NOTICE ********************************************************* NOTICE ********************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file pnmc5021. File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** FEDERAL COMMUNICATIONS COMMISSION FACT SHEET "SOCIAL CONTRACT" FOR CONTINENTAL CABLE QUESTION AND ANSWER SHEET April 21, 1995 Q1: What is the Continental "Social Contract?" A: The Commission's Cable Services Bureau and Continental Cablevision, Inc. have negotiated a proposed Social Contract that will, if finally adopted by the Commission, resolve cable television rate complaints pending against Continental and require Continental to take certain actions, including a 15% reduction in basic tier rates and upgrading of its systems. The Contract was negotiated in accordance with the Commission's authority to consider and to adopt "social contracts" as alternatives to other regulatory approaches applicable to cable television rates. Q2: Why was the proposed Contract negotiated without the participation of complainants? A: The proposed Contract was negotiated consistent with the modified ex parte rules released by the Commission on November 25, 1994. The negotiations resulted in a draft agreement that has been placed on public notice so that all interested parties can comment. Comments received from Local Franchising Authorities, complainants and the public at large will be considered before final adoption of the Contract. Q3: If the Contract goes into effect, what happens to the pending rate complaints? A: The proposed Contract resolves a large portion of the rate complaints filed against Continental from several sources. These include cable programming service tier (CPST) rate complaints in systems where Continental filed Benchmark and Cost of Service rate justifications and basic service tier (BST) rates in systems where Continental filed Cost of Service justifications. The proposed Contract does not cover BST rates in systems where Continental filed a Benchmark rate justification with the Local Franchising Authority. Adoption of the proposed Contract will allow for an expedient and fair resolution of pending matters. _________________________________________________________ Office of Public Affairs, Public Service Division, 1919 M Street NW, Washington, D.C., 20554 202-418-0200/TT 202-418-2555 Q4: Why were the Benchmark BST cases not included in this proposed Contract? A: The review of Benchmark filings requires fewer resources from the Local Franchising Authority. Therefore, it was more appropriate to have Continental and the Local Franchising Authorities resolve these cases individually. Q5: Can a Local Franchising Authority require Continental to make system improvements above and beyond those required by the Commission in the proposed Contract? A: The $1.35 billion in technical improvements, required by the proposed Contract, are largely state-of-the-art improvements to be achieved on a company wide basis. However, the proposed Contract does not preempt a Local Franchising Authority's right to negotiate other desired technical improvements in a franchise renewal proceeding. Q6: Does the Contract preempt some of the duties of Local Franchising Authorities? A: For the purpose of settling rate complaints, in areas where Continental has filed a Benchmark rate justification, the Local Franchising Authorities are still responsible for the processing and resolution of BST cases. The proposal will provide relief for those localities that desire regulation but do not have the resources to devote to Cost of Service rate proceedings. However, Local Franchising Authorities have the option to "opt-out" of the proposed Contract if they prefer to resolve their cases individually. In this manner, the Commission has only offered an alternative for those communities, but the final resolution rests with the Local Franchising Authority. With respect to equipment averaging which is provided for in the Contract, such averaging would not be permitted until 1996. Therefore all decisions made at the local level for equipment prices will remain valid and effective until the 1996 filings become effective. At that time, Continental would be permitted to average the cost of equipment and installation on a state or regional basis. Q7: How does a community "opt-out" of this agreement? A: A Local Franchising Authority may "opt-out" of this proposed Contract by notifying the Secretary of the Commission in writing of its decision to "opt-out." There is no required form that must be followed. The deadline for this notification has been extended from May 18, 1995 to June 6, 1995. Q8: What if a Local Franchising Authority wants to have its cases resolved as a part of this proposed Contract but Continental has sought to justify its rates under a Benchmark showing? A: Local Franchising Authorities have the ultimate responsibility for BST filings. However, in circumstances where a community lacks the necessary resources to enforce regulation the Commission will assume the responsibility. The Commission will review each petition for the Commission to regulate the BST on a case by case basis. None of these petitions will be included in the proposed Contract, but will be addressed independently outside of the Contract. Q9: If cable rate regulation is removed by Congress, will Continental be allowed to terminate the proposed Contract's requirements? A: Should Congress change the rules governing rate regulation in a manner that is materially favorable financially to operators, Continental would have the right to petition the Commission to terminate the proposed Contract and the Commission may not unreasonably deny such a petition. Q10: Where are the real savings and refunds to subscribers, if Continental is required to reduce their Basic Service Tier rate, regulated by the Franchising Authority and subscribed to by all subscribers, by 15%, and is then allowed to increase its Cable Programming Services Tier rate, regulated by the Commission and subscribed to by most subscribers, by 15%. A: This element of the Contract seeks to address several goals. First, "Lifeline" BST rates priced at 15% below the Benchmark rate for regulated systems and 15% below the current rate for unregulated systems, will benefit subscribers on a fixed income and those who only want basic service for clearer reception. An additional benefit of the "Lifeline" BST rate is that it may also stimulate competition in the market place. For instance, alternative video services, such as Direct Broadcast Satellites, which do not offer local over the air channels, become more affordable as a package with "Lifeline" BST. Competition helps everyone because marketplace rates tend to be the most ideal environment for the consumer. Q11: Why is the Commission discouraging Continental from adding new channels to the BST? A: The BST is the only tier required by all subscribers to take advantage of any cable service. A small, low-priced tier will provide more choices for subscribers who may only want a BST and a migrated product tier (MFT), new product tier (NPT), or a premium or pay-per-view service. This increases the choice for subscribers and provides subscribers with an opportunity to possibly lower their rates by modifying their viewing packages to meet their individual needs. Q12: Why is the Commission allowing Continental to move four regulated channels to a tier that may not be regulated after January 1, 1997? A: The channels moved to an MPT will continue to be priced at the rate regulated price while new channels added will be priced at a reasonable rate. After January 1, 1997, an MPT may be converted to an NPT. The NPT concept was introduced in the Commission's Going Forward order and was a tier designed to be regulated by market forces, primarily competition with traditionally rate regulated tiers. The proposed Contract also provides for the elimination of buy through provisions which will ensure that subscribers will have the option to purchase either the regulated CPST, the MPT, or both. This choice will essentially ensure market competition for the MPT and ensure that its channel offerings and pricing offer a reasonable value to the subscribers. Q13: Why is the Commission permitting equipment averaging and requiring that the equipment forms are now filed at the Commission level? A: Equipment averaging stabilizes equipment pricing for subscribers as costs are spread evenly across a larger base. In order to have uniform averaging, determinations must be made by a central reviewer. Q14: Why are in-kind refunds being given? A: The Commission determined that in-kind refunds represented an appropriate method of refunds to subscribers. Additional steps have been taken to ensure that subscribers will receive fair treatment under this proposed Contract. The Contract provides that the in-kind refund options offered by Continental must be approved by the Commission, and subscribers must have a minimum of three choices and at least six months to redeem their in-kind refund. Q15: What is the time period for Continental to issue the refunds? A: Continental has indicated that it anticipates offering refunds in the early Fall of 1995. Q16: Will systems acquired by Continental in the future be incorporated into the Contract? A: Cable systems acquired by Continental in the future may only be incorporated in the Contract after the acquisition has been consummated and the Commission and Continental have agreed on an amendment to the Contract to include the new systems. Q17: Will Local Franchising Authority and consumer comments be taken into consideration to possibly make changes in the proposed Contract? A: Yes, the Commission will review all comments from interested parties including Local Franchising Authorities, trade associations, and consumers before finalizing negotiations on the proposed Contract. 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: anonymous ftp from ftp.fcc.gov, file ilcb5001 (.txt or .wp) in directory \pub\Informal\Cable. For further information contact Morgan Broman (202) 416- 0852.