*Pages 1--6 from Microsoft Word - 15770* Federal Communications Commission DA 02- 611 Before the Federal Communications Commission Washington, D. C. 20554 In the Matter of: Falcon Cable Systems Company II, a California Limited Partnership, d/ b/ a Charter Communications Petitions for Determination of Effective Competition in Twelve Oregon Cities ) ) ) ) ) ) ) ) File Nos. CSR 5678- E Thru CSR 5689- E MEMORANDUM OPINION AND ORDER Adopted: March 12, 2002 Released: March 15, 2002 By the Deputy Chief, Cable Services Bureau: I. INTRODUCTION 1. Falcon Cable Systems Company II, a California Limited Partnership, d/ b/ a Charter Communications (“ Charter”), has filed with the Commission twelve petitions 1 pursuant to Sections 76.7 and 76.907 of the Commission's rules for determinations of effective competition in each of the twelve Oregon communities listed on Attachment A (the “Communities”). Charter alleges that its cable systems serving these communities are subject to effective competition pursuant to Section 623( 1) of the Communications Act of 1934, as amended (" Communications Act"), 2 and the Commission's implementing rules, 3 and are therefore exempt from cable rate regulation. More particularly, Charter claims the presence of effective competition in the twelve Communities stems from the competing services provided by two unaffiliated direct broadcast satellite (" DBS") providers, Direct TV, Inc. (“ DirectTV”) and EchoStar Communications Corporation (EchoStar”). Charter claims it is subject to effective competition in these twelve communities under the “competing provider” effective competition test set forth in Section 623( 1)( 1)( B) of the Communications Act. 4 The Regional Cable Commission (“ RCC”), an entity of the Lane County, Oregon Council of Government, filed oppositions to the petitions on behalf of each community, and Charter filed replies to the oppositions. Charter also submitted a supplement to each of the petitions. 1 See Public Notice, Cable Services Bureau Registrations; Special Relief and Show Cause Petitions, Report No. 1306, dated May 4, 2001. 2 47 U. S. C. § 543( 1). 3 47 C. F. R. § 76.905( b)( 4). 4 See 47 U. S. C. § 543( 1)( 1)( B), which sets forth the “competing provider” effective competition test. 1 Federal Communications Commission DA 02- 611 2 II. DISCUSSION 2. In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition, 5 as that term is defined by Section 623( 1) of the Communications Act of 1934, as amended, and Section 76.905 of the Commission's rules. 6 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. 7 Section 623( l) of the Communications Act provides that a cable operator is subject to effective competition, if either one of four tests for effective competition set forth therein is met. 8 A finding of effective competition exempts a cable operator from rate regulation and certain other of the Commission’s cable regulations. 9 3. Section 623( l)( 1)( B) of the Communications Act provides that a cable operator is subject to effective competition if its 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 (15%) of the households in the franchise area. 10 Turning to the first prong of this 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. 11 Charter states that its service is also offered to more than 50 percent of the households in each franchise area. In addition, Charter has provided evidence of the advertising of DBS service in national and local media serving the franchise areas. 12 With respect to the issue of program comparability, we find that the programming of the DBS providers satisfies the Commission's program comparability criterion because the DBS providers offer at least 12 channels of video programming, including at least one non- broadcast channel. 13 We find that Charter has demonstrated that the twelve Oregon Communities are 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 the franchise area. Therefore, the first prong of the competing provider test is satisfied. 4. 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 holds non- exclusive franchises issued by each of the twelve Communities to provide cable services in each of those Communities. Charter provided 1990 U. S. Census data showing the number of households for each of the Communities. Charter provided subscribership data showing that its subscribership exceeds the aggregate total of DBS subscribers in each of the Communities. These data, 5 47 C. F. R. § 76.906. 6 See 47 U. S. C. § 543( 1) and 47 C. F. R. § 76. 905. 7 See 47 C. F. R. §§ 76.906 & 907. 8 See 47 U. S. C. § 543( l)( 1)( A)-( D). 9 See 47 C. F. R. §76.905. 10 47 U. S. C. § 543( 1)( 1)( B); see also 47 C. F. R. § 76.905( b)( 2). 11 See MediaOne of Georgia, 12 FCC Rcd 19406 (1997). 12 See Petitions at 2- 4 and Exhibit 1. 13 See 47 C. F. R. § 76.905( g). See also Charter Petitions at 2- 3 and Exhibit 1. Each Exhibit 1 includes channel line ups for Charter’s cable systems serving these Communities as well as those of Direct TV and EchoStar. 2 Federal Communications Commission DA 02- 611 3 summarized on Attachment A, show that the number of Charter subscribers exceeds the number of DBS subscribers in each of these Communities and thus demonstrate that Charter is the largest MVPD in each of these Communities. 14 5. Charter also provided information in the petitions showing that in the twelve Communities the DBS and other MVPD providers collectively have attained subscriber penetration levels that range from 19 percent in Oakridge, Oregon, to 48 percent in Westfir, Oregon. 15 The RCC contends that these DBS penetration rates are based on 1990 household data and current subscriber levels and therefore are unreliable. The RCC suggests that any determination of penetration rates must await release of 2000 Census household data, noting the state- wide population growth rate in excess of 20% during the 1990’s and ranging from 47.2% in Cresswell, Oregon to a loss of 0.7% in Westfir, Oregon. 16 The supplements submitted by Charter provide updated penetration rate information that is based on recently released 2000 Census household data. This updated Census household data confirms that DBS penetration rates exceed the statutory 15% level in each community, with penetration levels ranging from 17.4% in Oakridge to 47% in Westfir. Based on this record, we find that Charter has satisfied the second prong of the competing provider test in these twelve Communities. 6. The RCC further contends that the process used by Sky Trends to determine DBS subscribership in the communities is faulty. The RCC argues that the subscriber postal zip code data used in the process does not correspond to the respective community, or franchise area, under consideration. The RCC notes that in virtually every case the franchise area makes up only a portion of the area described by the zip code. For that reason, the RCC claims the zip code data includes subscribers located outside the community in the penetration rate calculation, thus improperly inflating the resulting penetration rates. The RCC further argues that the process stemming from use of zip plus four zip codes is misleading and does not have the precision claimed by Charter, pointing out that zip codes other than zip plus four zip codes were in fact used. The RCC contends that use of the other zip codes, which define areas more broadly than zip plus four zip codes, virtually assured that subscribers located outside the communities were counted. 7. Charter provided in reply a Sky Trends description of how zip codes are used to identify DBS subscribers within communities named by cable operators for purposes of the statutory effective competition tests. 17 A zip plus four zip code rather precisely identifies mail delivery areas by city block, office or apartment building, group of streets, or group of post office boxes. 18 The Sky Trends program associates subscribers having zip plus four zip codes with specific set of geographic coordinates within the delivery area. Subscribers having zip codes associated with coordinates lying within a named community are deemed to be located within the named community. 19 We find this method of determining 14 Petitions at 4- 5 and Exhibit 2. 1990 U. S. Census data satisfy effective competition decision requirements. See Cable Operators' Petitions for Reconsideration and Revocation of Franchising Authorities' Certifications to Regulate Cable Service Rates, 9 FCC Rcd 3656 (1994). See also Charter letters, dated May 9, 2001, supplementing the information submitted with the petitions. 15 Petitions at 4- 5 and Exhibit 2 & 3. The penetration rate for each of the Communities is set forth on Attachment A. 16 Oppositions at 4- 5. 17 SkyTRENDS makes DBS satellite subscriber information data publicly available, but not sepatately for each DBS provider. Charter Replys at 2- 4. 18 Id. at 3, n. 6 & Exhibit A. 19 Id. 3 Federal Communications Commission DA 02- 611 4 DBS subscribers within a franchise area to be reasonable and sufficiently reliable for purposes of determining the presence of effective competition. With respect to two other zip code formats that define mail delivery areas more broadly, the Sky Trends program determines the geographic center of the zip code area. In instances where the zip code geographic center lies within a named community, the program deems the subscribers within that zip code to be located within the named community. 20 While the level of accuracy in these instances necessarily varies with the shape and size of the zip code area, we accept the Sky Trends data presented by Charter because it is the best available source for determining DBS suberscribership in such zip code areas. 21 The RCC has failed to offer a better alternative. 8. Finally, the RCC asks for modification of the standard for determining effective competition and argues that Charter relies on an inappropriate extension of prior Commission rulings on what constitutes effective competition. The RCC notes that, while the 1996 Telecommunications Act 22 effected certain modifications of cable rate regulation, local franchise authority to review basic service tier rates was retained. The RCC contends that many of the assumptions underlying that legislation about what would likely happen in the cable television market have not occurred. The RCC asserts that one of the assumptions was that DBS would provide “local- into- local” services pursuant to the voluntary provision set out in the Satellite Home Viewer Improvement Act of 1999. 23 The RCC contends, however, that local television stations are not being carried into local markets in many rural areas such as those represented by the Oregon communities involved in this case. Additionally, the RCC notes that neither Section 76.905( g) of the Commission’s regulations 24 nor Section 623( 1)( 1)( B)( i) of the statute 25 defines “comparable video programming.” For these reasons, the RCC requests that the standard for determination of effective competition be modified to focus on the basic services tier that has not been deregulated and to require a two part showing: (1) that at least one DBS competitor has elected to provide local- into- local service for the franchise area and (2) that the DBS service carries comparable channels to that of the local cable system. Absent such modification, the current standard improperly determines only whether competition may exist in segments of cable services already deregulated by the 1996 Telecommunications Act, according to the RCC. 26 9. We decline to modify the standard for determination of effective competition as requested by the RCC. Aside from prohibitions against using this adjudicatory proceeding for substantively modifying the standard for determining effective competition, we note that the Commission has determined previously that an offering of at least twelve channels of programming, including at least one channel of non- broadcast service programming, should ensure that an alternate source of programming “is competetitively comparable to a minimum basic tier service that an incumbent cable operator could offer.” 27 In adopting this standard, the Commission rejected suggestions that comparable 20 Id. 21 Contrary to Charter’s suggestion, In re Petition of Texas Cable Partners, L. P., 16 FCC Rcd 4886 (CSB 2001), presented no need to evaluate SkyTrends data in the detail considered here. 22 Pub. L. No. 104- 104, 110 Stat. 56 (1996) 23 Pub. L. No. 106- 113, 113 Stat. 1501 (1999). 24 47 C. F. R. § 76.905( g). 25 47 U. S. C § 543( 1)( 1)( B)( i). 26 Oppositions at 5- 9. 27 See Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992, Report and Order and Further Notice of Proposed Rulemaking, 8 FCC Rcd 5631, 5666 (1993). 4 Federal Communications Commission DA 02- 611 5 content in categories of programming be required, noting that such a requirement would place it in the difficult position of comparing the quality and content of programming offered. 28 In our view, requiring DBS providers to offer local- into- local service as a prerequisite to a finding of effective competition would involve making comparisons of programming quality and content the Commission has expressly declined to undertake. It may be noted also that the DBS providers offer more than 45 channels of programming, which substantially exceeds the minimum amount of programming channels required under the current standard. 29 Finally, a petition for rulemaking is the appropriate vehicle for requesting such rule changes and not an opposition filed in a proceeding initiated pursuant to Section 76.7 of the Rules. 10. Based on the foregoing, we conclude that Charter has submitted sufficient evidence demonstrating that its cable systems serving the twelve Oregon Communities listed on Attachment A are subject to effective competition. III. ORDERING CLAUSES 11. Accordingly, IT IS ORDERED that the captioned petitions for a determination of effective competition filed by Falcon Cable Systems Company II, a California Limited Partnership, d/ b/ a Charter Communications IS GRANTED. 12. This action is taken pursuant to authority delegated under Section 0.321 of the Commission’s rules. 30 FEDERAL COMMUNICATIONS COMMISSION William H. Johnson Deputy Chief, Cable Services Bureau 28 Id. at 5665. 29 Petitions at Exhibit 1. 30 47 C. F. R. §0.321. 5 Federal Communications Commission DA 02- 611 6 ATTACHMENT A TWELVE OREGON COMMUNITIES SERVED BY Falcon Cable Systems Company II, a California Limited Partnership, d/ b/ a Charter Communications Oregon CUID Nos./ Households DBS DBS Penetration Charter Community File Nos. 1990 2000* Subscribers 1990** Revised*** Subscribers Bay City OR0086 441 493 121 27% 24.54% 379 CSR 5683- E Brownsville OR0214 481 535 184 38% 34.39% 306 CSR 5688- E Coberg OR0176 293 367 74 25% 20.16% 126 CSR 5689- E Cottage Grove OR0340 2802 3264 742 26% 22.73% 1584 CSR 5682- E Creswell OR0321 886 1271 301 34% 23.68% 566 CSR 5681- E Drain OR0052 366 397 169 46% 42.57% 284 CSR 5680- E Garibaldi OR0087 386 436 118 32% 27.06% 355 CSR 5684- E Lowell OR0206 271 315 85 31% 26.98% 207 CSR 5678- E Oakridge OR0079 1250 1345 235 19% 17.47% 917 CSR 5685- E Veneta OR0209 904 966 255 28% 26.40% 601 CSR 5679- E Westfir OR0248 98 100 47 48% 47.00% 119 CSR 5686- E Yoncalla OR0202 351 409 102 29% 24.94% 234 CSR 5687- E ____________ *2000 Census households. ** DBS penetration rates using 1990 Census households data. *** DBS penetration rates using 2000 Census households data. 6