Federal Communications Commission DA 08-875 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Cable Inc. Time Warner Entertainment-Advance/Newhouse Partnership Petition for Determination of Effective Competition in Four Massachusetts Communities ) ) ) ) ) ) ) ) ) CSR 7231-E CSR 7232-E MEMORANDUM OPINION AND ORDER Adopted: April 14, 2008 Released: April 15, 2008 By the Senior Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION AND BACKGROUND 1. Time Warner Entertainment-Advance/Newhouse Partnership and Time Warner Cable Inc., hereinafter referred to as “Petitioner,” has filed with the Commission two 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 08-875 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 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 Petition CSR 7231-E at 4-5; Petition CSR 7232-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 7231-E at 5-6; Petition CSR 7232-E at 5-6. 12See Petition CSR 7231-E at 6; Petition CSR 7232-E at 6. 13See Petition CSR 7231-E at 2; Petition CSR 7232 at 2. 14Petition CSR 7231-E at 7; Petition CSR 7232-E at 7. Federal Communications Commission DA 08-875 3 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 Entertainment-Advance/Newhouse Partnership and Time Warner Cable Inc. 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 15Petition CSR 7231-E at 7-8; Petition CSR 7232-E at 7-8. 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 7231-E at 7-8 and Exhibit B; Petition CSR 7232-E at 7-8 and Exhibit B. 1747 C.F.R. § 0.283. Federal Communications Commission DA 08-875 4 ATTACHMENT A CSRs 7231-E & 7232-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. & TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP CSR 7231-E 2000 Estimated Census DBS Communities CUID(s) CPR* Household Subscribers Great Barrington MA0008 19.75% 3008 594 Town of Sheffield MA0346 24.62% 1369 337 CSR 7232-E 2000 Estimated Census DBS Communities CUID(s) CPR* Household Subscribers Town of Athol MA0013 24.6% 4487 1104 Town of Orange MA0014 17.24% 3045 525 *CPR = Percent of competitive DBS penetration rate.