Federal Communications Commission DA 08-2617 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Cable Inc., and Time Warner Entertainment-Advance/Newhouse Partnership 3 Petitions for Determination of Effective Competition in 52 Communities in the State of New York and the Commonwealth of Pennsylvania ) ) ) ) ) ) ) ) ) CSR 7377-E CSR 7493-E CSR 7496-E MEMORANDUM OPINION AND ORDER Adopted: December 16, 2008 Released: December 17, 2008 By the Senior Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION AND BACKGROUND 1. Time Warner Cable Inc., and Time Warner Entertainment-Advance/Newhouse Partnership, hereinafter referred to as “Petitioner,” has filed with the Commission petitions 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 the 52 communities listed on Attachment A and hereinafter referred to as “Communities.”1 Petitioner alleges that its cable systems serving the communities listed on Attachment B and hereinafter referred to as the Attachment B Communities, as well as the communities listed on Attachment C and hereinafter referred to as the Attachment C Communities, are subject to effective competition pursuant to Section 623(1) of the Communications Act of 1934, as amended (“Communications Act”)2 and the Commission’s implementing rules,3 and are 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”). 2. Petitioner also claims to be subject to effective competition because of the DBS providers in the Communities listed on Attachment D and hereinafter referred to as the Attachment D Communities, but has not furnished the data with which we can adjudicate those claims. Petitioner has, however, furnished data with which we can determine whether Petitioner is exempt from cable rate regulation in the Attachment D Communities because it serves fewer than 30 percent of the households there. The 1 The petitions also seek such a determination for 20 additional communities. By letters dated November 17, 2008, Petitioner requested permission to withdraw them from our consideration. The Communities are, in CSR 7377-E, Allegany (Village) NY0009; Andover (Village) NY0014; Belmont (Village) NY0016; Cattaraugus (Village) NY0860; Cuba (Village) NY0118; East Randolph (Village) NY1153; Ellicottville (Town) NY0857; Ellicottville (Village) NY0856; Franklinville (Village) NY0864; Portville (Village) NY0366; Randolph (Village) NY1151; and Wellsville (Village) NY0019; in CSR 7493-E, Nichols (Town) NY1074; Athens (Borough) PA0579; and South Waverly (Borough) PA0594; and, in CSR 7496-E, Bemus Point (Village) NY0908; Cassadaga (Village) NY0710; Falconer (Village) NY0157; Panama (Village) NY1564; and Sinclairville (Village) NY1244. We grant Petitioner’s request and do not consider these 20 communities further herein. 2 See 47 U.S.C. § 543(1). 3 47 C.F.R. § 76.905(b)(2) and 47 C.F.R. § 76.905(b)(1). Federal Communications Commission DA 08-2617 2 petitions are unopposed. 3. In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition,4 as that term is defined by Section 623(l) of the Communications Act and Section 76.905 of the Commission’s rules.5 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.6 For the reasons set forth below, we grant the petitions as to all of the Attachment B Communities and the Attachment D Communities, based on our finding that Petitioner is subject to effective competition in them; and we deny the petitions as to the Attachment C Communities. II. DISCUSSION A. The Competing Provider Test 4. 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;7 this test is otherwise referred to as the “competing provider” test. 5. 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.8 6. Turning to the first prong of this test, it is undisputed that the Attachment B Communities and the Attachment C 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.9 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.10 We further find that Petitioner has provided sufficient references to DBS promotions in media that serve the Attachment B Communities and the Attachment C Communities to support its assertion that potential customers in the Attachment B Communities and the Attachment C Communities are reasonably aware that they may purchase the service of these MVPD providers.11 The “comparable programming” element is met if a competing MVPD provider offers at least 12 channels of 4 47 C.F.R. § 76.906. 5 See 47 U.S.C. § 543(l) and 47 C.F.R. § 76.905. 6 See 47 C.F.R. §§ 76.906 & 907. 7 47 U.S.C. § 543(1)(1)(B); see also 47 C.F.R. § 76.905(b)(2). 8 47 C.F.R. § 76.905(b)(2)(i). 9 See, e.g., Petition in CSR 7377-E at 3-5. 10 Mediacom 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). 11 47 C.F.R. § 76.905(e)(2); see also Petition in CSR 7493-E at 4 n.12. Federal Communications Commission DA 08-2617 3 video programming, including at least one channel of nonbroadcast service programming12 and is supported in this petition with citations to the channel lineups for both DIRECTV and Dish.13 Also undisputed is Petitioner’s assertion that both DIRECTV and Dish offer service to at least “50 percent” of the households in the Attachment B Communities and the Attachment C Communities because of their national satellite footprint.14 Accordingly, we find that the first prong of the competing provider test is satisfied as to both the Attachment B Communities and the Attachment C Communities. 7. 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 most of the Attachment B Communities and the Attachment C Communities.15 Petitioner sought to determine the competing provider penetration in these Communities by purchasing a subscriber tracking report from the Satellite Broadcasting and Communications Association that identified the number of subscribers attributable to the DBS providers within these Communities on a five-digit zip code basis.16 8. In the remainder of the Attachment B Communities and the Attachment C Communities, the largest MVPD is unable to be identified because Petitioner’s subscribership is over 15 percent and so is the DBS providers’, but Petitioner’s is less than the DBS providers’.17 It is possible that the largest MVPD there is Petitioner or either of the two DBS providers. In such circumstances, nevertheless, it is clear that the second prong of the competing provider test is satisfied. If Petitioner is the largest MVPD in a Community, then the combined subscribership of the other MVPDs (the DBS providers) is greater than 15 percent. Or, if one of the DBS providers is the largest MVPD in the Community, then the combined subscribership of the other MVPDs (Petitioner and the other DBS provider) is greater than 15 percent. Petitioner’s data shows that both these determinations can be made for all the Attachment B Communities and the Attachment C Communities.18 9. Based upon the aggregate DBS subscriber penetration levels that were calculated using Census 2000 household data,19 as reflected in Attachment B and Attachment C, 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 both the Attachment B and Attachment C Communities. Therefore, based on the data in the Petitions, the second prong of the competing provider test is satisfied for each of the Attachment B and Attachment C Communities. 10. Attachment C, however, lists two Communities in which Petitioner’s data show that the combined subscriberships of Petitioner and the DBS Providers exceed 100 percent of the households. This data is obviously inaccurate and unreliable. It may be that the excessive subscribership totals result from the combined application of very small populations (in both the Attachment C Communities, there are only a few hundred households) and five-digit zip codes that cover large areas and many households 12 See 47 C.F.R. § 76.905(g). See also, e.g., Petition in CSR 7493-E at 5-6. 13 See, e.g., Petition in CSR 7496-E at 6. 14 See, e.g., Petition in CSR 7377-E at 3. 15 See, e.g., Petition in CSR 7493-E at 7. 16 See, e.g., Petition in CSR 7496-E at 9 n.26. 17 These Communities are, in CSR 7377-E, Allegany (Town), Cuba (Town), Eldred (Township), Hinsdale, Randolph (Town), and Wellsville (Town); in CSR 7493-E, Barton (Town); and, in CSR 7496-E, Cherry Creek (Village), North Harmony (Town), South Dayton (Village), and Stockton (Town). 18 See, e.g., Petition in CSR 7496-E at Exhs. A, E & F. 19 See, e.g., Petition in CSR 7377-E at 8 n.26. Federal Communications Commission DA 08-2617 4 outside the franchise areas. Whatever the reason, we cannot disregard these inaccuracies, which Petitioner should have corrected before filing or noticed and brought to our attention, because they undermine the reliability of the five-digit zip code data in these instances. We deny the petitions as to the two Attachment C Communities. 11. Based on the foregoing, we conclude that Petitioner has submitted sufficient evidence demonstrating that both prongs of the competing provider test are satisfied and reliable for purposes of concluding that Petitioner is subject to effective competition as to the Attachment B Communities. Accordingly, we grant the petitions as to the Attachment B Communities. B. The Low Penetration Test 12. 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.20 13. Petitioner alleges that it is subject to competing provider effective competition in the Attachment D Communities, and the first prong of that kind of effective competition is satisfied in them. Petitioner, however, has submitted incomplete or flawed evidence about the second prong. In two Attachment D Communities, French Creek, New York, and Wayne, Pennsylvania, Petitioner supplied no data about DBS subscribership. In the other Attachment D Communities, Petitioner’s subscribership is very small and, if the subscribership of one of the DBS providers is also very small, then the subscribership of the MVPDs other than the largest MVPD would not exceed 15 percent of the households in the franchise area.21 Thus, Petitioner cannot satisfy the second prong of the competing provider effective competition test in the Attachment D Communities. 14. In all the Attachment D Communities, however, Petitioner’s subscribership is under 30 percent.22 Based upon the subscriber penetration level calculated by Petitioner, as reflected in Attachment D, 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 Communities listed on Attachment D. Therefore, the low penetration test is satisfied in those Communities. 20 47 U.S.C. § 543(l)(1)(A). 21 See, e.g., Petition in CSR 7493-E at 8. 22 See, e.g., Petition in CSR 7496-E at 8-9. Federal Communications Commission DA 08-2617 5 III. ORDERING CLAUSES 15. Accordingly, IT IS ORDERED that Petitioner’s request that the 20 communities listed in footnote 1 be withdrawn from consideration in this proceeding IS GRANTED. 16. IT IS FURTHER ORDERED that the petitions for a determination of effective competition filed in the captioned proceeding by Time Warner Cable Inc., and Time Warner Entertainment-Advance/Newhouse Partnership ARE GRANTED as to the Communities listed in Attachment B and Attachment D and ARE DENIED as to the Communities listed in Attachment C. 17. IT IS FURTHER ORDERED that the certification to regulate basic cable service rates granted to any of the Communities set forth on Attachment B and Attachment D IS REVOKED. 18. This action is taken pursuant to delegated authority pursuant to Section 0.283 of the Commission’s rules.23 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau 23 47 C.F.R. § 0.283. Federal Communications Commission DA 08-2617 6 ATTACHMENT A ALL COMMUNITIES CSR 7377-E, CSR 7493-E, CSR 7496-E COMMUNITIES SERVED BY TIME WARNER CABLE INC., AND TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP Communities CUID(S) CSR 7377-E Allegany (Town) NY0010 Amity NY0470 Andover (Town) NY0015 Coldspring NY1596 Conewango NY1158 Cuba (Town) NY0913 Franklinville (Town) NY0865 Great Valley NY1523 Hinsdale NY1025 Ischua NY1524 Mansfield NY1154 New Albion NY1159 Olean (City) NY0012 Olean (Town) NY0011 Portville (Town) NY0367 Randolph (Town) NY1152 Scio NY0017 Wellsville (Town) NY0018 Willing NY0020 Ceres PA3273 Eldred (Borough) PA0034 Eldred (Township) PA1531 CSR 7493-E Barton (Town) NY0269 Chemung (Town) NY1076 Nichols (Village) NY1075 Waverly (Village) NY0270 Athens (Township) PA0578 Litchfield (Township) PA3177 Sayre (Borough) PA0593 Ulster (Township) PA0690 CSR 7496-E Brocton (Village) NY1071 Busti (Town) NY0383 Carroll (Town) NY1125 Cherry Creek (Village) NY1695 Clymer (Town) NY1671 Ellery (Town) NY0605 Ellicott (Town) NY0431 Ellington (Town) NY1705 Fredonia (Village) NY0618 French Creek (Town) NY1703 Gerry (Town) NY1201 Federal Communications Commission DA 08-2617 7 Communities CUID(S) CSR 7496-E (continued) Harmony (Town) NY1565 Mina (Town) NY1672 North Harmony NY1202 Poland (Town) NY0561 Pomfret (Town) NY0619 Portland (Town) NY1384 South Dayton (Village) NY1526 Stockton (Town) NY0711 Villenova (Town) NY1696 Wolcott (Town) NY1126 Wayne (Township) PA0220 Federal Communications Commission DA 08-2617 8 ATTACHMENT B “COMPETING PROVIDER” COMMUNITIES – GRANTED CSR 7377-E, CSR 7493-E, CSR 7496-E COMMUNITIES SERVED BY TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP AND TIME WARNER CABLE INC. 2000 Estimated Census DBS Communities CUID(S) CPR* Households Subscribers+ CSR 7377-E Allegany (Town) NY0010 27.22% 2599 707 Amity NY0470 46.69% 885 413 Cuba (Town) NY0913 48.59% 1336 649 Hinsdale NY1025 31.28% 861 269 Olean (City) NY0012 22.28% 6446 1436 Olean (Town) NY0011 22.28% 827 184 Portville (Town) NY0367 28.12% 1545 435 Randolph (Town) NY1152 48.75% 1007 491 Scio NY0017 35.56% 729 259 Wellsville (Town) NY0018 30.17% 3192 963 Willing NY0020 33.79% 538 182 Eldred (Township) PA1531 52.67% 686 361 CSR 7493-E Barton (Town) NY0269 25.34% 3568 904 Chemung (Town) NY1076 16.45% 969 159 Waverly (Village) NY0270 16.66% 1877 313 Athens (Township) PA0578 23.35% 2002 468 Sayre (Borough) PA0593 15.24% 2529 385 CSR 7496-E Brocton (Village) NY1071 22.68% 623 141 Busti (Town) NY0383 15.65% 3210 502 Carroll (Town) NY1125 16.34% 1364 223 Cherry Creek (Village) NY1695 49.02% 198 97 Clymer (Town) NY1671 38.97% 502 196 Ellery (Town) NY0605 17.10% 1852 317 Ellicott (Town) NY0431 15.08% 3818 576 Fredonia (Village) NY0618 17.85% 3641 650 Gerry (Town) NY1201 17.23% 661 114 Mina (Town) NY1672 36.92% 456 168 North Harmony NY1202 33.89% 927 314 Poland (Town) NY0561 36.18% 940 340 South Dayton (Village) NY1526 48.85% 248 121 Stockton (Town) NY0711 25.45% 859 219 Wolcott (Town) NY1126 33.84% 1742 589 * CPR = DBS penetration or subscribership + See Petition (numbers of DBS subscribers are rounded off) Federal Communications Commission DA 08-2617 9 ATTACHMENT C “COMPETING PROVIDER” COMMUNITIES – DENIED CSR 7377-E, CSR 7493-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. 2000 Estimated Time-Warner DBS Census DBS Communities CUID(S) Subscribership* Subscribership* Households Subscribers* CSR 7377-E Eldred (Borough) PA0034 77.07% 45.14% 362 163 CSR 7493-E Nichols (Village) NY1075 77.46% 29.18% 213 62 * See Petition (numbers of DBS subscribers are rounded off) Federal Communications Commission DA 08-2617 10 ATTACHMENT D “LOW PENETRATION” COMMUNITIES – GRANTED CSR 7377-E, CSR 7493-E, CSR 7496-E COMMUNITIES SERVED BY TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP Franchise Area Cable Penetration Community CUID Households Subscribers Percentage CSR 7377-E Andover (Town) NY0015 742 48 6.47% Coldspring NY1596 278 4 1.44% Conewango NY1158 509 9 1.77% Franklinville (Town) NY0865 1205 92 7.63% Great Valley NY1523 843 86 10.20% Ischua NY1524 345 10 2.90% Mansfield NY1154 305 18 5.90% New Albion NY1159 808 4 .50% Ceres PA3273 381 13 3.41% CSR 7493-E Litchfield (Township) PA3177 501 27 5.39% Ulster (Township) PA0690 512 67 13.09% CSR 7496-E Ellington (Town) NY1705 568 84 14.79% French Creek (Town) NY1703 332 48 14.46% Harmony (Town) NY1565 837 111 13.26% Pomfret (Town) NY0619 5105 580 11.36% Portland (Town) NY1384 1655 47 2.84% Villenova (Town) NY1696 415 23 5.54% Wayne (Township) PA0220 642 12 1.87%