*Pages 1--3 from Microsoft Word - 23521.doc* Federal Communications Commission DA 02- 3335 Before the Federal Communications Commission Washington, D. C. 20554 In the Matter of: Enstar XI d/ b/ a Charter Communications Petition for Determination of Effective Competition in Ashdown (AR0109) and Foreman (AR0145), Arkansas ) ) ) ) ) ) ) ) CSR- 6018- E MEMORANDUM OPINION AND ORDER Adopted: December 2, 2002 Released: December 6, 2002 By the Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION 1. Enstar XI d/ b/ a Charter Communications (“ Charter”) has filed with the Commission a petition pursuant to Section 76.7 of the Commission's rules for a determination of effective competition in the two above- captioned communities in Arkansas (the “Communities”). 1 Charter alleges that its cable system serving the Communities is subject to effective competition pursuant to Section 623( a) of the Communications Act of 1934, as amended (" Communications Act"), and Section 76.905( b)( 1)-( 2) of the Commission's rules, and seeks revocation of the certification of the local franchising authorities in the Communities to regulate basic cable service rates. 2 Charter claims the presence of effective competition in the City of Ashdown stems from the competing services provided by two direct broadcast satellite (" DBS") providers, DirecTV, Inc. and EchoStar Communications Corporation (“ EchoStar”). Within the City of Foreman, Charter contends that effective competition exists under the low penetration test. No opposition to the petition was filed. II. DISCUSSION 2. In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition, 3 as that term is defined by Section 76.905 of the Commission's rules. 4 The cable operator bears the burden of rebutting the presumption that effective competition does not exist with evidence that effective competition is present within the relevant franchise area. Based on the record 1 47 C. F. R. § 76.7. 2 47 U. S. C. § 543( a); 47 C. F. R. § 76. 905( b)( 1)-( 2). 3 47 C. F. R. § 76.906. 4 47 C. F. R. § 76.905. 1 Federal Communications Commission DA 02- 3335 2 in this proceeding, Charter has met this burden. A. The Competing Provider Test 3. Section 623( l)( 1)( B) of the Communications Act provides that a cable operator is subject to effective competition if the franchise area is (a) served by at least two unaffiliated multi- channel video programming distributors (" MVPD") each of which offers comparable video programming to at least 50 percent of the households in the franchise area; and (b) the number of households subscribing to programming services offered by MVPDs, other than the largest MVPD, exceeds fifteen percent of the households in the franchise area. 5 4. Turning to the first prong of the competing provider test, DBS service is presumed to be technically available due to its nationwide satellite footprint, and presumed to be actually available if households in a franchise area are made reasonably aware that the service is available. 6 Charter has provided evidence of the advertising of DBS service in news media serving Ashdown. 7 We find that the programming of the DBS providers satisfies the Commission's program comparability criterion because the DBS providers offer more than 12 channels of video programming, including more than one non-broadcast channel. 8 Charter has demonstrated that Ashdown is served by at least two unaffiliated MVPDs, namely the two DBS providers, each of which offers comparable video programming to at least 50 percent of the households in Ashdown. Charter has also demonstrated that the two DBS providers are physically able to offer MVPD service to subscribers in Ashdown, that there exists no regulatory, technical, or other impediments to households within Ashdown taking the services of the DBS providers, and that potential subscribers in Ashdown have been made reasonably aware of the MVPD services of DirecTV and EchoStar. 9 Therefore, the first prong of the competing provider test is satisfied. 5. The second prong of the competing provider test requires that the number of households subscribing to MVPDs, other than the largest MVPD, exceed 15 percent of the households in a franchise area. Charter sought to determine the competing provider penetration in Ashdown by purchasing a report from SkyTrends that identified the number of subscribers attributable to the DBS providers within Ashdown on a five- digit zip code basis. 10 However, rather than simply accepting SkyTrends’ figures, Charter assumes that some of the DBS subscribers identified in the report may actually live in zip codes outside of Ashdown. 11 To account for such a possibility, Charter has devised a formula that compares U. S. Census household data for Ashdown and the relevant zip codes in order to derive an allocation to apply against the DBS subscriber count. 12 Charter also reduces the estimated DBS subscriber count by 15 percent to reflect the possibility that some households have subscribed to both cable and DBS service and 5 47 U. S. C. § 543( 1)( 1)( B); see also 47 C. F. R. § 76.905( b)( 2). 6 See MediaOne of Georgia, 12 FCC Rcd 19406 (1997). 7 Petition at 4 and Exhibit 1. 8 See 47 C. F. R. § 76.905( g). See also Petition at 4- 5 and Exhibits 2, 3. Exhibit 2 contains the nationwide channel lineups of DirectTV and EchoStar and Exhibit 3 includes the channel line- up for Charter’s cable system serving the Communities. 9 Petition at 3- 5. 10 Id. at 5- 6. 11 Id. at 6. 12 Id. at 6- 7 and Exhibits 4- 6. 2 Federal Communications Commission DA 02- 3335 3 to take into account commercial or test accounts. 13 The Commission believes that Charter’s methodology is sound since it seeks to accurately quantify subscribers using the best available DBS subscriber data. 6. Charter asserts that it is the largest MVPD in Ashdown because Charter’s subscribership exceeds the aggregate DBS subscribership for the franchise area. 14 Based upon the 45.6 percent DBS subscriber penetration level in Ashdown, calculated using 2000 Census household data, 15 we find that Charter has demonstrated that the number of households subscribing to programming services offered by MVPDs, other than the largest MVPD, exceeds 15 percent of the households in Ashdown. Therefore, the second prong of the competing provider test is satisfied. Based on the foregoing, we conclude that Charter has submitted sufficient evidence demonstrating that its cable system serving Ashdown is subject to effective competition. B. The Low Penetration Test 7. Section 623( l)( 1)( A) of the Communications Act provides that a cable operator is subject to effective competition if fewer than 30 percent of the households in its franchise area subscribe to its system’s cable service. 16 Charter serves 130 out of the 493 households in Foreman reported by the 2000 Census, resulting in a 26.4 percent subscriber penetration rate. 17 On this basis, we find that Charter has established that its cable system serving Foreman is subject to effective competition. III. ORDERING CLAUSES 8. Accordingly, IT IS ORDERED that the petition for a determination of effective competition filed by Enstar XI d/ b/ a Charter Communications IS GRANTED. 9. IT IS FURTHER ORDERED that the certifications to regulate basic cable service in Ashdown and Foreman, Arkansas ARE REVOKED. 10. This action is taken pursuant to authority delegated under Section 0.283 of the Commission’s rules. 18 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Deputy Chief, Policy Division, Media Bureau 13 Id. at 7. According to documentation previously provided to the Commission, SkyTRENDS’ zip code subscriber numbers are inflated by roughly ten percent “due to dual receivers, and limited commercial and test accounts.” See Charter Communications, DA 02- 1919 at n. 13 (MB rel. Aug. 6, 2002). Since then, SkyTRENDS has revised its inflation estimate from ten to fifteen percent. Petition at n. 23. 14 Petition at 5 and Exhibit 4. 15 See id. at Exhibits 5- 6 (858 DBS subscribers ÷ 1,880 Ashdown 2000 Census Households = 0.456). 16 See 47 U. S. C § 543( l)( 1)( A); 47 C. F. R. § 76.905( b)( l). 17 Petition at 7- 8 and Exhibits 4, 6 (130 Charter subscribers ÷ 493 Foreman 2000 Census Households = 0.2636). 18 47 C. F. R. § 0.283. 3