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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ************************************************************************* Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of) ) Time Warner Cable d/b/a ) CUID No. IN0302 (City of Indianapolis) American Cablevision ) ) ) Complaint Regarding ) Cable Programming Services Tier ) Rate Increase ) ORDER Adopted: July 13, 1996 Released: July 23, 1996 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider a complaint concerning the January 1, 1996 rate increase of Time Warner Cable d\b\a American Cablevision ("Time Warner") for its cable programming services tier ("CPST") in the community referenced above. In response to this complaint, Time Warner submitted its "Time Warner Cable Form 1240." Upon review of the record, we conclude that Time Warner's rate increase, notwithstanding an adjustment, is not unreasonable. 2. Under the Communications Act, the Commission is authorized to review the CPST rates of cable systems not subject to effective competition to ensure that rates charged are not unreasonable. If the Commission finds the rate unreasonable, it shall determine the correct rate and any refund liability. The Telecommunications Act of 1996 and our rules implementing the new legislation require that complaints against the CPST rates be filed with the Commission by a franchising authority that has received subscriber complaints. A franchising authority may not file a CPST rate complaint unless, within 90 days after such increase becomes effective, it receives subscriber complaints. This standard requires more than one subscriber rate complaint. The provisions under the 1996 Act became effective upon its enactment on February 8, 1996. The City of Indianapolis, Cable Communications Agency, filed a complaint on April 25, 1996, thus the complaint is subject to the requirements of the 1996 Act. It has verified that it has received more than one subscriber complaint sufficient to trigger our jurisdiction to review its complaint. 3. To justify rates for the period beginning May 15, 1994, through a benchmark filing or a cost of service showing, operators must use the FCC Form 1200 series. Operators are permitted to make changes to their rates on a quarterly basis using FCC Form 1210. Operators may alternatively justify adjustments to their rates on an annual basis using FCC Form 1240 to reflect reasonably certain and quantifiable changes in external costs, inflation, and the number of regulated channels that are projected for the twelve months following the rate change. Any incurred cost that is not projected may be accrued with interest and added to rates at a later time. If actual and projected costs are different during the rate year, a "true-up" mechanism is available to correct estimated costs with actual cost changes. The "true-up" requires operators to decrease their rates or alternatively permits them to increase their rates to make an adjustment for over or under estimations of these cost changes. Inflation Calculation 4. We note that Time Warner Forms 1240 use an inflation factor of 2.96%, which is the annual factor for the period July 1, 1994 through June 30, 1995. However, the Time Warner Form 1240 filed with respect to the community in this proceeding, reflects a true-up period of only six months from July 1, 1995 through December 31, 1995. Thus, Time Warner used an annual inflation factor of 2.96% for a stated "true-up" period of six months. 5. The Thirteenth Reconsideration Order provides a "true-up" mechanism which allows operators to correct differences between charges the operator has actually collected and charges which reflect costs actually incurred by the operator. In the instant proceeding, the rates which were deemed reasonable under the Social Contract as of August 3, 1995, the starting rate used in the instant Time Warner Form 1240, did not include allowable inflation from July 1, 1994 to June 30, 1995. Therefore, Time Warner could have properly claimed inflation for such period on the instant Time Warner Form 1240. Thus, we will permit Time Warner to calculate inflation for the 12 month period (January 1, 1995 to December 31, 1995), as reflected on its filed Time Warner Forms 1240. Therefore, we make no adjustments to Time Warner's inflation factor and permit Time Warner to calculate inflation using the 12 month factor. Interest Calculation 6. We have reviewed the Time Warner Form 1240 submission, and have made an adjustment to the interest calculation. This adjustment results in a smaller increase than is calculated by Time Warner. However, since Time Warner's actual increase is lower than our adjusted increase, we find that Time Warner's rate increase is not unreasonable. The adjustment we made is described below and should be taken into account in Time Warner's true-up calculation in its next rate increase justification. 7. We have adjusted Time Warner's interest calculation to reflect the correct methodology to calculate interest, as shown in our corrected FCC Form 1240. We recognize, however, that the use of the incorrect formula to compute interest has no impact on Time Warner's maximum permitted CPST rate. Indeed, even with our correction for interest, Time Warner's current rate is below the maximum permitted rate pursuant to the Social Contract. However, this adjustment should be taken into account in Time Warner's true-up calculation in its next filing. 8. Upon review of the record herein, we conclude that, notwithstanding our adjustment, Time Warner has justified its CPST rate increase of $2.55. 9. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's Rules, 47 C.F.R.  0.321, that the complaint referenced herein with respect to CUID No. IN0302, against the CPST rate increase charged by Time Warner in the franchise area referenced in the caption during the period from January 1, 1996 to December 31, 1996 IS DENIED. 10. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's Rules, 47 C.F.R.  0.321, that Time Warner's January 1, 1996 CPST rate increase of $2.25 (plus franchise fee) is not unreasonable. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau