4Vhite Bear Lake, Willernie, Grant Township, White Beaz Township and Oakdale, Minnesota) City of St. Paul, Minnesota Ciry of Santa C1aza, California Village of Skokie, Illinois South Washington County Telecommunicafions Commission (which is comprised of the Cities of Cottage Crrove, Newport, 5t. Paul Park and Woodbury and the Township of Grey C1oud, Minuesota) City of Wheaton, Illinois 05 a �3 Appendix B 05 -a �3 � v V _ � � � � � � � � � � � � � � 0 L �.�. � C / � •V U J a �; Q a U � V � V y � � � � t i.fi s � Q N � � � C O CCS C[5 � � � � � � � Q .� � W � � � � a� � C � U � � � T � � r � ^ V/ m m C K L U e d � � R s U � LL y � �>a Q�� U � � �- d U w •j �J Q � 2 U LL m d N � 1 � � � F Q N H � R U �N y oaLL. U `�2 ��d �_ ;_� U N H W V � m O � �- U t- e o00 c� N u: r t0 � N a oco � o ra n N O O O N � �� rn rn o m N V O 0 ov �o a, � �, �, t") O (� M � `mm o v co tR E9 fA f? N � C � V r� cn 1 7 t � V, U � i V� N � o m Y WU tb j Q V � O � � � G G U m v Gf U >. q c Q m o y U . p _ m � W K m Q 2 eeoaeoe°ooa 1� l� W N O(D Of O O O t` Nf7NN? N'r 00�() vnnmcoon o m o`� m��co �� y��rnor c� a �- e} l7 � a N O OJ C7 f") �EH fRER'AfAEfl �� v v v v v �� tt�el4l Nc oJO� � W i0 f V h (O N Ql � � n �.�- � �.w � ai w ,R w d..R .R «. w .R «t 0 0 0 0 0 0 0 0 0 0 0000000 000 (7 (7 M t7 C� t7 t7 M CJ C� e> vs F» u1 � v� ej F» cs F» �J N 01 cJ oJ N O O N mwr�nrnrnm o 00 1(J N O�(O O O CJ N lD Q(p V� Q O O CJ � � O � O O O O O O t7 O� O c N N� O h � tV K M�O ilf O? t� N U N � N M�� N[O th 1n M N N A N .Q d N MW19VidiWW HWI9 � y «� «� � «� _ m tn Ui IN In �A In �[J In �[i 1� � c] tti C') M[7 CJ t7 M C� C) — 6 eje>F»�»u>»e> cncfl�sr V N� W �� N m n � (O T OJ �^ CO 4 'S llJ IO R W C 1� c0 V C N'V tfJ .-o 0 000 0 000 N i a � a �a m y F � a� _ fl, �" � s '^ v a �= � m� N m a� d H � Ec q m t=;�- . w � � n m y 4�p y � � O�� Q W R � 6 y � m�vN No . � � 3 3 G 2 3 3 o - O __ 0� m2 m0 m a�iF= . R f0 �•r 9� L L' R v d o o O m O1 m U U E . y 3 y a'a i IIrn 3 w C C» � S �aQQ��o»>U . 05 -a�3 Appendix C a� a�P3 ��n�� `N'es5sgtw,DG 1ASSa I.iNSfofm�sbe�vgflJW: �EV(env"i m0eappro0��«dox) �la wujwcdon wi0 FCC Fmm 1200, FCLFwm 1220, orFCC Pmm I225 Ahazh OeCUmpIMtlFCC Amm 120QPCCPo� I220� mFCC Farm (125 b Aska¢toEOSPem�, O& �Iu mdc b fuifill pCC rvip i�qui�ag av avwai 5Ln$ OC(NB f ia�uNeae¢ocwArbl'�ulutfilciWSfuw ��C�td3lYS) NMrlLis sM�1Gbe qe da�em wL'U+Lerncs lu[�mufied, tyudug ritherPCCFoem39� wNeprim 61ag of Wv fwm, wwm effecc A finttr Ne datt an wh¢hyou dwetlyau� baots (Orthe fi[eW yeavrellahJ �u Ihu 6�m IL3V03 (�ldNyy) Nox. Ris w11 mdiwie iLe md of We tLmwN Sscaz ye� sor wL�cL you are film8 �ID.s kem 3. Intlintt We mryonronams ofyour oDle ryswn [6vwm "z" iu @e wmc[ bw� X GCnrypauw SubcluptaSwrymaWv Pvmentip SOte ftopne,0rsiup oae.�n�c�wneaow] Apyrovdby.OMB30W-0]03 rcc ewm uos Y� � Exw16D fo� Wwdows Jmc 1996 BOR111205 DETERM1➢NLYGACGIIL�iEDEQU1P�NiA.\DLYSf,�LL1itOV COSIS "PQiRP.�S3ITPORH" 05-��3 FadoaiCO�muo¢[G�ritiw WaEmgbq6C 3L556 SCHEOULSA;CAPfl'ALCpS'J$ OPSERVICELlS'fALL1TI0N�NDM.1W1EtiAYCPOPEQOfP.�¢.VI.f(�'➢PLANT OI➢v]. pthv2. A vmtmdPlm[ VeBiUrs iooh Paditie (SpedlybtlaN) (Spmfybelow) 8 GosHookvatuc 56�LU,3,')SC 5420.9]t,9Tt C 4s�UttdDemantiw 2535,STSfl9 5�9,�16 D CeCSmiAUS SLqTBI.'!t'! 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Speo(y ONm I 5 `P�SY'OILV 2 Spmfy OWQ t CoutractLabo�; (:owutuMmv�eueucc S�x+(yUdC2 VeLicle&ywa)]osvavicelRmfilmdLoSeEkpmses APP�^"fd�' �*163050-0143 ACCFmm12M Page 2 E�scI6A £� WinMwz Jwe 1996 05-��3 F�� w��.n.� m,,. Page3 Exce160fmWivtlowa .�.��a,��,� FCV'FO:mt205 Imc1996 os a � � Fdcil Co�nvutiart Commm� Washmguu,D.G ?A556 P�+ 4 EusI4ATp Wmdoqs qpprorW bY DMH 1060.D]ro PCCFwm 1205 Imc1996 �THODOFBIId,LYGPORINSLSGiA3I0Y5(plaaav "inNesppmpriaebez) �"m , tirmz b9W h' Hx how5uvtonNe HSCUkduMaL'mc'f. E ics'a9ada�biYedaaSmtlmd�8a3� c`�S a�3 Fo3¢al Cnmmm�3W n� �'COmia�m WmEmgfav,DC 20554 ANO�val Cbarge (EV�u WeuomivYC6atgewL'me 36) a GoifortnHoutly Sanu Chv;e �plaa ao'Y" In tbeappropnale pOZ� �8� F ccl00forWiudows +�PRa'mMOM8 PCCFOem I205 l�c 1996 05 a�3 Fetl¢e1CO�atiomC �saau Wxmng�,DC L155a Pagc 6 & celd 0 (w Wmdaws �+PPqvMbr O.MB 3060-o>OJ FCCPOimt205 Lme t996 05 -a� 3 r�aa, c�m�aeom co�;w WNagm,D.G 9n56 LABOR COS]' AND POLICY C&1�1 GES In�cak yow avswerb Wc fo0owivge@�¢quamvs bypt 'vgev "x" w N<appmpnaw bwx t.HrvcywmclvdNtLeleborcos¢acwoaWwiiIlSUb hrwbteAOpsmyoiucbargcsforivoatiosWlaaov� PES x NO 2 Havcycucapi�atiu3Nelebaunxv�atcdvnW subsmbo pbledtcpS �Y£S O 1 ifYOULew filed this tom�pofwq y¢ve you cpmgM mYVOLcY.a 4, �tuwmmBOrroxe allacaWa Wa�eausea mwueaseia Wewsa ' eM1WNw WernmPutada¢ufywpmmtendwWiana�ch�BeY+ YCS(YwmsstatmchafiilleWY anen) BNO Appm.xd by O.V.B 30600�03 FCCFmm 605 �� Extt140 for Wmdows Iwe I996 CE&TlF6ATION STATFMPMT WII.LFVLFALSSSTATSMPNiBMADEONTIISMYRMAREPUNISHnBLEeYFtN6qND10RIMPffiSONMENT (U.S. CODER1iE 18, SEC[tpN 1W1), ANDIOR FOAP6ITUAE (� 5 CO�E, t1iLE 6�, SECLION 503) o5-a�63 Fdaal C �mnuws Co�mw Wa�gum�DC 20556 PaH[e Ew14.Ofo�Wadawa wppmvoiby O.�ffi3060-�>vi FCCFpm1205 Jwel➢95 05 a�t3 Appendix D �� N� Q� O O l� N �fJ i� t� N O (D 1� ["J � tn 1�- V O> � O r V�D c0 < O�'J O C.) 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th t(> A m d' O �- th � N m P V < t0 � t(J !� !� �T 1n N O�- A N N N O n h � � c O � K N N N N Q� � I� O d 1�- V� T R � oJ N N O V 0 t[l W N W I� (D V N h (D Oi N N V M� N W � M � O � r � W O Oi M � � N � � O � O � � i� d' V N N � W V � � W�<!+ i� N W O A M � � � � � � � � � o] t0 W N tn �[J .- N h O� V m O N N t0 C � o] O M N � W W M[O lD CJ n (7 N � C oJ M m� N� 0 Z v w n v w�- ` y v O O OJ fp (7 O Z � N t�9 `^ W O M M W N N N N c M N N N N N N � W J J Q � F- � wz � � Q O Z � U � 7 ?i K m j p � a � W Z 6 O�wO�� a �(A UtLI- � m n m � � n IA N} � O t�manx� �wwwww M n � � N � N � N N � V b r n N 0 C N N O � N � N m r � � N � � V C O _ = U � � U � = v�i � � F � Q � O za z ..l a � 0 rn o o � ww' � w 05 a�.� .�>.,, ��°"� '�`�? ik3��Estima� �cl`�ta d"a[�Efrors ,� ; � .� < �. J , � �' ��`�-.�' PRIMARY VARIABLE t: END AMOUNT (CUSTOMER EQUIP. 81NSTALL COSTS) StraNm N n Mean N'Mean s N(N-nyn N(N-n)s!n 'I 53 9 7,888,702.39 100,101,227 908,039 259 213fi4fi�89645251 2 37 7 3,989,576.0� �47,6'14,3'12 1,�3d,263 'I59 169623968050227 3 16 2 4,612,22'1.15 73.795,538 68,243 112 521596489467 4 S 2 10,377,'17273 83,017,382 3,253,82Q 24 254�96247559396 ttd 20� 404,528,459 63758790174433fi Estimated Tota = 5 Vanance = Std. Error= $ Estimated Mean = $ Vanance = Std. Error = $ � OF VARIA710N = PRIMARY VARIABLE 2: Stratum N i 7 53 2 37 3 16 , 4 8 1�4 21 61,717.67 139,774.64 165,355.66 294.120.48 7ER EQUIP. & INSTALL) N"Mean s 3,271,036 25,213 5,171,662 31,328 2,645.691 11,555 259 159 112 24 tstrmatea 7otai = Vanance = Std. Ecror= Estimated Mean = Variance = Sfd. Enor= OF VARIATIl1N = SECONDARYVA Stratum N 1 53 2 37 3 76 4 S 114 '12.687.58 28.791.81 43,031.97 N'Mean 672,A42 1,065,297 68&,572 479,959 � 1,490 10,574 3,052 259 �59 112 24 tsemated iotai = Vanance = Sttl. Ertor = Es6mated Mean = Variance = Std. Ercar= OF VARIATION = 25,256,442.78 3,548,49526 4908340272C T21,SA774 6.24 % 15563231 529,863,860,340 727.9'17.48 117,906 60 40,771,304 6,38524 1 57.596.221,949 239,992.13 25,493.06 4,43�,84226 2,105.19 os-a� 3 md �� $ F M � $ � Q � �� mw �rw a �-° > ,°-� m y y w � � N N r r A w � w w N 7 y gj 7 y E � w w � n ef al �roo os � o0 000 ��w �tw N � N � 7 y E € m�N u ' w �� m a � R � � � m $ ° m uws m e� �� =w m � N d � N E _ w � d � � A � � & w v � N y � N E � Qoo nm„ �Ps ��Q A�Q � o a o r A w` f � w` r a � > " = ' 'm a E E > � w r '� w C � m � � N F '� z n � � Z E j m tv n Q N ' m 4 �5 ��k 3 - o ao, e r o Ng� � ° ' m `�' 3 � n � m m � - - " � � � t w W o � j N $ j y 3 £ � � w w R e � ° � � e °��' o m m � - m`O _ `�N -f ° e t r m w � i w n � $ ` . 9 .- � £> v� m j m e N N m � .. W y� m rn m m n ��n n `� � ry � � � N .- O O N � e ' � O O O O� S� W � m W N � �n °- � y � � N � w w m S«° o g m �$ g � o e _ � e ' � n a � � � w f z w r.� � a> y d j y E E w w r n m - `�, m .- m ' . �` - $ � n o � � $ f n �D w `m � m � �n n4l � � N ` ' �� = � w � q � o t � � 9 E � � � � N E W � � � `p n lJ 3� Z ' o n f o Q 0 C $i Z O v � o � � f c W �� W F d j y m j y tt £ E a c w ' c E N - w a n z S � o o � � n M- m � � w m a �"'°I �Imll-�� 05 3 - a� ��" m � � w �mw N � m � h ° � w E - w �^ m � � rv � " o A m $m _o�? m m$n ° `$ - m � $ A �� q g �o z N o �� w f A w` g .- e v y � ' > %n a E E > �' w w O � ' ' w n a m � LL a m m � e $ m a r � e n m Q� r o 0 m �n �i i n ii 0 0 �° m w �° � 6 � 7 � � � y E � a a � w w n m � m�� aho �e a m om �o �e��o -� _ o� d m W � m W F r � a � ' " m � w a � E � w w C ' ' _ F � � � � � c � M � H .� <I m � m $ $ N $ 'o n u i� r m`_ w f w ` 7 N S � N £ E w w - o o c � '�" 0 0 0 0 �= g ° Z � w .�>y S>'y E � r .- e °1 w � � m � m�� a eo 4 05 ay 3 P � � � l� - Qi Q � F � W � _ .. v n � y N O j y E m J n W y� m v� N ei n m d �� N �a v a� O m .��+om w o � H � � Yi n f i� � � C V W F� W C � y N � � N Q E E > "+ w C N $ ° � o o ° *° � w °� � w � `w � N v � 41 E £ "' w no o_oo� � _ V �i Y Y u � O O O F� W � t � � ¢ n �-'i > y � 7 y K y ; � ° > ° _ u� E p ? m F . O < < � y � 5 w � E O e d � tJ y n 0 o e m U a n w 3 9 <w �r� �� a 0 0 o alo .., �.� �� a � w £ A w m 7 N e� N F E . . w u°{ � m � 0 0 m a' os a�3 HSC D5 ��E3 � W N O) N ID � C`�� O C U c> O M� M O M O c'1 m O O O O O O O O O 0 3 0 F= uo�oo�oo�ooi� m E m m � U > uo�oo�oe�� 3 M rn M O a r in j O O O � Q1 o t(J oJ � � n M d �CJ O f� UJ O O O O ¢ �I �� o I� i�� N f`� p N L O a' � 3 >, � M � 'm V � a o m m c � � � m o m < � C U O � V � ��} W 1d y O E 0 � U 9 N N N � N o V c m E �n ° N � � W � a G � 3 O " E � m o � � � N ?� U ) ° m �° U o m d c � E � � �, m � m 3 w � „ �p a °- l C N — > ? 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LABORCOSTqa�"DPOS�CYGHiYCEt IMicye�ne�wamwtlrfellox'vyefirtc4u-yip¢6rptxmgan � in�eappryriyetw I.Hree�vuh IWU1AeLMe�[mbvsocism�mM1rvbx'n'!¢oLk&W+urw��M1v3ntwuinal:rtualLw"cn? JM� Hse>nunP�� ac I�pyen.�n yµ�brcd �•�q tyeu�v evble dmps' YES � �AO 3 If.w6arzfi�N mista�m bd'on aaw_ mdw3w.u; poG.v eg. wnawqnws�� tavicnmai rnmx m i�cxssc u mccmn Yeoam uw�wwa� urn�m� �a �u,na�..assc' �� V�PoI 1 [ 0.YQ <ERYiE[G210NSTwSE�i[tti � ; �� ` ��=�i� ., t J ��L, � �°� E�10 Wm Ycspq 20 F � Alq' l9RA �� 3 N.eaCe�M Name. 7HORl70V ( FIBE G� 7 Hader.dNv.rEzr. H06Si> FCC FORIV11265 1YORIiSHEEi fOR G4L.CCCiiI\G ZQIAL EQl3IPl1E\I 4YD IYSTALL1S10� COSIS .1L7AC1in7EYT SCHEDULE 6ANALYSIS INSSAll / � ��.�-��?,,� (�� AllG ? �. t99� ? ; ; _� Page_ o�-a�.� ��'' ;,� - : t;; � - ��xt=<'=~�,It� �;?�z: � _ _ 's' i � €,� : _":; .. _ : ' ' ;'.: � �t . ��i �u��-� - ' � ,_;, �� , -��_ __ 1LLE-COlfI11U:FIC:lI10\S, I�\'C ICC IOl:AI 1305 Pt:i['Y:�1�:1`1'IO\' DOCTI�S��ti 1 rl'l 10;1` T�115 tll�lt?O �VI�� Sz[VC; [0 C�OCLIq72R[ lil SZtl2Fi �(BIRli [IIC SC8�1$ 1IlC{ IllfliflOClO�O�«=S OC(llil(� (�;c; pcepa,aeion oF FCC Foim (20� fo� systzms o�� ned and/or rnan:��ed by 1 elt-Cbn�municacions Inc ("TCI') Documentation wift cover on!y those fines requi�inR mai7ual oe compu[ei inpu� nnd no� those fines �hat ue caicufaeed {nathem�[;cally o; by obtainin� h�foimation fiom anothci line FCC Foem 120� is oeing �reparzd in accorclance with the Genzrit lnseructions fot' Aetnchment oE FCC Foim 1305, Dete�minir.� thz Costs oF Reguflted Cabfe Equipment and IEistallation ' page 9 Form f?QO instiuctions Such instzuction; indicatz that if ;fic repoitin� uniis iaces have bee❑ restiucturecl to bac!; out equipment and inst 2II1EIDt1 1E CDSI IJ:IS2CI OA $ EISCBI �•82t!' FOt �� nicii th:: boo4s have bzen closed prior [o ti[arch 3I, I99s then that data may be utiSized [o complecz a sinale Forin 120� t�ccoidin3ly,'T'CI has utilized tlie eq�eipmeEu a�td instatlation data i�ic�uded in tite iepostir�� unit`s FCC 393 fbt purposes of preparing [he Foim 1205 Ciled in conjunction �4�ieh �he i'eporting uniCs Forrn F?00 Ihe cost data, sL�bseriber informa[ion and conver[er uni[ informa[ion includzd in che Form 393; a�1d utilized in che Fonn IZO�s is inc4uded for cnz period c3osest to �he inicial d1[e of reguia�ion foi }4nich TCI had closed its books and foc which ine inf'om�ation is p�actically obtain�ble Tne datz; utilized a�e as folfows; Initiai Date of Re;ula[ion prioc to January 31, 199;1: Sched�de A: Schedute B: Schedule C: Subscribersl Cor�veitei' UniFSs Ocrober3}, 1993 December3l, 1492 Oaa6er 3! 1943 Sepcember 30, 1993 Initial Date of Re;ulation after January ;1, i99?: Schedule A: Sched«le B: Schedule C: Sabscribers! CanveRer Uni�s: December 31, 1993 Decembzr 31, 1993 Dzcembzr 3I, 1993 Deczmber 31, 1993 or �Iarch 31, I994 os a� � ._�:�;��:�=t: � =--. �. SCHLDULE �l - C;1PI1:iL COS7S OI SEI:VICL I\S"lrlLF, \l I0_\ �,ND NI_1T:1'TLcY_1NCS OP �QliIi i\IE\`7' _1\D YL-�\"F Linc f\ Rc'pzese�tts [he iypes of cquipnte�it necess:tn� fo; i��st:tlt;t[ion aaG mainrer.,;tn�e ot catofe Ftcifities l CI has itlenRt:zd {heSe ttent5 a5 vcElicleS (aCCOUnCS 2310 0000 arid 2={04_OOOdJ and maintenance eqiiipmcnt (accoiFnt ZipO 0000; Liac B Re��aser.ts the gross Dook rali�e of thz e�uipment items [isccd in Li�ie �l at zitftzr Oc�ebe� 3L [993 or Deccmber 31 1993 Gtoss book valuc is �aken t�om [he books and cecoids of TCt LinzC Represents nccumullted depreciation on the g�oss bool: vafue ot the equipment items fis[ed in Line A at Octobe� 3I, t99; or Decembec ; l. (99;, q�� depieciltion is calculated usin� TCI's standarc! uszfui liies foi [hz respec[i�e equi�ment itetns (� yeais for vehicles anc� 10 yzles Poc tnziintenance equipment) on a s[cai�ht-line basis (wirh half-yzar convention) Zine D Represents the defe�red tas balance associated with the itents tisied in Line A ac Octobei 31, 1993 or December i I, (99; Defecced tax bafances weie catculated by mu![iptyin, the difference bztween the ne[ 600k value and �he nz� tax value by the surn of che Federal income tax rate (3590) and the applicable state income tax cate (ne� of che Fedecal income tax beneFt) �ret tax vatue �vas calculatzd nsing �ross �ax vatue mimis aecunzuia[ed tax depreciacion Where Ehere is moce than one repoctin� uniE in [he accountin� uni� (an accountin� unit is [he level at which 7'CI has historically accoan[ed for the aceumulaeion of costs in aceordance tivith �znecatty accepted accouatsn� p�inciples), TCI has allocated �ross bool value, accumuia�zd deprecia�ion and net [ax value 6ased on [he propoi�ionate number of subscribers ia the communiry unu (iianchise area) �o �he �otaf accountin� unit _ L ine F L.iae G1 Lide G2 Line G4a Line G4b Reptesents the cequired c'a[e of retucn of I 1 2�90.. Represents the Federal incorae tax cate (n effect durin� 1993 or 3>°� Represents the regortin� uni�'s applicable state income tas ra[e foi 1993 Represenis 1993 intezest expense for th� entity (genziafiy "ICI) reco;nized for Fedeial and state income tates ourposes Repiesents Cota[ net assets o€ the entiry noted in Line G4a Tota] net assets equal totaf pipperty, pIant and equipment minus accumulated depcecia[ion, and tornl intan�ibles minus accumulated amortizatton. L.ine G6b Repcesents distributions made by partnecship or joint ventuce systems managed by TCI durin� the year enc�ed December 31, I99� Amouats are iacluded only for iepoctin� units that are part of a partneiship orjoint vennire. Liae G6c Represents contributions received (canaot excee� amounts incladed on Line G66) from those holding otivnership inteiests in parmecship or joint veatuie systems managed by TCI duiing the yeaz ended Decembec 31, 1943 Amounts ace inctuded only for repoc2ing units thac are part of a parmeiship or joint ven[ure � fcc I20�v I 6114/44 os-a�3 {� , �� :! � , �, ��:,r� ° - tf;i:_: ta_s< � = L: E �� ;�;� � 1 19�4 �� F= 1 VE.:!.�:�`.: iL: •�'�� iine i _____ ��v�y;:�;a{�,�{-gaoreciatior. e�pcase foi the icems (isted in CiFic \. D;:prcciation c;cpense is c2lculated u�ing TCi'; staiidacd usctitl li�es o�i a strai�€3t-linc basi� (�L i[h hair_y�2: conven[ion) ' SCZ3LbULL B-��v�(LI:iL OPLR>17f\G �lPL'\SLS LOI: SLI:Z'ICE T�S'I'.�I,L��TIO\' A\'D �I�iIl1�\':��CL OF LQUIP�f�N"I' �IND i'L=�:�1 Schecfuie B lis[s ,et1 annuai ope�atin� �xPenses (zsciudiug deQceci2tio�e) fo{ ins��l2ation and main�eraace of aIl cable faeifi�ies for the year ended Decamber 31 299? o{ fot tfiz yeat end�d Decembei 31, 1993 finnLZa! opecatin; e�penses for instal(ar.on 1nd maintenance of cab?z facifities are identified as [ech;�icaf salaiies, conuac[ labor, maiacenanczlopecacin� ml�ziial fiei�he converter rnaintenance, vehicle expense-gas and oit, vehicle expense-iepairs and tiies vehicle rent:tl, employee benefits and payso[1 taxes Technical salaries, contract labor, n�aintenancefopetatin� m�zteriaf frei�hc, cor�ve�l�c maif�cenance, vehicle expense-�as and oil, vehicte expense-repai�s and tires and vehiclz rental ezpznse amounts were obtained from the books and recotds oE T'CI. Employee benePi�s ivece calculated by mii(tipiying the numberof fu11 time eqtiivaten[ tec6nica! employees by S?,1QQ (escimated aveca�e employee beneiits pec ?CI employee as calculaied by TCFs risk managemenc depar[menc) Payro[i taxes wece calculated by muItiplyin� [zchrical salaries expense by i��7a {es[imated average payroll ta.e gercen�a;e). SCHEDUL� C- CAPIT�L COSIS QF LEAS�D CUSTOYiER �QUIPl�1E�`2` Line � Represents customer ec�uipment for which sheiz is a separate charge TCf idencitced iemo[es, standacd convertecs and addiessab{e convecters as chosz ieems of equipmeat w{tich �vilt have a separate chat�e, Liaz B Total maintenancz/sefvicz hours are no�inctuded i� Schedule C since the raonthiy chacge €oi iemotes and converters is no[ bein� recalcutated at this time (i e not tfiz annual fitin� of rorm 1305). L.ine C Represents the num6ec aF undcs in seivice as of Sepcember 30, 1993, Aecember i 1, 199.i, prMarch 31, 1944. L.ine D Represents the �ross book vaiae of Fhe equipment items listed in Line A ac Occobec 32, 1493 or Decembet 31, 1993. Gross book value (accoi�nt 21 !0 Q400) is tai:en fcom the books and records of' I'CI. LineE Represents accumufated depreciation oa the gross book vali�e of the equipment items listed in Line A at October 31, 1993 or Decembei 3I, 1993 Accumulated depteciation is cakufated usin3 T'CI's s�andard useFeEl life #br conveiters (� years) on a shaight-line basis {weth ha1P-yeac convention) T SR8 F Represents the defesed tax balance associated �vith the items listed in Line A at Octobec 31, 1993 or December 3I, 1993 Defened tax balaaces wefe caiculated by multiplyin� the difference bettiveen the neE bo0k valtie and the eet tax vaIue by tfie sum of the Federa[ incame [ax rate (3590) and the applicabte state income tax Face (net of t€�e Federal incnme [ax benefit) Ne[ tax vatue was caIcutatzd usin� ;ioss tax value minus acci2mulated tax depreciation Fcc1205v2 5l14/gq �5 �� 3 °��: - _ �.::` . .... _" ' `'' L r ..: '�_ " 1 Vfiei��fizre�;s+.ttor�-6h,tr,.��e t�epo:tia� w�i[ in !hc accotinrin� unit TC( 1t:i� aI!ocaizd gross book vc�[ue :c�ueit�:latzd ��p�eci�iion an� n�e [:{e tali�� t�a:ed o�i t€ie propo[tionate numbe[ of St:b<�:ibe�s arcon�eiter units in tE�e conimunity unit to tkte �oc.{ <�ccouncir,g un;t TC! h; s histoEiea4ly rzcoicied a(CcosU associa[ed tvidt i:;me[es se;�nda�d come�[ets and addressable convertets ir one accoun[ (2 f f0 OGODJ Acco{dingly to aa i�c at the �ross bool: value, accum�i{ated dzp2ciation and net [a� vaiue account ?! 10.00p0 was atiocated betaeen remoizs. s�andard com�e�ten and address�ible convettets proporiionately baied ugon estimatcd faii va(ues, Estiina[ed Fair � alues aie catcuiated by tal;in; estim��ed costs For rzn�otes (S7) standard convzrters (S3S) aad addiessabk convzrte,s (S;;} multipiied by che numbei ok units i�� setvice The piopaition�ete fr.ir value far e2ch item ro thz toial tair ��ali�� as then n�Ldtiplied by d�e rocal a�oss book vnlue, toca[ accumulaced dzpreeiation o� [ocal �tec ea� raliee to �irrive at the ailacated aatount; L�n� J Regresents annuaf dep�eciation expense for (hc items Iisted in Line A Depreciacion expense is catcuIated usm� ICi's standaid usetu! tife fo� ccnverte�s on a scraight- line basis (with half-yearcom:��tion) WOI2T�SHE�x I�OR CALCCiLATI\G TOIAL �QUIP��I��iI AA'D I�ST�LLA7I0�' COSTS Line 4 Represents the perceatage o# costs and expenszs entered oti Line 3(rotat annuai capitai costs of' installation and maincenance) that ieiate Ea the maintenance of custonei equipment and cusro:�er instalta[ions used to receive basic tier services Calcutated as the sam of the to�a! oE Box 1 of Schzdule i\ and Bos 2 of Schedufe B (muitiplied by the percentaQe of time technicai einpiayees spznd maintainin� ci�sromer equipmen� and perfo,min� szrvice installation used to rzceive the basic service tier) divided by the total of Boz 1 of Schedide A pies Boa 2 af Schedule B Llne S Repiesents the percentage aiiocation of L.ine I(arnual cvstonier equipmenc and ins[allatio� costs) to the repor[iag unit. 7he allocation peteen[a�e foc ali TCT Form 120�s is 1.00 since the amounts included in Schedales A, $ and C ate already atlocated [o the izporting unit level Line 1I Repi'esears the nttmber of basic subseiibers ro the repocting unit as of Septembec 30, 1993, Decem6er 31, 1943, ar March 31, 1994. Such dates approximate [he dates of the infoimation in ScheduJes A and C, The subscribers shown should �enetafly equal the basic subscrioecs included in the reportin� uniCs FCC 393, Linz I03 L.ine 13 Repsesents the inftation adjustment factor Ihe facroi oE' 1.00 tivas utilized sincz the infomtation included in Schedvtzs A and C(and Schedule B in cer[ain cases) is for a period endin� a8er September 3Q, 1993 {Octaber 3 i, 1993 or December 31, I993). fcc t 20� v( bf I4f94 ��-d�.3 ATTACFIMENT 2: ADDENDUM TO FINAL REPORT BY ASHPAUGH & SCULCO, CPAs, PLC AND FRONT RANGE CONSULTING, INC., TO THE PARTICIPATING LOCAL FRANCHISING AU'I'HORITTES REGARDING THE NATIONAL FCC FORM 1205 FILED BY COMCAST CABLE CONIMIJNICATIONS, INC., IN 2004 (January 18, 2005) �s � Addendum to Final Report I' , Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting, Inc. To The Participating Local Franchising Authorities Regarding the National FCC Form 1205 filed by Comcast Cable Communications, Inc. In 2004 January 1$, 2005 �5-ay3 'l� r ASHPAUGH & SCULCO. CPAs, PLG Cr. ,c quc�..:aw• ar. canrv!:zru Front Range Consulting, Inc. INTRODLICITON Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting, Ina (the "Consultants") provided to the Parhicipants our Final Report on Januaryi3, 2005. On review, one adjushnent that was made to Comcast's National FCC Form 1205 (the "Filing") was not addressed. The following discusses and explains that adjustment. ANNLiAI, EMPLOYEE LABOR HOLIRS Comcast calculated employee labor hours in each of the 20 sample systems for warehouse and dispatch, installation and technical personnel. In each calculation, Comcast stazted with the total number of annual working hours, 2,080, added overtime hours and then subtracted non-producrive hours. The non-productive hours component was made up of 2 pieces — non- productive administrative hours and non-productive field hours. Non-productive field hours only applied to technical personnel. Comcast was requested to provide support for non-productive administrarive hours. (For the Flint sample system) Question 28. Please provide detailed support for the amount of "373" for "Non-Productive Annual Hours" shown on "Attachment #1" worksheet. The support must include all studies, documents or other material used by the Flint personnel to support such amounts. To the extent the individual responsible for preparing such amounts did not use any supporting information, please state such and provide a detailed explanarion for the source of the amount shown. Please provide the name and rifle of the individual supporting the hours shown on this schedule. Response: Flease see EYhibit 1205_28_082704. This was the only response. This Exhibit is attached as Addendum Appendix A. This same response was consistent for each of the sample systems. The e�ibit supporting the amount of "373" hours was idenrical in most cases. The 373 hours consisted of the following — 80 hours of vacation, 60 sick leave hours, 80 hours far holidays, 49 hours for safety meerings and 104 other non-productive hours estimated at 25 minutes per day. The other activiries included such things as completing paperwork, communicaring with office personnel, complering rime sheets and refueling vehicles. It should also be noted that the E�ibit is identified as "for systems owned and managed by Tele-Communicarions, Inc. ("TCI")". TCI has not owned or managed these systems for several years. The hours are inconsistent with ComcasYs policies. Comcast only has 6 paid holidays. Comcast does not have "sick leave", but has "flex hours". ComcasYs calculation assumes Page 1 of 2 January, 2005 b Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting Inc. All rights reserved. Report analyses, conclusions and recommendations cannot be used without expressed written consent by both Ashpaugh & Sculco, CPAs, PLC a�d Front Range Consuldng, Inc. OS-� �3 ASHPAUGH 8 SCULGO. CPAs, PLC CernLec Pu*_ ¢ Acm.man:s xnC ConrvB=_ru Front Range Consulfing, Inc. every employee uses 100% of all vacarion, sick leave and holiday hours every year. The Consultants' analyses of other Comcast systems have shown that this is not the case and that the number of non-productive hours is significantly less than 373. Comcast has significant tumover in installation and technical personnel that result in less than 100% of vacation hours, flex hours and holiday hours being used, i.e. an employee terminates mid-year and does not receive compensarion for July 4, L,abor Day, Thanksgiving or Christmas. The Consultants' prior analyses also showed training hours exceed 49 hours per employee and the Consultants' calculation has increased this amount. As for other non-productive hours, Comcast has not supported the amounts and the Consultants' analyses from prior Comcast systems shows that 104 hours is overstated. As such, based on the best available inforznarion, the Consultants have reduced the amount of non-producrive hours from 373 to 224 and reflected this adjustment in each sample system calculation of employee labor hours. CONCLLISION The Consultants recommend that the participating LFAs include this Addendum with the Final Report and accept the findings set forth herein. Page 2 of 2 January, 2005 � Ashpau�h & Sculcq CPAs, PLC a3 Front Renge Consulting, Inc All ri�hts resewed Repoa anaLyses, conclusions and recommendations cannot be used without expressed wntten consrnt by both Ashpaugh & Scuico, CPAs, PLC and Front Range Consulti�g, Inc. as a�� Addendum Appendix A 05 ��43 TO�AL PEFtSOH li4URS f Totat days in a norma} year 1-ess: Tota! weekend days in a nama( year Tofaf working days in a norma! year Tu�es: (Vormal working hours in a daY x 8 Regufar Working hours available —' �i.�a( person Fjours for mairrtenanae af ptstamec QGuipment and service instayation {FCC Form 3205, Step R, Line &j far systems ovmed and managed Uy Tele-Commaaica6ons, inc. (°TC('� were ca{cxtlated for each individuat job cafegory using the following methodo(ogy: , KegularAnnuaf Woricing Hours (A} T'+mes: a'+nual Overtime Percentage Totai Annuat }iovrs Less Nonproductive Administra6ve Annua( iiours Less: Nonproduclive Fe�d annaa( Hows Totai Annua[ Waicing Hours per Year 2,080 fa} �os�� 2,i84 ��) 373 (n} 25 'l.786 The above qiculation vras formulated on fhe basis of the following= (Techniaaas Only) (A3 i2egWar annual working hours avsilabie in one year was deterntined by taking the rtum6er of days in a nc�nal year iess fotai weekend days times the number of hovrs in a normal working day of eight j8) hours. The raicu(afion can be demonstrafed as foHows: �B) 2�a �Xl�+t�iT" f�5 �� _D8a70� �filATiG€ OF 365 105 260 t:� The annuai overtime percenfage ior each category of emptoyees was determined using fhe io(towing formnla; 1+�3_� Overfime Satary � 1 5 tTime and�Half Pav) i996 ftegutar Salary C} NOTE: 7he 5% amount shown above is an exampte, the actuat overtime percentage vn7f vary by job category., 7he 373 nor�productive annuat hours consist of vacation time, sick leave, paid hotidays, sa{efy meetings, and no�productive hours and were defermrcted as foilows: 9.. 80 Vacation Nours: Vacafion time was deYermined by taking average vacaEion days tor fectuaical emp(oyees of two weeks or ten working days At eighf twurs per day, vaca8on time is equivalent to 8p hours.. 2. 60 Sick Leave Hours: Sick ieave was esfimated as 75°k of the 80 hours altowed under TCI poficy, 3. 8Q Paid Holiday Nours: Paid hofiday fime was determined by taking qie number of paid hoiidays for ail TCI employees of ter� days. Af eight hours per day, paid holidays are equivaleat to 80 taurs. 4.. 49 Safety Meating Hours: Sa#ety meef'�nqs are held once a weetc fo� one hour. All maintenance and insfa8atioa personnet are required to ariend.. This safety rneeting is re,Quired by Tq's poiicy fo meef fhe Deparhnenf of Labw, Occupatiorrai Safety and Healfh Administration safety standards. The estimate af 49 safety meetings is derived as 52 safefy meetings less 3 meetings hefd wh�le the emptoyee is eifher on vacaSOn or sick. 5.. 704 Nonproductive Hoars: Nonproductive Gme is the avetage time per day a fechnieian spencls on Perform+ng duties such as compieling fle7d paperwork, communicating with office pecsonnet, compieting payroii fime sheeks, refusling vehictes, etc. {104 Hours} Estimated nonproductive minufes per day Aivided 5y. Tota1 mimrtes in g hour day / qgp Perceatage of time spt�Y on nonproductive duties Times: Reg�iar wortcing honrs ava8abte per year Pnnuai nonpsoducfive hours 25 5% x 2 d8Q _t04 45 -��3 �x�s� �- r� . �S _ o� �o`� {D} tn add'�ion to the 70d nonproduckive administrative hours, rwn prodac6ve fre[d Izours are calcutated for techniaans in each it�dividtsa! sysfem. These nonprodnctive field hows are obtained from 3he system technical P&L report arid �� indude servke caUs whera no fautf was found, the cusf4mer was not af home, arid the customer carKefed at the door_ NOTE; The 25 hours shawr� a6ove is an example, the actuas nonprodudive field hours wilf vary hy system. 0-c 8 �J � -: GQ• + 8Q• + 49• + lfl;� t 37�•ct 2 o� a�3 ATTACFIMENT 3: ERRATA TO FINAL REPORT ON THE COMCAST NATIONAL FORM 1205 C� ��3 ASHPAUGH & SCULCO, CPAs, PLC Cer,�`�ed PutRc Accou�t=_nts znd Cons�l.zrt; Ashpaugh & Sculco, CPAs, PLC 1133 Louisiana Avenue, Suite 106 Winter Pazk, FL 32789 � Front Range Consulting, Inc. 4152 Bell Mountain Dnve Castle Rock, CO 80104 E�ta'ra To FINAL REPORT ON T� Co�casT NaTioNai, Fo� 1265 Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting, Inc. haue identified two typing errors in the Final Report delivered to our participating LFAs on January 14, 2005. Those errars are: In Table 1 on page 5, the row identified as"unwired installation" in the third colwnn reads "($1335}." The conect figure should be "($14.35}." On page 24, the last line of the first pazagraph under Table 3 beginning with "In sum," contains the word "meet." This word "meet" should be replaced with "met." • On page 31, footnote 29 should conected to replace "by 27" with "by 27%." b5 a� 3 ATTACI3MENT 4: COMNIENTS OF COMCAST CABLE COMMUNTCATIONS, LLC ON TI� F1NAL REPORT AND ADDENDUM REGARDING THE NATIONAL FCC FORM 1205 (February ll, 2005) a5 a �3 � COMNIENTS OF COMCAST CABLE COMMUNICATIONS, LLC ON THE FINAL REPORT AND ADDENDUM REGARDING 7'fiE NATIONAL F'CC FORM 1205 PeterH. Feinberg Associate C�eneral Counset Comcas# Cable Communications, LLC 1500 Mazket Street Philadelphia, PA 19102 (215) 320-7934 COlVICAST CABLE COMMUNICATIONS, LLC Steven 7. Horvitz Cole, Raywid & Braverman, LLP 1419 Pennsylvania Avenue, NW Suite 200 Washington, DC 20006 (202) 659-9750 Its Attorney February 11; Z005 � a�3 TABLE OF CONTENTS I. TF� REPORT ERRS IN TTS NEGATIVE CFIARACTBRIZATION OF COMCAST'S COOPERATION AND RESPONSIVENES5 ..............................................................:.....1 A. The Report Mischaracterizes the Invoice Review . ........................................................2 - B. Comcast Did Not Deliberately Complicate the Review Process . ..........................::......5 ; C. The Report Mischaracterizes ComcasYs Level of Responsiveness . ..............................6 _ II. TEiE REPORT ERRS IN PENALIZING COIvICAST POR ALLEGED UNBUNDLING INCONSLSTENCIES . .........................................................................................................7 III. TI� REPORT ERRS IN ADNSTING COMCAST'S ESTIMA'TED TIMES FOR INSTALLATION ACTIVITIES .......................................................................................10 TV. THE REP012T ERRS IN ADNSTING REPORTEA HOURS ........................................12 - V. THE REPORT ERRS IN ITS TREATMENT OF THE STEP "A" ALLOCATION........13 VI. THE REPORT INCLUDES NCiMEROUS ADDITIONAL ERRORS .............................15 A . Contraetor Time ...........................................................................................................15 B. Wazehouse Personnel ...................................................................................................16 C. Office Personnel ...........................................................................................................17 D. Inside Wiring ................................................................................................................17 E. Customer Trouble Calls ................................................................................................18 F. VCR Connections .........................................................................................................18 G . DVRService ................................................................................................................19 H. Unreturned Equipment Chazge ....................................................................................19 VII. THE REPORT ERRS IN QUESTTONIlVG THE STATISTICAL ACCURACY OF COMCA5T'S SAMPLING ...............................................................................................20 CONCLUSION ..............................................................................................................................20 � a�3 con�rr•rs o� COMCAST CABLE COMMIJiVTCATIONS, LLC ON'THE FI\i AL REPOI2T AND ADDE1YD77M REGARDTI�TG THE NATIONAL FCC FORM 1205 Comcast Cable Communications, LLC ("ComcasP' or the "Compan�'} appreciates ihis opportunity to comment on the Final Report and Addendum regazding the Company's 2064 National FCC Form 1205 (the "Report"), prepazed by Ashpaugh & 3culcq (;PAs, PLC and Front Range Consulting, Ina (together, the "Consultants"). It is clear that the Consultants and Comcast disagree about a variety of procedural and substaritive issues, but the repeated suggestion that Comcast proceeded in bad faith is entirely unwarranted and inappropriate. In this regard, Comcast s�angly ob}ects to the Report's assertion that the Company "abused" the rate review process. The Company does not believe that this cri#icism is justified, and it will attempt to provide a more balanced perspective in these Comments. Comcast anticipates that each of the local franchising autharities ("LFAs") parCicipating in this process will fairly consider these Comments in evaluating the reasonableness of Comcast's reguiatory approach. I. THE REPORT ERRS IN IT5IYEGATIVE CHARACTERTZATION OF COMCAST'S COOPERATION AND RESPONSIVENESS. The Report emphasizes ComcasYs alleged failure to respond fully to each and every Request For 3nformation ("RFT") propounded by the Consultants. An LFA reading the Report might mistakenly conclude that Comcast provided virtually no support for the Form 1205. That simply is not true. The Company responded to more than a thousand RFI quesfions and provided what amounted to more than three feet ofmaterial to the Consultants. Comcast also provided alectronic access to thousands of the Company's vendor invoices. d5 a �k 3 Unforhmately, the Consultants' attempt to depict Comcast as unreasonable and uncooperafive (so as to justify refiance on their own altemative Form 1205 calculations) omits the notion that an efficient regulatory process requires "cooperation" from both pariies. The Report properly cites FCC precedent for the proposition thaf cable operators are expected to cooperate in the rate review process, but this same case law consistently condifions the operatoz's ohligafion on receiving "reasonable requests" from the LFA. Comcasf appreciates that the parties may differ on what constitutes a`Yeasonable request," but the Consultants en when they dismiss bona fide concems regatding aa expansive and burdensome RFI as evidence of Comcast's bad faith. t A. The Renort Miscfiaracterizes the Invoice Review. The Consultants' distorted perception of the regulatory process is perhaps best illustrated by their criticism of ComcasYs reliance on existing fuiaricial records and its preference for responding to RFIs with relevant excerpts from the generalledger, rather tfian with boxes of invoices. See, e:g., Report at 12-13. The FCC inshuctions to the Form 1205 plainly and unequivocally state that operators "should complete this Form using financial data from the company's general ledger and subsidiazy records maintained in accordance with generally accepted accounting principles." FCC Form 1205 Inshuc6ons at 3. There is no suggestion in � Illustrative of the Consultants' antagonism to ComcasYs bona fide concerns regazding the RFI process is their depiction of ComcasYs efforts to move the review forward hy seeking FCC guidance. The Report notes, "ComcasYs filing of a Petition for Declazatory Ruling sought to short-circuit the normal process by asking the PCC to become involved before zny of the resulting analysis and conclusions could be addressed by the participating LFAs." Report at 9. In fact, Comcast's FCC filing was well-intentioned. The Consultants anfl Comcast obviously disa�eed as to ttie appropriate scope of review, and Comcast believed that it would be helpful to both parties if the FCC would quickly clarify this matter. Alihough the Consultauts aze certainly correct that disagreements can wait until rate arders aze adopted and appeals aze filed, Comcast generally prefers a mora cooperative and less costly approacfi to resolving differences. Comcast filed the DeclaratAry Ruling Perition in pursuit of that obj ec�ive. b5-a� 3 those instructions that operators compiling the Form 1205 should ignore e�sting financial records and revisit each and every invoice. Given the tremendous time and effort expended by a variety of Company personnel and outside auditors to ensiue She accuracy of the Company's financial records, it is reasonable for Comcast to prepare tlze Rorm 12Q5, and for LFAs to review the Form 1205, in reliance on those records. Comcast fears that the Consultants, in their zeal, have disregazded fhe "streamlined" ob}ecrives that aze a critical part of the existing benchinark regulatory scheme and have turned tiiis review process into something never intended by the Commission. With that said, Comcast acquiesced to The Consultants and provided access to all of the requested vendor invoices. Comcast made available an electronic document rehieval system that allowed the ConsultanCs to view the requested invoices. Nevertheless, the Report complains that fhe Consultants' access to these vendor invoices "did not work well and was very cumbersome," Report at 13, and it unplies that Comcast deIiberately complicated the data access process to sabotage the review. These aliegations aze unwarranted. In huth, Comcast went to considerable effort to facilitate the Consuttants' review. The Company arranged for special access to the elecironic retrieval system at sepazate offices in Leesburg, Plorida and Denver, Colarado, so as to minimize any travel burden for the Consultants. Althou� Mr. Ashpaugh reports that the retrieval process at the Fiorida office was slow, he wrongly suggests that Comcast had a better option available. The tnxth is that if Z The FCC estimates that it will take just 20 hours far an operator to complete FCC Form 1205, "including the time for reviewing instructions, searching existing data sources, gathering and mainfaining the data needed, and completing and reviewing the collection of information." Id. at 5. 3 Comcast disagrees fhhat hard copies of the invoices would have been easier to work with, which is why the Compaay does not retain hazd copies for its own use. If Comcast had hazd copies of the requested invoices, they would haue been provided to the Consultants. os a 4� 3 Comcast were itself to produce every invoice the Consultants demanded, it would have had to go thraugh the exact process that Mr. Ashpaugh found so unreasonable that he was unwilling to proceed. Mr. Ashpau�'s complaint regazding his inability Yo access certain system informafion is also unfair. The Report fails to mention that Comcast gave Mr. Ashpaugh comprehensive lists of each and every invoice requested (including dates, invoice numbers, payee names, and dollars amounts) in advance of lus visit to the Leesburg office. T`his information (which required many hours of work by several different Company departments to assemble) should have facilitated a ° tazgeted review, yet Mr. Ashpaug� did not even bother to bring that information with him. - Comcast provided the lists a second fime, and it was fully prepared to provide whatever addifional instructions or repairs were necessary for Mr. Ashpaugh to complete Ivs task. Although the Report complains that "Comcast has still never made the missing information available," Report at 13, the truth is the Consultants haue had the option of accessing that informarion and chose not to exercise it. When Comcast staff returned Mr. Ashpaugh's catl from the Leesburg office to see if they could hetp him resolve his appazent access problem, the offer was rejected. Mr. Askpaugh explained, "I'm in my car on the way back to my office." He never retumed, xnd Mr. Treich never visited the Colorado office made available to him. Of course, the most remazkable aspect of this particulaz dispute is the fact that it involves a zev3ew of invoices. The scope of the Consultants' inquiry was mxly extraordinary. Tnstead of criticizing Comcast for not maldng the invoice retrieval process even easier, the Consultants should be applauding Comcast for the extraordinary lengths it went to accommodate this review. 4 It should be noted that Comcast staff tested the electronic retrieval system both prior and subsequent to Mr. Ashpaugh's visit and had no difficulty rehieving the system information Mr. Ashpaugh claims he was unable to access. 0 05 ay 3 Requests to review contractor invoices aze excepiionally rare. In one instance when it did occur, Mr. Treich, who then Ied the regvlatory accounting group responsble for rate filiugs at AT&fi Broadband, instructed Ius staff not to provide invoices to regulatory consultants, because he regazded tfiose requests as overly burdensome. B. Comcast Did Not Detiberatelv Comnlicate the Review Process It is not reasonable to crificize Comcast foz "maldng the RFI process an unnecessarily time-consuming and burdensome `paper waz,"' Report at 12, when the Consultauts refused to rely on general ledger reports and deraanded instead that Comcast produce actual vendor invoices. That extraordinary demand is irreconcilahle with the interest the Consukants profess - here in simpfifying the review process and avoiding a"paper waz " In any event, on at least two occasions, Comcast and the Consultants did attempt to schedule a conference ca11 to discuss preliminary procedural matters. Comcast subsequentty deciined to participate in an informal discussion only when it became apparent that a conflict issue regazding Mr. Treich's prior work at AT&T Broadband needed to be resolved fizst 5 Comcast appreciates its responsibility to respond to RFIs issued by cerlified LFAs. In tlris case, however, it was faz from clear whether the various RFIs forwazded by the Consuitants were actually being issued on behal£of the LFAs. The consultants originally approached Comcast without identifying any of the LFAs they purportedly represented. Although a list was subsequently provided, at least one LFA who the Consultants claimed to represent told Comcast 5 The Consultants are similarly disingenuous in claiming that Comcast wanted RFIs mailed to the Company "for no appazent reason but with the effect of delaying the receipt and fuifillment of requests." Report at 12. As the Consultants aze well awaze, the e-mail delivery of RFIs during the week of August 23 conhibuted to a lock-up of "in hox" capabilities of ComcasYs Airector of Rate Regulation. Comcast's request that RFIs be forwarded by mail was simply to avoid repeating that problem and to min;mi�.e the possibility of inadvertently deleting any of the RFIs. 05 a�3 othenuise. To make matters worse, there aze now a number of LFAs who claim to be relying on the Report, but who were not identified as pazticipants during the RFI process. It is hudiy reasonable for an I.FA to issue a rate decision based on alleged deficiencies in ComcasYs RFI responses, when Comcast had no reason to believe it was responding to that particulaz LFA. C. The Renort Mischaracterizes ComcasPs Level of Resnonsiveness Atthough the Consultants complain that some of ComcasYs answers were not adequately detailed, they fail to acknowledge that the Company actually responded Yo hundreds of questions within very short timeframes. Careful consideration of the exaxnples the Report provides of � ComcasYs supposedly egregious misconduct fails to support the ConsultanYs negative - chazacterization. The Report, for instance, emphasizes ComcasYs failure to "provide a signed letter from an Officer of Comcast certifying that ALL of these cost categories were unbundled in Schedule B in each and every origina11205 filed on or about August 12, 1994 by Comcast and its predecessors in interest with each af the LFAs where this Narional 1205'was filed." Report at 11. The Report concludes that the Company's refusal "is indicative of ComcasYs belief that it may unilaterally decide what infoxmation it will provide to the participating LFAs." Report at 12. In faimess, Comcast repeatedly explained to the Consultants why factual circumstances made it "impossible to cornply with this request " Report at 11. The Company went on to explain why it thought fhe request was improper, and it volunteered available informarion that it believed was relevant to Yhis inquiry, even if not exacUy what was requested. It is difficult to imagine what else Comcast could do in this circumstance. 6 Comcast obj ects to any LFA relying on the Report where there was never a notification by either the LFA or the Consultants during the review process that the LFA was a part of the group of LFAs who had retained the Consultants to review the Company's National Form i205. 0 5-a �3 Comcast will address the substantive merits of the unbundling issue in the ne�t section. The point here is simply that the Consultants err in impugning ComcasYs commihnent to cooperate based on an "impossible" request. The Consultants themselves aze well awaze that Comcast could not, in good £aith, provide the requested certificarion. Comcast does not believe that the LFAs would want the Company ta pravide a faLse certification simply to appease the Consultants. TT. The Report repeatedly criricizes Comcast for failing to show that particulaz cost components included in the current Form 1205 filing (e.g., bonuseslcommissions, property tases, and insurance) were "unbundtecl' in aii of the original Form 1245 filings submitted more than a decade ago by the various companies tttat owned the many cable systems that now constitute Comcast. It is perverse that Comcast is expected to rehut that crificism, when the ConsuItants already know the untenable posidon in which they have placed the Company. Indeed, Mr. Treich previously was the nation's leading proponent for eluninating any requirement that an operator show unbundIing consistency. He properly recognized that such a requirement, even if once justifiable, has been rendered unworkable by the passage of time and changed circumstances. Given the passage of more than a decade since the current era of cable rate regulation commenced, a categorical approach to unbundling is incompatible with ordiaary business development. Surely an operator who failed to unbundle a very small cost component in 1993, that subsequently grew exponentialIy, should not be permanently precluded from including that � The Report ens in chastising Comcast for refusing to provide initial Form 1205 filings. The Company did provide copies of those filings for the relatively few sample systems for w2uch the initial filings couid be locaCed. o5-ay3 escalaYing cost in its rate filings. A rigid unbundling cut-off is ureconcilable with changing business practices, particulazly in the dynamic, technologically-evolving cable indusYry. Indeed, new costs may have azisen subsequent to 1993, aud that haz@ly means that the recovery of such costs should be deuied because they were not "unbundled." Comcast explained in its Comments in tfie pending rulemaking on Revisions to Cable Television Rafe Regulation, MB Docket i�TO. 02-144, MM Docket Nos. 92-266, 93-215, CS Docket Nos. 94-28 and 96-157 (2002), that rigid adherence to `5.mbundling" principles increasingly threatens to undermine the viability of the benchmazk regulatory scheme. Indeed, the unbundIing issue realiy should arise only when the LFA can demonstrate that the operator deliberately manipulated its initial and subsequent rate filings to evade the Comxnission's rate regulafions. Cable operators should not, in fairness, be required to shoulder the insurmountable burden of demonstrating that each and every cost zeflected in its current FCC Form 1205 was properly unbundled a dozen years earlier. The problem with the Report's draconian "unbundling" approach is manifest in its treatment of "bonuses/commissions." The Report claims that the "Consultants reviewed a number of 1994 Rorm 1205s and concluded that these items...do not appear to be part of the Schedule B amounts shown." Report at 15. The observation assumes that bonuses and commissions existed in 1993 and had a sepazate ledger enhy at that time. In fact, it is possible that many of the sysfem operators did not offer bonuses and commissions as part of their 1993 compensation scheme. It is also possible that these items did exist in 1993, but were not sepazately recorded in the financial records. In either instance, the Consultants wouid haue $ See Comcast Comments, Revzew to Cable Television Rate Regulation (submitted Nov. 4, zooa}. g Comcast recognizes that there is potentially conflicting FCC precedent, but this precedent does not address the circumstances of ComcasYs current filing. c� a�3 found no evidence on the initial Form 1205 filings that bonuses and commissions were unbundled in 1993, yet those items should clearly be included in the current Form 1205, even under a strict unbundlang regime. Although the Report suggests that bonuses and commission were not unbundled in the former AT&T Broadband ! TCT systems, the basis for this assertion is unclear. To the best of ComcasYs imowledge, the P&L statements used by TCI in the iaitial 1205 did not contain separate line items for bonuses and commissions. Those costs would simpIy have been entered as "Salaries." As such, they would have been unbundled as part of TCI's initiat Form 1205 filings. In any event, the Report goes no fiuther than asserting that bonuses and commissions "were not unbundled by a majorzty of the sysYems." (Emphasis added.) Report at 15. The ConsulYants aze effectively conceding that at least some of the systems did unbundle these costs. How, then, can the Consultants recommend that ald bonuses and commissions be excluded today based on purported unbundling concerns? This same problem exists wherever the Consultants reject a cost component based on purported unbundling concerns. In the case of insurance, for exampie, the Report notes, "Phe consultants' review of the prior Form 1205s filed by systems now part of Comcast has revealed that in many of these systems, the cable operator did not include insurance as part of Schedule B costs." (Emphasis added.) Report at 1$. Again, the Consultants do not eaplain why even a rigid unbundling analysis requires an excIusion of all insurance costs from the current Porm 1205. To the best of CorncasYs knowledge, the Company's original Form 1205 filings included, among other things, property ta�ces, insurance, and office personnel. The Consultants do no4 acknowledge this fact, yet they have removed the contested costs from these systems as well. 9 o5-a�3 III. THE REPORT ERR5 IN ADJUSTING COMCAST'S ESTIMATED TIMES FOR INSTALLATION ACPEVITIES Among the remarkable proposals in the Report is the recommendation that the Company's own estimates of the time necessary to complete certain installafion activiries should be rejected and replaced by alternative figures created by the Consuitants. The Consultants do not contest that a cable operator ordinarily can re2y on the time estimates provided by its own field personnel, but they assert that the estimates in the case are unreliable because Comcast provided prejudicial "guidance" to the &eld. Report at 24. This is simply wrong and is one of many examples where the Report is based not on ComcasY's costs but on the ConsultanYs unsupported postularions that aze just_not probative when compazed to ComcasYs own operatiug eacperience. The so-called "guidance" Comcast provided was simply an identification of the preceding year's tune figures. The instructioris to field personnel make it clear that they are free to change those figures. In fact, field personnet frequently ad.}ust the prior year's figure. Although the Report looks at four specific installation activities and concludes that "over half of the iwenty sample systems appear to have followed the `guidance' received from ComcasYs corporate level," Report at 24, this is huly a"half empty" analysis. It is also true that of 80 surveyed responses {i. e., 20 systems addressing 4 different installation activities), 34 responses (or more than 42%) were adjusted. In fact, a more comprehensive review of the field surveys reveals that each and every respondent adjusted at least one entry. The point here is simple — there is nothing nefarious in Comcast's collection of field data, It is hardly surprising that the estimated time to complete certain installation activiries did not vary from those reported for the prior yeaz, as insfallation times tend to be relatively stable on a year-to-yeaz basis. The record evidence clearly shows that field personnel were free to adjust 10 os a�3 tfiose figures based on their independent judgment and that they regularly exercise that grerogative. The ConsultanYs manipulafion of the "point system" used in Company's `�vork task tables" is equally disturbing, because by doing so they omitted a material component of the rate calculation — drive tune. The Consultants, in effect, requested data from Comcast that was not developed for purposes of rate regulation and then used the data to create an alternative rate scheme. Comcast provided those work task tables to the Consulfants because tiiey eaplicitly requested this materiai. The Company never suggested that the work task tables (that aze developed and used for very different purposes than rate regulation) should be controlling in this context. To the contrary, the Company's response emphasized, "Comcast has used the past eaperience of its technical personnel to make their best estimate of average hours spent per installation activity." Report at 20. It reiterated, "The technical personnel rely upon the work task table and points assig�ed to help them determine the best estimate of average hours spent per installarion acfivity." Report at 20. (Emphasis added.} The Consultants had no basis to rely on the work task tables (rather than the field estimates). As the Consultants themselves recognize, the work task tables do not necessarily attempt to accurately track the time spent on particular tasks. This is well illustrated by the Flint, Michigan work task tables, which simply assign a single point to each task. Report at 21-22. Even in cases where the work task figures aze more time sensitive, they do not comport with regulatory specifications. Among other things, the work task figures typicaily exclude drive time. Without an allowance for this drive time, Comcast could never be made whole for its installation and maintenance activities. It is for these reasons, that the fieid personnet might 10 The point system is typically used to help schadule work so that each installer/technician has a reasonable workload each day. 11 05 a�3 consider work task tables, but ultimately rely on their own best estimate in responding to the Form 1205 survey (wluah is precisely what the FCC expects}. IV. T�E REPORT ERRS IN ADJUSTING REPORTED HOURS. The Consultants wrongty contend that Comcast has underestnnated labor haurs used in the Form 1205 (and thereby improparly "loaded" the �Iourly Service Chazge) by overstating the average number of non-praductive fiours per employee. Their azgument is premised on Comcasf's decision to use the conservative hour methodology pzeviously empioyed by TCI 1 AT&T Broadband {under NIr. Treich's direcfion). They claim that the "faulty supporting i evidence" for that methodology is "inconsistent with ComcasYs policies." Addendum at 1. - It was Comcast's intention in continuing to rely on the more conservative TCI f AT&T Broadband approach (which was previousiy used in TCUAT&T's national filing) to a�oid a dispute regarding changed policies. As the Report rejects this option, Comcast is compelled to update the previously xeported figures to reflect the Company's current personnel policies. The update confirms that the originai methodology used in the filing was an extremely conservative one. The 373 hour figure for "non-productive" time claimed in ComcasYs filing actually understates the amounY of non-productive time associated with Comcast personnel. The Consultants' unilateral redacrion in the reported non-productive time by 30 percent (from 373 hours to 224 hours) is patently unreasonable. The Company's current personnei policies allow: 56 holiday hours 24 floating holiday hours 64 flex time hours 80 to 160 vacation hours (depending upon years of service) Total potential paid time-off= 224 to 304 houts. 12 J5��3 Remarkably, the 224 hour figure recommended in the Report exactly matches the amount of "leave" that the most junior Comcast employee receives. It faIls well short of the `leave" available to more senior personnel, and it makes absolutely no allowance for any other form of tton-productive tima. As fhe ConsultanCs themselves acknowledge, a substantial amount of safety training lime needs to be added to this talIy. Tndeed, they volunteer that the 49 training hours originally reported understates actual training time. Addenduxn at 2. When these trainuig hours aze considered, the non-producfive figure recommended by the Consultants becomes even more unrealistic. The Consultants next assert that the additional 104 "non-productive" hours claimed by Comcast is overstated. Yet this tally amounts to just 25 minutes per day. The assertion that 25 minutes per day spent on a variety of "non-productive" tasks is overstated, makes tto sense, particulariy whett one considers that this figure includes the dzive time back from the final job of the day (which typicaily consumes 15 minutes). Once that drive rime is deducted, only 10 minutes each day would be leR for complering paperwork, communicating with technical supervisors and office personnel, submitting payroll timesheets, refueling vehicles, etc. The Consultants cannot possibly believe that 10 minutes per day on such tasks is excessive. In fact, Comcast suspects that the 1Q4 hour it submitted is faz too low. In sfiort, if any adjustment to the non-productive hours originally claimed by Comcast were warranted, it would be an increase, not a decrease. V. THE REPQRT ERRS IN ITS TREATNIENT OF THE STEP "A" ALLOCATION. At several different junctures, the Report crificizes Comcast for not providing su£ficient detail for the Consultants to deternune whether a particular cost component should be included in the Form 1205. The Report wrongiy conciudes that the allocation factor calculated in Step A 13 o5�a�� fails to remove all the costs that should be excluded from the equipment basket, and it recommends a dramatic and azbifrary reduction in the ailocation factor to resolve this supposed problem. In so doing, fhe Consultants improperly reduce the Company's eligible equipment basket costs. The Consultants cleazly misunderstand the Step A allocation factor used by Comcast� They assert: "Comcast uses an allocarion factor based on salaries and wages by determiniug the regulated portion and comparing it to total Technical salaries plus salaries for a group called `Other'. This does not include all salaries and wages within the system and, as such over- allocates costs to regulated services" (Emphasis added.) Report at 17. In fact, the Consukants are exactly wrong. The comparison of "reb lated" campensation to "non-regulated" compensation does include in the latter group all salaries and wages within the system. That is accomplished through the inclusion of the "other" group in the caiculation. It is precisely for this reason that ComcasYs Form 1205 produces such a low allocation factor — just 16.27%. If, as the Consultants suggest, the allocarion calculation began with just Technical Salaries in the denominator, the allocation factor wouid be much higher. Comcast applies the Step A allocarion factor to a relatively limited number of account enlries that include at least some regulated acdvity. The low allocation £actor used by Comcast ensures that certain "general" costs (like "Maintenance & Repair Costs" and "Property Taxes"} aze adjusted so only an appropriately small portion of those costs are assigned Yo regulated activities. 'i'he addifional adjustments the ConsulYants propose would wrongly create a"double" deducrian and artificially reduce equipment basket costs. The Washingcon, DC sample system is a good example. A local allocation factor is developed to compaze rea lated activifies to a11 other system acfivities. As a result, the total 14 D5-�3 Schedule B Salaries-Regular of �10,860,347 was reduced by a 12.44% allocation factor Yo just S1,351,033. The problem with the Report's approach is manifest in their trea�nent of "Bonuses/Commissions" The Consultants insist that tIiey need to imow more details regazding bonuses/commissions (which appeaz under the "technical" category, as well as under other employee categaries) to ensure that they are "actually related to iegulated activities," Report at 16. They ulfimataly eliminate this cost entry entirely based on their "belie[ff that such bonus and commission plans aze not ried directiy to activities such as installarion and aze therefore not includabie in the Form 1205." Report at 16. In fact, the entry needs to be included, because it is unquestionably part of the Company's overall compensafion scheme. The exisring allocation factor properly ensures that only a small portion of the total bonuseslcommissions enhy is included in the equipment basket. Removing that entry from consideration altogether gives an inaccurate picture of the total compensation scheme upon which the allocation factor functions. The Washington, DC example provided above illustrates that only 12.44% of lacal bonuses/ commissions were included in the final Form 1205 Schedule B for this sample system. VI. THE REPORT INCLL"DES NIJNI�ROUS ADDITIONAL ERRORS The Report recommends a variety of other enoneous adjustments to Comcast's rate filina . Comcast wi11 highlight a few of those enors here so as to illustrate the pervasive scope of the Report's flaws. A. Contractor Time The Report adjusts the contractor time reported by Comcast based on enoneous assumpfions. As a preliminary mater, Comcast objects to the adjustrnents, because they are not adequately eaLplained and Comoast has been unable to replicate the Consultants' results. 15 �5-a�3 Comcast also disagrees that the Company's reparted activity times should be averaged between "caniractor" time and "in-house" time. The coniractor time reported typically excludes drive- time, so any resulting average is distorted, Comcast aLso objects to the Report's &ndiug fhat "Drop activities aze not part of the Form 1205 regulated activifies, and theu cost should not be included in the prices for instaliation acfivities." Report at 26. This assumption is wrong. Although the FCC typically specified wiuch costs should be included in the equipment basket and which should be excluded, it afforded cable operatars discrerion with regazd to the labor costs associated with drop - installafions. In Comcast Cablevtszon ofTallahassee, Inc., 10 FCC Rcd. 7686 (1995), the — Coxnmission discussed the two auailabie oprions for addressing drop labor. It concludes, "Comcast makes it abundantly clear that it elected to recover the cost of labor associated with the instal[ation of subscriber dtops throubh the installation charge." Id. at para. 36. The Commission went on to state that, given this election, "Comcast is required tA include the labor costs and labor hours associated with suhscriber drop installations in the calculation of the HSC." Id. The Report's exclusion of any contracY labor costs or hours associated with drop installation contradicts this FCC mandate. B. Warehouse Personnel The Consultants remove warehouse personnel costs and labor hours from Schedule B based on fhe mistaken assumption ihat those costs and hours are already captured as capitalized costs on Schedule C. In fact, Comcast does not include any wazehousing costs in Schedule C. All af the warehousing costs were properly reported on Schedule B. Comcast can only assume that the Schedule C costs to which the Consultants are referring aze those costs associated with the authorization of digitaI converters. These costs 16 Z�-��f 3 (which aze capitatized) are paid directly to the converter manufacturers. They are separate and apazt from fhe costs Comcast pays to its own warehouse personnel for fiandling converter inventory. AccordingIy, fhe assumprion that Comcast is malflng a double-recovery on warehouse personnel costs is in error. C. Office Personnel The Report errs in concluding that Comcast did not adequately support its time estimates, because "Comcast did not provide the requested information for any of the sample systems." Report at 19. Comcast actually provided the Consultants in September 2004 with copies of the field survey sent to the sampled systems to develop time estimates. Comcast samultaneously — provided completed copies of tUose same surveys in response to the sample system RFIs. Comcast also provided the Consultants with the requested work task reports in response to the � sample system RFIs. The final four work task reports (which the Report enoneously claims were never provided, Report at 20, n.23) were sent to the Consultants on dctober 7 in a foilow- up response. t i As the Consultants requested, the field surveys contained the names and tiUes of the system contacts for each saxnple system. These contacts were the personnel ultimateIy responsible for the information contained in the sample system support document that was provided with ComcasY s response. in short, Comcast properly provided e�sung material responsive to the RFI. D. Inside Wirine The Report ens in eliminating 5.0% of the inside wiring trouble calls reported by Comcast simply because significant number of customers may subscribe to an optional wire maintenance I 1 The follow-up response was provided as soon as the final documents were received from the field. 17 o5-a�6� plan and not be separately "charged" for trouble calls. When Comcast prepazes the Form 1205, it does not know whether a particulaz customer will be subj ect to tfie regulated rate charge. The only logical way for the Company to proceed is to complete the calculation as if every inside wiriug trouble call will be regulated. If a partiaular customer ends up paying the Company on a different basis (f. e., through the opfional inside wiring pian), it does not change the fact that the regulated rate unit was properly set. E. Cnstomer Trouble Cal{s The Report errs in reducing the 40 xninute estimate pzovided by Comcast far cusfomer trouble calls by 50 percent. Considering that the average drive time to a customer site is approximately 15 minutes, that would give each technician just 5 minutes to greet the customer, entex the customer's home, locate and check the cable equipmeat and various equipment interfaces, fix the problem (if any) with ComcasYs equipment, e�lain the solution to the customer, get the customer's signature on the work order, and retum to the huck. Many situations today involve sophisticated home theater systems, with a variety of video and audio anterfaces, and it may take considerable time to identify and resolve a problem. 'Fhe Consultants en in assuming that the Comcast technician quickly exits a household upon deterniiniug that the problem is related to customer equipment. As a practical matter, to promote customer satisfaction, the technician will sometimes resolve the problem even when it is determined that the problem is not directly associated with Comcast equipment. F. VCR Connections The Report ens in eliminaring any charge for VCR connections. Comcast gathered the avaitable information from saznple systems and provided that information to the Consultants. Although that information may have been 1'united, the Consultants concede that at least some of 18 aS-�4 3 the Field Data ReporYs did record VCR connection activities, Report at 31, and field personnei were able to provide time estimates for completing VCR connections. The limited records regazding VCR connecfions likely reflects the fact that many systems voluntarily forbear from imposing this modest fee on cable customers. That does not mean, however, that the systems aze not entiUed to impose such a fee. G. DVRService The I2eport errs in asserting regulatory authority over ComcasYs DVR service siruply because that service happened to be inadvertentiy identified on certain rate cards as an - "equipmenY' chazge. As the Consultants do not dispute that DVR service can be offered on an _ unregulated basis, it would irrationally elevate form over substance to adopt a contrary approach based on a mistaken formatting of rate cards. The rate card errar identified by the Consultants apparently occuned in the commtuuries represented by the North Suburban Communications Commission in Minnesota, but that hardly justifies precluding a recovery of DVR service fees on a nationwide basis. The vast majority of Comcast's service areas followed corporate policy and properly identified the DVR fee as a sezvice chazge. H. Tlureturned Equipment Charee The Report errs in asserting that cfiazges unposed for unreturned equipment must be subjected to the Forin 1205, particularly because some pricing flexibility is necessary in this area to deter theft. The Commission has never required that such charges be subject to regulafioa There aze no �isting instructions to calculate this sort of a charge, and there is no piace on the Form 12Q5 to make such a caIculation. An unreturned chazge is assessed only when a customer fails to honor its obligation to retum leased equipment, and it necassarily falls outside the ordinary Form 1205 restraints. 19 �-a� 3 VII. THE REPORT ERRS IN OUES'I'IONING THE STATISTICAL ACC'URACY OF COMCAST'S SAMPLING. The end of the Report discusses a variety of different concerns that do not directly Iead to a change in ComcasYs Form 1205, but aze apparently presented to cast further doubt on the integrity of tfiat filing. Although Comcast will not address eaoh of those concems, it is compelled to respond to the criricism of the Company's sampling methodotogy. The criticism is disconcerting, because (to the best of ComcasYs knowledge) neither Mr. Ashpaugh nor Mr. Treicfl is a trained statisrician. Comcast (like AT&T Broadband before it) has relied on the statistical work of Robert C. Hannum, Ph.D. Depamnent of Stafisrics and Operarions Technology, Daniels College of Business, University of Denver. Comcast shared the Report's purported concern that fewer "systems" aze inctuded in the sample than when Dr. Hannum first adopted a sampling methodology for TCI in 1996. Dr. Hannum provided the following eaplanation to Comcast: The systems (management azeas) are not smaller now, but larger. This is, in fact, why the sample size cau be smaller; the larger populatian is divided into fewer systews and hence a smaller sample can capture more of the population. Note far example, that the average percentage of subscribers in the population captured in the four yeazs since 2001 (including the current 2�04 sample) when the sample was reduced to twenty because of fhe aggregation aliuded to above is actually greater (32°Jo) than that for the first five yeazs when the sample size was forty (26%). It may help to consider in the e�ctreme — if the popularion consisted of only one system, The necessary sample size would be jusf one system. Accordingty, the Report's sampling concerns are ili-founded. Contrary to the allegations made in the Report, Comcast recognizes and respects the regutatory authority of its locai franchise autl�oriries, and it is committed to caoperating in the IZ Comcast disagees with fhe Consultants that any of the minor adjushnents made in the Form 12Q5 process affect fhe stafisrica2 accuracy of the established saznpling methodology. � � �-13 rate review process. It is essential, fiowever, that LFAs and their advisors proceed in a reasonable fashion. T'hese Comments have identified several critical azeas where the Report is deficient. The errors reflect mistaken assumptions and conclusions by the Consuitants. In some azeas, the Consultants misunderstood or misconstrued Comcast's submission. In other azeas, they wrongly discredited and discounted ComcasYs filings and concems. These errors must be conected, because they materially and unreasonably reduce ComcasYs equipment and installation rates, Alteznatively, the Report should be rejected in its entirety. Respectfully submitted, CONIMUNICATIONS, LLC Peter H. Feinberg Associate General Counsel Comcast Cable Communications, LLC 1500 Market Street Philadelphia, PA 19102 (215)320-7934 February 11, 2005 r. 1919 �nnsi ly v�nia Aver Suite 2 0 \ � Waslungton, j�C 20006 (202) 659-9750 Its Attorney 21 A ��-a�.� DE�LARA7TQN OF WARREN O FIT't'ING � R'azren O. Fitting, declaze under penalty of perjury, that the statemenrs made herein aze true and correct: 1. I am the Director, Rate Regulation for Comcast Cable Communications, LI.C, I am the individual ax the Company responsibie for overseeing the deveiopment and submission of the Company's narional FCC Form 12�5 filing. � 2. I previously was employed by TCI and AT&T Broadband. My work at those companies involved rate regularion, and my supervisor was Andrew Elsnn, who reported to Richard Treich. 3. I have reviewed the attached Comments. I azn fasniliaz with the matters addressesl in the Comments. The factual statements made therein are accurate to the best of my imowledge and belief. 2. �t t J o 5 2�.s..w._ �-'�}"�- > Date: Wazren O. �tting 05 - c�' - � 3 ATTAC�3IvIENT 5: SUPPLEMENTAL REPORT OF ASHPAUGH 8z SCULCO, CPAs, PLC AND FRONT RANGE CONSULTING, Iti TC., TO THE FEBRUARY 11, 2005 COMiVP'cNT5 OF COMCAST CABLE COMMUNICATIONS, LLC ON T`HE FINAL REPORT AND ADDEiVDUM REGARDING THE NATIONAL FCC FORNI 12Q5 (February 2005) os a`�3 , Supplemental Repart of Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting, Inc. To The February 11, 2005 Comments Of Coiucast Cable Communications, LLC On The Final Report and Addendum Regarding The National FCC Form 1205 February,2005 05-��3 d � kSHPAUGH & SCULGO, CPAs. PLC Ce-,�*�ea PapP: nccc.u:ancs zrtd Cc�z.::zrts I. INTRODZJC`FTf?i�T � I'ront Range Consulting, Inc. Ihe vazious mte regulation anfhorities pazticipating in the xeview of'the nafional FCC F orm 1205 provided Comcast Cable Communicatians, LLC {"Comcast") with an oppoxiunity to provide wzitten comments on the Final Report ("Fina1 Report'� and Addendum fo Final Repozt ("Addendwn") prepared by Ashpaugh & Sculco, CPAs, PLC and Fiont Range Consulting, Inc. (individually and collecfively the "Consultants"). More specifically, Comcast was given a peuod of twenty-eight (28) days to respond to the Final Report (i e., .3anuazy I5, 2005 fluough Februacy 11, 2005 —the deadline established in the extension ageement between Comcast and the pazticipatisg rate regulation authoxities)„ Ihe Consultants received ComcasYs wiitten comments on the Final Report by electronic mail on Febmazy 11, 2005 (the "Comments'�. Ihe fol�owing Supplemental Report wi11 addiess those Comments.. II. SUNIMAI2Y The substanflve poitions of Comcast's comznents have geaerally not provided any infoxmation that convinces the Consultants to altei the recommendaYions contained in the Final Repoxt Comcast does not challenae many of fhe adjusiments made bg the Consultanfs.. Foi example, Comcast does not cfiallenge the adjustment made to Converter Repait and Maintenance. Ihis adjustment removed ten pexcenf (10%) of the costs of'tlus categoiy because an invoice review showed cable modem costs were included in the general ledgei accounts fox convertexs With respect to those adjustments Comcast does challenge, many ofthe ciiricisms ara misplaced.. Comcast spends a significant amount of' its comments cridcizing Consultants peisonally Such criticisms do not snppoxt Comcast's pznposed xates, and foi that reason theFe is little reason to focus on them in this regoct (even though we disa�ee vrith the company's claims). Likewise, Comcast azgues that the Consultants asked fax an uzueasonable amaunt of' detail, azguing, foi example, that a review of'invoices was unnecessaiy (Comments at 2-5).. Detailed supporting infai2nation was requued because Comcast's geneialized statements psoved urneliable.. Comcast, for example, assuced Consultants that cable modem cosfs were nof included in the accounts used to piepaze the Fozm 12o5. Zhe ConsultanYs zeview of individuaS invoices showed that the company's zepiesentation was not accutate.. In anp case, with resgect to the disputed adjvshnents, the data Comcast produced in support of its filing contains enough emois, contliets and omissions that one cannot conclude that Comcast's pioposed iates reasonably Yeflect costs Consistent with FCC iules, the Consultants therefore set iates based on the best data available Page 1 of'25 Febniary 2005 � Ashpaugh & Sculco, CPAs, PLC and Fron[ Rsvge Consulting inc AIi righfs rexrved Report analysa, Conclusions and cecommendations carmot be ¢sed withouT expressed vrtitten consent 6y both Ashpwgh & Sculcq CPAs PLC and Front Range Consutting, 7nc a5-a�r3 ASHPAUGH 8� SCt1LC0 CPAs. PLt Cerr�ed P�u!:: A:,o;�xancs z�: Gon<yl;sr.0 III. ISSUES Nt1T A.ADRESSEB BY COMCAST Frant 12ange Consulting, Inc. Comcast's Comments do not address many of fhe issues zaised in the Fina1 Report and Addendum. Detailed beIow is a listing of the azeas where Comcast has not pmvided any response or comments to the ConsuItanYs' Final Repott and Addendum. � Bonuses and Commissions (discussed in Final Repoxt, VIii A} — Bonuses and commission were disailowed because {a} Comcast failed to show t1�at they had been unbundted from seivice iates; but as importantly (b) because Comcast did not show the bonuses and comxnissions were related to reguta#ed equipmenx. Comcast does aot address tbe second point, which by itself,justified disallowance of'the bonus and cammission plans • InstaIlaTion Times (Final Rzpoxt VIII.K) — Consultants pointed out that Comcast's selected installauon times did not match the times iecommended by theu own analyst, Dr. Hannum, and noted that Comcasf had not jnstified its own choices. Comcast does not challenge this cottclusion.. Otfie� adjuslments made by Cansultants to installafion tirnes that were challenged by Comcast aze discussed belo�v. Howevex, this admitted eitoz is significant, and by itself indicates that ComcasPs proposed xates are iuueasonable. • Contract Laboi (Fina1 Report H.2). Ihe Consultants explained that contract Iabor estimates included time spent on activities that �ce not ptopeily iacluded in setting equipment rates.. Comcast did not challenge this conciusion, but in its Comments pioposes no adjusfinent to iates to coireet this exroi (Ihe company does challenge the Consultants' exclusion oflabor time associated with installing a drop to the subscxibei's home, but that was only one of the activities impxopexly iacluded in the Iaboi estunates), • Payroll Iases (Finai Repoit VIII..D) — Comcast did not address this area at ati, howevei, this adjusfinent would follow the treatment of bonuses and coznmissions, • Othex Converter Asset Costs (Final Report VIII.O 2-3} — Comcast provided no comments with respect to this issue • Cab1eCARDS (Final Rapoxt VIII.P.1) — CoTncast did nat provide any comments on tlus issue. , • I�IV Installations (Final Report VIII..� — Comcast did not piovide any commeats on this issue. 1 Comcast has aitemgted to ptesetve its ii�ts to iaise additional points lata by inctud'ntg such gene7a3 statemenTS as "Comcast will highiight a£ew of those etrois fiere so as to ffiustrate tfie peivasive scope of the Report's #laws" (See Comments at 15} However, we uuderstand that Comcast was requued to submiE all its comments by Febtuary 11 Page 2 of'26 Febivaz,ry 2005 � AsLpaugh & Sc¢Ico, CPAs, PLC and Front Range Consu(dng, inc All rights reserved Report aaatyses, canc(usions and recwnmendahoas cam3ot be used without expressed written consent hy hathluhpaugh & Scuko, CPAs PL.0 and Fmnt Range Com�ilting 3nc � au� � �- ASNPAUGH & SCULCO, CPAs. PLC Ce^inc: P..hl:; Ac:car.tanos md Ccnvit;r.;< Front Range Consulring, Iuc. Based on Comcast's admission aud comments alone, it would be fau to conclude tkat Comcast's proposed iates weie unjust and urueasonable- IV. ADJI7STMENTS A. Unbnndling Ihe FCC Fotm 1205 sets iates for regulated equipment Ihe FCC Foim 124Q sets iates fo� service.. Both foims aze filed annually. The FCC's xate regutation system iequued operators to remove all regulated equipment-selated costs &om seivice iates, so that equipment and sefvice costs could be sef sepaYately. "Unbundling" eguipment costs from sexvice rates was ctificat to the integxity ofthe scheme. An opezatoi that left an equipment-related cost in service rates was able to keep sezvice tates higher. If that opezatoi then latez included the eqnipment cost in a Foim 1205 filiag without making an offsetting reduction in seivice tates, the opeiaYoi would be recovexing the same cost in sexvice iates and equipment iates — a double zecovet,y. Ihe FCC has gen�ally refused to accept cable opeiator methodolagies that resu2t in such a double recoveTy. In 1949, tlie FCC applied this rule iu reviewing a nafional rate filing made by a cable opexator, ICI. (See e.g., . In the Matter of TCI Cablevision of Oregon, Inc, d/b/a TCI of Tualatin �alley, Inc. DA 99-2227 (1999) According to ICI, its national rate filing set equipment iates for s,ystems where a paxticulat equipment costs had been unbundled and atso foi systems where the same cost had not been unbundled, TCI axgued that it wouid be too buidensome to iequue the company to ensure that costs had been unbuntiled eveiywhe�a, pazticulazly in light of the time fhat had passed since the initial unbundling, and in light of the fact that many of the systems coveted by its filing had been owned by different campanies initially.. Ihe Commission, howevez, concluded that unbundling was required: "nothing" pexmits operators To "recovei the same costs tluough both progian3ming and equipment iates " Tlus case, ]ike the Tuadatin case, involves a na#ional filing that combines costs from systems that had been previous�y owned by seveial diffezent cable opeiatois. Ihe costs identified in eacfi initial 1205 wiih each of'the pazticipating LFAs on this project oi aQinally f elated to locaI oi regionaI filings Each filing was unique, and filings in one xegion did not always use the same methodology foi unbundiing as in anothei region, even within the same company.. Consultants, relying in pazt on tkeu expexience in reviewing past equipment filings, identified costs where (a) tliey laiew fhat unbundling had not occ2ixxed for at least some of the systems covered by the frling; ox (b) the cost item had not previously appea�ed in local Foim 1205 filings. Absent some Z 5ee also.Tones Communrcations of GeorgidSouth Carolina, lnc. d/fi/a )ones Communieations (Savannah and Chatham County, Gerna a}, DA 04-2448 (August 4, 2004) Page 3 of Zb Febivazy 2005 � Ashpa¢gh & Sculco, CPps, PLC and Front Rauge Consuldng, Inc AII riahis reserved Report analyses, eondusionc and recommendaz�ons csanot 6e used without expressed written co-nsent by both Ashpaugh & Scalco, CPAs PLC artd Fmnt Range Consutung Inc c� a�3 � �- ASHPAUGH & SCULCO CPAs, PLC c�.r=,<a a��« F::o��:�,_� «a co.,,,i;:�:� � � ' Front Range Consulting, Inc. proof'that a cost item which was making its initial appearance on a foim was in fact a new cast item, it was reasonable to assume ihat tfie cost had not been unbundled in the past Ihe Finai Repoil found that Comcast had failed to show that unbundtin; had occuzi ed cvith respect ta costs associated with office personnel and warehouse petsonnel, insurance, propecty tases, mainYenance aad repair — plant and equipment, and bonuses and commissions 3 With zespect to each of these costs, there wete also significant additional xeasons for reducing oi xemoving the proposed cost fiom iates 4 ComcasYs Comments beginuing on page 7 regazding the "unbunclling" issue appeac to admit that its approach to unbundling is inconsistent with some FCC pxecedent Ft argues that the piecedent should not be applied in this cixnumstance, because of the passage of time, business complicatious and biuden.. Similaz azguments against unbundling weie raised and sejected by the FCC in Tualatin Valiey, and Consultants have been presented witti no facts that would justify a different approach here. Ihe company does not challenge the conclusion of Consultants that costs associated with office personnel and wazehouse personnel, insucance; p:opetty taYes, maintenance and repaix —plant and equipment, and bonuses anfl commissions weze noY unifotmly unbundled Comcast azgues (Comments a4 9) that c}iisallowing costs based on unbundling concesns is inappiopiiate since some systems may have unbundled, even if othe2s did not. However, that was also the case in Tualatin I�alley, where the Commission emphasized that it was incumbent on the opeiator to fully unbundle costs if'it wished to recover them tlunugh a national filing. ' ComcasYS data responses showed that costs had nat been fully unbundled. Systems pieviously owned by IKR, for example, had not unbundied insutance and pxnpecty ta�ces As anothex example, ptiot filings made in Denver and Montgomery County did not include costs the company inclvded in the Foim 1205 in this filing VJhile the company states (at p. 9j tfiat to the "best af ComcasYs imowIadge" filing� coveiing systems iT owned in 1993 unbundled insutance costs, property taxes and office personnel, those systems would represent only a smali percentage ofthe systems covered by the cutrent national filing. In addirion, Comcast does not state that even Yhe systems it owned unbundied bottuses and commissions 4 Conceining bonuses and commissions, the Consultants specifica]Iy requested infotmation and support foi the reason Comcast believed bonoses aad commissions were applicable to kotm 1205 ieguiated activity. Comcast did not provide iT As faz as the ConsulYants laiow, the bonuses and commissions couid well telaTe to sales and installaiion activity associated wifh cable modems. Even zf'bonuses and commissions weie ptoperly unbuadled iu the 1994 F oim 1205, such costs would only be included in the instaat 1205 to the extent the costs relazed to reguiated activiry No such relarionship has been demonshated or suppotYed by Comcast 5 Comcasf would apply this iule even i#'the majoiity of systems had failed to unbuadIe the cos[s Comcast does aot appeaz to challenge ihe Consultants' asseition that unbundling had not been pe=fo�med in a substantial number af ihe systems. Page 4 of 26 Febivazy 2005 � Ashpauah & ScWco, CPAS, PLC and Fmnt Rmmge Comuirina, Ine Nl rigMS ieserved Report analyses, conclusions and recommendations eannot be used without ezpressed wnttrn consent by boih Ashpau¢� Bc Sculco, CPAs Pi.0 and Fmnt Ran ConsultiRg Snc � ay 3 ASHPAUGH � SCULCO, CPAs_ PLC Ccrvi:e^.' P�SI:c A:ccu:.ian:s xr.� �cnsvl:ar._< �� Front Range ConsuIting, Inc. Camcast argues (Comments at 8) that bonuses aud co�nmissions mighf have been unbundled because they might have been included in line items foi salazies.. Likevrise, the company argues tbat bonuses and commissions might be new costs. Howevei, nothing presented ta Consultants and nathing in Comcast's commeuts actuaily sfiow that bonuses and commissions were inciuded in other costs and unbundled for the systems covered by the Filing, and noThing shows that the costs aze new costs.. What is cleac is that the bonuses and commission cost item did not appeaz in severai pxevious Foim 1205s {Montgomeiy County is one exaznple)_ Comcast's speculafiive aigument effectively pioposes to include costs if one can imagine that they might have been unbuncfled in some cases.. But Tualarin T�alley appears to requue companies to take steps to ensuce unbundl'mg occuis. Zhat has not occtured, as faz as the recoid shows Finally, Comcast azgues that Mr. Iseich o# Front Range Consulting, Inc, opposed unbundiing when he worked in the cab3e industry. Ihe comment is suxpxising in ligkt of'the fact that the authors of the Comcast comments weie involved in obtaining 1V1� Ixeich's agreemerrt to sefiain from consulfing on unbunclling issues in a Comcast FCC Foxm 120� until December 31, 2005 (an agreement Ms.. Treich has honosed) Comcast cannot Iegitiivately ask foi Ivi� , Iaeich's exclusion from this issue in this auatysis and then make assertions conceining positions he may a� may not have taken in the past. But even if'Comcast's sfatement above were acci.uate, posifions taken on behalf of'a foxmzs employei cannot be used to tzump what is now Commission precedent. Ihe FCC's orders requise the use of'nationally aggegated I205s to be revenue neuttal? Fuudacnentai to that neutraiity is that additionat costs cannot i�e added into the 1205 simply because it is compiled on a narionai basis as opposed to the locai hasis that had been used previously. Comcast would have to exclude costs from a local filing that had not been unbundled; if it could include them in a national filing, the effect would not be neuual, as the aggregate tates with these costs added would be higheY than they would fiave been in the separate local filings combined. Undet the cucumstauces, pazticulazIy in light of'the signzficant evidence that the filing includes cosis that have not been unbundled, the unbundling adjustments piopased ai'e appz'opxiate. S. Estimated Times for Installation Activities As the Fina1 Report explained, Comcast gave the Consnitants limited and canflicting data witti respect to instatlation times. Comeast asked tocal systems to provide it with estunates of'iimes required foi installation. Comeast also pzovided the toca3 systems with an unsuppoxted estima#e , 6 Mr Ireich can neitiiei verify nor deny the accuracy of'the statement because of his agceement to nat pazticipate in uubimclliug issues 7 See FCC 96-257, pazagragh 21 Page 5 of 26 Febmazy 2005 � Ashpaugh & Sculeq CPAS, pLC and honi Range Consulting, Ine All ri�fitr ieserved Rep�rt a�alyses, concius�ons az+d recommendatioas cazmot be usW without expressed written consent by both Asbpaugh & Sculco, CPAs, PLG and Front Ravge Consut[ing, inc o5a�3 �� ASHPAVGH & SCULCO, CPAs PLC Ce^tiSeL P;;Slic Ac.cv:iaas; zr.3 Cp�scl:zeL �, . , Front Range Consutting, Inc. from tha coipoiate affice puzporteclly reIIecting the time reported on the previous yeaz's Foim 1205, which related only to the foimei AI T Broadband systezns_ As Comcast notes in its Comznents, this estimate was adopted in more tban halftke cases. Comcast also relied upon the point system that is used to schedule installations to develop install times. I1vs data points in very different d'uections. As Comcast notes in its Camments at 10, "installation times tend to be relatively stabie on a yeai to yeaz basis " Yet as the Final Report indicates, thexe was in facT si�uificant vaziation between (a) installation times gathered frnm systems and used in the national filing an8 (b) iastallation times that fiad been used previously for the same systems.. Comcast did not explain the vaziafion 9 Ihe point system is used to schedule ttips and appouatments, and theiefore should pTOVide dispatchexs with a relativety accurate estimate of the time required to pe�foxm typical tasks. Yet ttiere was a significant difference between instalIarion times deiived from the point system aad the results af the field swveys.. Similazly, tiaere is no explanatian for Che difference in install times foi empIo,yees and conhactors, yet contractor install rimes were lower than employee install times. Adding to the complication were at least two othei factors. Fust, the install estimates used by Comcast appeared to miY activiries properly included in the F oim 1205, and activities that shonld be excluded from the Foim 1205 , Second, in the natianai F orm 1205, Comcast did not provide the bYeakdown af installation activities by task, and thus provides a meaus for checking the zeasonableness of estimates and ensuring only appioptiate costs aze included in the Fotm 1205 Given the si�ificanY pxoblems with the data, ComcasYs failuxe to eaplain the vaziations from estimate to estimate, and the failuie to sepaxate out tasks pcoperly included in the Foim 1205 from thase that aze not piopeily inciuded in the Poim ] ZOS, ComcasY s install astimates could not be used. The Consultants in the Fina1 Report therefoxe made iwo genexai changes to Comcasf's estimated times for the installation activities by employees: (1) a reduction in the un-wued and $ Comcast set national installarion iates based on instzlt times estimated fot a sample of systems Ihe ConsulYazRs looked at past installation time esti�xnates foi some of the sample systems, and sought to determine whether the difference benveen the past estimates and those used in the cutient filing could be e�cplained Comcast could not explain the differences. 9 For �ample, page 23 of'the Final Repart pomts out that Comcast significanfly lowered the amount of'time to do an install m the F1int MI system Comcast was asked to support this adjusUnent but it did not do so. (See Final Itepost at 22 J Absent some explanation, the variation saggests that eithez the estimate used in this filing by Comcast oi the past estimate was incorrecT ' Ihe ConsulYanTS asked fnr documentarion that would eacp2ain the esrimates used by Comcast and received oniy vague and paztial responses (See Final Repart secflon H at 21) It is sfill uncleaz, for example, what Ied personnei to degazt from times reflected in the the piioi estimates, corpotaYe guidance or ihe point system and subsutute an aitemarive times Page 6 0#'26 Febivazy 2005 � Ashpaugh & Scuteq CPAS, PLC and Front R�ge Consultiag, Ine Ali rights reserved Repott ana(yses, eonelusions and recommendations cannot be used withou; ccpresszd wriiten consent by both Ashpaugtr @ Scu]co, CPAs, PLC and Ftont Range Consuking, inc D5-��,� ` �_ ASH?AUGH & SCULCq CPAs. PLC Ce�L5e3 Pvhlic Asccun:aas zrd Cc..:vi:ncu f Front Range Consniting, Inc. pre-wued installation times ta reflect times related #o drop activities (see Final Repoct at 27); and (2) a ieduction in the installafion times for some sample systems where Comcast provided suffcciently detailed point systzm data to derive an installation esti�nate. Comcast's comments aze almost entirely devoted to ti�ese two adjustments, rather than a defense of its own estimates. Comcast challenges the use of ceitain point system data rather than the infoxmation Comcast abtained ia its Iimited field suzveys. Consultants chose that data as the most likely to be reliable foz at least four reasons. Fust, because fhe point system is used for scheduling, and failure to sehedule propeily can iesult in violations of customer secvice standazds, that system appeazed likeI,y to pxovide a reasoaable benchmaik fox times associated rvith certain tasks. Second, because the point system is nof simply used foT iate regulation puxposes, it appeazed less likely to be manipulated purely fox xate regulafion piuposes Ihud, the poznt system appeared to be moxe consistent witIz cont�actoi time estimates Fouith, ComcasYs sample system peisonnel used the data in part fox theu own estimates.. None of' Comcast's ciiticisms justify Iejecting Consulfants' appxoacfi and adopting Comcast's estimates instead. Comcast azgues that the point system used by fhe Consultants to make the minoi adjusbnents to the instalIafion times "typically exclude dxive time." {See Comments at 11.) Ihere is no evidence that is the case To the contraiy, in the data for fhe New Haven, C I system, Comcast provided the point system foi an "Al0 at time of'instatl" and an "Al0 sepazate tsip." As the only difference betweea the activities listec� couid be "dizve time," Comcast cannot explain tliat tlie points for the "A/O at time of'install" aze 8 and the points foz the "AJO sepazate trip" aze 10. As each point is 5 minutes, #his wouid equal an estimated dzave time of 10 minutes. Intexestingl,y, in the New Aaven case, the point system yields times highei than those estimated by the system personnel; these highez tiznes were included in the adjustment recommanded by the ConsuItants on page 24 of the Final Repart. Comcast also atgues thaT its point system fox some systems (the Flint, Michigan system, far example) appeazs completely utuelated to tfle fime requued to complete paiIICU1az taskz Consultants agree. ihe Fina1 Repost only made adjustments based on the point system whexe the point system was sufficiently detailed to ailow foT an adjustment to be made.. Comcast's other criiicism of the instaliation time analysis is a�ed hening. Its Comments ou page 10 begins by suggesting that the Final Repoxt concludes that the instaIl estimates aze wueliable because Comcast provided pxejudicial guidauce to the field That is not ihe case.. Ihe " Ihe point system was not vsed where it was apparen4 that it was not an accu[ate indicatot of'times spent on a task (see descussion below). Where the poinY system could not ba used, Cansultants were forced to use the Comcast instatlation estimate, adjusted to remove tasks that should not be included 'ut the equipment fiaskei Ihus, the Final Repoii did not reject the unsupported ittstallatian times but rathei began with the installation times Comcast used "ui the Fomt I205 aad made adjustrnents based on the "best available infotmation" to reflect a more reasonable time estimate. (See Final Report at 27 ) Page 7 of 26 Febivaty 20�5 @ Ashpaugh & Sculco, CPAS, pCC and Fioni Range Cansulting, ine A77 ri�ts reseryed Repmi mtialyses, conc7usions and recommendalions cannot be used without �pressed wlitten consent by both Ashpaugh & Scu1w, CPAS, PLC and Front Range Consulting inc �-a�3 ASNPAUG}i & SCUlCO. CPAs. PLC Cv.�ac9 Pnhli: AG<evrtaa+.; zn5 tans'd:zete �� Front Range Consulting, Inc. Consultant's coaclusions were based on a vaziety of facts that indicated the instailation estimates aze wueliable, discussed in the Final Repoxt and above. While the mannei in which "guidance" was pravided was of some concein, the pioblem heie is that Comcast failed to sugpoit its choice of instaliation estimates. ?he adjushnent for drop times is discussed in Pait N. E, below. C. Adjasting RepoTted Hours As pazt of'the calculafion of the Hou21y Service Chazge, it is typically necessazy to reduce total einployee hours by unproductive ho�us.. In its Addendum, Consultants pointed out that Comcast has reduced iepoited empIoyee houxs by 373 houxs based on TCI's 1996 data regaiding employee policies and piacrices. Consultants pointed out that ComcasYs cuszent policies and practices ate not the same as IC3's policies. In response, Comcast does not defend its use of'the TCI data.. Instead it introduces new infoimation in its Comments that it did not use in its Filing and did not provide to the Consultants (See Comments at 12..) By the inhoduction of this aew infoimation, Comcast is conceding that the infoimation used in the Fiting caFUiot be relied upon to establish unproductive hours. Comcast azgues that given the totai patential paid time-offundei Comcast poficies (224-304 houts) plus 1 �4 of' admini s4ative houzs per yeaz plus 49 hours of traiuiug, no adjustment zs required to the 373 hours estimate, Ihis acgument assumes that eveiy employee takes full advantage of every houx of every holiday, fIoating holiday, flex rime and vacation c3uting the yeas.. Iha Consul#ants' analyses of'othei Comcast filings over the last several yeazs have consistently found that this assumption is not,justified, (See Addendum at 2.) Comcast has high twnovez in installation and teahnical positions. Ihe weighted aveiages of actual time associated with each categoiy (holiday, floating holzday, flex time and vacation} fa11 far shoit of t�e total available.. If Comcast is seeking to justify the 373 hotus by azguing that the iQ4 adzninisttative houas is actually too low, that effoxt too, should be iejected.. Comcast was specifica]Iy asked to piovide detailed suppoit far this amount, see e.g, question 26 of'the WiIdwood N.7 sample system data request, and it failed to do so It cannot now propose some 12 Ihe Hoiu•Iy Setvice Chaz�ge that Comcasf can cfiaz�ge foc installation and cetfiain other activities basically is calculated by identifying costs associated with installation -type acflvides, and dividing Those costs by the total number of employee hours devoced to those acavities If the number of hows reported is reduced, the Ho�ly Service Charge increases_ Both Comcast and Consultants agree that non-productive hours have to be excluded. � Comcast states its "intention" in using the dsta was fo use "a more consesvative approach" and avoid disputes Comcast Comments at 12. Comoast thus seems to adm.it that it inientionally reparted hours it imew were not � r'eflective of'its own piactices There is a contlict here ttiat calls into question the reliability of any attesfations made by the oompany Page 8 of26 Pebivazy 2005 � Ashpwgh & Seulco, CPAS, PLC and Front Aarege Caasulvng, fac All rights reserved Report anatyses, concIusions aad recommendations camwE be vsed withtrut explessed w�itten eoasent by both Ashpaugh & Seuleo, CPAs PLC arid ErOnt Range Consultirig inc b5-a�3 ASHPAUGH & SCULCO, C?As_ P!C Ccr_iC�ei P-syli: Aacun::n:z =03 Cc^nd:ar;s Froat 12ange Consalting, Inc. substantially higher amount based on mere asseition. Ihe Consultants continue to suppoit the adjustment in the Finai Regott D. Treatmen# of'tLe Step A Allocation The Step A Allocation relates to adjustrnents to maintenance and repau — plant and equipment {Final Repoit VIIi,C}; Payroll Taxes (Final Report VIII,D); Properiy I�es (Final Report VIII E) and Insuiance (Final Report VIII F). This allocation is designed to enstue that a fais shaze of these general costs aze reflected in equipment rates — but no more than a fair shase. As the Fina1 Report expIains, in each instance the company uses an alloca#ion £actor that slufts fo regulated equipment expenses that shouid be aiicibuted to uncegulated seivices oi equipment. Comcast's Comments provide no new infoimation oi facts to suppoxt any chanoes to the Consultants' Repoxt with Iespect to the allocation in Step A of'tlie Foxm 1205. (See Comments at I3.) ComcasYs page 255 ofthe sampie data shows the "Schedule B Support" and the "Calculation of'the 3chedule B%" This percentage is cazxied foiwasd to "Page 3" of the sample data wheie 3t is used to aliocate all of'the foilowing costs to �egulated 1205 acrivity: Salazies — Regutai, Saiaties — Ovestime, Salazies Bonuses, Commissions, Employee Benefits, Opezating Supplies, M&R P1anfBuilding, M&R— Equipment, Utilities, Rentals/Lease Expense, Vehicles — Gas & Oii, Vehicles —Maintenance, Payroll TaYes, Propexty IaYes and Insuiance. Ihis allocarion percentage is caIculated on page 255 as follows: Iotal satazies and oveitime re]ated to regulated activity divided by Iotal salazies and oveitime.. Howevex, the "Iotals" aze only fox the Technical Depaztment. Foi the WiIdwood system, the calcutaiion iesults in a pe�centage of 16 35% based on the total number of Iecbnieal Depaztment employees of 3 7 50, consisting of' 17.14 Installeis, 9..61 I ec2wiciaus, 1.00 Disgatchexs 1.75 Wasehouse Staff; and Othei 8.QQ, and the associated salazies and ovez4ime of each. No othex depaztments are included in the calculatian The calcutation does not include Adminishative and General oi Marketing personnel. Yet it is used by Comcast to aliocate rentllease e�enses, prope�ty taYes and instuance to the Filing Ihe Consultants limited z'eview of a sataple of invoices cleazly and positivety shows costs included in ientllease expense and propexiy taxes that are associated with administaative offices, customez sexvice locations, and biIl payment facilities (See Final Report at I7 and 1&) Zhe Consuttants contend that the costs for marketing and adminisriative personnel are not included in the "Othei" category and theiefore allaw the categozies ofrent, property tases, insutance, etc. to be ovei allocated to the regulated activities. ComcasYs aIlocation of'these costs in the Piling to the ec}uipment basket in this mannei is incotiect. On page 255 of' ComcasYs Chicago sample system, Comcast identifies 3.31.75 employees in the "Othei" categoty summing to a total of 58b 75 "Totai Technical" employees. (Emphasis added) Ihis amowrt of S8b..75 etnployees would no# therefore include the admiuisirative, mazketing, customei setvice and othei employees Page 4 of'26 Febxvuy 2005 � Ashpaugh & Scu7co, CPAS, PIC and Front Range Consril4ae, Inc All rights reserved RepoR ana(yses, w¢clusions and recemmendations cannot be used wifLouf ezpressed written consent by boffi Ashpaugh & Sculco, CPAS, PLC and Front IZange Consutting, Inc �s-a� � ASHPAUGH & SCULCO,CPAs.PIC Ce^NSed Puolr Ac.cvc:an•s znd!c:sdvn:: � �. � i Front Range Consniting, Inc. Comcast's Comments on page i 4 ti�at its "1527%'' is "such a low allocation factor" is ➢ll$1l pported ia ln Detroif MI, Comcast's 20041205 filing showed the percentage of technical salazies foi instailation andmaintenance ($147,443) to totai system salaries ($15,277,275) was 0.97% for the yeaz 2003 — the same yeat used in the F iling I'ypically, this peicentage is less than 4 D% The Consultants did not use the i�suits of'fhe Detsnit MI analysis but conservatively reduced the peicentage allocation by 2/3 to account foi fhe administrative, mazketing and customex peisonnel based on the Consultants' best availab te infoimation.� Ihe Consultants request that the paztioipating LFAs reject ComcasYs position and adopt tfie adjustments in the Repart. E. Contzactox• Time Comcast raises two substanrive and ona pxoceduial objection to adjustments related to cont�actoi time. First, in the Final Report, VItI.K, the Consultan�s concIuded that Comcast I3ad impropeFly used only instal2ation time estimates fox in-honse pexsonnel in calculating the time required for an instatlation As discussed at pages 25-27 af the Pinal RepoxT, iustallations pexfoimed by conhactors represent the majority of'installs, and if'conttactoi instatl time is different from the time repoxted b,y employees, it needs to be taken into account to come up with an appropxiate avexage installation tnne.. The best a�ailable data indicates tfiat tk�ere aze substantial diffarences in employee-repoFted installation times and conhactor-repoxted installation times, and so the Fina1 Report develaped an avexage insfallation time based on the infoxmation available. Comcast objects that conhactor time "typically" does not inciude diive time (See Comments at 16..} Fust, that statement is unsupported.. Second, by use of'the word "typicaliy" Comcast admits that clxive time is not always excIuded — and it is not cleax it is excluded from any of'the sample systems. Ihutl, the in-house estimates for installations ase genexally longer than the estimates for contractors. D2ive time (wiuch should not vazy foi tasks) cannot expiain that difference.. Finally Comcast on sheet 270 in the sampie system data used the same install times as the Consultants to calculate cont�act labox hours. If'Comcast is conect in its Comments that diive iime is not inciuded (and should be), it is also admiiling that it is knowingly and intentionally undexstating conttacf labor flours, wluch would inflate the Hoiuly Service Charge ("HSC") ia the Filing. Tf only foi consistency, then, use of'the contractor hours is justified In sum: even if' one assumed that Comcast's point had some mexiT, it does not,justify the Comcast 14 Comcast has the bmden of providing the suppoiting calculations. ComcasYs claim of'being `Yoo low" should not be considered, as Comcast is responsible for pieparing tLis Filing using suppotryb2e fig�a�es and amounts is Ihis teduction had no paactical affect in Tlze revised tates as tke Consultants had already eliminaked this category because o€the un6undling noncesns Page 10 of 26 kebivaiy 2005 � Ashpaugh & ScWcp, CPAs. PI.0 and Front Range Consuliing, Inc Al2 rights reserved Report analyses, Conclusions and recommendations cannot be used without espressed written consentby both Ashpaugh & Sculco C4A5, PLC and Front Range CoasnlGng, Inc Z�5-d4�3 a � ASHPAUGH & SCULCO, CPAs PlC Qai-'aeC 2abf.< Accev+taaa :nd Ccax=�@ant<. Frant Range Consniting, Inc. approach, which is to ignore contractoi time altogethei. The approach used by Consulfants is the best appioach given the data available, and makes sense as a matter of inteinal consistency in the flHng- Second, ConsulFants reduced contractor time by the time estimated #o install a dtop to the demarcation point at a home. Comcast admits it included dzop instzll time, and justifies that decision by selectively quoting an F CC ordei at page 16 of' its cornrnents. Comcast quotes the first line of'paxagiaph 36 of Comcast Cablevision of Taldahassee, Inc, 10 FCC Rcd 7686 (1445), but faiIs to provide the lan of paFagcaphs 34 - 36 that ai e exacfly on point in this issue. "34. With respect to the heatment of'labos costs associated with installation of' oustomer dxops, we fiuther ea-plained in the HSC calcnlation inshuctions in Foim 12d5 {one of'the successor foims to Foxm 393} that opezatars haue anotha oprion in additian to �ecoveiing such costs fhrough the znstallation chazge. Ihe otl�es option is foT the operatos to capitalize [the labot costs] in distribution plant as pazt of'the aost of'the dsops. 35. Commission tules thus aliow one of'two options foz the recovery of labor zelated to the installation of subsciibex dxops at the time of sexvice installation These options aze: (1) to xecover the iaboa costs associated with the installation of subsctibei drops tluou� the installation chazges; or (2) to capitaLize such costs in distxibution pIaxit as pazt of'the cost of' diops (Footnote 96 —See inst�uctions to Foxm 1205..) Under the fizst option, related labor costs and labor hours shoutd be included in the caleularion of'the HSC {in Pazt III, Step A, Lines 1 and 4), This is requixed by the HSC £oimula in ordei to ensute t�at the HSC is propeily based on alt the activi&es to which it applies. (Footnote 97 — See 47 C..E R. § 76..933(d}..) Under the second option, the labor cast for drops is iecovered in the chaiges fox cable sexvices only —not in installation or customei equipment chazges (Footnote 98 —Foim I205, at 14 (Worksheet foi Calculating Peimitted Ec�uipment and Installafion Charges, Step A: Houcly Sexvice Chasge, Note 2}..} 3b. Comcast makes iT abundantiy cleaz that it elacted flie fust option — to recovex the cost of'labor associated with the instaliafion of'subscxiber dsops tluough the ivstallation ohaige. (Footnote 99 — Appeal at 24 ("Consistent with the Cammission's policy, Comcast instead chose to include labor costs as part of'its instailation chazge when initial installaiions require cable drop installation"} ) Ihus Comcast calculates its installarion ckazge by including suhsciiber cicop in�rallation laboi houTS in deteimining the oveiall instaIlatiott time, and then multiplying the overall time by the HSC. (Footnote l OQ — See Appeai, Eshibit Q (Comcast Veision Foxm 393), at Attachment 4..) It is clear howeve� that Comcast Page 11 of 26 Febivazy 2005 � Ashpaugh & Sculeo, CPAS, PL.0 and F�onC Range Consuttiug Ine All sighis reserved Report armtyses, conclusions aod recammendations c�noi 6e used Hnthout expressed wiitten consent by both Ashpaugh & Sculco CPAs PLC and Front Range Cansulting. Inc 2�5 a�3 ASHPAUGH & SCULCO, CPAs, PLC CE':11[3 P.uii[ nc.Cir.aas zc_ CO613Cifa: � Frant Range Consultina, Inc. did not include the Iaboi costs and laboi hours associated with installation of subscriber drops in the calcularion of the HSC " In its June 21, 2004 response to Quesrion 12 ia connection with this �iling, Comcast staeed the following: Question 12. Please e�cplain in detail Comcast's capitalization policy regazding installations in each sysfem included in the National 1205, including but not lixnited to: a) Does Comcast capitalize the cost of'the seTVice drop to a home or business? b) Does Comcast capitalize the uufial install of a home oi business? c) Does Comcast capitalize the prewired initial insfall of a home ox business? d) Does ComcasY capitalize the initial instalt of any/all addifional ouUets in a home oi business? e) Please piovide the total gross amount capitalized per books per s,ystem, the aet amount capitalized pe2 system and the depreciable life of' the asset. Response: Please see fhe attached e�ibit titled "Accounting fox Subscriber Connecfion Costs" frnm Comcast's Financial Policies & Proceduies Manuai AnsweTS To Question a) through e} az'e provided below a) b) c) d} e) Yes. Yes No.. Yes. Please see the attached e�chibit, "Capitatized Labor". Ihe excexpt from ComcasY s Manual had the following titie: "Cfiapter 8, Section 5, Financial Policies & Procedures Manual, Subject: Accounting for Subscziber Connection Costs, Scope: Ihis statement of'policy addresses the general accouu6n� for the capitalization of subsc7iber connecrion costs.. EfFecfive Date: .7anuazy 2004." In ad@ifion, Comcast pxovided the following xesponses on page 7 of the filed Form 1205; 1. Have you included the laboi costs associated with subscriber cable dtops in youz ckazges for initial installation? Page 12 of 26 Febxuary 2045 � Ashpaugh & Scu[co, CPAS, PL.0 and Froni Range Consuldng, Tnc All rights reserved Repat aoatyus, conclusions and recomme¢dafions cannot be used withouf expressed writfen consent by both Ashpaugh ffi. Sculco, CPAS, PLC and Fro¢t Ran�e Consu7ting, Inc os-a� 3 ` �- rf ASHPAUGH & SCUlCO, CPAs. 2lC s� Ce-ti�ieE P.bli� A<ce=u:,an;s ari C..�u(:arts l Fx ont Range Consulting, Tnc. ComcasYs response — No. Have ,you capitalized tha labor costs associated with subsciibex cable drops? ComcasPs resgonse— Yes. ComcasYs representations on page 16 of'its comments that the "Report's exclusion o£'any contaact Iaboz costs or hoias associated with drop installation contradicts this FCC mandate" is incoirect. By its own admission in the above responses to the 'Consultants requests and to the questions on the Foim 12Q5, Comcast indicates that it has chosen to cagitalize the labor costs of its drop and thecefoie based on the Comcast of Tallahassee orde: must exclude the labor costs (and hoius) associated with the drops from the Foim 1205. The exclusion is precisely what the Finai Repart did witb the contract labor costs and the time estimates. (See Final Repoxt at 2?.) rhe Consultan#s zequest that the gaziicipating LFAs reject Comcast's position and adopt the adjushnents in the Report. Finally, at page 15 of'its Comments, it "ohjects to the adjustments, because they are not adequatety explained." Ihe Consultants do not undesstaud Comcast's conten&on. The infonnation attached to the Final Report is the same sort of infoimation fiunished by Comcast withtfie Filing - a ievised Foim 1205 (Final Repoit Appendix C) an' a statistical sampia s„mmary (ginai Repoxt Apgend'vY D).. Comcast's Comments at 15 state that it "has been unable to xep&cate the Consultant's results." We do not undeistand the dif�culty, and Comcast never requested any support oi e�lanation fi�am the Consuitauts.. We havs attemptecl to provide infozmation to Comcast even wheLe not technically required to do so, Fac example, hy electsonic mail on Januazy 2b, 2005 Comcast iequested "Is it possible foi you to forward to us electronic veisions of'both Agpendix C and Appendis D so that we can get a better understanding of how you anived at pous final numbexs?" Copies of'the Excel spreadsheets for Appendices C and D were provided by electroxuc mail on Januasy 28, 2005, and were psevided in the same foun as ComcasYs response to a similaz request by the ConsuItants This was Comcast's only xequest concetning the Final Report Under the cucumstances, ComcasYs ciiticism does not justify zejection of any adjustment. F. Warehouse Personnel Consulfants eliminated warehouse pexsonnel from Schedule B of'the 1205 because (a} the costs had not been unbundled pieviously; and {b) the same cost appeared to be capitalized in Schedule C Although Comcast does not pxovide suppart foi the assertion, Comcast Commeuts claim that the costs on Sefiedule B aze not the same as the costs capitalized on Schedule C Even if one assumed thaY wexe the case, it would not solve the unbundling groblem. Moiraver, it does not mean that Comcast's esdma.tes are otheiwise �easonable. Comcast zncluded costs and hours foi warehouse peisonne� in some of'the sample system data that implies that warehouse pe�sonnel Page 13 of 26 FebTUazy 2005 � Ashpaugh & Sculco, CPAs. PI.0 and Front Range Coasuteng, Ine A(t ri�t� reserved Report analyses, coaelusions and recommendanons cannut be used withoui�pcessed wcitten consentby both Ashpaugh & Sculco, CPAS, PIC and Fmnt Rxn Consuiting, Inc a5 a� 3 ASHPAUGH & SCULCO, CPAs, PLC Ce�H ied Paik Accczrxana .ni ^ .ovs dxar.fs Fronf Itange Consulting, Inc. spend in excess of 70% of tfieir time on conveiter issues alone,� Considetiag that these wazehouse peisonnel also suppo�t non-regulated equipment and instaliation activities such as cable modems and telephone seivice, that percentage does not appeaz reasonable, and Comcast did not provide data that would support that peicentage, Consuttants therefore conclude tbat Comcast has not shown its estimates are reasonable with iegazd to this cost categoiy nor has it proven that these costs wexe unbundled oiiginally (Sse Final Report at 19.) The Consultauts request that the participating LFAs Le,}ect Comcast's position and adopt the adjustrnents in the Final Report. G. Office Peisonnel Comcast does nat provide any facts that change the conclusions in the Consultants' F inal Report regarding oifice peisonnel. (See Final Report at 19.) For example, ComcasYs Comments �eference the disc�assion at page 20, footnote 23 of the Final ZZeport, a discussion that has nothing to do with office personnel. Footnote 23 in the Final Report deals with point sheets that were missing fos the foui idenrified sample systems. Ihe Consultants agee that the missing point sheets were provided by letter dated Octobei 7, 2004.. Comcast makes the statement "In shoxt, Comcast pzopezly piovided existing matexials xesponsive to the RFI "(Comments at I7} Ihe zesponse "piopeily provided" for the VJildwood sample system was: Questions 23. Please pxovide suppoit for amount shown fox "Office Conveiter Maintenance Hours" of "bl 00" pei week on the "Miscellaneous Regulated Activities" woiksheet. Ihe suppoYt must include all studies, documents or other material nsed by the Wiidwood personnel used to support such amounts. To the extent the individual responsible for prepating such amounts did not use any supporting infoimation, please state such and piovide a detailed e�lanarion foi the soutce o# the amount shown Please pxnvide the name and titte of the individual supporting the houts shown on this schedute. (Emphasis added) Response: Ike FCC has stated, "We anticipate that cable operatois will use their past eapezience and historical data to make the best estimate of'the number o£'sezvice repau houts foi remotes Chazges foi leasing of converter boxes and all other equipment will be calc�lated in the same manner as for xemotes. For installation charges, the cable operatar must elect a unifoim installation chazge that is calculated based oa eithat: (1) the HSC times the peison houxs of'the visit; oi (2) the HSC times the av�age houcs spent per 16 F oi e�mpte, see rhe Flint MI sample system where the percentage is 79% Page 14 of 2b Febivazy 2005 � Ashpaugh & Scutco, CPAs, PLC aad Front Range Consultiag inc All cights reseeved Report analyses, rqnclusions and recommendatio� cannot 6e used without eapressed writken consent by both Ashpa¢gh & Sculw, CPAS, PL.0 and Front Range Consulling, Inc o5--a� 3 ASH?AttGH & SCULCO. CPAs, PLC c•,-;rled P�oN: Acccev:aa> xn. Com�t;zM< � � F�ont Range Consulting, Inc. in�tailafion visit." (See FCC Repost and Ordei, �CC 93-177, released May 3,1993, PaFagtaph 296.) (Emphasis added} Comcast has used the past expeiience of' its office pe�sonnel to make theu best estimate of the average houis spent pez week on convetter maintenance_ Zhe office conveTter maintenance hours of' 61 aze a sum of the acrivities listed an the Miscellaneous Regulated Activities woxksheet laheled "O", indicatina office peisonnel peifoxm these functions Ihe infoimation on the sample data wotksheet Miscellaneous Regulated Acrivities that was labelled "O" and tataled 61 hours pei week were: (i) 8 hours pei week "uouble shooting equipmenUconverter pxnblems ovez the telephone ptioc to scheduling sesvice call;" (2) 45 houcs pei week keying of convertes setial numbers to customer accounts aftei installatlon or exchange, and completing associated papexwoik;" and {3) 8 hours pet week "time spent exchanging oF reRieving convertei equipment at khe &ont countet:" Ihis does nat provide sfudies, documents ot other mateiials, does nat prnvide a detaited ezcplanation fox the souice of ti�e amount shown, and does not identify the individual suppoiting the hours shown on the schedule. Ihe Consultants asked for Comcast to provide details in the data request detailed above that would have encompassed "past ea�perienee aud kristorical claxa." Camcast piovided no such suppozting data. I he Consuttants therefore were not able to evaluaxe the data used by Comcast to any supparting info2mation_ Comcast has not shown in these cauttnents tttat it has met its burden of groof on inclusian of'these office personnel. Ihe lack of'suppoxt alone would justifp exclusion of'this cost, but exclusion is a1so,}ustified by the unbundling issue discnssed above. In liaht of these two flaws, Consultants sequest that the pazticipating L�As teject ComcasYs position and adopt the adjustments in the Repoit. H. Inside Wi:ing Comcast's Comments on page 13 and 18 fail to address the principal concetn with the inclusion of alI of'the trouble calls foi inside wuing. The Cansultants were concesned p2ima�ily that some of'these cails would ie]ate to wuiag that is not xelated to cable seivice, such as home netwoildng and telephone wiiing that aze covered undex the wire maintenaace plans, thus including the time estimates and casts for these non-cable and non-inside wiLing maintenance plan customers in the Filing. (See Pinal Repoxt pages 27 — 29). 7he Consultants asked fot copies of the uxside w•uing plans and the number of' customers on the plan. ComcasT only provided the number of' cunent customers on the plan but in almost all of the responses, Comcast never piovided the plan. Furthei, Comcast provided no estimate of'the time associated wifh tiiese inside wire trouble calls that wotild petmit one to distinguish between eable seFVice-xelated caIls and call telated to 17 Tt should noted that the wire maiatenaaee plan is a sepazate chazge on !he subsetibei's bill and none of the revenues genexated &om thase charges aze offset against the inside wuing exgenses Page 15 of 26 Febtuary 20�5 � Ashpaugh & Sculco, CPAS, PL.0 and Fcont Range Consulting Ine Ait xigirts reserveef Report analyse3, wneJusions and recommendariom cannat be usecE without eapressed written consentby bo4h Ashpauah @ Scu1c0, CPAs, PLC and From Range C�suiting Inc bs-a� 3 a �� ASHPAUGH & SCUlCO, CPAs. PLC Ce.^,iSeE Pe36: A::cvnaac; znd Lansalxsrss Front Range Consulting, Inc. maiatenance of telephone wues or home computer netwoiks_ ComcasY s appraach — which treats alI inside wue calls as if they weie cable-related — therefoze is not ieasonable, Ihe Consultants, however, have not disallowed this item completeiy, but have removed 50°l0 of the number of inside wire tcouble caiLs and left in the iemaining calls as Yhe best available information Ihe peicentage was based on infoimaYion &om Comcast regazdina the number of' customeis who subsctibe to an inside wuing plan (while Comcast does not Imaw how many trouble calls will involve customeis who subscxibe to wue maintenance plans, it is at least reasonahle to assume given the absence of' other infoimation that it will beaz some relationship to the number o#' subscn'bexs who have take a wire maintenance plan) . Comcast has not piovided any infoimation fhat would suggest that the ConsulfanYs adjustment iesults in an utueasonably low rate,.� Ihe Consultauts request that the participating LFAs reject Comcast's position and adopt the adjustments ia the Report. I. Cnstomer Tronble Calls Comcast's Commexits on page 18 do not addcess the problem idenfified hy the Consultants.. Ihe ConsuItants on pages 31 and 32 of'the Final Report idenrified tcvo issues with the inctusion of' customer trouble calls: (1) no suppoxting data and (2} no support that tkese amounts were unbunclled in the oziginal Foim 1205 unbundiing. Setting aside the unbundling issue, ComcasYs commenis at 18 do not address the failute by Comcast to meet its bucden of pxoof' with t�gards to the support foz the customei koubie calls If' Comcast had provided the support and i�ad reliable estimates of the nuinber and time to complete these calls, the adjustrnent might not have been aecessazy., While Comcast may believe that the Cansultants' estimate is unreasonable, it is in fact geneiaus considecing that Comcast has not actually suppoited inclusion of an,y time, much less tha 40 minutes it proposed. 19 ComcasYs Comments appeat to suppox2 the notion that this is no4 an atea where Comcast has eithei si�ificant costs — Comcast seems to indicate that it will even waive these charges to p�omote customer safisfaction (See Com2nents at 18.) Tfie ConsultanTs request that the pazticiparing LFAs ieject ComcasYs position and adopt the adjnstments in the Repoit 18 Based on Camcas['s Comments, the Consulfants re-ian theu analysis for t[ie Ilenton sample sysTem to revetse the 50% exclasion of the number of inside wire tzouble calls Ihe HSC calculated as parY of'the Final Report showed a T3SC foz this system fo be $34 43 Aftei eIiminating Yhe adjustmeat recommended, the HSC was lowered to $34 88 - a minor change modifying the Final Report based on ComcasYs Comments �esutfing in a slightly lower HSC 19 Comcast gives examples of cases where it could take mnre than 20 minutes to identiPy a ptoblem that is unrelated to equipment But it is aLso easy to imagine cases where it could take less tkan 20 minutes — where the customer has inadvertently unplugged equipment, for example. Aside from drive time (accounted for in Consultants estimate} there is no buis foi assuming that there is any signifrcant rime associated with the type of trouble call az issue, and as the company has tfie burden ofpznof; it is approptiate to assume tt�at t4ie time is shott � Page 16 of'26 Febivary 2005 � Ashpaugh c@ Sculco, CPAS, PLC and Front Rarige Consu[ting, Ine A71 rights reserved RepaR analyses, conclusions and rerqmmendations cannoT be used vrithout exprtsed wriiten consent 6y botfi Ashpau p& Sculcq CPAS, PLC and Front Range Consu�ting Inc 05 2,�3 ASHPAUGH & SCULCO CPAs. PLC Cr.nied P:�bl;: Ac:c.r..v., .n. �.nulnni[ J. VCR Connections k`ront Range Cansulti�¢g, Ina CamcasYs cominents at 18 do not address the fact that these VCR connections aze alieady iacluded in the un-wued and pie-wued installation iates chazged by the contractors. Comcast claims to have "limited" records on these VCR connections. (See Comments at 18.) Yet VCR connecfions haue been a regulated activity since the 1990's and the Consultants continue to question why Comcast has not caphued the number of' V CR connections done each yeaz on its "field data repoits." Ihe mere fact that Comcast is silent onthe potendal for double iecoveiy — once in the contcactoc installation costs and again vza a sepazate charge -- undeiscores the need to eliminaCe these chazges until it can be ensured tkat no double recovety occuis. Ihe Consuttants do agree that VCR oonnections can be charged — if' it can be shown that (a) it takes addirionat time to hook up a VCR — time tl�at is not ieflected in the inifial installation; and (b) if it can be shown tbat the estimated time foi those VCR installs reflect only the time to connect onty to a television, as opposed the tune to connect the cable to the average subscriber's equip�sent Neithei showing has been made. Fhe Consultants do iecognize that the potenrial douhle xecoveiy might not occiu in a VCR connection — sepazate t�ip and therefine will modif'y theiz xecommendation to include a"VCR— sepatate trip" c�azge with an MPR of' $13.78 ( 4577 ho�us times the $30.10 HSC). Ihe Consuttants request that the pazticipating LFAs reject ComcasYs position and adopt the revised recommendation desczibed above. K. DVR Equipment Comcast misconstcues the Consultants' Pina1 Repoxt and findings. {See Final Repoxt at 32.} Comcast claims at page 19 that the "Repoit eics in assenvng iegulatosy authoiity oves ComcasYs DVR secvice simply becanse the setvice happened to be inadveitenfly identified on cesfzin iate cazds ." Ihis is not the case. Ihe Consultants point out, and Comcast does not refute, that "DVIt seYVice" is not a setvice but is equipment — equipment that is used to receive and record tbe Basic Seivice I'iei along with other piogcammiug. (See Final Report at 32 ) Ihe FCC's iules cteaziy indicate that such equipment, because it is used ta receive basic sezvioe, is regulated and should be incTuded in fhe Foim I205 Comcast has failed to include the equipment in the Filing and should be precluded from charging a rate diffezent thaa an addtessable convester rate until such tune as it files a Fotm 12t35 supporting a diffesent amount I#' Comcast can show that it is pioviding a seivice independes�t of'the equipment used, then if may be able to also establish a iaie for service (it obviously cannot combine a xate foi sexvice with a rate for regulated equipment) Ihe Consul#ants request that the pasticipating LFAs zeject Comcast's position and adopt the adjustments in the Report.. Page 17 of'2b Februasy 2Qd5 33 Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting, Inc A!( nghcs resenred Report anatyses, condusinas and recommendatiom cannot be uaed wit(wut expressed written consent by both Ashpaugh & Sculco, CPAS, YLC and Front Range Consuiting 7nc d5 a�l'� ASHPAUGH & SCULCQ CPAs, PLC Ce:viiec Pv>ii� Acc�vvan*s cci Cc.s�l:arts L. I;nreturned Eqnipment Chai•ge Front Range ConsulEing, Inc. Based on recent actian by the F CC, the Consulrants zecommend the pazticipating LFAs do not sef a chaige oi requue Comcast to support such a chazge at this time as pazt of'this Fotm 1205. Based on the FCC decision, communities may wish to considet individually whether they have autho2ity undei state law to regulate the chazges at issue. It may aFso be wise to be cleaz in any Ordex that ComcasYs utueturned equipment chatges are not being adopted or endorsed. 1 STATISTICAL ACCURACY OF COMCAST'S SA.MPLING Ihe Consultants appieciate Comcast's fiu ther explanation regazding the sampling concexns (See Comments at 20) Howeve�, tke parricipating LFAs should also note that the sampling conceins discvssed in the Final Report weie not limited to the single point addressed by Comcast Ihe Consultants continue to support the recommendadons in Final Report. �. COMCAST'S COOPERATION ANi} RESPONSIVENESS A.. Generally In the Fina1 Report, Consultants explained that theu review had been hampered by ComcasPs failure ta xespond promptiy and completeIy to data iequests iegazding the Foim 1205.. In response, Comcast vaciously a2gues that it did reasonably coopeiate with the Consuttauts and that the Consnitants requests for infoxmation were iuueasonable, os unduly burdensome. In fact, given the scope of'this filing, and the methodology nsed by Comcast, the Consultants were consistent cuith the saope of theu requests submitted as pazt of'the FoFm 1205 xeview piocess.. Comcast seems to suggest, for example, that the numbec of questions asked -- `4nore than a thousand RFI questions -- was ea'isaoxdinazy. ComcasYs filing was based on data collected from 20 sample systems. T'he same data request was submitted for each o#'the 20 sample systems Ovex 960 of the requests were thus duplicate questions r'egazding each of the sample systems (See Comments at i.).. Faz from being a burden, by having sepazate, albeit duplicate requests for each system, ihe Consultants and Comcast could more easily keep the data segegated foi eaoh of the twenty sample systems.. Comcast's refeience to providing "more than three feef of'matetial to the Consultants" is misleading. (See Comments at 1.) Comcase coIlected infoimation from its sampie systems in order to develop its own Foim 1205. Just copies of'the sample system matexial Comcast callected for its own pucposes amounted to about three feet of' paper As Comcast's answei suggests, Comcast gave Consultants the data it wanted them to accept, but it was not willing to 20 Charter Communications Enteitainment � L.C.C, DA OS-392, ieleased E ebcu�yl4, 2005 Page 18 of'26 Febivary 2005 � Ashpaugh & 5culw, CPAS, PI,C and Froni Range Consalbng, Inc Al! riohts reserved Report analyses, conelusions and recommendaTions caanot be used without expressed written consent by 6ofh Ashpaugix & Scutco, CPAS.. PLC and Front Range Consultiug, inc d5-� 4 3 ' �, ASHPAUGH & SCULCO, C?As. PLC Cc^:i5e' P�SFC k::car.an:s m� Cc�:ol:mu Front Range Cattsulting, Inc. provide a significant amount of additional infoxmation to petmit Consultants to fully piobe the company's filina. Ilus was pazticulaziy trouhSiug because infozmation that was provided indicated tlzat there weie inconsis�tencies and ezrois in the Filing that could only be fully addtessed tFuough review of infozmafion that was neve� provided. Among othez things, the Consultants soaght informafion that would allow them to ideniify and cozxect unbundling pioblems. 3t sought histoiioai filings for aSl the Comcast systems covered by the filing, and when that was refused, sought histoiical infoimation for tfie sample systems. Comcast respoaded by filing a perition to quash the requests at the FCC. While Comcast clanns in footnote 1 of'its Comments that its "FCC filing was well-iutentioned" and that it "believed that it would be helpful to both pazties if the FCC would quickly claxxify this n2atter," the fact remains that the FCC did not authoiize the campany to withhold data. Ihe company, howevez, has continued to refuse to provide the infoxmation that was iequested, so the Consultants were iequired To sesolve unbundling and otheY issues based on the best infoimarion available to 0 them. Ihe requests submitted by the Consultants' in ieviewing the Filing weie not unusual or uzueasonable. In fact, ComcasYs piedecessor, AI&I Broadband, typically piovided sevexal boxes of suppoxting data with a consultanYs fust data xequest — that being the detailed support used foi the sampTe systems. Comcast has zesponded to these same xequests in piior yeazs when the Fotm 12Q5 filings were at a Iocal or system level.. {See Supplemental Repoxt Attachment 2— Pages 11 and 14 of ComcasYs Mazch 10, 2004 response to #32 and Page 9 of'Comcast's Apiil 16, 2004 response to #I6 in the City of' Dehoit Cab1e Communications Cominissian review of the 2004 filed FCC Foxm 12Q5.} B. Invoices In this case, Comcast has been pazticulazly reIuctant to ptoduce invoices to support its cast claims. Comcast states in its comments that review of Form 1205 cost data and suppoxting documents should be limited to "exisring financial records," a texm which is not defined or Z � The Consultants' F inal Repoct does not mischazactetize Comcast's level of'responsiveness as Comcast claims in its Comments at 6. (See Final Report at 8.) In fact, the Final Report merety summazizes the iesponses. Comcast did respond (in some fashion) eo "hundreds of questions," but the company did not provide at1 ofthe infoimation requested and 'm nvmeious instances only provided naziative responses when specific documentarion was requested (and vice veisa} or provided a partia3 answer at best (See F inal R.eport at 13, 16, and 22..) ZZ Ihe Consuliants made it clear m an August 4 request that 3f Comcas[ did not provide the zequested infotmatioa, the Consultants review wovld iely on the "6est avaiiable infotmation " Iu its August 18 response, Comcast again zefused to provide the requesfed infoimation. The Consultants unbundtiag recommendarions therefore had to be based on histoticat information and data that was availab2e, and Comcast's etiticisms must be weighed ia that lie�t. Page 19 0�'26 Febtvary 2Q�5 � Ashpau� & Sculrq, CPAs, PLC �d Front Range Co�suliing Iac All riglx4 reserved Reyort analyses, wndusions and mcommendatio�s cannot be used without ecp�ared wntten consent by bofh Ashpaug6 & Sculco, CPAS, PLC artd Fratrt Ra¢ge Consulting Inc t� ay 3 ASHPAUGH & SCULCO, CPAs, PLC Certi9ee aubii: A:.car,aa�s ene Ceu�l:ar.ts Front Range Consulting, Inc. explained, and `Yelevant exceipts i'rom the geneial ledgei:" (See Comments at 2 anc13_) What Comcast provided, by and Iarge, was "general Iedget" data. Ihe Consultants were concerned that "general tedger' infounation may aot identify costs that would be inappropiiafe for the Foim i205 filing. In order to address tius concern, the Gonsultants asked foi Comcast to produce actual invoices suppozting the costs olaimed by Comcast in the F osm 1205 filing In previous filings made by Comcast, fot �ample, such an invoice zeview identified that Comcast had inciuded cable modem costs incouectly in certain general ledgei accounts and included in those accounts in prior F oim 1205s and had allocated piopexty tases to conveiteis when said pxopexty taYes were not applicable to conveiters {See attached affidavit of Gazth T. Ashpaugh.) Comcast claimed in response to specific requests of the Consuitants� concexning the Piiing that cable modem oosts were not included in the Foxm 1205, although exauniiiation of' invoices showed that cable modem costs wese included. Such expeTience shocvs that a reviewer cannot simply take Comcast's genesal statements fox gzanted without examin;ng theu support Ihe Consulfants also were concemed that examivation of'geneial ledgei data would not, for example, piovide the necessazy split of'contxactor laboi beiween regulaTed (with{n 12 inches of' the home) and cuuegutated activity, such as installation o#'telephone sexvice and or cable modem service.. Noi would it identify "combo" installations — an installation involving a combination of' activities, some that ue regulated and some that aze not ragulated. Examination of geneial ledger and "existing financial records," whatever those may be, will nof provide the necessazy ass�uance foi costs clairued in the 1205 that xeview of invoices wi11� Examinatzon and iecalculation of'invoices is not new to this regulatory gcocess. Tt has been a key component of'the LFA review since 1993.. Futthesmore, Camcast did not use any infoimation from its "ea�isting financial records" to support its contract labox costs.. (See Comcast letter dated June 21, 2Q04, response 9.) The prepazexs of'the Filing "ereated" these costs by using un-audi4ed "fieId data reports" and "cost sheets" which may ar may not have any coF�elation to actual costs paid by Comcast to these conhactois Comcast states: Requests ta rehieve cont�actor invoices aze exceptionaIly rare� In ane instance when it did occcu, Mr Iieich, who fihen led the regulatosy accaunting gioup responsible foi iate filings at AI&I Broadband, instructed his staff'not to piovide invoices to xegulatoxy consultants, because he regaxded those requests as oveiIy buxdensome.. {Comments at 5} 23 See Comcast lettei dated June 21, 2004, iesponse to question l 1. Z ` It shovld be noted that the Consuitants' Report made specific adjustment to eliminate cable modem cosfs from conveiter costs aud that Comcast has aot disputed that adjushnent in its Comments Page 2Q of 26 Febivazy 2fl45 � Ashpwgh & Sculco, CPAs, PLC and Front Range Consuttu�g, Ir,c AII ngLfs reserved Report analyses, conclusions and cecommendalions cannot be used without eapressed writtea consent by boih Ashpaugh & SeWco CPAs, PI,C ar,d Front Raage Consulting, Inc �5 -� 43 . �, f ASHPAUGH & SCULCO. CPAs. PLC cnai .ca e�>r< Acoa: cams zcG cca<ui;aci. Fronf Rauge Consulting, Inc. Comcast faiis to give any specific reference oi supp� ort for #hat statement or the snecific `4eques�' to which Comcast aitributes its iemazks. 5 But in tlie end it does not matter what NIz . Ireich's personal views may haue been. As a factual matter, AI&I Bioadband actuaIly did pioduce invoices For- example, in the City of'I2ichardsan appeal to the FCC, the company provided the F CC with copies of' atl af the information given to the city, which compiised several lazge boxes of material_ In the next yeaz, the AT&I Broadband nat onty allowed the regula#oty consuitant access to all o#'its books and aecotds, but the company aIso ageed to reunburse the xegulatoxy consuttant fox lus costs associated with traveling to the coipcnate headqvattersin Denvex. Indeed, Consultants have been xeviewing contcacYoi invoices assooiated with Faxm 1205 filings of Comcast since 1996. In the Consultants' review of'ComcasYs 2004 Detroit 1205 filing, the Consul#ants requested aud were provided contczctoz invoices and convextei zepair invoices for the entite yeaz of'2003 — fhe same yeaz the Filing covesed. Comcast has also provided copies of' contractox invoices foz its Montgomeiy County, MD and.Ailington County, VA 1205 filings to the Consuitants since 2Q00 — the yeaz Comcast took ovei the system. Io be sure, Comcast did make some invoices available, and where invoices weie made available, Consuitants were able to identiiy costs that were not propeily includable in the Fozm 1205, such as cable modem costs.. However, tbe Consultanes were not piovided and were unable to review any invoices for: Bonuses, Commissions, Pxopetty Iases, Insivance and Contcact Labor, These five categoxies encompass ovei 20 percent of the Schedule B costs shown on Comcast's Foim 1205 filing (See Foim 1205 filing, FCC Focm 1205 Capita! AssetlGeneral Ledger Audit tepart 20Q3, page 3.) Comcast, in response to the sample system data requests for invoices, zesponded: Comcast will provide the iequested documents after we have iet�ieved the documents $om otu data stoiage systems aud copied them for travsmittal. In the meanrime, please see the attached E�ibit 1205 42_082404, the Genexal Ledgez for account 4b110, Contract Labor — Installs.. Please nofe that the Conkact Labor — Instail Genesal Ledger balance is $773,086..32 or $386,156 32 more than the invoice total you aze requesting that we tie out to of' $386,930. Also please refer to our Iune 21, 2004 detailed xesponse to yoiu request fot additional information question number 9. As noted above, we aze in the piocess of'ot�taiuing the iavoices for additional support. (For example, see Comcast response to tfie Wildwood NJ sample system question 42..) Ihe invoices wete never pxovided- (See Finat Report at 16 J. u Comcast hss attached an affidavit to its CommenTS supposedly suppozting the accutacy of that statement, although it does noY appeaz� to be based on petsonai 1mowledge Mr Ireich can neithei veiify noz deny the accutacy of the statement because of'his ageement not to disciose non-public infotmadon. Page 21 of' 26 F ebxuaty 2005 � Ashpa�gh & Scutco, C4AS, PIC and Fxont Range Consultlng Ine AII rights reserved Report anelyses, conclusioas and rxommendationc cannoi be used vrithout �pressed written consent by both 4shpaugh & Sculco, CPAs PIL and Front Range Consu(ting, Inc os-a�3 ASHPAUGH & SCU! CO. CPAs,- PLC Ce-n ied P:>li: Acccanxanss zni Con;uhzr.ss Front Range Cousulfing, Inc. Ihe ConsuItants specificaily and repeaYedty asked for cogies of'the invaices supporting conuact labrn and the sample system costs. (See Final 12.eport at 16.) It is not unusual £or Comcast to provide in excess of"2,OQ0 pagas foi a local Form 1205 review. Tn the case of tl�is Filing, it is a composite of'20 regiona2 reviews spanning hundceds of LFAs; in that context an 85,000 page production would not be surpiising 26 __ _ Even whete invoices weze produced, the campany produced them in a mannei that made ieview difficult, via an elecironic invoice ietrieval system that was discussed in the Final Repozt Comcasf cIai�zs that the invoice tetsieval system it provided was adequate fox the Consultants' review and made the xequested invoices available, (Comments at 3) The ConsuItants disagzee. Fust, the access to the invoice system was over an Intexnet connection Comcast could have easily made that Intemet access available to the Consultants xemotely and not requued kips to the Leesbucg and Denvex offices While the Consultants made it cleaz to Comcast with the initial request that they wouid travel ta Comeast's of&ces if necessaay to view the invoices, ttie Consultants waie also clear that copies were ta be made available Comcast does aot dispute the "cumbexsome" process, but appears to be stating that this was as good as it could do. (S`ee Comanents at 3.) Ihe Consultants disagree. As noted above, in othes cases, (Detsoit is an example) the company has produced papez invoices.. Consultants have no reason to believe thaf paper invoices aze not available fox, othes Comcast systems. Nonetheless, paper invoices — which are relatively easy to seview — weie not ptovided here , The Consuttants we.ie pi•epazed to go to each sample system location and review the invoices specific to the amounts claimed in the data provided. Comcast nevei made available this an option.. Comcast claims it pxovided "compsehensive lists of each and evezy invoice" that "shoutd have facilitated a tazgeted review." (See Comme�ts at 4.) Attached as Supplemental Report AppendiY A aze the fust 6 pa�es for the Ann Atbaz system &om this "comprehensive list." Each entry spans 6 pages. For the Ann Acboi system, the fotallength of the list is 438 pages. In all, it is S,S50 pages for the 20 sample systems - hazdly a tool for "facilitating" the Consultanfs' review. Comcast ttever indica#ed such a list (1) would not be available onsite oi (2) that the list wouid be iequised £ot the review of the invoices. (See emaii from Comcast attached as Supplemental Report Agpendiz� E.} Notwithstanding this misoommunication, the Coasuitauts were able to get a partial copy of ihese invoice spreadsheets in I,eesburg that aIlowed them to 26 Comcast on page 3 of 4ts Comments suggests in footnote 3 that the Fotm 1205 shoaid take 20 hours ta complete Ihe Consultants believe khat esEimate was developed many yeats ago and has not been revised by the FCC to encompass the use of the F CC's Bquipment Aveiaging methodology. It is hazd to nnagine even Comcast believes it should be able Yo compiete a Fo�cm 1205, a¢d in adclition raspond to daYa zequests foi ail of' its systems nationwide in the 20 hows estimated fox completing the form for a single system. This is pu2iciilarly so in light of the unbundling issues raised by the 51ing, and the Commission's Tualatin decision Page 22 af'26 Felnuazy 2405 � Ashpaueh & Sculco, CPAs, PLC and Fxam Range Consuiring, Spc All right5 reserved Repo�t a¢alysu, conclusions and recommendations cannot be used vriihout expzessed wacten cpnsentby bo2h Ashpaugh & Sculco, CPAS., PI.0 and Front Range Consul[ing, Inc o5-a�3 . � ,� ASHAAUG}i & SCULCO, CPAs. PLC Ce-:�5d PoDli: q;.:can:aats and G^ae Front Range Consulfing, Inc. begin tite� review. (See Comments at 4.} It was too Iazge for the Leesburg office #o psint in total, even fot a single sample sample system. Moraovei, the elecunnic retrieval system did not allow the ConsuItants to access all invaices requested foi the sample systems. (See Final Repoxt at 13.) ComcasYs Comments on page 4 that "the truth is the Consultants haue had the oprion of' accessing that infoimation and chose not to exeroise it" is incouect. Comcast claims that it was able to access all ofthe invoices.. Attached, as Supplemental Repoxt Appendix B, is a copy of'the elechonic mail message sent to Comcast upon seturn from the Leesbutg ieview.. Comcast nevei replied to that message and nevex informed the Consultants that Yhe infoxmation foi the eight sample systems was available. Comeast also nevei disputed the Consultants' claims other than to state that Comcast had previously trzed to access the infoxmation fiom its office and had been able to do so (See �ina1 Repott at 13 ) Ihe local Comcasf personnel, while veiy cozdial, wefe not familiaz w3th the so$waze used in accessing the data, Comcast had no one in Leesbutg to assist with the review. AS f01' " (w)hen Comcast staff'rahixned N� Ashpaugh's call .. ..," the cail to Comcast was placed while the Consultants we�e at the Leesbvxg offrce aud ihe Gonsultants had to 1ea.ve a message fot Comcast. Comcast did not xehun the call until sometitne later a$er the Consultants had le$ the Leesbiug office. {S'ee Comments at 4.) &y that time theie was no sense in reriuning fa the LeesbLUg o£fice until the pxoblem accessin; the data fox the eight additional systems was xesolved. As noted above, Comcast nevez notified the Consultants Tt�at the problem was resolved.. )n any event, the Z-day xeview of'documents in Leesbutg using the data access progam demansY�ated convincingly that Comcast's piocess did not wo2k well and was not conducive to the Focm 12�5 ieview and that the Consuttants would requue copies to be piovided. (See Final Repoxt at 13 } Comcast was specifically #old this wheu Comcast reriuned the Consultants' cali z � C. Th� Process As stated 'm the Final Repoi2 at 8 and as explained above, Comcast continually chose to withhold data and pxovided wzong oi misleading responses In Apiil 2004, the Cansultants discussed with Comcast iepresentarives that the Consultants would be doing the review of'the Foim 1205 filing fox a group ofLF'As acxoss the countrp and indicated that this should siutpIify things fot Comcast — dealing with one xeview frn a lazge numbei of LFAs_ (See Final Report at 7.J Comcast's coxuments aze a peifect e�cample oftlus simplifccation— one set of'comments addiessing the regulatory ieview of' oves 9Q LFAs.. Z � Comcast's Comments a# 4 discusses tkat "Mt . Ireich nevei visited the Coloxada offace " Ihe Consultants cfiose ta have Mr_ Ashpangh, who is a cectified public accountaaY, handle this task since he fias a backgound advaniageous to this type ofreview and woik Page 23 of'26 Februacy 2�45 � Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting, Inc All rights �eserved Report az�aiyses, conclusions and recommenda[ions cannot be vsed without expressed written consenf by both �shpaugh & Sculco, CPAs PLC aud Froai Itange Consulting inc 65- �,�k 3 ASHPAUG+1 R SCtiLCO, CPAs_ PlC G_r.ii�ei PuSlic ?c:cer:als sr? Ccns�.l::rtts Front Range Consulting, Ine. Comcast ieferences page 12 of the Fiaal Report on page 5 of its Comments concezning the phrase "paper wai." Comcast takes the stafement out of contea�t. Ihe discussion on page 12 of' the Final Report deals with the fact that "{t)he ConsuItants expressed a desire to meet and discuss the inirial RFI requests witfi Comcast, so that the company could provide infoimation responsiva to the requests and address any confusion oz discrepancies befoxe assembling #he necessazy infoimation. Comcast refused to fiave this meeting and instead prepared its iesponses without Ehe benefit of'such info�mal discussians " That discussion has nothing to do with ComcasYs staxement "the Consultants refused to rely on general ledge� repmts and demanded instead that Comcast produce actual vendor invoices.°' (See Comments at 5.) Tn fact, the initial request asked for contsactoi invoices at #3 —"Please pz ovide copies of all contractor invoices foz the yeaz ended Decembei 31, 2003 by spstem compxising the total of' $194,080,983 incIuded in the National 1205 and copies of any analyses of'contzact laboi prepaxed b,y Comcast," (Initial Request fot Infoimation dated May 21, 2004 } Comcast claims in footnote 5 that "(t)he ConsuItants aze similazly disingenuous �.." when they asserted thai the company had insisted, without reason that data iequests be mailed tather than emailed.. Accoxdiag to Comcast, this xequirement was esEablished only because fhe electronic requests weie "locking up" the D�ectoT of'Rate Regulation's mailbox.. Attached as SupplemenYal Rspoit Appendis C is a copy o#'the September 9, 2004 2ettex from Comcast. Nowhere does it provide any eaplanation for the demand to "submit additionai requests via first ctass mail fo my attention at: .. .." In facf, Comcast's initial.Tune 21, 2664 �esponse contained sunilaz language of "submit additional iequests to my attention at: ... " Ihe Septembei 9, 2004 response was the first time that "via fust class mail" was inseited into that line af'the covex letter to any zesponse. Comcast could just as easily flave iequesied faxing oi ovemight delivezy of'the requests, but instead it onlqpxovided regulax iJ S. mail foE receipt of ieqnests. Comcast makes at pages 5 and 6 of its Comments the ex�aordinazy claim that tl�e list of. pazticipating LFAs pi•ovided by the Consultants misxepiesented the pazticipants and that the Consultants withhel@ information regazding pazricipants &�om Comcast Cvmcast iequested a list of'participants on 3une 18, 2D04 and was provided the list by facsimile hansfec on.Tune 19, 2004.. Ihat was the fiist and only time Comcast requested such a list. Each pazticipant listed on Tune 19, 2004 response and in all subsequent communications had a signed agcee�nent with the Consultants foi pafticipation Subsequenfl,y, b,y lettex of.July23, 2005, the Viliage of Noxthbiook, Dlinois, which was completing its franciuse renewal with Comcast, withdxew its pai�icipation fo� no stated reason. A copy of the withdYawal letter is attached as Supplemenfal Report Appendix D.. WYule theze have been addifions to the p��icipant goup, that is the only witkdc awal Comcast makes the unsupported statement that "at least one LF A who the Consultants claimed to represent told Comcast otheswise" but does not name the LFA. {See Comments at 6) Each of the pazticipating LFAs has paid for this report aud have engaged legal counsel to suppoit their efforts in getting an extension of'the time to aliow Comcast mo�e time to Page 24 of 26 Febivazy 2005 � Ashpaugh & Sculco, CPAs, PLC and from Range Consul[ing, Snc All+ights reserved Aepmt analy5es, waclusions and �ecommendarions ca�ot be used without expressed written eonsent by both Ashpaugh & Swlco CPAS, PLC and Fro�t Range Consuiting. Inc �-��3 �� _ � ASHPAUGH F SCUlCO, CPAs, PLC Cctinei Ypilic Fc.qar:aa:s ane Ccnx:ItzMs Frout Range Coasuiting, Inc. prepare its Comments. Tn any evem, confixsion on ComcasYs part about the pazticipants does not excuse ComcasYs failure to piovide the iequesYed infoxmation. As for addifions to the numbez af pazficipating LFAs after the 7une 19, 2004 Ietter, the Consultants do not understand ComcasYs concein. (See Comments at 5 and 6.) Comcast filed the same Fozm 1205 with all but a few LFAs across the conntry. S2uely, Comcast is not claiming that it wouid have responded differend,y to differenf LFAs' identical questians concerning the Filing. Comcast, in fhe initial discussions between the ConsuItants and Comcast representatives, agreed that each pazticipating LFA would not have to send individual information Iequests, Comcast ageed that the Consultants weie to send such requests directly to Mr. Fitting. {See Finai Repoit at 7.) ComcasPs tettei of' June 18, 2004 stated: Io date, we have not received tIie afoiementioned list of local frznchise authoiities It has geneially been yoiu piactice to have a fxanclusi�g authocity provide us with a letter z'equesting the piovision of'this infoimation. Before we respond to youc reqaest, we need same confumation that each of your client $anchise authoiities has engaged your seivices. Upon zeceipt ofthis confumalion, we will respond to your iequest accordingly except as noted below In order to expedite yous notification to us of this aecessary infoimation, I request that you pxovide us with a list of franchising authozifies that have retaiued you services. Please show a"cc" to each o#'them on the tzansmittal lettex pxnviding us this infocmation which wiil seive as a confismation of'your representation for putposes of the review. Ihe Consultants responded by Iettei of .Tune 19, 2004, sent to Crnncast by facsimlie that included the following: I azn in seceipt of your letter fa;ied to me and dated June 18, 2004 xequesting the list of'pazficipants in o�u review of Comcast's 20Q4 FCC Foxm 12Q5. Enclosed is the cucrent pazticipant fist who aze each being copied on this letter. Please note that we wili peiiodicaliy �pdate tfiis list as additional pazticipazrts join dus project. We have contracts far pacticipation pending in a number of commwufies. In subsequent coixespondence and filings, the list ofpazlicipating LFAs was also disclosed. Eveiy RFI iequest tl�ough Augast 27, 2004 included a"cc" to each paFtieipating L�A and on each af the emails sent to Comcast, each pazticipating LFA was included with theu individual emai] address A copy of the email t�ansmittal foi the August 27, 2004 RFI is attached as Supplementai Repozt Appendix F_ Ihe facts do not suppoxt ComcasPs Comments at 6. Comcast appeazs to be claiming thaY its Comments ox its iesponses to the RFIs would have been different had it lmown an additional LFA was paztieipating. {See Comments at 6) Every pazticipating LFA has provided Comcast nofice of its pincess, a copy of'the Fina1 Report, a deadline for subznitting comments, its willingness to use the Report and to issue an oidei_ Page 25 of'26 Febivazy 2005 � Pshpauph & Sculco, CPAs, PLC and Front Range Consui[ing, Inc All righis reSe�ved Report anatyses, conclusions and recommendauons cannot be used wifhont ecprossed written consent by both Asfipaugh c$ Scu�co, GPAs PLC and Front Rauge Consulting, Inc 05-"��83 ASHPAUGN � SCUlCO CPAs, PLC Ccai:�eL P•mLC qcmunxans en; Cc�<ill;cr;s r Front Range Consulting, Inc. Comcast has neve� requested the Consultants or the paiticigating LFAs to provide "notification" othez tban the aotification af "cd'ing eacfi pazficipaat requested on 7une 18, 2004. The Consultants were cleaz in the response to the June 18, 2004 request that othei LFAs may join the process and Comcast neveL requested notificatioa of' any new additions. Never the 1ess, the Consultants did continue to identify the cuizent list of'patticipating LFAs on each email RFI sent to Comcast. VII. CONCLUSTON The Consu�tants tequest that the pazticipating LFAs teject Comcast's posifion and adopt the adjustrnents indicated in tl�is Supplemental Report.. Page 26 of 26 Febtuazy 2005 Cd Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting, Inc Alt rights reserved Report analyses, conclus�ons and recomniendations cannot 6e ased w�ffiouF cYptessed writtcn caasent by both Ashpaugh & Scutco, CPPs, FL.0 and Fro¢t Razye Consu7ting, inc OS-��13 Comcast 2004 T� CC From 1205 List of Partieipating Lncal Franchi�e Authorities City ofAlbuquerque, New i�fe�co Arfington County, Vu�nia, Sutns��llefEagan ielecommunications Co m��ion (which is compiised of the Cities of Bwnsville and Eagan, Minnesota) City of Coon Rapids, Minnesota Distcict of Columbia Village of'Downers Crrove, Illinais Greater Metro Telecommunications Consartium {which is compiised of'Adams Couniq, Acapahoe County, Aivada, Aurora, $iighton, Broomfie]d, CastSe Rock, Centennial, Cheiiy Hills Village, Columbine Valley, Commerce City, DenveL, Douglas County, Edgewater, Englewood, biie, FedeTal Heights, Glendale, Gieenwood Village, Tef�e�son Counry, Lafayette, Lakewood, Littleton, Lone Iree, Nocthglenn, Pazker, SheTidan, Ihoxnton, Westminster, and Wheat Ridge, Coloiado) City of'L,os Angeies, Califoinia City of Mentor, Ohio Metropolitan t�ea Communications Commission, Ihe (whieh is compiised of the Cities of' Banks, Beaverfon, Comelius, Durham, Forest Giove, Gaston, Hillsbotn, King City, Lake Oswego, North Plains, Itivera ove, Iigard and Tualatin and Washington County, Oregon) Moaztgomeiy Couniy, Mazyland Cityof'Mucfreesboro, Iennessee Nozth Metro Communications Commission (which is compiised of the Cities ofBlaine, Centeiville, CircIe Pines, Ham Lake, Le�nb on, Lino E,akes, and Spiing Lake PaTk, Minnesota) North Subuzban Communications Commission (which is compiised of'the Cities of A.iden Hills, Falcon Heights, LaudeYdale, Littie Canada, Mounds View, New Biighton, Nar2h Oaks, Roseville, St. Anthony and Shoxeview, MinnesoYa) Ciry of' St. Paul, Miunesota Quad Cities Ielecommunications Commission (wliich is comprised of'the Cities of'Andover, Anoka, Champlin and Raansey, Miuuesota) Ramsey/Wasbington Counties Subtuban Cable Commission (wluch is comprised of'the Ciries of' Lake Elmo, Maplewood, Noxth St.. Paul, Buchwood Village, Dellwood, Mahtomedi, Vaduais Hei�ts, White Bear Lake, Wille�nie, Cnarn Township, Wlrite Beaz Iownship an8 Oakdale Nlinnesota) City of'5t. Paul, Minnesota City of' Santa Claza, Califocnia City of'Sko2de, Illinois South W2.,flin�ton County ielecommunicatioas Commission (wluch is compxised of'the Cities o# Cottage Cnove, Newport, St. Paul Pazk and Woodbuzy and theTownslup of Giey Cloud, Mimiesota) Cit,y of' Wheaton, Rlinois b5-��3 SUPPI,�MENTAL REPORT APPENDIX A �5 -�`� 3 coci 'aic�facv�i:r�t�rn::r:orciaioic�scic�iwico�con�tit� c:io5�d�dn: r. �'c CO cfl W CGC9t0 cOt4tV iV N Ntn o]�1`-i�7�I�NNN V b] Nh CO1� O�O W CT W CSCO000 e00�q� �� tD(O V SC V Qf O�OJ ��q �Y � QfOKJ GNN N0�(V cV NNNG'SCJt7tn� W q W�¢ju� [D�R)c'i t1) W 3fJ V3[l�tnuJ � t(j oJ � p N� IDIf:00Q�0000 �NGV c�tCV �C V C'Q'V' �'�tQ W�YJffiifJYJtS) CD [Ot�l� p V.p (vM Nt'JMCJ f*1 co(7t�o'jC�(7f� mc*�NN NCV NNNNNNNNN NN N N(+i(V (u(y a�6>POT6)6i8i mOibiOiP.QJB��oiOi� W�4iOi 6i O)OiA mG30] 63m 6j Qj 6f QpjOi O) (`)ZNNNN NN N<� NNNNNNN NNNNN NNNNNNNNN�N N NN N NN �O c7mN Vl Gl I� W� N(0�3 Nm NN7 Nc0�6N o�� e90 c4 Q I�L�tbd�t0 Zo�i.�a�coomvmr rnor�oowr cfl�cvva�t�a<nc�•socornvowrn ��D I�on Q�� V t90 O o o'JtON NIL �576'>l`�� V aC�D� t��nr�rW m p�j � V'vh f�� rn ��NNN NN NCVNNNNN¢�NNNNNNIV NNNNNNNNNNNN C 2=� m � ('J t7 L') M(7 M c7 CJ M M M(+J !'J C') t7 M M M M M t7 C9 M Ci f0 M t7 M K] M t+I CR M M[7 M M C� �y0 � Q �� N O O O O O� N N N N�� t O N O� N N p O� N O� O O� O O e� p M M � 4 uJ 6) OJ 6> 61 W W O1 W P � f� 7 r e- N N N CV c�') o] V 7 a?� lfi �[4 C�O � 0 0 O � 0 0 C J O O 0 0 0 0 c- c�- � e 0 0 � 0 0 0 0 0 0 0 0 0 D O 0 0 p 0 0 p O � M Mc9 t']t'ic7MMU'3M M f'SM t7MMMnIMCOMCOMC9 cnmay thFjm MMM c� M c� c'J M C� O O O O O O O O O U O O O O O O G O p p O O O O O O O O O O O O O D p O O O � t �r uJ0001D f7ei�t7M.�1� 1� P�'Cs r ep4�901 �� 6� W tiLl� �- `r N �� .-�-r-`.-neN`�N,N` N N NNO00000 e-.-�p U �1N �q f0 NO00�0� O �O NNNC��y'<Yi} ��y�� y{�y�� n� Q O Od O � c-O�c- �-rr�rp OOOO oOO pOOOOOOQ OOOOQ o Eoqoo�4R4°O44400004Q �"'�n Mc7coc7M(��l c 00000 0q 00 000000c� q4 Q '� cQ wa�¢v��u Q iv�e } . - i��e�i��waaa�¢.�aaaaaa¢¢¢¢c»�� aZ�y�'�O �J�nOQOQOOOO[]4¢¢4¢4¢¢¢��ggg�-,-,��q � co w 0 �[ l �� i 1� �� W a LCfLI1:2aK�lYfL'fY a�aaaaaaaaa rt��ff�� 00000a0000 UUUUUC?UUUU m Q- d Z Z Z 2 Z Z Z Z Z Z __-------�-- O�QQQOO�7]O�Ofl[�pIIi]LlQ❑ E OOD�rmu.rrn�nenrnu�env� ��wwwwwwwwu�u.�iuu.iu�3.uiueuu� z rt��zzzzzzzzzz �..��,r�,.,��.�F�r�,rrrE-F-t-�--i.- C�C9C70d000000O0 d a ¢¢d Q¢ ¢q QQa o cAinct)t=t-t= l=H t � wu_.rw_�»��»�» o0000000a00000000000 G J..1...iJJJJJJ.J a aaria a aaa aaaaaaa � � �QOOa > o�ov,�n�nu��n�n��n�nm JJJ SQOOOOQOCJOOOOOOOOOOOO 000nooO��a��UVC�c��c��n��UU� zz�zzzzzooaooa000aozzzzazzzzzzzzzzzzzzz a ¢¢�x=u�oa o�c�o � mmmmUUUt70006000DO �pO0000Q000000600Q000 �OdO W W illllJlLtfJ tillll W Ltll1! 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N N N N N N N N N N N N N N N cV N N N N tV C� N N M v � 0 m � Q o5-a�� SUPPLEiYIE1VTAL R'E;PORT APPENDIX B 05 -a� 3 R'azren Eit{mg, i2:�2 A1lI 12/15l2Q{F4, Leesbura 12eview To: WauenFIl#mg Fzom: GaztfiAshpaugh <gashpauQ �a cpas com> Si�b�ct LeesEtueg Review Cc:'Dick Ire�h" �dic�fi�-m� com> $cc: Attzched Wazren: As we discitssed yesterday, tfie proeess you set up fo: reviewing the mvoices did iwt woik very well a� cvas v�y cmnl�ezsome No mstruct�ns oa how to use fhe tivs were pxovsded othei tban Yne y�np7e ema�1 The seazch and c3oc�ems Iocated had aptions ti�at were not eaplained and l�ad to be "found" There sigs�ificant delays wai4a�g Foi the downioads of umfotmatioa I had to speci&cally 2mow wfiat I was IooI�g foz - system and account mm�bea I could not go tbcougli asd see wliat was avaa7able then pemse through what I wanTed to see I had to manusky exttet the infA, wart £or the Seatch mLich ajcvays yook 15 seconds ox mote I could onty see one page at a t�e and had to wait foz it to load eaoh page 17iis then only produCed a list I then i�ad to choose the speciiic mvoice and wait auothei 15 seconds oa mo:e foi the'pdt" docuxnem Agam, oaty the fast paga, I had to manuaIly request 2 to then ptovide "aIl" pages If I wanted a capy, I bad ta then go to ptirrt and waiE anotliei 19 seconds oE more foi the pimt fiu�ction to complcte and free up the computez to move to the next rtem in order to move to d7e next rtem, I t�d to go back to the tist aad stazt agam Ikere seemed tn be an option to choose muffip7e tiocuments, but I c�xld not get if fi wt and I d'uI not 1�ave a� instrucvons It wou}d be impossib3e fot aay auditor to be productive usmg this setup. I was zmable to 2ccess azry data foi Ehe following: E332 W�7dwood, E840 Trenton, A54 Chesapeake Bay, EI{32 New Ery,vJand East, E858141ontgomery Coimfy, E346 Corniect'tcut, E86$ Vme�nd aad B56 P.nn Arboi On the facilities,l4fi Futlei and lu"s sYaff wete excellent hosts When we encocmtexed d� crnnputei psoblem to stazt on Monday, he aad his people were nnmediately on $ Unfoimnately zt did takz a wlule to resolve i would 1�ce to express my thanks to Iv�. Fuller, Clniy, Domm and the othet peopk I met � the I.eeslw[g offiee 0 Gazth I Ashpaugty GPA Asl�paugh & Sctdco, CPAs, PLC 1133 I.oirisiana Avenue, Surte ]06 Wmtez Pax3c, FL 32789 Phone (4i3'� 645-2020 Fas (447} 545-A070 Pi'vtted for Garth Ashpangh <gashpaugh@ascpas.com� 05-��43 SUPPLEMENIAL REPORT APPENDTX C D5 -�u 3 �omcas� �� ,ffi�� c�a, �o,�„z VL4 FACSIlLIILE [Epyestians and Respousce Only) Ai�ip OyEgN2GHr DELiVERY TO ADBRESSEE$ Septem6er 4, 2a04 Mr Gazth T Ashpaugh Ashpaug� & Scuica, CPP,s, PLC I]33 I,ottisiaaa Avenue, SuFte 1pb WiaterPazk, FI. 32789 RE; P'CC Form 1205 far Comrast 1'our Letier FTated August 27, 2A04 Ano Rr6or, bjj Sampje System Deaz Mr. Ashpaugh: Enclosed ate.responses fo the txquas#s fn[ additiona] info.tlnafiou regarding the PCC Fozm i245 submitted by Camca� Cabte Communications. LLC L"Ct3mcast" or "Company°'J to Yhe municipatities who have engaged your servFces The sespanses Fo12o� tha order ofthe quesrions conuined in your iettez perta'"'"a ��e q� Arboz sample s3�siem. Additional support is gmrided where neces4ary a�t wkeFe �,� haye 6ecn ab3e Yo iab-ieva Yhe suppaYnng doet�menfs. tiye are stitl attempfing tq obtaxn addicional supporting dxumen�s. Please tet me know if you iequire any sddiijoital jnfozmation Ylease submit reqyxesis fm additianal infarmatian in writiag via fi�st c1�ss maii to my attenfian aC C+�mcasf Cablc Commtimications, r.�r 15Q0 Markat Stceet-- 32B P]xiIadelptua,pA t9t92 �SfncerelY, ��.�..1� ��,,,�, w�a ��n�n� aisector, Rake Regulation Comcasc Csble Gommvninations, LLC C;e: R rreieh, Frone Aange Consuliing, !nc NL Andetsan P Fei¢6esg a5 -a �k� Su�r�,�n�v�rnt It�raBr Arr�vuix D �s-a�3 VII,LAGE OF o°` `°�. �` 5 - 1225 CE4AR LAI.tE N08Ih'BROOK, liLINOiS 6�062�5ffi 8?7tLi2-SffSU FAX &i7f272-9760 ' BOsll2D OF IRUSIEES - ar.�r� ' Roberlt.Jaeger RC.Buelu'al[I Sxndrn E Fvm Kent L Dnnewafd SamcsA Karagianis 3rian F h4eeY PRESIDEN7 — PeIIage hlmiaga +`dazkW IAmisch EonaN I.ouis S571age C7erk lohn M Nov�.son Jaiy 23, 2004 Gaxth I Ashpaugh, CPA Ptesiden[ Ashpaugh & Sculco, CPA, pI C 1133 Louisiana Ave Suite 106 Winfei Paik, FL 32789 Deai bf� Ashpae�gh, Pe: oui telephone convecsation today, tEtis lettec confums ihat tfie VIllage of Noitfibmok, Illinois, will no longeF bepazacipating in the anaiyses azd repoat regardiag the 2004 FCC Fornc 12Q5 Sled by Comcazt Cab3e PLease remove "Village of NaFthb�ook" fr•om the list fox FCC Foxm 1205 Review Pazriczpants Shank yon Sinceaety, � /`,�� _ O � CheTyI Fayne �oinumnicarions ivIana.ge� Cc: RicHard Nafirstadt, Assistant Village Managei www northbrook II us amail: vi[fage@northbropk il us �� a5 a�3 SUPPI,EMENTAL REPORT APP�ND7X E b5-�C3 �itting, Wasen, fl935 AM l lf4l2004, Sample Sysiems Invoices Review Page 1 of 2 X-duginal-To: ga,hPaughCc�ascPas com TJelivered-`I`o: gas�paug�Iocathost wozldt� net Fiam: "Fitting, Wanen" <Wacren Fitting(c�cable comcast com> Ta: ° com'" <gashpaugh(2�'ascpas. com> Cc: "Fullez, Fred" <Frecl Fullec@cat�le.comcast rAm>, "Feinberg, PeteF" <Petei Feinbeig{c�Comcast com>, •�Andersan, Marcia" <Marcia Anc�erson@cahle comcask com> Subject: Sample Systems Invoices Review Date: Tfm, 4 Nov 2QE14 09;35:24 -0500 X-Mat�a: TntesnetMail Service (5 5 26�3 13) Gazth, We are set up to have you review ttte saznple systems' invoices you xequested in our Lake Counry / Leesbutg, FL office Ihe add:ess is 8130 County Road 44, L,eg A, Leesbiug, 3478$ The contact person at thai facil'aty is Fi ed Fu1Iex You may ConSact Fied at 352•Slb-6862 (ce1I) ox 352-787-9601 ext 126 (of&ce) Out houzs of'opezation in Leesbu[g aze 8:00 AM to 6:00 PM Yon are welcome to wotk ducing the entue I D houis ot opeiation each day The PC yau will utilize is coimected to a netwoik psinter so that you may prin# copies of the inaoioes. At#ached aze insttuctions on how to access the 3ocuments through the web poxtal In a separate e-nail, I will send to you Iists of' ali ihe invoicss so�fed by sample system and account number. I'll be sending a similaz message to I?ick If you t�ave auy questious, please contact me at 2I5-324-74-05 Wazren WaEien Fitting D'ssectoi, Rate Regulation Comcast Cable C:ommunica�ons, LLC ISQ� Market Sheet East Tawet - 32nd Flooz Philadelphia, PA 19102 215-320-7405 {office) 215-�981 • 7853 (fax) 510-742-28b1 (cell} Wazren Fitting@cahle.comcastcom «� 14 The Web doc» Printed for Gazth Ashpaugh <gashpangh@ascpas com> 2/Zl{Z�g �-�� 3 Fittiug, Wa�en, 0935 AM 1Il4l2004, Samgle Systz�as Invoices Review Page 2 of 2 �b.14 Ihe Web.dac Printed fo: Gacth Ashpaug}s <gashpaugh@ascpas com> 212112Q05 os a�3 Searching for pocurnenfs on fhe Web ��.r�+�7�� Page 1 of 4 Searching for Qocuments on the Web 05 a�3 Searching far Qacuments on the Web SearcFting #or pocuments via the Web To search for a document (or documenfs) on the web, you wit! need fo login to the Websifa address: hfto:lll a2Q.11.56:808�lwebfddi[oqin.isp. The login tfiat you have been provided is: L�gin: ataditos Password: comcast5 After you have accessed the website, da ihe fiolfowing: Sfep 1) Login into the Feith Document Dafabase F�1t�a �+�c�s��tt �ata�asa usemame (--� " aasswurd �—� �eta0ass tdd °.. � �,� �� iJ�.`r.��t� �r� � �� .S'��'��. Page 2 of 4 Searching far pocuments on the Web 05 a�+� Searching fiar [3oeuments on fhe Web Step 2} Seleet the Fite Cabinet Audit ACC7 ENT and the Search File Cafrinef image wi31 display on the screen - - �� rmn�a _...�_�. �'',�€� Seardf � File Cabinat A�+€i ACC7' �NT -8A>CN h41PAE - VENQOR NPXE �-yEN6pR NC�ASBER - W'lOiCE DAlE� � INYOfCE NUkf ��L-.��_ �� •� �iNDICEffPA0i1Mi - YD{1CHER�YtAA -� EN7f1Y -� ACC7 NUN ..--� � �.- �� ae-; .€r�. ; auu�a�n�ss(zQ ",� ; caseam,sui�a � ; � a annwne�as{�r� � � imooR zcev Step 3) lnput your search criteria in the file cabit�ef ffslds. Use the tab key ta move from ane celf to the nax#. Step 4j C[ick on Search Step 5) After your results are retumed, ciick the box view and your image will be retrievect. Aad� ACCT EHT � r� �smwa�w�F_s�.'_j� r �� Step 8} To rotate fhe image ctick on the rotate buttons: To return tQyour list of invoices, cilck on fMe back arrow: � Page 3 of 4 Searehing for documents on the Web d5 a�3 8earching for pocuments on the �/Veb �o�� . cem�stcab7a�kbrtNPMfsaemnkareal9� �_ "__' _ Ct°'sbu c1Eb _ _ $1 ��_ CCVOtPSn�. !__� neoMm.erzalim•wnna�M4Y °,pa�-�� Cx4NPId".dabiv/ PA.6ac2d28 � � � 4tAVeeantxl Pi6azlaTyRlm.PA491065b28_ �S�Ma�'e9n 9'uan# ,. �Lxr�iAf9��Ama 3 Me� SSF &RiitNlm-3�dPhm�atEJ ..�._._ RnnSC-kmiRmiftaRT s �kk'3Y�ete�EtyPeltr _.�,,,.... Nrosnf.tsettl6}azSGmi+v Page 4 of 4 Searching for pocuments on tt�e Web �sa� � SUPPLE�'NTAL REPORT APPENDII� F 05 � 3 co�of r��.a•u, �r. ECC Foan 1?1F0 and Fom 1205 Febmary 1, 2404 �F�= Ibehovxs mpresen#ed aooveweza s¢gg�tedby fi:e Ciiy and A&S in �.e Cit}�s letYex ta the Company dated 3�nary i I, 7AOI and were usedby ComcasE ia � pisvions filmgs 3 f Regarding wmehause pecsoanel for the year 20D3, please specifica]Iyidenri£y a Eadtpetsmt; I2espauce: PleaseseeAttacLmeat#li b Ihe �e� of homs woiked byperson; Respaase: PleaseseeAttaclvnent#IS c tIll sctivityaud ffisks pexfoFmed by wazehouse gersonnet; and, Response: Please see AtmcLmeut # 22 d All types of equipinent and iaveat�ry stosed and mA�;.,r�,,.Pd Respons� Please see Attachmeat # 22. 32 Pmvide eopies of ali aoatracAU iavoices foi TSre yeaz ended Dee�rnbei 31, 2003, uzcIacIing any sU�iY �55� 1neP�'ed by C,omcast supporting the ammme shovm in Schedule B Response: IheamoantiaScheeialeBwactake=�omihefinancialrepoifs Attacha�eat�-isa listi¢g of aII eantrnetoi 'vmoices paid, and Atsac�nient include eopies of all fhe conuacEor iavoicey for this type n£1a6ox 33 ReBaxding 8�e "Sttppleme�at Tnfo�afioa" S`feg A, Line 6, P2ease pxovide deta�Ied snpport far fhe amount of "Tntal Imstai]atioa honrs" of 123,026 itespvnse: Please see Attacd�meat # 20 34 P3ease pzov3de #ke Wiat n�a of mstalfs in?A03 by type of activity Respnnse: PleaseseeAthcLment#23 35. P7easegrovide i8e "analysis of setvice calls" for 2UO3 insPallationacliviry Response: �theFC.CFarmI205andsupportiagdacnmenfatioasubmit�di�otSeCiry,thecewas notanat�chmeatlabeled "aaatysisafsetviceaalts" 36 PIease provide a lisf of al1 ia fiovse employees of 20Q3 incInded iu il�e deten�ation ofthe amQVass referenced'm ihe xesponses above For a71 employees, show t&e �te hued, ifduring 2003 the date feFmivated. the num�u ef vacatioalwus taken, t�e u�her afholidayhouis iaken, tfiemimbet of sick leave Tznais takea, fhe n�beL of peasanat leave hrnus takeu, anz{ tge sm�bei of houis of traiumg. Respous� See At+acIiment # IS Iius wacksheet mcIudes xegu}ax houts wod:ed and oveitime homs worked 3 7 Please provide a capy of CamcasYs employee pnlicies For the Deuoit yystem oa: a Iioliday $otus; b Vacati�FSo�s; c Pe[sonalLeaveHovis;and, d Piex Hovzs, aad, e. Sick Hovfs Response: Page II 31 �o ComcastofDetroi; Gp. PCCFomi 1240 andEmm IZtYS Febivazy 2, 2004 Dstroit 2004 1240f12Q5 Res{�onse L ist o{Ritashme�s Affachment i Amended 2403 �240 Farm Aftachmsrrt2 SubscrlberfrrFormation Attachmenf 3 Caps Channels Attachmenf 4 Average 8ST Channe[s A#achment 6 Programming Casf Informafion Attachment 6 Cnpyrighf Form Aitachmenf 7 Franchise Re�ated Cosf Informa5on Attachment 8 Channet Li�e-ups and Rata Cards Affachment 9 Deprsciafion Expense Report Attachmenf 16 Supplementaf Salance Sheet calcvlations AYrachment 17 58T 7a:c Rafe - Sfate af Michigan Attachment 12 Balance Sheet Aftachment 13 Satarylnfi�maftat by pepartrnenfftan P&L AtEachmenf 14 P/R Wages ac�d F{ours by depaNmerit Attachment 15 PiR DefaOed }iours by Erttployee Attachment 96 Schedule C, Une B Hours Attachment 17 Converter and Remote Subscriber Informaiion Attachmenf 18 ReconciGation of Installafion Costs Atfachment 19 ContracE (.abot Allocation Ca�cula&on Atfachment 2(3 Avetagz Contracto� RatQ Aftachmenf 2i Repair & Mainfenance Hours - M'FR Aftachment 22 Warehouse Job Description & Inventoey listireg Atbchment23 TaskSummary Aftachmenf 2¢ Co{sies of Corrfracf Labor imoices Page 14 os a� 3 3��0 o5-��f3 � Comca,t o#IIe�Yoit, GF. FCCPaffi 1240 and Fomi I2Q5 Febmazy 1, 2004 rding Pmperty Ta�, please provide: 'Ffie catcntafion of the anmvau mvolved w�h sapport for eack amouat A ooug�lt.�}isting aad "mveutnxy of atl �upmeu inc?aded in 8ie rei�mm; and, Copies of E3e taY rdmffi. ��.�..�. �... � �� 16 Comrastfz�edtoresgondto�30amt6eFeb�wuyf3zeqnest Comcastprovidedresponscssmply identified aa amo�t an a page. Ifie xesponse does aotprovide ffiy suppoxtmg defailfor the smomrt of conve�rzepait expease of'$124,389 and does aot provide any exglaaation of the chazges. Please provide sapportmg iavoices for Ebese charges 6� a} IdeaEifytfiespec�ctypeof'eqvipmentrepa'aed b} Who pesfumxd Yhe woSc aad c) TLe associated chacges Itesponsc: C�castresponded'mitsMuchlO'�tetteiideutifyingtfieamoimtinAftacl�meni#13 ILe . attaci�enf was a copp ofthe financiat stntemen; and showed an anmwrt of $114,389 fin CanverferRepsa E�ense. This document was ti�e snurce documeut fot t6e �ount entered iato ths "Sttpplementri Calculations fot $chedule C, Ime B" Ihe ncwly xeqaesied 'mformation fisfed in lba iLrongL 15c above canbe fovnd inAriaclmtent #32 Ii=e copies oftl� mvoices wi1L nnlybe seat to A&S 17 C4mcastfailedioxeapoadto#K3�biafheFebcuazyl3xeqaest CnmcastpmvidedAitacLwea�t#20fhat sfiows tLe $3U 33 canRactox rste bat actaaIlp computas � avecag,e tate nf $28.81($4,123 Please pcovide the calculation sugpocting !he $30 33 az provid� an amended 1265 corm.cimgthc pcavious fi3ing AesFons� ComcastrespandedinfluMmchl�`�IeUexvrithAttacS�eent#20_7nciudedwixhIIdsienzTis previoasipsaburi#edAtfachmeat#€2.OwiflinattativathatideaYd'iestfieca�M TfieassmriptiaabyYbe Commusi4n oftke cafcalation af tfie 53033 was incosecE I'� as saggested, flie rate was caieula.ted.by 7akeg the exteaded contcactar aaxonnis af $4,123,724 aaddividing itbythe mtal estcaded.hnms of 143,I57, fhe foimvlamo�ld he citcallaz si�e a poxEion of tlxs **�=+nf�++� Lo�as aza ba.sed on tHe avecage - conRactar rake, Insfcad the calcuIatioais (as coaected} $4,I23;724 dividedby d� sumaf the imctaIIation taskhoucs of 123,016 plas tfie service calt lmms of 12,669 Tfie othec 2 cakegories Y� equipment mamteuance aadzepaiz {conttactor convec2eei xepatt and�house aquipmentLepait) are nnY iacladed "mttris calcnLltioa liecause il;ey are aot mcluded'm the extended am�� shown Oniy instaqarian aud ee�eice call activity is repLese�edand as such, wets i6e only items inclvded in tfie xesultmg catcnlati6n 'Ihere was a sli�t euoi in the calculaGoa and an aznended Focm 12A5 w11be seat wifh the re.m�;�;,,fl docamentation. Therevisad avesage co�xactlahac mte ebau�ed &om$30 33 to $3Q34 I1te changes W flie amamits xe8.ectad aa the Foxm 1245 wete intmatedai and once We amouuts are muudad to 2 clec�al piaees, tiveze w¢e � cbanges to the eaIcnlzted a�axuinsnpemuYted isfis, Please see AttacHment #25 1$. Cnmcast fa�ledto respondta #30c in du Febroazy 13 xequest ComcasTwas requceted W pxovide "cleiatTeciexpiauaYian�dsuppo�' ComcastonlypsovidedAttacHmesst�21. Nos�x�poxtwaspxovuied fozanyoftheamoimtsshowaendDOexplanationwasgTOVided Pfeasepmvidethezequested"detailed explanafion and svpposY' for the totai zepafr �d mainteaance setvice homs o£25,338. Respanse: ComcasPstechnicalxeyoiiingdatabasepi�cesaMontLIyTechaicatRapa=t�"M1R") - This:eport shovra ffie mtal service cails pez mornh, the percenfage of oonaects hy con4actais, pereentage oi total activify bY eon�ctots aad, a facta: of eanveztex:elated seivice calla pa 1,000 svhscabera Attachntent#3i shows tfiese items The calcvFa#ioa of Seivices caIls on cosreitexs is eqo�lta tha End"mg Basic Subsan'bexs dividedbp 1,000 and�tfiplied by the factor showa Page 9 `�lrG r Y I� � 2 31 4 5 6 �� 8 3 1Q 14 92 93 94 15 16 17 98 79 24 21 22 23 24 25 26 27 28 DECLARAFIOhr OF GARTH T- ASHPAL`GH � I, Gacth F. Ashpaugh, declare as follows: i. I have secved as Presidexrt and 34Iembet of Ashpaugh & Sculco, CPAs, PLC, �("A&S'� since December 1999 I azn ficensed as a CerCified Public Accauntant in #he States of and Missouii I previously seFVe3 as an Audit Snpervisor foz the MissauFi Public Service I Commissian. I earned my Bacfielot of 8cience in Business Administration &om the Uuivexsity of i Missoiui in 1977 2 I)�ave ovei twenty yeazs of experience in cable and utilify xate regularion matiecs. Since 1992, I haveworked witFi nvat 200 cities and counties in cable-ielated matteis I have financial anaIyses and audits of cabie aperatot rats and equipmenf filings, renewat pmposaIs, and hansfei applicatzons in Aiizaaa, Califa2nia, Florida, Kenfucky, Mazyland, Michigau, Mi�nesota, New Mexim, New York, Ohio, Pennsylvania, Tennessee, Te:cas, Vuginia, Wisconsin and Wyoming I have also assisted c3ients in evaluaYing me�g�s and purchases inctuding Kansas CityPowei and Light and UtiiiCoxp, $altimare Gas and Eiectric Company and Potomac Electric Powet Company, S$C Media and Ptime Communicaiions, PZime Cornmunieations and Camcast, AT&I Communicatioas and Iele-G`ozinnunications Inc., andAT&T Bcnadband and Comcast Communicazions 3 3 have petfotmed expect reviews of the F CC Foxm ]205s filed by Comcast Cable Couinnmicatians with the City of Detzoit, Michigan, the County of Montgomery, Mazyland and the of Atlington, Vuginia since the mid 1994s In these xeviews, I have requested, been grovided and bave reviewsd invoiees, inetuc4iug contractor invoiees and convertes zepaiz invoices This is a nonnal request and reviaw step in the Frnm 1205 b5-a43 DEQ ARATION OP fiARTH T ASAPAUGH . � 1� 2 3 4 5 6 7 8 9 10 11 12 '', I 13 14 15 16 'i'7 48 19 20 21 22 23 24 25 26 27 28 I aw�T r' 4 Ihave aiso rero5ewed rhe national filing of AT&I Bmadband I was provided ccst supprnt far t£ie sanspie systems that I�eviewed That sampls in£oamatian was the hasis for adjustmenfs and zoz adclitionaL questians submitted to and tesponded to by AI &T Broadbaud 5. I deciare that the arpies af the dzta request respo�ses included as Sapplemental Appendix F are fsue copiea of the responses of Coxncast 6 F declaze that the statements contained within the Supplementat Repott concerning � reviews of Detrait, Montgamety Counfy and Atiington County are accuiate I declaz•e undet penalty of petjuty that tke foregoing is true and cozrect Daterl: -- BY: Gatth 7 Ashpaugh b5-��.� 2 DECI.ARATION OF GARTA T ASHPAi7GH � ~