PUBLIC NOTICE FEDERAL COMMUNICATIONS COMMISSION 1919 M STREET, N.W. WASHINGTON, D.C. 20554 News media information 202/418-0500 Recorded listing of releases and texts 202/632-0002. FCC 95-137 April 3, 1995 SOCIAL CONTRACT FOR CONTINENTAL CABLEVISION, INC. AVAILABLE FOR COMMENT THE COMMISSION SEEKS COMMENT ON A PROPOSED SOCIAL CONTRACT WITH CONTINENTAL CABLEVISION THAT RESOLVES RATE CASES, ASSURES RATE STABILITY, AND PROVIDES INCREASED INVESTMENT IN CABLE TV INFRASTRUCTURE; REFUNDS OF UP TO APPROXIMATELY $9.5 MILLION TO BE PROVIDED TO AFFECTED SUBSCRIBERS Continental Cablevision, Inc. ("Continental") and the Federal Communications Commission ("Commission") have negotiated a social contract. The Commission is considering the proposed Contract pursuant to its authority to regulate cable services under Title VI of the Communications Act and the Commission's February 22, 1994 decision that it would consider social contracts as an alternative form of regulation for cable operators. The proposed Contract will be considered for approval after evaluating public comment on the proposed agreement. This notice and the proposed Contract are being mailed to each person who has filed a rate complaint with respect to one of Continental's systems, and to all franchising authorities that have granted a cable franchise to Continental. This notice contains a summary description of the Contract. The terms of the proposed Contract will be controlling and interested persons should read the proposed Contract in its entirety. Copies of the proposed Contract can be obtained in the manner described below. The proposed Contract is designed to (1) assure fair and reasonable rates for Continental's cable service customers; (2) improve Continental's cable service by substantially upgrading the channel capacity and technical reliability of its United States cable systems; and (3) reduce the administrative burden and costs of regulation for local governments, the Commission, and Continental. The proposed six-year Contract covers both basic and cable programming service tiers in all of Continental's cable franchises, including those that are currently unregulated because no franchising authority has been certified to regulate basic rates, or because no complaint has been filed against the cable programming services tier. Franchise areas where the franchise authority has not certified to regulate rates contain approximately 1.8 million subscribers to Continental's basic service tiers and approximately 1.3 million subscribers to Continental's cable programming services tiers. Overall, Continental serves approximately 3 million subscribers. Under the 1992 Cable Television Consumer Protection and Competition Act, a basic service tier is the tier of programming that contains local broadcast stations. Cable programming services tiers are all other cable services, except those sold on a per channel or per program basis. Specifically, the proposed Contract provides for investment of at least $1.35 billion to rebuild and upgrade all of Continental's domestic cable systems from 1995-2000, including deployment of fiber optic technology, increased channel capacity and improved system reliability and picture quality. The proposed Contract provides for the resolution and termination of Continental's 148 pending basic service and cable programming services cases where Continental had justified its rates using cost of service filings ("cost of service cases") and 229 pending cable programming services cases where it had used the Commission's benchmark formula to justify rates ("benchmark cases"). As part of the resolution of these cases, Continental will make in-kind refunds to affected customers totalling approximately $9.5 million and conform all of its basic service benchmark and cost of service rates to 15% below the Commission's benchmark formula as described below. In unregulated franchise areas, basic rates will be reduced 15% below the current rates. In settlement of Continental's cost of service cases: Continental will provide each of its approximately 509,000 subscribers to basic service tiers with an in-kind refund with a minimum retail value of $5.00. These refunds will have a minimum aggregate retail value of approximately $2,545,000. Continental will provide each of its approximately 818,000 subscribers to cable programming services tiers with an in-kind refund with a minimum retail value of $4.50. These refunds will have a minimum aggregate retail value of approximately $3,681,000. In settlement of Continental's benchmark cable programming services cases: For pre-May 15, 1994 cable programming services benchmark cases Continental will provide each of the approximately 231,000 subscribers, who the Commission has determined qualify for a refund, with an in-kind refund having a minimum retail value of $2.00. These refunds will have a minimum aggregate retail value of $462,000. For post-May 15, 1994 cable programming services benchmark cases currently pending before the Commission, Continental will provide each of the approximately 351,000 subscribers, who the Commission has determined qualify for a refund, with an in-kind refund having a minimum retail value of $8.00. These refunds will have a minimum aggregate retail value of approximately $2,808,000. The resolution of pending rate cases is without any finding by the Commission of any wrongdoing by Continental. Basic service tier benchmark cases currently pending before franchise authorities will be resolved by Continental and the franchise authority pursuant to Commission rules. Franchise authorities will have the ability to opt out of the basic service tier cost of service refunds specified by the proposed Contract and to resolve with Continental any amounts owed to customers pursuant to Commission rules. To opt out of the proposed Contract provisions, franchise authorities must provide written notice to the Commission of its decision to do so no later than forty-five (45) days following the publication date of this notice. Continental will forego its right to use cost of service justifications to support any future rate increases in any franchises covered by this proposed Contract during the period that the Contract remains in effect. Continental will reduce its existing basic service tier rates in all franchises, creating a "lifeline basic" tier. To accomplish this, Continental will reduce its basic service tier rates for all regulated franchises, including franchises where benchmark and cost of service cases have been filed, to 15% below the Commission's benchmark rate formula. Continental will reduce its basic service tier rates for all unregulated franchises to 15% below their current rate levels. Continental will be permitted to offset each of the 15% reductions by increasing the rate for its cable programming services tier. After this conversion, which will be implemented no later than January 1, 1996, Continental will not add any additional programming to its lifeline basic tiers for the term of the proposed Contract, except as specifically required by franchise authorities or as required by law. Cable programming services tier rates for franchises for which Continental justified its rates under cost of service principles will be set at current rates. By January 1, 1996, the cable programming services rates for all Continental franchises that established their rates pursuant to the Commission's benchmark formula will comply with the Commission's benchmark rules. Cable programming services tiers rates that are currently unregulated will be set at current levels. In each case, Continental will be permitted to adjust its cable programming services rates to offset the 15% reductions in its basic service tier and to allow for external cost increases, inflation and channel additions permitted by the Commission's Going-Forward rules. Under the Going Forward rules, Continental is permitted, subject to limits prescribed in those rules, to add new services and to reflect the cost of those new services by an amount not to exceed $.20 per added channel, plus the actual license fees for the added channels. Continental will be permitted to conduct a second round of channel additions from 1998-2000 under the same terms. Continental will be permitted to average broad categories of equipment and various installation costs for all its systems on a state-wide or region-wide basis. Continental will be permitted on each system to move not more than four existing services on cable programming services tier(s) to a single Migrated Product Tier, provided the Migrated Product Tier is offered without requiring customers to purchase any tier other than the basic service tier. The rates of the Migrated Product Tier will be regulated in accordance with price limits contained in the proposed Contract until January 1, 1997, at which point Continental systems may elect to convert their Migrated Product Tiers into New Product Tiers, as defined by the Going Forward rules, provided that the tier continues to be offered without requiring customers to purchase any tier other than the basic service tier. The rates for the New Product Tiers are regulated by market forces. The Commission will treat this proceeding as a non-restricted proceeding. 47 C.F.R.  1.1206, 1.1200(a). Parties wishing to comment on the proposed Contract should do so by filing with the Secretary no later than May 3, 1995 an original and four copies of their comments. Replies may be filed no later than May 18, 1995. All such pleadings should reference the file number noted above. All comments will be available to any of the parties upon request. Franchise authorities that wish to opt out of the basic service tier cost of service refunds specified by the Contract, must provide written notice to the Commission of its decision to do so by May 18, 1995. All such notifications should reference the file number noted above. The contract is available for reference in the Cable Services Bureau's public reference room, Room 333 at 2033 M Street, N.W., Washington, D.C. Copies are available from the Commission's copy contractor, International Transcription Services, at Room 246, 1919 M Street, N.W., Washington, D.C., 20554, telephone number (202) 857-1433. The contract is also available via Internet at ftp@fcc.gov. For further information, contact JoAnn Lucanik, Jerome Fowlkes or Lenworth Smith, Jr. (202) 416-0800. Media contacts: Audrey Spivack (202) 418-0500 and Morgan Broman (202) 416-0852. --FCC--