Federal Communications Commission DA 08-1638 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 Michigan and Wisconsin Communities ) ) ) ) ) ) CSR 7816-E and 7817-E MEMORANDUM OPINION AND ORDER Adopted: July 10, 2008 Released: July 11, 2008 By the Associate Chief, 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 08-1638 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 5-6. 12See Petition at 6. 13See Petition at 6-7. 14Id. at 7. Federal Communications Commission DA 08-1638 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. 15Petition at 7-8. 16Petition at 8. 1747 U.S.C. § 543(l)(1)(A). Federal Communications Commission DA 08-1638 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 Nancy Murphy Associate Chief, Media Bureau 1847 C.F.R. § 0.283. Federal Communications Commission DA 08-1638 5 ATTACHMENT A CSR(s) 7816-E and 7817-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUID(S) CSR 7816-E Ingallston MI1836 Marinette WI0028 Menominee City MI0090 Menominee Town MI0947 Peshtigo City WI0181 Peshtigo Town WI0513 Porterfield WI1079 CSR 7817-E Bloomfield WI0932 Burlington City WI0285 Burlington Town WI0478 Dover WI0946 Geneva WI0931 Lake Geneva WI0070 Linn WI0933 Lyons WI0934 Paddock Lake WI0549 Randall WI1057 Rochester Town WI1058 Rochester Village WI0600 Salem WI0624 Spring Prairie WI1059 Sturtevant WI0232 Union Grove WI0497 Waterford Town WI0696 Waterford Village WI0537 Wheatland WI0627 Yorkville WI0602 Federal Communications Commission DA 08-1638 6 ATTACHMENT B CSR(s) 7816-E and 7817-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. 2000 Estimated Census DBS Communities CUID(S) CPR* Household Subscribers CSR 7816-E Marinette WI0028 16.43% 5,095 837 Menominee City MI0090 18.71% 4,063 760 Menominee Town MI0947 23.12% 1,570 363 Peshtigo City WI0181 25.93% 1,315 341 Peshtigo Town WI0513 18.86% 1,416 267 CSR 7817-E Burlington City WI0285 20.71% 3,838 795 Burlington Town WI0478 20.73% 2,354 488 Dover WI0946 21.29% 1,193 254 Geneva WI0931 29.28% 1,660 486 Lake Geneva WI0070 19.16% 3,053 585 Lyons WI0934 20.06% 1,231 247 Paddock Lake WI0549 15.25% 1,056 161 Rochester Town WI1058 19.57% 782 153 Rochester Village WI0600 19.51% 410 80 Salem WI0624 18.14% 3,529 640 Spring Prairie WI1059 28.93% 726 210 Sturtevant WI0232 16.81% 1,477 248 Union Grove WI0497 28.76% 1,631 469 Waterford Town WI0696 17.51% 2,086 365 Wheatland WI0627 19.44% 1,209 235 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 08-1638 7 ATTACHMENT C CSR(s) 7816-E and 7817-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Franchise Area Cable Penetration Communities CUID(S) Households Subscribers Percentage CSR 7816-E Ingallston MI1836 456 96 21.05% Porterfield WI1079 770 156 20.26% CSR 7817-E Bloomfield WI0932 2,067 186 9.00% Linn WI0933 910 258 28.35% Randall WI1057 1,031 190 18.43% Waterford Village WI0537 1,561 1 0.06% Yorkville WI0602 1,123 177 15.76%