Federal Communications Commission DA 10-928 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Cebridge Acquistion, L.P. d/b/a Suddenlink Charter Communications Time Warner Entertainment-Advance/Newhouse Partnership Petitions for Determination of Effective Competition in Various Communities ) ) ) ) ) ) ) ) ) ) ) CSR 7205-E CSR 8216-E, CSR 8217-E & CSR 8221-E CSR 8041-E MEMORANDUM OPINION AND ORDER Adopted: May 24, 2010 Released: May 24, 2010 By the Senior Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION AND BACKGROUND 1. Cebridge Acquisition, L.P. d/b/a Suddenlink (“Suddenlink”), Charter Communications (“Charter”), and Time Warner Entertainment-Advance/Newhouse Partnership (“Time Warner”), hereinafter referred to as “Petitioners,” have filed with the Commission petitions 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 Petitioners are subject to effective competition in those communities listed on Attachment A and hereinafter referred to as “Communities.” Petitioners allege that their cable systems serving the 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”). Petitioners alternatively claim to be exempt from cable rate regulation in the Communities listed on Attachment B because the Petitioners serve fewer than 30 percent of the households in those 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 1 See 47 U.S.C. § 543(1). 2 47 C.F.R. § 76.905(b)(2). 3 47 C.F.R. § 76.906. 4 See 47 U.S.C. § 543(l) and 47 C.F.R. § 76.905. 5 See 47 C.F.R. §§ 76.906 & 907. Federal Communications Commission DA 10-928 2 finding that Petitioners are subject to effective competition in the Communities listed on Attachments A and B. 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 the Communities are “served by” both DBS providers, DIRECTV and Dish, and that these two MVPD providers are unaffiliated with the Petitioners 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 the Petitioners have 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 is supported in these petitions with copies of channel lineups for both DIRECTV and Dish.12 Also undisputed are Petitioners’ assertions 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 47 U.S.C. § 543(1)(1)(B); see also 47 C.F.R. § 76.905(b)(2). 7 47 C.F.R. § 76.905(b)(2)(i). 8 See Cebridge Petition CSR 7205-E at 3-4; Charter Petition CSR 8216-E at 3-4; Charter Petition CSR 8217-E at 3- 4; Charter Petition CSR 8221-E at 3-4; Time Warner Petition CSR 8041-E at 4-5.. 9 Mediacom Illinois LLC, 21 FCC Rcd 1175, 1176, ¶ 3 (2006). 10 47 C.F.R. § 76.905(e)(2). 11 See 47 C.F.R. § 76.905(g). See also Cebridge Petition CSR 7205-E at 4-5; Charter Petition CSR 8216-E at 4-5; Charter Petition CSR 8217-E at 4-5; Charter Petition CSR 8221-E at 4; Time Warner Petition CSR 8041-E at 5-6. 12 See Cebridge Petition CSR 7205-E at 4-5 and Exhibits 1 and 2; Charter Petition CSR 8216-E at 4-5 and Exhibits 1 and 2; Charter Petition CSR 8217-E at 4-5 and Exhibits 1 and 2; Charter Petition CSR 8221-E at 4-5 and Exhibits 1 and 2; Time Warner Petition CSR 8041-E at 5-6. 13 See Cebridge Petition CSR 7205-E at 3; Charter Petition CSR 8216-E at 2-3; Charter Petition CSR 8217-E at 2-3; Charter Petition CSR 8221-E at 2-3; Time Warner Petition CSR 8041-E at 2-3. Federal Communications Commission DA 10-928 3 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. Petitioners assert that they are the largest MVPDs 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 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 the Petitioners have 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 the Petitioners have submitted sufficient evidence demonstrating that both prongs of the competing provider test are satisfied and the Petitioners are subject to effective competition in the Communities listed on Attachment A. 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 Petitioners allege that they are subject to effective competition under the low penetration effective competition test because they serve less that 30 percent of the households in the franchise areas listed on Attachment B. Based upon the subscriber penetration level calculated by the Petitioners, as reflected in Attachment B, we find that the Petitioners have demonstrated that the percentage of households subscribing to their cable service is less than 30 percent of the households in the Communities listed on Attachment B. Therefore, the low penetration test is also satisfied as to those Communities. 14 Cebridge Petition CSR 7205-E at 5; Charter Petition CSR 8216-E at 6; Charter Petition CSR 8217-E at 6; Charter Petition CSR 8221-E at 6; Time Warner Petition CSR 8041-E at 7. 15 Cebridge Petition CSR 7205-E at 5-7; Charter Petition CSR 8216-E at 5-6; Charter Petition CSR 8217-E at 5-7; Charter Petition CSR 8221-E at 5-7; Time Warner Petition CSR 8041-E at 7-8. 16 Cebridge Petition CSR 7205-E at 7 and Exhibit 6; Charter Petition CSR 8216-E at 6-7 and Exhibit 5; Charter Petition CSR 8217-E at 6-7 and Exhibit 5; Charter Petition CSR 8221-E at 6-7 and Exhibit 5; Time Warner Petition CSR 8041-E at 7 and Exhibit C. 17 47 U.S.C. § 543(l)(1)(A). Federal Communications Commission DA 10-928 4 III. ORDERING CLAUSES 10. Accordingly, IT IS ORDERED that the petitions for a determination of effective competition filed in the captioned proceeding by Cebridge Acquisition, L.P. d/b/a Suddenlink, Charter Communications, and Time Warner Entertainment-Advance/Newhouse Partnership ARE GRANTED. 11. IT IS FURTHER ORDERED that the certification to regulate basic cable service rates granted to any of the Communities set forth on Attachments A and B IS REVOKED. 12. This action is taken pursuant to delegated authority pursuant to Section 0.283 of the Commission’s rules.18 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau 18 47 C.F.R. § 0.283. Federal Communications Commission DA 10-928 5 ATTACHMENT A CSR 7205-E COMMUNITIES SERVED BY CEBRIDGE ACQUISITION, L.P. D/B/A SUDDENLINK COMMUNICATIONS Communities CUIDs CPR* 2000 Census Households Estimated DBS Subscribers Cushing City OK0173 34.45 3071 1058 Drumright City OK0240 16.87 1209 204 Perkins Town OK0242 45.23 913 413 Stillwater City OK0059 18.60 15604 2902 CSR 8216-E COMMUNITY SERVED BY CHARTER COMMUNICATIONS Community CUID CPR* 2000 Census Households Estimated DBS Subscribers Roanoke Rapids NC0039 27.56 6909 1904 CSR 8217-E COMMUNITY SERVED BY CHARTER COMMUNICATIONS Community CUID CPR* 2000 Census Households Estimated DBS Subscribers Woodfin NC0301 20.80 1394 290 CSR 8221-E COMMUNITIES SERVED BY CHARTER COMMUNICATIONS Communities CUIDs CPR* 2000 Census Households Estimated DBS Subscribers Granite Falls NC0371 31.17 1758 548 Hickory NC0113 19.87 16174 3213 Lenoir NC0024 NC0148 17.03 6913 1177 Rhodhiss NC0372 NC0373 24.12 170 41 Federal Communications Commission DA 10-928 6 CSR 8041-E COMMUNITIES SERVED BY TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP Communities CUIDs CPR* 2000 Census Households Estimated DBS Subscribers Alamo TX0165 21.42 4621 990 Brownsville TX0166 16.51 38174 6303 Edcouch TX0037 29.29 891 261 Elsa TX0336 29.33 1575 462 La Feria TX0170 24.29 2021 491 La Grulla TX1234 18.65 370 69 La Joya TX1439 17.56 860 151 La Villa TX1407 29.1 323 94 Lyford TX1433 33.81 562 190 Palmhurst TX2097 22.6 1226 277 Palmview TX2063 22.87 1093 250 Penitas TX1438 17.55 319 56 Port Isabel TX0498 17.04 1649 281 Primera TX1436 33.33 735 245 Rio Grande City TX2189 TX0176 18.87 3333 629 Rio Hondo TX1432 40.65 588 239 San Benito TX0178 23.65 7065 1671 San Juan TX0177 15.86 6606 1048 Santa Rosa TX1434 25.58 774 198 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 10-928 7 ATTACHMENT B CSR 7205-E COMMUNITY SERVED BY CEBRIDGE ACQUISITION, L.P. D/B/A SUDDENLINK COMMUNICATIONS Community CUID Franchise Area Households Cable Subscribers Penetration Percentage Payne County OK0416 6138 442 7.20 CSR 8041-E COMMUNITIES SERVED BY TIME WARNER ENTERTAINMENT-ADVANCE/NEWHOUSE PARTNERSHIP Communities CUIDs Franchise Area Households Cable Subscribers Penetration Percentage Combes TX1437 775 143 18.45 Hidalgo TX1408 TX1871 TX2143 TX2163 TX2165 TX2166 TX2167 TX2168 1747 2 0.11 Sullivan City TX2293 981 201 20.49