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Policy

Claim: Comcast Rates Too High

1/23/2005 7:00 PM Eastern

An audit of Comcast Corp.’s national rate filing, conducted by consultants to local franchising authorities representing more than 1 million cable subscribers, asserts that the operator overcharged in several regulated rate categories in 2004.

Florida-based firm Ashpaugh & Sculco CPAs PLC and Colorado-based Front Range Consulting Inc. generated the report. The firms were hired by a coalition of Comcast cities and joint regulatory authorities, ranging in size from Los Angeles to Detroit to Murfreesboro, Tenn.

Overcharging Claims
A franchise-authority-ordered audit report states Comcast overcharges in several basic categories:
CATEGORY COMCAST AUDITORS DIFFERENCE
Remotes $0.33 $0.29 $0.04
Basic set-top $1.30 $0.49 $0.81
Addressable/digital box $4.83 $4.10 $0.73
HDTV box $8.33 $6.06 $2.27
Unwired install $52.23 $37.88 $13.35
Prewired install $31.40 $19.83 $11.57
Hourly service charge $35.17 $30.10 $5.07
Source: Ashpaugh & Sculco CPA analysis of Comcast’s national Form 1250 rate filing for 2004.

FORM 1250

Auditors analyzed the operator’s Form 1250 rate filing to the Federal Communications Commission. Comcast, like other large cable operators with the exception of Cox Communications Inc., takes the rates from all its systems, averages them and generates a national rate report, according to the auditors.

The report covers rates charged since April 2004.

Comcast’s rate form can’t be a reliable basis for setting basic rates, the auditors told their clients in a report released Jan. 14, because of costs excluded in some rate categories and added in others. Comcast “has also ignored FCC precedents and Form 1205 instructions,” according to the report.

Comcast officials strongly disagree with the arguments the consultants expressed in their report, said company spokesman Tim Fitzpatrick. The company plans to file responses with the appropriate local authorities by mid-February, he added.

“Our equipment and installation prices have been established in accordance with FCC rules and policies, and Comcast has provided the required information to support our prices,” Fitzpatrick said.

The auditor found fault with Comcast’s rate calculations in several categories. For instance, the report asserts that installation costs are inflated by costs for work that occurs outside the home.

The operator hasn’t justified its installation time estimates and improperly included digital converter charges in basic-only equipment charge categories, the report added.

Auditor Garth Ashpaugh complained that Comcast was not forthcoming with all the examiners needed to accurately confirm the company’s rates. Auditors had to rely on a mix of Comcast data and numbers from “other reliable sources” to come up with corrected rates.

“I’ve been doing this since 1992, and Dick [Triech of Front Range Consulting] since 1993. We have a lot of history, with a good handle on where rates should end up,” said Ashpaugh. “We feel the numbers are really good.”

The consultants have recommended that its LFA clients adopt the rates generated by the auditors. The report asserts that Comcast, on average, has overcharged from 4 cents per unit for remote controls to as much as $13.35 for a first-time installation.

This is not the first time Ashpaugh & Sculco has issued a report criticizing Comcast. It contributed to a consultant’s report on the MSO’s merger with AT&T Broadband, asserting that the debt load assumed by Comcast would result in a slowdown in upgrades and product rollouts paired with huge rate increases. It urged its LFA clients to reject the merger.

ROLLBACK POSSIBLE

All operators are increasing their rates, but other predictions have not come to fruition. Comcast has accelerated its upgrade activity and is actively rolling out new products, such as telephony.

Ashpaugh said there could be basic-cable rate rollbacks of as much as 20% if its client cities adopt the rate recommendations.

The audit findings demonstrate the critical need for local regulators to periodically audit cable rates, said National Association of Telecommunications Officers and Advisers executive director Libby Beaty. Such reports often reveal a “significant number of errors,” she said.

“To the degree we have any authority left, we should make the most of it,” she said.

September