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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 ) ) Time Warner Cable ) CUID No. FL0035 (Clewiston) ) Complaint Regarding ) Cable Programming Services Tier ) Rate Increase ) ORDER Adopted: June 11, 1998 Released: June 15, 1998 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider a complaint against the January 1, 1998 rate increase of the above-referenced operator ("Operator") for its cable programming services tier ("CPST") in the community referenced above. Operator has attempted to justify its CPST rate increase through a benchmark showing on FCC Forms 1240. Accordingly, this Order addresses only the reasonableness of Operator's January 1, 1998 CPST rate increase. 2. Under the Communications Act, the Federal Communications Commission ("Commission") is authorized to review the CPST rates of cable systems not subject to effective competition to ensure that rates charged are not unreasonable. The Telecommunications Act of 1996 ("1996 Act") and our rules implementing the legislation ("Interim Rules"), require that a complaint against the CPST rate be filed with the Commission by a local franchising authority ("LFA") that has received more than one subscriber complaint. 3. The LFA for the franchise area referenced above filed a complaint with the Commission on April 8, 1998 against Operator's January 1, 1998 CPST rate increase from $14.80 to $15.62. The LFA verified that it received more than one subscriber complaint for the franchise area and that the first valid complaint was received by the LFA on February 4, 1998. The filing of a complete and timely complaint triggers an obligation upon the cable operator to file a justification of its CPST rates. The Operator has the burden of demonstrating that the CPST rates complained about are reasonable. If the Commission finds a rate to be unreasonable, it shall determine the correct rate and any refund liability. 4. To justify rates for the period beginning May 15, 1994, operators must use the FCC Form 1200 series. Operators are permitted to make changes to their rates on a quarterly basis using FCC Form 1210. Operators may justify their rates on an annual basis using FCC Form 1240 to reflect reasonably certain and quantifiable changes in external costs, inflation, and the number of regulated channels that are projected for the twelve months following the rate change. Any incurred cost that is not projected may be accrued with interest and added to rates at a later time. 5. On November 30, 1995, we issued an Order approving a Social Contract which Operator entered into with the Commission ("Social Contract"). Subsequently, Operator was given permission by Commission staff to file bifurcated FCC Form 1240s for the projected periods January 1, 1996 through December 31, 1996, January 1, 1997 through December 31, 1997, and January 1, 1998 through December 31, 1998, when responding to complaints filed against its January 1, 1998 CPST rates. In these bifurcated forms, Operator calculates the $1.00 annual increase permitted by the Social Contract ("Social Contract Dollar") and its true-up on a separate FCC Form 1240 ("SCD Form 1240"). On the SCD Form 1240, Operator calculates its true-up adjustment through to the effective date of the rate increase. On its other FCC Form 1240, Operator calculates the other adjustments to its CPST rate adjusting its true-up period to conform with FCC Form 1240 Instructions. 6. Upon review of Operator's bifurcated FCC Form 1240 methodology, we find Operator's methodology acceptable. It allows Operator to collect its Social Contract Dollar each year, and to true- up any applicable part of its Social Contract Dollar, within the calendar years covered by the Social Contract. In the present case, we will allow Operator to file its bifurcated FCC Form 1240s because we instructed Operator to make such filings. Absent such explicit instructions, we would reject the FCC Form 1240s filed by Operator. Further, our acceptance of Operator's bifurcated FCC Form 1240 methodology still requires that we review Operator's calculations on these FCC Form 1240s. 7. Upon review of Operator's FCC Form 1240s, for the projected period February 1, 1996 through December 31, 1996, we accept Operator's filings and find that Operator has correctly calculated its maximum permitted rate ("MPR"). Upon review of Operator's FCC Form 1240s for the projected period January 1, 1997 to December 31, 1997, we find that Operator did not correctly calculate its MPR. On Operator's SCD Form 1240, we adjusted Lines 801 through 811. On Operator's other FCC Form 1240, we adjusted Line 801 to conform with Operator's actual CPST rate, and we revised Line C5 (Current FCC Inflation Factor) to 1.0270. These revisions reduced Operator's total MPR to $17.90 for the projected period January 1, 1997 to December 31, 1997. 8. Upon review of Operator's FCC Form 1240s for the projected period January 1, 1998 to December 31, 1998, we find that Operator did not correctly calculate its MPR. On Operator's SCD Form 1240, we adjusted Line A1 (Current Maximum Permitted Rate), Line D6 (Current True-Up Segment), Line F8 (True-Up Segment for True-Up Period 1) and Line I8 (True-Up Segment for Projected Period) to conform to the prior revised SCD Form 1240. On Operator's other FCC Form 1240, we adjusted Operator's Line 804 to conform with Operator's actual CPST rate based on Operator's rate card. We also adjusted Line A1 (Current Maximum Permitted Rate), Line D6 (Current True-Up Segment), D7 (Current Inflation Segment), Line F8 (True-Up Segment for True-Up Period 1), Line I5 (Inflation Segment for Projected Period) and Line I8 (True-Up Segment for Projected Period) to conform to the prior revised FCC Form 1240. We also revised Worksheet 1 (True-Up Period Inflation) which adjusted Line 107 through 112 (Inflation Factor for True-Up Period 1) to 1.77% and 1.43%, and we adjusted Line C5 (Current FCC Inflation Factor) to 1.0143. These revisions reduced Operator's total MPR to $21.48 for the projected period January 1, 1998 to December 31, 1998. Because Operator's actual CPST rate, effective January 1, 1998, is $15.62, we find that Operator's actual CPST rate, effective January 1, 1998, is reasonable. 9. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. 0.321, that the CPST rate of $15.62, charged by Operator in the franchise area referenced above, effective January 1, 1998, IS REASONABLE. 10. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. 0.321, that Operator take into account our FCC Form 1240 adjustments when calculating its maximum permitted rate and performing the true-up calculation on its next FCC Form 1240s. 11. IT IS FURTHER ORDERED, pursuant to Section 0.32l of the Commission's rules, 47 C.F.R. 0.321, that the complaint referenced herein, against the CPST rate charged by Operator in the community set forth above, IS DENIED. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau