Federal Communications Commission DA 08-1037 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Cable Inc. Petitions for Determination of Effective Competition in various Franchise Areas in Maine ) ) ) ) ) ) ) ) ) ) ) CSR7522-E CSR 7524-E CSR 7526-E CSR 7527-E CSR 7529-E CSR 7530-E CSR 7531-E CSR 7532-E CSR 7533-E MEMORANDUM OPINION AND ORDER Adopted: May 1, 2008 Released: May 2, 2008 By the Senior Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION AND BACKGROUND 1. Time Warner Cable Inc., hereinafter referred to as “Petitioner,” has filed with the Commission petitions pursuant to Sections 76.7, 76.905(b)(2), 76.905(b)(1) and 76.907 of the Commission’s rules for a determination that Petitioner is subject to effective competition in those communities listed on Attachment A and hereinafter referred to as “Communities.” Petitioner alleges that its cable systems serving the communities listed on Attachment B and hereinafter referred to as Group B Communities 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 because of the competing service provided by two direct broadcast satellite (“DBS”) providers, DirecTV, Inc. (“DirecTV”) and Dish Network (“Dish”). Petitioner additionally claims to be exempt from cable rate regulation in the Community listed on Attachment C and hereinafter referred to as Group C Community because the Petitioner serves fewer than 30 percent of the households in the franchise area. The petitions are unopposed. 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(l) of the Communications Act 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 For the reasons set forth below, we grant the petitions based on our 1See 47 U.S.C. § 543(a)(1). 247 C.F.R. § 76.905(b)(2) and 47 C.F.R. § 76.905(b)(1). 347 C.F.R. § 76.906. 4See 47 U.S.C. § 543(l) and 47 C.F.R. § 76.905. 5See 47 C.F.R. §§ 76.906 & 907. Federal Communications Commission DA 08-1037 2 finding that Petitioner is subject to effective competition in the Communities listed on Attachment A. II. DISCUSSION A. The Competing Provider Test 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 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 this test is otherwise referred to as the “competing provider” test. 4. The first prong of this test has three elements: the franchise area must be “served by” at least two unaffiliated MVPDs who offer “comparable programming” to at least “50 percent” of the households in the franchise area.7 5. Turning to the first prong of this test, it is undisputed that these Group B Communities are “served by” both DBS providers, DIRECTV and Dish, and that these two MVPD providers are unaffiliated with Petitioner or with each other. A franchise area is considered “served by” an MVPD if that MVPD’s service is both technically and actually available in the franchise area. 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.8 The Commission has held that a party may use evidence of penetration rates in the franchise area (the second prong of the competing provider test discussed below) coupled with the ubiquity of DBS services to show that consumers are reasonably aware of the availability of DBS service.9 We further find that Petitioner has provided sufficient evidence of DBS advertising in local, regional, and national media that serve the Group B Communities to support their assertion that potential customers in the Group B Communities are reasonably aware that they may purchase the service of these MVPD providers.10 The “comparable programming” element is met if a competing MVPD provider offers at least 12 channels of video programming, including at least one channel of nonbroadcast service programming11 and this is supported by the petitions.12 Also undisputed is Petitioner’s assertion that both DIRECTV and Dish offer service to at least “50 percent” of the households in the Group B Communities because of their national satellite footprint.13 Accordingly, we find that the first prong of the competing provider test is satisfied. 6. 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 647 U.S.C. § 543(1)(1)(B); see also 47 C.F.R. § 76.905(b)(2). 747 C.F.R. § 76.905(b)(2)(i). 8See Petitions at 3. 9Mediacom Illinois LLC et al., Eleven Petitions for Determination of Effective Competition in Twenty-Two Local Franchise Areas in Illinois and Michigan, 21 FCC Rcd 1175 (2006). 1047 C.F.R. § 76.905(e)(2). 11See 47 C.F.R. § 76.905(g). See also Petitions at 5. 12See Petitions at 6. Time Warner does not provide channel line-ups for DIRECTV and Dish, but notes that these channel line-ups can be found at www.directv.com and www.dishnetwork.com and that these websites demonstrate the availability of the requisite programming. 13See Petitions at 6. Federal Communications Commission DA 08-1037 3 area. Petitioner asserts that it is the largest MVPD in the Group B Communities.14 Petitioner sought to determine the competing provider penetration in the Group B 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 Group B Communities on a five digit zip code basis.15 7. Based upon the aggregate DBS subscriber penetration levels that were calculated using Census 2000 household data,16 as reflected in Attachment B, we find that Petitioner 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 the Group B Communities. Therefore, the second prong of the competing provider test is satisfied for each of the Group B Communities. 8. Based on the foregoing, we conclude that Petitioner has submitted sufficient evidence demonstrating that both prongs of the competing provider test are satisfied and Petitioner is subject to effective competition in the Group B Communities. B. The Low Penetration Test 9. Section 623(l)(1)(A) of the Communications Act provides that a cable operator is subject to effective competition if the Petitioner serves fewer than 30 percent of the households in the franchise area; this test is otherwise referred to as the “low penetration” test.17 Petitioner alleges that it is subject to effective competition under the low penetration effective competition test because it serves less that 30 percent of the households in the franchise area. 10. Based upon the subscriber penetration level calculated by Petitioner, as reflected in Attachment C, we find that Petitioner has demonstrated the percentage of households subscribing to its cable service is less than 30 percent of the households in the Group C Community. Therefore, the low penetration test is also satisfied as to the Group C Community 14Id. at 7. Time Warner states that it cannot determine the largest MVPD in the following Communities: (CSR 7522-E – Anson, Avon, Embden, New Portland, New Vineyard, Norridgewock, Phillips, Solon, and Strong); (CSR 7526-E – Weld); (CSR 7527-E – Baldwin, Denmark, Greenwood, Hiram, Parsonsfield, Porter, West Paris and Woodstock); (CSR 7530-E – Addison, Columbia Falls, and Harrington); (CSR 7531-E – Greenbush). The Petitioner states that this is because the DBS subscribership data obtained from SBCA is aggregated and does not break down the individual subscribership of each DBS subscriber. With the exception of the Time Warner Community of New Portland (CSR-7522-E) which qualifies under the low penetration test, the Petitioner argues that it is subject to effective competition in the above-noted Communities because in addition to DBS penetration exceeding 15 percent of the occupied households, the number of Petitioner’s subscribers also exceeds 15 percent and the Commission has recognized that in such cases the second prong of the competing provider test is satisfied. In the Community of New Portland, Time Warner’s subscribership is less than 15 percent. 15Petitions at 7-9. The Petitioner states that the Commission has previously approved the five digit zip code allocation formula to calculate the DBS providers’ subscribership. See, e.g., Comcast of Dallas, L.P., 20 FCC Rcd 17968, 17969-70 (MB 2005) (approving a cable operator’s use of a Media Business Corporation “allocation factor, which reflects the portion of a five digit postal zip code that lies within the border of the City,” to determine DBS subscribership for that franchise area). 16Petitions at 7-9 and Exhibit D (CSR 7524-E, CSR 7526-E, CSR 7529-E, CSR 7531-E and CSR 7533-E) and Exhibits E and F (CSR 7522-E, CSR 7527-E, CSR 7530-E, and CSR 7532-E). 1747 U.S.C. § 543(l)(1)(A). Federal Communications Commission DA 08-1037 4 III. ORDERING CLAUSES 11. Accordingly, IT IS ORDERED that the petitions for a determination of effective competition filed in the captioned proceeding by Time Warner Cable Inc. ARE GRANTED. 12. IT IS FURTHER ORDERED that the certifications to regulate basic cable service rates granted to any of the Communities set forth on Attachment A ARE REVOKED. 13. This action is taken pursuant to delegated authority pursuant to Section 0.283 of the Commission’s rules.18 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau 1847 C.F.R. § 0.283. Federal Communications Commission DA 08-1037 5 ATTACHMENT A CSR 7522-E, CSR 7524-E, CSR 7526-E, CSR 7527-E, CSR 7529-E, CSR 7530-E, CSR 7531-E, CSR 7532-E, CSR 7533-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. CSR-7522-E Communities CUIDS Anson ME0088 Avon ME0084 Carrabassett ME0226 Valley Coplin ME0228 Embden ME0089 Eustis ME0085 Kingfield ME0086 New Portland ME0091 New Vineyard ME0312 Norridgewock ME0087 Phillips ME0092 Smithfield ME0255 Solon ME0090 Strong ME0205 Wyman ME0227 CSR 7524-E Communities CUID Lincoln ME0031 CSR 7526-E Communities CUID Weld ME0271 Federal Communications Commission DA 08-1037 6 CSR 7527-E Communities CUIDS Baldwin ME0220 Bethel ME0195 Bridgton ME0186 Cornish ME0221 Denmark ME0355 Greenwood ME0194 Harrison ME0265 Hiram ME0219 Hollis ME0150 Limerick ME0222 Limington ME0206 Naples ME0211 Newry ME0191 Norway ME0011 Paris ME0012 Parsonsfield ME0218 Porter ME0217 Sebago ME0354 Standish ME0207 Waterboro ME0151 Waterford ME0329 West Paris ME0192 Windham ME0178 Windham ME0190 Woodstock ME0193 Federal Communications Commission DA 08-1037 7 CSR 7529-E Communities CUID Vinalhaven ME0223 CSR 7530-E Communities CUIDS Addison ME0232 Columbia Falls ME0235 Harrington ME0233 CSR 7531-E Communities CUID Greenbush ME0269 CSR 7532-E Communities CUIDS Allagash ME0236 Eagle Lake ME0126 Fort Kent ME0040 Frenchville ME0095 Grand Isle ME0243 Madawaska ME0001 St. Agatha ME0148 St. Francis ME0234 St. John ME0231 Van Buren ME0039 Wallagrass ME0242 CSR 7533-E Communities CUID Dixfield ME0009 Federal Communications Commission DA 08-1037 8 ATTACHMENT B CSR 7522-E, CSR 7524-E, CSR 7526-E, CSR 7527-E, CSR 7529-E, CSR 7530-E, CSR 7531-E, CSR 7532-E, CSR 7533-E, COMMUNITIES SERVED BY TIME WARNER CABLE INC. CSR 7522-E 2000 Estimated Census DBS Communities CUIDS CPR* Households Subscribers Anson ME0088 37.43% 1,031 386 Avon ME0084 47.52% 202 96 Carrabassett ME0226 16.76% 179 30 Valley Coplin ME0228 22.41% 58 13 Embden ME0089 41.92% 365 153 Eustis ME0085 29.80% 302 90 Kingfield ME0086 16.946 454 77 New Vineyard ME0312 49.46% 279 138 Norridgewock ME0087 42.57% 1,285 547 Phillips ME0092 47.42% 407 193 Smithfield ME0255 30.65% 372 114 Solon ME0090 39.45% 398 157 Strong ME0205 43.37% 498 216 Wyman ME0227 17.14% 35 6 CSR 7524-E 2000 Estimated Census DBS Communities CUID CPR* Households Subscribers Lincoln ME0031 38.38% 2,108 809 Federal Communications Commission DA 08-1037 9 CSR 7526-E 2000 Estimated Census DBS Communities CUID CPR* Households Subscribers Weld ME0271 46.59% 176 82 CSR 7527-E 2000 Estimated Census DBS Communities CUIDS CPR* Households Subscribers Baldwin ME0220 32.86% 493 162 Bethel ME0195 48.16% 1,034 498 Bridgton ME0186 27.91% 1,924 537 Cornish ME0221 31.67% 521 165 Denmark ME0355 52.04% 417 217 Greenwood ME0194 54.69% 320 175 Harrison ME0265 41.85% 920 385 Hiram ME0219 44.38% 534 237 Hollis ME0150 26.34% 1,507 397 Limerick ME0222 26.18% 850 222 Limington ME0206 30.59% 1,141 349 Naples ME0211 26.91% 1,297 349 Newry ME0191 54.23% 142 77 Norway ME0011 23.70% 1,972 468 Paris ME0012 26.23% 1,975 518 Parsonsfield ME0218 37.22% 634 236 Porter ME0217 51.60% 562 290 Sebago ME0354 25.00% 584 146 Standish ME0207 22.15% 3,205 710 Waterboro ME0151 23.07% 2,211 510 Federal Communications Commission DA 08-1037 10 Waterford ME0329 31.86% 590 188 West Paris ME0192 38.85% 646 251 Windham ME0178 22.29% 5,522 1,231 ME0190 Woodstock ME0193 45.14% 525 237 CSR 7529-E 2000 Estimated Census DBS Communities CUID CPR* Households Subscribers Vinalhaven ME0223 29.64% 550 163 CSR-7530-E 2000 Estimated Census DBS Communities CUIDS CPR* Households Subscribers Addison ME0232 46.42% 489 227 Columbia ME0235 58.57% 251 147 Falls Harrington ME0233 38.46% 364 140 CSR-7531-E 2000 Estimated Census DBS Communities CUID CPR* Households Subscribers Greenbush ME0269 43.10% 522 225 CSR-7532-E 2000 Estimated Census DBS Communities CUIDS CPR* Households Subscribers Allagash ME0236 37.14% 140 52 Eagle Lake ME0126 37.45% 330 124 Fort Kent ME0040 37.58% 1,735 650 Frenchville ME0095 29.71% 478 142 Federal Communications Commission DA 08-1037 11 Grand Isle ME0243 26.15% 218 57 Madawaska ME0001 25.09% 1,993 500 St. Agatha ME0148 28.00% 350 98 St. Francis ME0234 36.86% 236 87 St. John ME0231 37.27% 110 41 Van Buren ME0039 20.64% 1,095 226 Wallagrass ME0242 37.33% 217 81 CSR-7533-E 2000 Estimated Census DBS Communities CUID CPR* Households Subscribers Dixfield ME0009 39.07% 1,011 395 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 08-1037 12 ATTACHMENT C CSR 7522-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Franchise Area Cable Penetration Communities CUID Households Subscribers Percentage New Portland ME0091 9.42% 329 31