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HomeMy WebLinkAboutORD 2000-026 ORDINANCE NO. 2000-26 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS ESTABLISHING THE MAXIMUM PERMITTED BASIC SERVICE TIER RATES CHARGED BY PARAGON CABLE, DECLARING AN EMERGENCY AND PROVIDING AN EFFECTIVE DATE WHEREAS, the City of Grapevine, Texas franchises cable television service for the benefit of its citizens; and WHEREAS, the City is the Grantor of a franchise ordinance by and between the City of Grapevine and Paragon Cable ("Paragon"); and WHEREAS, in accordance with applicable provisions of the Telecommunications Act of 1996 (herein the "Telecom Act") and rules adopted by the Federal Communications Commission ("FCC") and all other applicable federal and state laws and regulations, the City has undertaken all appropriate procedural steps to regulate the equipment and installation rates; and a WHEREAS, in accordance with applicable FCC regulations the City adopted an ordinance providing for the regulation of rates charged by cable television operators within the City for the equipment and installation rates and related equipment and installation charges and providing for a reasonable opportunity for interested parties to express their views concerning basic cable regulations. NOW, THEREFORE BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS: Section 1. Findings: 1. That on or about October 1, 1999, the City of Grapevine received Paragon's FCC form 1240 filing. 2. That the City engaged the services of C2 Consulting Services, Inc. to provide assistance in the review of Paragon's FCC form 1240 to determine the reasonableness of the proposed basic service tier rates, attached hereto as Exhibit "A". 3. That Paragon instituted a rate adjustment based on its Form 1240 filing effective January 1, 2000. 4. That based upon the information received from Paragon and recommendations from C2 Consulting Services, Inc., the City concludes that the rate proposed by Paragon for maximum permitted service rate is not reasonable. Section 2. Conclusions: The City has an obligation to timely act upon the pending rate application consistent with current FCC rules and regulations. Paragon's submittal of the FCC form 1240 received on or about October 1, 1999, is hereby rejected, for the reason that the proposed rate is not reasonable. Section 3. Orders for Action: Based on the foregoing Findings and Conclusions, the City hereby enters the following orders: 1. Paragon's request for maximum permitted basic service rate of $9.46 included in its Form 1240 filing is hereby denied. 2. Based on the information received from Paragon and recommendations from C2 Consulting Services, Inc. which is attached hereto as Exhibit "A" and included herein for all purposes, the maximum permitted rate for the basic service tier is established at $9.36 effective March 28, 2000. 3. Paragon cable is hereby required to refund to its current customers any amounts charged to them based on the Form 1240 rate adjustment, which were in excess of the rates approved herein. Section 4. The fact that the present ordinances and regulations of the City of Grapevine, Texas, are inadequate to properly safeguard the health, safety, morals, peace and general welfare of the public creates an emergency which requires that this ordinance become effective from and after the date of its passage, and it is accordingly so ordained PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS on this the 28th day of March, 2000. APPROVED: William D. Tate Mayor ORD. NO. 2000-26 2 ATTEST: A' � Linda Huff City Secretary APPROVED AS TO FORM Matthew Boyle City Attorney ORD. NO. 2000-26 3 • • EXHIBIT TO Page _.._ •- • of ONSULTING SERVICES, INC. •kk •aN • 7801 Pencross (972) 726-7216 Dallas. Texas 75248 (972) 726-0212(fax) January 28, 2000 Ms. Melisa Leal Assistant to the City Manager City of Grapevine PO Box 95104 Grapevine, Texas 76099 Dear Ms. Leal: C2 Consulting Services, Inc. ("C2") has completed its review of the FCC Form 1240 and the FCC Form 1235 submitted to the City of Grapevine, Texas (the "City") by Paragon Cable ("Paragon" or the "Company") on or about September 30, 1999. Paragon is proposing to combine the results of these two filings to justify its proposed basic service rates. The following report provides a brief discussion of the issues noted during the review and C2's recommendations regarding potential City Council actions in response to Paragon's proposed basic service rates. This study does not constitute an examination of the financial condition of Paragon or its parent company. Therefore, C2 cannot and does not express any position with regard to the accuracy or validity of the financial information provided by Paragon during the course of the analyses. OVERVIEW OF THE FILING According to the information provided by Paragon,the basic service tier includes twenty-two(22) channels. Prior to the January 3rd implementation of the filed rate, ' Paragon was charging $9.06 for basic service programming based on its Form 1240 computation for the 1999 rate year. However, this year, the Company has filed a FCC Form 1235 in an effort to collect costs related to the cable system upgrade. Pursuant to FCC regulation, the results of a Form 1235 computation can be added to the Form 1240 computation to develop the total basic service charge. Based on Paragon's proposed Form 1240 filing of $9.46 and proposed Form 1235 filing of $1.45, the Company has increased the basic service rate by $1.85 to a proposed rate of$10.91. The rate year is January 1, 2000 through December 31, 2000. There are three major factors that explain Paragon's proposed increase in the basic service rate: 'Based on paragraph 92 of the Thirteenth Order on Reconsideration, FCC 95-397, released September 22, 1995,a cable operator may implement a proposed rate ninety(90)days after it has filed for the rate change with the franchising authority. However,the franchising authority has one year from the date of the filing in which to render a final decision. Such decision is retroactive to the beginning date on which the proposed rate was charged. Because the Form 1235 rate is added as a component to the benchmarkForm 1240 rate,the City has the same period of review for the Form 1235 as it does the Form 1240. For either form,a decision is retroactive to the date of rate implementation. EXHIBIT '4 TO a &I" ‘'9 Ms. Melisa Leal Page -A-- of , January 28, 2000 Page 2 1. Paragon proposes to use a higher inflation factor in its current Form 1240 true-up period than what was estimated in the projected period for the prior1998 filing; 2. Paragon proposes an additional projected year of inflation in itscurrent Form 1240 that will be trued-up next year pursuant to FCC regulations; and 3. As stated above, Paragon proposes to add an additional $1.45 based on its FCC Form 1235 computation. ANALYSES OF THE FILINGS Project Objectives and Activities The project objectives are three-fold: 1. Assessment of the completeness of the filings with regard to the information and documentation that must be filed with the City. 2. Assessment of the reasonableness of the proposed computations in light of FCC regulations, and FCC rulings. 3. Assessment of the reasonableness of the proposed computations in light of the Company's election to opt out of certain provisions in the Social Contract.2 Given these objectives, C2 conducted the following project activities: 1. Review of the filings to assess the completeness based on the FCC Form instructions. 2. Review of the filings to identify any issues with respect to the data and/or methodologies employed by Paragon. 3. Submission of follow-up data requests and subsequent review of Paragon's responses. 4. Review of FCC decisions that clearly have an impact on Paragon's proposed methodologies. 5. Development of potential alternatives available to the City in establishing maximum permitted basic service rates. 2 Social Contract for TimeWarner Cable("Social Contract"),as approved by the FCC in Social Contract for Time Warner,Memorandum Opinion and Order, FCC 95-478, releasedNovember 30, 1995 ("Social Contract Order"). EXHIBIT TO 1 Ms. Melisa Leal Pane ._3____ Of ,1. ,.._.. January 28, 2000 Page 3 Summary of Findings Form 1240: C2 identified two main issues with respect to Paragon's proposed Fonn 1240 computation. These issues are: 1. Paragon inappropriately included estimated costs in its true-up period computations. 2. In conjunction with correcting the true-up period, the inflation factors to be applied during both the true-up period and the projected period need to reflect the most recent information available. Form 1235: The overriding issue related to the Form 1235: 1. Paragon's proposal to recover the upgrade costs that were the primary basis for CPST increases under application of Social Contract provisions in the last four years should not be considered now in the development of rate year 2000 basic service rates.3 Discussion—Form 1240 1. Use of Actual Costs Only For True-Up Period The Form 1240 methodology incorporates a series of calculations that involve an accounting of the actual costs previously projected for the prior rate year and an allowance for projecting certain cost increases/decreases for the upcoming rate year. In each annual Form 1240 filing, the projections from the prior computation are to be "trued-up" to actual costs, and any over/under- collections are taken into account in the development of the new rates. In the Thirteenth Order on Reconsideration, the FCC noted: Because the true-up will examine what costs were actually incurred, it can only examine costs as of the date the Form 1240 is filed. As a result, and because the Form 1240 must be filed at least 90 days before the proposed increase is scheduled to take effect. . . and the projections are made for the year beginning with the proposed implementation date, the period applicable for the true up will not exactly coincide with the previous year's projections. For example, if an operator files annually on October 1 for rates to take effect on January 1, the true-up will cover the period from the previous October through September, but the projections will apply to the period January to December. 4 Paragon's filing was submitted on September 30, 1999, for a rate year beginning January 1, 2000 (like the example above). However, Paragon's proposed true-up period is from January 1, 1999, through December 31, 1999, even though the information available to Paragon at the time of the filing was only through September 30, 1999. Therefore, the last three months of the true-up 3 See Social Contract at III.F.4. 4 See paragraph 79, footnote 151,FCC 95-397,released September 22, 1995. EXHIBIT /9 TO 4.Z f }z) Ms. Melisa Leal Page o RI January 28, 2000 Page 4 period as calculated by Paragon is based on estimated data and not on the actual data that must be used. The FCC has issued a number of decisions concerning this issue, many of which have been related to filings submitted by Paragon in other jurisdictions. For example: Upon review of the Operator's FCC Fonn 1240. . . we find that Operator has not correctly calculated its MPR. In particular, Operator made true-up adjustments through to the effective date of the rate increase. This is incorrect. . . The true-up data is intended to indicate real, not projected data. This policy is reflected in instructions accompanying FCC Form 1240.5 In C2's opinion and based on these FCC decisions, Paragon should not be authorized to include October 1999 through December 1999 in its Form 1240 true-up period. The true-up period should be only for the nine months ended September 1999.6 Actual data for the October through December 1999 period should be trued-up in Paragon's next rate filing. The impact of allowing only a nine month true-up period is to reduce the rate year 2000 Form 1240 proposed basic service calculation by approximately$.01. 2. Adjustment to Inflation Rates The Form 1240 methodology allows for an inflation adjustment to be projected for each rate year. Such projection becomes part of the true-up computation in the next rate filing. Based on FCC regulations, a cable operator is to use the most recent information published by the FCC concerning quarterly inflation factors to be applied. At the time of Paragon'scurrent Form 1240 filing, the latest published inflation factor for any of the true-up period in question was for the first quarter of 1999. Paragon used this factor of 1.60% not only to true-up the entire true-up period, but also to project for the twelve months ended December 2000. On October 4, 1999, which is shortly after Paragon filed its current Form 1240, the FCC published the second quarter inflation factor at 1.35%. In December 1999, the FCC published the third quarter inflation factor at 1.04%. Typically, if the inflation factor used is the only issue found in a franchising authority's review of a Form 1240 filing, the FCC has found in favor of the cable operator using what was the most recent data available at the time the filing was made. This policy was detailed by the FCC in the Third Order on Reconsideration as follows: We share National Cable Television Association's concern that rates adopted in an effort to comply with our rules as quickly as possible may become unreasonable solely as a 5 See Order,DA 97-1852,released August 29, 1997,paragraph 9(Paragon Cable operations in Portland, Oregon);Order, DA 97-1936,released September 9,1997,paragraph 9(Paragon Cable operations in Multnomah County);and Order, DA 97-1936,released September 9,1997,paragraph 9(Paragon Cable operations in Gresham et. al.). 6 Typically,a true-up period would be for twelve months. In this case,Paragon already trued-up October 1998 through December 1998,albeit inappropriately, in its prior rate filing. 7 FCC Form 1240 Instructions,Part I:Module C [Revised July 1996]. EXHIBIT It. TO 41)a Ms. Melisa Leal Page . Of January 28, 2000 Page 5 result of using later data to refresh the calculations. Operators should not be penalized for making good faith attempts to comply with our rules in a timely manner. When current rates are accurately justified by analysis using the old data (and that data was accurate at the time), cable operators will not be required to change their rates. . . When current rates are not justified by analysis using the old data (so that a rate adjustment would be necessary in any event), cable operators will be required to correct their rates pursuant to current data. In these circumstances, the resulting rates must be based on current data.8 [emphasis added] Clearly, if the franchising authority finds adjustments need to be made other than those attributable to the inflation factors, the FCC has found that the inflation factors can be adjusted with data that became available subsequent to the date of the filing. The FCC's position on this issue is evidenced in the above cited Portland Order (DA 97-1852). In that decision, the FCC found error with Paragon's use of estimated data in its true-up computation for CPST rates and also made an adjustment to reflect current inflation factor data: This adjustment required that we refresh Operator's inflation factors 9 Therefore, because Paragon's rate year 2000 Form 1240 true-up period should be reduced from twelve months to nine months to reflect actual data, the inflation factors for both the true-up period and the projected period need to be adjusted to include those published inflation factors through the most current data available (third quarter 1999). The impact of making such adjustment is to reduce the current Form 1240 proposed basic service rate calculation by approximately$.09. "" Discussion—Form 1235 The FCC developed the Form 1235 in order to allow cable operators an opportunity to justify rate increases for recovery of investment in cable system upgrades. It was intended to provide an abbreviated means of filing a"cost-of-service" showing, but only with respect to costs of upgrade and not general operations of the system. For general operations, a cable operator could continue to use the "benchmark" approach to developing rates reflected in the Form 1240. However, the results of a Form 1235 analysis could be added to the development of rates under the benchmark method for a total tier rate. In C2's opinion, the Form 1235 should not be available to Paragon under the Social Contract. The major components of the Social Contract that apply include: 1. CPST rates can be increased by 51.00 in each rate year over a five year period to fund an investment of $4 billion dollars to upgrade all Time Warner's systems (Social Contract, Section III.F.4.) 2. Basic service rates only shall be increased for changes in external programming costs and inflation(Social Contract, Section III.A.2.) In the Form 1235, Paragon proposes to recover its investment in the City's upgrade even though it already has collected from subscribers during the period 1996 through 1999 based on the s See Third Order on Reconsideration, FCC 94-40, released March 30, 1994, paragraphs 93 and 94. ,,. 9 See Order, DA 97-1852,released August 29, 1997,paragraph 10. EXHIBIT- TO. / '22�� �'�?—� Ms. Melisa Lea! Page (f of 64- January 28, 2000 Page 6 provision of the Social Contract as outlined in #1 above. However, Paragon clearly already has been compensated for this upgrade. By proposing now to spread the recovery between basic service and CPST rate tiers, Paragon's proposal, in C2's opinion, is not only a"double dip" into the pockets of subscribers, but also is in direct violation of the Social Contract to which Time Warner agreed. The intent of the Social Contract is unequivocally stated in the following: At the core of the Social Contract is the upgrade incentive plan whereby Time Warner will rebuild and upgrade all of its domestic cable systems and in turn will be allowed to recover the costs of the upgrade over time by adding a charge to the highest penetrated CPST during the years of the Social Contract.t0 Clearly, the $1.00 per year increase to the CPST tier was intended to cover all the upgrade costs to both the basic service and other regulated tiers." The Social Contract provided that Time Warner would not seek to pass any capital costs, in addition to the already received $1.00annual increase to subscribers.12 Paragon should be prohibited from recovering costs already recovered and from proposing to place some of that burden on the basic service subscriber. Paragon takes a different position arguing that it is no longer bound by the provisions of the Social Contract as it opted out pursuant to Section III.I.1.c: In the event of any changes to the Act or any material changes to the FCC rules hereunder relating to rates (BST,CPST or equipment) that are favorable to TWC , any TWC system may elect to be relieved from the relevant rate provisions(Sections III.A.2., IIl.A.3., III.B., III.D., III.F.4., and III.G.) of this Contract accordingly, but shall remain bound by all other provisions of this Contract.13 44.,01 The Company further states that, as a result of exercising this option, it is no longer subject to the 10% reduction to the basic service rate, the prohibition against adding satellite channels to the basic service rate, FCC regulation of equipment rates, and the prohibition against filing cost-of- service showings for the basic service tier. In an August 1999 letter to the City, Paragon indicates that the event to which it attributes its decision to opt out of theSocial Contract rate provisions was the passage of the Telecommunications Act of 1996 and the total deregulation of the CPST tier of service. It appears that Paragon desires the freedom to increase its CPST rate beyond the limits provided for is the Social Contract. Indeed, it is interesting to note that the provisions of the Telecommunications Act related to the 1999 deregulation of the CPST tier have been known since 1996, but Paragon continued to collect the $1.00 per year increase on CPST until such time that this tier no longer was regulated by the FCC. In C2's opinion,under the Social Contract there are only two circumstances under which Paragon should be able to charge additional amounts for upgrade costs outside of what it has already collected: 10 SeeSocial Contract Order,FCC 95-478,paragraph 19. " SeeSocial Contract Order,FCC 95-478,paragraph 25-26. 12 Subject to the provisions discussed below concerning franchising authorities' requirements for upgrades that exceed the requirements of the Social Contract. tos. 13 Paragon's response to Third Request for Information for the City of Grapevine, question 2, dated January 4,2000. EXHIBIT, 4 TO j d -4 ' Ms. Melisa Leal Page ._.. .— of January 28, 2000 Page 7 1. In the event that the City had negotiated an upgrade that exceeded the scope of the upgrade in the Social Contract(Section III.F.2.);and/or 2. Implementation of the favorable regulatory treatment on which the Company based its decision provides for a incremental increase in the amounts already recovered under the Social Contract(Section 111.1.1.c.). Based on C2's understanding, the City did not request any additional upgrade requirements. With respect to an allowance for the incremental increase in amounts to be recovered from the favorable regulatory provisions (i.e. the deregulation of CPST under the Telecommunications Act), Paragon has every right to increase the CPST more than the $1.00 that would have been added in 2000 under the final year of the Social Contract. In C2's opinion, Paragon has no basis to now seek total recovery of its upgrade costs pursuant to the Form 1235 methodology. The Telecommunications Act did not establish this methodology, nor did it provide for any new upgrade increment not already available to cable operators. It merely provided for the deregulation of the CPST tier rates, through which Paragon could justifiably recover the incremental amount that results under such favorable regulatory provisions on this tier of service. SUMMARY OF RECOMMENDATIONS Based on the above findings, C2 recommends the following adjustments be considered by the City in determining the maximum permitted monthly basic service rate: 1. The True-up Period should only reflect the nine months ended September 30, 1999. 2. The inflation factors should be adjusted to reflect the published factors for the first through the third quarters of 1999. 3. The City should consider ordering a maximum permitted rate for the Form 1240 computation of$9.36 rather than the$9.46 proposed by Paragon. 4. The City should consider completely disallowing Paragon's proposed Form 1235 basic service rate increase of$1.45. 5. The City should order Paragon to issue refunds to subscribers within ninety (90) days of a rate order based on the difference between the ordered rate and the January 3, 2000, implemented rate. Interest on the refund amount should accrue to the time the refund is issued. C2 greatly appreciates having this opportunity to work with the City of Grapevine. If you have any questions regarding this report, the project activities, or any of the recommendations, please contact Ms. Connie Cannady at(972) 726-7216. Very truly yours, ri5(\,,L1/4( vk-N6 avk-c- C2 Consulting Services, Inc. EXHIBIT 1 . ro Ado/0�- � Federal Communications Commission Page 9 01 . p,,sed by O\fE3 30taO-0b..S5 Washington,DC 20554 8.Status of Previous Filing of FCC Form 1210(enter an"x"in the appropriate box) YES NO 'l;an FCC Form 1210 been previously filed with the FCC? I I I If yes,enter the date of the most recent filing: (mm/dd/yy) YES NO b.Has an FCC Form 1210 been previously filed with the Franchising Authority? I I If yes,enter the date of the most recent filing: (mm/dd/yy) 9.Status of FCC Form 1200 Filing(enter an"x"in the appropriate box) YES NO a.Has an FCC Form 1200 been previously filed with the FCC? I I If yes,enter the date filed: (mm/dd/yy) YES NO b.Has an FCC Form 1200 been previously filed with the Franchising Authority? I I I If yes,enter the date filed: (mmldd/yy) 10.Cable Programming Services Complaint Status(enter an"x"in the appropriate box) YES NO a.Is this form being filed in response to an FCC Form 329 complaint? I I I If yes,enter the date of the complaint: (mm/dd/yy) YES NO 11.Is FCC Form 1205 Being Included With This Filing I I I 12.Selection of"Going Forward"Channel Addition Methodology (enter an"i in the appropriate box) Check here if you are using the original rules [MARKUP METHOD). Check here if you are using the new,alternative Hiles[CAPS METHOD]. If using the CAPS METHOD,have you elected to revise recovery for YES NO channels added during the period May 15,1994 to Dec.31,1994? 1 I I 13.Headend Upgrade Methodology s, 5=^7E•Opera/as roust certi(/o the Commiuioo r/cire/gibihiry to use ask upgrade methodology wdattach JR equipmrn/Ail indrkkp rise on schedule. ]Check here if you area qualifying small system using the streamlined headend upgrade methodology. Part I: Preliminary Information Module A: Maximum Permitted Rate From Previous Filing a b c d e Line Basic Tier 2 Tier 3 Tier 4 'Pier 5 Al Current Maximum Permitted Rate i.ine Description I 59.11689 I I I Module B: Subscribcrship a b c d e Line Line Description Basic Tier 2 Tier 3 Tier 4 Tier 5 01 Average Subscribership For True-Up Period 1 10.110 112 Average Subscribcrship For True-Up Period 2 63 Estimated Average Subscribership For Projected Period 10.274 Module C: Inflation Information Line Line Description Cl Unclaimed Inflation:Operator Switching From 1210 To 1240 1.0000 C2 Unclaimed Inflation:Unregulated Operator Responding to Rate Complaint 1.13000 C3 Inflation Factor For True-Up Period l[Wks I I 10133 C4 Inflation Factor For True-Up Period 2[\Vks I I CS Current FCC Inflation Factor 1.0104 Module D: Calculating the Base Rate a b c d e Line Line Description Basic Tier 2 Tier 3 Tier 4 Tier 5 Dl Current Headend Upgrade Segment 50.0000 ,D2 Current External Costs Segment 502453 s Current Caps Method Segment 50.0000 Current Markup Method Segment 50.013110 liteetai Current Channel Movement and Deletion Segment $0.0000 iD6 Current True-Up Segment (50.1606) FCC Form 1240 Page 2 Microsoft Excel 4.0 Version July 19% EXHIBIT. rt , TO c1/44140 " C° Federal Communications Commission - ._L Approved by OMB 3060-06R5 Washington,DC 20554 Pogo Of ._._ 1)7 Current Inflation Segment $0.1013 138 Base Rate[Al-D1-D2-D3-04-D5-D6-D71 $8.8829 Part II: True-Up Period Module E:Timing Information Line Line Description El What Type of True-Up Is Being Performed?(Answer"1"."2".or"3". See Instructions for a description of these types.) 2 If"I'.go to Module I. If"2%answer E2 and E3. If"3".answer E2.E3.E4,and E5. E2 Number of Months in the True-Up Period 1 0 E3 Number of Months between the end of'frue-Up Period 1 and the cad of the most recent Projected Period tt E4 Number of Months in True-Up Period 2 Eligible for Interest tJ ES `umber of Months True-Up Period 2 Ineligible for Interest 0 Module F: Maximum Permitted Rate For True-Up Period 1 a b c d e Line Line Description Basic Tier 2 Tier 3 Tier 4 Tier 5 Fl Caps Method Segment For True-Up Period I[Wks 21 F2 Markup Method Segment For True-Up Period 1[Wks 31 S0.0000 F3 Chan Mvmnt Dektn Segment For True-Up Period 1[Wks'4/51 50.00 F4 True-Up Period 1 Rate Eligible For Inflation[D8+F1+F2+F3[ $8.8829 F5 Inflation Segment for True-Up Period 1[(F4•C3)-F41 50.1181 F6 Headend Upgrade Segment For True-Up Period 1[Wks 61 F7 External Costs Segment For True-Up Period l[Wks 7] $0.2487 FS True-Up Segment For True-Up Period 1 ($0.1652) F9 Max Perm Rate for True-Up Period l[F4+F5+F6+F7+F8J $9.0846 Module G: Maximum Permitted Rate For True-Up Period 2 a b c d c Line Line Description Basic Tier 2 Tier 3 Tier 4 Tier 5 "'" Caps Method Segment For True-Up Period 2[Wks 2] Markup Method Segment For True-Up Period 2[Wks 3] Chan Mvmnt Delete Segment For True-Up Period 2[Wks'4/51 G4 TU Period 2 Rate Eligible For Inflation[D8+F5+Gl+G2+G3] 05 Inflation Segment for True-Up Period 2[(G4•C4)-G4[ 06 Headend Upgrade Segment For True-Up Period 2[Wks 6[ G7 External Costs Segment For True-Up Period 2[Wks 7] 08 True-Up Segment For True-Up Period 2 G9 Max Perm Rate for True-Up Period 2[G4+GS+G6+G7+081 FCC Form 1240 Page 3 Microsoft Excel 4.0 Version July 1996 EXHIBIT 4 TO Ad ° Page ._..L_ of �f l Approved by OMB 301(}-0ti95 Federal Communications Commission Washington,DC 20554 Module H:True-Up Adjustment Calculation a b c d e Line Description Basic Tier 2 Tier 3 Tier 4 Tier 5 clement For True-Up Period 1 Revenue From Period I 5824.360.4306 rrK„;u 112 Revenue From Max Permitted Rate for Period 1 5826.594.2143 113 True-Up Period t Adjustment 11124111 52.233.7837 114 Interest on Period I Adjustment 5159.7134 Adjustment For True-Up Period 2 115 Revenue From Period 2 Eligible for Interest 116 Revenue From Max Penn Rate for Period 2 Eligible For Interest 117 Period 2 Adjustment Eligible For Interest 1116-1151 118 Interest on Period 2 Adjustment(See instructions for formula) 119 Revenue From Period 2 Ineligible for Interest 1110 Revenue From Max Perm Rate for Period 2 Ineligible for Interest Hl I Period 2 Adjustment Ineligible For Interest[H10.1191 Total True-Up Adjustment 1112 Previous Remaining True-Up Adjustment 1113 Total True-Up Adjustment(113+114+117+118+1111+11121 S2.393.4970 1114 Amount of True-Up Claimed For This Projected Period 513914970 1115 Remaining True-Up Adjustment[H1341141 50.0000 Part III: Projected.Period Module I: New Maximum Permitted Rate a b c d e Line Line Description Itasic Tier 2 Tier 3 Tier 4 Tier 5 I I Caps Method Segment For Projected Period[Wks 21 12 Markup Method Segment For Projected Period[Wks 31 $0.0000 Chan Mvmnt Delete Segment For Projected Period[Wks 4/51 50.00 Proj.Period Rate Eligible For Inflation[D8+F5+G5+11+12+I3] 59.001 Inflation Segment for Projected Period[(14•CS}141 $0.0936 16 Headend Upgrade Segment For Projected Period[Wks 6] 17 External Costs Segment For Projected Period[Wks 7] 50.2422 18 True-Up Segment For Projected Period 50.0194 19 Max Permitted Rate for Projected Period[14+I5+16+17+18] 59.3563 110 Operator Selected Rate For Projected Period 59.46 Aale.•77Pe maximum p enai!/edirie/gwrsdoaa✓ate into scrawl anvielimdBabiRy oumayAtm II you Aviv previously&coOlr fed by thCComoussioo cr your he-/!tanr&singsunc,riirmoiaAi rrlunds, you are oolrelie r ed a/your obligat oo/a mate such refunds eyed if the perminedrale isbEherlban/be comesiedrile or your curfew/rile. Certification Statement WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE PUNISHABLE BY FINE AND/OR IMPRISONMENT (U.S.CODE TITLE 18.SECTION 1001),AND/OR FORFEITURE(U.S.CODE,TITLE 47,SECTION 503). 1 certify that the statements made in this form are true and correct to the best of my knowledge and belief,and are made in good faith. Signature I Date Name and Title of Person Completing this Form: 11 Telephone number Fax Number moimo FCC Form 1240 Page 4 Microsoft Excel 4.0 Version July 1996 Federal Communications Commission Approved By OMB 3060-0635 Washington,DC 20554 Worksheet 1 - True-Up Period Inflation For instructions,see Appendix A of Instructions For FCC Form 1240 EXHIBIT 11 BI T To Adg°/>�,� (° Page _/L_._. of l( Line Period FCC Inflation Factor 101 Month 1 1.60% 102 Month 2 1.60% 103 Month 3 1.60% 104 Month 4 1.35°o 105 Month 5 1.35% 106 Month 6 1.35% 107 Month 7 1.04% 108 Month 8 1.04% 109 Month 9 1.04!a 110 Month 10 I 1 1 Month 11 112 Month 12 1 l3 Average Inflation Factor for True-Up 1.0133 Period 1 114 Month 13 115 Month 14 116 Month 15 117 Month 16 118 Month 17 119 Month 18 120 Month 19 121 Month 20 122 Month 21 123 Month 22 124 Month 23 125 Month 24 126 Average Inflation Factor for True-Up Period 2 FCC Form 1240 Page 1 Microsoft Excel 4.0 Version July 1996 Federal Communications Commission Approved By 0MB 3060-1685 Washington.DC 20554 EXHIBIT, /9 TO f a( Worksheet.7- External Costs Page ._.1.a- of True-Up Period For instructions,see Appendix A of Instructions For FCC Form 1240 • True-Up Period Projected Period • Question 1.For which time period are you filling out this worksheet? [Put an"7C in the appropriate box.[ Question 2.How long is the tint period,in months,for which rates arc being set with this worksheet? 9 Question 3.How lona is the second period,in months.for which rates are being set with this worksheet? 0 a b c d e line Line Description Basic Tier 2 Tier 3 Tier 4 Tier 5 Period I External Costs Eligible for Markup _ Cost of Programming For Channels Added Prior to 5'15,94 or 701 510,368.60 After 5/1594 Using Markup Method For Period 702 Retransmission Consent Fees For Period 50.00 703 Copyright Fees For Period 57,297.32 704 External Costs Eligible For 7.5°4 Markup 517,665.92 705 Marked Up External Costs 518,990.8619 External Costs Not Eligible for Markup _ 706 Cable Specific Taxes For Period 50.00 707 Franchise Related Costs For Period 50.00 708 Commission Regulatory Fees For Period 53,639.56 709 Total External Costs For Period 522.630.4219 710 Monthly.Per-Subscriber External Costs For Period 1 50.2487 Period 2 !real Costs Eligible for Markup I. Cost of Programming For Channels Added Prior to 5/1594 or After 5/15/94 Using Markup Method For Period 712 Retransmission Consent Fees For Period 713 Copyright Fees For Period 714 External Costs Eligible For 7.5°o Markup 715 Marked Up Extanal Costs External Costs Not Eligible for Markup 716 Cable Specific Taxes For Period 717 Franchise Related Costs For Period 718 Commission Regulatory Fees For Period . 719 Total External Coats For Period 720 Monthly,Pa-Subscriber External Costs For Period 2 aastrse FCC Form 1240 Page 1 Microsoft Excel 4.0 Version July 1996 Federal Communications Commission Approved By()NIB 31160-0685 Washington.DC 20554 Worksheet.?- External Costs EXHIBIT__1_, TO al,,,/On A(0, Projected Period Page /3 of , , For instructions,see Appendix A of Instructions For FCC Form 1240 True-Up Period Projected Period Question 1.For which time period are you filling out this worksheet? [Put an"X"in the appropriate box] X Question 2.How long is the first period,in months,for which rates are being set with this worksheet? 12 Question 3.How long is the second period in months,for which rates are being set with this worksheet? 0 a b c d e line line Description Basic Tier 2 Tier 3 Tier 4 Tier 5 Period 1 External Costs Eligible for Markup 701 Cost of Programming For Channels Added Prior to 5/15/94 or 512,403.34 Atter 5/15/94 Using Markup Method For Period 702 Retransmission Consent Fees For Period 50.00 703 Copyright Fees For Period 510,788.19 704 External Costs Eligible For 7.5°'.Markup 523,191.53 705 Marked Up External Costs S24,930.89471 External Costs Not Eligible for Markup _ 706 Cable Specific Taxes For Period 50.00 707 Franchise Related Costs For Period $0.00 708 Commission Regulatory Fees For Period $4,931.75 709 Total External Costs For Period 529,862.6448 710 Monthly,Per-Subscriber External Costs For Period 1 50.2422 FCC Form 1240 Page 2 Microsoft Excel 4.0 Version July 19% Federal Communications Commission Approved By OMB 3060-0685 Washington,DC 20554 EXHIBIT 1 To d °, ",, Page . of , it Worksheet 8 - True-Up Rate Charged istructions,see Appendix A of Instructions For FCC Form 1240 Question 1.How long is the True-Up Period 1.in months? 9 Question 2.How long is the True-Up Period 2,in months? 0 a b • c d e Line Line Description Basic Tier 2 Tier 3 Tier 4 Tier 5 801 Month 1 $9.0600 802 Month 2 $9.0600 803 Month 3 $9.0600 804 Month 4 $9.0600 805 Month 5 $9.0600 806 Month 6 $9.0600 807 Month 7 $9.0600 S08 Month 8 $9.0600 309 Month 9 $9.0600 810 Month 10 811 Month 11 812 Month 12 813 Period 1 Average Rate $9.0600 1814 Month 13 Month 14 Month 15 Athrtro Month 16 813 Month 17 819 Month 18 820 Month 19 821 Month 20 822 Month 21 823 Month 22 824 Month 23 825 Month 24 826 Period 2 Average Rate FCC Form 1240 Page 1 Microsoft Excel 4.0 Version July 1996