Federal Communications Commission DA 11-1023 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Cable Inc. Petitions for Determination of Effective Competition in 34 Communities in North Carolina and South Carolina ) ) ) ) ) ) ) CSR 8374-E MEMORANDUM OPINION AND ORDER Adopted: June 8, 2011 Released: June 10, 2011 By the Senior Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION AND BACKGROUND 1. Time Warner Cable Inc., hereinafter referred to as “Petitioner,” 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 34 North Carolina and South Carolina communities. The petition alleged that Petitioner’s cable system serving most of those communities is subject to effective competition pursuant to Section 623(l)(1)(B) 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 because of the competing service provided by two direct broadcast satellite (“DBS”) providers, DIRECTV, Inc., and DISH Network. Later, Petitioner requested that three of these communities be withdrawn from consideration.3 We grant this request. The remaining communities in which Petitioner claims to be subject to “competing provider” effective competition are listed on Attachment A and will be referred to as “the Attachment A Communities.” Petitioner also claims to be exempt from cable rate regulation in the Communities listed on Attachment B (“the Attachment B Communities”) because 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,4 as that term is defined by Section 623(l) of the Communications Act and Section 76.905 of the Commission’s rules.5 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.6 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 Attachments A and B. 1 See 47 U.S.C. § 543(l)(1)(B). 2 47 C.F.R. § 76.905(b)(2). 3 Letter from Craig A. Gilley, Esq., Edwards Angell Palmer & Dodge LLP, counsel for Petitioner, to Steven A. Broeckaert, Senior Deputy Chief, Policy Division, Media Bureau (dated May 25, 2011) (“May 25 Letter”). The three communicates are Mr. Gilead (NC0530), Red Cross (NC1066), and Stallings (NC0500). 4 47 C.F.R. § 76.906. 5 See 47 U.S.C. § 543(l)(1); 47 C.F.R. § 76.905(b). 6 See 47 C.F.R. §§ 76.906, -.907(b). Federal Communications Commission DA 11-1023 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.7 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.8 It is undisputed that the Attachment A Communities are “served by” both DBS service providers 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.9 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.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 citations to the channel lineups for both DBS service providers.12 Also undisputed is Petitioner’s assertion that both DBS service providers offer service to at least “50 percent” of the households in the Attachment A Communities because of their national satellite footprint.13 Accordingly, we find that the first prong of the competing provider test is satisfied for each of those Communities. 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 A Communities. The second prong thus required Petitioner to calculate a ratio for each Attachment A Community the numerator of which was the number of DBS subscribers and the denominator of which is the number of households there. For its numerator, Petitioner purchased a subscriber tracking report from the Satellite Broadcasting and Communications Association that identified the number of subscribers attributable to the DBS providers within each Attachment A Community on a zip code plus four basis.14 For its denominator, Petitioner included household numbers for each Attachment A Community from the 2000 Census.15 Later, at the 7 47 U.S.C. § 543(l)(1)(B); see also 47 C.F.R. § 76.905(b)(2). 8 47 C.F.R. § 76.905(b)(2)(i). 9 See Petition at 4-6. 10 Mediacom Illinois LLC, 21 FCC Rcd 1175, 1176, ¶ 3 (2006). 11 See 47 C.F.R. § 76.905(g). See also Petition at 6. 12 See Petition at 5 n.12; id. at 6. 13 See id. at 7. 14 Id. at 9. 15 Id. at 10. Federal Communications Commission DA 11-1023 3 Commission’s request,16 it refreshed the record by submitting household numbers from the 2010 Census.17 Consistent with our longstanding policy of using household numbers from the most recent decennial Census,18 we use the 2010 household numbers. 6. Based upon the aggregate DBS subscribership levels 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 prong of the competing provider test is satisfied for each of the Attachment A Communities. 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 Attachment A Communities. B. The Low Penetration Test 7. 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.19 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. 8. 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 satisfied as to the Attachment B Communities. III. ORDERING CLAUSES 9. 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. 10. 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 Attachments A and B IS REVOKED. 11. This action is taken pursuant to delegated authority pursuant to Section 0.283 of the Commission’s rules.20 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau 16 Letter from Mr. Gilley to Mr. Broeckaert, January 20, 2011. 17 May 25 Letter. 18 See, e.g., Charter Commun. Entertainment I LLC, Memorandum Opinion & Order DA 11-697 at ¶ 17 (rel. April 18, 2011), available at 2011 WL 1483759; Time Warner Entertainment-Advance/Newhouse Partnership, Memorandum Opinion & Order DA 11-494 at ¶ 21 (rel. March 16, 2011), available at 2011 WL 901296; Cablevision of Raritan Valley, Inc., 19 FCC Rcd 6966, 6968, ¶ 6 (2004). 19 47 U.S.C. § 543(l)(1)(A). 20 47 C.F.R. § 0.283. Federal Communications Commission DA 11-1023 4 ATTACHMENT A CSR 8374-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUIDs CPR* 2010 Census Households Estimated DBS Subscribers Unincorporated Caburrus County NC0174 41.85 25578 10705 Town of Cleveland NC0754 46.34 328 152 Unincorporated Davidson County NC0112 32.71 29578 9676 Town of Faith NC0676 25.53 329 84 Town of Granite Quarry NC0407 26.72 1149 307 Town of Harrisburg NC0287 26.28 4003 1052 Town of Hemby Bridge NC1132 15.66 562 88 Village of Lake Park NC1079 37.29 1196 446 Town of Lawndale NC0523 24.49 245 60 Town of Marshville NC0499 48.95 809 396 Village of Marvin NC1080 15.52 1553 241 Town of McAdenville NC0309 23.81 252 60 Town of Mineral Springs NC1133 27.89 950 265 Town of Mint Hill NC0504 20.78 8528 1772 Village of Misenheimer NC1067 35.14 111 39 Town of Mt. Pleasant NC0455 25.04 619 155 Town of New London NC0507 18.03 233 42 Town of Norwood NC0519 26.67 960 256 Town of Oakboro NC0517 36.10 712 257 Town of Richfield NC00508 25.99 227 59 Town of Rockwell NC0677 25.83 848 219 Town of Troutman NC0947 34.88 903 315 Town of Wadesboro NC0156 37.30 2303 859 Town of Waxhaw NC0502 17.37 3242 563 Village of Wesley Chapel NC1083 19.46% 2282 444 *CPR = Percent of competitive DBS penetration rate. Some CPRs may be not exactly correct because of fractional DBS subscribers used in Time Warner's calculations but not reproduced above. Federal Communications Commission DA 11-1023 5 ATTACHMENT B CSR 8374-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUIDs Franchise Area Households Cable Subscribers Penetration Percentage Unincorporated Anson County NC1074 6121 707 11.55 Town of Fort Mill SC0665 4198 16 0.38 Town of Indian Trail NC0501 11121 751 6.75 Unincorporated Montgomery County NC1081 7746 371 4.79 Town of Mooresville NC0367 12374 1334 10.78 Town of Weddington NC0720 3129 455 14.54