Federal Communications Commission DA 10-1976 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Cable Inc. Petition for Determination of Effective Competition in 105 Franchise Areas in Ohio ) ) ) ) ) ) CSR 7799-E MEMORANDUM OPINION AND ORDER Adopted: October 14, 2010 Released: October 14, 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)(1-2), and 76.907 of the Commission’s rules for a determination that Petitioner is subject to effective competition in those communities listed on the Attachments hereto and hereinafter referred to as “Communities.”1 Petitioner alleges that its cable system serving the Communities listed on Attachments A hereto (the “Attachment A Communities”) is subject to effective competition pursuant to Section 623(1)(1)(B) of the Communications Act of 1934, as amended (“Communications Act”)2 and the Commission’s implementing rules,3 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 also claims to be exempt from cable rate regulation in the Communities listed on Attachment B (the “Attachment B Communities”) pursuant to Section 321(l)(1)(A) of the Communications Act4 because the Petitioner serves fewer than 30 percent of the households in those franchise areas. 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,5 as that term is defined by Section 623(l) of the Communications Act and Section 76.905 of the Commission’s rules.6 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.7 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 A and B. 1 By letter dated November 17, 2008, and an e-mail dated October 26, 2010 (10:07 A.M.), Petitioner withdrew approximately 25 Communities from our consideration. 2 See 47 U.S.C. § 543(l)(1)(B). 3 47 C.F.R. § 76.905(b)(2). 4 See 47 U.S.C. § 543(l)(1)(A); 47 C.F.R. § 76.905(b)(1). 5 47 C.F.R. § 76.906. 6 See 47 U.S.C. § 543(l)(1) and 47 C.F.R. § 76.905(b). 7 See 47 C.F.R. §§ 76.906 & 907. Federal Communications Commission DA 10-1976 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;8 this test is otherwise referred to as the “competing provider” test. 1. The First Part 4. The first part 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.9 5. Turning to the first part of this test, it is undisputed that the Attachment A and 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.10 The Commission has held that a party may use evidence of penetration rates in the franchise area (the second part 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.11 We further find that Petitioner has provided citations to the DBS providers’ growing subscribership and their web pages to support its assertion that potential customers in the Attachment A and B Communities are reasonably aware that they may purchase the service of these MVPD providers.12 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 programming13 and is supported in this petition with reference to channel lineups for both DirecTV and Dish posted on the Internet.14 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.15 Accordingly, we find that the first part of the competing provider test is satisfied in the Attachment A and B Communities. 8 47 U.S.C. § 543(1)(1)(B); see also 47 C.F.R. § 76.905(b)(2). 9 47 C.F.R. § 76.905(b)(2)(i). 10 See Petition at 4-5. 11 Mediacom Illinois LLC, 21 FCC Rcd 1175, 1176, ¶ 3 (2006). 12 47 C.F.R. § 76.905(e)(2); see also Petition at 5-7. 13 See 47 C.F.R. § 76.905(g); see also Petition at 6 & n.16. 14 See Petition at 7. 15 See id. Federal Communications Commission DA 10-1976 3 2. The Second Part 6. The second part 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 some of the Attachment A and B Communities and that, in others, both it and the DBS providers have subscribership exceeding 15 percent.16 Petitioner correctly asserts that, assuming the validity of these subscribership numbers, it is subject to effective competition in the latter Communities. If Petitioner is the largest MVPD there, then the DBS providers’ subscribership exceeds 15 percent. On the other hand, if one of the DBS providers is the largest MVPD, then the combined subscribership of Petitioner and the other DBS provider exceeds 15 percent. Either way, the subscribership of the MVPDs other than the largest one exceeds 15 percent.17 7. Petitioner sought to determine the competing provider penetration in the Attachment A 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 five-digit zip code basis.18 8. Based upon the aggregate DBS subscriber penetration levels that were calculated using Census 2000 household data,19 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 Attachment A Communities. Therefore, the second part of the competing provider test is satisfied for each of the Attachment A Communities. 9. Based on the foregoing, we conclude that Petitioner has submitted sufficient evidence demonstrating that both parts of the competing provider test are satisfied and Petitioner is subject to effective competition in the Communities listed on Attachment A. 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.20 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 Attachment B Communities. 11. Based upon the subscriber penetration level calculated by Petitioner, as reflected in Attachment B, 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 Attachment B Communities. Therefore, the low penetration test is also satisfied as to the Attachment B Communities. 16 See id. at 8-9. 17 See Charter Commun., 21 FCC Rcd 1208, 1210, ¶ 5 (2006). 18 Petition at 9, n.25, & Exh. D. 19 Id. at 9, n.25, & Exh. C. 20 47 U.S.C. § 543(l)(1)(A). Federal Communications Commission DA 10-1976 4 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 as to the Attachment A Communities and the Attachment B Communities. 13. IT IS FURTHER ORDERED that the certification to regulate basic cable service rates granted to or on behalf of any of the Communities set forth on Attachment A and B IS REVOKED. 14. This action is taken pursuant to delegated authority pursuant to Section 0.283 of the Commission’s rules.21 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau 21 47 C.F.R. § 0.283. Federal Communications Commission DA 10-1976 5 ATTACHMENT A CSR 7799-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. 2000 Estimated Census DBS Time Warner Sum of Communities CUIDs CPR* Households Subscribers Subscribers Subscribers Allen OH0442 OH0912 33.14% 1260 417.58 456 873.58 Bairdstown OH2751 23.51% 49 11.52 27 38.52 Ballville OH2506 OH0184 23.36% 2545 594.47 1512 2106.47 Bellevue OH0030 OH2508 23.78% 3332 792.31 2502 3294.31 Bettsville OH1363 15.69% 298 46.76 154 200.76 Bloomdale OH2752 51.06% 256 130.71 102 232.71 Bloomville OH1318 40.41% 366 147.90 213 360.90 Bradner OH1454 32.09% 445 142.78 204 346.78 Burgoon OH2225 44.40% 68 30.19 33 63.19 Carey OH0511 36.20% 1543 558.56 754 1312.56 Cygnet OH2753 43.53% 211 91.86 112 203.86 Eden OH2294 18.93% 737 139.49 265 404.49 Elmore OH1455 35.82% 588 210.63 287 497.63 Fremont OH2284 OH0161 22.19% 6856 1521.12 4350 5871.12 Genoa OH0911 31.52% 851 268.20 511 779.2 Gibsonburg OH1456 28.67% 949 272.11 609 881.11 Hopewell OH0549 15.79% 1084 171.21 332 503.21 Jenera OH1724 32.32% 95 30.71 49 79.71 Jerry City OH2750 43.53% 160 69.65 54 123.65 Jerusalem OH1587 31.45% 1113 350.06 445 795.06 Lake OH1181 17.02% 4169 709.60 1506 2215.6 Lindsey OH1471 36.82% 199 73.27 84 157.27 Loudon OH0551 17.34% 892 154.69 289 443.69 Lyme OH0459 27.32% 339 92.62 112 204.62 McClure OH2220 40.44% 285 115.25 141 256.25 Milton Center OH2218 53.39% 67 35.77 27 62.77 Nevada OH1249 43.86% 313 137.27 126 263.27 North Baltimore OH1030 23.51% 1272 299.08 885 1184.08 Pemberville OH1458 39.71% 541 214.81 325 539.81 Portage OH0629 36.48% 153 55.82 82 137.82 Rising Sun OH1361 33.17% 232 76.96 121 197.96 Sandusky OH0183 OH2058 22.19% 1610 357.21 627 984.21 Vanlue OH2021 37.55% 141 52.94 82 134.94 Walbridge OH1189 19.36% 1078 208.70 663 871.7 Weston OH1344 33.25% 638 212.14 305 517.14 Woodville OH1460 31.71% 786 249.25 530 779.25 York OH0458 22.20% 920 204.26 397 601.26 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 10-1976 6 ATTACHMENT B CSR 7799-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Franchise Area Cable Penetration Communities CUIDs Households Subscribers Percentage Adams OH1040 477 1 0.21% Amanda OH2017 383 17 4.44% Antrim OH812 490 15 3.06% Big Lick OH2018 344 66 19.19% Big Spring OH1617 620 63 10.16% Blanchard OH1038 414 12 2.90% Chatfield OH1368 295 23 7.80% Clay Center OH0910 1912 49 2.56% Cranberry OH2013 627 29 4.63% Crane OH1250 3060 72 2.35% Crawford OH2704 1964 77 3.92% Eagle OH0871 410 107 26.10% Eden OH1811 396 117 29.55% Freedom OH1581 1013 34 3.36% Green Creek OH0460 3602 735 20.41% Harris OH1457 1174 101 8.60% Jackson OH1035 374 111 29.68% Jackson OH2008 575 164 28.52% Jackson OH0550 598 104 17.39% Madison OH1037 808 43 5.32% Middleton OH2248 956 173 18.10% Montgomery OH1582 1686 105 6.23% Orange OH2633 498 63 12.65% Pitt OH2340 381 16 4.20% Riley OH1959 496 4 0.81% Scipio OH2015 633 7 1.11% Seneca OH1618 OH2091 OH2293 538 139 25.84% Sycamore OH1620 646 52 8.05% Townsend OH1960 609 105 17.24% Tymochtee OH1619 439 21 4.78% Union OH2059 619 52 8.40% Van Buren OH1034 Van Buren OH2638 353 14 3.97% Venice OH2016 731 18 2.46% Washington OH2056 1884 84 4.46% Woodville OH1580 1244 1 0.08%