Federal Communications Commission DA 08-1902 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Comcast Cable Communications, LLC Petition for Determination of Effective Competition in 17 Illinois Communities ) ) ) ) ) ) CSR 7064-E MEMORANDUM OPINION AND ORDER Adopted: August 13, 2008 Released: August 14, 2008 By the Senior Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION AND BACKGROUND 1. Comcast Cable Communications, LLC,, hereinafter referred to as “Petitioner,” has filed with the Commission a petition pursuant to Sections 76.7, 76.905(b)(2) 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 is subject to effective competition pursuant to Section 623(1)(1)(B) 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”). One opposition was filed by the Village of Hainesville and the Village of Island Lake, Illinois (together, the “Villages”). Comcast filed a reply to the Villages opposition. 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 petition based on our finding that Petitioner is subject to effective competition in the Communities listed on Attachment A. II. DISCUSSION 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 1See 47 U.S.C. § 543(a)(1). 247 C.F.R. § 76.905(b)(2). 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 08-1902 2 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 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 Communities to support their assertion that potential customers in the 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 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 Communities.14 Petitioner sought to determine the competing provider penetration in the 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 Communities on a zip code and zip code plus 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. 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 4. 12See Petition at 4 and Exhibit 3. 13See Petition at 3. 14Id. at 5. In the Community of McHenry, both the Comcast penetration figure and the aggregate DBS figure clearly exceed 15 percent. Comcast argues that it is subject to effective competition because in addition to DBS penetration exceeding 15 percent of the occupied households, the number of Comcast subscribers also exceed 15 percent and the Commission has recognized that in such cases the second prong of the competing provider test is satisfied. Federal Communications Commission DA 08-1902 3 four basis where necessary.15 7. In opposition, the Villages argue that Comcast failed to meet its burden of proof under the second prong of the competing provider test because no data regarding the number of Comcast subscribers is given.16 According to the Villages, the second prong of the competing provider test requires Comcast to provide their subscribers numbers, in addition to the subscriber counts of the competing MVPDS in order to measure the proportionate penetration of each multichannel video programming distributor.17 They argue that Section 76.905(f) directs that in order to measure the proportionate penetration of a multichannel video programming distributor one must first aggregate the number of subscribers of all multichannel video programming distributors which serve the area.18 In reply, Comcast argues that there is no such requirement and the Villages suggestion that the petitioner’s own subscriber numbers must be included in the calculation of competing MVPDs is incorrect.19 Moreover, Comcast asserts that although Section 76.905(f) states that the number of all multichannel video programming distributors that offer service in the franchise area will be aggregated, that aggregation clearly is prefaced by and refers to those MVPD households subscribing to entities, other than the largest multichannel video programming distributor.20 8. We find that the Villages arguments lack merit. Under the second prong of the competing provider test, a cable operator is not subject to rate regulation if a competing multichannel distributor serves at least 50 percent of the households in the subject system’s franchise area and more than 15 percent of the subscribers in the franchise area subscribe to the competitive services.21 In calculating whether 15 percent or more of the households in a franchise area subscribe to all but the largest multichannel video programming distributor, the Commission concluded that the subscribership of competing multichannel distributors on a cumulative basis shall be considered.22 Therefore, compliance with Section 76.905(f) requires the filing of data regarding competing service providers, not the filing of data regarding Comcast’s own subscriber numbers, unless one of the DBS providers is the largest MVPD in the franchise, which is not the case in this proceeding.23 Accordingly, we will accept the DBS penetration figures for the franchise areas filed in the petition. 9. Based upon the aggregate DBS subscriber penetration levels that were calculated using Census 2000 household data,24 as reflected in Attachment A, we find that Petitioner has demonstrated that the number of households subscribing to programming services offered by MVPDs, other than the largest 15Petition at 6. A zip code plus four analysis allocates DBS subscribers to a franchise area using zip code plus four information that generally reflects franchise area boundaries in a more accurate fashion than standard five digit zip code information. 16Opposition at 2. 17Id. 18Id. 19Reply at 2. 20Id. 21Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, Buy-Through Prohibition, MM Docket No. 92-266, MM Docket No. 92-262, Third Order on Reconsideration, 9 FCC Rcd 4316, 4320 , paras. 5, 7 (1994). 22Id. 23Moreover, were we to include Comcast’s subscribership in the calculation of the second prong of the competing provider test that would only serve to inflate the figures above the current levels for Hainesville and Island Lake. 24Petition at 7. Federal Communications Commission DA 08-1902 4 MVPD, exceeds 15 percent of the households in the Communities. Therefore, the second prong of the competing provider test is satisfied for each of the Communities. 10. 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 Communities listed on Attachment A. III. ORDERING CLAUSES 11. Accordingly, IT IS ORDERED that the petition for a determination of effective competition filed in the captioned proceeding by Comcast Cable Communications, LLC IS 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.25 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau 2547 C.F.R. § 0.283. Federal Communications Commission DA 08-1902 5 ATTACHMENT A CSR 7064-E COMMUNITIES SERVED BY COMCAST CABLE COMMUNICATIONS, LLC 2000 Estimated Census DBS Communities CUID(s) CPR* Household Subscribers CSR 7064-E Antioch IL0678 42.04% 3,235 1,360 Fox Lake IL0680 32.25% 4,046 1,305 Hainesville IL0583 37.66% 701 264 Holiday Hills IL0388 31.07% 280 87 Island Lake IL0393 30.56% 2,837 867 IL0394 Johnsburg IL0309 32.16% 1,760 566 Lake Villa IL0677 38.65% 2,052 793 Lindenhurst IL0676 40.28% 4,235 1,706 Lakemoor IL0305 32.45% 1,014 329 McHenry City IL0303 31.19% 7,872 2,455 McHenry County IL0304 45.39% 20,420 9,269 IL0178 IL1826 Port Barrington IL0464 29.49% 295 87 Prairie Grove IL1751 33.00% 303 100 Round Lake Park IL0391 33.93% 2,131 723 Volo IL1738 48.08% 52 25 Wonder Lake IL0308 35.73% 445 159 Woodstock IL0288 41.44% 7,273 3,014 *CPR = Percent of competitive DBS penetration rate.