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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 ) ) SOCIAL CONTRACT FOR ) COMCAST CABLE COMMUNICATIONS, INC. ) ) ) ORDER Adopted: October 9, 1997 Released: October 10, 1997 By the Commission: I. INTRODUCTION 1. The Commission has before it a proposed Social Contract between Comcast Cable Communications, Inc. ("Comcast") and the Commission. For the reasons stated below, and based upon our review of the record, we find that the proposed Social Contract, as modified herein, serves the interests of Comcast's subscribers by providing for system upgrades, expanded service offerings, and free cable and internet services to schools and libraries. Adoption of the Social Contract is consistent with the Commission's responsibility under the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act") to ensure that consumers' interests are protected in the receipt of cable services and that regulated rates are not unreasonable. II. BACKGROUND 2. The 1992 Cable Act gave the Commission and local franchising authorities jurisdiction over the cable programming and equipment rates of cable systems that did not face effective competition, as defined by that Act. Specifically, with respect to cable systems that are not subject to effective competition, the 1992 Cable Act provides that franchising authorities may regulate the rates for basic service tiers ("BSTs") pursuant to guidelines established by the Commission, and the Commission may regulate the rates for cable programming service tiers ("CPSTs"). The governing standard for CPSTs is that rates not be unreasonable. 3. In the 1992 Cable Act, Congress stated its intent to ensure that, where economically justified, cable operators continue expanding the capacity and programs offered over their systems. Subsequently, in our Report and Order and Further Notice of Proposed Rulemaking in MM Docket No. 93-215 and CS Docket No 94-28 ("Cost Order"), we announced that we would consider proposed upgrade incentive plans that would "permit an operator to enter into a social contract with its customers under which the operator would be given substantial flexibility in setting rates for new regulated services it introduces, such as new service tiers offering additional program channels." In exchange for this rate flexibility, rates for existing services would remain "stable and reasonable," at levels no higher than those in effect before the social contract was implemented or no higher than permitted by the benchmark/price cap approach. The quality of existing services would be maintained or improved. These social contracts would remain in effect for a fixed period and would offer operators an opportunity to earn higher profits as an incentive for upgrading their cable systems and introducing new and improved regulated services. In the Telecommunications Act of 1996 ("1996 Act"), Congress sought to encourage the rapid deployment of advanced communications services and technologies for the benefit of all Americans. These are goals that the Commission's upgrade incentive policy was designed to fulfill. 4. Under the terms of the proposed Social Contract, Comcast would ensure that by March 31, 1999, the majority of its subscribers will receive service on state-of-the art, upgraded systems. Comcast also would provide free cable and internet connections, services, and modems to schools and libraries. In exchange for these commitments, Comcast would be permitted to migrate up to four existing services on some of its systems into a Migrated Product Tier ("MPT"), which it could convert to a New Product Tier ("NPT") on or after January 1, 1998. The proposed Social Contract contains terms similar to those provided by Continental Cablevision, Inc. ("Continental"), and Time Warner Cable ("Time Warner") under their Social Contracts. Comcast did not seek to increase its rates by $1.00 per year, which was included in the Continental and Time Warner Social Contracts as a means for those operators to fund the required system upgrades. The proposed Social Contract does not resolve pending CPST rate complaints or BST rate proceedings. 5. On May 2, 1997, the Commission issued a public notice summarizing the proposed Social Contract and providing information on how interested parties could obtain a copy of it. The public notice provided a 45-day period for comments on the proposed Social Contract and a 15-day period thereafter for Comcast's reply. We have received 116 comments, including reply and supplemental comments. Ninety-four commenters expressed unqualified support for the Social Contract. III. SUMMARY OF SOCIAL CONTRACT A. System Upgrades 6. Comcast will be required to upgrade its cable systems so that by March 31, 1999, 80% of Comcast's subscribers will be served by a system with a capacity of at least 550 MHz; 60% of Comcast subscribers will be served by a system with a capacity of at least 750 MHz; systems serving 80% of Comcast subscribers will use fiber optic technology to transport signals from the headend to the neighborhood nodes; and 80% of Comcast's systems will use addressability or other suitable technology to make interactive services available to subscribers and to enhance the ability of subscribers to make service choices. B. Service to Schools and Libraries 7. Comcast will offer a free cable connection, upon request, to all elementary and secondary public schools and certain private schools and to 250 public libraries located within 200 feet of the activated plant of its cable system. Comcast will offer a cable connection at cost to any other unserved public school or public library located beyond 200 feet of the activated plant of its cable systems but within its franchise area. Service provided on the BST and CPST, including service provided on MPTs and NPTs, will be provided to the connected schools without cost. Comcast will wire additional classrooms in existing schools at cost, but for new schools and existing schools undergoing extensive rehabilitation, Comcast will coordinate whenever possible with local officials and contractors to wire each of the classrooms in such schools free of charge. Comcast also will provide to the connected schools a free monthly educational program guide with curriculum support ideas to assist educators in effectively using the new services, and Comcast will develop and provide to connected schools materials for teachers that explain the educational applications of Comcast's broadband cable services. Comcast will not seek to recover the costs of the free connections from cable customers as external or other costs. 8. Within one year after Comcast begins offering internet access service to residential customers in a specific franchise area, Comcast will offer this service free of charge and provide a free cable modem to each connected school and public library in the franchise area. Comcast will provide additional modems at cost to connected schools and will provide free internet access service for each modem purchased. Comcast also will sponsor local workshops and will develop training materials to enable teachers to optimize their use of the internet service. The staff from connected libraries will be permitted to participate in these training workshops. C. Home Wiring 9. Comcast will permit subscribers to remove, maintain, replace, or rearrange their home cable wiring so long as it does not create signal leakage or interfere with Comcast's ability to provide services and collect revenues from subscribers in a multiple dwelling unit. Comcast will notify its subscribers of this benefit with an initial notice and will provide a subsequent notice annually. Any signal leakages or repairs incurred due to wiring by a subscriber will be the responsibility of that subscriber. Comcast will provide the necessary home wiring materials to subscribers at cost and will identify other sources for such equipment. D. Migrated Product Tiers and New Product Tiers 10. Comcast may move up to four channels to an MPT in certain systems, provided that on or before March 31, 1999, each such system will have a capacity of at least 550 MHz and will offer service on at least 55 channels that are subject to regulation. Comcast may create MPTs in all systems that meet the foregoing capacity standard, except systems in which Comcast has already created an NPT as a result of a la carte packaging and systems in which Comcast was permitted to create an MPT or NPT as a result of its December 1, 1995 rate resolution ("Rate Resolution"). Comcast may add an unlimited number of new services to its MPTs. The initial price of each MPT on a per-channel basis shall be equal to the price of the services that were migrated to the MPT. Comcast may increase the initial price of any MPT to reflect the addition of new services, provided that the MPT price may increase no more than $0.20 per added channel, plus license fees for each added channel, and inflation and external cost increases permitted by the Commission's regulations governing CPSTs. The limitation on MPT rate increases shall not apply to systems that the Commission has found to be subject to effective competition. On or after January 1, 1998, Comcast may convert the MPTs created under the Social Contract to NPTs. If Comcast establishes an MPT or an NPT pursuant to the Social Contract on any system that has not been upgraded to at least 550 MHz and 55 regulated channels on or before March 31, 1999, Comcast will be required to refund any revenues collected for services provided on such MPT or NPT that exceed the maximum permitted rate that Comcast would have been allowed to charge for such services absent the MPT or NPT. E. Reporting Requirements 11. Comcast will be required to provide an annual progress report to the Commission no later than 90 days following the end of each calendar year that the Social Contract is in effect. The Commission will be entitled to inspect Comcast's books and records and interview its employees to assess Comcast's compliance with the Social Contract. F. Effective Date and Term 12. The Social Contract will become effective on the date the Commission adopts it and will terminate on March 31, 1999, except with respect to the requirements concerning home wiring and service to schools and libraries, which will terminate five years after the Effective Date. In addition, Comcast may terminate or modify the Social Contract prior to March 31, 1999, if the Commission consents to such early termination. IV. COMMENTS 13. Numerous local franchising authorities, public officials, schools, libraries, local businesses, legislators, and other members of the public have written in support of the proposed Social Contract and urge the Commission to adopt it. These commenters commend Comcast for its commitment to serving their communities and praise Comcast's commitment to provide free cable connections and cable and internet service to schools and libraries. The Mayor of Trenton, New Jersey, for example, stated: There is no question that these communications tools are part of the essential requirements for helping our children learn and achieve a 21st century education. Unfortunately, there are not enough of these critical outlets available to the majority of New Jersey's school children. That's why I applaud this agreement and look wholeheartedly toward its benefits in the future. 14. A comparatively small number of commenters urge the Commission to modify the Social Contract or reject it in its entirety. To address concerns raised by these commenters, we clarify and modify the Social Contract in several respects. V. DISCUSSION 15. In accordance with the discussion below, we find that the Social Contract, as clarified and modified, serves the public interest and the interests of Comcast's subscribers and promotes the goals enumerated by Congress in the Communications Act of 1934 ("Communications Act"), the 1992 Cable Act, the 1996 Act, and the Cost Order. Subscribers will benefit from improved service offerings and picture quality made possible by Comcast's use of state of the art technology, and from increased choice in the selection of programming tiers. In addition, Comcast's commitment to offer free cable connections, free cable and internet service, and free cable modems to schools and libraries in its franchise areas will provide a significant public benefit to these institutions and to the public they serve. 16. Local franchising authorities will retain their right to enforce existing franchise requirements, including upgrade obligations, and to seek upgrade commitments and other benefits for their individual communities through the franchise renewal or modification process, or through any other lawful means. Franchising authorities, subscribers, and other interested parties will be able to comment on any proposed modifications to the Social Contract and may seek redress at the Commission if Comcast violates the terms of the Social Contract or this Order. 17. The opposing commenters share several concerns. Some object to the Social Contract in its entirety, and others propose modifications or seek clarification of certain points. The opposing comments, proposed modifications, and requests for clarification are addressed below. We are not persuaded that the Social Contract should be rejected, but, as noted above, we will modify and clarify it to address some of the commenters' concerns. A. Preservation of Local Authority 18. Section III.E. of the proposed Social Contract states that: [n]othing herein shall affect the enforceability of any otherwise valid preexisting local franchise agreement, ordinance, local law, or regulation which provides benefits which exceed those provided in the Contract relating to system upgrades or the wiring of schools or libraries, nor shall LFAs [local franchising authorities] be restricted in their authority to negotiate for such additional benefits after the Effective Date. Section III.H. of the Social Contract discusses the Commission's authority to enforce the Social Contract and provides, in part, that "any failure to comply with this Contract shall not be a basis for any denial of a franchise renewal by, or other enforcement action of, any LFA." 19. Some of the opposing commenters fear that the proposed Social Contract would preempt local authority by preventing franchising authorities from enforcing franchise requirements that are identical to the Social Contract requirements. They point out that Section III.E. of the Social Contract appears to preserve local enforcement authority only with respect to local requirements that "exceed those provided in the Contract . . . ." Similarly, they believe Section III.H. could be read to prohibit local franchising authorities from denying a franchise renewal or taking other enforcement action in response to Comcast's failure to complete an upgrade required by the franchise agreement if the Social Contract requires an identical upgrade. One commenter claims that the Social Contract "will act as a ceiling on Comcast's provision of services and facilities" and will weaken franchising authorities' negotiating position regarding benefits they might seek through the franchising process. 20. This is not the intent of the Social Contract. As Comcast correctly explains in its reply comments, the Social Contract sets forth a minimum standard for system upgrades and other benefits, such as free connections and service for schools and libraries. Comcast is not precluded from voluntarily exceeding these minimum commitments, and local franchising authorities are not precluded from enforcing preexisting local requirements that are less than, meet, or exceed the requirements contained in the Social Contract. Nor are local franchising authorities precluded from enacting valid requirements now or in the future that are less than, meet, or exceed those contained in the Social Contract or from seeking to negotiate with Comcast to formalize such requirements at the local level. 21. To allay the opposing commenters' concerns, Comcast has agreed to modify the Social Contract so that local franchising authorities' rights are more clearly stated. Section III.E. is amended to read as follows (stricken language is deleted from original): Nothing herein shall affect the enforceability of any otherwise valid preexisting local franchise agreement, ordinance, local law, or regulation which provides benefits which exceed those provided in the Contract relating to system upgrades or the wiring of schools or libraries, nor shall LFAs be restricted in their authority to negotiate for such additional benefits after the Effective Date. This modification clarifies that local franchising authorities are not prohibited from taking any enforcement action against Comcast, including denial of a franchise renewal, because of Comcast's failure to meet a local requirement that is also a Social Contract requirement. Comcast agrees that the Social Contract is not intended to shield Comcast from local enforcement action that is based on Comcast's violation of a valid local requirement. 22. Neil Lehto argues that Comcast must obtain a telecommunications permit to provide internet service to schools and libraries in Michigan. In support of his argument, Mr. Lehto cites a Michigan law that purportedly requires cable operator and other telecommunications service providers to obtain a local franchise before they may offer telecommunications services. 23. The applicability of the Michigan statute to any services Comcast may provide under the Social Contract is outside the scope of this proceeding. 24. Betty Ann Kane, a public official in Rehoboth Beach, Delaware, states that the word "negotiate" as used in Section III.E. is inappropriate. She claims that local franchising authorities may require operators to provide benefits and are not limited to only those benefits they can obtain through negotiation. The Cities of Tuscaloosa, Alabama; Fort Wayne, Indiana; Gadsden, Alabama; Boca Raton, Florida; Mobile, Alabama; and Lower Merion, Pennsylvania ("Tuscaloosa, et al.") raise the same concern and state that the Social Contract should explicitly preserve these rights. 25. The language of Section III.E. is not meant to eviscerate a local franchising authority's right to require that franchise proposals contain benefits deemed appropriate by the franchising authority in its evaluation of the statutory criteria governing the initial grant of a franchise and franchise renewals. Conversely, the provision also is not meant to permit local franchising authorities to impose requirements they are not authorized to impose. With this clarification, we do not believe further modification of Section III.E. is necessary. 26. Some commenters object to the Social Contract on the basis that cities are better suited than the Commission to determine which schools and libraries should receive free cable connections and service. The Social Contract outlines Comcast's minimum commitment. Schools and libraries are free to decline the free connections or services, and local franchising authorities are free to require additional connections or services through the franchising process. B. Commission Policy on Social Contracts 27. Several opposing commenters assert that the Social Contract simply rewards Comcast's past actions and is not necessary to induce Comcast to undertake the commitments set forth in the Social Contract. The commenters maintain that Comcast has already completed some of the required upgrades, is already required by franchise agreements to complete upgrades to 550 or 750 MHz and offer connections and service to schools and libraries, has made other public commitments to complete upgrades and offer connections and service to schools and libraries, and has already incorporated an aggressive upgrade schedule into its pre-existing business plan. One commenter states that the Social Contract provisions governing internet service to schools and libraries do not confer a meaningful benefit because the Universal Service Fund will be available to fund the wiring of schools and libraries and their purchase of internet access service. Some commenters complain that their own communities or others will receive no benefits under the Social Contract but nevertheless may experience a rate increase. The commenters also contend that the Social Contract does not freeze current rates and, through the MPT and NPT provisions, permits Comcast to move existing services to a flexible-rate tier. 28. In response to these arguments, Comcast states that, outside of the Social Contract, it has never been required to provide free modems and internet access to schools or public libraries. Even where it already is committed to making upgrades, Comcast adds, it would not be obligated to continue upgrading its systems on a given schedule absent the Social Contract. Comcast also points out that Commission policy does not mandate that rates be frozen in connection with incentive upgrade plans and that the Commission has already determined that MPT and NPT provisions similar to those included in the Social Contract are in the public interest. Comcast further notes that under the Commission's rules it can already freely add services to existing tiers and that the rate increases it would be permitted to implement in connection with the addition of channels to an MPT are the same as the increases it would be permitted to implement upon the addition of channels to an existing tier. 29. We agree with Comcast and do not believe the opposing commenters' arguments justify rejection or modification of the Social Contract. The Social Contract will confer valuable benefits on Comcast systems, including systems serving communities that have independently required Comcast to upgrade their systems and/or provide connections, equipment, and service to schools and libraries. Although Comcast may have chosen voluntarily to upgrade systems and provide benefits to schools and libraries, and some local franchising authorities already may require Comcast to undertake such actions, the Social Contract binds Comcast to continue to make significant upgrades throughout its systems. It provides a firm completion deadline and a federally enforceable upgrade commitment. Absent the Social Contract, Comcast could cancel or delay completion of planned system upgrades not otherwise required. Moreover, the Social Contract applies to all of Comcast's systems, not just those systems that are subject to locally imposed requirements. Communities that have not already required Comcast to provide these benefits will obtain them automatically through the Social Contract. Those local franchising authorities that have already required system upgrades or other benefits will not be disadvantaged. The Social Contract makes clear that local franchising authorities can enforce or impose otherwise lawful requirements that meet or exceed the upgrade benefits of the Social Contract. In addition, schools and libraries are free to decline the cable connections, equipment, and services Comcast is obligated to offer. They will not be forced to forego other options that they deem preferable. 30. The Social Contract permits Comcast to migrate up to four existing services from an eligible system's BST and CPST to an MPT, which can be converted to an NPT. Our regulations governing NPTs prohibit the immediate migration of certain programming from existing regulated tiers to an NPT. The purpose of this prohibition is to ensure that BSTs and CPSTs remain competitive with NPTs so that NPT rates will be reasonable. Our regulations also prescribe specific procedures and restrictions related to the addition of channels to tiers and accompanying rate increases. 31. The Commission has authority to waive its rules if there is good cause to do so. The Commission may exercise its discretion to waive a rule where particular facts would make strict compliance with the rule inconsistent with the public interest. We find good cause to waive the channel migration provisions of our NPT rules and our regulatory provisions governing changes in the number of channels on a regulated tier as such provisions relate to the MPT and NPT provisions of the Social Contract. To the extent necessary to effectuate the terms of the Social Contract, we are waiving Sections 76.922(e)(3)(ii) and (g) of the Commission's rules as they affect the migration of channels to an MPT under the terms of the Social Contract, as well as Section 76.987(b)(2) and (b)(3), which (i) prohibits an operator from dropping channels that were offered on its BST or CPST on September 30, 1994, and moving them to NPTs unless it waits at least two years from the dates the channels were dropped and (ii) requires the operator to re-market its services when it creates an NPT. 32. We have previously waived these rules in connection with the adoption of MPT and NPT provisions that are nearly identical to those included in the Social Contract. We have found that the conditions applicable to such MPTs and NPTs will ensure that rates for existing services are reasonable and that the creation of MPTs and their conversion to NPTs will increase subscriber choice and will not constitute a fundamental change in the nature of existing services. Where we have previously waived our rules to allow the creation of MPTs convertible to NPTs, we have done so in the context of social contracts and rate resolutions that included subscriber benefits that otherwise would not have been available. 33. Our reasons for previously granting the waivers necessary to permit the creation of MPTs and their conversion to NPTs are equally applicable here. We conclude that a waiver of our rules is appropriate in the overall context of the Social Contract and is in the public interest. 34. First, Comcast's authority to create MPTs under the Social Contract is limited. Comcast will be permitted to create MPTs only on those systems that are not already authorized by the Rate Resolution to offer MPTs and that do not currently offer an NPT that was created as the result of a la carte packaging. Second, as we have concluded in approving similar provisions in other social contracts and rate resolutions, the creation of MPTs and NPTs under the Social Contract will expand the programming choices for subscribers and will not expose subscribers to unreasonable rates. In addition, the creation of MPTs and NPTs under the Social Contract will increase the choices available to subscribers because they need only buy the BST in order to select service on the MPT or NPT; they will not be required to purchase any other tier in order to obtain MPT/NPT service, nor are they required to purchase an MPT or NPT. Subscribers will not be forced to receive and pay for unwanted services. 35. Consistent with the rate principles articulated in the Cost Order, the services migrated to the MPT will continue to be priced at the regulated rate until January 1, 1998, and channels added to the MPT prior to that date will be priced at a level that we have found to be reasonable in other social contracts and rate resolutions. The rates for the regulated tiers from which programming was migrated will be reduced to reflect the deletion of those services from the regulated tiers. MPT rates may be increased only if Comcast adds additional services to the tier, which would increase its value to the subscriber. Subscribers are not required to purchase any tier except the BST to obtain an MPT or NPT under the Social Contract, and they will be free to choose any tier above the BST, or all of them, depending on their assessment of the relative value of the different tiers. Should Comcast elect to convert the MPT into an NPT, then the prohibition against buy-through requirements will ensure that the product offerings and rates on the NPT are competitive with the regulated BSTs and CPSTs. Otherwise, subscribers would elect not to subscribe to the NPT. Furthermore, Comcast will have an incentive to maintain the quality of the service offerings on its existing CPSTs to avoid losing revenue, because subscribers perceiving a decrease in quality in an existing CPST may discontinue that service in favor of the MPT or NPT. 36. Because the services migrated to an MPT will be services subscribers are already receiving and because they will be priced on a per-channel basis at regulated rate levels, the creation of MPTs does not constitute a fundamental change in the nature of existing services, and Comcast's automatic inclusion of an MPT in a subscriber's programming package will not constitute negative option billing, which is prohibited. For the same reason, when Comcast creates an MPT or converts an MPT to an NPT, it will not be required to re-market its services. C. Specificity 37. Some commenters complain that the Social Contract does not specify which systems will receive upgrades, and at what level, or which libraries will receive cable connections and internet service. These commenters point out that subscribers on systems that do not receive upgrades pursuant to the Social Contract may nevertheless be subject to rate increases as a result of Comcast's creation of MPTs and NPTs. They assert that this result would constitute cross-subsidization between different classes of subscribers to the detriment of those subscribers that do not receive service on upgraded systems. The premise of this argument is that Comcast will finance its upgrades through rate increases imposed through the creation of MPTs and their later conversion to NPTs. 38. Comcast objects to any requirement that it specify the details of its system upgrades under the Social Contract. Noting that as recently as two years ago the commercial viability of high speed modem service was not foreseen, Comcast explains that it cannot commit at this time to upgrade particular systems. Comcast denies that the Social Contract will result in cross-subsidization and asserts that all systems will benefit from the Social Contract. 39. We believe the flexibility of the Social Contract's upgrade provisions is essential to enable Comcast to respond to the rapid pace of technological change. Comcast is in the best position to determine whether a particular upgrade is economically viable. Requiring Comcast to specify now which systems it will upgrade would not affect the level of the benefits subscribers will receive under the Social Contract. Because of changing business conditions and technological developments, such requirement would unnecessarily bind Comcast to an upgrade plan that ultimately may not be viable for Comcast or beneficial to its subscribers. 40. Even without a specific listing of which systems will be upgraded and which libraries will receive the Social Contract benefits, local franchising authorities will be able to monitor Comcast's progress in fulfilling its obligations. The Social Contract requires Comcast to submit to the Commission an annual progress report that describes how it has met the Social Contract requirements. Local franchising authorities will be able to review the annual report to assess whether Comcast has completed the required upgrades and deployed the other benefits of the Social Contract. By March 31, 1999, or shortly thereafter, franchising authorities will know whether Comcast has met its overall upgrade commitment and can determine whether Comcast is obligated to issue refunds related to its creation of MPTs on systems that did not meet the minimum technical requirements of the Social Contract. In response to the concerns of several commenters, Comcast has agreed to make a copy of the annual report available in the public files of each of its systems within 30 days after it files the report with the Commission. Within 60 days after the Effective Date of the Social Contract, Comcast will notify local franchising authorities that the report will be made available in this manner. The Social Contract has been modified to include these procedures. 41. Some local franchising authorities sought clarification as to whether Comcast would be permitted to create MPTs on the systems serving their communities. Comcast has agreed to modify the proposed Social Contract so that the systems on which Comcast may create MPTs are more easily identifiable. The modified language clarifies that Comcast may create an MPT only on systems that were not allowed an MPT under the Rate Resolution and on systems that do not offer an NPT in the form of an a la carte package. As revised, this section reads as follows (stricken text is deleted from the original language; underscored text is added): The provisions of Section B.1.a. shall not be applicable where a Comcast system already offers an MPT which is convertible to an NPT or where an NPT already exists as a result of a la carte packaging. Comcast will not create an MPT or NPT pursuant to Section B.1.a. in systems that already have an NPT created through a la carte packaging or where a system was permitted to create an MPT pursuant to Comcast's rate resolution, In the Matter of Comcast Communications, Inc. -- Final Resolution of Cable Programming Service Rate Complaints, 11 FCC Rcd 4029 (1995). Comcast states that any system that offers a tier marketed as "ValuePac" will not meet the eligibility standards. With this information and the modified Social Contract language, local franchising authorities and system managers should be able to determine readily whether Comcast is permitted under the Social Contract to create an MPT on any given system. In addition, the Social Contract requires that fully 80% of Comcast's subscribers will have 550 MHz service and 55 regulated channels by March 31, 1999. While the Social Contract does not specify which systems will receive such service, it does provide that in any system in which Comcast fails to provide 550 MHz service with 55 regulated channels, Comcast must refund any revenues generated from an MPT or NPT that exceed revenues Comcast would have earned based on the maximum permitted rates it could have charged had it not been permitted to create MPTs and NPTs. D. Commission Jurisdiction 42. The opposing commenters also contend that the Commission does not have jurisdiction to enter into social contracts or to mandate technical requirements. Tallahassee/ Howard County allege that the Commission does not have jurisdiction to take any action not explicitly authorized by Title VI of the Communications Act, which does not explicitly authorize social contracts. Tallahassee/Howard County aver that even if the Communications Act could be construed to authorize social contracts, the Commission has no authority to regulate CPST rates except upon the filing of a complaint, and therefore, they argue, the Comcast Social Contract is defective because it does not resolve CPST complaints. Other commenters add that local franchising authorities are better suited than the Commission to determine the needs of their local communities. 43. We reject the argument that the Commission lacks jurisdiction to enter into social contracts. The Commission has broad authority to regulate the rates and services offered by cable operators and is not limited to the powers specifically enumerated in Title VI of the Communications Act. Section 4(i) of the Communications Act authorizes the Commission to "perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this Act, as may be necessary in the execution of its functions." Section 4(j) provides that "[t]he Commission may conduct its proceedings in such manner as will best conduce to the proper dispatch of business and to the ends of justice." Social contracts clearly fall within this broad grant of authority. 44. Further, contrary to the commenters' assertions, Title VI of the Communications Act provides a specific jurisdictional foundation for social contracts. Section 623(c) of the Communications Act directs the Commission to ensure that rates for CPST services are not unreasonable and to establish criteria for identifying unreasonable rates. Congress did not mandate a particular method for identifying unreasonable rates but left this matter to the Commission. The Commission fulfilled its obligation to specify such criteria when it adopted rules governing CPST rates and when it determined in the Cost Order that flexible rate treatment could be justified as part of an upgrade incentive plan. 45. The Commission's authority to enter into the Social Contract is also founded on its power to grant waivers of its rules and regulations upon a showing of good cause. The finding of good cause may be tied to conditions imposed on the beneficiary of the waiver. Comcast seeks a waiver of our rules governing channel migration and channel additions to permit it to create MPTs and later convert them to NPTs. This is the only benefit Comcast will gain from the Social Contract. As a condition to the granting of the requested waivers, the Commission and Comcast have agreed that Comcast will pursue an aggressive upgrade schedule and fulfill its other obligations under the Social Contract. This is the premise of the Social Contract. 46. We do not agree that our authority to enter into social contracts is tied to the concurrent resolution of CPST complaints. Although our first two social contracts did resolve CPST complaints, we did not contemplate the resolution of rate complaints as a feature of upgrade incentive plans when we first introduced this concept, and our initial public interest determination in authorizing upgrade incentive plans was not premised on the concurrent resolution of rate complaints. We made this clear in the Second Report and Order, First Order on Reconsideration, and Further Notice of Proposed Rulemaking in MM Docket No. 93-215 and CS Docket No. 94-28, stating that we have not limited social contracts to operators that are the subject of pending rate proceedings. Thus, we reject the argument that the Comcast Social Contract is deficient because it does not resolve CPST complaints. 47. We also reject the argument that we lack jurisdiction to mandate technical requirements and that, therefore, we should not adopt the Social Contract. We are not mandating that Comcast meet any technical requirements. Rather, we have concluded that Comcast's proposal to meet certain technical standards is appropriate in the overall context of the Social Contract. E. Enforcement 48. Several opposing commenters claim that the enforcement mechanisms in the Social Contract are inadequate. They argue that the Social Contract should be amended to include additional penalties for Comcast's failure to perform its obligations, or that local franchising authorities should have a role in the enforcement of the Social Contract. Tallahassee/Howard County state that the enforcement provisions should not terminate on March 31, 1999, but instead should survive for five years from the Effective Date, when Comcast's home wiring and schools and libraries obligations terminate. 49. The Social Contract gives the Commission ample discretion to enforce its terms. No further enforcement mechanisms are necessary. Among other things, the Social Contract requires Comcast to provide refunds of MPT/NPT charges, plus interest, if it does not complete the required upgrades prior to March 31, 1999. In addition, the Commission is empowered by the Communications Act and its regulations to impose fines and forfeitures on companies that violate valid Commission orders, and the Social Contract explicitly recognizes this authority. The expiration of most of the terms of the Social Contract on March 31, 1999, including the specific enforcement provisions in Section III.H., will not affect the Commission's ability to enforce Comcast's compliance with its obligations regarding home wiring and benefits for schools and libraries, which expire after that date. If Comcast breaches its agreement to comply with such terms after March 31, 1999, Comcast's action will be a violation of this Order, which incorporates the terms of the Social Contract, and we will be entitled to impose fines and forfeitures on Comcast pursuant to our statutory and regulatory authority. This is the purpose of the Social Contract provision stating "Comcast agrees to continue to comply with Section III.D. [i.e., provisions governing home wiring and benefits to school and libraries] for five years after the Effective Date." Moreover, the Social Contract requires Comcast to report annually to the Commission regarding its progress in fulfilling its upgrade obligations. Local franchising authorities will have access to these reports and can monitor Comcast's compliance. 50. Because the Social Contract is between the Commission and Comcast, and is being adopted through a Commission order, local franchising authorities have no jurisdiction to enforce the Social Contract. Local authorities may freely enforce any valid requirements they have independently imposed on Comcast. To the extent that franchising authorities or other interested parties disagree with Comcast's interpretation of any provision of the Social Contract, perceive a lack of enforcement of its terms and conditions, or disagree with the remedies we may prescribe, they may seek redress before the Commission. F. Additional Upgrades and Expanded Public Benefits 51. Some commenters assert that the Social Contract should be modified to require a greater upgrade commitment by Comcast. ACM states that the Commission should obtain additional information from Comcast before we adopt the Social Contract. Other commenters assert that all schools and libraries, regardless of their distance from Comcast's activated plant, and all classrooms in all schools, should receive free connections and service. The State of New Jersey Ratepayer Advocate ("Ratepayer Advocate") adds that schools and libraries should receive their free internet connections and service as soon as Comcast deploys internet service commercially, not one year later. The City of Indianapolis Cable Communications Agency ("Indianapolis") contends that Comcast should conduct an outreach program to ensure that schools and libraries are aware of their right to request free connections and service. ACM urges us to amend the Social Contract to require Comcast to construct an institutional network on all systems in which Comcast increases rates pursuant to the Social Contract and to provide public, educational, and governmental ("PEG") channel capacity, services, facilities, and equipment on each of its systems. 52. In response, Comcast asserts that, contrary to the suggestions of opposing commenters, the Social Contract benefits exceed Comcast's existing obligations. According to Comcast, it has never previously agreed or been required to provide free internet access to public libraries. Comcast adds that it cannot commit to provide internet service to schools and libraries less than one year after such service is deployed commercially because its past experience with the roll-out of new services has shown that delays in implementing new technology are common. It would not be practical, Comcast asserts, to attempt to meet an expedited deployment schedule for internet service to schools and libraries. In response to the comment regarding the need for outreach efforts, Comcast points out that it is already notifying schools and libraries of their right to request the benefits of the Social Contract and has publicized the Social Contract through various means. 53. The upgrade and other technical commitments Comcast has agreed to undertake are substantial, and we do not believe additional requirements are necessary to justify the limited benefits Comcast will receive under the Social Contract. In exchange for the right to create MPTs and NPTs on some of its systems, Comcast has agreed to upgrade the cable plant on virtually all of its systems, to enhance subscribers' control over their inside wiring, to provide free connections and cable service to all schools within 200 feet of its activated plant on all of its systems, to provide free connections to a minimum of 250 public libraries throughout its service areas, and to provide free cable modems and high- speed internet service to all connected schools and libraries in its service areas. 54. Although the Social Contract does not require Comcast to upgrade all its systems to a minimum level, the sole benefit available to Comcast under the Social Contract -- the right to create MPTs -- is contingent on Comcast's ability to meet the minimum standard of 550 MHz of capacity and 55 regulated channels of service. The Social Contract is not intended to force Comcast to undertake upgrades that are not economically viable, and Comcast is free to forego the MPT benefit with respect to any system. Even systems that are not upgraded to 550 MHz will benefit from the other aspects of the Social Contract. 55. In addition, the Social Contract cannot, and is not intended to, provide benefits to every institution that desires them. It nevertheless brings new and improved educational opportunities to public and private schools. Comcast will bear the cost of providing the required cable connections and services, and it will not seek to recover such costs through its rates. The benefits of the Social Contract are broad and will help many schools that lack access to Comcast's services. Even schools and libraries that, because of their distance from Comcast's activated plant, are not eligible for free cable connections will benefit from the Social Contract because they will be able to obtain connections at Comcast's cost. Comcast also will offer additional outlets at cost in schools that request them, and Comcast will fully wire any school and install outlets in each classroom at no charge if it is requested to do so and the school is being overhauled or newly constructed. The benefits to schools and libraries are significant even if other options exist for these institutions to secure internet access. 56. We agree that schools and libraries in Comcast's service areas should be apprised of the benefits that are available to them under the Social Contract. In light of Comcast's representations in its reply comments that it is already notifying schools and libraries of their right to request cable connections and service, we believe it is not necessary at this time to require Comcast to conduct an outreach program. The many comments in support of the Social Contract that we have received from schools and libraries attest to the efforts Comcast has already undertaken. G. Non-Discrimination 57. Betty Ann Kane states that the Social Contract does not guarantee that small and rural communities will receive the benefits of the Social Contract because Comcast's upgrade obligation is stated in terms of the number of subscribers, rather than the number of systems, that will be affected by the upgrade requirements. She says Comcast could fulfill its obligation by upgrading only its largest systems, which could leave subscribers on smaller systems without any of the system improvements required by the Social Contract. Ms. Kane proposes that the percentage requirements in the Social Contract be recast as a percentage of all of Comcast's systems, instead of a percentage of subscribers. She maintains that this would restrain Comcast from bestowing the benefits of the Social Contract primarily on large systems with many subscribers and would induce Comcast to include smaller systems in its upgrade plans. Ms. Kane notes that subscribers in Rehoboth Beach, Delaware, and surrounding areas cannot receive over-the-air television and have "identified high rates and rate increases, frequent outages, and limited programming as their primary concerns with the current Comcast franchise." 58. The City of Detroit ("Detroit") is also concerned about the possibility that certain classes of subscribers will not receive all of the benefits of the Social Contract. Detroit states that in planning its upgrades and the deployment of internet service, Comcast might exclude systems or neighborhoods in economically depressed areas. 59. It is important to ensure that subscribers in economically disadvantaged areas are not left behind in the information revolution. In response to the comments of Ms. Kane and Detroit, Comcast has agreed to modify the Social Contract to provide that it will not discriminate among its systems on the basis of the socio-economic status of a system's subscribers in determining which systems will receive upgrades. This modification is similar to provisions we have included in other Social Contracts. Although the modification may not address all of Ms. Kane's concerns with respect to small and rural systems, all systems will enjoy some benefit from the Social Contract even if they do not receive system upgrades. H. Procedural Matters 60. Sacramento claims that our adoption of the Social Contract violates the due process rights of Comcast's subscribers because local franchising authorities and subscribers did not have the opportunity to participate in the development of the proposed Social Contract before the Commission released it for public comment. Sacramento also maintains that Comcast was required by the guidelines set forth in the Cost Order to provide the proposed Social Contracts to franchising authorities for their review and comment before it submitted the proposal to the Commission. 61. We do not agree with Sacramento. We have previously determined that our procedures for soliciting public comment on proposed social contracts justify a waiver of the Cost Order to the extent it requires cable operators to submit proposed social contracts to local franchising authorities before they submit their proposals to the Commission. While we do not wish to discourage cable operators from submitting social contract proposals to local franchising authorities for comment, we are satisfied that the procedures we have followed here and in evaluating other social contracts afford subscribers and franchising authorities a meaningful opportunity to present their views. In this instance, we published a public notice announcing the proposed adoption of the Social Contract, summarizing its terms, and allowing interested parties 45 days to submit their comments. In addition, Comcast served copies of the public notice and the Social Contract on all local franchising authorities having jurisdiction over its systems. We have accepted and considered all of the numerous comments we received, including opposing comments that were filed out of time or were otherwise not permitted by the terms of the public notice. In response to the comments we received, we are adopting several modifications to the proposed Social Contract. All of these facts support our view that local franchising authorities and subscribers have had a meaningful opportunity to participate in the development of the Social Contract that we are adopting. Our procedures have not deprived interested parties of their due process rights. I. Miscellaneous Concerns 1. Conditions Applicable To MPTs 62. The Ratepayer Advocate suggests that the Social Contract be modified to prohibit Comcast from migrating services from a BST to an MPT. The Ratepayer Advocate states that this is necessary to protect BST subscribers from having to pay higher rates to continue to receive existing services. 63. We do not believe this restriction is necessary to protect subscribers' interests. Our rules already prohibit Comcast from removing from the BST any channel required by statute to be included. Under our rules, Comcast would be able to move any other channels out of the BST at its discretion. The Social Contract therefore does not expand Comcast's existing rights with respect to the migration of channels out of the BST. 64. The Georgia Municipal Association ("GMA") states that we should modify the Social Contract to require Comcast to notify subscribers of their right to decline or terminate MPT service free of charge. GMA points out that our rules allow subscribers to terminate service free of charge within 30 days after they receive notice of a rate increase or retiering. 65. We agree with GMA, and Comcast has assented to GMA's proposed modification of the Social Contract. The required notification will not unduly burden Comcast, and the information to be provided will enable subscribers to realize the benefit of increased programming choice that the creation of MPTs and NPTs affords. Section III.B.1.a. of the Social Contract has been modified to require the additional notification. 66. The Cable Authority of Paducah, Kentucky ("Paducah"), asks the meaning of the term "per channel" as it is used in the Social Contract requirement that services moved to an MPT will be priced at a rate equal to the per channel rate applicable to the tier from which they are moved. Paducah notes that the term "per channel" is not defined in the Social Contract and asks whether the existence of a pending rate proceeding will affect the rates for services that are moved to an MPT from a tier that is subject to the rate proceeding. 67. The term "per channel" is intended to refer to the term "per channel" as it is used in our regulations and rate forms, which describe the procedures for determining "per channel" rate adjustments. If the rates for tiers from which channels are migrated are under review by a local franchising authority or the Commission when Comcast migrates services into an MPT, then the rates for the migrated channels will be subject to adjustment based on the outcome of the pending rate review. The term "per channel rate" is not meant to allow Comcast to charge a rate that is determined to exceed the maximum permitted rate. 2. Restrictions on Internet Service 68. Indianapolis recommends that the Social Contract be modified to prohibit Comcast from restricting schools' and libraries' use of any internet service Comcast may provide them under the Social Contract. Indianapolis apparently fears that the announced investment of $1 billion by Microsoft, Inc. ("Microsoft"), in Comcast may induce Comcast to force schools and libraries to use Microsoft software or internet platforms. 69. We do not believe Indianapolis's concern warrants modification of the Social Contract. The fears expressed by Indianapolis are speculative and vague. We have no reason to believe that Comcast is likely to structure its internet services in a way that unduly restricts users' access to the internet. 3. Effective Competition Standard 70. The restrictions on MPT rate increases would not apply to Comcast systems whose prices are constrained by competition or to systems that are subject to effective competition. Detroit questions the reference to systems whose "prices are constrained by competition" and states that the quoted phrase is not a statutorily sanctioned standard for determining when a cable operator is not subject to rate regulation. 71. The reference to systems whose prices are constrained by competition has been removed from the Social Contract. The phrase is confusing and is not necessary to ensure that systems that are subject to effective competition are exempt from the MPT rate increase restriction. Comcast has agreed that this modification to the Social Contract is appropriate. VI. CONCLUSION AND ORDERING CLAUSES 72. For the reasons discussed above, we conclude that it is in the public interest to adopt the proposed Social Contract, as revised in accordance with the discussion set forth above. 73. Accordingly, IT IS ORDERED that the Social Contract attached to this Order IS ADOPTED AND INCORPORATED HEREIN. 74. IT IS FURTHER ORDERED that waivers of 47 C.F.R.  76.922(e)(3)(ii), 76.922(g), and 76.987(b)(2)-(b)(3), as discussed herein, ARE GRANTED. 75. IT IS FURTHER ORDERED that any waivers not explicitly mentioned herein, and any modifications to Commission forms, that are necessary to effectuate the terms of the Social Contract ARE GRANTED. 76. IT IS FURTHER ORDERED that the Cable Services Bureau IS GIVEN delegated authority to oversee implementation of the Social Contract, as adopted. 77. IT IS FURTHER ORDERED that this Order IS EFFECTIVE upon adoption. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary APPENDIX Page of 4 Comments in Support of the Social Contract State and Local Governments: Township of Abington, Pennsylvania City of Arnold, Pennsylvania Township of Belleville, New Jersey (separate letters from Hon. Victor M. Canning, Mayor, and Mario Drozdz, Council Member) City of Burton, Michigan Charter Township of Clinton, Michigan (separate letters from *James R. Sinnamon, Supervisor; and Dennis L. Tomlinson, Clerk) * Charter Township of Grand Blanc, Michigan Village of Grosse Pointe Shores, Michigan Macomb County, Michigan (separate letters from Board of Commissioners; Carmella Sabaugh, Clerk/Register of Deeds; William H. Hackel, Sheriff; and *Ted B. Wahby, Treasurer) City of Mount Clemens, Michigan State of New Jersey Board of Public Utilities City of Philadelphia, Pennsylvania Town of Plainfield, Indiana * Borough of Red Bank, New Jersey * City of Southgate, Michigan City of St. Clair Shores, Michigan * City of Taylor, Michigan City of Trenton, New Jersey * Upper Moreland Township, Pennsylvania, Board of Commissioners City of Utica, Michigan (separate letters from *Hon. Jacqueline K. Noonan, Mayor; and M. Catherine McGrail, City Clerk) City of Warren, Michigan (separate letters from Hon. Mark A. Steenbergh, Mayor; Lynn Armstrong, City Clerk; and Daniel E. Woodhouse, City Councilperson) Schools, Colleges, and Libraries: * Association of Independent Colleges and Universities in New Jersey Baltimore County Public Schools (Towson, Maryland) Belleville High School Students and Staff (Belleville, New Jersey) (71 individual letters) Belleville Public Schools (Belleville, New Jersey) (separate letters from Frank Montagna and Judy Piscatowski, Trustees, Belleville Board of Education) * Brookdale Community College (Lincroft, New Jersey) * Clintondale Community Schools (Clinton Township, Michigan) * Detroit Public Schools (Detroit, Michigan) * Eatontown Public Schools (Eatontown, New Jersey) Fraser Public School District (Fraser, Michigan) * Free Public Library of Verona (Verona, New Jersey) * Hampton Township School District (Allison Park, Pennsylvania) * Irvington Public Library (Irvington, New Jersey) APPENDIX Page of 4 Macomb Community College (Warren, Michigan) (separate letters from Albert L. Lorenzo, President; and Karl J. Wagner, Vice President for Community and Employer Services) Macomb Community College Center for Continuing Education (Fraser, Michigan) * McManus Middle School Multimedia Center (Linden, New Jersey) * New Kensington-Arnold School District (New Kensington, Pennsylvania) * Leona M. Ricchuito, Teacher, Grade 6, Middle School, New Kensington-Arnold School District (New Kensington, Pennsylvania) Riverview School District (Oakmont, Pennsylvania) Board of Education of Roselle Park, New Jersey Shore Regional High School District (West Long Branch, New Jersey) South Lake Schools (St. Clair Shores, Michigan) Taylor School District (Taylor, Michigan) Utica Community Schools (Sterling Heights, Michigan) * Warwick Pointe Academy (Grand Blanc, Michigan) Waterford School District (Waterford, Michigan) Congressional Representatives and State Legislators: Hon. Robert E. Andrews, U.S. House of Representatives, 1st District, New Jersey Hon. Jon D. Fox, U.S. House of Representatives, 13th District, Pennsylvania Hon. Frank Pallone, Jr., U.S. House of Representatives, 8th District, New Jersey Hon. Jim Saxton, U.S. House of Representatives, 3rd District, New Jersey Hon. Ellen M. Bard, Commonwealth of Pennsylvania House of Representatives, 153rd Legislative District Hon. John O. Bennett, Senate Majority Leader, New Jersey Senate, District 12 Hon. William J. Callahan, State of Michigan House of Representatives, 26th District Hon. Nick Ciaramitaro, State of Michigan House of Representatives, 27th District * Hon. Lita Indzel Cohen, Commonwealth of Pennsylvania House of Representatives, 148th District * Hon. Jack Collins, Speaker, New Jersey General Assembly, 3rd District Hon. Ken DeBeaussaert, State of Michigan Senate * Hon. Donald T. DiFrancesco, President, New Jersey Senate, 22nd Legislative District Hon. Sharon L. Gire, Michigan House of Representatives, 31st District * Hon. Reed Gusciora, New Jersey General Assembly, 15th District Hon. Stewart J. Greenleaf, Senate of Pennsylvania, 12th District Hon. Peter A. Inverso, New Jersey Senate, 14th District Hon. Paul R. Kramer, New Jersey General Assembly, 14th District Hon. F. Joseph Loeper, Majority Leader, Senate of Pennsylvania, 26th District Hon. Frank A. Salvatore, Majority Caucus Secretary, Senate of Pennsylvania, 5th District * Hon. Robert W. Singer, New Jersey State Senate, 30th District * Hon. John J. Taylor, Commonwealth of Pennsylvania House of Representatives, 177th District Hon. Shirley K. Turner, New Jersey General Assembly, 15th District * Hon. Terry E. VanHorne, Commonwealth of Pennsylvania House of Representatives, 54th District Hon. Barbara W. Wright, New Jersey General Assembly, 14th District APPENDIX Page of 4 Other: * Allegheny Intermediate Unit (Pittsburgh, Pennsylvania) * Alle-Kiski Literacy Council (New Kensington, Pennsylvania) Baltimore County Chamber of Commerce (Towson, Maryland) ** Comcast Cable Communications, Inc. Hon. William A. Crouchman, District Judge, 40th District of Michigan Discovery Communications, Inc. * Dennis F. Gianotti (New Kensington, Pennsylvania) * International Institute of Flint (Flint, Michigan) * Matrix Special Events, Inc. (Cranbury, New Jersey) Mercer County Chamber of Commerce (Trenton, New Jersey) The National Alliance For Excellence, Inc. (Shrewsbury, New Jersey) * New Jersey Council for the Humanities * Marta C. Person, Square Foot (Red Bank, New Jersey) Red Bank RiverCenter (Red Bank, New Jersey) * Riverview Medical Center (Red Bank, New Jersey) Trenton Rotary Club (Trenton, New Jersey) Union County Arts Center Inc. (Rahway, New Jersey) Comments Requesting Clarification, Modification, or Rejection State and Local Governments: Chesterfield County, Virginia City of Detroit, Michigan * Charter Township of Flushing, Michigan City of Fort Lauderdale, Florida Georgia Municipal Association City of Indianapolis, Indiana, Cable Communications Agency *** City of Indianapolis, Indiana, Cable Communications Agency Betty Ann Kane, Commissioner, City of Rehoboth Beach, Delaware, and Chairman, Committee on Cable Television State of New Jersey, Division of the Ratepayer Advocate Cable Authority of Paducah, Kentucky Town of Palm Beach, Florida The Village of Payne, Ohio City of Pontiac, Michigan * Town of Signal Mountain, Tennessee City of Tallahassee, Florida, and Howard County, Maryland (joint comments) ** City of Tallahassee, Florida, and Howard County, Maryland (joint comments) Cities of Tuscaloosa, Alabama; Ft. Wayne, Indiana; Gadsden, Alabama; Boca Raton, Florida; Mobile, Alabama; and Lower Merion, Pennsylvania (joint comments). Sacramento Metropolitan Cable Television Commission (Sacramento, California) APPENDIX Page of 4 Other: Alliance for Community Media * Neil J. Lehto (Sterling Heights, Michigan) * Denotes late-filed comments. ** Denotes reply comments *** Denotes late-filed supplemental comments ATTACHMENT SOCIAL CONTRACT FOR COMCAST CABLE COMMUNICATIONS, INC. TABLE OF CONTENTS PAGE NO. I. BACKGROUND AND SUMMARY..........................................................................................1 II. DEFINITIONS..........................................................................................................................2 III. TERMS AND CONDITIONS..................................................................................................3 A. INFRASTRUCTURE UPGRADE COMMITMENT....................................................3 1. TECHNICAL COMMITMENT........................................................................3 2. REPORTING REQUIREMENTS....................................................................4 B. MIGRATED PRODUCT TIERS AND NEW PRODUCT TIERS................................5 1. MIGRATED PRODUCT TIERS ....................................................................5 2. NEW PRODUCT TIERS.................................................................................6 C. ACQUIRED AND DIVESTED SYSTEMS..................................................................7 D. ADDITIONAL CONSUMER BENEFITS....................................................................7 1. SERVICE TO PUBLIC LIBRARIES...............................................................7 2. SERVICE TO SCHOOLS.................................................................................8 3. CABLE HOME WIRING COMMITMENTS...................................................10 E. NO IMPAIRMENT OF LOCAL AUTHORITY...........................................................11 F. MODIFICATION AND TERMINATION.....................................................................11 G. WAIVERS AND PREEMPTIONS...............................................................................11 H. AUTHORITY TO ENFORCE CONTRACT................................................................12 I. EFFECTIVE DATE AND TERM..................................................................................12 J. LEGAL CHALLENGES................................................................................................12 K. PUBLIC NOTICE........................................................................................................13 L. FORCE MAJEURE.......................................................................................................13 M. SEVERABILITY.........................................................................................................14 N. ENTIRE UNDERSTANDING......................................................................................14 SOCIAL CONTRACT FOR COMCAST CABLE COMMUNICATIONS, INC. I. BACKGROUND AND SUMMARY The "Social Contract" set out in this document (the "Contract") relates to services offered by Comcast Cable Communications, Inc. ("Comcast") and its subsidiaries and affiliated cable companies actually or potentially subject to regulation under the terms of the applicable provisions of Title VI of the Communications Act of 1934, as amended (the "Act"). The Federal Communications Commission ("Commission") finds that the Contract will advance the public interest by improving Comcast's cable service by substantially upgrading and improving channel capacity, system reliability and picture quality of its United States cable systems and providing substantial customer service benefits that will greatly improve the public's access to Comcast's communications services. The Contract has been negotiated by Comcast and the Commission in accordance with the Commission's authority to consider and adopt "social contracts" as an alternative to other regulatory approaches applicable to cable television rates, as modified and amplified in the Orders adopting the Continental Social Contract and the Time Warner Social Contract, and its authority to regulate Comcast's cable services under the Act, particularly in light of the Statement of Policy set forth in Section 2(b) of the Cable Television Consumer Protection and Competition Act of 1992. This Contract covers those Comcast cable systems owned as of the Publication Date (as hereinafter defined). II. DEFINITIONS For purposes of this Contract, the following terms shall have the meaning set forth below. A. "Basic Service Tier" or "BST" means the cable service level that includes the signals of any local television broadcast stations and any public, educational or governmental access channel required by the relevant franchise to be carried on the BST. B. "Cable Programming Services Tier" or "CPST" means any tier of video programming service, but shall not include (1) video programming carried on the BST; (2) video programming when offered on a per channel, multiplexed,   la carte or per program basis; (3) any Migrated Product Tier ("MPT"); or (4) any New Product Tier ("NPT") as defined by the Going Forward Rules and 47 C.F.R.  76.987. C. "Cost" means actual dollars used to purchase or acquire materials as documented on invoices, statements, canceled checks, etc. D. "Effective Date" means the date on which the Commission adopts an order approving this Contract. E. "Going Forward Rules" means the Commission's rules adopted in the Sixth Order on Reconsideration, Fifth Report and Order, and Seventh Notice of Proposed Rulemaking, in MM Docket Nos. 92-266 and 93-215, including all subsequent clarifications and amendments. F. "Interest" means the Internal Revenue Service rate of interest for tax overpayments. G. "Maximum Permitted Rate" or "MPR" means the maximum rate that Comcast could charge for each regulated channel pursuant to the Commission's rate regulations. H. "Migrated Product Tier" or "MPT" means a tier consisting of up to four services moved from a system's existing regulated tiers and to which other services may be added, as described in Section III.B.1. below. I. "New Product Tier" or "NPT" means a tier as defined in 47 C.F.R.  76.987, including subsequent modifications or amendments. J. "Publication Date" means the date on which the Commission releases its initial Public Notice relating to this Contract. K. "LFA" means Local Franchising Authority. III. TERMS AND CONDITIONS OF THE SOCIAL CONTRACT A. INFRASTRUCTURE UPGRADE COMMITMENT 1. Technical Commitment Comcast will upgrade its cable systems so that, by March 31, 1999, the following minimum conditions will be met:  At least 80% of Comcast's subscribers will be served by a system with a capacity of at least 550 MHz.  At least 60% of Comcast subscribers will be served by a system with a capacity of at least 750 MHz.  Systems serving at least 80% of Comcast subscribers will utilize fiber optic technology to transport signals from the system headend to neighborhood nodes.  At least 80% of Comcast's systems will utilize addressability or other suitable technology to make interactive services available to subscribers and to enhance the ability of consumers to make service choices. Comcast will make its best efforts to deploy new technology in a manner that is not disruptive to consumers. Comcast will distribute its system upgrade efforts so as not to discriminate among subscribers based on socio-economic status. 2. Reporting Requirements a. No later than ninety (90) days following the end of each calendar year that the Contract is in effect, Comcast will provide an annual progress report to the Commission outlining:  the number of subscribers served by systems, and the identity of those systems, with a capacity of either 550 MHz or 750 MHz;  the number of channels subject to regulation on each headend;  the identity of systems with MPTs created pursuant to this Contract; and  the aggregate amount which has been spent on the upgrade. No later than sixty (60) days after the Effective Date Comcast will serve a notice on all affected LFAs to advise them that a copy of the annual progress report that Comcast provides to the Commission will be placed in each cable system's public inspection file within thirty (30) days after it is filed with the Commission. b. The Commission shall have the right to inspect the books and records of Comcast and interview corporate employees for the purpose of determining compliance with the terms of this Contract. B. MIGRATED PRODUCT TIERS AND NEW PRODUCT TIERS 1. Migrated Product Tiers a. On each of its systems having a capacity of at least 550 MHz and providing 55 channels subject to rate regulation on or before March 31, 1999, Comcast may move a maximum of four regulated services to a single MPT except as provided for in subsection B.1.e. Because the MPT will initially consist of services subscribers have already asked to receive, Comcast will not be required to re-market the MPT to existing subscribers. Comcast may not require the subscription to any tier, other than the BST, as a condition for subscribing to an MPT, and may not require subscription to an MPT as a condition for subscribing to a CPST. Concurrently with its creation of an MPT, Comcast shall notify all subscribers on affected systems that within thirty (30) days after such notification, they have the right to decline the MPT and to drop any tier other than the BST without charge. b. Initially, Comcast will set the rate for a franchise's MPT at the same level, on a per channel basis, that is set for that system's regulated tier from which the channels were removed. There will be no limitation on the number of new services Comcast may add to an MPT. Comcast may increase the price of an MPT to reflect new services added to the MPT by an amount not to exceed $.20 per added channel, plus the actual license fee(s) for the added channel(s). Inflation and external cost increases will be permitted on the migrated services in the manner permitted for CPSTs. c. Where the Commission finds that a system subject to this Contract is subject to effective competition, then the provisions of this Contract which limit Comcast's ability to take rate increases shall not apply. d. Failure to Meet Upgrade Commitment. If by March 31, 1999, Comcast has failed to provide a capacity of 550 MHz and 55 regulated channels for any headend in which it has established an MPT or an NPT under this Contract, Comcast will be required to refund any revenues collected for services provided over such a headend on an MPT or an NPT operated under this Contract which exceed the MPR which Comcast would have been permitted to charge for such services. All refunds shall include all applicable interest. Refunds shall be structured so as to compensate those customers receiving service who have not benefitted from the technical upgrade requirements contained in Section A.1. e. Comcast will not create an MPT or NPT pursuant to Section B.1.a. in systems that already have an NPT created through a la carte packaging or where a system was permitted to create an MPT pursuant to Comcast's rate resolution, In the Matter of Comcast Communications, Inc. -- Final Resolution of Cable Programming Service Rate Complaints, 11 FCC Rcd 4029 (1995). 2. New Product Tiers On or after January 1, 1998, Comcast may reclassify each MPT as an NPT. These NPTs will be treated as all other NPTs under the Commission's rules. This reclassification is consistent with Section 76.981(b) of the Commission's rules and will not constitute a negative option, and Comcast will not be required to re-market the reclassified NPT to existing subscribers of the MPT. Nothing in the Contract shall be construed to prevent Comcast from creating other NPTs and/or offering   la carte channels pursuant to the Commission's rules. C. ACQUIRED AND DIVESTED SYSTEMS 1. Cable systems acquired by Comcast after the Publication Date, either through direct purchase or through a system trade, may be incorporated into this Contract only after the acquisition has closed and the Commission and Comcast have agreed on an amendment to include such systems under this Contract. 2. MPT adjustments that Comcast has implemented under the Contract will continue to apply to cable systems divested by Comcast through a system sale or trade. Other rights and obligations will apply only if the new owner elects, with the concurrence of the Commission, for the provisions of this Contract to apply to such systems. Such Commission concurrence shall be expeditiously decided and shall not be unreasonably withheld. D. ADDITIONAL CONSUMER BENEFITS 1. Service to Public Libraries Comcast will offer to make available to a specified number of public libraries as described below located within 200 feet of the activated plant of its cable systems (i) a cable service connection, (ii) a cable modem and (iii) free unlimited cable modem service through that modem. Such connections will be made free of charge and as promptly as possible. Upon request, Comcast will provide, at Cost, a service connection to any such library located within its franchise areas which is beyond 200 feet of the activated plant of its cable systems. Additionally, Comcast will provide any such library with a cable modem and free unlimited cable modem service. a. Comcast will make every reasonable effort to provide cable modem service to a minimum of 100 libraries (assuming that number of qualifying libraries accepts Comcast's offer) during the three-year period beginning on the Effective Date and a minimum of 250 libraries during the five-year period beginning on the Effective Date. b. In general, the cable modem service will be made available within one year after Comcast makes commercially available to residential customers a personal computer-based internet access service. Comcast reserves the right to provide telephone-return or other alternative cable modem service technologies on a pilot basis in other communities. c. The staff from participating libraries will be able to participate in any local workshops provided to teachers in their area pursuant to Comcast's modem commitment to K-12 schools. d. Comcast agrees not to seek to recover the cost for these connections from cable customers as external or other costs. 2. Service to Elementary and Secondary Schools a. Comcast will provide a service connection at one outlet to each public school and to each private school (grades K-12) located within 200 feet of the activated plant of its cable systems. Such connections will be made free of charge and as promptly as possible to all unserved schools requesting such a connection. Upon request, Comcast will provide, at Cost, such a service connection to any other unserved K-12 public or private school located within its franchise areas but beyond 200 feet of the activated plant of its cable systems. If any internal wiring installation is requested to serve additional outlets in any school, it will be provided at Cost; provided, however, that such internal wiring will be provided without charge if Comcast is able to coordinate with other comparable electrical wiring installation in cases of new construction or substantial rehabilitation of existing schools in Comcast's franchise areas. b. Any public or private school connected pursuant to this subsection may elect to install its own internal wiring and to bear the cost thereof. c. Free BST, CPST, MPT and NPT service will be provided to each outlet in all connected public and private schools. d. Comcast will provide a free monthly educational program listing to each connected school. Additional copies of such program listings will be provided, if requested by a school, at Cost. Such educational program listings will identify and describe programming on the Comcast system that is appropriate for use in the classroom and will provide suggested curriculum support ideas. e. Comcast will develop and provide to each connected school materials for teachers that explain the educational applications of Comcast's broadband cable systems and services. The materials will include a self-explanatory notebook and video. One free copy of such materials will be provided to all connected schools. Additional copies of such materials will be provided, upon request, at Cost. f. Within one year after Comcast makes commercially available to residential customers a personal computer-based internet access service within a specific franchise area or node utilizing cable modem technology (cable modem service), Comcast will, upon request by the local school department, provide each public or private K-12 school (as described at D.2.a.), supra, within such franchise area or node with one free connection to such on-line service. Upon request, each connected school will receive one free cable modem and free, unlimited access to the Comcast cable modem service for use. At a minimum, such on-line service will provide access to the Internet. Additional cable modems and certain operational support and services (for example, assisting connected schools in setting up and maintaining reliable Internet connections), will be provided to connected schools at Cost, upon request. g. Comcast will sponsor local workshops on use of the cable modem service in each franchise area where the service is commercially available to educate teachers about the educational services being provided by Comcast and to provide them with an opportunity for hands-on training. Comcast will provide these workshops for five years from the Effective Date of this Contract. h. Comcast agrees not to seek to recover the cost for these connections from cable customers as external or other costs. 3. Cable Home Wiring Commitments a. Prior to a residential customer's termination of cable service, Comcast will not restrict the ability of a customer to remove, replace, rearrange, or maintain any cable wiring located within the interior space of the customer's individual dwelling unit, so long as such actions do not interfere with the ability of the Comcast system to meet Commission technical standards or to provide services to, and collect associated revenues from, that customer or from any neighboring customer in a multiple dwelling context. Comcast's ownership rights to such cable home wiring shall be no less than that provided by applicable law or regulation. b. Upon commencement of service, and annually thereafter, Comcast will notify customers of their rights and options relating to cable home wiring. Such notice will advise customers that they may either: (i) remove, replace, rearrange, or maintain the cable home wiring themselves; (ii) select a qualified third-party contractor to perform these services; or (iii) request the Comcast system to provide such services at Cost. c. Such notice will inform customers that if any cable home wiring is installed or rearranged by anyone other than Comcast, and any harmful or improper signal leakage occurs as a result, the customer may be held responsible for the cost of rectifying the problem. Comcast recognizes that it is required by Commission rules to terminate service to any location where signal leakage problems are not corrected. d. Such notice will encourage Comcast customers to use high-quality home wiring materials to avoid signal leakage and to maintain signal quality. E. NO IMPAIRMENT OF LOCAL AUTHORITY Nothing herein shall affect the enforceability of any otherwise valid preexisting local franchise agreement, ordinance, local law, or regulation which provides benefits relating to system upgrades or the wiring of schools or libraries, nor shall LFAs be restricted in their authority to negotiate for such benefits after the Effective Date. F. MODIFICATION AND TERMINATION 1. The Contract may not be terminated or modified without the mutual agreement of Comcast and the Commission. The Commission's consent to any such termination or modification shall be demonstrated by an order issued by the Cable Services Bureau or, at the Commission's option, by the Commission itself. 2. Any proposed modification to the Contract will be placed on public notice. Comcast shall serve all LFAs affected by the proposed modification with a copy of the public notice. The notice shall state that the LFA may submit comments to the Commission and shall provide one copy to Comcast no later than thirty (30) days following the release date of the public notice. Comcast shall have fifteen (15) days to file reply comments. G. ALL NECESSARY WAIVERS AND PREEMPTIONS DEEMED GRANTED In addition to the specific waivers of the Commission's rules identified in the Contract, the order approving the Contract shall affirmatively state that any and all waivers of the Commission's rules, and any modifications to Commission forms, necessary to effectuate the terms of the Contract are deemed to be granted. The Commission will not assert in any proceeding that Comcast's compliance with the terms of the Contract violates any Commission rule or order, and, in any proceeding before the Commission brought by a third party, a showing by Comcast that it has complied with the terms of the Contract shall constitute a defense to any claim that Comcast's actions in meeting the terms of the Contract constitute a violation of any applicable Commission rule or order. H. AUTHORITY TO ENFORCE CONTRACT For purposes of the Commission's authority to enforce any provision of this Contract against Comcast, including enforcement actions brought in U.S. District Court, Comcast agrees that any breach of this Contract by Comcast shall be considered the equivalent of a violation of an order of the Commission, entitling the Commission to exercise any rights and remedies attendant to the enforcement of a Commission order. However, aside from this limited purpose, Comcast and the Commission agree that a breach of this Contract by Comcast is not to be considered by any other party as the equivalent of a violation of an otherwise-valid Commission regulation or order. In particular, any failure to comply with this Contract shall not be a basis for any denial of a franchise renewal by, or other enforcement action of, any LFA. I. EFFECTIVE DATE AND TERM This Contract shall become effective when the Commission adopts an order approving the Contract and shall continue in effect through March 31, 1999, subject to Section III.F. above regarding modification and termination. Except, however, that Comcast agrees to continue to comply with Section III.D. for five years after the Effective Date. J. LEGAL CHALLENGES 1. Comcast waives any right it may have to any judicial review or appeal, or any other right to otherwise challenge or contest the validity of any order by the Commission adopting this Contract, or to use this Contract as evidence in any such proceeding. Comcast agrees that the provisions of this Contract shall be incorporated by reference in the Commission's order formally approving this Contract. Comcast and the Commission agree that they will each actively defend, before any forum, any Commission order adopting the provisions of this Contract against any appeal of or other legal challenge by any third party to any such order. Comcast and the Commission each agree that they will reasonably cooperate with the other in any such defense of the Contract and any such order. 2. If the Commission, or the United States on behalf of the Commission, brings an action in any United States District Court to enforce the terms of any Commission order adopting this Contract, Comcast agrees, subject to the terms of the immediately preceding paragraph, that it will not contest the validity of such Commission order, or the Commission's authority to enter into the Contract. Comcast reserves the right, in defense of such an enforcement action, to demonstrate that it has complied with the provisions of the Contract or to assert its own interpretation regarding any performance obligations imposed by the Contract which may be subject to dispute. K. PUBLIC NOTICE The Commission will promptly issue a public notice in which the Commission proposes to adopt the Contract as a final order governing Comcast's provision of cable services, and shall provide interested parties with forty-five (45) days to comment on the Contract and an additional fifteen (15) days in which to file reply comments. Comcast will serve copies of the public notice and Contract on all affected LFAs. L. FORCE MAJEURE Comcast shall not be deemed in breach of its commitments under this Contract in the event of any delay or failure in performance by any Comcast system from any cause beyond its reasonable control and without its fault or negligence, including, but not limited to, acts of God, acts of civil or military authority, government regulations, embargoes, epidemics, war, terrorist acts, riots, insurrections, fires, explosions, earthquakes, nuclear accidents, floods, strikes, power blackouts, unusually severe weather conditions, or inability to secure local permits after all diligent efforts by Comcast to secure such permits. M. SEVERABILITY If any provision, clause or part of this Contract is invalidated by order of any court having proper jurisdiction over the subject matter of this Contract, the remainder of this Contract shall not be affected thereby and shall remain in full force and effect; provided, however, that, if either party reasonably determines that such invalidation is material to this Contract, the parties shall negotiate in good faith to reconstitute the Contract in a form that is, to the maximum extent possible, consistent with both the original intent of both parties in entering into this Contract and the rationale of such invalidation order. N. ENTIRE UNDERSTANDING This Contract, as it may be amended in accordance with the terms herein, constitutes the entire agreement between Comcast and the Commission with respect to the subject matter of this Contract and supersedes all prior agreements and understandings, whether oral or written, between Comcast and the Commission with respect to the subject matter of this Contract. No representation, warranty, promise, inducement, or statement of intention has been made by Comcast or the Commission which is not embodied in this Contract, and neither party shall be bound by, or be liable for, any alleged representation, warranty, promise, inducement, or statement of intention not embodied in this Contract or its appendices. IN WITNESS WHEREOF, this Social Contract has been duly executed and delivered by or on behalf of the parties hereto as of the Effective Date as defined herein. COMCAST CABLE COMMUNICATIONS, INC. By: __________________________________________ Name: Title: FEDERAL COMMUNICATIONS COMMISSION By: __________________________________________ Name: Title: