$// Order, Cable Act of 1992, certification, DA //$ $/ 600.623 Regulation of Rates/$ $/ 76.905 Standards for Effective Competition/$ $/ 76.906 Presumption of No Effective Competition/$ $/ 76.910 Franchising Authority Certification/$ $/ 76.911 Petition for Reconsideration/$ $/ 76.914 Revocation of Certification/$ $/ For FCC Record Only/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of: ) DA 95-121 ) TCI CABLEVISION, INC. ) ) Petition for Reconsideration ) of Certification of the ) City of Dallas (TX0762) ) MEMORANDUM OPINION AND ORDER Adopted: January 30, 1995 Released: January 31, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On March 14, 1994, TCI Cablevision of Dallas, Inc. ("TCI"), filed a timely Petition for Reconsideration of Certification challenging the certification of the City of Dallas ("The City" or "Dallas") to regulate the system's basic service rates in Dallas, Texas. Dallas filed an objection, to which TCI filed a reply. In addition, both parties filed additional pleadings. On August 1, 1994, TCI filed a Response to the Commission's information request letter dated July 22, 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 which 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. Regulation of rates is automatically stayed pending review of a timely filed petition for reconsideration alleging the presence of effective competition. II. DISCUSSION 3. TCI argues that its system in the City of Dallas is subject to effective competition because it serves fewer than 30 per cent of the households in the City of Dallas, its franchise area. In its initial submission, TCI claimed that it served only 124,635 net basic subscribers of the 437,136 households (that is, occupied housing units) in the City of Dallas, or 28.51 per cent of the total number of households. As supporting documentation, TCI provided household data prepared by Claritas, which asserted that there were 437,136 households in the City of Dallas, the franchise area. TCI also provided a signed declaration from the Executive Vice President, Scott Hiligel, regarding subscriber information. 4. Dallas disputed the household numbers presented by TCI. According to Dallas, there are 409,545 households in the City. Considering the 124,635 subscribers that TCI claimed to serve, Dallas argued that the penetration rate is 30.43 percent. Therefore, Dallas believes TCI is not subject to effective competition. The City argued that TCI's statistical information is fundamentally flawed since it relied on census tracts not fully in the City and did not rely on local statistics for construction and demolition to verify the correct number of housing units and households in the City. The City stated that in calculating its household numbers, the City started with 1990 Census data, but updated the data using local statistics. Specifically, Dallas claimed that it started with the 1990 Census data which lists 465,600 "housing units" in the city in 1990. Dallas adjusted that number, to account for the changes since the 1990 Census, by adding 5,587 "housing units" derived from new construction and demolition information. Finally, the City adjusted the "housing unit" data by factoring in the occupancy rates for each housing type (i.e. single family, multi-family, etc.). According to Dallas, this analysis provides a more specific estimate of the number of "households" or "occupied housing units" in the City than does the method used by TCI because the City accounted for the changes that have occurred since the 1990 Census. According to Dallas, "while Claritas is using annual estimates based on the 1990 Census, the City is using factual, current information from its own files and the population and household size estimates of the North Central Texas Council of Governments." 5. In response, TCI acknowledged that Claritas initially had considered several census tracts containing areas with adjoining cities to be wholly within Dallas, whereas it should have used split census tracts which would account only for the households actually in the City. TCI provided occupied housing unit count numbers recalculated by Claritas, and estimated that the number of occupied housing units within the City of Dallas as of 1994 is 416,219. TCI discounted the City's household numbers, arguing that the City's approach is unreliable because it is not an accurate method of estimating housing units that may have been added since the 1990 Census. TCI argued that the demolished buildings subtracted by the City during the 1990-92 period were most likely not counted as housing units in the 1990 Census. According to TCI, the only vacant units included in the "housing units" category of the 1990 Census, are those that are intended for occupancy. In addition, TCI argued that counting building permits severely undercounts the number of housing units. For example, TCI stated that a 100 unit apartment building may be represented by only one building permit. TCI claims that, only if separate building permits were issued for each and every housing unit could building permits be equated with housing units. Furthermore, TCI claimed that even if building permits were an accurate measure of housing units, the City's methodology incorrectly subtracts demolitions from its building permit count. TCI asserted that if the demolished buildings were not housing units in 1990, they cannot now be used to adjust the housing unit count. TCI maintained its total number of subscribers to be 124,635. Therefore, TCI argued that its penetration rate is be 29.945 percent. 6. In reply, Dallas argued that since the City's boundaries are not established or created in relation to census tracts, the City, in its reply to TCI's petition, demonstrated that "by using accurate, specific information, the estimates of Claritas were factually in error." Dallas claimed that it is required by law to keep complete and exact records of its boundaries. The City stated that it keeps records of housing units as they are constructed. Responding to TCI's claim that buildings under demolition permits were already excluded by the 1990 Census, Dallas argued that TCI is inaccurate because once a demolition permit is issued the building owner must begin demolition work within 10 working days or the permit expires. Therefore, according to Dallas, it is unlikely that any housing unit considered as vacant or ready to be demolished by the 1990 Census was issued a demolition permit in 1991, 1992, 1993 or 1994. As for TCI's concern that building permits are inaccurate because, as TCI claims, one permit may be issued for a 100 unit apartment building, but show as only one unit, Dallas argued that if that were true it would undercount the number of housing units in the city. However, Dallas stated that each applicant for a building permit is required to state the number of dwelling units to be constructed. Dallas argued that, upon completion of construction, the City issues a certificate of occupancy which also indicates the number of dwelling units. Dallas stated that TCI failed to rebut the presumption of effective competition because it based its claim upon the use of inaccurate information, as evidenced by the error in the boundaries of the City. 7. In its response to the Commission's letter request, TCI claimed that the number of subscribers in the franchise area, at the time Dallas certified, was actually 122,921 net basic subscribers. According to TCI, the number of net basic subscribers was determined by aggregating the basic service rate codes contained in TCI's billing report. This figure includes all individual residences in multiple dwelling units ("bulk basic units"), regardless of actual occupancy in the building. TCI did not include in the 122,921 net basic subscribers, the 341 subscribers that represent city, municipal, and school accounts. TCI also did not include 239 commercial accounts and 358 free employee accounts. TCI explained that commercial accounts were subtracted from the basic subscriber figure because non-residential units were not counted as households in the 1990 Census. TCI also stated that free accounts, such as municipal, school, and employee accounts, were subtracted from the basic subscriber figure because these accounts do not purchase cable service. TCI asserted that this calculation yields a net basic service subscriber count of 122,921. Taking into consideration the 416,219 households that TCI now claims are in the franchise area, TCI now argues that its penetration rate is 29.533 percent. 8. 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. TCI has not met that burden. TCI and the City of Dallas have each submitted data more current than 1990 Census data to attempt to illustrate the total number of households in the City of Dallas. TCI's more recent data is based on annual estimates compiled by Claritas. The City's data is based on 1990 Census data which lists 465,600 "housing units" in the city in 1990. The City adjusts that number, to account for the changes since the 1990 Census, by adding 5,587 "housing units" derived from new construction and demolition information. Finally, the City adjusts the "housing unit" data by factoring in the occupancy rates for each housing type (i.e. single family, multi-family, etc.). According to the City, this analysis provides a more specific estimate of the number of "households" or "occupied housing units" in the City than does the method used by TCI. 9. In a previous case, we accepted estimates compiled by Claritas, as an acceptable source of household information more recent than that offered by the 1990 Census. However, in that case the franchising authority did not submit alternative household data, or in any other way challenge the household estimates as compiled by Claritas. Here, the City of Dallas does challenge TCI's method of estimating the number of households in the City as determined by Claritas and submits its own more current household data. As noted above, the cable operator has the burden of rebutting the presumption that effective competition does not exist. We believe that where both the cable operator and the franchising authority submit household numbers more current than the most recent available census data, it is the cable operator's burden to demonstrate that its more current household numbers are more accurate and reliable than the household numbers submitted by the franchising authority. TCI has failed to make this showing. Specifically, although TCI's more current household numbers are based on a source which has been previously accepted as an acceptable source for more current household data, it has not convinced us that its data is a more accurate and reliable source for household numbers than the numbers submitted by the City of Dallas. 10. We further find that TCI inappropriately deducted the number of employee accounts from its number of subscribers. TCI deducted the number of its employees receiving cable service for no charge. TCI claims that such a deduction is consistent with the plain meaning of the term "subscriber" which TCI defines as a person "receiving something of a continuing or periodic nature on a prepayment plan." We find this argument unpersuasive. Typically, a cable operator provides cable service in consideration for fees paid. In providing cable service to employees for no fee, TCI is merely providing cable service in consideration for services rendered by its employees. The fact that TCI chooses to provide cable services to its employees in exchange for services rendered instead of charging a fee (as it does for other customers receiving its cable service) is immaterial. Accordingly, these subscribers should have been included for purposes of determining the presence of effective competition. 11. Since we are unable to accept TCI's household numbers, as compared to those numbers submitted by the City of Dallas, we will use the household numbers submitted by the City of Dallas in calculating TCI's penetration level. In addition, we add in the number of employees receiving cable service to TCI's subscriber total. Based upon the 409,545 households in the City of Dallas, as per the City's submission, and TCI's 123,279 subscribers, we find that TCI's system serving the City of Dallas serves 30.1 per cent of the households in the franchise area. Accordingly, we find that TCI's system serving the City of Dallas is not subject to effective competition. Thus, its petition is denied. III. ORDERING CLAUSES 12 Accordingly, IT IS ORDERED that the petition for reconsideration filed by TCI Cablevision of Dallas, Inc. challenging the certification of the City of Dallas, Texas to regulate basic cable rates IS DENIED. 13 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. 14 IT IS FURTHER ORDERED that TCI Cablevision of Dallas SHALL FILE the required rate justifications on the appropriate forms with the City of Dallas, Texas within thirty (30) days of the release date of this Memorandum Opinion and Order or within thirty (30) days of receipt of notice from the franchising authority that it is regulating TCI Cablevision's rates, whichever is later. 15 This action is taken pursuant to delegated authority under Section 0.321 of the Commission's rules, as amended, 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau