Federal Communications Commission DA 07-2284 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of: Bright House Networks Comcast Cable Communications, LLC Petitions for Determination of Effective Competition in various Alabama, Arkansas and Illinois Communities ) ) ) ) ) ) ) ) ) CSR 7060-E CSR 7062-E, 7068-E, 7125-E MEMORANDUM OPINION AND ORDER Adopted: May 31, 2007 Released: June 1, 2007 By the Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION 1. This Order considers several petitions which Comcast Cable Communications, LLC and Bright House Networks, LLC (collectively “the Petitioners” or “operators”) 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 Petitioners are subject to effective competition pursuant to Section 623(1) of the Communications Act of 1934, as amended ("Communications Act"),1 and the Commission's implementing rules,2 and are therefore exempt from cable rate regulation in the communities listed in Attachment A (the “Communities”). No opposition to any petition was filed. Finding that Petitioners are subject to effective competition in the listed Communities, we grant the petitions. 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 623(1) of the Communications Act of 1934, as amended, and 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.5 1 47 U.S.C. § 543(1). 2 47 C.F.R. § 76.905(b)(4). 3 47 C.F.R. § 76.906. 4 See 47 U.S.C. § 543(1) and 47 C.F.R. § 76.905. 5 See 47 C.F.R. §§ 76.906 & 907. Federal Communications Commission DA 07-2284 2 II. DISCUSSION A. Competing Provider Effective Competition 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 15 percent of the households in the franchise area.6 Turning to the first prong of this test, we find that the DBS service of DirecTV Inc. (“DirectTV”) and DISH Network (“Dish”) 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.7 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 was the second largest, and DISH the third largest, MVPD provider during the period.8 In view of this DBS growth data, and the data discussed below showing that more than 15 percent of the households in each of the communities listed on Attachment A relating to the competing provider test are DBS subscribers, we conclude that the population of the communities at issue here may be deemed reasonably aware of the availability of DBS services for purposes of the first prong of the competing provider test. 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 substantially more than 12 channels of video programming, including more than one non- broadcast channel.9 We further find that the operators have demonstrated that these 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. The Petitioners sought to determine the competing provider penetration in the Communities by purchasing a subscriber tracking report from the Satellite Broadcasting and Communications Association (“SBCA”) that identified the number of subscribers attributable to the DBS providers within the Communities on a zip code basis. Bright House asserts that it is the largest MVPD serving the Eufaula franchise area.10 Comcast asserts that it is the largest MVPD in the majority of the Communities because its subscribership exceeds the aggregate DBS subscribership for those franchise areas.11 With respect to the communities of Alexander, Bryant, and Pulaski County, Arkansas, Comcast asserts that it cannot determine the largest MVPD in these communities because the SBCA aggregates the number of subscribers for the DBS subscribers and this number is larger than the Comcast subscribers in these 6 47 U.S.C. § 543(1)(1)(B); see also 47 C.F.R. § 76.905(b)(2). 7 See MediaOne of Georgia, 12 FCC Rcd 19406 (1997). 8 Twelfth Annual Assessment of the Status of Competition in the Market for Delivery of Video Programming, FCC 06-11 at ¶¶ 6, 13, 72-73, 21 FCC Rcd 2503 (rel. March 3, 2006). 9See 47 C.F.R. § 76.905(g). 10 Bright House Petition at 7-8. 11 Comcast Petitions at 5-6 (for CSRs 7062-E, 7068-E, 7125-E). Federal Communications Commission DA 07-2284 3 communities.12 With regard to these communities, we are able to conclude that this portion of the test is met by analyzing the data submitted. The aggregate penetration rate for DBS, as well as the penetration rate for Comcast, exceeds 15 percent in each of these franchise areas and Comcast’s penetration rate exceeds 24 percent in each of these three franchise areas.13 5. With regard to the communities of Channahon, Minooka, Plainfield, Romeoville, and Wadsworth, Comcast contends that while it is not the largest MVPD in these franchise areas, it still has satisfied the second prong of the competing provider test for them.14 Comcast claims to be subject to competing provider competition in these communities because DBS penetration exceeds 15 percent of occupied households, and because the number of Comcast subscribers also exceeds 15 percent of the occupied households, as reported by the 2000 Census.15 Comcast determined the competing provider penetration levels in the franchise areas by applying a five-digit zip code allocation method.16 To calculate the DBS firms’ subscribership in each franchise area, Comcast purchased an Effective Competition Tracking Report (“ECTR”) from the SBCA. The SBCA reports the total DBS and DTH subscribers for the relevant zip codes in Comcast’s franchise area.17 To account for differences between the zip code boundaries used in the ECTR and the specific boundaries of the franchise areas, Comcast multiplied the SBCA zip code data by derived allocation percentages to estimate the number of DBS and DTH subscribers within the franchise areas. 6. Based upon the aggregate DBS subscriber penetration levels as reflected in Attachment A, calculated using 2000 Census household data, we find that Petitioners 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 Petitioners Comcast and Bright House have submitted sufficient evidence demonstrating that its cable systems serving the Communities set forth on Attachment A are subject to effective competition under the competing provider analysis. B. Low Penetration Effective Competition 7. 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.”18 Comcast provided information showing that less than 30 percent of the households within the Grundy County franchise area subscribe to its cable services. Accordingly, we conclude that Comcast has demonstrated the existence of “low penetration” effective competition in Grundy County pursuant to our rules. 12 Comcast Petition (CSR 7062-E) at 5-6. 13 Id. See Declaration of Peter Feinberg, dated November 13, 2006. 14 Comcast Petitions(CSR 7068-E) at 6 and (CSR 7125-E) at 5. 15 Id. 16 Comcast Petitions (CSR 7062-E, 7068-E, and 7125-E) at 6. 17 Comcast Petitions (CSR 7062-E, 7068-E and 7125-E) at 7. 1847 U.S.C § 543(l)(l)(A). Federal Communications Commission DA 07-2284 4 III. ORDERING CLAUSES 8. Accordingly, IT IS ORDERED that the petitions filed by Comcast Cable Communications, LLC and Bright House Networks, LLC for a determination of effective competition in the Communities listed thereon ARE GRANTED. 9. IT IS FURTHER ORDERED that the certification to regulate basic cable service rates granted to the local franchising authorities overseeing Comcast Cable Communications, LLC and Bright House Networks, LLC ARE REVOKED. 10. This action is taken pursuant to authority delegated under Section 0.283 of the Commission’s rules.19 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Deputy Chief, Policy Division, Media Bureau 1947 C.F.R. § 0.283. Federal Communications Commission DA 07-2284 5 Attachment A Cable Operators Subject to Competing Provider Effective Competition BRIGHT HOUSE NETWORKS: 7060-E 2000 DBS Census Communities CUIDS CPR* Subscribers+ Household Eufaula AL0074 19.82 1079.45 5447 COMCAST CABLE COMMUNICATIONS, LLC: 7062-E, 7068-E, 7125-E 2000 DBS Census Communities CUIDS CPR* Subscribers+ Household CSR 7062-E Alexander AR0686 48.91% 135 276 Bryant AR0271 51.50% 1,854 3,601 Jacksonville AR0063 22.84% 2,487 10,890 Little Rock AR0191 18.35% 14,193 77,352 North Little Rock AR0069 19.08% 4,874 25,542 Pulaski County AR0202 34.15% 7,027 20,575 AR0147 Sherwood AR0070 29.34% 2,581 8,798 AR0348 CSR 7068-E Bolingbrook IL0209 34.35% 5,982 17,416 Braidwood IL0186 42.09% 776 1,843 Channahon IL0317 60.98% 1,390 2,279 IL0629 Coal City IL0187 46.18% 864 1,871 Crest Hill IL0272 19.63% 879 4,478 Federal Communications Commission DA 07-2284 6 Diamond IL0283 45.73% 252 551 Joliet IL0039 27.75% 10,042 36,182 Frankfort IL1026 38.30% 1,309 3,418 Lemont IL0573 27.50% 1,216 4,420 Lockport IL0845 33.71% 1,888 5,599 Minooka IL0316 85.50% 1,124 1,315 Mokena IL0450 27.84% 1,309 4,703 Morris IL0050 36.41% 1,759 4,831 New Lenox IL1027 30.05% 1,759 5,853 Plainfield IL1232 69.29% 2,990 4,315 Rockdale IL1233 20.47% 156 762 Romeoville IL0197 55.07% 3,725 6,764 Shorewood IL0932 30.83% 791 2,565 Wilmington IL0185 44.45% 885 1,991 CSR 7125-E Waukegan IL0001 43.56% 12,104 27,787 Highwood IL0430 21.99% 342 1,555 Park City IL0469 18.96% 493 2600 Libertyville IL0525 21.03% 1,535 7,298 Mundelein IL0526 24.91% 2,456 9,858 Wauconda IL0527 33.00% 1,192 3,611 Grayslake IL0528 29.02% 1,887 6,503 Deerfield IL0613 19.83% 1,273 6,420 IL1221 Gurnee IL0679 24.37% 2,590 10,629 Winthrop Harbor IL1097 27.43% 650 2,370 Zion IL1098 24.51% 1,851 7,552 Federal Communications Commission DA 07-2284 7 Wadsworth IL1111 62.26% 645 1,036 Third Lake IL1196 30.37% 130 428 Green Oaks IL1197 20.38% 220 1,079 Bannockburn IL1318 20.00% 50 250 Lake Forest IL1386 19.59% 1,310 6,687 Kenilworth IL1400 19.31% 153 792 Riverwoods IL1537 19.67% 248 1,261 Beach Park IL1658 24.59% 894 3,636 Cable Operator Subject to Low Penetration Effective Competition COMCAST CABLE COMMUNICATIONS, LLC: CSR 7068-E Communities CUIDS Franchise Area Cable Penetration Households Subscribers Level Grundy County IL1181 3,950 633 16.03% IL1433 IL1828 *CPR = Percentage of DBS penetration + = See Cable Operator Petitions