Federal Communications Commission DA 08-938 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Cable Inc., and Time Warner Entertainment-Advance/Newhouse Partnership Petition for Determination of Effective Competition in Twenty-Six Communities in New Hampshire ) ) ) ) ) ) ) ) CSR 7520-E CSR 7523-E CSR 7525-E CSR 7528-E CSR 7542-E CSR 7543-E MEMORANDUM OPINION AND ORDER Adopted: April 22, 2008 Released: April 22, 2008 By the Senior Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION AND BACKGROUND 1. Time Warner Cable Inc., and Time Warner Entertainment-Advance/Newhouse Partnership, hereinafter referred to as “Petitioner,” has filed with the Commission a petition 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 systems serving the communities listed on Attachment B and hereinafter referred to as Group B Communities are 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 are 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 areas. 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. 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 08-938 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 is supported in the petitions with citations to channel lineups for both DIRECTV and Dish.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 area. Petitioner asserts that it is the largest MVPD in all but five of the Group B Communities.14 647 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 in CSR 7528-E 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 in CSR 7520-E at 5-6. 12See Petition in CSR 7523-E at 6 (citing web pages of DIRECTV and Dish). 13See Petition in CSR 7520-E at 2-3. 14Petition in CSR 7520-E at 7; Petition in CSR 7523-E at 7; Petition in CSR 7525-E at 7; Petition in CSR 7528-E at 7. Federal Communications Commission DA 08-938 3 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 and zip code plus four basis where necessary.15 In circumstances where the largest MVPD is unable to be identified, the Commission is able to determine that the second prong is met when it can make dual assumptions. First, we assume that Petitioner is the largest MVPD provider in the Community and determine that the combined DBS subscribership is greater than 15 percent; we then assume that one of the DBS providers is the largest MVPD in the Community and determine that Petitioner’s subscribership is greater than 15 percent. When both determinations can be made, then the second prong of the competing provider test is met. Petitioner’s data about its subscribership, along with data about DBS subscribership set forth in Attachment B, show that both these determinations can be made for the five Group B Communities mentioned above.16 7. Based upon the aggregate DBS subscriber penetration levels that were calculated using Census 2000 household data,17 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. 9. Petitioner also claims to have satisfied the second prong of the competing provider test in two additional franchise areas, Dorchester and Northumberland.18 In Dorchester, Petitioner’s subscribership is 2.27%19 and the DBS providers’ is 37.41%.20 In Northumberland, Petitioner’s subscribership is .91%21 and the DBS providers’ is 33.28%.22 It is conceivable that, in each of those Communities, the DBS provider with the smaller number of subscribers has so few of them that they and Petitioner’s subscribers – the subscribership of the MVPDs other than the largest one – do not amount to more than 15 percent of the households in the franchise area. In that event, the second prong of the competing provider test could not be satisfied. Accordingly, we deny Petitioner’s claim that competing provider effective competition exists in Dorchester and Northumberland. As shown in the following paragraphs, however, another form of effective competition exists in those two areas. 15Petition in CSR 7542-E at 7-8 & Exhs. D & E. 16Petition in CSR 7520-E at 7-8 (in Milan, Time Warner subscribership is over 15%), CSR 7523-E at 7-8 (same in Bath and Sugar Hill), CSR 7525-E at 7-8 (same for Stratford), CSR 7528-E at 7-8 (same for Richmond). 17Petition in CSR 7543-E at 8 n.25 . 18 Petitions in CSR 7542-E and CSR 7543-E at 7-8. 19 Petition in CSR 7543-E, Exh. A. 20 Id., Exhs. E & F. 21 Petition in CSR 7542-E, Exh. A. 22 Id., Exhs. E & F. Federal Communications Commission DA 08-938 4 B. The Low Penetration Test 10. 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.23 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 two franchise areas, the Group C Communities of Dorchester and Northumberland. 11. Based upon the subscriber penetration level calculated by Petitioner, as stated in paragraph 9 above and 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. III. ORDERING CLAUSES 12. Accordingly, IT IS ORDERED that the petitions for a determination of effective competition filed in the captioned proceeding by Time Warner Cable Inc., and Time Warner Entertainment-Advance/Newhouse Partnership, ARE GRANTED. 13. 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. 14. This action is taken pursuant to delegated authority pursuant to Section 0.283 of the Commission’s rules.24 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau 2347 U.S.C. § 543(l)(1)(A). 2447 C.F.R. § 0.283. Federal Communications Commission DA 08-938 5 ATTACHMENT A CSR 7520-E, CSR 7523-E, CSR 7525-E, CSR 7528-E, CSR 7542-E, CSR 7543-E COMMUNITIES SERVED BY TIME WARNER CABLE INC., AND TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP Communities CUID(S) CPR* CSR 7520-E Milan NH0233 60.12% CSR 7523-E Bath NH0173 48.58% Bethlehem NH0185 20.61% Carroll NH0193 48.67% Franconia NH0186 39.06% Lisbon NH0045 48.77% Littleton NH0014 18.75% Monroe NH0175 33.90% Sugar Hill NH0174 48.77% CSR 7525-E Groveton NH0204 39.47% Stratford NH0176 55.25% CSR 7528-E Marlborough NH0002 35.41% Richmond NH0224 27.20% Swanzey NH0003 18.26% CSR 7542-E Berlin NH0017 20.05% Gorham NH0018 24.70% Lancaster NH0019 28.74% Northumberland NH0215 33.28% Whitefield NH0074 28.95% Federal Communications Commission DA 08-938 6 Communities CUID(S) CPR* CSR 7543-E (continued) Dorchester NH0218 37.41% Groton NH0217 20.99% Lincoln NH0039 15.66% Rumney NH0182 23.90% Warren NH0181 41.47% Wentworth NH0183 29.51% Woodstock NH0040 17.99% Federal Communications Commission DA 08-938 7 ATTACHMENT B CSR 7520-E, CSR 7523-E, CSR 7525-E, CSR 7528-E, CSR 7542-E, CSR 7543-E COMMUNITIES SERVED BY TIME WARNER CABLE INC., AND TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP 2000 Estimated Census DBS Communities CUID(S) CPR* Household Subscribers CSR 7520-E Milan NH0233 60.12% 532 320 CSR 7523-E Bath NH0173 48.58% 350 170 Bethlehem NH0185 20.61% 924 190 Carroll NH0193 48.67% 279 136 Franconia NH0186 39.06% 384 150 Lisbon NH0045 48.77% 629 307 Littleton NH0014 18.75% 2,514 471 Monroe NH0175 33.90% 310 105 Sugar Hill NH0174 48.77% 258 126 CSR 7525-E Groveton NH0204 39.47% 514 203 Stratford NH0176 55.25% 397 219 CSR 7528-E Marlborough NH0002 35.41% 829 294 Richmond NH0224 27.20% 379 103 Swanzey NH0003 18.26% 2,666 487 CSR 7542-E Berlin NH0017 20.05% 4,555 913 Gorham NH0018 24.70% 1,293 319 Lancaster NH0019 28.74% 1,286 370 Federal Communications Commission DA 08-938 8 2000 Estimated Census DBS Communities CUID(S) CPR* Household Subscribers CSR 7542-E (continued) Whitefield NH0074 28.95% 819 237 CSR 7543-E Groton NH0217 20.99% 175 37 Lincoln NH0039 15.66% 583 91 Rumney NH0182 23.90% 569 136 Warren NH0181 41.47% 355 147 Wentworth NH0183 29.51% 310 91 Woodstock NH0040 17.99% 500 90 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 08-938 9 ATTACHMENT C CSR 7542-E, CSR 7543-E COMMUNITIES SERVED BY TIME WARNER CABLE INC., AND TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP Franchise Area Cable Penetration Communities CUID(S) Households Subscribers Percentage CSR 7542-E Northumberland NH0215 989 9 .91% CSR 7543-E Dorchester NH0218 132 3 2.27%