Federal Communications Commission DA 08-1286 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Cable Inc. Petition for Determination of Effective Competition in Various Franchise Areas in Ohio ) ) ) ) ) ) CSR-7724-E MEMORANDUM OPINION AND ORDER Adopted: June 12, 2008 Released: June 13, 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 a petition 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 system serving the communities listed on Attachment B and hereinafter referred to as Group B Communities is 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 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”). Petitioner additionally claims to be exempt from cable rate regulation in the Communities listed on Attachment C and hereinafter referred to as Group C Communities because the Petitioner serves fewer than 30 percent of the households in the franchise area. 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 3. 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. However, Petitioner included the community Warrensville (CUID OH0162) in the caption of its petition, but provided no information to support a determination that effective competition exists for this community. Accordingly, the petition is denied as to Warrensville without prejudice; Petitioner may file a petition including the necessary information for Warrensville. 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 08-1286 2 II. DISCUSSION A. The Competing Provider Test 4. 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. 5. 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 6. 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 is supported in this petition with copies of channel lineups for both DIRECTV and Dish.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. 7. 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 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 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 Petition at 3-5. 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 Petition at 5-6. 12See Petition at 6. 13Id. 14Id. Federal Communications Commission DA 08-1286 3 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 zip code plus four basis.15 8. 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. 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 Group B Communities. B. The Low Penetration Test 10. 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. 11. 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 Communities. Therefore, the low penetration test is also satisfied as to the Group C Communities. 15Petition at 7-8. In the townships of Burton, Jefferson, Lenox, Rice, and Townsend, as well as the village of North Randall, both Time Warner Cable Inc.’s penetration figure and the aggregate DBS penetration figure clearly exceed 15 percent. Petitioner argues that it is subject to effective competition because in addition to DBS penetration exceeding 15 percent of the occupied households, the number of Time Warner Cable Inc.’s subscribers also exceed 15 percent and the Commission has recognized that in such cases the second prong of the competing provider test is satisfied. 16Petition at 8, n.25. 1747 U.S.C. § 543(l)(1)(A). Federal Communications Commission DA 08-1286 4 III. ORDERING CLAUSES 12. Accordingly, IT IS ORDERED that, consistent with the terms of this Order, the petition for a determination of effective competition filed in the captioned proceeding by Time Warner Cable Inc. IS GRANTED IN PART AND DENIED IN PART. 13. 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. 14. 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 08-1286 5 ATTACHMENT A CSR-7724-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUID(S) CPR* Amherst OH0831 Amherst OH1029 Aquilla OH1323 Ashtabula OH0009 Ashtabula OH0253 Auburn OH2231 Aurora OH0930 Austinburg OH0397 Bainbridge OH1233 Bath OH1269 Bedford OH0805 Bedford Heights OH0967 Bentleyville OH1926 Berlin OH1441 Berlin Heights OH1440 Boston Heights OH1624 Bratenahl OH2290 Brownhelm OH1621 Brunswick OH1076 Brunswick Hills OH1077 Burton OH1585 Burton OH2060 Carlisle OH0989 Chagrin Falls OH0804 Chagrin Falls OH2673 Chardon OH1109 Chardon OH1232 Chester OH0897 Claridon OH1387 Cleveland OH1632 Concord OH0892 Copley OH1270 Eastlake OH0699 Eaton OH2287 Euclid OH0109 Fairport Harbor OH0996 Florence OH1631 Geneva OH0244 Geneva OH0329 Geneva on the Lake OH0288 Glenwillow OH1180 Grand River OH0879 Hambden OH1322 Harpersfield OH0194 Hiram OH1288 Hiram OH1289 Hudson OH0922 Jefferson OH0396 Federal Communications Commission DA 08-1286 6 Jefferson OH0398 Lakewood OH1449 Lenox OH1281 Leroy OH1242 Lorain OH0202 Macedonia OH0926 Madison OH0278 Mantua OH1286 Mantua OH1287 Maple Heights OH1004 Marblehead OH1393 Margaretta OH2102 Middlefield OH1586 Middlefield OH2653 Moreland OH1061 Munson OH1234 New Russia OH2307 Newburgh Heights OH1194 Newbury OH1584 North Perry OH1095 North Randall OH0757 North Ridgeville OH0696 Northfield OH0969 Northfield Center OH0927 Norton OH2671 Oakwood OH1001 Painesville OH0894 Painesville OH0880 Peninsula OH2652 Perry OH0895 Perry OH0960 Plymouth OH0255 Reminderville OH0924 Rice OH2099 Richfield OH1275 Richfield OH1276 Sagamore Hills OH0925 Saybrook OH0254 Shalersville OH1290 Sheffield OH1691 Sheffield OH2510 Sheffield OH1320 Sheffield Lake OH1022 Solon OH0968 South Amherst OH1112 South Russell OH1388 Timberlake OH0987 Townsend OH2556 Twinsburg OH0928 Twinsburg OH0929 Vermilion OH0994 Vermilion OH0995 Vermilion OH1164 Wakeman OH1417 Wakeman OH1418 Walton Hills OH1306 Warrensville OH0162 Warrensville Heights OH0113 Federal Communications Commission DA 08-1286 7 Willoughby OH0770 Willowick OH0776 Federal Communications Commission DA 08-1286 8 ATTACHMENT B CSR-7724-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. 2000 Estimated Census DBS Communities CUID(S) CPR* Household Subscribers Amherst (City) OH0831 16.22% 4459 723.05 Amherst (Township) OH1029 15.10% 2853 430.80 Aquilla OH1323 24.58% 138 33.92 Ashtabula (City) OH0009 15.05% 8435 1269.13 Ashtabula (Township) OH0253 15.05% 9412 1416.13 Auburn OH2231 26.44% 320 84.62 Aurora OH0930 21.65% 5047 1092.87 Austinburg OH0397 29.24% 821 240.05 Bainbridge OH1233 20.22% 3845 777.40 Bath OH1269 16.27% 3506 570.39 Bedford OH0805 17.79% 6659 1184.76 Bedford Heights OH0967 17.41% 5119 891 Bentleyville OH1926 15.09% 297 44.83 Berlin OH1441 21.17% 1366 289.24 Berlin Heights OH1440 42.07% 257 108.13 Boston Heights OH1624 18.82% 392 73.76 Bratenahl OH2290 16.19% 711 115.09 Brunswick OH1076 25.00% 11883 2970.75 Brunswick Hills OH1077 18.67% 1924 359.27 Burton (Township) OH1585 30.12% 1549 466.63 Burton (Village) OH2060 39.55% 585 231.38 Carlisle OH0989 17.47% 2795 488.15 Chagrin Falls (Village) OH2673 15.09% 1862 281.04 Chardon (Township) OH1109 24.58% 1673 411.23 Chardon (Village) OH1232 24.58% 2147 527.74 Chester OH0897 20.04% 3952 791.96 Claridon OH1387 29.40% 1136 333.96 Cleveland OH1632 16.89% 190638 32207.56 Federal Communications Commission DA 08-1286 9 Columbia OH1024 26.53% 2388 633.61 Concord OH0892 17.47% 5730 1001.26 Copley OH1270 15.69% 5140 806.55 Eastlake OH0699 17.34% 8055 1396.68 Euclid OH0109 15.89% 24353 3869.27 Fairport Harbor OH0996 21.08% 1404 295.99 Florence OH1631 24.24% 896 217.15 Geneva (City) OH0244 19.65% 2515 494.08 Geneva (Township) OH0329 19.65% 4681 919.61 Geneva on the Lake OH0288 19.65% 665 130.64 Glenwillow OH1180 20.08% 205 41.16 Grand River OH0879 21.08% 122 25.72 Hambden OH1322 24.58% 1450 356.42 Harpersfield OH0194 27.04% 970 262.25 Hiram (Village) OH1289 37.07% 234 86.74 Hudson OH0922 18.43% 7357 1355.56 Jefferson (Township) OH0396 34.57% 2059 711.70 Jefferson (Village) OH0398 34.57% 2059 711.70 Lenox OH1281 42.24% 497 209.92 Leroy OH1242 21.90% 1079 236.27 Lorain OH0202 17.51% 26434 4629.04 Macedonia OH0926 23.63% 3276 774.19 Madison (Township) OH0278 20.30% 6800 1380.09 Madison (Village) OH0281 20.30% 1107 224.67 Mantua (Township) OH1286 33.29% 1693 563.66 Mantua (Village) OH1287 26.78% 440 117.85 Maple Heights OH1004 18.36% 10489 1925.75 Marblehead OH1393 15.17% 332 50.38 Middlefield (Village) OH2653 24.61% 955 235.06 Moreland Hills OH1061 15.09% 1286 194.10 Munson OH1234 23.10% 2105 486.24 Newburgh Heights OH1194 20.04% 1052 210.84 Newbury OH1584 26.62% 2112 562.29 North Perry OH1095 23.79% 302 71.84 North Randall OH0757 20.31% 465 94.44 North Ridgeville OH0696 18.02% 8356 1506.01 Northfield OH0969 18.85% 1573 296.57 Northfield Center OH0927 18.85% 1913 360.67 Federal Communications Commission DA 08-1286 10 Norton OH2671 15.90% 4343 690.57 Oakwood OH1001 17.41% 1416 246.47 Painesville (City) OH0894 21.08% 6525 1375.61 Painesville (Township) OH0880 21.08% 7394 1558.82 Peninsula OH2652 22.08% 240 52.99 Perry (Township) OH0895 21.11% 2847 600.95 Perry (Village) OH0960 23.79% 426 101.34 Plymouth OH0255 19.10% 789 150.67 Reminderville OH0924 21.65% 917 198.57 Rice OH2099 25.50% 514 131.05 Richfield (Township) OH1275 16.50% 1933 318.88 Richfield (Village) OH1276 20.10% 1227 246.63 Sagamore Hills OH0925 18.85% 3818 719.83 Saybrook OH0254 16.82% 4141 696.64 Shalersville OH1290 20.64% 1942 400.89 Sheffield (Township) OH2510 18.59% 1597 296.89 Sheffield (Village) OH1320 20.28% 1089 220.83 Sheffield Lake OH1022 20.28% 3498 709.33 Solon OH0968 20.08% 7554 1516.78 South Amherst OH1112 16.22% 669 108.48 South Russell OH1388 19.27% 1364 262.81 Timberlake OH0987 17.34% 309 53.58 Townsend OH2556 17.34% 555 96.22 Twinsburg (City) OH0928 19.66% 6641 1305.85 Twinsburg (Township) OH0929 19.03% 769 146.32 Vermilion (City) OH0994, 21.47% 4254 913.40 OH0995 Vermilion OH1164 18.25% 3833 699.43 Wakeman (Village) OH1418 41.33 % 359 148.38 Walton Hills OH1306 17.41% 903 157.17 Willowick OH0776 17.34% 6101 1057.87 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 08-1286 11 ATTACHMENT C CSR-7724-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Franchise Area Cable Penetration Communities CUID(S) Households Subscribers Percentage Berlin OH1926 1366 411 30.09% Brownhelm OH1621 2869 197 6.87% Burton OH1585 1549 246 15.88% Chagrin Falls OH0804 1905 35 1.84% Eaton OH2287 2065 53 2.57% Hiram OH1288 804 111 13.81% Jefferson OH0398 2059 465 22.58% Lakewood OH1449 26693 831 3.11% Lenox OH1281 497 128 25.75% Margaretta OH2102 2377 239 10.05% Middlefield OH1586 1200 96 8.00% New Russia OH2307 853 37 4.34% North Randall OH0757 465 84 18.06% Rice OH2099 514 114 22.18% Sheffield OH1691 517 71 13.73% Townsend OH2556 555 91 16.40% Wakeman (Township) OH1417 937 109 11.63% Warrensville Heights OH0113 6325 152 2.40% Willoughby OH0770 10265 2669 26.00%