Social Contracts Value to Public Debated

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Time Warner Cable continues its march toward fulfillment of
its "social contract" by upgrading systems and connecting schools. But local
regulators, who were cut out of the dealmaking process, still wonder whether consumers got
the best of the deal.

According to a compliance report filed with the Federal
Communications Commission, which brokered the contract to end dozens of rate disputes in
1995, Time Warner has spent more than $3 billion on system upgrades and rate rebates since
it reached its agreement with the federal government in November 1995.

The vast majority of the amount -- $2.9 billion -- has been
spent on system upgrades. Time Warner agreed to improve its systems -- some of which were
at 250-megahertz capacity -- to 750 MHz. The company is allowed to reserve 200 MHz for
digital distribution.

The company also paid $4.7 million, plus interest, during
the first year of the contract to resolve more than 900 rate complaints.

At the time of the agreement, the FCC and Time Warner said
they brokered the social contract to foster fair cable rates, to create low-cost lifeline
service and to improve service, while reducing the administrative burden to cities that
challenged rates. But bad feelings remain among city officials who got little say in the
deal.

Regulators said the number of complaints fell during the
period of the social contract. This is attributable, they added, to the fact that
programming was added following rebuilds, so that when rates went up, consumers saw a
benefit, and not just an increased cost of living.

But many believe that business pressures would have
prompted Time Warner to rebuild the systems without the FCC agreement."From the
regulators whom I've talked to, the general consensus is that the contract benefited
Time Warner and it benefited the FCC," said Kathy Moore, manager of administrative
services and community relations for the city of Garden Grove, Calif. "Cities remain
unhappy with the process because the third party was not at the table."

Just because a system has been upgraded does not mean that
all complaints vaporize.

Frank Clark, senior management analyst for the city of
Cincinnati, said consumers and the city are happy with the upgrade there. Time Warner
rebuilt with fiber-to-the-node architecture, and it reduced the length of the longest
amplifier cascade from 40 to 12.

But now, consumers are complaining that the operator is
already maxed out on the analog platform, and that it shifts around niche stations such as
government access and Eternal Word Television Network, Clark said.

"[Time Warner] promises that within a year, there will
be tons more channels," he added.

Educational access was also a promise of the contract, and
Time Warner reported that it has added 800 high-speed broadband connections to the
Internet among the 11,000 schools that it has wired for cable. Teacher training was
provided with 700 tutorials through the operator's area last year.

A few systems have gone beyond the basic connectivity
commitment, according to the report. The Time Warner division in El Paso, Texas, added
extra Road Runner data connections for use by the hearing-impaired and special-education
students served by two local school districts.

Systems in San Diego and Portland, Maine, have used the
connections to do more localized outreach, creating "Key Pals," the wired
world's equivalent to pen pals. Schools within the clusters are linked to each other
to compare their lives and communities.

And all Time Warner divisions that have launched Road
Runner place free modems in public libraries to provide Internet access to a broader
portion of the community.

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