DRAFT SOCIAL CONTRACT FOR CONTINENTAL CABLEVISION, INC. TABLE OF CONTENTS PAGE NO. I. BACKGROUND AND SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . 1 II. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5 III. TERMS AND CONDITIONS OF THE SOCIAL CONTRACT. . . . . . . . . . . 6 A. Customer Refunds . . . . . . . . . . . . . . . . . . . . . . . . 6 1. Cost-of-Service Franchises. . . . . . . . . . . . . . . . . 6 a. BST Cost-of-Service Cases. . . . . . . . . . . . . . . 6 b. CPST Cost-of-Service Cases . . . . . . . . . . . . . . 7 2. Benchmark Franchises. . . . . . . . . . . . . . . . . . . . 8 a. BST Benchmark Cases. . . . . . . . . . . . . . . . . . 8 b. CPST Benchmark Cases . . . . . . . . . . . . . . . . . 8 B. Creation of a Low-Cost, Lifeline Basic Service Tier and Rate Stability Plan . . . . . . . . . . . . . . . . . . 9 1. Creation of a Low-Cost, Lifeline Basic Service Tier. . . . . . . . . . . . . . . . . . . . . . . . 9 2. Rate Stability Plan . . . . . . . . . . . . . . . . . . . . 10 a. Benchmark Franchises . . . . . . . . . . . . . . . . . 10 1). BST Rate. . . . . . . . . . . . . . . . . . . . . 10 2). CPST Rate . . . . . . . . . . . . . . . . . . . . 10 b. Cost-of-Service Franchises.. . . . . . . . . . . . . . 11 1). BST Rate. . . . . . . . . . . . . . . . . . . . . 11 2). CPST Rate . . . . . . . . . . . . . . . . . . . . 11 c. Unregulated Franchises . . . . . . . . . . . . . . . . 11 1). BST Rate. . . . . . . . . . . . . . . . . . . . . 11 2). CPST Rate . . . . . . . . . . . . . . . . . . . . 12 d. Equipment and Installation Rates for All Systems. . . . . . . . . . . . . . . . . . . . . . . . 13 C. Limitations on Rate Increases. . . . . . . . . . . . . . . . . . 13 1. BST Rates . . . . . . . . . . . . . . . . . . . . . . . . . 13 2. CPST Rates. . . . . . . . . . . . . . . . . . . . . . . . . 14 3. Equipment and Installation Rates. . . . . . . . . . . . . . 14 4. Waiver of Right to File Cost-of-Service Cases for Future Rate Increases . . . . . . . . . . . . . . . . . 15 D. Resolution of Existing Rate Cases. . . . . . . . . . . . . . . . 15 E. Infrastructure Upgrade Commitment. . . . . . . . . . . . . . . . 18 1. Infrastructure Upgrade: Financial. . . . . . . . . . . . . 18 2. Infrastructure Upgrade: Technical. . . . . . . . . . . . . 19 3. Infrastructure Upgrade: Non-Discrimination . . . . . . . . 20 4. Infrastructure Upgrade: Failure to Meet Investment Target . . . . . . . . . . . . . . . . . . . . . 20 F. Migrated Product Tiers and New Product Tiers . . . . . . . . . . 21 1. Migrated Product Tiers. . . . . . . . . . . . . . . . . . . 21 2. New Product Tiers . . . . . . . . . . . . . . . . . . . . . 22 G. Franchises Subject to Effective or Price- Constraining Competition . . . . . . . . . . . . . . . . . . . . 23 H. Acquired Systems . . . . . . . . . . . . . . . . . . . . . . . . 23 I. Local Franchising Authority Right to Opt Out of the Cost-of-Service Refund Settlement. . . . . . . . . . . . . . 23 1. Right to Opt Out. . . . . . . . . . . . . . . . . . . . . . 23 2. Effect of Opting Out. . . . . . . . . . . . . . . . . . . . 24 J. Reporting Requirements . . . . . . . . . . . . . . . . . . . . . 24 K. Modification and Termination . . . . . . . . . . . . . . . . . . 25 L. All Necessary Waivers and Preemptions Deemed Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 M. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 N. Service of Contract and Public Notice on Interested Parties . . . . . . . . . . . . . . . . . . . . . . . 26 O. Public Notice. . . . . . . . . . . . . . . . . . . . . . . . . . 26 P. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 27 Q. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 27 SOCIAL CONTRACT FOR CONTINENTAL CABLEVISION, INC. I. BACKGROUND AND SUMMARY. The "Social Contract" set out in this document (the "Contract") relates to services and equipment offered by Continental Cablevision, Inc. ("Continental") and its subsidiaries actually or potentially subject to regulation under the terms of the applicable provisions of Title VI of the Communications Act of 1934, as amended ("Act"). The Commission believes that this Contract will advance the public interest by: (1) assuring fair and reasonable rates for Continental's cable service customers; (2) improving Continental's cable service by substantially upgrading the channel capacity and technical reliability of its United States cable systems; and (3) reducing the administrative burden and costs of regulation for local governments, the Federal Communications Commission ("Commission"), and Continental. The Contract has been negotiated by Continental and the Commission in accordance with the Commission's authority to consider and adopt "social contracts" as an alternative to other regulatory approaches applicable to cable television rates, see Cost-of-Service Order, 9 FCC Rcd. 4527,  295-304 (1994), and its authority to regulate Continental's cable services under the Act. This Contract covers all of Continental's cable systems owned as of the Publication Date, including those franchises that are unregulated either because no Local Franchise Authority ("LFA") has certified and/or no complaint has been filed. Those unregulated franchises serve approximately 60% or 1.8 million of Continental's basic service tier ("BST") subscribers and approximately 46% or 1.3 million of Continental's cable programming service tier ("CPST") subscribers. Thus, the Contract will provide rate stability and other benefits for Continental customers regardless of their regulatory status. The principal terms of the Contract are: The resolution of 148 cost-of-service cases and 229 benchmark cases. (The 148 cost-of-service cases consist of 73 BST and 75 CPST cases filed between September 1, 1993 and the Publication Date. The 229 CPST benchmark cases consist of 129 Form 393 cases and 100 Form 1200 cases filed between September 1, 1993 and the Publication Date.) As part of the resolution of these cost-of-service and benchmark cases, Continental will make in-kind Refunds to its affected customers totalling approximately $9.5 million. The rates for BST cost-of-service cases resolved pursuant to this Contract will be reduced as necessary from their current levels, which Continental submitted under cost-of-service principles, to levels calculated pursuant to Commission Form 1200. Future BST increases for these franchises will be based solely on inflation and external cost increases, as permitted by 47 C.F.R.  76.922(d), including all subsequent clarifications and amendments. LFAs will have the ability to "opt out" of BST cost-of- service Refunds and elect to resolve any amounts owed to customers with Continental pursuant to Commission rules. Also, BST benchmark cases currently pending before LFAs will be resolved by Continental and the LFAs pursuant to Commission rules. Continental will convert its existing BSTs in all franchises into "Lifeline Basic" tiers so that customers who only can afford or who only want the most basic local programming may purchase it for a low monthly fee. To accomplish this, Continental will reduce its BST rates for all regulated franchises to 15% below the rates required by Commission Form 1200 and will reduce its BST rates for all unregulated franchises to 15% below Current Rates. Continental will forego its right to use cost-of- service justifications to support any future rate increases in any franchises covered by this Contract during the period that the Contract remains in effect. On a going-forward basis, Continental's BST and CPST rates for all subscribers will be limited by the Commission's rules for inflation and external cost adjustments and by the "Going-Forward" rules. In order to fund the six-year capital spending program required as part of this Contract, Continental will be permitted to conduct a second round of "Going-Forward" channel additions over the three-year period from 1998-2000. Continental will be permitted to migrate up to four existing CPST services on each system to a single "Migrated Product Tier" ("MPT"), provided the tier is offered without a buy-through requirement of any tier other than the BST. Initially, the MPT will be capped at current CPST levels for the migrated channels on the tier, and increases will be based on inflation and external costs, pursuant to Commission rules. However, there will be no limitation on the number of new channels that Continental may add to this tier at the price of $.20 per channel plus license fees. After January 1, 1997, Continental may convert the MPT into a New Product Tier ("NPT"), provided the tier is offered without a buy-through requirement of any tier other than the BST. Continental agrees to spend at least $1.35 billion from 1995 through 2000 to rebuild and upgrade its domestic cable facilities. This represents an annual investment that is 120% of Continental's average annual capital expenditures from 1990 through 1994. This Contract or any settlement contained herein does not constitute an admission by Continental of any violation of, or failure to conform to, any law, rule, or policy. II. DEFINITIONS. For the purposes of this Contract, the following definitions will apply: (a) "Current Rates" means those Continental system rates that are in effect as of the Publication Date, or rates that will become effective after the Publication Date and for which notice was given to subscribers on or before March 1, 1995. (b) "Effective Date" means the date on which the Commission issues an order approving this Contract. (c) "Eligible Subscribers" means those subscribers who the Commission has determined qualify for a Refund in Continental franchises where there is a pending CPST benchmark case. (d) "Going-Forward rules" means the Commission's rules adopted in the Sixth Order on Reconsideration, 76 R.R.2d (P&F) 859 (1994), including all subsequent clarifications and amendments. (e) "Lifeline Basic" means a Continental BST that has had its rates reduced 15% pursuant to section III.B. below. (f) "Migrated Product Tier" or "MPT" means a tier consisting of up to four services moved from a system's existing CPST(s) and to which other services may be added (as described in section III.F. below). (g) "Publication Date" means the date on which this Contract was placed on public notice by the Commission. (h) "Refund" means an in-kind service offering in lieu of a cash amount. Such Refunds may include premium services, pay-per-view services, additional outlet and VCR installations, viewing guides, and other services or items having an established retail value. III. TERMS AND CONDITIONS OF THE SOCIAL CONTRACT. A. Customer Refunds. Pursuant to the settlement of Continental's existing benchmark and cost-of-service cases as described in this section, Continental will provide customer Refunds, which in the aggregate total approximately $9.5 million, as set forth below. The Refunds required pursuant to this section are listed in Exhibits 1-5. 1. Cost-of-Service Franchises. a. BST Cost-of-Service Cases. 1). In settlement of Continental's pre- and post-May 15, 1994 BST cost-of-service cases on file as of the Publication Date, Continental will provide each of its approximately 509,000 cost-of-service subscribers with an in-kind Refund with a minimum retail value of $5.00. This Refund has a total consolidated retail value of approximately $2,545,000. Continental will ensure that all of these cost-of-service subscribers have at least three in-kind Refund options and at least 180 days to use the option(s) of their choice. Within 30 days of the Effective Date, Continental will submit to the Commission for its approval a list of proposed in-kind Refund options. 2). Where an LFA elects to "opt out" of BST cost-of-service settlements under section III.I. below, the consolidated Refund value shall be reduced by the product of the number of subscribers in the BST cost-of-service franchises for which LFAs have "opted-out" times the per subscriber Refund amount. b. CPST Cost-of-Service Cases. In settlement of Continental's pre- and post-May 15, 1994 CPST cost-of-service cases on file with the Commission as of the Publication Date, Continental will provide each of its approximately 818,000 cost-of-service subscribers with an in-kind Refund with a minimum retail value of at least $4.50. This Refund has a total consolidated retail value of approximately $3,681,000. Continental will ensure that all of these cost-of- service subscribers have at least three in-kind Refund options and at least 180 days to use the option(s) of their choice. Within 30 days of the Effective Date, Continental will submit to the Commission for its approval a list of proposed in-kind Refund options. 2. Benchmark Franchises. a. BST Benchmark Cases. Continental will resolve any pending BST benchmark rate matters, including any possible refunds, with the affected LFAs, pursuant to Commission rules. Nothing in this Contract, including Continental's commitment to reduce BST rates to a level 15% below the applicable Form 1200 rate, shall empower LFAs to order refunds beyond any that would be required pursuant to Commission rules. b. CPST Benchmark Cases. 1). In settlement of Continental's pre-May 15, 1994 CPST benchmark cases on file with the Commission as of the Publication Date, Continental will provide each of approximately 231,000 Eligible Subscribers with an in-kind Refund with a minimum retail value of $2.00. This Refund has a total consolidated retail value of $462,000. Continental will ensure that these Eligible Subscribers have at least three in-kind Refund options and at least 180 days to use the option(s) of their choice. Within 30 days of the Effective Date, Continental will submit to the Commission for its approval a list of proposed in-kind Refund options. 2). In settlement of Continental's post-May 15, 1994 CPST benchmark cases on file with the Commission as of the Publication Date, Continental will provide each of approximately 351,000 Eligible Subscribers with an in-kind Refund equal to $8.00. This Refund has a total consolidated retail value of approximately $2,808,000. Continental will ensure that these Eligible Subscribers have at least three in-kind Refund options and at least 180 days to use the option(s) of their choice. Within 30 days of the Effective Date, Continental will submit to the Commission for its approval a list of proposed in- kind Refund options. B. Creation of a Low-Cost, Lifeline Basic Service Tier and Rate Stability Plan. No later than January 1, 1996, Continental shall lower all of its BST rates. The rate reductions shall be implemented as set forth below: 1. Creation of a Low-Cost, Lifeline Basic Service Tier. In order to provide its customers with the option to purchase a low-cost basic service tier, Continental will create a Lifeline Basic tier by reducing the rates for its BSTs 15% as set forth in the next section. This conversion to Lifeline Basic service will be implemented no later than January 1, 1996. After this conversion, Continental will not add any additional programming to the Lifeline Basic tier for the term of this Contract, except, with prior notice to the Commission, as specifically required by LFAs or as required by law. 2. Rate Stability Plan. a. Benchmark Franchises. 1). BST Rate. By January 1, 1996, the BST rate for all Continental franchises that established their BST rate pursuant to the Commission's benchmark formula will be reduced 15% below the Form 1200 level, as of the Publication Date, and then adjusted at Continental's option, pursuant to Commission rules, for any previously unrecovered inflation and external costs that have accrued through the most recently completed calendar quarter prior to such Lifeline Basic rate reduction. 2). CPST Rate. By January 1, 1996, the CPST rate for all Continental franchises that established their rates pursuant to the benchmark formula will be set in accordance with Commission Form 1200, as of the Publication Date, and then adjusted at Continental's option for: (a) any channels added pursuant to the Commission's Going-Forward rules; (b) an amount which yields the total revenues foregone by the 15% Lifeline Basic rate reduction; and (c) pursuant to Commission rules, any previously unrecovered inflation and external costs that have accrued through the most recently completed calendar quarter prior to such Lifeline Basic rate reduction. b. Cost-of-Service Franchises. 1). BST Rate. By January 1, 1996, the BST rate for all Continental franchises that filed a BST cost-of-service justification will be reduced 15% below the level that would be allowable based on the Form 1200, as of the Publication Date, and then adjusted at Continental's option, pursuant to Commission rules, for any previously unrecovered inflation and external costs that have accrued through the most recently completed calendar quarter prior to such Lifeline Basic rate reduction. 2). CPST Rate. By January 1, 1996, the CPST rate for all Continental franchises that filed a CPST cost-of-service justification will be maintained at the Current Rate, and then adjusted at Continental's option for: (a) any channels added pursuant to the Commission's Going-Forward rules; (b) an amount which yields the total revenues foregone by the 15% Lifeline Basic rate reduction; and (c) pursuant to Commission rules, any previously unrecovered inflation and external costs that have accrued through the most recently completed calendar quarter prior to such Lifeline Basic rate reduction. c. Unregulated Franchises. 1). BST Rate. i. By January 1, 1996, the BST rate for all franchises that are unregulated as of the Publication Date will be reduced 15% below the Current Rate, and then adjusted at Continental's option, pursuant to Commission rules, for any previously unrecovered inflation and external costs that have accrued through the most recently completed calendar quarter prior to such Lifeline Basic rate reduction. ii. Since approximately 60% of Continental's BST customers are in unregulated franchises, this provision will assure rate stability and provide other benefits for approximately 1.8 million Continental customers whose rates are unregulated as of the Publication Date. iii. The order approving the Contract shall affirmatively find that rates set pursuant to this paragraph are reasonable under the Act and the Commission's rules. 2). CPST Rate. i. By January 1, 1996, the CPST rate for all franchises that are unregulated as of the Publication Date will be maintained at the Current Rate, and then adjusted at Continental's option for: (a) any channels added pursuant to the Commission's Going-Forward rules; (b) an amount which yields the total revenues foregone by the 15% Lifeline Basic rate reduction; and (c) pursuant to Commission rules, any previously unrecovered inflation and external costs that have accrued through the most recently completed calendar quarter prior to such Lifeline Basic rate reduction. ii. Since approximately 46% of Continental's CPST customers are in unregulated franchises, this provision will assure rate stability and provide other benefits for approximately 1.3 million Continental customers whose rates are unregulated as of the Publication Date. iii. The order approving the Contract shall affirmatively find that rates set pursuant to this paragraph are reasonable under the Act and the Commission's rules. d. Equipment and Installation Rates for All Systems. In order to reduce accounting and regulatory costs, minimize fluctuations in consumer equipment prices, and eliminate large increases in such prices as system upgrades occur pursuant to the terms of section III.E., Continental will be permitted to average broad categories of equipment -- such as addressable and non- addressable converters, and remotes -- and various installation costs for all its systems on a state-wide or region-wide basis. For purposes of this Contract, "region-wide" refers to Continental's five operating regions, described in Exhibit 6 to this Contract, and any reasonable modifications to such regions. C. Limitations on Rate Increases. 1. BST Rates. After a Continental franchise's rates are restructured as required under the "Rate Stability Plan" described in the previous section, future BST rate increases will be governed by the Commission's rules regarding the pass through of external cost increases and inflation. 2. CPST Rates. After a Continental franchise's rates are restructured as required under the "Rate Stability Plan" as described in the previous section, future CPST rate increases will be governed by the Commission's rules regarding the pass through of external cost increases and inflation and by the Going-Forward rules, except as modified herein. Specifically, Continental will be entitled to conduct a second round of channel additions over the three-year period from 1998 through 2000 in accordance with the existing Going-Forward rules. 3. Equipment and Installation Rates. Beginning on January 1, 1996, Continental will file annual updates to its Form 1205 equipment and installation rates with the Commission. The Commission shall review each updated Form 1205. Continental may begin charging revised equipment and installation rates to customers based upon the updated Form 1205 upon thirty (30) days notice. These revised equipment and installation rates will be subject to refund if the Commission later concludes that lower state-wide or region-wide rates are called for by the Form 1205 and applicable rules. 4. Waiver of Right to File Cost-of-Service Cases for Future Rate Increases. Upon the Effective Date of the Contract, Continental agrees not to file cost-of-service-based rate justifications for any future rate increases in any franchise covered by this Contract during the period that the Contract remains in effect. D. Resolution of Existing Rate Cases. 1. All CPST benchmark and BST and CPST cost-of- service cases currently pending before the Commission are resolved and finally terminated as part of the adoption of this Contract. 2. All BST cost-of-service cases currently pending before an LFA are resolved and fully terminated as part of the adoption of this Contract, subject to the right of LFAs to "opt out" of BST cost-of-service Refund settlements under the terms of section III.I. below. 3. Continental accepts the jurisdiction of the Commission over it and the subject matter of these rate settlements for purposes of this Contract and the order approving this Contract. 4. The Commission has reviewed Continental's CPST benchmark and BST and CPST cost-of-service filings. In light of this review, the covenants and representations contained in this Contract, and in express reliance thereon, and in order to conserve Commission resources, avoid litigation costs, and achieve the other benefits to the public contained in the Contract, the Commission agrees to resolve and terminate all cases involving Continental currently pending before it and all pending BST cost-of-service cases currently pending before LFAs, subject to the right of LFAs to "opt out" of the BST cost-of- service Refund settlement under the terms of section III.I below. 5. This settlement is without a finding by the Commission of any wrongdoing by Continental. Further, the Commission agrees that it will not institute, on its own motion, any proceedings against Continental based upon the information obtained during the consideration of the Contract. In addition, in the absence of additional facts, the Commission agrees that any allegations and other circumstances involved in consideration of this Contract or settlement of the pending rate cases will not be used against Continental with respect to any future proceedings at the Commission. Nor may they be used against Continental as evidence of any refund liability due subscribers in any proceeding conducted by any LFA that elects to opt out of the BST cost-of-service Refund settlement pursuant to section III.I. below. 6. Similarly, neither the Contract, nor any settlement contained herein, constitutes an admission by Continental of any violation of, or failure to conform to, any law, rule, or policy. 7. In consideration for the Commission's agreement to enter into this Contract and resolve and terminate pending benchmark and cost-of-service cases in accordance with the terms of this Contract, Continental hereby agrees to the terms, conditions, and procedures contained in the Contract, which Continental and the Commission believe will facilitate a fair and expeditious resolution of these cases in a manner that serves the public interest. 8. Continental waives any rights it may have to judicial review, appeal, or rights otherwise to challenge or contest the validity of any order adopting this Contract, or to use this Contract as evidence in any such proceeding. Continental agrees that the provisions of this Contract shall be incorporated by reference in the order formally approving this Contract. Continental and the Commission agree that they will each actively defend any order adopting the provisions of the Contract against any appeal of or other legal challenge to such an order by any third party. Continental and the Commission each agree that they will reasonably cooperate with the other in any such defense of the Contract. 9. Continental agrees that any violation of this Contract or the order approving this Contract shall constitute a violation of a Commission order, entitling the Commission to exercise any rights and remedies attendant to the enforcement of a Commission order. 10. The Commission and Continental further agree that the effectiveness of this Contract is expressly contingent upon resolution and termination of Continental's CPST benchmark and BST and CPST cost-of-service proceedings (except as LFAs may elect to opt out of the BST cost-of-service Refund settlement under section III.I. below), issuance of an order approving the Contract, and Continental's compliance with the terms, conditions, and procedures set forth in the Contract. If this Contract is not approved by the Commission and accepted by Continental, or if the Contract is otherwise rendered invalid, in whole or in part, by final order of any court of competent jurisdiction, the Contract or such part may not be used in any fashion in any legal proceeding. 11. If the Commission, or the United States on behalf of the Commission, brings an action in any United States District Court to enforce the terms of the order approving the terms of this Contract, Continental agrees, subject to the terms of the previous paragraph, that it will not contest the validity of the order, and will consent to a judgment incorporating the terms of this Contract. E. Infrastructure Upgrade Commitment. 1. Infrastructure Upgrade: Financial. Continental commits to invest at least $1.35 billion from January 1, 1995 through December 31, 2000, to substantially upgrade all of its cable systems nationwide so as to meet the technical upgrade commitment specified in the next paragraph. Continental will make an annual investment for rebuilds and upgrades of its United States cable systems which is at least 120% of its average aggregate annual capital expenditures from 1990 through 1994. Accelerated expenditures will be credited toward future years during the Contract period. All of the $1.35 billion will be dedicated to Continental cable systems within the United States. 2. Infrastructure Upgrade: Technical. The investment commitment described in the previous paragraph will be used to upgrade and rebuild Continental's U.S. cable systems so that, by December 31, 2000, the following minimum conditions will be met: For each Continental cable system less than 550 MHz, channel capacity will increase by a minimum of 20% of its capacity, measured in MHz. All Continental subscribers will be served by a system with a capacity of at least 550 MHz; At least 50% of Continental subscribers will be served by a system with a capacity of at least 750 MHz; Systems serving at least 85% of Continental subscribers will utilize fiber optic technology to transport signals from the system headend to neighborhood nodes; All Continental systems will utilize addressability or other suitable technology to make interactive services available to subscribers and to enhance the ability of consumers to make service choices. Continental will use its best efforts to deploy new technology in a manner that is not disruptive to consumers; and System reliability and picture quality will be improved through the replacement of active components (amplifiers) with passive conductors (fiber). 3. Infrastructure Upgrade: Non-Discrimination. Continental will distribute its system upgrade efforts so as not to discriminate among subscribers based on socio-economic status. 4. Infrastructure Upgrade: Failure to Meet Investment Target. If, at the end of any calendar year, Continental has failed to invest at least 85% of the annual amount committed to infrastructure upgrades, taking into consideration accelerated payments from previous years as described in paragraph 1 of this section, Continental will be required to make an in-kind Refund equal to the amount by which that year's capital expenditure falls short of its required annual investment. Any Refund applicable to a given year may be stayed, at Continental's option, for one year to allow Continental to meet its upgrade investment commitment by the end of the following year. If by the end of the following year Continental has met its investment commitment for the previous year, then no Refunds shall be due. Refunds shall be structured so as to compensate those customers who have not benefitted from the technical upgrade requirements set out in paragraph 2 of this section. F. Migrated Product Tiers and New Product Tiers. 1. Migrated Product Tiers. a. On each of its systems, Continental may move a maximum of four CPST services to a single "Migrated Product Tier" ("MPT"). Because the MPT will initially consist of services subscribers have already asked to receive, Continental will not be required to re-market the MPT to existing subscribers. These migrated channels may also be offered on an a la carte basis. Continental may not require the subscription to any tier, other than the BST, as a condition for subscribing to an MPT, and may not require subscription to an MPT as a condition for subscribing to a CPST. b. Initially, Continental will set the rate for a franchise's MPT at the same level, on a per channel basis, that is set for that franchise's CPSTs under section III.B.2. above. There will be no limitation on the number of new services Continental may add to an MPT. Continental may increase the price of an MPT to reflect new services added to the MPT by an amount not to exceed $.20 per added channel, plus the actual license fee(s) for the added channel(s). c. Because customers will be able to subscribe to CPST(s) and an MPT on a stand-alone basis, the Commission will regulate MPT prices as of January 1, 1997 in the same manner in which the Commission currently regulates NPT prices. Prior to January 1, 1997, previously unrecovered inflation and external cost increases will be permitted on the migrated services in the manner permitted by the Commission's rules for CPSTs. 2. New Product Tiers. On or after January 1, 1997, Continental may convert the MPT in each system into an NPT, as defined in 47 C.F.R.  76.987, including subsequent clarifications or amendments. These NPTs will be treated as all other NPTs under the Commission's rules, provided the tier is offered without a buy-through requirement of any tier other than the BST. Also, nothing in the Contract shall be construed to prevent Continental from creating other NPTs and/or offering a la carte channels pursuant to Commission rules. G. Franchises Subject to Effective or Price-Constraining Competition. The rate regulation terms of this Contract shall not apply to those Continental franchises that the Commission has found to be: (1) subject to effective competition under the Act; or (2) price constrained by competition. However, Continental's upgrade commitments set out in section III.E. continue to apply to such franchises. H. Acquired Systems. Cable systems acquired by Continental after the Publication Date may be incorporated into this Contract only after the acquisition has closed and the Commission and Continental have agreed on an amendment to include such systems under this Contract. Notwithstanding the foregoing, Continental will not be permitted to create an MPT pursuant to this Social Contract for acquired systems if NPTs already exist in those systems as a result of a la carte packaging by the prior owner(s) of such systems. I. Local Franchising Authority Right to Opt Out of the Cost-of-Service Refund Settlement. 1. Right to Opt Out. LFAs with pending BST cost-of-service cases will have the opportunity to "opt out" of the BST cost-of-service Refund settlement provisions of this Contract and resolve any amounts owed to customers in such franchises with Continental pursuant to Commission rules. To opt out of such provisions, an LFA must provide written notice to the Commission of its decision to do so no later than forty-five (45) days following the Publication Date. 2. Effect of Opting Out. a. In any franchise area where the LFA has opted out, Continental shall not be required to provide any Refunds to BST customers, as provided for in section III.A.1.a. Additionally, an LFA may not use the facts or circumstances of this Contract, including any Refunds agreed upon by Continental or Continental's agreement to reduce rates and to create a Lifeline Basic tier, as evidence in any rate proceeding of any refund liability due BST subscribers. b. In any franchise where the LFA opts out under this section, Continental retains the right to pursue any and all legal remedies regarding the decisions of the LFA, including appeals to the Commission and/or to appropriate state, local, and/or federal courts. J. Reporting Requirements. 1. No later than ninety (90) days following the end of each calendar year that the Contract is in effect, Continental will provide an annual progress report to the Commission outlining the amount of capital investment Continental has made in compliance with section III.E.1.; the number of subscribers affected by such capital investment; system reliability and service improvements resulting from upgrades completed during the previous calendar year; and Continental's projected expenditures and upgrades for the following year. 2. The Commission shall have the right to inspect the books and records of Continental to verify compliance with the terms of this Contract and to interview corporate employees. K. Modification and Termination. 1. The Contract may not be terminated or modified without the mutual agreement of Continental and the Commission. The Commission's consent to any such modification shall be demonstrated by an order issued by the Cable Services Bureau or, at the Commission's option, by the Commission itself. 2. If the laws or regulations applicable to any services offered in any Continental franchise change during the term of the Contract in a manner that would provide a material favorable financial impact on Continental, then at any time after such change has occurred, Continental may petition the Commission to terminate this Contract. The Commission shall act expeditiously on such petition, and grant of the petition will not be unreasonably withheld. L. All Necessary Waivers and Preemptions Deemed Granted. In addition to the specific waivers of the Commission's rules identified in the Contract, the order approving the Contract shall affirmatively state that any and all waivers of the Commission's rules, and any modifications to Commission forms, necessary to effectuate the terms of the Contract are deemed to be granted. The Commission will not assert in any proceeding that Continental's compliance with the terms of the Contract violates any Commission rule or order, and, in any proceeding before the Commission brought by a third party, a showing by Continental that it has complied with the terms of the Contract shall constitute a defense to any claim that Continental's actions in meeting the terms of the Contract constitute a violation of any applicable Commission rule or order. M. Term. This Contract shall become effective when the Commission issues an order approving the Contract and shall continue in effect through December 31, 2000, subject to section III.K. above regarding modification and termination. N. Service of Contract and Public Notice on Interested Parties. Continental will serve a copy of this Social Contract and the Public Notice announcing this proposed resolution on all Continental LFAs and also will serve all parties to any pending Continental cost-of-service or benchmark rate proceeding. O. Public Notice. The Commission will promptly issue a public notice in which the Commission proposes to adopt the Contract as a final order governing Continental's provision of cable services, and shall provide interested parties with thirty (30) days to comment on the Contract and an additional fifteen (15) days in which to file reply comments. P. Entire Agreement. This Contract and its exhibits, as either or both may be amended in accordance with the terms herein, constitute the entire agreement between Continental and the Commission with respect to the subject matter of this Contract and supersede all prior agreements and understandings, whether oral or written, between Continental and the Commission with respect to the subject matter of this Contract. No representation, warranty, promise, inducement, or statement of intention has been made by Continental or the Commission which is not embodied in this Contract, and neither party shall be bound by, or be liable for, any alleged representation, warranty, promise, inducement, or statement of intention not embodied in this Contract or its exhibits. Q. Severability. If any provision, clause, or part of this Contract is invalidated, the remainder of this Contract shall not be affected thereby and shall remain in effect; provided, however, that if such invalidation is material to this Contract, the parties shall negotiate in good faith to reconstitute the Contract in a form that is, to the maximum extent possible, consistent with the original intent of Continental and the Commission. IN WITNESS WHEREOF, this Contract has been duly executed and delivered by or on behalf of the parties hereto as of the Effective Date as defined herein. CONTINENTAL CABLEVISION, INC. By: __________________________ Name: Title: FEDERAL COMMUNICATIONS COMMISSION By: __________________________ Name: Title: EXHIBIT 6 CONTINENTAL CABLEVISION, INC. OPERATING REGIONS Northeast: Connecticut, Maine, Massachusetts, New Hampshire, New York Southeast: Florida, Georgia, Virginia Midwest: Michigan, Ohio Central: Illinois, Iowa, Minnesota, Missouri Western: California, Nevada