$/ FOR FCC RECORD ONLY /$ $// MO&O, Cable Act of 1992, DA 95-23//$ $/ 300.623 Regulation of Rates /$ $/ 1.106 Petitions for Reconsideration /$ $/ 76.906 Presumption of no effective competition /$ $/ 76.910 Franchising authority certification /$ $/ 76.911 Petition for reconsideration of certification /$ Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of : ) DA 95-23 ) FALCON TELECABLE ) ) Petition for Reconsideration of Certification ) ) of the Certification of the City of ) Sinton, Texas to Regulate Basic ) Cable Rates (TX0741) ) MEMORANDUM OPINION AND ORDER Adopted: January 9, 1995 Released: January 10, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On November 1, 1993, Falcon Telecable ("Falcon") filed a timely Petition for Reconsideration of Certification challenging the certification of the City of Sinton, Texas ("Sinton") to regulate rates for basic cable service and associated equipment. Sinton did not file an opposition to Falcon's Petition. At the Commission's request, Falcon filed additional information on November 23, 1994 and December 20, 1994. 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 Petitioner's Contentions 3. Falcon bases its challenge on the competing provider test for effective competition set forth in the 1992 Cable Act and our rules. Falcon argues that its system serving Sinton is subject to effective competition because its franchise area is: 1) served by itself and Omnivision of Corpus Christi, Texas ("Omnivision"), an unaffiliated wireless cable provider, and that each of them offers comparable programming to at least 50 percent of the households in the franchise area; and 2) the number of households subscribing to Omnivision, the smaller provider, exceeds 15 percent of the households in the franchise area. 4. Falcon's pleadings, and the Census information submitted therewith, indicate that, as of 1990, there were 2,031 "housing units" in Sinton, the franchise area. Falcon's pleadings state that its cable system passes 2,144 housing units. In addition, Falcon states that it serves 765 of the 2,031 housing units or 37.7 percent of the total number of housing units. Falcon submits a computer print-out indicating that it passes 2,144 homes in the franchise area. This same print-out demonstrates with sufficient detail that Falcon serves 765 subscribers. Falcon also submits a copy of its channel guide which demonstrates that it provides 37 channels of programming, including at least 27 non-broadcast channels. Finally, Falcon submits a declaration under penalty of perjury attesting to the accuracy of the information submitted by Falcon. 5. With respect to Omnivision, Falcon states that Omnivision is available to all of the housing units in Sinton (i.e., 2,031 of the 2,031 housing units) or 100 percent of the total number of housing units in the franchise area. In addition, Falcon states that Omnivision serves 568 of the 2,031 housing units, or 27.9 percent of the total number of housing units in the franchise area. As support, Falcon submits a letter from Omnivision, in which Omnivision states that its wireless cable system serves 568 subscribers in Sinton. In addition, Falcon submits a copy of Omnivision's channel line-up, which demonstrates that Omnivision offers 31 channels of video programming, including at least 25 non-broadcast channels. 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 its franchise area. Based on the totality of the evidence presented, we find that Falcon has met this burden. Disposition of Falcon's Competing Provider Effective Competition Claim 7. The first prong of the competing provider test for effective competition requires that the franchise area be served by at least two unaffiliated multichannel video programming distributors ("MVPD"), each of which offers comparable programming to at least 50 percent of the households in the franchise area. The information filed by Falcon indicates that it passes 100 percent of the 2,031 housing units in the franchise area and that Omnivision passes 100 percent of the 2,031 housing units in the franchise area. The 1990 Census data submitted by Falcon shows that there are 2,031 total housing units (i.e. occupied and unoccupied housing units), including 1,809 households (i.e. occupied housing units) in the franchise area. Thus, it is clear that the term "housing units" as used by Falcon refers to total housing units, not to households. Yet our rules require the number of households to be the reference point for purposes of gauging effective competition under this test, just as it is required under the low penetration test. However, we recognize that determining the number of households (i.e. occupied housing units) which are passed by a cable operator, as opposed to the number which exist in the franchise area, may not be easily accomplished. Such information is not provided by the Census data we routinely urge operators to rely upon, and we understand that such information may not generally be available to or easily collected by operators. Because we are concerned to identify franchise areas which are subject to effective competition between or among providers, we will examine the totality of the evidence submitted by Falcon to see if conclusions can be drawn from it about the percentage of households passed by Falcon and Omnivision. 8. In a previous case involving a cable operator's claim of effective competition in an unrelated franchise area, the Commission made certain calculations based on the evidence presented to determine whether two cable operators offered service to at least 50 percent of the households in the franchise area. Here, if we subtract the total number of households (1,809) from the total number of housing units the 1990 Census data show for Sinton (2,031), we find that 222 housing units, or approximately 11 percent of total housing units, were unoccupied. If we apply this same ratio to the number of "homes" Falcon claims it passes, we arrive at a rough "households passed" number of 1,908. Alternatively, if we assume as a worst case that Falcon passes all of the unoccupied housing units in the franchise area, and so subtract those 222 unoccupied housing units from 2,144, the number of "homes" Falcon claims it passes in 1994, we are left with a total of 1,922 households passed. Under either scenario, the evidence permits us to reasonably conclude that Falcon passes at least 50 percent of the households in the franchise area. 9. As evidence that Omnivision, the wireless cable operator which is Falcon's alleged competitor, offers programming to at least 50 percent of the households in Sinton, Falcon states that "Omnivision operates from Corpus Christi, Texas, less than twenty miles from Sinton." Falcon argues that the close proximity and flat terrain between Corpus Christi and Sinton make it apparent that Omnivision's service is technically available to all of the homes within the Sinton franchise area. As further evidence that Omnivision's wireless service is technically available and that citizens of Sinton are reasonably aware of its presence, Falcon states that Omnivision has 568 subscribers within the Sinton franchise area. The Commission has stated that service of a multichannel video programming distributor will be deemed "offered" for purposes of the statutory effective competition tests when the service is both "technically and actually available." To be considered technically and actually available, a wireless cable operator's: central transmitter must be in place in the franchise area and fully operational [and] . . .[o]nce a [wireless] operator has initiated operation, the service will be deemed "offered" to those subscribers residing in the interference-free contour. . .those subscribers also must be reasonably aware that [wireless] service is available to them. In light of the fact that Sinton is only 20 miles from Omnivision's central transmitter, we find it reasonable that Sinton is in Omnivision's interference-free contour zone. The Commission also finds that potential subscribers are reasonably aware that Omnivision's service is available to them. The evidence shows that 568 of the 1,809 households, or 31 percent of the households in the Sinton franchise area, currently subscribe to Omnivision. In addition, the evidence shows that Omnivision has been engaged in vigorous public debate involving broadcast retransmission in the Sinton area. Based on these findings, we conclude that Omnivision offers service to at least 50 percent of the households in the franchise area. 10. With regard to the issue of programming comparability, we find that Falcon has submitted sufficient evidence that the programming of the two operators are comparable. The channel lineups for both operators submitted by Falcon establish that each operator offers over 30 channels with more than 25 non-broadcast channels -- this satisfies the Commission's programming comparability criteria. 11. With regard to the second prong of the competing provider effective competition test, we find that the evidence shows that more than 15 percent of the households in the franchise area subscribe to the multichannel video programming distributor other than Falcon, the largest MVPD. Here, Falcon has submitted sufficient evidence that Omnivision, the smaller of the two competitors, serves 568 subscribers out of the 1,809 households, or 31 percent of total households. 12. As Falcon has submitted sufficient evidence demonstrating that its cable system serving the City of Sinton is subject to effective competition from a wireless cable operator, its petition is granted. III. ORDERING CLAUSES 13. Accordingly, IT IS ORDERED that the Petition for Reconsideration filed by Falcon Telecable challenging the Certification of the City of Sinton, Texas IS GRANTED. 14. IT IS FURTHER ORDERED that the certification of the City of Sinton, Texas to regulate Falcon Telecable's basic cable rates IS RESCINDED. 15. This action is taken pursuant to delegated authority under Section 0.321 of the Commission's Rules, as amended. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau