*Pages 1--6 from Microsoft Word - 39801* Federal Communications Commission DA 04- 1994 Before the Federal Communications Commission Washington, D. C. 20554 In the Matter of: HPI Acquisition Co., LLC d/ b/ a Charter Communications Tahlequah Cable Television Co., Inc. d/ b/ a WEHCO Video, Inc. Bright House Networks, LLC MCC Iowa, LLC Hometown Online, Inc. MCC Illinois, LLC Eleven Unopposed Petitions for Determination of Effective Competition in Thirty- Seven Local Franchise Areas ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CSR 6075- E 1 CSR 6111- E CSR 6126- E & 6182- E CSR 6148- E, 6159- E & 6212- E CSR 6184- E CSR 6211- E, 6224- E & 6239- E MEMORANDUM OPINION AND ORDER Adopted: June 29, 2004 Released: June 30, 2004 By the Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION 1. This Order considers eleven unopposed petitions which cable operators (the “Cable Operators”) have filed with the Commission pursuant to Sections 76.7, 76.905( b)( 2) and 76. 907 of the Commission’s rules for a determination that such operators are subject to effective competition pursuant to Section 623( a)( 1) of the Communications Act of 1934, as amended (" Communications Act") and the Commission's implementing rules and are therefore exempt from cable rate regulation in the communities listed in Attachment A (the “Communities”). No opposition to the petitions was filed. Finding that the Cable Operators are subject to effective competition in the listed Communities, we grant the petitions. 1 Charter filed for competing provider effective competition in seven North Carolina communities. Commission staff twice requested that Charter clarify the record with regard to certain inconsistencies relating to the number of households and Charter subscribers in those communities. Charter has failed to do so in a timely manner. Accordingly, we dismiss without prejudice to refiling at a later time Charter’s petition with regard to the communities of Banner Elk (NC0122), Beech Mountain (NC0450), Blowing Rock (NC0511), Elk Park (NC0123), New Land (NC0255), Seven Devils (NC0636), and Watauga County, North Carolina (NC0144, NC0820, NC0637, & NC0821). Any such refilling should address the inconsistencies raised by the Commission. Charter’s low penetration effective competition petition with regard to Halifax County, North Carolina does not suffer from the same deficiency and will be resolved herein. 1 Federal Communications Commission DA 04- 1994 2 II. DISCUSSION A. Competing Provider Effective Competition 2. In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition, 2 as that term is defined by Section 76. 905 of the Commission's rules. 3 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. 4 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 3. In ten of the petitions, the Cable Operators claim the presence of effective competition stems from the competing services provided by two direct broadcast satellite (“ DBS”) providers, DirecTV, Inc. and EchoStar Communications Corporation. 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 The Cable Operators have provided evidence of the advertising of DBS service in the news media serving the Communities for which a competing provider determination is requested. 7 Moreover, the two DBS providers’ subscriber growth reached approximately 20.4 million as of June 30, 2003, comprising approximately 20 percent of all MVPD subscribers nationwide; DirecTV has become the second largest, and EchoStar the fourth largest MVPD provider. 8 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. 9 We find that the Cable Operators have demonstrated that the 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 Communities. The Cable Operators have also demonstrated that the two DBS providers are physically able to offer MVPD service to subscribers in the Communities, that there exists no regulatory, technical, or other impediments to households within the Communities taking the services of the DBS providers, and that potential subscribers in the Communities have been made reasonably aware of the MVPD services of 2 47 C. F. R. § 76.906. 3 47 C. F. R. § 76.905. 4 See 47 C. F. R. §§ 76. 906 & 907. 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 See e. g., Bright House Petition at 4- 6 and Exhibit A; WEHCO Petition at 4 and Exhibit 1. 8 Tenth Annual Assessment of the Status of Competition in the Market for Delivery of Video Programming, FCC 04-5 at ¶ 65- 67 (rel. Jan. 28, 2004). 9 See 47 C. F. R. §76.905( g). See also Bright House Petition at 7- 8 and Exhibit B; WEHCO Petition at 4- 5 and Exhibits 2 & 3. 2 Federal Communications Commission DA 04- 1994 3 DirecTV and EchoStar. 10 Therefore, the first prong of the competing provider test is satisfied for each of the Communities. 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. The Cable Operators sought to determine the competing provider penetration in the Communities by purchasing a report from SkyTrends that identified the number of subscribers attributable to the DBS providers within the Communities on a zip code basis. 11 The Cable Operators assert that they are the largest MVPD in the Communities because their subscribership exceeds the aggregate DBS subscribership for those franchise areas. 12 Based upon the aggregate DBS subscriber penetration levels as reflected in Attachment A, calculated using 2000 Census household data, we find that the Cable Operator’s have 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 the Communities. Therefore, the second prong of the competing provider test is satisfied. Based on the foregoing, we conclude that the Cable Operators have submitted sufficient evidence demonstrating that their cable systems serving the Communities set forth on Attachment A are subject to competing provider effective competition. B. The Low Penetration Effective Competition Test 5. Section 623( l)( 1)( A) of the Communications Act provides that a cable operator is subject to effective competition, and therefore exempt from cable rate regulation, if “fewer than 30 percent of the households in the franchise area subscribe to the cable service of the cable system.” 13 The two Cable Operators listed on Attachment A provided information showing that less than 30 percent of the households within their franchise areas subscribe to their cable services. Based on this record, we conclude that the Cable Operators have demonstrated the existence of low penetration effective competition under our rules. 6. Based on the foregoing, we conclude that the eleven Cable Operators listed on Attachment A have submitted sufficient evidence to demonstrate that their cable systems are subject to effective competition. 10 See e. g., Bright House Petition at 8; WEHCO Petition at 3- 5. 11 See e. g., Bright House Petition at 9- 10 and Exhibits E & F; WEHCO Petition at 5- 6 and Exhibits 4 & 6. WEHCO provided a report that provided zip code plus four information. The remaining petitions reported on a five digit zip code basis. 12 See e. g., Bright House Petition at 8- 9 and Exhibit C; WEHCO Petition at 5 and Exhibit 4; see also, August 15, 2003 Letter Supplement from Cole, Raywid & Braverman, L. L. P. to Kenneth Lewis, Federal Communications Commission. 13 47 U. S. C § 543( l)( l)( A). 3 Federal Communications Commission DA 04- 1994 4 III. ORDERING CLAUSES 7. Accordingly, IT IS ORDERED that the petitions filed by the Cable Operators listed on Attachment A for a determination of effective competition in the Communities listed thereon ARE GRANTED. 8. IT IS FURTHER ORDERED that the certifications to regulate basic cable service rates granted to any of the local franchising authorities overseeing the Cable Operators ARE REVOKED. 9. IT IS FURTHER ORDERED that the competing provider effective competition petition filed by HPI Acquisition Co., LLC d/ b/ a Charter Communications in CSR 6075- E IS DISMISSED without prejudice. 10. This action is taken pursuant to authority delegated under Section 0.283 of the Commission’s rules. 14 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Deputy Chief, Policy Division, Media Bureau 14 47 C. F. R. § 0.283. 4 Federal Communications Commission DA 04- 1994 5 Attachment A Cable Operators Subject to Competing Provider Effective Competition Tahlequah Cable Television Co., Inc. d/ b/ a WEHCO Video, Inc.: CSR 6111- E 2000 Census DBS Communities CUIDS CPR* Households + Subscribers + Tahlequah OK0199 28. 20% 5,703 1,608 Bright House Networks, LLC: CSR 6126- E & 6182- E 2000 Census DBS Communities CUIDS CPR* Households + Subscribers + Belleview FL0622 22. 75 1600 364 Bunnell FL0637 43. 59 845 368 Center Hill FL0700 34. 60 282 98 Clermont FL0266 24. 19 3995 966 Coleman FL0624 18. 22 257 47 Groveland FL0269 39. 50 845 334 Kissimmee FL0223 15. 83 17121 2710 Lake Helen FL0582 18. 00 1124 202 Minneola FL0270 24. 19 1929 467 St. Cloud FL0137 22. 25 7716 1716 Webster FL0701 40. 59 294 119 Arvin CA0296 19.0 3010 571 Avenal CA0127 19.7 1928 379 Bakersfield CA0143 41.43 83441 35569 15 Delano CA0144 19.2 8409 1616 Maricopa CA0942 26.2 404 106 McFarland CA0145 19.5 1990 387 Shafter CA0146 16.9 3293 556 Tehachapi CA0298 33.1 2533 839 Wasco CA0147 16.3 3971 649 15 9,739 DBS subscribers + 24, 830 Cox Cable subscribers. 5 Federal Communications Commission DA 04- 1994 6 MCC Iowa, LLC: CSR 6148- E, 6159- E & 6212- E 2000 Census DBS Communities CUIDS CPR* Households + Subscribers + Adel IA0510 26.88 1369 368 Manchester IA0172 23.4 2167 507 Tama IA0156 22.54 1065 240 MCC Illinois, LLC: CSR 6211- E, 6224- E & 6239- E 2000 Census DBS Communities CUIDS CPR* Households + Subscribers + W. Frankfort IL0123 17.38 3596 625 Herrin IL0122 20.06 4831 969 Marion IL0128 18.28 6902 1262 Marseilles IL0052 22.50 1867 420 Cable Operators Subject to Low Penetration Effective Competition HPI Acquisition Co., LLC d/ b/ a Charter Communications: CSR- 6075- E Communities Franchise Area Cable Penetration Households Subscribers Level Halifax County 12,228 3,187 26.1% Hometown Online, Inc.: CSR 6184- E Communities Franchise Area Cable Penetration Households Subscribers Level Warwick 6,062 0 0% 6