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7 <br />-4- <br />4. Time Warner's FCC 1240 rate adjustments reflect the following external cost <br />elements: <br />a. External costs for True-up Period <br />h. External costs for Projected Period <br />c. Inflation from True-up Period <br />d. Inflation for Projected Period <br />e. Franchise related costs (PEG) from True-up Period <br />f. Franchise related costs (PEG) for Projected Period <br />5. CPST Rate Regulation Expiration, A sunset provision within the <br />Telecommunications Act of 1996 established March 31, 1999 as the date which rate <br />regulation for the upper cable service tiers ended, Thereafter, the cable operator is <br />allowed to change upper service tier rates at will upon 30 days notice to the franchise <br />authority and subscribers. <br />B. Rate Adjustment Analysis <br />1. External Costs. The rate adjustments reflect multiple external cost elements. An <br />external cost is an expense a cable operator incurs during the normal course of <br />business and may be included in rate calculations. External cost categories include: <br />state and local taxes; franchise fees; costs of complying with franchise requirements, <br />including costs of providing public, educational, and governmental access channels; <br />retransmission consent fees and copyright fees incurred for the carriage of broadcast <br />signals; other programming costs; FCC regulatory fees; and costs associated with <br />channel additions. <br />a. True Up and Projected Periods. The FCC 1240 Form must be filed with the <br />local franchise authority ninety (90) days before the rates are scheduled to take <br />eflbct, and may be filed no more frequently than annually. The FCC 1240 <br />represents a departure from the quarterly method of updating cable rates, in that it <br />allows cable operators to estimate their fitture costs over a 12-month period: this is <br />referred to as the projected periods The FCC 1240 also allows operators to <br />recover expenses that occurred during a specified prior period of time, referred to <br />as the true up period. If a cable operator incorrectly estimates its costs for a <br />projected period, it must correct those estimates by using the true up segment of <br />the next FCC 1240 rate filing. <br />SFCC 1210 Forms allow for the recovery of past costs, only, not future costs. Future costs are recoverable <br />through the use of the FCC 1240 Form only. <br />Action Agg its, LLC Franchise Fee U-Tax Audi ' & Telecommunication Administration <br />101 Pocono Lane, Cary, North Carolina 27513-5316 Voice # 919.467.5392 Fax # 919.460.6868