Federal Communications Commission 
In the Matter of: 
BEACH CABLE, INC. 
v. 
JONES SPACELINK, LTD. 
Geographic Uniform Rate 
Structure Complaint 
Before the 
Federal Communications Commission 
Washington, D.C. 20554 
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MEMORANDUM OPINION AND ORDER 
DA 96-1333 
CSR 4500-R 
Adopted: August 19, 1996 Released: August 20, 1996 
By the Chief, Cable Services Bureau: 
INTRODUCTION 
1. Beach Cable, Inc. ("Beach") filed a complaint on December 2~, 1994 (amended March 
31, 1995) against Jones Spacelink, Ltd. ("Jones"), alleging that certain of Jones's promotional 
discounts offered to residential customers ("Red-White-Blue Promotion") and to multiple dwelling 
units (":tvIDUs") in its Panama City Beach, Florida service area violate the uniform rate structure 
requirement of the 1992 Cable Act and the Commission's rules. 1 Jones has operated in the 
Panama City Beach area since 1981 and Beach began providing service to the area in June 1994. 
On May l, 1995, Jones opposed the amended complaint, and Beach replied on May 19, 1995. 
Beach requests that Jones be ordered to cease and desist from the alleged practices and that a 
monetary fine or forfeiture be imposed to deter future il~egal activity. 
2. Subsequent to the filing of the aforementioned pleadings, the United States Court of 
Appeals for the District of Columbia Circuit issued a decision in Time Warner Entertainment Co., 
L.P. v. FCC, 56 F.3d 151 (D.C. Cir. 1995), which held, inter alia, that "the Commission's 
uniform rate structure regulation is contrary to the [1992 Cable Act] insofar as it applies to cable 
operators subject to 'effective competition."' Id. at 191. The court stated: 
1Communications Act of 1934 §623(d), 47 U.S.C. §543(d); 47 C.F.R. §76.984. Section 623(d) of the 1992 Cable 
Act provides: 
A cable operator shall have a rate structure, for the provision of cable service, that is uniform 
throughout the geographic area in which cable service is provided over its cable system. 
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Federal Communications Commission DA 96-1333 
Application of the uniform rate provision to competitive systems violates 47 
U.S.C. §543(a)(2), which prohibits the Commission and franchising authorities 
from utilizing their rate regulation authority under the 1992 Cable Act to regulate 
the rates charged by cable systems facing "effective competition." 
Id at 190-91. 
In light of this decisipn, the Commission informed the parties herein that it must first determine 
that Jones does not face effective competition, as defined by the Communications Act and the 
Commission's rules,2 before ruling on the merits of Beach's complaint, and that, if the 
Commission determines that Jones is subject to effective competition, the Commission lacks 
jurisdiction to resolve Beach's complaint.3 The parties were directed to address the issue of the 
presence or absence of effective competition in supplemental pleadings. 4 On March 11, 1996, 
Jones filed its supplement;5 Beach responded on April I, 1996; and Jones replied on April II, 
1996. 
PLEADINGS 
3. In its supplement, Jones states that it is at present, and was in October 1994, when its 
Red-White-Blue Promotion was introduced, subject to effective competition in the Panama City 
Beach and Bay County franchise areas where the promotion was· offered. Specifically, Jones 
states that in its Panama City Beach franchise area, comprised of the incorporated City of Panama 
City Beach, it is subject to competing provider effective competition; and in its Bay County 
franchise area, comprised of the unincorporated areas of Bay County, excluding the military base, 
it is subject to low penetration effective competition .. 
4. Turning first to its Panama City Beach system, Jones argues that it satisfies the 
competing provider test for effective competition set forth in 47 U.S.C. §543(l)(l)(B) and 47 
C.F.R. §76.905(b)(2).6 Under the first prong of that test, Jones states that, according to the 1990 
2Communications Act of 1934 §623(l)(l)(A),(B),(C),(D), 47 U.S.C. §543(l)(l)(A),(B),(C),(D); 47 C.F.R. 
§76.905(b )( 1 ),(2),(3),(4). 
3Letter to Jaclyn N. Kolk and Burt A. Bravennan from Steven A. Broeckaert, Cable Services Bureau, February 
6, 1996. 
5Jones actually resubmitted on that date its Motion to Dismiss Amended Complaint, originally filed January 25, 
1996, which addressed the effective competition issue. 
6Under this test, first, there must be two or more unaffiliated multichannel video programming distributors that 
offer comparable programming to at least 50 percent of the households in the franchise area, and, second, more than 
15 percent of the households in the franchise area must subscribe to programming provided by other than the largest 
multichannel video programming distributor. 
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Federal Communications Commission DA 96-1333 
Census, there are approximately l, 7~9 households in Panama City Beach and, using the 2.2% 
annual growth rate reported by the Bay County Tourist Development Council, there are currently 
1,986 households in the City. Jones states that it offers cable service to nearly 100% of the 
households in its Panama City Beach franchise area and that Beach, according to its reply to 
Jones' s opposition to its amended complaint, offers comparable programming to 80% of the 
households in Panama City Beach. In addition, Jones states, Primestar, DirecTV, and USSB offer 
comparable programming to all of the households in Panama City Beach. Jones asserts that these 
latter systems all cover Panama City Beach with their satellite footprints, market themselves to 
Panama City Beach residents, and offer comparable programming to all the households in Panama 
City Beach. Moreover, Jones submits, in October 1994, when it began its Red-White-Blue 
Promotion, both it and Beach passed more than 50% of the households in Panama City Beach, 
and Primestar, DirecTV, and USSB offered comparable programming and were available to all 
of the residents of Panama City Beach. 
5. Turning to the second prong of the effective competition test under 47 C.F.R 
§76.905(b)(2), Jones states that, based on information received from Beach as to its August 1995 
subscribership in Jones's Panama City Beach and Bay County franchise areas combined and a 
breakdown of the number of Beach subscribers in October 1994, · it calculates that Beach, the 
smaller of the two operators, currently serves 2,458 subscribers in Panama City Beach.7 Because 
a significant portion of the population in Panama City Beach is made up of seasonal, recreational, 
and occasional residents, Jones states, in calculating the number ·of households served by its 
competitor, it reduced the number of subscribers served by Beach by the vacancy rate for Panama 
City Beach according to the 1990 Census. Jones asserts that this produced 730 households 
presently served by Beach which, divided by the number of households in Panama City Beach, 
1986, means that Beach serves 36. 7% of the households in Panama City Beach, well beyond the 
15% requirement. Using the same methodology and applying a 2.2% growth rate, Jones submits 
that, in October 1994, Beach served 281 of the 1,946 households in Panama City Beach at that 
time, or 14.4% of the total number of households. In addition, Jones states, a SMATV system 
provided comparab~e programming to at least 134 households at The Summit condominium 
complex in Panama City Beach, or 6.9% of the total number of households in the City. 
Moreover, relying on information from Media Business Corp. d/b/a SkyTrends, which provides 
quarterly reports on the number of subscribers served by DBS providers according to zip code 
areas, Jones calculates that DBS providers served at least 9 households in Panama City Beach in 
October 1994. All told, Jones concludes, competing providers other than itself served 424 
households or 21.8% of the total number of Panama City Beach households in October 1994. 8 
6. Next, addressing the situation in its Bay County franchise area, Jones states that it 
meets the low penetration test for effective competition established in 47 U.S.C. §543(l)(l)(A) 
7Jones updated Beach's figures by assuming that its subscribers grew at the same rate from August to December 
1995, and that the same percentage of those subscribers resided in Panama City Beach and Bay County in 1995 as 
did in October 1994. 
8See note 11, infra. 
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Federal Communications Commission DA 96-1333 
and 47 C.F.R. §76.905(b)(l).9 That is, using 1990 Census figures, assuming the same 2.2% 
annual growth rate used for Panama City Beach, and adjusting its subscribership numbers to 
reflect full-time occupancy, Jones states that it currently serves 3,348 households out of 19,657 
households in its Bay County franchise area, or 17% of the total number of households in the 
unincorporated portions of Bay County. Similarly, Jones asserts, in October 1994, it served 3,491 
households, or 18. l % of the total of 19 ,267 households in Bay County. At both times, Jones 
concludes, it satisfied the effective competition test of 47 C.F.R. §76.905(b)(l) by serving far 
fewer than 30% of the households in the Bay County franchise area 
7. In response, Beach focuses exclusively on the status of competition as of October 1, 
1994, when Jones's promotional activities began, and argues that its own figures and calculations 
establish that effective competition did not exist at that time. With regard to competing provider 
effective competition in the Panama City Beach franchise area, Beach states that both it and Jones 
passed 15,681 dwelling units and, adjusting for the average annual occupancy rate of 65% for 
Northwest Florida reported by the Bay County Tourist Qevelopment Council, there were a total 
of 10,193 households in Panama City Beach in 1994. After correcting its 1,065 subscribers for 
annual occupancy, Beach states, it served 692 households, the SMATV provider served 293 
households at The Summit condominium, and DBS or other satellite providers served 19 
households, for a total of 1,004 households or 9.85% of the 10,193 total households, which does 
not constitute effective competition. Beach also disputes Jones's claim that there were only 1,986 
households in Panama City Beach in 1994, since Beach passed 15,681 households and Jones 
stated in a November 1993 article in Multichannel News that it served 8,000 residential 
subscribers in Panama City Beach. Moreover, Beach asserts that, according to the Bay County 
Tourist Development Council, there were 9,800 households in Panama-City Beach in 1994, and 
the City billed 11,434 residential water accounts in 1996. In addition, Beach questions the 30% 
occupancy rate used by Jones in its calculations, which figure contrasts sharply with the average 
occupancy rate of 65% it relies on, but concedes that, whichever rate is used, the same effective 
competition percentages are derived as long as one number is used consistently. Beach also states 
that Jones' s figures are unreliable because Jones never discloses the number of households it 
actually served in 1994 and does not say when Beach passed over 50% of the households or 
offered service to over 15%. Finally, Beach argues that Jones's reliance on SkyTrends for 
satellite service is flawed because SkyTrends provides no·data for 1994 and SkyTrends omits an 
entire zip code area served by Jones from its computations. 
8. As to Jones' assertion of low penetration effective competition in Bay County, Beach 
maintains that Jones acknowledged that it served 5,808 households in the unincorporated area in 
1994, which is far more than 30% of the 7,031 households cumulatively passed by Jones and 
Beach. Even when these numbers are reduced to accord with the 60% occupancy rate employed 
by Jones for Bay County, Beach states, Jones still served more than 30% of the households 
passed. Beach argues that there can be no finding of effective competiton under the competing 
9Pursuant to this test, there is effective competition if fewer that 30% of the households in the franchise area 
subscribe to the cable service of a cable system. 
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Federal Communications Commission DA 96-1333 
provider test either, since as of October 1, 1994, Beach provided service to less than 50% of 
Jones's Bay County service area. Moreover, Beach submits that it served 322 subscribing 
households in the Bay County area and that DBS and other satellite providers served 7 
subscribing households, which equates to approximately 7% of the households passed, "USing the 
same 65% occupancy rate employed for Panama City Beach. Finally, Beach contends that the 
data submitted by Jones for its Bay County franchise is insufficient to determine what areas of 
Bay County it serves, and that Jones has never entered all of Bay County but has confined itself 
to areas adjacent to its Panama City Beach franchise. 10 
9. In reply, Jones asserts that Beach's response relies on erroneous descriptions of 
Jones's franchise areas. Specifically, Jones states that its Panama City Beach franchise area is 
limited to the incorporated area of the City of Panama City Beach, whereas the entire area served 
by Beach, referred to by residents as Panama City Beach, includes not only the City but adjacent 
areas of unincorporated Bay County as well. According to the Bay County Tourist Development 
Council, Jones states, the City represents only 20% of the Beach area's resident population, the 
·remaining 80% of which is located in unincorporated Bay County. Jones contends that Beach 
has defined Jones's City of Panama City Beach franchise area to include the entire area served 
by Beach. Thus, for example, Jones states, the number of housing units indicated by Beach for 
Panama City Beach, 15,681, far exceeds the number within the corporate limits of the City as 
reported on the 1990 Census, 6,013. In addition, Jones contends,.Beach relies on the number of 
water accounts for the entire Beach area, rather than the City alone; Beach refers to the number 
of households reported by the Tourist Council for the entire Beach area as opposed to the City 
proper; the Multichannel News article Beach cites concerned the num~er of subscribers passed 
by Jones in the City and Bay County together; and the zip code omitted form SkyTrends' report 
of competition is located outside the City limits. 
I 0. In calculating effective competition, Jones states, it appropriately used 1990 Census 
figures for the number of City of Panama City Beach households. 11 Moreover, Jones continues, 
it accounted for growth fiom, 1990 to 1994 by using the growth rate reported by the Tourist 
Council for the entire Beach area because a growth rate for the City was not available. Indeed, 
Jones claims, by extrapolating a higher household number, it made its effective competition 
showing more difficult. Its Citv household count for 1994, Jones also asserts, is consistent with 
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the Tourist Council count of households in the Beach area, approximately 20% of which were 
10Beach also claims at page 8 of its response that it lost approximately $295,000 in gross revenue over a two year 
period as a result of Jones's promotional activities. We will not consider this allegation because it contravenes the 
clear direction in the Commission's February 6, 1996 letter to the parties, note 3, supra, that "[a]ll pleadings shall 
be limited to the issue of the presence or absence of effective competition in the ... franchise area." 
11Jones notes, however, that it slightly overstated the number of City households listed in the Census as 1,789 
whereas the correct figure is 1,781. It also notes that Beach reported in its response that it served 1,065 subscribers 
in the City in 1994 as opposed to 94 7, the number previously reported to Jones. Adjusting for these new figures, 
Jones recalculates its effective competition showing,· and finds that Beach served 316 or 16.3% of the households 
and that Beach, the SMA TV provider, and the satellite providers together served 459 or 23.7% of the 1,938 
households in the City in 1994. See Jones's Reply, Exhibit 7. 
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Federal Communications Commission DA 96-1333 
located in the City. Jones further states that the 30% occupancy rate it used in its calculations 
was derived by dividing the number of households reported for the City in the 1990 Census by 
the number of housing units, thereby obtaining only occupied units. The 65% occupancy rate 
used by Beach, Jones maintains, is less reliable because it is the figure reported by the Tourist 
Council for the entire Beach area. Moreover, Jones maintains, use of a higher occupancy rate 
would increase the number of households in the City served by its competitors and strengthen its 
effective competition showing. Finally, Jones states that it did not provide the number of 
households it serves in its City of Panama City Beach franchise area because that number does 
not factor into its effective competition showing, but that, in fact, in November 1995, it had 2,090 
subscribers which, ~ultiplied by the 30% occupancy rate, equates to 621 households. 
11. Jones further contends that Beach has also defined Jones' s Bay County franchise area 
incorrectly. Jones states that it has a franchise to serve the unincorporated areas of Bay County 
but that Beach has improperly sought to redefine Jones's franchise area by claiming that Jones 
has confined its service to areas adjacent to its Panama City Beach franchise area. Jones asserts 
that Beach has not met its burden of proving a franchise redefinition and that its allegation is 
unsupported. Jones also submits that Beach's effective competition analysis, which is purportedly 
based on the competing provider test rather than the low penetration test utilized by Jones, is 
completely without empirical support. Lastly, Jones notes that Beach does not oppose Jones's 
showing of effective competition at the present time in both its franchise areas. This showing 
is relevant, Jones argues, because even assuming arguendo that it did not face effective 
competition in 1994, it would be free of the uniform rate structure requirement once it did 
become subject to effective competition, and Beach's asserted damages would be limited to the 
period prior to the presence of effective competition. · 
DISCUSSION 
12. In the absence of a demonstration to the contrary, cable systems are presumed not 
to be subject to effective competition. 12 The cable operator bears the burden of rebutting the 
presumption that effective competition does not exist with evidence that effective competition, 
as defined by Section 76.905 of the Commission's rules, is present within the franchise area. 13 
Jones has met this burden. 
13. Jones has correctly tied its effective competition showing to its individual franchise 
areas. 14 With respect to its City of Panama City Beach franchise area, Jones relies on the 
competing provider effective competition test set forth in 47 C.F.R. §76.905(b)(2). In this regard, 
1247 C.F.R. §76.906. 
1347 C.F.R. §76.91 I(b)(I). 
14See Report and Order and Further Notice of Proposed Rulemaking, MM Docket No. 92-266, 8 FCC Red 563 I, 
5673 (I 993) ("Rate Order"). Jones has separate franchises to serve the City of Panama City Beach and the 
unincorporated areas of Bay County. See Jones Reply, Exhibits I and 6. 
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Federal Communications Commission DA 96-1333 
Jones has properly looked to 1990 Census data15 and has reasonably attempted to update the 
Census figures to account for growth since 1990 by using available data for the growth rate of 
the Panama City Metropolitan Statistical Area (MSA), i.e., the Beach area. Jones has shown that 
it offers cable service to nearly 100% of the households in its City of Panama City Beach 
franchise area, that Beach offers comparable programming to over 50% of the households there, 
and that various satellite systems offer comparable programming16 to all of the households in the 
franchise area. 17 Jones has also demonstrated that the same providers offered service to over 
50% of the households in October 1994, when its Red-White-Blue Promotion began.18 Thus Jones 
has satisfied the first prong of the competing provider test for effective competition in its City 
of Panama City Beach franchise area. 
14. Based on subscribership information received from Beach, Jones calculated the 
number of households currently served by Beach in the City of Panama City Beach franchise 
area. J6nes properly focused on households in order to exclude unoccupied housing units or 
housing units used for seasonal, occasional, or recreational use. 19 Jones. derived the occupancy 
rate for the City by dividing the number of households reported in the 1990 Census for the City 
by the number of housing units. After reducing Beach's subscribers accordingly, Jones correctly 
concluded, without even considering penetration from SMA TV and satellite providers, that Beach 
alone serves almost 3 7% of the households in the City of Panama City Beach, which is 
substantially above the 15% benchmark for effective competition. 20 Employing the identical 
methodology, and on the basis of revised information (see note 11, supra), Jones determined that 
in October 1994, Beach alone served 16.3% of the households in the City of Panama City Beach; 
an additional 7.4% of households were served by SMATV and satellit~ providers, for a total of 
23. 7%. Although Beach questions the reliability of SkyTrends data to determine DBS penetration 
in 1994, Jones calculates that these providers served only 9 households (or less than 0.5% of the 
total households), and even excluding these households entirely from the overall count would not 
15 See Cable Operators' Petitions for Reconsideration and Revocation of Franchising Authorities' Certifications 
to Regulate Basic Cable Service Rates, 9 FCC Red 3656 if2(3) (Cab. Serv. Bur. 1994). 
16See Rate Order, 8 FCC Red at 5660-61; Annual Assessment of the State of Competition in the Market for the 
Delivery of Video Programming, Notice of Inquiry, CS Docket No. 95-61, 10 FCC Red 7805, 7813 (1995). 
11See Jones's Motion to Dismiss Amended Complaint, Affidavit of Ray Kistler, at para. 5; Beach's Reply to 
Jones's Opposition to Amended Complaint, at 5. 
18See Jones's Motion to Dismiss Amended Complaint, Affidavit of Ray Kistler, at para. 6. 
19See Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992, 
MM Docket Nos. 92-266 and 90-262, Third Order on Reconsideration, 9 FCC Red 4316, 4324 (1994); 47 C.F.R. 
§76.905(c); Horizon Cable I Limited Partnership, 9 FCC Red 7305 (Cab. Serv. Bur. 1994); Apollo Communications 
Corp., 10 FCC Red 988 (Cab. Serv. Bur. 1994). 
=
0use of the higher overall occupancy rate reported for Northwest Florida, as urged by Beach, would have 
increased the number of households served by Beach and made Jones's effective competition showing even stronger. 
10396 
Federal Communications Commission DA 96-1333 
appreciably alter the finding that the total competitive penetration was well in excess of the 15% 
level required for effective competition.21 
15. With respect to its unincorporated Bay County franchise area, Jones has demonstrated 
that it is subject to effective competition under the low penetration test set forth in 47 C.F.R. 
§76.905(b)(l). Although Beach, in its response, attempts to show that Jones does not satisfy the 
competing provider test for effective competition set forth in 47 C.F.R. §76.905(b)(2), Jones has 
the burden of rebutting the presumption that effective competition does not exist, and chose to 
make its showing under the low penetration test set forth in 47 C.F.R. §76.905(b)(l). Because 
the effective competition provisions are stated in the alternative, 22 and there is no requirement that 
an operator satisfy the same test in all franchise areas, Jones was free to choose which effective 
competition test specified by the rule it would attempt to meet in its Bay County franchise area. 
16. In its showing, Jones correctly used 1990 Census data to determine the number of 
households and applied the 2.2% annual growth rate for the Beach area, i.e., the Panama City 
MSA, to determine the number of households in 1995. It then multiplied the number of 
subscribers it presently has in Bay County, 5,570,23 by the 60% occupancy rate, which figure was 
derived by dividing the number of households listed in the 1990 Census by the total number of 
housing units in its Bay County franchise area. This means that Jones serves 3,348 households, 
or 17% of the total number of households in the Bay County franchise area. Similarly, Jones had 
5,808 subscribers in its Bay County franchise area in October 1994,24 which meant, after applying 
the 2.2% area annual growth rate and the 60% full-time occupancy rate for Bay County, that 
Jones served 3,491 households, or 18.1% of the total of approximately J9,267 households in the 
franchise area at that time. At both times, the penetration level was well below the Commission's 
30% low penetration test ceiling. Finally, as to the parties' "franchise redefinition" contentions, 
Beach has not submitted specific evidence to support its contention that Jones has made an 
affirmative decision to limit its Bay County service area to areas adjacent to its City of Panama 
City Beach franchise area. Thus, we are unpersuaded that the appropriate franchise area for 
21We also agree with Jones that the very different effective competition analysis offered by Beach in its response 
appears to be the result of its erroneous use of household and other statistical data for the entire Beach area, including 
Bay County, rather than for the much smaller City of Panama City Beach franchise area. See para. 8, supra. 
2247 C.F.R. §76.905(b) states: 
A cable system is subject to effective competition when any one of the following conditions is met: 
(emphasis added) 
23See Jones's Motion to Dismiss Amended Complaint, Affidavit of Ray Kistler, at para. 9. 
2~Id. 
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Federal Communications Commission DA 96-1333 
purposes of effective competition is some area other than the entire unincorporated area of Bay 
County.25 
1 7. In sum, Jones has met its burden in this case by establishing that effective 
competition is present in its City of Panama City Beach and Bay County franchise areas and was 
present at the time it introduced the "Red-White-Blue Promotion" that is the subject of Beach's 
complaint. In these circumstances, as explained earlier, the Commission is without jurisdiction 
to consider Beach's complaint that Jones violated the uniform rate structure requirement. 
ORDERING CLAUSES 
18. Accordingly, IT IS ORDERED, that the uniform rate structure complaint filed by 
Beach Cable, Inc. IS DISMISSED. 
19. This action is taken by the Chief, Cable Services Bureau, pursuant to authority 
delegated under Section 0.321 of the Commission's rules, 47 C.F.R §0.321. 
FEDERAL COMMUNICATIONS COMMISSION 
Meredith J. Jones 
Chief, Cable Services Bureau 
25 See TCI Cablevision of Georgia, Inc. 10 FCC Red 597 (Cab. Serv. Bur. 1994); American Cable Co., 9 FCC 
Red 7211 (Cab. Serv. Bur. 1994). 
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