Federal Communications Commission DA 08-1818 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 7105-E, 7778-E, 7792-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 08-1818 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 4-5. 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 5-7. 13See Petition at 6-7. 14Id. at 7-8. In the Communities of Hamler, Holgate, Pleasant, Cecil and Latty (CSR 7792-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 to DBS penetration exceeding 15 percent of the (continued....) Federal Communications Commission DA 08-1818 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) 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 7-9. 16Id. 1747 U.S.C. § 543(l)(1)(A). Federal Communications Commission DA 08-1818 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 08-1818 5 ATTACHMENT A CSR(s) 7105-E, 7778-E, 7792-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUID(S) CSR 7105-E Celina OH0292 CSR 7778-E Bennington OH2544 Buckeye Lake OH1012 Burlington OH2536 Eden OH2545 Franklin OH1016 Granville Township OH0702 Granville Village OH0655 Hanover Township OH0600 Hanover Village OH1889 Heath OH0586 Hebron OH0890 Liberty OH2618 Licking OH0656 Madison OH0701 Mary Ann OH2093 McKean OH2546 Newark Township OH0224 Newark City OH0654 Newton Township OH1014 Salt Creek OH2541 St. Louisville OH1178 Union OH1015 Walnut OH1013 CSR 7792-E Bartlow OH1160 Cecil OH2382 Crane OH2383 Deshler OH1157 Dover OH2491 Emerald OH2419 Flatrock OH2627 Florida OH2462 Freedom OH2783 Fulton OH2104 Grand Rapids Township OH1264 Grand Rapids Village OH1265 Hamler OH1158 Harding OH1636 Haskins OH1261 Holgate OH1159 Federal Communications Commission DA 08-1818 6 Jackson OH2387 Jerusalem OH1656 Lake OH1340 Latty OH0485 Liberty Center OH1353 Liberty OH2631 Luckey OH1339 Lyons OH1416 Malinta OH2460 Marion OH1161 Metamora OH1415 Middleton OH1135 Monclova OH1136 Monroe OH2622 Napoleon City OH0077 Napoleon Township OH2732 Paulding Township OH0931 Paulding Village OH0485 Perrysburg OH1134 OH2529 Pike OH2524 Pleasant OH1162 Providence OH1466 OH2531 Springfield OH1260 Swan Creek OH1396 OH2624 Swanton OH0338 OH0345 Troy OH1341 Washington OH1263 Waterville OH1078 OH1085 Wauseon OH0057 Whitehouse OH1084 York OH1637 OH2648 Federal Communications Commission DA 08-1818 7 ATTACHMENT B CSR(s) 7105-E, 7778-E, 7792-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. 2000 Estimated Census DBS Communities CUID(S) CPR* Household Subscribers CSR 7105-E Celina OH0292 21.55% 4,191 903 CSR 7778-E Buckeye Lake OH1012 20.80% 1,240 258 Eden OH2545 46.89% 418 196 Franklin OH1016 35.53% 622 221 Granville Township OH0702 29.17% 2,671 779 Granville Village OH0655 24.29% 1,309 318 Hanover Village OH1889 22.61% 314 71 Heath OH0586 35.03% 3,403 1,192 Hebron OH0890 22.45% 882 198 Licking OH0656 32.99% 1,570 518 Madison OH0701 25.32% 1,090 276 Mary Ann OH2093 23.79% 744 177 Newark City OH0654 22.56% 19,312 4,356 Newark Township OH0224 22.53% 790 178 Newton Township OH1014 23.83% 1,179 281 St. Louisville OH1178 57.98% 119 69 Walnut OH1013 31.13% 2,525 786 CSR 7792-E Lyons OH1416 55.45% 220 122 Metamora OH1415 44.00% 200 88 Swanton Township OH0338 34.80% 1,204 419 Swanton Village OH0345 39.80% 1,241 494 Federal Communications Commission DA 08-1818 8 Wauseon OH0057 38.32% 2,706 1,037 Whitehouse OH1084 24.32% 1,036 252 Deshler OH1157 41.31% 702 290 Florida OH2462 33.67% 98 33 Grand Rapids Village OH1265 40.05% 402 161 Hamler OH1158 52.12% 236 123 Haskins OH1261 23.24% 241 56 Holgate OH1159 50.72% 441 224 Jerusalem OH1656 31.45% 1,113 350 Lake OH1340 17.03% 4,169 710 Liberty Center OH1353 50.47% 424 214 Luckey OH1339 39.77% 357 142 Malinta OH2460 46.90% 113 53 Monclova OH1136 18.47% 2,360 436 Napoleon City OH0077 33.23% 3,813 1,267 Pleasant OH1162 53.72% 819 440 Cecil OH2382 55.84% 77 43 Latty OH0485 38.96% 77 30 Paulding Township OH0931 38.34% 1,466 562 Paulding Village OH0485 39.62% 1,580 626 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 08-1818 9 ATTACHMENT C CSR(s) 7778-E and 7792-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Franchise Area Cable Penetration Communities CUID(S) Households Subscribers Percentage CSR 7778-E Bennington OH2544 433 74 17.09% Burlington OH2536 402 85 21.14% Hanover Township OH0600 975 194 19.90% Liberty OH2618 623 36 5.78% McKean OH2546 576 138 23.96% Salt Creek OH2541 405 114 28.15% Union OH1015 3,270 187 5.72% CSR 7792-E Dover OH2491 512 150 29.30% Fulton OH2104 1,215 149 12.26% Pike OH2524 633 19 3.00% Providence OH1466 1,206 240 19.90% OH2531 Swan Creek OH1396 2,988 609 20.38% OH2624 Bartlow OH1160 928 19 2.05% Flatrock OH2627 453 4 0.88% Freedom OH2783 321 5 1.56% Grand Rapids Township OH1264 632 63 9.97% Harding OH1636 266 15 5.64% Liberty Township OH2631 999 53 5.31% Marion OH1161 509 6 1.18% Middleton OH1135 956 173 18.10% Monroe OH2622 439 8 1.82% Federal Communications Commission DA 08-1818 10 Napoleon Township OH2732 4,051 70 1.73% Perrysburg OH1134 6,592 524 7.95% OH2529 Springfield OH1260 9,453 981 10.38% Troy OH1341 1,616 343 21.23% Washington OH1263 612 159 25.98% Waterville OH1078 3,395 163 4.80% OH1085 York OH1637 1,570 25 1.59% OH2648 Crane OH2383 549 18 3.28% Emerald OH2419 319 17 5.33% Jackson OH2387 707 58 8.20%