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w <br /> 4 <br /> REPORT <br /> Time Warner Cable operates two service areas within Orange County. Orange County proper, <br /> with 5,718 subscribers, is served by the Chapel Hill Headend, Cablevision of Chapel Hill. A small <br /> segment of subscribers, 32, is served by the Durham Headend, or Cablevision of Durham. <br /> This report addresses the Chapel Hill 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 Chapel Hill Headend. <br /> Cable operators are allowed to update maximum permitted rates on a quarterly basis for basic tier <br /> service, based on external costs, such as copyright licenses, programming costs, inflation and <br /> retransmission fees no 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 1.0034 for subscribers served by the Chapel Hill 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.03 cent increase in basic rates due to inflation incurred during 1993- <br /> 1994, to $10.15 for basic service. <br /> b. Tier H: S.25 cent increase in Tier Two rates; S.24 cents attributable to programming. <br /> Time Warner incurred an increase in programming costs from the USA Network, of over <br /> S.20 cents,which may be passed on to the subscriber as an external cost, penny-for- <br /> penny. Time Warner also realized a small rate decrease from CNBC of about $.001, <br /> which was factored into the rate base as well; S.01 was due to inflation incurred during <br /> 1993-1994. <br /> 1 <br />