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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: November 26, 1997 Released: November 28, 1997 By the Chief, Cable Services Bureau: 1. Marcus Cable Partners, L.P. ("Marcus") 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 five cable television systems Marcus is acquiring from Time Warner. By this Order we grant the Marcus request. 2. The Commission adopted the Social Contract with Time Warner on November 30, 1995. It is designed to provide rate stability, improved quality of service, and incentives for upgrades and system improvements. Under its terms, 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. The five systems acquired by Marcus from Time Warner serve 32 communities and 67,894 subscribers in Illinois, Indiana, and Wisconsin. A list of the communities is attached hereto. Marcus has requested the continued application of the Social Contract to these five systems pursuant to Section III.F.6 of the Social Contract. Marcus asks for no modification of the Social Contract. 4. By its the 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. Marcus seeks the concurrence of the Commission to continue application of the Social Contract to the five cable systems Marcus is acquiring from Time Warner. 5. Marcus and Time Warner have entered into an agreement pursuant to which Marcus agrees to be bound to the Social Contract with respect to the five systems it is acquiring from Time Warner (the "Assignment and Assumption Agreement"). The Assignment and Assumption Agreement is attached as Exhibit 1 and its terms are incorporated herein. The Assignment and Assumption Agreement becomes effective upon the release by the Commission of this Order and the consummation of exchange agreements between Marcus and Time Warner. 6. Pursuant to the Assignment and Assumption Agreement and the Social Contract, Marcus will comply with provisions of the Social Contract that Time Warner has not fulfilled, including, but not limited to (1) upgrading those acquired systems with a capacity of at least 550 MHz to 750 MHZ; (2) upgrading all other of the acquired systems to 550 MHZ; (3) ensuring that at least 60 percent of new analog services in the acquired systems are added to the cable programming services tier ("CPST"); (4) adding at least 15 new channels on average (weighted by CPST subscribers) to the CPST of the acquired systems; (5) expending at least 60 percent of upgrade capital on benefits for basic service tier ("BST") and CPST subscribers; (6) submitting an annual progress report; and (7) assuming the obligation to pay all refunds and penalties imposed under the Social Contract for noncompliance with upgrade requirements not met by Marcus or Time Warner. 7. In addition, the Social Contract contains a requirement that at least 50 percent of all Time Warner subscribers will be served by a system with a capacity of at least 750 MHz of which at least 200 MHz is expected to be allocated to digital distribution. For purposes of measuring compliance by Time Warner with the 50 percent requirement at the expiration of the Social Contract, subscribers in the communities listed in Appendix B to the Assignment and Assumption Agreement will be counted as Time Warner subscribers. 8. 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. That financial commitment does not apply to Marcus. Instead, Marcus agrees to invest $13,500,000 in capital costs in connection with the completion of the upgrade of the acquired systems. The investment requirement imposed on Time Warner by the Social Contract is hereby reduced by an identical amount. 9. Accordingly, IT IS ORDERED that the request of Marcus Cable Partners, L.P. for the assignment of the rights and the assumption of the obligations of the Social Contract with respect to the five cable systems being acquired by Marcus Cable Partners, L.P. from Time Warner Cable IS GRANTED, provided that the Commission shall have the benefit of all agreements made between parties in the Assignment and Assumption 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 Assignment and Assumption Agreement. 10. This action is taken by the Chief, Cable Services Bureau, pursuant to authority granted by the Commission in Social Contract for Time Warner Cable and pursuant to authority delegated by Section 0.321 of the Commission's rules. 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau