Federal Communications Commission DA 08-1582 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 7782-E, 7786-E, 7787-E, 7789-E, 7790-E MEMORANDUM OPINION AND ORDER Adopted: July 2, 2008 Released: July 3, 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 08-1582 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 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 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. Federal Communications Commission DA 08-1582 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 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. 15Id. 16Id. 1747 U.S.C. § 543(l)(1)(A). Federal Communications Commission DA 08-1582 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 08-1582 5 ATTACHMENT A CSR(s) 7782-E, 7786-E, 7787-E, 7789-E, 7790-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUID(S) CSR 7782-E Beaver Township OH1217 Beaver Village OH1725 Clinton OH0233 Coal OH0232 Coalton OH0066 Hamden OH0235 Jackson OH2250 Jackson OH2191 Jackson OH0067 Liberty OH2724 Lick OH0231 Madison OH2785 Marion OH1911 McArthur OH1467 Oak Hill OH1468 Rio Grande OH1529 Union OH1910 Wellston OH0068 Zaleski OH2597 CSR 7786-E Caledonia OH1591 Grand Prairie OH2576 Marion City OH0074 Marion Township OH0590 Morral OH1938 Prospect OH2577 CSR 7787-E Albany OH0752 Athens OH0679 Waterloo OH1945 York OH2625 CSR 7789-E Falls OH1525 Good Hope OH2001 Green OH2611 Logan OH0027 CSR 7790-E Defiance Township OH1759 Defiance City OH0055 Highland OH2630 Ney OH2090 Noble OH2678 Richland OH2636 Washington OH2642 Federal Communications Commission DA 08-1582 6 ATTACHMENT B CSR(s) 7782-E, 7786-E, 7787-E, 7789-E, 7790-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. 2000 Estimated Census DBS Communities CUID(S) CPR* Household Subscribers CSR 7782-E Beaver Township OH1217 34.95% 515 180 Beaver Village OH1725 46.15% 195 90 Coalton OH0066 25.24% 210 53 Hamden OH0235 32.55% 344 112 Jackson OH2250 31.65% 2,667 844 OH2191 OH0067 Liberty OH2724 34.43% 607 209 Lick OH0231 31.69% 1,038 329 McArthur OH1467 31.14% 777 242 Oak Hill OH1468 44.43% 673 299 Wellston OH0068 25.13% 2,359 593 Zaleski OH2597 42.56% 148 63 CSR 7786-E Caledonia OH1591 54.78% 230 126 Grand Prairie OH2576 26.25% 598 157 Marion City OH0074 25.72% 13,551 3,485 Morral OH1938 54.42% 147 80 CSR 7787-E Albany OH0752 53.41% 352 188 Athens OH0679 16.03% 6,271 1,005 CSR 7789-E Green OH2611 42.74% 964 412 Logan OH0027 42.70% 2,790 1191 CSR 7790-E Defiance City OH0055 28.42% 6,572 1,868 Federal Communications Commission DA 08-1582 7 Ney OH2090 49.26% 136 67 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 08-1582 8 ATTACHMENT C CSR(s) 7782-E, 7786-E, 7787-E, 7789-E, 7790-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Franchise Area Cable Penetration Communities CUID(S) Households Subscribers Percentage CSR 7782-E Clinton OH0233 756 82 10.85% Coal OH0232 780 62 7.95% Madison OH2785 264 42 15.91% Marion OH1911 517 53 10.25% Rio Grande OH1529 232 45 19.40% Union OH1910 450 128 28.44% CSR 7786-E Marion Township OH0590 16,605 2,464 14.84% Prospect OH2577 835 151 18.08% CSR 7787-E Waterloo OH1945 1,023 186 18.18% York OH2625 3,045 65 2.13% CSR 7789-E Falls OH1525 4,627 858 18.54% Good Hope OH2001 535 135 25.23% CSR 7790-E Defiance Township OH1759 5,374 156 2.90% Highland OH2630 961 258 26.85% Noble OH2678 2,332 382 16.38% Richland OH2636 1,204 133 11.05% Washington OH2642 573 30 5.24%