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3-t5-00; 12:04PM;CentF81 Ina COG ;704 347 4710 # 2/ g CABLE TELEVISION RATE REVIEW FINDINGS SUMMARY Prepared by Centr~lina Council of Goyernments Franchise: CABARRUS COUNTY Cable Operator: TIME WARNER - METROLINA F m'Rev!e ed: 'i (: :' '.. i"i i.:... :. i...':". BASiCaAT .'i OR:20O0 .!.,'i .. Number of Channels: 13 Average Number of Substribers 2000: 40, 231 on entire headend Date Findings Prepared: 2-22-00 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 2000 FCC Form 1240 and 1235 was submitted by Time Warner in October, 1999 a full 90-days before the adjusted basic rate went into effect on January 1, 2000. The Social Contract, which controlled Time Warner's rates for the past five years has expired. 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 rotes. The Cable Programming Service Tier has been deregulated, and is no longer even under FCC review. Cable operators have the option of basing their maximum permitted rate on a "cost-of-servi~ 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 operatora ensuring them compensatory rates if thch- primary benchmark/price cap rates were undervalued. Only the cable operator, not thc FCC or the Franchise Authority can d~ide whether to undertake a cost-of-service showiag. In this case, Time Warner has cho~:n to £de a Form 1235, an abbreviated cost-of-service filiag for network upgrades. The rote 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. Once a cost-of-service rate is approved, it may not be adjusted by a subsequent cost-of-service showing until two years after the permitted rate has become effective. The Franchise Authority may waive this prohibition upon a showing of unustml circumstances that would create an undue hardship for thc cable operator. A review of FCC Form 1240 and 1235 for the year 2000 establishes the new maximum permitted Basic tier rate at $6.37 (excluding the franchise fee), compared to $5.40 in last year's 1240 forms. The new, higher rate is duc mainly to tho cost-of-service showing, for network upgrades. The changes arc summarized below: '~ER 1999 1999 2000 .... 2000 MAXIMUM ACTUAL MAXIMUM ACTUAL RATE RATE RATE RATE (without (without (withont (without franchise franchise franchise fee) franchise fee) fee) fee) Basic $5.40 $5.40 $6.37 $6.37