$/ FOR FCC RECORD ONLY/$ $// ORDER, CABLE ACT OF 1992, certification, DA 94-1629//$ $/ 600.623 Regulation of Rates/$ $/ 76.905 Standards for Effective Competition/$ $/ 76.906 Presumption of No Effective Competition/$ $/ 76.910 Franchising Authority Certification/$ $/ 76.911 Petition for Reconsideration/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of: ) DA 94-1629 ) AMERICAN CABLESYSTEMS ) OF CALIFORNIA, INC. AND ) AMERICAN CABLESYSTEMS OF ) SOUTH CENTRAL LOS ANGELES, ) INC. ) ) Petition for Reconsideration ) ) of the Certification of the ) City of Los Angeles to ) Regulate Basic Cable Rates ) (CA0808, CA1267) ) MEMORANDUM OPINION AND ORDER Adopted: December 30, 1994 Released: January 3, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On December 6, 1993, American Cablesystems of California, Inc. d/b/a Continental Cablevision and American Cablesystems of South Central Los Angeles, Inc. d/b/a Continental Cablevision (collectively "Continental") filed a timely petition for reconsideration challenging the certification of the City of Los Angeles (the "City") to regulate rates for basic cable service in the franchise areas designated as FCC Community ID Nos. CA0808 and CA1267. The City filed two oppositions to Continental's petition, one for each franchise area, to which Continental filed replies. Both parties submitted responses to the Bureau's requests for additional information and clarification. 2. Section 623(a)(4) of the Communications Act of 1934, as amended, 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 franchising authority does not meet the statutory certification requirements. Cable operators may file petitions for reconsideration of the franchising authority's certification within 30 days of the effective date of certification. Rate regulation is automatically stayed pending review of a timely-filed petition for reconsideration alleging effective competition. II. DISCUSSION 3. In its petition, Continental argues that its cable system in each of the two franchise areas is subject to effective competition because it serves fewer than 30 percent of the households in each of the franchise areas. Continental asserts that it serves 28.1 percent of the "households" in franchise area CA0808 and 24.5 percent of the "households" in franchise area CA1267. As support for its original petition for reconsideration, Continental provides its September 1993 Quarterly Subscriber Statistical Report which covers both franchise areas. In its January 7, 1994 reply to the City's opposition, Continental includes a report providing 1990 housing unit and household data as well as 1992 estimated housing unit data for both franchise areas which was compiled by Claritas/NPDC, a census data and demographics firm. Continental's August 15, 1994 response contains a September 1993 monthly subscriber report and another Claritas/NPDC housing report for CA0808. The City responds by claiming that Continental serves 32 percent of the households in franchise area CA0808 and that there is no effective competition in either franchise area since Continental is the City's sole cable operator. A. Franchise Area CA0808 4. In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition. The cable operator bears the burden of rebutting the presumption that effective competition does not exist with evidence that effective competition, as defined by Section 76.905 of the Commission's Rules, exists in the franchise area. With respect to franchise area CA0808, we find that Continental has failed to meet this burden. Continental miscalculated the number of subscribers and households in franchise area CA0808 when it determined its penetration level to be 28.1 percent. Continental's original petition states that hotel/motel accounts and other commercial accounts were included in its subscriber and household counts. Continental's petition also states that "households in each franchise area were determined by adding the number of housing units identified in the franchise area which have been entered into Continental's database plus the actual number of business addresses passed by the Continental system which have been entered into Continental's database." Continental should not have counted commercial entities, including hotels and motels, when it calculated its penetration level. The 1990 Census defined the term "household" as "all the persons who occupy a housing unit." Thus, commercial establishments, including hotels and motels, are not "households" for purposes of determining effective competition, and Continental should not have included them in its subscriber and household totals. 5. Furthermore, it is not clear whether Continental excluded vacant housing units when it determined its penetration level to be 28.1 percent for franchise area CA0808. In deriving a total of 373,186 households for franchise area CA0808, Continental did not use either "household" or "occupied housing unit" census data, both of which exclude vacant housing units. As mentioned in the paragraph above, Continental claims that it used "the number of housing units identified in the franchise area." When asked by the Bureau to clarify its definition of the term "housing unit," Continental did not specify whether vacant units were excluded from its housing totals. Rather, Continental argued that vacant units should be counted, suggesting that its totals do indeed include such units. However, as the Commission has stated, "[a]s used in the Cable Act, we presume that Congress did not intend "households" to have a different meaning in the 1990 Census that would include vacant units or even partial-year vacant units. 6. Although Continental's original petition does not include sufficient housing information, Continental's later submissions contain additional housing data. However, Continental's presentation of the facts it claims support its contention appear to support the opposite conclusion. For example, in its January 7, 1994 reply to the City's opposition, Continental claims in a brief footnote that, even if commercial units were excluded from its subscriber and household counts, its penetration level in franchise area CA0808 would be 28.38 percent. The data provided do not bear this out. In an exhibit attached to the January 7, 1994 reply, there is a chart showing 304,063 households (i.e., occupied housing units) for CA0808, which an accompanying letter from Claritas/NPDC to Continental Cablevision explains is from the 1990 Census. This data would be appropriate for use in determining the total number of households. In addition, a copy of Continental's September 1993 monthly subscriber report, attached as Exhibit 4 to Continental's August 15, 1994 response appears to show a total of 103,602 subscribers (excluding hotel/motel accounts and commercial subscribers). However, when this household figure (304,063) is compared to the subscriber figure (103,602), Continental's penetration level is 34 percent. 7. In addition, in a footnote to its August 15, 1994 response, Continental asserts that, even using the Census figure for occupied households, it is subject to effective competition in franchise area CA0808. The evidence, however, does not support this claim. Continental refers to an exhibit attached to its response which provides 1993 household and housing unit data for franchise area CA0808. The exhibit shows 305,598 households and 329,678 housing units for the franchise area. Continental's penetration level exceeds 30% when either of these figures is compared with 103,602, the total number of subscribers in the franchise area, as referenced in paragraph 6. Therefore, we find that, even when using these housing figures, Continental has not demonstrated that it is subject to effective competition in franchise area CA0808. Accordingly, with respect to this franchise area, Continental's petition is denied. B. Franchise Area CA1267 8. While Continental has not demonstrated with respect to franchise area CA1267 that it properly excluded vacant housing units and commercial entitities when it determined its penetration level to be 24.5 percent, there is sufficient information in the material it provides for us to make a determination. Specifically, in a footnote to its August 15, 1994 response, Continental claims that if 1990 Census data for occupied households were used, its penetration level in franchise area CA1267 would be 26.1 percent. The footnote indicates that there are 45,957 Continental subscribers and 176,208 households in franchise area CA1267. We will accept 176,208 as the correct household count since that number is supported by the chart containing 1990 Census data which is attached in Exhibit 1 to Continental's January 7, 1994 response. As shown by the subscriber printout attached in Exhibit 4 of its August 15, 1994 response, the 45,957 total for subscribers improperly includes commercial accounts; however, Continental provides sufficient information in the exhibit to enable us to determine that there are 45,819 residential subscribers in franchise area CA1267. Comparing this subscriber total of 45,819 with the correct household count of 176,208 allows us to conclude that Continental serves 26 percent of the households in franchise area CA1267. Based on this evidence, we find that Continental is subject to effective competition in franchise area CA1267. 9. In conclusion, we find that Continental has not demonstrated that it is subject to effective competition in franchise area CA0808. However, it has demonstrated that it is subject to effective competition in franchise area CA1267. Thus, its petition is denied in part and granted in part. III. ORDERING CLAUSES 10. Accordingly, IT IS ORDERED that the petition for reconsideration filed by American Cablesystems of California, Inc. challenging the certification of the City of Los Angeles to regulate rates in the franchise area designated as FCC Community ID No. CA0808 IS DENIED. 11. IT IS FURTHER ORDERED that the automatic stay of rate regulation in franchise area CA0808 initiated by American Cablesystems of California, Inc.'s petition pursuant to Section 76.911(c) of the Commission's Rules, as amended, 47 C.F.R.  76.911(c) IS TERMINATED. 12. IT IS FURTHER ORDERED that American Cablesystems of California, Inc. shall file the required rate justifications for franchise area CA0808 on the applicable forms with the City of Los Angeles within thirty days of the release date of this Memorandum Opinion and Order or within thirty days of receipt of notice from the City of Los Angeles that it is regulating the rates of American Cablesystems of California, Inc., whichever is later. 13. IT IS FURTHER ORDERED that the petition for reconsideration filed by American Cablesystems of South Central Los Angeles, Inc. challenging the certification of the City of Los Angeles to regulate rates in the franchise area designated as FCC Community ID No. CA1267 IS GRANTED. 14. IT IS FURTHER ORDERED that the certification of the City of Los Angeles to regulate the basic cable rates of American Cablesystems of South Central Los Angeles, Inc. IS RESCINDED. 15. This action is taken pursuant to delegated authority under Section 0.321 of the Commission's Rules, 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau