Federal Communications Commission DA 08-1089 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Cable Inc. Time Warner NY Cable LLC CAC Exchange I, LLC Petitions for Determination of Effective Competition in Six California Communities ) ) ) ) ) ) ) ) ) ) CSR 7711-E CSR 7708-E CSR 7712-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 Cable LLC, Time Warner NY Cable LLC, and CAC Exchange I, LLC 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 determinations 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”). Petitioner Time Warner NY Cable LLC additionally claims to be exempt from cable rate regulation in the community listed on Attachment C and hereinafter referred to as the “Group C Community” because it 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 finding that Petitioners are subject to effective competition in the Communities listed on Attachment A. 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 08-1089 2 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 the 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. 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 Petitioners have 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 Petitioners indicate 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 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.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. Petitioners assert that they are the largest MVPDs in the Group B Communities.13 Petitioners sought to determine the competing provider penetration in the Group B Communities by purchasing subscriber tracking reports from the Satellite Broadcasting and Communications Association (“SBCA”) 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 CSR 7711-E at 4-5, 6-7; Petition CSR 7708-E at 4-5, 7-8; Petition CSR 7712-E at 4-5, 7-8. 10See 47 C.F.R. § 76.905(g). See also Petition CSR 7711-E at 5; Petition CSR 7708-E at 5; Petition CSR 7712-E at 5-6. 11See Petition CSR 7711-E at 5-6; Petition CSR 7708-E at 6; Petition CSR 7712-E at 6. 12See Petition CSR 7711-E at 6; Petition CSR 7708-E at 6; Petition CSR 7712-E at 7. 13Petition CSR 7711-E at 6-7; Petition CSR 7708-E at 7; Petition CSR 7712-E at 7. Federal Communications Commission DA 08-1089 3 that identified the number of subscribers attributable to the DBS providers within the Group B Communities on a five-digit zip code basis and using a five-digit allocation formula previously approved by the Commission.14 7. Based upon the aggregate DBS subscriber penetration levels that were calculated using Census 2000 household data,15 as reflected in Attachment A, 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 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.16 Petitioner Time Warner NY Cable LLC 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 Group C Community. 10. Based upon the subscriber penetration level calculated by Time Warner NY Cable LLC, 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. 14Petition CSR 7711-E at 7; Petition CSR 7708-E at 7; Petition CSR 7712-E at 7-8. 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). 15Petition CSR 7711-E at 7 and Exhibit E; Petition CSR 7708-E at 7 and Exhibit E; Petition CSR 7712-E at 8 and Exhibit E. 1647 U.S.C. § 543(l)(1)(A). Federal Communications Commission DA 08-1089 4 III. ORDERING CLAUSES 11. Accordingly, IT IS ORDERED that the petitions for determination of effective competition filed in the captioned proceedings by Time Warner Cable LLC, Time Warner NY Cable LLC, and CAC Exchange I, LLC ARE GRANTED. 12. IT IS FURTHER ORDERED that the certification to regulate basic cable service rates granted to any of the Communities set forth on Attachment A IS REVOKED. 13. This action is taken pursuant to delegated authority pursuant to Section 0.283 of the Commission’s rules.17 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau 1747 C.F.R. § 0.283. Federal Communications Commission DA 08-1089 5 ATTACHMENT A CSRs 7711-E, 7708-E, 7712-E COMMUNITIES SERVED BY TIME WARNER CABLE LLC Communities CUID(S) Oxnard CA0396 Ventura CA0024 COMMUNITIES SERVED BY TIME WARNER NY CABLE LLC Communities CUID(S) Carlsbad CA0716 San Marcos CA0739 Vista CA0877 West Hollywood CA0254 COMMUNITIES SERVED BY CAC EXCHANGE I, LLC Communities CUID(S) West Hollywood CA0254 Federal Communications Commission DA 08-1089 2 ATTACHMENT B CSRs 7711-E, 7708-E, 7712-E COMMUNITIES SERVED BY TIME WARNER CABLE LLC Communities CUID CPR* 2000 Census Household Estimated DBS Subscribers Oxnard CA0396 17.74 43576 7732 Ventura CA0024 34.54 38524 13307 COMMUNITIES SERVED BY TIME WARNER NY CABLE LLC Communities CUID CPR* 2000 Census Household Estimated DBS Subscribers Carlsbad CA0716 15.30 31521 4823 San Marcos CA0739 16.84 18111 3051 COMMUNITIES SERVED BY CAC EXCHANGE I, LLC Communities CUID CPR* 2000 Census Household Estimated DBS Subscribers West Hollywood CA0254 21.89 23120 5062 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 08-1089 3 ATTACHMENT C CSRs 7708-E COMMUNITIES SERVED BY TIME WARNER NY CABLE LLC Franchise Area Cable Penetration Communities CUID Households Subscribers Percentage Vista CA0877 28877 3712 12.85