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RENAISSANCE MEDIA GROUP LLC filed this Form S-4/A on 09/04/1998
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  The FCC's regulations govern rates that may be charged to subscribers for
Regulated Services. The FCC uses a benchmark methodology as the principal
method of regulating rates for Regulated Services. Cable operators may also
justify rates using a cost-of-service methodology. The FCC has also adopted
comprehensive and restrictive regulations allowing operators to modify their
regulated rates on a quarterly or annual basis using various methodologies
that account for changes in the number of regulated channels, inflation, and
increases in certain external costs, such as franchise and other governmental
fees, copyright and retransmission consent fees, taxes, programming fees and
franchise related obligations. The FCC's regulations also permit cable
operators to create new programming packages, called new product tiers
("NPTs"), that are not subject to rate regulation upon compliance with certain
conditions, including affirmatively marketing NPT services and adding to an
NPT only new services which had not been previously carried by the system in
the past two years, among other conditions. The Company cannot predict whether
the FCC will modify these comprehensive regulations in the future.
  The 1996 Telecom Act provides for the deregulation of the CPST of certain
cable systems owned by "small cable operators." Among other requirements, an
eligible small operator is one which does not serve, directly or through an
affiliate, one percent or more of cable subscribers nationwide and is not
affiliated with any entity or entities whose gross annual revenues aggregate
more than $250,000,000. The Company will not be eligible for small cable
operator status under the 1996 Telecom Act because the Morgan Stanley Entities
own more than 20% of the Company and those investors and their affiliated
companies have aggregated revenues in excess of $250,000,000.
  In addition to rate deregulation for certain small cable operators under the
1996 Telecom Act, the FCC adopted regulations in June 1995 ("Small System
Regulations") pursuant to the 1992 Cable Act that were designed to reduce the
substantive and procedural burdens of rate regulation on "small cable
systems." For purposes of these FCC regulations, a "small cable system" is a
system serving 15,000 or fewer subscribers that is owned by or affiliated with
a cable company which serves, in the aggregate, 400,000 or fewer subscribers.
Under the FCC's Small System Regulations, qualifying systems may justify their
regulated service and equipment rates using a simplified cost-of-service
formula. The regulatory benefits accruing to qualified small cable systems
under certain circumstances remain effective even if such systems are later
acquired by a larger cable operator that serves in excess of 400,000
subscribers. Various franchising authorities and municipal groups have
requested the FCC to reconsider its Small System Regulations. Renaissance
Media's assumption of Time Warner's Social Contract precludes such exemption
from rate regulation for systems that serve 15,000 or fewer subscribers, but
ameliorates the effect of such preclusion by permitting the Company to benefit
from automatic rate adjustments during the term of the Social Contact for all
of the Systems acquired from Time Warner. The Company will have the right to
increase monthly CPST rates by $1.00 during each year of the Social Contact
above other permissible increases resulting from inflation and so-called
"external costs."
  Franchising authorities are empowered to regulate the rates charged for
additional outlets and for the installation, lease and sale of equipment used
by customers to receive the basic service tier, such as converter boxes and
remote control units. The FCC's rules require franchising authorities to
regulate these rates on the 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.