Federal Communications Commission DA 08-704 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Cable Inc. Petition for Determination of Effective Competition in Twenty-Three Missouri and Kansas Communities ) ) ) ) ) ) ) CSR 7150-E, CSR-7151-E & CSR 7535-E MEMORANDUM OPINION AND ORDER Adopted: March 25, 2008 Released: March 26, 2008 By the Associate Bureau Chief, Media Bureau: I. INTRODUCTION AND BACKGROUND 1. Time Warner Cable Inc. (“Time Warner”) , hereinafter referred to as “Petitioner,” has filed with the Commission three 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 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 Petition 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 08-704 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 Time Warner indicates that the program offerings are available on the websites of both DIRECTV and Dish, and we have reviewed their websites and confirmed that their program offerings meet the test.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 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 CSR 7150-E at 5; Petition CSR 7151-E at 5; Petition CSR 7535-E 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 CSR 7150-E at 6; Petition CSR 7151-E at 6; Petition CSR 7535-E at 5. 12See Petition CSR 7150-E at 6; Petition CSR 7151-E at 6; Petition CSR 7535-E at 6. 13See Petition CSR 7150-E at 7; Petition CSR 7151-E at 7; Petition CSR 7535-E at 6. Federal Communications Commission DA 08-704 3 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 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 plus four basis.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. 14 See Petition CSR 7150-E at 8; Petition CSR 7151-E at 7-8; Petition CSR 7535-E at 7. 15Petition CSR 7150-E at 8; CSR Petition 7151-E at 8; CSR Petition 7535-E at 7. 16Petition CSR 7150-E at 8 and Exhibit B; CSR 7151-E at 8 and Exhibit B; CSR 7535-E at 8 and Exhibit C. 1747 U.S.C. § 543(l)(1)(A). Federal Communications Commission DA 08-704 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 Nancy Murphy Associate Bureau Chief, Media Bureau 1847 C.F.R. § 0.283. Federal Communications Commission DA 08-704 5 ATTACHMENT A CSRs 7150-E, CSR-7151-E & CSR 7535-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. CSR 7150-E Communities CUIDS Bonner Springs KS0084 Edwardsville KS0096 Leavenworth KS0077 CSR 7151-E Communities CUIDS De Soto KS0081 Gardner KS0082 CSR 7535-E Communities CUID(S) Belton MO0073 Claycomo MO0517 Ferrelview MO0830 Independence MO1039 Glenaire MO0475 Kansas City KS0045 Kansas City MO1123 Lansing KS0260 Leavenworth KS0724 Lee’s Summit MO0072 Liberty MO0364 Lone Jack MO1127 Parkville MO0126 Federal Communications Commission DA 08-704 6 Pleasant Valley MO0476 Smithville MO0197 Tracy MO0443 Weatherby Lake MO0136 Weston MO0115 Federal Communications Commission DA 08-704 7 ATTACHMENT B CSRs 7150-E, CSR 7151-E &CSR 7535-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. CSR 7150-E 2000 Estimated Census DBS Communities CUID(S) CPR* Household Subscribers Bonner Springs KS0084 25.23% 2592 654 Edwardsville KS0096 17.47% 1568 274 Leavenworth KS0077 17.06% 12035 2053 CSR 7151-E 2000 Estimated Census DBS Communities CUID(S) CPR* Household Subscribers De Soto KS0081 28.75% 1642 472 Gardner KS0082 21.31% 3307 705 CSR 7535-E 2000 Estimated Census DBS Communities CUID(S) CPR* Household Subscribers Belton MO0073 25.45% 7945 2022 Claycomo MO0517 17.45% 596 104 Ferrelview MO0830 28.15% 302 85 Independence MO1039 20.68% 47390 9801 Glenaire MO0475 20.55% 219 45 Kansas City KS0045 21.03% 53597 11276 Kansas City MO1123 15.65% 183981 28802++ Lansing KS0260 17.21% 2435 419 Federal Communications Commission DA 08-704 8 Lee’s Summit MO0072 17.27% 26417 4562 Liberty MO0364 20.83% 9511 1981 Lone Jack MO1127 22.77% 202 46 Parkville MO0126 15.63% 1510 236 Pleasant Valley MO0476 20.78 1328 276 Smithville MO0197 30.33% 2067 627 Tracy MO0443 22.78% 79 18 Weatherby MO0136 16.71% 700 117 Lake Weston MO0115 35.80% 676 242 *CPR = Percent of competitive DBS penetration rate. ++ = (25,984 DBS Subscribers + 2,818 Everest Connections Subscribers = 28802). (Time Warner combines the DBS and Everest subscribers to establish that MVPDs other than the largest MVPD satisfies the 15 percent penetration rate required under the competing provider test). Federal Communications Commission DA 08-704 9 ATTACHMENT C CSR 7535-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Franchise Area Cable Penetration Communities CUID(S) Households Subscribers Percentage Independence MO1039 47390 24 5.06% Leavenworth KS0724 23071 112 0.48% Lone Jack MO1127 202 12 0.059%