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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: September 29, 1998 Released: October 1, 1998 By the Chief, Cable Services Bureau: 1. Telesat Acquisition Limited Partnership ("Telesat"), has requested that the provisions of the Time Warner Social Contract (the "Social Contract"), which the Commission entered into with Time Warner Cable ("Time Warner"), continue to apply to four cable systems that Telesat is acquiring from TWI Cable, Inc. ("TWC"). The systems are located in the State of Florida ("Florida Systems") and collectively serve 16 communities. By this Order we grant the Telesat 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 the terms of the Social Contract, 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, Telesat seeks the concurrence of the Commission to continue application of the Social Contract to the Florida Systems. Telesat does not seek modification of the Social Contract. 4. Telesat and TWC have entered into an agreement pursuant to which Telesat agrees to be bound by the Social Contract with respect to the Florida Systems (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 consummation of the system acquisition agreement between Telesat and TWC. 5. Subject to two exceptions, which are discussed below, Telesat 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 Telesat must ensure that (a) all systems with a capacity of under 550 MHz as of the Social Contract effective date are upgraded to at least 550 MHz, (b) at least 60 percent of new analog services added to the Florida Systems during the term of the Social Contract are added to the cable programming services tier ("CPST"), (c) CPST service on upgraded systems contains at least 15 new channels on average (weighted by CPST subscribers), and (d) at least 60 percent of capital expended in connection with required upgrades benefits basic service tier and CPST subscribers; (ii) the terms of Section III.F.3, which requires Telesat to report annually to the Commission on its compliance with the Social Contract; and (iii) the terms of Section III.F.5., under which Telesat will be obligated to pay refunds and penalties, including refunds and penalties associated with rate increases implemented by TWC under the Social Contract, if required upgrades are not completed as of the Social Contract expiration date. 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. This financial commitment will not apply to Telesat, since it is acquiring only a portion of the systems that are subject to the Social Contract. Instead, Telesat has agreed to invest $5,446,703 to complete the required upgrades of the Florida Systems. 7. The Social Contract provides that systems having a capacity of at least 550 MHz as of the Social Contract effective date must be upgraded to 750 MHz. It also requires Time Warner to ensure that as of the Social Contract expiration date, systems having a capacity of at least 750 MHz serve at least 50 percent of all subscribers served by systems that are subject to the Social Contract. For purposes of this requirement, subscribers served by the Florida Systems will be counted as TWC subscribers in determining whether TWC has met the 50 percent threshold, and Telesat shall not be subject to the requirement. None of the systems Telesat is acquiring from TWC is otherwise subject to the requirement that certain systems be upgraded to 750 MHz. 8. Accordingly, IT IS ORDERED that the request of Telesat Acquisition Limited Partnership for the assignment of the rights and the assumption of the obligations of the Social Contract with respect to the systems it is acquiring from TWI Cable Inc., 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. 9. This action is taken by the 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 Deborah A. Lathen Chief, Cable Services Bureau