Federal Communications Commission DA 07-1628 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Comcast Cable Communications, LLC, on Behalf of its subsidiaries and affiliates For Determination of Effective Competition In: 108 Utah and Idaho Communities ) ) ) ) ) ) ) ) ) ) CSR-7089-E CSR-7090-E CSR-7091-E CSR-7092-E CSR-7093-E CSR-7094-E CSR-7095-E CSR-7096-E CSR-7097-E CSR-7098-E MEMORANDUM OPINION AND ORDER Adopted: April 3, 2007 Released: April 6, 2007 By the Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION 1. Comcast Cable Communications, LLC (“Comcast”) has filed several petitions with the Commission for determinations of effective competition in 108 franchise areas (the “Franchise Areas”)1 1 See (1) See Comcast Bluffdale et al. Petition (CSR 7089-E) (requesting that the Commission find effective competition in Bluffdale (UT0221); Cottonwood Heights (UT0261); Draper (UT0128); Grantsville (UT0105); Herriman (UT0244); Holladay (UT0246); Midvale (UT0049, UT0214); Murray (UT0007); Park (UT0060); Riverton (UTO137); Salt Lake (UT0009; UT0157; UTO161; UTO199; UTO226); Sandy (UT0046, UT0070); South Jordon (UTO138); South Salt Lake (UT0008); Taylorsville (UT0225); Tooele (UT0106; UT0107); Tooele (UT0097); West Jordon (UT0051); West Valley City (UT0088)); (2) Comcast Bear River et al. Petition (CSR 7090- E) (requesting that the Commission find effective competition in Bear River (UTO167); Bountiful (UT0024); Box Elder (UTO230; UT0194); Brigham City (UT0021); Centerville (UT0068); Clearfield City (UT0026, UT0085); Clinton (UT0066, UT0200); Corinne (UT0169); Davis (UT0027, UT0203); Deweyville (UTO186); Farmington (UT0069); Farr West (UT0084); Fielding (UT0170); Fruit Heights (UT0117, UTO201); Garland (UT0147); Harrisville (UTO152); Honeyville (UT0168); Hooper (UT0249); Kaysville (UT0022); Layton (UT0022, UT0090, UT0255); Marriot (UT0245); North Ogden (UT0092); North Salt Lake (UT0023; UT0177); Ogden City (UT0013); Perry (UT0150); Plain City (UT0159); Pleasant View (UTO158); Plymouth (UTO171); Riverdale (UT0035); Roy City (UT0010): South Ogden (UT0011); South Weber City (UT0111); Sunset City (UT0025); Tremonton (UT0071); Uintah (UT0112); Washington Terrance (UT0012); Weber (UT0002, UTO187); West Bountiful (UT0065); West Haven (UT0217); West Point (UT0148); Willard (UTO166); (3) Comcast Alpine, UT et al. Petition (CSR-7091-E) (requesting that the Commission find effective competition in Alpine (UT0056); American Fork (UT0050); Cedar Hills (UTO236): Elk Ridge (UTO145); Highland (UTO189); Lehi (UTO124); Lindon (UTO190, UTO237); Mapleton (UTO191); Orem (UT0058) Payson (UT0055); Pleasant Grove (UT0052, UTO238); Provo (UT0015, UT0018); Salem (UT0053); Spanish Fork City (UT0054); Springville (UT0016); Utah (UT0153, UTO162, UTO192, UT0227); (4) Comcast Nephi, UT Petition (CSR-7092-E) (requesting that the Commission find effective competition in Nephi (UT0061)); (5) Comcast Preston, ID Petition (CSR-7093-E) (requesting that the Commission find effective competition in Preston (ID0101)); (6) Comcast Heber, UT et al. Petition (CSR-7094-E) (requesting that the Commission find effective competition in Heber (UT011), Midway (UT01242); Wasatch (UT0202)); (7) Comcast Coalville, UT et al. (CSR-7095-E) (requesting that the Commission find effective (continued....) Federal Communications Commission DA 07-1628 2 pursuant to Section 623(a) of the Communications Act2 and the Commission's implementing rules.3 Comcast alleges that its cable systems serving these Franchise Areas are subject to effective competition and, therefore, are exempt from cable rate regulation. Specifically, Comcast claims that the effective competition present in 79 of these franchise areas stems from the competing services provided by two unaffiliated direct broadcast satellite ("DBS") providers, DirecTV, Inc. and EchoStar Satellite, L.L.C. As a result, Comcast asserts that it is subject to effective competition in these franchise areas under the “competing provider” test set forth in Section 623(1)(1)(B) of the Communications Act. In addition, Comcast claims that in 29 of these franchise areas, Comcast serves less than 30 percent of the subscribers and therefore, is subject to effective competition under the “low penetration” test set forth in Section 623(l)(1)(A) of the Communications Act. No oppositions were filed. II. BACKGROUND 2. In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition,4 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.5 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.6 A finding of effective competition exempts a cable operator from rate regulation and certain other Commission cable regulations.7 3. Section 623(l) of the Act provides that a cable operator is subject to effective competition if any one of the four tests for effective competition set forth therein is met.8 The “competing provider” test, set forth in 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 15 percent of the households in the franchise area.9 The “low penetration” test, set forth in section 623(l)(1)(A) of the (...continued from previous page) competition in Coalville (UT0134)); (8) Comcast Morgan, UT et al. Petition (CSR-7096-E) (requesting that the Commission find effective competition in Morgan (UT0151); Morgan City (UT0130)); (9) Comcast Bear Lake, ID Petition (CSR-7097-E) (requesting that the Commission find effective competition in Bear Lake (ID0211); Garden City (UT0210); and St Charles (ID0212)); (10) Comcast Cache, UT et al. Petition (CSR-7098-E) (requesting that the Commission find effective competition in Cache (UT0126, UT0196); Clarkston (UT0163); Cornish (UT0205); Franklin (ID0201); Franklin City (1D0200): Hyde Park (UT0040); Hyrum (UT0043); Lewiston (UT0173); Logan (UT0004); Mendon (UT0048); Millville (UT0041); Newton (UT0164); Nibley (UT0042); North Logan (UT0037); Paradise (UT0165); Providence (UT0044); Richmond (UT0118); River Heights (UT0029); Smithfield (UT0062); Wellsville (UT0047). Communities are listed in multiple petitions because cable operators are required to file a processing fee for each physical system unit. See Public Notice, Reminder as To Procedures for Filing Cable Television Effective Competition Petitions, 20 FCC Rcd 7294 (2005). 2 47 U.S.C. § 543(a). 3 47 C.F.R. § 76.905(b). 4 47 C.F.R. § 76.906. 5 See 47 U.S.C. § 543(1); 47 C.F.R. § 76.905. 6 See 47 C.F.R. §§ 76.906 & 907. 7 See 47 C.F.R. §76.905. 8 See 47 U.S.C. § 543(l)(1)(A)-(D). 9 47 U.S.C. § 543(1)(1)(B); see also 47 C.F.R. § 76.905(b)(2). Federal Communications Commission DA 07-1628 3 Communications Act, provides that a cable operator is subject to effective competition under the “low penetration” competition test if fewer than 30 percent of the households in the franchise area subscribe to the cable service of a cable system.10 III. DISCUSSION A. Competing Provider Effective Competition 4. Comcast alleges that in 79 of the franchise areas, there is effective competition under the competing provider test.11 Comcast contends that EchoStar and DirecTV, two unaffiliated MVPDs, offers comparable video programming to at least 50 percent of the households in the Franchise Areas, and that residents in each of the communities are reasonably aware of the availability of DBS service. In the Provo, Utah Franchise Area, Comcast includes subscriber data from EchoStar, DirecTV, Veracity Communications, and MSTARmetro.12 While neither Veracity13 nor MSTARmetro currently have a subscriber base equal to 50 percent of the households in Provo, MSTARmetro states that it is capable of providing services to more than 50 percent of the households in Provo.14 Therefore, in each of these 79 communities, states Comcast, the first prong of the competing provider test is satisfied: at least two unaffiliated MVPDs offer comparable video programming to at least 50 percent of the households. 5. We agree. The Commission has repeatedly held that DBS service is presumed to be technically available due to its nationwide satellite footprint, and presumed to be actually available if households in the franchise area are made reasonably aware of the service’s availability.15 The two DBS providers’ subscriber growth reached approximately 26.1 million as of June, 2005, comprising approximately 27.7 percent of all MVPD subscribers nationwide; DirecTV has become the second largest, and EchoStar has become the third largest, MVPD provider.16 Because the two DBS providers have a nationwide footprint and serve well over 20 percent of all MVPD subscribers nationwide, we believe these statistics support the presumption that Comcast’s franchise areas are within their satellite footprint. Moreover, Comcast has provided sufficient evidence that residents of the Franchise Areas are reasonably aware of the availability of DBS service by offering examples of DBS advertising and as, will be discussed below, by presenting evidence that penetration rates in each of these franchise areas exceed 15 percent.17 Finally, with respect to the issue of program comparability, we find that the DBS providers’ programming satisfies the Commission's program comparability criterion because DirecTV and EchoStar offer more than 12 channels of video programming, including more than one non-broadcast channel.18 The additional evidence of MVPD services available through MSTARmetro in Provo, Utah, including advertising and programming information, further supports Comcast’s contention that the first prong of 10 47 U.S.C. § 543(1)(1)(B); see also 47 C.F.R. § 76.905(b)(2). 11 47 U.S.C. § 543(1)(1)(B); see also 47 C.F.R. § 76.905(b)(2). 12 See Petition at 2 n.7. To receive video programming over the iProvo Fiber Network, residents of Provo must subscribe to either Veracity Communications or MSTARmetro, both of whom require that subscribers bundle their cable television packages with either telephone and/or Internet service. See Petition, Exhibit 2 (Letter dated January 10, 2006 from Paul Venturella, Provo City Telecommunications Manager; Provo City Power). 13 See Petition, Exhibit 7 (email dated March 31, 2006 from Matthew Ward, VP Sales and Marketing). 14 See Petition, Exhibit 7 (email dated May 3, 2006 from Scott Little of MSTARmetro). 15 See MediaOne of Georgia, 12 FCC Rcd 19406 (1997). 16 See Twelfth Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, FCC 06-11, 21 FCC Rcd 2503 at ¶¶ 6, 13, 72-73 (2006). 17 See Comcast Petitions at 4 & Exhibit 1. See also Comcast Replies at Attachment A. 18 See 47 C.F.R. § 76.905(g). Federal Communications Commission DA 07-1628 4 the test is met. Therefore, we conclude that Comcast has met its burden under the first prong of the competing provider test. 6. Under the second prong of the test, Comcast must show that in each of the 79 communities, the number of households subscribing to MVPD service, other than the largest MVPD, exceeds 15 percent of the households. Comcast asserts that it is the largest MVDP in 46 of the 79 Franchise Areas. For the remaining 33 communities, Comcast was unable to determine the identity of the largest MVPD but contends that the identity of the largest MVPD is “immaterial” because “both DBS . . . and cable readily pass the 15% threshold.”19 For each of these 79 communities, Comcast has provided a copy of the 2000 Census Report showing the number of households in the Franchise Areas.20 Comcast also purchased a Satellite Broadcasting and Communications Association (“SBCA”) Effective Competition Tracking Report for the Franchise Areas reflecting the number of DBS subscribers within the specified ZIP codes associated with the cable communities.21 Because franchise areas and ZIP codes often do not directly overlap, Comcast applies an allocation figure derived through a geocoding process completed by Media Business Corp. (“MBC,” previously known as “SkyTrends”) to SBCA’s DBS subscriber count to ensure that the final count reflects only that portion of the five-digit postal ZIP code within a particular Franchise Area.22 The data provided by Comcast indicates that DBS penetration rates exceed 19 percent in 78 of the 79 communities, and therefore, Comcast asserts, there is effective competition in these communities.23 In the final community, Provo, Utah, Comcast used subscriber data from two additional MVPDs, Veracity Communications and MSTARmetro,24 to conclude that penetration rates of competing MVPDs in Provo, Utah exceeded the statutory 15 percent minimum. 7. We accept the data, including revised Exhibit A, provided by Comcast as establishing a reasonable basis for finding that DBS penetration exceeds 15 percent in the Franchise Areas. These penetration rates provide a sufficient margin of error with respect to the 15 percent competing provider threshold. Moreover, a similar methodology used in calculating DBS penetration has been approved by the Commission in previous cases with similar fact patterns to the ones described by Comcast here.25 We therefore find that Comcast has provided evidence sufficient to meet the second prong of the competing provider effective competition test. B. Low Penetration Effective Competition 8. Comcast also argues that it is subject to effective competition in an additional 29 19 See Petition at 6. To make this determination, Comcast compared its own subscriber data against the DBS subscriber data, purchased from the Satellite Broadcasting and Communications Association (“SBCA”) and adjusted, as described below, to reflect the actual franchise areas served by Comcast’s cable systems. Where the SBCA data exceeded Comcast’s own subscriber numbers, Comcast was unable to determine the largest MVPD in the Franchise Area. Comcast did not divulge the identity of these 33 communities. Nevertheless, both DBS and Comcast serve more than 15 percent of the households in these Franchise Areas. 20 See Petition at Exhibit 8. 21 See id. at 7. 22 See id. at 7-8. 23 See Petition at 8 and Exhibit 7. 24 See Petition at 2 n.7. To receive video programming over the iProvo Fiber Network, residents of Provo must subscribe to either Veracity Communications or MSTAR MetroNet, both of whom require that subscribers bundle their cable television packages with either telephone and/or Internet service. See Petition, Exhibit 3 (Letter dated January 10, 2006 from Paul Venturella, Provo City Telecommunications Manager; Provo City Power). 25 See, e.g., Charter Communications, Inc., 19 FCC Rcd 6878 (2004); Time Warner Entertainment- Advance/Newhouse Partnership, 21 FCC Rcd 26937 (2006). Federal Communications Commission DA 07-1628 5 franchise areas under the “low penetration” test because Comcast serves less than 30 percent of the local households in these franchise areas. For each of these franchise areas, Comcast compared the number of subscribers to its cable system serving the area to the U.S. Census household figures for each community.26 In each of the communities, Comcast determined that its penetration rates were less than 30 percent. Based on this evidence, as summarized in revised Exhibit B, as establishing that Comcast is subject to effective competition under the low penetration test as set forth in our rules. IV. ORDERING CLAUSES 9. Accordingly, IT IS ORDERED that the petition filed by Comcast Cable Communications, LLC for a determination of effective competition in the 108 Idaho and Utah communities IS GRANTED. 10. IT IS FURTHER ORDERED that the certifications to regulate basic cable service rates granted to any of the local franchising authorities in the Franchise Areas overseeing Comcast Cable Communications, LLC, ARE REVOKED. 11. This action is taken pursuant to authority delegated under Section 0.283 of the Commission’s rules.27 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Deputy Chief, Policy Division, Media Bureau 26 See Petition at 9. 27 47 C.F.R. § 0.283. Federal Communications Commission DA 07-1628 6 Exhibit A – Competing Provider Data for: CSR-7089-E CSR-7094-E CSR-7090-E CSR-7095-E CSR-7091-E CSR-7096-E CSR-7092-E CSR-7097-E CSR-7093-E CSR-7098-E Franchise Area 2000 Census Household 28 DBS/MVPD Subs Allocated CPR: DBS Penetration Rate Alpine 1662 831 50% American Fork 5934 2872 48% Bear River 226 55 24% Bluffdale 1112 890 80% Bountiful 13341 3400 25% Brigham City 5526 2121 38% Cedar Hills 695 381 55% Centerville 4138 1188 29% Clarkston 206 71 34% Clearfield 15842 3340 21% Clinton 3529 1522 43% Cottonwood Heights 11737 3557 30% Davis 1091 534 49% Deweyville 98 53 54% Draper 6305 3497 55% Farmington 3087 1481 48% Farr West 1034 375 36% Fielding 139 85 61% Fruit Heights 1256 489 39% Garland 588 264 45% Harrisville 1010 378 37% Heber City 2296 1822 79% Herriman 437 355 81% Highland 1804 871 48% Holladay 5096 1181 23% Hooper 1150 717 62% Hyde Park 763 291 38% Hyrum 1683 693 41% Kaysville 5496 2097 38% Layton 18282 6571 36% Lehi 5125 1077 21% Lindon 1935 815 42% Logan 13902 2656 19% Mapleton 1442 694 48% Mendon 267 134 50% Midvale 10089 2255 22% Midway 687 503 73% 28 Household Data Figures, available at http://factfinder.census.gov. Federal Communications Commission DA 07-1628 7 Franchise Area 2000 Census Household 29 DBS/MVPD Subs Allocated CPR: DBS Penetration Rate Millville 395 128 32% Murray 12673 2514 20% Nephi 1430 688 48% Newton 196 110 56% Nibley 566 146 26% North Logan 1728 356 21% North Ogden 4416 1760 40% North Salt Lake 2874 1264 44% Ogden City 27384 7836 29% Orem City 23382 5641 24% Paradise Town 217 139 64% Park 2705 1028 38% Payson 3654 2117 58% Perry 747 289 39% Plain City 979 322 33% Pleasant Grove City 6109 3347 55% Pleasant View 1740 701 40% Providence 1240 409 33% Provo 29192 713630 24% Richmond 619 327 53% River Heights 477 120 25% Riverdale 2806 934 33% Roy City 10689 3940 37% Salem 1128 580 51% Salt Lake 70607 15669 22% Smithfield 2066 1167 56% South Jordon 7507 4059 54% South Ogden 5193 1373 26% South Weber 1080 357 33% Springville 5975 2557 43% Summit 6003 3465 58% Sunset City 1785 781 44% Taylorsville 18530 5170 28% Tremonton 1698 515 30% Uintah 365 93 25% Washington Terrace 3019 930 31% Wellsville 778 395 51% West Bountiful 1250 605 48% West Jordon 18897 8562 45% West Point 1645 717 44% West Valley City 32253 8793 27% Willard 517 271 52% 29 Household Data Figures, available at http://factfinder.census.gov 30 Includes 1327 MSTARmetro subscribers, 1921Veracity subscribers, and 3888 DBS subscribers. See Petition at Exhibit 7. Federal Communications Commission DA 07-1628 8 Exhibit B – Low Penetration Data CSR-7089-E CSR-7094-E CSR-7090-E CSR-7095-E CSR-7091-E CSR-7096-E CSR-7092-E CSR-7097-E CSR-7093-E CSR-7098-E Franchise Area 2000 Census Household Data Comcast Subscribers Comcast Penetration Rates Bear Lake 709 8 1% Box Elder 2338 66 3% Cache 1582 60 4% Coalville 465 24 5% Corinne 190 45 24% Cornish 73 5 7% Elk Ridge 413 91 22% Franklin 17429 7 0% Franklin 195 30 15% Garden City 131 11 8% Grantsville 1856 354 19% Honeyville 358 93 26% Lewiston 531 88 17% Marriott 458 106 23% Morgan City 1257 136 11% Morgan 789 155 20% Plymouth 105 24 23% Preston 1529 208 14% Riverton 6348 1845 29% Sandy 25737 4284 17% South Salt 8022 2244 28% Spanish Fork City 5534 787 14% St. Charles 57 1 2% Tooele 2539 324 13% Tooele 7459 1542 21% Utah 46653 127 0.27% Wasatch 1557 29 2% Weber 5280 735 14% West Haven 1131 184 16%