Print Page  Close Window

SEC Filings

S-4
RENAISSANCE MEDIA GROUP LLC filed this Form S-4 on 06/12/1998
Entire Document
 
<PAGE>
 
basis of actual cost plus a reasonable profit as defined by the FCC. The FCC's
regulations permit operators to compute regulated equipment rates by
aggregating costs of broad categories of equipment at the franchise, system,
regional or company level.
 
  Cable operators required to reduce rates may also be required to refund
overcharges with interest. Rate reductions will not be required where a cable
operator can demonstrate that rates for Regulated Services are reasonable
using the FCC's cost-of-service rate regulations which require, among other
things, the exclusion of 34% of system acquisition costs related to intangible
and tangible assets used to provide Regulated Services. The FCC's cost-of-
service regulations contain a rebuttable presumption of an industry-wide
11.25% after-tax rate of return on an operator's allowable rate base, but the
FCC has initiated a further rulemaking in which it proposes to use an
operator's actual debt cost and capital structure to determine an operator's
cost of capital or rate of return.
 
  "Anti-Buy Through" Provisions
 
  The 1992 Cable Act also requires cable systems to permit customers to
purchase video programming offered by the operator on a per channel or a per
program basis without the necessity of subscribing to any tier of service,
other than the basic service tier, unless the system's lack of addressable
converter boxes or other technological limitations does not permit it to do
so. The statutory exemption for cable systems that do not have the
technological capacity to offer programming in the manner required by the
statute is available until a system obtains such capability, but not later
than December 2002. The FCC may waive such time periods, if deemed necessary.
Most of the Company's cable systems do not have the technological capability
to offer programming in the manner required by the statute and currently are
exempt from complying with the requirement.
 
  Must Carry/Retransmission Consent
 
  The 1992 Cable Act contains broadcast signal carriage requirements that
allow local commercial television broadcast stations to elect once every three
years to require a cable system to carry the station, subject to certain
exceptions, or to negotiate for "retransmission consent" to carry the station.
A cable system generally is required to devote up to one-third of its
activated channel capacity for the carriage of local commercial television
stations whether pursuant to the mandatory carriage or retransmission consent
requirements of the 1992 Cable Act. Local noncommercial television stations
are also given mandatory carriage rights; however, such stations are not given
the option to negotiate retransmission consent for the carriage of their
signals by cable systems. Additionally, cable systems are required to obtain
retransmission consent for all "distant" commercial television stations
(except for commercial satellite-delivered independent "superstations" such as
WGN), commercial radio stations and certain low power television stations
carried by such systems after October 1993. In March 1997, the U.S. Supreme
Court affirmed a three-judge district court decision upholding the
constitutional validity of the 1992 Cable Act's mandatory signal carriage
requirements. The FCC will conduct a rulemaking in the future to consider the
requirements, if any, for mandatory carriage of DTV signals. The Company
cannot predict the ultimate outcome of such a rulemaking or the impact of new
carriage requirements on the Company or its business. As a result of the
mandatory carriage rules, some of the Systems have been required to carry
television broadcast stations that otherwise would not have been carried and
may be required to displace possibly more attractive programming. The
retransmission consent rules have resulted in the deletion of certain local
and distant television broadcast stations which various Systems were carrying.
To the extent retransmission consent fees must be paid for the continued
carriage of certain television stations, the Company's cost of doing business
will increase with no assurance that such fees can be recovered through rate
increases.
 
  Designated Channels
 
  The Communications Act permits franchising authorities to require cable
operators to set aside certain channels for public, educational and
governmental access programming. Federal law also requires a cable system with
36 or more activated channels to designate a portion of its channel capacity
for commercial leased access by third parties to provide programming that may
compete with services offered by the cable operator. The U.S.
 
                                      63