Federal Communications Commission DA 08-1817 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 Wisconsin Communities ) ) ) ) ) ) CSR 7820-E and 7821-E MEMORANDUM OPINION AND ORDER Adopted: July 30, 2008 Released: July 31, 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 08-1817 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. 13Id. 14Id. at 7. Federal Communications Commission DA 08-1817 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. 16Id.. 1747 U.S.C. § 543(l)(1)(A). Federal Communications Commission DA 08-1817 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 08-1817 5 ATTACHMENT A CSR(s) 7820-E and 7821-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUID(S) CSR 7820-E Abrams WI1245 Algoma WI1209 Appleton WI0054 Ashwaubenon WI0228 Bellevue WI0477 Brillion WI0769 Buchanan WI0683 Cato WI1014 Center WI0770 Chase WI1192 Clayton WI0714 Combined Locks WI0143 Dale WI0716 De Pere WI0226 Ellington WI0768 Freedom WI0437 Grand Chute WI0116 Green Bay WI0234 Greenville WI0684 Harrison WI0685 Hilbert WI0735 Hobart WI0544 Holland WI1012 Howard WI0327 Kaukauna City WI0261 Kaukauna Town WI1016 Kimberly WI0144 Lawrence WI0984 Ledgeview WI0799 Liberty WI1062 Little Chute WI0262 Little Suamico WI1011 Menasha City WI0061 Menasha Town WI0263 Oneida WI1004 Osborn WI1127 Pittsfield WI0926 Reedsville WI0529 Rockland WI1168 Scott WI1227 Seymour WI0412 Sherwood WI0736 St. Nazianz WI0905 Stiles WI1243 Stockbridge Town WI0733 Stockbridge Village WI0734 Federal Communications Commission DA 08-1817 6 Suamico WI0675 Valders WI0906 Vandenbroek WI1015 Vinland WI0654 Winchester WI0715 Woodville WI1013 Wrightstown Town WI0520 Wrightstown Village WI1246 CSR 7821-E Adell WI0941 Ashippun WI0765 Belgium Town WI0553 Belgium Village WI0530 Cascade WI0942 Cedar Grove WI0531 Cleveland WI0598 Delafield WI0345 Dousman WI0572 Eagle Town WI0568 Eagle Village WI0546 East Troy Town WI0699 East Troy Village WI0548 Elkhart Lake WI0432 Fredonia Town WI0554 Fredonia Village WI0532 Germantown WI0347 Glenbeulah WI0433 Grafton WI1020 Greenbush WI0943 Hartland WI0348 Herman WI0945 Holland WI0555 Howards Grove WI0536 Ixonia WI0766 Lac La Belle WI0764 Lannon WI0284 Lima WI0944 Merton Town WI0640 Merton Village WI0349 Mosel WI1056 Nashotah WI0639 Newburg WI0574 North Prairie WI0545 Norway WI0541 Ocononowoc Lake WI0638 Oconomowoc WI0637 Oostburg WI0533 Ottowa WI0626 Port Washington WI0352 Random Lake WI0534 Rhine WI0434 Saukville Town WI1213 Saukville Village WI0353 Scott WI1072 Sherman WI0556 Sullivan WI1061 Summit WI0625 Federal Communications Commission DA 08-1817 7 Troy WI1060 Waldo WI0940 West Milwaukee WI0357 Federal Communications Commission DA 08-1817 8 ATTACHMENT B CSR(s) 7820-E and 7821-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. 2000 Estimated Census DBS Communities CUID(S) CPR* Household Subscribers CSR 7820-E Appleton WI0054 15.87% 26,884 4,266 Ashwaubenon WI0228 17.19% 7,137 1,227 Bellevue WI0477 20.13% 4,624 931 Buchanan WI0683 18.42% 1,846 340 Center WI0770 24.57% 1,095 269 Combined Locks WI0143 18.77% 884 166 Dale WI0716 41.02% 785 322 De Pere WI0226 19.14% 7,724 1,478 Freedom WI0437 22.80% 1,833 418 Grand Chute WI0116 15.30% 7,586 1,161 Green Bay WI0234 17.12% 41,591 7,122 Greenville WI0684 18.73% 2,301 431 Harrison WI0685 18.42% 1,998 368 Hilbert WI0735 33.25% 430 143 Hobart WI0544 18.57% 1,717 319 Howard WI0327 15.54% 5,236 814 Kaukauna City WI0261 21.61% 4,971 1,074 Kaukauna Town WI1016 22.70% 370 84 Kimberly WI0144 15.32% 2,507 384 Lawrence WI0984 19.21% 531 102 Ledgeview WI0799 19.66% 1,180 232 Little Chute WI0262 17.53% 3,878 680 Federal Communications Commission DA 08-1817 9 Menasha City WI0061 15.83% 6,951 1,101 Oneida WI1004 20.33% 359 73 Pittsfield WI0926 22.62% 818 185 Reedsville WI0529 44.16% 471 208 Seymour WI0412 33.99% 406 138 Sherwood WI0736 25.87% 572 148 St. Nazianz WI0905 37.84% 296 112 Stockbridge Village WI0734 35.85% 265 95 Valders WI0906 41.86% 375 157 Vandenbroek WI1015 20.65% 460 95 Vinland WI0654 15.00% 693 104 Wrightstown Village WI1246 20.83% 701 146 CSR 7821-E Adell WI0941 42.51% 207 88 Ashippun WI0765 21.54% 845 182 Belgium Town WI0553 26.63% 582 155 Belgium Village WI0530 29.62% 547 162 Cascade WI0942 43.14% 255 110 Cedar Grove WI0531 23.75% 699 166 Cleveland WI0598 38.06% 536 204 Delafield WI0345 16.18% 2,553 413 Dousman WI0572 19.30% 575 111 Eagle Town WI0568 15.72% 1,049 165 Eagle Village WI0546 23.99% 592 142 East Troy Town WI0699 17.48% 1,350 236 East Troy Village WI0548 17.94% 1,427 256 Elkhart Lake WI0432 46.10% 436 201 Fredonia Village WI0532 29.02% 727 211 Germantown WI0347 17.41% 6,904 1,202 Glenbeulah WI0433 45.10% 153 69 Federal Communications Commission DA 08-1817 10 Hartland WI0348 18.35% 3,002 551 Herman WI0945 25.26% 574 145 Howards Grove WI0536 19.20% 1,007 193 Ixonia WI0766 20.82% 1,047 218 Lac La Belle WI0764 17.94% 117 21 Lannon WI0284 15.29% 425 65 Merton Town WI0640 16.19% 2,706 438 Merton Village WI0349 18.27% 591 108 Nashotah WI0639 15.51% 445 69 Newburg WI0574 17.11% 398 68 North Prairie WI0545 15.82% 531 84 Norway WI0541 21.13% 2,641 558 Oconomowoc Lake WI0638 18.31% 208 38 Oconomowoc WI0637 18.60% 2,765 514 Oostburg WI0533 23.06% 980 226 Ottowa WI0626 18.98% 1,375 261 Port Washington WI0352 18.43% 4,071 750 Random Lake WI0534 33.81% 613 207 Saukville Village WI0353 17.85% 622 111 Summit WI0625 16.87% 1,747 295 Troy WI1060 31.54% 837 264 Waldo WI0940 31.95% 169 54 West Milwaukee WI0357 19.91% 2,059 410 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 08-1817 11 ATTACHMENT C CSR(s) 7820-E and 7821-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Franchise Area Cable Penetration Communities CUID(S) Households Subscribers Percentage CSR 7820-E Abrams WI1245 652 12 1.84% Algoma WI1209 1,940 9 0.46% Brillion WI0769 501 110 21.96% Cato WI1014 548 38 6.93% Chase WI1192 683 168 24.60% Clayton WI0714 1,071 33 3.08% Ellington WI0768 847 215 25.38% Holland WI1012 828 110 13.29% Liberty WI1062 456 64 14.04% Little Suamico WI1011 1,358 406 29.90% Menasha Town WI0263 6,298 1,119 17.77% Osborn WI1127 334 24 7.19% Rockland WI1168 483 81 16.77% Scott WI1227 658 94 14.29% Stiles WI1243 578 4 0.69% Stockbridge Town WI0733 506 86 17.00% Suamico WI0675 2,966 494 16.66% Winchester WI0715 620 183 29.52% Woodville WI1013 333 27 8.11% Wrightstown Town WI0520 666 1 0.15% CSR 7821-E Fredonia Town WI0554 727 149 21.26% Grafton WI1020 4,048 910 22.48% Federal Communications Commission DA 08-1817 12 Greenbush WI0943 526 127 24.14% Holland WI0555 433 110 25.40% Lima WI0944 1,008 236 23.41% Mosel WI1056 310 47 15.16% Rhine WI0434 829 178 21.47% Saukville Town WI1213 1,583 55 3.47% Scott WI1072 1,145 94 8.21% Sherman WI0556 533 77 14.45% Sullivan WI1061 819 131 16.00%