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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 ) ) Social Contract ) ) ORDER Adopted: June 22, 1998 Released: June 24, 1998 By the Acting Chief, Cable Services Bureau: 1. A-R Cable Services, Inc. ("A-R Cable"), a subsidiary of Cablevision Systems Corporation, has requested that the provisions of the Time Warner Social Contract (the "Social Contract"), which the Commission entered into with Time Warner Cable, continue to apply to the Litchfield, Connecticut cable television system ("Litchfield System") that A-R Cable is acquiring from Time Warner Entertainment Company, L.P. ("Time Warner") d/b/a Laurel Cablevision. The Litchfield System serves eight communities in Connecticut. By this Order we grant the A-R Cable request. 2. The Commission adopted the Social Contract on November 30, 1995. It is designed to provide rate stability, improved quality of service, and incentives for upgrades and system improvements. Under its terms, Time Warner is investing $4 billion to upgrade its domestic cable systems over the life of the Social Contract, has provided more than $4.7 million in refunds to its subscribers, has capped its regulated programming rate increases at $1 per year plus the recovery of external costs and the costs of inflation, has established "lifeline" basic service tiers priced below basic service tier rates in effect at the time of adoption of the Social Contract, and is providing free cable connections to public schools in its franchise areas. The Commission delegated to the Cable Services Bureau the authority to implement the Social Contract. 3. By its terms, the Social Contract may continue to apply to a cable system divested by Time Warner only if the acquiring operator agrees to be bound by the Social Contract. Section III.F.6 of the Social Contract provides: In the event of a sale of any system during the period of applicability of this Contract, the purchaser may elect, with the concurrence of the FCC, for the provisions of this Contract to continue to apply to such system. Such FCC concurrence shall be expeditiously decided and not be unreasonably withheld. In the event the purchaser elects not to have the provisions of this Contract apply to any such system, the CPST subscribers to such system shall be eligible for the refunds calculated pursuant to Section III.F.5 in the event the upgrade commitment described in Section III.F.1 has not been completed prior to the consummation of such sale. Pursuant to Section III.F.6, A-R Cable seeks the concurrence of the Commission to continue application of the Social Contract to the Litchfield System. A-R Cable does not seek modification of the Social Contract. 4. A-R Cable and Time Warner have entered into an agreement pursuant to which A-R Cable agrees to be bound to the Social Contract in its entirety with respect to the Litchfield System (the "Agreement"). The Agreement is attached, and its terms are incorporated herein. The Agreement becomes effective upon the release by the Commission of this Order and the closing of the Asset Exchange Agreement between A-R Cable and Time Warner. 5. Pursuant to the Agreement and the Social Contract, A-R Cable will comply with all applicable provisions of the Social Contract including, but not limited to: (i) the terms of Section III.F.1, under which A-R Cable must ensure that at least 60 percent of new analog services added to the Litchfield System during the term of the Social Contract are added to the cable programming services tier ("CPST") and that the CPST contains at least 15 new channels on average (weighted by CPST subscribers); and (ii) the terms of Section III.F.3, which requires A-R Cable to report annually to the Commission on its compliance with the Social Contract. A-R Cable states that Time Warner has already partially fulfilled the requirements of Section III.F.1 of the Social Contract by upgrading the Litchfield System to 750 MHz, and by ensuring that BST and CPST subscribers benefit from at least 60 percent of the capital invested in the upgrade. 6. The Social Contract imposes an investment requirement on Time Warner, pursuant to which Time Warner has agreed to invest $4 billion in capital costs associated with system upgrades. Because Time Warner has already upgraded the Litchfield System to 750 MHz, Time Warner's financial commitment does not apply to A-R Cable. 7. Accordingly, IT IS ORDERED that the request of A-R Cable Services, Inc., for the assignment of the rights and the assumption of the obligations of the Social Contract with respect to the Litchfield, Connecticut system being acquired by it from Time Warner Entertainment Company, L.P., IS GRANTED, provided that the Commission shall have the benefit of all agreements made between the parties to the Agreement and the right to enforce any provision of the Social Contract against the party that has agreed to be responsible for such provisions in the Agreement. 8. This action is taken by the Acting Chief, Cable Services Bureau, pursuant to authority granted by the Commission in Social Contract for Time Warner and pursuant to authority delegated by Section 0.321 of the Commission's rules. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Acting Chief, Cable Services Bureau