Federal Communications Commission DA 08-708 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Charter Communications, on behalf of its subsidiaries and affiliates Petition for Determination of Effective Competition in Three Tennessee Communities (CUIDs TN0012, TN0049, TN0023) ) ) ) ) ) ) ) ) CSR 7668-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. Charter Communications, on behalf of its subsidiaries and affiliates (“Charter”), 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 EchoStar Communications Corporation (“EchoStar”). The petition is 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. 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 08-708 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 EchoStar, 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 EchoStar 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 plus four basis.15 647 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 1. 13See Petition at 2-3. 14Id.at 5. 15Petition at 5-6. 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. Federal Communications Commission DA 08-708 3 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. III. ORDERING CLAUSES 9. Accordingly, IT IS ORDERED that the petition for a determination of effective competition filed in the captioned proceeding by Charter Communications, on behalf of its subsidiaries and affiliates IS GRANTED. 10. 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. 11. This action is taken pursuant to delegated authority pursuant to Section 0.283 of the Commission’s rules.17 FEDERAL COMMUNICATIONS COMMISSION Nancy Murphy Associate Bureau Chief, Media Bureau 16Petition at 6 and Exhibit 4. 1747 C.F.R. § 0.283. Federal Communications Commission DA 08-708 4 ATTACHMENT A CSR 7668-E COMMUNITIES SERVED BY CHARTER COMMUNICATIONS, ON BEHALF OF ITS SUBSIDIARIES AND AFFILIATES 2000 Estimated Census DBS Communities CUID(S) CPR* Household Subscribers Bristol TN0012 19.6% 10648 2087 Johnson City TN0049 23.0% 23720 5454 Kingsport TN0023 19.65% 19662 3863 *CPR = Percent of competitive DBS penetration rate.