Federal Communications Commission DA 08-1038 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Comcast Cable Communications, LLC and Time Warner Entertainment-Advance/Newhouse Partnership Petitions for Determination of Effective Competition in various Franchise Areas in Pennsylvania ) ) ) ) ) ) ) ) ) ) CSR 7458-E CSR 7481-E CSR 7482-E CSR 7484-E CSR 7544-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. Comcast Cable Communications, LLC and Time Warner Entertainment- Advance/Newhouse Partnership , hereinafter referred to as “Petitioners,” have 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 Petitioners are subject to effective competition in those communities listed on Attachment A and hereinafter referred to as “Communities.” Petitioners allege that their 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”). Petitioners additionally claim to be exempt from cable rate regulation in the Communities listed on Attachment C and hereinafter referred to as Group C Communities because Petitioners serve fewer than 30 percent of the households in the franchise areas. 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 08-1038 2 finding that Petitioners are 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 Petitioners 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 Petitioners have 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 Petitioners’ 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 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 Comcast Petitions (CSR 7458-E et al.) at 3; Time Warner Petition (CSR 7544-E) 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 Comcast Petitions (CSR 7458-E et al.) at 4-5; Time Warner Petition (CSR 7544-E) at 5. 12See Comcast Petitions (CSR 7458-E et al.) at 4-5 and Exhibit 1 and Time Warner Petition (CSR 7544-E) at 5-6. As support, Comcast provides copies of channel line-ups for both DIRECTV and Dish. Time Warner does not provide channel line-ups, 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 Comcast Petitions (CSR 7458-E at al.) at 2-3; Time Warner Petition (CSR 7544-E at 2). Federal Communications Commission DA 08-1038 3 subscribing to MVPDs, other than the largest MVPD, exceed 15 percent of the households in a franchise area. Petitioners assert that they are the largest MVPDs in the Group B Communities.14 Petitioners 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 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 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 Petitioners have submitted sufficient evidence demonstrating that both prongs of the competing provider test are satisfied and Petitioners are 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 Petitioners allege that they are subject to effective competition under the low penetration effective competition test because they serve less that 30 percent of the households in the franchise area. 10. Based upon the subscriber penetration level calculated by Petitioners, as reflected in 14 Comcast Petitions (CSR 7458-E et al.) at 5-6; Time Warner Petition (CSR 7544-E) at 7-8. Comcast in CSR 7481- E states that it cannot determine that it is the largest MVPD in Eldred and Union, but asserts that it is immaterial in these Franchise Areas which MVPD is the largest because both DBS and cable pass the 15% threshold. With regard to Comcast Petitions CSR 7481-E and CSR 7482-E, we note that the same six Communities are listed in both. Two petitions were filed because some of the Communities with different CUID numbers are on a separate Comcast cable system and required the filing of a separate petition with a separate filing fee. CSR 7481-E pertains to Brookville, Corsica, Eldred, Pine Creek (PA2419), Rose (PA2417), and Union. CSR 7582-E pertains to Pine Creek (PA3168) and Rose (PA3037). In CSR 7484-E, Comcast states that it cannot determine that it is the largest MVPD in Dean, Irvona, and White but again asserts that it is immaterial because both the DBS and cable numbers pass the 15% threshold. In CSR 7544-E, Time Warner states that it cannot determine the largest MVPD in Bridgewater, Choconut, Dimock, Franklin, Liberty, and Springville because the number of Time Warner subscribers in these Communities does not exceed the aggregate number of DBS subscribers. Time Warner states that SBCA does not release the DBS subscriber counts except as an aggregate. With the exception of Franklin which qualifies under the low penetration test, Time Warner argues that both DBS and cable pass the 15% threshold in the other Communities listed. In Franklin, Time Warner’s subscribership is less than 15 percent. In cases where both DBS and cable penetration exceed 15 percent of the occupied households, the Commission has recognized that the second prong of the competing provider test is satisfied. 15Comcast Petitions (CSR 7458-E et al.) at 5-7; Time Warner Petition (CSR 7544-E) at 8. Both Comcast and Time Warner state 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). 16Comcast Petitions (CSR 7458-E et al.) at 7-8 and Exhibits 5 and 6; Time Warner Petition at 7 and Exhibits E and F. 1747 U.S.C. § 543(l)(1)(A). Federal Communications Commission DA 08-1038 4 Attachment C, we find that Petitioners have demonstrated the percentage of households subscribing to their cable service is less than 30 percent of the households in the Group C Communities. Therefore, the low penetration test is also satisfied as to the Group C Communities. III. ORDERING CLAUSES 11. Accordingly, IT IS ORDERED that the petitions for a determination of effective competition filed in the captioned proceeding by Comcast Cable Communications, LLC and Time Warner Entertainment-Advance/Newhouse Partnership 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 08-1038 5 ATTACHMENT A CSR 7458-E, CSR 7481-E, CSR 7482-E & CSR 7484-E_& CSR 7544-E COMMUNITIES SERVED BY COMCAST CABLE COMMUNICATIONS, LLC CSR 7458-E Communities CUIDS Bridgewater Borough PA0670 Beaver County East Rochester PA0671 Freedom PA0672 Monaca PA0673 Rochester Borough PA0674 Rochester Township PA0675 Vanport PA0676 CSR 7481-E Brookville PA0402 Corsica PA1371 Eldred PA2421 Pine Creek PA2419 Rose PA2417 Union PA2418 CSR 7482-E Pine Creek PA3168 Rose PA3037 CSR 7484-E Beccaria PA0907 Clearfield PA2523 Coalport PA0905 Dean PA2524 Federal Communications Commission DA 08-1038 6 Irvona PA0906 Reade PA2002 White PA2001 TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP Bridgewater Township PA2614 Susquehanna County Choconut PA3353 Dimock PA2681 Franklin PA3687 Liberty PA3355 Montrose PA2303 Silver Lake PA3354 Springville PA2682 Federal Communications Commission DA 08-1038 7 ATTACHMENT B CSR 7458-E, CSR 7481-E, CSR 7482-E, CSR 7484-E & CSR 7544-E COMMUNITIES SERVED BY COMCAST CABLE COMMUNICATIONS, LLC CSR 7458-E 2000 Estimated Census DBS Communities CUIDS CPR* Household Subscribers Bridgewater Borough PA0670 17.91% 335 60 Beaver County East Rochester PA0671 24.74% 283 70 Freedom PA0672 15.28% 687 105 Monaca PA0673 19.38% 2709 525 Rochester Borough PA0674 24.13% 1732 418 Rochester Township PA0675 23.66% 1213 287 Vanport PA0676 16.52% 775 128 CSR 7481-E 2000 Estimated Census DBS Communities CUIDS CPR* Household Subscribers Brookville PA0402 32.23% 1849 596 Corsica PA1371 34.48% 145 50 Eldred PA2421 43.91% 501 220 Pine Creek PA2419 32.31% 424 137 Rose PA2417 33.12% 474 157 Union PA2418 38.39% 323 124 Federal Communications Commission DA 08-1038 8 CSR 7482-E 2000 Estimated Census DBS Communities CUIDS CPR* Household Subscribers Pine Creek PA3168 32.31% 424 137 Rose PA3037 33.12% 474 157 CSR 7484-E 2000 Estimated Census DBS Communities CUIDS CPR* Household Subscribers Beccaria PA0907 34.67% 747 259 Coalport PA0905 34.53% 223 77 Dean PA2524 54.55% 165 90 Irvona PA0906 51.87% 241 125 Reade PA2002 33.71% 623 210 White PA2001 55.31% 311 172 TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP 2000 Estimated Census DBS Communities CUIDS CPR* Household Subscribers Bridgewater Township PA2614 43.10% 1,058 456 Susquehanna County Choconut PA3353 43.99% 316 139 Dimock PA2681 44.81% 520 233 Liberty PA3355 31.44% 474 149 Montrose PA2303 44.14% 734 324 Silver Lake PA3354 43.77% 626 274 Springville PA2682 48.77% 570 278 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 08-1038 9 ATTACHMENT C CSR 7481-E, CSR 7484-E & CSR 7544-E COMMUNITIES SERVED BY COMCAST CABLE COMMUNICATIONS, LLC CSR 7481-E Franchise Area Cable Penetration Communities CUIDS Households Subscribers Percentage Eldred PA2421 E 501 108 21.56% CSR 7484-E Franchise Area Cable Penetration Communities CUIDS Households Subscribers Percentage Clearfield PA2523 571 50 8.76% COMUNITIES SERVED BY TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP Franchise Area Cable Penetration Communities CUIDS Households Subscribers Percentage Franklin PA3687 362 22 6.08%