Federal Communications Commission DA 08-1045 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Entertainment – Advance/Newhouse Partnership Petition for Determination of Effective Competition in Various Texas Communities ) ) ) ) ) ) ) CSR 7728-E MEMORANDUM OPINION AND ORDER Adopted: May 7, 2008 Released: May 8, 2008 By the Senior Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION AND BACKGROUND 1. Time Warner Entertainment – Advance/Newhouse Partnership (“Time Warner”), hereinafter referred to as “Petitioner,” has filed with the Commission a petition pursuant to Sections 76.7, 76.905(b)(2) and 76.907 of the Commission’s rules for a determination that Petitioner is subject to effective competition in the communities listed on Attachment A and hereinafter referred to as “Communities.” Petitioner alleges that its cable system serving the Communities is subject to effective competition pursuant to Section 623(1)(1)(B) of the Communications Act of 1934, as amended (“Communications Act”)1 and the Commission’s implementing rules,2 and is 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”). The petition is 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 petition based on our finding that Petitioner is subject to effective competition in the Communities listed on Attachment A. II. DISCUSSION 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 1See 47 U.S.C. § 543(a)(1). 247 C.F.R. § 76.905(b)(2). 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 08-1045 2 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 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. 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.8 Petitioner has demonstrated that this is the case.9 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 programming.10 Time Warner indicates that the program offerings are available on the websites of both DIRECTV and Dish, and we have reviewed their websites and confirmed that their program offerings meet the test.11 Also undisputed is Petitioner’s assertion that both DIRECTV and Dish offer service to at least “50 percent” of the households in the Communities because of their national satellite footprint.12 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 area. Petitioner states that it is the largest MVPD in all but one of the Communities.13 With regard to the City of Leander, Petitioner is unable to prove which MVPD is the largest. 14 Petitioner 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 five-digit zip code basis and using a five-digit allocation formula previously approved by the Commission.15 7. Based on the data provided, the failure to identify the largest MVPD in the City of 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). 8Mediacom 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). 9 Petition at 4-6, 8-9. 10See 47 C.F.R. § 76.905(g). See also Petition at 6. 11See Petition at 6-7. 12See Petition at 7. 13Petition at 8. 14Petition at 8. 15Petition at 9. See also, Charter Communications Properties, LLC, 17 FCC Rcd 4617 (2002); Charter Communications, 17 FCC Rcd 15491 (2002); Falcon First, Inc., 17 FCC Rcd 16629 (2002); Falcon Community Cable, L.P., 17 FCC Rcd 22162 (2002); Charter Communications, LLC, 19 FCC Rcd 7003 (2004). Federal Communications Commission DA 08-1045 3 Leander is not fatal. While it is undetermined which provider is the largest in this community, the DBS subscriber penetration level that was calculated using Census 2000 household data16 reflects that the aggregate subscribership for the DBS Providers in the City of Leander is 32.84 percent and Petitioner’s subscriber total in the community exceeds 15 percent.17 Because Petitioner and the DBS providers each serve more than 15 percent of the households in the City of Leander, the subscriber base of any MVPD, other than the largest, exceeds the 15 percent threshold in this community. 8. With respect to the other Communities, based upon the aggregate DBS subscriber penetration levels that were calculated using Census 2000 household data,18 as reflected in Attachment A, 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 Communities. Therefore, the second prong of the competing provider test is satisfied for each of the Communities. 9. 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 Communities listed on Attachment A. III. ORDERING CLAUSES 10. Accordingly, IT IS ORDERED that the petition for a determination of effective competition filed in the captioned proceeding by Time Warner Entertainment – Advance/Newhouse Partnership IS GRANTED. 11. IT IS FURTHER ORDERED that the certification to regulate basic cable service rates granted to the Communities set forth on Attachment A IS REVOKED. 12. This action is taken pursuant to delegated authority pursuant to Section 0.283 of the Commission’s rules.19 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau 16Petition at 8, and Exhibit E. 17See Petition at 8, and Exhibits A & E. 18 Petition at 9, and Exhibit E. 1947 C.F.R. § 0.283. Federal Communications Commission DA 08-1045 4 ATTACHMENT A CSR 7728-E 2000 Estimated Census DBS Communities CUID CPR* Household Subscribers Bastrop TX0596 TX2076 27.60 2034 561 Bee Cave TX2249 18.65 207 39 Bertram TX1089 49.09 387 190 Briarcliff TX2095 49.30 369 182 Buda TX1070 19.56 866 169 Cedar Park TX0766 22.09 8621 1904 Dripping Springs TX1242 41.64 554 231 Elgin TX0700 35.98 1869 672 Hays TX1112 19.56 88 17 Hutto TX1244 25.83 398 103 Jonestown TX1351 24.49 699 171 Kyle TX0895 TX2154 TX2321 18.18 1491 271 Lago Vista TX1182 63.24 1944 1229 Leander TX1422 32.84 2522 828 Liberty Hill TX1095 51.95 459 238 Manor TX2332 34.61 405 140 Mountain City TX2154 19.56 215 42 Round Rock TX0454 17.83 21076 3758 Smithville TX0128 TX2161 34.37 1491 512 Taylor TX0138 22.60 4730 1069 The Hills TX2251 18.65 585 109 Thorndale TX0965 37.57 485 182 Thrall TX1088 40.70 255 104 Uhland TX2336 18.18 134 24