NOTICE ************************************************************************* NOTICE ************************************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file pnmc5021. File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ************************************************************************* Before the Federal Communications Commission Washington, D.C. 20554 ) DANIELS CABLEVISION, INC. d/b/a ) PALA MESA CABLEVISION,) d/b/a NORTH COUNTY CABLEVISION, ) d/b/a CABLE TV OF LAKE SAN MARCOS) ) Petition for Revocation ) CUID Nos. CA0198, of the Certification of ) CA0672, CA0641 San Diego County, California ) to Regulate Basic Cable Service Rates ) MEMORANDUM OPINION AND ORDER Adopted: August 19, 1996 Released: August 29, 1996 By the Chief, Cable Services Bureau: INTRODUCTION 1. On October 30, 1995, Daniels Cablevision, Inc. d/b/a Pala Mesa Cablevision, d/b/a North County Cablevision, d/b/a Cable TV of Lake San Marcos ("Daniels") filed a petition for revocation challenging the certification of San Diego County, California (the "County") to regulate Daniels' basic cable service and equipment rates. On November 27, 1995, the County filed an opposition to Daniels' petition to which Daniels filed a reply on December 7, 1995. 2. Section 623(a)(4) of the Communications Act of 1934, as amended, allows franchising authorities to become certified to regulate the basic cable service rates of cable operators which are not subject to effective competition. For purposes of the initial request for certification, a franchising authority may rely on the presumption that cable operators within its jurisdiction are not subject to effective competition unless the franchising authority has actual knowledge to the contrary. Such certification becomes effective thirty days from the date of filing unless the Commission finds that the franchising authority does not meet the statutory certification requirements. Cable operators may file petitions for reconsideration of a franchising authority's certification within thirty days from the date such certification becomes effective. Rate regulation is automatically stayed pending review of a timely filed petition for reconsideration alleging effective competition. After the 30-day deadline for filing petitions for reconsideration has elapsed, cable operators may challenge the franchising authority's certification by filing a petition for revocation. However, regardless of its grounds, a petition for revocation does not automatically trigger a stay of the franchising authority's power to regulate basic rates. DISCUSSION A. The Pleadings 3. Daniels argues that its cable system is subject to low penetration effective competition in its franchise area, unincorporated San Diego County, because it serves fewer than 30 percent of the households therein. Daniels asserts that there are 127,665 households (that is, occupied housing units) in its franchise area. Daniels states that it serves 10,622 subscribers, or 8.3 percent of the households in the franchise area. As support, Daniels submits a copy of the relevant page from the 1990 Census which indicates that there are 127,665 households in unincorporated San Diego County. Pursuant to a Commission staff request, Daniels submitted a computer printout which indicates that Daniels serves 10,622 subscribers in unincorporated San Diego County. Daniels also requested that the Commission invoke the "automatic stay provided under 47 C.F.R. 76.914(d)." 4. The County does not challenge Daniels' statistical data, instead arguing that Daniels has redefined its San Diego County franchise area. Although the franchise agreement establishes Daniels' franchise area as "county-wide," the County contends that Daniels has made an affirmative decision to limit its franchise area to include only its current service areas located in the Pala Mesa/Fallbrook, San Diego County-North and Lake San Marcos portions of unincorporated San Diego County. Within this redefined franchise area, the County asserts that Daniels is not subject to effective competition because its penetration level exceeds 30 percent. The County also argues that Daniels is not entitled to a stay of rate regulation under Section 76.914 of the Commission's regulations. 5. In its reply, Daniels argues that its franchise area is clearly set forth in its franchise agreement with the County. Moreover, Daniels argues that it has not acted to restrict the scope of its franchise area. Daniels maintains that, in the near decade that it has provided service in unincorporated San Diego County, its subscriber base and physical plant have more than doubled in size including expansions into other regions of San Diego County. Daniels also states that it continues to consider expansion opportunities. B. Analysis 6. We are unpersuaded that Daniels' franchise area for purposes of effective competition is less than all of unincorporated San Diego County. The County argues that Daniels has redefined its franchise area to such an extent that its effective competition demonstration must be based on its current service area. We disagree. As the Commission has consistently stated, effective competition must be demonstrated on a franchise area basis. Generally, a franchise area is defined as the area a system operator is authorized to serve in its franchise. The Commission has also stated that, for purposes of the low penetration effective competition test, a more restricted definition of a franchise area may be appropriate under limited circumstances, such as when an operator, "through its own conduct, self-defined the areas to be served to such an extent that this redefined area accurately portrays the operator's franchise area. " The franchising authority has the burden of showing that the operator has made an "affirmative decision. . . to restrict service. . . ." However, as the Commission cautioned, the fact that a franchise had not yet been filled out entirely by system construction by the operator would not by itself be evidence that the service area had been redefined. 7. The facts alleged by the County are quite similar to those considered by the Commission in Valley Center Cablesystems, L.P. The Commission stated in Valley Center: The County's argument, without more, is simply an argument that a cable operator has not yet filled out its entire franchise area. This fact, if true, is insufficient to constitute evidence by which we could conclude that a cable operator has redefined its franchise area. Indeed, we note that the instant proceeding is not a case where the cable operator has engaged in no expansion. . . . In light of these facts, we find that [Valley Center Cablesystem's] alleged failure to expand into areas served by other cable operators, by itself, is not grounds upon which to reverse the Bureau's decision. As in Valley Center, we find that the County's argument that Daniels has failed to expand into areas served by other cable operators is not determinative of the issue of whether Daniels has redefined its franchise area. The franchise agreement between Daniels and the County designates Daniels' authorized service area "to be county-wide with primary responsibility for providing service to [Pala Mesa/Fallbrook, San Diego County-North, and Lake San Marcos]." The County does not contest that over the last ten years Daniels has expanded its system in unincorporated San Diego County, but argues that Daniels has failed to expand within areas served by other cable operators. The fact that Daniels has not constructed its cable plant in locations deemed most desirable by the County does not obviate the fact that Daniels has continued to expand its cable system. Therefore, we find that the County has failed to sustain its burden of proof that Daniels has redefined its franchise area. 8. In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition. 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 its franchise area. Daniels has met this burden. We find that Daniels appropriately relied on data reflecting the number of households as required by our rules. Daniels has submitted sufficient evidence demonstrating that its cable system serving unincorporated San Diego County provides service to 10,622 of the 127,665 households, or 8.3 percent of the households, within its franchise area. Thus, we find that Daniels' system serving unincorporated San Diego County is subject to low penetration effective competition. Therefore, its petition is granted. ORDERING CLAUSES 9. Accordingly, IT IS ORDERED that the petition for revocation filed by Daniels Cablevision, Inc. d/b/a Pala Mesa Cablevision, d/b/a North County Cablevision, d/b/a Cable TV of Lake San Marcos challenging the certification of San Diego County, California to regulate its basic cable service rates IS GRANTED. 10. IT IS FURTHER ORDERED that the certification of San Diego County, California to regulate the basic cable service rates of Daniels Cablevision, Inc. d/b/a Pala Mesa Cablevision, d/b/a North County Cablevision, d/b/a Cable TV of Lake San Marcos IS REVOKED. 11. IT IS FURTHER ORDERED that Daniels Cablevision, Inc. d/b/a Pala Mesa Cablevision, d/b/a North County Cablevision, d/b/a Cable TV of Lake San Marcos' request for a stay of San Diego County, California's rate regulation authority IS DENIED. 12. This action is taken pursuant to delegated authority 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