Effective
Competition Filings
NATOA 2003 Annual Conference
Denver, Colorado
September 10-13, 2003
Prepared by:
BRIAN
T. GROGAN, ESQ.
Moss
& Barnett
A
Professional Association
4800
Wells Fargo Center
90
South Seventh Street
Minneapolis,
MN 55402-4129
Telephone: (612) 347-0340
Facsimile: (612) 339-6686
Email: groganb@moss-barnett.com
Web
Site:www.municipalcommunicationslaw.com
Under FCC regulations at 47 C.F.R.
§ 76.905 cable systems are subject to effective competition when any of
the following conditions are met:
1.
Fewer than 30% of the households in its franchise area
subscribe to the cable service of a cable system.
2.
The franchise area is:
i.
served by at least two unaffiliated multi-channel video
programming distributors (“MVPDs”) each of which offers comparable programming
to at least 50% of the households in the franchise area; and
ii.
the number of households subscribing to multi-channel video
programming other than the largest MVPD exceeds 15% of the households in the
franchise area.
3.
A MVPD, operated by the franchising authority for that
franchise area, offers video programming to at least 50% of the households in
the franchise area.
4.
A local exchange carrier or its affiliate (or any MVPD 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.
The key criteria which the cable
industry has been using in its petitions for effective competition is the
criteria outlined in #2 above.
Generally, the industry’s petitions argue that a direct broadcast satellite
(“DBS”) provider meets this criteria because it offers comparable programming
to the entire franchise area via its satellite delivered signal and its
penetration in the franchise area exceeds 15% of the households.
FCC regulations at 47 C.F.R. § 76.905
provide a few definitions which may be helpful when analyzing whether effective
competition is present in your community.
1.
Each separately billed or billable customer counts as a
“household” subscribing to or being offered video programming services, with
the exception of multiple dwelling buildings that are billed as a single
customer. Individual units of multiple
dwelling buildings count as separate households.
2.
The term “households”
does not include those dwellings that are used solely for seasonal,
occasional or recreational use.
3.
A MVPD is an entity such as, but not limited to, a cable
operator, a multi-channel multipoint distribution service, a DBS service, a
television receive-only satellite program distributor, a video dial tone
service provider or a satellite master antenna television service provider that
makes available for purchase, by subscribers or customers, multiple channels of
video programming.
4.
For purposes of determining the number of the households
subscribing to the services of a MVPD, other than the largest MVPD, the number
of subscribers of all MVPDs that offer service in the franchise area
will be aggregated.
5.
In order to offer comparable programming, as that term is
used above, a competing MVPD must offer at least 12 channels of video
programming, including at least one channel of non-broadcast service
programming.
Despite the cable industry’s efforts to
the contrary, 47 U.S.C. § 76.906 maintains that cable systems are presumed
not to be subject to effective competition absent a demonstration to the
contrary. In other words, your cable
operator must prove to the FCC that effective competition exists.
1.
If the FCC determines a cable operator is subject to
effective competition the local franchising authority can no longer regulate
rates for: a) the basic cable services tier, b) converters, c) remotes, d)
installation, and e) hourly service charges.
2.
Cable operators generally are prohibited from requiring
customers to subscribe to specified tiers of programming on their cable system,
other than the basic service tier (“BST”), as a condition of subscription to
video programming offered on a per channel or per program basis. Thus, a cable operator is not allowed to
force a customer to subscriber to expanded basic service or some level of
digital cable service before that customer is permitted to buy HBO or
pay-per-view movies. However, if the
cable operator is deemed subject to effective competition this prohibition
(found at 47 C.F.R. § 76.921) is no longer applicable.
3.
A cable operator is no longer required to maintain a low
priced BST if subject to effective competition.
Some cable operators have argued that maintaining a low priced BST
permits customers to buy DBS services and then receive local channels via the
BST offered by the cable operator. Many
cable operators have indicated that if subject to effective competition they
would consider eliminating the BST and moving to a single, unregulated, tier of
expanded basic programming so as to prevent DBS customers from obtaining local
channels at a low cost. The problem with
this approach is that those residents of the community on a fixed income or
otherwise unable to afford a greater price for cable service may be prevented
from receiving cable programming as no low priced options may be maintained
from any provider.
4.
A number of other provisions under the FCC regulations would
also no longer be enforceable against the cable operator including
i.
47 C.F.R. § 76.980 which places limitations on the
charges which can be imposed by a cable operator on a customer for various
changes in the services which the customer selects from the cable operator.
ii.
47 C.F.R. § 76.981 which prohibits negative option
billing by a cable operator.
iii.
47 C.F.R. § 76.984 which requires a uniform rate structure
throughout a franchise area with respect to the rates charged by a cable
operator for basic service, cable programming service, and associated equipment
and installation charges.
According to the most recent FCC Report
on Competition in the Video Markets (Docket No. 02-145 released December 31,
2002) “relatively small percentages of consumers have a second wire line
alternative, such as an overbuild cable system.
Of the 33,246 cable community units nationwide, 671 or approximately 2%
have been certified by the Commission as having effective competition as a
result of consumers having a choice of more than one wire line MVPD.” Between June 30, 2001 and June 30, 2002 the
Commission granted eight petitions for effective competition, representing 75
communities, based on competitive entry for LECs or their affiliates and DBS
providers.
However, the FCC report on competition
generally gathers information through the prior June, therefore, the
information in the Ninth Report on Competition is over 14 months old. Within the last 14 months hundreds of
communities nationwide have received effective competition filings from their
cable operators and the trend appears to be on the increase. In fact the NCTA has suggested to the FCC
that the FCC should certify that effective competition is present in 44 states
around the country where the penetration of DBS meets or exceeds the 15%
threshold. The NCTA proposal would shift
the burden to the franchising authority to prove that the penetration of DBS
within its jurisdiction does not meet the 15% threshold. The FCC has not yet ruled on NCTA’s request.
The cable operators petition will be
filed with the FCC as well as with the franchising authority. The filing may be over 100 pages in length
although 5-10 pages will consist of the actual petition with the balance consisting
of exhibits and supporting documentation allegedly demonstrating the presence
of competition in the given jurisdiction.
In some cases the cable operator may submit joint petitions to groups of
cities utilizing the same set of exhibits which may increase the overall bulk
of the filing.
Many of the exhibits consist of
programming line-ups and advertising from DBS providers offering service in a
jurisdiction. It may include newspaper
clippings regarding the availability of DBS dishes, promotional packages and
related offerings from DBS providers. In
addition, the petition will include exhibits from a company known as SkyTrends
(see discussion later in this paper) purporting to specify a precise number of
DBS subscribers within the jurisdiction.
Upon receipt of an effective competition filing the city
should immediately utilize the the FCC’s web page to identify matters placed on
public notice. You can have the FCC;s
digest emailed to you daily. To subscribe or un-subscribe to the FCC’s free
Daily Digest mailing list, send the appropriate message below to subscribe@info.fcc.gov
subscribe digest
Your-first-name Your-last-name
or
unsubscribe
digest Your-first-name Your-last-name
and leave the subject line blank. These should be the only
words in the body of the message.
Typically the filing will be placed on public notice within
two to four weeks of the date it is received by the city. Once the matter is placed on public notice
the city then has 20 days within which to file a response to the FCC. When filing the response the city should also
provide copies to the “service list” which is attached to the cable operator’s
filing. This service list will typically
include a contact name for the cable operator, the cable operator’s legal
counsel and any other interested parties to the proceeding. The response should contain a full showing,
supported by affidavit of any facts or considerations relied on. The city should forward one original and four
copies of the response to the FCC. The
cable operator may file a reply to the response within 10 days after the city’s
submission.
Assuming the cable operator’s petition
focuses on the presence of a DBS provider there are a number of standard issues
which the city should immediately review.
First, the FCC criteria requires the presence of “comparable programming”
to at least 50% of the households in the franchise area. There is generally little question that the
DBS provider has the ability to reach virtually every household within the
jurisdiction and clearly more than 50%.
However, it is not always so clear whether the DBS provider offers
“comparable programming.”
The city should carefully scrutinize
the exhibits attached to the cable operator’s filing to determine if in fact
the DBS provider is marketing its programming offerings within that jurisdiction. In certain cases, cable operators have
attempted to use national advertising or even advertising from providers that
do not market services in a given jurisdiction as evidence of comparable
programming. Because cable operators
often attempt to send out numerous filings simultaneously it is not uncommon
for the exhibits to not accurately meet the burden of proof required under the
FCC’s criteria.
The FCC’s criteria also requires that
at least 15% of the households in the franchise area subscribe to the DBS
provider. In cases where other
competitors are present the cable operator may aggregate all subscribers from
these competing sources. Typically the
cable operator will rely on data provided from a company called SkyTrends.
First and foremost the city should
carefully double check the mathematics used in the cable operator’s
calculation. The cable operator
typically identifies the number of households in the franchise area based on
census information from the year 2000.
For fast growing suburban communities that household data may be grossly
inaccurate particularly given the fact that the 2000 census data was actually
collected as much as 18 months prior to its publication date. There may be nearly five years of household
growth since the 2000 census data was established. The total number of households is a key
number since this will determine the requisite number of households that must
subscribe to a DBS provider to reach the 15% penetration level.
Next, the city should verify the data
used by SkyTrends to calculate the number of DBS served households. While it is not possible to obtain from
SkyTrends the underlying data used by that company in its calculations, it is
possible to verify the zip code regions used by SkyTrends. Typically, SkyTrends will calculate DBS
subscribership based on zip code information.
Frequently, a postal zip code will not match identically with the
jurisdictional boundaries of a city and may encompass large portions of neighboring
jurisdictions. Since it is impossible to
verify whether DBS subscribers reside within the city or within the neighboring
jurisdiction based solely on a five-digit zip code this may be a shortcoming in
the cable operator’s filing.
SkyTrends typically offer two different
types of data to cable operators. One
set of data is based on a five-digit zip code while the other, more expensive
data, is provided on a nine-digit zip code.
However, even the nine-digit zip code data can sometimes be misleading
as SkyTrends has admitted that in the past it has identified households with
two DBS converter boxes as two household subscribers instead of a single
household subscriber.
Since the cable operator bears the
burden of proof in an effective competition proceeding it is important that a
city raise all relevant concerns in any opposition filing. In cases where the cable operator is relying
on a DBS penetration of just over 15% even the slightest calculation error
could result in a penetration below 15% and a finding that no effective
competition is present.
According to SkyTrends’ web site it is
a market research, data collection and reporting program for the home satellite
industry. Its partner companies include
DirecTV, Echostar Communications, Corp., Hubbard Media Group, Hughes Network
Systems and a number of other programming sources. SkyTrends purportedly collects and maintains
a comprehensive, computerized, sophisticated data base of satellite industry
information. Unfortunately, only the
partner companies and/or industry constituencies are permitted to obtain
SkyTrends data. SkyTrends will not
permit a audit of their collection techniques nor verification of the accuracy
of their data. The FCC has repeatedly
accepted the SkyTrends data without further analysis over municipal objections
and despite the fact that SkyTrends has admitted to reporting errors.
Given the FCC’s acceptance of the
SkyTrends data, virtually without question, it is difficult to demonstrate
inaccuracies in their purported conclusions.
Moreover, to the extent the FCC ever acts on the NCTA’s request for
state-wide effective competition certifications, municipalities will likely be
unable to access SkyTrends data to prove up a lack of effective competition in
a given jurisdiction.
The biggest question regarding
effective competition is whether its presence will lead to lower cable
rates. At the present time there is no
evidence to suggest that jurisdictions with high DBS penetration enjoy lower
rates from their cable operator.
According to FCC information cable rates have continued to outpace
inflation. On July 8, 2003, the FCC
issued a report regarding cable industry rates.
As reported in many media outlets the monthly rate for cable programming
services and equipment increased by over 8% despite the fact that the Consumer
Price Index for the same period increased by only 1.5%. As a result of the FCC’s Order Senator John
McCain, Chairman of the Senate Commerce Committee, described the cable rate
increases as “astounding” and stated that “this means that cable rates
increased an unbelievable five and one-half times faster than inflation.”
The FCC’s regulations are premised on
the concept that if subscribers have a choice between DBS and a cable operator
that the marketplace should govern rates and government regulation will no
longer be necessary. However, to date
the FCC has yet to find any evidence that cable rate increases have slowed and
in fact, various elected officials in Washington, D.C. have started to suggest
that they may be revisiting cable rate regulation in the upcoming session.
What appears clear is that in cases
where the FCC has found effective competition to be present cable operators
have utilized their freedom from rate regulation to package services
differently, offer different price packages within the same jurisdiction yet
not decrease the overall per subscriber revenue derived.
If your community has not yet received
a petition for effective competition it is likely to arrive in the near
future. When it does the time frame for
a response is short and the city should be prepared to consider whether
opposition is appropriate. One thing to
keep in mind is that these filings are not overly lengthy and the time and
money associated with an opposition to an effective competition filing is
generally quite modest in comparison with other FCC proceedings. There may also be opportunities for a city to
partner with neighboring jurisdictions involved in similar effective
competition proceedings. We have
attached hereto a sample filing which may be used as a generic model by cities.
~~ END OF PAPER ~~
Brian T.
Grogan is a shareholder
with the Minneapolis law firm of Moss & Barnett practicing in the areas of
telecommunications and cable television law.
Brian represents entities throughout the country on franchise renewals,
transfers of ownership, competitive franchising, telecommunications planning,
right-of-way management, first amendment issues, tower siting, leasing and
zoning, litigation and other related communication matters. He is a frequent presenter at state and
national conferences regarding communications law and he is a member of the
American Bar Association (Forum Committee on Communications Law), National
Association of Telecommunications Officers and Advisors, International
Municipal Lawyers Association (Contracts, Franchises and Technology Section),
and is past chair of the Communications Law Section of the Minnesota State Bar
Association.
Brian T. Grogan,
Esq., Moss & Barnett, A Professional Association
4800 Wells Fargo
Center, 90 South Seventh Street, Minneapolis, MN 55402-4129
Phone: 612-347-0340 Facsimile: 612-339-6686
E-mail: groganb@moss-barnett.com Web Site: www.municipalcommunicationslaw.com
Before
the
FEDERAL
COMMUNICATIONS COMMISSION
In
the Matter of:
Charter
Communications, Inc. on behalf of:
Falcon
Cable Media; Robin Media Group, Inc.;
The
Helicon Group, LP; Marcus Cable Associates;
Charter
Communications Properties, LLC; HPI CSR
No:
Acquisition
Co., LLC
For
Determination of Effective Competition in:
Clyde,
NC NC0213
Holly
Ridge, NC NC0427
Lenoir,
NC NCO024
NCO148
Marion,
NC NCO029
New
Hanover County, NC NCO152
NC0369
North
Topsail Beach NC0965
Old
Fort, NC NC0217
Onslow
County, NC NC0487
NC0490
Richlands,
NC NC0377
Roxboro,
NC NC0232
Surf
City, NC NC0338
Sugar
Mountain, NC NCO157
Topsail
Beach, NC NC0339
Wallace,
NC NC0492
Weaverville,
NC NC0300
To:
Chief, Media Bureau:
Charter
Communications, Inc. (“Charter”), on behalf of Falcon Cable Media, Robin Media
Group, Inc., The Helicon Group, LP, HPI Acquisition Co., LLC, Marcus Cable
Associates, Charter Communications Properties, LLC, by its attorneys, and
pursuant to Section 76.905 of the Commission's rules,[1] hereby
requests that the Commission find that Charter faces effective competition in the
above-captioned franchise areas ("Franchise Areas"). The Cable Television and Consumer Protection
and Competition Act of 1992 ("the Act") permits rate regulation only
in the absence of effective competition.
Specifically, Section 623(a)(2) of the Act provides:
[I]f the Commission finds
that a cable system is subject to effective competition, the rates for the
provision of cable service by such system shall not be subject to regulation by
the Commission or by a State or franchising authority under this section.[2]
The Act further states that, under the
"competing provider" test set forth in Section 623(1)(1)(B) of the
Act, and Section 76.905(b)(2) of the Commission's rules (the "Competing
Provider Test"), a cable system will be subject to effective competition
and, therefore, exempt from rate regulation if the franchise area is:
(i)
served by at least two unaffiliated multichannel video
programming distributors each of which offers comparable programming to at
least 50 percent of the households in the franchise area; and
(ii)
the number of households subscribing to multichannel video
programming other than the largest multichannel video programming distributor
exceeds 15 percent of the households in the franchise area.[3]
As
demonstrated below, at least two multichannel video programming distributors
("MVPDs") offer comparable service throughout each of Charter’s
Franchise Areas and the cumulative penetration of Charter's competition in the
Franchise Areas exceeds 15 percent.
Accordingly, Charter requests that the Commission issue an order finding
that Charter is subject to effective competition under the Competing Provider
Test in the following franchise areas in North Carolina: Clyde, Holly Ridge,
Lenoir, Marion, North Topsail Beach, Old Fort, Richlands, Roxboro, Surf City,
Sugar Mountain, Topsail Beach, Wallace and Weaverville.
The Act also provides that a
cable system that serves less than 30 percent of the subscribers in a franchise
area will be exempt from regulation.
Charter is also subject to effective competition pursuant to the
"less than 30 percent" test in New Hanover and Onslow County, North
Carolina pursuant to Section 543(1)(1)(A) of the Cable Act and Section
76.905(b)(1) of the Commission's Rules.
The Act
requires that "at least two unaffiliated multichannel video programming
distributors" serve the Franchise Areas.[4] In this case, Charter exceeds the Act's
requirement because more than two unaffiliated MVPDs[5] serve
the Franchise Areas, namely Charter, DirecTV and Echostar.[6] Charter therefore satisfies this first
element under the Competing Provider Test.
The Commission
has determined that DBS service is presumed to be technically available due to
its nationwide satellite footprint, and presumed to be actually available if
households in a franchise area are made "reasonably aware" that the
service is available. The Commission has explained that:
[O]nce 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 ....Moreover, for DBS service to be actually available, households in a franchise area must be reasonably aware that the service is available in their area, and reception equipment and subscription service must be reasonably available in the area ....[S]uch awareness may be accomplished through any sort of local, regional or national media, provided that such media reach the community in question.[7]
The Franchise
Areas are within the satellite footprint of DirecTV and EchoStar (the "DBS
Providers"), both of which are unaffiliated with Charter, and Charter is
unaware of any local regulations prohibiting reception of DBS service by home
satellite dishes. In addition,
advertising through various media sources have made consumers reasonably aware
of the availability of these DBS services in the Franchise Areas.[8] Attached hereto are examples of regional and
national advertising used by DBS providers to promote their services within the
Franchise Areas.[9] Given these marketing efforts, residents in
the Franchise Areas are undoubtedly aware that they may purchase DBS
service. Indeed, as demonstrated below,
the success of this advertising is manifest in the local penetration rates.
The Act also
prescribes that the programming offered by the competing provider must be
"comparable" to the programming offered by the cable operator.[10] The Commission's rules define comparable
programming as "at least 12 channels of video programming, including at
least one channel of nonbroadcast service programming."[11] The Commission has previously recognized that
the DBS Providers offer comparable programming under the Competing Provider
Test.[12] The DBS Providers offer well over 100 video
channels, most of which are nonbroadcast services.[13] As shown in the attached channel lineups,
Charter's programming service offerings in each of the Franchise Areas are
substantially similar to the DBS providers' programming services.[14] Accordingly, Charter has satisfied the first
prong of the Competing Provider Test.
The subscriber
base of any community or MVPD, other than the largest MVPD, serving a franchise
area must exceed 15 percent of the households in that franchise area in order
to meet the second prong of the Competing Provider Test. In each of the Franchise Areas at issue,
Charter's subscribership exceeds the aggregate total of DBS subscribers,
indicating that Charter is the largest MVPD.[15]
To determine
the number of DBS subscribers in a given franchise area, cable operators must
purchase zip code specific subscriber reports from DBS consulting firm
SkyTrends, Inc. ("SkyTrends") identifying the number of DBS
subscribers associated with each five-digit zip code in the franchise area.[16] Charter recognizes that zip code figures
provided by SkyTrends may not precisely match franchise boundaries. Accordingly, out of an abundance of caution,
Charter has applied a competitive penetration methodology that accounts for
that possibility.[17] Rather than simply using the
SkyTrends-provided DBS figures, Charter's method takes into consideration that
some of the reported DBS subscribers may be located in zip code areas outside
the actual franchise boundary. By
comparing U.S. Census household figures for the franchise area with household
figures for the zip code area, Charter is able to derive an allocation figure
to apply to the (zip code based) DBS subscriber count provided by
SkyTrends. The Commission has repeatedly
approved this methodology for determining DBS subscribership.[18]
As detailed in
the chart below, when applying this competitive penetration methodology in each
of the Franchise Areas, the subscriber base for the DBS Providers easily
exceeds the 15 percent threshold required under Section 623(l)(1)(B) of the
Act.[19]
Community
|
2000
Census Household[20] |
Households
per 5-digit Zip Code |
Allocation
% |
DBS
Subs per Zip Code |
DBS
Subs Allocated[21] |
Penetration
Rate |
|
Clyde, NC |
547 |
4,567 |
12.00% |
1,596 |
192 |
35.10% |
|
Holly Ridge, NC |
321 |
2,693 |
11.90% |
601 |
72 |
22.40% |
|
Lenoir, NC |
6,913 |
20,652 |
33.50% |
3,214 |
1,077 |
15.60% |
|
Marion, NC |
2,146 |
12,545 |
17.10% |
3,374 |
577 |
26.90% |
|
North Topsail Beach |
451 |
2,970 |
15.20% |
769 |
117 |
25.90% |
|
Old Fort, NC |
441 |
3,277 |
13.50°/a |
1,108 |
150 |
34.00% |
|
Richlands, NC |
399 |
4,273 |
9.30% |
1,570 |
146 |
36.60% |
|
Roxboro, NC |
3,666 |
5,987 |
61.20% |
2,026 |
1,240 |
33.80% |
|
Sugar Mountain, NC |
121 |
5,635 |
2.10% |
1,153 |
24 |
19.80% |
|
Surf City, NC |
689 |
2,693 |
25.60°/a |
601 |
154 |
22.40% |
|
Topsail Beach, NC |
252 |
2,693 |
9.40% |
601 |
56 |
22.20% |
|
Wallace, NC |
1,329 |
3,961 |
33.60% |
1,594 |
536 |
40.30% |
|
Weaverville, NC |
1,008 |
8,633 |
11.70% |
1,313 |
154 |
15.30% |
Accordingly, Charter faces effective competition under the Competing Provider Test in each of the Franchise Areas.
II. CHARTER SERVES FEWER THAN 30 PERCENT OF THE HOUSEHOLDS IN ITS COUNTY FRANCHISE AREA.
Charter is also
subject to effective competition pursuant to the "less than 30
percent" test in the New Hanover County and Onslow franchise area. Section 623(1)(1)(A) of the Act and Section
76.905(b)(1) of the Commission Rules provides that a cable system will be subject
to effective competition and, therefore, exempt from rate regulation, if
"fewer than 30 percent of the households in the franchise area subscribe
to the cable service of a cable system.”[22] The measurement of subscribership under this
test "will be based on the subscribership of the particular cable system
in question, and not an aggregation of the subscriberships of all cable systems
and competitors in the franchise area."[23]
New Hanover County Analysis.
As of
October 2002, Charter served 4,420 subscribers in its New Hanover County
franchise area.[24] According to the 2000 Census, there are
68,183 households in New Hanover County.[25] Within New Hanover County, however, there are
four incorporated areas that are not served by Charter's New Hanover County
franchise.[26] Charter excluded the number of households in
those incorporated areas from the 2000 Census household figure for New Hanover
County, which results in a net total of 29,530 households for the
unincorporated part of the County.[27] Charter's resulting penetration rate in this
franchise area is 15.0% percent (4,420 / 29,530 = .1496).
Onslow County Analysis.
As
of October 2002, Charter served 2,630 subscribers in its Onslow County
franchise area.[28] According to the 2000 Census, there are
48,122 households in Onslow County.[29] Within Onslow County, however, four
incorporated areas that are not served by Charter's Onslow County franchise.[30] Charter excluded the number of households in
those incorporated areas from the 2000 Census household figure for Onslow County,
which results in a net total of 29,520 households for the unincorporated part
of the County.[31] Charter's resulting penetration rate in this
franchise area is 8.90% percent (2,630/ 29,520 = .089).
Charter has clearly
demonstrated that fewer than 30 percent of the households in the New Hanover
and Onslow County franchise area subscribe to its cable service and therefore
has satisfied the criteria for establishing effective competition under 47
C.F.R. § 76.905(b)(I).
CONCLUSION
Accordingly, Charter has met its burden under Sections 623(1)(1)(A) and 623(1)(1)(B) of the Act. Charter respectfully requests that the Media Bureau promptly issue an order granting the instant Petition for Special Relief.
Respectfully
submitted,
Charter
Communications, Inc. on behalf of:
Falcon Cable Media; Robin Media Group,
Inc.;
The Helicon
Group, LP; Marcus Cable Associates;
Charter Communications Properties, LLC;
HPI Acquisition Co., LLC
EXHIBITS
NOT INCLUDED
Before
the
FEDERAL
COMMUNICATIONS COMMISSION
Washington,
D.C. 20554
In the matter of: )
)
Charter Communications, Inc. on behalf
of: ) CSR
No.: 6092-E
)
Falcon Cable Media; Robin Media Group,
Inc.; )
The Helicon Group, LP; Marcus Cable
Associates; )
Charter Communications Properties, LLC;
HPI )
Acquisition Co., LLC )
)
For Opposition of Effective Competition )
in Lenoir, North Carolina )
)
Community Identification No. NC0024 )
NC0148 )
To: The Chief, Media Bureau:
OPPOSITION
TO PETITION FOR
DETERMINATION
OF EFFECTIVE COMPETITION
The City of Lenoir, North Carolina
(“City”), by its attorneys, and pursuant to Section 76.7 of the Commission’s
Rules, hereby opposes Charter Communications, Inc.’s (“Charter”) request that
the Commission find that Charter faces effective competition in the City.
BACKGROUND
In Charter’s Petition for
Determination of Effective Competition (“Petition”) Charter accurately cites to
47 U.S.C. § 543 and Section 76.905(b)(2) of the Commission’s rules with
respect to the “Competing Provider Test” to determine if a cable system is
subject to effective competition. In its
Petition, Charter asserts that this test has been met with the entry of two
Direct Broadcast Satellite (“DBS”) providers-DirecTV and EchoStar-into the
Lenoir marketplace. While DBS providers
have been determined by the FCC to be qualified Multi-video Channel Video
Programming Distributors (MVPDs) for purposes of an effective competition
analysis, their presence alone does not demonstrate the existence of effective
competition. Charter has failed to show
that there is a sufficiently high level of DBS penetration within the franchise
area to overcome the strong presumption against effective competition.
DBS DOES NOT ENJOY 15% PENETRATION IN
THE CITY
Because of the
possible adverse impact on consumers, particularly senior citizens and other
individuals living on fixed incomes, flowing from the elimination of rate
regulation, there is a congressionally created presumption against the
existence of effective competition. It
is the burden of the petitioning cable operator to rebut this presumption and
affirmatively demonstrate the presence of effective competition. Based upon the DBS providers’ nationwide
footprint and prior FCC determinations, the City accepts (without conceding)
that the DBS providers satisfy the first prong of the Competing Provider Test –
comparable programming is being made available to at least 50 percent of the
households in the franchise area and these potential consumers are reasonably
aware of this service availability. The
City, however, does not believe that Charter has satisfied the second prong of
the Competing Provider Test. [32] Specifically, Charter has not met its burden
of demonstrating that the number of DBS subscribers within Lenoir exceeds 15 percent of the households in the Charter
franchise area for the City. Charter
relies upon flawed data to project the number of DBS subscribers within the
City and therefore its Petition cannot be sustained.
In an attempt to demonstrate that
greater than 15 percent of the households in the City subscribe to DBS, Charter
cites to reports provided by SkyTrends that identify the number of DBS
subscribers associated with a five digit zip code. Charter acknowledges “that the zip code
figures provided by SkyTrends may not precisely match franchise boundaries.”[33] Charter then references the number of
households within the franchise area[34] and
extrapolates a variety of numbers to conclude that the DBS providers have
achieved a 15.60 percent penetration rate within the City. What Charter fails to consider in its
analysis, however, is the fact that the vast majority of DBS subscribers reside
outside the City limits yet still are covered by the SkyTrends zip code
data. The reason DBS penetration is so
high outside of the City limits is because Charter does not extend service to
many of these households and therefore these households have no choice but to
subscribe to DBS.
Charter has miscalculated the
penetration of DBS subscribers based on its use of the zip code data purchased
from Skytrends. According to the local
postmaster, the zip code of 28645 serves not only the City with 6,913
households, but also the following communities: Brown Mountain Beach, Edgemont,
Gamewell, Joyceton, Kings Creek, Laytown, Mortimer, Upton, Valmead, Warrior,
Whitnel (“Surrounding Communities”).
Many of the DBS subscribers which
Charter includes in its calculations are located outside of the City limits in
the rural Surrounding Communities many of which do not have sufficient density
to justify a capital expenditure by Charter to extend service. Faced with the choice of no cable television
service from Charter there is no other option available but to subscribe to
DBS. Thus the penetration of DBS is
significantly higher outside of the City limits. However, inside of the City limits Charter’s
cable system passes the majority of all residential dwelling units and Charter
enjoys a very high penetration rate.[35]
There is no question but that the
penetration of DBS dishes just beyond the City limits is substantially greater
than within the City and renders Charter’s calculations completely inaccurate
and unreliable. The data relied upon by
Charter in its Petition is not sufficiently precise to determine whether the
DBS subscribers that it is attributing to the Lenoir franchise area actually
live outside of the City but share the same zip code as City residents. Given the strong congressional presumption
against the finding of effective competition, Charter should not be able to
meet this heavy burden on the basis of a questionable and overly broad
extrapolation.
This is particularly the case in light
of the ready availability of more accurate zip code information from SkyTrends
through the purchase of “Zip Plus 4” reports.
While it is true that the FCC has accepted the use of a five digit code
allocation formula in Charter Communications Properties, LLC, CSR No.
5804-E, DA02-605 (Rel, March 14, 2002) that proceeding was uncontested. In this instance there is a specific
objection to the use of the five digit code by a real party in interest-the
City-and evidence that the information provided thus far is widely inaccurate.
CONCLUSION
There are no other multi-channel video
programming distributors available in the City other than Charter and the
various DBS providers. Charter has
failed to meet its burden that the DBS providers collectively serve 15 percent
or more of the households in the City limits.
The formula which Charter used to arrive at the 15.60 percent DBS
penetration level is based purely on assumptions and approximations. Charter’s formula does not take into account
any of the unique features which exist in the region served by the 28645 zip
code or the fact that the penetration of DBS outside of the City limits is
significantly greater than within the City limits. While the Commission may have accepted
Charter’s method for determining DBS subscribership in other jurisdictions, the
fact remains that the demographics in and around Lenoir, North Carolina simply
do not justify Charter’s mathematical calculations.
Accordingly, the City submits that
Charter has failed to meet its burden under the Competing Provider Test and has
not demonstrated that DBS subscribership within the City limits exceeds the 15
percent threshold required under 47 U.S.C. § 543(1)(1)(B) of the Cable
Act. The City respectfully requests that
the Cable Services Bureau reject Charter’s Petition for Determination of
Effective Competition.
Respectfully
submitted,
City of Lenoir, North Carolina
By:________________________________
Brian
T. Grogan
Moss & Barnett
A Professional
Association
4800
Wells Fargo Center
90
South Seventh Street
Minneapolis,
MN 55402
(612)
347-0340
Its
Attorneys
February 5, 2003
CERTIFICATE OF
SERVICE
I,
Terri L. Hammer, a legal assistant at Moss & Barnett, hereby certify that
copies of the foregoing Opposition to Petition for Determination of Effective
Competition were served this 5th day of February, 2003, via first-class mail,
postage prepaid thereon to the following:
Terri
L. Hammer
Before
the
FEDERAL
COMMUNICATIONS COMMISSION
In
the Matter of:
Charter
Communications, Inc. on behalf of:
Falcon
Cable Media; Robin Media Group, Inc.;
The
Helicon Group, LP; Marcus Cable Associates;
Charter
Communications Properties, LLC; HPI CSR
No: 6092-E
Acquisition
Co., LLC
For
Determination of Effective Competition in:
Clyde,
NC NC0213
Holly
Ridge, NC NC0427
Lenoir,
NC NCO024
NCO148
Marion,
NC NCO029
New
Hanover County, NC NCO152
NC0369
North
Topsail Beach NC0965
Old
Fort, NC NC0217
Onslow
County, NC NC0487
NC0490
Richlands,
NC NC0377
Roxboro,
NC NC0232
Surf
City, NC NC0338
Sugar
Mountain, NC NCO157
Topsail
Beach, NC NC0339
Wallace,
NC NC0492
Weaverville,
NC NC0300
To:
Chief, Media Bureau:
MOTION
TO WITHDRAW LENOIR, NC FROM PETITION FOR
DETERMINATION
OF EFFECTIVE COMPETITION
Charter Communications, Inc., on behalf of Falcon Cable Media, Robin Media Group, Inc., The Helicon Group, LP, Marcus Cable Associates, Charter Communications Properties, LLC and HPI Acquisition Co., LLC (“Charter”), by its attorneys, hereby moves to withdraw the Lenoir, NC franchise areas (NC0024, NC0148) from its Petition for Special Relief seeking a determination of effective competition, filed December 23, 2002 (“Petition”). Charter maintains its Petition for the remaining 14 franchise areas in the above-captioned proceeding.
Charter seeks to withdraw Lenoir, NC
from the Petition without prejudice. The
instant Motion in no way indicates that Charter has not satisfied the required
showing for effective competition in Lenoir, NC and Charter reserves the right
to seek a determination of effective competition in Lenoir, NC in the
future. Good cause exists for granting
this request, as it will relieve the Bureau of reviewing one less community in
its consideration of Charter’s Petition.
Accordingly, Charter respectfully requests that the Bureau grant
Charter’s motion to withdraw the Lenoir, NC franchise area from its Petition.
Respectfully,
Charter
Communications, Inc. on behalf of:
Falcon Cable Media; Robin Media Group,
Inc.;
The Helicon
Group, LP; Marcus Cable Associates;
Charter Communications Properties, LLC;
HPI
Acquisition Co., LLC
February 26, 2003
[1]
See 47 C.F.R. § 76.905.
[2]
47 U.S.C. § 543(a)(2).
[3]
47 U.S.C. § 543(1)(1)(B)(i) and (ii); 47 C.F.R. § 76.905(b)(2)(i) and (ii).
[4]
47 U.S.C. § 543(1)(1)(B)(i); 47 C.F.R. § 76.905(b)(2)(i).
[5]
Section 602 of the Communications Act of 1934, as amended, defines
"multichannel video programming distributors" to include cable
operators, as well as DBS and MMDS providers.
See 47 U.S.C. § 522(13).
[6]
See TCI of Ventura County, Inc., Petition
for Special Relief, 13 FCC Rcd. 2545, ¶¶ 6-12 (1998) (granting petition
under Section 623(1)(1)(B)(i) where presence of cable operator and only one
other MVPD was sufficient to satisfy the Competing Provider Test). See
also Falcon Telecable d/b/a Falcon Cable TV; Petition for Change of Regulatory
Status, 13 FCC Rcd 17270, ¶ 16 (1998) (granting effective competition based
upon presence of cable operator and second MVPD).
[7]
In re Implementation of Sections of the Cable Television Consumer Protection
and Competition Act of 1992 Rate Regulation (Part 1 of 12), Report and
Order, 8 FCC Rcd. 5631 at ¶ 32 (1993) (citations omitted) ("Rate
Order").
[8]
Under this element of the effective competition definition, cable operators may
rely on "advertising in regional or local media, direct mail, or any other
marketing outlet" to demonstrate that potential subscribers are reasonably
aware of the competitors' service. Rate
Order al ¶ 29.
[9]
See Exhibit 1.
[10]
See 47 U.S.C. § 543(1)(1)(B)(i); 47
C.F.R. § 76.905(b)(2)(i).
[11]
47 C.F.R. § 76.905(g).
[12]
See Jones Intercable. Inc.; Petition for Determination of Effective
Competition in Pima County, Arizona, 15 FCC Rcd. 7257 at ¶ 4 (2000)
("With respect to the first prong of the competing provider test, we find
that the programming of DBS providers, such as DirecTV and EchoStar, satisfy
the Commission's programming comparability criterion. DBS service is presumed to be technically
available due to its nationwide satellite footprint, and presumed to be
actually available if households in a franchise area are made reasonably aware
that the service is available.") (citation omitted). See
also Charter Communications d/b/a Marcus Cable Associates, LLC: Petition for
Determination of Effective Competition in Fort Worth, Lake Worth and Certain
Other Texas Communities, 17 FCC Rcd. 15491 at ¶ 4 (rel. Aug. 6, 2002); Time Warner Entertainment-AdvancelNewhouse
Partnership; Petitions for Determination of Effective Competition in Dunedin.
Oldsmar, Safety Harbor & Tarpon Springs, Florida, 17 FCC Red. 6370 at ¶ 2 (2000).
[13]
See Channel Line-ups of DirecTV and
EchoStar, attached hereto as Exhibit 2.
[14]
See Charter Line-up, attached hereto
as Exhibit 3.
[15]
See Declaration of Denise Jones
(hereinafter “Jones Declaration”).
[16]
Cable operators also have the option of physically counting the number of DBS
dishes within their franchise areas, but performing visual and statistical
surveys are impracticable and often unreliable.
[17]
Although a more detailed Zip +4 report is theoretically available, it is
plagued by administrative difficulties, inaccurate reporting, significant
delays and high costs.
[18]
See, e.g., In re Petition for
Determination of Effective Competition in San Luis Obispo County, California, 17 FCC Rcd. 4617 at ¶ 6 (2002) ("The Commission believes
that Charter's methodology is sound since it seeks to accurately quantify
subscribers without actually obtaining individual DBS subscribership data.").
See also Fibervision, Inc.
Petition for Determination of
Effective Competition in Laurel, MT
and Park City, MT, 17 FCC Rcd.
16313 at ¶ 5 (rel. Aug. 27, 2002) (supporting
allocation methodology to estimate DBS subscriber
count because such methodology "accurately quantif[ied] subscribers using
the best available DBS subscriber
data.").
[19]
See Charter's Competitive Penetration
Calculation, attached hereto as Exhibit 4.
[20]
Household Data figures available at http://factfinder.census.gou attached
hereto as Exhibit 5.
[21]
As of September 2002, SkyTrends no longer inflates its DBS subscriber count by
15% to account for commercial and test accounts and households with dual DBS
receivers. See Letter from SkyTrends, dated September 30, 2002, attached as
Exhibit 6.
[22]
47 U.S.C. § 543(1)(1)(A); 47 C.F.R. § 76.905(b)(1). See also CC Michigan
L.L.C. d1bla Charter Communications: Petition for Determination of Effective
Competition in Petersburg, Michigan, 17 FCC Red. 1513 at ¶ 2 (2002).
[23]
See Rate Order at ¶ 18.
[24]
See Exhibit 7.
[25]
See Exhibit 5. Household data figures available at http://factfinder.census.gov.
[26]
See Jones Declaration.
[27]
Specifically, the incorporated areas of the New Hanover County consist of the
Town of Carolina Beach (2,296), Town of Kure Beach (723), City of Wilmington
(34,359), and the Town of Wrightsville Beach (1,275). See Exhibit 5. Charter subtracted the sum of the number of
households in these incorporated communities (38,653 households) from the 2000
Census total of 68,183 households to derive the net number of households
encompassed in Charter's New Hanover County franchise area. See Jones Declaration.
[28]
See Exhibit 7.
[29]
See Exhibit 5. Household data figures available at http://factfinder.census.gov.
[30]
See Jones Declaration.
[31]
Specifically, the separately-franchised, incorporated areas of the Onslow
County consist of the Town of Holly Ridge (321), Jacksonville City (17,175),
North Topsail Beach City (451) and the Town of Swansboro (655). See Exhibit 5. Charter subtracted the sum of the number of
households in these separately-franchised communities (18,602 households) from
the 2000 Census total of 48,122 households to derive the net number of
households encompassed in Charter's Onslow County franchise area. See Jones Declaration.
[32]
47 U.S.C. § 543(1)(1)(b); 47 C.F.R. § 76.905(b)(2).
[33]
Charter’s Petition at p.7.
[34]
The franchise area includes the entire City limits.
[35]
The precise penetration rate enjoyed by Charter in Lenoir, North Carolina is
conspicuously absent from the Petition.