HomeMy WebLinkAboutAgenda - 01-20-1998 - 5c~•
ORANGE COUNTY
BOARD OF COMMISSIONERS
Action Agenda
Item No. ~~
ACTION AGENDA ITEM ABSTRACT
Meeting Date: January 20, 1998
SUBJECT: Cable TV Rate Adjustment-Time Warner
DEPARTMENT: Manager's Office
PUBLIC HEARING: (Y/1~ ~ `~~~~'`
BUDGET AMENDMENT: (Y/1~ ...,A'
ATTACH1YlENT(S):
Report
Resolution
INFORMATION CONTACT:
Albert T. Kittrell, Assistant County Manager
TELEPHONE NUMBERS: - -ext. 2300
Hillsborough 732-8181
Chapel Hill 968-4501
Durham 688-7331
Mebane 227-2031
PURPOSE: To adopt a resolution adjusting rates for Tune Warner Cable.
BACKGROUND: In September 1997 Time Warner Cable submitted FCC form 1240 requesting
adjustments of basic cable rates. Under FCC regulations cable companies are permitted to request
rate adjustments based on inflation.
Triangle J Council of Governments Cable TV Consultant, Bob Sepe, has reviewed Time Warner
documentation on behalf of the County and determined the rates should not be increased as
requested by Time Warner. The consultants' report is attached and Bob Sepe will clarify
information in the report if requested by the Boazd.
The Chair of the County Cable TV Committee, Michael Patrick, concurs with TJCOG
determination and will present the resolution and information to the Boazd.
RECOMMENDATION(S): The Manager recommends the Board adopt aResolution/Order
Finding that Time Warner's 1998 proposed $9.04 and $8.20 Basic Service Tier Maximum
Permitted Rates as Unreasonable and Setting the Basic Service Tier Maximum Permitted
Rates at $8.84 and $8.02 for the Carrboro and Chapel Hill Cable Televeision System.
• t
2
Time Warner Cable
Orange County NC-0256 & NC-0276
(Carrboro and Chapel Hill Cable System Subscribers)
Fcc 1240 Rate Review
for 1998
January 13, 1998
REPORT
TO: John Link; Manager, Orange County Q ~
1~
FROM: Robert Sege, City of Raleigh Information Access Manager and TJ-COG Cable
Television Regulatory Consultant
RE: Review of Annual Updating Maximum Permitted Rates filed by Time Warner
Cable (NC-0256 & NC-0276) -FCC Form 1240
Consultants for Orange County have reviewed both of Time Warner Cable's FCC 1240 filings
and supporting documentation furnished by the cable operator, and have conducted fact-finding
discussions with the cable operator and Federal Communications Commission representatives.
The values stated in the filing are the responsibility of the cable operator's management.
Supplied data were reviewed to determine whether the operator calculated "updated" rates
consistent with the procedures prescribed by the FCC in accordance with the 13th Order on
Reconsideration, the Time Warner Social Contract, and the Telecommunications Act of 1996.
Original computations were performed by the consultants and compared against information
provided by Time Warner Cable. The consultants believe that the underlying cost data submitted
by the cable operator is free of material misstatements. However, the FCC 1240 rate filings
submitted to the County does rely upon old inflarion adjustment information, which if left
uncorrected will result in higher than normally occurring cable rates. 1 The accompanying report
provides a reasonable basis far the recommendations.
~ Time Warner may not have the latest inflation adjustment data available at the time it
prepared its FCC Form 1240 for 1998.
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EXECLfTIVE SU1I+IlVIA.RY
Ti>~e Warner seeks approval from the County to adjust its m~xfmurn,rnPrmitted rnte R) Basic
Service Tier programming rates for 1998 in the Hillsborough systems. Those rates are listed in
the table below:
System 1997 l2PR Proposed 1998 Chan;e
Basic Rate Basic yIPR Rate
Carrboro System $8.81 59.03 $0.22
NC-0256
Chapel Hill System $7.88 58.20 $0.32
NC-0276
The County's consultants have reviewed Time Warner Cable's rate calculations and
accompanying information, and recommend that only the justified maxirntan permitted rate for
basic service be approved as shown below.
System Proposed 1998 JustiIIable Regulated Rate
Basic MPR Rate Basic 1~iPR Rate Chan e
Carrboro System $9.03 $8.84 ($0.19)
NC-0256
Chapel Hill System $8.20 $8.02 ($0.18)
NC-0276
Had Time Warner's FCC 1240 rate filings incorporated the true up inflation factor for the second
quarter of 1997 released by the Commission on October 10, 1997 the Maximum Permitted BST,
CPST and Standard service rates would have been lower. Although the FCC's 1240 rules
provide a "true-up" process to rectify over and under charges in subsequent years, it is the
consultant's opinion that prudent public policy acts to eliminate potential over charges as
opposed to providing "credit" adjustments later.
Time Warner Cable (TWC) is likely to appeal= the County's rate order to the FCC. In this event,
TWC can continue to collect the `higher" rags until such time that the FCC's Cable Bureau rules
on the appeal [likeiy in Au;ust, 1998]. Given the FCC's historical action in matters, the FCC is
Iikeiy to rule in favor of the County or remand the iss;:e back to the County to resolve. Should
this occur, the inflation rates shall be known and it wilt be an easy mater to promulgate new
Maximum Permtted Rates for BST, CPST and Standard cable services and issue subscriber
refunds.
IThc consultant conversed with a TWC rcpreseatative regarding this matter. No information was provided
with rtspect to the action that TWC might pursue. The Consultant did offer TWC aa_opportuniry to refile its
FCC 1240 to incorporate the latest inflation values. A decision in this regard by TWC has not yet beet: forthcoming.
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All the information contained in the following report is based upon data provided by the
Company. No independent analysis of TWC's system cost data has been undertaken, all figures
supplied by TWC, pursuant to TWC's Certification, are accepted as true. The analysis begins by
trying to replicate TWC's results. The Consultant has been able to determine that TWC's
calculations are mathematically correct. The report constitutes a detailed analyses of the
Consultant's filings pursuant to this rate filing.
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REPORT
On October 1, 1997, Time Warner Cable (TWC) notified Osage County that the company will
adjust its cable service rates and equipment and installation service rates on January I, 1998.
The County administers two franchises, the Carrboro (NC-025G) cable system and Cablevision
of Chapel Hill (NC-027, each is a separate franchise with cost centers and separate subscriber
bases. It is the County's responsibility to verify that TWC correctly applied Federal
Communications Commission rate making rules when determining Basic Service Tia cable
rates.
The County~has direct regulatory control over the Basic Service Tier, but has only an oversight
role over the upper tiers (i.e., Tier Service, Standard Service) of cable service. However, if the
County determines that the cable operator incorrectly applied FCC rate making rules in
determining upper tier cable rates, then it may file a formal rate complaint with the FCC, which
will trigger an investigation into the rate making process used by the cable operator.
CARRBORO SYSTEM SUBSCRIBERS ~ YC-OZS6
Time Warner's proposed rate structure is adopted, subscribers receiving the Basic Service
Tier (BST) will see their monthly BST rate increase 536, from 58.65 to 59.01, though the
proposed maximum permitted rates (11~'R) would increase from 58.81 to 59.03. Time Warner
has chosen to charge a rate below the proposed MPR
Tier Service subscn'bers would see their monthly Tier Service rate increase by $196 from
518.95 to $20.91, though the proposed maximum permitted rates (1~R) will increase to 52096.
Time Warner has chosen to charge a rate blow the proposed MPR
Because of the inflation data discrepancy in Mme Warner's FCC 1240 f=ling for
1998 (see Discrepancies section), the l~Ia,simum Permitted Rate which can be justt; Fred for the
Basic Service Tier (BST) is 58.84 and 520.67 for the Cabla Programming Service Tier (CPST).
Time Warner's BST and CPST Selected Rates of S9.01 and S20.91 are not acceptable in that
they exceed Maximum Permitted Rate which can reasonably be justified.
Table A
Basic Rate Overtile~v
Carrboro Svstem: ~iC-026
Cable 1997 1998 Proposed 1993 1998
Service Seiected Selected liar Justified
Tier TWC TtiVC Permitted l~1PR
Rate Rate Rate
BST 53.65 59.01 59.0 $$.$:l
CPST 518.95 520.91 520.96 S20.67
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6
CHAPEL HILL SYSTEM SUBSCRIBERS -- NC-0276
There are only three (3) cable service tiers on the Chapel Hill cable system, unlike the Carrboro
system that has two (2) tiers of service. If Time Warner's proposed raie structure is adopted,
subscribers who receive only the Basic Service Tier (BST) will see their proposed monthly BST
rate increase by 5.48, from $7.70 to $8.18. The proposed maximum permitted rates (NffRs)
would increase from $7.88 to $8.20. Time Warner proposes to charge a rate below the BST-
MPR
Current CPST Service subscribers will see their Tier rate increase by S1S2, from $7.95 to 59.47
a month. Though the maximum permitted rate (lVLPR) will increase from 5839 to $9.49. Time
Warner proposes to charge a rate below the CPST-MPR
Current Standard Service tier subscribers will see their Standard Service tier rate increase by
$1.09, from 5935 to 510.44 a month. Though the maximum permitted rates (MPRs) will
increase from 59.57 to 510.46. Time Warner proposes to charge a rate below the CPST-MPR
Because of the inflation data discrepancy in Time Warner's FCC 1240 filing for 1998 (see
Discrepancies section), the ~Iaa3mam Permitted Rate which can be justified for the Basic
Service Tier (BST) is $8.02, 59.40 for the Cable Programming Service Tier (CPST), and $1035
for the Standard Service Tier. Time Warner's BST, CPST, and Standard Service Selected Rates
are not acceptable in that they exceed the Maximum Permitted Rates which can be reasonably
justified
Table B
Basic Rate Overview
Chaeel Hill Svstem NC-0276
Cable 1997 1998 Proposed 1998 1998
Service Selected Selected ri;uc Justified
'>'ier ~ TWC TWC Permitted bII'R
Rate Rate Rate
BS'T 57.70 S8.18 5820 58.02
CPST 57.95 59.47 S9.49 S9.40
Standard 59.35 S10.44 S10.46 510.35
Inflation Adjustment Discrepancy in TtiVC's FCC 1240 Filings
Time Warner is claiming inflation adjustments in its true up and projected period segments of its
FCC 1240 rate filing. Time Warner used the FCC true ug period inflation figure of 2.70% for
the period January through December, 1997. However, on October 1, 1997 the FCC announced
that the true-up inflation .rate for March throu;h June was 1.77%. Pursuant to the FCC's rate
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rules, the company must use the "current" inflation figure when calculating its true-up and
projected rate increase due to inflation. When the lower inflation rate was inserted into the rate
caieulation, the BST, CPST and Standard Service Maximum Permitted Rates dropped.
The consultants recalculated Time Warner Cable's charges attnbuted to inflation using currently
available information3. This resulted in a reduction of the overall inflation for 1997 brom 2.7%
to 2.0% and set the projected period (content) inflation figure to 1.77%. The projected period
inflation figure is subject to correction in the agerator's subsequent FCC 1240 rate filing.
Time Warner's FCC i240 rate filing did not reflect the true up inflation factor for the second
quarter of 1997 released by the Commission on October I, 1997. Had the operator used the
1.77% value to calculate the true-up period'inflation rate instead to the previous quarter's value
(2.7%), the Ma~cimum Permitted CPST rates would have been lower. Likewise, Time Warner
applied the 2.7% rate to its 1998 cost projections which contributed to higher Maximum
Permitted CPST rates. Apparently, Time Warner did not have this data available to it at the time
it completed its FCC Form 1244 for 1998.
A subscnber's total cable bill amount is inclusive of all tier rates below it. For elcarmple, a
Standard Service tier subsenber's total monthly rate will include rates for the Basic plus Tier
plus Standard Service. _ ~~
Rate Adjustments for Equipment and vnstallation Services
Regional FCC 1205
In addition to the rate increases for cable services, Time Warner also adjusted its rates for leased
customer egw'tgment and installation services. Pursuant to the Social Contract, Time Warner is
allowed to aggregate equipment and installation costs on a regional basis. Time Warner
submitted a regional FCC 1205 rate filing directly to the FCC for approval of equipment and
installation service rates applicable to multiple franchises across North Carolina. Though the
FCC 1205 filing is not submitted directly to relevant franchise authorities, federal rules explicitly
state that it is the franchise authority's responsibility to review the rates to ensure their
compliance with FCC rules.{
It is important to examine the rates established in the FCC 1205 filing (and those of other filings}
match the rates displayed on subscribers' cable statements. See the following table for egtuptnent
and installation service adjustments scheduled for January 1998.
3See FCC Form 1244 Instructions for Lice C3.
~"I'he local franchising authorities will be responsible for reviewing the rates (equipment and installation
services) charged to ensure compliance with the rates approved by the Commission. If Tina Warner charges rates
in excess of those permitted by the Commission, the local fiaactsising authority may order a refund." Paco. 37.
Time Warner Cable Social Contract. Memorandum Opinion and Order. DA FCC 95-478. Released: vovember 30,
1995.
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',$.
Table C
FCC 1205 Equipment and Installation Rate Adjustments
• Effective Jan 1,1998
Equipment 1996
Rate 1997
Rate 1998
Rate Rate
Change
Addressable Converter S 196 S2.10 5230 5020
No~addressabit Converter S 1.06 S 1.10 S 1.18 50.08
Remote Control 5024 S0.2S 5030 S0.05
Installation .near drop 521.90 S22?3 523.45 51.17
Reconnect existing drop 517.90 S 18.10 S2032 52.22
pdditiomt pub _ ~~ ~~ S 12.53 S 12.77 S 13.54 SO.77
Additional pallet .separate trip S 1627 S l 6.48 517.87 S 139
Relocate Oatlet . separate trip S 1533 S 16.48 S 17.87 S 139
VCR Hook Up S 15.70 513.69 514.24 SOSS
AB Switch Installation S15.70 513.69 514.24 SOS5
Upgrade _ truck ~P 512.!3 513.69 514.24 BOSS
Aezal to Underground 545.76 546.42 NA NA
g~ Service ~8e 522.28 S2321 524.51 5130
External Costs - Analysis of Cable Service Rate Increases
The cable service rate adjustments reflect multiple cost elements, the majority of which are
attributed to external costs. An external cost is an expense a cable operator incurs during the
normal course of business, and maybe added to the rate base. External cost categories include:
state and local taxes; franchise fees; costs of complying with franchise requirements, including
costs of providing public, educational, and governmental access channels; retransmission consent
fees and copyright fees incurred for the carriage of broadcast signals; other programming costs;
FCC regulatory fees; and costs associated with channel additions and deletions. Time Warner's
FCC 1240 rate adjustments reflect the following external cost elements:
1) External costs for true up period;
2) External costs for projected period;
3) Projected cable system upgrade costs (applied to upper cable tier only) -per Social Contract;
4) Inflation from true up period; and,
~) Inflation for projected period.
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9
True Up and Projected Periods
Thy FCC 1240 Foan must be filed with the Iocat franchise authority 90 days before the rates are
scheduled to take effect; it can be filed no more fiequently than annually. The FCC 1240 form
allows cable operators to adjust their rates but once a year, minimizing the impact on subscribers,
and administrative burden on cable operators and franchise authorities.
The FCC 1240 form permits operators to estimate their future costs over a I2-month period: this
is referred to as the projected periods The FCC 1240 also allows operators to recover costs that
have already occurred during a specified period of time, referred to as the true np period If a
cable operator incorrectly estimates its costs for a projected period, it must correct those
estimates by using the true up segment of the next FCC 1240 rate filing.
Time Warner's projected period for NC-0256 & NC-0276 encompasses the 12 months of 1998,
jrvrn January 1 to December 31. The operator's true np period includes all 12 months of 1997,
from January 1 to December 31. .
Franchise Related Costs
Time Warner did not attribute any expenses to franchise related costs, such as public, education
or public (PEG) access activities. In the future, should the County direct Time Warner to
participate in PEG activities, for example in 1999 - 2000, then these modest expenses will
become part of the rate base.
Programming Cots
Programming costs for the BST during 1998 are projected to be approximately 5.1135 monthhy,
per subscriber. This compares to 5.1631 monthly, per subscriber, during 1997. Time Warner
representatives state that program service providers customarily change their fee situciure
annually. Time Warner attnbutes the bulk of its BST programming costs to copyright fees paid
to the Copyright Tribunal and fees for carriage of super stations, like WGN. The company did
not claim any retransmission consent costs for either period.
Programmin; costs for the Tier Service during 1998 are projected to be approximately 54.84
monthly, per subscriber. This compares to 53.93 monthly, per subscriber, during 1997. In
addition to these programming costs. Added to this cost is the cable system upgrade cost, which
arrcounts to S3.40 per subscriber, per month, in 1998. Time Warner is allowed to pass through
this cast prior to the rebuild of the cable system, pursuant to the Social Contract between the
company and the FCC.
SFCC I2 t 0 Forms allow for the recovery of past costs, only, not future costs. Future cosy are recoverable
through the usa of the FCC 1240 Form, only.
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10
Subscribers
Carrboro System NC-0256
Time Warner states that its average subscnbership during 1997 (the true up period) was 1021. It
anticipates approximately 1,115 average subscribers during 1998 (the projected period, an
increase of 94 subscribers. Subscribers receiving "Only" Basic Service in 1997 numbered 56,
and is projected to increase to 114 during 1998.
Subscribers .
Chapel Hill System NC-0276
Time Wainer states that its average subscnbership during 1997 (the true up period) was 5710. It
anticipates approximately 5901 average subscribers during 1998 (the projected period), as
increase of 191 subscribers. Subscribers receiving "Only" Basic Service in 1997 numbered 558,
and is projected to increase to 658 during 1998. The number of CPST or Tier Z subscribers in
1997 was 5152 which was projected to increase to 5243 in 1998. Similarly, the number of
Standard Service or Tian 3 subscribers in 1997 was 4975 which is expected to grow to 4956 in
1998.
Cable System Upgrade Costs
Pursuant to the Social Contract, Time Warner is allowed to assess each CPST subscriber in 1998
$3.00 monthly to recover estimated costs associated with a cable system upgrade. This
assessment is levied only on the CPST tier and will increase by $1.00 for each of the five years
of the Social Contract. Thus, in the third year of the Social Contract, the operator will collect
$3.00 per subscriber tech month in the third year, etc.
By the cad of the Social Contract on December 31, 2000, it is estimated that Time Warner will
have collected approximately $1,170,532.08 to fund its rebuild of the cable system(s) within
Orange County (see the following Table for estimated annual revenue collected).
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11
Table D
Cable System Upgrade -Both Cable Systems
Projected Precapitalization ofSystem Upgrade
5 Year Social Contract
Year of
Contract Subscribers
2% growth rate Monthly Charge
per Subscriber Amount To Be Collected
1st year -1996 5,933 51.00 571,201.88
Zd year -1997 6,117 52.00 S 146,808.00
3d year -1998 6,244 53.00 S224,784.00
4th year - 1999 6,556 54.00 S314,697.60
5th year - 2000 .6,884 53.00 S413,040.60
5 year total Total amouo~t to be collected for upgrade S 1,170,532.08
Social Contract
Upgrade and Capital Commitments
According to Paragraph 25 of the Time Warner Social Contract, Time Warner is obligated to
provide "...an average of 15 new analog channels to benefit CPST subscribers and the initiation
of digital distribution technology, which will expand the capacity ofTime Warner to add
programming and improve picture quality." Time Warner agrees that ai least ".«60% of all
capital expended in connection with the upgrade.commitment described in the Social Contract
will be applied for the benefit of BST and CPST subscrbbers."
.Also, Time Warner agrees that "...each cable system will have a minimum bandwidth capacity of
550 MHZ, and at least 50%0 of Time Wame~'s subscribers will have access to a minimum
bandwidth capacity of 750 MHZ. Ia the 750 MHZ systems, at least 200 MHZ is expected to Lie
used for digital distribution."
Paragraph. l0 of the Social Contract states that Time Warner must provide each firanchise
affected by the Social Contract with a "...progress report outlining the amount of capital
investments made, the number of subscribers affected by those investments, improvements in
system reliability and service, and projected expenditure and upgrades for the following year..:'
within 90 days fallowing the end of the calendar year during which the Social Contract is in
effect.
Thus, the County can expect a report prior to March 31, 1998, from Time Warner stating exactly
what the company has accomplished during the past year re;azding the system upgrade.
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RECOh~NDATION
' Th'e' consultants recommend:
1. That the BST rate adjustmeata contained within the FCC 1240 filings for NC-0256 and NC-
0276submitted by Time Warner Cable be disapproved;
2. That the proposed maximum permitted BST rates of 59.03 for the Carrboro System
subscribers (NC-0256) and 58.20 for Chapel Hill System subscribers (NC-0276) be found
unreasonable.
3. That the County approve a Maximum Permitted BST rate of 58.84 for Carrboro System
subscribers (NC-0256) for the January 1 through December 1998 period and S8.02 for Chapel
Hill System subscribers (NC-0276). ..
4. That the County follow the FCC's rate complaint procedures and challenge Tfnre Warner
Cable's Proposed 1998, FCC 1240 Maximum Permitted Rates for the upper ~ services jor NC-
O2S6and NC-0276 acrd frle a FCC329~ rate complaint form challenging the CPST rates;
S. That the County direct Time Warner Cable to amend its 1998 FCC 1240 rate filing for NC-
0256 and NC-0276 and resubmit them to the County; and,
6. That the County request from Time Warner Cable its play for assigning bill credits, and or,
nfimds to subscribers.
The consultants recommend, and that the Board find that Time Warner Cable correctly applied
FCC rate making rules and procedures in calculaxing the maximum permitted Basic Service Tier
rates except that the "true-up" and "projected" inflation values used by the company wen not
current. Additionally, that the Board encourage Time Warner base subsequent FCC 1240 filings
upon inflation update statistics released by the FCC on each October 1 as opposed to submitting
its FCC 1240 filing on October 1 each year.
Proceeding
The franchise authority must either approve or deny the operator's BST FCC 1240 rate request,
finding the rate to be either reasonable, or not reasonable. This determination must be based
upon a finding of fact. The franchise authority should adopt the consultant's report as its own
and give the public an opportunity to offer comment on the matter. It is suggested that the public
comment period coincide with a regularly scheduled meeting.
6 The County may choose to enter into a joint TJ COG region CPST rate complaint.
I2
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I3
A rate order, finding the requested rate to be reasonable and conveying approval, is attached. To
be valid, the order must be executed following the conclusion of
a. a public meeting where the counciUcommission/boazd gives interested parties an
opportunity to comment;
b. cotlncil/commit¢ion/board'soffieial receipt of the report; and,
c. adoption by the counciUcommission/board ofthe report as its own -required
by FCC rules (a motion to adopt is necessary).
It is appropriate for public comment to be heard, related to the rate request by the cable operator
at the time the counciUcommission/board meets to deliberate upon this matter. A special session
is not required. It is necessary to call public comment duxing a regularly scheduled public
meeting. The comment period should be publicized by issuing a press release to the print and
tlectt+onic medza, included in the meeting's publicized agenda, and otherwise publicly announcal
in other ways. .
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Z4
STATE OF NORTH CAROLIlYA
COUNTY OF HILLSBOROUGH
BEFORE THE BOARD OF COMMISSIONERS OF ORANGE COUNTY
1N THE MATTER OF: )
Review of FCC 1240 Annual Basic )
Service Tier Rate Adjustment Request )
filed by Tune Warner Cable for Orange )
County, NC-0256 & NC-0276. )
BY THE BOARD OF COMMISSIONERS
Order Finding TWC'a 1998 Proposed
59.04 and 58.20 Basic Servfce Tier
ZVtarimwn Permitted Rates as
Unreasonable and Setting the'BST
MPRs at 58.84 and 58.02 for the
Carrboro and Chapel Hill Cable
Television Systems
WHEREAS, on October 1, 1997, Time Warner Cable submitted iwo FCC 1240 Annual Maximum
Permitted Rate filing requests far Regulated Cable Services with Orange County, one for the Chapel Hill
system, the other for the Durham system, Both filings cover exteznal costs, inflation, and cable system
upgrade costs for the projected period of January 1 through December 31, 1998; and above stated costs for
the true up period of January 1 through December 31, 1997;
WHEREAS, Time Warner Cable is pettnitted, pursuant to the Social Contract, to estimate and
recover arrticipateci inflation, external costs, and cable sysicm upgrade costs for the period of January
through December 31, 1998;
WHEREAS, the County received a report from its consultants stating that Time Warner's FCC
1240 rate calculations are not in compliance with Federal Communications Commission rate making rules,
and that the proposed ma.Yimuai permitted BST rates of $9.04 for the Carrboro System subscribers (NC-
0236} and 58.20 for Chapel Hill System ~bscribcrs (NC-0276) are unreasonable.
WHEREAS, FCC rules grant local franchise authorities an initia190-day review period, measured
fibm the date of receipt of the FCC 1240 filing by the franchise authority, to review the cable operator's rate
filings. If said 90-day review period expires before the rates go into effect, the franchise authority retains
review and refund authority past the initial 90-day review period as long as all inquiries from the cable
operator regarding said review are responded to in writing within 1 S days of said inquiry;
~YHEREAS, Time Warner's rate filings include cost estimates for the calendar year of 1998, and
said estimates may require adjustment (true up) in the cable operator's subsequent FCC 1240 rate filings;
and,
15
WHEREAS, Orange County is certif ed with the FCC to regulate basic service tier rates, equipment
and installation services provided by Time Warner Cable in franchise.
IT IS A FlivDlTiG:
THAT Time Warner Cable did not strucdure its 1997 true-up charges for the srcond through fourth
quarter on the FCC's currently available inflation factor of 1.77%;
THAT T'~me Warner Cable did not structure its 1998 projected charges for the period January
through December, 1998 on the FCC's currently available inflation factor of 1.77%;
THAT Time Warner Cable has not substantiated the adjustment of its mazintum permitted Basic
Service Tier rata of 59.04 for the Carrboro System subscribers, based on past inflation and cum~nt inflation
indices; .
THAT Time Warner requested inax3mmn pemnitted BST rate (59.04) for the Cairboro system
subsc~'bers is determined to be unreaaons-ble;
THAT, Time Warner has selected to charge the Basic Service Tier rate of 59.01 for the Carrboro
System subscribers during the 1998 calendar year in Orange County which exceeds the jastlfied MPR of
58.84;
THAT Time Warner Cable has not substantiated the adjustment of its proposed maximum permitted
Basic Service Tier rate of S8.20 for the Chapel Hill System subscribers, based on past inflation and cement
inflation costs;
THAT Time Warner requested maximum permitted BST rate (58.20) for the Chapel Hill System
subscribers is determined to be unreasonable; and
THAT, Time Warner has selected to charge the Basic Service Tier rata of S8.18 for the Chapel Hill
System subscribers during the 1998 calendar year in Orange County which exceeds the justified itiIPR of
S8.02.
IT IS THEREFORE ORDERED:
THa1T Time Warner Cabte's Basic Service Tian rates assassed subscribers shall not exceed the
maximum permitted rate of 58.8.1 for the Carrboro System subs~'ribers and 58.02 for Chapel Hilt System
subscribers during 1998, subject to modifications in subsequent findings by the franchise authority;
T)EL~T the County retains its authority to issue refunds or rate roil backs after the initial 90-day
re~~iew period with respect to the rates set out in the FCC 1240 filings, subject to subsequent findings by the
franchise authority;
THAT Time Warner must keep a full and accurate account of all revenues and costs associated with
the aforementioned cable rate adjustments;
16
THAT Time Warner revise its Form 1240 for the 1997 true-up and 1998 projected periods by
applyiAg the correct inflation values described in this Order and file an amended FCC Form 1240 with the
County within thirty (30) days of this Order, and
THAT Time Warner is directed to toll all revenues related to its proposed increase, issue refunds
and roll back BST rates to the MPRs set by this Order immediately upon the adoption of this Order by the
County.
I55UED BY ORDER OF THE COUI~ITY BOARD OF COiV1~'VIISSIONERS
This the 20th day of January, 1998.
ATTEST:
CHAIRhL1N
Deliver a copy of the Report and an Executed Order
.via Certified U.S. Mail to: Time Warner Cable
Copy to: City of Raleigh/'1'JCOG