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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 ) In the Matter of ) ) Continental Cablevision ) ) Social Contract ) ) ORDER Adopted: January 2, 1997 Released: January 2, 1997 By the Chief, Cable Services Bureau: 1. On August 1, 1995, the Federal Communications Commission adopted a Social Contract which it had negotiated with Continental Cablevision ("Continental"). The Social Contract is designed to provide rate stability, improved quality of service, and incentives for upgrades and system improvements. The Social Contract was subsequently amended in an order adopted on August 21, 1996. The amendment extended application of the Social Contract to cable systems acquired by Continental since the original Social Contract was approved and, inter alia, increased Continental's upgrade commitment and required Continental to provide cable service to schools in its franchise areas. Under the Social Contract, as amended, Continental is investing at least $1.7 billion to upgrade its domestic cable systems over the life of the contract, has provided more than $11 million in refunds in the form of cash and services, is permitted to increase cable rates by $1 per month per year in certain circumstances to provide for system upgrade costs and to increase rates to recover external costs and the cost of inflation, has established "lifeline" basic service tiers priced 15 to 20 percent below basic service tier rates in effect at the time of adoption of the Social Contract, and is providing free cable connections to public schools in its franchise areas. The Commission delegated to the Cable Services Bureau the authority to implement the Social Contract. 2. Cox Com, Inc. ("Cox") has requested that the Social Contract continue to be applied to three cable television systems recently acquired by Cox from Continental. The three systems are in Pawtucket, Rhode Island (CUID RI0005); York County, Virginia (CUID VA0302); and James City County, Virginia (CUID VA0270). Cox has requested the continued application of the Social Contract to these three systems pursuant Section III.H.2 of the Social Contract. Cox asks that application of the Social Contract be modified to suit the circumstances. By this Order the Bureau grants the Cox request. 3. Under the terms of the Social Contract, certain provisions continue to apply to cable systems divested by Continental, while other provisions apply only if the acquiring operator agrees to be bound by the terms of the Social Contract. Section III.H.2 provides: Rate, [Migrated Product Tier], and Going-Forward adjustments which Continental has implemented under the Social Contract will continue to apply to cable systems divested by Continental through a system sale or trade. Other rights and obligations will apply only if the new owner notifies the Commission that it agrees to be bound by the same or similar terms and conditions as those contained in the Social Contract. Continental will not be relieved of its total investment requirement under Section III.E.; the investment will continue to exist for Continental systems, including systems acquired through system trade (but not systems acquired through direct purchase) after the Publication Date. With respect to the three cable systems Cox has acquired, Cox has notified the Commission that it agrees to be bound by the terms of the Social Contract. 4. In view of the fact that only three systems are involved in Cox's requested application of the Social Contract, Cox proposes the following:  Cox commits to upgrade the systems it is acquiring to the maximum extent required by the Social Contract. The three systems to be acquired are currently at 450 MHz, and Cox affirms that all three systems will be upgraded to 750 MHz. The Pawtucket system will be upgraded to 750 MHz by the end of 1998, and the York County and James City County systems will be upgraded to 750 MHz by the end of 2000. Cox asks that the Bureau concur that the specific monetary expenditures required by the Social Contract will not apply to Cox.  Section III.E.1-4 of the original Social Contract requires Continental to invest annually at least 120 percent of its average aggregate annual capital expenditures from 1990 through 1994. If Continental fails to invest at least 85 percent of the amount it has committed to infrastructure upgrades in any one year, it must pay a penalty. Based on current projections, Cox plans to invest $22 million to upgrade all three systems to 750 MHz, and will complete the upgrades within the time frame prescribed in the Social Contract. Upgrade expenditures not are scheduled to begin until 1998, however, so Cox asks that the Bureau concur that the annual infrastructure expenditure requirement will not be applicable to Cox, so long as the systems are all upgraded to 750 MHz within the required time period. 5. The monetary commitment made by Continental to accomplish the upgrade of its systems is based on the estimated cost of upgrading 50 percent of those systems to 550 MHz and 50 percent to 750 Mhz and to provide fiber optic technology and addressability or other suitable technology for those systems. The technical commitment made by Cox meets or exceeds the requirement of the Social Contract. Cox has committed to an investment of $22 million to accomplish that result. We will accept Cox's commitment as its investment amount under the Social Contract. 6. The Social Contract requires Continental to invest at least 85 percent of the annual amount to which it has committed or pay a penalty. This provision ensures an annual commitment and prevents delays in the scheduling of upgrades in the Continental systems. Any given system subject to the Social Contract, however, may receive the benefits of the upgrade earlier or later than other systems. The Social Contract does not require that work begin in every Continental system immediately. Cox states that the upgrade to the Pawtucket system will be completed before the end of 1998 and the upgrade of the two Virginia systems will be completed before the end of 2000. This upgrade schedule could have been acceptable had the three systems remained part of the Continental organization. Cox states further that it will expend at least 10 percent of its financial commitment by 1998, another 45 percent by 1999, and the remainder before the end of 2000. We find the schedule proposed by Cox to be acceptable and conclude further that the 85 percent annual expenditure requirement of the Social Contact shall apply to the scheduled expenditures proposed by Cox. 7. Accordingly, IT IS ORDERED that the request of Cox Com, Inc. for the assignment of the rights and the assumption of the obligations of the Social Contract with respect to the three cable systems acquired by Cox Com, Inc. from Continental Cablevision, Inc. IS GRANTED. 8. IT IS FURTHER ORDERED that modifications of the Social Contract, relating to the obligations as to the amount and timing of the system upgrades and financial commitment as requested by Cox Com, Inc. ARE GRANTED. 9. This action is taken by the Chief, Cable Services Bureau, pursuant to authority delegated by Section 0.321 of the Commission's rules. 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau