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347 4710 Cen[ralina COQ P,03 FRANCHISE: CABLE TELEVISION RATE REVIEW FINDINGS SUMMARY C. entralina Council of Governments Cabarrus County ........ 'S~ARY DATE: April 24, 1996 CABLE OPERATOR: Time Warner Cnble - Metrolinn FORM REVIEWED: FCC FORM 1240 - Annual Updating of Maximum Permitted Rates REVIEW STATEMENT: XXX Rates have been reviewed and are ACCEPTABLE under required Federal Conununications Commission guidelines. Comments are provided below. COMMENTS AND EXPLANATIONS: On 9-15-95, the Federal Conununications Commission (FCC) adopted rules giv/ng cable operators the option of filing for rate adjustments on an annual basis instead of the existing quarterly system. To implement this option, the FCC developed a new fo~-iii, the FCC Form 1240, which allowed cable operators to elect to use the new methodology to adjust their rates once a year to reflect changes in external costs (such as programming costs), inflation, and the number of regulated chmmels. The annual rate adjustment option will benefit subscribers, cable operators, and franchising authorities by limiting rate increases to once per year. The Social Contract negotiated between Time Warner and the FCC directs Time Warner Cable to utilize the annual rate adjustment methodology. They delivered a complete FCC Form 1240 to the County and Centralina on 12-29-95, to adjust both the Basic Service Tier (10 channels) rates and the Cable Programming Service Tier (29 channels) rates for 1996. Oue new element in the FCC Form 1240 is its ability to calculate two maximum pel'l~dtted rates, one for the coming year, called the "Projected Period" and one for a period of time which has already pas~ed, called the "True-Up Period". When a cable operator fills out the FCC Form 1240, they are required to establish a new maximum permitted rate, which calls for predictions about whal changes will happen to the system in the upcoming year. This is called the "Projected Period" and is 12 months in duration. Any cost that is not projc~zted may be accrued and added to rates, with 11.25% return (as per FCC guidelines), when the operator makes its next filing. In essence, operator will not lose thc fight to make tale increases at a later date if they choose not to implement a rate change al the beginning of the next rate year. In addition, the cable operator is also asked to "True-Up" for a period of time which has already passed. The purpose of the "True-Up" process is to compare the revenues collected during the "'lYue-Up" period with the amount of revenues Time Warner should have been able 'to collect. If the sum collected is ]f~ than what should have been collected, then Time Warner is allowed to collec/ that difference during later rate periods, ff the sum collected is more than what should have been collected, then Time Warner must lower their rates in future rate periods to compensate subscribers for the difference.