Federal Communications Commission DA 11-351 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Cable Inc. Petition for Determination of Effective Competition in Communities in Ohio ) ) ) ) ) ) CSR 7798-E MEMORANDUM OPINION AND ORDER Adopted: February 24, 2011 Released: February 28, 2011 By the Senior Deputy Chief, Policy Division, Media Bureau: I. INTRODUCTION AND BACKGROUND 1. Time Warner Cable Inc. (“Time Warner” or the “Company”), has filed with the Commission a petition pursuant to Sections 76.7, 76.905(b)(2), and 76.907 of the Commission’s rules for a determination that Time Warner is subject to effective competition in those communities listed on Attachment A (the “Attachment A Communities”). Time Warner alleges that its cable system serving the Attachment A 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 there because of the competing service provided by two direct broadcast satellite (“DBS”) providers, DIRECTV, Inc. (“DIRECTV”), and DISH Network (“DISH”). Time Warner also claims to be exempt from cable rate regulation in the Communities listed on Attachment B (the “Attachment B Communities”), pursuant to Section 623(l)(1)(A) of the Communications Act3 and Section 76.905(b)(1) of the Commission’s rules,4 because the Time Warner serves fewer than 30 percent of the households there.5 An “Answer” to the petition was filed by the franchise authority in one Attachment A Community, Bethel Township,6 to which Time Warner filed a Reply. 2. In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition,7 as that term is defined by Section 623(l) of the Communications Act and Section 76.905 of the Commission’s rules.8 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(l)(1)(B). 2 47 C.F.R. § 76.905(b)(2). 3 See 47 U.S.C. § 543(l)(1)(A). 4 47 C.F.R. § 76.905(b)(1). 5 Time Warner’s Petition concerned 51 Communities, each with a Community Unit Identification Number (“CUID”). By letters dated November 17, 2008, and January 12, 2009, the Company requested that the Commission remove 13 of them. No party opposed that request, and we grant it. 6 Answer of Bethel Township, Miami County, Ohio (“Answer”). 7 47 C.F.R. § 76.906. 8 See 47 U.S.C. § 543(l); 47 C.F.R. § 76.905. Federal Communications Commission DA 11-351 2 within the relevant franchise area.9 For the reasons set forth below, we find that Time Warner is subject to effective competition in all the Communities listed on Attachments A and B, with two exceptions discussed in paragraphs 8 through 10 below. Except for those Communities, the Petition is granted. 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.10 This test is referred to as the “competing provider” test. 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.11 It is undisputed that the Attachment A Communities are “served by” both DBS providers, DIRECTV and DISH, and that these two MVPD providers are unaffiliated with Time Warner 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.12 The Commission has held that a party may use evidence of subscribership 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.13 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 programming14 and is supported in this petition with citations to the channel lineups for both DIRECTV and DISH.15 Also undisputed is Time Warner’s assertion that both DIRECTV and DISH offer service to at least “50 percent” of the households in the Attachment A Communities because of their national satellite footprint.16 Accordingly, we find that the first part of the competing provider test is satisfied. 5. 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. Time Warner asserts that it is the largest MVPD in all but five of the Attachment A Communities.17 In the five Attachment A Communities, Time Warner asserts that its own household share exceeds 15 9 See 47 C.F.R. §§ 76.906, -.907(b). 10 47 U.S.C. § 543(l)(1)(B); see also 47 C.F.R. § 76.905(b)(2). 11 47 C.F.R. § 76.905(b)(2)(i). 12 See Petition at 3-4. 13 Mediacom Illinois LLC, 21 FCC Rcd 1175, 1176, ¶ 3 (2006). 14 See 47 C.F.R. § 76.905(g). See also Petition at 5. 15 See Petition at 4, 6. 16 See id. at 6. 17 Petition at 7. The five Communities are Clearcreek (also spelled Clear Creek in the Petition, OH1079), Pleasant (OH1100), Silver Creek (also spelled Silvercreek in the Petition, OH0958), Spring Valley (OH0956) and Wayne (OH1130). Federal Communications Commission DA 11-351 3 percent and the household share of the two DBS providers combined also exceeds 15 percent.18 The Commission has recognized that in those conditions, whichever MVPD is the largest, the remaining competitors have subscribership of over 15 percent.19 6. Time Warner sought to determine the competing provider subscribership in the Attachment A 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 each of those Communities on a five-digit basis.20 Based upon the aggregate DBS subscribership levels that were calculated using Census 2000 household data,21 as reflected in Attachment A, we find that Time Warner 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 all but two of the Attachment A Communities. 7. Three Communities merit specific mention. In Dayton City (OH0453), Time Warner claims to be subject to competing provider effective competition based on evidence of 10,112.13 DBS subscribers and 67,409 households. Using those numbers, the Company claims DBS subscribership of exactly 15 percent.22 We choose to round off numbers of DBS subscribers in Dayton to the nearest whole number because there cannot be 13/100 of a subscriber.23 Thus, our calculations show DBS subscribership in Dayton to be 15.00096 percent (10112 ÷ 67409). This “exceeds fifteen percent,” however slightly, and thus satisfies the numerical requirement of the second part of the competing provider test, Section 623(l)(1)(B)(ii) of the Communications Act.24 8. Second, in Harrison Township (OH0507), Time Warner claims to be subject to competing provider effective competition based on evidence of 1,437.73 DBS subscribers and 10,929 households.25 Rounding off the DBS subscribers to the nearest whole number, DBS subscribership in Harrison Township is 1,438 ÷ 10,929, or 13.16 percent. This level of subscribership, stated in the Petition, is below the statutory minimum for competing provider effective competition. In addition, the Petition states that Time Warner’s own subscribership (6,368 subscribers out of 10,929 households26) is far too high to qualify for “low penetration” effective competition (30 percent subscribership by a cable operator).27 Accordingly, we deny the Petition as to Harrison Township. 9. Finally, Bethel Township in Miami County (OH0754, OH1280) appears concerned that any deregulation of Time Warner’s rates for basic cable service will deprive the Township of franchise fees.28 As Time Warner notes in its Reply, that deregulation will not alter the Company’s obligation to 18 See Petition at 7-8. 19 If Time Warner is the largest MVPD, then MVPDs other than the largest one are the DBS providers, which have a combined share of over 15%. On the other hand, if one of the DBS providers is the largest MVPD, then Time Warner (which alone has over 15%) and the other DBS provider combined have over 15%. See, e.g., Time Warner- Advance/Newhouse Partnership, 17 FCC Rcd 23587, 23589, ¶ 6 (2002). 20 Petition at Exh. D. 21 Id. at Exh. C. 22 Id. at Exh. E. 23 Time Warner Cable Inc., 23 FCC Rcd 12069, 12073, ¶ 15, reconsideration denied, 23 FCC Rcd 16483 (2008). 24 47 U.S.C. § 543(l)(1)(B)(ii); 47 C.F.R. § 76.905(b)(ii). 25 Petition at Exh. E. 26 Petition at Exhs. A, E. 27 47 U.S.C. § 543(l)(1)(A); 47 C.F.R. § 76.905(a). 28 Answer at 3-5. Federal Communications Commission DA 11-351 4 pay franchise fees.29 Second, Bethel Township notes that the Petition states that Time Warner has 6,661 subscribers in Bethel and that this number is incorrect.30 In its Reply, Time Warner states the correct number, 1,007.31 Time Warner’s correction reveals a remarkable overstatement by the Company in its Petition. Based on that and on the Company’s request for deregulation in Harrison Township, where it is clearly not entitled to it, we encourage Time Warner to be more careful in preparing future filings. 10. Furthermore, Time Warner’s revelation that it has only 1,007 subscribers in Bethel (11.11 percent of that Community’s 9,063 households) is fatal to its case under the second prong of the competing provider test. With Time Warner’s own household share under 15 percent, it is conceivable that the DBS provider with the smaller number of subscribers has so few of them that its and the Company’s subscribers (the subscribership of the MVPDs other than the largest one) do not amount to more than 15 percent of the households in the franchise area. If these are the facts – which the evidence at hand does not exclude as a possibility – then the second part of the competing provider test would not be met in Bethel.32 Accordingly, Time Warner has not shown that the second part of the competing provider test is satisfied in Bethel. 11. In sum, the second part of the competing provider test is satisfied for each of the Attachment A Communities except for Harrison and Bethel Townships. Based on the foregoing, we conclude that Time Warner has submitted sufficient evidence demonstrating that both parts of the competing provider test are satisfied and Time Warner is subject to effective competition in all the Attachment A Communities except Harrison and Bethel Townships. B. The Low Penetration Test 12. Section 623(l)(1)(A) of the Communications Act, the above-mentioned “low penetration” test, provides that a cable operator is subject to effective competition if the operator serves fewer than 30 percent of the households in the franchise area. Time Warner alleges that it is subject to effective competition under the low subscribership effective competition test because it serves less that 30 percent of the households in the Attachment B Communities. 13. Based upon the subscriber subscribership level calculated by Time Warner, as reflected in Attachment B, we find that Time Warner 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 subscribership test is satisfied as to the Attachment B Communities. III. ORDERING CLAUSES 14. Accordingly, IT IS ORDERED that the petition for a determination of effective competition filed in the captioned proceeding by Time Warner IS GRANTED except for Harrison and Bethel Townships. 15. IT IS FURTHER ORDERED that, with the exception of Harrison and Bethel Townships, 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. 29 Reply at 1. 30 Answer at 3; Petition at Exh. A. 31 Reply at 2. 32 Time Warner Cable Inc., Memorandum Opinion & Order DA 11-130 at ¶ 7 (rel. Jan. 25, 2011), available at 2011 WL 235287; Time Warner Cable Inc., 22 FCC Rcd 6805, 6807, ¶ 9 (2008). Federal Communications Commission DA 11-351 5 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 11-351 6 ATTACHMENT A CSR 7798-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUIDs CPR* 2000 Census Households Estimated DBS Subscribers Bethel Township OH0754, OH1280 22.97% 9063 2081 Cedarville Village OH0953 32.12% 681 219 Clearcreek Township OH1079 36.97% 7225 2671 Dayton City OH0453 15.00096% 67409 10112 Donnelsville Village OH0755 25.45% 98 25 Englewood City OH0481 17.03% 5062 862 Enon Village OH0690 17.01% 1118 190 Franklin Township OH1113 19.17% 10724 2056 Green Township OH1114 20.93% 1067 223 Harmony Township OH1099 18.88% 1305 246 Harrison Township OH0507 13.16% 10929 1438 Huber Heights City OH0372 20.76% 14392 2987 Jamestown Village OH0954 35.29% 743 262 Mad River Township OH0691 15.94% 4545 725 Miami Township (Montgomery County) OH0604 15.55% 19026 2958 Miamisburg City OH0500 16.49% 7449 1228 Moraine City OH0509 18.72% 2855 534 New Carlisle City OH0689 25.45% 2207 562 New Jasper Township OH0959 25.52% 895 228 Pleasant Township OH1100 36.77% 1135 417 Riverside City OH0961 18.37% 9768 1794 Silver Creek Township OH0958 35.29% 1355 478 South Solon Village OH1707 42.01% 141 59 Spring Valley Township OH0956 25.95% 1008 262 Trotwood City OH0484 16.66% 11110 1851 Union City OH0482 17.19% 2080 358 Wayne Township OH1130 39.08% 2670 1043 West Carrollton City OH0499 16.49% 6134 1012 *CPR = Percent of competitive DBS subscribership rate. Subscribership rates may be slightly inaccurate due to use of fractional DBS subscriber numbers not stated above. Federal Communications Commission DA 11-351 7 ATTACHMENT B CSR 7798-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUIDs Franchise Area Households Cable Subscribers Subscribership Percentage Bath Township OH0493 16020 2198 13.72% Beavercreek Township OH2085 15570 1015 6.52% Cedarville Township OH0957 1091 36 3.30% Clay Township OH2281 3447 427 12.39% Madison Township OH2279 1070 18 1.68% Miami Township (Greene County) OH1057 2090 8 .38%