Federal Communications Commission DA 08-2636 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Entertainment – Advance/Newhouse Partnership Petition for Determination of Effective Competition in Several Texas Communities ) ) ) ) ) ) CSR 8033-E, 8052-E, 8030-E, 8047-E, 8044-E, 8050-E, 8039-E, 8027-E MEMORANDUM OPINION AND ORDER Adopted: December 2, 2008 Released: December 3, 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 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 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) 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 alternatively claims to be exempt from cable rate regulation in the Communities listed on Attachment B 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 petition(s) based on our finding that Petitioner is subject to effective competition in the Communities listed on Attachments (A and B). II. DISCUSSION A. The Competing Provider Test 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 08-2636 2 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 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 these petitions.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 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 Petitions 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 Petitions at 5. 12See Petitions at 5. While Petitioner did not provide copies of channel lineups for either DIRECTV or Dish, Petitioner did provide links to the relevant DBS websites where listings are available. Petitioner is correct to note that we have consistently found that the programming of both DBS providers satisfies the programming compatibility component of the test. 13See Petitions at 6. 14Id. Federal Communications Commission DA 08-2636 3 subscribers attributable to the DBS providers within the Communities on a zip code basis.15 7. Based upon the aggregate DBS subscriber penetration levels that were calculated using Census 2000 household data,16 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 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. 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 Communities listed on Attachment A. 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 B, 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 B. Therefore, the low penetration test is also satisfied as to the Communities. 15See Petitions at 6-7, Exhibits B, D. 16Petitions at 7, Exhibits B D-E. 1747 U.S.C. § 543(l)(1)(A). Federal Communications Commission DA 08-2636 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 08-2636 5 ATTACHMENT A CSR 8039-E, 8050-E, 8047-E, 8044-E, 8030-E, 8052-E COMMUNITIES SERVED BY TIME WARNER CABLE, INC. 2000 Estimated Census DBS Communities CUID(S) CPR* Household Subscribers Asherton TX2042 27.34% 428 117 Carrizo Springs TX0185 32.93% 1816 598 Crystal City TX0186 22.26% 2183 486 Agua Dulce TX2350 25.64% 234 60 Beeville TX0122 26.12% 4697 1227 Driscoll TX2349 25.39% 256 65 Odem TX2156 28.09% 776 218 Orange Grove TX1209 45.67% 473 216 Robstown TX0742 25.44% 3644 927 San Diego TX0322 20.80% 1548 322 Woodsboro TX0758 35.24% 613 216 Cotulla TX2052 30.79% 1208 372 Dilley TX0351 29.53% 955 282 Pearsall TX0339 23.40% 2201 515 Anthony TX0634 18.13% 684 124 Clint TX0556 27.92% 308 86 El Paso TX0242 19.12% 182063 34819 Horizon City TX0423 26.74% 1668 446 Beaumont TX0251 17.17% 44361 7617 Bridge City TX0457 19.50% 3195 623 Orange TX0106 29.82% 7310 2180 Pine Forest TX1637 23.32% 223 52 Pinehurst TX0107 21.52% 962 207 Port Arthur TX0223 15.12% 21839 3302 Rose Hill Acres TX1297 16.57% 169 28 Silsbee TX0370 26.37% 2385 629 Vidor TX0458 23.19% 4222 979 West Orange TX0108 21.47% 359 1672 Del Rio TX0183 18.46% 10778 1990 Laughlin AFB TX2105 18.43% 120 651 Gonzales TX0284 37.22% 2571 957 Yoakum TX0234 45.92% 2156 990 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 08-2636 6 ATTACHMENT B CSR 8027-E, 8030-E,8047-E, 8052-E COMMUNITIES SERVED BY TIME WARNER CABLE, INC. Franchise Area Cable Penetration Communities CUID(S) Households Subscribers Percentage Kerr County TX0484 8611 1792 20.81% Orange County TX2377 13868 1632 11.77% Fabens TX0057 2147 442 20.59% Socorro TX0558 6756 1674 24.78% Sunland Park NM0151 3355 570 16.99% Vinton TX2347 496 114 22.98% Val Verde County TX1458 31642 1854 5.86%