Federal Communications Commission DA 11-1013 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 Franchise Areas ) ) ) ) ) ) CSR 8349-E MEMORANDUM OPINION AND ORDER Adopted: June 6, 2011 Released: June 9, 2011 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 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 Attachment 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 Attachment 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 Attachment A. 1 See 47 U.S.C. § 543(1)(1)(B). 2 47 C.F.R. § 76.905(b)(2). 3 47 C.F.R. § 76.906. 4 See 47 U.S.C. § 543(l); 47 C.F.R. § 76.905. 5 See 47 C.F.R. §§ 76.906 & 907. Federal Communications Commission DA 11-1013 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 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 It is undisputed that the Attachment 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 to support its assertion that potential customers in the Attachment 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 Attachment B Communities because of their national satellite footprint.13 Accordingly, we find that the first prong of the competing provider test is satisfied. 5. 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 Attachment B Communities.14 Petitioner sought to determine the competing provider penetration in the Attachment B 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 Attachment B Communities on a zip code plus four basis.15 For the numbers of households in the Attachment B 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 Petition at 4. 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 Petition at 6-7. 12 See Petition at 6 (listings available at www.directv.com and www.dishnetwork.com). 13 See id. at 7. 14 Id. at 8. 15 Id. at 8-9. Federal Communications Commission DA 11-1013 3 Communities, the petition used household numbers from the 2000 Census.16 6. On November 17, 2010, the Media Bureau sent the Petitioner a letter requesting supplemental information in this case.17 The Bureau cited flawed data in 14 of the 27 Attachment B Communities originally listed in the Petition18 because the combined number of subscribers to Time Warner’s cable service and to the DBS providers was more than the number of households in these Communities.19 The Bureau requested that the Petitioner supplement its Petition with either (a) other evidence that explains these discrepancies or sufficiently reliable household numbers that eliminate the flaw or (b) household numbers from the 2010 Census.20 7. On May 20, 2011, Time Warner responded to the Bureau Letter and submitted updated information reflecting the release of the Census Bureau’s updated 2010 household figures for the Communities in this proceeding.21 Based on the updated figures, Time Warner requests that the following communities be deleted from further consideration in this proceeding: Cherry Fork (OH2446), Fairfield Township (Butler Co.) (OH0634), Fairfield Township (Highland Co.) (OH2451), Hamilton Township (OH0945), Midland (OH1494), Millville (OH0434)22 and Winchester (OH1069). This request is granted.23 The use of 2010 household numbers and the deletion of the aforementioned communities leave no estimations of competing provider subscribership that suffer from the flaw described in the preceding paragraph. 8. Accordingly, based upon the aggregate DBS subscriber penetration levels that were calculated using Census 2010 household data,24 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 Attachment B Communities. Therefore, the second prong of the competing provider test is satisfied for each of the Attachment B Communities. Based on the foregoing, we conclude that Petitioner has submitted sufficient evidence 16 Id. at 8 & Exhibit B. 17 See Letter from Steven A. Broeckaert Esq., Senior Deputy Chief, Policy Division, Media Bureau, to Craig A. Gilley, Esq., Fleischman and Harding LLP, counsel for Time Warner (Nov.17, 2010) (“Bureau Letter”). 18 Petition at 8-9. 19 Bureau Letter at 1. The letter stated that the areas in question were as follows: Cherry Fork (OH2446), Fairfield Township (Butler Co.) (OH0634), Hamilton (OH0945), Harrison (OH0720), Mason (OH0726), Miami (OH0795), Midland (OH1494), Monroe (OH0838), Montgomery (OH0706), Newton (OH0791), Peebles (OH0229), South Lebanon (OH0903), Trenton (OH0615), and Winchester (OH1069). With regard to Fairfield Township (Butler Co.), we note that Time Warner asserted in its Petition that this community was subject to effective competition under the low penetration test. Petition at 9-10. Review of Exhibits A and B in the Petition, however, demonstrate that Time Warner appears to have meant to list Fairfield Township (Highland Co.) as the community subject to low penetration effective competition, while Fairfield Township (Butler Co.) would be eligible for consideration under the competing provider effective competition test. 20 Bureau Letter at 1. 21 See Letter from Craig A. Gilly, Esq., Edwards, Angell, Palmer & Dodge LLP, to Steven Broeckaert, Senior Deputy Chief, Policy Division, Media Bureau (May 20, 2011) (“Time Warner Letter”). 22 We note that the CUID number listed for the Village of Millville in Time Warner’s Petition is OH0834. Petition at 1. The Time Warner Letter requesting deletion of this community lists the CUID number for Millville as OH0434. 23 Two of the communities listed in the Time Warner Letter for deletion were not the subject of the Bureau’s Letter with regard to flawed data. Nonetheless, these communities – Fairfield Township (Highland Co.) and Millville – will accordingly be deleted from consideration in this proceeding. 24 Time Warner Letter at 3-4 (charts reflecting 2010 Census data and DBS subscribers by community). Federal Communications Commission DA 11-1013 4 demonstrating that both prongs of the competing provider test are satisfied and Petitioner is subject to effective competition in the Attachment 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 referred to as the “low penetration” test.25 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 Attachment C Communities. Therefore, the low penetration test is also satisfied as to the Attachment C Communities III. ORDERING CLAUSES 11. 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. 12. 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. 13. This action is taken pursuant to delegated authority pursuant to Section 0.283 of the Commission’s rules.26 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau 25 47 U.S.C. § 543(l)(1)(A). 26 47 C.F.R. § 0.283. Federal Communications Commission DA 11-1013 5 ATTACHMENT A CSR 8349-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUIDS Arlington Heights OH0707 Blanchester OH0313 Franklin (Adams Co.) OH2447 Franklin (Warren Co.) OH0379 Harrison OH0720 Highland OH1312 Lincoln Heights OH0719 Mason OH0726 Miami OH0795 Monroe OH0838 Montgomery OH0706 Newtown OH0791 Peebles OH0229 Seven Mile OH0533 South Lebanon OH0903 Springdale OH0731 Sycamore OH0710 Terrace Park OH0723 Trenton OH0615 West Union OH0214 Wilmington OH0328 Woodlawn OH0722 Wyoming OH0714 Federal Communications Commission DA 11-1013 6 ATTACHMENT B CSR 8349-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUIDs CPR* 2010 Census Households Estimated DBS Subscribers Arlington Heights OH0707 20.06% 329 66 Blanchester OH0313 24.94% 1,636 408 Harrison OH0720 21.97% 3,765 827 Highland OH1312 27.96% 93 26 Lincoln Heights OH0719 18.96% 1,287 244 Mason OH0726 22.30% 11,016 2,457 Miami (Clermont Co.) OH0795 22.83% 14,785 3,375 Monroe OH0838 22.65% 4,649 1,053 Montgomery OH0706 18.60% 3,849 716 Newton OH0791 28.05% 1,123 315 Peebles OH0229 22.30% 758 169 Seven Mile OH0533 21.02% 295 62 South Lebanon OH0903 16.05% 1,533 246 Springdale OH0731 26.56% 4,631 1,230 Sycamore OH0710 17.64% 8,383 1,479 Terrace Park OH0723 15.30% 758 116 Trenton OH0615 24.21% 4,160 1,007 West Union OH0214 24.28% 1,322 321 Wilmington OH0328 17.61% 5,072 893 Woodlawn OH0722 18.45% 1,507 278 Wyoming OH0714 15.07% 3,105 468 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 11-1013 7 ATTACHMENT C CSR 8349-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUIDs Franchise Area Households Cable Subscribers Penetration Percentage Franklin Township (Adams Co.) OH2447 1,021 44 4.31% Franklin Township (Warren Co.) OH0379 10,724 2,824 26.33%