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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: ) ) CHARTER COMMUNICATIONS ) CSR-4864-E ENTERTAINMENT II, L.P. ) ) Petition for Determination of ) City of Riverside (South) CA0468 Effective Competition ) City of Riverside (North) CA0211 ) Riverside County CA1040 ) City of Norco CA1039 MEMORANDUM OPINION AND ORDER Adopted: May 8, 1997 Released: May 9, 1997 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. In the above-captioned proceeding, Charter Communications Entertainment II, L.P. d/b/a Charter Communications ("Charter"), seeks a determination that Charter is subject to effective competition in the franchise areas of the City of Riverside (South), the City of Riverside (North), Riverside County, and the City of Norco, California (the "Communities") because Cross Country Wireless, Inc. ("Cross Country") provides competing service in each of the Communities. The Commission gave public notice seeking comment on Charter's petition. Pacific Telesis Enterprises ("PTE") filed comments in the proceeding and the City of Norco filed an opposition to Charter's petition. Charter 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. Charter asserts that it is subject to LEC effective competition in the Communities. With regard to the LEC affiliation requirement, Charter states that in April 1995, Pacific Telesis Group ("PTG"), announced through its Pacific Telesis Enterprises ("PTE") subsidiary, that it would acquire Cross Country. Charter states that PTE completed its acquisition of Cross Country in July 1995. Charter also notes that, in March 1996, PTE won the multipoint distribution service ("MDS") basic trading areas ("BTA") authorization for the Los Angeles BTA, which encompasses the Riverside area. Charter asserts that Cross Country and PTE are clearly LEC affiliates because PTE is a wholly-owned first tier subsidiary of PTG, one of the seven Regional Bell Holding Companies established after the 1984 divestiture of AT&T. Charter also notes that Pacific Bell and Nevada Bell, each a LEC, are subsidiaries of PTG and therefore affiliated with PTE and Cross Country. 4. With regard to the requirement that the LEC competitor offervideo programming service in the unaffiliated cable operator's franchise area, Charter asserts that Cross Country is physically able to offer service to subscribers in the Communities. Charter states that Cross Country's estimated 35-mile frequency interference zone completely envelops and extends well beyond the City and County of Riverside, the City of Norco, and Charter's service area. Charter further states that the best evidence that Cross Country is physically able to offer service is the fact that 43,000 subscribers are served from Cross Country's transmitter site. In addition, Charter states that the Commission has determined in a prior proceeding that "Riverside is in Cross Country's interference-free contour zone," and that "potential subscribers are reasonably aware that Cross Country's service is available to them." Thus, Charter asserts that the Commission has already found that Cross Country offers service in the City of Riverside, free of any regulatory or technical impediments and potential subscribers are reasonably aware that they may purchase the service of Cross Country. 5. Charter also asserts that Cross Country offers comparable programming to the Communities' subscribers. Charter notes that the Commission has previously determined that Cross Country offers comparable multichannel video programming. Charter submits Cross Country's channel line-up which demonstrates that Cross Country provides 33 channels of programming, nine of which are local television broadcasting signals, with a variety of non- broadcast tier and premium programming services. 6. PTE, the owner of Cross Country, filed comments in this proceeding stating that PTE does not oppose a Commission finding that Charter is subject to effective competition in the Communities provided that the Commission requires Charter to certify in writing that it holds no exclusive video programming agreements which would prevent competitors from having access to the same programming. PTE argues that a critical component of finding that a LEC, or its affiliate, offers comparable programming is ensuring that the LEC has the same access to the programming being offered by the petitioning cable operator. 7. The City of Norco opposes Charter's petition, arguing that Cross Country does not have the ability to serve Norco. According to the City of Norco, the only cable operator with the ability to serve the city with video programming services is Charter. In this regard, the City of Norco states that Cross Country has indicated to Norco that Cross Country does not have the ability to serve Norco. The City of Norco, therefore, requests that Charter's petition be denied or amended to exclude the City of Norco until such time as effective competition can be demonstrated. 8. In its reply, Charter argues that PTE's comments regarding program access are irrelevant to the effective competition analysis in this proceeding. Charter states that if PTE has a legitimate program access concern with regard to Charter's operations, PTE should file a program access complaint with the Commission. With regard to the City of Norco's opposition, Charter replies that it is in the process of confirming Cross Country's active subscriber count in the city. Charter contends, however, that in June 1993, Cross Country had at least one active subscriber in Norco. III. ANALYSIS 9. 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, as defined by Section 76.905 of the Commission's rules, is present in the franchise area. Charter has met this burden with regard to the City of Riverside and Riverside County. 10. 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 Charter has provided sufficient evidence demonstrating that Cross Country is a wholly- owned subsidiary of PTE, which is a wholly-owned subsidiary of PTG, which also owns and controls Pacific Bell and Nevada Bell, each of which are unquestionably LECs. Therefore, we find that Charter satisfies the affiliation prong of the LEC effective competition test. Additionally, we find that Charter is unaffiliated with Cross Country, PTE, or PTG. 11. We also find that Charter has submitted sufficient evidence demonstrating that Cross Country provides comparable programming. Cross Country offers 33 channels of programming, including at least nine local broadcast channels, which satisfies the Commission's programming comparability criteria. PTE expansively interprets the comparable programming requirement of the LEC effective competition test to require that the LEC competitor have the same access to the programming offered by the petitioning cable operator. In enacting the 1996 Act, Congress specified the comparable programming standard which the Commission must apply to LEC effective competition petitions. This standard does not include equal access to the programming of a LEC effective competition petitioner. 12. The LEC effective competition test requires that competitive service be offered directly to subscribers in the franchise area of an unaffiliated cable operator which is providing cable service in that franchise area. In enacting the LEC effective competition test, Congress indicated that the Commission should apply its preexisting definition of the term "offer" to the LEC effective competition test. This definition provides that 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. 13. Based on the information before us, we find that Cross Country is offering service in the City of Riverside and Riverside County. Charter has submitted evidence that Cross Country's central transmitter is in place and physically able to offer service, and in fact serves approximately 43,000 subscribers from its Riverside transmitter site, including 8,059 subscribers in the City of Riverside and 18,500 combined subscribers in the City of Riverside and Riverside County. In order to provide service, Cross Country need only install an MMDS antenna on, or near, a subscriber's home. In addition, a line-of-sight/shadow plot map on file with the Commission indicates that both the City and significant portions of the County (particularly the areas immediately surrounding the City of Riverside in which Charter's Riverside County facilities are located) lie within Cross Country's line-of-sight area. These facts convince us that Cross Country's service is physically available in the City of Riverside and Riverside County with the addition of no, or only minimal, additional investment. 14. We likewise conclude that no regulatory, technical or other impediments prevent potential subscribers from receiving Cross Country's service, and potential subscribers in the City of Riverside and Riverside County are reasonably aware that they may receive Cross Country's service. The Commission has previously determined that Cross Country's extensive subscribership combined with newspaper articles and advertisements regarding Cross Country's operations make potential subscribers reasonably aware that Cross Country's service is available to them. The fact that Cross Country is licensed by the Commission to operate as an MMDS operator and the fact that Cross Country has over 43,000 subscribers in its service area, coupled with the lack of evidence regarding any impediments to potential City of Riverside and Riverside County subscribers taking service, persuade us that there are no regulatory, technical or other impediments to households in the City and County taking service. 15. With regard to the City of Norco, however, Charter has not established that Cross Country "offers" service to subscribers in Norco as contemplated by the statute. In support of its position, Charter asserts that Cross Country serves one subscriber in Norco. Charter filed a supplement to its showing in April, 1997, which only confirmed that there was only one subscriber in Norco. With the exception of this one subscriber, there is no evidence to suggest that Cross Country is physically able to deliver service to potential subscribers with no additional or minimal investment. A line-of-sight/shadow plot map on file with the Commission indicates that the City of Norco is currently impeded from receiving service from Cross Country because the map indicates that the City is "shadowed," meaning that it would have difficulty receiving Cross Country's signal because it is blocked by terrain and does not have line-of-sight with the transmitter. In addition, we have no evidence that the terrain problem could be resolved by the use of a signal booster/repeater. Further, Norco asserts that Cross Country has indicated to the City that the wireless company does not have the ability to serve Norco. In addition to evidence of technical impediments, there is nothing in the record to show that subscribers in the area are reasonably aware that they may purchase Cross Country's services. For example, we have no evidence that Cross Country has engaged in any marketing efforts to attract subscribers in Norco. Thus, in considering all of the evidence before us, we cannot conclude that service is being offered by Cross Country in the City of Norco. IV. ORDERING CLAUSES 16. Accordingly, IT IS ORDERED that the Petition for Determination of Effective Competition filed by Charter Communications Entertainment II, L.P. IS GRANTED with respect to the City of Riverside (South), the City of Riverside (North), and Riverside County, California, and in all other respects IS DENIED. 17. IT IS FURTHER ORDERED that the certifications of the City of Riverside (South), the City of Riverside (North), and Riverside County, California applicable to Charter Communications Entertainment II, L.P.'s basic cable service rates are REVOKED. 18. 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. 19. 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