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Time Warner Petition For Effective Competition, North Carolina

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Released: November 27, 2013
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Federal Communications Commission

DA 13-2283

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of

)

)

Time Warner Entertainment-Advance/Newhouse

)

Partnership

)

CSR 8051-E

)

Petition for Determination of Effective

)

Competition in Communities in North Carolina

)

MEMORANDUM OPINION AND ORDER

Adopted: November 25, 2013

Released: November 27, 2013

By the Senior Deputy Chief, Policy Division, Media Bureau:

I.

INTRODUCTION AND BACKGROUND

1.

Time Warner Entertainment-Advance/Newhouse Partnership (“Time Warner” or “the

Company”) has filed with the Commission a petition pursuant to Sections 76.7, 76.905(b)(2), and 76.907

of the Commission’s rules for a determination that the Company is subject to effective competition in the

communities listed on Attachment A (“the Attachment A Communities”). Time Warner alleges that its

cable system serving the Attachment A Communities is subject to effective competition pursuant to

Section 623(l)(1)(B) of the Communications Act of 1934, as amended (“Communications Act”)1 and the

Commission’s implementing rules,2 and is therefore exempt from regulation of the rates for its basic

service in those Communities. The alleged competition is from the two direct broadcast satellite (“DBS”)

providers, DIRECTV, Inc., and DISH Network. Time Warner also claims to be exempt from cable rate

regulation in the Communities listed on Attachment B (“the Attachment B Communities”) pursuant to

Section 623(l)(1)(A) of the Communications Act3 and Section 76.905(b)(1) of the Commission’s rules,4

because the Company serves fewer than 30 percent of the households there.

2.

Virtually identical oppositions to the Petition were filed by 17 local governments in the

Attachment A Communities (“the Franchise Authorities”).5

No opposition was filed concerning any

Attachment B Community. Time Warner filed a single “Reply” to all the oppositions. Recently, the

Company filed a letter (“May 19 Letter”) that included new calculations of the DBS providers’ and the

Company’s market shares in the Attachment A and B Communities, respectively, using 2010 Census

data.6

The Company sent a copy of the May 19 Letter to each of the Franchise Authorities.7

None

1 See 47 U.S.C. § 543(l)(1)(B).

2 47 C.F.R. § 76.905(b)(2).

3 See 47 U.S.C. § 543(l)(1)(A).

4 47 C.F.R. § 76.905(b)(1).

5 The oppositions were filed by Alamance County; the Cities of Asheboro, Burlington, Eden, Graham and

Greensboro; Guilford County; the Town of Haw River, the City of High Point; the Towns of Liberty, Mayodan, and

Pleasant Garden; the Town of Ramseur; Randolph County; the Cities of Randleman and Reidsville; Rockingham

County; and the Town of Stokesdale. Each opposition is titled with the name of the filing government entity,

followed by “Opposition to Petition for Special Relief for Determination of Effective Competition.”

6 Letter from Craig A. Gilley, Esq., Edwards Angell Palmer & Dodge LLP, counsel for Time Warner, to Steven A.

Broeckaert, Senior Deputy Chief, Policy Division, Media Bureau (dated May 19, 2011).

7 E-Mail from Mr. Gilley to John W. Berresford, Esq., Media Bureau, 11:55 A.M., July 13, 2011.

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Federal Communications Commission

DA 13-2283

responded to it.

3.

In the absence of a demonstration to the contrary, cable systems are presumed not to be

subject to effective competition,8 as that term is defined by Section 623(l) of the Communications Act and

Section 76.905 of the Commission’s rules.9

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.10

For the reasons set forth below, we grant the petition based on our

finding that Time Warner is subject to effective competition in the Communities listed on Attachments A

and B.

II.

DISCUSSION

A.

The Competing Provider Test

4.

Section 623(l)(1)(B) of the Communications Act provides that a cable operator is subject

to effective competition if the franchise area is (a) served by at least two unaffiliated multi-channel video

programming distributors (“MVPDs”) each of which offers comparable video programming to at least 50

percent of the households in the franchise area; and (b) the number of households subscribing to

programming services offered by MVPDs other than the largest MVPD exceeds 15 percent of the

households in the franchise area.11

This test is referred to as the “competing provider” test.

1.

The First Part of the Competing Provider Test

5.

The first part of this test has three elements: the franchise area must be “served by” at

least two unaffiliated MVPDs who offer “comparable programming” to at least “50 percent” of the

households in the franchise area.12

It is undisputed that the Attachment A Communities are “served by”

both DBS providers and that these two MVPD providers are unaffiliated with Time Warner or with each

other. A franchise area is considered “served by” an MVPD if that MVPD’s service is both technically

and actually available in the franchise area. DBS service is presumed to be technically available due to its

nationwide satellite footprint, and presumed to be actually available if households in the franchise area are

made reasonably aware of the service's availability.13

The Commission has held that a party may use

evidence of penetration rates in the franchise area (the second part of the competing provider test

discussed below) coupled with the ubiquity of DBS services to show that consumers are reasonably aware

of the availability of DBS service.14

The “comparable programming” element is met if a competing

MVPD provider offers at least 12 channels of video programming, including at least one channel of

nonbroadcast service programming,15 and is supported in the petition with citations to the channel lineups

for both DBS providers.16

6.

Time Warner asserts that both DBS providers offer service to at least “50 percent” of the

8 47 C.F.R. § 76.906.

9 See 47 U.S.C. § 543(l); 47 C.F.R. § 76.905.

10 See 47 C.F.R. §§ 76.906-.907(b).

11 47 U.S.C. § 543(l)(1)(B); see also 47 C.F.R. § 76.905(b)(2).

12 47 C.F.R. § 76.905(b)(2)(i).

13 See Petition at 4.

14 Mediacom Illinois LLC, 21 FCC Rcd 1175, 1176, ¶ 3 (2006).

15 See 47 C.F.R. § 76.905(g); see also Petition at 6.

16 See Petition at 5 n.12; id. at 6.

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DA 13-2283

households in the Attachment A Communities because of their national satellite footprint.17

The

Franchise Authorities object that Time Warner’s evidence for this assertion is based on five-digit Zip

Codes, and that the Company should have used more precise nine-digit Zip Codes.18

This objection

misreads Time Warner’s petition. The Company relies not on Zip Codes or numbers, but on our

longstanding presumption that the DBS providers’ nationwide satellite footprint makes their service

available to at least 50 percent of the households in every community.19

The Franchise Authorities have

submitted nothing showing that the presumption is not correct. Accordingly, we find that DBS service is

offered to at least 50 percent of the households in the Attachment A Communities and that the first part of

the competing provider test is satisfied as to each of those Communities.

2.

The Second Part of the Competing Provider Test

7.

The second part of the competing provider test requires that the number of households

subscribing to MVPDs, other than the largest MVPD, exceed 15 percent of the households in a franchise

area. Time Warner asserts that it is the largest MVPD in all but four of the Attachment A Communities.20

In those four, it is unclear whether Time Warner or one of the DBS providers is the largest MVPD. In

each of them, however, the DBS providers’ combined household share is over 15 percent and is larger

than Time Warner’s, and Time Warner’s household share is also over 15 percent.21

This data makes clear

that, whichever of the three MVPDs is the largest, the combined share of the other two is also over 15

percent.22

8.

The second part of the competing provider test thus required Time Warner to calculate a

ratio for each Attachment A Community the numerator of which was the number of DBS subscribers in

the Community and the denominator of which is the number of households there. Time Warner began

composing its numerator – the number of DBS subscribers in each Attachment A Community – by

obtaining a list from Media Business Corporation of the five-digit Zip Codes that lay totally or partly

within each Attachment A Community.23

Then, Time Warner obtained from the Satellite Broadcasting

and Communications Association (“SBCA”) a statement of how many DBS subscribers were in each of

those Zip Codes.24

Next, for each Attachment A Community that contained only part of a Zip Code (a

17 Id. at 7.

18 See, e.g., City of Asheboro Opposition at 4.

19 Petition at 4, 7; Implementation of Section of the Cable Television Consumer Protection & Competition Act of

1992: Rate Regulation, 8 FCC Rcd 5631, 5660-62, ¶ 32 (1993) (“Once a ‘competitive’ DBS satellite system is

launched, it will be deemed technically available to households in a franchise area . . . if its footprint covers those

households, absent extraordinary circumstances”) (footnote omitted), on reconsideration, 9 FCC Rcd 4316, 4322, ¶

10 (“There is no dispute that multichannel video programming is available throughout the United States from

satellite stations (except where there are reception obstacles such as zoning restrictions)”) (1994), reversed in part

on other grounds, Time Warner Entertainment Co., L.P. v. FCC, 56 F.3d 151 (D.C. Cir. 1995), cert. denied, 516

U.S. 1112 (1996); United Cable Television Corp., 15 FCC Rcd 20382, 20383, ¶ 3 (2000); Mountain Cable Co., 14

FCC Rcd 13994, 14001, ¶ 15 (1999).

20 The four exceptions are the Towns of Biscoe (NC0410), Candor (NC0724), Franklinville (NC0841) and Liberty

(NC0540). Petition at 7; id. at Exh. A (Declaration of Jack W. Stanley, Regional Vice President of Government and

Public Affairs for the Carolina Region of Time Warner) at ¶ 3.

21 Petition at 7-8.

22 See Time Warner Cable Inc., 26 FCC Rcd 547, 548-49, ¶ 7 (2011); Comcast Cable Commc’ns, LLC, 23 FCC Rcd

10939, 10941, ¶ 9 (2008); Time Warner-Advance/Newhouse Partnership, 17 FCC Rcd 23587, 23589, ¶ 6 (2002).

23 Petition at Exh. B.

24 Id. at Exh. D.

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DA 13-2283

“partial Zip Code”), the Company used an allocation formula that we have accepted in past decisions25 to

estimate the percent of the DBS subscribers that were in those partial Zip Codes.26

Finally, Time Warner

multiplied the number of DBS subscribers in the Zip Codes by the allocation percent for that Attachment

A Community, and added the numbers of DBS subscribers in any Zip Codes that lay totally within the

Attachment A Community. This produced an estimate of the number of DBS subscribers in each

Attachment A Community.27

These estimates, placed over the number of households in the Communities,

show DBS subscribership in excess of 15 percent. If accepted and not overcome by superior evidence or

argument, they show that the second part of the competing provider effective competition test is satisfied

in each Attachment A Community.

9.

All the Franchise Authorities make several points. First, they make a vague objection that

there are “significant problems” and “errors in Time Warner’s data.”28

They do not specify any such

problem or error, however. Such generalities do not overcome the Company’s specific factual evidence.29

The Franchise Authorities’ objection is meritless.

10.

Second, the Franchise Authorities predict harmful consequences for “residents on fixed

and lower incomes” if Time Warner’s rates for basic service are deregulated.30

As we have repeatedly

held, however, any such consequences are immaterial under Section 623(l)(1)(B) of the Communications

Act. The only material issue is whether the cable operator satisfies the criteria stated in the statute.31

11.

Third, the Franchise Authorities object that Time Warner’s DBS subscriber numbers

include courtesy, complimentary, and free accounts.32

This objection also lacks merit, because we have

consistently allowed such accounts to be counted in DBS subscriber numbers. The existence of free DBS

service for some households shows that the cable operator faces intense competition for such

25 Time Warner Cable Inc., 26 FCC Rcd 7666, 7668-69, ¶¶ 8-10 (2011); Time Warner Cable Inc., 26 FCC Rcd

1728, 1733, ¶ 15 (2011); Charter Commc’ns, 26 FCC Rcd 1158, 1161, ¶ 9 (2011).

26 Petition at 8; id. at Exhs. B, E (col. F).

27 May 19 Letter, second attached page; see also Petition at Exh. E.

28 See, e.g., City of Burlington Opposition at 2. In the same vein, the City of Greensboro alleges without any

specificity or evidence that SBCA’s statement “overstates DBS subscribers” and “includes many [DBS] subscribers

within the City that are actually in another jurisdiction.” City of Greensboro Opposition at 2.

29 Comcast Cable Commc’ns, LLC, 26 FCC Rcd 3993, 3995-96, ¶ 8 (2011) (“the City must do more than produce

vague doubts”); Time Warner Cable Inc., 25 FCC Rcd 5457, 5460-61, ¶ 11 (2010) (“general objections about the

[factual evidence] submitted by Petitioner reveal no flaw in the petition”); Comcast Cable Commc’ns, LLC, 23 FCC

Rcd 8564, 8566, ¶ 9 (2008) (a cable operator’s credible numerical evidence “cannot be overturned by franchising

authorities expressing only generalized concerns and doubts. It is reasonable to require franchising authorities to

present factual evidence and showings about their own communities.”) (footnote omitted).

30 See, e.g., City of Eden Opposition at 4.

31 Comcast Cable Commc’ns, LLC, 26 FCC Rcd 3850, 3856, ¶ 24 (2011) (footnote omitted):

“if a cable operator shows that the number of households subscribing to programming services

offered by MVPDs other than the largest one exceeds 15 percent of the households in its franchise

area, then that cable operator is entitled to be free of regulation of its rates for basic cable service.

The statute leaves no room for the subjects that the City attempts to raise herein[, which include

alleged “disproportionate effects on residents of fixed and lower incomes”]”;

Mediacom Southeast LLC, 23 FCC Rcd 8379, 8381, ¶ 7 (2008) (rejecting claims that deregulation will have a

“possible adverse impact on . . . senior citizens and other individuals living on fixed incomes”); MCC Missouri LLC,

20 FCC Rcd 17909, 17911, ¶ 6 (2005) (same).

32 See, e.g., City of Graham Opposition at 3.

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households.33

12.

Fourth, the Franchise Authorities object that we should require Time Warner to use

relatively precise “Zip+4” nine-digit Zip Codes, which avoid the need for an allocation percentage.34

We

have several times declined to require nine-digit-based data35 and we do so again. No good purpose

would be served by prohibiting a cable operator from using one allocation formula and requiring another

method in the absence of any indication that would alter the outcome in the proceeding at hand, or that the

method used by the cable operator actually produced an erroneous result. Any of the Franchise

Authorities could have purchased its own nine-digit report to refute Time Warner's five-digit-based

calculations. Accordingly, consistent with our longstanding practice, we accept the five-digit Zip Code

basis of Time Warner’s showing of the number of DBS subscribers in the Attachment A Communities.

13.

The City of Greensboro makes the only objection to Time Warner’s denominator, the

number of households in an Attachment A Community. The Company’s petition used the 2000 Census

number of households in Greensboro, 92,087.36

The City submits a higher number, 100,570, which is “as

of 2008, as determined by the City’s Engineering & Inspections and Planning Departments.”37

We reject

the City’s submitted number for two reasons. First, the City has not shown how this number was

calculated or, most important, whether it is as reliable as an actual count made by the U.S. Census.38

Second, Time Warner’s May 19 Letter contains a household count for Greensboro from the 2010 Census

(111,731). We will use the latter number, following our practice of using the count of households from

the most recent decennial Census, absent a more recent number that is shown to be at least equally

reliable.39

14.

Finally, all the Franchise Authorities characterize two of our past effective competition

decisions as stating that if there are “discrepancies in factual data” between the evidence submitted by the

cable operator and the franchise authorities, the Commission “must construe such discrepancies against

the cable operator.”40

Assuming arguendo the accuracy of these characterizations, they are inapposite

here because, with the exception of the preceding paragraph, the Franchise Authorities have not disputed

the Company’s factual evidence with credible factual evidence of their own.41

They have rested instead

33 Comcast Cable Commc’ns, LLC, 26 FCC Rcd 4901, 4904, ¶ 8 (2011); Comcast Cable Commc’ns, LLC, 25 FCC

Rcd 4967, 4972, ¶ 17 (2010); Bright House Networks, LLC, 22 FCC Rcd 4390, 4394, ¶ 11 (2007).

34 See, e.g., Guilford County Opposition at 3. The City of Greensboro makes a sweeping objection to using Zip

Codes at all in measuring DBS subscribership. City of Greensboro Opposition at 3-4. We reject this objection

because Zip Code-based numbers have produced reliable estimates in hundreds of proceedings and the City of

Greensboro has not shown that Time Warner’s estimates for Greensboro are, in actual fact, inaccurate in any way.

35 Time Warner Cable Inc., 26 FCC Rcd 7666, 7669, ¶ 10 (2011); Comcast Cable Commc’ns, LLC, 26 FCC Rcd

3850, 3854, ¶ 18 (2011); Subsidiaries of Cablevision Systems Corp., 23 FCC Rcd 14141, 14151, ¶ 34 (2008).

36 Petition at Exh. E, col. A.

37 City of Greensboro Opposition at 3.

38 See, e.g., Charter Commc’ns Entertainment I LLC, 26 FCC Rcd 5975, 5980 ¶ 17 (2011); Comcast Cable

Commc’ns, LLC, 26 FCC Rcd 3733, 3735, ¶ 8 (2011); Comcast Cable Commc’ns, LLC, 26 FCC Rcd 3726, 3729, ¶

9 (2011); see also Reply at 6.

39 See authorities cited in note 38 supra.

40 See, e.g., City of Guilford Opposition at 2, citing Alert Cable TV of North Carolina, Inc., 18 FCC Rcd 12848,

12849-50, ¶¶ 5-6 (2003) (considering rival lists of zip codes submitted by the petitioning cable operator and the

franchise authority); Tri-Lakes Cable, 12 FCC Rcd 13170, 13179-80, ¶¶ 19-20 (1997) (choosing between numbers

submitted by the petitioning cable operator and a rival MVPD).

41 See supra note 29.

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DA 13-2283

on generalities that do not undermine Time Warner’s factual showings. Accordingly, their claims have

no merit.

15.

Based upon the aggregate DBS subscribership estimates that were calculated using

Census 2010 household data, as reflected in Attachment A,42 we find that Time Warner has demonstrated

that the number of households subscribing to programming services offered by MVPDs, other than the

largest MVPD, exceeds 15 percent of the households in the Attachment A Communities.43

Therefore, the

second part of the competing provider test is satisfied for each of the Attachment A Communities. Based

on the foregoing, we conclude that Time Warner has submitted sufficient evidence demonstrating that

both parts of the competing provider test are satisfied and Time Warner is subject to effective competition

in the Attachment A Communities.

B.

The Low Penetration Test

16.

Section 623(l)(1)(A) of the Communications Act provides that a cable operator is subject

to effective competition if it serves fewer than 30 percent of the households in the franchise area. This

test is referred to as the “low penetration” test.44

Time Warner alleges that it is subject to effective

competition under the low penetration effective competition test because it serves less that 30 percent of

the households in the Attachment B Communities.

17.

Based upon the subscriber penetration level calculated by Time Warner, as reflected in

Attachment B, we find that Time Warner has demonstrated the percentage of households subscribing to

its cable service is less than 30 percent of the households in the Attachment B Communities. Therefore,

the low penetration test is satisfied as to the Attachment B Communities.

42 The first seven franchise areas for which DBS subscribership calculations are made in Exhibit E to the Petition

(the Towns of Elon, Gibsonville, Jamestown, Madison, Mebane, Oak Ridge, and Whitsett) are not listed on the title

page of the Petition and are not included in Time Warner’s Certificate of Service. Accordingly, we consider the

Company not to be seeking findings of effective competition in them.

43 Attachment A shows DBS subscribership in the City of High Point to be 15.0029%. This “exceeds fifteen

percent,” however slightly, and thus satisfies the numerical requirement of the second part of the competing provider

test, 47 U.S.C. § 543(l)(1)(B)(ii). Time Warner Cable Inc., 26 FCC Rcd 2095, 2097, ¶ 7 (2011).

44 47 U.S.C. § 543(l)(1)(A).

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III.

ORDERING CLAUSES

18.

Accordingly, IT IS ORDERED that the petition for a determination of effective

competition filed in the captioned proceeding by Time Warner Entertainment/Advance-Newhouse

Partnership IS GRANTED.

19.

IT IS FURTHER ORDERED that the certification to regulate basic cable service rates

granted to or on behalf of any of the Communities set forth on Attachments A and B IS REVOKED.

20.

This action is taken pursuant to delegated authority pursuant to Section 0.283 of the

Commission’s rules.45

FEDERAL COMMUNICATIONS COMMISSION

Steven A. Broeckaert

Senior Deputy Chief, Policy Division, Media Bureau

45 47 C.F.R. § 0.283.

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DA 13-2283

ATTACHMENT A

CSR 8051-E

COMMUNITIES SERVED BY TIME WARNER ENTERTAINMENT-

ADVANCE/NEWHOUSE PARTNERSHIP

2010 Census

Estimated DBS

Communities

CUIDs

CPR*

Households

Subscribers

Unincorporated Alamance

NC0531

34.19

18,808

6,430

County

Village of Alamance

NC0532

20.92

365

76

City of Archdale

NC0350

23.12

4,556

1,053

City of Asheboro

NC0206

28.28

9,880

2,794

Town of Biscoe

NC0410

42.68

539

230

City of Burlington

NC0006

26.30

20,632

5,426

Town of Candor

NC0724

51.82

296

153

City of Eden

NC0214

20.69

6,645

1,375

Town of Franklinville

NC0841

46.50

388

180

City of Graham

NC0208

31.37

5,801

1,820

Town of Green Level

NC1061

32.31

779

252

City of Greensboro

NC0011

16.10

111,731

17,987

NC0654

Unincorporated Guilford

NC0323

20.21

28,344

5,728

County

Town of Haw River

NC0582

34.39

921

317

City of High Point

NC0052

15.0029

40,912

6,138

NC0658

Town of Liberty

NC0540

48.36

1,091

528

Town of Mayodan

NC0215

23.61

1,173

277

Town of Pleasant Garden

NC1048

20.71

1,690

350

Town of Ramseur

NC0577

38.85

640

249

City of Randelman

NC0420

28.81

1,739

501

Unincorporated Randolph

NC0352

30.26

28,210

8,537

County

NC0421

City of Reidsville

NC0153

33.82

6,262

2,118

Unincorporated Rockingham

NC0758

31.63

22,104

6,993

County

NC0222

Town of Seagrove

NC0840

34.78

97

34

Town of Stokesdale

NC1055

21.29

1,823

388

City of Stoneville

NC0327

35.00

464

162

City of Trinity

NC0351

20.33

2,630

535

* CPR = Percent of competitive DBS penetration rate. Some CPRs may be not exactly correct because of fractional

DBS subscribers used in Time Warner's calculations but not reproduced above.

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Federal Communications Commission

DA 13-2283

ATTACHMENT B

CSR 8051-E

COMMUNITIES SERVED BY TIME WARNER ENTERTAINMENT-

ADVANCE/NEWHOUSE PARTNERSHIP

Franchise Area

Cable

Penetration

Communities

CUIDs

Households

Subscribers

Percentage

Town of Sedalia

NC1069

249

7

2.81

Town of Star

NC0411

361

96

26.59

Town of Swepsonville

NC1059

469

72

15.35

Town of Wentworth

NC1068

1,043

4

.38

9

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