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2/19/01 AGENDA CABLE TELEVISION RATE REVIEW FINDINGS SUMM]k'RY Prepared by Centralina Council of Governments Franchise: Cable Operator: Form Reviewed: Tier Reviewed: Number of Channels: Average Number of Subscribers 2001: Date Findings Prepared: CABARRUS COUNTY TIME WARNER - METROLINA FORM 1240 and 1235 SETTING BASIC RATE FOR 2001 BASIC TIER - 2001 13 42,237 on entire headend 1-8-01 SUMMARY REVIEW STATEMENT: The Basic Tier Rate has been reviewed and is ACCEPTABLE under required Federal Communications Commission guidelines. Comments follow. COMMENTS AND EXPLANATIONS: · The 2001 FCC Form 1240 and 1235 was submitted by Time Warner in October, 2001 a full 90-days before the adjusted basic rate went into effect on January 1, 2001. The Social Contract, which controlled Time Wamer's rates in the past expired last year. Time Warner, however, still has to follow FCC guidelines in setting the Basic Tier Rate. The Franchise Authority only has authority over the Basic tier of rates. The Cable Programming Service Tier has been deregulated, and is no longer even under FCC, or local review. Cable operators have the option of basing their maximum permitted rate on a "cost-of-service showing" in lieu of using the benchmark/price cap approach used in Form 1240. The FCC established cost-of- service rate regulations to provide a "safety valve" to cable operators ensuring them compensatory rates if their primary benchmark/price cap rates were undervalued. Only the cable operator, not the FCC or the Franchise Authority can decide whether to undertake a cost-of-service showing. In this case, Time Warner has chosen to file a Form 1235, an abbreviated cost-of-service filing for network upgrades. The rate established in a cost-of-service filing is the permitted rate, even if it is lower than the rate that would have been allowed under the benchmark/price cap approach. As I mentioned last year, a "full" "cost-of-service filing can only be adjusted every two years. While one would think the "abbreviated" cost-of-service showing would also have this two year adjustment period, this is not the case. In fact, according to the Cable Services Bureau, who oversees the FCC rules and regulations, the FCC simply has not amended the FCC regulations to address current policies and current forms, thus the "abbreviated" cost-of-service filing falls into the cracks, and is interpreted by the Cable Services Bureau to allow for an annual adjustment. Thus, while I informed you, the franchise authority, we would not be reviewing the Basic rate for two years, logic does not prevail. A review of FCC Form 1240 and 1235 for the year 2001 establishes the new mawlmnm penni.ad Basic tier rate at $6.67 (excluding the franchise fee), compared to $6.37 in last year's 1240 forms. The new, higher rate is due mainly to the cost-of-service showing, for network upgrades. The changes are summarized on the next page: