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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 re: ) ) CSR-4414-P CROSS COUNTRY CABLE, INC. ) v. ) C-TEC CABLE SYSTEMS OF ) MICHIGAN, INC. ) ) ) CSR-4449 ROBERT BURGESS ) v. ) C-TEC CABLE SYSTEMS OF ) MICHIGAN, INC. ) ) MEMORANDUM OPINION AND ORDER Adopted: February 27, 1997 Released: March 5, 1997 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. Cross Country Cable, Inc. ("Cross Country"), a cable operator in Montague, Michigan, and Robert Burgess, a subscriber of C-TEC Cable Systems of Michigan, Inc. (jointly "Complainants") has filed with the Commission a joint complaint against C-TEC Cable Systems of Michigan, Inc. ("C-TEC") alleging violations of both the geographic rate uniformity requirement and the program access provisions of the Communications Act of 1934 ("Communications Act"), as amended,  623(d) and  628(b), 47 U.S.C.  543(d) and  548(b), and Sections 76.984 and 76.1001 of the Commission's rules. C-TEC filed a consolidated response ("Consolidated Response"). Complainants did not file a reply. Pursuant to a request by the staff of the Cable Services Bureau, Complainants separated their allegations into two complaints: the "Geographic Uniformity Complaint" and the "Program Access Complaint." In light of a decision issued in Time Warner Entertainment Co., L.P. v. FCC, in which the court concluded that the uniform rates requirement does not apply to cable operators that are subject to effective competition, the staff asked C-TEC to submit supplemental pleadings if it wished to assert the presence of effective competition within the relevant franchise area. C-TEC filed its supplement ("Supplement") to which Cross Country did not respond. In this Order, we address first the effective competition showing, then geographic uniformity, and finally, program access. We resolve both the Geographic Uniformity Complaint and the Program Access Complaint. II. GEOGRAPHIC UNIFORMITY AND EFFECTIVE COMPETITION A. Background 2. Section 623(d) of the Communications Act requires cable operators to maintain a rate structure that is uniform throughout their service areas. In accordance with the court's decision in Time Warner, Congress amended Section 623(d) to provide that the uniform rate structure requirement does not apply to cable operators subject to effective competition. Section 623(d) provides, in relevant part, as follows: (d) Uniform Rate Structure Required - 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. This subsection does not apply to (1) a cable operator with respect to the provision of cable service over its cable system in any geographic area in which the video programming services offered by the operator in that area are subject to effective competition, or (2) any video programming offered on a per channel or per program basis. The Commission must first determine whether a cable operator is subject to effective competition before turning to the question of whether the uniform rate structure requirement has been violated. Section 623(l)(1) of the Communications Act provides that a cable operator is subject to effective competition if any one of the following tests is met: (A) fewer than 30 percent of the households in the franchise area subscribe to the cable service of a cable system; (B) the franchise area is- (i) served by at least two unaffiliated multichannel video programming distributors each of which offers comparable video programming to at least 50 percent of the households in the franchise area; and (ii) the number of households subscribing to programming services offered by multichannel video programming distributors other than the largest multichannel video programming distributor exceeds 15 percent of the households in the franchise area; or (C) a multichannel video programming distributor operated by the franchising authority for that franchise area offers video programming to at least 50 percent of the households in that franchise area; or (D) 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. B. Summary of Pleadings 3. Complainant Cross Country provides cable service to the City of Montague and the City of Whitehall, Michigan. The Complainants assert that C-TEC also provides cable service to the Cities of Montague and Whitehall, as well to the Township of Whitehall, Michigan. The Complainants further assert that C-TEC is not subject to effective competition because neither C- TEC nor Cross Country offers cable service to at least 50 percent of the households in C-TEC's franchise area. 4. In its Supplement, C-TEC asserts that it is subject to effective competition in each franchise area at issue. C-TEC alleges that, in both the City of Whitehall and the City of Montague, a competitor is providing effective competition as that term is defined in Section 623(l)(1)(B) of the Communications Act and in Section 76.905(b)(2) of the Commission rules C- TEC states that the competition satisfies both parts of the "competing provider" test. Under that test, a cable operator must show that the franchise area at issue is: (1) served by at least two unaffiliated multichannel video programming distributors each of which offers comparable video programming to at least 50 percent of the households in the franchise area; and, (2) the number of households subscribing to multichannel video other than the largest multichannel video programming distributor exceeds 15 percent of the households in the franchise area. 5. With regard to the first prong of the competing provider test, C-TEC states that it and Cross Country offer "comparable programming" in that each offers at least 12 channels of video programming and at least one channel of nonbroadcast service programming to more than 50 percent of the households in the franchise areas of the Cities of Montague and Whitehall. C-TEC also states that there are 884 occupied housing units (households) in the City of Montague and 1,173 occupied housing units (households) in the City of Whitehall. C-TEC asserts that it passes more than 50 percent of those households as required under the first prong of the competing provider test. In fact, C-TEC asserts that it passes nearly all the households in each franchise area. C-TEC maintains that, since C-TEC passes at least 50 percent of the households in each franchise area, Cross Country must also pass as many, because Cross Country has overbuilt C-TEC's system. 6. With regard to the second prong of the test, that multichannel video programming distributor(s) (MVPDs) other than the largest MVPD must serve at least 15 percent of the households in the franchise area, C-TEC states that it and Cross Country are the only MVPDs in the two franchising areas at issue and that they each serve more than 15 percent of the households in the respective franchise areas. C-TEC states that Cross Country has a total of 970 customers between the two relevant franchise areas and that Cross Country has captured 65 percent of the cable television market in those areas, and so must serve well over 15 percent of the households in the Cities of Montague and Whitehall. Cross Country did not respond to the Supplement. C. Discussion 7. In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition, as that term is defined by Section 76.905 of the Commission's rules. 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. In the instant case, C-TEC alleges, in its Supplement, that the cable operator is subject to competing provider effective competition in each of the franchise areas at issue. C-TEC submits census data from the 1990 Census to indicate the number of households in the Cities of Whitehall and Montague. C-TEC attempts to make a showing of the presence of effective competition by making reference to the number of households passed and the number of households served by itself and by Cross Country. C-TEC calculates the minimum number of households that each operator must pass and the minimum number of households that Cross Country must serve in order to meet the competing provider test, and states that both C-TEC and Cross Country pass, and serve, at least that many. 8. The competing provider test requires, with regard to its first prong, a showing that at least two unaffiliated MVPDs pass at least 50 percent of households in the relevant franchise areas. C-TEC concludes that Cross Country passes the threshold number of households because Cross Country has overbuilt C-TEC's system. The fact that a cable operator "overbuilds" its system by entering into a market which is already being served by at least one other cable operator is not demonstrative of the actual number of households which either cable system passes. With regard to its second prong, the test requires a showing that one or more MVPDs, other than the largest MVPD, serves more than 15 percent of the households in the relevant franchise areas. In the instant case, C-TEC implies that it is the smaller of the two cable systems in the relevant franchise areas, and states that it serves at least 15 percent of the households in the Cities of Montague and Whitehall. 9. As noted above, C-TEC has attempted to show the presence of competing provider effective competition by demonstrating that it and Cross Country satisfy both prongs of the competing provider test. C-TEC did not provide sufficient evidence to make a determination that either C-TEC or Cross Country offers service to at least 50% of the households in the City of Montague and the City of Whitehall. We find that, with regard to the first prong of the test, C-TEC can best demonstrate the presence of competing provider effective competition by reference to the availability of video programming delivered by direct satellite systems. The Commission concluded in the Rate Order that "service received from satellites . . . is technically available nationwide in all franchise areas that do not, by regulation, restrict the use of home satellite dishes." At least two unaffiliated direct broadcast satellite ("DBS") service providers, DIRECTV and USSB, are available to more than 50%, in fact virtually all, of the households in the Cities of Montague and Whitehall. With respect to programming comparability, we find that the programming of DIRECTV and USSB is comparable to that offered by C-TEC and Cross Country. We note that each DBS provider offers at least 12 such channels of video programming. Section 76.905(g) of the Commission's rules defines comparable programming to be at least 12 channels of video programming including at least one channel of nonbroadcast service programming offered by an MVPD. Thus, the first prong of the test is satisfied. 10. With respect to the second prong of the test, C-TEC asserts that Cross Country serves more households than C-TEC and that C-TEC serves at least 15% of the households in those franchise areas. Those assertions are uncontroverted. We therefore conclude, based on the totality of the evidence, that both prongs of the "competing provider" effective competition test are satisfied for the Cities of Montague and Whitehall and that C-TEC is subject to effective competition. 11. As noted above, cable operators who overcome the presumption that they are not subject to effective competition are not subject to the geographic rate uniformity requirement. We have determined that effective competition is present in the franchise areas of the Cities of Montague and Whitehall because of the availability of DBS on virtually a nationwide basis. In light of this finding, our rules governing uniform rates do not apply. Accordingly, the Joint Complaint with regard to the allegation that C-TEC violated the geographic rate uniformity requirement is dismissed. III. PROGRAM ACCESS/UNFAIR PRACTICES A. Background 12. Section 628(b) of the Communications Act prohibits unfair methods of competition and unfair or discriminatory practices in the sale of satellite cable and satellite broadcast programming. The purpose underlying the enactment of Section 628 is the promotion of the public interest by increasing competition and diversity in the multichannel video programming market. To achieve that purpose, Congress enacted specific enforcement provisions and directed the Commission to adopt regulations to specify particular conduct that would constitute a violation of Section 628(b). Section 628(b) states: It shall be unlawful for a cable operator, a satellite cable programming vendor in which a cable operator has an attributable interest, or a satellite broadcast programming vendor to engage in unfair methods of competition or unfair or deceptive acts or practices, the purpose or effect of which is to hinder significantly or to prevent any multichannel video programming distributor from providing satellite cable programming or satellite broadcast programming to subscribers or consumers. B. Pleadings 13. With regard to the Program Access Complaint, the Complainants argue that C-TEC was engaging in an unfair method of competition or unfair act or practice when it marketed its discount plan to subscribers residing in the Cities of Montague and Whitehall. The Complainants allege that the discounts offered by C-TEC, which resulted in non-uniform pricing, also impeded Cross Country's ability to provide satellite cable programming to subscribers and consumers in the franchise areas at issue. The Complainants maintain that C-TEC's non-uniform rate structure has caused Cross Country to lose a substantial amount of revenue and has made it more difficult for Cross Country to attract new capital. 14. In its Consolidated Response, C-TEC denies the Complainants' allegation that C- TEC's marketing of a discount plan to certain of its subscribers constitutes a pattern or practice of unfair competition or discriminatory pricing in violation of Section 76.1001 of the Commissions rules. C-TEC states that its practice of uniformly offering a discount to subscribers in the Cities of Montague and Whitehall does not constitute an unfair method of competition or deceptive act or practice. C-TEC asserts that Section 76.1001 was intended primarily to prevent conduct associated with horizontal and vertical concentration among cable operators and their affiliates and not to prevent cable operators from offering uniform rate structures in compliance with Commission rules. C-TEC argues that the Complainants have failed to show any element of an offense under Section 76.1001. C. Discussion 15. In order to prevail under Section 628(b) of the Communications Act and Section 76.1001 of the Commission's rules, the Complainants must show not only the existence of a non- uniform rate structure, but that such a rate structure is an unfair method of competition which hinders or is intended to hinder or "prevent any multichannel video programming distributor from providing satellite cable programming or satellite broadcast programming to subscribers or consumers." We have already found that C-TEC is subject to effective competition and, therefore, has no grounds to bring a geographic rate uniformity complaint. 16. The Complainants have not met their burden of proof under Section 628(b). The mere assertion that C-TEC's discount rate plan impeded Cross Country's ability to offer its services in the franchise areas is not enough to support its program access complaint. The Complainants did not demonstrate any nexus between the alleged unfair method of competition and Cross country's ability to distribute satellite cable programming or satellite broadcast programming as required by Section 628(b). Thus, with regard to the Complainants allegation of a non-uniform rate structure in violation of Section 628(b), we find that the Complainants have not made a prima facie case. In the absence of the requisite showing under the unfair practices provision that the rate structure was an unfair method of competition or deceptive practice that hampered or prevented the distribution of programming, we have no basis for finding that C-TEC engaged in unfair practices in violation of Section 628(b) of the Communications Act. Accordingly, the Complainants' program access claim is denied. IV. ORDERING CLAUSES 17. Accordingly, IT IS ORDERED that the complaint filed by Cross Country Cable Inc. and Robert Burgess against C-TEC Cable Systems of Michigan, Inc. pursuant to Section 623(d) of the Communications Act, 47 U.S.C.  543(d), and Section 76.984 of the Commission's rules, 47 C.F.R.  76.984, IS DENIED. 18. IT IS FURTHER ORDERED that the complaint filed by Cross Country Cable Inc. against C-TEC Cable Systems of Michigan, Inc. (CSR-4414-P) pursuant to Section 628(b) of the Communications Act, 47 U.S.C.  548(b), and Section 76.1001 of the Commission's rules, 47 C.F.R.  76.1001, IS DENIED. 19. This action is taken by the Chief, Cable Services Bureau, pursuant to authority delegated by Section 0.321 of the Commission's rules, 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau