Federal Communications Commission DA 10-1932 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Cable Inc. Petition for Determination of Effective Competition in various Ohio Communities ) ) ) ) ) ) CSR 7969-E MEMORANDUM OPINION AND ORDER Adopted: October 6, 2010 Released: October 6, 2010 By the Senior Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION AND BACKGROUND 1. Time Warner Cable Inc., 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 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 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 Attachments B and C. We deny the petition as to the Addyston Community, which is listed only on Attachment A, for the reasons stated in paragraph 11. 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 10-1932 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 (“MVPDs”) 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 its 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 this petition with copies of 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 most of the Group B Communities.14 Petitioner 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 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 at 5. 12See Petition at 6. 13Id. 14Id. at 7. In the Communities of Clark, Clearcreek, Crosby, Franklin, Neville, Pike, and Williamsburg, both the Time Warner penetration figure and the aggregate DBS figure clearly exceed 15 percent. Time Warner argues that it is subject to effective competition because in addition to DBS penetration exceeding 15 percent of the occupied (continued....) Federal Communications Commission DA 10-1932 3 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 five-digit or nine-digit zip code 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. C. Addyston, Ohio 11. In the Addyston, Ohio franchise area (CUID OH0673), Petitioner claims to be subject to competing provider effective competition based on evidence of 365 households and 50.72 DBS subscribers there. Using those numbers, Petitioner claims DBS subscribership of 13.90 percent.18 We choose to round off numbers of DBS subscribers in Addyston to the nearest whole number because there cannot be 72/100 of a subscriber. Our calculations show DBS penetration in Addyston to be 13.972 or rounded to 13.97 percent (51 ÷ 365). This is insufficient to show competing provider effective competition as the Communications Act requires subscribership that exceeds fifteen percent.19 Furthermore, Petitioner’s data show its own subscribership in Addyston to be 78.08 percent (285 basic customers, 285 ÷ 365).20 This amount far exceeds the permissible threshold for showing “low (...continued from previous page) 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 at 8. 16Id. 1747 U.S.C. § 543(l)(1)(A). 18Petition, Exh. E at 1. 1947 U.S.C. § 543 (l)(1)(B)(ii). 20Petition, Exh. A at 1. Federal Communications Commission DA 10-1932 4 penetration” effective competition.21 Accordingly, we deny Petitioner’s effective competition finding for the Addyston, Ohio franchise area.22 III. ORDERING CLAUSES 12. Accordingly, IT IS ORDERED that the petition for a determination of effective competition filed in the captioned proceeding by Time Warner Cable Inc. IS GRANTED for the Communities listed on Attachments B and C. 13. IT IS FURTHER ORDERED that the certification to regulate basic cable service rates granted to any of the Communities set forth on Attachments B and C IS REVOKED. 14. This action is taken pursuant to delegated authority pursuant to Section 0.283 of the Commission’s rules.23 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau 21See supra ¶ 9. 22See Time Warner Cable Inc., and Time Warner Entertainment-Advance/Newhouse Partnership, 25 Petitions for Determination of Effective Competition in Various Communities in the State of New York and the Commonwealth of Pennsylvania, 23 FCC Rcd 12069 (2008). 2347 C.F.R. § 0.283. Federal Communications Commission DA 10-1932 5 ATTACHMENT A CSR 7969-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUID(s) Addyston OH0673 Batavia Township OH1123 Batavia Village OH1345 Bethel OH1511 Clark OH1881 Clearcreek OH1956 Colerain OH2126 Crosby OH1957 Delhi OH0675 Fairfield OH2269 Felicity OH1514 Franklin OH1880 Georgetown OH0324 Green OH1882 Hamilton OH1788 Hanover OH1876 Harlan OH1869 Harrison OH2308 Lemon OH2309 Liberty OH1599 Miami OH0677 Monroe OH1118 Morgan OH1927 Morrow OH1295 Moscow OH1921 Neville OH2311 New Richmond OH1121 Ohio OH1117 Pierce OH1346 Pike OH1883 Pleasant Plain OH1870 Reily OH1875 Ross OH1928 Salem OH1296 Sterling OH1884 Tate OH1119 Turtle Creek OH1955 Washington OH1922 Whitewater OH0867 Williamsburg Township OH1120 Williamsburg Village OH1124 Federal Communications Commission DA 10-1932 6 ATTACHMENT B CSR 7969-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. 2000 Estimated Census DBS Communities CUID(s) CPR* Households Subscribers Batavia Township OH1123 27.10% 6,238 1,690 Batavia Village OH1345 25.80% 651 168 Bethel OH1511 34.20% 1,012 346 Clark OH1881 38.13% 1,133 432 Clearcreek OH1956 18.17% 7,225 1,313 Colerain OH2126 20.41% 22,418 4,575 Crosby OH1957 31.90% 1,025 327 Fairfield OH2269 22.32% 16,960 3,785 Felicity OH1514 44.18% 344 152 Franklin OH1880 40.46% 1,525 617 Georgetown OH0324 47.02% 1,565 736 Hanover OH1876 19.40% 2,809 545 Miami OH0677 21.51% 4,518 972 Monroe OH1118 32.04% 2,843 911 Morgan OH1927 22.65% 1,810 410 Morrow OH1295 40.47% 462 187 Moscow OH1921 49.45% 91 45 Neville OH2311 48.93% 47 23 New Richmond OH1121 33.12% 788 261 Pike OH1883 42.78% 1,323 566 Pleasant Plain OH1870 41.81% 55 23 Ross OH1928 19.07% 2,318 442 Salem OH1296 23.57% 1,523 359 Sterling OH1884 42.71% 1,276 545 Federal Communications Commission DA 10-1932 7 Tate OH1119 35.24% 3,204 1,129 Whitewater OH0867 30.98% 2,133 661 Willamsburg Township OH1120 30.45% 1,859 566 Williamsburg Village OH1124 41.10% 927 381 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 10-1932 8 ATTACHMENT C CSR 7969-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Franchise Area Cable Penetration Communities CUID(s) Households Subscribers Percentage Delhi OH0975 10,357 15 .14% Green OH1882 1,213 31 2.56% Hamilton OH1788 3,524 399 11.32% Harlan OH1869 1,255 146 11.63% Harrison OH2308 1,716 171 9.97% Lemon OH2309 3,274 311 9.50% Liberty OH1599 7,062 786 11.13% Ohio OH1117 1,825 176 9.64% Pierce OH1346 4,656 141 3.03% Reily OH1875 917 99 10.80% Turtle Creek OH1955 3,279 366 11.16% Washington OH1922 812 76 9.36%