$/ For FCC Record Only/$ $// Order, Cable Act of 1992, certification, DA 95-5//$ $/ 600.623 Regulation of Rates/$ $/ 76.905 Standards for Effective Competition/$ $/ 76.906 Presumption of No Effective Competition/$ $/ 76.910 Franchising Authority Certification/$ $/ 76.911 Petition for Reconsideration/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of: ) DA 95-5 ) C-TEC CABLE SYSTEMS OF MICHIGAN, ) INC. ) ) Petition for Reconsideration ) ) of the Certification of ) Gaines Charter Township, MI ) to Regulate Basic Cable Service Rates ) (MI1341) ) MEMORANDUM OPINION AND ORDER Adopted: January 4, 1995 Released: January 5, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On October 29, 1993, C-TEC Cable Systems of Michigan, Inc. ("C-TEC") filed a timely petition for reconsideration challenging the certification of Gaines Charter Township, Michigan (the "Township") to regulate rates for basic cable service and associated equipment. The Township filed an objection to the petition to which C-TEC filed a reply. On August 19, 1994, both C-TEC and the Township supplemented their filings pursuant to a recent Commission Order. On November 30, 1994, C-TEC filed a response to a Bureau request for an explanation of the subscriber data included in C-TEC's petitions and supplement. 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 from the date such certification becomes effective. Rate regulation is automatically stayed pending review of a timely-filed petition for reconsideration alleging the presence of effective competition. II. DISCUSSION 3. C-TEC argues that its cable system is subject to effective competition because it serves fewer than 30 percent of the households in Gaines Charter Township, Michigan, its alleged franchise area. The supplement to C-TEC's petition shows that the cable system currently serves 214 of the 2,582 households (that is, occupied housing units) in the alleged franchise area, or 8.2 percent of the total number of households. As supporting documentation, C-TEC provides 1990 Census data which shows that there are 2,582 occupied housing units in the alleged franchise area. C-TEC also submits a computer print- out with sufficient subscriber information to show that it serves 214 households in the alleged franchise area. 4. The Township asserts that C-TEC's effective competition claim is inappropriately based on areas unserved by C-TEC's cable system. First, the Township argues that pursuant to a new franchise agreement which became effective on January 1, 1994, C-TEC's franchise area is limited to the area already served by C-TEC and any area in Gaines Charter Township that C-TEC notifies the Township of its intent to serve and which C-TEC serves within six months. The Township argues that, as C-TEC's authorized area of service is limited to certain areas of the Township, it is these areas, and not the entire Township which must form the basis of any effective competition claim. In the alternative, the Township argues that C-TEC has made an affirmative decision to redefine its franchise area. Specifically, it alleges that C-TEC has limited its service to areas where lack of competition and population density make service economically appealing. As supporting documentation, the Township provides a copy of the relevant portions of the new franchise agreement and an affidavit from a responsible official. According to the Township, C-TEC's actual service area consists of 580 households, of which C-TEC serves 211. The Township argues that under this redefined franchise area, C-TEC actually has a 36.3 percent penetration, and therefore has failed to overcome the presumption of the absence of effective competition. 5. In response, C-TEC disagrees with the Township's interpretation of the new franchise agreement. C-TEC emphasizes that under the franchise agreement, it is free to expand service to other areas of the Township within six months of notifying the Township. It also states that, pursuant to the new franchise agreement, it is required to expand into unserved areas of the municipality whenever the population density reaches at least 30 homes per cable mile. This requisite population density threshold decreases to 25 homes per cable mile in 1998 and 20 homes per cable mile in the year 2000. C-TEC further states that it has requested notification from the franchising authority when the required population density level is reached, or when investigation into the economic feasibility of service to unserved areas is needed. As supporting documentation, C-TEC submits a newsletter sent to the Township containing a form for requests to extend cable service, and language of C-TEC's intent to expand when economically feasible. This information is supported by the declaration of a responsible official. While the Township acknowledges that the franchise both permits and requires C-TEC to expand its service area in the future, it argues that unless and until that expansion occurs, the existence of effective competition should be determined on the basis of the existing authorized service area. 6. 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, is present within the franchise area. C-TEC has not met this burden. C-TEC fails to base its effective competition claim on its franchise area as defined by its new franchise agreement. We are persuaded that the appropriate franchise area for purposes of effective competition is the area that C-TEC currently serves in Gaines Charter Township. The relevant section of the new franchise agreement states that: Authorized Area shall mean the entire area from time to time within the corporate limits of the municipality, excluding, however, (a) all areas that are within such limits solely due to agreements executed under the authority of Michigan Act 425 of 1984, and (b) all areas not served by the Company on the Effective Date [January 1, 1994] unless Company notifies Municipality in writing of its intent to serve such areas and does so within 6 months of such notice. As we noted previously, the Commission defines a "franchise area" as "the area a system operator is granted authority to serve in its franchise." This new agreement establishes C- TEC's franchise area as its current service area. C-TEC claims that its franchise area remains the entire township as this agreement allows and even requires it to expand into other parts of the township. We disagree. The language of the agreement states that C- TEC's "authorized area" excludes those areas that C-TEC did not serve as of January 1, 1994. Thus, unless C-TEC can demonstrate that it in fact serves all of the Township as of January 1, 1994, or that it has notified the Township of an intent to expand, we must find that C-TEC's franchise area is the area it currently serves. As C-TEC has failed to submit information demonstrating that it is subject to effective competition based on its franchise area as specified in its franchise agreement, its petition is denied. Should C-TEC wish to submit information specific to its actual franchise area, it may do so by filing a petition for revocation pursuant to Section 76.914 of the Commission's rules. 47 C.F.R.  76.914. III. ORDERING CLAUSES 7. Accordingly, IT IS ORDERED that the petition for reconsideration filed by C-TEC Cable Systems of Michigan, Inc., challenging the certification of Gaines Charter Township, Michigan to regulate basic cable rates IS DENIED. 8. IT IS FURTHER ORDERED that the automatic stay imposed by Section 76.911(c) of the Commission's Rules, as amended, 47 C.F.R.  76.911(c) IS TERMINATED. 9. IT IS FURTHER ORDERED that C-TEC Cable Systems of Michigan, Inc. SHALL FILE the required rate justifications on the appropriate forms with Gaines Charter Township, Michigan within thirty days of the release date of this Memorandum Opinion and Order or within thirty days of receipt of notice from the franchising authority that it is regulating C-TEC Cable Systems of Michigan, Inc.'s rates, whichever is later. 10. This action is taken pursuant to delegated authority pursuant to Section 0.321 of the Commission's rules, 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau