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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: ) CSR 5069-E ) Time Warner Entertainment- ) Horry County, SC Advance /Newhouse Partnership ) CUID No. SC0080 d/b/a Time Warner Cable ) ) Petition for Special Relief ) MEMORANDUM OPINION AND ORDER Adopted: November 5, 1997 Released: November 10, 1997 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. Time Warner Entertainment-Advance /Newhouse Partnership d/b/a Time Warner Cable ("Time Warner") has filed a Petition for Special Relief seeking a determination of effective competition. Time Warner asserts that it is subject to effective competition in the unincorporated portions of Horry County, South Carolina ("unincorporated Horry County") because of the presence of Horry Cablevision's cable service in that franchise area. Horry County filed an opposition, and Time Warner filed a reply. For the reasons discussed below, the Petition is granted. 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 which 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. 3. 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. A finding that a cable system is subject to effective competition precludes regulation of its cable rates by the local franchising authority. 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. II. THE PLEADINGS 4. Time Warner asserts that it is subject to LEC effective competition in its unincorporated Horry County, South Carolina franchise area. With regard to the LEC affiliation requirement, Time Warner asserts that Horry Cablevision ("Horry Cable") is a competing franchised cable operator wholly owned by Horry Telephone Cooperative, Inc. ("Horry Telephone"), a local exchange carrier serving customers in Horry County, South Carolina. 5. With regard to the requirement that the LEC competitor offer video programming service in the unaffiliated cable operator's franchise area, Time Warner asserts that Horry Cable operates an existing franchised cable system which makes service available to the public throughout unincorporated Horry County. Time Warner estimates that Horry Cable's system serves over 14,800 subscribers in Horry County. Time Warner adds that Horry Cable has heavily marketed the availability of its cable service through local media and other means. Time Warner asserts there are no regulatory, technical, or other impediments to households taking service from Horry Cable. 6. Time Warner also asserts that Horry Cable offers comparable programming to unincorporated Horry County subscribers. Specifically, Time Warner provides Horry Cable's channel line-up which demonstrates that Horry Cable offers over 50 channels, of which at least 7 are local television broadcasting signals. Time Warner offers 62 channels of programming in unincorporated Horry County, of which at least 7 are local television broadcast signals. 7. Finally, Time Warner states that it has made several pricing and marketing changes in response to competition from Horry Cable. Time Warner notes that it recently: (1) expedited an upgrade of its cable plant to 450 MHz; (2) added channels to its expanded basic tier; and (3) extended customer service center hours during the week and initiated Saturday office hours. 8. In opposition, Horry County urges the Commission to deny Time Warner's Petition. Horry County does not provide any support or argument in its opposition other than providing a copy of a resolution adopted by the County Council for Horry County which states that "Horry County does not believe the action requested by Time Warner is in the public interest." 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 does not exist and 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. Time Warner has met this burden. 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 Time Warner has provided sufficient evidence demonstrating that Horry Cable is an MVPD wholly owned by a LEC. Horry Telephone is a LEC as defined by the Communications Act, and Horry Cable meets the Commission's definition of MVPD. Therefore, we find that Time Warner demonstrates that Horry Cable satisfies the affiliation prong of the LEC effective competition test. Time Warner is unaffiliated with both Horry Cable and Horry Telephone. 11. We also find that Time Warner has submitted sufficient evidence to show that the programming of Horry Cable is comparable to the programming which it provides. The channel information for Horry Cable submitted by Time Warner establishes that Horry Cable offers more than 52 channels of programming, including 7 local broadcast channels. This offering satisfies the programming comparability criterion. 12. In addition, we find that based on the information before us, Horry Cable is offering service in Time Warner's franchise area sufficient to demonstrate the presence of effective competition. Horry Cable has completed its overbuild of Time Warner's system in unincorporated Horry County and is competing for customers with Time Warner in the area at issue. We find that Horry Cable's presence and its service to 14,800 subscribers in the franchise area are indicia that Horry Cable is physically able to offer service in the cable community. 13. We note that Horry Cable's extensive marketing efforts and large subscriber base ensure that potential subscribers are reasonably aware of the availability of Horry Cable's service. Subscribers in unincorporated Horry County are able to receive Horry Cable's cable service for little or no additional investment and without encountering regulatory or technical obstacles. We also note that Time Warner has upgraded its cable plant, added new channels, and increased customer service center hours, all for the benefit of its subscribers. Applying the relevant criteria in Section 623(l)(1)(d) of the Communications Act, under the circumstances we find "effective competition" to be present. We disagree with Horry County's unsupported assertion that granting Time Warner's Petition is contrary to the public interest. The Telecommunications Act of 1996, which includes the LEC effective competition test, is based on the determination of Congress that it is in the public interest to end rate regulation when effective competition is present. IV. ORDERING CLAUSES 14. Accordingly, IT IS ORDERED that the Petition for Special Relief seeking a determination of effective competition filed by Time Warner Entertainment-Advance /Newhouse Partnership d/b/a Time Warner Cable IS GRANTED. 15. IT IS FURTHER ORDERED that the certification of Horry County, South Carolina to regulate the basic cable rates of Time Warner in the unincorporated portions of Horry County, South Carolina IS REVOKED. 16. 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. 17. 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