$/ FOR FCC RECORD ONLY /$ $// MO&O, Cable Act of 1992, DA 95-177//$ $/ 300.623 Regulation of Rates /$ $/ 1.106 Petitions for Reconsideration /$ $/ 76.906 Presumption of no effective competition /$ $/ 76.910 Franchising authority certification /$ $/ 76.911 Petition for reconsideration of certification /$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of: ) DA 95-177 ) TELESAT CABLEVISION, INC. ) ) Petition for Reconsideration ) ) of Certification of ) Orange County, Florida ) to Regulate Basic Cable Service Rates) (FCC Community ID No. FL0851) ) MEMORANDUM OPINION AND ORDER Adopted: February 7, 1995 Released: February 8, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On October 28, 1993, Telesat Cablevision, Inc. ("Telesat") filed a timely petition for reconsideration challenging the certification of Orange County, Florida ("County") to regulate its rates for basic cable service and associated equipment. The County filed an opposition to Telesat's petition for reconsideration to which Telesat filed a reply. In addition, both parties submitted supplemental pleadings in response to the Commission's July 29, 1994 Order. 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 effective competition. II. DISCUSSION 3. Telesat argues that its cable system is subject to effective competition because it serves fewer than 30 percent of the households in its franchise area, which is comprised of the unincorporated areas within Orange County. Specifically, Telesat claims that it serves 21,031 of the 160,356 households in the franchise area or 13.1 percent of the total number of households. As supporting documentation, Telesat provides 1990 Census data which demonstrates that there are 160,356 households (that is, occupied housing units) in its franchise area. Telesat also submits a computer print-out with sufficient subscriber information to show that it serves 21,031 households in the franchise area. Finally, Telesat provides an affidavit by a responsible official certifying to the accuracy of the data included in the petition and the supplement thereto. 4. In its opposition to Telesat's petition, the County argues that Telesat is not subject to effective competition because it has "redefined" its franchise area. The County alleges that Telesat has made an affirmative decision to limit its service area to only a portion of its authorized franchise area. The County argues that by including household data from portions of the franchise area that Telesat does not actually serve, Telesat miscalculates its penetration level. As supporting documentation, the County submits the following: a copy of an Orange County statistical report which, inter alia, calculates the penetration rates of the five cable operators serving the County, a copy of Telesat's 15 year franchise agreement with the County dated June 23, 1986, and three maps separately detailing (1) the areas actually served by Telesat and its competitors within Orange County as of April 27, 1993; (2) the location of the unincorporated areas of Orange County as of 1993; and (3) the areas actually served by Telesat and its competitors within Orange County as of August 22, 1991. The County asserts that these exhibits demonstrate that Telesat does not offer service to its entire authorized franchise area and has not expanded its service beyond the portions it was already serving in 1991. In addition, the County submits a copy of a 1992 contract which documents Telesat's sale of a portion of its Orange County system, located in the south central region of the County known as Meadow Woods, to its competitor, Cablevision Industries. Because this sale actually reduced Telesat's coverage in its service area, the County argues that the sale lends further support for its argument that Telesat has redefined its franchise area by restricting its area of service to limited portions of its entire authorized franchise area. 5. In its reply, Telesat argues that it has not limited its service area, nor has it redefined its franchise area. To the contrary, Telesat maintains that since 1986, when it was granted its franchise, it has built three separate, non-contiguous overbuild systems in Orange County. Telesat claims that the County's Map "B", which depicts Telesat's actual service area in 1993, proves that Telesat has expanded its service area beyond its 1991 borders, as depicted in the County's Map "D". Furthermore, Telesat contends that none of the evidence submitted, including the 1992 contract between it and Cablevision, sufficiently demonstrates that Telesat has affirmatively excluded any portion of its authorized franchise area from its potential service. Instead, Telesat asserts that because of the existence of actual competition in its franchise area, the lack of expansion over a period of less than two years does not prove that Telesat has chosen to restrict its service area or redefine its franchise area. To further emphasize its position, Telesat claims that much of its system is in overbuild situations with the other operators providing service in the County and that this makes expansion throughout the County more competitive and, therefore, more difficult. 6. As a preliminary matter, we are not persuaded that Telesat has affirmatively restricted its service area to some portion that is appreciably smaller than Telesat's authorized franchise area, for purposes of effective competition. The County concedes that Telesat's authorized franchise area encompasses the entire unincorporated area of Orange County. Moreover, as the Commission stated in the First Recon. Order, "the fact that a franchise area has not as yet been filled out by construction of a system would not by itself be taken as redefining the service area." The County has not offered sufficient evidence showing that Telesat has affirmatively decided to forego the possibility of further expanding its area of service within its authorized franchise area. We agree with Telesat that the County cannot only rely on Telesat's expansion record during a period of time encompassing less than two years over the life of a 15 year franchise to determine that Telesat has restricted its efforts at further expansion. 7. However, we recognize that, in 1992, Telesat sold the Meadow Woods portion of its system, located in the south central region of Orange County, to Cablevision Industries. As a condition to the contract of sale, Telesat agreed to refrain from providing any type of cable service to the Meadow Woods area for a period of five years. This evidence is sufficient to prove that Telesat has redefined its franchise area to exclude the Meadow Woods area. However, even when accounting for the exclusion of Meadow Woods from Telesat's franchise area, the record reveals that Telesat's penetration rate is still less than 30 percent. Specifically, the evidence shows that even when excluding the total number of households located in the Meadow Woods area from the total number of households located in Telesat's entire franchise area, there are still 158,829 households in Telesat's redefined franchise area. Applying the subscriber number to this figure yields a revised penetration rate of 13.2 percent, resulting in a de minimis increase from its original penetration rate of 13.1 percent. While the County has demonstrated that Telesat has made an affirmative decision to redefine its service area, the record indicates that the resulting penetration rate still remains less than 30 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 its franchise area. Telesat has met this burden. Telesat appropriately relied on data reflecting the number of households as required by our rules. Relying on this data, Telesat has submitted sufficient evidence demonstrating that its cable system, serving Orange County, its franchise area, serves 21,031 of the 158,829 households, or 13.2 per cent of the households, within its franchise area. Thus, we find that Telesat's system serving Orange County is subject to effective competition. Accordingly, its petition is granted. III. ORDERING CLAUSES 9. Accordingly, IT IS SO ORDERED that the petition for reconsideration filed by Telesat Cablevision, Inc. challenging the certification of Orange County, Florida to regulate Telesat's basic service cable rates IS GRANTED. 10. IT IS FURTHER ORDERED that the certification of Orange County to regulate the rates for basic cable service and associate equipment of Telesat Cablevision, Inc. IS RESCINDED. 11. 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