Federal Communications Commission DA 13-1509 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Time Warner Cable Inc. Petition for Determination of Effective Competition in 19 Kentucky Franchise Areas ) ) ) ) ) ) MB Docket No. 12-302, CSR 8727-E MEMORANDUM OPINION AND ORDER Adopted: June 27, 2013 Released: July 3, 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 a petition 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 “Communities.” Petitioner alleges that its cable system serving the 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 in the Communities because of the competing service provided by two direct broadcast satellite (“DBS”) providers, DIRECTV, Inc. (“DIRECTV”), and DISH Network (“DISH”). 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. II. DISCUSSION 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. 1 See 47 U.S.C. § 543(l)(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)(1); 47 C.F.R. § 76.905(b). 5 See 47 C.F.R. §§ 76.906-.907(b). 6 47 U.S.C. § 543(l)(1)(B); 47 C.F.R. § 76.905(b)(2). Federal Communications Commission DA 13-1509 2 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 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 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 programming,11 and is supported in the petition with citations to 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 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, exceeds 15 percent of the households in a franchise area. Petitioner asserts that it is the largest MVPD in the Communities.14 Petitioner sought to determine the competing provider penetration in the 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 Communities on a zip code plus four basis.15 6. Based upon the aggregate DBS subscriber penetration levels that were calculated using Census 2010 household data,16 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. 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 7 47 U.S.C. § 543(l)(1)(B)(i); 47 C.F.R. § 76.905(b)(2)(i). 8 See Petition at 3-5. 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 5-6. 12 See Petition at 6, citing www.directv.com and www.dishnetwork.com. 13 See Petition at 6-7. 14 See id. at 7 and attached Declaration of Edward Kozelek, Regional Vice President of Government Relations – Midwest for Time Warner Cable (July 27, 2012). 15 Petition at 7-8. 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. 16 Petition at 7-8. Federal Communications Commission DA 13-1509 3 Attachment A. III. ORDERING CLAUSES 7. 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. 8. IT IS FURTHER ORDERED that the certification to regulate basic cable service rates granted to any of the Communities set forth on Attachment A IS REVOKED. 9. This action is taken pursuant to delegated authority pursuant to Section 0.283 of the Commission’s rules.17 FEDERAL COMMUNICATIONS COMMISSION Steven A. Broeckaert Senior Deputy Chief, Policy Division, Media Bureau 17 47 C.F.R. § 0.283. Federal Communications Commission DA 13-1509 4 ATTACHMENT A MB Docket No. 12-302, CSR 8727-E COMMUNITIES SERVED BY TIME WARNER CABLE INC. Communities CUIDs CPR* 2010 Census Households Estimated DBS Subscribers Carlisle KY0402 37.89% 892 338 Cynthiana KY0162 30.92% 2,665 824 Danville KY0719 33.54% 6,405 2,148 Ewing KY0981 34.34% 99 34 Junction KY0092 44.25% 913 404 Lakeview Heights KY1034 52.56% 78 41 Lancaster KY0149 44.84% 1,416 635 Lebanon KY0054 33.67% 2,406 810 Loretto KY0999 38.73% 284 110 Midway KY0151 43.55% 643 280 Morehead KY0064 23.66% 2,160 511 New Haven KY1088 36.49% 348 127 North Middletown KY0410 27.98% 243 68 Olive Hill KY0146 24.34% 686 167 Owingsville KY0652 32.24% 670 216 Perryville KY0138 42.64% 326 139 Salt Lick KY0190 33.06% 124 41 Sharpsburg KY1126 33.54% 164 55 Stamping Ground KY1000 32.59% 270 88 *CPR = Percent of competitive DBS penetration rate.