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. ************************************************************************* Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of) ) Time Warner Cable, d/b/a ) Cablevision Industries, Inc. ) CUID Nos. FL0200 (Volusia County) ) FL0735 (Volusia County) Complaint Regarding ) Cable Programming Services Tier ) Rate Increase ) ORDER Adopted: August 8, 1996 Released: August 9, 1996 By the Chief, Financial Analysis and Compliance Division, Cable Services Bureau: 1. In this Order we consider a complaint against the February 1, 1996 rate increase of Time Warner Cable d/b/a Cablevision Industries, Inc. ("Time Warner") for its cable programming services tier ("CPST") in Volusia County CUID Nos. FL0200 and FL0735. In response to this complaint, Time Warner, pursuant to a Social Contract which was entered into with the Federal Communications Commission ("Commission"), submitted its "Time Warner Form 1240." Upon our review of the record, we conclude that, notwithstanding certain adjustments, Time Warner's rate increase is not unreasonable. 2. Under the Communications Act, the Commission is authorized to review the CPST rates of cable systems not subject to effective competition to ensure that rates charged are not unreasonable. If the Commission finds the rate unreasonable, it shall determine the correct rate and any refund liability. The Telecommunications Act of 1996 and our rules implementing the new legislation, require that complaints against the CPST rates be filed with the Commission by a franchising authority that has received subscriber complaints. A franchising authority may not file a CPST rate complaint unless, within 90 days after such increase becomes effective, it receives subscriber complaints. This standard requires more than one subscriber rate complaint. The provisions under the 1996 Act became effective upon its enactment on February 8, 1996. 3. The County of Volusia filed a complaint on May 20, 1996. It has verified that it has received more than one subscriber complaint sufficient to trigger our jurisdiction to review its complaint. On April 4, 1996, Time Warner filed a response to the complaint asserting that the rate increase complained of is permitted under the terms of the Time Warner Social Contract. 4. To justify rates for the period beginning May 15, 1994 through a benchmark or cost of service showing, operators must use the FCC Form 1200 series. Operators are permitted to make changes to their rates on a quarterly basis using FCC Form 1210. Operators may alternatively justify adjustments to their rates on an annual basis using FCC Form 1240 to reflect reasonably certain and quantifiable changes in external costs, inflation, and the number of regulated channels that are projected for the twelve months following the rate change. In the Matter of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, MM Docket No. 92-266, Thirteenth Order on Reconsideration ("Thirteenth Reconsideration Order"). Any incurred cost that is not projected may be accrued with interest and added to rates at a later time. If actual and projected costs are different during the rate year a "true-up" mechanism is available to correct estimated costs with actual cost changes. The "true-up"requires operators to decrease their rates or alternatively permits them to increase their rates to make an adjustment for over or under estimations of these cost changes. 5. There are no official Commission forms available for use in establishing the initial rate restructuring as required under the Social Contract. Therefore, the Commission has allowed Time Warner to use a modified format of FCC Form 1240 to reflect the adjustments required under the Social Contract. Time Warner asserts that the Time Warner Form 1240 that it filed for the above-captioned community on January 31, 1996 justifies the rate increase that went into effect on February 1, 1996. 6. We have reviewed the Time Warner Form 1240 for the above-captioned community, and have made certain adjustments. These adjustments result in a smaller increase than is calculated by Time Warner. However, since Time Warner's actual increase is lower than the our adjusted increase, we find that Time Warner's rate increase is not unreasonable. The adjustments we made are described below and these adjustments should be taken into account in Time Warner's true-up calculation in its next CPST rate adjustment calculation. Interest Calculation 7. We have made an adjustment to the Time Warner Form 1240 that reflects the correct methodology to calculate interest, as shown in the FCC Form 1240. We recognize, that the use of the incorrect formula to compute interest has an impact on Time Warner's maximum permitted CPST rate. However, even with our correction for interest, Time Warner's current rate is below the maximum permitted rate pursuant to the Social Contract. External Cost Calculation 8. We have made an adjustment to the external cost calculation on Time Warner Form 1240. In calculating the monthly per-subscriber External Cost Segment for the Projected Period, Time Warner incorrectly reflected a 12 month period. In this case, the correct period is 11 months because Time Warner used a Projected Period of 11 months beginning February 1, 1996 through December 31, 1996. 9. Upon review of the record herein, we conclude that notwithstanding our adjustments, Time Warner has justified its February 1, 1996 rate increase of $2.22. 10. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the complaint referenced herein with respect to the County of Volusia, Florida, CUID Nos. FL0200 and FL0735, against the February 1, 1996 CPST rate increase charged by Time Warner IS DENIED. 11. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321, that Time Warner's CPST rate increase is not unreasonable. FEDERAL COMMUNICATIONS COMMISSION Elizabeth W. Beaty Chief, Financial Analysis and Compliance Division Cable Services Bureau