Federal Communications Commission DA 11-254 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Comcast Cable Communications, LLC, on behalf of its subsidiaries and affiliates Petition for Determination of Effective Competition in Various Illinois and Kentucky Communities ) ) ) ) ) ) ) ) CSR 7753-E MEMORANDUM OPINION AND ORDER Adopted: February 9, 2011 Released: February 9, 2011 By the Senior Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION AND BACKGROUND 1. Comcast Cable Communications, LLC, on behalf of its subsidiaries and affiliates, 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 the “Communities.” Petitioner alleges that its cable system serving the 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”).3 Additionally, Petitioner asserts that it satisfies the competing provider test in three communities4 by aggregating the DBS subscribership with the subscribership of South Central Rural Telephone, a local exchange carrier. Petitioner alternatively claims to be exempt from cable rate regulation in the Communities listed on Attachment B because the Petitioner serves fewer than 30 percent of the households in those franchise areas. The petition is opposed by the City of Paducah, one of the Communities listed on Attachment A. Petitioner filed a reply to the City’s opposition. 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 1 See 47 U.S.C. § 543(1). 2 47 C.F.R. § 76.905(b)(2). 3The Petitioner identified the DBS providers as DirecTV and EchoStar Communications Corporation (“EchoStar”). Dish, however, is a registered trademark of EchoStar. 4These are Cave City, Hiseville, and Horse Cave. 5 47 C.F.R. § 76.906. 6 See 47 U.S.C. § 543(l) and 47 C.F.R. § 76.905. Federal Communications Commission DA 11-254 2 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. 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.8 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.9 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 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 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.11 We further find that Petitioner has provided sufficient evidence of DBS advertising in local, regional, and national media that serve the Communities to support its assertion that potential customers in the 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 copies of channel lineups for both DIRECTV and Dish.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 prong of the competing provider test is satisfied. 6. The second prong of the competing provider test requires that the number of households 7 See 47 C.F.R. §§ 76.906 & 907. 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 3. 11 Mediacom Illinois LLC, 21 FCC Rcd 1175, 1176, ¶ 3 (2006). 12 47 C.F.R. § 76.905(e)(2). 13 See 47 C.F.R. § 76.905(g). See also Petition at 4-5 . 14 See Petition at 5 and Exhibits 2 & 3. 15 See Petition at 3; Opposition at 3. Federal Communications Commission DA 11-254 3 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 nineteen of the twenty-four Communities.16 Petitioner sought to determine the competing provider penetration in the Communities by purchasing a subscriber tracking report from the Satellite Broadcasting and Communications Association. The report identified the number of subscribers attributable to the DBS providers in five-digit zip codes. Petitioner then used a formula to allocate the subscribers in each five-digit zip code between those who were in a Community and those who were not. 7. In opposition, the City questions the accuracy of the data and the methodology upon which the Petitioner relies to satisfy the second prong of the competing provider test.17 Initially, the City asserts that the data relied upon by the Petitioner is insufficiently precise to determine whether the number of DBS subscribers cited actually reside within the designated franchise area.18 The City maintains that because the SBCA report, which relied upon two five digit zip codes,19 included household areas which lie outside the jurisdictional boundaries of the City, the Petitioner has not properly demonstrated that 15 percent of the households in the franchise area subscribe to DBS.20 Although the City claims that the use of proportional figures by the Petitioner is “unfounded,” the Commission has previously held that this is an appropriate methodology for determining subscribers within a franchise area.21 The City also argues that the Petitioner should use nine-digit “zip+4” data to accurately determine households in the franchise area.22 8. In reply, the Petitioner argues that the opposition is “entirely unsupported” and it fails to rebut the Petitioner’s effective competition showing.23 Petitioner initially argues that the Commission has previously rejected similar unsupported uniform penetration arguments to those presented by the City and cite previous Commission decisions approving the use of similar allocation methods to those used in the Petition to determine subscribership penetration rates.24 In addition, the Petitioner cites prior Commission precedent that have held that zip code plus four data is not required for the purpose of determining effective competition calculations.25 9. We reject the City’s arguments. As the Petitioner correctly notes, the methodologies and 16 Petition at 5. In circumstances where the largest MVPD is unable to be identified, the Commission can determine that the second prong is met when it finds that the number of households subscribing to the DBS providers and the petitioning cable operator each exceeds 15 percent of the households in the franchise area. First, we assume that Petitioner is the largest MVPD provider in the Community and determine that the combined DBS subscribership is greater than 15 percent; we then assume that one of the DBS providers is the largest MVPD in the Community and determine whether Petitioner’s subscribership is greater than 15 percent. When both exceed 15 percent, then the second prong of the competing provider test is met. Petitioner’s data in Exhibit 6 shows that both these determinations can be made for all five of the Communities not covered under paragraph 6 above. Time Warner Cable, 23 FCC Rcd 12069, 12071-72, ¶ 8 (MB 2008). 17 Opposition at 3. 18 Petition at 5. 19 These are 42001 and 42003. Petition at 5.. 20 Petition at 3; Opposition at Exhibit A. 21 Opposition at 4; Reply to Opposition at 2. See Charter Commun., 21 FCC Rcd 11268, 11269-72, ¶¶ 4-7 (2006). 22 Opposition at 5. 23 Reply to Opposition at 2. 24 Id. at 2-3. 25 Id. at 3, citing Charter Commun., 22 FCC Rcd 10107 (2007). Federal Communications Commission DA 11-254 4 data sources relied upon in the Petition have been repeatedly accepted by the Commission,26 and the City has failed to present any information to sufficiently undermine the data and arguments presented by the Petitioner. Furthermore, the Petitioner has taken additional measures to supplement its five digit zip code information though the use of MBC’s allocation methodology to gain a more precise figure.27 The Petitioner has also presented accurate data to support its assertion that penetration rates in zip codes 42001 and 42003 are the same on both sides of the City’s boundary, contrary to the City’s unsupported assertions.28 Finally, the Commission has previously acknowledged that although zip code plus four data is preferred, the use of five digit zip codes is sufficient in most cases to determine allocation.29 10. Based upon the aggregate DBS subscriber penetration levels that were calculated using Census 2000 household data,30 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 Communities. Therefore, the second prong of the competing provider test is satisfied for each of the Communities. 11. 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 Communities listed on Attachment A. B. The Low Penetration Test 12. 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.31 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 areas listed on Attachment B.32 13. 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 Communities listed on Attachment B. Therefore, the low penetration test is also satisfied as to those Communities. 26 Id. 27 Reply to Opposition at 2; Petition at 7. 28 Reply at 4. 29 Reply to Opposition at 3, citing Charter Commun.,Inc. et all., 19 FCC Rcd 6878, 6880-81, ¶¶ 8-11 (2004). 30 Petition at 8 and Exhibit 7. 31 47 U.S.C. § 543(l)(1)(A). 32 Petition at 8-9. Federal Communications Commission DA 11-254 5 III. ORDERING CLAUSES 14. Accordingly, IT IS ORDERED that the petition for a determination of effective competition filed in the captioned proceeding by Comcast Cable Communications, LLC, on behalf of its subsidiaries and affiliates IS GRANTED. 15. 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. 16. This action is taken pursuant to delegated authority pursuant to Section 0.283 of the Commission’s rules.33 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau 33 47 C.F.R. § 0.283. Federal Communications Commission DA 11-254 6 ATTACHMENT A CSR 7753-E COMMUNITIES SERVED BY COMCAST CABLE COMMUNICATIONS, LLC, ON BEHALF OF ITS SUBSIDIARIES AND AFFILIATES Communities CUIDs CPR* 2000 Census Households Estimated DBS Subscribers Brookport City IL0471 59.33 450 267 Campbellsville City KY0114 42.92 4,432 1,902 Cave City KY0013 17.06 844 144** Central City KY0117 35.88 2,065 741 Clarkson City KY0643 69.41 353 245 Drakesboro City KY0333 43.31 247 107 Elizabethtown City KY0107 18.54 9,306 1,725 Greenville City KY0116 39.70 1,859 738 Hardin County KY0640 30.37 4,358 14,348 Hiseville City KY1208 17.02 94 16** Hodgenville City KY0115 37.65 1,235 465 Horse Cave City KY0112 17.09 977 167** Kevil City KY0711 35.10 245 86 LaRue County KY0750 33.49 1,312 3917 Leitchfield City KY0110 51.75 2,485 1,286 Livingston Town TN0060 42.51 1,543 656 McCracken County KY0203 28.88 315691 3433 Metropolis City IL0470 39.23 2,896 1,136 Muhlenberg County KY0731 44.26 7,610 3,368 Paducah City KY0189 18.12 11,825 2,143 Powderly City KY0118 25.73 342 88 South Carrollton City KY0334 37.14 70 26 Taylor County KY0751 45.16 4,801 2,168 Vine Grove City KY0642 40.21 1,619 651 *CPR = Percent of competitive DBS penetration rate. ** = Percent of competitive DBS and LEC penetration rate. Federal Communications Commission DA 11-254 7 ATTACHMENT B CSR 7753-E COMMUNITIES SERVED BY COMCAST CABLE COMMUNICATIONS, LLC, ON BEHALF OF ITS SUBSIDIARIES AND AFFILIATES Communities CUIDs Franchise Area Households Cable Subscribers Penetration Percentage LaRue KY0750 3,917 740 18.89% Massac IL0483 2,750 222 8.07% Muhlenberg County KY0731 7,610 1,691 22.22% Radcliff KY0396 8,487 36 0.42%