******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. 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 Nos. HI0004 (Oahu) d/b/a Oceanic Cable ) HI0006 (Honolulu) ) HI0007 (Kailua) ) HI0009 (Kaneohe) Complaint Regarding ) HI0013 (Wahiawa Cable Programming Services Tier ) HI0014 (Waipahu) ) HI0016 (Aiea) ) HI0041 (EWA District) ) HI0058 (Aliamanu) ) HI0067 (Kapahulu) RATE ORDER Adopted: June 22, 1998 Released: June 25, 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 communities referenced above. On November 30, 1995, we issued an Order approving a Social Contract ("Social Contract") which Operator entered into with the Federal Communications Commission ("Commission"), which resolved all previous complaints filed against Operator's CPST rates. This Order addresses only the reasonableness of Operator's CPST rate increase beginning January 1, 1998. 2. Under the Communications Act, the 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, effective February 8, 1996, 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 areas referenced above filed complaints with the Commission on March 31, 1998 against Operator's January 1, 1998 CPST rate increase from $15.11 to $17.63. In its complaint, the LFA asserts that it has received more than one subscriber complaint against Operator's rate increase, thereby triggering the Commission's jurisdiction to review the complaints. The valid complaint against Operator's CPST rates from the LFA triggers an obligation on behalf of the cable operator to file a justification of its CPST rate with the LFA. Thus, in this case, Operator is required to justify the increase in its CPST rate which is the subject of the LFA's complaint. Operator filed FCC Form 1240 with the LFA as justification for this rate increase. 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. Subsequent to the Social Contract, 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 January 1, 1996 through December 31, 1996, and January 1, 1997 through December 31, 1997, we accept Operator's filings and find that Operator has correctly calculated its maximum permitted rates ("MPRs"). We find Operator's actual CPST rate of $12.97, effective January 1, 1996 and actual CPST rate of $15.11, effective January 1, 1997, to be reasonable. Upon review of Operator's FCC Form 1240s for the projected period January 1, 1998 through December 31, 1998, we find that Operator did not correctly calculate its MPR. On Operator's SCD Form 1240 filing, we accept Operator's filing. On Operator's other FCC Form 1240, we find that Operator has failed to use the most current FCC Inflation Factors available at the time Operator filed its FCC Form 1240. Therefore, we revised Worksheet 1 (True-Up Period Inflation) which adjusted Line C3 (Inflation Factor for True-Up Period 1) to 1.0193. We also revised Line C5 (Current FCC Inflation Factor) to 1.0143. These revisions reduced Operator's total MPR to $17.78 for the projected period January 1, 1998 to December 31, 1998. Because Operator's actual CPST rate, effective January 1, 1998, is $17.63 we find Operator's actual CPST rate, effective January 1, 1998, to be reasonable. 8. The LFA has also requested that we review the FCC Form 1205s (Equipment Form) submitted by Operator. The Social Contract provides that Operator's FCC Form 1205s shall be reviewed by the Commission and that the equipment and installation charges, as approved by the Commission, "shall be subject to enforcement by local franchising authorities." Upon review of Operator's FCC Form 1205s, to establish equipment and installation charges effective January 1, 1996 through December 31, 1996, January 1, 1997 through December 31, 1997, and January 1, 1998 through December 31, 1998, we find that Operator has correctly calculated its maximum permitted equipment and installation charges. The LFA should determine if Operator's current equipment and installation charges are in compliance with the charges established on the Operator's FCC Form 1205s. 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 $17.63, charged by Operator in the franchise areas 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 1240. 11. IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R. Section 0.321, that the complaint referenced herein against the rates charged by Operator in the communities referenced above IS DENIED. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau