$/ FOR FCC RECORD ONLY /$ $// MO&O, Cable Act of 1992, DA 95-41//$ $/ 300.623 Regulation of Rates /$ $/ 1.106 Petitions for Reconsideration /$ $/ 76.906 Presumption of no effective competition /$ $/ 76.910 Franchising authority certification /$ $/ 76.911 Petition for reconsideration of certification /$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of: ) DA 95-41 ) TCI TKR OF HOUSTON, INC. ) ) Petition for Reconsideration ) ) of Cable Services Bureau Order ) Denying Petition for Reconsideration ) of the City of Houston's Certification) to Regulate Basic Cable Service Rates) (TX0755, TX0736) ) ORDER ON RECONSIDERATION Adopted: January 12, 1995 Released: January 12, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On December 21, 1994, TCI TKR of Houston, Inc. d/b/a TCI Cablevision of Houston ("TCI") filed a pleading challenging a Memorandum Opinion and Order ("Order") adopted by the Cable Services Bureau ("the Bureau") pursuant to delegated authority. The Order denied TCI's petition for reconsideration challenging the certification of the City of Houston ("the City") to regulate TCI's rates for basic cable service and associated equipment. In its challenge, TCI requests that the Bureau's decision in the Order be set aside and that TCI's petition for reconsideration be granted, rescinding the City of Houston's certification to regulate rates. 2. A petition for reconsideration of a Commission action or an action taken pursuant to delegated authority must be filed within 30 days from the public notice of that action. To warrant consideration, it must state the specific form(s) of relief sought by the petitioner and allege with particularity the respects in which the contested action should be changed. It should also cite findings of fact or conclusions that the petitioner believes to be in error and indicate how the petitioner believes they should be changed. II. BACKGROUND 3. 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. 4. In its original petition for reconsideration, TCI argued that its Houston system is subject to effective competition in its franchise area. TCI based its claim of effective competition on the allegation that its system's subscriber penetration rate was less than 30% in its franchise area. To support its claim, TCI submitted evidence indicating that its system serves 51,161 subscribers in a franchise area consisting of 200,352 "homes." By using these figures, the ratio of total TCI subscribers in relation to the total number of homes in the franchise area yields a subscriber penetration rate of 25.5%. Because this number is less than 30%, TCI argued that its system should be exempt from rate regulation and that the City's certification to regulate TCI's basic rates and associated equipment should be rescinded. 5. In its Order, the Bureau denied TCI's petition for reconsideration because TCI, in deriving its subscriber penetration rate, inappropriately relied upon "housing unit" data, rather than "occupied housing unit" data, to determine the total number of households in its franchise area. The term "housing units" reflects both occupied and vacant housing units. Because our rules require the use of household data reflecting the number of occupied housing units, the Bureau rejected TCI's claim of effective competition. As a result, the automatic stay imposed on the City's certification to regulate rates was terminated and TCI was ordered to file the applicable rate justifications with the City. 6. TCI now argues that the Bureau erred in denying its original petition because it did not consider an alternative argument made by TCI in its original petition that relied upon occupied housing unit data. TCI claims that, while the central argument in its original petition relied upon total housing units data, it had also made an alternative argument relying upon the total number of occupied housing units in its franchise area. Specifically, TCI noted in its original petition that the City, when submitting its request for certification to the Commission, attached a chart listing the number of subscribers served and the number of households located within the franchise areas of each cable operator subject to its jurisdiction. This chart indicated that there are 179,655 households or occupied housing units in TCI's franchise area. TCI claimed in a footnote to its original petition that when this figure, representing occupied housing unit data, is used to measure TCI's subscriber penetration in its franchise area, the rate still remains below 30%. Specifically, dividing 179,655 total households by TCI's total subscriber figure of 51,572 yields a subscriber penetration rate of 28.7%. In its original petition, TCI stated, in reference to the City's household figure, that, although it disagrees with the use of occupied housing unit data rather than housing unit data, its system would still qualify for an exemption from rate regulation because it is subject to effective competition even when using the occupied housing unit data provided by the City with its request for certification. TCI asserts that the Bureau disregarded this alternative argument in issuing its Order. 7. TCI notes that the Bureau has recently issued several orders, involving certification challenges, which have granted various operators' petitions for reconsideration despite the fact that the operators' claims alleging the presence of effective competition were initially based on housing unit data rather than on occupied housing unit data. TCI asserts that the Bureau's decision in this case failed to comport with the standard established in this line of cases and, therefore, must be set aside. III. DISCUSSION 8. To satisfy the low penetration test for effective competition, an operator must compare two statistics: 1) the operator's total number of subscribers in its franchise area, and 2) the total number of households in the franchise area. To prove that their systems are subject to effective competition, our rules require that operators must use data reflecting occupied housing units in establishing the total number of households in their franchise areas. Although TCI's central argument in its original petition did not rely upon the use of occupied housing unit data, TCI also presented an alternative argument that did rely upon the use of occupied housing unit data. As the record indicates, we agree with TCI that our initial review failed to consider TCI's use of the appropriate data in its petition in order to satisfy the low penetration test for effective competition. Accordingly, we will reconsider our decision. 9. 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. TCI has met this burden. Although initially TCI based its effective competition claim on "housing unit" data, TCI provided alternative data in its petition that reflects the use of "occupied housing unit" data. According to this data, there are 179,655 occupied housing units in its franchise area. A comparison of the number of TCI subscribers in relation to the total number of households in TCI's franchise area yields a subscriber penetration level of 28.7%. Thus, we find that TCI's system serving the City of Houston is subject to effective competition. Accordingly, we grant TCI's petition. 10. We wish to make clear that even though we are granting TCI's petition, we do not accept TCI's argument that housing unit data should be used instead of occupied housing unit data in establishing the total number of households in an operator's franchise area for purposes of determining the presence of effective competition. Our rules clearly require the use of occupied housing unit data. IV. ORDERING CLAUSES 11. Accordingly, IT IS ORDERED that TCI's application for review when treated as a petition for reconsideration IS GRANTED. 12. IT IS FURTHER ORDERED that the certification of Houston to regulate TCI's basic cable rates IS RESCINDED. 13. This action is taken under 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