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CHARTER COMMUNICATIONS, INC. /MO/ filed this Form S-1/A on 09/28/1999
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additional localities served by the systems may choose to certify and regulate
rates in the future.
     The Federal Communications Commission itself directly administers rate
regulation of cable programming service tiers, which is expanded basic
programming offering more services than basic programming, which typically
contain satellite-delivered programming. Under the 1996 Telecom Act, the Federal
Communications Commission can regulate cable programming service tier rates only
if a local franchising authority first receives at least two rate complaints
from local subscribers and then files a formal complaint with the Federal
Communications Commission. When new cable programming service tier rate
complaints are filed, the Federal Communications Commission considers only
whether the incremental increase is justified and it will not reduce the
previously established cable programming service tier rate. We currently have
rate complaints relating to approximately 240,000 subscribers pending at the
Federal Communications Commission. Significantly, the Federal Communications
Commission's authority to regulate cable programming service tier rates expired
on March 31, 1999. The Federal Communications Commission has taken the position
that it will still adjudicate cable programming service tier complaints filed
after this sunset date, but no later than 180 days after the last cable
programming service tier rate increase imposed prior to March 31, 1999, and will
strictly limit its review, and possibly refund orders, to the time period
predating the sunset date. We do not believe any adjudications regarding these
pre-sunset complaints will have a material adverse effect on our business. The
elimination of cable programming service tier regulation, which is the rate
regulation of a particular level of packaged programming services, typically
referring to the expanded basic level of service, on a prospective basis affords
us substantially greater pricing flexibility.
     Under the rate regulations of the Federal Communication Commission, most
cable systems were required to reduce their basic service tier and cable
programming service tier rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel carriage. The Federal Communications Commission
has modified its rate adjustment regulations to allow for annual rate increases
and to minimize previous problems associated with regulatory lag. Operators also
have the opportunity to bypass this "benchmark" regulatory scheme in favor of
traditional "cost-of-service" regulation in cases where the latter methodology
appears favorable. Cost of service regulation is a traditional form of rate
regulation, under which a utility is allowed to recover its costs of providing
the regulated service, plus a reasonable profit. The Federal Communications
Commission and Congress have provided various forms of rate relief for smaller
cable systems owned by smaller operations. Premium cable services offered on a
per-channel or per-program basis remain unregulated, as do affirmatively
marketed packages consisting entirely of new programming