Federal Communications Commission DA 08-1414 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 Ohio Communities ) ) ) ) ) ) CSR 7704-E, 7705-E, 7713-E, 7714-E, 7718-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 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 Petitioner is 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 08-1414 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 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. 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 asserts that it is the largest MVPD in the Group B Communities.14 Petitioner sought to 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 3-4. 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. 12See Petition at 6. 13See Petition at 6-7. 14Id. at 7-8. In the Communities of Sardinia (CSR 7704-E), Freeport Township, Freeport Village (CSR 7713-E), Madison and Morgan (CSR 7714-E), both the Time Warner penetration figure and the aggregate DBS penetration figure clearly exceed 15 percent. Time Warner argues that it is subject to effective competition because in addition (continued....) Federal Communications Commission DA 08-1414 3 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 zip code and zip code plus four basis where necessary.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 Communities. Therefore, the low penetration test is also satisfied as to the Group C Communities. (...continued from previous page) to DBS penetration exceeding 15 percent of the occupied households, the number of Time Warner subscribers also exceed 15 percent and the Commission has recognized that in such cases the second prong of the competing provider test is satisfied. 15Petition at 7-8. 16Id. 1747 U.S.C. § 543(l)(1)(A). Federal Communications Commission DA 08-1414 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 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.18 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau 1847 C.F.R. § 0.283. Federal Communications Commission DA 08-1414 5 ATTACHMENT A CSR(s) 7704-E, 7705-E, 7713-E, 7714-E, 7718-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUID(S) CSR 7704-E Mowrystown OH1230 Sardinia OH1228 Washington OH1229 White Oak OH1231 CSR 7705-E Israel OH2426 Milford OH1874 Oxford OH1879 CSR 7713-E Freeport Township OH0403 Freeport Village OH1327 CSR 7714-E Clay OH0536 Harrison OH0589 Jefferson OH0538 Madison OH0948 Morgan OH0631 Rush OH0630 Union OH2718 Valley OH0537 CSR 7718-E Baltic OH2196 Federal Communications Commission DA 08-1414 6 ATTACHMENT B CSR(s) 7704-E, 7705-E, 7713-E, 7714-E, 7718-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. 2000 Estimated Census DBS Communities CUID(S) CPR* Household Subscribers CSR 7704-E Sardinia OH1228 59.14% 328 194 CSR 7705-E Milford OH1874 20.16% 2,945 594 CSR 7713-E Freeport Township OH0403 52.50% 320 168 Freeport Village OH1327 48.82% 170 83 CSR 7714-E Harrison OH0589 19.02% 1,677 319 Jefferson OH0538 39.28% 1,008 396 Madison OH0948 41.11% 1,379 567 Morgan OH0631 44.18% 851 376 Rush OH0630 34.67% 1,165 404 Valley OH0537 19.42% 942 183 CSR 7718-E Baltic OH2196 21.09% 275 58 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 08-1414 7 ATTACHMENT C CSR(s) 7704-E, 7705-E, 7714-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Franchise Area Cable Penetration Communities CUID(S) Households Subscribers Percentage CSR 7704-E Mowrystown OH1230 143 17 11.89% Washington OH1229 849 31 3.65% White Oak OH1231 501 5 1.00% CSR 7705-E Israel OH2426 495 48 9.70% Oxford OH1879 6,738 40 0.59% CSR 7714-E Clay OH0536 1,516 105 6.93% Union OH2718 764 58 7.59%