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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of: ) ) Plymouth MI0452 Continental Cablevision of ) Plymouth Township MI0453 Southeast Michigan ) MI0965 ) Canton Township MI0470 Petition for Determination of) Northville MI0467 Effective Competition ) MI0468 ) Northville Township MI0469 MEMORANDUM OPINION AND ORDER Adopted: January 30, 1997 Released: February 4, 1997 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. In the captioned proceeding, Continental Cablevision of Southeast Michigan, Inc. ("Continental") seeks a determination that Continental is subject to effective competition in Plymouth, Plymouth Township, Canton Township, Northville, and Northville Township, Michigan ("Communities") because Ameritech New Media provides competing cable service in those Communities. Ameritech New Media filed comments in opposition to Continental's petition to which Continental filed a reply. 2. Section 623(a)(4) of the Communications Act of 1934, as amended ("Communications Act"), allows franchising authorities to become certified to regulate basic cable service rates of cable operators that are not subject to effective competition. For purposes of the initial request for certification, local franchising authorities may rely on a presumption that cable operators within their jurisdiction are not subject to effective competition unless they have actual knowledge to the contrary. Certification becomes effective 30 days from the date of filing unless the Commission finds that the authority does not meet the statutory certification requirements. In Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996, ("Cable Act Reform Order"), the Commission instructed cable operators believing themselves subject to local exchange carrier ("LEC") effective competition under Section 623(l)(1)(D) of the Communications Act to file a petition for determination of effective competition pursuant to Section 76.7 of the Commission's rules. Section 623(l)(1)(D) of the Communications Act provides that a cable operator is subject to effective competition where: a local exchange carrier or its affiliate (or any multichannel video programming distributor using the facilities of such carrier or its affiliate) offers video programming services directly to subscribers by any means (other than direct-to-home satellite services) in the franchise area of an unaffiliated cable operator which is providing cable service in that franchise area, but only if the video programming services so offered in that area are comparable to the video programming services provided by the unaffiliated cable operator in that area. Successful LEC effective competition petitions will exempt a cable operator from rate regulation as of February 8, 1996, the enactment date of the Telecommunications Act of 1996 (the "1996 Act"). II. THE PLEADINGS 3. Continental asserts that it is subject to LEC effective competition in the above captioned franchise areas. With regard to the LEC affiliation requirement, Continental asserts that Ameritech New Media ("Ameritech") is a competing franchised cable operator wholly owned by Ameritech Corporation, a local exchange carrier serving customers in Ohio, Illinois, Indiana, Michigan, and Wisconsin. Ameritech makes available 90 channels of video programming on its cable systems serving the Communities. 4. With regard to the requirement that the LEC competitor offer video programming service in the unaffiliated cable operator's franchise area, Continental asserts Ameritech is physically able to offer service to subscribers in the Communities. Continental attaches Ameritech's street construction maps and franchise agreement documentation that outlines the LEC's construction plan. Continental states that Ameritech's lines are deployed and Ameritech is providing cable service in each of the Communities. Continental asserts that there are no regulatory, technical, or other impediments to households taking service. Continental also asserts that potential subscribers in the franchise area are "reasonably aware" that they may purchase Ameritech's service. Continental states that Ameritech has generated extensive publicity about its new cable service through news releases, newspaper articles, and other marketing materials. 5. Continental asserts that Ameritech offers comparable programming to the Communities' subscribers. Specifically, Continental provides Ameritech's channel line-up which demonstrates that Ameritech offers at least 80 channels, 9 of which are local television broadcasting signals, and an additional 10 channels of premium service. Continental's system offers 74 channels in the Communities. 6. Ameritech opposes Continental's petition, arguing that the comparable programming prong of the LEC effective competition test has not been met. In this particular instance, Ameritech asserts that HBO cannot be offered to Ameritech's subscribers because the Commission has ruled that Continental may distribute this programming service in the Communities on an exclusive basis. Ameritech states that programming comparability should include consideration not only of the number of channels offered, but also the programming provided on those channels. As such, Ameritech argues that it cannot offer programming comparable to that offered by Continental. Ameritech states that the Commission should not grant Continental the relief its seeks prior to December 31, 1997, the expiration date of its exclusive HBO distribution agreement. 7. In its reply, Continental states that Ameritech does not take issue with any of the factual predicates of the petition. Instead, Continental argues, Ameritech is trying to relitigate the HBO exclusivity issue, which was settled by the Cable Services Bureau in an unrelated program access proceeding. Continental argues that the Commission measures comparability, for purposes of the LEC effective competition test, as 12 channels of programming, at least some of which are local broadcasting signals. Continental asserts that HBO need not be one of these channels. Continental then asserts that it has responded to Ameritech's presence by: (1) rebuilding the affected systems from 400 MHz to 750 MHz; (2) adding 21 channels of basic, premium, and pay-per-view services as well as multiplexing some premium services, such as HBO and Cinemax; (3) moving the Disney Channel and PASS Sports to the CPS tier; (4) increasing customer service to 24 hours a day; (5) creating 2 hour service and installation windows; and (6) creating a $29.95 multipremium package and other customer packages. III. ANALYSIS 8. In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition as defined in the Communications Act. The cable operator bears the burden of rebutting the presumption that such effective competition does not exist and so must provide evidence sufficient to demonstrate that effective competition, as defined by Section 76.905 of the Commission's rules, is present in the franchise area. Continental has met this burden. 9. With regard to the first part of the LEC effective competition test, which requires that the alleged competitive service be provided by a LEC or its affiliate (or any multi-channel video programming distributor ["MVPD"] using the facilities of such LEC or its affiliate), we find that Continental has provided sufficient evidence demonstrating that Ameritech New Media is an MVPD wholly owned by a LEC. Ameritech is unquestionably a LEC as defined by the Communications Act, and Ameritech New Media meets the Commission's definition of MVPD. Therefore, we find that Continental satisfies the affiliation prong of the LEC effective competition test. Continental is unaffiliated with both Ameritech New Media and Ameritech. 10. Contrary to Ameritech's assertion, we also find that Continental has submitted sufficient evidence that the programming of Ameritech is comparable to that which it provides. Comparable programming in a LEC effective competition setting can be defined as offering "at least 12 channels of programming, at least some of which are television broadcasting signals." Neither the Communications Act nor the Commission's rules mandate program-specific comparability to the extent argued by Ameritech. The channel line-up for Ameritech submitted by Continental establishes that Ameritech offers 90 channels, including 9 local broadcast channels. This satisfies the Commission's programming comparability criterion. 11. To meet the LEC effective competition test, the alleged competitive service must also be offered directly to subscribers in the franchise area. In enacting the LEC test, Congress indicated that the Commission should apply its preexisting definition of the term "offer" to the new LEC effective competition test. Under that definition, service is offered: (1) When the multichannel video programming distributor is physically able to deliver service to potential subscribers, with the addition of no or only minimal additional investment by the distributor, in order for an individual subscriber to receive service; and (2) When no regulatory, technical or other impediments to households taking service exist, and potential subscribers in the franchise area are reasonably aware that they may purchase the services of the multichannel video programming distributor. 12. Based on the information before us, we find that Ameritech is offering service in the Communities sufficient to demonstrate the presence of effective competition. Continental has provided Ameritech's construction schedule, maps of wired areas, and other demonstrations of Ameritech's actual and planned offering of service. Ameritech's overbuild of Continental's systems is 100% complete in the five Communities and Ameritech is now directly competing for customers with Continental in all parts of the areas at issue. Ameritech's marketing efforts, combined with the extensive press coverage of Ameritech in the local media, ensure that potential subscribers are well aware of the availability of Ameritech's service. According to the documents attached to Continental's petition, potential subscribers need only contact Ameritech to activate cable service. Moreover, subscribers are able to receive service for only a minimal additional investment and without regulatory, technical or other impediments. We note that Continental has upgraded its cable plant, expanded customer service to 24 hours a day, and added more than 20 new channels. In the circumstances, consistent with Congressional intent in adopting Section 623(l)(1)(d) of the Communications Act, we find "effective competition" to be present. IV. ORDERING CLAUSES 13. Accordingly, IT IS ORDERED that the Petition for Determination of Effective Competition filed by Continental Cablevision of Southeast Michigan, Inc. challenging the certifications of the City of Plymouth, Plymouth Township, Canton Township, Northville, and Northville Township, IS GRANTED. 14. IT IS FURTHER ORDERED that the certifications of the City of Plymouth, Plymouth Township, Canton Township, Northville, and Northville Township, to regulate the basic cable rates of Continental Cablevision of Southeast Michigan in Plymouth, Plymouth Township, Canton Township, Northville, and Northville Township are REVOKED. 15. This action is taken pursuant to the interim rules adopted in Implementation of Cable Reform Provisions of the Telecommunications Act of 1996, and is without prejudice to any further action taken by the Commission in adopting final rules pursuant to the Notice of Proposed Rulemaking contained therein. 16. This action is taken pursuant to delegated authority under Section 0.321 of the Commission's rules, as amended. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau