Agenda - 05-03-2005-5j - Laserfiche WebLink

Browse Search

I(v -13- subscribers are not paying for unregulated service costs- The rules are designed to "exclude from [regulated] rates, any costs that exceed what would have been incurred in a competitive environment or that are not related to regulated services.."" Costs are therefore allocated between regulated and unregulated services, so that regulated subscribers are not charged for benefits they do not receive.'SCosts aze divided into three categories "basic service (BST)," "cable programming service (CPST)," and "all other,"''-9 the latter two which now represent unregulated services. Because the lazgest portion of an operator's rate base is its plant in service, the FCC developed a "used and useful" standard to ensure that regulated subscribers pay for only those portions of plant that are used and useful in the provision ofregulated cable services.30 If a cable operator chooses to recover its investment in such used and useful plant, it must remove from the rate base any accumulated depreciation,31 in addition to which the FCC provided depreciation schedules.32 Plant determined not "used and useful" is deemed "excess" capacity, and operators are only permitted to include excess capacity in the ratebase "if it is fatty constructed plant that will be used to provide regulated services within 12 months." 33 TWC was not required to file a form 12.35, but it chose to do so to overcome the capital recovery ceiling imposed by federal government pursuant to the "Social Contract."" Because TWC included upgrade capital expense recovery (the fonn12:35 "Add-on" charge) as '-See 1994 Report and Order at ~~18, page I D '$"As noted, the interim rules also allow the operator to recover all operating expenses normally incurred by cable operators in the provision of regulated cable service. An operator may not recover through regulated rates other expenses, such as costs associated with non-regulated service, lobbying expenses, or club memberships. 1996 Cost of Service Final Report and Order at ¶I I . '-9See 1996 Cost of Service Final Report and Order at ¶121, page 50. This is a reduction from the 5 categories created in the 1994 Report and Order: "BST", "CPST" "non-regulated cable programming service", "other cable acti~~ties" and "non-cable activities." 30See 1994 Report and Order at ¶26 3t See 47 CFR 76.922 (6)(n 32See 1994 Cost of Service Report and Order, Attachment B, 1996 Cost of Service Fina] Report and Order, Attachment C. 33See 1996 Cost of Service Final Report and Order at ¶26. 3a See Time Warner Social Contract, FCC 95-478 at ¶I-5. The FCC adopted the Social Contract on November 30, 1995 to provide rate stability, improve the quality of cable service, and provide TW C incentive to upgrade its cable systems and make other improvements. Under its terms, Time Warner was to invest $4 billion to upgrade its domestic cable systems over the life of the Social Contract and any such investment recovery was capped at $1 per year (cumulative to $1 SO/customer) over its 5-yeaz term. In addition, the Socia] Contract was to resolve over 900 rate cases against TWC and approximately $4 7 million plus interest to TWC customers.