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13 <br /> REPORT <br /> Time Warner Cable has two separate service areas within Orange County. Orange County <br /> proper, with 5,718 subscribers, is served by the Chapel Hill Headend, Cablevision of Chapel Hill. <br /> A small segment of subscribers, 32, is served by the Durham Headend, or Cablevision of Durham. <br /> This report addresses the Durham Headend service area. <br /> Time Warner seeks to adjust its basic and expanded service tier rates based on external costs <br /> experienced in the provision of cable services from the Durham Headend. Cable operators are <br /> allowed to update maximum permitted rates on a quarterly basis for basic tier service, based on <br /> external costs, such as copyright licenses, programming costs, inflation and retransmission fees no <br /> more frequently than on a quarterly basis using the FCC-1210 form. <br /> FCC-1210 Inflationary Adjustments <br /> Time Warner and other cable operators were required to lower their rates at least twice since <br /> 1993, in accordance with FCC rate reduction rules: the first phase using the FCC-393 method, the <br /> second phase using the FCC-1200 Benchmark method. <br /> FCC Benchmark calculations at the time did not take into account inflation Transition Rate <br /> operators (such as Time Warner) may have incurred during 1993-1994. Thus, Time Warner, <br /> utilizing Transition Rate calculation methods, is now allowed to take the full inflation adjustment <br /> [5.21%], reduced by the adjustment it took on the FCC-393 form in 1993 combined with the <br /> actual rate reduction realized during the FCC-1200 process in 1994. Time Warner used an <br /> inflation adjustment figure of 1.0521 for subscribers served by the Durham Headend. The <br /> operator must recover this inflation before August 31, 1995. <br /> Increase in Rates <br /> Time Warner is seeking several rate adjustments attributed to inflation and programming costs: <br /> a. Basic Rates: S.49 cent increase in basic rates due to inflation incurred during 1993- <br /> 1994, to $10.15 for basic service. <br /> b. Tier H: S.67 cent increase in Tier Two rates; S.25 attributable to programming. Time <br /> Warner incurred an increase in programming costs from the USA Network, of over$.20 <br /> cents,which may be passed on to the subscriber as an external cost, penny-for-penny. <br /> Time Warner also realized a small rate decrease from CNBC of about S.001,which was <br /> factored into the rate base as well; S.42 was due to inflation incurred during 1993-1994. <br /> 1 <br />