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                            Before the
                Federal Communications Commission
                      Washington, D.C. 20554

                                        In The Matter of                   )    
                                                               )      
                                                            TIME WARNER CABLE           )           File No. CSB-A-0535 
                                                                    )           
                                           Appeal of Local Rate Order              )  
                                           Adopted by Clayton, NC (NC0065)         )  


                  MEMORANDUM OPINION AND ORDER

   Adopted:  May 28, 1998               Released:  June 1, 1998

By the Acting Chief, Cable Services Bureau:

     I.   INTRODUCTION

     1.   On February 19, 1998 and pursuant to Section 76.944(b) of the Commission's rules, Time
Warner Cable ("Time Warner") has filed an Appeal of a local rate order ("Order") adopted on January 20,
1998 by the Town of Clayton, North Carolina ("Town").  The issue is whether the Town's Order properly
explained its rejection of Falcon's proposed rate for its basic service tier ("BST").  The Town has not filed an
opposition to the Appeal.

     2.   Under the Communications Act, the Commission reviews appeals of rate orders issued by
LFAs.  When considering an appeal, the Commission will not conduct a de novo review, but instead will
sustain an LFA's decision as long as it did not act unreasonably in applying Commission regulations.  If the
Commission reverses an LFA's decision, it will not substitute its own judgment, but will remand the case to
the franchising authority with instructions to resolve it consistent with the decision.

     II.  DISCUSSION

     3.   On September 29, 1997, Time Warner submitted an FCC Form 1240 to the Town to justify
a maximum permitted rate ("MPR") of $8.90 for January 1 through December 31, 1998.  The Town hired a
consultant to review the rate filing, who concluded that Time Warner committed no "material misstatements,"
but did incorrectly rely on unrefreshed inflation information.  In its one-page Order, the Town notes the
consultant's opinion that Time Warner's rate calculations did not comply with Commission rules, but does not
elaborate.  The Town rejected both Time Warner's proposed rate of $8.90 and the consultant's suggested rate
of $8.72.  Instead, the Town authorized an MPR of $8.59.  Time Warner argues that the Town did not comply
with Commission rules because it neither explained why it departed from the consultant's advice nor
demonstrated how it arrived at the prescribed rate.

     4.   The City failed to issue a proper rate order.  When an LFA rejects an operator's proposed
rates, it must issue a written decision affirmatively demonstrating why the rate is unreasonable and why the
prescribed rate is reasonable.  A written order protects the due process rights of the cable operator by
explaining why the rate was disapproved and providing a basis to refile the rates or appeal the decision to the
Commission.  The Commission has previously rejected local rate orders that summarily rejected an operator's
proposed rates or rejected rates without adequately explaining the reasons for doing so.  Although the Town
references the consultant's report, the Town's Order neither explains why Time Warner's proposed rate of $8.90
is unreasonable nor why the prescribed rate of $8.59 is reasonable.  We therefore remand this case to the Town
for proceedings consistent with this decision.

     III. ORDERING CLAUSES

     5.   Accordingly, IT IS ORDERED that the Town's local rate order IS REMANDED for
proceedings consistent with this Memorandum Opinion and Order.

     6.   This action is taken by the Acting Chief, Cable Services Bureau, pursuant to authority
delegated by  0.321 of the Commission's rules.  47 C.F.R.  0.321.
                                                            
                                                            FEDERAL COMMUNICATIONS COMMISSION



                                                            John E. Logan
                                                            Acting Chief, Cable Services Bureau