Federal Communications Commission DA 07-639 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Millennium Digital Media Systems, LLC Petition for Determination of Effective Competition in Various Michigan Communities ) ) ) ) ) ) CSR 6037-E MEMORANDUM OPINION AND ORDER Adopted: February 27, 2007 Released: March 1, 2007 By the Deputy Chief, Policy Division, Media Bureau: INTRODUCTION 1. Millennium Digital Media Systems, LLC (“Millennium”) has filed with the Commission a petition pursuant to Section 623(a)(1) of the Communications Act of 1934, as amended ("Communications Act") and Sections 76.7(a)(1) and 76.905(b)(1) of the Commission's rules for a determination of effective competition in various communities in Michigan (the “Communities”).1 Millennium alleges that its cable systems serving the Communities are subject to effective competition and therefore exempt from cable rate regulation. Millennium alleges that its cable systems serving thirty- five Communities are subject to effective competition and therefore exempt from cable rate regulation because of competing services provided by two direct broadcast satellite (“DBS”) providers, DirecTV, Inc. (“DirecTV”) and DISH Network (“DISH”). Millennium also claims the presence of effective competition in forty-two communities because fewer than thirty percent of the households subscribe to the cable services of its cable system. 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,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 Based on the record presented in this proceeding, Millennium has met this burden. 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 1See 47 U.S.C. § 543(a)(1); 47 C.F.R. §§ 76.7(a)(1) and 76.905(b)(1). Concord Village (MI0477) is certfied to regulate basic cable rates. Millennium filed for seventy-eight communities, thirty-five under the competing provider test and forty-three under the low penetration test. Millennium no longer has a franchise in the community of North Plains, therefore, the petition for this community is dismissed. 247 C.F.R. § 76.906. 347 C.F.R. § 76.905. 4See 47 C.F.R. §§ 76.906 & 907. Federal Communications Commission DA 07-639 2 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 percent) of the households in the franchise area.5 In addition, 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.”6 The Competing Provider Test 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.7 Millennium has provided evidence of the advertising of DBS service in the news media serving the communities.8 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 DISH the third largest, MVPD provider.9 In view of this DBS growth data, and the data discussed below showing that more than 15 percent of the households in the communities 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 at least 12 channels of video programming, including at least one non-broadcast channel.10 We find further that Millennium has demonstrated that the community 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 the franchise area. 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. Millennium sought to determine the competing provider penetration in thirty-five of its franchise areas by purchasing a report from SkyTrends that identified the number of subscribers attributable to the DBS providers within the Communities on a zip code plus four basis.11 Millennium asserts that it is the largest MVPD in thirty of the Communities because Millennium’s 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,13 we find that Millennium has demonstrated that the number of households subscribing to programming services offered 547 U.S.C. §543(1)(1)(B); see also 47 C.F.R. §76.905(b)(2). 647 U.S.C § 543(l)(l)(A). 7See MediaOne of Georgia, 12 FCC Rcd 19406 (1997). 8See Millennium Petition at 5-6 and Exhibit C. 9Twelfth Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, FCC 06-11 at ¶¶ 6, 13, 72-73 (rel. March 3, 2006). 10See 47 C.F.R. § 76.905(g). See also Petition at 5-6 and Exhibits E and F. 11Id. at 6-7 and Exhibits A and D (SkyTrends Report). 12Id. 13Id. and Exhibit A. Federal Communications Commission DA 07-639 3 by MVPDs, other than the largest MVPD, exceeds 15 percent of the households in these thirty Communities. Therefore, the second prong of the competing provider test is satisfied as to these thirty Communities. Based on the foregoing, we conclude that Millennium has submitted sufficient evidence demonstrating that its cable systems serving thirty of the Communities set forth on Attachment A are subject to effective competition. 6. As to five other communities, Boston Township, Handy Township, Henrietta Township, Marengo Township, and Perry Township, Millennium is unable to determine the largest MVPD because the number of DBS subscribers for DirecTV and DISH Network provided by SkyTrends are aggregated and exceed the number of Millennium subscribers. Nevertheless, we are able to conclude that the second prong is met by analyzing the data submitted for both Millennium and the DBS providers. If the subscriber penetration for both Millennium and the aggregate DBS providers each exceed 15 percent in the franchise area, the second prong of the competing provider test is satisfied. In Boston Township, assuming Millennium is the largest MVPD, the combined DBS penetration rate is 36.48 percent.14 Conversely, assuming that one of the DBS providers is the largest MVPD in Boston Township, the subscribership of Millennium is 32.29 percent.15 In Handy Township, assuming that Millennium is the largest MVPD, the combined DBS penetration rate is 23.48 percent.16 Conversely, assuming that one of the DBS providers is the largest MVPD in Handy Township, Millennium’s penetration rate is 22.36%.17 In Henrietta Township, assuming that Millennium is the largest MVPD, the combined DBS penetration rate is 40.33 percent.18 Conversely, assuming that one of the DBS providers is the largest MVPD in Henrietta Township, Millennium’s penetration rate is 34.26 percent.19 In Marengo Township, assuming Millennium is the largest MVPD, the combined DBS penetration rate is 35.75 percent.20 Conversely, assuming that one of the DBS providers is the largest MVPD in Marengo Township, Millennium’s penetration rate is 34.22%.21 In Perry Township, assuming Millennium is the largest MVPD, the combined DBS penetration rate is 40.49 percent.22 Conversely, assuming that one of the DBS providers is the largest MVPD in Perry Township, Millennium’s penetration rate is 36.02%.23 Accordingly, we find that Millennium 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 its Boston Township, Handy Township, Henrietta Township, Marengo Township, and Perry Township franchise areas. The Low Penetration Test 7. Millennium submits sufficient evidence regarding household and subscriber data, demonstrating that its cable system serves less than 30 percent of households in forty-two of the 14Id. and Exhibits A and D (479 combined DBS subscribers ÷ 1313 Boston Township households = 36.48%). 15Id. (424 Millennium subscribers ÷ 1313 Boston Township households = 32.29%). 16Id. (588 combined DBS subscribers ÷ 2504 Handy Township households = 23.48%). 17Id. (560 Millennium subscribers ÷ 2504 Handy Township households = 22.36%). 18Id. (651 DBS subscribers ÷ 1614 Henrietta Township households = 40.33%). 19 Id. (553 Millennium subscribers ÷ 1614 Handy Township households = 34.26%). 20 Id. and Exhibits And D (281 combined DBS ÷ 786 Marengo households = 35.75%). 21Id. (269 Millennium households ÷ 786 Marengo households = 34.22%). 22 Id. and Exhibits A and D (507 combined DBS subscribers ÷ 1252 Perry Township households = 40.49%). 23 Id. (451 Millennium subscribers ÷ 1252 households = 36.02). Federal Communications Commission DA 07-639 4 Communities.24 Millennium provided 2000 Census Bureau household data for the communities in its franchise area.25 Millennium also provides the count of Millennium subscribers in the franchise area, which it used to calculate a subscriber-to-household penetration rate.26 Based upon the subscriber penetration levels as reflected in Attachment B, calculated using 2000 Census household data,27 we find that Millennium has demonstrated that the number of households subscribing to its service is less than 30 percent of the households in the forty-two Communities. Based on this record, we conclude that Millennium has demonstrated that its cable system meets the requirements of low penetration effective competition under our rules, and we grant its petition. III. ORDERING CLAUSES 8. Accordingly, IT IS ORDERED that the petition for a determination of effective competition filed by Millennium Digital Media Systems, LLC listed on Attachments A and B ARE GRANTED. 9. IT IS FURTHER ORDERED that the low penetration claim for the community of North Plains IS DISMISSED without prejudice. 10. IT IS FURTHER ORDERED that the certifications to regulate basic cable service rates granted to any of the local franchising authorities overseeing Millennium Digital Media Systems, LLC ARE REVOKED. 11. This action is taken pursuant to authority delegated under Section 0.283 of the Commiss1on’s rules.28 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Deputy Chief, Policy Division, Media Bureau 24Id. at 8. 25Id. and Exhibit B. 26Id. 27Id. 2847 C.F.R. § 0.283. Federal Communications Commission DA 07-639 5 Attachment A CSR-6037-E 2000 Estimated Census DBS Millennium Communities CUIDS CPR* Households+ Subscribers+ Subscribers+ Alaeidon MI1832 23.4 1115 261 440 Athens MI0930 21.9 397 87 239 Aurelius Township MI1716 39.2 1130 443 504 Bath Charter MI1060 21.9 2799 613 1846 Bellevue MI1064 15.2 525 80 335 Benton Township MI0653 33.4 991 331 446 Concord Village MI0477 20.4 318 65 47 Eaton Township MI0652 29.4 1531 451 780 Fowlerville Village MI0493 15.13 1156 175 736 Grass Lake Village MI1088 21.6 421 91 376 Hastings City MI0151 21.4 2759 592 1455 Homer Village MI1082 24.6 707 174 356 Hubbardston Village MI1549 20.0 130 26 51 Leslie City MI0454 20.1 734 148 485 Marshall Township MI1690 20.7 1081 224 312 Morrice Village MI1294 16.7 316 53 177 Mulliken Village MI1157 16.4 195 32 120 Oneida Charter MI1719 24.7 1352 335 373 Pewamo Village MI1375 15.7 197 31 109 Portland City MI0610 16.0 1507 242 1176 Potterville City MI0651 20.4 802 164 563 Union City Village MI0837 21.9 685 150 450 Vermontville Village MI1301 26.8 287 77 84 Vevay Township MI0614 35.0 1264 443 493 Victor Township MI1061 25.5 1139 291 346 Watertown Charter MI1314 28.4 1469 418 650 Williamstown Township MI0611 22.4 1692 379 1086 Windsor Charter MI0706 15.06 2781 419 1256 Woodhull Township MI1292 25.1 1390 350 872 Boston Township MI1250 25.4 1881 479 424 Handy Township MI0612 23.4 2504 588 560 Federal Communications Commission DA 07-639 6 Henrietta Township MI1087 40.3 1614 651 553 Marengo Township MI1691 35.7 786 281 269 Perry Township MI0745 32.3 1252 507 451 Sunfield Village MI1156 222 6 161 *CPR = Percent of competitive DBS penetration rate. +See Petition at 6-7 and Exhibits A and D. Federal Communications Commission DA 07-639 7 Attachment B 2000 Census Millennium Communities CUIDS CPR* Households+ Subscribers+ Albion Township MI1711 5.58 466 26 Athens Township MI1519 0.07 956 70 Bellevue Township MI1065 0.07 1161 82 Bunkerhill Township MI1068 2.03 690 14 Burlington Township MI1602 0.01 734 30 Campbell Township MI1249 0.04 780 34 Carmel Township MI1774 19.83 923 183 Concord Township MI0478 0.06 986 65 Convis Township MI1296 5.47 622 34 Danby Township MI1297 19.75 914 178 Eagle Township MI1315 16.39 848 139 Eaton Rapids Township MI1717 13.86 1328 184 Eckford Township MI1756 15.13 476 72 Fredonia Township MI1708 11.78 679 80 Grass Lake Township MI1089 13.49 1653 223 Green Oak Township MI0905 19.97 5438 1086 Hanover Township MI1077 22.99 1374 316 Hastings Charter MI1858 9.36 1015 95 Homer Township MI1083 0.02 1117 23 Ingham Township MI1604 18.55 722 134 Leroy Township MI0613 0.11 1329 148 Leslie Township MI1076 0.04 855 35 Liberty Township MI1298 14.63 1073 157 Lyons Township MI1548 0.01 1268 25 Odessa Township MI1090 0.06 1492 100 Onondaga Township MI1718 5.14 993 51 Parma Township MI1081 20.25 943 191 Portand Township MI1058 25.97 828 215 Pulaski Township MI0479 15.57 700 109 Roxand Towship MI1158 0.09 658 63 Sandstone Charter Town MI1079 0.00 1321 13 Sciota Township MI1063 22.72 625 142 Federal Communications Commission DA 07-639 8 Sheridan Township MI1737 27.14 770 209 Sherwood Township MI0931 17.74 885 157 Spring Arbor Township MI1078 1.05 2570 27 Stockbridge Township MI1085 0.20 1220 25 Sunfield Township MI1159 0.08 777 63 Union Township MI0932 0.08 1184 99 Walton Township MI1067 18.60 699 130 Westphalia Township MI1295 4.82 436 21 Wheatfield Township MI1293 12.98 570 74 Woodland Township MI1091 14.60 808 118 *CPR = Percent of Millennium penetration rate. +See Petition at 8 and Exhibit B.