Federal Communications Commission DA 13-1018 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Cable Inc. Petitions for Determination of Effective Competition in Eight Kentucky Franchise Areas ) ) ) ) ) ) MB Docket No. 12-191, CSR 8676-E MB Docket No. 12-192, CSR 8677-E MB Docket No. 12-193, CSR 8678-E MB Docket No. 12-194, CSR 8679-E MB Docket No. 12-195, CSR 8680-E MEMORANDUM OPINION AND ORDER Adopted: May 7, 2013 Released: May 9, 2013 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 petitions pursuant to Sections 76.7, 76.905(b)(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 “Attachment A Communities.” Petitioner alleges that its cable systems serving the Attachment A Communities are 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 are therefore exempt from cable rate regulation in those 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 B and hereinafter referred to as 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 Petitioner serves fewer than 30 percent of the households in the franchise areas.5 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,6 as that term is defined by Section 623(l) of the Communications Act and Section 76.905 of the Commission’s rules.7 The cable operator bears the burden of rebutting the 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 The five separate Time Warner petitions filed in this proceeding each list the same Kentucky Communities. The filing of five petitions was necessary because even though the same Communities are listed in all of the petitions, some of the Communities with different CUID numbers are on a separate Time Warner cable system which necessitated the filing of a separate petition with a separate filing fee. CSR 8676-E includes Oakland (KY0605) and Smiths Grove (KY0604) on PSID No. 006105. CSR 8677-E includes Robards (KY0947) on PSID No. 000458. CSR 8678-E includes unincorporated Laurel County (KY0243) on PSID No. 003345. CSR 8679-E includes Camargo (KY0709) on PSID No. 003347. CSR 8680-E includes Clay (KY0924), Dixon (KY0923), and unincorporated Webster County (KY1178) on PSID No. 011396. 6 47 C.F.R. § 76.906. 7 See 47 U.S.C. § 543(l); 47 C.F.R. § 76.905. Federal Communications Commission DA 13-1018 2 presumption that effective competition does not exist with evidence that effective competition is present within the relevant franchise area.8 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. 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.9 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.10 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 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.11 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.12 We further find that Petitioner has provided sufficient evidence to support its assertion that potential customers in those Communities are reasonably aware that they may purchase the service of these MVPD providers.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 programming,14 and is supported in this petitions with copies of channel lineups for both DIRECTV and DISH.15 Also undisputed is Petitioner’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 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 8 See 47 C.F.R. §§ 76.906-.907(b). 9 47 U.S.C. § 543(l)(1)(B); 47 C.F.R. § 76.905(b)(2). 10 47 U.S.C. § 543(l)(1)(B)(i); 47 C.F.R. § 76.905(b)(2)(i). 11 See Petitions at 3-5. 12 Mediacom Illinois LLC, 21 FCC Rcd 1175, 1176, ¶ 3 (2006). 13 47 C.F.R. § 76.905(e)(2). 14 See 47 C.F.R. § 76.905(g); see also Petitions at 5-6. 15 See Petitions at 6, citing www.directv.com and www.dishnetwork.com. 16 See Petitions at 6. Federal Communications Commission DA 13-1018 3 area. Petitioner asserts that it is the largest MVPD in the Attachment A Communities.17 Petitioner sought to determine the competing provider penetration there 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 A Communities on a zip code plus four basis.18 6. Based upon the aggregate DBS subscriber penetration levels that were calculated using 2010 Census household data,19 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. 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 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.20 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 that 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. 17 See id. at 7 and attached Declaration of Edward Kozelek, Regional Vice President of Government Relations – Midwest for Time Warner Cable (June 26, 2012). 18 Petitions at 7. A zip code plus four analysis allocates DBS subscribers to a franchise area using zip code plus four information that generally reflects franchise area boundaries in a more accurate fashion than standard five digit zip code information. 19 Petitions at 7-8. 20 47 U.S.C. § 543(l)(1)(A). Federal Communications Commission DA 13-1018 4 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 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.21 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau 21 47 C.F.R. § 0.283. Federal Communications Commission DA 13-1018 5 ATTACHMENT A MB Docket No. 12-191 CSR 8676-E, MB Docket No. 12-192 CSR 8677-E, MB Docket No. 12-193 CSR 8678-E, MB Docket No. 12-194 CSR 8679-E, MB Docket No. 12-195 CSR 8680-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUIDs CPR* 2010 Census Households Estimated DBS Subscribers Oakland KY0605 18.39% 87 16 Smiths Grove KY0604 29.76% 289 86 Robards KY0947 64.29% 196 126 Camargo KY0709 42.99% 428 184 Clay KY0924 54.76% 462 253 Dixon KY0923 53.71% 229 123 *CPR = Percent of competitive DBS penetration rate. Federal Communications Commission DA 13-1018 6 ATTACHMENT B MB Docket 12-191 CSR 8676-E, MB Docket No. 12-192 CSR 8677-E, MB Docket No. 12-193 CSR 8678-E, MB Docket No. 12-194 CSR 8679-E, MB Docket No.12-195 CSR 8680-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUIDs Franchise Area Households Cable Subscribers Penetration Percentage Unincorporated Laurel County KY0243 19,684 3,316 16.85% Unincorporated Webster County KY1178 2,531 27 1.06%