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                            Before the
                Federal Communications Commission
                      Washington, D.C. 20554

                                )
In the Matter of                )
                                )
Time Warner Communications      )  CUID No.  NY0487 (Town of Waterloo)
                                )            
                                )
                                )
                                )
Complaint Regarding             )
Cable Programming Services Tier Rates)


                             ORDER

     Adopted:  August 26, 1997          Released:  August 29, 1997  

By the Chief, Cable Services Bureau:

     1.   In this Order we consider a complaint concerning the rates of the above-captioned operator
("Operator") for its cable programming services tier ("CPST") in the community referenced above. 
Operator's response includes benchmark justifications filed on FCC Form 1240.  The cable services franchise
for the community referenced above was previously owned by Cablevision Industries Corporation ("CVI"). 
On January 3, 1996, CVI merged with Time Warner Cable ("TWC").  TWC and the Federal Communications
Commission ("Commission") had previously entered into a social contract ("Social Contract").  According
to the terms of the Social Contract, cable systems later acquired from CVI by TWC are to be included in the
Social Contract.  Also pursuant to the Social Contract, the CPST rates in effect on January 3, 1996 for the
community referenced above are deemed reasonable.  This Order addresses the reasonableness of Operator's
CPST rate of $16.49, effective January 1, 1997.

     2.   The Communications Act ("Act") authorizes the Commission to review the CPST rates of
cable systems not subject to effective competition to ensure that rates charged are not unreasonable.  The
Telecommunications Act of 1996 ("1996 Act") and our rules implementing the new legislation ("Interim
Rules"), require that complaints against CPST rates be filed with the Commission by a local franchising
authority ("LFA") that has received subscriber complaints.  An LFA may not file a CPST rate complaint
unless it receives more than one subscriber complaint within 90 days after such increase becomes effective. 
If the Commission finds the rate unreasonable, it shall determine the correct rate and any refund liability.

     3.   The Commission's original rate regulations took effect on September 1, 1993.  The
Commission subsequently revised its rate regulations effective May 15, 1994.  Cable operators must use
the FCC Form 1200 series to justify their rates through a benchmark showing for the period beginning May
15, 1994.  Operators may 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.  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.

     4.   On June 6, 1997, the LFA filed a complaint against Operator's January 1, 1997 rate
increase.  The LFA certified that it has complied with the Interim Rules.  Operator filed an FCC Form
1240 to justify its CPST rate of $13.42, effective February 1, 1996, and a second FCC Form 1240 to justify
its CPST rate of $16.49, effective January 1, 1997.  Operator also raised affirmative defenses to the LFA's
complaint.  Specifically, Operator claimed that its rates are not subject to regulation because the Operator
is subject to effective competition in the community set forth above.  Operator also argued that the CPST
rate charged in the community set forth above was established as part of a system-wide, revenue-neutral rate
structuring that comports with the Commission's recently adopted uniform rate-setting methodology
("Uniform Rate Rules").  If the Commission is unable to reach a determination regarding Operator's
affirmative defenses within the 90-day statutory deadline for resolving the complaint filed by the LFA,
Operator requested that any adverse determination regarding Operator's CPST rate be suspended pending
resolution of its defenses.

     5.   On June 3, 1997, the Commission adopted an order denying Operator's Effective
Competition Petition for the community referenced above.  As a result, Operator's effective competition
affirmative defense is moot.  We will therefore review Operator's FCC Forms 1240 to determine whether
Operator has correctly calculated its maximum permitted rate ("MPR") for its CPST.

     6.   Upon review of Operator's first FCC Form 1240, for the projected period February 1, 1996
to December 31, 1996, we find that Operator correctly calculated its MPR of $14.00.  Pursuant to the Social
Contract, Operator carried forward on Line A1 its actual rate in effect in January 3, 1996.

     7.   Upon review of Operator's second FCC Form 1240, for the projected period January 1, 1997
to December 31, 1997, we find that Operator incorrectly calculated its MPR.  Operator began its true-up
period with the same month that it had used as the final month of its true-up period in its first FCC Form
1240.  Operator is not permitted to perform a true-up on the same period of time twice.  For this reason,
we have eliminated the first month from Operator's true-up period, reducing it from 11 months to 10 months. 
Operator also made true-up adjustments through to the month prior to the effective date of the rate increase. 
This is incorrect.  The annual adjustment afforded by FCC Form 1240 allows operators to project changes
in external costs, inflation, and the number of regulated channels.  This structure avoids the delay some
operators experienced in recouping costs through multiple rate adjustments throughout the year.  Because
projections will not reflect the costs that actually occur, the Commission provided, as part of the annual
adjustment, a "true-up" to correct projected cost changes with the actual cost changes.  However, the
Commission has noted that, as FCC Form 1240 must be filed 90 days before an increase is to take effect, the
period for the true-up will not coincide with the previous year's projections.  The true-up data is intended
to indicate real, not projected data.  This policy is reflected in the instructions accompanying FCC Form
1240.

     8.   Based on this instruction and considering evidence in the filing and reasonable time for
closing accounts and completing forms, we have further adjusted Operator's true-up period from 10 months
to 8 months.  These adjustments required that we refresh Operator's inflation factors to 2.22 for the second
quarter of 1996 and to 2.21 for the third quarter of 1996 and adjust Worksheet 1 accordingly.  As a result,
the true-up inflation factor in Module C, Line C1 for the 8 month period was corrected to 1.0151 instead of
the 2.19 percent (1.0219) used by the Operator for an 11 month period.  We have adjusted Module E, and
have corrected the number of months on Line E2 to 8 months and Line E3 to 3 months.  We have also
adjusted the inflation segment in Module F, Line F5 to reflect the corrections made in Line C1.  This has
resulted in a corresponding adjustment on Line F9 (MPR for True-Up Period 1).

     9.   The reduction in the length of the true-up period also results in a reduction in Line H2
(Revenue From MPR for Period 1).  This results in a corresponding reduction in Line I8 (True-Up Segment
for the Projected Period).  In total, our adjustments to Operator's FCC Form 1240 result in an MPR for the
Projected Period, Line I9, of $15.43, rather than Operator's MPR for the projected period of $16.49. 
Because Operator's actual CPST rate of $16.49 exceeds its revised MPR of $15.43 for the projected period,
we find Operator's actual CPST rate of $16.49, effective January 1, 1997, to be unreasonable.

     10.  To the extent that external costs from the three months disallowed from Operator's true-up
period have been averaged into the rates charged in the eight months allowed in Operator's true-up period,
and have not been removed by our adjustments, we will order Operator to make a month-by-month
accounting of such external costs.  Such accounting shall allow a comparison of the actual external costs for
the permitted eight-month true-up period with the recovery of external costs afforded by the external cost
segment for that period as calculated on Worksheet 7.  We will order Operator to incorporate this accounting
report into its refund plan and refund any over-recovery, plus interest, to subscribers.  We will also order
Operator to submit an FCC Form 1240 for the projected period January 1, 1997 to December 31, 1997 which
incorporates our revisions and the adjustments described above.

     11.  As indicated above, Operator requests that any adverse determination regarding Operator's
CPST rate be suspended, pending resolution of Operator's Petition for Special Relief for Uniform Rates
("Petition") in its Finger Lakes, New York cable system.  We find that it would serve the public interest to
hold the refund liability of Operator in abeyance pending a decision on Operator's Petition.  There is an
administrative burden on Operator to implement a refund plan, which we seek to avoid, if we subsequently
grant Operator's Petition in the Finger Lakes, New York cable system, which includes the community set
forth above, and essentially seeks retroactive approval of its rate.  The interests of subscribers will be
safeguarded if Operator's Petition is denied because this Order imposes refund liability on Operator for its
overcharge on the CPST.  Therefore, we will hold in abeyance Operator's obligation to issue refunds until
30 days of the release of an Order denying Operator's Petition in the Finger Lakes cable system.

     12.  Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's rules, 47
C.F.R.  0.321, that Operator's CPST rate of $16.49, effective January 1, 1997, in the community referenced
above, IS UNREASONABLE.

     13.  IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47
C.F.R.  0.321, that the complaint referenced herein against the CPST rate charged by Operator in the
franchise area referenced in the caption IS GRANTED TO THE EXTENT INDICATED HEREIN.

     14.  IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47
C.F.R.  0.321, that Operator's refund liability for the overcharge on the CPST, effective January 1, 1997,
is held in abeyance, TO THE EXTENT INDICATED HEREIN.

     15.  IT IS FURTHER ORDERED, pursuant to Section 76.961 of the Commission's rules, 47
C.F.R.  76.961, that Operator shall refund to subscribers in the franchise area referenced above that portion
of the amount paid in excess of the maximum permitted CPST rate of $15.43 per month (plus franchise fees),
plus interest to the date of the refund, for the period January 13, 1997 through the day before Operator
implements the maximum permitted CPST rate of $15.43.

     16.  IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47
C.F.R.  0.321, that Operator shall conduct a month-by-month accounting of its external costs from
Operator's eight-month true-up period as found on Operator's Worksheets, and that Operator shall file, within
30 days of the release of this Order, a report detailing the over-recovery of external costs, plus interest, with
the Chief, Cable Services Bureau.

     17.  IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47
C.F.R.  0.321, that Operator shall promptly determine the overcharges to CPST subscribers for the stated
period, including any over-recovery as detailed in its accounting report, and shall file, within 30 days of the
release of an Order denying its Petition for Special Relief for Uniform Rates in its Finger Lakes, New York
cable system, a report with the Chief, Cable Services Bureau, stating the cumulative refund amounts so
determined (including franchise fees and interest), describing the calculation thereof, and describing its plan
to implement the refund within 60 days of the Commission approval of the plan.

     18.  IT IS FURTHER ORDERED, pursuant to Section 0.321 of the Commission's rules, 47
C.F.R.  0.321, that Operator shall revise its FCC Form 1240 for the projected period January 1, 1997
through December 31, 1997 incorporating the changes detailed in this order and shall file such amended FCC
Form 1240 with the Chief, Cable Services Bureau within 30 days of the release of this Order.

                              FEDERAL COMMUNICATIONS COMMISSION 



                              Meredith J. Jones
                              Chief, Cable Services Bureau