**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of )

) File No. EB-02-TC-037

Time Warner Entertainment Company, LP )

) CUID No.WI0265 (West Allis)

Complaint Regarding )

Cable Programming Services Tier )

**ORDER**

**Adopted: May 6, 2002 Released: May 8, 2002**

By the Chief, Enforcement Bureau:[^1]

1\. In this Order we consider a complaint[^2] against the rates charged
by the above-referenced operator (\"Operator\")[^3] for its cable
programming services tier (\"CPST\") in the community referenced
above.[^4] The Cable Services Bureau has already issued an order in
which it found Operator's CPST rates in effect through May 14, 1994 to
be unreasonable (\"Prior Order\").[^5] In the Prior Order, the Cable
Services Bureau stated that its findings \"do not in any way prejudge
the reasonableness of the prices for CPS service after May 14, 1994
under our new rate regulations.\"[^6] This Order addresses only the
reasonableness of Operator's CPST rates in effect beginning May 15,
1994.

2\. Under the provisions of the Communications Act[^7] that were in
effect at the time the referenced complaints were filed, the Federal
Communications Commission (\"Commission\") was authorized to review the
CPST rates of cable systems not subject to effective competition to
ensure that rates charged are not unreasonable. The Cable Television
Consumer Protection and Competition Act of 1992[^8] (\"1992 Cable Act\")
required the Commission to review CPST rates upon the filing of a valid
complaint by a subscriber or local franchising authority (\"LFA\"). The
filing of a complete and timely complaint triggers an obligation upon
the cable operator to file a justification of its CPST rates.[^9] The
Operator has the burden of demonstrating that the CPST rates complained
about are reasonable.[^10] If the Commission finds a rate to be
unreasonable, it shall determine the correct rate and any refund
liability.[^11]

3\. Operators must use the FCC Form 1200 series to justify rates for the
period beginning May 15, 1994.[^12] Operators may file an FCC Form 1210
to justify quarterly rate increases based on the addition and deletion
of channels, changes in certain external costs and inflation.[^13]
Operators may justify their rates on an annual basis using an 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.[^14] Any
incurred cost that is not projected may be accrued with interest and
added to rates at a later time.[^15] Additionally, an Operator may file
an FCC Form 1235 (Abbreviated Cost of Service Filing for Cable Network
Upgrades). The FCC Form 1235 allows cable operators to justify rate
increases related to significant capital expenditures used to improve
rate-regulated services. This option is extended only in cases of
significant upgrades requiring added capital investment, such as
bandwidth capacity and conversion to fiber optics, and for system
rebuilds. Normal improvements and expansions of service remain subject
to the usual rate adjustments allowed by filing FCC Form 1210s, 1220s
and 1240s. Cable operators that incur increases in operating costs
associated with a significant network upgrade will be permitted to
charge additional rates as justified by their FCC Form 1235 filing.

4\. Upon review of Operator's FCC Form 1200, we adjusted Line A6
(Monthly Charge per Tier as of 3/31/94) to \$10.01 to conform to the
maximum permitted rate (\"MPR\") from Operator\'s revised FCC Form 393
as adjusted in our Prior Order. Line A1 (Channels per Tier as of
3/31/94) and Line C1 (Channels per Tier as of 3/31/94) were adjusted to
23 channels for the CPST to reflect Operator's actual channel line-up,
in accordance with the channel line-up card provided by Operator. We
also adjusted Line C2 (Number of Regulated Non-Broadcast Channels per
Tier) to 23 for the CPST for the same reason. Our adjustments reduced
Operator's MPR from \$10.55 to \$9.36. The Commission's rules provide
for a refund liability deferral period, if timely requested by Operator,
beginning May 15, 1994 and ending July 14, 1994, for any overcharges
resulting from Operator's calculation of a new MPR on the FCC Form
1200.[^16] Operator elected to defer refund liability for overcharges
associated with its FCC Form 1200 pursuant to the Commission's
rules.[^17] However, Operator will incur refund liability from May 15,
1994 through July 14, 1994 for any CPST rates charged above the FCC Form
393 MPR approved by the Commission.[^18] In the Prior Order, the Cable
Services Bureau found that Operator justified an FCC Form 393 MPR of
\$10.01. Because Operator's actual CPST rate of \$10.27, effective May
15, 1994 through July 14, 1994, exceeds its FCC Form 393 MPR of \$10.01,
we find Operator's actual CPST rate of \$10.27, effective May 15, 1994
through July 14, 1994, to be unreasonable.

5\. Upon review of Operator's FCC Form 1210 covering the period April 1,
1994 through June 30, 1994, we adjusted Line A2 (Full Reduction Rate per
Tier) to reflect Operator's revised FCC Form 1200 Line K1 (Maximum
Permitted Rate) of \$9.36. Line C1 (Previous Number of Regulated
Channels per Tier) and Line C2 (Current Number of Regulated Channels per
Tier) were adjusted to 23 channels for the CPST as noted above. These
adjustments reduced Operator's MPR from \$11.15 to \$9.96, effective
July 1, 1994. Because Operator's actual CPST rate of \$10.27, effective
July 15, 1994 through July 31, 1994, exceeds its revised MPR of \$9.96,
we find Operator's actual CPST rate of \$10.27, effective July 15, 1994
through July 31, 1994, to be unreasonable. Because Operator's actual
CPST rate of \$10.55, effective August 1, 1994 through September 30,
1994, exceeds its revised MPR of \$9.96, we find Operator's actual CPST
rate of \$10.55, effective August 1, 1994 through September 30, 1994, to
be unreasonable.

6\. Upon review of Operator's FCC Form 1210 covering the period July 1,
1994 though September 30, 1994, we adjusted Line A2 to reflect
Operator's prior FCC Form 1210 MPR of \$9.96. Line C1 and Line C2 were
adjusted to 23 channels for the CPST. These adjustments reduced
Operator's MPR from \$11.35 to \$10.14, effective October 1, 1994.
Because Operator's actual CPST rate of \$10.55, effective October 1,
1994 through October 31, 1994, exceeds its revised MPR of \$9.96, we
find Operator's actual CPST rate of \$10.55, effective October 1, 1994
through October 31, 1994, to be unreasonable. Because Operator's actual
CPST rate of \$11.35, effective November 1, 1994 through December 31,
1994, exceeds its revised MPR of \$10.14, we find Operator's actual CPST
rate of \$11.35, effective November 1, 1994 through December 31, 1994,
to be unreasonable.

7\. Upon review of Operator\'s FCC Form 1210 covering the period October
1, 1994 through December 31, 1994, we adjusted Operator\'s Line A2 to
reflect Operator's prior FCC Form 1210 MPR of \$10.14. Line C1 and Line
C2 were adjusted to 23 channels for the CPST. These adjustments reduced
Operator's MPR from \$11.56 to \$10.34, effective January 1, 1995.
Because Operator's actual CPST rate of \$11.35, effective January 1,
1995 through March 31, 1995, exceeds its revised MPR \$10.34, we find
Operator's actual CPST rate of \$11.35, effective January 1, 1995
through March 31, 1995, to be unreasonable.

8\. Upon review of Operator's FCC Form 1210 covering the period January
1, 1995 through March 31, 1995, we adjusted Operator's Line A2 to
reflect Operator's prior FCC Form 1210 MPR of \$10.34. Line C1 and Line
C2 were adjusted to 23 channels for the CPST. These adjustments reduced
Operator's MPR from \$11.48 to \$10.27, effective April 1, 1995. Because
Operator's actual CPST rate of \$11.35, effective April 1, 1995 through
May 31, 1995, exceeds its revised MPR of \$10.27, we find Operator's
actual CPST rate of \$11.35, effective April 1, 1995 through May 31,
1995, to be unreasonable. Because Operator's actual CPST rate of
\$11.48, effective June 1, 1995 through May 31, 1996, exceeds its
revised MPR of \$10.27, we find Operator's actual CPST rate of \$11.48,
effective June 1, 1995 through May 31, 1996, to be unreasonable.[^19]

9\. Upon review of Operator\'s FCC Form 1240 for the projected period
June 1, 1996 through May 31, 1997, we adjusted Operator\'s Line A1
(Current Maximum Permitted Rate) and D2 (Current External Costs Segment)
to conform with Operator\'s previous revised FCC Form 1210. We revised
Worksheet 1 (True-Up Period Inflation) which adjusted Line C3 (Inflation
Factor for the True-Up Period 1) to 1.0151 and Line C5 (Current FCC
Inflation Factor) was adjusted to 1.0222.[^20] These adjustments
resulted in a revised MPR of \$9.33 rather than Operator's calculated
MPR of \$11.88. Because Operator's actual CPST rate of \$11.88,
effective June 1, 1996 through May 31, 1997, exceeds its revised MPR of
\$9.33, we find Operator's actual CPST rate of \$11.88, effective June
1, 1996 through May 31, 1997, to be unreasonable.

10\. Upon review of Operator\'s FCC Form 1240 for the projected period
June 1, 1997 through May 31, 1998, we adjusted Operator\'s Line A1 to
reflect the MPR of \$9.33 from its previous revised FCC Form 1240. We
revised Worksheet 1, which adjusted Line C3 to 1.0221 and we adjusted
Line C5 to 1.0177.[^21] We adjusted Line D6 (Current True-Up Segment),
Line D7 (Current Inflation Segment) and Line F8 (True-Up Segment for
True-Up Period 1) to conform to Operator's previous revised FCC Form
1240. Also, Operator made true-up adjustments through to the effective
date of the projected period and those adjustments did not include
actual data.[^22] Consequently, we reduced Operator\'s true-up period by
one month and adjusted Operator\'s MPR in accordance with our rules and
the FCC Form 1240 instructions.[^23] This resulted in an adjustment to
Line E2 (Number of Months in the True-up Period 1) to 12 months and Line
E4 (Number of Months in True-Up Period 2 Eligible for Interest) to 2
months. Line G5 (Inflation Segment for True-Up Period 2) was adjusted to
\$0.0254 and Line G8 (True--Up Segment Period 2) was adjusted to
\$0.8739. These adjustments resulted in a revised MPR of \$9.79 rather
than Operator\'s calculated MPR \$14.31.[^24] Because Operator\'s actual
CPST rate of \$14.31, effective June 1, 1997 through September 30, 1997,
exceeds its revised MPR of \$9.79, we find Operator\'s actual CPST rate
of \$14.31, effective June 1, 1997 through September 30, 1997, to be
unreasonable.

11\. Operator filed an FCC Form 1235 to justify its October 1, 1997 CPST
rate increase to \$16.58. Operator subsequently reduced its CPST rate on
December 1, 1997 to \$16.30 and gave a credit to its subscribers for
\$0.28 for the months of October and November.[^25] Upon review of
Operator's FCC Form 1235, we accept Operator's calculated MPR of \$1.99.
This results in a combined CPST MPR of \$11.78, effective October 1,
1997. Because Operator's actual CPST rate of \$16.30,[^26] effective
October 1, 1997 through December 31, 1998, exceeds its revised MPR of
\$11.78, we find Operator's actual CPST rate of \$16.30, effective
October 1, 1997 through December 31, 1998, to be unreasonable.

12\. On November 30, 1995, the Commission issued an Order approving a
Social Contract that Operator entered into with the Commission (\"Social
Contract\").[^27] Among its terms was a provision by which Time Warner
would be permitted to increase the monthly CPST rate by one dollar
during each year of the contract, but would waive the right to make any
other increase in rates.[^28] Operator was given permission by
Commission staff to file bifurcated FCC Form 1240s. In these bifurcated
forms, Operator calculates the \$1.00 annual increase permitted by the
Social Contract and its true-up on a separate FCC Form 1240 (\"SCD Form
1240\"). On the SCD Form 1240, Operator calculates its true-up
adjustment through to the effective date of the rate increase. On its
other FCC Form 1240, Operator calculates the other adjustments to its
CPST rate in conformance with FCC Form 1240 Instructions for the true-up
period.[^29] As noted above, Time Warner Cable purchased this system in
December 1997. Upon filing its first FCC Form 1240 for this cable
system, which we review below, Time Warner Cable elected to include the
system in its Social Contract, thus taking the annual Social Contract
Dollar for its upgrade and rejecting the FCC Form 1235 upgrade add-on
amount.

13\. Upon review of Operator\'s non-SCD FCC Form 1240 for the projected
period January 1, 1999 through December 31, 1999, we adjusted
Operator\'s Line A1, Line D6, Line D7, Line F8, and G8 to conform to
Operator's previous revised FCC Form 1240. We also added back the month
that we removed from the true-up period of the previous FCC Form 1240.
Consequently, Line E2 was adjusted to 12 months and Line E4 was adjusted
to 7 months. Our adjustments reduced Operator's MPR from \$15.50 to
\$8.18. Upon review of Operator\'s SCD Form 1240 for the projected
period January 1, 1999 through December 31, 1999, we accept Operator\'s
calculated MPR of \$3.14 for a total MPR of \$11.32, effective January
1, 1999. Because Operator's actual CPST rate of \$18.28, effective
January 1, 1999 through March 31, 1999, exceeds its revised MPR of
\$11.32, we find Operator's actual CPST rate of \$18.28, effective
January 1, 1999 through March 31, 1999, to be unreasonable.[^30]

14\. Accordingly, IT IS ORDERED, pursuant to Sections 0.111 and 0.311 of
the Commission's rules, 47 C.F.R. §§ 0.111 and 0.311, that the CPST
rates, charged by Operator in the community referenced above, effective
May 15, 1994 through March 31, 1999, ARE UNREASONABLE.

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 that portion of the amount paid in excess of the maximum
permitted CPST rate of \$10.01 per month (plus franchise fees), plus
interest to the date of the refund, for the period May 15, 1994 through
July 14, 1994.

16\. 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 that portion of the amount paid in excess of the maximum
permitted CPST rate of \$9.96 per month (plus franchise fees), plus
interest to the date of the refund, for the period July 15, 1994 through
September 30, 1994.

17\. 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 that portion of the amount paid in excess of the maximum
permitted CPST rate of \$10.14 per month (plus franchise fees), plus
interest to the date of the refund, for the period October 1, 1994
through December 31, 1994.

18\. 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 that portion of the amount paid in excess of the maximum
permitted CPST rate of \$10.34 per month (plus franchise fees), plus
interest to the date of the refund, for the period January 1, 1995
through March 31, 1995.

19\. 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 that portion of the amount paid in excess of the maximum
permitted CPST rate of \$10.27 per month (plus franchise fees), plus
interest to the date of the refund, for the period April 1, 1995 through
June 30, 1995.

20\. 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 that portion of the amount paid in excess of the maximum
permitted CPST rate of \$11.78 per month (plus franchise fees), plus
interest to the date of the refund, for the period from December 1, 1998
through December 31, 1998.

21\. 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 that portion of the amount paid in excess of the maximum
permitted CPST rate of \$11.32 per month (plus franchise fees), plus
interest to the date of the refund, for the period from January 1, 1999
through March 31, 1999.

22\. IT IS FURTHER ORDERED that Operator shall promptly determine the
overcharges to CPST subscribers for the stated periods, and shall within
30 days of the release of this Order, file a report with the Chief,
Enforcement Bureau, stating the cumulative refund amount so determined
(including franchise fees and interest), describing the calculation
thereof, and describing its plan to implement the refund within 60 days
of Commission approval of the plan.

23\. IT IS FURTHER ORDERED, pursuant to Sections 0.111 and 0.311 of the
Commission's rules, 47 C.F.R. §§ 0.111 and 0.311, that the complaint
referenced herein against the rates charged by Operator in the community
referenced above IS GRANTED.

FEDERAL COMMUNICATIONS COMMISSION

David H. Solomon

Chief, Enforcement Bureau

[^1]: Effective March 25, 2002, the Commission transferred
    responsibility for resolving cable programming services tier rate
    complaints from the former Cable Services Bureau to the Enforcement
    Bureau. *See* *Establishment of the Media Bureau, the Wireline
    Competition Bureau and the Consumer and Governmental Affairs Bureau,
    Reorganization of the International Bureau and Other Organizational
    Changes*, FCC 02-10, 17 FCC Rcd 4672 (2002).

[^2]: The first valid complaint against Operator's CPST rate in the
    community referenced above was filed on February 28, 1994. There are
    no subsequent complaints on file.

[^3]: The term \"Operator\" includes Operator\'s predecessors and
    successors in interest.

[^4]: On December 3, 1997, the Federal Communications Commission
    received notification, pursuant to 47 C.F.R. § 76.400, of a change
    of ownership from Marcus Cable Partners, LP to Time Warner
    Entertainment Company, LP.

[^5]: *See* *In the Matter of Crown Cable Wisconsin, Inc*., DA 95-680,
    10 FCC Rcd 7923 (CSB 1995); *refund plan denied,* *In the Matter of
    Marcus Cable Partners, LP*, DA 98-2442, 13 FCC Rcd 23411 (CSB 1998).

[^6]: Prior Order at n. 2.

[^7]: Communications Act, Section 623(c), *as amended*, 47 U.S.C.
    §543(c) (1996).

[^8]: Pub. L. No. 102-385, 106 Stat. 1460 (1992).

[^9]: *See* Section 76.956 of the Commission's rules, 47 C.F.R. §
    76.956.

[^10]: *Id.*

[^11]: *See* Section 76.957 of the Commission's rules, 47 C.F.R. §
    76.957.

[^12]: *See* Section 76.922 of the Commission\'s rules, 47 C.F.R.
    §76.922.

[^13]: *Id.*

[^14]: *Id.*

[^15]: *Id.*

[^16]: *See* Section 76.922(b)(6)(ii) of the Commission\'s rules, 47
    C.F.R. Section 76.922(b)(6)(ii).

[^17]: *See* Letter dated August 12, 1994 to the Federal Communications
    Commission from Trudi McCollum Foushee, Vice President, Crown Cable
    Law and Regulatory Affairs.

[^18]: *See* Section 76.922(b)(6)(ii) of the Commission\'s rules, 47
    C.F.R. § 76.922 (b)(6)(ii).

[^19]: Because Operator's refund liability for the period July 1, 1995
    through November 30, 1998, was trued up in subsequent FCC Form
    1240s, which we review herein, Operator is not required to
    separately calculate that refund liability and submit a refund plan
    for those time periods.

[^20]: In accordance with the FCC Form 1240 Instructions, we used the
    most recent Inflation Adjustment Factors released by the Cable
    Services Bureau for the relevant time periods. *See* Public Notice,
    DA 02‑791 (CSB released April 9, 2002).

[^21]: *Id.*

[^22]: Operator signed its FCC Form 1240 on April 30, 1997, one month
    prior to the ending date of its true-up period.

[^23]: Operator\'s true-up period, which began March 1, 1996 and
    originally ended on May 31, 1997, was adjusted to end on April 30,
    1997. The annual adjustment afforded by FCC Form 1240 allows
    operators to project changes in external cost, 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\" mechanism 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. *See* *In
    the Matter of Implementation of Sections of the Cable Television
    Consumer Protection and Competition Act of 1992: Rate Regulation*,
    MM Docket No. 92-266, Thirteenth Order on Reconsideration
    (\"Thirteenth Reconsideration Order\"), [11 FCC Rcd 388, 420 at
    n.151
    (1995)](http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=4493&FindType=Y&ReferencePositionType=S&SerialNum=1995263396&ReferencePosition=420).
    The true-up data is intended to indicate real, not projected data.
    *Id.* This policy is reflected in the instructions accompanying FCC
    Form 1240. *See* FCC Form 1240 Instructions, \"Timing\" at pp. 3-4.

[^24]: We allowed Operator to claim \$0.14 for increases in external
    costs between September 30, 1992 and the earlier of the initial date
    of regulation or February 28, 1994.

[^25]: *See* Letter dated November 30, 1997, with attached bill, to the
    Honorable Jeanette Bell, Mayor, City of West Allis, WI from Marty
    Robinson, District Manager, Marcus Cable.

[^26]: The actual CPST rate of \$16.30 reflects Operator\'s rate
    reduction and refund for October and November.

[^27]: *See* *In the Matter of Social Contract for Time Warner*, 11 FCC
    Rcd 2788 (1996).

[^28]: *Id.* at 2798.

[^29]: The true-up data is intended to indicate real, not projected
    data. *See* *In the Matter of Implementation of Sections of the
    Cable Television Consumer Protection and Competition Act of 1992:
    Rate Regulation*, MM Docket No. 92-266, Thirteenth Order on
    Reconsideration (\"Thirteenth Reconsideration Order\"), 11 FCC Rcd
    388, 420 at n.151 (1996). The period for the true-up will not
    coincide with the previous year's projections. *Id*. This policy is
    reflected in the instructions accompanying FCC Form 1240. *See* FCC
    Form 1240 Instructions, \"Timing\" at pp. 3-4.

[^30]: These findings are based solely on the representations of
    Operator. Should information come to our attention that these
    representations were materially inaccurate, we reserve the right to
    take appropriate action. This Order is not to be construed as a
    finding that we have accepted as correct any specific entry,
    explanation or argument made by any party to this proceeding not
    specifically addressed herein. Information regarding the specific
    adjustments made to Operator\'s FCC Forms can be found in the public
    files for the above-referenced community which are available in the
    FCC Reference Information Center, Portals II, 445 12th Street, SW,
    Room CY-A257, Washington, DC, 20554. This document may also be
    purchased from the Commission\'s duplicating contractor, Qualex
    International, Portals II, 445 12th Street, SW, Room CY-B402,
    Washington, DC, 20554, telephone 202-863-2893, facsimile
    202-863-2898, or via e-mail qualexint@aol.com.