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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 5103-E ) TCI of Ventura County, Inc. ) Thousand Oaks, CA ) CUID No. CA0303 Petition for Special Relief ) ) Camarillo, CA ) CIUD Nos. CA0653 and CA0757 MEMORANDUM OPINION AND ORDER Adopted: February 2, 1998 Released: February 5, 1998 By the Deputy Chief, Cable Services Bureau: I. INTRODUCTION 1. TCI of Ventura County, Inc. ("TCI") has filed a Petition for Special Relief seeking a determination of effective competition. TCI asserts that it is subject to competing provider effective competition in the City of Thousand Oaks, California and the City of Camarillo, California because of the cable service provided by GTE Media Ventures, Inc. in those cities. This petition is unopposed. For the reasons discussed below, the Petition is granted. 2. The Communications Act of 1934, as amended ("Communications Act") provides that only the rates of cable systems that are not subject to effective competition may be regulated. The Act permits local franchising authorities to become certified to regulate the basic cable service rates of cable operators that do not face effective competition. The Commission's rules presume that effective competition does not exist and place the burden on the cable operator to show that it faces effective competition in a given franchise area. Cable operators must prove that they are subject to effective competition under one of the four tests set forth in Section 76.905(b) of the Commission rules. 3. One basis upon which a cable system may be deemed subject to effective competition is the competing provider test. Under the competing provider test, a cable system is subject to effective competition if the franchise area is (1) served by at least two unaffiliated multichannel video programming distributors ("MVPD") each of which offers comparable programming to at least 50 percent of the households in the franchise area; and (2) the number of households subscribing to multichannel video programming other than from the largest MVPD exceeds 15 percent of the households in the franchise area. 4. Alternatively, a cable system may be deemed subject to local exchange carrier ("LEC") effective competition, as defined in Section 623(l)(1)(D) of the Communications Act. Section 623(l)(1)(D) provides that a cable system is subject to LEC 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. 47 U.S.C. 543(l)(1)(D). II. THE PLEADINGS 5. TCI states that it is subject to effective competition under the competing provider test set forth in Section 623(l)(1)(B) of the Communications Act due to the presence of GTE New Ventures, Inc. ("GTE"), a competing franchised cable operator in its City of Thousand Oaks and City of Camarillo franchise areas. TCI notes it has two franchise areas serving the City of Camarillo, designated by FCC community identification numbers CA0653 and CA0757. CA0653 serves western Camarillo and CA0757 serves eastern Camarillo. 6. To demonstrate that the first prong of the competing provider test is satisfied, TCI asserts that it passes 94 percent of the households in the City of Thousand Oaks, and estimates that GTE passes over 90 percent. In CA0653, TCI states it passes 94 percent of the households, and estimates GTE passes 95 percent. In CA0757, TCI states it passes all of the households, and estimates GTE passes 94 percent. TCI adds that in all three franchise areas, GTE and it meet the relevant programming comparability criterion because each offers at least 12 channels of video programming, at least one of which is nonbroadcast programming. 7. In regards to satisfaction of the second prong of the competing provider test, TCI represents that the number of households subscribing to multichannel video programming other than to the largest MVPD exceeds the 15 percent penetration requirement in all three franchise areas. TCI contends that GTE, the smaller MVPD of the two systems, has approximately a 26 percent penetration rate in the City of Thousand Oaks, and a 23 percent penetration rate in CA0653. In CA0757, TCI asserts that the combined penetration rate of GTE and DirecTV, another MVPD is 25 percent. 8. TCI asserts that, in the alternative, it is subject to LEC effective competition. With regard to the LEC affiliation requirement, TCI asserts that GTE is a competing franchised cable operator wholly owned by GTE Corporation, a local exchange carrier serving customers in 28 states. 9. With regard to the requirement that the LEC competitor offer video programming service in the unaffiliated cable operator's franchise area, TCI asserts that GTE has completed an overbuild of more than 90 percent of the City of Thousand Oaks and approximately 95 percent of the City of Camarillo. TCI believes that GTE is now providing service to more than 10,250 customers in Thousand Oaks and more than 4,000 customers in Camarillo and can provide service to potential subscribers in either of these areas with only minimal additional investment. TCI adds that GTE has heavily marketed the availability of its cable service through local media and other means. TCI asserts there are no regulatory, technical, or other impediments to households taking service from GTE. 10. TCI also asserts that GTE offers comparable programming to subscribers in Thousand Oaks and Camarillo. Specifically, TCI provides GTE's channel line-up which demonstrates that GTE offers over 75 channels, of which at least 11 are local television broadcasting signals. TCI offers 60 channels of programming in its Thousand Oaks franchise area and over 70 channels in each of its Camarillo franchise areas. III. ANALYSIS 11. 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. TCI has met this burden by satisfying the competing provider test for effective competition. In light of this finding, we will not address TCI's contention that it is also subject to effective competition under the LEC effective competition test. 12. The first part of the competing provider test requires that the franchise area be served by at least two unaffiliated MVPDs, each of which offers comparable programming to at least 50 percent of the households in the franchise area. We find that TCI has provided sufficient evidence demonstrating that it is unaffiliated with GTE, and that both offer service to the requisite percentage of households. TCI offers cable service to at least 50 percent of the households in all three franchise areas. GTE's service is also technically available to over 50 percent of households in each of the franchise areas. With respect to the issue of programming comparability, we find that the programming of TCI and GTE is comparable because they offer at least 12 channels of video programming, including at least one nonbroadcast channel. We conclude, therefore, that TCI has satisfied the first part of the competing provider test. 13. The second part of the competing provider test requires that the number of households subscribing to an MVPD other than to the largest MVPD exceeds 15 percent of the households in the franchise area. In all three franchise areas, this rate exceeds 20 percent. We find that TCI has demonstrated that the smaller MVPD penetration rate in the franchise areas satisfies the requirement of the second prong of the competing provider test. We conclude that TCI has established that both prongs of the competing provider effective competition test have been met. IV. ORDERING CLAUSES 14. Accordingly, IT IS ORDERED that the Petition for Special Relief seeking a determination of effective competition filed by TCI of Ventura County, Inc. IS GRANTED. 15. IT IS FURTHER ORDERED that the certification of the City of Thousand Oaks, California to regulate the basic cable rates of TCI in Thousand Oaks, California IS REVOKED. 16. IT IS FURTHER ORDERED that the certification of the City of Camarillo, California to regulate the basic cable rates of TCI in Camarillo, California IS REVOKED. 17. This action is taken pursuant to delegated authority under Section 0.321 of the Commission's rules, as amended. FEDERAL COMMUNICATIONS COMMISSION William H. Johnson Deputy Chief, Cable Services Bureau