Federal Communications Commission DA 08-807 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Cable San Antonio LP Time Warner Entertainment-Advance/Newhouse Partnership Petition for Determination of Effective Competition in Forty Texas Communities ) ) ) ) ) ) ) ) ) CSR 7640-E, CSR 7641-E & CSR 7647-E CSR 7650-E, CSR 7651-E, CSR 7652-E & CSR 7653-E MEMORANDUM OPINION AND ORDER Adopted: April 3, 2008 Released: April 4, 2008 By the Senior Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION AND BACKGROUND 1. Time Warner Cable San Antonio LP and Time Warner Entertainment- Advance/Newhouse Partnership (collectively “Time Warner”), hereinafter referred to as “Petitioner,” has filed with the Commission seven petitions 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”). 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 petitions 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 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 08-807 2 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 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 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 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 7640-E at 4-5; Petition CSR 7641-E at 5-6; Petition CSR 7647-E at 4-5; Petition CSR 7650-E at 4-5; Petition CSR 7651-E at 4-5; Petition CSR 7652-E at 4-5; Petition CSR 7653-E at 4-5. 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 7640-E at 5-6; Petition CSR 7641-E at 6-7; Petition CSR 7647- E at 5-6; Petition CSR 7650-E at 5-6; Petition CSR 7651-E at 5-6; Petition CSR 7652-E at 5-6; Petition CSR 7653-E at 5-6. 12See Petition CSR 7640-E at 6; Petition CSR 7641-E at 7; Petition CSR 7647-E at 6; Petition CSR 7650-E at 6; Petition CSR 7651-E at 6; Petition CSR 7652-E at 6; Petition CSR 7653-E at 6. 13See Petition CSR 7640-E at 7; Petition CSR 7641-E at 6-7; Petition CSR 7647-E at 7; CSR 7650-E at 7; CSR 7651-E at 7; CSR 7652-E at 7; CSR 7653-E at 7. 14Petition 7640-E at 7-9; Petition CSR 7641-E at 7-8; Petition CSR 7647-E at 7-8; Petition CSR 7650-E at 7-8; Petition CSR 7651-E at 7; Petition CSR 7652-E at 7; Petition CSR 7653-E at 7-8. With regard to Petitions CSR 7640-E (Blanco), CSR 7641-E (China Grove and Scenic Oaks), CSR 7647-E (Stockdale), and CSR 7650-E (continued....) Federal Communications Commission DA 08-807 3 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 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 petitions for a determination of effective competition filed in the captioned proceeding by Time Warner Cable San Antonio LP, and Time Warner Entertainment-Advance/Newhouse Partnership ARE 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 Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau (...continued from previous page) (Bartlett), Time Warner is unable to determine which MVPD is the largest in these communities because the DBS subscribership data obtained from SBCA is aggregated and does not break down the individual subscribership of each DBS provider. Nevertheless, Time Warner argues that it is subject to effective competition because, in addition to DBS penetration exceeding 15 percent of the occupied households, the number of Time Warner subscribers also exceed 15 percent and the Commission has recognized that in such cases the second prong of the competing provider test is satisfied.. 15Petition CSR 7640-E at 8-9; Petition CSR 7641-E at 8-9; Petition CSR 7647-E at 8-9; Petition CSR 7650-E at 8-9; Petition CSR 7651-E at 7-8; Petition CSR 7652-E at 7-8; Petition CSR 7653-E at 4-5. 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. 16Petition CSR 7640-E at 8-9 and Exhibit C; Petition CSR 7641-E at 9 and Exhibit C; Petition CSR 7647-E at 8-9 and Exhibit C; Petition CSR 7650-E at 8-9 and Exhibit C; Petition CSR 7651-E at 7-8 and Exhibit C; Petition CSR 7652-E at 7-8 and Exhibit C; Petition CSR 7653-E at 7-8 and Exhibit C. 1747 C.F.R. § 0.283. Federal Communications Commission DA 08-807 4 ATTACHMENT A CSRs 7640-E, 7641-E, 7647-E, 7650-E, 7651-E, 7652-E & 7653-E COMMUNITIES SERVED BY TIME WARNER CABLE SAN ANTONIO LP AND TIME WARNER ENTERTAINMENT ADVANCE/NEWHOUSE PARTNERSHIP CSR 7640-E TIME WARNER CABLE SAN ANTONIO LP 2000 Estimated Census DBS Communities CUID CPR* Household Subscribers Blanco TX2197 57.12% 576 329 TIME WARNER CABLE SAN ANTONIO LP CSR 7641-E 2000 Estimated Census DBS Communities CUIDS CPR* Household Subscribers Balcones Heights TX0519 16.28% 1437 234 Bulverde TX2371 53.33% 1292 689 Bexar County TX0478 22.41% 35903 8045 China Grove TX0699 56.93% 404 230 Cibolo TX0491 26.10% 1092 285 Converse TX0486 21.89% 3837 840 Elmendorf TX1754 43.36% 226 98 Fair Oaks Ranch TX2335 26.02% 1683 438 Garden Ridge TX1092** 23.0% 704 164 TX2158 Grey Forrest TX0521 28.49% 179 51 Helotes TX0936 24.07% 1471 354 Kirby TX0533 17.75% 2975 528 Federal Communications Commission DA 08-807 5 La Coste TX1169 25.48% 416 106 Live Oak TX0490 18.46% 3429 633 Marion TX1448 45.01% 371 167 New Braunfels TX0282** 19.45% 13558 2637 TX1272 Scenic Oaks(Unincor) TX2205 42.77% 1190 509 Schertz TX0494 24.95% 6604 1648 Sequin TX0211** 31.93% 7526 2403 TX1257 City of Selma TX0489 21.68% 286 62 City of Shavano Park TX0528 16.38% 629 103 City of Somerset TX1110 29.24% 513 150 City of Windcrest TX0488 17.79% 2232 397 TIME WARNER CABLE SAN ANTONIO LP CSR 7647-E 2000 Estimated Census DBS Communities CUIDS CPR* Households Subscribers City of Stockdale TX1014 47.28% 497 235 City of Bandera TX1021** 62.99% 408 257 TX2155 TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP CSR 7650-E 2000 Estimated Census DBS Communities CUIDS CPR* Households Subscribers City of Bartlett TX0929** 33.98% 571 194 TX0930 City of Granger TX0931 40.04% 502 201 Federal Communications Commission DA 08-807 6 TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP CSR 7651-E 2000 Estimated Census DBS Communities CUID CPR* Households Subscribers City of Florence TX1078 56.96% 381 217 TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP CSR 7652-E 2000 Estimated Census DBS Communities CUIDS CPR* Households Subscribers City of Fredericksburg TX0063** 41.62% 3784 1575 TX2157 TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP CSR 7653-E 2000 Estimated Census DBS Communities CUIDS CPR* Households Subscribers City of Lockhart TX0291 23.41% 3627 849 City of Luling TX0725 27.36% 1791 490 Town of Martindale TX0896 18.07% 332 60 Village of Wimberley TX0894 41.43% 1576 653 *CPR = Percent of competitive DBS penetration rate. ** - The communities of Garden Ridge, New Braunfels, Sequin, Bandera, Bartlett, and Fredericksburg each have two CUIDS that Time Warner operates as a single franchise area pursuant to an agreement with the local franchise authorities.